Pablo Eguirón - Head of Investor Relations César Alierta Izuel - Chief Executive Officer, Executive Chairman of the Board Ángel Vilá Boix - General Manager of Finance and Corporate Development José María Álvarez-Pallete Lopez - Chief Operating Officer, CEO and Chairman of Telefónica Europe Division, Executive Director

Nick Brown - Goldman Sachs Mandeep Singh - Redburn Georgios Ierodiaconou - Citi Mathieu Robilliard - Barclays Capital Giovanni Montalti - UBS Pedro Oliveira - BPI Ivón Leal - BBVA Research David Wrigt - Bank of America Merrill Lynch Keval Khiroya - Deutsche Bank Luis Prota - Morgan Stanley Luigi Minerva - HSBC Jonathan Dann - RBC Capital Markets Fernando Cordero - Santander

Ladies and gentlemen, thank you for standing by, and welcome to Telefónica’s January to December 2014 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 turn the call over to Mr. Pablo Eguirón, Head of Investor Relations. Please go ahead, sir. Pablo Eguirón: Good morning, ladies and gentlemen, and welcome to Telefónica’s conference call to discuss January-December 2014 results. I’m Pablo Eguirón, 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 in 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 releases and the slides, please contact Telefónica’s Investor Relations team in Madrid by dialing the following telephone number, 3-491-482-8700. Now, let me turn the call over to our Chairman and CEO, Mr. César Allerta, who will be leading this conference call. César Alierta Izuel: Thank you, Pablo. Good afternoon, and welcome to Telefónica 2014 results conference call. Today with me is José María Álvarez-Pallete, Chief Operating Officer; and Ángel Vilá, Chief Financial and Corporate Development Officer. So during the question-and-answer session, you will have the opportunity to address to us any questions that you may have. Before starting let me briefly explain to you the agenda for this conference call. I will first explain the milestones achieved in our transformation journey into a Digital Telco in 2014, and tradition that we have for the next two years. Ángel will explain the 2014 results in detail and José María will provide details on the strategy and outlook in 2016. Please turn to Slide 2, let’s start reviewing the business deep transformation carried out in the 2012-2014 period, which allow us to look on the next two years with great confidence that will be back and we will be back to sustainable profitable growth. During the past two years we have made significant advances. We invested in capturing growth opportunities in mobile data integrated services. Took initiatives to improve efficiency through our simplification and reform our asset portfolio and de-risking our balance sheet. As a result of this, we have been a solid platform and we have clear proof points of this transformation, which allow us to upgrade our ambitions for the 2015-2016 period. We will accelerate growth and investments, building a stronger networks and monetizing the data explosion coupled with increasing efficiency level, in addition to the synergies from Brazil and Germany, our positions. At the same time, maintaining financial flexibility will be key for delivering growth. Finally, let me stress our intention to increase the cash dividend after the seclusion of the proposed O2 UK disposal. Some of the indicator of our progress is explained on Slide 3, the average revenue per asset returning to growth for the first time in many years, demonstrating the demand for high-quality services and high speed connectivity. In digital services, we saw exponential growth in revenues setting the basis for their increased uptake in the future. We are proud to note the investment we make in expanding the reach of both fiber and LTE, doubling figures in just one year. We generated a run rate of €300 million of gross savings in 2014, the right for a linear operating model, reducing complexity and paving the way for further savings. In Spain, we recorded a significant improvement in the year-on-year trends throughout the year, and we are well on our way to return to growth in 2015. In terms of our balance sheet, we recovered robustness for Venezuela adjustment in proportion O2 UK sales. Turning to Slide 4, we can see the consistent improvement in our top line growth with all the signs that this thing is set to continue. Fourth quarter was particularly strong. Our revenue grew by 5% year-on-year in organic terms, underpinned by the steady increase in accesses, and the EBITDA returned per access. As you can see from the graph on the left, the trend in 2012 is one of sequential growth with a 2.6% year-on-year organic for the full year 2014. On Slide 5, we continue to demonstrate our fundamentals are steadily improving, as shown by our OIBDA and underlying earnings per share increase. In organic terms, EBITDA returned to growth in the full-year 2014, showing a 0.2% increase year-on-year, despite a more intense commercial activity aimed at high value customers. Underlying earnings per share reached, including results for the full-year at $0.93 per share, improving solidly in the fourth quarter. And I want to remind that, underlying net profit reached €4.5 billion in 2014, €4.5 billion for the year. And now Slide 6, review how Telefónica fulfill guidance given for 2014. We have this delivered on our operating outlook for 2014 leveraging on a strong execution strength. Net debt stood above our full-year target But let me stress that including the proposed O2 UK sale, we will have reduced it to €31.7 billion, demonstrating our commitment to financial flexibility. In addition, the high take-up ratio of scrip dividend translated into a cash dividend payout of just 55% of the free cash flow. Looking ahead 2015 and behind on Slide 7, we are well positioned for further growth acceleration. In Spain, one of our largest market macro and market trends look positive, increasing the appetite for higher value services, also our infrastructure and assets in fiber, Pay TV and LTE will continue to increase our differentiation. At a group level, we will be driving that amortization by expanding a differential LTE experience across our markets, and by designing propositions that lead to higher data adoption, including a push in prepaid smartphone penetration in Latin America. Also, we will leverage network and IT upgrades to enhance customer insight. Our focus for portfolio management will create significant synergies in Brazil and Germany. And it means, we can upsell our customers to higher value and quality bundles, thus creating additional revenue streams. We would also be concentrating on savings over the coming years, and we will be delivering more than €1.8 billion synergies flat. Turning to Slide 8, we will now touch on how external factors have turned around negative to positive for us. In terms of regulation, we have been very active in voicing our opinions on regulation. We have pointed out several times we are in favor of the market consolidation and precedent setting examples in Germany and other countries are very encouraging. Continuing with Europe, current fixed regulation give us certainty until 2020, while the Digital Agenda appears to be favoring investments. In LatAm, there has been also positive rulings by regulators in Mexico and Colombia to foster the sector development. On the macro side, the economy in some of our key markets is steadily improving. As it is the case of GDP growth in Spain and Germany and both are based on stronger consumption fundamentals. In addition, financial markets are now back to normalized risk levels. Risk rates have come down again. Finally, the market structure in some key markets has evolved which will after all allow us to move from a price deflationary competitive model to a quality of service model with differential infrastructure and therefore the investment made by Telco are the key drivers in gaining more loyal and high value customers. Turning to Slide 9, we at Telefónica have been working to drive a fair policy framework and a digital ecosystem. Level playing fields will be a priority for policymakers and regulators. The current situation is not sustainable to that, while media connectivity and Internet services are cumbersome. Telco operators need a balanced scenario with other players in the digital ecosystem, especially with Internet company, and our customer want to have a safe and open digital experience. We believe there is clearly a window of opportunity to achieve a fairer and less intrusive policy framework in Europe. The need for a level playing field and the need to recognize the investment risk with a more investment friendly framework are the key elements of regulatory and public policy strategies. We think that policies and regulations will be realized considering the whole Internet value chain; this is necessary to balancing a better Internet experience for consumer-base, enterprise and public administrations and have an open Internet, a portable digital life, and a safe and enjoyable digital experience. But also it is very important to avoid any situation of abuse or dominance, and ensure that users have choice in all layers of the digital value chain, which means that digital market needs to be watched carefully. Moving to the next slide, let me explain our financial priorities for the next two years. We have a firm determination to reach three interacting targets. First, we will have strengthened our balance sheet after the proposed O2 UK disposal. In addition, we have already de-risked balance sheet with Venezuela foreign exchange adjustment, which allow us to limit GVT capital increase up to €3 billion. On average, we aim to have a ratio in both years lower than €2.35, including the proposed O2 UK sale. The result of these financial policies should translate into ratings stabilizations reflecting our regained financial flexibility. Second, we would maintain an attractive shareholder remuneration comprised of sustainable dividend payments, tactical share buybacks and share cancellations to mitigate the scrip dividend dilution. Third, to support sustainable organic growth base on differentiations, we will keep analyzing inorganic opportunities to facilitate value creation as our portfolio strengthening policy remains in place. Let me now highlight our guidance for this year and the ambition for 2015. 2015 is going to be the year where we will increase our revenue growth to more than 7%, while our OIBDA margin will present a limited margin erosion of around 1 point to allow for commercial flexibility if needed. Our CapEx to sales ratio will be around 17%. For the period 2014-2015, the cumulative average growth rate of the revenue growth will stand at higher than 5%, with EBITDA margin establishing in the year 2016 versus 2015, in CapEx to sales to be stable around 17%, reaching the peak in this period, as it will be 2 points lower in 2007 [ph]. Revenue guidance in organic term is compatible with our strategy to accelerate growth. On the financial guidance let me add that we will do all these, maintaining our dividend for 2015 at €0.75 per share, with the same mix structure as last year. The first tranche €0.75 will be payable in the fourth quarter of 2015, by means of a voluntary scrip. In the second tranche of €0.40 in cash in the second quarter of 2016. Moreover, orientation is to increase the cash dividend to €0.75 per share once the UK deal is closed. In order to mitigate a scrip dividend dilution, we will propose to the General Meeting the cancellation of treasury sales equal to 1.5% of outstanding capital in the fourth quarter of 2015, Plus an additional 1.5% cancellation once the UK deal is closed. Now, I’ll pass on to Ángel to review the 2014 results in detail. Ángel Vilá Boix: Thank you, César. 2014 results clearly reflect the solid steps in our transformation strategy towards a Digital Telco, focused on accelerating long-term sustainable growth. Commercial momentum particularly in high quality services has gradually strengthened throughout the year, which along with booming mobile data monetization has allowed Telefónica to recover strong revenue growth and increase customer value. Thus, in the fourth quarter revenue growth accelerated to 5%. All this, along with for their efficiencies across the board, has translated into robust profitability, with OIBDA growth returning to positive territory in 2014 and limited year-on-year margin erosion. CapEx was up 16.9% in 2014, focused on technological transformation, setting the basis for future growth and differentiation. At the same time, we have strengthened our balance sheet, effort on solid free cash flow generation and active portfolio management. Let me stress that including the proposed O2 UK sale, the leverage ratio improves to 2.15 times. This proactive management of our asset portfolio has allowed us to lead in market consolidation and bolster our competitive position in key markets through value enhancing deals. Finally, we delivered on 2014 operating guidance and confirmed 2014 dividend commitments. Moving to the next slide let me summarize our key financials. Reported year-on-year evolution is significantly affected by non-recurrent factors, FX headwinds and changes in the perimeter of consolidation. The fourth quarter is particularly affected by these non-recurrent items. Regarding FX, we’re applying to 2014 financial statements the exchange rate of the Venezuelan bolivar set at the previously denominated SICAD II at VEF50 per $1. This decision has impacted OIBDA by €0.9 billion and net income by €0.4 billion. It is important to note that revenue contribution from this country is now reduced to just 1%, and the net cash position is now below €0.4 billion, minimizing the impact of any further potential adjustment. Other non-recurrent effects include one, a provision for restructuring costs with the aim of increasing efficiency in the future, impacting OIBDA in €644 million and net income in €405 million, mainly affecting Germany with the announced leaver program. Second, a value adjustment of our investment in Telco has reduced net income in €0.3 billion. And third, asset sales in Spain mainly towers with close to €0.2 billion impact on OIBDA. These non-recurrent items provide a clean sound and de-risk base for profitable growth going forward. To see these impacts in more detail, please move to Slide 15. FX has been the main factor dragging 23.9 percentage points to OIBDA year-on-year variation, with the evolution of the Venezuelan bolivar explaining about 90% of this effect. Let me stress again that impact is mitigated at free cash flow level. On the other hand, the consolidation of E-Plus since October 1, turned the contribution of perimeter changes to revenues to positive, and reduced the negative contribution to OIBDA, still affected by the deconsolidation of Czech Republic and Ireland. Non-recurrent FX reduced Q4 OIBDA net income by €1.4 billion and €1.1 billion respectively. Turning to Slide 16, sequential top line acceleration of 220 basis points in the quarter to 5% year-on-year organically is explained by strong commercial momentum, particularly in value services coupled with churn stabilization on a yearly basis. Mobile contract customers increased 11% versus 2014, boosted by smartphones, which deliver a remarkable growth of 39%. Pay-TV momentum remained high with strong net adds of 437,000 in October to December period and accesses increasing 1.5 times versus 2013, surpassing the 5 million mark. Fiber connected customers posted record net adds in the quarter and accesses doubled year-on-year. Best-in-class diversification and better revenue mix towards data explained the consistent improvement shown in sales performance during 2014. OIBDA in the full-year pointed towards sustainable growth reflecting revenue flow and efficiency gains. Organic OIBDA margin decline of 0.8 percentage points versus 2013, underlined higher commercial investments, and network and IT costs. Turning to Slide 17, we reviewed the strong performance of mobile data. Smartphone penetration reached 35% at the end of 2014 underpinned by increased LTE adoption. This along with a strong year-on-year growth in average data consumption across our footprint is driving the acceleration in total mobile data traffic, up 64% year-on-year in the fourth quarter. The boost in data traffic and smart pricing are reflected in data monetization and improved performance of non-SMS mobile data revenues, which grew 24% organic year-on-year. I would like to highlight that one-third of customers actually used more data than they initially subscribed in their data plans. And one-third of them subscribed additional data snacks. This has plenty of room to upsell as we currently have just one-third of customers already on plans with more than 1 gigabyte of data included. Please turn to Slide 18, for an update on our investment profile. In terms of network investments and in order to meet increasing customer demand for data traffic both in fixed and mobile, we have devoted 74% of our investments to growth and transformation. 5 percentage points more than a year-ago in organic terms, while at the same time we have reduced investments in legacy. By concept, fiber CapEx increased by 81% and investments related to TV increased by 79%. On the mobile side, 3G investment was 30% higher, and 4G spend was 19% higher, while we also advance on transmission and IT investing 15% more than a year-ago. It is also remarkable, the effort made in acquiring differential spectrum in 2014, to secure valuable spectrum in Brazil and Hispanoamérican countries. Let me now review the performance of Telefónica España in Slide 19. We are especially satisfied with the progress made in building a stronger franchise. Our successful convergent offer enhanced in 2014 with differential quality TV product drove a sound commercial turnaround, leading to an acceleration of growth in high value. Fiber customers doubling year-on-year, Pay TV tripling, and contract mobile resuming growth. Movistar Fusion traction continued reaching 73% of the fiber base and 50 - of the fixed broadband base and 57% of mobile contract, securing a larger revenue stream in the consumer segment on more loyal customers with higher ARPU. Lastly, we fulfilled the target of ultra-broadband coverage with more than 10 million premises past with fiber and 58% population coverage with LTE supporting structural differentiation which were reflected in the investment effort made in 2014. On Page 20, the sequential improvement of revenue year-on-year in Spain is a clear reflection of solid fundamentals underpinned by ongoing commercial momentum, price stabilization and a diminishing backbook impact. Importantly, revenue decline improved 7 percentage points in the last four quarters and this along with savings from efficiency measures limited year-on-year OIBDA erosion in the last quarter and delivered a healthy OIBDA margin of 45.6% in 2014 excluding tower sales. Hence, Telefónica España is on a clear trend to recover revenue growth. To review our operation in Germany, please turn to Slide 21. The successful integration of E-Plus consolidated Telefónica Deutschland as the mobile market leader by customers, recording solid contract net adds with focus on data monetization. Increased LTE coverage 62% at the end of December and attractive bundles are driving an improvement in the bundle adoption mix. New tariffs launched on February 15 are further incentivizing increased data usage and upselling initiatives. On financials, mobile service revenue now representing 70% of the combined company stabilized its year-on-year trend in the fourth quarter. Fourth quarter OIBDA margin was 18% in 2014 excluding restructuring costs of €401 million, reflecting higher commercial spend to capture market growth. Finally, the company has already started to execute the synergy program with quick wins in places such as cross and upsell activities, online procurement, define network grid and personnel restructuring agreed. On Slide 22, Telefónica UK added 394,000 customers, the highest of any quarter since 2008, underpinned by the contract segment, up 6% year-on-year. Market leading customer loyalty was reflected in contract churn at 1% for the full year and the quarter. The rapid roll-out of LTE is translated into an outdoor coverage of 58% at December, with customers having 3 times average usage versus a 3G user, this led to ARPU stabilization with broadly flat year-on-year performance in the quarter. As a result mobile service revenue excluding of O2 Refresh was up 3% versus the fourth quarter of 2013, with total revenue 5% higher, also boosted by the increased trading of high end devices. OIBDA margin grew 0.2 percentage points versus 2013 to 24.7%, with O2 Refresh adding 3.7 percentage points but negligible impact in the annual variation. In Brazil, moving to Slide 23, we have reinforced our market position in high value customers in both businesses. In mobile, during 2014 we strengthened our leadership capturing more than half of new contract customers and almost 40% of new LTE accesses. Thanks to our superior network and our innovative services. This strategy underpinned outgoing ARPU up 6% year-on-year on increasing data adoption. In fixed, we continue the process of transformation into a fiber company with connections and IPTV accesses accelerating throughout the year. Slide 24, shows our solid Brazilian financial performance. The quality customer growth strategy is leading to sustainable revenue growth. Thus mobile service revenue year-on-year organic growth accelerated in Q4 to 5.7% excluding Q4 2013 one-off on strong data growth and despite negative regulatory effects. In addition, despite the strong commercial activity, the efforts to achieve higher efficiencies resulted in an increase in cost much lower than inflation. And consequently in full year 2014, OIBDA returned to positive year-on-year growth. Turning to Slide 25, we review the performance of Telefónica Hispanoamérica. Strong trading with mobile gross adds growing year-on-year by more than 10% in Q4 and higher traffic volumes leading to mobile ARPU growth underpinned the steady double-digit revenue growth. On top of that, full-year organic OIBDA margin was 0.5 percentage points up year-on-year returning to 2012 levels with special mention in profitability increases in Colombia, Chile and Mexico. Let me say that OIBDA growth remains in high double-digit when excluding Venezuela. Let me now go through Mexico where as shown in Slide 26, we are gaining momentum and accelerating growth. Strong commercial traction with record gross adds once again Q4 led to sustained revenue growth acceleration to reach the highest mobile service revenue growth in five years in Q4. Let me also remark that the mix of top quality assets on strong CapEx efforts in the past and economies of scale starting to flow into the results expanded profitability, with OIBDA almost doubling year-on-year in Q4. Turning to Slide 27, we review the performance of other countries in Hispanoamérica where solid top line growth boosted bottom line performance. In Colombia, revenues continued outpacing inflation growing by 6% in Q4 amidst strong increase in profitability. As such margin expanded by more than 4 percentage points year-on-year in the last quarter of the year. In Peru, revenues also consolidated the trend posted in last quarters, while OIBDA was affected by high commercial activity to regain high value customers. In Argentina, the main highlight is that along the year we managed to offset the inflation and FX pressure and profitability was slightly up year-on-year. Let me now move to the financial slides on Page 28. First, I would like to highlight the strong cash flow generation shown in 2014 which has allowed us to reduce the comparable net debt figure as of year-end 2014 to €43.9 billion. However, by applying the SICAD II FX rate of VEF50 bolivars $1, this figure increases to €45 billion. Second, I wanted to underline the active portfolio management which is helping us to increase financial flexibility at the time we reinforce our strategic position and credit profile. In this regard the proposed total UK sale will trim our net debt figure to less than €32 billion, which will in turn bring our leverage ratio to 2.15% comfortably below the 2.35 times target. Moving to Slide 29, we continue delivering a prudent financial policy aimed at first maintaining a healthy and robust liquidity which exceeds €19 billion. Second, diversifying our funding which reached nearly €15 billion, with higher role for capital markets and hitting historical lower coupons on our long term bond issuances. And third, keeping cost under control so that average cost of debt is 5.4% and remains nearly flat below the midpoint of the long term guidance range of 5% to 6%. Changes in debt composition due to increasing LatAm weight and repayment of maturing lower cost debt in euros would have increased cost by 0.47 percentage points, but this has been nearly offset by 0.41 percentage point savings from lower interest rates. Now, I will turn to José María to review the outlook for 2015 and beyond. José María Álvarez-Pallete Lopez: Thank you, Ángel, and good morning to all of you. As you can see on the Slide 31, our business mix will be transforming working towards our goal of growing average revenue per access. Services over connectivity and broadband are both set to increase going forward. While there will be a slight reduction in access on voice and equipment, moving us away from selling minutes to selling gigabytes. We will focus on creating voice bundles and variable data proposition for all our customers, allowing more flexibility and quality of services. Over portfolio, as I think, we have proven over the last 12 months alone is evolving towards a much stronger position in our key markets, Spain, Brazil, and Germany, with bigger local scale. By the end of 2016, we aim to see the contribution from these markets to group revenues increase roughly two-thirds. In the Slide 32, we have said out how we will maximize the mobile data and video explosion. Telefónica will participate in and benefit from the data revolution capturing growing revenue streams. Differential LTE will form the basis and we will advance towards high LTE penetration and faster network, which will lead to more devices connected. The right devices for our customers is also a critical piece. We will increase the penetration of smartphones in our customer base by broadening our portfolio, lowering entry price points and facing upon the prepaid smartphone opportunity in Hispanoamérica. As the network improves and the devices of portability increases, customers will consume more data, exceeding their allowances and thus upgrading to complementary bundles, bringing in extra data revenues. We will leverage the strength by creating tariffs and pricing structure that we bring quality and satisfaction to our customers. On top of this, we aim to create an environment, where exciting everything is connected, be it through multi-devices or multi-user data plans or through improving connectivity with Fiber to the Home and LTE, leading to the adoption of new database services. On video, we are pursuing a focused strategy to fully capture the opportunity and where the up-take is key. Multi-device accesses, new high definition technologies, and larger screen devices are all increasing the appetite for video services. On Slide 33, we show our main priorities in terms of network. First of all, I would like to highlight that our main focus is to increase the deployment of our future-proof ultra-broadband networks. That would result in up to 22 million premises passed with favoring 2016, that is nearly double those of 2014, was always subject to a liquid regulation. The number of LTE enabled base addition will be approximately 50,000 more than doubled versus 2014. On Europe, this will mean, our population coverage about 85% in 2016, a more than 55% in Latin America. Network modernization and rationalization are the key pillars of our transformation to all IP networks. Technology benefits are expected to result in steady customer adoption of IP access technologies and network capabilities for voice over IP accesses, fiber-based broadband, and the rise of 4G. Regarding IT execution strategy where our main priorities are first, accelerate the business transformation, delivering more customer migrations to Full Stacks project; second simplification, including virtualization, which will improve business efficiency generating synergies; and third, enabled growth businesses to the data capabilities like online and multi-channel and big data among others. On Slide 34, you can see the savings, including synergies that we will continue to capture under the new operating model. Early quick wins from the different initiatives to become a linear company, where already visible in 2014, with the realization of savings above our initial expectation, €300 million versus originally €250. This was a result of several activities, including simplification of support functions from a regional to a global model and adapting the structure to the new operating model, SG&A global policies and outsourcing of support functions, for example, in Brazil. In the fourth quarter of 2014, we booked a provision for restructuring costs as Ángel mentioned before. Additionally, we continue working with the simplification of the other channel optimization, customer initiatives like selfcare, transformation of support functions, selective deployment base of analytics, network automation, and synergies in Germany and Brazil. By applying these initiatives, we will be able to generate up to more than €1.8 billion OpEx and CapEx growth savings annually from 2017, the €700 million already to be achieved in 2015. In Spain, we face a more positive scenario with improved macro, market consolidation, which should lead to more rationality in the market and our pro-investment approach in European regulation. I made this backdrop, we plan to reinforce differentiation with an unparalleled CapEx effort to further increase next-generation network coverage, we have the best-in-class network and bring four years forward the fulfillment of the European digital agenda targets just with our networks. We aim to cover up to 18 million premises with Fiber to the Home and more than 85% of population with LTE by 2016. But as we have always stated, this ambitious in business plan would only be executed in a scenario with adequate regulation. Movistar Fusion will continue to be the key pillar for our strategy, accelerating the take-up of Pay TV and making fiber the principal - a fixed broadband technology in convergent households. Growing high value services will increase ARPU and reduce churn, and ultimately, translate into the recovery of top line growth in 2015. Focus on OpEx control, we’ll continue and contribute to maintain a leading profitability. CapEx in 2017 once the next-generation network is made, we’ll go down and return to 2015 levels of network structural transformation will be mostly completed. Main priorities of the other businesses units are shown on Slide 36. Within digital services, we will focus on accelerating our capabilities in cloud, security, and machine-to-machine, in order to capture the full growth potential, especially refreshing the portfolio in the SME segment, while at the same time, we continue to drive emerging digital services. In Germany, we will base our strategy in three main pillars. First, setting market trends, we have a clear focus on stable mobile customers. Second, monetization of LTE opportunity, we tailor offers for customer segment, and with a goal of reaching an outdoor coverage of up to 90% at the end of 2016. And third, offer the best high-speed experience with a flexible combination of the latest technologies. The execution of synergies personnel shop footprint reduction, and mobile setting [ph] commission will improve profitability. For 2015, we are expecting €250 million of recurrent operating cash flow synergies, approximately 30% of the target is expected after year five. In Brazil, main focus will be on mobile data growth, increasing the penetration of high value customers on our superior network quality and innovative services. In the fixed business, we will continue deploying fiber, aiming to cover more than 5 million premises by 2016. Such our strategy will be conducive for a more balanced revenue growth, while we continue working on cost reductions and on the significant synergies, the activity of decision will bring once we get to definitive approvals from regulators. Finally, Hispanoamérica will continue to be one of the most significant leaders for growth in a landscape of different business realities, and a context of favorable market conditions in core countries like Mexico, Colombia, Peru, and Chile. Now, I will turn to César for the closing remarks. César Alierta Izuel: Thank you, José María. To wrap up, please move to Slide 32 for a final conclusion. I know it has been long presentation, but let me run up. We have reinforced our growth model in 2014 with the right fundamentals to grow and transform further. And in the fourth quarter we are just showing the first signs of the change. We have a very focused portfolio with various strong position in core markets. We are determined to maintain the financial flexibility recover and we are fully committed to offer very attractive returns to our shareholders. Thank you. And now all of us, we are open for your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Nick Brown from Goldman Sachs. Please go ahead.

Thanks. Three questions, please. Firstly, when you talk about Spain returning to growth in 2015, is it realistic to expect the point of inflection maybe in the first half? And secondly, I think previously you were guiding some margin stabilization in 2014, are you expecting you may have to invest more in commercial costs in Spain now to support revenue growth, or is there another market where you want this flexibility? Thanks. José María Álvarez-Pallete Lopez: Thanks for your question. In Spain, we are not guiding in which quarter we’re going to be returning back to growth, but the trend set during in the fourth quarter indicates that we reaffirm our vision during 2015 this should be accomplished. The first information that we have for the first month of the year and the advance that we have for the month of February are also driving into this direction. So we cannot be more precise on which quarter, but reaffirm the trend that now Spain is set to be back to revenue growth in 2015. And in terms of margin - we are guiding for limited OIBDA margin erosion on the basis of, first, overall I’m talking on the consolidated level, improved revenue trends in our markets driven us - we have been presenting during the slides on data monetization, and deeper smartphone penetration, LTE and fiber expansion and smart bundling. It is true that we are going to be including higher commercial costs, namely commissions and promotions, as we see growth ahead of us, and we capture - and we want to capture this revenue trend, this also true that we are going to have higher content costs, mainly in countries like Spain and also in Brazil where our TV offer is booming. And we are building best-in-class video offering and it’s getting traction. As the more traction it gets, the more diluted this effort in content is going to be taking advantage of the scale and network effect. We are also facing higher network costs, as we keep deploying ultra-broadband network both fiber and LTE, in all our geographies, but we are also seeing progressive positive impact of synergies in relation, namely in Germany, and potentially in Brazil when the GVT transaction will be cleared. Finally, let me stress that we are also seeing progressive positive impact of the simplification program. We already captured €300 million of savings in 2014, ahead of our initial expectation of 2015. So overall, we see OIBDA growing significantly in absolute terms, and accelerating in 2015, with limited margin erosion as we see profitable growth ahead of us, and we really want to capture it. Should now that be the case, we’ll be adopting our commercial strategy and therefore adopting our commercial expenses.

Right. Thanks. Pablo Eguirón: Thank you, Nick. Next question, please?

We will now take the next question from Mandeep Singh of Redburn. Please go ahead.

Hello, thank you for taking the question. I had two questions, please. First of all just on Spain, just to be very clear, are you guiding that Spain will grow for all of 2015, or it will return to grow that some point in 2015? So that’s the first question. The second question is really on Brazil, are you still supportive of consolidation, do you think it’s likely to happen and if not - what do you think the future is for Oi? And if you could maybe give some color on sort of concession renegotiations and how you think that might play out for the market as a whole? Thank you. José María Álvarez-Pallete Lopez: Thanks for your question. In the case of Spain, we are guiding for growth at the end of 2015 on cumulative basis and not just on a quarter-by-quarter basis, but on a cumulative basis.

Thank you. Ángel Vilá Boix: Regarding Brazil, our focus continues to be getting the approvals for the GVT transaction. And reach a successful closing, which we expect in the first half of this year. In the meanwhile, we continued strengthening our position both in mobile and in fixed broadband and we are posting clear growth, both in revenue and OIBDA and GVT. When it finally closes, we’ll reinforce our position increasing our growth prospects and allowing us to have convergent footprint and generate significant synergies. Regarding mobile consolidation we have stated in the past that we are strong believers in the benefit of the market mobile consolidation, which we would support and which could generate substantial synergies. But at this stage we are fully focused on GVT and we maintain our full optionality regarding potential consolidation in Brazil.

And any thoughts on concessions? José María Álvarez-Pallete Lopez: Well, in the concession, there are so many news around. We are pretty focused on what’s going on. We think that as we have been stating publicly is for all the wireline concession, therefore not just for all of us, but for just our case. We think we’re going to have a rational outcome, but too soon to say, I mean, we are positive but too soon to say.

Thank you. Pablo Eguirón: Thank you, Mandeep. Next question, please?

We will now take our next question from Georgios Ierodiaconou of Citi. Please go ahead.

Yes. Good morning and thank you for taking the questions. I just had a question on Spanish regulation on the wholesale fiber access that was announced earlier in the year, and also on the Digital Plus acquisition, if you could give us an update. And a specific clarification, the group CapEx of 17%, CapEx to sales, the way I interpret it is that assumes you carry on investing towards €18 million homes past in Spain, if you would scale that down, does that mean CapEx goes somewhere else, either in Spain or somewhere else in the group or will you come a bit lower on CapEx to sales? And then my second question is around Mexico, if you could give us an update of your options there, and whether you confirm that there any M&A that will happen in Mexico will it still mean you consolidate the resulting assets? Thank you. José María Álvarez-Pallete Lopez: Taking the first part of your question on Spain, we are addressing our CapEx effort to the area that have been considered to have already competition and we will - we take our coverage in other areas when it is clear what the rules of the games are. But we keep deploying and we keep focus on the areas of - that has been declared already with significant competition. And the CapEx obviously that we have stated includes these efforts, and the CapEx guidance that we have been given for the future includes the assumption that regulation is going to be stable on this subject. César Alierta Izuel: In respect to the regulation, now the important thing is that the maintenance of Europe is very difficult attrition of the economy and this is very clear seeing by the - in every country. In Europe and I think a fairly optimistic that this year is going to be big changes, big changes in favor of investment? And investment in what? In fiber and LTE. And the framework, as it going to be a more positive for us investing in fiber and LTE. Having said that my perception on how the regulation is going to be in Spain is very positive in the sense that everybody wants more digitalization of the Spanish economy and it means that regulation has to favor it. So I’m fairly optimistic on that. And with regard to Canal+, I’m also fairly optimistic I think that in the next couple of months it will be approved - it will be approved. And we will complete the transaction. In regards to Mexico as José María has been saying, we are focused on organic growth and the new regulation in Mexico favor us and this is our main objective. If there is any opportunities that we think are reasonable, we may do it, but it has to be reasonable as a separate. We are very consistent on that, and so we are very enthusiastic about the future of our operation in Mexico.

Very clear. Thank you. Pablo Eguirón: Thank you, Georgios. Next question, please.

We will now take the next question from Mathieu Robilliard of Barclays. Please go ahead.

Good morning. Thank you for taking the questions. I have two questions. First on Slide 2 of your presentation pack, one of the items you highlight is the strengthening of your portfolio as opposed to the focusing of your portfolio in the past, so I think, Mr. Alierta, you just mentioned Mexico as an area potentially for strengthening the portfolio. Generally, conceptually, I mean, where are the regions where strengthening of the portfolio could take place; I mean, do you see more opportunities in Latin America, on Europe? So that’s the first question. And the second question has to do with Brazil, GVT acquisition is not closed, but just thinking about the next few years ahead, obviously one of your competitors on fixed is quite weak. When we compare the GVT coverage to one of NET Serviços, for example, in terms of household passed there seems to be a big scope for an acceleration of the growth of the network. Is it how you’re thinking about Brazil, by that I mean, would GVT be a good platform to penetrate more households in the regions where you’re not present or you would be more focusing on transforming the existing home passed into more subscribers? Thank you. César Alierta Izuel: Okay. And, we are very happy with operation foothold and this is what we - I mean, very clear. We are concentrating on our core markets and then our core markets are very clear. In Latin America, I’d say, there are few countries in which we are not, which is Honduras, Paraguay and Bolivia. We are not going to go to Honduras, Paraguay and Bolivia. And in Europe, we are very happy with our position in Germany and Spain, and that’s it. And where we are going to go is in that market. We don’t perceive going into other markets at all, since the focus now is in our present footprint and grow there, in which we seen we have tremendous opportunities and José María will elaborate further. José María Álvarez-Pallete Lopez: Thanks, César. On the GVT situation, once - and when the regulator will approve the transaction we have - we have share what our ambition is. We are going to be combining the effort of both companies and therefore we are going to be significantly improving the network deployment of Vivo outside São Paulo in terms of fiber to the base station. And we are going to be significantly improving both our backbone and our backhaul. And you are right, in terms of our ultra-broadband deployment outside São Paulo but also in São Paulo, we are going to be taking significant advantage of the GVT situation. In fact, places where we are deploying fiber in São Paulo, just today on the Vivo perimeter. We are gaining market share out of our competitors including the cable operators which means that we have a pretty competitive product that the effort that we are doing in CapEx is paying off. And therefore we’ll be continuing support in the GVT effort outside São Paulo in the cities that were already considered. So overall, we think that out of the approval of the GVT process, you should expect us to keep investing and to keep growing both. And we aim to regain market share because of the fact that wherever we are competing with significant attributes, significant attributes like the speed and capacity, we are very relevant for customers and we are gaining market share. So pretty optimistic on the outcome, pretty confident that GVT will bring significant value and will foster our growth in Brazil.

Thank you very much. José María Álvarez-Pallete Lopez: Thank you. Pablo Eguirón: Thank you, Mathieu. Next question please.

We will now take our next question from Giovanni Montalti of UBS. Please go ahead.

Good morning, thank you. Just a question on content, what kind of competition especially on pricing do you expect in the content market in Spain going forward? Thank you. José María Álvarez-Pallete Lopez: Okay. In Spain, as in other markets, but mainly in Spain, we do see revenues accelerating or improving on the basis of a more rational market. Infrastructure based competition means that all major players in the different markets but mainly in Spain are going to - are building more sophisticated all-IP networks and that means that the sector is able to offer more sophisticated services both in core attributes like speed or capacity, but also in value added services like video, financial services, or other. That’s why data traffic is booming overall and mainly in Spain with significant growth year-over-year, above 50% in average in the - at the group level. We have a product for sector data, that people love and need and providing more value is what it is driving effectively higher ARPU. So we see more rationality on the market on the basis of more sophisticated product, and significant infrastructure based competition and as a result of all of that we see better trends in ARPU. And this is going to - this is what it is driving revenue up. Also data monetization in terms of bundling, more smarter bundling in terms of out of bundle consumption. So overall, I think that it is more rationality on the marketplace, focus on churn reduction, and I think that, we are going to see a better fundamental trend in the Spanish market.

Sorry, if I may quickly follow up, in this context what kind of let’s say inflexion do we expect for the cost of contents in Spain. Do you expect significant competition for example from the likes of Vodafone, ONO, or the players that in the past were active on the content arena in Spain? Thank you. José María Álvarez-Pallete Lopez: I think that on the content side you will see that whenever the digital plus transaction will be approved we will have a clear picture what are the remedies that are imposed and therefore what are the wholesale offers that we will need to have. So overall, I will say that it’s probably going to go through wholesale offers, but I think that overall the content process going to remain under rational environment. But most of all take into consideration that pay-TV penetration is still very low in Spain. And therefore the more it grows, the more diluted the overall content cost is going to be on the overall customer base. César Alierta Izuel: And in top of that you have to see that we are going to span our pay-TV in Latin America, which the penetration of pay-TV very low, which means the cost per user is going to go down for us very significantly in the coming years, because when you look at the base for potential customers in pay-TV in all the world, you don’t have to do the cost, after what José María said, which is right and then we don’t see prices going up in Spain, but the cost for user is going to be going down, down in the coming years, and that’s very good news for us.

Thanks so much. Pablo Eguirón: Thank you, Giovanni. Next question, please.

We will now take our next question from Pedro Oliveira of BPI. Please go ahead.

Hi, good morning. Thank you for taking my questions. The first question, you provided in the last conference call the weight of Fusion in consumer revenues and the weight of consumer revenues in the total Spanish revenues. Can you please provide an update on this breakdown? And the second question was regarding your working capital evolution. In the fourth quarter it seems to be around €2.5 billion. €400 million euros are explained by the provision in Germany. I was wondering if you could provide some detail on the remaining evolution. Thank you. José María Álvarez-Pallete Lopez: Could you repeat please the second part of your question?

My second part was your working capital, consumer related, was around €2.5 billion in the fourth quarter. Out of this, €400 million will be the provision in Germany, the rest €2 billion I wondering if you could provide some detail to explain the evolution and the capture of this fourth quarter, and if there is any relation with Venezuela’s evolution? José María Álvarez-Pallete Lopez: Okay. Thank you for your question. In terms of Fusion, we have reached 2.7 million customers with 1.4 million mobile lines on top of that. This is 27% year-on-year growth. 73% of our fixed broadband is already in Fusion. 57% of mobile contract is already in Fusion. Fusion represents approximately 50% of the residential revenues in Spain which approximately represents 50% of the total revenues in Spain. Germany Fusion is 1.1, significantly stable and significantly contributing to create value out of the product. So this is the overall figures that we have. If I may complement, let me remind you that 80% of the existing customers of the upsell and of the gross sales that are coming to Fusion, 80% are coming not to the basic product but to one value added product therefore the accretion of Fusion so to say in terms of value keeps growing up. Ángel Vilá Boix: With respect to working capital in the fourth quarter it has had a positive impact of €2.4 billion, out of this we have several factors, some of them are recurrent, and some of them which are not - which are just one time. Among the recurrent ones, we have the typical cyclicality of working capital and the evolution of CapEx accrual versus payments. We also have factoring that you have to take into account that there also some positive impacts, which are not recurrent. One is the restructuring charge, not only the German one, but the overall restructuring charge, so something between €0.6 billion and €0.7 billion that have been taken through EBITDA, but will be paid in 2015, and later. Second part of the spectrum that we are growing in Brazil –for the cost of the spectrum in Brazil, that will be the cleanup that will be taken places in later years, and this is to the tune of €300 million. And then we had also the advanced collection of some differ payments that we had in Czech Republic transaction. We had agreed some brand fees, some management fees to be collected across a period of four years from the buyer. Over the Czech Republic and we negotiated with them in the fourth quarter to collect them in advance. So these would be some of the impacts that we have in this positive free cash flow figure in the fourth quarter.

Thank you very much. Pablo Eguirón: Thank you, Pedro. Next question please.

We will now take our next question from Ivón Leal of BBVA. Please go ahead. Ivón Leal: Hello, good morning, everybody. Two questions, maybe the first one in Spain. I think you’ve announced post price increase in broadband in January to be applied in April, do you think the scope for the price increases in Spain maybe on mobile and pushing on bundles? And the second one on your financial cost, I don’t know if you could remind us what is the average financial cost stuff debt and what - is there a scope for improvement going forward there? José María Álvarez-Pallete Lopez: Taking your first question, I mean, we are seeing more up-selling rather than price increases. What we are doing right now is the more value we put into the offer, the more we see appetite from consumer to pay for that and to value for that. So this is part of the strategy that we are putting together. And this is especially relevant at a time that we are increasing coverage of both LTE and fiber and on the TV side. So overall, I would say that we do see a more rational behavior both from operators, but also consumers more willing to invest more value for more services. So that applies to fixed broadband, but that also applies to a mobile contract, that also applies to value added services like the voice mail all others. So overall, I would say, better trends, more rationale trends in this Spanish market, yes. Ángel Vilá Boix: Regarding the interest cost, as you can see Slide 29, we are seeing forces that are going in different directions. On the one hand we have the reduction of interest rates, which is clearly working in the direction of reducing our interest cost, but on the other hand, after we divested, for instance, Czech Republic in Europe and Ireland, we are - we have been considering some debt - some less expensive debt in euro, also we have some maturing euro that have less costs than the rate that we have in Latin America. So the mix in a lesser amount of total debt, the mix is moving towards Latin America is waiting more in the mix of our debt and the cost of Latin America is Latin America that is 3.5 percentage points higher than the one that you can see in Europe. We are still digesting the higher cost of debt in the refinancing exercises that we have to dig through 2011, 2012, and partially 2014. But this impact is going to be fading away and you will see progressively better interest cost flowing through our guidance. We’ve maintained the 5% to 6% range, but we are going to be in 2015 in the lower part of that range and 2016 and forward, we would be growing. Ivón Leal: Thank you. Pablo Eguirón: Thank you, Ivón. Next question please.

We will now take our next question from David Wrigt of BofAML. Please go ahead.

Yes, it’s David Wrigt from Bank of America Merrill Lynch. Just a couple of things, thank you for a very comprehensive presentation. I had two questions, please. First of all, just on the net debt guidance, if you could just maybe talk us through some of the bigger sort of ticket items that you are expecting so, for instance, the Hutchison cash and obviously, we’ve got GVT cash out. Are you looking to exploit the option on E-Plus? And also whether there are any convertible proceeds expected. So just a big ticket sort of a net debt items in the 2016 guidance please? And then second of all, just a comment on Venezuela, you’ve moved to just, I got two, both clearly the more commercial rate has gone away beyond that. Is this something that you could be forced to reconsider again in 2015, or is this something you tend to look at it on an annual basis, those are two questions. Thank you. Ángel Vilá Boix: Thanks, David. On net debt, the first outflow would be the acquisition of GVT. GVT is going to be financed from Telefónica Brasil with capital increase in - to raise money and cash and then issuing shares to Vivendi. The cash portion would be consequently also financed by a rights issue at Telefónica parent level. The capital increase in Brazil will be to the tune of €4.7 billion, our percentage of that would be €3.4 billion. We are going to do a capital - rights issue at Telefónica parent of €3 billion, less than those €3.4 billion, because we feel that we have the room to do so. So GVT basically is an equity-financed transaction and should not have major impact on net debt. With respect to the - to UK transaction, we are now in exclusive conversations. We are progressing nicely, I cannot comment on that, because those are confidential, but we are conducting due diligence with no surprises, and negotiations are progressing. We are highly confident that that deal will be successful. The figure is known, it’s €0.4 billion that cash inflow would be and the reduction would be at the time of closing of the transaction, which would be subject to Phase II review in Brussels, so at some point in the first-half of 2016. Also, another item that will impact our debt is the merger of Telco. Under the merger of Telco, we had 14.8% of Telecom Italia shares, part of that up to 6.5% will be given in view of the mandatory exchange of our NTA shares, so that €700 million - €750 million will not increase our debt. But out of the €1.6 billion of debt that Telco has, we are pro rata part of the debt of Telco, €0.9 billion, we will have to absorb in our balance sheet, because we will not be selling 8.3% shares that we give to Vivendi, we’ll swap them, we don’t sell them. So and that’s about €900 million that will increase our debt. With respect to the plus option it’s out of the money. We have an intention to exercise it. What we could do potentially over time is gradually increase modestly our stake in Telefónica Deutschland. Then regarding Venezuela, what we saw is that in events accelerated in the fourth quarter of last year, the last auction on the odd SICAD I and SICAD II systems took place in October, there have not been auctions since then and in the first-half of February there was a new FX system in enacted in Venezuela, they created - they joined the two SICAD rates, and they created a new rate which is called Simadi, Marginal System of Currency. So we decided that the most prudent was to move to the most conservative of the official exchange rates prevailing in the country at the end of 2014, which was SICAD II at VEF50 per $1. The SICAD has still not undergone any auctions of currency so far in this year. There have been of this new system, the Simadi. There has been some auctions, those are at a much lower rate to the tune of €150 million, €170 million. We are still assessing which would be the rate that we need to apply. But what is very important is that now Venezuela accounts for less than 1% of our revenues. The cash that we have in Venezuela is a further move to SICAD II is to the tune of €390 million equivalent. So any further devaluation that we could see in the country would have negligible impact in our cash position. We have neutralized. We have mitigated completely this financial impact in our accounts, while we continue to believe in investing in the country, obviously as much as we can in local currency, because we are getting good operational traction in the country.

That’s clear. And just to come back on your comments on net debt. I think in the last conference call, when it was clear, you guys were maybe just adding a little bit over the original guidance of 2014. You did suggest you could look at hybrid instruments. I assume now with the Hutchison sale - sorry the O2 UK sale, that you would no longer need to go down that route. Is that correct? Ángel Vilá Boix: Yes. That’s correct.

All right. Thank you. Pablo Eguirón: Thank you, David. Next question, please?

[Operator Instructions] We will now take a question from Keval Khiroya of Deutsche Bank. Please go ahead.

Thank you. I have two questions on Brazil, please. I mean firstly, from an economic perspective, it sounds like the news from Brazil has become a little bit weaker. I think many expect it to be in recess for this year. And what are your thoughts now that Brazilian economy could affect your business in 2015? And secondly, you’ve done a very good job at cost control and Brazil OpEx is basically flattish in the second-half of 2014, and the wage sensation is now 6% or 7%. And leaving GVT aside, could you give us some color on whether using that sustainable and maybe the OpEx trends should get to? Thank you. César Alierta Izuel: Well, regards to Brazil, we’re already optimistic, being realistic, and we expect GNP to grow at least 3% and the long-term growth of Brazil GNP is going to be higher, you have to take in mind. In the last decade, a large part of the population have become part of the middle class. Now the middle class and of the income there 160 million people, this is one of the biggest markets in the world. 160 million people, they are high consumer. The position of the country is very good. External debt is 23% of GNP and total debt is 34%. The reserves of the country called 80% of the external debt or the financial situation of Brazil, the potential is there, the market is there, and we are very, very happy to be number one in a market like that. José María Álvarez-Pallete Lopez: Taking your question on the cost structure of Brazil and recent evolution, overall at the end of 2014, total operating expenses have been flattish, I mean have declined 0.5% in the last quarter and flat year-on-year. If we open that split in terms of supplies, supplies is roughly €2.7 billion out of the €7.7 billion total. They have been down 6.3% year-on-year, and this is mainly due to interconnection. I mean the interconnection drove, but that’s significant in Brazil, and that are affecting us on the revenue side has another impact on the cost side. And this is going to keep going as the glide path is already in place. In terms of labor force, which is roughly €976 million out of it against 10,700. It has been down 4.2% and we keep going, because we have been doing another round of efficiency in the first month of this year. So we are very demanding - in internally demanding in terms of efficiency. You should expect us to keep focusing on efficiency on that front. And then on the other expenses, which are €4 billion mainly, they are up 6% year-on-year, and those are mainly commercially driven. We are talking about handset, we are talking about commissions, and we are talking about promotions. And again that - you should expect that to keep going, because we do see profitable growth mainly on the mobile side. So overall, we think that we can keep going on the efficiency side. We have been able to absorb a 6% CPI in the country with significant focus on cost reduction, interconnection is positively affecting us in terms of interconnection expenses. We do think that on a standalone basis, we can keep going into that direction. And now, if you put in place the potential impact of the GVT transaction, we have announced our €4.7 billion synergy program, which could significantly improve the situation. Most of the other operating expenses are also network related, and we’re considered the fact that we need to connect more base station with fiber, the backhaul synergies with GVT is very significant. So overall, we are moderately optimistic on the trends of operating expenses in Brazil.

That’s very clear. Thank you. Pablo Eguirón: Thank you, Keval. Next question, please?

We will now take our next question from Luis Prota of Morgan Stanley. Please go ahead.

Yes. Thank you. Two questions, please. The first is kind of a follow-up on the Spain, and you were mentioning your expectations of coming back revenue growth in 2015, but it would be very helpful if you could give us some kind of guidelines in terms of EBITDA margins in Spain. And then particularly interested in understanding the content costs, how much would that be on an annual basis? And how is that going to affect EBITDA margins in the Spain in 2015 and 2016? And the second question is a bit more theoretical one on the scrip dividend relative to the share buyback of shares that you were announcing on the cancellation of 1.5%, which is pretty much in line with the amount of shares from the scrip. So that why keeping the scrip dividend in 2015, instead of just going for an all cash dividend, at the end of the day, you are going to buy similar amount of shares on council. So I understand that some shareholders might like the scrip dividend, but it looks like, I don’t know the share buyback you’re mentioning is a practical one, I don’t know whether that means that it might happen or might not. So anything you could elaborate on that would be helpful? Thank you. José María Álvarez-Pallete Lopez: Thanks, Luis, for your questions. Taking the one on Spain, and mainly on the OIBDA margin going forward, we are not guiding us on margin in Spain. Having said that, I can give you some color on the trends that we are seeing. Again, overall, out of the total expense figures of Spain, which is roughly €6,965 million, it has had a 1.1% decline during 2014. If you open up that between supplies, which is €2.6 billion, we have the enough 4.2% year-on-year, mainly because of the contents and also because of the smartphones that we have been putting into our offer. In terms of labor force, it’s €2 billion, they have been growing 1.2% the measure that we took in 2013, are fading away, in terms of the contribution to the pension fund, and therefore this trend should keep going. And in terms of further operational cost, which is roughly €2.2 billion, they have been down 8.5% year-on-year because of the simplification effort that we have been doing. Keeping an eye on 2015, content costs will keep going up because of the new content that we are acquiring. But we are also working on other activities in order to mitigate the impact in margins, namely in insourcing activities and also about reconfiguring the distribution model, mainly the amount of our direct distribution that we have. If you take the overall into equation and you’re also putting top of the equation, the share reduction that we are also seeing, we think that we should be able to have attractive evolution of margins in Spain in the next quarters. Ángel Vilá Boix: Regarding the second question, the scrip dividend was designed temporarily to accommodate three interactive targets, one, the increasing investments derived from acquisition and CapEx that are waiting on our free cash flow. And from our presentation, you will see that we are going to keep on with substantial CapEx intensity in 2015, 2016, and that will be easing in 2017. So we wanted to accommodate with the scrip has increased investment intensity with our leverage and shareholder remuneration objectives. The share buybacks, as you know, and we announced publicly at the beginning of January, we have 2.88% of our share capital in treasury stock. So basically, what we are announcing now is to clarify the destination of this 2.88% that we already hold in treasury shares, that 1.5% would be cancelled this year, and an additional rounding 1.5% would be cancelled in 2016, once we close the O2 UK transaction. It’s not that we are planning to acquire the shares and then cancel its - the use that we are going to give to some shares that we already have a treasury stock.

Okay. Thank you. That’s clear. Pablo Eguirón: Thank you, Luis. Next question, please?

We will now take our next question from Luigi Minerva of HSBC. Please go ahead.

Yes. Good morning, everyone. I have a question on Spain. I don’t know how convergence will influence the pricing environment, as your competitors will aim to rebalance their fixed and mobile market shares. So, for example, if you take Vodafone ONO, they have a lower national market sharing fixed broadband than in mobile. They should target selling ONO fixed services to Vodafone mobile customers, in order to rebalance their market shares. So how is Telefónica going to react, will you accept some further loss in fixed broadband market shares, or will you defend your market shares with pricing? Thank you. José María Álvarez-Pallete Lopez: Thanks for your question. We see that from our perspective, I mean, the consolidation of the market, the example that you gave on Vodafone ONO, but potentially also the case with Orange, Jazztel means that the major competitors in Spain on the convergence side are going to have kind of similar ARPUs, overall ARPUs in the blended scenario, which means that the average mobile ARPU and the average wireline ARPU is going to be completely similar once you put both things together. Upon top of that, you consider the fact that both companies, both Vodafone and potentially Orange have been investing significant resources to acquire both ONO and Jazztel. That means that they would need now to defend higher ARPUs in order to make sure that the value that they acquire is not destroyed. So and on top of that, let me remind you also that we - it takes a while before you have a clear picture of what is the blended strategy, because you need to combine systems, that’s not similar. It took us, in the case of Spain, being in the same company for a long while, almost a year-and-a-half to have a clear picture of the wireline customers that are - that have or have not a wireless offer in - within the group. So overall, we think that we should expect a more rational performance of behavior from our competitors, as they become integrated. And I think is going to be shown not just on a more rational pricing scenario, but also in a more rational subsidies approach, in terms of being more focus on defending their core customer segments. And therefore, we think that the core of the subsidies are going to devoted at the market level to retain existing customers. This is how we see the market today, we’ll update you. But in our view, the trends are all going to a more rational behavior in the Spanish market.

Okay. Thank you very much. Pablo Eguirón: Thank you, Luigi. Next question, please?

We will now take the next question from Jonathan Dann of Royal Bank of Canada. Please go ahead.

Hi, everybody. Just one question. Fantastic results and I understand the Spanish turnaround very well. The question on cash flow and the €0.75 dividend, going forward, will the decision on whether or not to have a scrip dividend be based on if the annual cash flow is higher than the cash cost of the dividend, is that, I mean, I say, I guess, do you - I guess to simplify, do you think going forward you will have annual free cash flow of sort of mid-€3.5 billion and hence to be able to pay a full cash dividend or is there some other decision around the scrip? José María Álvarez-Pallete Lopez: The answer is absolutely, yes. That’s why we are seeing that we will move in 2016 to full cash dividend of €0.75 per share.

Yes. Thank you very much. Pablo Eguirón: Thank you, Jonathan. We’ll have time for just one final question, please?

Okay. We will take our final question from Fernando Cordero of Santander. Please go ahead.

Hello, good morning. Thanks for taking my two questions. The first one is related with the UK and particularly with the Sky agreement, MVNO agreement. I would like to know which extent this contract is already similar in terms of the structure of the contract to the new MVA - MVNO contracts to be signed in Germany, just to understand at which extent this contract is already aligned with the potential remedies to be seen into the O2 regulatory approval process. And the second question is related with regulation in Brazil. On top of the discussions or the general discussions or talks on potential changes on the fixed concession framework, I would like also to know if you are expecting or foreseeing any kind of - how can I say discussions on other changes in the regulatory framework like, for example, talks about the spectrum caps, about the spectrum re-farming in Brazil and so on? Thanks. José María Álvarez-Pallete Lopez: Thanks for your question. On the UK question, on the Sky MVNO the contract, as you might imagine is subject to confidentially the clauses, but it’s nothing different of where the kind of contract that we have signed with other plays like TalkTalk. For us the good news is - means that big wholesale customers like Sky being able to choose between different options decided to choose for O2. And the answer to that is that, because we have right now the best customer experience in our network. In terms of that - if that can be considered a remedy for the potential outcome of the consolidation that is going on in the UK market, well, certainly creates a new pleasure in terms of the mobile site. But again this is not a major game changer consider the current scenario of MVNOs in the UK. And in terms of the regulation in Brazil, we are holding discussion with the regulators, I mean because of the GVT transaction and also because of the concession, we are discussing mainly on every single matter. But we do see a more, I would say, rationale approach in all fronts in Brazil as well. The LTE spectrum has already been auctioned, as you know. In 2015, we will be cleaning up the spectrum, in order to that we prefer, we’re being exploited. And in terms of spectrum caps, too soon to say, I mean we - it’s all going to be - it depends on the final picture on the Brazilian market, which is a moving target, as we speak. So no major news that I can share with you on that front, unfortunately.

Okay. Fair enough. Many thanks. César Alierta Izuel: Well, thank you very much for your presence in this conference call and for your questions, which have been very important. I want to remark again that 2012, 2014 has been a key transformation of Telefónica to a telco digital, and we are very, very confident that 2015 and 2016 are going to be really growth years. On top of that, I just want to add a comment, I think the chain of regulation in the digital ecosystem is going to change for much better in this month, in this year and the next year for the telcos, and the value chain is going to be what it has to be, and that will be very good news for all of us. Thank you very much.

Telefónica’s January to December 2014 results conference call is now over. You may now disconnect your lines. Thank you.