17th May 2006 08:09
Telefonica SA17 May 2006 Telefonica, S.A., as provided in article 82 of the Spanish Stock Market Act(Ley del Mercado de Valores), hereby reports the following: In answer to the requirement of the Spanish National Securities MarketCommission (Comision Nacional del Mercado de Valores- CNMV), we enclose to thisdocument the "fairness opinion" of Credit Suisse Securites (Europe) Limitedaddressed to the Board of Directors of Telefonica, S.A. on the proposed mergerof Telefonica, S.A. and Telefonica Moviles, S.A. Madrid, May 16th, 2006 29th March 2006 Board of Directors Telefonica, S.A. Gran Via 28 Madrid Spain Dear Sirs: We understand that Telefonica, S.A. ("Telefonica") has made a proposal tomerge (the "Proposed Merger") with Telefonica Moviles, S.A. (the "Company"),92.457% of whose issued share capital is currently held by Telefonica, to beeffected by incorporation of the Company into Telefonica, whereby theshareholders of the Company will receive existing and newly issued ordinaryshares of Telefonica for their ordinary shares in the Company. We have been requested by the Board of Directors of Telefonica to advise itwith respect to the fairness to Telefonica from a financial point of view of theexchange ratio of four Telefonica shares for each five Company shares (the"Exchange Ratio"), pursuant to the terms of the Proposed Merger. In arriving at our opinion, we have reviewed certain publicly availablebusiness and financial information, including publicly available financialstatements, equity research reports and publicly available financial forecasts,relating to Telefonica and the Company. We have also reviewed certain otherinformation relating to the Company, including financial forecasts prepared bythe Company's management, provided to us by you. We have not had an opportunityto meet with the management of the Company. We have had the opportunity solelyto meet with the management of Telefonica to discuss certain informationrelating to the Company and Telefonica, including the assessment of managementof Telefonica as to the potential synergies anticipated to result from theProposed Merger. We have relied upon, without independent verification, theassessment of the management of Telefonica as to the strategic benefits andpotential synergies (including the amount, timing and achievability thereof)anticipated as a result of the Proposed Merger. Based on Telefonica's indications, we have assumed with your consent that,prior to consummation of the Proposed Merger, the Company will pay itsshareholders a special dividend of €0.435 per share, in addition to the annualdividend of €0.205 share, and that Telefonica will pay an annual dividend of€0.25 per share to its shareholders. We have also considered certain financial and stock market data ofTelefonica and the Company, and we have compared that data with similar data forother publicly held companies in businesses which we deemed similar to those ofTelefonica and the Company. We also considered such other information, financialstudies, analyses and investigations and financial, economic and market criteriawhich we deemed relevant. We have not reviewed the legal documentation required for the ProposedMerger as these documents are not yet available, including, inter alia: (i) theindependent experts' reports; (ii) the reports prepared by each of Telefonica'sand the Company's respective Boards of Directors; (iii) the draft notarial deedformalising the Proposed Merger and; (iv) a prospectus or equivalent disclosuredocument that may be required to be filed under Spanish law. In connection with our review, we have not assumed any responsibility forindependent verification of any of the foregoing information and have relied onits being complete and accurate in all material respects. In particular, withoutlimitation: (i) with respect to the publicly available financial forecasts forTelefonica referred to above, we have reviewed such forecasts with themanagement of Telefonica and have assumed, with your consent, that suchforecasts represent reasonable estimates and judgments with respect to thefuture financial performance of Telefonica; (ii) with respect to the Company'sfinancial forecasts prepared by the Company's management, we have assumed thatthey have been reasonably prepared on bases reflecting the best currentlyavailable estimates and judgments of the Company's management as to the futurefinancial performance of the Company; and (iii) with respect to the estimatesprovided to us by the management of Telefonica with respect to the synergiesanticipated to result from the Proposed Merger, we have been advised by themanagement of Telefonica, and we have assumed, that such forecasts have beenreasonably prepared on bases reflecting the best currently available estimatesand judgments of the management of Telefonica as to such synergies and will berealized in the amounts and the times indicated thereby. We also have assumed, with your consent, that in the course of obtainingnecessary regulatory and third party approvals and consents the Proposed Merger,no modification, delay, limitation, restriction or condition will be imposedthat will have an adverse effect on the Company, Telefonica or the contemplatedbenefits of the Proposed Merger, and that the Proposed Merger will beconsummated in accordance with its current financial terms, without waiver,modification or amendment of any material term, condition or agreement therein.In addition we have not been requested to make, and have not made an independentevaluation or appraisal of the assets or liabilities (contingent or otherwise)of the Company, nor have we been furnished with any such evaluations orappraisals. Our opinion addresses only the fairness, from a financial point ofview, to Telefonica of the Exchange Ratio and does not address any other aspector implication of the Proposed Merger or any other agreement, arrangement orunderstanding entered into in connection with the Proposed Merger or otherwise,but has also considered the aforementioned dividends distributions to be made bythe Company and Telefonica . Our opinion is necessarily based upon informationmade available to us on the date hereof and upon financial, economic, market andother conditions as they exist and can be evaluated on the date hereof. Ouropinion does not address the merits of the underlying decision by Telefonica toenter into the Proposed Merger and does not constitute an opinion orrecommendation to any shareholder of Telefonica or the Company as to how suchshareholder should vote at any shareholders' meetings to be held in connectionwith the Proposed Merger. We are not expressing any opinion as to what the valueof the ordinary shares of Telefonica actually will be when exchanged to theCompany's shareholders pursuant to the Proposed Merger or the prices at whichsuch ordinary shares will trade subsequent to Proposed Merger. We have acted as financial advisor to Telefonica in connection with theProposed Merger and will receive a fee for our services which is payable ondelivery of this letter. In addition, Telefonica has agreed to indemnify us forcertain liabilities and other items arising out of our engagement. From time totime, we and our affiliates have in the past provided, are currently providingand in the future we may provide, investment banking and other financialservices to the Company and/or Telefonica, for which we have received, and wouldexpect to receive, compensation. We are a full service securities firm engagedin securities trading and brokerage activities as well as providing investmentbanking and other financial services. In the ordinary course of business, we andour affiliates may acquire, hold or sell, for our and our affiliates ownaccounts and the accounts of customers, equity, debt and other securities andfinancial instruments (including bank loans and other obligations) of theCompany, Telefonica and any other company that may be involved in the ProposedMerger, as well as provide investment banking and other financial services tosuch companies. It is understood that this letter is for the information of the Board ofDirectors of Telefonica only in connection with its consideration of theProposed Merger and may not be disclosed to any person without our prior consentand is not to be quoted or referred to, in whole or in part nor shall thisletter be used for any other purposes, without our prior written consent.Notwithstanding the foregoing, we hereby consent to the inclusion of this letterin its entirety in the merger prospectus that will be prepared pursuant to theProposed Merger and in any other equivalent disclosure documentation solely ineach case to the extent that inclusion of this letter in such documents isrequired by applicable law or regulation or is requested by a competentAuthority. Based upon and subject to the foregoing, it is our opinion that, as of the datehereof, the Exchange Ratio is fair to Telefonica from a financial point of view. Yours faithfully, CREDIT SUISSE SECURITIES (EUROPE) LIMITED By: /s/ Eduardo Puebla Eduardo Puebla Managing Director This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
TDE.L