ERNST & YOUNG, S.L. | | | | | /s/ José Luis Perelli Alonso
| | | | | José Luis Perelli Alonso | | | /s/ Ignacio Viota del Corte | | | | | | | | | | Ignacio Viota del Corte | |
Madrid, Spain March 18, 201028, 2012 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Telefónica, S.A. We have audited the accompanying consolidated statements of financial position of Telefónica, S.A. and subsidiaries as of December 31, 20092011 and 2008,2010, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2009.2011. These consolidated financial statements are the responsibility of the Telefónica, S.A.’s Directors. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Telefónica, S.A. and subsidiaries as of December 31, 20092011 and 2008,2010, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009,2011, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Telefónica S.A.’s internal control over financial reporting as of December 31, 2009,2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 18, 201028, 2012 expressed an unqualified opinion thereon. ERNST & YOUNG, S.L. | | | | | /s/ José Luis Perelli Alonso
| | | | | José Luis Perelli Alonso | | | /s/ Ignacio Viota del Corte | | | | | | | | | | Ignacio Viota del Corte | |
Madrid, Spain March 18, 201028, 2012
TELEFÓNICA GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT DECEMBER 31 (MILLIONS OF EUROS) ASSETS | NOTE | | 2009 | | | 2008 | | NOTE | 2011 | | | 2010 | | | | | | | | | | | | | | | | A) NON-CURRENT ASSETS | | | 84,311 | | | 81,923 | | | | | 108,800 | | | | 108,721 | | | | | | | | | | | | | | | | | | | | | Intangible assets | (Note 6) | | 15,846 | | | 15,921 | | (Note 6) | | | 24,064 | | | | 25,026 | | Goodwill | (Note 7) | | 19,566 | | | 18,323 | | (Note 7) | | | 29,107 | | | | 29,582 | | Property, plant and equipment | (Note 8) | | 31,999 | | | 30,545 | | (Note 8) | | | 35,463 | | | | 35,797 | | Investment properties | | | 5 | | | 1 | | | | | 6 | | | | 5 | | Investments in associates | (Note 9) | | 4,936 | | | 2,777 | | (Note 9) | | | 5,065 | | | | 5,212 | | Non-current financial assets | (Note 13) | | 5,988 | | | 7,376 | | (Note 13) | | | 8,678 | | | | 7,406 | | Deferred tax assets | (Note 17) | | 5,971 | | | 6,980 | | (Note 17) | | | 6,417 | | | | 5,693 | | | | | | | | | | | | | | | | | | | | | B) CURRENT ASSETS | | | 23,830 | | | 17,973 | | | | | 20,823 | | | | 21,054 | | | | | | | | | | | | | | | | | | | | | Inventories | | | 934 | | | 1,188 | | | | | 1,164 | | | | 1,028 | | Trade and other receivables | (Note 11) | | 10,622 | | | 9,315 | | (Note 11) | | | 11,331 | | | | 12,426 | | Current financial assets | (Note 13) | | 1,906 | | | 2,216 | | (Note 13) | | | 2,625 | | | | 1,574 | | Tax receivables | (Note 17) | | 1,246 | | | 970 | | (Note 17) | | | 1,567 | | | | 1,331 | | Cash and cash equivalents | (Note 13) | | 9,113 | | | 4,277 | | (Note 13) | | | 4,135 | | | | 4,220 | | Non-current assets held for sale | | | 9 | | | 7 | | | | | 1 | | | | 475 | | | | | | | | | | | | | | | | | | | | | TOTAL ASSETS (A + B) | | | 108,141 | | | 99,896 | | | TOTAL ASSETS (A+B) | | | | | 129,623 | | | | 129,775 | | | | | | | | | | | | | | | | | | | | | EQUITY AND LIABILITIES | NOTE | | 2009 | | | 2008 | | NOTE | | 2011 | | | | 2010 | | | | | | | | | | | | | | | | | | | | | A) EQUITY | | | 24,274 | | | 19,562 | | | | | 27,383 | | | | 31,684 | | | | | | | | | | | | | | | | | | | | | Equity attributable to equity holders of the parent | | | 21,734 | | | 17,231 | | | | | 21,636 | | | | 24,452 | | Non-controlling interests | (Note 12) | | 2,540 | | | 2,331 | | (Note 12) | | | 5,747 | | | | 7,232 | | | | | | | | | | | | | | | | | | | | | B) NON-CURRENT LIABILITIES | | | 56,931 | | | 55,202 | | | | | 69,662 | | | | 64,599 | | | | | | | | | | | | | | | | | | | | | Non-current interest-bearing debt | (Note 13) | | 47,607 | | | 45,088 | | (Note 13) | | | 55,659 | | | | 51,356 | | Non-current trade and other payables | (Note 14) | | 1,249 | | | 1,117 | | (Note 14) | | | 2,092 | | | | 2,304 | | Deferred tax liabilities | (Note 17) | | 3,082 | | | 3,576 | | (Note 17) | | | 4,739 | | | | 6,074 | | Non-current provisions | (Note 15) | | 4,993 | | | 5,421 | | (Note 15) | | | 7,172 | | | | 4,865 | | | | | | | | | | | | | | | | | | | | | C) CURRENT LIABILITIES | | | 26,936 | | | 25,132 | | | | | 32,578 | | | | 33,492 | | | | | | | | | | | | | | | | | | | | | Current interest-bearing debt | (Note 13) | | 9,184 | | | 8,100 | | (Note 13) | | | 10,652 | | | | 9,744 | | Current trade and other payables | (Note 14) | | 14,023 | | | 13,651 | | (Note 14) | | | 17,855 | | | | 19,251 | | Current tax payables | (Note 17) | | 2,766 | | | 2,275 | | (Note 17) | | | 2,568 | | | | 2,822 | | Provisions | (Note 15) | | 963 | | | 1,106 | | | Current provisions | | (Note 15) | | | 1,503 | | | | 1,675 | | | | | | | | | | | | | | | | | | | | | TOTAL EQUITY AND LIABILITIES (A+B+C) | | | 108,141 | | | 99,896 | | | | | 129,623 | | | | 129,775 | |
The accompanying Notes 1 to 2524 and Appendices I to VVI are an integral part of these consolidated statements of financial positionposition.
TELEFÓNICA GROUP CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31 (MILLIONS OF EUROS)
INCOME STATEMENT | NOTE | | 2009 | | | 2008 | | | 2007 | | NOTE | | 2011 | | | 2010 | | | 2009 | | | | | | | | | | | | | | | | | | | | | Revenue from operations | (Note 19) | | 56,731 | | | 57,946 | | | 56,441 | | | Revenues | | (Note 19) | | | 62,837 | | | | 60,737 | | | | 56,731 | | Other income | (Note 19) | | 1,645 | | | 1,865 | | | 4,264 | | (Note 19) | | | 2,107 | | | | 5,869 | | | | 1,645 | | Supplies | | | (16,717 | ) | | (17,818 | ) | | (17,907 | ) | | | | (18,256 | ) | | | (17,606 | ) | | | (16,717 | ) | Personnel expenses | | | (6,775 | ) | | (6,762 | ) | | (7,893 | ) | | | | (11,080 | ) | | | (8,409 | ) | | | (6,775 | ) | Other expenses | (Note 19) | | (12,281 | ) | | (12,312 | ) | | (12,081 | ) | (Note 19) | | | (15,398 | ) | | | (14,814 | ) | | | (12,281 | ) | Depreciation and amortization | (Note 19) | | (8,956 | ) | | (9,046 | ) | | (9,436 | ) | (Note 19) | | | (10,146 | ) | | | (9,303 | ) | | | (8,956 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | OPERATING INCOME | | | 13,647 | | | 13,873 | | | 13,388 | | | | | 10,064 | | | | 16,474 | | | | 13,647 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share of profit (loss) of associates | (Note 9) | | 47 | | | (161 | ) | | 140 | | | Share of (loss) profit of associates | | (Note 9) | | | (635 | ) | | | 76 | | | | 47 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Finance income | | | 814 | | | 827 | | | 703 | | | | | 827 | | | | 792 | | | | 814 | | Exchange gains | | | 3,085 | | | 6,189 | | | 4,645 | | | | | 2,795 | | | | 3,508 | | | | 3,085 | | Finance costs | | | (3,581 | ) | | (3,648 | ) | | (3,554 | ) | | | | (3,609 | ) | | | (3,329 | ) | | | (3,581 | ) | Exchange losses | | | (3,625 | ) | | (6,165 | ) | | (4,638 | ) | | | | (2,954 | ) | | | (3,620 | ) | | | (3,625 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net financial expense | (Note 16) | | (3,307 | ) | | (2,797 | ) | | (2,844 | ) | (Note 16) | | | (2,941 | ) | | | (2,649 | ) | | | (3,307 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | PROFIT BEFORE TAX FROM CONTINUING OPERATIONS | | | 10,387 | | | 10,915 | | | 10,684 | | | | | 6,488 | | | | 13,901 | | | | 10,387 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate income tax | (Note 17) | | (2,450 | ) | | (3,089 | ) | | (1,565 | ) | (Note 17) | | | (301 | ) | | | (3,829 | ) | | | (2,450 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS | | | 7,937 | | | 7,826 | | | 9,119 | | | | | 6,187 | | | | 10,072 | | | | 7,937 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit after tax from discontinued operations | (Note 18) | | - | | | - | | | - | | | Profit after taxes from discontinued operations | | (Note 18) | | | - | | | | - | | | | - | | PROFIT FOR THE YEAR | | | 7,937 | | | 7,826 | | | 9,119 | | | | | 6,187 | | | | 10,072 | | | | 7,937 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-controlling interests | (Note 12) | | (161 | ) | | (234 | ) | | (213 | ) | (Note 12) | | | (784 | ) | | | 95 | | | | (161 | ) | PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | | | 7,776 | | | 7,592 | | | 8,906 | | | | | 5,403 | | | | 10,167 | | | | 7,776 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic and diluted earnings per share from continuing operations attributable to equity holders of the parent (euros) | (Note 19) | | | 1.71 | | | | 1.63 | | | | 1.87 | | (Note 19) | | | 1.20 | | | | 2.25 | | | | 1.71 | | Basic and diluted earnings per share attributable to equity holders of the parent (euros) | (Note 19) | | | 1.71 | | | | 1.63 | | | | 1.87 | | (Note 19) | | | 1.20 | | | | 2.25 | | | | 1.71 | |
The accompanying Notes 1 to 2524 and Appendices I to VVI are an integral part of these consolidated income statementsstatements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | | Year ended December 31 | | (MILLIONS OF EUROS) | | 2009 | | | 2008 | | | 2007 | | | | | | | | | | | | Profit for the year | | | 7,937 | | | | 7,826 | | | | 9,119 | | | | | | | | | | | | | | | Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | Gain (loss) on measurement of available-for-sale investments | | | 638 | | | | (1,167) | | | | (75) | | Reclassification of (losses) gains included in the income statement | | | (4) | | | | (142) | | | | 107 | | Income tax impact | | | (105) | | | | 281 | | | | 24 | | | | | 529 | | | | (1,028) | | | | 56 | | | | | | | | | | | | | | | (Losses) gains on hedges | | | (794) | | | | 1,302 | | | | 875 | | Reclassification of (losses) gains included in the income statement | | | (77) | | | | 50 | | | | 17 | | Income tax impact | | | 262 | | | | (402) | | | | (292) | | | | | (609) | | | | 950 | | | | 600 | | | | | | | | | | | | | | | Translation differences | | | 1,982 | | | | (4,051) | | | | (1,375) | | | | | | | | | | | | | | | Actuarial gains and losses and impact of limit on assets for defined benefit pension plans | | | (189) | | | | (182) | | | | 54 | | Income tax impact | | | 53 | | | | 55 | | | | (17) | | | | | (136) | | | | (127) | | | | 37 | | | | | | | | | | | | | | | Share of income (loss) recognized directly in equity of associates | | | 233 | | | | (59) | | | | (3) | | Income tax impact | | | 2 | | | | (13) | | | | (11) | | | | | 235 | | | | (72) | | | | (14) | | | | | | | | | | | | | | | Total other comprehensive income | | | 2,001 | | | | (4,328) | | | | (696) | | | | | | | | | | | | | | | Total comprehensive income recognized in the year | | | 9,938 | | | | 3,498 | | | | 8,423 | | | | | | | | | | | | | | | Attributable to: | | | | | | | | | | | | | Equity holders of the parent | | | 9,418 | | | | 3,612 | | | | 8,158 | | Non-controlling interests | | | 520 | | | | (114) | | | | 265 | | | | | 9,938 | | | | 3,498 | | | | 8,423 | |
The accompanying Notes 1 to 25 and Appendices I to V are an integral part of these consolidated statements of comprehensive incomeCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | | Year ended December 31 | | (MILLIONS OF EUROS) | | 2011 | | | 2010 | | | 2009 | | | | | | | | | | | | Profit for the year | | | 6,187 | | | | 10,072 | | | | 7,937 | | | | | | | | | | | | | | | Other comprehensive income (loss) | | | | | | | | | | | | | | | | | | | | | | | | | | (Losses) gains on measurement of available-for-sale investments | | | (13 | ) | | | (61 | ) | | | 638 | | Reclassification of losses (gains) included in the income statement | | | 3 | | | | 202 | | | | (4 | ) | Income tax impact | | | 3 | | | | (57 | ) | | | (105 | ) | | | | (7 | ) | | | 84 | | | | 529 | | | | | | | | | | | | | | | Losses on hedges | | | (921 | ) | | | (291 | ) | | | (794 | ) | Reclassification of losses (gains) included in the income statement | | | 210 | | | | 73 | | | | (77 | ) | Income tax impact | | | 217 | | | | 62 | | | | 262 | | | | | (494 | ) | | | (156 | ) | | | (609 | ) | | | | | | | | | | | | | | Translation differences | | | (1,265 | ) | | | 820 | | | | 1,982 | | | | | | | | | | | | | | | Actuarial gains (losses) and impact of limit on assets for defined benefit pension plans (Note 15) | | | (85 | ) | | | (94 | ) | | | (189 | ) | Income tax impact | | | 28 | | | | 35 | | | | 53 | | | | | (57 | ) | | | (59 | ) | | | (136 | ) | | | | | | | | | | | | | | Share of income (loss) recognized directly in equity of associates and others | | | 58 | | | | (84 | ) | | | 233 | | Reclassification of (gains) losses included in the income statement | | | - | | | | - | | | | - | | Income tax impact | | | (9 | ) | | | 23 | | | | 2 | | | | | 49 | | | | (61 | ) | | | 235 | | | | | | | | | | | | | | | Total other comprehensive income (loss) | | | (1,774 | ) | | | 628 | | | | 2,001 | | | | | | | | | | | | | | | Total comprehensive income recognized in the year | | | 4,413 | | | | 10,700 | | | | 9,938 | | | | | | | | | | | | | | | Attributable to: | | | | | | | | | | | | | Equity holders of the parent | | | 4,002 | | | | 10,409 | | | | 9,418 | | Non-controlling interests | | | 411 | | | | 291 | | | | 520 | | | | | 4,413 | | | | 10,700 | | | | 9,938 | |
The accompanying Notes 1 to 24 and Appendices I to VI are an integral part of these consolidated statements of comprehensive income | |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (MILLIONS OF EUROS) | Attributable to equity holders of the parent | | | | Attributable to equity holders of the parent | | | Non-controlling interests(Note 12) | | | Total equity | | Share capital | Share premium | Legal reserve | Revaluation reserve | Treasury shares | Retained earnings | Available-for-sale investments | Hedges | Equity of associates | Translation differences | Total | Non-controlling interests | Total equity | Share capital | | | Share premium | | | Legal reserve | | | Revaluation reserve | | | Treasury shares | | | Retained earnings | | | Available-for-sale investments | | | Hedges | | | Equity of associates | | | Translation differences | | | Total | | | Financial position at December 31, 2010 | | | | 4,564 | | | | 460 | | | | 984 | | | | 141 | | | | (1,376 | ) | | | 19,971 | | | | 45 | | | | 648 | | | | (42 | ) | | | (943 | ) | | | 24,452 | | | | 7,232 | | | | 31,684 | | Profit for the year | | | | - | | | | - | | | | - | | | | - | | | | | | | | 5,403 | | | | - | | | | - | | | | - | | | | - | | | | 5,403 | | | | 784 | | | | 6,187 | | Other comprehensive income (loss) | | | | - | | | | - | | | | - | | | | - | | | | | | | | (52 | ) | | | (7 | ) | | | (494 | ) | | | 49 | | | | (897 | ) | | | (1,401 | ) | | | (373 | ) | | | (1,774 | ) | Total comprehensive income | | | | - | | | | - | | | | - | | | | - | | | | | | | | 5,351 | | | | (7 | ) | | | (494 | ) | | | 49 | | | | (897 | ) | | | 4,002 | | | | 411 | | | | 4,413 | | Dividends paid (Note 12) | | | | - | | | | - | | | | - | | | | - | | | | | | | | (6,852 | ) | | | - | | | | - | | | | - | | | | - | | | | (6,852 | ) | | | (876 | ) | | | (7,728 | ) | Net movement in treasury shares | | | | - | | | | - | | | | - | | | | - | | | | (777 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (777 | ) | | | - | | | | (777 | ) | Acquisitions and disposals of non-controlling interests and business combinations (Note 5) | | | | - | | | | - | | | | - | | | | - | | | | | | | | 984 | | | | - | | | | - | | | | - | | | | (323 | ) | | | 661 | | | | (1,200 | ) | | | (539 | ) | Other movements | | | | - | | | | - | | | | - | | | | (15 | ) | | | 371 | | | | (206 | ) | | | - | | | | - | | | | - | | | | - | | | | 150 | | | | 180 | | | | 330 | | Financial position at December 31, 2011 | | | | 4,564 | | | | 460 | | | | 984 | | | | 126 | | | | (1,782 | ) | | | 19,248 | | | | 38 | | | | 154 | | | | 7 | | | | (2,163 | ) | | | 21,636 | | | | 5,747 | | | | 27,383 | �� | Financial position at December 31, 2009 | | | | 4,564 | | | | 460 | | | | 984 | | | | 157 | | | | (527 | ) | | | 16,685 | | | | (39 | ) | | | 804 | | | | 19 | | | | (1,373 | ) | | | 21,734 | | | | 2,540 | | | | 24,274 | | Profit for the year | | | | - | | | | | | | | - | | | | - | | | | - | | | | 10,167 | | | | - | | | | - | | | | - | | | | - | | | | 10,167 | | | | (95 | ) | | | 10,072 | | Other comprehensive income (loss) | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (55 | ) | | | 84 | | | | (156 | ) | | | (61 | ) | | | 430 | | | | 242 | | | | 386 | | | | 628 | | Total comprehensive income | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 10,112 | | | | 84 | | | | (156 | ) | | | (61 | ) | | | 430 | | | | 10,409 | | | | 291 | | | | 10,700 | | Dividends paid (Note 12) | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (5,872 | ) | | | | | | | - | | | | - | | | | - | | | | (5,872 | ) | | | (440 | ) | | | (6,312 | ) | Net movement in treasury shares | | | | - | | | | - | | | | - | | | | - | | | | (849 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (849 | ) | | | - | | | | (849 | ) | Acquisitions and disposals of non-controlling interests and business combinations (Note 5) | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,307 | | | | 4,307 | | Other movements | | | | - | | | | - | | | | - | | | | (16 | ) | | | - | | | | (954 | ) | | | - | | | | - | | | | - | | | | - | | | | (970 | ) | | | 534 | | | | (436 | ) | Financial position at December 31, 2010 | | | | 4,564 | | | | 460 | | | | 984 | | | | 141 | | | | (1,376 | ) | | | 19,971 | | | | 45 | | | | 648 | | | | (42 | ) | | | (943 | ) | | | 24,452 | | | | 7,232 | | | | 31,684 | | Financial position at December 31, 2008 | 4,705 | 460 | 984 | 172 | (2,179) | 16,069 | (566) | 1,413 | (216) | (3,611) | 17,231 | 2,331 | 19,562 | | | 4,705 | | | | 460 | | | | 984 | | | | 172 | | | | (2,179 | ) | | | 16,069 | | | | (566 | ) | | | 1,413 | | | | (216 | ) | | | (3,611 | ) | | | 17,231 | | | | 2,331 | | | | 19,562 | | Profit for the year | - | - | - | 7,776 | - | - | - | 7,776 | 161 | 7,937 | | | - | | | | - | | | | - | | | | - | | | | - | | | | 7,776 | | | | - | | | | - | | | | - | | | | - | | | | 7,776 | | | | 161 | | | | 7,937 | | Other comprehensive income (loss) | - | - | - | (136) | 527 | (609) | 235 | 1,625 | 1,642 | 359 | 2,001 | | | - | | | | - | | | | - | | | | - | | | | - | | | | (136 | ) | | | 527 | | | | (609 | ) | | | 235 | | | | 1,625 | | | | 1,642 | | | | 359 | | | | 2,001 | | Total comprehensive income | | | | | 7,640 | 527 | (609) | 235 | 1,625 | 9,418 | 520 | 9,938 | | | | | | | | | | | | | | | | | | | | | | | 7,640 | | | | 527 | | | | (609 | ) | | | 235 | | | | 1,625 | | | | 9,418 | | | | 520 | | | | 9,938 | | Dividends paid (Note 12) | - | - | - | (4,557) | - | - | - | (4,557) | (295) | (4,852) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (4,557 | ) | | | - | | | | - | | | | - | | | | - | | | | (4,557 | ) | | | (295 | ) | | | (4,852 | ) | Hyperinflation restatement to 01/01/09 | | | | | 613 | - | 613 | | Hyperinflation restatement to 01/01/09 (Note 2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 613 | | | | 613 | | | | - | | | | 613 | | Net movement in treasury shares | - | - | - | (656) | - | - | - | (656) | - | (656) | | | - | | | | - | | | | - | | | | - | | | | (656 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (656 | ) | | | - | | | | (656 | ) | Acquisitions and disposals of Non-controlling interests | - | - | - | - | - | (122) | (122) | | Acquisitions and disposals of non-controlling interests | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (122 | ) | | | (122 | ) | Capital reduction (Note 12) | (141) | - | - | - | 2,308 | (2,167) | - | - | - | - | | | (141 | ) | | | - | | | | - | | | | - | | | | 2,308 | | | | (2,167 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Other movements | - | - | (15) | - | (300) | - | - | - | (315) | 106 | (209) | | | - | | | | - | | | | - | | | | (15 | ) | | | - | | | | (300 | ) | | | - | | | | - | | | | - | | | | - | | | | (315 | ) | | | 106 | | | | (209 | ) | Financial position at December 31, 2009 | 4,564 | 460 | 984 | 157 | (527) | 16,685 | (39) | 804 | 19 | (1,373) | 21,734 | 2,540 | 24,274 | | | 4,564 | | | | 460 | | | | 984 | | | | 157 | | | | (527 | ) | | | 16,685 | | | | (39 | ) | | | 804 | | | | 19 | | | | (1,373 | ) | | | 21,734 | | | | 2,540 | | | | 24,274 | | | | Financial position at December 31, 2007 | 4,773 | 522 | 984 | 180 | (232) | 13,025 | 457 | 463 | (144) | 97 | 20,125 | 2,730 | 22,855 | | Profit for the year | - | - | - | 7,592 | - | - | - | 7,592 | 234 | 7,826 | | Other comprehensive income (loss) | - | - | - | (127) | (1,023) | 950 | (72) | (3,708) | (3,980) | (348) | (4,328) | | Total comprehensive income | | | | | 7,465 | (1,023) | 950 | (72) | (3,708) | 3,612 | (114) | 3,498 | | Dividends paid (Note 12) | - | - | - | (4,165) | - | - | - | (4,165) | (333) | (4,498) | | Net movement in treasury shares | - | 1,074 | - | - | (3,151) | (232) | - | - | - | (2,309) | - | (2,309) | | Acquisitions and disposals of Non-controlling interests | - | - | - | - | - | (42) | (42) | | Capital reduction (Note 12) | (68) | (1,136) | - | - | 1,204 | - | - | - | - | | Other movements | - | - | (8) | - | (24) | - | - | - | (32) | 90 | 58 | | Financial position at December 31, 2008 | 4,705 | 460 | 984 | 172 | (2,179) | 16,069 | (566) | 1,413 | (216) | (3,611) | 17,231 | 2,331 | 19,562 | | | | Financial position at December 31, 2006 | 4,921 | 2,869 | 984 | 1,358 | (329) | 5,717 | 401 | (137) | (130) | 1,524 | 17,178 | 2,823 | 20,001 | | Profit for the year | - | - | - | 8,906 | - | - | - | 8,906 | 213 | 9,119 | | Other comprehensive income (loss) | - | - | - | 37 | 56 | 600 | (14) | (1,427) | (748) | 52 | (696) | | Total comprehensive income | | | | | 8,943 | 56 | 600 | (14) | (1,427) | 8,158 | 265 | 8,423 | | Dividends paid (Note 12) | - | - | - | (3,077) | - | - | - | (3,077) | (324) | (3,401) | | Net movement in treasury shares | - | (13) | - | - | (2,105) | (13) | - | - | - | (2,131) | - | (2,131) | | Acquisitions and disposals of Non-controlling interests | - | - | - | - | - | (95) | (95) | | Capital reduction (Note 12) | (148) | (2,054) | - | - | 2,202 | - | - | - | - | | Other movements | - | (280) | - | (1,178) | - | 1,455 | - | - | - | (3) | 61 | 58 | | Financial position at December 31, 2007 | 4,773 | 522 | 984 | 180 | (232) | 13,025 | 457 | 463 | (144) | 97 | 20,125 | 2,730 | 22,855 | |
The accompanying Notes 1 to 2524 and Appendices I to VVI are an integral part of these consolidated statements of changes in equity. |
TELEFÓNICA GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 (MILLIONS OF EUROS) | NOTE | | 2009 | | | 2008 | | | 2007 | | NOTE | | 2011 | | | 2010 | | | 2009 | | Cash flows from operating activities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash received from customers | | | 67,358 | | | 69,060 | | | 67,129 | | | | | 77,222 | | | | 72,867 | | | | 67,358 | | Cash paid to suppliers and employees | | | (46,198 | ) | | (48,500 | ) | | (47,024 | ) | | | | (55,769 | ) | | | (51,561 | ) | | | (46,198 | ) | Dividends received | | | 100 | | | 113 | | | 124 | | | | | 82 | | | | 136 | | | | 100 | | Net interest and other financial expenses paid | | | | (2,170 | ) | | | (2,894 | ) | | | (3,221 | ) | | | | (2,093 | ) | | | (2,154 | ) | | | (2,170 | ) | Taxes paid | | | (2,942 | ) | | (1,413 | ) | | (1,457 | ) | | | | (1,959 | ) | | | (2,616 | ) | | | (2,942 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash from operating activities | (Note 23) | | | 16,148 | | | | 16,366 | | | | 15,551 | | (Note 23) | | | 17,483 | | | | 16,672 | | | | 16,148 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from investing activities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Proceeds on disposals of property, plant and equipment and intangible assets | | | 242 | | | 276 | | | 198 | | | | | 811 | | | | 315 | | | | 242 | | Payments on investments in property, plant and equipment and intangible assets | | | (7,593 | ) | | (7,889 | ) | | (7,274 | ) | | | | (9,085 | ) | | | (8,944 | ) | | | (7,593 | ) | Proceeds on disposals of companies, net of cash and cash equivalents disposed | | | 34 | | | 686 | | | 5,346 | | | | | 4 | | | | 552 | | | | 34 | | Payments on investments in companies, net of cash and cash equivalents acquired | | | (48 | ) | | (2,178 | ) | | (2,798 | ) | | | | (2,948 | ) | | | (5,744 | ) | | | (48 | ) | Proceeds on financial investments not included under cash equivalents | | | 6 | | | 31 | | | 14 | | | | | 23 | | | | 173 | | | | 6 | | Payments made on financial investments not included under cash equivalents | | | (1,411 | ) | | (114 | ) | | (179 | ) | | | | (669 | ) | | | (1,599 | ) | | | (1,411 | ) | Interest (paid) received on cash surpluses not included under cash equivalents | | | (548 | ) | | 76 | | | 74 | | | Payments from cash surpluses not included under cash equivalents | | | | | (646 | ) | | | (621 | ) | | | (548 | ) | Government grants received | | | 18 | | | 11 | | | 27 | | | | | 13 | | | | 7 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash used in investing activities | (Note 23) | | (9,300 | ) | | (9,101 | ) | | (4,592 | ) | (Note 23) | | | (12,497 | ) | | | (15,861 | ) | | | (9,300 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from financing activities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends paid | (Note 12) | | (4,838 | ) | | (4,440 | ) | | (3,345 | ) | (Note 12) | | | (7,567 | ) | | | (6,249 | ) | | | (4,838 | ) | Transactions with equity holders | | | (947 | ) | | (2,241 | ) | | (2,152 | ) | | | | (399 | ) | | | (883 | ) | | | (947 | ) | Proceeds on issue of debentures and bonds | (Note 13) | | 8,617 | | | 1,317 | | | 4,209 | | (Note 13) | | | 4,582 | | | | 6,131 | | | | 8,617 | | Proceeds on loans, borrowings and promissory notes | | | 2,330 | | | 3,693 | | | 6,658 | | | | | 4,387 | | | | 9,189 | | | | 2,330 | | Cancellation of debentures and bonds | (Note 13) | | (1,949 | ) | | (1,167 | ) | | (1,756 | ) | (Note 13) | | | (3,235 | ) | | | (5,482 | ) | | | (1,949 | ) | Repayments of loans, borrowings and promissory notes | | | (5,494 | ) | | (4,927 | ) | | (13,039 | ) | | | | (2,680 | ) | | | (7,954 | ) | | | (5,494 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash flow used in financing activities | (Note 23) | | (2,281 | ) | | (7,765 | ) | | (9,425 | ) | | Net cash used in financing activities | | (Note 23) | | | (4,912 | ) | | | (5,248 | ) | | | (2,281 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Effect of foreign exchange rate changes on collections and payments | | | 269 | | | (302 | ) | | (261 | ) | | | | (169 | ) | | | (463 | ) | | | 269 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Effect of changes in consolidation methods and other non-monetary effects | | | - | | | 14 | | | - | | | Effect of changes in consolidation methods | | | | | 10 | | | | 7 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents during the period | | | 4,836 | | | (788 | ) | | 1,273 | | | Net (decrease) increase in cash and cash equivalents during the year | | | | | (85 | ) | | | (4,893 | ) | | | 4,836 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CASH AND CASH EQUIVALENTS AT JANUARY 1 | | | 4,277 | | | 5,065 | | | 3,792 | | | | | 4,220 | | | | 9,113 | | | | 4,277 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CASH AND CASH EQUIVALENTS AT DECEMBER 31 | (Note 13) | | 9,113 | | | 4,277 | | | 5,065 | | (Note 13) | | | 4,135 | | | | 4,220 | | | | 9,113 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RECONCILIATION OF CASH AND CASH EQUIVALENTS WITH THE STATEMENT OF FINANCIAL POSITION | RECONCILIATION OF CASH AND CASH EQUIVALENTS WITH THE STATEMENT OF FINANCIAL POSITION | | RECONCILIATION OF CASH AND CASH EQUIVALENTS WITH THE STATEMENT OF FINANCIAL POSITION | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE AT JANUARY 1 | | | 4,277 | | | 5,065 | | | 3,792 | | | | | 4,220 | | | | 9,113 | | | | 4,277 | | Cash on hand and at banks | | | 3,236 | | | 2,820 | | | 2,375 | | | | | 3,226 | | | | 3,830 | | | | 3,236 | | Other cash equivalents | | | 1,041 | | | 2,245 | | | 1,417 | | | | | 994 | | | | 5,283 | | | | 1,041 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BALANCE AT DECEMBER 31 | (Note 13) | | 9,113 | | | 4,277 | | | 5,065 | | (Note 13) | | | 4,135 | | | | 4,220 | | | | 9,113 | | Cash on hand and at banks | | | 3,830 | | | 3,236 | | | 2,820 | | | | | 3,411 | | | | 3,226 | | | | 3,830 | | Other cash equivalents | | | 5,283 | | | 1,041 | | | 2,245 | | | | | 724 | | | | 994 | | | | 5,283 | | | | | | | | | | | | | | | | |
The accompanying Notes 1 to 2524 and Appendices I to VVI are an integral part of these consolidated statements of cash flowflow.
TELEFÓNICA, S.A. AND SUBSIDIARIES COMPOSING THE TELEFÓNICA GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONSOLIDATED ANNUAL ACCOUNTS) FOR THE YEAR ENDED DECEMBER 31, 20092011 (1) | BACKGROUND AND GENERAL INFORMATION |
| Telefónica Group organizational structure |
Telefónica, S.A. and its subsidiaries and investees (the “Telefónica Group” or "the Group”) make up an integrated group of companies (the “Telefónica Group,” “Telefónica”, or “the Group”) operating mainly in the telecommunications, media and contact center industries. The parent company of thisthe Group is Telefónica, S.A. (“Telefónica” or “the Company”), a public limited company incorporated on April 19, 1924 for an indefinite period. Its registered office is at calle Gran Vía 28, Madrid (Spain). Appendix V lists the subsidiaries, associates and investees in which the Telefónica Group has direct or indirect holdings, their corporate purpose, country, functional currency, share capital, the Telefónica Group’s effective shareholding and their method of consolidation. | Corporate structure of the Group |
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. TheIn 2011, the Telefónica Group followsfollowed a regional, integrated management model throughbased on three business areas defined by the geographical markets in which it operates,market and with an integrated view of the wireline and wireless businesses:businesses in Spain, Latin America and the rest of Europe.
| - | Telefónica Latin America |
On September 5, 2011, the Executive Committee of Telefónica’s Board of Directors approved a new organizational structure with the aim of reinforcing its growth story, actively participating in the digital world and capturing the most of the opportunities afforded by its global scale and industrial alliances. More detailed information on the activities carried out by the Group is provided in Note 4. The business activities carried out by most of the Telefónica Group companies are regulated by broad ranging legislation, pursuant to which permits, concessions or licenses must be obtained in certain circumstances to provide the various services. In addition, certain wireline and wireless telephony services are provided under regulated rate and price systems. A more detailed segmentation of the activities carried out by the Group is provided in Note 4.
(2) | BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS |
The accompanying consolidated financial statements were prepared from the accounting records of Telefónica, S.A. and of each of the companies comprising the Telefónica Group, whose individuals individual financial statements were prepared in accordance with the generally accepted accounting principles prevailing in the various countries in which they are located, and for purposes of these consolidated financial statements are presented in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), which do not differ for the purposes of the TelefóTelefónica Group are not different from IFRS asthose adopted by the European Union, to give a true and fair view of the consolidated equity and financial position at December 31, 2009,2011, and of the consolidated results of operations, changes in consolidated equity and the consolidated cash flows obtained and used in the year then ended. The figures in these consolidated financial statements are expressed in millions of euros, unless otherwise indicated, and therefore may be rounded. The euro is the Group’s reporting currency.
The accompanying consolidated financial statements for the year ended December 31, 20092011 were prepared by the Company’s Board of Directors at its meeting on February 24, 201022, 2012 for submission for approval at the General Shareholders’ Meeting, which is expected to occur without modification. Note 3 contains a detailed description of the most significant accounting policies used to prepare these consolidated financial statements. For comparative purposes, the accompanying financial statements for 20092011 include the consolidated statement of financial position at December 31, 20082010 and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows and the notes thereto for the yearsyear ended December 31, 20082010 and 2007.2009. Comparative information and main changes in the consolidation scope The accompanying consolidated statements of comprehensive incomemain events and consolidated statements of changes in equity for the year ended December 31, 2009 are presented in accordance with the amendment to IAS 1 “Revised Presentation of Financial Statements” (see Note 3.s). Accordingly, the information presented for the years ended December 31, 2008 and 2007 has been adapted to such amendment, and, therefore, differs, on a presentation basis, from the information contained in the approved 2008 and 2007 consolidated financial statements. The main changes in the consolidation scope affecting comparability of the consolidated information for 20092011 and 20082010 (see Appendix I for a more detailed explanation of the changes in consolidation scope in both years2010 and the main transactions in 2007)2009) are as follows:
20092011
| a) | ClassificationExtension of Venezuela as a hyperinflationary economythe strategic partnership agreement with China Unicom |
Throughout 2009Expanding on the existing strategic partnership, on January 23, 2011, Telefónica, S.A. and China Unicom (Hong Kong) Limited (“China Unicom”) signed an extension to their Strategic Partnership Agreement, in which both companies agreed to strengthen and deepen their strategic cooperation in certain business areas, and committed to investing the first daysequivalent of 2010, a number500 million US dollars in ordinary shares of factors arose in the Venezuelan economy that led theother party. Telefónica Group to reconsider the treatment it follows with respectacquired through its subsidiary Telefónica Internacional, S.A.U. 282,063,000 ordinary shares of China Unicom from third parties for 358 million euros.
Subsequent to the translationexecution of this transaction, Telefónica, through Telefónica Internacional, S.A.U., has a shareholding of approximately 9.57% of the financial statementsvoting shares of investees, as well asChina Unicom. China Unicom completed the recoveryacquisition of its financial investments in that country. Within these factorsTelefónica shares on January 28, 2011, giving it is worth highlighting the levelownership of inflation reached in 2009 and the cumulative inflation over the last three years; the restrictions to the official foreign exchange market and, finally, the devaluation1.37% of the Bolivar fuerte on January 8, 2010 (see Note 24). As a result, in accordance with IFRS, Venezuela must be considered a hyperinflationary economy in 2009. The main implications of this are as follows:
| · | That the 2008 figures should not be restated. |
| · | Adjustment of the historical cost of non-monetary assets and liabilities and the various items of equity of these companies from their date of acquisition or inclusion in the |
Company’s capital. | | consolidated statement of financial position to the end of the year to reflect the changes in purchasing power of the currency caused by inflation. |
The cumulative impactIn recognition of the accounting restatement to adjustChina Unicom's stake in Telefónica, approval was given at Telefónica’s General Shareholders' Meeting for the effectsappointment of hyperinflation for years prior to 2009 is reflecteda board member named by China Unicom, in accordance with prevailing legislation and the translation differences at the beginning of the 2009 financial year.
| · | Adjustment of the income statement to reflect the financial loss caused by the impact of inflation in the year on net monetary assets (loss of purchasing power). |
| · | The various components of the income statement and statement of cash flows have been adjusted for the inflation index since their generation, with a balancing entry in financial results and a reconciling item in the statement of cash flows, respectively. |
| · | All components of the financial statements of the Venezuelan companies have been translated at the closing exchange rate, which at December 31, 2009 was 2.15 Bolivares fuertes per dollar (3.1 Bolivares fuertes per euro). |
The main effects on the Telefónica Group’s consolidated financial statements for 2009 derived from the items mentioned above are as follows:
| Millions of euros | Revenue | 267 | Operating income excluding the impact of depreciation and amortization cost | 64 | Net profit | (548) | Translation differences | 1,224 | Impact on equity | 676 | Company's Bylaws. | b) | Tax amortization of goodwillCorporate structure in Brazil |
In December 2007,On March 25, 2011 the European Commission opened an investigation involving the KingdomBoards of Spain with respect to the potential consideration as state aidDirectors of each of the tax deductionsubsidiaries controlled by Telefónica, Vivo Participações and Telesp, approved the terms and conditions of a merger and restructuring process whereby all shares of Vivo Participações that were not owned by Telesp were exchanged for Telesp shares, at a rate of 1.55 new Telesp shares for each Vivo Participações share. These shares then became the tax basis amortizationproperty of goodwill generatedTelesp, whereby Vivo Participações then became a wholly owned subsidiary of Telesp. The restructuring process was approved by the shareholders of Vivo Participações at the Extraordinary General Shareholders’ Meeting held on certain foreign investments underApril 27, 2011 and by the provisionsshareholders of article 12.5 ofTelesp at the revised Spanish corporate income tax law (“TRLIS”). This investigation led to widespread uncertainties regarding the scope of the European Commission’s decisionExtraordinary General Shareholders’ Meeting held on the future for, among others,same date, following authorization by Anatel the Telefónica Group.Brazilian telecommunications regulator.
InOnce the case ofshares were exchanged, the Telefónica Group asbecame the owner of 73.9% of Telesp which, in turn, has 100% ownership of the shares of Vivo, S.A. The impact on equity attributable to equity holders of the parent arising from this transaction was an increase of 661 million euros (an increase of 984 million euros in “Retained earnings” offset by the impact of translation differences), against net equity attributable to non-controlling interests.
On June 14, 2011, the respective Boards of Directors of Vivo Participações and Telesp approved a resultrestructuring plan whose objective is to simplify the corporate structure of this uncertaintyboth companies and foster their integration, eliminating Vivo Participações from the Company deemed it necessary to recognizecorporate chain through the incorporation of its total equity into Telesp, and concentrating all mobile telephony activities in Vivo, S.A. (now a liability as the deduction was applied in the consolidated financial statements until the investigation was concluded.direct subsidiary of Telesp). In December 2009,The transaction was also subject to authorization from the textBrazilian telecommunications regulator and was approved at the General Shareholders’ Meetings of both companies on October 3, 2011. The company emerging from the European Commission’s decision regarding the investigation was released, which deems the deduction as state aid. Investments made priormerger changed its name of incorporation to December 21, 2007 (as is the case for the Telefónica Group’s investments in O2 Group companies, the operators acquired from BellSouth, Colombia Telecomunicaciones,Brasil, S.A., ESP and Telefónica O2 Czech Republic, a.s.) are not affected by this decision.
As a result of this decision,the merger of the Brazilian companies Telesp and consideringVivo Participações in October 2011, the corporate structuretax value of these investments,certain assets identified in the purchase price allocation changes, among them licenses, as they become tax deductible under Brazilian tax regulation. The change in the tax value of the licenses requires the reversal of the deferred tax liability recognized in the prior purchase price allocation, resulting in an impact to “Corporate income tax” in the accompanying consolidated income statement in the amount of 1,288 million euros (952 million euros in profit attributable to equity holders of the Telefónica Group for the year ended December 31, 2009 reflects a lower income tax expense due to the reversal of this liability in an amount of 591 million euros. parent company) (Note 17). | c) | Share exchange between Telefónica, S.A. and China Unicom Limited, and signing of strategic alliance agreementRedundancy plan in Spain |
On September 6, 2009,July 7, 2011, Telefónica de España, S.A.U. agreed with workers’ representatives a collective redundancy procedure for the period from 2011 to 2013 for up to a maximum of 6,500 employees, through voluntary, universal and the Chinese telecommunications company, China Unicom (Hong Kong) Limited (“China Unicom”) entered into a wide strategic alliance which includes, among others, the areas of: the joint procurement of infrastructure and client equipment; common development of mobile service platforms; joint provision of services to multinational customers; roaming; research and development; co-operation and sharing of best practices and technical, operational and management know-how; joint development of strategic initiatives in the area of the network evolution and joint participation in international alliances; and exchange of senior management. In addition,non-discriminatory programs. The “Redundancy Plan” was approved by employment authorities on the same date, Telefónica and China Unicom executed a mutual share exchange agreement through which each party agreed to invest the equivalent of 1,000 million US dollars in ordinary shares of the other party.
On October 21, 2009, the mutual share exchange was implemented through the subscription by Telefónica, S.A., through its wholly owned subsidiary Telefónica Internacional, S.A.U., of 693,912,264 newly issued shares of China Unicom, satisfied by a contribution in kind to China Unicom of 40,730,735 shares of Telefónica, S.A. (see Note 12).
Following the completion of the transaction, Telefónica increased its share of China Unicom’s voting share capital from 5.38% to 8.06% and obtained the right to appoint a member to its board of directors, while China Unicom became owner of approximately 0.87% of Telefónica’s voting share capital at that date. Subsequently, after a capital reduction carried out by China Unicom, the Telefónica Group reached a shareholding equivalent to 8.37% of the company’s voting share capital.July 14, 2011.
The investment in China Unicom is now includedGroup has recognized the cost of the 2011 Redundancy Plan, per Company estimates, under “Personnel expenses” in the consolidation scope under the equity method. The totalaccompanying consolidated income statement in an amount of this investment at December 31, 2009 amounts to 2,3012,671 million euros.euros (see Note 15). 20082010
| a) | Tender offer for all the remaining outstanding sharesAcquisition of Telefónica Chile, S.A.50% of Brasilcel, N.V. |
On July 28, 2010, Telefónica, S.A. and Portugal Telecom, SGPS, S.A. (“Portugal Telecom”) signed an agreement for the acquisition by Telefónica, S.A. of 50% of the share capital of Brasilcel, N.V. (“Brasilcel”) owned by Portugal Telecom. (Brasilcel owned approximately 60% of Vivo Participaçoes, S.A.). This transaction was completed on September 27, 2010, terminating the joint venture agreements entered into by Telefónica and Portugal Telecom in 2002. Vivo Participaçoes, S.A. was changed from the proportionate to full consolidation method within the scope of consolidation as of the transaction completion date. On September 17, 2008,December 21, 2010, the merger between Telefónica launchedand Brasilcel was registered in the Madrid Mercantile Register, with the Company becoming a direct shareholder of the Brazilian consolidated group Vivo, with 59.6% of its capital stock. Pursuant to Brazilian legislation, on October 26, 2010, Telefónica, S.A. announced a tender offer throughfor the voting shares of Vivo Participaçoes, S.A. (“Vivo Participaçoes”) held by non-controlling interests representing approximately 3.8% of its subsidiary Inversionescapital stock. This offer was approved by the Brazilian market regulator (C.V.M.) on February 11, 2011 and, after its execution, Telefónica Internacional Holding, Ltda.acquired an additional 2.7% of the Brazilian company's capital stock, for a total of 62.3%. Additionally, in accordance with IFRS 3 (see Note 3.c), the Telefónica Group remeasured the previously held 50% investment in Brasilcel, generating a capital gain of 3,797 million euros, recognized under "Other income" in the accompanying consolidated income statement for 2010 (Note 19). The main impacts of this transaction are explained in Note 5. | b) | Acquisition of HanseNet Telekommunikation GmbH |
On December 3, 2009, Telefónica’s subsidiary in Germany, Telefónica Deutschland GmbH (“Telefónica Deutschland”), signed an agreement to acquire all the outstanding shares of Telefónica Chile, S.A. (“CTC”) that it did not control directly or indirectly, amounting to 55.1% of CTC’s share capital. Once the acceptance period had ended and the transaction had been settled, Telefónica’s indirect ownership in CTC increased from 44.9% to 96.75%.
Subsequently, pursuant to Chilean law, on December 1, 2008, Inversiones Telefónica Internacional Holding, Ltda. launched a new tender offer for all the shares of CTC that it did not own directly or indirectly after settlementGerman company HanseNet Telekommunikation GmbH (“HanseNet”). The transaction was completed on February 16, 2010, the date on which the Telefónica Group completed the acquisition of 100% of the first offer, under the same economic terms as the initial offer.shares of HanseNet. The acceptance period for the second offer ended on December 31, 2008, butamount initially paid out was then extended to January 6, 2009, as allowed by Chilean law.
Upon the endapproximately 913 million euros, which included 638 million euros of the acceptance period of the second tender offer, Telefónica’s indirect ownership percentage in CTC’s share capital increased from 96.75% of all of CTC’s
refinanced debt, and outstanding shares, reachedan acquisition cost in the first tender offer, to 97.89%amount of 275 million euros, which was ultimately reduced by 40 million euros upon completion of the transaction (Note 5). The total payment for
This company has been included in the Telefónica Group’s consolidation scope under the full consolidation method. | c) | Devaluation of the Venezuelan Bolívar |
Regarding the devaluation of the Venezuelan Bolívar on January 8, 2010, the two tranches amountedmain factors to 558,547 million Chilean pesos, equivalentconsider with respect to 658 million euros.the Telefónica Group’s 2010 financial statements were: | · | The decrease in the Telefónica Group’s net assets in Venezuela as a result of the new exchange rate, with a balancing entry in translation differences under equity of the Group, generating an effect of approximately 1,810 million euros at the date of devaluation. |
| · | The translation of results and cash flows from Venezuela at the new devalued closing exchange rate. |
The principal accounting policies used in preparing the accompanying consolidated financial statements are as follows: | a) | Translation methodology |
The financial statements of the Group’s foreign subsidiaries were translated to euros at the year-end exchange rates, except for: | 1. | Capital and reserves, which were translated at historical exchange rates. |
| 2. | Income statements, which were translated at the average exchange rates for the year. |
| 3. | Statements of cash flow, which were translated at the average exchange rate for the year. |
Goodwill and statement of financial position items remeasured to fair value when a stake is acquired in a foreign operation are recognized as assets and liabilities of the company acquired and therefore translated at the closing exchange rate. The exchange rate differences arising from the application of this method are included in “Translation differences” under “Equity attributable to equity holders of the parent” in the accompanying consolidated statements of financial position, net of the portion of said differences attributable to non-controlling interests, which is shown under “Non-controlling interests.” When the Company loses control of a foreign operation is sold, totallysubsidiary, either through total or partially,partial sale or contributions are reimbursed,dilution of its interest, the entire cumulative translation differencesdifference since January 1, 2004 (the IFRS transition date) relatedapplicable to such operation is recognized in equity are taken proportionally to the income statement as atogether with any gain or loss onfrom the disposal.loss of control. Transactions in the stock of subsidiaries that do not result in loss of control are recognized within equity, with a reallocation of the related cumulative translation difference. All other transactions resulting in the total or partial sale of the Company´s interest in an entity not controlled by the Company will result in a proportionate recognition of the related cumulative translation difference in income. The financial statements of Group companies whose functional currency is the currency of a hyperinflationary economy are adjusted for inflation in accordance with the procedure described in the following paragraph prior to their translation to euros. Once restated, all the items of the financial statements are converted to euros using the closing exchange rate. Amounts shown for prior years for comparative purposes are not modified. To determine the existence of hyperinflation, the Group assesses the qualitative characteristics of the economic environment of the country, such as the trends in inflation rates over the previous three years. The financial statements of companies whose functional currency is the currency of a hyperinflationary economy are adjusted to reflect the changes in purchasing power of the local currency, such that all items in the statement of financial position not expressed in current terms (non-monetary items) are restated by applying a general price index at the financial statement closing date, and all income and expense, profit and loss are restated monthly by applying appropriate adjustment factors. The difference between initial and adjusted amounts is taken to profit or loss. In that regard, as indicated in Note 2, Venezuela has been classified as a hyperinflationary economy in 2011 and 2010. The inflation rates used to prepare the restated financial information are those published by the Central Bank of Venezuela. On an annual basis, these rates are 27.59% and 27.18% for 2011 and 2010, respectively. | b) | Foreign currency transactions |
Monetary transactions denominated in foreign currencies are translated to euros at the exchange rates prevailing on the transaction date, and are adjusted at year end to the exchange rates then prevailing. All realized and unrealized exchange gains or losses are taken to the income statement for the year, with the exception of gains or losses arising from specific-purpose financing of investments in foreign investees designated as hedges of foreign currency risk to which these investments are exposed (see Note 3 i), and exchange gains or losses on intra-group loans considered part of the net investment in a foreign operation, which are included under the “Translation differences” component of “Equity” in the consolidated statement of financial position.“Other comprehensive income.” For acquisitions after January 1, 2004, the IFRS transition date, goodwill represents the excess of the acquisition cost over the acquirer’s interest, at the acquisition date, in the fair values of identifiable assets, liabilities and contingent liabilities acquired from a subsidiary or joint venture. | - | For acquisitions occurring from January 1, 2010, the effective date of Revised IFRS 3, Business combinations, goodwill represents the excess of acquisition cost over the fair values of identifiable assets acquired and liabilities assumed at the acquisition date. Cost of acquisition is the sum of the fair value of consideration delivered and the value attributed to existing non-controlling interests. For each business combination, the company determines the value of non-controlling interests at either their fair value or their proportional part of the net identifiable assets acquired. After initial measurement, goodwill is carried at cost, less any accumulated impairment losses. Whenever an equity interest is held in the acquiree prior to the business combination (business combinations achieved in stages), the carrying value of such previously held equity interest is remeasured at its acquisition-date fair value and the resulting gain or loss, if any, is recognized in profit or loss. |
| - | For acquisitions after January 1, 2004, the IFRS transition date, and prior to January 1, 2010, the effective date of Revised IFRS 3, Business combinations, goodwill represents the excess of the acquisition cost over the acquirer’s interest, at the acquisition date, in the fair values of identifiable assets, liabilities and contingent liabilities acquired from a subsidiary or joint venture. After initial measurement, goodwill is carried at cost, less any accumulated impairment losses. |
| - | In the transition to IFRS, Telefónica availed itself of the exemption allowing it not to restate business combinations taking place before January 1, 2004. As a result, the accompanying consolidated statements of financial position include goodwill net of amortization deducted until December 31, 2003, arising before the IFRS transition date, from the positive consolidation difference between the amounts paid to acquire shares of consolidated subsidiaries, and their carrying amounts plus increases in the fair value of assets and liabilities recognized in equity. |
In all cases, goodwill is recognized as an asset denominated in the currency of the company acquired. Goodwill is tested for impairment annually or more frequently if there are certain events or changes indicating the possibility that the carrying amount may not be fully recoverable. The potential impairment loss is determined by assessing the recoverable amount of the cash-generatingcash generating unit (or group of cash-generating units) to which the goodwill relates when originated. If this recoverable amount is less than the carrying amount, an irreversible impairment loss is recognized in income (see Note 3 f). Intangible assets are stated at acquisition or production cost, less any accumulated amortization or any accumulated impairment losses. The useful lives of intangible assets are assessed individually to be either finite or indefinite. Intangible assets with finite lives are amortized systematically over the useful economic life and assessed for impairment whenever events or changes indicate that their carrying amount may not be recoverable. Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, or more frequently in the event of indications that their carrying amount may not be recoverable (see Note 3 f). Management reassesses the indefinite useful life classification of these assets on an annual basis. Amortization methods and schedules are revised annually at year end and, where appropriate, adjusted prospectively. Research and development costs Research costs are expensed as incurred. Costs incurred in developing new products to be marketed or used for the Group’s own network, and whose future economic viability is reasonably certain, are capitalized and amortized on a straight-line basis over the period during which the related project is expected to generate economic benefits, starting upon its completion. Recoverability is considered to be reasonably assured when the Group can demonstrate the technical feasibility of completing the intangible asset, whether it will be available for use or sale, its intention to complete and its ability to use or sell the asset and how the asset will generate future economic benefits. As long as intangible assets developed internally are not in use, the associated capitalized development costs are tested for impairment annually or more frequently if there are indications that the carrying amount may not be fully recoverable. Costs incurred in connection with projects that are not economically viable are charged to the consolidated income statement for the year in which this circumstance becomes known. Service concession arrangements and licenses These arrangements relate to the acquisition cost of the licenses granted to the Telefónica Group by various public authorities to provide telecommunications services and to the value assigned to licenses held by certain companies at the time they were included in the Telefónica Group. These concessions are amortized on a straight-line basis over the duration of related licenses from the moment commercial exploitation commences. Customer base This primarily represents the allocation of acquisition costs attributable to customers acquired in business combinations.combinations, as well as the acquisition value of this type of assets in a third-party acquisition entailing consideration. Amortization is on a straight-line basis over the estimated period of the customer relationship. Software Software is stated at cost and amortized on a straight-line basis over its useful life, generally estimated atto be between three and five years.
| e) | Property, plant and equipment |
Property, plant and equipment is stated at cost less any accumulated depreciation and any accumulated impairment in value. Land is not depreciated. Cost includes external and internal costs comprising warehouse materials used, direct labor used in installation work and the allocable portion of the indirect costs required for the related investment. The latter two items are recorded as revenues under “Other income - Own work capitalized.” Cost includes, where appropriate, the initial estimate of decommissioning, retirement and site reconditioning costs when the Group is under obligation to incur such costs due to the use of the asset. Interest and other financial expenses incurred and directly attributable to the acquisition or construction of qualifying assets are capitalized. Qualifying assets at the Telefónica Group are those assets that require a period of at least 18 months to bring the assets to their intended use or sale. The costs of expansion, modernization or improvement leading to increased productivity, capacity or efficiency or to a lengthening of the useful lives of assets are capitalized when recognition requirements are met. Upkeep and maintenance expenses are expensed as incurred. The Telefónica Group assesses the need to write down, if appropriate, the carrying amount of each item of property, plant and equipment to its recoverable amount, whenever there are indications that the assets’asset’s carrying amount exceeds the higher of its fair value less costs to sell or its value in use. The impairment provision is not maintained if the factors giving rise to the impairment disappear (see Note 3 f). The Group’s subsidiaries depreciate their property, plant and equipment, net of their residual values, once they are in full working condition 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: | Years of estimated | | useful life | Buildings | 25 – 40 | Plant and machinery | 10 – 15 | Telephone installations, networks and subscriber equipment | 5 – 20 | Furniture, tools and other items | 2 – 10 |
Assets’ estimated residual values and methods and depreciation periods are reviewed, and adjusted if appropriate, prospectively at each financial year end. | f) | Impairment of non-current assets |
Non-current assets, including property, plant and equipment, goodwill and intangible assets are evaluated at each reporting date for indications of impairment losses. Wherever such indications exist, or in the case of assets which are subject to an annual impairment test, a recoverable amount is estimated, asestimated. An asset’s recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,. In assessing value in use, the estimated future cash flows deriving from the use of the asset or its cash generating unit, as applicable, are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. When the carrying amount of an asset exceeds its recoverable amount, the asset is considered to be impaired. In this case, the carrying amount is written down to recoverable amount and the resulting loss is taken to the income statement. Future depreciation or amortization charges are adjusted for the asset’s new carrying amount over its remaining useful life. Each asset is assessed individually for impairment, unless the asset does not generate cash inflows that are largely independent of those from other assets (or cash-generatingcash generating units). The Group bases the calculation of impairment on the business plans of the various cash-generatingcash generating units to which the assets are allocated. These business plans generally cover a period of three to five years. For longer periods after the term of the strategic plan, an expected constant or decreasing growth rate is applied to the projections based on these plans from the fifth year.plans. The growth rates used in 20092011 and 2010 are as follows: Rates | 2009 | Businesses in Spain | 0.88%-0.94% | Businesses in Latin America | 1.21%-3.25% | Businesses in Europe | 1.00%-2.00% |
Rates | 2011 | 2010 | Businesses in Spain | 0.51%-0.59% | 0.91%-1.10% | Businesses in Latin America | 1.75%-2.58% | 1.66%-2.56% | Businesses in Europe | 0.96%-1.07% | 1.28%-1.46% |
The main variables used by management to determine recoverable amounts are ARPU (average revenues per user), customer acquisition and retention costs, share of net adds in accesses, market shares, investments in non-current assets, growth rates and discount rates. Pre-taxTax discount rates are adjusted for country and business risks are applied.risks. The following ranges of rates were used in 2009:2011 and 2010:
Rates | 2009 | Businesses in Spain | 6.8%-7.3% | Businesses in Latin America | 8.6%-19.4% | Businesses in Europe | 6.3%-8.5% |
Rates | 2011 | 2010 | Businesses in Spain | 7.5%-14.8% | 7.8%-8.6% | Businesses in Latin America | 7.3%-17.8% | 7.2%-17.3% | Businesses in Europe | 5.9%-11.2% | 6.3%-10.9% |
When there are new events or changes in circumstances that indicate that a previously recognized impairment loss no longer exists or has been decreased, a new estimate of the asset’s recoverable amount is made. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. The reversal is limited to the net carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss and the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount. Impairment losses relating to goodwill cannot be reversed in future periods. The determination of whether an arrangement is, or contains a lease is based on the substance of the agreement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset and the agreement conveys a right to the Telefónica Group to the use of the asset. Leases where the lessor does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term. Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased item to the Group. These are classified at the inception of the lease, in accordance with its nature and the associated liability, at the lower of the present value of the minimum lease payments or the fair value of the leased property. Lease payments are apportioned between the finance costs and reduction of the principal of lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance costs are reflected in the income statement over the lease term. In firm sale and leaseback transactions resulting in a finance lease, the asset sold is not derecognized and the case received is considered finance for the lease term. However, when the sale and leaseback transaction results in an operating lease, and it is clear that both the transaction and subsequent lease income are established at fair value, the asset is derecognized and any gain or loss generated on the transaction is recognized. | h) | Investments in associates |
The Telefónica Group’s investments in companies over which it exercises significant influence (evidenced via representation on the board of directors or agreements with shareholders) but does not control or manage jointly control with third parties are accounted for using the equity method. The Group evaluates whether it exercises significant influence not only on the basis of its percentage ownership but also on the existence of qualitative factors such representation on the board of directors of the investee, its participation in decision-making processes, interchange of managerial personnel and access to technical information. The carrying amount of investments in associates includes related goodwill and the consolidated income statement reflects the share of profit or loss from operations of the associate. If the associate recognizes any gains or losses directly in equity, the Group also recognizes the corresponding portion of these gains or losses directly in its own equity. The Group assesses the existence of indicators of impairment of the investment in each associate at each reporting date in order to recognize any required valuation adjustments. To do so, the recoverable value of the investment as a whole is determined as described in Note 3.f. | i) | Financial assets and liabilities |
All normal purchases and sales of financial assets are recognized in the statement of financial position on the trade date, i.e. the date that the Company commits to purchase or sell the asset. The Telefónica Group classifies its financial instruments into four categories for initial recognition purposes: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. When appropriate, the Company re-evaluates the designation at each financial year end. Financial assets held for trading, i.e., investments made with the aim of realizing short-term returns as a result of price changes, are included in the category financial assets at fair value through profit or loss and presented as current assets.or non-current assets, depending on their maturity. Derivatives are classified as held for trading unless they are designated as effective hedging instruments. The Group also classifies certain financial instruments under this category when doing so eliminates or mitigates measurement or recognition inconsistencies that could arise from the application of other criteria for measuring assets and liabilities or for recognizing gains and losses on different bases. Also in this category are financial assets for which an investment and disposal strategy has been designed based on their fair value. Financial instruments included in this category are recorded at fair value and are remeasured at subsequent reporting dates at fair value, with any realized or unrealized gains or losses recognized in the income statement. Financial assets with fixed maturities that the Group has the positive intention and ability (– legal and financial) – to hold until maturity are classified as held-to-maturity and presented as “Current assets” or “Non-current assets,” depending on the time left until settlement. Financial assets falling into this category are measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement when the investments are settlement or impaired, as well as through the amortization process. Financial assets which the Group 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 are classified as available-for-sale. These investments are recorded under “Non-current assets,” unless it is probable and feasible that they will be sold within 12 months. Financial assets in this category are measured at fair value. Gains or losses arising from changes in fair value are recognized in equity at each financial year end until the investment is derecognized or determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognized in profit or loss. Dividends from available-for-sale investments are recognized in the income statement when the Group has the right to receive the dividend. Fair value is determined in accordance with the following criteria: | 1. | Listed securities on active markets: | | | | | | Fair value is considered to be the quoted market price at the closing date. | | | |
Fair value is considered to be quoted market price or other valuation references available at the closing date. | 2. | Unlisted securities: | | | | | | Fair value is determined using valuation techniques such as discounted cash flow analysis, option valuation models, or by reference to arm’s length market transactions. When fair value cannot be reliably determined, these |
Fair value is determined using valuation techniques such as discounted cash flow analysis, option valuation models, or by reference to arm’s length market transactions. Exceptionally, with equity instruments, when fair value cannot be reliably determined, the investments are carried at cost. |
Loans and receivables include financial assets with fixed or determinable payments that are not quoted in an active market and do not fall into any of the previous categories. These assets are carried at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement when the loans and receivables are derecognized or impaired, as well as through the amortization process. Trade receivables are recognized at the original invoice amount. A provisionvaluation adjustment is recorded when there is objective evidence of customer collection risk. The amount of the provisionvaluation adjustment is calculated as the difference between the carrying amount of the doubtful trade receivables and their recoverable amount. As a general rule, current trade receivables are not discounted. The Group assesses at each reporting date whether a financial asset is impaired. If there is objective evidence that an impairment loss on a financial asset carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. For equity instruments included in available-for-sale financial assets, the Company assesses individually for each security whether there is any objective evidence that an asset is impaired as a result of one or more events indicating that the carrying amount of the security will not be recovered. If there is objective evidence that an available-for-sale financial instrument is impaired, the cumulative loss recognized in equity, measured as the difference between the acquisition cost (net of any principal payments and amortization made) and the fair value at that date, less any impairment loss on that investment previously recognized in the income statement, is removed from equity and recognized in the consolidated income statement. Financial assets are only fully or partially derecognized when: | 1. | The rights to receive cash flows from the asset have expired;expired. |
| 2. | An obligation to pay the cash flows received from the asset to a third party has been assumed; orassumed. |
| 3. | The rights to receive cash flows from the asset have been transferred to a third party and all the risks and rewards of the asset have been substantially transferred. |
Cash and cash equivalents Cash and cash equivalents comprise cash on hand and at banks, demand deposits and other highly liquid investments with an original maturity of three months or less. These items are stated at historical cost, which does not differ significantly from realizable value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents are shown net of any outstanding bank overdrafts. Preferred stock Preferred shares are classified as a liability or equity instrument depending on the issuance terms. A preferred share issue is considered equity only when the issuer is not obliged to give cash or another financial instrument in the form of either principle repayment or dividend payment, whereas it is recorded as a financial liability on the statement of financial position whenever the Telefónica Group does not have the right to avoid cash payments. | Issues and interest-bearing debt |
These debts are recognized initially at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, these financial liabilities are measured at amortized cost using the effective interest rate method. Any difference between the cash received (net of transaction costs) and the repayment value is recognized in the income statement over the life of the debt. Interest-bearing debt is considered non-current when its maturity is over 12 months or the Telefónica Group has full discretion to defer settlement for at least another 12 months from the reporting date. Financial liabilities are derecognized when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender under substantially different terms, such an exchange is treated as a derecognition of the original liability and the recognition of a new liability, and the difference between the respective carrying amounts is recognized in the income statement. | Derivative financial instruments and hedge accounting |
Derivative financial instruments are initially recognized at fair value, normally equivalent to cost. Their carrying amounts are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. They are classified as current or non-current depending on whether they fall due within less than or after one year, respectively. Derivatives that meet all the criteria for consideration as long-term hedging instruments are recorded as non-current assets or liabilities, depending on their positive or negative values. The accounting treatment of any gain or loss resulting from changes in the fair value of a derivative depends on whether the derivative in question meets all the criteria for hedge accounting and, if appropriate, on the nature of the hedge. The Group designates certain derivatives as: | 1. | Fair value hedges,, when hedging the exposure to changes in the fair value of a recognized asset or liability; liability or a firm transaction; |
| 2. | Cash flow hedges,, when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction; or |
| 3. | Hedges of a net investment in a foreign operation. |
A hedge of the foreign currency risk inof a firm commitment ismay be accounted for as either a fair value or a cash flow hedge. Changes in fair value of derivatives that qualify as fair value hedges are recognized in the income statement, together with changes in the fair value of the hedged asset or liability attributable to the risk being hedged. Changes in the fair value of derivatives that qualify and have been assigned to hedge cash flows, which are highly effective, are recognized in equity. The portion considered ineffective is taken directly to the income statement. Fair value changes from hedges that relate to firm commitments or forecast transactions that result in the recognition of non-financial assets or liabilities are included in the initial measurement of those assets or liabilities. Otherwise, changes in fair value previously recognized in equity are recognized in the income statement in the period in which the hedged transaction affects profit or loss. An instrument designed to hedge foreign currency exposure from a net investment in a foreign operation is accounted for in a similar manner to cash flow hedges. The application of the Company’s corporate risk-management policies could result in financial risk-hedging transactions that make economic sense, yet do not comply with the criteria and effectiveness tests required by accounting policies to be treated as hedges. Alternatively, the Group may opt not to apply hedge accounting criteria in certain instances. In these cases, gains or losses resulting from changes in the fair value of derivatives are taken directly to the income statement. Transactions used to reduce the exchange rate risk relating to the income contributed by foreign subsidiaries are not treated as hedging transactions. From inception, the Group formally documents the hedging relationship between the derivative and the hedged item, as well as the associated risk management objectives and strategies. The documentation includes identification of the hedge instrument, the hedged item or transaction and the nature of the risk being hedged. In addition, it states how it will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Hedge effectiveness is assessed, prospectively and retrospectively, both at the inception of the hedge relationship and on a systematic basis throughout the life of the hedge. Hedge accounting is discontinued whenever the hedging instrument expires or is sold, terminated or settled, the hedge no longer meets the criteria for hedge accounting or the Company revokes the designation. In these instances, gains or losses accumulated in equity are not taken to the income statement until the forecast transaction or commitment affects profit or loss. However, if the hedged transaction is no longer expected to occur, the cumulative gains or losses recognized directly in equity are taken immediately to the income statement. The fair value of the derivative portfolio includes estimates based on calculations using observable market data, as well as specific pricing and risk-management tools commonly used by financial entities. Materials stored for use in investment projects and inventories for consumption and replacement are valued at the lower of weighted average cost and net realizable value. When the cash flows associated with the purchase of inventory are effectively hedged, the corresponding gains and losses accumulated in equity become part of the cost of the inventories acquired. Obsolete, defective or slow-moving inventories have been written down to estimated net realizable value. The recoverable amount of inventory is calculated based on inventory age and turnover. | k) | Treasury sharesshare instruments |
Treasury shares are stated at cost and deducted from equity. Any gain or loss obtained on the purchase, sale, issue or cancellation of treasury shares is recognized directly in equity. Call options on treasury shares to be settled through the physical delivery of a fixed number of shares at a fixed price are considered treasury share instruments. They are valued at the amount of premium paid and are presented as a reduction in equity. If the call options are exercised upon maturity, the amount previously recognized is reclassified as treasury shares together with the price paid. If the options are not exercised upon maturity, the amount is recognized directly in equity. Pensions and other employee obligations
| Pensions and other employee obligations |
Provisions required to cover the accrued liability for defined-benefit pension plans are determined using “the projected unit credit” actuarial valuation method. The calculation is based on demographic and financial assumptions for each country considering the macroeconomic environment. The discount rates are determined based on market yield curves. Plan assets are measured at fair value. Actuarial gains and losses on post-employment defined-benefit plans are recognized immediately in equity. For defined-contribution pension plans, the obligations are limited to the payment of the contributions, which are taken to the income statement as accrued. Provisions for post-employment benefits (e.g. early retirement or other) are calculated individually based on the terms agreed with the employees. In some cases, these may require actuarial valuations based on both demographic and financial assumptions. Provisions are recognized when the Group has a present obligation (legal or constructive), as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted, and the corresponding increase in the provision due to the passage of time is recognized as a finance cost. The Group has compensation systems linked to the market value of its shares, providing employees share options. Certain compensation plans are cash-settled, while others are equity-settled.equity-settled in others. For cash-settled share-based transactions, the total cost of the rights granted is recognized as an expense in the income statement over the vesting period with recognition of a corresponding liability (“(Performance period”period). The total cost of the options is measured initially at fair value at the grant date using statistical techniques, taking into account the terms and conditions established in each share option plan. At each subsequent reporting date, the Group reviews its estimate of fair value and the number of options it expects to be exercised,settled, remeasuring the liability, with any changes in fair value recognized in the income statementstatement. For equity-settled share option plans, fair value at the grant date is measured by applying statistical techniques or using benchmark securities. The cost is recognized, together with a corresponding increase in equity, over the vesting period. At each subsequent reporting date, the Company reviews its estimate of the number of options it expects to vest, with a corresponding adjustment to equity. This heading in the accompanying consolidated income statement includes all the expenses and credits arising from the corporate income tax levied on the Spanish Group companies and similar taxes applicable to the Group’s foreign operations. The income tax expense of each year includes both current and deferred taxes, where applicable. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred taxes are calculated based on a statement of financial position analysis of the temporary differences generated as a result of the difference between the tax bases of assets and liabilities and their respective carrying amounts. The main temporary differences arise due to discrepancies between the tax bases and carrying amounts of property, plant property and equipment, intangible assets, and non-deductible provisions, as well as differences in the fair value and tax bases of net assets acquired from a subsidiary, associate or joint venture. Furthermore, deferred taxes arise from unused tax credits and tax loss carryforwards. The Group determines deferred tax assets and liabilities by applying the tax rates that will be effective when the corresponding asset is received or the liability is settled, based on tax rates and tax laws that are enacted (or substantively enacted) at the reporting date. Deferred income tax assets and liabilities are not discounted to present value and are classified as non-current, irrespective of the date of their reversal. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax liabilities on investments in subsidiaries, branches, associates and joint ventures are not recognized if the parent company is in a position to control the timing of the reversal and if the reversal is unlikely to take place in the foreseeable future. Deferred income tax relating to items directly recognized in equity is recognized in equity. Deferred tax assets and liabilities resultingarising from business combinations are recognized in connection withthe initial recognition of the purchase price allocation. Subsequent increasesallocation of business combinations impact the amount of goodwill. However, subsequent changes in required deferred tax assets acquired in a business combination are deducted from goodwill.recognized as an adjustment to profit or loss. Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Revenue and expenses are recognized on the income statement based on an accruals basis; i.e. when the goods or services represented by them take place, regardless of when actual payment or collection occurs. The Telefónica Group principally obtains revenues from providing the following telecommunications services: traffic, connection fees, regular (normally monthly) network usage fees, interconnection, network and equipment leasing, handset sales and other services such as pay TV and value-added services (e.g. text or data messaging) and maintenance. Products and services may be sold separately or in promotional packages (bundled). Revenues from calls carried on Telefónica’s networks (traffic) entail an initial call establishment fee plus a variable call rate, based on call length, distance and type of service. Both wireline and wireless traffic is recognized as revenue as service is provided. For prepaid calls, the amount of unused traffic generates a deferred revenue recognized in “Trade and other payables” on the statement of financial position. Prepaid cards generally expire within 12 months and any deferred revenue from prepaid traffic is taken directly to the income statement when the card expires as the Group has no obligation to provide service after this date. Revenue from traffic sales and services at a fixed rate over a specified period of time (flat rate) are recognized on a straight-line basis over the period of time covered by the rate paid by the customer.
Connection fees arising when customers connect to the Group’s network are deferred and taken to the income statement throughout the average estimated customer relationship period, which varies by type of service. All related costs, except those related to network enlargement expenses, administrative expenses and overhead, are recognized in the income statement as incurred. Installment fees are taken to the income statement on a straight-line basis over the related period. Equipment leases and other services are taken to profit or loss as they are consumed. Interconnection feesrevenues from wireline-wireless and wireless-wireline calls and other customer services are recognized in the period in which the calls are made. Revenues from handset and equipment sales are recognized once the sale is considered complete, i.e., generally when delivered to the end customer. In the wireless telephony business there are loyalty campaigns whereby customers obtain points for the telephone traffic they generate. The amount assigned to points awarded is recognized as deferred income until the points are exchanged and recognized as sales or services based onaccording to the product or service chosen by the customer. This exchange can be for discounts on the purchase of handsets, traffic or other types of services baseddepending on the number of points earned and the type of contract involved. The accompanying consolidated statements of financial position include the related deferred revenue, based on an estimate of the value of the points accumulated at year end,year-end, under “Trade and other payables.” Bundle packages, which include different elements, are sold in the wireline, wireless and internet businesses. They are assessed to determine whether it is necessary to separate the separately identifiable elements and apply the corresponding revenue recognition policy to each element. Total package revenue is allocated among the identified elements based on their respective fair values (i.e. the fair value of each element relative to the total fair value of the package). As connection or initial activation fees, or upfront non-refundable fees, cannot be separately identifiable as elements in these types of packages, any revenues received from the customer for these items are allocated to the remaining elements. However, amounts contingent upon delivery of undelivered elements are not allocated to delivered elements. All expenses related to mixed promotional packages are taken to the income statement as incurred. | p) | Use of estimates, assumptions and judgments |
The key assumptions concerning the future and other relevant sources of uncertainty in estimates at the reporting date that could have a significant impact on the consolidated financial statements within the next financial year are discussed below. A significant change in the facts and circumstances on which these estimates and related judgments are based could have a material impact on the Group’s results and financial position. Property, plant and equipment, intangible assets and goodwill The accounting treatment of investments in property, plant and equipment and intangible assets entails the use of estimates to determine the useful life for depreciation and amortization purposes and to assess fair value at their acquisition dates for assets acquired in business combinations. Determining useful life requires making estimates in connection with future technological developments and alternative uses for assets. There is a significant element of judgment involved in making technological development assumptions, since the timing and scope of future technological advances are difficult to predict. When an item of property, plant and equipment or an intangible asset is considered to be impaired, the impairment loss is recognized in the income statement for the period. The decision to recognize an impairment loss involves estimates of the timing and amount of the impairment, as well as analysis of the reasons for the potential loss. Furthermore, additional factors, such as technological obsolescence, the suspension of certain services and other circumstantial changes are taken into account. The Telefónica Group evaluates its cash-generating units’ performance regularly to identify potential goodwill impairments. Determining the recoverable amount of the cash-generating units to which goodwill is allocated also entails the use of assumptions and estimates and requires a significant element of judgment. IncomeDeferred income taxes
The Group assesses the recoverability of deferred tax assets based on estimates of future earnings. The ability to recover these taxes depends ultimately on the Group’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, as well as estimates of taxable earnings, which are sourced from internal projections and are continuously updated to reflect the latest trends. The appropriate classificationrecognition 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 Group company income tax receipts and payments could differ from the estimates made by the Group as a result of changes in tax legislation or unforeseen transactions that could affect tax balances. Provisions Provisions are recognized when the Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. This obligation may be legal or constructive, deriving from inter alia regulations, contracts, normal practices or public commitments that lead third parties to reasonably expect that the Group will assume certain responsibilities. The amount of the provision is determined based on the best estimate of the outflow of resources required to settle the obligation, bearing in mind all available information at the statement of financial position date, including the opinions of independent experts such as legal counsel or consultants. Given the uncertainties inherent in the estimates used to determine the amount of provisions, actual outflows of resources may differ from the amounts recognized originally on the basis of the estimates. Revenue recognition Connection fees Connection fees, generated when customers connect to the Group’s network, are deferred and recognized as revenue over the average estimated customer relationship period. The estimate of the average estimated customer relationship period is based on the recent history of customer churn. Potential changes in estimates could lead to changes in both the amount and timing of the future recognition of revenues. Bundled offers Bundled offers that combine different elements are assessed to determine whether it is necessary to separate the different identifiable components and apply the corresponding revenue recognition policy to each element. Total package revenue is allocated among the identified elements based on their respective fair values. Determining fair values for each identified element requires estimates that are complex due to the nature of ourthe business. A change in estimates of fair values could affect the apportionment of revenue among the elements and, as a result, revenues in future years.the date of recognition of revenues. The consolidation methods applied are as follows: | - | Full consolidation method for companies over which the Company controls either by exercising effective control or by virtue of agreements with the other shareholders. |
| - | Proportionate consolidation method for companies which are jointly controlled with third parties (joint ventures). Similar items are grouped together such that the corresponding proportion of these companies’ overall assets, liabilities, expenses and revenues and cash flows are integrated on a line by line basis into the consolidated financial statements. |
| - | Equity method for companies in which there is significant influence, but not control or joint control with third parties. |
In certain circumstances, some of the Group’s investees may require a qualified majority to adopt certain resolutions. This, together with other factors, is taken into account when selecting the consolidation method. All material accounts and transactions between the consolidated companies were eliminated on consolidation. The returns generated on transactions involving capitalizable goods or services by subsidiaries with other Telefónica Group companies were eliminated on consolidation. The financial statements of the consolidated companies have the same financial year endyear-end as the parent company’s individual financial statements and are prepared using the same accounting policies. In the case of Group companies whose accounting and valuation methods differed from those of the Telefónica Group, adjustments were made on consolidation in order to present the consolidated financial statements on a uniform basis. The consolidated income statement and consolidated statement of cash flows include the revenues and expenses and cash flows of companies that are no longer in the Group up to the date on which the related holding was sold or the company was liquidated, and those of the new companies included in the Group from the date on which the holding was acquired or the company was incorporated through year end. Revenue and expenses associated with discontinued operations are presented in a separate line on the consolidated income statement. Discontinued operations are those with identifiable operations and cash flows (for both operating and management purposes) and that represent a line of business or geographic unit which has been disposed of or is available for sale. The share of non-controlling interests in the equity and results of the fully consolidated subsidiaries is presented under “Non-controlling interests”"Non-controlling interests" on the consolidated statement of financial position and income statement, respectively. | r) | Acquisitions and disposals of non-controlling interests |
AcquisitionsChanges in investments in subsidiaries without loss of equity shares of subsidiaries from non-controlling interests:control:
ThePrior to January 1, 2010, the effective date of IAS 27 (Amended) Consolidated and separate financial statements, the Telefónica Group treatstreated increases in equity investments of companies already controlled by the Group via purchases of non-controlling interests by recognizing any difference between the acquisition price and the carrying amount of the minoritynon-controlling interest’s participation as goodwill.
Disposals of investments in subsidiaries without relinquishing control:
In transactions involving the sale of investments in subsidiaries in which the Group retainsretained control, the Telefónica Group derecognizesderecognized the carrying amount of the shareholding sold, including any related goodwill. The difference between this amount and the sale price iswas recognized as a gain or loss in the consolidated income statement. Effective January 1, 2010, any increase or decrease in the percentage of ownership interests in subsidiaries that does not result in a loss of control is accounted for as a transaction with owners in their capacity as owners, which means that as of the aforementioned date, these transactions do not give rise to goodwill or generate profit or loss; any difference between the carrying amount of the non-controlling interests and the fair value of the consideration received or paid, as applicable, is recognized in equity. Commitments to acquire non-controlling interests (put options): Put options granted to non-controlling interests of subsidiaries are measured at the exercise price and classified as a financial liability, with a deduction from non-controlling interests on the consolidated statement of financial position. Whereposition at each reporting date. Prior to January 1, 2010, the effective date of IAS 27 (Amended) Consolidated and separate financial statements, where the exercise price exceedsexceeded the balance of non-controlling interests, the difference iswas recognized as an increase in the goodwill of the subsidiary. At each reporting date, the difference iswas adjusted based on the exercise price of the options and the carrying amount of non-controlling interests. As of January 1, 2010, the effect of this adjustment is recognized in equity in line with the treatment of transactions with owners described in the previous paragraphs. | s) | New IFRS and interpretations of the International Financial ReportingIFRS Interpretations Committee (IFRIC) |
The accounting policies applied in the preparation of the financial statements for the year ended December 31, 20092011 are consistent with those used in the preparation of the Group’s consolidated annual financial statements for the year ended December 31, 2008,2010, except for the adoptionapplication of new standards, amendments to standards and interpretations published by the International Accounting Standards Board (IASB) and the International Financial ReportingIFRS Interpretations Committee (IFRIC), and adopted by the European Union, effective as of January 1, 2009,2011, noted below: | §- | Revised IAS 24, AmendmentRelated party disclosures |
This revised standard includes the following changes: (i) it includes a partial exemption for entities with government shareholdings, which requires disclosures of information on balances and transactions with these entities only if they are significant, taken individually or collectively; and (ii) includes a new revised definition of a “related party.” The adoption of this standard has had no impact on the disclosures included in the Group’s consolidated financial statements. | - | Amendments to IAS 23, 32, Borrowing costsClassification of rights issues |
The amendment consistspurpose of this change is to clarify that rights issues that allow a set number of own equity instruments to be acquired for a fixed exercise price are classified as equity, regardless of the eliminationcurrency in which the exercise price is denominated, provided that the issue is aimed at all holders of the possibility to immediately recognizesame class of shares in profit or loss the borrowing costs relatedproportion to the production or developmentnumber of qualifying assets. This amendmentshares they already own. The adoption of these changes has had no impact on the accounting policies applied by Telefónica. | § | Amendment to IAS 1, Revised Presentation of Financial Statements
|
The revised standard separates owner from non-owner changes in equity. The statement of changes in equity includes only details of transaction with owners, with non-owner changes presented as a single line. In addition, the standard introduces the statement of comprehensive income which can be presented in one single statement or in two linked statements. Telefónica has elected to present two statements. This change is not mandatory, but the Group has decided to use the proposed titles, which are:
| § | statement of financial position, instead of “balance sheet” |
| § | statement of comprehensive income, instead of “statement of recognized income and expense” |
| § | statement of changes in equity instead of “movements in equity” |
| § | statement of cash flows instead of “cash flow statement” |
| § | Amendment to IFRS 2, Share-based Payment: Vesting Conditions and Cancellations
|
This amendment clarifies the definition of vesting conditions and prescribes the accounting treatment of an award that is cancelled because a non-vesting condition is not met. The adoption of this amendment has not had any impact on the financial position or performanceresults of the Group.
| § | Amendments to IAS 32, Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation
|
These amendments include a limited scope exemption for puttable financial instruments to be classified as equity if they fulfill specified criteria. The adoption of this amendment has not had any impact on the financial position or performance of the Group.
| § | Improvements to IFRSs (May 2008)2010) |
These improvements establish a broad amountseries of amendments to current IFRSsIFRS with the aim of removing inconsistencies and clarifying wording. These improvements did notamendments have any impact on the financial position or performance of the Group. | § | Amendment to IFRS 7, Financial Instruments: Disclosures
|
This amendment enhances the disclosure required about fair value measurements and liquidity risk. In addition, it introduces a three-level hierarchy of fair value measurement and the requirement to disclose any kind of change in the method of measuring fair value and the reasons behind it. The adoption of this amendment has not had anyno impact on the results or financial position or performance of the Group.
| §- | Amendments to IAS 39 andIFRIC 9, Embedded derivatives19, Extinguishing financial liabilities with equity instruments
|
These amendments clarifyThis interpretation establishes that: (i) when the impact that a reclassificationterms of a financial asset outliability are renegotiated with the creditor and the creditor accepts the company’s equity instruments to extinguish all or part of the liability, the instruments issued are considered to be part of the consideration paid to extinguish the financial liability; (ii) these instruments must be measured at their fair value, through profit or loss category has onunless this cannot be reliably estimated, in which case the assessment of whether an embedded derivative shall be separated from its host contract. Additionally, it prohibits the reclassification when the embedded derivative is not subject to a separate valuation upon the moment of reclassification of a hybrid contract out of the aforementioned category. new instruments must reflect the fair value of the financial liability settled; and (iii) the difference between the carrying amount of the extinguished financial liability and the initial value of the equity instrument issued is recognized in the income statement for the period. The adoption of these criteria introduced by this amendmentnew interpretation has not had anyno impact on the financial position or performance of the Group.
| § | IFRIC 12, Service Concession Arrangements |
This interpretation provides guidance on the accounting by operators for obligations assumed and related rights acquired under service concession arrangements.The adoption of this amendment has not had any impact on the financial position or performanceresults of the Group.
| §- | Amendments to IFRIC 13, Customer Loyalty Programmes14, Prepayments when there is a minimum funding requirement |
This interpretation establisheschange is applied in specific situations in which the company is obligated to make minimum annual contributions to its defined benefit plan and make prepayments in order to meet this obligation. The amendment allows the company to consider the economic benefits that entities that have programs which award points or credits to their customersarise from such prepayments as the result of a commercial transaction, which in the future will be redeemed for free or discounted products or services, must treat these points as part of the commercial transaction that generates them. In other words, it is a transaction with multiple components, combining the sale of the product or service itself and the sale of points or credits, therefore such that a part of the amount earned must be allocated to the points awarded and its recognition deferred until their redemption. The portion corresponding to the points will be determined by reference to their fair value.an asset. The adoption of this amendmentthese criteria has not had a significantno impact on the financial position or performanceresults of the Group. | § | IFRIC 15,Agreements for the Construction of Real Estate
|
This interpretation refers to agreements for the construction of real estate and addresses to related issues: it determines whether the construction of real estate is within the scope of IAS 11, Construction Contracts, or IAS 18, Revenue and, when revenue from the construction of real estate should be recognized. The adoption of this amendment has not had any impact on the financial position or performance of the Group.
| § | IFRIC 16,Hedges of a Net Investment in a Foreign Operation
|
This interpretation establishes the criteria for the recognition of hedges of a net investment in foreign operations, including the foreign currency risks that qualify for hedge accounting in the hedge of a net investment, where within the group the hedging instruments can be held and how an entity should determine the amount of foreign currency gain or loss relating to both the hedging instrument and the hedged item that must be recognized in profit or loss on disposal of the investment. The adoption of this amendment has not had any impact on the financial position or performance of the Group.
| § | IFRIC 18, Transfers of Assets from Customers |
This interpretation applies to deliveries of assets from customers as of July 1, 2009. This interpretation establishes the criteria for accounting transactions in which an entity receives from a customer an item of property, plant and equipment (or cash for their acquisition or construction) that the entity must use either to connect the customer to a network and/or to
provide the customer with ongoing access to a supply of goods or services. The adoption of this amendment has not had any impact on the financial position or performance of the Group.
In addition, the Amendment to IAS 39 Hedges of Transactions between Segments, included in Improvements to IFRS published in April 2009, is effective for annual periods beginning on or after January 1, 2009, but has not been adopted by the European Union at the date of preparation of these consolidated financial statements. This amendment clarifies that hedge accounting may not be applied to transactions between segments in accordance with the principle of IAS 39, which does not allow hedge accounting to be applied to intragroup transactions in the consolidated financial statements. The application of this interpretation would not have had an impact on the 2009 consolidated financial statements.
New IFRSstandards and Interpretations of the International Financial Reporting Interpretations Committee (IFRIC)IFRIC interpretations issued but not effectiveeffect as of December 31, 20092011 At the date of preparation of the accompanying consolidated financial statements, the following IFRS, amendments and IFRIC interpretations had been published, but their application was not mandatory: Standards and amendments | Mandatory application: annual periods beginning on or after | IFRS 9 | Financial Instrumentsinstruments | January 1, 2015 | IFRS 10 | Consolidated financial statements | January 1, 2013 | IFRS 11 | Joint arrangements | January 1, 2013 | IFRS 12 | Disclosures of interests in other entities | January 1, 2013 | IFRS 13 | Fair value measurement | January 1, 2013 | Revised IFRS 3IAS 19 | Business Combinations | July 1, 2009 | Amendment to IAS 27 | Consolidated and Separate Financial Statements | July 1, 2009 | Improvements to IFRSs (April 2009)Employee benefits | January 1, 2010 (*)2013 | Revised IAS 2427 | Related Party DisclosuresSeparate financial statements | January 1, 2013 | Revised IAS 28 | Investments in associates and joint ventures | January 1, 2013 | Amendments to IFRS 7 | Disclosures - Transfers of financial assets | July 1, 2011 | Disclosures – Offsetting of financial assets and liabilities | January 1, 2013 | Disclosures - Transition to IFRS 9 | January 1, 2015 | Amendments to IAS 391 | Eligible Hedged ItemsPresentation of items of other comprehensive income | July 1, 20092012 | AmendmentAmendments to IFRS 2IAS 12 | Group Cash-Settled Share-Based Payment TransactionsDeferred tax: Recovery of underlying assets | January 1, 20102012 | Amendments to IAS 32 | ClassificationOffsetting of Rights Issuesfinancial assets and liabilities | FebruaryJanuary 1, 20102014 |
(*) The amendments to IFRS 2, IAS 38 (regarding intangible assets acquired in business combinations) IFRIC 9 and IFRIC 16 become effective for all annual periods beginning on or after July 1, 2009. In addition, no effective date has been established for the additional guidance to the appendix to IAS 18 for determining whether an entity is acting as a principal or as an agent, as this appendix does not form part of the standard. |
Interpretations | Mandatory application: annual periods beginning on or after | IFRIC 1720 | DistributionsStripping costs in the production phase of Non-Cash Assets to Owners | July 1, 2009 | IFRIC 19 | Extinguishing Financial Liabilities with Equity Instruments | July 1, 2010 | Amendment to IFRIC 14 | Prepayment of Minimum Funding Requirementsa surface mine | January 1, 20112013 | |
The Group is currently assessing the impact of the application of these standards, amendments and interpretations. Based on the analyses made to date, the Group estimates that their adoption will not have a significant impact on the consolidated financial statements in the initial period of application. However, the changes introduced by the revised IFRS 3 and amendments to IAS 27 will affect future acquisitions and transactions with non-controlling interests carried out on or after January 1, 2010, as well as the subsequent recognition of tax assets acquired in business combinations prior to that date, as provided for in the transitional provisions. Meanwhile, the changes introduced by IFRS 9 will affect financial assetsinstruments and future transactions with financial assets carried out on or after January 1, 2013.2015. Combining the wireline and wireless telephony services underscores the need to manage the business by region in order to offer customers the best integrated solutions and support wireless-wireline convergence. To implement this management model, the Group hashad three large business areas:areas in 2011: Telefónica Spain, Telefónica Europe and Telefónica Latin America, with each overseeing the integrated business. This forms the basis of the segment reporting in these consolidated financial statements. Telefónica Spain oversees the wireline and wireless telephony, broadband, internet, data, broadband TV, value added services operations and their development in Spain. Telefónica Latin America oversees the same operations in Latin America. Telefónica Europe oversees the wireline, wireless, broadband, value added services and data operations in the UK, Germany, the Isle of Man, Ireland, the Czech Republic and the Slovak Republic. The Telefónica Group is also involved in the media and contact center businesses through investments in Telefónica de Contenidos and Atento, included under “Other and eliminations” together with the consolidation adjustments.adjustments and the remaining Group companies. The segment reporting takes into account the impact of the purchase price allocation (PPA) to assets acquired and the liabilities assumed from the companies included in each segment. The assets and liabilities presented in each segment are those managed by the heads of each segment.segment, irrespective of their legal structure. Telefónica uses operating income before depreciation and amortization (OIBDA) to track the performance of the business and to establish operating and strategic targets. OIBDA is calculated by excluding depreciation and amortization from operating income to eliminate the impact of investments in fixed assets that cannot be directly controlled by management in the short term. Therefore, it is considered to be more important for investors as it provides a gauge of segment operating performance and profitability using the same measures utilized by management. This metric also allows for comparisons with other companies in the telecommunications sector without consideration of their asset structure. OIBDA is a commonly reported measure and is widely used among analysts, investors and other interested parties in the telecommunications industry, although not a measure explicitly defined in IFRS, and therefore, may not be comparable to similar indicators used by other companies. OIBDA should not be considered as an alternative to operating income as a measurement of our consolidated operating results or as an alternative to consolidated cash flows from operating activities as a measurement of our liquidity. The Telefónica Group manages its borrowing activities and tax implications centrally. Therefore, it does not disclose the related assets, liabilities, revenue and expenses breakdown by reportable segments. ForIn order to present the presentation of the segment reporting,information by region, revenue and expenses arising from intra-group invoicing for the use of the trademark and management services and that do not affect the Group’s consolidated results have been eliminated from the operating results of each Group segment.region, while centrally-managed projects have been incorporated at a regional level. These adjustments have no impact on the Group's consolidated results.
Inter-segment transactions are carried out at market prices. Key information for these segments is as follows:
2009 | Millions of euros | Telefónica Spain | Telefónica Latin America | Telefónica Europe | Other and eliminations | Total Group | Revenue from operations | 19,703 | 22,983 | 13,533 | 512 | 56,731 | External sales | 19,354 | 22,786 | 13,468 | 1,123 | 56,731 | Inter-segment sales | 349 | 197 | 65 | (611) | - | Other operating income and expenses | (9,946) | (13,840) | (9,623) | (719) | (34,128) | Depreciation and amortization | (2,140) | (3,793) | (2,895) | (128) | (8,956) | OPERATING INCOME | 7,617 | 5,350 | 1,015 | (335) | 13,647 | CAPITAL EXPENDITURE | 1,863 | 3,450 | 1,728 | 216 | 7,257 | INVESTMENTS IN ASSOCIATES | 3 | 2,453 | - | 2,480 | 4,936 | NON-CURRENT ASSETS | 14,082 | 25,016 | 26,962 | 1,351 | 67,411 | TOTAL ALLOCATED ASSETS | 26,156 | 44,678 | 32,097 | 5,210 | 108,141 | TOTAL ALLOCATED LIABILITIES | 13,363 | 22,862 | 6,435 | 41,207 | 83,867 |
2008 | Millions of euros | Telefónica Spain | Telefónica Latin America | Telefónica Europe | Other and eliminations | Total Group | Revenue from operations | 20,838 | 22,174 | 14,309 | 625 | 57,946 | External sales | 20,518 | 21,974 | 14,253 | 1,201 | 57,946 | Inter-segment sales | 320 | 200 | 56 | (576) | - | Other operating income and expenses | (10,553) | (13,729) | (10,129) | (616) | (35,027) | Depreciation and amortization | (2,239) | (3,645) | (3,035) | (127) | (9,046) | OPERATING INCOME | 8,046 | 4,800 | 1,145 | (118) | 13,873 | CAPITAL EXPENDITURE | 2,208 | 4,035 | 2,072 | 86 | 8,401 | INVESTMENTS IN ASSOCIATES | 99 | 107 | - | 2,571 | 2,777 | NON-CURRENT ASSETS | 14,372 | 21,959 | 27,265 | 1,193 | 64,789 | TOTAL ALLOCATED ASSETS | 32,273 | 37,942 | 32,726 | (3,045) | 99,896 | TOTAL ALLOCATED LIABILITIES | 20,754 | 21,998 | 6,420 | 31,162 | 80,334 |
2007 | Millions of euros | Telefónica Spain | Telefónica Latin America | Telefónica Europe | Other and eliminations | Total Group | Revenue from operations | 20,683 | 20,078 | 14,458 | 1,222 | 56,441 | External sales | 20,423 | 19,901 | 14,417 | 1,700 | 56,441 | Inter-segment sales | 260 | 177 | 41 | (478) | - | Other operating income and expenses | (11,235) | (12,957) | (9,481) | (*) 56 | (33,617) | Depreciation and amortization | (2,381) | (3,559) | (3,386) | (110) | (9,436) | OPERATING INCOME | 7,067 | 3,562 | 1,591 | 1,168 | 13,388 | CAPITAL EXPENDITURE | 2,381 | 3,343 | 2,125 | 178 | 8,027 | INVESTMENTS IN ASSOCIATES | 95 | 70 | - | 3,023 | 3,188 | NON-CURRENT ASSETS | 14,451 | 23,215 | 31,658 | 1,226 | 70,550 | TOTAL ALLOCATED ASSETS | 34,423 | 37,618 | 39,144 | (5,312) | 105,873 | TOTAL ALLOCATED LIABILITIES | 22,014 | 22,205 | 10,215 | 28,584 | 83,018 |
(*) “Other operating income and expenses” for the “Other and inter-group eliminations” segment includes the 1,368 million euro gain on the sale of Endemol (see Note 19).
2011 | | Millions of euros | | Telefónica Spain | | | Telefónica Latin America | | | Telefónica Europe | | | Other and eliminations | | | Total Group | | Revenues | | | 17,284 | | | | 29,237 | | | | 15,524 | | | | 792 | | | | 62,837 | | External revenues | | | 16,941 | | | | 29,138 | | | | 15,212 | | | | 1,546 | | | | 62,837 | | Inter-segment revenues | | | 343 | | | | 99 | | | | 312 | | | | (754 | ) | | | - | | Other operating income and expenses | | | (12,212 | ) | | | (18,296 | ) | | | (11,291 | ) | | | (828 | ) | | | (42,627 | ) | OIBDA | | | 5,072 | | | | 10,941 | | | | 4,233 | | | | (36 | ) | | | 20,210 | | Depreciation and amortization | | | (2,088 | ) | | | (4,783 | ) | | | (3,117 | ) | | | (158 | ) | | | (10,146 | ) | OPERATING INCOME | | | 2,984 | | | | 6,158 | | | | 1,116 | | | | (194 | ) | | | 10,064 | | CAPITAL EXPENDITURE | | | 2,914 | | | | 5,299 | | | | 1,705 | | | | 306 | | | | 10,224 | | INVESTMENTS IN ASSOCIATES | | | 1 | | | | 3 | | | | - | | | | 5,061 | | | | 5,065 | | FIXED ASSETS | | | 15,070 | | | | 43,890 | | | | 28,133 | | | | 1,541 | | | | 88,634 | | TOTAL ALLOCATED ASSETS | | | 21,428 | | | | 62,923 | | | | 35,247 | | | | 10,025 | | | | 129,626 | | TOTAL ALLOCATED LIABILITIES | | | 12,768 | | | | 27,289 | | | | 9,754 | | | | 52,429 | | | | 102,243 | |
2010 (revised1) | | Millions of euros | | Telefónica Spain | | | Telefónica Latin America | | | Telefónica Europe | | | Other and eliminations | | | Total Group | | Revenues | | | 18,711 | | | | 25,756 | | | | 15,724 | | | | 546 | | | | 60,737 | | External revenues | | | 18,301 | | | | 25,618 | | | | 15,407 | | | | 1,411 | | | | 60,737 | | Inter-segment revenues | | | 410 | | | | 138 | | | | 317 | | | | (865 | ) | | | - | | Other operating income and expenses | | | (10,191 | ) | | | (12,043 | ) | | | (11,644 | ) | | | (1,082 | ) | | | (34,960 | ) | OIBDA | | | 8,520 | | | | 13,713 | | | | 4,080 | | | | (536 | ) | | | 25,777 | | Depreciation and amortization | | | (2,009 | ) | | | (3,954 | ) | | | (3,201 | ) | | | (139 | ) | | | (9,303 | ) | OPERATING INCOME | | | 6,511 | | | | 9,759 | | | | 879 | | | | (675 | ) | | | 16,474 | | CAPITAL EXPENDITURE | | | 2,021 | | | | 5,455 | | | | 3,152 | | | | 216 | | | | 10,844 | | INVESTMENTS IN ASSOCIATES | | | 1 | | | | 71 | | | | - | | | | 5,140 | | | | 5,212 | | FIXED ASSETS | | | 14,179 | | | | 45,459 | | | | 29,329 | | | | 1,438 | | | | 90,405 | | TOTAL ALLOCATED ASSETS | | | 23,291 | | | | 64,963 | | | | 36,199 | | | | 5,322 | | | | 129,775 | | TOTAL ALLOCATED LIABILITIES | | | 11,021 | | | | 29,093 | | | | 10,333 | | | | 47,644 | | | | 98,091 | |
1 Revised to present, for comparative purposes, results for Telefónica International Wholesale Services (TIWS) and Telefónica North America (TNA), formerly part of Telefónica Latin America, and consolidated within Telefónica Europe since January 1, 2011.
2009 (revised1) | | Millions of euros | | Telefónica Spain | | | Telefónica Latin America | | | Telefónica Europe | | | Other and eliminations | | | Total Group | | Revenues | | | 19,703 | | | | 22,709 | | | | 13,954 | | | | 365 | | | | 56,731 | | External revenues | | | 19,354 | | | | 22,600 | | | | 13,653 | | | | 1,124 | | | | 56,731 | | Inter-segment revenues | | | 349 | | | | 109 | | | | 301 | | | | (759 | ) | | | - | | Other operating income and expenses | | | (9,946 | ) | | | (13,668 | ) | | | (9,955 | ) | | | (559 | ) | | | (34,128 | ) | OIBDA | | | 9,757 | | | | 9,041 | | | | 3,999 | | | | (194 | ) | | | 22,603 | | Depreciation and amortization | | | (2,140 | ) | | | (3,700 | ) | | | (2,988 | ) | | | (128 | ) | | | (8,956 | ) | OPERATING INCOME | | | 7,617 | | | | 5,341 | | | | 1,011 | | | | (322 | ) | | | 13,647 | | CAPITAL EXPENDITURE | | | 1,863 | | | | 3,377 | | | | 1,801 | | | | 216 | | | | 7,257 | | INVESTMENTS IN ASSOCIATES | | | 3 | | | | 152 | | | | - | | | | 4,781 | | | | 4,936 | | FIXED ASSETS | | | 14,082 | | | | 24,441 | | | | 27,537 | | | | 1,351 | | | | 67,411 | | TOTAL ALLOCATED ASSETS | | | 26,156 | | | | 42,336 | | | | 32,994 | | | | 6,655 | | | | 108,141 | | TOTAL ALLOCATED LIABILITIES | | | 13,363 | | | | 22,614 | | | | 6,769 | | | | 41,121 | | | | 83,867 | |
1 Revised to present, for comparative purposes, results for Telefónica International Wholesale Services (TIWS) and Telefónica North America (TNA), formerly part of Telefónica Latin America, and consolidated within Telefónica Europe since January 1, 2011.
The breakdowncomposition of the segment revenues, from operationsdetailed by business and the main countries in which the Group operates, is as follows: | | Millions of euros | | | | 2011 | | | 2010 (revised1) | | | 2009 (revised1) | | Country | | Fixed | | | Mobile | | | Other and eliminations | | | Total | | | Fixed | | | Mobile | | | Other and eliminations | | | Total | | | Fixed | | | Mobile | | | Other and eliminations | | | Total | | Spain | | | 10,631 | | | | 7,747 | | | | (1,094 | ) | | | 17,284 | | | | 11,397 | | | | 8,550 | | | | (1,236 | ) | | | 18,711 | | | | 12,167 | | | | 8,965 | | | | (1,429 | ) | | | 19,703 | | Latin America | | | | | | | | | | | | | | | 29,237 | | | | | | | | | | | | | | | | 25,756 | | | | | | | | | | | | | | | | 22,709 | | Brazil | | | 5,890 | | | | 8,436 | | | | (1,799 | ) | | | 14,326 | | | | 6,843 | | | | 4,959 | | | | (683 | ) | | | 11,119 | | | | 5,766 | | | | 3,036 | | | | (426 | ) | | | 8,376 | | Argentina | | | 1,237 | | | | 2,039 | | | | (102 | ) | | | 3,174 | | | | 1,187 | | | | 1,979 | | | | (93 | ) | | | 3,073 | | | | 1,047 | | | | 1,643 | | | | (81 | ) | | | 2,609 | | Chile | | | 1,037 | | | | 1,399 | | | | (126 | ) | | | 2,310 | | | | 1,038 | | | | 1,266 | | | | (107 | ) | | | 2,197 | | | | 893 | | | | 1,010 | | | | (72 | ) | | | 1,831 | | Peru | | | 1,069 | | | | 1,088 | | | | (127 | ) | | | 2,030 | | | | 1,097 | | | | 1,001 | | | | (138 | ) | | | 1,960 | | | | 1,006 | | | | 840 | | | | (130 | ) | | | 1,716 | | Colombia | | | 682 | | | | 916 | | | | (37 | ) | | | 1,561 | | | | 700 | | | | 872 | | | | (43 | ) | | | 1,529 | | | | 615 | | | | 685 | | | | (31 | ) | | | 1,269 | | Mexico | | | N/A | | | | 1,557 | | | | N/A | | | | 1,557 | | | | N/A | | | | 1,832 | | | | - | | | | 1,832 | | | | N/A | | | | 1,552 | | | | - | | | | 1,552 | | Venezuela | | | N/A | | | | 2,688 | | | | N/A | | | | 2,688 | | | | N/A | | | | 2,318 | | | | - | | | | 2,318 | | | | N/A | | | | 3,773 | | | | - | | | | 3,773 | | Remaining operators and inter-segment eliminations | | | | | | | | | | | | | | | 1,591 | | | | | | | | | | | | | | | | 1,728 | | | | | | | | | | | | | | | | 1,583 | | Europe | | | | | | | | | | | | | | | 15,524 | | | | | | | | | | | | | | | | 15,724 | | | | | | | | | | | | | | | | 13,954 | | UK | | | 164 | | | | 6,762 | | | | - | | | | 6,926 | | | | 134 | | | | 7,067 | | | | - | | | | 7,201 | | | | 70 | | | | 6,442 | | | | - | | | | 6,512 | | Germany | | | 1,426 | | | | 3,609 | | | | - | | | | 5,035 | | | | 1,412 | | | | 3,414 | | | | - | | | | 4,826 | | | | 558 | | | | 3,188 | | | | - | | | | 3,746 | | Czech Republic | | | 913 | | | | 1,217 | | | | - | | | | 2,130 | | | | 960 | | | | 1,237 | | | | - | | | | 2,197 | | | | 1,015 | | | | 1,248 | | | | (3 | ) | | | 2,260 | | Ireland | | | 12 | | | | 711 | | | | N/A | | | | 723 | | | | 4 | | | | 844 | | | | - | | | | 848 | | | | 1 | | | | 904 | | | | - | | | | 905 | | Remaining operators and inter-segment eliminations | | | | | | | | | | | | | | | 710 | | | | | | | | | | | | | | | | 652 | | | | | | | | | | | | | | | | 531 | | Other and inter-segment eliminations | | | | | | | | | | | | | | | 792 | | | | | | | | | | | | | | | | 546 | | | | | | | | | | | | | | | | 365 | | Total Group | | | | | | | | | | | | | | | 62,837 | | | | | | | | | | | | | | | | 60,737 | | | | | | | | | | | | | | | | 56,731 | |
| Millions of euros | | 2009 | 2008 | 2007 | Country | Wireline | Wireless | Other and eliminations | Total | Wireline | Wireless | Other and eliminations | Total | Wireline | Wireless | Other and eliminations | Total | Spain | 12,167 | 8,965 | (1,429) | 19,703 | 12,581 | 9,684 | (1,427) | 20,838 | 12,401 | 9,693 | (1,411) | 20,683 | Latin America | | | | 22,983 | | | | 22,174 | | | | 20,078 | Brazil | 5,766 | 3,036 | (426) | 8,376 | 6,085 | 2,932 | (411) | 8,606 | 5,619 | 2,396 | (353) | 7,662 | Argentina | 1,047 | 1,643 | (81) | 2,609 | 1,027 | 1,585 | (85) | 2,527 | 984 | 1,353 | (73) | 2,264 | Chile | 893 | 1,010 | (72) | 1,831 | 974 | 1,051 | (89) | 1,936 | 974 | 930 | (90) | 1,814 | Peru | 1,006 | 840 | (130) | 1,716 | 977 | 773 | (123) | 1,627 | 1,031 | 603 | (121) | 1,513 | Colombia | 615 | 685 | (31) | 1,269 | 710 | 815 | (35) | 1,490 | 739 | 869 | (39) | 1,569 | Mexico | N/A | 1,552 | N/A | 1,552 | N/A | 1,631 | N/A | 1,631 | N/A | 1,431 | N/A | 1,431 | Venezuela | N/A | 3,773 | N/A | 3,773 | N/A | 2,769 | N/A | 2,769 | N/A | 2,392 | N/A | 2,392 | Remaining operators and inter-segment eliminations | | | | 1,857 | | | | 1,588 | | | | 1,433 | Europe | | | | 13,533 | | | | 14,309 | | | | 14,458 | UK | 70 | 6,442 | - | 6,512 | 33 | 7,019 | N/A | 7,052 | 10 | 7,393 | N/A | 7,403 | Germany | 558 | 3,188 | - | 3,746 | 496 | 3,099 | N/A | 3,595 | 353 | 3,188 | N/A | 3,541 | Czech Republic | 1,015 | 1,248 | (3) | 2,260 | 1,183 | 1,388 | 10 | 2,581 | 1,067 | 1,192 | (2) | 2,257 | Ireland | 1 | 904 | N/A | 905 | N/A | 957 | N/A | 957 | N/A | 991 | N/A | 991 | Remaining operators and inter-segment eliminations | | | | 110 | | | | 124 | | | | 266 | Other and inter-segment eliminations | | | | 512 | | | | 625 | | | | 1,222 | Total | | | | 56,731 | | | | 57,946 | | | | 56,441 |
1 Revised to present, for comparative purposes, results for Telefónica International Wholesale Services (TIWS) and Telefónica North America (TNA), formerly part of Telefónica Latin America, and consolidated within Telefónica Europe since January 1, 2011. On September 5, 2011, the Executive Committee of Telefónica, S.A.’s Board of Directors approved a new organizational structure, which will become fully operational starting in 2012. The main differences are: | · | The streamlining and balancing of the business’ geographical mix based on stages of market development, leading to the configuration of two large blocks: Europe and Latin America. |
| · | The creation of a new business unit, Telefónica Digital, headquartered in London with regional offices in Madrid, Sao Paulo, Silicon Valley and certain strategic hubs in Asia. Its mission will be to bolster Telefónica’s place in the digital world and leverage any growth opportunities arising in this environment, driving innovation, strengthening the product and service portfolio and maximizing the advantages of its large customer base. |
| · | The creation of a Global Resources operating unit designed to ensure the profitability and sustainability of the business by leveraging and unlocking economies of scale, as well as driving Telefónica’s transformation into a fully global group. |
This new organizational structure will revolve around a nine-member Executive Committee, backed by a Transformation Committee composed of the company’s senior managers. For information purposes, segment information for 2011 in accordance with the new definition of the Telefónica Group regions is as follows: 2011 | | Millions of euros | | Telefónica Latin America | | | Telefónica Europe | | | Other and eliminations | | | Total Group | | Revenues | | | 28,941 | | | | 32,074 | | | | 1,822 | | | | 62,837 | | External revenues | | | 28,831 | | | | 31,891 | | | | 2,115 | | | | 62,837 | | Inter-segment revenues | | | 110 | | | | 183 | | | | (293 | ) | | | - | | Other operating income and expenses | | | (18,057 | ) | | | (22,803 | ) | | | (1,767 | ) | | | (42,627 | ) | OIBDA | | | 10,884 | | | | 9,271 | | | | 55 | | | | 20,210 | | Depreciation and amortization | | | (4,770 | ) | | | (5,076 | ) | | | (300 | ) | | | (10,146 | ) | OPERATING INCOME | | | 6,114 | | | | 4,195 | | | | (245 | ) | | | 10,064 | | CAPITAL EXPENDITURE | | | 5,263 | | | | 4,515 | | | | 446 | | | | 10,224 | | INVESTMENTS IN ASSOCIATES | | | 3 | | | | 1 | | | | 5,061 | | | | 5,065 | | FIXED ASSETS | | | 43,716 | | | | 42,584 | | | | 2,334 | | | | 88,634 | | TOTAL ALLOCATED ASSETS | | | 65,475 | | | | 55,738 | | | | 8,410 | | | | 129,623 | | TOTAL ALLOCATED LIABILITIES | | | 27,124 | | | | 21,910 | | | | 53,206 | | | | 102,240 | |
(5) | BUSINESS COMBINATIONS AND ACQUISITIONS OF NON-CONTROLLING INTERESTS |
Business combinations:combinations 2011 Acquisition of Acens Technologies, S.L. On June 7, 2011, the Telefónica Group formalized the acquisition of 100% of Acens Technologies, S.L., a leader in hosting/housing in Spain for small- and medium-sized enterprises. The consideration paid for the purchase was approximately 55 million euros. After the preliminary allocation of the purchase price to the assets acquired and the liabilities assumed, the goodwill generated on the transaction was 52 million euros. 2010 Acquisition of Brasilcel, N.V. As described in Note 2.b), on July 28, 2010, Telefónica and Portugal Telecom signed an agreement for the acquisition by Telefónica of 50% of the capital stock of Brasilcel, N.V. (company then jointly owned by Telefónica and Portugal Telecom, which owned shares representing, approximately, 60% of the aforementioned capital stock of Brazilian company Vivo Participações, S.A.). The acquisition price for the aforementioned capital stock of Brasilcel was 7,500 million euros, of which 4,500 million euros was paid at the closing of the transaction on September 27, 2010, 1,000 million euros on December 30, 2010, and the remaining 2,000 million euros on October 31, 2011. Furthermore, the aforementioned agreement established that Portugal Telecom waived its right to the declared dividend payable by Brasilcel of approximately 49 million euros. In accordance with IFRS 3, the Group opted to record at fair value the non-controlling interests of Vivo Participaçoes, S.A. corresponding to non-voting shares, determining such fair value based on a discounted cash flows valuation determined in accordance with the company's business plans. In 2010, Telefónica proceeded to recognize and value the identifiable assets acquired and liabilities assumed at the date of acquisition. These values were determined using various measurement methods for each type of asset and/or liability based on the best available information. The advice of experts was also considered in addition to the various other considerations made in determining these fair values. The methods and assumptions used to measure these fair values were as follows: Licenses The fair value of the licenses was determined through the use of the Multi-period Excess Earnings Method (MEEM), which is based on a discounted cash flows analysis of the estimated future economic benefits attributable to the licenses, net of the elimination of charges related to contributing assets involved in the generation of such cash flows and excluding cash flows attributable to the customer base. This method assumes that intangible assets rarely generate income on their own. Thus, the cash flows attributable to the licenses are those remaining after the return on investment of all the contributing assets required to generate the projected cash flows. Customer base The customer base was measured using the MEEM, which is based on a discounted cash flow analysis of the estimated future economic benefits attributable to the customer base, net of the elimination of charges involved in its generation. An analysis of the average length of customer relationships, using the retirement rate method, was performed in order to estimate the remaining useful life of the customer base. The objective of the analysis of useful lives is to estimate a survival curve that predicts future customer churn of our current customer base. The so-called “Iowa curves” were considered to approximate the survival curve of customers. Trademark The fair value of the trademark was calculated using the “relief-from-royalty” method. This method establishes that an asset's value is calculated by capitalizing the royalties saved by holding the intellectual property. In other words the trademark owner generates a gain in holding the intangible asset rather than paying royalties for its use. The royalties saving was calculated by applying a market royalty rate (expressed as a percentage of revenues) to future revenues expected to be generated from the sale of products and services associated with the intangible asset. A market royalty rate is the rate, normally expressed as a percentage of net revenues, that a knowledgeable, interested holder would charge a knowledgeable, interested user for the use of an asset in an arm's length transaction. The carrying amounts, fair values, goodwill and purchase consideration cost of the identifiable assets acquired and liabilities assumed in this transaction at the acquisition date after the purchase price allocation were the following: | | Brasilcel, N.V. | | Millions of euros | | Carrying amount | | | Fair value | | Intangible assets | | | 3,466 | | | | 8,401 | | Goodwill | | | 932 | | | | N/A | | Property, plant and equipment | | | 2,586 | | | | 2,586 | | Other non-current assets | | | 1,921 | | | | 1,953 | | Other current assets | | | 3,101 | | | | 3,101 | | | | | | | | | | | Financial liabilities | | | (1,913 | ) | | | (1,913 | ) | Deferred tax liabilities | | | (828 | ) | | | (2,506 | ) | Other liabilities and current liabilities | | | (3,046 | ) | | | (3,203 | ) | Value of net assets | | | 6,219 | | | | 8,419 | | Purchase consideration cost | | | | | | | 18,408 | | Goodwill (Note 7) | | | - | | | | 9,989 | |
The impact of this acquisition on cash and cash equivalents is as follows: | | Millions of euros | | Cash and cash equivalents of the company acquired | | | 401 | | Cash paid in the acquisition net of the declared dividend | | | 5,448 | | Total net cash outflow | | | 5,047 | |
Of the amount of consideration agreed in the acquisition of Brasilcel (Vivo), 5,500 million euros was paid in 2010 and the remainder in 2011. Had the acquisition occurred on January 1, 2010, the Telefónica Group’s revenues and operating income excluding the impact of the related depreciation for the year would have been approximately 2,400 million and 890 million euros higher, respectively. Similarly, the contributions of the 50% stake in Brasilcel to revenues and operating income excluding the impact of the related depreciation since the date of its acquisition to December 31, 2010 were 875 million and 360 million euros, respectively. Acquisition of HanseNet Telekommunikation GmbH (HanseNet) On December 3, 2009, Telefónica’s subsidiary in Germany, Telefónica Deutschland GmbH (“Telefónica Deutschland”), signed an agreement to acquire all of the shares of German company HanseNet Telekommunikation GmbH (“HanseNet”). The Telefónica Group completed the acquisition of 100% of the shares of HanseNet on February 16, 2010. The initial amount paid was approximately 913 million euros, which included 638 million euros of refinanced debt, leaving an acquisition cost of 275 million euros, which was finally reduced by 40 million euros at completion of the transaction. Upon the acquisition of this shareholding, the purchase price was allocated to the identifiable assets acquired and the liabilities assumed using generally accepted valuation methods for each type of asset and/or liability, based on the best available information. The complete carrying amounts, fair values, goodwill and purchase consideration cost of the identifiable assets acquired and the liabilities assumed in this transaction at the date control was obtained are as follows: | | HanseNet | | Millions of euros | | Carrying amount | | | Fair value | | Intangible assets | | | 277 | | | | 309 | | Goodwill | | | 461 | | | | N/A | | Property, plant and equipment | | | 514 | | | | 531 | | Other assets | | | 191 | | | | 235 | | | | | | | | | | | Financial liabilities | | | (657 | ) | | | (665 | ) | Deferred tax liabilities | | | - | | | | (101 | ) | Other liabilities and current liabilities | | | (303 | ) | | | (356 | ) | Value of net assets | | | 483 | | | | (47 | ) | Purchase consideration cost | | | - | | | | 235 | | Goodwill (Note 7) | | | - | | | | 282 | |
In addition, the impact of this acquisition on cash and cash equivalents was as follows: | | Millions of euros | | Cash and cash equivalents of the company acquired | | | 28 | | Cash paid in the acquisition | | | 235 | | Total net cash outflow | | | 207 | |
The contributions to the Telefónica Group’s revenues and operating income excluding the impact of the related depreciation from the consolidation of HanseNet in 2010 amounted to 786 million and 77 million euros, respectively. 2009 No significant business combinations were carried out in 2009 that had been completed as of December 31, 2009. 2008Acquisitions of non-controlling interests
On April 8, 2008, VIVO, through its subsidiary Tele Centro Oeste IP,2011
Acquisition of non-controlling interests of Vivo Participações As described in Note 2, on October 26, 2010, Telefónica, S.A. (TCO IP, S.A.), launchedannounced a voluntary tender offer for shares representing up to one third of the free float of the preferred stock of Telemig Celular Participaçoes, S.A. and its subsidiary Telemig Celular, S.A. at a price per share of 63.90 and 654.72 Brazilian reais, respectively. This offer, which concluded on May 15, 2008, reached a level of acceptance of close to 100%, which implied the acquisition by TCO IP, S.A. of 31.9% and 6% of the preferredall outstanding voting shares of Telemig CelularVivo Participaçoes,ões, S.A. and Telemig Celular, S.A., respectively. Furthermore, in accordance with Brazilian Corporations law, TCO IP, S.A. submitted a mandatory tender offer on July 15, 2008, for all the voting stock in Telemig Celular(Vivo Participaçoes, S.A. and Telemig Celular, S.A. at a price per share equivalent to 80%ões) not already owned or controlled by Telefónica, representing approximately 3.8% of the purchase price of the votingits capital stock.
This offer was approved by the Brazilian market regulator (C.V.M.) on February 11, 2011 and, after its execution, Telefónica acquired an additional 2.7% of Vivo Participações’ capital stock for 539 million euros, for a total of these companies. After this offer VIVO owned, directly and indirectly, 90.65%62.3%. In addition, on March 25, 2011 the Boards of Directors of each of the share capitalsubsidiaries controlled by Telefónica, Vivo Participações and Telesp approved the terms and conditions of Telemig Celular, S.A. and 58.9%a restructuring process whereby all shares of Vivo Participações that were not owned by Telesp were exchanged for Telesp shares, at a rate of 1.55 new Telesp shares for each Vivo share. These shares then became the share capitalproperty of Telemig CelularTelesp, whereby Vivo Participaçoes, S.A. Both companies are included inões then became a wholly owned subsidiary of Telesp. Once the shares were exchanged, the Telefónica Group’s consolidation scope using proportionate consolidation. AfterGroup became the acquisitionowner of these shareholdings, the purchase price was allocated to the assets acquired and the liabilities assumed using generally accepted measurement methods for each type73.9% of asset and/or liability based on the best information available.
The fair valueTelesp which, in turn, has 100% ownership of the licenses was determined using the Multi-period Excess Earnings Method (MEEM) by discounting the estimated future cash flowsshares of the company’s wireless business based on the assumptions contained in the Business Economic Valuation (BEV) prepared in accordance with Brazilian corporation law.
The calculation only considered estimated revenue generated by new customers in the business plan and not existing customers in the portfolio at the time of the transaction. All applicable costs are deducted from the estimated revenue, while the impact on cash flows of changes in working capital and the acquisition of assets is also considered, thus obtaining the estimated net cash flow attributable to the asset.
The carrying amounts, fair values, goodwill and acquisition prices of the assets acquired and the liabilities assumed in this transaction at the date control was obtained bearing considering the effects of proportionality, were the following:
Millions of euros (Data at 50%) | Telemig Group | Carrying amount | Fair value | Intangible assets | 18 | 562 | Property, plant and equipment | 126 | 183 | Other assets | 376 | 477 | | | | Deferred tax liabilities | 3 | 208 | Other liabilities | 265 | 263 | Net asset value | 252 | 751 | Non-controlling interests | 119 | 335 | Acquisition cost | | 451 | Goodwill (Note 7) | | 35 |
The amount paid for the acquisition in 2008 was 522 million euros. Acquisition cost was calculated bearing in mind the exchange rate effect of the difference between the exchange rate applied upon the initial inclusion of Telemig’s assets and liabilities in the Telefónica Group’s consolidated financial statements and the average exchange rate of the payments made in the acquisition of the shareholding.
Vivo Participações. The impact of this acquisition on cash and cash equivalents was as follows: Millions of euros | Telemig Group | Cash and cash equivalents of companies acquired | 175 | Cash paid in the acquisition plus related costs | 522 | Total net cash outflow (Note 23) | 347 |
Acquisitions of non-controlling interests:
2009
There were no acquisitions of significant non-controlling interests in 2009. The detail of transactions carried out in the year is provided in Appendix I (see Note 24).
2008
The effect of the tender offer for CTC’s non-controlling interests was recognized in 2008. The impact of this acquisitiontransaction on equity attributable to non-controlling interests amounted to 397was a decrease of 661 million euros (see Note 12); whileeuros.
2010 There were no significant acquisitions of non-controlling interests in 2010. The detail of the related goodwill was 277 million euros (see Note 7).main transactions carried out in 2010 is provided in Appendix I. MovementsThe composition of and movements in the items comprising net intangible assets in 20092011 and 20082010 are as follows:
| Millions of euros | | Millions of euros | | | Balance at 12/31/08 | Additions | Amortization | Disposals | Transfers and other | Translation differences and hyperinflation adjustments | Balance at 12/31/09 | | Balance at 12/31/10 | | | | | | | | | | | | Transfers and other | | | | | | Inclusion of Companies | | | | | | | | | | | | | | | | | | | Translation | | | Exclusion of Companies | | | Balance at 12/31/11 | | | | Additions | | | Amortization | | | Disposals | | | differences and hyperinflation adjustments | | Development costs | 175 | 84 | (81) | (2) | (14) | - | 162 | | | 206 | | | | 106 | | | | (68 | ) | | | - | | | | (34 | ) | | | (1 | ) | | | - | | | | - | | | | 209 | | Service concession arrangements | 8,697 | 10 | (786) | - | (8) | 929 | 8,842 | | Service concession arrangements and licenses | | | | 14,566 | | | | 503 | | | | (1,041 | ) | | | (8 | ) | | | 1,387 | | | | (643 | ) | | | - | | | | - | | | | 14,764 | | Software | 2,394 | 964 | (1,312) | - | 772 | 130 | 2,948 | | | 3,526 | | | | 1,249 | | | | (1,588 | ) | | | (2 | ) | | | 610 | | | | (63 | ) | | | - | | | | - | | | | 3,732 | | Customer base | 3,046 | - | (512) | - | 24 | 123 | 2,681 | | | 3,143 | | | | - | | | | (595 | ) | | | - | | | | 1 | | | | (73 | ) | | | 26 | | | | - | | | | 2,502 | | Other intangible assets | 1,229 | 81 | (170) | (1) | (51) | 51 | 1,139 | | | 2,172 | | | | 26 | | | | (184 | ) | | | (4 | ) | | | (41 | ) | | | (53 | ) | | | - | | | | - | | | | 1,916 | | Prepayments on intangible assets | 380 | 166 | - | - | (479) | 7 | 74 | | | 1,413 | | | | 953 | | | | - | | | | - | | | | (1,422 | ) | | | (3 | ) | | | - | | | | - | | | | 941 | | Net intangible assets | 15,921 | 1,305 | (2,861) | (3) | 244 | 1,240 | 15,846 | | | 25,026 | | | | 2,837 | | | | (3,476 | ) | | | (14 | ) | | | 501 | | | | (836 | ) | | | 26 | | | | - | | | | 24,064 | |
| | Millions of euros | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Translation | | | | | | | | | | | | | Balance at 12/31/09 | | | Additions | | | Amortization | | | Disposals | | | Transfers and other | | | differences and hyperinflation adjustment | | | Inclusion of Companies | | | Exclusion of Companies | | | Balance at 12/31/10 | | Development costs | | | 162 | | | | 104 | | | | (55 | ) | | | - | | | | (18 | ) | | | 2 | | | | 11 | | | | - | | | | 206 | | Service concession arrangements and licenses | | | 8,842 | | | | 1,237 | | | | (836 | ) | | | - | | | | 61 | | | | 623 | | | | 4,639 | | | | - | | | | 14,566 | | Software | | | 2,948 | | | | 945 | | | | (1,381 | ) | | | - | | | | 558 | | | | 134 | | | | 322 | | | | - | | | | 3,526 | | Customer base | | | 2,681 | | | | - | | | | (563 | ) | | | - | | | | (141 | ) | | | 134 | | | | 1,032 | | | | - | | | | 3,143 | | Other intangible assets | | | 1,139 | | | | 41 | | | | (309 | ) | | | (18 | ) | | | 166 | | | | 50 | | | | 1,103 | | | | - | | | | 2,172 | | Prepayments on intangible assets | | | 74 | | | | 1,638 | | | | - | | | | - | | | | (324 | ) | | | 5 | | | | 20 | | | | - | | | | 1,413 | | Net intangible assets | | | 15,846 | | | | 3,965 | | | | (3,144 | ) | | | (18 | ) | | | 302 | | | | 948 | | | | 7,127 | | | | - | | | | 25,026 | |
| Millions of euros | | Balance at 12/31/07 | Additions | Amortization | Disposals | Transfers and other | Translation differences and hyperinflation adjustments | Inclusion of companies | Exclusion of companies | Balance at 12/31/08 | | | Development costs | 177 | 96 | (81) | - | (14) | (3) | - | - | 175 | Service concession arrangements | 9,670 | 293 | (757) | - | 50 | (1,103) | 544 | - | 8,697 | Software | 2,452 | 933 | (1,111) | (15) | 276 | (160) | 22 | (3) | 2,394 | Customer base | 4,153 | 1 | (585) | - | (136) | (387) | - | - | 3,046 | Other intangible assets | 1,534 | 16 | (209) | (3) | 108 | (218) | 3 | (2) | 1,229 | Prepayments on intangible assets | 334 | 292 | - | - | (233) | (14) | 1 | - | 380 | Net intangible assets | 18,320 | 1,631 | (2,743) | (18) | 51 | (1,885) | 570 | (5) | 15,921 |
The gross cost, accumulated amortization and impairment losses of intangible assets at December 31, 20092011 and 20082010 are as follows: Millions of euros | Balance at December 31, 2009 | | | | Balance at December 31, 2011 | | | | | Gross cost | | | Accumulated amortization | | | Impairment losses | | | Net intangible assets | | | | Millions of euros | Gross cost | Accumulated amortization | Impairment losses | Net intangible assets | 1,613 | (1,451) | - | 162 | | | 787 | | | | (578 | ) | | | - | | | | 209 | | Service concession arrangements | 14,074 | (5,232) | - | 8,842 | | Service concession arrangements and licenses | | | | 21,228 | | | | (6,464 | ) | | | - | | | | 14,764 | | Software | 11,175 | (8,226) | (1) | 2,948 | | | 15,081 | | | | (11,326 | ) | | | (23 | ) | | | 3,732 | | Customer base | 5,476 | (2,795) | - | 2,681 | | | 6,181 | | | | (3,679 | ) | | | - | | | | 2,502 | | Other intangible assets | 2,143 | (973) | (31) | 1,139 | | | 3,358 | | | | (1,437 | ) | | | (5 | ) | | | 1,916 | | Prepayments on intangible assets | 74 | - | - | 74 | | | 941 | | | | - | | | | - | | | | 941 | | Net intangible assets | 34,555 | (18,677) | (32) | 15,846 | | | 47,576 | | | | (23,484 | ) | | | (28 | ) | | | 24,064 | |
Millions of euros | Balance at December 31, 2008 | | | | Balance at December 31, 2010 | | | | | Gross cost | | | Accumulated amortization | | | Impairment losses | | | Net | | | | | intangible | | Millions of euros | Gross cost | Accumulated amortization | Impairment losses | Net intangible assets | | assets | | 1,613 | (1,438) | - | 175 | | | 1,229 | | | | (1,023 | ) | | | - | | | | 206 | | Service concession arrangements | 12,430 | (3,733) | - | 8,697 | | Service concession arrangements and licenses | | | | 20,438 | | | | (5,872 | ) | | | - | | | | 14,566 | | Software | 9,207 | (6,813) | - | 2,394 | | | 13,724 | | | | (10,172 | ) | | | (26 | ) | | | 3,526 | | Customer base | 5,072 | (2,026) | - | 3,046 | | | 6,481 | | | | (3,338 | ) | | | - | | | | 3,143 | | Other intangible assets | 2,055 | (822) | (4) | 1,229 | | | 3,445 | | | | (1,269 | ) | | | (4 | ) | | | 2,172 | | Prepayments on intangible assets | 380 | - | - | 380 | | | 1,413 | | | | - | | | | - | | | | 1,413 | | Net intangible assets | 30,757 | (14,832) | (4) | 15,921 | | | 46,730 | | | | (21,674 | ) | | | (30 | ) | | | 25,026 | |
Within
“Additions” in 2011 include the “Additions” column,acquisition of spectrum licenses in Spain for 842 million euros (of which 793 million euros are recognized as prepayments on intangible assets as the main additionslicenses had not yet started), the acquisition of spectrum in 2009band H (1.9 GHz/2.1GHz) in Brazil for 349 million euros, the acquisition of spectrum licenses in Costa Rica for 68 million euros and 2008 relatethe acquisition of software. “Additions” in 2010 include the acquisition of the spectrum license in Mexico for 1,237 million euros, for the 1850-1910/1930-1990 MHz and 1710-1770/2110-2170 MHz frequencies. Telefónica México acquired eight additional blocks of radioelectric spectrum, equivalent to 140 MHz in the 1900 MHz auction and 60 MHz in the 1700 MHz auction. The cost of these licenses will be paid in 20 years (Note 14). Furthermore, an advanced payment of 1,379 million euros was made for the license to use the spectrum in Germany, which was recognized as "Additions" of prepayments on intangible assets and reclassified as concessions and licenses in 2011. Finally, we also made investments in software. “Additions” of service concession arrangements in 2009 include the renewal of the operator’s license in Nicaragua for an amount equivalent to 10 million euros, and in 2008 the spectrum license at VIVO for 225 million euros and the operator’s license in Ecuador for 90 million US dollars, equivalent to 62 million euros.
“Inclusion of companies” in 2008 mainly reflects the impact of the inclusion of the Telemig GroupChanges in the consolidation scope (see Notefrom inclusion of companies in 2010 primarily consisted of the consolidation of all assets of HanseNet, as well as the 50% interest in Vivo Participaçoes, S.A. (Note 5).
Details of the principal concessions and licenses with which the Group operates are provided in Appendix VI. At December 31, 20092011 and 2008,2010, the CompanyGroup carried intangible assets with indefinite useful lives of 111105 and 104108 million euros, respectively, related primarily to permanent licenses to operate wireless telecommunications services in Argentina. Intangible assets are also subject to impairment tests whenever there are indicationsindicators of a potential loss in value and, in any event, at the end of each year.year for intangible assets with indefinite useful lives. There was no significant impairment recognized in the consolidated financial statements for 2009 or 20082011 and 2010 as a result of these impairment tests. “Other intangible assets” includes the amounts allocated to trademarks acquired in business combinations, of 1,4772,292 million euros and 1,4112,339 million euros at December 31, 20092011 and 2008 (9012010 (1,449 million euros and 9991,586 million euros net of the related accumulated amortization)., respectively.
exchange rate movements on opening balances, as well as the impact of the monetary adjustments due to hyperinflation in Venezuela. The effect of exchange rates on movements in the year is included in the column corresponding to such movement. The movement in this heading assigned to each Group segment was the following: Millions of euros | Millions of euros | Millions of euros | | 2009 | Balance at 12/31/08 | Acquisitions | Disposals | Translation differences and hyperinflation adjustments | Balance at 12/31/09 | | 2011 | | | Balance at 12/31/10 | | | Acquisitions | | | Disposals | | | Transfers | | | Translation differences and hyperinflation adjustments | | | Balance at 12/31/11 | | Telefónica Spain | 3,238 | - | - | - | 3,238 | | | 3,280 | | | | 52 | | | | - | | | | - | | | | - | | | | 3,332 | | Telefónica Latin America | 5,450 | 23 | (209) | 1,056 | 6,320 | | | 15,672 | | | | - | | | | - | | | | (2 | ) | | | (626 | ) | | | 15,044 | | Telefónica Europe | 9,452 | - | - | 358 | 9,810 | | | 10,421 | | | | - | | | | (3 | ) | | | 2 | | | | 110 | | | | 10,530 | | Other | 183 | 7 | - | 8 | 198 | | | 209 | | | | - | | | | - | | | | - | | | | (8 | ) | | | 201 | | Total | 18,323 | 30 | (209) | 1,422 | 19,566 | | | 29,582 | | | | 52 | | | | (3 | ) | | | - | | | | (524 | ) | | | 29,107 | |
Millions of euros | Millions of euros | Millions of euros | | 2008 | Balance at 12/31/07 | Acquisitions | Translation differences and other | Balance at 12/31/08 | | 2010 | | | Balance at 12/31/09 | | | Acquisitions | | | Disposals | | | Transfers | | | Translation differences and hyperinflation adjustments | | | Balance at 12/31/10 | | Telefónica Spain | 3,233 | 5 | - | 3,238 | | | 3,238 | | | | 42 | | | | - | | | | - | | | | - | | | | 3,280 | | Telefónica Latin America | 5,524 | 406 | (480) | 5,450 | | | 6,320 | | | | 9,201 | | | | - | | | | (350 | ) | | | 501 | | | | 15,672 | | Telefónica Europe | 10,830 | 5 | (1,383) | 9,452 | | | 9,810 | | | | 397 | | | | (37 | ) | | | - | | | | 251 | | | | 10,421 | | Other | 183 | 16 | (16) | 183 | | | 198 | | | | - | | | | - | | | | - | | | | 11 | | | | 209 | | Total | 19,770 | 432 | (1,879) | 18,323 | | | 19,566 | | | | 9,640 | | | | (37 | ) | | | (350 | ) | | | 763 | | | | 29,582 | |
Goodwill generated in the acquisition of foreign companies is treated as an asset denominated in the currency of the company acquired, and is therefore subject to exchange rate differences, which are included under “Translation differences.” The impairment tests carried out did not identify the need to recognize any material write-downs to goodwill at the 20092011 and 20082010 year ends as the recoverable amount, in all cases based on value in use, was higher than carrying amount. In addition, sensitivity analyses were performed on changes reasonably expected to occur in the primary valuation variables, and the recoverable amount remained above the net carrying amount. 20092011
The primary disposals“Additions” in 2009 correspond2011 relate to the measurementgoodwill arising on the acquisition of Acens Technologies, S.L. (see Note 5).
2010 “Additions” in 2010 include the goodwill generated on the acquisition of Vivo Participaçoes in the amount of 9,989 million euros which, net of the purchase commitment for non-controlling interests of Colombia de Telecomunicaciones, S.A. for 90 million euros (see Note 21) andgoodwill from the impact of the corporate restructuring carried out at the VIVO Group. Inpreviously held investment, results in an addition the favorable evolution of exchange rates applied to goodwill has led to an increase in this line item of 719 million euros in the year, and the impact of recognizing Venezuela as a hyperinflationary economy (see Note 2) led to an increase in goodwill of 7139,200 million euros.
2008
The primarySimilarly, the acquisitions of HanseNet and Jajah led to increases in goodwill in 2008 correspond toof 282 million and 115 million euros, respectively, while the acquisition of the Telemig Group, whichTuenti Technologies, S.L. led to the recognitionan addition in goodwill of 3542 million euros of goodwill, and the first tranche of the buyout by CTC’s non-controlling interests, which generated 277 million euros of goodwill.euros.
In 2008, “Translation differences and other” had a major impact on the movementFluctuations in exchange rates in the year owing to currency depreciation in severalvarious countries in which the Group operates, especiallycombined with the pound sterling, which resultedhyperinflationary adjustment in Venezuela, led to a decrease in goodwill of 1,343524 million euros.euros (increase of 763 million euros in 2010).
(8) | PROPERTY, PLANT AND EQUIPMENT |
The composition of and movement ofin the items comprising net “Property, plant and equipment” in 20092011 and 2008 was2010 were the following: | | | Millions of euros | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at 12/31/10 | | | | | | | | | | | | | | | Translation | | | Inclusion of Companies | | | Exclusion of Companies | | | Balance at 12/31/11 | | | Balance at 12/31/08 | Additions | Depreciation | Disposals | Transfers and other | Translation differences and hyperinflation adjustments | Inclusion of companies | Balance at 12/31/09 | | Additions | | | Depreciation | | | Disposals | | | Transfers and other | | | differences and hyperinflation adjustments | | Land and buildings | 7,031 | 34 | (454) | (19) | (852) | 352 | - | 6,092 | | | 6,152 | | | | 252 | | | | (569 | ) | | | (125 | ) | | | 381 | | | | (98 | ) | | | - | | | | - | | | | 5,993 | | Plant and machinery | 19,250 | 1,356 | (4,980) | (100) | 4,607 | 1,254 | 4 | 21,391 | | | 24,206 | | | | 2,015 | | | | (5,398 | ) | | | (53 | ) | | | 3,274 | | | | (335 | ) | | | 3 | | | | (4 | ) | | | 23,708 | | Furniture, tools and other items | 1,546 | 285 | (661) | (6) | 362 | 134 | - | 1,660 | | | 1,947 | | | | 348 | | | | (703 | ) | | | (3 | ) | | | 234 | | | | (22 | ) | | | 12 | | | | (3 | ) | | | 1,810 | | Total PP&E in service | 27,827 | 1,675 | (6,095) | (125) | 4,117 | 1,740 | 4 | 29,143 | | | 32,305 | | | | 2,615 | | | | (6,670 | ) | | | (181 | ) | | | 3,889 | | | | (455 | ) | | | 15 | | | | (7 | ) | | | 31,511 | | PP&E in progress | 2,485 | 3,973 | - | (4) | (3,937) | 102 | - | 2,619 | | | 3,259 | | | | 4,574 | | | | - | | | | (4 | ) | | | (4,122 | ) | | | 7 | | | | - | | | | - | | | | 3,714 | | Advance payments on PP&E | 6 | 6 | - | - | (2) | - | - | 10 | | | 8 | | | | 9 | | | | - | | | | - | | | | (5 | ) | | | - | | | | - | | | | - | | | | 12 | | Installation materials | 227 | 298 | - | (3) | (297) | 2 | - | 227 | | | 225 | | | | 189 | | | | - | | | | (2 | ) | | | (176 | ) | | | (10 | ) | | | - | | | | - | | | | 226 | | Net PP&E | 30,545 | 5,952 | (6,095) | (132) | (119) | 1,844 | 4 | 31,999 | | | 35,797 | | | | 7,387 | | | | (6,670 | ) | | | (187 | ) | | | (414 | ) | | | (458 | ) | | | 15 | | | | (7 | ) | | | 35,463 | |
| | | Balance at 12/31/07 | Additions | Depreciation | Disposals | Transfers and other | Translation differences | Inclusion of companies | Balance at 12/31/08 | Land and buildings | 7,289 | 68 | (628) | (166) | 850 | (385) | 3 | 7,031 | Plant and machinery | 20,814 | 2,520 | (4,977) | (117) | 2,352 | (1,429) | 87 | 19,250 | Furniture, tools and other items | 1,784 | 397 | (654) | (15) | 129 | (162) | 67 | 1,546 | Total PP&E in service | 29,887 | 2,985 | (6,259) | (298) | 3,331 | (1,976) | 157 | 27,827 | PP&E in progress | 2,274 | 3,406 | - | (16) | (2,957) | (250) | 28 | 2,485 | Advance payments on PP&E | 15 | 6 | - | - | (15) | - | - | 6 | Installation materials | 284 | 373 | (44) | 28 | (403) | (11) | - | 227 | Net PP&E | 32,460 | 6,770 | (6,303) | (286) | (44) | (2,237) | 185 | 30,545 |
| | Millions of euros | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at 12/31/09 | | | | | | | | | | | | | | | Translation | | | Inclusion of Companies | | | Exclusion of Companies | | | Balance at 12/31/10 | | | | Additions | | | Depreciation | | | Disposals | | | Transfers and other | | | differences and hyperinflation adjustments | | Land and buildings | | | 6,092 | | | | 61 | | | | (538 | ) | | | (40 | ) | | | 180 | | | | 332 | | | | 87 | | | | (22 | ) | | | 6,152 | | Plant and machinery | | | 21,391 | | | | 1,447 | | | | (4,869 | ) | | | (57 | ) | | | 3,750 | | | | 1,198 | | | | 1,390 | | | | (44 | ) | | | 24,206 | | Furniture, tools and other items | | | 1,660 | | | | 448 | | | | (752 | ) | | | - | | | | 339 | | | | 77 | | | | 178 | | | | (3 | ) | | | 1,947 | | Total PP&E in service | | | 29,143 | | | | 1,956 | | | | (6,159 | ) | | | (97 | ) | | | 4,269 | | | | 1,607 | | | | 1,655 | | | | (69 | ) | | | 32,305 | | PP&E in progress | | | 2,619 | | | | 4,781 | | | | - | | | | (3 | ) | | | (4,370 | ) | | | 139 | | | | 100 | | | | (7 | ) | | | 3,259 | | Advance payments on PP&E | | | 10 | | | | 3 | | | | - | | | | - | | | | (5 | ) | | | - | | | | - | | | | - | | | | 8 | | Installation materials | | | 227 | | | | 139 | | | | - | | | | (16 | ) | | | (143 | ) | | | 18 | | | | - | | | | - | | | | 225 | | Net PP&E | | | 31,999 | | | | 6,879 | | | | (6,159 | ) | | | (116 | ) | | | (249 | ) | | | 1,764 | | | | 1,755 | | | | (76 | ) | | | 35,797 | |
The gross cost, accumulated depreciation and impairment losses of property, plant and equipment at December 31, 20092011 and 20082010 are as follows: | | Balance at December 31, 2011 | | | | Gross cost | | | Accumulated depreciation | | | Impairment losses | | | Net PP&E | | | | Land and buildings | | | 12,522 | | | | (6,526 | ) | | | (3 | ) | | | 5,993 | | Plant and machinery | | | 100,692 | | | | (76,961 | ) | | | (23 | ) | | | 23,708 | | Furniture, tools and other items | | | 7,463 | | | | (5,571 | ) | | | (82 | ) | | | 1,810 | | Total PP&E in service | | | 120,677 | | | | (89,058 | ) | | | (108 | ) | | | 31,511 | | PP&E in progress | | | 3,714 | | | | - | | | | - | | | | 3,714 | | Advance payments on PP&E | | | 12 | | | | - | | | | - | | | | 12 | | Installation materials | | | 248 | | | | - | | | | (22 | ) | | | 226 | | Net PP&E | | | 124,651 | | | | (89,058 | ) | | | (130 | ) | | | 35,463 | |
| | Balance at December 31, 2010 | | | | Gross cost | | | Accumulated depreciation | | | Impairment losses | | | Net PP&E | | | | Land and buildings | | | 12,372 | | | | (6,216 | ) | | | (4 | ) | | | 6,152 | | Plant and machinery | | | 100,496 | | | | (76,266 | ) | | | (24 | ) | | | 24,206 | | Furniture, tools and other items | | | 7,406 | | | | (5,367 | ) | | | (92 | ) | | | 1,947 | | Total PP&E in service | | | 120,274 | | | | (87,849 | ) | | | (120 | ) | | | 32,305 | | PP&E in progress | | | 3,259 | | | | - | | | | - | | | | 3,259 | | Advance payments on PP&E | | | 8 | | | | - | | | | - | | | | 8 | | Installation materials | | | 256 | | | | - | | | | (31 | ) | | | 225 | | Net PP&E | | | 123,797 | | | | (87,849 | ) | | | (151 | ) | | | 35,797 | |
“Additions” for 2011 and 2010, totaling 7,387 million euros and 6,879 million euros, respectively, reflect the Group’s investment efforts made during the year.
| Balance at December 31, 2009 | Gross cost | Accumulated depreciation | Impairment losses | Net PP&E | Land and buildings | 11,560 | (5,456) | (12) | 6,092 | Plant and machinery | 87,017 | (65,548) | (78) | 21,391 | Furniture, tools and other items | 6,184 | (4,534) | 10 | 1,660 | Total PP&E in service | 104,761 | (75,538) | (80) | 29,143 | PP&E in progress | 2,619 | - | - | 2,619 | Advance payments on PP&E | 10 | - | - | 10 | Installation materials | 260 | - | (33) | 227 | Net PP&E | 107,650 | (75,538) | (113) | 31,999 |
| Balance at December 31, 2008 | Gross cost | Accumulated depreciation | Impairment losses | Net PP&E | Land and buildings | 11,752 | (4,703) | (18) | 7,031 | Plant and machinery | 75,414 | (56,077) | (87) | 19,250 | Furniture, tools and other items | 5, 286 | (3,737) | (3) | 1,546 | Total PP&E in service | 92,452 | (64,517) | (108) | 27,827 | PP&E in progress | 2,486 | - | (1) | 2,485 | Advance payments on PP&E | 6 | - | - | 6 | Installation materials | 317 | (57) | (33) | 227 | Net PP&E | 95,261 | (64,574) | (142) | 30,545 |
Among the main investments“Additions” in 2009 and 2008 were additions by Telefónica de España of 1,276 million euros (1,042Spain amount to 1,411 million euros in the fixed line and 2342011, compared to 1,500 million euros in 2010. Significant investments in the wireline business) and 1,681 million euros, respectively. Inbusiness include those in broadband to continue with the fixed line business, investments mainly went to broadband, Imageniolocalized roll-out of fiber optics, TV and data serviceservices for large corporate customers, and toas well as the maintenance of the traditional business. Investment in the wireless business mainly went to the deployment of 3G.improving third generation (3G) network capacity.
Telefónica Latin America’s investments in 20092011 and 20082010 amounted to 3,1874,401 million euros and 3,3933,948 million euros, respectively. Investment in 2009 centered2011 focused mainly on driving wireline technologies, namely the transformation in growth businesses (broadband and pay-TV), and in the wireless business, on extendingmostly in the expansion of coverage and on 3G and GSM network capacity, and on the wireline business, network and plant upgrades and investment in broadband accounted for the rolloutbulk of GSM networks.the investment. Customer related investments were also made in both the wireline and wireless businesses. Investment byin Telefónica Europe in 20092011 and 20082010 amounted to 1,3561,351 million euros and 1,6341,254 million euros, respectively. Investment hereInvestments in 20092011 continued to be focused primarily on allimproving capacity and coverage of the operators’ 3Gmobile networks to continue expanding coverage, with further amounts earmarked for investment in the ADSLUnited Kingdom and Germany as well as the broadband business, primarily in the UK, GermanyCzech Republic and the Czech Republic.Germany. “InclusionChanges in the consolidation scope for the inclusion of companies”companies in 2008 reflects the 182 million euros impact2010 primarily consisted of the consolidation of Telemig.the Group’s interest in HanseNet, as well as the additional 50% of Vivo Participaçoes, S.A. (Note 5).
“Translation differences”differences and hyperinflation adjustments” reflects the impact of exchange rate movements on opening balances, as well as the impact of the recognition of Venezuela as a hyperinflationary economy (see Note 2).monetary adjustments due to hyperinflation in Venezuela. The effect of exchange rates on movements in the year is included in the column corresponding to such movement. Telefónica Group companies have purchased insurance policies to reasonably cover the possible risks to which their property, plant and equipment used in operations are subject, with suitable limits and coverage. In addition, as part of its commercial activities and network roll-out, the Group maintains several property acquisition commitments. The timing of scheduled payments in this regard is disclosed in Note 19. Property, plant and equipment deriving from finance leases amounted to 691648 million euros at December 31, 2009 (7332011 (787 million euros at December 31, 2008) (see2010). The most significant finance leases are disclosed in Note 22).22. The net amounts of “Property, plant and equipment” temporarily out of service at December 31, 20092011 and 20082010 were not significant. (9) | ASSOCIATES AND JOINT VENTURES |
Associates The breakdown of amounts recognized in the consolidated statementstatements of financial position and income statementstatements related to associates is as follows: | | Millions of euros | | Description | | 12/31/11 | | | 12/31/10 | | Investments in associates | | | 5,065 | | | | 5,212 | | Long-term loans to associates (Note 13) | | | 3 | | | | 604 | | Short-term loans to associates | | | 682 | | | | 43 | | Receivables from associates for current operations (Note 11) | | | 69 | | | | 84 | | Loans granted by associates (Note 14) | | | 347 | | | | 147 | | Payables to associates for current operations (Note 14) | | | 93 | | | | 46 | | Revenue from operations with associates | | | 578 | | | | 518 | | Work performed by associates and other operating expenses | | | 617 | | | | 906 | | Share of (loss) profit of associates | | | (635 | ) | | | 76 | |
Description | Millions of euros | | 12/31/09 | 12/31/08 | Investments in associates | 4,936 | 2,777 | Long-term loans to associates | 3 | 49 | Short-term loans to associates | 15 | 77 | Receivables from associates for current operations (Note 11) | 189 | 120 | Loans granted by associates (Note 14) | 149 | 109 | Payables to associates for current operations (Note 14) | 113 | 73 | Revenue from operations with associates | 204 | 212 | Work performed by associates and other operating expenses | 484 | 533 |
In addition, the Telefónica Group,Transactions performed through its stake in Telco S.p.A., has an indirect equity interest in Telecom Italia S.p.A. equivalent to 7.21% of its voting shares. Key information on the balances and transactions between the Telefónica Group and Telecom Italia S.p.A. and group companies is as follows:
Description | Millions of euros | | 12/31/09 | 12/31/08 | Receivables from current operations (Note 11) | 73 | 65 | Payables from current operations (Note 14) | 25 | 54 | Operating revenue | 379 | 406 | Operating expenses | 420 | 504 |
Balances and transactions with Portugal Telecom, SGPS, S.A. through Brasilcel N.V. group companies are shown at 50%. until September 27, 2010.
The breakdown of the main associates and key financial highlights for the last 12-month periods available at the time of preparation of these consolidated financial statements are as follows: December 31, 2009 | Millions of euros | | December 31, 2011 | | | Millions of euros | | COMPANY | % Holding | Total Assets | Total liabilities | Operating income | Profit/(loss) for the year | Carrying amount | Fair value | | % holding | | | Total assets | | | Total liabilities | | | Operating income | | | Profit (loss) for the year | | | Carrying amount | | | Market value | | Telco S.p.A. (Italy) (*) | 46.18% | 7,111 | 3,703 | - | (39) | 2,026 | 2,026 | | Portugal Telecom, SGPS, S.A. (Portugal) | 9.86% | 14,948 | 12,965 | 6,674 | 516 | 458 | 764 | | Telco, S.p.A. (Italy) (*) | | | | 46.18 | % | | | 5,410 | | | | 3,300 | | | | - | | | | (1,126 | ) | | | 1,453 | | | | N/A | | DTS Distribuidora de Televisión Digital, S.A. (Spain) | | | | 22.00 | % | | | 1,423 | | | | 458 | | | | 908 | | | | 50 | | | | 473 | | | | N/A | | China Unicom (Hong Kong) Limited | 8.37% | 37,397 | 16,203 | 21,490 | 3,687 | 2,301 | 2,301 | | | 9.57 | % | | | 53,332 | | | | 27,961 | | | | 22,466 | | | | 539 | | | | 3,031 | | | | 3,665 | | Hispasat, S.A. (Spain) | 13.23% | 841 | 383 | 151 | 71 | 56 | N/A | | Other | | | | | | 95 | | | | | | | | | | | | | | | | | | | | | | | | 108 | | | | | | TOTAL | | | | | | 4,936 | | | | | | | | | | | | | | | | | | | | | | | | 5,065 | | | | | |
December 31, 2010 | | Millions of euros | | COMPANY | | % holding | | | Total assets | | | Total liabilities | | | Operating income | | | Profit (loss) for the year | | | Carrying amount | | | Market value | | Telco, S.p.A. (Italy) (*) | | | 46.18 | % | | | 6,554 | | | | 3,356 | | | | - | | | | 63 | | | | 2,055 | | | | N/A | | DTS Distribuidora de Televisión Digital, S.A. (Spain) | | | 22.00 | % | | | 1,497 | | | | 497 | | | | 1,085 | | | | 169 | | | | 488 | | | | N/A | | China Unicom (Hong Kong) Limited | | | 8.37 | % | | | 47,494 | | | | 24,238 | | | | 18,604 | | | | 388 | | | | 2,499 | | | | 2,112 | | Other | | | | | | | | | | | | | | | | | | | | | | | 170 | | | | | | TOTAL | | | | | | | | | | | | | | | | | | | | | | | 5,212 | | | | | |
December 31, 2008 | Millions of euros | COMPANY | % Holding | Total Assets | Total liabilities | Operating income | Profit/(loss) for the year | Carrying amount | Fair value | Telco S.p.A. (Italy) (*) | 42.30% | 7,241 | 3,688 | - | (1,556) | 2,082 | 2,082 | Portugal Telecom, SGPS, S.A. (Portugal) | 9.86% | 13,713 | 12,513 | 6,734 | 582 | 456 | 544 | Medi Telecom, S.A. (Morocco) | 32.18% | 1,217 | 951 | 464 | 30 | 95 | N/A | Hispasat, S.A. (Spain) | 13.23% | 716 | 335 | 138 | 47 | 50 | N/A | Other | | | | | | 94 | | TOTAL | | | | | | 2,777 | |
(*) Through this company, Telefónica effectively has an indirect stake in TelecomTelcom Italia, S.p.A.’s voting shares at December 31, 2009 and 20082011 of approximately 10.49%10.46%, representing 7.21%7.19% of the dividend rights.rights (10.47% and 7.20%, respectively, at December 31, 2010).
The detail of the movement in investments in associates in 20092011 and 20082010 was the following:
Investments in associates | | Millions of euros | Balance at 12/31/07 | 3,188 | Acquisitions | 4 | Disposals | (55) | Inclusion of companies | 1 | Translation differences | (45) | Income (loss) | (161) | Dividends | (65) | Transfers and other | (90) | Balance at 12/31/08 | 2,777 | Acquisitions | 772 | Disposals | (114) | Translation differences | 103 | Income (loss) | 47 | Dividends | (58) | Transfers and other | 1,409 | Balance at 12/31/09 | | | 4,936 | | Acquisitions | | | 489 | | Disposals | | | (473 | ) | Translation differences | | | 321 | | Income | | | 76 | | Dividends | | | (97 | ) | Transfers and other | | | (40 | ) | Balance at 12/31/10 | | | 5,212 | | Acquisitions | | | 358 | | Disposals | | | (3 | ) | Translation differences | | | 218 | | Income (loss) | | | (635 | ) | Dividends | | | (45 | ) | Transfers and other | | | (40 | ) | Balance at 12/31/11 | | | 5,065 | |
Changes“Acquisitions” and “Disposals” at December 31, 20092011 and 20082010 reflect the amounts from transactions detailed in the changes to the consolidation scope (see Appendix I andI). The amount for 2011 includes the investment of 358 million euros in China Unicom as part of the agreement to extend the strategic partnership (see Note 2). The figureamount for 2009 reflects the inclusion in the consolidation scope of the equity investment in China Unicom Limited for 2,301 million euros. Of this amount, 1,467 million euros were transferred from “Non-current financial assets – Equity investments” (see Note 13) following the acquisition of an additional 2.68% of this company.
Disposals in 2009 include the sale by Telefónica Móviles España, S.A.U., a wholly owned subsidiary of Telefónica, S.A., of its 32.18% stake in Moroccan operator Medi Telecom, S.A., along with outstanding loans to shareholders, for a total amount of 400 million euros. The net gain from this transaction before tax amounts to 220 million euros (see Note 19).
Disposals in 2008 included2010 includes the disposal of a 0.476%472 million euros due to the deconsolidation of Portugal Telecom, as well as the addition of 488 million euros for the 22% stake in Portugal Telecom, SGPS,DTS Distribuidora de Televisión Digital, S.A. The Telefónica Group’s effective shareholding in this company at December 31, 2008 was 9.857%.
Results for 2008 includeThe year 2011 reflects the impact of the write-downadjustment made by Telco, S.p.A. to the value of Telco S.p.A.’s investmentits stake in Telecom Italia S.p.A. To estimatewhich, coupled with the impact of operational synergies considered in the Telefónica Group tookinvestment and its contribution to profit for the estimated synergies to be obtained by improving certain processesyear, resulted in its European operations through the alliances reached with Telecom Italia S.p.A. The amount shown ina negative impact on “Share of (loss) profit (loss) of associates” in theof 620 million euros.
income statementThe most significant dividends received from associates in 2011 were those from China Unicom, for 2008 reflects a 20918 million euros, loss in this respect (146and DTS Distribuidora de Televisión Digital, S.A., for 18 million euros after the related tax effect) at Telefónica, S.A..euros.
Joint ventures On December 27, 2002, Telefónica Móviles, S.A. and PT Movéis ServiciosServiços de Telecomunicaçoes, S.G.P.S., S.A. (PT Movéis) set up a 50/50 joint venture, Brasilcel, N.V., via the contribution of 100% of the groups’ direct and indirect shares in Brazilian cellular operators. This company iswas integrated in the consolidated financial statements of the Telefónica Group using proportionate consolidation. As disclosed in Note 2, on September 27, 2010 these joint venture agreements were terminated, thereby having no impact since such date. The contributions of Brasilcel, N.V. to the Telefónica Group’s 2009 2008 and 2007 consolidated statementsstatement of financial position and 2010 and 2009 consolidated income statements are as follows: | Millions of euros | | | 2009 | 2008 | 2007 | | Millions of euros | | | 2010 | | | 2009 | | Current assets | 1,170 | 1,234 | 1,193 | | | - | | | | 1,170 | | Non-current assets | 5,617 | 4,616 | 4,358 | | | - | | | | 5,617 | | Current liabilities | 1,170 | 1,351 | 1,328 | | | - | | | | 1,170 | | Non-current liabilities | 1,505 | 1,212 | 644 | | | - | | | | 1,505 | | Operating revenue | 2,743 | 2,662 | 2,152 | | | 2,583 | (*) | | | 2,743 | | Operating expenses | 2,046 | 2,063 | 1,778 | | | 1,896 | (*) | | | 2,046 | |
(*) For the period from January 1, 2010 to September 27, 2010 Significant shareholders The main transactions between Telefónica Group companies and significant shareholders of Telefónica, S.A.the Company are described below. All of these transactions were carried out at market prices. Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) and subsidiaries comprising the consolidated group: | · | Financing transactions, arranged under market conditions, with approximately 531538 million euros drawn down at December 31, 2009 (4362011 (682 million euros at December 31, 2008)2010). |
| · | Time deposits amounting to 878349 million euros at December 31, 2009 (3552011 (260 million euros at December 31, 2008)2010). |
| · | Derivative transactions, contracted under market conditions, for a total nominal amount of approximately 7,82423,291 million euros at December 31, 2009 (6,9302011 (11,197 million euros at December 31, 2008)2010). |
| · | Dividends and other earnings distributed to BBVA in 2011 for 514 million euros (439 million euros in 2010). |
| · | Guarantees granted by BBVA for approximately 237584 million euros at December 31, 2009 (132011 (922 million euros at December 31, 2008). |
| · | Dividends and other benefits paid to BBVA in 2009 for 287 million euros (279 million euros in 2008)2010). |
| · | Services, mainly telecommunications and telemarketing, rendered by Telefónica Group companies to the BBVA Group, under market conditions.Group. |
Caja de Ahorros y Pensiones de Barcelona (“la Caixa”), and subsidiaries comprising the consolidated group: | · | Financing transactions, arranged under market conditions, with approximately 643370 million euros drawn down at December 31, 2009 (6822011 (305 million euros at December 31, 2008)2010). |
| · | Time deposits amounting to 1,293298 million euros at December 31, 2009 (3682011 (118 million euros at December 31, 2008)2010). |
| · | Derivative transactions, arranged under market conditions, for a total nominal amount of approximately 800 million euros in 2009, with no amounts in 2008.2011 and 2010. |
| · | Dividends and other benefits paidearnings distributed to la Caixa in 20092011 for 260366 million euros (237(298 million euros in 2008)2010). |
| · | Guarantees granted for 1756 million euros at December 31, 2009 (12011 (47 million euros in 2008)2010). |
| · | TelecommunicationsThe telecommunications services rendered by Telefónica Group companies to la Caixa group companies under market conditions.companies. |
Associates and joint ventures The most significant balances and transactions with associates and joint ventures and their contributions to the consolidated statement of financial position and income statement are detailed in Note 9. Directors and senior executives During the financial year to which these accompanying consolidated annual financial statements refer, the directorsDirectors and senior executives did not perform any transactions with Telefónica 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, as well as the detail of the equity interests and positions or duties held by the directors in companies engaging in an activity that is identical, similar or complementary to that of the Company and the performance of similar activities by the directors for their own account or for third parties, are detailed in Note 21 of these consolidated financial statements. (11) | TRADE AND OTHER RECEIVABLES |
The breakdown of this consolidated statement of financial position heading at December 31, 20092011 and 20082010 is as follows: | Balance at | Balance at | | Balance at | | | Balance at | | Millions of euros | 12/31/09 | 12/31/08 | | 12/31/11 | | | 12/31/10 | | Trade receivables | 10,877 | 10,116 | | | 12,282 | | | | 13,002 | | Receivables from associates (Note 9) | 262 | 120 | | | 69 | | | | 84 | | Other receivables | 1,103 | 585 | | | 918 | | | | 1,182 | | Allowance for uncollectibles | (2,589) | (2,196) | | Allowance uncollectibles | | | | (3,135 | ) | | | (3,098 | ) | Short-term prepayments | 969 | 690 | | | 1,197 | | | | 1,256 | | Total | 10,622 | 9,315 | | | 11,331 | | | | 12,426 | |
Public-sector net trade receivables in the countries in which the Group operates at December 31, 20092011 and 20082010 amounted to 666779 million euros and 539696 million euros, respectively. The breakdown of trade receivables at December 31, 20092011 and 20082010 is as follows: Millions of euros | 12/31/09 | 12/31/08 | Trade receivables billed | 7,544 | 7,153 | Trade receivables unbilled | 3,333 | 2,963 | Total | 10,877 | 10,116 |
Millions of euros | | 12/31/11 | | | 12/31/10 | | Trade receivables billed | | | 9,168 | | | | 9,420 | | Trade receivables unbilled | | | 3,114 | | | | 3,582 | | Total | | | 12,282 | | | | 13,002 | |
The movement in impairment losses in 20092011 and 20082010 is as follows: | | Millions of euros | Impairment losses at December 31, 2007 | 2,070 | Allowances | 1,232 | Retirements/amount applied | (926) | Inclusion of companies | 6 | Translation differences | (186) | Impairment losses at December 31, 2008 | 2,196 | Allowances | 1,209 | Retirements/amount applied | (970) | Translation differences | 154 | Impairment losses at December 31, 2009 | | | 2,589 | | Allowances, net of retirements | | | 847 | | Amounts applied | | | (664 | ) | Inclusion of companies | | | 133 | | Exclusion of companies | | | (1 | ) | Translation differences | | | 194 | | Impairment losses at December 31, 2010 | | | 3,098 | | Allowances, net of retirements | | | 784 | | Amounts applied | | | (729 | ) | Inclusion of companies | | | 2 | | Exclusion of companies | | | (1 | ) | Translation differences | | | (19 | ) | Impairment losses at December 31, 2011 | | | 3,135 | |
The balance of trade receivables billed net of impairment losses at December 31, 20092011 amounted to 4,9556,033 million euros (4,957(6,322 million euros at December 31, 2008)2010), of which 2,9813,400 million euros were not yet due (2,642(3,852 million euros at December 31, 2008)2010). Of the amounts due, only net amounts of 204280 and 216260 million euros are over 360 days at December 31, 20092011 and 2008,2010, respectively. They are mainly with the public sector. a) Share capital and share premium At December 31, 2009,2011, Telefónica, S.A.’s share capital amounted to 4,563,996,485 euros and consisted of 4,563,996,485 fully paid ordinary shares of a single series, par value of 1 euro, all recorded by the book-entry system and traded on the Spanish electronic trading system (“Continuous Market”), where they form part of the Ibex 35 Index, on the four Spanish Stock Exchanges (Madrid, Barcelona, Valencia and Bilbao) and listed on the New York, London, Tokyo, Buenos Aires Sao Paulo and Lima Stock Exchanges. With respect to authorizations given regarding share capital, on June 21, 2006,May 18, 2011, authorization was given at the Annual Shareholders’ Meeting of Telefónica, S.A. for the Board of Directors, at its discretion and in accordance with the Company’s needs, to increase the Company’s capital, at one or several times, within a maximum period of five years from that date, under the terms of Article 153.1 b)Section 297.1.b) of the Spanish Corporation Law (authorized capital)Corporate Enterprises Act up to a maximum increase of 2,460 million2,281,998,242.50 euros, equivalent to half of the Company’sTelefónica, S.A.’s share capital at that date, by issuing and placing new ordinary shares, be they ordinary, preferred, redeemable, non-voting or of any other type permitted by the Law, with a fixed or variable premium, with-with or without pre-emptive subscription rightsa premium- and, in all cases, in exchange for cash, and expressly considering the possibility that the new shares may not be fully subscribed in accordance with the terms of Article 161.1 of the Spanish Corporation Law.subscribed. The Board of Directors was also empowered to exclude, partially or fully, pre-emptive subscription rights under the terms of Article 159.2Section 506 of the Spanish Corporation Law and related provisions.Enterprises Act. In addition, at the May 10, 2007June 2, 2010 Shareholders’ Meeting, authorization was given for the Board of Directors to issue fixed-income securities and preferred shares at one or several times within a maximum period of five years from that date. These securities may be in the form of debentures, bonds, promissory notes or any other kind of fixed-income security, plain or, in the case of debentures and bonds, convertible into shares of the CompanyTelefónica, S.A. and/or exchangeable for shares of any of the group companies.Group companies or of any other company. They may also be preferred shares. The total maximum amount of the securities issued agreed under this authorization is 25,000 million euros or the equivalent in another currency. For promissory notes, the outstanding balance of promissory notes issued under this authorization will be calculated for purposes of the aforementioned limit. As at December 31, 2009,2011, the Board of Directors had exercised these powers, approving threetwo programs to issuefor the issuance of corporate promissory notes for 2008, 2009in 2011 and 2010.2012. In addition, on June 23, 2009,2, 2010, shareholders voted to authorize the acquisition by the Board of Directors of treasury shares, for a consideration, up to the limits and pursuant to the terms and conditions established at the Shareholders’ Meeting, within a maximum period of 18 monthsfive years 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 (currently 10% of Telefónica, S.A.’s share capital). Finally, on December 28, 2009, the deed of capital reduction formalizing the implementation by the Company’sTelefónica, S.A.’s Board of Directors of the resolution adopted by the Shareholders’ Meeting on June 23, 2009, was executed. Capital was reduced through the cancellation of treasury shares previously acquired by the CompanyTelefónica, S.A. as authorized by the Shareholders’ Meeting. As a result, 141,000,000141 million Telefónica, S.A. treasury shares were cancelled and the Company’s share capital was reduced by a nominal amount of 141,000,000141 million euros. Article 5 of the Corporate Bylaws relating to the amount of share capital was amended accordingly to show 4,563,996,485 euros. At the same time, a reserve was recordedestablished for the cancelled shares for 141 million euros. The balanceas described in the “Other reserves” section of this reserve at December 31, 2009 was 498 million euros.Note. The cancelled shares were delisted on December 30, 2009. Proposed appropriationdistribution of profit attributable to equity holders of the parent Telefónica, S.A. obtained 6,252generated 4,910 million euros of profit in 2009.2011. Accordingly, the Company’s Board of Directors will submit the following proposed distribution of 2011 profit for approval at the Shareholders’ Meeting: | | Millions of euros | | Total distributable profit | | | 4,910 | | Interim dividend (paid in May 2011) | | | 3,394 | | Goodwill reserve | | | 2 | | Voluntary reserves | | | 1,514 | | Total | | | 4,910 | |
Dividends paid in 2011 At its meeting of April 29, 2009,12, 2011, Telefónica, S.A.’s Board of Directors resolved to pay an interim dividend against 20092011 profit of a fixed gross 0.50.75 euros for each of the Company'sper outstanding sharesshare carrying dividend rights. This dividend was paid in full on May 12, 2009,6, 2011, and the total amount paid was 2,2773,394 million euros. Accordingly,In addition, approval was given at the General Shareholders’ Meeting on May 18, 2011 to pay a gross 0.77 dividend per share outstanding carrying dividend rights with a charge to unrestricted reserves. This dividend was paid in full on November 7, 2011, and the total amount paid was 3,458 million euros.
In accordance with Article 277 of the Corporate Enterprises Act, the following table presents the mandatory statement of accounts prepared to confirm the existence of sufficient liquidity to pay the dividend at the date of its approval. Liquidity statement at April 12, 2011 | | Millions of euros | | | | | | Income from January 1 through March 31, 2011 | | | 5,961 | | Mandatory appropriation to reserves | | | - | | Distributable income | | | 5,961 | | | | | | | Proposed interim dividend (maximum amount) | | | 3,423 | | | | | | | Cash position at April 12, 2011 | | | | | Funds available for distribution | | | | | Cash and cash equivalents | | | 1,670 | | Unused credit facilities | | | 6,593 | | Proposed interim dividend (maximum amount) | | | (3,423 | ) | Difference | | | 4,840 | |
The Telefónica Group manages its liquidity risks (see Note 16) in order to have cash available for the following year. Dividends paid in 2010 At its meeting of April 28, 2010, the Company’s Board of Directors will submitresolved to pay an interim dividend against 2010 profit of a fixed gross 0.65 euros per outstanding share carrying dividend rights. This dividend was paid in full on May 11, 2010, and the following proposed appropriation of 2009 profit fortotal amount paid was 2,938 million euros. In addition, approval was given at the General Shareholders’ Meeting: | Millions of euros | Total distributable profit | 6,252 | Interim dividend (paid in May 2009) | 2,277 | Goodwill reserve | 2 | Voluntary reserves | 3,973 | Total | 6,252 |
b) DividendsMeeting on June 2, 2010 to pay a gross 0.65 dividend per share outstanding with a charge to unrestricted reserves. This dividend was paid in full on November 8, 2010, and the total amount paid was 2,934 million euros.
Dividends paid in 2009 At its meeting held on June 23, 2009, the Company’s Board of Directors resolved to pay a dividend charged to unrestricted reserves for a fixed gross amount of 0.50.50 euros per outstanding share carrying dividend rights. This dividend was paid in full on November 11, 2009, and the total amount paid was 2,280 million euros. In addition, as indicated above, in May 2009 an interim dividend against 2009 profit of a gross 0.50 euros per share was paid, entailing a total payment of 2,277 million euros. In accordance with Article 216 of the Spanish Corporations Law, the following table shows the provisional statement issued substantiating the existence of sufficient liquidity at the time the resolution to distribute this dividend was adopted.
Liquidity statement at April 29, 2009 | Millions of euros | | | Income from January 1 through March 31, 2009 | 3,024 | Mandatory appropriation to reserves | - | Distributable income | 3,024 | | | Proposed interim dividend (maximum amount) | 2,352 | | | Cash position at April 29, 2009 | | Funds available for distribution | | Cash and cash equivalents | 2,218 | Unused credit facilities | 4,667 | Proposed interim dividend (maximum amount) | (2,352) | Difference | 4,533 |
The Company manages its liquidity risks (see Note 16) in order to have cash available for the following year.
Dividends paid in 2008
At its meeting held on April 22, 2008, the Company’s Board of Directors agreed to pay an additional dividend charged against 2007 profit of a gross 0.40 euros per share. A total of 1,869 million euros was paid in May 2008.
In addition, in November 2008 an interim dividend against 2008 profit of a gross 0.50 euros per share was paid, entailing a total payment of 2,296 million euros.
Dividends paid in 2007
At its meeting held on May 10, 2007, the Company’s Board of Directors resolved to pay an additional dividend charged against 2006 profit of a gross 0.30 euros per share. A total of 1,425 million euros was paid in May.
In addition, in November an interim dividend against 2007 profit of a gross 0.35 euros per share was paid, entailing a total payment of 1,652 million euros.
According to the revised text of Spanish Corporation Law,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 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. At December 31, 2009,2011, the Company had duly set aside this reserve. The balance of “Revaluation reserves” 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, an amount of 15 million euros in 2009 (82011 (16 million euros in 20082010 and 1,17815 million euros in 2007)2009) corresponding to revaluation reserves subsequently considered unrestricted has beenwas reclassified to “Retained earnings.” Retained earnings | These reserves include undistributed profits of companies comprising the consolidated Group less interim dividends paid against profit for the year, actuarial gains and losses, and the impact of the asset ceiling on defined-benefit plans. |
| d) | Translation differences |
The translation differences relate mainly to the effect of exchange rate fluctuations on the net assets of the companies located abroad after the elimination of intra-group balances and transactions (see Note 3.b).transactions. They also include exchange rate differences resulting from specific-purpose foreign-currency financing transactions relating to investmentsintra-group monetary items considered part of the net investment in investees and which hedge the exchange rate risk on these investmentsa foreign subsidiary, and the impact of the restatement of financial statements of companies in hyperinflationary economies.economies (see Note 3.b). The Group companies took an exemption that allows all translation differences generated up to the IFRS transition date to be reset to zero, with the impact on prior years recognized as retained earnings. The breakdown of the accumulated contribution of translation differences at December 31 is as follows: Millions of euros | 2009 | 2008 | 2007 | | 2011 | | | 2010 | | | 2009 | | Telefónica Latin America | 1,052 | (834) | 669 | | | (550 | ) | | | 1,208 | | | | 1,052 | | Telefónica Europe | (2,524) | (2,793) | (619) | | | (2,071 | ) | | | (2,363 | ) | | | (2,524 | ) | Other adjustments and intra-group eliminations | 99 | 16 | 47 | | | 458 | | | | 212 | | | | 99 | | Total Telefónica Group | (1,373) | (3,611) | 97 | | | (2,163 | ) | | | (943 | ) | | | (1,373 | ) |
At December 31, 2009, 20082011, 2010 and 2007,2009, Telefónica Group companies held the following shares in the Telefónica, S.A. parent company: | No. of shares | Euros per share | Market Value Millions of euros | % | Acquisition price | Trading price | Treasury shares at 12/31/09 | 6,329,530 | 16.81 | 19.52 | 124 | 0.13868% | Treasury shares at 12/31/08 | 125,561,011 | 16.68 | 15.85 | 1,990 | 2.66867% | Treasury shares at 12/31/07 | 64,471,368 | 16.67 | 22.22 | 1,433 | 1.35061% |
| | | | | Euros per share | | | | | | | | | | Number of shares | | | Acquisition price | | | Trading price | | | Market value Millions of euros | | | % | | Treasury shares at 12/31/11 | | | 84,209,364 | | | | 15.68 | | | | 13.39 | | | | 1,127 | | | | 1.84508 | % | Treasury shares at 12/31/10 | | | 55,204,942 | | | | 17.01 | | | | 16.97 | | | | 937 | | | | 1.20957 | % | Treasury shares at 12/31/09 | | | 6,329,530 | | | | 16.81 | | | | 19.52 | | | | 124 | | | | 0.13868 | % |
Telefónica, S.A. directly owns the onlyall treasury shares in the Group. No other Group, company owns anyexcept for one share that is held by Telefónica Móviles Argentina, S.A. (16,896 treasury shares.shares held by Telefónica Móviles Argentina, S.A. at December 31, 2010). In 2009, 20082010 and 20072011 the following transactions involving treasury shares were carried out: | No. | Number of shares | Treasury shares at 12/31/06 | 75,632,559 | Acquisitions | 149,099,044 | Disposals | (12,621,573) | Lycos and Endemol employee share option plans | (4,750) | Exchange of Telefónica, S.A. shares for Telefónica Móviles, S.A. shares | (147,633,912) | Treasury shares at 12/31/07 | 64,471,368 | Acquisitions | 129,658,402 | Disposals | (68,759) | Share cancellation | (68,500,000) | Treasury shares at 12/31/08 | | | 125,561,011 | | Acquisitions | | | 65,809,222 | | Exchange of Telefónica, S.A. shares for China Unicom shares | (40,730,735) | | (40,730,735 | ) | Employee share option plan | (3,309,968) | | (3,309,968 | ) | Share cancellation | (141,000,000) | | (141,000,000 | ) | Treasury shares at 12/31/09 | | | 6,329,530 | | Acquisitions | | | 52,650,000 | | Disposals | | | (810,151 | ) | Employee share option plan (Note 20.a) | | | (2,964,437 | ) | Treasury shares at 12/31/10 | | | 55,204,942 | | Acquisitions | | | 55,979,952 | | Disposals | | | (24,075,341 | ) | Employee share option plan (Note 20.a) | | | (2,900,189 | ) | Treasury shares at 12/31/11 | | | 84,209,364 | |
The amount paid to acquire treasury shares in 20092011 was 822 million euros (897 million and 1,005 million euros (2,225 millionin 2010 and 2,324 million euros in 2008 and 2007,2009, respectively). Treasury shares sold in 2011 and 2010 amounted to 445 million euros and 14 million euros, respectively. The amount in 2011 included 371 million euros related to the strategic alliance with China Unicom (see Note 2). Following the end of the third phase of the Performance Share Plan (see Note 20.a), a total of 2,446,104 treasury shares were added, corresponding to two derivative financial instruments arranged by the Company to meet its obligations to deliver treasury shares to managers and executives. A net 2,900,189 shares (33 million euros) were finally delivered. At December 31, 2009, the Groupdate of authorization for issue of these consolidated financial statements, Telefónica held 234 million call options on treasury shares subject to physical settlement (options on 190 million, 160 million and 150 million treasury shares and at December 31, 2008, put options2011, 2010 and 2009, respectively). The Company also has a derivative financial instrument on 6approximately 26 million treasury shares.Telefónica shares, subject to net settlement, recognized under “Current interest-bearing debt” in the accompanying consolidated statement of financial position. | f) | Non-controlling interests |
“Non-controlling interests” represents the share of non-controlling interests in the equity and incomeprofit or loss for the year of fully consolidated Group companies. The movements in this heading ofin the 2009, 20082011, 2010 and 20072009 consolidated statement of financial position are as follows: Millions of euros | Balance at 12/31/08 | Capital contributions and inclusion of companies | Profit (loss) for the year | Change in translation differences | Acquisitions of non-controlling interests and exclusion of companies | Dividends paid | Other movements | Balance at 12/31/09 | | Balance at 12/31/10 | | | Capital contributions and inclusion of companies | | | Profit/(loss) for the year | | | Change in translation differences | | | Acquisitions of non-controlling interests and exclusion of companies | | | Dividends paid | | | Other movements | | | Balance at 12/31/11 | | Telefónica O2 Czech Republic, a.s. | 1,095 | - | 114 | 21 | - | (186) | - | 1,044 | | Telefónica Czech Republic, a.s. | | | | 1,033 | | | | - | | | | 95 | | | | (25 | ) | | | - | | | | (161 | ) | | | (2 | ) | | | 940 | | Telefónica Chile, S.A. | 23 | 1 | 1 | 6 | (8) | (1) | - | 22 | | | 23 | | | | - | | | | 2 | | | | (1 | ) | | | - | | | | (3 | ) | | | - | | | | 21 | | Telesp Participaçoes, S.A. | 385 | - | 101 | 118 | - | (64) | 2 | 542 | | Brasilcel (Holdings) | 774 | - | 46 | 214 | (108) | (41) | - | 885 | | Telefónica Brasil, S.A. | | | | 6,136 | | | | - | | | | 864 | | | | (345 | ) | | | (539 | ) | | | (710 | ) | | | (661 | ) | | | 4,745 | | Fonditel Entidad Gestora de Fondos de Pensiones, S.A. | 20 | - | 3 | - | - | - | - | 23 | | | 22 | | | | - | | | | 2 | | | | - | | | | - | | | | (1 | ) | | | - | | | | 23 | | Iberbanda, S.A. | 9 | - | (3) | - | - | - | - | 6 | | | 2 | | | | - | | | | (4 | ) | | | - | | | | 2 | | | | - | | | | - | | | | - | | Colombia Telecomunicaciones, S.A., ESP | - | - | (104) | - | - | - | 104 | - | | | - | | | | - | | | | (175 | ) | | | - | | | | - | | | | - | | | | 175 | | | | | | Other | 25 | - | 3 | (2) | (7) | (3) | 2 | 18 | | | 16 | | | | - | | | | - | | | | 3 | | | | (2 | ) | | | (1 | ) | | | 2 | | | | 18 | | Total | 2,331 | 1 | 161 | 357 | (123) | (295) | 108 | 2,540 | | | 7,232 | | | | - | | | | 784 | | | | (368 | ) | | | (539 | ) | | | (876 | ) | | | (486 | ) | | | 5,747 | |
Millions of euros | | Balance at 12/31/09 | | | Capital contributions and inclusion of companies | | | Profit/(loss) for the year | | | Change in translation differences | | | Acquisitions of non-controlling interests and exclusion of companies | | | Dividends paid | | | Other movements | | | Balance at 12/31/10 | | Telefónica Czech Republic, a.s. | | | 1,044 | | | | - | | | | 88 | | | | 57 | | | | - | | | | (156 | ) | | | - | | | | 1,033 | | Telefónica Chile, S.A. | | | 22 | | | | - | | | | 3 | | | | 3 | | | | - | | | | (1 | ) | | | (4 | ) | | | 23 | | Telesp Participaçoes, S.A. | | | 542 | | | | - | | | | 131 | | | | 69 | | | | - | | | | (105 | ) | | | (7 | ) | | | 630 | | Brasilcel (Holdings) | | | 885 | | | | 4,304 | | | | 224 | | | | 258 | | | | - | | | | (171 | ) | | | 6 | | | | 5,506 | | Fonditel Entidad Gestora de Fondos de Pensiones, S.A. | | | 23 | | | | - | | | | 2 | | | | - | | | | - | | | | (3 | ) | | | - | | | | 22 | | Iberbanda, S.A. | | | 6 | | | | - | | | | (4 | ) | | | - | | | | - | | | | - | | | | - | | | | 2 | | Colombia Telecomunicaciones, S.A., ESP | | | - | | | | - | | | | (540 | ) | | | - | | | | - | | | | - | | | | 540 | | | | - | | Other | | | 18 | | | | 6 | | | | 1 | | | | 3 | | | | (3 | ) | | | (4 | ) | | | (5 | ) | | | 16 | | Total | | | 2,540 | | | | 4,310 | | | | (95 | ) | | | 390 | | | | (3 | ) | | | (440 | ) | | | 530 | | | | 7,232 | |
Millions of euros | Balance at 12/31/07 | Capital contributions and inclusion of companies | Profit (loss) for the year | Change in translation differences | Acquisitions of non-controlling interests and exclusion of companies | Dividends paid | Other movements | Balance at 12/31/08 | Telefónica O2 Czech Republic, a.s. | 1,192 | - | 112 | (12) | - | (197) | - | 1,095 | Telefónica Chile, S.A. | 473 | - | 25 | (72) | (397) | (7) | 1 | 23 | Telesp Participaçoes, S.A. | 464 | - | 127 | (93) | - | (113) | - | 385 | Brasilcel (Holdings) | 545 | 348 | 61 | (163) | - | (12) | (5) | 774 | Fonditel Entidad Gestora de Fondos de Pensiones, S.A. | 19 | - | 4 | - | - | (2) | (1) | 20 | Iberbanda, S.A. | 11 | 8 | (10) | - | - | - | - | 9 | Colombia Telecomunicaciones, S.A., ESP | - | - | (89) | - | - | - | 89 | - | Other | 26 | - | 4 | (3) | (1) | (2) | 1 | 25 | Total | 2,730 | 356 | 234 | (343) | (398) | (333) | 85 | 2,331 |
Millions of euros | | Balance at 12/31/08 | | | Capital contributions and inclusion of companies | | | Profit/(loss) for the year | | | Change in translation differences | | | Acquisitions of non-controlling interests and exclusion of companies | | | Dividends paid | | | Other movements | | | Balance at 12/31/09 | | Telefónica Czech Republic, a.s. | | | 1,095 | | | | - | | | | 114 | | | | 21 | | | | - | | | | (186 | ) | | | - | | | | 1,044 | | Telefónica Chile, S.A. | | | 23 | | | | 1 | | | | 1 | | | | 6 | | | | (8 | ) | | | (1 | ) | | | - | | | | 22 | | Telesp Participaçoes, S.A. | | | 385 | | | | - | | | | 101 | | | | 118 | | | | - | | | | (64 | ) | | | 2 | | | | 542 | | Brasilcel (Holdings) | | | 774 | | | | - | | | | 46 | | | | 214 | | | | (108 | ) | | | (41 | ) | | | - | | | | 885 | | Fonditel Entidad Gestora de Fondos de Pensiones, S.A. | | | 20 | | | | - | | | | 3 | | | | - | | | | - | | | | - | | | | - | | | | 23 | | Iberbanda, S.A. | | | 9 | | | | - | | | | (3 | ) | | | - | | | | - | | | | - | | | | - | | | | 6 | | Colombia Telecomunicaciones, S.A., ESP | | | - | | | | - | | | | (104 | ) | | | - | | | | - | | | | - | | | | 104 | | | | - | | Other | | | 25 | | | | - | | | | 3 | | | | (2 | ) | | | (7 | ) | | | (3 | ) | | | 2 | | | | 18 | | Total | | | 2,331 | | | | 1 | | | | 161 | | | | 357 | | | | (123 | ) | | | (295 | ) | | | 108 | | | | 2,540 | |
2011 The movement in 2011 includes the exchange of Telesp shares for Vivo Participações shares, which resulted in a net decrease of 661 million euros (see Note 5), included under “Other movements.”
Millions of euros | Balance at 12/31/06 | Profit (loss) for the year | Change in translation differences | Acquisitions of non-controlling interests and exclusion of companies | Dividends paid | Other movements | Balance at 12/31/07 | Telefónica O2 Czech Republic, a.s. | 1,239 | 92 | 14 | - | (153) | - | 1,192 | Telefónica Chile, S.A. | 515 | 25 | (28) | (31) | (8) | - | 473 | Telesp Participaçoes, S.A. | 445 | 119 | 35 | - | (135) | - | 464 | Endemol, N.V. | 54 | 11 | - | (45) | (20) | - | - | Brasilcel (Holdings) | 493 | 19 | 35 | - | (2) | - | 545 | Fonditel Entidad Gestora de Fondos de Pensiones, S.A. | 17 | 4 | - | - | (2) | - | 19 | Iberbanda, S.A. | 21 | (12) | - | - | - | 2 | 11 | Colombia Telecomunicaciones, S.A., ESP | - | (50) | - | - | - | 50 | - | Other | 39 | 5 | (4) | (19) | (4) | 9 | 26 | Total | 2,823 | 213 | 52 | (95) | (324) | 61 | 2,730 |
“Acquisitions of non-controlling interests and exclusion of companies” includes the impact of the tender offer for the voting shares of Vivo Participaçoes, S.A. held by non-controlling interests representing, approximately, 3.8% of its capital stock. After its execution, Telefónica acquired an additional 2.7% of the Brazilian company’s capital stock for 539 million euros, for a total stake of 62.3% (Note 5).Also noteworthy were the dividends declared in the year by Telefónica Czech Republic, a.s. and Telefónica Brasil, S.A. “Other movements” includes the impact of the agreement signed with the holders of non-controlling interests in Colombia Telecomunicaciones, S.A., ESP (see Notes 21.b and 3.r). 2010 As disclosed in Note 5, the Group availed itself of the option to measure the non-controlling interests of Vivo Participaçoes, S.A. at fair value at the date of acquisition (see Note 3.c) in the amount of 5,290 million euros, which has resulted in an increase in non-controlling interests of 4,304 million euros, net of the amount of the previously existing non-controlling interests. Similarly, the activity in 2010 reflected the allocation to non-controlling interests of the losses incurred by Colombia Telecomunicaciones, S.A., ESP, as described in Note 17, in the amount of 414 million euros. “Other movements” includes the impact of the agreement signed with the holders of non-controlling interests in Colombia Telecomunicaciones, S.A., ESP (see Notes 21.b and 3.r). Also noteworthy was the impact of the dividends paid during that year by Brasilcel, N.V., Telefónica O2 Czech Republic, a.s. and Telesp Participaçoes, S.A. 2009 The reorganization of Brasilcel Group companies in 2009 following the acquisition of the Telemig Group in 2008 decreased the balance of “Non-controlling interests” by 108 million euros. Also noteworthy was the impact of the dividends paid during thethat year by Telefónica O2 Czech Republic, a.s. and Telesp Participaçoes, S.A. 2008
The main variation in 2008 relates to the acquisition of Telefónica Chile, S.A.’s non-controlling interests (see Note 2), which decreased the balance of “Non-controlling interests” by 397 million euros, and to the acquisition of the Telemig Group companies, which increased the balance by 335 million euros.
Also worth highlighting was the movement caused by the dividends paid by Telefónica O2 Czech Republic, a.s. operators, of 197 million euros, and by Telesp Participaçoes, S.A., of 113 million euros.
2007
Movements in non-controlling interests in 2007 included the dividends paid by Telefónica O2 Czech Republic, a.s. and Telesp Participaçoes, S.A., as well as the profit (loss) for the year attributable to non-controlling interests.
(13) | FINANCIAL ASSETS AND LIABILITIES |
1.1.- Financial assets
The breakdown of financial assets of the Telefónica Group at December 31, 20092011 and 20082010 is as follows: | December 31, 2009 | | Fair value through profit or loss | | | Measurement hierarchy | | | | Millions of euros | Held for trading | Fair value option | Available-for-sale | Hedges | Level 1 (Quoted prices) | Level 2 (Other directly observable market inputs) | Level 3 (Inputs not based on observable market data) | Amortized cost | Total carrying amount | Total fair value | Non-current financial assets | 930 | 233 | 1,248 | 1,572 | 1,508 | 2,475 | - | 2,005 | 5,988 | 5,988 | Equity investments | - | - | 654 | - | 570 | 84 | - | - | 654 | 654 | Long-term credits | 91 | 233 | 594 | - | 918 | - | - | 1,022 | 1,940 | 1,940 | Deposits and guarantees given | - | - | - | - | - | - | - | 1,496 | 1,496 | 983 | Derivative instruments | 839 | - | - | 1,572 | 20 | 2,391 | - | - | 2,411 | 2,411 | Impairment losses | - | - | - | - | - | - | - | (513) | (513) | - | Current financial assets | 859 | 134 | 237 | 59 | 769 | 520 | - | 9,730 | 11,019 | 11,019 | Financial investments | 859 | 134 | 237 | 59 | 769 | 520 | - | 617 | 1,906 | 1,906 | Cash and cash equivalents | - | - | - | - | - | - | - | 9,113 | 9,113 | 9,113 | Total financial assets | 1,789 | 367 | 1,485 | 1,631 | 2,277 | 2,995 | - | 11,735 | 17,007 | 17,007 |
| | December 31, 2011 | | | | Fair value through profit or loss | | | | | | | | | Measurement hierarchy | | | | | | | | | | | | | | Millions of euros | | Held for trading | | | Fair value option | | | Available-for-sale | | | Hedges | | | Level 1 (Quoted prices) | | | Level 2 (Other directly observable market inputs) | | | Level 3 (Inputs not based on observable market data) | | | Amortized cost | | | Held-to-maturity investments | | | Total carrying amount | | | Total fair value | | Non-current financial assets | | | 1,574 | | | | 273 | | | | 1,310 | | | | 2,720 | | | | 1,521 | | | | 4,355 | | | | 1 | | | | 2,798 | | | | 3 | | | | 8,678 | | | | 8,673 | | Investments | | | - | | | | - | | | | 680 | | | | - | | | | 588 | | | | 91 | | | | 1 | | | | - | | | | - | | | | 680 | | | | 680 | | Long-term credits | | | - | | | | 273 | | | | 630 | | | | - | | | | 894 | | | | 9 | | | | - | | | | 1,322 | | | | 3 | | | | 2,228 | | | | 2,223 | | Deposits and guarantees | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,875 | | | | - | | | | 1,875 | | | | 1,476 | | Derivative instruments | | | 1,574 | | | | - | | | | - | | | | 2,720 | | | | 39 | | | | 4,255 | | | | - | | | | - | | | | - | | | | 4,294 | | | | 4,294 | | Impairment losses | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (399 | ) | | | - | | | | (399 | ) | | | - | | Current financial assets | | | 165 | | | | 171 | | | | 518 | | | | 225 | | | | 668 | | | | 367 | | | | 44 | | | | 5,024 | | | | 657 | | | | 6,760 | | | | 6,760 | | Financial investments | | | 165 | | | | 171 | | | | 518 | | | | 225 | | | | 668 | | | | 367 | | | | 44 | | | | 889 | | | | 657 | | | | 2,625 | | | | 2,625 | | Cash and cash equivalents | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,135 | | | | - | | | | 4,135 | | | | 4,135 | | Total financial assets | | | 1,739 | | | | 444 | | | | 1,828 | | | | 2,945 | | | | 2,189 | | | | 4,722 | | | | 45 | | | | 7,822 | | | | 660 | | | | 15,438 | | | | 15,433 | |
| December 31, 2008 | | Fair value through profit or loss | | | Measurement hierarchy | | | | Millions of euros | Held for trading | Fair value option | Available-for-sale | Hedges | Level 1 (Quoted prices) | Level 2 (Other directly observable market inputs) | Level 3 (Inputs not based on observable market data) | Amortized cost | Total carrying amount | Total fair value | Non-current financial assets | 1,182 | 92 | 2,327 | 2,404 | 2,334 | 3,671 | - | 1,371 | 7,376 | 7,642 | Equity investments | - | - | 1,584 | - | 1,503 | 81 | - | - | 1,584 | 1,585 | Long-term credits | - | 88 | 743 | - | 831 | - | - | 863 | 1,694 | 1,562 | Deposits and guarantees given | - | - | - | - | - | - | - | 905 | 905 | 905 | Derivative instruments | 1, 182 | 4 | - | 2,404 | - | 3,590 | - | - | 3,590 | 3,590 | Impairment losses | - | - | - | - | - | - | - | (397) | (397) | - | Current financial assets | 700 | 273 | 181 | 388 | 275 | 1,267 | - | 4,951 | 6,493 | 6,605 | Financial investments | 700 | 273 | 181 | 388 | 275 | 1,267 | - | 674 | 2,216 | 2,328 | Cash and cash equivalents | - | - | - | - | - | - | - | 4,277 | 4,277 | 4,277 | Total financial assets | 1,882 | 365 | 2,508 | 2,792 | 2,609 | 4,938 | - | 6,322 | 13,869 | 14,247 |
| | December 31, 2010 | | | | Fair value through profit or loss | | | | | | | | | Measurement hierarchy | | | | | | | | | | | | | | Millions of euros | | Held for trading | | | Fair value option | | | Available-for-sale | | | Hedges | | | Level 1 (Quoted prices) | | | Level 2 (Other directly observable market inputs) | | | Level 3 (Inputs not based on observable market data) | | | Amortized cost | | | Held-to-maturity investments | | | Total carrying amount | | | Total fair value | | Non-current financial assets | | | 948 | | | | 211 | | | | 1,194 | | | | 1,630 | | | | 1,321 | | | | 2,660 | | | | 2 | | | | 3,423 | | | | - | | | | 7,406 | | | | 7,325 | | Investments | | | - | | | | - | | | | 597 | | | | - | | | | 482 | | | | 113 | | | | 2 | | | | - | | | | - | | | | 597 | | | | 597 | | Long-term credits | | | 12 | | | | 211 | | | | 597 | | | | - | | | | 816 | | | | 4 | | | | - | | | | 2,118 | | | | - | | | | 2,938 | | | | 2,838 | | Deposits and guarantees | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,680 | | | | - | | | | 1,680 | | | | 1,324 | | Derivative instruments | | | 936 | | | | - | | | | - | | | | 1,630 | | | | 23 | | | | 2,543 | | | | - | | | | - | | | | - | | | | 2,566 | | | | 2,566 | | Impairment losses | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (375 | ) | | | - | | | | (375 | ) | | | - | | Current financial assets | | | 272 | | | | 160 | | | | 309 | | | | 201 | | | | 554 | | | | 363 | | | | 25 | | | | 4,604 | | | | 248 | | | | 5,794 | | | | 5,794 | | Financial investments | | | 272 | | | | 160 | �� | | | 309 | | | | 201 | | | | 554 | | | | 363 | | | | 25 | | | | 384 | | | | 248 | | | | 1,574 | | | | 1,574 | | Cash and cash equivalents | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4,220 | | | | - | | | | 4,220 | | | | 4,220 | | Total financial assets | | | 1,220 | | | | 371 | | | | 1,503 | | | | 1,831 | | | | 1,875 | | | | 3,023 | | | | 27 | | | | 8,027 | | | | 248 | | | | 13,200 | | | | 13,119 | |
The calculation of the fair values of the Telefónica Group’s debt instruments required an estimate, for each currency and subsidiary,counterparty, of a credit spread curve using the prices of the Group’s bonds and credit derivatives. 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.
a) | a) | Non-current financial assets |
The movement in items composing “Non-current financial assets” and the related impairment losses at December 31, 20092011 and 20082010 are as follows: Millions of euros | Millions of euros | Millions of euros | | | Investments | Long-term credits | Derivative financial assets | Deposits and guarantees | Long-term prepayments | Impairment losses | Total | | Investments | | | Long-term credits and prepayments | | | Deposits and guarantees | | | Derivative financial assets | | | Impairment losses | | | Total | | Balance at 12/31/07 | 2,235 | 1,572 | 1,483 | 813 | 97 | (381) | 5,819 | | Balance at 12/31/09 | | | | 654 | | | | 1,940 | | | | 1,496 | | | | 2,411 | | | | (513 | ) | | | 5,988 | | Acquisitions | 1,124 | 793 | 1,049 | 201 | 42 | (40) | 3,169 | | | 51 | | | | 1,465 | | | | 339 | | | | 62 | | | | (79 | ) | | | 1,838 | | Disposals | (664) | (433) | - | (66) | (18) | 22 | (1,159) | | | (1 | ) | | | (748 | ) | | | (112 | ) | | | (389 | ) | | | 243 | | | | (1,007 | ) | Inclusion of companies | - | 9 | - | 63 | - | (1) | 71 | | | 8 | | | | 205 | | | | 203 | | | | 34 | | | | (7 | ) | | | 443 | | Translation differences | (8) | (114) | 131 | (107) | (4) | 2 | (100) | | | 13 | | | | 99 | | | | (186 | ) | | | 16 | | | | 39 | | | | (19 | ) | Fair value adjustments | (1,095) | (34) | 1,172 | - | (7) | 1 | 37 | | | (128 | ) | | | 60 | | | | 34 | | | | 444 | | | | - | | | | 410 | | Transfers | (8) | (191) | (245) | 1 | (18) | - | (461) | | | - | | | | (83 | ) | | | (94 | ) | | | (12 | ) | | | (58 | ) | | | (247 | ) | Balance at 12/31/08 | 1,584 | 1,602 | 3,590 | 905 | 92 | (397) | 7,376 | | Balance at 12/31/10 | | | | 597 | | | | 2,938 | | | | 1,680 | | | | 2,566 | | | | (375 | ) | | | 7,406 | | Acquisitions | 3 | 921 | - | 842 | 35 | (114) | 1,687 | | | - | | | | 936 | | | | 425 | | | | 224 | | | | (11 | ) | | | 1,574 | | Disposals | (33) | (503) | (1,118) | (364) | (26) | - | (2,044) | | | (12 | ) | | | (873 | ) | | | (207 | ) | | | - | | | | 1 | | | | (1,091 | ) | Inclusion of companies | - | - | - | - | - | - | - | | Translation differences | 9 | 90 | (38) | 146 | 6 | (2) | 211 | | | (1 | ) | | | (45 | ) | | | (53 | ) | | | 34 | | | | 1 | | | | (64 | ) | Fair value adjustments | 565 | (53) | (5) | - | - | - | 507 | | | (160 | ) | | | 18 | | | | 2 | | | | 1,721 | | | | - | | | | 1,581 | | Transfers | (1,474) | (221) | (18) | (33) | (3) | - | (1,749) | | | 256 | | | | (746 | ) | | | 28 | | | | (251 | ) | | | (15 | ) | | | (728 | ) | Balance at 12/31/09 | 654 | 1,836 | 2,411 | 1,496 | 104 | (513) | 5,988 | | Balance at 12/31/11 | | | | 680 | | | | 2,228 | | | | 1,875 | | | | 4,294 | | | | (399 | ) | | | 8,678 | |
“Investments” includes the marketfair value of investments in companies where Telefónica does not exercise significant control and for which there is no specific disposal plan forin the short term (see Note 3.i). Among these is the Telefónica Group’sGroup's shareholding in Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) since 2000 of 468326 million euros (314(418 million euros at December 31, 2008)2010), representing 0.98%0.90% of its share capital. In 2011, the Telefónica Group adjusted the value of its investment in BBVA by 80 million euros. In 2010, the Telefónica Group transferred 191 million euros of the value of the holding in BBVA, up to its fair value, from equity to net financial expenses. In 2009,2011, the Telefónica Group’sdirect stake in China Unicom wasPortugal Telecom and the assigned shares through the equity swaps contracts were transferred to “Investments in associates” following the share exchange described in Note 2.“Investments.” The amount transferred was 1,467256 million euros. At the end of 2010, they were included under “Non-current assets held for sale” in the consolidated statement of financial position. In January 2008, Telefónica, S.A., through its Telefónica Internacional, S.A.U. subsidiary, signed an agreementthis respect, economic exposure to acquire an additional stakePortugal Telecom was reduced in 2011 via partial disposals, which generated a gain of approximately 2.22% in Chinese telecommunications company China Netcom Group Corporation (Hong Kong) Limited (CNC). On September 22, it carried out this purchase for approximately 313184 million euros. In addition, in September 2008, Telefónica Internacional, S.A.U. reached another agreement to acquire an additional stake of approximately 5.74% of CNC’s share capital.
This acquisition was structured in two tranches: the first, carried out in September 2008, entailed shares representing 2.71% of CNC for approximately 374 million euros and the second, carried out after the merger between CNC and China Unicom (Hong Kong) Limited (“CU"), entailed shares of the new company representing up to 3.03% of CNC’s share capital.
On October 14, 2008 the merger between these companies was carried out. The exchange ratio applied in calculating the number of shares corresponding to the new company arising from the merger between CNC and CU was 1.508 shares of the new company for each year of the former company.
Once the merger was completed, the second tranche was carried out, requiring an investment by the Telefónica Group of approximately 413 million euros.
After these acquisitions and the merger, the Telefónica Group’s stake in CU at December 31, 2008 stood at approximately 5.38%, recognized at December 31, 2008 at approximately 1,102 million euros.
In addition, in 2008, Telefónica tendered all the shares it owned in Sogecable, S.A. in the takeover bid launched for this company by the Prisa Group. The amount received from the sale was 648 million euros. This investment was included in the statement of financial position at December 31, 2007 in “Equity investments” under “Non-current financial assets,” for 634 million euros. The gain obtained on the sale was 143 million euros, recognized under “Other income” in the accompanying consolidated income statement (see Note 19).
Given the poor situation of financial markets, at year-end the Group assessed the securities in its portfolio of listed available-for-sale assets individually for impairment. The analysis did not uncoveridentify the need to recognize any significant additional impairment losses. “Long-term credits”credits and prepayments” includes mainly the investment of the net level premium reserves of the Group’s insurance companies, primarily in fixed-income securities, amounting to 1,023894 million and 792931 million euros at December 31, 20092011 and 2008,2010, respectively, and long-term prepayments of 149 million euros and 167 million euros at December 31, 2011 and 2010, respectively. It also includesAt December 2010 the amounts included the long-term loanscredit with Telco, S.p.A. in an amount of 600 million euros, which has been classified as short term in 2011. “Deposits and guarantees” consists mainly of balances to associates described in Note 9.cover guarantees and stood at 1,875 million euros at December 31, 2011 (1,680 million euros at December 31, 2010). These deposits will decrease as the respective obligations they guarantee are reduced. “Derivative financial assets” includes the fair value of economic hedges of assets or liabilities in the consolidated statement of financial position whose maturity is 12 months or greater, as part of the Group’s financial risk-hedging strategy (see Note 16). “Deposits and guarantees” consists mainly of balances to cover guarantees and stood at 1,496 million euros at December 31, 2009 (905 million euros at December 31, 2008). These deposits will decrease as the respective obligations they guarantee are reduced.
b) | b) | Current financial assets |
This heading in the accompanying consolidated statement of financial position at December 31, 20092011 and 20082010 includes mainly the following items: | - | “CurrentInvestments in financial assets”instruments recognized at fair value to cover commitments undertaken by the Group’s insurance companies, amounting to 140171 million euros at December 31, 2009 (2762011 (160 million euros at December 31, 2008)2010). The maturity schedule for these financial assets is established on the basis of payment projections for the commitments. |
| - | Derivative financial assets with a short-term maturity or not used to hedge non-current items in the consolidated statement of financial position, which amounted to 537385 million euros (1,086(371 million euros in 2008)2010). The variation in the balance between the two years was due to exchange- and interest-rate fluctuations (see Note 16). |
| - | Short-term deposits and guarantees amountingamounted to 47087 million euros at December 31, 2009 (1252011 (196 million euros at December 31, 2008)2010). |
| - | Financing extended to Telco, S.p.A. for 600 million euros. |
| - | Current investments of cash surpluses which, given their characteristics, have not been classified as “Cash and cash equivalents.” |
Current financial assets that are highly liquid and are expected to be sold withinhave maturities of three months or less from the date contracted are recorded under “Cash and cash equivalents” on the accompanying consolidated statement of financial position. The composition of this heading at December 31, 20092011 and 20082010 is as follows: Millions of euros | Balance at 12/31/09 | Balance at 12/31/08 | | Balance at 12/31/11 | | | Balance at 12/31/10 | | Issues | 35,843 | 30,079 | | | 42,239 | | | | 39,692 | | Interest-bearing debt | 20,948 | 22,926 | | | 24,072 | | | | 21,408 | | Other financial liabilities | - | 183 | | Total | 56,791 | 53,188 | | | 66,311 | | | | 61,100 | | Total non-current | 47,607 | 45,088 | | | 55,659 | | | | 51,356 | | Total current | 9,184 | 8,100 | | | 10,652 | | | | 9,744 | |
The maturity profile of these financial liabilities at December 31, 20092011 is as follows: (Millions of euros) | Maturity | | 2010 | 2011 | 2012 | 2013 | 2014 | Subsequent years | Total | Debentures and bonds | 5,090 | 3,275 | 1,749 | 4,174 | 4,763 | 13,911 | 32,962 | Promissory notes & commercial paper | 812 | - | - | - | - | - | 812 | Other marketable debt securities | 61 | 54 | - | - | - | 1,954 | 2,069 | Loans and other payables | 1,789 | 6,132 | 3,695 | 1,433 | 513 | 4,396 | 17,958 | Derivative financial liabilities | 1,432 | 255 | 106 | 65 | 63 | 1,069 | 2,990 | TOTAL | 9,184 | 9,716 | 5,550 | 5,672 | 5,339 | 21,330 | 56,791 |
| | Maturity | | | | | (Millions of euros) | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | Subsequent years | | | Total | | Debentures and bonds | | | 2,824 | | | | 5,203 | | | | 4,933 | | | | 3,860 | | | | 6,590 | | | | 15,012 | | | | 38,422 | | Promissory notes & commercial paper | | | 1,832 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,832 | | Other marketable debt securities | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,985 | | | | 1,985 | | Loans and other payables | | | 5,683 | | | | 2,314 | | | | 2,746 | | | | 4,384 | | | | 2,774 | | | | 3,722 | | | | 21,623 | | Derivative financial liabilities | | | 313 | | | | 92 | | | | 126 | | | | 289 | | | | 191 | | | | 1,438 | | | | 2,449 | | TOTAL | | | 10,652 | | | | 7,609 | | | | 7,805 | | | | 8,533 | | | | 9,555 | | | | 22,157 | | | | 66,311 | |
| · | The estimate of future interest that would accrue on the Group’sthese financial liabilities held by the Group at December 31, 20092011 is as follows: 2,382 million euros in 2010, 2,074 million euros in 2011, 1,8183,215 million euros in 2012, 1,6203,083 million euros in 2013, 1,3552,638 million euros in 2014, 2,040 million euros in 2015, 1,740 million euros in 2016 and 8,1907,545 million euros in years after 2014.2016. For variable rate financing, the Group mainly estimates future interest using the forward curve of the various currencies at December 31, 2009.2011. |
| · | The amounts shown in this table take into account the fair value of derivatives classified as financial liabilities (i.e., those with a negative marketfair value) and exclude the fair value of derivatives classified as current financial assets, in the amount of 385 million euros, and those classified as non-current, for 4,294 million euros (i.e., those with a positive market value, of 537 million euros)fair value). |
The composition of the Group’sthese financial liabilities, by category, at December 31, 20092011 and 20082010 is as follows: Millions of euros | December 31, 2009 | | Fair value through profit or loss | Hedges | Measurement hierarchy | Liabilities at amortized cost | Total carrying amount | Total fair value | | | | December 31, 2011 | | | | | Fair value through profit or loss | | | | | | Measurement hierarchy | | | | | | | | | | | Millions of euros | Held for trading | Fair value option | Hedges | Level 1 (Quoted prices) | Level 2 (Other directly observable market inputs) | Level 3 (Inputs not based on observable market data) | Liabilities at amortized cost | Total carrying amount | Total fair value | | Held for trading | | | Fair value option | | | Hedges | | | Level 1 (Quoted prices) | | | Level 2 (Other directly observable market inputs) | | | Level 3 (Inputs not based on observable market data) | | | Liabilities at amortized cost | | | Total carrying amount | | | Total fair value | | - | - | - | - | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 42,239 | | | | 42,239 | | | | 42,203 | | 705 | - | 2,285 | 147 | 2,843 | - | 17,958 | 20,948 | 20,840 | | | 1,246 | | | | - | | | | 1,203 | | | | 78 | | | | 2,371 | | | | - | | | | 21,623 | | | | 24,072 | | | | 21,961 | | Total financial liabilities | 705 | - | 2,285 | 147 | 2,843 | - | 53,801 | 56,791 | 58,730 | | | 1,246 | | | | - | | | | 1,203 | | | | 78 | | | | 2,371 | | | | - | | | | 63,862 | | | | 66,311 | | | | 64,164 | |
| | December 31, 2010 | | | Fair value through profit or loss | | | | | | Measurement hierarchy | | | | | | | | | | | Millions of euros | | Held for trading | | | Fair value option | | | Hedges | | | Level 1 (Quoted prices) | | | Level 2 (Other directly observable market inputs) | | | Level 3 (Inputs not based on observable market data) | | | Liabilities at amortized cost | | | Total carrying amount | | | Total fair value | | Issues | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 39,692 | | | | 39,692 | | | | 39,127 | | Interest-bearing debt | | | 695 | | | | - | | | | 806 | | | | 210 | | | | 1,291 | | | | - | | | | 19,907 | | | | 21,408 | | | | 19,777 | | Total financial liabilities | | | 695 | | | | - | | | | 806 | | | | 210 | | | | 1,291 | | | | - | | | | 59,599 | | | | 61,100 | | | | 58,904 | |
The calculation of the fair values of the Telefónica Group’s debt instruments required an estimate, for each currency and subsidiary, of the credit spread curve using the prices of the Group’s bonds and credit derivatives. Millions of euros | December 31, 2008 | Fair value through profit or loss | Hedges | Measurement hierarchy | Liabilities at amortized cost | Total carrying amount | Total fair value | Held for trading | Fair value option | Level 1 (Quoted prices) | Level 2 (Other directly observable market inputs) | Level 3 (Inputs not based on observable market data) | Issues | - | - | - | - | - | - | 30,079 | 30,079 | 28,203 | Interest-bearing debt | 1,013 | 3 | 1,980 | - | 2,996 | - | 19,930 | 22,926 | 22,253 | Other financial liabilities | - | - | - | - | - | - | 183 | 183 | 183 | Total financial liabilities | 1,013 | 3 | 1,980 | - | 2,996 | - | 50,192 | 53,188 | 50,639 |
Some of the financing arranged by various Telefónica groupGroup companies is subject to compliance with certain financial covenants. All the covenants were being complied with at the date of these consolidated financial statements. The movement in issues of debentures, bonds and other marketable debt securities in 20092011 and 20082010 is as follows: Millions of euros | Domestic currency issues | Foreign currency issues | Short-term promissory notes and commercial paper | Other long-term marketable debt securities | Total | | Domestic currency issues | | | Foreign currency issues | | | Short-term promissory notes and commercial paper | | | Other non Current Marketable debt securities | | | Total | | Balance at 12/31/07 | 11,716 | 14,058 | 2,202 | 2,081 | 30,057 | | Balance at 12/31/09 | | | | 17,575 | | | | 15,387 | | | | 873 | | | | 2,008 | | | | 35,843 | | New issues | 1,247 | 70 | 14 | 15 | 1,346 | | | 2,392 | | | | 3,879 | | | | 1,102 | | | | - | | | | 7,373 | | Redemptions, conversions and exchanges | (737) | (448) | (643) | (22) | (1,850) | | | (1,269 | ) | | | (3,634 | ) | | | (311 | ) | | | - | | | | (5,214 | ) | Changes in consolidation scope | - | 4 | - | - | 4 | | | - | | | | 317 | | | | - | | | | - | | | | 317 | | Revaluation and other movements | 1,405 | (885) | 22 | (20) | 522 | | | 96 | | | | 1,250 | | | | 64 | | | | (37 | ) | | | 1,373 | | Balance at 12/31/08 | 13,631 | 12,799 | 1,595 | 2,054 | 30,079 | | Balance at 12/31/10 | | | | 18,794 | | | | 17,199 | | | | 1,728 | | | | 1,971 | | | | 39,692 | | New issues | 5,750 | 2,855 | 105 | - | 8,710 | | | 2,300 | | | | 2,283 | | | | 166 | | | | - | | | | 4,749 | | Redemptions, conversions and exchanges | (1,152) | (802) | (909) | - | (2,863) | | | (2,250 | ) | | | (985 | ) | | | (66 | ) | | | - | | | | (3,301 | ) | Changes in consolidation scope | - | - | - | - | - | | | - | | | | - | | | | - | | | | - | | | | - | | Revaluation and other movements | (654) | 535 | 82 | (46) | (83) | | | 641 | | | | 439 | | | | 5 | | | | 14 | | | | 1,099 | | Balance at 12/31/09 | 17,575 | 15,387 | 873 | 2,008 | 35,843 | | Balance at 12/31/11 | | | | 19,485 | | | | 18,936 | | | | 1,833 | | | | 1,985 | | | | 42,239 | |
Debentures, bondsBonds and other marketable debt securities
Telefónica, S.A. has a full and unconditional guarantee on issues made by Telefónica Emisiones, S.A.U., Telefónica Finanzas México, S.A. de C.V. and Telefónica Europe, B.V., bothall of which are, directly or indirectly, wholly owned subsidiaries of Telefónica, S.A. Appendix II presents the characteristics of all outstanding debentures and bond issues at year-end 20092011 and 2008,2010, as well as the significant issues made in each year. Promissory notes & commercial paper At December 31, 2009 and 2008,2011, Telefónica S.A.Europe, B.V., had a promissory note program for issuance of commercial paper, guaranteed by Telefónica, S.A., for an amount of up to 2,000 million euros. The outstanding balances at December 31, 2009 and 2008 were 254 million euros and 741 million euros, respectively, carrying average interest ratesbalance of 1.318% and 4.49%, respectively. At December 31, 2009, Telefónica Europe, B.V. had a commercial paper program secured by Telefónica, S.A. for issuance of up to 2,000 million euros. The outstanding balances onissued under this program at December 31, 2009 and 2008 were 5512011 was 1,596 million euros, and 840 million euros, respectively, carryingissued at an average interest ratesrate of 1.17% and 3.70%1.50% (1,613 million issued in 2010 at an average rate of 0.82%).
On December 13, 2010, Telefónica Móviles, S.A. (Peru) registered a commercial paper program for an equivalent of up to 150 million US dollars (approximately 116 million euros). The outstanding balance of commercial paper issued under this program at December 31, 2011 was 13 million US dollars (approximately 9 million euros). On 20 December, 2010, Telefónica de Perú, respectively.S.A.A. registered a commercial paper program for an equivalent of up to 150 million US dollars (approximately 116 million euros). At December 31, 2011, no amount had been drawn under this program. On May 11, 2011, Telefónica Móviles Colombia, S.A. registered a commercial paper program for an equivalent of up to 350,000 million Colombian pesos (approximately 137 million euros). The outstanding balance of commercial paper issued under this program at December 31, 2011 was 318,055 million Colombian pesos (approximately 127 million euros). At December 31, 2011, Telefónica, S.A. has a corporate promissory note program for 500 million euros, which can be increased to 2,000 million euros, with an outstanding balance at such date of 87 million euros (42 million euros in 2010).
Other marketable debt securities This heading consists mainly of preferred shares issued by Telefónica Finance USA, LLC, with a redemption value of 2,000 million euros. These shares were issued in 2002 and have the following features: | · | Interest rate up to December 30, 2012 of 3-month Euribor, and maximum and minimum effective annual rates of 7% and 4.25%, respectively, and from then on 3-month Euribor plus a 4% spread. |
| · | Interest is paid every three calendar months provided the Telefónica Group generates consolidated net income.profit. |
The detail of “Interest-bearing debt” is as follows: Millions of euros | Balance at 12/31/09 | Balance at 12/31/08 | | Current | Non-current | Total | Current | Non-current | Total | | | | | Balance at 12/31/11 | | | Balance at 12/31/10 | | | | | Current | | | Non-current | | | | | | Current | | | Non-current | | | | | | | | Total | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and other payables | 1,789 | 16,169 | 17,958 | 3,752 | 16,178 | 19,930 | | | 5,683 | | | | 15,940 | | | | 21,623 | | | | 3,664 | | | | 16,243 | | | | 19,907 | | Derivative financial liabilities (Note 16) | 1,432 | 1,558 | 2,990 | 747 | 2,249 | 2,996 | | | 313 | | | | 2,136 | | | | 2,449 | | | | 323 | | | | 1,178 | | | | 1,501 | | Total | 3,221 | 17,727 | 20,948 | 4,499 | 18,427 | 22,926 | | | 5,996 | | | | 18,076 | | | | 24,072 | | | | 3,987 | | | | 17,421 | | | | 21,408 | |
The average interest rate on outstanding loans and other payables at December 31, 20092011 was 3.58% (4.28%4.04% (2.56% in 2008)2010). This percentage does not include the impact of hedges arranged by the Group. The main financing transactions included under “Interest-bearing debt” outstanding at December 31, 20092011 and 20082010 and their nominal amounts are provided in Appendix IV. Interest-bearing debt arranged in 20092011 and 20082010 mainly includes the following: | · | On February 13, 2009,October 31, 2011, Telefónica Brasil took out a loan with Banco do Brasil (BNB) for 150 million US dollars (equivalent to approximately 116 million euros); |
| · | On September 20, 2011, Vivo, S.A. arranged long-term financing with Banco Nacional de Desenvolvimento Econômico e Social (BNDES) for a nominal amount of up to 3,000 million Brazilian reais. Principal amounts drawn under this financing at December 31, 2011 amounted to 1,004 million Brazilian reais (equivalent to 414 million euros). |
| · | On May 12, 2011 Telefónica, S.A. executed, withsigned an amendment to the syndicated loan agreement entered into on July 28, 2010 whereby it was agreed that, in exchange for the additional payment of certain fees and an upward adjustment to applicable interest rates, of the 5,000 million euros that would initially mature in July 2013, 2,000 million euros would be extended for another year, i.e. until July 2014, and another 2,000 million for a group of participating banks in the 6,000 million euro syndicatedfurther three years, i.e. until July 2016. At December 31, 2011, this line of credit dated June 28, 2005had been drawn down by 8,000 million euros (6,000 million euros at December 31, 2010). |
| · | On May 3, 2011, Telefónica, S.A. entered into a long-term line of credit facility for an aggregate amount of 376 million US dollars at a fixed rate with the guarantee of the Finnish Export Credits Guarantee Board (Finnvera). This credit facility is divided into four tranches: a tranche of 94 US dollars maturing on June 28,January 30, 2020, another of 90 million US dollars maturing on July 30, 2020, a third of 94 million US dollars maturing on January 30, 2021, and a fourth of 98 million US dollars maturing on July 30, 2021. At December 31, 2011, an extensionnone of 4,000this credit had been drawn down. |
| · | On March 29, 2011, Atento Inversiones y Teleservicios, S.A.U. and its subsidiaries, Atento, N.V. and Atento Teleservicios España, S.A.U., entered into a four-year syndicated loan agreement totaling 235 million euros ofeuros. At December 31, 2011, the 6,000 million euros available at such date, for an additional period of one year for 2,000 million euros and two years for the remaining 2,000outstanding balance on this loan amounted to 228 million euros. |
| · | On December 28, 2009, Colombia de Telecomunicaciones,February 12, 2010, Telefónica, S.A., ESP. signed entered into a loanlong-term credit facility for 310,000an aggregate amount of 472 million Colombian pesos (equivalent to 105US dollars at fixed rates with the guarantee of the Swedish Export Credits Guarantee Board (EKN) for equipment and network purchases from a supplier in this country. This credit facility is divided into three tranches: a tranche of 232 US dollars maturing on November 30, 2018, another of 164 million eurosUS dollars maturing on April 30, 2019, and a third of 76 million US dollars maturing on November 30, 2019. During the year, it repaid 218 million US dollars of the first tranche and 154 million US dollars of the second, although since this facility has a repayment schedule at December 31, 2009) maturing on December 28, 2014. |
| · | On January 15, 2008, Telefónica Móviles Colombia, S.A. drew down2011, the entire amount of financing arranged on December 10, 2007, which was structured in two tranches. Tranche A, for 125outstanding balance amounted to 335 million US dollars entailed bilateral financing with the Inter-American Development Bank (IDB) maturing in 7 years. Tranche B entailed a 5-year 475(equivalent to 259 million US dollar syndicated credit facility with a group of banks, in which the IDB acted as agent bank. |
| · | On January 30, 2008, Telefónica Finanzas, S.A.U. (Telfisa) drew down the 450 million euros of facilities arranged with the European Investment Bank (EIB) related to the “Telefónica Mobile Telephony II” project, of which 375 million euros mature in seven years and the remaining 75 million euros in eight years. |
| · | On May 1, 2008, Vivo, S.A. drew down an additional 750 million Brazilian reais of the financing arranged with the Brazilian Development Bank (BNDES) on August 9, 2007 |
| | and maturing on August 15, 2014. In 2009, an additional 89 million Brazilian reais were drawn down. |
| · | On June 9, 2008, Compañía de Telecomunicaciones de Chile, S.A. (CTC) extended the maturity of a 150 million US dollar syndicated loan to May 13, 2013. |
| · | On October 28, 2008, Telesp drew down an additional 886 million Brazilian reais of the financing arranged with the BNDES on October 23, 2007 and maturing on May 15, 2015. In 2009, an additional 273 million Brazilian reais were drawn down.euros). |
The main repayments or maturities of bank interest-bearing debt in 20092011 and 20082010 are as follows: | · | On July 6, 2009,December 12, 2011, the loan facility arranged by Telefónica Finanzas, S.A.U. with the European Investment Bank (EIB) for 300 million euros matured as scheduled. This loan had the guarantee of Telefónica, S.A. |
| · | On June 28, 2011, the syndicated loan facility arranged by Telefónica, S.A. with a group of banks on July 6, 2004,June 28, 2005 for 3,0006,000 million euros matured as scheduled. The outstanding balance at maturity was 300 million euros (5,700 million matured in 2010). |
| · | On January 5, 2011, the syndicated loan facility arranged by Telefónica Móviles Chile, S.A. on December 29, 2005 for 180 million euros (equivalent to 138 million euros) matured as scheduled. |
| · | On June 21, 2011, the syndicated loan facility arranged by Telefónica Finanzas, S.A.U. (Telfisa) madeMóviles Chile, S.A. on October 28, 2005 for 150 million euros (equivalent to 116 million euros) matured as scheduled. |
| · | In 2011, Vivo, S.A. paid the payments correspondinginstallments included in the repayment schedule for the financing arranged with BNDES on July 13, 2007, for an aggregate amount of 318 million Brazilian reais (equivalent to 2009approximately 131 million euros). At December 31, 2011, the nominal amount outstanding on certain finance dealsthis financing was 818 million Brazilian reais (approximately 337 million euros). |
| · | In 2011, Telesp paid the installments included in the repayment schedule for the financing arranged with BNDES on October 23, 1997, for an aggregate amount of 408 million Brazilian reais (equivalent to approximately 168 million euros). At December 31, 2011, the nominal amount outstanding on this financing was 1,390 million Brazilian reais (approximately 573 million euros). |
| · | In 2011, Telefónica Móviles Colombia, S.A. paid the installments included in the repayment schedule for the financing arranged with the EIBInter-American Development Bank (IDB) on December 20, 2007, for an aggregate amount equalof 218 million US dollars (equivalent to approximately 77168 million euros (502euros). At December 31, 2011, the nominal amount outstanding on this financing was 273 million euros in 2008), of which 26US dollars (approximately 211 million euros relate to financing matured (440 million euros in 2008)euros). |
At December 31, 2009,2011, the Telefónica Group had total unused credit facilities from various sources amounting to over 7,200approximately 10,119 million euros (over 7,400(approximately 11,000 million euros at December 31, 2008).2010), which included 2,000 million euros related to the undrawn amount of the loan to acquire Brasilcel, N.V. Loans by currency The breakdown of loans by currency at December 31, 20092011 and 2008,2010, along with the equivalent value of foreign-currency loans in euros, areis as follows: | Outstanding balance (in millions) | | Outstanding balance (in millions) | | | Currency | Euros | | Currency | | | Euros | | Currency | 12/31/09 | 12/31/08 | 12/31/09 | 12/31/08 | | 12/31/11 | | | 12/31/10 | | | 12/31/11 | | | 12/31/10 | | Euros | 10,835 | 11,592 | 10,835 | 11,592 | | | 13,099 | | | | 11,778 | | | | 13,099 | | | | 11,778 | | US dollars | 2,498 | 3,267 | 1,734 | 2,444 | | | 2,520 | | | | 2,580 | | | | 1,947 | | | | 1,931 | | Brazilian reais | 3,114 | 3,228 | 1,242 | 992 | | | 4,014 | | | | 3,633 | | | | 1,545 | | | | 1,632 | | Argentine pesos | 603 | 51 | 110 | 11 | | | 764 | | | | 1,080 | | | | 137 | | | | 203 | | Colombian pesos | 7,675,200 | 7, 819,166 | 2,610 | 2,502 | | | 9,035,173 | | | | 8,176,727 | | | | 3,594 | | | | 3,197 | | Yen | 17,258 | 58,832 | 130 | 467 | | | 14,916 | | | | 16,882 | | | | 149 | | | | 155 | | Chilean peso | 151,943 | 176,163 | 208 | 199 | | | 106,284 | | | | 54,886 | | | | 158 | | | | 88 | | New soles | 1,120 | 1,096 | 269 | 251 | | | 853 | | | | 948 | | | | 245 | | | | 253 | | Pounds sterling | 708 | 1,383 | 798 | 1,452 | | | 552 | | | | 557 | | | | 661 | | | | 648 | | Czech crown | 301 | 389 | 11 | 14 | | | 49 | | | | 131 | | | | 2 | | | | 5 | | Other currencies | | | 11 | 6 | | | | | | | | | | | 86 | | | | 17 | | Total Group | N/A | N/A | 17,958 | 19,930 | | | N/A | | | | N/A | | | | 21,623 | | | | 19,907 | |
(14) | TRADE AND OTHER PAYABLES |
The composition of “Trade and other payables” is as follows: Millions of euros | 12/31/09 | 12/31/08 | | | | 12/31/11 | | | 12/31/10 | | Millions of euros | Non-current | Current | Non-current | Current | | Non-current | | | Current | | | Non-current | | | Current | | - | 6,963 | - | 7,845 | | | - | | | | 8,888 | | | | - | | | | 9,038 | | Advances received on orders | - | 115 | - | 94 | | | - | | | | 77 | | | | - | | | | 83 | | Other payables | 752 | 5,130 | 582 | 4,316 | | | 1,620 | | | | 6,684 | | | | 1,761 | | | | 8,162 | | Deferred income | 497 | 1,528 | 535 | 1,214 | | | 472 | | | | 1,766 | | | | 543 | | | | 1,775 | | Payable to associates (Note 9) | - | 287 | - | 182 | | | - | | | | 440 | | | | - | | | | 193 | | Total | 1,249 | 14,023 | 1,117 | 13,651 | | | 2,092 | | | | 17,855 | | | | 2,304 | | | | 19,251 | |
“Deferred income” principally includes the amount of connection fees not yet recognized in the income statement, customer loyalty programs, and advance payments received on prepay contracts. These will be recognized as revenue over Non-current “Other payables” mainly comprises the estimated customer relationship period (see Note 3.o) or asdeferred portion of the purchases related topayment for acquiring the revenue are incurred.license for spectrum use in Mexico, in the amount of 878 million euros (1,039 million euros in 2010) (Note 6). The detail of current “Other payables” under “Current liabilities” at December 31, 20092011 and 20082010 is as follows: Millions of euros | Balance at 12/31/09 | Balance at 12/31/08 | | Balance at 12/31/11 | | | Balance at 12/31/10 | | Dividends payable by Group companies | 157 | 157 | | | 241 | | | | 199 | | Payables to suppliers of property, plant and equipment, current | 3,598 | 2,915 | | Payables to suppliers of property, plant and equipment | | | | 4,393 | | | | 4,455 | | Accrued employee benefits | 695 | 595 | | | 728 | | | | 780 | | Deferred payment for Brasilcel, N.V. (Note 5) | | | | - | | | | 1,977 | | Other non-financial non-trade payables | 680 | 649 | | | 1,322 | | | | 751 | | Total | 5,130 | 4,316 | | | 6,684 | | | | 8,162 | |
Information on deferred payments to suppliers of Spanish companies (Third additional provision, "Information requirement" of Law 15/2010 of July 5th) The Telefónica Group’s Spanish companies have adapted their internal processes and payment schedules to the provisions of Law 15/2010, which establishes measures against late payments in commercial transactions. To this end contractual conditions with commercial suppliers in 2011 have included payment periods equal to or inferior to 85 days, as established in the regulation. For efficiency and in line with general business practice, the Telefónica Group’s companies in Spain have defined payment schedules with providers, whereby payments are made on set days, which, for the main companies, occur three times a month. Invoices falling due between two payment days are settled on the following payment date in the schedule. Payments to Spanish suppliers in 2011 surpassing the established legal limit were the results of circumstances or incidents beyond the payment policies, which include the closing of agreements with suppliers over the delivery of goods or the rendering of services, or occasional processing issues. Information on contracts entered into after Law 15/2010 took effect that surpassed the established legal limit per the law is as follows: | | 2011 | | Millions of euros | | Amount | | | % | | Payments within allowable period | | | 8,361 | | | | 95.2 | | Other | | | 425 | | | | 4.8 | | Total payments to commercial suppliers | | | 8,786 | | | | 100.0 | | Weighted average days past due | | | 38 | | | | | | Deferrals at year-end that exceed the limit (*) | | | 27 | | | | | |
(*) To adapt to Law 15/2010, the Telefónica Group’s Spanish companies paid 82 million euros in early 2011 related to the outstanding balance not adapted at year-end 2010. |
At the date of authorization for issue of these financial statements, the Group had processed the outstanding payments, except for cases where an agreement with suppliers was being negotiated. The amounts of provisions in 20092011 and 20082010 are as follows: Millions of euros | 12/31/09 | 12/31/08 | | | | 12/31/11 | | | 12/31/10 | | Millions of euros | Current | Non-current | Total | Current | Non-current | Total | | Current | | | Non-current | | | Total | | | Current | | | Non-current | | | Total | | 667 | 3,594 | 4,261 | 791 | 4,002 | 4,793 | | | 807 | | | | 4,999 | | | | 5,806 | | | | 916 | | | | 2,974 | | | | 3,890 | | - Post-employment plan | 652 | 2,418 | 3,070 | 781 | 2,993 | 3,774 | | - Termination plans | | | | 790 | | | | 3,908 | | | | 4,698 | | | | 898 | | | | 1,858 | | | | 2,756 | | - Post-employment defined benefit plans | - | 911 | 911 | - | 741 | 741 | | | - | | | | 799 | | | | 799 | | | | - | | | | 829 | | | | 829 | | - Other benefits | 15 | 265 | 280 | 10 | 268 | 278 | | | 17 | | | | 292 | | | | 309 | | | | 18 | | | | 287 | | | | 305 | | Other provisions | 296 | 1,399 | 1,695 | 315 | 1,419 | 1,734 | | | 696 | | | | 2,173 | | | | 2,869 | | | | 759 | | | | 1,891 | | | | 2,650 | | Total | 963 | 4,993 | 5,956 | 1,106 | 5,421 | 6,527 | | | 1,503 | | | | 7,172 | | | | 8,675 | | | | 1,675 | | | | 4,865 | | | | 6,540 | |
Employee benefits | a) | Post-employmentTermination plans |
In the last few years, the Telefónica Group has carried out early retirement plans in order to adapt its cost structure to the prevailing environment in the markets where it operates, making certain strategic decisions relating to its size and organization. In this respect, on July 29, 2003, the Ministry of Labor and Social Affairs approved a labor force reduction plan for Telefónica de España, S.A.U. through various voluntary, universal and non-discriminatory programs, which waswere announced on July 30, 2003. The plan concluded on December 31, 2007, with 13,870 employees taking part for a total cost of 3,916 million euros. Provisions recorded for this plan at December 31, 20092011 and 20082010 amounted to 2,2951,404 million and 2,6891,825 million euros, respectively. Furthermore,On July 14, 2011, the Ministry of Labor and Social Affairs approved a new labor force reduction plan for Telefónica de España, S.A.U. for up to a maximum of 6,500 employees for the period from 2011 to 2013, through various voluntary, universal and non-discriminatory programs (the “Redundancy Plan”).
The cost of estimated payments for the Redundancy Plan, recognized by the Group, using actuarial criteria updated with a market interest rate curve (see Note 3.p) is 2,671 million euros, recognized under “Personnel expenses” in the accompanying consolidated income statement (see Note 19). A total of 2,359 requests for voluntary severance were received in 2011, which has resulted in 1,925 employee contracts being terminated in 2011, for which the estimated present value of future payments is 659 million euros. The provision recorded for the Redundancy Plan at December 31, 2009,2011 amounted to 2,727 million euros. Furthermore, the Group had recorded provisions totaling 775567 million euros (1,085(931 million euros at December 31, 2008)2010) for other planned adjustments to the workforce and plans prior to 2003. The companies bound by these commitments calculated provisions required at 20092011 and 20082010 year-end using actuarial assumptions pursuant to current legislation, including the PERM/F-2000F- 2000 C mortality tables and a variable interest rate based on market yield curves. The Group made efforts in 2007 to adapt headcount in line with the integration of its businesses, for which it recorded provisions of 838 million euros, mainly in Latin America (306 million euros), Spain (325 million euros) and Europe (158 million euros) (see Note 19). The movement in provisions for post-employmentpost employment plans in 20092011 and 20082010 is as follows: Millions of euros | | Total | | Provisions for post-employmentpost employment plans at 12/31/0709 | 4,584 | | 3,070 | | Additions | 321 | | 406 | | Retirements/amount applied | (1,121) | | (813 | ) | Transfers | 1 | | (3 | ) | Translation differences and accretion | (11) | | 96 | | Provisions for post-employmentpost employment plans at 12/31/0810 | 3,774 | | 2,756 | | Additions | 109 | | 2,787 | | Retirements/amount applied | (1,021) | | (936 | ) | Transfers | 59 | | (29 | ) | Translation differences and accretion | 149 | | 120 | | Provisions for post-employmentpost employment plans at 12/31/0911 | 3,070 | | 4,698 | |
| b) | Post-employment defined benefit plans |
The Group has a number of defined-benefit plans in the countries where it operates. The following tables present the main data of these plans: 12/31/09 | Spain | Europe | Latin America | | | 12/31/11 | | | Spain | | | Europe | | | Latin America | | | | | Millions of euros | ITP | Survival | UK | Germany | Brazil | Other | Total | | ITP | | | Survival | | | UK | | | Germany | | | Brazil | | | Other | | | Total | | Obligation | 451 | 191 | 922 | 37 | 159 | 11 | 1,771 | | | 412 | | | | 242 | | | | 976 | | | | 55 | | | | 298 | | | | 18 | | | | 2,001 | | Assets | - | - | (744) | (58) | (116) | - | (918) | | | - | | | | - | | | | (971 | ) | | | (79 | ) | | | (235 | ) | | | (7 | ) | | | (1,292 | ) | Net provision before asset ceiling | 451 | 191 | 178 | (21) | 43 | 11 | 853 | | | 412 | | | | 242 | | | | 5 | | | | (24 | ) | | | 63 | | | | 11 | | | | 709 | | Asset ceiling | - | - | - | 15 | 12 | - | 27 | | | - | | | | - | | | | - | | | | 17 | | | | 51 | | | | - | | | | 68 | | Net provision | 451 | 191 | 178 | - | 80 | 11 | 911 | | | 412 | | | | 242 | | | | 5 | | | | 2 | | | | 127 | | | | 11 | | | | 799 | | Net assets | - | - | - | 6 | 25 | - | 31 | | | - | | | | - | | | | - | | | | 9 | | | | 13 | | | | - | | | | 22 | |
12/31/08 | Spain | Europe | Latin America | | Millions of euros | ITP | Survival | UK | Germany | Brazil | Other | Total | Obligation | 485 | 188 | 587 | 33 | 104 | 12 | 1,409 | Assets | - | - | (579) | (51) | (78) | - | (708) | Net provision before asset ceiling | 485 | 188 | 8 | (18) | 26 | 12 | 701 | Asset ceiling | - | - | - | 13 | 19 | - | 32 | Net provision | 485 | 188 | 10 | - | 46 | 12 | 741 | Net assets | - | - | 2 | 5 | 1 | - | 8 |
12/31/10 | | Spain | | | Europe | | | Latin America | | | | | Millions of euros | | ITP | | | Survival | | | UK | | | Germany | | | Brazil | | | Other | | | Total | | Obligation | | | 424 | | | | 208 | | | | 918 | | | | 57 | | | | 272 | | | | 13 | | | | 1,892 | | Assets | | | - | | | | - | | | | (838 | ) | | | (63 | ) | | | (250 | ) | | | (5 | ) | | | (1,156 | ) | Net provision before asset ceiling | | | 424 | | | | 208 | | | | 80 | | | | (6 | ) | | | 22 | | | | 8 | | | | 736 | | Asset ceiling | | | - | | | | - | | | | - | | | | 9 | | | | 71 | | | | - | | | | 80 | | Net provision | | | 424 | | | | 208 | | | | 80 | | | | 3 | | | | 106 | | | | 8 | | | | 829 | | Net assets | | | - | | | | - | | | | - | | | | - | | | | 13 | | | | - | | | | 13 | |
The movement in the present value of obligations in 20092011 and 20082010 is as follows: | Spain | Europe | Latin America | | | Spain | | | Europe | | | Latin America | | | | | Millions of euros | ITP | Survival | UK | Germany | Brazil | Other | Total | | ITP | | | Survival | | | UK | | | Germany | | | Brazil | | | Other | | | Total | | Present value of obligation at 12/31/07 | 483 | 152 | 947 | 37 | 99 | 40 | 1,758 | | Present value of obligation at 12/31/09 | | | | 451 | | | | 191 | | | | 922 | | | | 37 | | | | 159 | | | | 11 | | | | 1,771 | | Translation differences | - | - | (199) | - | (38) | (30) | (267) | | | - | | | | - | | | | 31 | | | | - | | | | 26 | | | | - | | | | 57 | | Current service cost | - | 7 | 39 | 3 | 1 | 1 | 51 | | | - | | | | 8 | | | | 29 | | | | 2 | | | | 4 | | | | - | | | | 43 | | Past service cost | | | | - | | | | - | | | | (35 | ) | | | - | | | | - | | | | - | | | | (35 | ) | Interest cost | 22 | 7 | 50 | 2 | 9 | - | 90 | | | 15 | | | | 7 | | | | 55 | | | | 2 | | | | 23 | | | | 1 | | | | 103 | | Actuarial losses and gains | 35 | 26 | (235) | (8) | 40 | 1 | (141) | | | 8 | | | | 9 | | | | - | | | | 16 | | | | 2 | | | | 1 | | | | 36 | | Benefits paid | (55) | (4) | (21) | - | (7) | - | (87) | | | (50 | ) | | | (7 | ) | | | (14 | ) | | | - | | | | (11 | ) | | | - | | | | (82 | ) | Plan curtailments: | - | - | 6 | (1) | - | - | 5 | | Present value of obligation at 12/31/08 | 485 | 188 | 587 | 33 | 104 | 12 | 1,409 | | Plan curtailments | | | | - | | | | - | | | | 1 | | | | - | | | | - | | | | - | | | | 1 | | Inclusion of companies | | | | - | | | | - | | | | - | | | | - | | | | 69 | | | | - | | | | 69 | | Exclusion of companies | | | | - | | | | - | | | | (71 | ) | | | - | | | | - | | | | - | | | | (71 | ) | Present value of obligation at 12/31/10 | | | | 424 | | | | 208 | | | | 918 | | | | 57 | | | | 272 | | | | 13 | | | | 1,892 | | Translation differences | - | - | 42 | - | 38 | (4) | 76 | | | - | | | | - | | | | 29 | | | | - | | | | (26 | ) | | | 1 | | | | 4 | | Current service cost | - | 7 | 22 | 2 | 1 | 2 | 34 | | | - | | | | 9 | | | | 25 | | | | 3 | | | | 4 | | | | 1 | | | | 42 | | Past service cost | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Interest cost | 16 | 7 | 42 | 2 | 12 | 1 | 80 | | | 13 | | | | 7 | | | | 51 | | | | 2 | | | | 26 | | | | 2 | | | | 101 | | Actuarial losses and gains | 3 | (4) | 241 | - | 11 | - | 251 | | | 23 | | | | 26 | | | | (27 | ) | | | (7 | ) | | | 38 | | | | 2 | | | | 55 | | Benefits paid | (53) | (7) | (18) | - | (7) | - | (85) | | | (48 | ) | | | (8 | ) | | | (20 | ) | | | - | | | | (16 | ) | | | - | | | | (92 | ) | Plan curtailments: | - | - | 6 | - | - | - | 6 | | Present value of obligation at 12/31/09 | 451 | 191 | 922 | 37 | 159 | 11 | 1,771 | | Plan curtailments | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1 | ) | | | (1 | ) | Present value of obligation at 12/31/11 | | | | 412 | | | | 242 | | | | 976 | | | | 55 | | | | 298 | | | | 18 | | | | 2,001 | |
Movements in the fair value of plan assets in 20092011 and 20082010 are as follows: | Europe | Latin America | | Millions of euros | UK | Germany | Brazil | Other | Total | Fair value of plan assets at 12/31/07 | 970 | 44 | 89 | 65 | 1,168 | Translation differences | (189) | - | (24) | (63) | (276) | Expected return on plan assets | 67 | 2 | 9 | - | 78 | Actuarial losses and gains | (327) | (1) | 5 | - | (323) | Company contributions | 81 | 6 | 2 | 1 | 90 | Employee contributions | 1 | - | - | - | 1 | Benefits paid | (24) | - | (3) | (3) | (30) | Fair value of plan assets at 12/31/08 | 579 | 51 | 78 | - | 708 | Translation differences | 42 | - | 29 | (3) | 68 | Expected return on plan assets | 43 | 2 | 7 | 3 | 55 | Actuarial losses and gains | 59 | (2) | 5 | - | 62 | Company contributions | 36 | 7 | 2 | - | 45 | Employee contributions | 1 | - | - | - | 1 | Benefits paid | (16) | - | (5) | - | (21) | Fair value of plan assets at 12/31/09 | 744 | 58 | 116 | - | 918 |
| | Europe | | | Latin America | | | | | Millions of euros | | UK | | | Germany | | | Brazil | | | Other | | | Total | | Fair value of plan assets at 12/31/09 | | | 744 | | | | 58 | | | | 116 | | | | - | | | | 918 | | Translation differences | | | 23 | | | | - | | | | 25 | | | | 1 | | | | 49 | | Expected return on plan assets | | | 54 | | | | 2 | | | | 23 | | | | 1 | | | | 80 | | Actuarial losses and gains | | | (4 | ) | | | (5 | ) | | | 4 | | | | - | | | | (5 | ) | Company contributions | | | 76 | | | | 8 | | | | 4 | | | | 3 | | | | 91 | | Employee contributions | | | 1 | | | | - | | | | - | | | | - | | | | 1 | | Benefits paid | | | (14 | ) | | | - | | | | (11 | ) | | | - | | | | (25 | ) | Inclusion of companies | | | - | | | | - | | | | 89 | | | | - | | | | 89 | | Exclusion of companies | | | (42 | ) | | | - | | | | - | | | | - | | | | (42 | ) | Fair value of plan assets at 12/31/10 | | | 838 | | | | 63 | | | | 250 | | | | 5 | | | | 1,156 | | Translation differences | | | 29 | | | | - | | | | (21 | ) | | | 1 | | | | 9 | | Expected return on plan assets | | | 48 | | | | 3 | | | | 23 | | | | - | | | | 74 | | Actuarial losses and gains | | | (13 | ) | | | (3 | ) | | | (5 | ) | | | - | | | | (21 | ) | Company contributions | | | 89 | | | | 16 | | | | 3 | | | | 1 | | | | 109 | | Employee contributions | | | - | | | | - | | | | - | | | | - | | | | - | | Benefits paid | | | (20 | ) | | | - | | | | (15 | ) | | | - | | | | (35 | ) | Fair value of plan assets at 12/31/11 | | | 971 | | | | 79 | | | | 235 | | | | 7 | | | | 1,292 | |
The amounts of actuarial gains and losses of these plans recognized directly in equity in accordance with thetheir asset ceilings of these plans in 2011, 2010 and 2009, 2008before non-controlling interests and 2007, before the related tax effect, are as follows: Millions of euros | 2009 | 2008 | 2007 | | 2011 | | | 2010 | | | 2009 | | Spain | 1 | (61) | 25 | | | (48 | ) | | | (17 | ) | | | 1 | | Europe | (184) | (85) | 36 | | | 14 | | | | (6 | ) | | | (184 | ) | Latin America | (6) | (36) | (7) | | | (51 | ) | | | (71 | ) | | | (6 | ) | Total | (189) | (182) | 54 | | | (85 | ) | | | (94 | ) | | | (189 | ) |
The Group’s principal defined-benefit plans are: a) Plans in Spain: | a. | ITP: Telefónica Spain reached an agreement with its employees whereby it recognized supplementary pension payments for employees who had retired as of June 30, 1992, equal to the difference between the pension payable by the social security system and that which would be paid to them by ITP (Institución Telefónica de Previsión). Once the aforementioned supplementary pension payments had been quantified, they became fixed, lifelong and non-updateable and sixty percent (60%) of the payments are transferable to the surviving spouse, recognized as such as of June 30, 1992, and to underage children. |
The amount for this provision totaled 451412 million euros at December 31, 2009 (4852011 (424 million euros at December 31, 2008)2010). | b. | Survival: Survivors of serving employees who did not join the defined pension plan are still entitled to receive survivorship benefits at the age of 65. |
The amount for this provision totaled 191242 million euros at December 31, 2009 (1882011 (208 million euros at December 31, 2008)2010). These plans do not have associated assets which qualify as “plan assets” under IAS 19. The main actuarial assumptions used in valuing these plans are as follows: | Survival | ITP | Survival | ITP | | 12/31/09 | 12/31/08 | 12/31/09 | 12/31/08 | 12/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | Discount rate | 0.382%-3.903% | 2.596%-3.900% | 0.382%-3.903% | 2.596%-3.900% | 0.787%-2.521% | 0.682%-3.417% | 0.787%-2.521% | 0.682%-3.417% | Expected rate of salary increase | 2.50% | 2.50% | - | - | 2.50% | 2.50% | - | - | Mortality tables | PERM/F-2000C Combined with OM77 | PERM/F-2000C Combined with OM77 | 92% PERM 2000C/100% PERF 2000 C | PERM/F 2000 C | PERM/F-2000C Combined with OM77 | PERM/F-2000C Combined with OM77 | 92% PERM 2000C/100% PERF 2000 C | 92% PERM 2000C/100% PERF 2000 C |
b) Plans in the rest of Europe: The various O2 Group companies consolidated within the Telefónica Group have defined-benefit post-employment plans, covered by qualifying assets. The number of beneficiaries of these plans at December 31, 20092011 and 20082010 is as follows: Employees | 2011 | 2010 | UK | 4,590 | 4,617 | Germany | 5,979 | 5,839 |
Employees | 2009 | 2008 | UK | 4,613 | 4,636 | Germany | 5,594 | 4,964 | Other | 401 | 393 | Total | 10,608 | 9,993 |
F-67
The main actuarial assumptions used in valuing these plans are as follows: | 12/31/09 | 12/31/08 | 12/31/11 | 12/31/10 | | UK | Germany | UK | Germany | UK | Germany | UK | Germany | Nominal rate of salary increase | 4.6% | 3.80% | 4.0% | 3.25% -3.80% | 4.0% | 3.5% | 4.5% | 1% | Nominal rate of pension payment increase | 3.6% | 1.0%-4.0% | 2.8%-3.0% | 2.0%-4.0% | 2.9% | 1.0%-4.0% | 3.5% | 2.0%-4.0% | Discount rate | 5.8% | 6.1% | 6.6% | 6.2% | 4.9% | 5.3% | 5.6% | 6.1% | Expected inflation | 3.6% | 1.0%-4.0% | 3.0% | 2% | 3.0% | 2% | 3.5% | 2.0%-4.0% | Expected return on plan assets | | | | | | | | - Shares | 8.0% | N/A | 7.4% | N/A | 7.0% | N/A | 7.5% | N/A | - UK government bonds | 4.4% | N/A | 3.6% | N/A | - | N/A | - | N/A | - Other bonds | 5.3% | N/A | 6.6% | N/A | 4.9% | N/A | 5.2% | N/A | - Rest of assets | 4.4% -8.8% | 4.25%-4.30% | 3.6% -7.6% | 4.25%-4.30% | 3.0% | 4%-4.25% | 4.2% | 4.10%-4.25% | Mortality tables | Pa00mcfl0.5 | Prf. Klaus Heubeck (RT 2005 G) | Pa00mcfl0.5 | Heubeck RT 2005 G | Pna00mc0.5 underpin | Prf. Klaus Heubeck (RT 2005 G) | Pna00mcfl0.5 | Prf. Klaus Heubeck (RT 2005 G) |
c) Plans in Latin America: Subsidiary Telefónica Brasil (formerly Telecomunicações de São Paulo, S.A.) and its subsidiaries and group companies of Brasilcel, N.V. had various pension plan, medical insurance and life insurance obligations with employees. The main actuarial assumptions used in valuing these plans are as follows: | 12/31/09 | 12/31/08 | 12/31/11 | 12/31/10 | Discount rate | 9.8% | 10.14% | 9.73% | 10.25% | Nominal rate of salary increase | 6.14% - 6.79% | 6.44% - 7.10% | 6.54%-7.20% | 6.54% - 7.20% | Expected inflation | 4.6% | 4.90% | 4.50% | 5.00% | Cost of health insurance | 7.74% | 8.04% | 7.64% | 8.15% | Expected return on plan assets | 9.83% - 14.94% | 10.88% - 11.15% | 11.07%-12.08% | 10.70% - 11.60% | Mortality tables | AT 83 | AT 83 | AT 2000 M/F | AT 2000 M/F |
In addition, Telefónica Brasil, along with other companies resulting from the privatization of Telebrás (Telecomunicações Brasileiras, S.A.) in 1998, adhered to PBS-A, a non-contribution defined benefit plan managed by Fundação Sistel de Seguridade Social, whose beneficiaries are employees that retired prior to January 31, 2000. At December 31, 2011, net plan assets amounted to 668 million Brazilian reais, equivalent to 275 million euros (579 million Brazilian reais at December 31, 2010, equivalent to 260 million euros). This plan does not have an impact on the consolidated statement of financial position, given that recovery of the assets is not foreseeable. The valuations used to determine the value of obligations and plan assets, where appropriate, were performed as of December 31, 20092011 by external and internal actuaries. The projected unit credit method was used in all cases. c) Other benefits This heading mainly includes the amount recorded by Telefónica Spain related to the amount accrued portion of long-service bonuses to be awarded to employees after 25 years’ service.service, amounting to 210 million euros (196 million euros at December 31, 2010).
Other provisions The movement in “Other provisions” in 20092011 and 20082010 is as follows: | | Millions of euros | Other provisions at December 31, 2007 | 1,866 | Additions | 448 | Retirements/amount applied | (518) | Transfers | (5) | Inclusion of companies | 64 | Translation differences | (121) | Other provisions at December 31, 2008 | 1,734 | Additions | 381 | Retirements/amount applied | (571) | Transfers | (29) | Translation differences | 180 | Other provisions at December 31, 2009 | | | 1,695 | | Additions | | | 733 | | Retirements/amount applied | | | (315 | ) | Transfers | | | 112 | | Inclusion of companies | | | 341 | | Translation differences | | | 84 | | Other provisions at December 31, 2010 | | | 2,650 | | Additions | | | 707 | | Retirements/amount applied | | | (480 | ) | Transfers | | | 88 | | Translation differences | | | (96 | ) | Other provisions at December 31, 2011 | | | 2,869 | |
“Other provisions” includes the amount recorded in 2007 in relation to the 171188 million euro fine imposed on Telefónica de España, S.A.U. by the EC anti-trust authorities. Also included are the provisions for dismantling of assets recognized by Group companies in the amount of 270 million euros (200401 million euros in 2008)2011 (405 million euros in 2010). Finally, “Other Provisions” in 20092011 and 20082010 also includes the provisions recorded (or used) by the Group companies to cover the risks inherent in the realization of certain assets, the contingencies arising from their respective business activities and the risks arising from commitments and litigation acquired in other transactions, recognized as indicated in Note 3.l.3.1. Given the nature of the risks covered by these provisions, it is not possible to determine a reliable schedule of potential payments, if any. (16) | DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT POLICIES |
The Telefónica Group 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 TelefónicaGroup companies are as follows: 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, but also in the United Kingdom and the Czech Republic), 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. Interest rate risk arises primarily from changes in interest rates affecting (i) financial expenses on floating rate debt (or short-term debt likely to be renewed), due to changes in interest rates and (ii) the value of long-term liabilities at fixed interest rates.
Share price risk arises primarily from changes in the value of ourthe 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 our treasury shares and from equity derivatives. The Telefónica Group is also exposed to liquidity risk if a mismatch arises between its financing needs (including operating and financial expense, investment, debt redemptions and dividend commitments) and its sources of finance (including revenues, divestments, credit lines from financial institutions and capital market transactions). The cost of finance could also be affected by movements in the credit spreads (over benchmark rates) demanded by lenders. Finally, the Telefónica Group 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 the Telefónica Group operates, especially in Latin America. The Telefónica Group actively manages these risks through the use of derivatives (primarily on exchange rates, interest rates and share prices) and by incurring debt in local currencies, where appropriate, with a view to stabilizing cash flows, the income statement and partially, albeit to a lesser extent, investments. In this way, Telefónicait attempts to protect itsthe Telefónica Group’s solvency, facilitate financial planning and take advantage of investment opportunities. The Telefónica Group manages its exchange rate risk and interest rate risk in terms of net debt and net financial debt as calculated by them. The Telefónica Group believes that these parameters are more appropriate to understanding its debt position. Net debt and net financial debt take into account the impact of ourthe Group’s cash balance and cash equivalents including derivatives positions with a positive value linked to liabilities. Neither net debt nor net financial debt as calculated by the Telefónica Group should be considered an alternative to gross financial debt (the sum of current and non-current interest-bearing debt) as a measure of our liquidity. For a more detailed description on reconciliation of net debt and net financial debt to gross financial debt, (seesee Note 2).2.
Exchange rate risk The fundamental objective of ourthe exchange rate risk management policy is that, in event of depreciation in foreign currencies relative to the euro, any potential losses in the value of the cash flows generated by ourthe businesses in such currencies, caused by depreciation in exchange rates of a foreign currency relative to the euro, are offset (to some extent) by savings from the reduction in the euro value of our debt denominated in such currencies. The degree of exchange rate hedging we employemployed varies depending on the type of investment. At December 31, 2009,2011, net debt in Latin American currencies was equivalent to approximately 5,6227,953 million euros. However, the composition of this net debt in the various Latin American currencies in which this debt is denominated is not proportionaldistributed in proportion to the cash flows generated at any given moment.in each currency. The future effectiveness of the strategy described above as a hedge of exchange rate risks therefore depends on which currencies depreciate relative to euro. The Telefónica Group aims to protect itself against declines in Latin American currencies relative to the euro affecting our asset values through the use of dollar-denominated debt, incurred 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, 2009,2011, the Telefónica Group’s net debt denominated in dollars was equivalent to 1,7441,373 million euros, of which 981 million euros was related to assets in Latin America and the remaining 763 million euros was related to its investment in China Unicom.euros. At December 31, 2009, pound sterling-denominated net debt was approximately 2.3 times the value of our 2009 operating income excluding the impact of the depreciation and amortization cost from theThe Telefónica Europe business unit in the United Kingdom. Telefónica’sGroup’s aim is to maintain thisthe same proportion of pound sterling-denominated net debt to operating income excluding the impact of the related depreciation and amortization cost as the Telefónica Group’s net debt to operating income excluding the impact of the related depreciation and amortization cost ratio, on a consolidated basis, in order to help them to reduce its sensitivity to changes in the pound sterling to euro exchange rate. Pound sterling-denominated net debt at December 31, 2009,2011, was equivalent to 3,7993,540 million euros, less than the 3,8554,025 million euros at December 31, 2008.2010. ToThe risk-management objective to protect ourthe investment in the Czech Republic Telefóis similar to that described for the investment in the UK, where the amount of Czech crown-denominated debt is proportional to the “Telefónica hasEurope” business unit in the Czech Republic. Czech crown-denominated net debt denominated in Czech crowns, which at December 31, 20092011 was equivalent to 2,513 million euros, almost 59% of the original cost of the investment and less than 2.31.7 times the operating income excluding the impact of the related depreciation in Czech crown (1.6 times in 2010) on a consolidated basis and amortization cost of2.5 times (2.3 times in 2010) on a proportional basis. Both were below the Telefónica Europe’s businessGroup’s net debt to operating income excluding the impact of the related depreciation ratio in the Czech Republic, down from approximately 3,034 million euros at December 31, 2008.2011.
WeThe Telefónica Group also managemanages exchange rate risk by seeking to minimize the negative impact of any remaining exchange rate exposure on the income statement, regardless of whether we havethere are open positions. Such open position exposure can arise for any of three reasons: (i) a thin market for local derivatives or difficulty in sourcing local currency finance which makes 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 financing 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 risk of depreciation.
In 2009,2011, exchange rate management resulted in negative exchange rate differences totaling 209176 million euros (excluding the impact of monetary correction), compared to 24147 million euros in positivenegative differences in 2008.2010. To illustrateThe following table illustrates the sensitivity of exchange gains or lossesincome loss and equity to variabilitychanges in exchange rates, assumingwhere: a) to calculate the impact on the income statement, the exchange rate position affecting the income statement at the end of 2009 were2011 was considered constant during 20102012; and b) to calculate the impact on equity, only monetary items have been considered, namely debt and derivatives such as hedges of net investments and loans to subsidiaries associated with the investment, whose composition is considered constant in 2012 and identical to that existing at the end of 2011. In both cases, Latin American currencies depreciatedare assumed to depreciate against the US dollar, and the rest of the currencies against the euro by 10%, Telefónica estimates that exchange gains or losses.
Millions of euros Currency | Change | Impact on the consolidated income statement | Impact on consolidated equity | All currencies vs. EUR | 10% | 112 | (180) | USD vs. EUR | 10% | 15 | 32 | European currencies vs. EUR | 10% | 1 | (353) | Latin American currencies vs. USD | 10% | 96 | 141 | All currencies vs. EUR | (10)% | (112) | 180 | USD vs. EUR | (10)% | (15) | (32) | European currencies vs. EUR | (10)% | (1) | 353 | Latin American currencies vs. USD | (10)% | (96) | (141) |
The Group’s monetary position in Venezuela at December 31, 2011 is a net debtor position of 1,428 million Venezuelan bolivars (equivalent to approximately 257 million euros). However, it had an average creditor position in 2011, leading to a higher financial expense in the amount of 21 million euros. recorded for 2010 would be 46 million euros less. Nonetheless, Telefónica manages its exposure on a dynamic basis to mitigate their impact.
Interest rate risk The Telefónica Group’s financial expenses are exposed to changes in interest rates. In 2009,2011, the rates applied to the largest amount of our short-term debt were mainly based on the Euribor, the Czech crown Pribor, the Brazilian SELIC, the US dollar and pound sterling Libor, and the Colombian UVR. In nominal terms, at December 31, 2009, 52.6%2011, 66% of the Telefónica’snica Group’s net debt (or 50%70% of long-term net debt) was at rates fixed for morea period longer than one year, compared to 43.8%65% of net debt (46.3%(70% of long-term net debt) in 2008.2010. Of the remaining 47.4%30% (net debt at floating or fixed rates maturing in less than one year), the interest rate on 2415 percentage points was set for a period of more than one year (10.7%(5% of long-term net debt), compared to 2818 percentage points on debt at floating or fixed rates maturing in less than one year (17%(7% of long-term net debt) at December 31, 2008.2010. This decrease in 20092011 from 20082010 is due to the cancellation and maturity (without renewal) ofour decision to cancel or not renew an amount equivalent to 2,234692 million euros of caps and floors in euros, US dollars and pounds sterling, following the policy implemented in 2009 in anticipation of a fall in interest rates. In addition, early retirement liabilities were discounted to present value over the year usingbased on the curve on the swap rate markets. The decrease in interest rates has increased the market value of these liabilities. However, this increase was nearly completely offset by the increase in the value of the hedges on these positions. Net financial expenses rose 18.2%11% to 3,3072,941 million euros in 20092011 from 2,7972,649 million euros de 2008,in 2010, mainly due to the impact of Venezuela.12.7% increase in average debt in 2011. Stripping out exchange-rate effects (and including the impact of monetary correction), net financial expense for 20092011 totaled 2,7672,764 million euros, a 1.9% decrease10% increase from the 2,8212,502 million euros recordedobtained in 2008.2010, below the 12.7% increase in average debt mentioned previously. To illustrate the sensitivity of net financial expenseexpenses to variability in short-term interest rates, assuming a 100 basis pointpoints increase in interest rates in all currencies in which there areTelefónica has financial positions and no change in the currency make-up and balance of the position at year end, we estimate that net financial expense at December 31, 2009 would2011 has been assumed, and a 100 basis points decrease in interest rates in all currencies except pound sterling and the US dollar, to avoid negative rates. The constant position equivalent to that prevailing at the end of 2011 has also been assumed. To illustrate the sensitivity of equity to variability in interest rates, a 100 basis points increase in interest rates in all currencies and in all curve periods where there is a financial position at December 31, 2011, and a 100 basis points decrease in all currencies and in all periods, have been 124 million euros higher.assumed. In addition, only positions with cash flow hedges have been considered, given that they are mostly the only positions where the change in fair value due to interest rate movements is recorded in equity.
Millions of euros Change in basis points (bp) (*) | Impact on consolidated income statement | Impact on consolidated equity | +100bp | (141) | 779 | -100bp | 147 | 849 | (*) Impact on results of 100bp change in all currencies, except the pound sterling and the US dollar. |
Share price risk The Telefónica Group is exposed to changes in the value of our equity investments that may be bought, sold or otherwise involved in transactions, from changes in the value of derivatives associated with such investments, from treasury shares and from equity derivatives. As part of the shareholder remuneration policy, in 2008, Telefónica announced plans to buy back up to 150 million of our shares. This buyback plan was finished on March 31, 2009.
According to the Telefónica, S.A. share option plan, Performance Share Plan (PSP) - -(seeand the Performance & Investment Plan (PIP) (see Note 20)- the shares to be delivered to employees under such plan may be either the parent company treasury shares, acquired by them or any of its Group companies; or newly-issued shares. The possibility of delivering shares to employeesbeneficiaries of the plan in the future, in accordance with relative total shareholders’ return, implies a risk since there could be an obligation to hand over a maximum number of shares at the end of each cycle,phase, 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 cyclephase if the share price is above the corresponding price on the phase start date. In the event that new shares are issued for delivery to the beneficiaries of the plan, there would be a dilutive effect for our ordinary shareholdershareholders as a result of the higher number of shares delivered under such plan outstanding. To reduce the risk to us associated with variations in share price under this plan,these plans, Telefónica has acquired derivativesinstruments that replicate the risk profile of some of the shares derivabledeliverable under the plan as explained in Note 20. 2009, was initiated. The cost of this plan will not exceed 50 million euros, as agreed in the aforementioned Ordinary General Shareholders’ Meeting (see Note 20 for further details). In addition, the Group may use part of the 6,329,530 treasury shares of the parent companyTelefónica, S.A. held at December 31, 2009 may be used2011 to cover shares deliverable under the PSP.PSP or the PIP. The net asset value of the treasury shares could increase or decrease depending on variations in Telefónica, S.A.’s share price. Additionally, at the Ordinary General Shareholders’ Meeting of 2009, an incentive plan for Group employees to purchase Telefónica shares was approved. The cost of this plan will not exceed 60 million euros. The plan is expected to be implemented during the first half of 2010. Telefónica will assess if will have to take any action in order to reduce any risk related to the future delivery of shares.
Liquidity risk The Telefónica Group 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. | The Telefónica Group’s average maturity of our 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. | The Telefónica Group must be able to pay all commitments over the next 12 months without accessing new borrowing or accessing the capital markets (although includingdrawing upon firm credit lines arranged with banks), assuming budget projections are met. |
As of December 31, 2009,2011, the average maturity of 43,551its 56,304 million euros of net financial debt was 6.555.44 years. Telefónica would need to generate approximately 6,649 million euros per year to repay the debt in this period if we used all our cash for this purpose. At December 31, 2009,2011, gross financial debt scheduled maturities in 20102012 amounted to approximately 8,64710,333 million euros (including the net position of derivative financial instruments), which is lower than the amount of funds available, calculated as the sum of: (i)a) current financial assets and cash at December 31, 2009 (10,4822011 (6,434 million euros excluding derivative financial instruments), (ii)b) annual cash generation projected for 2010;2012; and (iii)c) undrawn credit facilities arranged with banks whose original maturity is over one year (an aggregate of more than 4,4807,724 million euros at December 31, 2009). This gives us2011), providing flexibility to the Telefónica Group with regard to accessing capital or credit markets in the next 12 months. For a further description of ourthe Telefónica Group’s liquidity and capital resources in 2012, see Note 13.2 Financial Liabilities and Appendix III. Country risk The Telefónica Group 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 itsthe Telefónica Group’s Latin American companies such 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. |
Regarding the first point, at December 31, 2009, its2011, the Telefónica Group’s Latin American companies had net financial debt not guaranteed by the parent company of 4,0446,564 million euros, which represents 9.29%11.7% of our consolidated net financial debt. Regarding the repatriation of funds to Spain, it has received 1,7903,139 million euros from ourthe Group’s Latin America companies in 2009,2011, of which 7662,379 million euros was from dividends, and 1,024402 million euros from intra-group loans (payments of interest and repayments of principal), 112 million euros from financial investments, 28 million euros from capital reductions and capital reductions.219 million euros from other items. These amounts were equally offset by additional amounts invested in its Latin American companies, mainly in Peru (27 million euros), in Argentina (2 million euros) and in Colombia (1Mexico (65 million euros). As a result of the foregoing, net funds repatriated to Spain from ourthe Group’s Latin America companies amounted to the equivalent of 1,7603,074 million euros as ofat December 31, 2009.2011. In this regard, it is worth noting that since February 2003, Venezuela has had an exchange control mechanism in place, managed as indicated above by the Currency Administration Commission (CADIVI). The body has issued a number of regulations (“providencias”providencias”) governing the modalities of currency sales in Venezuela at official exchange rates. Foreign companies which are duly registered as foreign investors are entitled to request approval to acquire currencies at the official exchange rate by the CADIVI, in line with regulation number 029, article 2, section c) "Remittance of earnings, profits, income, interest and dividends from international investment." Telefónica Venezolana, C.A. (formerly Telcel, itsC.A.), a Telefónica Group subsidiary in Venezuela, obtained the aforementioned requested approval on Venezuelan Bolivar fuerte 295 million Venezuelan bolivars in 2006, Venezuelan Bolivar fuerte 473 million Venezuelan bolivars in 2007 and Venezuelan Bolivar fuerte 785 million Venezuelan Bolivars in 2008. At December 31, 2009,2011, payment of a dividendtwo dividends agreed by the company in the amount of 5,882 million Venezuelan Bolivar fuerte 1,152 millionbolivars is pending approval.approval by the CADIVI. Credit risk The Telefónica is exposed to credit risk through its tradingGroup trades in derivatives with counterparties of high creditworthiness and senior debtcreditworthy counterparties. Therefore, Telefónica, S.A. generally trades with credit entities with “senior debt” ratings of at least “A”.“A.” In Spain, where it holds most of Telefónica’sthe Group’s derivatives portfolio it hasis 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, since Lehman went bankrupt, the credit ratings of rating agencies have proved to be less effective as a credit risk management tool. Therefore, the 5-year CDS (Credit Default Swap) of credit institutions has been added. This way, the CDS 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. For other subsidiaries, particularly those in Latin America, given theassuming a stable sovereign rating provides a ceiling andwhich 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 and highly liquid money-market assets. These placements are regulated by a general framework, revised annuallyannually. Counterparties are chosen according to criteria of liquidity, solvency and diversification based on the conditions of the market and countries where Telefónicathe Group operates. The general framework sets: (i) the maximum amounts to be invested by counterparty based on its rating (long-term debt rating); (ii) the maximum tenor of the investment;investment, set at 180 days; and (iii) the instruments in which the surpluses may be invested. For the parent company, which places the bulk of Telefónica surpluses, the maximum placement in 2009 was 180 days and the creditworthiness of the counterparties used, measured by their debt ratings, remained above A- and/or A3 by Standard & Poor’s and Moody’s, respectively.invested (money-market instruments). These placements are regulated by a general framework, authorization procedures and homogeneous management practices withinThe Telefónica based on particular conditions and best international practices observed in the telecom sector, and incorporating this commercial credit risk management approach to Telefónica’s decision policy both from a strategic and operating (in the ordinary course of business) perspective.
Telefónica alsoGroup considers managing commercial credit risk as crucial to meeting its sustainable business and customer base growth targets in a manner that is consistent with Telefónica’sits risk-management policy.
Therefore, Telefónica’s commercial credit risk-management approachThis is based on continuous monitoring of the risk assumed and the resources necessary to manage its various units, in order to optimize the risk-reward relationshipratio in its operations and the assessment, particularly,operations. Particular attention is given to those clients that could cause a material impact on Telefónica’sthe Group's financial condition.statements for which, depending on the segment and type of relation, hedging instruments or collateral may be required to mitigate exposure to credit risk.
All Group companies adopt policies, procedures, authorization guidelines, and homogeneous management practices, in consideration of the particularities of each market and best international practices, and incorporating this commercial credit risk management model into the Group's decision making processes, both from a strategic and day to day operating perspective, which risk assessment guides the commercial offering available for the various credit profiles. The Telefónica’snica Group’s maximum exposure to credit risk is initially represented by the carrying amounts of the financial assets (see Notes(Notes 10, 11 and 13) and the guarantees given by the Telefónica.nica Group. Several Telefónica Group companies provide operating guarantees granted by external counterparties, which are offered during their normal commercial activity, in bids for licenses, permits and concessions, and spectrum acquisitions. At December 31, 2011, these guarantees amounted to approximately 2,545 million euros (see Note 21.e). Capital management Telefónica’s corporate finance department, which is in charge of Telefónica’s capital management, takes into consideration several factors when determining Telefónica’s capital structure, with the aim of ensuring sustainability of the business and maximizing the value to shareholders. Telefónica monitors its cost of capital with a goal of optimizing its capital structure. In order to do this, Telefónica monitors the financial markets and updates to standard industry approaches for calculating weighted average cost of capital, or WACC “weighted average cost of capital”.WACC. Telefónica also uses a gearingnet financial debt ratio that enables itbelow 2.35x operating income excluding the impact of the related depreciation in the medium term (excluding items of a non-recurring or exceptional nature), enabling to obtain and maintain the desired credit rating over the medium term, and with which the Telefónica Group can match itsthe potential cash flow generation andwith the alternative uses of this cash flowthat could arise at all times. These general principles are refined by other considerations and the application of specific variables, such as country risk in the broadest sense, tax efficiency andor the volatility in cash flow generation, when determining ourthe Telefónica Group’s financial structure. Derivatives policy At December 31, 2009,2011, the nominal value of outstanding derivatives with external counterparties amounted to 131,614178,641 million euros equivalent, a 7.3% decrease27% increase from 140,272 million euros equivalent at December 31, 2008 (141,984 million euros equivalent).2010. 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). 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. Telefónica’s derivatives policy emphasizes the following points: | 1) | Derivatives based on a clearly identified underlying. |
Acceptable underlyings include profits, revenues and cash flows in either a company’s functional currency or another currency. These flows can be contractual (debt and interest payments, settlement of foreign currency payables, etc.), reasonably certain or foreseeable (investment program,(property, plant, and equipment purchases, future debt issues, commercial paper programs, etc.). The acceptability of an underlying asset in the above cases does not depend on whether it complies with accounting rules requirements for hedge accounting, as is required in the case of certain intra-groupintragroup transactions, for instance. Parent company investments in subsidiaries with functional currencies other than the euro also qualify as acceptable underlying assets. Economic hedges, which are hedges with a designated underlying asset and which in certain circumstances offset fluctuations in the underlying asset value, do not always meet the requirements and effectiveness tests laid down by accounting standards for treatment as hedges. The decision to maintain positions that cease to qualify as effective or fail to meet other requirements will depend on the marginal impact on the income statement and how far this might compromise the goal of a stable income statement. In any event, the variations are recognized in the income statement. | 2) | Matching of the underlying to one side of the derivative. |
This matching basically applies to foreign currency debt and derivatives hedging foreign currency payments by Telefónica’snica Group subsidiaries. The aim is to eliminate the risk arising from changes in foreign currency interest rates. Nonetheless, even when the aim is to achieve perfect hedging for all cash flows, the lack of liquidity in certain markets, especially in Latin American currencies, has meant that historically there have been mismatches between the terms of the hedges and those of the debts they are meant to hedge. The Telefónica Group intends to reduce these mismatches, provided that doing so does not involve disproportionate costs. In this regard, if adjustment does prove too costly, the financial timing of the underlying asset in foreign currency will be modified in order to minimize interest rate risk in foreign currency. In certain cases, the timing of the underlying as defined for derivative purposes may not be exactly the same as the timing of the contractual underlying. | 3) | Matching the company contracting the derivative and the company that owns the underlying. |
Generally, the aim is to ensure that the hedging derivative and the hedged asset or liability belong to the same company. Sometimes, however, the holding companies (Telefónica, S.A. and Telefónica Internacional, S.A.) have arranged hedges on behalf of a subsidiary that owns the underlying asset. The main reasons for separating the hedge and the underlying asset were possible differences in the legal validity of local and international hedges (as a result of unforeseen legal changes) and the different credit ratings of the counterparties (whether(of the Telefónica groupGroup companies oras well as those of the banks). | 4) | Ability to measure the derivative’s fair value using the valuation systems available to us.the Telefónica Group. |
| | The Telefónica Group uses a number of tools to measure and manage risks in derivatives and debt. The main ones are Kondor+, licensed by Reuters, which is widely used by financial institutions, and MBRM specialist financial calculator libraries. |
| 5) | Sale of options only when there is an underlying exposure. |
Telefónica considers the sale of options when: i) there is an underlying exposure (on the consolidated statement of financial position or associated with a highly probable cash outflow) that would offset the potential loss for the year if the counterparty exercised the option, or ii) the option is part of a structure in which another derivative offsets any loss. The sale of options is also permitted in option structures where, at the moment they are taken out, the net premium is either positive or zero. For instance, it would be possible to sell short-term options on interest rate swaps that entitle the counterparty to receive a certain fixed interest rate, below the level prevailing at the time the option was sold. This would mean that if rates fell and the counterparty exercised its option, wethe Group would swap part of ourits debt from floating rate to a lower fixed rate, having received a premium.
| 6) | Hedge accounting.accounting |
The main risks that may qualify for hedge accounting are as follows: | · | Variations in market interest rates (either money-market rates, credit spreads or both) that affect the value of the underlying asset or the measurement of the cash flows; |
| · | Variations in exchange rates that change the value of the underlying asset in the company’s functional currency and affect the measurement of the cash flow in the functional currency; |
| · | Variations in the volatility of any financial variable, asset or liability that affect either the valuation or the measurement of cash flows on debt or investments with embedded options, whether or not these options are separable; and |
| · | Variations in the valuation of any financial asset, particularly shares of companies included in the portfolio of “Available-for-sale financial assets”. |
Regarding the underlying: | · | Hedges can cover all or part of the value of the underlying; |
| · | The risk to be hedged can be for the whole period of the transaction or for only part of the period; and |
| · | The underlying may be a highly probable future transaction, or a contractual underlying (loan, foreign currency payment, investment, financial asset, etc.) or a combination of both that defines an underlying with a longer term. |
This may on occasion mean that the hedging instruments have longer terms than the related contractual underlying. This happens when we enterthe Group enters into long-term swaps, caps or collars to protect ourselves against interest rate rises that may raise the financial expense of ourits promissory notes, commercial paper and some floating rate loans which mature earlier than their hedges. These floating rate financing programs are highly likely to be renewed and Telefónica commits to this by defining the underlying asset in a more general way as a floating rate financing program whose term coincides with the maturity of the hedge. Hedges can be of three types: | · | 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 instrument used is options and only the intrinsic value of the option is recognized as an effective hedge. Changes in the time value of options are recognized in the income statement.statement. To prevent excessive swings in the income statement from changes in time value, the hedging ratio (amount of options for hedging relative to the amount of options not treated as hedges) is assigned dynamically, as permitted by the standard. |
| · | Hedges of net investment in consolidated foreign subsidiaries. Generally, such hedges are arranged by the parent company and the other Telefónica’snica holding companies. Wherever possible, these hedges are implemented through real debt in foreign currency. Often, 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 may also be that the debt market in the currency concerned is too thin to accommodate the required hedge (for example, the Czech crown and pounds sterling), or that an acquisition is made in cash with no need for market financefinancing. In these circumstances derivatives, either forwards or cross-currency swaps are used to hedge the net investment. |
Hedges can comprise a combination of different derivatives. Management of accounting hedges is not static, and the hedging relationship may change before maturity. Hedging relationships may change to allow appropriate management that serves ourthe Group’s stated principles of stabilizing cash flows, stabilizing net financial income/expense and protecting our share capital. The designation of hedges may therefore be cancelled, before maturity, because of a change in the underlying, a change in perceived risk on the underlying or a change in market view. Derivatives included in these hedges may be reassigned to new hedges where they meet the effectiveness test and the new hedge is well documented. To gauge the efficiency of transactions defined as accounting hedges, we analyzethe Group analyzes the extent to which the changes in the fair value or in the cash flows attributable to the hedged item would offset the changes in fair value or cash flows attributable to the hedged risk using a linear regression model. The main guiding principles for risk management are laid downestablished by Telefónica’s Finance Department and implemented by company chief financial officerofficers (who isare responsible for balancing the interests of each company and those of the Telefónica as a whole)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. New companies joining usthe Telefónica Group as a result of mergers or acquisitions may also need time to adapt.
The breakdown of the financial results recognized in 2009, 20082011, 2010 and 20072009 is as follows: (Millions of euros) | 2009 | 2008 | 2007 | | 2011 | | | 2010 | | | 2009 | | Interest income | 528 | 589 | 524 | | | 586 | | | | 454 | | | | 528 | | Dividends received | 45 | 67 | 72 | | | 42 | | | | 40 | | | | 45 | | Other financial income | 151 | 217 | 107 | | | 181 | | | | 266 | | | | 151 | | Interest expenses | (3,036) | (3,333) | (3,175) | | | (2,671 | ) | | | (2,514 | ) | | | (3,036 | ) | Ineffective portion of cash flow hedges | (17) | (71) | (43) | | | 1 | | | | (16 | ) | | | (17 | ) | Accretion of provisions and other liabilities | (254) | (453) | (200) | | | (106 | ) | | | (145 | ) | | | (254 | ) | Changes in fair value of financial assets at fair value through profit or loss | 124 | 341 | 25 | | | 573 | | | | 25 | | | | 124 | | Changes in fair value of financial liabilities at fair value through profit or loss | (132) | (115) | (4) | | | (808 | ) | | | (39 | ) | | | (132 | ) | Transfer from equity to profit and loss from cash flow hedges | 77 | (50) | (17) | | | (210 | ) | | | (73 | ) | | | 77 | | Transfer from equity to profit and loss from available-for-sale assets | 4 | (2) | (107) | | | (3 | ) | | | (202 | ) | | | 4 | | (Gain)/loss on fair value hedges | (427) | 912 | 75 | | Loss/(gain) on adjustment to items hedged by fair value hedges | 439 | (883) | (102) | | Gain/(loss) on fair value hedges | | | | 908 | | | | 168 | | | | (427 | ) | (Loss)/gain on adjustment to items hedged by fair value hedges | | | | (747 | ) | | | (211 | ) | | | 439 | | Other expenses | (269) | (40) | (6) | | | (528 | ) | | | (290 | ) | | | (269 | ) | Net finance costs excluding foreign exchange differences | (2,767) | (2,821) | (2,851) | | | (2,782 | ) | | | (2,537 | ) | | | (2,767 | ) |
The breakdown of Telefónica’s derivatives at December 31, 2009,2011, their fair value at year-end and the expected maturity schedule isare as set forth in the table below: Millions of euros | Fair value: at 12/31/09 (**) | Maturity (notional amount) (*) | Fair value: at 12/31/11 (**) | Maturity (notional amount) (*) | Derivatives | 2010 | 2011 | 2012 | Subsequent years | Total | 2012 | 2013 | 2014 | Subsequent years | Total | Interest rate hedges | (282) | 3,044 | (103) | 163 | (2,520) | 584 | (81) | (1,785) | 668 | (825) | 8,217 | 6,275 | Cash flow hedges | 147 | 1,769 | 1,143 | 659 | 3,024 | 6,595 | 866 | (1,118) | 1,086 | (350) | 11,380 | 10,998 | Fair value hedges | (429) | 1,275 | (1,246) | (496) | (5,544) | (6,011) | (947) | (667) | (418) | (475) | (3,163) | (4,723) | Exchange rate hedges | 1,055 | 1,792 | 788 | 112 | 4,900 | 7,592 | (962) | 328 | 339 | 77 | 6,702 | 7,446 | Cash flow hedges | 1,055 | 1,797 | 788 | 112 | 4,900 | 7,597 | (932) | 340 | 230 | 1 | 6,519 | 7,090 | Fair value hedges | - | (5) | - | - | - | (5) | (30) | (12) | 109 | 76 | 183 | 356 | Interest and exchange rate hedges | 157 | 14 | (419) | (314) | (281) | (1,000) | (618) | (76) | 1,110 | (45) | 2,547 | 3,536 | Cash flow hedges | 152 | 51 | (426) | (171) | (360) | (906) | (597) | (31) | 1,158 | 66 | 2,098 | 3,291 | Fair value hedges | 5 | (37) | 7 | (143) | 79 | (94) | (21) | (45) | (48) | (111) | 449 | 245 | Hedge of net investment in foreign operations | (276) | (2,555) | (958) | (113) | (868) | (4,494) | (81) | (1,427) | (160) | (280) | (1,313) | (3,180) | Derivatives not designated as hedges | (612) | 6,110 | 341 | 388 | (744) | 6,095 | (488) | 9,375 | (480) | (144) | (1,516) | 7,235 | Interest rate | (299) | 5,532 | 413 | 483 | (1,770) | 4,658 | (230) | 8,038 | (579) | (144) | (2,404) | 4,911 | Exchange rate | (270) | 738 | (9) | (28) | 1,026 | 1,727 | (255) | 1,338 | 99 | - | 888 | 2,325 | Interest and exchange rate | (43) | (160) | (63) | (67) | - | (290) | (3) | (1) | - | - | (1) |
The Company also has debt assigned to the investment of 944 million dollars, 2,643 million pound sterling and 302 million Czech crowns (data in equivalent euros).(*) For hedges, the positive amount is in terms of fixed “payment.” | For foreign currency hedges, a positive amount means payment in functional vs. foreign currency. | (**) Positive amounts indicate payables. |
The breakdown of Telefónica’s derivatives at December 31, 2008,2010, their fair value at year-end and the expected maturity schedule isare as set forth in the table below: Millions of euros | Fair value: at 12/31/08 (**) | Maturity (notional amount) (*) | Fair value: at 12/31/10 (**) | Maturity (notional amount) (*) | Derivatives | 2009 | 2010 | 2011 | Subsequent years | Total | 2011 | 2012 | 2013 | Subsequent years | Total | Interest rate hedges | (612) | 2,031 | 1,747 | 520 | 72 | 4,370 | (355) | (5,850) | 60 | (2,083) | 7,202 | (671) | Cash flow hedges | 183 | 2,028 | 493 | 1,749 | 3,505 | 7,775 | 266 | (3,504) | 556 | (438) | 8,487 | 5,101 | Fair value hedges | (795) | 3 | 1,254 | (1,229) | (3,433) | (3,405) | (621) | (2,346) | (496) | (1,645) | (1,285) | (5,772) | Exchange rate hedges | 519 | 985 | 2,382 | 793 | 3,717 | 7,877 | (405) | 1,329 | 113 | 579 | 4,323 | 6,344 | Cash flow hedges | 519 | 985 | 2,382 | 793 | 3,717 | 7,877 | (404) | 1,206 | 113 | 579 | 4,323 | 6,221 | Fair value hedges | 0 | 0 | 0 | 0 | 0 | 0 | (1) | 123 | - | - | 123 | Interest and exchange rate hedges | (173) | 12 | 458 | 18 | 399 | 887 | (31) | 253 | 272 | 1,162 | 2,595 | 4,282 | Cash flow hedges | (71) | 18 | 232 | 4 | 288 | 542 | (87) | 191 | 246 | 1,148 | 2,252 | 3,837 | Fair value hedges | (102) | (6) | 226 | 14 | 111 | 345 | 56 | 62 | 26 | 14 | 343 | 445 | Hedge of net investment in foreign operations | (546) | (2, 830) | (517) | (1,125) | (751) | (5,223) | (234) | (2,221) | (118) | (160) | (1,030) | (3,529) | Derivatives not designated as hedges | (868) | 7,328 | (627) | (578) | (164) | 5,959 | (411) | 4,839 | 318 | (289) | (428) | 4,440 | Interest rate | (271) | 8,587 | (303) | (609) | (1,100) | 6,575 | (245) | 4,231 | 426 | (427) | (1,316) | 2,914 | Exchange rate | (395) | (839) | (137) | 96 | 1,026 | 146 | (168) | 528 | (107) | 138 | 888 | 1,447 | Interest and exchange rate | (202) | (420) | (187) | (65) | (90) | (762) | 2 | 80 | (1) | - | - | 79 |
(*) For interest rate hedges, the positive amount is in terms of fixed “payment.”
For exchange rate hedges, a positive amount means payment in functional vs. foreign currency.
(*) For hedges, the positive amount is in terms of fixed “payment.” | For foreign currency hedges, a positive amount means payment in functional vs. foreign currency. | (**) Positive amounts indicate payables. |
A list of derivative products entered into at December 31, 20092011 and 20082010 is provided in Appendix III. 17)(17) | INCOME TAX MATTERS |
Consolidated tax group Pursuant to a Ministerial Order dated December 27, 1989, since 1990 Telefónica, S.A. has filed consolidated tax returns for certain Group companies. The consolidated tax group comprised 4048 companies in 2009 (392011 (46 in 2008)2010). Modification of tax rates
In 2009 and 2008, the impact of changes in the tax rates applicable to the income statements of the main Telefónica Group companies was not material.
Deferred taxtaxes The movements in deferred taxes in 20092011 and 20082010 are as follows: | Millions of euros | | Deferred tax assets | Deferred tax liabilities | Balance at December 31, 2010 | 5,693 | 6,074 | Additions | 2,162 | 779 | Disposals | (1,326) | (1,688) | Transfers | 48 | (145) | Translation differences and hyperinflation adjustments | (163) | (302) | Company movements and others | 3 | 21 | Balance at December 31, 2011 | 6,417 | 4,739 |
| Millions of euros | | Deferred tax assets | Deferred tax liabilities | Balance at December 31, 2008 | 6,980 | 3,576 | Increases | 771 | 188 | Decreases | (811) | (955) | Transfers | (864) | (51) | Net international movements | (106) | 324 | Company movements and others | 1 | - | Balance at December 31, 2009 | 5,971 | 3,082 |
| | Millions of euros | | | | Deferred tax assets | | | Deferred tax liabilities | | Balance at December 31, 2009 | | | 5,971 | | | | 3,082 | | Additions | | | 1,221 | | | | 586 | | Disposals | | | (2,270 | ) | | | (421 | ) | Transfers | | | (16 | ) | | | 365 | | Translation differences and hyperinflation adjustments | | | 207 | | | | 312 | | Company movements and others | | | 580 | | | | 2,150 | | Balance at December 31, 2010 | | | 5,693 | | | | 6,074 | |
| Millions of euros | | Deferred tax assets | Deferred tax liabilities | Balance at December 31, 2007 | 7,829 | 3,926 | Increases | 1,308 | 571 | Decreases | (1,979) | (526) | Transfers | (39) | (43) | Net international movements | (159) | (352) | Company movements and others | 20 | - | Balance at December 31, 2008 | 6,980 | 3,576 |
“Additions” of deferred tax assets in 2011 include the tax impact of the labor force reduction plan for Telefónica in Spain (see Note 15).
Meanwhile, “Disposals” of deferred tax assets include the impact of the Group’s labor force reduction plans carried out and which were recorded in previous years. The movement in “Deferred tax liabilities” in 2011 includes mainly the reversal of a deferred tax liability as a result of the merger between Brazilian companies Telesp and Vivo Participações, S.A. in October in the amount of 1,288 million euros (see Note 2). Expected realization of deferred tax assets and liabilities In the majority of cases, realization of the Group’s deferred tax assets and liabilities depends on the future activities carried out by the different companies, tax regulations in the different countries in which these companies operate, and on the strategic decisions affecting the companies. In this regard, the expected realization is based on a series of assumptions that may be altered as the corresponding situations continue to develop. Under the assumptions made, the estimated realization of deferred tax assets and liabilities recognized in the consolidated statement of financial position at December 31, 2011 is as follows: 12/31/11 | Total | Less than 1 year | More than 1 year | Deferred tax assets | 6,417 | 1,094 | 5,323 | Deferred tax liabilities | 4,739 | 777 | 3,962 |
Deferred tax assets Deferred tax assets in the accompanying consolidated statement of financial position include tax loss carryforwards, unused tax credits recognized (deductions) and deductible temporary differences recognized at the end of the reporting period. Tax credits for loss carryforwards The available tax loss carryforwards in Spain at December 31, 20092011 at the main Group companies amounted to 3,9684,933 million euros (3,643(4,575 million euros for companies belonging to the tax group). The consolidated statement of financial position at December 31, 20092011 includes a 500729 million euro deferred tax asset corresponding to 1,6662,430 million euros of recognized tax loss carryforwards in Spain. The 2002 tax return included a negative adjustment forof 2,137 million euros from Telefónica Móviles, S.A. (now Telefónica, S.A.) arising through the transfer of certain holdings of Group companies acquired in previous years, which was questionedchallenged by the Spanish tax authorities. The challenging of this adjustment in the tax audit has not affected the consolidated financial statements as in accordance with past rulings by the tax authorities, which differed from the interpretation put forward by the Company, the Company decided then not to capitalizerecognize it. In relation to the sale by Terra Networks, S.A. (now Telefónica, S.A.) of its stake in Lycos Inc. in 2004, the Company has begunbegan procedures to recognize a higher tax loss of up to 7,418 million euros because of measuring as acquisition value for tax purposes, the market value of Lycos Inc. shares received, rather than their carrying amount, in conformity with Article 159 of the Spanish Corporation Law. No effect on the consolidated financial statements has been considered until the Company receives a definitive ruling on this procedure. The O2Telefónica Europe has recognized 439 million euros, mainly from the Telefónica Germany groupGroup, which has tax credits and deductible temporary differences incurred in prior years amounting to 8,5177,682 million euros, of which 426412 million euros have been recognized as deferred tax assets in line with the prospects of generating future taxable earnings. These losses were generated by O2 Germany and the rest of the Germany subsidiaries of the Telefónica Group prior to the acquisition of the O2 Group. These tax credits do not expire.
Unused tax credits recognized in the consolidated statement of financial position at the Latin American subsidiaries at December 31, 20092011 amounted to 461323 million euros. Deductions InThe Group has recognized an amount of 191 million euros of unused tax credits, generated primarily from export activity, in the consolidated statement of financial position at December 31, 2009, the Group had recognized 252 million euros of unused tax credits, mainly export activity tax credits.2011.
Temporary differences Temporary differences are generated as a result of the difference between tax bases of the assets and liabilities and their respective carrying amounts. Deductible temporary differences, tax deductions and credits and tax loss carryforwards give rise to deferred tax assets on the consolidated statement of financial position, whereas taxable temporary differences in tax bases give rise to deferred tax liabilities.liabilities on the consolidated statement of financial position. The sources of deferred tax assets and liabilities from temporary differences recognized at December 31, 20092011 and 20082010 are as follows: | | Millions of euros | | | | 2011 | | | 2010 | | | | Deferred tax | | | Deferred tax | | | Deferred tax | | | Deferred tax | | | | assets | | | liabilities | | | assets | | | liabilities | | Property, plant and equipment | | | 283 | | | | 753 | | | | 273 | | | | 467 | | Intangible assets | | | 268 | | | | 2,211 | | | | 265 | | | | 4,522 | | Personnel commitments | | | 1,546 | | | | - | | | | 956 | | | | - | | Provisions | | | 1,267 | | | | 158 | | | | 1,172 | | | | 81 | | Investments in subsidiaries, associates and joint ventures | | | 614 | | | | 975 | | | | 443 | | | | 532 | | Other | | | 757 | | | | 642 | | | | 873 | | | | 472 | | Total | | | 4,735 | | | | 4,739 | | | | 3,982 | | | | 6,074 | |
The net movements of assets and liabilities resulting from temporary differences recognized directly in equity in 2011 and 2010 amounts to 239 million euros and 63 million euros, respectively, as shown in the consolidated statement of comprehensive income. | Millions of euros | | 2009 | 2008 | | Deferred tax | Deferred tax | Deferred tax | Deferred tax | | assets | liabilities | assets | liabilities | Property, plant and equipment | 922 | 395 | 809 | 387 | Intangible assets | 225 | 2,084 | 239 | 2,085 | Personnel commitments | 1,088 | 3 | 1,325 | 1 | Provisions | 769 | 30 | 598 | 11 | Investments in subsidiaries, associates and joint ventures | 626 | 147 | 1,083 | 256 | Other | 702 | 423 | 620 | 836 | Total | 4,332 | 3,082 | 4,674 | 3,576 |
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Tax payables and receivables Current tax payables and receivables at December 31, 20092011 and 20082010 are as follows: ��
| Millions of euros | | Millions of euros | | | Balance at | Balance at | | Balance at | | | Balance at | | | 12/31/09 | 12/31/08 | | 12/31/11 | | | 12/31/10 | | Taxes payable: | | | | | | | | | Tax withholdings | 118 | 91 | | | 163 | | | | 124 | | Indirect taxes | 897 | 704 | | | 1,018 | | | | 1,164 | | Social security | 178 | 187 | | | 187 | | | | 228 | | Current income taxes payable | 872 | 873 | | | 611 | | | | 695 | | Other | 701 | 420 | | | 589 | | | | 611 | | Total | 2,766 | 2,275 | | | 2,568 | | | | 2,822 | |
| Millions of euros | | Millions of euros | | | Balance at | Balance at | | Balance at | | | Balance at | | | 12/31/09 | 12/31/08 | | 12/31/11 | | | 12/31/10 | | Tax receivables: | | | | | | | | | Indirect tax | 662 | 452 | | | 772 | | | | 775 | | Current income taxes receivable | 377 | 365 | | | 569 | | | | 338 | | Other | 207 | 153 | | | 226 | | | | 218 | | Total | 1,246 | 970 | | | 1,567 | | | | 1,331 | |
Reconciliation of book profit before taxes to taxable income The reconciliation between accounting profit and the income tax expense for 2009, 20082011, 2010 and 20072009 is as follows: | | Millions of euros | | | | 2011 | | | 2010 | | | 2009 | | Accounting profit before tax | | | 6,488 | | | | 13,901 | | | | 10,387 | | Tax expense at prevailing statutory rate (30%) | | | 1,946 | | | | 4,170 | | | | 3,116 | | Effect of statutory rate in other countries | | | (19 | ) | | | (52 | ) | | | (20 | ) | Variation in tax expense from new taxes | | | 11 | | | | 10 | | | | (15 | ) | Permanent differences | | | (22 | ) | | | (69 | ) | | | (402 | ) | Changes in deferred tax charge due to changes in tax rate | | | (26 | ) | | | (21 | ) | | | - | | Capitalization of tax deduction and tax relief | | | (97 | ) | | | (112 | ) | | | (143 | ) | Use of loss carryforwards | | | (200 | ) | | | (134 | ) | | | (5 | ) | Increase / (Decrease) in tax expense arising from temporary differences | | | (1,344 | ) | | | (42 | ) | | | (82 | ) | Other | | | 52 | | | | 79 | | | | 1 | | Income tax expense | | | 301 | | | | 3,829 | | | | 2,450 | | Breakdown of current/deferred tax expense | | | | | | | | | | | | | Current tax expense | | | 1,557 | | | | 2,455 | | | | 3,848 | | Deferred tax benefit | | | (1,256 | ) | | | 1,374 | | | | (1,398 | ) | Total income tax expense | | | 301 | | | | 3,829 | | | | 2,450 | |
The income tax expense for 2011 includes the reversal of a deferred tax liability as a result of the merger between Brazilian companies Telesp and Vivo Participações, S.A. in October for 1,288 million euros (see Note 2), included in the preceding table under “Increase/(Decrease) in tax expense arising from temporary differences.” | Millions of euros | | 2009 | 2008 | 2007 | Accounting profit before tax | 10,387 | 10,915 | 10,684 | Tax expense at prevailing statutory rate | 3,116 | 3,275 | 3,472 | Effect of statutory rate in other countries | (20) | (99) | 458 | Variation in tax expense from new taxes | (15) | 12 | (22) | Permanent differences | (402) | 243 | (1,893) | Changes in deferred tax charge due to changes in tax rate | - | - | (36) | Capitalization of tax deduction and tax relief | (143) | (175) | (200) | Use of loss carryforwards | (5) | (106) | (203) | Decrease in tax expense arising from temporary differences | (82) | (2) | (8) | Consolidation adjustments | 1 | (59) | (3) | Income tax expense | 2,450 | 3,089 | 1,565 | Breakdown of current/deferred tax expense | | | | Current tax expense | 3,848 | 3,371 | 2,152 | Deferred tax benefit | (1,398) | (282) | (587) | Total income tax expense | 2,450 | 3,089 | 1,565 |
PermanentThe permanent differences arise mainly from events that produce taxable income not recognized in the consolidated income statement.
As describedstatement, as well as impacts recognized in Note 2.b),profit before tax that do not generate taxable profit. Noteworthy in December 2009,this respect in 2010 is the European Commission released its decision regarding the investigation involving the Kingdom of Spain on the potential considerationportion of the deduction for tax amortizationcapital gain obtained from the remeasurement of the financial goodwill arising on certain foreign shareholding acquisitions as government aid under the provisions of article 12.5 of the revised Spanish Income Tax Law (“TRLIS”), deeming the deduction to be state aid. This decision does not affect investments made before December 21, 2007previously held investment in Brasilcel (see Note 2). As a result of this decision, income tax, as it relates to temporary differences on investments in the Telefónica Group’s consolidated income statement for the year ended December 31, 2009 is 591 million euros lower due to the reversal of this liability, included in “Permanent differences” for 2009 in the preceding table.subsidiaries (see Note 3.n).
In 2007, the Company recognized a tax credit arising fromaddition, permanent differences for 2010 include the recognition of a higher tax loss carryforward amounting to 2,812credits in Mexico and Terra Brasil, in the amounts of 75 million euros generatedand 63 million euros, respectively, based on the disposalestimates of taxable income of each of the stake in Endemol Investment Holding, B.V. as a difference betweencompanies according to the updated business plan. In addition, subsequent to the review of tax and carrying amount of the Endemol shares at the time of disposal. The positive impactassets recognized in “Income tax expense” in the consolidated income statement forof financial position at the year amounted to 914end of 2010, it was determined that the 864 million euros presented inof tax assets recognized at Colombia Telecomunicaciones, S.A. should be derecognized since the preceding table under “Permanent differences” for 2007. Also included under “Permanent differences” for 2007 arecompany’s revised business plans did not ensure that there would be sufficient taxable profit to allow the accounting gain on this disposal, of 1,368 million euros,deferred tax asset to be utilized. Tax inspections and the accounting gain on the disposal of Airwave for 1,296 million euros.tax-related lawsuits On September 25, 2002, tax inspections commenced at several companies included in tax group 24/90, of which Telefónica, is the parent company. The taxes inspected were corporate income tax (forcompany for the years from 1998 to 2000) and VAT, tax withholdings and payments relating to personal income tax, tax on investment income, property tax and nonresident income tax (1998 to 2001).2000. The tax assessments related to this review, which included settlement agreements and imposed fines on Telefónica, were signed by the company in disagreement in October 2004 and July 2005. The total amount of these assessments was 140 million euros. The final outcome of these assessments is not expected give rise to material additional liabilities on the Telefónica Group consolidated financial statements. In April 2007, Telefónica S.A. filed an administrative appeal before the National Court of Justice. The company alsoJustice, requesting the annulment of the settlement as well as the inclusion of other concepts in its favor not contemplated in the inspection. In the process, it was requested that the execution of the settlements and penalties appealed be suspended by providing the appropriate guarantees. Telefónica presented in writing its conclusions on September 1, 2008.
On February 22, 2010, Telefónica received the notification of the ruling by the National courtsCourt of Justice dated February 4, 2010, in which it partially accepted the Company’s allegations. sanctions. On May 18, 2010, the National Court of Justice accepted Telefónica, is assessingS.A.'s appeal and ruled on April 5, 2010 to refer the impacts, both positive and negative, of this ruling, and as it maycase to the Supreme Court. On June 4, 2010, the tax authorities filed an appeal for an overturn inbefore the Supreme Court it does not expect this to give rise additional material liabilities.against one of the rulings of the National Court of Justice partially accepting Telefónica’s allegations. In January 2011, Telefónica submitted a brief of opposition against that appeal before the Supreme Court. AIn addition, a new tax inspection commenced in June 2006 and concluded in July 2008.2008 for the periods 2001-2004. The income tax statements for such periods included a negative adjustment for 2,317 million euros which was challenged by the Spanish tax authorities, although this did not affect the consolidated financial statements as it was not recognized. At the same time, the Treasury challenged the export credits claimed, which amounted to deductions of approximately 346 million euros.
Telefónica filed an administrative appeal before the Central Administrative Economic Court, which on September 10, 2009 ruled against the interests of the Company. Telefónica, S.A. filed an administrative appeal before the National Court of Justice against this resolution of September 10, 2009. Telefónica, S.A. filed the claim in April 2010. Telefónica presented in writing its conclusions in April 2011. Additional, in June 2010, new inspections of various companies in the 24/90 tax group, of which Telefónica, S.A. is the parent, were initiated. The taxes subject to review were corporate income tax for the years 20012005 to 2004,2007, VAT, tax withholdings and payments on account in respect of personal income tax, tax on investment income, property tax and non-residentnonresident income tax for the years 20022006 to 2004. In addition to the above, the Company has proposed additional adjustments to the tax amounts considered by Telefónica Móviles, S.A.U. in 2002 (of 2,137 million euros), of approximately 346 million euros. As a result, the inspection resolved the controversy with a new settlement of said tax, which was not accepted by Telefónica for the same reasons put forward before the Central Administrative Economic Court, which on September 10, 2009 ruled against the interests of the Company.
Telefónica filed an administrative appeal before the National Court of Justice against this resolution of September 10, 2009.
The assessment of this case has not uncovered the need to recognize additional liabilities in the Telefónica Group’s consolidated financial statements.
No material liabilities arose as a result of the inspection of the other items and financial years reviewed, and the Company has not and will not file any appeal.2007.
Meanwhile, after the related inspections, four tax assessments were raised by the State Treasury of Sao Paulo against Telecomunicações de São Paulo, S.A. -Telesp (“Telesp”) in relation– Telefónica Brasil has a number of appeals underway regarding the ICMS –similar to the Merchandise Circulation Tax (ICMS) -similar to the VATVAT- levied on telecommunications services- for different periods between 2001services. There is a dispute with the Brazilian tax authorities over which services should be subject to settlement of this tax. In most cases, the authorities require the collection of the ICMS on complementary or auxiliary services to base telecommunications service. To date, all the related procedures are being contested in all instances (administrative and 2007.judicial). The aggregate amount of thethese assessments, updated to take into account interests, fines and other items, is approximately 4131,077 million euros. After deciding on the actions to take against the Sao Paolo tax authorities, the Company lost oneOn February 11, 2011, Telefónica del Perú, S.A.A. was notified of the suits indecision of the tax court concluding the administrative proceedings and is awaiting a decision in first instance in the court proceedings, whilematter regarding income tax for 2000 and 2001 and the other threerespective payments on account, noted by the tax authorities in 2005, confirming the second instancereservations of administrative proceedings.the National Tax Administration (SUNAT) regarding (i) financial charges, (ii) provisions for doubtful collectibles, (iii) lease expenses (TPI), (iv) non-divestment reorganization and (v) overhead.
The company believeshas submitted various appeals at the arguments presented could reasonably leadjudicial level, petitioning the courts to favorable rulings byoverturn the pertinent judicial bodies.decision, considering that it was based on insufficient legal grounds. Telefónica del Perú has paid 38 million euros, in compliance with a collection enforcement rule established in order to have the company pay the amount until a definitive resolution of the matter is reached. No additional provisions are deemed necessary for recognition in the consolidated financial statements of the Group at December 31, 2011 as a result of the final resolution of tax litigation and ongoing inspections. Years open for inspection The years open for review by the tax inspection authorities for the main applicable taxes vary from one consolidated company to another, based on each country’s tax legislation, taking into account their respective statute-of-limitations periods. In Spain, as a result of the tax audit completed in 2008, the main companies of the tax group are open to inspection for all years from 2005. In the other countries in which the Telefónica Group has a significant presence, the years open for inspection by the relevant authorities are generally as follows: | · | The last seven years in Argentina |
| · | The last five years in Argentina, Brazil, Mexico, Colombia Venezuela and the Netherlands.Netherlands |
| · | The last four years in Ecuador,Venezuela, Nicaragua and Peru.Peru |
| · | The last three years in Chile, Ecuador, El Salvador, the US and Panama.Panama |
| · | The last two years in Uruguay.Uruguay |
| · | In Europe, O2 Group has the last three yearsmain companies have open to inspection the last six years in the UK,United Kingdom, the last fiveeight years in Germany, and the last twothree years in the Czech Republic. |
The tax audit of the open years is not expected to give rise to additional material liabilities for the Group. (18) | DISCONTINUED OPERATIONS |
None of the Group’s principal operations were discontinued in 2009, 20082011, 2010 or 2007.2009. Revenue from operations:Revenues:
The breakdown of “Revenue from operations”“Revenues” is as follows: Millions of euros | 2009 | 2008 | 2007 | | 2011 | | | 2010 | | | 2009 | | Rendering of services | 52,498 | 53,751 | 52,436 | | | 58,415 | | | | 56,434 | | | | 52,498 | | Net sales | 4,233 | 4,195 | 4,005 | | | 4,422 | | | | 4,303 | | | | 4,233 | | Total | 56, 731 | 57,946 | 56,441 | | | 62,837 | | | | 60,737 | | | | 56,731 | |
Other income The breakdown of “Other income” is as follows: | Millions of euros | | Millions of euros | | 2009 | 2008 | 2007 | | 2011 | | | 2010 | | | 2009 | | Ancillary income | 584 | 702 | 601 | | | 445 | | | | 882 | | | | 584 | | Own work capitalized | 720 | 736 | 708 | | | 739 | | | | 737 | | | | 720 | | Government grants | 54 | 59 | 57 | | | 62 | | | | 66 | | | | 54 | | Gain on disposal of assets | 287 | 368 | 2,898 | | | 861 | | | | 4,184 | | | | 287 | | Total | 1,645 | 1,865 | 4,264 | | | 2,107 | | | | 5,869 | | | | 1,645 | |
“GainThe gain on disposal of assets”assets in 2009 includes2011 relates mainly to the disposal of non-strategic items of property, plant and equipment of the Group, mostly in Latin America, for 564 million euros (with 200 million euros by Telefónica Brasil and 240 million euros by Telefónica Móviles Mexico) and the gain on the partial settlement of 220the equity swap contracts on the investment in Portugal Telecom for 184 million euros obtained(see Note 13).
The gain on disposal of assets in 2010 included the capital gain recognized in accordance with IFRS 3 resulting from the remeasurement of the previously held interest in Brasilcel, as described in Note 5, in the amount of 3,797 million euros. It also included gains on the sale of Medi Telecom, S.A. In 2008, this heading mainly included the gain of 143 million euros oncertain non-strategic Group property, plant and equipment and the sale of the stake in Sogecable, S.A. (see Note 13)Manx, for 260 million euros and in 2007, mainly the gains of the holdings in Airwave O2, Ltd. and Endemol Investment Holding, B.V. for 1,296 million and 1,36861 million euros, respectively. Also included are gains on the disposal of properties in line with the Telefónica Group’s real estate efficiency plan via the selective sale of properties in Spain and the Czech Republic, which amounted to 47, 104 and 161 million euros in 2009, 2008 and 2007, respectively.Other expenses The breakdown of “Other expenses” in 2009, 20082011, 2010 and 20072009 is as follows: Millions of euros | 2009 | 2008 | 2007 | | 2011 | | | 2010 | | | 2009 | | Leases | 1,068 | 914 | 938 | | | 1,033 | | | | 1,083 | | | | 1,068 | | Advertising | 1,123 | 1,626 | 2,198 | | | 1,457 | | | | 1,419 | | | | 1,123 | | Other external services | 7,729 | 7,539 | 6,854 | | | 10,529 | | | | 9,726 | | | | 7,729 | | Taxes | 1,203 | 1,147 | 974 | | Taxes other than income tax | | | | 1,328 | | | | 1,279 | | | | 1,203 | | Other operating expenses | 203 | 250 | 303 | | | 190 | | | | 453 | | | | 203 | | Changes in trade provisions | 874 | 748 | 666 | | Losses on disposal of non-current assets | 81 | 88 | 148 | | Change in trade provisions | | | | 818 | | | | 853 | | | | 874 | | Losses on disposal of fixed assets and changes in provisions for fixed assets | | | | 43 | | | | 1 | | | | 81 | | Total | 12,281 | 12,312 | 12,081 | | | 15,398 | | | | 14,814 | | | | 12,281 | |
In 2010, the Group approved firm commitments in connection with the Telefónica Foundation’s social welfare projects, in order to provide it with adequate financing to enable it to carry out its forecast short and medium-term plans, in the amount of 400 million euros. These commitments were partially met with the contribution of certain properties in 2011 to the foundation, generating a gain of 40 million euros. Outstanding commitments at the end of the year amounted to 259 million euros. The estimated payment schedule for the next few years on operating leases, purchase and acquisitioncontractual commitments is as follows: 12/31/09 | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | Over 5 years | Operating leases | 6,547 | 1,023 | 1,700 | 1,327 | 2,497 | Purchase and contract commitments | 3,151 | 1,305 | 769 | 395 | 682 |
12/31/11 | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | Over 5 years | Operating lease obligations | 9,613 | 1,543 | 2,591 | 2,114 | 3,365 | Purchase and other contractual obligations | 2,568 | 1,473 | 737 | 345 | 13 |
The main finance lease transactions are described in Note 22. Headcount and employee benefits a) Number of employees The table below presents the breakdown of the Telefónica Group’s average number of employees in 2009, 20082011, 2010 and 2007,2009, together with total headcount at December 31 each year. The employees shown for each subgroup include the Telefónica Group companies with similar activities in accordance with the segment reporting.
| | 2011 | | | 2010 | | | 2009 | | | | Average | | | Year-end | | | Average | | | Year-end | | | Average | | | Year-end | | Telefónica Spain | | | 35,168 | | | | 33,929 | | | | 35,313 | | | | 35,379 | | | | 35,318 | | | | 35,338 | | Telefónica Latin America | | | 60,589 | | | | 61,527 | | | | 55,164 | | | | 60,909 | | | | 50,709 | | | | 51,606 | | Telefónica Europe | | | 26,715 | | | | 26,085 | | | | 26,517 | | | | 25,968 | | | | 28,249 | | | | 27,023 | | Subsidiaries and other companies | | | 163,673 | | | | 169,486 | | | | 152,053 | | | | 162,850 | | | | 140,875 | | | | 143,459 | | Total | | | 286,145 | | | | 291,027 | �� | | | 269,047 | | | | 285,106 | | | | 255,151 | | | | 257,426 | |
| 2009 | 2008 | 2007 | Average | Year-end | Average | Year-end | Average | Year-end | Telefónica Spain | 35,318 | 35,338 | 35,708 | 35,562 | 37,688 | 35,792 | Telefónica Latin America | 50,709 | 51,606 | 49,990 | 49,849 | 48,844 | 49,946 | Telefónica Europe | 28,249 | 27,023 | 28,828 | 28,888 | 29,249 | 29,305 | Subsidiaries and other companies | 140,875 | 143,459 | 137,249 | 142,736 | 128,271 | 133,444 | Total | 255,151 | 257,426 | 251,775 | 257,035 | 244,052 | 248,487 |
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The number of employees shown in the table above corresponds to the consolidated companies. It is worth highlighting the large number of employees at the various companies of the Atento Group performing contact center activities, whose average and year-end headcount for 20092011 were 129,885152,197 and 132,256,156,734, respectively. Of the final headcount at December 31, 2009,2011, approximately 51.8%53.5% are women (50.8%(51.5% and 51.8% at December 31, 2008)2010 and December 31, 2009, respectively). “Personnel expenses” in 2011 include the amount related to the labor force reduction plan of Telefónica de España, S.A.U. The amount recognized by the Group to undertake the restructuring in Spain was 2,671 million euros (Note 15). In 2010, the Group reduced its workforce as part of the integration of its businesses, entailing provisions of 670 million euros in the different companies comprising the Group, including provision made in Germany for the integration of Telefónica Germany and HanseNet in an amount of 202 million euros. b) Employee benefits The Telefónica Group has arranged a defined-contribution pension plan for its employees in Spain. Under this plan, the company makes contributions of 4.51% of the regular base salary (6.87% for employees of Telefónica de España, S.A.U. whose hiring date was prior to June 30, 1992). This is in addition to a 2.21% compulsory contribution by each participant. This plan is entirely externalized in outside funds. At December 31, 2009,2011, a total of 52,91249,580 Group employees were covered by the pension plans managed by the subsidiary Fonditel Entidad Gestora de Fondos de Pensiones, S.A. (54,819(51,572 and 57,67552,915 at December 31, 20082010 and 2007,2009, respectively). The contributions made by the various companies in 20092011 amounted to 104 million euros (99 million euros and 97 million euros (98in 2010 and 95 million euros in 2008 and 2007,2009, respectively). Furthermore, in 2006, the Group approved a Pension Plan for Senior Executives, wholly funded by the company, which complements the previous plan. This plan envisages annual defined contributions equivalent to specific percentages of the executives’ fixed remuneration, in accordance with their professional category, and extraordinary contributions in accordance with the circumstances of each executive, payable in line with the conditions of said Plan. No provision was made for this plan as it has been fully externalized.
Depreciation and amortization The breakdown of “Depreciation and amortization” on the consolidated income statement is as follows: Millions of euros | 2009 | 2008 | 2007 | Depreciation of property, plant and equipment | 6,095 | 6,303 | 6,497 | Amortization of intangible assets | 2,861 | 2,743 | 2,939 | Total | 8,956 | 9,046 | 9,436 |
Millions of euros | 2011 | 2010 | 2009 | Depreciation of property, plant and equipment | 6,670 | 6,159 | 6,095 | Amortization of intangible assets | 3,476 | 3,144 | 2,861 | Total | 10,146 | 9,303 | 8,956 |
Earnings per share Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent (adjusted for any dilutive effects inherent in converting potential ordinary shares issued) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Both basic and diluted earnings per share attributable to equity holders of the parent are calculated based on the following data: | Millions of euros | | Millions of euros | | | 2009 | 2008 | 2007 | | 2011 | | | 2010 | | | 2009 | | Profit attributable to ordinary equity holders of the parent from continuing operations | 7,776 | 7,592 | 8,906 | | | 5,403 | | | | 10,167 | | | | 7,776 | | Profit attributable to ordinary equity holders of the parent from discontinued operations | - | - | - | | | - | | | | - | | | | - | | Total profit attributable to equity holders of the parent for basic earnings | 7,776 | 7,592 | 8,906 | | | 5,403 | | | | 10,167 | | | | 7,776 | | Adjustment for dilutive effects of the conversion of potential ordinary shares | - | - | - | | | - | | | | - | | | | - | | Total profit attributable to equity holders of the parent for diluted earnings | 7,776 | 7,592 | 8,906 | | | 5,403 | | | | 10,167 | | | | 7,776 | |
No. of shares | Thousands | 2009 | 2008 | 2007 | Weighted average number of ordinary shares (excluding treasury shares) for basic earnings per share | 4,552,656 | 4,645,852 | 4,758,707 | Telefónica, S.A. “Performance Share Plan” share option plan | 7,908 | 5,182 | 1,808 | Weighted average number of ordinary shares (excluding treasury shares) outstanding for diluted earnings per share | 4,560,564 | 4,651,034 | 4,760,515 |
| | Thousands | | Number of shares | | 2011 | | | 2010 | | | 2009 | | Weighted average number of ordinary shares (excluding treasury shares) for basic earnings per share | | | 4,511,165 | | | | 4,522,228 | | | | 4,552,656 | | Telefónica, S.A. share option plan. | | | 1,675 | | | | 6,017 | | | | 7,908 | | Weighted average number of ordinary shares (excluding treasury shares) outstanding for diluted earnings per share | | | 4,512,840 | | | | 4,528,245 | | | | 4,560,564 | |
The denominators used in the calculation of both basic and diluted earnings per share have been adjusted to reflect any transactions that changed the number of shares outstanding without a corresponding change in equity as if they had taken place at the start of the first period under consideration. There have been no transactions involving existing or potential ordinary shares between the end of the year and the date of preparation of the consolidated financial statements. Basic and diluted earnings per share attributable to equity holders of the parent broken down by continuing and discontinued operations are as follows: Figures in euros | Continuing operations | Discontinued operations | Total | | | | Continuing operations | | | Discontinued operations | | | Total | | Figures in euros | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | | 2011 | | | 2010 | | | 2009 | | | 2011 | | | 2010 | | | 2009 | | | 2011 | | | 2010 | | | 2009 | | 1.71 | 1.63 | 1.87 | - | - | - | 1.71 | 1.63 | 1.87 | | | 1.20 | | | | 2.25 | | | | 1.71 | | | | - | | | | - | | | | - | | | | 1.20 | | | | 2.25 | | | | 1.71 | | Diluted earnings per share | 1.71 | 1.63 | 1.87 | - | - | - | 1.71 | 1.63 | 1.87 | | | 1.20 | | | | 2.25 | | | | 1.71 | | | | - | | | | - | | | | - | | | | 1.20 | | | | 2.25 | | | | 1.71 | |
(20) | SHARE-BASED PAYMENT PLANS |
At year-end 2009, 20082011, 2010 and 2007,2009, the Telefónica Group had the following shared-based payment plans linked to the share price of Telefónica, S.A. The main plans in force at the end of 20092011 are as follows: | a) | Telefónica, S.A. share plan: “Performance Share Plan” |
At the General Shareholders’ Meeting of Telefónica, S.A. on June 21, 2006, its shareholders approved the introduction of a long-term incentive plan for managers and senior executives of Telefónica, S.A. and other Telefónica Group companies. Under this plan, selected participants who met the qualifying requirements were given a certain number of Telefónica, S.A. shares as a form of variable compensation. The planPlan was initially intended to last seven years. It is divided into five phases, each three years long, beginning on July 1 (the “Start Date”) and ending on June 30 three years later (the “End Date”). At the start of each phase the number of shares to be awarded to Plan beneficiaries is determined based on their success in meeting targets set. The shares are delivered, assuming targets are met, at the End Date of each phase. Each phase is independent from the others. The first started on July 1, 2006 (with shares delivered on July 1, 2009) and the fifth phase begins on July 1, 2010 (with any shares to be delivered from July 1, 2013). Award of the shares is subject to a number of conditions: | -– | The beneficiary must continue to work for the company throughout the three yearsthree-year duration of theeach phase, subject to certain special conditions related to departures.departures. |
| -– | The actual number of shares awarded at the end of each phase will depend on success in meeting targets and the maximum number of shares assigned to each executive. Success is measured by comparing the Total Shareholder Return (“TSR”), which includes both share price and dividends offered by Telefónica shares, with the TSRs offered by a basket of listed telecoms companies that comprise the comparison group. Each employee who is a member of the plan is assigned at the start of each phase a maximum number of shares. The actual number of shares awarded at the end of the phase is calculated by multiplying this maximum number by a percentage reflecting their success at the date in question. This will be 100% if the TSR of Telefónica is equal to or better than that of the third quartile of the Comparison Group and 30% if Telefónica's TSR is in line with the average. The percentage rises linearly for all points between these two benchmarks. If the TSR is below average no shares are awarded. |
June 30, 2009 marked the end of the first phase of this plan, which entailed the following maximum number of shares allocated: | No. of shares | Unit value | End date | 1st phase July 1, 2006 | 6,530,615 | 6.43 | June 30, 2009 |
| No. of shares | Unit fair value | End date | 1st phase July 1, 2006 | 6,530,615 | 6.43 | June 30, 2009 |
With the maturity of the plan, in July 2009 a total of 3,309,968 shares (corresponding to a total of 4,533,393 gross shares less a withholding of 1,224,610 shares prior to delivery)delivery and at the option of the employee) were delivered to Telefónica Group directors included in the first phase. The shares delivered were deduced from the Company’s treasury shares in 2009. All the shares included in the first phase of the plan were hedged with a derivative instrument acquired in 2006. The cost of this instrument was 46 million euros, which in unit terms is 6.43 euros per share. At June 30, 2009, the bank with which the financial instrument was entered into delivered the contracted shares to Telefónica, S.A. the own shares contracted. These were accounted for as treasury shares. The second phase of the plan matured on June 30, 2010, with the maximum number of shares allocated as follows: | No. of shares | Unit fair value | End date | 2nd phase July 1, 2007 | 5,556,234 | 7.70 | June 30, 2010 |
With the maturity of the second phase of the plan on June 30, 2010, a total of 2,964,437 shares (corresponding to a total of 4,091,071 gross shares less a withholding of 1,132,804 shares prior to delivery, at the option of the employee) were delivered to Telefónica Group directors included in the second phase. The shares delivered were deducted from the Company’s treasury shares in 2010. The third phase of the plan matured on June 30, 2011, with the maximum number of shares allocated as follows:
| No. of shares | Unit fair value | End date | 3rd phase July 1, 2008 | 5,286,980 | 8.39 | June 30, 2011 |
With the maturity of the third phase of the plan on June 30, 2011 a total of 2,900,189 shares (corresponding to a total of 4,166,304 gross shares less a withholding of 1,266,115 shares prior to delivery, at the option of the employee) were delivered to Telefónica Group directors included in the third phase. The shares delivered were deducted from the Company’s treasury shares in 2011. The third phase of the Plan was partially covered through two financial instruments relating to 2,446,104 shares at a cost of 10.18 euros per share. The maximum number of the shares issuable in each of the threetwo outstanding phases at December 31, 20092011 is as follows: Phase | No. of shares | Unit value | End date | 2nd phase July 1, 2007 | 5,556,234 | 7.70 | June 30, 2010 | 3rd phase July 1, 2008 | 5,286,980 | 8.39 | June 30, 2011 | 4th phase July 1, 2009 | 6,356,597 | 8.41 | June 30, 2012 |
| No. of shares assigned | Outstanding shares at 12/31/11 | Unit fair value | End date | 4th phase July 1, 2009 | 6,356,597 | 5,407,401 | 8.41 | June 30, 2012 | 5th phase July 1, 2010 | 5,025,657 | 4,684,289 | 9.08 | June 30, 2013 |
This plan is equity-settled via the delivery of shares to the participants. Accordingly, a balancing entry for the 43, 3849, 42 and 2343 million euros of employee benefits expenses recorded in 2011, 2010 and 2009, 2008 and 2007respectively, was made in equity. In relation to the fourth phase of the Plan and for the sole purpose of ensuring the shares necessary at the end of thethis phase, begun in 2008 (the third phase of the plan), Telefónica, S.A. purchased an instrument from a financial institution that will deliver to Telefónica, at the end of the phase, a total of 2,500,000 shares, part of the shares necessary to settle the phase. This instrument is indexed to the success of the plan; i.e. the instrument has the features as the plan. The cost of the financial instrument was 25 million euros, equivalent to 9.96 euros per option (see Note 16). For the fourth phase of the Plan, Telefónica, S.A. has acquired an instrument from a financial institution with the same features ofas the plan,Plan whereby, at the end of the phase, Telefónica will obtain part of the shares necessary to settle the phase (4,000,000(4 million shares). The cost of the financial instrument was 3436 million euros, equivalent to 8.41 euros per option (see Note 16).
| b) | Telefónica, S.A. share option plan targeted at Telefónica Europe employees: “Performance Cash Plan” “Performance Share Plan” |
In addition to the Performance Share Plan, another plan called the Performance Cash Plan, operating under the same conditions as the Performance Share Plan is targeted at employees of the Europe segment.Telefónica Europe. This plan entails delivery to this segment’s executives of a specific number of theoretical options in Telefónica, S.A. which, in the event, would be cash-settled at the end of each phase via a payment equivalent to the market value of the shares on settlement date up to a maximum of three times the notional value of the shares at the delivery date. The value of the theoretical options is established as the average share price in the 30 days immediately prior to the start of each phase, except for the first phase, where the average share price during the 30 days immediately prior to May 11, 2006 (12.83 euros) was taken as the reference. The estimated duration of this plan is also 7 years, with 5 phases, each of 3 years, commencing on July 1 of each year, starting in 2006. Like the Telefónica, S.A. Performance Share Plan, the performance rate for setting payments is measured based on the TSR on Telefónica shares with respect to the comparison group’s TSRs, in line with the following criteria: | · | Below average | 0% | | | | | | · | Average | 30% | | | | | | · | Equal to or higher than the third quartile | 100% | |
The number of options assigned at December 31, 2011 was 358,860 (364,601 and 412,869 at December 31, 2010 and 2009, was 412,869.respectively). The fair value at December 31, 20092011 of the options delivered in each phase in force at that time was 19.5513.39 euros per option. This value is calculated by taking the Telefónica share price and including the estimated TSR and is updated at each year end. | c) | Telefónica, S.A. global share plan: “Global Employee Share Plan” |
At the June 23, 2009 General Shareholders’ Meeting of Telefónica, S.A. , the shareholders approved the introduction of a Telefónica, S.A. share incentive plan for all employees of the Telefónica Group worldwide, with certain exceptions. Under this plan, participants that meet the qualifying requirements are offered the possibility of acquiring Telefónica, S.A. shares, with this company assuming the obligation of giving participants a certain number of Telefónica, S.A. shares free of charge. The initial duration of the plan is intended to be two years. Employees subscribed to the plan can acquire Telefónica, S.A. shares through monthly installments of up to 100 euros (or the local currency equivalent), up to a maximum of 1,200 euros over a twelve-month period of (acquisition period). The delivery of shares will occur, where applicable, when the plan is consolidated, as of September 1, 2012, subject to a number of conditions: | - | The beneficiary must continue to work for the company throughout the two-year duration of the plan (consolidation period), subject to certain special conditions related to departures. |
| - | The actual number of shares to be delivered at the end of the consolidation period will depend on the number of shares acquired and retained by each employee. Each employee who is a member of the plan, has remained a Group employee, and has retained the shares acquired for an additional twelve-month period after the acquisition date, will be entitled to receive one free share per share acquired and retained at the end of the consolidation period. |
The acquisition period opened in August 2010, and at December 31, 2011, 37,230 employees had adhered to the plan. This plan is equity-settled via the delivery of shares to the participants. Accordingly, a balancing entry for the 21 and 11 million euros of employee benefits expenses recorded in 2011 and 2010, respectively, was made in equity. | d) | Long-term incentive plan based on Telefónica, S.A. shares: “Performance and Investment Plan” |
At the General Shareholders’ Meeting held on May 18, 2011, a new long-term share-based incentive plan called “Performance and Investment Plan” (the “Plan” or “PIP”) was approved for Telefónica Group directors and executive officers. This plan will take effect following completion of the Performance Share Plan. Under this Plan, a certain number of shares of Telefónica, S.A. will be delivered to plan participants selected by the Company who decide to participate on compliance with stated requirements and conditions. The Plan lasts five years and is divided into three independent three-year phases (i.e. delivery of the shares for each three-year phase three years after the start date). The first phase began on July 1, 2011 (with the delivery of the related shares from July 1, 2014). The second phase will begin on July 1, 2012 (with delivery of the related shares from July 1, 2015). The third phase will begin on July 1, 2013 (with delivery of the related shares from July 1, 2016). The specific number of Telefónica, S.A. shares deliverable within the maximum amount established to each member at the end of each phase will be contingent and based on the Total Shareholder Return (“TSR”) of Telefónica, S.A. shares (from the reference value) throughout the duration of each phase compared to the TSRs of the companies included in the Dow Jones Global Sector Titans Telecommunications Index. For the purposes of this Plan, these companies make up the comparison group (“Comparison Group”). The TSR is the indicator used to determine the Telefónica Group’s medium- and long-term value generation, measuring the return on investment for each shareholder. For the purposes of this Plan, the return on investment of each phase is defined as the sum of the increase or decrease in the Telefónica, S.A. share price and dividends or other similar items received by the shareholder during the phase in question. At the beginning of each phase, each Participant is allocated a theoretical number of shares. According to the Plan, the number of shares to be delivered will range from: | - | 30% of the number of theoretical shares if Telefónica, S.A.’s TSR is at least equal to the Comparison Group’s median, and |
| - | 100% if Telefónica, S.A.’s TSR is within the third quartile or higher than the Comparison Group’s. The percentage is calculated using linear interpolation when it falls between the median and third quartile. |
| - | No shares will be delivered if Telefónica, S.A.’s TSR is below the Comparison Group’s median. |
The Plan includes an additional condition regarding compliance by all or part of the Participants with a target investment and holding period of Telefónica, S.A. shares through each phase (“Co-Investment”), to be determined for each participant, as appropriate, by the Board of Directors based on a report by the Nominating, Compensation and Corporate Governance Committee. Participants meeting the co-investment requirement will receive an additional number of shares, provided the rest of the requirements established in the Plan are met. In addition, and independently of any other conditions or requirements that may be established, in order to be entitled to receive the corresponding shares, each Participant must be a Telefónica Group employee at the delivery date for each phase, except in special cases as deemed appropriate. Shares will be delivered at the end of each phase (i.e., in 2014, 2015, and 2016, respectively). The specific delivery date will be determined by the Board of Directors or the committee or individual entrusted by the Board to do so. The shares to be delivered to Participants, subject to compliance with the pertinent legal requirements in this connection, may be either (a) treasury shares in Telefónica, S.A. acquired by Telefónica, S.A. itself or by any of the Telefónica Group companies; or (b) newly-issued shares. The first allocation of shares under this Plan was made on July 1, 2011. Therefore, the maximum number of shares assigned (including the amount of co-investment) under the Plan at December 31, 2011 is as follows: In connection with the PIP Plan, Telefónica, S.A. acquired an instrument from a financial institution with the same features of the plan, whereby at the end of the phase, Telefónica will obtain part of the shares necessary to settle the phase (4 million shares). The cost of the financial instrument is 37 million euros, equivalent to 9.22 euros per option | e) | “Restricted Share Plan” (RSP) |
At Telefónica, S.A.'s General Shareholders' Meeting held on May 18, 2011, the Company approved the roll-out of the Restricted Share Plan (RSP), a long-term share-based incentive plan with two primary aims: (a) to retain and motivate certain high-potential employees, and (b) to retain key personnel upon new acquisitions, providing them with an ownership interest in the Company through rights convertible to shares. The RSP is established for a five-year period, with independent deliveries permitted at any time between 2011 and 2015. At each delivery date the Company extends certain Restricted Share Units (RSUs) carrying the right to automatically receive the same number of Telefónica, S.A. shares at the end of the vesting period, subject to compliance with certain length-of-service requirements. Delivery of shares is conditional on compliance with certain service-related conditions, namely: | 1. | Final delivery: participants must have been employed by the Company continuously from the grant date to the conversion date |
| 2. | Final delivery: participants must have worked for a minimum period of 12 months within the vesting period |
| 3. | The specific duration of the vesting period will be set on a case-by-case basis. |
The required deliveries at December 31, 2011 were not significant. | a) | Litigation and arbitration |
Telefónica and its group companies are party to several lawsuits or proceedings that are currently in progress in the law courts and administrative and arbitration bodies of the various countries in which the Telefónica Group is present. Considering the reports of the Company’s legal advisors regarding these proceedings, it is reasonable to assume that this litigation or cases will not materially affect the financial position or solvency of Telefónica Group, regardless of the outcome. Among unresolved cases or those underway in 20092011 (see Note 17 for details of tax-related cases), we would highlight the following:following are of special note: | 1. | Contentious proceedings in connection with the merger between Terra Networks, S.A. and Telefónica |
On September 26, 2006, Telefónica was notified of the claim filed by former shareholders of Terra Networks, S.A. (Campoaguas, S.L., Panabeni, S.L. and others) alleging breach of contract in respect of the terms and conditions set forth in the Prospectus of the Initial Public Offering of shares of Terra Networks, S.A. dated October 29, 1999. This claim was rejected via a ruling issued on September 21, 2009, and the appellants were charged for the court costs. This ruling was appealed on December 4, 2009. appealed on December 4, 2009. On June 16, 2010, Telefónica was notified of the written appeal filed by the appellants. Telefónica opposed this appeal in January 2011. | 2. | Claim before the Center for Settlement of Investment Disputes (ICSID) against the Argentine Government |
As a resultCancellation of the enactment by the Argentine Government of Public Emergency and Exchange Rules Reform Law 25561, of January 6, 2002, Telefónica considered that the terms and conditions of the Share Transfer Agreement approved by Decree 2332/90 and the Pricing Agreement ratified by Decree 2585/91, both of which were executed by the Company with the Argentine government, had been affected appreciably, since the Law rendered ineffective any dollar or other foreign currency adjustment clauses, or indexation clauses based on price indexes of other countries, or any other indexation mechanism in contracts with the public authorities. The law also required that prices and rates derived from such clauses be denominated in pesos at an exchange rate of one Argentine peso to one US dollar.
Accordingly, since negotiations with the Argentine Government were unsuccessful, on May 14, 2003, Telefónica filed a request for arbitration with the International Center for Settlement of Investment Disputes (ICSID) pursuant to the Agreement for the Promotion and Reciprocal Protection of Investments between the Argentine Republic and the Kingdom of Spain. On December 6, 2004, Telefónica filed the “Memorial” or claim with the ICSID, as well as the initial testimonies supporting the claim.
On February 15, 2006, Telefónica Argentina signed a memorandum of understanding with the Argentine government as a prerequisite to reaching an agreement to renegotiate the transfer contract pursuant to the provisions of Article 9 of Law 25561. Among other issues, the memorandum of understanding envisaged the suspension for a certain period of all claims, appeals and demands planned or underway, based on events or measures taken as a result of emergency situation established by Law No. 25561 with regard to the Transfer Agreement and theUMTS license granted to Telefónica Argentina.
On August 21, 2009, after successive extensions of the period of suspension includedQuam GMBH in the memorandum of understanding, Telefónica and the Argentine Government agreed to consider this arbitration proceeding concluded. As a result, both parties requested the ICSID Court to file the proceeding, which the court agreed to on September 24, 2009.
| 3. | Appeal for judicial review of the Spanish Competition Court (TDC) ruling of April 1, 2004. |
On April 1, 2004, the TDC ruled that Telefónica de España had engaged in unfair trade practices prohibited under Article 6 of Antitrust Law 16/1989, dated July 17, and Article 82 of the EC Treaty, consisting in the abuse of a dominant market position, by conditioning the provision of certain services to the non-existence of predialing arrangements with rival operators and running disloyal advertising campaigns. It imposed a fine of 57 million euros.
Telefónica de España filed an appeal for judicial review of this decision. On January 31, 2007, the National Appellate Court ruled in favor of the appeal, thereby overturning the TDC’s ruling. The State attorney filed an appeal to overturn the Supreme Court ruling on January 15, 2008, which Telefónica contested in July of 2008. This Court has set April 6, 2010 as the judgment date.
| 4. | Cancellation of the UMTS license granted to Quam GMBH in Germany.
| Germany. In December 2004, the German Telecommunications Market Regulator revoked the UMTS license granted in 2000 to Quam GmbH, in which Telefónica has a stake. After obtaining a suspension of the revocation order, on January 16, 2006, Quam GmbH filed a suit against the order with the German courts. This claim sought two objectives: 1) to overturn the revocation order issued by the German Telecommunications Market Regulator, and 2) if this failed, to be reimbursed for the total or partial payment of the original amount paid for the license; i.e. 8.48,400 million euros. This claim was rejected by the Cologne Administrative Court. Quam GmbH appealed the decision before the Supreme Administrative Court of North Rhine-Westphalia, which also rejected its appeal. Finally,Lastly, Quam GmbH filed a new claim inappeal, at third instance, before the Federal Supreme courtCourt for Administrative Cases, which was not admitted for processing.
Quam GmbH appealed this decision on August 14, 2009, and is currently awaiting another decision by this court.2009. On August 17, 2011, after the oral hearing, the Federal Administrative Court rejected Quam GMBH’s appeal at third instance. In October 2011, Quam GmbH filed a constitutional complaint for the German Federal Constitutional Court (Karlsruhe). | 5. | Appeal against the European Commission ruling of July 4, 2007 against Telefónica de España’s broadband pricing policy. |
On July 9, 2007, Telefónica was notified of the decision issued by the European Commission (“EC”) imposing a fine of approximately 152 million euros for breach of Articlethe former article 82 of EC Treaty rules by charging unfair prices between whole and retail broadband access services. The ruling charged Telefónica with applying a margin squeeze between the prices it charged competitors to provide regional and national wholesale broadband services and its retail broadband prices using ADSL technology between September 2001 and December 2006. On September 10, 2007, Telefónica and Telefónica de España filed an appeal to overturn the decision before the General Court of First Instance of the European Communities.Union. The Kingdom of Spain, as an interested party, also lodged an appeal to overturn the decision. Meanwhile, France Telecom and the Spanish Association of Bank Users (AUSBANC) filed requests to intervene, towhich the General Court admitted. A hearing was held on May 23, 2011, at which Telefónica presented its case. A ruling has submitted its comments.yet to be issued as of December 31, 2011. | 6. | Claim against the decision by Agencia Nacional de Telecomunicações (ANATEL) regarding the inclusion of interconnection and network usage revenues in the Fundo de Universalização de Serviços de Telecomunicações (FUST)Claim against the decision by Agencia Nacional de Telecomunicações (ANATEL) regarding the inclusion of interconnection and network usage revenues in the Fundo de Universalização de Serviços de Telecomunicações (FUST).
|
Brasilcel, N.V. (VIVO)Vivo Group operators, together with other Brazilian wireless operators, appealed ANATEL’s decision of December 16, 2005, to include interconnection and network usage revenues and expenses in the calculation of the amounts payable into the Fund for Universal Access to Telecommunications
Services (Fundo de Universalização de Serviços de Telecomunicações or FUST for its initials in Portuguese) –a fund to pay for the obligations to provide universal service- with retroactive application from 2000. On March 13, 2006, the Brasilia Federal Regional Court granted the injunction requested by the appellants, preventing ANATEL’s decision from being applied.2000. On March 6, 2007, a ruling in favor of the wireless operators was issued, stating that it was not appropriate to include the revenues received from other operators in the taxable income for the FUST’s calculation and rejecting the retroactive application of ANATEL’s decision. ANATEL filed an appeal to overturn this decision with Brasilia Regional Federal Court no. 1. This appeal is pending resolution. At the same time, TelespTelefónica Brasil and Telefónica Empresas, S.A., together with other wireline operators through ABRAFIX (Associação Brasileira de Concessionárias de Serviço Telefonico Fixo Comutado) appealed ANATEL’s decision of December 16, 2005, also obtaining injunctions. On June 21, 2007, Federal Regional Court no. 1 ruled that it was not appropriate to include the interconnection and network usage revenues and expense in the FUST’s taxable income and rejected the retroactive application of ANATEL’s decision. ANATEL filed an appeal to overturn this ruling on April 29, 2008 before Brasilia Federal Regional Court no. 1.
the claim is quantified at 1% of the interconnection revenues. | 7. | Proceeding before the Prague District Court against the ruling of the Czech Telecommunications Office dated December 22, 2003. |
On December 22, 2003,Public civil procedure by the Czech Telecommunications Office issued a ruling that required Cesky Telecom, a.s. (nowSao Paulo government against Telefónica O2 Czech Republic, a.s.) to pay T-Mobile Czech Republic, a.s. (T-mobile) an amount of approximately 898 million Czech crowns (approximately 26.4 million euros)Brasil for alleged reiterated malfunctioning in interconnection fees (call termination) for the period from January to November 2001.
Although the administrative procedure filedservices provided by Telefónica O2 Czech Republic, a.s. (Telefónica O2 Czech Republic) against this resolution had yetBrasil compensation for damages to be resolved, in 2007 T-Mobile asked Prague District Court no. 3 to execute the ruling, entailing an amount of approximately 1,859 million Czech crowns (approximately 57.3 million euros) of principal and interest. The Court accepted the petition and on May 23, 2007 issued a ruling to initiate the execution against any asset of Telefónica O2 Czech Republic, whose inadmissibility it had requested.
Telefónica O2 Czech Republic paid approximately 2,023 million Czech crowns (approximately 82 million euros) to prevent a potential order of execution and to remove the preventive embargo on its assets. Nonetheless, the procedure continued in the courts. In April 2009, an agreement was reached between T-Mobile and Telefónica O2 Czech Republic that ended the procedure, whereby T-Mobile returned approximately 1,053 million Czech crowns (approximately 40 million euros) to Telefónica O2 Czech Republic.
| 8. | Public civil procedure by the Sao Paulo government against Telesp for alleged reiterated malfunctioning in the services provided by Telesp compensation for damages to the customers affected. | customers affected This proceeding was filed by the Public Ministry of the State of Sao Paulo for alleged reiterated malfunctioning in the services provided by Telesp,Telefónica Brasil, seeking compensation for damages to the customers affected. A general claim is filed by the Public Ministry of the State of Sao Paulo, for 1,000 million Brazilian reais (approximately 448 million euros), calculated on the company’s revenue base over the last five years. A potential charge of responsibility for compensation by Telesp would be carried out through the settlement and executing of the ruling at the request of individual consumers. It is impossible to quantify the amount of this lawsuit at present. This proceeding was suspended via resolution dated November 5, 2009, for a period of 90 days, to assess the proposed agreement being negotiated between the parties. As no agreement was reached, the suspension was lifted and the procedure remains in the courts.
Commitments
Agreements with Portugal Telecom (Brazil).
In accordance with the agreements signed betweenApril 2010, a ruling in first instance convicting the Telefónica Group andwas issued. On May 5, 2010, Telefónica Basil filed an appeal before the Sao Paolo Court of Justice, suspending the effect of the ruling. No further action has been taken since then. Case before the Directorate General for Competition of the European Commission – Telefónica / Portugal Telecom Group governing their 50/50 joint venture, Brasilcel, N.V., which groups together their cellular businesses in Brazil, On January 5, 2011, the Portugal Telecom Group is entitled to sellEuropean Commission sent a request to Telefónica, S.A., which is obliged to buy, its holding in Brasilcel, N.V. should there be a change in control at Telefónica or at any for information on the agreements entered into with Portugal Telecom SGPS, S.A. (Portugal Telecom) for the purchase of its subsidiaries that hold a direct or indirect ownership interest in Brasilcel, N.V. Similarly,, a joint venture in which both are venturers and owner of Brazilian company Vivo. On January 19, 2011, the European Commission initiated formal proceedings to investigate whether Telefónica is entitledand Portugal Telecom had infringed on European Union anti-trust laws with respect to sella clause contained in these agreements. After responding to a number of requests for information from the European Commission, on September 24, 2011, Telefónica received a list of charges from the European Commission. On January 13, 2012, it presented its response to the Portugal Telecom Group, which is obliged to buy, its holding in Brasilcel, N.V. if there is a change of control at Portugal Telecom, SGPS, S.A., at PT Móveis, SGPS, S.A or at any of their subsidiaries that hold a direct or indirect ownership interest in Brasilcel, N.V.
charges. The price in both cases will be determined on the basis of an independent appraisal (under the terms provided for in the definitive agreements) performed by investment banks, selected using the procedure established in these agreements. The related payment could be made, at the choice of the group exercising the put option, in cash or in shares of the wireless telephony operators contributed by the related party, making up the difference, if any, in cash. Telefónica Internacional, S.A.U. as strategic partner of Colombia Telecomunicaciones, S.A. ESP. Pursuant to the terms of the Framework Investment Agreement signed on April 18, 2006 between Telefónica Internacional, S.A.U., the Colombian Governmentgovernment and Colombia Telecomunicaciones, S.A. ESP, shareholders of Colombia Telecomunicaciones, S.A. ESP may offer, from April 28, 2006, at any time and in a single package, all the shares they hold in Colombia Telecomunicaciones, S.A. ESP to Telefónica Internacional, S.A.U., who shall be obliged to acquire them, directly andor via one of its subsidiaries. The sale/purchase price of each share will be determined based on thea per share valuation of each share offered infor sale by an independent investment bank designated by agreement between the two parties. Guarantees provided for Ipse 2000 (Italy). At December 31, 2009, theThe Telefónica Group had provided guarantees for the Italian company Ipse 2000 S.p.A. (holder of a UMTS license in Italy and in which the Company has a stake through Solivella B.V.) to ensure the amounts payable to the Italian government in connection with the grant of the license. The only payment pending at December 31, 2009, wasIn November 2010, the last of the 10 monthly payments scheduled.scheduled was paid. Therefore, the guarantee expired on that day. Pending was the release letter to be issued by the Italian government, which is finally issued. There are no other risks or commitments related to this matter.
In this respect,Acquisition of radioelectric spectrum by Telefónica (together with the other strategic partners of Ipse 2000, S.p.A) arranged Móviles España counterguarantee (cash collateral) for a bank which, in turn, issued a bank guarantee for the Italian authorities as security for the deferred payment of the UMTS license.S.A.U.
AtTelefónica Móviles España S.A.U. has won the concessions for the private use of public radioelectric spectrum in the 800 MHz, 900 MHz and 2.6 GHz bands, all until December 31, 2009, the2030. The total amount corresponding to the Telefónica Group in this cash collateral was 97.5 million euros.
Commitments relating to the acquisition in Germany of HanseNet Telekommunikation GmbH by Telefónica Deutschland GmbH
On December 3, 2009, Telefónica’s subsidiary in Germany, Telefónica Deutschland GmbH (“Telefónica Deutschland”), signed an agreement to acquire all of the shares of German company HanseNet Telekommunikation GmbH (“HanseNet”). The purchase price agreed by the parties was based on the firm value of 900these concessions is 842 million euros, subjectof which 441 million euros has already been paid, leaving an outstanding amount to a seriesbe paid by June 1, 2012, of adjustments upon completion of the transaction.
The purchase and sale was subject to compliance with a series of conditions, including approval of the transaction by the pertinent competition authorities, which was obtained on January 29, 2010. The transaction was completed in February 2010; hence the outstanding payment commitment was fulfilled (see Note 24).
Agreements with PRISA-SOGECABLE
On November 25, 2009, Telefónica signed an agreement with Promotora de Informaciones, S.A. (“Prisa”) and Sogecable, S.A.U. (“Sogecable”) for the acquisition of a 21% stake in DTS Distribuidora de Televisión Digital, S.A. (“DTS”), the company that will include the pay-TV services of PRISA Group (Digital+), for a firm value of 2,350401 million euros.
Additionally, on the same date Telefónica signed a shareholder agreement with Prisa and Sogecable for DTS (“Shareholder agreement”), which will come into effect following completion of the transaction and will establish, among other things, that in the event of a change in control at Telefónica, Sogecable will have the right to acquire from Telefónica, which will be obliged to sell,
its stake in DTS. Similarly, in the event of a change of control at Prisa, Telefónica will have the right to buy from Sogecable, which will be obliged to sell, its stake in DTS. In these events, the acquisition would be carried out at the real value of the shares based on an independent valuation by investment banks in accordance with the procedure stipulated in the agreement (see Note 24).
The contingencies arising from the litigation and commitments described above were evaluated (see Note 3.1) when the consolidated financial statements for the year ended December 31, 20092011 were prepared, and theprepared. The provisions recorded in respect of the commitments taken as a whole are not material. | b)c) | Environmental matters |
Through its investees and in line with its environmental policy, the Telefónica Group has undertaken various environmental-management initiatives and projects. In 20092011 and 20082010, these initiatives and projects resulted in expenditure and investment for insignificant amounts, which were recognized in the consolidated income statement and consolidated statement of financial position, respectively. The Group has launched various projects with a viewaimed at improving current systems to reducingreduce the environmental impact of its existing installations, with project costs being added to the cost of the installation to which the project relates. In addition, in line with its commitment to the environment, the Group announced the creation of a Climate Change Office to provide a framework for strategic and RD&I projects in the quest for energy efficient solutions. This initiative entails the launch and implementation of solutions in each area that contributescontribute to optimizing the company'sCompany's processes (operations, suppliers, employees, customers and society). In the area of operations, the main objective is to develop and implement projects that will allow for more efficient networks and systems by reducing and optimizing energy consumption.
| • | In the area of operations, the main objective is to develop and implement projects that will allow for more efficient networks and systems by reducing and optimizing energy consumption. |
| • | In the area of suppliers, active efforts are underway to include energy efficiency criteria in the purchasing process for all product lines in the Telefónica Group’s value chain. |
| • | In the area of employees, the aim is to foster among the Company’s employees a culture of respect and awareness regarding the environment and energy saving. |
| • | In the area of customers, work is being carried out to better leverage ICTs (information and communication technologies) and increase energy efficiency with the objective of reducing carbon emissions. |
| • | And finally, in the area of society, the objective is to promote change in citizens’ behavior through actions by the Telefónica's actions.nica Group. |
The Group has also rolled out internal control mechanisms sufficient to pre-empt any environmental liabilities that may arise in future, which are assessed at regular intervals either by Telefónica staff or renowned third-party institutions. No significant risks have been identified in these assessments. FeesThe expenses accrued in respect of the fees for 2009 and 2008 ofservices rendered to the various member firms of the Ernst & Young international organization, to which Ernst & Young, S.L. (the auditors of the Telefónica Group) belongs, amounted to 24.07 and 24.4527.93 million euros and 27.71 million euros in 2011 and 2010, respectively.
The detail of these amounts is as follows: | Millions of euros | | Millions of euros | | | 2009 | 2008 | | 2011 | | | 2010 | | Audit services (1) | 22.62 | 22.79 | | | 26.29 | | | | 25.75 | | Audit-related services (2) | 1.40 | 1.65 | | | 1.64 | | | | 1.92 | | Tax services (3) | 0.01 | 0.00 | | | - | | | | 0.03 | | All other services (4) | 0.04 | 0.01 | | | - | | | | 0.01 | | TOTAL | 24.07 | 24.45 | | | 27.93 | | | | 27.71 | |
The description of the fees paid to the various member firms of the Ernst & Young international organization is as follows: | (1) | Audit services: services included under this heading are mainly the audit of the annual and reviews of interim financial statements, work to comply with the requirements of the Sarbanes-Oxley Act (Section 404) and the review of the 20-F report to be filed with the US Securities and Exchange Commission (SEC). |
| (2) | Audit-related services: This heading mainly includes services related to the review of the information required by regulatory authorities, agreed financial reporting procedures not requested by legal or regulatory bodies and the review of corporate responsibility reports. |
| (3) | Tax services: theno such services included under this heading relatewere provided in 2011. The services in 2010 related to the review of tax obligations. |
| (4) | All other services: the services included under this heading relate to training. |
Ernst & Young’s fees include amounts in respect of fully and proportionately consolidated Telefónica Group companies. A total of 1.170.07 and 1.390.04 million euros, respectively, corresponding to 50% of the fees paid by proportionallyproportionately consolidated companies, were included in 20092011 and 2008,2010, respectively. FeesThe expenses accrued in respect of the fees for 2009 and 2008 ofservices rendered to other auditors in 2011 and 2010 amounted to 21.6032.41 million euros and 15.9528.10 million euros, respectively, as follows:
| Millions of euros | | Millions of euros | | | 2009 | 2008 | | 2011 | | | 2010 | | Audit services | 0.86 | 0. 71 | | | | 0.68 | | | | 0.75 | | Audit-related services | 2.17 | 1.05 | | | | 0.76 | | | | 1.26 | | Tax services | 3.95 | 4. 35 | | | All other services | 14.62 | 9.84 | | | Tax services: | | | | 6.37 | | | | 7.29 | | All other services (consulting, advisory, etc.) | | | | 24.60 | | | | 18.80 | | TOTAL | 21.60 | 15.95 | | | | 32.41 | | | | 28.10 | |
Other auditors’ fees include amounts in respect of fully and proportionately consolidated Telefónica Group companies. In 20092011 and 2008,2010, a total of 0.240.02 million euros and 0.340.02 million euros, respectively, corresponding to 50% of the fees by proportionately consolidated companies, were included. | d)e) | Trade and other guarantees |
The Company is required to issue trade guarantees and deposits for concession and spectrum tender bids (see Note 16) and in the ordinary course of its business. No significant additional liabilities in the accompanying consolidated financial statements are expected to arise from guarantees and deposits issued.
| e)f) | Directors’ and Senior executives’ compensation and other benefits |
Directors’ compensation The compensation of Telefónica, S.A.’s Directors is governed by Article 28 of the Bylaws, which states that the compensation amount that the Company may pay to all of its Directors as remuneration and attendance fees shall be fixed by the shareholders at the General Shareholders’ Meeting, which amount shall remain unchanged until and unless the shareholders decide to modify it. The Board of Directors shall determine the exact amount to be paid within such limit and the distribution thereof among the Directors. In this respect,This compensation, as laid down in said article of the Bylaws, is compatible with other professional or employment compensation accruing to the Directors by reason of any executive or advisory duties that they perform for the Company, other than the supervision and collective decision-making duties inherent in their capacity as Directors. Accordingly, on April 11, 2003, shareholders set the maximum gross annual amount to be paid to the Board of Directors at 6 million euros. This includes a fixed payment and fees for attending meetings of the Board of Director’s advisory or control committees. In addition, the compensation provided for in the preceding paragraphs, deriving from membership on the Board of Directors, shall be compatible with other professional or employment compensation accruing to the Directors by reason of any executive or advisory duties that they perform for the Company, other than the supervision and collective decision-making duties inherent in their capacity as Directors. Therefore, theCommittees. Total compensation paid to Telefónica, S.A.’s Directors for discharging their duties in 2011 amounted to 4,549,501 euros in fixed compensation.
The compensation paid to Telefónica, S.A. directors in their capacity as members of the Board of Directors, the Executive CommissionCommittee and/or the advisory and control committeesCommittees consists of a fixed amount payable monthly plus fees for attending the meetings of the Board’s advisory or control committees. In this respect, it was also agreed that executive Board members other than the Chairman woulddo not receive the fixedany amounts established for their directorships, but only receive the corresponding amounts for discharging their executive duties as stipulated in their respective contracts.
The following table presents the fixed amounts established for membership to the Telefónica, S.A. Board of Directors, Standing CommitteeExecutive Commission and the advisory or control committees.Committees: (Euros) Position | Board of Directors | Standing Committee | Advisory or Control Committees | Chairman | 300,000 | 100,000 | 28,000 | Vice Chairman | 250,000 | 100,000 | - | Board member: Executive Proprietary Independent Other external | - 150,000 150,000 150,000 | - 100,000 100,000 100,000 | - 14,000 14,000 14,000 |
(Amounts in euros) | Position | Board of Directors | Executive Commission | Advisory or Control Committees | Chairman | 300,000 | 100,000 | 28,000 | Vice Chairman | 250,000 | 100,000 | - | Board member: | | | | Executive | - | - | - | Proprietary | 150,000 | 100,000 | 14,000 | Independent | 150,000 | 100,000 | 14,000 | Other external | 150,000 | 100,000 | 14,000 |
In addition, the amounts paid for attendance at each of the Advisory or Control CommitteeCommittee’s meetings is 1,250 euros. Total compensation paid to Telefónica Directors for discharging their duties in 2009 amounted to 4,081,333 euros in fixed compensation and 252,500 euros in fees for attending the Board Advisory or Control Committee meetings. It should also be noted that the compensation paid to Company directors sitting on the Boards of other Telefónica Group companies amounted to 1,791,104 euros. In addition, the Company directors who are members of the regional advisory committees, including the Telefónica Corporate University Advisory Council, received a total of 553,750 euros in 2009.
Individual breakdown The following table presents the breakdown by item of the compensation and benefits paid to Telefónica, S.A. Directors in 2011: (euros) Director | | Wage/ Compensation1 | | | Fixed Payment Board Committees2 | | | Attendance fees3 | | | Short-term Variable Compensation4 | | | Other items5 | | | TOTAL | | Executive | | | | | | | | | | | | | | | | | | | Mr. César Alierta Izuel | | | 2,530,800 | | | | 100,000 | | | | -- | | | | 4,015,440 | | | | 265,300 | | | | 6,911,540 | | Mr. Julio Linares López | | | 1,973,100 | | | | -- | | | | -- | | | | 3,011,580 | | | | 126,084 | | | | 5,110,764 | | Mr. José María Álvarez-Pallete López | | | 316,000 | | | | -- | | | | -- | | | | -- | | | | 21,570 | | | | 337,570 | | Proprietary | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Isidro Fainé Casas | | | 250,000 | | | | 100,000 | | | | -- | | | | -- | | | | 10,000 | | | | 360,000 | | Mr. Vitalino Nafría Aznar | | | 250,000 | | | | 56,000 | | | | 26,250 | | | | -- | | | | -- | | | | 332,250 | | Mr. José María Abril Pérez | | | 150,000 | | | | 122,167 | | | | 13,750 | | | | -- | | | | -- | | | | 285,917 | | Mr. Antonio Massanell Lavilla | | | 150,000 | | | | 70,000 | | | | 32,500 | | | | -- | | | | 10,000 | | | | 262,500 | | Mr. Chang Xiaobing | | | 87,500 | | | | -- | | | | -- | | | | -- | | | | -- | | | | 87,500 | | Independent | | | | | | | | | | | | | | | | | | | | | | | | | Mr. David Arculus | | | 150,000 | | | | 28,000 | | | | 11,250 | | | | -- | | | | -- | | | | 189,250 | | Ms. Eva Castillo Sanz | | | 150,000 | | | | 42,000 | | | | 25,000 | | | | -- | | | | -- | | | | 217,000 | | Mr. Carlos Colomer Casellas | | | 150,000 | | | | 156,000 | | | | 21,250 | | | | -- | | | | 130,000 | | | | 457,250 | | Mr. Alfonso Ferrari Herrero | | | 150,000 | | | | 212,000 | | | | 58,750 | | | | -- | | | | 132,500 | | | | 553,250 | | Mr. Luiz Fernando Furlán | | | 150,000 | | | | 14,000 | | | | 5,000 | | | | -- | | | | -- | | | | 169,000 | | Mr. Gonzalo Hinojosa Fernández de Angulo | | | 150,000 | | | | 198,000 | | | | 48,750 | | | | -- | | | | 133,750 | | | | 530,500 | | Mr. Pablo Isla Álvarez de Tejera | | | 150,000 | | | | 75,833 | | | | 13,750 | | | | -- | | | | -- | | | | 239,583 | | Mr. Javier de Paz Mancho | | | 150,000 | | | | 156,000 | | | | 11,250 | | | | -- | | | | 120,000 | | | | 437,250 | | Other external | | | | | | | | | | | | | | | | | | | | | | | | | Mr. Fernando de Almansa Moreno-Barreda | | | 150,000 | | | | 56,000 | | | | 25,000 | | | | -- | | | | 10,000 | | | | 241,000 | | Mr. Peter Erskine | | | 150,000 | | | | 156,000 | | | | 27,500 | | | | -- | | | | 3,750 | | | | 337,250 | |
| 1 | Wage/Compensation: Cash compensation with a predefined payment frequency, accruable or not over time and payable contractually, irrespective of effective attendance by the Director to Telefónica, S.A. Board Meetings. Includes non-variable remuneration accrued, as appropriate, by the Director for discharging any related executive duties. |
| 2 | Fixed Payment Board Committees: Amount of items other than attendance to meetings payable to Directors for membership to the Executive Committee or advisory or control Committees of Telefónica, S.A., irrespective of effective attendance to meetings of said Committees. |
| 3 | Attendance fees: Amounts payable for attendance to meetings of the advisory or control Committees of Telefónica, S.A. |
| 4 | Short-term variable compensation: Variable amount linked to the performance or achievement of individual or group objectives (quantitative or qualitative) and commensurate with other compensation or any other reference in euros for a period of up to a year. |
| 5 | Other items: Includes, inter alia, amounts paid for membership to the various regional advisory committees in Spain, and the Telefónica Corporate University Advisory Council. |
It is duly noted that Mr. Vitalino Nafría Aznar tendered his resignation as Director on December 14, 2011. Appointed to replace him by the method of co-option was Mr. Ignacio Moreno Martínez, which did not receive any compensation in this respect in 2011. The following table presents the specific compensation paid to Directors of Telefónica, S.A. for membership of the various advisory or control Committees in 2011: Amounts in euros | | | | | | | | | | | | | | | | | | | | | | | | | | | | Board Members | | Audit and Control | | | Nomination, Compensation and Corporate Governance | | | Human Resources and Corporate Reputation and Responsibility | | | Regulation | | | Service Quality and Customer Service | | | International Affairs | | | Innovation | | | Strategy | | | TOTAL | | Mr. César Alierta Izuel | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Mr. Isidro Fainé Casas | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Mr. Vitalino Manuel Nafría Aznar | | | 26,500 | | | | - | | | | 16,500 | | | | 21,500 | | | | - | | | | 17,750 | | | | - | | | | - | | | | 82,250 | | Mr. Julio Linares López | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | - | | Mr. José María Abril Pérez | | | - | | | | - | | | | - | | | | - | | | | - | | | | 20,250 | | | | 15,667 | | | | - | | | | 35,917 | | Mr. José Fernando de Almansa Moreno-Barreda | | | - | | | | - | | | | - | | | | 21,500 | | | | - | | | | 34,250 | | | | - | | | | 25,250 | | | | 81,000 | | Mr. José María Álvarez-Pallete López | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Mr. David Arculus | | | - | | | | - | | | | - | | | | 20,250 | | | | - | | | | 19,000 | | | | | | | | - | | | | 39,250 | | Ms. Eva Castillo Sanz | | | - | | | | - | | | | - | | | | 21,500 | | | | 20,250 | | | | - | | | | - | | | | 25,250 | | | | 67,000 | | Mr. Carlos Colomer Casellas | | | - | | | | 17,750 | | | | - | | | | - | | | | 17,750 | | | | - | | | | 41,750 | | | | - | | | | 77,250 | | Mr. Peter Erskine | | | - | | | | 20,250 | | | | - | | | | - | | | | - | | | | - | | | | 24,000 | | | | 39,250 | | | | 83,500 | | Mr. Alfonso Ferrari Herrero | | | 27,750 | | | | 38,000 | | | | 17,750 | | | | 21,500 | | | | 20,250 | | | | 20,250 | | | | - | | | | 25,250 | | | | 170,750 | | Mr. Luiz Fernando Furlán | | | - | | | | - | | | | - | | | | - | | | | - | | | | 19,000 | | | | - | | | | - | | | | 19,000 | | Mr. Gonzalo Hinojosa Fernández de Angulo | | | 40,500 | | | | 22,750 | | | | 19,000 | | | | - | | | | 20,250 | | | | 20,250 | | | | - | | | | 24,000 | | | | 146,750 | | Mr. Pablo Isla Álvarez de Tejera | | | - | | | | 20,250 | | | | 14,000 | | | | 35,500 | | | | 14,000 | | | | - | | | | 5,833 | | | | - | | | | 89,583 | | Mr. Antonio Massanell Lavilla | | | 25,250 | | | | - | | | | 16,500 | | | | - | | | | 34,250 | | | | - | | | | 26,500 | | | | - | | | | 102,500 | | Mr. Francisco Javier de Paz Mancho | | | - | | | | - | | | | 33,000 | | | | 16,500 | | | | - | | | | 17,750 | | | | - | | | | - | | | | 67,250 | | Mr. Chang Xiaobing | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | TOTAL | | | 120,000 | | | | 119,000 | | | | 116,750 | | | | 158,250 | | | | 126,750 | | | | 168,500 | | | | 113,750 | | | | 139,000 | | | | 1,062,000 | |
The following presents also a breakdown of the amounts received from other Telefónica Group companies by Directors for discharging theirexecutive duties in 2009:or for membership of the companies’ governing bodies: (Euros) Board Members | Board of Directors | Standing Committee | Other Board Committees | TOTAL | Fixed payment | Attendance fees | Chairman | | | | | | Mr. César Alierta Izuel | 300,000 | 100,000 | - | - | 400,000 | Vice chairmen | | | | | | Mr. Isidro Fainé Casas | 250,000 | 100,000 | - | - | 350,000 | Mr. Vitalino Manuel Nafría Aznar | 250,000 | - | 56,000 | 22,500 | 328,500 | Members | | | | | | Mr. Julio Linares López | - | - | - | - | - | Mr. José María Abril Pérez | 150,000 | 100,000 | 14,000 | 1,250 | 265,250 | Mr. José Fernando de Almansa Moreno-Barreda | 150,000 | - | 56,000 | 21,250 | 227,250 | Mr. José María Álvarez-Pallete López | - | - | - | - | - | Mr. David Arculus | 150,000 | - | 28,000 | 11,250 | 189,250 | Ms. Eva Castillo Sanz | 150,000 | - | 14,000 | 10,000 | 174,000 | Mr. Carlos Colomer Casellas | 150,000 | 100,000 | 56,000 | 16,250 | 322,250 | Mr. Peter Erskine | 150,000 | 100,000 | 56,000 | 25,000 | 331,000 | Mr. Alfonso Ferrari Herrero | 150,000 | 100,000 | 84,000 | 38,750 | 372,750 | Mr. Luiz Fernando Furlán | 150,000 | - | 14,000 | 3,750 | 167,750 | Mr. Gonzalo Hinojosa Fernández de Angulo | 150,000 | 100,000 | 98,000 | 42,500 | 390,500 | Mr. Pablo Isla Álvarez de Tejera | 150,000 | - | 84,000 | 16,250 | 250,250 | Mr. Antonio Massanell Lavilla | 150,000 | - | 65,333 | 28,750 | 244,083 | Mr. Francisco Javier de Paz Mancho | 150,000 | 100,000 | 56,000 | 15,000 | 321,000 | TOTAL | 2,600,000 | 800,000 | 681,333 | 252,500 | 4,333,833 |
(euros)Director | | Wage/ Compensation1 | | | Attendance fees2 | | | Short-term variable compensation3 | | | Other items4 | | | TOTAL | | Executive | | | | | | | | | | | | | | | | Mr. José María Álvarez-Pallete López | | | 961,709 | | | | -- | | | | 1,140,138 | | | | 57,553 | | | | 2,159,400 | | Proprietary | | | | | | | | | | | | | | | | | | | | | Mr. Vitalino Nafría Aznar | | | 16,737 | | | | -- | | | | | | | | -- | | | | 16,737 | | Independent | | | | | | | | | | | | | | | | | | | | | Mr. David Arculus | | | 86,456 | | | | -- | | | | | | | | -- | | | | 86,456 | | Ms. Eva Castillo Sanz | | | 240,847 | | | | -- | | | | | | | | -- | | | | 240,847 | | Mr. Alfonso Ferrari Herrero | | | 297,275 | | | | -- | | | | | | | | -- | | | | 297,275 | | Mr. Luiz Fernando Furlán | | | 299,406 | | | | -- | | | | | | | | -- | | | | 299,406 | | Mr. Javier de Paz Mancho | | | 840,667 | | | | -- | | | | | | | | -- | | | | 840,667 | | Other external | | | | | | | | | | | | | | | | | | | | | Fernando de Almansa Moreno-Barreda | | | 436,214 | | | | -- | | | | | | | | -- | | | | 436,214 | | Mr. Peter Erskine | | | 86,456 | | | | -- | | | | | | | | -- | | | | 86,456 | |
| 1 | Wage/Compensation: Cash compensation with a predefined payment frequency, accruable or not over time and payable contractually, irrespective of effective attendance by the Director to Board Meetings or similar of the Telefónica Group company in question. Includes non-variable remuneration accrued, as appropriate, by the Director for discharging executive duties. |
| 2 | Attendance fees: Amounts payable for attendance to meetings of the Board of Directors or similar bodies of any Telefónica Group company. |
| 3 | Short-term variable compensation: Variable amount linked to the performance or achievement of individual or group objectives (quantitative or qualitative) and commensurate with other compensation or any other reference in euros for a period of up to a year. |
| 4 | Other items: Other amounts related to pension schemes. |
With respect to employee benefits, the following table presents a breakdown of internal or external contributions made in 2011 to both long-term savings schemes (including retirement and any other survival benefit) financed fully or partially by the total paid to executive directors Mr.César Alierta Izuel, Mr.Julio Linares López and Mr. José María Álvarez-Pallete LópezCompany for discharging their executive dutiesDirectors, along with any other compensation in kind received by item is as follows:the Director during the year: Director (Executive) | Contributions to pension plans | | Contribution to the Pension Plan for Senior Executives1 | | Compensation in kind2 | Mr. César Alierta Izuel | 8,402 | | 1,014,791 | | 57,955 | Mr. Julio Linares López | 9,468 | | 555,033 | | 83,923 | Mr. José María Álvarez-Pallete López | 7,574 | | 355,563 | | 17,346 |
ITEM | 1 | 2009
(euros)Contributions to the Pension Plan for Executives set up in 2006, funded exclusively by the Company to complement the existing Pension Plan. It entails defined contributions equivalent to a certain percentage of the Director’s fixed remuneration in accordance with their professional category within the Telefónica Group’s organization.
|
Salaries | 5,947,604 | Variable compensation2 | 8,058,179 | “Compensation in kind(1) | 100,051 | Contributions to pension plans | 25, 444 | (1) “Compensation in kind”” includes life and other insurance premiums (general(e.g. general medical and dental insurance). |
Share-based payment plans information as follows: | (i) | The “Performance Share Plan” (“PSP”) approved at the General Shareholders’ Meeting of June 21, 2006, whose fifth and final phase began in 2010. Under this plant, shares corresponding to the third phase were delivered in July 2011. In accordance with the general terms and conditions, a rate of 97.8% was applied to the theoretical number of shares assigned to each participant to determine the number of shares to deliver. |
In addition, with respectAccordingly, the shares delivered in the third phase of the PSP to the Pension Plan for Senior Executives (see Note 19), the total amount of contributions made by the Telefónica Group in 2009 in respect of executivethree Executive Directors was 1,925,387 euros.
In relationwere as follows: 145,544 shares to the “Performance Share Plan” approved at the General Shareholders’ Meeting of June 21, 2006 (see Note 20),Mr. César Alierta Izuel, 99,233 shares to Mr. Julio Linares López, and 66,155 shares to Mr. José María Álvarez-Pallete López. Likewise, the maximum number of shares corresponding to the second, thirdfourth and fourth phasesfifth cycle of the PlanPSP that will be given (ondelivered (from July 1, 2010, July 1, 20112012 and July 1, 2012)2013, respectively) to each of the Executive Directors of Telefónica, S.A.’s executive Directors if all the terms establishedupon completion of conditions for such delivery, are met, is as follows: For Mr.D. César Alierta Izuel 116,239, 148,818(173,716 shares and 173,716170,897 shares respectively; for Mr.the fourth and fifth cycles, respectively), D. Julio Linares López 57,437, 101,466(130,287 and 130,287128,173 shares respectively, for Mr.the fourth and fifth cycles, respectively), D. José María Álvarez-Pallete López 53,204, 67,644(78,962 and 78,962 shares, respectively. Similarly, with respect to77,680 for the executionfourth and fifth cycles, respectively); and
| (ii) | The “Performance & Investment Plan“ (“PIP”) approved at the General Shareholders’ Meeting of May 18, 2011. Under this plan, participants who meet qualifying requirements receive a number of Telefónica shares as variable remuneration. The first phase of this plan began in 2011, once the PSP has finished. The theoretical number of shares assigned and the maximum possible number of shares to be received by the Executive Directors in the first phase of the PIP if the co-investment requirement established in the Plan and the maximum target TSR established for each phase are met are as follows: (i) to Mr. César Alierta Izuel: 249,917 theoretical shares and a maximum of 390,496 shares; to Mr. Julio Linares López: 149,950 theoretical shares and a maximum of 234,298; and Mr. José María Álvarez-Pallete López: 79,519 theoretical shares and a maximum of 124,249 shares. |
Furthermore, at the General Shareholders’ Meeting of Telefónica, S.A. on June 23, 2009, its shareholders approved the introduction of a Telefónica, S.A. share incentive plan for all employees, including executives and board members, of the first phaseTelefónica Group worldwide. Under this plan, employees that meet the qualifying requirements are offered the possibility of acquiring Telefónica, S.A. shares, with this company assuming the obligation of giving participants a certain number of shares free of charge. The maximum sum each employee can assign to this plan is 1,200 euros, while the minimum is 300 euros. The three board members decided to participate in this plan, contributing the maximum, i.e. 100 euros a month, over 12 months. Therefore, at the date of preparing these financial statements, the three executive Directors had acquired a total of 212 shares through this plan, whereby they are entitled to receive, free of charge, an equivalent number of shares providing that, among other conditions, they retain the acquired shares during the consolidation period (12 months from the end of the Plan in July 2009, since the Total Shareholder Return (“TSR”) of Telefónica was higher in this phase than the TSRs of companies representing 75% of the market cap of the comparison group, the beneficiaries received, in accordance with the general terms and conditions of the Plan, all the shares assigned to them as follows: to Mr. César Alierta Izuel, 129,183 shares; to Mr. Julio Linares López, 65,472 shares; and to Mr. José María Álvarez-Pallete López, 62,354 shares.acquisition period). It should be noted that the external Directors do not receive and did not receive in 20092011 any compensation in the form of pensions or life insurance, nor do they participate in the share-based payment plans linked to Telefónica’s share price. In addition, the Company does not grant and did not grant in 20092011 any advances, loans or credits to the directors,Directors, or to its top executives, thus complying with the requirements of the U.S.A. Sarbanes-Oxley Act, passed in the U.S., which is applicable to Telefónica, S.A. as a listed company in that market. Senior executives’ compensation Meanwhile, the sixseven senior executives1 of the Company in 2011, excluding those that are directors,also members of the Board of Directors, received since their appointment a total for all items in 20092011 of 10,533,85212,122,954 euros. In addition, the contributions by the Telefónica Group in 20092011 with respect to the Pension Plan described in Note 1920 for these directorsDirectors amounted to 922,7282,709,866 euros. Contribution to the pension plan amounted to 50,208 euros and compensation in kind including life and other insurance premiums (e.g. general medical and dental insurance) to 154,955 euros. Furthermore,Meanwhile, a total of 299,377 shares corresponding to the third phase of the PSP were delivered to senior executives of the Company, who had that consideration at the time of the delivery. The maximum number of shares corresponding to the second, thirdfourth and fourth phasesfifth cycle of the “Performance Share Plan”PSP assigned to the Company’ senior executives for each of the periods is 130,911 shares for the second phase, 306,115 shares for the third phase andCompany are 394,779 shares forin the fourth phase. Similarly, as explained above, these senior executives receivedcycle and 350,485 shares in the fifth cycle.
Regarding the “Performance and Investment Plan” approved at the General Shareholders’ Meeting of May 18, 2011, a total of 284,248457,949 shares in the first phasewere assigned to all executive directors of the Plan.Company. | f)g) | Equity interests and positions held or duties performed in companies engaging in an activity that is identical, similar or complementary to that of the Company and the performance of similar activities by the directors on their own behalf or on behalf of this parties: |
Pursuant to Article 127 ter. 4Section 229 of the Spanish Corporation Law,consolidated Corporate Enterprises Act, introduced by Law 26/2003Royal Legislative Decree 1/2010 of July 17, which amends Securities Market Law 24/1988 of July 28, and the revised Spanish Corporation Law, in order to reinforce the transparency of listed corporations,2, details are given below of (i) the companies engaging in an activity that is identical, similar or complementary to the corporate purpose of Telefónica, S.A., including Telefónica Group companies, in which thedirect and indirect interests held by members of the Board of Directors own equity interests,of Telefónica, S.A., and by persons related thereto as set out in Section 231 of the functions, if any,consolidated Corporate Enterprises Act and (ii) the positions or duties carried out by those individuals, both of the foregoing in respect to companies with the same, analogous, or similar corporate purpose as that they discharge in them, on their own behalf or on behalf of others: Telefónica, S.A.
Name | Activity performed | Company | Position or functions | Stake %%12 | Mr. César Alierta Izuel | Telecommunications | Telecom Italia S.p.A. | Director | -- | Telecommunications | China Unicom (Hong Kong) Limited | Director | -- | Mr. Isidro Fainé Casas | Telecommunications | Abertis Infraestructuras, S.A. | Vice Chairman | < 0.01% | Mr. Julio Linares López | Telecommunications | Telefónica de España, S.A.U. | Director | -- | Telecommunications | Telefónica Móviles España, S.A.U. | Director | -- | Telecommunications | Telefónica Europe, Plc. | Director | -- | Telecommunications | Telecom Italia S.p.A. | Director | -- | Mr. José Fernando de Almansa Moreno-Barreda | Telecommunications | Telefónica Internacional, S.A.U. | Director | -- | Telecommunications | Telefónica del Perú, S.A.A. | Director | -- | Telecommunications | Telefónica de Argentina, S.A. | Director | -- | Telecommunications | Telecomunicaçoes de Sao Paulo, S.A. | Director | -- | Telecommunications | Telefónica Móviles México, S.A. de C.V. | Director | -- | Mr. José María Álvarez-Pallete López | Telecommunications | Telefónica Internacional, S.A.U. | Executive Chairman | -- | Telecommunications | Telefónica DataCorp, S.A.U. | Director | -- | Telecommunications | Telefónica de Argentina, S.A. | Acting Director | -- | Telecommunications | Telecomunicaçoes de Sao Paulo, S.A. | Director/Vice Chairman | -- | Telecommunications | Telefónica Chile, S.A. | Acting Director | -- | Telecommunications | Telefónica Móviles México, S.A. de C.V. | Director/Vice Chairman | -- | Telecommunications | Colombia Telecomunicaciones, S.A. ESP | Director | -- | Telecommunications | Telefónica del Perú, S.A.A. | Director | -- | Telecommunications | Brasilcel, N.V. | Chairman of Supervisory Board | -- | Telecommunications | Telefónica Móviles Colombia, S.A. | Acting Director | -- | Telecommunications | Telefónica Larga Distancia de Puerto Rico, Inc. | Director | -- | Telecommunications | Telefónica Móviles Chile, S.A. | Acting Director | -- | Telecommunications | Portugal Telecom, SGPS., S.A. | Director | -- | Mr. David Arculus | Telecommunications | Telefónica Europe, Plc. | Director | -- | Telecommunications | British Sky Broadcasting Group, Plc. | -- | < 0.01% | Telecommunications | BT Group, Plc. | -- | < 0.01% | Mr. Peter ErskineIgnacio Moreno Martínez | Telecommunications | Telefónica Europe, Plc.Conitas Comunicaciones, S.A. | Director | --4.89% |
| 1 | In this context, senior executive are taken as being those individuals who, in fact or in law, perform senior management duties, reporting directly to the Board of Directors or executive Committees or the CEOs thereof, including in all cases the Manager of Internal Audit. |
| 2 | In cases where the shareholding is less than 0.01% of share capital, “<0.01%” is noted. |
Information on Board member Chang Xiaobing, Executive Chairman of China Unicom (Hong Kong) Limited, is not included in this section given that: | · | in accordance with Article 26 bis of the Company's Bylaws, whereby "(...) the following shall not be deemed to be in a situation of effective competition with the Company, even if they have the same or a similar or complementary corporate purpose: (...) companies with which Telefónica, S.A. maintains a strategic alliance", Mr. Xiaobing's interests are not in conflict with those of Telefónica, S.A. |
| · | Mr. Xiaobing holds no stakes in the capital of the companies in which he is a Board member (Section 229 of the Corporate Enterprises Act). |
In addition, for information purposes, details are provided below on the positions or duties performed by members of the Board of Directors of Telefónica, S.A. in those companies whose activity is identical, similar or complementary to the corporate purpose of the Company, of any Telefónica Group company, or of any company in which Telefónica, S.A. or any of its Group companies holds a significant interest whereby it is entitled to board representation in those companies or in Telefónica, S.A. Name | Company | Position or functions | Mr. César Alierta Izuel | Telecom Italia, S.p.A. | Director | China Unicom (Hong Kong) Limited | Director | Mr. Julio Linares López | Telecom Italia, S.p.A. | Director | Mr. Alfonso Ferrari Herrero | Telecommunications | Telefónica Internacional, S.A.U. | Director | -- | Telecommunications | Telefónica Chile, S.A. | Acting Director | -- | Telecommunications | Telefónica dedel Perú, S.A.A. | Director | -- | Telecommunications | Telefónica Móviles Chile, S.A. | Director | -- | Mr. Luiz Fernando Furlán | Telecommunications | Telecomunicaçoes de Sao Paulo, S.A. | Director | -- | Telecommunications | Telefónica Internacional, S.A.U. | Director | -- | Mr. Francisco Javier de Paz Mancho | Telecommunications | Atento Inversiones y Teleservicios, S.A.U. | Non-executive Chairman | -- | Telecommunications | Telefónica Internacional, S.A.U.Brasil, S.A. | Director | -- | Telecommunications | Telefónica de Argentina, S.A. | Director | -- | TelecommunicationsMr. José Fernando de Almansa Moreno-Barreda | Telecomunicaçoes de Sao Paulo,Telefónica Brasil, S.A. | Director | --Telefónica de Argentina, S.A. | Director | Telefónica del Perú, S.A.A. | Director | Telefónica Móviles México, S.A. de C.V. | Director |
Pursuant to Article 114.2 of the Spanish Corporation Law, also introduced by Law 26/2003 of July 17, it is stated that in the year to which these annual financial statements refer, the directors, or persons acting on their behalf, did not perform any transactions with Telefónica or any other company in the Telefónica Group other than in the normal course of the Company’s business or that were not on an arm’s length basis.
________________________
1 In cases where the shareholding is less than 0.01% of share capital, “<0.01%” is noted.
Mr. José María Álvarez- Pallete López | Telefónica Europe, Plc. | Chairman of the Board of Directors | Telefónica Czech Republic, a.s. | Chairman of Supervisory Board | Telefónica de Argentina, S.A. | Acting Director | Telefónica del Perú, S.A.A. | Director | Telefónica Móviles Colombia, S.A. | Acting Director | | Telefónica Datacorp, S.A.U. | Director (*) | Mr. Luiz Fernando Furlán | Telefónica Brasil, S.A. | Director | Ms. María Eva Castillo Sanz | Telefónica Czech Republic, a.s. | First Vice Chairman of Supervisory Board | Mr. Chang Xiaobing | China United Network Communications Group Company Limited | Chairman | China United Network Communications Corporation Limited | Chairman | China Unicom (Hong Kong) Limited | Executive Chairman | China United Network Communication Limited | Chairman |
(*) On February 3, 2012, Mr. José María Álvarez-Pallete López tendered his resignation as Director of Telefónica DataCorp, S.A.U.
The principal finance leases at the Telefónica Group are as follows: | a) | Future minimum lease payment commitments in relation to finance leases at O2 GroupTelefónica Europe companies. |
Millions of euros | Present value | Revaluation | Installments pending payment | Present value | Revaluation | Pending payment | Within one year | 52 | 6 | 58 | 40 | - | 40 | From one to five years | 203 | 86 | 289 | 175 | 19 | 194 | Total | 255 | 92 | 347 | 215 | 19 | 234 |
These commitments arise from plant and equipment lease agreements. Between March 30, 1991 and April 9, 2001, finance lease agreements were signed between O2Telefónica UK and a number of US leasing trusts. A part of the radio and switch equipment of its GSM network is subject to the terms of said agreements. The agreements have a term of 16 years and an early purchase option after the first 12 years. At December 31, 20092011 and 2008,2010, net assets under this lease amounting to 208197 and 186201 million euros, respectively, were recognized under property, plant and equipment. | b) | Finance lease agreement at Colombia Telecomunicaciones, S.A., ESP. |
Similarly, via its subsidiary Colombia Telecomunicaciones, S.A., ESP, the Group has a finance lease agreement with PARAPAT, the consortium which owns the telecommunications assets and manages the pension funds for the entities which were predecessors to Colombia de Telecomunicaciones, S.A., E.S.P., and which regulate the operation of assets, goods and rights relating with the provision of telecommunications services by the company, in exchange for financial consideration. This agreement includes the transfer of these assets and rights to Colombia de Telecomunicaciones, S.A., ESP once the last installment of the consideration has been paid in line with the payment schedule over a period of 17 years from 2006: | Present value | Revaluation | Installments pending payment | 2010 | 101 | 68 | 169 | 2011 | 97 | 86 | 183 | 2012 | 128 | 143 | 271 | 2013 | 123 | 170 | 293 | 2014 | 119 | 199 | 318 | Subsequent years | 808 | 2,891 | 3,699 | Total | 1,376 | 3,557 | 4,933 |
Million euros | Present value | Revaluation | Future payments | 2012 | 284 | 16 | 300 | 2013-2016 | 1,053 | 426 | 1,479 | Subsequent years | 1,360 | 2,023 | 3,383 | Total | 2,698 | 2,464 | 5,162 |
The net amount of property, plant and equipment recorded under the terms of this lease was 483421 million euros at December 31, 2009 (5472010 (470 million euros at December 31, 2008)2010). Net cash flow from operating activities Net cash flow from operating activities fell 1.33%increased 4.86% to 17,483 million euros in 2011 from 16,672 million euros in 2010, which in turn represented an increase of 3.24% from 16,148 million euros in 2009 from 16,366 million euros in 2008, which was 5.24% higher than the 15,551 million euros obtained in 2007.2009. Telefónica Latin America, as the Group’s driver, Telefónica Europe, which is achieving solid results thanks to the advantages afforded by its larger size and efficiency gains, and the businesses in Spain, which boasts efficient commercial activity, coupled with control over costs and capex are all easing the pressure of revenue on operating cash flow.
Meanwhile, cash payments to suppliers and employees in 2009 decreased by 4.75% to 46,198 million euros from 48,500 million euros in 2008. This reduction is the result of cost containment amid efforts to maximize the efficiency of the cost structure. Employee benefits expense rose in 2009 in line with the increase the costs related to the higher average headcount in the year. In 2009,2011, the Telefónica Group obtained operating cash flow (operating revenue less payments to suppliers for expenses and employee benefits expenses) totaling 21,16121,453 million euros, 2.92%0.69% more than the 20,56021,306 million euros generated in 2008. Driving this2010.
Cash received from customers increased by 5.98% to 77,222 million euros in 2011 from 72,867 million euros in 2010. This increase, were the Company’s highly diversified business mix and its ability to deliver in an ever-changing environment, not to mention its skilled management of costs and investment. Strong commercial efforts are helping drive growth in accesses across all operating businesses and regions, helping generate operating cash flow. In 2008,which helped improve operating cash flow totaled 20,560 million euros, 2.26% more thanfrom the 20,105 million euros generation in 2007. This increaseprior year, was largely driven by the Group’s strong position in its main markets,larger contribution from Vivo to consolidated customer collections following the impactacquisition of an additional 50% of the Company’s extensive business diversificationcompany in 2010, efforts to manage current assets in the various regions and its strategic commitment to tapping the growth potentialpositive results of its operating markets. Meanwhile, strong commercial efforts helped drive growth in accesses across all operating businesses and regions, thereby helping boost operating cash flow.by Telefónica’s global efficiency projects. Customer collections increased by 2.46% to 67,358 million euros in 2009 (from 69,060 million euros in 2008), in line with the performance of revenues from operations in the year. Customer collections increased by 2.88% to 69,060 million euros in 2008 (from 67,129 million euros in 2007). This growth was the result of higher revenue due to the growth in accesses, which in turn was due to the success of the commercial campaigns to win and retain customers.
Meanwhile, cashCash payments to suppliers and employees in 2008 rose 3.14%2011 amounted to 48,50055,769 million euros, up 8.16% from the 51,561 million euros recorded in 2010. This increase was due to Vivo’s larger share of consolidated payments to suppliers compared to 2010, commercial efforts undertaken in the various regions and payments of certain restructuring expenses, which were offset by containment and management of current liabilities, which contributed positively to the generation of operating cash flow.
Meanwhile, as compared to 2010, cash payments to employees in 2011 followed the trend resulting from costs associated with the change in average headcount, in line with 2009. In 2010, operating cash flow was 0.69% more than the 21,160 million euros generated in 2009. This improvement was due to the robust growth of consolidated income, which continued to accelerate in all regions, underpinned by significant business diversification and the high level of commercial activity, above all in wireline and wireless broadband. This growth was driven simultaneously by policies to strengthen customer loyalty and bundling voice, broadband and television services. Cash received from customers increased by 8.18% to 72,867 million euros in 2010 from 67,358 million euros in 2009. Telefónica Latin America continued to enjoy accelerating growth due to diversification and enhanced commercial effort. Telefónica Europe saw a sharp rise in income, while the businesses in Spain generated operating cash flow thanks to a considerable and effective commercial efforts and cost controls. In 2010, cash paid to suppliers and employees increased 11.61% to 51,561 million euros from 47,02446,198 million euros in 2007.2009. This slight increase was the resultattributable to a higher supply of greaterhandsetss in Telefónica Latin America, partially offset by lower mobile termination expenses in Telefónica Spain and Telefónica Europe, and increased commercial effortseffort in the various geographic areas, mainlythree regions. Attempts to garner customer loyalty, and to higher interconnection charges, while maximizingincrease the efficiency of the cost structure.structure contributed positively to the generation of operating cash flow. Cash flows arising from payments of interest and other finance costs were relatively steady in 2009 fell 25.02%2011 despite the increase in interest rates during the year and the rise in financial debt, mostly due to payments of deferred interest, decreasing by 0.4% to 2,011 million euros. In 2010, payments of interest and other finance expenses decrease 0.74% to 2,154 million euros from 2,170 million euros due toin 2009, in line with the decline in interest rates during the year and despite the reductionincrease in financial debt in previous years. These figures do not include payments onduring the main issues made in 2009, which will begin falling due as of 2010. Payments for net interest and other finance costs in 2008 fell 10.15% to 2,894 million euros (from 3,221 million euros in 2007) mostly due to the decrease in financial debt. Taxes paid in 2009 soared 108.21% to 2,942 million euros from 1,413 million euros in 2008 due to the 1,297 million euros payment on account made by Telefónica, S.A. in the year. Taxes paid in 2008 were 3.02% lower than the 1,457 million euros paid in 2007.
Tax payments amounted to 1,959 million euros in 2011, down 25.1% compared with 2010 (2,616 million euros), primarily because no tax payments on account for the tax group were made in 2011. In 2010, payments on account amounted to 729 million euros, compared to 1,297 million euros in 2009. Tax paid in 2010 decreased by 326 million euros, a 11.1% decrease from 2,942 million euros in 2009, primarily attributable to lower tax payments on accounts in 2010. Net cash used in investing activities Net cash used in investing activities increaseddecreased by 2.19%21.21% in 20092011 to 9,30012,497 million euros from 9,10115,861 million euros in 2008. Net cash used2010, primarily due to the decrease in investing activities increased by 4,509 million euros in 2008, to 9,101 million euros from 4,592 million euros in 2007. Payments onpayments for investments in companies (netnet of cash and cash equivalents acquired)equivalents.
During the year, payments for investments in 2008 declined by 22.16%, from 2,798companies amounted to 2,948 million euros, to 2,178 million euros. The mainwith the principal investments werebeing: the acquisitionsthird payment for the acquisition in 2010 of Telemig by50% of Brasilcel, N.V., for 347which a total of 1,970 million euros was paid in the year; the payment to non-controlling interests of sharesVivo of China Netcom and539 million euros; the acquisition of an additional 1.2% of the share capital of China Unicom for 688358 million euros; and 424the acquisition of Acens for 52 million euros, respectively,net of cash and of 51.8% of CTC’s non-controlling interests for 640 million euros. The main payment on investments in 2007 was for the 42.3% stake in Telco S.p.A. for 2,314 million euros.cash equivalents. Payments on financial investments not included in cash equivalents amounted to 1,411 million euros, compared to 114669 million euros in 2008. This increase was2011 and mainly include legal deposits, financial investments by Telefónica insurance companies, the resultrepurchase of investmentsTelefónica S.A. bonds in depositssecondary markets and other long-term financialoptions on equity instruments. InvestmentIn 2010, payments for investments in companies which amounted to 5,744 million euros, with the main investments being the acquisition of 50% of Brasilcel, for a total of 5,047 million (net of cash and cash equivalents), the acquisition of 22% of the share capital of DTS, Distribuidora de Televisión Digital S.A. (230 million euros) and the acquisitions in Europe of JaJah Inc. and the German company HanseNet Telekommunikation GmbH (“HanseNet”) for 150 million euros and 207 million euros, respectively, net of cash and cash equivalents.
Payments on financial investments not included in cash equivalents amounted to 1,599 million euros in 2010. This includes payments of 638 million euros for the refinancing in connection with the acquisition of 100% of shares of HanseNet and the financing provided to Telco, SpA, for 600 million euros at December 31, 2010. Proceeds on disposals of companies in 2010 (552 million euros) primarily related to divestments in Meditelcom for 380 million euros and in Manx Telecom Limited for 157 million euros (in the latter case, net of cash and cash equivalents). Payments on investments in companies (net of cash and cash equivalents acquired) in 2009 amounted to 48 million euros. The principal investments were the acquisition of shares of non-controlling shareholders of the Telefónica Argentina Group for 22 million euros, which represented the acquisition of an additional 1.8% stake, and the payment of Telefónica Chile, S.A.’s second takeover for 18 million euros. In 2009, proceeds on disposals of companies amounted to 34 million euros. The main transaction in this respect was the sale of Meditelcom for 20 million euros. Payments on investments in property, plant and equipment and intangible assets in 2009 totaled 7,593totalled 9,085 million euros 3.75% lessin 2011, 1.57% higher than the 7,889prior year (8,944 million euros of 2008.euros). This decrease is in line withincrease was due to the declinerise in acquisitions of property, plant and equipment and intangible assets during the year.period, particularly the purchases of spectrum licenses in Brazil and Spain (349 million euros and 441 million euros, respectively). Payments on investments in property, plant and equipment and intangible assets increased 17.8% to 8,944 million euros in 2010 from 7,593 million euros in The amount at December 31, 20082009. This increase was 615due to the rise in acquisitions of property, plant and equipment and intangible assets during the period, particularly the purchases of spectrum licenses in Mexico and Germany (276 million euros higher than in 2007 (7,274and 1,379 million euros) driven by further investment in fiber optics, 3G, TV and ADSL.euros, respectively). Proceeds fromon disposals of investments in companies, net of cashproperty, plant and cash equivalents acquired,equipment and intangible assets amounted to 686811 million euros in 2008, mainly2011, an increase of 157% from 315 million euros 2010, primarily due to the 648 million euros obtainedreceipts from the saledisposal of Sogecable.non-strategic assets (693 million euros). In 2007,2009, this figure was 5,346item amounted to 242 million euros and entailed disposals of stakes in Airwave and Endemol for 2,841 million and 2,107 million euros, respectively.euros. In 2009,2011, net short-term financial investments included in cash flows from cash surpluses not included under cash equivalents amounted to 646 million euros, 3.97% higher than the 621 million euros recorded in 2010. Net investments in 2009 amounted to 548 million euros. Net disposals of these investments in 2008 amounted to 76 million euros. Net cash used in financing activities NetIn 2011, net cash used in financing activities in 2009 totaled 2,281amounted to 4,912 million euros, 71% less6.41% lower than in 2010 (5,248 million euros). The decrease was primarily due to lower cash outflow from the 7,765redemption of bonds and debentures (3,235 million euros compared to 5,482 million euros in 2010), which was not offset by proceeds from new issues of 2008, mainlybonds and debentures, which declined from 6,131 million euros in 2010 to 4,582 million euros in 2011, to higher proceeds from the sale of treasury shares (375 million euros) and declines in both proceeds and payments on loans, credit facilities and promissory notes, whichpayments declined from 7,954 million euros in 2010 to 2,680 million euros in 2011. The decrease in proceeds from and payments on loans was primarily due to the 8,617drawdown in 2010 of 6,000 million on the syndicated facility agreement signed on July 28, and to several voluntary repayments amounting to 5,700 million euros under its 6,000 million euros credit facility of proceeds fromJune 2005 (see Note 13). These decreases were partly offset by an increase in the issuance of debentures and bonds (1,317dividend paid by Telefónica, S.A., which amounted to 6,852 million euros compared with 5,872 million euros in 2008).2010.
Net cash used in financing activities in 2008 totaled 7,7652010 increased by 130% to 5,248 million in 2010 euros down from 9,4252,281 million euros in 2007. The 1,660 million euro decline was due basically to the decrease in the repayment of financing2009, mainly due to the declinehigher dividend distributed by Telefónica, S.A. of 5,872 million euros (4,557 million euros in 2009), the debt balancehigher cash outflow due to redemption of bonds and debentures upon maturity, totaling 5,482 million euros (1,949 million euros in the last few years. 2009) and repayments of loans, credit facilities and promissory notes for 7,954 million euros (5,494 million euros in 2009). (24) | EVENTS AFTER THE REPORTING PERIOD |
SignificantThe following events affectingregarding the Telefónica takingGroup took place frombetween December 31, 2009 to2011 and the date of preparationauthorization for issue of thesethe accompanying consolidated financial statements include:statements:
Financing | · | On January 5, 2012, Telefónica Europe, B.V. arranged financing guaranteed by Telefónica, S.A. with China Development Bank (CDB) for an aggregate amount of 375 million US dollars (equivalent to approximately 290 million euros) at a floating rate and maturing in 2022. This financing was completed on February 15, 2012. |
| · | On January 21, 2012, MMO2, Plc repaid at maturity the bonds issued on January 25, 2002, for an aggregate amount of 375 pounds sterling (equivalent to approximately 481 million euros). |
Financing
a) Maturity of debentures and bonds:
On January 25, 2010, Telefónica Emisiones, S.A.U. repaid at maturity the bonds issued on July 25, 2006 under the bond issuance program (“EMTN”) registered with the London Stock Exchange for an aggregate amount of 1,250 million euros.
b) Voluntary early redemptions:
The following issues were redeemed voluntarily before maturity in the early months of 2010:
| - | On January 29, 2010, Telefónica, S.A. made a voluntarily repayment ahead of schedule of 500 million euros on the 6,000 million euro syndicated loan arranged on June 28, 2005 and amended on February 13, 2009 to extend the maturity of 4,000 million euros from June 28, 2011 by one year for 2,000 million euros and two years for the other 2,000 million euros. |
| - | Similarly, on February 11, 2010, Telefónica, S.A. made a voluntary repayment of 500 million euros on the same loan. |
c) Financing of Telco
On January 11, 2010, Telco S.p.A. (“Telco”) arranged a 1,300 million euro loan with Intesa Sanpaolo, S.p.A., Mediobanca, S.p.A., Société Générale, S.p.A. and Unicredito, S.p.A. maturing on May 31, 2012, part of which is secured with Telecom Italia S.p.A. shares. The lending banks have granted Telco shareholders a call option on the Telecom Italia S.p.A. shares that they may be entitled to receive as a result of the potential execution of the pledge.
In line with the commitments assumed by Telco shareholders, on December 22, 2009, the rest of Telco’s financing needs with respect to debt maturities were met with a bridge loan granted by shareholders Telefónica, Intesa Sanpaolo, S.p.A. and Mediobanca, S.p.A., for approximately 902 million euros, and a bank bridge loan granted by Intesa Sanpaolo, S.p.A. and Mediobanca, S.p.A., for the remaining 398 million euros.
The financing from the bridge loans was substituted with a bond subscribed by Telco’s shareholder groups, on a pro-rate basis in accordance with their interests in the company, on February 19, 2010 for 1,300 million euros.
d) Financing of ECAs
On February 12, 2010, Telefónica, S.A. arranged long-term financing for an amount of 472 million US dollars at fixed rates with a guarantee of the Swedish Export Agency (EKN) to acquire network equipment from a Swedish service provider. This financing entailed three tranches: tranche A, for 232 million US dollars maturing on November 30, 2018, tranche B, for 164 million US dollars maturing on April 30, 2019, and tranche C, for 76 million US dollars maturing on November 30, 2019.
Devaluation of the Venezuelan Bolivar fuerte
Regarding the devaluation of the Venezuelan Bolivar fuerte on January 8, 2010 (see Note 2), the two main factors to consider with respect to the Telefónica Group’s 2010 financial statements will be:
| · | The decrease in theOn February 7, 2012, Telefónica Group’s net assets in VenezuelaEmisiones, S.A.U., as a resultpart of the new exchange rate,European medium-term notes program (“EMTN”) registered with a balancing entrythe Financial Services Authority (FSA) in equityLondon and updated on June 20, 2011, extended the issue of the Group. This effect is estimated at approximately 1,810bonds made on February 7, 2011 for an initial aggregate amount of 1,200 million euros maturing on February 7, 2017, by 120 million euros. These bonds are guaranteed by Telefónica, S.A. |
| · | The translationOn February 21, 2012, Telefónica Emisiones, S.A.U., as part of resultsthe EMTN registered with the Financial Servies Authority (FSA) in London and cash flows from Venezuela at the new devalued closing exchange rate.updated on June 20, 2011, issue bonds for an aggregate amount of 1,500 million euros maturing on February 21, 2018. These bonds are guaranteed by Telefónica, S.A. |
Finally, on January 19, the Venezuelan Authorities announced that they would grant a preferential rateSale of 2.60 Bolivar fuerte per dollar for new items, among which payment of dividends is included, as long as the request for Authorization of Acquisition of Foreign Exchange was filed before January 8, 2010. To that date, the Company had in fact requested authorizations related to the distribution of dividends of prior years (see Note 16).
Fulfillment of commitments relating to the acquisition in Germany of HanseNet Telekommunikation GmbH by Telefónica Deutschland GmbH
On February 16, 2010, having complied with the terms established in the agreement dated December 3, 2009 by the parties, the Telefónica Group completed the acquisition of 100% of the shares of HanseNet. The final amount paid out was approximately 912 million euros.
Amendment to the agreements signed with Prisa and Sogecable following the purchase of anica’s stake in Digital+ by Gestevisión Telecinco,Hispasat, S.A.
Following the signing on the agreement between Prisa and Gestevisión Telecinco, S.A. (“Telecinco”) for the sale by Prisa to Telecinco of a 22% stake in Digital+, on January 29, 2010, Telefónica and Prisa signed a new agreement raising the percentage stake to be acquired by Telefónica from 21% to 22%. Meanwhile, following the agreement reached between Prisa and Telecinco, Telefónica has undertaken to renegotiate the terms of the Shareholder Agreement to reflect the shareholder structure of Digital+ following the acquisition of a stake in the company by Telecinco.
The estimated total investment to be made by Telefónica, after deduction of the net debt, will be around 495 million euros, of which approximately 230 million euros will be covered by the assumption by the buyer of subordinated loan betweenOn February 21, 2012, Telefónica de Contenidos, S.A.U. (creditor) and Sogecable (debtor).
This acquisition, a company wholly owned by Telefónica, S.A., reached an agreement to sell its 13.23% stake in Hispasat, S.A. to Abertis Telecom, S.A. for 124 million euros in cash, which it will receive when the transaction is closed. Closing of the transaction is subject, among other conditions,inter alia, to the obtainment of the appropriate regulatory authorizations.
Acquisition of JAJAH
In January 2010, the Telefónica Group, through its wholly owned subsidiary Telefónica Europe plc, acquired 100% of the shares of JAJAH, the leading communications innovator, for 145 million euros.
(25) | ADDITIONAL NOTE FOR ENGLISH TRANSLATION |
These consolidated financial statements were originally prepared in Spanish. In the event of discrepancy, the Spanish-language version prevails.
These financial statements are presented on the basis of International Reporting Standards as issuedapproval by the International Accounting Standars Board (IASB), which do not differ for the purposes of the Telefónica Group from IFRS as adopted by the European Union. Consequently, certain accounting practices applied by the Group do not conform with generally accepted principles in other countries.Spanish Cabinet.
APPENDIX I: CHANGES IN THE CONSOLIDATION SCOPE The following changes took place in the consolidation scope in 2009:2011: Telefónica Spain On June 7, 2011, the Telefónica Group formalized the acquisition of 100% of Acens Technologies, S.L., a leader in hosting/housing in Spain for small- and medium-sized enterprises. The consideration paid for the purchase was 55 million euros. This company has been included in the Telefónica Group’s consolidation scope using the full consolidation method. In August, Telefónica de España, S.A.U. increased its stake in Iberbanda, S.A. from 51% to 100%. The Telefónica Group still consolidates this company using the full consolidation method. Telefónica Salud, S.A., a 51% subsidiary of the Group, was sold off from the Telefónica Group in the year. This company, which had been fully consolidated in the Telefónica Group, was removed from the consolidation scope. Telefónica Latin America In February 2011, the Costa Rican company Telefónica Costa Rica, S.A. was included in the Telefónica Group’s consolidation scope using the full consolidation method following payment by Telefónica, S.A. of 2.2 million US dollars corresponding to 100% of its initial share capital. On March 25, 2011 the Boards of Directors of each of the subsidiaries controlled by Telefónica, Vivo Participações and Telecomunicações de São Paulo S.A. – Telesp approved the terms and conditions of a restructuring process whereby all shares of Vivo Participações that were not owned by Telesp were exchanged for Telesp shares, at a rate of 1.55 new Telesp shares for each Vivo Participações share. These shares then became the property of Telesp, whereby Vivo Participações then became a wholly owned subsidiary of Telesp. On June 14, 2011, the Boards of Directors of Vivo Participações and Telesp approved a restructuring plan whose objective is to simplify the corporate structure of both companies and foster their integration, eliminating Vivo Participações from the corporate chain through the incorporation of its total equity into Telesp, and concentrating all mobile telephony activities in Vivo, S.A. (now a direct subsidiary of Telesp). In October, the company arising from the merger changed its name to Telefónica Brasil, S.A. At the end of 2011, the Telefónica Group owned of 73.9% of Telefónica Brasil which, in turn, has 100% ownership of the shares of Vivo, S.A. Both companies are still fully consolidated in the Telefónica Group’s consolidation scope. In April, the Spanish company Wayra Investigación y Desarrollo, S.L. was incorporated. Its corporate purpose is to identify talent in Spain and Latin America in the field of new Information and Communication Technologies (ICT) and promote its development through integral support and provide the entrepreneurs with the necessary tools and financing. This company has been included in the Telefónica Group’s consolidation scope using the full consolidation method. Also in 2011, Wayra incorporated companies in Peru, Venezuela, Mexico, Argentina and Colombia. All of these companies have been included in the Telefónica Group’s consolidation scope using the full consolidation method. As of January 1, 2011, Telefónica Brasil included GTR Participações e Emprendimentos, S.A., TVA Sul Paraná, S.A., Lemontree, S.A. and Comercial Cabo TV São Paulo, S.A. in its consolidated financial statements using the full consolidation method. Up until 2010, these companies had been included in the Telefónica Group’s consolidated financial statements through the equity method of accounting. Telefónica Europe German company Telefónica Germany GmbH & Co. OHG, a wholly owned subsidiary of the Telefónica Group, set up a German company, Telefónica Global Online Services, GmbH, with initial capital of 25 thousand euros. Other companies In accordance with the strategic partnership agreement reached by Telefónica, S.A. and China Unicom on January 23, 2011, Telefónica, S.A. paid 358 million euros to increase its ownership interest in China Unicom by approximately 1.2% to 9.6%. The companies BT Cellnet LtdTelefónica Group continues to account for this investment using the equity method of accounting. In December, Telefónica, S.A. incorporated Luxembourg company Telefónica Luxembourg Holding, S.à.r.l. with initial share capital of 12,500 euros. It is the company’s sole shareholder. This company has been included in the Telefónica Group’s consolidation scope using the full consolidation method. In December, Telefónica Digital España, S.L., formerly Terra Networks Asociadas, S.L.U., a wholly owned subsidiary of Telefónica, S.A., incorporated Sonora Music Streaming España, S.L. Unipersonal, subscribing and SPT Telecom Finance,paying out the entire initial share capital of 3 thousand euros. Also in December, Telefónica, S.A. subscribed and paid out the entire share capital of Telefónica Digital Holdings, S.L.U., which amounted to 3 thousand euros. Atento Italia, S.R.L. was wound up and liquidated in 2011. This company, which had been fully consolidated, was removed from the Telefónica Group’s consolidation scope. Solivella Investments, B.V. and 3G Mobile AG, both of which were disposed of. Both entities, previouslyfully consolidated, were wound up in 2011 and therefore removed from the Telefónica Group’s consolidation scope. Changes to the 2010 consolidation scope are described in the following sections. Telefónica Spain In April 2010, Teleinformática y Comunicaciones, S.A. (Telyco) sold its subsidiary Telyco Marruecos, S.A. This company, which had been fully consolidated in the Telefónica Group, was removed from the consolidation scope. In August, Telefónica Móviles España, S.A.U., a wholly owned subsidiary of Telefónica, S.A., acquired approximately 91.2% of the Spanish company Tuenti Technologies, S.L. Following a subsequent rights offering, the Telefónica Group increased its stake in the company’s share capital to 91.38%. This company is included in the consolidated financial statements of the Telefónica Group using the full consolidation method, weremethod. Telefónica Latin America On June 30, the Telefónica Chile group embarked on a corporate restructuring. The restructuring was executed through the acquisition by Inversiones Telefónica Móviles Holding Limitada of all assets of fixed line telephony in Chile through its acquisition of Telefónica Internacional Chile, Ltda. On September 27, 2010, Telefónica acquired 50% of the shares of Brasilcel (a Dutch company that owns shares representing, approximately, 60% of the share capital stock of Brazilian company Vivo Participações, S.A.) owned by Portugal Telecom, having made a first payment, as agreed, of 4,500 million euros. The Brasilcel Group, which was previously proportionately consolidated in the Telefónica Group, has been fully consolidated since September 2010 (100% of all assets and liabilities of the Brazilian group are consolidated. Subsequently, in December 2010, a cross-border merger was completed whereby the Dutch company was taken over by Telefónica, S.A. Telefónica Europe In January 2010, the Telefónica Group, through its wholly owned subsidiary Telefónica Europe Plc, acquired 100% of the shares of Jajah Inc. for 145 million euros. This company has been included in the Telefónica Group’s consolidation scope using the full consolidation method. On December 3, 2009, the Telefónica Group’s subsidiary in Germany, Telefónica Deutschland GmbH (“Telefónica Deutschland”), signed an agreement to acquire all of the shares of German company HanseNet Telekommunikation GmbH (“HanseNet”). The transaction was completed on February 16, 2010, the date on which the Telefónica Group completed the acquisition of 100% of the shares of HanseNet. The amount initially paid out was approximately 913 million euros, which included 638 million euros of refinanced debt, leaving an acquisition cost of 275 million euros, which was finally reduced by 40 million euros on completion of the transaction. This company has been included in the Telefónica Group’s consolidation scope using the full consolidation method. In June 2010, British company Manx Telecom Limited was sold for approximately 164 million euros. The sale generated a gain of 61 million euros. This company, which had been fully consolidated in the Telefónica Group, was removed from the consolidation scope. Other companies In April 2010, Chilean company Telefónica Factoring Chile, S.A., which is 50% owned by the Telefónica Group, was incorporated. This company is included in the consolidation scope using the equity method. In February 2010, Irish company Telfin Ireland Limited was incorporated, with an initial share capital of approximately 919 million euros, fully subscribed by its sole shareholder Telefónica, S.A. This company has been included in the Telefónica Group’s consolidation scope using the full consolidation method. In June 2010, the Telefónica Group reduced its ownership interest in Portugal Telecom by 7.98%. In addition, Telefónica entered into three equity swap contracts for Portugal Telecom shares with a number of financial institutions, all subject to net settlement, which grant Telefónica the equivalent total return of the investment. The company, included in the consolidation scope using the equity method of accounting, was removed from the consolidation scope on June 30, 2010. In December 2010, Telefónica, S.A., through subsidiary Telefónica de Contenidos, S.A.U., completed the acquisition of 22% of the capital stock of D.T.S., Distribuidora de Televisión Digital S.A. for approximately 488 million euros, 228 million euros of which was settled by cancelling the subordinated loan between Telefónica de Contenidos, S.A.U. (as creditor) and Sogecable, S.A. (currently Prisa Televisión, S.A.U., as debtor). This company was included in the consolidation scope using the equity method of accounting. Changes to the 2009 consolidation scope are described in the following sections. Telefónica Europe BT Cellnet Ltd and SPT Telecom Finance, B.V. were liquidated. Both fully consolidated companies were excluded from the scope of consolidation of the Telefónica Group. In December, German company Telefónica Global Services, GmbH, a wholly owned subsidiary of the Telefónica Group, set up aestablished German company Telefónica Global Roaming, GmbH, with initial capital of 25 thousand euros. ThisThe company was includedfully consolidated in the consolidation scope using the full consolidation method.Telefónica Group. Telefónica Latin America Pursuant to Chilean law, on December 1, 2008, Telefónica, S.A., through subsidiary Inversiones Telefónica Internacional Holding, Ltda., launched a second tender offer (“second offer”) for all the shares of Compañía Telefónicade Telecomunicaciones de Chile, S.A. (CTC) Telefónica did not already hold (representing 3.25% of CTC’s capital). Upon completion of the second offer, Telefónica’snica’s indirect stake in CTCCTC’s share capital increased from 96.75%97.89% to 97.89%96.75% at the date of filing the notice with the Spanish National Securities Commission, the CNMV was notified on January 9, 2009. TheThis Chilean company is still fully consolidated in the Telefónica Group still consolidates the Chilean company using the full consolidation method.Group. PursuantIn order to the corporate restructuring ofrestructure the Brazilian group Vivo on July 27, 2009Group, Telemig Celular, S.A. was absorbedtaken over by Telemig Celular Participaçoes, S.A., which in turn was subsequently absorbedtaken over by Vivo Participaçoes, S.A. FollowingSubsequent to this transaction, Telemig Celular, S.A. and Telemig Celular Participaçoes,operation, the first two companies, which had been fully consolidated inusing proportionate consolidation, were excluded from the Telefónica Group, were removed from the consolidation scope.Group. The Telefónica Group still consolidatesconsolidated Vivo Participaçoes, S.A. using proportionate consolidation.
OnAs part of the aforementioned restructuring, on November 19 2009, within the scope of the same corporate restructuring, the companies Tagilo Participaçoes, Ltda., Sudestecel Participaçoes, Ltda., Avista Participaçoes, Ltda. and Vivo Brasil Comunicaçoesões Ltda. were absorbedtaken over by Portelcom Participaçoes, S.A. All these companies previously consolidated using proportionate consolidations, were removedexcluded from the Telefónica Group’sscope of consolidation scope.
In September 2009, deeds of liquidation of Nicaraguan companies Telefónica Móviles Nicaragua, S.A., Doric Holdings y Compañía, Ltda. and Kalamai Holdings y Compañía, Ltda. were executed. The companies, which had been fully consolidated in the Telefónica Group were removed from the consolidation scope.in which they had been previously proportionately consolidated.
On December 3, 2009, following approval by the National Securities Commission of the Argentine Republic,Comisión Nacional de Valores de la República Argentina, the Argentine securities regulator,regulatory, Telefónica, S.A. acquired shares representing 1.8% of the share capital of Telefónica de Argentina, S.A. held by minority shareholders for a price of approximately 23 million euros. Following thisThis acquisition gave the Telefónica Group is owner of all of the shares of the Argentinea 100% stake in this Argentinean company. This company is still fully consolidated in the consolidated financial statements of the Telefónica Group. On October 21, 2009, Telefónica, S.A. and China Unicom (Hong Kong) Limited (“China Unicom”) completed the mutual share exchange agreement through which Telefónica, through Telefónica Internacional, S.A.U., subscribed for 693,912,264 newly issued shares of China Unicom, satisfied by the contribution in kind to China Unicom of 40,730,735 Telefónica shares. This entailedinvolved an investment of approximately 1,000 million US dollars ofin ordinary shares of China Unicom. Followingin the other party. Subsequent to this acquisition, the Telefónica Group’s shareholding interestGroup increased its stake in China Unicom’s voting share capital increased from 5.38% to 8.06%. On November 5, the share buyback2009, an agreement ofwas reached to repurchase shares from one of the major shareholders of China Unicom’s core shareholders,Unicom, SK Telecom Co., Ltd. (“("SKT”), was carried out. Following. Subsequent to this acquisition and the buyback and cancellationredemption of these shares, considering the shares, theshare capital of China Unicom, Telefónica Group’s holding inheld 8.37% of China Unicom’sUnicom's share capital reached 8.37%.capital. The Telefónica Group accounts for this investment using the equity method. Other companies In February 2009, Telefónica International Wholesale Services II, S.L. was incorporated with an initial capital of 3,006 euros, fully subscribed and paid up by Telefónica, S.A.. ThisS.A. The company is included in the consolidated financial statements ofhas been incorporated into the Telefónica Group using the full consolidation method.Group's financial statements. In 2009, Telefónica International Wholesale Services II, S.L. incorporated the European companies TIWS Hungary, TIWS Sweden and TIWS Latvia, subscribing and paying up 100% of their respective share capital. All of these companies have beenwere included in the Telefónica Group’s consolidation scope using the full consolidation method. In April, Dutch company Atento, N.V. acquired 100% of the shares of Venezuelan company Teleatención de Venezuela, C.A. for approximately 9 thousand euros. This company has been included in the Telefónica Group’s consolidation scope using the full consolidation method. It has been idle since its incorporation.
In April, Chilean company Compañía de Telecomunicaciones de Chile, Marketing e Información, S.A., a subsidiary of Atento Chile, S.A., was wound up. The company, which was fully consolidated in the Telefónica Group’s financial statements, was removed from the consolidation scope.
Spanish company Telefónica Remesas, S.A. was incorporated by Telefónica Telecomunicaciones Públicas, S.A., a wholly owned Telefónica Group subsidiary, with initial capital of 0.3 million euros, fully subscribed and paid. ThisThe company has beenwas included in the Telefónica Group’s consolidation scope using the full consolidation method. Telefónica Móviles España, S.A., a 100% owned subsidiary of Telefónica, S.A., sold its 32.18% stake in Moroccan company Medi Telecom, S.A. (Méditel) and the company’s outstanding loans, for 400 million euros to the rest of Méditel’s local partners. This company, which in 2008the prior year was accounted for by the Telefónica Group using the equity method, was removed from the consolidation scope. In September, Argentine company Atusa, S.A. was incorporated, with initial capital of 50 thousand Argentine pesos, which was fully subscribed. The Telefónica Group paid for 25% of the company. This company has been included in the Telefónica Group’s consolidated financial statements using the full consolidation method.
In 2009, Spanish company Atento Teleservicios España, S.A.U., a whollysolely owned subsidiary of the Telefónica Group, tookwas taken over and merged Amsterdam-basedin 2009 by the Dutch company Atento EMEA, B.V. This fully consolidated company was excluded from the scope of consolidation.
company, which was fully consolidated in the Telefónica Group’s consolidated financial statements, was removed from the consolidation scope.
Following the sale ofSubsequent to Sintonia, S.A.’s selling its stake in Telco, S.p.A. (Telco), thean Italian company withthat held a 22.45% shareholdingstake in the telecommunications operator Telecom Italia, S.p.A., Telefónica, S.A.’s increased its stake in Telco increased from 42.3% to 46.18%, maintaining itsretaining the effective intereststake in Telecom Italia, S.p.A. through this company atof 10.36% of theits voting shares. Theshare capital. This company is still accounted forincluded in the consolidated financial statements of the Telefónica Group consolidated financial statements usingunder the equity method.
In November, Telefónica Servicios Audiovisuales, S.A., a wholewholly owned subsidiary of the Telefónica Group, acquired 100% of Spanish company Gloway Broadcast Services, S.L. (“Gloway”) for approximately 6 million euros. ThisThe company has been includedwas fully consolidated in the Telefónica Group's consolidated financial statements usingof the full consolidation method.Telefónica Group. APPENDIX II: DEBENTURES AND BONDS The list and main changes in consolidation scope in 2008 werefeatures of outstanding debentures and bonds at December 31, 2011 are as follows:follows (in millions of euros): Telefónica and its instrumental companies | | | Maturity (nominal) | | Debentures and bonds | Currency | % Interest rate | 2012 | 2013 | 2014 | 2015 | 2016 | Subsequent years | Total | | CAIXA 07/21/29 ZERO COUPON | EUR | 6.386% | - | - | - | - | - | 64 | 64 | | ABN 15Y BOND | EUR | 1.0225 x GBSW10Y | - | - | - | 50 | - | - | 50 | | Telefónica, S.A. | | | - | - | - | 50 | - | 64 | 114 | | T. EUROPE BV SEP_00 GLOBAL D | USD | 8.250% | - | - | - | - | - | 966 | 966 | | TEBV FEB_03 EMTN FIXED TRANCHE A | EUR | 5.125% | - | 1,500 | - | - | - | - | 1,500 | | TEBV FEB_03 EMTN FIXED TRANCHE B | EUR | 5.875% | - | - | - | - | - | 500 | 500 | | T.EUROPE BV JULY A 2007 | JPY | 2.110% | 150 | - | - | - | - | - | 150 | | T.EUROPE BV JULY B 2007 | JPY | 1 x JPYL6M + 0.425000% | 150 | - | - | - | - | - | 150 | | Telefónica Europe, B.V. | | | 300 | 1,500 | - | - | - | 1,466 | 3,266 | | EMTN O2 EUR (I) | EUR | 4.375% | - | - | - | - | 1,750 | - | 1,750 | | EMTN O2 GBP (I) | GBP | 5.375% | - | | - | - | - | 898 | 898 | | EMTN O2 GBP (II) | GBP | 5.375% | - | - | - | - | - | 599 | 599 | | TELEF EMISIONES JUN 06 TRANCHE C | USD | 6.421% | - | - | - | - | 966 | - | 966 | | TELEF EMISIONES JUN 06 TRANCHE D | USD | 7.045% | - | - | - | - | - | 1,546 | 1,546 | | TELEF EMISIONES SEPTEMBER 06 | EUR | 4.393% | 500 | - | - | - | - | - | 500 | | TELEF EMISIONES DECEMBER 06 | GBP | 5.888% | - | - | 598 | - | - | - | 598 | | TELEF EMISIONES FEBRUARY 07 | EUR | 4.674% | - | - | 1,500 | - | - | - | 1,500 | | TELEF EMISIONES JUNE B 07 | CZK | 4.351% | 116 | - | - | - | - | - | 116 | | TELEF EMISIONES JUNE C 07 | CZK | 4.623% | - | - | 101 | - | - | - | 101 | | TELEF EMISIONES JULY A 07 | USD | 5.855% | - | 580 | - | - | - | - | 580 | | TELEF EMISIONES JULY C 07 | USD | 6.221% | - | - | - | - | - | 541 | 541 | | TELEF EMISIONES JUNE 08 | EUR | 5.580% | - | 1,250 | - | - | - | - | 1,250 | | TELEF EMISIONES FEBRUARY 09 | EUR | 5.431% | - | - | 2,000 | - | - | - | 2,000 | | TELEF EMISIONES APRIL 2016 | EUR | 5.496% | - | - | - | - | 1,000 | - | 1,000 | | TELEF EMISIONES APRIL 3, 2016 | EUR | 5.496% | - | - | - | - | 500 | - | 500 | | TELEF EMISIONES JULY 6, 2015 | USD | 4.949% | - | - | - | 966 | - | - | 966 | | TELEF EMISIONES JULY 15, 2019 | USD | 5.877% | - | - | - | - | - | 773 | 773 | | TELEF EMISIONES JUNE 2015 | EUR | 1 x EURIBOR3M + 1.825% | - | - | - | 400 | - | - | 400 | | TELEF EMISIONES JULY B 07 | USD | 1 x USDL3M + 0.33000% | - | 657 | - | - | - | - | 657 | | TELEF EMISIONES JANUARY 07 A | EUR | 1 x EURIBOR6M + 0.83000% | - | - | - | - | - | 55 | 55 | | TELEF EMISIONES JANUARY 07 B | EUR | 1 x EURIBOR3M + 0.70% | - | - | - | - | - | 24 | 24 | | TELEF EMISIONES NOVEMBER 11, 2019 | EUR | 4.693% | - | - | - | - | - | 1,750 | 1,750 | | EMTN GBP 12/09/2022 650 GBP | GBP | 5.289% | - | - | - | - | - | 778 | 778 | | TELEF EMISIONES DECEMBER 09 | EUR | 1 x EURIBOR3M + 0.70% | - | - | 100 | - | - | - | 100 | | TELEF EMISIONES MARCH 10 | EUR | 3.406% | - | - | - | 1,400 | - | - | 1,400 | | TELEF EMISIONES APRIL 1, 2010 | USD | 2.582% | - | 927 | - | - | - | - | 927 | | TELEF EMISIONES APRIL 2, 2010 | USD | 3.729% | - | - | - | 696 | - | - | 696 | | TELEF EMISIONES APRIL 3, 2010 | USD | 5.134% | - | - | - | - | - | 1,082 | 1,082 | | TELEF EMISIONES SEPTEMBER 10 | EUR | 3.661% | - | - | - | - | - | 1,000 | 1,000 | | EMTN GBP 10/08/2029 400 GBP | GBP | 5.445% | - | - | - | - | - | 479 | 479 | | TELEF EMISIONES FEBRUARY 2011 | EUR | 4.750% | - | - | - | - | - | 1,200 | 1,200 | | TELEF EMISIONES FEBRUARY 2011 | USD | 3.992% | - | - | - | - | 966 | - | 966 | | TELEF EMISIONES FEBRUARY 2011 | USD | 5.462% | - | - | - | - | - | 1,159 | 1,159 | | TELEF EMISIONES MARCH 2011 | EUR | 4.750% | - | - | - | - | - | 100 | 100 | | TELEF EMISIONES NOVEMBER 2011 | EUR | 4.967% | - | - | - | - | 1,000 | - | 1,000 | | TELEF EMISIONES NOVEMBER 2011 | JPY | 2.8247% | - | - | - | - | 70 | - | 70 | | Telefónica Emisiones, S.A.U | 616 | 3,414 | 4,299 | 3,462 | 6,252 | 11,984 | 30,027 | | Total Telefónica, S.A. and its instrumental companies | 916 | 4,914 | 4,299 | 3,512 | 6,252 | 13,514 | 33,407 | |
In June 2008, Spanish company Iberbanda, S.A. raised and then decreased capital to offset losses. In the move, Telefónica de España, S.A.U. subscribed more shares than corresponded to its shareholding, thereby raising its stake in the company from 51% to 58.94%. This company is still fully consolidated.Foreign operators | | % Interest | Maturity | | Debentures and bonds | Currency | rate | 2012 | 2013 | 2014 | 2015 | 2016 | Subsequent years | Total | Series F | UF | 6.000% | 2 | 2 | 2 | 2 | 1 | - | 9 | Series L | UF | 3.750% | 100 | - | - | - | - | - | 100 | Series N | CLP | 3.500% | - | - | 166 | - | - | - | 166 | Series M | CLP | 6.050% | - | - | 31 | - | - | - | 31 | Telefónica Chile, S.A. | | | 102 | 2 | 199 | 2 | 1 | - | 306 | Bond A | CLP | 5.600% | - | - | 48 | - | - | - | 48 | Bond C | CLP | 6.300% | - | - | - | - | 98 | - | 98 | Bond D | UF | 3.600% | - | - | - | - | 66 | - | 66 | USD bond | CLP | 2.875% | - | - | - | 232 | - | - | 232 | Telefónica Móviles Chile, S.A. | | | - | - | 48 | 232 | 164 | - | 444 | Series B | USD | 8.000% | 4 | 2 | | | | | 6 | Series C | USD | 8.500% | 1 | - | - | - | - | - | 1 | Commercial paper | USD | 4.000% | 4 | - | - | - | - | - | 4 | Commercial paper | USD | 4.000% | 12 | - | - | - | - | - | 12 | Otecel, S.A. | | | 21 | 2 | - | - | - | - | 23 | CB TELEFONICA FINANZAS MEXICO B | MXN | 9.250% | 194 | - | - | - | - | - | 194 | T FINANZAS MEX EMISIÓN 0710 FIJ | MXN | 8.070% | - | - | - | - | - | 110 | 110 | T. FINANZAS MEX EMISION 0710 VAR | MXN | TIIE28 + 55bp | - | - | 222 | - | - | - | 222 | Telefónica Finanzas México, S.A. | | | 194 | - | 222 | - | - | 110 | 526 | T. Perú 4th Program (10th Series A) | PEN | 7.875% | 9 | - | - | - | - | - | 9 | T. Perú 4th Program (10th Series B) | PEN | 6.438% | 15 | - | - | - | - | - | 15 | T. Perú 4th Program (16th Series A) | PEN | 6.000% | 29 | - | - | - | - | - | 29 | T. Perú 4th Program (4th Series A) | PEN | 6.625% | 23 | - | - | - | - | - | 23 | T. Perú 4th Program (16th Series B) | PEN | 6.250% | - | 9 | - | - | - | - | 9 | T. Perú 4th Program (41st Series A) | PEN | 7.938% | 5 | - | - | - | - | - | 5 | T. Perú 4th Program (42nd Series A) | PEN | 7.375% | - | 7 | - | - | - | - | 7 | T. Perú 4th Program (42nd Series B) | PEN | 5.313% | - | 6 | - | - | - | - | 6 | T. Perú 4th Program (42nd Series C) | PEN | 6.063% | - | 4 | - | - | - | - | 4 | T. Perú 5th Program (5th Series A) | PEN | 6.188% | - | 6 | - | - | - | - | 6 | T. Perú 5th Program (3rd Series A) | PEN | 4.375% | 9 | - | - | - | - | - | 9 | T. Perú 5th Program (25th Series A) | PEN | 4.313% | 6 | - | - | - | - | - | 6 | T. Perú 5th Program (25th Series B) | PEN | 4.313% | 3 | - | - | - | - | - | 3 | T. Perú 5th Program (31st Series A) | PEN | 7.500% | - | - | - | - | 7 | - | 7 | T. Perú 4th Program (45th Series A) | USD | 6.688% | - | - | - | - | 17 | - | 17 | T. Perú Senior Notes | PEN | 8.000% | - | 36 | 72 | 72 | 36 | - | 216 | T. Perú 5th Program (33rd Series A) | PEN | 6.813% | - | - | - | - | - | 18 | 18 | T. Perú 5th Program (29th Series A) | PEN | 6.188% | - | - | - | - | 17 | - | 17 | PROG1EM1B | PEN | 7.900% | 12 | - | - | - | - | - | 12 | PROG1EM1D | PEN | 8.075% | - | - | - | - | - | 35 | 35 |
On September 17, 2008, Telefónica launched a tender offer through its Inversiones Telefónica Internacional Holding, Ltda. subsidiary to acquire all the outstanding shares of Compañía Telefónica de Chile, S.A. (“CTC”) that Telefónica did not control directly or indirectly. This amounted to 55.1% of CTC’s share capital. This included all CTC shares listed on the Santiago de Chile and New York Stock Exchanges (represented by American Depositary Shares). The offer was structured as a purchase of shares in cash, initially at a price of 1,000 Chilean pesos for class A shares and 900 Chilean pesos for class B shares. On October 11, 2008 the offer price was increased to 1,100 Chilean pesos for class A shares and 990 Chilean pesos for class B shares.
Upon completion of the acceptance period of the tender offer, a total of 496,341,699 shares issued by CTC were tendered, representing 94.11% of the shares to which the offer related and a total investment of approximately 640 million euros.
After settlement of the transaction, Telefónica’s indirect ownership in CTC’s share capital increased from 44.9% to 96.75%. This Chilean company was still included in the Telefónica Group’s consolidation scope using the full consolidation method.
Subsequently, pursuant to the obligations in Chilean law, on December 1, 2008, Telefónica, through subsidiary Inversiones Telefónica Internacional Holding, Ltda., presented a second tender offer to acquire all the outstanding shares of CTC that it did not own, directly or indirectly, after settlement of the first offer (representing 3.25% of CTC’s capital), on the same economic terms as the initial bid. This offer expired on January 9, 2009.
In August 2008, Telefónica del Perú, S.A.A. acquired 71.29% of Peruvian company Star Global Com, S.A.C. for 8 million US dollars. The company was included in the Telefónica Group’s consolidation scope using the full consolidation method.
On April 3, 2008, in accordance with the terms of a sale and purchase agreement entered into on August 2, 2007, after the pertinent administration authorizations were obtained, Vivo Participaçoes,Foreign operators | | % Interest | Maturity | Debentures and bonds | Currency | rate | 2012 | 2013 | 2014 | 2015 | 2016 | Subsequent years | Total | T. Perú 4th Program (19th Series A) | PEN | VAC + 3.6250% | - | - | - | - | - | 20 | 20 | T. Perú 4th Program (36th Series A) | PEN | VAC + 3.6875% | - | - | - | - | - | 50 | 50 | T. Perú 4th Program (12th Series A) | PEN | VAC + 3.6875% | - | - | - | - | - | 20 | 20 | T. Perú 4th Program (36th Series B) | PEN | VAC + 3.3750% | - | - | - | - | - | 16 | 16 | T. Perú 4th Program (19th Series B) | PEN | VAC + 2.8750% | - | - | - | - | - | 16 | 16 | T. Perú 4th Program (37th Series A) | PEN | VAC + 3.1250% | - | - | - | - | - | 15 | 15 | T. Perú 4th Program (19th Series C) | PEN | VAC + 3.1875% | - | - | - | - | - | 6 | 6 | T. Perú 5th Program (22nd Series Aa) | PEN | VAC + 3.5000% | - | - | - | - | - | 7 | 7 | T. Perú 5th Program (22nd Series Ab) | PEN | VAC + 3.5000% | - | - | - | - | - | 4 | 4 | T. Perú 5th Program (22nd Series Ac) | PEN | VAC + 3.5000% | - | - | - | - | - | 8 | 8 | Telefónica del Perú, S.A.A. | | | 111 | 68 | 72 | 72 | 77 | 215 | 615 | T.M. Perú 1st Program (3rd Series A) | PEN | 7.438% | - | 10 | - | - | - | - | 10 | T.M. Perú 1st Program (3rd Series B) | PEN | 7.688% | - | 6 | - | - | - | - | 6 | T.M. Perú 1st Program (16th Series A) | PEN | 8.188% | - | 7 | - | - | - | - | 7 | T.M. Perú 1st Program (18th Series A) | PEN | 6.313% | - | - | 11 | - | - | - | 11 | T.M. Perú 1st Program (18th Series B) | PEN | 6.375% | - | - | 18 | - | - | - | 18 | T.M. Perú 2nd Program (3rd Series A) | PEN | 5.750% | - | 7 | - | - | - | - | 7 | T.M. Perú 2nd Program (11th Series A) | PEN | 7.750% | - | - | - | - | - | 20 | 20 | T.M. Perú 2nd Program (9th Series A) | PEN | 6.813% | - | - | - | - | 18 | - | 18 | T.M. Perú 2nd Program (9th Series B) | PEN | 6.375% | - | - | - | - | 15 | - | 15 | T.M. Perú 2nd Program (11th Series B) | PEN | 7.375% | - | - | - | - | - | 18 | 18 | T.M. Perú 2nd Program (1st Series C) | PEN | 4.75% | 10 | - | - | - | - | - | 10 | Telefónica Móviles Perú, S.A. | | | 10 | 30 | 29 | - | 33 | 38 | 140 | Nonconvertible bonds | BRL | 1.06 x CDI | 140 | - | - | - | - | - | 140 | Nonconvertible bonds | BRL | 1.08 x CDI | 40 | - | - | - | - | - | 40 | Nonconvertible bonds | BRL | 1.12 x CDI | - | 264 | - | - | - | - | 264 | Nonconvertible bonds | BRL | IPCA + 7% | - | - | 30 | - | - | - | 30 | Convertible bonds (Telemig) I | BRL | IPCA + 0.5% | - | - | - | - | - | 3 | 3 | Convertible bonds (Telemig) II | BRL | IPCA + 0.5% | - | - | - | - | - | 7 | 7 | Convertible bonds (Telemig) III | BRL | IPCA + 0.5% | - | - | - | - | - | 13 | 13 | Brasilcel Group | | | 180 | 264 | 30 | - | - | 23 | 497 | Total issues other operators | | 618 | 366 | 600 | 306 | 275 | 386 | 2,551 | TOTAL OUTSTANDING DEBENTURES AND BONDS | | 1.534 | 5,280 | 4,899 | 3,818 | 6,527 | 13,900 | 35,958 |
S.A. (“VIVO”) completed the acquisition of 53.90% of the voting stock (ON) and 4.27% of the preferred stock (PN) of Telemig Celular Participaçoes, S.A., the controlling shareholder of Telemig Celular, S.A., a mobile telephony operator in the State of Minas Gerais (Brazil). According to the terms of the sale and purchase agreement, the total purchase price was 1,163 million reais (approximately 429 million euros). VIVO also acquired the right held by the seller to subscribe in the future for paid up shares in Telemig Celular Participaçoes, S.A. for a price of approximately 70 million Brazilian reais (26 million euros).
Moreover, on April 8, 2008, VIVO, through its subsidiary Tele Centro Oeste IP, S.A., launched a voluntary tender offer for shares representing up to one third of the free float represented by the preferred stock in Telemig Celular Participaçoes, S.A. and in its subsidiary Telemig Celular, S.A. at a price of 63.90 and 654.72 Brazilian reais, respectively. Once the offer concluded, on May 15, 2008, having reached a level of acceptance of close to 100%, TCO IP, S.A. acquired 31.9% and 6% of the preferred shares of Telemig Celular Participaçoes, S.A. and Telemig Celular, S.A., respectively. Furthermore, in accordance with Brazilian Corporations law, TCO IP, S.A. submitted a mandatory tender offer on July 15 for all the voting stock in Telemig Celular Participaçoes, S.A. and Telemig Celular, S.A. at a price per share equivalent to 80% of the purchase price of the voting stock of these companies.
On December 19, 2008, approval was given by shareholders of Telemig Celular Participaçoes, S.A., Telemig Celular, S.A. and Vivo Participaçoes, S.A. (Vivo) in their respective extraordinary meetings to reorganize the Vivo Group, whereby TCO IP, S.A. was spun off. Its assets were subsequently integrated under Telemig Celular, S.A. and Telemig Celular Participaçoes, S.A., making Vivo a shareholder in both Brazilian companies, with direct and indirect stakes at December 31, 2008 amounting to 90.65% and 58.9%, respectively.Both companies were included in the Telefónica Group’s consolidation scope using proportionate consolidation.
Multi Holding Corporation, S.A., which was wholly owned by Telefónica, S.A., was wound up. Accordingly, the company, which was fully consolidated in the Telefónica Group’s financial statements, was removed from the consolidation scope.
On June 16, 2006, Telefónica de Argentina, S.A signed a contract to acquire the shares of Telefónica Data Argentina, S.A. (787,697 shares, representing 97.89% of its share capital) held by Telefónica Data Corp, S.A.U., a wholly owned subsidiary of Telefónica.
After extending the deadline for the sale, on January 28, 2008 Telefónica Data Corp, S.A.U. assumed the obligation to acquire all the shares of Telefónica Data Argentina, S.A. it did not already own (14,948 shares at a price of 224.30 Argentine pesos, representing 1.8578% of share capital). This acquisition was carried out on November 17, 2008.
As a result, Telefónica DataCorp, S.A.U. became owner of 802,645 shares, representing 100% of Telefónica Data Argentina, S.A. It subsequently transferred these shares to Telefónica de Argentina, S.A. in various stages, which ended on December 11, 2008.
Other companies
In November 2008, Telefónica del Perú, S.A.A. sold a total of 4,496,984 shares representing approximately 30% of the share capital of Teleatento del Perú, S.A.C. to Dutch company Atento, N.V. (1,124,246 shares), Chilean company Atento Chile (2,323,442 shares) and to shareholders of Teleatento del Perú, S.A.C. itself (1,049,296 shares), for approximately 103 million new soles. Following this transaction, the Telefónica Group holds 100% of the Peruvian company’s share capital. This company was still fully consolidated.
F-98
In October 2008, Atento Holding Inversiones y Teleservicios, S.A. (Atento HIT) set up Dutch company Atento EMEA, B.V., with start-up capital of approximately 21 thousand euros. This capital was provided via the spin-off of the wholly owned subsidiary Atento HIT, Atento, N.V. The companies it owned in Europe and Morocco then belonged to the new company Atento EMEA, while those located in Latin America and Italy were still controlled by Atento, N.V. Both the newly created Atento EMEA, B.V. and the existing Atento, N.V. were fully consolidated in the Telefónica Group. In addition, on March 4, 2008, Atento HIT acquired 100% of the shares of Telemarketing Prague, a.s.
In January 2008, Turmed, S.L. and the Telefónica Group, through its wholly owned Terra Networks Asociadas, S.L. subsidiary, sold their 100% stakes in Viajar.com Viajes, S.L.U. and Terra Business Travel, S.A., respectively, to the Spanish company Red Universal de Marketing y Bookings On Line, S.A. (RUMBO). The Telefónica Group consolidated this company using the equity method until February 2008 and then proportionately from March. Subsequently, on October 28, 2008, RUMBO, Viajar.com Viajes, S.L.U. and Terra Business Travel, S.A. were merged, with RUMBO absorbing Viajar.com Viajes, S.L.U. and Terra Business Travel, S.A., which were extinguished.
Terra Lycos Holding, B.V. and Telefónica U.S.A. Advisors Inc. were liquidated.
In March 2008, Telco S.p.A., in which Telefónica holds a stake of 42.3%, acquired 121.5 million shares at a price of 1.23 euros per share in the Italian company Telecom Italia (equivalent to 0.9% of its share capital), bringing its total direct interest to 24.5% of the voting rights and 16.9% of the dividend rights. The transaction implied a payment of 149.8 million euros.
As a result, the Telefónica Group indirectly held 10.4% of Telecom Italia’s voting rights and 7.1% of its dividend rights. Telco S.p.A. was included in the Telefónica Group’s consolidated financial statements by the equity method.
After a capital hike by Colombian company Telefónica Móviles Colombia, S.A., which Telefónica, S.A. fully subscribed, Telefónica, S.A.’s stake in the company increased to 49.42%, while the shareholding of Colombian company Olympic, Ltd., a 99.99% subsidiary of the Telefónica Group, decreased to 50.58%. The Telefónica Group still consolidated the Colombian operator using the full consolidation method.
In December, Portuguese company Portugal Telecom, SGPS, S.A. (PT) bought back and cancelled 46,082,677 shares in line with its share buyback program. This raised the Telefónica Group’s direct and indirect ownership interest to 10.48%. In accordance with article 20 of the Portuguese stock market code, Telefónica sold 4,264,394 shares of PT, thereby lowering its stake to 10%. This company was still included in the consolidation scope using the equity method.
In December 2008, Telefactoring Colombia, S.A. was incorporated, with start-up capital amounting to 4 billion Colombian pesos, fully subscribed and paid in. Telefónica subscribed and paid 1,620 million Colombian pesos, equivalent to a 40.5% stake. This company had yet to commence operations and was not included in the consolidation scope at the end of 2008.
Changes to the 2007 consolidation scope are described in the following sections.
Telefónica Europe
Telefónica O2 Europe Plc, a wholly owned subsidiary of Telefónica, S.A., and its 100%-owned subsidiary O2 Holdings, Ltd, sold 100% of the share capital of UK company Airwave O2, Ltd, for 1,932 million pounds sterling (equivalent to 2,841 million euros at the transaction date), obtaining a
gain of 1,296 million euros. This company, which had been fully consolidated in the Telefónica Group, was removed from the consolidation scope.
On December 20, 2007, the O2 Group transferred legal ownership to the entire business in Germany to Telefónica, S.A. through a dividend in kind for 8,500 million euros.
Telefónica Latin America
In 2007, Brazilian company Telecomunicaçoes de Sao Paulo, S.A. acquired 100% of Brazilian company NavyTree Participaçoes, S.A. for 361 million euros. This company was included in the consolidation scope using the full consolidation method.
Other companies
In February 2007, 100% of the shares of Endemol France were sold to Endemol, N.V., a company in which the Telefónica Group has a 75% stake.
In May, 2007, Telefónica, S.A. signed an agreement to sell its 99.7% stake in Dutch company Endemol Investment Holding, B.V. to a newly created consortium owned equally by Mediacinco Cartera, S.L., a newly created company owned by Italian company Mediaset and its listed Spanish subsidiary Gestevisión Telecinco, Cyrte Fond II, B.V. and G.S. Capital Partners VI Fund, L.P, for 2,629 million euros, obtaining capital gains of 1,368 million euros. This sale was carried out on July 3, 2007. This company, which had been fully consolidated in the Telefónica Group, was removed from the consolidation scope.
In August 2007, the Telefónica Group disposed of its 100% holding in Spanish company Azeler Automoción, S.A. for 0.34 million euros. This company, which had been fully consolidated in the Telefónica Group, was removed from the consolidation scope.
On April 28, 2007, Telefónica, S.A., together with its partners Assicurazioni Generali S.p.A., Intesa Sanpaolo, S.p.A., Mediobanca S.p.A. and Sintonía, S.A. (Benetton), entered into a “Co- Investment Agreement” and “Shareholders Agreement” with a view to establishing the terms and conditions of their acquisition of an indirect shareholding in Telecom Italia S.p.A. through an Italian company, currently called Telco S.p.A., in which Telefónica has a 42.3% interest. Both agreements were modified on October 25, 2007 following the inclusion of the Assicurazioni Generali Group companies indicated and the “Shareholders Agreement” was further amended on November 19, 2007.
On October 25, 2007 Telco S.p.A. acquired 100% of Olimpia, S.p.A., which held 17.99% of the voting shares of Telecom Italia S.p.A. Also on that date, Assicurazioni Generali S.p.A. (together with its group companies Alleanza Assicurazioni S.p.A., INA Assitalia S.p.A., Volksfürsorge Deutsche Lebenversicherung A.G. and Generali Vie S.A.) and Mediobanca S.p.A. contributed a total share of 5.6% of Telecom Italia S.p.A.’s voting shares (4.06% and 1.54%, respectively) to Telco S.p.A.
On December 10, 2007, an agreement was reached to takeover and merge Olimpia S.p.A. into Telco S.p.A., making Telco S.p.A’s entire stake in the voting shares of the Italian operator (23.6%) direct and leaving Telefónica with an indirect holding in the voting shares of Telecom Italia S.p.A. of 9.98% (6.88% of the dividend rights) for 2,314 million euros.
The “Shareholders Agreement” signed on April 28, 2007, contained a general clause whereby both Telefónica, at the shareholders meetings of Telco S.p.A. and Telecom Italia S.p.A, and the Telefónica directors appointed to the companies’ respective boards, would abstain from participating in and voting at the meetings dealing with issues regarding the provision of
telecommunications services by companies controlled by Telecom Italia S.p.A., in countries where there are legal or regulatory restrictions on the exercise of voting rights by Telefónica.
However, as indicated above, on November 19, 2007 the partners expounded on and detailed the “Shareholders Agreement”, as well as the Bylaws of Telco S.p.A., to include the specific limitations imposed by the Brazilian telecommunications regulator, Agência Nacional de Telecomunicações (“ANATEL”), as initially posted on its website on October 23, 2007 and subsequently published on November 5, 2007 as ANATEL’s “Ato” no. 68,276 dated October 31, 2007.
Pursuant to clause 8.5(a) of the “Shareholders Agreement,” on November 6, 2007 Telco S.p.A. and Telefónica entered into a Call Option Agreement giving Telefónica the option to buy shares of Telecom Italia S.p.A. in the event Telco S.p.A adopted a resolution to sell or pledge shares of Telecom Italia S.p.A (or rights related to its shares, such as voting rights) by simple majority and Telefónica were the “dissenting party,” under the terms of the “Shareholders Agreement.”
APPENDIX II: DEBENTURES AND BONDS
The list and main features of outstanding debentures and bonds at December 31, 20092010 are as follows (in millions of euros): Telefónica and special purpose vehicles | | | | Maturity | Debentures and bonds | Currency | % Interest rate | Final rate | 2010 | 2011 | 2012 | 2013 | 2014 | Subsequent years | Total | CAIXA 07/21/29 ZERO COUPON | EUR | 6.39% | 6.390% | - | - | - | - | - | 57 | 57 | ABN 15Y BOND | EUR | 1.0225xGBSW10Y | 3.80% | - | - | - | - | - | 50 | | TELEFÓNICA FEBRUARY 90C-12.60% | EUR | 12.6% | 12.600% | 4 | - | - | - | - | - | 4 | TELEFÓNICA FEBRUARY 90 F ZERO COUPON | EUR | 12.82% | 12.820% | 15 | - | - | - | - | - | 15 | Telefónica, S.A. | | | | 19 | - | - | - | - | 107 | 126 | T. EUROPE BV SEP_00 GLOBAL C | USD | 7.75% | 7.750% | 1,735 | - | - | - | - | - | 1,735 | T. EUROPE BV SEP_00 GLOBAL D | USD | 8.25% | 8.250% | - | - | - | - | - | 868 | 868 | TEBV FEB_03 EMTN FIXED TRANCHE A | EUR | 5.125% | 5.125% | - | - | - | 1,500 | - | - | 1,500 | TEBV FEB_03 EMTN FIXED TRANCHE B | EUR | 5.875% | 5.875% | - | - | - | - | - | 500 | 500 | T.EUROPE BV JULY A 2007 | JPY | 2.11% | 2.110% | - | - | 113 | - | - | - | 113 | T.EUROPE BV JULY B 2007 | JPY | 1 x JPYL6M + 0.40000% | 1.060% | - | - | 113 | - | - | - | 113 | Telefónica Europe, B.V. | | | | 1,735 | - | 226 | 1,500 | - | 1,368 | 4,829 | EMTN O2 EUR (I) | EUR | 4.375% | 4.375% | - | - | - | - | - | 1,750 | 1,750 | EMTN O2 EURO (II) | EUR | 3.75% | 3.750% | - | 2,250 | - | - | - | - | 2,250 | EMTN O2 GBP (I) | GBP | 5.375% | 5.375% | - | - | - | - | - | 844 | 844 | EMTN O2 GBP (II) | GBP | 5.375% | 5.375% | - | - | - | - | - | 563 | 563 | TELEF. EMISIONES JUN 06 TRANCHE B | USD | 5.984% | 5.984% | - | 694 | - | - | - | - | 694 | TELEF. EMISIONES JUN 06 TRANCHE C | USD | 6.421% | 6.421% | - | - | - | - | - | 868 | 868 | TELEF. EMISIONES JUN 06 TRANCHE D | USD | 7.045% | 7.045% | - | - | - | - | - | 1,388 | 1,388 | TELEF. EMISIONES JULY 06 | EUR | 1 x EURIBOR3M + 0.35000% | 1.083% | 1,250 | - | - | - | - | - | 1,250 | TELEF. EMISIONES SEPTEMBER 06 | EUR | 4.393% | 4.393% | - | - | 500 | - | - | - | 500 | TELEF. EMISIONES DECEMBER 06 | GBP | 5.888% | 5.888% | - | - | - | - | 563 | - | 563 | TELEF. EMISIONES JANUARY 06 A | EUR | 1 x EURIBOR6M + 0.83000% | 1.822% | - | - | - | - | - | 55 | 55 | TELEF. EMISIONES JANUARY 06 B | EUR | 1 x EURIBOR3M + 0.70000% | 1.422% | - | - | - | - | - | 24 | 24 | TELEF. EMISIONES FEBRUARY 07 | EUR | 4.674% | 4.674% | - | - | - | - | 1,500 | - | 1,500 | TELEF. EMISIONES JUNE A 07 | CZK | 1 x CZKPRIB_3M + 0.16000% | 1.710% | 91 | - | - | - | - | - | 91 | TELEF. EMISIONES JUNE B 07 | CZK | 4.351% | 4.351% | - | - | 113 | - | - | - | 113 | TELEF. EMISIONES JUNE C 07 | CZK | 4.623% | 4.623% | - | - | - | - | 98 | - | 98 | TELEF. EMISIONES JULY A 07 | USD | 5.855% | 5.855% | - | - | - | 521 | - | - | 521 | TELEF. EMISIONES JULY B 07 | USD | 1 x USDL3M + 0.33000% | 0.609% | - | - | - | 590 | - | - | 590 | TELEF. EMISIONES JULY C 07 | USD | 6.221% | 6.221% | - | - | - | - | - | 486 | 486 | TELEF. EMISIONES JUNE 08 | EUR | 5.58% | 5.580% | - | - | - | 1,250 | - | - | 1,250 | TELEF. EMISIONES FEBRUARY 09 | EUR | 5.431% | 5.431% | - | - | - | - | 2,000 | - | 2,000 | TELEF. EMISIONES APRIL 2016 | EUR | 5.4960% | 5.496% | - | - | - | - | - | 1, 000 | 1,000 | TELEF. EMISIONES JUNE 2015 | EUR | 1 x EURIBOR3M + 1.825% | 2.544% | - | - | - | - | - | 400 | 400 | TELEF. EMISIONES APRIL 1, 2016 | EUR | 5.496% | 5.496% | - | - | - | - | - | 500 | 500 | TELEF. EMISIONES JULY 6, 2015 | USD | 4.949% | 4.949% | - | - | - | - | - | 868 | 868 | TELEF. EMISIONES JULY 15, 2019 | USD | 5.877% | 5.877% | - | - | - | - | - | 694 | 694 | TELEF. EMISIONES NOVEMBER 11, 2019 | EUR | 4.693% | 4.693% | - | - | - | - | - | 1,750 | 1,750 | EMTN GBP 12/09/22 650 GBP | GBP | 5.289% | 5.289% | - | - | - | - | - | 732 | 732 | TELEF. EMISIONES DECEMBER 09 | EUR | 1 x EURIBOR3M + 0.70% | 1.409% | - | - | - | - | 100 | - | 100 | Telefónica Emisiones, S.A.U. | | 1,341 | 2,944 | 613 | 2,361 | 4,261 | 11,922 | 23,442 | Total Telefónica, S.A. and special purpose vehicles | | 3,095 | 2,944 | 839 | 3,861 | 4,261 | 13,397 | 28,397 |
Telefónica and its instrumental companies | | | Maturity (nominal) | Debentures and bonds | Currency | % Interest rate | 2011 | 2012 | 2013 | 2014 | 2015 | Subsequent years | Total | CAIXA 07/21/29 ZERO COUPON | EUR | 6.39% | - | - | - | - | - | 61 | 61 | ABN 15Y BOND | EUR | 1.0225xGBSW10Y | - | - | - | - | 50 | - | 50 | Telefónica, S.A. | - | - | - | - | 50 | 61 | 111 | T. EUROPE BV SEP_00 GLOBAL D | USD | 8.250% | - | - | - | - | - | 935 | 935 | TEBV FEB_03 EMTN FIXED TRANCHE A | EUR | 5.125% | - | - | 1,500 | - | - | - | 1,500 | TEBV FEB_03 EMTN FIXED TRANCHE B | EUR | 5.875% | - | - | - | - | - | 500 | 500 | T.EUROPE BV JULY A 2007 | JPY | 2.110% | - | 138 | | - | - | - | 138 | T.EUROPE BV JULY B 2007 | JPY | 1 x JPYL6M + 0.40000% | - | 138 | | - | - | - | 138 | Telefónica Europe, B.V. | - | 276 | 1,500 | - | - | 1,435 | 3,211 | EMTN O2 EUR (I) | EUR | 4.375% | - | - | - | - | - | 1,750 | 1,750 | EMTN O2 EURO (II) | EUR | 3.750% | 2,250 | - | - | - | - | - | 2,250 | EMTN O2 GBP (I) | GBP | 5.375% | - | - | - | - | - | 871 | 871 | EMTN O2 GBP (II) | GBP | 5.375% | - | - | - | - | - | 581 | 581 | TELEF EMISIONES JUN 06 TRANCHE B | USD | 5.984% | 748 | - | - | - | - | - | 748 | TELEF EMISIONES JUN 06 TRANCHE C | USD | 6.421% | - | - | - | - | - | 935 | 935 | TELEF EMISIONES JUN 06 TRANCHE D | USD | 7.045% | - | - | - | - | - | 1,497 | 1,497 | TELEF EMISIONES SEPTEMBER 06 | EUR | 4.393% | - | 500 | - | - | - | - | 500 | TELEF EMISIONES DECEMBER 06 | GBP | 5.888% | - | - | - | 581 | - | - | 581 | TELEF EMISIONES FEBRUARY 07 | EUR | 4.674% | - | - | - | 1,500 | - | - | 1,500 | TELEF EMISIONES JUNE B 07 | CZK | 4.351% | - | 120 | - | - | - | - | 120 | TELEF EMISIONES JUNE C 07 | CZK | 4.623% | - | - | - | 104 | - | - | 104 | TELEF EMISIONES JULY A 07 | USD | 5.855% | - | - | 561 | - | - | - | 561 | TELEF EMISIONES JULY C 07 | USD | 6.221% | - | - | - | - | - | 524 | 524 | TELEF EMISIONES JUNE 08 | EUR | 5.580% | - | - | 1,250 | - | - | - | 1,250 | TELEF EMISIONES FEBRUARY 09 | EUR | 5.431% | - | - | - | 2,000 | - | - | 2,000 | TELEF EMISIONES APRIL 2016 | EUR | 5.496% | - | - | - | - | - | 1,000 | 1,000 | TELEF EMISIONES APRIL 2016 | EUR | 5.496% | - | - | - | - | - | 500 | 500 | TELEF EMISIONES JULY 6, 2015 | USD | 4.949% | - | - | - | - | 935 | | 935 | TELEF EMISIONES JULY 15, 2019 | USD | 5.877% | - | - | - | - | - | 748 | 748 | TELEF EMISIONES JUNE 2015 | EUR | 1 x EURIBOR3M + 1.825% | - | - | - | - | 400 | - | 400 | TELEF EMISIONES JULY B 07 | USD | 1 x USDL3M + 0.33000% | - | - | 636 | - | - | - | 636 | TELEF EMISIONES JANUARY 06 A | EUR | 1 x EURIBOR6M + 0.83000% | - | - | - | - | - | 55 | 55 | TELEF EMISIONES JANUARY 06 B | EUR | 1 x EURIBOR3M + 0.70% | - | - | - | - | - | 24 | 24 | TELEF EMISIONES NOVEMBER 11, 2019 | EUR | 4.693% | - | | - | - | - | 1,750 | 1,750 | EMTN GBP 12/09/2022 650 GBP | GBP | 5.289% | - | | - | - | - | 755 | 755 | TELEF EMISIONES DECEMBER 09 | EUR | 1 x EURIBOR3M + 0.70% | - | | - | 100 | - | - | 100 | TELEF EMISIONES MARCH 10 | EUR | 3.406% | - | | - | - | 1,400 | | 1,400 | TELEF EMISIONES APRIL 1, 2010 | USD | 2.582% | - | | 898 | - | - | - | 898 | TELEF EMISIONES APRIL 2, 2010 | USD | 3.729% | - | | - | - | 674 | - | 674 | TELEF EMISIONES APRIL 3, 2010 | USD | 5.134% | - | | - | - | - | 1,048 | 1,048 | TELEF EMISIONES SEPTEMBER 10 | EUR | 3.661% | - | - | - | - | - | 1,000 | 1,000 | EMTN GBP 10/08/2029 400 GBP | GBP | 5.445% | - | - | - | - | - | 465 | 465 | Telefónica Emisiones, S.A.U. | 2,998 | 620 | 3,345 | 4,285 | 3,409 | 13,503 | 28,160 | Total Telefónica, S.A. and its instrumental companies | 2.998 | 896 | 4,845 | 4,285 | 3,459 | 14,999 | 31,482 |
| | | Maturity (nominal) | | Foreign operators Debentures and bonds | Currency | | 2011 | 2012 | 2013 | 2014 | 2015 | Subsequent years | Total | Marketable debentures | USD | 8.850% | 87 | - | - | - | - | - | 87 | Telefónica Argentina, SA | | | 87 | - | - | - | - | - | 87 | Serie F | UFC | 6.00% | 2 | 3 | 3 | 2 | 2 | 1 | 13 | Serie L | UFC | 3.75% | - | 103 | - | - | - | - | 103 | Serie N | UFC | 3.50% | - | - | - | 172 | - | - | 172 | Serie M | CLP | 6.05% | - | - | - | 33 | - | - | 33 | Telefónica Chile, S.A. | | | 2 | 106 | 3 | 207 | 2 | 1 | 321 | Bond A | CLP | 5.60% | - | - | - | 51 | - | - | 51 | USD bond | USD | 2.875% | - | - | - | - | 225 | - | 225 | Telefónica Móviles Chile, S.A. | | | - | - | - | 51 | 225 | - | 276 | Series C | USD | 8.50% | 2 | 3 | 2 | - | - | - | 7 | Series A | USD | 7.75% | 1 | - | - | - | - | - | 1 | Series B | USD | 8.00% | 1 | 1 | - | - | - | - | 2 | Commercial paper | USD | 3.75% | 4 | - | - | - | - | - | 4 | Commercial paper | USD | 3.80% | 11 | - | - | - | - | - | 11 | Otecel, S.A. | | | 19 | 4 | 2 | - | - | - | 25 | CB TELEFÓNICA FINANZAS MEXICO B | MXN | 9.25% | - | 212 | - | - | - | - | 212 | T. FINANZAS MEX EMISIÓN 0710 FIJ | MXN | 8.07% | - | - | - | - | - | 121 | 121 | T. FINANZAS MEX EMISION 0710 VAR | MXN | TIIE28 + 55bps | - | - | - | 242 | - | - | 242 | Telefónica Finanzas México, S.A. | | | - | 212 | - | 242 | - | 121 | 575 | T. Perú 4th Program (4th Series A) | PEN | 6.625% | - | 22 | - | - | - | - | 22 | T. Perú 4th Program (9th Series A) | PEN | 6.9375% | 15 | - | - | - | - | - | 15 | T. Perú 4th Program (9th Series B) | PEN | 6.375% | 24 | - | - | - | - | - | 24 | T. Perú 4th Program (10th Series A) | PEN | 7.875% | - | 8 | - | - | - | - | 8 | T. Perú 4th Program (10th Series B) | PEN | 6.4375% | - | 14 | - | - | - | - | 14 | T. Perú 4th Program (12th Series A) | PEN | VAC + 3.6875% | - | - | - | - | - | 16 | 16 | T. Perú 4th Program (14th Series B) | PEN | 5.9380% | 9 | - | - | - | - | - | 9 | T. Perú 4th Program (14th Series C) | PEN | 5.750% | 12 | - | - | - | - | - | 12 | T. Perú 4th Program (16th Series A) | PEN | 6.000% | - | 27 | - | - | - | - | 27 | T. Perú 4th Program (16th Series B) | PEN | 6.250% | - | - | 8 | - | - | - | 8 | T. Perú 4th Program (19th Series A) | PEN | VAC + 3.6250% | - | - | - | - | - | 16 | 16 | T. Perú 4th Program (19th Series B) | PEN | VAC + 2.8750% | - | - | - | - | - | 13 | 13 | T. Perú 4th Program (19th Series C) | PEN | VAC + 3.1875% | - | - | - | - | - | 5 | 5 | T. Perú 4th Program (36th Series A) | PEN | VAC + 3.6875% | - | - | - | - | - | 40 | 40 | T. Perú 4th Program (36th Series B) | PEN | VAC + 3.3750% | - | - | - | - | - | 13 | 13 | T. Perú 4th Program (37th Series A) | PEN | VAC + 3.1250% | - | - | - | - | - | 13 | 13 | T. Perú 4th Program (40th Series A) | PEN | 5.875% | 8 | - | - | - | - | - | 8 | T. Perú 4th Program (40th Series B) | PEN | 4.875% | 4 | - | - | - | - | - | 4 | T. Perú 4th Program (41st Series A) | PEN | 7.9375% | - | 4 | - | - | - | - | 4 | T. Perú 4th Program (42nd Series A) | PEN | 7.3750% | - | - | 7 | - | - | - | 7 | T. Perú 4th Program (42nd Series B) | PEN | 5.3125% | - | - | 5 | - | - | - | 5 | T. Perú 4th Program (42nd Series C) | PEN | 6.0625% | - | - | 4 | - | - | - | 4 | T. Perú 4th Program (45th Series A) | USD | 6.685% | - | - | - | - | - | 16 | 16 | T. Perú 5th Program (1st Series A) | PEN | 3.50% | 8 | - | - | - | - | - | 8 | T. Perú 5th Program (1st Series B) | PEN | 3.50% | 7 | - | - | - | - | - | 7 |
| | | Maturity (nominal) | | Foreign operators Debentures and bonds | Currency | | 2011 | 2012 | 2013 | 2014 | 2015 | Subsequent years | Total |
T. Perú 5th Program (3rd Series A) | PEN | 4.38% | - | 8 | - | - | - | - | 8 | T. Perú 5th Program (5th Series A) | PEN | 6.1875% | - | - | 6 | - | - | - | 6 | T. Perú 5th Program (25th Series A) | PEN | 4.3125% | - | 5 | - | - | - | - | 5 | T. Perú 5th Program (25th Series B) | PEN | 4.3125% | - | 3 | - | - | - | - | 3 | T. Perú 5th Program (25th Series B) | PEN | 7.50% | - | - | - | - | - | 6 | 6 | T. Perú 5th Program (33rd Series A) | PEN | 6.8125% | - | - | - | - | - | 16 | 16 | T. Perú 5th Program (22nd Series A) | PEN | VAC + 3.5000% | - | - | - | - | - | 16 | 16 | T. Perú Senior Notes | PEN | 8.000% | - | - | 33 | 67 | 67 | 34 | 201 | Telefónica del Perú, S.A. | | | 87 | 91 | 63 | 67 | 67 | 204 | 579 | T.M. Perú 1st Program (2nd Series A) | PEN | 7.0625% | 14 | - | - | - | - | - | 14 | T.M. Perú 1st Program (2nd Series B) | PEN | 7.5625% | 7 | - | - | - | - | - | 7 | T.M. Perú 1st Program (2nd Series C) | PEN | 7.5625% | 12 | - | - | - | - | - | 12 | T.M. Perú 1st Program (3rd Series A) | PEN | 7.4375% | - | - | 10 | - | - | - | 10 | T.M. Perú 1st Program (3rd Series B) | PEN | 7.6875% | - | - | 5 | - | - | - | 5 | T.M. Perú 1st Program (16th Series A) | PEN | 8.1875% | - | - | 6 | - | - | - | 6 | T.M. Perú 1st Program (18th Series A) | PEN | 6.3125% | - | - | - | 11 | - | - | 11 | T.M. Perú 1st Program (18th Series B) | PEN | 6.3750% | - | - | - | 17 | - | - | 17 | T.M. Perú 2nd Program (3rd Series A) | PEN | 5.750% | - | - | 7 | - | - | - | 7 | T.M. Perú 2nd Program (9th Series A) | PEN | 6.8125% | - | - | - | - | - | 16 | 16 | T.M. Perú 2nd Program (9th Series B) | PEN | 6.3750% | - | - | - | - | - | 13 | 13 | T.M. Perú 2nd Program (11th Series A) | PEN | 7.750% | - | - | - | - | - | 19 | 19 | Telefónica Móviles, S.A. (Perú) | | | 33 | - | 28 | 28 | - | 48 | 137 | Nonconvertible bonds | BRL | 1.20 x CDI | 90 | - | - | - | - | - | 90 | Nonconvertible bonds | BRL | 1.06 x CDI | - | 153 | - | - | - | - | 153 | Nonconvertible bonds | BRL | 1.08 x CDI | - | 44 | - | - | - | - | 44 | Nonconvertible bonds | BRL | 1.12 x CDI | - | - | 287 | - | - | - | 287 | Nonconvertible bonds | BRL | IPCA + 7% | - | - | - | 32 | - | - | 32 | Convertible bonds (Telemig) | BRL | IPCA + 0.5% | - | - | - | - | - | 25 | 25 | Vivo Participações, S.A. | | | 90 | 197 | 287 | 32 | - | 25 | 631 | O2 pounds sterling issue | GBP | 7.625% | - | 436 | - | - | - | - | 436 | MMO2, Plc | | | - | 436 | - | - | - | - | 436 | Total issues other operators | | | 318 | 1,046 | 383 | 627 | 294 | 399 | 3,067 | TOTAL OUTSTANDING DEBENTURES AND BONDS | 3,316 | 1,942 | 5,228 | 4,912 | 3,753 | 15,398 | 34,549 |
Foreign operators | | | Maturity | | Debentures and bonds | Currency | | 2010 | 2011 | 2012 | 2013 | 2014 | Subsequent years | Total | Marketable debentures | USD | 9% | 101 | - | - | - | - | - | 101 | Marketable debentures | USD | 8.85% | - | 80 | - | - | - | - | 80 | Telefónica Argentina, S.A. | | | 101 | 80 | - | - | - | - | 181 | Series F | UF | 6.00% | 2 | 2 | 2 | 2 | 2 | 3 | 13 | Series L | UF | 3.75% | - | - | 86 | - | - | - | 86 | Series M | CLP | 6.05% | - | - | - | - | 28 | - | 28 | Series N | UF | 3.50% | - | - | - | - | 143 | - | 143 | CTC Chile | | | 2 | 2 | 88 | 2 | 173 | 3 | 270 | Series A | CLP | 5.60% | - | - | - | - | 44 | - | 44 | Telefónica Móviles Chile | | | - | - | - | - | 44 | - | 44 | Series A | USD | 7.75% | 3 | 2 | - | - | - | - | 5 | Series B | USD | 8.00% | 2 | 2 | 2 | - | - | - | 6 | Series C | USD | 8.50% | 3 | 3 | 3 | 3 | - | - | 12 | Otecel, S.A. | | | 8 | 7 | 5 | 3 | - | - | 23 | Peso bonds, Series A | MXN | 91-day CETES + 0.61% | 425 | - | - | - | - | - | 425 | Peso bonds, Series B | MXN | 9.250% | - | - | 186 | - | - | - | 186 | Telefónica Finanzas México | | | 425 | - | 186 | - | - | - | 611 | O2 sterling issue | GBP | 7.625% | - | - | 422 | - | - | - | 422 | O2 | | | - | - | 422 | - | - | - | 422 | T. Peru 3rd Program (1st series) | PEN | VAC +5.00% | 12 | - | - | - | - | - | 12 | T. Peru 4th Program (10th Series A) | PEN | 7.8750% | - | - | 7 | - | - | - | 7 | T. Peru 4th Program (10th Series B) | PEN | 6.4375% | - | - | 12 | - | - | - | 12 | T. Peru 4th Program (12th Series A) | PEN | VAC + 3.6875% | - | - | - | - | - | 15 | 15 | T. Peru 4th Program (14th Series A) | PEN | 6.3750% | 12 | - | - | - | - | - | 12 | T. Peru 4th Program (14th Series B) | PEN | 5.9375% | - | 8 | - | - | - | - | 8 | T. Peru 4th Program (14th Series C) | PEN | 5.7500% | - | 11 | - | - | - | - | 11 | T. Peru 4th Program (16th Series A) | PEN | 6.0000% | - | - | 24 | - | - | - | 24 | T. Peru 4th Program (16th Series B) | PEN | 6.2500% | - | - | - | 7 | - | - | 7 | T. Peru 4th Program (19th Series A) | PEN | VAC + 3.6250% | - | - | - | - | - | 15 | 15 | T. Peru 4th Program (19th Series B) | PEN | VAC + 2.8750% | - | - | - | - | - | 12 | 12 | T. Peru 4th Program (19th Series C) | PEN | VAC + 3.1875% | - | - | - | - | - | 5 | 5 | T. Peru 4th Program (36th Series A) | PEN | VAC + 3.6875% | - | - | - | - | - | 38 | 38 | T. Peru 4th Program (36th Series B) | PEN | VAC + 3.3750% | - | - | - | - | - | 13 | 13 | T. Peru 4th Program (37th Series A) | PEN | VAC + 3.1250% | - | - | - | - | - | 12 | 12 | T. Peru 4th Program (4th Series A) | PEN | 6.6250% | - | - | 19 | - | - | - | 19 | T. Peru 4th Program (40th Series A) | PEN | 5.8750% | - | 7 | - | - | - | - | 7 | T. Peru 4th Program (40th Series B) | PEN | 4.8750% | - | 4 | - | - | - | - | 4 | T. Peru 4th Program (41st Series A) | PEN | 7.9375% | - | - | 4 | - | - | - | 4 | T. Peru 4th Program (42nd Series A) | PEN | 7.3750% | - | - | - | 6 | - | - | 6 | T. Peru 4th Program (42nd Series B) | PEN | 5.3125% | - | - | - | 5 | - | - | 5 | T. Peru 4th Program (42nd Series C) | PEN | 6.0625% | - | - | - | 3 | - | - | 3 | T. Peru 4th Program (45th Series A) | USD | 6.6875% | - | - | - | - | - | 15 | 15 | T. Peru 4th Program (7th Series C) | PEN | 5.5625% | 4 | - | - | - | - | - | 4 | T. Peru 4th Program (8th Series A) | PEN | 7.3750% | 7 | - | - | - | - | - | 7 | T. Peru 4th Program (8th Series B) | PEN | 6.2500% | 13 | - | - | - | - | - | 13 | T. Peru 4th Program (9th Series A) | PEN | 6.9375% | - | 14 | - | - | - | - | 14 | T. Peru 4th Program (9th Series B) | PEN | 6.3750% | - | 21 | - | - | - | - | 21 | T. Peru 5th Program (1st Series A) | PEN | 3.5000% | - | 7 | - | - | - | - | 7 | T. Peru 5th Program (1st Series B) | PEN | 3.5000% | - | 6 | - | - | - | - | 6 | T. Peru 5th Program (22nd Series A) | PEN | VAC + 3.5000% | - | - | - | - | - | 14 | 14 | T. Peru 5th Program (3rd Series A) | PEN | 4.3750% | - | - | 7 | - | - | - | 7 | T. Peru 5th Program (5th Series A) | PEN | 6.1875% | - | - | - | 5 | - | - | 5 | T. Peru Senior Notes | PEN | 8.0000% | - | - | - | 30 | 60 | 91 | 181 | Telefónica del Perú, S.A.A. | | | 48 | 78 | 73 | 56 | 60 | 230 | 545 | T.M. Peru 1st Program (16th Series A) | PEN | 8.1875% | - | - | - | 6 | - | - | 6 | T.M. Peru 1st Program (18th Series A) | PEN | 6.3125% | - | - | - | - | 10 | - | 10 | T.M. Peru 1st Program (18th Series B) | PEN | 6.3750% | - | - | - | - | 15 | - | 15 | T.M. Peru 1st Program (2nd Series A) | PEN | 7.0625% | - | 12 | - | - | - | - | 12 | T.M. Peru 1st Program (2nd Series B) | PEN | 7.5625% | - | 6 | - | - | - | - | 6 | T.M. Peru 1st Program (2nd Series C) | PEN | 7.5625% | - | 11 | - | - | - | - | 11 | T.M. Peru 1st Program (3rd Series A) | PEN | 7.4375% | - | - | - | 8 | - | - | 8 | T.M. Peru 1st Program (3rd Series B) | PEN | 7.6875% | - | - | - | 5 | - | - | 5 | T.M. Peru 1st Program (8th Series A) | PEN | 6.4375% | 11 | - | - | - | - | - | 11 | Telefónica Móviles, S.A (Perú) | | | 11 | 29 | - | 19 | 25 | - | 84 | Nonconvertible bonds | BRL | 1.042* CDI | 159 | - | - | - | - | - | 159 | Nonconvertible bonds | BRL | 1.02 *CDI | - | 40 | - | - | - | - | 40 | Nonconvertible bonds | BRL | 1.1355* CDI | 42 | - | - | - | - | - | 42 | Nonconvertible bonds | BRL | 1.08 *CDI | - | - | 20 | - | - | - | 20 | Nonconvertible bonds | BRL | 1.12 *CDI | - | - | - | 128 | - | - | 128 | Nonconvertible bonds | BRL | CPI-A + 7% | - | - | - | - | 14 | - | 14 | Convertible bonds (Telemig) | BRL | CPI-A + 0.5% | - | - | - | - | - | 10 | 10 | Vivo Participações, S.A. | | | 201 | 40 | 20 | 128 | 14 | 10 | 413 | Nonconvertible bonds | BRL | 1 * CDI + 0.35000% | 598 | - | - | - | - | - | 598 | Telesp | | | 598 | - | - | - | - | - | 598 | Total issues other operators | | | 1,394 | 236 | 794 | 208 | 316 | 243 | 3,191 | TOTAL OUTSTANDING DEBENTURES AND BONDS | 4,489 | 3,180 | 1,633 | 4,069 | 4,577 | 13,640 | 31,588 |
The list and main features of outstanding debentures and bonds at December 31, 2008 are as follows (in millions of euros):
Telefónica and special purpose vehicles | | | | Maturity | Debentures and bonds | Currency | | Final rate | 2009 | 2010 | 2011 | 2012 | 2013 | Subsequent years | Total | ABN 15Y BOND | EUR | 1.0225 * GBSW10Y | 5.260% | - | - | - | - | - | 50 | 50 | CAIXA 07/21/29 ZERO COUPON | EUR | 6.370% | 6.370% | - | - | - | - | - | 54 | 54 | TELEFÓNICA FEBRUARY 90 F ZERO COUPON | EUR | 12.579% | 12.579% | - | 14 | - | - | - | - | 14 | TELEFÓNICA FEBRUARY 90C-12.60% | EUR | 12.600% | 12.600% | - | 4 | - | - | - | - | 4 | TELEFÓNICA JUNE 99-EURIBOR+63BP | EUR | 1*EURIBOR1Y+0.63000% | 6.038% | 300 | - | - | - | - | - | 300 | TELEFÓNICA MARCH 99-4.50% | EUR | 4.500% | 4.500% | 500 | - | - | - | - | - | 500 | Telefónica, S.A. | | | | 800 | 18 | - | - | - | 104 | 922 | T. EUROPE BV SEP_00 GLOBAL C | USD | 7.750% | 7.750% | - | 1,796 | - | - | - | - | 1,796 | T. EUROPE BV SEP_00 GLOBAL D | USD | 8.250% | 8.250% | - | - | - | - | - | 898 | 898 | TEBV FEB_03 EMTN FIXED TRANCHE A | EUR | 5.125% | 5.125% | - | - | - | - | 1,,500 | - | 1,500 | TEBV FEB_03 EMTN FIXED TRANCHE B | EUR | 5.875% | 5.875% | - | - | - | - | - | 500 | 500 | T.EUROPE BV JULY A 2007 | JPY | 2.110% | 2.110% | - | - | - | 119 | - | - | 119 | T.EUROPE BV JULY B 2007 | JPY | 1 x JPYL6M + 0.40000% | 1.411% | - | - | - | 119 | - | - | 119 | Telefónica Europe, B.V. | | | | - | 1,796 | - | 238 | 1,500 | 1,398 | 4,932 | EMTN O2 EUR (I) | EUR | 4.375% | 4.375% | - | - | - | - | - | 1,750 | 1,750 | EMTN O2 EURO (II) | EUR | 3.750% | 3.750% | - | - | 2,250 | - | - | - | 2,250 | EMTN O2 GBP (I) | GBP | 5.375% | 5.375% | - | - | - | - | - | 787 | 787 | EMTN O2 GBP (II) | GBP | 5.375% | 5.375% | - | - | - | - | - | 525 | 525 | TELEF. EMISIONES JUN 06 TRANCHE A | USD | 1 * USDL3M + 0.30000% | 1.825% | 719 | - | - | - | - | - | 719 | TELEF. EMISIONES JUN 06 TRANCHE B | USD | 5.984% | 5.984% | - | - | 719 | - | - | - | 719 | TELEF. EMISIONES JUN 06 TRANCHE C | USD | 6.421% | 6.421% | - | - | - | - | - | 898 | 898 | TELEF. EMISIONES JUN 06 TRANCHE D | USD | 7.045% | 7.045% | - | - | - | - | - | 1,437 | 1,437 | TELEF. EMISIONES JULY 06 | EUR | 1 * EURIBOR3M + 0.35000% | 5.271% | - | 1,250 | - | - | - | - | 1,250 | TELEF. EMISIONES SEPTEMBER 06 | EUR | 4.393% | 4.393% | - | - | - | 500 | - | - | 500 | TELEF. EMISIONES DECEMBER 06 | GBP | 5.888% | 5.888% | - | - | - | - | - | 525 | 525 | TELEF. EMISIONES JANUARY 06 A | EUR | 1 * EURIBOR6M + 0.83000% | 3.891% | - | - | - | - | - | 55 | 55 | TELEF. EMISIONES JANUARY 06 TRANCHE B | EUR | 1 * EURIBOR3M + 0.70000% | 5.527% | - | - | - | - | - | 24 | 24 | TELEF. EMISIONES FEBRUARY 07 | EUR | 4.674% | 4.674% | - | - | - | - | - | 1,,500 | 1.500 | TELEF. EMISIONES MARCH 07 | EUR | 1 * EURIBOR3M + 0.13000% | 3.121% | 350 | - | - | - | - | - | 350 | TELEF. EMISIONES JUNE A 07 | CZK | 1 * CZKPRIB_3M + 0.16000% | 4.070% | - | 89 | - | - | - | - | 89 | TELEF. EMISIONES JUNE B 07 | CZK | 4.351% | 4.351% | - | - | - | 111 | - | - | 111 | TELEF. EMISIONES JUNE C 07 | CZK | 4.623% | 4.623% | - | - | - | - | - | 97 | 97 | TELEF. EMISIONES JULY A 07 | USD | 5.855% | 5.855% | - | - | - | - | 539 | - | 539 | TELEF. EMISIONES JULY B 07 | USD | 1 * USDL3M + 0.33000% | 3.356% | - | - | - | - | 611 | - | 611 | TELEF. EMISIONES JULY C 07 | USD | 6.221% | 6.221% | - | - | - | - | - | 503 | 503 | TELEF. EMISIONES JUNE 08 | EUR | 5.580% | 5.580% | - | - | - | - | 1,250 | - | 1,250 | Telefónica Emisiones, S.A.U. | | | | 1,069 | 1,339 | 2,969 | 611 | 2,400 | 8,101 | 16,489 | Total Telefónica, S.A. and special purpose vehicles | | 1,869 | 3,153 | 2,969 | 849 | 3,900 | 9,603 | 22,343 |
The main debentures and bonds issued by the Group in 2011 are as follows: Foreign operators | | | Maturity | | Debentures and bonds | Currency | | 2009 | 2010 | 2011 | 2012 | 2013 | Subsequent years | Total | Marketable debentures | USD | 9.125% | - | 141 | - | - | - | - | 141 | Marketable debentures | USD | 8.85% | - | - | 97 | - | - | - | 97 | Marketable debentures | USD | 8.85% | - | - | - | - | - | - | - | Telefónica de Argentina, SA | | | - | 141 | 97 | - | - | - | 238 | Series F | UFC | 6% | 2 | 2 | 2 | 2 | 2 | 4 | 13 | Series L | UFC | 3.75% | - | - | - | 73 | - | - | 73 | CTC Chile | | | 2 | 2 | 2 | 75 | 2 | 4 | 86 | Peso bonds, Series A | MXN | 91-day CETES + 0.61% | - | 425 | - | - | - | - | 425 | Peso bonds, Series B | MXN | 9.25% | - | - | - | 186 | - | - | 186 | Telefónica Finanzas México | | | - | 425 | - | 186 | - | - | 611 | O2 sterling issue | GBP | 7.625% | - | - | - | 394 | - | - | 394 | O2 | | | - | - | - | 394 | - | - | 394 | 8th issue T. Peru bonds | USD | 3.8125% | 12 | - | - | - | - | - | 12 | T. Peru 1st Program (2nd) | PEN | VAC + 7% | 10 | - | - | - | - | - | 10 | T. Peru 3rd Program (1st) | PEN | VAC + 5% | - | 11 | - | - | - | - | 11 | T. Peru 4th Program (10th Series A) | PEN | 7.875% | - | - | - | 7 | - | - | 7 | T. Peru 4th Program (10th Series B) | PEN | 6.4375% | - | - | - | 12 | - | - | 12 | T. Peru 4th Program (12th Series A) | PEN | VAC + 3.6875% | - | - | - | - | - | 14 | 14 | T. Peru 4th Program (14th Series A) | PEN | 6.375% | - | 11 | - | - | - | - | 11 | T. Peru 4th Program (14th Series B) | PEN | 5.9375% | - | - | 8 | - | - | - | 8 | T. Peru 4th Program (14th Series C) | PEN | 5.75% | - | - | 10 | - | - | - | 10 | T. Peru 4th Program (16th Series A) | PEN | 6% | - | - | - | 23 | - | - | 23 | T. Peru 4th Program (16th Series B) | PEN | 6.25% | - | - | - | - | 7 | - | 7 | T. Peru 4th Program (19th Series A) | PEN | VAC + 3.625% | - | - | - | - | - | 14 | 14 | T. Peru 4th Program (19th Series B) | PEN | VAC + 2.875% | - | - | - | - | - | 11 | 11 | T. Peru 4th Program (19th Series C) | PEN | VAC + 3.1875% | - | - | - | - | - | 5 | 5 | T. Peru 4th Program (36th Series A) | PEN | VAC + 3.6875% | - | - | - | - | - | 34 | 34 | T. Peru 4th Program (36th Series B) | PEN | VAC + 3.375% | - | - | - | - | - | 11 | 11 | T. Peru 4th Program (37th Series A) | PEN | VAC + 3.125% | - | - | - | - | - | 11 | 11 | T. Peru 4th Program (13th Series A) | PEN | 5.2625% | 18 | - | - | - | - | - | 18 | T. Peru 4th Program (4th Series A) | PEN | 6.625% | - | - | - | 18 | - | - | 18 | T. Peru 4th Program (7th) | PEN | 6.1875% | 12 | - | - | - | - | - | 12 | T. Peru 4th Program (7th Series B) | PEN | 5.875% | 4 | - | - | - | - | - | 4 | T. Peru 4th Program (7th Series C) | PEN | 5.5625% | - | 4 | - | - | - | - | 4 | T. Peru 4th Program (8th Series A) | PEN | 7.375% | - | 7 | - | - | - | - | 7 | T. Peru 4th Program (8th Series B) | PEN | 6.25% | - | 12 | - | - | - | - | 12 | T. Peru 4th Program (9th Series A) | PEN | 6.9375% | - | - | 13 | - | - | - | 13 | T. Peru 4th Program (9th Series B) | PEN | 6.375% | - | - | 20 | - | - | - | 20 | T. Peru Senior Notes | PEN | 8% | - | - | - | - | 29 | 144 | 173 | Telefónica de Perú, S.A.A. | | | 56 | 45 | 51 | 60 | 36 | 244 | 492 | T.M. Peru 1st Program (1st Series A) | PEN | 6.25% | 11 | - | - | - | - | - | 11 | T.M. Peru 1st Program (2nd Series A) | PEN | 7.0625% | - | - | 11 | - | - | - | 11 | T.M. Peru 1st Program (2nd Series B) | PEN | 7.5625% | - | - | 6 | - | - | - | 6 | T.M. Peru 1st Program (2nd Series C) | PEN | 7.5625% | - | - | 10 | - | - | - | 10 | T.M. Peru 1st Program (3rd Series A) | PEN | 7.4375% | - | - | - | - | 8 | - | 8 | T.M. Peru 1st Program (3rd Series B) | PEN | 7.6875% | - | - | - | - | 5 | - | 5 | T.M. Peru 1st Program (8th Series A) | PEN | 6.4375% | - | 11 | - | - | - | - | 11 | Telefónica Móviles, S.A. (Peru) | | | 11 | 11 | 27 | - | 13 | - | 62 | Nonconvertible bonds | BRL | 104.2% CDI | - | | - | - | - | 123 | 123 | Nonconvertible bonds | BRL | 103% CDI | | - | - | - | - | 31 | 31 | Convertible bonds (Telemig) I | BRL | CPI-A + 0.5% | - | - | - | - | - | 1 | 1 | Convertible bonds (Telemig) II | BRL | CPI-A + 0.5% | - | - | - | - | - | 3 | 3 | Convertible bonds (Telemig) III | BRL | CPI-A + 0.5% | - | - | - | - | - | 5 | 5 | Vivo Participações, S.A. | | | - | - | - | - | - | 163 | 163 | Nonconvertible bonds | BRL | 1 x CDI + 0.35000% | - | 461 | - | - | - | - | 461 | Telesp | | | - | 461 | - | - | - | - | 461 | Total issues other operators | 69 | 1,085 | 177 | 715 | 50 | 410 | 2,505 | TOTAL OUTSTANDING DEBENTURES AND BONDS | 1,938 | 4,239 | 3,146 | 1,563 | 3,950 | 10,013 | 24,849 |
Item | Date | Maturity | Nominal value | Currency of issuance | Interest rate | (millions) | (millions of euros) (1) | EMTN bonds | 02/07/11 | 02/07/17 | 1,200 | 1,200 | EUR | 4.7500% | | 03/21/11 | 02/07/17 | 100 | 100 | EUR | 4.7500% | | 11/03/11 | 02/03/16 | 1,000 | 1,000 | EUR | 4.9670% | | 11/04/11 | 11/04/16 | 7,000 | 70 | JPY | 2.8247% | U.S. Shelf (SEC) bond | 02/16/11 | 02/16/16 | 1,250 | 966 | USD | 3.9920% | | 02/16/11 | 02/16/21 | 1,500 | 1,159 | USD | 5.4620% | Telefónica Emisiones, S.A.U. | | | | | | | Bond | 11/22/11 | 11/22/16 | 66,000 | 98 | CLP | 6.3000% | | 11/22/11 | 11/22/16 | 2 | 66 | UFC | UF + 3.60% | Telefónica Móviles Chile, S.A. | | | | | | | Bond | 10/04/11 | 10/05/16 | 59 | 17 | PEN | 6.1875% | Telefónica del Perú, S.A.A. | | | | | | | Bond | 03/24/11 | 03/24/18 | 60 | 17 | PEN | 7.3750% | Telefónica Móviles, S.A. (Perú) | | | | | | | Securitization | 11/17/11 | 10/10/12 | 5 | 4 | USD | 4.0000% | | 11/23/11 | 10/10/12 | 15 | 12 | USD | 4.0000% | Otecel, S.A. | | | | | | | (1) Exchange rate at December 31, 2011 |
The main debentures and bonds issued by the Group in 20092010 are as follows: Item | Date | Nominal value | Currency of issuance | Maturity | Interest rate | (millions) | (millions of euros) | EMTN bonds | 02-03-09 | 2,000 | 2,000 | EUR | 02-03-14 | 5.431% | 04-01-09 | 1,000 | 1,000 | EUR | 04-01-16 | 5.496% | 06-03-09 | 500 | 500 | EUR | 04-01-16 | 5.496% | 06-02-09 | 400 | 400 | EUR | 06-02-15 | 3-month Euribor + 1.825% | 11-10-09 | 1,750 | 1,750 | EUR | 11-11-19 | 4.693% | 12-10-09 | 650 | 732 | GBP | 12-09-22 | 5.289% | 12-23-09 | 100 | 100 | EUR | 12-23-14 | 3-month Euribor + 0.70% | SEC bond | 07-06-09 | 1,000 | 694 | USD | 07-15-19 | 5.877% | 07-06-09 | 1,250 | 868 | USD | 01-15-15 | 4.949% | Telefónica Emisiones, S.A.U. | Debentures | 01-16-09 | 105 | 42 | BRL | 01-11-10 | 113.55% CDI | 10-15-09 | 49 | 20 | BRL | 10-15-19 | 108% CDI (until 10/15/12 (1)) | 10-15-09 | 320 | 128 | BRL | 10-15-19 | 112% CDI (until 10/15/13 (1)) | 10-15-09 | 36 | 14 | BRL | 10-15-19 | HCPI + 7% (until 10/15/14 (1)) | Vivo Participações, S.A. | Bonds | 04-15-09 | 5 | 143 | UFC | 04-01-14 | 3.50% | 04-22-09 | 20,500 | 28 | CLP | 04-01-14 | 6.05% | 08-05-09 | 32,000 | 44 | CLP | 07-15-14 | 5.60% | CTC Chile | | | | | | | Bonds | 02-12-09 | 16.675 | 4 | PEN | 02-12-12 | 7.9375% | 03-27-09 | 25 | 6 | PEN | 03-27-13 | 7.3750% | 06-08-09 | 14.30 | 3 | PEN | 06-08-13 | 6.0625% | 06-08-09 | 15.70 | 4 | PEN | 06-08-11 | 4.8750% | 05-19-09 | 30 | 7 | PEN | 05-19-11 | 5.8750% | 05-19-09 | 20.50 | 5 | PEN | 05-19-16 | 5.3125% | 04-22-09 | 22 | 15 | USD | 04-22-13 | 6.6875% | 06-16-09 | 21 | 5 | PEN | 06-17-13 | 6.1875% | 10-20-09 | 25 | 6 | PEN | 10-20-11 | 3.5% | 10-20-09 | 30 | 7 | PEN | 10-20-12 | 4.375% | 10-07-09 | 60 | 14 | PEN | 10-07-21 | VAC + 3.5% | 09-14-09 | 30 | 7 | PEN | 09-14-11 | 3.5% | Telefónica de Perú, S.A.A | Bonds | 01-23-09 | 23 | 6 | PEN | 01-23-13 | 8.1875% | 09-22-09 | 40 | 10 | PEN | 09-23-14 | 6.3125% | 10-05-09 | 62 | 15 | PEN | 10-06-14 | 6.375% | Telefónica Móviles, S.A. (Perú) | Securities | 04-01-09 / 06-2-09 | 15 | 7 | USD | 03-2-11 | 7.75% | 04-01-09 / 06-10-09 | 9 | 6 | USD | 03-16-12 | 8.00% | 04-01-09 | 20 | 14 | USD | 03-11-13 | 8.50% | Otecel, S.A. |
Item | Date | Maturity | Nominal value | Currency of issuance | Interest rate | (millions) | (millions of euros) (1) | EMTN bonds | 03/24/10 | 03/24/15 | 1,400 | 1,400 | EUR | 3.406% | | 09/19/10 | 09/18/17 | 1,000 | 1,000 | EUR | 3.661% | | 10/08/10 | 10/08/29 | 400 | 465 | GBP | 5.445% | U.S. Shelf (SEC) bond | 04/26/10 | 04/26/13 | 1,200 | 898 | USD | 2.582% | | 04/26/10 | 04/27/15 | 900 | 674 | USD | 3.729% | | 04/26/10 | 04/27/20 | 1,400 | 1,048 | USD | 5.134% | Telefónica Emisiones, S.A.U. | | | | | | U.S. Shelf (SEC) bond | 11/09/10 | 11/09/15 | 300 | 225 | USD | 2.875% | Telefónica Móviles Chile, S.A. | | | | | | Peso bonds | 07/19/10 | 07/06/20 | 2,000 | 121 | MXN | 8.07% | | 07/19/10 | 07/14/14 | 4,000 | 242 | MXN | TIIE28 + 55bp | Telefónica Finanzas México, S.A. de CV. | | | | | | Bond | 04/23/10 | 04/23/12 | 20 | 5 | PEN | 4.313% | | 04/29/10 | 04/29/12 | 12 | 3 | PEN | 4.313% | | 06/18/10 | 06/18/16 | 23 | 6 | PEN | 7.5% | | 08/20/10 | 08/23/17 | 60 | 16 | PEN | 6.813% | Telefónica del Perú, S.A.A. | | | | | | Bond | 06/09/10 | 06/09/13 | 26 | 7 | PEN | 5.75% | | 06/09/10 | 06/09/17 | 70 | 19 | PEN | 7.75% | | 09/09/10 | 09/10/16 | 60 | 16 | PEN | 6.8125% | | 10/14/10 | 10/15/16 | 50 | 13 | PEN | 6.375% | Telefónica Móviles, S.A. (Perú) | | | | | | | 11/19/10 | 11/13/11 | 20 | 15 | USD | 3.75% | Otecel, S.A. | | | | | | |
(1) Exchange rate at December 31, 2010 | (1) | Date on which certain conditions are renegotiated |
The main debentures and bonds issued by the Group in 2008 are as follows:
Item | Date | Nominal value | Currency of issuance | Maturity | Interest rate | (millions) | (millions of euros) | EMTN bonds | 06/12/2008 | 1,250 | 1,250 | EUR | 06/12/2013 | 5.58% | Telefónica Emisiones, S.A.U. | Bonds | 03/04/2008 | 34 | 8 | PEN | 03/04/2011 | 5.9375% | 03/18/2008 | 50 | 11 | PEN | 03/18/2018 | VAC (*) + 3.375% | 04/02/2008 | 45 | 10 | PEN | 04/02/2011 | 5.75% | 04/14/2008 | 30 | 7 | PEN | 04/14/2013 | 6.25% | 04/22/2008 | 49 | 11 | PEN | 04/22/2028 | VAC (*) + 2.8750% | 05/22/2008 | 48 | 11 | PEN | 05/22/2028 | VAC (*) + 3.1250% | 07/21/2008 | 20 | 5 | PEN | 07/21/2028 | VAC (*) + 3.1875% | Telefónica de Perú, S.A.A. |
APPENDIX III: FINANCIAL INSTRUMENTS The detail of the type of financial instruments arranged by the Group (notional amount) by currency and interest rates at December 31, 20092011 is as follows: | | | | Fair value | | | | | | Fair value | Millions of Euros | 2010 | 2011 | 2012 | 2013 | 2014 | Subsequent years | Total | Underlying debt | Associated derivatives | TOTAL | 2012 | 2013 | 2014 | 2015 | 2016 | Subsequent years | Total | Underlying debt | Associated derivatives | TOTAL | EURO | (1,933) | 8,517 | 3,998 | 3,917 | 3,336 | 11,493 | 29,328 | 24,400 | 5,234 | 29,634 | 5,187 | 5,396 | 5,447 | 7,094 | 8,808 | 9,224 | 41,156 | 31,251 | 10,767 | 42,018 | Floating rate | (6,551) | 5,197 | 515 | 3,879 | 2,514 | (42) | 5,512 | 9,421 | (3,865) | 5,556 | (1,221) | 639 | 2,751 | 1,887 | 3,288 | (4,392) | 2,952 | 12,087 | (9,152) | 2,935 | Spread - Ref Euribor | (0.14%) | 0.25% | 1.49% | 0.05% | 0.03% | (11.71%) | (10.03%) | | | (1.71%) | (0.33%) | 0.56% | 1.75% | 0.46% | (0.02%) | - | - | - | - | Fixed rate | 4,618 | 3,320 | 133 | 38 | 822 | 10,285 | 19,216 | 10,347 | 9,109 | 19,456 | 6,408 | 2,907 | 2,696 | 5,207 | 5,070 | 12,816 | 35,104 | 16,064 | 19,919 | 35,983 | Interest rate | 4.47% | 1.88% | (4.63%) | 67.24% | 10.33% | 27.37% | 106.66% | - | | 1.46% | 2.31% | 4.67% | 3.03% | 5.09% | 3.63% | - | - | - | - | Rate cap | - | 3,350 | - | 1,250 | 4,600 | 4,632 | (10) | 4,622 | - | 1,850 | - | - | 450 | 800 | 3,100 | 3,100 | - | 3,100 | OTHER EUROPEAN CURRENCIES | 60 | 805 | 1,271 | 172 | 883 | 2,581 | 5,772 | 4,263 | 1, 875 | 6,138 | | | | | | | | | Instruments in CZK | 1,855 | 123 | 224 | - | 320 | (14) | 2,508 | 321 | 2, 212 | 2,533 | 569 | 162 | 329 | 159 | 378 | - | 1,597 | 127 | 1,495 | 1,622 | Floating rate | 283 | - | 111 | - | - | 394 | 91 | 304 | 395 | 114 | 159 | - | 159 | - | - | 432 | 15 | 1,063 | 1,078 | Spread | 0.07% | - | (0.00%) | - | - | 0.07% | | | - | (0.09%) | - | (0.02%) | - | - | - | - | - | - | Fixed rate | 1,572 | 123 | 113 | - | 320 | (14) | 2,114 | 230 | 1,908 | 2,138 | 455 | 3 | 329 | - | 378 | - | 1,165 | 112 | 432 | 544 | Interest rate | 2.03% | 3.43% | 4.35% | - | 3.84% | 3.84% | 17.49% | - | | 1.12% | 4.17% | - | 3.84% | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | - | - | Instruments in GBP | (1,795) | 682 | 1,047 | 172 | 563 | 2,595 | 3,264 | 3,942 | (337) | 3,605 | (755) | 419 | 160 | - | 485 | 2,754 | 3,063 | 4,477 | (944) | 3,533 | Floating rate | - | 55 | 231 | 166 | 563 | 619 | 1,634 | 320 | 1,420 | 1,740 | 664 | - | 84 | 48 | 108 | 1,209 | 2,113 | 126 | 2,010 | 2,136 | Spread | - | (0.50%) | 0.27% | - | - | 0.04% | | | - | - | 4.13% | - | - | - | - | - | Fixed rate | (1,795) | 627 | 422 | 6 | - | 1,863 | 1,123 | 3,111 | (1,757) | 1,354 | (1,419) | - | 76 | (48) | 377 | 1,425 | 411 | 3,812 | (2,954) | 858 | Interest rate | 0.88% | 5.12% | 7.63% | 6.44% | - | 15.71% | 35.78% | - | | (0.34%) | - | 5.01% | 1.46% | 5.88% | 6.31% | - | - | - | - | Rate cap | - | 394 | - | 113 | 507 | 511 | - | 511 | - | 419 | - | - | - | 120 | 539 | 539 | - | 539 | AMERICA | (1,136) | 1,349 | 1,089 | 1,344 | 830 | 4,138 | 7,614 | 13,663 | (6,802) | 6,861 | | | | | | | | | Instruments in USD | (200) | 87 | 45 | 629 | 56 | 1,325 | 1,942 | 11,208 | (9,622) | 1,586 | (15) | 784 | (13) | 56 | (1,490) | 2,880 | 2,202 | 14,814 | (13,446) | 1,368 | Floating rate | 291 | (152) | 90 | 436 | 19 | 21 | 705 | 1,560 | (1,094) | 466 | 119 | 481 | (44) | (49) | (1,424) | 1,227 | 310 | 1,547 | (525) | 1,022 | Spread | 0.19% | 1.98% | 0.82% | 0.61% | 0.35% | 0.70% | 4.66% | | | 2.02% | 0.71% | (1.18%) | (1.35%) | (0.05%) | 0.01% | - | - | - | - | Fixed rate | (501) | 229 | (55) | 183 | 27 | 1,285 | 1,168 | 9,580 | (8,528) | 1,052 | (134) | 292 | 20 | 94 | (77) | 1,642 | 1,837 | 13,267 | (12,921) | 346 | Interest rate | (0.60%) | 9.48% | 4.06% | 3.53% | 3.80% | 23.38% | 43.65% | - | | (9.74%) | 5.47% | (14.48%) | 27.57% | (28.28%) | 10.77% | - | - | - | - | Rate cap | 10 | 19 | 69 | 68 | - | 68 | - | 11 | 11 | 11 | 11 | 55 | - | - | - | Instruments in UYU | (12) | 2 | - | - | (10) | 1 | - | 1 | (15) | - | 1 | - | - | (14) | (14) | - | (14) | Floating rate | - | - | - | - | - | - | - | - | - | - | - | - | Spread | - | - | - | | | - | - | - | - | - | - | - | - | Fixed rate | (12) | 2 | - | - | (10) | 1 | - | 1 | (15) | - | 1 | - | - | (14) | (14) | - | (14) | Interest rate | 1.15% | 3.75% | - | - | 4.90% | - | | 4.23% | - | - | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | - | - | Instruments in ARS | 216 | 143 | - | - | 359 | (120) | 461 | 341 | 171 | 5 | 4 | 4 | - | 10 | 194 | 171 | 23 | 194 | Floating rate | - | - | - | - | - | - | - | - | - | - | - | - | Spread | - | - | - | | | - | - | - | - | - | - | - | - | Fixed rate | 216 | 143 | - | - | 359 | (120) | 461 | 341 | 171 | 5 | 4 | 4 | - | 10 | 194 | 171 | 23 | 194 | Interest rate | 12.18% | 14.68% | - | - | 26.86% | - | | 14.55% | 19.00% | - | - | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | - | - | Instruments in BRL | (113) | 331 | 309 | 400 | 243 | 291 | 1,461 | 972 | 448 | 1,420 | (303) | 927 | 494 | 351 | 255 | 196 | 1,920 | 1,084 | 590 | 1,674 | Floating rate | (233) | 245 | 217 | 340 | 219 | 168 | 956 | 753 | 176 | 929 | (966) | 432 | 199 | 253 | 70 | 196 | 184 | (309) | 167 | (142) | Spread | (4.10%) | 3.03% | 3.37% | 2.16% | 3.10% | 1.60% | 9.16% | | | (0.31%) | 1.17% | 2.91% | 3.36% | 12.03% | 10.77% | - | - | - | - | Fixed rate | 120 | 86 | 92 | 60 | 24 | 123 | 505 | 219 | 272 | 491 | 663 | 495 | 295 | 98 | 185 | - | 1,736 | 1,393 | 423 | 1,816 | Interest rate | 11.63% | 9.59% | 9.74% | 5.29% | 9.93% | 19.16% | 65.34% | - | | 9.32% | 9.47% | 9.82% | 9.71% | 7.84% | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | - | - | Instruments in CLP | 74 | 206 | 192 | 95 | 267 | - | 834 | (34) | 830 | 796 | (297) | 102 | 329 | 263 | 287 | - | 684 | 695 | (199) | 496 | Floating rate | 209 | 110 | 73 | 21 | 28 | - | 441 | 105 | 353 | 458 | 57 | 22 | 69 | 263 | 287 | - | 698 | 85 | 105 | 190 | Spread | 0.60% | 1.10% | 1.63% | 1.48% | - | - | 4.81% | | | 2.26% | 1.48% | 1.09% | 0.98% | 1.45% | - | - | - | - | - | Fixed rate | (135) | 96 | 119 | 74 | 239 | - | 393 | (139) | 477 | 338 | (354) | 80 | 260 | - | - | - | (14) | 610 | (304) | 306 | Interest rate | 0.16% | 1.81% | 3.86% | 3.66% | 5.97% | - | 15.46% | - | | 0.76% | 3.66% | 5.97% | - | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | - | - | Instruments in UFC | (77) | 80 | 2 | 3 | 12 | (296) | (264) | (560) | (3) | 2 | 2 | 1 | - | 4 | 338 | (8) | 330 | Floating rate | - | - | - | (103) | (103) | - | - | - | - | - | - | - | - | Spread | - | - | - | | | - | - | - | - | - | - | - | - | Fixed rate | (77) | 80 | 2 | 3 | 12 | (296) | (161) | (457) | (3) | 2 | 2 | 1 | - | 4 | 338 | (8) | 330 | Interest rate | 1.23% | 4. 43% | 7.45% | 6.00% | 5.43% | 12.00% | 36.54% | - | | (3.54%) | 6.00% | 5.43% | 6.00% | 6.00% | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | - | - | Instruments in PEN | 84 | 246 | 102 | 89 | 103 | 315 | 939 | 827 | 143 | 970 | 148 | 161 | 163 | 86 | 123 | 300 | 981 | 971 | - | 971 | Floating rate | - | - | - | - | (8) | (5) | (5) | (5) | 189 | 161 | 161 | - | 161 | Spread | - | - | - | | | 3.55% | 3.47% | 3.47% | 3.47% | 3.48% | - | - | - | - | Fixed rate | 84 | 246 | 102 | 89 | 103 | 315 | 939 | 827 | 143 | 970 | 156 | 166 | 168 | 91 | 128 | 111 | 820 | 810 | - | 810 | Interest rate | 11.43% | 5.23% | 6.56% | 7.25% | 7.61% | 36.07% | 74.15% | - | | 6.51% | 6.60% | 7.35% | 7.48% | 7.35% | 7.37% | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | - | - | Instruments in COP | 200 | 254 | 253 | 129 | 159 | - | 995 | 563 | 670 | 1,233 | 918 | 171 | 211 | 68 | 43 | 21 | 1,432 | 1,272 | 130 | 1,402 | Floating rate | | 287 | 134 | 143 | 56 | 31 | - | 651 | 650 | - | 650 |
| | | | | | | | Fair value | Millions of Euros | 2012 | 2013 | 2014 | 2015 | 2016 | Subsequent years | Total | Underlying debt | Associated derivatives | TOTAL |
Spread | 3.78% | 3.24% | 3.20% | 3.22% | 3.31% | - | - | - | - | - | Fixed rate | 631 | 37 | 68 | 12 | 12 | 21 | 781 | 622 | 130 | 752 | Interest rate | 4.47% | 6.48% | 6.71% | 5.22% | 5.22% | 5.30% | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | Instruments in UVR | - | 35 | - | 119 | 132 | 2,437 | 2,723 | 2,723 | - | 2,723 | Floating rate | - | 35 | - | 119 | 132 | 2,437 | 2,723 | 2,723 | - | 2,723 | Spread | - | - | - | - | - | - | - | - | - | - | Fixed rate | - | - | - | - | - | - | - | - | - | - | Interest rate | - | - | - | - | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | Instruments in VEB | (1,653) | (4) | (3) | - | - | - | (1,660) | (1,671) | - | (1,671) | Floating rate | - | - | - | - | - | - | - | - | - | - | Spread | - | - | - | - | - | - | - | - | - | - | Fixed rate | (1,653) | (4) | (3) | - | - | - | (1,660) | (1,671) | - | (1,671) | Interest rate | 1.68% | 14.19% | 16.00% | - | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | Instruments in UDI | (32) | (32) | (32) | (76) | (21) | 91 | (102) | 876 | 60 | 936 | Floating rate | (32) | (32) | (32) | (76) | (21) | 91 | (102) | 876 | 60 | 936 | Spread | 3.63% | 5.21% | 5.26% | 4.66% | 6.50% | (3.18%) | - | - | - | - | Fixed rate | - | - | - | - | - | - | - | - | - | - | Interest rate | - | - | - | - | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | Instruments in MXN | 451 | 54 | 276 | 54 | 54 | 791 | 1,680 | 920 | (166) | 754 | Floating rate | (2) | - | - | - | - | 58 | 56 | 248 | (26) | 222 | Spread | - | - | - | - | - | 0.74% | - | - | - | - | Fixed rate | 453 | 54 | 276 | 54 | 54 | 733 | 1,624 | 672 | (140) | 532 | Interest rate | 10.13% | 3.70% | 5.19% | 3.70% | 3.70% | 3.95% | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | Instruments in GTQ | (6) | - | - | - | - | - | (6) | (19) | - | (19) | Floating rate | (6) | - | - | - | - | - | (6) | (6) | - | (6) | Spread | 0.01% | - | - | - | - | - | - | - | - | - | Fixed rate | - | - | - | - | - | - | - | (13) | - | (13) | Interest rate | - | - | - | - | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | ASIA | | | | | | | | | | | Instruments in JPY | - | - | - | - | - | - | - | 520 | (532) | (12) | Floating rate | - | - | - | - | - | - | - | 150 | (150) | - | Spread | - | - | - | - | - | - | - | - | - | - | Fixed rate | - | - | - | - | - | - | - | 370 | (382) | (12) | Interest rate | - | - | - | - | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | - | TOTAL | | | | | | | 55,854 | 58,535 | (2,230) | 56,305 | Floating rate | | | | | | | 10,172 | 18,353 | (6,448) | 11,905 | Fixed rate | | | | | | | 41,988 | 36,543 | 4,218 | 40,761 | Rate cap | | | | | | | 3,694 | 3,639 | - | 3,639 | Currency options | 22 | - | 22 | 22 |
| | | | | | | | Fair value | Millions of Euros | 2010 | | | | | Subsequent years | | | | TOTAL | Floating rate | 9 | 59 | 81 | 108 | 138 | - | 395 | 409 | - | 409 | Spread | 3.19% | 2.74% | 2.86% | 2.96% | 3.28% | - | 15. 03% | | | | Fixed rate | 191 | 195 | 172 | 21 | 21 | - | 600 | 154 | 670 | 824 | Interest rate | 7.85% | 8.27% | 8.43% | 7.09% | 7.09% | - | 38.73% | - | - | | Rate cap | - | - | - | - | - | - | - | - | - | - | Instruments in UVR | - | - | - | - | - | 2,175 | 2,175 | 2,175 | - | 2,175 | Floating rate | - | - | - | - | - | - | - | - | - | - | Spread | - | - | - | - | - | - | - | | | | Fixed rate | - | - | - | - | - | 2,175 | 2,175 | 2,175 | - | 2,175 | Interest rate | - | - | - | - | - | 23.01% | 23.01% | - | - | | Rate cap | - | - | - | - | - | - | - | - | - | - | Instruments in VEB | (2, 264) | - | - | - | - | - | (2,264) | (2,263) | - | (2,263) | Floating rate | - | - | - | - | - | - | - | - | - | - | Spread | - | - | - | - | - | - | - | | | | Fixed rate | (2,264) | - | - | - | - | - | (2,264) | (2,263) | - | (2,263) | Interest rate | 0.98% | - | - | - | - | - | 0.98% | - | - | | Rate cap | - | - | - | - | - | - | - | - | - | - | Instruments in MXN | 959 | - | 186 | - | - | 29 | 1,174 | 633 | 532 | 1,165 | Floating rate | 263 | - | - | - | - | - | 263 | 421 | 3 | 424 | Spread | 0.61% | - | - | - | - | - | 0.61% | | | | Fixed rate | 696 | - | 186 | - | - | 29 | 911 | 212 | 529 | 741 | Interest rate | 5.74% | - | 9.25% | - | - | 12.52% | 27.51% | - | - | | Rate cap | | | | | | | | | | | Instruments in GTQ | (3) | - | - | - | - | - | (3) | (3) | - | (3) | Floating rate | (3) | - | - | - | - | - | (3) | (3) | - | (3) | Spread | 0.01% | - | - | - | - | - | 0.01% | | | | Fixed rate | - | - | - | - | - | - | - | - | - | - | Interest rate | - | - | - | - | - | - | - | - | - | - | Rate cap | - | - | - | - | - | - | - | - | - | | ASIA | - | - | - | - | - | - | - | 207 | (250) | (43) | Instruments in JPY | - | - | - | - | - | - | - | 207 | (250) | (43) | Floating rate | - | - | - | - | - | - | - | 113 | (113) | - | Spread | - | - | - | - | - | - | - | | | | Fixed rate | - | - | - | - | - | - | - | 94 | (137) | (43) | Interest rate | - | - | - | - | - | - | - | - | - | | Rate cap | - | - | - | - | - | - | - | - | - | - | AFRICA | - | - | 88 | - | - | - | 88 | - | 84 | 84 | Instruments in MAD | - | - | 88 | - | - | - | 88 | - | 84 | 84 | Floating rate | - | - | - | - | - | - | - | - | - | - | Spread | - | - | - | - | - | - | - | | | | Fixed rate | - | - | 88 | - | - | - | 88 | - | 84 | 84 | Interest rate | - | - | 4.54% | - | - | - | 4.54% | - | - | | Rate cap | - | - | - | - | - | - | - | - | - | - | TOTAL | (3,009) | 10,671 | 6,446 | 5,433 | 5,049 | 18,212 | 42,802 | 42,533 | 141 | 42,674 | Floating rate | (5,732) | 5,514 | 1,318 | 4,950 | 3,481 | 766 | 10,297 | 13,190 | (2,919) | 10,271 | Fixed rate | 2,713 | 5,147 | 1,374 | 473 | 1,558 | 16,064 | 27,329 | 24,132 | 3,070 | 27,202 | Rate cap | 10 | 10 | 3,754 | 10 | 10 | 1,382 | 5,176 | 5,211 | (10) | 5,201 | Currency options | (99) | | | | Other | 848 | | | |
The table below is an extract of the previous table that shows the sensitivity to interest rates originated by our position on interest rate swaps categorized into instruments entered into for trading purposes and instruments entered into for purposes other than trading purposes at December 31, 2009:2011: INTEREST RATE SWAPS | INTEREST RATE SWAPS | INTEREST RATE SWAPS | | | Maturity | | | Maturity | | | | | Millions of euros | 2010 | 2011 | 2012 | 2013 | 2014 | Subsequent years | TOTAL | Fair value | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | Subsequent years | | | TOTAL | | | Fair value | | TRADING PURPOSES | | | | | | | | | | | | | | | | | | | | | | | | | | | EUR | | (214) | | | | | | | | | | | | | | | | | | | | | | | | (78 | ) | Fixed to fixed | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 27 | | Receiving leg | | | | (2,023 | ) | | | - | | | | (35 | ) | | | (20 | ) | | | - | | | | - | | | | (2,078 | ) | | | (2,081 | ) | Average interest rate | | | | 1.60 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1.56 | % | | | - | | Paying leg | | | | 2,023 | | | | - | | | | 35 | | | | 20 | | | | - | | | | - | | | | 2,078 | | | | 2,108 | | Average spread | | | | 1.60 | % | | | - | | | | 1.12 | % | | | 1.63 | % | | | - | | | | - | | | | 1.60 | % | | | - | | Fixed to floating | - | (389) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (527 | ) | Receiving leg | (790) | (1,685) | (420) | (1,250) | (1,065) | (1,736) | (6,946) | (5,823) | | | (475 | ) | | | (1,405 | ) | | | (1,447 | ) | | | (745 | ) | | | (2,145 | ) | | | (6,626 | ) | | | (12,843 | ) | | | (8,061 | ) | Average interest rate | 3.23% | 3.50% | 3.77% | 4.69% | 3.33% | 3.47% | 3.67% | - | | | 15.34 | % | | | 2.76 | % | | | 2.22 | % | | | 3.15 | % | | | 0.41 | % | | | 3.15 | % | | | 2.99 | % | | | - | | Paying leg | 790 | 1,685 | 420 | 1,250 | 1,065 | 1,736 | 6,946 | 5,434 | | | 475 | | | | 1,405 | | | | 1,447 | | | | 745 | | | | 2,145 | | | | 6,626 | | | | 12,843 | | | | 7,534 | | Average spread | 0.80% | 0.01% | 0.05% | 0.03% | 0.01% | 0.00% | 0.11% | | | | 0.17 | % | | | 0.85 | % | | | 1.35 | % | | | 0.60 | % | | | 2.57 | % | | | - | | | | 0.71 | % | | | - | | Floating to fixed | - | 175 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 408 | | Receiving leg | (8,742) | (935) | (231) | (710) | (950) | (2,195) | (13,763) | (11,185) | | | (7,458 | ) | | | (710 | ) | | | (1,325 | ) | | | - | | | | (3,485 | ) | | | (1,325 | ) | | | (14,303 | ) | | | (12,663 | ) | Average spread | 0.10% | - | 0.07% | - | | | (0.05 | %) | | | 1.56 | % | | | - | | | | - | | | | 1.22 | % | | | - | | | | 0.35 | % | | | - | | Paying leg | 8,742 | 935 | 231 | 710 | 950 | 2,195 | 13,284 | 11,760 | | | 7,458 | | | | 710 | | | | 1,325 | | | | - | | | | 3,485 | | | | 1,325 | | | | 14,303 | | | | 13,071 | | Average interest rate | 1.31% | 1.57% | 2.18% | 3.52% | 3.27% | 1.84% | - | | | 0.92 | % | | | 2.35 | % | | | 3.14 | % | | | - | | | | 1.54 | % | | | 7.80 | % | | | 1.99 | % | | | - | | Floating to floating | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 14 | | Receiving leg | | | | (4,123 | ) | | | - | | | | - | | | | (50 | ) | | | - | | | | - | | | | (4,173 | ) | | | (4,191 | ) | Average interest rate | | | | (0.08 | %) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (0.08 | %) | | | - | | Paying leg | | | | 4,123 | | | | - | | | | - | | | | 50 | | | | - | | | | - | | | | 4,173 | | | | 4,205 | | Average spread | | | | (0.08 | %) | | | - | | | | - | | | | 0.28 | % | | | - | | | | - | | | | (0.08 | %) | | | - | | USD | - | (37) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 54 | | Fixed to floating | - | (28) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (42 | ) | Receiving leg | (594) | (63) | - | (229) | (886) | (914) | | | - | | | | - | | | | (39 | ) | | | (39 | ) | | | (124 | ) | | | (286 | ) | | | (488 | ) | | | (529 | ) | Average interest rate | - | 3.08% | - | 3.74% | 4.43% | - | | | - | | | | - | | | | 1.04 | % | | | 1.66 | % | | | 1.15 | % | | | 3.61 | % | | | 2.62 | % | | | - | | Paying leg | 594 | 63 | - | 229 | 886 | 886 | | | - | | | | - | | | | 39 | | | | 39 | | | | 124 | | | | 286 | | | | 488 | | | | 487 | | Average spread | - | | - | - | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Floating to fixed | - | (9) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 96 | | Receiving leg | (486) | (191) | (451) | (416) | - | (635) | (2,179) | (473) | | | (128 | ) | | | (464 | ) | | | (100 | ) | | | (105 | ) | | | (19 | ) | | | (1,021 | ) | | | (1,837 | ) | | | (655 | ) | Average spread | 0.20% | 0. 35% | 3.99% | 3.61% | | - | 1.59% | - | | | 2.57 | % | | | 3.61 | % | | | - | | | | - | | | | - | | | | - | | | | 1.09 | % | | | - | | Paying leg | 486 | 191 | 451 | 416 | - | 635 | 2,179 | 464 | | | 128 | | | | 464 | | | | 100 | | | | 105 | | | | 19 | | | | 1,021 | | | | 1,837 | | | | 751 | | Average interest rate | 2.62% | 0.50% | - | | 3.68% | 1.70% | - | | | - | | | | - | | | | 0.92 | % | | | 2.52 | % | | | 1.07 | % | | | 3.31 | % | | | 2.05 | % | | | - | | MXN | - | - | | GBP | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3 | ) | Fixed to floating | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (11 | ) | Receiving leg | | | | - | | | | - | | | | 60 | | | | 48 | | | | 108 | | | | 341 | | | | 557 | | | | 559 | | Average interest rate | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Paying leg | | | | - | | | | - | | | | (60 | ) | | | (48 | ) | | | (108 | ) | | | (341 | ) | | | (557 | ) | | | (570 | ) | Average spread | | | | - | | | | - | | | | 1.53 | % | | | 1.46 | % | | | 1.75 | % | | | 2.25 | % | | | 2.01 | % | | | - | | Floating to fixed | - | - | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 8 | | Receiving leg | (1) | - | (1) | (1) | | | - | | | | - | | | | 156 | | | | - | | | | - | | | | 269 | | | | 425 | | | | 434 | | Average spread | (0.54%) | - | (0.54%) | | | | - | | | | - | | | | 1.31 | % | | | - | | | | - | | | | 2.40 | % | | | 2.00 | % | | | - | | Paying leg | 1 | - | 1 | 1 | | | - | | | | - | | | | (156 | ) | | | - | | | | - | | | | (269 | ) | | | (425 | ) | | | (426 | ) | Average interest rate | 8.43% | - | 8.43% | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
INTEREST RATE SWAPS | | Maturity | | Millions of euros | 2010 | 2011 | 2012 | 2013 | 2014 | Subsequent years | TOTAL | Fair value | NON TRADING PURPOSES | | | | | | | | | EUR | - | - | - | - | - | - | - | (274) | Fixed to floating | - | - | - | - | - | - | - | (669) | Receiving leg | (5,088) | (2,039) | (504) | (1,654) | (3,055) | (3,313) | (15,653) | (13,806) | Average interest rate | 3.23% | 3.50% | 3. 77% | 4.69% | 3.33% | 3.47% | 3.51% | - | Paying leg | 5,088 | 2,039 | 504 | 1,654 | 3,055 | 3,313 | 15,653 | 13,137 | Average spread | 0.80% | 0.01% | 0.05% | 0.03% | 0.01% | 0.00% | 0.27% | - | Floating to fixed | - | - | - | - | - | - | - | 395 | Receiving leg | (5,312) | (3,949) | (500) | (550) | (730) | (7,503) | (18,544) | (14,842) | Average spread | 0.19% | - | - | 3.48% | 2.35% | - | 0.25% | - | Paying leg | 5,312 | 3,949 | 500 | 550 | 730 | 7,503 | 18,544 | 15,237 | Average interest rate | 2.64% | 2.82% | 3.74% | - | 1.09% | 3.72% | 3.01% | - | CZK | - | - | - | - | - | - | - | 5 | Floating to fixed | - | - | - | - | - | - | - | 5 | Receiving leg | (430) | - | - | - | - | - | (430) | (430) | Average spread | 0.01% | - | - | - | - | - | 0.01% | - | Paying leg | 430 | - | - | - | - | - | 430 | 435 | Average interest rate | 3.35% | - | - | - | - | - | 3.35% | - | USD | - | - | - | - | - | - | - | (547) | Fixed to floating | - | - | - | - | - | - | - | (583) | Receiving leg | - | (694) | - | (521) | - | (4,304) | (5,519) | (6,103) | Average interest rate | | 3.90% | | 5.52% | | 4.84% | 4.79% | - | Paying leg | - | 694 | - | 521 | - | 4,304 | 5,519 | 5,520 | Average spread | - | - | - | - | - | - | - | - | Floating to fixed | - | - | - | - | - | - | - | 36 | Receiving leg | (26) | (26) | (26) | (616) | (26) | (51) | (771) | (769) | Average spread | - | - | - | - | - | - | - | - |
NON TRADING PURPOSES | | | | | | | | | | | | | | | | | | | | | | | | | EUR | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 522 | | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | (70 | ) | | | (70 | ) | | | (1,039 | ) | Receiving leg | | | (594 | ) | | | (1,654 | ) | | | (2,815 | ) | | | (1,005 | ) | | | (3,093 | ) | | | (2,650 | ) | | | (11,811 | ) | | | (12,717 | ) | Average interest rate | | | 4.26 | % | | | 4.69 | % | | | 3.26 | % | | | 2.32 | % | | | 2.80 | % | | | 3.41 | % | | | 3.35 | % | | | - | | Paying leg | | | 594 | | | | 1,654 | | | | 2,815 | | | | 1,005 | | | | 3,093 | | | | 2,580 | | | | 11,741 | | | | 11,678 | | Average spread | | | 0.04 | % | | | 0.03 | % | | | 0.01 | % | | | 0.03 | % | | | 0.01 | % | | | - | | | | 0.02 | % | | | - | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,561 | | Receiving leg | | | (4,776 | ) | | | (4,476 | ) | | | (2,330 | ) | | | (6,302 | ) | | | (3,120 | ) | | | (13,303 | ) | | | (34,307 | ) | | | (24,704 | ) | Average spread | | | 1.03 | % | | | 0.65 | % | | | 0.74 | % | | | 0.32 | % | | | - | | | | - | | | | 0.34 | % | | | - | | Paying leg | | | 4,776 | | | | 4,476 | | | | 2,330 | | | | 6,302 | | | | 3,120 | | | | 13,303 | | | | 34,307 | | | | 26,265 | | Average interest rate | | | 0.92 | % | | | 1.33 | % | | | 1.62 | % | | | 2.70 | % | | | 3.13 | % | | | 3.19 | % | | | 2.43 | % | | | - | | Floating to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Receiving leg | | | (42 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (42 | ) | | | (43 | ) |
INTEREST RATE SWAPS | | Maturity | | Millions of euros | 2010 | 2011 | 2012 | 2013 | 2014 | | TOTAL | Fair value | Paying leg | 26 | 26 | 26 | 616 | 26 | 51 | 771 | 805 | Average interest rate | 4.34% | 4.34% | 4.34% | 3.35% | 4.34% | 4.34% | 3.55% | - | | - | - | - | - | - | - | - | - | BRL | - | - | - | - | - | - | - | - | Floating to floating | - | - | - | - | - | - | - | - | Receiving leg | (598) | - | - | - | - | - | (598) | (483) | Average spread | 0.35% | - | - | - | - | - | 0.35% | - | Paying leg | 598 | - | - | - | - | - | 598 | 483 | Average spread | - | - | - | - | - | - | - | - | MXN | - | - | - | - | - | - | - | 3 | Floating to fixed | - | - | - | - | - | - | - | 3 | Receiving leg | (159) | - | - | - | - | - | (159) | (166) | Average spread | 0.61% | - | - | - | - | - | 0.61% | - | Paying leg | 159 | - | - | - | - | - | 159 | 169 | Average interest rate | 8.16% | - | - | - | - | - | 8.16% | - | GBP | - | - | - | - | - | - | - | 22 | Fixed to floating | - | - | - | - | - | - | - | 216 | Receiving leg | - | - | - | - | (563) | (732) | (1,295) | (1341) | Average interest rate | - | - | - | - | 5.25% | 3.92% | 4.50% | - | Paying leg | - | - | - | - | 563 | 732 | 1,295 | 1,557 | Average spread | | | | | - | 1.64% | 0.92% | - | Floating to fixed | - | - | - | - | - | - | - | (194) | Receiving leg | - | (609) | - | - | - | (455) | (1,064) | (1,065) | Average spread | - | - | - | - | - | - | - | - | Paying leg | - | 609 | - | - | - | 455 | 1,064 | 871 | Average interest rate | - | 5.12% | - | - | - | 4.96% | 5.05% | - | JPY | - | - | - | - | - | - | - | (4) | Fixed to floating | - | - | - | - | - | - | - | (4) | Receiving leg | - | - | (113) | - | - | - | (113) | (117) | Average interest rate | - | - | 1.68% | - | - | - | 1.68% | - | Paying leg | - | - | 113 | - | - | - | 113 | 113 | Average spread | - | - | - | - | - | - | - | - | CLP | - | - | - | - | - | - | - | - | Fixed to floating | - | - | - | - | - | - | - | 1 | Receiving leg | - | - | - | (21) | (28) | - | (49) | (48) | Average interest rate | - | - | - | 4.12% | 4.51% | | 4.34% | - | Paying leg | - | - | - | 21 | 28 | - | 49 | 49 | Average spread | - | - | - | - | - | - | - | - | Floating to fixed | - | - | - | - | - | - | - | (1) | Receiving leg | (82) | (96) | (51) | (95) | - | - | (324) | (147) | Average spread | 1.55% | - | - | - | - | - | 0.39% | - | Paying leg | 82 | 96 | 51 | 95 | - | - | 324 | 146 | Average interest rate | - | 1.82% | 3.74% | 3.76% | - | - | 2.23% | - |
Average spread | | | 0.43 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 0.43 | % | | | - | | Paying leg | | | 42 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 42 | | | | 43 | | Average interest rate | | | (0.10 | %) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (0.10 | %) | | | - | | USD | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,916 | ) | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,949 | ) | Receiving leg | | | (222 | ) | | | (1,711 | ) | | | (79 | ) | | | (1,973 | ) | | | (5,103 | ) | | | (5,356 | ) | | | (14,444 | ) | | | (12,663 | ) | Average interest rate | | | 0.61 | % | | | 2.97 | % | | | 3.07 | % | | | 3.04 | % | | | 3.25 | % | | | 4.45 | % | | | 3.59 | % | | | - | | Paying leg | | | 222 | | | | 1,711 | | | | 79 | | | | 1,973 | | | | 5,103 | | | | 5,356 | | | | 14,444 | | | | 10,714 | | Average spread | | | 2.27 | % | | | 0.14 | % | | | - | | | | 0.17 | % | | | 1.90 | % | | | - | | | | 0.75 | % | | | - | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 33 | | Receiving leg | | | (28 | ) | | | (685 | ) | | | (28 | ) | | | (28 | ) | | | (28 | ) | | | - | | | | (797 | ) | | | (800 | ) | Average spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Paying leg | | | 28 | | | | 685 | | | | 28 | | | | 28 | | | | 28 | | | | - | | | | 797 | | | | 833 | | Average interest rate | | | 4.34 | % | | | 3.35 | % | | | 4.34 | % | | | 4.34 | % | | | 4.34 | % | | | - | | | | 3.49 | % | | | - | | MXN | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (9 | ) | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (9 | ) | Receiving leg | | | - | | | | - | | | | (222 | ) | | | - | | | | (166 | ) | | | - | | | | (388 | ) | | | (417 | ) | Average spread | | | - | | | | - | | | | 0.55 | % | | | - | | | | 5.38 | % | | | - | | | | 2.62 | % | | | - | | Paying leg | | | - | | | | - | | | | 222 | | | | - | | | | 166 | | | | - | | | | 388 | | | | 408 | | Average interest rate | | | - | | | | - | | | | 5.55 | % | | | 2.66 | % | | | 2.66 | % | | | - | | | | 4.31 | % | | | - | | GBP | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (174 | ) | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (248 | ) | Receiving leg | | | - | | | | - | | | | (599 | ) | | | - | | | | - | | | | (1,257 | ) | | | (1,856 | ) | | | (2,106 | ) | Average interest rate | | | - | | | | - | | | | 5.25 | % | | | - | | | | - | | | | 3.73 | % | | | 4.22 | % | | | - | | Paying leg | | | - | | | | - | | | | 599 | | | | - | | | | - | | | | 1,257 | | | | 1,856 | | | | 1,858 | | Average spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 74 | | Receiving leg | | | - | | | | - | | | | - | | | | - | | | | (484 | ) | | | - | | | | (484 | ) | | | (484 | ) | Average spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Paying leg | | | - | | | | - | | | | - | | | | - | | | | 484 | | | | - | | | | 484 | | | | 558 | | Average interest rate | | | - | | | | - | | | | - | | | | - | | | | 4.96 | % | | | - | | | | 4.96 | % | | | - | | JPY | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (10 | ) | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (10 | ) | Receiving leg | | | (150 | ) | | | - | | | | - | | | | - | | | | (70 | ) | | | - | | | | (220 | ) | | | (230 | ) | Average interest rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Paying leg | | | 150 | | | | - | | | | - | | | | - | | | | 70 | | | | - | | | | 220 | | | | 220 | | Average spread | | | 0.34 | % | | | - | | | | - | | | | - | | | | 2.82 | % | | | - | | | | 1.13 | % | | | - | | CLP | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (8 | ) | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (7 | ) | Receiving leg | | | - | | | | (22 | ) | | | (31 | ) | | | - | | | | (171 | ) | | | - | | | | (224 | ) | | | (246 | ) | Average interest rate | | | - | | | | 4.12 | % | | | 4.51 | % | | | - | | | | 6.51 | % | | | - | | | | 6.00 | % | | | - | | Paying leg | | | - | | | | 22 | | | | 31 | | | | - | | | | 171 | | | | - | | | | 224 | | | | 239 | | Average spread | | | - | | | | - | | | | - | | | | - | | | | 1.66 | % | | | - | | | | 1.27 | % | | | - | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1 | ) | Receiving leg | | | (78 | ) | | | (103 | ) | | | - | | | | - | | | | - | | | | - | | | | (181 | ) | | | (182 | ) | Average spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Paying leg | | | 78 | | | | 103 | | | | - | | | | - | | | | - | | | | - | | | | 181 | | | | 181 | | Average interest rate | | | 1.15 | % | | | 3.76 | % | | | - | | | | - | | | | - | | | | - | | | | 2.64 | % | | | - | |
Foreign exchange and interest rate options, by maturity, at December 31, 20092010 are as follows: | CURRENCY OPTIONS | | MATURITIES | Millions of euros | 2012 | 2013 | 2014 | 2015 | 2016 | Subsequent years | Put USD / Call EUR | | | | | | | Notional amount of options bought | 289 | 159 | | 192 | | 1,662 | Strike | 1.32% | 1.49% | | 1.54% | | 1.38% | Notional amount of options sold | 202 | | | | | 832 | Strike | 1.26% | | | | | 1.20% |
| CURRENCY OPTIONS | | MATURITIES | Figures in euros | 2010 | 2011 | 2012 | 2013 | Subsequent years | Put USD / Call EUR | | | | | | Notional amount of options bought | - | 201,305,012 | - | 70,803,832 | 1,664,931,279 | Strike | - | 1.59% | - | 1.50% | 1.75% | Notional amount of options sold | - | 195,129,693 | - | - | 831,255,453 | Strike | - | 1.49% | - | - | 1.20% |
| INTEREST RATE OPTIONS | | | MATURITIES | | | Figures in euros | 2010 | 2011 | 2012 | 2013 | Subsequent years | | | Collars | | | | | | | | Notional bought | - | - | 1,119,299,628 | - | 2,161,986,806 | | | Strike Cap | - | - | 4.746% | - | 4.77% | | | Strike Floor | - | - | 3.409% | - | 3.48% | | | Caps | | | | | | | | Notional bought | - | - | 3,412,999,662 | - | | | | Strike | - | - | 4.205% | - | | | | Notional sold | - | - | 6,032,299,291 | - | 2,161,986,806 | | | Strike | - | - | 5.399% | - | 5.003% | | | Floors | | | | | | | | Notional bought | - | - | 2,619,299,628 | - | 2,094,499,493 | | | Strike | - | - | 2.844% | - | 0.802% | | | Notional sold | 363, 096,573 | - | 700,000,000 | - | - | | | Strike | 4. 382% | - | 2. 147% | - | - | |
| INTEREST RATE OPTIONS | | MATURITIES | Millions of euros | 2012 | 2013 | 2014 | 2015 | Subsequent years | Collars | | | | | | Notional amount of options bought | 919 | - | - | 504 | 1,698 | Strike Cap | 5.05% | - | - | 4.29% | 4.76% | Strike Floor | 3.30% | - | - | 3.00% | 3.63% | Caps | | | | | | Notional amount of options bought | 2,749 | - | - | - | - | Strike | 4.37% | - | - | - | - | Notional amount of options sold | 3,668 | - | - | 504 | 1,698 | Strike | 4.95% | - | - | 4.45% | 5.22% | Floors | | | | | | Notional amount of options bought | 919 | - | - | 450 | 1,698 | Strike | 0.96% | - | - | 0.50% | 0.99% | Notional amount of options sold | - | - | - | - | - | Strike | - | - | - | - | - |
Cash flows receivable or payable on derivative financial instruments settled via the swap of nominals, by currency of collection/payment, along with contractual maturities are as follows: Millions of euros | 2010 | 2011 | 2012 | 2013 | 2014 | Subsequent years | Total | Currency swaps | | | | | | | | Receive | ARS | - | - | - | - | - | - | - | Pay | ARS | (130) | (52) | - | - | - | - | (182) | Receive | BRL | - | - | - | - | - | - | - | Pay | BRL | (51) | (64) | (65) | (4) | (38) | (88) | (310) | Receive | CLP | 96 | 175 | 82 | 95 | - | - | 448 | Pay | CLP | (191) | (349) | (232) | (189) | (195) | - | (1,156) | Receive | COP | - | - | - | - | - | - | - | Pay | COP | (86) | (172) | (172) | (21) | (21) | - | (472) | Receive | CZK | - | - | - | - | - | - | - | Pay | CZK | (622) | (111) | (111) | - | (222) | - | (1,066) | Receive | EUR | 1,714 | 958 | 323 | - | 280 | 588 | 3,863 | Pay | EUR | (3,619) | (785) | (356) | (1,118) | - | (7,872) | (13,750) | Receive | GBP | 873 | - | - | - | - | - | 873 | Pay | GBP | (873) | (609) | - | - | - | (455) | (1,937) | Receive | JPY | 8 | 9 | 451 | - | - | 113 | 581 | Pay | JPY | - | - | - | - | - | - | - | Receive | MAD | - | - | - | - | - | - | - | Pay | MAD | - | - | (88) | - | - | - | (88) | Receive | MXN | - | - | - | - | - | - | - | Pay | MXN | (2) | - | - | - | - | - | (2) | Receive | PEN | - | - | - | - | - | - | - | Pay | PEN | (7) | (15) | (16) | (16) | (13) | (60) | (127) |
Millions of euros | | Millions of euros | 2012 | 2013 | 2014 | 2015 | 2016 | Subsequent years | Total | Currency swaps | | Currency swaps | | | | | Receive | UFC | 204 | 34 | 172 | - | 143 | - | 553 | ARS | - | - | - | - | Pay | UFC | (102) | (111) | (86) | - | (299) | ARS | - | - | - | - | Receive | USD | 1,959 | 1,297 | 160 | 1,286 | 67 | 7,283 | 12,052 | BRL | 110 | - | 68 | - | 178 | Pay | USD | (7) | (156) | - | (104) | - | (267) | BRL | (258) | (136) | (151) | (197) | (177) | (38) | (957) | TOTAL | (836) | 49 | 62 | (71) | 1 | (491) | (1,286) | | | | | | | | | Forwards | | | | Receive | | CLP | 89 | 103 | - | 263 | 116 | - | 571 | Pay | | CLP | (252) | (206) | (212) | (527) | (231) | - | (1,428) | Receive | ARS | 42 | - | 42 | COP | - | - | - | - | Pay | ARS | (340) | - | (340) | COP | (214) | (37) | (37) | (12) | (21) | (333) | Receive | BRL | - | - | CZK | - | - | - | - | Pay | BRL | (159) | - | (159) | CZK | (114) | (159) | (228) | (159) | (378) | - | (1,038) | Receive | CLP | 142 | - | 142 | EUR | 608 | 286 | 281 | 163 | 1,151 | - | 2,489 | Pay | CLP | (244) | (1) | - | (245) | EUR | (582) | (2,943) | (72) | (3,176) | (4,533) | (8,034) | (19,340) | Receive | COP | 22 | - | 22 | GBP | - | - | - | - | Pay | COP | (191) | - | (191) | GBP | - | - | - | (484) | - | (484) | Receive | CZK | - | 14 | 14 | JPY | 599 | - | - | - | 70 | - | 669 | Pay | CZK | (1,145) | - | (1,145) | JPY | - | - | - | - | Receive | EUR | 3,262 | - | 3,262 | MAD | 90 | - | - | - | 90 | Pay | EUR | (2,985) | (3) | (23) | (19) | - | (14) | (3,044) | MAD | (90) | - | - | - | (90) | Receive | GBP | 2,488 | - | 2,488 | MXN | - | - | - | - | Pay | GBP | (544) | - | (544) | MXN | (51) | (51) | (51) | (645) | (900) | Receive | MXN | - | - | PEN | - | - | - | - | Pay | MXN | (530) | - | (530) | PEN | (29) | (15) | (15) | (15) | (35) | (23) | (132) | Receive | PEN | 25 | - | 25 | UFC | 199 | - | 166 | - | 133 | - | 498 | Pay | PEN | (27) | - | (27) | UFC | (100) | - | - | - | (66) | - | (166) | Receive | UFC | 140 | - | 140 | USD | 306 | 3,498 | 284 | 4,203 | 4,690 | 8,419 | 21,400 | Pay | UFC | (142) | - | (142) | USD | (189) | (260) | (73) | (277) | (54) | - | (853) | Receive | USD | 2,112 | 4 | 24 | 20 | - | 2,160 | UDI | 52 | 52 | 52 | 664 | 924 | Pay | USD | (1,897) | - | (1,897) | UDI | - | - | - | - | TOTAL | TOTAL | 29 | - | 1 | - | 31 | TOTAL | 174 | 132 | 12 | 267 | 191 | 322 | 1,098 | Forwards | | Forwards | | | | | Receive | | ARS | 26 | - | - | - | 26 | Pay | | ARS | (197) | - | - | - | (197) |
Receive | BRL | - | - | - | - | - | - | - | Pay | BRL | (192) | - | - | - | - | - | (192) | Receive | CLP | 185 | - | - | - | - | - | 185 | Pay | CLP | (91) | - | - | - | - | - | (91) | Receive | COP | 18 | - | - | - | - | - | 18 | Pay | COP | (190) | - | - | - | - | - | (190) | Receive | CZK | 5 | - | - | - | - | - | 5 | Pay | CZK | (604) | - | - | - | - | - | (604) | Receive | EUR | 3,661 | - | - | - | - | - | 3,661 | Pay | EUR | (3,350) | (19) | - | - | - | - | (3,369) | Receive | GBP | 2,530 | - | - | - | - | - | 2,530 | Pay | GBP | (994) | - | - | - | - | - | (994) | Receive | MXN | 4 | - | - | - | - | - | 4 | Pay | MXN | (597) | - | - | - | - | - | (597) | Receive | PEN | 2 | - | - | - | - | - | 2 | Pay | PEN | (93) | - | - | - | - | - | (93) | Receive | UFC | 20 | - | - | - | - | - | 20 | Pay | UFC | (20) | - | - | - | - | - | (20) | Receive | USD | 1,682 | 22 | - | - | - | - | 1,704 | Pay | USD | (1,792) | - | - | - | - | - | (1,792) | TOTAL | 13 | 3 | - | - | - | - | 16 |
The breakdowndetail of the type of financial instruments arranged by us (notional amount)the Group notional amount by currency and interest rates at December 31, 2008, is2010 was as follows: | | | | FAIR VALUE | | | | | | | | | | | | | | | | | | | | | | | | | Fair value | | Millions of Euros | 2009 | 2010 | 2011 | 2012 | 2013 | Subsequent years | Total | | Underlying debt | Associated derivatives | TOTAL | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | Subsequent years | | | Total | | | Underlying debt | | | Associated derivatives | | | TOTAL | | | | | | | | EURO | 619 | 3,198 | 8,482 | 3,223 | 4,066 | 7,893 | 27,481 | | 24,421 | 2,626 | 27,047 | | | 6,343 | | | | 3,777 | | | | 7,548 | | | | 3,677 | | | | 6,933 | | | | 11,336 | | | | 39,614 | | | | 34,588 | | | | 6,151 | | | | 40,739 | | Floating rate | (9,170) | (1,210) | 6,475 | (158) | 4,112 | 799 | 848 | | 7,639 | (7,574) | 65 | | | 796 | | | | 1,855 | | | | 6,862 | | | | 1,195 | | | | 2,529 | | | | (5,177 | ) | | | 8,060 | | | | 8,575 | | | | (784 | ) | | | 7,791 | | Spread - Ref Euribor | -0.05% | -0.35% | 0.18% | 0.46% | 0.04% | 0.25% | 0.62% | | | | | | 0.12 | % | | | 0.59 | % | | | 0.22 | % | | | 0.04 | % | | | 1.16 | % | | | 11.70 | % | | | (6.81 | %) | | | | | | | | | | | | | Fixed rate | 9,439 | 4,408 | 1,607 | 31 | (46) | 5,844 | 21,283 | | 11,349 | 10,244 | 21,593 | | | 5,547 | | | | (228 | ) | | | (14 | ) | | | 2,482 | | | | 4,404 | | | | 15,263 | | | | 27,454 | | | | 21,870 | | | | 6,648 | | | | 28,518 | | Interest rate | 4.40% | 4.76% | 2.66% | -22.88% | -51.84% | 4.20% | 4.37% | | | | | | (0.46 | %) | | | 3.69 | % | | | (157 | %) | | | 4.78 | % | | | 3.24 | % | | | 25.17 | % | | | 14.86 | % | | | | | | | | | | | | | Rate cap | 350 | - | 400 | 3,350 | - | 1,250 | 5,350 | | 5,433 | (44) | 5,389 | | | - | | | | 2,150 | | | | 700 | | | | - | | | | - | | | | 1,250 | | | | 4,100 | | | | 4,143 | | | | 287 | | | | 4,430 | | OTHER EUROPEAN CURRENCIES | 846 | 700 | 779 | 1,770 | 160 | 2,359 | 6,614 | | 3,557 | 2,964 | 6,521 | | | (469 | ) | | | 1,324 | | | | 170 | | | | 919 | | | | 164 | | | | 3,377 | | | | 5,485 | | | | 3,882 | | | | 1,589 | | | | 5,471 | | Instruments in CZK | 2,025 | 700 | 123 | 111 | - | 97 | 3,056 | | 303 | 2,753 | 3,056 | | | 646 | | | | 242 | | | | 164 | | | | 338 | | | | 164 | | | | - | | | | 1,554 | | | | 45 | | | | 1,527 | | | | 1,572 | | Floating rate | - | 278 | - | 278 | | 88 | 191 | 279 | | | - | | | | 116 | | | | 164 | | | | - | | | | 164 | | | | - | | | | 444 | | | | - | | | | 446 | | | | 446 | | Spread | - | 0.07% | - | 0.07% | | | | | | - | | | | (0.00 | %) | | | (0.09 | %) | | | - | | | | (0.02 | %) | | | - | | | | (0.04 | %) | | | | | | | | | | | | | Fixed rate | 2,025 | 422 | 123 | 111 | - | 97 | 2,778 | | 215 | 2,562 | 2,777 | | | 646 | | | | 126 | | | | - | | | | 338 | | | | - | | | | - | | | | 1,110 | | | | 45 | | | | 1,081 | | | | 1,126 | | Interest rate | 4.04% | 3.35% | 3.41% | 4.35% | - | 4.62% | 3.94% | | | | | | 1.81 | % | | | 4.17 | % | | | - | | | | 3.84 | % | | | - | | | | - | | | | 2.69 | % | | | | | | | | | | | | | Rate cap | - | - | - | | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in GBP | (1,179) | - | 656 | 1,659 | 160 | 2,262 | 3,558 | | 3,254 | 211 | 3,465 | | | (1,115 | ) | | | 1,082 | | | | 6 | | | | 581 | | | | - | | | | 3,377 | | | | 3,931 | | | | 3,837 | | | | 62 | | | | 3,899 | | Floating rate | - | 63 | 740 | 155 | (525) | 433 | | 59 | 569 | 628 | | | - | | | | 238 | | | | - | | | | 581 | | | | - | | | | 1,340 | | | | 2,159 | | | | 101 | | | | 1,818 | | | | 1,919 | | Spread | - | 4.60% | 0.27% | - | 0.34% | | | | | | - | | | | 0.27 | % | | | - | | | | - | | | | - | | | | - | | | | 0.03 | % | | | | | | | | | | | | | Fixed rate | (1,179) | - | 593 | 394 | 5 | 1,737 | 1,550 | | 1,916 | (472) | 1,444 | | | (1,115 | ) | | | 437 | | | | 6 | | | | - | | | | - | | | | 1,921 | | | | 1,249 | | | | 3,210 | | | | (1,874 | ) | | | 1,336 | | Interest rate | 3.16% | - | 5.12% | 7.63% | 6.44% | 5.27% | 7.42% | | | | | | (1.99 | %) | | | 7.57 | % | | | 6.44 | % | | | - | | | | - | | | | 17.33 | % | | | 31.12 | % | | | | | | | | | | | | | Rate cap | - | 525 | - | 1,050 | 1,575 | | 1,279 | 114 | 1,393 | | | - | | | | 407 | | | | - | | | | - | | | | - | | | | 116 | | | | 523 | | | | 526 | | | | 118 | | | | 644 | | AMERICA | (60) | 1,844 | 889 | 747 | 1,146 | 3,764 | 8,330 | | 12,334 | (6,555) | 5,779 | | | (1,035 | ) | | | 1,639 | | | | 1,982 | | | | 1,317 | | | | 830 | | | | 5,006 | | | | 9,739 | | | | 17,237 | | | | (8,700 | ) | | | 8,537 | | Instruments in USD | 473 | 205 | 245 | 188 | 782 | 921 | 2,814 | | 9,855 | (9,502) | 353 | | | (257 | ) | | | 10 | | | | 650 | | | | 36 | | | | 27 | | | | 1,270 | | | | 1,736 | | | | 12,880 | | | | (11,715 | ) | | | 1,165 | | Floating rate | (529) | 206 | 151 | 173 | 142 | 96 | 239 | | 2,492 | (2,374) | 118 | | | (153 | ) | | | 93 | | | | 480 | | | | 68 | | | | (73 | ) | | | (86 | ) | | | 329 | | | | 1,950 | | | | (1,787 | ) | | | 163 | | Spread | 0.85% | 0.41% | -1.34% | 0.96% | 1.89% | - | -0.98% | | | | | | 1.84 | % | | | 0.80 | % | | | 0.69 | % | | | 0.76 | % | | | (0.56 | %) | | | 0.53 | % | | | 0.53 | % | | | | | | | | | | | | | Fixed rate | 669 | (11) | 84 | 5 | 630 | 795 | 2,172 | | 6,957 | (7,143) | (186) | | | (114 | ) | | | (93 | ) | | | 160 | | | | (42 | ) | | | 90 | | | | 1,344 | | | | 1,345 | | | | 10,867 | | | | (9,931 | ) | | | 936 | | Interest rate | 4.09% | -48.90% | 26.66% | -7.92% | 3.20% | 13.20% | 8.28% | | | | | | (23.54 | %) | | | 3.93 | % | | | 7.83 | % | | | 1.05 | % | | | 27.27 | % | | | (86.84 | %) | | | (82.40 | %) | | | | | | | | | | | | | Rate cap | 333 | 10 | 30 | 403 | | 406 | 15 | 421 | | | 10 | | | | 10 | | | | 10 | | | | 10 | | | | 10 | | | | 12 | | | | 62 | | | | 63 | | | | 3 | | | | 66 | | Instruments in UYU | (2) | 2 | - | 2 | | 1 | - | 1 | | | (48 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (48 | ) | | | 2 | | | | - | | | | 2 | | Floating rate | - | | - | - | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | Spread | - | | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | Fixed rate | (2) | 2 | - | 2 | | 1 | - | 1 | | | (48 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (48 | ) | | | 2 | | | | - | | | | 2 | | Interest rate | -3.19% | 3.75% | - | 13.67% | | | | | | 3.40 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 3.40 | % | | | - | | | | - | | | | | | Rate cap | - | | | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in ARS | 110 | 141 | 59 | - | 310 | | (85) | 321 | 236 | | | 399 | | | | - | | | | - | | | | - | | | | - | | | | 15 | | | | 414 | | | | 139 | | | | 252 | | | | 391 | | Floating rate | - | | - | - | | Spread | - | | | | | Fixed rate | 110 | 141 | 59 | - | 310 | | (85) | 321 | 236 | | Interest rate | -54.69% | 6.63% | 11.49% | - | -14.12% | | | | | Rate cap | - | | | | | Instruments in BRL | (209) | 726 | 161 | 154 | 311 | 1,297 | | 607 | 661 | 1,268 | | Floating rate | (348) | 667 | 136 | 130 | 272 | 987 | | 548 | 469 | 1,017 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value | | Millions of Euros | | | 2011 | | | | 2012 | | | | 2013 | | | | 2014 | | | | 2015 | | | | Subsequent years | | | | Total | | | | Underlying debt | | | | Associated derivatives | | | | TOTAL | | Floating rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | Fixed rate | | | 399 | | | | - | | | | - | | | | - | | | | - | | | | 15 | | | | 414 | | | | 139 | | | | 252 | | | | 391 | | Interest rate | | | 13.29 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 12.77 | % | | | | | | | | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in BRL | | | (1,127 | ) | | | 662 | | | | 856 | | | | 406 | | | | 299 | | | | 125 | | | | 1,221 | | | | 582 | | | | 674 | | | | 1,256 | | Floating rate | | | (1,608 | ) | | | 336 | | | | 460 | | | | 203 | | | | 234 | | | | 34 | | | | (341 | ) | | | (636 | ) | | | 388 | | | | (248 | ) | Spread | | | (0.90 | %) | | | 3.89 | % | | | 3.28 | % | | | 5.57 | % | | | 1.26 | % | | | - | | | | (16.67 | %) | | | | | | | | | | | | | Fixed rate | | | 481 | | | | 326 | | | | 396 | | | | 203 | | | | 65 | | | | 91 | | | | 1,562 | | | | 1,218 | | | | 286 | | | | 1,504 | | Interest rate | | | 7.53 | % | | | 7.60 | % | | | 4.61 | % | | | 7.58 | % | | | 7.77 | % | | | 27.24 | % | | | 7.98 | % | | | | | | | | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in CLP | | | (64 | ) | | | 225 | | | | 110 | | | | 312 | | | | 283 | | | | - | | | | 866 | | | | (129 | ) | | | 795 | | | | 666 | | Floating rate | | | (56 | ) | | | 85 | | | | 24 | | | | 33 | | | | 283 | | | | - | | | | 369 | | | | 87 | | | | 689 | | | | 776 | | Spread | | | (2.53 | %) | | | 1.63 | % | | | 1.48 | % | | | - | | | | 0.98 | % | | | - | | | | 1.60 | % | | | | | | | | | | | | | Fixed rate | | | (8 | ) | | | 140 | | | | 86 | | | | 279 | | | | - | | | | - | | | | 497 | | | | (216 | ) | | | 106 | | | | (110 | ) | Interest rate | | | (24.06 | %) | | | 3.86 | % | | | 3.66 | % | | | - | | | | - | | | | - | | | | 5.47 | % | | | | | | | | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in UFC | | | 3 | | | | 2 | | | | 2 | | | | 2 | | | | 2 | | | | 2 | | | | 13 | | | | 197 | | | | 121 | | | | 318 | | Floating rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | Fixed rate | | | 3 | | | | 2 | | | | 2 | | | | 2 | | | | 2 | | | | 2 | | | | 13 | | | | 197 | | | | 121 | | | | 318 | | Interest rate | | | 40.94 | % | | | 7.45 | % | | | 6.00 | % | | | 5.43 | % | | | 6.00 | % | | | 6.00 | % | | | 13.62 | % | | | | | | | | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in PEN | | | 60 | | | | 152 | | | | 144 | | | | 124 | | | | 77 | | | | 360 | | | | 917 | | | | 1,130 | | | | 125 | | | | 1,255 | | Floating rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | Fixed rate | | | 60 | | | | 152 | | | | 144 | | | | 124 | | | | 77 | | | | 360 | | | | 917 | | | | 1,130 | | | | 125 | | | | 1,255 | | Interest rate | | | 18.68 | % | | | 6.23 | % | | | 6.73 | % | | | 6.58 | % | | | 7.95 | % | | | 31.05 | % | | | 17.06 | % | | | | | | | | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in COP | | | 551 | | | | 322 | | | | 154 | | | | 135 | | | | 26 | | | | 5 | | | | 1,193 | | | | 561 | | | | 715 | | | | 1,276 | | Floating rate | | | 147 | | | | 124 | | | | 129 | | | | 110 | | | | 26 | | | | 5 | | | | 541 | | | | 584 | | | | - | | | | 584 | | Spread | | | 2.22 | % | | | 3.10 | % | | | 3.11 | % | | | 3.14 | % | | | 3.00 | % | | | 3.00 | % | | | 2.86 | % | | | | | | | | | | | | | Fixed rate | | | 404 | | | | 198 | | | | 25 | | | | 25 | | | | - | | | | - | | | | 652 | | | | (23 | ) | | | 715 | | | | 692 | | Interest rate | | | 2.42 | % | | | 8.43 | % | | | 7.09 | % | | | 7.09 | % | | | - | | | | - | | | | 4.60 | % | | | | | | | | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in UVR | | | 7 | | | | - | | | | - | | | | - | | | | 52 | | | | 2,523 | | | | 2,582 | | | | 2,582 | | | | - | | | | 2,582 | | Floating rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | Fixed rate | | | 7 | | | | - | | | | - | | | | - | | | | 52 | | | | 2,523 | | | | 2,582 | | | | 2,582 | | | | - | | | | 2,582 | | Interest rate | | | 12.38 | % | | | - | | | | - | | | | - | | | | 12.38 | % | | | 74.28 | % | | | 72.88 | % | | | | | | | | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in VEB | | | (1,082 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,082 | ) | | | (1,084 | ) | | | - | | | | (1,084 | ) | Floating rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | Fixed rate | | | (1,082 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,082 | ) | | | (1,084 | ) | | | - | | | | (1,084 | ) | Interest rate | | | 1.66 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1.66 | % | | | - | | | | - | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in UDI | | | 45 | | | | 48 | | | | 60 | | | | 54 | | | | 58 | | | | 492 | | | | 757 | | | | - | | | | (246 | ) | | | (246 | ) | Floating rate | | | 45 | | | | 48 | | | | 60 | | | | 54 | | | | 58 | | | | 492 | | | | 757 | | | | - | | | | (246 | ) | | | (246 | ) | Spread | | | 3.56 | % | | | 3.52 | % | | | 3.12 | % | | | 3.09 | % | | | 3.09 | % | | | 2.98 | % | | | 3.07 | % | | | | | | | | | | | | | Fixed rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Interest rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in MXN | | | 484 | | | | 218 | | | | 6 | | | | 248 | | | | 6 | | | | 214 | | | | 1,176 | | | | 377 | | | | 579 | | | | 956 | | Floating rate | | | (70 | ) | | | - | | | | - | | | | 242 | | | | - | | | | 87 | | | | 259 | | | | 17 | | | | - | | | | 17 | | Spread | | | 0.45 | % | | | - | | | | - | | | | 0.55 | % | | | - | | | | 0.46 | % | | | 0.55 | % | | | | | | | | | | | | | Fixed rate | | | 554 | | | | 218 | | | | 6 | | | | 6 | | | | 6 | | | | 127 | | | | 917 | | | | 360 | | | | 579 | | | | 939 | | Interest rate | | | 3.57 | % | | | 9.10 | % | | | 4.00 | % | | | 4.00 | % | | | 4.00 | % | | | 5.16 | % | | | 5.11 | % | | | | | | | | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Instruments in GTQ | | | (6 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (6 | ) | | | - | | | | - | | | | - | | Floating rate | | | (6 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (6 | ) | | | - | | | | - | | | | - | | Spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | Fixed rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Interest rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | ASIA | | | (1 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1 | ) | | | 295 | | | | (301 | ) | | | (6 | ) | Instruments in JPY | | | (1 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1 | ) | | | 295 | | | | (301 | ) | | | (6 | ) | Floating rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 138 | | | | (138 | ) | | | - | | Spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | Fixed rate | | | (1 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1 | ) | | | 157 | | | | (163 | ) | | | (6 | ) | Interest rate | | | (0.04 | %) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (0.04 | %) | | | | | | | | | | | | |
| | | | | | | | | FAIR VALUE | | | Millions of Euros | 2009 | 2010 | 2011 | 2012 | 2013 | Subsequent years | Total | | Underlying debt | Associated derivatives | TOTAL |
Spread | 0.74% | 0.49% | 3.64% | 3.74% | 3.75% | - | 2.20% | | | | | Fixed rate | 139 | 59 | 25 | 24 | 24 | 39 | 310 | | 59 | 192 | 251 | Interest rate | 21.00% | 4.23% | 10.03% | 10.03% | 10.03% | 9.96% | 13.83% | | | | | Rate cap | - | - | - | - | - | - | - | | | | | Instruments in CLP | 349 | 105 | 170 | 102 | 78 | - | 804 | | (15) | 820 | 805 | Floating rate | 212 | 105 | 151 | 102 | 78 | - | 648 | | 113 | 475 | 588 | Spread | -0.20% | 0.09% | 0.06% | 0.13% | - | - | -0.01% | | | | | Fixed rate | 137 | - | 19 | - | - | - | 156 | | (128) | 345 | 217 | Interest rate | 8.59% | - | 4.70% | - | - | - | 8.11% | | | | | Rate cap | - | - | - | - | - | - | - | | | | | Instruments in UFC | 2 | 2 | 68 | 2 | 2 | 4 | 80 | | 173 | (95) | 78 | Floating rate | - | - | - | - | - | - | - | | 86 | (86) | - | Spread | - | - | - | - | - | - | - | | | | | Fixed rate | 2 | 2 | 68 | 2 | 2 | 4 | 80 | | 87 | (9) | 78 | Interest rate | 6.53% | 6.56% | 4.43% | 7.45% | 6.00% | 6.00% | 4.74% | | | | | Rate cap | - | - | - | - | - | - | - | | | | | Instruments in PEN | 161 | 181 | 102 | 82 | 61 | 339 | 926 | | 807 | 155 | 962 | Floating rate | - | - | - | - | - | - | - | | - | - | - | Spread | - | - | - | - | - | - | - | | | | | Fixed rate | 161 | 181 | 102 | 82 | 61 | 339 | 926 | | 807 | 155 | 962 | Interest rate | 5.63% | 7.13% | 6.67% | 6.70% | 7.45% | 6.23% | 6.47% | | | | | Rate cap | - | - | - | - | - | - | - | | | | | Instruments in COP | 579 | 56 | 82 | 33 | 69 | 183 | 1,002 | | 391 | 587 | 978 | Floating rate | 8 | 43 | 36 | 33 | 30 | - | 150 | | 148 | - | 148 | Spread | - | - | - | - | - | - | - | | | | | Fixed rate | 571 | 13 | 46 | - | 39 | 183 | 852 | | 243 | 587 | 830 | Interest rate | 12.66% | 15.82% | 14.10% | - | 13.44% | - | 10.10% | | | | | Rate cap | - | - | - | - | - | - | - | | | | | Instruments in UVR | - | - | - | - | - | 2,006 | 2,006 | | 2,006 | - | 2,006 | Floating rate | - | - | - | - | - | - | - | | - | - | - | Spread | - | - | - | - | - | - | - | | | | | Fixed rate | - | - | - | - | - | 2,006 | 2,006 | | 2,006 | - | 2,006 | Interest rate | - | - | - | - | - | 7.67% | 7.67% | | | | | Rate cap | - | - | - | - | - | - | - | | | | | Instruments in VEB | (1,998) | - | - | - | - | - | (1, 998) | | (1,999) | - | (1,999) | Floating rate | - | - | - | - | - | - | - | | - | - | - | Spread | - | - | - | - | - | - | - | | | | | Fixed rate | (1,998) | - | - | - | - | - | (1,998) | | (1,999) | - | (1,999) | Interest rate | 10.34% | - | - | - | - | - | 10.34% | | | | | Rate cap | - | - | - | - | - | - | - | | | | | Instruments in MXN | 479 | 426 | - | 186 | - | - | 1,091 | | 597 | 498 | 1,095 | Floating rate | 47 | 266 | - | - | - | - | 313 | | 412 | 63 | 475 | Spread | 3.30% | 0.61% | - | - | - | - | 1.01% | | | | | Fixed rate | 432 | 160 | - | 186 | - | - | 778 | | 185 | 435 | 620 | Interest rate | 12.85% | 8.17% | - | 9.25% | - | - | 11.02% | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value | Millions of Euros | | | 2011 | | | | 2012 | | | | 2013 | | | | 2014 | | | | 2015 | | | | Subsequent years | | | | Total | | | | Underlying debt | | | | Associated derivatives | | | | TOTAL | | Rate cap | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | TOTAL | | | 4,838 | | | | 6,740 | | | | 9,700 | | | | 5,913 | | | | 7,927 | | | | 19,719 | | | | 54,837 | | | | 56,002 | | | | (1,261 | ) | | | 54,741 | | Floating rate | | | (905 | ) | | | 2,895 | | | | 8,179 | | | | 2,486 | | | | 3,221 | | | | (3,305 | ) | | | 12,571 | | | | 10,816 | | | | 386 | | | | 11,202 | | Fixed rate | | | 5,733 | | | | 1,278 | | | | 811 | | | | 3,417 | | | | 4,696 | | | | 21,646 | | | | 37,581 | | | | 40,454 | | | | (2,055 | ) | | | 38,399 | | Rate cap | | | 10 | | | | 2,567 | | | | 710 | | | | 10 | | | | 10 | | | | 1,378 | | | | 4,685 | | | | 4,732 | | | | 408 | | | | 5,140 | | Currency options | | | | (175 | ) | | | | | | | | | | | | | Other | | | | | 931 | | | | | | | | | | | | | |
The table below is an extract of the previous table that shows the sensitivity to interest rates originated by the Group´s position on interest rate swaps categorized into instruments entered into for trading purposes and instruments entered into for purposes other than trading at December 31, 2010: | | | | | | | | | FAIR VALUE | | | Millions of Euros | 2009 | 2010 | 2011 | 2012 | 2013 | Subsequent years | Total | | Underlying debt | Associated derivatives | TOTAL |
Rate cap | - | - | - | - | - | - | - | | | | | Instruments in GTQ | (4) | - | - | - | - | - | (4) | | (4) | - | (4) | Floating rate | (4) | - | - | - | - | - | (4) | | (4) | - | (4) | Spread | 0.01% | - | - | - | - | - | 0.01% | | | | | Fixed rate | - | - | - | - | - | - | - | | - | - | - | Interest rate | - | - | - | - | - | - | - | | | | | Rate cap | - | - | - | - | - | - | - | | | | | ASIA | | | | | | | | | 575 | (597) | (22) | Instruments in JPY | - | - | - | - | - | - | - | | 575 | (597) | (22) | Floating rate | - | - | - | - | - | - | - | | 152 | (158) | (6) | Spread | - | - | - | - | - | - | - | | | | | Fixed rate | - | - | - | - | - | - | - | | 423 | (439) | (16) | Interest rate | - | - | - | - | - | - | - | | | | | Rate cap | - | - | - | - | - | - | - | | | | | AFRICA | - | - | - | 88 | - | - | 88 | | - | 84 | 84 | Instruments in MAD | - | - | - | 88 | - | - | 88 | | - | 84 | 84 | Floating rate | - | - | - | - | - | - | - | | - | - | - | Spread | - | - | - | - | - | - | - | | | | | Fixed rate | - | - | - | 88 | - | - | 88 | | - | 84 | 84 | Interest rate | - | - | - | 4.54% | - | - | 8.57% | | | | | Rate cap | - | - | - | - | - | - | - | | | | | TOTAL | 1,405 | 5,742 | 10,150 | 5,828 | 5,372 | 14,016 | 42,513 | - | 40,887 | (1,478) | 39,409 | Floating rate | (9,784) | 355 | 7,012 | 1,020 | 4,647 | 642 | 3,892 | - | 11,733 | (8,425) | 3,308 | Fixed rate | 10,506 | 5,377 | 2,728 | 923 | 715 | 11,044 | 31,293 | - | 22,036 | 6,862 | 28,898 | Rate cap | 683 | 10 | 410 | 3,885 | 10 | 2,330 | 7,328 | - | 7,118 | 85 | 7,203 | Currency options | | | | | | | (202) | | | (202) | | Other | - | - | - | - | - | - | 422 | | - | - | - |
INTEREST RATE SWAPS | | | | Maturity | | | | | Millions of euros | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | Subsequent years | | | TOTAL | | | Fair value | | TRADING PURPOSES | | | | | | | | | | | | | | | | | | | | | | | | | EUR | | | | | | | | | | | | | | | | | | | | | | | | (88 | ) | Fixed to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 3 | | Receiving leg | | | - | | | | - | | | | - | | | | (35 | ) | | | (20 | ) | | | - | | | | (55 | ) | | | (50 | ) | Average interest rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | Paying leg | | | - | | | | - | | | | - | | | | 35 | | | | 20 | | | | - | | | | 55 | | | | 53 | | Average spread | | | - | | | | - | | | | - | | | | 1.12 | % | | | 1.63 | % | | | - | | | | 1.31 | % | | | | | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (308 | ) | Receiving leg | | | (1,685 | ) | | | (420 | ) | | | (1,250 | ) | | | (1,255 | ) | | | (575 | ) | | | (2,359 | ) | | | (7,544 | ) | | | (6,141 | ) | Average interest rate | | | 4.62 | % | | | 4.25 | % | | | 3.46 | % | | | 2.50 | % | | | 3.57 | % | | | 3.37 | % | | | 3.59 | % | | | | | Paying leg | | | 1,685 | | | | 420 | | | | 1,250 | | | | 1,255 | | | | 575 | | | | 2,359 | | | | 7,544 | | | | 5,833 | | Average spread | | | 0.00 | % | | | 0.00 | % | | | 0.95 | % | | | 1.56 | % | | | 0.77 | % | | | 2.45 | % | | | 1.24 | % | | | | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 218 | | Receiving leg | | | (5,327 | ) | | | (175 | ) | | | (710 | ) | | | (1,000 | ) | | | - | | | | (2,185 | ) | | | (9,397 | ) | | | (8,812 | ) | Average spread | | | 0.00 | % | | | 0.00 | % | | | 2.00 | % | | | 0.00 | % | | | - | | | | 0.00 | % | | | 0.15 | % | | | | | Paying leg | | | 5,327 | | | | 175 | | | | 710 | | | | 1,000 | | | | - | | | | 2,185 | | | | 9,397 | | | | 9,030 | | Average interest rate | | | 1.03 | % | | | 2.17 | % | | | 2.35 | % | | | 3.43 | % | | | - | | | | 3.32 | % | | | 1.94 | % | | | | | Floating to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1 | ) | Receiving leg | | | - | | | | - | | | | - | | | | - | | | | (50 | ) | | | - | | | | (50 | ) | | | (52 | ) | Average interest rate | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | Paying leg | | | - | | | | - | | | | - | | | | - | | | | 50 | | | | - | | | | 50 | | | | 51 | | Average spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | USD | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 6 | | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (13 | ) | Receiving leg | | | (68 | ) | | | - | | | | - | | | | - | | | | (37 | ) | | | (322 | ) | | | (427 | ) | | | (440 | ) | Average interest rate | | | 3.08 | % | | | - | | | | - | | | | - | | | | 0.00 | % | | | 3.26 | % | | | 2.95 | % | | | | | Paying leg | | | 68 | | | | - | | | | - | | | | - | | | | 37 | | | | 322 | | | | 427 | | | | 427 | | Average spread | | | - | | | | - | | | | - | | | | - | | | | 1.04 | % | | | - | | | | 0.09 | % | | | | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 19 | | Receiving leg | | | (206 | ) | | | (67 | ) | | | (449 | ) | | | - | | | | (102 | ) | | | (876 | ) | | | (1,700 | ) | | | (633 | ) | Average spread | | | 0.35 | % | | | 3.99 | % | | | 3.61 | % | | | - | | | | - | | | | - | | | | 1.15 | % | | | | | Paying leg | | | 206 | | | | 67 | | | | 449 | | | | - | | | | 102 | | | | 876 | | | | 1,700 | | | | 652 | | Average interest rate | | | 0.50 | % | | | - | | | | - | | | | - | | | | 2.52 | % | | | 3.54 | % | | | 2.03 | % | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CURRENCY OPTIONS | Figures in euros | MATURITIES | | 2009 | 2010 | 2011 | 2012 | 2013 | 2013+ | Call USD/Put BRL | | | | | | | Notional amount of options bought | 287,418,265 | - | - | - | - | - | Strike | 2.36 | - | - | - | - | - | Notional amount of options sold | 290,062,464 | - | - | - | - | - | Strike | 2.36 | - | - | - | - | - | Put USD / Call BRL | | | | | | | Notional amount of options bought | 114,284,734 | - | - | - | - | - | Strike | 1.86 | - | - | - | - | - | Notional amount of options sold | 143,709,133 | - | - | - | - | - | Strike | 1.86 | - | - | - | - | - | | | | | | | | Call USD / Put ARS | | | | | | | Notional amount of options bought | 15,825,484 | - | - | - | - | - | Strike | 3.38 | - | - | - | - | - | Call USD / Put EUR | | | | | | | Notional amount of options bought | 291,010,994 | - | 208,378,242 | - | 148,020,407 | 1,723,431,774 | Strike | 1.59 | - | 1.59 | - | 1.49 | 1.40 | Notional amount of options sold | 268,984,547 | - | 195,129,693 | - | - | 831,255,453 | Strike | 1.51 | - | 1.49 | - | - | 1.20 |
| INTEREST RATE OPTIONS | | MATURITIES | Figures in euros | 2009 | 2010 | 2011 | 2012 | 2013+ | Collars | | | | | | Notional bought | 781,127,398 | - | 400,000,000 | 200,000,000 | 2,689,686,974 | Strike Cap | 3.897% | - | 4.000% | 3.80% | 4.53% | Strike Floor | 2.733% | - | 3.300% | 2.80% | 3.13% | Caps | | | | | | Notional bought | - | - | - | 6,784,908,136 | - | Strike | - | - | - | 4.28% | - | Notional sold | 700,000,000 | - | 400,000,000 | 6,784,908,136 | 2,689,686,974 | Strike | 4.75% | - | 4.55% | 5.156% | 5.24% | Floors | | | | | | Notional bought | 1,481,127,398 | - | 400,000,000 | 567,454,068 | 2,599,868,766 | Strike | 0.71% | - | 1.00% | 1.15% | 1.72% | Notional sold | 1,050,000,000 | 367,974,663 | - | 1,067,454,068 | - | Strike | 2.73% | 4.39% | - | 2.75% | - |
NON TRADING PURPOSES | | | | | | | | | | | | | | | | | | | | | | | | | EUR | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (784 | ) | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (661 | ) | Receiving leg | | | (2,039 | ) | | | (504 | ) | | | (1,654 | ) | | | (3,055 | ) | | | (1,005 | ) | | | (3,318 | ) | | | (11,575 | ) | | | (12,218 | ) | Average interest rate | | | 3.23 | % | | | 3.50 | % | | | 3.77 | % | | | 4.69 | % | | | 3.33 | % | | | 3.47 | % | | | 3.78 | % | | | | | Paying leg | | | 2,039 | | | | 504 | | | | 1,654 | | | | 3,055 | | | | 1,005 | | | | 3,318 | | | | 11,575 | | | | 11,557 | | Average spread | | | 0.80 | % | | | 0.01 | % | | | 0.05 | % | | | 0.03 | % | | | 0.01 | % | | | 0.00 | % | | | 0.16 | % | | | | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (123 | ) | Receiving leg | | | (11,699 | ) | | | (556 | ) | | | (550 | ) | | | (2,230 | ) | | | (5,412 | ) | | | (11,832 | ) | | | (32,279 | ) | | | (15,695 | ) | Average spread | | | 0.19 | % | | | - | | | | - | | | | 3.48 | % | | | 2.35 | % | | | - | | | | 0.70 | % | | | | | Paying leg | | | 11,699 | | | | 556 | | | | 550 | | | | 2,230 | | | | 5,412 | | | | 11,832 | | | | 32,279 | | | | 15,572 | | Average interest rate | | | 2.64 | % | | | 2.82 | % | | | 3.74 | % | | | - | | | | 1.09 | % | | | 3.72 | % | | | 3.01 | % | | | - | | USD | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (880 | ) | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (928 | ) | Receiving leg | | | (776 | ) | | | (42 | ) | | | (1,501 | ) | | | (42 | ) | | | (1,875 | ) | | | (4,891 | ) | | | (9,127 | ) | | | (9,539 | ) | Average interest rate | | | - | | | | 3.90 | % | | | - | | | | 5.52 | % | | | - | | | | 4.84 | % | | | 2.64 | % | | | | | Paying leg | | | 776 | | | | 42 | | | | 1,501 | | | | 42 | | | | 1,875 | | | | 4,891 | | | | 9,127 | | | | 8,611 | | Average spread | | | | | | | - | | | | | | | | - | | | | | | | | - | | | | - | | | | - | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 48 | | Receiving leg | | | (28 | ) | | | (28 | ) | | | (664 | ) | | | (28 | ) | | | (28 | ) | | | (28 | ) | | | (804 | ) | | | (802 | ) | Average spread | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | Paying leg | | | 28 | | | | 28 | | | | 664 | | | | 28 | | | | 28 | | | | 28 | | | | 804 | | | | 850 | | Average interest rate | | | 4.34 | % | | | 4.34 | % | | | 4.34 | % | | | 3.35 | % | | | 4.34 | % | | | 4.34 | % | | | 4.31 | % | | | - | | MXN | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1 | ) | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1 | ) | Receiving leg | | | (85 | ) | | | - | | | | - | | | | - | | | | - | | | | (121 | ) | | | (206 | ) | | | (69 | ) | Average spread | | | 0.61 | % | | | | | | | | | | | | | | | | | | | | | | | 0.25 | % | | | - | | Paying leg | | | 85 | | | | - | | | | - | | | | - | | | | - | | | | 121 | | | | 206 | | | | 68 | | Average interest rate | | | 8.16 | % | | | | | | | | | | | | | | | | | | | | | | | 3.37 | % | | | - | | GBP | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2 | | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (64 | ) | Receiving leg | | | - | | | | - | | | | - | | | | (581 | ) | | | - | | | | (1,220 | ) | | | (1,801 | ) | | | (1,867 | ) | Average interest rate | | | | | | | | | | | | | | | 5.25 | % | | | - | | | | 3.92 | % | | | 2.66 | % | | | - | | Paying leg | | | - | | | | - | | | | - | | | | 581 | | | | - | | | | 1,220 | | | | 1,801 | | | | 1,803 | | Average spread | | | | | | | | | | | | | | | | | | | - | | | | 1.64 | % | | | 1.11 | % | | | - | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 66 | | Receiving leg | | | (628 | ) | | | - | | | | - | | | | - | | | | - | | | | (470 | ) | | | (1,098 | ) | | | (1,099 | ) | Average spread | | | | | | | - | | | | | | | | | | | | | | | | - | | | | - | | | | - | | Paying leg | | | 628 | | | | - | | | | - | | | | - | | | | - | | | | 470 | | | | 1,098 | | | | 1,165 | | Average interest rate | | | | | | | 5.12 | % | | | | | | | | | | | | | | | 4.96 | % | | | 2.13 | % | | | - | | JPY | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (4 | ) | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (4 | ) | Receiving leg | | | - | | | | - | | | | (138 | ) | | | - | | | | - | | | | - | | | | (138 | ) | | | (142 | ) | Average interest rate | | | | | | | | | | | 1.68 | % | | | | | | | | | | | | | | | 1.68 | % | | | - | | Paying leg | | | - | | | | - | | | | 138 | | | | - | | | | - | | | | - | | | | 138 | | | | 138 | | Average spread | | | | | | | | | | | | | | | - | | | | - | | | | | | | | - | | | | - | | CLP | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (35 | ) | Fixed to floating | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1 | | Receiving leg | | | - | | | | - | | | | (24 | ) | | | (33 | ) | | | - | | | | - | | | | (57 | ) | | | (56 | ) | Average interest rate | | | | | | | | | | | 4.12 | % | | | 4.51 | % | | | - | | | | | | | | 2.39 | % | | | - | | Paying leg | | | - | | | | - | | | | 24 | | | | 33 | | | | - | | | | - | | | | 57 | | | | 57 | | Average spread | | | | | | | | | | | | | | | - | | | | - | | | | | | | | - | | | | - | | Floating to fixed | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (36 | ) | Receiving leg | | | (297 | ) | | | (60 | ) | | | (110 | ) | | | - | | | | - | | | | - | | | | (467 | ) | | | (355 | ) | Average spread | | | 1.55 | % | | | - | | | | - | | | | - | | | | | | | | | | | | 0.98 | % | | | - | | Paying leg | | | 297 | | | | 60 | | | | 110 | | | | - | | | | - | | | | - | | | | 467 | | | | 319 | | Average interest rate | | | - | | | | 1.82 | % | | | 3.74 | % | | | | | | | | | | | | | | | 1.11 | % | | | - | |
Foreign exchange and interest rate options, by maturity, at December 31, 2010 were as follows: | CURRENCY OPTIONS | | MATURITIES | | 2011 | 2012 | 2013 | 2014 | 2015 | Subsequent years | Put USD / Call EUR | | | | | | | Notional amount of options bought | 217 | | 154 | | 186 | 1,609 | Strike | 1.59% | | 1.49% | | 1.54% | 1.38% | Notional amount of options sold | 195 | | | | | 831 | Strike | 1.49% | | | | | 1.20% |
| INTEREST RATE OPTIONS | | MATURITIES | Figures in euros | 2011 | 2012 | 2013 | 2014 | Subsequent years | Collars | | | | | | Notional amount of options bought | - | 1,406,622,132 | - | - | 2,179,179,407 | Strike Cap | - | 4.718% | - | - | 4.63% | Strike Floor | - | 3.204% | - | - | 3.48% | Caps | | | | | | Notional amount of options bought | - | 4,430,888,760 | - | - | - | Strike | - | 4.031% | - | - | - | Notional amount of options sold | - | 5,837,510,892 | - | - | 2,179,179,407 | Strike | - | 3.669% | - | - | 5.032% | Floors | | | | | | Notional amount of options bought | - | 1,706,622,132 | - | - | 2,121,333,140 | Strike | - | 0.764% | - | - | 0.786% | Notional amount of options sold | - | 700,000,000 | - | - | - | Strike | - | 2.147% | - | - | - |
Cash flows receivable or payable on derivative financial instruments settled via the swap of Contentsnominals, by currency of collection/payment, along with contractual maturities at December 31, 2010 were as follows: Millions of euros | 2011 | 2012 | 2013 | 2014 | 2015 | Subsequent years | Total | Currency swaps | | | | | | | | Receive | ARS | - | - | - | - | - | - | - | Pay | ARS | (54) | - | - | - | - | - | (54) | Receive | BRL | 75 | - | - | - | - | - | 75 | Pay | BRL | (202) | (73) | (5) | (84) | (199) | - | (563) | Receive | CLP | 204 | 95 | 110 | - | 284 | - | 693 | Pay | CLP | (408) | (271) | (221) | (228) | (565) | - | (1,693) | Receive | COP | - | - | - | - | - | - | - | Pay | COP | (198) | (198) | (25) | (25) | - | - | (446) | Receive | CZK | - | - | - | - | - | - | - | Pay | CZK | (117) | (117) | (164) | (235) | (164) | - | (797) | Receive | EUR | 978 | 323 | 160 | 281 | 163 | 588 | 2,493 | Pay | EUR | (870) | (485) | (2,928) | (41) | (3,145) | (8,286) | (15,755) | Receive | GBP | - | - | - | - | - | - | - | Pay | GBP | (628) | - | - | - | - | (470) | (1,098) | Receive | JPY | 18 | 552 | - | - | - | 138 | 708 | Pay | JPY | - | - | - | - | - | - | - |
Millions of euros | 2011 | 2012 | 2013 | 2014 | 2015 | Subsequent years | Total |
Receive | MAD | - | 89 | - | - | - | - | 89 | Pay | MAD | - | (89) | - | - | - | - | (89) | Receive | MXN | - | - | - | - | - | - | - | Pay | MXN | (12) | (12) | (12) | (12) | (12) | (182) | (242) | Receive | PEN | - | - | - | - | - | - | - | Pay | PEN | (17) | (28) | (19) | (14) | (14) | (54) | (146) | Receive | UFC | 41 | 206 | - | 171 | - | - | 418 | Pay | UFC | (133) | (103) | - | - | - | - | (236) | Receive | USD | 1,526 | 225 | 3,224 | 151 | 4,007 | 8,104 | 17,237 | Pay | USD | (185) | - | (112) | - | (268) | - | (565) | Receive | UDI | 12 | 12 | 12 | 12 | 12 | 186 | 246 | Pay | UDI | - | - | - | - | - | - | - | TOTAL | 30 | 126 | 20 | (24) | 99 | 24 | 275 | Forwards | | | | | | | | Receive | ARS | - | - | - | - | - | - | - | Pay | ARS | (229) | - | - | - | - | - | (229) | Receive | BRL | - | - | - | - | - | - | - | Pay | BRL | (156) | - | - | - | - | - | (156) | Receive | CLP | 129 | - | - | - | - | - | 129 | Pay | CLP | (129) | - | - | - | - | - | (129) | Receive | COP | 65 | - | - | - | - | - | 65 | Pay | COP | (295) | - | - | - | - | - | (295) | Receive | CZK | - | - | - | - | - | - | - | Pay | CZK | (718) | - | - | - | - | - | (718) | Receive | EUR | 3,357 | - | - | - | - | - | 3,357 | Pay | EUR | (3,055) | (32) | (18) | - | - | - | (3,105) | Receive | GBP | 2,257 | 8 | - | - | - | - | 2,265 | Pay | GBP | (1,031) | - | - | - | - | - | (1,031) | Receive | MXN | 286 | - | - | - | - | - | 286 | Pay | MXN | (746) | - | - | - | - | - | (746) | Receive | PEN | 42 | 2 | - | - | - | - | 44 | Pay | PEN | (12) | - | - | - | - | - | (12) | Receive | UFC | - | - | - | - | - | - | - | Pay | UFC | (11) | - | - | - | - | - | (11) | Receive | USD | 2,351 | 26 | 21 | - | - | - | 2,398 | Pay | USD | (2,107) | (2) | - | - | - | - | (2,109) | TOTAL | (2) | 2 | 3 | - | - | - | 3 |
APPENDIX IV: INTEREST-BEARING DEBT The main financing transactions included under this heading outstanding at December 31, 20092011 and 20082010 and their nominal amounts are as follows: Name | Amount of contract | Outstanding nominal balance (million euros) | Arrangement date | Maturity date | Summary | (millions) | 12/31/09 | 12/31/08 | | | Telefónica Europe, B.V. syndicated loan O2 acquisition | 5,250 | GBP | 3,091 | 4,203 | 12/07/06 | 12/14/13 | Telefónica Europe, B.V. loan | 15,000 | JPY | 113 | 119 | 08/23/07 | 07/27/37 | Telefónica, S.A. syndicated loan Cesky acquisition | 6,000 | EUR | 6,000 | 6,000 | 06/28/05 | 06/28/13 | Telefónica, S.A. syndicated loan with savings banks | 700 | EUR | 700 | 700 | 04/21/06 | 04/21/17 | TELFISA EIB financing | 257 | USD | 179 | 211 | 09/15/04 | 09/15/16 | TELFISA EIB financing | 109 | EUR | 109 | 125 | 11/15/04 | 09/15/16 | TELFISA EIB financing | 300 | EUR | 300 | 300 | 12/12/06 | 12/12/11 | TELFISA EIB financing | 100 | EUR | 100 | 100 | 01/31/07 | 01/31/15 | TELFISA EIB financing | 375 | EUR | 375 | 375 | 01/30/08 | 01/30/15 | Vivo loans | 765 | BRL | 287 | 211 | 07/13/07 | 08/15/14 | Telesp loans | 2,034 | BRL | 792 | 525 | 10/23/07 | 05/15/15 | CTC loans | 4 | UFC | 103 | 86 | 04/14/05 | 04/14/10 | CTC syndicated loans | 150 | USD | 104 | 108 | 10/28/05 | 06/21/11 | CTC syndicated loans | 150 | USD | 104 | 108 | 06/09/08 | 05/13/13 | Telefónica Móviles Chile syndicated loans | 180 | USD | 125 | 129 | 01/05/06 | 01/05/11 | Telefónica Móviles Chile syndicated loans | 100,000 | CLP | 105 | 113 | 11/15/06 | 11/15/12 | Colombia Telecomunicaciones loans | 310,000 | COP | 105 | 99 | 12/28/09 | 12/28/14 | Telefónica Móviles Colombia loans | 600 | USD | 417 | 431 | 12/20/07 | 11/15/12 | Other | | | 4,849 | 5,987 | | TOTAL | | | 17,958 | 19,930 | |
Descriptive name summary | | Contractual limit amount | | Currency | | Outstanding principal balance (millions of euros) | | Arrangement | Maturity | | | (millions) | | | | 12/31/11 | | | 12/31/10 | | date | date | Total Telefónica, S.A. and its instrument companies | | | | | | | | | | | | | Telefónica, S.A. 2005 syndicated facility | | | 650 | | EUR | | | - | | | | 300 | | 06/28/05 | 06/28/11 | Telfisa EIB bilateral facility | | | 300 | | EUR | | | - | | | | 300 | | 12/12/06 | 12/12/11 | Telefónica Europe, B.V. 2006 syndicated facility | | | 4,200 | | GBP | | | 2,965 | | | | 2,945 | | | | Tramo D (*) | | | 2,100 | | GBP | | | 2,502 | | | | 2,459 | | 12/07/06 | 12/14/12 | Tramo E (*) | | | 2,100 | | GBP | | | 463 | | | | 486 | | 12/07/06 | 12/14/13 | Telefónica, S.A. 2010 syndicated facility | | | 8,000 | | EUR | | | 8,000 | | | | 6,000 | | | | Tranche A.1 | | | 1,000 | | EUR | | | 1,000 | | | | 3,000 | | 07/28/10 | 07/28/13 | Tranche A.2 | | | 2,000 | | EUR | | | 2,000 | | | | - | | 07/28/10 | 07/28/14 | Tranche A.3 | | | 2,000 | | EUR | | | 2,000 | | | | - | | 07/28/10 | 07/28/16 | Tranche B | | | 3,000 | | EUR | | | 3,000 | | | | 3,000 | | 07/28/10 | 07/28/15 | Bilateral loan | | | 160 | | EUR | | | 160 | | | | 160 | | 12/22/10 | 12/22/15 | Telfisa EIB bilateral facility | | | 100 | | EUR | | | 100 | | | | 100 | | 01/31/07 | 01/31/15 | Telfisa EIB bilateral facility | | | 375 | | EUR | | | 375 | | | | 375 | | 01/30/08 | 01/30/15 | Telfisa EIB bilateral facility | | | 253 | | USD | | | 196 | | | | 227 | | 09/15/04 | 09/15/16 | Cajas Telefónica, S.A. 2006 Saving Bank’s syndicated facility | | | 700 | | EUR | | | 700 | | | | 700 | | 04/21/06 | 04/21/17 | Telefónica, S.A. ECAs – EKN loan | | | 472 | | USD | | | 259 | | | | - | | 02/12/10 | 11/30/19 | Telefónica Europe, B.V. bilateral | | | 15,000 | | JPY | | | 150 | | | | 138 | | 08/16/07 | 07/27/37 | | | | | | | | | | | | | | | | | Other operators | | | | | | | | | | | | | | | | Telefónica Chile 2005 syndicated facility | | | 150 | | USD | | | - | | | | 112 | | 10/28/05 | 06/21/11 | Móviles Chile 2006 syndicated facility | | | 180 | | USD | | | - | | | | 134 | | 12/29/05 | 01/05/11 | Cesky financing | | | 115 | | EUR | | | 115 | | | | 115 | | 07/30/97 | 07/30/12 | Telefónica Chile 2008 syndicated facility | | | 150 | | USD | | | 116 | | | | 112 | | 06/09/08 | 05/13/13 | Telefónica Brasil bilateral loan – Banco do Brasil | | | 150 | | USD | | | 116 | | | | - | | 10/31/11 | 10/25/13 | Vivo bilateral loan - BNDES | | | 818 | | BRL | | | 339 | | | | 509 | | 07/13/07 | 08/15/14 | Colombia Telecomunicaciones loan | | | 310,000 | | COP | | | 123 | | | | 121 | | 12/28/09 | 12/28/14 | Vivo EIB bilateral | | | 265 | | USD | | | 212 | | | | 203 | | 02/29/08 | 03/02/15 | Atento syndicated facility | | | 235 | | EUR | | | 228 | | | | - | | 03/29/11 | 03/29/15 | Telefónica Brasil bilateral loan - BNDES | | | 1,390 | | BRL | | | 576 | | | | 812 | | 10/23/97 | 05/15/15 | Móviles Colombia IDB financing | | | 273 | | USD | | | 211 | | | | 367 | | | | Tranche A | | | 83 | | USD | | | 64 | | | | 83 | | 12/20/07 | 11/15/14 | Tranche B | | | 190 | | USD | | | 147 | | | | 284 | | 12/20/07 | 11/15/12 | Vivo bilateral loan - BNB | | | 255 | | BRL | | | 111 | | | | 170 | | 10/30/08 | 10/30/16 | Telefónica Brasil bilateral loan - BNDES | | | 3,000 | | BRL | | | 414 | | | | - | | 09/20/11 | 07/15/19 | | | | | | | | | | | | | | | | | Others | | | | | | | | 6,157 | | | | 6,069 | | | | Total | | | | | | | | 21,623 | | | | 19,907 | | | |
APPENDIX V: MAIN COMPANIES COMPRISING THE TELEFÓNICA GROUP The table below lists the main companies comprising the Telefónica Group at December 31, 20092011 and the main investments consolidated using the equity method. Included for each company are the company name, corporate purpose, country, functional currency, share capital (in million of functional currency units), the Telefónica Group's effective shareholding and the company or companies through which the Group holds a stake. Name and corporate purpose | Country | Currency | Share capital | % Telefónica Group | Holding company | Country | Currency | Capital | % Telefónica Group | Holding company | Parent company: | | | | | | | Telefónica, S.A. | Spain | EUR | 4,564 | | | Spain | EUR | 4,564 | | | Telefónica Spain | | | | | | | Telefónica de España, S.A.U. Telecommunications service provider | Spain | EUR | 1,024 | 100% | Telefónica, S.A. (100%) | Spain | EUR | 1,024 | 100% | Telefónica, S.A. (100%) | Telefónica Móviles España, S.A.U. Wireless communications services provider | Spain | EUR | 423 | 100% | Telefónica, S.A. (100%) | Spain | EUR | 423 | 100% | Telefónica, S.A. (100%) | Acens Technologies, S.L. Hosting, housing and telecommunications solutions service provider | | Spain | EUR | 23 | 100% | Telefónica de España, S.A.U. (100%) | Telefónica Soluciones Sectoriales, S.A.U. Consulting services for ICT companies | | Spain | EUR | 14 | 100% | Telefónica de España, S.A.U. (100%) | Teleinformática y Comunicaciones, S.A.U. (TELYCO) Promotion, marketing and distribution of telephone and telematic equipment and services | | Spain | EUR | 8 | 100% | Telefónica de España, S.A.U. (100%) | Telefónica Serv. de Informática y Com. de España, S.A.U. Telecommunications systems, networks and infrastructure engineering | Spain | EUR | 6 | 100% | Telefónica de España, S.A.U. (100%) | Spain | EUR | 5 | 100% | Telefónica de España, S.A.U. (100%) | Telefónica Soluciones Sectoriales, S.A.U. Consulting services for ICT companies | Spain | EUR | 14 | 100% | Telefónica de España, S.A.U. (100%) | | Telefónica Cable, S.A.U. Cable telecommunication services provider | | Spain | EUR | 3 | 100% | Telefónica de España, S.A.U. (100%) | Iberbanda, S.A. Broadband telecommunications operator | | Spain | EUR | 2 | 100% | Telefónica de España, S.A.U. (100%) | Telefónica Telecomunicaciones Públicas, S.A.U. Installation of public telephones | | Spain | EUR | 1 | 100% | Telefónica de España, S.A.U. (100%) | Interdomain, S.A.U. Internet resources operator | Spain | EUR | - | 100% | Telefónica Soluciones Sectoriales, S.A. (100%) | Spain | EUR | - | 100% | Telefónica Soluciones Sectoriales, S.A. (100%) | Teleinformática y Comunicaciones, S.A.U. (TELYCO) Promotion, marketing and distribution of telephone and telematic equipment and services | Spain | EUR | 8 | 100% | Telefónica de España, S.A.U. (100%) | | Telyco Marruecos, S.A. Promotion, marketing and distribution of telephone services | Morocco | MAD | 6 | 54.00% | Teleinformática y Comunicaciones, S.A. (TELYCO) (54.00%) | | Telefónica Telecomunicaciones Públicas, S.A.U. Installation of public telephones | Spain | EUR | 1 | 100% | Telefónica de España, S.A.U. (100%) | | Telefónica Remesas, S.A. Remittance management | Spain | EUR | - | 100% | Telefónica Telecomunicaciones Públicas, S.A.U. (100%) | Spain | EUR | - | 100% | Telefónica Telecomunicaciones Públicas, S.A.U. (100%) | Telefónica Salud, S.A. Management and operation of telecommunications and public television services | Spain | EUR | - | 51.00% | Telefónica Telecomunicaciones Públicas, S.A.U. (51.00%) | | Iberbanda, S.A. Broadband telecommunications operator | Spain | EUR | 3 | 58.94% | Telefónica de España, S.A.U. (58.94%) | | Telefónica Cable, S.A.U. Cable telecommunication services provider | Spain | EUR | 3 | 100% | Telefónica de España, S.A.U. (100%) | | Tuenti Technologies, S.L. Private social platform | | Spain | EUR | - | 91.38% | Telefónica Móviles España, S.A.U. (91.38%) | Telefónica Latin America | | | | | | | Telefónica Internacional, S.A. Investment in the telecommunications industry abroad | Spain | EUR | 2,839 | 100% | Telefónica, S.A. (100%) | | Telefónica Internacional, S.A.U. Investment in the telecommunications industry abroad | | Spain | EUR | 2,839 | 100% | Telefónica, S.A. (100%) | Telefónica International Holding, B.V. Holding company | Netherlands | USD | 548 | 100% | Telefónica Internacional, S.A. (100%) | Netherlands | EUR | - | 100% | Telefónica Internacional, S.A.U. (100%) | Latin American Cellular Holdings, B.V. (NETHERLANDS) Holding company | Netherlands | EUR | 281 | 100% | Telefónica, S.A. (100%) | | Telefónica Datacorp, S.A.U. Telecommunications service provider and operator | Spain | EUR | 700 | 100% | Telefónica, S.A. (100%) | | Telecomunicaçoes de Sao Paulo, S.A. - TELESP Wireline telephony operator in Sao Paulo | Brazil | BRL | 6,558 | 87.95% | Telefónica Internacional, S.A. (65.30%) Sao Paulo Telecomunicaçoes Participaçoes, Ltda. (22.65%) | | Brasilcel, N.V. (*) Joint Venture and holding company for wireless communications services | Netherlands | BRL | - | 50.00% | Telefónica, S.A. (50.00%) | | Vivo Participaçoes, S.A. (*) Holding company | Brazil | BRL | 8,780 | 33.31% | Brasilcel, N.V. y subsidiarias (29.63%) Subsidiaries of Telefónica Group (3.68%) | | Vivo, S.A. (*) Wireless services operator | Brazil | BRL | 5,999 | 33.31% | Vivo Participaçoes, S.A. (33.31%) | | Telemig Celular, S.A. (*) Wireless services operator | Brazil | BRL | 528 | 33.31% | Vivo Participaçoes, S.A. (33.31%) | | Compañía Internacional de Telecomunicaciones, S.A. Holding company | Argentina | ARS | 731 | 100% | Telefónica Holding de Argentina, S.A. (50.00%) Telefónica International Holding, B.V. (37.33%) Telefónica Internacional, S.A. (12.67%) | | Telefónica de Argentina, S.A. Telecommunications service provider | Argentina | ARS | 624 | 100% | Compañía Internacional de Telecomunicaciones, S.A. (51.49%) Telefónica Internacional, S.A. (16.20%) Telefónica Móviles Argentina, S.A. (29.56%) Telefónica International Holding, B.V. (0.95%) Telefónica, S.A. (1.80%) | |
Name and corporate purpose | Country | Currency | Capital | % Telefónica Group | Holding company |
Latin American Cellular Holdings, B.V. Holding company | Netherlands | EUR | 281 | 100% | Telefónica, S.A. (100%) | Telefónica Datacorp, S.A.U. Telecommunications service provider and operator | Spain | EUR | 700 | 100% | Telefónica, S.A. (100%) | Telefónica Brasil, S.A. Wireline telephony operator in Sao Paulo | Brazil | BRL | 37,798 | 73.92% | Telefónica Internacional, S.A.U. (29.42%) Sao Paulo Telecomunicaçoes Participaçoes, Ltda. (19.72%) Telefónica, S.A. (24.72%) Telefónica Chile, S.A. (0.06%) | Vivo, S.A. Wireless services operator | Brazil | BRL | 7,051 | 73.9% | Telefónica Brasil, S.A.(100%) | Compañía Internacional de Telecomunicaciones, S.A. Holding company | Argentina | ARS | 561 | 100% | Telefónica Holding de Argentina, S.A. (47.22%) Telefónica Móviles Argentina Holding, S.A. (42.77%) Telefónica International Holding, B.V. (10.01%) | Telefónica de Argentina, S.A. Telecommunications service provider | Argentina | ARS | 624 | 100% | Compañía Internacional de Telecomunicaciones, S.A. (51.49%) Telefónica Internacional, S.A. (16.20%) Telefónica Móviles Argentina, S.A. (29.56%) Telefónica International Holding, B.V. (0.95%) Telefónica, S.A. (1.80%) | Telefónica Móviles Argentina Holding, S.A. Holding company | Argentina | ARS | 1,198 | 100% | Telefónica, S.A. (75%) Telefónica Internacional, S.A.U. (25%) | Telefónica Venezolana, C.A. Wireless communications operator | Venezuela | VEF | 1,468 | 100% | Latin America Cellular Holdings, B.V. (97.04%) Telefónica, S.A. (0.09%) Comtel Comunicaciones Telefónicas, S.A. (2.87%) | Telefónica Móviles Chile, S.A. Wireless communications services operator | Chile | CLP | 589,404 | 99.99% | TEM Inversiones Chile Ltda. (99.99%) | Telefónica Chile, S.A. Local and international long distance telephony services provider | Chile | CLP | 578,078 | 97.89% | Inversiones Telefónica Internacional Holding Ltda. (53.00%) Telefónica Internacional de Chile, S.A. (44.89%) | Telefónica del Perú, S.A.A. Local, domestic and international long distance telephone service provider | Peru | PEN | 2,962 | 98.33% | Telefónica Internacional, S.A.U. (49.90%) Latin America Cellular Holdings, B.V. (48.28%) Telefónica, S.A. (0.15%) | Telefónica Móviles Perú, S.A.C. Wireless communications services provider | Peru | PEN | 625 | 99.99% | Telefónica del Perú, S.A.A. (99.99%) |
Name and corporate purpose | Country | Currency | Capital | % Telefónica Group | Holding company |
Colombia Telecomunicaciones, S.A. ESP Communications services operator | Colombia | COP | 909,929 | 52.03% | Telefónica Internacional, S.A.U. (52.03%) | Telefónica Móviles Colombia, S.A. Wireless communications operator | Colombia | COP | 82 | 100% | Olympic, Ltda. (50.57%) Telefónica, S.A. (49.43%) | Telefónica Móviles México, S.A. de C.V. (MEXICO) Holding company | Mexico | MXN | 50,452 | 100% | Telefónica, S.A. (100%) | Pegaso Comunicaciones y Sistemas, S.A. de C.V. Wireless telephone and communications services | Mexico | MXN | 27,173 | 100% | Telefónica Móviles México, S.A. de C.V. (100%) | Telefónica Móviles del Uruguay, S.A. Wireless communications and services operator | Uruguay | UYU | 255 | 100% | Latin America Cellular Holdings, B.V. (68.00%) Telefónica, S.A. (32.00%) | Telefónica Larga Distancia de Puerto Rico, Inc. Telecommunications service operator | Puerto Rico | USD | - | 98% | Telefónica Internacional Holding, B.V. (98%) | Telefónica Móviles Panamá, S.A. Wireless telephony services | Panama | USD | 24 | 100% | Telefónica, S.A. (56.31%) Panamá Cellular Holdings, B.V. (43.69%) | Telefónica Móviles El Salvador, S.A. de C.V. Provision of wireless and international long distance communications services | El Salvador | USD | 187 | 99.18% | Telefónica El Salvador Holding, S.A. de C.V. (99.18%) | Telefónica Móviles Guatemala, S.A. Wireless, wireline and radio paging communications services provider | Guatemala | GTQ | 1,420 | 99.98% | TCG Holdings, S.A. (65.99%) Telefónica, S.A. (13.60%) Guatemala Cellular Holdings, B.V. (13.12%) Panamá Cellular Holdings, B.V. (7.27%) | Telefonía Celular de Nicaragua, S.A. Wireless telephony services | Nicaragua | NIO | 247 | 100% | Latin America Cellular Holdings, B.V. (100%) | Otecel, S.A. Wireless communications services provider | Ecuador | USD | 183 | 100% | Ecuador Cellular Holdings, B.V. (100%) | Telefónica de Costa Rica TC, S.A. Wireless communications | Costa Rica | CRC | 91,047 | 100% | Telefónica, S.A. (100%) | Wayra Investigacion y Desarrollo, S.L. Talent identification and development in ICT. | Spain | EUR | - | 100% | Telefónica Internacional, S.A.U. (100%) | WY Telecom, S.A. de C.V. Talent identification and development in ICT. | Mexico | MXN | 8 | 100% | Telefónica Móviles México, S.A. de C.V. (98%) Pegaso PCS, S.A. de C.V. (2%) | Wayra Argentina, S.A. Talent identification and development in ICT. | Argentina | ARS | 7 | 100% | Telefónica Móviles Argentina, S.A. (90%) Telefónica Internacional Holding, B.V. (10%) | Wayra Colombia, S.A.S. Technological innovation-based business project development | Colombia | COP | 5 | 100% | Telefónica Móviles Colombia, S.A. (100%) | Proyecto Wayra, C.A. Commercial, industrial and mercantile activities | Venezuela | VEF | 2 | 100% | Telefónica Venezolana, C.A. (100%) |
Name and corporate purpose | Country | Currency | Capital | % Telefónica Group | Holding company |
Wayra Perú Aceleradora de Proyectos, S.A.C. Technological innovation-based business project development | Peru | PEN | 2 | 100% | Telefónica del Perú, S.A.A. (99.99%) Telefónica Móviles Perú, S.A.C. (0.01%) | Terra Networks Brasil, S.A. ISP and portal | Brazil | BRL | 1,046 | 100% | Sao Paulo Telecomunicaçoes Participaçoes, Ltda. (100%) | Terra Networks México, S.A. de C.V. ISP, portal and real-time financial information services | Mexico | MXN | 45 | 99.99% | Terra Networks Mexico Holding, S.A. de C.V. (99.99%) | Terra Networks Perú, S.A. ISP and portal | Peru | PEN | 10 | 99.99% | Telefónica Internacional, S.A.U. (99.99%) | Terra Networks Argentina, S.A. ISP and portal | Argentina | ARS | 7 | 100% | Telefónica Internacional, S.A.U. (99.99%) Telefónica International Holding, B.V. (0.01%) | Terra Networks Guatemala, S.A. ISP and portal | Guatemala | GTQ | 154 | 99.99% | Telefónica Internacional, S.A.U. (99.99%) | Telefónica Holding Atticus, B.V. Holding company | Netherlands | EUR | - | 100% | Telefónica Internacional, S.A.U. (100%) | Telefónica Europe | | | | | | Telefónica Europe plc Holding company | UK | GBP | 39 | 100% | Telefónica, S.A. (100%) | MmO2 plc Holding company | UK | GBP | 9 | 99.99% | Telefónica Europe plc (99.99%) | O2 Holdings Ltd. Holding company | UK | GBP | 12 | 100% | MmO2 plc (100%) | Telefónica UK Ltd. Wireless communications services operator | UK | GBP | 17 | 100% | O2 Networks Ltd. (80.00%) O2 Cedar Ltd. (20.00%) | Tesco Mobile Ltd. (*) Wireless telephony services | UK | GBP | - | 50% | O2 Communication Ltd. (50.00%) | O2 (Europe) Ltd. Holding company | UK | EUR | 1,239 | 100% | Telefónica, S.A. (100%) | Telefónica Germany GmbH & Co. OHG Wireless communications services operator | Germany | EUR | 51 | 100% | Telefónica Germany Verwaltungs GmBh (99.99%) Telefónica O2 Germany Management GmBh (0.01%) | Telefonica Ireland Ltd. Wireless communications services operator | Ireland | EUR | 98 | 100% | O2 Netherland Holdings B.V. (97.06%) Kilmaine, Ltd. (2.94%) | Jajah Inc. IP telephony platform | US | USD | - | 100% | Telefónica Europe plc (100%) | Telefónica Czech Republic, a.s. Telecommunications service provider | Czech Republic | CZK | 32,209 | 69.41% | Telefónica, S.A. (69.41%) | Telefónica Slovakia, s.r.o. Wireless telephony, internet and data transmission services | Slovak Republic | EUR | 240 | 69.41% | Telefónica Czech Republic, a.s. (100%) |
Name and corporate purpose | Country | Currency | Share capitalCapital | % Telefónica Group | Holding company |
Telefónica Móviles Argentina, S.A. Wireless telephone services provider | Argentina | ARS | 1,198 | 100% | Telefónica Móviles Argentina Holding, S.A. (84.60%) Telefónica, S.A. (15.40%) | Telcel, C.A. Wireless operator | Venezuela | VEF | 905 | 100% | Latin America Cellular Holdings, B.V. (97.21%) Telefónica, S.A. (0.08%) Comtel Comunicaciones Telefónicas, S.A. (2.71%) | Telefónica Móviles Chile, S.A. Wireless communications services operator | Chile | CLP | 1,628,654 | 100% | TEM Inversiones Chile Ltda. (100%) | Telefónica Chile, S.A. Local, long distance and international telephony services provider | Chile | CLP | 578,078 | 97.89% | Inversiones Telefónica Internacional Holding Ltda. (53.00%) Telefónica Internacional de Chile, S.A. (44.89%) | Telefónica del Perú, S.A.A. Local, domestic and international long distance telephone service provider | Peru | PEN | 2,962 | 98.34% | Telefónica Internacional, S.A. (49.90%) Latin America Cellular Holdings, B.V. (48.28%) Telefónica, S.A. (0.16%) | Telefónica Móviles Perú, S.A.C. Wireless communications services provider | Peru | PEN | 602 | 100% | Telefónica del Perú, S.A.A. (100%) | Colombia Telecomunicaciones, S.A. ESP Communications services operator | Colombia | COP | 909,929 | 52.03% | Telefónica Internacional, S.A. (52.03%) | Telefónica Móviles Colombia, S.A. Wireless operator | Colombia | COP | - | 100.00% | Olympic, Ltda. (50.58%) Telefónica, S.A. (49.42%) | Telefónica Móviles México, S.A. de C.V. (MEXICO) Holding company | Mexico | MXN | 46,271 | 100% | Telefónica Internacional, S.A. (100%) | Pegaso Comunicaciones y Sistemas, S.A. de C.V. Wireless telephone and communications services | Mexico | MXN | 27,173 | 100% | Telefónica Móviles México, S.A. de C.V. (100%) | Telefónica Móviles del Uruguay, S.A. Wireless communications and services operator | Uruguay | UYU | 196 | 100% | Latin America Cellular Holdings, B.V. (68.00%) Telefónica, S.A. (32.00%) | Telefónica Larga Distancia de Puerto Rico, Inc. Telecommunications service operator | Puerto Rico | USD | 111 | 98.00% | Telefónica Internacional, S.A. (98.00%) | Telefónica Móviles Panamá, S.A. Wireless telephony services | Panama | USD | 71 | 100% | Telefónica, S.A. (56.31%) Panamá Cellular Holdings, B.V. (43.69%) | Telefónica Móviles El Salvador, S.A. de C.V. Provision of wireless and international long distance communications services | El Salvador | SVC | 367, 541 | 99.08% | Telefónica El Salvador Holding, S.A. de C.V. (99.08%) | Telefónica Móviles Guatemala, S.A. Wireless, wireline and radio paging communications services provider | Guatemala | GTQ | 1,420 | 99.98% | TCG Holdings, S.A. (65.99%) Telefónica, S.A. (13.60%) Guatemala Cellular Holdings, B.V. (13.12%) Panamá Cellular Holdings, B.V. (7.27%) | Telefonía Celular de Nicaragua, S.A. Wireless telephony services | Nicaragua | NIO | 247 | 100% | Latin America Cellular Holdings, B.V. (98.00%) Telefónica El Salvador Holding, S.A. de C.V. (2.00%) | Otecel, S.A. Wireless communications services provider | Ecuador | USD | 156 | 100% | Ecuador Cellular Holdings, B.V. (100%) | Telefónica International Wholesale Services, S.L. International services provider | Spain | EUR | 230 | 100% | Telefónica, S.A. (92.51%) Telefónica Datacorp, S.A.U (7.49%) | Telefónica International Wholesale Services America, S.A. Provision of high bandwidth communications services | Uruguay | UYU | 579 | 100% | Telefónica, S.A. (76.85%) Telefónica International Wholesale Services II, S.L. (23.15%) | Telefónica International Wholesale Services France, S.A.S. Provision of high bandwidth communications services | France | EUR | - | 100% | Telefónica International Wholesale Services, S.L. (100%) | Telefónica International Wholesale Services Argentina, S.A. Provision of high bandwidth communications services | Argentina | USD | 78 | 100% | T. International Wholesale Services America, S.A. (99.94%) Telefónica International Wholesale Services, S.L. (0.06%) | Telefónica International Wholesale Services Brasil Participaçoes, LtdParticipaçoes, Ltd. Provision of high bandwidth communications services | Brazil | USD | 62 | 100% | Telefónica International Wholesale Services, S.L. (99.99%) Telefónica International, S.A. (0.01%) | Telefónica International Wholesale Services Perú, S.A.C. Provision of high bandwidth communications services | Peru | USD | 20 | 100% | T. International Wholesale Services America, S.A. (100%) Telefónica Servicios Integrados, S.A.C. | Telefónica International Wholesale Services USA, Inc. Provision of high bandwidth communications services | United States | USD | 36 | 100% | T. International Wholesale Services America, S.A. (100%) | Telefónica International Wholesale Services Puerto Rico, Inc. Provision of high bandwidth communications services | Puerto Rico | USD | 24 | 100% | T. International Wholesale Services America, S.A. (100%) | Telefónica International Wholesale Services Ecuador, S.A Provision of high bandwidth communications services | Ecuador | USD | 6 | 100% | T. International Wholesale Services America, S.A. (99.99%) Telefónica International Wholesale Services Perú, S.A.C. (0.01%) | Terra Networks Brasil, S.A. ISP and portal | Brazil | BRL | 1,046 | 100% | Sao Paulo Telecomunicaçoes Participaçoes, Ltda. (100%) | Terra Networks Mexico, S.A. de C.V. ISP, portal and real-time financial information services | Mexico | MXN | 45 | 99.99% | Terra Networks Mexico Holding, S.A. de C.V. (99.99%) |
Telefónica International Wholesale Services II, S.L. International services provider | Spain | EUR | - | 100% | Telefónica, S.A. (100%) | Telefónica International Wholesale Services, S.L. International services provider | Spain | EUR | 230 | 100% | Telefónica, S.A. (92.51%) Telefónica Datacorp, S.A.U.(7.49%) | Telefónica International Wholesale Services America, S.A. Provision of high bandwidth communications services | Uruguay | UYU | 14,563 | 100% | Telefónica, S.A. (74.36%) Telefónica International Wholesale Services, S.L. (25.64%) | Telefónica International Wholesale Services USA, Inc. Provision of high bandwidth communications services | US | USD | 36 | 100% | T. International Wholesale Services America, S.A. (100%) | Other companies | | | | | | Telefónica Global Services, GmbH Purchasing services | Germany | EUR | - | 100% | Telefónica Germany GmbH & Co. OHG (100%) | Telefónica Global Roaming, GmbH Optimization of network traffic | Germany | EUR | - | 100% | Telefónica Global Services, GmbH (100%) | Telefónica Compras Electrónicas, S.L. Development and provision of information society services | Spain | EUR | - | 100% | Telefónica Global Services, GmbH (100%) | Telefónica de Contenidos, S.A.U. Organization and operation of multimedia service-related businesses | Spain | EUR | 1,865 | 100% | Telefónica, S.A. (100%) | Televisión Federal S.A.- TELEFE Provision and operation TV and radio broadcasting – ervices | Argentina | ARS | 135 | 100% | Atlántida Comunicaciones S.A. (79.02%) Enfisur S.A. (20.98%) | Atlántida Comunicaciones, S.A. Media | Argentina | ARS | 22 | 100% | Telefónica Media Argentina S.A. (93.02%) Telefónica Holding de Argentina, S.A. (6.98%) | Telefónica Servicios Audiovisuales, S.A.U. Provision of all type of audiovisual telecommunications services | Spain | EUR | 6 | 100% | Telefónica de Contenidos, S.A.U. (100%) | Telefónica On The Spot Services, S.A.U. Provision of telemarketing services | Spain | EUR | 1 | 100% | Telefónica de Contenidos, S.A.U. (100%) | Telefónica Broadcast Services, S.L.U. DSNG-based transmission and operation services | Spain | EUR | - | 100% | Telefónica Servicios Audiovisuales, S.A.U. (100%) | Telefónica Learning Services, S.L. Vertical e-learning portal | Spain | EUR | 1 | 100% | Telefónica Digital España, S.L. (100%) | Red Universal de Marketing y Bookings Online, S.A. (RUMBO) (*) Online travel agency | Spain | EUR | 1 | 50.00% | Telefónica Digital España, S.L. (50.00%) | Atento Inversiones y Teleservicios, S.A.U. Holding company | Spain | EUR | 24 | 100% | Telefónica, S.A. (100%) | Atento Ceská Republika, a.s. Provision of call-center services | Czech Republic | CZK | 1 | 100% | Atento Inversiones y Teleservicios, S.A. (100%) | Atento Teleservicios España, S.A.U. Provision of all type of telemarketing services | Spain | EUR | 1 | 100% | Atento N.V. (100%) |
Name and corporate purpose | Country | Currency | Share capitalCapital | % Telefónica Group | Holding company |
Terra Networks Perú, S.A. ISP and portal | Peru | PEN | 10 | 99.99% | Telefónica Internacional, S.A. (99.99%) | Terra Networks Argentina, S.A. ISP and portal | Argentina | ARS | 18 | 100% | Telefónica Internacional, S.A. (99.92%) TelefónicaTelefónica International Holding, B.V. (0.08%) | Terra Networks Guatemala, S.A. ISP and portal | Guatemala | GTQ | 154 | 99.99% | Telefónica Internacional, S.A. (99.99%) | TelefónicaTelefónica China, B.V. Holding company | Netherlands | EUR | - | 100% | Telefónica Internacional, S.A. (100%) | Telefónica Europe | | | | | | Telefónica Europe plc Holding company | UK | GBP | 13,061 | 100% | Telefónica, S.A. (100%) | MmO2 plc Holding company | UK | GBP | 20 | 99.99% | Telefónica Europe plc (99.99%) | O2 Holdings Ltd. Holding company | UK | EUR | 12 | 100% | MmO2 plc (100%) | Telefónica O2 UK Ltd. Wireless communications services operator | UK | GBP | 10 | 100% | O2 Networks Ltd. (80.00%) O2 Cedar Ltd. (20.00%) | The Link Stores Ltd. Telecommunications equipment retailer | UK | GBP | - | 100% | Telefónica O2 UK Ltd. (100%) | Be Un Limited (Be) Internet services provider | UK | GBP | 10 | 100% | Telefónica O2 UK Ltd. (100%) | Tesco Mobile Ltd. (*) Wireless telephony services | UK | GBP | - | 50.00% | O2 Ash Ltd. (50.00%) | O2 (Europe) Ltd. Holding company | UK | GBP | 1,239 | 100% | Telefónica, S.A. (100%) | Telefónica O2 Germany GmbH & Co. OHG Wireless communications services operator | Germany | EUR | 51 | 100% | Telefónica O2 Germany Verwaltungs GmBh (99.99%) Telefónica O2 Germany Management GmBh (0.01%) | Tchibo Mobilfunk GmbH & Co. KG (*) Telecommunications equipment retailer | Germany | EUR | 16 | 50.00% | Telefónica O2 Germany GmbH & Co. OHG (50.00%) | TelefónicaTelefónica O2 Ireland Ltd. Wireless communications services operator | Ireland | EUR | 98 | 100% | Kilmaine, Ltd. (1%) O2 Netherland Holdings B.V. (99%) | Manx Telecom Ltd. Telecommunications service provider | Isle of Man | GBP | 12 | 100% | O2 (Netherlands) Holdings BV (100%) | Telefónica O2 Czech Republic, a.s. Telecommunications service provider | Czech Republic | CZK | 32,209 | 69.41% | Telefónica, S.A. (69.41%) | Telefónica O2 Slovakia, s.r.o. Wireless telephony, internet and data transmission services | Slovak Republic | EUR | 192 | 69.41% | Telefónica O2 Czech Republic, a.s. (100%) | Other companies | | | | | | Telefónica de Contenidos, S.A.U. Organization and operation of multimedia service-related businesses | Spain | EUR | 1,865 | 100% | Telefónica, S.A. (100%) | Atlántida Comunicaciones, S.A. Media | Argentina | ARS | 22 | 100% | Telefónica Media Argentina S.A. (93.02%) Telefónica Holding de Argentina, S.A. (6.98%) | Televisión Federal S.A.- TELEFE Provision and operation TV and radio broadcasting services | Argentina | ARS | 148 | 100% | Atlántida Comunicaciones S.A. (79.02%) Enfisur S.A. (20.98%) | Telefónica Servicios Audiovisuales, S.A.U. Provision of all type of audiovisual telecommunications services | Spain | EUR | 6 | 100% | Telefónica de Contenidos, S.A.U. (100%) | Gloway Broadcast Services, S.L. DSNG-based transmission and operation services | Spain | EUR | - | 100% | Telefónica Servicios Audiovisuales, S.A.U. (100%) | Telefónica Servicios de Música, S.A.U. Provision of telemarketing services | Spain | EUR | 1 | 100% | Telefónica de Contenidos, S.A.U. (100%) | Atento Inversiones y Teleservicios, S.A.U. Telecommunications service provider | Spain | EUR | 24 | 100% | Telefónica, S.A. (100%) | Atento N.V. Telecommunications service provider | Netherlands | EUR | - | 100% | Atento Inversiones y Teleservicios, S.A. (100%) | Atento Teleservicios España, S.A.U. Provision of all type of telemarketing services | Spain | EUR | 1 | 100% | Atento N.V. (100%) | Atento Brasil, S.A. Telecommunications services provider | Brazil | BRL | 152 | 100% | Atento N.V. (100%) | Atento Argentina, S.A. Telecommunications services provider | Argentina | ARS | 3 | 100% | Atento Holding Chile, S.A. (97.99%) Atento N.V. (2.01%) | Teleatento del Perú, S.A.C. Telecommunications services provider | Peru | PEN | 14 | 100% | Atento N.V. (83.33%) Atento Holding Chile, S.A. (16.67%) | Atento Chile, S.A. Telecommunications services provider | Chile | CLP | 11,128 | 99.06% | Atento Holding Chile, S.A. (71.16%) Compañía de Telecomunicaciones de Chile, S.A (26.52%) Telefónica Empresas Chile, S.A. (0.93%) Telefónica Larga Distancia, S.A. (0.45%) | Atento Centroamérica, S.A. Provision of call-center services | Guatemala | GTQ | 55 | 100% | Atento N.V. (99.99%) Atento El Salvador, S.A. de C.V. (0.01%) | Terra Networks Asociadas, S.L. Holding company | Spain | EUR | 7 | 100% | Telefónica, S.A. (100%) | Red Universal de Marketing y Bookings Online, S.A. (RUMBO) (*) Online travel agency | Spain | EUR | 1 | 50.00% | Terra Networks Asociadas, S.L. (50.00%) |
Atento Impulsa, S.L.U. Management of specialist job centers for people with disabilities | Spain | EUR | - | 100% | Atento Teleservicios España, S.A. (100%) | Atento N.V. Holding company and telecommunications service provider | Netherlands | EUR | - | 100% | Atento Inversiones y Teleservicios, S.A. (100%) | Atento Brasil, S.A. Provision of call-center services | Brazil | BRL | 152 | 100% | Atento N.V. (100%) | Atento Colombia, S.A. Provision of call-center services | Colombia | COP | 2,997 | 100% | Atento N.V. (94.98%) Atento Mexicana, S.A. De C.V. (5.00%) Atento Venezuela, S.A. (0.01%) Atento Brasil, S.A. (0.004%) Teleatento del Perú, S.A.C. (0.004%) | Atento Argentina, S.A. Provision of call-center services | Argentina | ARS | 4 | 100% | Atento Holding Chile, S.A. (75.56%) Atento N.V. (24.44%) | Atento Mexicana, S.A. de C.V. Provision of call-center services | Mexico | MXN | 47 | 100% | Atento N.V. (100%) | Teleatento del Perú, S.A.C. Provision of call-center services | Peru | PEN | 14 | 100% | Atento N.V. (83.33%) Atento Holding Chile, S.A. (16.67%) | Atento Chile, S.A. Telecommunications services provider | Chile | CLP | 11,128 | 100% | Atento Holding Chile, S.A. (71.16%) Telefónica Chile, S.A. (27.44%) Telefónica Empresas Chile, S.A. (0.96%) Telefónica Larga Distancia, S.A. (0.44%) | Atento Centroamérica, S.A. Provision of call-center services | Guatemala | GTQ | 55 | 100% | Atento N.V. (99.99%) Atento El Salvador, S.A. de C.V. (0.01%) | Telfin Ireland Ltd. Intragroup financing | Ireland | EUR | - | 100% | Telefónica, S.A. (100%) | Telefónica Digital España, S.L. Holding company | Spain | EUR | 7 | 100% | Telefónica, S.A. (100%) | Telefónica Ingeniería de Seguridad, S.A.U. Security services and systems | Spain | EUR | 7 | 100% | Telefónica, S.A. (100%) | Telefónica Engenharia de Segurança do Brasil, Ltda. Security services and systems | Brazil | BRL | 35 | 99.99% | Telefónica Ingeniería de Seguridad, S.A. (99.99%) | Telefónica Capital, S.A.U. Finance company | Spain | EUR | 7 | 100% | Telefónica, S.A. (100%) | Lotca Servicios Integrales, S.L. Aircraft ownership and operation | Spain | EUR | 17 | 100% | Telefónica, S.A. (100%) | Fonditel Pensiones, Entidad Gestora de Fondos de Pensiones, S.A. Administration of pension funds | Spain | EUR | 16 | 70.00% | Telefónica Capital, S.A. (70.00%) |
Name and corporate purpose | Country | Currency | Share capitalCapital | % Telefónica Group | Holding company |
Telefónica Learning Services, S.L. Vertical e-learning portal | Spain | EUR | 1 | 100% | Terra Networks Asociadas, S.L. (100%) | Telefónica Ingeniería de Seguridad, S.A.U. Security services and systems | Spain | EUR | 1 | 100% | Telefónica, S.A. (100%) | Telefónica Engenharia de Segurança Security services and systems | Brazil | BRL | 21 | 99.99% | Telefónica Ingeniería de Seguridad, S.A. (99.99%) | Telefónica Capital, S.A.U. Finance company | Spain | EUR | 7 | 100% | Telefónica, S.A. (100%) | Lotca Servicios Integrales, S.L. Aircraft ownership and operation | Spain | EUR | 17 | 100% | Telefónica, S.A. (100%) | Fonditel Pensiones, Entidad Gestora de Fondos de Pensiones, S.A. Administration of pension funds | Spain | EUR | 16 | 70.00% | Telefónica Capital, S.A. (70.00%) | Fonditel Gestión, Soc. Gestora de Instituciones de Inversión Colectiva, S.A. Administration and representation of collective investment schemes | Spain | EUR | 2 | 100% | Telefónica Capital, S.A. (100%) | Telefónica Investigación y Desarrollo, S.A.U. Telecommunications research activities and projects | Spain | EUR | 6 | 100% | Telefónica, S.A. (100%) | Telefónica Investigación y Desarrollo de Mexico, S.A. de C.V. Telecommunications research activities and projects | Mexico | MXN | - | 100% | Telefónica Investigación y Desarrollo, S.A. (100%) | Telefônica Pesquisa e Desenvolvimento do Brasil, Ltda. Telecommunications research activities and projects | Brazil | BRL | 1 | 100% | Telefónica Investigación y Desarrollo, S.A. (100%) | Casiopea Reaseguradora, S.A. Reinsurance | Luxemburg | EUR | 4 | 100% | Telefónica, S.A. (99.97%) Telefónica Finanzas, S.A. (TELFISA) (0.03%) | Pléyade Peninsular, Correduría de Seguros y Reaseguros del Grupo Telefónica, S.A. Distribution, promotion or preparation of insurance contracts | Spain | EUR | - | 100% | Casiopea Reaseguradora, S.A. (83.33%) Telefónica, S.A. (16.67%) | Altaïr Assurances, S.A. Direct insurance transations | Luxemburg | EUR | 6 | 100% | Casiopea Reaseguradora, S.A. (95.00%) Seguros de Vida y Pensiones Antares, S.A. (5.00%) | Seguros de Vida y Pensiones Antares, S.A. Life insurance, pensions and health insurance | Spain | EUR | 51 | 100% | Telefónica, S.A. (89.99%) Casiopea Reaseguradora, S.A. (10.01%) | Telefónica Finanzas, S.A.U. (TELFISA) Integrated cash management, consulting and financial support for Group companies | Spain | EUR | 3 | 100% | Telefónica, S.A. (100%) | Fisatel Mexico, S.A. de C.V. Integrated cash management, consulting and financial support for Group companies | Mexico | MXN | 5 | 100% | Telefónica, S.A. (100%) | Telfisa Global, B.V. Integrated cash management, consulting and financial support for Group companies | Netherlands | EUR | - | 100% | Telefónica, S.A. (100%) | Telefónica Europe, B.V. Fund raising in capital markets | Netherlands | EUR | - | 100% | Telefónica, S.A. (100%) | Telefónica Finance USA, L.L.C. Financial intermediation | United States | EUR | 2,000 | 0.01% | Telefónica Europe, B.V. (0.01%) | Telefónica Emisiones, S.A.U. Financial debt instrument issuer | Spain | EUR | - | 100% | Telefónica, S.A. (100%) | Spiral Investments, B.V. Holding company | Netherlands | EUR | 39 | 100% | Telefónica Móviles España, S.A.U. (100%) | Solivella Investment, B.V. Holding company | Netherlands | EUR | 881 | 100% | Telefónica Móviles España, S.A.U. (100%) | Aliança Atlântica Holding B.V. Holder of 5,225,000 Portugal Telecom, S.A. shares | Netherlands | EUR | - | 93.99% | Telefónica, S.A. (50.00%) Telecomunicaçoes de Sao Paulo, S.A. - TELESP (43.99%) | Telefónica Gestión de Servicios Compartidos España, S.A. Provision of management and administration services | Spain | EUR | 8 | 100% | Telefónica, S.A. (100%) | Telefónica Gestión de Servicios Compartidos, S.A.C. Provision of management and administration services | Argentina | ARS | - | 99.99% | T. Gestión de Servicios Compartidos España, S.A. (95.00%) Telefónica, S.A. (4.99%) | Telefónica Gestión de Servicios Compartidos, S.A. Provision of management and administration services | Chile | CLP | 1,017 | 97.89% | Compañía de Telecomunicaciones de Chile, S.A (97.89%) | Telefónica Gestión de Servicios Compartidos, S.A. Provision of management and administration services | Peru | PEN | 1 | 100% | T. Gestión de Servicios Compartidos España, S.A. (100%) | Cobros Serviços de Gestao, Ltda. Provision of management and administration services | Brazil | BRL | - | 99.33% | T. Gestión de Servicios Compartidos España, S.A. (99.33%) | Tempotel, Empresa de Trabajo Temporal, S.A. Temporary employment agency | Spain | EUR | - | 100% | T. Gestión de Servicios Compartidos España, S.A. (100%) | Telefónica Gestao de Serviços Compartilhados do BRASIL, Ltda. Provision of management and administration services | Brazil | BRL | 12 | 99.99% | T. Gestión de Servicios Compartidos España, S.A. (99.99%) | Telefónica Gestión de Servicios Compartidos Mexico, S.A. de C.V. Provision of management and administration services | Mexico | MXN | 50 | 100% | T. Gestión de Servicios Compartidos España, S.A. (100%) | Telefónica Servicios Integrales de Distribución, S.A.U. Distribution services provider | Spain | EUR | 2 | 100% | T. Gestión de Servicios Compartidos España, S.A. (100%) | Telefónica Compras Electrónicas, S.L. Development and provision of information society services | Spain | EUR | - | 100% | T. Gestión de Servicios Compartidos España, S.A. (100%) | Companies accounted for using the equity method | | | | | | Telco S.p.A. Holding company | Italy | EUR | 3,588 | 46.18% | Telefónica, S.A. (46.18%) |
Fonditel Gestión, Soc. Gestora de Instituciones de Inversión Colectiva, S.A. Administration and representation of collective investment schemes | Spain | EUR | 2 | 100% | Telefónica Capital, S.A. (100%) | Telefónica Investigación y Desarrollo, S.A.U. Telecommunications research activities and projects | Spain | EUR | 6 | 100% | Telefónica, S.A. (100%) | Telefónica Investigación y Desarrollo de México, S.A. de C.V. Telecommunications research activities and projects | Mexico | MXN | - | 100% | Telefónica Investigación y Desarrollo, S.A. (100%) | Telefónica Luxembourg Holding, S.à.r.L. Holding company | Luxembourg | EUR | 8 | 100% | Telefónica, S.A. (100%) | Casiopea Reaseguradora, S.A. Reinsurance | Luxembourg | EUR | 4 | 100% | Telefónica Luxembourg Holding, S.à.r.L. (100%) | Pléyade Peninsular, Correduría de Seguros y Reaseguros del Grupo Telefónica, S.A. Distribution, promotion or preparation of insurance contracts | Spain | EUR | - | 100% | Telefónica Finanzas, S.A.U. (TELFISA) (83.33%) Telefónica, S.A. (16.67%) | Telefónica Insurance, S.A. Direct insurance transactions | Luxembourg | EUR | 6 | 100% | Casiopea Reaseguradora, S.A. (95.00%) Seguros de Vida y Pensiones Antares, S.A. (5.00%) | Seguros de Vida y Pensiones Antares, S.A. Life insurance, pensions and health insurance | Spain | EUR | 51 | 100% | Telefónica, S.A. (89.99%) Casiopea Reaseguradora, S.A. (10.01%) | Telefónica Finanzas, S.A.U. (TELFISA) Integrated cash management, consulting and financial support for Group companies | Spain | EUR | 3 | 100% | Telefónica, S.A. (100%) | Fisatel Mexico, S.A. de C.V. Integrated cash management, consulting and financial support for Group companies | Mexico | MXN | 5 | 100% | Telefónica, S.A. (100%) | Telfisa Global, B.V. Integrated cash management, consulting and financial support for Group companies | Netherlands | EUR | - | 100% | Telefónica, S.A. (100%) | Telefónica Europe, B.V. Fund raising in capital markets | Netherlands | EUR | - | 100% | Telefónica, S.A. (100%) | Telefónica Finance USA, L.L.C. (**) Financial intermediation | US | EUR | 2,000 | 0.01% | Telefónica Europe, B.V. (0.01%) | Telefónica Emisiones, S.A.U. Financial debt instrument issuer | Spain | EUR | - | 100% | Telefónica, S.A. (100%) | Spiral Investments, B.V. Holding company | Netherlands | EUR | 39 | 100% | Telefónica Móviles España, S.A.U. (100%) | Telefónica Global Technology, S.A.U. Gloabl management and operation of IT systems | Spain | EUR | 10 | 100% | Telefónica, S.A. (100%) | Telefónica Móviles Soluciones y Aplicaciones, S.A. IT and communications services provider | Chile | CLP | 7,801 | 100% | Telefónica S.A. (100%) |
Name and corporate purpose | Country | Currency | Share capitalCapital | % Telefónica Group | Holding company |
Telecom Italia S.p.A. Holding company | Italy | EUR | 10,674 | 10. 49% | Telco S.p.A. (10.49%) | Portugal Telecom, SGPS, S.A. Holding company | Portugal | EUR | 27 | 9.86% | Telefónica, S.A. (8.51%) Telecomunicaçoes de Sao Paulo, S.A. - TELESP (0.79%) Aliança Atlântica Holding B.V. (0.56%) | Lycos Europe, N.V. Internet portal | Netherlands | EUR | 3 | 32.10% | LE Holding Corporation (32.10%) | Telefónica Factoring Mexico, S.A. de C.V. SOFOM ENR Factoring services provider | Mexico | MXN | 33 | 50% | Telefónica, S.A. (40.5%) Telefónica Factoring España, S.A. (9.50%) | Hispasat, S.A. Operation of a satellite telecommunications system | Spain | EUR | 122 | 13.23% | Telefónica de Contenidos, S.A.U. (13.23%) | Telefónica Factoring España, S.A. Factoring services provider | Spain | EUR | 5 | 50.00% | Telefónica, S.A. (50.00%) | Telefónica Factoring Do Brasil, Ltd. Factoring services provider | Brazil | BRL | 5 | 50.00% | Telefónica, S.A. (40.00%) Telefónica Factoring España, S.A. (10.00%) | Ipse 2000 S.p.A Installation and operation of 3G wireless communications systems | Italy | EUR | 13 | 39.92% | Solivella Investment, B.V. (39.92%) | China Unicom (Hong Kong) Limited Telecommunications service operator | China | RMB | 2,329 | 8.37% | Telefónica Internacional, S.A. (8.37%) |
Aliança Atlântica Holding B.V. Holding company | Netherlands | EUR | 40 | 93.99% | Telefónica, S.A. (50.00%) Telefónica Brasil, S.A. (43.99%) | Telefónica Gestión de Servicios Compartidos España, S.A. Management and administrative services rendered | Spain | EUR | 8 | 100% | Telefónica, S.A. (100%) | Telefónica Gestión de Servicios Compartidos, S.A.C. Management and administrative services rendered | Argentina | ARS | - | 99.99% | T. Gestión de Servicios Compartidos España, S.A. (95.00%) Telefónica, S.A. (4.99%) | Telefónica Gestión de Servicios Compartidos, S.A. Management and administrative services rendered | Chile | CLP | 1,019 | 97.89% | Telefónica Chile, S.A.(97.89%) | Telefónica Gestión de Servicios Compartidos, S.A. Management and administrative services rendered | Peru | PEN | 1 | 100% | T. Gestión de Servicios Compartidos España, S.A. (99.99%) Telefónica del Perú, S.A.A. (0.01%) | Cobros Serviços de Gestao, Ltda. Management and administrative services rendered | Brazil | BRL | - | 99.33% | T. Gestión de Servicios Compartidos España, S.A. (99.33%) | Tempotel, Empresa de Trabajo Temporal, S.A. Temporary employment agency | Spain | EUR | - | 100% | T. Gestión de Servicios Compartidos España, S.A. (100%) | Telefonica Serviços Empresariais do BRASIL, Ltda. Management and administrative services rendered | Brazil | BRL | 12 | 99.99% | T. Gestión de Servicios Compartidos España, S.A. (99.99%) | Telefónica Gestión de Servicios Compartidos México, S.A. de C.V. Management and administrative services rendered | Mexico | MXN | 50 | 100% | T. Gestión de Servicios Compartidos España, S.A. (100%) | Telefónica Servicios Integrales de Distribución, S.A.U. Distribution services provider | Spain | EUR | 2 | 100% | T. Gestión de Servicios Compartidos España, S.A. (100%) | Companies accounted for using the equity method | | | | | | Telefónica Factoring España, S.A. Factoring services provider | Spain | EUR | 5 | 50.00% | Telefónica, S.A. (50.00%) | Telefónica Factoring Do Brasil, Ltd. Factoring services provider | Brazil | BRL | 5 | 50.00% | Telefónica, S.A. (40.00%) Telefónica Factoring España, S.A. (10.00%) | Telefónica Factoring Mexico, S.A. de C.V. SOFOM ENR Factoring services provider | Mexico | MXN | 33 | 50.00% | Telefónica, S.A. (40.5%) Telefónica Factoring España, S.A. (9.50%) | Telefónica Factoring Perú, S.A.C. Factoring services provider | Peru | PEN | 6 | 50.00% | Telefónica, S.A. (40.5%) Telefónica Factoring España, S.A. (9.50%) | Telefónica Factoring Colombia, S.A. Factoring services provider | Colombia | COP | 4,000 | 50.00% | Telefónica, S.A. (40.5%) Telefónica Factoring España, S.A. (9.50%) | Telco, S.p.A. Holding company | Italy | EUR | 2,186 | 46.18% | Telefónica, S.A. (46.18%) | DTS Distribuidora de Televisión Digital, S.A. Broadcasting, satellite TV signal transmission and linkage services | Spain | EUR | 126 | 22.00% | Telefónica de Contenidos, S.A.U. (22%) |
Name and corporate purpose | (*)Country | Companies consolidated using proportionate consolidation.Currency | Capital | % Telefónica Group | Holding company |
Hispasat, S.A. Operation of a satellite telecommunications system | Spain | EUR | 122 | 13.23% | Telefónica de Contenidos, S.A.U. (13.23%) | China Unicom (Hong Kong) Limited Telecommunications service operator | China | RMB | 2,311 | 9.57% | Telefónica Internacional, S.A.U. (9.57%) |
(*) Consolidated by using proportionate consolidation method (**) Fully consolidated with 100% of voting rights Through these consolidated financial statements, O2Telefónica (Germany) GmbH & Co. OHG, complies with the provisions of Art. 264b HGB [“Handelsgesetzbuch”: Germany code of commerce], and is exempt in accordance with the stipulations of Art. 264b HGB. APPENDIX VI: KEY REGULATORY ISSUES AND CONCESSIONS AND LICENSES HELD BY THE TELEFÓNICA GROUP In order to provide network services, the Group must obtain general authorizations, concessions or licenses from the national regulatory authorities of the countries in which the Group operates. Procedures for obtaining licenses are also applicable to radio frequency permits for the Group’s mobile operators. The duration of a license or of the rights to use spectrum depend on the legal framework applicable in the country in question. The main issues regarding the regulatory environment in which the Group operates, as well as the service licenses, concessions and authorizations held by the Group at December 31, 2011, are described below. Regulatory environment The regulatory debate in 2011 remained focused on the roll-out of ultra-high speed networks, roaming charges and net neutrality, all important issues for the development of the European telecommunications market and the Information Society. In March 2011, the European Commission held a roundtable with 39 executives of telecommunications, equipment and content companies to discuss speeding up Next Generation network deployment. In July, the industry representatives presented 11 specific proposals regarding the sustainability of the internet ecosystem, interoperability, the framework for investments and network funding. This initiative sparked debate over new mechanisms for fiber network development, particularly co-investment between operators and public-private funding. In this connection, in October the Commission held a consultation on the current costs and pricing of copper networks and the future fiber networks. The Commission encourages investment in fiber and is currently looking at how to set prices for current and future wholesale services to achieve this goal. In April, the Commission released a report on Net Neutrality, in which it maintains the non-regulatory alternative. It did, however, pose the need to know and supervise operators’ traffic management practices. The Commission turned to BEREC to draft a set of guidelines for transparency and minimum quality of service standards. In July, the Commission released a proposal for a review of the Roaming Regulation aimed a achieving a long-term solution to continued high roaming costs. The proposal entails a dramatic change to how roaming services have been provided in Europe until now. From July 2014, mobile operators would be forced to separate the sale of roaming services from their domestic services. This would allow users to choose a different operator for calls made in other Member States. The proposal includes a transitional period during which the current maximum prices would be applied until the structural measure is implemented. Retail data roaming prices would also include new caps. In Spain, the government reorganized spectrum during the year 2011 to prepare the industry for mobile broadband. In an auction, Telefónica Móviles España, S.A.U. obtained 6 MHz (2x10 MHz each) in the 800 MHz (2x10 MHz), 900 MHz (2x10 MHz) and 2.6 GHz (2x20 MHz each) bands for a total of 842 million euros, of which it has already paid 441 million euros. It has until June 1, 2012, to pay the remaining 401 million euros. The government also held a tender to appoint the operator(s) in charge of providing components of the universal service. Telefónica de España, S.A.U. was appointed public electronic communications network connection and public telephony service provider. It was also entrusted with drafting and delivering the telephone directory to subscribers of public telephone service. Telefónica Telecomunicaciones Públicas, S.A.U. was engaged to oversee the part of universal service dealing with having a sufficient number of public pay telephones. The concession for the appointment of the universal service operator is for five years, from January 1, 2012 to December 31, 2017. Also during the year, the government passed Royal Decree 726/ 2011, of May 20, which states that connection to the public electronic communications network with internet access, guaranteed under the universal service, must allow for broadband data communication with download speeds of at least 1Mbit per second. As regards regulation of relevant markets, a general Service Level Agreement (SLA) model was implemented –within the scope of NEON (new national operator environment)- to ensure quality indicators in wholesale offers. The Spanish telecoms regulator, Comisión del Mercado de Telecomunicaciones (CMT), raised the price of the unbundled loop and cut prices for wholesale access to the telephone network (AMLT). The regulator put a freeze on monthly charges and finally approved the new wholesale broadband service (NEBA), which will replace the current indirect access service. Lastly, in December 2011, the CMT launched a public consultation on mobile network call termination rates, proposing a reduction of 75-80 %. The government prepared a draft bill amending General Telecommunications Law 32/2003, of November 3, to adapt it to the package of EU directives on electronic communications. It set the deadline for transposing these directives into Spanish law at May 25, 2011. The November 20 general elections and the dissolution of the house of representatives delayed passage of this law for its presentation to congress and the senate in the new legislature. Accordingly, the directives were not transposed within the established timeframe. Finally, the European Commission brought the Kingdom of Spain before the European Court of Justice in 2011 for failure to eliminate within the established timeframe the tax included in the law on funding of RTVE, which affects Telefónica España, S.A.U., Telefónica Móviles, S.A.U. and Telefónica Telecomunicaciones Públicas, S.A.U. as electronic communications operators (0.9% of gross operating revenues excluding those obtained in the wholesale market) and providers of conditional access services to pay TV (1.5% of gross operating income). In the other European markets where Telefónica operates, discussions surrounding the procedures for awarding and sharing radioelectric spectrum intensified in 2011. In Germany, the regulator launched a public consultation to identify demand for spectrum in the 900 MHz and 1800 MHz frequencies from 2017. A decision in this respect should come in 2013. On October 21, 2011, amid the process for refarming, the regulator adopted the decision not to redistribute spectrum in the 900 MHz frequency, allowing Telefónica Germany to keep the spectrum allotted to it. In the Czech Republic, in September 2011 the regulator (CTO) published the terms and conditions for a combined spectrum auction in the 800 MHz, 1800 MHz and 2.6 GHz bands. This auction will be held during the second half of 2012. At the end of 2011, in Slovakia, the regulator set the guidelines for initiating an allocation of frequencies in the 800 MHz, 1800 MHz and 2.6 GHz bands in the first quarter of 2012. In Ireland, the regulator continued to hold public consultations on a future spectrum auction expected to take place in 2012. Because of delays in the auction, Telefónica Ireland was given a provisional license in the 900 MHz band until 2013. The national regulators also continued to adopt measures aimed at reducing mobile termination rates (MTRs). In the United Kingdom, in March 2011, regulator OFCOM adopted a decision to reduce termination rates. Both Vodafone and Everything Everywhere appealed this decision before the Competition Appeals Tribunal (CAT), with the support of Telefónica UK. In the resolution to this appeal, the CAT agreed to bring forward the date of application of the rates for the year included in the OFCOM resolution (2015) to 2014, as it deemed this would help competition and, ultimately, consumers. In Germany, the regulator adopted a decision in February 2011, with retroactive effects from December 1, 2010, cutting MTRs. The MTRs will remain effective until November 30, 2012. The German regulator also launched a consultation implementing a more stringent cost model, which is expected to be applied when the next MTRs are established. In Slovakia, in May 2011, the regulator decided not to extend the asymmetric application of MTRs to Telefónica Slovakia. In the Czech Republic, the regulator, CTO, reduced MTRs in two steps. From July 1, 2011, the price is 1.08 Czech crown per minute. In Ireland, MTRs are established based on the average price of MTRs published by the BEREC. In Latin America, in February 2011, the fine levied by the anti-trust authorities of Argentina imposed on Telefónica for late filing of notification of the concentration move related to the new composition of the company controlling Telecom Argentina was reduced to 50 million Argentine pesos (from 104.7 million Argentine pesos initially, equivalent to approximately 19 million euros). In Brazil, in June 2011, the country’s President approved the new general targets for universal service plan (PGMU) applicable for 2011 to 2015. The PGMU lowers the targets for public telephone its large cities and sets out the installation of public telephones in remote and inaccessible areas. Along with approval of the PGMU, Telefónica signed a revised CFTS contract, valid between 2011 and 2015. The principal change relates to the end of restrictions on cable TV concessionaires, enabling Telefónica to exercise its option to acquire full control of TVA (the Abril group’s cable TV company). Meanwhile, Telefónica Brasil signed a memorandum of understanding with the Communications Ministry to participate in the national broadband plan. With this document, Telefónica undertakes to offer 1 MB private broadband plans at a maximum price of 35 Brazilian reais and to gradually service all cities of São Paulo until 2014. In June, Vivo signed the terms of operation of band H (1.8 GHz) spectrum, which it was awarded in the 2010 tender. In October 2011, Anatel approved the fixed-mobile rate adjustment regulation, which entails a gradual reduction of these rates by applying a CPI- factor. This reduction factor is 18% in 2012, 12% in 2013 and 10% in 2014. The absolute decrease in public rates must be passed on to mobile interconnection prices (VU-M). In Peru, on December 28, 2011, Osiptel set the cap on local calls from fixed telephones of Telefónica del Perú, S.A.A. customers to mobile telephony networks, for both personal and trunk communications. This new rate, in place since last December 30, came alongside a new rate scheme, which grants fixed telephony operators control over the rates for fixed-to-mobile calls. In Chile, in line with the rate-setting procedure for the 5-year period from 2009 to 2014, the country’s ministry adopted a series of measures, including rates on local calls, access and minor local telephony service. In addition, rates were regulated for unbundled wholesale broadband (Bitstream). For mobile rates, a cap was placed on access fees for network usage, while the time structure was also modified. A new rate-setting process will begin at the end of 2012. On July 16, 2011, a new net neutrality law in Chile came into effect. Long-distance service was eliminated in some regions of the country between October and November. Around the beginning of 2014, it will be eliminated throughout the country. Subtel called for bids in a public tender to allocate public fixed and/or mobile data transmission service in the 2.505 - 2.565 MHz and 2.625 - 2.685 MHz frequency bands. Bids will be received and opened on April 19, 2012. In Mexico, through 2011, the Federal Telecommunications Commission (“Cofetel”), in a plenary meeting, issued a number of resolutions over interconnection disputes lodged by various operators. Among these, it set a mobile telephone call termination rate in Telefónica México’s mobile network and for other operators of 0.3912 Mexican pesos per minute of interconnection, measured by second and without rounding. Telefónica México has filed an administrative appeal to Cofetel’s resolutions, although to date they have not been resolved. In May 2011, the Supreme Court ruled that Cofetel’s resolutions regarding interconnection should not be suspended without effect as it was an issue on public interest. On October 27, 2011, the CFC declared all mobile operators (except Nextel) in the switched termination services market to be dominant operators. Appeals were filed against these resolutions on December 13 and 16. In Venezuela, CONATEL published a government order in February setting reference levels for setting interconnection prices for use of mobile telephone services based on long-run incremental costs with a breakdown of network components by CONATEL, which will only step in to set price where consensus is not reached in disputes among operators over interconnection prices during the period specified in the interconnection regulations.
In Colombia, the Telecommunications Regulation Commission (CRT) set a scaled reduction in mobile access charges from April 2012 to 2015 for both usage and capacity and initiated an individual administrative proceeding against COMCEL (América Móviles group) as the dominant operator. In May 2011, it designed a new protection scheme for convergent users. In August, it established a new interconnection regime for converging networks, laying down the general terms for network access for content and application providers. In December, it established the terms for providing content and application services on mobile networks, setting new government rules on numbering and mobile internet quality. It approved maximum regulated SMS rates among mobile operators from January 1, 2012 to December 31, 2014. It also issued the terms for net neutrality, allowing for product differentiation by customer usage profile and prohibiting arbitrary discrimination of traffic. In Ecuador, the July 2010 ruling that Claro (América Móviles group) was the dominant mobile operator in the relevant mobile/domestic mobile market pursuant to an application submitted by Telecsa and MoviStar was upheld. The National Communications Department established the requirement that Claro share the infrastructure; MoviStar and Claro entered into a sharing agreement that covers the inclusion of base stations. This agreement is still in force. In Guatemala, Congress unveiled a number of draft bills in 2011. Noteworthy of these regarding the renewal of frequency licenses is the proposed increase in license periods to 25 years from 15 years. In El Salvador, amendments (interconnection prices and maximum rates) were made in April to the Telecommunications Law to establish that the ANR will set base interconnection prices and rates for fixed and mobile telephony users based on a cost model recognized by the UIT. The approved amounts must be reviewed each year. In addition, the country migrated to a system in which fixed-to-mobile call rates are set by the fixed telephony operator, which only has to pay the mobile operator an interconnection fee. The outcome of the first cost review by ANR was notified to operators in July 2011. In July 2012, the ANR must disclose the results of the approved fees and rates review. In Panama, the National Public Services Regulator (ASEP) brought forward the deadline for portability to November 29, 2011 from the initial estimate of March 2012, declaring portability applicable first to mobile operators and then to fixed operators. In Costa Rica, on January 7, 2011 the regulator (SUTEL) awarded Telefónica with one of the three licenses applied for, subject to the technical, financial and legal requirements laid down in the bidding documents. In May 2011, Telefónica and the Costa Rican government entered into an agreement for the use and operation of radioelectric spectrum to provide mobile telecommunications services for a period of 15 years. Telefónica began operations in November 2011. Main concessions and licenses held by the Telefónica Group Spain In accordance with the European Union regulatory framework, companies wishing to operate a telecommunications network or provide electronic communication services must notify the Spanish telecommunications market regulator (Comisión del Mercado de Telecomunicaciones, CMT) prior to commencing such activities. Every three years, operators must notify the CMT of their intention to continue these activities. Concessions for the use of spectrum are auctioned through a competitive, non-discriminatory procedure. Telefónica Móviles España holds rights to provide mobile services in certain spectrum bands. The main concessions are as follows: Technology | Duration | End date | Renewal period | 800 MHz | 19 years | December 31, 2030 | -- | 900 MHz (Pp. technological neutrality) | 19 years | December 31, 2030 | --- | DCS-1800 (Pp. technological neutrality) | 19 years | December 31, 2030 | ---- | UMTS | 20 years (+ 5 extension) | April 18, 2020 (+ April 5-18, 2025) | 5 years | 2.6 GHz | 19 years | December 31, 2030 | ------ |
UK Telefónica UK has provided GSM services since July 1994. In January 2011, this license was modified to enable the UMTS roll-out on the 900 MHz (2 x 17.4 MHz) and 1800MHz (2 x 5.8 MHz) frequency bands. This license is for an indefinite period. In April 2000, Telefónica UK obtained a UMTS license expiring on December 13, 2021 (2 x 10 MHz + 5 MHz). Telefónica UK may apply for indefinite validity for this license. To be eligible, it must agree to provide coverage to 90% of the population. Germany Telefónica O2 Germany obtained a GSM license for the 1800 MHz frequency band in October 1998, as well as a separate license for the 900 MHz band in February 2007 (GSM900 2 x 5 MHz and GSM 1800: 2 x 17.4 MHz). The GSM licenses expire on December 31, 2016. These licenses are for a set period of time, although they may be renewed. The German regulator launched a public consultation to identify demand for spectrum in the 900 MHz and 1800 MHz frequencies from 2017. A decision in this respect is expected for 2013. On October 21, 2011, amid the process for refarming, the regulator adopted the decision not to redistribute spectrum in the 900 MHz frequency, allowing Telefónica Germany to keep the spectrum allotted to it. In August 2000, Telefónica Germany obtained a UMTS license expiring on December 31, 2020 (2 x 9.9 MHz). In May 2010, after a spectrum auction procedure, Telefónica Germany acquired 10 MHz in the 800 MHz band (Digital Dividend), 20 MHz in the 2.6 GHz band (paired), 10 MHz in the 2.6 GHz band (unpaired), 5 MHz in the 2.0 GHz band (paired), and 20 MHz in the 2.0 GHz band (unpaired). These licenses expire in 2025. The assigned frequencies may be used for any technology. Czech Republic Telefónica Czech Republic provides electronic mobile communications services in the 900 MHz and 1800 MHz bands, under the GSM standard, in accordance with CTO licenses valid until February 7, 2016; in the 2100 MHz band under the UMTS standard, valid until January 1, 2022; and in the 450 MHz band for CDMA 2000, valid until February 7, 2011. The Czech government has granted an individual license to operate the CDMA network, which is valid under November 30, 2013. The amendment to the Electronic Communications Law, which took effect on January 1, 2012, grants Telefónica Czech Republic (as the previous license holder) the right to obtain a new license in the same 450 MHz frequency without having to participate in a selection process. Slovakia On September 7, 2006, Telefónica Slovakia secured a license for supplying electronic communications services through the public network using the GSM and UMTS mobile network standards. The license was granted for 20 years and expires in September 2026. Ireland Since March 1997, Telefónica Ireland has been providing GSM services under a license granted in May 1996. The GSM900 license is for a 15-year period (GSM900: 2 x 7.2 MHz). In May 2011, the company was provisionally granted a license to extend the validity of its license until January 2013). In 2000, the company obtained another GSM 1800 license (2 x 14.4 MHz), also for 15 years. In October 2002, the company secured a 20-year UMTS license (2 x 15 MHz + 5 MHz). Brazil In Brazil, concessions are awarded for providing services under the public system and authorizations are granted for providing private system services. The only service provided under both systems is the Commuted Fixed Telephony Service (CFTS). All other services are provided under the private system. The main differences between the systems relate to the obligations which operators have to fulfil. Public services concessionaires, such as Telefónica Brasil, are required to expand the network (universal service obligations) and ensure continuity in service undertakings. These obligations are not imposed on operators that provide services under the private system. In the state of São Paulo, Telefónica Brasil provides local and long-distance CFTS under the public system. In the remaining states of Brazil, Telefónica Brasil provides local and long-distance CFTS, and broadband services, all under the private system. In 2005, Telefónica Brasil’s concession arrangements for local and long-distance services were extended for an additional 20-year period. Telefónica Brasil’s authorization for local and long-distance services under the private system was granted for an unlimited period of time. Telefónica Brasil also holds an authorization to provide broadband data services under the private system in the state of São Paulo for an unlimited period of time. Licenses for personal mobile services carry the right to provide mobile services for an unlimited period of time. However, the use of spectrum is restricted in accordance with the specific license conditions. All Telefónica’s Brazilian mobile operators are integrated under Vivo and hold the following licenses: | · | Vivo-Rio Grande do Sul (“A” band) until 2022 (renewed in 2006); |
| · | Vivo-Rio de Janeiro (“A” band) until 2020 (renewed in 2005); |
| · | Vivo-Espírito Santo (“A” band) until 2023 (renewed in 2008); |
| · | Vivo-Bahia (“A” band) and Vivo-Sergipe (“A” band) until 2023 (renewed in 2008); |
| · | Vivo-São Paulo (“A” band) until 2023 or 2024, for the cities of Ribeirão Preto and Guatapará (renewed in 2008); |
| · | Vivo-Paraná/Santa Catarina (“B” band) until 2013; |
| · | Vivo-Distrito Federal (“A” band) until 2021 (renewed in 2006); |
| · | Vivo-Acre (“A” band), Vivo-Rondônia (“A” band), Vivo-Mato Grosso (“A” band) and Vivo-Mato Grosso do Sul (“A” band) until 2024 (renewed in 2008); |
| · | Vivo-Goiás/Tocantins (“A” band) until 2023 (renewed in 2008); |
| · | Vivo-Amazonas/Roraima/Amapá/Pará/Maranhão (“B” band) until 2013; |
| · | Vivo Minas Gerais* (“A” band) until 2023 (renewed in 2007); |
| · | Vivo for the cities in which CTBC Telecom operates in the state of Minas Gerais* (“E” band) until 2020; |
* Vivo Participações S.A. was incorporated by Vivo S.A. in 2011. License renewals for “A” and “B” bands must be requested 30 months in advance of the expiry date. Spectrum rights may be renewed only once, for a 15-year period. After this period, the license must be renegotiated. License renewals for the “E” band must be requested between 36 and 48 months in advance of the expiry date. Spectrum rights may be renewed only once, for a 15-year period. After this period, the license must be renegotiated. In December 2007, ANATEL auctioned off nationally 15 blocks in the 1900 MHz band (“L” band). Vivo won 13 through Brasil, except in the northern region and the towns of Londrina and Tamarana in the state of Paraná. The spectrum licenses, along with the related renewal dates, are as follows: | · | Vivo-Rio Grande do Sul (“L” band) until 2022 (renewed in 2006) or also to 2022 for cities in the Pelotas metropolitan area; |
| · | Vivo-Rio de Janeiro (“L” band) until 2020 (renewed in 2005); |
| · | Vivo-Espírito Santo (“L” band) until 2023 (renewed in 2008); |
| · | Vivo-Bahia (“L” band) and Vivo-Sergipe (“L” band) until 2023 (renewed in 2008); |
| · | Vivo-São Paulo (“L” band) until 2023, the cities of Ribeirão Preto, Guatapará and Bonfim Paulista (all renewed in 2008) until 2024, and the cities where CTBC Telecom operates in the state of São Paulo until 2022; |
| · | Vivo-Paraná (excluding the cities of Londrina and Tamarana)/Santa Catarina (“L” band) until 2013; |
| · | Vivo-Federal District (“L” band) until 2021 (renewed in 2006); |
| · | Vivo-Acre (“L” band), Vivo-Rondônia (“L” band), Vivo-Mato Grosso (“L” band) and Vivo-Mato Grosso do Sul (“L” band) until 2024 (renewed in 2008) and the city of Paranaíba de Mato Grosso do Sul until 2022; |
| · | Vivo-Goiás/Tocantins (“L” band) until 2023 (renewed in 2008) and the cities where CTBC Telecom operates in the state of Goiás until 2022; and |
| · | Vivo-Alagoas/Ceará/Paraíba/Piauí/Pernambuco/Rio Grande do Norte (“L” band) until 2022; |
License renewals for the “L” band must be requested between 36 and 48 months in advance of the expiry date. Spectrum rights may be renewed only once, for a 15-year period. After this period, the license must be renegotiated. In April 2008, ANATEL auctioned off 36 blocks 2100 MHz band (3G licenses). Vivo obtained nine in the “J” band through Brasil, enabling it to provide nationwide coverage in 3G. The spectrum licenses, along with the related renewal dates, are as follows: | · | Vivo-Rio Grande do Sul (including cities in the Pelotas metropolitan area) (“J” band) until 2023; |
| · | Vivo-Rio de Janeiro (“J” band) until 2023; |
| · | Vivo-Espírito Santo (“J” band) until 2023; |
| · | Vivo-Bahia (“J” band) and Vivo-Sergipe (“J” band) until 2023; |
| · | Vivo-São Paulo (including the cities of Ribeirão Preto, Guatapará and Bonfim Paulista and the cities where CTBC Telecom operates in the state of São Paulo) (“J” band) until 2023; |
| · | Vivo-Paraná (including the cities of Londrina and Tamarana)/Santa Catarina (“J” band) until 2023; |
| · | Vivo-Federal District (“J” band) until 2023; |
| · | Vivo-Acre (“J” band), Vivo-Rondônia (“J” band), Vivo-Mato Grosso (“J” band) and Vivo-Mato Grosso do Sul (including the city of Paranaíba) (“J” band) until 2023; |
| · | Vivo-Goiás (including the cities where CTBC Telecom operates in the state of Goiás)/Tocantins (“J” band) until 2023; |
| · | Vivo-Alagoas/Ceará/Paraíba/Piauí/Pernambuco/Rio Grande do Norte (“J” band) until 2023; |
| · | Vivo-Amazonas/Roraima/Amapá/Pará/Maranhão (“J” band) until 2023; and |
| · | Vivo-Minas Gerais (including the cities where CTBC Telecom operates in the state of Minas Gerais) (“J” band) until 2023 |
* Vivo Participações S.A. was incorporated by Vivo S.A. in 2011. License renewals for the “J” band must be requested between 36 and 48 months in advance of the expiry date. Spectrum rights may be renewed only once, for a 15-year period. After this period, the license must be renegotiated. In December 2010, ANATEL auctioned off 169 licenses in the 900 MHz, 1800 MHz and 2100 MHz frequencies. Vivo secured 23 blocks, 14 in 1800 MHz frequency band “D”, “E”, “M” and extension bands, and 9 in the 900 MHz extension bands, giving it nationwide coverage in the 1800 MHz frequency band. The spectrum licenses are up for renewal in 2023. | · | "M" Band (1800 MHz) in the Federal District and the states of Paraná, Santa Catarina, Rio Grande do Sul, Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia and Acre; |
| · | Extension of the 1800 MHz band throughout the State of São Paulo; |
| · | “D" Band (1800 MHz) in the cities of Pelotas, Morro Redondo, Capão do Leão and Turuçu in the state of Rio Grande do Sul; |
| · | "E" Band (1800 MHz) in the states of Alagoas, Ceará, Paraíba, Piauí, Pernambuco and Rio Grande do Norte; |
| · | Extension of the 900 MHz band in the State of Rio de Janeiro; |
| · | Extension of the 900 MHz band in the State of Espírito Santo; |
| · | Extension of the 900 MHz band in the States of Goiás, Tocantins, Mato Grosso do Sul, Mato Grosso, Rondônia and Acre and the Federal District, with the exception of the cities of Paranaíba in the state of Mato Grosso do Sul and the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás; |
| · | Extension of the 900 MHz band in the State of Rio Grande do Sul, with the exception of the cities of Pelotas, Morro Redondo, Capão do Leão and Turuçu; |
| · | Extension of the 900 MHz band in the cities of registry area number 43 in the state of Paraná with the exception of the cities of Londrina and Tamarana; |
| · | Extension of the 900 MHz band in the States of Paraná and Santa Catarina with the exception of the cities of registry area number 43 in the state of Paraná and the cities of Londrina and Tamarana; |
| · | Extension of the 900 MHz band in the state of Bahía; |
| · | Extension of the 900 MHz band in the state of Sergipe; |
| · | Extension of the 900 MHz band in the states of Amazonas, Amapá, Maranhão Pará and Roraima; |
| · | Extension of the 1800 MHz band in the state of São Paulo, with the exception of the cities in the metropolitan area of São Paulo and the cities where CTBC Telecom operates in the state of São Paulo; |
| · | Extension of the 1800 MHz band in the States of Amazonas, Amapá, Maranhão Pará and Roraima; |
| · | Extension of the 1800 MHz band in the city of Paranaíba in the state of Mato Grosso do Sul; |
| · | Extension of the 1800 MHz band in the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás; |
| · | Another extension of the 1800 MHz band in the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás; |
| · | Extension of the 1800 MHz band in the states of Rio do Janeiro, Espírito Santo, Bahía and Sergipe; |
| · | Extension of the 1800 MHz band in the states of Amazonas, Amapá, Maranhão Pará and Roraima; |
| · | Extension of the 1800 MHz band in the states of Alagoas, Ceará, Paraíba, Piauí, Pernambuco and Rio Grande do Norte; |
| · | Extension of the 1800 MHz band in the city of Paranaíba in the state of Mato Grosso do Sul, and the cities of Buriti Alegre, Cachoeira Dourada, Inaciolândia, Itumbiara, Paranaiguara and São Simão, in the state of Goiás; |
| · | Extension of the 1800 MHz band in the cities of Londrina and Tamarana in the state of Paraná; |
It is also worth highlighting that Vivo has a MCS –multimedia communication services- license allowing it to provide nationwide service for an unlimited period of time. Along with approval of the PGMU, Telefónica signed a revised CFTS contract, valid between 2011 and 2015 after which the terms must be revised again. The principal change relates to the end of restrictions on cable TV concessionaires, enabling Telefónica to exercise its option to acquire full control of TVA (the Abril group’s cable TV company). Mexico Authorizations to provide mobile telephone services in Mexico (mobile and personal communications services, PCS, in the 800 MHz and 1900 MHz bands, respectively) are granted through concessions. Telefónica Móviles México and its subsidiaries and investees hold 40 licenses for providing telecommunications services. Concessions in the “A” band (800 MHz) mobile telephone services were initially granted in 1990 and were renewed in May 2010 for a 15-year period. In addition, at the same time a concession was granted for the installation, operation and development of a public telecommunications network for the same length as the aforementioned concessions. The subsidiary Pegaso Comunicaciones y Sistemas, S.A. de C.V. holds a concession for providing public telecommunications services, granted in 1998, and nine licenses for providing personal communications services (PCS) in the 1900 MHz band, until 2018. These licenses are renewable for an additional 20-year period. Renewal has been requested for all licenses. In April 2005, Telefónica México obtained four additional licenses in the same 1900 MHz band, for providing personal communications services (PCS) for a 20-year period, with possible renewal for an additional 20-year period. In addition, new concessions were awarded during 2010: eight spectrum concessions in the 1900 MHz band for providing personal communications services (PCS) and for a greater bandwidth in regions 1,2,3,4,5,6,7 and 9, for a period of 20 years; and six new concessions in band 1.7 – 2.1 GHz to provide AWS services in regions 2,3,4,5,6,7 and 9, for a period of 20 years. On January 6, 2011, the Communications and Transport Department (“SCT”) granted Grupo de Telecomunicaciones Mexicanas, S.A. de C.V. (“GTM”) a concession to install, operate and exploit a public telecommunication network to provide restricted TV and data transmission via satellite throughout the country. Also in 2011, GTM initiated procedures to obtain a concession for the rights to broadcast and receive signals of frequency bands linked to foreign satellite systems that cover or may provide services throughout Mexico for the purposes of providing satellite internet. The authority has yet to issue a ruling. However, on December 20, 2011, GTM received a favorable opinion by the Federal Competition Commission (“CFC”), which is required before the concession can be granted. Venezuela Telefónica Venezolana, C.A. holds a mobile telephone concession for operating and offering mobile services in the 800 MHz band, with national coverage. This concession was granted in 1991 and expires on May 31, 2011. The concession is renewable for up to 20 years, at the discretion of CONATEL. In line with prevailing legislation, Telefónica Venezolana, C.A. submitted the application for renewal of the general 806-890 MHz and 890 to 902 concession (related to the provision of subscription TV services, radiodetermination –PTT-, wireless telephony and data access network), to CONATEL, 90 days before their expiry. On May 31, 2011, CONATEL renewed these licenses for another 11 years. Pursuant to these renewals, the new expiry of the concessions is November 28, 2022.
Telefónica Venezolana, C.A. also holds a private network services concession granted in 1993 and renewed in 2007, until December 15, 2025. This concession allows Telefónica Venezolana, C.A. to provide private point-to-point and point-to-multipoint telecommunications services for companies. In 2001, Telefónica Venezolana, C.A. secured a concession for offering nationwide wireless fixed access services using wireless technology in the subscriber loop until August 24, 2026. In 2000, Telefónica Venezolana, C.A. received a general authorization for offering local, national long-distance and international long-distance telephony services and for operating telecommunications networks, for a 25-year period to December 15, 2025. In 2007, the remaining services provided by Telefónica Venezolana, C.A. were incorporated into this license, namely mobile, private networks, Internet access and transport services. On the same date, the company secured a concession for operating in the 1900 MHz band for a 15-year period until November 2022, renewable for a 10-year period. Via administrative order PADS-GST-00120, of March 31, 2011, the regulator granted Telefónica Venezolana, C.A. the Land Mobile Radio (for "Push to Talk" service) license, enabling it provide nationwide service in the assigned mobile telephony bands. The license expires on December 15, 2025, i.e. the same expiration date as its general HGT-001 license covering all the specific telecommunications services it can provide.
Sistemas Timetrac, C.A. initially began operating under the 10-year concession No. SRMT-C-001 granted on July 30, 1996. While this concession expired on July 30, 2006, it was not until March 10, 2008 that CONATEL converted the licenses, granting the general HGTS-01268 license, which includes radiodetermination and telecommunications network creation and operation. The regulator set expressly the expiration of this license at September 23, 2010. On May 21, 2010, procedures were initiated to renew the license and, according to a statement issued by the regulator, definitive renewal will be given once the technical rule containing the allocation of frequency bands (CUNABAF) is published. Chile Telefónica Chile holds the following telecommunications services licenses: | · | Local public telephony services. Telefónica Chile holds a renewable license for local telephony services in all regions of Chile, for a 50-year period. This license was awarded in 1982, except for the X and XI regions, which were incorporated into the license in 1995. In addition, Telefónica Chile holds other nationwide renewable licenses for local telephone services, exclusively targeting rural areas. It also holds a renewable nationwide license for public data transmission services for a period of 30 years from July 1995 and another four renewable licenses for public data transmission services for a period of 30 years from June 2008. Telefónica Chile also has a renewable nationwide license for public VOIP services, for a period of 30 years from August 2010. |
| · | Long distance licenses. Through its subsidiary Telefónica Larga Distancia, Telefónica Chile holds renewable licenses for a 30-year period as from November 1989, to install and operate a national fiber optics network, a national base station network and other transmission equipment, and to provide national and international long-distance services, including voice, data and image transmission throughout Chile. In addition, the company holds renewable nationwide public data transmission services licenses for a 30-year period as from June 1993. Telefónica also holds indefinite licenses for providing national and international long-distance services through central switches and nationwide cable and fiber optic networks. |
| · | Public data transmission services. Since March 1987, Telefónica Empresas holds a license for an indefinite period for providing public nationwide data transmission services. |
| · | Public mobile telephony services. Since November 1989, Telefónica Móviles Chile has held licenses for an indefinite period for providing public mobile telephone services throughout Chile in the 800 MHz band. In addition, the company holds three licenses for providing nationwide mobile telecommunications services in the 1900 MHz band. These concessions may be renewed for successive 30-year periods from November 2002, at the request of the license holder. |
| · | Limited television license. Telefónica Multimedia holds a license to establish, operate and use part of the 2.6 GHz band spectrum in Santiago de Chile for intermediate telecommunications services, authorizing the frequencies used for communicating voice, data and images, for a thirty-year period as from May 2008. The company also has a limited license to provide television services in the 2.6 GHz band. Since December 2005, the company holds a 10-year renewable license for providing limited satellite television services. In addition, since January 2006, it has a limited license for providing nationwide television services in the largest cities, except in region III, in Telefónica Chile’s VDSL broadband network, for an indefinite period. Furthermore, in March 2007 the company was awarded a limited license for providing television services through the VDSL broadband network in the Santiago de Chile metropolitan area, for an indefinite period. |
Argentina Telefónica de Argentina holds licenses, all of which have been granted for an unlimited period, allowing it to provide fixed telephony services, international telecommunications services, local services in the northern and southern regions; long-distance, international telecommunications services and data transmission in the northern region; and Internet and international data transmission access services. Telefónica Móviles de Argentina’s licenses for providing mobile services include PCS licenses and the corresponding authorizations for using spectrum in different regions, as well as licenses for trunk services or closed groups of users, in different cities. These licenses do not expire, although they may be cancelled by SECOM in the event of failure to comply with the license terms. Colombia In March 1994, the company was awarded concessions for providing mobile services in the eastern region, along the Caribbean coast and in the western region, for a 10-year period, renewed for another 10 years to March 2014. Prior to that year, Telefónica Móviles Colombia may waive the concessions, renew the spectrum use permit for a 10-year period, and subsequently negotiate an extension. If Telefónica Móviles Colombia continues to hold its current concessions until 2014, in that year it must seek registration as a telecommunications operator and request permission to use spectrum. In addition, Telefónica Móviles Colombia holds nationwide carrier service concessions granted in June 1998 and November 1998 (initially for 10 years, renewed for an additional 10 years). In 2008, these concessions were rolled over into a convergent permit to provide carrier services for an additional 10 years (which may be extended for a further 10 years). As in the preceding case, Telefónica Móviles Colombia may waive these licenses and seek registration as an operator under the general authorization system set out by law. In 2011, Telefónica Móviles obtained a license via Resolution 2105 of 2011 to operate 15 MHz spectrum in the 1900 frequency band after participating in an auction held by the ICT Ministry. The ICT Ministry requested applicants to send, by January 6, 2012, statements of interest in acquiring spectrum in the 1.7, 2.1 and 2.5 GHz bands in order to verify plurality in participating in the allocation process. With respect to fixed telephone services, the law establishes an indefinite permit for all operators to operate as local exchange carriers, nationwide. Colombia Telecomunicaciones registered in November 8, 2011, enabling it to provide all telecommunications networks and services; e.g. long-distance carrier services, value-added services, domestic carrier services and mobile services. Peru Telefónica del Perú, S.A. provides nationwide fixed telecommunications services under two concessions granted on May 16, 1994 by the Transport and Communications Ministry. The concessions were initially for 20 years, with partial renewal for additional five-year periods up to a maximum of 20 years. To date, three partial renewals extending the concession to November 27, 2027 have been approved. Telefónica Móviles Peru has four mobile services concessions, each for 20-year periods renewable for equal periods. Although the concession periods for providing mobile service in Lima and Callao have expired, they remain valid by law until the renewals are processed. It also holds three 20-year concessions to provide domestic and international long-distance carrier services expiring between 2019 and 2022, three 20-year concessions to provide fixed mobile telephone services expiring between 2019 and 2028 and three concessions for local carrier services expiring between 2016 and 2022. Ecuador Otecel renewed the mobile telephony services concession under which it provides advanced mobile services, including 3G services. The concession expires in November 2023 and may be renewed for an additional 15-year period. In addition, Otecel holds a fixed and mobile carrier services concession expiring in 2017. This concession may be renewed for an additional 15-year period. The different licenses for providing added-value mobile services and Internet access services expire in 2011. This license has been renewed until June 2, 2021 and may be extended for another 10 years. Other countries in Latin America | | | | | | Costa Rica | Concession | Telecommunication services (7) | 10.6 MHz/850 MHz 30 MHz/1800 MHz 20 MHz/2100 MHz | | 2026 (8) | El Salvador | Concession | Telecommunication services (1) | 25 MHz/800 MHz | Band B | 2018(2) | Concession | Telecommunication services (1) | 30 MHz/1900 MHz | Band C | 2021 | Guatemala | Concession | Telecommunication services (1) | 80 MHz/1900 MHz | Bands B, C, E and F | 2014(3) | Concession | Telecommunication services (1) | | | 2014(3) | Concession | Telecommunication services (1) | | | 2014(3) | Nicaragua | Concession | Mobile telecommunication services | 25 MHz/800 MHz | Band A | 2023(4) | Concession | Mobile telecommunication services | Additional spectrum 60 MHz /1900 | Bands B, D, E and F | 2023(4) | Panama | Concession | GSM/UMTS | 25 MHz /800 10MHz/1900 MHz | Band A Band F | 2016(5) | Uruguay | License | Mobile telephony | 25 MHz/800 MHz | | 2022-2024(6) |
(1) | In accordance with the Telecommunications Law all of these concessions were granted to provide any type of telecommunication services. |
(2) | Concessions for the use of spectrum are granted for a period of 20 years and may be renewed for additional 20 year periods once the procedures established by the Telecommunications Law are fulfilled. |
(3) | These concessions are granted for a period of 15 years and may be renewed for successive 15 year periods at the holder’s request. In order to renew a concession the holder must prove to the regulatory agency that the spectrum has actually been used during the prior 15-year period. These concessions expire in 2014. |
(4) | Telefonía Celular de Nicaragua, S.A. ("TCN") obtained a concession in 1992 for a period of 10 years to use the 25 MHz spectrum in band A of 800 MHz in order to provide mobile telecommunication services. This concession was renewed for a period of 10 years from August 2013 until July 2023. The regulatory agency awarded TCN additional spectrum of 65 MHz in bands B, D, E and F of 1900. The concession may be renewed for an additional 10-year periods via negotiation with TELCOR two years in advance of the expiry of the current concession, subject to compliance by the operator with certain conditions. |
(5) | The concession is valid for 20 years and expires in 2016. It is renewable for an additional period in accordance with the concession contract. The Government of Panama granted the right to use 10MHz (5+5) in the 1900 MHz until 2016, which can be renewed for a further period. |
(6) | The expiry date depends upon the spectrum awarded: 800 MHz band (12.5 MHz + 12.5 MHz) – 20 years from July 2004; 1900 MHz band (5 MHz + 5 MHz) – 20 years from December 2002; and 1900 MHz band (5 MHz + 5 MHz) – 20 years from July 2004. |
(7) | Except for traditional basic telephone services through copper networks. |
(8) | The concession may be renewed for a period that added to the initial period and previous renewals does not exceed 25 years from the start date. |
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