Pablo Eguirón Vidarte - Telefonica SA Ángel Vilá - Telefonica SA Laura Abasolo García de Baquedano - Telefonica SA

Nicolas Didio - Joh. Berenberg, Gossler & Co. KG (United Kingdom) Joshua A. Mills - Goldman Sachs International Sam McHugh - Exane Ltd. David Wright - Bank of America Merrill Lynch Keval Khiroya - Deutsche Bank AG Georgios Ierodiaconou - Citigroup Global Markets Ltd. Fernando Cordero Barreira - Banco Santander Mathieu Robilliard - Barclays Capital Securities Ltd. Luis Prota - Morgan Stanley SV SAU James McKenzie - Fidentiis Equities Sociedad de Valores SA

Ladies and gentlemen, thank you for standing by, and welcome to Telefónica's January to September 2017 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, today's conference is being recorded. I would now like to turn the conference over to Mr. Pablo Eguirón, Head of Investor Relations. Please go ahead, sir. Pablo Eguirón Vidarte - Telefonica SA: Hello. Good morning, and welcome to Telefónica's conference call to discuss January-September 2017 results. I'm Pablo Eguirón, Head of Investor Relations. Before proceeding, let me mention that financial information contained in this document related to the third quarter has been prepared under International Financial Reporting Standards, as adopted by the European Union, and that this financial information is unaudited. This conference call webcast, including the Q&A session, may contain forward-looking statements and information relating to the Telefónica Group. These statements may include financial or operating forecasts and estimates based on assumptions or statements regarding plans, objectives and expectations that make reference to different matters. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond the company's control. 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. Now, let me turn the call over to our Chief Operating Officer, Mr. Ángel Vilá. Ángel Vilá - Telefonica SA: Thank you, Pablo. Good morning and welcome to Telefónica's third quarter results conference call. With me today is Laura Abasolo, Chief Financial and Control Officer. And during the Q&A session, you will have the opportunities to address us with any questions you may have. Telefónica continues to execute on its key priorities. First, organic growth was consistent and profitable. Revenue and revenue products (2:22) acceleration were supported by strategic KPIs, namely fiber and LTE, data monetization, and churn control. OIBDA continued to post a positive increase, despite the negative drag from Roam Like at Home this quarter. Second, thanks to cost control simplification synergies and investments carried out in recent years, along with a focused digitalization program, we are more efficient and we will continue to optimize resource allocation. And, third, our balance sheet was reinforced with enhanced solvency and liquidity. We are committed to deleveraging, reflected in the €3.6 billion decline in the last 12 months, including the Telxius deal which already closed this week. Strong free cash flow is a driver of the deleverage and was 39% higher than the figure posted in January-September 2016. In addition, we continue benefiting from positive bond refinancing. As shown in slide 3, we are well on track to deliver our full-year guidance across all three metrics. Regarding the dividend, we confirm the €0.4 per share in cash for 2017, consisting in two tranches of €0.2 per share each, with payments to be made on 14th of December of this year and June 2018. Finally, our objective is to maintain a solid investment-grade rating. To review financial Telefónica snapshot, please move to slide 4. Third quarter consolidated revenues reached almost €12.8 billion, growing in organic terms plus 4%. And OIBDA reached €4.1 billion, growing 2.8% in spite of being impacted by European Roam Like at Home regulation. Reported headlines in the quarter were also affected by negative FX contribution. Looking to the first nine months of the year, margins stood at 31.6% and expanded 0.3 percentage points year-on-year organically, proving a strong execution. At the same time, a distinctive declining CapEx trend drove the high-single-digit organic increase in operating cash flow, growing above 9%. Free cash flow and net debt are also improving, as we will explain later on. Moving to slide 5. Net income grew 10% versus the January-September 2016 period, outpacing OIBDA growth by 67 basis points as financial expenses posted better performance. As such, net income reached €2.4 billion and earnings per share €0.44, or €0.56 in underlying terms, up almost 9%. As seen on slide 6, in the third quarter, we posted a progressive improvement in free cash flow, leading to an increase up to September of €909 million year-on-year or 39.2%. The main component of this strong free cash flow growth was the operating performance of the business, coupled with the lower interest payments. We expect free cash flow to continue improving in Q4, maintaining a healthy growth year-on-year. Let me also mention that net financial debt continued its consistent declining trend, fueled by organic drivers. Slide 7 takes you through the different moving parts affecting OIBDA evolution. The most remarkable is the organic contribution to total OIBDA growth in the first nine months of the year of €457 million versus a negative FX impact of €85 million. In the third quarter, I would also like to highlight the organic figure of €119 million, despite approximately €70 million negative effect from Roam Like at Home regulation. Negative impact of FX increased markedly in the quarter to minus €224 million or minus 5.4 percentage points on the year-on-year variation, mainly due to the Venezuelan devaluation and the depreciation of Argentinean peso, British pound, and Brazilian real. Again, it is important to highlight that the FX drag at OIBDA is naturally hedged in our business due to CapEx, interest payments and others. And thus, up to September, the negative OIBDA impact was offset completely at free cash flow level. To review the good quality performance of our top line, please move to slide 8. Revenues accelerated in the third quarter 90 basis points, leading to a growth up to September of 4% year-on-year, excluding regulation. The main contributors were Hispam and mobile data, which both grew at double-digit rates, and the return to service revenue growth in Spain. Service revenues improved further to 3.3% in the July-September period, with all segments increasing year-on-year performance despite regulation, except Germany. The revenue mix continued to transform, as reflected in the accelerated change from traditional services towards connectivity and new services. Finally, the strong commercial momentum built on our high value base is flowing directly to revenues. Our strong focus on data monetization to foster revenue growth is shown on slide 9. We continue to develop our prepaid value proposition in LatAm around recurrent plans and tiered pricing schemes. We also continue to apply More 4 More strategies to improve value for money and ARPU on the back of new bundles richer in mobile data, video or data sharing. We have leveraged our digital capabilities with focus on flexibility and real-time by launching a new prepaid concept based on mobile applications in Mexico and Brazil. The benefit of all these actions is a consistent growth in volumes and ARPU attrition that translates into steady year-on-year increase in mobile data revenue growth. In addition, on the fixed business, data volumes continued to post high growth, driven by the higher fiber-to-the-home penetration. Slide 10 takes you through profitability. During the last three months, OIBDA year-on-year variation reflected the negative impact of the new Roam Like at Home framework, which deducted 1.7 percentage points, affecting our UK and German businesses. This effect, along with tougher comps in Argentina, broadly explain the lower performance versus the second quarter. OIBDA maintained a positive growth in the quarter. And in the first nine months of the year, it reached 5.3%, excluding the regulatory effect, as we continue delivering efficiencies and operational improvements. This, together with our ability to reduce CapEx, minus 2.3% year-on-year, led us to post an outstanding 9% operating cash flow growth with all segments improving, with the exception of UK which is focused on an accelerated LTE rollout. On slide 11, we show the revenue growth opportunities based on up-selling existing customer relationships. First, in the speed and capacity wave, we are monetizing the investments made in ultra-broadband, with a price premium on fiber versus DSL and a higher ARPU uplift from LTE customers. Second, in services beyond connectivity, these functionalities add further ARPU. TV is the main driver, along with other services such as the Sky cooperation in Germany or the Oops! (12:25) smartphone insurance included in UK this quarter. Third, Aura, our cognitive power, will improve cross-selling and encourage up-selling through recommendations, increasing customers' loyalty and reducing churn. In this context, our long-term value creation strategy will be built on our customers' higher loyalty, their value and their trust in us. Digital services are providing a differentiated offering, as you can see on slide 12. In video, we continue to invest in quality and scale with differential content and technology. Thus, our IPTV base continues to grow, up to 40% of total, and revenues were up 6.8% year-on-year on higher ARPUs. We are also proud to be producing and distributing our own original content. Our other digital pillars posted strong results in the quarter with the exception of security, albeit the B2B performance in this area has been impressive. In machine-to-machine, we are focused on Smart Mobility and Smart Retail, while in cloud we have new projects in Spain and Brazil. Turning to slide 13. You can see the key role of global resources in our journey to become a digital company. Outstanding connectivity was enlarged to approximately 43 million premises passed with fiber and cable, while LTE coverage reached 69% across our footprint and 90% in Europe. Network transformation is being accelerated as we continue to deploy our virtualization program, UNICA, across five countries, enabling software-driven networks to have more capabilities and function smarter. And let me remark that digitalization is already a reality in Telefónica with 55% of our processes end-to-end enabled. This is mainly the result of the end-to-end digital management of already 19% of customer base, driven by full-stack projects and a huge increase in our big data capacity. In short, big progress has been made, enabling us to better compete in the digital world. Our vision as a platform company with close to €54 billion invested from (15:26-15:32). On slide number 14, digitalization is the driver of Telefónica's differentiation and efficiency. We have built best-in-class networks and are leaders in fiber deployment in Europe and LatAm. This is being complemented by switching off legacy networks and is the foundation for the digital revolution which lies ahead of us. Beyond this, services like cloud, IoT, video and digital home innovation equipment, among others, are improving the customer experience. Today, we are immersed in an end-to-end digitalization program addressing, first, transformation of key processes that support customer interactions; sales, service provisioning, payments, top-ups, post sales, and technical support. And, second, network transformation. Moving towards all-IP networks, virtualizing the networks and using big data to ensure the best quality experience, while optimizing return on capital employed. And tomorrow, we will move towards digital customer engagement, while the network adapts to the needs of our customers dynamically. Offering a personalized experience. This will lead to brand differentiation, improving the customer perception, and as we have mentioned before, having new revenue streams. On the next slide, number 15, we are currently in full deployment of an end-to-end digitalization program to transform customer processes and network. We are making our processes automated and real-time. Fostering digital channels. We're using assisted channel interactions and improving customer experience. These initiatives have an impact on operational KPIs and will support higher revenue growth and reduce both OpEx and CapEx needs. The main impacts so far are coming from reductions in back-office costs, customer care, invoice printing, commissions and payments, and the cost of technical support. At the network level, the main initiatives are all-IP networks, which are much more efficient and support more and better services. Radical network virtualization, optimizing CapEx required and with much faster deployments and using big data for network planning. Our operation in Spain, in slide 16, is a showcase of the tangible benefits of digitalization. Its transformation process started in 2012; so far, driving benchmark efficiency and business enhancement. Let me highlight, on the commercial front, we started to optimize old channels and customer processes involved in the customer journey, resulting in better time to market, CSI and lower commercial costs. At the network level, widespread fiber deployment, IP migration and legacy switch-off are allowing us to reduce failures and improve quality of service, leading to lower maintenance costs and new revenues. IT & Systems simplification, standardization and automation have reduced manual tasks and enabled end-to-end data management, hence, reducing costs and CapEx. Finally, digitalization and simplification have allowed us to improve productivity and redeploy human resources in a more flexible and effective way. And this has not ended. There is much more to come. Moving to slide 17, digitalization is gradually being adopted group-wide. And we are starting to see the benefits of it in terms of self-management levels and process automation. Let me illustrate this with customer processes in the Brazilian case. The expected impact on operations is boosted by business initiatives to become digital and supported by key technological enablers. As you can see on the left-hand side of the slide, expectations for 2018 are promising in terms of, first, post sales and customer clearance support, providing real-time information, fostering the self-assistant channel to reduce call center activity. Second, redefinition of the sales processes to improve effectiveness and work in the channel mix to boost online activity. And, third, technical support improvements, working to increase remote resolutions. Therefore, all these should be translated in a more efficient business model. Now, I will hand over to Laura. Laura Abasolo García de Baquedano - Telefonica SA: Thank you, Ángel. Onto slide 18, Spain recovered commercial momentum following the launch of new convergent bundles with differential TV in July. TV net adds doubled quarter-on-quarter. Fixed broadband gained traction heading in the right direction. And mobile contract posted best quarterly net adds of the last 10 years. Moreover, our focus on value continued to sustain a value mix improvement in Fusión. High-value packages increased to 26% of customer base, and ARPU increased 7.1% year-on-year to almost €88. Segmentation of the offering and our best-in-class assets brought about this positive dynamic. Continuing with the Spain financials on slide 19. Service revenues were back to growth year-on-year, plus 0.4%, a sequential improvement of 1.2 percentage points driven by improvements in all segments. (22:25) cost containment led to an improvement in the OIBDA trend in the quarter, declining 0.6% year-on-year excluding real estate gains, while margin reached 41%, plus 0.7 percentage point versus Q2. Roam Like at Home regulation had a marginally positive impact in the quarter. CapEx declined sharply, minus 14.5% year-on-year in the first nine months and translated into a robust cash flow generation of €2.6 billion, up 4.7% year-on-year excluding real estate sales. On slide 20. Telefónica Deutschland remained increasingly focused on the data monetization opportunity in a competitive environment. Bigger data buckets fueled mobile data growth close to plus 49% year-on-year with O2 Free 15 customers usage of more than 5 gigabytes. The new O2 Free portfolio is setting new standards for mobile freedom with ARPU-up potential. The mobile service revenue trend improved this quarter to almost flat year-on-year excluding regulation. OIBDA was 0.1% down mostly reflecting regulation, a €28 million drag mainly related to Roam Like at Home. Nonetheless, incremental synergy savings of €40 million were achieved, and margin expanded 0.3 percentage points. Finally, operating cash flow reached €630 million in the first nine months, growing by 12.9% year-on-year, reflecting lower CapEx intensity. Moving to our UK business on slide 21 where we continued to post strong operational results. Our innovative offerings focused on our customers' needs are driving our sustained market-leading contract churn levels. Contract customers now account for 63% of our total base. LTE reached 58% penetration, and we are successfully driving data adoption with usage up 55% year-on-year. O2 UK's financial performance this quarter reflects the impact from Roam Like at Home as expected. However, it must be noted that we continue to grow both in revenues and mobile service revenue as our customers spend more with us. OIBDA was down 4.7% in organic terms, reflecting the roaming impact and leaving margin at 25.7% this quarter. Operating cash flow in the first nine months was slightly down 0.9% year-on-year, improving sequentially as CapEx levels gradually ease as our LTE network rollout nears completion. Moving on to Brazil now on slide 22. During this quarter, Telefónica Brazil widened its quality gap, reaching 76% 4G coverage and connecting 18 million premises with fiber. Throughout the year, we have increased our fiber reach to 12 new cities, while we are already capturing 82% of ultra-broadband market with an impressive take-up of 40% out of the premises we have passed. Moreover, in mobile, we are also growing in the most profitable segments, grabbing 46% of contract net adds share from January to August. While with a new portfolio we announced in recent days, we reinforce our position with unique and innovative features, fully aligned with our group-wide More 4 More strategy. On our slide 23, we show how this commercial positioning is consistently delivering top-line positive growth, with service revenues up 1.7% year-on-year. On top of that, synergies, end-to-end digitization benefits and other cost control measures drove operating expenses down 1.1%. And in yet another quarter, it resulted in expanding profitability with OIBDA margin up 1.7 percentage points to almost reach 35% in Q3, aiding (26:22) OIBDA growth to 6%. Finally, operating cash flow posted a solid double-digit growth of 11% in January to September. In Eastern America, as shown on slide 24, our continuous network improvements are driving record quarterly net adds in LTE, 2.8 million, and fiber and cable with 249,000 new connections. And let me also highlight the unparallel opportunity ahead of us as penetration rates remain in the 20s for contracts, 4G accesses and fiber connections. This continuous focus on value led to a significant growth in mobile, fixed broadband and Pay TV ARPU, which in turn drove total revenue per access up 18% in the quarter. Moving to slide 25, this growing adoption of data services is being translated into solid year-on-year evolution in revenues, up 16%; and in OIBDA, 9% above Q3 2016 despite inflation-driven cost, greater commercial efforts and tougher year-on-year comparisons in countries like Argentina and Colombia. All in all, this has reflected in the strong operating cash flow generation in the first nine months of the year, reaching €1.3 billion and growing by almost 27% year-on-year. On slide 26, Telxius saw a strong set of results, with revenues increasing by 7.5% year-on-year and OIBDA margin reaching 46.5%, fueled by the positive performance in both the cable and the tower business. Let me highlight that in the third quarter, Telxius acquired 304 towers in Argentina and grew its tenancy ratio to 1.31 times, plus 0.03 versus December 2016. At the same time, the cable business is delivering a strong traffic demand, while the two best-in-class cables, MAREA and BRUSA, are advancing in the rollout plan as expected. Let's move now to the financial metrics on slide 27. We continued to steadily lower our net-to-debt to OIBDA ratio down to 2.80 as of September 2017, which could be further reduced to 2.72 including the Telxius stake sale. This week, we'll receive the first payment of €0.8 billion from KKR. A strong organic free cash flow generation continued to be the main driver of our leverage improvement. Slide 28 shows how financing year-to-date of €8.2 billion has increased our average debt life to 7.85 years and allow us to build a strong liquidity position to phase comfortably for around the next two years of maturities. The effective cost of debt in September 2017 stood at 3.23%, 71 basis points lower than the end of 2016. This positive evolution is mainly due to refinancing in Europe at very attractive rates. I will now hand back to Ángel to recap. Ángel Vilá - Telefonica SA: Thank you, Laura. To finish, please move to slide 29 for our final conclusions. Today's results demonstrate the delivery of profitable organic growth and strong execution. With our best technology platforms, IT systems integration and new digital products and services, we are building for the future with cognitive intelligence at the forefront. In this context, continuing with our digitalization program started some years ago, we see a big opportunity ahead of us in terms of better customer experience, higher efficiencies and new revenue streams. On the leverage side, progressive improvement has been achieved. Furthermore, we secured our market position and confirmed our outlook and dividend for the current year. Finally, we have a clear and consistent strategy built on two pillars: sustainable growth and digitalization. Thank you very much. And we are now ready to take your questions.

Our first question comes from the line of Nicolas Didio of Berenberg. Please go ahead. Nicolas Didio - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Hi. Good morning. Thanks for taking the question. I have two as per the rules. A question about the network sharing in LatAm. José María, in Q1 conference call, indicated that you are being much more rational in terms of CapEx deployment in LatAm. And that's something we should score into our models. I'd like to know if this is something that we already see through the Q3 numbers, or that's something incremental in the next quarters and years. And the second question is about the arbitration in Colombia. I mean, there has been some CapEx, we hear on the other side Millicom keep (32:04) investing at the expense of the margin in terms of investing in growth. I'd like to know if the arbitration in Colombia and the unfavorable ruling is changing the software with which you are managing Colombia. Are you kind of having lower ambitions than in the past? And do you want to kind of catch up with Millicom in terms of investments in broadband? And what about ETB, the sale has been put on hold, but just if you can highlight your position in terms of the potential market consolidation in Colombia. Thank you. Ángel Vilá - Telefonica SA: Thank you, Nicolas, for your questions regarding network sharing in Latin America. We continue to believe that network sharing is an opportunity to reduce network costs not affecting coverage and quality. We already have several sharing agreements in place and we believe that where infrastructure is not a competitive advantage, it makes absolute sense to share. (33:18) convinced that this is the very forward. Part of this is being reflected in our numbers. But we are in talks with various players in various countries. Conversations in each country are different with many formats of discussion, and we should be progressing along this line. We also think that, looking forward, when we move to other networks like 5G, this will bring additional opportunities and needs for network sharing. Regarding the second question, in Colombia, we recapitalized the company through two capitalizations: one, to deal with a PARAPAT; and the other one with the arbitration award. The financial result of these two capitalizations has been practically neutral in terms of leverage for the company, but has had the advantage of leading a company free of contingencies and liabilities with a very sound balance sheet and ready for a new phase of development and growth. Of course, we will continue with our legal actions be it at domestic level or international that we deem appropriate with respect to the levels of situation. But the company now is enjoying, which was not the case before, a quite light and unlevered balance sheet and it has all the opportunities to capture growth as they present themselves. Nicolas Didio - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Thank you. Pablo Eguirón Vidarte - Telefonica SA: Okay. Thank you, Nicolas. Next question, please.

Our next question comes from Joshua Mills of Goldman Sachs. Please go ahead. Joshua A. Mills - Goldman Sachs International: Hi, there. Thanks for taking the questions. Two for me. First one on Spain, just in terms of revenue trend. So, encouraging to see that back to growth, and one of the key swing factors this quarter was in wholesale. So I know that there's potentially some losses to come on the MVNO front given you've renegotiated contracts with MÁSMÓVIL. Is that going to weigh in Q4 or is that more of a 2018 story? I'm just trying to understand whether or not we can see a further acceleration in the overall Spanish service revenue growth, given you've already kind of met your guidance initially to stabilize by year-end? And then, secondly, just pressing on digitalization. So I think, on slide 16, you lay out some very clear data points in terms of how this is a cost-cutting opportunity. But the references you make for monetization and how this can help improve the customer experience on slide 14 are obviously a bit vague. In a nutshell, do you see digitalization as an opportunity to really increase ARPUs and ask more money from the customer? Or is it mainly going to come through on the cost side? Thank you. Ángel Vilá - Telefonica SA: Thank you, Joshua. First, on Spain. In Spain, we have had a very good third quarter performance. In previous results calls and investor meetings this year, we have been saying that we expected revenue trends in Spain to improve along the quarters. And in Q3, Spain is back to service revenue growth. We have recovered positive commercial momentum following the launch of the new convergent bundles, as you have seen in the presentation. And improvement in service revenue is in all segments, in B2C, in B2B, and in wholesale. B2C, which accounts for, as you can see on slide 19, accounts for 54% of service revenues is growing 2.1%, and this growth in B2C service revenue accelerated from Q2 to Q3. B2B, which accounts for 27% of service revenue is declining 1.1%, but it's improving sequentially 0.2 percentage points quarter-on-quarter and is declining a bit less than in the second quarter. And the third component that you were asking about wholesale, wholesale accounts for 19% of the revenues, and it's improving sequentially 3.2 percentage points quarter-on-quarter. This impact of wholesale revenue has several components. One of them is the impact from wholesale revenues from selling football content. We had already been saying that this comparison year-on-year would fade away from August because now we have the same content that we were wholesaling in the same quarter of one year ago. So the football rights component is fading away starting in August. We are seeing also a good performance in NEBA and roaming revenues. The loss of Yoigo revenues would be more in 2018. So, and also, service revenue trends are improving in all three segments. And if I should say, we expect them to continue growing in Q4. Second, regarding digitalization, this is a topic in which we started early, we started early. And we are already seeing results. We have tried to make an effort in this presentation. We have included five slides on this, giving you an overview on our approach to digitalization, which you saw on slide 14; a description of the areas where we can see potential benefits in slide 15; the progress made so far in end-to-end digitalization and enabling digital capabilities that you can see in slide 13. And then, the proof points that we are achieving already with respect to two examples, but we have more. Two examples which are Spain and Brazil. The ones in Spain are on page 16. And probably, you can go through them. We see beyond cost benefits from digitalization. We see benefits that can affect the cross-selling and up-selling to our customers. We can foresee benefits regarding loyalty and therefore reducing churn of our customers. We can see benefits, obviously, at cost and efficiency level, and we also see benefits at CapEx deployment level with the use of big data to be more efficient. So it's more than cost cutting. It goes beyond efficiency. I think we tried to present how it permeates all the platforms of our business. And again, I would like to highlight that we have achieved significant benefits but there is much more to come. Joshua A. Mills - Goldman Sachs International: Thanks. Can I just ask one follow-up on that? I mean, have you got any data points that show, for example, that people you have a digital relationship with Telefónica pay more or have a higher NPS, for example, or is it still too early to get those kind of numbers? Ángel Vilá - Telefonica SA: Well, our customers that in Spain, for instance, have fiber they are paying more than they used to pay when they had copper. The ones that not only have fiber but have the advanced Home Gateway Unit in Spain can have access to higher-quality content than the vision of the content that customers that do not have it. The ones that have the Smart Wi-Fi capabilities at home can adjust also their coverage at home. And all of this is resulting in customers being willing to use our Pay TV compared to the one of other players, and that would be one example, for instance. Joshua A. Mills - Goldman Sachs International: Thank you very much. Pablo Eguirón Vidarte - Telefonica SA: Thank you, Josh. Next question, please.

Our next question comes from Sam McHugh of Exane. Please go ahead. Sam McHugh - Exane Ltd.: Yeah. Morning, guys. Thanks for the questions. Just two. One on content. So I think before you said you're spending something like €100 million to €200 million over the next year or so on original content. That number's in your guidance. But should we expect that to grow in the coming years? And then just secondly, on Spain, we've seen a bit of a slowdown in customers taking the 100 megabits, 300 megabits fiber. Can you talk about kind of some consumer experience and demand for higher speeds? Is this a structural problem or do you think growth there is going to reaccelerate going into 2018? That's all. Thank you. Ángel Vilá - Telefonica SA: Thank you, Sam. Regarding content, I think that you are talking about our own production. The figures that we have given to the market are the ones that will stay here. If anything to be highlighted is that we are having quite a successful reception to the series that we are producing. We have been previewing them in film festivals. They have been deemed to have the best quality, and the start audience that we're having in our series are quite successful. This is one part of the three legs that make our TV strategy successful. One would be the high-speed connection on the home equipment that I was touching before; then the content, own content and acquired content; and then, TV platforms with the best functionalities. We have, on content, the most complete and widest offer in the market, including movies, series and sport. None of our competitors has a similar level of contents than the one that we have. And we are producing in the limited figures that you know our production. We have noticed, on the other hand, recent inflation on certain circle rates. (43:34) And as always, we will analyze the cost benefit equation of content in a rational way and we'll decide accordingly. Regarding Spain fiber, well, we have been recovering momentum commercially in Spain. We have launched in July some new convergent bundles. These have led to traction commercially in several metrics. You were asking about fiber, but we have had very good commercial traction on TV. We have had very good commercial traction on mobile. We have had traction going back to positive net adds in Fusión. And fixed broadband gained traction as well and is in positive territory in the last two months of the quarter since we launched any offers. So we have a good recovery in commercial momentum in Q3. Sam McHugh - Exane Ltd.: Can I just follow up very quickly on the content... Ángel Vilá - Telefonica SA: I think... Sam McHugh - Exane Ltd.: ...if that's possible, quickly? Pablo Eguirón Vidarte - Telefonica SA: Okay. Sam McHugh - Exane Ltd.: Just to ask, is there like a particular series or is there kind of a point in time where you'll launch some of your new series and we'll see a bit more of a commercial splash? Do you have your own version of Narcos sneaking around the corner somewhere or something like that? Ángel Vilá - Telefonica SA: Well, we have a series called Velvet, which is quite successful. We also are launching one called The Zone (45:07) which is also being very well received. We plan to add more, I don't know how to say it, Españ (45:19) flavor to the production of some of our series, so that they fly over to Latin America also successfully. And we can leverage that in our over-the-top TV proposition, the Movistar Play in Latin America, which is already active in Peru and will be deployed across the footprint in Latin America. So, this is really getting traction within limited or not exaggerated budget levels. Sam McHugh - Exane Ltd.: Awesome. Thank you very much. Pablo Eguirón Vidarte - Telefonica SA: Thank you, Sam. Next question, please.

Our next question comes from David Wright of Bank of America. Please go ahead. David Wright - Bank of America Merrill Lynch: Yeah. Hello, guys. Just a couple of questions on the Roam Like at Home because it's obviously impacted the UK really quite materially. And there's also, I think, in the domestic business, there's some increased Roam Like at Home expenses. Q3 is a seasonally – we might expect, is a seasonally higher impact. So, given you have, I believe, in the presentation quantified the UK impact in Q3, could you give us an indication as to how that could progress in Q4. And similarly in Spain, the drag in Q3, if you could quantify that and how you could expect that to progress in Q4? I think that would be very useful. And then my only other question is on the CapEx side. Again, just visibility in full-year 2018 domestically, if you could give us some indication of whether absolute CapEx levels could be falling. Thank you. Ángel Vilá - Telefonica SA: Thank you, David. Regarding Roam Like at Home, we have seen high traffic elasticity since this new regulation is in place. Data traffic growing by three to four times. Voice traffic also growing although at a lower pace, no? We have seen a significant impact on group revenue and OIBDA from Roam Like at Home in Q3 due to the seasonal behavior of roaming revenues in the holiday season is clearly a high. That impact should be lower, both the positive ones in Spain and the negative ones in Germany, and UK should be lower in Q4 compared to Q3. In the UK, it has a significant impact. We have put the figures, the €48 million impact in OIBDA in Q3. From Roam Like at Home, it's a slight lower impact in revenues, but revenues that grew 1.1% in the UK in Q3 would have grown 3.6%, excluding roaming and MTR impacts. So this has been significant in the quarter. The third quarter is the highest. It was positive in Spain. It has had a negative impact in the UK, a little bit more phased impact in Germany because not all the customers have moved to the new roaming tariffs. But Q4 will have lesser of an impact, less positive in Spain, less negative in UK, less negative in Germany. Regarding CapEx 2018, well, first... David Wright - Bank of America Merrill Lynch: Yeah. Sorry. Sorry. Ángel Vilá - Telefonica SA: Yes? David Wright - Bank of America Merrill Lynch: Sorry, Ángel. Sorry to interrupt you. Excuse me. But are you able to quantify the kind of net headwind, how you've got positive Spain, you've got negative (49:07). Is the net roaming impact lower in Q4? So, obviously, the benefits in Spain, the reduced roaming benefit there, is that more than offset by the reduced headwind from all the markets? Ángel Vilá - Telefonica SA: It will continue to be a negative impact, the net impact for group-wide and though it will be lower. David Wright - Bank of America Merrill Lynch: Okay. That's clear. And the CapEx please, Ángel. Ángel Vilá - Telefonica SA: Yes. CapEx is on a declining trend in Spain. We have already 97% LTE coverage. I think it's close to 70% fiber-to-the-home coverage. We will continue deploying fiber, but more reduce speed and focusing on connecting. You know that we don't guide CapEx by OB (49:56), but the CapEx trend in Spain is already declining in terms of CapEx to revenues. David Wright - Bank of America Merrill Lynch: Very good. Thank you. Pablo Eguirón Vidarte - Telefonica SA: Next question, please.

Our next question comes from the line of Keval Khiroya of Deutsche Bank. Please go ahead. Keval Khiroya - Deutsche Bank AG: Thank you for the question. On the assets in Chile and Peru, please. Wasn't the mix in these two still relatively weak from an EBITDA perspective? Are you happy with your strategy for turning these assets around? And if so, do you have visibility as to when the double-digit EBITDA declines you're seeing within Chile and Peru could also start to improve as well? Thank you. Ángel Vilá - Telefonica SA: Thank you. Thank you, Keval, for your question. Both in Chile and Peru, we are seeing improvements from Q3 compared to what was Q2, but we see challenges in both markets. In Chile, we are seeing some increasing commercial intensity on the mobile side with the launch of some unlimited tariffs. And in spite of this, we have seen a progression or a lesser decline in mobile in total revenues, but still slight decline. OIBDA is decreasing due to an increase in operational expenses that are driven by this competitive situation in Chile, but we are managing to control the OIBDA margin in Chile. And through some adjustments on CapEx, to your question, we have managed to have an operating cash flow growth year-to-date of positive of 5.5% year-on-year. Regarding Peru, again, Q3 is better than Q2, but challenges are remaining. We have seen some improvements in some trends. So our prepaid base with frequent top-ups is returning to growth, postpaid loss is slowing down, and in fixed, we continue to have a robust commercial trading with Pay TV accesses growing 5%, with fiber accesses growing 4%. So, here, we are having a better performance. All-in-all, these are markets that we are focusing a lot our management efforts and there is still challenges looking forward. Keval Khiroya - Deutsche Bank AG: That's great. Thank you. Pablo Eguirón Vidarte - Telefonica SA: Next question, please.

Our next question comes from the line of Georgios Ierodiaconou of Citi. Please go ahead. Georgios Ierodiaconou - Citigroup Global Markets Ltd.: Yes. Hi. I've got two questions, please. My first question is around DTH in Latin America. Yesterday, Vivo suggested that the focus is more on IPTV and that DTH options are not that appealing in Brazil. Obviously, you do have some M&A options there and I'll be interested to hear your thoughts more broadly not just in Brazil but across Latin America where there are countries where maybe adding a DTH base could help with cross-selling and where there's any scope of that. And my second question is around the moving parts on EBITDA for Spain in 2018. Obviously, we've got the content side, we've got the loss of MVNO revenues. I was just trying to understand whether digitalization will get some savings through. If you could more or less give us an idea of what are the headwinds and tailwinds we should anticipate going into next year and whether you think you can offset this in order to be on flat to positive EBITDA performance? Thanks. Ángel Vilá - Telefonica SA: Thank you, Georgios. On your first question on DTH in Latin America or our video strategy in Latin America, we have different situations in different markets. In Peru, we are, by far, the leader in Pay TV through our historical position. In cable, in Brazil, as was highlighted in the call yesterday, we are focusing on IPTV. We are growing our fiber base in Brazil. We are covering more and more cities with fiber in Brazil and following that with IPTV and in markets like Argentina where we'll be able to offer Pay TV starting next year in some regions and progressively nationwide. Our strategy is more focused on IPTV and, second, in those markets where we would have lesser position in IPTV. We are focusing on over-the-top aggregator strategy. We call it Movistar Play. It's already launched in some of our markets. And this will be our priority rather than progressing on DTH. We know that at some point there could be some potential available assets on DTH. We tend to look at opportunities for a market consideration always, but it would have to make sense in terms of valuation conditions. We are at this moment focused in our organic development. Regarding what you call the moving parts in OIBDA in Spain, and you were asking about 2018 which obviously I cannot give an answer. But if I had to give you some color, first, let me touch on the Q3 OIBDA evolution. The OIBDA in Spain in the third quarter had a margin of 41%. It's an outstanding OIBDA margin figure for Q3. And we believe and we have been telling that we continue to see margin sustainable around the 40% level. This is including our OpEx in Q3 grew just 0.2% organic in Spain on lower personnel and higher supply costs. Personnel cost was 4.5% down year-on-year, other operational expenses down 1.1% year-on-year and supply cost was up 4.2% mainly on higher content cost. Other cost items were declining handset costs and a little bit higher roaming out. But we are managing to maintain margins sustainable around 40% in spite of the content inflation. Do we have room for additional efficiencies and part of them from digitalization? Yes, for sure. We now have additional efficiencies in distribution channels from end-to-end digitalization, leading to increasing online sales. The usage of the improved Mi Movistar app will drive lower CRM expense. We continue on, and you saw it again on – and I encourage you to look at slide 16, point of sale and store optimization, lower commissions and so on. We will continue to have incremental savings from personnel redundancy programs because the run rate will not be achieved until 2019. So it still has room to grow. We continue to have efficiencies from running a full fiber LTE network. Maintain and cost of fiber versus copper is 40% and as we continue deploying, that will continue flowing through. And we continue to switch off legacy. By year-end, we will have closed approximately 70 copper central switches. We will have tendered 300 closure announcements, and this will continue. For the next 10 years, we expect to close 2,000 copper switches. So this is something to continue. Of course, we're seeing the inflation of content cost. And as I said before, we will continue working and optimizing the content cost according to our rational cost benefit analysis that we perform. And then, migration to full-stack business support systems will drive additional simplification and reduction in our IT cost. So we think that we continue to have levers to be able to maintain the Spanish operation in the levels of OIBDA that you're seeing. Georgios Ierodiaconou - Citigroup Global Markets Ltd.: Thank you. Pablo Eguirón Vidarte - Telefonica SA: Next question, please.

Our next question comes from the line of Fernando Cordero of Santander. Please go ahead. Fernando Cordero Barreira - Banco Santander: Hello, all. Thanks for taking my two questions. The first one is related with your guidance and considering that you have reiterated the EBITDA margin expansion up to 1 percentage point year-on-year. And given the performance in the first nine months, should we consider that the fourth quarter should reflect more than the nine months the margin expansion? And the second question is a follow-up of your previous comment on the efficiencies to be. We've been improving training (1:00:23) in the Spanish operations and particularly on the copper network switch-off. You have said that you are expecting to close 2,000 switches in 10 years. Given, I want to say, the diversity of the switches, I would like to know how much of the current lines or the size of the network would be switched off with these 2,000 switches closed. Thank you. Ángel Vilá - Telefonica SA: Thank you, Fernando. First, on the guidance. First of all, I would like to reiterate that with our Q3 results we are well on track to deliver on the guidance across all metrics. We have upgraded our revenue guidance in Q2 and, well, we tend to be conservative. So, if we extrapolate the nine months performance, we should exceed the revised revenue growth guidance. At the same time, we expect to be in the range regarding the OIBDA margin and we expect to comfortably meet the CapEx guidance. So, to your question on OIBDA, we expect to be in the range regarding the margin. And then with respect to the copper switch off, I think Telefónica Spain is the company that has done the most globally across all operators with respect to switching off copper networks. Here, we need to give advance notice in those switches where we have other operators collocate with it to give notice in advance of five years. If we didn't, which is quite unusual, have anybody collocated, we could do it with one year. But still since we started our fiber deployment back in 2012, we started tendering those notices and we are steadily closing some of those switches. There's going to be a much optimized network and the metrics I gave you before, copper central switches closed down by year-end and 300 closure notices already tendered. Fernando Cordero Barreira - Banco Santander: Okay. Thank you. Pablo Eguirón Vidarte - Telefonica SA: Thank you, Fernando. Next question, please.

Our next question comes from the line of Mathieu Robilliard from Barclays. Please go ahead. Mathieu Robilliard - Barclays Capital Securities Ltd.: Yes. Good morning. Thank you for taking the questions. Two questions, please. First, in terms of the regulatory environment in Europe, obviously, lots of discussion recently about what the final tax is going to be around regulation, around fiber. And I wanted to know if any of the recent changes or discussions that could introduce tactical legal plea (1:03:14) or not allow for the regulation on fiber. If that could affect your expected return on investment and generally your operations in Spain? And the second question about the competitive environment, how would you characterize it today compared to a few months ago? I mean, are you seeing the kind of discipline you were expecting and hoping at the mid- to high-end of the market? Thank you. Ángel Vilá - Telefonica SA: Thank you, Mathieu. With respect to fiber regulation, you know that in Spain we have the biggest fiber deployment in Europe and this was the result of a regulation that favored infrastructure investment as opposed to favoring other metrics. What we have in Spain separates between competitive areas in which it's not regulated. Competitive areas are those where you have three networks with commercial competition from those areas in which there are less than three networks in which there is different degrees of regulation. So it's a geographically segmented regulation. We think that at European level, with the euro/gigabyte vision, there is an underlying desire to promote more for investment and more for innovation environment. And it's still in process, but the proposal represents a good starting point because we think that there are areas, including the promotion of infrastructure investments, that are in the correct direction, also generating or proposing some measures that address the level playing field with respect to over-the-top. So, for us, if regulation continues to be one that promotes investment, for us it's the way to go forward and we think that Europe is taking some inspiration from the Spanish case. Regarding competitive landscape, and I assume you were asking about the landscape in Spain, we think that the market remains competitive but rational, which is quite important. The market is driven by conversions in all accesses with fiber quality, TV, and mobile data as the main levers, but it's clearly segmented, this competitive environment. The mid high-end segment has three infrastructure based players, all oriented to up-selling and cross-selling. Here, you can see and you will see tactical promotions but not structural ones. And we believe that different players are adopting policies or strategies that in the end aim to be ARPU-accretive. The low end is seeing some more intense competition, but we feel well-equipped to compete here because we have differential strengths, we have the best fiber network, we have an LTE coverage which is second to none, we have the best platform, the best content. We think we have the best distribution channels. And we are working, as we have been highlighting throughout the presentation, to have the best digital customer experience. So we feel very well-equipped to compete. And you can see this, in addition to all this talk, you can see this in metrics. Since we launched the Fusión Cero and the Fusión Series to address the low-end segment, we are back to positive commercial momentum. We have added Fusión customers. The mix of Fusión customers is better than the one we had in the previous quarters. We have more Fusión customers in the mid and high segments. Fusión ARPU is up, is up 7.1%, it's at €5.8. And churn is broadly stable in a controlled range. So it continues to be a competitive market but, we think, it's a rational one. And we are competing comfortably in this market. Mathieu Robilliard - Barclays Capital Securities Ltd.: Thank you. Pablo Eguirón Vidarte - Telefonica SA: Thank you, Mathieu. Next question, please?

Our next question comes from the line of Luis Prota of Morgan Stanley. Please go ahead. Luis Prota - Morgan Stanley SV SAU: Yes. Thank you. I have two questions. The first one is on Mexico. I don't know whether you could give us some rough estimate on the impact on EBITDA in Telefónica Mexico from the new regulation on termination rates and whether you see this as a major change to the competitive landscape. And the second question is on the Spain and the wholesale market. I don't know whether you could give us some data points on the take-up of wholesale fiber accesses by Vodafone. I don't know whether you could give us their run rate or what could we expect mid-term in this regard, potentially helping to stabilize or even grow wholesale revenues once the Yoigo impact is over. Thank you. Ángel Vilá - Telefonica SA: Thank you, Luis. Regarding Mexico interconnection, in the month of August, the Supreme Court ruled in favor of América Móvil's injunction regarding the legality or constitutionality of having a zero fee due to interconnection. Two points here. The regulator now has to set the new rates, but those rates have to be based on the principal of asymmetry, maintaining asymmetry, will be lower asymmetry but maintaining asymmetry. And second point, important one, is that this ruling was not retroactive. So this would be applying from January 1, 2018 onwards and is not retroactive. This is going to be decided quite soon because has to be applied by the beginning of next year. And there are different speculations about where could be the levels of these termination rates in the respective networks. But there will be a level of asymmetry. It's likely that there will be less asymmetry than the one that we had before. So this will have an impact in our OIBDA and impact in other players' OIBDA in Mexico. But it's still soon to quantify the potential impact. Regarding the fiber wholesale in Spain, the fiber network growth keeps ramping up based on recent agreements and regulation, but penetration is still low. And this is, going forward, something that will grow. Another important thing to note is that the migration from unbundled local loop to NEBA, given the prices, is revenue-accretive and this will be another important factor into this growth. And I'll say that we're happy with our Vodafone agreement and are open to further agreements with other players, which could be or will be analyzed according to profitability criteria. So, if one were to look at the moving pieces of the service revenue evolution, for looking forward I can give you not a guidance but some trends for Q4. In B2C and B2E, we expect similar trends. But in wholesale, and this would in fact include this fibre wholesale, we expect the trend of service revenues in the wholesale component in Spain to continue to improve in 2017. I hope this can help you with your model. Luis Prota - Morgan Stanley SV SAU: Yes, it does. Thank you. Pablo Eguirón Vidarte - Telefonica SA: Thank you, Luis. We have time for the last question, please.

Our last question comes from the line of James McKenzie of Fidentiis. Please go ahead. James McKenzie - Fidentiis Equities Sociedad de Valores SA: Hi. Thanks very much. A question on Spain and the Fusión KPIs. You have seen a big pickup in – well, a reasonable pick up in churn during the quarter. In previous quarters, I think, we've talked about churn being higher in the lower-end bundles. Is that still the case or has there been a tick-up in churn in the high-end bundles because of the price increases you've put through? And then, I mean, just finally on Fusión. How do you see the commercial success of the new low-end offers that you launched at the beginning of July? How is the gross adds been doing on the low-end bundles? Ángel Vilá - Telefonica SA: Thank you, James. I will respond to your questions about Fusión, I'm unable to say Fusión. I prefer to call it Spanish way. I would challenge your statement that Fusión churn is worsening. We have been seeing in the different quarters a 0.1 up or down movement. This is a metric that, as you can imagine, we monitor very closely. James McKenzie - Fidentiis Equities Sociedad de Valores SA: Yeah. Ángel Vilá - Telefonica SA: And we think that this is broadly stable and we see in a controlled range. What we said in the previous call continues to be true. The churn in the mid-, high-end subscribers is around 70% lower than the churn in the low segment because the higher-end subscribers show more loyalty. And actually, when you look at the mix of mid- and high-end, it's moving up rather than moving down. And we are seeing, to your second question, traction in our lower-end offers. We launched – and we included TV in Fusión Cero and Fusión Series. Fusión Series is under a promo at the same prices as Fusión Cero. And what we're seeing is traction in Fusión Series. And bear in mind that this is under promotion and when the promotion finishes, we continue to see substantial percentage of customers staying with the products, and therefore, it tends to be ARPU-accretive when the promotion finishes. So we get commercial traction partially through a promotion that when it end up it will become ARPU-accretive. So I hope this answers your question. James McKenzie - Fidentiis Equities Sociedad de Valores SA: Yeah. Very good. Thank you. Pablo Eguirón Vidarte - Telefonica SA: Thank you, James.

At this time, no further questions will be taken. Ángel Vilá - Telefonica SA: (1:14:58) for your participation. And we certainly hope to have provided you some useful insights. Should you still have further questions, we kindly ask you to contact IR Department. Good morning and thank you.

Telefónica's January to September 2017 results conference call is over. You may now disconnect your line. Thank you.