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Consolidated
Annual
Report
2023
Consolidated
financial
statements
2023
Index of the Consolidated annual accounts

Consolidated statements of financial position ............................................................................................. | 3
Consolidated income statements ..................................................................................................................... | 4
Consolidated statements of comprehensive income ................................................................................. | 5
Consolidated statement of changes in equity .............................................................................................. | 6
Consolidated statements of cash flows .......................................................................................................... | 8
Consolidated Financial Statements for the year ended December 31, 20 23 ...................................... | 9
Note 1. Background and general information ...................................................................................................... | 10
Note 2. Basis of presentation of the consolidated financial statements ......................................................... | 11
Note 3. Accounting policies ................................................................................................................................... | 19
Note 4. Segment information ................................................................................................................................ | 27
Note 5. Business combinations ............................................................................................................................. | 35
Note 6. Intangible assets ........................................................................................................................................ | 38
Note 7. Goodwill ...................................................................................................................................................... | 40
Note 8. Property, plant and equipment ............................................................................................................... | 44
Note 9. Rights of use .............................................................................................................................................. | 46
Note 10. Associate and joint ventures .................................................................................................................. | 48
Note 11. Related parties .......................................................................................................................................... | 55
Note 12. Financial assets and other non-current assets .................................................................................... | 58
Note 13. Inventories ................................................................................................................................................ | 61
Note 14. Receivables and other non-current assets .......................................................................................... | 62
Note 15. Other current financial assets ................................................................................................................ | 64
Note 16. Breakdown of financial assets ................................................................................................................ | 65
Note 17. Equity ......................................................................................................................................................... | 67
Note 18. Financial liabilities .................................................................................................................................... | 76
Note 19. Derivative financial instruments and risk management policies ....................................................... | 81
Note 20. Lease liabilities ........................................................................................................................................ | 100
Note 21. Payables and other non-current liabilities ............................................................................................ | 101
Note 22. Payables and other current liabilities ................................................................................................... | 102
Note 23. Breakdown of contractual assets and liabilities, and capitalized costs ........................................... | 105
Note 24. Provisions ................................................................................................................................................. | 108
Note 25. Tax matters .............................................................................................................................................. | 115
Note 26. Revenue and expenses .......................................................................................................................... | 126
Note 27. Long-term incentive plans based on Telefónica, S.A. shares ........................................................... | 129
Note 28. Cash flow analysis ................................................................................................................................... | 132
Note 29. Other information ................................................................................................................................... | 136
Note 30. Operations classified as held for sale ................................................................................................... | 151
Note 31. Events after the reporting period ........................................................................................................... | 152
Note 32. Additional note for English translation ................................................................................................. | 153
Appendix ................................................................................................................................................................ |
Appendix I: Scope of consolidation ................................................................................................................... | 154
Appendix II: Board and Senior Management Compensation ........................................................................ | 172
Appendix III: Debentures and bonds ................................................................................................................. | 178
Appendix IV: Financial instruments ................................................................................................................... | 181
Appendix V: Interest-bearing debt .................................................................................................................... | 188
Appendix VI: Key regulatory issues and concessions and licenses held by the Telefónica Group .......... | 189

| Index |  | Consolidated financial statements 2023

Consolidated Annual Report 2023 Telefónica, S. A.2
Telefónica Group
Consolidated statements of financial position at December 31

Millions of euros | Notes | 2023 | 2022
ASSETS |  |  |
A) NON-CURRENT ASSETS |  | 83,568 | 87,053
Intangible assets | (Note 6) | 11,370 | 12,017
Goodwill | (Note 7) | 18,708 | 18,471
Property, plant and equipment | (Note 8) | 22,944 | 23,714
Rights of use | (Note 9) | 8,448 | 8,279
Investments accounted for by the equity method | (Note 10) | 8,590 | 11,587
Financial assets and other non-current assets | (Note 12) | 7,268 | 8,101
Deferred tax assets | (Note 25) | 6,240 | 4,884
B) CURRENT ASSETS |  | 20,756 | 22,589
Inventories | (Note 13) | 929 | 1,546
Receivables and other current assets | (Note 14) | 10,132 | 9,134
Tax receivables | (Note 25) | 1,193 | 2,213
Other current financial assets | (Note 15) | 1,078 | 2,444
Cash and cash equivalents | (Note 16) | 7,151 | 7,245
Non-current assets and disposal groups held for sale | (Note 30) | 273 | 7
TOTAL ASSETS (A+B) |  | 104,324 | 109,642

| Notes | 2023 | 2022
EQUITY AND LIABILITIES |  |  |
A) EQUITY |  | 27,096 | 31,708
Equity attributable to equity holders of the parent and other holders of equity instruments | (Note 17) | 21,852 | 25,088
Equity attributable to non-controlling interests | (Note 17) | 5,244 | 6,620
B) NON-CURRENT LIABILITIES |  | 53,829 | 54,834
Non-current financial liabilities | (Note 18) | 33,360 | 35,059
Non-current lease liabilities | (Note 20) | 6,708 | 6,657
Payables and other non-current liabilities | (Note 21) | 3,605 | 3,546
Deferred tax liabilities | (Note 25) | 2,702 | 3,067
Non-current provisions | (Note 24) | 7,454 | 6,505
C) CURRENT LIABILITIES |  | 23,399 | 23,100
Current financial liabilities | (Note 18) | 3,701 | 4,020
Current lease liabilities | (Note 20) | 2,239 | 2,020
Payables and other current liabilities | (Note 22) | 13,957 | 13,509
Current tax payables | (Note 25) | 1,869 | 1,920
Current provisions | (Note 24) | 1,596 | 1,631
Liabilities associated with non-current assets and disposal groups held for sale | (Note 30) | 37 | —
TOTAL EQUITY AND LIABILITIES (A+B+C) |  | 104,324 | 109,642

The accompanying notes and appendices are an integral part of these consolidated statements of financial position.

| Index |  | Consolidated financial statements 2023

Consolidated Annual Report 2023 Telefónica, S. A.3
Telefónica Group
Consolidated income statements for the years ended December 31

Millions of euros | Notes | 2023 | 2022 | 2021
Revenues | (Note 26) | 40,652 | 39,993 | 39,277
Other income | (Note 26) | 1,541 | 2,065 | 12,673
Supplies |  | (13,298) | (12,941) | (12,258)
Personnel expenses | (Note 26) | (7,207) | (5,524) | (6,733)
Other expenses | (Note 26) | (10,298) | (10,741) | (10,976)
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION (OIBDA) |  | 11,390 | 12,852 | 21,983
Depreciation and amortization | (Note 26) | (8,797) | (8,796) | (8,397)
OPERATING INCOME |  | 2,593 | 4,056 | 13,586
Share of (loss) income of investments accounted for by the equity method | (Note 10) | (2,162) | 217 | (127)
Finance income |  | 1,099 | 1,803 | 614
Exchange gains |  | 1,837 | 2,910 | 2,801
Finance costs |  | (3,014) | (3,030) | (2,028)
Exchange losses |  | (1,826) | (2,996) | (2,751)
Net financial expense | (Note 19) | (1,904) | (1,313) | (1,364)
(LOSS) PROFIT BEFORE TAX |  | (1,473) | 2,960 | 12,095
Corporate income tax | (Note 25) | 899 | (641) | (1,378)
(LOSS) PROFIT FOR THE YEAR |  | (574) | 2,319 | 10,717
Attributable to equity holders of the parent |  | (892) | 2,011 | 8,137
Attributable to non-controlling interests | (Note 17) | 318 | 308 | 2,580
Basic (loss) earnings per share (euros) | (Note 26) | (0.20) | 0.31 | 1.34
Diluted (loss) earnings per share (euros) | (Note 26) | (0.20) | 0.31 | 1.34

The accompanying notes and appendices are an integral part of these consolidated income statements.

| Index |  | Consolidated financial statements 2023

Consolidated Annual Report 2023 Telefónica, S. A.4
Telefónica Group
Consolidated statements of comprehensive income for the years ended
December 31

Millions of euros | 2023 | 2022 | 2021
(Loss) profit for the year | (574) | 2,319 | 10,717
Other comprehensive (loss) income | (43) | 1,908 | 4,557
Gains (losses) from financial assets measured at Fair value through other comprehensive income | 22 | (29) | 2
Income tax impact | (7) | 9 | (1)
| 15 | (20) | 1
(Losses) gains on hedges | (624) | 1,081 | 1,593
Income tax impact | 151 | (282) | (395)
Reclassification of losses (gains) included in the income statement (Note 19) | 76 | (704) | (1,874)
Income tax impact | (17) | 181 | 478
| (414) | 276 | (198)
Gains (losses) on hedges costs | 79 | (59) | 128
Income tax impact | (20) | 15 | (32)
Reclassification of (gains) losses included in the income statement (Note 19) | (9) | (9) | (10)
Income tax impact | 2 | 2 | 3
| 52 | (51) | 89
Share of (losses) gains recognized directly in equity of associates and others (Note 10) | (31) | 65 | 32
Income tax impact | — | — | —
| (31) | 65 | 32
Translation differences (Note 17) | 270 | 1,562 | 4,098
Total other comprehensive (loss) income recognized for the year that may be reclassified subsequently to profit or loss | (108) | 1,832 | 4,022
Actuarial (losses) gains and impact of limit on assets for defined benefit pension plans | (45) | 102 | 130
Income tax impact | 14 | (32) | (35)
Reclassification to reserve actuarial losses (gains) and impact of limit on assets for defined benefit pension plans (Note 2) | — | — | 392
| (31) | 70 | 487
Gains (losses) from financial assets measured at fair value through comprehensive income | 113 | 42 | 49
Income tax impact | — | — | (1)
Reclassification to reserve of losses (gains) from financial assets measured at fair value through comprehensive income (Note 12) | 24 | 71 | —
| 137 | 113 | 48
Share of (losses) gains recognized directly in equity of associates (Note 10) | (41) | (107) | —
| (41) | (107) | —
Total other comprehensive income (loss) recognized for the year that will not be reclassified subsequently to profit or loss | 65 | 76 | 535
Total comprehensive (loss) income recognized for the year | (617) | 4,227 | 15,274
Attributable to: |  |  |
Equity holders of the parent and other holders of equity instruments | (1,165) | 3,519 | 12,652
Non-controlling interests | 548 | 708 | 2,622
| (617) | 4,227 | 15,274

The accompanying notes and appendices are an integral part of these consolidated statements of comprehensive income.

| Index |  | Consolidated financial statements 2023

Consolidated Annual Report 2023 Telefónica, S. A.5
Telefónica Group
Consolidated statement of changes in equity for the year ended December 31

| Attributable to equity holders of the parent and other holders of equity instruments | Non- controlling interests (Note 17) | Total equity
Millions of euros | Share capital | Share premium | Treasury Shares | Other equity instru- ments | Legal reserve | Retained earnings | Fair value financial assets | Hedges | Equity of associates and others | Translation differences | Total
Financial position at December 31, 2022 | 5,775 | 3,824 | (341) | 7,550 | 1,059 | 27,698 | (449) | 725 | (30) | (20,723) | 25,088 | 6,620 | 31,708
(Loss) profit for the year | — | — | — | — | — | (892) | — | — | — | — | (892) | 318 | (574)
Other comprehensive income (loss) for the year | — | — | — | — | — | (26) | 148 | (412) | (20) | 37 | (273) | 230 | (43)
Total comprehensive income (loss) for the year | — | — | — | — | — | (918) | 148 | (412) | (20) | 37 | (1,165) | 548 | (617)
Dividends and distribution of profit (Note 17) | — | — | — | — | — | (1,698) | — | — | — | — | (1,698) | (345) | (2,043)
Net movement in treasury shares | — | — | (186) | — | — | (35) | — | — | — | — | (221) | — | (221)
Acquisitions and disposals of non-controlling interests and business combinations (Note 2) | — | — | — | — | — | — | — | — | — | — | — | (1,579) | (1,579)
Capital reduction | (25) | (73) | 98 | — | — | — | — | — | — | — | — | — | —
Undated deeply subordinated securities (Note 17) | — | — | — | — | — | (239) | — | — | — | — | (239) | — | (239)
Other movements | — | — | — | — | — | 87 | — | — | — | — | 87 | — | 87
Financial position at December 31, 2023 | 5,750 | 3,751 | (429) | 7,550 | 1,059 | 24,895 | (301) | 313 | (50) | (20,686) | 21,852 | 5,244 | 27,096

The accompanying notes and appendices are an integral part of these consolidated statements of changes in equity.

| Index |  | Consolidated financial statements 2023

Consolidated Annual Report 2023 Telefónica, S. A.6
Telefónica Group
Consolidated statements of changes in equity for the years ended December 31

| Attributable to equity holders of the parent and other holders of equity instruments | Non- controlling interests (Note 17) | Total equity
Millions of euros | Share capital | Share premium | Treasury Shares | Other equity instruments | Legal reserve | Retained earnings | Fair value financial assets | Hedges | Equity of associates and others | Translation differences | Total
Financial position at December 31, 2021 | 5,779 | 4,233 | (547) | 7,550 | 1,038 | 26,091 | (547) | 438 | 64 | (21,892) | 22,207 | 6,477 | 28,684
Profit for the year | — | — | — | — | — | 2,011 | — | — | — | — | 2,011 | 308 | 2,319
Other comprehensive income (loss) for the year | — | — | — | — | — | 48 | 98 | 287 | (94) | 1,169 | 1,508 | 400 | 1,908
Total comprehensive income (loss) for the year | — | — | — | — | — | 2,059 | 98 | 287 | (94) | 1,169 | 3,519 | 708 | 4,227
Dividends and distribution of profit (Note 17) | 135 | — | — | — | 21 | (1,223) | — | — | — | — | (1,067) | (411) | (1,478)
Net movement in treasury shares | — | — | (342) | — | — | (22) | — | — | — | — | (364) | — | (364)
Acquisitions and disposals of non-controlling interests and business combinations (Note 17) | — | — | — | — | — | 936 | — | — | — | — | 936 | (155) | 781
Capital reduction | (139) | (409) | 548 | — | — | — | — | — | — | — | — | — | —
Undated deeply subordinated securities (Note 17) | — | — | — | — | — | (201) | — | — | — | — | (201) | — | (201)
Other movements | — | — | — | — | — | 58 | — | — | — | — | 58 | 1 | 59
Financial position at December 31, 2022 | 5,775 | 3,824 | (341) | 7,550 | 1,059 | 27,698 | (449) | 725 | (30) | (20,723) | 25,088 | 6,620 | 31,708
Financial position at December 31, 2020 | 5,526 | 4,538 | (476) | 7,550 | 1,038 | 19,046 | (597) | 647 | (57) | (25,980) | 11,235 | 7,025 | 18,260
Profit for the year | — | — | — | — | — | 8,137 | — | — | — | — | 8,137 | 2,580 | 10,717
Other comprehensive income (loss) for the year | — | — | — | — | — | 465 | 50 | (209) | 121 | 4,088 | 4,515 | 42 | 4,557
Total comprehensive income (loss) for the year | — | — | — | — | — | 8,602 | 50 | (209) | 121 | 4,088 | 12,652 | 2,622 | 15,274
Dividends and distribution of profit (Note 17) | 336 | — | — | — | — | (936) | — | — | — | — | (600) | (3,051) | (3,651)
Net movement in treasury shares | — | — | (459) | — | — | (20) | — | — | — | — | (479) | — | (479)
Acquisitions and disposals of non-controlling interests and business combinations | — | — | — | — | — | (354) | — | — | — | — | (354) | (119) | (473)
Capital reduction | (83) | (305) | 388 | — | — | — | — | — | — | — | — | — | —
Undated deeply subordinated securities and notes mandatorily convertible (Note 17) | — | — | — | — | — | (263) | — | — | — | — | (263) | — | (263)
Other movements | — | — | — | — | — | 16 | — | — | — | — | 16 | — | 16
Financial position at December 31, 2021 | 5,779 | 4,233 | (547) | 7,550 | 1,038 | 26,091 | (547) | 438 | 64 | (21,892) | 22,207 | 6,477 | 28,684

The accompanying notes and appendices are an integral part of these consolidated statements of changes in equity.

| Index |  | Consolidated financial statements 2023

Consolidated Annual Report 2023 Telefónica, S. A.7
Telefónica Group
Consolidated statements of cash flows for the years ended December 31

Millions of euros | Notes | 2023 | 2022 | 2021
Cash received from operations | (Note 28) | 47,314 | 46,925 | 46,415
Cash paid from operations | (Note 28) | (34,646) | (34,778) | (34,379)
Net payments of interest and other financial expenses net of dividends received | (Note 28) | (565) | (292) | (1,309)
Taxes (paid)/proceeds | (Note 28) | (454) | (92) | (459)
Net cash flow provided by operating activities | (Note 28) | 11,649 | 11,763 | 10,268
(Payments on investments)/proceeds from the sale in property, plant and equipment and intangible assets | (Note 28) | (5,851) | (5,508) | (6,164)
Proceeds/(payments) on disposals of companies, net of cash and cash equivalents disposed | (Note 28) | 1,004 | (115) | 13,369
Payments on investments in companies, net of cash and cash equivalents acquired | (Note 28) | (252) | (1,628) | (414)
Proceeds on financial investments not included under cash equivalents | (Note 28) | 1,432 | 2,967 | 2,163
Payments on financial investments not included under cash equivalents | (Note 28) | (1,475) | (2,575) | (1,474)
Net proceeds/(payments) for temporary financial investments |  | 856 | 1,532 | (1,584)
Net cash flow used in investing activities | (Note 28) | (4,286) | (5,327) | 5,896
Dividends paid | (Note 28) | (2,139) | (1,397) | (3,630)
Proceeds from share capital increase with minority interest | (Note 28) | 113 | 1,022 | —
(Payments)/proceeds of treasury shares and other operations with shareholders and with minority interests | (Note 28) | (1,771) | (555) | (604)
Operations with other equity holders | (Note 28) | (329) | (268) | (354)
Proceeds on issue of debentures and bonds and other debts | (Note 28) | 967 | 1,746 | 561
Proceeds on loans, borrowings and promissory notes | (Note 28) | 1,707 | 839 | 3,085
Repayments of debentures and bonds and other debts | (Note 28) | (1,910) | (3,541) | (5,847)
Repayments of loans, borrowings and promissory notes | (Note 28) | (1,465) | (3,077) | (4,146)
Lease principal payments | (Note 20) | (2,114) | (1,996) | (1,782)
Financed operating payments and investments in property, plant and equipment and intangible assets payments | (Note 28) | (245) | (698) | (273)
Net cash used in financing activities | (Note 28) | (7,186) | (7,925) | (12,990)
Effect of changes in exchange rates |  | (258) | 156 | (179)
Cash reclassified to assets held for sale | (Note 30) | (14) | — | (7)
Effect of changes in consolidation methods and others |  | 1 | (2) | (12)
Net increase (decrease) in cash and cash equivalents during the year |  | (94) | (1,335) | 2,976
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | (Note 16) | 7,245 | 8,580 | 5,604
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | (Note 16) | 7,151 | 7,245 | 8,580
RECONCILIATION OF CASH AND CASH EQUIVALENTS WITH THE STATEMENTS OF FINANCIAL POSITION |  |  |  |
BALANCE AT THE BEGINNING OF THE PERIOD | (Note 16) | 7,245 | 8,580 | 5,604
Cash on hand and at banks |  | 6,653 | 7,353 | 4,600
Other cash equivalents |  | 592 | 1,227 | 1,004
BALANCE AT THE END OF THE PERIOD | (Note 16) | 7,151 | 7,245 | 8,580
Cash on hand and at banks |  | 6,265 | 6,653 | 7,353
Other cash equivalents |  | 886 | 592 | 1,227

The accompanying notes and appendices are an integral part of these consolidated statements of cash flows.

| Index |  | Consolidated financial statements 2023

Consolidated Annual Report 2023 Telefónica, S. A.8
Telefónica, S.A. and subsidiaries
composing the Telefónica Group
Notes to the consolidated financial
statements (consolidated annual
accounts) for the year ended
December 31, 2023
Consolidated Annual Report 2023 Telefónica, S. A.9
Note 1. Background and
general information
Telefónica, S.A. and its subsidiaries and investees
(hereinafter also referred to as Telefónica, the Company,
the Telefónica Group or the Group) make up an
integrated and diversified telecommunications group
operating mainly in Europe and Latin America . The
Group’s activity is centered around services of fixed and
wireless telephony, broadband, Internet, data traffic, Pay
TV and other digital services.
The parent company of the Group is Telefónica, S.A., 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 I lists the main companies composing the
Telefónica Group, their corporate purpose, country,
functional currency, share capital, the Group’s effective
shareholding and their method of consolidation.
As a multinational telecommunications company which
operates in regulated m arkets, the Group is subject to
different laws and regulations in each of the jurisdictions
in which it operates, pursuant to whic h permits,
concessions or licenses must be obtained in certain
circumstances to provide the various services. In addition,
certain fixed and wireless telephony services are provided
under regulated rate and price systems. Key regulatory
issues, and concessions and licenses held by the
Telefónica Group are detailed in Appendix VI.
The accompanying consolidated financial statements for
the year ended December 31, 2023 were approved by the
Company’s Board of Directors at its meeting on February
21, 2024 for submission for approval at the General
Shareholders’ Meeting, which is expected to occur
without modification.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.10
Note 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 each of the companies comprising the Telefónica
Group, whose separate financial statements were
prepared in accordance with the generally accepted
accounting principles applicable in the various countries
in which they are located, and for the purposes of these
consolidated financial statements are presented in
accordance with the International Financial Reporting
Standards (IFRS) adopted by the European Union, which
for the purposes of the Telefónica Group are not different
from those issued by the International Accounting
Standards Board (IASB). These consolidated financial
statements present fairly, in all material respects, the
consolidated equity and financial position at December 31,
2023, 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 euro is the Group’s reporting currency. The figures in
these consolidated financial statements are expressed in
million euros, unless indicated otherwise, and may
therefore be rounded.
Note 3 contains a detailed description of the most
significant accounting policies used to prepare these
consolidated financial statements.
Materiality criteria
These consolidated financial statements do not include
certain information or disclosures that, not having to be
presented due to their qualitative significance, were
deemed to be immaterial or of no relevance pursuant to
the concepts of materiality or relevance defined in the
IFRS conceptual framework, insofar as the Telefónica
Group’s consolidated financial statements, taken as a
whole, are concerned.
Comparative information and main
changes in the consolidation scope
For comparative purposes, the accompanying
consolidated financial statements for 2023 include the
figures for 2022 , 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 year then ended, on a voluntary basis, they
also include those of 2021.
The main events and changes in the consolidation scope
affecting comparability of the consolidated information
(see Appendix I for a detailed description of the
consolidation scope and the changes during the year) are
as listed below.
Exchange rates evolution

Variation of average exchange rate vs euro
| 2023 vs 2022 | 2022 vs 2021
Brazilian real | 0.3% | 17.6%
Pound sterling | (2.0%) | 0.8%
New peruvian sol | (0.4%) | 13.7%
Chilean peso | 1.1% | (2.2%)
Colombian peso | (4.3%) | (0.6%)
Mexican peso | 10.3% | 13.5%

Variation of closing exchange rate vs euro
| 2023 vs 2022 | 2022 vs 2021
Brazilian real | 4.1% | 13.5%
Pound sterling | 2.1% | (5.3%)
New peruvian sol | (0.7%) | 10.9%
Argentine peso | (78.8%) | (38.5%)
Chilean peso | (5.7%) | 4.7%
Colombian peso | 21.6% | (12.2%)
Mexican peso | 11.2% | 11.5%

In 2018 Argentina became a hyperinflationary economy.
The exchange rate used to translate inflation-adjusted
items denominated in Argentine pesos in the 2023
financial statements is the closing exchange rate as of
December 31, 2023 which was 893.45 Argentine pesos
per euro (189.08 Argentine pesos per euro at
December 31, 2022). The annual inflation rate for 2023 in
Argentina has been 211% (see Note 3.a). The contribution
of Telefónica Argentina to the consolidated Revenues
and Operating income for 2023, after its conversion to
euros, has been 1,237 million euros and -199 million euros,
respectively (2,066 and -270 million euros, respectively, in
2022). Likewise, the Equity attributable to equity holders
of the Parent Company has been reduced by 647 million
euros in 2023 (compared to an increase of 338 million

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.11
euros in 2022) due to the translation differences of the
financial statements of the Group companies whose
functional currency is the Argentine peso (see Note 17.f).
In 2023, there was a positive impact on Equity attributable
to equity holders of the Parent Company for translation
differences amounting to 419 million euros (1,261 million
euros in 2022) due to the appreciation of the Brazilian real
(see Note 17.f).
VMED O2 UK joint venture
On May 7, 2020, Telefónica reached an agreement with
Liberty Global plc to combine into a 50-50 joint venture
their operating businesses in the United Kingdom (O2
Holdings Ltd. and Virgin Media UK, respectively). On June
1, 2021 after obtaining the relevant regulatory approvals,
consummation of the necessary recapitalization and
satisfaction of other closing conditions, the closing of the
transaction was carried out, resulting in the combination
of both businesses into the joint venture called VMED O2
UK Limited ("VMO2").
Telefonica United Kingdom, which was fully consolidated
within the Group, is excluded from the scope of
consolidation from June 1, 2021 (Note 4). From that date,
VMO2 is registered under the equity method (see notes 4
and 10).
The constitution of the joint venture resulted in a
contribution of 5,376 million pounds sterling (equivalent to
6,234 million euros at the transaction day) for Telefonica,
of which 2,622 million pounds sterling correspond to the
cash payment to Telefónica to equalize ownership in the
joint venture (including the post-completion adjustment)
and 2,754 million pounds sterling correspond to proceeds
from recapitalization.
As a consequence of this transaction, the Group
recognized a gain amounting to 4,460 million euros in
“Other income” in 2021 (see Note 26), as follows:

| Millions of euros
Cash received | 6,234
Fair value of 50% of VMO2 (Note 10) | 12,012
Less: carrying amount of Telefonica United Kingdom at June 1, 2021 | (10,937)
Liabilities assumed and other costs (see Note 29.c) | (441)
Result before reclassification of translation differences and gains on hedges | 6,868
Reclassification of translation differences included in equity | (3,135)
Reclassification of gains on hedges included in equity | 727
Result of the transaction: gain | 4,460

Telefónica received dividends from VMO2 amounting to
1,000 million pounds sterling (approximately 1,154 million
euros), 800 million pounds sterling (909 million euros) and
161 million pounds sterling (187 million euros) in 2023,
2022 and 2021, respectively (see Note 28).
The share of (loss) income of VMO2 accounted for by the
equity method in the consolidated income statements of
the Telefónica Group amounted to a loss of 2,030 million
euros in 2023, an income of 292 million euros in 2022 and
a loss of 103 million euros in 2021 (see Note 10). The loss in
2023 includes the effect of the impairment of goodwill
recorded by VMO2 in the amount of 3,572 million euros
with an impact of 1,786 million euros on the consolidated
income statement of the Telefónica Group (see Note 10).
Agreement between Telxius Telecom and American
Tower Corporation for the sale of its
telecommunications towers divisions in Europe and
Latin America
On January 13, 2021 Telxius Telecom, S.A. (a company of
the Telefónica Group minority-owned, directly or
indirectly, by KKR and Pontegadea), signed an agreement
with American Tower Corporation ("ATC") for the sale of
its telecommunications towers divisions in Europe (Spain
and Germany) and in Latin America (Brazil, Peru, Chile
and Argentina).
The agreement established the sale of a number of
approximately 30,722 telecommunication tower sites and
comprises two separate and independent transactions
(on one hand, the Europe business and, on the other
hand, the Latin American business), fixing the respective
closures after the corresponding regulatory
authorizations. The agreement included the transfer to
ATC of the towers that Telxius agreed to acquire from
Telefónica Germany GmbH & Co. under the agreement
signed on June 8, 2020, both the towers acquired in the
first phase on September 1, 2020 as well as the towers
that were acquired in the second phase in August 2021.
On June 1, 2021, once the relevant regulatory approvals
had been obtained in Spain and Germany, the closing of
the sale of the telecommunication towers division located
in Europe was carried out, for a total selling price of
6,346 million euros.
On June 3, 2021, the closing of the sale of the
telecommunication towers division located in Latin
America was carried out, for a selling price of 887 million
euros.
On August 2, 2021, the closing of the sale to ATC of 4,080
sites that Telxius undertook to acquire from Telefónica
Germany GmbH & Co. OHG, under the second phase of
the agreement reached between both parties on June 8,
2020 was carried out, which stated a total purchase price
of 632 million euros. With the closing of this transaction,
together with the sales of the telecommunications towers
divisions in Europe and Latin America carried out in June,

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.12
the sale process agreed between Telxius and ATC was
finalized.
These transactions generated in 2021 a gain of 6,099
million euros registered in "Other income" (see Note 26),
with the following breakdown:

| Millions of euros
Selling price | 7,865
Less: carrying amount of net assets and transaction costs | 1,729
Result before reclassification of translation differences | 6,136
Translation differences | (37)
Result of the transaction: gain | 6,099
Income tax | (162)
Result attributable to non-controlling shareholders | (2,246)
Result attributable to equity holders of the parent | 3,691

After the closing of these transactions, the companies of
the Europe and Latin América towers divisions were
excluded from the consolidation perimeter. The
Telefónica Group operators maintained the leases
agreements of the towers signed with the sold
subsidiaries of Telxius. Consequently, as of the closing
date of the transactions, rights of use and lease liabilities
were recorded in the consolidated statement of financial
position, amounting to 2,633 million euros (see Note 9)
and 2,775 million euros (see Note 20), respectively.
Acquisition of mobile assets of Oi Group
On April 20, 2022, the closing of the transaction related to
the Purchase Agreement for Acquisition of Unidade
Produtiva Isolada (UPI) Mobile Assets of Oi Group took
place, and Telefónica Brasil acquired, on such date, all the
shares of the company Garliava RJ Infraestrutura e Redes
de Telecomunicações S.A. (Garliava), to which the mobile
assets of Oi Group assigned to Telefónica Brazil had been
contributed, under the segregation plan stated in the Oi
Agreement (see Note 29.c).
Telefónica Brasil thus acquired its share of mobile assets
of the Oi Group for an amount, which was subject to
adjustments, of 5,373 million Brazilian reais (approximately
1,063 million euros at the exchange rate at such date). A
payment of 4,885 million Brazilian reais (approximately
972 million euros) was made at closing of the transaction.
The remaining amount, equivalent to 10% of the payment
made on that date, is withheld subject to certain price
adjustments and potential indemnification obligations
contained in the Oi Agreement.
The total consideration also included 110 million Brazilian
reais subject to the fulfilment of certain targets, and other
costs amounting to 8 million Brazilian reais. Thus, the total
consideration transferred amounted to 5,492 million
Brazilian reais (1,093 million euros at the date of the
closing of the transaction).
On the date of approval of the consolidated financial
statements for the year 2022, the Company had
concluded the report for the allocation of the purchase
price. The fair value assigned to Oi's licenses amounted to
520 million euros. The goodwill amounted to 676 million
euros (see Note 5).
In October 2023, the arbitration proceeding between the
parties ended (see Note 29.c), resulting on a final price the
for the UPI Mobile Assets assigned to Telefónica Brasil of
5,129 million Brazilian reais as of the closing date
(compared to the 5,373 million Brazilian reais of the initial
price). As a result, 50% of the retained amount (488
million reais), plus applicable interest was offset against
the amount allocated as debt and the other 50%, in the
updated amount of 277 million reais (51 million euros at
such date), was withdrawn by Telefónica Brasil before the
Arbitration Chamber (see Note 5).
Agreement between Telefónica de España and
Telefónica Infra with Vauban Infrastructure Partners
and Credit Agricole Assurance for the establishment
of Bluevia
In July 2022, an agreement was reached between
Telefonica de España and Telefonica Infra with the
consortium formed by Vauban Infrastructure Partners
(Vauban) and Crédit Agricole Assurances (CAA) for the
establishment of a company, Bluevia Fibra, S.L. for the
deployment and commercialization of a fiber to the home
network mainly in rural areas in Spain.
On December 20, 2022 once the regulatory
authorizations were obtained and after the fulfillment of
the remaining agreed conditions, the transaction was
completed.
The consortium formed by CAA and Vauban has acquired
45% of the Company for a total amount of 1,021 million
euros in cash, paid on the closing of the agreement (see
Note 28). The transaction had no impact on the
consolidated income statements of the Telefónica Group
as it consisted on the sale of minority interest, with
Telefónica retaining control over Bluevia. The impact of
this transaction in equity attributable to equity holders of
the parent was an increase of 986 million euros in
"Retained earnings". In addition, there was in increase in
equity attributable to non-controlling interest amounting
to 23 million euros (see Note 17).
The difference between the tax value of the assets
transferred to Bluevia and their carrying amount in the
Group's consolidated annual accounts generated a

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.13
deferred tax asset for deductible temporary differences
amounting to 548 million euros (see Note 25).
Collective Bargaining Agreement and Collective
Redundancies Plan
On December 28, 2023, certain subsidiaries of Telefónica
Spain and the most representative Trade Union
Organizations reached an agreement to sign the III
Collective Bargaining Agreement valid until December 31,
2026 and can be extended for a further year, with the aim
of moving towards a more digital, flexible company
prepared for future challenges in a highly competitive
context. These agreements were endorsed on January 3,
2024.
In addition, and in parallel, these subsidiaries agreed to
execute the Collective Redundancies Plan, which
provides for collective redundancies affecting up to a
total of 3,420 employees. Employees turning 56 years or
older in 2024 and with a seniority of more than 15 years
can adhere to the Collective Redundancies Plan.
However, targets have been established that may result in
limits on joining in critical areas or additional
redundancies based on business reasons.
In "Personnel expenses" of the consolidated income
statement for the year 2023, a provision of 1,320 million
euros before taxes (see Note 24) corresponding to
Telefónica Spain has been recorded as of December 31,
2023, based on the present value of the estimated
payment flows resulting from the Collective
Redundancies Plan.
Public Offer for the Acquisition of Shares of
Telefónica Deutschland
On November 7, 2023, Telefónica, through its subsidiary
Telefónica Local Services GmbH, launched a partial
voluntary public tender offer for shares of Telefónica
Deutschland Holding AG (“Telefónica Deutschland”). The
Offer acceptance period began on December 5, 2023 and
ended on January 17, 2024 (both inclusive).
At the date of the Offer announcement, Telefónica was
the owner, directly or indirectly, of 71.81% of the share
capital and voting rights of Telefónica Deutschland and,
consequently, the Offer was announced on shares
representing approximately 28.19% remaining.
On December 31, 2023, Telefónica owned 82.43% of the
share capital of Telefónica Deutschland (70.58% as of
December 31,2022), having made direct purchases on the
market for an amount of 816 million euros (see Note 27.h y
28).
These purchases made in 2023 produced an increase of
46 million euros in the equity attributed to the parent
company and a decrease of 866 million euros in the
equity attributed to minority interests (see Note 17 h).
The Offer was settled on January 26, 2024 reaching
94.12% of the share capital, including acquisitions through
the Offer and acquisitions in the market until that date
(See Note 31).
Alternative measures not defined in
IFRS
In addition to the measures expressly defined in the IFRS,
the Group also uses a series of other measures for
decision-making because they provide additional
information useful to assess the Group’s performance,
solvency and liquidity. These measures should not be
viewed in isolation or as a substitute for the measures
presented according to the IFRS.
Operating income before depreciation and
amortization (OIBDA)
Operating income before depreciation and amortization
(OIBDA) is calculated by excluding solely depreciation
and amortization from operating income. OIBDA is used to
track the performance of the business and to establish
operating and strategic targets of Telefónica Group
companies. OIBDA is a commonly reported measure and
is widely used among analysts, investors and other
stakeholders in the telecommunications industry.
However, it is not a measure expressly defined in the IFRS
and therefore it may not be comparable to similar
indicators used by other companies. OIBDA should not be
considered as a substitute for operating income.
Furthermore, the Group management uses the measure
OIBDA margin, which is the result of dividing the OIBDA
by the revenues.
The following table presents the reconciliation of OIBDA
to operating income for the Telefónica Group for the
years ended December 31, 2023 , 2022 and 2021:

Millions of euros | 2023 | 2022 | 2021
OIBDA | 11,390 | 12,852 | 21,983
Depreciation and amortization | (8,797) | (8,796) | (8,397)
Operating income | 2,593 | 4,056 | 13,586

OIBDA in 2021 includes the gains on the sale of the
towers divisions of Telxius, amounting to 6,099 million
euros and from the establishment of VMO2 amounting to
4,460 million euros (see Note 4).
The following table presents the reconciliation of OIBDA
to operating income for each business segment for the
years ended December 31, 2022, 2021 and 2020 (see
Note 4):

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.14

2023
Millions of euros | Telefónica Spain | Telefónica Germany | Telefónica Brazil | Telefónica Hispam | Other companies | Eliminations | Total Group
OIBDA | 3,229 | 2,640 | 4,128 | 1,510 | (45) | (72) | 11,390
Depreciation and amortization | (2,200) | (2,323) | (2,511) | (1,557) | (244) | 38 | (8,797)
Operating income | 1,029 | 317 | 1,617 | (47) | (289) | (34) | 2,593

2022
Millions of euros | Telefónica Spain | Telefónica Germany | Telefónica Brazil | Telefónica Hispam | Other companies | Eliminations | Total Group
OIBDA | 4,588 | 2,558 | 3,732 | 1,958 | 94 | (78) | 12,852
Depreciation and amortization | (2,157) | (2,295) | (2,369) | (1,799) | (218) | 42 | (8,796)
Operating income | 2,431 | 263 | 1,363 | 159 | (124) | (36) | 4,056

2021
Millions of euros | Telefónica Spain | Telefónica United Kingdom | Telefónica Germany | Telefónica Brazil | Telefónica Hispam | Other companies | Eliminations | Total Group
OIBDA | 3,377 | 919 | 2,424 | 3,138 | 1,718 | 10,648 | (241) | 21,983
Depreciation and amortization | (2,153) | 0 | (2,394) | (1,918) | (1,873) | (356) | 297 | (8,397)
Operating income | 1,224 | 919 | 30 | 1,220 | (155) | 10,292 | 56 | 13,586

OIBDA-CapEx and OIBDA-CapEx excluding
spectrum acquisitions
OIBDA-CapEx is defined as operating income before
depreciation and amortization, reduced by accrued
capital expenditures, and OIBDA-CapEx excluding
spectrum acquisitions is defined as operating income
before depreciation and amortization, reduced by
accrued capital expenditures excluding those related to
spectrum acquisitions.
We believe that it is important to consider capital
expenditures, and capital expenditures excluding
spectrum acquisitions, together with OIBDA in order to
have a more complete measure of the performance of our
telecommunications businesses. We use these measures
internally to track the performance of our business, to
establish operating and strategic targets of the
businesses of the Group and in our internal budgeting
process.
Neither OIBDA-CapEx nor OIBDA-CapEx excluding
spectrum acquisitions are measures expressly defined in
IFRS, and therefore they may not be comparable to similar
indicators used by other companies. In addition, neither
OIBDA-CapEx nor OIBDA-CapEx excluding spectrum
acquisitions should be considered substitutes for
operating income, the most comparable financial
measure calculated in accordance with IFRS, or any
measure of liquidity calculated in accordance with IFRS.
The Group management also uses the measures OIBDA-
CapEx margin and OIBDA-CapEx excluding spectrum
acquisitions margin, which is the result of dividing these
measures by revenues.
In the table below we provide a reconciliation of our
OIBDA-CapEx and OIBDA-CapEx excluding spectrum
acquisitions to operating income for the periods indicated.

Millions of euros | 2023 | 2022 | 2021
Operating income | 2,593 | 4,056 | 13,586
Depreciation and amortization | (8,797) | (8,796) | (8,397)
OIBDA | 11,390 | 12,852 | 21,983
Capital expenditures in intangible assets (Note 6) | (1,838) | (1,530) | (2,981)
Capital expenditures in property, plant and equipment (Note 8) | (3,741) | (4,289) | (4,286)
CapEx | (5,579) | (5,819) | (7,267)
OIBDA-CapEx | 5,811 | 7,033 | 14,716
Spectrum acquisitions (Note 6) | 183 | 173 | 1,704
OIBDA-CapEx excluding spectrum acquisitions | 5,994 | 7,206 | 16,420

Debt indicators
As calculated by us, net financial debt includes:
(A) adding the following liabilities:
i. Current and non-current financial liabilities in our
consolidated statement of financial position (which
includes the negative mark-to-market value of
derivatives),

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.15
ii. Other liabilities included in "Payables and other non-
current liabilities" and "Payables and other current
liabilities" (mainly corresponding to payables for
deferred payment of radio spectrum that have an
explicit financial component and supplier financing for
customer financing of terminal sales), and
iii. Financial liabilities included in "Liabilities associated
with non-current assets and disposal groups held for
sale".
(B) subtracting the following amounts from the resulting
amount of the preceding step:
i. "Cash and cash equivalents",
ii. "Other current financial assets" (which include
short-term derivatives),
iii. Cash and other current financial assets included in
"Non-current assets and disposal groups held for sale",
iv. The positive mark-to-market value of derivatives
with a maturity beyond one year,
v. Other interest-bearing assets (included in "Financial
assets and other non-current assets", "Receivables
and other current assets" and "Tax receivables" in our
consolidated statement of financial position).
"Financial assets and other non-current assets"
includes derivatives, installments for long-term sales of
terminals to customers and other long-term financial
assets, and "Receivables and other current assets"
includes the customer financing of terminal sales
classified as short-term.
vi. Mark-to-market adjustment by cash flow hedging
activities related to debt, and
vii. Fair value of derivatives adjustment used for the
economic hedging of gross commitments related to
employee benefits.
We calculate net financial debt plus leases by adding
lease liabilities calculated under IFRS 16 (including those
corresponding to the companies held for sale) to net
financial debt and deducting assets from subleases.
We calculate net financial debt plus commitments by
adding gross commitments related to employee benefits
and the fair value of the derivatives used for the economic
hedging of such commitments to net financial debt, and
deducting the value of long-term assets associated with
those commitments related to employee benefits and the
tax benefits arising from the future payments of those
commitments related to employee benefits. Gross
commitments related to employee benefits are current
and non-current provisions recorded for certain employee
benefits such as termination plans, post-employment
defined benefit plans and other benefits.
We believe that net financial debt, net financial debt plus
leases, net financial debt plus commitments and net
financial debt plus leases plus commitments are
meaningful for investors and analysts because they
provide an analysis of our solvency using the same
measures used by our management. We use them to
calculate internally certain solvency and leverage ratios.
Nevertheless, none of them as calculated by us should be
considered as a substitute for gross financial debt as
presented in the consolidated statement of financial
position.
The following table presents a reconciliation of net
financial debt, net financial debt plus leases, net financial
debt plus commitments and net financial debt plus leases
plus commitments as of December 31, 2023 and 2022 to
the Telefónica Group’s gross financial debt as indicated in
the consolidated statement of financial position.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.16

Millions of euros | 12/31/2023 | 12/31/2022
Non-current financial liabilities | 33,360 | 35,059
Current financial liabilities | 3,701 | 4,020
Gross financial debt | 37,061 | 39,079
Cash and cash equivalents | (7,151) | (7,245)
Other current financial assets | (1,066) | (2,431)
Cash and other current financial assets included in "Non-current assets and disposal groups held for sale" (Note 30) | (13) | —
Positive mark-to-market value of long-term derivative instruments (Note 12) | (1,940) | (2,668)
Other liabilities included in "Payables and other non- current liabilities" | 1,750 | 1,431
Other liabilities included in "Payables and other current liabilities" | 446 | 402
Other assets included in "Financial assets and other non-current assets" | (1,481) | (1,892)
Other assets included in "Receivables and other current assets" | (711) | (646)
Other current assets included in "Tax receivables" (Note 25) | — | (123)
Mark-to-market adjustment by cash flow hedging activities related to debt | 659 | 1,102
Fair value of derivatives adjustment used for the economic hedging of gross commitments related to employee benefits | (205) | (322)
Net financial debt | 27,349 | 26,687
Lease liabilities | 8,920 | 8,645
Net financial debt plus leases | 36,269 | 35,332
Gross commitments related to employee benefits and associated economic hedging | 6,159 | 5,291
Value of associated long-term assets | (114) | (104)
Tax benefits | (1,535) | (1,281)
Net commitments related to employee benefits | 4,510 | 3,906
Net financial debt plus commitments | 31,859 | 30,593
Net financial debt plus leases plus commitments (*) | 40,779 | 39,238
(*) Includes assets and liabilities considered to be Net financial debt plus leases plus commitments related to employee benefits for companies classified as held for sale (see Note 30).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.17
Free Cash Flow
The Group’s free cash flow is calculated starting from
"Net cash flow provided by operating activities" as
indicated in the consolidated statement of cash flows;
deducting (Payments on investments)/Proceeds from the
sale of investments in property, plant and equipment and
intangible assets, net, adding the cash received from
government grants, deducting dividends paid to non-
controlling interests and payments of financed spectrum
without explicit interest. The cash used to pay for
commitments related to employee benefits (included in
the Net cash flow provided by operating activities) is
added back since it represents the payments of principal
of the debt incurred with those employees.
We believe that free cash flow is a meaningful measure
for investors and analysts because it provides an analysis
of the cash flow available to protect solvency levels and
to remunerate the parent company’s shareholders and
other equity holders. The same measure is used internally
by our management. Nevertheless, free cash flow as
calculated by us should not be considered as a substitute
for the various cash flows presented in the consolidated
statements of cash flows.
The following table presents the reconciliation between
the Telefónica Group’s Net cash flow provided by
operating activities as indicated in the consolidated
statement of cash flows and the free cash flow for 2023,
2022 and 2021:

Millions of euros | 2023 | 2022 | 2021
Net cash flow provided by operating activities | 11,649 | 11,763 | 10,268
(Payments on investments)/Proceeds from the sale of property, plant and equipment and intangible assets, net (Note 28) | (5,851) | (5,508) | (6,164)
Dividends paid to non-controlling interests (Note 28) | (438) | (438) | (410)
Payments for commitments related to employee benefits (Note 28) | 854 | 853 | 844
Payments of financed spectrum without explicit interest (Notes 21 and 28) | (112) | (108) | (108)
Free Cash Flow excluding lease principal payments | 6,102 | 6,562 | 4,430
Lease principal payments (Notes 20 and 28) | (2,114) | (1,996) | (1,782)
Free Cash Flow | 3,988 | 4,566 | 2,648

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.18
Note 3. Accounting policies
As stated in Note 2, the Group’s consolidated financial
statements have been prepared in accordance with IFRSs
and interpretations issued by the International
Accounting Standards Board (IASB) and the IFRS
Interpretations Committee (IFRIC) as endorsed by the
European Commission for use in the European Union
(IFRSs - EU).
Accordingly, only the most significant accounting policies
used in preparing the accompanying consolidated
financial statements, in light of the nature of the Group’s
activities, are set out below, as well as the accounting
policies applied where IFRSs permit a policy choice, and
those that are specific to the sector in which the Group
operates.
a) Hyperinflationary economies
Venezuela has been considered a hyperinflationary
economy since 2009. In light of the worsening of the
economic and political crisis in Venezuela and in the
absence of official rates that are representative of the
situation in the country, the Group maintains as a policy
for the purposes of the consolidated financial statements
the estimation of an exchange rate, known as synthetic
exchange rate, that matches the progression of inflation
and reflects the economic and financial position of the
Group’s Venezuelan operations in a more accurate way.
The synthetic exchange rate is calculated considering the
inflation rates that are published. On an annual basis,
these rates are 189.8% , 174.3% and 686.4% for 2023, 2022
and 2021, respectively.
The exchange rate used to translate inflation-adjusted
bolivar-denominated items in the consolidated financial
statements is the synthetic exchange rate as of the
closing date of each reporting period, amounting to
159.45 digital bolivars per U.S. dollar, 45.18 digital bolivars
per U.S. dollar and 16.47 digital bolivars per U.S. dollar as
of December 31, 2023, 2022 and 2021, respectively. In
turn, the official reference exchange rate at December 31,
2023 was 35.959 VED/USD ( 17.489 VED/USD and
4.597 VED/USD at December 31, 2022 and 2021,
respectively).
The use of a synthetic exchange rate versus the official
reference exchange rate does not have a significant
impact given the contribution of Telefónica Venezolana to
the consolidated financial position and to the Group's
results and cash flows for the year.
In 2018 Argentina became a hyperinflationary economy. In
order to restate its financial statements, the Company
uses the series of indices defined by resolution JG No.
539/18 issued by the Federación Argentina de Consejos
Profesionales de Ciencias Económicas (FACPCE), based
on the National Consumer Price Index (IPC) published by
the Instituto Nacional de Estadística y Censos (INDEC) of
the Argentine Republic and the Wholesale Internal Price
Index (IPIM) published by FACPCE. The cumulative index
at December 31, 202 3, 2022 and 2021 is 3,533.2%, 1,134.6%
and 582.5%, respectively, while on an annual basis the
index for 2023 is 211% (95% and 51% in 2022 and 2021 ,
respectively).
The exchange rate used to translate inflation-adjusted
items denominated in Argentine pesos in the 2023
financial statements is the closing exchange rate as of
December 31, 2023 which was 893.45 Argentine pesos
per euro (189.08 and 116.37 Argentine pesos per euro at
December 31, 2022 and 2021, respectively).
The Group includes in a single line item ("Translation
Differences") all the equity effects derived from
hyperinflation. This is as follows: (a) the restatement for
inflation of the financial statements of the Group
companies operating in hyperinflationary economies, and
(b) the effects of translating their respective financial
statements into euros using the exchange rate at the end
of the period.
b) Translation methodology
The income statements and statements of cash flows of
the Telefónica Group’s foreign subsidiaries (except
Venezuela and Argentina) were translated into euros at
the average exchange rates for the year, as a rate that
approximates the exchange rates at the dates of the
transactions.
c) Goodwill
After initial recognition, goodwill is carried at cost, less any
accumulated impairment losses. Goodwill is recognized
as an asset denominated in the currency of the company
acquired and is tested for impairment annually at the
least, 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 generating unit (or group
of cash generating units) to which the goodwill is
allocated from the acquisition date.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.19
d) Intangible assets
Intangible assets are carried at acquisition or production
cost, less any accumulated amortization or any
accumulated impairment losses.
Intangible assets are amortized on a straight-line basis
according to the following:
• Licenses granted to the Telefónica Group by various
public authorities to provide telecommunications
services and the value allocated to licenses held by
certain companies at the time they were included in the
Telefónica Group (“Service concession arrangements
and licenses”) are amortized on a straight-line basis
over the duration of related licenses from the moment
commercial operation begins.
• The allocation of acquisition costs attributable to
customers acquired in business combinations, as well
as the acquisition value of these types of assets in a
third-party transaction for consideration (Customer
base) are amortized on a straight-line basis over the
estimated period of the customer relationship. The term
length is between 4 and 14 years, based on the
customer segment (residential, business, etc.) and the
business model (prepaid, postpaid, etc.).
• Software is amortized on a straight-line basis over its
useful life, generally estimated to be between two and
five years.
e) Property, plant and equipment
Property, plant and equipment is carried at cost less any
accumulated depreciation and any accumulated
impairment in value.
Cost includes, among others, direct labor used in
installation and the allocable portion of the indirect costs
required for the related asset. The latter two items are
recorded as revenue under the concept Own work
capitalized of the line item Other income.
Interest and other financial expenses incurred and
directly attributable to the acquisition or construction of
qualifying assets are capitalized. Qualifying assets for the
Telefónica Group are those assets that require a period of
at least 18 months to bring the assets to the condition
necessary for their intended use or sale.
The Group’s subsidiaries depreciate their property, plant
and equipment, from the time they can be placed in
service, amortizing the cost of the assets, net of their
residual values on a straight-line basis over the assets’
estimated useful lives, which are calculated in
accordance with technical studies that are revised
periodically in light of technological advances and the
rate of dismantling, as follows:

| Years of estimated useful life
Buildings | 25 – 40
Plant and machinery | 4 – 30
Furniture, tools and other items | 2 – 10

f) Impairment of non-current assets
Non-current assets, including goodwill, intangible assets
and investments in associates and joint ventures, are
assessed at each reporting date for indicators of
impairment. Whenever such indicators exist, or in the
case of assets which are subject to an annual impairment
test, the recoverable amount is estimated. An asset’s
recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the
estimated future post-tax cash flows deriving from the
use of the asset or its cash generating unit, as applicable,
are discounted to their present value using a post-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the
asset, provided that the result obtained is the same that
would be obtained by discounting pre-tax cash flows at a
pre-tax discount rate.
The Group bases the calculation of impairment on the
approved business plans of the various cash generating
units to which the assets are allocated. The projected
cash flows, based on the approved strategic business
plans, cover a period of five years. Starting with the sixth
year, an expected constant growth rate is applied.
g) Lease agreements
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
use of the asset.
At the inception date of the lease (i.e. the date when the
underlying asset is available for use), a lessee recognizes
a right of use asset that represents the right to use the
underlying asset over the term of the lease, and a lease
liability for the present value of the lease payments
payable over the lease term – discounted using the
incremental borrowing rate at the start date of the lease.
Rights of use assets are measured at cost, less
accumulated depreciation and impairment losses, and are
adjusted for any remeasurement of lease liabilities. The
cost of rights of use assets includes the amount of initial
direct costs incurred and lease payments made before
the commencement date less incentives received. Right-
of-use assets are depreciated on a straight-line basis over
the shorter of the estimated useful life of the underlying
asset and the lease term.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.20
Lease payments include fixed payments (including in-
substance fixed payments) less any lease incentive
receivable, variable lease payments that depend on an
index or rate, and amounts expected to be paid as
residual value guarantees. Similarly, the measurement of
the lease liability includes the exercise price of a purchase
option, if the lessee is reasonably certain to exercise that
option, and payments of penalties for early termination, if
the lease term reflects the lessee exercising such
cancellation option. After the commencement date, the
amount of the lease liabilities is increased to reflect the
accrual of interest and reduced for the payments made. In
addition to this, the carrying amount of the lease liability is
remeasured in certain cases, such as changes in the lease
term, changes in future lease payments resulting from a
change in an index or rate used to determine those
payments. The amount of such remeasurement is
generally recognized against an adjustment to the right-
of-use asset.
The Group uses the "low value" asset lease recognition
exemption for office equipment and the short-term lease
recognition exemption for all leases with a term of 12
months or less. Therefore, lease payments in such cases
are recognized as an expense on a straight-line basis over
the lease term.
The Group recognizes non-lease components separately
from lease components for those classes of assets in
which non-lease components are significant with respect
to the total value of the arrangement.
The Group determines the lease term as the non-
cancellable term of the contract, together with any period
covered by an extension (or termination) option whose
exercise is discretionary for the Group, if there is
reasonable certainty that it will be exercised (or it will not
be exercised). In its assessment, the Group considers all
available information by asset class in the industry and
evaluates all relevant factors (technology, regulation,
competition, business model) that create an economic
incentive to exercise or not a renewal/cancellation option.
Notably, the Group takes into consideration the time
horizon of the strategic planning of its operations. After
the commencement date, the Group reassesses the lease
term if there is a significant event or change in
circumstances that is within its control that may affect its
ability to exercise (or not to exercise) an option to extend
or terminate (for example, a change in business strategy).
Where the Group acts as a lessor, leases are classified
between operating and finance leases. Leases in which
the lessor retains a significant portion of the risks and
rewards of ownership of the leased asset are treated as
operating leases. Otherwise, the lease is a finance lease.
h) Investment in associates and joint
arrangements
The Group assesses whether it has significant influence
not only on the basis of its ownership percentage but also
on the existence of qualitative factors such as
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 Group assesses rights and obligations agreed to by
the parties to a joint arrangement and, when relevant,
other facts and circumstances in order to determine
whether the joint arrangement in which it is involved is a
joint venture or a joint operation.
Upon the sale or contribution of a controlled business to
an associate or joint venture, the Group measures and
recognizes any retained interest at its fair value. Any
difference between the carrying amount of the business
contributed and the fair value of the retained investment
and the consideration received from disposal is
recognized in full in profit or loss.
i) Financial assets and liabilities
Financial Assets
All regular way 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 Group applies an impairment model for financial
assets based on expected credit losses, using a simplified
method for certain short- and long-term assets
(commercial receivables, lease receivables and
contractual assets).
Under this simplified approach, credit impairment is
recognized by reference to expected credit losses over
the life of the asset. For this purpose the Group uses
matrices based on historical bad debt experience by
geographical area on a portfolio segmented by customer
category according to credit pattern. The matrix for each
category has a defined time horizon divided into intervals
in accordance with the collection management policy and
is fed with historical data that covers at least 24 collection
cycles. This data is updated on a regular basis. Based on
the information observable at each close, the Group
assesses the need to adjust the rates resulting from these
matrices, considering current conditions and future
economic forecasts.
Derivative financial instruments and hedge
accounting
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

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.21
for hedge accounting and, if appropriate, on the nature of
the hedge.
Changes in fair value of derivatives that qualify as fair
value hedging instruments 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 designated as cash flow hedges, which are
highly effective, are recognized in equity. The ineffective
portion is recognized immediately in the income
statement. Fair value changes recognized in equity arising
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 carrying
amount 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 designated to hedge foreign currency
exposure from a net investment in a foreign operation is
accounted for in a similar manner to cash flow hedges.
When the Group chooses not to apply hedge accounting
criteria, gains or losses resulting from changes in the fair
value of derivatives are taken directly to the income
statement. In this respect, transactions used to reduce
the exchange rate risk of income contributed by foreign
subsidiaries are not treated as hedging transactions.
j) Audio-visual rights
Audio-visual rights which will generally be consumed in a
period of less than twelve months, as well as own content
whose production cycle will in no case exceed thirty-six
months, are included in inventories.
The cost of film, documentary, short film and series rights
acquired from third parties is charged to the income
statement on a straight-line basis from the time of first
broadcasting or release until the completion of the rights.
In-house produced programs and series and program
titles are charged at the time of their broadcast or up to
thirty-six months from the date of release, depending on
their nature and broadcasting strategy. The cost of in-
house productions that the Group expects to recover
through sale to third parties is recognized as an intangible
asset.
The cost of broadcasting rights that have expired or
whose recovery value is estimated to be lower than the
acquisition cost is recognized directly as an expense.
Broadcasting rights to football and motor sports events,
including their inherent production costs, are charged to
the income statement on a straight-line basis over twelve
months from the start of the season, while rights to other
premium sports are charged over the period of the
competition. All other sports rights are recognized in the
income statement upon first broadcast. When these
rights are paid for prior to the moment of allocation to the
income statement, and the terms and conditions of the
agreement involve performance obligations that still have
to be fulfilled in the future by both parties (also known as
executory contracts), prepaid amounts are recognized as
prepayments under "Other current assets".
k) 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 determined at a country level, and in
consideration of the macroeconomic environment. The
discount rates are determined based on high quality
market yield curves. Plan assets are measured at fair
value.
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.
l) Revenues and expenses
The Telefónica Group revenues are derived principally
from providing the following telecommunications
services: traffic, connection fees, regular (normally
monthly) network usage fees, interconnection, network
and equipment leasing, handset sales and other digital
services such as Pay TV and value-added services or
maintenance. Products and services may be sold
separately or bundled in promotional packages.
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 fixed and wireless traffic is recognized as
revenue as service is provided. For prepaid calls, the
amount of unused traffic generates deferred revenues
presented in Contractual liabilities on the statement of
financial position.
Revenues 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 term covered by the rate
paid by the customer.
Installation fees are taken to the income statement on a
straight-line basis over the related period. Equipment
leases and other services are taken to the income
statement as they are consumed.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.22
Interconnection revenues from fixed-wireless and
wireless-fixed 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.
When the Group is in an intermediary position between a
supplier/vendor and an end customer, it must determine if
it is supplying the product or service as the principal in the
transaction or if it is acting as an agent on behalf of the
supplier (manufacturer, wholesaler). The distinction
involves identifying who controls the goods or services
being provided and who is the primary obligor to satisfy
the performance obligations in the arrangement. Control
is often evidenced when, in the delivery to the end
customer, the Group provides significant integration of
the goods and services from a third party vendor into its
own goods and services. In addition to this, assessment of
the primary obligor includes the analysis of indicators
such as: whether the Group's responsibilities require
infrastructure and resources with specific functionalities,
who acts as the main customer contact, who manages
claims and provides support services, and who has
discretion setting the final price. This principal/agent
assessment affects the timing and amount of revenue
recognized in the financial statements, either on a gross
basis as the principal or on a net basis as the agent,
representing the margin earned by the Group for
arranging the transaction between the principal and the
customer. This is particularly relevant for the Group in
connection with digital services, such as streaming TV
content, software licenses and other cloud-based
products and services.
For bundled packages that include multiple elements sold
in the fixed, wireless, Internet and television businesses it
is determined whether it is necessary to identify the
separate performance obligations and apply the
corresponding revenue recognition policy to each one.
Total package revenues are allocated among the
identified performance obligations based on their
respective standalone selling prices.
As connection or initial activation fees, or upfront non-
refundable fees, are not separately identifiable
performance obligations in these types of packages, any
consideration received from the customer for these items
is allocated to the remaining elements.
When the customer has a right of return, the agreed
consideration is considered variable. The Group estimates
the amount of variable consideration to which it is entitled
using the expected value method (probability-weighted
possible amounts), considering all historical, current and
forecast information that is reasonably available, and only
to the extent that it determines that it is highly probable
that a significant reversal in the amount of cumulative
revenue recognized will not occur.
Expenses relating to customer contracts (mainly,
commissions payable to dealers for customer
acquisitions) are recognized as an asset to the extent that
they are incremental and are expected to be recovered.
Subsequently, these costs are amortized over the same
term as the revenues associated with such contract are
recognized, unless the expected amortization period is
one year or less, in which case they are expensed as
incurred. For the purposes of allocating to profit or loss
the incremental costs of obtaining a contract with
indefinite duration, renewal periods are taken into
consideration, estimated on the basis of the customer
churn rate, unless there are contract renewal costs which
are commensurate with those incurred in the initial
contract.
As part of our strategy, the Group has increased its use of
renewable energy through power purchase agreements
(PPAs) to purchase energy from sustainable sources,
such as wind and solar. These contracts often have a long
term and provide the Group with a mechanism to ensure
the supply of green energy at fixed prices. When these
arrangements involve physical delivery of electricity and
are entered into for the purpose of receiving the energy
for the entity’s expected purchase, sale or usage
requirements (i.e. volume agreed does not exceed actual
and expected power needs), the contract is for “own use”
and is generally accounted for as power purchases or
sales when the underlying transactions take place.
m) Non-current assets held for sale
The Group classifies non-current assets and disposal
groups as held for sale if their carrying amounts will be
recovered principally through a sale transaction rather
than through continuing use. Non-current assets and
disposal groups classified as held for sale are measured at
the lower of their carrying amount and fair value less
costs to sell and are presented separately in the
statement of financial position as “Non-current assets and
disposal groups held for sale” and “Liabilities associated
with non-current assets and disposal groups held for
sale”. Once classified as held for sale property, plant and
equipment and intangible assets (including right-of-use
assets) are no longer depreciated or amortized.
The criteria for held for sale classification is regarded as
met only when the Group determines the sale to be highly
probable: management is committed to a decision to sell
and all actions required to complete the sale indicate that
it is unlikely that significant changes to the sale will be
made or that the decision will be withdrawn. In addition,
the asset or disposal group is available for immediate sale
in its present condition (subject only to terms that are
usual and customary for such transactions) and the sale is
expected to be completed within one year from the date
of the classification.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.23
n) Use of estimates
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. Accordingly, sensitivity analysis are
disclosed for the most relevant situations (see Notes 7
and 24).
Non-current assets and goodwill
The accounting treatment of investments in non-current
assets such as property, plant and equipment, intangible
assets and interests in associates and joint ventures,
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.
Also, upon the sale or contribution of a controlled
business to an associate or joint venture, the Group
measures and recognizes any retained interest at its fair
value. The fair value assigned to the retained investment
is determined on the basis of its business plan, including
significant judgments when considering significant
assumptions such as long-term OIBDA margin, long-term
capital expenditure ratio, discount rate and perpetuity
growth rate which would be significantly affected by the
future trends in the economic, competitive, regulatory
and technological environment.
The decision to recognize an impairment loss involves
developing estimates that include, among others, an
analysis of the causes of the potential impairment, as well
as its timing and expected amount. Furthermore,
additional factors, such as technological obsolescence,
the suspension of certain services and other
circumstantial changes, which highlight the need to
evaluate a possible impairment, are taken into account.
The Telefónica Group evaluates its cash-generating units’
performance on a regular basis to identify potential
impairments of goodwill and other non-current assets.
Determining the recoverable amount of the cash-
generating units also entails the use of assumptions and
estimates and requires a significant element of judgment.
Deferred income taxes
The Group assesses the recoverability of deferred tax
assets based on estimates of future earnings, and of all
the options available to achieve an outcome, it considers
the most efficient one in tax terms within the legal
framework the Group is subject to. Such recoverability
ultimately depends 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 that are continuously updated to
reflect the latest trends.
The recognition 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, the outcome of underway tax proceedings or
unforeseen future transactions that could affect tax
balances.
Provisions
Provisions are recorded when, at the end of the period,
we have a present obligation as a result of past events,
whose settlement requires an outflow of resources that is
considered probable and can be measured reliably. This
obligation may be legal or constructive, arising from, but
not limited to, regulation, contracts, common practice or
public commitments, which have created a valid
expectation for third parties that we will assume certain
responsibilities. The amount recorded is the best
estimation performed by the management in respect of
the expenditure that will be required to settle the
obligations, considering all the information available at the
closing date, including the advice of external experts,
such as legal advisors or consultants.
Should we be unable to reliably measure the obligation,
no provision would be recorded and information would
then be presented in the notes to the Consolidated
Financial Statements.
Because of the inherent uncertainties in this estimation,
actual expenditures may be different from the originally
estimated amount recognized.
Revenue recognition
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 revenues are allocated among
the identified elements based on their respective
standalone selling prices.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.24
Determining standalone selling prices for each identified
element requires estimates that are complex due to the
nature of the business.
A change in estimates of standalone selling prices could
affect the apportionment of revenue among the elements
and, as a result, the timing of recognition of revenues.
Leases
Accounting for rights and obligations as a lessee under a
lease contract requires the use of estimations to
determine the lease term in contracts that include
extension options or early termination options.
Determining the lease term involves making estimates
over the time horizon of the Group's strategic planning
process with respect to relevant factors such as expected
technological progress, possible regulatory
developments, market and competition trends or changes
in the business model. The assumptions regarding these
variables involve a significant degree of judgment to the
extent that the timing and nature of future changes are
difficult to anticipate.
Due to the uncertainties inherent to these estimates,
changes in the assumptions made in respect of uncertain
matters when determining the lease term of a lease
contract may have an impact on the amounts of the right
of use assets and lease liabilities recognized on the basis
of the estimates made by the Group.
o) New IFRS and interpretations of the
International Financial Reporting
Interpretations Committee (IFRIC)
The accounting policies applied in the preparation of the
consolidated financial statements for the year ended
December 31, 2023 are consistent with those used in the
preparation of the Group’s consolidated annual financial
statements for the year ended December 31, 2022, with
the exception of the following new standards and
amendments to existing standards issued by the IASB
and adopted by the European Union for application in
Europe, which are mandatory for annual periods
beginning on or after January 1, 2023.
The application of these amendments for the current
reporting period did not have a significant impact on the
consolidated financial statements of the Group. The
Group did not have to change its accounting policies or
make retrospective adjustments as a result of adopting
these new pronouncements.
IFRS 17: Insurance contracts
IFRS 17 Insurance Contracts is a comprehensive new
accounting standard for insurance contracts covering
recognition and measurement, presentation and
disclosure. Applies to all types of insurance contracts (i.e.,
life, non-life, direct insurance and reinsurance), regardless
of the type of entities that issue them, as well as to certain
guarantees and financial instruments with discretionary
participation features. The overall objective of IFRS 17 is to
provide an accounting model for insurance contracts that
is more useful and consistent for insurers, covering all
relevant accounting aspects.
Given the nature of the Group’s core business, the
adoption of IFRS 17 did not have a significant impact on
the Group’s consolidated equity at the date of transition
to the new requirements (less than 1 million euros as of
January 1, 2023). At the transition date, the balances of
insurance and reinsurance contract assets and liabilities
have been reclassified from receivables (payables) to
specific line items within other current assets (liabilities)
amounting to 132 million euros and 197 million euros,
respectively (see Notes 14 and 22).
The Group has considered the disclosures required by the
new standard in preparing the annual consolidated
financial information.
Amendments to IAS 12: Deferred Tax related to
Assets and Liabilities arising from a Single
Transaction
These amendments narrow the scope of the initial
recognition exception, so that it does not apply to
transactions that, on initial recognition, give rise to equal
taxable and deductible temporary differences.
The application of these requirements for the current
reporting period did not have a significant impact on the
annual consolidated financial statements of the Group.
Amendments to IAS 12: International Tax Reform
– Pillar Two Model Rules
The amendments give companies temporary relief from
accounting for deferred taxes arising from jurisdictions
implementing the OECD international tax reform, and
include targeted disclosure requirements to help
investors better understand an entity’s exposure to
income taxes arising from the reform, particularly before
local legislation that regulates said taxes enters into force.
At the date of authorization for issue of these
consolidated annual financial statements, the legislation
implementing the Pillar Two rules was not yet effective in
Spain. The Group has used this exception not to
recognize and disclose information about deferred tax
assets and liabilities related to the ongoing tax reform.
Also, in preparing the annual consolidated information,
the Group has taken into consideration the disclosures on
possible impacts derived from the application of the Pillar
Two rules, which are included in Note 25.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.25
Amendments to IAS 8 – Definition of
Accounting Estimates
These amendments clarify the distinction between
changes in accounting estimates, and changes in
accounting policies and the correction of errors. They also
clarify how entities use measurement techniques and
inputs to develop accounting estimates. The distinction
between accounting estimates and accounting policies is
important because changes in accounting estimates are
applied prospectively to future transactions and events,
whereas changes in accounting policies are generally
applied retrospectively.
The Group's practice is consistent with these criteria and
therefore these amendments had no impact on the
Group’s annual consolidated financial statements.
Amendments to IAS 1 and Practice Statement 2 –
Disclosure of Accounting Policies
These amendments provide guidance and examples on
how to apply the concept of materiality to accounting
policy disclosures, the amendments require entities to
disclose their "material" rather than their "significant"
accounting policies.
The amendments have been considered in preparing the
Group’s annual consolidated financial statements.
New standards and amendments to standards
issued but not effective as of December 31,
2023.
At the date of preparation of the consolidated financial
statements, the following amendments to existing
standards had been published, but their application is not
mandatory:

Standards and amendments | Mandatory application: annual periods beginning on or after
Amendments to IAS 1 | Classification of Liabilities as Current or Non-current | January 1, 2024
Amendments to IAS 1 | Non-current Liabilities with Covenants | January 1, 2024
Amendments to IFRS 16 | Lease Liability in a Sale and Leaseback | January 1, 2024
Amendments to IAS 7 and IFRS 7 | Supplier Finance Arrangements | January 1, 2024
Amendments to IAS 21 | Lack of Exchangeability | January 1, 2025

Based on the assessment performed to date, the Group
estimates that the adoption of these new
pronouncements will not have a significant impact on the
consolidated financial statements in the initial period of
application.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.26
Note 4. Segment information
In 2023 the Telefónica Group is reporting financial
information, both internally and externally, according to
the following segments: Telefónica Spain, VMO2
(recorded by the equity method), Telefónica Germany,
Telefónica Brazil and Telefónica Hispam (formed by the
Group's operators in Colombia, Mexico, Venezuela,
Ecuador, Argentina, Chile, Peru and Uruguay).
During 2021, compared to 2020, the Telefónica Group
changed its reporting segments as follows:
(i) On June 1, 2021, upon the establishment of the VMO2
joint venture (whose results are accounted for under the
equity method), the former Telefónica United Kingdom
segment was replaced by the new VMO2 segment (see
notes 2 and 10). The 2021 results include the
consolidation of Telefónica United Kingdom from January
1 to June 1, and the equity accounting of 50% of the net
result of VMO2 from June 1 to December 31 (see Note 10).
The gain registered on the establishment of VMO2,
amounting to 4,460 million euros (see notes 2 and 26), are
recorded in "Other companies".
(ii) The Telxius Group ceased to be a reporting segment
as a result of the sale of the telecommunications towers
divisions in Europe and Latin America (see Note 2). The
Telxius Group’s results as well as the gain obtained for the
sale of the telecommunications towers divisions,
amounting to 6,099 million euros (see notes 2 and 26),
were recorded in "Other companies".
The impairment loss on goodwill of Telefónica Ecuador in
2023 (see Note 7) and of Telefónica del Perú in 2021, as
well as, the impairment losses on other assets of
Telefonica Argentina in 2022 (see notes 6 and 8), are
included in the Telefónica Hispam segment.
The segments referred to above include the information
relating to the fixed, mobile, cable, data, internet,
television and other digital services businesses provided
in each country. Intersegment transactions are carried out
as if on an arm's length basis.
Information relating to other Group companies not
specifically included in these segments is reported under
"Other companies" (see Appendix I), which includes
Telefónica, S.A. and other holding companies, as well as
companies whose main purpose is to provide cross-
sectional services to Group companies and other
operations not included in the segments. The Incremental
Group and BE-terna Group, acquired in 2022, and
Cancom Group, acquired in 2021 (see Note 5), are
reported within "Other companies". "Other companies"
also includes the share of results of investments
accounted for by the equity method corresponding to the
fiber optic companies in which Telefónica Infra, S.L. has
ownership interests (see Note 10).
The Group centrally manages borrowing activities, mainly
through Telefónica, S.A. and other companies (see Note
19, Appendix III and Appendix V), so most of the Group's
financial assets and liabilities are reported under Other
companies. In addition, Telefónica, S.A. is the head of the
Telefónica tax group in Spain (see Note 25). Therefore, a
significant part of the deferred tax assets and liabilities is
included under Other companies. For these reasons, the
results of the segments are disclosed through operating
income.
Revenues and expenses arising from intra-group
invoicing for the use of the trademark and management
services were eliminated from the operating results of
each Group segment. The results of the holding
companies also exclude dividends from Group companies
and impairments of investments in Group companies.
These adjustments have no impact on the Group’s
consolidated results. In addition, segment reporting
considers the impact of the purchase price allocation to
the assets acquired and the liabilities assumed by the
companies included in each segment. The assets and
liabilities presented in each segment are those managed
by the heads of each segment, regardless of their legal
structure.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.27
The following table presents income, CapEx information (capital expenditures in intangible assets and property, plant and equipment, see Notes 6 and 8) and acquisitions of rights of
use (see Note 9) regarding the Group’s operating segments:

2023
Millions of euros | Telefónica Spain | VMO2 | Telefónica Germany | Telefónica Brazil | Telefónica Hispam | Other companies | Eliminations | Total Group
Revenues | 12,654 | — | 8,614 | 9,650 | 8,381 | 3,553 | (2,200) | 40,652
External revenues | 12,350 | — | 8,585 | 9,637 | 8,284 | 1,790 | 6 | 40,652
Intersegment revenues | 304 | — | 29 | 13 | 97 | 1,763 | (2,206) | —
Other operating income and expenses(1) | (9,425) | — | (5,974) | (5,522) | (6,871) | (3,598) | 2,128 | (29,262)
OIBDA | 3,229 | — | 2,640 | 4,128 | 1,510 | (45) | (72) | 11,390
Depreciation and amortization | (2,200) | — | (2,323) | (2,511) | (1,557) | (244) | 38 | (8,797)
Operating income | 1,029 | — | 317 | 1,617 | (47) | (289) | (34) | 2,593
Share of (loss) income of investments accounted for by the equity method | (23) | (2,030) | — | — | (3) | (106) | — | (2,162)
CapEx | 1,607 | — | 1,133 | 1,671 | 938 | 230 | — | 5,579
Acquisitions of rights of use | 575 | — | 624 | 815 | 387 | 48 | (58) | 2,391
(1) Other operating income and expenses includes “Other income”, “Supplies”, “Personnel expenses” and “Other expenses”.

2022
Millions of euros | Telefónica Spain | VMO2 | Telefónica Germany | Telefónica Brazil | Telefónica Hispam | Other companies | Eliminations | Total Group
Revenues | 12,497 | — | 8,224 | 8,870 | 9,141 | 3,243 | (1,982) | 39,993
External revenues | 12,224 | — | 8,195 | 8,854 | 9,026 | 1,685 | 9 | 39,993
Intersegment revenues | 273 | — | 29 | 16 | 115 | 1,558 | (1,991) | —
Other operating income and expenses(1) | (7,909) | — | (5,666) | (5,138) | (7,183) | (3,149) | 1,904 | (27,141)
OIBDA | 4,588 | — | 2,558 | 3,732 | 1,958 | 94 | (78) | 12,852
Depreciation and amortization | (2,157) | — | (2,295) | (2,369) | (1,799) | (218) | 42 | (8,796)
Operating income | 2,431 | — | 263 | 1,363 | 159 | (124) | (36) | 4,056
Share of income (loss) of investments accounted for by the equity method | (15) | 292 | — | — | (19) | (41) | — | 217
CapEx | 1,550 | — | 1,209 | 1,795 | 1,058 | 212 | (5) | 5,819
Acquisitions of rights of use | 724 | — | 594 | 596 | 514 | 17 | 3 | 2,448
(1)Other operating income and expenses includes “Other income”, “Supplies”, “Personnel expenses” and “Other expenses”.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.28

2021 |
Millions of euros | Telefónica Spain | Telefónica United Kingdom | VMO2 | Telefónica Germany | Telefónica Brazil | Telefónica Hispam | Other companies | Eliminations | Total Group
Revenues | 12,417 | 2,628 | — | 7,765 | 6,910 | 8,362 | 3,059 | (1,864) | 39,277
External revenues | 12,156 | 2,609 | — | 7,738 | 6,897 | 8,258 | 1,628 | (9) | 39,277
Intersegment revenues | 261 | 19 | — | 27 | 13 | 104 | 1,431 | (1,855) | —
Other operating income and expenses(1) | (9,040) | (1,709) | — | (5,341) | (3,772) | (6,644) | 7,589 | 1,623 | (17,294)
OIBDA | 3,377 | 919 | — | 2,424 | 3,138 | 1,718 | 10,648 | (241) | 21,983
Depreciation and amortization | (2,153) | — | — | (2,394) | (1,918) | (1,873) | (356) | 297 | (8,397)
Operating income | 1,224 | 919 | — | 30 | 1,220 | (155) | 10,292 | 56 | 13,586
Share of (loss) income of investments accounted for by the equity method | (2) | — | (103) | — | — | (6) | (16) | — | (127)
CapEx | 1,815 | 933 | — | 1,284 | 2,069 | 978 | 206 | (18) | 7,267
Acquisitions of rights of use (2) | 482 | 389 | — | 833 | 489 | 387 | 113 | (254) | 2,439
(1)Other operating income and expenses includes “Other income”, “Supplies”, “Personnel expenses” and “Other expenses”. |
(2) Additionally, rights of use in the amount of 2,633 million euros have been recorded in 2021 following the sale of the tower division of Telxius. |

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.29
The table below shows the income, CapEx and acquisitions of rights of use of VMED O2 UK (VMO2) in 2023 and 2022 (see Note 2). VMO2 is a joint venture 50% owned by Telefónica
and Liberty Global and is recorded under the equity method (see Note 10). The tables below show the information of the joint venture at 100% and the reconciliation with the
Telefónica Group's share of income (loss) accounted for by the equity method.

VMO2 |  |  |
Millions of euros | January-December 2023 | January-December 2022 | June - December 2021
Revenues | 12,547 | 12,155 | 7,223
Other operating income and expenses | (8,116) | (7,754) | (4,773)
Impairment losses in goodwill | (3,572) | — | —
OIBDA | 859 | 4,401 | 2,450
Depreciation and amortization | (3,685) | (4,170) | (2,395)
Operating income | (2,826) | 231 | 55
Share of income (loss) of investments accounted for by the equity method | 2 | 1 | —
Financial income | 55 | 24 | 27
Financial expenses | (1,436) | (1,020) | (504)
Realised and unrealised gains on derivative instruments, net | (924) | 2,567 | 489
Foreign currency transaction losses, net | 677 | (1,296) | (367)
Net financial expense | (1,628) | 275 | (355)
Result before taxation | (4,452) | 507 | (300)
Income tax | 265 | (15) | 65
Result for the period (100% VMO2) | (4,187) | 492 | (235)
50% attributable to Telefónica Group | (2,094) | 246 | (117)
Share-based compensation | 8 | 14 | 14
Sale of minority stake in Cornerstone | 76 | — | —
Other adjustments | (20) | 32 | —
Share of (loss) income of investments accounted for by the equity method | (2,030) | 292 | (103)
Capital expenditures (CapEx) | 2,408 | 2,707 | 1,508
Acquisitions of rights of use | 135 | 118 | 75

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.30
The following table presents main assets and liabilities by segment:

2023
Millions of euros | Telefónica Spain | VMO2 | Telefónica Germany | Telefónica Brazil | Telefónica Hispam | Other companies | Eliminations | Total Group
Fixed assets | 14,186 | — | 11,114 | 18,749 | 6,742 | 2,243 | (12) | 53,022
Rights of use | 1,771 | — | 3,203 | 2,258 | 1,179 | 111 | (74) | 8,448
Investments accounted for by the equity method | 233 | 7,774 | — | 3 | 219 | 361 | — | 8,590
Financial assets and other non-currents assets | 1,058 | — | 962 | 1,054 | 1,374 | 7,384 | (4,564) | 7,268
Deferred tax assets | 2,676 | — | 538 | 406 | 738 | 1,882 | — | 6,240
Other current financial assets | 36 | — | 10 | 55 | 272 | 3,660 | (2,955) | 1,078
Non-current assets and disposal groups held for sale | — | — | — | — | 273 | — | — | 273
Total allocated assets | 27,119 | 7,774 | 18,565 | 26,114 | 15,019 | 23,096 | (13,363) | 104,324
Non-current financial liabilities | 695 | — | 1,235 | 688 | 6,164 | 28,948 | (4,370) | 33,360
Non-current lease liabilities | 1,223 | — | 2,559 | 1,817 | 1,111 | 44 | (46) | 6,708
Deferred tax liabilities | 82 | — | 254 | 927 | 601 | 838 | — | 2,702
Current financial liabilities | 1,458 | — | 286 | 48 | 768 | 6,960 | (5,819) | 3,701
Current lease liabilities | 486 | — | 555 | 725 | 476 | 20 | (23) | 2,239
Liabilities associated with non-current assets and disposal groups held for sale | — | — | — | — | 37 | — | — | 37
Total allocated liabilities | 16,869 | — | 9,937 | 9,837 | 13,720 | 40,159 | (13,294) | 77,228

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.31

2022
Millions of euros | Telefónica Spain | VMO2 | Telefónica Germany | Telefónica Brazil | Telefónica Hispam | Other companies | Eliminations | Total Group
Fixed assets | 14,285 | — | 11,602 | 18,217 | 7,870 | 2,237 | (9) | 54,202
Rights of use | 1,722 | — | 3,277 | 2,048 | 1,169 | 100 | (37) | 8,279
Investments accounted for by the equity method | 252 | 10,779 | — | — | 146 | 410 | — | 11,587
Financial assets and other non-currents assets | 875 | — | 992 | 984 | 1,578 | 6,082 | (2,410) | 8,101
Deferred tax assets | 2,395 | — | 463 | 485 | 612 | 929 | — | 4,884
Other current financial assets | 32 | — | 34 | 162 | 222 | 7,435 | (5,441) | 2,444
Non-current assets and disposal groups held for sale | — | — | — | — | — | 7 | — | 7
Total allocated assets | 27,917 | 10,779 | 19,142 | 24,875 | 15,951 | 26,288 | (15,310) | 109,642
Non-current financial liabilities | 2,089 | — | 1,510 | 653 | 2,502 | 30,425 | (2,120) | 35,059
Non-current lease liabilities | 1,317 | — | 2,663 | 1,531 | 1,115 | 45 | (14) | 6,657
Deferred tax liabilities | 95 | — | 274 | 1,032 | 744 | 922 | — | 3,067
Current financial liabilities | 1,840 | — | 128 | 350 | 4,120 | 8,449 | (10,867) | 4,020
Current lease liabilities | 392 | — | 597 | 629 | 402 | 19 | (19) | 2,020
Liabilities associated with non-current assets and disposal groups held for sale | — | — | — | — | — | — | — | —
Total allocated liabilities | 16,782 | — | 10,246 | 9,437 | 13,861 | 42,869 | (15,261) | 77,934

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.32
The detail of assets and liabilities of VMO2 is as follows (amounts corresponding to 100%
of the company, see Note 10):

VMO2
Millions of euros | December 2023 | December 2022
Fixed assets | 38,817 | 42,576
Rights of use | 773 | 862
Financial assets and other non-currents assets | 1,741 | 2,763
Deferred tax assets | 366 | 79
Other current financial assets | 569 | 511
Total assets | 46,455 | 50,062
Non-current financial liabilities | 21,061 | 19,668
Non-current lease liabilities | 663 | 725
Deferred tax liabilities | 1 | 1
Current financial liabilities | 4,165 | 3,248
Current lease liabilities | 201 | 221
Total liabilities | 30,727 | 28,626

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.33
The composition of segment revenues is as follows:

Millions of euros | 2023 |  | 2022 |  | 2021
Country by segments | Fixed | Mobile | Others and elims. | Total |  | Fixed | Mobile | Others and elims. | Total |  | Fixed | Mobile | Others and elims. | Total
Spain (*) |  |  |  | 12,654 |  |  |  |  | 12,497 |  |  |  |  | 12,417
United Kingdom |  |  |  | — |  |  |  |  | — |  | 96 | 2,532 | — | 2,628
Germany | 827 | 7,767 | 20 | 8,614 |  | 806 | 7,394 | 24 | 8,224 |  | 814 | 6,942 | 9 | 7,765
Brazil | 2,858 | 6,792 | — | 9,650 |  | 2,764 | 6,106 | — | 8,870 |  | 2,300 | 4,610 | — | 6,910
Hispam | 2,888 | 5,493 | — | 8,381 |  | 3,138 | 6,003 | — | 9,141 |  | 2,907 | 5,444 | 11 | 8,362
Other and inter-segment eliminations |  |  | 1,353 | 1,353 |  |  |  | 1,261 | 1,261 |  |  |  | 1,195 | 1,195
Total Group |  |  |  | 40,652 |  |  |  |  | 39,993 |  |  |  |  | 39,277

Note: In the countries of Telefónica Hispam segment with separate fixed and mobile operating companies, intercompany revenues were not considered.
(*) The detail of revenues for Telefónica Spain is shown in the table below.
Given the convergence reached at Telefónica Spain due to the high penetration of
convergent offers in Telefónica Spain, the revenue breakdown by fixed and mobile is less
relevant in this segment. For this reason, management believes that the revenue
breakdown shown below is more meaningful.

Millions of euros |  |  |
Telefónica Spain | 2023 | 2022 | 2021
Retailers | 9,872 | 9,662 | 9,699
Wholesalers, mobile handsets sales and others | 2,782 | 2,835 | 2,718
Total | 12,654 | 12,497 | 12,417

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.34
Note 5. Business combinations
2023
During 2023, no significant business combinations have
taken place.
2022
Acquisition of mobile assets of Oi Group
On April 20, 2022, the closing of the transaction related to
the Purchase Agreement for Acquisition of UPI Mobile
Assets of Oi Group took place, and Telefónica Brasil
acquired, on such date, all the shares of the company
Garliava RJ Infraestrutura e Redes de Telecomunicações
S.A. (Garliava), to which the mobile assets of Oi Group
assigned to Telefónica Brasil had been contributed, under
the segregation plan stated in the Oi Agreement (see
Note 29).
The mobile assets of Oi Group finally assigned to
Telefónica Brasil were the following:
• Customers: approximately 12.5 million (equivalent to
30% of the total customer base of the mobile assets of
Oi Group) – according to ANATEL’s February 2022 data;
• Spectrum: 43 MHz as national population-weighted
average (46% of the radiofrequency of the mobile
assets of Oi Group); and
• Infrastructure: contracts for the use of approximately
2.7 thousand sites of mobile access (corresponding to
19% of the sites of the mobile assets of Oi Group).
On the date of approval of the consolidated financial
statements for the year 2022, the Company had
concluded the report for the allocation of the purchase
price. The following table presents the consideration, the
fair value of the identifiable assets and the liabilities
assumed at the acquisition date and the goodwill:

Millions of euros |
Consideration | 1,093
Intangible assets | 539
Licenses | 520
Customer relationships | 19
Property, plant and equipment | 29
Rights of use | 105
Deferred tax assets | 44
Trade receivables | 74
Other assets | 30
Cash and cash equivalents | 13
Lease liabilities | (117)
Trade payables | (24)
Provisions | (221)
Other liabilities | (55)
Fair value of net assets | 417
Goodwill (Note 7) | 676

The fair value of the licenses was determined using the
discounted cash flow method of the Income Approach,
which considers the earning capacity of the asset. The
amortization period of the licenses ranges from 5 to 15
years (average period of 10.08 years).
The fair value of trade receivables amounted to 74 million
euros, which did not differ from the book value consisting
of a gross amount of 81 million euros, net of estimated
impairment losses of 7 million euros.
At the acquisition date, contingent liabilities were
recognized at fair value in the amount of 90 million euros.
The contribution of Garliava since its inclusion in the
scope of consolidation and until December 31, 2022 was
206 million euros in revenues and 1 million euros in profit
for the period. The information was only available since
the mobile assets of Oi assigned to Telefónica Brasil were
contributed to Garliava. Consequently, it was not
practicable to calculate these impacts as if the
transaction had taken place on January 1, 2022.
On October 3, 2022, Telefónica Brasil, together with Claro
S.A. and TIM S.A., started an arbitration procedure against
the Seller (see Note 29.c). The Buyers made a judicial
deposit of the amount withheld from the updated
purchase price (see Note 15), until the dispute arising from
the price adjustment was resolved by arbitration,
corresponding to Telefónica Brazil an amount of 522

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.35
million reais at December 31, 2022 (approximately 94
million euros).
In October 2023, the arbitration proceeding between the
parties ended (see Note 29.c), resulting on a final price the
for the UPI Mobile Assets assigned to Telefónica Brasil of
5,129 million Brazilian reais as of the closing date
(compared to the 5,373 million Brazilian reais of the initial
price, see Note 2). As a result, 50% of the retained amount
(488 million reais), plus applicable interest was offset
against the amount allocated as debt and the other 50%,
in the updated amount of 277 million reais (51 million euros
at such date), was withdrawn by Telefónica Brasil before
the Arbitration Chamber.
The post-closing price adjustment occurred during the
second half of 2023, after the measurement period of the
purchase price allocation process. Therefore, the impact
generated by the post-closing price adjustment was
recorded in the 2023 income statement, with no changes
in the goodwill recorded as of December 31, 2022.
Acquisition of Incremental
On March 21, 2022, Telefónica Tech UK & Ireland, Ltd
completed the acquisition of 100% of the shares of the
British group Perpetual TopCo, Limited and affiliates
(Incremental), one of Microsoft's fastest-growing business
partners in the UK, for a 104 million euros consideration
(including potential contingent payments linked to its
future performance). In addition, at the closing of the
transaction a payment was made in the amount of 91
million euros to cancel payment obligations of the
acquired companies. At the date of preparation of the
consolidated financial statements for the year 2022, the
purchase price allocation was provisional. In 2023, the
preliminary allocation was reviewed within the twelve-
month period from the acquisition date, without any
change in the fair value of the assets and liabilities
acquired.
The following table presents the consideration, the fair
value of assets and liabilities identified at the acquisition
date and the final goodwill:

Millions of euros |
Share purchase price | 104
Payment obligations cancelled | 91
Total | 195
Intangible assets | 24
Customer relationships | 23
Other intangible assets | 1
Property, plant and equipment | 1
Rights of use | 1
Accounts receivable | 11
Other assets | 1
Cash and cash equivalents | 9
Lease liabilities | (2)
Accounts payable | (3)
Deferred tax liabilities | (6)
Other liabilities | (11)
Fair value of net assets | 25
Goodwill (Note 7) | 170

The contribution of Incremental to the profit for the year
2022, after the impact of the amortization of the assets
identified in the purchase price allocation, was a 1 million
euro profit.
Acquisition of BE-terna
On June 9, 2022, Telefónica Cybersecurity & Cloud Tech,
S.L.U. completed the acquisition of 100% of the shares of
the German group BE-terna Acceleration Holding GmbH
and affiliates ("BE-terna Group"), for a 191 million euros
consideration (including potential contingent payments
linked to its future performance). In addition, at the
closing of the transaction a payment was made in the
amount of 162 million euros to cancel payment obligations
of the acquired companies.
At the date of preparation of the consolidated financial
statements for the year 2022, the purchase price
allocation was provisional. In 2023, the preliminary
allocation was reviewed within the twelve-month period
from the acquisition date, resulting in a 3 million euro
increase in goodwill.
The following table presents the consideration, the fair
value of assets and liabilities identified at the acquisition
date and the final goodwill:

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.36

Millions of euros |
Share purchase price | 191
Payment obligations cancelled | 162
Total | 353
Intangible assets | 73
Customer relationships | 53
Other intangible assets | 20
Property, plant and equipment | 6
Right of use | 5
Accounts receivable | 19
Other assets | 12
Cash and cash equivalents | 17
Lease liabilities | (5)
Trade payables | (9)
Deferred tax liabilities | (20)
Current tax payables | (6)
Other liabilities | (21)
Fair value of net assets | 71
Goodwill (Note 7) | 282

The contribution of BE-terna Group to the profit for the
year 2022, after the impact of the amortization of the
assets identified in the purchase price allocation, was a 3
million euros loss.
2021
Acquisition of Cancom
On July 29, 2021, Telefónica Cybersecurity & Cloud Tech,
S.L.U. reached an agreement with Cancom Group for the
acquisition of 100% of the shares of the British company
Cancom Ltd.
Cancom Ltd (currently called Telefónica Tech UK &
Ireland Ltd.) is a company that provides end-to-end
advanced cloud and cybersecurity services in the United
Kingdom and Ireland.
The following table presents the transaction, fair value of
assets and liabilities identified at the acquisition moment,
and the goodwill generated:

Millions of euros |
Enterprise value | 398
Adjustments of debt and cash | (127)
Consideration (share purchase price) | 271
Intangible assets | 108
Customer relationships | 107
Other intangible assets | 1
Property, plant and equipment | 15
Rights of use | 8
Other non-current assets | 6
Other current assets | 45
Deferred tax assets | 2
Cash and cash equivalents | 19
Deferred tax liabilities | (27)
Other non-current liabilities | (140)
Other current liabilities | (49)
Fair value of net assets | (13)
Goodwill (Note 7) | 284

In addition, at the closing of the transaction a payment
was made in the amount of 122 million euros to cancel
accounts payable of the acquired companies to Cancom
Group.
The contribution of Cancom Ltd to the profit for the year
2021, after the impact of the amortization of the assets
identified in the purchase price allocation, was a 4 million
euros loss.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.37
Note 6. Intangible assets
The composition of and movements in net intangible
assets in 2023 and 2022 are as follows:

2023 |  |  |  |  |  |  |  |  |
Millions of euros | Balance at 12/31/2022 | Additions | Amorti- zation | Dispo- sals | Impair- ments | Transfers and others | Translation differences and hyperinflation adjustments | Business combi- nations | Balance at 12/31/2023
Service concession arrangements and licenses | 7,550 | 183 | (840) | — | — | 2 | (9) | — | 6,886
Software | 2,800 | 486 | (1,356) | (1) | — | 1,122 | 38 | — | 3,089
Customer base | 721 | — | (333) | — | — | (3) | 4 | (3) | 386
Trademarks | 263 | — | (33) | — | — | — | 5 | — | 235
Other intangible assets | 39 | 20 | (21) | — | (2) | 5 | 2 | 15 | 58
Intangible assets in process | 644 | 1,149 | — | (1) | — | (1,076) | — | — | 716
Total intangible assets | 12,017 | 1,838 | (2,583) | (2) | (2) | 50 | 40 | 12 | 11,370

2022 |  |  |  |  |  |  |  |  |
Millions of euros | Balance at 12/31/2021 | Additions | Amortiz ation | Dispos als | Impair- ments | Transfers and others | Translation differences and hyperinflation adjustments | Business combi- nations | Balance at 12/31/2022
Service concession arrangements and licenses | 7,328 | 173 | (844) | — | (19) | — | 392 | 520 | 7,550
Software | 2,494 | 495 | (1,337) | — | (2) | 1,011 | 119 | 20 | 2,800
Customer base | 971 | — | (356) | — | — | 1 | — | 105 | 721
Trademarks | 276 | — | (34) | — | — | 1 | 18 | 2 | 263
Other intangible assets | 42 | 22 | (28) | (4) | (2) | 9 | — | — | 39
Intangible assets in process | 614 | 840 | — | — | (8) | (818) | 16 | — | 644
Total intangible assets | 11,725 | 1,530 | (2,599) | (4) | (31) | 204 | 545 | 647 | 12,017

Additions of spectrum in 2023 amounted to 183 million
euros (173 million euros in 2022 ).
In 2023 Telefónica Hispam, spectrum acquisitions stand
out in Argentina for 109 million euros in the 3.5 GHz band,
in Ecuador for 18 million euros and in Uruguay for 24
million euros.
In 2022 15 MHz of spectrum in the 1900 MHz band was
renewed in Colombia for an amount of 125 million euros.
The amount pending payment is detailed in Notes 21 and
22.
In 2022 Telefónica Brazil renewed spectrum in the 850
MHz band for an amount of 35 million euros. The amount
pending payment is detailed in Notes 21 and 22.
"Impairments" in 2022 included an impairment loss
related to licenses and software of Telefónica Argentina,
amounting to 21 million euros.
"Business combinations” in 2022 corresponded mainly to
the acquisition of the intangible assets of Oi, the
Incremental Group and the BE-terna Group amounting to
539, 24 and 77 million euros (see Note 5), respectively.
Appendix VI contains the details of the main concessions
and licenses which the Group operates.
The effect of the translation into euros of the intangible
assets of the Group's companies in Argentina and
Venezuela, together with the effect of the hyperinflation
adjustments (see Note 3.a), is shown in the column
"Translation differences and hyperinflation adjustments".

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.38
The gross cost, accumulated amortization and impairment
losses of intangible assets at December 31, 2023 and
2022 are as follows:

Balance at December 31, 2023
Millions of euros | Gross cost | Accumulated amortization | Impairment losses | Intangible assets
Service concession arrangements and licenses | 16,056 | (9,061) | (109) | 6,886
Software | 17,851 | (14,753) | (9) | 3,089
Customer base | 4,166 | (3,780) | — | 386
Trademarks | 958 | (723) | — | 235
Other intangible assets | 867 | (805) | (4) | 58
Intangible assets in process | 724 | — | (8) | 716
Total intangible assets | 40,622 | (29,122) | (130) | 11,370

Balance at December 31, 2022
Millions of euros | Gross cost | Accumulated amortization | Impairment losses | Intangible assets
Service concession arrangements and licenses | 15,837 | (8,123) | (164) | 7,550
Software | 17,158 | (14,344) | (14) | 2,800
Customer base | 5,089 | (4,368) | — | 721
Trademarks | 944 | (681) | — | 263
Other intangible assets | 870 | (829) | (2) | 39
Intangible assets in process | 652 | — | (8) | 644
Total intangible assets | 40,550 | (28,345) | (188) | 12,017

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.39
Note 7. Goodwill
Movement in goodwill
The movement in goodwill assigned to each Group
segment was as follows:

2023
Millions of euros | Balance at 12/31/2022 | Additions | Disposals | Write-offs | Transfers | Exchange rate impact | Balance at 12/31/2023
Telefónica Spain | 4,291 | — | — | — | — | — | 4,291
Telefónica Brazil | 7,752 | 5 | — | — | — | 319 | 8,076
Telefónica Germany | 4,386 | — | — | — | — | — | 4,386
Telefónica Hispam | 1,215 | — | — | (58) | (36) | (13) | 1,108
Others | 827 | 11 | — | — | — | 9 | 847
Total | 18,471 | 16 | — | (58) | (36) | 315 | 18,708

2022
Millions of euros | Balance at 12/31/2021 | Additions | Disposals | Write-offs | Transfers | Exchange rate impact | Balance at 12/31/2022
Telefónica Spain | 4,291 | — | — | — | — | — | 4,291
Telefónica Brazil | 6,278 | 695 | — | — | — | 779 | 7,752
Telefónica Germany | 4,386 | — | — | — | — | — | 4,386
Telefónica Hispam | 1,166 | — | — | — | — | 49 | 1,215
Others | 398 | 457 | — | — | (5) | (23) | 827
Total | 16,519 | 1,152 | — | — | (5) | 805 | 18,471

In 2023, an impairment of goodwill assigned to the cash-
generating unit in Ecuador was recorded, amounting to
58 million euros, with a counterpart to Other expenses
(see Note 26).
On July 6, 2023, Telefónica Hispanoamérica, S.A. entered
into share subscription agreements with the group
Kohlberg Kravis Roberts – KKR & Co, Inc. and Entel Perú
S.A., for the entry of both companies, with 54% and 10%,
respectively, into the share capital of Pangeaco, S.A.C.,
the wholesale fiber-to-the-home (“FTTH”) company in
Peru, maintaining Telefónica Hispam 36% of the shares of
said company. As part of the transaction Telefónica del
Perú S.A.A. and Entel Perú will sell to Pangeaco certain
assets of their FTTH infrastructure.
The amount in transfers of Telefónica Hispam in 2023
corresponds to the estimation of goodwill of the cash
generating unit Telefónica del Perú allocated to this
agreement, which has been reclassified to "Non-current
assets and disposal groups held for sale" (see Note 30).
Additions of Telefónica Brazil in 2022 mainly
corresponded to the goodwill from the acquisition of the
assets of the mobile business of Oi Group (see notes 2
and 5).
Additions in 2022 also included the preliminary goodwill
from the acquisitions of Incremental and BE-terna,
amounting to 170 million euros and 279 million euros,
respectively. The allocation of the purchase price of these
transactions was concluded in 2023 (see Note 5).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.40
Cash-generating units
In order to test for impairment, goodwill was allocated to
the different cash-generating units (CGUs), which are
grouped into the following reportable operating
segments:

Millions of euros | 12/31/2023 | 12/31/2022
Telefónica Spain | 4,291 | 4,291
Telefónica Brazil | 8,076 | 7,752
Telefónica Germany | 4,386 | 4,386
Telefónica Hispam | 1,108 | 1,215
Colombia | 164 | 135
Ecuador | 75 | 137
Chile | 615 | 652
Peru | 229 | 265
Uruguay | 23 | 23
Others T. Hispam | 2 | 3
Other companies | 847 | 827
Telefónica Tech UK & Ireland | 438 | 429
BE-terna | 282 | 279
Others | 127 | 119
TOTAL | 18,708 | 18,471

Goodwill is tested for impairment at the end of the year
using the business plans of the cash-generating units to
which the goodwill is assigned, approved by the Board of
Directors of Telefónica.
The business plan covers a four-year period, including the
closing year. In order to complete the five years of cash
flows after the closing year, an additional normalization
period is added to the business plans on the operating
ratios until the terminal parameters are reached. The
consensus' forecasts are used as a reference. For specific
cases, extended business plans are used to cover the
five-year period of cash flows, when the normalization
period does not properly reflect the expected evolution of
the business.
Finally, to determine the terminal value of each CGU, a
constant free cash flows growth over time is assumed,
applying a terminal growth rate. The model used is similar
to the dividend discount model developed by Gordon-
Shapiro, internationally recognized for business
valuations.
The process of preparing the CGUs’ business plans
considers the current market condition of each CGU,
analyzing the macroeconomic, competitive, regulatory
and technological environments, as well as the growth
opportunities of the CGUs, and the differentiation
capabilities compared to the competition based on
market projections. A growth target is therefore defined
for each CGU, based on the appropriate allocation of
operating resources and the capital investments required
to achieve the target. In addition, operating efficiency
improvements are defined, in line with the strategic
transformation initiatives, in order to increase the
forecasted operating cash flow. In this process, the Group
considers the compliance with business plans in the past.
Main assumptions used in calculating
value in use
CGUs’ value in use are calculated based on the approved
business plans. Certain variables are then considered,
including the long-term OIBDA margin and the long-term
Capital Expenditure ratio (expressed as a percentage of
revenue), which are considered the key operating
variables to measure business performance and to set
financial targets. Finally, the discount rates and the
perpetuity growth rates are considered.
The main variables considered for the most significant
CGUs (T. Brazil, T. Spain, and T. Germany) are described
below.
Revenues
In terms of revenues, the four-year plan reflects a trend of
stability or improvement.
OIBDA margin and long-term Capital
Expenditure (CapEx) ratio
The values obtained, as described in the previous
paragraphs, are compared with the available data of
analysts and competitors in the geographic markets
where the Telefónica Group operates.
In Europe, the long-term OIBDA margins three -year
estimates of Telefónica Group's analysts are within a
range of 35% to 39% for Spain and 26% to 31% for
Germany.
In relation to the long-term ratio of CapEx over revenues
in the valuations performed for the impairment tests for
Spain and Germany, the ratios are within the range
estimated by the Telefónica Group’s analysts in terms of
investment needs (range between 10% and 12% for Spain
and between 11% and 14% for Germany).
As for the long-term OIBDA margin three-year estimates
of Telefónica Group's analysts for the operator in Brazil, it
is in a range within 37% to 45%. Regarding investments,
the operator will invest in the horizon of the projected
plan a percentage that is aligned with the investment
needs planned for the development of its business, which
is located in a range between 14% and 19%.
Discount rate
The discount rate, applied to discount cash flows, is the
weighted average cost of capital (WACC), determined by
the weighted average cost of equity and cost of debt

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.41
according to the finance structure determined for each
CGU.
This rate is calculated using the capital asset pricing
model (CAPM), which considers the asset’s systemic risk,
and the impact of those risks not already considered on
cash flows, such as country risk, business-specific credit
risk, currency risk and price risk specific to the financial
asset, constantly monitoring the fluctuations of the
financial markets.
The most significant components of WACC are
summarized as follows:
• Risk-Free Rate: defined as the interest rate offered by
long-term sovereign bonds. The rate is determined
using current market data and equilibrium level
estimates (according to standard econometric models,
supported by modeling of neutral rates prepared by the
central banks themselves) in which the interest rates
should be located, thus adjusting the yields, influenced
by central banks interventions.
• Political Risk Premium: adds the country's insolvency
risk due to political and/or financial events; calculation is
based on the quoted prices of credit default swaps for
each country or, the EMBI+ index published by JP
Morgan based on the information available and the
liquidity conditions of these swaps.
• Equity Risk Premium: the return in excess that equity
assets are expected to yield over the risk-free rate. This
is determined using a combination of historical
approaches (ex post) backed by external publications
and studies based on historical market returns series,
and prospective approaches (ex-ante), based on
market publications, considering the medium- and
long-term profit expectations based on the degree of
maturity and development of each country.
• Beta Coefficient: a measure of the volatility, or
systematic risk, of an equity asset in comparison to the
entire market. It is estimated based on a series of
historical share prices of comparable companies listed
on the stock exchange, to estimate the correlation
between the company shares´ returns and the stock
market returns, of the country where the company is
listed.
The main underlying data used in these calculations are
obtained from independent and renowned external
information sources.
The discount rates applied to the cash flow projections in
2023 and 2022 for the main CGUs are as follows:

| 2023
Discount rate in local currency | Before tax | After-tax
Spain | 9.1% | 7.0%
Brazil | 14.8% | 12.0%
Germany | 8.4% | 5.8%

| 2022
Discount rate in local currency | Before tax | After-tax
Spain | 9.0% | 6.9%
Brazil | 16.4% | 12.6%
Germany | 8.0% | 5.7%

Perpetuity growth rate
Cash flow projections from the sixth year are calculated
using an expected constant growth rate (g), considering
the analyst consensus estimates for each business, based
on the maturity of the industry and technology, and the
degree of development of each country. Each indicator is
compared to the forecasted long-term real and nominal
GDP growth of each country and growth data from
external sources, adjusting any particular case with
specific characteristics related to the business evolution.
The perpetuity growth rates applied to the cash flow
projections in 2023 and 2022 for the main CGUs are as
follows:

Perpetuity growth rate in local currency | 2023 | 2022
Spain | 0.8% | 0.8%
Brazil | 4.0% | 4.5%
Germany | 1.0% | 1.0%

The perpetuity growth rates for 2023 remained stable for
Spain and Germany compared to those used in the
previous year. In the case of Brazil, the perpetual growth
rate has been reduced by 0.5 p.p., placing it within the
range of analyst estimates; it is consistent with the
inflation objective of the Central Bank of Brazil for the
medium term (in a range between 1.5% and 4.5%) and it is
below the nominal GDP growth rate, which fluctuates
around 5.5%, according to market expectations.
Sensitivity to changes in assumptions
The Group performs a sensitivity analysis of the
impairment test by considering reasonable changes in the
main assumptions used in the test. For the main CGU, the

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.42
following maximum increases or decreases were
assumed, expressed in percentage points:

Changes in key assumptions, In percentage points | Spain | Germany | Brazil
Financial variables |  |  |
Discount rate | +/-0.5 | +/-0.5 | +/-1
Perpetuity growth rates | +/-0.25 | +/-0.25 | +/-0.5
Long-term operating variables |  |  |
OIBDA Margin | +/-1.75 | +/-1.5 | +/-2.25
Ratio of CapEx/ Revenues | +/-0.875 | +/-0.75 | +/-1.125

The sensitivity analysis revealed that there is still room
between the recoverable value and the carrying amount
for the main CGUs at December 31, 2023.
Regarding the CGU of Ecuador, in the sensitivity of the
calculation of the value in use to reasonable variations in
the key assumptions, an increase of around 150 basis
points in the WACC which is above 16%, would generate
an additional impairment of goodwill in the amount of 34
million euros, while a decrease of around 25 basis points
in the perpetual growth rate of 2% would have an extra
negative impact of 4 million euros on the valuation of
goodwill. Regarding the operating assumptions, a 1.75
percentage point decrease in the OIBDA margin would
generate an additional impairment of approximately 25
million euros, and a 0.9 percentage points increase in the
investment ratio would result in an additional impairment
of around 16 million euros.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.43
Note 8. Property, plant and
equipment
The composition and movements in 2023 and 2022 of the
items comprising net "Property, plant and equipment"
were as follows:

2023 |  |  |  |  |  |  |  |
Millions of euros | Balance at 12/31/2022 | Additions(1) | Depre- ciation | Disposals | Impair- ments | Transfers and others | Translation differences and hyperinflation adjustments | Balance at 12/31/2023
Land and buildings | 2,641 | 21 | (206) | (21) | — | 145 | (64) | 2,516
Plant and machinery | 18,165 | 1,123 | (3,650) | (14) | — | 2,399 | (76) | 17,947
Furniture, tools and other items | 576 | 136 | (199) | 4 | — | 112 | (11) | 618
PP&E in progress | 2,332 | 2,420 | — | (38) | (3) | (2,826) | (22) | 1,863
Total PP&E | 23,714 | 3,700 | (4,055) | (69) | (3) | (170) | (173) | 22,944

(1) Total additions of property, plant and equipment in 2023 amounted to 3,741 million euros, including the additions corresponding to companies held for sale
during the annual reporting period (see Note 2).

2022 |  |  |  |  |  |  |  |  |
Millions of euros | Balance at 12/31/2021 | Addi- tions | Depre- ciation | Disposals | Impair- ments | Transfers and others | Translation differences and hyperinflation adjustments | Business combi- nations | Balance at 12/31/2022
Land and buildings | 2,660 | 25 | (216) | (22) | (12) | 104 | 97 | 5 | 2,641
Plant and machinery | 17,752 | 1,323 | (3,707) | (28) | (43) | 1,908 | 933 | 27 | 18,165
Furniture, tools and other items | 552 | 74 | (210) | (1) | (1) | 132 | 26 | 4 | 576
PP&E in progress | 1,761 | 2,867 | — | (12) | (3) | (2,353) | 71 | 1 | 2,332
Total PP&E | 22,725 | 4,289 | (4,133) | (63) | (59) | (209) | 1,127 | 37 | 23,714

Telefónica Spain's investments in property plant and
equipment in 2023 and 2022 amounted to 1,092 and 1,288
million euros, respectively, focused on continuing the
deployment of the fiber optic network to achieve the goal
of decommissioning the legacy copper network . Likewise,
investment in 4G network capacity continues, as well as
the development of the 5G network.
Telefónica Germany's investments in property, plant and
equipment in 2023 and 2022 amounted to 747 and 854
million euros, respectively. The strong progress in the
network modernization continues, specially 5G rollout .
The transformation of the transport network continued in
2023, as well as the maintenance of the focus in the
evolution of the radical transformation of business
support systems.
Telefónica Brazil's investments in property, plant and
equipment in 2023 and 2022 amounted to 1,130 and 1,277
million euros, respectively. The investments were mainly
dedicated to extending the capacity of the 4G mobile
networks, improving quality, absorbing traffic growth and
preparing the preparing the network for 5G, as well as a
massive rollout of 5G in the 3,500MHz band.
Telefónica Hispam's investments in property, plant and
equipment in 2023 and 2022 amounted to 586 and 732
million euros, respectively. Investments continued to
focus on the improvement of the mobile networks (with
the expansion of the coverage and capacity
reinforcement), as well as on the deployment of fiber.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.44
"Transfers and others" in 2023 includes the
reclassifications of fiber optic assets in Peru amounted to
163 million euros to "Non-current assets and disposal
groups held for sale" of the statement of financial position
(see Note 30).
"Impairments" in 2022 included an impairment loss
related to assets of Telefónica Argentina, amounting to 56
million euros.
"Business combinations" in 2022 mainly corresponded to
the acquisition of property, plant and equipment of Oi, the
Incremental Group and the BE-terna Group amounting to
29 , 1 and 6 million euros (see Note 5), respectively .
In 2022, there was an increase in the depreciation of
property, plant and equipment amounted to 8 million
euros (47 million euros in 2021 ) due to the reduction in the
useful lives of certain assets of Telefónica México as a
result of the transformation of the operating model
announced in November 2019.
The effect of translating into euros of property, plant and
equipment of the Group's companies in Argentina and
Venezuela, together with the effect of the hyperinflation
adjustments (see Note 3.a), is shown in the column
"Translation differences and hyperinflation adjustments".
Telefónica Group companies 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.
Additionally, as part of its commercial activities and
network deployment, the Group maintains several
property acquisition commitments. The timing of
scheduled payments in this regard is disclosed in Note 26.
The gross cost, accumulated depreciation and
impairment losses of property, plant and equipment at
December 31, 2023 and 2022 were as follows:

Balance at December 31, 2023
Millions of euros | Gross cost | Accumulated depreciation | Impairment losses | PP&E
Land and buildings | 8,689 | (6,116) | (57) | 2,516
Plant and machinery | 88,224 | (70,001) | (276) | 17,947
Furniture, tools and other items | 5,190 | (4,558) | (14) | 618
PP&E in progress | 1,877 | — | (14) | 1,863
Total PP&E | 103,980 | (80,675) | (361) | 22,944

Balance at December 31, 2022
Millions of euros | Gross cost | Accumulated depreciation | Impairment losses | PP&E
Land and buildings | 9,097 | (6,375) | (81) | 2,641
Plant and machinery | 91,319 | (72,742) | (412) | 18,165
Furniture, tools and other items | 5,157 | (4,566) | (15) | 576
PP&E in progress | 2,343 | — | (11) | 2,332
Total PP&E | 107,916 | (83,683) | (519) | 23,714

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.45
Note 9. Rights of use
The movement of rights of use in 2023 and 2022 is as
follows:

2023 |  |  |  |  |  |  |
Millions of euros | Balance at 12/31/2022 | Additions | Amortization | Disposals | Transfers and others | Translation differences and hyperinflation | Balance at 12/31/2023
Rights of use on land and natural properties | 885 | 194 | (231) | (10) | — | (4) | 834
Rights of use on buildings | 4,130 | 1,345 | (1,172) | (95) | 1 | 78 | 4,287
Rights of use on plant and machinery | 3,037 | 752 | (686) | (26) | 3 | — | 3,080
Other rights of use | 227 | 100 | (70) | (2) | (6) | (2) | 247
Total of rights of use | 8,279 | 2,391 | (2,159) | (133) | (2) | 72 | 8,448

2022 |  |  |  |  |  |  |  |
Millions of euros | Balance at 12/31/2021 | Additions | Amorti- zation | Disposals | Business combina- tions | Transfers and others | Translation differences and hyperinflation | Balance at 12/31/2022
Rights of use on land and natural properties | 793 | 367 | (279) | (7) | — | (15) | 26 | 885
Rights of use on buildings | 3,561 | 1,402 | (1,139) | (29) | 110 | (11) | 236 | 4,130
Rights of use on plant and machinery | 3,024 | 596 | (574) | (19) | — | (5) | 15 | 3,037
Other rights of use | 201 | 83 | (72) | (2) | 1 | 11 | 5 | 227
Total of rights of use | 7,579 | 2,448 | (2,064) | (57) | 111 | (20) | 282 | 8,279

"Business combinations" in 2022 corresponded to the
acquisition of rights of use of Oi, the Incremental Group
and the BE-terna Group (see Note 5) amounted to 105, 1
and 5 million euros, respectively.
The effect of the translation into euros of rights of use of
the Group's companies in Argentina and Venezuela,
together with the effect of the hyperinflation adjustments
(see Note 3.a) is shown in the column "Translation
differences and hyperinflation adjustments".
In 2022, there was an increase in amortization of rights of
use amounted to 17 mil lion euros (40 million euros in 2021 )
due to the reduction in the useful lives of certain rights of
use of Telefónica México as a result of the transformation
of the operating model announced in November 2019 .

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.46
The gross cost and accumulated depreciation of the
rights of use at December 31, 2023 and 2022 are as
follows:

Balance at December 31, 2023
Millions of euros | Gross cost | Accumulated depreciation | Rights of use
Rights of use on land and natural properties | 2,051 | (1,217) | 834
Rights of use on buildings | 9,411 | (5,124) | 4,287
Rights of use on plant and machinery | 5,250 | (2,170) | 3,080
Other rights of use | 498 | (251) | 247
Total of rights of use | 17,210 | (8,762) | 8,448

Balance at December 31, 2022
Millions of euros | Gross cost | Accumulated depreciation | Rights of use
Rights of use on land and natural properties | 1,923 | (1,038) | 885
Rights of use on buildings | 8,053 | (3,923) | 4,130
Rights of use on plant and machinery | 4,560 | (1,523) | 3,037
Other rights of use | 469 | (242) | 227
Total of rights of use | 15,005 | (6,726) | 8,279

The detail of expenses related to leases included in
Supplies and Other expenses (see Note 3.g) of the
consolidated income statement for 2023 and 2022 are as
follows.

Millions of euros | 2023 | 2022
Short-term leases included in operating results as supplies | 73 | 79
Variable lease payments not included in the measurement of lease liabilities | 14 | 17
Total expenses as supplies | 87 | 96
Short-term leases included in external services | 45 | 52
Leases of low-value assets included in external services | 7 | 8
Variable lease payments not included in the measurement of lease liabilities | 16 | 26
Total expenses as external services (Note 26) | 68 | 86
Total lease expenses | 155 | 182

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.47
Note 10. Associates and joint
ventures
The detail of investments accounted for by the equity
method and the share of (loss)/income of these
investments is the following:

| % Holding |  | Investments accounted for by the equity method |  | Share of (loss) income of investments accounted for by the equity method
Millions of euros |  |  | 12/31/2023 | 12/31/2022 |  | 2023 | 2022 | 2021
VMED O2 UK Ltd | 50% |  | 7,774 | 10,779 |  | (2,030) | 292 | (103)
Movistar Prosegur Alarmas | 50% |  | 230 | 252 |  | (22) | (12) | (2)
FiBrasil Infraestructura e Fibra Ótica, S.A. | 50% |  | 100 | 79 |  | (4) | (8) | (3)
Unsere Grüne Glasfaser | 50% |  | 97 | 108 |  | (55) | (64) | (25)
Opal Jvco Limited (nexfibre) | 25% |  | 55 | 55 |  | (32) | 26 | —
Utiq, S.A. | 25% |  | 5 | — |  | — | — | —
Others |  |  | 4 | 2 |  | (2) | (4) | 1
Joint ventures |  |  | 8,265 | 11,275 |  | (2,145) | 230 | (132)
Daytona Midco, S.L. (Nabiax) | 20% |  | 65 | 120 |  | (1) | (1) | —
Adquira España, S.A. | 44.44% |  | 4 | 4 |  | — | — | —
HoldCo Infraco SpA. (Onnet Fibra Chile) | 40% |  | 150 | 79 |  | 7 | — | (1)
Alamo HoldCo S.L. (Onnet Fibra Colombia) | 40% |  | 14 | 12 |  | (10) | (15) | —
Internet para todos S.A.C. | 54.67% |  | 55 | 55 |  | — | (3) | (5)
Telefónica Factoring España, S.A. | 50% |  | 7 | 7 |  | 4 | 4 | 3
Telefónica Factoring do Brasil, Ltda. | 50% |  | 2 | 3 |  | 1 | 3 | 3
Telefónica Factoring Peru, S.A.C. | 50% |  | 3 | 2 |  | 1 | 1 | 1
Telefónica Factoring Colombia, S.A. | 50% |  | 1 | 1 |  | 1 | 1 | 1
Telefónica Factoring México, S.A.de C.V. | 50% |  | 1 | 1 |  | — | — | —
Telefónica Factoring Chile, SpA. | 50% |  | 1 | 1 |  | — | — | —
Telefónica Factoring Ecuador, S.A. | 50% |  | — | — |  | — | — | —
Telefónica Renting, S.A. | 50% |  | 1 | 1 |  | — | — | —
Telefónica Consumer Finance, Establecimiento Financiero de Crédito, S.A. | 50% |  | 18 | 19 |  | 1 | 2 | 2
Movistar Consumer Finance Colombia SAS | 50% |  | — | 2 |  | (21) | (3) | (1)
Others |  |  | 3 | 5 |  | — | (2) | 2
Associates |  |  | 325 | 312 |  | (17) | (13) | 5
Total |  |  | 8,590 | 11,587 |  | (2,162) | 217 | (127)

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.48
The detail of the movement in investments accounted for
by the equity method in 2023 and 2022 is as follows:

Investments accounted for by the equity method | Millions of euros
Balance at 12/31/2021 | 12,773
Additions | 181
Disposals | (12)
Translation differences and other comprehensive income (loss) | (646)
Income (loss) | 217
Dividends | (920)
Transfers and others | (6)
Balance at 12/31/2022 | 11,587
Additions | 236
Translation differences and other comprehensive income (loss) | 144
(Loss) income | (2,162)
Dividends | (1,218)
Transfers and others | 3
Balance at 12/31/2023 | 8,590

Additions for the year 2023 includes the capital increase
of 73 million euros at Unsere Grüne Glasfaser (50 million
euros for the year 2022) and the capital increase in
nexfibre amounting to 33 million euros (see Note 28).
Additions in 2023 also includes 70,960 million Chilean
pesos (equivalent to 73 million euros) corresponding to
the capital contribution made by Telefónica Chile, S.A. in
HoldCo Infraco SpA (of which it owns 40% of the capital)
for the acquisition by InfraCo SpA (a subsidiary of HoldCo
InfraCo SpA) of the fiber optic assets owned by Empresa
Nacional de Telecomunicaciones S.A. ("Entel") following
its authorization by the National Economic Prosecutor's
Office on December 14, 2023.
"Translation differences and other comprehensive income
(loss)" for the year 2023 mainly includes the impact of the
pound sterling appreciation associated with the
investment in VMO2, amounting to 219 million euros (627
million euros associated with sterling depreciation for the
year 2022) and the results of the defined benefit pension
plan in VMO2 amounting to 41 million euros (106 million
euros for the year 2022). This also includes losses
imputed to equity on derivatives financial instruments in
Unsere Grüne Glasfaser amounting to 30 million euros
(69 million euros gains for the year 2022).
During the year 2023, dividends amounting to 1,000
million pounds sterling were received from VMO2,
equivalent to 1,154 million euros (800 million pounds
sterling equivalent to 909 million euros for the year 2022,
see Note 28). Additionally includes dividends amounting
to 54 million euros from Nabiax.
On January 11, 2022 , once the corresponding
authorizations from the regulatory authorities were
obtained and after the fulfilment of certain agreed
conditions, the transaction between Colombia
Telecomunicaciones S.A. ESP BIC (Telefónica Colombia)
and a Colombian company controlled by Kohlberg Kravis
Roberts - KKR (Onnet Fibra Colombia S.A.S) for the sale
and purchase of certain fiber assets owned by Telefónica
Colombia and for the provision of wholesale connectivity
services by Onnet Fibra Colombia S.A.S to Telefónica
Colombia, the development of activities of deployment of
fiber network, and other associated services, was
completed. Telefónica Colombia received, as
consideration, 187 million U.S. dollars (approximately
165 million euros at the exchange rate at such date) and
40% of the shares of a Spanish company controlled by
KKR, Alamo HoldCo S.L., the sole shareholder of Onnet
Fibra Colombia S.A.S. The gain included in "Other income"
in the consolidated income statement for the year 2022
amounted to 162 million euros (see Note 26). Additions for
the year 2022 included the fair value assigned to the 40%
of the investment in Alamo HoldCo, S.L. amounting to 28
million euros.
On May 24, 2022 , Telefónica Infra, S.L. achieved a 20%
stake in Daytona Midco S.L. as a result of the agreement
reached on May 7, 2021 with Asterion Industrial Partners
("Asterion") for the contribution to Nabiax (a subsidiary of
Asterion) of four data centers owned by the Telefónica
Group (see Note 29.c). Additions for the year 2022
regarding this transaction amounted to 41 million euros.
On July 29, 2022, Telefónica, Liberty Global and InfraVia
(see Note 29.c.) reached an agreement for the
establishment of a joint venture, "nexfibre", for the
deployment of fiber-to-the-home (FTTH) in the United
Kingdom. Once the relevant regulatory authorizations
were obtained and the other conditions were fulfilled, the
closing of the transaction took place on December 15,
2022. After closing, Liberty Global and Telefónica
participate by halves in a joint vehicle that holds a 50%
interest in nexfibre, with InfraVia owning the remaining
50% .

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.49
VMED O2 UK
Main assumptions used in the initial fair value
calculation as of June 1, 2021
The fair value calculation for VMED O2 UK Ltd at the time
of its constitution was based on a discounted cash flows
valuation, using the methods of multiples of comparable
companies and multiples of transactions as a cross-
check.
The valuation emanated from the business plan of the
joint venture for the 2021-2023 period that resulted from
the aggregation of the individual business plans of O2 and
Virgin Media approved by Telefónica and Liberty Global,
respectively, extended to 2030 and the synergies plan
prepared by the strategy teams of both groups. The
following is a description of the main variables considered
in the fair value calculation, according to the primary
method:
• Revenues: the valuation scenario assumed growth
rates between 0% and 3% over the period, in line with
the estimations of analysts and supported in the
revenues synergies expected for the transaction.
• EBITDA margin: the normalized margin (post-IFRS 16,
i.e., before amortization of rights of use), adjusted to
consider the impact of annual payments of spectrum
licenses once expired, was in the range of 36% to 40%.
• Synergies: were considered taking into account
management’s analysis and benchmarked with analyst
estimates of probability of achievement.
• Long-term capital expenditure ratio: it was
expected to be in a range of 16% to 22% (including
CapEx and rights of use additions), aligned with the
historical level of comparable companies.
• The discount rate applied to the cash flow projections
was the weighted average cost of capital (WACC). A
modified version of the Capital Asset Pricing Model
(“CAPM”) was used to estimate the required return on
equity, including a specific premium or alpha, which
captured additional risks considered at the time of
incorporation in relation to the likelihood of realization of
synergies and the execution risk of the combined
business plan. To relever the beta it was considered the
intrinsic leverage of the joint venture.
In conclusion, the discount rate applied for the valuation
was 6.9%.
• Perpetuity growth rate: the perpetuity growth rate
considered was 1.0%.
Impairment of goodwill recorded by VMO2
VMO2's management carried out the annual goodwill
impairment test at the end of 2023. Future cash flows
used in the value in use calculation were based on the
latest three-year business plan approved by the VMO2
board of directors. To complete the five years of post-
closing cash flows, an additional normalization period was
estimated in the operating variables until the perpetuity
parameters were reached. A longer time horizon was
used for capital intensive projects such as the full fiber
upgrade plan.
As a result of this analysis, VMO2 has recorded an
impairment of goodwill amounting to 3,107 million pounds
sterling (approximately 3,572 million euros), mainly due to
the decrease in projected cash flows of VMO2 as a
consequence of the effects of macroeconomic conditions
and the competitive environment in the United Kingdom
and the increase in the discount rate (WACC).
50% of this amount (approximately 1,786 million euros) is
reflected in Telefónica's consolidated income statement
for the year ended December 31, 2023, as its share in the
loss of VMO2 accounted for by the equity method (see
table detailing the result from the equity method below).
The CGU that VMO2 uses to evaluate goodwill for
impairment is VMO2's sole reportable segment reflecting
its mobile, broadband internet, video and fixed-line
telephony business delivered across its fixed-line and
mobile networks in the United Kingdom.
The initial registration of the constitution of VMO2 was
accounted for in accordance with IFRS 3 — Business
Combinations, using the acquisition method of
accounting as of June 1, 2021. The identifiable net assets
of both Virgin Media and O2 were assessed for their
respective fair values and the excess of VMO2’s business
enterprise value over the fair value of identifiable net
assets was allocated to goodwill. As of December 31,
2022, the goodwill reported by VMO2 amounted to
20,857 million pounds sterling, approximately 23,508
million euros as of that date (see detailed table of VMO2's
statement of financial position below). In the impairment
test carried out as of December 31, 2022, it was revealed
that reasonably possible variations in the key
assumptions, mainly the discount rate (WACC), could
lead to an impairment of goodwill. The determination of
value in use inherently has a high component of judgment
on the part of management in estimating the key
assumptions that support the calculation.
VMO2 has achieved continued subscriber growth
throughout the year 2023, expanding its mobile, fixed and
converged customer base against a challenging
macroeconomic backdrop of high inflation and
rationalization of consumer spending habits.
The macro-economic environment is expected to remain
challenging, affecting the consumption patterns of
VMO2's customer base, which has a premium ARPU in
the market derived from higher speeds and multi-service
bundles that are susceptible to customer optimization,
such as TV services, basic telephony or longer mobile
handset device substitution. In addition, the competitive

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.50
environment has intensified with the accelerated roll-out
of fiber networks, which threatens VMO2's competitive
speed advantage. The B2B market has also been affected
by the macroeconomic situation. On the other hand, the
company has accelerated the implementation of the
synergies expected from the integration. As a result, the
company continues to focus on its pillars of future growth,
such as its commitment to convergence, the digitalization
of the company and the development of state-of-the-art
infrastructures through significant investments that are
expected to contribute to future growth.
Among the G7 economies, the United Kingdom had the
second lowest GDP growth in 2023, and since 2019 the
country's per capita income has performed worst. Its
economy has entered recession in the second half of
2023, an event not foreseen at the beginning of the year.
Growth forecasts for 2024 have also been reduced (0.4%
currently vs. almost 1% expected in the first half of 2023
for 2024). Behind this weak performance there are mainly
two factors, both related to Brexit: the low growth of the
labor force and the lack of dynamic behavior of exports.
These factors have also contributed to the fact that the
decline in inflation has been slower than expected, and
therefore that interest rates have not decreased, which
has had a negative impact on the disposable income of
families and companies.
The discount rate applied in the impairment test as of
December 31, 2023 was 7.5% after taxes, compared to
7.3% the previous year. The increase in the discount rate
is due to the increase in financial rates and the impacts of
the macroeconomic conditions in the United Kingdom on
estimated business projections.
The terminal growth rate considered continues to be 1%.
The growth projections and operating ratios
contemplated in the valuation of VMO2 are aligned with
the analyst ranges for comparable companies in the
region. In terms of revenue, despite the challenges of the
competitive environment, the strategic plan includes a
growth trend in long-term projections, in line with the
estimated evolution for the sector in the United Kingdom.
In relation to EBITDA margins two years ahead, analyst
estimates for comparable companies in Europe are in a
range of between 33% and 41%, while, regarding long-
term investment needs, the capex to revenue ratio is in a
range between 12% and 15%.
Regarding the sensitivity of the calculation to reasonably
possible variations in key assumptions:
• An increase of about 50 basis points over the WACC
rate used of 7.5%would have a negative impact of 1,401
million euros on the result attributable to Telefónica.
• A decrease of around 25 basis points in the terminal
growth rate (1%) would have an impact of about 577
million euros.
• Regarding the operating variables used (which are
within the ranges considered in the calculation of the
initial fair value, although with a shift with respect to the
initial projections), a decrease of 1 percentage point in
the EBITDA margin would have an additional impact of
566 million euros, and an increase of 0.5 percentage
points in the capex to revenue ratio would have an
impact of 283 million euros.
After the accounting record of the income statement and
the statement of financial position reported by VMO2 as
of December 31, 2023, the carrying value of Telefónica's
equity-accounted investment in VMO2 has decreased to
7,774 million euros (10,779 million euros as of December
31, 2022). Telefónica has carried out an additional analysis
of the carrying value of its investment as of this date,
comparing it with the estimate of its value in use. As a
result of this analysis, no need to record any additional
impairment was identified. The key assumptions
considered in the calculation are the same as those used
by VMO2 in determining its value in use, and the
sensitivity of the calculation to reasonably possible
variations in these assumptions offers similar results.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.51
Detail of the main items on the statements of financial
position and income statements of VMED O2 UK Ltd

Millions of euros | 12/31/2023 | 12/31/2022
Non current assets | 41,697 | 46,280
Intangible assets | 8,379 | 9,252
Goodwill | 20,427 | 23,508
Property, plant and equipment | 10,011 | 9,816
Other non current assets | 2,880 | 3,704
Current assets | 4,758 | 3,782
Inventories | 301 | 200
Current receivables and other current assets | 2,882 | 2,516
Other current financial assets | 567 | 511
Cash and cash equivalents | 1,008 | 555
Total Assets | 46,455 | 50,062
Non current liabilities | 22,136 | 20,840
Non current financial liabilities | 21,061 | 19,668
Non-current lease liabilities | 663 | 725
Other non current liabilities | 412 | 447
Current liabilities | 8,591 | 7,786
Current financial liabilities | 4,165 | 3,248
Current lease liabilities | 201 | 221
Other current liabilities | 4,225 | 4,317
Total Liabilities | 30,727 | 28,626
Equity attributable to non- controlling interests (100% VMO2) | 261 | —
Equity attributable to equity holders of the parent (100% VMO2) | 15,467 | 21,436
50% Telefónica Group | 7,734 | 10,718
Acquisition costs | 61 | 61
Other adjustments | (21) | —
Investments accounted for by the equity method | 7,774 | 10,779

Millions of euros | January - December 2023 | January - December 2022 | June - December 2021
Revenues | 12,547 | 12,155 | 7,223
Other operating income | 516 | 551 | 290
Operating expenses | (8,632) | (8,305) | (5,063)
Impairment losses in goodwill | (3,572) | — | —
OIBDA | 859 | 4,401 | 2,450
Depreciation and amortization (1) | (3,685) | (4,170) | (2,395)
Operating income | (2,826) | 231 | 55
Share of income (loss) of investments accounted for by the equity method | 2 | 1 | —
Financial income | 55 | 24 | 27
Financial expenses | (1,436) | (1,020) | (504)
Realised and unrealised gains on derivative instruments, net (2) | (924) | 2,567 | 489
Foreign currency transaction losses, net | 677 | (1,296) | (367)
Net financial expense | (1,628) | 275 | (355)
Result before taxation | (4,452) | 507 | (300)
Income tax | 265 | (15) | 65
Result for the period (100% VMO2) | (4,187) | 492 | (235)
50% attributable to Telefónica Group | (2,094) | 246 | (117)
Share-based compensation (3) | 8 | 14 | 14
Sale of a minority interest in Cornerstone (4) | 76 | — | —
Other adjustments | (20) | 32 | —
Share of (loss) income of investments accounted for by the equity method | (2,030) | 292 | (103)
Other comprehensive income (100% VMO2) | (213) | (113) | 68

(1) Includes amortization of the customer relationships recorded after the
purchase price allocation, amounting to 985 million euros in 2023 (1,005
million euros in 2022).
(2) VMO2 entered into various derivative instruments to manage interest rate
exposure and foreign currency exposure. Generally, VMO2 does not apply
hedge accounting to its derivative instruments. Accordingly, changes in the
fair values of most of its derivatives are recorded in the finance results of its
consolidated income statement.
(3) Amount related to incentive awards held by certain employees of VMO2
associated with ordinary shares of Liberty Global and Telefónica. Share-
based compensation expense is included in Operating expenses in the
consolidated income statement of VMO2.
(4) In 2023 VMO2 sold a minority interest in its mobile towers joint operation
Cornerstone. This amount reflects the change in the Telefónica Group's
indirect ownership interest in Cornerstone (from 25% to 16.67%) resulting
from the inflow of resources from a third party.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.52
Commitments

Millions of euros | 2024 | 2025 | 2026 | 2027 | 2028 | Subsequent years | Total
Purchase commitments | 664 | 226 | 122 | 107 | 94 | 43 | 1,256
Programming commitments | 635 | 463 | 456 | 435 | 214 | — | 2,203
Network and connectivity commitments | 1,072 | 160 | 63 | 23 | 14 | 202 | 1,534
Other commitments | 341 | 264 | 251 | 231 | 214 | 290 | 1,591
Total commitments VMO2 (100%) | 2,712 | 1,113 | 892 | 796 | 536 | 535 | 6,584

Purchase commitments include unconditional and legally
binding obligations related to the purchase of customer
premises and other equipment and certain service-
related commitments, including call center, information
technology and maintenance services.
Programming commitments consist of obligations
associated with programming contracts that are
enforceable and legally binding that includes minimum
fees.
Network and connectivity commitments include service
commitments associated with the network extension
program in the U.K. and commitments associated with the
mobile virtual network operator (MVNO) agreements.
On the date of constitution of the joint venture, Telefónica
and Liberty Global entered with VMO2 into certain
service agreements, either on a transitional or ongoing
basis. Likewise, Telefónica licensed the use of Telefónica
and O2 brand rights to VMO2 (see Note 29.c).
The breakdown of balances and transactions related to
associates and joint ventures recognized with VMO2 in
the consolidated statement of financial position and
consolidated income statement is as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Receivables and other assets from associates and joint ventures | 66 | 40
Payables and other liabilities to associates and joint ventures | 34 | 5

Millions of euros | January - December 2023 | January - December 2022 | June - December 2021
Revenue from operations with associates and joint ventures | 134 | 130 | 103
Expenses from operations with associates and joint ventures | 63 | 63 | 29

Movistar Prosegur Alarmas
The breakdown of the key financial highlights of Movistar
Prosegur Alarmas group for the latest period available at
the time of preparation of these consolidated financial
statements and the reconciliation with the carrying
amount in the Group are as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Assets | 391 | 352
Liabilities | (383) | (346)
Net assets | 8 | 6
Purchase price allocation |  |
Assets | 76 | 136
Liabilities | (20) | (35)
Net assets | 56 | 101
% Holding | 50% | 50%
Group’s share in equity | 32 | 54
Goodwill | 198 | 198
Carrying amount in the Telefónica Group | 230 | 252

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.53
Breakdown of balances and
transactions with associates and joint
ventures
The breakdown of items related to associates and joint ventures recognized in the consolidated statements of financial
position and consolidated income statements is as follows:

| 12/31/2023 |  | 12/31/2022
Millions of euros | Associates | Joint ventures | Total |  | Associates | Joint ventures | Total
Credits and other financial assets from associates and joint ventures | 263 | 2 | 265 |  | 217 | 11 | 228
Receivables and other assets from associates and joint ventures (Note 14) | 91 | 93 | 184 |  | 66 | 85 | 151
Long-term contractual liabilities to associates and joint ventures | 44 | 54 | 98 |  | 82 | 51 | 133
Payables and other liabilities to associates and joint ventures (Notes 21 and 22) | 103 | 48 | 151 |  | 72 | 22 | 94
Short-term contractual liabilities to associates and joint ventures | 15 | 6 | 21 |  | 7 | 12 | 19

| 2023 |  | 2022 |  | 2021
Millions of euros | Associates | Joint ventures | Total |  | Associates | Joint ventures | Total |  | Associates | Joint ventures | Total
Revenue from operations with associates and joint ventures | 473 | 223 | 696 |  | 209 | 251 | 460 |  | 65 | 263 | 328
Expenses from operations with associates and joint ventures | 279 | 136 | 415 |  | 199 | 116 | 315 |  | 86 | 36 | 122
Financial revenues with associates and joint ventures | 29 | 1 | 30 |  | 27 | 1 | 28 |  | 1 | — | 1
Financial expenses with associates and joint ventures | 1 | 7 | 8 |  | 1 | 9 | 10 |  | 1 | — | 1

"Credits and other financial assets from associates and
joint ventures" at December 31, 2023 includes 112 million
euros of loans and 29 million euros of long-term trade
receivables granted by Colombia Telecomunicaciones,
S.A. ESP BIC to the associate company Álamo Holdco,
S.L. and it subsidiary Onnet Fibra Colombia S.A.S.,
respectively (82 million euros and 59 million euros as of
December 31, 2022, respectively). Additionally, this line
includes 121 million euros corresponding to the
subordinated debt granted by Telefónica Chile to the
associate company HoldCo Infraco, SpA. of which 75
million euros was generated by the sale of 40% of the
fiber optic business (75 million euros as of December 31,
2022) and 46 million euros corresponding to the
indefinite-term loan granted by Telefónica Chile, S.A. to
the associate HoldCo Infraco, SpA for the acquisition of
the fiber optic assets owned by Entel (see Note 12).
"Long-term contractual liabilities to associates and joint
ventures" at December 31, 2023 includes 44 million euros
corresponding to Colombia Telecomunicaciones, S.A.
ESP BIC with the associate company Onnet Fibra
Colombia, S.A.S. (82 million euros as of December 31,
2022).
"Revenue from operations with associates and joint
ventures" in 2023 includes 243 million euros
corresponding to the Group's transactions with
Telefónica Renting, S.A., the associated company
controlled by the CaixaBank group (see Note 11).
Additionally includes 63 million euros corresponding to
the transactions of the Group with the associate company
HoldCo Infraco SpA (88 million euros and 52 million euros
in 2022 and 2021, respectively) and 140 million euros with
the associate company Onnet Fibra Colombia, S.A.S. (97
million euros as of December 31, 2022). In 2021 it included
98 million euros corresponding to the transactions of the
Group with the joint venture Tesco Mobile Ltd. from
January 1, to the date of the incorporation of VMED O2 UK.
"Expenses from operations with associates and joint
ventures" in 2023 mainly includes 144 million euros
corresponding to the transactions of the Group with the
associate company HoldCo Infraco SpA (121 million euros
and 50 million euros in 2022 and 2021, respectively) and
60 million euros with the associate company Onnet Fibra
Colombia, S.A.S. (39 million euros in 2022).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.54
Note 11. Related parties
Shareholders with representation on
the Board of Directors of Telefónica,
S.A.
In 2023, the Company's shareholders represented on the
Board of Directors of Telefónica, S.A. were Banco Bilbao
Vizcaya Argentaria, S.A. (BBVA) and CaixaBank, S.A.
Based on the information provided by CaixaBank, S.A. for
the 2023 Annual Report on Corporate Governance, as of
December 31, 2023, the shareholding of CaixaBank, S.A. in
Telefónica’s share capital were 3.51%.
Based on the information provided by Banco Bilbao
Vizcaya Argentaria, S.A. (BBVA) for the 2023 Annual
Report on Corporate Governance, as of December 31,
2023, the shareholding of BBVA in Telefónica’s share
capital were 4.86% . Likewise, and according to the
aforementioned information provided by BBVA, the
percentage of economic rights attributed to Telefónica,
S.A. shares owned by BBVA as of December 31, 2023,
would increase by 0.168% without voting rights of the
Company's share capital.
The following is a summary of significant transactions
between the Telefónica Group and BBVA and CaixaBank
companies, other than the payment of the dividend
corresponding to its shareholding. All transactions were
carried out at market prices.
Participated companies
On November 20, 2020, Telefónica Innovación Digital,
S.L.U. (previously called Telefónica Digital España, S.L.U.),
and Compañía Chilena de Inversiones, S.L., an affiliated
company of BBVA, entered into an agreement related to
the incorporation of a subsidiary in Colombia with the aim
of commercializing loans to consumers and SME in such
country. On January 5, 2021, this company was
incorporated as a 50 /50 joint venture between the two
companies, under the name Movistar Consumer Finance
Colombia, S.A.S (see Note 10).
The Telefónica Group holds a 50% interest in Telefónica
Consumer Finance, E.F.C., S.A., a company controlled by
CaixaBank (see Note 10).
The Telefónica Group and BBVA each hold a 44.44%
interest in the joint venture Adquira España, S.A. (see
Note 10).
The Telefónica Group has a 50% interest in Telefónica
Factoring España and its subsidiaries in Brazil, Peru,
Colombia, Mexico, Chile and Ecuador, accounted for by
the equity method (see Note 10), in which BBVA and
CaixaBank have minority interests.
On July 21, 2022, Telefónica, S.A. and CaixaBank
Payments and Consumer E.F.C., E.P., S.A. incorporated
the company Telefónica Renting, S.A. 50% each. This
company is controlled by CaixaBank (see Note 10).
The accounting balances as of December 31, 2023 and
2022, as well as the accounting reflection of the
transactions carried out in 2023 and 2022 of Telefónica
Group companies with the aforementioned associates
and joint ventures in which BBVA and CaixaBank hold
interests are shown below:

Millions of euros | 12/31/2023 | 12/31/2022
Receivables and other assets from associates and joint ventures | 33 | 7
Payables and other liabilities to associates and joint ventures | 14 | 7

Millions of euros | 2023 | 2022
Revenue from operations with associates and joint ventures | 261 | 13
Expenses from operations with associates and joint ventures | 40 | 7
Finance cost from operations with associates and joint ventures | 1 | 1

The heading "Revenue from operations with associates
and joint ventures" for 2023 includes 243 million euros
corresponding to the Group's transactions with
Telefónica Renting, S.A., an associated company
controlled by the CaixaBank group.
Derivatives
The net fair value of the outstanding derivatives as of
December 31, 2023 contracted with BBVA and CaixaBank
amounts to 52 and 27 million euros, respectively (185 and
41 million euros, respectively, as of December 31, 2022).
The nominal value of these derivatives amounted to 9,797
and 707 million euros, respectively (5,778 million euros
with BBVA and 264 million euros with CaixaBank in 2022).
As explained in the 'Derivatives policy' section of Note 19,
this volume is so high because derivatives can be applied
several times to the same underlying asset for an amount
equal to its face value. As of December 31, 2023, the
derivatives contracted with BBVA and CaixaBank account
for approximately 13% of the total amount of outstanding

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.55
derivatives contracted by the Group with external
counterparties (see Note 19).
The Company maintains various derivative financial
instruments settled by differences contracted with BBVA
(see Note 17).
Additionally, at December 31, 2023, collateral guarantees
on derivatives from BBVA and CaixaBank have been
received, amounting to 45 million euros (net asset
position) and 31 million euros (net liability position),
respectively (236 million euros and 43 million euros (net
liability position), respectively at December 31, 2022).
Renting operations with CaixaBank
In mid-2021, a new Fusion portfolio came into force that
included a rental device. The Group has an agreement
with CaixaBank to in turn rent these devices (a model
known as "rent to rent"), covered by a framework
financing agreement previously formalized between
Telefónica and CaixaBank. In 2023, the volume of these
operations with companies of the CaixaBank group
(mainly Telefónica Renting and CaixaBank Equipment
Finance) amount to 393 million euros (405 million euros in
2022) which have involved 33 million euros in financial
expenses (19 million euros in 2022). As of December 31,
2023, the balance of the account payable to CaixaBank
amounted to 717 million euros (501 million euros as of
December 31, 2022).
Likewise, the Group carries out other equipment rental
operations with CaixaBank (equipment at customers'
homes, such as routers or decoders). In 2023, the volume
of this equipment leasing transactions was 117 million
euros (82 million euros in 2022), with financial expenses
amounting to 6 million euros (3 million euros in 2022). As
of December 31, 2023, the debt with CaixaBank for these
concepts amounts to 142 million euros (119 million euros in
2022).
Other operations
The impact on the consolidated income statement of the
Telefónica Group of the rest of the operations with BBVA
and CaixaBank in 2023 and 2022 is shown below:

BBVA |  |
Millions of euros | 2023 | 2022
Finance costs | 42 | 11
Receipt of services | 8 | 7
Other expenses | 38 | 3
Total costs | 88 | 21
Finance income | 47 | 14
Dividends received (1) | 21 | 15
Services rendered | 48 | 40
Sale of goods | 10 | 7
Other income | 3 | 7
Total revenues | 129 | 83

(1) At December 31, 2023, Telefónica held a 0.76% stake (0.73% stake at
December 31, 2022) in the share capital of Banco Bilbao Vizcaya Argentaria,
S.A. (see Note 12).

CaixaBank |  |
Millions of euros | 2023 | 2022
Finance costs | 12 | 6
Receipt of services | 4 | 5
Purchase of goods | 63 | 53
Total costs | 79 | 64
Services rendered | 79 | 69
Sale of goods | 63 | 51
Other income | — | 2
Total revenues | 142 | 122

The following table shows the balance sheet positions of
these operations as of December 31, 2023 and 2022, as
well as the current guarantees and other off-balance
sheet positions.

BBVA |  |
Millions of euros | December 31, 2023 | December 31, 2022
Finance arrangements: loans, capital contributions and others (borrower) | 191 | 140
Finance arrangements: loans and capital contributions (lender) | 696 | 13
Guarantees | 239 | 165

The heading "Finance arrangements: loans and capital
contributions (lender)" for 2023 mainly includes a deposit
set up by Telefónica, S.A.of 600 million euros maturing in
January 2024.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.56

CaixaBank |  |
Millions of euros | December 31, 2023 | December 31, 2022
Finance arrangements: loans, capital contributions and others (borrower) | 174 | 148
Finance arrangements: loans and capital contributions (lender) | 48 | —
Other payables | 135 | 37
Guarantees | 104 | 160

Other significant shareholders
During fiscal year 2023, the significant shareholders of the
Company without representation on the Board of
Directors of Telefónica, S.A. were BlackRock, Inc. and
Public Investment Fund. These shareholders are not
considered a related party as they do not have
representation on the Board of Directors of Telefónica,
S.A. nor exert significant influence on the company.
Based on the information notified by BlackRock, Inc to the
CNMV on March 31, 2020, as updated per the share
capital of Telefónica, S.A. as of December 31, 2023, the
shareholding of BlackRock, Inc in Telefónica’s share
capital were 4.50%. Based on the Schedule 13G/A filed
with the SEC, on October 7, 2022, BlackRock, Inc.
beneficially owned 4.98% of Telefónica, S.A. shares (4.51%
of voting rights), updated per the share capital of
Telefónica, S.A. as of December 31, 2023.
According to the information contained in the
communication sent by Public Investment Fund to the
CNMV on September 8, 2023, it is indicated that Green
Bridge Investment Company SCS (a company controlled
by Saudi Telecom Company which in turn is controlled by
Public Investment Fund): (i) acquired shares representing
4.90% of the share capital of Telefónica, S.A, and (ii)
entered into a conditional sale and purchase agreement
for 5.00% of the shares of Telefónica, S.A., subject, among
other matters, to the approval of the Spanish Council of
Ministers. In addition, on September 11, 2023, Morgan
Stanley notified the CNMV of a 12.178% interest in voting
rights attributed to shares (0.007%) and through financial
instruments (12.171%) including a financial instrument (put/
call option) on 9.90% of the share capital of Telefónica,
S.A., related to the risk management of the position under
the financial operation on the same shares as those
referred to in the Public Investment Fund referred to
above. According to the communication sent to the
CNMV, this financial instrument would not imply an
incremental or additional participation in the share capital
of Telefónica, S.A.
Other related parties
The most significant balances and transactions with
associates and joint ventures are detailed in Note 10.
During 2023 and 2022, the Directors and senior
executives performed no transactions with Telefónica,
S.A. or any Telefónica Group company other than those in
the Group’s normal trading activity and business.
Compensation and other benefits paid to members of the
Board of Directors and senior executives are detailed in
Note 29.g and Appendix II.
Telefónica contracted a civil liability insurance scheme
(D&O) for Directors, managers and staff with similar
functions in the Telefónica Group, with standard
conditions for these types of insurance and a premium
attributable to 2023 of 5,565,729 euros (6,598,467 euros
in 2022). This scheme provides coverage for Telefónica,
S.A. and its subsidiaries in certain cases.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.57
Note 12. Financial assets and
other non-current assets
The breakdown of financial assets and other non-current
assets of the Telefónica Group at December 31, 2023 and
December 31, 2022 is as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Non-current financial assets (Note 16) | 5,201 | 6,219
Investments | 616 | 497
Credits and other financial assets | 741 | 981
Deposits and guarantees | 966 | 1,163
Trade receivables | 1,049 | 1,019
Receivables for subleases | 14 | 19
Impairment of trade receivables | (125) | (128)
Long-term derivative financial assets (Note 19) | 1,940 | 2,668
Other non-current assets | 2,067 | 1,882
Contractual assets (Note 23) | 325 | 359
Deferred expenses (Note 23) | 1,001 | 854
Long-term receivables for taxes | 354 | 345
Prepayments | 387 | 324
Total | 7,268 | 8,101

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.58
Non-current financial assets
The movement in investments, other long-term credits,
deposits and guarantees, trade receivables, long-term
receivables for subleases and impairment of trade
receivables in 2023 and 2022 , is as follows:

Millions of euros | Invest- ments | Other long- term credits | Deposits and guarantees | Trade receivables | Long-term receivables for subleases | Impairment of trade receivables
Balance at 12/31/2021 | 479 | 890 | 1,254 | 752 | 27 | (112)
Additions | 12 | 503 | 64 | 616 | 4 | (10)
Disposals | (74) | (94) | (33) | (162) | (4) | 3
Translation differences | (1) | 2 | 69 | 12 | 1 | (13)
Fair value adjustments and financial updates | 80 | 64 | 26 | (2) | — | —
Transfers and other | 1 | (384) | (217) | (197) | (9) | 4
Balance at 12/31/2022 | 497 | 981 | 1,163 | 1,019 | 19 | (128)
Additions | 17 | 114 | 9 | 610 | 4 | (38)
Disposals | (17) | (310) | (111) | (303) | (1) | 16
Translation differences | (1) | (17) | 30 | 37 | — | (11)
Fair value adjustments and financial updates | 115 | 26 | 35 | 1 | — | —
Transfers and other | 5 | (53) | (160) | (315) | (8) | 36
Balance at 12/31/2023 | 616 | 741 | 966 | 1,049 | 14 | (125)

Investments
“Investments” includes the fair value of investments in
companies where Telefónica exercises no significant
influence or control and for which there is no specific
short-term disposal plan (see Note 3.i).
The Telefónica Group’s shareholding in Banco Bilbao
Vizcaya Argentaria, S.A. (BBVA) amounted to 363 million
euros ( 249 million euros at December 31, 2022 ),
representing 0.76% of its share capital at December 31,
2023 (0.73% at December 31, 2022 ).
At December 31, 2023, Telefónica maintains a 0.59% stake
in the share capital of China Unicom (Hong Kong) Limited,
valued at 103 million euros (same percentage at
December 31, 2022, valued at 105 million euros).
On May 19, 2022 Telefónica signed an agreement with
the company Global Alconaba, S.L., for the sale of
50,147,058 shares of Promotora de Informaciones, S.A.
(PRISA), equivalent to 7.076% of its share capital. As a
result of this sale, 71 million euros of losses from financial
assets measured at fair value through comprehensive
income were reclassified to retained earnings. On June 21,
2023 the Company has sold its total remaining shares in
this investment.
Other long-term credits
This line item includes long-term financial assets of
Telefónica Germany amounting to 114 million euros and
104 million euros at December 31, 2023 and 2022,
respectively, most of them related to reimbursement
rights to cover pension obligations of the company but do
not represent "plan assets" in accordance with IAS 19 (see
Note 24).
Additionally, at December 31, 2023 this line includes 112
million euros of loans granted by Colombia
Telecomunicaciones, S.A. ESP BIC to the associate
company Álamo Holdco, S.L. (82 million euros included in
additions for the year 2022, see Note 10).
Additions in 2023 includes 44,187 million Chilean pesos
(46 million euros) corresponding to the indefinite-term
loan granted by Telefónica Chile, S.A. to the associate
HoldCo Infraco, SpA for the acquisition of the fiber optic
assets owned by Entel (see Note 10). Additionally, at
December 31, 2023 includes 75 million euros
corresponding to the subordinated debt granted by
Telefónica Chile to the associate company HoldCo
Infraco, SpA. generated by the sale of 40% of the fiber
optic business (75 million euros as of December 31, 2022,
see Note 10).
Additionally at December 31, 2023 includes the collection
right arising from Telxius with American Tower
Corporation as a result of the sale of the
telecommunications towers division in Europe (Spain and
Germany) in June 2021 amounting to 269 million euros
(264 million euros at December 31, 2022).
Additions for the year 2022 included financial instruments
(Federal Treasury Certificates) of Pegaso PCS, S.A. de

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.59
C.V. amounted to 260 million euros, for the purpose of
securing certain legal proceedings with the Mexican tax
Administration Service. These instruments were classified
as long-term based on the estimated term of the
proceedings and accrue interest according to the time
elapsed. Derived from the judicial resolution that exempts
Pegaso PCS, S.A. de C.V. from securing the amount in
dispute, the aforementioned financial instruments were
cancelled, and the collection was received in July 2023
and registered as disposals in 2023 for an amount of 287
million euros (see Note 28).
Transfers for the year 2022 included the short-term
transfer of the notes issued by the international issue
platform Single Platform Investment Repackaging Entity,
S.A. ("Spire") for an amount of 313 million euros, all of
which were registered at December 31, 2022 in "Other
current financial assets" for an amount of 939 million
euros (see Note 15).
The vast majority of long-term credits, recognized at
amortized cost (Note 16), are considered to be low credit
risk assets, therefore the impairment analysis was carried
out on the basis of expected credit losses in the next
twelve months.
Deposits and guarantees
Telefónica Brazil has non-current judicial deposits
amounting to 531 million euros (see Note 24) at December
31, 2023 (501 million euros at December 31, 2022).
At December 31, 2023, there were deposits related to the
collateral guarantees on derivatives (CSA) signed by
Telefónica, S.A. and its counterparties for the credit risk
management of derivatives amounting to 273 million
euros, not having cross currency swap (365 million euros
at December 31, 2022 that included 42 million euros
related to cross currency swap).
In relation with collateral contracts, there is an additional
guarantee of 51,988 b onds issued by Telefónica
Emisiones, S.A.U. deposited in a securities account owned
by Telefónica, S.A. with a notional of 47 million euros at
December 31, 2023 (79,034 bonds for a nominal amount
of 78 million euros at December 31, 2022).
The vast majority of deposits and guarantees recognized
at amortized cost (Note 16), are considered to be low
credit risk assets, therefore the impairment analysis was
carried out on the basis of expected credit losses in the
next 12 months.
Trade receivables
"Additions" for the year in 2022 included trade receivables
amounting to 69 million euros from Colombia
Telecomunicaciones, S.A. ESP BIC to the associate Onnet
Fibra Colombia SAS, (29 million euros and 59 million euros
at December 31, 2023 and December 31, 2022,
respectively, see Note 10).
At December 31, 2023 includes Telefónica Germany trade
receivables at fair value through other comprehensive
income for an amount of 280 million euros (292 million
euros as of December 31, 2022, see Note 16).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.60
Note 13. Inventories
The detail of inventories of the Telefónica Group at
December 31, 2023 and December 31, 2022 is as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Audiovisual rights | 242 | 823
Mobile terminals and other equipments | 636 | 701
Other inventories | 91 | 57
Other advance payments | 1 | —
Inventories impairment provision | (41) | (35)
Inventories | 929 | 1,546

"Audiovisual rights" mainly includes rights to broadcast
films, television series and documentaries (see Note 3.j).
At the closing of fiscal year 2023, advanced payments for
broadcasting rights for sporting events to be held in
periods subsequent to year-end, amounting to 532 million
euros, are presented as prepayments under Other current
assets (see Note 14). This amount represents payments
advanced under executory contracts related to future
sports commitments (see Note 29.c).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.61
Note 14. Receivables and other
current assets
The detail of receivables and other current assets of the
Telefonica Group at December 31, 2023 and December
31, 2022 and the opening balance as of January 1, 2023
after the impacts of first application of IFRS 17 (see Note
3) is as follows:

Millions of euros | 12/31/2023 | 12/31/2022 | First application of IFRS 17 impact | 01/01/2023
Receivables (Note 16) | 7,430 | 7,340 | (132) | 7,208
Trade receivables | 9,938 | 9,680 | (75) | 9,605
Impairment of trade receivables | (2,992) | (2,891) | — | (2,891)
Receivables from associates and joint ventures (Note 10) | 139 | 151 | — | 151
Other receivables | 345 | 400 | (57) | 343
Other current assets | 2,702 | 1,794 | 132 | 1,926
Contractual assets (Note 23) | 202 | 195 | — | 195
Capitalized costs (Note 23) | 998 | 885 | — | 885
Prepayments | 1,344 | 714 | — | 714
Short-term insurance and reinsurance contracts assets | 113 | — | 132 | 132
Short-term insurance and reinsurance contracts assets from associates and joint ventures (Note 10) | 45 | — | — | —
Total | 10,132 | 9,134 | — | 9,134

The balance of prepayments at December 31, 2023
includes 532 million euros corresponding to payments for
broadcasting rights of sporting events that will take place
in the future, which have been advanced under executory
contracts (see Notes 13 and 29.c).
The movement in impairment of trade receivables in 2023
and 2022 is as follows:

| Millions of euros
Impairment provision at December 31, 2021 | 2,531
Allowances | 613
Transfers | 12
Amounts applied | (397)
Translation differences and other | 132
Impairment provision at December 31, 2022 | 2,891
Allowances | 582
Transfers | 48
Amounts applied | (481)
Translation differences and other | (48)
Impairment provision at December 31, 2023 | 2,992

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.62
Public-sector net trade receivables at December 31, 2023
and 2022 amounted to 526 million euros and 518 million
euros, respectively.
The detail of the age of the accounts receivable balances
from customers and their corrections for impairment as of
December 31, 2023 and 2022 is as follows:

| 12/31/2023
Millions of euros | Trade receivables | Impairment
Unbilled receivables | 2,755 | (28)
Amount not overdue invoiced | 2,920 | (116)
Less than 90 days | 994 | (157)
Between 90 and 180 days | 324 | (135)
Between 180 and 360 days | 523 | (393)
More than 360 days | 2,422 | (2,163)
Total | 9,938 | (2,992)

| 12/31/2022
Millions of euros | Trade receivables | Impairment
Unbilled receivables | 2,495 | (9)
Amount not overdue invoiced | 3,011 | (154)
Less than 90 days | 1,024 | (160)
Between 90 and 180 days | 347 | (150)
Between 180 and 360 days | 534 | (381)
More than 360 days | 2,269 | (2,037)
Total | 9,680 | (2,891)

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.63
Note 15. Other current financial
assets
The breakdown of other financial assets of the Telefónica
Group at December 31, 2023 and December 31, 2022 is as
follows:

Millions of euros | 12/31/2023 | 12/31/2022
Short-term credits | 192 | 128
Short-term deposits and guarantees | 209 | 439
Short-term derivative financial assets (Note 19) | 352 | 712
Other current financial assets | 325 | 1,165
Total | 1,078 | 2,444

Short-term deposits and guarantees at December 31,
2022 included current judicial deposits amounting to 106
million euros (see Note 24) constituted by Telefónica
Brazil which included the judicial deposit of the amount
withheld from the acquisition price of OI's mobile assets
(see Note 5), amounted to 522 million Brazilian reais (94
million euros).
Additionally at December 31, 2023 there were 50 million
euros registered in deposits ( 232 million euros at
December 31, 2022), associated with collateral
guarantees of Telefónica, S.A. classified as current
according to the maturity of the underlying derivative
instruments which they relate to.
The vast majority of short-term credits and deposits and
guarantees recognized at amortized cost and at fair value
with changes in "Other comprehensive income" (Note 16)
are considered to be low credit risk assets.
"Other current financial assets" include short-term
investments in financial instruments to cover
commitments undertaken by the Group’s insurance
companies, amounted to 187 million euros at
December 31, 2023 (126 million euros at December 31,
2022) and were recorded at fair value.
Additionally at December 31, 2022 this included the notes
issued by the international issue platform Single Platform
Investment Repackaging Entity, S.A. ("Spire"). These notes
were deposited in a securities account owned by
Telefónica, S.A. with a notional of 1,000 million dollars
equivalent to 939 million euros registered entirely under
"Other current financial assets" (see Note 12). The
investments have been fully cancelled according to its
maturity in 2023.
Current financial assets that are highly liquid and have
maturity periods of three months or less from the date
contracted, and present an insignificant risk of value
changes, are recorded under “Cash and cash equivalents”
on the accompanying consolidated statement of financial
position.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.64
Note 16. Breakdown of financial assets
The breakdown of financial assets of the Telefónica Group at December 31, 2023 is as follows:

December 31, 2023
| Fair value through profit or loss |  | Fair value through other comprehensive income |  | Measurement hierarchy |  |  |
Millions of euros | Held for trading | Fair value option |  | Debt instru- ments | Equity instru- ments | 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 (Note 12) | 224 | — |  | 289 | 578 | 1,785 | 537 | 2,326 | 13 | 2,325 | 5,201 | 5,201
Investments | 38 | — |  | — | 578 | — | 510 | 106 | — | — | 616 | 616
Credits and other financial assets | 31 | — |  | 9 | — | — | 27 | — | 13 | 701 | 741 | 741
Deposits and guarantees | — | — |  | — | — | — | — | — | — | 966 | 966 | 966
Derivative instruments | 155 | — |  | — | — | 1,785 | — | 1,940 | — | — | 1,940 | 1,940
Trade receivables | — | — |  | 280 | — | — | — | 280 | — | 769 | 1,049 | 924
Trade receivables for subleases | — | — |  | — | — | — | — | — | — | 14 | 14 | 14
Impairment of trade receivables | — | — |  | — | — | — | — | — | — | (125) | (125) | —
Current financial assets | 291 | — |  | 945 | — | 271 | 293 | 1,214 | — | 14,152 | 15,659 | 15,659
Trade receivables (Note 14) | — | — |  | 854 | — | — | — | 854 | — | 9,568 | 10,422 | 7,430
Impairment of trade receivables (Note 14) | — | — |  | — | — | — | — | — | — | (2,992) | (2,992) | —
Other current financial assets (Note 15) | 291 | — |  | 91 | — | 271 | 293 | 360 | — | 425 | 1,078 | 1,078
Cash and cash equivalents | — | — |  | — | — | — | — | — | — | 7,151 | 7,151 | 7,151
Total | 515 | — |  | 1,234 | 578 | 2,056 | 830 | 3,540 | 13 | 16,477 | 20,860 | 20,860

The calculation of the fair values of the Telefónica Group's debt instruments required an estimate, for each currency and counterparty, of a credit spread curve using the prices of
the Group's bonds and credit derivatives.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.65
The breakdown of financial assets of the Telefónica Group at December 31, 2022 was as follows:

December 31, 2022
| Fair value through profit or loss |  | Fair value through other comprehensive income |  | Measurement hierarchy |  |  |
Millions of euros | Held for trading | Fair value option |  | Debt instru- ments | Equity instru- ments | 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 (Note 12) | 323 | — |  | 350 | 465 | 2,404 | 464 | 3,067 | 11 | 2,677 | 6,219 | 6,219
Investments | 32 | — |  | — | 465 | — | 390 | 107 | — | — | 497 | 497
Credits and other financial assets | 27 | — |  | 58 | — | — | 74 | — | 11 | 896 | 981 | 981
Deposits and guarantees | — | — |  | — | — | — | — | — | — | 1,163 | 1,163 | 1,163
Derivative instruments | 264 | — |  | — | — | 2,404 | — | 2,668 | — | — | 2,668 | 2,668
Trade receivables | — | — |  | 292 | — | — | — | 292 | — | 727 | 1,019 | 891
Trade receivables for subleases | — | — |  | — | — | — | — | — | — | 19 | 19 | 19
Impairment of trade receivables | — | — |  | — | — | — | — | — | — | (128) | (128) | —
Current financial assets | 405 | — |  | 833 | — | 466 | 181 | 1,513 | 10 | 15,325 | 17,029 | 17,029
Trade receivables (Note 14) | — | — |  | 792 | — | — | — | 792 | — | 9,439 | 10,231 | 7,340
Impairment of trade receivables (Note 14) | — | — |  | — | — | — | — | — | — | (2,891) | (2,891) | —
Other current financial assets (Note 15) | 405 | — |  | 41 | — | 466 | 181 | 721 | 10 | 1,532 | 2,444 | 2,444
Cash and cash equivalents | — | — |  | — | — | — | — | — | — | 7,245 | 7,245 | 7,245
Total | 728 | — |  | 1,183 | 465 | 2,870 | 645 | 4,580 | 21 | 18,002 | 23,248 | 23,248

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.66
Note 17. Equity
a) Share capital and share premium
2023
At December 31, 2023 , Telefónica, S.A.´s share capital
amounted to 5,750,458,145 euros and is divided into
5,750,458,145 common shares, of a single series and with
a par value of 1 euro each, fully paid in. All the shares of
the Company have the same characteristics and carry the
same rights and obligations.
The Board of Directors of Telefónica, S.A. at its meeting
held on March 31, 2023, resolved to carry out the
implementation of the share capital reduction through the
cancellation of own shares approved by the Annual
General Shareholders’ Meeting held on March 31, 2023.
The share capital of Telefónica, S.A. was reduced in the
amount of 24,779,409 euros, through the cancellation of
24,779,409 own shares of the Company held as treasury
stock, with a nominal value of one euro each. The share
capital of the Company resulting from the reduction was
set at 5,750,458,145 euros corresponding to 5,750,458,145
shares with a nominal value of one euro each. Related to
the capital reduction the share premium was reduced by
73 million euros.
The reduction did not entail the return of contributions to
the shareholders since the Company is the owner of the
cancelled shares. The reduction was carried out with a
charge to unrestricted reserves, through the allocation of
a reserve for cancelled share capital in an amount equal
to the nominal value of the cancelled shares (i.e. for an
amount of 24,779,409 euros). This reserve for cancelled
share capital can only be used if the same requirements
as those applicable to the reduction of share capital are
met. Therefore, in accordance with the Section 335.c) of
the Corporate Enterprises Act, the creditors of the
Company can not claim the opposition right disclosed in
article 334 of the Corporate Enterprise Act.
On April 17, 2023, the deed relating to the share capital
reduction was registered in the Commercial Registry of
Madrid.
The shares of Telefónica, S.A. are represented by book
entries that are listed on the Spanish Electronic Market
(within the selective Ibex 35 index) and on the four
Spanish Stock Exchanges (Madrid, Barcelona, Valencia
and Bilbao), as well as on the New York and Lima Stock
Exchanges (on these latter two Exchanges through
American Depositary Shares (ADSs), with each ADS
representing one share of the Company).
2022
At December 31, 2022, Telefónica, S.A.´s share capital
amounted to 5,775,237,554 euros and is divided into
5,775,237,554 common shares, of a single series and with
a par value of 1 euro each, fully paid in.
The Board of Directors of Telefónica, S.A. at its meeting
held on April 8, 2022, resolved to carry out the
implementation of the share capital reduction through the
cancellation of own shares approved by the Annual
General Shareholders’ Meeting held on April 8, 2022.
The share capital of Telefónica, S.A. was reduced in the
amount of 139,275,057 euros, through the cancellation of
139,275,057 own shares of the Company held as treasury
stock, with a nominal value of one euro each. The share
capital of the Company resulting from the reduction was
set at 5,639,772,963 euros corresponding to 5,639,772,963
shares with a nominal value of one euro each. Related to
the capital reduction the share premium was reduced by
409 million euros.
The reduction did not entail the return of contributions to
the shareholders since the Company is the owner of the
cancelled shares. The reduction was carried out with a
charge to unrestricted reserves, through the allocation of
a reserve for cancelled share capital in an amount equal
to the nominal value of the cancelled shares (i.e. for an
amount of 139,275,057 euros). This reserve for cancelled
share capital can only be used if the same requirements
as those applicable to the reduction of share capital are
met. Therefore, in accordance with the Section 335.c) of
the Corporate Enterprises Act, the creditors of the
Company can not claim the opposition right disclosed in
article 334 of the Corporate Enterprise Act.
On April 22, 2022, the deed relating to the share capital
reduction was registered in the Commercial Registry of
Madrid.
On June 24, 2022 the deed of capital increase amounting
to 135,464,591 euros, divided into 135,464,591 ordinary
shares, with a nominal value of one euro each, and issued
against reserves as part of the scrip dividend, was filed in
the Madrid Commercial registry. Following the share
capital increase, the share capital was set up at
5,775,237,554 euros.
Authorizations by Shareholders’ Meeting
As regards the authorizations conferred in respect of the
share capital, the shareholders acting at the Ordinary
General Shareholders’ Meeting held on June 12, 2020
resolved to delegate to the Board of Directors, as broadly

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.67
as required by Law, pursuant to the provisions of Section
297.1.b) of the Companies Act, the power to increase the
share capital on one or more occasions and at any time,
within a period of five year from the date of adoption of
such resolution, by the maximum nominal amount of
2,596,065,843 euros, equal to one-half of the share
capital of the Company on the date of adoption of the
resolution at the General Shareholders’ Meeting, issuing
and floating the respective new shares for such purpose
with or without a premium, the consideration for which
will consist of monetary contributions, with express
provision for incomplete subscription of the shares to be
issued. The Board of Directors was also authorized to
exclude pre-emptive rights in whole or in part, as
provided in section 506 of the Companies Act. However,
the power to exclude pre-emptive rights is limited to 20%
of the share capital on the date on which the resolution is
adopted. In accordance with the above-mentioned
authorization, as of the end of fiscal year 2023, the Board
would be authorized to increase the share capital by the
maximum nominal amount of 2,596,065,843 euros.
Furthermore, the shareholders acting at the Ordinary
General Shareholders’ Meeting of Telefónica, S.A. held on
June 12, 2020 delegated to the Board of Directors, in
accordance with the general rules governing the issuance
of debentures and pursuant to the provisions of
applicable law and the Company’s By-Laws, the power to
issue securities, including preferred shares and warrants,
with the power to exclude the pre-emptive rights of
shareholders. The aforementioned securities may be
issued on one or more occasions, within a maximum
period of five years as from the date of adoption of the
resolution. The securities issued may be debentures,
bonds, notes and other fixed-income securities, or debt
instruments of a similar nature, or hybrid instruments in
any of the forms admitted by Law (including, among
others, preferred interests) both simple and, in the case of
debentures, bonds and hybrid instruments, convertible
into shares of the Company and/or exchangeable for
shares of the Company, of any of the companies of its
Group or of any other company and/or giving the holders
thereof an interest in the corporate earnings. Such
delegation also includes warrants or other similar
instruments that may entitle the holders thereof, directly
or indirectly, to subscribe for or acquire newly-issued or
outstanding shares, payable by physical delivery or
through differences. The aggregate amount of the
issuance or issuances of instruments that may be
approved in reliance on this delegation may not exceed,
at any time, 25,000 million euros or the equivalent thereof
in another currency. In the case of notes and for purposes
of the above-mentioned limits, the outstanding balance of
those issued in reliance on the delegation shall be
computed. In the case of warrants, and also for the
purpose of such limit, the sum of the premiums and
exercise prices of each issuance shall be taken into
account.
Furthermore, under the aforementioned delegation
resolution, the shareholders at the Ordinary General
Shareholders’ Meeting of Telefónica, S.A. resolved to
authorize the Board of Directors to guarantee, in the
name of the Company, the issuance of the
aforementioned instruments issued by the Companies
belonging to its Group of Companies, within a maximum
period of five years as from the date of adoption of the
resolution.
Furthermore, on March 31, 2023, shareholders voted to
authorize the acquisition by the Board of Directors of
Telefónica, S.A. treasury shares, up to the limits and
pursuant to the terms and conditions established at the
Shareholders’ Meeting, within a maximum five-year
period from that date. However, it specified that in no
circumstances could the par value of the shares acquired,
added to that of the treasury shares already held by
Telefónica, S.A. and by any of its controlled subsidiaries,
exceed the maximum legal percentage at any time.
b) Dividends
Dividends distribution in 2023
Approval was given at the General Shareholders’ Meeting
of March 31, 2023 to pay a dividend in cash charge to
unrestricted reserves amounting to 0.30 euros per share
payable in two tranches.
On June 15, 2023,0.15 euros per share was paid, for a total
amount of 851 million euros, and on December 14, 2023, a
second payment of 0.15 euros amounting to 847 million
euros.
Dividends distribution in 2022
Approval was given at the General Shareholders’ Meeting
of April 8, 2022 to pay a dividend in two tranches, for an
approximately amount of 0.30 euros per share.
On June 22, 2022, took place the payment of a scrip
dividend of approximately 0.15 euros per share consisting
of the assignment of free allotment rights with an
irrevocable purchase commitment by the Company, after
the adoption of the corresponding corporate resolutions.
At its meeting held on May 25, 2022, the Executive
Commission of Telefónica, S.A. Board of Directors agreed
to carry out the execution of the increase in paid-up
capital, related to the shareholders compensation by
means of a scrip dividend. Thus, each shareholder
received one free allotment right for each Telefónica
share held. Such free allotment rights were traded on the
Continuous Market in Spain during a period of 15 calendar
days. Once this trading period ended, the shareholders of
25.54% of the free-of-charge allotment rights accepted
the irrevocable purchase commitment assumed by
Telefónica, S.A. The payment to these shareholders was

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.68
made on June 16, 2022. The gross impact of this dividend
amounted to 213 million euros.
On the other hand, the shareholders of 74.46% of the
free-of-charge allotment rights were entitled, therefore,
to receive new shares of Telefónica, S.A. So the final
number of shares issued after June 24, 2022 in the capital
increase was 135,464,591 shares with a nominal value of 1
euro each.
On December 15, 2022 took place the payment of a
dividend of 0.15 euros per share amounting to 854 million
euros.
Dividends distribution in 2021
Approval was given at the General Shareholders’ Meeting
of April 23, 2021 to pay a scrip dividend amounting to
approximately 0.30 euros per share in two tranches,
consisting of the assignment of free allotment rights with
an irrevocable purchase commitment by the Company,
and a subsequent capital increase by means of the issue
of new shares to fulfill said allotments, following a specific
calculation mechanism which might result in variations of
the amount.
At its meeting held on May 26, 2021, the Executive
Commission of Telefónica, S.A. Board of Directors agreed
to carry out the execution of the increase in paid-up
capital, related to the shareholders compensation by
means of a scrip dividend. Thus, each shareholder
received one free allotment right for each Telefónica
share held. Such free allotment rights were traded on the
Continuous Market in Spain during a period of 15 calendar
days. Once this trading period ended, the shareholders of
28.53% of the free-of charge allotment rights accepted
the irrevocable purchase commitment assumed by
Telefónica, S.A. The payment was made on June 17, 2021.
The gross impact of this dividend amounted to 308 million
euros.
On the other hand, the shareholders of 71.47% of the free
of-charge allotment rights were entitled, therefore, to
receive new shares of Telefónica, S.A. So the final number
of shares issued after June 22, 2021 in the capital increase
was 194,518,911 shares with a nominal value of 1 euro each.
The Executive Commission of Telefónica, S.A. Board of
Directors meeting of November 3, 2021 agreed the
implementation of the second capital increase with
charge to reserves related to the shareholder
compensation by means of a scrip dividend. Thus, each
shareholder received one free allotment right for each
Telefónica share held. The shareholders of 34.98% of the
free of- charge allotment rights accepted the irrevocable
purchase commitment assumed by Telefónica, S.A. The
payment was made on December 17, 2021. The gross
impact of this dividend amounted to 292 million euros.
On the other hand, the shareholders of 65.02%of the free
of-charge allotment rights were entitled, therefore, to
receive new shares of Telefónica, S.A. So the final number
of ordinary shares with a nominal value of 1 euro issued in
the capital increase was 140,994,513
Proposed distribution of results of the parent
company
Telefónica, S.A. generated 2,153 million euros of profits in
2023.
The Company’s Board of Directors will submit the
following proposed distribution of 2023 results for
approval at the Shareholders’ Meeting:

| Millions of euros
Legal reserve | 91
Unrestricted reserves | 2,062
Total | 2,153

c) Other equity instruments
Undated deeply subordinated securities
Unless specified otherwise, undated deeply subordinated
securities were issued by Telefónica Europe, B.V.
The characteristic of undated deeply subordinated
securities, the detail of the tender offer and the amounts
repurchased in the operations and the amount amortized
in advance, are the following (million euros):

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.69

Issue date | Annual Fix | Variable | Exercisable by issuer | 12/31/2022 | Tender Offer | Amount repurchased | Redemption | 12/31/2023
9/7/2023 (1) | 6.750% | from 09/07/31 rate SWAP + spread incremental | 2031 | — |  |  |  | 750
2/2/2023 (1) | 6.135% | from 05/03/30 rate SWAP + spread incremental | 2030 | — |  |  |  | 1,000
11/23/2022 (1) | 7.125% | from 11/23/28 rate SWAP + spread incremental | 2028 | 750 |  |  |  | 750
11/24/2021 (2) | 2.880% | from 05/24/28 rate SWAP + spread incremental | 2028 | 750 |  |  |  | 750
2/12/2021 (2) | 2.376% | from 05/12/29 rate SWAP + spread incremental | 2029 | 1,000 |  |  |  | 1,000
2/5/2020 (1) | 2.502% | from 05/05/27 rate SWAP + spread incremental | 2027 | 500 |  |  |  | 500
09/24/2019 | 2.875% | from 09/24/27 rate SWAP + spread incremental | 2027 | 500 |  |  |  | 500
03/14/2019 | 4.375% | from 03/14/25 rate SWAP + spread incremental | 2025 | 1,300 |  |  |  | 1,300
03/22/2018 | 3.000% | from 12/04/23 rate SWAP + spread incremental | 2023 | 750 | 750 | (388) | (362) | —
3.875% | from 09/22/26 rate SWAP + spread incremental | 2026 | 1,000 |  |  |  | 1,000
03/31/2014 | 5.875% | from 03/31/24 rate SWAP + spread incremental | 2024 | 1,000 | 1,000 | (855) | (145) | —
|  |  |  | 7,550 |  |  |  | 7,550

(1) Green undated deeply subrodinated securities (see Note 29.d)
(2) Sustanible undated deeply subordinated securities (see Note 29.d)
In all issuances of undated deeply subordinated securities
(hybrid instruments), the issuer has an option to defer the
payment of coupons and holders of such securities
cannot call for payment.
As the repayment of principal and the payment of
coupons depend solely on Telefónica’s decision, these
undated deeply subordinated securities are equity
instruments and are presented under “Other equity
instruments” in the accompanying consolidated
statement of changes in equity.
In January 2023, Telefónica Europe, B.V. carried out
several transactions on its hybrid capital: (a) a new issue
amounting to 1,000 million euros, guaranteed by
Telefónica, S.A. (see Note 29.d); (b) a tender offer on a
hybrid instruments, denominated in euros, with call dates
in December 2023 and March 2024. The issuer accepted
the purchase in cash of the tendered securities in a
principal amount of 1000 million euros.
In September 2023, Telefónica Europe, B.V. carried out
several transactions on its hybrid capital: (a) a new issue
amounting to 750 million euros, guaranteed by
Telefónica, S.A. (see Note 29.d); (b) a tender offer on a
hybrid instruments, denominated in euros, with first call
date in March 2024. The issuer accepted the purchase in
cash of the tendered securities in a principal amount of
242 million euros.
In October 2023, Telefónica Europe, B.V. exercised the
clean-up call option for the remaining hybrid instruments
with first non-call date March 2024, with an aggregate
principal amount of 145 million euros and in December
2023, exercised the clean-up call option for the remaining
hybrid instruments with call date December 2023, with an
aggregate principal amount of 362 million euros.
In 2023 , the payment of the coupons related to hybrids
instruments, in an aggregate amount, net of tax effects, of
239 million euros ( 201 million and 263 million euros in
2022 and 2021, respectively), was recorded as “Retained
earnings” in the consolidated statements of changes in
equity.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.70
d) Legal reserve
According to the consolidated text of the Spanish
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 of December 31,
2023 the legal reserve amounts to 1,059 million euros
representing 18.42% of the share capital at the date.
e) Retained earnings
These reserves include undistributed profits of companies
constituting the consolidated Group minus interim
dividends paid against profit for the year, actuarial gains
and losses, the impact of the asset ceiling on defined
benefit plans and the payment of coupons related to
subordinated securities, if applicable.
These reserves also include revaluation reserves and the
reserve for canceled share capital. These reserves are
regulated by some restrictions for their distribution.
Revaluation reserves
The balance of Revaluation reserves arose as a result of
the revaluation made pursuant to Spanish Royal Decree-
Law 7/1996 of June 7, and may be used, free of tax, to
offset any losses incurred in the future and to increase
capital. It may also 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 was
recorded for accounting purposes or when the revalued
assets were transferred or recognized. In this respect, 3
million euros were reclassified to “Retained earnings” in
2023 ( 4 million euros in 2022) corresponding to
revaluation reserves subsequently considered to be
unrestricted. At December 31, 2023 , this reserve
amounted to 51 million euros ( 54 million euros at
December 31, 2022).
Reserve for canceled share capital
In accordance with Section 335.c) of the Spanish
Corporate Enterprises Act and to render null and void the
right of opposition provided for in Section 334 of the same
Act, whenever the Company decreases capital, it should
record a reserve for canceled share capital for an amount
equal to the par value of the canceled shares, which can
only be used upon satisfaction of the same requirements
as those applicable to the reduction of share capital. In
2023 was recorded in this account 25 million euros ( 139
million euros in 2022). The cumulative amount as of
December 31, 2023 is 979 million euros.
f) Translation differences
The breakdown of the accumulated contribution of
translation differences attributable to equity holders of
the parent at December 31 is as follows:

Millions of euros | 2023 | 2022 | 2021
Brazilian real | (13,612) | (14,031) | (15,292)
Pound sterling | (97) | (322) | 309
Venezuelan bolivar | (3,686) | (3,734) | (3,755)
Argentine peso | (2,011) | (1,364) | (1,702)
Other currencies | (1,280) | (1,272) | (1,452)
Total Group | (20,686) | (20,723) | (21,892)

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.71
g) Treasury share instruments
Telefónica, S.A. held the following treasury shares at
December 31, 2023, 2022 and 2021 :

|  | Euros per share |  |
| Number of shares | Acquisition price | Trading price | Market value(*) | %
Treasury shares at 12/31/2023 | 111,099,480 | 3.87 | 3.53 | 393 | 1.932%
Treasury shares at 12/31/2022 | 85,217,621 | 4.00 | 3.39 | 288 | 1.476%
Treasury shares at 12/31/2021 | 139,329,370 | 3.92 | 3.85 | 537 | 2.411%

(*) Millions of euros.
The following transactions involving treasury shares were
carried out in 2023, 2022 and 2021:

| Number of shares
Treasury shares at 12/31/2020 | 98,231,380
Acquisitions | 122,032,764
Scrip dividend | 6,291,518
Employee share option plan | (4,329,826)
Other movements | (82,896,466)
Treasury shares at 12/31/2021 | 139,329,370
Acquisitions | 90,403,530
Scrip dividend | 563,415
Employee share option plan | (5,391,956)
Capital reduction | (139,275,057)
Sales | (411,681)
Treasury shares at 12/31/2022 | 85,217,621
Acquisitions | 60,070,274
Employee share option plan | (8,845,558)
Capital reduction | (24,779,409)
Sales | (563,448)
Treasury shares at 12/31/2023 | 111,099,480

There were treasury shares purchases in 2023 amounting
to 223 million euros (365 and 478 million euros in 2022
and 2021, respectively)
The Company also has different derivative instruments, to
be settled by offset, on a nominal value equivalent to 193
million of Telefónica shares, mainly contracted through
Banco Bilbao Vizcaya, recorded in the statement of
financial position at December 31, 2023 in accordance
with their maturity date and fair value (193 million euros at
December 31, 2022).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.72
h) Equity attributable to non-
controlling interests
“Equity attributable to non-controlling interests”
represents the share of non-controlling interests in the
equity and income or loss for the year of fully
consolidated Group companies. The movements in this
balance for the 2023 , 2022 and 2021 consolidated
statements of financial position are as follows:

Millions of euros | Balance at 12/31/22 | Sales of non- controlling interests and inclusion of companies | Acquisitions of non- controlling interests and exclusion of companies | Dividends paid | Profit/ (loss) for the year | Change in translation differences | Other movements | Balance at 12/31/23
Telefônica Brasil, S.A. | 3,399 | — | (111) | (158) | 238 | 182 | (4) | 3,546
Telefónica Deutschland Holding, A.G. | 2,237 | — | (866) | (157) | 71 | — | 1 | 1,286
Colombia Telecomunicaciones, S.A., ESP BIC | 344 | — | — | — | (44) | 70 | (8) | 362
Telxius Telecom, S.A. | 599 | — | (585) | (28) | 22 | (19) | 11 | —
Other | 41 | — | (17) | (2) | 31 | — | (3) | 50
Total | 6,620 | — | (1,579) | (345) | 318 | 233 | (3) | 5,244
Millions of euros | Balance at 12/31/21 | Sales of non- controlling interests and inclusion of companies | Acquisitions of non- controlling interests and exclusion of companies | Dividends paid | Profit/ (loss) for the year | Change in translation differences | Other movements | Balance at 12/31/22
Telefônica Brasil, S.A. | 3,106 | — | (86) | (241) | 198 | 425 | (3) | 3,399
Telefónica Deutschland Holding, A.G. | 2,353 | — | (48) | (161) | 68 | — | 25 | 2,237
Colombia Telecomunicaciones, S.A., ESP BIC | 409 | — | — | (7) | (4) | (47) | (7) | 344
Telxius Telecom, S.A. | 546 | — | — | — | 50 | 13 | (10) | 599
Other | 63 | 23 | (44) | (2) | (4) | 2 | 3 | 41
Total | 6,477 | 23 | (178) | (411) | 308 | 393 | 8 | 6,620
Millions of euros | Balance at 12/31/20 | Sales of non- controlling interests and inclusion of companies | Acquisitions of non- controlling interests and exclusion of companies | Dividends paid | Profit/ (loss) for the year | Change in translation differences | Other movements | Balance at 12/31/21
Telefônica Brasil, S.A. | 3,106 | — | (63) | (236) | 271 | 17 | 11 | 3,106
Telefónica Deutschland Holding, A.G. | 2,346 | — | (56) | (165) | 218 | — | 10 | 2,353
Colombia Telecomunicaciones, S.A., ESP BIC | 408 | — | — | — | 7 | (28) | 22 | 409
Telxius Telecom, S.A. | 1,089 | — | — | (2,645) | 2,098 | 16 | (12) | 546
Other | 76 | — | — | (5) | (14) | 5 | 1 | 63
Total | 7,025 | — | (119) | (3,051) | 2,580 | 10 | 32 | 6,477

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.73
2023
The 2023 movement mainly includes the impact of the
acquisition of KKR's stake in Telxius and the acquisition by
Telefónica of shares of Telefónica Deutschland through a
public tender Offer.
Acquisition of KKR's percentage stake in Telxius
In January 2023, once the corresponding regulatory and
competition approvals were obtained, Pontel
Participaciones, S.L. ("Pontel"), Telefónica’s subsidiary
held 83.35%by Telefónica and 16.65% by Pontegadea
Inversiones, S.L., ("Pontegadea") acquired 40% of the
share capital of Telxius Telecom, S.A. from Taurus Bidco
S.à r.l. (a company managed by KKR). As a result of the
transaction, Pontel, which held the remaining 60% of
Telxius Telecom, S.A.'s share capital, became the sole
shareholder of Telxius Telecom, S.A. Likewise,
Pontegadea increased its holding in Pontel to 30% and
Telefónica has a 70% stake.
Within the framework of this transaction and on the same
date, Pontel carried out a capital increase fully subscribed
and paid up by its shareholders in the proportion agreed
between them, in such a way that both Telefónica and
Pontegadea paid out 111 million euros.
Additionally, in January 2023 Telxius recovered the credit
amounting 876 million euros corresponding to the income
tax for the 2021 fiscal year (see Note 24). The amount was
distributed to its shareholders, with KKR receiving 351
million euros for 40% and Pontegadea receiving 88 million
euros for 9.99%.
Subsequently, with effect from March 24, 2023, Telxius
Telecom, S.A. absorbed Pontel Participaciones, S.L.
The impact of these transactions on the consolidated
statement of changes in equity in 2023 was a reduction in
equity attributable to the parent company for an amount
of 46 million euros and a reduction in equity attributable
to minority interests for an amount of 585 million euros.
Public Offer for the Acquisition of Shares of
Telefónica Deutschland
On November 7, 2023, Telefónica, through its subsidiary
Telefónica Local Services GmbH, launched a partial
voluntary public offer for the acquisition of shares of
Telefónica Deutschland Holding AG. The Offer
acceptance period began on December 5, 2023 and
ended on January 17, 2024 (both inclusive).
The cash outflow in 2023 of the direct purchases made in
the fiscal year has amounted to 816 million euros (see
Notes 2, 28 and 31).
2022
In 2022, "sales of non-controlling interest and inclusion of
companies" reflected the impact of the acquisition by the
consortion form by CAA and Vauban of 45% of the
company Bluevia for 23 million euros (see Note 2).
2021
In 2021 noteworthy is the result attributable to minority
shareholders of Telxius from the sale of its
telecommunications towers division (see Note 2) and the
dividend distribution related with this transaction (Note
28).
Note 4 contains the revenues, OIBDA, Operating income,
capital expenditure and the main items of the statement
of financial position for the main segments of the
Telefónica Group with non-controlling interests, namely
Telefónica Brazil and Telefónica Germany. The detail of
these figures for Colombia Telecomunicaciones and
Telxius Telecom is as follows:

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.74

Millions of euros |  |  |
Colombia Telecomunicaciones | 2023 | 2022 | 2021
Revenues | 1,497 | 1,517 | 1,312
OIBDA | 359 | 569 | 413
Depreciation and amortization | (295) | (308) | (314)
Operating income | 64 | 261 | 99
Capital Expenditure | 125 | 261 | 151
Fixed Assets | 1,234 | 1,116 | 1,264
Total allocated assets | 2,936 | 2,696 | 2,725
Total allocated liabilities | 2,258 | 2,001 | 1,878

Millions of euros |  |  |
Telxius Telecom | 2023 | 2022 | 2021
Revenues | 410 | 421 | 587
OIBDA | 211 | 218 | 6,332
Depreciation and amortization | (66) | (66) | (72)
Operating income | 145 | 152 | 6,260
Capital Expenditure | 66 | 65 | 91
Fixed Assets | 500 | 507 | 475
Total allocated assets | 1,210 | 2,129 | 2,083
Total allocated liabilities | 1,333 | 1,163 | 1,225

The statements of cash flows of these companies are as follows:

Millions of euros |  |  |
Telefónica Brazil | 2023 | 2022 | 2021
Net cash flow provided by operating activities | 3,710 | 3,678 | 2,949
Net cash flow used in investing activities | (1,477) | (2,741) | (1,295)
Net cash flow used in financing activities | (1,709) | (1,674) | (1,467)

Millions of euros |  |  |
Telefónica Germany | 2023 | 2022 | 2021
Net cash flow provided by operating activities | 2,684 | 2,732 | 2,407
Net cash flow used in investing activities | (1,337) | (1,608) | (875)
Net cash flow used in financing activities | (1,498) | (1,339) | (1,820)

Millions of euros |  |  |
Colombia Telecomunicaciones | 2023 | 2022 | 2021
Net cash flow provided by operating activities | 206 | 180 | 344
Net cash flow provided by (used in) investing activities | (144) | 30 | (153)
Net cash flow provided by (used in) financing activities | (80) | (225) | (218)

Millions of euros |  |  |
Telxius Telecom | 2023 | 2022 | 2021
Net cash flow provided by operating activities | 174 | 152 | (627)
Net cash flow provided by (used in) investing activities | 902 | (63) | 6,874
Net cash flow provided by (used in) financing activities | (999) | (89) | (6,164)

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.75
Note 18. Financial liabilities
The breakdown of financial liabilities at December 31,
2023 and the corresponding maturities schedule is as
follows:

Millions of euros
| Current |  | Non-current |  |
Maturity | 2024 |  | 2025 | 2026 | 2027 | 2028 | Subse- quent years | Non- current total | Total
Debentures and bonds | 1,565 |  | 3,133 | 2,072 | 3,911 | 2,110 | 17,407 | 28,633 | 30,198
Promissory notes & commercial paper | 1,141 |  | 54 | 12 | 3 | 19 | 140 | 228 | 1,369
Total Issues | 2,706 |  | 3,187 | 2,084 | 3,914 | 2,129 | 17,547 | 28,861 | 31,567
Loans and other payables | 759 |  | 553 | 498 | 327 | 311 | 1,153 | 2,842 | 3,601
Derivative instruments (Note 19) | 236 |  | 160 | 77 | 585 | 335 | 500 | 1,657 | 1,893
Total | 3,701 |  | 3,900 | 2,659 | 4,826 | 2,775 | 19,200 | 33,360 | 37,061

The estimate of future payments for interest on these
financial liabilities at December 31, 2023 is as follows:
1,202 million euros in 2024, 1,115 million euros in 2025,
1,031 million euros in 2026 , 912 million euros in 2027 , 831
million euros in 2028 and 7,067 million euros in years after
2028. For floating rate financing, the Group mainly
estimates future interest using the forward curve of the
various currencies at December 31, 2023.
Derivative instruments in the table above include the fair
value of derivatives classified as financial liabilities, i.e.
when they have a negative mark-to-market, yet excluding
the fair value of derivatives classified as current financial
assets (352 million euros, see Note 15) and non-current
financial assets ( 1,940 million euros, see Note 12).
The heading “Financed operating payments and
investments in property, plant and equipment and
intangible assets payments”, in the “Net cash used in
financing activities” flow of the consolidated statement of
cash flow (see Note 28) amounted to 245 million euros
corresponding in its totality to financed spectrum licenses
(698 million euros in 2022 of which 657 million euros
corresponded to financed spectrum licenses and 41
million euros of payments to suppliers or with factoring
companies with extended terms).
The composition of the financial liabilities by category at
December 31, 2023 and 2022 is as follows:

December 31, 2023
| 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 | — | — | — | — | — | — | 31,567 | 31,567 | 30,498
Loans and other payables | — | — | — | — | — | — | 3,601 | 3,601 | 3,602
Derivative instruments | 582 | — | 1,311 | — | 1,893 | — | — | 1,893 | 1,893
Total financial liabilities | 582 | — | 1,311 | — | 1,893 | — | 35,168 | 37,061 | 35,993

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.76

December 31, 2022
| 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 | — | — | — | — | — | — | 32,167 | 32,167 | 29,314
Loans and other payables | — | — | — | — | — | — | 4,544 | 4,544 | 4,514
Derivative instruments | 973 | — | 1,395 | — | 2,368 | — | — | 2,368 | 2,368
Total financial liabilities | 973 | — | 1,395 | — | 2,368 | — | 36,711 | 39,079 | 36,196

The calculation of the fair values of the Telefónica
Group’s debt instruments required an estimate of the
credit spread curve for each currency and corresponding
subsidiary using the prices of the Group’s bonds and
credit derivatives.
At December 31, 2023 , some of the financing arranged by
Telefónica Group companies in Latin America (Peru),
which amounted to approximately 1% of the Telefónica
Group’s gross debt, was subject to compliance with
certain financial covenants. To date, these covenants are
being met and have no impact on the debt of the
Telefónica Group companies. Due to the absence of
cross-defaults, breach of the covenants would not affect
the debt at Telefónica, S.A. level.
Some of the financial liabilities of Telefónica Group
includes adjustments in the amortized cost at
December 31, 2023 and 2022 as a result of fair value
interest rate and exchange rate hedges.
Issues, promissory notes, commercial
paper, loans and other payables
The movement in issues, promissory notes, commercial
paper, loans and other payables in 2023 and 2022 arising
from financial activities is as follows:

| Cash used in financing activities |  |  |
Millions of euros | Balance at 12/31/2022 | Cash received | Cash paid | Translation differences and exchange gains and losses | Financial updates | Other movements | Balance at 12/31/2023
Issues | 31,268 | 967 | (1,910) | (302) | 175 | — | 30,198
Promissory notes and commercial paper | 899 | 504 | (43) | — | — | 9 | 1,369
Loans and other payables | 4,544 | 1,183 | (1,456) | 26 | 1 | (697) | 3,601

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.77

| Cash used in financing activities |
Millions of euros | Balance at 12/31/2021 | Cash received | Cash paid | Translation differences and exchange gains and losses | Financial updates | Other movements | Balance at 12/31/2022
Issues | 33,920 | 1,746 | (3,541) | 724 | (1,623) | 42 | 31,268
Promissory notes and commercial paper | 1,488 | 7 | (600) | 4 | — | — | 899
Loans and other payables | 4,693 | 742 | (1,802) | 55 | (38) | 894 | 4,544

Debentures and bonds
Financial updates of debenture and bond issues include
mainly the value adjustment of the basis adjustment
bonds due to their fair value hedges, impacted by interest
rate movements.
At December 31, 2023, the nominal amount of
outstanding debentures and bonds issues was 29,779
million euros ( 31,095 million euros at December 31, 2022 ).
Appendix III presents the characteristics of all outstanding
debentures and bond issues at the year-end 2023 , and
the significant issues made during the year.
Telefónica, S.A. has a full and unconditional guarantee on
issues made by Telefónica Emisiones, S.A.U., and
Telefónica Europe, B.V., both of which are wholly owned
finance subsidiaries of Telefónica, S.A. No other
subsidiaries of Telefónica, S.A. provide guarantees on
these issues.
Promissory notes and commercial paper
The main programs for issuance of promissory notes and
commercial paper are the following:
• At December 31, 2023, Telefónica Europe, B.V. had a
commercial paper issuance program guaranteed by
Telefónica, S.A. for up to 5,000 million euros. The
outstanding balance of commercial paper issued under
this program at December 31, 2023 was 1,000 million
euros, issued at an average interest rate of 3.65% for
2023 (500 million euros issued in 2022 at an average
rate of 0.28%).
• At December 31, 2023 , Telefónica, S.A. had a corporate
promissory note program for 500 million euros
expandable to 2,000 million euros, with no outstanding
balance at December 31, 2023 (no outstanding balance
at December 31, 2022).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.78
Interest-bearing debt
Other movements in "Loans and other payables" at
December 31, 2023 include collections and payments
related to collateral liabilities deposit associated with
Telefónica, S.A. debt for a net amount of proceeds
amounting to 589 million euros (580 million euros for a
net amount of payments at December 31, 2022).
The average interest rate on outstanding loans and other
payables at December 31, 2023 was 4.47% (3.45% in
2022 ). This percentage does not include the impact of
hedges arranged by the Group.
The main financing transactions included under
“Interest-bearing debt” line outstanding at December 31,
2023 and 2022 and their nominal amounts are provided
in Appendix V.
Interest-bearing debt arranged or repaid in 2023 mainly
includes the following:

Description | Limit 12/31/2023 (*) (million euros) | Currency | Outstanding balance 12/31/2023 (million euros) | Arrangement date | Maturity date | Drawndown 2023 (million euros) | Repayment 2023 (million euros)
Telefónica, S.A. |  |  |  |  |  |  |
Sustainable syndicated (1) | 5,500 | EUR | — | 03/15/2018 | 01/13/2027 | — | —
Bilateral loan | — | EUR | 125 | 12/23/2022 | 06/15/2033 | 125 | —
Bilateral loan | — | EUR | 150 | 02/14/2023 | 09/29/2033 | 150 | —
Telefónica Brasil, S.A. |  |  |  |  |  |  |
Bilateral loan | — | USD | — | 04/04/2022 | 09/28/2023 | — | 199
Telefónica Móviles Chile, S.A. |  |  |  |  |  |  |
Bilateral loan | — | USD | — | 04/17/2020 | 09/29/2023 | — | 133
Bilateral loan | — | USD | 116 | 08/22/2023 | 08/22/2026 | 116 | —
Bluevia Fibra S.L.U. |  |  |  |  |  |  |
Syndicated (2) | 360 | EUR | 250 | 11/16/2022 | 12/20/2028 | 10 | (5)
Telxius Telecom, S.A. |  |  |  |  |  |  |
Syndicated (3) | — | EUR | — | 12/01/2017 | 12/01/2024 | — | 201
Syndicated (4) | 145 | EUR | 100 | 12/01/2023 | 12/01/2028 | 100 | —

(1) The first one year extension option of the 5,500 million euros syndicated credit facility of Telefonica, S.A., was executed on January 13, 2023 and the
second one year extension option on January 13, 2024. The facility had two annual extension options at Telefónica, S.A. request, with a maximum maturity
up to 2029.
(2) On December 20, 2023 the first one year extension of the Bluevía Fibra S.L.U syndicated facility for 360 million euros was executed. The facility has two
annual extension options at Bluevía Fibra S.L.U request with a maturity maximum up to 2029.
(3) On December 1, 2023 there was early cancellation on the Telxius Telecom, S.A, syndicated facility signed on 2017.
(4) The facility has two annual extension options at Telxius Telecom, S.A, request with a maturity maximum up to 2030.
(*) Undrawn limit.
At December 31, 2023 , the Telefónica Group presented
availabilities of financing from different sources that
amounted to approximately 11,315 million euros (11,737
million euros at December 31, 2022 ), of which 11,148
million euros will mature in more than twelve months.
Within these availabilities of financing, 10,282 million
euros are included, whose interests are linked to the
fulfillment of sustainability objectives. Of these, 4,032

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.79
million euros correspond to committed lines and bilateral
financing, 750 million euros correspond to the
sustainable syndicated loan of Telefónica Germany
GmbH & Co. OHG (see Annex V) and 5,500 million euros
correspond to the sustainable syndicated loan of
Telefónica, S.A. (see Note 29.d).
Loans by currency
The breakdown of “Loans and other payables” line by
currency at December 31, 2023 and 2022, and the
equivalent value of foreign-currency loans in euros, is as
follows:

| Outstanding balance (in millions)
| Local Currency |  | Euros
Currency | 12/31/2023 | 12/31/2022 |  | 12/31/2023 | 12/31/2022
Euro | 2,266 | 2,823 |  | 2,266 | 2,823
U.S. dollar | 389 | 514 |  | 352 | 481
Brazilian real | 119 | 1,688 |  | 22 | 303
Colombian peso | 1,402,872 | 1,402,435 |  | 332 | 273
Mexican peso | 2,716 | 4,501 |  | 145 | 217
Uruguayan peso | 5,455 | 5,456 |  | 126 | 128
Chilean Peso | 247,252 | 181,601 |  | 255 | 199
Other currencies |  |  |  | 103 | 120
Total Group |  |  |  | 3,601 | 4,544

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.80
Note 19. 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 the Group 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), (ii) debt
denominated in currencies other than that of the
country where the business is conducted or the home
country of the company incurring such debt , and (iii) for
those trade receivables or payables in foreign currency
related to the company with the transaction registered.
• Interest rate risk: arises primarily in connection with
changes in interest rates affecting: (i) financial expenses
on floating-rate debt (or short-term debt likely to be
renewed), (ii) the value of long-term liabilities at fixed
interest rates and (iii) financial expenses and principal
payments of inflation-linked financial instruments,
considering interest rate risk as the impact of changes
in inflation rates.
• Share price risk : arises primarily from changes in the
value of the equity investments (that may be bought,
sold or otherwise involved in transactions), from
changes in the value of derivatives associated with
such investments, from changes in the value of treasury
shares and from changes in the value of equity
derivatives.
• Liquidity risk: arises due to a mismatch between
financing needs (including operating and financial
expenses, investment, debt redemptions and dividend
commitments) and 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.
• Country risk : 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.
• Credit risk : appears when a counterparty fails to meet
or delays its payment obligations in accordance with
the agreed terms, driving an impairment in an asset due
to: (i) solvency issues, or (ii) no intention to pay.
Risk management
The Telefónica Group actively manages these risks
through the use of derivatives (primarily on exchange
rates, interest rates, credit, share prices and commodities)
and by incurring debt in local currencies, where
appropriate, with a view to optimize the financial cost and
to stabilizing cash flows, the income statement and
investments. In this way, it attempts to protect the
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 financial debt (including
leases under IFRS 16) plus commitments as calculated by
the Group. The Telefónica Group believes that these
parameters are more appropriate to understand its debt
position. Net financial debt and net financial debt plus
commitments take into account the impact of the Group’s
cash balance and cash equivalents including derivatives
positions with a positive value linked to liabilities. Neither
net financial debt nor net financial debt plus
commitments as calculated by the Telefónica Group
should be considered as a substitute for gross financial
debt (the sum of current and non-current interest-
bearing debt).
For a more detailed description on reconciliation of net
financial debt and net financial debt plus commitments to
gross financial debt, see Note 2.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.81
Exchange rate risk
The fundamental objective of the 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 OIBDA generated by the
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 debt denominated in such currencies.
This objective is also reflected on the decrease of the
sensitivity to exchange rate variations of the net debt to
OIBDA ratio, in order to protect the Group's solvency. The
degree of exchange rate hedging varies depending on
the type of investment and may easily and actively be
adjusted. For transactions of purchase or sale of business
in currencies other than euro, additional hedges can be
made on the estimated prices of the transactions or on
estimated cash flows and OIBDA.
At December 31, 2023 , the net financial debt in Latin
American currencies was equivalent to approximately
6,535 million euros (6,360 million euros in 2022). However,
the Latin American currencies in which this debt is
denominated is not distributed in proportion to the OIBDA
generated in each currency. The future effectiveness of
the strategy described above as an economic hedge of
exchange rate risks therefore depends on which
currencies depreciate relative to the euro.
Telefónica occasionally takes out dollar-denominated
debt to hedge the euro-dollar intermediate component in
the relation Euro-Latin American currencies, either in
Spain (where such debt is associated with an investment
as long as it is considered to be an effective hedge) or in
the country itself, where the market for local currency
financing or hedges may be inadequate or non-existent.
At December 31, 2023 , the Telefónica Group’s net
financial debt denominated in dollars to hedge that
component was equivalent to 657 million euros of asset
position ( 978 million euros of asset position in 2022).
At December 31, 2023, net financial debt in pounds
sterling was equivalent to 82 million euros ( 597 million
euros at December 31, 2022). As a consequence of setting
up in June 2021 of the joint venture VMO2 (see Note 2),
the previous objective of maintaining a debt in pounds
sterling in the consolidated balance sheet of the Group of
twice OIBDA has been modified, as a result of changing
the consolidation of UK assets (VMO2 is registered by
equity method) and incorporating VMO2 to leverage
higher than the ratio of twice Debt OIBDA. The synthetic
debt target denominated in pounds will be directly related
to the flows that are expected to be repatriated from
VMO2.
The Telefónica Group also manages exchange rate risk by
seeking to reduce the negative impact of any exchange
rate exposure on the income statement, as a result of
transactions recognized on the statement of financial
position sheet and highly probable transactions,
regardless of whether there 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.
The main transactions that generate or may generate
exchange rate risk (regardless of whether or not they
have an impact on the income statement) are, among
others, as follows: issues in currencies other than the
functional currency of the Group company, highly
probable transactions in other currencies, future cash
inflows in other currencies, investments and divestments,
provisions for collections or payments and collections in
foreign currency, the actual value of the investments
(subsidiaries) in currencies other than the euro.
In 2023 , net foreign exchange results were obtained from
the management of the exchange rate (excluding
monetary correction) for a total positive net result of 124
million euros ( negative net result of 23 million euros in
2022 ).
The following table illustrates the sensitivity of foreign
currency gains and sensitivity losses and of equity to
changes in exchange rates, where: a) in calculating the
impact on the income statement, the exchange rate
position affecting the income statement at the end of
2023 was considered constant during 2024; b) in
calculating the impact on equity, only monetary items
have been considered, namely debt and derivatives such
as hedges of net investment and loans to subsidiaries
related to the investment, breakdown of which is
considered constant in 2024 and identical to that existing
at the end of 2023 . In both cases, Latin American
currencies are assumed to change their value against the
dollar and the rest of the currencies against the euro by
10%.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.82

Millions of euros |  |  |
Currency | Change | Impact on the consolidated income statement | Impact on consolidated equity
All currencies vs EUR | 10% | (17) | (355)
USD vs EUR | 10% | 1 | (47)
Other currencies vs EUR | 10% | 1 | (12)
Latin American currencies vs USD | 10% | (19) | (296)
All currencies vs EUR | (10%) | 17 | 355
USD vs EUR | (10%) | (1) | 47
Other currencies vs EUR | (10%) | (1) | 12
Latin American currencies vs USD | (10%) | 19 | 296

The Group’s monetary position in Venezuela at
December 31, 2023 is a net asset position of 19,900 million
Venezuelan digital bolivars equivalent to 113 million euros
( 4,206 million Venezuelan digital bolivars equivalent to 87
million euros at December 31, 2022). The net monetary
position exposure in 2023 has been an asset position,
which led to a higher financial expense of 161 million euros
due to the effect of the monetary correction for inflation
during the year (101 million euros of expense in 2022).
Interest rate risk
The main objective of the interest rate risk management
policy is to bring the Company's financing costs in line
with the budget for financial expenses for the current
year, as well as the current strategic plan. In accordance
with this objective, Telefónica decided to actively adjust
the exposure of its debt to interest rates, i.e., the amount
of debt that would accrue interest at fixed rates and
variable rates.
In order to meet this target, Telefónica mainly carried out
the following:
a) The interest rate of borrowings tied to a variable
interest rate was set.
b) Interest rate fluctuations of debt tied to a variable
interest rate were reduced.
c) Fixed rate debt instruments were converted into
variable market rate debt instruments.
These transactions may be carried out against an existing
underlying asset or those that are highly likely to take
place in the future (for example, a highly probable future
issue of debt).
The Telefónica Group’s financial expenses are exposed to
changes in interest rates. In 2023 the Euro, Brazilian Real,
British Pound, American Dollar, Chilean peso and
Colombian peso were the short-term rates that
accounted for most of the exposure. In nominal terms, at
December 31, 2023 , 88.6% of Telefónica’s net financial
debt was pegged to fixed interest rates for a period
greater than one year, compared to 88.3% in 2022. Of the
remaining 11.4% (net debt at floating rates or at fixed rates
maturing within one year), no debt had interest rates
bounded in a period over one year, the same as on
December 31, 2022 .
In addition, early retirement and Individual Suspension
Plan liabilities (see Note 24) were discounted to present
value over the year, based on the curve for instruments
with very high credit quality. The decrease in interest
rates during the year has led to an increase in the market
value of these liabilities. However, this increase was nearly
completely offset by the increase in the market value of
the hedges on these positions.
Net financial expenses amounted to 1,904 million euros in
2023, increasing 591 million euros compared to 2022. The
lower amount in 2022 was mainly due to extraordinary
income of 526 million euros related to payments by the
Spanish administration to the Group of delayed interest in
connection with tax litigation in Spain.
To illustrate the sensitivity of the Company's net financial
expense to fluctuations in short-term interest rates, on
one hand a 100 basis point increase in interest rates in all
currencies in which Telefónica has financial positions at
December 31, 2023 , and a 100 basis point decrease in all
currencies has been assumed, and on the other hand a
constant position equal to the position at year-end has
been considered.
To calculate the sensitivity of equity to fluctuations in
interest rates, on one hand a 100 basis point increase in
interest rates in all currencies and in all periods on the
yield curve in which Telefónica has financial positions at
December 31, 2023, and a 100 basis point decrease in all
currencies and all periods was assumed, and on the other
hand only positions with cash flow hedges were
considered, which are basically the only positions in
which changes in market value due to interest rate
fluctuations are recognized in equity.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.83

Millions of euros
Change in basis points (bp) | Impact on consolidated income statement | Impact on consolidated equity
+100bp | (25) | 238
-100bp | 25 | (238)

Share price risk
The Telefónica Group is exposed to changes in the value
of equity investments, of derivatives associated with such
investments, of share-based payments plans, of treasury
shares and of equity derivatives over treasury shares.
According to the share-based payments plans (see Note
27), the shares to be delivered to employees under such
plan may be either Telefónica S.A. treasury shares,
acquired by itself or any of its Group companies, or newly
issued shares. The possibility of delivering shares to
beneficiaries of the plans in the future, implies a risk since
there could be an obligation to hand over a maximum
number of shares at the end of each 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 phase 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 ordinary shareholders of Telefónica as a result of the
higher number of shares delivered under such plan
outstanding.
In 2018, the General Shareholder’s Meeting approved a
Long-Term Incentive Plan allocated to Senior Executive
Officers of the Telefónica Group consisting of the delivery
of shares of Telefónica, S.A. This plan has a total duration
of five years and is divided into three mutually exclusive
cycles of three years each. Each of the cycles
commenced, respectively, in January 2018, 2019 and 2020
and matured on December 31, 2020, 2021 and 2022 with
a result of a delivery of shares to its participants in 2021, in
2022 and in 2023.
In 2021, the General Shareholder’s Meeting approved a
new Long-Term Incentive Plan allocated to Senior
Executive Officers of the Telefónica Group consisting of
the delivery of shares of Telefónica, S.A. This plan has a
total duration of five years and is divided into three
mutually exclusive cycles of three years each. Each of the
cycles commenced, respectively, in January 2021, 2022
and 2023. The first (2021) of the three cycles matured on
December 31, 2023 (see Note 27).
Finally, the 2022 Shareholder’s Meeting approved a
Global Employee Incentive Share Purchase Plan for
shares of Telefónica, S.A. for the Employees of the
Telefónica Group, which is expected to deliver shares to
its participants in 2024 (see Note 27).
To reduce the risk associated with variations in share
price under these plans, Telefónica could acquire
instruments that hedge the risk profile of some of these
plans.
In addition, the Group may use part of the treasury shares
of Telefónica, S.A. held at December 31, 2023 to cover
shares deliverable under the outstanding Plans. The net
asset value of the treasury shares could increase or
decrease depending on variations in Telefónica, S.A.’s
share price.
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 net
financial debt is intended to stay above six 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, a portion 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 tapping the capital
markets (drawing upon firm credit lines arranged with
banks), assuming budget projections are met.
At December 31, 2023, the average maturity of net
financial debt ( 27,349 million euros) was 11.63 years
(including undrawn committed credit facilities).
At December 31, 2023, financial liabilities (Note 18) and
lease liabilities (Note 20) scheduled to mature in 2024
amounted to 3,701 and 2,239 million euros, respectively.
These maturities are lower than the amount of funds
available, calculated as the sum of: a) cash and cash
equivalents and current financial assets; b) annual cash
generation projected for 2024 , and c) undrawn credit
facilities arranged with banks whose original maturity is
over one year (an aggregate of 11,148 million euros at
December 31, 2023), providing flexibility to the Telefónica
Group with regard to accessing capital or credit markets
in the next two years. For a further description of the
Telefónica Group’s liquidity and capital resources in 2023 ,
see Note 18 and Appendix V.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.84
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 the 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, 2023 , the
Telefónica Group’s Latin American companies had net
financial debt not guaranteed by the Parent company of
2,420 million euros, which represents 8.8% of net financial
debt of the Group. Nevertheless, in certain countries,
such as Venezuela, there is a net cash balance (instead of
a net liability balance).
Regarding the net repatriation of funds to Spain, 247
million euros from Latin America companies have been
received in 2023. This amount includ es a dividend
collection of 544 million euros, partially offset by loans
made to subsidiaries in an aggregate amount of
307 million euros.
Credit risk
The Telefónica Group trades in derivatives with
creditworthy counterparties. Therefore, Telefónica, S.A.
generally trades with credit entities whose “senior debt”
ratings are of at least “A-” or in case of Spanish entities in
line with the credit rating of the Kingdom of Spain. In
Spain, where most of the Group’s derivatives portfolio is
held, there are netting agreements with financial
institutions, with debtor or creditor positions offset in case
of bankruptcy, limiting the risk to the net position. In
addition, the CDS (Credit Default Swap) of all the
counterparties with which Telefónica, S.A. operates is
monitored at all times in order to assess the maximum
allowable CDS for operating at any given time.
Transactions are generally only carried out with
counterparties whose CDS is below the threshold.
Net CVA (CVA+DVA) or Credit Valuation Adjustment is
the method used to measure credit risk for both
counterparties and Telefónica in order to determine the
fair value of the derivatives portfolio. This adjustment
reflects the probability of default or the deterioration of
the credit quality of both Telefónica and its
counterparties. The simplified formula to calculate CVA is
Expected Exposure times Probability of Default times Loss
Given Default (LGD). In order to calculate these variables
standard market practices are used.
At the same time, and in order to address the credit risk,
Telefónica considers the use of CDS, novations,
derivatives with break clauses and signing CSA's under
certain conditions.
For other subsidiaries, particularly those in Latin America,
assuming a stable sovereign rating provides a ceiling
which is below “A”, trades are with local financial entities
whose rating by local standards is considered to be of
high creditworthiness.
Meanwhile, with credit risk arising from cash and cash
equivalents, the Telefónica Group places its cash
surpluses in high quality money-market assets. These
placements are regulated by a general framework, revised
annually. Counterparties are chosen according to criteria
of liquidity, solvency and diversification based on the
conditions of the market and countries where the Group
operates. The general framework sets: the maximum
amounts to be invested by counterparty based on its
rating (long-term debt rating) and the instruments in
which the surpluses may be invested (money-market
instruments). Additionally, for Treasury surpluses
managed at Telefónica S.A, a criteria based on CDs has
been added, similar to that used for the selection of
counterparties to operate with derivatives, for the
selection of counterparties for the placement of those
surpluses.
The Telefónica Group considers customer credit risk
management as a key element to achieve its business and
customer base growth targets in a sustainable way. This
management approach relies on the active evaluation of
the risk-reward balance within the commercial operations
and on the adequate separation between the risk
ownership and risk management functions.
Formal delegation of authority procedures and
management practices are implemented in the different
Group companies, taking into account benchmark risk
management techniques, adapted to the local
characteristics of each market. Commercial debtors that
may cause a relevant impact on the Telefónica Group
consolidated financial statements and increased risk
profile products - due to customer target, term, channels
or other commercial characteristics - are subject to
specific management practices in order to mitigate the
exposure to credit risk.
This customer credit risk management model is
embedded in the day-to-day operational processes of the
different companies, where the credit risk assessment
guides both the product and services available for the
different customers and the collection strategy.
The Telefónica Group’s maximum exposure to credit risk
is initially represented by the carrying amounts of the
financial assets and the guarantees given by the
Telefónica Group.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.85
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, 2023 , these guarantees
amounted to approximately 7,316 million euros ( 6,657
million euros at December 31, 2022).
Capital management
Telefónica’s corporate finance department takes into
consideration several factors for the evaluation of the
Telefónica’s capital structure, with the aim of maintaining
the solvency and creating value to the shareholders.
The corporate finance department estimates the cost of
capital on a continuous basis through the monitoring of
the financial markets and the application of standard
industry approaches for calculating weighted average
cost of capital, or WACC, so that it can be applied in the
valuation of businesses in course and in the evaluation of
investment projects. In addition, Telefónica also uses as
reference net financial debt (excluding items of a non-
recurring or exceptional nature) that allows for a
comfortable investment grade credit rating as assigned
by credit rating agencies, aiming at protecting credit
solvency and making it compatible with alternative uses
of cash flow that could arise at any time.
These general principles are refined by other
considerations and the application of specific variables,
such as country risk in the broadest sense, or the volatility
in cash flows generation that are considered, when
evaluating the financial structure of the Telefónica Group
and its different areas.
Interest rate benchmark reform and
associated risks
In 2022, the transition was made to the new reference
indices affected as of December 31, 2022 (GBP Libor and
CHF Libor) and in June 2023 the one related to USD Libor.
Due to the need to incorporate substitute indices (known
as fallbacks) of the reference rates used in the contracts,
in 2021 Telefonica S.A. decided not to adhere to the ISDA
Protocol and has since negotiated bilateral contracts with
each affected counterparty. Thanks to the decisions
agreed in 2021 to manage the changes in Libor, there
have been no impacts from these changes, no
contractual modifications of derivative instruments or
impact on hedging relationships directly affected by the
reform. Thus, as of June 2023, all Libor indices have been
replaced by Libor Fallbacks for the entire portfolio
outstanding on that date.
Derivatives policy
At December 31, 2023 , the nominal value of outstanding
derivatives with external counterparties amounted to
81,097 million euros equivalent, a 3% decrease from
December 31, 2022 (83,706 million euros equivalent). This
figure is inflated by the use in some cases of several levels
of derivatives applied to the nominal value of a single
underlying liability. For example, a foreign currency loan
can be hedged into floating rate, and then each interest
rate period can be fixed using a fixed rate hedge, or FRA
(Forward Rate Agreement) The high volume is also due to
the fact that when a derivative transaction is canceled,
the company may either cancel the derivative or take the
opposite position, which cancels out the variability
thereof. The second option is usually chosen in order to
cut costs. Even using such techniques to reduce the
position, it is still necessary to take extreme care in the
use of derivatives to avoid potential problems arising
through error or a failure to understand the real position
and its associated risks.
The main principles in the management of derivatives are
detailed below:
1) Derivatives based on a clearly identified hedged items.
Telefónica’s derivatives policy emphasizes the following
points:
• Acceptable underlyings include assets and liabilities,
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 (PP&E 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-group
transactions, for instance. Parent company investments
in subsidiaries with functional currencies other than the
euro also qualify as acceptable underlying assets.
• Economic hedges are hedges that have a designated
underlying asset and that, under certain circumstances,
may offset the changes in the value of the underlying
asset. These economic hedges may not always meet
the requirements to be treated as hedges for
accounting purposes. The decision to arrange these
hedges if they do not meet certain requirements will
depend on the marginal impact on the income
statement and, therefore, on how far this may
compromise the goal of having a stable income
statement. In any case, the changes are recognized in
the income statement.
2) Matching of the hedged item to one side of the
derivative.
This matching basically applies to foreign currency debt
and derivatives hedging foreign currency payments by
Telefónica Group subsidiaries. The aim is to eliminate the
risk arising from changes in foreign currency interest

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.86
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 hedged item.
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 Latinoamérica Holding,
S.L.) 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 the
chance of 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 (of the Telefónica Group companies as
well as those of the banks).
4) Ability to measure the derivative’s fair value using the
valuation systems available to the Telefónica Group.
Telefónica uses several tools to evaluate and manage the
risk involved in derivatives and debt. Among these tools
are the Calypso system, extensively used in various
financial institutions, and the specialized libraries in the
MBRM financial calculation, both of which are
widespread throughout the market and have shown
proven reliability. In order to perform these calculations,
customary market techniques are used when configuring
the calculation methods, and information from money
market curves is used on a daily basis as market inputs
(swaps, depos, FRA, etc.) for interest rates, official fixings
for exchange rates and the interest rates and volatility
matrices for interest and exchange rates that are listed in
the multi-contributor systems, Reuters and Bloomberg.
For those yield curves that are less liquid or whose prices
published in Reuters and Bloomberg are considered not
to adequately reflect the market situation, these curves
will be requested from relevant banks in these markets.
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. This
exposure does not have to be treated as a purchased
option, but rather it can be another type of hedged item
(in these cases, hedge accounting does not apply since
this hedging instrument does not meet the criteria
required by accounting standards to treat the sale of
options as hedging instruments), 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, the Group would swap part of its
debt from floating rate to a lower fixed rate, having
received a premium.
6) Hedge 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 valuation of any financial asset,
particularly shares of companies included in the
portfolio of “Equity instruments”.
• Variations in the price of commodities related to
contracts that the Group has with third parties.
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.
• 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.
The main coverage instruments used are:
• Forwards / NDF: they are used mainly for exchange rate
hedges related to commercial positions in foreign
currency. They can also be used to hedge financing in

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.87
foreign currency and net investment hedge in foreign
currency.
• Exchange Rate Options: in some cases, this type of
instruments can be used linked to future CapEx and
OpEx operations and investments and divestments in
foreign currency.
• Spots: for purchases and sales of currencies that are
made same day value or two days’ value. Generally
used for operational needs or for divestments of
operations in foreign currency.
• Currency swaps: this type of transaction is generally
executed to hedge bonds issuance or loans issued in
foreign currency or net investment hedge.
• Interest Swaps / Interest Rate Options: these
instruments are used to manage the interest rate of the
debt portfolio. Their use of them is ruled by the
Financial Expenses Budget with the objective of its
fulfillment. Both the volume to be contracted and the
maturity of these products are determined by the
underlying assets to be hedged.
It is possible that in several markets the maturity, as
well as the low liquidity, does not allow to contract a
"perfect” hedge, but this circumstance will have to be
analyzed case by case.
• CDS: in order to manage the counterparty credit risk or
CVA / DVA, CDS operations can be arranged to
mitigate this risk.
• Derivatives of Commodities associated to:
▪ Price risk hedge (mainly Electricity) associated with
the Group's own contracts.
▪ Supporting the business lines that may need it and
always hedging the commercial risks of the signed
contracts. They would be settled by differences,
this is, in a non-deliverable format.
• Equity Derivatives: these are derivatives that address
strategic decisions or hedging needs, either to hedge
future investments or hedge existing risks. They protect
Telefónica from the potential appreciation or
depreciation in the price of the shares they hold as
underlying.
Between the hedged item and the hedging instrument
there is an economic relationship, this is, in general terms
they move in opposite directions due to the same risk or
risk covered. In other words, there must be an expectation
that the value of the hedging instrument and the value of
the hedged item will change systematically in opposite
directions in response to the movements of one of the
following elements:
• the same underlying item; or
• Underlying items that are economically related in such
sense that they respond similarly to the risk that is being
hedged.
Depending on the complexity of the hedge relationship
and the way in which the hedge has been structured, a
quantitative or qualitative analysis will have to be
performed to demonstrate that there is an economic
relationship between the hedged item and the hedging
instrument.
This may on occasion mean that the hedging instruments
have longer terms than the related contractual
underlying. This happens when the Telefónica Group
enters into long-term swaps, caps or collars to protect the
Group against interest rate increases that may raise the
financial expense of its 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. In those cases in
which the underlying assets representing the risk hedged
are canceled or refinanced early, and if there is an open
risk with similar characteristics as the underlying asset
that was canceled or refinanced early, either because
there is new financing or because there is an underlying
asset with similar characteristics and risk profile, the
hedge may remain in force with the derivatives assigned
thereto and the risk will be subject to the hedge arranged
in the aforementioned refinancing. When either of these
situations occurs, the effectiveness of the hedge will be
reviewed taking into account the new situation.
There can be three types of hedges:
• Fair value hedges.
• Cash flow hedges. Such hedges can be set at any value
of the risk to be hedged (interest rates, exchange rates,
etc.) or for a defined range (interest rates between 2%
and 4% , above 4%, etc.). In this last case, the hedging
instrument used is options.
• Hedges of net investment in consolidated foreign
subsidiaries. Generally, such hedges are arranged by
Telefónica S.A. and other Telefónica 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, due to the debt
market deepness, the debt in the currency concerned is
not enough to accommodate the required hedge, or
that an acquisition is made in cash with no need for
market financing. In these circumstances derivatives
either forwards or cross-currency swaps are mainly
used to hedge the net investment.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.88
When using options, forwards or cross-currency swaps as
hedging instruments, the exclusion of the time value of
the option, the element at maturity of the forward and the
currency spread of the cross-currency swap of the
hedging relationship are evaluated on a case by case
basis, in order to be treated as hedge costs.
Hedges can comprise a combination of different
derivatives.
Management of accounting hedges is not static, and the
hedging relationship may change before maturity. The
interruption of the hedge accounting is possible within
the framework of the management of financial risks and
described in the internal document of “financial risks
management and hedging strategy under IFRS 9”. To
gauge the efficiency of transactions defined as
accounting hedges, the 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 prospectively. To evaluate
the effectiveness of hedges, under IFRS 9, there is no
numerical range under which it is accepted that a hedge
is effective and hence the hedge accounting standards
are applicable. Therefore, Telefónica considers that if
there is an economic relationship, not dominated by
changes in credit risk and if the appropriate hedging
rationale has been designated, the requirements for
effectiveness are met. However, at the moment when
ineffectiveness arises, Telefónica will evaluate whether
there is still an economic relationship or whether the
designated hedging rationale is appropriate. The possible
sources of ineffectiveness that Telefónica can have when
designing a hedging relationship and that will be
considered when establishing the hedging rationale are:
• The hedging instrument and the hedged item have
different maturity dates, initial dates, contract dates,
repricing dates, etc.
• The hedging instrument starts with initial value and a
financing effect is produced.
• When the underlying items have different sensitivity
and are not homogeneous, for example EURIBOR 3M
versus EURIBOR 6M.
The main guiding principles for risk management are laid
down by Telefónica’s Finance Department and
implemented by the company financial officers (who are
responsible for balancing the interests of each company
and those of the Telefónica Group). The Corporate
Finance Department may allow exceptions to this policy
where these can be justified, normally when the market is
too thin for the volume of transactions required or on
clearly limited and small risks. New companies joining the
Telefónica Group as a result of mergers or acquisitions
may also need time to adapt.
7) Cancellation of derivatives.
When a derivative transaction is canceled, the company
may:
• Cancel the derivative and pay its market value.
• Take the opposite position which cancels out the
variability thereof, if cancellation costs are high or if it is
recommended for operating or business reasons.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.89
Breakdown of financial results
The breakdown of the financial results recognized in
2023, 2022 and 2021 is as follows:

Millions of euros | 2023 | 2022 | 2021
Interest income | 516 | 384 | 191
Dividends received | 29 | 25 | 14
Other financial income | 349 | 894 | 174
Subtotal | 894 | 1,303 | 379
Changes in fair value of asset derivatives at fair value through profit or loss | 114 | 377 | 132
Changes in fair value of liability derivatives at fair value through profit or loss | (42) | (861) | (24)
Changes in the fair value of debt instruments and other assets at fair value to profit or loss | 4 | 8 | —
Transfer from equity of results of cash flow hedges - future cash flows that are no longer expected to happen | — | (2) | —
(Loss)/Gain on fair value hedges | 246 | (1,818) | (517)
Gain/(loss) on adjustment to items hedged by fair value hedges | (292) | 1,763 | 527
Subtotal | 30 | (533) | 118
Interest expenses | (1,606) | (1,548) | (1,290)
Financial expenses on lease liabilities (see Note 20) | (435) | (393) | (274)
Ineffective portion of cash flow hedges | (12) | (15) | (41)
Accretion of provisions and other liabilities | (489) | 276 | (169)
Other financial expenses | (297) | (317) | (137)
Subtotal | (2,839) | (1,997) | (1,911)
Net finance costs excluding foreign exchange differences and hyperinflation adjustments | (1,915) | (1,227) | (1,414)

"Other financial income" in 2022 included 526 million
euros corresponding to delayed interest after the
Agreement for the Execution of the Judgment of the
Audiencia Nacional issued on October 24, 2022 (see Note
25, Inspections of the tax group in Spain).
"Other financial income" in 2023 included 46 million euros
corresponding to the default interest as a result of the
final decisions in favor of Telefónica Brazil about the right
to deduct the ICMS from the calculation basis of PIS/
COFINS (139 million euros and 90 million euros in 2022
and 2021, respectively, see Note 25).
"(Loss)/Gain on fair value hedges" includes mainly the
impact on income of fair value hedges contracted by
Telefónica, S.A., which are similarly reflected under "Gain/
(loss) on adjustment to items hedged by fair value
hedges" and therefore, have no significant net impact on
the consolidated income statement. The decrease in both
items in 2023 and the increase in 2022 with respect to
previous years is the result of lower and higher interest
rates, respectively. The impact of hyperinflation on the net
monetary position of the Group’s subsidiaries in Argentina
amounted to 48 million euros in 2023 (39 million euros in
2022 and 25 million euros in 2021) and is recorded under
Exchange differences in the consolidated income
statement.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.90
Evolution of derivative instruments
The movement of the net position of derivatives during
the years ended December 31, 2023 and December 31,
2022 is as follows:

Millions of euros | Movement in 2023 | Movement in 2022
Opening balance of assets/ (liabilities) | 1,012 | 1,573
Financing payments | (33) | 715
Financing proceeds | (20) | (89)
Interest (proceeds)/payments | 97 | 283
Other (proceeds)/payments | 87 | (17)
Fair value adjustments through other comprehensive income | (584) | 1,031
Movements with counterparty in the income statement | (57) | (2,649)
Translation differences | (115) | 169
Other movements | 12 | (4)
Closing balance of assets/ (liabilities) | 399 | 1,012

The variation in 2023 represents a decrease of 613 million
euros of asset (decrease of 561 million euros of asset in
2022) mainly due to the evolution of exchange rate,
mainly due to the depreciation of dollar and the
appreciation of Brazilian real, and due to the increase of
interest rates of dollar and decrease of euro. These
variations are mostly by a similar impact and in the
opposite direction in the hedge accounting of the
different issuances and loans in dollar and euro currency
of the Telefónica Group.
As of December 31, 2023 the derivatives portfolio amount
a net positive value of 399 million euros (a net positive
value of 1,012 as of December 31, 2022 ). This amount
includes a net positive value of 135 million euros due to
hedges (cross currency swaps) to transfer financial debt
issued in foreign currency to local currency (a positive
value of 638 million euros at December 31, 2022 ).
The calculation of the fair values of the Telefónica
Group’s debt instruments required an estimate, for each
currency and counterparty, of a credit spread curve using
the prices of the Group’s bonds and credit derivatives.
The derivatives portfolio was measured through the
techniques and models normally used in the market,
based on money market curves and volatility prices
available in the markets. Additionally, the credit valuation
adjustment or net CVA per counterparty (CVA+DVA) is
calculated on that measurement as the method used to
measure the credit risks of the counterparties and also
Telefónica for the purpose of adjusting the fair value
valuation of the derivatives. This adjustment reflects the
possibility of bankruptcy or credit rating impairment of the
counterparty and Telefónica.
Derivatives arranged by the Group at December 31, 2023
are detailed in Appendix IV.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.91
The breakdown of Telefónica’s hedges and other derivative instruments at
December 31, 2023 and December 31, 2022 , their fair value at year-end and the
expected maturity schedule is as set forth in the table below:

December 31, 2023
Millions of euros | Notional amount - Maturities (*) |  | Book value of the derivative and no-derivative instruments (**)
2024 | 2025 | 2026 | Later | Total |  | Non-current asset | Current asset | Non-current liabilities | Current liabilities | Total
Derivative instruments of accounting hedges | (3,225) | 873 | 2,533 | 4,917 | 5,098 |  | (1,785) | (272) | 1,224 | 87 | (746)
Interest rate risk | (1,190) | (123) | 2 | (4,070) | (5,381) |  | (334) | (163) | 404 | 35 | (58)
Cash flow hedges | (1,490) | (650) | — | 3,532 | 1,392 |  | (16) | — | 83 | 35 | 102
Fair value hedges | 300 | 527 | 2 | (7,602) | (6,773) |  | (318) | (163) | 321 | — | (160)
Exchange rate risk | (2,115) | — | 2,344 | 6,103 | 6,332 |  | (1,124) | (69) | 711 | 51 | (431)
Cash flow hedges | 657 | — | 2,344 | 6,038 | 9,039 |  | (1,124) | (38) | 708 | 20 | (434)
Fair value hedges | 401 | — | — | 65 | 466 |  | — | (5) | 3 | 20 | 18
Net investment in a foreign business hedges | (3,173) | — | — | — | (3,173) |  | — | (26) | — | 11 | (15)
Interest rate and exchange rate risk | 80 | 996 | 187 | 2,884 | 4,147 |  | (327) | (40) | 109 | 1 | (257)
Cash flow hedges | 80 | 996 | 9 | 2,339 | 3,424 |  | (281) | (40) | 35 | 1 | (285)
Fair value hedges | — | — | 178 | 545 | 723 |  | (46) | — | 74 | — | 28
Undesignated derivatives | 396 | (416) | (738) | (1,625) | (2,383) |  | (155) | (80) | 433 | 149 | 347
Other derivatives of interest rate | (288) | (525) | (738) | (1,625) | (3,176) |  | (155) | (54) | 399 | 14 | 204
Other derivatives of exchange rate | (123) | — | — | — | (123) |  | — | (14) | — | 13 | (1)
Other derivatives | 807 | 109 | — | — | 916 |  | — | (12) | 34 | 122 | 144
Total derivative instruments | (2,829) | 457 | 1,795 | 3,292 | 2,715 |  | (1,940) | (352) | 1,657 | 236 | (399)
No derivatives instruments of accounting hedges (***) | — | — | — | 27 | 27 |  | — | — | 27 | — | 27
Exchange rate risk | — | — | — | 27 | 27 |  | — | — | 27 | — | 27
Fair value hedges | — | — | — | — | — |  | — | — | — | — | —
Net investment in a foreign business hedges | — | — | — | 27 | 27 |  | — | — | 27 | — | 27

(*) For interest rate 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.
(***) Of the hedging instruments that are not derivatives, 27 million euros correspond to "Loans and other debts"" (see Note 18).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.92

December 31, 2022
Millions of euros | Notional amount - Maturities (*) |  | Book value of the derivative and no-derivative instruments (**)
2023 | 2024 | 2025 | Later | Total |  | Non- current asset | Current asset | Non- current liabilities | Current liabilities | Total
Derivative instruments of accounting hedges | (2,034) | 116 | (77) | 7,237 | 5,242 |  | (2,404) | (466) | 1,317 | 78 | (1,475)
Interest rate risk | (795) | 2 | (123) | (5,590) | (6,506) |  | (211) | (187) | 446 | 9 | 57
Cash flow hedges | 3 | — | — | 1,114 | 1,117 |  | (26) | (4) | 8 | 9 | (13)
Fair value hedges | (798) | 2 | (123) | (6,704) | (7,623) |  | (185) | (183) | 438 | — | 70
Exchange rate risk | (1,340) | 34 | — | 9,284 | 7,978 |  | (1,742) | (213) | 711 | 68 | (1,176)
Cash flow hedges | 744 | 34 | — | 8,824 | 9,602 |  | (1,742) | (57) | 704 | 30 | (1,065)
Fair value hedges | 837 | — | — | 460 | 1,297 |  | — | (87) | 7 | 28 | (52)
Net investment in a foreign business hedges | (2,921) | — | — | — | (2,921) |  | — | (69) | — | 10 | (59)
Interest rate and exchange rate risk | 101 | 80 | 46 | 3,543 | 3,770 |  | (451) | (66) | 160 | 1 | (356)
Cash flow hedges | 101 | 80 | 46 | 3,234 | 3,461 |  | (445) | (66) | 74 | 1 | (436)
Fair value hedges | — | — | — | 309 | 309 |  | (6) | — | 86 | — | 80
Undesignated derivatives | (1,964) | (479) | (525) | (2,363) | (5,331) |  | (264) | (246) | 706 | 267 | 463
Other derivatives of interest rate | (1,539) | (688) | (525) | (2,363) | (5,115) |  | (264) | (59) | 631 | 16 | 324
Other derivatives of exchange rate | (1,132) | — | — | — | (1,132) |  | — | (179) | — | 145 | (34)
Other derivatives | 707 | 209 | — | — | 916 |  | — | (8) | 75 | 106 | 173
Total derivative instruments | (3,998) | (363) | (602) | 4,874 | (89) |  | (2,668) | (712) | 2,023 | 345 | (1,012)
No derivatives instruments of accounting hedges (***) | — | 141 | — | — | 141 |  | — | — | 141 | — | 141
Exchange rate risk | — | 141 | — | — | 141 |  | — | — | 141 | — | 141
Fair value hedges | — | — | — | — | — |  | — | — | — | — | —
Net investment in a foreign business hedges | — | 141 | — | — | 141 |  | — | — | 141 | — | 141

(*) For interest rate 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.
(***) Of the hedging instruments that are not derivatives, 141 million euros correspond to "Loans and other debts" (see Note 18).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.93
The detail of hedged items by fair value hedges at December 31, 2023 and
December 31, 2022 are as follows:

December 31, 2023
Millions of euros | Hedged items carrying amount |  | Accumulated amount in the hedged item adjusted by fair value hedge (*)
Interest rate risk | Exchange rate risk | Interest rate and exchange rate risk | Total |  | Interest rate risk | Exchange rate risk | Interest rate and exchange rate risk | Total | Of which: accumulated amount of any hedge item that have cesased to be adjusted for gains and losses
Assets | 32 | 249 | — | 281 |  | (15) | — | — | (15) | —
Financial assets and other non-current assets | 28 | 96 | — | 124 |  | (14) | — | — | (14) | —
Receivables and other current assets | — | 150 | — | 150 |  | — | — | — | — | —
Other current financial assets | 4 | — | — | 4 |  | (1) | — | — | (1) | —
Other heading of assets | — | 3 | — | 3 |  | — | — | — | — | —
Liabilities | 8,092 | 1,365 | 1,495 | 10,952 |  | 153 | (8) | 34 | 179 | (9)
Non-current financial liabilities | 8,009 | 452 | 1,397 | 9,858 |  | 153 | — | 34 | 187 | 33
Payables and other non-current liabilities | — | 44 | — | 44 |  | — | (1) | — | (1) | —
Current financial liabilities | 83 | 10 | 98 | 191 |  | — | — | — | — | —
Payables and other current liabilities | — | 859 | — | 859 |  | — | (7) | — | (7) | (42)

(*) Accumulated amount adjusted by fair value hedge is shown with negative sign when it reduces the value (lowest liability or lowest asset) and viceversa.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.94

December 31, 2022
Millions of euros | Hedged items carrying amount |  | Accumulated amount in the hedged item adjusted by fair value hedge (*)
Interest rate risk | Exchange rate risk | Interest rate and exchange rate risk | Total |  | Interest rate risk | Exchange rate risk | Interest rate and exchange rate risk | Total | Of which: accumulated amount of any hedge item that have cesased to be adjusted for gains and losses
Assets | 15 | 250 | — | 265 |  | 8 | 22 | — | 30 | —
Financial assets and other non-current assets | 8 | 96 | — | 104 |  | 8 | 1 | — | 9 | —
Receivables and other current assets | — | 152 | — | 152 |  | — | 21 | — | 21 | —
Other heading of assets | — | 2 | — | 2 |  | — | — | — | — | —
Liabilities | 8,125 | 1,295 | 1,619 | 11,039 |  | (88) | (38) | 67 | (59) | 21
Non-current financial liabilities | 7,735 | 468 | 1,454 | 9,657 |  | (89) | — | 15 | (74) | 36
Non-current lease liabilities | — | — | — | — |  | — | — | — | — | —
Payables and other non-current liabilities | — | 60 | — | 60 |  | — | (2) | — | (2) | —
Current financial liabilities | 387 | 11 | 165 | 563 |  | — | — | 52 | 52 | 1
Payables and other current liabilities | 3 | 756 | — | 759 |  | 1 | (36) | — | (35) | (16)

(*) Accumulated amount adjusted by fair value hedge is shown with negative sign when it reduces the value (lowest liability or lowest asset) and vice versa.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.95
The evolutions of hedges in equity at December 31, 2023 and December 31, 2022 are as follows:

Millions of euros | Derivative instruments |  | No derivative instruments | Total Gross amount | Tax effect | Total hedges in equity
Gains (losses) of cash flow hedges | Derivatives - Net investment hedges |  | No Derivatives - Net investment hedges
Interest rate risk | Exchange rate risk | Exchange rate and interest rate risks
Balance at 12/31/2022 | (37) | 861 | 210 | (30) |  | (9) | 995 | (270) | 725
Changes in the fair value registered in equity | (49) | (445) | (66) | (66) |  | 2 | (624) | 155 | (469)
Transfer to the initial value of hedged item | 1 | 6 | 13 | — |  | — | 20 | (5) | 15
Transfer to the income statement of the period - the hedged future cash flows are no longer expected to happen | — | — | — | — |  | — | — | — | —
Transfer to the income statement of the period - the hedged item has affected profit or loss | 32 | 19 | 19 | — |  | — | 70 | (17) | 53
Total translation differences | (3) | — | — | (1) |  | — | (4) | — | (4)
Other movements | — | — | — | (3) |  | (4) | (7) | — | (7)
Balance at 12/31/2023 | (56) | 441 | 176 | (100) |  | (11) | 450 | (137) | 313
Amounts remaining in equity for continuing hedges | (33) | 408 | 250 | (100) |  | (11) | 514 |  |
Amounts remaining in equity from any hedging relationship for which hedge accounting is no longer applied | (23) | 33 | (74) | — |  | — | (64) |  |
Balance at 12/31/2023 | (56) | 441 | 176 | (100) |  | (11) | 450 |  |

The total amount of "Transfer to the income statements of the period - the hedged
item has affected profit or loss" has impacted in financial results, reported under
"Interest expenses" amounted to +240 million euros ( +181 million euros in 2022), see
detail of "Net finance costs excluding foreign exchange differences and hyperinflation
adjustments" in this Note, and in exchange differences amounted to -324 million euros
(+536 million euros in 2022).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.96

Millions of euros | Derivative instruments |  | No derivative instruments | Total Gross amount | Tax effect | Total hedges in equity
Gains (losses) of cash flow hedges | Derivatives - Net investment hedges |  | No Derivatives - Net investment hedges
Interest rate risk | Exchange rate risk | Exchange rate and interest rate risks
Balance at 12/31/2021 | (70) | 247 | (270) | 705 |  | (5) | 607 | (170) | 437
Changes in the fair value registered in equity | 4 | 1,235 | 612 | (743) |  | (4) | 1,104 | (284) | 820
Transfer to the initial value of hedged item | 1 | (2) | (7) | — |  | — | (8) | 2 | (6)
Transfer to the income statement of the period - the hedged future cash flows are no longer expected to happen | — | 1 | — | — |  | — | 1 | — | 1
Transfer to the income statement of the period - the hedged item has affected profit or loss | 26 | (620) | (127) | 10 |  | — | (711) | 181 | (530)
Total translation differences | 2 | — | 2 | (6) |  | — | (2) | 5 | 3
Other movements | — | — | — | 4 |  | — | 4 | (4) | —
Balance at 12/31/2022 | (37) | 861 | 210 | (30) |  | (9) | 995 | (270) | 725
Amounts remaining in equity for continuing hedges | 10 | 826 | 290 | (30) |  | (9) | 1,087 |  |
Amounts remaining in equity from any hedging relationship for which hedge accounting is no longer applied | (47) | 35 | (80) | — |  | — | (92) |  |
Balance at 12/31/2022 | (37) | 861 | 210 | (30) |  | (9) | 995 |  |

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.97
The evolution of cost of hedging in equity in 2023 and 2022 are as follows:

Millions of euros Exchange rate risk |  | Total gross amount | Tax effect | Total cost of hedging in equity
A time-period related hedge item
Balance at 12/31/2021 | 43 | 43 | (11) | 32
Changes in the fair value registered in equity | (59) | (59) | 15 | (44)
Transfer to the income statement of the period - the hedged item has affected profit or loss | (9) | (9) | 2 | (7)
Balance at 12/31/2022 | (25) | (25) | 6 | (19)
Changes in the fair value registered in equity | 79 | 79 | (20) | 59
Transfer to the income statement of the period - the hedged item has affected profit or loss | (9) | (9) | 2 | (7)
Balance at 12/31/2023 | 45 | 45 | (12) | 33

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.98
The details of the ineffective portion of accounting hedges with impact on the income
statement in 2023 and 2022 are as follows:

2023 |  |  |
Millions of euros | Changes in fair value of the hedging instrument | Changes in the fair value of hedges item for the hedged risk | Ineffective portion hedged registered in the income statement
Interest rate risk | 97 | 98 | (1)
Cash flow hedges | (39) | (39) | —
Fair value hedges | 136 | 137 | (1)
Exchange rate risk | (702) | (699) | (3)
Cash flow hedges | (409) | (406) | (3)
Net investment hedges | (293) | (293) | —
Interest rate and exchange rate risk | (45) | (35) | (10)
Cash flow hedges | (45) | (35) | (10)
Total | (650) | (636) | (14)

2022 |  |  |
Millions of euros | Changes in fair value of the hedging instrument | Changes in the fair value of hedges item for the hedged risk | Ineffective portion hedged registered in the income statement
Interest rate risk | (1,257) | (1,238) | (19)
Cash flow hedges | 35 | 35 | —
Fair value hedges | (1,292) | (1,273) | (19)
Exchange rate risk | (8) | (8) | —
Cash flow hedges | 1,108 | 1,108 | —
Net investment hedges | (1,116) | (1,116) | —
Interest rate and exchange rate risk | 462 | 475 | (13)
Cash flow hedges | 462 | 475 | (13)
Total | (803) | (771) | (32)

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.99
Note 20. Lease liabilities
The evolution of lease liabilities in 2023 and 2022 were as
follows:

Millions of euros | Lease liabilities
Balance at 12/31/2022 | 8,677
Additions | 2,382
Principal and interests payments | (2,559)
Principal payments (Note 28) | (2,114)
Interests payments | (445)
Disposals | (138)
Accrued interests | 435
Translation differences and hyperinflation adjustments | 62
Transfers and others | 88
Balance at 12/31/2023 | 8,947

Millions of euros | Lease liabilities
Balance at 12/31/2021 | 8,070
Additions | 2,487
Principal and interests payments | (2,361)
Principal payments (Note 28) | (1,996)
Interests payments | (365)
Disposals | (59)
Business combinations | 124
Accrued interests | 393
Translation differences and hyperinflation adjustments | 246
Transfers and others | (223)
Balance at 12/31/2022 | 8,677

"Additions" includes fixed asset sale and leaseback
transactions, which amounted to 21 million euros in 2023
(125 million euros in 2022 ). The gain recorded in 2023 and
2022 for sale and leaseback transactions amounted to
105 million euros and 381 million euros, respectively (see
Note 26) .
"Business combinations" in 2022 included 117 million
euros of lease liabilities related to the acquisition of rights
of use of Oi (see Note 29), as well as, 2 and 5 million euros
for the incorporation of the Incremental group and the
BE-terna group, respectively (see Note 5).
There are commitments for leases not started at
December 31, 2023 amounting to 1,117 million euros,
mainly related to the sites construction agreement
between Telefónica Germany GmbH and Telxius Towers
Germany GmbH (at December 31, 2022 1,569 million
euros).
"Transfers and others" in 2022 included the
reclassification of lease liabilities on shutdown site
contracts of Pegaso PCS amounted to 264 million euros.
The maturity schedule of lease liabilities at December 31,
2023 is as follows:

Millions of euros
| Current |  | Non-Current |  |
Maturity | 2024 |  | 2025 | 2026 | 2027 | 2028 | Subsequent years | Non-current total | Total
Lease liabilities | 2,354 |  | 1,876 | 1,455 | 1,190 | 1,008 | 2,060 | 7,589 | 9,943

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.100
Note 21. Payables and other
non-current liabilities
The composition of “Payables and other non-current
liabilities” of the Telefónica Group at December 31, 2023
and December 31, 2022 is as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Payables | 1,913 | 1,914
Trade payables | 553 | 463
Debt for spectrum acquisition | 1,184 | 1,293
Other payables | 175 | 158
Payables to associates and joint ventures (Note 10) | 1 | —
Other non-current liabilities | 1,692 | 1,632
Contractual liabilities (Note 23) | 778 | 891
Deferred revenue | 126 | 199
Current tax payables | 784 | 542
Long-term insurance and reinsurance contracts liabilities from associates and joint ventures (Note 10) | 4 | —
Total | 3,605 | 3,546

"Non-currrent debt for spectrum acquisition" as of
December 31, 2023 a nd December 31, 2022, is detailed
below:

Millions of euros | 12/31/2023 | 12/31/2022
Telefónica Spain | 69 | 74
Telefónica Colombia | 108 | 85
Telefónica Brazil | 211 | 243
Telefónica Germany | 791 | 891
Telefónica Uruguay | 5 | —
Total | 1,184 | 1,293

The outstanding liabilities at December 31, 2023 from the
acquisition of spectrum licenses by Telefónica Brazil in
November 2021 amounted to 1,301 million Brazilian real
( 243 million euros) including 949 million Brazilian reais (177
million euros) are classified as non-current. At December
31, 2022, outstanding liabilities amounted to 1,844 million
Brazilian reais (331 million euros at exchange rate of 2022),
including 1,192 million Brazilian reais (214 million euros at
closing exchange rate of 2022) were classified as non-
current.
In June 2019 Telefónica Germany acquired a total of 90
MHz spectrum at a cost of 1,425 milli on euros. The
Company, like the other auction participants, reached an
agreement to defer payments in interest-free annual
installments until 2030 , instead of an upfront one-time
payment (see Appendix VI). In 2023 and 2022, payments
amounting to 108 million euros have been made each
year (see Note 28). The current value of the debt at
December 31, 2023 amounted to 898 million euros (998
million euros at December 31, 2022 ), 791 million euros
have a maturity of more than twelve months (891 million
euros at December 31, 2022).
Payments for financed licenses for the years 2023 and
2022 amounted to 245 and 657 million euros, respectively
(see Note 28).
“Deferred revenues” include grants amounting to 47
million euros at December 31, 2023 (53 million euros at
December 31, 2022).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.101
Note 22. Payables and
other current liabilities
The breakdown of "Payables and other current liabilities"
of the Telefónica Group at December 31, 2023 and
December 31, 2022 and the opening balance as of
January 1, 2023 after the impacts of first application of
IFRS 17 (see Note 3) is as follows:

Millions of euros | 12/31/2023 | 12/31/2022 | First application of IFRS 17 impact | 01/01/2023
Payables | 12,138 | 12,018 | (197) | 11,821
Trade payables | 7,693 | 7,545 | (197) | 7,348
Payables to suppliers of property, plant and equipment | 2,763 | 2,841 | — | 2,841
Debt for spectrum acquisition | 218 | 248 | — | 248
Other payables | 1,176 | 1,088 | — | 1,088
Dividends pending payment | 166 | 203 | — | 203
Payables to associates and joint ventures (Note 10) | 122 | 93 | — | 93
Other current liabilities | 1,819 | 1,491 | 198 | 1,689
Contract liabilities (Note 23) | 1,035 | 1,038 | — | 1,038
Deferred revenue | 98 | 102 | — | 102
Advances received | 465 | 350 | — | 350
Short-term insurance and reinsurance contracts liabilities | 197 | — | 198 | 198
Short-term insurance and reinsurance contracts liabilities and other liabilities to associates and joint ventures (Note 10) | 24 | 1 | — | 1
Total | 13,957 | 13,509 | 1 | 13,510

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.102
"Current debt for spectrum acquisition" as of
December 31, 2023 and December 31, 2022 , is detailed
below:

Millions of euros | 12/31/2023 | 12/31/2022
Telefónica Germany | 107 | 107
Telefónica Colombia | 10 | 17
Telefónica Brazil | 66 | 117
Telefónica Spain | 7 | 7
Telefónica Ecuador | 16 | —
Telefónica Uruguay | 12 | —
Total | 218 | 248

At December 31, 2023 and December 31, 2022 , “Payables
for spectrum acquisition”, includes the debt maturing
within twelve months of the spectrum licenses in
Telefónica Brazil acquired in November 2021 a nd the
spectrum licenses in Telefónica Germany acquired in
June 2019 (see Note 21).
“Deferred revenue” includes grants amounting to 24
million euros at December 31, 2023 (17 million euros at
December 31, 2022).
The composition of current "Other payables" at
December 31, 2023 and December 31, 2022 is as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Accrued employee benefits | 621 | 608
Other non-financial non- trade payables | 555 | 480
Total | 1,176 | 1,088

Information on average payment
period to suppliers. Third additional
provision, “Information requirement” of
Law 15/2010 of July 5, modified by
Law 18/2022, of September 28.
In accordance with the aforementioned Law 15/2010, the
following information corresponding to the Spanish
companies of the Telefónica Group is disclosed:

Number of days | 2023 | 2022
Weighted average maturity period | 51 | 53
Ratio of payments | 53 | 55
Ratio of outstanding invoices | 39 | 42
Millions of euros
Total payments | 7,897 | 8,362
Outstanding invoices | 1,211 | 1,251

On October 19, 2022, Law 18/2022, of September 28, on
the creation and growth of companies, came into force,
which modifies the third additional provision of Law
15/2010. The new standard establishes the obligation to
publish in annual accounts, in addition to the information
already required, the monetary volume and number of
invoices paid in a period less than the maximum
established in the late payment regulations, and the
percentage they represent of the total number of invoices
and on the total monetary payments to its suppliers. This
information for the 2023 and 2022 financial years is
shown below:

| 2023 | 2022
Monetary volume of invoices paid in a period less than the maximum established in the regulations (millions of euros) | 4,558 | 4,899
Percentage of total payments | 58% | 59%
Number of invoices paid in a period less than the maximum established in the regulations | 141,862 | 157,523
Percentage of the total number of invoices paid | 51% | 54%

The Telefónica Group’s Spanish companies adapted their
internal processes and payment schedules to the
provisions of Law 15/2010 (amended by Law 31/2014) and
Royal Decree-Law 4/2013, amending Law 3/2004, which
establishes measures against late payment in commercial
transactions. Engagement conditions with commercial

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.103
suppliers in 2023 included payment periods of up to 60
days, according to the terms agreed between the parties.
For efficiency purposes and in line with general business
practices, Telefónica Group companies in Spain have
agreed payment schedules with suppliers, whereby most
of the payments are made on set days of each month.
Invoices falling due between two payment days are
settled on the following payment date in the schedule.
Payments to Spanish suppliers in 2023 surpassing the
established legal limit were the result of circumstances or
incidents beyond the payment policies, mainly the delay
in issuing invoices (legal obligation of the supplier), the
closing of agreements with suppliers over the delivery of
goods or rendering of services, or occasional processing
issues.
The average payment period to suppliers of the
Telefónica Group’s companies in Spain in 2023,
calculated in accordance with the only additional
provision of the Resolution of the Instituto de
Contabilidad y Auditoría de Cuentas (Spanish Accounting
and Audit Institute) of January 29, 2016, amounted to 51
days (53 days in 2022).

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.104
Note 23. Breakdown of
contractual assets and liabilities,
and capitalized costs
The movement of contractual assets and capitalized costs
in 2023 and 2022 is as follows:

Millions of euros | Balance at 12/31/2022 | Additions | Disposals | Transfers | Balance at 12/31/2023
Long-term contractual assets (Note 12) | 359 | 118 | (17) | (135) | 325
Contractual assets | 360 | 118 | (17) | (135) | 326
Impairment losses | (1) | — | — | — | (1)
Short-term contractual assets (Note 14) | 195 | 276 | (403) | 134 | 202
Contractual assets | 202 | 277 | (404) | 134 | 209
Impairment losses | (7) | (1) | 1 | — | (7)
Total | 554 | 394 | (420) | (1) | 527

Millions of euros | Balance at 12/31/2021 | Additions | Disposals | Transfers | Translation differences and hyperinflation adjustments | Balance at 12/31/2022
Long-term contractual assets (Note 12) | 209 | 261 | (12) | (100) | 1 | 359
Contractual assets | 210 | 261 | (12) | (100) | 1 | 360
Impairment losses | (1) | — | — | — | — | (1)
Short-term contractual assets (Note 14) | 133 | 294 | (337) | 100 | 5 | 195
Contractual assets | 141 | 295 | (340) | 100 | 6 | 202
Impairment losses | (8) | (1) | 3 | — | (1) | (7)
Total | 342 | 555 | (349) | — | 6 | 554

Once the amounts recognized as contract assets become
receivables, which normally occurs when they are
invoiced, they are transferred to the "Trade receivables"
heading. In this regard, the balance of the contract assets
account basically represents amounts not yet due.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.105
The movement of the deferred expenses in 2023 and
2022 is as follows:

Millions of euros | Balance at 12/31/2022 | Additions | Disposals | Transfers | Translation differences and hyperinflation adjustments | Balance at 12/31/2023
Non-current capitalized costs (Note 12) | 854 | 838 | (2) | (682) | (7) | 1,001
Of obtaining a contract | 610 | 694 | (1) | (536) | 7 | 774
Of fulfilling a contract | 244 | 144 | (1) | (146) | (14) | 227
Impairment losses | — | — | — | — | — | —
Current capitalized costs (Note 14) | 885 | 620 | (1,175) | 684 | (16) | 998
Of obtaining a contract | 710 | 534 | (967) | 538 | — | 815
Of fulfilling a contract | 175 | 86 | (208) | 146 | (16) | 183
Impairment losses | — | — | — | — | — | —
Total | 1,739 | 1,458 | (1,177) | 2 | (23) | 1,999

Millions of euros | Balance at 12/31/2021 | Additions | Disposals | Transfers | Translation differences and hyperinflation adjustments | Other movements | Balance at 12/31/2022
Non-current capitalized costs (Note 12) | 555 | 820 | (2) | (547) | 19 | 9 | 854
Of obtaining a contract | 371 | 671 | — | (447) | 6 | 9 | 610
Of fulfilling a contract | 184 | 149 | (2) | (100) | 13 | — | 244
Impairment losses | — | — | — | — | — | — | —
Current capitalized costs (Note 14) | 668 | 630 | (987) | 547 | 20 | 7 | 885
Of obtaining a contract | 537 | 509 | (801) | 448 | 10 | 7 | 710
Of fulfilling a contract | 131 | 121 | (186) | 99 | 10 | — | 175
Impairment losses | — | — | — | — | — | — | —
Total | 1,223 | 1,450 | (989) | — | 39 | 16 | 1,739

The movement of contractual liabilities of contracts with
customers in 2023 and 2022 is as follows:

Millions of euros | Balance at 12/31/2022 | Additions | Disposals (previous years) | Disposals (current year) | Transfers | Translation differences and hyperinflation adjustments | Balance at 12/31/2023
Long-term contractual liabilities (Note 21) | 891 | 162 | (2) | (1) | (279) | 7 | 778
Short-term contractual liabilities (Note 22) | 1,038 | 5,374 | (973) | (4,700) | 286 | 10 | 1,035
Total | 1,929 | 5,536 | (975) | (4,701) | 7 | 17 | 1,813

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.106

Millions of euros | Balance at 12/31/2021 | Additions | Disposals (previous years) | Disposals (current year) | Transfers | Translation differences and hyperinflation adjustments | Other movements | Balance at 12/31/2022
Long-term contractual liabilities (Note 21) | 829 | 300 | (2) | — | (242) | 6 | — | 891
Short-term contractual liabilities (Note 22) | 958 | 5,546 | (984) | (4,756) | 236 | 16 | 22 | 1,038
Total | 1,787 | 5,846 | (986) | (4,756) | (6) | 22 | 22 | 1,929

The maturity schedule of contractual liabilities at
December 31, 2023 is as follows:

Millions of euros | 2024 | 2025 | 2026 | Subsequent years | Total
Contractual liabilities, activation fees | 23 | 9 | 1 | 2 | 35
Contractual liabilities, sales of prepay cards | 487 | — | — | — | 487
Contractual liabilities, services | 306 | 49 | 11 | 72 | 438
Contractual liabilities, sales of handsets | 33 | 5 | — | — | 38
Contractual liabilities, sales of other equipments | 3 | — | — | 18 | 21
Contractual liabilities, irrevocable rights to use | 69 | 55 | 49 | 396 | 569
Other contractual liabilities | 114 | 24 | 19 | 68 | 225
Maturity of performance obligations | 1,035 | 142 | 80 | 556 | 1,813

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.107
Note 24. Provisions
The amounts of provisions in 2023 and 2022 are as
follows:

| 12/31/2023 |  | 12/31/2022
Millions of euros | Current | Non-current | Total |  | Current | Non-current | Total
Employee benefits | 1,005 | 4,949 | 5,954 |  | 885 | 4,093 | 4,978
Termination plans | 282 | 1,461 | 1,743 |  | 135 | 241 | 376
Post-employment defined benefit plans | 12 | 428 | 440 |  | 9 | 329 | 338
Other benefits | 711 | 3,060 | 3,771 |  | 741 | 3,523 | 4,264
Dismantling of assets | 17 | 505 | 522 |  | 26 | 502 | 528
Other provisions | 574 | 2,000 | 2,574 |  | 720 | 1,910 | 2,630
Total | 1,596 | 7,454 | 9,050 |  | 1,631 | 6,505 | 8,136

a) Employee benefits
In 2023 the Group recorded a provision o f 1,538 mil lion
euros (179 million euros in 2022), of which 1,320 m illion
euros corresponds to Telefónica Spain mainly relating to
the agreement reached with the most representative
Trade Unions for the execution of Collective
Redundancies, explained in Termination plans in this note
(57 million euros in 2022). The distribution by segment of
the restructuring costs, in terms of their impact on
operating income, is as follows:

Millions of euros | 2023 | 2022
Telefónica Spain | 1,320 | 57
Telefónica Germany | 11 | 16
Telefónica Hispam | 128 | 98
Other companies | 79 | 8
Total | 1,538 | 179

Termination plans
The movement in provisions for termination plans in 2023
and 2022 is as follows:

Millions of euros | Total
Provisions for termination plans at 12/31/2021 | 628
Additions | 106
Retirements/amount applied | (311)
Transfers | (43)
Translation differences, hyperinflation adjustments and accretion | (4)
Provisions for termination plans at 12/31/2022 | 376
Additions | 1,520
Retirements/amount applied | (133)
Translation differences, hyperinflation adjustments and accretion | (20)
Provisions for termination plans at 12/31/2023 | 1,743

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.108
Telefónica Spain
On December 28, 2023 certain subsidiaries of Telefónica
Spain, taking into account the concurrence of productive,
organizational and technical causes, has reached an
agreement with the most representative Trade Unions for
the execution of collective redundancies up to a total of
3,420 employees, to which employees turning 56 years or
older during 2024 and with a seniority of more than 15
years have adhered (see Note 2). This agreement was
endorsed on January 3, 2024.
As a consequence of these agreements, a provision of
1,299 million euros has been recorded, charged to the
personnel expenses heading of the consolidated income
statement in 2023. The amount for this provision
classified as current totaled 107 million euros.
The discount rate used for this termination plan at
December 31, 2023 was 3.00% with an average plan
length of 4.05 years.
Additionally, the III Collective Bargaining Agreement has
been signed, valid until December 31, 2026 and
extendable for another year, with the aim of moving
towards a more digital, flexible company prepared for
future challenges in a highly competitive context and
deep transformation.
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:

12/31/2023
Millions of euros | Germany | Brazil | Hispam | Others | Total
Obligation | 236 | 764 | 74 | 15 | 1,089
Assets | (103) | (777) | — | (14) | (894)
Net provision before asset ceiling | 133 | (13) | 74 | 1 | 195
Asset ceiling | — | 200 | — | — | 200
Total | 133 | 187 | 74 | 1 | 395
Net provision | 143 | 201 | 86 | 10 | 440
Net assets | 10 | 14 | 12 | 9 | 45

12/31/2022
Millions of euros | Germany | Brazil | Hispam | Others | Total
Obligation | 208 | 622 | 64 | 19 | 913
Assets | (101) | (751) | — | (18) | (870)
Net provision before asset ceiling | 107 | (129) | 64 | 1 | 43
Asset ceiling | — | 266 | — | — | 266
Total | 107 | 137 | 64 | 1 | 309
Net provision | 117 | 138 | 75 | 8 | 338
Net assets | 10 | 1 | 11 | 7 | 29

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.109
The movement in the present value of obligations in 2023
and 2022 is as follows:

Millions of euros | Germany | Brazil | Hispam | Other | Total
Present value of obligation at 12/31/2021 | 322 | 549 | 67 | 22 | 960
Translation differences | — | 74 | (7) | 1 | 68
Current service cost | 11 | 3 | 4 | 1 | 19
Interest cost | 3 | 54 | 6 | — | 63
Actuarial losses and gains | (123) | (10) | 3 | — | (130)
Benefits paid | (5) | (48) | (4) | (1) | (58)
Plan curtailments | — | — | (3) | — | (3)
Other movements | — | — | (2) | (4) | (6)
Present value of obligation at 12/31/2022 | 208 | 622 | 64 | 19 | 913
Translation differences | — | 27 | 4 | — | 31
Current service cost | 11 | 2 | 5 | 1 | 19
Interest cost | 8 | 61 | 8 | 1 | 78
Actuarial losses and gains | 15 | 101 | 2 | — | 118
Benefits paid | (6) | (49) | (5) | (1) | (61)
Plan curtailments | — | — | (3) | — | (3)
Other movements | — | — | (1) | (5) | (6)
Present value of obligation at 12/31/2023 | 236 | 764 | 74 | 15 | 1,089

Movements in the fair value of plan assets in 2023 and
2022 are as follows:

Millions of euros | Germany | Brazil | Other | Total
Fair value of plan assets at 12/31/2021 | 99 | 660 | 15 | 774
Translation differences | — | 89 | 1 | 90
Interest income | 1 | 65 | — | 66
Actuarial losses and gains | (1) | (2) | — | (3)
Company contributions | 2 | — | — | 2
Benefits paid | (3) | (42) | — | (45)
Transfers | 3 | — | 2 | 5
Other movements | — | (19) | — | (19)
Fair value of plan assets at 12/31/2022 | 101 | 751 | 18 | 870
Translation differences | — | 31 | — | 31
Interest income | 3 | 74 | — | 77
Actuarial losses and gains | — | (30) | — | (30)
Company contributions | 2 | — | — | 2
Benefits paid | (3) | (45) | — | (48)
Transfers | — | — | (4) | (4)
Other movements | — | (4) | — | (4)
Fair value of plan assets at 12/31/2023 | 103 | 777 | 14 | 894

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.110
Telefónica Brazil post-employment benefit plans
Telefónica Brazil sponsors the following post-employment
benefit plans:

Plans | Management entity | Sponsor
Health plans |  |
Plano de Assistência Médica ao Aposentado y Programa de Coberturas Especiais (PAMA/PCE) | Fundação Sistel de Seguridade Social | Telefônica Brasil, jointly and severally with other companies resulting from the privatization of Telebrás (Telecomunicações Brasileiras, S.A.)
Assistencia médica – Lei 9.656/98 | Telefônica Brasil | Telefônica Brasil, Terra Networks, TGLog, TIS, IoTCo Brasil and CloudCo Brasil
Pension plans |  |
PBS Assistidos (PBS-A) | Fundação Sistel de Seguridade Social | Telefônica Brasil, jointly and severally with other companies resulting from the privatization of Telebrás (Telecomunicações Brasileiras, S.A.)
CTB | Telefônica Brasil | Telefônica Brasil
Telefônica BD | Visão Prev | Telefônica Brasil
Planes VISAO | Visão Prev | Telefônica Brasil, Terra Networks, TGLog, TIS, IoTCo Brasil and CloudCo Brasil

The main actuarial assumptions used in valuing these
plans are as follows:

| 12/31/2023 | 12/31/2022
Discount rate | 8.90% - 9.18% | 9.75% - 9.83%
Nominal rate of salary increase | 4.57% - 6.60% | 4.57% - 6.35%
Long term inflation rate | 3.50% | 3.50%
Growth rate for medical costs | 6.61% | 6.61%
Mortality tables | AT 2000 M/F | AT 2000 M/F

The discount rate and growth rate for medical costs are
considered to be the most significant actuarial
assumptions with a reasonable possibility of fluctuations
depending on demographic and economic changes and
may significantly change the amount of the post-
employment benefit obligation. The sensitivity to changes
in these assumptions is shown below:

| Present value of the discounted obligation at the current discount rate | Present value of the obligation by increasing the discount rate by 0.5% | Present value of the obligation by reducing the discount rate by 0.5%
Pension plans | 405 | 391 | 420
Health plans | 358 | 337 | 383
Total obligation | 763 | 728 | 803

| Present value of the obligation at the current growth rate for medical costs | Present value of the obligation by increasing the rate by 1% | Present value of the obligation by reducing the rate by 1%
Pension plans | 405 | 405 | 405
Health plans | 358 | 409 | 317
Total obligation | 763 | 814 | 722

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.111
Other employee benefits
Telefónica de España, Telefónica Móviles España and
Telefónica Soluciones Individual Suspension Plans
In 2015 Telefónica de España, S.A.U., Telefónica Móviles
España, S.A.U. and Telefónica Soluciones de Informática y
Comunicaciones de España, S.A.U. signed the first
Collective Bargaining Agreement of Related Companies
(CEV). This agreement considered elements that included
a plan of measures for individual suspension of the
employment relationship in 2016 and 2017, applying
principles of voluntariness, universality, non-
discrimination and social responsibility. In December 2016,
the Collective Bargaining Agreement of Related
Companies was extended until 2018 by virtue of the
provisions thereof. In September 2019 Telefónica España
signed the second Collective Agreement of Related
Companies that includes, among other aspects, an
"Individual Suspension Plan" that was completely
voluntary for the year 2019, with the same conditions as
the previous one. In 2021, Telefónica España signed a
Social Pact for Employment supported by the largest
trade unions, which contemplated an Individual
Suspension Plan of employment, fully voluntary.
These plans are based on mutual agreement between the
company and employees and entail the possibility of
voluntarily suspending the employment relationship for an
initial three-year period, renewable for consecutive three-
year periods until the retirement age. Employees who
meet the age and seniority requirements may enter the
Individual Suspension Plans (PSI) in the periods opened
for these purposes.
At the end of each period, the current value of the
forecast payment flows to meet the commitments of
these programs (applying certain hypotheses regarding
estimated number of accessions and future reintegration
ratio) is recognized. At 2023 and 2022 year-ends, this
figure was calculated using the biometric table
PERM2020 published in the resolution of December 17,
2020 combined with the invalidity table published in the
ministerial order of 1977 and a high quality credit market
based interest rate.
The provision at December 31, 2023 amounted to 3,648
million euros (4,150 million euros at December 31, 2022).
The discount rate used for these provisions at
December 31, 2023 was 3.08% with an average plans
length of 3.18 years.
Sensitivity of the valuation
The table below shows the sensitivity of the value of
termination, post-employment and other obligations,
including the Individual Suspension Plans of Telefónica
Group companies in Spain to changes in the discount
rate:

-100 b.p. |  | +100 b.p.
Impact on value | Impact on income statement |  | Impact on value | Impact on income statement
(171) | (171) |  | 161 | 161

A 100 b.p. increase in the discount rate would reduce the
value of the liabilities by 161 million euros and have a
positive impact on the income statement of 161 million
euros before tax. On the other hand, a 100 b.p. decrease
in the discount rate would increase the value of the
liabilities by 171 million euros and have a negative impact
on the income statement of 171 million euros before tax.
The Telefónica Group actively manages this position and
has arranged a derivatives portfolio to significantly reduce
the impact of changes in the discount rate (see Note 19).
b) Provisions for dismantling of assets
The movement of provision for dismantling of assets in
2023 and 2022 is as follows:

| Millions of euros
Dismantling of assets at December 31, 2021 | 577
Additions | 141
Accretion | (160)
Retirements/amount applied | (41)
Transfers | 16
Translation differences and other | (5)
Dismantling of assets at December 31, 2022 | 528
Additions | 54
Accretion | 23
Retirements/amount applied | (67)
Transfers | 14
Translation differences and other | (30)
Dismantling of assets at December 31, 2023 | 522

The detail by segments of provision for dismantling of
assets in 2023 and 2022 is as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Telefónica Spain | 16 | 18
Telefónica Germany | 354 | 323
Telefónica Brazil | 76 | 71
Telefónica Hispam | 76 | 116
Total | 522 | 528

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.112
c) Other provisions
The movement in “Other provisions” in 2023 and 2022 is
as follows:

| Millions of euros
Other provisions at December 31, 2021 | 2,128
Additions and accretion | 856
Retirements/amount applied | (646)
Business combinations | 226
Transfers | (7)
Translation differences and other | 73
Other provisions at December 31, 2022 | 2,630
Additions and accretion | 809
Retirements/amount applied | (805)
Transfers | (16)
Translation differences and other | (44)
Other provisions at December 31, 2023 | 2,574

"Business combinations" in 2022 mainly corresponded to
provisions related to the acquisition of mobiles assets of
Oi (see Note 5).
The Group is exposed to risks of claims and litigation,
mainly related to tax and regulatory proceedings, and
labor and civil claims.
Given the nature of the risks covered by these provisions,
no reliable schedule of potential payments, if any, can be
determined.
Telefónica Brazil
Telefônica Brasil, S.A. and its subsidiaries are party to
administrative and judicial proceedings and labor, tax and
civil claims filed in different courts. The Telefónica Group
management based on the opinion of its legal counsel,
recognized provisions for proceedings for which an
unfavorable outcome is considered likely.
The balance of these provisions at December 31, 2023
and December 31, 2022 is shown in the following table:

Millions of euros | 12/31/2023 | 12/31/2022
Tax proceedings | 515 | 446
Regulatory proceedings | 329 | 336
Labor claims | 130 | 97
Civil proceedings | 229 | 214
Amounts to be refunded to customers | 18 | 108
Provision for fines for canceling lease agreements | 8 | 99
Total | 1,229 | 1,300

Additionally, Telefónica Brazil recognized contingent
liabilities according to IFRS 3 generated on acquisition of
the controlling interest of Vivo Participaçoes in 2011, GVT
in 2015 and the mobile assets of Oi in 2022 (see Note 5).
These contingent liabilities amounted to 187 million euros
at December 31, 2023 ( 176 million euros at December 31,
2022).
In 2022, Complementary Law No. 194 was enacted in
Brasil, leading to a reduction in the tax rate ICMS on
communications services and the respective refund of
these amounts to customers. The provision in Telefónica
Brasil at December 31, 2023 amounted to 18 million euros
(108 million euros at December 31, 2022).
"Provision for fines for canceling lease agreements"
relates to the acquisition of Garliava, resulting from the
sale or shutdown of sites (see Note 5).
The detail of provisions for tax proceedings by nature of
risk is as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Federal taxes | 149 | 140
State taxes | 248 | 200
Municipal taxes | 9 | 8
FUST | 109 | 98
Total | 515 | 446

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.113
The breakdown of changes in provisions for tax
proceedings in 2023 and 2022 is as follows:

| Millions of euros
Balance at 12/31/2021 | 340
Movements with a counterparty in operating income | 31
Write-offs due to payment | (6)
Monetary updating | 37
Translation differences | 44
Balance at 12/31/2022 | 446
Movements with a counterparty in operating income | 16
Write-offs due to payment | (3)
Monetary updating | 38
Translation differences | 18
Balance at 12/31/2023 | 515

Group management and legal counsel understand that
losses are possible from tax contingencies in federal,
state, municipal and other taxes for an aggregated
amount of 36,963 million Brazilian reals (6,909 million
euros) as of December 31, 2023 (33,473 million Brazilian
reals, 6,009 million euros as of December 31, 2022 ). The
possible contingencies from the main income tax
proceedings (federal tax) are described in Note 25.
Noteworthy state tax-related contingencies include the
"ICMS" tax (see Note 25). Moreover, Telefónica Brazil
presently has different open proceedings regarding the
Fundo de Universalização de Serviços de
Telecomunicações (FUST, refer to Note 29).
With regard to regulatory proceedings, Telefónica Brazil is
party to administrative proceedings against Agencia
Nacional de Telecomunicações (ANATEL) based on an
alleged failure to meet sector regulations and judicial
proceedings to contest sanctions applied by ANATEL at
the administrative level. Consolidated provisions totaled
1,761 million Brazilian reals (329 million euros) at December
31, 2023 (1,869 million Brazilian reals, 336 million euros at
December 31, 2022 ). In addition, Group management and
legal counsel understand that losses are possible from
regulatory contingencies amounting to 6,765 million
Brazilian reals (1,264 million euros) at December 31, 2023
(5,845 million Brazilian reals, 1,049 million euros at
December 31, 2022), including the sanction for breaches
of the Fixed Telephony Regulation (see Note 29.a).
In addition, Group management and legal counsel
understand that losses are possible from civil
proceedings, amounting to 398 million euros at
December 31, 2023 (391 million euros at December 31,
2022 ).
In some situations, in connection with a legal requirement
or presentation of guarantees, judicial deposits are made
to secure the continuance of the claims under discussion.
The judicial deposits by nature of risk at December 31,
2023 and December 31, 2022 are as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Tax proceedings | 304 | 280
Labor claims | 17 | 21
Civil proceedings | 161 | 248
Regulatory proceedings | 58 | 54
Garnishments | 4 | 4
Total | 544 | 607
Current (see Note 15) | 14 | 106
Non-current (see Note 12) | 531 | 501

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.114
Note 25. Tax matters
Pursuant to a Ministerial Order dated December 27, 1989,
Telefónica, S.A. files consolidated tax returns in Spain for
certain Group companies. The consolidated tax group
comprised 45 companies at December 31, 2023 ( 47
companies at December 31, 2022).
This tax consolidation regime applies indefinitely
providing the companies continue to meet the
requirements set down in prevailing legislation, and that
application of the regime is not expressly waived.
Group companies which are resident in Spain and which
are not part of this consolidation regime and non-resident
companies file individual or aggregated tax returns under
the tax law applicable in each country.
Deferred taxes movement
The movements in deferred taxes in the Telefónica Group
in 2023 and 2022 are as follows:

Millions of euros | Deferred tax assets | Deferred tax liabilities
Balance at December 31, 2022 | 4,884 | 3,067
Additions | 2,040 | 383
Disposals | (760) | (673)
Transfers | 15 | 21
Translation differences and hyperinflation adjustments | 61 | (92)
Company movements and others | — | (4)
Balance at December 31, 2023 | 6,240 | 2,702

Millions of euros | Deferred tax assets | Deferred tax liabilities
Balance at December 31, 2021 | 5,616 | 2,602
Additions | 1,080 | 685
Disposals | (1,877) | (400)
Transfers | 21 | (30)
Translation differences and hyperinflation adjustments | 42 | 184
Company movements and others | 2 | 26
Balance at December 31, 2022 | 4,884 | 3,067

The Group assesses the recoverability of deferred tax
assets based on the future activities carried out by the
different companies, on tax regulations in the different
countries in which these companies operate, and on the
strategic decisions affecting the companies.
Main changes registered in 2023
Following the ruling of the General Court Judgment of
September 27, 2023 that finally annuls the Third Decision
(EU) 2015/314 of the Commission (see Tax deductibility of
financial goodwill in Spain in this note) an addition of tax
credits for tax loss carryforwards has been recognized
with a balancing entry in the income tax amounting to 334
million euros.
Likewise, as of December 31, 2023, the recoverability of
the deferred tax assets of the Tax Group in Spain has
been estimated, considering: i) the estimates of results of
the companies that make up the Tax Group; and ii) the
effects of RD 3/2016 (see Constitutional Court Judgment
on Royal Decree Law 3/2016 in this note). Following this
analysis, deferred tax assets have been recorded for
negative tax bases and deductions, with a counterpart in
income taxes, in the amount of 541 million euros.
Additionally, in 2023 there were additions of deferred tax
assets for 412 million euros as a result of the provisions
recognized during the year in relation to the various
workforce restructuring plans and other obligations with
employees of the companies include in the group in Spain
(see Note 24). Likewise, disposals of deferred tax assets in
2023 included the impact of the materialization of these
provisions and its financial update, amounting to 208
million euros.
Deferred tax assets have been added in Spain in the
amount of 306 million euros, as a consequence of Law
38/2022, of December 27, which establishes temporary
measures in determining the tax base under the tax
consolidation regime, limiting the amount of individual tax
loss carryforwards corresponding to fiscal year 2023 to
50%.
Telefónica Germany recognized tax credits for loss
carryforwards generated in previous years amounting to
115 million euros and applied tax loss carryforwards
amounting to 41 million euros in 2023. Furthermore,
Telefónica Germany recognized deferred tax liabilities
disposals amounting to 18 million euros.
The additions of deferred tax assets included tax credits
recognized for 73 million euros by the German company
Group 3G UMTS Holding GmbH. Furthermore, this

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.115
company applied tax loss carryforwards in 2023
amounting to 79 million euros.
Telefónica Brasil recognized additions of deferred tax
assets in the amount of 23 million euros, applied tax loss
carryforwards amounting to 60 million euros and
recognized disposals for temporary differences in the
amount of 61 million euros in 2023. Additionally, it
recognized additions of liabilities for deferred taxes
amounting to 119 million euros and disposals of deferred
tax liabilities amounting to 266 million euros.
Telefónica Chile recognized additions of deferred tax
assets in the amount of 94 million euros and disposals of
deferred tax assets in the amount of 18 million euros in
2023. Additionally, recognized additions of deferred tax
liabilities in the amount of 48 million euros and disposals
of deferred tax liabilities amounting to 28 million euros.
Telefónica Colombia recognized additions of deferred tax
assets in the amount of 9 million euros and disposals of
deferred tax assets in the amount of 66 million euros in
2023. Additionally, recognized disposals of deferred tax
liabilities in the amount of 13 million euros.
The movements relating to deferred taxes recognized
directly in equity in 2023 amounted to 2 million euros of
additions (net position of higher deferred tax liabilities)
and 194 million euros of disposals (net position of higher
deferred tax liabilities).
Likewise, the amount of recognized deferred tax liabilities
associated with investments in subsidiaries amounted to
258 million euros as of December 31, 2023 (319 million
euros as of December 31, 2022). The amount of
unrecognized deferred tax liabilities associated with
investments in subsidiaries amounted to 233 million euros
as of December 31, 2023 (234 million euros as of
December 31, 2022).
Main changes registered in 2022
In July 2022, Telefónica was notified of the Supreme
Court's ruling rejecting the appeal filed by the State
Attorney's Office against the Supreme Court's ruling of
October 29, 2021, which had upheld the criteria for the
use of tax losses and deductions maintained by
Telefónica in relation to the settlement agreements
arising from the corporate income tax audit for those
years (see Inspections of the tax group in Spain in this
note). On October 24, 2022, the Supreme Court's ruling
was enforced, ordering the refund to Telefónica of 790
million euros for taxes paid in those years, as well as 526
million euros in late-payment interest (see "Breakdown of
financial result" in Note 19). As a result of the new
assessments made, in 2022 tax credits of Telefónica,
S.A.'s tax group that had been capitalized at December 31,
2021, amounting to 512 million euros for tax loss
carryforwards and 278 million euros for tax credits, were
derecognized. Also, in relation to the above, an addition of
deferred tax assets of the tax group was recorded, with a
balancing entry in the income tax of the consolidated
income statement of tax loss carryforwards in the amount
of 58 million euros and a derecognition of tax credits for
deductions in the amount of 16 million euros.
In December 2022, the consortium formed by CAA and
Vauban (see Note 2) acquired 45% of Bluevia Fibra, S.L.
(Bluevia) for an amount of 1,021 million euros in cash. The
transaction has not had any impact on the consolidated
income statement as it is a change in the percentage of
ownership that has not resulted in a loss of control. In the
context of this transaction, Bluevia acquired from
Telefónica de España a number of assets constituting the
business object of Bluevia (see Note 29.c) at their fair
value at the transaction date, which was higher than the
pre-existing net book value, generating an accounting
gain at the headquarters of Telefónica de España which,
as Bluevia is outside the consolidation perimeter of the
tax group of Telefónica, S.A., forms part of the taxable
income of the aforementioned tax group. However, from
an accounting point of view, this difference in value is not
reflected in the consolidated accounts as it is a
transaction between companies of the same Group. The
difference between the tax value of these assets in
Bluevia and their book value in the Group's consolidated
accounts has generated an asset for deductible
temporary differences amounting to 548 million euros,
recorded as additions in the table above.
As of December 31, 2022, the estimated recoverability of
the deferred tax assets of the companies that continue to
form part of the tax group after the exit of Bluevia has
been assessed. As a result of this analysis, a reversal of
deferred tax assets for tax loss carryforwards amounting
to 85 million euros and 112 million euros of deductions has
been recorded.
In 2022 there were additions of deferred tax assets for 10
million euros as a result of the provisions recognized
during the year in relation to the various workforce
restructuring plans and other obligations with employees
of the companies include in the group in Spain (see Note
24). Likewise, disposals of deferred tax assets in 2022
included the impact of the materialization of these
provisions and its financial update, amounting to 319
million euros.
Telefónica Germany recognized tax credits for loss
carryforwards generated in previous years amounting to
76 million euros and applied tax loss carryforwards
amounting to 46 million euros in 2022. Furthermore,
Telefónica Germany recognized deferred tax liabilities
disposals amounting to 42 million euros.
The additions of deferred tax assets included tax credits
recognized for 76 million euros by the German company
Group 3G UMTS Holding GmbH. Furthermore, this
company applied tax loss carryforwards in 2022
amounting to 76 million euros.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.116
Telefónica Brazil recognized deferred tax assets
amounting to 78 million euros and applied tax loss
carryforwards amounting 86 million euros in 2022. I n
addition Telefónica Brazil, recognized deferred tax
liabilities amounting to 59 million euros and disposals
amounting to 212 million euros.
Telefónica Colombia recognized deferred tax assets
amounting to 26 million euros and applied tax loss
carryforwards amounting 119 million euros in 2022.
Furthermore, recognized deferred tax liabilities amounting
to 22 million euros.
The movements relating to deferred taxes recognized
directly in equity in 2022 amounted to 238 million euros of
additions (net position of higher deferred tax liabilities)
and 44 million euros of disposals (net position of higher
deferred tax liabilities).
Expected realization of deferred tax
assets and liabilities
The estimated realization of deferred tax assets and
liabilities recognized in the consolidated statement of
financial position in 2023 is as follows:

Millions of euros |  |  |
12/31/2023 | Total | Less than 1 year | More than 1 year
Deferred tax assets | 6,240 | 779 | 5,461
Deferred tax liabilities | 2,702 | 370 | 2,332

Deferred tax assets
Deferred tax assets in the accompanying consolidated
statements of financial position include the tax loss
carryforwards, unused tax credits recognized and
deductible temporary differences recognized at the end
of the reporting period.

Millions of euros | 12/31/2023 | 12/31/2022
Tax credits for loss carryforwards | 2,803 | 2,011
Unused tax deductions | 733 | 565
Deferred tax assets for temporary differences | 2,704 | 2,308
Total deferred tax assets | 6,240 | 4,884

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.117
Tax credits for loss carryforwards
The movements in Tax credits for loss carryforwards in
the Telefónica Group in 2023 and 2022 are as follows:

Location of the company (Millions of euros) | Balance at 12/31/2022 | Additions | Reversals | Perimeter changes | Translation differences and other | Balance at 12/31/2023
Spain | 457 | 725 | (75) | — | 3 | 1,110
Germany | 810 | 189 | (120) | — | — | 879
Latin America | 741 | 133 | (113) | — | 53 | 814
Other | 3 | — | (3) | — | — | —
Total tax credits for loss carryforwards | 2,011 | 1,047 | (311) | — | 56 | 2,803

Location of the company (Millions of euros) | Balance at 12/31/2021 | Additions | Reversals | Perimeter changes | Translation differences and other | Balance at 12/31/2022
Spain | 999 | 58 | (600) | — | — | 457
Germany | 778 | 153 | (122) | 1 | — | 810
Latin America | 861 | 64 | (216) | — | 32 | 741
Other | 1 | 3 | (1) | — | — | 3
Total tax credits for loss carryforwards | 2,639 | 278 | (939) | 1 | 32 | 2,011

The Spanish tax group considers that unused tax loss
carryforwards in Spain, taking into account tax litigation in
which the group is involved, amount to 4,628 million euros
at December 31, 2023:

Millions of euros | Total | Less than 1 year | More than 1 year
Tax loss carryforwards generated in the tax group | 2,633 | — | 2,633
Tax loss carryforwards generated before consolidation in the tax group | 1,995 | — | 1,995

Total tax credits for loss carryforwards in Spain in the
statement of financial position at December 31, 2023
amounted to 1,110 million euros (457 million euros at
December 31, 2022). Total unrecognized tax credits for
loss carryforwards of the Spanish tax group amounted to
77 m illion euros (498 million euros at December 31, 2022).
These tax credits do not expire.
The Group companies in Germany have recogn ized 879
milli on euros of tax credits for loss carryforwards at
December 31, 2023. Total unrecognized tax credits for
loss carryforwards of these companies amount t o 5,295
million euros (5,452 million euros at December 31, 2022).
These tax credits do not expire.
Recognized tax credits in the consolidated statement of
financial position arising from the Latin American
subsidiaries at December 31, 2023 amounted to 814
million euros. Total unrecognized tax credits for tax loss
carryforwards in Latin America amounted to 841 million
euros (683 million euros at December 31, 2022).
Deductions
The Group has recognized 733 million euros of tax credits
from deductions at December 31, 2023, in Spain (565
millIon euros in 2022), generated primarily from R+D+i,
double taxation, donations to non-profit organizations and
film productions. Total unrecognized tax credits from
deductions in Spain amount t o 244 million euros at
December 31, 2023.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.118
Temporary differences
The sources of deferred tax assets and liabilities from
temporary differences recognized at December 31, 2023
and 2022 are as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Goodwill and intangible assets | 787 | 828
Property, plant and equipment | 378 | 473
Personnel commitments | 1,498 | 1,278
Provisions | 1,062 | 935
Inventories and receivables | 330 | 324
Rights of use | 48 | 51
Lease liabilities | 994 | 1,049
Other concepts | 489 | 267
Total deferred tax assets for temporary differences | 5,586 | 5,205
Deferred tax assets and liabilities offset | (2,882) | (2,897)
Total deferred tax assets for temporary differences registered in the statement of financial position | 2,704 | 2,308

Millions of euros | 12/31/2023 | 12/31/2022
Goodwill and intangible assets | 1,928 | 1,970
Property, plant and equipment | 1,105 | 1,282
Personnel commitments | 2 | 12
Provisions | 454 | 447
Investments in subsidiaries, associates and other shareholdings | 327 | 374
Inventories and receivables | — | —
Rights of use | 1,023 | 1,046
Other concepts | 743 | 833
Total deferred tax liabilities for temporary differences | 5,584 | 5,964
Deferred tax assets and liabilities offset | (2,882) | (2,897)
Total deferred tax liabilities for temporary differences registered in the statement of financial position | 2,702 | 3,067

Deferred tax assets and liabilities are offset if a legally
enforceable right exists to offset current tax assets
against current tax liabilities and the deferred taxes relate
to the same taxable entity and the same taxation
authority.
The heading "Other concepts” includes, among others,
the difference between the accounting and tax values
created by the value of financial derivatives at year end
(see Note 19).
Total unrecognized tax credits from temporary
differences, mainly from Pegaso Pcs S.A. de C.V. and
Colombia Telecomunicaciones S.A. ESP BIC, amount to
982 million euros at December 31, 2023.
Tax payables and receivables
Current tax payables and receivables at December 31,
2023 and 2022 are as follows:

Millions of euros | Balance at 12/31/2023 | Balance at 12/31/2022
Tax payables |  |
Tax withholdings | 111 | 96
Indirect taxes | 561 | 390
Social security | 117 | 114
Current income taxes payable | 769 | 957
Other | 311 | 363
Total | 1,869 | 1,920

Millions of euros | Balance at 12/31/2023 | Balance at 12/31/2022
Tax receivables |  |
Indirect taxes | 493 | 569
Current income taxes receivable | 598 | 1,549
Other | 102 | 95
Total | 1,193 | 2,213

The heading "Current income taxes receivable" as of
December 31, 2022 included a receivable from Telxius
Telecom amounting to 876 million euros corresponding
to the income tax for the 2021 fiscal year, which was
mainly generated by the second advance corporation tax
paid for 2021 ("minimum instalment payment regime",
regulated by RDL 2/2016 of 30 September, which is
calculated on the positive result of the consolidated profit
and loss account of its tax group whose parent company
is Telxius Telecom). The profit obtained on the sale of its
tower division subsidiaries, despite being tax exempt (at
95%) from corporate income tax, was nevertheless
included in the basis for calculating the instalment
payment. This credit was included into consideration for
the annual corporate income tax return for 2021, which

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.119
was filed in July 2022. The effective recovery of this credit
took place in January 2023.
On May 13, 2021 the Supreme Court of Brazil concluded
the judgment of one of the most important tax disputes in
Brazil, related to the exclusion of the ICMS tax (state tax
on goods and services) in the PIS/COFINS (Contribuição
para Financiamento da Seguridade Social) tax base. The
impact in the consolidated income statement at 2021
amo unted to 1,660 million Brazilian reals (261 million
euros) reducing "Taxes other than income tax" within
"Other expenses" (see Note 26), 573 million Brazilian reals
(90 million euros) in "Finance income" (see Note 19) and
36 million Brazilian reals correspond to monetary updating
(6 million euros).
Additionally, Telefónica Brazil has another legal
proceeding that became final in 2018 for which it partially
recognized the credit. The remaining portion of this
process, relating to the period from April 1998 to June
2002 was not recognized at that time, as Telefónica Brazil
considered it to be a contingent asset and, therefore, did
not meet the parameters for its accounting recognition. In
August 2022, based on the evolution of more recent
decisions handed down by the STF that could impact the
process in question, Telefónica Brazil, supported by the
opinions of its legal advisors, concluded that the
aforementioned process reached the status of net
recoverability and therefore would be entitled to the
accounting recognition of the remaining portion of the
credit. Consequently, in 2022 1,146 million Brazilian reais
(212 million euros at the average exchange rate of
December, 2022) were registered in "Current income
taxes receivable". The impact in the consolidated income
statement at 2022 amo unted to 397 million Brazilian reals
(73 million euros) reducing "Taxes other than income tax"
within "Other expenses" (see Note 26), 749 million
Brazilian reals (139 million euros) in "Finance income" (see
Note 19) and 67 million Brazilian reals correspond to
monetary updating (12 million euros). In 2022 the
Company started the offset of said credit and at
December 31, 2022 the credits pending compensation
amounting to 787 million Brazilian reals, equivalent to 141
million euros at the closing exchange rate of December
31, 2022. At December 31, 2023 these credits had been
totally compensated.
In 2023, after evaluating a complementary issue,
Telefónica Brazil offset an additional tax credit amounted
to 522 million Brazilian reals (97 million euros at the
average exchange rate of December, 2023). The impact
in the consolidated income statement of 2023 amounted
to 277 million Brazilian reals (51 million euros) reducing
"Taxes other than income tax" within "Other
expenses" (see Note 26) and 245 million Brazilian reals (46
million euros) in "Finance income" (see Note 19).
As of December 31, 2023, these credits have been fully
compensated.
"Current income taxes payable" as of December 31, 2023
includes the balance provisioned for litigation in Peru (see
Tax litigation in Telefónica del Perú in this note).
Reconciliation of book profit before
taxes to taxable income
The reconciliation between book profit before tax and
the income tax expense from continuing operations for
2023 , 2022 and 2021 is as follows:

Millions of euros | 2023 | 2022 | 2021
Accounting profit before tax | (1,473) | 2,960 | 12,095
Tax expense at prevailing statutory rate | (248) | 797 | 2,768
Permanent differences | 442 | (793) | (1,705)
Changes in deferred tax charge due to changes in tax rates | 0 | 1 | 51
(Capitalization)/reversal of tax deduction and tax relief | (173) | 88 | 225
(Capitalization)/reversal of loss carryforwards | (855) | 197 | (307)
Increase/(decrease) in tax expense arising from temporary differences | 11 | 43 | 84
Other concepts | (76) | 308 | 262
Corporate income tax | (899) | 641 | 1,378
Breakdown of current/deferred tax expense |  |  |
Current tax expense | 473 | (218) | 831
Deferred tax expense | (1,372) | 859 | 547
Total Corporate income tax | (899) | 641 | 1,378

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.120
2023
Permanent differences for 2023 mainly include 477 million
euros that result from excluding from the reconciliation
the share of loss of VMO2 accounted for by the equity
method (see Note 10). This result is part of the Accounting
profit before tax but has no effect on the consolidated
Corporate income tax.
(Capitalization)/reversal of tax deduction and tax relief in
2023 mainly includes the reversal of deferred tax assets
for tax credits of the Telefónica, S.A. tax group amounting
to 173 million euros, with a balancing entry in deferred tax
expense (see Main changes registered in 2023 above in
this note).
(Capitalization)/reversal of loss carryforwards in 2023
mainly includes the effect of the General Court Judgment
of September 27, 2023 that finally annuls the Third
Decision (EU) 2015/314 of the Commission (see Tax
deductibility of financial goodwill in Spain in this note)
with counterpart in deferred tax assets amounting to 334
million euros and the activation of tax credits for tax loss
carryforwards generated in previous years of Telefónica,
S.A. for an amount of 368 million euros, the recognition of
tax credits for tax loss carryforwards generated in
previous years of Telefónica Germany amounting to 115
million euros and Group 3G UMTS Holding GmbH
amounting to 73 million euros are included too in
(Capitalization)/reversal of loss carryforwards in 2023 (see
Main changes registered in 2023 above in this note).
2022
"Permanent differences" for 2022 , mainly includes 651
million of income corresponding to the last corporate
simplification implemented in Brazil due to the approval in
2021 of a new Telecommunications Law (Law 14.195 of 26
August 2021), the consequent repeal of Decree
2.617/1998, which abolishes the obligation to control a
telecommunications company through a Brazilian
company.
Likewise, as a result of the closure of the tax inspection of
Group 3G UMTS Holding GmbH for several years up to
2015 and once it was confirmed that no adjustment was
proposed, the company has reversed the provision that
had been recorded for this purpose, with an impact on
Corporate income tax of 186 million euros and in Finance
income of 69 million euros. This movement has not had
any cash effect.
(Capitalization)/reversal of tax deduction and tax relief in
2022 mainly includes the reversal of deferred tax assets
for tax credits of the Telefónica, S.A. tax group amounting
to 112 million euros, with a balancing entry in deferred tax
expense.
(Capitalization)/reversal of loss carryforwards in 2022
mainly includes the effect of unrecorded tax loss
carryforwards generated in the year and the reversal of
tax loss carryforwards generated in prior years of the
Telefónica, S.A. tax group, amounting to 326 million euros
and 85 million euros, respectively. On the other hand, the
recognition of tax credits for tax loss carryforwards
generated in previous years of Telefónica Germany
amounting to 76 million euros and Group 3G UMTS
Holding GmbH amounting to 76 million euros are included
too in (Capitalization)/reversal of loss carryforwards in
2022 (see Main changes registered in 2022 above in this
note).
Other items in 2022 mainly include an expense of 241
million euros as a result of the provision for tax
contingencies recorded during the year by Telefónica del
Perú (see Tax litigation at Telefónica del Perú later in this
note).
2021
"Permanent differences" for 2021 mainly included the
effect of the corporate income tax exemption on capital
gains generated on the constitution of VMED O2 UK and
on the sale of Telxius' telecommunications tower division
(see Note 2). It also included 387 million euros expense for
the signing of the Settlement Agreement following the
closure of the corporate income tax audit for the years
2014 to 2017 in Spain referred to in the section
"Inspections of the tax group in Spain" of this note.
"Changes in deferred tax charge due to changes in tax
rates" in 2021 included the impact of the change in the
corporate income tax rate in Argentina, United Kingdom
and Colombia. In Argentina the Law 27,630 of June 16,
2021 of the Corporation Tax established an increase in the
nominal tax rate from 30% to 35% with retroactive effect
from January 1st, 2021. In addition, on May 24, 2021 a
change in the nominal tax rate from 19% to 25% was
substantially enacted in the United Kingdom, which will
begin to apply on April 1st, 2023. In September 2021, the
so-called Social Investment Law (Law 2155 of 2021) was
approved in Colombia, which established that as of 2022,
the general income tax rate for legal entities is 35%. As a
result of these changes in tax rates, a net deferred tax
effect was recorded with a counterpart in Corporate
income tax, amounting to 51 million euros.
"(Capitalization)/reversal of loss carryforwards" in 2021
included the recognition of tax credits in Telefónica
Germany and Group 3G UMTS amounting to 77 million
euros and 72 million euros, respectively, the recognition of
tax credits in Brazil amounting to 221 million euros as a
result of a decision of the Supreme Federal Court of
September 24, 2021, partially compensated by the
reversal of the tax group in Spain amounting to 65 million
euros.
"Increase/(decrease) in tax expense arising from
temporary differences" in 2021 mainly included the effect
of deductible temporary differences not recognized in
Telefónica México, amounting to 83 million euros.

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Consolidated Annual Report 2023 Telefónica, S. A.121
The heading "Other concepts" in 2021 included an
expense of 97 million euros as a result of the provision for
tax contingencies recorded by Telefónica del Perú in the
year (see "Tax litigation in Telefónica del Perú" later in this
note) and 97 million euros for the taxation of dividend
income from Spanish companies.
Tax deductibility of financial goodwill
in Spain
The tax regulations added article 12.5 to the Spanish
Corporate Income Tax Law, which came into force on
January 1, 2002. The article regulated the deductibility of
tax amortization of financial goodwill (fondo de comercio)
arising from the acquisition of non-Spanish companies,
which could be amortized over 20 years at 5% per annum.
Following the entry into force of the Laws 9/2011 of
August 19, 2011 and 16/2013 of October 29, 2013, the
amount of goodwill amortization deductible for tax
purposes under article 12.5 for the years 2011 to 2015 was
reduced from 5% to 1%. The effect is temporary because
the 4% not amortized for five years ( 20% in total) will be
recovered extending the deduction period from the initial
20 years to 25 years.
The Telefónica Group, under this regulation, has been
amortizing for tax purposes the financial goodwill from its
investments, both direct and indirect, in O2, BellSouth and
ColTel (prior to December 21, 2007) and Vivo (acquired in
2010). The positive accumulated effect of the
corresponding settlements of corporate income tax from
2004 to the closing of December 31, 2023, was 2,206
million euros.
In relation to this tax incentive, the European Commission
(EC) has in recent years commenced three proceedings
against the Spanish State, as it deems that this tax benefit
could constitute an example of state aid. Although the EC
itself acknowledged the validity of the tax incentive for
those investors that invested in European companies for
operations carried out before December 21, 2007 in the
first decision, and before May 21, 2011 for investments in
other countries in the second decision, in its third decision
issued on October 15, 2014 it calls into question the
applicability of the principle of legitimate expectations in
the application of the incentive for indirect acquisitions,
whatever the date of acquisition may have been.
There are also doubts in the Spanish Courts about the
classification of the incentive as a deduction and its
maintenance in the case of subsequent transmission.
On October 6, 2021, the Court of Justice of the European
Union concluded that the European Commission
correctly classified the Spanish tax depreciation scheme
of the Fondo de Comercio as State aid incompatible with
the internal market for the First and Second Decisions.
With regard to the recognition of legitimate expectations
for the First and Second decisions, the Court of Justice of
the European Union confirms its applicability.
The proceedings initiated on the Third Decision,
suspended until the resolution of the 1st and the 2nd
Decisions resumed on October 19, 2021. The General
Court of the Court of Justice of the European Union
issued a ruling on September 27, 2023 annulling the
Commission's Third Decision (EU) 2015/314, effective as of
the day of its publication. However, the proceedings have
not been finally concluded as the European Commission
appealed the ruling to the Court of Justice of the
European Union on December 14, 2023.
As a result of the execution of this Sentence, as well as
that of the Constitutional Court on Royal Decree Law
3/2016, Telefónica could once again have available (in
addition to the 334 million euros in accordance with the
opinion of the Company and its advisors as to the likely
outcome of the aforementioned appeal), totally or
partially, the tax credits for negative tax bases and
deductions under Constitutional Court Ruling on Royal
Decree Law 3/2016 of this note.
The "Tax and Customs Control Unit of the Spanish Tax
Authority" (Dependencia de Control Tributario y
Aduanero de la Agencia Tributaria), in compliance with
the obligation set out in the EC Decision (EU) 2015/314,
recovered in March 2019, February 2021 and July 2023,
the amounts that had been deducted in connection with
the amortization of goodwill for the indirect acquisition of
non-resident companies from 2005 to 2015, 2016 to 2018
and 2019 to 2020, respectively. The amount paid by
Telefónica after offsetting outstanding tax credits (tax
losses carryforward and deductions) amounted to 13.4
million euros.
Notwithstanding the fact that Telefónica understands
that the principle of legitimate expectations in relation to
this tax incentive applies, in relation to tax-amortized
goodwill through the purchase of some companies for
which the applicability of the legitimate expectations
principle is questioned, mainly Vivo, the Group applied in
2023 the provision for the recovered part, 49 million
euros, and has decided to continue provisioning the
amount of the goodwill amortized for tax purposes, and
not recovered by the Administration which amounted to
419 million euros as of December 31, 2023 (406 million
euros as of December 31, 2022).
Inspections of the tax group in Spain
In July 2019, new inspection procedures were initiated for
several of the companies belonging to Tax Group 24/90,
of which Telefónica, S.A. is the dominant company. The
periods audited for Corporate Income Tax were the years
2014 to 2017.
The closing of the inspection procedure took place in
January 2022, with the Settlement Agreement being

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Consolidated Annual Report 2023 Telefónica, S. A.122
notified, and which the Company challenged in an
economic-administrative procedure at the Central
Economic-Administrative Court due to the adjustments
with which it did not agree, mainly related to the "juros
sobre el capital propio". In December 2022, the Company
received a rejection resolution from the Central
Economic-Administrative Court, which was challenged on
the National High Court in February 2023. The final
decision is still pending.
In relation to the 2008-2011 inspection procedure, in July
2022 Telefónica was notified of the Supreme Court's
decision rejecting the appeal for cassation filed by the
State Attorney's Office against the judgment of the
Audiencia Nacional (National High Court) of October 29,
2021 . This confirmed the criteria used by Telefónica, S.A.
for the use of tax losses carryforward and deductions in
relation to the liquidation agreements derived from the
Corporate Income Tax inspection of those years.
On October 24, 2022 , an Agreement for the Execution of
the Judgment of the Audiencia Nacional (National High
Court) was issued, which orders the refund to Telefónica
of an amount of 790 million euros for taxes paid in those
years, as well as an amount of 526 million euros as
delayed interest. Said amounts were collecte d on
October 28, 2022.
In July 2023 new inspection procedures were initiated
with respect to several of the companies belonging to Tax
Group 24/90, of which Telefónica, S.A. is the dominant
company. The taxes and periods being audited were as
follows: corporate income tax for the years 2018 to 2021
and value added tax for the period from May to December
2019 as well as for the years 2020 and 2021.
As a result of the ongoing inspection process and the
years still to be inspected, at the end of the financial year
2023, it is not estimated that there will be a need to
recognize additional liabilities in the Consolidated
Financial Statements.
Constitutional Court Ruling on Royal
Decree Law 3/2016
On January 18, 2024, the plenary session of the
Constitutional Court of Spain ("TC") unanimously
declared unconstitutional certain measures introduced by
Royal Decree-Law 3/2016 of December 2 on corporate
income tax. Specifically, the TC declared unconstitutional
the setting of stricter ceilings for the offsetting of negative
tax bases, the introduction ex novo of a limit on the
application of double taxation deductions, and the
obligation to automatically integrate into the tax base of
the tax the impairment of holdings that had been
deducted in previous years. This ruling, following the
trend of previous TC rulings, points out that, in the
interest of legal certainty, the effects of the declaration of
unconstitutionality are limited.
However, because Telefónica has submitted letters of
request for rectification for the financial years 2016
onwards of both the consolidated self-assessment tax
returns (Form 220) of the Tax Group 24/90 and the
individual self-assessment tax returns (Form 200) of the
Group companies affected by the measures, Telefónica
would not be affected by any such limitation on the scope
of the declaration of unconstitutionality
Although the corporate income tax returns of the Tax
Group 24/90 in Spain for the years 2016 to 2022 will be
affected by the aforementioned ruling, it is not possible at
this time to determine with any degree of certainty what
the specific effects on Telefónica's tax position will be or,
given the status of the proceedings in which Telefónica's
claims are being resolved, when the administrative rulings
recognizing such effects will be issued. This is because
there are various factors of uncertainty which make it
impossible to determine, from a quantitative point of view,
these effects, or to predict when they may be determined
or when they will materialize.
As a result of the implementation of this TC ruling, as well
as that of the General Court of the Court of Justice of the
European Union regarding the amortization of goodwill,
Telefónica could again have available (in addition to the
334 million euros, see Main changes registered in 2023
above in this note), totally or partially, the following tax
credits for tax loss carryforwards and deductions used in
the settlements of those years; for tax loss carryforwards
for the years: 2002, 247 million euros, 2004, 21 million
euros, 2011, 615 million euros and 2015, 1,503 million euros;
and, for deductions: for double taxation from 2010 to
2020, 952 million euros, for reinvestment from 2003 and
from 2011 to 2013, 23 million euros, for investments from
2003 to 2013, 476 million euros, for donations from 2009
to 2018, 260 million euros, for fixed assets in the Canary
Islands from 2010 to 2020, 101 million euros and for
reversal of temporary measures from 2015 to 2020, 29
million euros.
Tax litigation in Telefónica Brazil
State taxes
The Telefónica Group is involved in a range of tax
litigation in Brazil over direct and indirect taxes (including
those relating to GVT). This includes a number of appeals
relating to ICMS tax (a tax similar to VAT, levied on
telecommunications services). There is a dispute with the
Brazilian tax authorities over which services should be
subject to this tax.
To date the most significant issues have focused on the
requirement to collect ICMS on penalties charged to
customers for non-compliance, and complementary or
additional services to the basic telecommunications
services such as value-added services, modem rental,
and the application of this tax on the basic fee (assinatura
básica). In the case of the latter (assinatura básica), the

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Consolidated Annual Report 2023 Telefónica, S. A.123
Supreme Court has established that the tax is only
payable in respect of assessments for periods after
October 2016.
All related procedures are being contested in all instances
(administrative and court proceedings). The aggregate
amount of the relevant proceedings, updated to take into
account interest, fines and other items, is approximately
23,130 million Brazilian reais as of December 31, 2023
(approximately 4,323 million euros at the exchange rate
on that date, see Note 24 to the Consolidated Financial
Statements), 21,712 million Brazilian reais as of December
31, 2022 (approximately 3,898 million euros at the
exchange rate on that date). Telefónica Brazil has
obtained independent expert reports supporting its
position, i.e. that the aforesaid services are not subject to
ICMS.
Federal taxes
In addition, there are possible contingencies in relation to
the federal income taxes for the total amount of 30,379
million Brazilian reais as of December 31, 2023
(approximately 5,678 million euros at the exchange rate
on that date), 29,778 million Brazilian reais as of
December 31, 2022 (approximately 5,346 million euros at
the exchange rate on that date), mainly related to the tax
amortization in Brazil in the years 2011 to 2020 of the
goodwill originated in the acquisitions of Vivo and GVT
and their subsequent merger with Telefónica Brasil.
These proceedings are at the administrative and judicial
stage and no provisions have been made since the
potential risk associated with them has been classified as
"not probable" and Telefónica Brazil has received
independent expert reports that support this view.
There are other probable contingencies in relation to the
federal income taxes for the total amount of 198 million
Brazilian reais as of December 31, 2023 (approximately 37
million euros at the exchange rate as of December 31,
2023), 104 million Brazilian reais as of December 31, 2022
(approximately 19 million euros at the exchange rate on
that date). The Company has recognized a provision for
this amount.
Tax litigation in Telefónica del Perú
In relation to tax claims in Peru, it should be noted that
Telefónica del Perú is party to numerous legal
proceedings (contentious administrative proceedings
(ACAs) and appeals (amparos)) for tax matters relating to
corporate income tax and VAT, mainly for the years 1998
to 2005, the most relevant being those corresponding to
the years 1998 to 2001 (relating to corporate income tax,
payments in advance, credit balances, associated VAT,
interest and applicable penalties).
The evolution of the appeals of the different cases from
the period 1998 to 2001 has been uneven and complex
over the last few years, but we can highlight the second
instance Judgment of 2015, which was partially upheld;
the Supreme Court Judgments of 2019; the January 2020
Supreme Court Ruling, annulling the previous rulings of
2000 and 2001 in relation to the provision for doubtful
debts; the Constitutional Court Rulings in 2021 in relation
to the settlement of late payment interest, partially
upheld; and the Supreme Court Rulings of 2021 and 2022
on the credit balance from 1999 used in 2000.
On January 17 and 18, 2023, Telefónica del Perú received
notifications of the judgments handed down by the
Supreme Court that resolved, in the last instance and
unfavorably to the Company (references to the
“Company” in this section refer to Telefónica del Perú),
the contentious administrative proceedings relating to
income tax for the years 1998, 2000 and 2001.
The rulings issued by the Fifth Chamber of Constitutional
and Social Transitory of the Supreme Court do not
contain any payment mandate to the Company, as the
rulings issued in the administrative contentious
proceedings were resolved on concepts derived from a
pronouncement of the Tax Court. At the end of these
proceedings - and any others that may be applicable - the
Tax Administration, through an administrative act, will
determine the amount of the corresponding payment
obligations.
Because there were certain adjustments on which the
rulings had been definitive since 2015 (positively for the
Company in relation to the deductibility of the rental of
public spaces and negatively in the case of the
deductibility of certain financial charges), the Company
previously recorded a provision with an impact on income
tax, the amount of which has been updated periodically
and constantly depending on the evolution of the various
proceedings and the applicable interest rates.
In addition to the above, in June 2022 a new ruling was
received from the Tax Court in relation to the corporate
income tax of Telefónica Móviles del Perú for 2000. This
ruling was favorable to the Company with respect to the
recognition of the tax value of certain network assets and
unfavorable with respect to the deductibility of the
exchange rate tax.
In relation to all these proceedings, the Group considers
that the initial amount claimed by the Peruvian
government has been exponentially increased by the
accrual of interest generated by the delay, not
attributable to the Company, of almost 20 years in
processing the lawsuits, meaning that almost 80% of the
total amount claimed is due to interest and fines. And all
this, despite the fact that in 2021 the Constitutional Court
itself ruled in favor of Telefónica del Perú, recognizing that
it had been charged interest for delays not attributable to
the company.
For this and other reasons, the Group has been in
international arbitration before ICSID since March 2021
for various conducts of the Peruvian State in violation of

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Consolidated Annual Report 2023 Telefónica, S. A.124
the Agreement for the Promotion and Reciprocal
Protection of Investments between Spain and Peru (see
Note 29.a).
The Company has recorded the necessary provisions for
the contingencies considered probable, leaving as
possible contingencies an amount of 587 million Peruvian
soles as of December 31, 2023, or approximately 143
million euro s at the exchange rate on that date (560
million Peruvian soles as of December 31, 2022, or
approximately 138 million euros at the exchange rate on
that date).
The total provision for tax litigation in Peru, following the
payments made to date, as well as the use of credit
balance and the restatement of interest, have led to the
adjustment of the provision at December 31, 2023, which
amounts to 3,117 million Peruvian soles, or approximately
761 million euros at the exchange rate as of December 31,
2023 (3,849 million Peruvian soles as of December 31,
2022 or approximately 945 million euros at the exchange
rate of the date).
Years open for inspection in the Group
companies
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, years
from 2018 onwards are open to inspection.
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 twelve years in Germany.
• The last nine years in the United Kingdom.
• The last seven years in Argentina.
• The last six years in Venezuela and Colombia
• The last five years in Brazil, Mexico, Uruguay and the
Netherlands.
• The last four years in Peru and Ecuador.
• The last three years in Chile and the United States.
The tax inspection of the open years is not expected to
give rise to additional material liabilities for the Group.
The new international tax regulation
(Pillar Two)
The rules of Pillar Two will apply to the Telefónica Group
starting in 2024. On December 20, 2023, the Draft Law
establishing a complementary tax to guarantee a global
minimum level of taxation for multinational groups and
large national groups was published in Spain. Said
document has been submitted to the public information
process for the presentation of observations during the
period between December 21, 2023 and January 19, 2024,
without it having been approved as of the date of
formulation of these financial statements.
Starting in 2024, once the aforementioned Law is
approved, the Telefónica Group will be subject in Spain to
a complementary tax that will tax the profits obtained in
any jurisdiction in which it operates in which the effective
tax rate, calculated at the jurisdictional level, is lower than
the minimum rate of 15%.
As the rule that regulates this tax has not yet come into
force in Spain, the Group has not recorded any impact on
the tax expense for the year. On the other hand, the
Group applies the exception to recognize and disclose
information on deferred tax assets and liabilities related to
this tax, as provided in the amendments to IAS 12 issued in
May 2023 (see Note 3.o).
Taking into account the existing regulatory framework at
the date of authorization for issuance of these financial
statements, it is not yet possible to make a precise and
reliable estimate of the impact that the application of the
Pillar Two standard will have. However, and in
accordance with the analysis carried out on the years
prior to the period of application, and except for possible
unforeseen events in subsequent years, it is estimated
that the new tax will not have a material impact on the
Group's income statement.
The Telefónica Group has assumed the commitment to
apply the OECD Pillar Two guidelines, is aligned with the
principles and actions advocated by the OECD and is
working on the analysis of the impact of the new
standard, to establish a system of compliance and control
and management, which allows to adapt to regulations in
a timely manner.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.125
Note 26. Revenue and expenses
Revenues
The breakdown of Revenues for the years 2023 , 2022 and
2021 is as follows:

Millions of euros | 2023 | 2022 | 2021
Revenues from rendering of services | 34,832 | 34,479 | 33,697
Lease revenues | 71 | 76 | 127
Sale of goods | 5,749 | 5,438 | 5,453
Total | 40,652 | 39,993 | 39,277

"Revenues from sale of goods" mainly include the sale of
mobile handsets, also including those corresponding to
leases of terminals with a purchase option.
In 2023, "revenues from rendering of services" includes
212 million euros corresponding to insurance contracts
related to the adoption of IFRS 17 on January 1, 2024 (see
Note 3 o).
Other income
The breakdown of “Other income” is as follows:

Millions of euros | 2023 | 2022 | 2021
Own work capitalized | 803 | 783 | 771
Gain on disposal of businesses | 24 | 205 | 11,008
Gain on disposal of property, plant and equipment | 257 | 582 | 478
Gain on disposal of intangible assets | 2 | 1 | 7
Government grants | 27 | 16 | 13
Other operating income | 428 | 478 | 396
Total | 1,541 | 2,065 | 12,673

"Gain on disposal of businesses" in 2022 mainly included
the gain from the sale of fiber optics assets of Colombia
Telecomunicaciones, amounting to 162 million euros .and
the gain from the establishment of the joint company for
the deployment of fiber in the United Kingdom amounting
to 20 million euros (see Note 10).
"Gain on disposal of businesses" in 2021 mainly included
the gain from the sale of the towers division of Telxius
(6,099 million euros, see Note 2), the gain generated in
the constitution of the joint venture VMO2 ( 4,460 million
euros, see Note 2), the gain from the sale of 60% of the
shares of InfraCo, SpA ( 274 million euros) and the gain
from the sale of Telefónica de Costa Rica (136 million
euros).
"Gain on disposal of property, plant and equipment"
includes the gains on sale and leaseback transactions,
which amount to 105 million euros, 381 million euros and
263 million euros in 2023, 2022 and 2021, respectively
(see Note 20).
Other expenses
The breakdown of “Other expenses” is as follows:

Millions of euros | 2023 | 2022 | 2021
Leases included in "Other expenses" (1) | 68 | 86 | 80
Other external services | 8,282 | 8,731 | 8,604
Taxes other than income tax | 753 | 834 | 703
Change in trade provisions | 734 | 693 | 660
Losses on disposal of fixed assets and changes in provisions for fixed assets | 33 | 124 | 51
Goodwill impairment (Note 7) | 58 | — | 416
Other operating expenses | 370 | 273 | 462
Total | 10,298 | 10,741 | 10,976

(1) Following the adoption of IFRS 16, only included short-term leases and
leases of low-value or intangible assets (see Notes 9).
"Losses on disposal of fixed assets and changes in
provisions for fixed assets" in 2022 included impairment
losses of intangible assets and property, plant and
equipment of Telefónica Argentina, for a total amount of
77 million euros (see Notes 6 and 8).
“Taxes other than income tax” includes the outstanding
credits related to the court decisions in favor of Telefónica
Brasil which recognized the right to deduct the ICMS
from the calculation base of the PIS and COFINS. The
impact was 51 million euros reducing "Taxes other than
income tax" in 2023 (73 million euros and 261 million euros
in 2022 and 2021, respectively, see note 25).

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.126
Purchases and other contractual
commitments
The estimated payment schedule for purchases and other
contractual commitments (non-cancelable without
penalty cost) is as follows:

Millions of euros | Purchases and other contractual commitments
Less than 1 year | 3,571
1 to 3 years | 4,470
3 to 5 years | 1,754
More than 5 years | 2,254
Total | 12,049

The purchases and other contractual commitments in the
table above include 1,123 million euros corresponding to
power purchase agreements (PPAs), mainly of Telefónica
Spain for the period from 2024 to 2031 and Telefónica
Germany for the period from 2024 to 2035 and 2040 (see
Note 29.d). The Group uses these contracts to purchase
energy from sustainable sources, such as wind and solar,
at generally fixed prices (see Note 3.l).
Commitments for short-term leases and low value leases
amounted to 52 million euros as of December 31, 2023. In
addition, the Group has lease collection commitments
amounting to 7 million euros as of December 31, 2023.
Headcount
The table below presents the breakdown of the
Telefónica Group’s average number of employees by fully
consolidated segment (see Note 4) in 2023, 2022 and
2021 , together with total headcount at December 31 each
year.

| 2023 |  | 2022 |  | 2021
| Average | Year-end |  | Average | Year-end |  | Average | Year-end
Telefónica Spain | 21,342 | 21,443 |  | 21,099 | 20,947 |  | 22,872 | 22,976
Telefónica United Kingdom | — | — |  | — | — |  | 2,884 | —
Telefónica Germany | 7,232 | 7,367 |  | 7,029 | 7,099 |  | 7,375 | 7,056
Telefónica Brazil | 35,118 | 35,519 |  | 34,275 | 34,846 |  | 33,987 | 34,343
Telefónica Hispam | 29,715 | 29,087 |  | 30,232 | 29,994 |  | 31,806 | 30,717
Other companies | 10,717 | 10,726 |  | 9,928 | 10,765 |  | 8,852 | 9,058
Total | 104,124 | 104,142 |  | 102,563 | 103,651 |  | 107,776 | 104,150

At December 31, 2023, approximately 39% of the final
headcount are women (approximatel y 39% at
December 31, 2022).
At December 31, 2023, the number of employees with
disabilities is 2,572 (1,482 employees at December 31,
2022), of which 462 employees are in Spain (314
employees in 2022).
Depreciation and amortization
The breakdown of “Depreciation and amortization” on the
consolidated income statement is as follows:

Millions of euros | 2023 | 2022 | 2021
Property, plant and equipment (Note 8) | 4,055 | 4,133 | 4,360
Intangible assets (Note 6) | 2,583 | 2,599 | 2,388
Rights of use (Note 9) | 2,159 | 2,064 | 1,649
Total | 8,797 | 8,796 | 8,397

Earnings per share
Basic earnings per share amounts are calculated by
dividing (a) the profit for the year attributable to equity
holders of the parent, adjusted for the net coupon
corresponding to the undated deeply subordinated
securities (see Note 17.c) by (b) the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by
dividing the net profit for the year attributable to ordinary
equity holders of the parent, adjusted as described above,
by the weighted average number of ordinary shares
adjusted as described in the preceding paragraph, 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:

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.127

Millions of euros | 2023 | 2022 | 2021
(Loss) profit attributable to ordinary equity holders of the parent company | (892) | 2,011 | 8,137
Adjustment for the coupon corresponding to perpetual subordinated obligations | (339) | (279) | (337)
Tax effect | 85 | 70 | 84
Total (loss) profit attributable to ordinary equity holders of the parent for basic and diluted earnings per share | (1,146) | 1,802 | 7,884

Number of shares (thousands) | 2023 | 2022 | 2021 (*)
Weighted average number of ordinary shares for basic earnings per share (does not include treasury shares) | 5,668,142 | 5,740,105 | 5,864,070
Telefónica, S.A. plans of rights over shares | 47,435 | 23,096 | 10,098
Weighted average number of ordinary shares outstanding for diluted earnings per share (excluding treasury shares) | 5,715,577 | 5,763,201 | 5,874,168

(*) Revised data.
For the purposes of calculating the earnings per share
(basic and diluted) attributable to equity holders of the
parent, the weighted average number of shares
outstanding is retrospectively adjusted for transactions
that have changed the number of shares outstanding
without a corresponding change in resources, as if such
transactions had occurred at the beginning of the earliest
period presented. Such is the case of the bonus share
issues carried out to meet the scrip dividend (see Note
17.b).
Thus, basic and diluted (loss) earnings per share
attributable to equity holders of the parent are as follows:

(Loss) earnings per share (euros) | 2023 | 2022 | 2021
Basic | (0.20) | 0.31 | 1.34
Diluted | (0.20) | 0.31 | 1.34

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.128
Note 27. Long-term incentive plans
based on Telefónica, S.A. shares
Long-term incentive plan based on
Telefónica, S.A. shares: Performance
Share Plan 2018-2022
At the General Shareholders’ Meeting held on June 8,
2018 , a long-term incentive plan was approved, consisting
of the delivery of shares of Telefónica, S.A. aimed at senior
executive officers of the Telefónica Group, including the
Executive Directors of Telefónica, S.A. The plan consisted
of the delivery to the participants of a certain number of
shares of Telefónica, S.A. based on compliance with the
objectives established for each of the cycles into which
the plan was divided.
The number of shares to deliver depended (i) 50% on
achievement of the total shareholder return ("TSR")
objective for shares of Telefónica, S.A. with regard to the
TSRs of a comparison group made up of companies of the
telecommunication sector, weighted by its relevance for
Telefónica, and (ii) 50% on the generation of Free Cash
Flow of Telefónica Group ("FCF"). Performance
assessment was carried out based on the evolution of the
stock price and on the audited results of the Company.
The plan had a duration of five years and was divided into
three cycles of three years each.
• The first cycle commenced in 2018 and finalized on
December 31, 2020 . The maximum number of shares
assigned to this cycle of the plan was 8,466,996,
assigned as of January 1, 2018 with a unit fair value of
6.4631 euros per share for FCF objective and 4.516
euros for TSR. As of December 31, 2020 the number of
outstanding shares was 7,093,162. Once considered the
target fulfillment levels for 2018 , 2019, and 2020, a
weighted achievement ratio of 50% was reached.
• The second cycle commenced in 2019 and finalized on
December 31, 2021 The maximum number of shares
assigned to this cycle of the plan was 9,471,489 with a
unit fair value of 6.1436 euros per share for FCF
objective and 4.4394 euros for TSR. As of December 31,
2021 the number of outstanding shares was 7,494,896 .
Once considered the target fulfillment levels for 2019,
2020 , and 2021, a weighted achievement ratio of 50%
was reached.
• In 2020 the third and final cycle commenced, which
finalized on December 31, 2022. The maximum number
of shares assigned to this cycle of the plan was
5,346,508 , assigned as of January 1, 2020 with a unit fair
value of 3.2136 euros per share for FCF objective and
1.6444 euros for TSR. As of December 31, 2022 the
number of outstanding shares was 4,595,621. Once
considered the target fulfillment levels for 2020 , 2021,
and 2022 , a weighted achievement ratio of 50% was
reached.
Long-term incentive plan based on
Telefónica, S.A. shares: Performance
Share Plan 2021-2025
At the General Shareholders’ Meeting held on April 23,
2021, a long-term incentive plan was approved, consisting
of the delivery of shares of Telefónica, S.A. aimed at senior
executive officers of the Telefónica Group, including the
Executive Directors of Telefónica, S.A. The plan consists
of the delivery to the participants of a certain number of
shares of Telefónica, S.A. based on compliance with the
objectives established for each of the cycles into which
the plan is divided.
The number of shares to deliver depends (i) 50% on
achievement of the total shareholder return ("TSR")
objective for shares of Telefónica, S.A. with regard to the
TSRs of a comparison group made up of companies of the
telecommunication sector, weighted by its relevance for
Telefónica, (ii) 40% on the generation of Free Cash Flow
of Telefónica Group ("FCF"), and (iii) 10% on CO2 Emission
Neutralization, in line with the goal set by the Company.
The plan has a duration of five years and is divided into
three cycles of three years each. Performance assesment
is carried out on the basis of the evolution of the share
price, as well as the audited results of the Company, prior
to their validation by the Nominating, Compensation and
Corporate Governance Committee.
• The first cycle commenced on January 1, 2021 and
ended on December 31, 2023. The maximum number of
shares assigned to this cycle of the plan was 19,425,499
and the outstanding shares at December 31, 2023 were
17,728,523, with the following breakdown:

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.129

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

After considering the levels of performance during the
measurement period, a weighted achievement
coefficient of 89.45% was reached.
• The second cycle commenced on January 1, 2022 and
will end on December 31, 2024. The maximum number
of shares assigned to this cycle of the plan was
15,069,650 and the outstanding shares at December 31,
2023 were 14,545,706, with the following breakdown:

Second cycle | No. of shares assigned | Outstanding shares at 12/31/2023 | Unit fair value (euros)
TSR Objective | 7,534,825 | 7,272,853 | 2.43
FCF Objective | 6,027,860 | 5,818,282 | 2.95
CO2 E.N. Objective | 1,506,965 | 1,454,571 | 2.95

• The third cycle commenced on January 1, 2023 and will
end on December 31, 2025. The maximum number of
shares assigned to this cycle of the plan was 16,618,564
and the outstanding shares at December 31, 2023 were
16,496,424, with the following breakdown:

Third cycle | No. of shares assigned | Outstanding shares at 12/31/2023 | Unit fair value (euros)
TSR Objective | 8,309,282 | 8,248,212 | 1.77
FCF Objective | 6,647,426 | 6,598,570 | 2.81
CO2 E.N. Objective | 1,661,856 | 1,649,642 | 2.81

Long-term incentive plan based on
Telefónica, S.A. shares: Talent for the
Future Share Plan 2018-2022
At its meeting on June 8, 2018 , the Telefónica, S.A.'s Board
of Directors agreed to launch the long-term incentive
plan Talent for the Future Share Plan.
The term of this plan was five years and it was divided into
three cycles. As in the case of the Performance Share
Plan 2018-2022 described above, the number of shares to
deliver depended (i) 50% on achievement of the total
shareholder return ("TSR") objective for shares of
Telefónica, S.A. and (ii) 50% on the generation of Free
Cash Flow of the Telefónica Group ("FCF"). Performance
assessment was carried out based on the evolution of the
stock price and on the audited results of the Company.
• The first cycle commenced in 2018 and finalized on
December 31, 2020. The maximum number of shares
assigned to this cycle of the plan was 787,500, assigned
as of January 1, 2018 with a unit fair value of 6.4631 euros
per share for FCF objective and 4.516 euros for TSR. As
of December 31, 2020 the number of outstanding
shares was 691,750 . Once considered the target
fulfillment levels for 2018, 2019, and 2020 , a weighted
achievement ratio of 50% was reached.
• The second cycle commenced in 2019 and finalized on
December 31, 2021 . The maximum number of shares
assigned to this cycle of the plan was 812,000, assigned
as of January 1, 2019 with a unit fair value of 6.1436 euros
per share for FCF objective and 4.4394 euros for TSR.
As of December 31, 2021 the number of outstanding
shares was 690,750. Once considered the target
fulfillment levels for 2019 , 2020, and 2021, a weighted
achievement ratio of 50% was reached.
• In 2020 the third and final cycle commenced, which
finalized on December 31, 2022. The maximum number
of shares assigned to this cycle of the plan was
897,400, assigned as of January 1, 2020 with a unit fair
value of 3.2136 euros per share for FCF objective and
1.6444 euros for TSR. As of December 31, 2022 the
number of outstanding shares was 761,600. Once
considered the target fulfillment levels for 2020, 2021,
and 2022, a weighted achievement ratio of 50% was
reached.
Long-term incentive plan based on
Telefónica, S.A. shares: Talent for the
Future Share Plan 2021-2025 (TFSP)
At its meeting on March 17, 2021, the Telefónica, S.A.'s
Board of Directors agreed to launch a new installment of
the long-term incentive plan Talent for the Future Share
Plan.
The term of this plan is also five years and it is divided into
three cycles. As in the case of the Performance Share
Plan 2021-2025 described above, the number of shares to
deliver will depend (i) 50% on achievement of the total
shareholder return ("TSR") objective for shares of
Telefónica, S.A. with regard to the TSRs of a comparison
group made up of companies of the telecommunication
sector, weighted by its relevance for Telefónica, (ii) 40%
on the generation of Free Cash Flow of Telefónica Group
("FCF"), and (iii) 10% on CO2 Emission Neutralization, in
line with the goal set by the Company.
• The first cycle commenced on January 1, 2021 and
ended on December 31, 2023. The maximum number of
shares assigned to this cycle of the plan was 1,751,500
and the outstanding shares at December 31, 2022 were
1,557,000, with the following breakdown:

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.130

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

After considering the levels of performance during the
measurement period, a weighted achievement
coefficient of 89.45% was reached.
• The second cycle commenced on January 1, 2022 and
will end on December 31, 2024. The maximum number
of shares assigned to this cycle of the plan was
1,646,500 and the outstanding shares at December 31,
2023 was 1,542,000, with the following breakdown:

Second cycle | No. of shares assigned | Outstanding shares at 12/31/2023 | Unit fair value (euros)
TSR Objective | 823,250 | 771,000 | 2.43
FCF Objective | 658,600 | 616,800 | 2.95
CO2 E.N. Objective | 164,650 | 154,200 | 2.95

• The third cycle commenced on January 1, 2023 and will
end on December 31, 2025. The maximum number of
shares assigned to this cycle of the plan was 1,771,500
and the outstanding shares at December 31, 2023 was
1,745,500, with the following breakdown:

Third cycle | No. of shares assigned | Outstanding shares at 12/31/2023 | Unit fair value (euros)
TSR Objective | 885,750 | 872,750 | 1.77
FCF Objective | 708,600 | 698,200 | 2.81
CO2 E.N. Objective | 177,150 | 174,550 | 2.81

In centivized purchases of Telefónica,
S.A. shares for employees
The Telefónica, S.A. Ordinary General Shareholders’
meeting on April 8, 2022 approved a voluntary plan for
incentivized purchases of shares of Telefónica, S.A. for the
employees of the Group. Under this Plan, employees were
offered the option to acquire Telefónica, S.A. shares
during a twelve-month period, with the company
undertaking to deliver a certain number of free shares to
participants, subject to certain requirements. The
maximum amount that each employee could invest was
limited to 1,800 euros. The total number of free shares to
be delivered for the whole plan may never exceed 0.38%
of the share capital of Telefónica, S.A. at the date of
approval of the plan at the General Shareholders'
Meeting.
The purchase period commenced in October 2022 and
ended in September 2023. In March 2024 the vesting
period of the plan will end. At December 31, 2023, 26,590
employees had registered for the plan.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.131
Note 28. Cash flow detail
Net cash flow provided by operating
activities
The detail of net cash flow provided by operating
activities is the following:

Millions of euros | 2023 | 2022 | 2021
Cash received from operations | 47,314 | 46,925 | 46,415
Cash paid from operations | (34,646) | (34,778) | (34,379)
Cash paid to suppliers | (29,188) | (29,509) | (29,236)
Cash paid to employees | (4,604) | (4,416) | (4,299)
Payments related to cancellation of commitments | (854) | (853) | (844)
Net payments of interest and other financial expenses net of dividends received | (565) | (292) | (1,309)
Net interest and other financial expenses paid | (1,811) | (1,236) | (1,519)
Dividends received | 1,246 | 944 | 210
Taxes (payments)/proceeds | (454) | (92) | (459)
Net cash flow provided by operating activities | 11,649 | 11,763 | 10,268

In 2023, dividends amounting to 1,000 million pounds
were received from VMED O2 UK Ltd (see Note 10)
equivalent to 1,154 million euros (800 million pounds,
equivalent to 909 million euros in 2022 and 161 million
pounds, equivalent to 187 million euros in 2021)
In 2023, payments have been made on account of the
Corporate Tax of the Tax Group of Telefónica, S.A. for an
amount of 198 million euros (289 million euros in 2022). In
December 2023, after executing a credit assignment
contract signed with a financial institution, 285 million
euros were collected corresponding to the 2022
installment.
Net cash flow used in investing
activities
The following is a detail of the items comprising the net
cash flow used in investing activities.

Millions of euros | 2023 | 2022 | 2021
Proceeds from the sale in property, plant and equipment and intangible assets | 310 | 842 | 564
Payments on investments in property, plant and equipment and intangible assets | (6,161) | (6,350) | (6,728)
(Payments on investments)/proceeds from the sale in property, plant and equipment and intangible assets | (5,851) | (5,508) | (6,164)

Payments for non-financed spectrum in 2023 amounted
to 128 million euros, mainly due to the payment of 97
million euros for Telefónica Móviles Argentina and 20
million euros for Telefónica de España.
Payments for non-financed spectrum in 2022 amounted
to 27 million euros, mainly due to the payment of 11 million
euros for Telefónica Móviles Argentina and 8 million euros
for Telefónica de España.
Payments for non-financed spectrum in 2021 amounted
to 999 million euros, mainly due to the payment of 521
million euros for Telefónica United Kingdom, 343 million
euros for Telefónica Spain and 131 million euros for
Telefónica Chile.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.132

Millions of euros | 2023 | 2022 | 2021
Tax associated with the sale of the tower division of Telxius (Note 25) | 876 | — | (917)
Constitution of VMO2 (1) (Note 2) | — | (256) | 5,872
Sale of Telecommunications towers divisions of Telxius (Note 2) | 90 | 2 | 7,434
Sale of Telefónica de Costa Rica | — | (15) | 442
Sale of InfraCo | — | — | 479
Tax associated with the sale of InfraCo | — | (124) | —
Sale of Telefónica Móviles El Salvador | — | 116 | —
Sale of fiber assets of Colombia Telecomunicaciones | — | 55 | —
Deferred collection sale of T. Ireland | — | 35 | 35
Others | 38 | 72 | 24
(Payments)/proceeds on disposals of companies, net of cash and cash equivalents disposed | 1,004 | (115) | 13,369
Oi mobile assets acquisition (Note 2) | (3) | (986) | —
Incremental acquisition (Note 5) | — | (178) | —
BE-terna acquisition (Note 5) | (5) | (328) | —
Cancom acquisition (Note 5) | — | — | (374)
Capital increase of UGG TopCo (Note 10) | (73) | (50) | (27)
Capital increase of InfraCo Chile (Note 10) | (46) | — | —
Loan to InfraCo Chile (Note 12) | (46) | — | —
Capital increase of nexfibre (Note 10) | (33) | — | —
Others | (46) | (86) | (13)
Payments on investments in companies, net of cash and cash equivalents acquired | (252) | (1,628) | (414)

(1) Cash received (see Note 2) less: (i) Cash and cash equivalents of Telefonica UK at the date of its exit from the scope of consolidation, and (ii) payments made in
2021 and 2022 to the O2 UK pension plan and other expenses (see Note 29.c).

Millions of euros | 2023 | 2022 | 2021
Collateral guarantees on derivatives | 1,088 | 2,891 | 1,897
Legal deposits | 31 | 3 | 125
Long-term financial instruments of Pegaso PCS (Note 12) | 287 | — | —
Others | 26 | 73 | 141
Proceeds on financial investments not included under cash equivalents | 1,432 | 2,967 | 2,163
Legal deposits | (16) | (4) | (7)
Collateral guarantees on derivatives | (1,402) | (2,195) | (1,228)
Investment in funds shares of Telefónica Brasil | — | — | (117)
Long-term financial instruments of Pegaso PCS (Note 12) | — | (260) | —
Others | (57) | (116) | (122)
Payments on financial investments not included under cash equivalents | (1,475) | (2,575) | (1,474)
Net proceeds/(payments) for temporary financial investments | 856 | 1,532 | (1,584)

Net proceeds/(payments) for temporary financial
investments mainly includes placements of treasury
surpluses not included in cash equivalents.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.133
Net cash flow used in financing
activities
The following is a detail of the items comprising the net
cash flow used in financing activities.

Millions of euros | 2023 | 2022 | 2021
Dividends paid to the shareholders of Telefónica, S.A. (*) | (1,701) | (959) | (617)
Payments to non-controlling interests of Telefônica Brasil, S.A. | (189) | (268) | (198)
Payments to non-controlling interests of Telefónica Deutschland Holding, A.G. | (157) | (161) | (165)
Payments to non-controlling interests of Telxius for the sale of the telecommunications tower divisions (see Note 17.h) | — | — | (2,603)
Payments to non-controlling interests of Telxius Telecom, S.A. | (76) | — | (42)
Others | (16) | (9) | (5)
Dividends paid (see Note 17) | (2,139) | (1,397) | (3,630)
Share capital increase Pontel, S.L. (see Note 17.h) | 111 | — | —
E stablishment of Bluevia Fibra (see notes 2 and 17.h) | — | 1,021 | —
Others | 2 | 1 | —
Proceeds from share capital increase with minority interests | 113 | 1,022 | —
Acquisition of 40% Telxius Telecom, S.A. from KKR (see Note 17) | (224) | — | —
Payment to KKR related to 2021 Income Tax of Telxius (Note 17) | (351) | — | —
Payment to Pontegadea related to 2021 Income Tax of Telxius (Note 17) | (88) | — | —
Own shares purchase of Telefónica Brasil | (92) | (111) | (78)
Shares purchase of Telefónica Deutschland (Note 2) | (816) | (48) | (51)
Transactions carried out by Telefónica, S.A. (see Note 17) | (223) | (365) | (478)
Telefónica Centroamérica Inversiones, S.L. share premium (ECPN.) refund related to the sale of T. Guatemala, T. Nicaragua and T. Panama | — | (44) | —
Others | 23 | 13 | 3
(Payments)/proceeds of treasury shares and other operations with shareholders and with minority interests | (1,771) | (555) | (604)
Issuance of undated deeply subordinated securities (Note 17) | 1,750 | 750 | 1,750
Acquisition and payment of undated deeply subordinated securities (Note 17) | (1,750) | (750) | (1,750)
Payment of the coupon related to the issuances of undated deeply subordinated securities issued (see Note 17) | (329) | (268) | (354)
Operations with other equity holders | (329) | (268) | (354)

(*) This amount differs from that indicated in Note 17 because of withholding taxes deducted in the payment to certain major shareholders in accordance with
current legislation.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.134

Millions of euros | 2023 | 2022 | 2021
Issued under the EMTN program of Telefónica Emisiones, S.A.U. (see Appendix III) | 850 | 1,100 | —
Issuance of Telefónica Móviles Chile, S.A. (*) (see Appendix III) | 114 | — | 535
Issuance of Telefónica Brasil, S.A. (*) | — | 628 | —
Others | 3 | 18 | 26
Proceeds on issue of debentures and bonds, and other debts | 967 | 1,746 | 561
Disposal bilateral loans of Telefónica, S.A. (see Note 18) | 275 | 150 | 200
Syndicated provision of 750 million euros by Telefónica Germany GmbH | — | — | 750
Syndicated provision of Telxius Telecom, S.A. (see Note 18) | 100 | 100 | —
Disposal bilateral loan of Telefónica Brasil, S.A. (*) | — | 199 | —
Syndicated provision of Bluevia Fibra S.L. (see Note 18) | 10 | 245 | —
Settlement of nominal value of gross debt hedging derivatives | 20 | 89 | —
New promissory note debt (see Note 18) | 504 | 7 | 53
Others | 798 | 49 | 2,082
Proceeds on loans, borrowings and promissory notes (see Appendix V) | 1,707 | 839 | 3,085
Repayments of debentures and bonds, and other debts | (1,910) | (3,541) | (5,847)
Syndicated amortization by Telefónica, S.A. | — | — | (750)
Syndicated amortization by Colombia Telecomunicaciones, S.A. ESP BIC | — | — | (200)
Amortization bilateral loans of Colombia Telecomunicaciones, S.A. ESP BIC (*) | — | (117) | —
Syndicated amortization by Telxius Telecom, S.A. | — | (70) | —
Settlement of nominal value of amortized debt hedging derivatives | 33 | (715) | (34)
Others | (1,498) | (2,175) | (3,162)
Repayments of loans, borrowings and promissory notes (see Appendix V) | (1,465) | (3,077) | (4,146)
Lease principal payments (Note 20) | (2,114) | (1,996) | (1,782)
Financed spectrum licenses payments (Note 21) | (133) | (549) | (57)
Payments for investments in spectrum use licenses financed without explicit interest (Notes 2 and 21) | (112) | (108) | (108)
Payments to suppliers with extended payment terms (Note 18) | — | (41) | (108)
Financed operating payments and investments in property, plant and equipment and intangible assets payments | (245) | (698) | (273)

(*) Data converted at the exchange rate at the end of each of the corresponding periods. The impact of the exchange rate with respect to the date of the
transaction is included in the "Others" line within the same sub-heading.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.135
Note 29. Other information
a) Litigation and arbitration
Telefónica and its Group companies are party to several
legal proceedings which are currently in progress in the
courts of law and the arbitration bodies of the various
countries in which we are present.
Based on the advice of our legal counsel it is reasonable
to assume that these legal proceedings will not materially
affect the financial condition or solvency of the Telefónica
Group.
The contingencies arising from the litigation and
commitments described below were evaluated (see Note
3.n) when the consolidated financial statements for the
year ended December 31, 2023 were prepared. The
provisions recorded in respect of the commitments taken
as a whole are not material.
The following unresolved legal proceedings or those
underway in 2023 are highlighted (see Note 25 for details
of tax-related cases):
Appeal 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”)
Vivo Group operators (currently Telefônica Brasil, S.A.),
together with other cellular 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 FUST (Fundo de Universalização de Serviços de
Telecomunicações) –a fund which pays for the
obligations to provide Universal Service– with retroactive
application from 2000. On March 13, 2006, Brasilia
Federal Regional Court no. 1 granted a precautionary
measure which stopped the application of ANATEL’s
decision. 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 by transfer
from other operators in the taxable income for the FUST’s
calculation and rejecting the retroactive application of
ANATEL’s decision. On January 26, 2016, ANATEL filed an
appeal to overturn this Decision with Brasilia Federal
Regional Court no. 1, which was also dismissed. On May
10, 2017 ANATEL appealed to the higher courts on the
merits of the case.
At the same time, Telefônica 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 the precautionary measures requested. On
June 21, 2007, Brasilia Federal Regional Court no. 1 ruled
that it was not appropriate to include the interconnection
and network usage revenues 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, which was dismissed on May 10,
2016. ANATEL filed an appeal against this dismissal.
The fixed operators filed an appeal to clarify that revenues
obtained through interconnection and dedicated line
operation should not be included in the calculation of the
amounts payable to the FUST. In addition, the court was
also requested to rule on two grounds which had not
been analyzed in the initial Decision: (i) that the FUST has
become obsolete, among other reasons, by the advance
of mobile telephony; and (ii) that amounts collected are
not applied to the purpose for which the FUST was
created, since only a very low percentage of the revenues
collected by the FUST is used to finance fixed telephony.
Although the petition for clarification was dismissed on
August 23, 2016, the court noted that the FUST should
not be funded with revenues from interconnection and
dedicated line operation. ABRAFIX appealed to the higher
courts on these two elements that had not been analyzed.
ANATEL appealed all the holdings of the ruling to the
higher courts.
The amount of the claim is quantified at 1% of the
interconnection revenues.
Decision by the High Court regarding the
acquisition by Telefónica of shares in Český
Telecom by way of a tender offer
Venten Management Limited ("Venten") and Lexburg
Enterprises Limited ("Lexburg") were non-controlling
shareholders of Český Telecom. In September 2005, both
companies sold their shares to Telefónica in a mandatory
tender offer. Subsequently, Venten and Lexburg, in 2006
and 2009, respectively, filed actions against Telefónica
claiming a higher price than the price for which they sold
their shares in the mandatory tender offer.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.136
On August 5, 2016, the hearing before the High Court in
Prague took place in order to decide the appeal against
the second decision of the Municipal Court, which had
been favorable to Telefónica's position (as was also the
case with the first decision of the Municipal Court). At the
end of the hearing, the High Court announced the second
appellate decision by which it reversed the second
decision of the Municipal Court and ordered Telefónica to
pay 644 million Czech korunas (approximately 23 million
euros) to Venten and 227 million Czech korunas
(approximately 8 million euros) to Lexburg, in each case
plus interest.
On December 28, 2016, the decision was notified to
Telefónica. Telefónica filed an extraordinary appeal,
requesting the suspension of the effects of the decision.
In March 2017, Telefónica was notified of the decision of
the Supreme Court, which ordered the suspension of the
effects of the unfavorable decision to Telefónica issued
by the High Court.
Venten and Lexburg filed with the Supreme Court a
motion to partially abolish the suspension of enforceability
of the Decision of the High Court in Prague. On January
17, 2018, Telefónica filed its response seeking dismissal of
such motion for lack of legal basis.
On February 14, 2019, notification was given to Telefónica
of the resolution of the Supreme Court which, based on
the extraordinary appeal filed by Telefónica, abolished the
decision of the High Court in Prague dated August 5, 2016
and remanded the case back to the High Court.
In December 2021, the High Court of Prague confirmed its
appointment of an expert in order to produce a new
expert report to assess the reliability of market-based
price criteria used in the mandatory tender offer and
further technical issues discussed in this litigation,
including a new discounted cashflow valuation of the
shares of Český Telecom in 2005.
After receiving the expert report, Telefónica challenged
its findings on April 30, 2023. Hearings with respect to this
challenge were held in the High Court of Prague in
November and December 2023, and an additional hearing
is expected to be held in the first quarter of 2024.
Appeal against the resolution of ANATEL to
sanction Telefónica Brasil for breaches of the
Fixed Telephony Regulation
In May 2018, Telefónica filed a judicial action for
annulment against a resolution issued by ANATEL (the
National Telecommunications Agency of Brazil) in March
2018 concluding the administrative process for
determination of non-compliance with obligations
(Processo Administrativo para Apuração de
Descumprimento de Obrigações or "PADO") investigating
alleged infractions of the Fixed Telephony Regulation by
Telefónica Brasil.
This PADO investigation had been suspended during the
negotiations of the conduct adjustment term (Termo de
Ajustamento de Conduta or "TAC") between Telefónica
and ANATEL relating to this and certain other PADO
investigations. Since the negotiations concluded without
agreement, the suspended PADO sanctioning procedures
were reactivated and finalized.
In its resolution of March 2018, ANATEL considered that
Telefónica Brasil committed several infractions,
specifically those related to the inadequate notice of
suspension of services to defaulting users, the terms of
reactivation of services after payment of outstanding
amounts by defaulting users and the disagreement with
the terms of refunds claimed by users of the services.
The fine imposed by ANATEL and appealed by Telefónica
Brasil is approximately 211 million Brazilian reals
(approximately 39 million euros), which amounted to
approximately 623 million Brazilian reals after currency
value updates and accrued interest as of December 31,
2023 (approximately 116 million euros).
Telefónica Brasil has appealed the fine imposed by
ANATEL based, fundamentally, on the following
arguments: (i) ANATEL should have considered a smaller
universe of users to determine the fine and (ii) the
calculation of the fine is disproportionate and based on
insufficient grounds.
Telefónica Brasil has not yet paid the fine, although
Telefónica Brasil has guaranteed its payment through a
guarantee insurance submitted to the court.
As of the date of these financial statements, there has
been no conciliation and the proceeding is following its
normal course.
ICSID Arbitration Telefónica, S.A. vs. Republic
of Colombia
In the local arbitration brought by Colombia against
Colombia Telecomunicaciones (“ColTel”), on July 25, 2017,
the local arbitration tribunal ordered ColTel to pay 470
million euros as economic compensation for the reversion
of assets related to voice services in relation to the
concession granted between 1994 and 2013.
On August 29, 2017, ColTel’s share capital was increased
in order to make the payment ordered by the local arbitral
award; Telefónica, S.A. contributed and disbursed an
amount equivalent to 67.5% of the award’s amount (317
million euros) and the Colombian Government
contributed an amount equivalent to the remaining 32.5%
(153 million euros).
On February 1, 2018, Telefónica, S.A. filed a Request for
Arbitration against Colombia at the International Centre
for Settlement of Investment Disputes ("ICSID"), which
was formally registered on February 20, 2018.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.137
The ICSID Court was constituted on February 26, 2019,
with Mr. José Emilio Nunes Pinto as President, Mr. Horacio
A. Grigera Naón appointed by Telefónica, S.A., and Mr.
Yves Derains appointed by Colombia.
Colombia filed Preliminary Objections on Jurisdiction on
August 5, 2019. Telefónica, S.A. responded to Colombia’s
objections in its Claimant’s Memorial on September 23,
2019, in which it also requested that Colombia pay
compensation for damages caused to Telefónica, S.A.
On October 23, 2019, Colombia submitted its
Complementary Objections on Jurisdiction as well as a
request for Bifurcation, to which Telefónica, S.A.
responded on November 29, 2019.
On January 24, 2020, the Court dismissed the request for
Bifurcation presented by Colombia, ordering the
continuation of the proceeding. A decision on the merits
of Telefónica, S.A.’s claim is pending.
On July 3, 2020, Colombia filed its reply to the claim filed
by Telefónica before the ICSID.
On November 2, 2020, Telefónica presented its response
to Colombia's reply.
After the hearing held in April 2021, on July 27, 2021 the
hearing of closing arguments was held, and the parties
are awaiting the issuance of the arbitration award.
Telefónica's lawsuit against Millicom
International Cellular for default in the sale of
Telefónica de Costa Rica
Telefónica, S.A. (Telefónica) and Millicom International
Cellular, S.A. (Millicom) reached an agreement on
February 20, 2019 for the purchase and sale of the entire
capital stock of Telefónica de Costa Rica TC, S.A.
In March 2020, Telefónica informed Millicom that, once
the pertinent regulatory authorizations had been obtained
and all the other conditions established in the
aforementioned agreement for the execution of the sale
had been completed, the execution of the contract and
the closing of the transaction should be in April 2020.
Millicom expressed its refusal to proceed with the closing,
arguing that the competent Costa Rican administrative
authorities had not issued the appropriate authorization.
On May 25, 2020, Telefónica filed a lawsuit against
Millicom before the New York Supreme Court,
considering that Millicom had breached the terms and
conditions established in the sale contract, demanding
compliance with the provisions of the aforementioned
agreement, and compensation for all damages that this
unjustified breach could cause to Telefónica.
On June 29, 2020, Millicom filed a Motion to Dismiss, to
which Telefónica replied on July 8, 2020.
On August 3, 2020, Telefónica submitted an amendment
to the lawsuit, removing the requirement to comply with
the provisions of the sale and purchase contract and
requesting only compensation for all damages that the
unjustified breach of said agreement could cause to
Telefónica.
On January 5, 2021, the Motion to Dismiss filed by
Millicom in June 2020 was dismissed by the New York
Supreme Court.
On February 24, 2023, both parties filed a "motion for
summary judgment" once the discovery period had
ended.
On February 13, 2024, the New York Supreme Court
issued a decision granting Telefónica’s motion for partial
summary judgment, concluding that Telefónica is entitled
to compensatory damages and prejudgment interest
(approximately 140 million U.S. dollars) from Millicom. The
decision remains subject to appeal.
ICSID Arbitration Telefónica, S.A. vs. Republic
of Peru
On February 5, 2021, Telefónica filed a request for
arbitration against the Republic of Peru at the ICSID,
which was formally registered on March 12, 2021.
Telefónica bases its claims on the Agreement for the
Promotion and Reciprocal Protection of Investments
between the Kingdom of Spain and the Republic of Peru
("APRPI") signed on November 17, 1994. Telefónica argues
that the Peruvian tax administration (called
Superintendencia Nacional de Aduanas y de
Administración Tributaria, known as "SUNAT") and other
state bodies have failed to comply with the obligations
established in the APRPI, including by adopting arbitrary
and discriminatory actions.
It is requested that the defendant be ordered to fully
compensate Telefónica for all damages suffered.
Once the Tribunal was constituted, on February 9, 2023,
Telefónica filed a request for urgent injunctive relief
together with a request for injunctive relief, requesting
the suspension of the administrative litigation (acción
contencioso-administrativa or ACA) related to the income
tax for the years 1998, 2000 and 2001, as well as the
extension of the deadline for submission by Telefónica of
the memorial or claim. Following response of Peru, on
February 16, 2023, the Tribunal ruled to dismiss
Telefónica's request for urgent injunctive relief, to
establish the procedural calendar to process the request
for injunctive relief and to grant Telefonica two additional
weeks to file the memorial or claim.
On March 2, 2023, Telefónica filed a memorial on the
merits. On that date, the Republic of Peru filed
observations on the claimant's request for provisional
measures submitted by Telefónica on February 9, 2023.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.138
On March 24, 2023, the Tribunal held a hearing on the
claimant's request for provisional measures.
On May 11, 2023, the Tribunal issued Procedural Order No.
5 concerning the defendant's request to address the
objections to jurisdiction as a preliminary question. As a
result, the objections to jurisdiction were joined to the
merits of the dispute.
On September 18, 2023, the defendant filed a counter-
memorial on the merits and a memorial on jurisdiction.
On December 22, 2023, the Tribunal issued Procedural
Order No. 6 concerning production of documents.
Appeal against the ANATEL resolution on the
calculation of amounts for the renewal of radio
frequencies in Brazil associated with the
provision of the personal mobile services (filed
in 2013)
In 2013, Telefónica Brasil filed a lawsuit against the
resolution of ANATEL which sets forth the calculation of
the amount to be paid by Telefónica Brasil for the renewal
of radio frequencies associated with the provision of
personal mobile services (which has been granted to
Telefónica Brasil for a period of fifteen years).
According to ANATEL the renewals, which must be
carried out every two years, should be accompanied by a
payment equivalent to 2% of all income derived from the
provision of personal mobile services, while Telefónica
Brasil believes that the calculation must be made with
respect to the income derived from voice services only,
which would exclude data services and interconnection
revenues.
In February 2020, Telefónica Brasil filed an appeal before
the Regional Federal Court of Brasilia after obtaining an
unfavorable ruling in the Court of First Instance, which
considered that the criteria defended by ANATEL was the
one to be followed.
As of December 31, 2023, the amount under litigation was
840 million Brazilian reais (157 million euros based on the
exchange rate of such date), resulting from the method of
calculation of ANATEL that has been appealed.
Appeal against the ANATEL resolution on the
calculation of amounts for the renewal of radio
frequencies in Brazil associated with the
provision of the personal mobile services (filed
in 2015)
In 2015, Telefónica Brasil filed a lawsuit against the
resolution of ANATEL which sets forth the calculation of
the amount to be paid by Telefónica Brasil for the renewal
of radio frequencies associated with the provision of
personal mobile services (which has been granted to
Telefónica Brasil for a period of fifteen years).
According to ANATEL the renewals, which must be
carried out every two years, should be accompanied by a
payment equivalent to 2% of all income derived from the
provision of personal mobile services, while Telefónica
Brasil believes that the calculation must be made with
respect to the income derived from voice services only,
which would exclude data services and interconnection
revenues.
In August 2016, Telefónica Brasil filed an appeal before
the Regional Federal Court of Brasilia after obtaining an
unfavorable ruling in the Court of First Instance, which
considered that the criteria defended by ANATEL was the
one to be followed. The parties are currently waiting for a
judgment on the appeal.
As of December 31, 2023, the amount under litigation was
294 million Brazilian reais ( 55 million euros based on the
exchange rate of such date), resulting from the method of
calculation of ANATEL that has been appealed.
UK High Court claim by Phones 4 U Limited
against various mobile network operators and
other companies, among others, Telefónica,
S.A., Telefonica O2 Holdings Limited and
Telefonica UK Limited
In late 2018, Phones 4U Limited (in administration) (“P4U”)
commenced a claim in the English High Court in London
against various mobile network operators: Everything
Everywhere, Deutsche Telekom, Orange, Vodafone,
Telefónica, S.A., Telefonica O2 Holdings Limited and
Telefonica UK Limited (together the “Defendants”).
P4U carried on a business of selling mobile phones and
connections to the public, such connections being
supplied by mobile network operators including the
Defendants. In 2013 and 2014, the Defendants declined
to extend and / or terminated their contracts to supply
connections to P4U.
P4U went into administration in September 2014.
P4U alleges that the Defendants ceased to supply
connections because they had colluded between
themselves in contravention of the United Kingdom and
the European Union competition laws and asserts that it
has a basis to claim damages for breach of competition
law by all the Defendants. The Defendants deny all P4U’s
allegations.
The claim commenced on December 18, 2018 by P4U. The
Defendants filed their initial Defences in the course of
April and May 2019, with P4U filing replies on October 18,
2019. The first case management conference took place
on March 2, 2020.
The trial was held between May and July 2022. On
November 10, 2023 the court issued a judgment,
concluding that none of the Defendants was in breach of
either UK or EU competition law. This judgment is subject
to appeal.

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Consolidated Annual Report 2023 Telefónica, S. A.139
b) Other proceedings
The Group is currently cooperating with governmental
authorities (and, where appropriate, conducting the
relevant internal investigations) regarding requests for
information potentially related, directly or indirectly, to
possible violations of applicable anti-corruption laws.
Telefónica believes that, considering the size of the
Group, any potential penalty as a result of matters relating
to those specific information requests would not
materially affect the Group's financial condition.
c) Commitments
Agreement related to the Sale of Customer
Relationship Management (“CRM”) Business,
Atento
As a result of the sale agreement of Atento by Telefónica,
announced on October 12, 2012, and ratified on December
12, 2012, both companies signed a Master Service
Agreement which regulates Atento’s relationship with the
Telefónica Group as a service provider for an initial period
of nine years. The agreement has since been amended.
By virtue of this agreement, Atento became Telefónica’s
preferred Contact Center and Customer Relationship
Management (“CRM”) service provider. The agreement
stipulated annual commitments in terms of turnover that
were updated based on inflation and deflation that vary
from country to country, pursuant to the volume of
services Atento has been providing to the entire Group.
Failure to meet these annual turnover commitments in
principle resulted in the obligation of the counterparty to
pay additional amounts, which would be calculated based
on the difference between the actual amount of turnover
and the predetermined commitment, applying a
percentage based on the Contact Center’s business
margin to the final calculation. These minimum annual
turnover commitments have been reduced at various
points over the life of the Master Service Agreement.
The Master Service Agreement sets forth a reciprocal
arrangement, whereby Atento assumes similar
commitments to subscribe for certain
telecommunications services from Telefónica.
On March 30, 2023, the parties agreed to renew the
Master Service Agreement (extending its validity for all
applicable jurisdictions (Spain, Brazil and Latin America)
until December 31, 2025) but eliminate the minimum
annual turnover commitments (and the related penalties)
while maintaining, however, Atento's preferred supplier
status.
Investment Framework Agreement between the
shareholders of Colombia Telecomunicaciones,
S.A. ESP BIC - Sale of shares
Pursuant to the Framework Investment Agreement
entered into between the shareholders of Colombia
Telecomunicaciones, S.A. ESP BIC (a) if Telefónica
decides to dispose or transfer of all or part of its
shareholding in Colombia Telecomunicaciones, S.A. ESP
BIC to third parties, Telefónica commits that: (i) the
acquirer or transferee will be obliged to adhere to the
Framework Investment Agreement; and (ii) that the
acquirer or transferee will be obliged to present an offer
to purchase all of the shares in Colombia
Telecomunicaciones, S.A. ESP BIC held by the Colombian
Government (that amounts to 32.5% of the share capital)
at the same price and under the same terms and
conditions negotiated with Telefónica and through the
procedure established by Law 226 of 1995 for the disposal
of shares held by public entities and, (b) if the Colombian
Government transfers its shares in Colombia
Telecomunicaciones, S.A. ESP BIC under certain
circumstances, the Strategic Partner shall subscribe with
the acquirer of the shares a new shareholders agreement
which will have to be then negotiated by the parties and
which, as the case may be, will include some of the rights
currently held by the Colombian Government under the
Framework Investment Agreement currently in force.
Agreement for the sale of the shares of
Telefónica Gestión de Servicios Compartidos
España, S.A.U., Telefónica Gestión de Servicios
Compartidos Argentina, S.A. and T-Gestiona
Servicios Contables y Capital Humano, S.A.C.
On March 1, 2016, a share purchase agreement between,
on one hand, Telefónica, S.A., Telefónica Servicios
Globales, S.L.U. and Telefónica Gestión de Servicios
Compartidos Perú, S.A.C. (as sellers), and, on the other
hand, IBM Global Services España, S.A., IBM del Perú,
S.A.C., IBM Canada Limited and IBM Americas Holding,
LLC (as purchasers) for the sale of the companies
Telefónica Gestión de Servicios Compartidos España,
S.A.U., Telefónica Gestión de Servicios Compartidos
Argentina, S.A. and T-Gestiona Servicios Contables y
Capital Humano, S.A.C., for a total price of approximately
22 million euros, was ratified before Notary Public. This
share purchase agreement was subscribed on December
31, 2015.
Following the aforementioned share purchase agreement
and in connection with the latter transaction, also, on
December 31, 2015, Telefónica subscribed a master
services agreement with IBM for the outsourcing of
economic-financial and HR activities and functions to be
provided to the Telefónica Group during a period of ten
years, for a total amount of approximately 450 million
euros. Most of the Telefónica Group’s subsidiary
companies have already adhered to that master services
agreement.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.140
On March 31, 2021 and March 31, 2022 the master
services agreement with IBM for the outsourcing of
economic-financial and HR activities and functions to be
provided to the Telefónica Group was amended. By virtue
of these amendments the term may be extended for
those adhered companies that decide to extend their
services beyond the initial term.
In addition, on July 29, 2022 and August 31, 2023 a new
amendments were executed by virtue of which the term
may be extended for those adhered companies in
Latinoamerica that decide to extend some of their
services beyon the initial term.
Commitments derived from the agreements
reached for the acquisition of football (soccer)
related rights between Telefónica (through its
affiliate Telefónica Audiovisual Digital, S.L.U.)
and LaLiga, UEFA and RFEF
On July 2, 2020 Telefónica signed an agreement for
acquiring the exclusive media rights in Spain of UEFA
Champions League and UEFA Europa League, as well as
the UEFA Europa Conference League (a new competition
to be separated from the UEFA Europa League) and UEFA
Youth League, for the next cycle comprising seasons
2021/2022, 2022/2023 and 2023/2024, (ending June 30,
2024).
The agreement guaranteed Telefónica all media rights
with respect to the main European football competitions
for all its customers, both residential and non-residential
(hotels, restaurants, cafes, etc.).
The direct acquisition from UEFA of this "premium"
content allowed Telefónica to continue designing and
selling its own produced channels and content with the
best European football that could be, likewise, accessible
to other operators in the market interested in this content.
The total award price for all competitions amounted to
975 million euros (i.e. 325 million euros for each of the
seasons 2021/2022, 2022/2023 and 2023/2024) which
amount is less than the license fees paid for the previous
cycle and without any year-to-year increase.
On December 13, 2021, Telefónica was provisionally
awarded the exclusive broadcasting rights of five
matches per matchday of the Spanish First Division
Football League National Championship (“LaLiga”), for
pay television in the residential market, in Spain.
Telefónica received the first pick on 18 matchdays of each
season and second pick on 17 matchdays, including the
second match of the season between Real Madrid and
Barcelona (Option D bis, Lot D.1 bis).
Likewise, Telefónica was awarded the exclusive
broadcasting rights of three matchdays, which contain
ten matches each matchday, including matches of Real
Madrid C.F., F.C. Barcelona and Club Atlético de Madrid
against the six first classified of the previous season; and
Valencia C.F., Athletic Club de Bilbao or Real Betis
Balompié, if they were not among the aforementioned
first classified (Option D bis, Lot D.3 bis).
The award initially included all seasons between the cycle
2022/2023 and 2026/2027 although the 2025/2026 and
2026/2027 seasons were subject to the CNMC lifting or
modifying a resolution that limited the maximum duration
of the contracts entered into by Telefónica for the
acquisition of sports rights (Expte. VC/0612/14).
The award was made at a price of 520 million euros for
each of the seasons.
The award was subject to the execution of an agreement
between Telefónica and LaLiga with the remaining terms
and requirements established in the LaLiga tender, which
agreement was signed on January 19, 2022. This
agreement has been recently modified to adjust its
duration to the CNMC Competition Directorate’s
interpretation of the maximum length of contracts for the
acquisition of exclusive sports rights (three years from
signature) within the above referenced procedure (Expte.
VC/0612/14). In this regard, LaLiga issued on December
29, 2023 a new tender regarding those same packages
for seasons 2024/2025 (from January 20, 2025) and
2025/2026 and 2026/2027.
On January 19, 2024, Telefónica Audiovisual Digital, S.L.U.
was awarded exclusive broadcasting rights for five
matches per matchday of the Spanish First Division
Football League National Championship for pay television
in the residential market in Spain. Telefónica Audiovisual
will have first pick on 18 matchdays and second pick on 17
matchdays (or the applicable portion for the 2024/2025
season), including the second match of the season
between Real Madrid and Barcelona. In addition, it has
been awarded exclusive broadcasting rights of one
matchday for the 2024/2025 season and three
matchdays in the remaining seasons. The award covers
the 2024/2025 season, beginning January 20, 2025, as
well as the 2025/2026 and 2026/2027 seasons. The price
has been set at 250 million euros for the 2024/2025
season and 520 million euros for each of the 2025/2026
and 2026/2027 seasons.
On March 28, 2022, Telefónica entered into an agreement
with the company DAZN for the distribution of the so-
called DAZN LaLiga Package. Such package includes the
remaining five football matches per match-weekend of
the Spanish First Division Football League National
Championship, in 35 out of 38 match-weekends for
exploitation on pay television for residential subscribers in
Spain (Option D bis, Package D.2 bis).
This is a non-exclusive agreement for five seasons, from
2022/2023 to 2026/2027. The agreed value amounts
280 million euros for each of the seasons.In addition, on
July 29, 2022, Telefónica signed a new contract with
LaLiga for the non-exclusive broadcasting of the channel
that broadcasts matches of the Second Division of

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.141
National Football Championship League for seasons
2022/2023, 2023/2024 and 2024/2025, with Telefónica’s
unilateral option to extend for two additional seasons,
with a variable cost that amounts to approximately
16 million euros per season.
Similarly, on August 4, 2022, a contract was formalized
with LaLiga for the non-exclusive broadcast of the LaLiga
TV Bar Channel for non-residential subscribers for the
2022/2023 season with a minimum guarantee of 29
million euros, being the final price variable. Likewise, the
contract for the 2023/2024 season was signed on July 30,
2023, with a minimum guaranteed consideration of
approximately 29 million euros.
On November 2, 2022, Telefonica was also awarded by
Real Federación Española de fútbol (RFEF) exclusive pay
television rights of Copa del Rey Competiton and
Supercopa de España for seasons 2022/2023, 2023/2024
and 2024/2025.
On June 13, 2023, Telefónica submitted its offer for the
acquisition of the audiovisual rights of the UEFA
Champions League and UEFA Europa League, as well as
the UEFA Europa Conference League and the UEFA
Youth League ("UEFA Competitions") for the 2024/2025,
2025/2026 and 2026/2027 seasons, upon expiration of
the current contract.
UEFA awarded Telefónica on August 1, 2023, with
exclusive media rights in Spain of UEFA Competitions for
residential subscribers during seasons 2024/2025,
2025/2026 and 2026/2027. The corresponding
agreements were signed on November 3, 2023.
The total award price for all competitions covered by
these agreements with UEFA amounted to 960 million
euros (i.e. 320 million euros for each of the seasons
2024/2025, 2025/2026 and 2026/2027).
Wholesale Access Services Agreement with
AT&T Mexico
On November 21, 2019, Pegaso PCS, S.A. de C.V.
(“Telefónica México”) and AT&T Comunicaciones
Digitales, S. de R.L. de C.V. (“AT&T Mexico”) entered into a
Wholesale Access Services Agreement (“Wholesale
Agreement”), under which AT&T Mexico agreed to
provide wholesale wireless access to Telefónica México
on 3G, 4G and any other future technology available in
Mexico.
The Wholesale Agreement has a minimum duration of
eight years, renewable for additional consecutive periods
of three years . Such Wholesale Agreement establishes a
gradual migrat ion of Telefónica México’s traffic to AT&T
Mexico's access network over the first three years of the
agreement.
As set forth in the Wholesale Agreement such migration
was completed during the first half of 2022. As a result,
Telefónica México’s wireless access infrastructure was
turned off and Telefónica México no longer uses the
licensed spectrum that it used in the past to operate its
network.
Agreement to share network infrastructure
between Telefônica Brasil (VIVO) and TIM.
On December 19, 2019 Telefônica Brasil S.A. and TIM S.A.
executed two agreements for the share of 2G, 3G and 4G
mobile network infrastructure. Both companies reiterate
that they will preserve their commercial and customer
management autonomy, regardless of any infrastructure
sharing agreement.
The agreements cover the following matters:
1. 2G network Sharing: to be implemented in areas
where both operators are present, so that the
operator reminiscent will provide 2G mobile
connectivity services to the Vivo and TIM customer
base, resulting in the disconnection of overlapping
sites and therefore achieving cost reduction and the
optimization of spectrum use.
2. 3G and 4G network Sharing: covering only cities
with less than 30 thousand inhabitants with the aim
of sharing 4G and 3G network in cities where only
one operator is present (coverage expansion) and
where both already provide services (network
consolidation).
Both agreements were approved by the
Telecommunications and Competition regulatory
authorities ("Agência Nacional de Telecomunicações” -
ANATEL and “Conselho Administrativo de Defesa
Económica” - CADE).
Contracts for the provision of IT services with
Nabiax
In 2019 Telefónica, S.A. signed an agreement for the sale
of a portfolio of eleven data center businesses to a
company (hereinafter "Nabiax") controlled by Asterion
Industrial Partners SGEIC, S.A.
At the same time as this sale, agreements were entered
into with Nabiax to provide housing services to the
Telefónica Group, allowing Telefónica to continue
providing housing services to its customers, in
accordance with its previous commitments. Such service
provision agreements have an initial term of ten years and
include minimum consumption commitments in terms of
capacity. These commitments are consistent with the
Group's expected consumption volumes, while prices are
subject to review mechanisms based on inflation and
market reality.
On May 7, 2021, Asterion Industrial Partners SGEIC, S.A.
and Telefónica Infra (T. Infra), the infrastructure unit of the
Telefónica Group, reached an agreement for the
contribution to Nabiax of four additional data centers

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.142
owned by the Telefónica Group (two of them located in
Spain and two in Chile). In exchange for the contribution
of these four data centers, T. Infra will receive a 20%
equity stake in Nabiax. Once the relevant authorizations
and other conditions precedent to the contribution of the
two data centers located in Spain were obtained, the
partial closing of the transaction took place as of July 21,
2021, whereby Telefónica Group contributed those data
centers to Nabiax, with T. Infra receiving in exchange a
13.94% stake in Nabiax at this stage. The agreement was
complemented by the signing of a contract for the
provision to Telefónica of housing services from those
two data centers under terms and conditions equivalent
to those established in the transaction executed in 2019,
for an initial period of ten years.
Once the conditions related to the contribution of the two
data centers located in Chile were fulfilled, on May 24,
2022, the complete closing of the transaction took place,
and T. Infra reached a 20% stake in Nabiax (see Note 10).
The agreement was complemented by the signing of a
contract for the provision to Telefónica of housing
services from those two data centers under terms and
conditions equivalent to those established in the
transaction executed in 2019, for an initial period ending in
2031.
On June 13, 2023, the data centers owned by Nabiax
located in the Americas were sold to the investment fund
Actis. Telefónica Infra, S.L.U. owns a 20% of Nabiax. After
this transaction, Nabiax only owns data centers in Spain.
The data centers sold to Actis continue to provide
housing services to the Telefónica Group under the terms
of the contracts signed in 2019, as Telefónica, S.A. waived
its right to terminate the housing services contracts upon
the sale of the data centers.
50:50 joint venture with Liberty Global for the
combination of both groups' businesses in the
United Kingdom
On May 7, 2020, Telefónica agreed to enter into a joint
venture with Liberty Global plc ("Liberty Global") pursuant
to a contribution agreement (as amended from time to
time, the "Contribution Agreement") between Telefónica,
Telefonica O2 Holdings Limited, Liberty Global, Liberty
Global Europe 2 Limited and a newly formed entity of
which, after closing, each of Telefónica and Liberty Global
would hold 50% of its share capital named VMED O2 UK
Limited.
After having obtained the clearance from the Competition
and Market Authority (the antitrust authority in the UK) to
complete this transaction and having fulfilled all the other
pre-closing conditions included in the Contribution
Agreement, the transaction was completed on June 1,
2021. From such date, Telefónica and Liberty Global each
hold an equal number of shares in VMED O2 UK Limited;
after: (i) Telefónica having contributed to VMED O2 UK
Limited its O2 mobile business in the United Kingdom and
(ii) Liberty Global having contributed its Virgin Media
business in the United Kingdom to VMED O2 UK Limited.
The corporate governance of VMED O2 UK Limited is
regulated by a shareholders' agreement, which was
entered into by the parties to the Contribution Agreement
on June 1, 2021 and was amended on November 15, 2023
(as amended from time to time, (the "Shareholders'
Agreement").
On the date of closing of the transaction, Telefónica,
Liberty Global, and certain companies belonging to each
shareholder’s corporate group entered into certain
services, reverse services, licensing and data protection
agreements with VMED O2 UK Limited and certain
entities belonging to the VMED O2 UK Limited group. In
particular, Telefónica and Liberty Global agreed that each
shareholder’s group would provide certain services, either
on a transitional or ongoing basis to VMED O2 UK Limited
and its group and that, for a limited period of time. Finally,
VMED O2 UK Limited and its group would also provide
certain services to specific companies belonging to the
corporate group of each of its shareholders.
Pursuant to the terms of the above referred services
agreements, the transitional services that are to be
provided by the Telefónica Group to VMED O2 UK Limited
shall be provided for terms initially ranging from 7 to 24
months (later extended in some cases to terms up to 40
months) while the ongoing services that are to be
provided by the Telefónica Group to VMED O2 UK Limited
will be provided for periods of two to six years, depending
on the service. The services provided by the Telefonica
Group to VMED O2 UK Limited consist primarily of
technology and telecommunication services that will be
used by or will otherwise benefit VMED O2 UK Limited. In
addition to providing VMED O2 UK Limited with such
services, the mobile operators of the Telefonica Group
and VMED O2 UK Limited will maintain their roaming
commercial relationships in order to reciprocally provide
roaming services for their respective customers.
Likewise, as of closing of the transaction Telefónica
granted certain trademark license agreements to VMED
O2 UK Limited (the “VMED O2 UK Limited Trademark
Licenses”). Pursuant to the VMED O2 UK Limited
Trademark Licenses, Telefonica Group licensed the use of
Telefónica and O2 brand rights to VMED O2 UK Limited.
Purchase Agreement for Acquisition of UPI
Mobile Assets of the Oi Group
On January 28, 2021, Telefónica Brasil executed the
Purchase and Sale Agreement of Shares and Other
Covenants (the “Oi Agreement”), by and among Oi Móvel
SA - In Judicial Recovery, as "Seller", Telefónica Brasil, Tim
S.A. and Claro S.A., as “Buyers”, and Oi S.A. - In Judicial
Recovery and Telemar Norte Leste S.A. - In Judicial
Recovery, as intervening parties and guarantors of the
seller’s obligations.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.143
On April 20, 2022, the closing of the transaction related to
the Purchase Agreement for the Acquisition of the Assets
of Oi Group's mobile business operations (the "UPI
Mobile Assets") took place, and Telefónica Brasil
acquired, on such date, all the shares of Garliava RJ
Infraestrutura e Redes de Telecomunicações S.A.
(Garliava), to which the mobile assets of Oi Group
assigned to Telefónica Brasil had been contributed under
the segregation plan stated in the Oi Agreement.
Telefónica Brasil thus acquired its share of mobile assets
of the Oi Group for an amount of 5,373 m illion Brazilian
reais (approximately 1,063 million euros at the exchange
rate at such date), having paid, on such day, the amount
of 4,885 million Brazilian reais (approximately 972 million
euros). The remaining amount, equivalent to 10% of the
payment made on that date, was withheld and its release
was subject to certain ongoing discussions regarding
price adjustments, as provided for in the Oi Agreement.
Lik ewise, on such date, Telefónica Brasil: (i) committed to
an additional payment of 110 million Brazilian reais
(approximately 23 million euros) of which 40 million
Brazilian reais were paid at that date (approximately 8
million euros), subject to the fulfilment of certain targets
by Oi; (ii) made a payment of approximately 148 million
Brazilian reais (approximately 29 million euros) for certain
transition services provided by Oi to Garliava; and (iii)
entered into a take-or-pay data transmission capacity
agreement, with a net present value of 179 million
Brazilian reais (approximately 35 million euros), to be paid
in monthly installments during a period of 10 years.
The mobile assets of Oi Group finally assigned to
Telefónica Brasil were the following:
a. Customers: approximately 12.5 million (equivalent
to 30% of the total customer base of the mobile assets of
Oi Group) – according to ANATEL’s February 2022 data;
b. Spectrum: 43MHz as national population-
weighted average (46% of the radiofrequency of the
mobile assets of Oi Group); and
c. Infrastructure: contracts for the use of
approximately 2.7 thousand sites of mobile access
(corresponding to 19% of the sites of the mobile assets of
Oi Group).
All commitments assumed were duly submitted to
ANATEL and CADE during 2022.
On October 3, 2022, Telefónica Brasil initiated an
arbitration procedure against Oi S.A. – In Judicial
Recovery (“Seller”), pursuant to the terms of the Oi
Agreement, alleging manifest breach by Seller of certain
terms of the Oi Agreement, after the exchange of notices
about the post-closing price adjustment between Buyers
and Seller, upon the competent request of arbitration filed
with the Market Arbitration Chamber.
On February 1, 2023, Telefónica Brasil's Extraordinary
Shareholders' Meeting was held and Garliava’s merger
into Telefónica Brasil was approved, subject to certain
conditions since satisfied. The merger became effective
on February 28, 2023, with Telefónica Brasil surviving the
merger.
On October 4, 2023, the Market Arbitration Chamber
approved the agreement reached between Telefónica
Brasil and Oi to end the controversy and the arbitral
proceeding between the parties resulting in a final price
the for the UPI Mobile Assets assigned to Telefónica
Brasil of 5,129 million Brazilian reais as of the closing date
(approximately 948 million euros at the exchange rate at
such date) (see Note 5 to the Consolidated Financial
Statements).
Investment Agreement with Allianz and
Telefónica Germany
On October 29, 2020, Telefónica Infra Germany GmbH
(“TEF Infra Germany”, a subsidiary indirectly wholly-
owned by Telefónica through Telefónica Infra, S.L.U.)
entered into an investment agreement (and related
contracts, including a partners’ agreement which sets
forth the principles of corporate governance of the joint
venture) with several entities belonging to the Allianz
Group ("Allianz") and Telefónica Germany 1.
Beteiligungsgesellschaft mbH (a subsidiary wholly-owned
by Telefónica Germany GmbH & Co. OHG) (“TEF
Germany”) for the creation of a joint venture to deploy
Fiber-to-the-Home (FTTH) in Germany, pursuant to
which TEF Infra Germany and TEF Germany conditionally
agreed to invest up to 500 million euros equity in total
(400 million euros by TEF Infra Germany and 100 million
euros by TEF Germany) and Allianz conditionally agreed
to invest up to 1,000 million euros through different
sources of funding over a six year period.
The closing of the transaction and the acquisition of the
joint control took place on December 18, 2020. The
registration of Allianz and TEF Germany as limited
partners of the joint venture in the German commercial
registry occurred on January 21, 2021. After the closing of
the transaction, the Allianz Group and the Telefónica
Group each holds 50% in the joint venture under a co-
control governance model. Telefónica Group’s ownership
is held through TEF Infra Germany holding 40% and TEF
Germany holding a 10% stake.
New long-term master services agreement in
the United Kingdom
On January 7, 2021, each of Telefónica U.K. and Vodafone
U.K. entered into new Master Services Agreements with
Cornerstone Telecommunications Infrastructure Limited
(“CTIL”), their passive tower network infrastructure
partnership which was initially 50:50 jointly owned and
operated by the two operators. The new agreements
came into effect on January 1, 2021, with initial terms of 8
years, with three additional 8-year renewal periods.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.144
CTIL was formed in 2012 through the consolidation of
both Telefónica U.K. and Vodafone U.K.’s existing basic
network infrastructure, including towers and masts, which
were transferred to the joint operation. CTIL currently
operates c. 14,200 macro sites with a 2.0 x tenancy ratio
(including active sharing) and c.1,400 micro sites. CTIL
also provides management services for the anchor
tenants for a further c.5,100 third party sites where their
active equipment is deployed. Telefónica's stake in CTIL is
currently held through VMED O2 UK Limited (see Note
10), the joint venture between Telefonica and Liberty
Global plc in the United Kingdom, which on November 15,
2023 transferred an indirect 16.67% minority stake in CTIL
to the UK-based infrastructure fund GLIL Infrastructure
LLP.
The new agreements do not materially impact existing
network agreements and will continue to allow CTIL to
primarily serve its shareholders as well as some third
parties.
Transaction between Colombia
Telecomunicaciones S.A. ESP BIC and Kohlberg
Kravis Roberts (“KKR”)
On July 16, 2021, Colombia Telecomunicaciones S.A. ESP
BIC and KKR entered into an agreement to sign the
following contracts:
(i) An assets purchase agreement for the fiber optic
assets owned by Colombia Telecomunicaciones S.A. ESP
BIC with a Colombian company controlled by KKR
(InfraCo, SpA), in consideration for an initial payment of
320 million U.S. dollars, which may be subject to post-
closing adjustments under usual conditions for this type
of operation. As well as a subsequent payment, consisting
of the possibility of receiving a higher consideration from
its result in network deployment activities, for an amount
of up to an additional 100 million U.S. dollars.
(ii) A contract through which Colombia
Telecomunicaciones S.A. ESP BIC will acquire a 40%
stake in a Spanish company controlled by KKR, which it
holds the remaining 60%. The Colombia
Telecomunicaciones S.A. ESP BIC´s contribution would
be a portion of the consideration received from assets
purchase agreement for the fiber optic assets.
(iii) Several commercial contracts between Colombia
Telecomunicaciones S.A. ESP BIC and InfraCo, SpA for
the provision of wholesale connectivity services by
InfraCo, SpA to Colombia Telecomunicaciones S.A. ESP
BIC, deployment of fiber optic network and other related
services.
The signing of the contracts of numerals (i) and (iii), as
well as the execution of the aforementioned operations
contracts, was subject to the respective contractual
provisions and to the obtaining of the necessary
regulatory authorizations.
On January 11, 2022, after obtaining the necessary
regulatory authorizations and meeting certain agreed
conditions, the transaction was executed. Therefore,
Colombia Telecomunicaciones S.A. ESP BIC executed the
sale of fiber optic assets to Onnet Fibra Colombia S.A.S.
(“Onnet”), a company with which it also entered into a
series of commercial contracts by virtue of which (i)
Onnet will provide wholesale connectivity services to
Colombia Telecomunicaciones S.A. ESP BIC, and (ii)
Colombia Telecomunicaciones S.A. ESP BIC will provide
to Onnet fiber optic network deployment services and
other related services. Simultaneously, Colombia
Telecomunicaciones S.A. ESP BIC acquired shares
equivalent to a 40% in Alamo HoldCo S.L., a Spanish
company that owns 100% of Onnet's shares (see Note 10).
Agreement reached between Telefónica España
Filiales, S.A.U. (“Telefónica España Filiales”), T.
Infra, Vauban and Crédit Agricole Assurances
for the establishment of Bluevia Fibra
On July 25, 2022, Telefónica España Filiales S.A.U,
Telefónica Infra S.L.U. (T. Infra) and the consortium
formed by Vauban Infrastructure Partners ("Vauban") and
Crédit Agricole Assurances ("CAA") reached an
agreement for the establishment of a company, Bluevia
Fibra, S.L. ("Bluevia"), whose corporate purpose is the
deployment and commercialization of a fiber-to-the-
home (FTTH) network mainly in rural areas in Spain.
Once the relevant regulatory authorizations were
obtained, the closing of the transaction took place on
December 20, 2022.
After closing, the Telefónica Group holds 55% of the
capital of Bluevia (30% through Telefónica España Filiales
and 25% through T. Infra), with Vauban/CAA holding the
remaining 45%. At closing, Bluevia purchased from
Telefónica España 3.9 million already passed real estate
units, and agreed to deploy 1.1 million additional units over
the following two years after closing, reaching a total
footprint of 5 million passed real estate units. The
3.9 million already passed real estate units acquired by
Bluevia at closing represented 14% of Telefónica's FTTH
network in Spain, with Telefónica España retaining
ownership of the remainder of the network. In addition, as
part of the transaction, the Telefónica Group entered into
a series of service provision agreements with Bluevia
which entail the mutual provision and receipt of services
by/to Telefonica Group and Bluevia. As part of the
transaction Telefonica Group contributed equity funds to
Bluevia in the amount of approximately 1,247 million euros
and the Vauban/CAA consortium acquired 45% of Bluevia
from Telefónica España for 1,021 million euros in cash (see
Note 2).

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.145
Agreement reached by T. Infra, Liberty Global
and InfraVia for the establishment of a fiber-to-
the-home (FTTH) joint venture in the United
Kingdom
On July 29, 2022, T. Infra, Liberty Global plc ("Liberty
Global") and InfraVia Capital Partners ("InfraVia") reached
an agreement for the establishment of a joint venture,
"nexfibre", for the deployment of fiber-to-the-home
(FTTH) to 5 million homes in the United Kingdom not
reached by VMED O2 UK Limited's (VMO2) network, with
potential for expansion to an additional 2 million homes.
The fiber network will offer wholesale FTTH access to
telecommunications service providers, with VMO2 acting
as the lead customer, as well as providing a range of
technical services.
Once the relevant regulatory authorizations were
obtained and the other conditions were fulfilled, the
closing of the transaction took place on December 15,
2022.
After closing, Liberty Global and T. Infra participate by
halves in a joint vehicle that holds a 50% interest in
nexfibre, with InfraVia owning the remaining 50%.
The business plan for the initial rollout to 5 million homes
envisages an investment of approximately 4,500 million
pounds sterling (approximately 5,179 million euros at the
exchange rate at December 31, 2023). The three partners
have funded their pro-rata share of equity funding for the
construction, totaling up to 1,400 million pounds sterling
(approximately 1,611 million euros at the exchange rate at
December 31, 2023). In addition, nexfibre has
entered into a facilities agreement with a consortium of
banks for an amount of up to 3,300 million pounds
sterling (approximately 3,798 million euros at the
exchange rate at December 31, 2023).
As part of the transaction, InfraVia has made and will
continue to make certain payments to Liberty Global and
T. Infra, a portion of which will be linked to the progress of
the construction of the network.
In support of its obligations to nexfibre, VMO2 continues
to extend network build contracts with various providers.
d) Environmental and climate change
matters
Environmental management of the Group
Commitment to protect the environment is part of the
Company's general strategy and is the responsibility of
the Board of Directors. The performance in this area is
regularly supervised by the Sustainability and Regulation
Committee as well as by the Global Sustainability (ESG)
Office in coordination with the global areas responsible
for executing this strategy alongside the business units.
The Group has global environmental and energy
management policies, and externally certified
environmental management systems in accordance with
ISO 14001 in all Group operators. The environment is a
central issue throughout the Company, involving both
operational and management areas as well as business
and innovation areas.
The Telefónica Group has contracted, both locally and
globally, several insurance programs in order to mitigate
the possible occurrence of an incident stemming from the
risks of environmental liability and/or natural disasters.
Managing environmental impact and energy
consumption is a strategic priority and carbon reduction
targets are part of the variable remuneration of all
Company employees, including the Executive Committee.
In addition, Telefónica, S.A.'s long-term share-based
incentive plans 2021-2025 (see Note 27) include CO2
Emission Neutralization targets, in line with the target set
by the Company.
Climate change and energy
In managing climate change, Telefónica identifies
adaptation and mitigation measures and new
opportunities for growth and development. To analyse
climate change risks, the recommendations of the Task
Force on Climate Related Financial Disclosures (TCFD)
are followed, identifying short, medium and long-term
risks. Specifically, physical and transition risks identify the
importance of reducing GHG emissions and energy
consumption, and are managed in accordance with
Telefónica's decarbonization roadmap. On their side, the
opportunities are mainly related to energy efficiency,
renewables, sustainable financing and the development
of new products and services.
All of this is contained in the Climate Action Plan, which
defines Telefónica's decarbonization process to achieve
net zero emissions by 2040, which involves minimising its
own emissions (Scope 1 and 2) and those of the value
chain (Scope 3).
For Telefonica, it is a priority to keep energy consumption
stable despite the sharp increase in the digitalization of
society and, therefore, in data traffic transmitted through
the networks. The Group's Energy Efficiency Plan
therefore includes initiatives such as network
modernisation, for example, with investments in fiber
optics (more efficient) that replace the copper network, or
5G.
The Company's decarbonization requires not only
maximum efficiency in the use of energy, but also that it
comes from renewable sources. Telefónica's Renewable
Energy Plan contemplates different solutions such as self-
generation, the purchase of renewable electricity with a
guarantee of origin and long-term power purchase
agreements (PPAs, see Note 26), and prioritizes non-
conventional renewable electricity sources, defines the

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.146
strategy that allows us to reduce operating costs and
reduces exposure to fluctuations in electricity prices.
Most of the electricity consumption in our own facilities
comes from renewable sources. In Brazil, it is worth
highlighting the continuation of the distributed generation
project, which allowed 67 renewable energy plants to be
put into operation in 2023, out of a total of 85 planned,
which will generate more than 700 GWh per year for our
operation. In Spain, the five long-term renewable energy
purchase agreements (PPA) keep being into operation,
signed for the period 2021-2031 and equivalent to 582
GWh annually for 10 years. In addition, Telefónica
Germany signed two PPAs, the first for an annual volume
of 350 GWh from an offshore wind farm during the period
between 2025 and 2035, and a second for an annual
volume of 200 GWh for the period 2025-2040, both with
energy suppliers that provide long-term energy security
and renewable energy supply.
As part of its net zero objective, Telefónica supports
projects that absorb or reduce carbon emissions in order
to offset and neutralize emissions that are not reduced. To
this end, it purchases carbon credits from projects under
the highest standards in certain regions where Telefónica
operates.
Financing linked to sustainability criteria
Sustainable financing is a key tool to support the
transformation of the business through investment in
projects with positive environmental and social impact. In
2018, the Company published its first Sustainable
Financing Framework. The most recent version was
published in July 2023, and it has a favorable second party
opinion from Sustainalytics. The framework is linked to the
United Nations Sustainable Development Goals and is
aligned with the International Capital Markets Association
(ICMA) Green, Social and Sustainable Bond Principles, as
well as the Green Lending Principles and the Social Loans
of the LMA (Loan Market Association), the APLMA (Asian
Pacific Loan Market Association) and the LSTA (Loan
Syndications and Trading Association).
Telefónica was the first issuer of senior green bonds and
hybrid instruments (green and sustainable) in the
telecommunications sector. The funds that were obtained
have been mainly allocated to projects to transform the
network from copper to fiber, more efficient and with
fewer breakdowns; and the deployment and
improvement of mobile connectivity in rural areas.
In addition to senior green bonds and hybrid instruments,
the Group uses other sustainable banking financing tools,
such as loans and credits linked to sustainability
objectives that allow continued progress on objectives
such as emissions reduction or gender equality. Also in
this case, the Group's main syndicated loan is linked to
sustainability criteria in line with the corporate
Sustainability Linked Loan Framework, prepared at the
end of 2021 and with a second party opinion from
Sustainalytics.
In 2023, the Company has maintained an active presence
in the capital market with several issues, successfully
raising a total of 2,600 million euros of debt in green
format throughout the year. In January 2023, Telefónica
opened the sustainable debt market with the placement
of a green hybrid instrument for an aggregate principal
amount of 1,000 million euros (Note 17.c), and in
September, another green hybrid instrument was issued
for an aggregate principal amount of 750 million euros
(Note 17.c). The third operation was carried out in
November, a green bond for an aggregate principal
amount of 850 million euros (see Annex III). The funds will
be allocated to projects related to the transformation of
telecommunications networks, both fixed and mobile, as
well as to promote the deployment in rural areas.
In 2022 Telefónica Brazil carried out its first issuance of
sustainability-linked bonds, for an aggregate principal
amount of 3,500 million reais (equivalent to 654 million
euros at the exchange rate at the end of 2023, see
Appendix III). The financing costs are linked to the
fulfillment of sustainability objectives by 2027. Also in
Colombia, Telefónica maintains loans worth 1,098 billion
Colombian pesos (equivalent to 260 million euros at the
exchange rate at the closing of 2023).
In terms of bank financing, the emissions indicator linked
to the Telefónica Group's 5,500 million euro syndicated
loan signed at the beginning of 2022 was updated in
2023 (see Note 18 and Annex V). Interest payments on
this loan are linked to compliance with a more demanding
emissions reduction path.
In addition, the Group has committed lines and bilateral
financing with numerous financial entities, reaching a
total volume of 4,032 million euros at the end of 2023, the
interest applied to which is also linked to the fulfillment of
sustainability objectives.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.147
Overall, as at December 31, 2023, the Group's sustainable
financing amounts to 18,796 million euros, broken down as
follows:

Millions of euros | Sustainable financing
Financial liabilities | 3,764
Senior green bond of Telefónica Emisiones 2019 (Appendix III) | 1,000
Senior sustainable bond of Telefónica Emisiones 2022 (Appendix III) | 1,000
Senior green bond of Telefónica Emisiones 2023 (Appendix III) | 850
Sustainability linked bonds of Telefónica Brazil (Appendix III) | 654
Sustainability linked facilities of Colombia Telecomunicaciones | 260
Undated deeply subordinated securities (hybrid instruments) (Note 17.c) | 4,750
Undrawn facilities at December 31, 2023 (Note 18) | 10,282
Sustainability linked facility of Telefónica, S.A. | 5,500
Sustainability linked facility of Telefonica Germany | 750
Sustainability linked bilateral facilities | 4,032
Total | 18,796

e) Auditors’ fees
The services entrusted to the auditors comply with the
independence requirements established by the Spanish
Audit Law 22/2015 of July 20, as well as with the rules of
the Securities and Exchange Commission (SEC) and the
Public Company Accounting Oversight Board (PCAOB),
both of the United States of America.
The expenses accrued by the Group, in respect of the
fees for services rendered to the various member firms of
the PwC network, of which PricewaterhouseCoopers
Auditores, S.L. ("PwC Auditores, S.L."), the auditors of
Telefónica, S.A., forms part, amounted to 20.02 million
euros and 20.07 million euros in 2023 and 2022 ,
respectively.
The detail of these amounts is as follows:

| 2023
Millions of euros | PwC Auditores, S.L. | Other companies PwC network | Total
Audit services | 8.13 | 10.48 | 18.61
Audit-related services | 1.01 | 0.40 | 1.41
Total | 9.14 | 10.88 | 20.02

| 2022
Millions of euros | PwC Auditores, S.L. | Other companies PwC network | Total
Audit services | 7.73 | 10.98 | 18.71
Audit-related services | 0.99 | 0.37 | 1.36
Total | 8.72 | 11.35 | 20.07

Audit services include audit fees with respect to the
individual and consolidated financial statements of
Telefónica, S.A. and its subsidiaries, as well as the review
of interim financial statements. These Audit services also
include the integrated audit of the financial statements
for the annual report on Form 20-F filed with the US SEC
for those entities currently required, including therefore,
the audit of the internal control over financial reporting to
comply with the requirements of the Sarbanes-Oxley Act
of 2002 (Section 404). It also includes audit work related
to legal and regulatory requirements that the auditor is
required to perform as part of its role.
The main items included in Audit-related services relate
to the review of financial information required by
regulators, the issuance of agreed-upon procedures
reports on financial reporting, the verification of non-
financial information in annual reports, the issuance of
comfort letters, the review of allocation and impact
reports of green finance instruments, the special report
on the Solvency and Financial Condition Review under
the Solvency II regulatory framework and the reasonable
assurance report on the system of Internal Control over
Financial Reporting (ICFR).
In 2023, the Principal Auditor has performed services
other than those mentioned above for a total amount of
0.002 million euros. During 2022, the Principal Auditor did
not provide any services in the Group other than audit or
audit-related services.
PwC Auditores, S.L., has provided the following services
to the Group in 2023 and 2022: the individual and
consolidated financial statements audit, the review of
interim financial statements, the integrated audit of the
financial statements for the annual report on Form 20-F
filed with the US SEC, the audit of the internal control
over financial reporting in order to comply with the

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.148
requirements of the Sarbanes-Oxley Act of 2002 (Section
404), the verification of non-financial information in the
annual reports, the issuance of comfort letters, the
issuance of agreed upon procedures reports on financial
reporting, the review of allocation and impact reports of
green finance instruments, the special report on the
Solvency and Financial Condition Review under the
Solvency II regulatory framework and the reasonable
assurance report on the system of Internal Control over
Financial Reporting (ICFR).
The expenses accrued to other audit firms, which are not
part of the international PwC network and which have
provided audit services to the companies included in the
consolidation of the Group for the year 2023 have
amounted to a total of 1.77 million euros ( 1.46 million euros
in 2022), the details of the audit services correspond to
0.94 million euros ( 0.83 million euros in 2022).
f) Trade and other guarantees
The Company is required to issue trade guarantees and
deposits for concession and spectrum tender bids (see
Note 19) 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.
g) Directors’ and Senior Executives’
compensation and other benefits
The compensation of the members of Telefónica’s Board
of Directors is governed by article 35 of the Company’s
By-Laws, which provides that the annual amount of the
compensation to be paid thereby to all of the Directors in
their capacity as such, i.e., as members of the Board of
Directors and for the performance of the duty of
supervision and collective decision-making inherent in
such body, shall be fixed by the shareholders at the
General Shareholders' Meeting. The Board of Directors
shall determine the exact amount to be paid within such
limit and the distribution thereof among the Directors,
taking into account the duties and responsibilities
assigned to each Director, their membership on
Committees within the Board of Directors and other
objective circumstances that it deems relevant.
Furthermore, Executive Directors shall receive such
compensation as the Board determines for the
performance of executive duties delegated or entrusted
to them by the Board of Directors. Such compensation
shall conform to the Director compensation policy
approved by the shareholders at the General
Shareholders’ Meeting.
In accordance with the foregoing, the shareholders,
acting at the Ordinary General Shareholders’ Meeting
held on April 11, 2003, set at 6 million euros the maximum
amount of annual gross compensation to be received by
the Board of Directors as a fixed allotment and as
attendance fees for attending the meetings of the
Advisory or Control Committees of the Board of Directors.
Thus, as regards fiscal year 2023, the total amount of
compensation accrued by the Directors of Telefónica, in
their capacity as such, was 2,871,801 euros for the fixed
allocation and for attendance fees.
The compensation of the Directors of Telefónica in their
capacity as members of the Board of Directors, of the
Executive Commission and/or of the Advisory or Control
Committees, consists of a fixed amount payable monthly,
and of attendance fees for attending the meetings of the
Advisory or Control Committees.
The amounts established in fiscal year 2023 as fixed
amounts for belonging to the Board of Directors, the
Executive Commission and the Advisory or Control
Committees of Telefónica, and the attendance fees for
attending meetings of the Advisory or Control
Committees of the Board of Directors, are indicated
below:
Compensation of the Board of Directors and of
the Committees thereof

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

(*) In addition, the amount of the attendance fee for each of the meetings of
the Advisory or Control Committees is 1,000 euros. It is also noted that the
Board of Directors, at its meeting held on December 13, 2023, approved,
following a favourable report from the Nominating, Compensation and
Corporate Governance Committee, a new configuration of the Company's
Consultative or Control Committees, specifically: (i) to abolish the Strategy
and Innovation Committee; and (ii) to integrate the Regulation and
Institutional Affairs Committee and the Sustainability and Quality Committee,
which now constitute a single Committee, under the name of Sustainability
and Regulation Committee.
In this regard, it is noted that the Executive Chairman, Mr.
José María Álvarez-Pallete López, waived the receipt of
the above amounts (i.e., 240,000 euros as Chairman of
the Board of Directors and 80,000 euros as Chairman of
the Executive Commission).

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.149
Likewise, the fixed remuneration of 1,923,100 euros
established for the 2024 financial year related to
executive roles carried out by Executive Chairman, Mr.
José María Álvarez-Pallete López is equal to that received
in the previous eight years (i.e. 2023, 2022, 2021 , 2020,
2019, 2018 , 2017 and 2016), which was set in his capacity
as Chief Operating Officer, remaining invariably after his
appointment as Chairman in 2016.
The fixed remuneration, for his executive roles, of
1,600,000 euros that the Chief Operating Officer (C.O.O.),
Mr. Ángel Vilá Boix, has established for the 2024 financial
year is equal to the one received in the years 2023, 2022,
2021, 2020 and 2019.
Individualized description
Appendix II provides an individual breakdown by item of
the compensation and benefits that the members of the
Board of Directors of the Company have accrued and/or
received from Telefónica, S.A,. and from other companies
of the Telefónica Group during fiscal year 2023. Likewise,
the compensation and benefits accrued and/or received,
during such year, by the members of the Company's
Senior Management are broken down.

| Index | l | Consolidated financial statements 2023
Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.150
Note 30. Operations classified
as held for sale
The breakdown of non-current assets and disposal
groups held for sale and liabilities associated at
December 31, 2023 and December 31, 2022 is as follows:

Millions of euros | 12/31/2023 | 12/31/2022
Fiber optic assets in Peru | 273 | —
Goodwill (Note 7) | 34 | —
Property, plant and equipment (Note 8) | 198 | —
Others | 41 | —
Other assets | — | 7
Non-current assets and disposal groups held for sale | 273 | 7
Millions of euros | 12/31/2023 | 12/31/2022
Liabilities associated with Fiber optic assets in Peru | 37 | —
Liabilities associated with non- current assets and disposal groups held for sale | 37 | —

Fiber optic business in Peru
On July 6, 2023, Telefónica Hispam entered into share
subscription agreements with an affiliate of KKR and Entel
Perú, for the entry of both companies, with 54% and 10%,
respectively, into the share capital of Pangea the
wholesale fiber-to-the-home (“FTTH”) company in Peru,
maintaining Telefónica Hispam 36% of the shares of said
company.
As part of the transaction Telefónica del Perú S.A.A.
(“TDP”) and Entel will sell to Pangea certain assets of their
FTTH infrastructure. Likewise, as part of the transaction,
certain agreements will be signed, among them,
agreements for the provision of wholesale connectivity
services with TDP and Entel Perú.
The transaction is subject to obtaining the regulatory
approvals.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.151
Note 31. Events after
the reporting period
The following events regarding the Telefónica Group took
place between December 31, 2023 and the date of
authorization for issue of the accompanying consolidated
financial statements:
• On January 3, 2024, certain subsidiaries of Telefónica
Spain endorsed the agreement reached on December
28, 2023 with the most representative trade unions to (i)
sign the III Collective Bargaining Agreement, which runs
until December 31, 2026 and can be extended for a
further year; and (ii) agreed execution of collective
redundancies plan up to a total of 3,420 employees (the
"Collective Redundancies Plan"). Employees turning 56
years or older in 2024 and with a seniority of more than
15 years can adhere to the Collective Redundancies
Plan. However, targets have been established that may
result in limits on joining in critical areas or additional
redundancies based on business reasons. The present
value of the Collective Redundancies Plan is estimated
in a provision of 1,320 million euros (before taxes),
recorded as of December 31, 2023 under "Personnel
expenses" (see Note 24.a to the Consolidated Financial
Statements), with no cash impact as of such date.
• On January 13, 2024, the second annual extension of
the sustainability-linked syndicated loan facility for
5,500 million euros of Telefónica, S.A. was exercised.
The new expiration date is January 13, 2029.
• On January 17, 2024, Telefónica, S.A., through its wholly-
owned subsidiary Telefónica Emisiones, S.A.U. launched
under the EMTN Programme a new issuance of notes
guaranteed by Telefónica, S.A. in an aggregate principal
amount of 1,750 million euros. This issue was split into
two tranches. The first tranche, with an aggregate
principal amount of 1,000 million euros, due on January
24, 2032, pays an annual coupon of 3.698% and was
issued at par. The second tranche, with an aggregate
principal amount of 750 million euros, due on January
24, 2036, pays an annual coupon of 4.055% and was
also issued at par. The settlement of the transaction
took place on January 24, 2024. An amount equivalent
to the net proceeds will be allocated towards eligible
investments in accordance with Telefónica's 2023
Sustainable Financing Framework, including the
transformation and modernization of
telecommunications networks based on high-speed
fixed and mobile networks, including supporting
infrastructure and software to improve the energy
efficiency of the networks, as well as the
implementation of Telefónica's Renewable Energy Plan,
and development and implementation of digital
products and services with a focus on saving energy
and/or natural resources.
• On January 19, 2024, Telefónica Audiovisual Digital,
S.L.U. was awarded exclusive broadcasting rights for
five matches per matchday of the Spanish First Division
Football League National Championship for pay
television in the residential market in Spain. Telefónica
Audiovisual will have first pick on 18 matchdays and
second pick on 17 matchdays (or the applicable portion
for the 2024/2025 season), including the second match
of the season between Real Madrid and Barcelona. In
addition, it has been awarded exclusive broadcasting
rights of one matchday for the 2024/2025 season and
three matchdays in the remaining seasons. The award
covers the 2024/2025 season, beginning January 20,
2025, as well as the 2025/2026 and 2026/2027
seasons. The price has been set at 250 million euros for
the 2024/2025 season and 520 million euros for each of
the 2025/2026 and 2026/2027 seasons (see Note 29.c).
• On January 22, 2024, regarding the voluntary public
acquisition offer in the form of a partial offer (the
“Offer”) launched by Telefónica —through Telefónica
Local Services GmbH— for shares of Telefónica
Deutschland Holding AG (“Telefónica Deutschland”)
announced on November 2023, the Company reported
that following the expiry of the acceptance period that
the Offer has been accepted by shareholders holding
233,732,773 Telefónica Deutschland shares,
representing approximately 7.86% of its share capital
and voting rights, for an approximate amount of 549
million euros. In addition, Telefónica has made direct
market purchases, from January 1, 2024 to January 26,
2024, for a total of 113,999,566 shares of the
aforementioned subsidiary, for an approximate amount
of 268 million euros. Thus, as of January 26, 2024
Telefónica owns, directly and indirectly, 2,799,576,769
shares which represent 94.12% of the share capital and
voting rights of Telefónica Deutschland.
• On February 5, 2024, Telefónica Emisiones, S.A.U.
redeemed 1,000 million euros of its notes issued on
February 5, 2019. These notes were guaranteed by
Telefónica, S.A.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.152
Note 32. Additional note for English
translation
These consolidated financial statements were originally
prepared in Spanish. In the event of a discrepancy, the
Spanish-language version prevails.

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Notes to the consolidated financial statements

Consolidated Annual Report 2023 Telefónica, S. A.153
Appendix I: Scope of consolidation
The main companies of the Telefónica Group
The table below lists the main companies comprising the
Telefónica Group at December 31, 2023 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 millions of functional currency units), the
Telefónica Group’s effective shareholding and the
company or companies through which the Group holds a
stake.
Parent Company
Telefónica, S.A.

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Telefónica Spain |  |  |  |  |
Telefónica de España, S.A.U. Telecommunications service provider | Spain | EUR | 1,024 | 100% | Telefónica, S.A.
Telefónica Móviles España, S.A.U. Wireless communications services provider | Spain | EUR | 209 | 100% | Telefónica, S.A.
Teleinformática y Comunicaciones, S.A.U. (Telyco) Promotion, marketing and distribution of telephone and telematic equipment and services | Spain | EUR | 8 | 100% | Telefónica España Filiales, S.A.U.
Telefónica Soluciones de Informática y Com. de España S.A.U. Telecommunications systems, networks and infrastructure engineering | Spain | EUR | 2 | 100% | Telefónica de España, S.A.U.
Telefónica Soluciones de Outsourcing, S.A.U. Promotion and networks management | Spain | EUR | 1 | 100% | Telefónica España Filiales, S.A.U.
Telefónica Servicios Integrales de Distribución S.A.U. Logistic service provider | Spain | EUR | 2 | 100% | Telefónica de España, S.A.U.
Telefónica España Filiales, S.A.U. Organization and operation of multimedia service-related business | Spain | EUR | 226 | 100% | Telefónica, S.A.
Telefónica Servicios Audiovisuales, S.A.U. Provision of all type of audiovisual telecommunications services | Spain | EUR | 6 | 100% | Telefónica España Filiales, S.A.U.
Telefónica Broadcast Services, S.L.U. DSNG-based transmission and operation services | Spain | EUR | — | 100% | Telefónica España Filiales, S.A.U.
TBSC Barcelona Producciones, S.L.U. Provision of audiovisual telecommunications services | Spain | EUR | — | 100% | Telefónica Broadcast Services, S.L.U.
Telefónica Audiovisual Digital, S.L.U. Provision of all type of audiovisual telecommunications services | Spain | EUR | 46 | 100% | Telefónica España Filiales, S.A.U.

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Appendix

Consolidated Annual Report 2023 Telefónica, S. A.154

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Telefónica Spain (cont.) |  |  |  |  |
Telefónica Global Technology, S.A.U. Global management and operation of IT systems | Spain | EUR | 16 | 100% | Telefónica España Filiales, S.A.U.
Telefónica Educación Digital, S.L.U. Vertical e-learning portal | Spain | EUR | 1 | 100% | Telefónica España Filiales, S.A.U.
Bluevia Fibra, S.L. Operations and exploitation of FTTH network and other connectivity services. | Spain | EUR | 68 | 55% | Telefónica España Filiales, S.A.U. (30%) Telefónica Infra, S.L.U. (25%)
Solar360 Soluciones de Instalacion y Mantenimiento S.L. Marketing and management in the installation, sale and maintenance of photovoltaic equipment | Spain | EUR | — | 51% | Telefónica de España, S.A.U.
Telefónica Ingeniería de Seguridad, S.A.U. Security services and systems | Spain | EUR | 8 | 100% | Telefónica España Filiales, S.A.U.
Telefónica Germany |  |  |  |  |
Telefónica Deutschland Holding A.G Holding company | Germany | EUR | 2,975 | 82.43% | Telefónica Germany Holdings Limited (69.22%) Telefónica, S.A. (13.20%)
Telefónica Germany GmbH & Co. OHG Wireless communications services operator | Germany | EUR | 51 | 82.43% | Telefónica Deutschland Holding A.G (82.42%) T. Germany Management, GmbH (0.01%)
E-Plus Service GmbH Wireless communications services operator | Germany | EUR | — | 82.43% | Telefónica Germany GmbH & Co. OHG
Telefónica Germany Business Sales GmbH Technological and consulting services in Big Data provider | Germany | EUR | — | 82.43% | Telefónica Germany GmbH & Co. OHG
O2 Telefónica Deutschland Finanzierungs GmbH Integrated cash management, consulting and financial support for Group companies | Germany | EUR | — | 82.43% | Telefónica Germany GmbH & Co. OHG
Telefónica Brazil |  |  |  |  |
Telefônica Brasil, S.A. Wireline telephony operator | Brazil | BRL | 63,571 | 75.29% | Telefónica Latinoamérica Holding, S.L.U. (36.85%) Telefónica, S.A. (38.39%) Telefónica Chile, S.A. (0.06%)
Terra Networks Brasil, Ltda. ISP and portal | Brazil | BRL | 159 | 75.29% | Telefônica Brasil, S.A.
Telefônica Infraestructura e Segurança Ltda. Servicios y sistemas de seguridad | Brazil | BRL | 309 | 75.29% | Terra Networks Brasil, Ltda.
Vivo ventures fundo de investimento em participacoes multiestrategia. Investment funds | Brazil | BRL | 100 | 75.78% | Telefônica Brasil, S.A. (73.78%) Telefonica Open Innovation S.L.U. (2.00%)
Vale Saúde, Administradora de Cartões Ltda. Provision of health services | Brazil | BRL | 7 | 75.29% | POP Internet Ltda.
Telefónica Hispam |  |  |  |  |
Telefónica Hispanoamérica, S.A.U. Sociedad holding | Spain | EUR | 97 | 100% | Telefónica, S.A.
TLH Holdco, S.L.U. Sociedad holding | Spain | EUR | 87 | 100% | Telefónica, S.A.

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Appendix

Consolidated Annual Report 2023 Telefónica, S. A.155

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Telefónica Hispam (cont.) |  |  |  |  |
Telefónica Venezolana, C.A. Wireless communications operator | Venezuela | VED | 1,375 | 100% | Telefónica Hispanoamérica, S.A.U. (97.13%) Comtel Comunicaciones Telefónicas, S.A. (2.87%)
Colombia Telecomunicaciones S.A. ESP BIC Communications services operator | Colombia | COP | 3,410 | 67.50% | Telefónica Hispanoamérica, S.A.U.
Operaciones Tecnológicas y Comerciales S.A.S Communications services operator | Colombia | COP | 3,330 | 67.50% | Colombia Telecomunicaciones S.A. ESP BIC
Pegaso Pcs S.A. de C.V. Communications services operator | Mexico | MXN | 2,041 | 100% | Telefónica Hispanoamérica, S.A. (99.98%) Celular de Telefonía S.A. de CV. (0.02%)
Terra Networks México, S.A. de C.V. ISP, portal and real-time financial information services | Mexico | MXN | 305 | 100% | Telefónica Hispanoamérica, S.A.U.
Fisatel México, S.A. de C.V. SOFOM E.N.R. Integrated cash mangement, consulting and financial support for Group companies | Mexico | MXN | 3,505 | 100% | Telefónica Hispanoamérica, S.A.U. (99.99%) Pegaso Pcs S.A. de CV. (0.01%)
Otecel, S.A. Wireless communications services provider | Ecuador | USD | 183 | 100% | Telefónica Hispanoamérica, S.A.U.
Telefónica de Argentina, S.A. Telecommunications service provider | Argentina | ARS | 679,830 | 100% | Telefónica Móviles Argentina, S.A. (79.06%) TLH Holdco, S.L.U. (20.94%)
Telefónica Móviles Argentina, S.A. Telecommunications service provider | Argentina | ARS | 84,706 | 100% | TLH Holdco, S.L.U.
Telefónica Móviles Chile, S.A. Wireless communications services operator | Chile | CLP | 1,631,069 | 100% | Inversiones Telefónica Internacional Holding SpA. (99.14%) Telefónica Hispanoamérica, S.A.U. (0.86%)
Telefónica Chile, S.A. Local and international long distance telephony services provider | Chile | CLP | 874,772 | 99.39% | Telefónica Móviles Chile, S.A.
Telefónica Chile Holdings, S.L.U. Holding Company | Chile | CLP | — | 100% | Telefónica Hispanoamérica, S.A.U.
Telefónica del Perú, S.A.A. Local, domestic and international long distance telephone service provider | Peru | PEN | 2,638 | 99.15% | Telefónica Hispanoamérica, S.A.U.
Media Networks Latin America, S.A.C Telecommunications research activities and proyects | Peru | PEN | 158 | 100% | Telefónica Latinoamérica Holding, S.L.U.
Telefónica Móviles del Uruguay, S.A. Wireless communications and services operator | Uruguay | UYU | 1,107 | 100% | Telefónica Hispanoamérica, S.A.U.
Other companies |  |  |  |  |
Telefónica Infra, S.L.U. Sociedad holding | Spain | EUR | 12 | 100% | Telefónica , S.A.

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Appendix

Consolidated Annual Report 2023 Telefónica, S. A.156

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Other companies (cont.) |  |  |  |  |
Telefónica Infra Germany GmbH Broadband telecommunications operator | Germany | EUR | — | 100% | Telefónica Infra, S.L.U.
Telefónica O2 Holdings Ltd. Holding company | United Kingdom | GBP | 9 | 100% | Telefónica, S.A. (99,99%) Telefónica Capital S.A. (0,01%)
MmO2 Ltd. Holding company | United Kingdom | GBP | — | 100% | Telefónica O2 Holding Ltd.
O2 International Holdings Ltd. Holding company | United Kingdom | GBP | — | 100% | O2 (Europe) Ltd.
Telefónica Germany Holdings Ltd. Holding company | United Kingdom | EUR | 3,463 | 100% | O2 (Europe) Ltd.
O2 (Europe) Ltd. Holding company | United Kingdom | EUR | 6,895 | 100% | Telefónica, S.A.
Telefónica International Holding, B.V Holding company | Netherlands | EUR | — | 100% | Telefónica Latinoamérica Holding, S.L.
Telefónica Latinoamérica Holding, S.L.U. Sociedad holding | Spain | EUR | 291 | 100% | Telefónica, S.A.
Telefónica Global Solutions, S.L.U. International service provider | Spain | EUR | 1 | 100% | Telefónica, S.A
Telefonica Global Solutions USA, Inc. Provision of telecommunications services | USA | USD | 202 | 100% | Telefónica Global Solutions, S.L.U.
Telefónica Global Solutions Germany GmbH. International service provider | Germany | EUR | — | 100% | Telefónica Global Solutions, S.L.U.
Telefónica Global Solutions México, S.A. de C.V. Carrying out research activities and projects in the field of telecommunications | Mexico | MXN | 38 | 100% | Telefónica Global Solutions, S.L.U.
Telefónica Innovación Digital, S.L.U. Desarrollo de actividades y servicios en el área de telecomunicaciones. Sociedad de cartera | Spain | EUR | 28 | 100% | Telefónica, S.A
Telefónica Digital Ltd. Developer Telco Services | United Kingdom | GBP | 45 | 100% | Telefónica Innovación Digital, S.L.U.
Telefonica Open Innovation S.L.U. Talent identification and development in ICT. | Spain | EUR | 2 | 100% | Telefónica Innovación Digital, S.L.U.
Wayra Chile Tecnología e Innovación SpA Technological innovation based business project development | Chile | CLP | 29,899 | 100% | Telefonica Open Innovation S.L.U.
Wayra Brasil Desenvolvedora e Apoiadora de Projetos Ltda Technological innovation based business project development | Brazil | BRL | 52 | 100% | Telefonica Open Innovation S.L.U. (99.99%) Telefónica Innovación Digital, S.L.U. (0.01%)
WY Telecom, S.A. de C.V. Talent identification and development in ICT | Mexico | MXN | 134 | 100% | Telefonica Open Innovation S.L.U. (99.99%) Telefónica Innovación Digital, S.L.U. (0.01%)
Wayra Argentina, S.A. Talent identification and development in ICT | Argentina | ARS | 3,500 | 100% | Telefonica Open Innovation S.L.U. (95%) Telefónica, S.A. (5%)

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Appendix

Consolidated Annual Report 2023 Telefónica, S. A.157

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Other companies (cont.) |  |  |  |  |
Wayra Colombia, S.A.S. Technological innovation based business project development | Colombia | COP | 2,304 | 100% | Telefonica Open Innovation S.L.U.
Proyecto Wayra, C.A. Commercial, industrial and mercantile activities | Venezuela | VED | 9 | 100% | Telefónica Venezolana, C.A.
Wayra Perú Aceleradora de Proyectos, S.A.C. Technological innovation based business project development | Peru | PEN | 28 | 100% | Telefonica Open Innovation S.L.U.
Wayra UK Ltd. Technological innovation based business project development | United Kingdom | GBP | — | 100% | Telefonica Open Innovation S.L.U.
Terra Networks Perú, S.A. ISP and portal | Peru | PEN | 10 | 100% | Telefónica Latinoamérica Holding, S.L.
Terra Networks Argentina, S.A. ISP and portal | Argentina | ARS | 132 | 100% | Telefónica Latinoamérica Holding, S.L. (99.99%) Telefónica International Holding, B.V. (0.01%)
Telfisa Global, B.V. Integrated cash management, consulting and financial support for Group companies | Netherlands | EUR | — | 100% | Telefónica, S.A.
Telefónica Global Activities Holding, B.V. Holding Company | Netherlands | EUR | — | 100% | Telfisa Global, B.V.
Telefónica Global Services, GmbH Purchasing services | Germany | EUR | — | 100% | Group 3G UMTS Holding, GmbH
Telefónica Global Roaming, GmbH Optimization of network traffic | Germany | EUR | — | 100% | Telefónica Global Services, GmbH
Group 3G UMTS Holding GmbH Holding Company | Germany | EUR | 250 | 100% | Telefónica Global Activities Holdings, B.V
Telefónica Compras Electrónicas, S.L.U. Development and provision of information Society services | Spain | EUR | — | 100% | Telefónica Global Services, GmbH
Telefonica Iot & Big Data Tech S.A.U. Provision of telemarketing services | Spain | EUR | 1 | 100% | Telefónica Tech S.L.U.
Geprom Software Engineering S.L.U. Technical engineering services and other consultancy activities | Spain | EUR | — | 100% | Telefonica Iot & Big Data Tech S.A.U.
Geprom Software Engineering S.A. de C.V. Technical engineering services and other consultancy activities | Mexico | MXN | — | 100% | Geprom Software Engineering S.L.U.
TIS Hispanoamérica, S.L.U. Security services and systems | Spain | EUR | — | 100% | Telefónica, S.A.
Telefónica Capital, S.A.U. Finance company | Spain | EUR | 7 | 100% | Telefónica, S.A.
Lotca Servicios Integrales, S.L.U. Aircraft ownership and operation | Spain | EUR | 17 | 100% | Telefónica, S.A.
Fonditel Pensiones, Entidad Gestora de Fondos de Pensiones, S.A Administration of pension funds | Spain | EUR | 16 | 70% | Telefónica Capital, S.A.U.

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Consolidated Annual Report 2023 Telefónica, S. A.158

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Other companies (cont.) |  |  |  |  |
Fonditel Gestión, Soc. Gestora de Instituciones de Inversión Colectiva, S.A.U. Administration and representation of collective investment schemes | Spain | EUR | 2 | 100% | Telefónica Capital, S.A.U.
Telefónica Luxembourg Holding, S.à.r.L. Holding company | Luxembourg | EUR | 3 | 100% | Telefónica, S.A.
Nova Casiopea RE S.A. Reinsurance | Luxembourg | EUR | 15 | 100% | Telefónica Luxembourg Holding, S.à.r.L.
Telefónica Seguros y Reaseguros Compañía Aseguradora, S.A.U. Conducting direct insurance business | Spain | EUR | 24 | 100% | Telefónica Luxembourg Holding, S.à.r.L.
Telefónica Finanzas, S.A.U. Integrated cash management, consulting and financial support for Group companies | Spain | EUR | 3 | 100% | Telefónica, S.A.
Telefónica Correduría de Seguros y Reaseguros Compañía de Mediación, 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 Europe, B.V. Fund raising in capital markets | Netherlands | EUR | — | 100% | Telefónica, S.A.
Telefónica Participaciones, S.A.U. Financial debt instrument issuer | Spain | EUR | — | 100% | Telefónica, S.A.
Telefónica Emisiones, S.A.U. Financial debt instrument issuer | Spain | EUR | — | 100% | Telefónica, S.A.
Aliança Atlântica Holding B.V. Holding company | Netherlands | EUR | 40 | 87.65% | Telefónica, S.A. (50%) Telefônica Brasil, S.A. (37.65%)
Telefónica Serviços Empresariais do BRASIL, Ltda. Management and administrative services rendered | Brazil | BRL | 63 | 100% | Telefónica Servicios Globales, S.L.U.
Telefónica Gestión Integral de Edificios y Servicios S.L.U. Management and administrative services rendered | Spain | EUR | — | 100% | Telefónica Servicios Globales, S.L.U.
O2 Worldwide Limited Wireless telecommunications activities | United Kingdom | GBP | — | 100% | Telefónica, S.A.
Telefónica Servicios Globales, S.L.U. Holding company | Spain | EUR | 1 | 100% | Telefónica, S.A.
Telefónica Holding Atticus, B.V. Holding company | Netherlands | EUR | — | 100% | Telefónica Latinoamérica Holding, S.L.U.
Telefónica Soluciones de Criptografía, S.A.U. Engineering, research and development | Spain | EUR | 1 | 100% | Telefónica, S.A.
Cryptography & Security Systems S.L.U. Software programming activities | Spain | EUR | — | 100% | Telefónica Soluciones de Criptografía, S.A.U.
Telefónica Centroamérica Inversiones ,S.L. Communications services provider | Spain | EUR | 1 | 60% | Telefónica, S.A.
Telefónica Tech S.L.U. Holding company | Spain | EUR | 67 | 100% | Telefónica, S.A.
Telefónica Cybersecurity & Cloud Tech S.L.U. Cybersecurity, electronic information security and IT consultancy | Spain | EUR | 34 | 100% | Telefónica Tech S.L.U.
Telefónica Cybersecurity & Cloud Tech Chile SpA. Cybersecurity, electronic information security and IT consulting | Chile | CLP | 20,540 | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Telefónica Tech Inc. Cybersecurity, electronic information security and IT consulting | USA | USD | 7 | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.159

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Other companies (cont.) |  |  |  |  |
Audertis Audit Services S.L.U. Provision of audit services in the areas of security, privacy and data protection | Spain | EUR | — | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Govertis Advisory Services S.L.U. Cybersecurity, electronic information security and IT consulting | Spain | EUR | — | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Telefónica Cybersecurity & Cloud Tech Colombia SAS Cybersecurity, electronic information security and IT consulting | Colombia | COP | 406 | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Telefonica Cybersecurity Tech Mexico, S.A de C.V. Cybersecurity, electronic information security and IT consulting | Mexico | MXN | 48 | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Telefônica Cibersegurança e Tecnología do Brasil Ltda Cybersecurity, electronic information security and IT consulting | Brazil | BRL | 26 | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Telefónica Cybersecurity & Cloud Tech Perú S.A.C Cybersecurity, electronic information security and IT consulting | Peru | PEN | 30 | 100% | Telefónica Tech S.L.U.
Telefonica Cybersecurity Tech Ecuador Tctech S.A. Cybersecurity, electronic information security and IT consulting | Ecuador | USD | — | 100% | Otecel, S.A. (99%) Telefónica Global Solutions Ecuador TGSE, S.A. (1%)
Telefónica Cybersecurity & Cloud Tech Deutschland GmbH Cybersecurity, electronic information security and IT consulting | Germany | EUR | — | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Acens Technologies, S.L.U. Holding housing and telecommunications solutions Service provider | Spain | EUR | 2 | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Altostratus Solutions, S.L.U. Provision of IT services | Spain | EUR | — | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Telefónica Tech UK & Ireland, Limited Holding company | United Kingdom | GBP | 14 | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
Telefónica Tech UK Holdings Limited Holding company | United Kingdom | GBP | — | 100% | Telefónica Tech UK & Ireland, Limited
Telefónica Tech UK TOG Limited Headquarters activities | United Kingdom | GBP | — | 100% | Telefónica Tech UK Holdings Limited
Telefónica Tech UK Managed Services Limited Information technology, management and IT services consultancy | United Kingdom | GBP | — | 100% | Telefónica Tech UK TOG Limited
Telefónica Tech UK Limited Information technology, management and IT services consultancy | United Kingdom | GBP | — | 100% | Telefónica Tech UK TOG Limited
Telefónica Tech Northern Ireland Holdings Limited Other computer service activities | United Kingdom | GBP | — | 100% | Telefónica Tech UK & Ireland, Limited
Telefónica Tech Communication & Collaboration Limited Other computer service activities | United Kingdom | GBP | — | 100% | Telefónica Tech Northern Ireland Holdings Limited
Telefónica Tech Northern Ireland Limited Other computer service activities | United Kingdom | GBP | — | 100% | Telefónica Tech Northern Ireland Holdings Limited
Telefónica Tech Ireland Limited Provision of IT services | Ireland | EUR | — | 100% | Telefónica Tech Northern Ireland Holdings Limited
Telefónica Tech Ocean Limited Holding company | United Kingdom | GBP | — | 100% | Telefónica Tech UK & Ireland, Limited.

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.160

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Other companies (cont.) |  |  |  |  |
Perpetual Topco Limited Holding company | United Kingdom | GBP | 4 | 100% | Telefónica Tech UK & Ireland Limited
Perpetual Midco Limited Holding company | United Kingdom | GBP | 4 | 100% | Perpetual Topco Limited
Perpetual Bidco Limited Holding company | United Kingdom | GBP | 3 | 100% | Perpetual Midco Limited
Incremental Group Holdings Limited Holding company | United Kingdom | GBP | 1 | 100% | Perpetual Bidco Limited
Redspire Limited Software development and information technology consultancy activities | United Kingdom | GBP | — | 100% | Incremental Group Holdings Limited
Incremental Group Limited Information technology consultancy activities and other services activities | United Kingdom | GBP | — | 100% | Incremental Group Holdings Limited
Adatis Group Limited Holding company | United Kingdom | GBP | — | 100% | Incremental Group Holdings Limited
Adatis Consulting Limited Information technology consultancy activities | United Kingdom | GBP | — | 100% | Adatis Group Limited
Adatis BG LTD Information technology consultancy activities | Bulgaria | BGN | — | 100% | Adatis Consulting Limited
Adatis India Private Limited Information technology consultancy activities | India | INR | — | 100% | Adatis Group Limited (99%) Adatis Consulting Limited (1%)
Adatis Managed Services Limited Information technology consultancy activities | United Kingdom | GBP | — | 100% | Adatis Group Limited
BE-terna Acceleration Holding GmbH Holding company and provision of marketing, consultancy, implementation and commercialisation services for software and information technology | Germany | EUR | — | 100% | Telefónica Cybersecurity & Cloud Tech S.L.U.
BE-terna Acceleration GmbH Holding company | Germany | EUR | — | 100% | BE-terna Accelera Holding GmbH
BE-terna Enhancement GmbH Holding company | Germany | EUR | — | 100% | BE-terna Acceleration GmbH
BE-terna Germany GmbH Holding company | Germany | EUR | — | 100% | BE-terna Enhancement GmbH
BE-terna AB (Sweden) Technology services | Sweden | SEK | — | 100% | BE-terna Enhancement GmbH
BE-terna Automation AG Technology services | Switzerland | CHF | — | 100% | BE-terna Enhancement GmbH
BE-terna ApS Computer programming activities | Denmark | DKK | — | 100% | BE-terna Enhancement GmbH
BE-terna B.V. (Netherlands) Technology services | Netherlands | EUR | — | 100% | BE-terna ApS (Denmark)
BE-terna GmbH (Leipzig) Software production, electronic data processing, consultancy, services and project management | Germany | EUR | — | 100% | BE-terna Germany GmbH
BE-terna Austria GmbH Holding company | Austria | EUR | — | 100% | BE-terna Enhancement GmbH
BE-terna GmbH (Innsbruck) Services in automatic data processing and information technology | Austria | EUR | — | 100% | BE-terna Austria GmbH

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.161

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Other companies (cont.) |  |  |  |  |
Pipol A/S Conduct business with international implementation of business-oriented software solutions | Denmark | DKK | 1 | 100% | BE-terna Enhancement GmbH
BE-terna A/S (Norway) Computer programming activities | Norway | NOK | — | 100% | BE-terna Enhancement GmbH
BE-terna Business Solutions GmbH Software development and consulting, distribution of corresponding products, systems and processes | Germany | EUR | — | 100% | BE-terna GmbH (Innsbruck)
BE-terna Industry Solutions GmbH Sales, implementation and maintenance of international ERP products | Germany | EUR | — | 100% | BE-terna GmbH (Innsbruck)
BE-terna AG (Switzerland) Service provision, analysis and optimisation of business processes, selection of business software and implementation of ERP solutions | Switzerland | CHF | — | 100% | BE-terna GmbH (Innsbruck)
BE-terna SRL Services in automatic data processing and information technology | Italy | EUR | — | 100% | BE-terna GmbH (Innsbruck)
BE-terna Adriatic d.o.o Holding company | Slovenia | EUR | — | 100% | BE-terna Austria GmbH
BE-terna d.o.o. (Serbia) Technology services | Serbia | RSD | 13 | 100% | BE-terna Adriatic d.o.o
BE-terna d.o.o (Slovenia) Technology services | Slovenia | EUR | — | 100% | BE-terna Adriatic d.o.o
BE-terna d.o.o (Croatia) Technology services | Croatia | EUR | 2 | 100% | BE-terna Adriatic d.o.o
Telxius Telecom, S.A. Telecommunications service provider | Spain | EUR | 260 | 70% | Telefónica, S.A.
Telxius Cable América, S.A. Provision of high bandwidth communications services | Uruguay | USD | 291 | 70% | Telxius Telecom, S.A.
Telxius Cable España, S.L.U. Establishment and operation of any kind of communications infrastructure and/or network | Spain | EUR | 5 | 70% | Telxius Telecom, S.A.
Telxius Cable República Dominicana, S.A.S. Telecommunications service provider | Republica Dominicana | USD | 6 | 70% | Telxius Cable América, S.A. (69.30%) Telxius Cable España, S.L.U. (0.70%)
Telxius Cable Argentina, S.A. Operation and deployment of telecommunications infraestructure | Argentina | USD | 78 | 70% | Telxius Cable América, S.A. (66.50%) Telxius Cable España, S.L.U. (3.50%)
Telxius Cable Panamá, S.A. Installation and operation of telecommunications networks for wholesalers | Panama | USD | 10 | 70% | Telxius Cable América, S.A.
Telxius Cable Puerto Rico, Inc. High capacity optical fibre network communications services | Puerto Rico | USD | 14 | 70% | Telxius Cable América, S.A.
Telxius Cable USA, Inc. High bandwidth communications services | USA | USD | 58 | 70% | Telxius Telecom, S.A.
Telxius Cable Ecuador, S.A. Sale of usage of data transmission capacity via an underwater optical fibre network | Ecuador | USD | 5 | 70% | Telxius Cable América, S.A.
Telxius Cable Chile, S.A. Involvement in businesses related to public or private telecommunications services | Chile | USD | 26 | 70% | Telxius Cable América, S.A.

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.162

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Other companies (cont.) |  |  |  |  |
Telxius Cable Guatemala, S.A. Installation and operation of telecommunications networks for wholesalers | Guatemala | USD | 20 | 70% | Telxius Cable América, S.A.
Telxius Cable Perú, S.A.C. Involvement in the operation and deployment of international telecommunications services via underwater cables and others means | Peru | USD | 20 | 70% | Telxius Cable América, S.A.
Telxius Cable Colombia, S.A. Supply of data transmission capacity via underwater cable system | Colombia | USD | 4 | 70% | Telxius Cable América, S.A. (66.49%) Telxius Cable Chile, S.A. (1.17%) Telxius Cable Perú, S.A.C. (1.17%) Telxius Cable Guatemala, S.A. (1.16%) Telxius Cable Argentina, S.A. (0.01%)
Telxius Cable Brasil Participaçoes, Ltda. Holding company | Brazil | USD | 62 | 70% | Telxius Cable América, S.A.
Telxius Cable Brasil, Ltda. Operation and deployment of telecommunications infrastructures | Brazil | USD | 74 | 70% | Telxius Cable Brasil Participaçoes, Ltda.
Telxius Cable Bolivia, S.A. Establishment and operation of any kind of communications infrastructure and/or network | Bolivia | USD | 2 | 70% | Telxius Cable América, S.A. (68.60%) Telxius Cable España, S.L.U. (0.7%) Telxius Cable Argentina, S.A. (0.7%)
Telxius México, S.R.L. DE C.V Establishment and operation of any kind of communications infrastructure and/or network | Mexico | USD | — | 70% | Telxius Cable América, S.A. (69.99%) Telxius Cable España, S.L.U. (0.01%)
Telefónica Local Services GmbH Holding company | Germany | EUR | — | 100% | Telefónica, S.A.
Companies accounted for using the equity method |  |  |  |  |
VMED O2 UK Limited Integrated provider of fixed and mobile services | United Kingdom | GBP | — | 50% | Telefónica O2 Holdings Limited
FiBrasil Infraestrutura e Fibra Ótica S.A. Fibre wholesale supplier | Brazil | BRL | 189 | 43.82% | Telefônica Brasil, S.A. (18.82%) Telefónica Infra S.L.U. (25%)
VivaE Educação Digital S.A. Training for professional and management development | Brazil | BRL | 26 | 37.65% | Telefônica Brasil, S.A.
HoldCo InfraCo SpA Investment in money and/or securities | Chile | CLP | 135,534 | 39.76% | Telefónica Chile, S.A.
Infraco SpA. Operation of physical fibre optic infrastructure | Chile | CLP | 246,002 | 39.76% | HoldCo InfraCo SpA
Telefónica Factoring España, S.A. Factoring services provider | Spain | EUR | 5 | 50% | Telefónica, S.A.
Telefónica Factoring Do Brasil, Ltda. Factoring services provider | Brazil | BRL | 5 | 50% | Telefónica, S.A. (40%) Telefónica Factoring España, S.A. (10%)
Telefónica Factoring Mexico, S.A. de C.V. SOFOM ENR Factoring services provider | Mexico | MXN | 34 | 50% | Telefónica, S.A. (40,50%) Telefónica Factoring España, S.A. (9,50%)
Telefónica Factoring Perú, S.A.C. Factoring services provider | Peru | PEN | 6 | 50% | Telefónica, S.A. (40.50%) Telefónica Factoring España, S.A. (9.50%)

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.163

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Companies accounted for using the equity method (cont.) |  |  |  |  |
Telefónica Factoring Colombia, S.A. Factoring services provider | Colombia | COP | 4,000 | 50% | Telefónica, S.A. (40.50%) Telefónica Factoring España, S.A. (9.50%)
Telefónica Factoring Chile, SpA. Factoring services provider | Chile | CLP | 547 | 50% | Telefónica Factoring España, S.A.
Mobile Financial Services Holding SPRL Financial services | Belgium | USD | 198 | 50% | Telefónica Internacional Holding, B.V (26.28%) Telefónica Holding Atticus, B.V (23.72%)
Telefónica Consumer Finance, Establecimiento Financiero de Crédito, S.A. Specialised credit institution | Spain | EUR | 5 | 50% | Telefónica, S.A.
Movistar Consumer Finance Colombia SAS. Specialised credit institution | Colombia | COP | 6,000 | 50% | Telefónica Innovación Digital, S.L.U.
Alamo Holdco S.L. Holding company | Spain | EUR | — | 27% | Colombia Telecomunicaciones S.A. ESP BIC
ONNET Fibra Colombia S.A.S. Fibre wholesale supplier | Colombia | COP | 56,307 | 27% | Alamo Holdco S.L.
Internet para todos S.A.C Telecommunications service provider | Peru | PEN | 364 | 54.21% | Telefónica del Perú, S.A.A.
Movistar Prosegur Alarmas, S.L. Private security services | Spain | EUR | — | 50% | Telefónica España Filiales, S.A.U.
Prosegur Soluciones S.A.U. Private security services | Spain | EUR | — | 50% | Movistar Prosegur Alarmas, S.L.
Buendía Estudios, S.L. Service provision related to film and video production activities | Spain | EUR | — | 50% | Telefónica Audiovisual Digital, S.L.U.
Buendía Estudios Uno, S.L.U. Service provision related to film and video production activities | Spain | EUR | — | 50% | Buendía Estudios, S.L.
Buendía Estudios Dos, S.L.U. Service provision related to film and video production activities | Spain | EUR | — | 50% | Buendía Estudios, S.L.
Buendía Estudios Canarias, S.L.U Service provision related to film and video production activities | Spain | EUR | — | 50% | Buendía Estudios, S.L.
Buendía Estudios Bizkaia, S.L.U. Service provision related to film and video production activities | Spain | EUR | — | 50% | Buendía Estudios, S.L.
Solar360 de Repsol y Movistar S.L. Development and marketing of photovoltaic self- consumption products and/or services | Spain | EUR | — | 50% | Telefónica de España, S.A.U.
UGG TopCo/HoldCo General Partner GmbH. Holding company | Germany | EUR | — | 48.24% | Telefónica Infra Germany GmbH. (40%) Telefónica Germany 1. Beteiligungsgesellschaft mbH. (8.24%)
UGG TopCo GmbH & Co KG Holding company | Germany | EUR | — | 48.24% | Telefónica Infra Germany GmbH. (40%) Telefónica Germany 1. Beteiligungsgesellschaft mbH. (8.24%)

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.164

Name and corporate purpose | Country | Currency | Capital | %Telefónica Group | Holding Company
Companies accounted for using the equity method (cont.) |  |  |  |  |
UGG HoldCo GmbH& Co KG Holding company | Germany | EUR | — | 48.24% | UGG TopCo GmbH & Co KG
UGG General Partner GmbH Holding company | Germany | EUR | — | 48.24% | UGG HoldCo GmbH& Co KG
Unsere Grüne Glasfaser GmbH & Co KG Broadband telecommunications operator | Germany | EUR | — | 48.24% | UGG HoldCo GmbH& Co KG
Daytona Midco S.L. Securities transactions | Spain | EUR | — | 20% | Telefónica Infra, S.L.U.
Digital Data Centre BidCo, SLU. Management and administration of equity securities | Spain | EUR | 4 | 20% | Daytona Midco S.L.
Telefónica Renting, S.A. Purchase, sale and leasing of all kinds of movable property and provision of services ancillary to the leasing thereof | Spain | EUR | — | 50% | Telefónica, S.A.
Opal Holdco Limited Holding company | United Kingdom | GBP | — | 50% | Telefónica Infra, S.L.U.
Opal Jvco Limited Holding company | United Kingdom | GBP | — | 25% | Opal Holdco Limited
Utiq, S.A. Technology solutions for digital advertising | Belgium | EUR | 14 | 25% | Telefónica Innovación Digital, S.L.U.

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.165
Main changes in the scope of consolidation for the
year 2023
Acquisition of new companies

Companies/Segment/Subsidiaries | Country | Date of inclusion | % Acquisition
Telefónica Brazil |  |  |
Vale Saúde, Administradora de Cartões Ltda. Provision of health services | Brazil | 03/31/2023 | 75.13%
Other companies |  |  |
Telxius Telecom, S.A. Telecommunications service provider | Spain | 01/31/2023 | 40%
Cryptography & Security Systems S.L.U. Software programming activities | Spain | 01/31/2023 | 100%
Telefónica Local Services GmbH Holding company | Germany | 10/31/2023 | 100%

Incorporation of companies

Companies/Segment/Subsidiaries | Country | Date of incorporation | % Acquisition
Other companies |  |  |
BE-terna SRL Services in automatic data processing and information technology | Italy | 04/30/2023 | 100%
Telxius México, S.R.L. DE C.V Establishment and operation of any kind of communications infrastructure and/or network | Mexico | 11/30/2023 | 70%
Companies accounted for using the equity method |  |  |
Utiq, S.A. Technology solutions for digital advertising | Belgium | 03/31/2023 | 25%

Merged companies

Companies/Segment/Subsidiaries | Country | Date | Surviving company
Telefónica Brazil |  |  |
Garliava RJ Infraestrutura e Redes de Telecomunicacoes S.A. Wireline telephony operator | Brazil | 02/28/2023 | Telefônica Brasil, S.A.
Vita IT Comércio e Serviços de Soluções em TI Ltda. Technical support, maintenance and other IT services | Brazil | 11/30/2023 | Telefônica Infraestructura e Segurança Ltda.
Other companies |  |  |
Pontel Participaciones, S.L. Holding company | Spain | 03/31/2023 | Telxius Telecom, S.A.
Tempotel, Empresa de Trabajo Temporal, S.A.U. Temporary employment agency | Spain | 10/31/2023 | Telefónica Gestión Integral de Edificios y Servicios S.L.U.
Telefónica Investigación y Desarrollo, S.A.U. Telecommunications research activities and projects | Spain | 10/31/2023 | Telefónica Innovación Digital, S.L.U.
Companies accounted for using the equity method |  |  |
Buendía Producción, S.L. Service provision related to film and video production activities | Spain | 10/31/2023 | Buendía Estudios, S.L.

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.166
Divestment companies

Companies/Segment/Subsidiaries | Country | Deconsolidation date | % Sold
Other companies |  |  |
Pontel Participaciones, S.L. Holding company | Spain | 01/31/2023 | 13.35%
Companies accounted for using the equity method |  |  |
The Smart Steps Data Technology Company Big data services in China | China | 05/31/2023 | 33.75%
Cornerstone Telecommunications Infrastructure Limited Mobile phone towers | United Kingdom | 11/30/2023 | 8.33%

Liquidated companies

Companies/Segment/Subsidiaries | Country | Deconsolidation date | % Shareholding
Other companies |  |  |
Kumo Analytics Limited Information technology consultancy activities | United Kingdom | 01/31/2023 | 100%
iHackLabs Ltd. Cybersecurity, electronic information security and IT consulting | United Kingdom | 09/30/2023 | 100%
O2 (Netherlands ) Holdings BV. Holding company | Netherlands | 11/30/2023 | 100%
Telfin Ireland DAC. Intragroup financing | Ireland | 11/30/2023 | 100%

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.167
Main changes in the scope of consolidation for the
year 2022
Acquisition of new companies

Companies/Segment/Subsidiaries | Country | Date of inclusion | % Acquisition
Telefónica Brazil |  |  |
VivaE Educação Digital S.A. Training for professional and management development | Brazil | 02/28/2022 | 74.79%
Garliava RJ Infraestrutura e Redes de Telecomunicacoes S.A. Wireline telephony operator | Brazil | 04/30/2022 | 74.79%
Vivo ventures fundo de investimento em participacoes multiestrategia. Fondos de inversión | Brazil | 04/30/2022 | 74.79%
Vita IT Comércio e Serviços de Soluções em TI Ltda. Technical support, maintenance and other IT services | Brazil | 10/31/2022 | 74.79%
Other companies |  |  |
Geprom Software Engineering S.L. Technical engineering services and other consultancy activities | Spain | 01/30/2022 | 100%
Geprom Software Engineering S.A. de C.V. Technical engineering services and other consultancy activities | Mexico | 01/30/2022 | 100%
Perpetual Topco Limited Holding company | United Kingdom | 03/31/2022 | 100%
Perpetual Midco Limited Holding company | United Kingdom | 03/31/2022 | 100%
Perpetual Bidco Limited Holding company | United Kingdom | 03/31/2022 | 100%
Incremental Group Holdings Limited Holding company | United Kingdom | 03/31/2022 | 100%
Redspire Limited Software development and information technology consultancy activities | United Kingdom | 03/31/2022 | 100%
Incremental Group Limited Information technology consultancy activities and other services activities | United Kingdom | 03/31/2022 | 100%
Adatis Group Limited Holding company | United Kingdom | 03/31/2022 | 100%
Adatis Consulting Limited Information technology consultancy activities | United Kingdom | 03/31/2022 | 100%
Adatis BG LTD Information technology consultancy activities | Bulgaria | 03/31/2022 | 100%
Adatis India Private Limited Information technology consultancy activities | India | 03/31/2022 | 100%
Kumo Analytics Limited Information technology consultancy activities | United Kingdom | 03/31/2022 | 100%
Adatis Managed Services Limited Information technology consultancy activities | United Kingdom | 03/31/2022 | 100%
BE-terna Acceleration Holding GmbH Holding company and provision of marketing, consultancy, implementation and commercialisation services for software and information technology | Germany | 06/30/2022 | 100%
BE-terna Acceleration GmbH Holding company | Germany | 06/30/2022 | 100%
BE-terna Enhancement GmbH Holding company | Germany | 06/30/2022 | 100%
BE-terna Germany GmbH Holding company | Germany | 06/30/2022 | 100%
BE-terna AB (Sweden) Technology services | Sweden | 06/30/2022 | 100%
Boydak Automation AG Technology services | Switzerland | 06/30/2022 | 100%

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.168

Companies/Segment/Subsidiaries | Country | Date of inclusion | % Acquisition
Other companies (cont.) |  |  |
BE-terna ApS (Denmark) Computer programming activities | Denmark | 06/30/2022 | 100%
BE-terna B.V. (Netherlands) Technology services | Netherlands | 06/30/2022 | 100%
BE-terna GmbH (Leipzig) Software production, electronic data processing, consultancy, services and project management | Germany | 06/30/2022 | 100%
BE-terna Austria GmbH Holding company | Austria | 06/30/2022 | 100%
BE-terna GmbH (Innsbruck) Services in automatic data processing and information technology | Austria | 06/30/2022 | 100%
Pipol A/S Conduct business with international implementation of business-oriented software solutions | Dinamarca | 06/30/2022 | 100%
BE-terna A/S (Norway) Computer programming activities | Norway | 06/30/2022 | 100%
BE-terna Business Solutions GmbH Software development and consulting, distribution of corresponding products, systems and processes | Germany | 06/30/2022 | 100%
BE-terna Industry Solutions GmbH Sales, implementation and maintenance of international ERP products | Germany | 06/30/2022 | 100%
BE-terna AG (Switzerland) Service provision, analysis and optimisation of business processes, selection of business software and implementation of ERP solutions | Switzerland | 06/30/2022 | 100%
BE-terna Adriatic d.o.o Holding company | Slovenia | 06/30/2022 | 100%
BE-terna d.o.o Belgrade (Serbia) Technology services | Serbia | 06/30/2022 | 100%
BE-terna d.o.o Ljubijana (Slovenia) Technology services | Slovenia | 06/30/2022 | 100%
BE-terna d.o.o Zagreb (Croatia) Technology services | Croatia | 06/30/2022 | 100%
Companies accounted for using the equity method |  |  |
Alamo Holdco S.L. Holding company | Spain | 01/31/2022 | 27%
ONNET Fibra Colombia S.A.S. Fibre wholesale supplier | Colombia | 01/31/2022 | 27%
Opal Holdco Limited Holding company | United Kingdom | 08/31/2022 | 50%
Opal Jvco Limited Holding company | United Kingdom | 08/31/2022 | 50%

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Consolidated Annual Report 2023 Telefónica, S. A.169
Incorporation of companies

Companies/Segment/Subsidiaries | Country | Date of incorporation | % Acquisition
Telefónica Spain |  |  |
Bluevia Fibra, S.L. Operations and exploitation of FTTH network and other connectivity services. | Spain | 06/30/2022 | 100%
Solar360 Soluciones de Instalacion y Mantenimiento S.L. Marketing and management in the installation, sale and maintenance of photovoltaic equipment | Spain | 06/30/2022 | 51%
Telefónica Hispam |  |  |
TLH Holdco, S.L. Holding company | Spain | 09/30/2022 | 100%
Other companies |  |  |
TIS Hispanoamérica, S.L. Security services and systems | Spain | 10/31/2022 | 100%
Companies accounted for using the equity method |  |  |
Buendía Estudios Canarias, S.L.U Service provision related to film and video production activities | Spain | 01/01/2022 | 50%
Buendía Estudios Bizkaia, S.L. Service provision related to film and video production activities | Spain | 09/30/2022 | 50%
Solar360 de Repsol y Movistar S.L. Development and marketing of photovoltaic self-consumption products and/or services | Spain | 06/30/2022 | 50%
Telefónica Renting, S.A. Purchase, sale and leasing of all kinds of movable property and provision of services ancillary to the leasing thereof | Spain | 07/31/2022 | 50%

Merged companies

Companies/Segment/Subsidiaries | Country | Date | Surviving company
Telefónica Spain |  |  |
Compañía Independiente de Televisión, S.L. Provision of all type of audiovisual telecommunications services | Spain | 06/30/2022 | Telefónica Audiovisual Digital, S.L.U.

Divestment companies

Companies/Segment/Subsidiaries | Country | Deconsolidation date | % Sold
Telefónica Spain |  |  |
Bluevia Fibra, S.L.U. Operations and exploitation of FTTH network and other connectivity services. | Spain | 12/31/2022 | 45%
Other companies |  |  |
Telefónica Móviles El Salvador, S.A. de C.V. Provision of wireless and international long distance communications services | El Salvador | 01/31/2022 | 59.58%
Companies accounted for using the equity method |  |  |
VivaE Educação Digital S.A. Training for professional and management development | Brazil | 04/30/2022 | 50%
Opal Jvco Limited Holding company | United Kingdom | 12/31/2022 | 25%

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Consolidated Annual Report 2023 Telefónica, S. A.170
Liquidated companies

Companies/Segment/Subsidiaries | Country | Deconsolidation date | % Shareholding
Other companies |  |  |
Telefónica Cybersecurity Tech Argentina S.A. Cybersecurity, electronic information security and IT consulting | Argentina | 08/31/2022 | 100%
Sao Paulo Telecomunicaçoes Participaçoes Ltda Holding company | Brazil | 10/31/2022 | 100%

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.171
Appendix II: Board and Senior
Management Compensation
TELEFÓNICA, S.A.
(Amounts in euros)

Directors | Salary 1 | Fixed remunera -tion 2 | Allowances 3 | Short-term variable remuneration 4 | Remuneration for belonging to the Board Committees 5 | Other items 6 | Total
Mr. José María Álvarez-Pallete López | 1,923,100 | — | — | 3,717,737 | — | 6,207 | 5,647,044
Mr. Isidro Fainé Casas | — | 200,000 | — | — | 80,000 | — | 280,000
Mr. José María Abril Pérez | — | 200,000 | 10,000 | — | 91,200 | — | 301,200
Mr. José Javier Echenique Landiríbar | — | 200,000 | 24,000 | — | 113,600 | — | 337,600
Mr. Ángel Vilá Boix | 1,600,000 | — | — | 2,577,600 | — | 27,383 | 4,204,983
Ms. Carmen García de Andrés | — | 120,000 | 35,000 | — | 33,600 | — | 188,600
Ms. María Luisa García Blanco | — | 120,000 | 33,000 | — | 44,800 | — | 197,800
Mr. Peter Löscher | — | 120,000 | 24,000 | — | 113,600 | — | 257,600
Ms. Verónica Pascual Boé | — | 120,000 | 11,000 | — | 11,200 | — | 142,200
Mr. Francisco Javier de Paz Mancho | — | 120,000 | 33,000 | — | 124,800 | — | 277,800
Mr. Alejandro Reynal Ample 7 | — | — | — | — | — | — | —
Mr. Francisco José Riberas Mera | — | 120,000 | — | — | — | — | 120,000
Ms. María Rotondo Urcola | — | 120,000 | 24,000 | — | 22,400 | — | 166,400
Ms. Claudia Sender Ramírez | — | 120,000 | 20,000 | — | 22,400 | — | 162,400
Ms. Solange Sobral Targa 7 | — | — | — | — | — | — | —

1 Salary: Regarding Mr José María Álvarez-Pallete López and Mr Ángel Vilá Boix, the amount includes the non-variable remuneration earned from their executive
functions.
2 Fixed remuneration: Amount of the compensation in cash, with a pre-established payment periodicity, whether or not it can be consolidated over time, earned
by the member for his/her position on the Board, regardless of the effective attendance of the member to board meetings.
3 Allowances: Total amount of allowances for attending Advisory or Steering Committee meetings.
4 Short-term variable remuneration (bonuses): Variable amount linked to the performance or achievement of a series of individual or group objectives
(quantitative or qualitative) within a period of time equal to or less than a year, corresponding to the year 2023 and to be paid in the year 2024. In reference to the
bonus corresponding to 2022, which was paid in 2023, Executive Board Member Mr José María Álvarez-Pallete López received 4,198,897 euros and Executive
Board Member Mr Ángel Vilá Boix received 2,911,200 euros.
5 Remuneration for belonging to the Board Committees: Amount of items other than allowances, which the directors are beneficiaries through their position on
the Executive Commission and the Advisory or Steering Committees, regardless of the effective attendance of the board member such Committee meetings. It
is also noted that the Board of Directors, at its meeting held on December 13, 2023, approved, following a favourable report from the Nominating, Compensation
and Corporate Governance Committee, a new configuration of the Company's Consultative or Control Committees, specifically: (i) to abolish the Strategy and
Innovation Committee; and (ii) to integrate the Regulation and Institutional Affairs Committee and the Sustainability and Quality Committee, which now
constitute a single Committee, under the name of Sustainability and Regulation Committee.
6 Other concepts: This includes, among others, the amounts received as remuneration in kind (general medical and dental coverage and vehicle insurance), paid
by Telefónica, S.A.
7 Mr. Alejandro Reynal Ample and Ms. Solange Sobral Targa were appointed Directors of the Company on December 13, 2023.

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Consolidated Annual Report 2023 Telefónica, S. A.172
Mr. Peter Erskine and Mr. Juan Ignacio Cirac Sasturain
stood down as Board Members on December 13, 2023,
reflecting below the payment received and/or accrued by
them in 2023:
(Amounts in euros)

Directors | Salary 1 | Fixed remune- ration 2 | Allowances 3 | Short-term variable remuneration 4 | Remuneration for belonging to the Board Committees 5 | Other items 6 | Total
Mr. Juan Ignacio Cirac Sasturain | — | 120,000 | 33,000 | — | 33,600 | — | 186,600
Mr. Peter Erskine | — | 120,000 | 20,000 | — | 113,600 | — | 253,600

1 to 6: Definitions of these concepts are those included in the previous table.
The following table breaks down the amounts accrued
and/or received from other companies of the Telefónica
Group other than Telefónica, S.A. individually, by the
Board Members of the Company, by the performance of
executive functions or by their membership to the Board
of Directors of such companies:
OTHER COMPANIES OF THE TELEFÓNICA GROUP
(Amounts in euros)

Directors | Salary 1 | Fixed remune- ration 2 | Allowances 3 | Short-term variable remuneration 4 | Remuneration for belonging to the Board Committees 5 | Other items 6 | Total
Mr. José María Álvarez-Pallete López | — | — | — | — | — | — | —
Mr. Isidro Fainé Casas | — | — | — | — | — | — | —
Mr. José María Abril Pérez | — | — | — | — | — | — | —
Mr. José Javier Echenique Landiríbar | — | 90,000 | — | — | — | 87,500 | 177,500
Mr. Ángel Vilá Boix | — | — | — | — | — | — | —
Ms. Carmen García de Andrés | — | — | — | — | — | — | —
Ms. María Luisa García Blanco | — | — | — | — | — | 87,500 | 87,500
Mr. Peter Löscher | — | 119,000 | — | — | — | — | 119,000
Ms. Verónica Pascual Boé | — | 51,667 | — | — | — | 65,000 | 116,667
Mr. Francisco Javier de Paz Mancho | — | 177,935 | — | — | — | 155,000 | 332,935
Mr. Alejandro Reynal Ample7 | — | — | — | — | — | — | —
Mr. Francisco José Riberas Mera | — | — | — | — | — | — | —
Ms. María Rotondo Urcola | — | — | — | — | — | — | —
Ms. Claudia Sender Ramírez | — | — | — | — | — | 132,500 | 132,500
Ms. Solange Sobral Targa7 | — | — | — | — | — | — | —

1. Salary: Amount of non-variable remuneration earned by the Director from other companies of the Telefónica Group for his/her executive functions.
2. Fixed remuneration: Amount of the compensation in cash, with a pre-established payment periodicity, subject to consolidation over time or not, earned by the
member for his/her position on the boards of other companies of the Telefónica Group.
3. Allowances: Total amount of the allowances for attending the board meetings of other companies of the Telefónica Group.
4. Variable short-term remuneration (bonuses): Variable amount linked to the performance or achievement of a series of individual or group objectives
(quantitative or qualitative) within a period of time equal to or less than a year, corresponding to the year 2023 and to be paid in the year 2024 by other
companies of the Telefónica Group.
5. Remuneration for belonging to the Board Committees of other companies of the Telefónica Group: Amount of items other than allowances, which the directors
are beneficiaries through their position on the Advisory or Steering Committees of other companies of the Telefónica Group, regardless of the effective
attendance of the board member such Committee meetings.
6. Other concepts: This includes, among others, the amounts received as remuneration in kind (general medical and dental coverage and vehicle insurance), paid
by other companies of the Telefónica Group. Also included are the amounts received for membership of the Advisory Boards of Telefónica España, Telefónica
Hispanoamérica, Telefónica Tech and Telefónica Ingeniería de Seguridad.

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Consolidated Annual Report 2023 Telefónica, S. A.173
7. Mr. Alejandro Reynal Ample and Ms. Solange Sobral Targa were appointed Directors of the Company on December 13, 2023.
Likewise, Mr. Peter Erskine and Mr. Juan Ignacio Cirac
Sasturain stood down as Board Members on December
13, 2023, reflecting below the payment received and/or
accrued by them in 2023:
(Amounts in euros)

Directors | Salary 1 | Fixed remune- ration 2 | Allowances 3 | Short-term variable remuneration 4 | Remuneration for belonging to the Board Committees 5 | Other items 6 | Total
Mr. Juan Ignacio Cirac Sasturain | — | — | — | — | — | 95,000 | 95,000
Mr. Peter Erskine | — | 80,000 | — | — | — | — | 80,000

1 to 6: Definitions of these concepts are those included in the previous table.
Additionally, as mentioned in the Remuneration Policy
section, the Executive Board Members have a series of
Assistance Services. Below, the contributions made
during 2023 are detailed for the Company to long-term
savings systems (Pension Plans and Social Welfare Plan):
LONG-TERM SAVINGS SYSTEMS
(Amounts in euros)

Directors | Contributions for fiscal year 2023
Mr. José María Álvarez-Pallete López | 673,085
Mr. Ángel Vilá Boix | 560,000

The breakdown of the long-term saving systems includes
contributions to Pension Plans, to the Benefit Plan and to
the Unit link-type Insurance, as set out below:
(Amounts in euros)

Directors | Contribution to Pension Plans | Contribution to Executive Social Welfare Plan 1 | Contributions to Unit link- type Insurance/ Pension Plan Surplus 2
Mr. José María Álvarez- Pallete López | 7,574 | 540,968 | 124,543
Mr. Ángel Vilá Boix | 6,721 | 487,840 | 65,439

1. Contributions to the Executive Social Welfare Plan established in 2006,
financed exclusively by the Company, to complement the current Pension
Plan, which involves defined contributions equivalent to a certain percentage
of the fixed remuneration of the Director, depending on the professional
levels in the organization of the Telefónica Group.
2. Contributions to Unit link-type Insurance/Pension Plan Surplus: In 2015
and 2021, applicable law reduced the financial and tax limits of the
contributions to Pension Plans; for this reason, in order to compensate for the
difference in favor of the Beneficiaries, a Unit-link type group insurance
policy was arranged to channel such differences that occur during each
fiscal year.
This Unit-link type insurance is arranged with the entity Occident GCO,
S.A.U. de Seguros y Reaseguros (as the legal successor of Plus Ultra,
Seguros Generales y Vida, S.A. de Seguros y Reaseguros), and covers the
same contingencies as those of the “Pension Plan” and the same exceptional
liquidity events in case of serious illness or long-term unemployment.
LIFE INSURANCE PREMIUMS
The 2023 amounts for life insurance premiums were as
follows:
(Amounts in euros)

Directors | Life insurance premiums
Mr. José María Álvarez-Pallete López | 23,156
Mr. Ángel Vilá Boix | 18,574

REMUNERATION PLANS BASED ON
SHARES
As regards to remuneration plans based on shares
(involving Executive Directors), the following long-term
variable remuneration plans were in existence during the
year 2023:
The so-called Performance Share Plan ("PSP"), made up
of three cycles (2021-2023; 2022-2024; 2023-2025),
approved by the General Shareholders' Meeting held on
April 23, 2021.
During the financial year 2023, the Plan consisted of three
cycles. The first cycle, whose target measurement period
started on January 1, 2021 and ended on December 31,
2023.
In this cycle, a maximum of 1,913,000 shares were
allocated to the Executive Directors on January 1, 2021,
with a unit fair value of 3.1598 euros per share for FCF
("Free Cash Flow"), 2.6465 euros for TSR ("Total
Shareholder Return") and 3.1598 euros for the CO2
Emission Neutralisation and Reduction target.
At the end of the cycle, Kepler provided the Nominating,
Compensation and Corporate Governance Committee
with the calculation of Telefónica's Total Shareholder
Return, which was 37.9% at the end of the period, ranking
sixth in the comparison group, i.e. between the median

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Consolidated Annual Report 2023 Telefónica, S. A.174
and the 75th percentile according to the established
scale of achievement, and generating a weighted payout
ratio of 39.45% linked to relative TSR.
With regard to the Free Cash Flow, after taking into
account the partial annual payments for 2021, 2022 and
2023, previously audited and approved by the Board at
the proposal of the Nominating, Compensation and
Corporate Governance Committee, the weighted payout
ratio is 40%. The assessment of the level of compliance
was based on the results of the audit by the Company’s
external and internal auditors, which were first analysed
by the Audit and Control Committee before being
validated by the Nominating, Compensation and
Corporate Governance Committee and approved by the
Board of Directors.
Finally, in relation to the CO2 Emission Neutralisation and
Reduction target, the Appointments, Remuneration and
Corporate Governance Committee has regularly
monitored the level of CO2 Emissions Neutralisation and,
after analysing the report from the Corporate Affairs and
Sustainability Department, has determined the level of
achievement. The Nominating, Compensation and
Corporate Governance Committee was supported in this
evaluation function by the Sustainability and Quality
Committee (now the Sustainability and Regulation
Committee) and the Audit and Control Committee. In this
respect, the minimum CO2 emission reduction threshold
that triggers the possibility of assessing the degree of
compliance with the CO2 Neutralisation target has been
met and therefore the weighted payout ratio linked to
CO2 Neutralisation was 10%.
Taking into account the Relative TSR, Free Cash Flow and
CO2 Neutralisation results, the weighted payout ratio
increased to 89.45%. Thus, at the end of the Plan's First
Cycle, Executive Directors are entitled to receive 978,583
gross shares in the case of the Executive Chairman, Mr.
José María Álvarez-Pallete López, and 732,596 gross
shares in the case of the Chief Operating Officer (COO)
Mr. Ángel Vilá Boix.
Similarly, during the 2023 financial year, the second cycle
and third cycle of the Plan were in force, starting on
January 1, 2022 and January 1, 2023 respectively and
ending on December 31, 2024 and December 31, 2025
respectively.
In both cycles, the number of Telefónica, S.A. shares that
could be delivered to the participants, within the
established maximum, is conditioned and determined by
the compliance with the established objectives: 50% of
the compliance with the Total Shareholder Return (TSR)
objective of Telefónica, S.A. shares, 40% of the Telefónica
Group's Free Cash Flow (FCF) and 10% of the
Neutralisation and Reduction of CO2 Emissions.
To determine compliance with the TSR target and
calculate the specific number of shares to be delivered for
this concept, the performance of the TSR on Telefónica,
S.A.'s shares will be measured during the measurement
period of each three-year cycle, in relation to the TSRs
experienced by certain companies in the
telecommunications sector, weighted according to their
relevance to Telefónica, S.A., which for purposes of the
Plan will constitute a comparison group (hereinafter the
"Comparison Group"). The companies included in the
Comparison Group are listed below: América Móvil, BT
Group, Deutsche Telekom, Orange, Telecom Italia,
Vodafone Group, Proximus, Koninklijke KPN, Millicom,
Swisscom, Telenor, TeliaSonera, TIM Brasil, and Liberty
Global.
With regard to complying with the TSR objective, the
number of shares to be delivered associated with meeting
this objective will range from 15% of the number of
theoretical shares assigned, assuming that the TSR
performance of Telefónica, S.A. shares is at least the
median of the comparison group, to 50% if the
performance is in the third quartile or above in the
comparison group, with the percentage calculated by
linear interpolation for cases falling between the median
and third quartile.
In order to determine the compliance with the FCF
objective and calculate the specific number of shares to
be delivered for this concept, the FCF level generated by
the Telefónica Group during each year will be measured
and compared to the value set in the budgets approved
by the Board of Directors for each financial year.
With regard to the FCF, for each of the cycles in force
during the financial year 2023, the Board of Directors, at
the proposal of the Appointments, Remunerations and
Corporate Governance Committee, determined a scale of
achievement that includes a minimum threshold of 90%
compliance, below which no incentive is paid and
compliance with which will entail the delivery of 20% of
the theoretical shares assigned, and a maximum level of
100% compliance, which will entail the delivery of 40% of
the theoretical shares assigned.
In order to determine compliance with the CO2 Emission
Neutralisation and Reduction target and to calculate the
specific number of shares to be delivered for this item, the
level of CO2 Emissions Neutralisation achieved at the end
of the cycle will be measured, with the incentive being
paid upon reaching a certain level of scope 1 + 2.
The level of direct and indirect CO2 emissions from our
daily activity shall be calculated according to the
following:
CO2 Emission = Activity Data x Emission Factor, where:
- Activity: Amount of energy, fuel, gas, etc. consumed by
the Company.
- Emission Factor: Amount of CO2 emitted to the
atmosphere by the consumption of each unit of activity.

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Consolidated Annual Report 2023 Telefónica, S. A.175
The emission factor provided by official sources
(European Union, Ministries, CNMC, International Energy
Agency, etc.) is used for electricity and the GHG Protocol
emission factors are used for fuels.
At the beginning of both cycles, the Board of Directors, at
the proposal of the Appointments, Remunerations and
Corporate Governance Committee, determined a scale of
achievement that includes a minimum threshold of 90%
compliance, below which no incentive is paid and
compliance with which will entail the delivery of 5% of the
theoretical shares assigned, and a maximum level of 100%
compliance, which will entail the delivery of 10% of the
theoretical shares assigned. In addition, a minimum level
of emission reductions of Scope 1 + 2 will need to be
achieved for the incentive to be paid.
In any case, 100% of the shares delivered under the Plan
to the Executive Directors and other Participants as
determined by the Board of Directors shall be subject to a
two-year holding period.
In addition, in accordance with the provisions of the
Remuneration Policy for Directors of Telefónica, SA, the
Executive Directors must maintain (directly or indirectly) a
number of shares (including those delivered as
remuneration) equivalent to two years of their Gross Fixed
Remuneration, as long as they continue to belong to the
Board of Directors and perform executive functions. Until
such time as this requirement is met, the holding period
for any shares delivered under the Plan to Executive
Directors will be three years.The maximum number of
allocated shares to be delivered in the event of maximum
compliance with the TSR (Total Shareholder Return), FCF
(Free Cash Flow) and CO2 Emission Neutralisation and
Reduction targets set for the Second and Third Cycles of
the Plan is shown below.
PSP - Second cycle / 2022-2024

Directors | Maximum number of shares (*)
Mr. José María Álvarez-Pallete López | 995,000
Mr. Ángel Vilá Boix | 745,000

(*) Maximum possible number of shares to be received in case of maximum
completion of TSR, FCF and Neutralization of CO2 Emissions target.
In any case, it is noted that no shares have been delivered
to Executive Directors under the second cycle of the PSP
and that the above table only reflects the number of
potentially deliverable shares, without in any way implying
that all or part of the shares will actually be delivered.
PSP - Third cycle / 2023-2025

Directors | Maximum number of shares (*)
Mr. José María Álvarez-Pallete López | 1,100,000
Mr. Ángel Vilá Boix | 831,000

(*) Maximum possible number of shares to be received in case of maximum
completion of TSR, FCF and Neutralization of CO2 Emissions target.
In any case, it is noted that no shares have been delivered
to Executive Directors under the third cycle of the PSP
and that the above table only reflects the number of
potentially deliverable shares, without in any way implying
that all or part of the shares will actually be delivered. On
the other hand, Telefónica, S.A. General Meeting of
Shareholders held on April 8, 2022, approved a new
Global Telefónica, S.A. Incentive Share Purchase Plan for
Telefónica Group Employees, in which the Executive
Directors participate as a token of their commitment to
the Company and in order to encourage other employees
to participate in the Global Plan. The Plan will end in
March 2024, and the maximum amount that each
employee can allocate to it is 1,800 euros. As a result,
each Executive Director is entitled to receive 589 gross
shares upon termination of the Plan.
In addition, it should be noted that the external directors
of the company do not perceive nor have perceived
remuneration during the year 2023 in concept of
pensions or life insurance, nor do they participate in
compensation plans referenced to the value of the share
price.
Furthermore, the company does not grant nor has
granted during the year 2023, an advance, loan or credit
in favor of its Board Members or its Senior Management,
complying with the requirements of the Sarbanes-Oxley
Act published in the United States, which is applicable to
Telefónica as a listed company in this market.
Remuneration of the Company’s
Senior Management
As for the Directors who made up the Senior
Management 1 of the company in the year 2023, excluding
those who form an integral part of the Board of Directors,
have accrued a total amount o f 8,749,939 e uros during
the 2023 fiscal year.
In addition, and in terms of long-term savings systems, the
contributions made by the Telefónica Group during the
year 2023 to the Social Security Plan described in the
"Income and expenditure" note with regard to these
directors increased to 947,676 euros; the contributions
corresponding to the Pension Plan increased to 212,281
euros; the contributions to the Seguro Unit link-Excess
Pension Fund increased to 113,293 euros.

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Consolidated Annual Report 2023 Telefónica, S. A.176
Furthermore, the amount related to the remuneration in
kind (which includes the fees for life insurance and other
insurance, such as the general medical and dental
coverage, and vehicle insurance) was 122,315 euros.
On the other hand, regarding share-based remuneration
plans, during the year 2023, there were in force the
following long-term variable remuneration plans:
The so-called "Performance Share Plan" ("PSP"), made up
of three cycles (2021-2023; 2022-2024; 2023-2025),
approved by the General Shareholders' Meeting held on
April 23, 2021.
The target measurement period of the first cycle started
on January 1, 2021 and ended on December 31, 2023. The
maximum number of shares allocated to be delivered in
the event of maximum compliance with the TSR ("Total
Shareholder Return"), FCF ("Free Cash Flow") and CO2
Emission Neutralisation and Reduction targets set for the
First Cycle for all the Company's Senior Executives was
1,333,081.
At the end of the First Cycle, Kepler provided the
Nominating, Compensation and Corporate Governance
Committee with the calculation of Telefónica's Total
Shareholder Return, which was 37.9% at the end of the
period, ranking sixth in the comparison group, i.e.
between the median and the 75th percentile according to
the established scale of achievement, and generating a
weighted payout ratio of 39.45% linked to relative TSR.
In terms of Free Cash Flow, after taking into account the
partial annual payments for 2021, 2022 and 2023, the
weighted payout ratio is 40%. The assessment of the level
of compliance was based on the results of the audit by
the Company’s external and internal auditors, which were
first analysed by the Audit and Control Committee before
being validated by the Nominating, Compensation and
Corporate Governance Committee and approved by the
Board of Directors.
Finally, in relation to the CO2 Emission Neutralisation and
Reduction target, the Appointments, Remuneration and
Corporate Governance Committee has regularly
monitored the level of CO2 Emission Neutralisation and,
after analysing the report from the Corporate Affairs and
Sustainability Department, has determined the level of
achievement. The Nominating, Compensation and
Corporate Governance Committee was supported in this
evaluation function by the Sustainability and Quality
Committee (now the Sustainability and Regulation
Committee) and the Audit and Control Committee. In this
respect, the minimum CO2 emission reduction threshold
that triggers the possibility of assessing the degree of
compliance with the CO2 Neutralisation target has been
met and therefore the weighted payout ratio linked to
CO2 Neutralisation was 10%.
Taking into account the Relative TSR, Free Cash Flow and
CO2 Neutralisation results, the weighted payout ratio
increased to 89.45%. Thus, at the end of the first cycle of
the Plan, the Company's Senior Executives are entitled to
receive 1,192,442 gross shares.
The target measurement period for the second and third
cycles started on 1 January 2022 and 1 January 2023
respectively, and will end on December 31, 2024 and
December 31, 2025 respectively. The maximum number of
shares allocated to be delivered in the event of maximum
compliance with the TSR (Total Shareholder Return), FCF
(Free Cash Flow) and CO2 Emission Neutralisation and
Reduction targets set for the second and third cycles for
all the Company's Senior Executives is 1,241,015 in the
second cycle of the Plan and 1,378,418 in the third cycle of
the Plan.
On the other hand, Telefónica, S.A. General Meeting of
Shareholders held on April 8, 2022, approved a new
Global Telefónica, S.A. Incentive Share Purchase Plan for
Telefónica Group Employees, in which the Senior
Management participate as a token of their commitment
to the Company and in order to encourage other
employees to participate in the Plan. The Plan will end in
March 2024, and the maximum amount that each
employee can allocate to it is 1,800 euros. Thus, at the
end of the first cycle of the Plan, the Company's Senior
Executives are entitled to receive 2,936 gross shares.
(1) For these purposes, Senior Management is understood to be those
persons who perform, de jure or de facto, senior management functions
reporting directly to the Board of Directors or Executive Committees or
Managing Directors of the Company, including, in all cases, the person
responsible for Internal Audit.

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.177
Appendix III: Debentures and bonds
The detail and key features of outstanding debentures and bonds at December 31, 2023 are as follows (in millions of
euros):

Total Telefónica and its instrumental companies
|  |  | Maturity (nominal)
Debentures and bonds | Currency | % Interest rate | 2024 | 2025 | 2026 | 2027 | 2028 | Subsequent years | Total
T. EUROPE BV SEP_00 BOND GLOBAL D | USD | 8.250% | — | — | — | — | — | 1,109 | 1,109
TEBV FEB_03 EMTN FIXED TRANCHE B | EUR | 5.875% | — | — | — | — | — | 500 | 500
Telefónica Europe, B.V. |  |  | — | — | — | — | — | 1,609 | 1,609
TELEF. EMISIONES FEBRUARY 2019 (1) | EUR | 1.069% | 1,000 | — | — | — | — | — | 1,000
TELEF. EMISIONES JANUARY 2017 | EUR | 1.528% | — | 1,127 | — | — | — | — | 1,127
TELEF. EMISIONES SEPTEMBER 2018 | EUR | 1.495% | — | 892 | — | — | — | — | 892
EMTN O2 GBP | GBP | 5.375% | — | — | 575 | — | — | — | 575
TELEF. EMISIONES APRIL 2016 | EUR | 1.460% | — | — | 1,279 | — | — | — | 1,279
TELEF. EMISIONES JANUARY 2018 | EUR | 1.447% | — | — | — | 1,000 | — | — | 1,000
TELEF. EMISIONES MARCH 2017 | USD | 4.103% | — | — | — | 1,131 | — | — | 1,131
TELEF. EMISIONES MAY 2020 | EUR | 1.201% | — | — | — | 1,250 | — | — | 1,250
TELEF. EMISIONES JANUARY 2017 | EUR | 2.318% | — | — | — | — | 500 | — | 500
TELEF. EMISIONES SEPTEMBER 2017 | EUR | 1.715% | — | — | — | — | 1,250 | — | 1,250
TELEF. EMISIONES MARCH 2017 | EUR | 2.318% | — | — | — | — | 200 | — | 200
TELEF. EMISIONES MARCH 2019 | EUR | 1.788% | — | — | — | — | — | 1,000 | 1,000
EMTN GBP 10/08/2029 400 GBP | GBP | 5.445% | — | — | — | — | — | 460 | 460
TELEF. EMISIONES OCTOBER 2014 | EUR | 2.932% | — | — | — | — | — | 800 | 800
TELEF. EMISIONES FEBRUARY 2020 | EUR | 0.664% | — | — | — | — | — | 1,000 | 1,000
TELEF. EMISIONES MAY 2022 (2) | EUR | 2.592% | — | — | — | — | — | 1,000 | 1,000
TELEF. EMISIONES OCTOBER 2016 | EUR | 1.930% | — | — | — | — | — | 750 | 750
TELEF. EMISIONES MAY 2020 | EUR | 1.807% | — | — | — | — | — | 750 | 750
TELEF. EMISIONES JUNE 06 TRANCHE D | USD | 7.045% | — | — | — | — | — | 1,810 | 1,810
TELEF. EMISIONES APRIL 2017 | USD | 4.900% | — | — | — | — | — | 181 | 181
TELEF. EMISIONES MARCH 2018 | USD | 4.665% | — | — | — | — | — | 453 | 453
TELEF. EMISIONES JULY 2019 | EUR | 1.957% | — | — | — | — | — | 500 | 500
TELEF. EMISIONES JULY 2020 | EUR | 1.864% | — | — | — | — | — | 500 | 500
TELEF. EMISIONES APRIL 2022 | EUR | 1.864% | — | — | — | — | — | 100 | 100
TELEF. EMISIONES MARCH 2017 | USD | 5.213% | — | — | — | — | — | 1,810 | 1,810
TELEF. EMISIONES APRIL 2017 | USD | 5.213% | — | — | — | — | — | 452 | 452
TELEF. EMISIONES MARCH 2018 | USD | 4.895% | — | — | — | — | — | 1,131 | 1,131
TELEF. EMISIONES MARCH 2019 | USD | 5.520% | — | — | — | — | — | 1,131 | 1,131
TELEF. EMISIONES DECEMBER 2016 | EUR | 4.000% | — | — | — | — | — | 150 | 150
TELEF. EMISIONES NOVEMBER 2023 (1) | EUR | 4.183% | — | — | — | — | — | 850 | 850
Telefónica Emisiones, S.A.U. |  |  | 1,000 | 2,019 | 1,854 | 3,381 | 1,950 | 14,828 | 25,032
Total Telefónica, S.A. and its instrumental companies |  |  | 1,000 | 2,019 | 1,854 | 3,381 | 1,950 | 16,437 | 26,641

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.178

Foreign operators
|  |  | Maturity
Debentures and bonds | Currency | % Interest rate | 2024 | 2025 | 2026 | 2027 | 2028 | Subsequent years | Total
Bond Serie T | UFC | 4.200% | — | — | — | — | 112 | — | 112
Bond O | CLP | 3.500% | — | 72 | — | — | — | — | 72
Bond Q | CLP | 3.600% | — | — | 93 | — | — | — | 93
Bond 144 A | USD | 3.537% | — | — | — | — | — | 423 | 423
Telefónica Móviles Chile, S.A. |  |  | — | 72 | 93 | — | 112 | 423 | 700
Bond T. Peru 4th Program (19th Serie A) | N. SOL | VAC + 3.6250% | — | — | — | 26 | — | — | 26
Bond T. Peru 4th Program (19th Serie B) | N. SOL | VAC + 2.8750% | — | — | — | — | 20 | — | 20
Bond T. Peru 4th Program (37th Serie A) | N. SOL | VAC + 3.1250% | — | — | — | — | 20 | — | 20
Bond T. Peru 4th Program (19th Serie C) | N. SOL | VAC + 3.1875% | — | — | — | — | 8 | — | 8
Bond T. Peru 6th Program (17th Serie A) | N. SOL | VAC + 3.0938% | — | — | — | — | — | 18 | 18
Bond T. Peru 6th Program (11th Serie B) | N. SOL | 6.188% | 29 | — | — | — | — | — | 29
Bond T. Peru 6th Program (15th Serie A) | N. SOL | 5.469% | 33 | — | — | — | — | — | 33
Bond T. Peru 6th Program (16th Serie A) | N. SOL | 5.500% | — | 26 | — | — | — | — | 26
Bond T. Peru 1st Private Program (1st Serie A) | N. SOL | 7.281% | — | — | 20 | — | — | — | 20
Bond T. Peru 1st Program International Issue (1sr Serie A) | N. SOL | 7.375% | — | 138 | 138 | 138 | — | — | 414
Telefónica del Perú, S.A. |  |  | 62 | 164 | 158 | 164 | 48 | 18 | 614
Debentures (2) | BRL | CDI + 1.12% | — | 280 | — | — | — | — | 280
Debentures (2) | BRL | CDI + 1.35% | — | — | — | 374 | — | — | 374
Telefônica Brasil, S.A. |  |  | — | 280 | — | 374 | — | — | 654
BOND R144-A | USD | 4.950% | — | — | — | — | — | 452 | 452
Bond A5 | COP | 6.650% | 82 | — | — | — | — | — | 82
Bond C10 | COP | IPC + 3.39% | — | — | — | — | — | 36 | 36
Colombia Telecomunicaciones, S.A, ESP |  |  | 82 | — | — | — | — | 488 | 570
Bond | EUR | 1.750% | — | 600 | — | — | — | — | 600
O2 Telefónica Deutschland Finanzierungs, GmbH |  |  | — | 600 | — | — | — | — | 600
Total Outstanding Debentures and Bonds Foreign operators |  |  | 144 | 1,116 | 251 | 538 | 160 | 929 | 3,138
Total Outstanding Debentures and Bonds |  |  | 1,144 | 3,135 | 2,105 | 3,919 | 2,110 | 17,366 | 29,779

(1) Debentures and green bonds (See Note 29.d)
(2) Debentures and sustainable bonds (See Note 29.d)

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.179
The main debentures and bonds issued by the Group in
2023 are as follows:

|  |  | Nominal (millions) |
Item | Date | Maturity Date | Currency | Euros | Currency of issuance | Coupon
Telefónica Emisiones, S.A.U. |  |  |  |  |  |
EMTN Bond (1) | 11/21/2023 | 11/21/2033 | 850 | 850 | EUR | 4.183%
Telefónica Móviles Chile, S.A. |  |  |  |  |  |
Internacional Bond (1) | 08/18/2023 | 08/18/2028 | 3 | 114 | UFC | UFC + 4.7339%

(1) Internacional and sustainable bonds and debentures (See Note 29. d)

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.180
Appendix IV: Financial instruments
The detail of the net financial debt arranged by the Group
(notional amount) by currency and interest rates at
December 31, 2023 is as follows:

|  |  |  |  |  |  |  | Fair value
Millions of euros | 2024 | 2025 | 2026 | 2027 | 2028 | Subsequent years | Notional | Underlying debt (*) | Associated derivatives | Total
Euro | (6,794) | 2,302 | 3,807 | 3,771 | 2,250 | 15,558 | 20,894 | 13,417 | 7,988 | 21,405
Floating rate | 799 | (113) | 1,845 | 170 | 374 | 3,190 | 6,265 | 1,042 | 8,950 | 9,992
Spread | 0.12% | — | (0.11%) | 0.72% | 0.16% | 0.10% | 0.06% | — | — | —
Fixed rate | (7,592) | 2,415 | 1,962 | 3,601 | 1,876 | 12,368 | 14,629 | 12,375 | (962) | 11,413
Interest rate | 2.52% | 0.89% | 2.23% | 1.16% | 1.78% | 1.74% | 1.83% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Other european currencies |  |  |  |  |  |  |  |  |  |
Instruments in CZK | (95) | — | — | — | — | — | (95) | — | (93) | (93)
Floating rate | — | — | — | — | — | — | — | — | — | —
Spread | — | — | — | — | — | — | — | — | — | —
Fixed rate | (95) | — | — | — | — | — | (95) | — | (93) | (93)
Interest rate | 6.36% | — | — | — | — | — | 6.36% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in GBP | 99 | — | (2) | (6) | (4) | — | 87 | 899 | (817) | 82
Floating rate | — | — | — | — | — | — | — | — | (2) | (2)
Spread | — | — | — | — | — | — | — | — | — | —
Fixed rate | 99 | — | (2) | (6) | (4) | — | 87 | 899 | (815) | 84
Interest rate | 5.14% | — | 5.37% | 0.70% | 0.70% | — | 4.76% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in CHF | (3) | — | — | — | — | — | (3) | — | — | —
Floating rate | — | — | — | — | — | — | — | — | — | —
Spread | — | — | — | — | — | — | — | — | — | —
Fixed rate | (3) | — | — | — | — | — | (3) | — | — | —
Interest rate | 1.00% | — | — | — | — | — | 1.00% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
America |  |  |  |  |  |  |  |  |  |
Instruments in USD | (612) | (23) | (1,807) | — | 27 | 1,810 | (605) | 12,336 | (12,916) | (580)
Floating rate | (13) | — | (1,810) | — | 27 | 1,810 | 14 | 206 | (192) | 14
Spread | (0.02%) | — | 0.28% | — | 1.00% | — | 0.14% | — | — | —
Fixed rate | (599) | (23) | 3 | — | — | — | (619) | 12,129 | (12,724) | (594)
Interest rate | 0.46% | 1.87% | 3.47% | — | — | 5.19% | 0.52% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.181

|  |  |  |  |  |  |  | Fair value
Millions of euros | 2024 | 2025 | 2026 | 2027 | 2028 | Subsequent years | Notional | Underlying debt(*) | Associated derivatives | Total
Instruments in UYU | 37 | — | 28 | — | — | — | 65 | 116 | (43) | 73
Floating rate | — | — | — | — | — | — | — | — | — | —
Spread | — | — | — | — | — | — | — | — | — | —
Fixed rate | 37 | — | 28 | — | — | — | 65 | 116 | (43) | 73
Interest rate | 11.66% | — | 8.90% | — | — | — | 10.46% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in ARS | (100) | — | — | — | — | — | (100) | (90) | — | (90)
Floating rate | — | — | — | — | — | — | — | — | — | —
Spread | — | — | — | — | — | — | — | — | — | —
Fixed rate | (100) | — | — | — | — | — | (100) | (90) | — | (90)
Interest rate | 81.86% | — | — | — | — | — | 81.86% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in BRL | 2,462 | 1,016 | 9 | 383 | 14 | 95 | 3,979 | 809 | 3,219 | 4,028
Floating rate | (737) | 1,016 | 9 | 383 | 14 | 95 | 780 | 810 | 63 | 873
Spread | 0.86% | 0.26% | — | 1.32% | — | — | 0.62% | — | — | —
Fixed rate | 3,199 | — | — | — | — | — | 3,199 | (2) | 3,156 | 3,154
Interest rate | 8.84% | — | — | — | — | — | 8.84% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in CLP | (280) | 173 | 338 | — | 112 | 433 | 776 | (253) | 1,052 | 798
Floating rate | (20) | — | 245 | — | 112 | 388 | 725 | 52 | 689 | 742
Spread | — | — | 1.53% | — | 1.66% | (0.49%) | 0.48% | — | — | —
Fixed rate | (260) | 173 | 93 | — | — | 45 | 51 | (306) | 362 | 57
Interest rate | 6.64% | 3.30% | 3.60% | — | — | 4.31% | 4.95% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in UFC | — | — | — | — | — | — | — | 119 | (120) | (1)
Floating rate | — | — | — | — | — | — | — | 119 | (120) | (1)
Spread | — | — | — | — | — | — | — | — | — | —
Fixed rate | — | — | — | — | — | — | — | — | — | —
Interest rate | — | — | — | — | — | — | — | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in PEN | 259 | 164 | 158 | 138 | — | — | 719 | 371 | 350 | 721
Floating rate | 12 | — | — | — | — | — | 12 | 12 | — | 12
Spread | — | — | — | — | — | — | — | — | — | —
Fixed rate | 247 | 164 | 158 | 138 | — | — | 707 | 359 | 350 | 709
Interest rate | 3.63% | 7.08% | 7.36% | 7.38% | — | — | 5.99% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in VAC | — | — | — | 26 | 48 | 18 | 92 | 93 | — | 93
Floating rate | — | — | — | 26 | 48 | 18 | 92 | 93 | — | 93
Spread | — | — | — | 3.63% | 3.03% | 3.09% | 3.21% | — | — | —
Fixed rate | — | — | — | — | — | — | — | — | — | —
Interest rate | — | — | — | — | — | — | — | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —

| Index | l | Consolidated financial statements 2023
Appendix

Consolidated Annual Report 2023 Telefónica, S. A.182

|  |  |  |  |  |  |  | Fair value
Millions of euros | 2024 | 2025 | 2026 | 2027 | 2028 | Subsequent years | Notional | Underlying debt(*) | Associated derivatives | TOTAL
Instruments in COP | 294 | 267 | 7 | 7 | 7 | 541 | 1,123 | 412 | 743 | 1,156
Floating rate | 75 | (301) | 7 | 7 | 7 | 505 | 300 | 395 | (76) | 319
Spread | 1.19% | 0.03% | — | — | — | 0.33% | 0.29% | — | — | —
Fixed rate | 219 | 568 | — | — | — | 36 | 823 | 18 | 819 | 837
Interest rate | 7.14% | 3.19% | — | — | — | 8.09% | 4.45% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in VEB | (23) | — | — | — | — | — | (23) | (24) | — | (24)
Floating rate | — | — | — | — | — | — | — | — | — | —
Spread | — | — | — | — | — | — | — | — | — | —
Fixed rate | (23) | — | — | — | — | — | (23) | (24) | — | (24)
Interest rate | 36.02% | — | — | — | — | — | 36.02% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Instruments in MXN | (264) | 20 | 40 | — | — | — | (204) | (449) | 237 | (212)
Floating rate | (1) | — | — | — | — | — | (1) | (1) | — | (1)
Spread | 1.13% | — | — | — | — | — | 1.13% | — | — | —
Fixed rate | (263) | 20 | 40 | — | — | — | (203) | (448) | 237 | (211)
Interest rate | 9.53% | 6.08% | 8.80% | — | — | — | 9.23% | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
Other currencies |  |  |  |  |  |  |  |  |  |
Instruments in other currencies | (7) | — | — | — | — | — | (7) | (7) | — | (7)
Floating rate | — | — | — | — | — | — | — | — | — | —
Spread | — | — | — | — | — | — | — | — | — | —
Fixed rate | (7) | — | — | — | — | — | (7) | (7) | — | (7)
Interest rate | — | — | — | — | — | — | — | — | — | —
Rate cap | — | — | — | — | — | — | — | — | — | —
TOTAL |  |  |  |  |  |  | 26,697 | 27,748 | (399) | 27,349
Floating rate |  |  |  |  |  |  | 8,185 | 2,729 | 9,313 | 12,042
Fixed rate |  |  |  |  |  |  | 18,512 | 25,019 | (9,712) | 15,307

(*) Includes all net financial debt adjustments

| Index | l | Consolidated financial statements 2023