Telefónica S.A.

Individual Annual

Report 2024

Telefónica S.A.

Annual financial statements

and management report

for the year ended

2024

	Individual Annual Report 2024	Telefónica, S. A.	2

Financial statements 2024	Index

Index

Balance sheet at December 31 ...............................................................................................................................	3
Income statements for the years ended December 31 ...................................................................................	5
Statements of changes in equity for the years ended December 31 ..........................................................	6
Cash flow statements for the years ended December 31 ..............................................................................	7
Note 1. Introduction and general information ............................................................................................................	9
Note 2. Basis of presentation .......................................................................................................................................	10
Note 3. Proposed appropriation of net results ...........................................................................................................	11
Note 4. Recognition and measurement accounting policies ...................................................................................	13
Note 5. Intangible assets ..............................................................................................................................................	16
Note 6. Property, plant and equipment ......................................................................................................................	17
Note 7. Investment properties ......................................................................................................................................	18
Note 8. Investments in group companies and associates ........................................................................................	19
Note 9. Financial investments ......................................................................................................................................	26
Note 10. Trade and other receivables .........................................................................................................................	30
Note 11. Equity .................................................................................................................................................................	31
Note 12. Financial liabilities ...........................................................................................................................................	35
Note 13. Bonds and other marketable debt securities ..............................................................................................	37
Note 14. Interest-bearing debt and derivatives .........................................................................................................	38
Note 15. Payable to group companies and associates .............................................................................................	41
Note 16. Derivative financial instruments and risk management policies ..............................................................	43
Note 17. Income tax ........................................................................................................................................................	53
Note 18. Trade, other payables and provisions ..........................................................................................................	59
Note 19. Revenue and expenses ..................................................................................................................................	61
Note 20. Other information ..........................................................................................................................................	67
Note 21. Cash flow analysis ..........................................................................................................................................	77
Note 22. Events after the reporting period .................................................................................................................	80
Note 23. Additional note for English translation ........................................................................................................	82
Appendix I: Details of subsidiaries and associates at December 31, 2024 .............................................................	83
Appendix II: Board and Senior Management Compensation ..................................................................................	87
Management report 2024 ............................................................................................................................................	94
Business Model .........................................................................................................................................................	94
Economic results of Telefónica, S.A. ......................................................................................................................	96
Investment activity ....................................................................................................................................................	96
Share price performance .........................................................................................................................................	96
Contribution and innovation ....................................................................................................................................	97
Environment, human resources and managing diversity ....................................................................................	99
Liquidity and capital resources ...............................................................................................................................	109
Risks factors associated with the issuer ................................................................................................................	111
Events after the reporting period ............................................................................................................................	125
Annual Corporate Governance Report for Listed Companies ...........................................................................	125
Annual Report on the Remuneration of Directors ................................................................................................	125

	Individual Annual Report 2024	Telefónica, S. A.	3

Financial statements 2024	Index

Telefónica, S.A.

Balance sheet at December 31

Millions of euros
ASSETS	Notes	2024	2023
NON-CURRENT ASSETS		55,304	57,729
Intangible assets	5	12	15
Software		9	10
Other intangible assets		3	5
Property, plant and equipment	6	137	129
Land and buildings		81	76
Plant and other property, plant and equipment items		54	51
Property, plant and equipment under construction and prepayments		2	2
Investment property	7	288	299
Land		100	100
Buildings		188	199
Non-current investments in Group companies and associates	8	50,100	53,407
Equity instruments		49,650	52,966
Loans to Group companies and associates		442	432
Other financial assets		8	9
Financial investments	9	3,007	2,621
Equity instruments	9	417	466
Derivatives	16	2,474	1,873
Other financial assets	9	116	282
Deferred tax assets	17	1,725	1,224
Non current account receivables and other		35	34
CURRENT ASSETS		8,149	7,271
Trade and other receivables	10	265	500
Current investments in Group companies and associates	8	1,917	1,694
Loans to Group companies and associates		1,865	1,625
Derivatives	16	6	3
Other financial assets		46	66
Investments	9	941	402
Loans to companies		531	7
Derivatives	16	368	340
Other financial assets		42	55
Current deferred expenses		11	7
Cash and cash equivalents		5,015	4,668
TOTAL ASSETS		63,453	65,000

The accompanying notes 1 to 23 and Appendices I and II are an integral part of these balance sheets.

	Individual Annual Report 2024	Telefónica, S. A.	4

Financial statements 2024	Index

Millions of euros
EQUITY AND LIABILITIES	Notes	2024	2023
EQUITY		18,465	20,077
CAPITAL AND RESERVES		18,155	19,707
Share capital	11	5,670	5,750
Share premium	11	3,522	3,752
Reserves	11	8,507	8,482
Legal & Statutory		1,199	1,110
Other reserves		7,308	7,372
Treasury shares and own equity instruments	11	(107)	(430)
Profit (Loss) for the year	3	563	2,153
UNREALIZED GAINS (LOSSES) RESERVE	11	310	370
Financial assets at fair value with changes though equity		144	101
Hedging instruments		166	269
NON-CURRENT LIABILITIES		39,096	36,824
Non-current provisions	18	1,387	609
Non-current borrowings	12	3,206	2,592
Bank borrowings	14	828	513
Derivatives	16	1,702	1,532
Other debts		676	547
Non-current borrowings from Group companies and associates	15	33,893	33,482
Deferred tax liabilities	17	576	95
Long term deferred revenues		34	46
CURRENT LIABILITIES		5,892	8,099
Current provisions	18	31	36
Current borrowings	12	302	322
Bonds and other marketable debt securities	13	35	—
Bank borrowings	14	87	141
Derivatives	16	179	179
Other financial liabilities	14	1	2
Current borrowings from Group companies and associates	15	5,260	7,353
Trade and other payables	18	287	371
Current deferred revenues		12	17
TOTAL EQUITY AND LIABILITIES		63,453	65,000

The accompanying notes 1 to 23 and Appendices I and II are an integral part of these balance sheets.

	Individual Annual Report 2024	Telefónica, S. A.	5

Financial statements 2024	Index

Telefónica, S.A.

Income statements for the years ended December 31

Millions of euros	Notes	2024	2023
Revenue	19	6,429	4,362
Rendering of services to Group companies and associates		509	464
Rendering of services to non-group companies		11	11
Dividends from Group companies and associates		5,879	3,859
Interest income on loans to Group companies and associates		30	28
Impairment and gains (losses) on disposal of financial instruments	8	(4,480)	(1,207)
Impairment losses and other losses		(4,405)	(1,208)
Gains (losses) on disposal and other gains and losses		(75)	1
Other operating income	19	399	41
Non-core and other current operating revenue - Group companies and associates		30	33
Non-core and other current operating revenue - non-group companies		369	8
Personnel expenses	19	(196)	(232)
Wages, salaries and others		(161)	(199)
Social security costs		(35)	(33)
Other operational expense		(338)	(382)
External services - Group companies and associates	19	(93)	(114)
External services - non-group companies	19	(234)	(258)
Taxes other than income tax		(11)	(10)
Depreciation and amortization	5, 6 and 7	(25)	(25)
OPERATING PROFIT (LOSS)		1,789	2,557
Finance revenue	19	540	516
Finance costs	19	(1,892)	(1,935)
Change in fair value of financial instruments		53	0
Net result on sales of financial assets at fair value with changes through equity	9 and 11	53	2
Exchange rate gains (losses)	19	22	(11)
NET FINANCIAL EXPENSE		(1,277)	(1,428)
PROFIT (LOSS) BEFORE TAX	21	512	1,129
Income tax	17	51	1,024
PROFIT (LOSS) FOR THE YEAR		563	2,153

The accompanying notes 1 to 23 and Appendices I and II are an integral part of these income statements

	Individual Annual Report 2024	Telefónica, S. A.	6

Financial statements 2024	Index

Telefónica, S.A.

Statements of changes in equity for the years ended December 31

A) Statement of recognized income and expense for the years ended December 31
Millions of euros	Notes	2024	2023
Profit (Loss) for the period		563	2,153
Total income and expense recognized directly in equity	11	417	(210)
From valuation of financial assets at fair value with impact in equity		96	115
From cash flow hedges		428	(432)
Income tax impact		(107)	107
Total amounts transferred to income statement	11	(477)	48
From valuation of financial assets at fair value with changes through equity		(53)	2
From cash flow hedges		(565)	63
Income tax impact		141	(17)
TOTAL RECOGNIZED INCOME AND EXPENSE		503	1,991

The accompanying notes 1 to 23 and Appendices I and II are an integral part of these statements of changes in equity.

B) Statements of total changes in equity for the years ended December 31
Millions of euros	Share capital	Share premium and Reserves	Treasury shares	Profit (Loss) for the year	Net unrealized gains (losses) reserve	Total
Balance at December 31, 2022	5,775	15,239	(341)	(880)	532	20,325
Total recognized income and expense	—	—	—	2,153	(162)	1,991
Transactions with shareholders and owners	(25)	(1,706)	(89)	—	—	(1,820)
Capital decreases (Note 11)	(25)	(73)	98	—	—	—
Dividend distributions (Note 11)	—	(1,698)	—	—	—	(1,698)
Other transactions with shareholders and owners	—	65	(187)	—	—	(122)
Other movements	—	(419)	—	—	—	(419)
Appropriation of prior year profit (loss)	—	(880)	—	880	—	—
Balance at December 31, 2023	5,750	12,234	(430)	2,153	370	20,077
Total recognized income and expense	—	—	—	563	(60)	503
Transactions with shareholders and owners	(80)	(1,978)	323	—	—	(1,735)
Capital decreases (Note 11)	(80)	(230)	310	—	—	—
Dividend distributions (Note 11)	—	(1,693)	—	—	—	(1,693)
Other transactions with shareholders and owners (Nota 11)	—	(55)	13	—	—	(42)
Other movements (Note 11)	—	(380)	—	—	—	(380)
Appropriation of prior year profit (loss)	—	2,153	—	(2,153)	—	—
Balance at December 31, 2024	5,670	12,029	(107)	563	310	18,465

The accompanying notes 1 to 23 and Appendices I and II are an integral part of these statements of changes in equity.

	Individual Annual Report 2024	Telefónica, S. A.	7

Financial statements 2024	Index

Telefónica, S.A.

Cash flow statements for the years ended December 31

Millions of euros	Notes	2024	2023
A) CASH FLOWS FROM OPERATING ACTIVITIES		4,547	1,720
Profit (Loss) before tax		512	1,129
Adjustments to net results:		(490)	(1,190)
Depreciation and amortization	5, 6 and 7	25	25
Impairment of investments in Group companies and associates	8	4,405	1,208
Change in long term provisions		(5)	35.528
Losses on the sale of financial assets		75	—
Financial assets registered as other operating income		(358)	—
Dividends from Group companies and associates	19	(5,879)	(3,859)
Interest income on loans to Group companies and associates	19	(30)	(28)
Net financial expense		1,277	1,428
Change in working capital		(48)	(15)
Trade and other receivables		26	(54)
Other current assets		(44)	32
Trade and other payables		(30)	7
Other cash flows from operating activities	21	4,573	1,796
Net interest paid		(1,365)	(1,495)
Dividends received and other		5,703	2,835
Income tax receipts		235	456
B) CASH FLOWS (USED IN) / FROM INVESTING ACTIVITIES		(397)	1,761
Payments on investments	21	(3,829)	(3,958)
Proceeds from disposals	21	3,432	5,719
C) CASH FLOWS USED IN FINANCING ACTIVITIES		(3,762)	(3,834)
Proceeds from equity instruments	11	87	23
(Payments) / Proceeds from financial liabilities	21	(1,984)	(1,933)
Debt issues		3,758	3,425
Repayment and redemption of debt		(5,742)	(5,358)
Acquisition of treasury shares		(145)	(223)
Dividends paid	21	(1,720)	(1,701)
D) NET FOREIGN EXCHANGE DIFFERENCE		(41)	32
E) NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS		347	(321)
Cash and cash equivalents at January 1		4,668	4,989
Cash and cash equivalents at December 31		5,015	4,668

The accompanying notes 1 to 23 and Appendices I and II are an integral part of these cash flow statements.

	Individual Annual Report 2024	Telefónica, S. A.	8

Financial statements 2024	Index

Telefónica, S.A.

Annual financial statements

for the ended December 31, 2024

	Individual Annual Report 2024	Telefónica, S. A.	9

Financial statements 2024	Index

Note 1. Introduction and

general information

Telefónica, S.A. (“Telefónica” or “the Company”) is a

public limited company incorporated for an indefinite

period on April 19, 1924, under the corporate name of

Compañía Telefónica Nacional de España, S.A. It

adopted its present name in April 1998.

The Company’s registered office is at Gran Vía 28,

Madrid (Spain) and its Employer Identification Number

(CIF) is A-28/015865.

Telefónica’s basic corporate purpose, pursuant to Article

4 of its Bylaws, is the provision of all manner of public or

private telecommunications services, including ancillary

or complementary telecommunications services or

related services. All the business activities that

constitute this stated corporate purpose may be

performed either in Spain or abroad and wholly or

partially by the Company, either through shareholdings

or equity interests in other companies or legal entities

with an identical or a similar corporate purpose.

In keeping with the above, Telefónica is currently the

parent company of a group that offers both fix and

mobile telecommunications with the aim to turn the

challenges of the new digital business into reality and

being one of the most important players. The objective

of the Telefónica Group is positioning as a Company

with an active role in the digital business taking

advantage of the opportunities of its size and industrial

and strategic alliances.

The Company is taxed under the general tax regime

established by the Spanish State, the Spanish

Autonomous Communities and local governments, and

files consolidated tax returns with most of the Spanish

subsidiaries of its Group under the consolidated tax

regime applicable to corporate groups.

	Individual Annual Report 2024	Telefónica, S. A.	10

Financial statements 2024	Index

Note 2. Basis of presentation

a) True and fair view

These financial statements have been prepared from

Telefónica, S.A.’s accounting records by the Company’s

Directors in accordance with the accounting principles

and standards contained in the Spanish GAAP in force

approved by Royal Decree 1514/2007, on November 16

(PGC 2007), modified by Royal Decree (RD) 602/2016,

dated December 2, 2016, and by Royal Decree (RD)

1/2021, dated January 12, 2021, and other prevailing

legislation at the date of these financial statements, to

give a true and fair view of the Company’s equity,

financial position, income statements and of the cash

flows obtained and applied in 2024.

The accompanying financial statements for the year

ended December 31, 2024 were prepared by the

Company’s Board of Directors at its meeting on

February 26, 2025 for submission for approval at the

General Shareholders’ Meeting, which is expected to

occur without modification.

The figures in these financial statements are expressed

in millions of euros, unless indicated otherwise, and

therefore may be rounded. The euro is the Company’s

functional currency.

b) Comparison of information

Accounting policies applied in 2024 are consistent with

those applied in 2023. 2023 figures are included in these

financial statements for comparison purposes.

c) Materiality

These financial statements do not include any

information or disclosures that, not requiring

presentation due to their qualitative significance, have

been determined as immaterial or of no relevance

pursuant to the concepts of materiality or relevance

defined in the PGC 2007 conceptual framework.

d) Use of estimates

The financial statements have been prepared using

estimates based on historical experience and other

factors considered reasonable under the circumstances.

The carrying value of assets and liabilities, which is not

readily apparent from other sources, was established

based on these estimates. The Company periodically

reviews these estimates.

A significant change in the facts and circumstances on

which these estimates are based could have an impact

on the Company’s results and financial position.

Key assumptions concerning the future and other key

sources of estimation uncertainty at the reporting date

that have a significant risk of causing a material

adjustment to the financial statements of the following

year are discussed below.

Provisions for impairment of investments in

Group companies and associates

Investments in group companies, joint ventures and

associates are tested for impairment at each year end to

determine whether an impairment loss must be

recognized in the income statement or a previously

recognized impairment loss be reversed. The decision to

recognize an impairment loss (or a reversal) involves

estimates of the reasons for the potential impairment (or

recovery), as well as the timing and amount. In note 8.2

it is assessed the impairment of these investments.

There is a significant element of judgment involved in

the estimates required to determine recoverable

amount and the assumptions regarding the

performance of these investments, since the timing and

scope of future changes in the business are difficult to

predict.

Deferred taxes

The Company assesses the recoverability of deferred

tax assets based on estimates of future earnings, and of

all the options available to achieve an outcome, it

considers the most efficient one in terms of tax within

the legal framework the Company is subject to. The

ability to recover these taxes depends ultimately on the

Company’s ability to generate taxable earnings over the

period for which the deferred tax assets remain 

deductible. This analysis is based on the estimated

schedule for reversing deferred tax liabilities, the

expected outcome from pending lawsuits affecting the

estimations as well as estimates of taxable earnings,

which are sourced from internal projections and are

continuously updated to reflect the latest trends.

The appropriate valuation of tax assets and liabilities

depends on a series of factors, including estimates as to

the timing and realization of deferred tax assets and the

projected tax payment schedule. Actual income tax

receipts and payments could differ from the estimates

made by the Company as a result of changes in tax

legislation, the outcome of ongoing tax proceedings or

	Individual Annual Report 2024	Telefónica, S. A.	11

Financial statements 2024	Index

unforeseen future transactions that could affect tax

balances. The information about deferred tax assets and

unused tax credits for loss carryforwards, whose effect

has been registered when necessary in balance, is

included in note 17.

	Individual Annual Report 2024	Telefónica, S. A.	12

Financial statements 2024	Index

Note 3. Proposed appropriation

of net results

Telefónica, S.A. obtained a profit of 563 million euros in 2024.

Accordingly, the Company’s Board of Directors will

submit the following proposed appropriation of 2024 net

results for approval at the General Shareholders’

Meeting:

Millions of euros
Proposed appropriation:
Profit for the year	563
Distribution to:
Legal reserve	—
Unrestricted reserves	563

	Individual Annual Report 2024	Telefónica, S. A.	13

Financial statements 2024	Index

Note 4. Recognition and

measurement accounting policies

As stated in note 2, the Company’s financial statements

have been prepared in accordance with the accounting

principles and standards contained in the Código de

Comercio, which are further developed in the Plan

General de Contabilidad currently in force (PGC 2007),

modified by RD 602/2016 and RD 1/2021 as well as any

commercial regulation in force at the reporting date.

Accordingly, only the most significant accounting

policies used in preparing the accompanying financial

statements are set out below, in light of the nature of

the Company’s activities as a holding.

a) Intangible assets

Intangible assets are stated at acquisition or production

cost, less any accumulated amortization or any

accumulated impairment losses.

Intangible assets are amortized on a straight-line basis

over their useful lives. The most significant items

included in this caption are computer software, which

are generally amortized on a straight-line basis over

three years.

b) Property, plant and equipment

and investment property

Property, plant and equipment is stated at cost, net of

accumulated depreciation and any accumulated

impairment in value.

The Company depreciates its property, plant and

equipment once the assets are in full working conditions

using the straight-line method based on the assets’

estimated useful lives, calculated in accordance with

technical studies which are revised periodically based

on technological advances and the rate of dismantling,

as follows:

Estimated useful life	Years
Buildings	40
Plant and machinery	3 - 25
Other plant or equipment, furniture and office equipment	10
Other items of property, plant and equipment	4 - 10

Investment property is measured and depreciated using

the same criteria described for land and buildings for

own use.

c) Impairment of non-current assets

Non-current assets are assessed at each reporting date

for indicators of impairment. If such indicators exist, or if

an asset's nature requires an annual impairment test, the

Company estimates the asset’s recoverable amount as

the higher of its fair value less costs of disposal and the

present value of expected future cash flows.

For investments in equity instruments, cash flows may

be estimated on the basis of expected dividends and the

investment's disposal value, or based on the share of

cash flows generated by the investee. In the absence of

better evidence of the recoverable amount, the

investee's net equity, adjusted for after-tax existing

unrealised gains, is considered. If the investee holds

investments in other entities, the consolidated net

equity under Spanish accounting standards is used as a

reference.

Impairment is recognised as an expense in the income

statement and, in the event of reversal, it is recorded as

income, without exceeding the carrying amount that the

investment would have had if it had never been

impaired.

d) Financial assets and liabilities

The main future assumptions as well as other

uncertainties related to estimations at year end which

could cause a significant effect in the financial

statements are disclosed below.

Financial investments

"Investments in group companies, joint ventures and

associates” are classified into a category of the same

name and are shown at cost less any impairment loss

(see note 4.c). Group companies are those over which

the Company exercises control, either by exercising

effective control or by virtue of agreements with the

other shareholders. Joint ventures are companies which

are jointly controlled with third parties. Associates are

companies in which there is significant influence, but

not control or joint control with third parties. Telefónica

assesses the existence of significant influence not only

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Financial statements 2024	Index

in terms of percentage ownership but also in qualitative

terms such as presence on the board of directors,

involvement in decision-making, the exchange of

management personnel, and access to technical

information.

Financial investments which the Company intends to

hold for an unspecified period of time and could be sold

at any time to meet specific liquidity requirements or in

response to interest rate movements and which have

not been included in the other categories of financial

assets defined in the RD 1/2021, which amends PGC

2007, are classified as financial assets at fair value

through equity. These investments are recorded under

“Non-current assets,” unless it is probable and feasible

that they will be sold within 12 months.

Derivative financial instruments and hedge

accounting

When Telefónica chooses not to apply hedge

accounting criteria but economic hedging, gains or

losses resulting from changes in the fair value of

derivatives are taken directly to the income statement.

e) Revenue and expenses

Revenue and expenses are recognized on the income

statement based on an accrual basis; i.e. when the

goods or services represented by them take place,

regardless of when actual payment or collection occurs.

A distribution of unrestricted reserves is considered as

dividend distribution, and therefore, is registered as

dividend revenue in the accounting of the receiving

Company whenever the distributing company and/or

any of its group's subsidiaries have gathered profits

above the amount of equity distributed.

When the Company receives free-allotment rights,

known as scrip dividends, that can be used to acquire

new shares at no cost or be sold in the market or to the

distributing company, it accounts for the concept as

dividend revenue with a counterpart of account

receivable on the distribution date.

The income obtained by the Company in dividends

received from Group companies and associates, and

from the interest accrued on loans and credits given to

them, are included in revenue in compliance with the

provisions of consultation No. 2 of BOICAC 79, published

on September 30, 2009.

f) Related party transactions

In business merger or spin-off transactions involving the

parent company and its direct or indirect subsidiary, as

well as in the case of non-monetary contributions of

business units between Group companies and in the

case of in-kind dividend distributions, the valuation of

the assets and liabilities should be done in accordance

with the Standards on Preparing Consolidated Financial

Statements (Spanish “NOFCAC”), at their pre-

transaction carrying amount in the consolidated

financial statements of the group or subgroup with a

Spanish parent company.

In the particular case of a contribution to a group

company of the shares of another group company, the

pre-transaction carrying amount in the standalone

financial statements of the contributing company could

be used, unless the net equity amount was higher, in

which case this amount was used.

The change in value arising in the contributing company

as a result of the above accounting treatment is

recognized in reserves.

g) Financial guarantees

The Company has provided guarantees to a number of

subsidiaries to secure their transactions with third

parties (see note 20.a). Where financial guarantees

provided have a counter-guarantee on the Company’s

balance sheet, the value of the counter-guarantee is

estimated to be equal to the guarantee given, with no

additional liability recognized as a result.

Guarantees provided for which there is no item on the

Company’s balance sheet acting as a counter-

guarantee are initially measured at fair value which,

unless there is evidence to the contrary, is the same as

the premium received plus the present value of any

premiums receivable. After initial recognition, these are

subsequently measured at the higher of:

i) The amount resulting from the application of the rules

for measuring provisions and contingencies.

ii) The amount initially recognized less, when applicable,

any amounts take to the income statement

corresponding to accrued income.

	Individual Annual Report 2024	Telefónica, S. A.	15

Financial statements 2024	Index

h) Consolidated data

As required under prevailing legislation, the Company

has prepared separate consolidated annual financial

statements, drawn up in accordance with International

Financial Reporting Standards (IFRS) as adopted by the

European Union. The balances of the main headings of

the Telefónica Group’s consolidated financial

statements for 2024 and 2023 are as follows:

Millions of euros
Item	2024	2023
Total assets	100,502	104,324
Equity:	22,749	27,096
Attributable to equity holders of the parent	19,347	21,852
Attributable to minority interests	3,402	5,244
Revenue from operations	41,315	40,652
Profit for the year:	209	(574)
Attributable to equity holders of the parent	(49)	(892)
Attributable to minority interests	258	318

	Individual Annual Report 2024	Telefónica, S. A.	16

Financial statements 2024	Index

Note 5. Intangible assets

The movements in the items composing intangible

assets and the related accumulated amortization in

2024 and 2023 are as follows: 

2024
Millions of euros	Opening balance	Additions and allowances	Disposals	Transfers	Closing balance
INTANGIBLE ASSETS, GROSS	285	6	(64)	(2)	225
Software	180	4	—	1	185
Other intangible assets	105	2	(64)	(3)	40
ACCUMULATED AMORTIZATION	(262)	(7)	56	—	(213)
Software	(170)	(6)	—	—	(176)
Other intangible assets	(92)	(1)	56	—	(37)
DEPRECIATION ACCRUAL	(8)	—	8	—	—
NET CARRYING AMOUNT	15	(1)	—	(2)	12

2023
Millions of euros	Opening balance	Additions and allowances	Disposals	Transfers	Closing balance
INTANGIBLE ASSETS, GROSS	276	9	—	—	285
Software	172	6	—	2	180
Other intangible assets	104	3	—	(2)	105
ACCUMULATED AMORTIZATION	(255)	(7)	—	—	(262)
Software	(165)	(5)	—	—	(170)
Other intangible assets	(90)	(2)	—	—	(92)
DEPRECIATION ACCRUAL	(8)	—	—	—	(8)
NET CARRYING AMOUNT	13	2	—	—	15

As of December 31, 2024 and 2023 commitments to

acquire intangible assets amount to 0.4 and 0.6 million

euros, respectively.

As of December 31, 2024 and 2023, the Company had

204 and 254 million euros, respectively, of fully

amortized intangible assets in use. During 2024, some

fully amortized intangible assets no longer in use have

been written off. The impact is shown as Disposal of

gross and accumulated amortization captions in the

2024 chart of movements.

	Individual Annual Report 2024	Telefónica, S. A.	17

Financial statements 2024	Index

Note 6. Property, plant and

equipment

The movements in the items composing property, plant

and equipment (PP&E) and the related accumulated

depreciation in 2024 and 2023 are as follows:

2024
Millions of euros	Opening balance	Additions and allowances	Disposals	Transfers	Closing balance
PROPERTY, PLANT AND EQUIPMENT, GROSS	573	12	—	5	590
Land and buildings	207	3	—	4	214
Plant and other PP&E items	364	8	—	2	374
PP&E under construction and prepayments	2	1	—	(1)	2
ACCUMULATED DEPRECIATION	(444)	(10)	—	1	(453)
Buildings	(131)	(3)	—	1	(133)
Plant and other PP&E items	(313)	(7)	—	—	(320)
NET CARRYING AMOUNT	129	2	—	6	137

2023
Millions of euros	Opening balance	Additions and allowances	Disposals	Transfers	Closing balance
PROPERTY, PLANT AND EQUIPMENT, GROSS	559	6	—	8	573
Land and buildings	199	—	—	8	207
Plant and other PP&E items	356	5	—	3	364
PP&E under construction and prepayments	4	1	—	(3)	2
ACCUMULATED DEPRECIATION	(428)	(10)	—	(6)	(444)
Buildings	(122)	(3)	—	(6)	(131)
Plant and other PP&E items	(306)	(7)	—	—	(313)
NET CARRYING AMOUNT	131	(4)	—	2	129

Firm commitments to acquire property, plant and

equipment at December 31, 2024 and 2023 amounted

to 0.4 and 0.5 million euros, respectively.

At December 31, 2024 and 2023, the Company had 359

and 353 million euros, respectively, of fully depreciated

items of property, plant and equipment.

Telefónica, S.A. has taken on insurance policies with

appropriate limits to cover the potential risks which

could affect its property, plant and equipment.

“Property, plant and equipment” includes the net

carrying amount of the land and buildings occupied by

Telefónica, S.A. at its Distrito Telefónica headquarters,

amounting to 60 and 61 million euros at 2024 and 2023

year-ends, respectively. It also includes the net carrying

amount of the remaining assets in this site (mainly

property, plant and equipment items) of 22 and 21 million

euros at December 31, 2024 and 2023, respectively.

	Individual Annual Report 2024	Telefónica, S. A.	18

Financial statements 2024	Index

Note 7. Investment properties

The movements in the items composing investment

properties in 2024 and 2023 and the related

accumulated depreciation are as follows:

2024
Millions of euros	Opening balance	Additions and allowances	Disposals	Transfers	Closing balance
INVESTMENT PROPERTIES, GROSS	437	—	—	(2)	435
Land	100	—	—	—	100
Buildings	337	—	—	(2)	335
ACCUMULATED DEPRECIATION	(138)	(8)	—	(1)	(147)
Buildings	(138)	(8)		(1)	(147)
NET CARRYING AMOUNT	299	(8)	—	(3)	288

2023
Millions of euros	Opening balance	Additions and allowances	Disposals	Transfers	Closing balance
INVESTMENT PROPERTIES, GROSS	439	—	—	(2)	437
Land	100	—	—	—	100
Buildings	339	—	—	(2)	337
ACCUMULATED DEPRECIATION	(130)	(8)	—	—	(138)
Buildings	(130)	(8)	—	—	(138)
NET CARRYING AMOUNT	309	(8)	—	(2)	299

“Investment properties” mainly includes in both 2024

and 2023 the value of land and buildings leased by

Telefónica, S.A. to other Group companies in Distrito

Telefónica, the operational headquarters in Madrid.

In 2024 the Company has buildings with a total area of

263,320 square meters (263,325 square meters in 2023)

leased to several Telefónica Group companies,

equivalent to an occupancy rate of 73.65% of the

buildings it has earmarked for lease (75.21% in 2023).

Total income from leased buildings in 2024 and 2023

(see note 19.1.a) amounted to 34 million euros for both

years.

Future minimum rentals receivable under non-

cancellable leases are as follows:

	2024	2023
Millions of euros	Future minimum recoveries	Future minimum recoveries
Up to one year	30	29
Between two and five years	—	—
Total	30	29

The most significant lease contracts held with

subsidiaries occupying Distrito Telefónica have been

renewed in 2024 for a non-cancellable period of 12

months.

The main operating leases in which Telefónica, S.A. acts

as lessee are described in note 19.5.

	Individual Annual Report 2024	Telefónica, S. A.	19

Financial statements 2024	Index

Note 8. Investments in group

companies and associates

8.1. Detail and evolution of investment in group companies and associates:

2024
Millions of euros	Opening balance	Additions	Disposals	Transfers	Exchange rate impacts	Dividends	Net investment hedges	Closing balance	Fair value
Equity instruments (Net) (1)	52,966	(2,132)	(1,438)	743	—	(87)	(402)	49,650	77,615
Equity instruments (Cost)	91,449	2,273	(1,548)	—	—	(87)	(402)	91,685
Impairment losses	(38,483)	(4,405)	110	743	—	—	—	(42,035)
Loans to Group companies and associates	432	4	—	—	6	—	—	442	447
Other financial assets	9	16	—	(17)	—	—	—	8	8
Total non-current investment in Group companies and associates	53,407	(2,112)	(1,438)	726	6	(87)	(402)	50,100	78,069
Loans to Group companies and associates	1,625	1,946	(1,699)	—	(7)	—	—	1,865	1,865
Derivatives	3	3	—	—	—	—	—	6	6
Other financial assets	66	43	(80)	17	—	—	—	46	46
Total current investments in Group companies and associates	1,694	1,992	(1,779)	17	(7)	—	—	1,917	1,917

(1) Fair value at December 31, 2024 of Group companies and associates quoted in an active market (Telefônica Brasil, S.A.) was calculated taking the listing of the

investments on the last day of the year; the rest of the shareholdings are stated at the value of discounted cash flows based on those entities business plans.

2023
Millions of euros	Opening balance	Additions	Disposals	Transfers	Exchange losses	Dividends	Net investment hedges	Closing balance	Fair value
Equity instruments (Net) (1)	55,445	345	(425)	—	—	(2,491)	92	52,966	78,437
Equity instruments (Cost)	92,810	1,553	(515)	—	—	(2,491)	92	91,449
Impairment losses	(37,365)	(1,208)	90	—	—	—	—	(38,483)
Loans to Group companies and associates	245	235	(1)	(50)	3	—	—	432	437
Other financial assets	15	26	(3)	(29)	—	—	—	9	9
Total non-current investment in Group companies and associates	55,705	606	(429)	(79)	3	(2,491)	92	53,407	78,883
Loans to Group companies and associates	1,470	1,885	(1,786)	50	6	—	—	1,625	1,624
Derivatives	5	—	(2)	—	—	—	—	3	3
Other financial assets	55	8	(26)	29	—	—	—	66	66
Total current investments in Group companies and associates	1,530	1,893	(1,814)	79	6	—	—	1,694	1,693

(1) Fair value at December 31, 2023 of Group companies and associates quoted in an active market (Telefônica Brasil, S.A. and Telefónica Deutschland Holding,

A.G.) was calculated taking the listing of the investments on the last day of the year; the rest of the shareholdings are stated at the value of discounted cash

flows based on those entities business plans.

	Individual Annual Report 2024	Telefónica, S. A.	20

Financial statements 2024	Index

a) Most significant transactions

The most significant transactions occurred in 2024 and

2023 as well as their accounting impacts are described

below:

2024

On November 7, 2023, Telefónica, through its subsidiary

Telefónica Local Services GmbH, launched a partial

voluntary public tender offer for shares of Telefónica

Deutschland Holding AG (“Telefónica Deutschland”).

The Offer acceptance period began on December 5,

2023 and ended on January 17, 2024 (both inclusive).

When the acceptance period was over, on January 23,

2024, with the aim of funding the payment to the

shareholders' who agreed to the offer, Telefónica Local

Services, GmbH launched a capital increase fully

subscribed and disbursed by Telefónica, S.A. amounting

to 550 million euros.

On March 20, 2024, Telefónica launched a public

delisting offer with the objective of acquiring the shares

of Telefónica Deutschland that were not directly or

indirectly owned by Telefónica at that time (the

“Delisting Offer”). The offer closed on April 18, 2024.

Needing to raise funding for the additional payment to

shareholders, Telefónica Local Services, GmbH (TLS) on

April 23, 2024 completed an additional capital increase

of 111 million euros fully subscribed and paid by

Telefónica, S.A.

Simultaneously, during 2024 Telefónica, S.A. continued

acquiring in the stock market shares of Telefónica

Deutschland totaling 256 million euros. Additionally, the

Company executed an equity swap purchasing

additional shares with a total cost of 92 million euros.

Once the delisting process of the affiliate was finalized,

Telefónica decided to transfer its direct stake in

Telefónica Deutschland, to its subsidiary TLS. As a

consequence, on May 23, 2024 Telefónica, S.A. carried

out an in-kind contribution of its investment in

Telefónica Deutschland to TLS. In accordance with the

accounting principles , the disposal has been registered

by the net carrying value (amounting to 1,255 million

euros), and shown as Disposal in 2024 chart of

movements. On the other hand, the impact in TLS

investment has been shown as Addition at its

consolidated book value as adjusted to Spanish

standards, 875 million euros in 2024 chart of

movements. The difference between both amounts has

been recorded in Other reserves as mentioned in note

11.

2023

On January 18, 2023 the shareholders of Pontel

Participaciones, S.L., an affiliated company of Telefónica,

S.A. (with a 83.35% ownership as of that date), approved

a capital increase of 223 million euros. Telefónica, S.A.

contributed with 111 million euros, decreasing its

percentage of ownership in the subsidiary to 70%. The

transaction is reflected as Additions in the 2023 chart of

movements. On February 7, 2023 the general

shareholders' meeting of Pontel Participaciones, S.L.

agreed to an additional paid-in capital and reserves

distribution of 688 million euros. Telefónica, S.A.

received 551 millions of euros and according to the

accounting principles, 492 million were registered as

investment reimbursement and this movement shown

as Dividends in 2023 chart of movements. On March 16,

2023 and accounting effects January 1, 2023 Telxius

Telecom, S,A. (absorbing entity) and Pontel

Participaciones, S.L. (absorbed entity) carried out a

merger. The effect of the transaction, amounting to 403

million euros is shown as Disposals in 2023 chart of

movements.

On February 2, 2023 Telefónica, S.A. granted a credit

facility of 175 million euros to Pontel Participaciones, S.L..

The credit was cancelled on March 16, 2023, the date of

the above mentioned merger. These transactions are

shown as Additions and Disposals in 2023 chart of

movements.

On January 18, 2023 in order to rebalance the equity

situation, Telefónica Innovación Digital, S.L. (previously

Telefónica Digital España, S.L.) carried out a capital

increase of 45 million euros subscribed and paid in full

by Telefónica, S.A. On October 31, 2023 the merger

between Telefónica Innovación Digital, S.L. as absorbing

entity and Telefónica Investigación y Desarrollo, S.A.

(absorbed entity) was filed to the Commercial Registry.

Telefónica, S.A. was the sole shareholder in both

companies. With accounting effects on January 1, 2023

and according to the accounting principles, a disposal

was registered and shown as Disposals in 2023 chart of

movements (32 million euros of cost and 18 million euros

of impairment). The cost of the investment in the

absorbing entity was increased by 13 million euros and

shown as Additions in 2023 chart of movements.

In January 2023, the Company sold its investment in

Telefónica Ingeniería de Seguridad, S.A. to Telefónica

Filiales España, S.A. by 6 million euros. The sale is

reflected in 2023 chart of movements as Disposals

(under the caption cost of the investment by 78 million

euros and 72 million euros under the impairment

caption).

All the aforementioned transactions in 2024 and 2023

have been valued in accordance with the accounting

principles.

	Individual Annual Report 2024	Telefónica, S. A.	21

Financial statements 2024	Index

b) Acquisitions of investments and capital

increases (Additions)

Millions of euros
Companies	2024	2023
TLH HOLDCO, S.L.	—	38
Telefónica Hispanoamérica, S.A.	220	380
Telefónica Local Services, GmbH	1,536	—
Telefónica Tech, S.L.	—	36
Telefónica Infra, S.L.	133	103
Telefónica Deutschland Holding, A.G.	348	813
Pontel Participaciones, S.L.	—	111
Telefónica Innovación Digital, S.L. (previously Telefónica Digital España, S.L.)	—	58
Other companies	36	14
Total group and associated companies	2,273	1,553

2024

On March 18, 2024 Telefónica Hispanoamérica, S.A. has

completed a capital increase by 220 million euros, fully

subscribed and paid by Telefónica, S.A.

In 2024 the Company has carried out several

contributions to the reserves of Telefónica Infra, S.L. in

March, June, September and December totaling 133

million euros. These contributions to distributable

reserves have had no issuance of new shares.

The amounts regarding TLS and Telefónica

Deutschland Holding, A.G. have been disclosed at the

beginning of this note.

2023

On March 21, 2023 Telefónica Hispanoamérica, S.A.

completed a share capital increase of 380 million euros

totally subscribed and disbursed by Telefónica, S.A.

In 2023 the Company carried out several contributions

to the reserves of Telefónica Infra, S.L. in March, June,

August, October and December totaling 103 million

euros. These contributions to distributable reserves had

no issuance of new shares.

During 2023 the Company acquired in the stock market

shares of Telefónica Deutschland Holding, A.G. (352

million shares for a total amount of 813 million euros).

The amount corresponding to Pontel Participaciones,

S.L. is framed within the transactions detailed at the

beginning of this note.

The figure shown for Telefónica Innovación Digital, S.L.

(previously Telefónica Digital España, S.L.) is disclosed

at the beginning of this note.

c) Disposals of investments and capital

decreases

Millions of euros
Companies	2024	2023
Telefónica Deutschland Holding, A.G.	1,255	—
Telefônica de Brasil, S.A.	292	—
Pontel Participaciones, S.L.	—	403
Telefónica Investigación y Desarrollo, S.A.	—	32
Telefónica Ingeniería de Seguridad, S,A.	—	78
Other companies	1	2
Total group and associated companies	1,548	515

2024

Pursuant to the agreement of the General Shareholders'

Meeting held on November 8, 2023, on March 25, 2024

Telefônica de Brasil, S.A. carried out a reduction of its

share capital with a return of contributions to the

shareholders' by 1,500 million Brazilian Reais of which

Telefónica, S.A. was entitled, based on its percentage of

ownership, to 576 million Brazilian Reais, equivalent to

107 million euros. In accordance with the accounting

principles, the transaction has been reflected as

Disposal both in the cost of the investment by 292

million euros and in the impairment accrual by 110 million

euros within the 2024 chart of movements. Moreover, a

negative impact of 75 million euros has been expensed

under the caption "Losses on disposals and other" of the

income statement.

The amount shown for Telefónica Deutschland Holding,

A.G. refers to the in-kind contribution carried out by

Telefónica, S.A. to TLS as explained in the beginning of

this note.

2023

The amount referring to Pontel Participaciones, S.L.

related to the merger with Telxius Telecom, S.A. detailed

at the beginning of this note.

The disposal of Telefónica Investigación y Desarrollo,

S.A. related to the cost of the investment in the merger

with Telefónica Innovación Digital, S.L. (previously

Telefónica Digital España, S.L.) detailed at the beginning

of the note.

The amount corresponding to Telefónica Ingeniería de

Seguridad, S.A. was disclosed at the beginning of this

note.

d) Other movements

On December 10, 2024 Telefónica Local Services,

GmbH has distributed a 145 million dividend. After

completing an accounting assesment, 83 million euros

have been registered as investment reimbursement and

shown as Dividends in 2024 chart of movements. The

	Individual Annual Report 2024	Telefónica, S. A.	22

Financial statements 2024	Index

remaining amount has been registered as dividend

revenue (see note 19).

On December 22, 2023 Telefónica Latinoamérica

Holding, S.L. completed a dividend distribution by 1,994

million euros. After completing an accounting

assesment, the transaction has been registered as

investment reimbursement as Dividends in 2023 chart

of movements.

8.2. Assessment of impairment of

investments in group companies,

joint ventures and associates

At each year end, the Company re-estimates the future

cash flows derived from its investments in Group

companies and associates. The estimation is calculated

based on the subsidiaries' business plans approved by

the Board of Telefónica, S.A.

The business plans of the subsidiaries covers a three-

year period, including the closing year. In order to

complete the five years of cash flows after the closing

year, an additional normalization period is added to the

business plans on the operating ratios until the terminal

parameters are reached. The consensus' forecasts are

used as a reference. For specific cases, extended

business plans are used to cover the five-year period of

cash flows, when the normalization period does not

properly reflect the expected evolution of the business.

In the specific case of the indirect investment in the JV

in the United Kingdom, the future cash flows used in the

calculation of the value in use carried out by the JV are

based on ten-year financial forecasts included as a part

of the latest business plan approved by the Board of

Directors of VMED O2 UK Limited (VMO2) for use in

goodwill impairment testing, considering that in such

period the operating variables until the perpetuity

parameters are reached. This time horizon has been

used to properly reflect capital-intensive projects, such

as the fiber rollout plan.

The estimated value is based on the business plans of

each subsidiary expressed in its functional currency,

discounted using the appropriate rate, net of the

liabilities associated with each investment (mainly net

debt), considering the percentage of ownership in each

subsidiary and translated to euros at the official closing

rate of each currency at December 31. The main

assessments used to determine the discounted cash

flows are the revenue growth, the long term EBITDA

margin, the long term investment ratio, the weighted

average cost of capital (WACC) and the perpetual

growth rate, indicators employed by the Group in its

investments valuation.

Moreover, and only for the companies where

discounted cash flow analysis is not available due to the

specific nature of their businesses, the impairment is

calculated by comparing their equity figure as of the end

of the period and the net book value of those

investments.

As a result of these estimations and the effect of the net

investment hedge, in 2024 an impairment provision of

4,405 million euros was recognized (1,208 million euros

in 2023). This amount derives mainly from the following

companies: 

a. a write down reversal, net of hedges, of 931 million

euros for Telefónica O2 Holdings, Ltd. (write down of

3,169 million euros, net of hedges, was registered in

2023) due to the outcome of the impairment test

carried out at year-end as well as the positive

evolution of the pound sterling exchange rate in

2024 (see note 19.8).

b. a write down reversal for TLH HOLDCO, S.L.

amounting to 134 million euros. In 2023 a write down

of 660 million euros was registered due to the

Argentinian peso devaluation in December 2023.

c. a write down, net of hedges, of 604 million euros for

Telefônica Brasil, S.A. (1,215 million euros of write

down reversal in 2023).

d. a write down by 2,481 million euros for Telefónica

Hispanoamérica, S.A. (348 million euros in 2023)

mainly due to the fall in the valuation of the

investments in Peru, Chile, and Colombia.

The aforementioned write off has set the carrying

value of the investment in Telefónica

Hispanoamérica, S.A. in a negative amount of 743

million euros as of December 31, 2024. Therefore, the

concept has been reclassified as a non current

provision (note 18) and shown as Transfers in the

2024 chart of movements included at the beginning

of this note.

e. a write down of 1,772 million euros for Telefónica

Latinoamérica Holding, S.L. (write down reversal by

1,770 million euros in 2023) mainly due to the

valuation of its investment in Brazil.

f. a write down of 667 million euros for O2 Europe, Ltd.

mainly caused by the dividend distributed by the

subsidiary with the corresponding decrease in its net

cash figure. The dividend has been registered as

Dividend revenue (see note 19.1). There was no write

down in 2023 related to this investment.

Main assumptions used for the calculation of

the discounted cash flows of investments

United Kingdom

Long term growth and operational ratios considered in

the assessment of the value in use of VMO2 are aligned

within analyst ranges for peer companies in the region.

	Individual Annual Report 2024	Telefónica, S. A.	23

Financial statements 2024	Index

In terms of revenues, despite challenges in the

competitive environment, the strategic plan reflects a

trend of growth in the long term projections, in line with

the estimated industry evolution in the UK. Regarding

EBITDA margin over a two-year horizon, analysts'

estimates for peer companies in Europe range between

32% to 41%, while the analysts long-term capex to

revenue ratio range within 12% to 15%. The WACC

(Weighted average cost of capital) used to discount the

cash flows is 7.7% as of December 2024. Terminal

growth rate is set at 1%, below the real terminal growth

forecasted for the UK economy.

Brazil

The country has once again surprised the market in

2024 in terms of economic growth. The country will

grow for the fourth year in a row, clearly above its

potential, thanks to the boost from private consumption

and, although to a lesser extent, investment. However,

this dynamism is largely explained by the expansion of

public spending that the government is carrying out,

which has led to an increase in the inflation rate and

greater distrust in fiscal credibility and sustainability,

which has forced the Central Bank to a sharp rise in the

interest rates. This will have a negative impact in the

medium term via both the need for a future adjustment

or through more restrictive financial conditions.

As far as the relevant variables considered in the

calculation of the value in use are concerned, the long-

term EBITDA margin two-year estimates of Telefónica

Group's analysts for the operator in Brazil, it is in a range

within 41% to 44%. Regarding investments, the operator

will invest in the horizon of the projected plan a

percentage that is aligned with the investment needs

planned for the development of its business, which is

located in a range between 10% and 16%. The WACC

after taxes used for year-end 2024 is 11.5% (12% in 2023).

The perpetual growth rate has stabilized in 4% since

2023.

Moreover, the depreciation of Brazilian real against euro

by 16.88% has been noteworthy causing a relevant

negative impact, net of hedges, in the value of the

investment (see note 19.8).

Chile

The economic growth of Chilean economy remains at a

low rate with financial stress and still suffering from the

impacts of the recent inflationary and cost crisis, which

prevents greater monetary ease.

With this economic scenario, internal demand is

expected to remain weak and competitive intensity will

remain strong. Due to all this, the growth of the main

operating variables has been lower comparing to the

prior year impairment analysis. The discount rate

(WACC) used to calculate the value in use as of

December 31, 2024 has been 8.5% after taxes (10.4%

pre-taxes and the perpetuity growth rate used in the

valuations has been 2.8%.

8.3. Detail of subsidiaries and

associates

The detail of subsidiaries and associates is shown in

Appendix I.

8.4. Transactions protected for tax

purposes

Transactions carried out in 2024 that qualify for special

tax regime, as defined in Articles 76 and 87, as

applicable, of Chapter VII of Title VII of Legislative Royal

Decree 27/2014 of November 27 approving the Spanish

Corporate Income Tax Law, are detailed in the following

paragraphs. Transactions qualified for special tax regime

carried out in prior years are disclosed in the financial

statements for those years.

On January 1, 2024, the merger by absorption between

Telefónica Móviles de Argentina S.A. and Telefónica de

Argentina S.A. took effect for operations, accounting

and tax purposes, and all assets and liabilities, including

registrable assets, rights and obligations belonging to

Telefónica de Argentina S.A., as the absorbed company,

were incorporated into the equity of Telefónica Móviles

de Argentina S.A., in its capacity of absorbing and

continuing company.The net carrying value of the

absorbed company, Telefónica Argentina, S.A.,

amounted to 125,028 thousand euros, and said value

being the same as that for the shares received in the

merged company. The tax value of the shares delivered

and received amounted to 388,411 thousand euros.

8.5. Maturity of loans to Group

companies and associates

The breakdown and maturity of loans to Group

companies and associates in 2024 and 2023 are as

follows:

	Individual Annual Report 2024	Telefónica, S. A.	24

Financial statements 2024	Index

2024
Millions of euros
Company	2025	2026	2027	2028	2029	2030 and subsequent years	Final balance, current and non- current
Telefónica Móviles España, S.A.U.	677	—	—	—	—	—	677
Telefónica Cybersecurity & Cloud Tech, S.L.	1	—	121	—	—	—	122
Telefónica de España, S.A.U.	827	—	—	—	—	—	827
Telxius Telecom, S.A.	2	50	—	—	235	—	287
Telefônica Brasil, S.A.	115	—	—	—	—	—	115
Telefónica Finanzas, S.A.U.	159	—	—	—	—	—	159
Other companies	84	—	—	—	—	36	120
Total	1,865	50	121	—	235	36	2,307

2023
Millions of euros
Company	2024	2025	2026	2027	2028	2029 and subsequent years	Final balance, current and non- current
Telefónica Móviles España, S.A.U.	776	—	—	—	—	—	776
Telefónica Cybersecurity & Cloud Tech, S.L.	4	—	—	116	—	—	120
Telefónica de España, S.A.U.	473	—	—	—	—	—	473
Telxius Telecom, S.A.	50	—	50	—	235	—	335
Telefônica Brasil, S.A.	133	—	—	—	—	—	133
Telefónica Finanzas, S.A.U.	138	—	—	—	—	—	138
Other companies	51	—	—	—	—	31	82
Total	1,625	—	50	116	235	31	2,057

The main loans granted to Group and associated

companies are described below:

• The outstanding balance with Telefónica Móviles

España, S.A.U. in 2024 includes dividends distributed

in December 2024, amounting to 522 million euros

and uncollected as of the date of these financial

statements.

In addition, in 2024 there are 155 million euros of tax

balances receivable from this subsidiary for its tax

expense declared in the consolidated tax return (99

million euros in 2023).

• On March 21, 2022 the Company granted a credit to

its subsidiary Telefónica Cybersecurity & Cloud Tech,

S.L. of 140 million pounds sterling and maturity date on

June 21, 2022. At maturity date, the credit was partially

cancelled and the outstanding amount, 100 million

pounds sterling, extended its maturity date until 2027.

The equivalent amount of this credit at year end

amounts to 121 million euros (116 million euros in 2023).

Moreover, there are uncollected interests accounted

as current amounting to 1 million euros both in 2024

and 2023.

In 2024 there are no tax balances receivable from this

subsidiary for its tax expense declared in the

consolidated tax return (3 million euros of tax amounts

outstanding in 2023).

• The balance of Telefónica de España, S.A.U. in 2024

includes an amount of 815 million euros of dividends

distributed in December 2024 and uncollected as of

the date of these financial statements.

In 2024 there are 12 million euros corresponding to tax

receivables from the subsidiary for its tax expense

declared in the consolidated tax return. There were no

outstanding amounts to be collected in 2023 for this

concept.

• In 2024 the installment by 50 million euros granted in

2016 to Telxius Telecom, S.A. was cancelled according

to its maturity date (see note 21). As far as the credits

granted to the subsidiary in 2016 are concerned, the

only outstanding amount is 50 million euros with a

maturity date in 2026 as shown in the disclosure.

In December 2023 a new loan was granted with a total

figure of 235 million euros and a variable interest rate.

It was disbursed in two tranches by 153 and 82 million

euros, respectively. The maturity date of the loan was

	Individual Annual Report 2024	Telefónica, S. A.	25

Financial statements 2024	Index

originally December 2028, with an additional one-year

extension at grantee request. This option has been

exercised in 2024 and the maturity has been extended

until December 2029.

• The balance totaling 115 million euros shown in 2024

with Telefônica Brasil, S.A. entirely corresponds to

dividends agreed by the subsidiary and unpaid at year

end (133 million euros in December 2023).

• The balance of Telefónica Finanzas, S.A.U. in

December 2024 includes dividends distributed and

uncollected at year end amounting to 115 million euros

(118 million euros in 2023).

Moreover, in 2024 there are uncollected balances of

44 million euros of tax balances receivable from this

subsidiary for its tax expense declared in the

consolidated tax return (20 million euros in 2023).

In the 2024 chart of movements, additions of current

loans to group companies and associates comprise 292

million euros (161 million euros in 2023) of loans in

connection with the taxation of Telefónica, S.A. as the

head of the tax group pursuant to the consolidated tax

regime applicable to corporate groups (see note 17). The

most significant amounts have already been disclosed

through this note. All these amounts fall due in the short

term.

Disposals of current loans to group companies and

associates includes the cancellation of balances

receivable from subsidiaries on account of their

membership of Telefónica, S.A.’s tax group totaling 161

million euros (548 million euros in 2023).

Total accrued interest receivable at December 31, 2024

and 2023 included under the caption Current loans to

group companies and associates amount to 2.4 and 2.3

million euros, respectively.

8.6. Other financial assets with

Group companies and associates

This includes rights to collect amounts from other Group

companies related to share-based payment plans

involving Telefónica, S.A. shares offered by subsidiaries

to their employees.

Invoices of share plans that were already vested and are

outstanding at year end are shown as other current

financial assets. Amounts derived from the new share

plans launched in 2024 and 2023 with a maturity date

longer than 2024 are included as other non-current

financial assets (see note 19.3).

	Individual Annual Report 2024	Telefónica, S. A.	26

Financial statements 2024	Index

Note 9. Financial investments

9.1. The breakdown of “Financial investments” at December 31, 2024 and 2023 is as follows:

2024
	Assets at fair value								Assets at amortized cost
					Measurement hierarchy
Millions of euros	Financial Assets at fair value with changes  through  equity	Financial assets at fair value with changes through income statement	Hedges with changes through equity	Subtotal assets at fair value	Level 1: quoted prices	Level 2: Estimates based on other directly observable market inputs	Level 3: Estimates not based on observable market data		Financial assets at amortized cost	Other financial assets at amortized cost	Subtotal financial assets at amortized cost	Fair value	Total carrying amount	Total fair value
Non-current financial investments	417	752	1,722	2,891	417	2,474	—		116	—	116	116	3,007	3,007
Equity instruments	417	—	—	417	417	—	—		—	—	—	—	417	417
Derivatives (Note 16)	—	752	1,722	2,474	—	2,474	—		—	—	—	—	2,474	2,474
Loans to third parties and other financial assets	—	—	—	—	—	—	—		116	—	116	116	116	116
Current financial investments	—	91	277	368	—	368	—		531	42	573	573	941	941
Loans to third parties and other financial assets	—	—	—	—	—	—	—		531	42	573	573	573	573
Derivatives (Note 16)	—	91	277	368	—	368	—		—	—	—	—	368	368
Total financial investments	417	843	1,999	3,259	417	2,842	—		647	42	689	689	3,948	3,948

	Individual Annual Report 2024	Telefónica, S. A.	27

Financial statements 2024	Index

2023
	Assets at fair value								Assets at amortized cost
					Measurement hierarchy
Millions of euros	Financial Assets at fair value with changes though  equity	Financial assets at fair value with changes through income statement	Hedges with changes through equity	Subtotal assets at fair value	Level 1: quoted prices	Level 2: Estimates based on other directly observable market inputs	Level 3: Estimates not based on observable market data		Financial assets at amortized cost	Other financial assets at amortized cost	Subtotal assets at amortized cost	Fair value	Total carrying amount	Total fair value
Non-current financial investments	466	508	1,365	2,339	466	1,873	—		282	—	282	282	2,621	2,621
Equity instruments	466	—	—	466	466	—	—		—	—	—	—	466	466
Derivatives (Note 16)	—	508	1,365	1,873	—	1,873	—		—	—	—	—	1,873	1,873
Loans to third parties and other financial assets	—	—	—	—	—	—	—		282	—	282	282	282	282
Current financial investments	—	96	244	340	—	340	—		62	—	62	62	402	402
Loans to third parties and other financial assets	—	—	—	—	—	—	—		62	—	62	62	62	62
Derivatives (Note 16)	—	96	244	340	—	340	—		—	—	—	—	340	340
Total financial investments	466	604	1,609	2,679	466	2,213	—		344	—	344	344	3,023	3,023

Derivatives are measured using the valuation techniques and models normally used in

the market, based on money-market curves and volatility prices available in the

market.

Additionally, on this valuation, the credit valuation adjustment or CVA net for

counterparty (CVA + DVA), which is the methodology used to measure the credit risk

of the counterparties and of Telefónica itself is calculated to adjust the fair value

determination of the derivatives. This adjustment reflects the possibility of insolvency

or deterioration of the credit quality of the counterparty and Telefónica.

	Individual Annual Report 2024	Telefónica, S. A.	28

Financial statements 2024	Index

9.2 Financial assets at fair value with

changes though income statement

and hedges with changes through

equity

These two asset categories include the fair value of

outstanding derivative financial instruments at

December 31, 2024 and 2023 (see note 16).

9.3 Financial assets at fair value with

changes through equity

This category mainly includes the fair value of

investments in listed companies (equity instruments)

over which the Company does not have significant

control or influence. The movement of items composing

this category at December 31, 2024 and 2023 are as

follows:

December 31, 2024
Millions of euros	Opening balance	Disposals	Fair value adjustments	Closing balance
Banco Bilbao Vizcaya Argentaria, S.A.	363	—	54	417
China Unicom (Hong Kong), Ltd.	103	(144)	41	—
Total	466	(144)	95	417

December 31, 2023
Millions of euros	Opening balance	Disposals	Fair value adjustments	Closing balance
Banco Bilbao Vizcaya Argentaria, S.A.	249	—	114	363
China Unicom (Hong Kong), Ltd	105	—	(2)	103
Promotora de Informaciones, S.A. (PRISA)	4	(5)	1	—
Total	358	(5)	113	466

Banco Bilbao Vizcaya Argentaria, S.A. (BBVA)

At December 31, 2024 and 2023 Telefónica, S.A.'s

investment in BBVA represents 0.766% and 0.756%,

respectively, of that company's share capital at each

year-end.

China Unicom (Hong Kong), Ltd.

The investment in China Unicom (Hong Kong), Ltd. (182

million shares) in 2023 represented 0.593% of that

company's share capital.The shares are quoted in Hong

Kong stock exchange.

During the second half of 2024 the Company has traded

in the market the total amount of its shares in this

investment achieving an aggregate profit of 53 million

euros included under the caption "Net result on financial

assets at fair value with changes through equity" of the

income statement.

The impacts shown in the column Fair value

adjustments on both years include the fair value

adjustments in the quotation of these investments.

These impacts are registered in the equity of the

Company (note 11.2).

	Individual Annual Report 2024	Telefónica, S. A.	29

Financial statements 2024	Index

9.4 Financial assets at amortized

cost

The breakdown of investments included in this category

at December 31, 2024 and 2023 is as follows:

Millions of euros	2024	2023
Financial assets at amortized cost, non- current:
Deposits related to real state properties	6	6
Collateral guarantees	108	273
Marketable debt securities	2	3
Financial assets at amortized cost, current:
Loans to third parties	526	5
Collateral guarantees	39	55
Other current financial assets	8	2
Total	689	344

Collateral guarantees are comprised in both years under

the caption Financial assets at amortized cost and

classified in accordance with the maturity of the

underlying derivative instruments which they relate to.

In relation with collateral contracts, there is an additional

guarantee of 59,808 bonds issued by Telefónica

Emisiones, S.A.U. deposited in a securities account

owned by Telefónica, S.A. with a notional of 58 million

euros as of December 31, 2024 (there were 51,988 bonds

with a notional of 47 million euros as of December 31,

2023).

As detailed in note 20 b) of these financial statements,

on November 12, 2024, Telefónica has obtained a

favorable award regarding the investment dispute

submitted to the International Centre for Settlement of

Investment Disputes (“ICSID”) against the Republic of

Colombia. The Court has stated that the Republic of

Colombia failed to comply with its obligation to grant fair

and equitable treatment to Telefónica's investments

under Article 2(3) of the APPRI, and has ordered it to pay

the amount of 380 million U.S. dollars (equivalent to 365

million euros converted at year-end exchange rates)

plus compound interest at a rate of 5% as compensation

for the damages caused. Total accumulated accrued

interest as of December 31, 2024 amounts to 164 million

US dollars (equivalent to 158 million euros).

Moreover, the Company is entitled to be reimbursed for

the legal costs suffered during the proceeding.

Once the decision was received and following the legal

analysis carried out, Telefónica's management considers

that the decision represents a firm right of collection 

and therefore, it has been recorded in the financial

statements as of December 31, 2024 under the heading

loans to third parties in the 2024 column of the attached

table.

As indicated in note 20 b) the execution of the decision

is provisionally suspended until the court's decision,

which is expected in the short term.

In 2023 the concept of loans to third parties included

the uncollected amounts from financial entities as a

result of the maturity of derivative instruments.

Other current financial assets include in 2024 and 2023

the uncollected revenues from bank accounts.

	Individual Annual Report 2024	Telefónica, S. A.	30

Financial statements 2024	Index

Note 10. Trade and other

receivables

The breakdown of “Trade and other receivables” at

December 31, 2024 and 2023 is as follows:

Millions of euros	2024	2023
Trade receivables	30	28
Trade receivables from Group companies and associates	211	233
Other receivables	—	1
Employee benefits receivable	1	1
Tax receivables (Note 17)	23	237
Total	265	500

“Trade receivables from Group companies and

associates” mainly includes amounts receivable from

subsidiaries for the impact of the rights to use the

Telefónica brand and the monthly office rental fees (see

note 7).

Trade receivables and Trade receivables from Group

companies and associates in 2024 and 2023 include

balances in foreign currency equivalent to 104 and 98

million euros, respectively.

In 2024 and 2023 these amounts relate to receivables in

US dollars and pounds sterling.

These balances give rise to positive exchange rate

differences in the income statement by 5 and 3 million

euros in 2024 and 2023.

	Individual Annual Report 2024	Telefónica, S. A.	31

Financial statements 2024	Index

Note 11. Equity

11.1 Capital and reserves

a) Share capital

2024

At December 31, 2024, Telefónica, S.A.´s share capital

amounted to 5,670,161,554 euros and is divided into

5,670,161,554 common shares, of a single series and with

a par value of 1 euro each, fully paid in. All the shares of

the Company have the same characteristics and carry

the same rights and obligations. 

The Board of Directors of Telefónica, S.A. at its meeting

held on April 12, 2024, resolved to carry out the

implementation of the share capital reduction through

the cancellation of own shares approved by the Annual

General Shareholders’ Meeting held on the same day.

The share capital of Telefónica, S.A. was reduced in the

amount of 80,296,591 euros, through the cancellation of

80,296,591 own shares of the Company held as treasury

stock, with a nominal value of one euro each. The share

capital of the Company resulting from the reduction was

set at 5,670,161,554 euros corresponding to

5,670,161,554 shares with a nominal value of one euro

each. Related to the capital reduction the share

premium was reduced by 230 million euros.

The reduction did not entail the return of contributions

to the shareholders since the Company was the owner

of the cancelled shares. The reduction was carried out

with a charge to unrestricted reserves, through the

allocation of a reserve for cancelled share capital in an

amount equal to the nominal value of the cancelled

shares (i.e. for an amount of 80,296,591 euros). This

reserve for cancelled share capital can only be used if

the same requirements as those applicable to the

reduction of share capital are met. Therefore, in

accordance with the Section 335.c) of the Corporate

Enterprises Act, the creditors of the Company cannot

claim the opposition right disclosed in article 334 of the

Corporate Enterprise Act.

On May 13, 2024, the deed relating to the share capital

reduction was registered in the Commercial Registry of

Madrid.

The shares of Telefónica, S.A. are represented by book

entries that are listed on the Spanish Electronic Market

(within the selective Ibex 35 index) and on the four

Spanish Stock Exchanges (Madrid, Barcelona, Valencia

and Bilbao), as well as on the New York and Lima Stock

Exchanges (on these latter two Exchanges through

American Depositary Shares (ADSs), with each ADS

representing one share of the Company).

2023

As of December 31, 2023, the share capital of Telefónica,

S.A. was set at 5,750,458,145 euros and was divided into

5,750,458,145 common shares, of a single series and

with a par value of 1 euro each, fully paid in. All the

shares of the Company have the same characteristics

and carry the same rights and obligations.

The impacts in 2023 share capital are detailed below:

On March 31, 2023 the Board of Directors of Telefónica,

S.A. agreed to carry out the share capital reduction with

treasury share amortization previously approved by the

General Shareholders' Meeting, held on the same date.

The share capital was reduced by 24,779,409 euros after

the amortization of 24,779,409 treasury shares, with a

par value of 1 euro each. The share capital of the

Company was set at 5,750,458,145 euros, corresponding

to 5,750,458,145 shares with a par value of 1 euro each.

As a consequence of this transaction, the share

premium reserve was reduced by 73 million euros.

The reduction of capital did not entail the return of

contributions to the shareholders since the Company

was the owner of the cancelled shares. The reduction

was carried out with a charge to unrestricted reserves,

through the allocation of a reserve for cancelled share

capital in an amount equal to the nominal value of the

cancelled shares (i.e. for an amount of 24,779,409

euros). This reserve for cancelled share capital could

only be used if the same requirements as those

applicable to the reduction of share capital were met.

Therefore, in accordance with the Section 335.c) of the

Corporate Enterprises Act, the creditors of the Company

could not claim the opposition right disclosed in article

334 of the Corporate Enterprise Act.

On April 17, 2023 the deed of the share capital reduction

was registered in the Commercial Registry of Madrid.

Authorizations by Shareholders’ Meeting

As regards the authorizations conferred in respect of the

share capital, the shareholders acting at the Ordinary

General Shareholders’ Meeting held on June 12, 2020

resolved to delegate to the Board of Directors, as

broadly as required by Law, pursuant to the provisions of

Section 297.1.b) of the Companies Act, the power to

increase the share capital on one or more occasions and

	Individual Annual Report 2024	Telefónica, S. A.	32

Financial statements 2024	Index

at any time, within a period of five years from the date of

adoption of such resolution, by the maximum nominal

amount of 2,596,065,843 euros, equal to one-half of the

share capital of the Company on the date of adoption of

the resolution at the General Shareholders’ Meeting,

issuing and floating the respective new shares for such

purpose with or without a premium, the consideration

for which will consist of monetary contributions, with

express provision for incomplete subscription of the

shares to be issued. The Board of Directors was also

authorized to exclude pre-emptive rights in whole or in

part, as provided in section 506 of the Corporate

Enterprises Act. However, the power to exclude pre-

emptive rights is limited to 20% of the share capital on

the date on which the resolution is adopted. In

accordance with the above-mentioned authorization, as

of the end of fiscal year 2024, the Board would be

authorized to increase the share capital by the

maximum nominal amount of 2,596,065,843 euros.

Furthermore, the Ordinary General Shareholders’

Meeting of Telefónica, S.A. held on June 12, 2020

delegated to the Board of Directors, in accordance with

the general rules governing the issuance of debentures

and pursuant to the provisions of applicable law and the

Company’s By-Laws, the power to issue securities,

including preferred shares and warrants, with the power

to exclude the pre-emptive rights of shareholders. The

aforementioned securities may be issued on one or

more occasions, within a maximum period of five years

as from the date of adoption of the resolution. The

securities issued may be debentures, bonds, notes and

other fixed-income securities, or debt instruments of a

similar nature, or hybrid instruments in any of the forms

admitted by Law (including, among others, preferred

interests) both simple and, in the case of debentures,

bonds and hybrid instruments, convertible into shares of

the Company and/or exchangeable for shares of the

Company, of any of the companies of its Group or of any

other company, and/or giving the holders thereof an

interest in the corporate earnings. Such delegation also

includes warrants or other similar instruments that may

entitle the holders thereof, directly or indirectly, to

subscribe for or acquire newly-issued or outstanding

shares, payable by physical delivery or through

differences. The aggregate amount of the issuance or

issuances of instruments that may be approved in

reliance on this delegation may not exceed, at any time,

25,000 million euros or the equivalent thereof in another

currency. In the case of notes and for purposes of the

above-mentioned limits, the outstanding balance of

those issued in reliance on the delegation shall be

computed. In the case of warrants, and also for the

purpose of such limit, the sum of the premiums and

exercise prices of each issuance shall be taken into

account. Moreover, under the aforementioned

delegation resolution, the shareholders at the Ordinary

General Shareholders’ Meeting of Telefónica, S.A.

resolved to authorize the Board of Directors to

guarantee, in the name of the Company, the issuance of

the aforementioned instruments issued by the

companies belonging to its Group of companies, within

a maximum period of five years as from the date of

adoption of the resolution.

On the other hand, on March 31, 2023, shareholders

voted to authorize the acquisition by the Board of

Directors of Telefónica, S.A. treasury shares, up to the

limits and pursuant to the terms and conditions

established at the Shareholders’ Meeting, within a

maximum five-year period from that date. However, it

specified that in no circumstances could the par value of

the shares acquired, added to that of the treasury

shares already held by Telefónica, S.A. and by any of its

controlled subsidiaries, exceed the maximum legal

percentage at any time.

On December 31, 2024 and 2023, Telefónica, S.A. held

the following treasury shares:

		Euros per share
	Number of shares	Acquisition price	Trading price	Market value (*)	%
Treasury shares at Dec 31 2023	111,099,480	3.87	3.53	393	1.932%
Treasury shares at Dec 31 2024	26,874,751	3.97	3.94	106	0.474%

(*) Millions of euros

	Individual Annual Report 2024	Telefónica, S. A.	33

Financial statements 2024	Index

The movement in treasury shares of Telefónica, S.A.

during the years 2024  and 2023 is as follows:

	Number of shares
Treasury shares at 12/31/22	85,217,621
Acquisitions	60,070,274
Share capital reduction	(24,779,409)
Employee share option plan (See Note 19.3)	(8,845,558)
Other movements	(563,448)
Treasury shares at 12/31/23	111,099,480
Acquisitions	36,525,204
Disposals	(20,543,444)
Share capital reduction	(80,296,591)
Employee share option plan (See Note 19.3)	(19,909,898)
Treasury shares at 12/31/24	26,874,751

Acquisitions

In 2024 and 2023 acquisition of treasury shares

amounting to 145 and 223 million euros respectively,

have been registered (see note 21).

Share redemption 

On April 24, 2024, following the agreement of the

General Shareholders' Meeting held on the same date,

the share capital reduction was carried out through the

cancellation of 80,296,591 own shares with an impact of

310 million euros.

On March 31, 2023 following the agreement of the

General Shareholders' Meeting held on the same date,

the share capital reduction was carried out with the

amortization of 24,779,409 treasury shares with an

impact of 98 million euros.

Disposals

The amount recorded for sales of treasury shares  in

2024 amounts to 81 million euros. The difference with

the proceeds from the sale has been recorded under 

the unrestricted reserves caption.

Employee share option plan 

Treasury shares related to share plans redemptions in

2024 and 2023 amount to 78 and 35 million euros,

respectively. 

Other instruments

The Company also has different derivative instruments,

to be settled by offset, on a nominal value equivalent to

173 million of Telefónica shares, mainly contracted

through Banco Bilbao Vizcaya, recorded in the balance

sheet at December 31, 2024 in accordance with their

maturity date and fair value (193 million euros at

December 31, 2023).

b) Legal reserve

According to the text of the Corporate Enterprises Act,

companies must transfer 10% of profit for the year to a

legal reserve until this reserve reaches at least 20% of

the share capital. The legal reserve can be used to

increase capital by the amount exceeding 10% of the

increased share capital amount. Except for this purpose,

until the legal reserve exceeds the limit of 20% of share

capital, it can only be used to offset losses, if there are

no other reserves available. The General Shareholders'

meeting of April 12, 2024 approved an increase of 91

million euros in the legal reserve as a result of the 2023

profit distribution. On December 31, 2024 and 2023, this

reserve amounted to 1,150 and 1,059 million euros

representing 20.28% and 18.42% of the share capital at

both year ends, respectively.

c) Other reserves

The concepts included under this caption are:

• The Revaluation reserve which arose as a result of the

revaluation made pursuant to Royal Decree-Law

7/1996 dated June 7. The revaluation reserve may be

used, free of tax, to offset any losses incurred in the

future and to increase capital. From January 1, 2007, it

may be allocated to unrestricted reserves, provided

that the capital gain has been realized. The capital

gain will be deemed to have been realized in respect

of the portion on which the depreciation has been

recorded for accounting purposes or when the

revalued assets have been transferred or

derecognized. In this respect, at the end of 2024 and

2023, an amount of 2 and 3 million euros,

corresponding to revaluation reserves subsequently

considered unrestricted has been reclassified to Other

reserves. The balance of this reserve at December 31,

2024 and 2023 was 49 and 51 million euros,

respectively.

• Reserve for cancelled share capital: In accordance

with Section 335.c) of the Corporate Enterprises Act

and to render null and void the right of opposition

provided for in Section 334 of the same Act, whenever

the Company carries out a share capital reduction, it

records a reserve for cancelled share capital for an

amount equal to the par value of the cancelled shares,

which can only be used if the same requirements as

those applicable to the reduction of share capital are

met. The cumulative amount of the reserve for

cancelled share capital at December 31, 2024 and

2023 totals 1,059 and 978 million euros, respectively.

• In addition to the restricted reserves explained above,

Other reserves includes unrestricted reserves from

gains obtained by the Company in prior years. In

addition, this caption includes the equity impacts of

the corporate transactions described in note 8. Thus,

in 2024 the negative impact of the in-kind contribution

of the Telefónica Deutschland Holding, A.G. shares to

Telefónica Local Services GmbH (see note 8)

amounting to 380 million euros is shown under the

caption Other movements of the statement of

changes in equity.

	Individual Annual Report 2024	Telefónica, S. A.	34

Financial statements 2024	Index

In 2023 the reverse merger between Pontel

Participaciones, S.L. and Telxius Telecom, S.A. with

absorption of the first entity by the latter generated a

negative impact by 418 million euros in the statement

of changes in equity under the "other movements"

caption. The merger between Telefónica Innovación

Digital, S.L. (previously Telefónica Digital España, S.L.)

and Telefónica Investigación y Desarrollo, S.A. has an

effect of 1 million euros registered under the same

caption.

d) Dividends

Dividend distribution in 2024

Approval was given at the General Shareholders’

Meeting of April 12, 2024 to pay a dividend in cash

charge to unrestricted reserves amounting to 0.30

euros per share payable in two tranches.

On June 20, 2024, cash dividend of 0.15 euros per share

was paid, for a total amount of 846

million euros, and on December 19, 2024, a second

payment of 0.15 euros amounting to 847 million euros.

Dividend distribution in 2023

Approval was given at the General Shareholders’

Meeting of March 31, 2023 to pay a dividend in cash

charge to unrestricted reserves, in two tranches, for an

approximate amount of 0.30 euros per share.

On June 15, 2023, 0.15 euros per share was paid, for a

total amount of 851 million euros, and on December 14,

2023, a second payment of 0.15 euros amounting to 847

million euros.

11.2 Unrealized gains (losses)

reserve

The movements in the items composing “Unrealized

gains (losses) reserve” in 2024 and 2023 are as follows:

2024
Millions of euros	Opening balance	Valuation at market value	Tax effect of additions	Amounts transferred to income statement	Tax effect of transfers	Closing balance
Financial assets at fair value with changes through equity  (Note 9.3)	101	96	—	(53)	—	144
Cash flow hedges	269	428	(107)	(565)	141	166
Total	370	524	(107)	(618)	141	310

2023
Millions of euros	Opening balance	Valuation at market value	Tax effect of additions	Amounts transferred to income statement	Tax effect of transfers	Closing balance
Financial assets at fair value with changes through equity  (Note 9.3)	(14)	113	—	2	—	101
Cash flow hedges	546	(432)	109	63	(17)	269
Total	532	(319)	109	65	(17)	370

Since 2018, the Company includes the fair value hedges,

whose impacts are generated and transferred to the

income statement in the same period, in the statement

of recognized income and expense in equity, and

transfers the amounts to the income statement of the

same period. The impacts are shown in the column

Valuation at market value and with the opposite sign in

the column Amounts transferred to income statement of

the tables above.

	Individual Annual Report 2024	Telefónica, S. A.	35

Financial statements 2024	Index

Note 12. Financial liabilities

The breakdown of “Financial liabilities” at December 31, 2024 and 2023 is as follows:

2024
	LIABILITIES AT FAIR VALUE							LIABILITIES AT AMORTIZED COST
				MEASUREMENT HIERARCHY
Millions of euros	Financial liabilities with changes through income statement	Hedges with changes through equity	Subtotal financial liabilities at fair value	Level 1: quoted prices	Level 2: Estimates based on other directly observable market inputs	Level 3: Estimates not based on other directly observable market data		Financial liabilities at amortized cost	Fair value of financial liabilities	TOTAL CARRYING AMOUNT	TOTAL FAIR VALUE
Non-current financial liabilities	599	1,103	1,702	—	1,702	—		35,397	36,724	37,099	36,724
Payable to Group companies and associates	—	—	—	—	—	—		33,893	33,508	33,893	33,508
Bank borrowings	—	—	—	—	—	—		828	838	828	838
Derivatives (Note 16)	599	1,103	1,702	—	1,702	—		—	1,702	1,702	1,702
Other financial liabilities	—	—	—	—	—	—		676	676	676	676
Current financial liabilities	160	19	179	—	179	—		5,383	5,514	5,562	5,514
Payable to Group companies and associates	—	—	—	—	—	—		5,260	5,212	5,260	5,212
Bank borrowings	—	—	—	—	—	—		87	87	87	87
Bonds and other marketable debt securities	—	—	—	—	—	—		35	35	35	35
Derivatives (Note 16)	160	19	179	—	179	—		—	179	179	179
Other financial liabilities	—	—	—	—	—	—		1	1	1	1
Total financial liabilities	759	1,122	1,881	—	1,881	—		40,780	42,238	42,661	42,238

	Individual Annual Report 2024	Telefónica, S. A.	36

Financial statements 2024	Index

2023	LIABILITIES AT FAIR VALUE							LIABILITIES AT AMORTIZED COST
				MEASUREMENT HIERARCHY
Millions of euros	Financial liabilities with changes through income statement	Hedges with changes through equity	Subtotal financial liabilities at fair value	Level 1: quoted prices	Level 2: Estimates based on other directly observable market inputs	Level 3: Estimates not based on other directly observable market data		Financial liabilities at amortized cost	Fair value of financial liabilities	TOTAL CARRYING AMOUNT	TOTAL FAIR VALUE
Non-current financial liabilities	597	935	1,532	—	1,532	—		34,542	35,556	36,074	35,556
Payable to Group companies and associates	—	—	—	—	—	—		33,482	32,933	33,482	32,933
Loans with financial entities	—	—	—	—	—	—		513	544	513	544
Derivatives (Note 16)	597	935	1,532	—	1,532	—		—	1,532	1,532	1,532
Other financial liabilities	—	—	—	—	—	—		547	547	547	547
Current financial liabilities	149	30	179	—	179	—		7,496	7,674	7,675	7,674
Payable to Group companies and associates	—	—	—	—	—	—		7,353	7,351	7,353	7,351
Loans with financial entities	—	—	—	—	—	—		141	142	141	142
Derivatives (Note 16)	149	30	179	—	179	—		—	179	179	179
Other financial liabilities	—	—	—	—	—	—		2	2	2	2
Total financial liabilities	746	965	1,711	—	1,711	—		42,038	43,230	43,749	43,230

Derivatives are measured using the valuation techniques and models normally used in

the market, based on money-market curves and volatility prices available in the

market.

Additionally, on this valuation, the credit valuation adjustment or CVA net for

counterparty (CVA + DVA), which is the methodology used to measure the credit risk

of the counterparties and of Telefónica itself is calculated to adjust the fair value

determination of the derivatives. This adjustment reflects the possibility of insolvency

or deterioration of the credit quality of the counterparty and Telefónica. The

calculation of the fair values of the Company’s financial debt instruments required an

estimate for each currency of a credit spread curve using the prices of the Company’s

bonds and credit derivatives.

	Individual Annual Report 2024	Telefónica, S. A.	37

Financial statements 2024	Index

Note 13. Bonds and other

marketable debt securities

This caption, at December 31, 2024 and 2023, only

includes a promissory notes program.

The features of the 2024 and 2023 programs are the

same and the detail is as follows:

Amount	Placement system	Nominal amount of the Promissory notes	Terms of the Promissory notes	Placement
500 millions of euros	Auctions	100,000 euros	30, 60, 90, 180 and 364 days	Competitive auctions
	Tailored	100,000 euros	Between 3 and 364 days	Specific transactions

The balances and movements of the financial

instruments included under this caption at December

31, 2024 and 2023 are as follows:

	2024	2023
Millions of euros	Other marketable debt securities (Promissory notes)	Other marketable debt securities (Promissory notes)
Opening balance	—	—
Additions	63	29
Disposals	(28)	(29)
Closing balance	35	—
Details of maturities:
Non-current	—	—
Current	35	—

The average interest rate for promissory notes in 2024

has been 3.646% (3.256% in 2023).

	Individual Annual Report 2024	Telefónica, S. A.	38

Financial statements 2024	Index

Note 14. Interest-bearing debt and

derivatives

14.1 Detail of debt balances

The balances at December 31, 2024 and 2023 are as

follows:

December 31, 2024
Millions of euros	Current	Non-current	Total
Loans with financial entities (Note 12)	87	828	915
Derivatives (Note 16)	179	1,702	1,881
Total	266	2,530	2,796

December 31, 2023
Millions of euros	Current	Non-current	Total
Loans with financial entities (Note 12)	141	513	654
Derivatives (Note 16)	179	1,532	1,711
Total	320	2,045	2,365

14.2 Disclosure of nominal amount of debts

The nominal values of the main interest-bearing debts

at December 31, 2024 and 2023 is as follows:

2024
Description	Value Date	Maturity Date	Currency	Limit 12/31/2024 (millions of local currency)	Balance (millions of euros)
Bilateral Loan	11/21/2024	12/16/2031	EUR	100	100
Bilateral Loan	10/09/2024	10/31/2031	EUR	140	140
Bilateral Loan	03/27/2024	07/31/2034	EUR	150	150
Bilateral Loan	02/14/2023	09/29/2033	EUR	150	150
Bilateral Loan	12/23/2022	06/15/2033	EUR	125	125
Bilateral Loan	09/26/2022	12/15/2032	EUR	150	150

	Individual Annual Report 2024	Telefónica, S. A.	39

Financial statements 2024	Index

2023
Description	Value Date	Maturity Date	Currency	Limit 12/31/2023 (millions of local currency)	Balance (millions of euros)
Structured Financing (*)	12/11/2015	03/11/2026	USD	150	136
Structured Financing (*)	12/11/2015	03/11/2026	EUR	101	101
Bilateral loan	09/26/2022	12/15/2032	EUR	150	150
Bilateral loan	12/23/2022	06/15/2033	EUR	125	125
Bilateral loan	02/14/2023	09/29/2033	EUR	150	150

(*) Facilities with amortization schedule, showing in the column "Limit 12/31/2023" the outstanding amount.

14.3 Maturities of balances

The maturity of balances at December 31, 2024 and

2023 are as follows:

December 31, 2024	Maturity
Millions of euros	2025	2026	2027	2028	2029	Subsequent years	Closing balance
Loans with financial entities	87	15	(2)	—	—	815	915
Derivatives (Note 16)	179	45	531	353	265	508	1,881
Total	266	60	529	353	265	1,323	2,796

December 31, 2023	Maturity
Millions of euros	2024	2025	2026	2027	2028	Subsequent years	Closing balance
Loans with financial entities	141	46	45	(3)	—	425	654
Derivatives (Note 16)	179	71	58	568	247	588	1,711
Total	320	117	103	565	247	1,013	2,365

14.4 Interest-bearing debt arranged or repaid in 2024

The most significant transactions in 2024 mainly

includes the following:

Description	Limit 12/31/2024 (*) (millions)	Currency	Outstanding balance Dec 31 2024 (million euros)	Arrangement date	Maturity date	Drawdown 2024 (million euros)	Repayment 2024 (million euros)
Telefónica, S.A.
Green Syndicated (1)	5,500	EUR	—	03/15/2018	01/13/2029	—	—
Bilateral loan	—	EUR	150	3/27/2024	07/31/2034	150	—
Bilateral loan	—	EUR	140	10/09/2024	10/31/2031	140	—
Bilateral loan	—	EUR	100	11/21/2024	12/16/2031	100	—

(1) The second one year extension option of the 5,500 million euros green syndicated credit facility of Telefonica, S.A., was executed on January 13, 2024 with a

maximum maturity up to 2029.

(*) Undrawn limit.

	Individual Annual Report 2024	Telefónica, S. A.	40

Financial statements 2024	Index

14.5 Average interest on loans and

borrowings

The average interest rate in 2024 on loans and

borrowings denominated in euros was 4.223% (3.281% in

2023) and 2.4% (2.6% in 2023) for foreign-currency

loans and borrowings.

14.6 Unused credit facilities

The balances of loans and borrowings only relate to

drawn down amounts.

At December 31,  2024 and 2023, Telefónica had

undrawn credit facilities amounting to 9,524 million

euros and 9,688 million euros, respectively.

Financing arranged by Telefónica, S.A. at December 31,

2024 and 2023 is not subject to compliance with

financial ratios (covenants).

	Individual Annual Report 2024	Telefónica, S. A.	41

Financial statements 2024	Index

Note 15. Payable to group

companies and associates

15.1 Detail of group debts

The breakdown of payable to group companies and

associates at the 2024 and 2023 year ends is as follows:

December 31, 2024
Millions of euros	Non-current	Current	Total
Loans	33,882	5,048	38,930
Trade payables to Group companies and associates	11	111	122
Derivatives (Note 16)	—	5	5
Tax Group payables to subsidiaries	—	96	96
Total	33,893	5,260	39,153

December 31, 2023
Millions of euros	Non-current	Current	Total
Loans	33,473	7,103	40,576
Trade payables to Group companies and associates	9	107	116
Derivatives (Note 16)	—	15	15
Tax Group payables to subsidiaries	—	128	128
Total	33,482	7,353	40,835

The maturity of these loans at the 2024 and 2023 year

ends is as follows (figures in millions of euros):

December 31, 2024
Company	2025	2026	2027	2028	2029	2030 and subsequent years	Final balance, current and non-current
Telefónica Emisiones, S.A.U.	2,375	1,881	3,445	1,940	2,528	14,630	26,799
Telefónica Europe, B.V.	1,388	998	998	1,493	997	4,852	10,726
Telfisa Global, B.V.	1,285	—	—	—	—	—	1,285
Telefónica Móviles Argentina, S.A.	—	—	—	—	120	—	120
Total	5,048	2,879	4,443	3,433	3,645	19,482	38,930

	Individual Annual Report 2024	Telefónica, S. A.	42

Financial statements 2024	Index

December 31, 2023
Company	2024	2025	2026	2027	2028	2029 and subsequent years	Final balance, current and non-current
Telefónica Emisiones, S.A.U.	1,298	2,013	1,853	3,367	1,935	15,049	25,515
Telefónica Europe, B.V.	1,225	1,298	998	997	1,491	4,472	10,481
Telfisa Global, B.V.	4,580	—	—	—	—	—	4,580
Total	7,103	3,311	2,851	4,364	3,426	19,521	40,576

Financing raised by Telefónica, S.A. through its

subsidiary Telefónica Europe, B.V. at December 31, 2024

amounting 10,726 million euros (10,481 million euros in

2023). This financing entails a number of loans paying

market interest rates calculated on a Euribor plus spread

basis, with average interest rates at December 31, 2024

of 5.23% (4.75% in 2023). The main source of this

financing was the funds obtained through the issuance

of undated deeply subordinated reset rate guaranteed

securities amounting to 7,578 million euros (7,656 million

euros in 2023), bonds and debentures amounting to

1,656 million euros in 2024 y 2023 and commercial paper

amounting to 1,165 million euros (1,000 million euros in

2023)

Financing raised by Telefónica, S.A. through Telefónica

Emisiones, S.A.U. at December 31, 2024 was 26,799

million euros (25,515 million euros in 2023). This

financing is arranged as loans between these

companies on the similar terms and conditions as those

of the notes issued under the debt issuance programs of

Telefónica Emisiones, S.A.U. The average interest rate in

2024 was 3.33% (3.08% in 2023). The financing

arranged includes, as a related cost, the fees or

premiums taken to the income statement for the period

corresponding to the financing based on the

corresponding effective interest rates. Telefónica

Emisiones, S.A.U. raised financing in 2024 by tapping the

European capital markets, issuing bonds totaling 1,750

million euros (850 million euros in 2023).

Part of the amount owed by Telefónica, S.A. to

Telefónica Emisiones, S.A.U. and to Telefónica Europe,

B.V. includes adjustments to amortized cost at

December 31, 2024 and 2023 as a result of fair value

interest rate and exchange rate hedges.

In January 2024 Telefónica Móviles Argentina, S.A.

granted a 117 million US dollars loan to Telefónica, S.A.

with maturity date in 2029. The payment of interests

was originally established to be biannual but in July

2024 the contract was amended so that the interests

will be paid at maturity.

Telfisa Global, B.V. centralizes and handles cash

management and flows for the Telefónica Group in Latin

America, the United States, Europe and Spain. The

balance payable to this subsidiary is formalized through

several deposit agreements accruing interest at market

rates and amounting to 1,285 million euros in 2024

(4,580 million euros in 2023).

15.2 Tax liabilities

The balance of “Payable to subsidiaries due to taxation

on a consolidated basis” was 96 and 128 million euros at

December 31, 2024 and 2023, respectively. This

basically includes payables to Group companies for their

contribution of taxable income (tax loss carryforwards)

to the tax group headed by Telefónica, S.A. (see note 17).

The current or non-current classification is based on the

Company’s projection of maturities.

The most significant balances in 2024 correspond to

Telefónica Hispanoamérica, S.L. amounting to 40 million

euros and Telefónica Latinoamérica Holding, S.L.

amounting to 24 million euros.

The most significant balances in 2023 corresponded to

Telefónica Latinoamérica Holding, S.L. amounting to 38

million euros and 73 million euros for Telefónica de

España, S.A.

	Individual Annual Report 2024	Telefónica, S. A.	43

Financial statements 2024	Index

Note 16. Derivative financial

instruments and risk

management policies

a) Derivative financial instruments

During 2024, the Group continued to use derivatives to

limit interest and exchange rate risk on otherwise

unhedged positions, and to adapt its debt structure to

market conditions.

At December 31, 2024, the total outstanding balance of

derivatives transactions was 68,590 million euros (64,139

million euros in 2023), of which 50,369 million euros are

related to interest rate risk and 18,221 million euros to

foreign currency risk. In 2023 there were, 44,719 million

euros related to interest rate risk and 19,420 million

euros to foreign currency risk.

This figure is inflated by the use, in some cases, of

several levels of derivatives applied to the nominal value

of a single underlying liability. For example, a foreign

currency loan can be hedged into floating rate, and then

each interest rate period can be fixed using a fixed rate

hedge, or FRA (forward rate agreement). The high

volume is also due to the fact that when a derivative

transaction is cancelled, the Company may either

cancel the derivative or take the opposite position,

which cancels out the variability thereof. The second

option is usually chosen in order to cut costs. Even using

such techniques to reduce the position, it is still

necessary to take extreme care in the use of derivatives

to avoid potential problems arising through error or a

failure to understand the real position and its associated

risks.

It should be noted that on December 31, 2024,

Telefónica, S.A. had transactions with financial

institutions to hedge exchange rate risk for other

Telefónica Group companies amounting to 774 million

euros (636 million euros in 2023). At year-end 2024 and

2023, the Company had no transactions to hedge

interest rate risk for other Group companies. These

external trades are matched by intragroup hedges with

identical terms and maturities between Telefónica, S.A.

and Group companies, and therefore involve no risk for

the Company. External derivatives not backed by

identical intragroup transactions consist of hedges on

net investment and future acquisitions that, by their

nature, cannot be transferred to Group companies and/

or transactions to hedge financing raised by Telefónica,

S.A. as parent company of the Telefónica Group, which

are transferred to Group subsidiaries in the form of

financing rather than via derivative transactions.

	Individual Annual Report 2024	Telefónica, S. A.	44

Financial statements 2024	Index

The breakdown of Telefónica, S.A.’s interest rate and

exchange rate derivatives at December 31, 2024, their

notional amounts at year end and the expected maturity

schedule is as follows:

2024
Millions of euros		Telefónica receives			Telefónica pays
Type of risk	Value in Euros	Carrying	Currency		Carrying	Currency
Euro interest rate swaps	36,286
Fixed to floating	12,928	12,928	EUR		12,928	EUR
Floating to fixed	13,860	13,860	EUR		13,860	EUR
Floating to floating	9,498	9,498	EUR		9,498	EUR
Foreign currency interest rate swaps	14,083
Fixed to floating
GBPGBP	482	400	GBP		400	GBP
USDUSD	13,601	14,138	USD		14,138	USD
Exchange rate swaps	13,090
Fixed to fixed
GBPEUR	582	500	GBP		582	EUR
Fixed to floating
JPYEUR	95	15,000	JPY		95	EUR
Floating to floating
EURUSD	260	260	EUR		270	USD
GBPEUR	448	400	GBP		448	EUR
USDEUR	11,705	12,938	USD		11,705	EUR
Forwards	5,131
BRLEUR	16	101	BRL		16	EUR
EURPEN	160	160	EUR		627	PEN
CZKEUR	92	2,340	CZK		92	EUR
EURBRL	2,804	2,804	EUR		18,047	BRL
EURCLP	1	1	EUR		1,075	CLP
EURGBP	221	221	EUR		183	GBP
EURMXN	1	1	EUR		11	MXN
EURUSD	1,079	1,079	EUR		1,122	USD
GBPEUR	23	19	GBP		23	EUR
USDBRL	20	22	USD		128	BRL
USDCLP	3	4	USD		3,281	CLP
USDCOP	3	3	USD		12,682	COP
USDEUR	698	740	USD		698	EUR
USDPEN	2	2	USD		9	PEN
CLPUSD	1	756	CLP		1	USD
BRLUSD	7	44	BRL		8	USD
Total	68,590

	Individual Annual Report 2024	Telefónica, S. A.	45

Financial statements 2024	Index

The breakdown by average maturity is as follows:

Millions of euros
Hedged underlying item	Notional	Up to 1 year	From 1 to 3 years	From 3 to 5 years	Over 5 years
Pension Plans	5,966	935	2,507	1,367	1,157
Loans	719	96	278	—	345
In national currency	250	—	—	—	250
In foreign currencies	469	96	278	—	95
Debentures and bonds MtM	48,074	4,992	12,120	1,105	29,857
In national currency	13,288	4,175	100	175	8,838
In foreign currencies	34,786	817	12,020	930	21,019
Other underlying (*)	13,831	9,852	279	—	3,700
Forward	5,131	4,852	279	—	—
IRS	8,700	5,000	—	—	3,700
Total	68,590	15,875	15,184	2,472	35,059

(*) Most of these transactions are related to economic hedges of investments, assets and liabilities of subsidiaries.

	Individual Annual Report 2024	Telefónica, S. A.	46

Financial statements 2024	Index

The breakdown of Telefónica, S.A.'s derivatives in 2023,

their notional amounts at year end and the expected

maturity schedule is as follows:

2023
Millions of euros		Telefónica receives			Telefónica pays
Type of risk	Value in Euros	Carrying	Currency		Carrying	Currency
Euro interest rate swaps	31,386
Fixed to floating	11,208	11,208	EUR		11,208	EUR
Floating to fixed	12,580	12,580	EUR		12,580	EUR
Floating to floating	7,598	7,598	EUR		7,598	EUR
Foreign currency interest rate swaps	13,333
Fixed to floating
GBPGBP	460	400	GBP		400	GBP
USDUSD	12,873	14,226	USD		14,226	USD
Exchange rate swaps	12,910
Fixed to fixed
GBPEUR	582	500	GBP		582	EUR
Fixed to floating
JPYEUR	95	15,000	JPY		95	EUR
Floating to floating
GBPEUR	448	400	GBP		448	EUR
USDEUR	11,785	13,026	USD		11,785	EUR
Forwards	6,510
BRLEUR	39	210	BRL		39	EUR
EURPEN	95	95	EUR		391	PEN
CZKEUR	95	2,339	CZK		95	EUR
EURBRL	3,194	3,194	EUR		17,088	BRL
EURCLP	58	58	EUR		56,635	CLP
EURGBP	324	324	EUR		282	GBP
EURMXN	1	1	EUR		15	MXN
EURUSD	1,415	1,415	EUR		1,563	USD
GBPEUR	12	10	GBP		12	EUR
USDBRL	26	27	USD		138	BRL
USDCLP	4	5	USD		4,315	CLP
USDCOP	3	3	USD		13,885	COP
USDEUR	1,237	1,358	USD		1,237	EUR
USDPEN	3	3	USD		12	PEN
CLPUSD	1	872	CLP		1	USD
BRLUSD	2	9	BRL		2	USD
COPUSD	1	4,027	COP		1	USD
PENUSD	—	2	PEN		—	USD
Subtotal	64,139

	Individual Annual Report 2024	Telefónica, S. A.	47

Financial statements 2024	Index

The breakdown by average maturity is as follows:

Millions of euros
Hedged underlying item	Notional	Up to 1 year	From 1 to 3 years	From 3 to 5 years	Over 5 years
Pension plans	6,254	1,138	2,627	1,445	1,044
Loans	765	560	111	—	94
In national currency	400	400	—	—	—
In foreign currencies	365	160	111	—	94
Debentures and bonds MtM	42,609	3,298	4,636	7,859	26,816
In national currency	8,650	2,850	125	275	5,400
In foreign currencies	33,959	448	4,511	7,584	21,416
Other underlying (*)	14,511	10,811	—	—	3,700
Forward	6,511	6,511	—	—	—
IRS	8,000	4,300	—	—	3,700
Total	64,139	15,807	7,374	9,304	31,654

(*) Most of these transactions are related to economic hedges of investments, assets and liabilities of subsidiaries.

The debentures and bonds hedged relate to intragroup

loans on the same terms as the issues of Telefónica

Europe, B.V. and Telefónica Emisiones, S.A.U.

b) Risk management policy

Telefónica, S.A. is exposed to various financial market

risks as a result of: (i) its ordinary business activity, (ii)

debt incurred to finance its business, (iii) its investments

in companies, and (iv) other financial instruments

related to the above commitments.

The main market risks affecting Telefónica are as

follows:

Exchange rate risk

Foreign currency risk primarily arises in connection with:

(i) Telefónica’s international presence, through its

investments and businesses in countries that use

currencies other than euro (primarily in Latin America

and in the United Kingdom), and (ii) debt denominated in

currencies other than that of the country where the

business is conducted or the home country of the

company incurring such debt and (iii) due to those

accounts payable or receivable referred to the entity

that has registered the transaction.

Interest rate risk

Interest rate risk arises primarily in connection with

changes in interest rates affecting (i) financial expenses

on floating rate debt (or short-term debt likely to be

renewed), (ii) the value of non-current liabilities at fixed

interest rates and (iii) financial expenses and principal

payments of inflation-linked financial instruments,

considering interest rate risk as the impact of changes in

inflation rates.

Share price risk

Share price risk arises primarily from changes in the

value of the equity investments (that may be bought,

sold or otherwise involved in transactions), from

changes in the value of derivatives associated with such

investments, from changes in the value of treasury

shares and from derivatives on treasury shares.

Other risks

Telefónica, S.A. is also exposed to liquidity risk if a

mismatch arises between its financing needs (operating

and financial expense, investment, debt redemptions

and dividend commitments) and its sources of finance

(revenues, divestments, credit lines from financial

institutions and capital market operations). The cost of

finance could also be affected by changes in the credit

spreads (over benchmark rates) demanded by lenders.

Credit risk appears when a counterparty fails to meet or

delays its payment obligations in accordance with the

agreed terms, driving an impairment in an asset due to:

(i) solvency issues, or (ii) no intention to pay.

Finally, Telefónica is exposed to country risk (which

overlaps with market and liquidity risks). This refers to

the possible decline in the value of assets, cash flows

generated, or cash flows returned to the parent

company as a result of political, economic or social

instability in the countries where Telefónica, S.A.

operates, especially in Latin America.

Risk management

Telefónica, S.A. actively manages these risks through

the use of derivatives (primarily on exchange rates,

interest rates, credit and share prices) and by incurring

debt in local currencies, where appropriate, with a view

to optimize the financial cost and to stabilizing cash

flows, the income statement and investments. In this

	Individual Annual Report 2024	Telefónica, S. A.	48

Financial statements 2024	Index

way, Telefónica attempts to protect its solvency,

facilitate financial planning and take advantage of

investment opportunities.

Telefónica manages its exchange rate risk and interest

rate risk in terms of net debt and net financial debt

internally calculated. Telefónica believes that these

parameters are more appropriate to understand its debt

position. Net debt and net financial debt take into

account the impact of the Group’s cash and cash

equivalents balances including derivative positions with

a positive value linked to liabilities. Neither net debt nor

net financial debt as calculated by Telefónica should be

considered an alternative to gross financial debt (the

sum of current and non-current interest-bearing debt).

Exchange rate risk

The fundamental objective of the exchange rate risk

management policy is that, in case of depreciation in

foreign currencies relative to the euro, any potential

losses is hedged in the value of the business investment

in foreign currency. The degree of exchange rate

hedging employed varies depending on the type of

investment. For transactions of purchase or sale of a

business in currencies other than euro, additional

hedges can be made based on the estimate prices of

the transactions or on estimated cash flows.

Telefónica occasionally takes out dollar-denominated

debt to hedge the euro-dollar intermediate component

in the relation euro-Latin American currencies, either in

Spain (where such debt is associated with an

investment as long as it is considered to be an effective

hedge) or in the country itself, where the market for

local currency financing or hedges may be inadequate

or non-existent.

At December 31, 2024, net financial debt in pounds

sterling was equivalent to 46 million euros (82 million

euros at December 31, 2023). The synthetic debt target

denominated in pounds sterling will be directly related

to the flows that are expected to be repatriated from

VMED O2 UK.

Telefónica also manages its exchange rate risk seeking

to significantly reduce the negative impact of any

currency exposure on the income statement, both from

transactions recognized on the balance sheet and those

classified as highly probable, regardless of whether or

not open positions are held. Such open position

exposure can arise for any of three reasons: (i) a thin

market for local derivatives or difficulty in obtaining

funding in the local currency, making it impossible to

arrange a low-cost hedge (as in Argentina and

Venezuela); (ii) financing through intra-group loans,

where the accounting treatment of exchange rate risk is

different from that for funding through capital

contributions, and (iii) as the result of a deliberate policy

decision, to avoid the high cost of hedges that are not

warranted by expectations or high depreciation risks.

The main transactions that generate or may generate

exchange rate risk (regardless of whether or not they

have an impact on the income statement) are, among

others: bond issuances in currencies other than the

euro, which is Telefónica, S.A.'s functional currency,

highly probable transactions in other currencies, future

cash inflows in other currencies, investments and

divestments, provisions for collections or payments and

collections in foreign currency, the actual value of the

investments (subsidiaries) in currencies other than the

euro.

Interest rate risk

Telefónica´s financial expenses are exposed to changes

in interest rates. In 2024 the euro, Brazilian real, pounds

sterling and the US dollar were the short term rates that

accounted for most of the exposure. Telefónica

manages its interest rate risk by entering into derivative

financial instruments, primarily swaps and interest rate

options.

Telefónica analyzes its exposure to changes in interest

rates at the Telefónica Group level. The table illustrates

the sensitivity of finance costs and the balance sheet to

variability in interest rates at Group and Telefónica, S.A.

level.

	Impact on        Consolidated P/L	Impact on Telefónica, S.A. P/L	Impact on Consolidated Equity	Impact on Telefónica, S.A.  Equity
+100bp	(41)	(14)	533	363
-100bp	41	14	(533)	(363)

To calculate the sensitivity of the income statement, a

100 basis point rise in interest rates in all currencies in

which there are financial positions at December 31, 2024

has been assumed, as well as a 100 basis point decrease

in all currencies in order to avoid negative rates.           

The constant position equivalent to that prevailing at the

end of the year has also been assumed.

To calculate the sensitivity of equity to variability in

interest rates, a 100 basis point increase in interest rates

in all currencies and terms in which there are financial

positions at December 31, 2024 was assumed, as well as

a 100 basis point decrease in all currencies and terms.

Cash flow hedge positions were also considered as they

are the only positions where changes in market value

due to interest-rate fluctuations are recognized in

equity.

	Individual Annual Report 2024	Telefónica, S. A.	49

Financial statements 2024	Index

In both cases, only transactions with external

counterparties have been considered.

Share price risk

The Telefónica Group is exposed to changes in the

value of equity investments, of derivatives associated

with such investments, of share-based payments plans,

of treasury shares and of equity derivatives over treasury

shares.

According to the share-based payments plans (see note

19) the shares to be delivered to employees under such

plan may be either the parent company treasury shares,

acquired by Telefónica or any of its Group companies; or

newly-issued shares. The possibility of delivering shares

to beneficiaries of the plan in the future implies a risk

since there could be an obligation to hand over the

maximum number of shares granted at the end of each

cycle, whose acquisition (in the event of acquisition in

the market) in the future could imply a higher cash

outflow than required on the start date of each cycle if

the share price at the vesting date is above the price at

the start of the cycle. In the event that new shares are

issued for delivery to the beneficiaries of the plan, there

would be a dilutive effect for ordinary shareholders of

Telefónica as a result of the higher number of shares

delivered under such plan outstanding.

In 2021, the General Shareholder’s Meeting approved a

long-term incentive plan consisting of the delivery of

shares of Telefónica, S.A. allocated to executives and

managers of the Telefónica Group.

Additionally, the 2022 Shareholder’s Meeting approved

a share plan for the incentivized purchase of shares for

employees of the Telefónica Group, which was

implemented in June 2022.

Finally, in 2024 the General Shareholders' Meeting

approved a long-term incentive plan consisting of the

delivery of shares of Telefónica, S.A. allocated to

executives and managers of the Telefónica Group.

The characteristics of these above mentioned plans are

described in note 19.

To reduce the risk associated with variations in share

price under these plans, Telefónica could acquire

instruments that hedge the risk profile of some of these

plans.

In addition, part of the treasury shares of Telefónica, S.A.

held at December 31, 2024 might be used to hedge the

shares deliverable under the new plans. The fair value of

the treasury shares at liquidation moment could

increase or decrease depending on the variations in

Telefónica, S.A.’s share quotation.

Liquidity risk

Telefónica seeks to match the schedule for its debt

maturity payments to its capacity to generate cash flows

to meet these maturities, while allowing for some

flexibility. In practice, this has been translated into two

key principles:

1. Telefónica’s average maturity of net financial debt is

intended to stay above 6 years, or be restored above

that threshold in a reasonable period of time if it

eventually falls below it. This principle is considered

as a guideline when managing debt and access to

credit markets, but not a rigid requirement. When

calculating the average maturity for the net financial

debt and part of the undrawn credit lines can be

considered as offsetting the shorter debt maturities,

and extension options on some financing facilities

may be considered as exercised, for calculation

purposes.

2. Telefónica must be able to pay all commitments over

the next 12 months without accessing new

borrowing or tapping the capital markets (drawing

upon firm credit lines arranged with banks),

assuming budget projections are met.

Country risk

Telefónica managed or mitigated country risk by

pursuing two lines of action (in addition to its normal

business practices):

1. Partly matching assets to liabilities (those not

guaranteed by the parent company) in the Latin

American companies so that any potential asset

impairment would be accompanied by a reduction in

liabilities; and,

2. Repatriating funds generated in Latin America that

are not required for the pursuit of new, profitable

business development opportunities in the region.

Credit risk

The Telefónica Group trades in derivatives with

creditworthy counterparties. Therefore, Telefónica, S.A.

generally trades with credit entities whose “senior debt”

ratings are of at least “A-” or in case of Spanish entities

in line with the credit rating of the Kingdom of Spain. In

Spain, where most of the Group’s derivatives portfolio is

held, there are netting agreements with financial

institutions, with debtor or creditor positions offset in

case of bankruptcy, limiting the risk to the net position.

In addition, the CDS (Credit Default Swap) of all the

counterparties with which Telefónica, S.A. operates is

monitored at all times in order to assess the maximum

allowable CDS for operating at any given time.

Transactions are generally only carried out with

counterparties whose CDS is below the threshold.

	Individual Annual Report 2024	Telefónica, S. A.	50

Financial statements 2024	Index

CVA or net Credit Valuation Adjustment (CVA+DVA) by

is the method used to measure credit risk for both

counterparties and Telefónica in order to determine the

fair value of the derivatives portfolio. This adjustment

reflects the probability of default or the deterioration of

the credit quality of both Telefónica and its

counterparties. The simplified formula to calculate CVA

is Expected Exposure times Probability of Default times

Loss Given Default (LGD). In order to calculate these

variables standard market practices are used.

When managing credit risk, Telefónica considers the

use of CDS, novations, derivatives with break clauses

and signing CSAs under certain conditions as well as

derivatives with early termination conditions.

For other subsidiaries, particularly those in Latin

America, assuming a stable sovereign rating provides a

ceiling which is below “A”, trades are with local financial

entities whose rating by local standards is considered to

be of high creditworthiness.

Meanwhile, with credit risk arising from cash and cash

equivalents, the Telefónica Group places its cash

surpluses in high quality money-market assets. These

placements are regulated by a general framework,

revised annually. Counterparties are chosen according

to criteria of liquidity, solvency and diversification based

on the conditions of the market and countries where the

Group operates. The general framework sets: the

maximum amounts to be invested by counterparty

based on its rating (long-term debt rating); the

counterparty-related CDS compared with the banks

which Telefónica S.A. operates with (on analogue way

as to the derivatives) and the instruments in which the

surpluses may be invested (money-market instruments).

Formal delegation of authority procedures and

management practices are implemented in the different

Group companies, taking into account benchmark risk

management techniques but adapted to the local

characteristics of each market. Commercial debtors that

may cause a relevant impact on the individual financial

statements and increased risk profile products - due to

customer target, term, channels or other commercial

characteristics - are subject to specific management

practices in order to mitigate the exposure to credit risk.

This customer credit risk management model is

embedded in the day-to-day operational processes of

the different companies, where the credit risk

assessment guides both the product and services

available for the different customers and the collection

strategy.

Telefónica’s maximum exposure to credit risk is initially

represented by the carrying amounts of the assets (see

notes 8 and 9) and the guarantees given by Telefónica

(see note 20).

Capital management

Telefónica’s corporate finance department takes into

consideration several factors for the evaluation of the

capital structure of the Company, with the aim of

maintaining the solvency and creating value to the

shareholders.

The corporate finance department estimates the cost of

capital on a continuous basis through the monitoring of

the financial markets and the application of standard

industry approaches for calculating weighted average

cost of capital, or WACC, so that it can be applied in the

valuation of businesses in course and in the evaluation

of investment projects. Telefónica also uses as

reference a certain level of net financial debt (excluding

items of a non-recurring or exceptional nature) that

allows a comfortable investment grade credit rating as

assigned by credit rating agencies, aiming at protecting

credit solvency and making it compatible with

alternative uses of cash flow that could arise at any time.

These general principles are refined by other

considerations and the application of specific variables,

such as country risk in the broadest sense, or the

volatility in cash flow generation that are considered,

when evaluating the financial structure of the Telefónica

Group and its different business units.

Interest rate benchmark reform and associated

risks

In 2022, the transition was made to the new reference

indexes affected as of December 31, 2022 (GBP Libor

and CHF Libor) and in June 2023 the one related to USD

Libor. Due to the need to incorporate substitute indexes

(known as fallbacks) of the reference rates used in the

contracts, in 2021 Telefonica, S.A. decided not to adhere

to the ISDA Protocol and has since negotiated bilateral

contracts with each affected counterparty. Thanks to

the decisions agreed in 2021 to manage the changes in

Libor, there have been no impacts from these changes,

no contractual modifications of derivative instruments

nor impact on hedging relationships directly affected by

the reform. Thus, since June 2023, all Libor indexes have

been replaced by Libor fallbacks for the entire portfolio

outstanding on that date.

Derivatives Policy

Telefónica’s derivatives policy emphasizes the following

points:

• Derivatives based on a clearly identified underlying.

• Matching of the underlying to one side of the

derivative.

• Matching the company contracting the derivative and

the company that owns the underlying.

• Ability to measure the derivative’s fair value using the

valuation systems available to the Telefónica Group.

	Individual Annual Report 2024	Telefónica, S. A.	51

Financial statements 2024	Index

• Sale of options only when there is an underlying

exposure.

Hedge accounting

Hedges can be of three types:

• Fair value hedges.

• Cash flow hedges. Such hedges can be set at any

value of the risk to be hedged (interest rates,

exchange rates, etc.) or for a defined range (interest

rates between 2% and 4%, above 4%, etc.). In this last

case, the hedging instruments used are options and

only the intrinsic value of the option is recognized as

an effective hedge. The changes in the temporal value

of the option are registered in the income statement.

• Net investment hedges in consolidated foreign

subsidiaries. Generally, such hedges are arranged by

the parent company. Wherever possible, these

hedges are implemented through real debt in foreign

currency. However, this is not always possible as

many Latin American currencies are non-convertible,

making it impossible for non-resident companies to

issue local currency debt. It might also occur that the

local debt market is not deep enough to

accommodate the required hedge, or that an

acquisition is made in cash with no need for market

financing. In these circumstances, derivatives, either

forwards or cross-currency swaps, are mainly used to

hedge the net investment.

Hedges can comprise a combination of different

derivatives.

There is no reason to suppose management of

accounting hedges will be static, with an unchanging

hedging relationship lasting right through maturity.

Hedging relationships may change to allow appropriate

management that serves our stated principles of

stabilizing cash flows, stabilizing net financial income/

expense and protecting our equity. The designation of

hedges may therefore be cancelled, before maturity,

because of a change in the underlying, a change in the

perceived risk on the underlying or a change in market

view. The hedges must meet the effectiveness test and

be well documented. To gauge the efficiency of

transactions defined as accounting hedges, Telefónica

analyzes the extent to which the changes in the fair

value or in the cash flows attributable to the hedging

instrument would offset the changes in fair value or

cash flows attributable to the hedged risk using a linear

regression model for both forward- and backward-

looking analysis.

The possible sources of ineffectiveness that might arise

when designing a hedging relationship and that will be

considered when establishing the hedging rationale are:

• The hedging instrument and the hedged item have

different maturity dates, initial dates, contract dates,

repricing dates, etc.

• The hedging instrument starts with initial value and a

financing effect is produced.

• When the underlying items have different sensitivity

and are not homogeneous, for example EURIBOR 3M

versus EURIBOR 6M.

The main guiding principles for risk management are laid

down by Telefónica’s finance department (who are

responsible for balancing the interests of the companies

in a standalone basis and those of the Telefónica

Group). The Corporate finance department may allow

exceptions to this policy where these can be justified,

normally when the market is too thin for the volume of

transactions required or on clearly limited and small

risks. 

In 2024 the Company recognized a loss of 0.6 million

euros for the ineffective part of cash flow hedges (a loss

of 2.8 million euros in 2023).

The fair value of Telefónica, S.A.'s derivatives with third

parties amounted to a positive MtM (accounts

receivable) of 961 million euros in 2024 (502 million

euros in 2023).

The fair value of Telefónica, S.A.´s intragroup derivatives

amounted to a positive MtM minor than 1 million euros in

2024 (accounts payable of 12 million euros in 2023).

The breakdown of the Company’s derivatives with third

party counterparties at December 31, 2024 and 2023 by

type of hedge, their fair value at year end and the

expected maturity schedule of the notional amounts is

as follows:

	Individual Annual Report 2024	Telefónica, S. A.	52

Financial statements 2024	Index

2024
Millions of euros		Notional amount maturities (*)
Derivatives	Fair value (**)	2025	2026	2027	Subsequent years	Total
Interest rate hedges	(224)	(1,802)	—	381	(4,565)	(5,986)
Cash flow hedges	23	(2,327)	—	—	3,627	1,300
Fair value hedges	(247)	525	—	381	(8,192)	(7,286)
Exchange rate hedges	(578)	—	582	714	4,699	5,996
Cash flow hedges	(578)	—	582	714	4,699	5,996
Interest and exchange rate hedges	(5)	46	9	472	279	806
Cash flow hedges	(5)	46	9	472	279	806
Net investment Hedges	(69)	(2,595)	—	—	—	(2,595)
Other derivatives	(84)	(553)	895	(325)	(1,628)	(1,612)
Interest rate	163	(348)	(738)	(325)	(2,253)	(3,664)
Exchange rate	(347)	(588)	1,240	—	625	1,277
Other	100	382	393	—	—	775

(*) For interest rate hedges, the positive amount is in terms of fixed “payment.” For foreign currency hedges, a positive amount means payment in functional

versus foreign currency.

(**) Positive amounts indicate payables.

2023
Millions of euros		Notional amount maturities (*)
Derivatives	Fair value (**)	2024	2025	2026	Subsequent years	Total
Interest rate hedges	(300)	(1,200)	(302)	—	(3,849)	(5,351)
Cash flow hedges	21	(1,500)	(827)	—	2,627	300
Fair value hedges	(321)	300	525	—	(6,476)	(5,651)
Exchange rate hedges	(381)	(81)	—	582	5,413	5,914
Cash flow hedges	(377)	—	—	582	5,413	5,995
Fair value hedges	(4)	(81)	—	—	—	(81)
Interest and exchange rate hedges	30	80	46	9	751	886
Cash flow hedges	30	80	46	9	751	886
Net investment Hedges	6	(2,965)	—	—	—	(2,965)
Other derivatives	143	(168)	(239)	1,023	(1,032)	(416)
Interest rate	109	(288)	(348)	(738)	(1,657)	(3,031)
Exchange rate	(110)	(687)	—	1,761	625	1,699
Other	144	807	109	—	—	916

(*) For interest rate hedges, the positive amount is in terms of fixed “payment.” For foreign currency hedges, a positive amount means payment in functional

versus foreign currency.

(**) Positive amounts indicate payables.

	Individual Annual Report 2024	Telefónica, S. A.	53

Financial statements 2024	Index

Note 17. Income tax

Pursuant to a Ministerial Order dated December 27,

1989, Telefónica, S.A. has filed consolidated tax returns

with certain Group companies. The consolidated tax

group in 2024 and 2023 comprised 47 and 45

companies, respectively.

This tax consolidation regime applies indefinitely

providing the companies continue to meet the

requirements set down in prevailing legislation, and that

application of the regime is not expressly waived.

Tax balances as of December 31, 2024 and 2023 are as

follows:

Millions of euros	2024	2023
Tax receivables:	1,748	1,460
Deferred tax assets:	1,725	1,224
Deferred income tax (income)	518	371
Long-term tax credits for loss carryforwards	823	658
Unused tax deductions	384	195
Current tax receivables (Note 10):	23	236
Withholdings	5	10
Corporate income tax receivable	11	216
VAT and Canary Islands general indirect tax refundable	7	10
Tax payable:	696	252
Deferred tax liabilities:	576	95
Current payables to public administrations (Note 18):	120	157
Personnel income tax withholdings	5	5
Withholding on investment income, VAT and other	113	150
Social security	2	2

Telefónica, S.A., considers that unused tax loss

carryforwards in Spain, taking into account tax litigation

in which the Group is involved, amount to 3,687 million

euros at December 31, 2024.

Dec 31 2024	Total carry- forwards	Less than 1 year	More than 1 year	Total recognized
Tax Group tax credits for loss carryforwards	3,439	868	2,571	3,294
Prior to Tax Group loss carryforwards (*)	248	—	248	—

(*) Unused tax credits for loss carryforwards

Total tax credits based on the taxable income

recognized in the balance sheet at December 31, 2024

amounts to 823 million euros (658 million euros in 2023).

During 2024, Telefónica, S.A., as head of the Telefónica

tax group, made no payments on account of income tax

(198 million euros in 2023).

	Individual Annual Report 2024	Telefónica, S. A.	54

Financial statements 2024	Index

17.1 Movement in deferred tax

assets and liabilities

The balances and movements in deferred tax assets and

liabilities for Telefónica, S.A. at December 31, 2024 and

2023 are as follows:

2024
Millions of euros	Tax credits	Temporary differences, assets	Deductions	Total deferred tax assets	Deferred tax liabilities
Opening balance	658	371	195	1,224	95
Additions	178	193	176	546	515
Disposals	(13)	(45)	(20)	(78)	(34)
Transfers to the tax Group’s net position	—	—	33	33	—
Closing balance	823	518	384	1,725	576

2023
Millions of euros	Tax credits	Temporary differences, assets	Deductions	Total deferred tax assets	Deferred tax liabilities
Opening balance	38	118	267	423	189
Additions	702	273	23	998	4
Disposals	(80)	(19)	(119)	(218)	(96)
Transfers to the tax Group’s net position	(1)	—	24	23	(2)
Closing balance	658	371	195	1,224	95

The company assesses the recoverability of deferred tax

assets based on the future activities carried out by the

different companies that conform the Tax Group, on the

Spanish tax regulation and on the strategic decisions

affecting the companies. On December 31, 2024 the

estimate of the recoverability of deferred tax assets has

been assessed taking into account, (i) the estimated Tax

Group companies result, (ii) the regulatory changes

caused by the entry into force of Law 38/2022 setting a

limit to the compensation of loss within subsidiaries

within Consolidated Tax Groups and (iii) the impacts of

RD 3/2016 (see Sentence of the Constitutional Court

over the Royal Decree 3/2016 at the end of this note)

and (iv) the impact of Law 7/2024.

The aforementioned Law 7/2024 of December 20, also

restores the obligation of reversal for impairment losses

on investments that had been tax deductible prior to

2013 and that were pending of reversal as of January 1,

2024 (see section Constitutional Court Ruling on Royal

Decree Law 3/2016 in this note). The reversal must be

carried out, at a minimum, in equal parts for each of the

first three fiscal years beginning after January 1, 2024,

which has entailed the accounting of a deferred tax

liability of 535 million euros for the outstanding balance

at the beginning of fiscal year 2024. In addition, in its

analysis of the recoverability of deferred tax assets at

the end of 2024, the Company has taken into account

the amount of impairment losses deducted before 2013

that are pending of reversal, quantifying the effects on

the following years.

Pursuant to this analysis, in 2024 an activation of

deferred tax assets for loss carryforwards amounting to

174 million euros and deductions amounting to 147

million euros have been recorded with a balancing entry

to the deferred income tax caption by a total of 321

million euros.

In addition, deferred tax assets were recorded

corresponding to deductible temporary differences

amounting to 165 million euros, under the same Law,

which also establishes the extension to the years 2024

and 2025 of the 50% limitation on the use of standalone

tax loss carryforwards for the year, which must be

reversed in equal parts during each of the ten years

following its application.

As a consequence of the ruling by the EU General Court

(TGEU) on September 27, 2023 finally cancelling the

Third Decision 2015/314 of the European Commision

(see note 17.3 Tax deductibility of financial goodwill in

Spain), an addition of tax credits for loss carryforwards

was recorded in 2023 by 334 million euros with an entry

in deferred income tax.

	Individual Annual Report 2024	Telefónica, S. A.	55

Financial statements 2024	Index

Moreover, in 2023 a long term tax provisions (see note

18) and the related deferred tax assets were reversed by

49 million euros after the decision about the state aid

recuperation procedure corresponding to the tax

deductibility of financial goodwill from 2019 and 2020

(see note 17.3 Tax deductibility of financial goodwill in

Spain).

Furthermore, in 2024 there has been a reversal in the

deferred tax liabilities caption caused by the accounting

of the tax effect in the valuation of financial derivative

instruments with changes through equity amounting to

29 million euros (a reversal of 96 million euros in 2023).

17.2 Reconciliation of accounting

profit (loss) to taxable income and

income tax expense to income tax

payable

The calculation of the income tax expense and income

tax payable for 2024 and 2023 is as follows.

Millions of euros	2024	2023
Accounting profit (loss) before tax	512	1,129
Permanent differences	(1,799)	(3,102)
Temporary differences:	(34)	(7)
Arising in the year	39	61
Arising in prior years	(73)	(68)
Tax result	(1,321)	(1,980)
Gross tax payable	(330)	(495)
Corporate income tax refundable	(330)	(495)
Activation/Reversal of loss carryforwards and/or deductions	(335)	(655)
Temporary differences for tax valuation	9	2
Other effects	572	93
Corporate income tax accrued in Spain	(84)	(1,055)
Foreign taxes	31	31
Minimum complementary  tax	2	—
Income tax	(51)	(1,024)
Current income tax	(155)	(244)
Deferred income tax	102	(780)

The permanent differences mainly correspond to the

impairment of the investments in Group companies, to

the non-taxable dividends received and to the financial

goodwill.

The heading Activation/Reversal of loss carryforwards

and/or deductions mainly includes the activation of loss

carryforwards by 174 million euros as described at the

beginning of this note (activation of loss carryforwards

by 702 million euros in 2023) and the activation of

deductions by 147 million euros in 2024 (70 million euros

of deduction reversals in 2023).

The “Other impacts” caption mainly includes the effects

of the reversal of impairment losses deducted before

2013 and the inclusion of the years 2016 to 2021 as

described in note 17.1, giving rise to a deferred tax

liability of 535 million euros.

The caption "minimum complementary tax" arises from

Law 7/2024, which implements the European regulation

Pillar Two in Spain, establishing, with a retroactive effect

for fiscal years starting on January 1, 2024, a

complementary tax ensuring that large multinational

groups are taxed at a minimum effective rate of 15%

wherever they operate. The impact of this tax, which is

no relevant in 2024, is shown in the chart above.

17.3 Tax inspections and tax-related

lawsuits

In July 2019, new inspection proceedings were initiated

with respect to several of the companies belonging to

tax group 24/90, of which Telefónica, S.A. is the

dominant company. The taxes and period being audited

were corporate income tax for the years 2014 to 2017. 

In January 2022 the tax inspection proceeding was

closed after the reception of the resolution agreement.

The Company filed an appeal against this resolution to

the Economic-Administrative Central court including

the non-agreed adjustments, mainly corresponding to

the "juros over equity". In December 2022 the Company

received a rejected resolution by the Economic-

Administrative Central court which was appealed by the

Company to the Contencioso-Administrativo court in

the Spanish Audiencia Nacional in February 2023.

With respect to the inspection proceedings for the years

2008-2011, in July 2022 a Supreme Court resolution was

notified with the dismissal of the appeal filed by the

Government lawyers against the resolution of the

Spanish Audiencia Nacional dated October 29, 2021,

which validated the liquidation usage criteria of negative

loss carryforwards and deductions used by Telefónica,

S.A. in the inspections agreements of those years.

On October 24, 2022 an execution agreement filed by

the Spanish Audiencia Nacional ordered a payment to

Telefónica, S.A. amounting to 790 million euros as

notional of the taxes as well as 526 million euros of

interests.

In July 2023 new inspection proceedings were initiated

with respect to several of the companies belonging to

tax group 24/90, of which Telefónica, S.A. is the

dominant company. The taxes and period being audited

were as follows: corporate income tax for the years 2018

to 2021 and value added tax for period between May to

December 2019 as well as the years 2020 and 2021. 

	Individual Annual Report 2024	Telefónica, S. A.	56

Financial statements 2024	Index

At year-end of 2024, even if there are inspection

proceedings ongoing, tax-related lawsuits to be

concluded and additional years to be inspected yet, it

was determined that there was no need to record

additional liabilities to those already described in these

financial statements.

Constitutional Court Ruling on Royal Decree

Law 3/2016

On January 18, 2024, the plenary session of the

Constitutional Court of Spain ("TC") unanimously

declared unconstitutional certain measures introduced

by Royal Decree-Law 3/2016 of December 2 on

corporate income tax. Specifically, the TC declared

unconstitutional the setting of stricter ceilings for the

offsetting of tax loss carryforwards, the introduction ex

novo of a limit on the application of double taxation

deductions, and the obligation to automatically

integrate into the tax base of the tax the impairment of

holdings that had been deducted in previous years. This

ruling, following the trend of previous TC rulings, points

out that, in the interest of legal certainty, the effects of

the declaration of unconstitutionality are limited.

However, because Telefónica has submitted letters of

request for rectification for the financial years 2016

onwards of both the consolidated self-assessment tax

returns (Form 220) of the Tax Group 24/90 and the

individual self-assessment tax returns (Form 200) of the

Group companies affected by the measures deemed to

be unconstitutional, Telefónica would not be affected by

any such limitation on the scope of the declaration of

unconstitutionality.

Furthermore, on December 21, 2024, Law 7/2024 of

December 20 was published in the Official State

Gazette (BOE), which, in addition to regulating a

complementary tax ensuring a minimum global tax rate

for multinational groups (transposing European Council

Directive 2022/2523 of December 15), introduces other

changes to the corporate income tax in order to reverse

the effects of the partial annulment of the tax measures

introduced by Royal Decree-Law 3/2016 of December 2.

With effect from tax periods starting on or after January

1, 2024 and not yet concluded at the time the Law

7/2024 comes into force, the mandatory reversal regime

for impairments of securities on share capital or equity

that had been fiscally deductible prior to 2013 is

reinstated.

Specifically, the total amount of impairments that were

deductible before 2013 and are pending reversal as of

January 1, 2024 must be included in the tax base.

The reversal must be made, at a minimum, in equal parts

during each of the first three financial years starting

from January 1, 2024. It will be possible to offset the

positive income arising from this mandatory reversal

with tax loss carryforwards generated in years prior to

2021, without the application of the 25% and 50% limits

mentioned earlier (although the general 70% limit will

still apply).

As a result, the corporate income tax returns of the fiscal

group in Spain for the years 2016 to 2021 will be affected

by the aforementioned ruling. Given the current status

of the litigation related to the corporate income tax for

2016-2017 before the Spanish National Court, and the

conclusion of the tax inspection process for the years

2018 to 2021, it is expected that the Spanish tax

authorities will issue the corresponding enforcement

agreements when the inspection procedure concludes

in 2025.

Accordingly, Telefónica, with the support of its external

advisors, based on the applicable financial reporting

framework, has taken into account the effects of the

unconstitutionality of Royal Decree-Law 3/2016 and

Law 7/2024. 

The effects are disclosed at the beginning of note 17.1

Movement in deferred tax assets and liabilities.

As a result of the execution of this TC ruling, as well as

the ruling from the General Court of the European Union

regarding the amortization of goodwill, Telefónica could

once again have available (in addition to the 334 million

euros, either in whole or in part, the following tax credits

for negative tax bases and deductions used in the

assessments of those years: for negative tax bases of

the years 2002, 247 million euros; 2004, 21 million euros;

2011, 615 million euros; and 2015, 1,503 million euros; and

for deductions: for double taxation for the years 2010 to

2020, 952 million euros; for reinvestment for the years

2003 and 2011 to 2013, 23 million euros; for investments

from 2003 to 2013, 476 million euros; for donations from

the years 2009 to 2018, 260 million euros; for fixed

assets in the Canary Islands from 2010 to 2020, 101

million euros and due to the reversal of temporary

measures from 2015 to 2020, 29 million euros.

Tax deductibility of financial goodwill in Spain

The tax regulations added article 12.5 to the Spanish

Corporate Income Tax Law, which came into force on

January 1, 2002. The article regulated the deductibility of

tax amortization of financial goodwill (fondo de

comercio) arising from the acquisition of non-Spanish

companies, which could be amortized over 20 years at

5% per annum.

Following the entry into force of the Laws 9/2011 of

August 19, 2011 and 16/2013 of October 29, 2013, the

amount of goodwill amortization deductible for tax

purposes under article 12.5 for the years 2011 to 2015

was reduced from 5% to 1%. The effect is temporary

because the 4% not amortized for five years (20% in

total) will be recovered extending the deduction period

from the initial 20 years to 25 years.

	Individual Annual Report 2024	Telefónica, S. A.	57

Financial statements 2024	Index

The Telefónica Group, under this regulation, has been

amortizing for tax purposes the financial goodwill from

its investments, both direct and indirect, in O2,

BellSouth and Colombia Telecomunicaciones (prior to

December 21, 2007) and Vivo (acquired in 2010). The

positive accumulated effect of the corresponding

settlements of corporate income tax from 2004 to the

closing of December 31, 2024, was 2,368 million euros. 

In relation to this tax incentive, the European

Commission (EC) has in recent years commenced three

proceedings against the Spanish State, as it deems that

this tax benefit could constitute an example of state aid.

Although the EC itself acknowledged the validity of the

tax incentive for those investors that invested in

European companies for  operations carried out before

December 21, 2007 in the first decision, and before May

21, 2011 for investments in other countries in the second

decision, in its third decision issued on October 15, 2014

it calls into question the applicability of the principle of

legitimate expectations in the application of the

incentive for indirect acquisitions, whatever the date of

acquisition may have been.

There are also doubts in the Spanish Courts about the

classification of the incentive as a deduction and its

maintenance in the case of subsequent transmission.

On October 6, 2021, the Court of Justice of the European

Union concluded that the European Commission

correctly classified the Spanish tax depreciation scheme

of the Fondo de Comercio as State aid incompatible

with the internal market for the First and Second

Decisions.

With regard to the recognition of legitimate

expectations for the First and Second decisions, the

Court of Justice of the European Union confirms its

applicability.

The proceedings initiated on the Third Decision,

suspended until the resolution of the 1st and the 2nd

Decisions resumed on October 19, 2021. The General

Court of the Court of Justice of the European Union

issued a ruling on September 27, 2023 annulling the

Commission's Third Decision (EU) 2015/314, effective as

of the day of its publication. However, the proceedings

have not been finally concluded as the European

Commission appealed the ruling to the Court of Justice

of the European Union on December 14, 2023.

As a result of the execution of this Sentence, in

accordance with the opinion of the Company and its

advisors as to the likely outcome of the aforementioned

appeal, as well as that of the Constitutional Court on

Royal Decree Law 3/2016, Telefónica could once again

have available (in addition to the 334 million euros from

2023), totally or partially, the tax credits for tax loss

carryforwards and deductions described under

"Constitutional Court Ruling on Royal Decree Law

3/2016" of this note.

The "Tax and Customs Control Unit of the Spanish Tax

Authority" (Dependencia de Control Tributario y

Aduanero de la Agencia Tributaria), in compliance with

the obligation set out in the EC Decision (EU) 2015/314,

recovered in March 2019, February 2021 and July 2023,

the amounts that had been deducted in connection with

the amortization of goodwill for the indirect acquisition

of non-resident companies from 2005 to 2015, 2016 to

2018 and 2019 to 2020, respectively. The amount paid

by Telefónica after offsetting outstanding tax credits

(tax losses carryforward and deductions) amounted to

13.4 million euros. All settlements have been appealed

by the Company in the Spanish courts.

Notwithstanding the fact that Telefónica understands

that the principle of legitimate expectations in relation to

this tax incentive applies, in relation to tax-amortized

goodwill through the purchase of some companies for

which the applicability of the legitimate expectations

principle is questioned, mainly Vivo, the Group has

decided to continue provisioning the amount of the

goodwill amortized for tax purposes, and not recovered

by the Administration which amounted to 480 million

euros as of December 31, 2024 (419 million euros as of

December 31, 2023). 

Minimum complementary tax (Pillar Two)

On December 21, 2024, the Official State Gazette

published Law 7/2024 of December 20, which

establishes a Complementary Tax to guarantee a

minimum global level of taxation for multinational

groups and large domestic groups, a Tax on the margin

of interest and fees of certain financial entities, and a

Tax on liquids for electronic cigarettes and other

tobacco-related products, as well as amendments to

other tax regulations (hereinafter, "Law 7/2024").

Law 7/2024 implements Pillar Two in Spain, establishing,

with retroactive effect for fiscal years starting on

January 1, 2024, a Complementary Tax that ensures

large multinational groups are taxed at a minimum

effective rate of 15% wherever they operate.

The Telefónica Group, as a large multinational group, is

subject to this Complementary Tax.

In this regard, the group has conducted an analysis of

the potential impacts that may arise from the application

of this tax in the 2024 financial year in those jurisdictions

where it is present, considering the application of the

Transitional Safe Harbours outlined in the Fourth

Transitional Provision of Law 7/2024 and, where

applicable, the full calculation.

These Transitional Safe Harbours aim to facilitate

adaptation to the Pillar Two regulations by stipulating

	Individual Annual Report 2024	Telefónica, S. A.	58

Financial statements 2024	Index

that the Complementary Tax will be zero if any of the

three regulated tests are met..

The tax expense in the financial statements for 2024

related to jurisdictions where none of the safe harbor

tests are met does not have a significant impact, in

accordance with the application of the Pillar Two

legislation.

The exception applies to recognise and disclose

information on deferred tax assets and liabilities arising

from the implementation of Law 7/2024, as provided in

the Eighth Transitory Disposition of Royal Decree

1514/2007, of November, 16 approving the Plan General

de Contabilidad, in force though Law 7/2024.

	Individual Annual Report 2024	Telefónica, S. A.	59

Financial statements 2024	Index

Note 18. Trade, other payables

and provisions

A) Trade and other payables

The breakdown of “Trade and other payables” is as

follows:

Millions of euros	2024	2023
Suppliers	121	156
Accounts payable to personnel	39	46
Other payables	7	12
Other payables to public administrations (Note 17)	120	157
Total	287	371

Information on deferred payments to third

parties. Third additional provision, “Information

requirement” of Law 15/2010 of July, 5,

amended by Law 28/2022 of September, 28

In accordance with the aforementioned Law, the

following information corresponding to the Company is

disclosed:

	2024	2023
	Number of days	Number of days
Weighted average maturity period	22	22
Ratio of payments	23	23
Ratio of outstanding invoices	11	20
	Millions of euros	Millions of euros
Total Payments	274	215
Outstanding invoices	27	33

Telefónica, S.A. has adapted its internal processes and

payment schedules to the provisions of Law 15/2010

(amended by Law 31/2014) and Royal Decree 4/2013,

amending Law 3/2004, establishing measures against

late payment in commercial transactions. Engagement

conditions with commercial suppliers, as contractually

agreed with them, in 2024 included payment periods

with a maximum of 60 days.

For reasons of efficiency and in line with general

practice in the business, the Company has set payment

schedules, whereby payments are made on set days.

Invoices falling due between two payment days are

settled on the following payment date in the schedule.

Payments to Spanish suppliers in 2024 surpassing the

legal limit were due to circumstances or incidents

beyond the payment policies, mainly the delay in the

billing process (a legal obligation for the supplier), the

closing of agreements with suppliers over the delivery of

goods or the rendering of services, or occasional

processing issues.

Additional information required by Law 18/2022,

amending the third additional provision of Law 15/2020

is disclosed below:

	2024	2023
Monetary volume of invoices paid in a period less than the maximum established in the regulations (millions of euros)	242	183
Percentage over total payments	89%	85%
Number of invoices paid in a period less than the maximum established in the regulations	4,818	4,411
Percentage over the total number of invoices paid	63%	60%

B) Provisions

In 2024 and 2023 the concepts and amounts under the

provisions caption are the following:

2024
Millions of euros	Non-current	Current	Total
Tax Provisions	481	—	481
Other responsibilities (Note 8)	743	—	743
Termination plans (Note 19)	59	31	90
Other provisions	104	—	104
Total	1,387	31	1,418

	Individual Annual Report 2024	Telefónica, S. A.	60

Financial statements 2024	Index

2023
Millions of euros	Non-current	Current	Total
Tax Provisions	419	—	419
Termination plans (Note 19)	81	36	117
Other provisions	109	—	109
Total	609	36	645

Movements in the provisions during 2024 and 2023 are

disclosed below:

Millions of euros	2024	2023
Opening balance:	645	629
Additions	69	111
Amortization and reversals	(39)	(92)
Transfers (note 8)	743	—
Fair value adjustments and others	—	(3)
Closing balance:	1,418	645
Non-current	1,387	609
Current	31	36

In 2024 and 2023 the caption “Additions” included 62

million euros in both years, of tax provisions for the

article 12.5 of the Spanish Corporate Tax Law related to

the acquisition of Vivo (see note 17). In 2024, no

additional movements have been recorded to this

allocation in the tax provision. In 2023, after the recovery

of the amortization of financial goodwill made by

Spanish Tax Authorities detailed in note 17.3, the

Company amortized an amount of 49 million euros of

long term tax accrual for this concept. The amortization

is shown as Amortization and reversals in 2023 chart of

movements.

In 2023 the Company launched a new voluntary

termination plan for the employees who meet certain

requirements regarding the age of the employee and

the seniority in the Company. The program was

implemented during the first months of 2024. An accrual

of 34 million euros corresponding to this plan was

registered in 2023 income statement. In addition, in

2024, an accrual of 7 million euros corresponding to

certain employee layoffs has been registered (see note

19).

In 2024 and 2023 amortization of 34 and 21 million euros,

respectively, related to the different programs launched

in previous years have been registered.

	Individual Annual Report 2024	Telefónica, S. A.	61

Financial statements 2024	Index

Note 19. Revenue and expenses

19.1 Revenue

a) Rendering of services

Telefónica, S.A. has contracts for the right to use the

Telefónica brand with Group companies which use the

license. The amount each subsidiary must recognize as

a cost for use of the license is stipulated in the contract

as a percentage of income obtained by the licensor. In

2024 and 2023, “Rendering of services to Group

companies and associates” included 398 and 399 million

euros, respectively, for this item.

Telefónica, S.A. has signed contracts to provide

management support services to several subsidiaries.

Revenues received for this concept in 2024 and 2023

amount to 37 and 26 million euros, respectively, and are

recognized under "Rendering of services to Group

companies and associates".

Revenues in 2024 and 2023 also include property rental

income amounting to 34 million euros in both years,

mainly generated from the lease of office space in

Distrito Telefónica to several Telefónica Group

companies (see note 7).

b) Dividends from Group companies and

associates

The detail of the main amounts recognized in 2024 and

2023 is as follows:

Millions of euros	2024	2023
O2 Europe, Ltd.	2,200	—
Telefónica Latinoamérica Holdings, S.L.	1,000	—
Telefónica de España, S.A.U.	815	473
Telefónica Móviles España, S.A.U.	522	677
Telefónica O2 Holdings Limited	512	1,153
Telfisa Global, B.V.	435	1,042
Telefônica Brasil, S.A.	202	242
Telefónica Finanzas, S.A.U.	115	118
Telefónica Local Services, Gmbh	62	—
Telxius Telecom, S.A.U.	2	140
Other companies	14	14
Total	5,879	3,859

c) Interest income on loans to Group

companies and associates

This heading includes the return obtained on loans

granted to subsidiaries to carry out their business (see

note 8.5). The breakdown of the most significant

amounts is as follows:

Millions of euros	2024	2023
Telefónica Cybersecurity & Cloud Tech, S.L.	6	5
Telfisa Global, B.V.	10	13
Telxius Telecom, S.A.U.	13	4
Telefónica Europe, B.V.	1	2
Other companies	—	4
Total	30	28

As described in note 15.1, Telfisa Global, B.V. is in charge

of the cash pooling services of the Group. In 2021, and

based on the recommendations by the OECD Transfer

Pricing Guidance on Financial Transactions, the

Company signed an agreement to partially share the

financial profit or loss raised by its subsidiary within its

operations. In 2024 and 2023 the impact has been a

revenue shown in the chart above.

19.2 Non-core and other current

operating revenues

Non-core and other current operating revenues – Group

companies relates to revenues on centralized services

that Telefónica, S.A., as head of the Group, provides to

its subsidiaries. Telefónica, S.A. bears the full cost of

these services and then charges each individual

subsidiary for the applicable portion.

This caption includes in 2024 the notional amount of the

ICSID award dated November 12, granted to Telefónica,

S.A. amounting to 380 million US dollars equivalent to

358 million euros at that date (see notes 9.4 and 20.b).

	Individual Annual Report 2024	Telefónica, S. A.	62

Financial statements 2024	Index

19.3 Personnel expenses and

employee benefits

The breakdown of Personnel expenses is as follows:

Millions of euros	2024	2023
Wages, salaries and other personnel expenses	161	199
Pension plans	9	7
Social security costs	26	26
Total	196	232

In 2024 and 2023, Wages, salaries and other personnel

expenses includes compensation accruals amounting to

7 million euros (34 million euros in 2023) as described in

note 18.

Telefónica has reached an agreement with its staff to

provide an Occupational Pension Plan pursuant to

Legislative Royal Decree 1/2002, of November 29,

approving the revised Pension Plans and Funds Law.

The features of this plan are as follows:

• Defined contribution of 4.51% of the participating

employees’ base salary. The defined contributions of

employees transferred to Telefónica from other Group

companies with different defined contributions (e.g.

6.87% in the case of Telefónica de España, S.A.U.) will

be maintained.

• Mandatory contribution by participants of a minimum

of 2.2% of their base salary.

• Individual and financial capitalization systems.

This fund was outsourced to Telefónica's subsidiary,

Fonditel Entidad Gestora de Fondos de Pensiones, S.A.,

which has added the pension fund assets to its Fonditel

B fund.

At December 31, 2024, 2,428 participants have signed

up for the plan (2,334 participants in 2023). This figure

includes both active employees, employees under

termination plans and former employees who voluntarily

decided to maintain the plan, as provided for in Royal

Decree 304/2004 approving the regulations for Pension

Plans and Funds. The cost for the Company amounted

to 3.5 and 4 million euros in 2024 and 2023, respectively.

In 2006, a Pension Plan for Senior Executives, wholly

funded by the Company, was created and complements

the previous plan and involves additional defined

contributions at a certain percentage of the executive’s

fixed remuneration, based on professional category, plus

some extraordinary contributions depending on the

circumstances of each executive, payable in

accordance with the terms of the plan.

Telefónica, S.A. has recorded costs related to the

contributions to this executive plan of 7 million euros in

both 2024 and 2023. In 2024 and 2023 some executives

under this Pension Plan for Senior Executives left the

Company, and accordingly their accumulated

contributions were retrieved by Telefónica, S.A. and

registered as a decrease in the expense totaling 3 and 5

million euros, respectively.

No provision was made for this plan as it has been fully

externalized.

The main share-based payment plans in place in the

2024 and 2023 period are as follows:

Long-term incentive plan based on Telefónica,

S.A. shares: Performance Share Plan 2021-2025

At the General Shareholders’ Meeting held on April 23,

2021, a long-term incentive plan was approved,

consisting of the delivery of shares of Telefónica, S.A.

aimed at senior executive officers of the Telefónica

Group, including the Executive Directors of Telefónica,

S.A. The plan consists of the delivery to the participants

of a certain number of shares of Telefónica, S.A. based

on compliance with the objectives established for each

of the cycles into which the plan is divided.

The number of shares to be delivered depends (i) 50%

on achievement of the total shareholder return ("TSR")

objective for shares of Telefónica, S.A. with regard to the

TSRs of a comparison group made up of companies of

the telecommunication sector, weighted by its

relevance for Telefónica, (ii) 40% on the generation of

Free Cash Flow of Telefónica Group ("FCF"), and (iii) 10%

on CO2 Emission Neutralization, in line with the goal set

by the Company.

The plan has a duration of five years and is divided into

three cycles of three years. Performance assessment

has been carried out based on the evolution of the stock

price and on the audited results of the Company

(audited both by internal and external audit teams) prior

to the approval by the Nominating, Compensation and

Corporate Governance Committee. 

The first cycle commenced on January 1, 2021 and

ended on December 31, 2023. The maximum number of

shares assigned to this cycle of the plan was 19,425,499

and the outstanding shares at December 31, 2023 were

17,728,523 with the following breakdown:

First cycle	No. of shares assigned	Outstanding shares at 12/31/2023	Unit fair value (euros)
TSR Objective	9,712,749	8,864,262	2.64
FCF Objective	7,770,200	7,091,409	3.15
CO2 E.N. Objective	1,942,550	1,772,852	3.15

	Individual Annual Report 2024	Telefónica, S. A.	63

Financial statements 2024	Index

Out of this total, the maximum number of shares

assigned to Telefónica, S.A.'s employees amounted to

7,831,873 euros (outstanding shares were 7,615,700).

Once considered the target fulfillment levels, a

weighted achievement ratio of 89.45% was fulfilled.

The second cycle commenced on January 1, 2022 and

ended on December 31, 2024. The maximum number of

shares assigned to this cycle of the plan was 15,069,650

and the outstanding shares at December 31, 2024 were

13,851,509 with the following breakdown:

Second cycle	No. of shares assigned	Outstanding shares at 12/31/2024	Unit fair value (euros)
TSR Objective	7,534,825	6,925,755	2.43
FCF Objective	6,027,860	5,540,604	2.95
CO2 E.N. Objective	1,506,965	1,385,150	2.95

The maximum number of shares assigned to Telefónica,

S.A.'s employees amounted to 7,209,211 (outstanding

shares as of December 31, 2024 amounting to

6,795,543 ). Once considered the target fulfillment

levels, a weighted achievement ratio of 100% has been

fulfilled.

The third cycle commenced on January 1, 2023 and it

will end on December 31, 2025. The maximum number

of shares assigned to this cycle of the plan was

16.618.564 and the outstanding shares at December 31,

2024 were 15,856,658, with the following breakdown:

Third  cycle	Nº of shares assigned	Outstanding shares at 12/31/2024	Unit fair value (euros)
TSR Objective	8,309,282	7,928,329	1.77
FCF Objective	6,647,426	6,342,664	2.81
N.E. CO2 Objective	1,661,856	1,585,665	2.81

The maximum number of shares assigned to Telefónica,

S.A.'s employees amounts to 7,874,832 (outstanding

shares as of December 31, 2024 amounting to

7,562,239).

Long-term incentive plan based on Telefónica,

S.A. shares: Performance Share Plan

2024-2028

At the General Shareholders’ Meeting held on April 12,

2024, a long-term incentive plan was approved,

consisting of the delivery of shares of Telefónica, S.A.

aimed at senior executive officers of the Telefónica

Group, including the Executive Directors of Telefónica,

S.A. The plan consists of the delivery to the participants

of a certain number of shares of Telefónica, S.A. based

on compliance with the objectives established for each

of the cycles into which the plan is divided.

The number of shares to be delivered depends (i) 50%

on achievement of the total shareholder return ("TSR")

objective for shares of Telefónica, S.A. with regard to the

TSRs of a comparison group made up of companies of

the telecommunication sector, weighted by its

relevance for Telefónica, (ii) 40% on the generation of

Free Cash Flow of Telefónica Group ("FCF"), and (iii) 5%

on CO2 Emission Neutralization, in line with the goal set

by the Company and (iv) 5% on the number of women in

executive positions, aligned with the target set by the

Company.

The plan has a duration of five years and is divided into

three cycles of three years. Performance assessment

has been carried out based on the evolution of the stock

price and on the audited results of the Company

(audited both by internal and external audit teams) prior

to the approval by the Nominating, Compensation and

Corporate Governance Committee. 

The first cycle commenced on January ,1 2024 and will

end on December 31, 2026. The maximum number of

shares assigned to this cycle of the plan was 15,353,759

and the outstanding shares at December 31, 2024 were

15.317.175, with the following breakdown:

First cycle	Nº of shares assigned	Outstanding shares at 12/31/2024	Unit fair value (euros)
TSR Objective	7,676,879	7,658,587	2.85
FCF Objective	6,141,504	6,126,870	3.42
N.E. CO2 Objective	767,688	765,859	3.42
Women executives	767,688	765,859	3.42

The maximum number of shares assigned to Telefónica,

S.A.'s employees amounts to 7,105,106 (outstanding

shares as of December 31, 2024 amounting to

6.948.729 ).

Long-term incentive plan based on Telefónica,

S.A. shares: Talent for the Future Share Plan

2021-2025 (TFSP)

At its meeting on March 17, 2021, the Telefónica, S.A.'s

Board of Directors agreed to launch a new installment of

the long-term incentive plan "Talent for the Future

Share Plan".

As in the case of the Performance Share Plan

2021-2025 described above, the number of shares to be

delivered will depend (i) 50% on achievement of the

total shareholder return ("TSR") objective for shares of

Telefónica, S.A. with regard to the TSRs of a comparison

group  made up of companies of the telecommunication

sector, weighted by its relevance for Telefónica, (ii) 40%

on the generation of Free Cash Flow of Telefónica

Group ("FCF"), and (iii) 10% on CO2 Emission

Neutralization, in line with the goal set by the Company.

	Individual Annual Report 2024	Telefónica, S. A.	64

Financial statements 2024	Index

The plan has a duration of five years and is divided into

three cycles of three years. Performance assessment

has been carried out based on the evolution of the stock

price and on the audited results of the Company

(audited both by internal and external audit teams) prior

to the approval by the Nominating, Compensation and

Corporate Governance Committee. 

The first cycle commenced on January 1, 2021 and

ended on December 31, 2023. The maximum number of

shares assigned to this cycle of the plan was 1,751,500

and the outstanding shares at December 31, 2023 were

1,557,000 with the following breakdown:

First cycle	No. of shares assigned	Outstanding shares at 12/31/2023	Unit fair value (euros)
TSR Objective	875,750	778,500	2.64
FCF Objective	700,600	622,800	3.15
CO2 E.N. Objective	175,150	155,700	3.15

From this total, the shares assigned to Telefónica, S.A.'s

employees were 232,500. The outstanding shares as of

December 31, 2023 were 203,000. Once considered the

target fulfillment levels, a weighted achievement ratio of

89.45% was reached.

The second cycle commenced on January 1, 2022 and

ended on December 31, 2024. The maximum number of

shares assigned to this cycle of the plan was 1,646,500

and the outstanding shares at December 31, 2024 was

1,458,000 with the following breakdown:

Second cycle	No. of shares assigned	Outstanding shares at 12/31/2024	Unit fair value (euros)
TSR Objective	823,250	729,000	2.43
FCF Objective	658,600	583,200	2.95
CO2 E.N. Objective	164,650	145,800	2.95

From this total, the shares assigned to Telefónica, S.A.'s

employees were 219,000. The outstanding shares as of

December 31, 2023 were 214,000. Once considered the

target fulfillment levels, a weighted achievement ratio of

100% has been reached.

The third cycle commenced on January 1, 2023 and it

will end on December 31, 2025. The maximum number

of shares assigned to this cycle of the plan was 1,771,500

and the outstanding shares at December 31, 2024 was

1,663,000, with the following breakdown:

Third cycle	Nº of shares assigned	Outstanding shares at 12/31/2024	Unit fair value (euros)
TSR Objective	885,750	831,500	1.77
FCF Objective	708,600	665,200	2.81
N.E. CO2 Objective	177,150	166,300	2.81

From this total, the shares assigned to Telefónica, S.A.'s

employees are 239,000. The outstanding shares as of

December 31, 2023 are 244,000.

Long-term incentive plan based on Telefónica,

S.A. shares: Talent for the Future Share Plan

2024-2028 (TFSP)

At its meeting on April 12, 2024, the Telefónica, S.A.'s

Board of Directors agreed to launch a new installment of

the long-term incentive plan "Talent for the Future

Share Plan".

As in the case of the Performance Share Plan

2024-2028 described above, the number of shares to be

delivered will depend (i) 50% on achievement of the

total shareholder return ("TSR") objective for shares of

Telefónica, S.A. with regard to the TSRs of a comparison

group  made up of companies of the telecommunication

sector, weighted by its relevance for Telefónica, (ii) 40%

on the generation of Free Cash Flow of Telefónica

Group ("FCF"), and (iii) 5% on CO2 Emission

Neutralization, in line with the goal set by the Company

and (iv) 5% on the number of women in executive

positions aligned with the target set by the Company.

The plan has a duration of five years and is divided into

three cycles of three years. Performance assessment

has been carried out based on the evolution of the stock

price and on the audited results of the Company

(audited both by internal and external audit teams) prior

to the approval by the Nominating, Compensation and

Corporate Governance Committee. 

The first cycle commenced on January ,1 2024 and will

end on December 31, 2026. The maximum number of

shares assigned to this cycle of the plan was 1,530,500

and the outstanding shares at December 31, 2024 were

1,513,500 with the following breakdown:

First cycle	Nº of shares assigned	Outstanding shares at 12/31/2024	Unit fair value (euros)
TSR Objective	765,250	756,750	2.85
FCF Objective	612,200	605,400	3.42
N.E. CO2 Objective	76,525	75,675	3.42
Women  executives	76,525	75,675	3.42

	Individual Annual Report 2024	Telefónica, S. A.	65

Financial statements 2024	Index

From this total, the shares assigned to Telefónica, S.A.'s

employees are 206,000. The outstanding shares as of

December 31, 2023 are 202,500.

Telefónica, S.A. global share plans: Global

Employee Share Plans

The Telefónica, S.A.'s Ordinary General Shareholders'

Meeting on April 8, 2022 approved a new voluntary plan

for incentivized purchases of shares of Telefónica, S.A.

for the employees of the Group. Under this Plan,

employees were offered the option to acquire

Telefónica, S.A. shares during a twelve-month period,

with the company undertaking to deliver a certain

number of free shares to participants, subject to certain

requirements.

The maximum amount that each employee can invest is

limited to 1,800 euros. Nevertheless, the total free

shares to be delivered can not exceed 0.38% of the

share capital of Telefónica, S.A. as of the approval date

in 2022 General Shareholders’ meeting.

The purchase period commenced in October 2022 and

ended in September 2023. In March 2024 the vesting

period of the plan ended and 10,255,044 shares were

distributed to the Group employees. From this total,

303,747 shares corresponded to Telefónica, S.A.'s

employees.

19.4 Average number of employees

in 2024 and 2023 and number of

employees at year-end

2024
	Employees at 12/31/24				Average no. of employees in 2024
Professional category	Females	Males	Total		Females	Males	Total
Head of departments	49	93	142		49	102	151
Managers	140	160	300		139	144	283
Mid range managers	117	141	258		139	167	306
Other professionals	281	173	454		242	135	377
Total	587	567	1,154		569	548	1,117

2023
	Employees at 12/31/2023				Average no. of employees in 2023
Professional category	Females	Males	Total		Females	Males	Total
Head of departments	50	107	157		50	106	156
Managers	141	141	282		144	140	284
Mid range managers	137	167	304		140	164	304
Other professionals	251	138	389		250	143	393
Total	579	553	1,132		584	553	1,137

According to the requirement of the Spanish Companies

Law established in article 260, the average number of

employees with disability of 33% or higher, establishing

the categories to which they belong are the following:

Professional category	Average number of employees
Managers	2
Other professionals	6
Total	8

19.5 External services

The items composing External services are as follows:

Millions of euros	2024	2023
Rent	4	4
Independent professional services	95	127
Donations	41	48
Marketing and advertising	140	158
Other expenses	47	35
Total	327	372

In 2024 and 2023 the caption donations includes funds

contributed and paid to Fundación Telefónica

amounting to 39 and 47 million euros.

	Individual Annual Report 2024	Telefónica, S. A.	66

Financial statements 2024	Index

On May 30, 2019, Telefónica, S.A. signed a 10-year

contract to rent Diagonal 00 building, owned by the

Company until that moment, due in 2029, renewable for

another 6 years.

Future minimum rentals payable under non-cancellable

operating leases without penalization at December 31,

2024 and 2023 are as follows:

Millions of euros	Total	Up to 1 year	From 1 to 3 years	From 3 to 5 years	Over 5 years
Future compromised payments 2024	12	3	5	4	—
Future compromised payments 2023	23	4	10	8	1

19.6 Finance revenue

The items composing Finance revenue are as follows:

Millions of euros	2024	2023
Dividends from other companies	39	28
Other third parties financial revenues and gains on derivative instruments	501	488
Total	540	516

In 2024 other financial income from third parties

includes the interest revenue from the ICSID award

detailed in note 9.4 and note 20.b) for a total amount of

164 million euros (equivalent to 154 million euros).

Other third parties financial revenues and gains on

derivative instruments includes the effect of the

financial hedges arranged to unwind positions for 2024

and 2023, which have the same amount under Finance

costs payable to third parties and losses on interest

rates of financial hedges and therefore do not have a

net impact in the income statement.

19.7 Finance costs

The breakdown of “Finance costs” is as follows:

Millions of euros	2024	2023
Interest on borrowings from Group companies and associates	1,573	1,487
Finance costs payable to third parties and losses on interest rates of financial hedges	319	448
Total	1,892	1,935

The breakdown by Group company of debt interest

expenses is as follows:

Millions of euros	2024	2023
Telefónica Europe, B.V.	542	510
Telefónica Emisiones, S.A.U.	865	766
Other companies	166	211
Total	1,573	1,487

Other companies includes financial costs with Telfisa

Global, B.V. related to current payables for specific cash

needs.

The amount included as Finance costs payable to third

parties and losses on interest rate of financial hedges

refers to fair value effects in the measurement of

derivative instruments described in note 16, together

with the effect of the debt interest rates' trend during

the year.

19.8 Exchange differences

The breakdown of exchange gains recognized in the

income statement is as follows:

Millions of euros	2024	2023
On current operations	34	39
On loans and borrowings	21	1
On derivatives	461	383
On other items	12	23
Total	528	447

The breakdown of exchange losses recognized in the

income statement is as follows:

Millions of euros	2024	2023
On current operations	45	37
On loans and borrowings	15	8
On derivatives	406	400
On other items	41	13
Total	506	458

The variation in exchange gains and losses is due to the

fluctuations in the main currencies the Company works

with. In 2024 euro exchange rate has depreciated

against US dollar (6.32%) and pound sterling (4.78%).

However, euro exchange rate has appreciated against

Brazilian real (16.88%).

In 2023 euro exchange rate has appreciated against US

dollar 3.4%. However, euro exchange rate has

depreciated against Brazilian real (4.11%) and pound

sterling (2.1%).

These impacts are offset by the hedges contracted to

mitigate exchange rate fluctuations.

	Individual Annual Report 2024	Telefónica, S. A.	67

Financial statements 2024	Index

Note 20. Other information

a) Financial guarantees

At December 31, 2024, Telefónica, S.A. had provided

financial guarantees for its subsidiaries and affiliates to

secure their transactions with third parties amounting to

36,853 million euros (35,374 million euros at December

31, 2023). These guarantees are measured as indicated

in note 4.g).

Millions of euros
Nominal Amount	2024	2023
Debentures and bonds and equity instruments	35,596	34,778
Loans and other payables	92	96
Other marketable debt securities	1,165	500
Total	36,853	35,374

The debentures, bonds and equity instruments in

circulation at December 31, 2024 issued by Telefónica

Emisiones, S.A.U., and Telefónica Europe, B.V. were

guaranteed by Telefónica, S.A. The nominal amount

guaranteed was equivalent to 35,596 million euros at

December 31, 2024 (34,778 million euros at December

31, 2023). During 2024 Telefónica Emisiones, S.A.U.

issued 1,750 million euros of instruments on capital

markets (850 million euros in 2023) and 1,000 million

euros matured during 2024 (1,705 million euros during

2023).

Other marketable debt securities includes the

guarantee of Telefónica, S.A. relating to the commercial

paper issue program of Telefónica Europe, B.V. The

outstanding balance of commercial paper in circulation

issued through this program at December 31, 2024 was

1,165 million euros and 500 million euros in 2023

Telefónica, S.A. provides operating guarantees granted

by external counterparties, which are offered during its

normal commercial activity. At December 31, 2024 these

guarantees amounted to approximately 29 million euros

(31 million euros in 2023).

b) Litigation and arbitration

Telefónica and its group companies are party to several

legal proceedings which are currently in progress in the

courts of law and the arbitration bodies of the various

countries in which Telefónica Group is present.

Based on the advice of our legal counsel it is reasonable

to assume that these legal proceedings will not

materially affect the financial condition or solvency of

Telefónica, S.A.

It is worth highlighting the following aspects relating to

the unresolved legal proceedings or those underway

during 2024 (see note 17 for details of tax-related cases):

Decision by the High Court regarding the

acquisition by Telefónica of shares in Český

Telecom by way of a tender offer

Venten Management Limited ("Venten") and Lexburg

Enterprises Limited ("Lexburg") were non-controlling

shareholders of Český Telecom. In September 2005,

both companies sold their shares to Telefónica in a

mandatory tender offer. Subsequently, Venten and

Lexburg, in 2006 and 2009, respectively, filed actions

against Telefónica claiming a higher price than the price

for which they sold their shares in the mandatory tender

offer.

On August 5, 2016, the hearing before the High Court in

Prague took place in order to decide the appeal against

the second decision of the Municipal Court, which had

been favorable to Telefónica's position (as was also the

case with the first decision of the Municipal Court). At

the end of the hearing, the High Court announced the

second appellate decision by which it reversed the

second decision of the Municipal Court and ordered

Telefónica to pay 644 million Czech korunas

(approximately 23 million euros) to Venten and 227

million Czech korunas (approximately 8 million euros) to

Lexburg, in each case plus interest.

On December 28, 2016, the decision was notified to

Telefónica. Telefónica filed an extraordinary appeal,

requesting the suspension of the effects of the decision.

In March 2017, Telefónica was notified of the decision of

the Supreme Court, which ordered the suspension of

the effects of the unfavorable decision to Telefónica

issued by the High Court.

Venten and Lexburg filed with the Supreme Court a

motion to partially abolish the suspension of

	Individual Annual Report 2024	Telefónica, S. A.	68

Financial statements 2024	Index

enforceability of the Decision of the High Court in

Prague. On January 17, 2018, Telefónica filed its

response seeking dismissal of such motion for lack of

legal basis.

On February 14, 2019, notification was given to

Telefónica of the resolution of the Supreme Court

which, based on the extraordinary appeal filed by

Telefónica, abolished the decision of the High Court in

Prague dated August 5, 2016 and remanded the case

back to the High Court.

In December 2021, the High Court of Prague confirmed

its appointment of an expert in order to produce a new

expert report to assess the reliability of market-based

price criteria used in the mandatory tender offer and

further technical issues discussed in this litigation,

including a new discounted cashflow valuation of the

shares of Český Telecom in 2005.

After receiving the expert report, Telefónica challenged

its findings on April 30, 2023. Hearings with respect to

this challenge were held in the High Court of Prague in

November and December 2023.

On February 20, 2025 a hearing of closing arguments

was held before the High Court of Prague.

ICSID Arbitration Telefónica, S.A. vs. Republic

of Colombia

In the local arbitration brought by Colombia against

Colombia Telecomunicaciones, on July 25, 2017, the

local arbitration tribunal ordered Colombia

Telecomunicaciones to pay 470 million euros as

economic compensation for the reversion of assets

related to voice services in relation to the concession

granted between 1994 and 2013.

On August 29, 2017, Colombia Telecomunicaciones’s

share capital was increased in order to make the

payment ordered by the local arbitral award; Telefónica,

S.A. contributed and disbursed an amount equivalent to

67.5% of the award’s amount (317 million euros) and the

Colombian Government contributed an amount

equivalent to the remaining 32.5% (153 million euros).

On February 1, 2018, Telefónica, S.A. filed a Request for

Arbitration against Colombia at the International Centre

for Settlement of Investment Disputes ("ICSID"), which

was formally registered on February 20, 2018.

The ICSID tribunal was constituted on February 26,

2019.

Colombia filed Preliminary Objections on Jurisdiction on

August 5, 2019. Telefónica, S.A. responded to

Colombia’s objections in its Claimant’s Memorial on

September 23, 2019, in which it also requested that

Colombia pay compensation for damages caused to

Telefónica, S.A.

On October 23, 2019, Colombia submitted its

Complementary Objections on Jurisdiction as well as a

request for Bifurcation, to which Telefónica, S.A.

responded on November 29, 2019.

On January 24, 2020, the tribunal dismissed the request

for Bifurcation presented by Colombia, ordering the

continuation of the proceeding. A decision on the merits

of Telefónica, S.A.’s claim is pending.

On July 3, 2020, Colombia filed its reply to the claim filed

by Telefónica before the ICSID.

On November 2, 2020, Telefónica presented its

response to Colombia's reply.

After the hearing held in April 2021, on July 27, 2021 the

hearing of closing arguments was held.

On November 12, 2024, the tribunal issued an arbitration

award favorable to the interests of Telefónica,

determining that Colombia failed to comply with its

obligation to grant fair and equitable treatment to

Telefónica's investments under the applicable

investment treaty and ordering Colombia to pay the

amount of 380 million U.S. dollars (approximately 358

million euros at the exchange rate of November 12,

2024) plus compound interest at a rate of 5% per year as

compensation for the damages caused (i.e., the entire

principal amount and interest sought by Telefónica in

the dispute). In addition, the tribunal ordered Colombia

to pay Telefónica’s attorneys’ fees with respect to the

arbitration proceedings, together with the

corresponding interest.

On November 27, 2024, the Republic of Colombia filed a

request with the ICSID to annul and suspend the award.

According to ICSID procedures, the request for a stay of

enforcement in the annulment proceeding provisionally

suspends the enforcement of the award until the new

tribunal decides on the request within a maximum

period of 30 days from its constitution. As of the date of

preparation of this Annual Report, the new tribunal has

not been constituted. The account receivable

associated with this award, amounting to 544 million

U.S. dollars (523 million euros based on the exchange

rate as of December 31, 2024), is recorded under "Short-

term credits".

Telefónica's lawsuit against Millicom

International Cellular for default in the sale of

Telefónica de Costa Rica

Telefónica, S.A. (Telefónica) and Millicom International

Cellular, S.A. (Millicom) reached an agreement on

February 20, 2019 for the purchase and sale of the entire

capital stock of Telefónica de Costa Rica TC, S.A.

In March 2020, Telefónica informed Millicom that, once

the pertinent regulatory authorizations had been

obtained and all the other conditions established in the

	Individual Annual Report 2024	Telefónica, S. A.	69

Financial statements 2024	Index

aforementioned agreement for the execution of the sale

had been completed, the execution of the contract and

the closing of the transaction should be in April 2020.

Millicom expressed its refusal to proceed with the

closing, arguing that the competent Costa Rican

administrative authorities had not issued the

appropriate authorization.

On May 25, 2020, Telefónica filed a lawsuit against

Millicom before the New York Supreme Court,

considering that Millicom had breached the terms and

conditions established in the sale contract, demanding

compliance with the provisions of the aforementioned

agreement, and compensation for all damages that this

unjustified breach could cause to Telefónica.

On June 29, 2020, Millicom filed a Motion to Dismiss, to

which Telefónica replied on July 8, 2020.

On August 3, 2020, Telefónica submitted an

amendment to the lawsuit, removing the requirement to

comply with the provisions of the sale and purchase

contract and requesting only compensation for all

damages that the unjustified breach of said agreement

could cause to Telefónica.

On January 5, 2021, the Motion to Dismiss filed by

Millicom in June 2020 was dismissed by the New York

Supreme Court.

On February 24, 2023, both parties filed a "motion for

summary judgment" once the discovery period had

ended.

On February 13, 2024, the New York Supreme Court

issued a decision granting Telefónica’s motion for partial

summary judgment, concluding that Telefónica is

entitled to compensatory damages and prejudgment

interest (approximately 140 million U.S. dollars) from

Millicom.

On August 5, 2024, Millicom filed its appellate brief with

the Appellate Division of the New York Supreme Court,

and Telefónica filed its response on September 4, 2024.

On December 17, 2024, the Appellate Division issued a

decision and order upholding Telefónica’s entitlement to

summary judgment, but decided that the Supreme

Court had calculated the prejudgment interest

incorrectly and reduced the amount to be awarded to

Telefónica accordingly.

On January 21, 2025, Telefónica filed an appeal against

the decision of the Appellate Division of the New York

Supreme Court.

ICSID Arbitration Telefónica, S.A. vs. Republic

of Peru

On February 5, 2021, Telefónica filed a request for

arbitration against the Republic of Peru at the ICSID,

which was formally registered on March 12, 2021.

Telefónica bases its claims on the Agreement for the

Promotion and Reciprocal Protection of Investments

between the Kingdom of Spain and the Republic of Peru

("APRPI") signed on November 17, 1994. Telefónica

argues that the Peruvian tax administration (called

Superintendencia Nacional de Aduanas y de

Administración Tributaria, known as "SUNAT") and other

state bodies have failed to comply with the obligations

established in the APRPI, including by adopting arbitrary

and discriminatory actions.

It is requested that the defendant be ordered to fully

compensate Telefónica for all damages suffered.

Once the Tribunal was constituted, on February 9, 2023,

Telefónica filed a request for urgent injunctive relief

together with a request for injunctive relief, requesting

the suspension of the administrative litigation (acción

contencioso-administrativa or ACA) related to the

income tax for the years 1998, 2000 and 2001, as well as

the extension of the deadline for submission by

Telefónica of the memorial or claim. Following response

of Peru, on February 16, 2023, the Tribunal ruled to

dismiss Telefónica's request for urgent injunctive relief,

to establish the procedural calendar to process the

request for injunctive relief and to grant Telefónica two

additional weeks to file the memorial or claim.

On March 2, 2023, Telefónica filed a memorial on the

merits. On that date, the Republic of Peru filed

observations on the claimant's request for provisional

measures submitted by Telefónica on February 9, 2023.

On March 24, 2023, the Tribunal held a hearing on the

claimant's request for provisional measures.

On May 11, 2023, the Tribunal issued Procedural Order

No. 5 concerning the defendant's request to address the

objections to jurisdiction as a preliminary question. As a

result, the objections to jurisdiction were joined to the

merits of the dispute.

On September 18, 2023, the defendant filed a counter-

memorial on the merits and a memorial on jurisdiction.

On December 22, 2023, the Tribunal issued Procedural

Order No. 6 concerning production of documents.

On March 29, 2024, Telefónica filed a reply on the

merits, and on June 28, 2024, the Republic of Peru filed a

rejoinder on the merits and a reply on jurisdiction.

On July 16, 2024, following the resignation of the

arbitrator appointed by Peru, the Acting Secretary-

	Individual Annual Report 2024	Telefónica, S. A.	70

Financial statements 2024	Index

General notified the parties of the vacancy on the

Tribunal and the proceeding was temporarily

suspended pursuant to ICSID Arbitration Rule 10 (2).

On August 12, 2024, the proceedings resumed under

ICSID Arbitration Rule 12, following the appointment of

the new arbitrator by the Republic of Peru.

On August 20, 2024, the defendant filed a submission

on quantum.

The final hearing was held in the last weeks of February

2025.

UK High Court claim by Phones 4 U Limited

against various mobile network operators and

other companies, among others, Telefónica,

S.A., Telefonica O2 Holdings Limited and

Telefonica UK Limited

In late 2018, Phones 4U Limited (in administration)

(“P4U”) commenced a claim in the English High Court in

London against various mobile network operators:

Everything Everywhere, Deutsche Telekom, Orange,

Vodafone, Telefónica, S.A., Telefonica O2 Holdings

Limited and Telefonica UK Limited (together the

“Defendants”). 

P4U carried on a business of selling mobile phones and

connections to the public, such connections being

supplied by mobile network operators including the

Defendants.  In 2013 and 2014, the Defendants declined

to extend and / or terminated their contracts to supply

connections to P4U.

P4U went into administration in September 2014.

P4U alleges that the Defendants ceased to supply

connections because they had colluded between

themselves in contravention of the United Kingdom and

the European Union competition laws and asserts that it

has a basis to claim damages for breach of competition

law by all the Defendants. The Defendants deny all

P4U’s allegations.

The claim commenced on December 18, 2018 by P4U.

The Defendants filed their initial defenses in the course

of April and May 2019, with P4U filing replies on October

18, 2019. The first case management conference took

place on March 2, 2020.

The trial was held between May and July 2022. On

November 10, 2023 the court issued a judgment,

concluding that none of the Defendants was in breach

of either UK or EU competition law.

On April 10, 2024, P4U filed an appeal, and the

Defendants filed a response on June 28, 2024.

The oral argument for the appeal is scheduled for May

2025.

c) Other contingencies

In October 2024, Telefónica Venezolana, C.A.,

Telefónica, S.A. and the United States Department of

Justice (“DOJ”) entered into a Deferred Prosecution

Agreement (“DPA”) to resolve a single charge of

conspiracy to violate the anti-bribery provisions of the

FCPA. The charge, made against Telefónica

Venezolana, C.A., concerns conduct in and around 2014

and 2015 related to a Venezuelan government-

sponsored currency auction.

Telefónica, S.A., is not a defendant in the matter but as

parent company of the Telefónica Group has agreed to

certain terms and conditions under the DPA.

The terms of the DPA include, among other things,

requirements concerning a corporate compliance

program, annual reports concerning that program

during the term of the DPA and a monetary penalty of

$85,260,000 U.S. dollars (approximately 81 million euros

at payment date ). The DOJ has agreed that if all the

obligations under the DPA are fully complied with, then

DOJ will seek dismissal with prejudice of the charge

described above after the DPA concludes.

d) Commitments

Agreement for the sale of the shares of

Telefónica Gestión de Servicios Compartidos

España, S.A.U., Telefónica Gestión de Servicios

Compartidos Argentina, S.A. and T-Gestiona

Servicios Contables y Capital Humano, S.A.C.

On March 1, 2016, a share purchase agreement

between, on one hand, Telefónica, S.A., Telefónica

Servicios Globales, S.L.U. and Telefónica Gestión de

Servicios Compartidos Perú, S.A.C. (as sellers), and, on

the other hand, IBM Global Services España, S.A., IBM

del Perú, S.A.C., IBM Canada Limited and IBM Americas

Holding, LLC (as purchasers) for the sale of the

companies Telefónica Gestión de Servicios

Compartidos España, S.A.U., Telefónica Gestión de

Servicios Compartidos Argentina, S.A. and T-Gestiona

Servicios Contables y Capital Humano, S.A.C., for a total

price of approximately 22 million euros, was ratified

before Notary Public. This share purchase agreement

was subscribed on December 31, 2015.

Following the aforementioned share purchase

agreement and in connection with the latter transaction,

also, on December 31, 2015, Telefónica subscribed a

master services agreement with IBM for the outsourcing

of economic-financial and HR activities and functions to

be provided to the Telefónica Group for an initial

duration of 10 years and a total amount of approximately

450 million euros. Most of the Telefónica Group’s

subsidiary companies adhered to that master services

agreement.

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The master service agreement has been amended on

several occasions (on March 31, 2021, March 31, 2022,

July 29, 2022 and August 31, 2023). The most relevant

changes have affected the scope of services and

extended the term of the agreement.

On June 28, 2024, an additional amendment to the

master service agreement was signed. As a result of the

various amendments, the term of the master service

agreement may be extended up to 2031 for adhering

companies in Latin America or up to 2034 for adhering

companies in Spain.

Contracts for the provision of IT services with

Nabiax

In 2019 Telefónica, S.A. signed an agreement for the sale

of a portfolio of eleven data center businesses to a

company (hereinafter "Nabiax") controlled by Asterion

Industrial Partners SGEIC, S.A.

At the same time as this sale, agreements were entered

into with Nabiax to provide housing services to the

Telefónica Group, allowing Telefónica to continue

providing housing services to its customers, in

accordance with its previous commitments. Such

service provision agreements have an initial term of ten

years and include minimum consumption commitments

in terms of capacity. These commitments are consistent

with the Group's expected consumption volumes, while

prices are subject to review mechanisms based on

inflation and market reality.

On May 7, 2021, Asterion Industrial Partners SGEIC, S.A.

("Asterion") and Telefónica Infra (T. Infra), the

infrastructure unit of the Telefónica Group, reached an

agreement for the contribution to Nabiax of four

additional data centers owned by the Telefónica Group

(two of them located in Spain and two in Chile). In

exchange for the contribution of these four data

centers, T. Infra received a 20% equity stake in Nabiax.

Once the relevant authorizations and other conditions

precedent to the contribution of the two data centers

located in Spain were obtained, the partial closing of the

transaction took place as of July 21, 2021, whereby

Telefónica Group contributed those data centers to

Nabiax, with T. Infra receiving in exchange a 13.94%

stake in Nabiax at this stage. The agreement was

complemented by the signing of a contract for the

provision to Telefónica of housing services from those

two data centers under terms and conditions equivalent

to those established in the transaction executed in 2019,

for an initial period of ten years.

Once the conditions related to the contribution of the

two data centers located in Chile were fulfilled, on May

24, 2022, the complete closing of the transaction took

place, and T. Infra reached a 20% stake in Nabiax. The

agreement was complemented by the signing of a

contract for the provision to Telefónica of housing

services from those twodata centers under terms and

conditions equivalent to those established in the

transaction executed in 2019, for an initial period ending

in 2031.

On June 13, 2023, the data centers owned by Nabiax

located in the Americas were sold to the investment

fund Actis. T. Infra owns a 20% stake in Nabiax. After this

transaction, Nabiax only owns data centers in Spain.

The data centers sold to Actis continue to provide

housing services to the Telefónica Group under the

terms of the contracts signed in 2019, as Telefónica, S.A.

waived its right to terminate the housing services

contracts upon the sale of the data centers.

On June 10, 2024, Telefónica de España, S.A.U. and

Nabiax’s subsidiary Digital DHF Iberia S.L signed an

addendum to the agreement for the provision of

housing services in Spain to, among other things, extend

the validity of the agreement until July 2034, but only

with respect to a data center in Alcalá de Henares.

In June 2024, Asterion began a process to sell its 80%

stake in Nabiax. In accordance with the rights held by

Asterion under the Nabiax Shareholders Agreement,

Asterion negotiated the conditions of the sale and also

exercised its drag-along right over the 20% stake in

Nabiax owned by T. Infra. On November 7, 2024, a

purchase and sale agreement for 100% of the share

capital of Nabiax was signed with the investment fund

Aermont Capital. The closing of the transaction is

subject to obtaining regulatory approval and is expected

to be completed in the first quarter of 2025, with Nabiax

continuing to provide housing services to the Telefónica

Group under the terms of the contracts signed in 2019.

50:50 joint venture with Liberty Global for the

combination of both groups' businesses in the

United Kingdom

On May 7, 2020, Telefónica agreed to enter into a joint

venture with Liberty Global plc ("Liberty Global")

pursuant to a contribution agreement (as amended from

time to time, the "Contribution Agreement") between

Telefónica, Telefonica O2 Holdings Limited, Liberty

Global, Liberty Global Europe 2 Limited and a newly

formed entity of which, after closing, each of Telefónica

and Liberty Global would hold 50% of its share capital

named VMED O2 UK Limited.

After having obtained the clearance from the

Competition and Market Authority (the antitrust authority

in the UK) to complete this transaction and having fulfilled

all the other pre-closing conditions included in the

Contribution Agreement, the transaction was completed

on June 1, 2021. From such date, Telefónica and Liberty

Global each hold an equal number of shares in VMED O2

UK Limited; after: (i) Telefónica having contributed to

VMED O2 UK Limited its O2 mobile business in the United

Kingdom and (ii) Liberty Global having contributed its

	Individual Annual Report 2024	Telefónica, S. A.	72

Financial statements 2024	Index

Virgin Media business in the United Kingdom to VMED O2

UK Limited.

The corporate governance of VMED O2 UK Limited is

regulated by a shareholders' agreement, which was

entered into by the parties to the Contribution

Agreement on June 1, 2021  and was amended on

November 15, 2023 (as amended from time to time, (the

"Shareholders' Agreement").

On the date of closing of the transaction, Telefónica,

Liberty Global, and certain companies belonging to each

shareholder’s corporate group entered into certain

services, reverse services, licensing and data protection

agreements with VMED O2 UK Limited and certain

entities belonging to the VMED O2 UK Limited group. In

particular, Telefónica and Liberty Global agreed that

each shareholder’s group would provide certain

services, either on a transitional or ongoing basis, to

VMED O2 UK Limited and its group. Finally, VMED O2

UK Limited and its group would also provide certain

services to specific companies belonging to the

corporate group of each of its shareholders.

Pursuant to the terms of the above referred services

agreements, the transitional services that are to be

provided by the Telefónica Group to VMED O2 UK

Limited would be provided for terms initially ranging

from 7 to 24 months (subsequently extended in some

cases to terms up to 40 months) while the ongoing

services that are to be provided by the Telefónica Group

to VMED O2 UK Limited would be provided for periods

of two to six years, depending on the service. The

services provided by the Telefónica Group to VMED O2

UK Limited, under the agreements as amended, consist

primarily of technology and telecommunication services

that will be used by or will otherwise benefit VMED O2

UK Limited. In addition to providing VMED O2 UK

Limited with such services, the mobile operators of the

Telefónica Group and VMED O2 UK Limited will maintain

their roaming commercial relationships in order to

reciprocally provide roaming services for their

respective customers.

Likewise, as of closing of the transaction Telefónica

granted certain trademark license agreements to VMED

O2 UK Limited (the “VMED O2 UK Limited Trademark

Licenses”). Pursuant to the VMED O2 UK Limited

Trademark Licenses, Telefónica Group licensed the use

of Telefónica and O2 brand rights to VMED O2 UK

Limited. 

e) Directors’ and Senior executives’

compensations and other benefits

The compensation of the members of Telefónica’s

Board of Directors is governed by article 35 of the

Company’s By-Laws, which provides that the annual

amount of the compensation to be paid thereby to all of

the Directors in their capacity as such, i.e., as members

of the Board of Directors and for the performance of the

duty of supervision and collective decision-making

inherent in such body, shall be fixed by the shareholders

at the General Shareholders' Meeting. The Board of

Directors shall determine the exact amount to be paid

within such limit and the distribution thereof among the

Directors, taking into account the duties and

responsibilities assigned to each Director, their

membership on Committees within the Board of

Directors and other objective circumstances that it

deems relevant. Furthermore, Executive Directors shall

receive such compensation as the Board determines for

the performance of executive duties delegated or

entrusted to them by the Board of Directors. Such

compensation shall conform to the Director

compensation policy approved by the shareholders at

the General Shareholders’ Meeting.

In accordance with the foregoing, the shareholders,

acting at the Ordinary General Shareholders’ Meeting

held on April 11, 2003, set at 6 million euros the

maximum amount of annual gross compensation to be

received by the Board of Directors as a fixed allotment

and as attendance fees for attending the meetings of

the Advisory or Control Committees of the Board of

Directors. Thus, as regards fiscal year 2024, the total

amount of compensation accrued by the Directors of

Telefónica, in their capacity as such, was 2,732,667

euros for the fixed allocation and for attendance fees. 

The compensation of the Directors of Telefónica in their

capacity as members of the Board of Directors, of the

Executive Commission and/or of the Advisory or Control

Committees, consists of a fixed amount payable

monthly, and of attendance fees for attending the

meetings of the Advisory or Control Committees.

The amounts established in fiscal year 2024 as fixed

amounts for belonging to the Board of Directors, the

Executive Commission and the Advisory or Control

Committees of Telefónica, and the attendance fees for

attending meetings of the Advisory or Control

Committees of the Board of Directors, are indicated

below:

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Financial statements 2024	Index

Compensation of the Board of Directors and of

the Committees thereof

Amounts in euros
Position	Board of Directors	Executive Commission	Advisory or Control Committees (*)
Chairman	240,000	80,000	22,400
Vice chairman	200,000	80,000	—
Executive Member	—	—	—
Proprietary Member	120,000	80,000	11,200
Independent Member	120,000	80,000	11,200
Other external	120,000	80,000	11,200

(*) In addition, the amount of the attendance fee for each of the meetings of

the Advisory or Control Committees is 1,000 euros. 

In this regard, it is noted that Mr. José María Álvarez-

Pallete López (Executive Chairman until January 18,

2025), waived the receipt of the above amounts (i.e.,

240,000 euros as Chairman of the Board of Directors

and 80,000 euros as Chairman of the Executive

Commission).

Likewise, the fixed remuneration of 1,923,100 euros

established for the 2024 financial year related to

executive roles carried out by Mr. José María Álvarez-

Pallete López was equal to that received in the previous

eight years (i.e. 2023, 2022, 2021, 2020, 2019, 2018, 2017

and 2016), which was set in his capacity as Chief

Operating Officer, remaining invariably after his

appointment as Chairman in 2016.

The fixed remuneration, for his executive roles, of

1,600,000 euros that the Chief Operating Officer

(C.O.O.), Mr. Ángel Vilá Boix, has established for the

2024 financial year is equal to the one received in the

years 2023, 2022, 2021, 2020 and 2019. 

Individualized description

Appendix II provides an individual breakdown by item of

the compensation and benefits that the members of the

Board of Directors of the Company have accrued and/or

received from Telefónica, S.A., and from other

companies of the Telefónica Group during fiscal year

2024. Likewise, the compensation and benefits accrued

and/or received, during such year, by the members of

the Company's Senior Management are broken down.

f) Related-party transactions

1. Significant shareholders with representation

on the Board of Directors of Telefónica S.A.

General Information

In 2024, the Company's shareholders represented on

the Board of Directors of Telefónica, S.A. were Banco

Bilbao Vizcaya Argentaria, S.A. (BBVA), CaixaBank, S.A.

(ceased to be represented on the Board on April 12,

2024), Criteria Caixa, S.A.U. (obtained representation on

the Board on April 12, 2024), and Sociedad Estatal de

Participaciones Industriales (with representation on the

Board since May 8, 2024).

According to information provided by BBVA for the 2024

Annual Corporate Governance Report of Telefónica S.A.,

corresponding to the fiscal year 2024, as of December

31, 2024, the BBVA's participation in the share capital of

Telefónica, S.A. was 4.93%. Likewise, and in accordance

with the aforementioned information provided by BBVA,

the percentage of economic rights attributed to the

shares of Telefónica, S.A. that were owned by BBVA as

of December 31, 2024, would increase by  0.231%.

without voting rights of the Company's share capital.

According to the information provided by Sociedad

Estatal de Participaciones Industriales (SEPI) for the

2024 Annual Corporate Governance Report of

Telefónica, S.A., as of December 31, 2024, the

participation of the SEPI in the share capital of

Telefónica, S.A. was 10%

According to information provided by Criteria Caixa,

S.A.U. for the 2024 Annual Corporate Governance

Report of Telefónica, S.A., as of December 31, 2024, the

participation of Criteria Caixa, S.A.U. (CriteriaCaixa) in

the share capital of Telefónica, S.A., was 9.99%.

Likewise, and without this implying an incremental or

additional participation, Fundación Bancaria Caixa

d'Estalvis i Pensions de Barcelona, as the sole

shareholder of Criteria Caixa, S.A.U., holds the same

participation indirectly.

Below is a summary of the relevant transactions of the

Telefónica Group with the companies of BBVA,

CaixaBank, CriteriaCaixa and SEPI groups, other than

the payment of the dividend corresponding to its

participation.

Participated companies

Telefónica, S.A. holds a 50% interest in Telefónica

Consumer Finance, E.F.C., S.A., a company controlled by

Caixabank (see Appendix I).

Telefónica, S.A. holds a 50% interest in Telefónica

Factoring España and a 40.5% interest in its subsidiaries

in Peru, Colombia and México as well as a 40% interest

in its subsidiary in Brazil, in which BBVA and Caixabank

have minority interests. (see Appendix I).

	Individual Annual Report 2024	Telefónica, S. A.	74

Financial statements 2024	Index

On July 21, 2022, Telefónica, S.A. and CaixaBank

Payments and Consumer E.F.C., E.P., S.A. incorporated

the company Telefónica Renting, S.A. 50% each. This

company is controlled by CaixaBank (see Appendix I).

Derivatives held with BBVA

In addition, the nominal outstanding value of derivatives

held with BBVA in 2024 amounted to 6,911 million euros

(8,970 million euros held with BBVA in 2023). The fair

value of these derivatives in the balance sheet is 123

million euros in 2024 (78 million euros in 2023). As

explained in Derivatives policy in note 16, this figure is

inflated by the use in some cases of several levels of

derivatives applied to the nominal value of a single

underlying.

The Company maintains various derivative financial

instruments settled by differences contracted with

BBVA (see note 11).

Moreover, in 2024 collateral guarantees on derivatives

from BBVA have been received, amounting to 24 million

euros, net liability position (46 million euros, net asset

position, in 2023).

Others operations carried out with BBVA

In this chapter the most significant transactions of

Telefónica, S.A. with BBVA group companies are

disclosed.

The impact on the balance sheet and income statement

of Telefónica, S.A. of the rest of the operations with

BBVA in 2024 and 2023 are as follows:

BBVA	2024	2023
Financial expenses	3	3
Total expenses	3	3
Financial revenues	18	20
Dividends received (1)	30	21
Total revenues	48	41
Finance arrangements: loans and capital contributions (lender)	35	600
Other accounts receivable	353	—
Finance arrangements: loans and capital contributions (receiver)	12	27
Dividends distributed	84	84

(1) As of December 31, 2024 Telefónica holds 0.766% (0.756% in 2023)

investment in Banco Bilbao Vizcaya Argentaria, S.A. (See note 9.3).

The heading "Finance arrangements: loans and capital

contributions (lender)" for 2023 mainly included a

deposit set up by Telefónica, S.A.of 600 million euros

maturing in January 2024.

In 2024 the caption "Other accounts receivable" mainly

includes the outstanding balance at year end of the

current bank accounts Telefónica, S.A. has in the

aforementioned financial institution.

Operations with CriteriaCaixa

Since the date on which it became considered a related

party, Telefónica, S.A. has not carried out significant

transactions with the companies controlled by

CriteriaCaixa Group.

Operations with SEPI

Since the date on which it became considered a related

party, Telefónica, S.A. has not carried out significant

transactions with the companies controlled by SEPI

Group.

General State Administration

SEPI is an entity that is part of the Spanish State

Institutional Public Sector.

Since the date on which it became considered a related

party, Telefónica, S.A. has not carried out any

individually significant transaction with entities

belonging to the Spanish State Institutional Public

Sector. During 2024, the only transactions considered as

a whole exceeding 1 million euros refer to 1,6 million

euros in external service expenses with the Spanish

Public Sector.

2. Other significant shareholders

During fiscal year 2024, the significant shareholders of

the Company without representation on the Board of

Directors of Telefónica, S.A. were BlackRock, Inc. and

Public Investment Fund. These shareholders are not

considered a related party as they do not have

representation on the Board of Directors of Telefónica,

S.A. nor exert significant influence on the company.

Based on the information notified by BlackRock, Inc. to

the CNMV on November 25, 2024, BlackRock, Inc.'s

participation in the share capital of Telefónica, S.A. was

4.29%

According to the data collected in the communication

sent by Public Investment Fund to the CNMV, as of

February 6, 2025, Green Bridge Investment Company

SCS (a company controlled by Saudi Telecom Company

and this in turn controlled by Public Investment Fund)

had a stake in the share capital of Telefónica, S.A. of

9.97%.

3. Balances with Group and Associated

companies

Telefónica, S.A. is a holding company for various

investments in companies in Latin América, Spain and

the rest of Europe which do business in the

telecommunications, media and entertainment sectors.

The balances and transactions between the Company

and these subsidiaries (Group and associated

Companies) at December 31, 2024 and 2023 are

detailed in the notes to these individual financial

statements.

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Financial statements 2024	Index

4. Directors and senior executives

During the financial year to which these accompanying

financial statements refer, the Directors and senior

executives did not perform any transactions with

Telefónica, S.A. or any Telefónica Group company other

than those in the Group’s normal trading activity and

business.

Compensation and other benefits paid to members of

the Board of Directors and senior executives are

detailed in note 20 e) and Appendix II of these financial

statements.

Telefónica contracted a civil liability insurance scheme

(D&O) for Directors, managers and staff with similar

functions in the Telefónica Group, with standard

conditions for these types of insurance and a premium

attributable to 2024 of 4.743.347,97 euros (5,565,728.82

euros in 2023). This scheme provides coverage for

Telefónica, S.A. and its subsidiaries in certain cases. Out

of this amount, Telefónica, S.A. has paid 2.354.919,59

euros in 2024 (2,854,063 euros in 2023).

g) Auditors' fees

The services commissioned to PricewaterhouseCoopers

Auditores, S.L., the Auditor of Telefónica, S.A. for the

years 2024 and 2023, meet the independence

requirements stipulated by the Spanish Audit Law

22/2015, July 20, the US SEC rules and the Public

Company Accounting Oversight Board (PCAOB), both

Board from the US.

The expenses accrued refer to the fees for services

rendered by the various member firms of the PwC

network, comprising PricewaterhouseCoopers

Auditores, S.L., amount to 4.71 and 4.18 million euros in

2024 and 2023, respectively.

The detail of these amounts is as follows:

Millions of euros	2024	2023
Audit services	3.54	3.39
Audit-related services	1.17	0.79
Total	4.71	4.18

"Audit services" mainly includes audit fees for the

individual and consolidated financial statements, as well

as reviews of interim financial statements. These Audit

services also incorporate the integrated audits of the

financial statements for the annual report Form 20-F to

file with the US SEC and the internal control audit over

the financial information to comply with the

requirements of the Sarbanes-Oxley 2002 Act (Section

404).

"Audit-related services" mainly includes services related

to the verification of the Statement of Non-Financial

Information and Sustainability Information, the issuance

of comfort letters, the review of allocation and impact

reports of green finance instruments and the reasonable

assurance report on the system of Internal Control over

Financial Reporting (ICFR).

During the years 2024 and 2023, the principal auditor

has not performed services, other than the audit

services or the audit-related services in Telefónica, S.A.

h) Environmental matters

Commitment to protect the environment is part of the

Company's general strategy and is the responsibility of

the Board of Directors. The performance in this area is

regularly supervised by the Sustainability and

Regulation Committee as well as by the Global

Sustainability (ESG) Office in coordination with the

global areas responsible for executing this strategy

alongside the business units.

The Group has a Global Environment and Energy Policy,

and externally certified environmental management

systems in accordance with ISO 14001 in the Group

operators. The environment is a cross-cutting issue

throughout the Company, involving both operational

and management areas as well as business and

innovation areas.

The Telefónica Group has contracted, both locally and

globally, several insurance programs in order to mitigate

the possible occurrence of an incident stemming from

the risks of environmental liability and/or natural

disasters.

Managing environmental impact and energy

consumption is a strategic priority and carbon reduction

targets are part of the variable remuneration of the

Company employees, including the Executive

Committee. Likewise, Telefónica, S.A.'s long-term share-

based incentive plans 2021-2025 and 2024-2028 (see

note 19) include CO2 Emissions Neutralization targets.

Telefónica's Sustainable Financing Framework is aligned

with the International Capital Markets Association

(ICMA) Green, Social and Sustainable Bond Principles,

as well as the Green Lending Principles and the Social

Loans of the LMA (Loan Market Association), the

APLMA (Asian Pacific Loan Market Association) and the

LSTA (Loan Syndications and Trading Association), and

it is linked to the United Nations Sustainable

Development Goals.

In addition to senior green bonds and hybrid

instruments, the Group uses other sustainable banking

financing tools, such as loans and credits linked to

sustainability objectives, such as emissions reduction or

gender equality. The Group's main syndicated loan is

also linked to the performance of sustainability

indicators.

	Individual Annual Report 2024	Telefónica, S. A.	76

Financial statements 2024	Index

In 2024, the Company has maintained an active

presence in the capital market with several issues,

successfully raising a total of 3,050 million euros of debt

in green format throughout the year (2,600 million euros

in 2023). In January 2024, Telefónica launched an

issuance split into two tranches, for an aggregate

amount of 1,750 million euros (see note 15). In March, a

green hybrid instrument was issued for an amount of

1,100 million euros (see note 15). In September, a

reopening of the 750 million euros hybrid bond issued in

September 2023 took place for an amount of 200

million euros. These bond issuances have not been

directly launched by Telefónica, S.A. but are guaranteed

by the Company.

In terms of bank financing, Telefónica has an undrawn

syndicated loan linked to sustainability indicators,

signed at the beginning of 2022, amounting to 5,500

million euros (see note 14).

i) Trade and other guarantees

The Company is required to issue trade guarantees and

deposits for concession and spectrum tender bids and

in the ordinary course of its business. No significant

additional liabilities in the accompanying financial

statements are expected to arise from guarantees and

deposits issued (see note 20.a).

	Individual Annual Report 2024	Telefónica, S. A.	77

Financial statements 2024	Index

Note 21. Cash flow analysis

Cash flows from/(used in) operating

activities

The net result before tax in 2024 amounts to a profit of

512 million euros (see income statement), adjusted by

items recognized in the income statement that did not

require an inflow or outflow of cash in the year, or are

included within the investing and financing activities.

These adjustments relate mainly to:

• The impairment of investments in Group companies,

associates and other investments of 4,405 million

euros (in 2023 a write down of 1,208 million euros).

• Declared dividends as income in 2024 for 5,879 million

euros (3,859 million euros in 2023), interest accrued in

2024 on loans granted to subsidiaries of 30 million

euros (28 million euros in 2023) and a net financial

expense of 1,277 million euros (1,428 million euros in

2023), adjusted initially to include only movements

related to cash inflows or outflows during the year

under “Other cash flows from operating activities.”

• In 2024, 358 million euros related to the ICSID award

have been adjusted as this amount, that is registered

as other operating income (see note 19.2), has not

raised a cash flow and it has been registered as

current financial asset and it is not under the

operating balance sheet (see note 9.4).

Other cash flows from operating activities amount to

4,573 million euros (1,796 million euros in 2023). The

main items included are:

a) Net interest paid:

Payments of net interest and other financial expenses

amounted to 1,365 million euros (1,495 million euros in

2023), including:

•Net proceeds from external credit entities, net of

hedges, for 129 million euros (21 million euros in

2023 offset by their hedges), and

• Interest and hedges paid to Group companies of

1,494 million euros (1,516 million euros in 2023).

b)Dividends and other distributions from reserves and

paid-in capital received:

Millions of euros	2024	2023
O2 Europe, Ltd.	2,200	—
Telefónica Latinoamérica Holding, S.L.	1,000	—
Telefónica Móviles España, S.A.U.	677	—
Telefónica O2 Holdings, Ltd.	511	1,153
Telefónica de España, S.A.U.	473	—
Telfisa Global, B.V.	435	1,056
Telefónica Finanzas, S.A.U. (TELFISA)	118	182
Telxius Telecom, S.A.	2	125
Telefônica Brasil, S.A.	173	277
TLS	62	—
Other dividend collections	52	42
Total	5,703	2,835

In addition to the dividends declared in 2024 (see note

19.1) and collected in the same period, this caption also

includes dividends from previous periods collected in

2024.

c) Income tax collected: Telefónica, S.A. is the parent of its

consolidated Tax Group (see note 17) and therefore it is

liable for filing income tax with the Spanish Tax

Authorities. It subsequently informs companies included

in the Tax Group of the amounts payable by them. No

payments on account of income tax were made in 2024

(198 million euros in 2023) as disclosed in note 17. In

December 2024, after the execution of a credit sale

signed with a financial entity, proceeds by 214 million

euros have been received related to 2023 ( 285 million

euros have been received related to 2022 income tax).

In this regard, the main amounts passed on to

subsidiaries of the tax group were as follows:

•Telefónica Móviles España, S.A.U.: total collection of

98 million euros, corresponding to a refund for the

2023 income tax.

In 2023, there was a total collection of 207 million

euros, corresponding to: 78 million euros for the 2022

income tax settlement and 129 million euros in

payments on account of 2022 and 2023 income tax.

•Telefónica de España, S.A.U.: total payment of 77

million euros, corresponding to a payment for the

2023 income tax.

In 2023 there was a collection of 499 million euros,

corresponding to: 411 million euros for the 2022

	Individual Annual Report 2024	Telefónica, S. A.	78

Financial statements 2024	Index

income tax settlement and 88 million euros in

payments on account of 2022 and 2023 income tax.

•Telefónica Latinoamérica Holding, S.L.: total

collection of 20 million euros, corresponding to a

refund for the 2023 income tax.

In 2023, there was a payment of 304 million euros,

corresponding to: A payment for the 2022 income

tax by 351 million euros partially offset by proceeds

of 47 million euros corresponding to payments on

account of 2022 and 2023 income tax.

•Telefónica Hispanoamérica, S.A.: There has been a

total payment of 8 million euros corresponding to a

payment of withholding taxes of 10 million euros

partially offset by the collection of 2 million euros

for the income tax of 2023.

  In 2023, there was a total payment of 57 million

euros corresponding to: 24 million euros related to

2022 income tax and 33 million euros

corresponding to payments on account of 2022

and 2023 income tax. 

▪ Telefónica Finanzas, S.A.: total payment of 19

million euros, corresponding to a payment for the

2023 income tax.

Cash flows from/(used in) investing

activities

Payments on investments under Cash flows from/ (used

in) investing activities included a total payment of 3,829

million euros (3,958 million euros in 2023). The main

transactions to which these payments refer are as

follows:

•Capital increases: the main disbursements correspond

to Telefónica Local Services, GmbH by 660 million

euros (partially offset by the dividend distributions

registered as investment refunds by 83 million euros).

Telefónica Hispanoamérica, S.A. amounting to 220

million euros, Telefónica Infra, S.L. amounting to 133

million euros. These capital increases, as well as other

minor disbursements of this same concept are

disclosed in note 8.1.a.

• Acquisition of Telefónica Deutschland Holding, A.G.'s

shares for a total sum of 256 million euros as detailed

in note 8.1.a.

• Payments of financial investments related to the

reinvestment of treasury overage amounting to 1,506

million euros.

•Payments of collaterals related to financial derivative

instruments amounting to 994 million euros.

Proceeds from disposals totaling 3,432 million euros in

2024 (5,719 million euros in 2023) includes:

•Proceeds from the share capital decrease of

Telefónica de Brasil amounting to 98 million euros.

•Collection of 147 million euros as a result of the sale of

China Unicom shares as described in note 9.

• Collection according to the maturity schedule of 50

million euros of the loan granted to Telxius Telecom,

S.A.U. which was due in 2024.

• Collections from financial divestments for

reinvestment of treasury surpluses amounting to 1,506

million euros.

• Proceeds from collaterals related to financial

derivative instruments amounting to 1.295 million

euros.

• Net collection of hedge financial instruments

designed as net investment hedges amounting to 330

million euros.

Cash flows from/(used in) financing

activities

This caption mainly includes the following items:

i. Proceeds from financial liabilities:

a) Debt issues: The main collections comprising this

heading are as follows:

Millions of euros	2024	2023
Telefónica Emisiones, S.A.U. (Note 15)	1,750	850
Bank loans (Note 14)	390	275
Promissory notes (Note 13)	33	—
Telefónica de Argentina, S.A. (Note 15)	107	—
Telefónica Europe B.V. (Note 15)	1,300	1,750
Telefónica Europe, B.V. promissory notes (Note 15)	158	488
Other collections	20	62
Total	3,758	3,425

	Individual Annual Report 2024	Telefónica, S. A.	79

Financial statements 2024	Index

b) Prepayments and redemption of debt: The main

payments comprising this heading are as follows:

Millions of euros	2024	2023
Bilateral loans with several entities (Note 14.4)	140	178
Telfisa Global, B.V. (Note 15)	3,298	1,710
Telefónica Europe, B.V. (Note 15)	1,300	1,750
Telefónica Emisiones, S.A.U. (Note 15)	1,000	1,705
Other payments	4	15
Total	5,742	5,358

The commercial paper transactions with

Telefónica Europe, B.V. are stated at their net

balance as recognized for the purposes of the

cash flow statement, being high-turnover

transactions where the interval between purchase

and maturity never exceeds six months.

The financing obtained by the Company from

Telfisa Global, B.V. relates to the Group's

integrated cash management (see note 15). These

amounts are stated net in the cash flow statement

as new issues or redemptions on the basis of

whether or not at year-end they represent current

investment of surplus cash or financed balances

payable.

ii. Acquisition of own equity instruments for an amount

of 145 million euros refers to the purchases of

treasury shares as indicated in note 11.a."

iii. Payments of dividends amount to 1,720 million euros

(1,701 million euros in 2023). The figure differs from

the one shown in note 11.1.d) because of the

withholding taxes deducted in the payment to certain

major shareholders, which will be paid to Tax

Authorities in 2025 and also the withholding taxes

referred to the dividend distribution made in

December 2023 which have been paid to the Tax

Authorities in January 2024.

	Individual Annual Report 2024	Telefónica, S. A.	80

Financial statements 2024	Index

Note 22. Events after the

reporting period

The following events regarding the Company took place

between the reporting date and the date of preparation

of the accompanying financial statements:

Financing

• On January 13, 2025, Telefónica, S.A. signed an

extension with respect to its sustainability-linked

syndicated credit facility for up to 5,500 million euros

for an additional year (extending the maturity date to

January 13, 2030). Additionally, Telefónica signed 2

extension options for 1 additional year each, permitting

Telefónica, S.A.,to extend the maturity date of the

credit facility to January 13, 2032.

• On January 15, 2025, Telefónica, S.A. signed a bilateral

loan in the amount of 125 million euros maturing on

January 15, 2035. As of the date, there was 0

outstanding amount under this bilateral loan.

• On January 16, 2025, Telefónica, S.A. through its

wholly-owned subsidiary Telefónica Emisiones, S.A.U.,

launched in the Euro market under its EMTN

Programme an issuance of Notes guaranteed by

Telefónica, S.A. in a principal amount of 1,000 million

euros. This issue, due on January 23, 2034, pays an

annual coupon of 3.724% and was issued at par. The

settlement of the issuance took place on January 23,

2025.

• On January 17, 2025, Telefónica Emisiones, S.A.U.

redeemed 1,250 million euros of its notes issued on

January 17, 2017. These notes were guaranteed by

Telefónica, S.A.

• On February 24, 2025, Telefónica, S.A. has transferred

the principal and cumulative interests of the loan that

Telefónica Móviles Argentina, S.A. had granted in

January 2024 (see Note 15) to its subsidiary TLH

HOLDCO, S.L. The total amount transferred amounts

to 126 million US dollars.

Corporate Governance

• On January 18, 2025, Telefónica, S.A. in view of its new

shareholding structure and that some of its relevant

shareholders expressed the convenience of

embarking on a new stage in the executive

chairmanship, Telefónica’s Board of Directors, which

met on the aforementioned date to assess the

situation, under the chairmanship of Mr. José María

Álvarez-Pallete, adopted, following a favorable report

from the Nominating, Compensation and Corporate

Governance Committee, the following resolutions:

◦ To agree on the orderly renewal of the Company's

chairmanship, in order to adapt it to its new

shareholding structure.

◦ To approve the termination of the contract signed

with Mr. José María Álvarez-Pallete as Executive

Chairman of Telefónica’s Board of Directors, and to

request from him, in accordance with the provisions

of Article 12.2.a) of the Regulations of the Board of

Directors, his resignation from his position as

Director. Mr. Álvarez-Pallete, in response to said

request, tendered his resignation as a Director,

which was accepted by the Board of Directors.

◦ In order to guarantee an adequate replacement in

the executive chairmanship of the Company, to

approve the appointment by co-optation of Mr.

Marc Thomas Murtra Millar, as Executive Director of

the Company, also appointing him as Executive

Chairman of the Board of Directors and delegating

to him all the powers that may be delegated by the

Board of Directors, to be exercised jointly and

severally. Mr. Murtra accepted his appointment as

Executive Chairman of Telefónica, on this same

date.

• On January 29, 2025, the Board of Directors of

Telefónica, S.A., resolved with the abstention of the

Executive Directors and upon proposal of the

Nominating, Compensation and Corporate

Governance Committee, to appoint Mr. Peter Löscher

as Lead Independent Director. On the same date, the

Audit and Control Committee resolved  to appoint the

Independent Director Ms. María Luisa García Blanco

as Chairwoman of that Committee.

• On February 14, 2025 the Board of Directors of

Telefónica del Perú, S.A.A. (“Telefónica del Perú”), with

the aim of achieving an orderly restructuring of the

liabilities of said company, resolved to invoke the

Ordinary Insolvency Procedure, established under the

Peruvian law (Ley General del Sistema Concursal)

with respect to Telefónica del Perú. The invocation of

said insolvency procedure is focused on the financial

and operational restructuring within the framework of

the applicable insolvency law. Thus, the protection of

	Individual Annual Report 2024	Telefónica, S. A.	81

Financial statements 2024	Index

the insolvency framework, established by the Ley

General del Sistema Concursal, will allow Telefónica

del Perú for an orderly restructuring of liabilities with

the arrangement of its creditors. In order to facilitate

the invocation of the Ordinary Insolvency Procedure,

Telefónica Hispanoamérica has granted a credit

facility of up to 1,549 million Peruvian soles

(approximately 394 million euros at an estimated

average rate of 3.93 Peruvian soles per euro), subject

to strict conditionality and with a maturity of 18

months, to meet exclusively operational cash

requirements of Telefónica del Perú. The financial

situation of Telefónica del Perú has been very

negatively affected by tax contingencies that are

more than 20 years old , as well as by administrative

decisions that have placed the company in a

competitive disadvantage within a particularly

challenging market environment. In relation to the

abovementioned tax contingencies, Telefónica is

currently in arbitration before the International Centre

for Settlement of Investment Disputes (ICSID) (see

Note 20.b). As previously informed to the market,

Telefónica reiterated that Telefónica del Perú’s

liabilities are not guaranteed by any other company of

the Telefónica Group. Telefónica will continue to

explore strategic alternatives with regard to its

investment in Telefónica del Perú.

• On February 24, 2025, Telefónica's subsidiary TLH

Holdco, S.L.U., a company 100% owned by Telefónica,

sold all the shares that it held in Telefónica Móviles

Argentina, S.A. representing  99.999625% of its share

capital and of the entire share capital of its operations

in Argentina to Telecom Argentina S.A. The total price

for 100% of the shares transferred amounts

to1,245 million U.S. dollars (approximately 1,189 million

euros at the date of the transaction). The signing and

closing of the transaction took place simultaneously.

	Individual Annual Report 2024	Telefónica, S. A.	82

Financial statements 2024	Index

Note 23. Additional note for

English translation

These annual financial statements were originally

prepared in Spanish and were authorized for issue by

the Company’s Directors in the meeting held on

February 26, 2025. In the event of a discrepancy, the

Spanish language version prevails.

	Individual Annual Report 2024	Telefónica, S. A.	83

Financial statements 2024	Index

Appendix I: Details of subsidiaries

and associates at December 31,

2024

Millions of euros	% Ownership					Income (loss)
Name and corporate purpose	Direct	Indirect	Capital	Rest of equity	Dividends	From operations	For the year	Net carrying amount
Telefónica Latinoamérica Holding, S.L.U. (SPAIN) Holding Company Distrito Telefónica. Ronda de la Comunicación s/n 28050 Madrid	100%	—	291	8,784	1,000	(49)	193	9,374
Telefónica Móviles España, S.A.U. (SPAIN) Wireless communications services provider Distrito Telefónica, Ronda de la Comunicación s/n 28050 Madrid	100%	—	209	308	522	814	549	5,561
Telefónica O2 Holdings Limited (UNITED KINGDOM) Holding Company Highdown House, Yeoman Way, Worthing, West Sussex,  BN99 3HH	99.99%	0.01%	13	8,137	512	—	507	9,259
Telefónica Móviles México, S.A. de C.V. (MEXICO) Holding Company Prolongación Paseo de la Reforma 1200 Col. Cruz Manca, México D.F. CP.05349	99.99%	0.01%	601	(559)	—	—	6	48
Telefónica de España, S.A.U. (SPAIN) Telecommunications service provider in Spain Gran Vía, 28 - 28013 Madrid	100%	—	1,024	2,481	815	867	557	2,455
O2 (Europe) Ltd. (UNITED KINGDOM) Holding Company Highdown House, Yeoman Way, Worthing, West Sussex,  BN99 3HH	100%	—	6,896	—	2,200	(273)	1,583	7,753
Telefónica España Filiales, S.A.U. (SPAIN) Organization and operation of multimedia service- related activities and businesses Distrito Telefónica, Ronda de la Comunicación s/n, Madrid 28050	100%	—	226	997	—	(4)	79	1,302
Telfisa Global, B.V. (NETHERLANDS) Integrated cash management, consulting and financial support for Group companies Strawinskylaan 1259; tower D; 12th floor 1077 XX - Amsterdam	100%	—	—	294	435	(1)	436	712
O2 Oak Limited (UNITED KINGDOM) Holding Company Highdown House, Yeoman Way, Worthing, West Sussex,  BN99 3HH	100%	—	—	—	—	—	—	—
Telefónica Hispanoamérica, S.A. (SPAIN) Holding Company Ronda de la Comunicación, s/n – 28050 Madrid	100%	—	108	(57)	—	(1,219)	(1,376)	—
TIS Hispanoamérica, S.L.  (SPAIN)                                                                    Holding Company                                                                                                  Ronda de la Comunicación, s/n  - 28050 Madrid	100%	—	1	13	—	(4)	(7)	6

	Individual Annual Report 2024	Telefónica, S. A.	84

Financial statements 2024	Index

Millions of euros	% Ownership					Income (loss)
Name and corporate purpose	Direct	Indirect	Capital	Rest of equity	Dividends	From operations	For the year	Net carrying amount
Telefónica Soluciones de Criptrografía, S.A. (SPAIN)                                                          Other services related to information technology and computing Gran Vía 28, 28013 Madrid	100%	—	1.2	15	—	1	—	17
Telefónica Tech , S.L. (SPAIN) Promotion of business initiatives and holding for securities Gran Vía 28-28013 Madrid	100%	—	67	882	—	(1)	(1)	941
O2 Worldwide Limited (UNITED KINGDOM) Private Limited Company C/O Stobbs Building 1000, Cambridge Research Park, Cambridge,  CB25 9PD	100%	—	—	—	—	—	—	—
Telefónica Capital, S.A.U. (SPAIN) Finance Company Gran Vía, 28 - 28013 Madrid	100%	—	7	219	—	—	10	110
TLH HOLDCO, S.L. (SPAIN)                                                                                   Holding Company                                                                                                                Ronda de la Comunicación, s/n - 28050 Madrid	100%	—	87	937	—	(10)	(7)	1,158
Lotca Servicios Integrales, S.L. (SPAIN) Ownership, operation and aircraft leases Gran Vía, 28 - 28013 Madrid	100%	—	18	51	—	(13)	(10)	59
Telefónica Local Services GmbH (GERMANY) Holding company Adalbertstrasse 82-86 85737, Ismaning	100%	—	—	1,787	62	—	2	1,452
Telefónica Infra, S.L. (SPAIN) Portfolio Company (Holding) Ronda de la Comunicación S/N - 28050 Madrid	100%	—	12	935	—	(7)	(7)	940
Telefónica Finanzas, S.A.U. (TELFISA) (SPAIN) Cash pooling, consulting and financial support for Group companies Ronda de la Comunicación, s/n – 28050 Madrid	100%	—	3	(91)	115	—	141	13
Telefónica Global Solutions, S.L.U. (SPAIN) International services provider Ronda de la Comunicación, s/n – 28050 Madrid	100%	—	1	29	—	(9)	(6)	24
Telefónica Innovación Digital, S.A.U. (SPAIN) Development of activities and research projects in telecommunication Ronda de la Comunicación S/N  - 28050 Madrid	100%	—	28	302	—	(11)	6	336
Telefónica Luxembourg Holding S.à.r.L. (LUXEMBOURG) Holding Company 26, rue Louvingny, L-1946- Luxembourg	100%	—	3	175	—	—	—	4
Telefónica Servicios Globales, S.L.U. (SPAIN) Management and administrative services provider Ronda de la Comunicación, s/n – 28050 Madrid	100%	—	1	77	—	—	—	79
Telefónica Participaciones, S.A.U. (SPAIN) Issues of preferred shares and/or other debt financial instruments Gran Vía, 28 - 28013 Madrid	100%	—	—	1	—	—	—	—
Telefónica Emisiones, S.A.U. (SPAIN) Issues of preferred shares and/or other debt financial instruments Gran Vía, 28 - 28013 Madrid	100%	—	—	16	—	(3)	1	—
Telefónica Europe, B.V. (NETHERLANDS) Fund raising in capital markets Strawinskylaan 1259; tower D; 12th floor 1077 XX – Amsterdam	100%	—	—	3	3	(1)	3	—

	Individual Annual Report 2024	Telefónica, S. A.	85

Financial statements 2024	Index

Millions of euros	% Ownership					Income (loss)
Name and corporate purpose	Direct	Indirect	Capital	Rest of equity	Dividends	From operations	For the year	Net carrying amount
Toxa Telco Holding, S.L. (SPAIN) Holding Company Ronda de la Comunicación s/n Madrid 28050	100%	—	—	—	—	—	—	—
Telxius Telecom, S.A. (SPAIN)      Telecommunications Services Ronda de la Comunicación, s/n- 28050 Madrid	70%	—	260	207	2	(8)	(5)	—
Telefónica Centroamérica Inversiones, S.L (SPAIN) Holding Company Ronda de la Comunicación, s/n. - 28050 Madrid	60%	—	—	1	—	—	—	—
Telefónica Factoring España, S.A. (SPAIN) Factoring Zurbano, 76, 8 Plta. - 28010 Madrid	50%	—	5	2	5	12	10	3
Telefónica Consumer Finance E.F.C., S.A. (SPAIN) Lending and consumer loans c/Caleruega, 102 -28033 Madrid	50%	—	5	21	2	2	2	13
Aliança Atlântica Holding B.V. (NETHERLANDS) Portfolio Company Strawinskylaan 1725 – 1077 XX – Amsterdam	50%	38.24%	40	5	—	—	1	22
Telefónica Renting, S.A. (SPAIN) Retail renting business of furniture and office ancillary. Av. de Manoteras, 20, Hortaleza, 28050 Madrid	50%	—	1	9	—	11	8	5
Telefônica Brasil, S.A. (BRAZIL) (1) (*) Telecommunication operator in Brazil Av. Luis Carlos Berrini, 1.376 – Brooklin São Paulo 04571-000	38.9%	37.59%	22,990	(12,269)	202	1,516	977	8,001
Telefónica Telecomunicaciones México, S.A. de C.V. (MÉXICO) Factoring Prolongación Paseo de la Reforma 1200 Col. Cruz Manca, México D.F. CP.05349	49%	51%	—	—	—	—	—	—
Telefónica Factoring Do Brasil, Ltd. (BRAZIL) Factoring Rua Desembargador Eliseu Guilherme, 69 Pt. 6 Paraíso Sao Paulo	40%	10%	2	(2)	1	(1)	3	1
Telefónica Factoring México, S.A. de C.V. SOFOM ENR (MEXICO) Factoring                                                                      Prolongación Paseo de la Reforma 1200 Col. Cruz Manca, México D.F. CP.05349	40.50%	9.50%	—	—	—	—	—	—
Telefónica Factoring Perú, S.A.C. (PERÚ) Factoring                                                                            Avenida República de Panamá Nro 3030 piso 6to. San Isidro  Lima, Perú	40.50%	9.50%	1	3	1	(1)	2	1
Telefónica Factoring Colombia, S.A. (COLOMBIA) Factoring Calle 93 No. 15-73 Oficina 502 Bogotá	40.50%	9.50%	1	—	1	2	1	1
Telefónica Correduría de Seguros y Reaseguros Compañía de Mediación, S.A. (SPAIN)            Insurance contracts, operating as a broker                Ronda de la Comunicación S/N  - 28050 Madrid	16.67%	83.33%	—	(1)	2	9	10	—
Torre de Collçerola, S.A. (SPAIN) Operation of telecommunications tower and technical assistance and consulting services.  Ctra. Vallvidrera- Tibidabo, s/n - 08017 Barcelona	30.40%	—	5	—	—	—	—	1
Wayra Argentina,S.A.  (ARGENTINA) Telecommunications activities                                              Av. Corrientes 707, Planta Baja,                                    Ciudad de Buenos Aires, Argentina	5%	95%	27	(24)	—	—	2	—

	Individual Annual Report 2024	Telefónica, S. A.	86

Financial statements 2024	Index

Millions of euros	% Ownership					Income (loss)
Name and corporate purpose	Direct	Indirect	Capital	Rest of equity	Dividends	From operations	For the year	Net carrying amount
Telefónica Global Solutions Argentina, S.A.                (ARGENTINA) Telecommunications services                                              Avenida Ingeniero Huergo 723, 1107 Buenos Aires	5%	95%	3	(4.7)	—	1	(2)	—
Total group companies and associates					5,879			49,650

(1) Consolidated data.

(*) Companies listed on international stock exchanges at December 31, 2024.

	Individual Annual Report 2024	Telefónica, S. A.	87

Financial statements 2024	Index

Appendix II: Board and Senior

Management Compensation

TELEFÓNICA, S.A.

(Amounts in euros)

Directors	Salary1	Fixed remunera- tion2	Allowances3	Short-term variable remuneration4	Remuneration for belonging to the Board Committees5	Other items6	Total
Mr. José María Álvarez-Pallete López7	1,923,100	—	—	3,513,504	—	6,207	5,442,811
Mr. Isidro Fainé Casas	—	200,000	—	—	80,000	—	280,000
Mr. José María Abril Pérez	—	200,000	10,000	—	91,200	—	301,200
Mr. Ángel Vilá Boix	1,600,000	—	—	2,436,000	—	27,383	4,063,383
Ms. María Luisa García Blanco	—	120,000	38,000	—	33,600	—	191,600
Mr. Peter Löscher	—	120,000	26,000	—	113,600	—	259,600
Mr. Carlos Ocaña Orbis8	—	80,000	8,000	—	60,800	—	148,800
Ms. Verónica Pascual Boé	—	120,000	12,000	—	11,200	—	143,200
Mr. Francisco Javier de Paz Mancho	—	120,000	25,000	—	113,600	—	258,600
Mr. Alejandro Reynal Ample	—	120,000	—	—	—	—	120,000
Mr. Francisco José Riberas Mera	—	120,000	—	—	—	—	120,000
Ms. María Rotondo Urcola	—	120,000	25,000	—	22,400	—	167,400
Ms. Claudia Sender Ramírez	—	120,000	1,000	—	80,000	—	201,000
Ms. Solange Sobral Targa	—	120,000	10,000	—	11,200	—	141,200

1Salary: Regarding Mr José María Álvarez-Pallete López and Mr Ángel Vilá Boix, the amount includes the non-variable remuneration earned from their executive

functions.

2Fixed remuneration: Amount of the compensation in cash, with a pre-established payment periodicity, whether or not it can be consolidated over time, earned

by the member for his/her position on the Board, regardless of the effective attendance of the member to board meetings.

3 Allowances: Total amount of allowances for attending Advisory or Steering Committee meetings.

4Short-term variable remuneration (bonuses): Variable amount linked to the performance or achievement of a series of individual or group objectives

(quantitative or qualitative) within a period of time equal to or less than a year, corresponding to the year 2024 and to be paid in the year 2025. In reference to

the bonus corresponding to 2023, which was paid in 2024, Executive Board Member Mr José María Álvarez-Pallete López received 3,717,737 euros and

Executive Board Member Mr Ángel Vilá Boix received 2,577,600 euros.

5Remuneration for belonging to the Board Committees: Amount of items other than allowances, which the directors are beneficiaries through their position on

the Executive Commission and the Advisory or Steering Committees, regardless of the effective attendance of the board member such Committee meetings.

6Other concepts: This includes, among others, the amounts received as remuneration in kind (general medical and dental coverage and vehicle insurance), paid

by Telefónica, S.A.                                                                                                                                   

7 Mr.José María Álvarez-Pallete López ceased as Executive Chairman and Director of the Company on January 18, 2025. Likewise, on the same date, it was

agreed to co-opt Mr. Marc Thomas Murtra Millar as the new Executive Chairman of the Board of Directors of Telefónica, S.A.                                                                    

8 Mr. Carlos Ocaña Orbis was appointed Director of the Company on May 8, 2024. 

	Individual Annual Report 2024	Telefónica, S. A.	88

Financial statements 2024	Index

Ms. Carmen García de Andrés stood down as Board

Member on May 7, 2024. Mr. José Javier Echenique

Landiríbar passed away on December 15, 2024. 

Payment received and/or accrued by them in 2024 is

detailed below:

(Amounts in euros)

Directors	Salary1	Fixed remunera -tion2	Allowances 3	Short-term variable remuneration 4	Remuneration for belonging to the Board Committees5	Other items6	Total
Mr. José Javier Echenique Landiríbar	—	200,000	27,000	—	113,600	—	340,600
Ms. Carmen García de Andrés	—	40,000	12,000	—	7,467	—	59,467

1 to 6: Definitions of these concepts are those included in the previous table.

The following table breaks down the amounts accrued

and/or received from other companies of the Telefónica

Group other than Telefónica, S.A. individually, by the

Board Members of the Company, by the performance of

executive functions or by their membership to the Board

of Directors of such companies:

OTHER COMPANIES OF THE TELEFÓNICA GROUP

(Amounts in euros)

Directors	Salary1	Fixed remunera- tion2	Allowances3	Short-term variable remuneration4	Remuneration for belonging to the Board Committees5	Other items6	Total
Mr. José María Álvarez-Pallete López 7	—	—	—	—	—	—	—
Mr. Isidro Fainé Casas	—	—	—	—	—	—	—
Mr. José María Abril Pérez	—	—	—	—	—	—	—
Mr. Ángel Vilá Boix	—	—	—	—	—	—	—
Ms. María Luisa García Blanco	—	—	—	—	—	87,500	87,500
Mr. Peter Löscher	—	125,997	—	—	—	—	125,997
Mr. Carlos Ocaña Orbis 8	—	—	—	—	—	—	—
Ms. Verónica Pascual Boé	—	90,000	—	—	—	65,000	155,000
Mr. Francisco Javier de Paz Mancho	—	173,159	—	—	—	155,000	328,159
Mr. Alejandro Reynal Ample	—	—	—	—	—	—	—
Mr. Francisco José Riberas Mera	—	—	—	—	—	—	—
Ms. María Rotondo Urcola	—	—	—	—	—	—	—
Ms. Claudia Sender Ramírez	—	—	—	—	—	132,500	132,500
Ms. Solange Sobral Targa	—	85,659	—	—	—	—	85,659

1. Salary: Amount of non-variable remuneration earned by the Director from other companies of the Telefónica Group for his/her executive functions. 

2. Fixed remuneration: Amount of the compensation in cash, with a pre-established payment periodicity, subject to consolidation over time or not, earned by the

member for his/her position on the boards of other companies of the Telefónica Group.

3. Allowances: Total amount of the allowances for attending the board meetings of other companies of the Telefónica Group.

4. Variable short-term remuneration (bonuses): Variable amount linked to the performance or achievement of a series of individual or group objectives

(quantitative or qualitative) within a period of time equal to or less than a year, corresponding to the year 2024 and to be paid in the year 2025 by other

companies of the Telefónica Group.

5. Remuneration for belonging to the Board Committees of other companies of the Telefónica Group: Amount of items other than allowances, which the

directors are beneficiaries through their position on the Advisory or Steering Committees of other companies of the Telefónica Group, regardless of the

effective attendance of the board member such Committee meetings.

6. Other concepts: This includes, among others, the amounts received as remuneration in kind (general medical and dental coverage and vehicle insurance),

paid by other companies of the Telefónica Group. Also included are the amounts received for membership of the Advisory Boards of Telefónica España,

Telefónica Hispanoamérica, Telefónica Tech and Telefónica Ingeniería de Seguridad.

7 Mr.José María Álvarez-Pallete López ceased as Executive Chairman and Director of the Company on January 18, 2025. Likewise, on the same date, it was

agreed to co-opt Mr. Marc Thomas Murtra Millar as the new Executive Chairman of the Board of Directors of Telefónica, S.A.

8  Mr. Carlos Ocaña Orbis was appointed Director of the Company on May 8, 2024.  

	Individual Annual Report 2024	Telefónica, S. A.	89

Financial statements 2024	Index

Ms. Carmen García de Andrés stood down as Board

Member on May 7, 2024. Mr. José Javier Echenique

Landiríbar passed away on December 15, 2024. Payment

received and/or accrued by them with respect to the

other companies of the Telefónica Group in 2024 is

detailed below:

(Amounts in euros)

Directors	Salary1	Fixed remunera -tion2	Allowances 3	Short-term variable remuneration 4	Remuneration for belonging to the Board Committees5	Other items6	Total
Mr. José Javier Echenique Landiríbar	—	90,000	—	—	—	87,500	177,500
Ms. Carmen García de Andrés	—	—	—	—	—	—	—

1 to 6: Definitions of these concepts are those included in the previous table.

Additionally, the Executive Board Members have a

series of Assistance Services. Below, the contributions

made during 2024 are detailed for the Company to

long-term savings systems (Pension Plans and Social

Welfare Plan):

LONG-TERM SAVINGS SYSTEMS

(Amounts in euros)

Directors	Contributions for fiscal year 2024
Mr. José María Álvarez-Pallete López1	673,085
Mr. Ángel Vilá Boix	560,000

1 Mr.José María Álvarez-Pallete López ceased as Executive Chairman and

Director of the Company on January 18, 2025. Likewise, on the same date, it

was agreed to co-opt Mr. Marc Thomas Murtra Millar as the new Executive

Chairman of the Board of Directors of Telefónica, S.A.

The breakdown of the long-term saving systems

includes contributions to Pension Plans, to the Benefit

Plan and to the Unit link-type Insurance, as set out

below:

(Amounts in euros)

Directors	Contribution to Pension Plans	Contribution to Executive Social Welfare Plan1	Contributions to Unit link- type Insurance/ Pension Plan Surplus2
Mr. José María Álvarez- Pallete López3	7,574	540,968	124,543
Mr. Ángel Vilá Boix	6,721	487,840	65,439

1. Contributions to the Executive Social Welfare Plan established in 2006,

financed exclusively by the Company, to complement the current Pension

Plan, which involves defined contributions equivalent to a certain

percentage of the fixed remuneration of the Director, depending on the

professional levels in the organization of the Telefónica Group.

2. Contributions to Unit link-type Insurance/Pension Plan Surplus: In 2015

and 2021, applicable law reduced the financial and tax limits of the

contributions to Pension Plans; for this reason, in order to compensate for

the difference in favor of the Beneficiaries, a Unit-link type group insurance

policy was arranged to channel such differences that occur during each

fiscal year. This Unit-link type insurance is arranged with the entity Occident

GCO, S.A.U. de Seguros y Reaseguros, and covers the same contingencies

as those of the “Pension Plan” and the same exceptional liquidity events in

case of serious illness or long-term unemployment.

3 Mr.José María Álvarez-Pallete López ceased as Executive Chairman and

Director of the Company on January 18, 2025. Likewise, on the same date, it

was agreed to co-opt Mr. Marc Thomas Murtra Millar as the new Executive

Chairman of the Board of Directors of Telefónica, S.A.

	Individual Annual Report 2024	Telefónica, S. A.	90

Financial statements 2024	Index

LIFE INSURANCE PREMIUMS

The 2024 amounts for life insurance premiums were as

follows:

(Amounts in euros)

Directors	Life insurance premiums
Mr. José María Álvarez-Pallete López1	41,708
Mr. Ángel Vilá Boix	33,328

1 Mr.José María Álvarez-Pallete López ceased as Executive Chairman and

Director of the Company on January 18, 2025. Likewise, on the same date, it

was agreed to co-opt Mr. Marc Thomas Murtra Millar as the new Executive

Chairman of the Board of Directors of Telefónica, S.A.

REMUNERATION PLANS BASED ON

SHARES

As regards to remuneration plans based on shares

(involving Executive Directors Mr. José María Álvarez

Pallete-López and Mr. Ángel Vilá Boix), the following

long-term variable remuneration plans were in

existence during the year 2024:

The so-called Performance Share Plan ("PSP"), made up

of:the Long-Term Incentive Plan 2021-2025 (with

Second cycle (2022-2024) and Third cycle (2023-2025)

active) approved by the General Shareholders' Meeting

held on April 23, 2021, and the Long-Term Incentive Plan

2024-2028 (with First cycle (2024-2026) active),

approved by the General Shareholders' Meeting held on

April 12, 2024.

The Second cycle (2022-2024) of the Long-Term

Incentive Plan 2021-2025 started on January 1, 2022 and

ended on December 31, 2024.

In this cycle, a maximum of 1,740,000 shares were

allocated to the Executive Directors on January 1, 2022,

with a unit fair value of 2.9515 euros per share for FCF

("Free Cash Flow"), 2.4316 euros for TSR ("Total

Shareholder Return") and 2.9515 euros for the CO2

Emission Neutralization and Reduction target.

At the end of the cycle, Kepler provided the Nominating,

Compensation and Corporate Governance Committee

with the calculation of Telefónica's Total Shareholder

Return, which was 33.6% at the end of the period,

ranking fourth in the comparison group, i.e. above the

75th percentile according to the established scale of

achievement, and generating a weighted payout ratio of

50% linked to relative TSR.

With regard to the Free Cash Flow, after taking into

account the partial annual payments for 2022, 2023 and

2024, previously audited and approved by the

Telefónica's Board of Directors at the proposal of the

Nominating, Compensation and Corporate Governance

Committee, the weighted payout ratio is 40%. The

assessment of the level of compliance was based on the

results of the audit by the Company’s external and

internal auditors, which were first analyzed by the Audit

and Control Committee before being validated by the

Nominating, Compensation and Corporate Governance

Committee and approved by the Board of Directors.

Finally, in relation to the CO2 Emission Neutralization

and Reduction target, the Nominating, Compensation

and Corporate Governance Committee has regularly

monitored the level of CO2 Emissions Neutralization

and, after analyzing the report from the Corporate

Affairs and Sustainability Department, has determined

the level of achievement. The Nominating,

Compensation and Corporate Governance Committee

was supported in this evaluation function by the

Sustainability and Regulation Committee and the Audit

and Control Committee. In this respect, the minimum

CO2 emission reduction threshold that triggers the

possibility of assessing the degree of compliance with

the CO2 Neutralization target has been met and

therefore the weighted payout ratio linked to CO2

Neutralization was 10%.  

Taking into account the Relative TSR, Free Cash Flow

and CO2 Neutralization results, the weighted payout

ratio increased to 100%. Thus, at the end of the Plan's

cycle, the Chief Operating Officer (COO) Mr. Ángel Vilá

Boix is entitled to receive 745,000 gross shares.

In the case of Mr. José María Álvarez-Pallete López, due

to his termination as Executive Chairman, he will not

receive the delivery of shares corresponding to this

cycle (995,000 gross shares) but will receive an

equivalent settlement in cash.

Similarly, during the 2024 financial year, the Third cycle

(2023-2025) of the Long-Term Incentive Plan

2021-2025 and First cycle (2024-2026) of the Long-

Term Incentive Plan 2024-2028 were in force, starting

on January 1, 2023 and January 1, 2024 respectively and

ending on December 31, 2025 and December 31, 2026

respectively.

In relation to the Third cycle (2023-2025) of the Long-

Term Incentive Plan 2021-2025, the number of

Telefónica, S.A. shares that could be delivered to the

participants, within the established maximum, is

conditioned and determined by the compliance with the

established objectives: 50% on the compliance with the

Total Shareholder Return (TSR) objective of Telefónica,

S.A. shares, 40% on the Telefónica Group's Free Cash

Flow (FCF) and 10% on the Neutralization and Reduction

of CO2 Emissions. On the other hand, in the First Cycle

(2024-2026) of the Long-Term Incentive Plan

2024-2028, the weight of CO2 Neutralization and

Emission Reduction has been reduced by half, giving

room to the target for the number of Women in

Executive Positions with a weight of  5%.

	Individual Annual Report 2024	Telefónica, S. A.	91

Financial statements 2024	Index

To determine compliance with the TSR target and

calculate the specific number of shares to be delivered

for this concept, the performance of the TSR on

Telefónica, S.A.'s shares will be measured during the

measurement period of each three-year cycle, in

relation to the TSRs experienced by certain companies

in the telecommunications sector, weighted according

to their relevance to Telefónica, S.A., which for purposes

of the Plan will constitute a comparison group

(hereinafter the "Comparison Group"). The companies

included in the Comparison Group are listed below:

América Móvil, BT Group, Deutsche Telekom, Orange,

Telecom Italia, Vodafone Group, Proximus, Koninklijke

KPN, Millicom, Swisscom, Telenor, TeliaSonera, TIM

Brasil, and Liberty Global.

With regard to complying with the TSR objective, the

number of shares to be delivered associated with

meeting this objective will range from 15% of the number

of theoretical shares assigned, assuming that the TSR

performance of Telefónica, S.A. shares is at least the

median of the comparison group, to 50% if the

performance is in the third quartile or above in the

comparison group, with the percentage calculated by

linear interpolation for cases falling between the median

and third quartile.   

In order to determine the compliance with the FCF

objective and calculate the specific number of shares to

be delivered for this concept, the FCF level generated

by the Telefónica Group during each year will be

measured and compared to the value set in the budgets

approved by the Board of Directors for each financial

year. 

With regard to the FCF, for each of the cycles in force

during the financial year 2024, the Board of Directors, at

the proposal of the Nominating, Compensation and

Corporate Governance Committee, determined a scale

of achievement that includes a minimum threshold of

90% compliance, below which no incentive is paid and

compliance with which will entail the delivery of 20% of

the theoretical shares assigned, and a maximum level of

100% compliance, which will entail the delivery of 40%of

the theoretical shares assigned. In the case of the First

cycle (2024-2026) of the 2024-2028 Long-Term

Incentive Plan, includes a potential upside in case of

over achievement that may end in a payout of 60% at

the end of the cycle.

In order to determine compliance with the CO2

Emission Neutralization and Reduction target and to

calculate the specific number of shares to be delivered

for this item, the level of CO2 Emissions Neutralization

achieved at the end of the cycle will be measured, with

the incentive being paid upon reaching a certain level of

scope 1 + 2.

The level of direct and indirect CO2 emissions from our

daily activity shall be calculated according to the

following:

CO2 Emission = Activity Data  x Emission Factor, where:

-  Activity: Amount of energy, fuel, gas, etc. consumed

by the Company.

-  Emission Factor: Amount of CO2 emitted to the

atmosphere by the consumption of each unit of activity.

The emission factor provided by official sources

(European Union, Ministries, CNMC, International

Energy Agency, etc.) is used for electricity and the GHG

Protocol emission factors are used for fuels.

At the beginning of the Third Cycle (2023-2025) of the

Long-Term Incentive Plan 2021-2025 and the First

Cycle (2024-2026) of the Long-Term Incentive Plan

2024-2028, the Board of Directors of Telefónica, S.A., at

the proposal of the Nominating, Compensation and

Corporate Governance Committee, determined a scale

of achievement that includes a minimum threshold of

90% compliance, below which no incentive is paid and

compliance with which will entail the delivery of 5% of

the theoretical shares assigned, and a maximum level of

100% compliance, which will entail the delivery of 10% of

the theoretical shares assigned. In addition, a minimum

level of emission reductions of Scope 1 + 2 will need to

be achieved for the incentive to be paid.

In the case of Women in Executive Positions target for

the Long-Term Incentive Plan 2024-2028, the

proportion of Women Executives over the total

executives population will be measured at December 31,

2026.

In any case, 100% of the shares delivered under the Plan

to the Executive Directors and other Participants as

determined by the Board of Directors shall be subject to

a two-year holding period.

In addition, in accordance with the provisions of the

Remuneration Policy for Directors of Telefónica, SA, the

Executive Directors must maintain (directly or indirectly)

a number of shares (including those delivered as

remuneration) equivalent to two years of their Gross

Fixed Remuneration, as long as they continue to belong

to the Board of Directors and perform executive

functions. Until such time as this requirement is met, the

holding period for any shares delivered under the Plan

to Executive Directors will be three years.

The maximum number of allocated shares to be

delivered in the event of maximum compliance with the

TSR (Total Shareholder Return), FCF (Free Cash Flow),

CO2 Emission Neutralization Reduction and Women in

Executive Positions targets of the active plans, as

applicable, is shown below.

	Individual Annual Report 2024	Telefónica, S. A.	92

Financial statements 2024	Index

PSP 2021-2025 - Third cycle / 2023-2025

Directors	Maximum number of shares (*)
Mr. José María Álvarez-Pallete López	1,110,000
Mr. Ángel Vilá Boix	831,000

(*) Maximum possible number of shares to be received in case of maximum completion of

TSR, FCF and Neutralization of CO2 Emissions  target. . 

In any case, it is noted that no shares have been

delivered to the Chief Operating Officer (COO) Mr.

Ángel Vilá Boix under the Third cycle (2023-2025) of the

Long-Term Incentive Plan 2021-2025 and that the

above table only reflects the number of potentially

deliverable shares, without in any way implying that all

or part of the shares will actually be delivered.

In the case of Mr. José María Álvarez-Pallete López, due

to his resignation as Executive Chairman, he will not

receive the delivery of shares corresponding to this

position but he will receive the equivalent part in cash

based on the time he has been with the Company.

PSP 2024-2028 - First cycle / 2024-2026

Directors	Maximum number of shares (*)
Mr. José María Álvarez-Pallete López	1,015,000
Mr. Ángel Vilá Boix	760,000

(*) Maximum possible number of shares to be received in case of maximum completion of

TSR, FCF and Neutralization of CO2 Emissions target. 

In any case, it is noted that no shares have been

delivered to the Chief Operating Officer (COO) Mr.

Ángel Vilá Boix under the First cycle (2024-2026) of the

Long-Term Incentive Plan 2024-2028 and that the

above table only reflects the number of potentially

deliverable shares, without in any way implying that all

or part of the shares will actually be delivered.

PSP 2024-2028 - First cycle / 2024-2026

Directors	Maximum number of shares (*)
Mr. José María Álvarez-Pallete López	1,015,000
Mr. Ángel Vilá Boix	760,000

(*) Maximum possible number of shares to be received in case of maximum completion of

TSR, FCF and Neutralization of CO2 Emissions target.   

In any case, it is noted that no shares have been

delivered to the Chief Operating Officer (COO) Mr.

Ángel Vilá Boix under the First cycle (2024-2026) of the

PSP and that the above table only reflects the number

of potentially deliverable shares, without in any way

implying that all or part of the shares will actually be

delivered.

In the case of Mr. José María Álvarez-Pallete López, due

to his resignation as Executive Chairman, he will not

receive the delivery of shares corresponding to this

position but he will receive the equivalent part in cash

based on the time he has been with the Company.

In addition, it should be noted that the external Directors

of the Company do not receive and did not receive

remuneration during the year 2024 in concept of

pensions or life insurance, nor do they participate in

compensation plans referenced to the value of the

share price. 

Furthermore, the Company does not grant nor has

granted during the year 2024, an advance, loan or credit

in favor of its Board Members or its Senior Management,

complying with the requirements of the Sarbanes-Oxley

Act published in the United States, which is applicable

to Telefónica as a listed company in this market.

Remuneration of the Company’s

Senior Management

As for the Directors who made up the Senior

Management1 of the company in the year 2024,

excluding those who form an integral part of the Board

of Directors, have accrued a total amount of 8,528,820

euros during the 2024 fiscal year.

In addition, and in terms of long-term savings systems,

the contributions made by the Telefónica Group during

the year 2024 to the Social Security Plan described in

the "Income and expenditure" note with regard to these

Directors increased to 947,676 euros; the contributions

corresponding to the Pension Plan increased to 212,885

euros; the contributions to the Seguro Unit link-Excess

Pension Fund increased to 113,293 euros.

Furthermore, the amount related to the remuneration in

kind (which includes the fees for life insurance and other

insurance, such as the general medical and dental

coverage, and vehicle insurance) was 144,788 euros.

On the other hand, regarding share-based remuneration

plans, during the year 2024, there were in force the

following long-term variable remuneration plans:  

The so-called "Performance Share Plan" ("PSP"), made

up of: the Long-Term Incentive Plan 2021-2025 (with

Second cycle (2022-2024) and Third cycle (2023-2025)

active) approved by the General Shareholders' Meeting

held on April 23, 2021, and the Long-Term Incentive Plan

2024-2028 (with First cycle (2024-2026) active),

approved by the General Shareholders' Meeting held on

April 12, 2024.

The target measurement period of the Second cycle

(2022-2024) of the Long-Term Incentive Plan

2021-2025 started on January 1, 2022 and ended on

December 31, 2024. The maximum number of shares

allocated to be delivered in the event of maximum

compliance with the TSR ("Total Shareholder Return"),

FCF ("Free Cash Flow") and CO2 Emission

	Individual Annual Report 2024	Telefónica, S. A.	93

Financial statements 2024	Index

Neutralization and Reduction targets set for the this

cycle for all the Company's Senior Executives was

1,241,015.

At the end of the this cycle, Kepler provided the

Nominating, Compensation and Corporate Governance

Committee with the calculation of Telefónica's Total

Shareholder Return, which was 33.6% at the end of the

period, ranking fourth in the comparison group, i.e.

above the 75th percentile according to the established

scale of achievement, and generating a weighted

payout ratio of 50% linked to relative TSR.

In terms of Free Cash Flow, after taking into account the

partial annual payments for 2022, 2023 and 2024, the

weighted payout ratio is 40%. The assessment of the

level of compliance was based on the results of the

audit by the Company’s external and internal auditors,

which were first analyzed by the Audit and Control

Committee before being validated by the Nominating,

Compensation and Corporate Governance Committee

and approved by the Board of Directors.

Finally, in relation to the CO2 Emission Neutralization

and Reduction target, the Nominating, Compensation

and Corporate Governance Committee has regularly

monitored the level of CO2 Emission Neutralization and,

after analyzing the report from the Corporate Affairs and

Sustainability Department, has determined the level of

achievement. The Nominating, Compensation and

Corporate Governance Committee was supported in

this evaluation function by the Sustainability and

Regulation Committee and the Audit and Control

Committee. In this respect, the minimum CO2 emission

reduction threshold that triggers the possibility of

assessing the degree of compliance with the CO2

Neutralization target has been met and therefore the

weighted payout ratio linked to CO2 Neutralization was

10%.

Taking into account the Relative TSR, Free Cash Flow

and CO2 Neutralization results, the weighted payout

ratio increased to 100%. Thus, at the end of the first

cycle of the Plan, the Company's Senior Executives are

entitled to receive 1,241,015 gross shares.

The target measurement period for the Third cycle

(2023-2025) of the Long-Term Incentive Plan

2021-2025 and First cycle (2024-2026) of the Long-

Term Incentive Plan 2024-2028 started on January 1,

2023 and January 1, 2024 respectively, and will end on

December 31, 2025 and December 31, 2026 respectively.

The maximum number of shares allocated to be

delivered in the event of maximum compliance with the

TSR (Total Shareholder Return), FCF (Free Cash Flow),

CO2 Emission Neutralization and Reduction and Women

in Executive Positions targets set for both cycles, as

applicable, for all the Company's Senior Executives is

1,378,418 in the Third cycle (2023-2025) of the Long-

Term Incentive Plan 2021-2025 and 1,250,041 in the First

cycle (2024-2026) of the Long-Term Incentive Plan

2024-2028.

(1) For these purposes, Senior Management is understood to be those

persons who perform, de jure or de facto, senior management functions

reporting directly to the Board of Directors or Executive Committees or

Managing Directors of the Company, including, in all cases, the person

responsible for Internal Audit. 

	Individual Annual Report 2024	Telefónica, S. A.	94

Management report 2024	Index

Management report 2024

This Management Report has been prepared taking into

consideration the ‘Guidelines on the preparation of

annual corporate governance reports for listed

companies’, published by CNMV in July 2013.

In accordance with Law 11/2018 of December 28, and

following the amendment of the article 262 of

Commerce Law, the Company is not complied to

include non-financial information in the Management

Report. The disclosure of this information can be found

in the Consolidated Management Report of the

Telefónica Group (whose parent Company is Telefónica,

S.A.) which will be filed as well as the consolidated

financial statements in the Commercial Registry of

Madrid.

Business Model

The year 2024 continued to be marked by uncertainty

and volatility arising from geopolitical and

macroeconomic tensions. Exceptionally, this volatility

coexisted with opportunities for growth and

technology-based transformation. The telco sector has

benefited from its defensive nature, the investments

made in new networks and a regulatory environment

which anticipated constructive changes to rules that

have become obsolete under the new competition

conditions.

A volatile global environment with

opportunities for growth:

Elections took place in major/influential countries in

2024, in the midst of a socio-political environment that

remains strongly polarised. These brought about

changes in government and, looking to the future,

uncertainty about the evolution of key policies for

economic development.

• There are expectations for a resolution to active

military and geopolitical conflicts, although there is

also a risk of new tensions as we move towards a

multipolar world.

• Potential risks related to world trade and global supply

chains have emerged as a result of new and more

protectionist tariff policies and restrictions on

technology use.

• The positive trend in inflation in 2024 suggests bigger

cuts in interest rates, although these expectations

may not be materialise due to changes in fiscal

policies. Global growth, especially in the Eurozone,

remains low, while states' debt levels are rising after

the years of expansionist policies.

• Against this backdrop, financial markets have

responded positively (mainly in the US). Defensive

stocks (such as telcos) have created value for their

shareholders.

Accelerated technological change led by

the development of artificial intelligence

(AI):

The pace of technological change continues to

accelerate. Artificial intelligence and the components

required to develop it (e.g. semiconductors, computing,

energy and communications) have boosted investment

in infrastructure.

• AI applications have driven a strong growth in demand

for capacity at data centres (DC), with some regions

under strain from high occupancy rates. The

construction of new DCs requires new electrical

infrastructure to be developed in parallel.

• There is continued uncertainty around the impact of

AI on traffic needs in telecommunications networks.

Operators maintain their expectations of growth in

demand for edge computing, to reduce latency and

enable new business models.

• Tensions in the supply of semiconductors and other

dual-use technologies are reshaping the technology

supplier ecosystem.

• The launch of a new generation of connected devices

with integrated AI capacities could accelerate the

replacement of current devices, increasing sales of

hardware.

• Advances in quantum computing are starting to make

its implementation within a reasonable time period

viable. For telcos, developing new security and

encryption systems is crucial in order to protect

communications.

• Operators continue to carry out the softwarisation of

their networks and transform their operations. By

opening up their infrastructure to third parties through

standardised APIs, operators are paving the way for

new business models (e.g. API-centric SaaS).

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Demographic change in a social

environment that is more aware of the

impact of technology:

The population in economically significant regions of the

world  continues to age. Meanwhile, new technologies

are rapidly impacting the lives of the general public and

business activities.

• The transformation of the population pyramid

continues in the West as life expectancy rises and the

birth rate stalls, in spite of the impact of migration

flows. This shift compromises economies in the long

term, straining healthcare and retirement systems.

• Consumers and  families have suffered the impact of

inflation and interest rates in previous years, reducing

their disposable income.

• The profound impact that new technologies and

applications are having on societies is fuelling anxiety

about their potentially negative repercussions

(security, misinformation, etc.).

• For companies, the key is resilience. Technological

transformation and digitalisation are gaining speed to

increase productivity. In turn, against a backdrop of

geopolitical tensions, the concern about cybersecurity

is growing.

• Applications based on AI are beginning to be adopted

to a significant degree by consumers, companies and

developers. Given the expectations surrounding this

technology and projected investment, there is

reasonable uncertainty about its measurable

economic impact and the time horizons for returns.

• The work environment continues to evolve. As new

generations replace previous generations, they cause

shifts in corporate culture. The implementation of AI

and technological acceleration have given rise to a

structural shortage of talent, which needs to be

addressed.

The telecommunications industry remains

highly dynamic, with a sector that is calling

out for new regulatory models:

Despite a past of stagnation in terms of revenues and

adverse regulation, telcos continue to galvanise

investment in networks, to the benefit of the societies in

which they operate. The sector is therefore strategic

both in itself and as an enabler of other sectors.

• Competition within the sector remains high in the

main markets, with a multitude of brands and

operators. Despite inflation, communication prices are

still falling, especially in lower-value segments.

• The operators in developed markets are completing

the fibre and 5G investment cycle and have

announced fewer future investment needs. There is

some uncertainty about the next generation of 6G

mobile technology (capacity, time horizons, costs,

etc.).

• In Europe, the publication of the Letta and Draghi

reports could herald a new approach for industrial

policy. For telcos, the two reports confirm the

diagnosis of the state of the sector.

• Operator consolidation has begun to reshape some

European telecommunications markets. A favourable

policy could strengthen a strategic and distinctly

investment-oriented sector in Europe.

• The overhaul of an obsolete regulatory environment

has already started in certain markets, with aspects

such as infrastructure-sharing obligations, wholesale

prices, authorisation systems and concessions being

reviewed. In Europe, discussions about standardising

the conditions for spectrum acquisitions have begun.

Strategy: Telefónica has built solid

foundations for the future

In a highly dynamic macroeconomic and industry

landscape, Telefónica has developed a solid positioning

based on:

◦ Telefonica’s relevance to its growing customer base,

reflected on improved satisfaction and customer

loyalty indicators.

◦ A world-class positioning in infrastructure, based on

fibre and 5G, on Telefonica’s core markets.

◦ An experienced management team, with proven

know-how in the sector.

Looking ahead, Telefónica remains focused on creating

value for its shareholders and other stakeholders

through rigorous strategic analysis and the effective

execution of key initiatives:

◦ Focus on its core markets: A customer-centric

approach that enhances satisfaction and loyalty

metrics, leveraging leading brands and tailored

value propositions for each market segment.

◦ Improved operational efficiency: A commitment to

efficiency, leveraging technology for process

optimisation. Past investments made in fibre and 5G

networks enable a significant reduction in capital

expenditure (CapEx) needs, directly impacting free

cash flow (FCF).

◦ Efficient capital allocation: Financial discipline and

strict criteria for capital allocation, prioritising

investments in growth areas with high potential for

returns.

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◦ Acceleration of growth opportunities: Capitalising

on opportunities to drive further growth, including

the development of new business lines .

Economic results of

Telefónica, S.A.

Telefónica, S.A. obtained positive net results of 563

million euros in 2024. Highlights of the 2024 income

statement include:

• Revenue from operations, amounting to 6,429 million

euros, higher than the previous year figure due to the

increase in dividends registered as revenues

(disclosed in note 19).

• The figure of “Impairment losses and other losses”

amounting to a write down of 4,405 million euros in 

2024 (a write down of 1,208 million euros in 2023).

• Net financial expense totaled 1,277 million euros (1,428

million euros of financial expense in 2023). This figure

is mainly due to finance costs with Group companies

and associates, principally from Telefónica Europe,

B.V. amounting to 542 million euros (510 million euros

in 2023) and Telefónica Emisiones, S.A.U. totaling 865

million euros (766 million euros in 2023). Net exchange

rate gains amount to 22 million euros (11 million of

exchange rate losses in 2023).

• Income tax caption amounts to positive 51 million

euros (see note 17).

Investment activity

The investment activity of the Company regarding

additions, sales, valuation criteria and impact of this

valuation in 2024 is described in note 8 of these financial

statements.

Share price performance

In 2024, global equity markets posted positive returns

(MSCI World index +25.1% in euro terms) in a year

characterized by a change of route by the major central

banks, which implemented the first interest rate cuts

after the disinflationary process initiated in 2023. US

stock markets performed particularly well, boosted by

the “Magnificent 7” technology stocks on the back of

expectations about Artificial Intelligence. European

stock markets posted more modest returns, in a more

difficult economic environment in some countries, while

Asian stock markets rallied in the last quarter

(announcement of strong monetary and fiscal stimulus

in China).

Among the main European indices (Stoxx 600, +6.0%,

EStoxx-50 +8.3%), the DAX (+18.9%) recorded the best

performance, reaching new record highs, followed by

the Ibex-35 (+14.8%) which continued its upward trend,

with +40.9% in the last two years. The CAC 40 ended in

negative territory (-2.1%), in a year of political turmoil in

France, which reinforced doubts about its financial

stability. The US markets were the undisputed leaders of

the year, with the S&P 500 (+23.3%) surpassing 6,000

points in the last quarter after the Republican victory,

while technology companies continued to dominate,

driving the Nasdaq (+28.6%) sharply higher.

The bond market has had a volatile year due to

inflationary spikes in the final months of the year. Long-

dated bond yields rose sharply from the year’s lows, with

the 10-year US Treasury bond bouncing from a low of

3.60% to 4.60%, while the 10-year German bond yield

climbed from a low of 2% to over 2.40%.

The European Telco sector delivered its best relative

performance versus the market since 2013 (+16.2% vs.

Stoxx 600 +6.0%), ranking as the third best sector in the

region supported by its defensive nature in an

environment of growing macroeconomic doubts. The

expected return to revenue growth, evidence that

CapEx has peaked and high single-digit EPS growth

have improved market sentiment towards the sector,

coupled with expectations of market consolidation. The

outlook for the Telco sector in 2025 remains positive;

continued revenue growth (albeit more moderate)

should benefit companies' EBITDA through operating

leverage, which together with lower CapEx efforts, will

continue to drive growth in cash generation.

Furthermore, the implementation of artificial

intelligence, together with an improved regulatory

scenario and optimism about consolidation movements

in the sector, support these good expectations for 2025.

Telefónica has continued to successfully execute its

strategy, benefiting from the transformation process it

started years ago. Today, it is a stronger, faster growing,

more efficient and more sustainable company. And it is

consistently delivering on the long-term objectives. It

has also continued to work to address regulatory and

competitive obstacles (leading the necessary

discussions to improve the regulatory environment), the

depreciation of Latin American currencies, especially

the Brazilian real in the second half of 2024, and the

context in general, in order to preserve and increase

value for shareholders. Telefónica has also benefited

from the entry of new shareholders in the share capital,

providing greater stability to the shareholding structure.

In addition to this, Telefónica is a leader in network

development (fibre and 5G) and customer relations

(NPS and churn), with a focus on prioritizing

investments and improving operating leverage to

generate solid double-digit FCF growth.

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Telefónica ended 2024 with a market capitalization of

22,323 million euros, a share price of 3.94 euros, an

increase of 11.4% in the year, and a total shareholder

return of 19.9%, in line with the sector.

Regarding the dividend payment, 0.3 euros per share in

cash has been paid in 2024 (0.15 in June and 0.15 in

December). The 2024 dividend policy is 0.3 euros per

share in cash (0.15 euros per share paid in December

2024 and 0.15 euros per share to be paid in June 2025).

This dividend is in line with the minimum of 0.3 euros per

share announced until 2026. The dividend yield for 2024

has been set at 7.6%. Finally, 80.3 million treasury shares

were cancelled in 2024.

Sustainable offer and

innovation

Telefónica remains committed to technological

innovation as a fundamental tool for being one of the

main players in the new digital universe, contributing to

the creation of a more sustainable world while achieving

competitive advantages and distinctive products. By

introducing new technologies and developing business

solutions and processes, we aim to become a more

effective, efficient and customer-oriented Group.

Telefónica bases its innovation strategy on the balance

between two main models:

– First, through our internal research,

development and innovation (R&D&I), for which we have

developed our own innovation model, which allows us

to leverage R&D&I results and capabilities in developing

commercial products and services benefiting from

knowledge gained in collaborations with research

centers, technological institutes and universities,

amongst other sources; and

– Second, through the creation of open

innovation ecosystems, in which the “Wayra” initiative

stands out as a global program designed to connect

entrepreneurs, start-ups, investors, venture capital

funds and public and private organizations around the

world to promote innovation in collaboration with other

actors.

In addition to these two models, Telefónica seeks to

promote the development of sustainable solutions that

generate a positive impact on the environment and on

the economic, social and technological progress of the

regions in which we operate. To this effect, Telefónica

invests in promoting sustainable innovation projects and

in the activities that improve the accessibility of our

solutions to all groups.

Internal Research, Development and Innovation:

Telefónica believes that competitive advantage cannot

be based solely on acquired technology, and so has

considered the promotion of internal R&D&I activities as

a strategic axis, in an effort to achieve this differentiation

and move forward in other activities which support the

sustainability of our business.

To this end, Telefónica Group’s internal innovation

policy focuses on contributing solutions that support

Telefónica’s commitment to developing a responsible

business under the criteria of economic, societal and

environmental sustainability, by:

• Developing new products and services that enable

growth and competition in an increasingly global

environment, while being adapted to the diversity and

local needs of each market;

• Increasing the revenue potential related to new

products by creating value from the intellectual

property rights of the generated technology;

• Increasing our customers' loyalty and satisfaction;

• Increasing the revenues, profits and value of the

Company;

• Increasing the quality of our infrastructure and

services;

• Strengthening our relationship with our technology

and solutions providers; and

• Improving business processes and operations with the

aim of optimizing resources, increasing efficiency and

reducing environmental impact.

During 2024, Telefónica’s numerous technological

innovation activities were focused on three main areas: 

• Telecommunications networks. These activities aim at

developing and integrating new assets and

components into our networks and systems, with

three main pillars: (i) high capacity and high energy-

efficiency networks: next generation of mobile

network technologies (evolution of 5G and 6G),

network slicing, new in-home networks, open and

disaggregated technologies (Open RAN, Open

Broadband, TIP), Quantum Communications (QKD,

PQC) integrating our quantum ring infrastructure and

connecting it to the European infrastructure Euro-

QCI; (ii) cloud-native and software-based network

architectures: which enable us to have a more flexible

network that is dynamically adaptable to the new

requirements of digital services and customers, with

the Telco Cloud (multi-cloud virtualization) initiative,

leading ETSI-OSM project, contributing to the

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European Alliance for Industrial Data, Edge and Cloud,

and launching the Spanish IPCEI-CIS project; and (iii)

Data and Artificial Intelligence driven operations:

leveraging new tools and available network data

within every process and every domain (fixed and

mobile access, transport and core) and cloud

infrastructure, with early deployments in Brazil,

Germany and Spain, and exploring the network Digital

Twin in a TM Forum project.

• The development of new products and services which

are carried out within the framework of the digital

services strategy. Products and services for the mass

market include: generative Artificial Intelligence

solutions, new opportunities in the metaverse and the

Web3, with a new cryptoasset management solution

(operated by the Bit2Me exchange), and digital

identity; in video and entertainment with new

applications, advertising and payment capabilities,

and digital cognitive marketing, using artificial

intelligence preserving consumer privacy and our

ethical principles, etc. Products and services for the

B2B market include: the further development and

promotion of Open Gateway, an industry-wide

initiative that seeks to expose network APIs to service

developers enabling a Network as a Service model,

and UTIQ, a joint venture with three other European

telecommunications operators that offers

programmatic advertising solutions that do not use

third-party cookies, as well as a wide portfolio of cloud

and cybersecurity services, IoT platforms and

connectivity, Big Data, Artificial Intelligence and

blockchain, with vertical services tailored to industry

sectors and public administrations, including

quantum-safe IoT connectivity.

• Experimental and applied research: With a medium

and long-term outlook, Telefónica also has specialized

scientific groups whose mission is to research and

advance the state of the art of technologies to solve

the technological, social and environmental

challenges that arise. These activities are carried out

in collaboration with public and private, national and

international universities and research centers.

The total research and development ("R&D") expense in

the Group for 2024 amounted to 647 million euros,

12.63% lower than the 741 million euros incurred in 2023.

These expenses represented 1.6% and 1.8% of the

Group’s consolidated revenues for 2024 and 2023,

respectively. These figures were calculated using

guidelines of the Organization for Economic Co-

operation and Development ("OECD") manual.

During 2024, Telefónica filed 18 patent applications for

new inventions, 16 of which were European applications,

and two of which were international applications (PCT).

All of them were registered through the Spanish Patent

and Trademark Office (OEPM). During 2024 a total of 13

patent applications from former years were granted.

These figures represent an increase of 5.9% in the

number of patent applications for new inventions

compared with the 17 patent applications in 2023 and a

decrease of 64% in the number of patent applications

granted compared with the 37 patent applications in

2023.

In addition, Telefónica filed a new utility model

application in 2024 at the Spanish Patent and

Trademark Office (OEPM).

Moreover, three new industrial design families related to

Customer Premises Equipment with European scope

were registered in 2024 through the European Union

Intellectual Property Office (EUIPO) and in Argentina,

Brazil, Chile, Colombia, Peru and the United Kingdom (in

2023 five new industrial designs were registered).

At the end of 2024, the Telefónica Group had a portfolio

of 419 active patents, 138 industrial designs and nine

utility models, resulting in a portfolio of 566 registered

technological intangible assets (497 as of December 31,

2023).

Open Innovation

Wayra is Telefónica’s main Open Innovation program. It

connects Telefónica and technological disruptors

around the world. We seek to become their preferred

strategic partner, with a view to accelerate their

business and ours. Wayra offers a unique and smooth

interface between entrepreneurs and our network of

corporate, government and other partners, adding value

to the ecosystems where we are present.

Wayra has seven physical hubs serving nine countries in

Europe and Latin America. Wayra manages its own

corporate venture capital fund, investing in partnerships

with other startup leaders in startups with a focus on the

digital consumer market (digital home, entertainment,

eHealth, fintech and energy), the B2B market (Artificial

Intelligence, Internet of Things, cybersecurity, cloud and

Big Data), next generation connectivity and Web3. Since

2022, Wayra also manages investment funds from other

Telefónica Group companies like Vivo Ventures in Brazil

and Íope Ventures from Telefónica Seguros y

Reaseguros Compañía Aseguradora, S.A.U.

In addition to direct investments, Wayra invests as a

limited partner in a network of 14 leading venture funds

in key markets, aiming to address the big challenges

facing the telecommunications industry and create new

businesses leveraging cutting edge technology to build

strategic partners fully aligned with the Group’s global

strategy. The most relevant of these funds is Leadwind,

in which we act as anchor investor, targeting deep tech

scale-ups in southern Europe and Brazil.

Telefónica has been engaged in Open Innovation for

over 15 years. As of 2024, it has helped create and

transform local entrepreneurship ecosystems in Europe

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and Latin America investing more than 240 million euros

(including direct and indirect investments), in more than

1,100 startups, contributing to the creation of more than

10,000 highly skilled jobs.

Wayra invested in 37 startups in Europe and Latin

America in 2024 for an aggregate total direct

investment amount of 9 million euros, including new

investments via Íope Ventures. Telefónica had interests

in more than 530 active startups whereof 190 were

working with Telefónica by the end of 2024.

Telefónica has invested in more than 1,100 startups,

engaging more than 330 startups to work with

Telefónica and its customers, generating through some

of their solutions more than 520 million euros in

revenues for the startups and more than 830 million

euros in revenues for Telefónica.

In addition, in 2024 Telefónica Open Future maintained

its entrepreneurship spaces in three countries, and

continued its participation in Alaian, the Open

Innovation initiative from ten major global

telecommunication companies with an aggregate

customer base of 1.5 billion and presence in 70

countries.

Environment

Climate change adaptation and mitigation

Telefónica integrates the risks and opportunities

identified into its business model through the Climate

Action Plan, which is included in the Company’s

strategy and financial planning. Through the

diversification of products and services, sustainable

financing models, and mitigation and adaptation

measures such as the consumption of renewable

energy and energy efficiency, the Company takes

climate change into consideration in its strategy and

financial planning.

The Company’s policies address across the board the

issues of climate change — mitigation, adaptation and

energy efficiency — through the Global Environmental

and Energy Policy, the Supply Chain Sustainability

Policy and the Risk Management Policy.

Global Environmental and Energy Policy

The Global Environmental and Energy Policy sets out

the guidelines that help the Company to support and

improve its environmental and energy performance

globally and locally. Specifically, it includes issues

relating to climate change mitigation and adaptation,

and reflects the commitment to consume energy

efficiently and reduce GHG emissions, which allows

Telefónica to continue to make progress towards

achieving net zero emissions by 2040, including in its

value chain.

The main objectives of the policy refer to: legal

compliance with the applicable requirements, reducing

the impact on the environment, collaborating with

suppliers to reduce their carbon emissions, managing

the impacts, risks and opportunities of climate change,

and fostering the development of digital solutions to

address environmental challenges.

Based on a firm commitment to accelerating the

transition to a decarbonised company and decoupling

business growth from GHG emissions, and in

accordance with the provisions of the policy, all the

companies of the Telefónica Group must work on the

following:

• Defining short-, medium- and long-term Scopes 1, 2

and 3 GHG emissions reduction targets that are

science based and externally validated.

• Transitioning to 100% renewable electricity

consumption in their own operations (assets under

operational control), in order to minimise the

Company's carbon footprint.

• Reducing the use of fossil fuels in their own

operations, promoting the adoption of cleaner and

alternative forms of energy.

• Incorporating innovative measures that lead

Telefónica progressively towards a net zero emissions

scenario.

• Offsetting/neutralising residual emissions in

accordance with Company requirements.

• Minimising the impact of refrigerant gases.

• Promoting energy efficiency measures, both in the

design and the operation of facilities and

infrastructure.

Supply Chain Sustainability Policy

The purpose of this policy is to establish sustainability

requirements for Telefónica's suppliers. The policy sets

minimum responsible business criteria related to climate

change impact mitigation measures and energy

efficiency that must be fulfilled by suppliers. Specifically,

it sets the following criteria:

• Climate change: the supplier shall take action to

minimise the impact of its activities on climate change

and consider the entire supply chain (Scopes 1, 2 and

3 GHG emissions) in its planning for such action. It

must work to reduce its GHG emissions by setting

reduction targets for the next three years, which

should, as far as possible, be science based. To this

end, it will promote energy efficiency and renewable

energy initiatives in its own activities. The supplier will

respond Telefónica's requests for data on GHG

emissions or energy consumption corresponding to

the products and services it provides to Telefónica.

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• Refrigerant gases: the supplier shall not supply

equipment containing ozone-depleting gases (such as

CFC or HCFC), nor shall it recharge with these gases,

unless expressly authorised to do so by Telefónica.

These are the climate change adaptation and mitigation

actions that Telefónica is working on:

1. Renewable Energy Plan.

2. Energy efficiency projects.

3. Supplier engagement.

4. Circular economy of equipment.

5. Business Continuity Plans.

6. Insurance Programs and Coverage for climate-related

events.

7. Products aimed at decarbonising the economy

1.Renewable Energy Plan

In 2024, the consumption of renewable energy

continued to increase through Telefónica's Renewable

Energy Plan.

The consumption of renewable energy contributes to

fulfilling the key objectives of Telefónica’s Global

Environmental and Energy Policy, specifically to the

management of environmental risks and the

achievement of net zero carbon emissions at the

Company. This action contributes to reducing Scope 2

emissions and category 3 of Scope 3 emissions

(emissions associated with the life cycle of fossil

energy).

The strategy of consuming renewable energy helps to

mitigate the potential transitional climate risks

associated with the increase in costs derived from

carbon and electricity prices,, and the uncertainty about

carbon credit prices For example, long-term power

purchase agreements reduce exposure to price

volatility, making it unnecessary to acquire carbon

credits and assume additional indirect costs passed on

by energy suppliers subject to carbon mechanisms.

This action also contributes to adaptation to physical

climate-related risks, such as drought and precipitation

variability. Increasing the self-generation of photovoltaic

renewable energy diminishes dependence on other

sources such as hydroelectric, which is more exposed to

prolonged episodes of drought. The Renewable Energy

Plan not only promotes adaptation to and mitigation of

the potential effects of climate change, but also

leverages it as a market opportunity to reduce operating

costs and strengthen the Company’s competitiveness

The main goal of this action is to achieve 100%

consumption of renewable energy by 2030 and

contribute to enhancing the resilience of all Telefónica’s

operations.

The scope of the Renewable Energy Plan, and therefore

the consumption of this type of energy, is applicable to

all Telefónica operations in all the countries in which it

operates. Renewable energy consumption involves

three groups of activities:

1. Self-generation of renewable energy: by the end of

the year, Telefónica had 517 self-generation systems

installed in both its own fixed network buildings and its

own mobile network base stations. Last year, the self-

generation of renewable energy represented the

production of around 7,377 MWh per year, which is set

to gradually increase. These facilities enable the

improvement of electricity consumption through

renewable sources and the phasing out of fossil fuel

generators in isolated base stations (off-grid),

achieving reductions in consumption of between 60%

and 80% in 2024. During the year, 33 self-generation

projects were implemented.

2. Purchase of renewable electricity with guarantees of

origin: this covers up to 100% of electricity

consumption at Telefónica Spain, Telefónica

Germany, Telefónica Brazil, Telefónica Chile and

Telefónica Peru, and has been expanded to other

markets. In 2024, Telefónica Argentina, Telefónica

Colombia and Telefónica Ecuador continued to

increase their renewable electricity consumption to

60%, 93% and 68% respectively. Likewise, in Latin

American operations, the first multi-country and multi-

year purchase (2024-2026) was awarded to acquire

certificates of origin (IREC) for a volume of 489 GWh

in 2024, 846 GWh in 2025 and 981 GWh in 2026.

3. Long-term power purchase agreements (PPAs): these

agreements are designed to promote the construction

of renewable energy facilities and move towards

achieving the commitment to being 100% renewable.

These contracts contribute to increasing the

percentage of renewable energy in countries' energy

mixes, facilitating the achievement of medium- and

long-term consumption commitments under the PPA

model.

At Telefónica Spain, there are five PPAs in operation

representing a capacity of 582 GWh/year. The

agreements cover 52% of the power consumption for

the operator’s technical buildings. In addition, Telefónica

Germany has signed two PPAs which will be in force

between 2025 and 2040 and are equivalent to 550

GWh a year, therefore covering 87% of the total energy

consumption of its operations. Noteworthy at Telefónica

Brazil is the continuation of the distributed generation

(DG) project, with the installation of 72 renewable

energy plants with a production of 650 GWh. Upon

completion of the project's implementation, these plants

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will produce more than 710 GWh per year, reducing

dependence on renewable energy certificates or IREC.

This action is considered to be currently in progress and

will be completed in the short term (by 2030) to

contribute to achieving the climate-related targets.

In 2024, consumption of renewable energy increased by 

6% compared to the previous year, reaching 89% of total

electricity consumption in Telefónica facilities.

2. Energy efficiency projects

In 2024, Telefónica continued to increase the energy

efficiency of its operations through its Energy Efficiency

Plan.

Improving energy efficiency is one of the main

commitments established in the Global Environmental

and Energy Policy. This action not only strives to make

optimised use of energy but also enables the

achievement of two objectives: management of

environmental risks and the commitment to achieving

net zero emissions at the Company. This initiative

contributes to reducing Scopes 1 and 2 emissions and

those in category 3 of Scope 3 (emissions associated

with the life cycle of fossil energy), thus mitigating the

effects of climate change and moving the Company

closer to reaching its decarbonisation target.

The strategy of improving energy efficiency helps

mitigate potential transitional climate risks associated

with the increase in costs derived from carbon and

electricity prices and the uncertainty about carbon

credit prices. Optimising efficiency in operations makes

it possible to reduce electricity consumption, which

reduces exposure to the volatility of electricity prices

and avoids the need to acquire carbon credits or

assume additional costs associated with energy

suppliers subject to carbon-related regulations.

At the same time, it serves as an adaptation measure to

extreme climate events such as heat waves and cold

snaps By implementing more efficient processes and

equipment, the Company intends to adapt HVAC to a

context of extreme temperatures, ensuring an optimal

environment in which the infrastructure is operative and

workers can perform their jobs in a safe setting.

The expected result of this action is the improvement of

energy consumption per unit of Company traffic (MWh/

Petabyte) by 95% by 2030 compared to 2015. The aim

of this target is to keep energy consumption stable over

time, thereby decoupling the growth of data traffic on

Telefónica's networks from the emissions associated

with its operations. Through the Energy Efficiency Plan,

Telefónica not only promotes adaptation to and

mitigation of the potential effects of climate change but

also transforms it into a market opportunity to reduce

operating costs and strengthen the Company’s

competitiveness .

The scope of the Energy Efficiency Plan extends to all

Telefónica operations in all the countries in which it

operates. Energy efficiency is achieved through the

following activities:

• Network transformation: estimated savings of 177,708

MWh 2024 through the following initiatives:

◦ Deployment of new generation networks, fibre optic

and 5G, and the shutdown of legacy networks: the

Company moved ahead with shutting down 2G and

3G networks, compacting equipment and replacing

the copper network with fibre optics, which is 85%

more efficient in terms of customer access

(according to empirical measurements by

Telefónica and in consensus with the sector). In

2020, Telefónica presented the results of a study

based on real measurements which demonstrated

that 5G technology is up to 90% more efficient than

4G in terms of energy consumption per unit of traffic

(MWh/Petabyte). In 2023, after several comparative

exercises, it was concluded that energy efficiency in

virtualised environments is up to 27% higher than in

legacy environments.

In alignment with the copper shutdown plan,

Telefónica Spain closed 3,671 plants in 2024 (7,820

since 2014). In turn, the operations in

Hispanoamerica made progress with their multi-

layer shutdowns saving 33 GWh in 2024. For

example, Telefónica Uruguay successfully shut

down 100% of the 2G mobile network (including

controllers) in January 2024, and Telefónica

Argentina shut down 100% of the 2G mobile

network in the Buenos Aires Metropolitan Area – La

Plata in June. In the fixed network, Telefónica

Hispam shut down more than 1,362 plants and 3,492

DSLAMs.

◦ Compacting and consolidation of technical rooms:

The objective is to bring the occupancy level of all

critical sites closer to the target of 80%, which

allows the designed PUE levels to be achieved. The

Company is carrying out a study of its infrastructure

with the goal of categorising the sites based on their

reliability and efficiency. This will make it possible to

perform consolidation projects and transfer loads to

more efficient buildings. Telefónica Germany is

executing a consolidation project involving data

centres and core plants, which will enable it to

reduce electricity consumption in addition to

strengthening its network.

• Modernisation of equipment:

◦ Equipment has been replaced with more efficient

models, and technological innovations such as

rectifiers, power plants, external panels and

uninterruptible power supply (UPS) systems have

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been incorporated into electrical infrastructure.

Savings of 1,250 MWh were calculated for 2024.

There is also work ongoing to upgrade cooling

equipment to improve energy efficiency, with

estimated savings of 33,128 MWh per year in 2024.

Other initiatives are being promoted, such as

adjusting the temperature set point in cooling

systems, free cooling in technical rooms utilising air

from outside, and advanced technologies such as

liquid cooling by immersion. An energy monitoring

system has been implemented in one of the Group's

data centres with the aim of verifying the real

efficiencies delivered by the use of chillers with

magnetic levitation compressors, which were

installed in 2023. Telefónica Spain continued with

the ‘Apagado Milles’ (Switch Off Thousands)

project, which consists of matching the climate

control equipment to the actual load and shutting

down 572 devices, bringing estimated savings of 17

GWh in 2024. 

• Power saving features (PSFs): this initiative is

expected to save 21,606 MWh in 2024. It consists of

implementing energy saving systems during periods

of low traffic, delivering reductions of up to 30%. In

2024, 14 new PSFs were put into operation in the 4G

and 5G networks in the main markets (Spain, Brazil

and Germany), without compromising service quality.

Thanks to the use of artificial intelligence (AI) tools and

machine learning algorithms, known as phase

learning, which act on top of these features, it is

possible to predict the behaviour of future traffic and

activate cell-sleep states 24 hours a day.

• Other energy efficiency measures in 2024:

◦ Replacement of fluorescent lighting with LED

technology. This initiative saved 5,259 MWh.

◦ Power-factor correction and installation of

occupancy sensors and smart meters, among

others. This initiative is estimated to save 

2,770MWh.

◦ Leakage control, preventive maintenance and

replacement of refrigerant gases: digitalising the

process of managing operational fuel consumption

data and refrigerant gas recharge data optimises

monitoring for leakage of these gases. This, together

with the preventive maintenance performed,

reduces gas leaks. At Telefónica Brazil, digitalisation

of the management process increased the reliability

of data through continuous monitoring, which

enabled a reduction in refrigerant gas recharges of

9% compared to 2023. At Telefónica Argentina, a

mobile application was implemented in June 2024 to

digitalise and manage fuel and refrigerant gas

consumption, as a result of which savings of 34% in

fuel and 10% in refrigerant gases were achieved

compared to the same period in the previous year.

When purchasing new HVAC equipment, and when

replacing these gases in existing equipment, the

global warming potential (GWP) is taken into

consideration to ensure that it is lower.

◦ Replacement of diesel with natural gas or propane

gas in boilers, which reduces the emissions

associated with heating in the facilities, as these

fuels generate fewer emissions for the same amount

of heat produced during combustion processes.

◦ Replacement of generator fuel. Telefónica Germany

deployed two off-grid mobile sites equipped with

methanol and solar panels. These solutions ensure

the independent functioning of the sites and

generate estimated savings of approximately 13

MWh a year compared to a conventional mobile

site. Additionally, a feasibility study was conducted

on the use of HVO, or hydrotreated vegetable oil (a

second-generation renewable diesel produced from

waste), in the emergency generators located at

Telefónica Spain's plants and data centres. This fuel

reduces Scope 1 emissions up to 90% and improves

operation due to its greater stability compared to

fossil diesel, making its use appropriate for

emergency generators.

◦ Reduction of fuel consumption: the extension of

battery autonomy, the implementation of BaaS

(Battery as a Service), the adjustment of capacity

according to demand and the replacement of

generator sets reduce diesel consumption and

maintenance costs. Telefónica Colombia carried out

a pilot scheme for Starfuel at the Chocontá earth

station. This type of fuel (diesel) incorporates green

hydrogen at 12%. This combination reduces CO 2 e

emissions by approximately 10% and reduces the

consumption/energy ratio (gl/KWh) by 21%.

◦ Installation of lithium batteries: the implementation

of delayed start-up logic for emergency generators

using high-cycle (lithium) batteries at sites with

frequent power outages reduces generator

operation and saves fuel. Telefónica Venezuela

implemented the battery cycling project at 35 sites.

The aim of this initiative is to reduce average fuel

consumption by 31% by delaying the start-up of the

generator and  allowing the batteries to be cycled

during the first phase of the commercial power

outage.

◦ Replacement of vehicles and gradual reduction of

the fleet of vehicles: replacing the fleet of vehicles

that consume fossil fuels with electric vehicles or

those that use biofuels, such as ethanol, reduces

Scope 1 emissions. Telefónica Spain renewed its

operational fleet of vehicles, reducing the vehicle

fleet by 41% and increasing the purchase of electric

vehicles by 50%, going from 24 to 42 vehicles in

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2024. The impact has been a reduction of

approximately 19% in the carbon footprint of the

vehicle fleet.

This action is considered to be currently in progress and

will be completed in the short term (by 2030) to

facilitate the achievement of the climate-related targets.

In 2024, energy consumption per unit of traffic was 38 

(MWh/Petabyte). This ratio has improved by 90%

compared to 2015.

This energy intensity metric (MWh/PetaBytes) is the

ratio of total energy consumption (fuel consumption in

operations and vehicle fleet and electricity

consumption), divided by the volume of data traffic in

PetaBytes.

The traffic used is the annual volume of data traffic

(mobile and fixed) carried on Telefónica's data access

networks. It is aggregated both in the downstream

direction (network-customer) and in the upstream

direction (customer-network). The units in which it is

expressed are PetaBytes (10^15 Bytes).

3. Supplier engagement

Scope 3 emissions represent a significant portion of the

Company's carbon footprint. In fact, more than half of

Scope 3 emissions are derived from the activities of

Telefónica's main suppliers (category 1 and 2) found in

its supply chain. Hence, it is essential to engage with

suppliers to mitigate their emissions and, therefore, drive

Scope 3 emissions reductions. This action contributes to

achieving the target of net zero emissions in the Global

Environmental and Energy Policy, as well as the target

of minimising the adverse impact of suppliers on climate

change, set in the Supply Chain Sustainability Policy.

Furthermore, engaging with suppliers and potentially

reducing Scope 3 emissions as a result, contributes to

mitigating, inter alia, the potential climate-related

transition risks associated with the uncertainty of carbon

credit prices derived from Telefónica's commitment to

purchase these.

It is expected that by achieving emissions reductions, a

smaller number of carbon credits will need to be

purchased, and therefore the exposure to uncertainty

about the prices and their potential rise will decrease.

To this end, in 2024, Telefónica carried out engagement

initiatives with its suppliers, which were structured into

three priority groups.

The scope of these initiatives varies depending on the

suppliers’ contribution to Telefónica's footprint.

As a starting point and to establish a common basis for all

suppliers within the Company’s Procurement Model,

suppliers are required to accept the Supply Chain

Sustainability Policy, which includes, among other things,

requirements for the calculation and reduction of

emissions. This policy defines the minimum requirements

for all Telefónica’s Scope 3 emissions within categories 1

and 2. 

Subsequently, Telefónica categorises the suppliers

based on their contribution to the Group’s footprint and

groups them into three priority levels (1, 2 and 3): 

• Priority group 1: comprises 44 key suppliers in terms of

ICT sector emissions, of which 27 are also its suppliers

and make up 23% of Telefónica's supply chain

emissions. 

• Priority group 2: comprises 82 suppliers that make up

79% of Telefónica's supply chain emissions.

• Priority group 3: comprises 188 suppliers that make up

88% of Telefónica’s supply chain emissions.

The suppliers in priority group 3 are invited to participate

in the following engagement initiatives:   

◦ CDP Supply Chain campaign: key suppliers in terms

of emissions are invited to participate in the CDP

Supply Chain program, where they provide

information about their strategy, targets and climate

actions.

◦ Supplier Engagement Programme (SEP): the

suppliers’ climate management maturity is assessed

based on the information gathered in the CDP

Supply Chain campaign. The analysis is shared with

the suppliers, and various actions are taken as part

of the programme in order to improve their climate

management. These actions include the

identification of improvement areas through a

pledge model and capacity-building webinars. 

Furthermore, in 2022, Telefónica established the

following additional requirement for suppliers in priority

group 2:

◦ SBTi requirement: a requirement for suppliers to

commit to establishing science-based emissions

reduction targets and have these validated by the

Science-Based Targets initiative (SBTi). This

commitment is monitored regularly. 

Additionally, those suppliers who are also part of priority

group 1 as a result of their GHG emissions contribution

to the ICT sector are invited to participate in a

collaborative initiative called the Carbon Reduction

Programme (CRP).

• The CRP is a programme managed through the sector

initiative Joint Alliance for CSR (JAC) that aims to

further GHG emissions reduction at the product level.

In it, the suppliers that work alongside the Company

identify the most carbon-intensive products and,

through a lifecycle analysis (LCA), determine which

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production stages offer the greatest emissions

reduction potential. The aim is to use this analysis as a

basis for agreeing on reduction plans specific to these

products with the suppliers. In 2024, 44 suppliers were

engaged through the CRP, the majority of which were

also Telefónica suppliers. 

It is worth mentioning that the scopes of both the SEP

and the CRP have widened since their initial

implementation. 

Telefónica launched the SEP in 2022 and since then it

has been raised to the sector level, incorporating the

efforts of other companies within the JAC sector

initiative. With the broadening of its scope, the SEP

includes nearly 900 suppliers, including also those

suppliers in priority group 3 . 

Similarly, in 2023, the CRP initiative was promoted by

the Company with the support of another three

telecommunications operators. Following its proven

success, in 2024, the scope of the project in the ICT

sector tripled, growing to a dozen operators, including

Telefónica.

All in all, supplier engagement as an adaptation and

mitigation action is considered to be currently in

progress and will be completed in the short term (by

2030) to facilitate the achievement of the climate-

related targets.

4. Circular economy for equipment

Telefónica promotes the refurbishment and reuse of fixed

customer equipment, such as routers and set-top boxes,

mobile telephones and electronic operations equipment,

through different initiatives.

Integrating circularity criteria into Telefónica’s business

models contributes to achieving net zero carbon emissions

at the Company, as the reuse of equipment extends its

lifespan and avoids the emissions associated with

extracting the materials needed to manufacture new

devices, which would be necessary if the current

equipment was not reused. It also reduces the emissions

associated with the equipment's manufacturing process,

which are greater than the emissions generated by

refurbishment.

These initiatives help to decrease Scope 3 emissions,

mainly in categories 1 and 2. These are the emissions

generated by manufacturing the products and capital

goods that Telefónica acquires. Decreasing them therefore

mitigates the effects of climate change and brings the

Company closer to achieving its decarbonisation target.

5. Business Continuity Plans

During 2024, Telefónica continued working on

developing the Business Continuity Plans. Some of them

take into consideration the risks deriving from extreme

climate events. This action contributes to the

achievement of one of the targets of the Global

Environmental and Energy Policy: effective

management of environmental risks.

In addition, it contributes to the implementation of the

guidelines established in the Global Business Continuity

Regulation, which mandates the preventive

management of risks. The main result anticipated from

this action is to improve the Company’s resilience, that

is, a greater capacity to respond and adapt in the face of

any possible interruption related to climate change.

The Business Continuity Plans are applicable to all

relevant Company processes and services. They

establish the activities for contingency operations in

different risk scenarios that exceed the risk appetite. As

a starting point, in 2025 the Global Business Continuity

Office will promote the analysis of risk treatment plans

that include climate-related hazards.

Additionally, the crisis management system, through

which the events that materialise and have a significant

impact on the Company are managed, has a Crisis

Committee structure (Local Crisis Committees, one per

business unit, and a Global Crisis Committee). These are

activated when required and are backed by specialists

for each type of incident.

Crisis management and business continuity are both

supported by activities such as:

• Analysis of Risk Treatment Plans (RTP), which

includes climate-related hazards (natural disasters,

disasters caused by fire or by water) in relevant

processes.

• Development of Local Crisis Management Plans

based on the Global Crisis Management System,

which establishes the type of crisis, the phases and

the governance model.

• The Strategic Plan of the Global Security and

Intelligence Directorate, a plan that sets out three-

year global security and intelligence plans, including

the Global Crisis Management Plan, which

encompasses the Crisis Management and Business

Continuity projects.

There is a Security Advisory Board, which is made up of

major security and intelligence figures from outside the

Company and has the aim of contributing best

practices, increasing the efficiency of capabilities and

procedures, and enhancing the quality of the

Company's strategy in this area.

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This action is considered to be in continuous

development and under regular review, and is projected

to be completed in the short and medium term, with a

time horizon set to 2040, given its essential nature

within the Company’s strategy.

During 2024, new Business Continuity Plans were

developed, considering risks derived from climate-

related events such as floods, fires and other natural

disasters (e.g. cyclones, hurricanes, landslides). These

made it possible to improve the Business Continuity

maturity level of the Telefónica Group.

In addition, two crises considered relevant, due to

climate-related events, were managed by the Local

Crisis Committees:

One of the relevant crisis management processes was

associated with the DANA, the Spanish acronym for

high-altitude isolated depression, in Valencia (Spain).

This extreme weather event caused severe damage to

Telefónica's infrastructure due to the lack or electricity

supply instability and the washout of water and flooding.

Both fixed service (loss of service in 30% of the province

of Valencia) and mobile service (with a maximum of 245

base stations down, 22% of the province of Valencia)

were affected, resulting in the isolation of entire

municipalities (104 at the worst moment).

Recovery was not only due to the complexity of the

failures, but also to the difficult access to the affected

areas. In the first instance, the priority was to re-

establish critical and emergency services such as 112,

hospital and outpatient centres, as well as command or

control centres (security forces). Once these services

were stabilised, the focus shifted to restoring fixed and

mobile infrastructure so that citizens could be

connected again.

In just three days, more than 50% of the fixed and

mobile services had been recovered, and after 10 days,

100% of the infrastructures had been recovered.

The event has accelerated the learning curve,

reinforcing the effectiveness of internal crisis

management procedures.

Another of the crisis management processes considered

as relevant in 2024 was the management of the floods

and landslides that occurred between April and May in

the state of Rio Grande do Sul, Brazil. These events

affected the supply of essential services, such as energy

and telecommunications. At peak of the crisis, 31 cities

were isolated and at least 200 others had some form of

partial disruption.

To ensure emergency connectivity for the people of Rio

Grande do Sul, Vivo, a Telefónica Group company, and

other operators provided free network roaming. In

addition, Vivo provided 60 satellite phones to the Civil

Protection of Rio Grande do Sul to use in extreme

situations.

In order to restore services as soon as possible, the

Business Continuity Management (BCM) area

established the Public Calamity Crisis Table—comprising

19 areas of the Company—. Joint actions, as well as the

work of the entire field team, dedicated to normalising

services, ensured greater agility and efficiency in

restoring connectivity for the people.

6. Insurance Programs and Coverage for climate-

related events

During 2024, the Group's Property Damage and Loss of

Profit Program was renewed, its objective is to provide

total or partial coverage for potential economic losses

that the Telefónica Group may suffer as a result of a

property damage event or natural catastrophe and

which includes damages, losses and harm derived from

the occurrence of climate-related events in any of the

countries or territories in which Telefónica has

operations and provides services. This program has

been renewed for a period of one year and will expire on

20 March 2026.

This action contributes to the achievement of one of the

key objectives of the Global Environmental and Energy

Policy: the effective management of environmental risks.

The program is based on the risk management

methodology for identifying, assessing, managing and

transferring the climate risks that may affect the assets

of the Group and its income statements/balance sheets,

thereby affecting the Group's achievement of its main

targets and strategy.

The main result expected from this action is the

coverage of damages and losses suffered by the

Group’s assets, goods, income statement and balance

sheet that allows for the quickest and most effective

way to replace and/or rebuild damaged or lost assets

and goods and meet the Company’s economic targets.

In addition to improving the Company’s resilience, that

is, its capacity to respond and adapt in the face of any

possible interruption related to climate change.

In order to protect Telefónica's assets, goods, balance

sheet and income statement, the Corporate Risk and

Insurance Department carries out risk modelling for

natural events, including physical events arising from

climate change, in all countries in which the Group

operates. The aim is to determine potential maximum

losses in certain return periods in the event of different

types of natural and climate events by using the models

of different suppliers such as RMS and KatRisk.

The result of this analysis is key to understanding the

Group's risks and exposure. In addition, it provides the

basis and framework for designing the most efficient

and complete insurance structure, helping to determine,

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for example, the limits, withholdings and deductibles

both for the Group and for each country.

This action is considered to be in continuous

development given its essential nature within the

Company’s strategy.

During the 2024 financial year, the baseline data

collection sheets used for vulnerability analysis were

improved. This made it possible to improve the

efficiency of the process of analysing, reviewing and

modelling the global insurance scheme that

encompasses, among other things, extreme climate

events.

In addition, floods were included as a hazard in risk

modelling in several countries where this was not

previously available.

7. Products aimed at decarbonising the economy

In 2024, Telefónica continued strengthening its portfolio

of digital products and services that help with the

decarbonisation of other sectors of the economy,

fostering the digital and green transitions as twin

transitions. These initiatives not only constitute one of

the Company's main strategies for mitigating climate

change beyond its value chain, but they are also a key

strategic opportunity for the Group. They provide

Telefónica with access to a growing market, in which

there is rising demand for technological solutions

capable of decarbonising customers’ productive

processes, helping them to face greater regulatory

pressure and increasing environmental consciousness.

They also directly contribute to one of the main targets

of the Global Environmental and Energy Policy,

specifically, to promoting digital solutions that help

Telefónica's customers tackle the major environmental

challenges that affect society as a whole.

The Exponential Roadmap initiative highlights that

digital technologies could reduce greenhouse gas

(GHG) emissions by 15% in the industrial sector, and by

up to 35% if people’s habits change to become more

digital and sustainable. This underlines the role of

digitalisation in the transition to a low-carbon economy

and strengthens the Company's commitment to

solutions that benefit both the environment and its

customers’ competitiveness.

This action is in continuous development given its

essential nature within the Company’s strategy and is

implemented through the following activities:

Development of Eco Smart services

Telefónica develops services based on connectivity,

Internet of Things (IoT), cloud, big data and 5G. These

solutions have the potential to provide not only

operational and cost-saving benefits, but environmental

benefits as well. To identify them, the Company uses the

Eco Smart seal. The label has four icons that represent

energy savings, reduction of water consumption,

reduction of CO2e emissions and promotion of the

circular economy. Below are examples relating to the

decarbonisation potential of some of these solutions:

• Energy savings: services that, for example, optimise

logistics routes or vehicle fleets or allow the energy

consumption of facilities to be monitored and

managed.

• Reduction in CO 2 e emissions: services that, for

example, improve traffic planning in cities or the

maintenance of air conditioning equipment, avoiding

refrigerant gas leaks.

In 2024 the Group continued to develop green digital

solutions and identify them with the Eco Smart seal. At

the end of the year, AENOR analysed the B2B solutions

portfolios for Telefónica Argentina, Telefónica Brazil,

Telefónica Chile, Telefónica Colombia, Telefónica

Ecuador, Telefónica Germany, Telefónica Global

Solutions (TGS), Telefónica Mexico, Telefónica Peru,

Telefónica Spain, Telefónica Tech, Telefónica Uruguay

and Telefónica Venezuela.

As a result of the verification process of the B2B

solutions portfolios, 57% of the services offered in these

entities have been verified as Eco Smart due to their

potential for delivering environmental benefits and

contributing to mitigating the customers’ impact on the

planet.

Eco Smart services meet the following criteria: the

environmental benefit must occur in the customer's

production activity/process or in the users of a service

provided by that customer, it must be a direct

consequence and not a secondary effect derived from

the main benefit, and it must be significant.

Avoided emissions quantification

To ascertain the level of Telefónica's contribution to

mitigating climate change, the Company annually

quantifies the GHG emissions avoided by its customers

thanks to their use of Telefónica products and services,

that is, the net carbon impact generated compared to a

reference scenario in which that solution is not used.

This scenario is defined based on well-documented

external references and should reflect the most likely

alternative scenario, considering the same functional

unit and the same technical specifications.

Telefónica estimates that its Eco Smart and connectivity

services helped customers avoid the emission of 17.4

million tonnes of CO 2 e in 2024. It is important to clarify

that these emissions do not contribute to reducing the

Telefónica Group's carbon footprint.

The calculation of this indicator used a methodology

based on the WBCSD "Guidance on Avoided Emissions"

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and the ITU standard “L.1480: Enabling the Net Zero

transition: Assessing how the use of information and

communication technology solutions impact

greenhouse gas emissions of other sectors".

The contribution of the connectivity services offered to

the residential segment (B2C) in Spain, Germany and

Brazil has been quantified, as well as some IoT-based

Eco Smart services offered to business customers (B2B)

in these markets, given that currently only these have

the complete information required by these standards.

Every year, the Company works to include a greater

number of Eco Smart services.

Specifically, in terms of connectivity services in the B2C

segment, fixed and mobile broadband services are

considered, including the following uses: teleworking,

online learning, online shopping, public transport

applications and carpooling applications. The IoT

solutions incorporated are those related to the

management of smart cities (lighting, waste and

parking) and vehicle fleets management.

For each of the solutions analysed, the following types

of effects have been identified and, where possible,

quantified:

• First-order effects: direct environmental impacts

associated with the physical existence of the solution

and its components, i.e. all stages of its life cycle

(LCA). For example, the impact of Narrowband access,

the SIM card and the sensor in an IoT solution.

• Second-order effects: indirect impacts generated by

the use and application of the solution, which could be

positive or negative. For example, the emission

savings associated with the journeys avoided by a

person who teleworks using a connectivity service or

the emissions generated by the increase in energy

consumption at home.

• Higher-order effects: indirect impacts other than first-

and second-order effects that occur through changes

in consumption patterns or lifestyles in society in the

medium and long term. These can also be positive or

negative. For example, emission savings associated

with the consolidation of offices due to the medium-

or long-term adoption of teleworking.

The calculation of the net carbon impact for each

solution is obtained from the sum of the effects

described above:

Net carbon impact = ∑ First-order effects + ∑ Second-

order effects + ∑ Higher-order effects

The total emissions avoided are therefore obtained by

adding up the net carbon impacts of all the solutions

analysed.

The calculations related to the B2C connectivity

solutions, which represent close to 99% of the total data

on avoided emissions, are explained below.

For all of them, the first-order effects considered are the

CO 2 e emissions generated by the provision of each

access (fixed and/or mobile).

Second-order and higher-order effects may differ from

one use to another and are determined based on

primary data (results of surveys of Telefónica

customers) and secondary data (bibliographic sources).

For example, in the case of teleworking and online

learning, two second-order effects are identified:

• Commuting avoided. The surveys provide the

percentage of adoption of these habits, the average

number of days a week that the customer teleworks or

learns online, or the average distance and type of

transport avoided by not having to travel to their place

of work or study. This makes it possible to calculate

the emissions saved by the commuting avoided.

• Additional energy consumption at home. Emissions

are calculated using information from surveys and

bibliographic sources.

The higher-order effect identified is the consolidation of

offices and study centres. Avoided emissions, where

applicable, are calculated from bibliographic sources.

This example also demonstrates the consideration given

to the calculation of possible adverse or rebound

effects.

Circular economy

Telefónica has implemented actions to achieve the

goals of becoming a Zero Waste company by 2030 and

meeting the circular economy commitments outlined in

its Global Environmental and Energy Policy. These

involve minimising the impact of the waste generated,

promoting reuse and recycling, and reducing the

generation of hazardous waste.

These are the main actions that Telefónica is working on

in order to manage the negative impacts , material risks

and opportunities related to the circular economy.

1. Reuse customer-premises equipment (routers

and set-top boxes)

This action focuses on the reuse of B2C/B2B routers

and set-top boxes that follow a device as a service-

model. It includes equipment that the Company collects

from customers and delivers to a refurbishing company

to give a second life. The scope of the initiative also

includes the digitalisation of reverse logistics processes

and the use of blockchain technology to increase device

reuse rates, such as the VICKY initiative.

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This project is being rolled out to all Telefónica

operators offering fixed telecommunications services:

Spain, Brazil, Germany, Argentina, Chile, Colombia and

Peru. The stages of the value chain involved are:

procurement (goods for business development),

operations (equipment installation) and after-sales

(reverse logistics, technical support and repair).

Reusing equipment helps to reduce dependency risks

related to the circular economy while also representing

an opportunity to make financial savings by avoiding the

purchase of new equipment.

The expected outcome of this action is the reuse of 90%

of the routers and set-top boxes delivered for

refurbishment by the end of 2024, meaning it is a short-

term action.

In 2024, the Company reused more than 4 million

routers and set-top boxes, amounting to 91.4% of all

equipment delivered to be refurbished.

2. Reuse mobile devices

The scope of this initiative covers giving customer- or

Telefónica-owned mobile devices obtained through

various channels a second life, whether through

buyback programs, the sale of refurbished devices,

repair services, reuse within leasing services or the

MARA program, among other actions.

This initiative is being rolled out in the markets in which

Telefónica offers mobile phone services, such as

Germany, Spain, Brazil and Hispanoamerica. The

different stages of the value chain involved are

procurement, products and services, and after-sales

(reverse logistics, technical support and repair).

Reusing devices contributes to the reduction of circular

economy-related dependency risks . These are long-

term actions that are expected to deliver the reuse of

over 500,000 mobile phones by 2030. In 2024, 437,180

mobile devices were reused.

3. Prioritise the reuse of network equipment

Telefónica has implemented programs and platforms to

extend the lifespan and reuse of second-hand network

equipment (for example, the MAIA marketplace).

This equipment comes from its infrastructure and

partner companies, mainly in markets with

telecommunication networks such as Spain, Brazil and

Hispanoamerica.

The stages of the value chain involved are procurement

(goods for business development), operations

(installation of network, customer and data centre

infrastructure) and marketing (logistics and distribution).

The reuse of network equipment is a long-term action 

that will contribute to the reduction of circular

economy-related dependency risks. In 2024, 533,818

items of network equipment were reused, a larger figure

than the expected result of maintaining similar reuse

figures to the previous year. This was due to a greater

reuse of equipment among Group operators.

4. Recycle 100% of waste when reuse is not

possible

This initiative includes delivering waste for recycling to

waste managers authorised by the competent bodies

and consolidating the waste generated by the

Company’s activity. In some cases it is possible to

generate income through the sale of waste for recycling .

The GreTel digital tool enhances the traceability of

waste disposal information, helping to mitigate risks and

impacts from improper treatment.

The project, implemented across all regions with fixed or

mobile telecommunications infrastructure, focuses on

the operations stage (waste management from the

business activities) of the value chain.

This is a long-term action that is expected to recycle

over 95% of the waste generated. In 2024, 94% of waste

was recycled.

Human Capital

Telefónica is promoting its Human Resources strategy

under the principles of Impact, Collaboration,

Transformation and Growth. These values are the

driving force behind the new strategic plan, designed to

ensure the sustainability of the business and the

professional development of its employees:

• Impact: Prioritising the effective execution to ensure

the sustainability of the business.

• Collaboration: Promoting teamwork between

employees, customers and partners to maximise

results.

• Transformation: Continuously evolve processes and

ways of working to adapt to a digital and dynamic

environment.

• Growth: Update skills through continuous learning,

strengthening employability and internal talent.

A new performance evaluation model measures these

key dimensions through continuous and honest

conversations, aimed at supporting development and

maximizing employee impact.

Relevant Policies at Telefónica, S.A.

Key policies include Human Rights, Equality, Diversity

and Inclusion, Safety, Health and Wellbeing, Digital

Disconnection policy, as well as specific regulations on

harassment, responsible business, privacy, etc.

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Skills Management at Telefónica, training

and education

Telefónica aligns its current and future capabilities

through Skills Workforce Planning, developing new

capabilities through reskilling and upskilling programs.

Tools such as SkillsBank personalize training, while

Universitas Telefónica offers programs designed to

develop strategic skills and foster leadership. We also

use internal mobility as a tool to acquire new skills.

To attract talent, we use digital and global channels,

complementing traditional methods. We focus on

establishing long-term relationships with candidates

and simplifying selection. We actively participate in

digital job fairs, forums, social networks and

technological universities.

Company/employee relationship.

Commitment and motivation of our

employees

Employee commitment is key to Telefónica's strategy,

measured annually by the Employee Net Promoter

Score (eNPS), which assesses the likelihood of

recommending the company. In 2024 we achieved a

score of 75, complemented by satisfaction surveys and

qualitative analysis. Internal listening exercises and

evaluations are also carried out to promote equality,

diversity and employee well-being.

Since 2019, the company has implemented agreements

to guarantee a balance between personal and work life,

encouraging digital disconnection.

We offer different Benefit Programs, including:

• Universal health insurance, which includes coverage

for disabilities, mental and reproductive health.

• Financial aid for raising and educating children,

including daycare and school subsidies.

• Extended parental leave, adapted to the specific

needs of employees.

Diversity and Equal Opportunity

We are committed to diversity as a source of talent and

to the creation of inclusive and accessible

environments. To this end, we have a Global Diversity

and Inclusion Policy and we also have specific protocols

for issues related to diversity, inclusion, accessibility and

gender equality.

To achieve this , we design initiatives to promote 

diverse talent, inclusion, attract and retain high-

potential professionals, maximize employee potential,

foster innovation and enhance productivity. Only in this

way we will be able to empathize with our clients,

understand their specific needs and innovate to meet

them. We also establish objectives that reinforce this

commitment, such as:

• Annual target percentage of women in executive

positions. Meeting the target for female executives is

linked to the variable remuneration of our employees

and is one of the indicators of sustainable financing.

For 2024, it was set at 33.4%, achieving 34%.

• Adjusted wage gap of ±1%, achieved in 2022 and

maintained as a target until 2024.

Safety, Health and Wellbeing

At Telefónica, we understand safety and health at work

as comprehensive physical, mental and social wellbeing.

We have a Global Safety, Health and Wellbeing Policy

that promotes the health, safety and wellbeing of our

employees, supply chain and partners. Occupational

health and safety management systems are

implemented in accordance with international

standards to prevent incidents and occupational

diseases. In addition, employee participation in health

committees is encouraged and initiatives for physical

and emotional wellbeing are promoted, including social

benefits and health programs, with the aim of reducing

stress and improving the work environment.

These measures not only benefit employees, who

perceive through internal surveys that Telefónica

actively promotes their well-being, but also create a

positive societal impact and contribute to long-term

business success.

Liquidity and capital

resources

Financing

The main financing transactions carried out in the bond

market in 2024 are as follows:

Description	Issue date	Maturity date	Amount in millions (nominal)	Currency of issue	Amount in millions (nominal)	Coupon
Telefónica Emisiones, S.A.U.
EMTN bond (1)	01/24/2024	01/24/2032	1,000	1,000	EUR	3.698%
EMTN bond (1)	01/24/2024	01/24/2036	750	750	EUR	4.055%

(1) Sustainable bonds

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These transactions are guaranteed by Telefónica, S.A.

On the same dates Telefónica, S.A. perceived loans from

Telefónica Emisiones, S.A.U. of similar amount, terms

and conditions.

The main transaction arranged in 2024 in the bank

market is as follows:

• The second one-year extension option for the

Telefónica, S.A. sustainability-linked syndicated credit

facility for up to 5,500 million euros, was executed on

January 13, 2024, extending the maturity date to

January 13, 2029.

• On July 31, 2024, Telefónica, S.A. drew down 150

million euros of its bilateral loan signed on March 27,

2024, and maturing on July 31, 2034.

• On October 31, 2024, Telefónica, S.A. drew down 140

million euros of its bilateral loan signed on October 9,

2024, and maturing on October 31, 2031.

• On December 16, 2024, Telefónica, S.A. drew down

100 million euros of its bilateral loan signed on

November 21, 2024, and maturing on December 16,

2031.

Available funds

At December 31, 2024 Telefónica, S.A.’s available funds

from undrawn lines of credit in different financial

institutions totaled 9,524 million euros (of which 9,354

million euros maturing in more than 12 months).

Additionally, cash and cash equivalents as of December

31, 2024 amount to 5,015 million euros.

Additional information on sources of liquidity and

undrawn lines of credit available to the Company, on

liquidity risk management, on the Company’s debt

levels, and on capital management is provided in notes

13, 14, 15 and 16 of the financial statements.

Contractual commitments

Note 19 to the financial statements provides information

on firm commitments giving rise to future cash outflows

and associated with operating leases, primarily.

Credit risk management

The credit risk in Telefónica, S.A. mainly refers to the one

associated with financial derivative instruments

arranged with different entities. The detailed description

of how those risks are managed and hedged is included

in note 16.

Credit rating

At December 31, 2024, Telefónica, S.A.’s long-term

issuer default rating is "BBB stable outlook" from Fitch,

“BBB- stable outlook" from Standard & Poor's and “Baa3

stable outlook" from Moody's. During this year, there

have not been changes in the long-term credit ratings

by any of the three agencies. Last changes in the credit

ratings took place in 2020 when Standard and Poor’s

revised the outlook to “negative“ from “stable” on April 1,

2020 and later, on November 20, 2020 downgraded the

rating to “BBB - stable” from “BBB negative”. On

November 7, 2016 Moody's downgraded the rating to

“Baa3 stable” from “Baa2 negative” and on September 5,

2016 Fitch downgraded the rating to “BBB stable” from

“BBB+ stable”.

In 2024, measures taken to protect the credit rating

included an active portfolio management through the

voluntary public acquisition offer for shares of

Telefónica Deutschland that reinforces Telefónica’s

strategy to focus on its core geographies and its strong

commitment to the German market, one of the most

attractive and stable telecom markets in Europe. The

offer also supports Telefónica’s efforts to simplify the

Group’s structure and enhances the euro-denominated

cash flows generated in the Group.

Telefónica has also undertaken an employee’s

restructuring process, allowing the capture of savings

and with a positive cash generation impact from 2024

and Telefónica España has reached an agreement with

Vodafone España to incorporate a joint company, whose

main activity is the commercialization of a fiber to the

home network for its shareholders.

In addition, Telefonica maintains a solid liquidity position

and conservative approach to debt refinancing, as the

Group took advantage of the historical low refinancing

rates to extend average debt life and smooth its

maturity profile in coming years.

Dividend policy

Telefónica establishes the shareholder remuneration

policy taking into account the Group’s earnings, cash

generation, solvency, liquidity, flexibility to make

strategic investments, and shareholders and investors’

expectations.

On March 2017 the Board of Directors of Telefónica, S.A.

decided to define the corresponding payment periods of

the dividends. Therefore, from there on, the dividend

payment in the second quarter will take place in June,

and the dividend payment in the fourth quarter will take

place in December, in both cases on or before the third

Friday of the corresponding month.

In February 2023, Telefónica announced the dividend

policy for the year 2023, which consists of an amount of

0.30 euros per share in cash, payable in December 2023

(0.15 euros per share) and in June 2024 (0.15 euros per

share).

The Annual General Shareholders Meeting held on

March 31, 2023 approved the Proposals of the cash

dividend paid in June 2023 and December 2023.

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In February 2024, Telefónica announced the dividend

policy for the year 2024, which consists of an amount of

0.30 euros per share in cash, payable in December 2024

(0.15 euros per share) and in June 2025 (0.15 euros per

share).

The Annual General Shareholders Meeting held on April

12, 2024 approved the Proposals of the cash dividend

paid in June 2024 and December 2024.

Treasury shares

Telefónica has performed, and may consider performing,

transactions with treasury shares and financial

instruments or contracts that confer the right to acquire

treasury shares or assets whose underlying is Company

shares.

Treasury share transactions will always be for legitimate

purposes, including:

• Undertaking treasury share acquisitions approved by

the Board of Directors or pursuant to General

Shareholders' Meeting resolutions.

• Honoring previous legitimate commitments assumed.

• Covering requirements for shares to allocate to

employees and management under stock option

plans.

• Other purposes in accordance with prevailing

legislation. In the past, treasury shares purchased on

the stock market were exchanged for other shares-

securities (as in the case of preferred capital

securities), swapped for stakes in other companies

(e.g. the share exchange with KPN) acquired to

reduce the number of shares in circulation (by

redeeming the shares acquired), thereby boosting

earnings per share, the delivery of treasury shares in

exchange for the acquisition of a stake in another

company (such as the agreement with Prosegur

Compañía de Seguridad, S.A.).

Treasury share transactions will not be performed in any

event based on privileged information or in order to

intervene in free price formation. In particular, any of the

conduct referred to in Articles 83.ter.1 of the Spanish

Securities Market Law and 2 of Royal Decree 1333/2005

of November 11 implementing the Spanish Securities

Market Law, with regards to market abuse will be

avoided.

The disclosure of number of treasury shares at the end

of 2024 and 2023, as well as the explanation about the

evolution of the figure and the transactions involving

treasury shares 2024, are described in note 11 of these

financial statements.

Risk Factors

The Telefónica Group’s business is affected by a series

of risk factors that affect exclusively the Group, as well

as a series of factors that are common to businesses of

the same sector. The main risks and uncertainties faced

by Telefónica, that could affect its business, financial

condition, results of operations and/or cash flows are set

out below and must be considered jointly with the

information set out in the rest of this Annual Report. 

These risks are currently considered by the Telefónica

Group to be material, specific and relevant in making an

informed investment decision in respect of Telefónica.

However, the Telefónica Group is subject to other risks

that have not been included in this section based on the

Telefónica Group’s assessment of their specificity and

materiality based on the Telefónica Group’s assessment

of their probability of occurrence and the potential

magnitude of their impact. The assessment of the

potential impact of any risk is both quantitative and

qualitative considering, among other things, potential

economic, compliance, reputational and environmental,

social and governance ("ESG") impacts.

Risks are presented in this section grouped into four

categories: business, operational, financial, and legal

and compliance.

These categories are not presented in order of

importance. However, within each category, the risk

factors are presented in descending order of

importance, as determined by Telefónica at the date of

this document. Telefónica may change its vision about

their relative importance at any time, especially if new

internal or external events arise.

Risks related to Telefónica's Business

Activities.

Telefónica's competitive position in some

markets could be affected by the evolution of

competition and market consolidation.

The Telefónica Group operates in highly competitive

markets and it is possible that the Group may not be

able to market its products and services effectively or

respond successfully to the different commercial

actions carried out by its competitors, causing it to not

meet its growth and customer retention plans, thereby

jeopardizing its future revenues and profitability.

Additionally, the Telefónica Group could be affected by

the regulatory actions of antitrust authorities. These

authorities could prohibit certain actions, such as new

acquisitions or specific practices, create obligations or

impose heavy fines. Any such measures implemented by

the antitrust authorities could result in economic and/or

reputational loss for the Group, in addition to a loss of

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market share and/or harm to the future growth of some

of its businesses.

The entry of new competitors in core markets

(leveraging asymmetric regulation and wholesale

obligations for incumbents), market concentration via

mergers by other players (e.g. MasOrange in Spain and

Vodafone/Three in the United Kingdom) or changes in

control at key competitors (e.g. Vodafone – Zegona in

Spain), may re-configure markets. This could affect

Telefónica’s relative competitive position, impacting the

potential evolution of revenues and market share,

especially if new entrants pursue aggressive customer

acquisition strategies. Additionally, new entrants could

decide to accelerate network rollout (e.g. 5G) aiming at

differentiating in the market, which could lead to

increased competition in infrastructure.

Today most telecom operators, such as Telefónica,

include services beyond core connectivity services in

their portfolio, albeit the weight of these services is

relatively minor. Competitive dynamics for digital

services are different, since these markets are

dominated by specialized over-the-top (OTT) players

and big tech, which leverage global platform economics

and strong customer brands.

If Telefónica is not able to successfully face these

challenges, by ensuring a supply of cutting-edge

technology products and services and maintaining its

competitiveness against current or future competitors,

the Group's business, financial condition, results of

operations and/or cash flows could be adversely

affected.

Telefónica could be affected by disruptions in

the supply chain or international trade

restrictions, or by the dependency on its

suppliers.

The existence of critical suppliers in the supply chain,

especially in areas such as network infrastructure,

information systems or handsets with a high

concentration in a small number of suppliers, poses risks

that may affect Telefónica’s operations. In the event that

a participant in the supply chain engages in practices

that do not meet acceptable standards or does not

meet Telefónica’s performance expectations (including

delays in the completion of projects or deliveries, poor-

quality execution, cost deviations, reduced output due

to the suppliers own stock shortfalls, or inappropriate

practices), this may harm Telefónica's reputation, or

otherwise adversely affect its business, financial

condition, results of operations and/or cash flows.

Further, in certain countries, Telefónica may be exposed

to labour contingencies in connection with the

employees of such suppliers. 

As of December 31, 2024, the Group depended on three

handset suppliers (one of them located in China) and

seven network infrastructure suppliers (two of them

located in China), which, together, accounted for 85%

and 83%, respectively, of the aggregate value of

contracts awarded in 2024 to handset suppliers and

network infrastructure suppliers, respectively. One of

the handset suppliers (not located in China) represented

46% of the aggregate value of contracts awarded in

2024 to handset suppliers.

As of December 31, 2024, the Telefónica Group had

approximately 100 information system ("IT") providers

that together accounted for 80% of the total amount of

IT purchase awards made in 2024, seven of them

representing 30% of purchases in that area and time

frame.

If suppliers cannot supply their products to the

Telefónica Group within the agreed deadlines or such

products and services do not meet the Group’s

requirements, this could hinder the deployment and

expansion plans of the network. This could in certain

cases affect Telefónica’s compliance with the terms and

conditions of the licenses under which it operates, or

otherwise adversely affect the business and operating

results of the Telefónica Group.

In addition, the possible adoption of new protectionist

measures in certain parts of the world, including, the

imposition of tariffs by major economies, the adoption of

lockdown or other restrictive measures as a result any

crisis or pandemic, as well as disruptions derived from

geopolitical events such as the Russia-Ukraine war,

armed conflict and political instability in the Middle East,

among others, could disrupt global supply chains or may

have an adverse impact on certain of Telefónica’s

suppliers and other players in the industry. Any of the

above could increase prices for Telefónica and

ultimately make our services more expensive for our

customers, which could adversely affect the business

and operating results of the Telefónica Group.

National security concerns may also limit Telefónica’s

ability to utilize certain suppliers and require it to incur

additional costs. Several EU countries have imposed

restrictions on the use of telecom suppliers that are

considered high-risk for 5G network infrastructure, such

as certain Chinese suppliers. In Germany, Telefónica

and other mobile network operators have entered into

public law contracts with the Federal Ministry of the

Interior and Community that obligate the mobile

network operators to stop using all critical components

made by Chinese suppliers in their 5G core networks by

the end of 2026. The operators are also required to

replace the critical functions of such suppliers’ 5G

network management systems in the access and

transport networks of the 5G mobile network with

technical solutions of other manufacturers by the end of

2029. This requires the cooperation of the suppliers,

who must provide open interfaces for controlling the

network elements.

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The semiconductor industry in particular is facing

various challenges, as a result mainly of supply problems

at a global level, which in turn is affecting multiple

sectors (including technology) through delivery delays

and price increases, which could affect the Telefónica

Group or others who are relevant to its business,

including its customers, suppliers and partners. Since

2021 a specific monitoring has been carried out and

action plans have been developed by the Group with

respect to the supply chain challenges resulting from

the armed conflict in Ukraine as well as the potential

discontinuation of use of some suppliers as a result of

tensions between the United States and China. While

Telefónica's supply chain has been generally resilient in

recent years, despite various stresses affecting the

semiconductor industry and raw materials, this may

change in the future.

The imposition of trade restrictions and any disruptions

in the supply chain, such as those related to

international transport, could result in higher costs and

lower margins or affect the ability of the Telefónica

Group to offer its products and services and could

adversely affect the Group's business, financial

condition, results of operations and/or cash flows.

Further, in its sale of digital services, the Telefónica

Group regularly integrates the digital services it offers

with third-party technologies. Similar to more traditional

supplier relationships, these integrations subject the

Telefónica Group to the risks of performance failures by

these third parties and the cost of continuously

monitoring these strategic partners to ensure they

maintain appropriate levels of accreditation and that the

technologies they provide remain secure and up to date.

Any such performance failure by the third parties or the

technologies they provide could negatively impact the

digital services offered by the Telefónica Group, and the

Group's business, financial condition, results of

operations and/or cash flows could be adversely

affected as a result.

Telefónica could be affected by the global

technology talent shortage and the need for

new skills in the workforce due to rapid

technological changes, which may limit the

Group's competitiveness.

The changing need for new skills in the workforce due

to ongoing technological disruptions and the shortage

of technology talent in the marketplace pose significant

risks that may affect the Group's competitiveness.

The successful execution of Telefónica's strategic plan

and Telefónica's ability to compete effectively now and

in the future depend to a large extent on the Company's

key talent, as well as on a highly skilled workforce.

Experienced profiles in the technology sector are in high

demand and competition for talent is fierce worldwide.

A lack of talent and the necessary skills in the Group can

slow down innovation and adaptation to rapid changes

in the sector, impacting business opportunities and the

quality of services provided.

While the Group takes various steps to manage these

risks, including by fostering a culture of continuous

learning, though ambitious employee training and

reskilling programs, motivating and seeking to retain the

Group's key talent and by redefining Telefónica's

corporate culture to ensure the company's long-term

growth and sustainability, there can be no assurance

that such steps will be sufficient.

If the Group fails to attract and retain technology talent,

this could negatively affect the Group's business,

financial condition, results of operations and/or cash

flows.

The Group requires government concessions

and licenses for the provision of a large part of

its services and the use of spectrum, which is a

scarce and costly resource.

Many of the Group’s activities (such as the provision of

telephone services, Pay TV, the installation and

operation of telecommunications networks, use of

spectrum, etc.) require licenses, concessions or

authorizations from governmental authorities, which

typically require that the Group satisfies certain

obligations, including minimum specified quality levels,

and service and coverage conditions. If the Telefónica

Group breaches any of such obligations, it may suffer

consequences such as fines or other measures that

would affect the continuity of its business. In addition, in

certain jurisdictions, the terms of granted licenses may

be modified before the expiration date of such licenses

or, at the time of the renewal of a license, new

enforceable obligations could be imposed or the

renewal of a license could be refused.

In addition, the Telefónica Group requires sufficient

appropriate spectrum to offer its services. The intention

of the Group is to maintain current spectrum capacity

and, if possible, to expand it, through the participation of

the Group in spectrum auctions which are expected to

take place in the next few years, which will likely require

cash outflows to obtain additional spectrum or to

comply with the coverage requirements associated with

some of the related licenses. While Telefónica considers

its current spectrum capacity to be sufficient in all the

regions in which Telefónica operates, the Group's failure

to retain or obtain sufficient or appropriate spectrum

capacity in these jurisdictions in the future, or its inability

to assume the related costs, could have an adverse

impact on its ability to maintain the quality of existing

services and on its ability to launch and provide new

services, which may materially adversely affect

Telefónica’s business, financial condition, results of

operations and/or cash flows.

Any of the foregoing, as well as the additional matters

addressed below, could have an adverse effect on the

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business, financial condition, results of operations and/

or cash flows of the Group.

Access to new concessions/ licenses of spectrum.

In Spain, the Ministry of Economic Affairs and Digital

Transformation (currently the Ministry of Digital

Transformation and Civil Service) approved in June 2023

a modification to the National Frequency Allocation

Table ("CNFA"), allowing for the possibility of making

available 450 MHz of the 26 GHz spectrum band, to

companies, industries and organizations operating in a

specific sector, that deploy private networks to support

their connectivity needs (verticals). This could mean

more competition in the private corporate network

segment.

In the UK, following the clearance of the merger

between Vodafone UK and Three UK, the Office of

Communications ("Ofcom") has confirmed that it will

hold an auction for 26 GHz and 40 GHz bands in the

third quarter of 2025.

In Latin America, the following 5G auction processes are

expected in 2025: in Peru, on July 4, 2024, a law was

approved that allows the Ministry of Transport and

Communications (MTC) to advance in the process of

reordering the 3.5GHz band so that it can be used for

the provision of 5G services and assign 5G spectrum

without launching a public bidding process, as long as

there is no lack of available spectrum to cover the

demand of all interested operators. There is no specific

information on when the MTC could advance in the

process of reordering and assigning spectrum of the

3.5GHz band. On September 20, 2023, after an

employee presented a false document regarding his

academic degree, Telefónica del Perú was disqualified

following a decision of the government procurement

supervisor (OSCE), from contracting with the Peruvian

state for a period of 36 months, meaning it cannot

request concessions for spectrum or participate as a

contractor or subcontractor in any government tender

process. Telefónica del Perú has initiated legal actions

against the sanction resolution, and the aforementioned

employee was fired and criminally prosecuted.

Telefónica del Perú has concessions for the provision of

public telecommunications services and 4G and 5G

spectrum (including in the same 3.5 GHz band, but

obtained in a previous auction) with validity that

exceeds the disqualification period. In addition, this

disqualification does not affect the renewals of

Telefónica del Perú licenses and we expect it would not

preclude Telefónica del Perú from accessing additional

spectrum for the provision of 5G services through the

reordering process provided for in the July 4, 2024 law.

In Brazil, the Agencia Nacional de Telecomunicações

(“ANATEL”) is conducting a public consultation (until

April 7, 2025) about a long-term schedule for spectrum

auctions. This proposal includes frequencies in multiple

bands for awards in the short (2026–2028), medium

(2029–2032) and long term (2032–2036). With regard to

700 MHz in the 6 GHz band (6425–7125 MHz), ANATEL

plans on submitting rules for the award to consultation

in the second half of 2025 and granting the award by

2026. In addition, on January 31, 2025, ANATEL

concluded the public consultation on the 700 MHz band

Auction Proposal, which involves the spectrum that was

returned by the provider Winity in 2023. According to

the proposal, regional lots would be offered, with priority

for participation given to providers that do not yet have

spectrum authorizations in the 700 MHz band, and only

if there is no interest from these providers, established

providers would be able to acquire spectrum. The

auction is expected to take place by the second half of

2025.

Existing licenses: renewal processes and modification of

conditions for operating services.

In Germany, in May 2024, the Bundesnetzagentur

(“BNetzA”) published a draft decision on the extension of

the frequencies at 800 MHz, 1800 MHz and 2.6 GHz,

which will partially expire at the end of 2025. The draft

decision provides for the existing frequency usage rights

in the above mentioned frequency ranges, to be

extended for a transitional period of five years. It is

expected that BNetzA will adopt a final decision in the

first quarter of 2025. The extension of the usage rights

would be accompanied by obligations for the further

deployment of mobile networks, particularly in rural

areas and along transport routes. There would also be a

requirement to negotiate with MVNOs on the purchase

of wholesale mobile services as well as an obligation to

negotiate national roaming and a co-operative shared

frequency usage below 1 GHz with 1&1 Mobilfunk GmbH

(“1&1”). Finally, an obligation would be imposed to

continue existing spectrum leasing arrangements

between network operators. As part of a second set of

actions, a larger procedural framework is expected to be

established for utilization from 2031 onwards, including

with respect to rights of use and new frequency ranges

that expire in 2033 or become newly available for mobile

communications in the coming years. A decision on this

set of actions is planned for 2028.

In the UK, mobile spectrum licenses are generally

indefinite in term, subject to an annual fee set after a

fixed period (usually 20 years) from the initial auction. In

2033, after this mentioned fixed period, Ofcom will set

spectrum fees for 800 MHz and 2.6 GHz bands. VMO2

currently holds spectrum in both of these bands.

With respect to Latin America:

In Brazil, ANATEL approved on February 8, 2021,

Resolution 741/2021 which sets the regulation for the

transition from the existing concession regime to a new

authorization model for the provision of fixed commuted

telephony services (“STFC”). On December 16, 2024,

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Telefônica Brasil, ANATEL, the Brazilian Federal Court of

Accounts and the Brazilian Ministry of Communications

signed an agreement on the terms and conditions for

the adaptation of the STFC concession contracts to an

authorization instrument (the “Self-Composition

Agreement”). The Self-Composition Agreement includes

several key conditions: (i) Telefônica Brasil is required to

make specific investments on terms established under

the agreement; (ii) Telefônica Brasil must maintain the

provision of fixed-line telephone services in certain 

locations without adequate competition, within the

concession area until December 31, 2028; (iii) all pending

administrative and judicial proceedings related to the

concession at ANATEL or in the courts must be

resolved, and Telefônica Brasil must withdraw any cases

filed against the regulator; and (iv) Telefônica Brasil

must commit to fulfilling public interest pledges for up to

ten years as part of the adaptation process. Completion

of the migration to the authorization regime is

conditioned upon the signing of a unified authorization

term with ANATEL, compiling all previous licenses into

one single title, which is expected to occur during the

first quarter of 2025.

ANATEL agreed to extend authorizations of the

currently existing bands of 850MHz until November

2028, of 900/1800 MHz between 2031 and 2035

(depending on the region), and of 2100 MHz, until 2038.

Additionally, pursuant to Resolution n° 757/2022,

ANATEL intends to carry out, respectively, a refarming

action consisting of the promotion of changes in the

channel arrangements of the 850 MHz (2028) and

900/1800 MHz (2032) sub-bands.  Certain specific

requirements imposed for these renewals, including

those related to the valuation criteria and obligations,

are still under review by the Federal Court of Accounts.

In Peru, an arbitration process was started by Telefónica

del Perú, to challenge the decision adopted by the

Ministry of Transportation and Communications

(“MTC”), denying the renewal of concessions for the

provision of fixed-line services, valid until 2027, which

ended with a favorable award for Telefónica del Perú.

The award recognizes that the methodology applied to

assess compliance with the concession obligations in

the concession renewal process was not in accordance

with the provisions of the concession contract. The

MTC, following this award, has initiated a new

evaluation of Telefónica's request of renewal of these

concessions for the period 2027-2032. In any case,

Telefónica del Perú S.A.A. holds other concessions for

the provision of fixed-line services that allow it to

provide these services beyond 2027. The renewal of the

1900 MHz band in all of Peru, except for Lima and

Callao, which expired in 2018, and of other licenses to

offer telecommunications services were requested by

the Group and a decision by the MTC is still pending.

Nevertheless, these concessions are valid while the

procedures are in progress.

In Ecuador, the concession contract that authorizes the

provision of telecommunication services by Telefónica

and includes the spectrum licenses (25 MHz in the 850

MHz band and 60 MHz in the 1900 MHz band) that

expired in November 2023, was extended on several

occasions, with the last extension being authorized until

May 15, 2025, under the same conditions as the original

contract through an addendum and through provisional

payments applicable to the new concession rights. At

the end of 2024, the negotiation process for the renewal

of the concession contract for a 15-year period was

suspended by the Telecommunications Regulation and

Control Agency (ARCOTEL) because it requires a

favorable opinion from the Ministry of Economy and

Finance (MEF) in relation to the terms and conditions

agreed for the renewal. Once the opinion of the MEF is

issued, we expect that the negotiations will resume.

During 2024, the Group’s consolidated investment in

spectrum acquisitions and renewals amounted to 157

million euros, mainly due to the acquisition of spectrum

in Colombia (183 million euros in 2023, mainly due to the

acquisition of spectrum in Argentina). In the event that

the licenses mentioned above are renewed or new

spectrum is acquired, it would involve additional

investments by Telefónica.

Further information on certain key regulatory matters

affecting the Telefónica Group and the concessions and

licenses of the Telefónica Group can be found in

Appendix VI "Key regulatory issues and concessions and

licenses held by the Telefónica Group" of the

Consolidated Financial Statements.

Telefónica operates in a sector characterized

by rapid technological changes and it may not

be able to anticipate or adapt to such changes

or select the right investments to make. 

The pace of innovation and Telefónica's ability to keep

up with its competitors is a critical issue in a sector so

affected by technology such as telecommunications. In

this sense, significant additional investments will be

needed in new high-capacity network infrastructures to

enable Telefónica to offer the features that new services

will demand, through the development of technologies

such as 5G or fiber.

New products and technologies are constantly

emerging that can render products and services offered

by the Telefónica Group, as well as its technology,

obsolete. In addition, the explosion of the digital market

and the entrance of new players in the communications

market, such as mobile network virtual operators

("MNVOs"), internet companies, technology companies

or device manufacturers, could result in a loss of value

for certain of the Group's assets, affect the generation of

revenues, or otherwise cause Telefónica to have to

update its business model. In this respect, revenues

from traditional voice businesses have been shrinking in

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recent years, while revenues from connectivity services

(e.g., fixed and mobile internet) are increasing. To

diversify revenue sources, Telefónica offers new digital

services such as Internet of Things (IoT), cybersecurity,

Big Data, Artificial Intelligence and cloud services

among others. Although these services still have a

substantially lower weight in Telefónica's total revenues,

the related revenues represented more than 40% of the

Company's B2B revenues in 2024 and grew by double

digits compared to 2023.

Additionally, the world of telecommunications is

evolving towards a model of programmable networks

and services. This type of network can be used by

programmers in a completely new and different way

than it had been in the past. As a first big step, the

GSMA (Global System for Mobile Communications) is

leading the Open Gateway initiative for the standardized

exposure of APIs (Application Programming Interface) to

developers. This is a totally new market in which

telecommunications companies must be able to

develop not only attractive services but new skills in

order to be successful.

One of the technologies currently being developed by

telecommunications operators, including Telefónica (in

Spain and Latin America), is the FTTx type networks

which allow the offering of broadband accesses over

fiber optics with high performance. However, the

deployment of such networks, in which the copper of

the access loop is totally or partially replaced by fiber,

requires high levels of investment. In Spain, more than

90% of the retail copper network has been switched off.

Due to regulatory requirements, the remaining portion of

the network is expected to be switched off by May

2025.

As of December 31, 2024, in Spain, fiber coverage

reached 30.8 million premises. There is a growing

demand for the services that these new networks can

offer to the end customer. However, the high levels of

investment required by these networks result in the

need to continuously consider the expected return on

investment. Telefónica is constantly looking for co-

investments through Telefónica Infra, but it may not be

able to identify suitable partners.

In addition, the ability of the Telefónica Group's IT

systems (operational and backup) to adequately support

and evolve to respond to Telefónica's operating

requirements is a key factor to consider in the

commercial development, customer satisfaction and

business efficiency of the Telefónica Group. While

automation and other digital processes may lead to

significant cost savings and efficiency gains, there are

also significant risks associated with such

transformation processes. Any failure by the Telefónica

Group to develop or implement IT systems that

adequately support and respond to the Group's evolving

operating requirements could have an adverse effect on

the Group's information, business, financial condition,

results of operations and/or cash flows.

The changes outlined above force Telefónica to

continuously invest in the development of new

products, technology and services to continue to

compete effectively with current or future competitors.

Any such investment may reduce the Group’s profit and

margins and may not lead to the development or

commercialization of successful new products or

services. To contextualize the Group’s total research

and development effort, the total expenditure in  2024

was 647 million euros (741 million euros in 2023),

representing 1.6% of the Group’s revenues (1.8% in

2023). These figures have been calculated using the

guidelines established in the Organization for Economic

Co-operation and Development (“OECD”) manual.

Telefónica's investment in CapEx in 2024 was 5,475

million euros (5,579 million euros in 2023).

If Telefónica is not able to anticipate and adapt to the

technological changes and trends in the sector, or to

properly select the investments to be made, this could

negatively affect the Group's business, financial

condition, results of operations and/or cash flows.

The Telefónica Group's strategy, which is

focused on driving new digital businesses and

providing data-based services, involves

exposure to risks and uncertainties arising from

data privacy regulation.

The Telefónica Group’s commercial portfolio includes

products and/or services whose provision involves the

processing of large amounts of information and data.

This entails an enormous responsibility, while at the

same time increasing the challenges related to

compliance with strong and growing privacy and data

protection regulations throughout the Telefónica

Group's footprint, which may stifle the technological

innovation that characterizes it and to which the Group

is committed. Similarly, the Group's efforts to promote

innovation may result in increased compliance risks and,

where applicable, costs.

Telefónica is subject to Regulation (EU) 2016/679 of the

European Parliament and Council of April 2016, on the

protection of natural persons with regard to the

processing of personal data and on the free movement

of such data ("GDPR"), which is considered by the

Group as a common standard of compliance in all its

operations, even beyond the European Union.

Additionally, the European Union has initiated a data

legislative strategy that seeks to make the EU a leading

space for the data-driven society, allowing data to flow

freely throughout the territory and between different

sectors. As a result, it is expected that new regulatory

obligations will be imposed on operators.

In addition, since 2017 the European Union has been

considering a proposal for a future European regulation

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concerning the respect for privacy and protection of

personal data in electronic communications (“e-Privacy

Regulation”), which would repeal Directive 2002/58/EC.

If approved, the e-Privacy Regulation could establish

additional and more restrictive rules than those

established in the GDPR, with the consequent increase

in the risks and costs that this could entail for Telefónica.

Discussions on the proposal for the e-Privacy Regulation

have stalled, and the European Commission is studying

different regulatory alternatives on the matter, which

creates additional uncertainty with respect to the

applicable regulatory framework going forward, which

may negatively affect the development of new

innovative products.

Moreover, considering that the Telefónica Group

operates its business on a global scale, it frequently

carries out international data transfers concerning its

customers, users, suppliers, employees and other data

subjects to countries outside the European Economic

Area ("EEA") that have not been declared to have an

adequate level of data protection by the European

Commission, either directly or through third parties. In

this context, it is particularly relevant to have the

necessary legal and technical controls and mechanisms

in place to ensure that such international data transfers

are carried out in accordance with the GDPR, in an

environment marked by uncertainty on this issue as to

the most adequate and effective measures to mitigate

such risks.

With regard to the international transfer of data to the

United States, on July 10, 2023, the European

Commission adopted its adequacy decision for the EU-

U.S. Data Privacy Framework. The adequacy decision

concludes that the United States ensures an adequate

level of protection for personal data transferred from the

EU to U.S. companies participating in the EU-U.S. Data

Privacy Framework. This adequacy decision remains

subject to challenge by privacy activists as was the case

with previous decisions.

Telefónica is subject to data privacy regulations similar

to the GDPR in the non-EU countries in which it

operates, including the United Kingdom, Brazil, Ecuador,

Chile and Peru, increasing compliance risks and costs in

these countries. For example, since its formal exit from

the European Union ("Brexit”), the United Kingdom has

implemented its own data protection framework, which

largely mirrors the GDPR with certain tailored

adjustments. Subsequent legislative efforts to simplify

compliance for businesses in the United Kingdom (and,

therefore, reduce data protections), while unsuccessful

to date, have raised data privacy risks for EU companies

who, like Telefónica, regularly engage with UK partners.

Any such potential shifts in the applicable data privacy

framework necessitate careful monitoring by Telefónica

to mitigate compliance and cross-border data transfer

risks.

To limit the risks derived from international transfers of

personal data among Telefónica Group companies, the

Telefónica Group adopted Binding Corporate Rules

(BCRs), approved by the Spanish Data Protection

Authority on March 8, 2024, following a procedure of

co-operation between the European data protection

authorities. However, there can be no assurance that

such rules will be sufficient to ensure compliance with

requirements in every jurisdiction in which the

Telefónica Group operates.

Data privacy protection requires careful design of

products and services, as well as robust internal

procedures and rules that can be adapted to regulatory

changes where necessary, all of which entails

compliance risk. Failure to maintain adequate data

security and to comply with any relevant legal

requirements could result in the imposition of significant

penalties, damage to the Group’s reputation and the

loss of trust of customers and users.

Telefónica’s reputation depends to a large extent on the

digital trust it is able to generate among its customers

and other stakeholders. In this regard, in addition to any

reputational consequences, in the European Union, very

serious breaches of the GDPR may entail the imposition

of administrative fines of up to the larger of 20 million

euros or 4% of the infringing company’s overall total

annual revenue for the previous financial year.

Furthermore, if eventually approved, the e-Privacy

Regulation or any similar alternative regulation may set

forth sanctions for breaches of it similar to those

provided for in the GDPR.

Any of the foregoing could have an adverse effect on

the business, financial condition, results of operations

and/or cash flows of the Group.

Telefónica may not anticipate or adapt in a

timely manner to changing customer demands

and/or new ethical or social standards, which

could adversely affect Telefónica's business

and reputation.

To maintain and improve its position in the market vis-à-

vis its competitors, it is vital that Telefónica: (i)

anticipates and adapts to the evolving needs and

demands of its customers, and (ii) avoids commercial or

other actions or policies that may generate a negative

perception of the Group or the products and services it

offers, or that may have or be perceived to have a

negative social impact. In addition to harming

Telefónica's reputation, such actions could also result in

fines and sanctions.

In order to respond to changing customer demands,

Telefónica needs to adapt both (i) its communication

networks and (ii) its offering of digital services.

The networks, which had historically focused on voice

transmission, have evolved into increasingly flexible,

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dynamic and secure data networks, replacing, for

example, old copper telecommunications networks with

newer technologies such as fiber, which facilitate the

absorption of the exponential growth in the volume of

data demanded by the Group's customers.

In relation to digital services, customers require an

increasingly digital and personalized experience, as well

as a continuous evolution of the Group’s product and

service offering. In this sense, relatively new services

such as "Living Apps", “Connected Car”, “Smart Cities”,

“Smart Agriculture”, “Smart Metering”, "Solar 360" and

"Perplexity" (an Artificial Intelligence-driven answer

engine service) which facilitate certain aspects of the

Group’s customers’ digital lives, are being developed.

Furthermore, new solutions for greater automation in

commercial services and in the provision of the Group’s

services are being developed, through new apps and

online platforms that facilitate access to services and

content, such as new video platforms that offer both

traditional Pay TV, video on demand or multi-device

access. In addition, Telefónica has launched new

customer care applications (My Movistar in Spain, Me

Vivo in Brazil, My O2 in the United Kingdom) and

developed a virtual assistant, Aura, with the aim of

increasing the accessibility of the products and services

the Group offers. However, there can be no assurance

that these and other efforts will be successful.

In the development of all these initiatives it is also

necessary to take into account several factors: firstly,

there is a growing social and regulatory demand for

companies to behave in a socially responsible manner,

and, in addition, the Group’s customers are increasingly

interacting through online communication channels,

such as social networks, in which they express this

demand. Telefónica's ability to attract and retain clients

depends on their perceptions regarding the Group’s

reputation and behavior. The risks associated with

potential damage to Telefónica's reputation have

become more relevant, especially due to the impact that

the publication of news through social networks can

have.

If Telefónica is not able to anticipate or adapt to the

evolving needs and demands of its customers or avoid

inappropriate actions, its reputation could be adversely

affected, or it could otherwise have an adverse effect on

the business, financial condition, results of operations

and/or cash flows of the Group.

Operational Risks

Information technology is key to the Group's

business and is subject to cybersecurity risks.

Telefónica's operations, as well as the products and

services it provides, rely on information technology

systems and platforms that are susceptible to

cyberattacks. If successful, these attacks can hinder the

effective provision, operation, and commercialization of

our products and services and our customers’ use of the

same. Therefore, cybersecurity risks are among the

most significant risks for the Group.

Telecommunications companies worldwide, including

Telefónica, face a continuous increase in cybersecurity

threats. These companies and their customers are

becoming increasingly digital, processing and storing

valuable information electronically relying on cloud

services provided by third parties, permitting remote

access and teleworking by employees and collaborators

and expanding IoT environments. All of this complicates

security management, forcing companies to review

security controls beyond the traditional corporate

network perimeter. At the same time, cyberattackers,

including both state and independent actors, are

becoming more sophisticated, armed with high levels of

funding and advanced digital tools that use

technologies such as artificial intelligence and machine

learning. Threats include unauthorized access to

systems, the installation of computer viruses or

malicious software, and security breaches in the supply

chain, with the aim of improperly obtaining sensitive

information or disrupting the Group's operations, which

may result in regulatory penalties. Furthermore,

traditional security threats persist, such as the theft of

laptops, data storage devices, and mobile phones, along

with the possibility that Group employees or

collaborators may leak information and/or perform acts

that affect their networks or internal information.

Additionally, the Telefónica Group is aware of potential

cybersecurity risks arising from various international

conflicts and monitors cyberattacks that may affect its

infrastructure.

In the past three years, the Group has suffered various

types of cybersecurity incidents that have included:

intrusion attempts (direct or phishing), exploitation of

vulnerabilities and corporate credentials being

compromised; Distributed Denial of Service (DDoS)

attacks, using massive volumes of Internet traffic that

saturate the service; and malicious actions to carry out

fraud in respect of services provided by Telefónica. In

some of these incidents, personal data from our

customers and employees has been stolen. To date,

none of these cybersecurity incidents have had material

consequences for the Telefónica Group, but this may

change in the future.

The development and maintenance of systems to

prevent and detect cyberattacks is costly and requires

ongoing monitoring and updating to address the

increasing sophistication of cyberattacks. In response to

these risks, Telefónica has adopted technical and

organizational measures as defined in its digital security

strategy, such as the use of early vulnerabilities

detection, access control, log review of critical systems

and network segregation, as well as the deployment of

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firewalls, security controls in the supply chain, intrusion-

prevention systems, virus scanners incident response

and recovery procedures, and backup systems.

However, Telefónica can provide no assurance that

such measures are sufficient to avoid or fully mitigate

such incidents. The Telefónica Group has insurance

policies in place intended to cover certain losses arising

out of these types of incidents. However, due to the

potential severity and uncertainty about the evolution of

the aforementioned events, these policies may not be

sufficient to cover in its entirety all losses that may arise

out of a cybersecurity attack.

Climate change, natural disasters and other

factors beyond the Group's control may result

in physical damage to Telefónica's technical

infrastructure that may cause unanticipated

network or service interruptions or quality loss

or otherwise affect the Group's business.

Climate change, natural disasters and other factors

beyond the Group's control, such as system failures, lack

of electric supply, network failures, hardware or

software failures or the theft of network elements, can

damage Telefónica's infrastructure and affect the

quality of, or cause interruption to, the provision of the

services of the Telefónica Group. For example, in late

October 2024, record-breaking flooding and related

power outages in Valencia, Spain, resulting from a high-

altitude, cut-off low-pressure storm system, caused

severe damage to Telefónica's infrastructure. Fixed and

mobile services were affected, and certain

municipalities (104 at the worst moment) lost all

communications. Repairs to the damaged infrastructure

took up to 10 days. Telefónica's operations have also

been affected by power outages in certain Latin

American countries due to droughts and flooding.

Further, changes in temperature and precipitation

patterns associated with climate change may increase

the energy consumption of telecommunications

networks or cause service disruption due to extreme

temperature waves, floods or extreme weather events.

These changes may cause increases in the price of

electricity due to, for example, reduction in hydraulic

generation as a result of recurrent droughts. Further, as

a result of global commitments to tackle climate change,

new carbon dioxide taxes may be imposed and could

affect, directly or indirectly, Telefónica Group, and may

have a negative impact on the Group’s operations and

results. Telefónica analyses these risks in accordance

with the guidelines set forth in the Corporate

Sustainability Reporting Directive (CSRD), and with the

recommendations of the Task Force on Climate-Related

Financial Disclosures (TCFD).

Network or service interruptions or quality loss or

climate-related risks could cause customer

dissatisfaction, a reduction in revenues and traffic, the

realization of expensive repairs, the imposition of

sanctions or other measures by regulatory bodies, and

damage to the image and reputation of the Telefónica

Group, or could otherwise have an adverse effect on the

business, financial condition, results of operations and/

or cash flows of the Group.

Financial Risks

Worsening of the economic and political

environment could negatively affect

Telefónica's business. 

Telefónica’s international presence enables the

diversification of its activities across countries and

regions, but it exposes Telefónica to diverse legislation,

as well as to the political and economic environments of

the countries in which it operates. Any adverse

developments in these countries, such as economic

uncertainty, inflationary pressures, rapid normalization of

monetary policy, exchange rate or sovereign-risk

fluctuations, as well as growing geopolitical tensions,

may adversely affect Telefónica’s business, financial

position, debt management, cash flows and results of

operations and/or the performance of some or all of the

Group’s financial indicators.

In recent years, successive shocks have ushered in a

period characterized by extraordinary uncertainty and

the simultaneous occurrence of multiple negative

disruptions. Inflationary pressures arising from

bottlenecks associated with the rapid post-pandemic

recovery, coupled with increases in commodity prices,

led to a robust response from central banks (raising

interest rates and withdrawing liquidity from the system)

and a significant loss of purchasing power for

consumers. Additionally, the recent higher wage

demands observed internationally, reflecting both the

strength of labour markets, especially those in major

developed economies, and the prevalence (though to a

lesser extent than in the past) of wage indexation

mechanisms, have also contributed to these inflationary

pressures.

Although inflationary pressures eased in 2024, there are

recent signs that progress is stalling in some countries

where the Group operates, or even reversing course as

in Brazil. Price pressures and relatively high interest

rates persist in many countries. Geopolitical events such

as the Russia-Ukraine war, armed conflict and political

instability in the Middle East and the possible imposition

of tariffs by major economies pose risks to inflation

dynamics, interest rates and exchange rates. Moreover,

there is a risk that the decrease in global liquidity and

higher-for-longer interest rates could generate

increased financial volatility, giving rise to new stress

episodes, especially if inflation proves to be more

persistent than expected. Additionally, premature

monetary easing by central banks could lead to

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resurgent inflation, potentially triggering a new

stagflation period akin to the 1970s.

Looking forward, elements that could worsen the effects

of the current situation include the escalation of armed

conflicts and potential disruptions to energy and goods

supply, as well as possible additional increases in

commodity prices. This could result in a potential de-

anchoring of inflation expectations and higher-than-

expected wage hikes, prolonging and amplifying the

inflation-recession scenario. As a consequence of the

above, economic growth is expected to remain weak in

the short term, with the risk of recession still present in

some parts of the world.

So far, the main European countries where the Group

operates have been affected by the ongoing

geopolitical conflicts mainly through the price channel

(higher commodity prices, intermediate inputs and

salary costs, among others), as their direct trade and

financial exposure is limited. However, there continues

to be a concern in Europe  about energy dependence in

the face of potential episodes of gas shortages and

lengthening energy transition. Latin America could be

affected by lower external demand associated with

slower global growth, deteriorating terms of trade,

tighter financial conditions and doubts about debt

sustainability. 

As of December 31, 2024, the contribution of each

segment to the Telefónica Group's total assets was as

follows: Telefónica Spain 25.7% (26.0% as of December

31, 2023), VMO2 7.6% (7.5% as of December 31, 2023),

Telefónica Germany 17.7% (17.8% as of December 31,

2023), Telefónica Brazil 22.2% (25.0% as of December 31,

2023) and Telefónica Hispam 14.1% (14.4% as of

December 31, 2023). Part of the Group's assets are

located in countries that do not have an investment

grade credit rating (in order of importance, Brazil,

Argentina (sold in February 2025), Ecuador and

Venezuela). Likewise, Venezuela and Argentina are

considered countries with hyperinflationary economies

in 2024 and 2023.

During 2024, the contribution of each segment to the

Telefónica Group's revenues was as follows (does not

include VMO2 that is recorded by the equity method

and therefore does not contribute to the consolidated

revenues): Telefónica Spain 31.0% (31.1% in 2023),

Telefónica Germany 20.6% (21.2% in 2023), Telefónica

Brazil 23.3% (23.7% in 2023) and Telefónica Hispam

21.9% (20.6% in 2023).

The main risks by geography are detailed below:

In Europe, there are several economic and political risks.

Firstly, the evolution of armed conflicts poses a threat to

growth and inflation prospects. Any worsening in the

supply of gas, oil, food, or other goods due to disruptions

in the supply chain would negatively impact their prices,

with a consequent effect on the disposable income of

both households and businesses. In the medium term,

this could result in wage increases, a persistent rise in

inflation, and tighter monetary policy. Any of the above

could have a negative impact on the cost of financing

for the private sector, including Telefónica, and could

trigger episodes of financial stress.

In addition, there is also a risk of financial fragmentation

in the eurozone, meaning that interest rates may react

differently in different countries within the eurozone,

leading to differences in yields on bonds issued by more

indebted countries (including Spain) and those issued

by less indebted countries, making it challenging for the

former to access credit at low rates.

Lastly, Europe faces three significant long-term risks.

First, Europe may fall behind in the global technological

race in particular because of both its dependence on

several critical raw materials, indispensable for key

sectors, that must be imported from other regions, and

its lag in technological innovation. Second, a

burdensome regulatory environment in the European

Union poses a significant threat to business, impeding

growth and eroding competitiveness, with companies

based in countries and regions where regulations are

relatively less complex, extensive or restrictive. Third,

demographic factors such as declining birth rates and

population aging may have a negative impact on the

region's labor force and long-term growth prospects.

Regarding political risk, centrist political groups

maintained a majority following the 2024 European

Parliament elections but nationalist and populist parties

made significant gains. It remains to be seen whether

greater fragmentation in the parliament will hinder

governance and the continuity of the ongoing agenda in

fiscal and economic matters, climate and energy policy

as well as other aspects of regional governance.

• Spain: there are several local sources of risks. One of

them stems from the risk that high commodity prices

and/or the emergence of wage pressures could

prolong the inflationary episode with a deeper impact

on household income. Secondly, further delays in the

disbursement of Next Generation European Funds

(NGEU) could limit their final impact on GDP growth

and employment. In addition, as one of the most open

countries in the world from a commercial point of

view, being among the top ten countries in respect of

capital outflows and inflows globally, Spain could be

negatively impacted by the rise of protectionism and

trade restrictions. Lastly, the impact of higher-for-

longer interest rates could be a source of financial

stress due to high public indebtedness and lead to a

possible correction in the real estate market. In the

long term, the challenge is to increase the growth of

potential GDP through improvements in productivity

and investment and ensure the sustainability of public

debt.

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• Germany : the risk of energy shortages has diminished

recently due to Europe's response in terms of

diversification of energy sources and the rapid

construction of regasification plants in the country.

However, it is possible that problems with energy

supply may arise again. Alternative sources for gas

imports could be limited, consumption could be higher

due, for example, to an unusually cold winter, or

competition for gas from other countries could

increase. On the other hand, there is concern that

higher-than-expected wage growth and/or higher

input costs could lead to more persistent inflation

diminishing competitiveness among the

manufacturing sector. As for the medium to long term,

there is a risk that prolonged or escalating geopolitical

tensions could reduce international trade or increase

competition to German-made products with a

consequent impact on the country’s potential growth,

which is dependent on exports. Additionally, following

the German federal election, it is relevant that a stable

majority is formed capable of addressing the major

challenges facing the country, especially in terms of

investment needs. Finally, long-term challenges

remain, such as the ageing of the population.

• United Kingdom : more persistent inflation could weigh

on consumption and further depress economic

growth. In particular, there is a concern that currently

dynamic wage growth could lead to a further increase

in the prices of goods and services, preventing

inflation rates from totally normalizing. On the other

hand, although the UK economy has few direct trade

links with Russia and Ukraine, it is vulnerable to

developments in the global energy market as it is the

second European economy with the largest share of

gas in the energy mix. Finally, the formal exit of the

United Kingdom from the European Union on

December 31, 2020 (Brexit) has created new barriers

to trade in goods and services, mobility and cross-

border exchanges, which will continue to entail an

economic adjustment in the medium term.

In Latin America, the exchange rate risk is currently

considered moderate by the Telefónica Group, except in

Venezuela, but may increase in the future. The end of

electoral events and rapid central bank actions to

contain inflation may, at least partially, limit the impact of

external risks (global trade tensions, abrupt movements

in commodity prices, concerns about global growth,

tightening U.S. monetary policy and financial imbalances

in China) and internal risks (managing the monetary

normalization and the possible fiscal deterioration) but

there is no assurance that this will be the case.

• Brazil: fiscal sustainability and increased economic

intervention remain the main domestic risk. Despite

recently announced measures to curb public

spending, tax reforms aimed at simplifying the indirect

tax system and promoting stronger and sustainable

economic growth and an upward revision of Brazil's

credit rating outlook by Moody's, volatility surrounding

fiscal sustainability has increased. Moreover, inflation

expectations have continued to deteriorate following

the poor performance of the Brazilian real in a context

of fiscal volatility, paving the way for further interest

rate hikes and increasing the risks of a more

pronounced economic slowdown. 

• Chile, Colombia, Peru and Ecuador: these countries

are exposed not only to changes in the global

economy, given their vulnerability and exposure to

changes in commodity prices, but also to tightening of

global financial conditions. On the domestic side,

existing political instability and the possibility of

further social unrest and the resurgence of populism

could have a negative impact in both the short and

medium term. In this regard, measures that result in

excessive growth in public spending that jeopardize

fiscal balance could have a negative impact on

sovereign credit ratings, further deteriorating local

financing conditions. If inflation is more persistent than

expected, this could limit central banks' ability to

respond to an abrupt drop in activity levels and could

also increase the risk of financial instability. Political

uncertainty has decreased in Chile, following the

rejection of a proposed new Constitution in December

2023, but the maintenance of the former status quo

could give rise to new social demands. A presidential

election is due to take place in November 2025 (and a

runoff election may follow in December 2025). In

Colombia, the structural reforms promoted by

Colombia's government are expected to be more

market friendly due to the weakening of the

government coalition. In Peru, the government

succeeded in reducing the social protests against the

installation of the current administration, although it

remains politically weak. In Ecuador, presidential and

legislative elections were held in February 2025. The

election took place against a backdrop of

unprecedented social and economic challenges, as

well as armed conflicts between the government and

several organized crime groups. A run-off presidential

election will be held in April 2025.

As discussed above, the countries where the Group

operates are generally facing significant economic

uncertainties and, in some cases, political uncertainties.

The worsening of the economic and political

environment in any of the countries where Telefónica

operates may materially adversely affect the Group’s

business, financial condition, results of operations and/

or cash flows.

The Group has experienced and, in the future,

could experience impairment of goodwill,

investments accounted for by the equity

method, deferred tax assets or other assets.

In accordance with current accounting standards, the

Telefónica Group reviews on an annual basis, or more

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frequently when the circumstances require it, the need

to introduce changes to the book value of its goodwill

(which as of December 31, 2024, represented 16.4% of

the Group’s total assets), deferred tax assets (which as

of December 31, 2024, represented 6.6% of the Group’s

total assets) or other assets, such as intangible assets

(which represented 9.8% of the Group's total assets as

of December 31, 2024), and property, plant and

equipment (which represented 21.3% of the Group's

total assets as of December 31, 2024).  In the case of

goodwill, the potential loss of value is determined by the

analysis of the recoverable value of the cash-generating

unit (or group of cash-generating units) to which the

goodwill is allocated at the time it is originated, and such

calculation requires significant assumptions and

judgment. In 2024, Telefónica recorded impairment

losses on intangible assets and property, plant and

equipment in Argentina in an aggregate amount of 1,274

million euros and impairment losses on goodwill in an

aggregate amount of 866 million euros with respect to

the cash-generating units in Chile (397 million euros),

Peru (226 million euros), Telefónica Tech UK & Ireland

(192 million euros) and BE-terna Group (51 million euros).

Likewise, impairment losses were recorded in Peru in

2024, including impairment losses on intangible assets

(54 million euros) and on goodwill allocated to the fiber

optics business (34 million euros), as well as a reversal of

deferred tax assets for loss carryforwards (91 million

euros).  Additionally, following the analysis of the

recoverability of the assets of Pangea (the wholesale

fiber optic company in Peru) at the end of 2024, an

impairment of property, plant and equipment amounting

to 108 million euros has been recorded, as well as a

reversal of deferred tax assets amounting to 13 million

euros (see Notes 2, 6, 7, 8, 25 and 30 to the

Consolidated Financial Statements). In 2023,

impairment losses in the goodwill of Telefónica Ecuador

were recognized for a total of 58 million euros. In

addition, VMO2, Telefónica's 50:50 joint venture with

Liberty Global in the United Kingdom, recorded in 2023

an impairment of goodwill amounting to 3,572 million

euros, with a negative impact of 1,786 million euros on

the share of (loss) income of investments accounted for

by the equity method in the consolidated income

statement of the Group in 2023. 

In addition, Telefónica may not be able to realize

deferred tax assets on its statement of financial position

to offset future taxable income. The recoverability of

deferred tax assets depends on the Group’s ability to

generate taxable income over the period for which the

deferred tax assets remain deductible. If Telefónica

believes it is unable to utilize its deferred tax assets

during the applicable period, it may be required to

record an impairment against them resulting in a non-

cash charge on the income statement.

Further impairments of goodwill, deferred tax assets or

other assets may occur in the future which may

materially adversely affect the Group’s business,

financial condition, results of operations and/or cash

flows.

The Group faces risks relating to its levels of

financial indebtedness, the Group's ability to

finance itself, and its ability to carry out its

business plan.

The operation, expansion and improvement of the

Telefónica Group's networks, the development and

distribution of the Telefónica Group's services and

products, the implementation of Telefónica's strategic

plan and the development of new technologies, the

renewal of licenses and the expansion of the Telefónica

Group's business in countries where it operates, may

require a substantial amount of financing.

The Telefónica Group is a relevant and frequent issuer

of debt in the capital markets. As of December 31, 2024,

the Group's gross financial debt amounted to 38,782

million euros (37,061 million euros as of December 31,

2023), and the Group's net financial debt amounted to

27,161 million euros (27,349 million euros as of December

31, 2023). As of December 31, 2024, the average maturity

of the debt was 11.3 years (11.6 years as of December 31,

2023), including undrawn committed credit facilities.

A decrease in the liquidity of Telefónica, or a difficulty in

refinancing maturing debt or raising new funds as debt

or equity could force Telefónica to use resources

allocated to investments or other commitments to pay

its financial debt, which could have a negative effect on

the Group's business, financial condition, results of

operations and/or cash flows.

Funding could be more difficult and costly to obtain in

the event of a deterioration of conditions in the

international or local financial markets due, for example,

to monetary policies set by central banks, including

increases in interest rates and/or decreases in the

supply of credit, increasing global political and

commercial uncertainty and oil price instability, or if

there is an eventual deterioration in the reputation,

solvency or operating performance of Telefónica.

As of December 31, 2024, the Group's gross financial

debt scheduled to mature in the following 12 months

amounted to 5,590 million euros and the gross financial

debt scheduled to mature in 2026 amounted 2,607

million euros.

In accordance with its liquidity policy, Telefónica has

covered its gross debt maturities for the next 12 months

with cash and credit lines available as of December 31,

2024. As of December 31, 2024, the Telefónica Group

had undrawn committed credit facilities arranged with

banks for an amount of 11,017 million euros (10,634

million euros of which were due to expire in more than

12 months). Liquidity could be affected if market

conditions make it difficult to renew undrawn credit

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lines. As of December 31, 2024, 3.5% of the aggregate

undrawn amount under credit lines was scheduled to

expire prior to December 31, 2025.

In addition, given the interrelation between economic

growth and financial stability, the materialization of any

of the economic, political and exchange rate risks

referred to above could adversely impact the availability

and cost of Telefónica's financing and its liquidity

strategy. This in turn could have a negative effect on the

Group's business, financial condition, results of

operations and/or cash flows.

Finally, any downgrade in the Group’s credit ratings may

lead to an increase in the Group's borrowing costs and

could also limit its ability to access credit markets.

The Group's financial condition and results of

operations may be adversely affected if it does

not effectively manage its exposure to interest

rates or foreign currency exchange rates.

Interest rate risk arises primarily in connection with

changes in interest rates affecting: (i) financial expenses

on floating-rate debt (or short-term debt likely to be

renewed); (ii) the value of long-term liabilities at fixed

interest rates; and (iii) financial expenses and principal

payments of inflation-linked financial instruments,

considering interest rate risk as the impact of changes in

inflation rates.

In nominal terms, as of December 31, 2024, 83% of the

Group's net financial debt had its interest rate set at

fixed interest rates for periods of more than one year.

The effective cost of debt related interest payments for

the last 12 months excluding leases was 3.32% as of

December 31, 2024 compared to 3.80% as of December

31, 2023. To illustrate the sensitivity of financial

expenses to variations in short-term interest rates as of

December 31, 2024: (i) a 100 basis points increase in

interest rates in all currencies in which Telefónica had a

financial position at that date would have led to an

increase in financial expenses of 41 million euros,

whereas (ii) a 100 basis points decrease in interest rates

in all currencies (even if negative rates are reached)

would have led to a reduction in financial expenses of 41

million euros. For the preparation of these calculations, a

constant position equivalent to the position at that date

is assumed of net financial debt.

Exchange rate risk arises primarily from: (i) Telefónica’s

international presence, through its investments and

businesses in countries that use currencies other than

the euro (primarily in Latin America and the United

Kingdom); (ii) debt denominated in currencies other than

that of the country where the business is conducted or

the home country of the company incurring such debt;

and (iii) trade receivables or payables in a foreign

currency to the currency of the company with which the

transaction was registered. According to the Group's

calculations, the impact on results, and specifically on

net exchange differences, due to a 10% depreciation of

Latin American currencies against the U.S. dollar and a

10% depreciation of the rest of the currencies to which

the Group is most exposed against the euro would

result in exchange gains of 42 million euros as of

December 31, 2024 and a 10% appreciation of Latin

American currencies against the U.S. dollar and a 10%

appreciation of the rest of the currencies to which the

Group is most exposed, would result in exchange losses

of 42 million euros as of December 31, 2024. These

calculations have been made assuming a constant

currency position with an impact on profit or loss as of

December 31, 2024 taking into account derivative

instruments in place.

In 2024, the evolution of exchange rates (without

considering the effects of hyperinflationary countries)

had a negative impact in the year-on-year growth of the

Group's consolidated revenues and EBITDA, subtracting

2.2 percentage points and 2.9 percentage points

respectively (in 2023 it had a positive impact of 0.2

percentage points on year-on-year revenue growth and

no impact at the EBITDA level). Furthermore, translation

differences in 2024 had a negative impact on the

Group's equity of 959 million euros (positive impact of 37

million euros in 2023).

The Telefónica Group uses a variety of strategies to

manage this risk including, among others, the use of

financial derivatives, which are also exposed to risk,

including counterparty risk. The Group's risk

management strategies may be ineffective, which could

adversely affect the Group's business, financial

condition, results of operations and/or cash flows. If the

Group does not effectively manage its exposure to

foreign currency exchange rates or interest rates, it may

adversely affect its business, financial condition, results

of operations and/or cash flows.

Legal and Compliance Risks

Telefónica and Telefónica Group companies are

party to lawsuits, antitrust, tax claims and other

legal proceedings.

Telefónica and Telefónica Group companies operate in

highly regulated sectors and are and may in the future

be party to lawsuits, tax claims, antitrust and other legal

proceedings in the ordinary course of their businesses,

the outcome of which is unpredictable.

The Telefónica Group is subject to regular reviews, tests

and audits by tax authorities regarding taxes in the

jurisdictions in which it operates and is a party and may

be a party to certain judicial tax proceedings. In

particular, the Telefónica Group is currently party to

certain tax and regulatory proceedings in Brazil,

primarily relating to the ICMS (a Brazilian tax on

telecommunication services) and the corporate tax.

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Telefónica Brazil maintained provisions for tax

contingencies amounting to 314 million euros and

provisions for regulatory contingencies amounting to 179

million euros as of December 31, 2024. In addition,

Telefónica Brazil faces possible tax and regulatory

contingencies for which no provisions are made (see

Note 24.c. "Provisions—Other Provisions—Telefónica

Brazil" and Note 25 "Tax matters—Tax Litigation in

Telefónica Brazil" to the Consolidated Financial

Statements).

The Group makes estimates for its tax liabilities that the

Group considers reasonable, but if a tax authority

disagrees, the Group could face additional tax liability,

including interest and penalties. There can be no

guarantee that any payments related to such

contingencies or in excess of Telefónica's estimates will

not have a significant adverse effect on the Group’s

business, results of operations, financial condition and/

or cash flows. In addition to the most significant

litigation indicated above, further details on these

matters are provided in Notes 25 (Tax matters) and 29

(Other information) to the Consolidated Financial

Statements. The details of the provisions for litigation,

tax sanctions and claims can be found in Note 24

Provisions of the Consolidated Financial Statements.

Telefónica Group is also party to certain litigation in Peru

concerning certain previous years' income taxes in

respect of which Telefónica has been notified that the

judicial resolutions which resolve the contentious

administrative processes are unfavorable to the Group

and will require it to pay taxes related to prior years. At

the end of the relevant proceedings, the Tax

Administration, through an administrative act, has not

yet finally determined the amount of the payment

obligation. The total provision as of December 31, 2024

amounted to 2,739 million Peruvian soles (approximately

700 million euros at the exchange rate at such date). 

An adverse outcome or settlement in these or other

proceedings, present or future, could result in significant

costs and may have a material adverse effect on the

Group's business, financial condition, results of

operations and/or cash flows.

Increased scrutiny and changing expectations

from stakeholders, evolving reporting and other

legal obligations and compliance with the

Telefónica Group's own goals regarding ESG

matters, may expose the Telefónica Group to

various risks.

The Telefónica Group may be unable to adapt to or

comply with increasingly demanding expectations from

analysts, investors, customers and other stakeholders

and new regulatory reporting or other legal

requirements related to ESG issues. Further,

expectations and requirements may differ from region to

region, may be based on diverging calculation or other

criteria and may experience material changes as they

still are at their emerging phase.

Further, the Telefónica Group's disclosure of information

on its ESG objectives and initiatives in its public reports

and other communications (including its CO2 emission

reduction targets) exposes it to the risk that it will fail to

achieve these objectives and initiatives.

Although the Telefónica Group is working to comply

with new ESG reporting requirements, to achieve its

objectives, and to meet the expectations of its

stakeholders in these matters, if the Company is unable

to meet these expectations, fails to adequately address

ESG matters or fails to achieve the reported objectives

(including its CO2 emission reduction targets), the

Telefónica Group’s reputation, its business, financial

position, results of operations and/or cash flows could

be materially and adversely affected.

The Telefónica Group is exposed to risks in

relation to compliance with anti-corruption

laws and regulations and economic sanctions

programs.

The Telefónica Group is required to comply with the

anti-corruption laws and regulations of the jurisdictions

where it conducts operations around the world,

including in certain circumstances with laws and

regulations having extraterritorial effect such as the U.S.

Foreign Corrupt Practices Act of 1977 (the "FCPA") and

the United Kingdom Bribery Act of 2010. The anti-

corruption laws generally prohibit, among other

conduct, providing anything of value to government

officials for the purposes of obtaining or retaining

business or securing any improper business advantage

or failing to keep accurate books and records and

properly account for transactions.

In this sense, due to the nature of its activities, the

Telefónica Group is increasingly exposed to this risk,

which increases the likelihood of occurrence. In

particular, it is worth noting the continuous interaction

with officials and public administrations in several areas,

including the institutional and regulatory fronts (as the

Telefónica Group carries out a regulated activity in

different jurisdictions), the operational front (in the

deployment of its network, the Telefónica Group is

subject to obtaining multiple activity permits) and the

commercial front (the Telefónica Group provides

services directly and indirectly to public

administrations). Moreover, Telefónica is a multinational

group subject to the authority of different regulators and

compliance with various regulations, which may be

domestic or extraterritorial in scope, civil or criminal, and

which may lead to overlapping authority in certain

cases. Therefore, it is very difficult to quantify the

possible impact of any breach, bearing in mind that such

quantification must consider not only the economic

amount of sanctions, but also the potential negative

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impact on the business, reputation and/or brand, or the

ability to contract with public administrations.

Additionally, the Telefónica Group’s operations may be

subject to, or otherwise affected by, economic sanctions

programs and other forms of trade restrictions

(“sanctions”) including those administered by the United

Nations, the European Union, the United States,

including by the U.S. Treasury Department’s Office of

Foreign Assets Control (OFAC) and the United Kingdom.

Sanctions restrict the Group’s business dealings with

certain countries, territories, individuals and entities and

may impose certain trade restrictions, among others,

export and/or import trade restrictions to certain goods

and services. In this context, the provision of goods and

services by a multinational telecommunications group,

such as the Telefónica Group, directly and indirectly,

and in multiple countries, requires the application of a

high degree of diligence to prevent the contravention of

sanctions. Given the nature of its activity, the Telefónica

Group’s exposure to these sanctions is particularly

noteworthy.   

Although the Group has internal policies and

procedures designed to ensure compliance with the

above mentioned applicable anti-corruption laws and

sanctions regulations, there can be no assurance that

such policies and procedures will be sufficient or that

the Group's employees, directors, officers, partners,

agents and service providers will not take actions in

violation of the Group's policies and procedures (or,

otherwise in violation of the relevant anti-corruption

laws and sanctions regulations) for which the Group, its

subsidiaries or they may be ultimately held responsible.

In this regard, Telefónica cooperates with governmental

authorities in connection with the enforcement of anti-

corruption laws. For example, certain companies within

the Group have been the subject of corruption

investigations and charges in the past, one of which

recently resulted in a financial penalty. See Note 29 b)-

Other Proceedings to the Consolidated Financial

Statements. 

Failure to comply with anti-corruption laws and

sanctions regulations could lead to further financial

penalties, termination of government contracts, and the

revocation of licenses and authorizations, and could

have a material adverse effect on the Group's

reputation, or otherwise adversely affect the Group's

business, financial condition, results of operations and/

or cash flows.

Events after the

reporting period

The events regarding the Company that took place

between the reporting date and the date of preparation

of the accompanying financial statements have been

disclosed in note 22.

Annual Corporate

Governance Report

See Chapter 4 (Annual Corporate Governance Report)

of the 2024 Consolidated Management Report of

Telefónica, S.A.

This document is also available in the public registers of

the National Securities Market Commission (CNMV).

Annual Report on the

Remuneration of the

Directors

See Chapter 5 (Annual Report on the Remuneration of

the Directors) of the 2024 Consolidated Management

Report of Telefónica, S.A.

This document is also available in the public registers of

the National Securities Market Commission (CNMV).