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Safe Harbor

Safe Harbor.

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Safe Harbor

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  1. Safe Harbor This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company . Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Telefónica undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Telefónica´s business or acquisition strategy or to reflect the occurrence of unanticipated events. Analysts and investors are encouraged to consult the Company´s Annual Report on Form 20-F as well as periodic filings made on Form 6-K, which are on file with the United States Securities and Exchange Commission.

  2. THE SPECIALIST IN THE AMERICAS “The Virtuous Cycle” Growth Strategy Commercial Performance Financial Performance Conclusion

  3. MISSION The specialist in the Americas • We are a broadband infrastructure services provider • We offer services to international carriers, Internet service providers, and other communications-intensive businesses • We coordinate demand and offer from Telefónica´s Group.

  4. CLIENT AND PRODUCT CHAIN Telefónica Media Terra / Lycos B2B TPI Competitors Content Competitors Telefónica: - Data - Mobile - Wireline Emergia: - Specialization - Broad spectrum of potential customers ISP/Portal Competitors Client and product Chain Voice/Data Services Bandwidth Services

  5. NETWORK • € 1.3 bn capex • 1.92 Tbps capacity • 25,000 km network • 10 cities in 7 countries • Ready for Service in March, 2001

  6. PRODUCTS & SERVICES Services Attributes City-express Building Blocks Bandwidth cap. Wavelength exp. Ring capacity Restore easy Service type Private networks Wavelength Configuration Backhaul Sales type Basic co-location

  7. EMERGIA´S COMPETITIVE ADVANTAGES The specialist in the Americas • Telefónica´s leading position • Early mover advantage: Marginal cost of duplicating capacity • Technologically advanced high-capacity network • City-to-city connectivity • Commercial partner

  8. BENEFITS FOR TELEFONICA The specialist in the Americas • Builds up Telefónica´s competitive platform • Secure first-class end-to-end communication • Optimize demand and offer of broadband capacity from Telefónica

  9. The specialist in the Americas “THE VIRTUOUS CYCLE” Growth Strategy Commercial Performance Financial Performance Conclusion

  10. MODEL • Tele-office: e-mail; Intranet; etc. • E-commerce: B2B; B2C; E-money • Leisure & Entertainment: V.O.D.; Games • Last-mile broadband services network: DSL; cable TV • Third-generation mobile phones • Prominent increase of Internet use/access equipment: PC; TV The Virtuous Cycle ACCESS CONTENT TRANSPORTATION • Geographic concentration of content • International alliance: media/telecommunications

  11. MODEL • TPI • Terra • Telefónica Media • B2B • Telefónica Móviles • Telefónica Data • ISPs • Wireline operators The Virtuous Cycle ACCESS CONTENT TRANSPORTATION • EMERGIA • Telefónica Data • Wireline operators

  12. BROADBAND APPLICATIONS Bandwidth Full-motion TV-quality Video 4mbps Streaming Video Palm Pilots™, Web TV™, PCS cellular devices 1.5 mbps Dynamic Web Browsing Still image download 56 kbps 28.8 kbps Static Web-browsing Email 9.6 kbps 1980’s … Early-1990’s … Late 1990’s … 2000+

  13. Year when target is reached Period Differentiation Capacity SOURCE Gb/sec. Merrill Lynch OVUM Yankee Group 05/1999 06/1999 04/2000 50 2001 2001 2000 Yankee Group 500 2007 2005 2004 1000 2008 2006 1.000 OVUM 500 Merrill Lynch Latam Demand 2000 = 20 Gb/sec G t/sec. 0 2002 2003 2004 2005 2007 2008 2000 2006 1992 1993 1994 1995 1996 1997 1998 1999 2001 LATAM DEMAND FORECAST

  14. Company/´000 2004E Telesp 950 TASA 474 CTC 71 Telefónica del Perú 48 Total 1,543 BROADBAND DEMAND – ADSL FORECAST Source: companies´ forecasts

  15. The specialist in the Americas “The Virtuous Cycle” GROWTH STRATEGY Commercial Performance Financial Performance Conclusion

  16. ALTERNATIVES Growth Strategy Capillarity Submarine Backhaul Terrestrial Geography America Global Services Bandwidth Mgmt. IP Transm. Value added

  17. CAPILLARITY Network Layers:

  18. LAST-MILE CONNECTIVITY Sao Paulo

  19. LAST-MILE CONNECTIVITY Buenos Aires

  20. LAST-MILE CONNECTIVITY Santiago de Chile

  21. GEOGRAPHY Emergia´s capacity will be the main source of funding to expand our network • America • Colombia • México • Uruguay • Venezuela • Global • Southern Europe • Transatlantic • Marginal new capex • Emergia as swap currency • Emergia as single broadband capacity manager for Telefónica Group

  22. SERVICES V A L U E A D D E D V A L U E A D D E D E-Commerce Applications Hosting Web Hosting IP VPN VOIP Managed Co-location Internet Access IP Transit ATM Co-location Managed Bandwidth Services Colors/Lambdas Dark/Dim Fibers Global Accounts Carrier / ISP SME Retail Wholesale

  23. The specialist in the Americas “The Virtuous Cycle” Growth Strategy COMMERCIAL PERFORMANCE Financial Performance Conclusion

  24. LATEST AGREEMENTS Commited Capacity to be Activated during First Commercial Transactions € 938 MM Year - 28 stm-1 50% 50% 92% 8% Telefónica Telefónica Group Group Other customers Other customers

  25. The specialist in the Americas “The Virtuous Cycle” Growth Strategy Commercial Performance FINANCIAL PERFORMANCE Conclusion

  26. MARKET 2001-04 60-130 Market Growth - % p.a. 25-30 Market Share - % 30-110 Capacity Sold annual growth rate - %

  27. FINANCE 2004 Forecast – € MM GAAP Revenues 250 / 300 60 / 70 GAAP EBITDA Margin - % 150 / 200 Free Cash Flow

  28. 1,550 6 1,500 5 1,450 4 1,400 1,350 3 1,300 2 1,250 1 1,200 1,150 0 2001 2002 2003 2004 FINANCE Capex & Cost per Unit Euros MM Euros MM Cumulative Capex Capex per unit-stm-1-

  29. The specialist in the Americas “The Virtuous Cycle” Growth Strategy Commercial Performance Financial Performance CONCLUSION

  30. KEY SUCCESS FACTORS Emergia Our goal Network provider as partner Yes Strong regional presence Leader Capillarity Yes Resilient structural network Yes High-volume transmission

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