Telefonica S.A. (TEF) | Equity Method Investments

Selected Financial Data

Telefonica S.A.'s selected financial data

USD $ in millions, translated from EUR €

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Share of profit (loss) of associates	(1,681)	(824)	101	67	(224)
Investments in associates	3,254	6,571	6,916	7,075	3,866

ROA (equity method investments only)¹	-51.66%	-12.54%	1.46%	0.95%	-5.80%

Source: Based on data from Telefonica S.A. Annual Reports

2012 Calculations

¹ ROA (equity method investments only) = 100 × Share of profit (loss) of associates ÷ Investments in associates
= 100 × -1,681 ÷ 3,254 = -51.66%

Item	Description	The company
Share of profit (loss) of associates	This item represents the entity's proportionate share for the period of the net income (loss) of its investee (such as unconsolidated subsidiaries and joint ventures) to which the equity method of accounting is applied. Such amount typically reflects adjustments similar to those made in preparing consolidated statements, including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between cost and underlying equity in net assets of the investee at the date of investment.	Telefonica S.A.'s share of profit (loss) of associates declined from 2010 to 2011 and from 2011 to 2012.
Investments in associates	This item represents the carrying amount on the entity's balance sheet of its investment in common stock of an equity method investee. This is not an indicator of the fair value of the investment, rather it is the initial cost adjusted for the entity's share of earnings and losses of the investee, adjusted for any distributions (dividends) and other than temporary impairment losses recognized.	Telefonica S.A.'s investments in associates declined from 2010 to 2011 and from 2011 to 2012.
ROA (equity method investments only)	A profitability ratio calculated as share of profit (loss) of associates divided by investments in associates.	Telefonica S.A.'s ROA of equity method investments deteriorated from 2010 to 2011 and from 2011 to 2012.

Summarized Financial Information

Summarized financial information for Telefonica S.A.'s affiliates, subsidiaries, associates, and joint ventures

USD $ in millions, translated from EUR €

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Total assets	81,556	78,055	74,960	86,423	31,858
Total liabilities	45,779	41,151	37,870	47,662	24,342
Equity	35,777	36,905	37,090	38,760	7,517
Liabilities and equity	81,556	78,055	74,960	86,423	31,858
Operating income	40,409	30,324	26,364	40,583	10,212
Profit for the year	(1,330)	(697)	918	6,070	(1,249)

Source: Based on data from Telefonica S.A. Annual Reports

Item	Description	The company
Equity	This item represents the disclosure of summarized financial information for unconsolidated subsidiaries and 50 percent-or-less owned entities accounted for using the equity method of accounting. If investments in common stock of corporate joint ventures or other investments accounted for under the equity method are, in the aggregate, material in relation to the financial position or results of operations of an investor, it may be necessary to present summarized information as to assets, liabilities, and results of operations of the investee, or group of investments for which combined disclosure is appropriate, either by individual financial statement caption or in groups, as appropriate. Such summarized financial information may include total equity or capital (as applicable).	Equity of Telefonica S.A.'s affiliates, subsidiaries, associates, and joint ventures declined from 2010 to 2011 and from 2011 to 2012.
Profit for the year	This item represents the disclosure of summarized financial information for unconsolidated subsidiaries and 50 percent-or-less owned entities accounted for using the equity method of accounting. If investments in common stock of corporate joint ventures or other investments accounted for under the equity method are, in the aggregate, material in relation to the financial position or results of operations of an investor, it may be necessary to present summarized information as to assets of the investee, or group of investments for which combined disclosure is appropriate, either by individual financial statement caption or in groups, as appropriate. Such summarized financial information may, at a minimum, include net income or loss.	Profit for the year of Telefonica S.A.'s affiliates, subsidiaries, associates, and joint ventures declined from 2010 to 2011 and from 2011 to 2012.

Adjustments to Financial Data: Proportionate Consolidation

Recognition of Telefonica S.A.'s proportionate share of affiliates, subsidiaries, associates, and joint ventures assets and liabilities instead of net equity.

Telefonica S.A., adjustments to financial data

USD $ in millions, translated from EUR €

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Weighted average percentage interest in affiliates	9.10%	17.81%	18.65%	18.25%	51.43%
Adjustment to Total Assets
Total assets (as reported)	171,114	168,167	172,207	154,996	139,053
Less: Investments in associates (adjustment)	3,254	6,571	6,916	7,075	3,866
Add: Total assets of affiliates (adjustment)	7,418	13,898	13,978	15,774	16,383
Total assets (adjusted)	175,278	175,494	179,268	163,696	151,571
Adjustment to Total Liabilities
Total liabilities (as reported)	134,641	132,641	130,163	120,205	111,823
Add: Total liabilities of affiliates (adjustment)	4,164	7,327	7,062	8,700	12,518
Total liabilities (adjusted)	138,805	139,969	137,225	128,904	124,341
Adjustment to Revenues
Revenues (as reported)	82,220	81,522	80,596	81,311	80,660
Add: Operating income of affiliates (adjustment)	3,676	5,399	4,916	7,407	5,251
Revenues (adjusted)	85,896	86,921	85,512	88,719	85,911

Adjusted Ratios: Proportionate Consolidation (Summary)

Telefonica S.A., adjusted ratios

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Net Profit Margin
Reported net profit margin	6.30%	8.60%	16.74%	13.71%	13.10%
Adjusted net profit margin	6.03%	8.06%	15.78%	12.56%	12.30%
Total Asset Turnover
Reported total asset turnover	0.48	0.48	0.47	0.52	0.58
Adjusted total asset turnover	0.49	0.50	0.48	0.54	0.57
Financial Leverage
Reported financial leverage	6.34	5.99	5.31	4.98	5.80
Adjusted financial leverage	6.50	6.25	5.52	5.25	6.32
Return on Assets (ROA)
Reported ROA	3.03%	4.17%	7.83%	7.19%	7.60%
Adjusted ROA	2.95%	3.99%	7.53%	6.81%	6.97%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as net income divided by adjusted revenue.	Telefonica S.A.'s adjusted net profit margin deteriorated from 2010 to 2011 and from 2011 to 2012.
Adjusted total asset turnover	An activity ratio calculated as adjusted total revenue divided by adjusted total assets.	Telefonica S.A.'s adjusted total asset turnover improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Telefonica S.A.'s adjusted financial leverage increased from 2010 to 2011 and from 2011 to 2012.
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Telefonica S.A.'s adjusted ROA deteriorated from 2010 to 2011 and from 2011 to 2012.

Adjusted Net Profit Margin

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Profit for the year attributable to equity holders of the parent (USD $ in millions, translated from EUR €)	5,179	7,010	13,491	11,145	10,568
Revenues (USD $ in millions, translated from EUR €)	82,220	81,522	80,596	81,311	80,660

Net profit margin¹	6.30%	8.60%	16.74%	13.71%	13.10%
Adjusted: from Equity Method to Proportionate Consolidation
Profit for the year attributable to equity holders of the parent (USD $ in millions, translated from EUR €)	5,179	7,010	13,491	11,145	10,568
Adjusted revenues (USD $ in millions, translated from EUR €)	85,896	86,921	85,512	88,719	85,911

Adjusted net profit margin²	6.03%	8.06%	15.78%	12.56%	12.30%

2012 Calculations

¹ Net profit margin = 100 × Profit for the year attributable to equity holders of the parent ÷ Revenues
= 100 × 5,179 ÷ 82,220 = 6.30%

² Adjusted net profit margin = 100 × Profit for the year attributable to equity holders of the parent ÷ Adjusted revenues
= 100 × 5,179 ÷ 85,896 = 6.03%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as net income divided by adjusted revenue.	Telefonica S.A.'s adjusted net profit margin deteriorated from 2010 to 2011 and from 2011 to 2012.

Adjusted Total Asset Turnover

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Revenues (USD $ in millions, translated from EUR €)	82,220	81,522	80,596	81,311	80,660
Total assets (USD $ in millions, translated from EUR €)	171,114	168,167	172,207	154,996	139,053

Total asset turnover¹	0.48	0.48	0.47	0.52	0.58
Adjusted: from Equity Method to Proportionate Consolidation
Adjusted revenues (USD $ in millions, translated from EUR €)	85,896	86,921	85,512	88,719	85,911
Adjusted total assets (USD $ in millions, translated from EUR €)	175,278	175,494	179,268	163,696	151,571

Adjusted total asset turnover²	0.49	0.50	0.48	0.54	0.57

2012 Calculations

¹ Total asset turnover = Revenues ÷ Total assets
= 82,220 ÷ 171,114 = 0.48

² Adjusted total asset turnover = Adjusted revenues ÷ Adjusted total assets
= 85,896 ÷ 175,278 = 0.49

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as adjusted total revenue divided by adjusted total assets.	Telefonica S.A.'s adjusted total asset turnover improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.

Adjusted Financial Leverage

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Total assets (USD $ in millions, translated from EUR €)	171,114	168,167	172,207	154,996	139,053
Equity attributable to equity holders of the parent (USD $ in millions, translated from EUR €)	26,979	28,070	32,447	31,151	23,985

Financial leverage¹	6.34	5.99	5.31	4.98	5.80
Adjusted: from Equity Method to Proportionate Consolidation
Adjusted total assets (USD $ in millions, translated from EUR €)	175,278	175,494	179,268	163,696	151,571
Equity attributable to equity holders of the parent (USD $ in millions, translated from EUR €)	26,979	28,070	32,447	31,151	23,985

Adjusted financial leverage²	6.50	6.25	5.52	5.25	6.32

2012 Calculations

¹ Financial leverage = Total assets ÷ Equity attributable to equity holders of the parent
= 171,114 ÷ 26,979 = 6.34

² Adjusted financial leverage = Adjusted total assets ÷ Equity attributable to equity holders of the parent
= 175,278 ÷ 26,979 = 6.50

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Telefonica S.A.'s adjusted financial leverage increased from 2010 to 2011 and from 2011 to 2012.

Adjusted Return On Assets (ROA)

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Profit for the year attributable to equity holders of the parent (USD $ in millions, translated from EUR €)	5,179	7,010	13,491	11,145	10,568
Total assets (USD $ in millions, translated from EUR €)	171,114	168,167	172,207	154,996	139,053

ROA¹	3.03%	4.17%	7.83%	7.19%	7.60%
Adjusted: from Equity Method to Proportionate Consolidation
Profit for the year attributable to equity holders of the parent (USD $ in millions, translated from EUR €)	5,179	7,010	13,491	11,145	10,568
Adjusted total assets (USD $ in millions, translated from EUR €)	175,278	175,494	179,268	163,696	151,571

Adjusted ROA²	2.95%	3.99%	7.53%	6.81%	6.97%

¹ ROA = 100 × Profit for the year attributable to equity holders of the parent ÷ Total assets
= 100 × 5,179 ÷ 171,114 = 3.03%

² Adjusted ROA = 100 × Profit for the year attributable to equity holders of the parent ÷ Adjusted total assets
= 100 × 5,179 ÷ 175,278 = 2.95%

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Telefonica S.A.'s adjusted ROA deteriorated from 2010 to 2011 and from 2011 to 2012.