Telefonica’s Strategy pay TV and content. Brussels 25 October 2012

2 Area

Razón Social

The ICT sector has experienced an exponential growth in the last years …

New digital world

Total Accesses

7,700 mill.

x2 2006 – 2011 1

Applications

1 Million

x2 in 2011 3

Devices

1,500

million sold last year 2

Use

Smartphones

x15 vs. mobile 4

Internet users

> 2,000mill.

30% world population 5

Traffic

x150 in 10 years

Sources: (1) Pyramid – Fixed and mobile forecast pack, Apr 2012. (2) Connected CE Devices Global Market Forecast Datatable, Dec2011. (3) Pyramid & Distimo, 2011. (4) Merril Lynch, Matrix Wirelex Q4; AppsFire, Jan 2011; Morgan Stanley Blue Paper, Feb 2011. (5) Internetwordlstats.com (2011).

3 Area

Razón Social

Telefónica

Among the top 50

global companies by revenues *

Top 10 worldwide …

… by total accesses … by revenues

… by customer base and revenues

(Million, June 2012) (Million Euros, FY 2011)

Total accesses (as reported by companies) = Fixed Lines + Mobile Customers + Narrow and Broad Band Internet + Pay TV

FY 2011 revenues as reported by companies

* Financial Times Global 500 (2011)

38,454

38,921

45,277

53,780

58,653

58,656

62,837

79,629

91,010

96,451NTT

at&t

Verizon

Telefónica

China Mobile

Deutsche Telekom

Vodafone

France Telecom

NTT DoCoMo

América Móvil209.7

216.0

224.2

260.7

311.8

313.1

372.3

395.4

414.9

683.1China Mobile

Vodafone

China Telecom

China Unicom

América Móvil

Telefónica

Bharti-Airtel

France Telecom

Vimpelcom

Deutsche Telekom

4 Area

Razón Social

In this digital world, telecom operators are key players

Applications

O.S.

Content

Devices

Network

5 Area

Razón Social

Telefónica aims to evolve its Pay-TV service

according to new market rules…

From 3 different &

independent services…

…To a unique service with

distinctive user experience

IPTV OTT Mobile

TV

• Pay-TV as value added to broadband • Deployed over managed networks (IPTV, 3G) • Integration on Telefónica technology & processes • Running on Telefónica proprietary devices

Multi-device

Multi-technology

• Stand-alone service • Convergence of tech (IPTV,OTT) • Internet capabilities & processes (ID, payment,

billing) • On proprietary & third party devices

+ …

SPAIN

6 Area

Razón Social

Pay-TV market in Spain is not as relevant as in other

European countries

• Attractive FTA offer, in contents and variety

• Football (soccer) is the key content to drive Pay-TV subscription

• Additionally, movies & series are great complementary contents

• Ads investment is moving to Internet

• FTA audience fragmentation

Key issues

Source: TV households & Revenues Forecast 2010-2015. Ovum. Dec-10

Source: 2010 Telecom Market Annual Report. CMT. Jun-11

7 Area

Razón Social

More than 18% of Spanish Pay-TV subscribers are

trusting Movistar Imagenio

• Commercial launch: 2005

• 3-play IPTV offer

• TV contents: linear TV, VoD, PPV and TV apps

• Differentiation in content bundling (football included in standard offer)

• Cost-efficient offer for subscribers

Movistar Imagenio

main topics

Distribution of Pay-TV Spanish households

2010

Total: 4,6 MM

Others

(Cable) (SAT)

(IPTV)

(DTT)

Source: Pay-TV Market Report. Market Research. Telefónica

Source: Pay-TV Market Report. Market Research. Telefónica

8 Area

Razón Social

Besides Movistar Imagenio, Telefónica deployed

three alternative pay-TV offers

• Commercial launch: Q4 ‘10

• Exclusive non-linear content offer for fixed broadband Movistar customers

• Transactional VoD catalogue. No monthly fee

• 31k customers (2011 EOY) Movistar

Videoclub

• Commercial launch: 2008

• +30 Linear TV channels, both web browsing & mobile app access

• Access through 3G mobile devices Movistar Mobile

Imagenio (42k) (174k)

(12k)

• Commercial launch: Q4 ‘11

• Exclusive non-linear content offer for fixed broadband Movistar customers

• 6 linear channel including football channel

• 30k customers (2011 EOY) Movistar

Imagenio Xbox

9 Area

Razón Social

Final purpose: provide a unique service to clients,

independently of network and device.

2011

+

2012 2013…

If you have Imagenio at home,

mobile TV is free.

If you have Imagenio at home,

mobile TV at 50%

Access

ANY TIME, ANY WHERE, ANY

DEVICE, ANY CONTENT.

10 Area

Razón Social

Accesses June 2012 (million)

Total Accesses

103 Mill.

… and has achieved a relevant scale in Europe

Spain: 44.0

Germany: 25.2

United Kingdom: 23.3

Czech Republic: 7.8

Ireland: 1.6

Slovakia: 1.3

11 Area

Razón Social

Accesses June 2012 (million)

Telefónica is a reference in the Latin American Telco market …

Notes: - Central America includes Guatemala, Panama, El Salvador, Nicaragua and Costa Rica - Total accesses figure includes Narrowband Internet accesses of Terra Brazil and Terra Colombia, and Broadband Internet accesses of Terra Brazil, Telefónica de Argentina, Terra Guatemala and Terra Mexico

Total Accesses

209 Mill.

Brazil: 91.2

Argentina: 23.0

Mexico: 20.0

Peru: 19.7

Colombia: 14.7

Chile: 12.7

Venezuela: 10.9

Central America: 9.1

Ecuador: 4.8

Uruguay: 1.8

12 Area

Razón Social

Pay TV:

DTH, Cable, IPTV, MMDS

700.000 subscribers.

6% Market share.

Others:

Web TV, Mobile TV, OTT.

Country’s landscape

Telefónica’s TV / video Services

Brazil Chile

Pay TV: DTH, IPTV 410.000 subscribers 19% Market share. Others: Hybrid (1Q 2013), Web TV, OTT.

Colombia Argentina

Pay TV: DTH 265.000 subscribers 7% Market share Others: Web TV.

FTA:

Telefe, Leading channel in Arg. OTT: 50.000 subscribers. Others: Web TV

13 Area

Razón Social

Pay TV:

DTH

160.000 subscribers.

7% Market share.

Others:

Web TV, Mobile TV,

Country’s Landscape

Telefónica’s TV / video Services

Germany

Pay TV: IPTV 83.000 subscribers 0’5% Market share.

Czech Rep.

Pay TV: IPTV 140.000 subscribers 6% Market share.

Venezuela

Peru

Pay TV: Cable, DTH, IPTV 800.000 subscribers 68% Market share Others: Mobile TV, Web TV, OTT.

14 Area

Razón Social

Telefonica’s audiovisual entertainment offer renews and

reinforces our leadership in telecomunications.

Conectivity

Fixed, mobile

Content

Tv / Video,

Music,

Games…

Access

Devices

Set top boxes,

PC, hand sets,

tablets…

Capacities

ID, payments,

M2M, e-health,

cloud,

Comercial

attention…

Brands

Spain & LatAm

Europe

Brazil

15 Area

Razón Social

The Future is here: From the One to All… to the All to One.

Any time, anywhere, any device…

2020: 50 bn. connected devices

16 Area

Razón Social

THANK YOU