13 Nov 2007 07:17
Telefonica SA12 November 2007 Quarterly results January-September 2007 TABLE OF CONTENTS TELEFONICA GROUP Market Size Financial Highlights Consolidated Results Financial Data RESULTS BY REGIONAL BUSINESS UNITS Telefonica Espana . Wireline Business . Wireless Business Telefonica Latinoamerica . Brazil . Argentina . Chile . Peru . Colombia . Mexico . Venezuela . Central America . Ecuador . TIWS Telefonica O2 Europe . O2 UK . O2 Germany . O2 Ireland . Telefonica O2 Czech Republic Other Companies . Atento Group ADDENDA Key Holdings of the Telefonica Group and its Subsidiaries Significant Events Changes to the Perimeter and Accounting Criteria of Consolidation The financial information contained in this document has been prepared underInternational Financial Reporting Standards (IFRS). This financial informationis unaudited and, therefore, is subject to potential future modifications. The English language translation of the consolidated financial statementsoriginally issued in Spanish has been prepared solely for the convenience ofEnglish speaking readers. Despite all the efforts devoted to this translation,certain omissions or approximations may subsist. Telefonica, its representatives and employees decline all responsibility in this regard. In the event of adiscrepancy, the Spanish-language version prevails. TELEFONICA GROUP Market Size TELEFONICA GROUP ACCESSES Unaudited figures (thousands) January - September 2007 2006 % Chg Final Clients Accesses 216,229.8 193,759.6 11.6 Fixed telephony accesses (1) 42,087.5 42,660.1 (1.3) Internet and data accesses 12,583.5 11,774.8 6.9 Narrowband 2,805.4 4,287.5 (34.6) Broadband (2) 9,620.4 7,285.4 32.1 Other (3) 157.7 201.9 (21.9) Mobile accesses 160,157.1 138,443.3 15.7 Pay TV 1,401.7 881.4 59.0Wholesale Accesses 2,365.3 2,102.5 12.5 Unbundled loops 1,277.5 790.6 61.6 Shared ULL 713.5 438.5 62.7 Full ULL 564.1 352.2 60.2 Wholesale ADSL (4) 591.8 1,167.4 (49.3) Other (5) 496.0 144.4 243.5 Total Accesses 218,595.1 195,862.1 11.6 (1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6 Access x30. Company'saccesses for internal use included. (2) ADSL, satellite, optical fibre, cable modem and broadband circuits. (3) Remaining non-broadband final client circuits. (4) Includes Unbundled Lines by T. Deutschland. (5) Circuits for other operators. Note: Mobile accesses, Fixed telephony accesses and Broadband accesses include MANX customers. TELEFONICA GROUP Financial Highlights The most relevant factors of Telefonica Group results for the January-September 2007period are the following: • Consolidated net income reached 7,848(1) million euros: • Basic earnings per share increases by 50.4% to 1.644 euros per share (1.093 euros per share in January-September 2006), the thirteenth consecutive quarter of growth. ---------------------------------------------------------------------------- (1) Includes Airwave capital gain by an amount of 1,296 million euros and Endemol capital gain by an amount of 1,368 million euros. • Revenues (+8.6%), OIBDA (+24.5%), OI (+51.0%) and net income (+51.0%) continue to show outstanding year-on-year growth rates. • Guidance(2) upgrade for fiscal year 2007, reiterated: • Revenue growth is expected to be in the range +8%/+10% versus +6%/+9% previously announced. • OIBDA growth is expected to be in the range +10%/+13% (vs. initial range of+8%/+11%). • OI growth is expected to be between +19%/+23% compared with the range previously communicated (+14%/+20%). • 2007 CapEx is expected to be below 8,100 million euros versus the initial estimation of < 7,814 million euros. ---------------------------------------------------------------------------- (2) Base 2006 reported numbers include eleven months of O2 Group (consolidated since February 2006), eight months of Telefonica Telecom (consolidated since May 2006), six months of Iberbanda (consolidated since July 2006), three months of start-up losses in Slovakia, and exclude Endemol and Airwave results. 2007 guidance assumes constant exchanges rates as of 2006 and excludes changes in the consolidation perimeter. In terms of guidance calculation, OIBDA and OI exclude other exceptional revenues/ expenses not foreseeable in 2007. Personnel Restructuring and Real Estate Programs are included as operating revenues/expenses, with the exception of the ones decided after the guidance communication. For comparison purposes the equivalent other exceptional revenues/expenses registered in 2006 are also deducted from reported figures. CapEx excludes investments related to Real Estate Efficiency Plan. • Reinforced organic growth(3) strength: top line +7.6% year-on-year: • By geographies, Telefonica Latinoamerica revenues posted an organic growth of 12.6% year-on-year, Telefonica Espana 4.9% year-on-year and Telefonica O2 Europe +4.9% year-on-year. ---------------------------------------------------------------------------- (3)Assuming constant exchange rates and including the consolidation of the O2 Group, Telefonica Telecom and Iberbanda in January-September 2006. It excludes the consolidation of Telefonica O2 Slovakia in January-September 2007, the consolidation of Airwave in April-September 2006 and the consolidation of Endemol in July-September 2006. • Intense commercial activity on customer acquisition and retention, that translates into a strong accesses expansion (+11.6% year-on-year) to 218.6 million, mainly on mobile and broadband: • Mobile accesses stood at 160.2 million, 15.7% higher than September 2006. • Retail Internet broadband accesses totalled 9.6 million as of September 2007, up 32.1% against September 2006. • Pay TV customers reached 1.4 million (+59.0% year-on-year). • Operating cash flow (OIBDA-CapEx) totalled 13,221 million euros, backed by executed synergies through the integrated management of operations, cost optimisation and improved diversification. TELEFONICA GROUP Consolidated Results Telefonica Group organizational restructuring by Regional Business Units:Telefonica Espana, Telefonica Latinoamerica and Telefonica O2 Europe, inaccordance with the new regional and integrated management model, defines thatthe companies legal structure is not relevant for the presentation of theTelefonica Group financial information. In this sense, operating results of eachregional business units are presented independently of their legal structure. In line with this new structure, Telefonica Group has incorporated in TelefonicaEspana and Telefonica Latinoamerica regional businesses units all theinformation corresponding to fixed, cellular, cable and Internet businesses. Likewise, Telefonica O2 Europe includes O2 Group results and Telefonica O2 CzechRepublic results. In the caption Other companies and Eliminations Content and Media Business isincluded, where the results of Telefonica S.A. direct stake has been integratedin the share capital of Endemol Entertainment Holding, N.V. The results for the Telefonica Group for the first nine months of the year continueto prove the Company's growth profile, the high value of the diversification bybusiness and geographies, the efficient cost structure and the generation ofsynergies through the integrated management of the Company. Once again, cumulative revenues (+8.6% year-on-year), OIBDA (+24.5%year-on-year), OI (+51.0% year-on-year) and net profit (+51.0% year-on-year)show significant growth rates as compared to the same period last year. The customer base grew 11.6% due to the successful campaigns to attract andretain customers, while operating cash flow (OIBDA-CapEx) rose almost 38%year-on-year to 13,221 million euros (+10.1% ex-capital gains from the Airwaveand Endemol disposals). During the third quarter of 2007, the Telefonica Group maintained its highcommercial activity, ending September with a total of 218.6 million accesses,11.6% more than a year earlier. Telefonica Espana currently has 45.6 millionaccesses, an increase of 5.3% year-on-year. Not only have the mobile andbroadband customer bases grown, but fixed line loss has been contained, with thesame year-on-year loss as in June 2007. Meanwhile, the number of total accessesin Telefonica Latinoamerica continued to accelerate (+14.9% year-on-year to 126.5million) thanks to a robust mobile market, the strong growth in broadband, andan expanding pay TV subscriber base. Telefonica O2 Europe saw the number of totalaccesses advance 7.8% to 40.7 million, driven by strong performance in themobile business, notably in the contract segment. By access type, growth in mobile accesses at the Telefonica Group continues toaccelerate to reach almost 160.2 million (+15.7% year-on-year). Latin Americarecorded 4.1 million net adds in the quarter, with Brazil, Peru, Mexico andArgentina as the main contributors. In Spain, net adds in the quarter totalled317,038, driven by the summer campaign and reduced churn, to put the managedcustomer base at over 22.4 million, 6.7% higher than a year earlier. In Europe,the customer base expanded 8.3% to over 37.2 million thanks to net adds of840,000 during the quarter, 610,000 of which came from O2 Germany. Retail internet broadband accesses at the Telefonica Group advanced 32.1%year-on-year to over 9.6 million at the end of September. ADSL, TV and voicebundles are still an important feature for Telefonica's markets in order to developfaster the broadband market and customer loyalty. In Spain, retail broadbandaccesses surpassed 4.3 million (up 27.3% year-on-year), in Latin America, 4.7million (+34.4%) while in Europe, 572,000 (+53.2%). Net adds in the thirdquarter were 145,756 in Spain, while this figure amounted to 323,000 and 32,000in Latin America and Europe, respectively. Pay TV accesses at the end of the quarter exceeded 1.4 million, 59.0% more thana year before, with operations up and running in Spain, the Czech Republic,Peru, Chile, Colombia and Brazil. Meanwhile in Brazil the company enriched itsproprietary satellite TV offer with Globo content from 30 September. Thanks to the sound performance of the Group's customer base, revenues at theend of September totalled 42,014 million euros, a year-on-year increase of 8.6%.Negative exchange rate effect detracted just 1 percentage point from revenuegrowth (-1.4 percentage points to June and -2.6 percentage points to March),while changes in the consolidation perimeter contributed 1.9 percentage pointsto growth (vs. +4.5 percentage points in the first half of 2007 and +9.8percentage points in the first quarter 2007). Accordingly, organic revenuegrowth1 was 7.6%. The main contributors to growth were Telefonica Latinoamerica whichaccounted for 4.2 percentage points and, to a lesser extent, Telefonica Espana, whichcontributed 1.9 percentage points. By business, mobile services and broadbandcontributed the most to organic growth, up 11.2% and 23.0% year-on-year,respectively. Third quarter revenues amounted to 14,188 million euros, up 4.8%year-on-year.-------------------------------------------------------------------------------- 1 Assuming constant exchange rates and including the O2 Group, Telefonica Telecomand Iberbanda in January-September 2006. It excludes the consolidation of TelefoO2 Slovakia in January-September 2007, the consolidation of Airwave inApril-September 2006 and the consolidation of Endemol in July-September 2006. In absolute terms, Telefonica Espana contributed the most to Telefonica Grouprevenues, accounting for 36.8% of the total. In the period January-September2007, Telefonica Espana generated revenues of 15,462 million euros, up 5.0%year-on- year. Telefonica Espana Wireline Business posted revenues of 9,219million in the first nine months of the year, up 3.7% year-on-year, on the backof strong internet and broadband growth while the declines in voice revenuescontinued to narrow. Meanwhile, the Wireless Business generated revenues of7,287 million euros in the first nine months of 2007, up 6.1% driven mainly byservice revenue growth (+5.2%). Service revenues were in turn boosted bycustomer revenues (+8.8%), underpinned by the growing customer base - especiallyin the contract segment -, and higher usage of data. Telefonica Latinoamerica (34.9% of consolidated revenues) recorded revenues of14,676 million euros in the period January-September 2007, 10.8% more than inthe same period last year (+14.5% in constant euros). Organic revenue growth2was 12.6%. In constant currency terms, the countries contributing most torevenue growth, leaving aside Colombia due to the change in the consolidationperimeter, were Mexico and Venezuela, each contributing 3.1 percentage points,followed by Argentina (+2.0 percentage points). In absolute terms, Brazilremains Telefonica Latinoamerica's greatest contributor accounting for 38.4% oftotal revenues, followed by Venezuela (11.7%) and Argentina (11.4%). TASA is thebest performing fixed telephony operator in the region, reporting 9.3% growth inlocal currency thanks to higher broadband revenues (+53.5% in local currency)and a robust traditional business (+5.6% in local currency). In Brazil, VIVO(revenues up 15.8% in local currency) should be highlighted, whose results provethe advance in the target of obtaining profitable growth. -------------------------------------------------------------------------------- 2 Assuming constant exchange rates and including Telefonica Telecom in theconsolidation in January-September 2006. Telefonica O2 Europe contributed 10,776 million euros (25.6%) to the TelefonicaGroup's total revenues in the first nine months of 2007. Telefonica O2 Europe's2006 revenues include the O2 Group assets for February-September 2006, as wellas Telefo Deutschland and Telefonica O2 Czech Republic for January-September2006. The continued growth in the customer base and ARPU have helped O2 UK'srevenues increase 10.2% in local currency vs. the first nine months of 2006despite a tough market environment. At Telefonica O2 Czech Republic, cumulativerevenues to September rose 3.3% year-on-year in local currency, boosted by themobile business and a stable fixed business. However, at O2 Germany revenuesfell 2.5% vs. January-September 2006 due to the cut in termination rates andintense competition. In the first nine months of the year, operating expenses at the Telefonica Grouptotalled 27,050 million euros, 8.2% higher than the same period the year before.This increase is largely due to changes in the consolidation perimeter and thehigher commercial efforts carried out in Latin America and Europe, in a contextof maximizing the cost structure efficiency. Supplies rose 10.6% year-on-year in the period January-September to 13,254million euros (up 11.6% excluding the exchange rate effect). Excluding alsochanges to the consolidation perimeter, supplies would have risen 9.3%, mainlydue to higher interconnection expenses at Telefonica Latinoamerica and O2 UK. Personnel expenses rose 2.2% year-on-year to 5,315 million (+3.1% in constanteuros). The average number of employees in the period was 242,605, 16,726 morethan the year before, due to the increase of the Atento Group workforce and theinclusion of new companies in the consolidation perimeter. Excluding the AtentoGroup workforce, the average number of employees at the Telefonica Group wouldhave been virtually flat year-on-year, reaching 127,385 employees. Workforcerestructuring expenses amounted to 299 million euros in the period January-September 2007, mainly due to the 126 million euro provision due to TelefonicaEspana's Wireline Business 2003-2007 redundancy programme (with 445 employeessigning up) and the provision of 114 million euros at the O2 Group (Germany, UKand Ireland) also associated to workforce restructuring programmes. External service expenses in the period January-September increased 8.5%year-on-year (9.7% in constant euros) to 7,220 million euros. In organic terms,this increase was mainly due to increased commercial activity at TelefonicaLatinoamerica and in Telefonica Espana's Wireline Business. Also, in the first nine months of the year, gains on sale of fixed assetstotalled 2,634 million euros due to the recognition in the second quarter of1,296 million euros of capital gains from the sale of Airwave and in the thirdquarter of 1,368 million euros of capital gains from the disposal of Endemol.Meanwhile a capital loss of 45 million euros was recorded in connection with thedisposal of the Group's 6.9% stake in CANTV. Operating income before depreciation and amortization (OIBDA) in the periodJanuary-September totalled 18,248 million euros, 24.5% higher than in the sameperiod last year, thanks to OIBDA growth in the third quarter (+29.0% to 6,979million euros) due to the recognition of the capital gains generated by the saleof Endemol. Excluding capital gains from Airwave and Endemol disposals, OIBDArose 6.3% year-on-year in cumulative terms. At the end of September, organicgrowth3 in OIBDA was 24.7% (6.8% excluding capital gains). The OIBDA margin inthe first nine months of 2007 was 43.4% (37.1% excluding the Airwave and Endemolcapital gains vs. 37.9% the year before). -------------------------------------------------------------------------------- 3 Assuming constant exchange rates and including the O2 Group, Telefonica Telecomand Iberbanda in January-September 2006. It excludes the consolidation of Telefonica O2 Slovakia in January-September 2007, the consolidation of Airwave inApril-September 2006 and the consolidation of Endemol in July-September 2006. Telefonica Espana (47.4%4 of consolidated OIBDA) reported OIBDA of 7,384 millioneuros in the period January-September 2007, 7.6% more than in the year before.The OIBDA margin was 47.8%, 1.1 percentage points wider than in the same periodlast year. OIBDA at Telefonica Latinoamerica (5,309 million euros) represented 34.1% ofconsolidated OIBDA4 for the first nine months of 2007, a year-on-year increaseof 10.4%, or organic growth5 of 12.2%. In constant euros, OIBDA rose 13.8%. Thebiggest contributors to growth were Venezuela (+4.9 percentage points), Mexico(+3.2 percentage points) and Colombia (+2.4 percentage points), the latter dueto the change in the consolidation perimeter. The OIBDA margin to September was36.2%, largely in line with the same period the year before. -------------------------------------------------------------------------------- 4 Telefonica Group's OIBDA for January-September 2007 excludes the capital gainsfrom the sales of Airwave (1,296 million euros) and Endemol (1,368 millioneuros).5 Assuming constant exchange rates and including Telefonica Telecom inJanuary-September 2006. Telefonica O2 Europe generated OIBDA of 4,151 million in cumulative termsincluding the 1,296 capital gain on the sale of Airwave, a contribution of 18.3%to total Telefonica Group OIBDA6. In the period January-September 2006,Telefonica O2 Europe reported OIBDA of 2,798 million euros; this figureconsolidated the O2 Group assets for February-September and Telefonica O2 CzechRepublic and Telefonica Deutschland for the full nine months. The OIBDA marginexcluding the Airwave capital gains was 26.5% vs. 29.7% in January-September2006. In the third quarter, OIBDA growth at O2 UK accelerated to 9.0% year-on-year in local currency (+5.1% in the second quarter 2007 and -4.6% in the firstquarter 2007). The OIBDA margin was 27.3% in the third quarter, practically flatyear-on-year. In O2 Germany, OIBDA grew 8.4% year-on-year in the third quarter2007 to 197 million euros, leaving an OIBDA margin of 21.7%. At Telefonica O2Czech Republic, the OIBDA margin to September 2007 was 45.8% (3.1 percentagepoints lower than in the same period last year), with a negative impact ofaround 2 percentage points from operations in Slovakia. -------------------------------------------------------------------------------- 6 Excluding Airwave capital gain (1,296 million euros) in Telefonica O2 EuropeOIBDA and capital gains from both Airwave (1,296 million euros) and Endemol(1,368 million euros) at Telefonica Group level Depreciation and amortization in cumulative terms totalled 6,985 million euros,2.9% lower than the year earlier figure. Telefonica Espana and TelefonicaLatinoamerica (6.3% and 7.4% less year-on-year, respectively) contributed themost to the lower depreciation and amortization of Telefonica Group. MeanwhileTelefonica O2 Europe recorded an increase (4.2% year-on-year) as a result of therecognition of the O2 Group's Purchase Price Allocation (of 616 million euros)and the Telefonica O2 Czech Republic (of 117 million euros). In organic terms 7,depreciation and amortization at the Telefonica Group fell 5.5%, similar to thedecline recorded in the first half of 2007, being Telefonica Latinoamerica themain contributor to this reduction. -------------------------------------------------------------------------------- 7 Assuming constant exchange rates and including the O2 Group, Telefonica Telecom and Iberbanda in January-September 2006. It excludes the consolidation of Telefonica O2 Slovakia in January-September 2007, the consolidation of Airwave in April-September 2006 and the consolidation of Endemol in July-September 2006. The sharp rise in OIBDA and fall in depreciation and amortization droveoperating income (OI) 51.0% higher in the first nine months of the year to11,263 million euros. Excluding the impact of the Airwave and Endemol disposals,OI would have increased by 15.3%. Organic growth8 was 55.3% (+19.2% excludingcapital gains from Airwave and Endemol). -------------------------------------------------------------------------------- 8 Assuming constant exchange rates and including the O2 Group, TelefonicaTelecom and Iberbanda in January-September 2006. It excludes the consolidationof Telefonica O2 Slovakia in January-September 2007, the consolidation ofAirwave in April-September 2006 and the consolidation of Endemol in July-September 2006. Profit from associates jumped 75.6% to 107 million. The bulk of the increase wasdue to Lycos Europe, which in April sold its investment in the Czech-basedInternet portal provider Seznam, c.z. The improvement is also underpinned by thefact that Sogecable and The Link are no longer consolidated under the equitymethod since the fourth quarter of 2006. Net financial results at the end of September 2007 amounted to 2,095 millioneuros, 8.6% above those of the same period of 2006. This variation arises mainlyfrom the increase in the average cost of debt for the Telefonica Group due tohigher interest rates in Europe and higher percentage of debt in Latin America,that drives financial expenses up by 242 million euros. Management of thepresent value of pre-retirement plan commitments and other positions associatedto marked-to-market positions, have a positive impact of 107 million euros, 22million euros above the figure reported for the first nine months of 2006. Theaverage cost calculated on average total net debt for the period January-September 2007 is 5.39% and 5.41% when excluding FX results. Free cash flow generated by the Telefonica Group in the period January-September2007 totalled 5,959 million euros of which 1,797 and 1,425 million euros wereassigned to Telefonica S.A. share buyback program and dividend paymentrespectively, and 587 million euros to commitment cancellations derived mainlyfrom the pre-retirements plans. Due to the fact that financial divestitures forthe period amounted to 4,875 million euros, mainly due to Airwave and Endemoldisposals, net financial debt decreased in 7,024 million euros. Also, net debtwas reduced by an additional 1,117 million euros because of foreign exchangeimpact, changes in the consolidation perimeter and other effects on financialaccounts. All this has been translated in a decrease of 8,141 million euros withrespect to the net financial debt of the fiscal year 2006 (52,145 millioneuros), reaching the net financial debt of Telefonica Group 44,004 million eurosat September 2007. The tax provision for the first nine months of the year totalled 1,271 millioneuros, implying a 13.71% tax rate. However, the cash outflow for the TelefoGroup will be further reduced as negative tax bases from past periods will becompensated. In 2007, the tax rate has been reduced due to several factors, mainly thedisposal of Endemol, that implied a fiscal loss, the fiscal reform in UK,implying a reduction in terms of deferred liabilities and the disposal ofAirwave, with no fiscal impact. Minority interests substracted 156 million euros in the period January-September2007, a 42.8% year-on-year decrease mainly due to the merger by absorption ofTelefonica Moviles, S.A. by Telefonica S.A. in July 2006. Minority stakes inTelesp and Telefonica O2 Czech Republic accounted for the bulk of profitattributable to minority interests. In all, consolidated net profit to September totalled 7,848 million euros, up51.0% year-on-year. Basic earnings per share jumped 50.4% to 1.644 euros. In thethird quarter, net income amounted to 4,018 million euros, 38.7% more than inthe third quarter of 2006, while earnings per share stood at 0.849 euroscompared to 0.6 euros per share in the third quarter of 2006. CapEx in the first nine months of 2007 totalled 5,027 million euros, down 0.8%year-on-year. Exchange rate effects detracted 1.2 percentage points However,CapEx is highly seasonal, so this trend should not be extrapolated for the fullyear. FINANCIAL TARGETS (9): The Telefonica Group reiterates its financial targets for 2007, upgraded in thesecond quarter 2007, specifically the following: • Growth in consolidated revenues of +8%/+10% compared to the initial target of +6/+9% • OIBDA growth of +10%/13% vs. +8%/11% previously announced. • OI growth of +19%/+23% vs. the previously announced guidance of +14%/+20%. • CapEx of less than 8,100 million euros vs. the initial estimate of < 7,814 million euros. -------------------------------------------------------------------------------- 9 2006 figures include eleven months of the O2 Group (consolidated fromFebruary 2006), eight months of Telefonica Telecom (consolidated from May 2006),six months of Iberbanda (consolidated from July 2006), three months of lossesfor the start-up of operations in Slovakia, while Endemol and Airwave resultsare excluded. 2007 guidance assumes constant exchange rates from 2006 andexcludes changes in the consolidation perimeter. In terms of guidancecalculations, OIBDA and OI exclude exceptional revenues and expenses notforeseeable in 2007. Staff restructuring and real estate plans are included asoperating revenues/expenses except those which are decided on after guidance hasbeen announced. For comparative purposes, equivalent extraordinaryrevenues/expenses recorded in 2006 have also been deducted from the reportedfigures. CapEx excludes investments related to the real estate efficiency plan. TELEFONICA GROUP Financial Data SELECTED FINANCIAL DATAUnaudited figures (Euros in millions) January - September 2007 2006 % ChgRevenues 42,014 38,704 8.6Operating income before D&A (OIBDA) 18,248 14,654 24.5Operating income (OI) 11,263 7,460 51.0Income before taxes 9,275 5,592 65.9Net income 7,848 5,198 51.0Basic earnings per share 1.644 1.093 50.4Weighted average number of ordinary shares outstanding during the period (millions) 4,772.3 4,754.0 0.4 Note: Figures are presented considering the Purchase Price Allocation of O2 as of February 2006. Note: For the basic earnings per share calculation purposes, the weighted average number of ordinary shares outstanding during the period have been obtained applying IFRS rule 33 "Earnings per share". Thereby, there are not taking into account as outstanding shares the weighted average number of shares held as treasury stock during the period. TELEFONICA GROUPRESULTS BY REGIONAL BUSINESS UNITSUnaudited figures (Euros in millions) REVENUES OIBDA OPERATING INCOME January - September January - September January - September 2007 2006 % Chg 2007 2006 % Chg 2007 2006 % ChgTelefonica Espana 15,462 14,720 5.0 7,384 6,863 7.6 5,590 4,949 13.0Telefonica Latinoamerica 14,676 13,242 10.8 5,309 4,811 10.4 2,760 2,059 34.1Telefonica O2 Europe (1) 10,776 9,434 14.2 4,151 2,798 48.3 1,585 336 371.8Other companies and eliminations (2) 1,101 1,308 (15.9) 1,403 182 n.m. 1,328 116 n.m.Total Group 42,014 38,704 8.6 18,248 14,654 24.5 11,263 7,460 51.0 Note: Figures are presented considering the Purchase Price Allocation of O2 as of February 2006. Note: OIBDA for wireline operations in Latin America is presented after management fees. (1) Telefonica O2 Europe includes in 2006 Telefonica O2 Czech Republic (January-September), T. Deutschland (January-September) and O2 Group (February-September) (2) OIBDA and Operating Income exclude the variation in investment valuation allowances accounted by Telefonica S.A. CAPEX BY REGIONAL BUSINESS UNITSUnaudited figures (Euros in millions) January - September 2007 2006 % ChgTelefonica Espana 1,571 1,457 7.8Telefonica Latinoamerica 1,885 1,628 15.7Telefonica O2 Europe (1) 1,450 1,675 (13.4)Other companies and eliminations 121 306 (60.4)Total Group 5,027 5,067 (0.8)Note: Group CapEx in 2006 at cumulative average exchange rate.(1) Telefonica O2 Europe includes in 2006 Telefonica O2 Czech Republic (January-September), T. Deutschland (January-September)and O2 Group (February-September) TELEFONICA GROUPCONSOLIDATED INCOME STATEMENTUnaudited figures (Euros in millions) January - September July - September 2007 2006 % Chg 2007 2006 % ChgRevenues 42,014 38,704 8.6 14,188 13,542 4.8Internal exp capitalized in fixed assets (1) 497 524 (5.1) 160 182 (12.2)Operating expenses (27,050) (25,003) 8.2 (8,927) (8,474) 5.3 Supplies (13,254) (11,985) 10.6 (4,411) (4,246) 3.9 Personnel expenses (5,315) (5,201) 2.2 (1,670) (1,612) 3.6 Subcontracts (7,220) (6,652) 8.5 (2,427) (2,251) 7.8 Bad Debt Provisions (537) (484) 10.9 (178) (128) 38.7 Taxes (725) (681) 6.5 (242) (238) 1.6Other net operating income (expense) 166 219 (24.4) 185 94 96.3Gain (loss) on sale of fixed assets 2,634 224 n.s. 1,375 72 n.m.Impairment of goodwill and other assets (13) (14) (7.5) (2) (4) (40.5)Operating income before D&A (OIBDA) 18,248 14,654 24.5 6,979 5,412 29.0Depreciation and amortization (6,985) (7,194) (2.9) (2,272) (2,460) (7.6)Operating income (OI) 11,263 7,460 51.0 4,707 2,952 59.5Profit from associated companies 107 61 75.6 26 21 22.9Net financial income (expense) (2,095) (1,929) 8.6 (657) (738) (10.9)Income before taxes 9,275 5,592 65.9 4,075 2,235 82.4Income taxes (1,271) (1,717) (25.9) (15) (831) (98.2)Income from continuing operations 8,004 3,875 106.5 4,061 1,404 189.3Income (Loss) from discontinued ops. 0 1,596 n.m. 0 1,577 n.m.Minority interest (156) (273) (42.8) (43) (84) (48.4)Net income 7,848 5,198 51.0 4,018 2,897 38.7Weighted average number of ordinary shares outstanding during the 4,772.3 4,754.0 0.4 4,730.2 4,828.1 (2.0)period (millions)Basic earnings per share 1.644 1.093 50.4 0.849 0.600 41.6Note: Figures are presented considering the Purchase Price Allocation of O2 as of February 2006."Bad debt provisions" have been reclassified from "Other net operating income (expense)" to "Operating expenses".(1) Including work in process.Note: For the basic earnings per share calculation purposes, the weighted average number of ordinary shares outstandingduring the period have been obtained applying IFRS rule 33 "Earnings per share". Thereby, there are not taking intoaccount as outstanding shares the weighted average number of shares held as treasury stock during the period. TELEFONICA GROUPCONSOLIDATED BALANCE SHEETUnaudited figures (Euros in millions) January - September 2007 2006 % ChgNon-current assets 85,150 90,426 (5.8) Intangible assets 18,554 20,986 (11.6) Goodwill 20,045 21,828 (8.2) Property, plant and equipment and Investment property 32,065 33,428 (4.1) Long-term financial assets and other non-current assets 6,343 5,981 6.1 Deferred tax assets 8,143 8,202 (0.7)Current assets 20,473 19,128 7.0 Inventories 1,002 1,052 (4.8) Trade and other receivables 10,258 9,709 5.7 Current tax receivable 1,174 1,468 (20.1) Short-term financial investments 1,482 1,788 (17.1) Cash and cash equivalents 6,545 5,101 28.3 Non-current assets classified as held for sale 13 9 40.8Total Assets = Total Equity and Liabilities 105,623 109,554 (3.6)Equity 22,410 19,185 16.8 Equity attributable to equity holders of the parent 19,700 16,397 20.1 Minority interest 2,710 2,788 (2.8)Non-current liabilities 58,142 63,908 (9.0) Long-term financial debt 47,362 51,647 (8.3) Deferred tax liabilities 4,004 4,727 (15.3) Long-term provisions 5,783 6,545 (11.6) Other long-term liabilities 993 988 0.5Current liabilities 25,071 26,462 (5.3) Short-term financial debt 6,458 8,975 (28.0) Trade and other payables 8,542 8,782 (2.7) Current tax payable 2,671 2,529 5.6 Short-term provisions and other liabilities 7,400 6,176 19.8 Liabilities associate with non-current assets classified "held for sale" 0 0 n.m.Financial DataNet Financial Debt (1) 44,004 52,239 (15.8)Note: Figures are presented considering the Purchase Price Allocation of O2 as of February 2006.(1) Net Financial Debt = Long term financial debt + Other long term liabilities + Short term financial debt - Shortterm financial investments - Cash and cash equivalents - Long term financial assets and other non-current assets. TELEFONICA GROUPFREE CASH FLOW AND CHANGE IN DEBTUnaudited figures (Euros inmillions) January - September 2007 2006 % ChgI Cash flows from operations 14,068 13,730 2.5II Net interest payment (1) (2,373) (1,711)III Payment for income tax (1,157) (879)A=I+II+III Net cash provided by operating activities 10,538 11,140 (5.4)B Payment for investment in fixed and intangible assets (5,067) (4,982)C=A+B Net free cash flow after CAPEX 5,471 6,158 (11.2)D Net Cash received from sale of Real Estate 29 24E Net payment for financial investment 4,846 (21,302)F Net payment for dividends and treasury stock (2) (3,321) (3,521)G=C+D+E+F Free cash flow after dividends 7,024 (18,641) c.s.H Effects of exchange rate changes on net financial debt (421) (616)I Effects on net financial debt of changes in consolid. and (696) 4,147 othersJ Net financial debt at beginning of period 52,145 30,067K=J-G+H+I Net financial debt at end of period 44,004 52,239 (15.8)(1) Including cash received from dividends paid by subsidiaries that are not under full consolidation method.(2) Dividends paid by Telefo S.A. and dividend payments to minoritaries from subsidiaries that are under fullconsolidation method and treasury stock. RECONCILIATIONS OF CASH FLOW AND OIBDA MINUS CAPEXUnaudited figures (Euros in millions) January - September 2007 2006 % ChgOIBDA 18,248 14,654 24.5- CapEx accrued during the period (5,027) (5,067)- Payments related to commitments (587) (616)- Net interest payment (2,373) (1,711)- Payment for income tax (1,157) (879)- Results from the sale of fixed assets (2,634) (224)- Invest. in working cap. and other deferred income and exp (1,000) 1= Net Free Cash Flow after CapEx 5,471 6,158 (11.2)+ Net Cash received from sale of Real Estate 29 24- Net payment for financial investment 4,846 (21,302)- Net payment for dividends and treasury stock (3,321) (3,521)= Free Cash Flow after dividends 7,024 (18,641) c.s.Note: The concept expected "Free Cash Flow" was introduced to reflect the amount of cash flow available to remunerateTelefo S.A. Shareholders, to protect solvency levels (financial debt and commitments), and to accomodate strategicflexibility.The differences with the caption "Net Free Cash Flow after CapEx" included in the table presented above, are related to"Free Cash Flow" being calculated before payments related to commitments (workforce reductions and guarantees) andafter dividend payments to minoritaries, due to cash recirculation within the Group. Jan-Sep 2007 Jan-Sep 2006Net Free Cash Flow after CapEx 5,471 6,158+ Payments related to cancellation of commitments 587 616- Ordinary dividends payment to minoritaries (99) (289)= Free Cash Flow 5,959 6,486Weighted average number of ordinary shares outstanding during the period (millions) 4,772.3 4,754.0= Free Cash Flow per share 1.249 1.364 NET FINANCIAL DEBT AND COMMITMENTSUnaudited figures (Euros inmillions) September 2007 Long-term debt 47,646 Short term debt including current maturities 6,458 Cash and Banks (6,545) Short and Long-term financial investments (1) (3,556) A Net Financial Debt 44,004 Guarantees to IPSE 2000 365 B Commitments related to guarantees 365 Gross commitments related to workforce reduction (2) 4,802 Value of associated Long-term assets (3) (670) Taxes receivable (4) (1,475) C Net commitments related to workforce reduction 2,657 A + B + C Total Debt + Commitments 47,026 Net Financial Debt / OIBDA (5) 2.1x Total Debt + Commitments/ OIBDA (5) 2.3x(1) Short term investments and certain investments in financial assets with a maturity profile longer than oneyear, whose amount is included in the caption "Investment" of the Balance Sheet.(2) Mainly in Spain. This amount is detailed in the caption "Provisions for Contingencies and Expenses" of theBalance Sheet, and is the result of adding the following items: "Provision for Pre-retirement, Social SecurityExpenses and Voluntary Severance", "Group Insurance", "Technical Reserves", and "Provisions for Pension Fundsof Other Companies".(3) Amount included in the caption "Investment" of the Balance Sheet, section "Other Loans". Mostly related toinvestments in fixed income securities and long-term deposits that cover the materialization of technicalreserves of the Group insurance companies.(4) Net present value of tax benefits arising from the future payments related to workforce reductioncommitments.(5) Calculated based on September 2007 OIBDA, excluding results on the sale of fixed assets and proportionallyannualized. TELEFONICA GROUPEXCHANGES RATES APPLIED P&L and CapEx (1) Balance Sheet (2) Jan - Sep 2007 Jan - Sep 2006 September 2007 September 2006USA (US Dollar/Euro) 1.344 1.243 1.418 1.266United Kingdom (Sterling/Euro) 0.677 0.685 0.697 0.678Argentina (Argentinean Peso/Euro) 4.172 3.821 4.466 3.930Brazil (Brazilian Real/Euro) 2.688 2.714 2.607 2.753Czech Republic (Czech Crown/Euro) 28.076 28.441 27.605 28.330Chile (Chilean Peso/Euro) 710.657 659.895 724.873 679.880Colombia (Colombian Peso/Euro) 2,808.805 2,948.089 2,854.488 3,034.691El Salvador (Colon/Euro) 11.756 10.880 12.407 11.078Guatemala (Quetzal/Euro) 10.313 9.462 10.994 9.649Mexico (Mexican Peso/Euro) 14.714 13.543 15.490 13.945Nicaragua (Cordoba/Euro) 24.625 21.707 26.468 22.510Peru (Peruvian Nuevo Sol/Euro) 4.261 4.093 4.393 4.111Uruguay (Uruguayan Peso/Euro) 32.199 29.898 32.824 30.257Venezuela (Bolivar/Euro) 2,888.586 2,673.433 3,048.485 2,721.900(1) These exchange rates are used to convert the P&L and CapEx accounts of the Group foreign subsidiaries from localcurrency to euros.(2) Exchange rates as of 30/Sep/07 and 30/Sep/06. RESULTS BY REGIONAL BUSINESS UNITS Telefonica Espana In third quarter 2007 Telefonica Espana Group extended the healthy earnings trendseen in the first half, underpinned by the strength of its competitivepositioning in the wireline and wireless businesses. Revenues climbed 5.0% to 15,462 million euros in the January-September 2007period, and OIBDA jumped by 7.6% to 7,384 million euros during the same period,leaving an OIBDA margin of 47.8%. The following should be highlighted in Telefonica Espana Wireline Business: • Sustained topline growth (+3.7% in the nine months to September 2007 over same period 2006) underpinned fundamentally by growth in Internet and Broadband, where revenues surged 16.8% year-on-year. • Competitive strength in the Broadband market, with Telefo maintaining an estimated market share slightly above 56%. • Leadership in Pay TV market growth during third quarter 2007, reaching a 12% estimated market share at the end of September. • Contained losses of fixed telephony lines, with year-on-year decline maintained at 0.7%. • Significant 5.6% underlying OIBDA growth (once stripped out special effects such as the redundancy programme, the real estate plan and subsidies) in the nine months to September 2007. The following are note worthy in Telefonica Espana Wireless Business: • Service revenues grew by 5.2% year-on-year in the nine months to September, driven by the strong performance of customer revenues (+8.8%). • Commercial activity during the third quarter (up 5.3% on third quarter 2006) and the churn containment (churn in the contract segment was lower year-on-year) drove the customer base 6.7% higher vs. September 2006, with a noteworthy 13.1% jump of post pay customer base. • Data revenues grew by 14.5% in the period January-September 2007 vs. same period 2006, with connectivity revenues posting the strongest performance. • On-going solid OIBDA growth in the first nine months of the year of 6.9%, with an OIBDA margin of 45.8%. RESULTS BY REGIONAL BUSINESS UNITS Telefonica Espana WIRELINE BUSINESS Revenues in the January-September 2007 period amounted to 9,219 million euros,with growth vs. nine months to September 2006 reaching 3.7%. Year-on-yearrevenue growth in the third quarter was 3.4%. Topline growth was underpinned by strong performances in Internet and broadbandservice revenues in addition to higher IT and data service revenues. Meanwhilethe declines in voice revenues continued to narrow. Traditional access revenues through September amounted to 2,084 million euros, ayear-on-year increase of 0.2% relative to nine months to September 2006, led byfewer losses of fixed telephony accesses and the 2.0% increase in the PSTN linemonthly fee. • So far this year, growth in the Spanish wireline market has remained steady at en estimated 2.1%, in clear contrast to the prevailing trend in other European markets. Telefonica Espana's fixed telephony accesses totalled 15,865,165 at the end of the third quarter in the wake of net quarterly line losses of 40,996. This figure is equivalent to a year-on-year decline of 0.7%, the same rate recorded last quarter (second quarter 2007). The strong performance during the third quarter means that January-September 2007 net line losses were contained at 84,702, down substantially on those recorded in January-September 2006 (157,429 net access losses). • Telefonica's share of the wireline access market remained stable vs. June 2007 at an estimated 81%. Traditional voice service revenues rose 0.6% year-on-year in the third quarter2007, thus limiting year-on-year decline in the first nine months to 2.1%. Thestrong third quarter performance is underpinned by an 8.2% jump ininterconnection revenues, driven by higher incoming international and carriertraffic, and the narrower fall (-0.8%) in voice revenues. • The number of pre-selected lines continues to fall, declining by 89,202 so far this year to 1,817,317 at the end of September. • In line with the positive trend in revenues, Telefonica Espana's estimated share of wireline traffic remains unchanged at 65%. Internet and broadband revenues surged by 13.4% in the third quarter, boosted byrevenues in the retail broadband segment which were 22.5% higher year-on-year.Internet and broadband revenues rose 16.8% in January-September 2007 vs. sameperiod 2006. Year-to-date retail broadband service revenues are up 26.9%, accounting for 4.1percentage points of the growth in revenues at Telefonica Espana's wireline business. Meanwhile, wholesale broadband service cumulative revenues fell 11.7%year-on-year mainly on account on lower growing revenues per ULL in bothunbundled and shared access loops. • Estimated net adds in the fixed broadband Internet access market in the third quarter amounted to 0.2 million, leading to 1 million cumulative net adds for the Spanish market in the nine months to September 2007; estimated net adds for the January-September 2007 period were 13.8% lower than those of the January-September 2006 period. At the end of the third quarter, the size of the Spanish market is estimated at 7.7 million accesses. • Telefonica's retail Internet broadband net adds during the third quarter came to 145,756, taking total accesses to 4,344,119 by the end of September. This gave Telefonica continued segment leadership with an estimated market share slightly above 56%. • Unbundled loops accounted for a steady 16% share of the broadband Internet access market as of September 2007 end. Net adds during the quarter amounted to 67,844 loops, 29.7% less than a year earlier. Total unbundled loops at the end of September amounted to 1,237,852, of which 57.6% were shared access loops. • Wholesale ADSL accesses smoothed their declining trend during the third quarter due to slower growth in unbundled loops. In the wake of net third quarter losses of 17,536, total wholesale accesses amounted to 512,921 at the end of September 2007. • Telefo continues to spearhead the development of the pay TV market in Spain, reaching a 12% estimated share of the Spanish pay TV market by September 2007. Net adds in the third quarter amounted 18,142, to bring overall customer base to 469,067 subscribers at the end of September. • The total number of Duo and Trio bundles stood at 3,528,313 units at the end of September 2007; almost 11% of this figure is accounted for by triple play subscribers. Revenues from data services rose 5.6% year-on-year in the first nine months of2007. This growth is underpinned by the strong performance of Virtual PrivateNetworks (VPNs), which were 20% higher driven by the strong uptake in fibre andADSL VPNs. IT service revenues in the first nine months of the year rose a noteworthy 18.8%year-on-year. Operating expenses at Telefonica Espana Wireline Business totalled 5,152 millioneuros in January-September 2007, 3.1% less than in January-September 2006. Thisfall relates to the 70.4% lower workforce restructuring provision during thefirst nine months of 2007 vs. same period 2006. A restructuring provisionamounting 116 million euros was accounted for in the nine months to September2007, linked to 445 employees joining the Redundancy Plan (E.R.E.), compared tothe 392 million euros E.R.E. provision for the January-September 2006 period. Stripping the E.R.E. effect out, operating expenses were 2.2% higher in thefirst nine months of 2007. This growth was shaped by an 8.4% increase inexternal services to 1,022 million euros reflecting stronger commercial activitythrough the year, and a 1.7% increase in supplies, mainly in connection with thepurchase of equipment for resale and content for Imagenio, which totalled 2,213million euros. Personnel expenses amounted to 1,706 million euros, dropping14.3% year-on-year vs. January-September 2006, or by 0.6% excluding redundancyprovisions from both years and the actuarial review Topline growth outpaced expenses excluding the E.R.E. provisions. This, togetherwith the lower E.R.E. provision in the first nine months of 2007, boostedJanuary-September 2007 operating income before depreciation and amortization(OIBDA) 7.9% higher year-on-year to 4,068 million euros. In the third quarter of 2007, OIBDA amounted 1,442 million euros, slightly underthat of the third quarter 2006 (-0.4%). This reflects a 22 million euros E.R.E.provision in the third quarter 2007 (compared to no charge in third quarter2006) and 86 million euros real estate capital gains recognised duringJuly-September 2006. Stripping out specific items such as the E.R.E. provisions, the real estateprogramme, subsidies and the fine imposed by the EU and recognised in the secondquarter, and others, year-on-year underlying OIBDA growth stood at 5.6% for thenine months to September 2007, in line with the growth recorded in the firsthalf 2007, after reaching 5.6% in the third quarter. OIBDA margin reached 44.1% for the January-September 2007. Excluding the effectof the E.R.E. provisions and the actuarial review in both years, as well as theE.U. fine recognised in the second quarter, the OIBDA margin would have expandedby 0.2 percentage points to 47.0%. RESULTS BY REGIONAL BUSINESS UNITS Telefonica Espana WIRELESS BUSINESS The Spanish wireless market surpassed the 49.5 million-line mark by the end ofSeptember 2007, with an estimated penetration rate of over 108% (+6 percentagepoints vs. September 2006). In this context, Telefonica Espana Wireless Business posted net adds of 317,038lines in the third quarter of 2007 (364,698 in the third quarter of 2006),boosted by the summer campaign and churn containment. The contract segment isdriving this growth, posting 341,891 net adds in the third quarter of 2007(335,214 in the third quarter of 2006). Year-to-date, Telefonica Espana's netadds are running at 973,759 lines (1,129,792 in the first nine months of 2006),with a noteworthy number of added customers in the contract segment (1,118,751,up 9.1% on the first nine months of 2006). Commercial activity in the third quarter of 2007 was more intense than in thesame period of the year before, with 2.8 million commercial actions (up 5.3%)driving the total customer base to over 22.4 million (+6.7% vs. September 2006).As with the preceding quarters, the contract segment increased strongly with ayear-on-year growth of 13.1% to represent more than 59% of the total customerbase (3.4 percentage points more than in September 2006). In portability, lines were added on balance in the third quarter of 2007,underpinned by the strong performance of the high value segment, with 59,156 netcontract adds. For the first nine months the net portability balance thereforenarrowed to a loss of 5,413 lines, with cumulative net adds in the contractsegment of 201,727 lines. Strong gross adds (up 4.5% in the third quarter of 2007) and good churnperformance were key to the healthy commercial results achieved by the company.During the third quarter of 2007 churn was 1.8%, virtually unchanged compared tothe third quarter of 2006 (+0.1 percentage points), despite more intensecompetition. The positive performance of contract churn this quarter, at 0.98%,was noteworthy and slightly lower than the last quarter and the one reached inthe third quarter of 2006 (-0.02 percentage points). Once again, residentialsegment handset upgrades (+11.6% vs. the third quarter of 2006) played arelevant role in customer loyalty. In terms of usage, the summer campaign, over 1.7 million sign-ups, drove trafficcarried 14.9% higher year-on-year in the third quarter to 16,883 millionminutes. On-net traffic rose a noteworthy 23.1% in the third quarter of 2007.MoU amounted to 168 minutes (+6.2% vs. the third quarter of 2006). Voice ARPU reached 28.3 euros in the third quarter, 3.4% lower than in the thirdquarter of 2006. The decrease was caused by the October 2006 and April 2007 cutsin interconnection rates (-13.9% in all). Outgoing voice ARPU held virtuallydespite lower prices and the summer promotional campaign. Meanwhile, data ARPU reached 4.9 euros in the third quarter, year-on-year growthof 6.1% (with an increase of 6.3% in outgoing data ARPU). The growth in dataARPU is underpinned by the strong performance in data connectivity revenues (up57%), in non P2P SMS revenues (up 24%) and by the new data rate plans launchedduring the second quarter. Interpersonal communications represented just 54% ofrevenues for the quarter, with the remainder accounted for by advancedconnectivity (14%) and content services (32%). The company has almost 190,000customers on data flat rate and e-mail plans. The third quarter also featuredadditional increases in the overall number of UMTS/HSDPA handsets held by TelefoEspan customers to close to 2.9 million as commercial activity was adapted tomarket evolution. As a result, total ARPU in the third quarter of 2007 was 33.1 euros, 2.1% lowerthan in the third quarter of 2006 due to the cuts in interconnection rates,which more than offset the growth in outgoing ARPU (up 0.2% year-on-year). Revenues rose 3.6% in the third quarter to 2,536 million euros and by 6.1% inthe first nine months to 7,287 million euros, driven by higher customerrevenues. It is worth noting that since the 1st of January 2007 there has been achange in the way of accounting pre-pay sales and top-up commissions whichchanged from being registered as minor revenues to being added to costs and theregistering of revenues/costs of portability transit routing which are nowregistered for the net amounts. The net effect of this change is neutral at theOIBDA level, although revenues would have risen 3.3% year-on-year in the thirdquarter of 2007 and 5.9% year-on-year in the first nine months of 2007 excludingthese accounting changes. Highlights by revenue item: • Service revenues grew 3.3% year-on-year in the third quarter of 2007 to 2,245 million euros, and were up 5.2% year-on-year in the first nine months of 2007. This growth was driven mainly by growth in customer revenues, which rose 7.2% year-on-year in the third quarter of 2007 to 1,801 million euros and 8.8% year-on-year in the first nine months of 2007 on the back of the sharp year-on-year increase in the total customer base, particularly in the contract segment, and by increased data usage (data revenues were 14.5% higher in the first nine months of the year). • Interconnection revenues fell 11.8% year-on-year in the third quarter of 2007 (-7.8% in nine months of 2007), due to the impact of the reduction in interconnection rates. • Roaming revenues fell 11.7% due to the downward trend in wholesale prices (-13.8% in the nine months of 2007). • Revenue from handset sales hit the 291 million-euro mark in the third quarter, a 6.7% increase over the third quarter of 2006. Year-to-date, handset sale revenues are up 13.5%. Operating costs rose 1.2% year-on-year in the third quarter to 1,333 millioneuros, driven by higher efficiency in costs. Cumulative growth in costs for thefirst nine months of the year is running at 5.5%. Driven by topline growth and by the good evolution of costs, operating incomebefore depreciation and amortization (OIBDA) in the third quarter of 2007amounted to 1,226 million euros, an increase of 6.7% over the same period lastyear. The third quarter OIBDA margin stood at 48.3%, 1.4 percentage pointshigher than in the third quarter of 2006. OIBDA is up 6.9% year-to-date, whilethe margin is running at 45.8% (vs. 45.5% in the first nine months of 2006). TELEFONICA ESPANAACCESSESUnaudited figures (thousands) 2006 2007 September December March June September % Chg y-o-y Final Clients Accesses 41,951.0 42,620.8 43,115.8 43,508.2 43,885.2 4.6 Fixed telephony accesses (1) 15,978.1 15,949.9 15,920.3 15,906.2 15,865.2 (0.7) Internet and data accesses 4,648.8 4,842.0 4,963.2 5,048.4 5,131.3 10.4 Narrowband 1,177.7 1,040.5 916.0 798.1 736.5 (37.5) Broadband (2) 3,411.3 3,742.7 3,992.7 4,198.4 4,344.1 27.3 Other (3) 59.8 58.8 54.4 52.0 50.7 (15.2) Mobile accesses 21,019.7 21,446.0 21,813.7 22,102.7 22,419.7 6.7 Pre-pay 9,290.7 9,303.0 9,283.8 9,182.9 9,158.0 (1.4) Contract 11,729.0 12,142.9 12,529.9 12,919.8 13,261.7 13.1 Pay TV 304.4 383.0 418.6 450.9 469.1 54.1 Wholesale Accesses 1,406.5 1,531.8 1,640.8 1,707.8 1,757.2 24.9 Unbundled loops 774.8 939.0 1,071.2 1,170.0 1,237.9 59.8 Shared ULL 438.5 527.7 605.2 664.5 713.5 62.7 Full ULL 336.3 411.3 466.0 505.5 524.4 55.9 Wholesale ADSL 625.2 586.4 561.7 530.5 512.9 (18.0) Other (4) 6.5 6.4 7.8 7.4 6.5 0.4Total Accesses 43,357.5 44,152.6 44,756.6 45,216.0 45,642.5 5.3(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6 Access x30.Company's accesses for internal use included.(2) ADSL, satellite, optical fibre, cable modem and broadband circuits.(3) Leased lines.(4) Wholesale circuits.Note: Does not include Iberbanda's accesses TELEFONICA ESPANACONSOLIDATED INCOME STATEMENTUnaudited figures (Euros in millions) January - September July - September 2007 2006 % Chg 2007 2006 % ChgRevenues 15,462 14,720 5.0 5,271 5,055 4.3Internal exp capitalized in fixed assets (1) 161 150 7.6 50 49 0.2Operating expenses (8,138) (8,102) 0.5 (2,688) (2,599) 3.4Other net operating income (expense) (79) 24 c.s. 38 11 n.m.Gain (loss) on sale of fixed assets (7) 83 c.s. (7) 72 c.s.Impairment of goodwill and other assets (14) (11) 22.4 (2) (4) (37.8)Operating income before D&A (OIBDA) 7,384 6,863 7.6 2,661 2,585 3.0Depreciation and amortization (1,794) (1,914) (6.3) (587) (623) (5.8)Operating income (OI) 5,590 4,949 13.0 2,074 1,962 5.8Note: "Bad debt provisions" have been reclassified from "Other net operating income (expense)" to "Operatingexpenses".(1) Including work in process. TELEFONICA ESPANA: WIRELINE BUSINESSSELECTED FINANCIAL DATAUnaudited figures (Euros in millions) January - September July - September 2007 2006 % Chg 2007 2006 % ChgRevenues 9,219 8,894 3.7 3,074 2,973 3.4OIBDA 4,068 3,770 7.9 1,442 1,448 (0.4)OIBDA margin 44.1% 42.4% 1.7 p.p. 46.9% 48.7% (1.8 p.p.)CapEx 1,062 1,049 1.2 337 373 (9.7) TELEFONICA ESPANA: WIRELINE BUSINESSSELECTED REVENUES DATAUnaudited figures (Euros in millions) January - September July - September 2007 2006 % Chg 2007 2006 % ChgTraditional Access (1) 2,084 2,079 0.2 694 696 (0.4)Traditional Voice Services 3,589 3,666 (2.1) 1,201 1,194 0.6 Domestic Traffic (2) 2,192 2,275 (3.6) 726 732 (0.8) Interconnection (3) 715 696 2.8 253 234 8.2 Handsets sales and others (4) 681 695 (2.0) 222 228 (2.9)Internet Broadband Services 2,058 1,763 16.8 685 604 13.4 Narrowband 77 118 (34.1) 23 37 (38.2) Broadband 1,981 1,645 20.4 662 567 16.8 Retail (5) 1,737 1,369 26.9 587 479 22.5 Wholesale (6) 244 276 (11.7) 75 88 (14.2)Data Services 851 806 5.6 283 273 3.8IT Services 304 256 18.8 102 90 13.2Note: Telefonica de Espana parent company's operating revenues includes Terra Espana's revenues as of the first quarter 2006.(1) Monthly and connection fees (PSTN, Public Use Telephony, ISDN and Corporate Services) and Telephone boothssurcharges.(2) Local and domestic long distance (provincial and interprovincial) traffic, Intelligent Network Services, SpecialValued Services, Information Services (118xy), bonusses and others.(3) Includes revenues from fixed to fixed incoming traffic, fixed to mobile incoming traffic, and transit and carriertraffic.(4) Managed Voice Services and other businesses revenues.(5) Retail ADSL services and other Internet Services.(6) Includes Megabase, Megavi, GigADSL and local loop unbundling. TELEFONICA ESPANA: WIRELESS BUSINESSSELECTED FINANCIAL DATAUnaudited figures (Euros in millions) January - September July - September 2007 2006 % Chg 2007 2006 % ChgRevenues 7,287 6,866 6.1 2,536 2,446 3.6OIBDA 3,340 3,125 6.9 1,226 1,149 6.7OIBDA margin 45.8% 45.5% 0.3 p.p. 48.3% 47.0% 1.4 p.p.CapEx 510 409 24.7 204 168 21.7 TELEFONICA ESPANA: WIRELESS BUSINESSSELECTED REVENUES DATAUnaudited figures (Euros in millions) January - September July - September 2007 2006 % Chg 2007 2006 % ChgService Revenues 6,398 6,084 5.2 2,245 2,174 3.3 Customer Revenues 5,143 4,729 8.8 1,801 1,680 7.2 Interconnection 1,039 1,127 (7.8) 345 391 (11.8) Roaming - In 176 204 (13.8) 83 93 (11.7) Other 40 23 72.6 17 9 91.2Handset 888 783 13.5 291 273 6.7 TELEFONICA ESPANA: WIRELESS BUSINESSSELECTED OPERATING DATAUnaudited figures 2006 2007 September December March June September % Chg y-o-yMobile customer (thousands) 21,019.7 21,446.0 21,813.7 22,102.7 22,419.7 6.7Pre-pay 9,290.7 9,303.0 9,283.8 9,182.9 9,158.0 (1.4)Contract 11,729.0 12,142.9 12,529.9 12,919.8 13,261.7 13.1 3Q 4Q 1Q 2Q 3Q % ChgMOU (minutes) 158 157 160 159 168 6.2Pre-pay 71 66 74 67 89 25.0Contract 228 228 224 225 223 (2.1)ARPU (EUR) 33.9 33.0 31.7 32.8 33.1 (2.1)Pre-pay 17.6 15.9 14.9 15.7 16.5 (6.3)Contract 46.9 45.7 44.3 45.1 44.8 (4.5)Data ARPU 4.6 5.0 4.6 4.6 4.9 6.1%non-P2PSMS over data revenues 43.9% 45.3% 48.1% 49.5% 48.4% 4.5 p.p.Note: MOU and ARPU calculated as monthly quarterly average. RESULTS BY REGIONAL BUSINESS UNITS Telefonica Latinoamerica In accordance with the Group's new structure, Telefonica Latinoamerica's results includeTelefonica Group's fixed line and wireless operators' results in the Latin Americanregion. Furthermore, figures for the Telefonica Latinoamerica Group also include theresults of Telefonica Telecom, from the 1st of May 2006. Year-on-year the currencies of the countries in which in Telefonica Latinoamerica'soperates have all depreciated relative to the euro with the exception of theBrazilian real and the Colombian peso, whose average exchange rate show anappreciation of 0.9% and 5.0%, respectively. This has detracted 3.7 percentagepoints and 3.5 percentage points from revenue and OIBDA growth, respectivelyalthough less than in previous quarters (currency effects reduced revenue andOIBDA growth by 5.0 percentage points and 4.9 percentage points in the first sixmonths, and both revenues and OIBDA by 8.1 percentage points in the firstquarter of 2007). Revenues at Telefonica Latinoamerica in the first nine months of 2007 rose 10.8%year-on-year in current euros to 14,676 million euros. In constant euros revenuegrowth was 14.5%, with Telefonica Telecom contributing 1.9 percentage points of thetotal. In constant currency terms, the countries contributing most to toplinegrowth, leaving aside Colombia due to the change in the consolidation perimeter,Mexico and Venezuela are particularly noteworthy, each contributing 3.1percentage points, followed by Argentina (+2.0 percentage points). In absoluteterms, Brazil remains Telefonica Latinoamerica's greatest contributor accounting for 38.4% of the total revenues, followed by Venezuela (11.7%) and Argentina(11.4%). Operating income before depreciation and amortization (OIBDA) jumped 10.4% incurrent euros to 5,309 million euros. In constant currency terms, OIBDA growthin Telefonica Latinoamerica increased to 13.8%, with Telefonica Telecomcontributing 2.0 percentage points. By country, Venezuela contributed most toOIBDA growth (+4.9 percentage points), followed by Mexico (+3.2 percentagepoints) and Colombia (+2.4 percentage points), the latter shaped by the changein the consolidation perimeter. In absolute terms, Brazil is TelefonicaLatinoamerica's greatest contributor accounting for 41.9% of total OIBDA,followed by Venezuela (14.2%) and Argentina (11.4%). Telefonica Latinoamerica's CapEx amounted to 1,885 million euros at the end ofSeptember (an increase of 15.7% in current euros and of 19.9% in constanteuros). Investment was largely deployed in the expansion of the broadband and TVbusinesses in addition to enhancing its GSM networks. At the end of the thirdquarter Telefonica Latinoamerica generated operating cash flow (OIBDA-CapEx) of3,425 million euros, recording a growth of 7.6% in current euros (+10.7% inconstant euros). At the end of September 2007, Telefonica Latinoamerica managed 126.5 millionaccesses, a year-on-year increase of 14.9%, boosted by growth of 20.2% incellular customers to over 94.7 million. This advance in mobile customersreflects healthy growth in nearly all countries, with noteworthy growth inMexico (up 48.8% year-on-year) to surpass the 11 million mark, in Argentina(+28.8%) with over 13 million customers and Peru (+60.0%). Fixed telephonyaccesses reached 24.0 million, in line with those managed a year earlier, withsignificant growth in Peru (up 11.1% year-on-year) which alone almostcompensated the relatively poorer performance in other countries. Regionalgrowth in the Group's retail internet broadband accesses remained buoyant, up34.4% year-on-year to over 4.7 million accesses, reflecting the sales andmarketing efforts made by all the operators. Telefonica Latinoamerica alreadyhas 880,000 pay TV subscribers at its operations in Peru, Chile, Colombia andsince third quarter 2007 in Brazil. BRAZIL In the first nine months of the year, Telefonica Latinoamerica generatedrevenues of 5,637 million euros in Brazil, with a year-on-year growth in localcurrency of 3.5% while operating income before depreciation and amortization(OIBDA) fell 5.4% to 2,226 million euros, as the significant improvement at Vivowas not sufficient to offset lower profits at Telesp, partly due to the recoveryof past taxes in 2006. Meanwhile CapEx in the first nine months of the yearamounted to 656 million euros, an increase of 12.3% year-on-year in localcurrency, driven by greater investments carried out by Telesp. From an operating standpoint, Telefonica Latinoamerica managed 46.6 millionaccesses in Brazil at 30 September 2007, 4.7% more than the year before. Thisgrowth reflects the 9.0% increase in Vivo's customer base, partially offset by aslight reduction in the number of fixed line accesses at Telesp and the changesto the accounting criteria used to record narrowband internet accesses made inthe second quarter of 2007. TELESP At the end of the third quarter, Telesp managed 15.3 million accesses (fixedtelephony and broadband), 3.0% less than the figure registered at the end ofSeptember, 2006, due both to the reduction in the number of fixed line accessescaused by the strong growth in the cellular business in the country and theimplementation of a more restrictive accounting criteria (based on activity) fornarrowband internet accesses. The company ended the quarter with 12.0 millionfixed line accesses (-2.2% year-on-year), of which approximately 22% werepre-pay or lines with consumption limits. In the third quarter the broadband market continued to grow at a strong pace(over 39% year-on-year, slightly less than the 41% growth recorded in theprevious quarter), and Telesp captured circa 56% of this increase, bringing itsretail broadband accesses to 1.9 million (+30.4% year-on-year). Net adds in thethird quarter were 124,300, 1.8% more than the previous quarter. It is worthhighlighting the launch of the Trio Telefonica triple play bundle on 12th August,with different connection speed options and a range of TV content choices. On 30September the company added GloboSat content to its menu, thereby increasing thevalue of its offer. Telesp carried slightly more traffic during the first nine months of the year(+0.3% year-on-year to reach 52,787 million minutes), due mainly to growth inlong distance traffic between SMP mobile accesses (+31.2%) as a result of ajoint marketing strategy undertaken with VIVO. Nonetheless, local trafficcontinued to fall (-1.1% year-on-year) due to the reduction in fixed lines onthe back of the surge in mobile telephony and a stricter sales policy designedto reign in fraud and defaults. Fixed-mobile traffic fell a noteworthy 4.4%year-on-year as a result of heavy migration to wireless networks. To counteract this trend, the operator is focusing on the sale of trafficbundles; Telesp had 3.5 million bundled lines (monthly fee + local trafficbundles) at the end of September, which represents 29% of fixed line accesses,and 1.6 million traffic packages bundling long distance calling, fixed-mobilecalls or narrowband internet access. It is worth highlighting the impact oftraffic packages on long distance intra-state traffic which fell by just 2.2%year-on-year, as bundled minutes rose 8-fold year-on-year without having seen abig impact on revenues. The downward trend in inter-state traffic seen in recentquarters was plugged (+5.3% year-on-year in the first nine months of the year),partly due to larger discounts extended to corporate customers aimed to increasecustomer loyalty. From the regulatory standpoint, it is important to note migration process frominvoicing by pulses to minutes, which commenced in mid March and was completedat the end of July with approximately 95% of customers in the Basic plan. On 13th July Anatel published its tariff adjustments for 2007. These entailed a2.21% increase in the local basket (effective from 1st October), as well as forDomestic Long Distance rates. In addition, the regulator approved a 3.29% hikein the fixed to mobile rate (VCs) and of 2.25% in the fixed to mobileinterconnection fee (VUM), all effective from 20th July. Telesp reported revenues of 4,154 million in the January-September period, down1.0% year-on-year in local currency. This decrease was mainly due to the fall intraditional business revenues (-2.1% in local currency), following the tariffadjustment made in July 2006, the delay in implementing the new local callingrates until October, and the change in the customer mix with a higher percentageof lines with consumption limits. The 20% reduction in local interconnectionrates implemented in January was also a contributing factor. The increase in broadband revenues (+14.8% in local currency), lagged broadbandaccesses growth due to more intense competition that drove ARPU down and was notsufficient to full offset the fall in traditional revenues. Internet revenues(narrowband and broadband) posted growth in line with the second quarter(+10.3%), to account for an increasing percentage of total revenues, as theyweighted 9.4% at the end of September. Operating expenses increased by 6.1% year-on-year in local currency in the firstnine months of the year, mainly due to higher external service expenses (+6.2%year-on-year in local currency) caused by stronger commercial activity. Inaddition, the company, after having finalized its billing systems migrationprocess, has experienced an increase in bad debt, which has led to higherprovisions for bad debts (+88.3% in local currency vs. the same period of 2006).The ratio of bad debt to revenues was 3.9%, less than the 4.1% figure alreadyachieved in the January-June period. This has been the result of theimplementation of various measures conceived to reign in bad debt. These includesetting up strict entry filters and more actions to recover bad debts. Personnelexpenses (+0.8% year-on-year in local currency) reflect the results of theworkforce restructuring programmes carried out in March 2006 and February 2007,in addition to the impact of the headcount reduction made in June this yearwhich affected 759 employees. Supply costs increased by 3.2% year-on-year inlocal currency despite the 20% reduction in the local interconnection tariff,mainly due to the rise in traffic with interconnection to other networks. Telesp reported operating income before depreciation and amortization (OIBDA) of1,806 million euros in the first nine months of the year, down 10.5%year-on-year in local currency due to higher bad debt provisions, the loss oftraditional business revenues and higher workforce restructuring costs (up 12.6%year-on-year in local currency). The comparison is further affected by the factthat in September 2006 Telesp recovered past taxes (Pis/Cofins). Stripping outthis effect, OIBDA would have fallen by 4.9%, in line with the performancethrough to June. The OIBDA margin at 30th September 2007 stood at 43.5%, 4.6 percentage pointslower than the year before, or 1.8 percentage points lower stripping out thetaxes recovered in 2006. CapEx in the first nine months of the year was 482 million euros, 25.6%year-on-year in local currency higher than the figure reported the year before,due to greater investments in broadband and pay TV and higher cable theft(already reported in the previous quarter). This left operating cash flow(OIBDA-CapEx) of 1,324 million euros (down 18.9% year-on-year in localcurrency). VIVO Vivo's third quarter results continue to reflect the management measuresimplemented to achieve profitable growth and increase customer satisfaction asevidenced by the significant growth in the customer base. Despite scant loss ofmarket share, ARPU jumped significantly quarter-on-quarter and year-on-year. Also noteworthy is the strong take-up of Vivo's GSM technology, with currentcoverage of more than 99% of the towns where the company operates. Vivo made 77%of gross adds in the quarter in this technology, putting its GSM customer baseat the end of September over 6.7 million, 22% of its total customer base. Vivo is still the only operator to provide solutions using two technologies,offering CDMA/EVDO technology as the best data solution on the market. It hasbeen leveraging this technology to steadily grow its WAP offer and Vivo ZAPsolutions (EV-DO PMCIA cards and USB), and to launch innovative services usingVivo PLAY (downloads and video streaming) and Vivo Flash (mobile Internetaccess). Vivo ended September with a total of 31.3 million customers (+9.0% vs. September2006) in a market with an estimated penetration rate of 61.2% (+7.9 percentagepoints year-on-year). This marks a slight acceleration in market growth and isevidence of the strong commercial activity undertaken this quarter. Vivo's commercial strategy centred on its Father's Day campaign, which attractedthe bulk of new adds (3.2 million in the third quarter, one of the highestnumbers seen in recent years and 29.5% higher than the third quarter of 2006,despite marking a slight slowdown on the record second quarter figure). Thisgood performance was underpinned by the wider variety of handsets on offer,keeping leadership in commercial capillarity, continued pre-pay trafficpromotions and improved contract subscriber acquisition capabilities through thelaunch of the new "Vivo Escolha" plans. Blended churn in the third quarter was2.2%, down from 2.3% in the second quarter. By the end of the third quarter, 39.5% of the contract segment had subscribed toa Vivo Escolha plan, significantly enhancing the market's perception of Vivo'scommercial offer. Contract adds rose 54.1% year-on-year in the third quarter. Regarding financial results, revenues through to September totalled 1,740million euros (+15.8% year-on-year in local currency). Service revenues grew18.9% year-on-year in local currency, largely driven by higher interconnectionrevenues after the elimination of the Bill & Keep rule in July 2006. Strippingout this factor, the increase would have been 8.1%. In the contract segment, itis worth to highlight that the "Vivo Escolha" plan continued providing thecompany with an acquisition and retention tool for its most valued customers. In addition, it is important to highlight the continued performance of thepre-pay segment, with an outgoing cumulative ARPU growth of 26.6% year-on-yearin local currency as a result of successful traffic incentive campaigns, whichled to a 42% year-on-year increase in outgoing pre-pay MoU for the period. As a result blended MoU in the January-September period rose 7.8% year-on-year,while blended ARPU jumped 19.1% year-on-year in local currency to 11.7 eurosover the same period. In the third quarter, MoU remained stable, while ARPUjumped 11.3%. VIVO recorded operating income before depreciation and amortization (OIBDA)through to September of 420 million euros, an increase of 24.2% in localcurrency over the same period of last year. Contributing factors include toplinegrowth combined with control over customer management costs, notably the 50.3%year-on-year reduction in local currency in bad debts provisions. This in turnevidences that the strict control exercised over new customer acquisitions inthe end-of-year campaigns were sufficient to offset higher commercial expenseson the back of more intense marketing activity. The OIBDA margin in the firstnine months of the year stood at 24.2%, 1.6 percentage points wider than a yearbefore, while in the third quarter the margin widened to 3.1 percentage pointsto reach 23.8%. Stripping out the impact of the Bill & Keep rule, OIBDA growthin the January-September 2007 would have been 23.2%, with a margin of 26.2%. It is important to mention that at the beginning of August, Vivo hassuccessfully closed the acquisition of Telemig Celular in the Minas Geraisregion of Brazil and Amazonia Celular in the Amazon region, and more recently,on the 23rd October, Anatel approved the Telemig Celular acquisition, being theAmazonia Celular acquisition still pending from regulatory approval. Inaddition, Vivo participated in the spectrum tender held by Anatel in Septemberin the 1,900 Mhz band. It prevailed in 13 of the 15 blocks it bid for, includingspectrum in north-eastern Brazil. This spectrum, together with the acquisitionof Telemig gives Vivo nationwide coverage. ARGENTINA Telefonica's competitive positioning in Argentina enabled to maintain itsleadership in its operating area in the first nine months of 2007, underpinnedby 19.4% year-on-year growth in the total number of accesses to 18.8 millioncustomers. This growth was fuelled primarily by a 28.8% growth in the number ofwireless customers to 13.1 million and 50.6% growth in the number of broadbandusers to 720,000. In the wireline business, the operator increased lines by0.4%. This strong business momentum boosted revenues 16.6% higher year-on-yearin the first nine months of the year to 1,678 million euros. Operating incomebefore depreciation and amortization (OIBDA) meanwhile stood at 605 millioneuros in the January-September 2007 period, up 16.6% year-on-year, furtherunderscoring the strong business momentum. CapEx through September 2007 totalled179 million euros. TELEFONICA DE ARGENTINA Telefonica de Argentina (TASA) reached 5.7 million accesses at the end ofSeptember 2007, up 2.2% vs. September 2006, boosted by 50.6% growth in retailbroadband users to 720,000. Fixed line accesses meanwhile were flat over theprevious quarter and 0.4% higher than in September 2006 at 4.6 million, markedby limited operations as a result of the labour conflict that lasted from June2007 until the beginning of August. The performance in fixed accesses and the strong trend in usage drovetraditional business revenues 5.6% higher in the first nine months of 2007.Total voice traffic was flat year-over-year with mobile-to-fixed interconnectiontraffic (up 26.7% vs. the period January-September 2006) offsetting lowerfixed-to-fixed traffic, both local (-5.0% vs. the first nine months of 2006) andinterconnection (-4.7% vs. the first nine months of 2006). Growth in intelligentnetwork traffic continued to improve (+55.8% vs. the January-September period),while public telephony usage fell further (-19.5% vs. the first nine months of2006). Revenues came to 731 million euros in the first nine months of the year,year-on-year growth of 9.3% in local currency terms, with the traditional fixedline and internet businesses making equal contributions to this growth.Traditional revenues rose 5.6% in local currency in the first nine months of2007, reflecting the strong uptake of minutes bundles, interconnection trafficand value added services. Bundle revenue growth was underpinned mainly by localfixed-to-fixed calling plans on the back of the flat call rate launchedmid-2006. Higher interconnection revenues were driven primarily by trafficgenerated by mobile operators and incoming international traffic. Internet andbroadband revenues grew 39.7% year-on-year in the first nine months of 2007. Theweight of this segment in overall revenues continued to increase, currentlyaccounting for 14% of the total revenues. The broadband business was the maingrowth driver in the first nine months of 2007 with revenues up 53.5%year-on-year in local currency and accesses at 720,000 at the end of September(up from 477,900 in September 2006). Broadband was in turn boosted by the launchof the DUO plan (a flat rate plan bundling voice and broadband) in the lastquarter of 2006 with 34% of broadband users currently using this plan. In thefirst nine months of 2007 the data and IT revenues increased 5.6% in localcurrency mainly as a result of higher revenues from VPNs and satellite services. Over the first nine months of the year, operating expenses grew 17.0%year-on-year in local currency. This was largely due to an increase in personnelexpenses (+32.7% in local currency) caused by salary rises and severancepayments in connection with the workforce restructuring plan launched during thesecond half of 2006. Supply costs in the first nine months of 2007 also grew by14.9% in local currency due to higher interconnection and equipment lease costs.In the first nine months of 2007, external service expenses rose 6.4%year-on-year in local currency due to more intense commercial activity in termsof both advertising and commissions as well as price increases across variousservices including rents, energy, billing, etc. The ratio of bad debt to revenues stood at 1.1%, 0.5 percentage points higherthan in the first nine months of 2006 due to the impact of the days of strike,which meant lower collection activity during those days. Collection management,however, remains solid and the pre-pay and the consumption control plantcontinue to account for 28% of the total customer base. TASA posted operating income before depreciation and amortization (OIBDA) of 316million euros in the first nine months of 2007, a 1.3% year-on-year decline inlocal currency, due primarily to higher personnel expenses as detailed above. CapEx amounted to 108 million euros, a 26.0% increase in local currency on thefirst nine months of 2006. Investment was primarily earmarked for thedevelopment of broadband and new businesses. Operating cash flow (OIBDA-CapEx)at the Argentinean wireline business came to 208 million euros. TEM ARGENTINA The Argentine cellular market continued to grow at a strong pace in the thirdquarter of the year, boosting penetration to over 93% (+24 percentage pointshigher than in September 2006), still the highest of all Latin America. Net adds in the third quarter of 2007 amounted to 668,695 (664,181 in the thirdquarter of 2006), bringing the total for the first nine months of the year to1,878,350, just above the first nine months of 2006 figure. The healthyperformance in net adds was due to practically flat levels of gross adds in bothperiods combined with the excellent churn rate, which stood at 1.5% in the thirdquarter of 2007 (0.4 percentage points lower than in the third quarter of 2006and 0.2 percentage points lower than in the second quarter of 2007). As aresult, the company ended the quarter with over 13.1 million customers,representing a 28.8% increase in the customer base from September 2006. GSMcustomers accounted for 84% of the total customer base at the end of the period(a 15.2 percentage point year-on-year increase). Revenues hit the 1,000 million euro mark in the first nine months of 2007, a20.5% year-on-year increase in local currency. Driving growth was a solidperformance of service revenues, which were 22,0% higher in local currency thanduring the same period a year earlier. Revenue growth, coupled with lower unit commercial costs and customer managementexpenses as well as lower network expenses, led to an increase in operatingincome before depreciation and amortization (OIBDA) of 45.4% year-on-year inlocal currency in the first nine months of 2007 to 289 million euros. This leftthe OIBDA margin in the first nine months of 2007 at 28.9%, 5.0 percentagepoints higher than the year-earlier figure. CapEx for the first nine months of 2007 amounted to 72 million euros, virtuallyflat compared to the first nine months of 2006, flowing therefore all OIBDAimprovement to operating cash flow (OIBDA-CapEx) to stand at 218 million euros(up 59.1% in local currency vs. the first nine months of 2006). CHILE At the end of the third quarter Telefonica Latinoamerica managed a total of 9.1million accesses in Chile (+7.5% year-on-year). Net adds in the third quarter2007 totalled 168,574, underpinned by growth in mobile users, and to a lesserextent retail Internet broadband accesses and pay TV subscribers, while thenumber of fixed telephony accesses held fairly steady. At the end of thequarter, Telefonica managed 6.1 mobile accesses, 7.7% more than a year earlier,and 2.2 million fixed line accesses, with the year-on-year decline plugged at2.4%. Solid growth was also seen in retail Internet broadband accesses (up 33.1%year-on-year) and in pay TV (satellite TV/DTH), a service that was launched inJune 2006. Revenues for the first nine months of the year totalled 1,319 million euros, ayear-on-year increase of 12.3% in local currency. Topline growth was stilldriven by sharp expansion in the mobile telephony (+22.6%) and broadband and payTV (+81.5%) businesses which more than offset the decline in traditionaltelephony revenues (-7.5%). Operating income before depreciation andamortization (OIBDA) for the January-September 2007 period totalled 514 millioneuros, a year-on-year increase of 10.3% in local currency. Telefonica Latinoamerica continues to invest heavily in Chile. CapEx in thenine-month period totalled 285 million euros, an increase of 33.3% in localcurrency from the same period last year. Investment is still being poured intothe fastest growing businesses: mobile telephony, ADSL and pay TV. TELEFONICA CHILE Overall accesses at Telefonica Chile grew further in the third quarter thanks togrowth in the broadband and pay TV businesses. At the end of September,Telefonica Chile managed a total of 3.0 million accesses (year-on-year growth of7.2% vs. September 2007), after adding 165,152 net accesses in the January-September 2007 period. The number of fixed line access at Telefonica Chile fella scant 1,718 in the third quarter 2007. The company therefore stemmed thedeclines recorded the year before, consolidating the shift in trend initiated inthe first quarter: the average quarterly loss in fixed lines in 2006 was 56,000;this figure narrowed to 28,852 in the first quarter 2007, and to 2,994 in thesecond quarter. At the end of September the Company managed 2.2 million fixedlines, 2.4% fewer than at the end of the third quarter 2006. Telefonica Chileremains the Chilean fixed line market leader with an estimated share of 66%. Theoperator has managed to plug the rate of loss in the last twelve months at 2.5percentage points (loss of 3.9 percentage points in last twelve months to June2007). Broadband and pay TV accesses continued to grow. The company's commercial focuswas set on fostering customer loyalty by pushing the DUO and TRIO bundles(double and triple play bundles), packages which additionally increase ARPU. Atthe end of September, retail broadband Internet accesses totalled 606,866 thanksto net gains of 32,778 in the July-September 2007 period, and 112,397 in thefirst nine months of 2007. Telefonica Chile remains the leading broadbandInternet access provider in the country with an estimated market share of 49% atthe end of the third quarter. Telefonica Chile is still boosting the development of the pay TV business,adding 25,893 subscribers in the third quarter 2007 and 103,070 in the ninemonths to September 2007, to put the total satellite TV (DTH) subscriber base at197,279 at the end of the third quarter. One year since the business waslaunched, Telefonica Chile has established itself as the country's secondlargest pay TV player with an estimated market share of 16%. In June the companylaunched its IPTV service (modelled on Telefonica Espana's IP TV service,Imagenio), providing coverage in certain areas of Santiago, and becoming thefirst company to do so in Latin America. In addition, new services on the DTHplatform, such as decoders equipped with personal video recorders (PVRs), werelaunched in September. The competitive landscape in the Chilean telephony market is marked by asignificant fixed to mobile substitution effect, predominantly since the mobileoperators launched on-net pricing packages. Triple play is the cornerstone ofTelefonica Chile's strategic focus. The goal is to increase the number ofservices per customer and accordingly, ARPU. In this way the Company continuedto offset the contraction of its traditional telephony business due to thefixed-to-mobile substitution effect with revenue growth in broadband and pay TV.Against this backdrop, revenues for the first nine months of the year totalled720 million euros, a year-on-year increase of 2.3% in local currency. Revenuesfrom broadband and pay-TV services rose 81.5% year-on-year in local currencyduring the first nine months of 2007 driven by the launch of the pay TV businessin July 2006 and growth in ADSL penetration. This revenue expansion wassufficient to offset the 7.5% decline in revenues generated by the traditionalbusiness. Internet and broadband revenues accounted for 18% of the total in thenine months to September 2007, 8 percentage points more than in the first ninemonths of 2006. Revenues from data and IT services rose 4.0% year-on-year inlocal currency in the January-September 2007 period. Operating expenses advanced 6.7% in local currency over the nine months toSeptember 2006 reflecting a 19.1% increase in external services costs on theback of more intense commercial activity, improvements made to service qualityand customer service. Personnel expenses declined by 2.2% due to the personnelrestructuring charges accounted for in 2006; excluding this effect, personnelexpenses increased by 12.8% affected by the enactment of the ChileanSubcontracting Law. Supply costs were virtually flat, up just 0.8% in localcurrency, with the increase in expenditure on TV content and satellite capacityoffset by lower interconnection costs, especially in fixed-mobile traffic. Baddebt provisions in January-September 2007 were 4.7% higher year-on-year in localcurrency, amounting to 2.9% of revenues. With expense growth outpacing topline growth, operating income beforedepreciation and amortization (OIBDA) fell 5.9% year-on-year in local currencyin January-September 2007 period to 275 million euros. CapEx in the nine-month period totalled 137 million euros, an increase of 34.3%in local currency from nine months to September 2006, driven mainly by sharpgrowth in satellite TV services (DTH), the launch of IPTV, growth of the ADSLaccesses and initiatives designed to enhance network quality. Operating cashflow (OIBDA-CapEx) through September amounted to 138 million euros, a decline of27.4% in local currency vs. January-September 2007 as a result of increasedinvestment activity. TEM CHILE The rate of growth of the Chilean mobile market slowed in the third quarter of2007, with penetration increasing an estimated 0.3 percentage points to 87%;market resilience in the last twelve months remains noteworthy with penetrationincreasing 8.4 percentage points between September 2006 and September 2007. Telefonica Moviles Chile remains market leader, with over 6.1 million customersat the end of September 2007 boosted by net adds of 124,344 in July-September2007. Growth in the customer base was driven by net adds to the GSM service,accounting GSM customers for 86% of the total base by the end of September, 4percentage points more than in June 2007. This trend puts the company on targetto achieving its goal of migrating its entire customer base over to GSMtechnology by year-end 2008. Contract customers (1.5 million, up 29.6% year-on-year) are driving growth in the customer base, which expanded 7.7% vs. September2006, thanks to net adds of 433,765 in the twelve months to September 2007. Revenues for the first nine months of the year totalled 662 million euros, ayear-on-year increase of 22.6% in local currency. Service revenues jumped 20.2%in local currency, driven by growth in ARPU, which rose 8.4%, 10.5% and 11.6% inlocal currency in the first, second and third quarters of 2007 respectively.This trend is underpinned by migration to GSM technology, growth in the contractcustomer base, plan upgrades and the sale of minute bundles and Value AddedServices (VAS). Operating income before depreciation and amortization (OIBDA) rose 38.2% inlocal currency in January-September 2007 vs. same period 2006 to 240 millioneuros, reflecting revenue growth and enhanced operating efficiency. Thanks tothis operating efficiency, the OIBDA margin in the first nine months of 2007jumped 4.1 percentage points vs. January-September 2006 to 36.3%, despiteincreased commercial initiatives aimed at fostering customers migration to GSMtechnology and to the contract segment and in response to stiffer competition inthe marketplace. CapEx for the first nine months of 2007 amounted to 148 million euros, puttingoperating cash flow (OIBDA-CapEx) at 92 million euros. PERU Revenues for the first nine months of 2007 amounted to 1,126 million, growth of11.2% on January-September 2006. This growth was driven by a 24.0% increase inlocal currency of Internet and broadband revenues in the wireline business and a161.1% jump in outgoing revenues in the wireless business in the pre-paysegment. Operating income before depreciation and amortization (OIBDA) fell by 1.9% inlocal currency to 415 million, with intense commercial activity taking place inboth, wireline and wireless businesses. OIBDA growth at the wireless division(+20.4% first nine months 2007 vs. same period 2006 in local currency) was notsufficient to fully offset the 7.8% decline in OIBDA in the wireline business. Cumulative CapEx to September 2007 rose 29.2% in local currency overJanuary-September 2006 to 156 million euros owning primarily to heavy investmentin mobile telephony (up 94.9% in local currency) in order to service capacityrequirements on the back of higher usage. At the end of the quarter, accesses in Peru stood at 11.2 million (4.0 millionwireline and 7.2 million wireless), year-on-year growth of 40.3% mainly as aresult of significant growth in the pre-pay customer base (up 70.4%year-on-year) and 14.7% in the wireline business (including TV, broadband andtraditional accesses). In mid-March 2007 the IRIS project was launched, acollaboration project between the wireline and wireless businesses conceived togenerate synergies and facilitate access to fixed telephony using wirelesstechnology. By the end of September almost 190,000 customers had signed up forthe IRIS service. TELEFONICA DEL PERU Telefonica del Peru had 4.0 million accesses at the end of September, up sharplyyear-on-year (+14.7%) accelerating the posted cumulative growth to June 2007(+12.2%): net adds for the twelve months ended September 2007 stood at 0.5million accesses compared to net adds of 0.4 million in the twelve months endedJune 2007. Growth in fixed line accesses picked up (+11.1% year-on-year toSeptember 2007 up from +7.1% to June 2007) to reach a total 2.7 millionaccesses; fixed line accesses growth constituted the main growth driver foraccesses. Broadband accesses jumped 27.6% to 555,869. Pay TV subscribers reached628,014 in the quarter, up 23.7% year-on-year: of these, 550,444 were cable TVsubscribers and the remaining 77,570 satellite subs (DTH). Fixed wirelesstelephony was launched on 15 March 2007 with the aim of extending fixedcoverage. Of total fixed lines at the end of September, 189,482 were fixedwireless lines. Growth in voice traffic remained healthy at 8.7% in January-September 2007 dueto the strong performance of basic telephony service traffic (+15.2%) in local,long distance and incoming calls. In contrast, public telephony traffic slumped(-32.1%) as a result of increased mobile telephony and illegal call centres inboth the wireless and fixed segments. Revenues for the first nine months of the year totalled 786 million euros,slightly below the previous year's figure (-0.2% in local currency). Revenuesgrew in the Internet and broadband business (up 24.0% in local currency on thefirs nine months of 2006) thanks to intense sales and marketing activity.Broadband revenues rose a noteworthy 26.7% year-on-year while TV revenues jumped23.5%. Internet and broadband revenues accounted for 24.4% of Telefonica del Peru'stotal revenues in the January-September 2007 period. Data service revenues werealso higher, up 2.5% in local currency, thanks to increased revenues fromVirtual Private Networks (VPNs). In contrast, traditional business revenuesdeclined 6.0% in local currency in the January-September 2007 period due mainlythe 25.7% fall in public telephony revenues, the fixed-mobile substitutioneffect and competition from illegal call centres, as detailed above. Meanwhile,IT revenues were dragged down 15.6% due to fewer turnkey projects (activity wasintense in 2006 due to projects undertaken for the administration in connectionwith the Peruvian elections) and government projects delayed until 2008. Operating expenses rose 6.3% in local currency reflecting more intensecommercial activity which specifically impacted expenditure on equipment,customer service expenses and sales commissions. Furthermore, the Telefonica delPeru spent more on enhancing security to prevent cable theft. Other contributingfactors include higher expenditure on equipment rental (+4.4% inJanuary-September 2007), mostly in the TV business, and bad debt provisions,which accounted for 1.4% of revenues, higher interconnection expenses due to therise in fixed-mobile and international traffic carried and, finally, a 2.1%increase in personnel expenses. Operating income before depreciation and amortization (OIBDA) totalled 309million euros for the January-September 2007 period, a year-on-year drop of 7.8%in local currency due to higher expense and the recognition of contingencies,mostly labour- and tax-related. The OIBDA margin was 39.3%, compared to 42.6%for January-September 2006. CapEx in the nine-month period totalled 75 million euros, a decrease of 5.1% inlocal currency from nine months to September 2006. Operating cash flow (OIBDA-CapEx) was 234 million euros, down 8.6% in local currency terms. TEM PERU The Peruvian mobile market grew 7.0% in the third quarter. Penetration stood at42.7% at the end of September (+2.7 percentage points. vs. June 2007 and +14.3percentage points year-on-year). At the end of the quarter, Telefonica Moviles Peru's customer base stood at 7.2million. Pre-pay customers accounted for 88.5% of the total. The customer basegrowth rate picked up to 60.0% year-on-year to September 2007 compared to 57.2%to June 2007. Migration to GSM technology was ongoing during the quarter. AtSeptember-end 2007 GSM customers accounted for 71.5% of the total. Ongoingintense commercial activity at Telefonica Moviles Peru translated intosignificant year-on-year growth in gross adds of 83.9% in the January-September2007 period. Gross adds during the quarter reached a record high level of 1.4million. Revenues surged 40.4% to 430 million euros in local currency, underpinned bygrowth in service revenues driven mainly by outgoing revenues in the pre-paysegment (+161.1% in local currency in the first nine months of 2007) as a resultof efforts to boost card top-ups with the 'double' and 'triple' campaigns, andto a lesser extent in the contract segment (+15.8%). Operating income before depreciation and amortization (OIBDA) rose 20.4%year-on-year to 106 million euros despite higher commercial expenditure whichpaid off in terms of higher accesses. The OIBDA margin stood at 24.7% in theJanuary-September 2007 period, a 4.1 percentage points drop over same period2006. CapEx amounted to 81 million euros, up 94.4% in local currency on the sameperiod last year. This investment was used to service demand on the back ofsharp growth in the customer base and in traffic. With CapEx outstripping OIBDAgrowth, operating cash flow (OIBDA-CapEx) fell 46.1% in local currency terms to25 million euros. COLOMBIA During the first nine months of 2007, revenues from fixed and mobile businessesreached 1,138 million euros, up 31.1% on the same period the previous year inconstant currency, reflecting the first time consolidation of Telefonica Telecom in May 2006 and strong growth in internet and broadband revenues and servicerevenues at the mobile business. Operating income before depreciation and amortization (OIBDA) rose 59.8%year-on-year In local currency terms, to 328 million euros in theJanuary-September period as a result of the consolidation of Telefonica Telecom from May 2006. The OIBDA margin for the period stood at 28.8% (up 5.2 percentagepoints on September 2006). At the end of September 2007, Telefonica reached 10.1 million accesses in Colombia which translates into a growth of 0.1% compared to September 2006. TELEFONICA TELECOM 1 Telefonica Telecom had a total of 2.6 million accesses as of the end of September2007, 6.1% above last year's figure, underpinned by strong growth in broadbandusers (296.4% compared to September of 2006) that reached a total of 167,511users. -------------------------------------------------------------------------------- 1 Telefonica Telecom is consolidated into the Telefonica Group since May 2006.Year-on-year variations are calculated against proforma figures. The Satellite TV product was launched at the start of the year. This is a keyproduct which will enable Telefonica Telecom to launch 'Trio' triple play bundles(voice, broadband and TV). The number of satellite TV customers had reached46,200 by September 2007 de TV. Revenues for the fixed telephony business through September 2007 reached 527million euros, equivalent to an annual growth of 3.1% in local currency, drivenmainly by internet and broadband growth (+95.8% year-on-year in local currency).The contribution to total revenues from this business jumped to 8.4% in thefirst nine month of 2007 from 4.4% at September 2006. The strong growth in thenumber of ADSL users (+296.4%) offset the drop in the revenues of the narrowbandbusiness (-11.5% in local currency) due to migration to broadband. In the firstnine months of 2007, the company extended broadband coverage to new towns andcities and strengthened its position in areas where it maintains a leadershipposition. The broadband business was also boosted by marketing bandwidthupgrades to corporate customers. Operating expenses in the January-September period rose 4.9% year-on-year inlocal currency, mainly as a consequence of the growth in supplies and bad debtprovisions. Telefonica Telecom's operating income before depreciation and amortization (OIBDA)amounted to 219 million euros in the first nine months of the year, whichrepresents year-on-year growth of 24.7% in local currency, driven largely by thestrategic commitment to broadband. CapEx through September 2007 stood at 84 million euros. The bulk of this wasinvested in deploying broadband and a series of regional systems projects suchas ATIS and SAP. Operating cash flow (OIBDA-CapEx) came to 135 million euros inthe January-September 2007 period. TEM COLOMBIA The Colombian cellular market ended September with a total of 29.5 millioncustomers, 0.3 million more than in September 2006. Penetration stood at 69%. In the third quarter of 2007, there was a 19.6% drop in gross adds when comparedto the third quarter of 2006, due to the reduction in handset subsidies. Churnwas slightly higher than in the second quarter of 2007 (+0.1 percentage points)standing at 3.9% due to the disconnection of low value customers who signed onin the aggressive campaigns launched in 2006. As a result, the company recordeda negative net gain of 60,317 clients, leaving the customer base at 7.6 millionat the end of September 2007 (down 1.8% versus September 2006). Of the total,77% were GSM customers (+5.3 percentage points on the second quarter of 2007). Revenues in the first nine months of 2007 amounted to 641 million euros, up 4.6%year-on-year in local currency. Third quarter revenues were 5.8% higheryear-on-year in local currency when compared to the third quarter of 2006.Service revenues rose 12.8% year-on-year in local currency in the first ninemonths of 2007 and by 12.5% in local currency in the third quarter of 2007,despite the slight fall in the average customer base. Operating income before depreciation and amortization (OIBDA) rose 21.9%year-on-year in local currency to 108 million euros in the January-September2007 period. Third quarter OIBDA amounted to 50 million euros, equivalent to ayear-on-year growth of 33.5% in local currency, as a result of service revenuegrowth and lower subsidies offered to new customers. The OIBDA margin stood at16.9% in the first nine months of 2007 and 22.4% in the third quarter of 2007,up 2.4 percentage points and 4.4 percentage points year-on-year, respectively. CapEx in the January-September 2007 period amounted to 63 million euros (37million euros in the third quarter of 2007), leaving operating cash flow(OIBDA-CapEx) of 45 million euros at the end of September 2007. MEXICO Telefonica Moviles Mexico continued to step up its commercial activitysignificantly in the third quarter, leveraging the strong competitivepositioning of its promotions, underpinned by the launch of innovative productsand the result of initiatives designed to continually improve its salesprocesses and network quality. Growth in the Mexican cellular market accelerated yet again with the penetrationrate reaching an estimated 60% by September 2007 (up 10 percentage points vs.September 2006). Telefonica Moviles Mexico's customer base at the end of thequarter had reached 11.1 million (of which 623,000 thousand were contractcustomers), a growth of 48.8% vs. September 2006. The strong growth in thecustomer base in the third quarter was underpinned by a competitive and flexiblecommercial offer in the pre-pay segment to surpass 1.6 million gross adds in thethird quarter of 2007, 33.0% more than in the third quarter of 2006. The higherquality of gross adds in recent quarters along with the introduction of lowertop-up amounts led to further 0.6 percentage points year-on-year improvement inchurn to 2.5% in the third quarter of 2007 (vs. 3.1% in the third quarter of2006 and 2.8% in the second quarter of 2007). As a result, third quarter netadds approached 840,000, year-on-year growth of 45.4%. Net adds for the firstnine months of the year are running at over 2.5 million, more than 2.3 times thenet adds figure recorded in the first nine months of 2006. Traffic growth remains buoyant, particularly outgoing and on-net traffic,although expanding at slower rates than in previous quarters since it is now ayear since the launch of the commercial offer that introduced the new concept of"Fixed rate per call" in the Mexican market As a result, third quarter MoUreached 145 minutes, year-on-year growth of 65.6%. Higher usage fed through toARPU in the third quarter of 2007, up 14.4% year-on-year to 141 Mexican pesos. The company's strong business momentum fuelled a 57.7% year-on-year increase inrevenues in local currency in the third quarter of 2007 to 358 million euros anda 59.4% year-on-year increase in the first nine months of 2007 to 1,011 millioneuros. Up 69.1% year-on-year, service revenues continued to grow strongly in thethird quarter. The rate of growth slowed slightly compared to the 73.1% recordedin the second quarter, which included the effect of the Mothers' Day campaign.However, the third quarter 2007 figure is stronger than the performance in thefirst quarter when service revenues were 66.4% higher year-on-year. Servicerevenues continued to outstrip growth in the company's customer base (+48.8%),underscoring the higher quality and usage of its customers. Year-to-date,service revenues are 69.6% higher. Service revenue growth was driven by bothoutgoing and incoming revenues, both underpinned by the launch of the nationalcalling party pays system in November 2006. The pace of growth of outgoingrevenues slowed slightly to 85.7% year-on-year in local currency in the thirdquarter of 2007 from 91.0% in the first half of 2007 on the back of sustainedgrowth in on-net traffic. Meanwhile, the launch of the national calling partypays service underpinned a sharp 44.7% jump in incoming traffic revenues in thethird quarter of 2007. Operating income before depreciation and amortization (OIBDA) growth in thethird quarter is the reflection of the solid topline growth, economies of scalereached and the closure of the CDMA network at the end of June 2007. Despiteintense commercial activity in the quarter, OIBDA reached 52 million euros,compared to the 0.7 million euros in the third quarter of 2006. In the firstnine months of 2007, OIBDA amounted to 113 million euros to put the OIBDA marginat 11.2%, compared with an OIBDA loss in first nine months of 2006 of -33million euros. CapEx through September 2007 amounted to 154 million euros (97 million euros inthe first nine months of 2006). This high level of investment is the reason whythe operator generated, despite strong growth in OIBDA, negative operating cashflow (OIBDA-CapEx) of 40 million euros in the first nine months of 2007,significantly less negative than what was generated in the first nine months of2006. VENEZUELA The Venezuelan cellular market continued to record strong growth in the thirdquarter of 2007, although at a slightly slower pace due to market maturity, withpenetration reaching an estimated 79% by the end of September, 18 percentagepoints higher than by September 2006. Telefonica maintained its intense commercial activity in Venezuela, focusing this quarter on end-of-holiday and back-to-class campaigns, clearly targeting the youth segment. Commercial initiatives accelerated gross adds in the thirdquarter of 2007, driving them up by 17.4% vs. the third quarter of 2006,compared to a 7.1% growth for the first nine months of the year. Telefonica Moviles Venezuela's commercial strategy this quarter was designedaround broadening the range of handsets on offer vis-a-vis its competitors,offering certain models on an exclusive basis. The operator also launched newplans in the prepay segment. These so-called "A tu medida" plans enablecustomers to adapt the basic package to their specific needs. Under these planscustomers can add on to the basic on-net usage plan additional plans such ashigher on-net traffic plans, calls to other operators, flat rate text messagesor data download packages, depending on their individual preferences. At September 2007, Telefonica Moviles Venezuela's customer base stood at over9.8 million (+22.6% year-on-year), after recording net adds of over 1 millioncustomers in the first nine months of the year. Since the network beganoperating at the beginning of the year, GSM adds have accounted for 62% of thetotal. GSM customers made up 28% of the total customer base at September 2007. This rapid migration of the customer base to GSM technology, together with thesharp overall growth of the market in the last year, is behind the 0.4percentage points increase in churn to 2.8% in the third quarter of 2007.Although high, churn fell by 0.1 percentage points compared to the secondquarter of 2007 thanks to policies designed to improve activity and increasecustomer retention rates. Revenues to September 2007 amounted to 1,716 million euros in the first ninemonths of 2007 (+27.9% year-on-year in local currency), driven by higher growthin service revenues (+30.2%) than in the customer base and a noteworthy 1.6%increase in ARPU in the third quarter of 2007, albeit slightly lower growth thanin preceding quarters, pushed down by the cut in interconnection ratesimplemented in July 2007. Operating income before depreciation and amortization (OIBDA) in the first ninemonths of 2007 reached 756 million euros, 41.0% more than the first nine monthsof 2006 figure in local currency, owing to growth in revenues and commercialsavings due to lower unit costs for GSM handsets, which more than offset thepick up in commercial activity. As a result, the OIBDA margin stood at 44.0%, a4.1 percentage points increase over the first nine months of 2006 and a 2.2percentage points increase over the first six months of the year. CapEx for the first nine months of 2007 amounted to 154 million euros,generating operating cash flow (OIBDA-CapEx) of 602 million euros (up 39.5% inlocal currency vs. first nine months of 2006). CENTRAL AMERICA Telefonica Moviles de Centroame (Panama, Guatemala, El Salvador and Nicaragua)continued to ramp up commercial activity in the first nine months of 2007 whencompared to the same period last year, especially in Guatemala. At the end of September 2007, the penetration of the Central American marketstood at an estimated 63% (up 21.3 percentage points versus September 2006). Inthis context, Telefonica Moviles de Centroame's customer base rose 36.8% year-on-year reaching 4.9 million clients (259,840 fixed wireless and 376,693contract customers). Growth was fuelled by the effectiveness of commercialcampaigns carried out in the third quarter, focused on traffic promotions thatincrease usage, and underpinned by a robust network performance. In addition,only SIM campaigns drove total gross adds 56.9% higher year-on-year to 720,053in the third quarter of 2007. As a result, third quarter net adds stood at407,960. At the operating level, traffic growth remained noteworthy, especially outgoing,buoyed by the promotional plan which encourages pre-pay usage. MoU for the thirdquarter of 2007 came to 140 minutes, up 5.1% compared to the third quarter of2006. As a result of the company's strong commercial performance, revenues in thefirst nine months of 2007 totalled 439 million euros, up 18.6% year-on-year inconstant terms. Service revenues rose 19.4% year-on-year in constant currency inthe January-September 2007 period, extending the positive trend of previousquarters. This was driven by higher outgoing revenues (+30.4% in constantterms), higher on-net traffic (+88% when compared to the third quarter of 2006)and incoming revenues (+10.5% in constant terms), mainly due to the growth ofthe pre-pay customer base. Despite the increase in commercial activity, operating income beforedepreciation and amortization (OIBDA) reached 171 million euros in the firstnine months of 2007, up 47.2% year-on-year in constant terms. The OIBDA marginstood at 39.1% in the January-September 2007 period, an improvement of 7.6percentage points when compared to the same period the previous year. CapEx through September 2007 amounted to 63 million euros, 6.0% below theJanuary September 2006 figure in constant currency. Operating cash flow (OIBDA-CapEx) surged 119.9% in constant terms to 108 million euros compared to thefirst nine month of 2006, fuelled by growth in OIBDA and lower investmenteffort. ECUADOR The Ecuadorian cellular market has experienced strong growth year-to-date, withpenetration reaching 69% by September 2007, 11.6 percentage points higher thanlast year's figure. Telefonica Moviles Ecuador's customer base at the end of September 2007 stood at 2.7 million, 65% of which were GSM customers. Revenues for the first nine months of the year totalled 211 million euros,equivalent to an annual growth of 3.6% in local currency. In theJanuary-September 2007 period, service revenues fell 3.9% year-on-year in localcurrency, showing a change in the declining trend (from a year-on-year retreatof 9.3% through June 2007) due to the stronger outgoing contract revenues. Operating income before depreciation and amortization (OIBDA) rose 3.2%year-on-year in local currency to 52 million euros in the January-September 2007period. OIBDA margin stood at 24.4%, 0.1 percentage points lower than in thesame period the previous year. CapEx through September totalled 28 million euros, 40.3% higher in localcurrency than in the same period last year in order to service the increase intraffic carried out by the operator. As a result of this high level of investment, operating cash flow (OIBDA-CapEx)declined to 24 million euros in the first nine months of 2007, compared to the33 million euros reached in the same period the previous year. TELEFONICA INTERNATIONAL WHOLESALE SERVICES Momentum remained strong at Telefonica International Wholesale Services (TIWS)throughout the third quarter. In line with previous quarters, business momentumwas underpinned by strong growth in wholesale revenues (mainly traffic and IPcapacity). Revenues rose 24.0% year-on-year in constant euros in the first ninemonths of the year to 202 million euros. By revenue contribution International IP revenues (up 18.4% year-on-year inconstant euros) are noteworthy, accounting for around 51% of the total, boostedby sharp growth in operators' demand. Remaining services also posted healthygrowth, led by bandwidth capacity (+46.3% in constant euros), VPNs (+29.1% inconstant euros) and satellite services (+36.2% in constant euros). Operating income before depreciation and amortization (OIBDA) amounted to 70million euros (+26.9% in constant euros). Topline growth offset the increase inoperating expenses (+23.0% in constant euros), mainly the result of highersupply costs on the back of increased business activity. The OIBDA margin stoodat 34.5%, 0.8 percentage points higher than in the same period of the previousyear. TELEFONICA LATINOAMERICAACCESSESUnaudited figures (thousands) 2006 2007 September December March June September % Chg y-o-y Final Clients Accesses 109,987.5 114,604.4 116,905.7 121,773.0 126,423.0 14.9 Fixed telephony accesses (1) 24,072.6 23,916.9 23,810.9 23,894.7 24,027.4 (0.2) Internet and data accesses 6,563.3 6,723.7 6,757.6 6,467.8 6,803.4 3.7 Narrowband (2) 2,931.2 2,813.5 2,615.3 1,989.8 2,000.6 (31.7) Broadband (3) (4) 3,500.2 3,780.3 4,045.6 4,380.4 4,703.5 34.4 Other 131.8 130.0 96.7 97.6 99.3 (24.7) Mobile accesses 78,777.4 83,298.4 85,637.0 90,610.9 94,712.1 20.2 Contract 63,501.6 67,329.9 69,112.7 73,654.3 77,117.4 21.4 Pre-pay 14,075.4 14,705.4 15,208.7 15,582.9 16,210.8 15.2 Fixed Wireless 1,200.4 1,263.1 1,315.5 1,373.7 1,384.0 15.3 Pay TV 574.2 665.3 700.1 799.6 880.0 53.2 Wholesale Accesses 76.0 65.9 64.6 64.5 64.1 (15.6)Total Accesses 110,063.5 114,670.3 116,970.3 121,837.5 126,487.1 14.9(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6 Access x30. Company'saccesses for internal use included.(2) Includes narrowband ISP of Terra Brasil and Terra Colombia.(3) Includes broadband ISP of Terra Brasil, Telefonica de Argentina, Terra Guatemala y Terra Me.(4) Includes ADSL, optical fiber, cable modem, broadband circuits and Telefonica de Argentina ISP in the North part of the country. TELEFONICA LATINOAMERICACONSOLIDATED INCOME STATEMENTUnaudited figures (Euros in millions) January - September July - September 2007 2006 % Chg 2007 2006 % ChgRevenues 14,676 13,242 10.8 5,048 4,535 11.3Internal exp capitalized in fixed assets (1) 69 72 (4.4) 23 24 (6.4)Operating expenses (9,639) (8,685) 11.0 (3,285) (2,858) 15.0Other net operating income (expense) 200 184 8.6 118 103 14.5Gain (loss) on sale of fixed assets 3 (1) c.s. 15 4 n.m.Impairment of goodwill and other assets 0 (2) n.m. 0 0 n.m.Operating income before D&A (OIBDA) 5,309 4,811 10.4 1,919 1,809 6.1Depreciation and amortization (2,550) (2,752) (7.4) (846) (924) (8.5)Operating income (OI) 2,760 2,059 34.1 1,073 884 21.3Note: "Bad debt provisions" have been reclassified from "Other net operating income (expense)" to "Operatingexpenses".(1) Including work in process. TELEFONICA LATINOAMERICAACCESSES BY COUNTRIES (I)Unaudited figures (Thousands) 2006 2007 September December March June September % Chg y-o-y-----------------------------------------------------------------------------------------------------------------BRAZIL Final Clients Accesses 44,484.7 44,716.9 44,599.1 45,344.4 46,607.3 4.8 Fixed telephony accesses (1) 12,295.1 12,107.1 12,033.6 12,031.3 12,019.0 (2.2) Internet and data accesses 3,463.9 3,556.8 3,535.2 3,072.6 3,259.5 (5.9) Narrowband 1,884.5 1,856.6 1,786.3 1,201.1 1,262.3 (33.0) Broadband (2) 1,485.2 1,608.2 1,690.8 1,813.0 1,937.3 30.4 Other 94.2 92.0 58.1 58.6 59.9 (36.4) Mobile accesses 28,725.7 29,053.1 29,030.3 30,240.5 31,320.2 9.0 Pre-pay 23,481.5 23,543.4 23,377.0 24,549.4 25,456.8 8.4 Contract 5,244.1 5,509.6 5,653.2 5,691.1 5,863.5 11.8 Pay TV 0.0 0.0 0.0 0.0 8.5 n.m. Wholesale Accesses 46.4 38.4 38.9 38.1 37.4 (19.4)Total Accesses 44,531.1 44,755.3 44,638.0 45,382.5 46,644.7 4.7-----------------------------------------------------------------------------------------------------------------ARGENTINA Final Clients Accesses 15,761.5 16,809.4 17,464.1 18,112.1 18,812.2 19.4 Fixed telephony accesses (1) 4,612.4 4,636.3 4,627.9 4,633.5 4,633.1 0.4 Internet and data accesses 998.9 973.7 1,023.2 1,069.5 1,101.3 10.3 Narrowband 504.1 439.2 418.0 392.9 363.6 (27.9) Broadband (2) 477.9 517.7 588.1 659.0 719.7 50.6 Other 16.8 16.8 17.1 17.7 18.1 7.4 Mobile accesses 10,150.2 11,199.4 11,813.0 12,409.1 13,077.8 28.8 Pre-pay 6,498.1 7,315.8 7,753.1 8,112.8 8,553.1 31.6 Contract 3,499.4 3,742.9 3,925.8 4,169.9 4,410.4 26.0 Fixed wireless 152.7 140.7 134.2 126.3 114.3 (25.2) Wholesale Accesses 7.2 7.3 7.6 8.7 8.9 24.5Total Accesses 15,768.7 16,816.6 17,471.7 18,120.8 18,821.2 19.4-----------------------------------------------------------------------------------------------------------------CHILE Final Clients Accesses 8,435.3 8,538.4 8,670.5 8,909.3 9,077.8 7.6 Fixed telephony accesses (1) 2,225.9 2,206.2 2,177.4 2,174.4 2,172.7 (2.4) Internet and data accesses 538.9 557.7 597.3 636.0 656.0 21.7 Narrowband 72.8 53.3 59.0 52.5 40.1 (44.9) Broadband (2) 456.0 494.5 528.2 574.1 606.9 33.1 Other 10.1 10.0 10.0 9.5 9.0 (10.4) Mobile accesses 5,618.1 5,680.2 5,766.8 5,927.5 6,051.9 7.7 Pre-pay 4,491.6 4,507.6 4,515.7 4,557.9 4,591.4 2.2 Contract 1,126.5 1,172.7 1,251.1 1,369.6 1,460.5 29.6 Pay TV 52.4 94.2 129.1 171.4 197.3 n.m. Wholesale Accesses 21.9 19.9 17.6 17.2 17.3 (21.2)Total Accesses 8,457.2 8,558.3 8,688.1 8,926.5 9,095.1 7.5(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6 Access x30.Company's accesses for internal use included.(2) Includes ADSL, optical fiber, cable modem and broadband circuits. TELEFONICA LATINOAMERICAACCESSES BY COUNTRIES (II)Unaudited figures (Thousands) 2006 2007 September December March June September % Chg y-o-y-----------------------------------------------------------------------------------------------------------------PERU Final Clients Accesses 7,983.8 8,710.9 9,303.2 10,152.5 11,199.0 40.3 Fixed telephony accesses (1) 2,468.2 2,498.5 2,531.2 2,605.7 2,742.1 11.1 Internet and data accesses 494.2 525.5 547.4 581.8 608.4 23.1 Narrowband 49.6 47.8 40.3 44.2 42.4 (14.5) Broadband (2) 435.7 468.5 497.7 527.8 555.9 27.6 Other 8.9 9.2 9.4 9.7 10.2 14.2 Mobile accesses 4,513.8 5,129.8 5,663.5 6,365.0 7,220.5 60.0 Pre-pay 3,749.7 4,353.3 4,882.3 5,570.7 6,389.7 70.4 Contract 691.9 705.2 711.0 724.4 763.2 10.3 Fixed wireless 72.2 71.3 70.2 70.0 67.7 (6.3) Pay TV 507.5 557.2 561.1 600.0 628.0 23.7 Wholesale Accesses 0.5 0.4 0.4 0.5 0.5 (1.3)Total Accesses 7,984.2 8,711.4 9,303.6 10,153.0 11,199.5 40.3-----------------------------------------------------------------------------------------------------------------COLOMBIA Final Clients Accesses 10,094.9 10,190.0 9,995.9 10,095.6 10,105.5 0.1 Fixed telephony accesses (1) 2,362.6 2,359.4 2,346.5 2,330.5 2,340.3 (0.9) Internet and data accesses 45.4 70.9 94.3 125.0 167.5 n.m. Narrowband 3.1 2.9 0.0 0.0 0.0 n.m. Broadband (2) 42.3 68.0 94.3 125.0 167.5 n.m. Other 0.0 0.0 0.0 0.0 0.0 n.m. Mobile accesses 7,687.0 7,759.7 7,545.2 7,611.8 7,551.5 (1.8) Pre-pay 5,883.5 5,960.5 5,734.6 5,887.0 5,867.4 (0.3) Contract 1,803.5 1,799.2 1,810.6 1,724.8 1,684.1 (6.6) Pay TV 0.0 0.0 10.0 28.3 46.2 n.m. Wholesale Accesses 0.0 0.0 0.0 0.0 0.0 n.m.Total Accesses 10,094.9 10,190.0 9,995.9 10,095.7 10,105.5 0.1-----------------------------------------------------------------------------------------------------------------MEXICO Mobile accesses 7,443.3 8,553.2 9,319.6 10,232.8 11,072.7 48.8 Pre-pay 6,950.7 8,017.8 8,775.0 9,655.2 10,446.9 50.3 Contract 490.9 533.4 542.4 574.8 622.6 26.8 Fixed wireless 1.6 2.0 2.2 2.8 3.2 97.0Total Accesses 7,443.3 8,553.2 9,319.6 10,232.8 11,072.7 48.8-----------------------------------------------------------------------------------------------------------------VENEZUELA Mobile accesses 8,025.9 8,826.2 9,100.3 9,746.6 9,840.0 22.6 Pre-pay 6,813.6 7,520.2 7,724.2 8,345.1 8,392.2 23.2 Contract 431.6 469.4 495.4 474.7 510.3 18.2 Fixed wireless 780.7 836.6 880.7 926.8 937.5 20.1Total Accesses 8,025.9 8,826.2 9,100.3 9,746.6 9,840.0 22.6(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6 Access x30.Company's accesses for internal use included.(2) Includes ADSL, optical fiber, cable modem and broadband circuits. TELEFONICA LATINOAMERICAACCESSES BY COUNTRIES (III)Unaudited figures (Thousands) 2006 2007 September December March June September % Chg y-o-y-----------------------------------------------------------------------------------------------------------------CENTRAL AMERICA (3) Fixed telephony accesses (1) 108.4 109.4 94.4 119.4 120.3 10.9 Internet and data accesses 25.2 26.0 26.0 22.3 22.2 (12.1) Broadband (2) 23.4 24.1 24.0 20.2 20.0 (14.4) Other 1.9 1.9 2.0 2.1 2.2 15.9 Mobile accesses 3,564.8 3,829.5 4,042.1 4,469.4 4,877.4 36.8 Pre-pay 3,078.9 3,303.1 3,472.5 3,856.6 4,240.8 37.7 Contract 295.0 315.6 342.8 366.6 376.7 27.7 Fixed Wireless 190.9 210.9 226.7 246.2 259.8 36.1 Pay TV 14.3 14.0 0.0 0.0 0.0 n.m.Total Accesses 3,712.8 3,978.9 4,162.5 4,604.1 5,019.8 35.2-----------------------------------------------------------------------------------------------------------------ECUADOR Mobile accesses 2,393.1 2,490.0 2,481.7 2,645.0 2,653.2 10.9 Pre-pay 1,984.0 2,133.0 2,116.8 2,275.2 2,272.1 14.5 Contract 406.9 355.3 363.3 368.2 379.6 (6.7) Fixed Wireless 2.2 1.7 1.6 1.5 1.5 (34.3)Total Accesses 2,393.1 2,490.0 2,481.7 2,645.0 2,653.2 10.9-----------------------------------------------------------------------------------------------------------------URUGUAY Mobile accesses 655.4 777.3 874.6 963.1 1,047.0 59.7 Pre-pay 569.8 675.3 761.4 844.3 907.0 59.2 Contract 85.6 102.0 113.2 118.8 140.0 63.5Total Accesses 655.4 777.3 874.6 963.1 1,047.0 59.7(1) PSTN (including Public Use Telephony) x1; ISDN Basic access x1; ISDN Primary access; 2/6 Access x30.Company's accesses for internal use included.(2) Includes ADSL, optical fiber and broadband circuits.(3) Includes Guatemala, Panama, El Salvador and Nicaragua TELEFONICA LATINOAMERICASELECTED FINANCIAL DATA (I)Unaudited figures (Euros in millions) January - September 2007 2006 % Chg % Var Local Cur-----------------------------------------------------------------------------------------------------------------BRAZIL Revenues 5,637 5,397 4.4 3.5 OIBDA 2,226 2,330 (4.5) (5.4) OIBDA margin 39.5% 43.2% (3.7 p.p.) CapEx 656 579 13.4 12.3 Telesp Revenues 4,154 4,157 (0.1) (1.0) OIBDA 1,806 1,998 (9.6) (10.5) OIBDA margin 43.5% 48.1% (4.6 p.p.) CapEx 482 380 26.7 25.6 Vivo Revenues 1,740 1,488 16.9 15.8 OIBDA 420 335 25.4 24.2 OIBDA margin 24.2% 22.5% 1.6 p.p. CapEx 175 196 (10.9) (11.8)-----------------------------------------------------------------------------------------------------------------ARGENTINA Revenues 1,678 1,572 6.8 16.6 OIBDA 605 566 6.8 16.6 OIBDA margin 34.6% 34.6% 0.0 p.p. CapEx 179 161 11.3 21.5 Telefonica de Argentina Revenues 731 730 0.1 9.3 OIBDA 316 349 (9.6) (1.3) OIBDA margin 36.7% 40.7% (4.0 p.p.) (1) CapEx 108 93 15.4 26.0 TEM Argentina Revenues 1,000 907 10.3 20.5 OIBDA 289 217 33.2 45.4 OIBDA margin 28.9% 24.0% 5.0 p.p. CapEx 72 68 5.6 15.2-----------------------------------------------------------------------------------------------------------------CHILE Revenues 1,319 1,265 4.3 12.3 OIBDA 514 502 2.4 10.3 OIBDA margin 38.9% 39.7% (0.7 p.p.) CapEx 285 230 23.8 33.3 Telefonica Chile Revenues 720 758 (5.0) 2.3 OIBDA 275 315 (12.6) (5.9) OIBDA margin 38.2% 41.5% (3.3 p.p.) CapEx 137 110 24.7 34.3 TEM Chile Revenues 662 581 13.9 22.6 OIBDA 240 187 28.3 38.2 OIBDA margin 36.3% 32.2% 4.1 p.p. CapEx 148 121 22.9 32.3OIBDA is presented after management fees. Data for Telefonica de Argentina include the ISP business of Advance.(1) Margin over revenues includes fixed to mobile interconnection. TELEFONICA LATINOAMERICASELECTED FINANCIAL DATA (II)Unaudited figures (Euros in millions) January - September 2007 2006 % Chg % Var Local Cur-----------------------------------------------------------------------------------------------------------------------PERU Revenues 1,126 1,054 6.8 11.2 OIBDA 415 440 (5.8) (1.9) OIBDA margin 36.9% 41.8% (4.9 p.p.) CapEx 156 126 24.1 29.2 Telefonica del Peru (2) Revenues 786 819 (4.1) (0.2) OIBDA 309 349 (11.4) (7.8) OIBDA margin 39.3% 42.6% (3.3 p.p.) CapEx 75 82 (8.9) (5.1) TEM Peru Revenues 430 319 34.9 40.4 OIBDA 106 92 15.6 20.4 OIBDA margin 24.7% 28.8% (4.1 p.p.) CapEx 81 43 86.7 94.4-----------------------------------------------------------------------------------------------------------------------COLOMBIA Revenues 1,138 826 37.7 31.1 OIBDA 328 195 67.8 59.8 OIBDA margin 28.8% 23.6% 5.2 p.p. CapEx 147 188 (21.7) (25.4) Telefonica Telecom (3) Revenues 527 243 n.c. n.c. OIBDA 219 111 n.c. n.c. OIBDA margin 41.6% 45.8% (4.2 p.p.) CapEx 84 36 n.c. n.c. TEM Colombia Revenues 641 584 9.8 4.6 OIBDA 108 84 28.1 21.9 OIBDA margin 16.9% 14.5% 2.4 p.p. CapEx 63 152 (58.7) (60.7)-----------------------------------------------------------------------------------------------------------------------MEXICO (TEM Mexico) Revenues 1,011 689 46.7 59.4 OIBDA 113 (33) c.s. c.s. OIBDA margin 11.2% (4.8%) 16.1 p.p. CapEx 154 97 58.0 71.7-----------------------------------------------------------------------------------------------------------------------VENEZUELA (TEM Venezuela) Revenues 1,716 1,451 18.3 27.9 OIBDA 756 579 30.5 41.0 OIBDA margin 44.0% 39.9% 4.1 p.p. CapEx 154 113 36.3 47.3-----------------------------------------------------------------------------------------------------------------------CENTRAL AMERICA (4) Revenues 439 404 8.8 OIBDA 171 127 35.2 OIBDA margin 39.1% 31.4% 7.6 p.p. CapEx 63 73 (13.7)-----------------------------------------------------------------------------------------------------------------------ECUADOR (TEM Ecuador) Revenues 211 220 (4.1) 3.6 OIBDA 52 54 (4.5) 3.2 OIBDA margin 24.4% 24.5% (0.1 p.p.) CapEx 28 21 29.9 40.3OIBDA is presented after management fees.(2) Telefonica del Peru includes Cable Magico.(3) Data for Telefonica Telecom (formerly Colombia Telecom) only include results for May-December 2006 period, includingTelefo Data Colombia.(4) Includes Guatemala, Panama, El Salvador and Nicaragua TELEFONICA LATINOAMERICASELECTED FINANCIAL DATA (III)Unaudited figures (Euros in millions) January - September 2007 2006 % Chg % Var Local Cur-----------------------------------------------------------------------------------------------------------------URUGUAY (TEM Uruguay) Revenues 72 54 34.4 44.8 OIBDA 17 10 70.2 83.3 OIBDA margin 23.9% 18.9% 5.0 p.p. CapEx 8 4 87.4 101.8-----------------------------------------------------------------------------------------------------------------TIWS Revenues 202 168 20.5 24.0 OIBDA 70 57 23.3 26.9 OIBDA margin 34.5% 33.7% 0.8 p.p. CapEx 30 22 37.8 37.8OIBDA is presented after management fees. 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