COMMUNICATION OF A RELEVANT FACT MASMOVIL GROUP. 28 th of February 2018

Transcription

1 COMMUNICATION OF A RELEVANT FACT MASMOVIL GROUP 28 th f February 2018 The fllwing Relevant Fact is prvided regarding the cmpany MASMOVIL IBERCOM, S.A. (hereinafter either the MASMOVIL Grup r MASMOVIL, r Grup ) in accrdance with what is laid dwn in article 17 f Regulatin (UE) nº 596/2014 n market abuse and article 228 f the revised text f the Securities Market Act passed by Legislative Ryal Decree 4/2015 f 23 rd Octber and subsequent dispsitins. Financial results: FY 2017 In Madrid n 28 th f February 2018 Meinrad Spenger CEO MASMOVIL IBERCOM, S.A. 1

2 FINANCIAL RESULTS FY17 Index Key Highlights Review guidance 7 Medium-term Targets 9 Implementatin f IFRS15 11 Operatinal and Financial Review 12 Analysis f the Cnslidated Prfit and Lss Accunt 15 Analysis f the Cnslidated Balance Sheet 17 Analysis f Cash Flw 19 Relevant issues fllwing the clsing f the perid 21 Infrmatin als available n in Infrmatin fr Investrs 2

3 Key Highlights MASMOVIL exceeds revised FY17 guidance FY17 Actual Guidance Mbile Pstpaid and Bradband Lines Net Adds 946k 800k Service Revenue Grwth +20% +18% Recurrent EBITDA 238M 235M MASMOVIL was ne f the fastest grwing Eurpean Telecm peratrs in FY17 FY17 4Q17 Actual yy Grwth Actual yy Grwth Service Revenues 1,007M +20% 271M +23% Recurrent EBITDA 238M +100% 70M +142% Net adds in cnvergent and pstpaid mbile lines cntinue t accelerate Net Adds - Lines (k) 1Q17 2Q17 3Q17 4Q17 FY17 Bradband Mbile Pstpaid Ttal Net Adds - Lines MASMOVIL strengthened its netwrk partnership with Orange including: Expanded the existing jint FTTH agreement by a minimum f 2 millin incremental Business Units ( BU s ) which will allw cst efficient extensin f MASMOVIL s wn FTTH ftprint frm currently 2.1 millin t 6.5 millin BU s ver the next 2 years. Mdificatins and imprvements t the existing whlesale bitstream cntract fr the usage f Orange s FTTH netwrk cvering mre than 8 millin BU s. Revisins t the terms f the current Site Sharing agreement including access t apprximately 5,600 incremental mbile sites, giving MASMOVIL the ptin t cst effectively duble the size f its wn mbile netwrk. Imprvement f terms f the existing Natinal Raming agreement, which has been extended. Amendments t the current natinal Data Transmissin agreement with imprved unitary pricing, and reasnable minimum cmmitments. 3

4 Outstanding peratinal achievements Established MASMOVIL as a high quality 4 th peratr fcused n innvatin and custmer experience Leader in custmer satisfactin. Premium ffer: fastest Fibre ffer in market (1Gb), abundant data bundles, best mbile cverage. Cntinuus ARPU increase (increase f FMC entry price levels and reductin f discunts). Smth prgress in integratin Netwrk migratin f Yig custmers t new natinal raming partner cmpleted withut meaningful custmer impact. Majr frnt and back ffice integratin cmpleted n time with n disruptin t cmmercial peratins. Launch f bradband under Yig and Pepephne brands. Premium repsitining f Yig brand (Piens, lueg Yig). Re-energized Yig stre netwrk. Fcus n Digitizatin Creatin f an internal Digital Hub with tp tier team. Launch f new websites fr Yig and Pepephne. Autmatin f client interactins. Infrastructure ptimizatin Multiplied by >10 the size f FTTH ftprint t 10.4 M BU s. Increased mbile netwrk by >300 antennas fr a ttal f clse t 5,000 antennas. Wn awards and special recgnitin fr bth mbile as well as FTTH netwrks (1) (1) Best 2017 bradband peratr by ADSL Zne ( Best 2017 fiber peratr by Grup Infrmátic ( Operatr with the fastest fiber netwrk in Spain by nperf. ( Operatr with the fastest 3G +4G aggregated netwrk by Tutela ( 4

5 2018 guidance annunced Guidance is prvided n a pst IFRS15 basis. An estimate f guidance excluding the impact f IFRS15 is als prvided t allw like fr like cmparisn with 2017 results. 330M f Recurrent EBITDA n cmparable terms t 2017, which is reduced thrugh IFRS15 accunting adjustments t 300M as a cnsequence f the new revised treatment f cnvergent cmmissins (further detail in Sectin 5). 305M f Net Capex investment related t (1) the build ut f FTTH wn netwrk by an additinal 3M BU s at cst-effective terms as per the revised Orange agreements, (2) maintenance capex and (3) capex devted t strategic prjects Pre-IFRS Est. Guidance 2018 (Actual) (Cmparable with 2017) (Adjusted fr IFRS15) Mbile pst-paid + BB net adds 946k >800k >800k Service revenues grwth +20% >15% >10% Recurrent EBITDA 238M 330M (+38%) 300M Net Capex (Infrastructure) (1) 125M c.305m c.305m Nte: Guidance fr 2018 is prvided just n a Pst-IFRS15 basis (1) Cmmercial capex linked t new clients is nt part f the 2018 Capex Guidance as required Capex investment depends n the cmmercial perfrmance f the Cmpany Surce: Cmpany MASMOVIL publishes 2020 plan Based n current market cnditins, MASMOVIL targets Recurrent EBITDA f 460M -480M by 2020, dubling the level f 238m achieved in Net Capex (Infrastructure) t nrmalize in 2020 t c.40% f the level f 2018 (pst FTTH netwrk rll-ut). Revenue and Recurrent EBITDA estimate incrprates the impact f IFRS15 Ttal Revenue grwth Recurrent EBITDA Net Capex (Infrastructure) 2020 Duble digit CAGR FY M c.150m 5

6 2017 Review FY17 was a strng year fr MASMOVIL due t cntinued rganic grwth and tailwinds frm integratin synergies. FY17 Financial Highlights: In FY17, the cmpany delivered Service Revenues f 1,007M (+20% yy) with Ttal Revenues f 1,301M (+16% yy) Recurrent EBITDA fr the year reached 238M (+100% yy). 4Q17 Financial Highlights: Service Revenues increased frm 221M in 4Q16 t 271M (+23% yy). The Q4 grwth rate f +23% cmpares t an average f +20% yy fr the full financial year Ttal Revenues increased frm 300M t 352M (+17% yy). Recurrent EBITDA increased frm 29M t 70M (+143% yy) and the EBITDA margin increased t 19.8% in 4Q17 (vs 9.6% in 4Q16). Subscribers: MASMOVIL exceeded expectatins fr client acquisitin and added 946k mbile pstpaid and bradband lines in FY17. The perating mmentum fr client additins cntinues t accelerate and 4Q17 was the strngest quarter f the year with 324k net adds (c.34% f ttal FY17 net adds). Table 2.1 Key figures Units FY16 FY17 Grwth 4Q16 4Q17 Grwth Mbile pstpaid (M) % % Mbile Prepaid (M) % % Bradband (M) % % Ttal number f lines (M) % % Ttal revenues (M ) 1,120 1,301 16% % Ttal service revenues (M ) 838 1,007 20% % Recurrent EBITDA (1) (M ) % % Margin (%) 10.6% 18.3% 9.6% 19.8% Adjusted Net Incme (M ) (37) 97 n.m. (39) 52 n.m. Adjusted EPS (fully diluted) ( ) n.m Net Debt excluiding cvertible debt (M ) Leverage (3) 2.8x 1.1x 2.8x 1.1x Shares Outstanding (M) Fully Diluted Shares Outstanding (2) (M) (1) Recurrent EBITDA excludes, ne-ff expenses and stck appreciatin rights (lng term management incentive plan) (2) Calculated based n number f shares utstanding plus cnversin f utstanding cnvertibles and ESOP (3) Leverage fr FY17 calculated by cnsidering Recurrent EBITDA FY 2017 f 238 and prfrma Recurrent EBITDA f 119M fr FY16. 6

7 2018 guidance After its strng perfrmance in 2017, MASMOVIL expects t sustain its perating mmentum and is pleased t prvide the belw guidance fr perating results in 2018: >800k ttal cmbined net increase in fixed bradband and mbile pst-paid lines >10% yy grwth f Service Revenues (>15% pre IFRS15) 300M f Recurrent EBITDA. The Cmpany expects 330M f Recurrent EBITDA pre-irfs15, with a 30M reductin f Recurrent EBITDA thrugh implementatin f IFRS15. This implies a 38% yy grwth f Recurrent EBITDA cmpared t 238M achieved in The adjustments related t IFRS15 are neutral t Recurrent Cashflw frm Operatins (n a nrmalized basis and assuming a cnstant subscriber base). A detailed explanatin f these changes is included in Sectin 5. c.305m f Net Capex infrastructure investment related t the build ut f FTTH wn netwrk by an additinal 3M BU s at cst-effective terms as per the revised Orange agreements, plus maintenance capex as well as capex devted t strategic prjects. The Cmpany als prvides an initial indicatin f 2018 Guidance n a pre-ifrs15 basis. This indicatin is prvided t allw like fr like cmparisn with 2017 results. Table 3.1 Summary f Guidance Pre-IFRS Est. Guidance 2018 (Actual) (Cmparable with 2017) (Adjusted fr IFRS15) Mbile pst-paid + BB net adds 946k >800k >800k Service revenues grwth +20% >15% >10% Recurrent EBITDA 238M 330M (+38%) 300M Net Capex (Infrastructure) (1) 125M c.305m c.305m (1) Cmmercial capex is excluded frm Guidance as it depends n the cmmercial perfrmance f the Cmpany Surce: Cmpany 7

8 Net Capex fr 2018 The Cmpany plans t invest 385M Capex in FY18 t drive the cntinued expansin f the FTTH ftprint and t accmmdate its expected custmer grwth. Of the ttal Net Capex 13% r 50M is recurring infrastructure capex while 80M is cmmercial and the remaining 255M is nn-recurring in nature Recurring Infrastructure Capex (50M r 13% f Ttal Net Capex) This represents the Capex investment required t maintain the existing peratins acrss ur fixed netwrk, mbile netwrk and IT systems. Nn-Recurring Infrastructure Capex (255M r 67% f Ttal Net Capex) This represents the net Capex required fr the build ut f FTTH hmes (net f IRUs paid by Orange) as per the latest revised Orange agreement. MASMOVIL is planning t expand its wn FTTH ftprint by 3M hmes in 2018 which requires arund 210M Net Fixed Netwrk Capex (r apprximately 70 / building unit). In additin, MASMOVIL plans t invest 45M in strategic transfrmatin prjects n IT, cre netwrks etc. with attractive underlying business cases. Cmmercial Capex (80M r 20% f Ttal Net Capex) The cmmercial Capex f 80M is required t nbard the estimated number f new clients and includes capitalized equipment, installatin, lgistics, etc. Liquidity and Financial Resurces Thrugh a cmbinatin f cash n hand at the end f FY17 f 320M, cmmitted but undrawn credit facilities f apprximately 200M and the expected cash flw generatin in FY18, MASMOVIL has sufficient available liquidity t fund the 2018 capex plan while maintaining a Debt/EBITDA rati in the range f 2x (excluding cnvertibles). Table Capex Guidance Breakdwn 8

9 Medium-term plan MASMOVIL s medium-term (3 year) financial plan incrprates the benefits f the Cmpany s Capex investment int the cntinued rll-ut f wn netwrk infrastructure (FTTH wn BU s and mbile netwrk expansin). Key highlights: Cntinued duble digit ttal revenue grwth thrugh 2020 (based n like-frlike accunting plicies) Recurrent EBITDA target f abve 460M implies that MASMOVIL will duble its EBITDA relative t The cntinued high grwth reflects the perating mmentum and the expected ROI n the Cmpany s infrastructure capex investment, including an increasing prprtin f ur bradband custmers residing n MASMOVIL s wn FTTH netwrk. As a result, the Recurrent EBITDA margin is expected t exceed 25% by Table 4.1 Mid-term Ttal Revenues and Recurrent EBITDA plan 9

10 2018 will be a peak year in terms f bth Net Capex (385M ) and Capex deplyed t grw / maintain the Cmpany s infrastructure (305M ). We expect that the Cmpany s Net Capex will nrmalize by 2020 t apprximately 40% f the 2018 levels. Table 4.2 Mid-term Net Capex plan 10

11 Implementatin f IFRS15 Starting frm the 1 st f January 2018 the Grup will adpt the new standard IFRS15 fr revenue recgnitin The Grup has elected t utilize the Mdified Retrspective apprach fr the implementatin f IFRS15. This means that the Cmpany will reflect the apprpriate adjustments in the 2018 pening balance sheet and ging frward all financial accunts will reflect the implementatin f the new standard. Under IFRS15, handset subsidies and certain ther discunts are reclassified as cntra-revenue items rather than perating expenses. This is estimated t reduce 2018 revenues by apprximately 70 millin when cmpared t 2018 pre IFRS15 implementatin. The impact n Recurrent EBITDA is de minimis. Masmvil capitalizes certain cmmissins paid fr cnvergent client acquisitin. Such capitalized amunts were previusly amrtized ver a 4 year perid and charged t amrtizatin expense. Under IFRS15, the amunts will be charged int the P&L abve EBITDA as deferred expenditure ver 2 years. This is expected t reduce respectively EBITDA and Net incme by apprximately 30 millin and 11 millin in 2018 when cmpared t prir accunting standards. The impact n perating cash flw (EBITDA minus Capital Expenditure) will be neutral n a nrmalized basis and assuming a cnstant subscriber base. The final impact will ultimately depend n the grwth achieved by the Cmpany fr the full year 2018, the client mix, subsidy and discunt levels and the vlume f handset sales and culd differ frm MASMOVIL s initial estimates. 11

12 Operatinal and Financial Review +20% Prfrma Service Revenue grwth in FY17, +23% in 4Q17 Service Revenues grew t 1.007M (+20% yy) in FY17 and accunted fr 77% f the Grup s ttal revenues. Other Revenues are cmprised f equipment and whlesale revenues with limited grss prfit cntributin grwing +4% yy (+2% in 4Q17 yy). Table 6.1 Revenue split (Millin ) FY16 FY17 Grwth 4Q16 4Q17 Grwth Service Revenues , % % Other Revenues % % Ttal Revenues 1, , % % Net Revenues (1) , % % (1) Net Revenues calculated as Service Revenues plus grss prfit cntributin frm whlesale and equipment revenues. Surce: Cmpany Client evlutin Table 6.2 Custmer base Number f lines (millin) FY16 FY17 Dif Grwth Mbile pstpaid % Mbile prepaid % Ttal Mbile Only % Bradband % Ttal lines % Surce: Cmpany At the end f FY17, the Grup had 5.51M ttal lines, +25% vs FY16. Mbile pstpaid and bradband lines ttaled 4.4M at the end f FY17, +27% vs FY16. Multi-brand strategy has prven t be a success. Crss-selling f bradband t existing mbile subscriber base remains n track. 12

13 Chart 6.1 Quarterly evlutin f mbile pstpaid and bradband lines Mbile business: +17% grwth in pst-paid lines As f the end f FY17 the Grup had 3.9M pst-paid clients, an increase f 564k lines r 17% vs FY16 (prfrma). The use f the different brands f the Grup (MASMOVIL, Yig, Pepephne and Llamaya) allws the Cmpany t target different market segments efficiently. In 2017 this enhanced ur ability t attract new mbile subscribers. Bradband mmentum cntinues t accelerate The Grup attracted 382k new bradband lines during the year, resulting in a ttal f 504k bradband lines at the end f FY17. The perfrmance f Bradband net adds accelerated during the furth quarter with 134k new adds vs. 77k in 1Q17, 78k in Q2, and 93k fr 3Q17. 13

14 Chart 6.3 Bradband accesses evlutin prfrma (thusands) FTTH Netwrk: MASMOVIL grew its FTTH ftprint t 10.4 millin building units (BUs) as f FY17. This represents a grwth f c.12 times cmpared t 4Q16. At the end f FY17, MASMOVIL s fixed netwrk reached 19.4 millin BU s with bradband, f which 10.4 millin based n fiber technlgy. Of the 10.4 millin, 2.1 millin building units are wn develpment (including the mutualized BU s) and the remaining 8.3 millin are accessible thrugh the bitstream agreement with Orange. Table 6.4 FTTH ftprint (Millin BU s) 14

15 Analysis f the Cnslidated Prfit and Lss Accunt Table 7.1 Summarized P&L (Millin ) 2016 (1) FY17 Grwth 4Q16 (1) 4Q17 Grwth Service Revenues , % % Revenue 1, , % % Other perating revenue n.m n.m. Cst f sales (889.1) (977.9) 10% (240.0) (263.3) 10% Other perating expenses (117.6) (117.1) 0% (33.0) (28.9) -13% Recurrent EBITDA % % Net ne Offs (30.6) (22.5) -27% (26.5) 1.7 n.m. Reprted EBITDA n.m n.m. Depreciatin and amrtizatin (106.6) (123.6) 16% (39.6) (33.1) -16% Reprted EBIT (18.4) 92.0 n.m. (37.3) 38.3 n.m. Net financial expenses 3 (26.2) (233.9) n.m. (12.8) (46.0) n.m. Reprted Prfit befre taxes (44.6) (141.8) n.m. (50.2) (7.8) n.m. Incme tax n.m n.m. Reprted Net Incme/(Lss) (39.8) (102.8) n.m. (39.4) 45.3 n.m. Sum f the "Adjustments" n.m % Adjusted Net Incme/(Lss) 2 (36.6) 96.6 n.m. (39.4) 51.5 n.m. (1) Prfrma. (2) Please see detailed explanatin belw. (3) Including negative impact f141m f nn-cash accunting charges fr ACS cnvertible. Surce: Cmpany. FY17 recurrent EBITDA grew +100% yy t reach 238M Recurrent EBITDA margin expanded frm 10.6% in FY16 t 18.3% in FY17. 4Q17 Recurrent EBITDA grew +143% YY t reach 70M representing a cntinued acceleratin f the perating mmentum. 22M Net ne-ff csts in FY17 These csts related t the migratin f the different natinal raming cntracts, ne-ff integratin csts and the gain n the sale f mbile sites in December Adjusted net incme reached 97M fr FY17 Psitive net incme f 97M after adjusting fr ne-ffs and ther nn-businessrelated accunting charges: The negative accunting nn-cash impact f the ACS cnvertible amunted t 142M, mst f them already accunted fr in 1H17. 15

16 Net perative ne ffs reached 22M in 2017, and financial ne-ffs reached 4M The amrtizatin f acquired custmer base & brand ttaled 21M. 7M charges linked t the lng-term incentive plan fr management and the increase in MASMOVIL s share price in The interest n the Prvidence and the ACS cnvertible summed up t 22M. Finally, tax impact f the adjustments amunted t 19M. Adjusted EPS reached 2.90, n a fully diluted basis, cnsidering 33.4 millin fully diluted shares (including the cnversin f bth Prvidence and ACS cnvertibles and the Grup s ESOP plan under the equity methd). Table 7.2 Adjusted Net Incme and EPS (Millin ) (except EPS) FY17 Reprted Net Incme/(Lss) (102.8) Accunting impact f ACS cnvertible Reprted Net Incme excl. ACS cnvert 39.2 Operative One-ffs 22.5 Financial One-ffs 3.6 Amrtizatin f acquired custmer base & brand 21.0 Management incentive plans (SAR) 7.4 Interest n Prvidence and ACS cnvertibles 22.0 Tax impact f "Adjustments" (19.1) Adjusted Net Incme/(Lss) fully diluted 96.6 Fully diluted number f shares (millin) 33.4 Adjusted EPS (fully diluted) ( ) 2.90 Agreement with ACS regarding ACS cnvertible The FY17 incme statement includes a nn-cash charge f 142M linked t the ACS cnvertible. This cnvertible was cnsidered t be a hybrid instrument under IFRS rules and accrdingly any increase in the market value f the shares underlying the cnvertible was charged t earnings. This accunting treatment under IFRS rules was different t that applied fr the Prvidence cnvertible, which is nt cnsidered t be a hybrid instrument. On July 13 th, 2017 the Cmpany re-negtiated the terms f the ACS cnvertible s that the accunting treatment under IFRS will be cnsistent between bth cnvertible instruments. As a result, pst July 13 th, 2017 and with CNMV apprval, there has been n further nn- cash financial charges and the Cmpany has reclassified as sharehlders equity in the 3Q17 accunts a ttal f 150M, thereby increasing bk equity and reducing financial debt. 16

17 Analysis f the Cnslidated Balance Sheet Table 8.1 Cnslidated Balance Sheet (Millin ) Reprted 2016 Reprted 2017 Variance Nn current assets 1, , Intangible assets Prperty, plant and equipment Othre nn current assets Deferred tax assets Current assets Inventries Trade and ther receivables Other current assets Cash and cash equivalents Ttal assets 1, , (Millin ) Reprted 2016 Reprted 2017 Variance Equity Share capital Additinal paid in capital Reserves and ther equity instruments Nn-current liabilities , lng term debt Other financial nn-current liabilities Prvisins Other nn-financial nn-current liabilities Deferred tax liabilities Current liabilities Current prtin f lng term debt Other financial current liabilities Prvisins Trande and ther payables Other nn-financial current liabilities Ttal equity and liabilities 1, , Surce: Cmpany Net debt f 265M (excluding cnvertibles) equivalent t leverage f 1.1x The Grup s net debt excluding the utstanding cnvertibles was 265M and 519M including cnvertibles at the end f FY17. Net Debt excluding utstanding cnvertibles is cnsidered t be the mst relevant benchmark as bth the Prvidence and the ACS cnvertibles are deep in the mney with strike prices at and respectively, well belw the current share price. 17

18 Table 8.2 Financial net debt calculatin FY17 (Millin ) FY16 1H17 9M17 FY17 FY17-9M17 Shrt term cmmercial paper (9) Senir debt Bnds (62) Junir debt Prvidence cnvertible ACS cnvertible (2) Other debts (9) Cash & Equivalents (236) (203) (216) (320) (104) Net debt as per Cmpany (112) Prvidence cnvertible (102) (108) (111) (115) (4) ACS cnvertible (144) (289) (140) (139) 2 ND per Cmpany excl. Cnverts (115) Leverage (x Recurrent Ebitda) ) Leverage calculated as Net debt excluding cnvertibles divided by annualized Recurrent EBITDA (1Q17x4 fr 1Q17 r 180M, 1H17x2 fr 1H17 r 208M, 9M17/3x4 fr 9M17 r 224M and real FY17 Recurrent EBITDA fr FY17 r 238M Surce: Cmpany MASMOVIL cmpleted a refinancing f the senir facility in Q t imprve its financial flexibility, reduce csts and prvide an additinal line fr future capex investments Key highlights f the refinancing are: Increase in the financial flexibility fr the Grup t pursue ptential investments in its fixed and mbile infrastructure by intrducing a new tranche where we can draw up t 150M fr capex investments. Extensin f the average life f the debt under the SFA by apprximately 12 mnths. Reductin f the verall interest csts. Additinally, a tender ffer f MASMOVIL Bradband, S.A. prjects bnds was successfully cmpleted arund the end f the year end with all the 68M nminal value wrth f such bnds being repurchased. All the cvenants f the different financial instruments were met cmfrtably Leverage Rati further decreased t 1.1x at the end f FY17 (vs. 2.8x at the end f FY16). The psitive impact in Net Debt frm the increase in cash due t net wrking capital (97M ) will partially reverse during the first part f

19 Analysis f Cash Flw Net Capex: 221M The Cmpany s FTTH wn netwrk increased frm the 0.9M BU s reprted at the end f 2016 t 2.1M BU s at the end f The assciated capital expenditure was a net investment f 88M resulting in an average build-ut cst f 70 per BU. At the end f 2017, the ttal fixed ftprint reached 10.4 millin building units, including the ftprint frm third party netwrks. In additin t the abve, Recurrent Infrastructure Capex ttaled 33M during the perid. Accrdingly, MASMOVIL invested121m f capex in 2017 dedicated t the extensin and imprvement f its infrastructure. Custmer related capex represented 100M in 2017 which is directly assciated with the Cmpany s grss adds acquired during the year. The final Ttal Net Capex figure f 221M fr 2017 is slightly ahead f the Cmpany s initial expectatins due t the better than expected perfrmance f bth the develpment f MASMOVIL s fixed netwrk as well as the cmmercial success f its bradband ffer ver the last part f the year. Table 9.1 Capex split (after taking int accunt the sale f IRU s) (Millin ) FY17 Net fixed netwrk buildut 88 Recurrent infrastructure 33 Subttal 121 Custmer capex 100 Ttal Net Capex 221 Surce: Cmpany Cash Flw frm Operatins: 210M In FY17, the Net Wrking Capital variatin related t peratins resulted in an inflw f 97M due t timing effects f certain payments. In additin, the Cmpany had 104M f psitive wrking capital variatin due t the timing f payments related t the FTTH expansin prgram. MASMOVIL als had a cash inflw f 44M in FY17 which was mainly due t the divestment f mbile twers. After adjusting fr interest expense f 44M and prvisins / taxes f 8M, MASMOVIL generated a ttal f 210M f Cash Flw frm Operatins in FY17. 19

20 Table 9.3 Cash Flw frm Operatins (Millin ) FY17 Recurrent EBITDA 238 Adjustments Nn-cash (8) Wrking capital variatin - Operatins 97 Wrking capital variatin - FTTH related 104 Divestments 44 Financial expenses cash ut (44) Net Capex (221) Cash utflw delayed 210 Surce: Cmpany 20

21 Relevant issues fllwing the clsing f the perid On January 3 rd, 2018 MASMOVIL annunced that the tender ffer made t all hlders f the senir secured bnds f MASMOVIL BROADBAND, S.A.U ( MMBB ) in an aggregate principal amunt f 68M was accepted by all bndhlders. The bnds were accrdingly repurchased and amrtized. On January 23 th, Prvidence annunced the sale f 2.8 millin shares f MASMOVIL, representing c.8% f the fully diluted shares, r 14% f the shares utstanding. The sale tk place thrugh an accelerated bk building prcess (ABB).. After the sale, Prvidence cntinues t hld 76% f its initial stake, which crrespnds t arund 27% f the Cmpany s fully diluted shares. Prvidence will retain its tw seats n the MASMOVIL Bard. On February 27 th, MASMOVIL annunced that cmprehensive agreements were signed with Orange Espagne, S.A. Sciedad Unipersnal and Orange España Cmunicacines Fijas, S.L., Sciedad Unipersnal. ( Orange ). - Orange and MASMOVIL agreed t expand their existing FTTH c-investment framewrk and share Capex fr the build ut f an additinal 2.0 FTTH BU s. Therefre, MASMOVIL expects t increase its wn FTTH ftprint frm 2.1M t 6.5M BU s ver the next 2 years: Ttal required netwrk net investment fr the future buildut is apprximately 330M (r 75 per FTTH hme), which results in relevant Capex saving fr the 4.4M incremental BU s relative t a standalne scenari. The new agreement als includes the sharing f netwrk maintenance Opex and includes a vlume-based reductin f unitary pricing which will materialize ver the cming years. - MASMOVIL has als revised the ecnmic terms f its FTTH bitstream whlesale agreement with Orange which prvides access t 100% f Orange s FTTH netwrk. Grwth restrictins which had existed in the previus cntract, such as the subscriber limitatin f 250K in unregulated areas, have been eliminated. - MASMOVIL s revised its Mbile Site Sharing and Natinal Raming agreements with Orange resulting in imprved terms, extending the latter. The revised agreement creates an ptin t duble the size f MASMOVIL s mbile netwrk n cst-efficient terms thrugh active and passive infrastructure sharing in up t sites. This ptin can be exercised ver the next 5 years. If the full prgram were t be implemented, the ttal investment requirement wuld be apprximately 50M cumulative CAPEX ver , which implies relevant Capex savings (vs k /site f a standard deplyment) and f ca. ne third in terms f annual Opex reductin relative t a standalne slutin. - Finally, the revised agreement will leverage Orange s investments and netwrk reach in a cst-efficient manner fr MASMOVIL, resulting in a reductin f unitary transmissin csts and avidance f significant wn transmissin investments, with reasnable minimum cmmitments. 21

22 Disclaimer This dcument and the cnference-call webcast (including the Q&A sessin) may cntain frward-lking statements and infrmatin (hereinafter, the Statements ) relating t MASMOVIL IBERCOM, S.A., and r MASMOVIL Grup (hereinafter indistinctly, MASMOVIL, the "Cmpany r the Grup") r therwise. These Statements may include financial frecasts and estimates based n assumptins r statements regarding plans, bjectives and expectatins that make reference t different matters, such as the custmer base and its evlutin, grwth f the different business lines and f the glbal business, market share, pssible acquisitins, divestitures r ther transactins, Cmpany s results and ther aspects related t the activity and situatin f the Cmpany. The Statements can be identified, in certain cases, thrugh the use f wrds such as frecast, "expectatin", "anticipatin", aspiratin, "purpse", estimates, plan r similar expressins r variatins f such expressins. These Statements reflect the current views f MASMOVIL with respect t future events, d nt represent, by their wn nature, any guarantee f future fulfilment, and are subject t risks and uncertainties that culd cause the final develpments and results t materially differ frm thse expressed r implied by such Statements. These risks and uncertainties include thse identified in the dcuments cntaining mre cmprehensive infrmatin filed by MASMOVIL befre the different supervisry authrities f the securities markets in which its shares are listed and, in particular, the Spanish Natinal Securities Market Cmmissin. Except as required by applicable law, MASMOVIL des nt assume any bligatin t publicly update the Statements t adapt them t events r circumstances taking place after the date heref, including changes in the Cmpany's business r business develpment strategy r any ther unexpected circumstance. This dcument and the cnference-call (including the Q&A sessin) may cntain summarized, nn-audited r nn-gaap financial infrmatin. The infrmatin cntained herein and therein shuld therefre be cnsidered as a whle and in cnjunctin with all the public infrmatin regarding the Cmpany available, including any ther dcuments released by the Cmpany that may cntain mre detailed infrmatin. Recipients f this dcument are invited t read ur cnslidated financial statements and cnslidated management reprt fr the year 2017 submitted t the Spanish Natinal Securities Market Cmmissin. Neither this dcument nr the cnference-call (including the Q&A sessin) nr any f their cntents cnstitute an ffer t purchase, sale r exchange any security, a slicitatin f any ffer t purchase, sale r exchange f any security, r a recmmendatin r advice regarding any security. 22