María García-Legaz - Head, IR Ángel Vilá - General Manager, Finance and Corporate Development Julio Linares - COO José María Álvarez-Pallete - Chairman and CEO, Telefónica Europe. Santiago Fernández Valbuena - Chairman and CEO, Telefónica Latin America Miguel Escrig - CFO

Jesus Romero - Merrill Lynch Tim Boddy - Goldman Sachs Georgios Ierodiaconou - Citibank Will Milner - Arete Jerry Dellis - Jefferies Keval Khiroya - Deutsche Bank Torsten Achtmann - JPMorgan Mathieu Robilliard - Exane BNP Paribas Jonathan Dann - Barclays Capital Giovanni Montalti - Cheuvreux Luigi Minerva - HSBC Ivón Leal - BBVA Fabián Lares - JB Capital Markets

Ladies and gentlemen thank you for standing by. Welcome to Telefónica's January to September 2011 results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder today's conference is being recorded. I would now like to pass you over to Ms. María García-Legaz, Head of Investor Relations. Please go ahead madam. María García-Legaz: Good afternoon ladies and gentlemen and welcome to Telefónica's conference call to discuss January-September 2011 results. I am María García-Legaz, Head of Investor Relations. Before proceeding, let me mention that this document contains financial information that has been prepared under International Financial Reporting Standards. This financial information is unaudited. This presentation may contain announcements that constitute forward-looking statements, which are not guarantees of future performance and involve risks and uncertainties, and that certain results may differ materially from those in the forward-looking statements as a result of various factors. We invite you to read the complete disclaimer included in the first page of the presentation, which you will find on our website. We encourage you to review our publicly available disclosure documents filed with the relevant securities market regulators. If you don't have a copy of the relevant press release and the slides, please contact Telefónica's Investor Relations team in Madrid by dialing the following telephone number, 34-91-482-8700. Now, let me turn the call over to our Chief Financial and Corporate Development Officer, Mr. Ángel Vilá who will be leading this conference call. Ángel Vilá: Good afternoon, ladies and gentlemen and thank you for attending Telefónica's 2011 third quarter results conference call. It is my pleasure to chair this call as new Chief Financial and Corporate Development Officer. Today I have here with me Julio Linares, Chief Operating Officer; José María Álvarez-Pallete, Head of the new Telefónica Europe and Santiago Fernández Valbuena, Head of Telefónica Latin America. Also with me are the heads of the new global units of Telefónica Digital and Telefónica Global Resources led by Matthew Key and Guillermo Ansaldo respectively. Miguel Escrig, our CFO is also attending this call. During the Q&A session you will have the opportunity to ask questions directly to any of them. The results released today show that our diversification and skill enable us to deliver strong revenue growth and solid profitability despite ongoing economic pressure and severe regulation in some of our markets. We are particularly pleased with a very strong commercial activity recorded in the last quarter leading our customer base to reach the 300 million mark. Revenue to September was up 5.4% year-on-year on the back of outstanding performance of Telefónica Latin America and sustained growth in mobile data. Despite increased commercial investment, in contract of mobile broadband, our underlying or EBITDA margin was 36% with limited erosion year-on-year as guided at the beginning of the year. By regions, Latin America is already the largest contributor to key financial metrics. And quite soon we’ll represent 50% of our results driving Telefónica’s growth. Within Europe, stabilization of underlying trends in Spain is to be highlighted. Well the very good performance in Germany, offset the slowdown in other European countries. I would also like to highlight the new organization announced in September which will allow us to bolster growth and to further improve efficiency. Finally, let me say that we fully confirm our goals for 2011 and our shareholder remuneration commitments. Let me turn to slide number 4. Both Q3 2011 and Q3 2010 are quarters impacted by very large extraordinary items that materially affect reported results. Therefore, in order to facilitate year-on-year comparisons, we are showing our P&L in underlying terms. That is adjusting the restorations derived from such exceptional items, investments in spectrum and non-cash impact from [OIBDAs]. In these underlying figures, we are not adjusting the impact on changes in our consolidation perimeter nor FX. In these terms, revenue rose sharply at 6.8% if we exclude MTR cuts ahead of our peers. OIBDA exceeded 16.7 billion euros, flat year-on-year, as we decided to ramp up commercial activity to foster future revenue growth. Excluding regulation impact, OIBDA would have grown 1% year-on-year. Net income was over 5.4 billion euros, down 10.6% year-on-year due to increase in depreciation and amortization and financial expenses. And as a proxy to cash flow generation, operating cash flow we expect around top 11.2 billion euros and spectrum outlays were less as compared to 2010. Turning to slide five; our diversified portfolio allows us to deliver solid profitability and healthy cash flow generation. Revenue growth was driven by our Latin America business which probably account for around 45% of consolidated figures in underlying terms from revenue to operating cash flow. It is important to highlight our lower dependence of Spain which now is at 28% of our sales and 35% of our OIBDA. And by services, we made further progress in attempting a revenue mix with broadband and services beyond connectivity already representing over 26% of revenues on the back of their double digit year-on-year growth. In organic terms, as the slide number six shows, revenue grew 0.3% up to September or 1.6% excluding regulation impacts. OIBDA declined 4.6%, while operating cash flow dropped 8.6% year-on-year as we increased CapEx in fixed broadband and mobile broadband. These organic ratios put us on track to fulfill our 2011 guidance. Turning to slide number seven; I would like to highlight, the net financial debt has decreased about 1 billion euros in the quarter, falling slightly below last year end level. Over 2.5 billion euros of free cash flow have been generated in the quarter. And free cash flow generated in the nine months to September was 5.7 billion euros, up 11.6% year-on-year. Let me also highlight that up to September cash repatriation from Latin America has reached to 1.7 billion euros. So net financial debt stood at 2.49 times rolling OIBDA at the end of the quarter and at 2.55 times when including commitments, slightly lower than previous quarter after recent repayments. Effective interest cost of our debt stood at 4.58% excluding FX results. This is 24 basis points lower than in the first nine months of 2010 on a comparable basis. It is only 37 basis points higher than in the first half in-spite of current unfavorable debt market conditions and is well below our guidance. Next slide, number eight, shows the limited impact from currencies fluctuations year-to-date benefitting from Telefónica’s active FX management policy and other quick diversification. Our operating cash flow has been adversely impacted from FX movements by just 34 million euros in the first nine months, with appreciating currencies offsetting losses from those depreciating. On top of that, such movement is compensated by reduction in debt not denominated in euros. In order to protect our solvency, we proactively managed the currency mix of our debt to reduce the FX sensitivity of our leverage ratio. In the sense, as of September our debt in non-euro denominated European currencies approached two times OIBDA in those same currencies. And the debt in LatAm currencies ex-Venezuela was slightly above two times operating cash flow generated in the region. In slide number nine, clearly highlight that we have a sold liquidity position that withdraws any pressure for refinancing of 2012 maturities. If we can comfortably manage long term debt maturing next year, that amounts to 7.1 billion euros. At first, we have an extension option on 2 billion preferred shares maturing 31st of December. Second, the biggest maturity a syndicated loan tranche for 2.4 billion euros based also in December, so with more than one year to address it’s refinancing. Third, 1.8 billion euros equivalent debt matures in LatAm where local funding markets are not under stress. Fourth, 64 billion euro credit lines maturing beyond 2012 more than covers the sum of banking and LatAm debt maturities of the year. And fifth, only 1 billion euros Telefónica S.A. debt matures in the first 11 months of next year and that has been already covered by the 1 billion bond issued in October. We also enjoy a 4.1 billion cash position, excluding the cash of Venezuela, and it is also worth mentioning that we have been reinforcing our liquidity position by increasing our undrawn committed credit lines by 1.3 billion euros in the quarter, most of them long-term to a total of 9.2 billion euros. In any case, we will continue with a prudent, early access to credit markets as we’ve done during the year, where we have so far raised close to 11 billion euros so far. Let me now review our operating results, starting on slide number 10, where I would like to stress the very strong commercial volumes recorded in the third quarter. Our strategy targeted at the increasing value of our customer base translates in to two key related points. Contract mobile customers accounted for roughly 50% of mobile networks in the first nine months of the year, and mobile growth in penetration has already reached 15%. Figures for our European operations exceed by far the average for Telefónica, while the lower data penetration in LatAm is a huge upside opportunity for us. Especially worth mentioning is the rapid expansion of the mobile broadband base at 76% year-on-year, being a key growth lever for the future of Telefónica Digital. Moving to page number 11. Mass marketing of smartphones, which capitalizes on the large availability of handsets with competitive prices, and on tiered pricing in all of our markets, is bearing fruits. Shortly, a sustained ramp up in mobile data revenue, which posted an outstanding 20% year-on-year organic growth. Mobile data revenue already accounts for 30% of mobile service revenue. We’ve been reaching 25% in Spain and LatAm and over 40% in Europe. Particularly strong is the booming growth of non-P2P SMS revenue, which stands now at 52% of total data revenue and limits the cannibalization of risk from the year obligations, which so far continue to have a negligible impact in our geographies. Actually, peer-to-peer SMS revenues continued to increase our 4% year-on-year up to September. It is also worth highlighting that Latin America is delivering a sharp 32% growth in mobile data sales, despite low mobile broadband penetration. Let me now walk you through the performance by regions starting with Latin America on slide number 12. The most relevant feature of Q3 in the region is the very strong commercial momentum with total net adds beating previously statistical records, increase volume of gross on businesses and even a higher activity than in the second quarter. Total net adds rose by 60% versus the third quarter of 2010 where the growth was over 10% quarter-on-quarter. But it’s certainly the absolute number what makes the quarter exceptional was the good quality of a customer base expansion with focus on their higher value segments. In the mobile business, in Q3, mobile broadband gross adds almost tripled to 2010 figure and contract gross adds were 25% higher, while in the wireline business, we continued delivering double-digit growth in fixed broadband with a significant ramp up in paid TV net adds and a successful production of operational lines. All these led to sustained acceleration in total customer’s growth, shifting the basis for enhanced topline growth in the coming future. Slide number 13 sums up the financial results in Latin America. Reported revenue growth was over 18% up to September. On the back of the excellent, top line performance posted by Brazil, which already accounts for 50% of our results in the region. Excluding Mexico, revenue would have risen a sharp 21% year-on-year. And underlying year-on-year growth in OIBDA was 11%, again driven by the increased contribution from Brazil, leading to a solid 36.1% OIBDA margin in the first nine months of the year. In organic terms, revenue growth was close to 5%, driven by the very strong performance of data and broadband across businesses, which already account for roughly 25% of fixed mobile revenues, with outstanding and sustained acceleration in mobile sales. OIBDA declined 0.9% year-on-year in organic terms with a sharp increase in commercial activities, driving 4.4 percentage points year-on-year. On top of that, annual comparisons were impacted by the lower contribution of regional projects, and non-strategic to our disposals and by insurance compensation related with the earthquake in Chile a year ago, which all together would add 2.6 percentage points in our EBITDA growth year-on-year. Finally, the weak performance of the Mexican business also brought OIBDA down. Striping out these effects, OIBDA growth would have been very strong. Moving into our Brazilian operations, we are very pleased to note that one year after taking full control of Vivo, we are now even stronger and we continue to widen our leadership in Brazil. In Q3, we posted record commercial volumes with mobile net adds up over 70 % year-on-year and 50 % quarter-on-quarter. Very importantly, we continue to gain market share in the high value segments, which close to 37% share in the contract segment and 43% share in the mobile data space. Improving volumes and quality at the same time would not have been possible without our differential asset base, particularly in 3G coverage where we are well ahead of our competitors. It is also worth highlighting the launch of new products like push to talk which has gained a lot of traction in just few months and the projected launch of fixed wireless services in 31 cities outside São Paulo along the fourth quarter of the year. On the financial side, revenue and OIBDA performance was stellar in spite of increased commercial costs. Total revenue rose 5.4% up to September with a sufficiently remarkable performance of mobile service revenue which continue to ramp up quarter-on-quarter driven by booming data revenues. On top of that, fixed broadband and PTV revenues posted a very strong annual growth already accounting for 20% of total revenues. OIBDA growth stood at 7.8% with margin expanding year-on-year to 36.3% despite increased commercial investment as we are leveraging in region synergies. Regarding the Brazilian integration, on slide number 15 and after finalizing the corporate restructuring in early October, I am pleased to announce the increase of the original guidance provided a year ago for the expected synergies. After increasing in July our target for operating synergies, we are now upgrading the net present value of expected tax and financial synergies to 1.7 billion euros. So, all in all we expect now to reach synergies with an NPV between 4.4 billion euros and 4.8 billion euros, well over 50% of the total value of the deal and ahead of our initial forecasts. Let me now move to slide 16 and quickly review the performance of our operations in the southern and northern regions in Latin America. In the South, commercial activity in the third quarter was strong across our footprint with strong revenue growth in Argentina, Chile, Peru and Columbia and sustained acceleration in mobile service revenue across markets. In the North, our operations in Venezuela posted solid revenue and strong margins while Mexico’s performance continues to be weak. We are already adapting our commercial proposition in Mexico through the drastic cuts in MTRs, having launched [new] schemes should contribute to accelerate the capture of mobile market share as well as to accelerate the cannibalization of fixed traffic in the coming future. Moving now to Europe. I will start with Spain on slide number 17. During the third quarter we launched new commercial offers across businesses to enhance our competitive position which are already delivering positive results. The new integrated fixed broadband offer introduced in September has clearly set an inflexion point in net additions while the new mobile offer launch in July has slid to lower churn levels. Regarding financials I would like to stress the stabilization in comparable trends, as revenue recorded the same decline as in Q2, 6.6% while OIBDA deterioration was contained quarter-on-quarter delivering a marginally improved OIBDA margin. Please bear in mind that 2011 results still do not reflect the benefits of the new special agreement signed in Q2 which should lead to additional cost savings. Therefore the healthier OIBDA margin reported is also a reflection of our rational approach to commercial expenses and particularly subsidies in a context where some of our competitors are just focused on volume and are heavily deteriorating their margins. Our strategy has allowed us to continue reporting revenue, OIBDA and operating cash flow shares well above excessive market share. Turning to slide 18 to cover our Spanish fixed business. In the broadband market, the new commercial offer launch in September has led to a significant ramp up in gross adds. Therefore we expect our fixed broadband access base to record a better performance in coming quarters. In Pay TV our enhanced content proposition including all the (inaudible) is also being reflected in our strong net add figures. So we’re seeing improved commercial trends which are compatible with a better performance of our connectivity ARPU, which remains stable quarter-on-quarter. Again our new offers are very attractive for our customers, but are not value disruptive for us. In terms of revenues Q3 year-on-year performance continues to be driven by similar factors to those we’ve seen in recent quarters and we recorded a slight sequential improvement on the back of the better broadband business already mentioned and improved trends in traditional revenues. Regarding our mobile business in Spain and despite the adverse economic conditions, I would like to highlight the strong growth delivered in mobile data. Mobile growth on (inaudible) rose close to 50% year-on-year up to September, while data ARPU recorded a solid improvement driven by the strong performance of connectivity services which already represents 75% of our data revenues in Spain. The good data performance is also helping to manage ARPU in the contract segment, which already account for 69% of our customers, delivering stable ARPUs quarter-on-quarter. Our focus on this segment is driven by our policy to maximize the value of our customer base. With significantly higher relative ARPUs, lower churn versus [rebate]. And churn should be improve as the new tariff launched lead to 30% drop in churn for those customers who applied for renewal rate. Finally, a very strong performance in data should be further empowered by the new data-centric operation we launched. We’re bundling voice, SMS and data being the first in the market to launch bundles with unlimited SMSs and offering lower prices for those customers who have fixed broadband with us therefore boosting gross selling opportunities. In the UK, in the third quarter we regained commercial momentum in a challenging environment with no signs of competition relief. Contract mobile net adds increased over threefold quarter-on-quarter following the launch of the new smartphone tariff structure at the end of August while we kept churn low at 1.1%. Smartphone adoption continue to growing reflecting the good acceptance of our renewed tariff portfolio reaching a 36% penetration in September. It is remarkable that 60% of the customer segment has already contracted one of our three bolt-on (inaudible) operating choices, the majority of them on the £6 to £10 pound price range. This is central to the revenue growth acceleration to grow to 10% year-on-year driven by the non peer-to-peer SMS revenue increase of over 38%. Topline continued to be under pressure impacted by the slowdown in customer growth sustained from the bundled and tariff optimization amid customer confidence weakness and a significant hit of regulation. Regarding profitability, we posted a solid OIBDA performance, up 5.1% year-on-year, we saw a 27.3% margin in the first nine months of the year. In Germany, turning to slide 21, we continue posting very good results gaining value market share as we leverage a strong commercial momentum on our renewed tariff portfolio, existing class customer satisfaction and the flexibility of My Handy handset commercialization model. It is also worth to highlight our partner distribution channels which are driving the low end smartphone segment with sub-contract euro devices. We are very pleased with a remarkable contract mobile net adds, up over 250,000 in the quarter. This combined which increased usage of data services led to an acceleration of mobile service revenue growth of 5% in the first quarter to 9% in the third quarter excluding the negative impact from MTR cuts. In addition, OIBDA posted a year-on-year organic increase of 2.3% reaching close to 25% margin in the third quarter with the benefits of business restructuring and large scale and further efficiencies offsetting increased commercial spend. To close the review of our European operations, let me highlight a sequential operating and financial improvement across the board posted by Telefónica Czech Republic as shown on slide number 22. Solid commercial performance in focused areas was maintained in the third quarter. In mobile, we outperformed again the contract market after recording positive net-adds driven by mobile broadband customers uptake. It is also worth to highlight that fixed broadband performance on the back of the VDSL launch which is helping to protect existing customer base and to better manage ARPU. As a result, we have increased our fixed broadband market share by 2 percentage points year-on-year. In addition, line losses continues to decrease sharply. In the third quarter, Czech revenues showed a sequential improvement, and in Slovakia, we recorded another strong set of results. Profitability remained stable year-on-year, thanks to cost efficiencies. Consolidating the best-in-class margin in the Central and Eastern European region, while operating cash flow generation continues to be very strong exceeding 0.5 billion euros up till September. Let me now briefly explain the new organization approach in September which will accelerate the execution of the strategy presented at the Investor Day. The creation of Telefónica Digital and Telefónica Global Resources will reinforce our status as a global player and leader in the digital world and will allow us to capture the most of the opportunities supported by our global scale and industrial alliances. At the same time, we are simplifying and managing the business geographic mix leading to the configuration of two large regions, Europe and Latin America. Reporting along these new structures will begin in the first quarter of 2012. The first new global unit is Telefónica Digital, a brand new organization with a mission to create the power for Telefónica to outperform in the digital world and reinforce our profile as a growth company. Telefónica Digital aims to create new propositions and revenue streams and provide value to customers beyond pure telecommunication services. We are starting from solid foundations. Based in the same cluster, both existing assets like Terra, Jajah, Tuenti, Telefónica R+D and the verticals featuring digital services in key growth areas such as financial services, machine-to-machine, cloud, security, health, media and advertising. We are now in the process of assessing and prioritizing the opportunities where we can make breakthroughs and add value to Telefónica. Telefónica Digital will exploit our leadership position in markets where we are present; leveraging on our 300 million direct customer relationships and will also explore over the top opportunities in the right markets with the right partners. The second new global unit, Telefónica Global Resources, aims to leverage the full potential of our global scale to maximize business profitability. We are already making significant progress on global projects. But, we aim to accelerate the generation of additional synergies and to maximize the benefits from scale economies. We are already working on a few flexi-projects; focusing our efforts on fewer but with higher value impact opportunities. First, we will increase the level of our standardization in global sourcing to further increase the level of aggregation in global purchases leading to significant additional savings. Second, we will further advance in the global management of IT infrastructures, progressing in transformation and providing enablers clear visions to carryout their business with competitive advantages in terms of cost and service quality. Third, we will apply more radical approaches in the management of our operating assets. For example, we aim to further advance in network sharing, reaching new agreements and going beyond the traditional site sharing in some cases. And we will continue with the sale of non-strategic net core elements such as towers in the areas where they do not provide the competitive advantage. Finally, we will speedup the growth of our MNC business reaching out natural market share. All these organizational changes are being implemented and we have set clear priorities in the short term to drive growth on profitability and to improve our financial flexibility. In Latin America, Santiago and his team are focusing on maintaining our operating and financial leadership in Brazil, while negotiations with the Colombian Government to merge our fixed and mobile businesses are underway. This transaction, when finally approved, should lead to significant synergies and debt reduction. Turnaround in Mexico is another key target for the short term. In Europe, José María and his team are working to balance stronger commercial momentum with free cash flow protection in Spain, while in the UK the main goal is to enhance our commercial activity. In Germany, the whole team is focused to keep on gaining high value market share, while in the Czech Republic, we aim to continue delivering a superior cash generation. Regarding Telefónica Digital and Telefónica Global Resources, both Matthew and Guillermo are working fast to quickly launch (inaudible) to foster growth in the digital world and to fully leverage scale benefits. Finally, my first priority, my new role is to improve financial flexibility, exploiting several levers and building on our firm figure flow generation. We will proactively manage our assets base. We will also increase our focus on profitable efficient investment where we will continue to have a strict – a very strict working capital and tax management. All of this will allow us to reinforce our growth profile and to deliver on all our commitments which we reiterate. To sum up, we are building the foundation for future revenue growth. We are on-track to meet 2011 guidance leveraging our diversification and strong growth in mobile data. We continue to have a sound free cash flow and a strong liquidity position. Our new organization will bolster growth and efficiency gains enhancing execution. We will pursue an active portfolio management portfolio to optimize use of capital and improve financial flexibility and the strong free cash flow generation will allow us to comfortably reiterate our dividend commitments. Thank you very much. And now we are ready to take your questions.

The first question comes from Jesus Romero from Merrill Lynch. Please go ahead with your question. Jesus Romero - Merrill Lynch: The first question was on the P&L account. How concerned are you with all the austerity measures that could be introduced in Spain with the new government starting on November 20th? And do you feel confident on the possibility of maintaining the trend that confident looking out for EBITDA in 2012. And second, I heard, you were saying about the financial flexibility, how important is the current rating that Telefónica has right now and do you see the net debt-to-return declining materially over the next 12 months? Thank you. José María Álvarez-Pallete: This is José. I will take your first question on Spain and the overall economic situation. We do not expect any improvement in the short run. Competition is not showing either any sign of competitive relief. So we are focusing highly on our – remodeling our commercial strategy with a dice, you know that we have been launching new ties on the contract side. On the mobile side, we have been launching a new fixed broadband proposition as well. And very recently, as of yesterday we launched a full bunch of our new ties on modeling mobile both voice and data. So, no major changes. We’re not expecting any major improvement in the short run but we keep growing and commercial activity is improving. On our commercial momentum is becoming stronger. So we are not exploring them, we are not considering any improvement. But we can go into the same direction commercially speaking. Ángel Vilá: On the leverage ratio. We have reiterated our target for leverage ratio for year-end. The exact level by year end will depend on the financial market rates, especially on FX but also on interest rates. It will also depend on foreign improvement targeting the working capital. Also on the pace of commitments on new retirement programs, and the EBITDA resolution in the last quarter. I should say that we don’t have just the ambition of generating cash flow to pay the dividend but to have some leeway for the purposes of, say, including some debt cancellation. So we reiterate the leverage ratio for year-end as we have expressed.

The next question comes from Tim Boddy from Goldman Sachs. Please go ahead with your question. Tim Boddy - Goldman Sachs: Yes. Thanks. Two questions, first of all, in LatAm, it seems like the cost of growth for a couple of quarter now has been consistently higher than expected. Is this for the sustainable trend or can we see a point perhaps next year where we start seeing EBITDA growth accelerating faster than revenue growth as oppose to obviously this year’s trend. Secondly, just on what you are seeing around disposals, it will be helpful to understand how broadly you’re thinking, is this all of the current assets and scope including things like China Unicom stake? And then just to clarify your dividend guidance in relation to that. I know you’re saying you want to pay the dividend out of cash flow. Could that be cash flow that includes cash generated from disposals? Thank you? Ángel Vilá: Tim, this is Angel. Let me take your question first of all. When and if the OIBDA decline that you’ve seen in this quarter might turn around. I think the answer is two-fold. First, market is growing faster than we had originally planned. And are doing better in general terms than what we originally thought. And that has required especially in a place like Brazil that we step on higher commercial effort. This is a welcome development in the sense that acceleration in growth is going to mean a higher penetration in EBITDA result for those already present at the relevant market shares like it generally tends to be in our case. On top of that we have had on this quarter a number of different irregular events that have coincided in the sense that they are non-recurrent or they do not happen every quarter. As that might have lowered the EBITDA picture which I think that underline, you can say, is proceeding at the right pace. Whether we will regain acceleration in OIBDA growth sometime next year will continually demand on what happens with the market growth and with the attitude of other competitors, who are of course also trying to reach the same goals. With regard to the investments, we are working in several projects to maximize the value of non-core assets and to optimize the use of capital. Given the volatility that we are seeing in the markets, we would rather not disclose which are those projects or the timing of those executions. But I should say that the final target of this sale is to optimize our portfolio rather than a must to accomplish our remuneration commitments.

The next question comes from Georgios Ierodiaconou from Citibank. Please go ahead with your question. Georgios Ierodiaconou - Citibank: Two questions from my side. The first one is on the EBITDA trend, obviously, we have seen just over a 1% decline in the margin and your three-year guidance suggest a small decline, more or less, slight margin. I was wondering whether you can give us some color on how you expect the margins to progress beyond 2011 and will the improvement be a result of specific efficiency measures beyond the one you announced in Spain or whether that’s a result of lower commercial investment in Latin America and other parts of the footprint. My second question is on the Spanish business, the regulator reported close to 90,000 mobile number portability deficits for every one of the three months in December, and I know in the past you are very focused on churn, but it has been rising this year. So my question is would you be willing to allow churn to increase further or do you believe at this time, it’s a priority to stabilize the KPIs. Thank you.

Regarding your first question, this is Julio Linares, when we provide our guidance for this year, we prioritize topline growth and it holds to capture growth opportunities in our footprint. Because of that and taking into account the uncertainties that we saw in the market, our own macroeconomic competition, consumer behavior, we provide a threshold guidance to be able to manage those uncertainties. Reality has been tougher than we thought, and we thought that we would suffer because the macroeconomic evolution because regulation and because of competition. Additionally, the consumers were very sensible to pricing and indeed optimizing their tariffs. On the other hand it was great. The growth in mobile broadband, although it had a significant impact on the growth side because of the commercial, for regarding smartphones and because of that we have this kind of margin and OIBDA evolution. And of course we are using all the levers we have in order to improve these efficiency, particular in now taking into account our new organization for global resources. Ángel Vilá: Talking about your question about Spain and churn. We focus on churn under different segments and as a result we do answer in different fronts. First of all, in terms of the new product and services that we have been launching, we are starting to get traction as I was telling you before and that's showing significant improvements in net add figures and reducing down churn namely on the fixed broadband side, so you will see some traction and some improvement in the coming month. As well on the contract side, with this six cents tariffs that we launched a few months ago is starting to good, to show good signals as well and therefore on the contract side, the churn on the mobile side is getting better. The new tariffs again that we launched yesterday bundling voice and data on the mobile side again will help us in that direction. So depending issue would be on the prepaid side where we have become very practical. We will see some campaigns, you will see some campaigns from us on here till the yearend, but we won't be disclosing them now. So churn, it's always our focus, but we are also very keen on the value and therefore for us, we are managing churn under different segments. So you will see some improvement on the different products and services and we will keep you posted.

The next question comes from Will Milner from Arete. Will Milner - Arete: Thank you, I guess the first question is just on shareholder returns. On the commitments to pay shareholder returns at a similar level beyond 2012, so I think 8 billion euros annually. I guess just in the context of your organic EBITDA trend today which is over minus 4% and rising interest costs, are you still confident in your ability to pay that level of shareholder returns beyond 2012 and what might cause you to think differently about that? Ángel Vilá: Okay. We are reiterating our shareholder remuneration in the light of the strong free cash flow generation that we are seeing. The first nine month as I said before we reached the 5.7 billion euros of free cash flow which is up 11.6% year-on-year. Now we spent free cash flow performance for the full year. We do not provide free cash flow target, so I cannot provide the free cash flow payout for the next year, but as a reference, last year after the spectrum, we generated 8.5 billion free cash flow, 175 euros per share, with again 7, and 7.9 billion euros for that. So it would be a 78% of free cash flow generated in a year like 2010. On 2013 onwards we have not decided what would be the split of shareholder (inaudible) dividends or potential share buybacks. That’ll be decided later on taking to account investors interest and also market conditions. Will Milner - Arete: My second question is on UK. It looks like minute volumes there are now falling 11% year-over-year and the relative performance I guess has deteriorated. I just wonder if you can talk around the prospects for improving that relative revenue performance in the UK?

The answer obviously is yes. We keep focusing on volumes rather than on value, but we need to acknowledge that during the year in the last months, the deceleration in service revenues has been mainly based on the reduction on the base growth and therefore we already have launched the [inner focus] a new set of tariffs namely on the smartphone field on the contract side where we specifically aim to regress market momentum and in fact according to the latest figures that we have, we are getting traction on that side, both in prepaid and postpaid. So yes we are focusing on that and yes we are taking corrective action.

The next question comes from Jerry Dellis from Jefferies. Jerry Dellis - Jefferies: Two questions please. First one is regarding the workforce reduction on the new collective agreements in Spain. As the benefits for that comes through in 2012, should we expect to see this invested in heavy commercial investments as we've seen in Brazil and then in Mexico in the last quarter? Or should it see through perhaps into a stable EBITDA trend as you see market conditions at present? And the second question is just regarding mobile data. Back in April, you provided some very interesting information about the percentage of customers who are hitting the caps in their tier data plans. I wonder if you had any other updated information around that to give us some sense of what proportion of your smartphone customers are now trading up through the tier mix? Ángel Vilá: I will take the first question on the workforce reduction in Spain. The processes being run and is proceeding according to schedule. So we will see the benefits of debt reduction well flowing through the P&L account during 2012 progressively because you are going to depend on, of this year how many people will be registering for that. And secondly at what time of this year, they will be leaving the company and therefore you will have a big impact all along the year. The use of those savings on those efficiencies is going to be decided all on the year basis your depending on market and commercial conditions, but you should expect those efficiencies to flow all along the year, not at the beginning of the year, but throughout the year 2012 and we will keep you posted on the process. Regarding your second question, I'm trying to answer for the whole Telefónica Group. Right now we have a penetration of mobile broadband I mean [angles], smartphones and tablets all together of 15% of our total base. With this penetration, we are above expectations, both in excessive and ARPU levels. And the ARPU that we are getting with these kind of mobile broadband customers is 1.5 average mobile ARPU, which is in line with the information that we provided in our Investor Conference in London. Profit that we have seen in this mobile broadband customer base is better than average profit and it is as well in line with information that we provided at that conference.

The next question comes from Keval Khiroya from Deutsche Bank. Keval Khiroya - Deutsche Bank: Two questions for me please. The first, you reported a 0.3% revenue growth in the first nine months. Do you consider this to be within the definition of up to 2% revenue growth. And secondly you have upgraded your Brazil synergy target, so is it a positive, can you give some time, some color on the phasing of incremental synergies?

Regarding your first question. Our revenue growth is within our guidance that we provided at the beginning of the year, that means that we will have positive growth until up to 2%. Ángel Vilá: Second, in terms of the synergy extraction process, in Brazil, what we can share with you is that what we have upgraded is the non-operating part of them, now that we have been able to clarify a bit better of how the full impact of the reorganization process is going to be. But unfortunately, we're not in a position to disclose at this very moment exactly how we are going to be (inaudible). Those will be however event driven, meaning by the time we report the results and we file the tax returns or refinance the synergy, real values will be more visible than they are today.

The next question comes from Torsten Achtmann from JPMorgan. Please go ahead with your question. Torsten Achtmann - JPMorgan: Two questions please. First on Latin America, when do you expect to see the benefit of the higher commercial activity come through in terms of revenues and therefore when you see – when do you think we can see more accelerated revenue growth coming from Latin America? And secondly on Spain, it seems total voice traffic seems to – the decline seemed to have accelerated in the quarter compared to last quarter. Can you give an update what is happening and is there any chance this could turnaround in the near term? Thank you. Santiago Fernández Valbuena: Torsten, this is Santiago; let me take your question on LatAm first. The sequence of events should be, we get new-adds especially those related with contract; in the contract segment or with new products like mobile broadband that eventually translates itself into higher revenue growth and how fast that process happens depends crucially on how well penetrated the market is. So it will be very market specific; it is hard to generalize because that might be off in one market and in, in some others. Brazil is probably a bit tail-end of that process and because Brazil is so much, I think it’s going to be sooner rather than later that we can see some acceleration in growth; we’ve seen for instance this quarter that we’ve had very good top-line numbers in Brazil, that with the wobbles and the ups and downs that aren’t to be expected from the very competitive environment, probably should be the trend going on. We’re also very happy that our leadership in the new products like mobile broadband is so far un-weathered and it is going to be very hard to catch-up on that, because of the investments that we’ve been able to make in the past. And eventually those revenue growth should of course translate themselves when markets stabilizing to OIBDA and in the rest of the account. Ángel Vilá: Taking your question about voice traffic evolution spend, tariff has been – the decline accelerated a little bit in the third quarter and that’s why we have reacted with these bundling strategy both on the wireline and on the wireless. And as a result, because we have increased attractiveness on the amount of minutes that we are bundling, we expect to have a better – evolution of our MoU reviewing the next quarters. In fact, after the launching of the 0.06 cents tariff here, we have gained some traction and we hope that with the new tariff sample that we launched yesterday, we will get some traction over there. But you are right, during the third quarter voice traffic declined a little bit more in the second quarter.

The next question comes from Mathieu Robilliard from Exane BNP Paribas. Please go ahead with your question. Mathieu Robilliard - Exane BNP Paribas: Two questions please. First, with regards to organic OIBDA trajectory which has deteriorated throughout the year for the reasons you highlighted and Q4 2010 on my number is going to be a tougher comparable. So I was wondering in which part of the business you were expecting recovery so that you can offset the (inaudible) comparable and stay within guidance? And then the second question regarding LTE auctions in Brazil; apparently the schedule is moving ahead and I think the nature of that concession was talking about there is the possibility of a new entrant in Brazil mobile through LTE auction; may be if you can give us a little bit of color in terms of the timing and the kind of different players that you envision in the market there? Thank you.

Regarding your first question, what we expect is that in Spain we will not see major changes on revenues on EBITDA performance. We will leverage on our commercial activity that we expect to improve in this fourth quarter, thanks to our new commercial proposition launch in the market as well as the sales of some non-strategic assets. And in America, we will see improved trends as we capitalize the strong commercial activity recorded in the last quarter particularly, and the synergies in Brazil that are progressing in world. Ángel Vilá: Mathieu, in terms of the expected LTE auction, the Ministry of Telecoms in Brazil have said that by the end of April next year there should be an auction. That is not a proposition, but it is an indication to be in the 2.5 Gigahertz space and we are still unsure about what the other conditions about the coverage, regarding investments or quality would be, and so there will be a few more of those. We have the intention of course to participate and whether or not there are new entrants or new bidders remains to be seen. We certainly think this is a good investment for the future. Although, quite frankly, it might come in a bit early relative to the recent auctions and the still ongoing deployment of 3G; but nevertheless whenever it is auctioned, we will participate.

The question comes from Jonathan Dann from Barclays Capital. Please go ahead with your. Jonathan Dann - Barclays Capital: It says in the slides that so far you've repatriated 1.7 billion of cash. I think in the second quarter, you might have said you are expecting 3.5 billion. Could you just update us on the amount? And then secondly, you've provided net debt in Spain, UK, Czech Republic; I believe Germany have to hold cash. But, currently where and does it matter at the group level where the cash balances sit in terms of liquidity or are you able to manage refinancing etcetera without much larger dividends from Latin America? Ángel Vilá: This is Ángel Vilá. On repatriations, we have repatriated 1.7 billion euros from Latin America. Last year by the same time we had repatriated 1.1 billion euros. And what we said at the end of the second quarter conference call, we by then had repatriated 1.4 billion euros, we said we were expecting to level that figure by year end.

This is Miguel; regarding your question on our cash, it is mainly located in Latin America as the cash that we have usually in Spain or in Europe, is used basically to pay down the credit lines that may be withdrawn later on. Anyway, we have a centralized cash management and so although the cash is owned by Latin American companies, big part of that is lend through our central cash unit management so that it can be used also at holding level.

The next question comes from Giovanni Montalti from Cheuvreux. Giovanni Montalti - Cheuvreux: And sorry just coming back to Brazil, and could you confirm if we can expect an improvement in profitability already starting from the next quarter? Thank you. Santiago Fernández Valbuena: Giovanni, it’s Santiago here. I think it’s not prudent to say when the acceleration in trends is going to happen. I think the direction is quite clear though; it might be next; it might be the following, but certainly all the requirements are in place. But I would rather not comment right now to an acceleration – immediate acceleration in trends. Giovanni Montalti - Cheuvreux: So can I quickly follow-up on the synergies; is there any synergies already, I mean are you already making use and executing a portion of those synergies on the fiscal and financial sides? Thanks. Ángel Vilá: Almost operational and synergies are taking place gradually, but they are happening after the integration which is very recent and some of them are going to be extracted by things like that Miguel gave us an example; by long distance being split between São Paulo and outside of São Paulo, which previously had to pay taxes because they belonged to different company and now they are all within the same company. This is an obvious and very clear tax saving that is, because it is now going to be internalized. And there are many others like that not thousands; but there are many others like that that happen as services gets sold. The financial and the tax events as I think I mentioned before are more event specific and they will happen more likely next year than this year.

The next question comes from Luigi Minerva from HSBC. Pleas go ahead with your question. Luigi Minerva - HSBC: And two questions on regulation. The first one in Europe, in a speech Neelie Kroes at the beginning of October mentioned two options or two possibilities with regards to incentivizing investments in the next generation access investments. And the first one was a reduction in a [ULL] copper prices and the second one was inevitable increase in the wholesale and retail fiber base prices in and the medium term. I was wondering what are your views on these two possibilities on the first one, maybe in the short-term and the second one, whether it acceptable over the medium-term? And my second question is on Brazil and Anatel had launch this some [bundling] consultation process in August. I was wondering if you can give us an update, if you have more visibility now on the priorities of Anatel with the type of cost methodology they are thinking of and whether Teleste or Telefónica Brazil would be interested in becoming an unbundler outside São Paulo in the new framework? Thanks.

Regarding your first question, we really believe that to artificially try to reduce prices in the market through our sales or through a bundle local loop is not the right solution to incentivize investment in the new generation. We really believe that there are all the frameworks that will be much better in order to stimulate that kind of new infrastructure development. Santiago Fernández Valbuena: In terms of, Luigi, it’s Santiago here, in terms of the unbundling process, in Brazil it just started. It was announced early next year. We should have much more clarity about how and when it is going to be applied, prices are, to the best of my knowledge, is still not known and the Telefónica strategy is still not fully developed but I can give you some indications is that outside of São Paulo we have very little of any interest in using that instrument without knowing the price. Maybe the price isn't as attractive. We have to take a second look at that. But our current strategy is to use the fixed wireless technology to access the market outside of São Paulo as we have just launched in some of the southern states of Brazil two weeks ago. So we don’t have still full clarity. It is coming. The conditions are unknown and we’ll be in no likelihood not participate heavily, at least not heavily on the outside of São Paulo market.

The next question comes from Ivón Leal from BBVA. Please go ahead with your question. Ivón Leal - BBVA: Hello, good afternoon. Couple of questions in Spain. The first one is given that you’ve highlighted in the third quarter the commercial investment in order to try and to gain commercial tractions for the market. I was wondering if we should expect part of the savings generating in Spain as a result of restructuring to be reinvested in order to regain market share in 2012 or rather we should expect that to flow through the [BDA] line, and the second one, is you say that your commercial -- the lace of commercial offering fixed broadband in Spain has given some good results. And I'm truly - if you look at the numbers released by the Spanish Telecom Regulator, it looks like is a fixed – the fiber deployment which is really collecting very good results. So why then -- your initial coverage target has changed at any point in time probably this quarter. May be give us some color on your target coverage for 2012 and how the fiber deployments is working? José María Álvarez-Pallete: Well, on the first question about how you are going to be treating efficiencies next year. First of all, efficiencies are not going to – they are going to come from the voluntary reduction program in our [work force]. We have further plans in Spain, namely on the handset reduction in terms of the amounts of handsets that we are buying in the interest of the catalog that we have. We have already announced that. We will keep centralizing all our purchasing effort and therefore and we expect to generate more savings thanks to the action of the Guillermo Ansaldo's team on Global Resources. So, you will see more savings than that or more efficiency process running in Spain and all around Europe than just in workforce reduction. And for sure we will invest some of those in commercial activity because we see the market, we see value in the market. We are seeing value in the commercial offer as I was telling you before on the fixed broadband, both on fiber and in DSL. And for sure on the mobile side, namely in contracts. So, yes we intend to be much more efficient next year but not just with the reduction of workforce, with other plans. And yes, we intend part of that on the commercial effort because we will do see value and growth on that side. And on the second question on the results, we are getting traction on the fiber. We are happy with the fiber deployment and the state of deployment is not huge. We are growing step by step, but it is doing very well. On the 24.9 euros offer that we launch at the end of August, beginning of September, the numbers of the evolution of net adds that were negative for a while. This is starting to show better results and I hope that from here to year-end, you will see the traction on that product. But yes, we are optimistic and yes, we are getting better results. Ivón Leal - BBVA: Could give us any idea of the run rate? Ángel Vilá: I am sorry, but we do not disclose that information. In terms of both (inaudible) that getting very significant traction namely in Barcelona and in Madrid. I would try to give you more color on the next calls, but for the time being we are not going to disclose that information.

The final question comes from Fabián Lares from JB Capital Markets. Please go ahead with your question. Fabián Lares - JB Capital Markets: Hi, good afternoon. Thank you for taking my question. Regarding the evolution of the company, and the amount that had been paid down by the nine months generated, I was wondering considering the foreseeable future, we do not see the capacity of, I think a bit arising any stronger and obviously with CapEx commitments, your capacity to generate more operational cash flow is probably limited. I was wondering whether as of 2013 you are considering other shareholder remuneration formulas outside the cash and the share buyback. Mainly I am thinking of script issues? And the second item would be related to Argentina. I was wondering whether you can refer more color related to the possible hyperinflation or the excess inflation that could be happening in that market and whether you are able to contain that at the [auditor] level? Thank you. Ángel Vilá: Okay. With respect to the first question, regarding shareholder remuneration after 2012, we have still not decided which would be this plate of such and as I said before, we would take into account market conditions, any best of preferences when the time arise. You spoke about the potential strip dividend, but I can say that we are not contemplating in our agenda, strip dividend, given the low valuation levels that we have in Telefónica share price.

And in terms of Argentina, our two comments, one is that Argentina is still not a hyperinflationary economy by accounting standards. Inflation is quite high, but official inflation is slightly lower than whatever real recorded or expected inflation. This is not a new trend. This has been going on for a number of years and as a result of that, we've been able to adjust the non-inflation exposed part of our business quite dramatically, meaning, non-regulated or less regulated prices have taken a bigger role in our basket of promises. So it is fixed that remains, the tariffs remain frozen, the big if there. There has been and there will continue to be an impact on cost because costs are adjusted, if not in full to inflation, at least very much so. So it is a difficult thing to combat. On the other hand, the increased tendency of Argentineans to spend on the back of a better economy and high inflation is helping alleviate the trend somewhat. So, considering that inflation is not a welcome development, we still think that in Argentina it is a less, unfavorable event than it might be in other regions. At this time no further questions will be taken.

Ángel Vilá, I will turn the call back over to you for closing remarks. Ángel Vilá: Okay. Thank you very much for your participation and we certainly expect to have provided some useful insights for you. Thank you and good afternoon.

Telefónica’s January to September 2011 results conference call is over. You many now disconnect your lines. Thank you.