Obbligazione Telefónica Europe B.V 2.625% ( XS1731823255 ) in EUR

Telefónica Europe B.V

100 EUR ▼

Paesi Bassi

XS1731823255 ( in EUR )

2.625% per anno ( pagato 1 volta l'anno)

perpetue

Prospetto opuscolo dell'obbligazione Telefónica Europe B.V XS1731823255 en EUR 2.625%, scadenza perpetue

100 000 EUR

1 000 000 000 EUR

07/06/2025 ( In 339 giorni )

The Obbligazione issued by Telefónica Europe B.V ( Netherlands ) , in EUR, with the ISIN code XS1731823255, pays a coupon of 2.625% per year.
The coupons are paid 1 time per year and the Obbligazione maturity is perpetue

PROSPECTUS

Telefónica Europe B.V.
(incorporated with limited liability under
the laws of The Netherlands)
EUR 1,000,000,000 Undated 5.5 Year Non-Call
Deeply Subordinated Guaranteed Fixed Rate Reset Securities
unconditionally and irrevocably guaranteed on a subordinated basis by
Telefónica, S.A.
(incorporated with limited liability under
the laws of the Kingdom of Spain)
The EUR 1,000,000,000 Undated 5.5 Year Non-Call Deeply Subordinated Guaranteed Fixed Rate Reset
Securities (the "Securities") are issued by Telefónica Europe B.V. (the "Issuer") and unconditionally and
irrevocably guaranteed on a subordinated basis by Telefónica, S.A. (the "Guarantee", and the "Guarantor" or
"Telefónica", respectively).
As described in the Terms and Conditions of the Securities (the "Conditions"), the Securities will bear interest
on their principal amount (i) at a fixed rate of 2.625 per cent. per annum from (and including) the Issue Date to
(but excluding) the First Reset Date (as defined in the Conditions) payable annually (except for a short first
Interest Period) in arrear on 7 June in each year, with the first Interest Payment Date on 7 June 2018; and (ii)
from (and including) the First Reset Date (as defined in the Conditions), at the applicable 5 year Swap Rate in
respect of the Reset Period, plus: (A) in respect of the period commencing on the First Reset Date to (but
excluding) 7 June 2028, 2.327 per cent. per annum; (B) in respect of the period commencing on 7 June 2028 to
(but excluding) 7 June 2043, 2.577 per cent. per annum; and (C) from and including 7 June 2043, 3.327 per
cent. per annum, all as determined by the Agent Bank, payable annually in arrear on 7 June in each year (each,
an Interest Payment Date as defined in the Conditions), commencing on 7 June 2024.
The Issuer may, at its sole discretion, elect to defer (in whole or in part) any payment of interest on the
Securities, as more particularly described in the "Terms and Conditions of the Securities -- Optional Interest
Deferral". Any amounts so deferred, together with further interest accrued thereon (at the Prevailing Interest
Rate applicable from time to time), shall constitute Arrears of Interest (as defined in the Conditions). The Issuer
may pay outstanding Arrears of Interest, in whole or in part, at any time in accordance with the Conditions.
Notwithstanding the foregoing, the Issuer shall pay any outstanding Arrears of Interest in whole, but not in
part, on the first occurring Mandatory Settlement Date following the Interest Payment Date on which any
outstanding Deferred Interest Payment was first deferred, all as more particularly described in "Terms and
Conditions of the Securities -- Optional Interest Deferral -- Mandatory Settlement of Arrears of Interest".
The Securities will be undated securities in respect of which there is no specific maturity date and shall be
redeemable (at the option of the Issuer) in whole, but not in part, (i) on any date during the Relevant Period (as
defined in the Conditions) or (ii) upon any Interest Payment Date (as defined in the Conditions) thereafter, at
their principal amount together with any accrued and unpaid interest up to (but excluding) the Redemption
Date (as defined in the Conditions) and any outstanding Arrears of Interest (including any Additional Interest
Amounts thereon). In addition, upon the occurrence of an Accounting Event, a Capital Event, a Tax Event, a
Withholding Tax Event or a Substantial Purchase Event (each such term as defined in the Conditions of the
Securities), the Securities will be redeemable (at the option of the Issuer) in whole, but not in part, at the
amount set out, and as more particularly described, in "Terms and Conditions of the Securities -- Redemption
and Purchase".
The Securities will constitute direct, unsecured and subordinated obligations of the Issuer and will at all times
rank pari passu and without any preference among themselves, all as more particularly described in "Terms
and Conditions of the Securities -- Status and Subordination of the Securities and Coupons". The payment
obligations of the Guarantor under the Guarantee will constitute direct, unsecured and subordinated obligations
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of the Guarantor and will at all times rank pari passu and without any preference among themselves. In the
event of the Guarantor being declared in insolvency under Spanish Insolvency Law (as defined below), the
rights and claims of Holders (as defined in the Conditions) against the Guarantor in respect of or arising under
the Guarantee will rank, as against the other obligations of the Guarantor, in the manner more particularly
described in "Terms and Conditions of the Securities Guarantee, Status and Subordination of the Guarantee".
Payments in respect of the Securities will be made without withholding or deduction for, or on account of, any
present or future taxes, duties, assessments or governmental charges of whatever nature of The Netherlands or
the Kingdom of Spain, unless such withholding or deduction is required by law. In the event that any such
withholding or deduction is made, additional amounts will be payable by the Issuer or, as the case may be, the
Guarantor, subject to certain exceptions as are more fully described in "Terms and Conditions of the Securities
 Taxation".
This Prospectus has been approved by the United Kingdom Financial Conduct Authority (the "FCA"), which is
the United Kingdom competent authority for the purposes of Directive 2003/71/EC, as amended (the
"Prospectus Directive") and relevant implementing measures in the United Kingdom as a prospectus issued in
compliance with the Prospectus Directive and relevant implementing measures in the United Kingdom for the
purpose of giving information with regard to the issue of the Securities. Applications have been made for the
Securities to be admitted to listing on the Official List of the FCA and to trading on the Regulated Market of
the London Stock Exchange plc (the "London Stock Exchange"). The Regulated Market of the London Stock
Exchange is a regulated market for the purposes of Directive 2004/39/EC on markets in financial instruments.
The Securities have not been, and will not be, registered under the United States Securities Act of 1933, as
amended (the "Securities Act") and are subject to United States tax law requirements. The Securities are being
offered outside the United States by the Joint Bookrunners (as defined in "Subscription and Sale") in
accordance with Regulation S under the Securities Act ("Regulation S"), and may not be offered, sold or
delivered within the United States or to, or for the account or benefit of, US persons except pursuant to an
exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
The Securities will be in bearer form and in the denomination of EUR 100,000 each and will initially be
represented by a temporary global security (the "Temporary Global Security"), without interest coupons or
talons, which will be deposited with a common depositary on behalf of Euroclear Bank SA/NV ("Euroclear")
and Clearstream Banking S.A. ("Clearstream, Luxembourg") on or about the Issue Date. Interests in the
Temporary Global Security will be exchangeable for interests in the permanent global security (the
"Permanent Global Security" and together with the Temporary Global Security, the "Global Securities") in
the circumstances set out in the Temporary Global Security. The Permanent Global Security will be
exchangeable for definitive Securities (the "Definitive Securities") in the circumstances set out in the
Permanent Global Security. See "Summary of Provisions relating to the Securities while in Global Form".
The Securities are expected to be rated BB+ by Standard & Poor's Credit Market Services Europe Limited
("S&P"), Ba2 by Moody's Investors Service Limited ("Moody's") and BB+ by Fitch Ratings Limited
("Fitch").
Each of S&P, Moody's and Fitch is established in the European Union and registered under Regulation (EU)
No 1060/2009, as amended (the "CRA Regulation").
A security rating is not a recommendation to buy, sell or hold securities and may be subject to
suspension, reduction or withdrawal at any time by the assigning rating agency.
Prospective investors should have regard to the factors described under the section headed "Risk
Factors" in this Prospectus.
Joint Bookrunners
Banca IMI
BofA Merrill Lynch

CaixaBank
Crédit Agricole CIB

Morgan Stanley
MUFG

UBS Investment Bank
UniCredit Bank

30 November 2017
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CONTENTS

Page
IMPORTANT NOTICES ............................................................................................................................. 1
RISK FACTORS .......................................................................................................................................... 6
OVERVIEW OF THE SECURITIES ........................................................................................................ 32
INFORMATION INCORPORATED BY REFERENCE .......................................................................... 38
TERMS AND CONDITIONS OF THE SECURITIES ............................................................................. 40
SUMMARY OF PROVISIONS RELATING TO THE SECURITIES IN GLOBAL FORM ................... 61
FORM OF GUARANTEE ......................................................................................................................... 63
USE OF PROCEEDS ................................................................................................................................. 68
DESCRIPTION OF THE ISSUER............................................................................................................. 69
DESCRIPTION OF THE GUARANTOR ................................................................................................. 70
TAXATION ............................................................................................................................................... 94
SUBSCRIPTION AND SALE ................................................................................................................... 99
GENERAL INFORMATION .................................................................................................................. 101

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IMPORTANT NOTICES
Each of the Issuer and the Guarantor accepts responsibility for the information contained in this
Prospectus and declares that, having taken all reasonable care to ensure that such is the case, the
information contained in this Prospectus to the best of its knowledge is in accordance with the facts and
contains no omission likely to affect its import. Information appearing in this Prospectus is only accurate
as of the date on the front cover of this Prospectus. The business, financial condition, results of operations
and prospects of the Issuer and the Guarantor may have changed since such date.
Each of the Issuer and the Guarantor has confirmed to the Joint Bookrunners named under "Subscription
and Sale" below (the "Joint Bookrunners") that this Prospectus contains all information regarding the
Issuer, the Guarantor and the Securities which is (in the context of the issue of the Securities) material;
such information is true and accurate in all material respects and is not misleading in any material respect;
any opinions, predictions or intentions expressed in this Prospectus on the part of the Issuer or (as the case
may be) the Guarantor are honestly held or made and are not misleading in any material respect; this
Prospectus does not omit to state any material fact necessary to make such information, opinions,
predictions or intentions (in such context) not misleading in any material respect; and all proper enquiries
have been made to ascertain and to verify the foregoing.
Neither the Issuer nor the Guarantor has authorised the making or provision of any representation or
information regarding the Issuer, the Guarantor or the Securities other than as contained in this Prospectus
or as approved for such purpose by the Issuer and the Guarantor. Any such representation or information
should not be relied upon as having been authorised by the Issuer, the Guarantor or the Joint
Bookrunners.
Neither the Joint Bookrunners nor any of their respective affiliates have authorised the whole or any part
of this Prospectus and none of them makes any representation or warranty or accepts any responsibility as
to the accuracy or completeness of the information contained in this Prospectus. Neither the delivery of
this Prospectus nor the offering, sale or delivery of any Security shall in any circumstances create any
implication that there has been no adverse change, or any event reasonably likely to involve any adverse
change, in the condition (financial or otherwise) of the Issuer or the Guarantor since the date of this
Prospectus.
This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, any
Securities.
The distribution of this Prospectus and the offering, sale and delivery of Securities in certain jurisdictions
may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer,
the Guarantor and the Joint Bookrunners to inform themselves about and to observe any such restrictions.
For a description of certain restrictions on offers, sales and deliveries of Securities and on distribution of
this Prospectus and other offering material relating to the Securities, see "Subscription and Sale".
In particular, the Securities have not been and will not be registered under the Securities Act and are
subject to United States tax law requirements. Subject to certain exceptions, Securities may not be
offered, sold or delivered within the United States or to US persons.
In this Prospectus, unless otherwise specified, references to a "Member State" are references to a
Member State of the European Economic Area, references to "US$", and "US dollar" are to United States
dollars, the lawful currency of the United States of America, references to "sterling", "pound sterling" or
"£" are to the currency of the United Kingdom and references to "EUR", "euro" or "" are to the currency
introduced at the start of the third stage of European economic and monetary union, and as defined in
Article 2 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, as
amended.
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The Securities are securities which, because of their nature, are normally bought and traded by a limited
number of investors who are particularly knowledgeable in investment matters, and may not be a suitable
investment for all investors. Each potential investor in the Securities must determine the suitability of that
investment in light of its own circumstances. In particular, each potential investor should:
(i)
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Securities and the impact the Securities will
have on its overall investment portfolio;
(ii)
have sufficient financial resources and liquidity to bear all of the risks of an investment in the
Securities, including where the currency for principal or interest payments is different from the
potential investor's currency;
(iii)
understand thoroughly the terms of the Securities and be familiar with the behaviour of any
relevant indices and financial markets; and
(iv)
be able to evaluate (either alone or with the help of a financial advisor) possible scenarios for
economic, interest rate and other factors that may affect its investment and its ability to bear the
applicable risks.
Sophisticated institutional investors generally do not purchase complex financial instruments as stand-
alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield
with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor
should not invest in the Securities unless it has the knowledge and expertise (either alone or with a
financial advisor) to evaluate how the Securities will perform under changing conditions, the resulting
effects on the value of the Securities, and the impact this investment will have on the potential investor's
overall investment portfolio.
Prior to making an investment decision, potential investors should consider carefully, in light of their own
financial circumstances and investment objectives, all the information contained in this Prospectus or
incorporated by reference herein. Potential investors should not construe anything in this Prospectus as
legal, tax, business or financial advice. Each investor should consult with his or her own advisers as to the
legal, tax, business, financial and related aspects of a purchase of the Securities.
In connection with the issue of the Securities, Merrill Lynch International (the "Stabilisation
Manager") (or persons acting on behalf of the Stabilisation Manager may over-allot Securities or
effect transactions with a view to supporting the market price of the Securities at a level higher
than that which might otherwise prevail. However, stabilisation may not necessarily occur. Any
stabilisation action may begin on or after the date on which adequate public disclosure of the terms
of the offer of the Securities is made and, if begun, may cease at any time, but it must end no later
than the earlier of 30 days after the issue date of the Securities and 60 days after the date of the
allotment of the Securities. Any stabilisation action or over-allotment must be conducted by the
Stabilisation Manager (or person(s) acting on behalf of the Stabilisation Manager) in accordance
with all applicable laws and rules.
Certain terms and conventions
As used herein, "Telefónica", "Telefónica Group", "Group" and "the Company" mean Telefónica, S.A.
and its consolidated subsidiaries, unless the context requires otherwise.
Below are definitions of certain technical terms used in this Prospectus:
"Access" refers to a connection to any of the telecommunications services offered by Telefónica. A single
fixed customer may contract for multiple services, and Telefónica believes that it is more useful to count
the number of accesses a customer has contracted for, than to merely count the number of its customers.
For example, a customer that has fixed line telephony service and broadband service is counted as two
accesses rather than as one customer.
"ARPU" is the average revenues per user per month. ARPU is calculated by dividing total gross service
revenues (excluding inbound roaming revenues) from sales to customers for the preceding 12 months by
the weighted average number of accesses for the same period, and then dividing by 12.
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"Bundles" refer to combination products that combine fixed services (wirelines, broad bands and
television) and mobile services.
"Churn" is the percentage of disconnections over the average customer base in a given period.
"Cloud computing" is the delivery of computing as a service rather than a product, whereby shared
resources, software and information are provided to computers and other devices as a utility over a
network (typically the Internet).
"Commercial activity" includes the addition of new lines, replacement of handsets and migrations.
"Data ARPU" is the average data revenues per user per month. Data ARPU is calculated by dividing
total data revenues (from sources such as Short Message Service ("SMS"), Multimedia Messaging
Services ("MMS"), other mobile data services such as mobile connectivity and mobile Internet, premium
messaging, downloading ringtones and logos, mobile mail and wireless application protocol ("WAP")
connectivity from sales to customers for a given period by the weighted average number of accesses for
the same period, and then dividing by the relevant period.
"Data revenues" include revenues from SMS, MMS, other mobile data services such as mobile
connectivity and mobile Internet, premium messaging, downloading ringtones and logos, mobile mail and
WAP connectivity from sales to customers.
"Data traffic" includes all traffic from Internet access, messaging (SMS, MMS) and connectivity services
that is transported by the networks owned by Telefónica.
"FaasT" is a cybersecurity technology that scans an organisation's system 24 hours a day, seven days a
week, in order to prevent cybernetic attacks.
"Final client accesses" means accesses provided directly to residential and corporate clients.
"Fixed telephony accesses" includes public switched telephone network, or PSTN, lines (including
public use telephony), and integrated services digital network, or ISDN, lines and circuits. For the
purpose of calculating Telefónica's number of fixed line accesses, Telefónica multiplies its lines in
service as follows: PSTN (x1); basic ISDN (x1); and primary ISDN (x30, x20 or x10).
"Fixed termination rates" is an established fixed network tariff that applies when a customer makes a
call to someone in a network operated by another operator.
"FTTx" is a generic term for any broadband network architecture that uses optical fiber to replace all or
part of the metal local loop.
"FWA" means the fixed broadband service supported on fixed wireless technology (fixed telephony
service with mobile technology).
"Gross adds" means the gross increase in the customer base measured in terms of accesses in a period.
"HDTV" or "high definition TV" has at least twice the resolution of standard definition television
(SDTV), allowing it to show much more detail than an analog television or digital versatile disc (DVD).
"Hybrid/Control Customer" is a contractual relationship with the customer, where the customer has a
postpaid line; if the customer consumes more traffic than the pre-established limit the excess will be
billed according to the pre-negotiated tariffs and requires the customer to top up.
"Incoming revenues" refers to the interconnection revenues derived from the completion of calls made
from outside mobile or fixed carriers into Telefónica's network.
"Interconnection revenues" means revenues received from other operators which use Telefónica's
networks to connect to or finish their calls and SMS or to connect to their customers.
"Internet and data accesses" include broadband accesses (including retail asymmetrical digital
subscriber line "ADSL", very high bit-rate digital subscriber line "VDSL", satellite, fiber optic and
circuits over 2 Mbps), narrowband accesses (Internet service through the PSTN lines) and the remaining
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non-broadband final customer circuits. Internet and data accesses also include "Naked ADSL", which
allows customers to subscribe for a broadband connection without a monthly fixed line fee.
"IPTV" (Internet Protocol Television) refers to distribution systems for television subscription signals or
video using broadband connections over the IP protocol.
"ISP" means Internet service provider.
"IT", or information technology, is the acquisition, processing, storage and dissemination of vocal,
pictorial, textual and numerical information by a microelectronics-based combination of computing and
telecommunications.
"Latch", is a cybernetic application, protecting accounts and on-line services.
"Local loop" means the physical circuit connecting the network termination point at the subscriber's
premises to the main distribution frame or equivalent facility in the fixed public telephone network.
"LTE" means Long Term Evolution, a 4G mobile access technology.
"M2M", or machine to machine, refers to technologies that allow both mobile and wired systems to
communicate with other devices of the same ability.
"Market share" is the percentage ratio of the number of final accesses or operator revenues over the
existing total market in an operating area.
"Metashield" is a cybernetic product for protecting metadata (information on data) in digital documents
and archives.
"Mobile accesses" includes accesses to the mobile network for voice and/or data services (including
connectivity). Mobile accesses are categorised into contract and pre-pay accesses.
"Mobile broadband" includes Mobile Internet (Internet access from devices also used to make voice
calls such as smartphones), and Mobile Connectivity (Internet access from devices that complement fixed
broadband, such as PC Cards/dongles, which enable large amounts of data to be downloaded on the
move).
"MTR" means mobile termination rate, which is the charge per minute or SMS paid by a
telecommunications network operator when a customer makes a call to another network operator.
"MVNO" means mobile virtual network operator, which is a mobile operator that is not entitled to use
spectrum for the provision of mobile services. Consequently, an MVNO must subscribe to an access
agreement with a mobile network operator in order to provide mobile access to their customers. An
MVNO pays a determined tariff to such mobile network operator for using the infrastructure to facilitate
coverage to their customers.
"Net adds" means the number of new accesses in a certain period.
"Non SMS data revenues" means data revenues excluding SMS revenues.
"OTT services" or "over the top services" means services provided through the Internet (such as
television).
"Outgoing revenues" refers to mobile voice or data revenues (SMS, MMS) derived from Telefónica's
consumers' consumed service.
"P2P SMS" means person to person short messaging service (usually sent by mobile customers).
"Pay-TV" includes cable TV, direct to home satellite TV, or DTH, and Internet Protocol TV, or IPTV.
"p.p." means percentage points.
"Revenues" means net sales and revenues from rendering of services.
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"Service revenues" means revenues less revenues from handset sales. Service revenues are mainly
related to telecommunications services, especially voice revenues and data revenues (SMS and data
traffic download and upload revenues) consumed by Telefónica's customers.
"SIM" means subscriber identity module, a removable intelligent card used in mobile handsets, USB
modems, etc. to identify the user in the network.
"Tacyt" is a cybersecurity tool that supervises, stores, analyses, correlates and classifies mobile
applications.
"Unbundled local loop", or "ULL" includes accesses to both ends of the copper local loop leased to
other operators to provide voice and DSL services (fully unbundled loop, fully ULL) or only DSL service
(shared unbundled loop, "shared ULL").
"Voice Traffic" means voice minutes used by Telefónica's customers over a given period, both outbound
and inbound.
"VoIP" means voice over Internet protocol.
"Wholesale accesses" means accesses Telefónica provides to its competitors, who then sell services over
such accesses to their residential and corporate clients.
"Wholesale ADSL" means accesses of broadband or fiber that Telefónica provides to its competitors,
who then sell services over such accesses to their residential and corporate clients.
"YoY" or "y-o-y" means year-on-year.
In this Prospectus certain comparisons are made in local currency or on a "constant Euro basis" or
"excluding foreign exchange rate effects" in order to present an analysis of the development of the
Group's results of operations from year-to-year without the effects of currency fluctuations. To make
comparisons on a local currency basis, financial items in the relevant local currency are compared for the
periods indicated as recorded in the relevant local currency for such periods. To make comparisons on a
"constant Euro basis" or "excluding foreign exchange rate effects," the relevant financial item is
converted into Euro using the prior year's average Euro to relevant local currency exchange rate. In
addition, certain financial information is presented excluding the effects of Venezuela being considered a
hyperinflationary economy in 2014, 2015 and 2016 by eliminating all adjustments made as a result of
such consideration.
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RISK FACTORS
Any investment in the Securities is subject to a number of risks. Prior to investing in the Securities,
prospective investors should carefully consider risk factors associated with any investment in the
Securities, the business of the Issuer and the Guarantor and the industries in which each of them operates
together with all other information contained in this Prospectus, including, in particular the risk factors
described below. Words and expressions defined in the "Terms and Conditions of the Securities" below,
or elsewhere in this Prospectus, have the same meanings in this section.
The Issuer and the Guarantor have identified in this Prospectus a number of factors which could
materially adversely affect their businesses and ability to make payments due under the Securities and
believes that the factors described below represent the principal risks inherent in investing in the
Securities.
The following is not an exhaustive list or explanation of all risks which investors may face when making
an investment in the Securities and should be used as guidance only. Additional risks and uncertainties
relating to the Issuer and the Guarantor that are not currently known to the Issuer and the Guarantor, or
that either currently deems immaterial, may individually or cumulatively also have a material adverse
effect on the business, prospects, results of operations and/or financial position of the Issuer and the
Guarantor and, if any such risk should occur, the price of the Securities may decline and investors could
lose all or part of their investment. Investors should consider carefully whether an investment in the
Securities is suitable for them in light of the information in this Prospectus and their personal
circumstances.
Risks relating to the Issuer and the Guarantor
The risk factors set out below are applicable to the Issuer, as a member of the Telefónica Group, and to
the Guarantor.
No regulation of the Issuer by any regulatory authority.
The Issuer is not required to be licenced, registered or authorised under any current relevant laws in The
Netherlands, and will operate without supervision by any authority in any jurisdiction. Regulatory
authorities in one or more jurisdictions may decide, however, that the Issuer is subject to certain laws in
such jurisdiction, which could have an adverse impact on the Issuer or the holders of Securities.
The Telefónica Group's business is affected by a series of intrinsic risk factors that affect exclusively the
Group, as well as a series of external factors that are common to businesses of the same sector. The main
risks and uncertainties facing Telefónica which could affect its business, financial position and results of
operations are as follows:
Risks relating to the Group
Worsening of the economic and political environment could negatively affect Telefónica's business.
Telefónica's international presence enables the diversification of its activities across countries and
regions, but it exposes Telefónica to diverse legislation, as well as to the political and economic
environments of the countries in which it operates. Any adverse developments or even uncertainties in
this regard, including exchange-rate or sovereign-risk fluctuations, may adversely affect the Company's
business, financial position, cash flows and results of operations and/or the performance of some or all of
the Group's financial indicators.
Economic conditions may adversely affect the level of demand of existing and prospective customers, as
they may no longer deem critical the services offered by the Group.
Macroeconomic perspectives in Europe have improved as two major risks from 2016 have diminished.
On the one hand, political uncertainty has reduced after the results of the general elections in some
European countries and, on the other hand, the agreement reached in relation to the Greek bailout
programme and better macroeconomic data in the country has opened the door to a potential solution to
the Greek debt crisis in the near term. While such risks have diminished, economic activity and financial
stability in Europe could be affected by the monetary normalisation that the European Central Bank is
expected to continue implementing in the near future, with a negative impact on the balance between the
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private and public sectors, and by the restructuring processes which the European banking sector is still
immersed in. Furthermore, the exit process of the United Kingdom from the European Union following
the outcome of the referendum held in 2016, will result in economic adjustments regardless of the nature
of the new trade and investment relationships between the United Kingdom and the rest of Europe in the
future. In the meantime, there is uncertainty regarding investment, activity, employment and financial
market volatility. Finally, another focus of uncertainty given Telefónica's exposure, could come from
Catalonia's political situation and its impact on the Spanish economy. Although recent measures taken by
the Spanish Government have contributed to reduce the uncertainty, if political tensions re-emerge or
intensify, there could be a negative impact both on financing conditions and on the current positive
Spanish macroeconomic scenario. In the first nine months of 2017, the Telefónica Group obtained 24.2
per cent. of its revenues in Spain, 13.9 per cent. in Germany and 12.4 per cent. in the United Kingdom.
In Latin America, there is an increasing exchange rate risk created by external factors such as the
uncertainty derived from the monetary normalisation process in the United States, the continuing low
commodity prices environment in certain cases, and doubts about growth and imbalances in China.
Certain internal factors such the high fiscal and external deficits in major Latin American countries and
the low liquidity in certain exchange markets, together with a reduced productivity growth, hinder a more
accelerated progress in economic development and the rebalancing of still existent mismatches.
In Brazil, although the political scenario continues to be unstable, the government has approved relevant
legislative reforms and promoted the approval process of other key items, such as social security reform,
which could be approved before the end of the term, which has improved the confidence levels in the
government. While signs of stabilisation have emerged and the economy has started to show positive
growth figures, the pace of the recovery is still weak and the unemployment rate remains above 12 per
cent. Moreover, despite decreasing external financing needs, internal financing needs remain high. The
combination of such elements have led to risks of further downgrades to the country's credit rating, which
is already below investment grade, leading, possibly, to a more depreciated currency.
Focusing on some of the other countries in the region, Mexico has a high commercial and financial
exposure to the United States, which could generate uncertainty despite having a relatively stable internal
outlook, subject to the outcome of the coming general elections and of the renegotiation of the North
American Free Trade Agreement (NAFTA), which is now underway. Any increase in interest rates in the
United States and/or a possible overhaul of trade agreements between both countries could result in
higher restrictions on imports into the United States which together with political uncertainty surrounding
such matters, could negatively impact economic activity and exchange rates in Mexico. The relative
weight of Mexico in the consolidated revenues of the Telefónica Group was 2.6 per cent. for the nine-
month period ended 30 September 2017.
In countries such as Chile, Colombia and Peru, the increase in commodity prices is having a positive
impact on their respective fiscal and external accounts, but growth continues to be below its potential
levels due to the lower external inflows, which have affected investment and, to a lesser extent, private
consumption.
In Argentina, the government is focused on resolving Argentina's macroeconomic and financial
imbalances and on recovering international confidence. The October legislative elections have confirmed
the good results of the government coalition. Telefónica would expect Macri's reforms and also a
dynamic growth (approximately 3 per cent.) to continue. However, even though the economy has returned
to positive growth rates and the measures taken by the government may continue having positive effects
in the medium term, short term risks persist, including exchange rate risk, especially due to the high
inflation rate.
In Ecuador, despite the recovery in oil prices and the recent dollar depreciation, which have allowed for
an improvement in economic activity through exports, risks persist, mainly on the fiscal front. The
country's financing needs are still high, which, together with low international reserves, keep the country
in a more vulnerable position against volatility shocks.
During the first nine months of 2017 Telefónica Hispanoamérica represented 24.2 per cent. of the
Telefónica Group's revenues, of which 27.7 per cent. proceeded from revenues in Argentina, 18.7 per
cent. in Peru and 17.2 per cent. in Chile. During the first nine months of 2017, Telefónica Brazil
represented 23.5 per cent. of the Telefónica Group's revenues. In this respect, 32.8 per cent. of the
Group's revenues were generated in countries that do not have investment grade status (in order of
185485-3-18510-v27.0
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55-40662627

Document Outline

#4">IMPORTANT NOTICES
#5">The Securities are securities which, because of their nature, are normally bought and traded by a limited number of investors who are particularly knowledgeable in investment matters, and may not be a suitable investment for all investors. Each poten...
- #5">(i) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Securities and the impact the Securities will have on its overall investment portfolio;
- #5">(ii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Securities, including where the currency for principal or interest payments is different from the potential investor's currency;
- #5">(iii) understand thoroughly the terms of the Securities and be familiar with the behaviour of any relevant indices and financial markets; and
- #5">(iv) be able to evaluate (either alone or with the help of a financial advisor) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
#9">RISK FACTORS
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#25">Risks related to the structure of the Securities
#25">The Guarantee is a subordinated obligation.
#25">There are no events of default under the Securities.
#25">The Securities are undated securities.
#25">The Issuer may redeem the Securities under certain circumstances.
#26">The Issuer may redeem the Securities after a Tax Event relating to an intra-group loan.
#26">The Issuer has the right to defer interest payments on the Securities.
#26">Substitution or variation of the Securities.
#27">Changes in rating methodologies may lead to the early redemption of the Securities.
#27">No limitation on issuing senior or pari passu securities or other liabilities.
#27">Fixed rate securities have a market risk.
#27">Interest rate reset may result in a decline of yield.
#29">Risks arising in connection with the Dutch Insolvency Law
#31">Risks arising in connection with the Spanish Insolvency Law
#31">Creditors will not be able to accelerate the maturity of their credits based only in the declaration of the insolvency (declaración de concurso) of the debtor. Any provision to the contrary will be null and void. The insolvency order contains an expr...
- #31">(i) Debts against the insolvency estate (créditos contra la masa) are not considered part of the debtor's general debt and are payable when due according to their own terms (and, therefore, are paid before other debts under insolvency proceedings). De...
- #31">(ii) Debts benefiting from special privileges, representing attachments on certain assets (basically in rem security). These privileges may entail separate proceedings, though subject to certain restrictions derived from a waiting period that may last...
- #31">(iii) Debts benefiting from general privileges, including among others certain labour debts and certain debts with public administrations. Other debts with public administrations corresponding to tax debts and social security obligations are recognise...
- #32">(iv) Ordinary debts (non-subordinated and non-privileged creditors). They will be paid on a pro-rata basis.
- #32">(v) Subordinated debts (thus classified by virtue of law). Subordinated debts include, among others, those credits held by parties in special relationships with the debtor: in the case of an individual, his/her relatives; in the case of a legal entity...
#33">Risks related to the Securities generally
#33">Majority decisions bind all Holders.
#33">Change of law.
#33">There is no active trading market for the Securities.
#35">OVERVIEW OF THE SECURITIES
#41">INFORMATION INCORPORATED BY REFERENCE
#41">For ease of reference, the tables below set out:
- #41">(i) the relevant page references for the financial statements, the notes to the financial statements and the Auditors' reports for the years ended 31 December 2016 and 2015, and the unaudited interim unconsolidated financial information for the six mo...
- #41">(ii) the relevant page references for the consolidated financial statements, the notes to the consolidated financial statements and the Auditors' reports for the years ended 31 December 2016 and 2015, the financial statements and the notes to financia...
#43">TERMS AND CONDITIONS OF THE SECURITIES
#43">The issue of the Securities was authorised by a resolution of the Board of Managing Directors of the Issuer dated 17 November 2017 and the guarantee of the Securities was authorised by a resolution of the Executive Commission of the Board of Director...
- #43">1. Form, Denomination and Title
  - #43">(a) Form and denomination: The Securities are serially numbered and in bearer form in the denomination of 100,000, each with Coupons attached on issue.
- #43">2. Status and Subordination of the Securities and Coupons
  - #43">(a) Status of the Securities and Coupons: The Securities and the Coupons constitute direct, unsecured and subordinated obligations of the Issuer (senior only to Junior Obligations of the Issuer) and shall at all times rank pari passu and without any p...
  - #43">(b) Subordination of the Securities: In the event of an Issuer Winding-up, the rights and claims of the Holders against the Issuer in respect of or arising under the Securities and the Coupons will rank (i) junior to the claims of all holders of Senio...
- #43">3. Guarantee, Status and Subordination of the Guarantee
  - #43">(a) Guarantee: The Guarantor has unconditionally and irrevocably guaranteed the due payment of all sums expressed to be payable by the Issuer under the Securities and the Coupons on a subordinated basis. Its obligations in that respect (the "Guarantee...
  - #44">(b) Status of the Guarantee: The payment obligations of the Guarantor under the Guarantee constitute direct, unsecured and subordinated obligations of the Guarantor (senior only to Junior Obligations of the Guarantor) and shall at all times rank pari ...
  - #44">(c) Subordination of the Guarantee: Subject to mandatory provisions of Spanish applicable law, in the event of the Guarantor being declared in insolvency (concurso) under Spanish insolvency law, the rights and claims of Holders against the Guarantor i...
- #44">4. Interest Payments
  - #44">(a) General
  - #44">(b) Interest Accrual
  - #44">(c) Prevailing Interest Rate
    - #44">(i) from (and including) the Issue Date to (but excluding) the First Reset Date, at the rate of 2.625 per cent. per annum, payable annually in arrear on each Interest Payment Date commencing on 7 June 2018; and
    - #45">(ii) from (and including) the First Reset Date, at the applicable 5 year Swap Rate in respect of the relevant Reset Period plus:
      - #45">(A) in respect of the period commencing on the First Reset Date to (but excluding) 7 June 2028, 2.327 per cent. per annum;
      - #45">(B) in respect of the period commencing on 7 June 2028 to (but excluding) 7 June 2043, 2.577 per cent. per annum; and
      - #45">(C) from and including 7 June 2043, 3.327 per cent. per annum,
  - #46">(d) Publication of Subsequent Fixed Interest Rates
  - #46">(e) Agent Bank and Reset Reference Banks
  - #46">(f) Determinations of Agent Bank Binding
- #46">5. Optional Interest Deferral
  - #46">(a) Deferral of Interest Payments: The Issuer may, subject as provided in Conditions 5(b) (Optional Interest Deferral … Optional Settlement of Arrears of Interest) and 5(c) (Optional Interest Deferral … Mandatory Settlement of Arrears of Interest) bel...
  - #47">(b) Optional Settlement of Arrears of Interest: Arrears of Interest may be satisfied at the option of the Issuer, in whole or in part, at any given time (the "Optional Deferred Interest Settlement Date") following delivery of a notice to such effect g...
  - #47">(c) Mandatory Settlement of Arrears of Interest: Notwithstanding the provisions of Condition 5(b) (Optional Interest Deferral … Optional Settlement of Arrears of Interest), the Issuer shall pay any outstanding Arrears of Interest in whole, but not in ...
    - #47">(i) as soon as reasonably practicable (but not later than the fifth business day) following the date on which a Compulsory Arrears of Interest Settlement Event occurs;
    - #47">(ii) following any Deferred Interest Payment, on the next scheduled Interest Payment Date on which the Issuer does not elect to defer in whole the interest accrued in respect of the relevant Interest Period;
    - #47">(iii) the date on which the Securities are redeemed or repaid in accordance with Condition 6 (Redemption and Purchases) or become due and payable in accordance with Condition 9 (Enforcement Events and No Events of Defaults); and
    - #47">(iv) the date on which the Securities are substituted or varied in accordance with Condition 12(c).
    - #47">(i) a Dividend Declaration is made in respect of any Junior Obligations or any Parity Obligations (other than in respect of any such dividend, distribution or payment paid or made exclusively in Ordinary Shares of the Guarantor); or
    - #47">(ii) the Guarantor or any of its subsidiaries has repurchased, redeemed or otherwise acquired any Junior Obligations or any Parity Obligations,
- #48">6. Redemption and Purchase
  - #48">(a) Final redemption: Subject to any early redemption described below, the Securities are undated securities with no specified maturity date. The Securities may not be redeemed at the option of the Issuer other than in accordance with Conditions 6(b) ...
  - #48">(b) Issuer's Call Option: The Issuer may, by giving not less than 30 nor more than 60 days' notice to the Fiscal Agent, the Paying Agents and, in accordance with Condition 14 (Notices), the Holders (which notice shall be irrevocable), redeem the Secur...
  - #48">(c) Redemption for Taxation Reasons: If, immediately prior to the giving of the notice referred to below, a Tax Event or a Withholding Tax Event has occurred and is continuing, then the Issuer may, subject to having given not less than 30 nor more tha...
  - #48">(d) Redemption for Accounting Reasons: If, immediately prior to the giving of the notice referred to below, an Accounting Event has occurred and is continuing, then the Issuer may, subject to having given not less than 30 nor more than 60 days' notice...
  - #49">(e) Redemption for Rating Reasons: If, immediately prior to the giving of the notice referred to below, a Capital Event has occurred and is continuing, then the Issuer may, subject to having given not less than 30 nor more than 60 days' notice to the ...
  - #49">(f) Redemption following a Substantial Purchase Event: If, immediately prior to the giving of the notice referred to below, a Substantial Purchase Event has occurred, then the Issuer may, subject to having given not less than 30 nor more than 60 days'...
  - #49">(g) Preconditions to Redemption: Prior to serving any notice of redemption pursuant to this Condition 6 (other than Condition 6(b) (Redemption and Purchase … Issuer's Call Option)), the Guarantor shall
    - #49">(i) deliver to the Fiscal Agent a certificate signed by two directors of the Guarantor stating that the relevant requirement or circumstance giving rise to the right to redeem is satisfied;
    - #49">(ii) in the case of a Tax Event or Withholding Tax Event deliver to the Fiscal Agent an opinion of independent legal or other tax advisers to the effect set out in paragraph (i) above;
    - #49">(iii) in the case of an Accounting Event, deliver to the Fiscal Agent the relevant opinion from the relevant accountancy firm; and
    - #49">(iv) in the case of a Capital Event, deliver to the Fiscal Agent the relevant confirmation from the relevant Rating Agency.
  - #49">(h) Purchase: Each of the Issuer, the Guarantor and their respective subsidiaries may at any time purchase Securities in the open market or otherwise at any price (provided that, if they should be cancelled pursuant to this Condition 6(h), they are pu...
  - #50">(i) Cancellation: All Securities so redeemed and any unmatured Coupons attached to or surrendered with them will be cancelled and may not be re-issued or re-sold.
- #50">7. Payments
  - #50">(a) Method of Payment: Payments of principal and interest will be made against presentation and surrender (or, in the case of a partial payment, endorsement) of Securities or the appropriate Coupons (as the case may be) at the specified office of any ...
  - #50">(b) Payments subject to fiscal laws: All payments are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 8 (Taxation). No commissions or expenses sh...
  - #51">(c) Unmatured Coupons: Upon the due date for redemption of any Security, unmatured Coupons relating to such Security (whether or not attached) shall become void and no payment shall be made in respect of them. Where any Security is presented for redem...
  - #51">(d) Exchange of Talons: On or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet issued in respect of any Securities, the Talon forming part of such Coupon sheet may be surrendered at the specified office of the Fiscal...
  - #51">(e) Payments on business days: A Security or Coupon may only be presented for payment on a day which is a business day in the place of presentation (and, in the case of payment by transfer to a euro account, a day that is a Business Day). No further i...
  - #51">(f) Paying Agents: The initial Paying Agents and their initial specified offices are listed below. The Issuer and the Guarantor reserve the right at any time to vary or terminate the appointment of any Paying Agent and appoint additional or other Payi...
- #51">8. Taxation
  - #51">(a) Additional Amounts: All payments of principal and interest in respect of the Securities and the Coupons by the Issuer or (as the case may be) the Guarantor under the Guarantee will be made without withholding or deduction for, or on account of, an...
    - #51">(i) to, or to a third party on behalf of, a Holder or to the beneficial owner of any Security or Coupon who is liable for Taxes in respect of such Security or Coupon by reason of his having some connection with The Netherlands or the Kingdom of Spain ...
    - #51">(ii) presented for payment more than 30 days after the Relevant Date except to the extent that the relevant Holder or the beneficial owner thereof would have been entitled to such Additional Amounts on presenting the same for payment on the thirtieth ...
    - #51">(iii) in relation to any estate, inheritance, gift, sales, transfer or similar Taxes;
    - #52">(iv) to, or to a third party on behalf of, a Holder or to the beneficial owner of any Security or Coupon if the Issuer or the Guarantor does not receive in a timely manner a duly executed and completed certificate from the Fiscal Agent, pursuant to th...
    - #52">(v) where such withholding or deduction of Taxes is imposed, withheld or deducted by reason of the failure of the Holder or the beneficial owner of any Security or Coupon to comply with the Issuer's or the Guarantor's request addressed to the Holder o...
    - #52">(vi) presented for payment in the Kingdom of Spain;
    - #52">(vii) presented for payment by or on behalf of a Holder who would have been able to avoid such withholding or deduction by presenting the relevant Security to another Paying Agent in a Member State of the European Union; or
    - #52">(viii) any taxes that are imposed or withheld pursuant to Sections 1471 through 1474 of the Internal Revenue Code of 1986 (FATCA) (or any amended or successor version of such sections that is substantively comparable and not materially more onerous to...
  - #52">(b) Tax Credit Payment: If any Additional Amounts are paid by the Issuer or, as the case may be, the Guarantor under this Condition for the benefit of any Holder and such Holder, in its sole discretion, determines that it has obtained (and has derived...
  - #52">(c) Tax Credit Clawback: If any Holder makes any payment to the Issuer or, as the case may be, the Guarantor pursuant to this Condition and such Holder subsequently determines in its sole opinion, that the credit, relief, remission or repayment in res...
  - #53">(d) Tax Affairs: Nothing in Conditions 8(b) (Taxation … Tax Credit Payment) and 8(c) (Taxation … Tax Credit Clawback) above shall interfere with the right of any Holder to arrange its tax or any other affairs in whatever manner it thinks fit, oblige a...
  - #53">(e) Definitions: References in these Conditions to (i) "Principal" shall be deemed to include all amounts in the nature of principal payable pursuant to Condition 7 (Payments) or any amendment or supplement to it; (ii) "interest" shall be deemed to in...
  - #53">(f) Applicable law for Spanish tax purposes: The Guarantor will apply the First Additional Provision of Law 10/2014 to the Securities for Spanish tax purposes.
  - #53">(g) Substitute taxing jurisdiction: If, pursuant to the Issuer's option under Condition 12(c) (Substitution and Variation), the Securities are exchanged for new securities of any wholly-owned direct or indirect finance subsidiary of the Guarantor that...
- #53">9. Enforcement Events and No Events of Default
- #54">10. Prescription
- #54">11. Replacement of Securities and Coupons
- #54">12. Meetings of Holders of Securities and Modification, Substitution and Variation
  - #54">(a) Meetings of Holders of Securities: The Fiscal Agency Agreement contains provisions for convening meetings of Holders of Securities to consider matters affecting their interests, including the sanctioning by Extraordinary Resolution (as defined in ...
  - #54">(b) Modification: The Securities, these Conditions, the Deed of Covenant and the Deed of Guarantee may be amended without the consent of the Holders of Securities to correct a manifest error. No other modification may be made to the Securities, these ...
  - #55">(c) Substitution and Variation: If at any time after the Issue Date the Issuer and/or the Guarantor determines that a Tax Event, a Withholding Tax Event, an Accounting Event or a Capital Event has occurred, the Issuer may, as an alternative to an earl...
    - #55">(i) the Issuer giving not less than 30 nor more than 60 days' notice to the Fiscal Agent and the Holders in accordance with Condition 14 (Notices);
    - #55">(ii) the Issuer complying with the rules of any stock exchange (or any other relevant authority) on which the Securities are for the time being admitted to trading, and (for so long as the rules of such exchange require) the publication of any appropr...
    - #55">(iii) the Issuer paying any outstanding Arrears of Interest in full prior to such exchange or variation;
    - #55">(iv) the Exchanged Securities or Varied Securities shall: (A) rank at least pari passu with the ranking of the Securities prior to the exchange or variation, (B) have the benefit of a guarantee (the "Exchanged or Varied Guarantee") from the Guarantor ...
    - #56">(v) the preconditions to redemption set out in Condition 6(g) having been satisfied and the terms of the exchange or variation (in the sole opinion of the Issuer or Substitute Issuer or the Guarantor, as the case may be) not being prejudicial to the i...
    - #56">(vi) the issue of legal opinions addressed to the Fiscal Agent (and which shall be made available to the Holders at the specified offices of the Fiscal Agent during usual office hours) for the benefit of the Holders from one or more international law ...
  - #56">Notwithstanding Condition 8(a) (Taxation … Additional Amounts), if at any time after the Issue Date, the Issuer is required to withhold on account of Taxes imposed or levied in The Netherlands on any payment under the Securities, the Issuer may on any...
  - #56">Any such exchange or variation shall be subject to the fulfilment of the same conditions as described under Condition 12(c) (Substitution and Variation) in relation to Exchanged Securities or Varied Securities if a Tax Event, a Withholding Tax Event, ...
- #57">13. Further Issues
- #57">14. Notices
- #57">15. Contracts (Rights of Third Parties) Act 1999
- #57">16. Governing Law
  - #57">(a) Governing Law: The Fiscal Agency Agreement, the Securities, the Coupons and the Guarantee and any non-contractual obligations arising out of or in connection with them are governed by and shall be construed in accordance with English law, other th...
  - #57">(b) Jurisdiction: The courts of England have exclusive jurisdiction to settle any dispute (a "Dispute") arising from or connected with the Securities or the Coupons (including a dispute relating to the existence, validity or termination of the Securit...
  - #57">(c) Agent for Service of Process: The Issuer agrees that the documents which start any Proceedings and any other documents required to be served in relation to those Proceedings may be served on it by being delivered to Telefónica Digital Limited, 20 ...
- #58">17. Definitions
#64">If:
- #64">(a) the Temporary Global Security is not duly exchanged, whether in whole or in part, for the Permanent Global Security by 5.00 p.m. (London time) on the thirtieth day after the time at which the preconditions to such exchange are first satisfied; or
- #64">(b) Definitive Securities have not been delivered by 5.00 p.m. (London time) on the thirtieth day after the bearer has duly requested exchange of the Permanent Global Security for Definitive Securities; or
- #64">(c) the Temporary or Permanent Global Security (or any part of it) has become due and payable in accordance with the Conditions of the Securities or the date for final redemption of the Securities has occurred and, in either case, payment in full of t...
#66">FORM OF GUARANTEE
#66">THIS DEED WITNESSES as follows:
- #66">1. Interpretation
  - #66">1.1 All terms and expressions which have defined meanings in the Conditions (as defined in the Deed of Covenant), the Fiscal Agency Agreement or the Deed of Covenant shall have the same meanings in this Deed of Guarantee except where the context requi...
  - #66">1.2 Any reference in this Deed of Guarantee to a Clause is, unless otherwise stated, to a clause hereof.
  - #66">1.3 All references in this Deed of Guarantee to an agreement, instrument or other document (including the Conditions, the Fiscal Agency Agreement and the Deed of Covenant) shall be construed as a reference to that agreement, instrument or other docume...
  - #66">1.4 Any reference in this Deed of Guarantee to any legislation (whether primary legislation or regulations or other subsidiary legislation made pursuant to primary legislation) shall be construed as a reference to such legislation as the same may have...
  - #66">1.5 Clause headings are for ease of reference only.
- #66">2. Guarantee and Indemnity
  - #66">2.1 The Guarantor hereby unconditionally and irrevocably guarantees on a subordinated basis:
    - #66">2.1.1 to each Holder the due and punctual payment of all sums expressed to be payable from time to time by the Issuer in respect of any Security as and when the same become due and payable and accordingly undertakes to pay to such Holder, forthwith in...
    - #67">2.1.2 to each Relevant Account Holder the due and punctual payment of all sums which become payable from time to time by the Issuer to such Relevant Account Holder in respect of the Direct Rights as and when the same become due and payable and accordi...
  - #67">2.2 The Guarantor undertakes to each Holder and each Relevant Account Holder that, should any amount referred to in Clause 2.1 not be recoverable from the Guarantor thereunder for any reason whatsoever (including, without limitation, by reason of any ...
- #67">3. Taxes
- #67">4. Preservation of Rights
  - #67">4.1 The obligations of the Guarantor herein contained shall be deemed to be undertaken as principal debtor.
  - #67">4.2 The obligations of the Guarantor herein contained shall be continuing obligations notwithstanding any settlement of account or other matters or things whatsoever and, in particular but without limitation, shall not be considered satisfied by any i...
  - #67">4.3 Neither the obligations expressed to be assumed by the Guarantor herein contained nor the rights, powers and remedies conferred upon the Holders, the Relevant Account Holders or any of them by this Deed of Guarantee or by law shall be discharged, ...
  - #68">4.4 Any settlement or discharge between the Guarantor and the Holders, the Relevant Account Holders or any of them shall be conditional upon no payment to the Holders, the Relevant Account Holders or any of them by the Issuer or any other person on th...
  - #68">4.5 No Holder or Relevant Account Holder shall be obliged before exercising any of the rights, powers or remedies conferred upon it by this Deed of Guarantee or by law:
  - #68">4.6 The Guarantor agrees that so long as any amounts are or may be owed by the Issuer under any of the Securities or the Deed of Covenant or the Issuer is under any actual or contingent obligations thereunder, the Guarantor shall not exercise rights w...
- #68">5. Conditions, Status and Subordination
  - #68">5.1 The Guarantor undertakes to comply with and be bound by those provisions of the Conditions which relate to it and which are expressed to relate to it.
  - #68">5.2 The Guarantor undertakes that its obligations hereunder rank, and will at all times rank, as described in Condition 3(b) (Guarantee, Status and Subordination of the Guarantee … Status of the Guarantee).
  - #68">5.3 In the event of the Guarantor being declared in insolvency ("concurso") under Spanish insolvency law, the provisions of Condition 3(c) (Guarantee, Status and Subordination of the Guarantee … Subordination of the Guarantee) shall apply.
- #68">6. Delivery of Deed of Guarantee
- #69">7. Deed Poll; Benefit of Guarantee
  - #69">7.1 This Deed of Guarantee shall take effect as a Deed Poll for the benefit of the Holders and the Relevant Account Holders from time to time.
  - #69">7.2 The obligations expressed to be assumed by the Guarantor herein shall enure for the benefit of each Holder and Relevant Account Holder, and each Holder and each Relevant Account Holder shall be entitled severally to enforce such obligations agains...
  - #69">7.3 The Guarantor may not assign or transfer all or any of its rights, benefits and obligations hereunder except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation of the Guarantor on terms appro...
- #69">8. Provisions Severable
- #69">9. Notices
  - #69">9.1 All communications to the Guarantor hereunder shall be made in writing (by letter, telex or fax) and shall be sent to the Guarantor at:
  - #69">9.2 Every communication sent in accordance with Clause 9.1 shall be effective upon receipt by the Guarantor; and provided, however, that any such notice or communication which would otherwise take effect after 4.00 p.m. on any particular day shall not...
- #69">10. Law and Jurisdiction
  - #69">10.1 Governing Law: This Deed of Guarantee and all non-contractual obligations arising from or connected with it, are governed by and shall be construed in accordance with English law, except for the provisions of Conditions 3(b) (Guarantee, Status an...
  - #69">10.2 English courts: The courts of England have exclusive jurisdiction to settle any dispute (a "Dispute"), arising from or connected with this Deed of Guarantee (including a dispute regarding the existence, validity or termination of this Deed of Gua...
  - #70">10.3 Appropriate forum: The Guarantor agrees that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue to the contrary.
  - #70">10.4 Rights of the Holders and Relevant Account Holders: Clause 10.2 (English courts) is for the benefit of the Holders and the Relevant Account Holders only. As a result, nothing in this Clause 10 (Law and jurisdiction) prevents the Holders and Relev...
  - #70">10.5 Process agent: The Guarantor agrees that the documents which start any Proceedings and any other documents required to be served in relation to those Proceedings may be served on it by being delivered to, Telefónica Digital Limited, 20 Air Street...
#71">USE OF PROCEEDS
#72">DESCRIPTION OF THE ISSUER
#72">Introduction
#72">Business
#72">Directors
#72">Auditors
#73">DESCRIPTION OF THE GUARANTOR
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#73">On 24 October 2017, after obtaining all the relevant regulatory approvals, Telefónica transferred 62 million shares of Telxius (representing 24.8 per cent. of its share capital) to KKR in exchange for 790.5 million ( 12.75 per share). Following the e...
#73">On 13 November 2017, KKR exercised the call option foreseen in the agreement over 38 million shares of Telxius (representing 15.2 per cent. of its share capital) in exchange for 484.5 million ( 12.75 per share). Following the closing of this sale, ex...
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#97">TAXATION
#97">Dutch Tax
#97">For the purpose of the paragraph "Taxes on Income and Capital Gains" below it is assumed that, a holder of Securities, being an individual or a non-resident entity, does not have nor will have a substantial interest (aanmerkelijk belang), or - in the...
#98">Investors should consult their professional advisers on the tax consequences of their acquiring, holding and disposing of Securities.
- #98">1. WITHHOLDING TAX
- #98">2. TAXES ON INCOME AND CAPITAL GAINS
#98">Residents
#98">Resident entities
#98">Resident individuals
#98">Non-residents
- #99">3. GIFT AND INHERITANCE TAXES
- #99">4. VALUE ADDED TAX
- #99">5. OTHER TAXES AND DUTIES
- #99">6. RESIDENCE
#99">Spanish Tax
#100">The proposed financial transactions tax ("FTT")
#102">SUBSCRIPTION AND SALE
#102">United Kingdom
#102">Each Joint Bookrunner has further represented, warranted and undertaken that:
- #102">(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection wi...
- #102">(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom.
#102">United States of America
#102">The Netherlands
#102">The Kingdom of Spain
- #103">(a) to qualified investors (investitori qualificati), as defined pursuant to Article 100 of Legislative Decree no. 58 of 24 February 1998 (the "Financial Services Act") and Article 34-ter, paragraph 1, letter (b) of CONSOB regulation No. 11971 of 14 M...
- #103">(b) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Issuers Regulation.
#103">General
#104">GENERAL INFORMATION
#104">Authorisation
- #104">1. The creation and issue of the Securities has been authorised by a resolution of the Board of Managing Directors of the Issuer dated 17 November 2017. The giving of the Guarantee of the Securities has been authorised by a resolution of the Executive...
#104">Legal and Arbitration Proceedings
- #104">2. Save as described in "Risk Factors … Telefónica and Telefónica Group companies are party to lawsuits, tax claims and other legal proceedings" on page 20 of this Prospectus, and under "Description of the Guarantor … Legal Proceedings" and "Descripti...
#104">Significant/Material Change
- #104">3. Since 31 December 2016 there has been no material adverse change in the prospects of the Issuer, and since 30 June 2017 there has been no significant change in the financial or trading position of the Issuer. Since 31 December 2016 there has been n...
#104">Auditors
- #104">4. The consolidated financial statements of the Guarantor have been audited without qualification for the years ended 31 December 2016 and 2015 by Ernst & Young, S.L. with its registered address at Plaza Pablo Ruiz Picasso, 1, 28020, Madrid, Spain, re...
#105">Documents on Display
- #105">5. Copies of the following documents may be inspected during normal business hours at the offices of the Fiscal Agent and at the registered/head office of the Issuer and the Guarantor for 12 months from the date of this Prospectus:
  - #105">(a) the articles of association of the Issuer (together with English translations thereof);
  - #105">(b) the by-laws of the Guarantor (together with English translations thereof);
  - #105">(c) drafts (subject to modification) of the Fiscal Agency Agreement, the Deed of Covenant and the Deed of Guarantee;
  - #105">(d) the audited unconsolidated financial statements of the Issuer for the years ended 31 December 2016 and 2015 and the unaudited interim unconsolidated financial information of the Issuer for the six months ended 30 June 2017; and
  - #105">(e) the audited consolidated financial statements of the Guarantor for the years ended 31 December 2016 and 2015, the unaudited but reviewed condensed consolidated interim financial statements of the Guarantor for the six months ended 30 June 2017 and...
#105">Yield
- #105">6. From (and including) the Issue Date to (but excluding) the First Reset Date, the yield on the Securities will be 2.627 per cent. per annum. The yield is calculated at the Issue Date on the basis of the Issue Price and it is not an indication of fut...
#105">Legend Concerning US Persons
- #105">7. The Securities and any Coupons and Talons appertaining thereto will bear a legend to the following effect: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the lim...
#105">Listing
- #105">8. It is expected that the listing of the Securities on the Official List of the FCA and the admission of the Securities to trading on the Regulated Market of the London Stock Exchange will take place on or about 8 December 2017, subject to the issue ...
#105">Fees
- #105">9. The estimated costs and expenses in relation to admission to trading are £4,200.
#105">ISIN and Common Code
- #105">10. The Securities have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN is XS1731823255 and the common code is 173182325.
#105">Conflicts of Interests
- #105">11. Certain Joint Bookrunners and/or their affiliates (including parent companies) may have engaged in various general financing and banking transactions with, and provided financial advisory and investment banking services to the Issuer, the Guaranto...
- #106">In addition, in the ordinary course of their business activities, the Joint Bookrunners and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial i...