tefres4q23

The financial information related to January-December 2023 contained in this document has been prepared under International Financial Reporting Standards (IFRS), as adopted by the European Union, which do not differ for the purposes of the Telefónica Group, from IFRS as issued by the International Accounting Standards Board (IASB). The management of the Group uses a series of APM in its decision-making, in addition to those expressly defined in the IFRS, as they provide additional information useful to assess the Group’s performance, solvency and liquidity. These measures should not be viewed separately or as a substitute for the measures presented according to the IFRS (see the Appendix “Alternative performance measures”, page 21 of this document).

Telefónica’s management model, regional and integrated, means that the legal structure of the companies is not relevant for the release of Group financial information, and therefore, the operating results of each of these business units are presented independently, regardless of their legal structure. For the purpose of presenting information on a business unit basis, revenue and expenses arising from invoicing among companies within Telefónica’s perimeter of consolidation for the use of the brand and management contracts have been excluded from the operating results for each business unit. This breakdown of the results does not affect Telefónica’s consolidated earnings.

The English language translation of the consolidated financial results originally issued in Spanish has been prepared solely for the convenience of English speaking readers. Despite all the efforts devoted to this translation, certain omissions or approximations may subsist. Telefónica, its representatives and employees decline all responsibility in this regard. In the event of a discrepancy, the Spanish-language version prevails.

In 2023, we delivered on execution and a solid financial and operational performance, achieving upgraded guidance, while maintaining our commitments to shareholders via our FCF. We have grown in reported revenue y-o-y, we have increased profitability, we have delivered better customer engagement and very strong FCF growth. Earnings momentum also showed improving trends in Q4. Furthermore, we have made great strides in reducing the environmental impact of our company, while we continue to deliver social impact via our connectivity. Moreover, our progress in diversity has been substantial.

In our CMD we announced the launch of the GPS programme, that will guide our Plan for the next 3 years on 5 lines of action: Sustain revenue growth in B2C, maintain above-industry B2B momentum, manage our wholesale revenue evolution and evolve our partners’ business, drive efficiencies to reduce OpEx, and sustain differentiation while reducing CapEx. All with a strict and disciplined capital allocation that will help to create significant shareholder value.

1 Criteria for 2023 guidance: Includes 50% of VMO2 JV results. Assumes constant exchange rates of 2022 (average in 2022). Excludes the contribution to growth from T. Argentina and T. Venezuela. Considers constant perimeter of consolidation and does not include capital gains/losses from the sale of companies, for significant impacts. Does not include write-offs, material non-recurring impacts and restructuring costs. CapEx excludes investments in spectrum.


	FY 23 (€m)	Reported y-o-y % Chg	Organic y-o-y % Chg	Q4 23 (€m)	Reported y-o-y % Chg	Organic y-o-y % Chg
Revenue	40,652	1.6		10,153	(0.5)
Telefónica España	12,654	1.3	1.3	3,321	3.3	3.3
Telefónica Brasil	9,650	8.8	8.4	2,538	7.5	6.9
Telefónica Deutschland	8,614	4.7	4.7	2,291	4.6	4.6
Telefónica Hispam	8,381	(8.3)	(0.1)	1,653	(21.4)	1.7
Other companies & eliminations	1,353	7.3	6.7	351	5.9	6.1
Revenue + 50% VMO2	46,813		3.7	11,765		4.1
VMO2 (100%)	12,547	3.2	5.2	3,265	3.9	3.7
OIBDA	11,390	(11.4)		1,795	(44.9)
Telefónica España	3,229	(29.6)	(0.8)	(138)	c.s.	0.1
Telefónica Brasil	4,128	10.6	10.2	1,128	9.5	8.9
Telefónica Deutschland	2,640	3.2	3.0	691	3.9	3.7
Telefónica Hispam	1,510	(22.9)	(4.8)	311	(14.1)	8.8
Other companies & eliminations	(116)	c.s.	28.2	(198)	c.s.	c.s.
OIBDA + 50% VMO2	11,801		3.1	603		4.5
VMO2 (100%)	859	(80.5)	5.6	(2,376)	c.s.	10.6
CAPEX (including spectrum)	5,579	(4.1)		1,705	(5.2)
Telefónica España	1,607	3.7	2.4	457	(9.5)	(9.5)
Telefónica Brasil	1,671	(6.9)	(6.0)	438	(11.9)	(7.8)
Telefónica Deutschland	1,133	(6.3)	(6.3)	317	3.2	3.2
Telefónica Hispam	938	(11.4)	(4.4)	410	2.5	(10.4)
Other companies & eliminations	230	11.0	11.2	83	(7.1)	(5.5)
CAPEX (including spectrum) + 50% VMO2	6,783		(2.9)	1,973	20.8	(8.6)
VMO2 (100%)	2,408	(11.1)	(3.3)	537	(25.5)	(18.3)

Regarding our Network and Systems, we are actively advancing towards the Hyper-Automation of the company through the Autonomous Network Journey (ANJ) program across all operations, benefiting from the application of Artificial Intelligence (AI), Machine Learning (ML) and the management of valuable Network Data. Our focus is on exploring and implementing solutions to make decisions more efficiently and rapidly, which ultimately enhance our competitive position, CapEx allocation and cost savings.

We are actively incorporating automated processes for software testing, deployment and maintenance to capture the benefits of network 'softwarization' and contribute to the reduction of our solutions’ time to market. In Brazil, we automated the deployment of Cloud-native network functions within the virtualized 5G SA CORE; while in Spain, we automated tests for Software-Defined Networks (SDNs) related to Firewalls and Load Balancers within the IT Cloud domain. Also, we deployed automatic software updates and audits for a diverse range of network components.

All this transformation is facilitating the acceleration of FTTH and 5G deployments and the planned switch-off of the retail copper service in Spain set for April 2024 (1,913 COs closed to Dec-23; 4,149 closed since 2014). We maintain our position as a global leader in fibre offering an optimal carrier solution (with XGS-PON readiness) for the next 50 years. Our extensive coverage includes 173.1m UBB PPs, +3% y-o-y to; 74.3m FTTH PPs +14% y-o-y.

5G network covers 87% of population in Spain as of Dec-23, 94% in Germany, 48% in Brazil and 51% in the UK. In addition, we have launched 5G SA in Spain (5G+) improving user experience and allowing enterprises to implement advanced mobile connectivity services. It is also already launched in Brazil and Germany, while in the UK is expected in the coming months. Massive commercial deployment of full 5G SA in core markets will continue until 2025, depending on the availability of technology, devices, and spectrum as well as on the specific market conditions.

The FX impact in Q4 23 was positive, reverting Q3 23's trend, attributed to the stabilisation of core markets currencies, particularly the Brazilian reais (Q4 23: +€43m on revenue, +€7m on OIBDA y-o-y; FY 23: +€78m, €3m). Including 50% of VMO2 results, in Q4 23 the impact was +€46m on revenue and +€7m on OIBDA y-o-y (-€49m, -€42m in FY 23). For net debt, FX had a negative impact of €0.6bn in FY 23 (-€0.7bn on net debt plus leases). The contribution to y-o-y growth from hyperinflationary countries was -€517m on revenue and -€77m on OIBDA in Q4 23 (-€809m, -€193m in FY 23) due to the Argentine peso devaluation since August, which was particularly relevant in December.

Revenue fell 0.5% y-o-y to €10,153m in reported terms in Q4 23 (FY 23: +1.6% to €40,652m in FY 23). The slight sequential deceleration of 2.5 p.p. vs. Q3 23 was mainly due to the Argentina effect (Q4 23: -€524m; FY 23: -€817m). However, organically, revenue accelerated to +4.1% y-o-y in Q4 23 (+3.7% in FY 23) driven by a 4.2% increase in service revenues y-o-y (+3.7% in FY 23) and a 3.3% rise in handset sales in Q4 23 (+3.2% in FY 23).

B2B revenue accelerated its growth sequentially and increased by 4.9% y-o-y organic in Q4 23 (€9,442m in FY 23; +6.3% y-o-y) on the back of record IT revenues in Spain and improved performance in Brazil and Tech Companies. In FY 23 B2B revenue in the Corporate segment posted solid growth (+7.3% y-o-y in FY 23) mostly fuelled by core markets while SMEs revenue (+3.9% y-o-y in FY 23) consolidated its growing trend.

Operating expenses increased by 18.6% y-o-y to €8,776m in Q4 23 (+5.6% to €30,713m in FY 23) due to provisions for restructuring costs totalling €1.5bn (€1.4bn in Spain, €84m in Hispam, €72m in Other Companies and Eliminations, €9m in Germany) and other contingencies of €75m, partially mitigated by the Argentina effect (€448m in Q4 23 and €632m in FY 23). Organically, OpEx rose by 2.8% y-o-y (+2.7% in FY 23) primarily driven by higher supply and personnel costs, countered by lower other expenses.

Share of loss of investments accounted for by the equity method amounted to -€1,929m in Q4 23 (vs €263m in Q4 22; FY23: -€2,162m vs +€217m in FY 22). This is primarily driven by two factors: a €1,786m goodwill impairment in VMO2, influenced by rising discount rates and broader macroeconomic conditions in the UK affecting future cash flow estimates; and by a change in fair value of derivatives.

Net financial expenses amounted to €622m in Q4 23, +€702m y-o-y (FY 23 €1,904m; +€591m y-o-y) due to extraordinary effect in 2022 mainly related to Spain’s tax refund interests (+€526m). Debt-related interest expenses fell in both periods due to a reduction in debt denominated in Brazilian reais and a solid fixed interest rates position in strong currencies effectively neutralising the impact of rising interest rates.

Profit attributable to equity holders of the parent company was -€2,154m in Q4 23 and -€892m in FY 23, resulting in earnings per share of -€0.39 and -€0.20 respectively, affected by exceptional items. In underlying terms, net income amounted to €730m in Q4 23 (-5.5% y-o-y, after excluding -€1,151m of restructuring and -€1,734m of other impacts, including the goodwill impairment in VMO2), and €2,369m in FY 23 (+17.1% y-o-y, after excluding -€1,185m of restructuring and -€2,076m of other impacts, including the goodwill impairment in VMO2). Correspondingly, EPS was €0.12 in Q4 23 (-6.2% y-o-y) and €0.37 in FY 23 (+18.6% y-o-y).

Working capital generated €313m in FY 23, mainly impacted by restructuring provisions and the associated effect of the judicial decision in Brazil, partially mitigated by recurring seasonal effects such as CapEx. Working capital generation was €74m lower than in FY 22, mainly due to the accrued financed spectrum in 2022, to be paid in the coming years, the diminished positive impact associated with the judicial decision in Brazil, and along with other seasonal impacts.

Interest payments rose 46.6% y-o-y to €1,811m in FY 23 mainly due to tax refund collections in Spain in 2022 (+€526m). Debt-related interest payments decreased due to less debt denominated in Brazilian reais, and a robust fixed interest rates position in strong currencies which countered the impact of rising interest rates in these currencies. The effective cost of debt related interest payments (L12M, ex leases) was 3.80% as of Dec-23 (3.96% as of Dec-22).

Net financial debt stood at €27,349m as of Dec-23. In Q4 23, it was up €812m despite positive free cash flow generation of €1,562m. Factors contributing to increased net debt were: shareholder remuneration (€895m, including coupon payments of capital instruments); net financial investments (€881m, mainly acquisition of T. Deutschland shares); labour commitment payments (€207m); issuance and repurchase of hybrid bonds (€362m); and other net factors (€29m).

In FY 23, net debt increased by €662m despite positive free cash flow generation of €3,988m. Factors increasing net debt were: shareholder remuneration (€2,320m, including coupon payments of capital instruments); net financial investments (€688m, mainly acquisition of T. Deutschland shares); labour commitment payments (€854m); and other net factors (€788m, mainly due to the higher value in euros of net debt in foreign currencies).

•Highlights: On the path to net-zero: -51% reduction in total carbon emissions (Scopes 1+2+3) over past 8 years, with accelerated reduction targets for Scopes 1+2, (now -90% across all main markets in 2030) and included on CDP Climate A List for 10th consecutive year. Decarbonising the economy: our services helped customers to avoid 86.1m tCO2 emissions. (SDG #7, #11, #12, #13).

•Highlights: Balanced Board of Directors: 40% female and 67% independent Directors, Telefónica’s Board continues to follow best governance practices. Zero confirmed corruption cases: prioritising compliance. Sector leaders in sustainable financing: €18.8bn in sustainable financing as of Dec-23 (33.6% o/ total financing), additional green bond of €1.75bn issued in Jan-24. (SDG #7, #8, #9, #11, #13).

The company's commitment to sustainability is evident in the progress made in 2023. In environmental matters, promoting the circular economy of electronic equipment. On the social agenda, fostering digital inclusion with wider rural coverage and improving working conditions with the signing of a new Collective Bargaining Agreement which, among other aspects, focuses on retaining and attracting the best talent, reskilling and new ways of working and work-life balance. On the governance side, T. España has been the first company in the sector to gain double certification in Compliance Criminal and Anti-bribery from EQA.

The convergent base, stable y-o-y, maintained positive net adds of 3k in Q4 23 while ARPU rose 1.0% y-o-y to €91.2, an improvement over Q3 23, thanks to the presence of football throughout the quarter. At the same time, annual churn declined -0.2 p.p. vs. 2022 to 0.9%, the lowest level since 2013 (when the convergent offer was launched). The combination of these leading ARPU and churn figures drives T. España's leadership in the average value of convergent customers.

Revenue in Q4 23 accelerated its y-o-y growth to +3.3% thanks to higher handset sales (+6.5% vs. +1.3% in Q3 23) and higher service revenue (+3.2% y-o-y; +2.2 p.p. vs. Q3 23). Noteworthy is the solid 'Retail' revenue (+2.7% y-o-y, +0.3 p.p. vs. Q3 23), driven by record sales of IT services in B2B and better commercial activity in B2C. The improved sequential evolution of “Wholesale and other” revenues (+5.3% year-on-year), was mainly driven by higher compensation from the Universal Service and the like-for-like comparison of football from this Q4. In FY 23, revenue grew 1.3% y-o-y (+1.6% service revenue; -5.4% handset revenues).

OIBDA stabilised in Q4 23, with a slight growth (+0.1%, +0.6 p.p. vs. Q3 23) supported by solid 'retail' revenue and further efficiencies (network transformation, digitalisation, energy consumption...), which led the OIBDA margin to 37.4% (-1.2 p.p. y-o-y). In reported terms, Q4 23 OIBDA is impacted by the recognition of a €1,380m provision (€1,320m in personnel expenses associated with the restructuring plan and €60m for the transformation of channels). This plan will generate ~€285m of direct savings in personnel costs from 2025 (more than €200m in 2024), additional to those derived from previous plans, and its impact on cash generation will be positive from 2024. Excluding this effect, FY 23 OIBDA declined -0.8% y-o-y, leaving the margin at 36.4%.

Vivo is the new leader in the ISE-B3 Corporate Sustainability Index and it is among the top 5 in the index for the third consecutive year, scoring above average in criteria such as Corporate Governance, Environment and Climate Change. In addition, the company and Auren Energia S.A. have signed an investment agreement for a JV for the sale of customised renewable energy solutions in Brazil.

In mobile, Vivo remains leader with a market share of 38.7% and 43.4% in contract. In Q4 23, contract net additions amounted to 1.1m (2.0m in FY 23), accounting for 46% of the total. Vivo's differential value proposition, the quality of connectivity and the growing demand for bundles resulted in an excellent performance in churn (1.0% in Q4 23), ARPU (+8% y-o-y), reaching the best levels in both KPIs in the last 4 years.

T. Deutschland reached a 5G pop coverage already ~95% at year-end 2023 and is well on track for nationwide 5G coverage latest by year-end 2025. Continuous investments in network quality are reflected not only in low churn rates but also in high network test ratings. Connect magazine awarded T. Deutschland’s O2 network a ‘very good’ rating for the fourth time in a row, despite tougher test criteria.

In parallel, T. Deutschland continued to focus on its ESG commitments and is well on track to make a substantial contribution to a sustainable digital future. The company was not only honoured as a finalist of the ‘16th German Sustainability Award’, but also further improved its low ‘Sustainalytics ESG Risk Score’, now being ranked as #1 telco worldwide by Sustainalytics.

Revenue posted strong growth of +4.6% y-o-y in Q4 23 (FY 23 +4.7% y-o-y) on sustained mobile revenue momentum (Q4 23 +4.9% y-o-y, FY 23 +2.7%) reflecting MSR growth on own-brand success combined with a solid contribution from partners as well as another quarter of record sales for hardware (continued customer demand for accessories and high value devices supported by the ‘O2 myHandy’ model). As such, handsets sales grew +24.3% y-o-y in Q4 23 (FY 23 +13.3% y-o-y).

Virgin Media O2 (VMO2) has achieved continued subscriber growth throughout the year, expanding its mobile, fixed and broadband customer base against a challenging macroeconomic backdrop of high inflation and rationalisation of consumer spending habits. The Company has also delivered its revised guidance while focusing on key customer-first initiatives such as inclusive EU roaming and the O2 Priority loyalty scheme.

The fixed network rollout progressed at an unprecedented pace this year, with 299k PPs in Q4 23. The deployment was primarily on behalf of Nexfibre, where VMO2 is the anchor wholesale tenant. In mobile, it has reached the target of 50% UK outdoor 5G population coverage and is now committed to meeting the Government’s stated target of providing 5G Stand Alone coverage in all populated areas of the UK by 2030.

Revenue grew by +3.7% y-o-y in Q4 23 (+5.2% y-o-y in FY 23) supported by other revenue (+115.6% y-o-y), driven by nexfibre construction revenue. Mobile revenue declined -5.4% y-o-y in Q4 23 (+0.6% y-o-y FY 23), as service revenue growth was offset by a -20.0% decline in handset sales (-5.8% y-o-y FY 23), as consumers continued to tighten their spend. Fixed revenue grew +1.9% y-o-y in Q4 23 (-2.3% y-o-y in FY 23), reverting the Q3 decline (-1.9% y-o-y), explained by the flow through of the price rise benefit and B2B growth (+13.1% in Q4 23), driven by high margin revenue recognised related to long-term leases of a portion of our network.

T. Tech now operates with geographic units (Spain & Americas, UK & Ireland and Central Europe), and Global Service Lines (GSL) as transversal units expanding high-value capabilities. IoT and BizApps GSL were launched in mid-2023 and Cybersecurity capabilities are being expanded in the UK over Q4 23. This new operating model allows us to unify the portfolio and deliver the best service.

T. Tech reinforced its credentials with new Partners’ accreditations: “To infinity and beyond“ by Google Cloud Next, “HPE Best Computing Partner 2023” by HPE, “Top Selling Partner 2023” by NetApp and, “Top Performance Partner 2023” by Akamai. In addition, T. Tech was recognized with awards such as: “Leader: in Magic Quadrant Managed IoT Connectivity Services 2024” for 10th consecutive year by Gartner, “Major Player: Provider Communications infrastructure and digital services” in MarketScape 2023 report by IDC. Moreover, Telefónica was ranked as ”#1 Telco worldwide in digital capabilities”at the Telecom Services Sector Scorecard by Global Data and as "Telco leader" by STL Partners, highlighting the external audits of the environmental benefits of Telefónica Tech’s EcoSmart B2B services.

Cybersecurity & Cloud capabilities were improved in Q4 23 with the launch of new services such as: i) integrated security offer with Fortinet, Checkpoint and Palo Alto, ii) multi-technology flexWAN, iii) cyberintelligence provided from our Digital Operations Centres (DOC) based in Spain and Colombia, iv) Virtual Data Center (VDC) service in Canary Islands and Tarrasa (Barcelona) and v) security edge services with Netskope technology in Hispam.

In Big Data, T. Tech is leveraging Generative AI to reinforce its positioning as a reference partner for MNCs, SMEs and governments, which are asking for expert advice to take advantage of this new technology while managing its risks appropriately. T. Tech has developed solutions to help them to embrace Generative AI while addressing cost, ethical and security issues, combining open-source and proprietary Large Language Models (LLMs) as well as cloud-based, hybrid and on-premises deployments.

IoT capabilities were reinforced with: i) a new smart water solution for the digitalisation of the water cycle, ii) a new electro mobility solution for fleets improving charging infrastructure, iii) an agreement with Ses Imagotag, a leading company of smart shelves solutions and iv) an expansion of our drone value proposition with energy infrastructure inspection and warehouse inventory solutions.

Revenue reached €551m in Q4 23 (+19.2% y-o-y) and €1,878m in FY 23, +26.7% or +€395m vs FY 22. In constant perimeter, revenue maintained solid double-digit growth of +21.7% y-o-y in FY 23 (c. 2x market growth). This is the third consecutive year growing above the market, delivering a consistent performance and consolidating our strategy. T. Tech revenue mix is well-balanced in services (with a high weight of revenue from Managed & Professional services & own platforms) and geographies (>85% revenues from hard-currency markets).

In Brazil, FiBrasil (CDPQ 50%, T. Infra 25% and T. Brasil 25%) offers high-quality fibre connectivity across 150+ municipalities, having deployed 4.4m PPs in 22 Brazilian states, and has signed agreements to provide connectivity services to over 40 ISPs, consolidating its position as a neutral fibre network. In 2023, FiBrasil received the Great Place to Work® Brazil recognition for the second consecutive time.

ONNET Fibra Chile (KKR 60% and T. Chile 40%) continued its roll-out and obtained regulatory and competition approvals for acquiring Entel Chile’s fibre assets. ONNET Fibra Colombia (KKR 60% and T. Colombia 40%) progressed at a slightly lower pace, with 3.6m PPs as of Dec-23. In Peru, Pangea (KKR 54%, Entel Perú 10% and T. Hispam 36%), which expects the sale approval in H2 24, is accelerating its FTTH deployment to achieve 5.2m PPs by 2026, with 3.2m PPs as of Dec-23.

Telxius (>100k km of international fibre) is joining the Firmina subsea cable system that will connect the East Coast of the USA to Las Toninas (Argentina), with additional landings in Praia Grande (Brazil) and Punta del Este (Uruguay). The agreement includes hosting Firmina in Telxius’ Santos digital hub in Brazil. This provides Telxius’ customers with three redundant routes between the US and Brazil (Firmina, Brusa, SAm-1) as well as with three redundant routes extending to Argentina (Firmina, Tannat, SAm-1), bolstering the Telxius network’s resilience, ensuring robust and low-latency connectivity spanning the Americas.

T. Hispam continues to make progress in sustainability, with the aim of building a greener future, helping society prosper and leading by example. Thus, the Company, together with "Internet for All", CAF, IDB and "IDB Invest", organised the first meeting for "Digital Inclusion in Latin America", addressing the best strategies to reduce the digital, social, and economic divide in the region. Furthermore, despite an 11.5x increase in traffic, T. Hispam's energy consumption has decreased by -10% since 2015.

In fixed, FTTH & cable connected accesses grew 8% y-o-y, driven by Colombia, Argentina, and Chile. Premises passed with FTTH amounted to 20.3m after deploying 3.5m in the last 12 months (0.8m in Q4 23). The largest contributor to the deployment of PPs in the last 12 months was Colombia after deploying 1.4m PPs. Indecopi, Peru's competition authority, has started the second phase of the approval for the transaction between Pangea, KKR and Entel.

The y-o-y evolution of revenues and OIBDA in reported terms is also impacted by goodwill impairment to Ecuador of -€58m, the depreciation of the Argentine peso, from 371 ARS/EUR as of Sep-23 to 893 ARS/EUR as of Dec-23. Additionally, Q4 23 reported OIBDA includes 84M€ of restructuring expenses (-128M€ in FY 23) mainly Chile (37M€), Argentina (36M€), Colombia (6M€) and Peru (5M€).

Chile: The difficult competitive environment and the use of ONNet's fibre network had a negative impact on OpEx (but positive in CapEx). However, following the recent agreement between ONNet and Entel, the unit cost of network usage will be reduced by ~22% from January 2024. Service revenue, which include the aforementioned exclusivity revenue, increased by 16.9% (+6.5% in FY 23) and OIBDA grew by 40.4% (-9.3% in FY 23). T. Chile has achieved the first place in Large Corporations in the Best Organisations for Work-Life Balance ranking and has been re-certified in ISO 50001 for energy management.

Perú: Results continued to be strongly affected by a highly competitive environment, resulting in a 10.9% y-o-y fall in service revenue in Q4 23 (-10.1% in FY 23). Efficiency efforts reduced operating expenses by 3.2% y-o-y (-6.0% in FY 23), partially offsetting the decline in revenues, but OIBDA fell by -31.6% y-o-y (-22.4% in FY 23). The commitment to digital inclusion is supported by the increased deployment of connectivity: fiber has already reached 3.2m PPs, in addition to more than 18k rural communities through "Internet for all" (+10% y-o-y).

Colombia: Service revenue in Q4 23, including exclusivity revenues, grew 16.6% year-on-year (+8.8% in FY 23), driven by the good performance in residential and B2B, leveraged on the mobile contract and FTTH. OIBDA grew 20.6%, -6.5% in FY 23, despite the higher expenses associated with the growth in fibre accesses (+43% y-o-y) and the impact of inflation. T. Colombia closed 2023 with 39% women executives and continued to foster the "Women in Network" programme, with the aim of promoting the employability and skills of women in technical roles.

México: Solid revenue performance, +4.7% y-o-y (+2.0% in FY 23) on handset sales, contract and despite the reduction in interconnection tariffs (-33%). OIBDA grew 31.5% y-o-y in Q4 23 (+28.5% in FY 23). Progress continued to be made in the recycling of decommissioned access network equipment; 680 tonnes of electrical and electronic equipment, 1,107 tonnes of ferrous metal structures and 430 tonnes of debris have been dismantled for recycling.


TELEFÓNICA CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)	FY 23		FY 22		y-o-y % Chg Reported	Q4 23		Q4 22		y-o-y % Chg Reported


Revenue	40,652		39,993		1.6	10,153		10,200		(0.5)
Other income	1,541		2,065		(25.4)	485		538		(9.8)
Operating expenses	(30,713)		(29,082)		5.6	(8,776)		(7,398)		18.6
Impairments & losses on disposal of assets	(91)		(124)		(27.1)	(69)		(81)		(15.9)
Underlying operating income before D&A (OIBDA)	13,121		12,940		1.4	3,473		3,419		1.6
Operating income before D&A (OIBDA)	11,390		12,852		(11.4)	1,795		3,259		(44.9)
OIBDA Margin	28.0	%	32.1	%	(4.1 p.p.)	17.7	%	31.9	%	(14.3 p.p.)
Depreciation and amortisation	(8,797)		(8,796)		0.0	(2,177)		(2,126)		2.4
Operating income (OI)	2,593		4,056		(36.1)	(382)		1,132		c.s.
Share of profit (loss) of investments accounted for by the equity method	(2,162)		217		c.s.	(1,929)		(263)		n.s.
Net financial income (expense)	(1,904)		(1,313)		45.0	(622)		80		c.s.
Profit before taxes	(1,473)		2,960		c.s.	(2,933)		949		c.s.
Corporate income tax	899		(641)		c.s.	884		(326)		c.s.
Profit for the period	(574)		2,319		c.s.	(2,049)		624		c.s.
Attributable to equity holders of the Parent	(892)		2,011		c.s.	(2,154)		525		c.s.
Attributable to non-controlling interests	318		308		3.1	105		99		6.1

Weighted average number of ordinary shares outstanding during the period (millions)	5,668		5,740		(1.3)	5,651		5,699		(0.9)
Basic earnings per share attributable to equity holders of the Parent (Euros)	(0.20)		0.31		c.s.	(0.39)		0.08		c.s.
Underlying basic earnings per share attributable to equity holders of the Parent (Euros)	0.37		0.32		18.6	0.12		0.13		(6.2)

- The weighted average number of ordinary shares outstanding during the period has been obtained applying the IAS rule 33 "Earnings per share". Thereby, the weighted average of shares held as treasury stock have not been taken into account as outstanding shares. On the other hand, the denominator is retrospectively adjusted for transactions that have changed the number of shares outstanding without a corresponding change in resources (as if such transactions had occurred at the beginning of the earliest period presented). For instance, the bonus share issue carried out to meet the scrip dividends paid in June 2022, were taken into account.


TELEFÓNICA CONSOLIDATED STATEMENT OF FINANCIAL POSITION


Unaudited figures (Euros in millions)	Dec 23	Dec 22	% Chg vs. Dec


Non-current assets	83,568	87,053	(4.0)
Intangible assets	11,370	12,017	(5.4)
Goodwill	18,708	18,471	1.3
Property, plant and equipment	22,944	23,714	(3.2)
Rights of Use	8,448	8,279	2.0
Investments accounted for by the equity method	8,590	11,587	(25.9)
Financial assets and other non-current assets	7,268	8,101	(10.3)
Deferred tax assets	6,240	4,884	27.8
Current assets	20,756	22,589	(8.1)
Inventories	929	1,546	(39.9)
Receivables and other current assets	10,132	9,134	10.9
Tax receivables	1,193	2,213	(46.1)
Other current financial assets	1,078	2,444	(55.9)
Cash and cash equivalents	7,151	7,245	(1.3)
Non-current assets and disposal groups held for sale	273	7	n.s.

Total Assets = Total Equity and Liabilities	104,324	109,642	(4.9)

Equity	27,096	31,708	(14.5)
Equity attributable to equity holders of the parent and other holders of equity instruments	21,852	25,088	(12.9)
Equity attributable to non-controlling interests	5,244	6,620	(20.8)
Non-current liabilities	53,829	54,834	(1.8)
Non-current financial liabilities	33,360	35,059	(4.8)
Non-current lease liabilities	6,708	6,657	0.8
Payables and other non-current liabilities	3,605	3,546	1.7
Deferred tax liabilities	2,702	3,067	(11.9)
Non-current provisions	7,454	6,505	14.6
Current liabilities	23,399	23,100	1.3
Current financial liabilities	3,701	4,020	(7.9)
Current lease liabilities	2,239	2,020	10.9
Payables and other current liabilities	13,957	13,509	3.3
Current tax payables	1,869	1,920	(2.7)
Current provisions	1,596	1,631	(2.1)
Liabilities associated with non-current assets and disposal groups held for sale	37	—	n.s.


TELEFÓNICA CONSOLIDATED CASH FLOW STATEMENT

Unaudited figures (Euros in millions)	FY 23	FY 22	y-o-y % Chg


Cash received from operations	47,314	46,925
Cash paid from operations	(34,646)	(34,778)
Net payments of interest and other financial expenses net of dividends received	(565)	(292)
Taxes proceeds/(paid)	(454)	(92)
Net cash flow provided by operating activities	11,649	11,763	(1.0)

(Payments)/proceeds on investments in property, plant and equipment and intangible assets, net	(5,851)	(5,508)
Proceeds on disposals/ (payments on investments) in companies, net of cash and cash equivalents disposed	752	(1,743)
Proceeds/(payments) on financial investments and placements of cash surpluses not included under cash equivalents	813	1,924
Net cash flow used in investing activities	(4,286)	(5,327)	(19.5)

Dividends paid	(2,139)	(1,397)
Proceeds from share capital increase with minority interest	113	1,022
Proceeds/(payments) of treasury shares and other operations with shareholders and with minority interests	(1,771)	(555)
Operations with other equity holders (1)	(329)	(268)
Proceeds on issue of debentures and bonds, loans, borrowing and promissory notes, and other debts	2,674	2,585
Repayments of debentures and bonds, and other debts and repayments of loans, borrowings and promissory notes	(3,375)	(6,618)
Lease Principal Payments	(2,114)	(1,996)
Financed operating payments and investments in property, plant and equipment and intangible assets payments	(245)	(698)
Net cash used in financing activities	(7,186)	(7,925)	(9.3)

Effect of changes in exchange rates, cash reclassified to assets held for sale, effect of changes in consolidation methods and others	(271)	154
Net increase (decrease) in cash and cash equivalents during the year	(94)	(1,335)	(93.0)

Cash and cash equivalents at the beginning of the period	7,245	8,580
Cash and cash equivalents at the end of the period	7,151	7,245

Operating income before depreciation and amortisation (OIBDA) is calculated by excluding solely depreciation and amortisation from Operating income. OIBDA is used to track the performance of the business and to establish operating and strategic targets of Telefónica Group companies. OIBDA is a commonly reported measure and is widely used among analysts, investors and other interested parties in the telecommunications industry, although not a measure explicitly defined in IFRS, and therefore, may not be comparable to similar indicators used by other companies. OIBDA should not be considered as a substitute for Operating income.

We believe that it is important to consider capital expenditures, and capital expenditures excluding spectrum acquisitions, together with OIBDA in order to have a more complete measure of the performance of our telecommunications businesses. We use these measures internally to track the performance of our business, to establish operating and strategic targets of the Group's businesses and in our internal budgeting process.

Neither OIBDA-CapEx nor OIBDA-CapEx excluding spectrum acquisitions is a measure expressly defined in IFRS, and therefore they may not be comparable to similar indicators used by other companies. In addition, neither OIBDA-CapEx nor OIBDA-CapEx excluding spectrum acquisitions should be considered a substitute for Operating income, the most comparable financial measure calculated in accordance with IFRS, or any measure of liquidity calculated in accordance with IFRS.

As per the Group calculation, net financial debt includes: i) current and non-current financial liabilities in our consolidated statement of financial position (which includes the negative mark-to-market value of derivatives), ii) other payables included in “Payables and other non-current liabilities” and "Payables and other current liabilities" (mainly corresponding to payables for deferred payment of radio spectrum that have an explicit financial component and the supplier financing for the customer financing of terminal sales) and (iii) financial liabilities included in “Liabilities associated with non-current assets classified as held for sale”.

From these liabilities, the following are subtracted: i) cash and cash equivalents, ii) current financial assets (which include short-term derivatives), iii) the positive mark-to-market value of derivatives with a maturity beyond one year, iv) other interest-bearing assets (components of “Receivables and other current assets”, “Tax receivables” and “Financial assets and other non-current assets” in the consolidated statement of financial position), v) cash and other current financial assets included in “Non-current assets classified as held for sale”, vi) mark-to-market adjustment by cash flow hedging activities related to debt, and vii) fair value of derivatives adjustment used for the economic hedging of gross commitments related to employee benefits. In "Receivables and other current assets" we include the customer financing of terminal sales classified as short term, and "Financial assets and other non-current assets" includes derivatives, instalments for the long-term sales of terminals to customers and other long-term financial assets.

Net financial debt plus commitments is calculated by adding gross commitments related to employee benefits to net financial debt and the fair value of the derivatives used for the economic hedging of such commitments to net financial debt, and deducting the value of long-term assets associated with those commitments and the tax benefits arising from the future payments of those commitments. Gross commitments related to employee benefits are current and non-current provisions recorded for certain employee benefits such as termination plans, post-employment defined benefit plans and other benefits.

Net financial debt, net financial debt plus leases and net financial debt plus commitments are meaningful for investors and analysts because they provide an analysis of Group solvency using the same measures used by Group management. They are used to calculate internally certain solvency and leverage ratios. Nevertheless, none of them should be considered as a substitute for gross financial debt as presented in the consolidated statement of financial position.

The Group’s free cash flow is calculated starting from “Net cash flow provided by operating activities” as indicated in the consolidated statement of cash flows; deducting (payments)/proceeds on investments in property, plant and equipment and intangible assets, net, adding the cash received form government grants and deducting dividends paid to minority interests and payments of financed spectrum without explicit interest. The cash used to cancel commitments related to employee benefits (originally included in the Net cash flow provided by operating activities) is added as it represents the payments of principal of the debt incurred with those employees.

We believe that free cash flow is a meaningful measure for investors and analysts because it provides an analysis of the cash flow available to protect solvency levels and to remunerate the parent company’s shareholders and other equity holders. The same measure is used internally by Group management. Nevertheless, free cash flow should not be considered as a substitute for the various flows of cash as presented in the consolidated statements of cash flows.

•They provide information on the organic performance of the Group's operations in the different markets in which it operates, by maintaining constant exchange rates and perimeter, adjusting the results corresponding to the participation of relevant non-consolidated operations in the Group (VMO2 joint venture in the UK), removing the impact of certain exogenous factors which may distort the y-o-y comparison since they are specific to a certain moment and not associated with the ordinary performance of the business (such as, for example, capital gains or losses from the sale of companies or restructuring associated to simplification plans and aimed at improving efficiency and future profitability of the Company) and therefore, helping the business performance analysis in homogeneous terms.

•Organic results are therefore used both internally and by the various agents in the market to conduct consistent monitoring of trends and of the operating performance of the business. Moreover, this data helps the comparison between the business performance of Telefónica and that of other operators, although the term "organic" is not a term defined in IFRS, and the "organic" measures included herein may not be comparable to similar measures presented by other companies.

“Underlying” result or results in “underlying” terms intend to present a result adjusted by certain factors which distort the analysis of the business performance, but without adjusting for exchange rates, hyperinflation, or perimeter. The underlying result is calculated up to net income, while organic variations are calculated up to the Operating income and OIBDA - CapEx. The "underlying" result provides useful information for the company and market agents because:

•The inclusion of the business underlying performance is used both internally and by the various agents in the market to consistently monitor trends and operating performance of the business; this data also facilitates the relation between the business performance of Telefónica and that of other operators, although the term "underlying" is not a term defined in IFRS, and the "underlying" measures included herein may not be comparable to similar measures presented by other companies.

Telefónica UK, which was fully consolidated, left the consolidation perimeter on June 1, 2021. On the same date, the closing of the transaction resulting in the VMED O2 UK Ltd joint venture (VMO2) was carried out. VMO2 is considered a reportable segment in the consolidated financial statements of the Group, as Telefónica UK was until June 1, 2021, while VMO2 is a joint venture and as such it is registered by the equity method under IFRS. The effect on the Group's alternative performance measures included in this document is as follows:

•Organic variations: 50% of VMO2's results are computed in the Group's organic variations in order to provide a more complete view of the evolution of the businesses managed by the Company and to reflect the relative weight of the different geographies. Furthermore, the performance by segment table presents, in addition to the consolidated figures calculated in accordance with IFRS, the consolidated revenue, OIBDA and CapEx figures, aggregating 50% of VMO2.

This document has been prepared by Telefónica, S.A. (hereinafter “Telefónica” or “the Company”, and in conjunction with its subsidiaries the “Telefónica Group”) exclusively for been used during the presentation of financial results. The Company does not assume any liability for the content of this document if used for any purposes different from the one outlined above. The present document may contain forward-looking statements, opinions and information (hereinafter, the “Statements”) relating to the Telefónica Group. These Statements may include financial forecasts and estimates or statements regarding plans, objectives and expectations regarding matters such as the customer base and its evolution, growth of the different business lines and of the global business, market share, possible acquisitions, divestitures or other transactions, the outcome of recently completed transactions, the Company’s results and its operations, including its environmental, social and governance commitments and targets. The Statements can be identified, in certain cases, through the use of words such as “forecast”, "expectation", "anticipation", “aspiration”, "purpose", "belief", “may”, “will”, “would”, “could”, “plan”, “project” or similar expressions or variations of such expressions.

In any case, these Statements do not intend to be exhaustive, nor have been verified by third parties or audited, therefore, Telefónica's opinions and aspirations with respect to future events should be considered indicative, provisional and only for illustrative purposes. For this reason, these Statements do not represent, by their own nature, any guarantee of future fulfilment or profitability, and are subject to risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such Statements. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Telefónica with the different supervisory authorities of the securities markets in which its shares are listed and, in particular, the Spanish National Securities Market Commission (CNMV) and the U.S. Securities and Exchange Commission (SEC).

This document may contain summarized, non-audited or non-IFRS financial information (including information referred to as “organic” and “underlying”). Such information may not be prepared in accordance with the financial reporting requirements established by the SEC, is presented for supplemental informational purposes only and should not be considered a substitute for audited financial information presented in accordance with IFRS. The Company’s non-IFRS financial measures may differ from similarly titled measures used by other companies. In addition, there are material limitations associated with the use of non-IFRS financial measures since they exclude significant expenses and income that are recorded in the Company’s financial statements. Information related to Alternative Performance Measures (APM) used in the present document are included in the Appendix “Alternative performance measures”, page 22 of this document. Moreover, recipients of this document are invited to read Telefónica’s consolidated financial statements and consolidated management report for 2023, submitted to the CNMV, in Note 2, page 14, of the pdf filed.


Item		Sequential Page Number

1.	Quarterly Results of Telefónica Group: January- December 2023	2




	Dec 23 (thousands)	y-o-y % Chg
Total Accesses	387,798	1.2
o/ w FTTH	16,121	13.0
o/ w Contract	130,134	3.1
o/ w Pay TV	10,259	(3.1)
o/ w Wholesale	25,724	(0.8)


27%	of total Telefónica FY 23 revenue	31%	of total Telefónica FY 23 OIBDA	36%	of total Telefónica FY 23 OIBDA-CapEx
Weights calculated with revenue, OIBDA and CapEx (ex spectrum) with 50% of the VMO2 JV and excluding restructuring cost in Spain and goodwill impairment in VMO2


21%	of total Telefónica FY 23 revenue	28%	of total Telefónica FY 23 OIBDA	29%	of total Telefónica FY 23 OIBDA-CapEx
Weights calculated with revenue, OIBDA and CapEx (ex spectrum) with 50% of the VMO2 JV and excluding restructuring cost in Spain and goodwill impairment in VMO2


18%	of total Telefónica FY 23 revenue	18%	of total Telefónica FY 23 OIBDA	18%	of total Telefónica FY 23 OIBDA-CapEx
Weights calculated with revenue, OIBDA and CapEx (ex spectrum) with 50% of the VMO2 JV and excluding restructuring cost in Spain and goodwill impairment in VMO2


Telefónica
Highlights			3
Operational, infrastructure and IT performance			6
Financial performance			7
Sustainability performance			9

Telefónica España			10
Telefónica Brasil			11
Telefónica Deutschland			12
Virgin Media - O2 UK			13
Telefónica Tech			14
Telefónica Infra			15
Telefónica Hispam			16

Appendix
Selected consolidated financial statements			18
Alternative performance measures			21
Disclaimer			25



	FY 23		Q4 23
	Reported (€m)	Reported y-o-y % Chg	Reported (€m)	y-o-y reported % Chg

Revenue	40,652	1.6	10,153	(0.5)
OIBDA	11,390	(11.4)	1,795	(44.9)
OIBDA underlying	13,121	1.4	3,473	1.6
Net Income	(892)	c.s.	(2,154)	c.s.
FCF (incl. leases principal payments)	3,988	(12.7)	1,562	(25.3)
Net Financial Debt ex-leases	27,349	2.5




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