15th May 2006 07:30
Telefonica SA15 May 2006 Part 2 RESULTS BY BUSINESS LINES Others Business DIRECTORIES BUSINESS During the first quarter of 2006 the TPI Group's revenues increased by 28.6% to123.2 million euros. The Group's OIBDA amounted to 29.5 million euros, 21.1%higher than the figure for the same period of 2005. Net income rose by 22.5% to14.6 million euros. These results are explained by: • The good performance of Europe, whose advertising revenues rose by 29.4% to 60.0 million euros, mainly thanks to variations in the publication calendar of some guides, the good behavior of the editorial business (+4.8% like for like growth of books published in the period), and the strong growth of the Internet revenues, improving a 29.6%. • Telephone traffic revenues rose 62.6% to 21.7 million euros, thanks to the consolidation of revenues coming from the Italian telephone information market. • Total revenues of TPI Peru grow 6.9% in euros (+0.4% in local currency)- after the publication of the Lima directory. • The consolidation of Telinver results, contributing with 1.6 million euros to revenues. Once again we would like to emphasize that the TPI Group's interim results arenot comparable on a yearly basis and cannot be extrapolated to year-end. This ismainly due to the higher concentration of directory publications in the secondhalf of the year and changes in directory publication schedules. TPI business in Europe contributed 68% of the Group's revenues in the firstquarter 2006, versus the 65% figure in the first quarter 2005. This increase inrevenues' contribution is explained by the strong growth of revenues in Europe,positively affected by changes in the first quarter publication schedule of fivedirectories. In terms of OIBDA, it remains in a 64%. Revenues in Europe rose 35.9% to 84.4 million euros, mostly due to: • Changes in the calendar of publication for five guides • Organic growth of 4.8% in paper products • 29.6% increase of the Internet products • growth of the telephone traffic associated to the telephone assistance services, with revenues increasing in a 61.2%. This growth is helped by the fact that during the first quarter of 2005 the telephone information service in Italy had not been launched yet. Latin America made the remaining 32% contribution to total revenues and 36% toOIBDA, with TPI Peru being the biggest Latin American contributor to revenues inthe region, thanks to the publication of the Lima directory, which is its mainactivity throughout the year. During the first quarter, TPI Peru revenuesreached 27.4 million euros, implying a growth of 6.9% in euros (+0.4% in localcurrency). OIBDA of this subsidiary grew a 10.7% in euro terms (+4% in localcurrency) to 10.7 million euros. Low activity registered in the Chilean, the Brazilian and Argentineansubsidiaries because of their guides publishing calendar make their contributionto Group's results negligible. In turn, the directories business of the Telefonica Group, which includes theArgentinean company Telinver in the three months of both 2005 and 2006, anincrease in revenues of 28.0% compared with the first quarter of 2005 to reach123.2 million euros. OIBDA reached 29.5 million euros, representing ayear-on-year increase of 23.3%. TPI - PAGINAS AMARILLAS GROUPCONSOLIDATED INCOME STATEMENTUnaudited figures (Euros in millions) January - March 2006 2005 % Chg Revenues 123.2 95.8 28.6Internal expenditure capitalized in fixed assets (1) 0.0 0.0 N.S.Operating expenses (88.5) (67.0) 32.1Other net operating income (expense) (5.3) (4.5) 18.1Gain (loss) on sale of fixed assets 0.1 0.0 N.S.Impairment of goodwill and other assets 0.0 0.0 N.S.Operating income before D&A (OIBDA) 29.5 24.3 21.1Depreciation and amortization (6.9) (5.7) 20.8Operating income (OI) 22.6 18.6 21.2Profit from associated companies 0.0 (0.1) c.s.Net financial income (expense) (1.8) (0.6) N.S.Income before taxes 20.9 18.0 16.0Income taxes (6.3) (6.1) 3.4Income from continuing operations 14.6 11.9 22.5Income (Loss) from discontinued operations 0.0 0,0 n.s.Minority interest 0.0 0.0 n.s.Net income 14.6 11.9 22.5 (1) Including work in process. DIRECTORIES BUSINESSCONSOLIDATED INCOME STATEMENTUnaudited figures (Euros in millions) January - March 2006 2005 % Chg Revenues 123.2 96.2 28.0Internal expenditure capitalized in fixed assets 0.0 0.0 N.S.(1)Operating expenses (88.5) (67.8) 30.5Other net operating income (expense) (5.3) (4.5) 17.7Gain (loss) on sale of fixed assets 0.1 0.0 N.S.Impairment of goodwill and other assets 0.0 0.0 N.S.Operating income before D&A (OIBDA) 29.5 23.9 23.3Depreciation and amortization (6.9) (5.8) 18.5Operating income (OI) 22.6 18.1 24.8Profit from associated companies 0.0 (0.1) c.s.Net financial income (expense) (1.8) (1.3) 38.5Income before taxes 20.9 16.7 24.6Income taxes (6.3) (6.1) 3.4Income from continuing operations 14.6 10.6 36.7Income (Loss) from discontinued operations 0.0 0.0 N.S.Minority interest 0.0 0.0 N.S.Net income 14.6 10.7 36.5 (1) Including work in process. RESULTS BY BUSINESS LINES Others Business ATENTO GROUP The revenues of the Atento Group continued to grow quite significantly duringthe first quarter of 2006. Revenues stood at 255.5 million euros at March 2006,a year-on-year growth of 43%. The net income of 13.7 million euros was up 75.3%(5.9 million euros) in relation to the previous year. All Atento operations increased their revenues during the first three months ofthe year except for Atento Puerto Rico, which dropped its volume of activityslightly in relation to the same period of the previous year. Most notable wereAtento Venezuela with a growth rate of over 166%, Atento Brasil with a growthrate of 71.4%, Atento Mexico with a growth in revenues of 60.1% and AtentoColombia that recorded an increase in sales of 57.5%. Atento Brasil, remainednumber one in terms of contribution towards revenues, accounting for 38.8% ofthe total Atento Group. Revenues of Atento Espana represented 31.5% of turnover.The total of both operations recorded a 40.8% increase year on year, losing onepercentage point in the relative weight of the total group's revenues to thegrowth in other operations, primarily in Mexico, Venezuela and Chile. AtentoMexico consolidated its position as the third operation in terms of itscontribution to revenues with 9.1%, followed by Atento Chile with 5.9%. The growth in sales of the Atento Group in 2006 was supported by the moderategrowth in the activities of the Telefonica Group companies and, primarily, bythe solid performance in the market of clients outside the Telefonica Group thatstood at 45.4% of total revenues, 0.6 percentage points up on the same period ofthe previous year. OIBDA of the Atento Group in 2006 amounted to 34.5 million euros, a 53.1%increase on the 22.6 million euros obtained in the first quarter of 2005. AtentoBrasil represented 43.5% of the total with 15 million euros. Mexico (4.1 millioneuros), Spain (4.0 million euros) and Chile (3.5 million euros) are the othermarkets with operations contributing to over 10% of the group's total OIBDA. The pressure to drop prices remains a trend in the telemarketing activity.Despite this, margins have increased by 0.9 percentage points year on year andremain steady in relation to the fourth quarter of 2005. Thus, the OIBDA marginin relation to total sales stood at 13.5%. In absolute terms, depreciation and amortization remained at very similaramounts to those of the first quarter of 2005, allowing for an improvement inthe Operating Income of 11.8 million euros to increase from 15.6 to 27.4 millioneuros. The increase in revenues was accompanied by maintained CapEx that amounted to3.8 million euros in comparison with the 4.1 million euros of the first quarterof 2005, primarily focusing on Brazil, Mexico, and Peru. Operating free cash flow (OIBDA - CapEx) improved year on year by 12.6 millioneuros to stand at 30.8 million euros, as a result of the increased operatingresults and lower investment effort. At operating level, the Atento Group had 39,468 positions in place at March 31st2006, 24.1% more than one year ago and concentrated in Brazil (+2,944), Mexico(+1,047), Venezuela (+784) and Chile (+639). The average number of occupiedposition for 2006 was 32,846. Productivity stood at 80%, a 5 percentage pointsincrease in comparison with the same period of the previous year. ATENTO GROUPCONSOLIDATED INCOME STATEMENTUnaudited figures (Euros in millions) January - March 2006 2005 % Chg Revenues 255.5 178.7 43.0Internal expenditure capitalized in fixed assets (1) 0.0 0.0 N.S.Operating expenses (221.0) (156.8) 41.0Other net operating income (expense) 0.0 0,7 (95.3)Gain (loss) on sale of fixed assets 0.0 0.0 N.S.Impairment of goodwill and other assets 0.0 0.0 N.S.Operating income before D&A (OIBDA) 34.5 22.6 53.1Depreciation and amortization (7.2) (7.0) 2.2Operating income (OI) 27.4 15.5 76.1Profit from associated companies 0.0 0.0 N.S.Net financial income (expense) (5.3) (3.4) 56.6Income before taxes 22.0 12.1 81.5Income taxes (7.2) (3.6) 98.0Income from continuing operations 14.9 8.5 74.5Income (Loss) from discontinued operations 0.0 0.0 N.S.Minority interest (1.1) (0.7) 67.0Net income 13.7 7.8 75.3 (1) Including work in process. RESULTS BY BUSINESS LINES Others Business CONTENT AND MEDIA BUSINESS The Contents and Media business ended the first quarter of 2006 with a revenuesof 349.0 million euros, 30.9% up on the figure reached in the same period of theprevious year. This increase is due to the progress in results from all lines ofbusiness. Operating income before depreciation and amortization (OIBDA) in theJanuary-March 2006 period amounted to 166.7 million euros, compared with the45.4 million euros obtained in the same period of 2005. This significant growthin 2006 was primarily due to the revenues from the sale of part of the SogecableCapital by the Telefonica Group in the take-over bid launched by the PrisaGroup. ENDEMOL NV Progress has been made during the first quarter of 2006 on all elements ofEndemol's strategy: Endemol has enjoyed a very successful first quarter of 2006within its Core business area. Endemol's top format in terms of turnover, BigBrother, remains strong, as it was on air in more countries than in the sameperiod of last year, returning to screens in Italy and Belgium after an absencein 2005. The success Endemol has enjoyed worldwide with Deal or no Deal duringthe first quarter, in particular in the UK and the USA, has resulted in anincreasing appetite for game shows (a core element of Endemol's portfolio),which Endemol is capitalizing on. Regarding North America, Extreme Makeover: Home Edition continued to be amongthe most popular shows in the US. After being successfully introduced in the USmarket in December 2005, Deal or No Deal again had promising ratings for thesecond series, which aired on NBC in March. Specific examples of the resurgenceof game shows can be seen in the US were newly created formats Show Me The Moneyand For The Rest of Your Life where sold to Fox and ABC respectively and therejuvenated version of Endemol's existing format One versus 100 was sold to NBC,all in the same week. In the Scripted field, Endemol enjoyed a sound performance with severalcontinuing and new soap operas and drama series in its main scriptedterritories, like the Netherlands, Italy and Spain, but also with initial dramaproductions in countries such as Russia and South Africa. In April, Endemolincreased its stake in the Dutch production company NL Film & TV to 51%, whichfocuses exclusively on television drama, comedy and feature films. In line with the Company's continuing search for expansion in New Territories,the first Asian subsidiary, Endemol India, opened for business at the beginningof the year and enjoyed a successful start in the first three months. Inaddition, Endemol Polska officially kicked off in Poland as a fully independentproduction company headed by a newly appointed Managing Director. In the Digital Media field, the success of formats like Deal or no Deal and BigBrother is generating substantial revenues on calls and SMSs. Furthermore,Endemol is exploring new sustainable revenue streams through cooperation withcompanies such as KPN in the Netherlands and BT in the UK further exploitingEndemol's library and developing of new specific content for their IPTVconcepts. ATCO The advertising market in Argentina (Capital and Gran Buenos Aires regions) fellby 2% over the first quarter of the year in relation to that of the previousyear. This decline can be compared with the 6% increase recorded in the sameperiod of 2005, which reflected the market recovery recorded over 2004 and 2005. In this favourable market context, Telefe reaffirmed its position as leader,obtaining 40.6% of the total audience by the end of the first quarter 2006,representing a three and a half-point increase in accumulated audience on thesame period of the previous year, followed by Canal 13, its main competitor,with an average share of 25.1%. The market share accumulated by Telefe in thefirst quarter of 2006 stood at 41.8%, very similar to that reached in the sameperiod of 2005 and, once again, followed by Canal 13 with 35.5%. Hence, ATCO improved its financial results in comparison to the previous yearthanks to both the increased audience obtained by Telefe, enabling it toincrease its advertising sales in the Inland Provinces, and to the internationalsale of its own contents, which exceeded that of the same period of the previousyear by over 40%. CONTENT AND MEDIA BUSINESSCONSOLIDATED INCOME STATEMENTUnaudited figures (Euros in millions) January - March 2006 2005 % Chg Revenues 349.0 266.5 30,9Internal expenditure capitalized in fixed assets (1) 0.0 0.0 N.S.Operating expenses (299.2) (228.9) 30.7Other net operating income (expense) (25.3) 0.8 c.s.Gain (loss) on sale of fixed assets 142.3 7.0 N.S.Impairment of goodwill and other assets 0.0 (0.0) N.S.Operating income before D&A (OIBDA) 166.7 45.4 N.S.Depreciation and amortization (6.9) (7.4) (5.7)Operating income (OI) 159.8 38.1 N.S.Profit from associated companies (7.5) (8.7) (14.5)Net financial income (expense) (21.6) 2.9 c.s.Income before taxes 130.7 32.2 N.S.Income taxes (0.9) (13.0) (93.1)Income from continuing operations 129.8 19.2 N.S.Income (Loss) from discontinued operations 0.0 0.0 N.S.Minority interest (7.3) (0.3) N.S.Net income 122.5 18.9 N.S. (1) Including work in process. ADDENDA Companies included in each Financial Statement Based on what was indicated at the start of this report, the results breakdownof Telefonica Group are detailed according to the business in which the Grouphas a presence. The main differences between this view and the one that wouldapply attending to the legal structure, are the following: • Telefonica O2 Europa Group includes O2 Group results from February 1st 2006, and Cesky Telecom and Telefonica Deutschland results from January 1st 2006. Telefonica Group 69.4% stake in Cesky Telecom is legally dependent upon Telefonica S.A. In the case of Telefonica Deutschland, the company is a 100% dependent upon Telefonica Data Corp, S.A. • Telefonica, S.A. directly participates in the share capital of Endemol Entertainment Holding, N.V., which has been included in Content and Media Business. The results from the Sogecable S.A. stake have been also assigned to Content and Media Business, including the portal divestiture that took place in the first quarter, even though a part of the investment is legally dependent upon Telefonica, S.A. • Telefonica Holding Argentina, S.A. holds 6.98% of Atlantida de Comunicaciones, S.A. (ATCO) which, for those purposes, is considered to be part of Telefonica de Contenidos, consolidating 100% share capital of ATCO in the Content and Media Business. • The participation of Telefonica Group in IPSE 2000 SpA is assigned to the cellular business, also including the investment legally dependent upon Telefonica DataCorp, S.A. • Telefonica de Argentina (TASA), participated by Telefonica Latinoamerica Group, sold in November 2005 its 100% stake in Telinver, S.A. share capital to TPI Group. Nevertheless, the results from this company has been assigned to the directories business through 2005 in line with our vision for the total Telefonica's directories business. • Telefonica Data Group (denominated "Telefonica Empresas"), legally dependent upon Telefonica S.A., has been segregated and subsequently integrated into the fixed line activities both in Latin America and Spain for presentation purposes, and according to geographic criteria. • Telefonica International Wholesale Services Group (TIWS) financial results has been assigned to Telefonica Latinoamerica Group, even though is legally dependent upon Telefonica, S.A. (92.5%) and Telefonica Data Corp (7.5%). • The activities of Terra Networks Espana S.A., Maptel Networks, S.A.U. and Azeler Automocion, S.A. have been included in Telefonica de Espana Group. As of March 31st 2006, Terra Networks Espana is directly held by Telefonica S.A., while Maptel Networks and Azeler Automocion are directly held by Terra Networks Asociadas, S.L. • Latin American companies formerly dependent upon Terra Group have been legally transferred to Telefonica International, S.A. during the second quarter of 2005, although the results have been assigned to Telefonica Latinoamerica Group from the beginning of 2005. ADDENDA Key Holdings of the Telefonica Group and its Subsidiaries detailed by businesslines TELEFONICA GROUP TELEFONICA DE ESPANA GROUP % Part % Part Telefonica de Espana 100.00 Telyco 100.00Telefonica Moviles (1) 92.46 Telefonica Telecomunic. Publicas 100.00Telefonica Latinoamerica 100.00 Telefonica Soluciones Sectoriales 100.00TPI Group 59.90 Telefonica Empresas Espana 100.00Telefonica de Contenidos 100.00 Terra Networks Espana (1) 100.00Atento Group 91.35 T. Soluciones de Informatica y 100.00O2 Group (2) 98.35 Comunicaciones de EspanaCesky Telecom 69.41 (1) Telefonica S.A. owns 100%.(1) Effective participation: 92.91%. IncludesTelefonica Moviles S.A.' Stock Options Program("Programa MOS").(2) Currently 100%. TELEFONICA LATINOAMERICA GROUP TELEFONICA MOVILES GROUP % Part % Part Telesp 87.49 Telefonica Moviles Espana 100.00Telefonica del Peru (1) 98.19 Brasilcel (1) 50.00Telefonica de Argentina 98.03 TCP Argentina 100.00TLD Puerto Rico 98.00 T. Moviles Peru 98.03Telefonica Chile (2) 44.89 T. Moviles Mexico 100.00Terra Networks Peru 99.99 TM Chile 100.00Terra Networks Mexico 99.99 T. Moviles El Salvador 99.04Terra Networks USA 100.00 T. Moviles Guatemala 100.00Terra Networks Guatemala 100.00 Telcel (Venezuela) 100.00Terra Networks Venezuela 100.00 T. Moviles Colombia 100.00Terra Networks Brasil 100.00 Otecel (Ecuador) 100.00Terra Networks Argentina 99.99 T. Moviles Panama 99.98Terra Networks Chile 100.00 T. Moviles Uruguay 100.00Terra Networks Colombia 99.99 Telefonia Celular Nicaragua 100.00Telefonica Data Colombia 100.00 Radiocomunicac. Moviles SA (Arg) 100.00Telefonica Empresas Brasil 93.98 Telefonica Moviles Chile 100.00Telefonica Data Argentina 97.92 Group 3G (Germany) 57.20Telefonica Data USA 100.00 IPSE 2000 (Italy) (2) 45.59T. Intern. Wholesale Serv. (TIWS) (3) 100.00 3G Mobile AG (Switzerland) 100.00 Medi Telecom 32.18 Mobipay Espana 13.36(1) Telefonica Empresas Peru has been absorbed by Mobipay Internacional 50.00T.del Peru as of May 1st 2006.(2) CTC has changed its name. T. Moviles Soluciones y Aplicac. (Chile) 100.00(1) Telefonica, S.A. owns 92.51% y Telefonica DataCorp Tempos 21 38.50owns 7.49%. (1) Joint Venture which fully consolidates Telergipe Celular, S.A., Telebahia Celular, S.A., Telest Celular, Telerj Celular, Celular CRT, Global Telecom, Telesp Celular and TeleCentro Oeste Part., S.A. through participation at Vivo Participacoes (62.38%). (2) ditionally, Telefonica Group holds a 4.08% of IPSE 2000 through Telefonica DataCorp. TPI - PAGINAS AMARILLAS GROUP TELEFONICA O2 EUROPE % Part % Part TPI Edita 100.00 O2 UK 100.00Publiguias (Chile) 100.00 O2 Gemany 100.00TPI Brasil 100.00 O2 Ireland 100.00TPI Peru 100.00 Manx 100.00Teleinver (Argentina) 100.00 Airwave 100.0011888 Servicios de Consulta Telefonica 100.00 Cesky Telecom 69.41Services de Renseig. T. (France) 100.00 Eurotel 69.41Servizio di Consultazione Telefonica, 100.00 Telefonica Deutschland (1) 100.00S.R.L. (Italy) (1) Telefonica S.A. owns 100% through Telefonica DataCorp. ATENTO GROUP % Part OTHER PARTICIPACIONS % Part Atento Teleservicios Espana, S.A. 100.00Atento Brasil, S.A. 100.00 Lycos Europe 32.10Atento Argentina, S.A. 100.00 Sogecable (1) 16.84Atento de Guatemala, S.A. 100.00 Portugal Telecom (2) 9.84Atento Mexicana, S.A. de C.V. 100.00 China Netcom Group (3) 5.00Atento Peru, S.A.C. 99.46 BBVA 1.07Atento Chile, S.A. 77.60 Amper 6.10Atento Maroc, S.A. 100.00 Telepizza 4.33Atento El Salvador. S.A. de C.V. 100.00 (1) Telefonica de Contenidos, S.A. holds 15.71% andTelefonica, S.A. holds 1.13%. (2) Telefonica Group's effective participation. Telefonica Group participation would be 9.96% if we exclude the minority interests. (3) Ownership held by Telefonica Latinoamerica TELEFONICA DE CONTENIDOS GROUP % Part Telefe 100.00Endemol (1) 99.70Telefonica Servicios de Musica 100.00Telefonica Servicios Audiovisuales 100.00Hispasat 13.23 (1) Ownership held by Telefonica S.A. Endemol Holding NV isthe parent company of Endemol Group and owns 75% of EndemolNV, company quoted in the Amsterdam Stock Exchange. ADDENDA Significant Events • On May 12th, 2006, Telefonica, S.A., paid an interim dividend from 2005 net income of a fix gross amount of 0.25 euros for each Company share issued, in circulation and carrying entitlement to this dividend. • On April 28th, 2006, having analyzed the offers received within the framework for the sale of the equity interest of Telefonica, S.A. in the capital of Telefonica Publicidad e Informacion, S.A., Telefonica decided to sign the contract committing to the formulation and acceptance of a Public Tender Offer with the English telephone directory company Yell Group plc. The price of the offer submitted by Yell is 8.50 euros per share (ex-dividend), which entails a total price of 1,838 million euros for 59.905% of the share capital of TPI currently owned by Telefonica. In this regard, the shareholders acting at the General Shareholders' Meeting of TPI held in Madrid on 8 April 2006 approved the distribution of a dividend of 0.40 euros per share, which was paid on May 5th 2006. • On April 13th 2006, the Swiss government informed 3G Mobile AG, the Swiss subsidiary of Telefonica Moviles, S.A., of its decision to revoke the UMTS license granted to this company in 2001. Telefonica Moviles plans to appeal against this ruling at the Swiss Federal Court. • On April 7th, 2006, Telefonica acquired the ownership of 50% of Colombia Telecom's shares plus one. Telefonica as the company's strategic partner, will take over management of the operator. The deal was formalised on April 17th with the signing of an Investment Agreement. The rest of the operator's share capital will remain in the government's hands. The government will have a put option on its stake, exercisable until 2022. In terms of deal price and financing, Telefonica committed to subscribe in cash to a Colombian pesos 853,577 million capital increase (approximately 368 million dollars) at the end of April to be financed from the Company's free cash flow. • On March 31st 2006, Ipse 2000 SpA lodged its appeal against the decision taken by the Italian government to revoke the UMTS license it had been granted in 2000. • On March 30th 2006, Telefonica S.A. treasury stock position was 239,580,268 shares representing 4.868% of its current share capital, accordingly to the CNMV filing. • On March 29th, 2006, the Boards of Directors of Telefonica, S.A. and Telefonica Moviles, S.A. agreed the approval of a Merger Plan regarding the merger between Telefonica Moviles, S.A. and Telefonica, S.A., resulting in the extinction, upon dissolution without liquidation of Telefonica Moviles, S.A., and the en bloc transmission of its net worth to Telefonica, S.A., which shall acquire, by universal succession, all rights and obligations of Telefonica Moviles, S.A. The exchange ratio for the shares of the companies participating in the merger, determined on the basis of the current value of the corporate assets of Telefonica Moviles, S.A. and Telefonica, S.A., shall be (with no supplemental cash compensation) of four (4) shares of Telefonica, S.A., each having a face value of one euro, for every five (5) shares of Telefonica Moviles, S.A., each having a face value of fifty cents of euro. Additionally, the Merger Plan sets forth the distribution by Telefonica Moviles, S.A. of an extraordinary dividend against the distributable reserves for a gross amount of euro 0.085 per share and an interim dividend, also extraordinary, against the result obtained from January 1 to March 28, 2006 for a gross amount of euro 0.35 per share. The total amount of the dividends (both of that initially proposed and of the additional dividends agreed in the framework of the merger) is, therefore, 0.64 euros gross per share in circulation and will be paid, if approved by the relevant Shareholders' Meeting, on July 21, 2006, i.e., before the share exchange deriving from the merger and, therefore, will be collected only by the shareholders of Telefonica Moviles, S.A. • On March 29th, 2006, the Board of Directors of Telefonica, S.A accepted the resignation of Mr. Miguel Horta e Costa from his position on the Board. ADDENDA Changes to the Perimeter and Accounting Criteria of Consolidation In the period January-March of 2006, the main changes have occurred in theconsolidation perimeter were the following TELEFONICA GROUP • Once the Bid for the purchase of all the shares in the UK company O2 plc ended and the procedure began for the mandatory sale of O2 shares according to the UK Law, by March Telefonica held 98.35% of the shares forming the capital of this company that, as of 7th March this year, were no longer listed on the London Stock Exchange. The company has been included in the consolidation perimeter of the Telefonica Group using the full integration method. • Capital increase in the subsidiary company Comet, Compania Espanola de Tecnologia, S.A. in February this year through an increase in the face value of the 119,850 existing shares by 1.92 euros to total 0.23 million euros. Telefonica, S.A., its sole shareholder, subscribed and paid up the entire capital increase. In March Comet also increased its share capital by approximately 0.01 million euros with an additional paid-in capital of 1.72 million euros, fully subscribed and paid up by its sole shareholder Telefonica. The company continues to be included in the consolidation perimeter of the Telefonica Group using the full integration method. TELEFONICA DE ESPANA GROUP • In February, the Spanish company Telefonica Cable, S.A. acquired 15% of the share capital of Telefonica Cable Galicia, S.A. Through this purchase, Telefonica Cable became the sole shareholder of the company. The company continues to be included in the consolidation perimeter of the Telefonica Group using the full integration method. TELEFONICA LATIONAMERICA GROUP • The Brazilian company Santo Genovese Participacoes Ltda., a holding company that owned all of the capital stock of the Brazilian Atrium Telecomunicacoes Ltda., was liquidated during the first quarter of 2006 after taking over its subsidiary Atrium. Both companies, which were included in the consolidated accounts of the Telefonica Group using the full integration method, have been removed from the consolidation perimeter. TELEFONICA MOVILES GROUP • On the 22nd of February 2006, the Shareholders' Meetings of Telesp Celular Participacoes S.A. ("TCP"), Tele Centro Oeste Celular Participacoes S.A., ("TCO"), Tele Sudeste Celular Participacoes S.A. ("TSD"), Tele Leste Celular Participacoes, S.A. ("TBE") and Celular CRT Participacoes S.A. ("CRTPart") approved corporate restructuring in order to exchange TCO shares for TCP shares to become a wholly-owned TCP subsidiary and the take-over of TSD, TBE and CRT Part by TCP. TELEFONICA CONTENIDOS GROUP • In March, Prisa launched a partial take-over bid for the 20% of Sogecable, S.A. The Telefonica Group sold shares representative of 6.57% of the company's share capital, reducing its stake from 23.83% to 17.26%. Later in March, Sogecable made a capital increase although without Telefonica Group taking part, thus diluting its stake in the company's share capital to the present 16.84%. Telefonica Group continues consolidating Sogecable into the financial statements by the equity method. • Andalucia Digital Multimedia, S.A. made a capital increase with the participation of Telefonica de Contenidos, S.A., which subscribed enough shares to enable it to increase its shareholding to 24.20%. The company continues to be included in the consolidation perimeter of the Telefonica Group using the full integration method. DISCLAIMER This document contains statements that constitute forward looking statements inits general meaning and within the meaning of the Private Securities LitigationReform Act of 1995. These statements appear in a number of places in thisdocument and include statements regarding the intent, belief or currentexpectations of the customer base, estimates regarding future growth in thedifferent business lines and the global business, market share, financialresults and other aspects of the activity and situation relating to the Company.The forward-looking statements in this document can be identified, in someinstances, by the use of words such as "expects", "anticipates", "intends","believes", and similar language or the negative thereof or by forward-lookingnature of discussions of strategy, plans or intentions. Such forward-looking statements are not guarantees of future performance andinvolve risks and uncertainties, and other important factors that could causeactual developments or results to differ materially from those expressed in ourforward looking statements. Analysts and investors are cautioned not to place undue reliance on thoseforward looking statements which speak only as of the date of this presentation.Telefonica undertakes no obligation to release publicly the results of anyrevisions to these forward looking statements which may be made to reflectevents and circumstances after the date of this presentation, including, withoutlimitation, changes in Telefonica's business or acquisition strategy or toreflect the occurrence of unanticipated events. Analysts and investors areencouraged to consult the Company's Annual Report as well as periodic filingsfiled with the relevant Securities Markets Regulators, and in particular withthe Spanish Market Regulator. The financial information contained in this document has been prepared underInternational Financial Reporting Standards (IFRS). This financial informationis unaudited and, therefore, is subject to potential future modifications. For additional information, please contact. Investor Relations Gran Via, 28 - 28013 Madrid (Spain) Phone number: +34 91 584 4700 Fax number: +34 91 531 9975 Email address: Ezequiel Nieto - [email protected] Diego Maus - [email protected] Dolores Garcia - [email protected] Isabel Beltran - [email protected] [email protected] www.telefonica.es/accionistaseinversores This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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