Telefonica in Latin America: Transforming Investment into Growth and Development The EURO: Global Implications and Relevance for Latin America

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1 Telefonica in Latin America: Transforming Investment into Growth and Development The EURO: Global Implications and Relevance for Latin America Maurício Giusti Strategy and Regulation Director March 18 th, 2008

2 In the beginning of 90s, Telefonica anticipated today s Latin American economic growth and engaged on a strong commitment with long-term investments Telefonica s Investments in Latin America (Billion euros) 43,0 34,4 77,4 Telefonica customers in Latin America (September 2007) 4,7 millions ADSL 19x 2001 s value 95 millions mobile 27x 1998 s value Direct Foreign Investment Infrastructure Investment Total investment 24 millions fixed line 2x 1998 s value The largest foreign investor in the region 2

3 making telecommunications available to all socioeconomic layers % Population Fixed Line Penetration High Income ~10% 90% 107% Middle Income 20% 20-30% 90% Low Income 60-70% 2% 45% 3 Start of Telefonica s operation 2005

4 Latin America now represents one third of Telefonica s total business Total Telefonica Results (September 2007) 218,6 Access 58% (Million) 195,9 11,6% Latin America Sep-06 Sep-07 Revenues (Billion euros) 38,7 8,6% 42,0 35% Latin America 9M06 9M07 18,2 14,7 OIBDA 24,5% 29% (Billion euros) 9M06 9M07 Latin America 4

5 Latin America s contribution was decisive in transforming Telefonica into a leading telecommunications group Top 10 telecommunications operators MM of customers September 2007 Top 10 telecommunications operators Market capitalization 19/Nov/2007 US$bn

6 The region is enjoying an unique macroeconomic moment in its history At the first time in the last 40 years the 7 main Latin American economies grew simultaneously PIB growth, constant currency Argentina Peru Brazil Mexico Colombia CAGR 06-08E Chile 5,5% 6,5% Venezuela 5,5% 6,6% 4,3% 3,4% 5,6% 15 million new middle class households estimated for Latin American GDP per capita (PPP): CAGR 06-10E >5,7 % 6

7 and presents positive perspectives of macroeconomics and politics evolution From a region with high risk perception Investment Grade countries in 2006 Macroeconomics and politics stability More than 75% of Latin America s GDP in Investment Grade countries to a region with profitable growth and investors confidence Expected Investment Grade countries in

8 In addition, it will be the fastest-growing region in the global telecommunications sector until 2010 TELECOMMUNICATION SECTOR GROWTH CAGR 06-10E TELECOMMUNICATION SECTOR IN LATIN AMERICA Latin America 7,8 % ICT Expenditure* (Million euros) m Developing Asia* 7,1% Central and Eastern Europe Africa USA and Canada 6,9% 5,8% 1,2% FY 2006 Total Customers** (Millions) FY 2010E >200m new customers CAGR 05-10E: 10,6% E Source: IDC * Excludes Japan, Korea, Hong Kong, Cingapore y Taiwan *Source: Telefónica **Source: IDATE 8

9 with broadband and mobility as the growth levers MOBILE PENETRATION 1 BROADBAND PENETRATION Total Latam Dec-06 Dec-10E 56% ~83% Penetration Growth 06-10E + 27 p.p. Total Latam Dec-06 Dec-10E 10% ~23% Penetration Growth 06-10E + 13 p.p. Mobile Market Growth in Latin America + 140/160 million additional mobile accesses Mobile Market Growth in Latin America + 18/19 million additional broadband lines Potential Telefonica customers + 55/60 million additional mobile accesses Potential Telefonica customers + 4/5 million additional broadband lines 1.- Source: Telefonica estimate 9

10 Telefonica is a key partner of the Latin America s future development Telefonica has a long-term commitment to the region The operators are important employment generators The company contributes to the region's economic growth and to the progress of its Information Society We believe in social improvement, promoting digital inclusion Telefonica is a strategic partner of Latin America 10