1) Telefónica is a leading telecommunications company operating in Europe and Latin America with over 240,000 employees and serving over 219 million customers. 2) Telefónica R&D focuses on innovation in networks, platforms, services and applications to support Telefónica's business. One of its key areas is the Connected Car initiative. 3) The Connected Car initiative aims to provide smart services for drivers and passengers through three pillars: mobile services for drivers, a roadside network for vehicle-to-infrastructure communication, and an in-vehicle software platform for advanced applications.

1. Carolina Pinart, Daniel García Networked Vehicles Division TELEFÓNICA I+D November 5, 2008 © 2008 Telefónica Investigación y Desarrollo, S.A. Unipersonal Telefónica Research and Development The Connected Car initiative – A focus on services

3. The Telefónica Group: a solid leader in the telco industry

5. Total accesses (as reported by companies)=Fixed lines + Mobile subscribers + Narrow and Broad Band + Pay TV. Geographic Diversification 9M07 Business Diversification 9M07 … as it enjoys a unique diversified portfolio among the largest operators at a worldwide level Total accesses worldwide Top 10 Million accesses as of September 2007 73.2% Accesses Accesses Revenues

6. Telefónica is a leader in the Latin American Telco market … Data as of September 2007 Note: Central America includes Guatemala, Panama, El Salvador and Nicaragua * As of 2006, using IDATE’s 2006 accesses estimates (DigiWorld 2007) Argentina: 18.8 Mill. Brazil: 46.6 Mill. Central America: 5.0 Mill. Colombia: 10.1 Mill. Chile: 9.1 Mill. Ecuador: 2.6 Mill. México: 11.1 Mill. Peru: 11.2 Mill. Uruguay: 1.0 Mill. Venezuela: 9.8 Mill. 1 1 1 2 2 1 1 1 2 2 1 1 1 1 2 Wireline market ranking Mobile market ranking Total Accesses (as of Sep’07) 126.5 Mill. Market Share* (2006) 28%

7. ... and has obtained a relevant scale in the European market … Total Accesses (as of Sep’07) 86.1 Mill. Market Share* (2006) 10% Data as of September 2007 * As of 2006, using IDATE’s 2006 accesses estimates for EU-25 (DigiWorld 2007) Wireline market ranking Mobile market ranking Germany : 12.6 Mill. Spain : 45.6 Mill. Ireland : 1.6 Mill. UK : 18.0 Mill. Czech Republic : 7.8 Mill. Slovakia : 0.5 Mill. 4 1 1 1 1 2 1 3

8. Moreover, Telefónica’s activity has a clear positive impact in the societies where it is present ... a driver for technological innovation and employment ... As an engine of economic development … ... a company committed to help overcome the digital divides ... ... and a perfect partner to foster social development IN SOCIETY

9. Telefónica is helping to overcome the digital divides and is committed to social development Skills inclusion 25,000 child workers reintegrated into school in Latin America Used by more than 25 Million people in Spain and Latin America Telefónica invested in Social Action more than €50 Mill. during 2006, which benefited more than 33 million people worldwide Telefónica’s global investment in Social Action (€ Thousand) +12.4% Social inclusion Telefónica Accesible, launched in partnership with people with disabilities For Spanish employees in retirement

10. Telefónica R&D: Telefónica’s research and development unit

11. Telefónica I+D was created in 1988 with the mission of contributing to the improvement of the Telefónica Group competitiveness through technological innovation. Network and platforms Services for the final customer Operation Support Systems (OSS) Business Support Systems (BSS) Multimedia Applications, Multilingual Services and new Internet paradigms Telefónica I+D's activities focus 45M€ invested in Applied Research 207M€ of total activity 1189 staff 94% University graduates Collaborating with 36 companies on Project development Agreements with 29 universities 89 EU financed projects 260 IPR’s protected and registered 203 papers and conferences 350 Trainees Telefónica I+D’s figures of the year 2006

12. Our centres MADRID (1,263 people) BARCELONA (187 people) VALLADOLID (Boecillo) (242 people) HUESCA (Walqa) (26 people) MEXICO (2 people) BRAZIL (182 people) GRANADA (31 people) 1,933 people are working in our centres around the world Last update on December 31st, 2007

13. In 2007 Technological Innovation (1) in Telefónica exceeded € 4,300 millions (1) According to OECD's definitions. Products/Services/ Processes Development Technological Innovation (1) R&D M€ 594 Who does it? What are we developing? M€ 4,384 How do we innovate? Who do innovate? Applied Research R&D M€ 61 Who promotes it?

14. The complete innovation cycle Where? TID Research Development Invention Pre-commercial Innovation Commercial Innovation Commercial Exploitation Research Development of innovation Exploitation BU’s Who? Financing? Local Global Regional Applied research Evolution Deployment Basic research Pilot test Prototype Demos Initial Deployment Solution proposal Telefónica I+D focus Subsidies and Corporate Business Units

15. We are a key element in the Open Innovation process of Telefónica

16. Initiatives Telefónica Corporate Innovation Programme Incubation Programme Venture Capital Corporate Innovation Group

17. Telefónica R&D’s Direction for Services to the End Customer

18. Telefonica I+D Areas of activity Internet and Multimedia Services for the Final Customer Networks and Platforms OSS BSS

19. Services for the Final Customer Areas of activity Services for the Enterprise Services for the Final Customer Personal Mobile Services Connected Car Connected Digital Home eHealth Services

22. The Connected Car, a key area within Telefónica R&D Autonomic Computing Augmented reality Device management Widgets Gadgets mashups Ambient intelligence Multimedia search QoS QoE User Generated Services Internet of Things Identity Personalization Recommendation systems Hybrid worlds Ubiquitous video Future service platforms Ubiquitous & Seamless Access Social media & communications Devices Enablers 2008-11 Strategy Services Infrastructures Long Term Mid Term Short Term eEntertainment Broadband access eHealth Connected car Rating & charging Digital Home NGN Core network evolution Telepresence Open capabilities Advertising Security & trust Financial services New generation of business environments Urban computing Services for the enterprise Base Of Pyramid Mobile Internet & personal mobile services User characterization Next generation SOA/WEB Agile networks Audio/video/image processing UX - User eXperience Key areas Long tail areas

26. Our R&D approach 1 Know the key agents in the ITS field, and also our competitors, whoever and wherever they are 3 Focus on product ideas aligned with the strategy Movistar Car, Telefónica Road Network, Telefónica In-Car Box Work with and learn from the big ones - Partnerships to turn product ideas into products - Basic and applied research “providers” to solve challenges of current product ideas and to spot future product ideas 4 2 Have a clear strategy for short- and mid-to-long-term, and hints on longer-term Towards Ambient Intelligence & Advanced Networking Hybrid Node OSGi Service Framework

29. © 2008 Telefónica Investigación y Desarrollo, S.A. Unipersonal