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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of April, 2018

Commission File Number: 001-09531

Telefónica, S.A.

(Translation of registrant’s name into English)

Distrito Telefónica, Ronda de la Comunicación s/n,

28050 Madrid, Spain

3491-482 87 00

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F   ☒            Form 40-F   ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐            No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐            No  ☒

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes  ☐            No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

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Telefónica, S.A.

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INTERIM MANAGEMENT STATEMENT

JANUARY – MARCH 2018

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The financial information related to January-March 2018 contained in this document has been prepared under International Financial Reporting Standards (IFRS), as adopted by the European Union, which do not differ for the purposes of the Telefónica Group, from IFRS as issued by the International Accounting Standards Board (IASB).

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

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

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01

CONSOLIDATED RESULTS

Telefónica’s accesses base stood at 356.9m at March 2018 (-1% y-o-y) and included 14.8m in wholesale mobile accesses.

Customer value continued to improve, driving average revenue per access growth (+2.5% y-o-y organic in the first quarter) and reducing churn levels (-0.1 p.p.).

Higher-value services maintained elevated growth rates, leveraged on the growing demand for data, speed and content: i) LTE customers totalled 102.9m (+36% y-o-y), with quarterly net additions of 5.4m and a penetration of 40% (+11 p.p. y-o-y); ii) mobile contract accesses (117.5m; +5% y-o-y) reported quarterly net additions of 1.6m (2.5 times y-o-y), representing 43% of the total (+3 p.p. y-o-y); iii) smartphones (+7% y-o-y; 161.6m), with quarterly net additions of 2.9m (+29% vs. October-December 2017), achieved a penetration of 64% (+5 p.p. y-o-y); iv) FTTx/Cable customers (11.5m; +20% y-o-y) posted net additions of 530k (+20% y-o-y) and represented 54% of total fixed broadband accesses (+9 p.p. y-o-y), with a coverage of 45.8m premises passed with proprietary network (+15% y-o-y); and v) pay TV accesses (8.6m; +5% y-o-y) accelerated their quarterly net additions to 137k (92k in October-December 2017; -70k in January-March 2017).

It is important to note that reported variations of the January-March 2018 consolidated financial results reflected the adoption of IFRS 15 and 9 (the financial results in the same period of 2017 are reported under prior accounting standards). Organic variations excluded the impact of the accounting change to IFRS 15 in 2018 results (-€10m in revenues; +€11m in OIBDA). The accounting change to IFRS 9 had no significant impact on the results.

Exchange rate fluctuations in January-March had a negative impact on key financial metrics, mainly the depreciation of the Brazilian real and the Argentine peso against the euro. Thus, in the first quarter of 2018 currencies dragged y-o-y growth of revenues by 8.6 p.p. and OIBDA by 9.2 p.p.

Nevertheless, it should be noted that the negative impact of the depreciation of currencies at OIBDA level has been significantly reduced in terms of cash flow generation, where the negative impact decreased to €26m, as it reduced the payment in euros of CapEx, taxes and interests.

Revenues in the quarter (€12,190m) decreased 7.2% y-o-y. However, in organic terms, they grew 1.9% vs. January-March 2017, on the back of the strong pace of growth of handset sales (+16.5%) and the positive performance of service revenues (+0.8%).

Mobile data revenues increased 9.5% y-o-y in organic terms and represented 62% of mobile service revenues in the quarter (+4 p.p. y-o-y in organic terms).

Excluding the negative impact of regulation (-1.2 p.p.), revenues would have risen 3.1% y-o-y organic in the first quarter.

In the first quarter, provisions for restructuring costs amounted to €18m (€14m in T. Deutschland and €3m in T. Centroamérica) impacting “personnel expenses” by €4m and “other net income (expense)” by €14m. In the first quarter of 2017, restructuring costs totalled €88m (mainly €76m in T. Espańa and €11m in T. Deutschland).

Operating expenses amounted to €8,533m and decreased 8.7% y-o-y in reported terms. In organic terms, operating expenses increased 1.1% y-o-y in the quarter due to higher “other operating expenses” (+1.4% y-o-y; on higher network expenses and the appreciation of the USD, mainly against the Brazilian real and the Argentine peso), and “supplies” (+1.3% y-o-y; higher handset consumption and the impact of “RLAH” on European operations, despite interconnection savings). Personnel expenses remained stable y-o-y.

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The average headcount in January-March 2018 stood at 122,834 employees (-3.2% y-o-y).

The gain on sale of fixed assets in the first quarter (€12m) mainly included the impact on OIBDA of capital gains from the sale of towers in T. Colombia (€8m).

Operating income before depreciation and amortisation (OIBDA) amounted to €3,864m in the first quarter (-3.9% y-o-y).

In organic terms, OIBDA rose 3.3% y-o-y in the quarter, reflecting the positive revenue performance, efficiencies from the transformation process and digitalisation, and synergy capture. Excluding the impact of regulation (-2.2 p.p. in the quarter), OIBDA would have grown by 5.4% y-o-y in organic terms.

Underlying OIBDA climbed to €3,863m in January-March (-5.6% y-o-y) and excluded restructuring expenses (-€18m), tower sales (€8m) and the impact on OIBDA of the accounting change to IFRS 15 (€11m).

OIBDA margin stood at 31.7%, with an expansion of 1.1 p.p. vs. January-March 2017 (+0.4 p.p. in organic terms).

Depreciation and amortisation (€2,227m) decreased by 9.2% y-o-y and included a negative impact of 7.6 p.p. from the evolution of exchange rates (-0.2% y-o-y in organic terms).

Thus, operating income (OI) reached €1,638 in January-March and rose 4.3% y-o-y (+8.2% in organic terms).

Net financial expenses (€381m) decreased 15.0% compared with the first quarter of the previous year, mainly due to the reduction in both debt and cost of debt in European and Latin American currencies.

Tax expenses in the first quarter amounted to €359m and increased 14.3% y-o-y, mainly due to higher profit before tax (€1,259m; +12.1% y-o-y).

Profit attributable to minority interests in the first quarter (€64m) is higher than the same period of the previous year (€30m), mainly due to the profit attributed to minority shareholders of Telxius, following the closing of the 40% stake sale of the company in the fourth quarter of 2017, and the higher results attributed to T. Colombia and T. Deutschland minority shareholders.

In this regard, the profit attributable to ordinary equity holders of the parent in January-March reached €837m (€953m in underlying terms) growing by 7.4% y-o-y (-1.0% in underlying terms).

Basic earnings per share amounted to €0.12 in the first quarter and decreased 13.2% y-o-y, impacted by the result of the hybrid bond tender offer made in March 2018. In underlying terms, this impact is excluded (€0.17; -3.0% y-o-y).

CapEx in January-March 2018 stood at €1,490m (-8.0% reported y-o-y) and included €7m of spectrum in Argentina. In organic terms, CapEx increased by 1.5% and continued to focus on the deployment of UBB networks, and the simplification and digitalisation of processes and systems.

Operating cash flow (OIBDA-CapEx) totalled €2,374m (-1.1% y-o-y). In organic terms, it increased 4.4% reflecting the positive performance of the business and CapEx efficiency.

Interest payments in the quarter (€698m) increased 8.8% y-o-y, mainly due to calendar effects on coupon payments. The effective cost of interest payments in the last twelve months stood at 3.50% as of March 2018, similar to the 3.48% as of March 2017.

Tax payments totalled €21m vs. €149m in January-March 2017, due to larger tax refunds from previous years.

Working capital consumed €939m and reflected mainly CapEx seasonality, prepayment of taxes, site rentals and content, partially offset by the execution of factoring measures on accounts receivable and the extension of payment terms with suppliers or with the factoring company where those had been discounted. This is an improvement of €129m compared with January-March 2017, mainly because of lower consumption from restructurings.

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Operations with minority shareholders amounted to €168m (€21m in the first quarter 2017), largely due to the payment of an extraordinary dividend to Telxius shareholders (€166m), mainly associated with the optimisation of its capital structure.

The free cash flow before operations with minority shareholders amounted to €719m in the first quarter (+15.2% vs. the same period 2017) and the free cash flow reached €550m (-8.7% y-o-y).

Net financial debt at March 2018 (€43,975m) decreased by €255m compared with December 2017 thanks to free cash flow generation (€550m) and the replacement of capital instruments (€226m). On the other hand; i) shareholder remuneration (€224m, including the payment of capital instrument coupons), ii) labour-related commitments (€201m), iii) financial investments (€54m) and iv) other factors (€43m), increased debt.

During the first quarter 2018, Telefónica’s financing activity amounted to approximately €10,692m equivalent (without considering the refinancing of commercial paper and short-term bank loans) and focused on maintaining a solid liquidity position, and refinancing and extending debt maturities (in an environment of low interest rates). Therefore, as of the end of March, the Group has covered debt maturities for the next two years. The average debt life stood at 9.11 years (vs. 8.08 years in December 2017).

The main financing operations of the quarter included:

Throughout the quarter, Telefónica Group obtained funding by means of extending payment terms with suppliers or with the factoring firm where those had been discounted, for a total of €120m (€367m equivalent in January-March 2017).

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Meanwhile, Telefónica, S.A. and its holding companies continued their issuance activity under the Promissory Notes and Commercial Paper Programmes (Domestic and European), maintaining an outstanding notional balance of approximately €2,052m at the end of March.

At the end of the quarter, Telefónica maintained undrawn, committed credit lines with different credit institutions for an approximate amount of €12,511m (€11,558m maturing in more than twelve months) which, combined with the cash equivalents position and current financial assets excluding Venezuela, placed liquidity at €20,274m.

Definitions:

Organic growth: Assumes average constant foreign exchange rates of 2017, except for Venezuela (2017 and 2018 results converted at the closing synthetic exchange rate for each period). For organic comparative purposes, this synthetic exchange rate has been fixed at 2,091 VEF/USD at the end of March 2017. Considers constant perimeter of consolidation. Excludes the effects of the accounting change to IFRS 15 in 2018, write-downs, capital gains/losses from the sale of companies, tower sales, restructuring costs and material non-recurring impacts. CapEx excludes spectrum investments.

Underlying growth: Excludes the effects of the accounting change to IFRS 15 in 2018, write-downs, capital gains/losses from the sale of companies, tower sales, restructuring costs and material non-recurring impacts. CapEx excludes spectrum investments. The January-March 2017 results in Venezuela are converted at the synthetic exchange rate set at 2,091 VEF/USD at the close of March 2017.

Digitalisation and Monetisation

(y-o-y changes in organic terms)

In recent years, Telefónica has progressed significantly in its transformation towards becoming a Platform Company, with a strategic focus Digitalisation and Data Monetisation, as an additional catalyst for digital transformation, in which the Company is already a pioneer.

Digitalisation entails going even further in the transformation of the operating model, increasing its efficiency by modernising processes and networks, so that they operate automatically and in real time. All this will enable the Company to offer a genuinely digital value proposition.

Moreover, the new role of CDTO (Chief Digital Transformation Officer) contributes to accelerate the Company’s digital transformation and to maximise its impact on the business, supporting the operating businesses with the implementation of initiatives.

The Company’s E2E Digitalisation Programme is focused on five priorities around the customer:

i. Increase direct interaction with our customers in sales (focus on online sales).

ii. Promote top-ups and sale of additional packages through digital channels.

iii. Increase the efficiency of payment and collection processes, improving the customer experience.

iv. Improve the experience in technical support and services.

v. Enhance the experience we provide in customer service.

The operating businesses are executing these E2E initiatives and their impact on operational KPIs, customer experience and operating expenses is as expected.

The radical automation of processes to convert them into real-time processes is leveraged on the new networks and transformation of systems that continued to progress, with “Full Stack” migration now at 25% over the total customer base (+10 p.p. y-o-y; +2 p.p. vs. December). Thus, the digital capacity indicator reached 61% as of March 2018 (+9 p.p. y-o-y).

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Customers are becoming more digital, requesting more data, higher speeds and greater personalisation of products and services and therefore the monetisation opportunities are increasingly greater.

Data traffic continued to grow at elevated rates in mobile networks (+67% y-o-y in the quarter) and fixed networks (+35% y-o-y), driven by two levers: larger customer base with data tariffs and growth in average data consumption. In the mobile network, total LTE traffic (+121% y-o-y) grew on the back of a larger LTE customer base (40% of the total; +11 p.p. y-o-y) with higher average use (+69% after LTE adoption) and ARPU uplift (+10%).Thus, the average mobile data traffic per customer reached 2GB/month (+54% y-o-y) and reflected the transformation of the data offering, focused on increasing the weight of recurrent plans in both prepay and contract, the launch of family plans with data-sharing and the incorporation of digital services such as video, cloud or music. In the fixed network, due to the adoption of fibre and growing demand for video, fibre customers in Spain presented, compared to DSL customers, a higher average data usage (x2.6; 136GB/month) and greater ARPU (+20%).

Telefónica’s priority continued to build next-generation networks in order to provide excellent connectivity, including customer equipment to improve user experience:

In this context, Telefónica has committed to a more interactive and digital customer-centric relationship model with the launch of a single application adapted to each operation. Today, this application, which is transforming the way that Telefónica interacts with its customers, both in marketing and support, is already available in Argentina, Brazil and UK and will be deployed in further countries in the coming months. This application is one of the channels through which customers can access Aura. Aura, which has already been launched in six countries, proposes a customer relationship model that, through artificial intelligence, allows customers to use technology in a simple manner to engage with Telefónica products and services, providing a solution that lets customers transparently control and manage their data in an open ecosystem with third parties, for which the customers themselves decide how their own data is used.

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Broadband connectivity and services over connectivity revenues continued to increase their weight over the total revenues of the Company and represented 53% of the total in the first quarter 2018 (+3 p.p. y-o-y).

In particular, Digital Services revenues totalled €1,608m in the quarter with a notable growth of 28.6% vs. the same period in the previous year. In light of the different degrees of maturity of the digital services, and view to giving an overview of these services in their entirety, they are structured in the following four blocks:

i. Video revenues in January-March stood at €722m, with a y-o-y change of 1.0%. Pay TV accesses reached 8.6m (+5% y-o-y), with prominent growth in IPTV (+18% y-o-y) and a continuous improvement in content and functional features, driving a reduction in churn (-0.1 p.p.). The launch of “Movistar Series” was announced in February, through which 12 original TV series produced by Movistar will reach over 13 countries in 2018 via the “Movistar TV” (fixed) and “Movistar Play” (OTT) platforms.

ii. Advanced Digital Services, focused on supporting the digital transformation of B2B customers, posted revenues of €305m (+22.5% y-o-y) driven by the positive performance in the Cloud business (133M€; +32.9% y-o-y) and due to greater Security revenues (€93m; +25.4% y-o-y). Of note this quarter, “Multicloud for Businesses” from Microsoft Azure and Amazon Web services have been included in the offering, as well as the creation of the largest global Telco alliance in security (total customers surpassed 1,200m) together with Etisalat, Singtel and SoftBank, which will support the B2B information security business, whose revenues grew 78.1% y-o-y this quarter.

iii. Content contributed €423m to quarterly revenues, with a strong growth of 152.0% y-o-y. Their performance in Brazil has been particularly relevant after the bundling of mobile contents (in-house and third party productions) into flat rates for different mobile segments since the second quarter 2017.

iv. Lastly, Other Digital Services also contributed to revenue growth (+16.1%), primarily driven by the positive performance of the Advertising business.

Telxius

(y-o-y changes in organic terms)

Telxius continued to make progress to become the benchmark provider of telecommunications infrastructures, and reported a solid operational performance in the first quarter 2018.

Revenues amounted to €180m in January-March and rose to 2.0% y-o-y, mainly driven by the tower business (€80m; +9.4% y-o-y), as the cable business decreased 3.1% vs. January-March 2017 mainly due to the euro/dollar appreciation impacting contracts denominated in dollars and a seasonal incoming revenue in the first quarter of 2017. Both effects subtracted 4.0 p.p. in the quarter from Telxius y-o-y revenue growth in the quarter. OIBDA reached €86m (+0.6% y-o-y, the above mention effects subtracted 5 p.p. from y-o-y growth) and the margin stood at 47.6% (-0.7 p.p. y-o-y).

At an operational level, the tenancy ratio in the tower business improved to 1.34x (+0.01x q-o-q and +0.06x vs. January-March 2017) over a base portfolio of 16,312 towers (+24 towers in the first quarter; primarily in Spain and Brazil).

In the cable business, the international managed data traffic improved significantly (+22% y-o-y in IP traffic and +52% bandwidth in Capacity services). Since the end of March 2018, Telxius services can also be commercialised through the new MAREA cable (Spain, USA), state-of-the-art submarine infrastructure. The new BRUSA cable (Brazil, Puerto Rico, USA) remains on target to enter into service during 2018.

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CapEx reached €57m (vs. €13m in January-March 2017), reflecting the investment effort in the deployment of the MAREA and BRUSA cables. This investment will significantly decrease in the second half of the year.

TELEFÓNICA

ACCESSES

Unaudited figures (thousands)

TELEFÓNICA

MOBILE ACCESSES

Unaudited figures

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TELEFÓNICA

CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)

Notes:

GUIDANCE 2018

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TELEFÓNICA

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Unaudited figures (Euros in millions)

TELEFÓNICA

NET FINANCIAL DEBT PLUS COMMITMENTS

Unaudited figures (Euros in millions)

Notes:

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TELEFÓNICA

CONSOLIDATED CASH FLOW STATEMENT

Unaudited figures (Euros in millions)

Notes:

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TELEFÓNICA

FREE CASH FLOW AND CHANGE IN DEBT

Unaudited figures (Euros in millions)

TELEFÓNICA

RECONCILIATIONS OF CASH FLOW AND OIBDA MINUS CAPEX

Unaudited figures (Euros in millions)

Notes:

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TELEFÓNICA

EXCHANGES RATES APPLIED

NET FINANCIAL DEBT STRUCTURE BY CURRENCY

Unaudited figures

TOTAL FINANCIAL LIABILITIES BREAKDOWN

Unaudited figures

CREDIT RATINGS

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02

TELEFÓNICA ESPAÑA

(y-o-y changes in organic terms)

In the first quarter of 2018 Telefónica España bolstered the y-o-y growth in service revenues (+0.8%) and OIBDA (+0.6%), as well as the increased value of its customer base.

Particularly noteworthy was the sequential churn improvement observed across all services, in a market characterised this quarter by lower promotional activity and tariff upgrades implemented by the main market operators, centred on the “More for More” strategy.

Total “Movistar Fusión” accesses reached 20.9m, 10% more than in March 2017, driven by the growth in mobile accesses (1.3m) and in TV (+500k), while “Movistar Fusión” customers grew by 2% to 4.5m (+34k in the quarter) and accounted for 88% of TV accesses (+6 p.p. y-o-y), 86% of broadband (+2 p.p.) and 81% of mobile contract (+6 p.p.).

Furthermore, it is worth highlighting the continuous progress in the average mobile lines per customer (1.9 vs. 1.7 in March 2017) and in the “Fusión” customer base with TV; 78% (+10 p.p. y-o-y) and UBB fibre; 38%.

‘Fusión’ ARPU (€87.8) growth accelerated to 8% y-o-y (vs. +6% in the previous quarter) on the tariff upgrades and the y-o-y improvement of the customer mix, and churn was reduced by 0.1 p.p. q-o-q to stand at 1.5%.

Net additions in mobile accesses (167k) were the highest since 2010 (vs. 157k in the previous quarter), supported by solid progress in the contract base (+6% y-o-y), with record net additions of 276k accesses, and lower churn (1.5%; -0.1 p.p. y-o-y and q-o-q) in spite of the tariff updates, altogether indicating the benefits from the “totalisation” strategy.

Fixed broadband reached 6.0m accesses and churn improved 0.1 p.p. q-o-q (1.7%), however a quarterly net loss of 6k accesses was posted due to the lower volume of gross additions. Fibre accesses reflected the improved customer quality and maintained strong growth (+14% y-o-y), now representing 59% of broadband base (+7 p.p. y-o-y). Fixed telephony accesses (-4% y-o-y) recorded a net loss of 124k.

Pay TV accesses grew to 3.9m and their growth accelerated to 9% y-o-y (quarterly net additions of 80k, similar to the previous quarter), fostered by a highly compelling commercial offering with exclusive content and features.

Wholesale accesses totalled to 4.1m (-7% y-o-y) with a quarterly loss of 102k accesses, with a noteworthy increase in the NEBA fibre base which more than doubled y-o-y (+146k accesses in the quarter) to reach 996k, 24% of total wholesale accesses (+15 p.p. y-o-y; +4 p.p. q-o-q).

Total premises passed with fibre to the home stood at 19.7m (+500k in the quarter) and connected customer uptake rose to 23% (18% retail and 5% wholesale).

Quarterly revenues rose to €3,098m and recovered y-o-y growth (+1.1%), which was the highest rate since the second quarter 2016 and a sequential improvement of 1.2 p.p. This performance was underpinned by the continuous progress in service revenues for the fifth straight quarter (€3,007m; +0.8% y-o-y, +0.1 p.p. q-o-q) and by the return of growth in handset sales (+14.5% y-o-y).

Consumer revenues in January-March (€1,666m) accelerated y-o-y growth to 2.9% (+1.6 p.p. vs. the previous quarter), reflecting the acceleration in the growth of convergent and non-convergent ARPUs; with greater growth in “Fusión” revenues (+9.5% y-o-y; +1.5 p.p. q-o-q) and an improved trend in non-Fusión revenues (-10.0% y-o-y; +0.9 p.p. q-o-q).

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Business revenues (€835m) progressed towards stabilisation (-0.6% y-o-y), with a 2.0 p.p. sequential improvement in their y-o-y performance, driven by both Communications revenues (-2.2%; +2.1 p.p. q-o-q) and IT revenues (+5.2%; +2.7 p.p. q-o-q).

Wholesale and other revenues (€506m; -3.5% y-o-y) reverted their trend, highly affected by the migration of wholesale/MNVO customers (Yoigo and Pepephone) and the regulatory impact related to mobile interconnection rate cut (-36% from the start of February).

Quarterly operating expenses (€1,939m) performance improved (+0.6% y-o-y) vs. the previous quarter (+0.7% y-o-y), primarily because of the reduction in commercial costs in a more rational market.

Supplies (€852m in October-December) increased by 4.4% y-o-y (vs. +3.6% y-o-y in the previous quarter) because of the growth in content costs and expenses driven by higher mobile handset sales in the quarter. The net cost (of wholesale revenues) of content grew by 8% y-o-y.

Personnel expenses (€503m in the quarter) decreased by 4.0% y-o-y, impacted by the savings related to the employment suspension plan (€29m). Headcount at the end of March stood at 27,062 employees (-5% y-o-y).

Other operating expenses (€584m) reverted their trend and decreased by 0.4% y-o-y due to lower commercial expenses.

OIBDA in the first quarter amounted to €1,224m and grew by 0.6% y-o-y leading to OIBDA margin to 39.5% (-0.2 p.p. y-o-y).

CapEx in January-March rose to €346m (+3.9% y-o-y) due to the different phasing of investments, and operating cash flow stood at €878m (-0.7% y-o-y, +2.3 p.p. vs. the previous quarter).

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TELEFÓNICA ESPAÑA

CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)

Notes:

TELEFÓNICA ESPAÑA

ACCESSES

Unaudited figures (Thousands)

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TELEFÓNICA ESPAÑA

CONSUMER ACCESSES (Fusión + non-Fusión)

Unaudited figures (thousands)

TOTAL MOBILE ACCESSES

Unaudited figures

CONSUMER FUSIÓN

Unaudited figures (thousands)

CONSUMER FUSIÓN

Unaudited figures

SELECTED OPERATIONAL DATA

Unaudited figures

Notes:

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03

TELEFÓNICA DEUTSCHLAND

(y-o-y changes in organic terms)

Telefónica Deutschland first quarter results came in on-track for full year guidance, with revenue trends further sequentially improving and sustained OIBDA growth on the back of successful synergy capture and a clear value-over-volume focus in a dynamic yet rational competitive environment. The Company continued to proof its execution strength during the integration process and was ranked #2 in the Connect Mobile Hotline-Test.

Contract mobile customers (21.4m; +3% y-o-y) posted solid net additions in the quarter (+157k) leveraging on the demand for the O₂ Free portfolio and strong partner trading (61% of gross additions), which benefitted from the introduction of 4G offers. Prepay customers (21.3m; -11% y-o-y) saw 535k net disconnections as the demand for prepay offers remained affected by the regulatory changes introduced in the summer of 2017. Smartphone penetration continued to grow (+5 p.p. y-o-y to 62%) and LTE accesses increased (15% y-o-y) to 16.1m with LTE penetration reaching 39% (+7 p.p. y-o-y). The average data usage for O₂ contract LTE customers was up 56% y-o-y to 2.8 GB per month. O₂ Free portfolio continued driving ARPU-up with “M” tariff being the most popular tariff with over 60% share of new customers, data usage of ~6GB per month and average ARPU of ~€25. Retail broadband accesses were slightly lower y-o-y at 2.1m, while VDSL (1.2m; +43% y-o-y) again saw solid traction (92k net additions, up 38% y-o-y). Wholesale DSL (63k) registered 125k net disconnections due to the planned dismantling of the legacy infrastructure.

Revenue (€1,767m in the first quarter; -0.4% y-o-y) trends continued improving and returned to growth excluding regulatory effects (+0.2% y-o-y). Mobile service revenues (€1,287 m; -0.5% y-o-y) reflected the ongoing rotation of the legacy base, an increasing share of partner MSR and headwinds from the European roaming legislation. Ex-regulation, MSR growth trend continued in the quarter (+0.3% y-o-y). Handset revenues amounted to €280m in the quarter (+10.5% y-o-y), mainly driven by an increase in customer demand. Fixed revenues (€199m; -12.3% y-o-y) trends remain unchanged due to the ongoing migration of the wholesale customer base.

Operating expenses (€1,383m in January-March; +0.5% y-o-y) reflected continued market invest into the positioning of the O₂ brand and O₂ Free portfolio to drive future MSR with a clear focus on value-over-volume. Supplies (€587m) increased 0.4% y-o-y mainly as a result of the higher demand for handsets. Personnel expenses (€152m) increased 2.4% y-o-y reflecting an inflation-related salary adjustment effective 1 January 2018. Other operating expenses reached €644m in the quarter and were broadly stable (+0.1% y-o-y). Restructuring expenses amounted to €14m (€11m in January-March 2017).

OIBDA (€403m in the first quarter) posted a y-o-y growth of 0.7%, with incremental synergies of €35m mainly rollover effects from FTE restructuring and network consolidation (€35m in January-March 2017), while the regulatory drag was -€14m (-€7m in the same quarter last year). OIBDA margin stood at 22.8% in the quarter (+0.3p.p. y-o-y).

CapEx (€197m) was 5.6% lower y-o-y benefiting from incremental CapEx synergies of ~€15m, while network integration, the subsequent LTE rollout and the strategy to bring fibre to the backhaul progressed according to plan.

As such, Operating cash flow (OIBDA-CapEx) was up 7.1% y-o-y to €207m in the first quarter of 2018.

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TELEFÓNICA DEUTSCHLAND

CONSOLIDATED INCOME STATEMENT

Unaudited figures (Euros in millions)

Notes:

TELEFÓNICA DEUTSCHLAND

ACCESSES

Unaudited figures (Thousands)