Pablo Eguirón – Head-Investor Relations Ángel Vilá – Chief Financial and Corporate Development Officer Eva Castillo Sanz – Chairwoman and Chief Executive Officer-Telefónica Europe Santiago Fernández Valbuena – Chairman and Chief Executive Officer-Telefónica Latin America José María Álvarez-Pallete – Chief Operating Officer

Tim Boddy – Goldman Sachs Georgios Ierodiaconou – Citigroup Ivón Leal – BBVA Research Frederic E. Boulan – Nomura International Plc Paul Marsch – Berenberg Bank Luigi Minerva – HSBC Bank Plc Will Milner – Arete Justin Funnell – Credit Suisse Robin Bienenstock – Sanford C.

Bernstein & Co. LLC Fabián Lares – JB Capital Markets Luis Prota – Morgan Stanley Jonathan Dann – Barclays Capital

Thank you. Good afternoon ladies and gentlemen, and welcome to Telefónica's conference call to discuss January-March 2013 results.

I’m Pablo Eguirón, Head of Investor Relations. Before proceeding, let me mention that this document contains financial information that has been prepared under International Financial Reporting Standards.

This financial information is not audited. This presentation may contain announcements that constitute forward-looking statements, which are not warranties of future performance and involve risks and uncertainties.

Certain results may differ materially from those in the forward-looking statements as a result of various factors. We invite you to read the complete disclaimer included in the first page of the presentation, which you will find in our website.

We encourage you to review our publicly available disclosure documents filed with the relevant securities market regulators. If you don't have a copy of the relevant press release and the slides, please contact Telefónica's Investor Relations team in Madrid by dialing the following telephone number; 34-91-482-8700.

Now, let me turn the call to our Chief Financial & Corporate Development Officer, Mr. Ángel Vilá, who will be leading this call.

Thank you Pablo. Good afternoon, ladies and gentlemen, and welcome to Telefónicas’ first quarter 2013 conference call.

Today, with me are the members of the executive committee, so during the Q&A session you will have the opportunity for the rest of them any questions you may have. Let me start with the highlights of the first quarter of the year.

It has been a quarter of delivering on our transformation strategy towards sustainable growth. First, results up to March reflected business stabilization with similar organic OIBDA figures year-on-year for the second consecutive quarter.

Thanks to margin progression, and with operating cash flow maintaining the organic growth trend initiative last quarter. Second, we’ll continue progressing in our transformation, which is already delivering tangible results.

As an example, profitability in Spain stood up 47% and Movistar Fusión continues having strong traction in the market. Third, we keep on diversifying the business, increasing the exposure of the Latin America, which accounts for over 51% of total revenues, while Brazil has already become the main market by revenues.

Fourth, we continue taking decisive actions to reduce it, offsetting non-recurring factors and seasonality, which impacted our net debt as of March. And finally, we are posting strong earnings per share growth of 22.2%.

Revenues reached over EUR14.1 billion in the first quarter, down 1.6% in organic terms, while OIBDA was close to EUR4.6 billion, almost flat organically year-on-year. Operating cash flow exceeded the EIR3.3 billion mark, growing 9.6% organically.

In summary, let me highlight that Q1 results are fully aligned with our internal expectations and therefore we reiterate our full-year guidance. In slide number five, I would like to highlight the outstanding results of our focus on high quality customer base.

Smartphone penetration has increased by 6 percentage points year-on-year to 20%, driving contract base growth of driving more than 1.4 million customers in the first quarter. As such, contract mix further improved by two percentage points year-over-year to reach 33%.

In the fixed business, wholesale broadband penetration has expanded to 27% of fixed accesses with connection rate increasing to 10%. There is demand for higher speeds and we are progressively adopting our networks to capture it.

In Europe, we are launching innovative and simple propositions offering the best value for money and with the progressive elimination of subsidies as a common denominator. This will allow us to capture the data opportunity with a sustainable model.

In Latin America, we are clear market leaders in the high value segments and we are in the best position to capture the data opportunity that lies ahead of us. Sequential top line stabilization excluding current year FX, was driven by two main levers, Latin America and mobile data as shown in Slide 6.

I want to remark that Latin America continues its progression as the key engine to revenue growth and almost offsetting lower sales from our European businesses. We continue to evolve our revenue mix increasing our exposure to the fastest growth businesses as shown by the increasing weight of data revenues over mobile service revenues, to 37% compared to 34% one year ago.

Non-SMS revenues are the main growth driver and already represent 62% of data revenues. Seven percentage points ahead of last year figure as a result of our pricing strategy that is delivering positive data monetization.

Please turn to Slide 7, to review our achievements with regards to profitability. This is the third consecutive quarter of lower costs.

The successful delivery of cost control initiatives, leverage on scale and simplification are the main levers of this performance. Sound costs control more than offset revenue pressure and rise our OIBDA margin improvement of 50 basis points to 32.3%.

Commercial cost efficiencies delivered by our new commercial model and further efficiencies achieved due to simplification and resources optimization led this performance. This is especially remarkable in a context of increasing smartphone penetration and growing network costs related to the data-centric businesses.

Lastly, and as I would explain in the next slide, I would like to stress our initiatives to capture the value of our scale. Global resources is further optimizing scale benefits, delivering savings and helping to maximize business profitability.

As such, in Q1, the unit has been focused in certain priority projects to consistently progress in transformation, aiming to improve global operating and commercial processes. To give some examples, in network and operations, the step forward in supporting operations has been achieved and we will ensure smooth implementation of network sharing agreements in Europe and extend them to the term.

A good example of this is the MoU with América Móvil in Brazil. I think mostly in the recent successful tariffs refreshment in UK and Czech Republic.

We have also launched a new mobile for application maintenance in Latin, and we have further advanced in executing infrastructure consolidation. In devices, we have simplified our catalog reducing references by 25% versus 2012 concentrating 80% of value in 30 references.

Moving to Slide number 9, let me highlight the progress made by Telefónica Digital to continue transforming Telefónica into digital telecom. Firstly, strong momentum continues around five folks of us with a large industry support.

The first handsets will be on sale in Spain, Columbia and Venezuela in the coming months. Meanwhile, company content partnerships are already in place.

Secondly, end-to-end capabilities were bolstered with introduction of a new platform for managing end-to-end communications. While innovative services were launched and new partnership has strengthened our position.

Telefónica Digital is also driving innovation in over the top communications with two goals, a service that will change the way people use their phone by allowing them to use a single mobile number across any of Internet connected devices seamlessly. On top of that, Telefónica joined Spain to create one of the largest mobile advertising alliances in the world and will become the first telco in Latin America to deliver end-to-end services in the Ethernet market.

Please turn now to Slide number 10, to review our operations in Latin America. In this quarter, commercial activity remains strong in the most valuable segments.

The profile of our superior customer base pleases us in an unparallel position to capture the mobile data opportunity in the region. This is reflected in the strong growth of contact accesses with accelerated smartphone adoption.

As a result, revenues grew strongly by almost 7% year-on-year in organic terms, doubling accesses growth. Data services update progressively increases its contribution to total revenues.

This reflects the quality and sustainability of our growth model. Let me also remark that despite the higher commercial activity in high value clients and the accelerated smartphone adoption, OIBDA growth continue to outpace revenue growth, resulting in a slight margin expansion as our efficiency efforts are delivering tangible results.

The next slide gives our view on the Brazilian business. We continue to widening our mobile leadership in the first quarter.

We believe our market strengths and the competitive advantage provided our differential 3G infrastructure and our superior service quality. As a result, we capture 42% of market net adds in the contract segment in the first quarter with smartphones growing strongly.

Our contract customer base grew by 17% year-on-year with smartphones rocketing by 88%. Meanwhile, we kept strengthening our position with new innovative multi-device plans launched in April.

In the fixed business, we remain committed to our action plan aimed to improve fixed quality mainly enhancing the mix of broadband speeds while increasing the uptake of Vivo fiber. Positive commercial results translated into financial metrics as shown in slide number 12.

Revenues accelerated this quarter on the back of the outstanding performance in mobile revenues, growing by double-digit year-on-year and bolstering top line growth as the account for two-thirds of total revenues in Brazil. Let me also highlight that we keep leading mobile service revenue market year-on-year growth, owing to our strategy based on sustainable growth model centered on quality.

Similarly, profitability continued to improve year-on-year mainly driven by synergies derived from our businesses integration along with ongoing efficiency efforts to bring further margin sustainability, and let me also highlight that once again in this quarter, we led OIBDA market share and we keep widening that leadership. Now, please turn to slide number 13, to review the results of our businesses in LatAm.

In Peru, very strong commercial momentum remained, flowing into top line acceleration while maintaining stable OIBDA margin year-on-year. In Argentina, revenue growth surpassed the 20% mark year-on-year, while historical record in net adds for the first quarter affected profitability, but secured future growth.

Meanwhile, Chile remains as one of the most competitive markets in the region with revenues impacted by market dynamics and pricing pressure. We reshaped our commercial offer mainly to take advantage of a low penetrated mobile data market and in the meantime, we continue to work on the costs side, gaining efficiency to offset revenue decline.

Turning to our Colombian business in slide number 14, despite a tough competitive environment, we continued to post high growth in contract customers, while enhancing our position in the fixed business with the highest net additions in the last four years in both fixed traditional and fixed broadband accesses. On top of that, benefits stemming from the integration of our fixed at the bottom line.

In Mexico, the new regulatory framework should improve the competitive landscape creating the conditions to exploit other market growth potential. In the meantime, Q1 results consolidated deposited commercial traction with excess is growing after the four quarters declining, and doing with our LatAm assets in Venezuela once again this quarter.

Operational performance remains impressive for growth of ARPU. Let me now review our operations in Europe.

Telefónica Europe continued executing its strategy to focus on quality and increase business efficiency, I mean intensified competition and economic headwinds. We have been revisiting our commercial approach to reinforce our competitive position.

Launching an empower portfolio, the local market conditions, that’s sharing our common philosophy of simplicity, transparency, data simplicity, and moving away from subsidies. The incremental savings derived from transformation initiatives led for a second consecutive quarter to an OIBDA margin improvement year-on-year of 210 basis points despite ongoing revenue pressure.

Moving to Spain on Page 16, I would like to highlight that our commercial offer, Movistar Fusión continued to be the key lever behind the company’s commercial activity in the quarter, sustaining strong market momentum. Movistar Fusión surpassed 1.7 million customers as of March.

It is especially remarkable that 47% of gross ads were from new customers, either new fixed or new mobile services, 17 percentage points more than in Q4. New revenues from these customers along with upselling and increased addition on mobile lines allow Movistar Fusión to reach revenue break-even from January.

Movistar Fusión is consolidating solid fixed broadband and fiber net adds as well as reducing fixed telephony losses and on top of that, improving customer satisfaction and churn. Convergent offers in the market and market shrinkage affected mobile quarterly net adds.

In particular, MVNOs integrated offers resulted in higher contract portability losses. During April, we introduced new commercial propositions to better compete in the marketplace, completing our conversion portfolio in the entry level with Movistar Fusión Cero and addressing different consumption levels for mobile only customer with Movistar Cero and Movistar Total.

Turning to slide number 17, we review Telefónica España financials. Total revenues stabilize their year-on-year decline on a sequential basis, ex-handset sales, which were affected by the new commercial strategy against a difficult macroeconomic backdrop.

On top of that and despite increased coverage of fiber up to 2.3 million households as of March, CapEx showed a 30% year-on-year reduction, flowing directly to operating cash flow generation, which remained stable year-on-year in organic terms. Turning to Slide 18, in UK you have maintained commercial momentum in a highly competitive market.

Contract mobile data remains solid. As the company continued capturing share of smartphones and the efforts of retention led to a record low contract term.

As such, we have improved our customer mix with the contract segment representing already 53% of the mobile base, up 3 percentage points year-on-year. I would like to mention the recent launch of an innovative, simple, and transparent proposition, O2 Refresh.

This study scheme offers the best value for money proposition and continues to be data centric while generating commercial efficiencies as it eliminates handset subsidies. Mobile service revenue year-on-year trend excluding regulation improved for the second consecutive quarter, reflecting the better trading in 2012.

With regards to revenues, I would also like to highlight the RPI price increase under disposal of our fixed business that will start impacting from the second quarter. Top line performance and further efficiencies around network sharing focus on aligned customer care and the benefits of scale led to a margin expansion of 1.6 percentage points leading to OIBDA year-on-year growth for the first time since the third quarter of 2011.

In Germany, on Slide 19, the first quarter has been impacted by typical competitive moves on retention. This commercial environment led to lower trading volumes with strong focus on the existing customer base and upselling activities.

Contract churn improved by 0.2 percentage points leading to a contract needs of 53%. To further monetize data opportunity, the company has launched a new O2 Blue portfolio and is seeing encouraging adoption trends.

I would also like to highlight the ongoing expansion of the LTE network with high-speed metropolitan areas of Munich and Berlin already operational since the end of March. Regarding the MOU signed with Deutsche Telecom, we see this business has levered to develop our conversion strategy and this will allow more effective high-speed bundle offers.

In terms of financials, focus on smartphones did to a strong non-SMS revenue growth. Mobile service revenues excluding MTR grew 0.5%, accelerating their growth trend sequentially due to ARPU pressure as we continue our process of renewing the contracts of our customer base and as we have been impacted by lower SMS volumes.

Lastly, OIBDA margin increased by 5 percentage points to 23.9%, allowing OIBDA to remain stable year-on-year. Let me now move to the financial side on Slide 20.Telefónica remains on track on its leveraging process.

Net debt including post-closing events decreases by €1 billion compared to December 2012 net debt adjusted by the evaluation in Venezuela. Positive free cash flow spectrum has contributed with €238 million, nearly three-fold the Q1 2012 figure.

This has been complemented with several measures such as the sale of assets and stakes for €1.2 billion, including the recently announced sale of a 40% stake in Central America, the divestment of UK retail fixed business in Hispasat and the placement of treasury shares. In the opposite direction, we have suffered exceptional items such as the Venezuelan evaluation, the spectrum accrued UK and seasonal ones like the traditional seasonality of working capital in the first quarter, which should reverse in the coming quarters.

So we’d reiterate our target to reduce our net debt below €47 billion in 2013. On slide 21, I would like to highlight again, that financing conditions are normalized for us.

Several long-term financing operations have allowed us to raise €7 billion year-to-date and to increase our average deadline to 6.75 years. This successful financing has contributed to an additional improvement in our liquidity position reaching €21.4 billion as of March, €0.4 billion above the level of December 23.

We have further strengthened our liquidity position by repurchasing and exchanging short dated bonds by an amount of €0.8 billion. So we’ll remain comfortably ahead of our target of 24 months of covered maturities.

It is also worth mentioning, the decreasing effective interest cost during the last six months almost by nearly 30 basis points to 5.22%, close to the bottom of the range of our guidance and despite the strong liquidity position. To conclude, let me highlight that in the first quarter, we continued transforming our model.

We continued keeping strong commercial push, focusing quality and innovation and avoiding subsidies, which would result in a sustainable growth model. We’ve continued to stabilizing the business as reflected in the stable OIBDA and growing operating cash flows year-on-year.

And lastly, we continued with our debt reduction program after taking decisive actions to increase financial flexibility. Thank you very much.

And now, we are ready to take your questions.

Yes, thank you for the question. I wanted to ask a little bit about Spain, where it looks like the general KPIs weakened fairly materially sequentially from the fourth quarter level, obviously, it was slightly slower uptake of Fusión with significant increase in line losses and obviously the mobile contract adds.

Where do you see these trends going over the next couple of quarters and is there a kind of tipping point in your mind where you have to think again about the need for incremental price accounts? And then the second point following that is really around the potential for ongoing cost saving in Spain, which you’ve highlighted, is there anyway you can quantify the kind of sequential ongoing benefits through the year, will continue to the cost base in Spain?

Thanks very much.

Thank you very much, Tim. I think that your first question is to send again the message around what we’re trying to achieve in Spain and what we believe is a very good evolution of our transformational strategy in the first quarter 2013.

It will take first that message, the consolidation of this transformation strategy. What we want to highlight is that first of all Fusión on the base of our sustained commercial momentum is very clear at the moment.

We have continued having a very good traction of Fusión which is more than $1.7 million customers. We have improved our customer mix with 47% of gross adds that’s our new customers are customers compared to the 30% that we saw in the last quarter of 2012.

We have improved our customer satisfaction, which has logically impacted on lower churn rate consequently, and importantly as stated in previous quarters we have seen how Fusión have continued helping us to perform in the fixed business. For example, we have had a very solid fixed broadband net art with very much focus on value services and positive churn evolution.

As you know, on the (inaudible) by net ad broadband network we had hardly 52000 in the first quarter of 2013, with improvement in the churn rate. But it is very, very importantly effect that we wanted to highlight in the last quarter is that they take in five which is even higher value is hired fixed broadband with 60,000 in the first quarter.

Again I know that (inaudible) net loss is the low historical evidence and we are accelerating (inaudible) on mobile broadband adoption, where it is very important to highlight – compared to the last quarter and to evolution. It is very important to highlight we say, compared to the last quarter and to see evolution on those KPIs that you think are – below are decelerating is that, we have made that in the mobile business.

We are seeing some impact on the pure impact of those mobile made us worth. We have to address very clearly what was the reference of that mobile impact in our business and we have them sold.

So when you look at what’s happened is definitely a shrinkage of the market. And we have also seen that part of our loss of those net ads were to MVNOs.

And those were mainly happening at the low-end, the very specific segment of the low-end both on the convergence and the peer mobile. So we address that specifically during the first quarter and we adjust our tariff in that specific segment.

One, we’re doing the convergence segment, just putting term at what we call Fusión Cero, which was introduced at the end of April. So we have very little results yet.

And the orders, which were very much focused on addressing the mobile only business, which were this Movistar Cero and the Movistar Total, which were introduced at the beginning of the month of April. So we believe that respect of the performance, we have continued to show an evolution of positive evolution and we have managed through addresses specifically the low-end of the mobile business, which was affected so far.

If I may, as of U.S. may specifically for going forward, both what we see, I can give you some of the results we are seeing in April, which consolidated trends we have seen in terms of revenue stabilization, which were very important as you remember at the beginning of the fourth quarter and definitely during the first quarter.

We have seen that April confirms revenue decline stabilization and we expect this trend to continue despite the ongoing challenging macro competitive factor, which is a reality. In terms of our EBITDA margin, I want to confirm that we believe it is sustainable despite the top line pressure and lower savings in commercial costs that we are continuing with the simplification as pointed out in the presentation made by Ángel in sourcing in Spain and personnel cost measures continue and will continue bearing the fruits.

We expect commercial saving improvement in mobile and maintaining those focus on momentum in fixed business posted by the Fusión effect. And I think I could continue talking, but probably we should pose the next question.

That’s great, thank you.

Thank you, Tim. Next question please.

Thank you, Georgios. And with regard to the refresh tariff that we launched these new tariffs on April 16, and as you know they’re quite bold and innovative proposition for a commercial offer in the UK.

Just to clarify on the refresh tariff and in the refresh offer, customer can have first of all the latest form whenever they want. Customers can also choose their device and the tariffs from the O2 Refresh range that it is quite upstated in the offer.

Also the customers can make a decision about how much they want to pay upfront, and how much to spread over time available over a 24-month contract. The truth is that it’s very early stage to give you results, but what we believe the impact so far is a positive one.

we’ve seen people entering and understanding the tariffs in fact they continue that fairly out of 10, nine are thinking on the refresh tariffs and although it’s early days we are seeing deposited momentum. With regards to the factoring yes, that’s an absolute yes.

And probably going into the second question on the TV, when you look at the Fusión and what we were trying to achieve, it is clear that we have managed to, convinced that market with our convergent offer and now we look into the totality of the clients in a different way. We have to admit that the MVNO of the, what we call the Pay TV within Fusión on the net adds front is under pressure and we believe there are a couple of analysis or reasons that we can take into account.

No doubt that the macroeconomic environment is challenging and somehow people can look at TV or Pay TV as they look surely good. Although, we are trying to adjust that in order to make sure that we get closer to our clients and we have adjust the offer.

The important factor is that ARPU has increased by 19% year-over-year due to the price increase that had to implement in October 2012. But importantly, we analyzed, such as we promised in the fourth quarter, very specifically how to adopt to market conditions the TV offering.

So in April, exactly April 15, Telefónica launched the promotional offer, which MVNO can be subscribed at €10 up to September. We’ve seen the right traction.

We can confirm this and we are also expecting an improvement in the MVNO performance in the following quarters based on this attractive promotion that is already been well taken by our customers. Also something that I stated in the last quarter of 2012, it was not just a matter of price, but also a matter of adjusting to our platform to a better look and feel, to a better technological offering and that, we are already working on that and I see we are quite ready to announce soon.

And importantly as well as I mentioned in the last quarter, we have to improve our content, which we will be working on that. This is something that is important to us for the whole firm and (inaudible) we will continue working on it.

Perfect. Thank you.

Thank you, Georgios. Next question please?

Hello. Good afternoon, everybody.

My two questions; the first one is in the Spain, specifically on fiber. Are you satisfied with the 16% uptick you have seen in the fiber product?

Is it how we should look at the market going forward with 15%, 20% uptake in the product? Or eventually do you feel you have to do something this year in order to push more aggressively on that, and if it’s the case, what you need to do and when are you going to do it?

That’s the first one. And the second one is on Mexico, I don’t know how we should think about operations in Mexico going forward?

It’s true that subscribers have pro forma be bidding the fourth quarter, but it expense up much lower ARPU. So I don’t know if you could share with us, if you can live there with a mobile-only business or eventually how the strategic changes after the perspective of the new regulation there?

Thank you, Ivón. Again, if we go first to the fiber performance, we are very happy with the fiber performance.

Specifically, we continue commercial traction of the fiber net adds quarter-after-quarter. So yes, year-over-year as you mentioned 23% increase into the first quarter, and when you look at each of the variables that we are looking at.

As I mentioned earlier, this quarter we have had a positive net ads of 60,000. We have added a new promotional tariff levels of €29.9 for 12 months in order to foster even more the fiber adoption and this was launched on April 15.

I believe that it is important to highlight what Fusión, the important hype that Fusión is making into the take of fiber overall. Fusión is, as we pre-analyze from the very, very earlier stages is that is fostering and improving the business into the fixed business with positive impact on the fixed broadband net adds, but even at a greater pace they take on fiber.

We see the 16% take as a very positive one, but obviously we will continue analyzing during the rest of the year and the quarters to come if there is any need to foster even more the fiber adoption. We believe it is important to see the relation being stable and being a relation that fosters and helps us to continue investing as you know in fiber.

But so far we maintain a flexible investment approach in the coming years. We’ve figured to reach, as I stated last quarter, 8 million households by the end of 2015.

Thank you.

Yes, Ivón. This is Santiago.

Two observations in Mexicol, first on regulation and the change of law. First it has gone through the, both the Congress and the Senate, but the important things are still unknown and those important things are how are the bylaws or the lesser level laws going to be a reason not because we expect anything different, of course, from what it says because (inaudible) is going to be very significant to achieve the purposes of the reform, which basically should be favorable to the non-incumbents in Mexico.

So we are going to have to wait for the better part of the remainder for that to actually transpire. We do think, however, that this is going to be a positive development both for the Mexican market and for our operations in Mexico.

Addressing the quarterly numbers you’re quite frankly pointing out that the lower option numbers are be levering. Unless we’re it then the numbers show for two reasons.

This strategy is working and it is working, because it is basically getting what we intended, which has got stability in the newcomers in the net ads to the base. The hit rate there is almost on target with our expectations, but it is having a negative effect on the existing or prior customer base, which has taken advantage of the more attractive features and the more attractive tariffs and therefore it’s trading down.

And that’s where the option decline is coming from. So we think this is going to lapse throughout every year.

And as this strategy unfolds, it will show itself that it has taken us away from material price work, which is allowing and kicking very strongly in Mexico. You may have noticed that some of our competitors especially the big incumbent have sacrificed their previous review part of their profitability just to counter that amount.

So all in all, we think we’re on the right track. It’s going to take sometime for you to show that we did the case.

And I urge you to look at the combination of the new additions to the base and the old degrading customers that are taking advantage of the new tariffs.

Thank you, Santiago.

Thank you, Ivón. Next question, please?

Hi. Thank you for taking my question, if we could go back to Spain for a couple of questions.

First of all, at the time of the full-year numbers, we had a message of an improvement in the business later in the year. So can you comment here on, as you expect to applying to start to get better LatAm points, specifically what should we expect to move up the dilution from migration to Total and Cero, which are probably 60% cheaper than the previous price points.

If you could clarify the exact impact of the loyalty program, we have entered sales decline, doubling over Q4 ‘12. So how is that helping the top line?

And third point, can you explain the fading of the EBITDA versus with recent Q1 with much higher standing points under the margin especially in the second half of the last year at $0.47 margins already. Thank you very much.

Thank you very much. And I think that if I may start with – we’ll go first to the question around the back book or even the (inaudible), make sure that I address – it was ARPU, it was loyalty, it was EBITDA, just to make sure.

Yeah, perfect.

Perfect? Okay.

Well, I would say that in terms of the revenue, the environment continues being tough. So no one denies that.

But I would say that despite that revenue pressure, we see the evolution in market share on net gains. Also, if you look at the fact that we have to do more positioning, we believe those are very much focused on values that you think as segments.

And we believe that improvement from global movement are from the past. When we look at the margin just specifically, we cannot or we believe that the improvement will be gradual and interannual, as we improve as well our commercial costs and non-commercial costs.

But to highlight that the simplification measures that we have taken and I can’t expand a lot on that. The new negotiations with the unions in terms of personal situation and very importantly, the in-sourcing capabilities that we are incorporating into the business, that permit us to maintain a margin confirm the sustainability of those margins and that despite the current tough situation on revenues.

I would like to go a bit on what it means simplification and what it means in-sourcing in our operation. I would like to highlight that this is a number one priority work for our operation in Spain and is done with discipline and day-to-day care.

I think that we have stated in the past, the level of simplification in our operation in Spain, but I would like to give some details, for example, with regards to the April portfolio. In terms of references, we have gone down by more than 40,000 references, which have been eliminated from our catalog.

That is more than 60% and we continue to do so. In terms of simplification of systems, more than 800 terabytes of information have been deleted from our systems and we continue to doing so.

The simplification of the services, as I mentioned, at least a 100 service applications have been switched off just in 2012 and there are more to come, and there has been clear switch off of absolute networks. There are many other efficiency measures that are impacting our operation and this is not just one quarter or two quarters.

As I mentioned to you, we look at this on a daily basis and Ángel and team take these as a part of the daily activity. So that is investing in quality of customer service and getting more rationale commercial expense even in the advertising of our campaigns we have reduced them substantially adjust fine during 2012.

If you ask me if this is sustainable, I can tell you and I can confirm you that we have still quite a lot of room to continue doing this and more, and this is a matter of continuing discipline and this way of working. When we speak about other things that we’re doing that are quite innovative, as you know, Telefónica Spain implemented at the end of 2012 what we call in sourcing.

In sourcing is innovative and is quite a bold movement in a country like the one we have today with tough economic conditions and we do have to recreate it in order to produce not only improvement, but also being able to get more productivity in European nations. What we call in sourcing, it is a matter of analyzing what we were our outsourcing costs and our estimated OpEx related to that outsource.

Just to get an idea, we have target that we have analyzed around €1 billion or more of OpEx – which is around €1 billion of OpEx, which is around 60% of our total costs and also CapEx of around €350 million, so €1.3 billion targeted in order to improve those costs and to get more in sourcing than the outsourcing critical in our operation.

The second question, which is really spot on in your analysis and we have read very carefully, I guess, we have to say that the impact of the loyalty program is positive. And that you can compare ARPU on customer base evaluation versus service revenue and you can get the numbers.

But I want to highlight that the material impact on revenues, our figures is important and I think that is fair to highlight it, but it’s not the only factor to take into account, because we also know that subsidies have been removed and so the combination of both is what will make the balance of the mobile.

With regard to mobile ARPUs, those will be impacted by Fusión and we will see that positive impact in the fixed revenues.

Thank you Frederic. Next question please?

Hi. Thank you very much.

So it’s really just back on the domestic mobile business, and I suppose the overall question is, is why is Fusión not helping your mobile churn rate? I understood that this was going to help the broadband side and the fixed side of the business.

But I thought this was a trade-off of a lower spend for customers taking a bundled package in exchange for a lower churn rate for longer customer lifetime and the bigger customer lifetime value therefore or at least a neutral customer lifetime value impact. So, why is Fusión not actually helping your mobile churn rate?

And perhaps in your answer you could – that you could maybe give the mobile contract churn in the quarter as well? Thank you.

Well, thank you very much. I think that when you look at the mobile business and what we look at if from Fusión and from the non- Fusión point of view, it is clear that is where we have to be more innovative and look at the effort quarter-by-quarter or mostly by the month-by-month.

So we needed to have a turnaround of the situation, but analyze first what was going on. And I think that there’s a few things to look at.

We will really – and when you look at the net loss, it is primarily a two MVNOs and is primarily on the low, a bit specific segment, on a very specific segment on the low-end of this segment. So we – that’s what we have taken into account and we have gone into looking how to address the churn?

So we have launched the tariffs, which are primarily different. One is on the converge offer which is what we call Fusión Cero at the end of April and we have also addressed specially the mobile business outside Fusión with the Movistar Cero and Movistar Total at the beginning of April.

Again, those are all around the segment in which we were losing from convergence and from non-convergence to low and the low consumption area or what you can call a very specific part of the whole chain. Top section when I look and I speak with the Spanish team all the time is that we have now completed the offer in both mobile fix and including as well as TV.

But it’s to in specifically mobile; we believe we have addressed that with a new tariff. Just to give you an example, this weekend when people enter to look into Fusión Cero, quite frankly the reality is that the people want to consume more data.

So they ended up by more in to the €49 to €50 offer. So it is quite an important factor to explain to consumers what it means to have the Fusión Cero or the specific new mobile tariff.

And another point to look at and that’s why we’re still optimistic about the future is that once you have the completed offering in all the segments, in all the tariffs and all the customer needs, we also look at their commitment and compared to competitors, This and the new tariff, you have new commitments about the 12 demands and that I believe also compares better with the rest of the market. Also when you look at what is happening in recent weeks is here is the long jump.

The tariff is at when you look at customers entering in and trying to get new tariffs and the offers more than 50% of them are now within the converge of getting, which is also a very positive sign. So I hope I answered the question.

So can I just follow on, do you think then the second quarter will be the quarter that we will see gross ads in mobile actually benefitting and the churn rate actually falling as a result of these new developments around Fusión?

Yes. We expect so quite frankly.

Yes.

Okay. Thank you very much.

Thank you, Paul. Next question, please?

Yes, good afternoon. Thanks for taking my questions.

The first one is on Germany, KPN’s CEO in the last conference call expressed his desire for a network sharing agreement and went as far as saying that they would be ready to reimburse to part of the spectrum cost. It is something, which would be of interest to you and is it better to get part of the spectrum money back and give up some of the competitive advantage you gained through the spectrum auction?

The second question is on Latin America, the organic revenue growth in 6.8%, but if I exclude Venezuela and Argentina, I’m left with 1.5%. I’m wondering if this is a growth rate we should extrapolate for the rest of the year and if you see an improvement where it could come from?

Thank you.

Thanks for the question. Taking your first one on potential consolidation of Europe and mainly in Germany, we do think there are too many networks in Europe.

We do think that consolidation makes sense and we do think it will happen. We don’t have ongoing conversation with KPN right now, as you know, they are in the middle of a right issue process.

We do think that our 1,000 megahertz spectrum is a significant competitive advantage in Germany, and therefore we are not willing to give it away at a marginal or at a limited price because we do think it’s valued even more at the time of the option. And at the same time, we keep the improving our competitive position in Germany.

As you know that we have been doing, reaching some agreements namely with Deutsche Telekom with T-Mobile on their transport site to connect with fiber all over base stations and more recently this proposal to consolidate our wireline infrastructure into their infrastructure and renting back all the capacity that we need to bundle our products and services in Germany. So we have been keeping advancing.

We will wait and we will be open and receptive to a specific proposal that might create value. By the way, we think that on top of negotiating agreement, the value creation of our potential consolidation in Germany is on top of, I guess, negotiating deal.

To say, there is no ongoing conversations today with KPN.

Yes, Luigi, in terms of the difference between Venezuela and Argentina and the full line in organics, the numbers you have mentioned are applicable, no question about that. We do expect three things to happen; first, there to be revenue growth.

So we’re confident that the Latin American region will continue contributing on organic terms revenue growth. That is a strong and firm statement.

Second, we do not expect the gap between the more inflationary and the non-inflationary markets to widen, but to shorten, the reason is threefold. Number one, we will be able at some point to increase tariffs and to improve revenue growth in the more backward markets, I am thinking of Chile, I am thinking of Mexico that I mentioned before and I am thinking of the expected recovery of the Brazilian market.

And finally, because of the effect of the evaluation (inaudible) in the first quarter of this year, it is unlikely that there will be a sizable evaluation in each and every quarter of the reminder of the year and so the gap between the two should narrow. Some underlying fundamental factors especially in Chile, Mexico should contribute along with Brazil.

And finally, the inflationary nature of – the cost passing nature of some of these increases will be more visible as we go on. Essentially, there will be growth.

Okay, thank you.

Thank you. Next question please.

Thanks. Just to continue to seem on Spanish mobile, I just want to come back to the impact of the loyalty programs because it does look – for the last three quarter, you’ve enjoyed a very beneficial impact on the mobile service revenue trend from back points accrued under the loyalty programs and no longer needed given the elimination of subsidies.

And just looking at this ARPU based revenue, so let’s take your ARPU and multiply three by the average subscribers. I mean, it sort of suggests the revenue based on our ARPU and that is 26% in the first quarter compared to the service revenue decline of about minus 13, minus 14 and the difference is that the beneficial impact as you say it, the loyalty points.

But given that this is going to lap in the third quarter, would you expect the mobile service revenue trend in Spain to trend towards to sort of minus 26% level with out that benefit. Was there a reason why it should de close to minus 14?

Let me take the question on reform. As I said, that was not trying to avoid the question, it’s difficult to paying the whole picture until the floor and low has been reaching down and explained in detail.

What do we expect? We expect a level Plainfield to obtain, which is not, but we think we have today.

And so and the obstacles they now prevent us from competing fairly as we do elsewhere in the region. We expect them to be removed as the low as past.

Just exactly what those in term, I’ve got a lot of comment publicly, but it is not very difficult to look at Mexico as anomaly, because elsewhere in the region the difference between the first and the second and the in force that all of us have put into a competition have yielded some results except Mexico, maybe Mexico is the (inaudible) other than our own effort. We do expect as I said that many of these things will happen and exactly, which remains an open plain.

So whether or not in Mexico elsewhere there will be opportunities, it’s probably not for me to say, but we continue to scan many thing available and in due course, we will inform you if there is anything. But we do not think that a major combination is needed in order for us to make our – to fulfill our goals.

Thank you.

Thank you, Will. Next question please?

Yeah, couple of questions please, first of Brazil. You mentioned even this multi device plans in Brazil, that’s been a very successful strategy for Verizon in the U.S.

Can you just elaborate a little bit more on those plans and what you expect the effect beyond your growth over the next couple quarters putting some equally on Brazil fixed line. Your working trend got a bit worse.

As I understand that now your focus is to speed up your broadband to build more fiber. What do you think your fiber build will be by the end of this year?

And to think you look pretty much fixed to the problem by then or is it going to take longer? And finally, besides, sort of surprised to see the fund raising, the capital increase, (inaudible) earlier this quarter or earlier this year, understand this important hit, that that target, put stress on your balance sheet and you’re on yield is far; actually it was an year ago.

So it seems you’re pretty determined to reduce leverage to come on May. I’m just wondering what your priorities are here?

Is it to perhaps create more of a gap between your credit rating and the credit rating of Spain, is it – to hit your dividends’ promise or are you actually starting to try and create more balance sheet capacity for acquisitions in the future?

(Inaudible) told me to take the question on Brazil first, so the two questions on Brazil. First on the new plants, we will continue to try the forefront of innovation.

That means the latest plan which is barely three weeks old is such a lead point in exaggeration. What it is, is a combination of data plans that allow a single payer to source multiple users; typically a family with one payer multiple members in it now being used being allowed to combine at a price the data usage.

We think this is flying very well. It is very early days but it is flying very well and we will continue and dive deeper into what is it that customers’ need, expect or could have a bit of service with us for.

Not everything will last forever. Successful products and our plans are immediately copied.

We do expect that to continue being the case. But this plan is expected to be ARPU accretive, is expected to be service enhancing and certainly the first reaction from our customers show high satisfaction and high praise for the plan.

So we are very happy with the first three weeks of this product. In terms of fixed, plan is the one you probably have already heard us talk about, is to develop broadband at the high-end including fiber.

We do expect the Sao Paulo market to be covered with 1.7 million homes passed, which is significantly better than what we have today, that includes both fiber and cable, the cable that we have with a minor overlapping. So the rough numbers are 1.2 million to 1.3 million in fiber; 0.7 million, 0.8 million in cable and the overlap is around 0.3 million.

So by the end of this year, we should be able to access almost all the households that we think are worthy of the investment. And so it should be by the end of this year that if we have been successful, we should be able to raise the flag and say here we are and at that time, broadband might be at a better position than it is today.

Thank you.

With regard to your second question, Justin, hello, this is Ángel.

Hi.

We decided to place a treasury stock at the end of the quarter just with the population to reduce that. We had seen that our net debt position have increased due to the Venezuela devaluation.

We also had the (inaudible) in the first quarter regarding the payment of the U.K. Spectrum, which came very nicely at around 50% of what the market had been estimating the deal would be, but still it had to rebate and then we have traditional seasonal elements in the first quarter, particularly working capital consumption from CapEx accrued in the last quarter of the previous year and also some impacts on interest payments or financial payments ahead of accruals due to the contemplation of some bond payments in the first quarter and some fees – from fees of new facilities that appear in the first quarter.

So at that point what we’ve realized is that there could be a moment of increasing our net debt compared to the end of last year. We wanted to send a clear signal that we remain committed to reducing our leverage and achieving our target and commitment to market of less than €47 billion to be below 2.35 times, net debt to OIBDA and then we decided to place those shares.

We also wanted to signal to the market that we were committed to pay the dividend in cash and no script dividend do we contemplated. And this was the reason of doing the transaction in a moment that was prior to the closing of the quarters that we could record as you have seen in our net debt evolution and evolution in the kind of the decline that we wanted.

After the closing of the quarter, we have continued progressing, we have managed to close the second tranche of the Hispasat divestment, which is now completely divested. We already got the payment for the sale of our UK broke down asset.

And last week, we announced the sale of 40% to financial investors and the strategic investors in this dynamic addition of our assets and we have continued to reduce our stake in Portugal Telecom, which now lies below 2%. So we continued to committed to the leveraging and this is the reason behind the placement of a treasury stock, which was not a new equity arising, it was just a placement of treasury stock.

Thank you very much.

Thank you, Justin. Next question, please?

Yeah, hi. Thanks very much.

Two questions if I may, the first is that you are clearly working hard to improve your own balance sheet, but there is press report suggest that you are less enthusiastic about Telecom Italia improving its balance sheet with investments from Hutch or the CDP, and I’m wondering to what extent there is still growing competitive interest between you and the other stakeholders in Telco and whether or not that’s sustainable? And my second question, you always had a clear desire from the European Union to see a reduction in Pan-European data roaming costs for consumers and we think we are starting to see the beginnings of consortia or likes for star lines consortia in airlines that could compete away a lot of those revenues, is that something you are interested in participating in proactively in those sorts of consortia or are you more interested in trying to assist the regulation?

Thanks very much.

Hi Robin, this is Ángel. Let me take your question on Italy.

We are happy with our position in Telco. We have very good relationship.

I think we have a relationship of trust with our partners in Telco and our position in Telecom Italia and as such we will be supportive of actions that improve the value of the Telecom Italia because we are among the first beneficiaries in that situation because we are indirectly the largest shareholder in that company. Some of the topics which are being widely speculated in the media, it’s difficult for us to give clear details early, this is better as to Telecom Italia tomorrow but from our position as Telco shareholders, for instance, with respect to our potential in market consolidation in mobile.

In Italy, I should say that no specific proposal has been made to telco. And if and when such a proposal were to be made, telco would have to analyze its merits and its risks, including aspects such as evaluation, deal structure and the first implications, credit rating implications and other.

So, but it’s early to say, we don’t have information to have an opinion. With respect to network separation and a potential CDT investment, the situation is similar.

We don’t have telco shareholders information to give an opinion that it’s clearly an impression that the move in the telco space particularly in Europe. And as such, we understand that Telecom Italia is analyzing it very carefully as they should, but probably the question is to be addressed to them tomorrow.

Thanks.

Hi, Robi, José María here. Remember that we already launch on market in Europe for our own customers.

So we already have that in place and we already have seen the effects of that roaming data. Data roaming products in our own catalogue products and services for our own units and business units in Europe.

And for the remainder of the competitive landscape, yes, we are open to conversations. We think this is something that needs to be a structure jointly with the regulatory effect.

So part of the equities already been done through our own products and service catalogue, and yes, we are open to participate in joint effort.

Thank you.

Thank you, Robin. Next question please?

Hi. Good afternoon.

Thank you for taking my questions. With regards to the Spanish evolution, I know Eva has been mentioning that you believe that the margin is sustainable.

I would like to focus more on the CapEx situation. Over the first quarter, the decline has been substantial considering you have ahead the deployment of LTE and Fiber to the Home and likely acceleration of it.

Would you – with this figure, if there’s a seasonal kind of figure that we should be expecting or how much of this should we consider to be sustainable going forward in order to project our operational cash flow estimates? And second, also in Spain, with regarding with the evolution of Pay TV, you mentioned, over this week the relaunch of Movistar Television, maybe if you could comment more exactly if it’s possible to mention whether there is any intention to integrate further with your participation in Presa cannot lose, whereas you can get more content, what does that agreement that you have with Presa and report to you in terms of not only being a minority shareholder in Presa TV, but also being a shareholder in Presa itself in the future.

Thank you.

Thank you very much for your question. On the first part of your question, last year, we already – in the beginning of the year.

We already said that copies will be below the level of last year for 2013. But the commitment of this year’s CapEx will contain being intact.

It is absolutely true. The first quarter gets and takes some seasonality effect there is a less during first quarter that has been taken.

But we maintain our commitment on the investments that we wanted to do and in fact, as you know and I stated earlier how important it is today specifically in Spain, the investment on the new generation network and specifically in fiber, so just to confirm on that

With regard to the second question on the digital plus, as you know, we own 22% in the company along with (inaudible) set. We are happy with that investment that are continuously (inaudible) from the market, but it is nothing concrete to report on this front.

Thank you. Next question please.

Yes, thank you two question please. The first is on regulation and the request from Vodofone and Orange to get access to Telefónica cyber network, I don’t know whether you could give us some light on what are exactly there request, and how this request or the agreement they want to achieve differentiate to the agreement that you reach.

We just tell, whether you expect any regulatory intervention on the back of these anything soon – Just (inaudible) and whether you expect any regular intervention on back of (inaudible) foreseen access to the Telefónica Cyber network. And the second question is a follow up on debt figure and then debt target of being below €47 billion year end.

The question is whether this target is achievable this year without further asset disposals or asset sales, being required. So from what we know so far in terms of asset disposals whether in an organic way, you can get to this level and any further disposal could be on top of and I don’t know whether you can mention on recently comments on potential IPO in Colombia, reduction after taking (inaudible) are any of these contemplated?

Thank you.

Thank you, Luis. I think that the question around relation and about some of our competitors’ messages.

I think it’s important to clarify that our existing agreement of co-investment in fiber with Jazztel is happening and is happening in the terms that we agreed with Jazztel. And as you know we compromised in both players granting accesses for more than or for 3 million premises in 18 months, 1.5 million each and that is happening and we’re quite satisfied with that.

This agreement was, from the very beginning, open to all the third-party players. I believe that it is very important to state in this market, the conditions that we have that you have to be willing to invest and that’s what we are just requesting that our agreement is open, it would be good idea to order for the participants in it.

The willingness for them to invest is a must and for that I guess that wouldn’t alter at all any of our plans of investing in the fiber business.

Hello, Luis. Regarding reduction of that towards the target that we have for the end of year.

We plan to achieve that debt reduction in two ways; one is organically with free cash flow in excess of dividends. So you have seen we are going now is formally proposed to the shareholder meeting we are going to pay €0.55 in November of dividend in cash.

This would be the first tranche the interim part of the dividend of the €0.75 that we committed to the market. The second tranche would be paid next year.

Our estimates most of the internal estimates for free cash flow exceeds significantly the cash commitment that we have with dividends whether it will be organic debt reduction and the leverage due to that. And second, we continued to very actively manage our portfolio of assets.

We don’t feel comfortable commenting on market rumors and we have as you know traditionally being (inaudible) commenting on specific situations and transactions, because it’s never easy unless in the times that we’re leaving to get deals to the finished lines. So we would want to create uncomfortable situations in our operations.

Having said this, we are managing our portfolio, aiming to increase the value of the businesses where we are present. We are not in an expansion mode, but yes, we can be strengthening mode in some the markets where we operate.

Some of those markets could benefit from the market consolidation. And there are several examples, some of the analysts spoke about one of them before and there could be another one.

In Columbia, I want to stress that we are not sellers. In Columbia we are seeing a very good growth.

As we were showing the presentation and in my remarks within the presentation, I’m here we are just initiating the talk with our partner with the Colombian government about possibilities to capitalize the company to accelerate growth and in doing so, provide liquidity to the partner. And the Czech Republic continues to be a very strong cash generator.

You should expect us to actively manage the portfolio. You saw the Central America transaction, you saw the U.K.

broadband and so you should expect us to continue doing things. And therefore, reduce that organically and inorganically.

Thank you. The second, follow up on this Colombia comment you made on – the government – talks with the government to capitalize the company for growth.

Would that imply that Telefónica is putting or has to put more money or when you said, you are not sellers, it could be that you’re just giving an entrance to the government putting more and diluting your position, reducing debt, but keeping still the majority and reducing net debt beyond like it happened last year help to better structure? Thank you.

It’s harder to say, we have (inaudible) for an option, obviously we are talking with our partner on that. And whenever there is definite structure on steps going forward, we will duly communicate to the market.

It’s too early to say. It’s too early to say.

We are assessing for an option. So obviously we are talking with our partner on that and whenever there is definite structure and steps to bring it forward, we will duly communicate to the market.

Thank you, Luis. We have time for just one more question, please.

Hi, there. It’s two questions, one, if you look across the various assets you’ve got, multi device in markets like Germany, Brazil but not for example in the U.K.

and then vice versa you have say network sharing and in some countries, but not all those. I mean is there a plan to, for example, do multi-devices in the U.K., why the delay?

And secondly, network sharing beyond simply Brazil. And then a final, I guess, philosophical question, is the right way to monitor Latium to ignore inflation, I mean, do you guys incentivize local management with perhaps real revenue growth I guess otherwise, you sort better of managing Venezuela than Brazil.

Hi, Jonathan, yes, with regard to the multi-device and the new potential in the U.K. market, definitely like in the other markets, for example, we could use our opportunity when trying to price LTE appropriately.

On the other question, regarding network sharing, as you know, we have already shown that we are opened for innovative network sharing situations and in fact we will not lose out any opportunity in order to give our clients better service or better option. I think the beauty of current market in Europe is that, that is one way to continue having a good network and being open to also sharing with others and get benefit both sides as we are seeing currently in Germany, Spain or in our markets.

I’m not sure if there was anything else for me?

(Inaudible)

Jonathan, on philosophical question, there is (inaudible) two pieces of information. One is we access the quality of local management in local currency.

So the Venezuelans are just Bolivars and the Brazilian are touched on reais as we think they should because we do manage centrally in third quarters the commercial risks associated with our investments and our operations. And then again the risk of stating the obvious, there are two sides to our how inflationary economies are treated, one is, you are not able to pass higher costs onto higher prices and management is sometimes at all trying to pass on the increases in each posts to the revenues and that’s a highly regulated sector like ours, this is especially difficult.

One if you look at country like Venezuela, you see that all in all, we have been very successful in doing actually that, probably not on a day-to-day basis, but, yes, on an event-by-event basis. As you see by the margins not having contracted.

The second effect, which is more difficult to manage locally this branch centrally is how many euros or dollars and this highly inflationary economies actually deliver in the way of FX. But that’s not what we do locally, that’s what the currency risk and management team does centrally.

So the managers are charged on local currency passing inflation, cost inflation onto product for us is difficult, but so far so good. And the risk of devaluation or depreciation is always present, but can manage that to the extent wanted or needed centrally.

Great, thank you.

With this we have to finish the call. Thank you very much for your participation.

And we certainly do hope that we have provided some useful insights for you. Good afternoon.