Financial Performance - Consolidated revenues for 2023 reached €40,652 million, a 1.65% increase from €39,993 million in 2022[62] - Operating income for 2023 decreased to €2,593 million, down 36.1% from €4,056 million in 2022[62] - Profit before tax for 2023 was a loss of €1,473 million, compared to a profit of €2,960 million in 2022[62] - The net profit for 2023 was a loss of €574 million, a significant decline from a profit of €2,319 million in 2022[62] - Basic loss per share attributable to equity holders of the parent for 2023 was €(0.20), compared to earnings of €0.31 in 2022[62] Cash Flow and Assets - Cash and cash equivalents as of December 31, 2023, were €7,151 million, a slight decrease from €7,245 million in 2022[62] - Net cash provided by operating activities for 2023 was €11,649 million, down from €11,763 million in 2022[62] - Total assets decreased to €104,324 million in 2023 from €109,642 million in 2022[62] - Equity decreased to €27,096 million in 2023 from €31,708 million in 2022[62] Dividends and Investments - The company plans to maintain dividends per ordinary share at €0.30 for 2023, consistent with 2022[62] - The consolidated investment in spectrum acquisitions and renewals amounted to €157 million in 2024, primarily due to spectrum acquisition in Colombia[102] - The Group's investment in CapEx for 2024 was €5,475 million, slightly down from €5,579 million in 2023[111] Research and Development - Total research and development expenditure in 2024 was €647 million, representing 1.6% of the Group's revenues[111] - Revenues from new digital services, including IoT, cybersecurity, and cloud services, accounted for over 40% of the Company's B2B revenues in 2024, growing by double digits compared to 2023[106] Regulatory and Compliance - The United Kingdom has implemented its own data protection framework post-Brexit, which mirrors the GDPR but with tailored adjustments, increasing compliance risks for Telefónica[119] - The European Commission adopted its adequacy decision for the EU-U.S. Data Privacy Framework on July 10, 2023, allowing for international data transfers to U.S. companies[118] - Telefónica has adopted Binding Corporate Rules (BCRs) approved by the Spanish Data Protection Authority on March 8, 2024, to limit risks from international data transfers[120] - Significant breaches of the GDPR may result in fines of up to 20 million euros or 4% of the company's total annual revenue for the previous financial year[122] Cybersecurity and Risks - The Group has faced various cybersecurity incidents in the past three years, including intrusion attempts and data theft, although none have had material consequences to date[133] - Inflationary pressures have eased in 2024, but high interest rates and geopolitical tensions continue to pose risks to Telefónica's business operations[140] - The Group's operations are exposed to diverse legislation and political environments, which may adversely affect its financial position and cash flows[138] - The Group faces significant economic and political uncertainties in the regions it operates, which may adversely affect its business and financial condition[156] Debt and Financial Management - As of December 31, 2024, the Group's gross financial debt was €38,782 million, an increase from €37,061 million in 2023, while net financial debt was €27,161 million, slightly down from €27,349 million in 2023[161] - The average maturity of the Group's debt as of December 31, 2024, was 11.3 years, compared to 11.6 years in 2023[161] - A 100 basis points increase in interest rates would result in an additional €41 million in financial expenses, while a decrease of the same magnitude would reduce expenses by €41 million[169] - The Group had undrawn committed credit facilities amounting to €11,017 million as of December 31, 2024, with 3.5% of this amount scheduled to expire before December 31, 2025[165] Capital Expenditures and Network Expansion - Capital expenditures in 2024 amounted to 5,475 million euros, a decrease of 1.9% compared to 2023[224] - The company aims for a CapEx-to-revenue ratio below 12% by year-end 2026, with over two-thirds of 2024 CapEx allocated to network expansion and IT system transitions[223] - By the end of 2024, Telefónica Spain's fiber optic network reached 30.8 million homes passed, with 5G coverage at 91% of the population[225] - Telefónica Germany achieved 99% 5G coverage in 2024, with investments of 1,141 million euros focused on expanding 5G and enhancing 4G capacity[225] Corporate Transactions and Shareholder Actions - Telefónica launched a new issuance of notes in an aggregate principal amount of 1,750 million euros, intended for investments in high-speed telecommunications networks and renewable energy[191] - The voluntary public acquisition offer for shares of Telefónica Deutschland was accepted by shareholders holding approximately 7.86% of its share capital for an approximate amount of 549 million euros[193] - Telefónica owned, directly and indirectly, 94.12% of the share capital and voting rights of Telefónica Deutschland as of January 26, 2024[194] - Telefónica reduced its share capital by €80,296,591 through the cancellation of an equal number of treasury shares, resulting in a new share capital of €5,670,161,554[9]

Financial Position and Performance - Telefónica, S.A. reported non-current investments in Group companies and associates amounting to €49,650 million as of December 31, 2024[14]. - The audit opinion confirmed that the annual accounts present fairly the financial position and performance of Telefónica, S.A. in accordance with applicable financial reporting standards[7]. - The company is responsible for assessing its ability to continue as a going concern and must disclose any relevant matters[23]. - The audit and control committee oversees the preparation and presentation of the annual accounts[23]. - The management report for the 2024 financial year is consistent with the information contained in the annual accounts[21]. - Total assets decreased to €63,453 million, down 2.4% from €65,000 million in 2023[43]. - Equity decreased to €18,465 million, down 8.0% from €20,077 million in 2023[45]. - Non-current assets decreased to €55,304 million, down 4.2% from €57,729 million in 2023[43]. - Total recognized income and expense for the year was €503 million, down from €1,991 million in 2023[49]. - The company reported a net increase in cash and cash equivalents of €347 million in 2024, contrasting with a decrease of €321 million in 2023[52]. Revenue and Profitability - Total revenue for 2024 increased to €6,429 million, up 47.4% from €4,362 million in 2023[47]. - Profit for the year decreased to €223 million, down 89.6% from €2,153 million in 2023[47]. - The company experienced a profit before tax of €512 million in 2024, down from €1,129 million in 2023, indicating a decline of approximately 54.6%[52]. - Profit for the year improved from a loss of €574 million in 2023 to a profit of €209 million in 2024, marking a significant turnaround[97]. Impairment and Write-downs - A net write-down of impairment provision of €4,405 million was recognized in the income statement for the year[18]. - The company conducted an impairment test for its investments at least annually, or more frequently if necessary[15]. - Impairment losses on financial instruments increased to €4,480 million, up from €1,207 million in 2023[47]. - Impairment of investments in Group companies and associates rose sharply to €4,405 million in 2024 from €1,208 million in 2023, reflecting a substantial increase of 264.5%[52]. - Telefónica, S.A. recognized an impairment provision of €4,405 million in 2024, compared to €1,208 million in 2023, primarily affecting Telefónica Hispanoamérica, S.A.[140]. Cash Flow and Investments - Telefónica reported cash flows from operating activities of €4,547 million in 2024, a significant increase from €1,720 million in 2023[52]. - Cash flows used in investing activities were negative at €397 million in 2024, a decrease from positive cash flows of €1,761 million in 2023[52]. - Cash flows used in financing activities were €(3,762) million in 2024, slightly improved from €(3,834) million in 2023[52]. - The company plans to invest between 10% and 16% of revenue for business development in Brazil[147]. - The total loans to group companies and associates in 2024 amounted to €2,307 million, an increase from €2,057 million in 2023[155]. Shareholder Actions and Capital Structure - The company proposed a distribution of €563 million from its net profit for 2024, which will be allocated entirely to unrestricted reserves[73]. - Telefónica, S.A. launched a capital increase of €550 million on January 23, 2024, to fund the payment to shareholders from the voluntary public tender offer for Telefónica Deutschland Holding AG[116]. - The share capital of Telefónica, S.A. was reduced by €80.3 million through the cancellation of treasury shares, resulting in a new share capital of €5,670 million[189]. - The Board of Directors is authorized to increase the share capital by a maximum nominal amount of €2,596,065,843 within five years from the resolution date[197]. - The shareholders authorized the Board to issue securities, including preferred shares and warrants, with a maximum issuance limit of €25 billion[199]. Market and Economic Factors - Management's cash flow projections involved significant judgments regarding revenue growth, long-term EBITDA margin, and discount rates, which could be affected by future economic trends[17]. - The long-term EBITDA margin estimates for Telefónica Group in Brazil range between 41% to 44%, with a WACC of 11.5% after taxes for year-end 2024[147]. - The depreciation of the Brazilian real against the euro was 16.88%, negatively impacting the value of investments[148]. - In Chile, the discount rate (WACC) used for value calculations is 8.5% after taxes, with a perpetuity growth rate of 2.8%[150]. - The terminal growth rate for discounted cash flows is set at 1%, below the real terminal growth forecast for the UK economy[145]. Other Financial Metrics - Non-current borrowings increased to €3,206 million, up 23.7% from €2,592 million in 2023[45]. - Cash and cash equivalents increased to €5,015 million, up 7.4% from €4,668 million in 2023[43]. - The fair value of financial assets at fair value with changes through equity was €417 million at the end of 2024, down from €466 million in 2023[172]. - Trade receivables decreased from €500 million in 2023 to €265 million in 2024, primarily due to a reduction in tax receivables from €237 million to €23 million[184]. - The company recorded a favorable award of $380 million (approximately €365 million) from the Republic of Colombia, with accrued interest of $164 million (approximately €158 million) as of December 31, 2024[180][181].

Core Viewpoint - Telefonica, S.A. reported a significant decline in net income for Q4 2024, with a year-over-year drop of 41.8% to €425 million, alongside a decrease in basic earnings per share (EPS) from €0.12 to €0.06 [1][2]. Financial Performance - Total revenues for Q4 2024 increased by 5.4% year over year to €10,701 million, driven by strong performance in key markets, with residential revenues up 6.5% and business segment revenues up 10% [2]. - For the full year 2024, revenues reached €41,315 million, reflecting a 1.6% year-over-year increase, surpassing the initial growth target of around 1% [2]. Business Unit Results - **Telefonica Espana**: Revenues increased by 1.3% year over year to €3,364 million, supported by an 8.9% rise in handset sales and a 1% growth in service revenues. Adjusted EBITDA grew by 1% to €1,255 million [3]. - **Telefonica Deutschland**: Revenues fell by 3.7% to €2,205 million, primarily due to weak mobile business trends, while adjusted EBITDA margin stood at 33.4% [4]. - **VirginMedia-O2 U.K.**: Revenues slightly decreased by 0.1% to €3,263 million, with an adjusted EBITDA margin of 36.6% [4]. - **Telefonica Brasil**: Revenues decreased by 7.4% to €2,350 million, impacted by foreign exchange headwinds, with adjusted EBITDA declining by 6.9% to €1,050 million [5]. - **Telefonica Hispam**: Revenues surged by 47.1% to €2,432 million, largely due to a lower comparison base from the previous year and other factors [8]. - **Telefonica Tech**: Revenues increased by 11.1% year over year to €612 million, driven by growth in cybersecurity and IoT sectors [7]. Cash Flow and Liquidity - For the year ending December 31, 2024, Telefonica generated €10,994 million in net cash from operating activities, down from €11,649 million the previous year. Free cash flow totaled €2,634 million, exceeding the target with a 14.1% increase from the prior year [10]. - As of December 31, 2024, the company held €8,062 million in cash and cash equivalents, with non-current financial liabilities amounting to €33,192 million [11]. Future Guidance - The company anticipates continued organic growth in revenues, EBITDA, and EBITDAaL minus CapEx for 2025. Free cash flow is expected to remain stable compared to 2024 [12]. - A cash dividend of €0.30 per share has been confirmed for 2025, to be distributed in two installments [12].

***Este documento está clasificado como PUBLICO por TELEFÓNICA. ***This document is classified as PUBLIC by TELEFÓNICA. Disclaimer This document and any related conference call or webcast (including any related Q&A session) has been prepared by Telefónica, S.A. ("Telefónica" or the "Company", and together with its subsidiaries the "Telefónica Group") exclusively for its use during the presentation of financial results. The Company does not assume any liability for the content of this document if used for an ...

Financial Data and Key Metrics Changes - Free cash flow generated was €2.634 billion, representing a 14% year-on-year growth, exceeding the guidance of more than 10% [15][50] - Revenue increased by 5.4% in Q4, reflecting solid commercial momentum across the company's footprint [22] - EBITDA remained flat year-on-year in Q4, while CapEx increased by 5.7% due to Argentina and foreign exchange impacts [23] Business Line Data and Key Metrics Changes - Telefonica Spain saw year-on-year growth in all main accesses for the first time since 2018, with revenue growth of 1.3% in Q4 [25][27] - Telefonica Brasil's revenue increased by nearly 8% in local currency, with a record high in fixed line business [29] - Telefonica Tech exceeded €2 billion in revenue, with a growth acceleration of 10% year-on-year in Q4 [35] Market Data and Key Metrics Changes - The company passed an additional 10 million premises with fiber during the year, extending 5G coverage by 10 percentage points across core markets [20] - In Germany, O2 brand maintained strong appeal with revenue declining by 3.7% year-on-year in Q4 due to various market pressures [31] - In the U.K., revenue was flat year-on-year in Q4, with significant fiber rollout and stable mobile contract churn [32] Company Strategy and Development Direction - The company aims to enhance execution across its business, focusing on core connectivity services and growing B2B technology solutions [11][12] - A strategic review is planned to be completed by the end of 2025, focusing on operational rationale and improving margins [57][116] - The company is committed to disciplined capital allocation while exploring consolidation opportunities in Europe [12][68] Management's Comments on Operating Environment and Future Outlook - Management highlighted the need for rapid adaptation to capture full potential in a dynamic macro environment [10] - The company sees significant opportunities in Europe, driven by technological disruption and a favorable regulatory framework [12][68] - The outlook for 2025 includes expectations for organic growth in revenue, EBITDA, and free cash flow generation similar to 2024 [59][130] Other Important Information - The company has maintained a robust balance sheet with net financial debt at €27.2 billion and a net debt-to-EBITDA ratio of 2.58x [47] - The company is committed to reducing leverage and has a solid liquidity position of €20.9 billion [48] - The company received recognition for its sustainability efforts, with 89% of electricity sourced from renewable sources [53][55] Q&A Session Summary Question: Why was the midterm guidance put on hold? - Management clarified that the decision was made to allow for strategic flexibility during the ongoing review, not due to doubts about achievability [66] Question: Is there scope for in-market mobile consolidation? - Management acknowledged potential for more flexibility in consolidation but refrained from specifics at this stage [68] Question: What are the driving elements for market analysis? - Management indicated that the analysis will focus on operational rationale, improving margins, and consolidating markets for better positioning [77] Question: What is the outlook for OpEx in Spain? - Management expects revenue growth in Spain to sustain year-on-year, with EBITDA growth slightly above revenue growth due to operational efficiencies [130][132] Question: Is there appetite for cross-border consolidation in Europe? - Management detected a determination for drastic change in Europe regarding strategic autonomy, but acknowledged challenges in execution [140]

Group 1 - The core viewpoint is that Telefónica's high-dividend yield may be misleading due to weak growth prospects and insufficient dividend coverage by earnings and cash flows [1] Group 2 - The company has been identified as having a high-dividend yield, which could be perceived as a trap for investors [1] - Concerns are raised regarding the adequacy of the company's earnings and cash flows to support its dividend payments [1]

Group 1: Partnership and Solutions - Telefonica has partnered with Collibra to enhance data governance solutions for enterprises, focusing on reliability, transparency, and compliance [1] - Collibra's platform evaluates and tracks data and AI use cases, automating compliance with data privacy regulations and protecting sensitive information [2] - The solution is flexible, allowing organizations to integrate with cloud services and data lakes, and will be showcased at the Mobile World Congress 2025 [3] Group 2: Strategic Initiatives - Telefonica continues to form strategic partnerships, including a recent agreement with IBM to develop security solutions for a post-quantum world [4] - The company aims to optimize value creation by focusing on core operations and accelerating digitization, despite concerns over a debt-laden balance sheet [5] Group 3: Financial Performance - Telefonica's shares have increased by 10.9% over the past year, contrasting with a 12.9% decline in the industry [6] - The company currently holds a Zacks Rank of 3 (Hold) [6]

Core Insights - Telefónica Tech and IBM have entered a collaboration agreement to develop security solutions addressing challenges posed by future quantum computers [1][6] - The partnership aims to integrate IBM's quantum-safe technology with Telefónica Tech's cybersecurity services to protect organizations from potential data vulnerabilities [6][9] Group 1: Quantum Computing and Security Challenges - Quantum computing presents opportunities for advanced calculations but also poses significant cybersecurity challenges as traditional encryption may become vulnerable [3] - Data may already be at risk of being harvested by cybercriminals for future decryption, even before cryptographically relevant quantum computers are available [3] Group 2: IBM's Quantum-Safe Technology - IBM has developed enterprise software focused on quantum-safe solutions, including IBM Guardium Quantum Safe, which helps organizations manage cryptography and improve security posture [4] - Additional tools such as IBM Quantum Safe Explorer and IBM Quantum Safe Remediator are designed to identify cryptographic vulnerabilities and test quantum-safe algorithms [5] Group 3: Implementation and Collaboration - The collaboration will focus on creating solutions that adhere to new quantum-safe cryptography standards defined by the U.S. National Institute of Standards and Technology (NIST) [7] - IBM's infrastructure has been deployed at Telefónica's headquarters in Madrid to support business development aimed at enhancing cyber resiliency against future quantum threats [12][9] Group 4: Future Directions - The agreement includes the establishment of a joint use case office to focus on communications encryption and adaptation to new secure algorithms [11] - Telefónica Tech will assist organizations in transitioning to new cryptographic standards to ensure resilience against cybersecurity risks posed by quantum computing [10]

Core Insights - Telefonica's subsidiary Movistar has launched a 12-month free subscription to Perplexity Pro, an AI-powered response engine, showcasing the company's commitment to integrating advanced technology in the telecom sector [1][5] - The collaboration with Perplexity aims to enhance user experiences through AI, with significant investments from Telefonica's corporate venture capital division, Wayra, and other notable investors [5] Group 1: Product Offering - Movistar users can activate their Perplexity Pro subscription via the Movistar website or the miMovistar app, allowing up to five individuals to share the benefits [4] - Perplexity Pro utilizes advanced AI models to facilitate personalized communication and deeper engagement through follow-up questions [2] Group 2: Technological Capabilities - Perplexity Pro can analyze uploaded files and images, providing real-time insights and summaries, and retrieving relevant information from the Internet [3] - The service has been integrated into Movistar Plus+, enabling users to interact with AI through voice commands and receive real-time responses displayed on their screens [6] Group 3: Strategic Partnerships - Telefonica's partnership with Perplexity has expanded to Brazil and the United Kingdom, with plans for further rollout in other markets [5] - Movistar has also collaborated with Xbox to enhance the esports ecosystem in Colombia, offering access to high-quality games and training programs [7] - A partnership with Tigo aims to improve mobile connectivity for millions of Colombians, enhancing overall mobile experience [8] Group 4: Market Performance - Telefonica currently holds a Zacks Rank 3 (Hold), with its shares declining 6% over the past year, compared to a 17.3% decline in the industry [9]

Group 1: Partnership and Offerings - Movistar, a subsidiary of Telefonica, has partnered with Xbox to enhance the esports ecosystem in Colombia, targeting over 10 million active gamers in the country [1] - Movistar customers can access the Xbox Game Pass Ultimate for $38,690 per month, which includes unlimited access to over 100 high-quality games [2] - Prepaid customers can purchase the Xbox Game Pass Ultimate package online or at Movistar Experience Centers, with a promotional offer of a free one-month license for select gaming smartphones until February 28 [3] Group 2: Community Engagement and Training - The Movistar GameClub has hosted over 9,000 gamers and organized 50 events in eight months, demonstrating a commitment to building a vibrant gaming community [4] - Movistar GameClub is offering training courses for children aged 12 and older on video game creation, covering popular games and providing both in-person and virtual learning options [5] Group 3: Digital Transformation and Infrastructure - Telefonica is driving digital transformation in the Spanish industry through partnerships with Siemens, focusing on advanced connectivity and technologies like 5G and IoT [6] - Telefonica has invested significantly in network upgrades to enhance speed, coverage, and security across its mobile and fixed communication services in Europe and Latin America [7]