Investor Conference March 2001, Rio de Janeiro. 1 This presentation contains statements that...

Investor ConferenceMarch 2001, Rio de Janeiro.

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This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company . Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telefónica undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefónica´s business or acquisition strategy or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged to consult the Company´s Annual Report on Form 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securities and Exchange Commission.

Safe Harbour


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Telefónica´s Financial Profile and Prospects

Telefónica´s Financial Profile and Prospects


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Telefónica’s financial profile: Y2kTelefónica’s financial profile: Y2k

Ebitda: Profitability, growth and diversification

A milestone year in terms of assets growth

Strong balance sheet

Stable Financial strategy and timely execution


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Steady growth recordSteady growth record

Euro Mill. 1999 2000 YoY Growth

TURNOVER 22,957 28,485 24%

EBITDA 10,885 11,919 9.5%

NET INCOME 1,805 2,505 38.8%

E.P.S. (Euros) 0.57 0.67 18.5%


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Data / Media / Internet

4%

Cellular26%

Wireline (LATAM)34%

Wireline (Spain)36%

EBITDA: Growth + diversificationEBITDA: Growth + diversification

Revenue 2000: 28,485 Millions Euro

Wireline (LATAM)44%

Wireline (Spain)36%

Cellular20%

EBITDA 2000: 11,919 Millions Euro


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2000E EBITDA

(Eu

ro B

n)

(Eu

ro B

n)

3.3

9.710.5

11.912.613.8

DeutscheTelekom

TelecomItalia

Telefónica FranceTelecom

BT KPN

EBITDA: SIZEEBITDA: SIZE


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2.5

1.3

1.8

1998 1999 2000

11.910.9

9.3

1998 1999 2000

28.4

22.9

17.5

1998 1999 2000

Revenues EBITDA Net Income

Strong historical growth (Euro Bn)Strong historical growth (Euro Bn)


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A milestone year: Asset growth ... A milestone year: Asset growth ...

62,211

45,571

1999 2000

Consolidated Net Assets (Euro Mill.) YoY growth: + 36.5%


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… while preserving a strong balance sheet… while preserving a strong balance sheetNet DebtNet Debt 20,47220,472

26,95126,951

Minority InterestMinority Interest 10,61410,614 9,330 9,330

Shareholders’ EquityShareholders’ Equity 14,48514,48525,93025,930

Total Capital EmployedTotal Capital Employed 45,57145,57162,21162,211

Net Debt / Total Capital EmployedNet Debt / Total Capital Employed 44.9%44.9%43.3%43.3%

Net Debt / EBITDA (x)Net Debt / EBITDA (x) 1.9 1.9 2.3 2.3

EBITDA / Net financial expenses (x)EBITDA / Net financial expenses (x) 6.1 6.1 6.4 6.4

1999 2000


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With a clear financial strategy andtimely executionWith a clear financial strategy andtimely execution

Equity funding

Full access to LATAM’s cash flows

Optimising WACC and credit rating

Financial flexibility

Enhancing stability of a growing cash flow

Efficiency and transparency in capital allocation


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Equity funding: now and before ...Equity funding: now and before ...

2000 Equity issues Bn Eur

Verónica 21

Endemol 5

New equity

Mobile IPO 3.3

TPI 3% sale 0.1

Motorola Assets 2

Total Equity 31.4

New equity: 82% of attributable UMTS licenses costs

Verónica: EPS accretive by 29.7% (*)

(*) Before extraordinary income; after extraordinary income EPS accretive by 15.3%


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Rating stabilityRating stability

09/99 12/99 03/00 06/00 09/00 12/00 02/01

AA+ FTBT BT BT

AA FTKPN KPN KPN KPN

AA- FT FTDT DT DT

A+ TELEFONICATELEFONICATELEFONICA TELEFONICA TELEFONICATELEFONICATELEFONICA

FT FT BTA VODAFONE VODAFONEVODAFONE BT BT BT VODAFONE

VODAFONEVODAFONEA- KPN KPN FT

DT DT DT DTVODAFONE

BBB+ KPN


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7

5.5

1999 2000 (*)

… Enhancing financial flexibility… Enhancing financial flexibility

Average debt maturity (years)

(*) Average life global bond: 12.5 years / Amortisation of short term debt


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… and diversifying risk… and diversifying risk

USD41.7%

EURO37.6%

Other1.6%LATAM

19.1%

By currency (*)

Domestic bonds30.8%

Loans43.1%

Euro Medium Term Notes + Commercial

Paper5.3%

Global bonds20.8%

By instrument (*)

(*) Net Debt breakdown (31/12/00)


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Financial Profile above European peers

Financial Profile above European peers

Net Debt/Market Cap 20/02/01 Net Debt/ EBITDA

Source: analyst estimates

2.3

4.655.18

4.36

DT FT BT TEF

35.10%

77.00%71.00%69.60%

DT FT BT TEF


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Cash - flows accretionCash - flows accretion

Verónica: 3.6 billion Euro additional cash - flow

Avoiding intrinsic subordination

Internal loans (*):

– TEM : 4.9 Billion Euro

– TISA : 585 M USD

– T. Media : 945 M USD

Enhanced financial flexibility

(*) Market prices


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11%

5.4%

20.5%

Stand-alone LATAM countriesTelefónica's LATAM portfolioTelefónica's LATAM + SPAINportfolio

Improving cash - flow quality Improving cash - flow quality

US$ EBITDA Average Standard Deviation


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Services

CorporationCorporation

Business linesBusiness lines

CompaniesCompaniesThird partiesThird parties

Looking for more efficiencyLooking for more efficiency

Services

Expected NPV of USD 850 millions

Shared Services Centers

Shared Services Centers

Services

Services


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Improving capital allocation Improving capital allocation

WIRELINE YELLOW PAGES WIRELESS CALL CENTERS DATA INTERNET

ESPAÑ

A USAM

ÉJICOCH

ILE

BRASI

LPERÚ

ARGEN

TINA

WIRELINE

YELLOW PAGES

WIRELESS

CALL CENTERS

DATA

INTERNET0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

WACC


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What’s nextWhat’s next

Solid and well diversified revenue growthSolid and well diversified revenue growth

Reinforcing capital discipline: Capex / Operating RevenueReinforcing capital discipline: Capex / Operating Revenue

Improving asset turnover: Revenue / Capital employedImproving asset turnover: Revenue / Capital employed

Well balanced and growing EBITDA margin: EBITDA / RevenueWell balanced and growing EBITDA margin: EBITDA / Revenue

Enhancing Free cash flow marginsEnhancing Free cash flow margins


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Solid and well diversified revenue growthSolid and well diversified revenue growth

13%-15%

24.00%

2000 CAGR 00/04

Wireline (Spain)22%

Wireline LATAM20%

Data / Media / Internet

21%

Cellular37%

Revenue Breakdown 2004

Revenue growth


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Reinforcing Capital discipline Reinforcing Capital discipline

31%

21%-23%

2000 (*) Average 2001 - 2004

(*) 2000 : UMTS Licenses / Op. Revenue = 41%

(Capex / Op. Revenue)


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0.50-0.55

0.46

2000 Average 2001 - 2004

Improving Asset turnover (*)Improving Asset turnover (*)

(*) Asset turnover: Revenue / Capital employed


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Well balanced and growing EBITDAWell balanced and growing EBITDA

41.8%

38%-41%

2000 Average 2001 - 2004

Wireline (LATAM)28.5%

Data / Media / Internet24.5%

Wireline (Spain)26.7%

Cellular20.3%

EBITDA breakdown 2004

EBITDA / Operating Revenue


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Enhancing Free Cash Flow marginsEnhancing Free Cash Flow margins

8%-12%

2.8%

2000 Average 2001-2004

% Free Cash Flow / Operating Revenue% Free Cash Flow / Operating Revenue


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MessagesMessages

Proven management execution capability

Accountability and transparency

Diversification and growth

Capital allocation discipline

A value creating group with a focused strategy

Unique position to take advantage of the market environment


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Investor Conference March 2001, Rio de Janeiro. 1 This presentation contains statements that...

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