DGAP-RPT:Telefónica Deutschland sells c.10,100 mobile sites to Telxius for EUR 1.5 billion

DGAP Related Party Transactions announcement: Telefónica Deutschland Holding AG / Release of an announcement according to Article 111c of the AktG [the German Stock Corporation Act] Telefónica Deutschland sells c.10,100 mobile sites to Telxius for EUR 1.5 billion 08.06.2020 / 19:02 Dissemination of a Related Party Transactions announcement transmitted by DGAP - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement.

Munich, 8 June 2020 Telefónica Deutschland Holding AG: Publication of material transactions with related parties pursuant to § 111c AktG Telefónica Deutschland sells c.10,100 mobile sites to Telxius for EUR 1.5 billion On 8 June 2020, Telefónica Deutschland (specifically Telefónica Germany GmbH & Co. OHG) signed a comprehensive agreement with Telxius Telecom S.A. (Telxius) on the spin-off and sale of its passive infrastructure on c.10,100 mobile sites including c.10,000 rooftop sites and up to 80 tower sites at a purchase price of EUR 1.5 billion. The active radio technology at the transferred sites remains the property of Telefónica Deutschland and will continue to be used by the company to operate the mobile communications network. The agreed purchase price implies an EV/EBITDA multiple of c.23x. Telefónica S. A. indirectly holds 69.2% of Telefónica Deutschland Holding AG and at the same time indirectly holds a majority interest in Telxius, as it holds 50.01% alongside KKR & Co. Inc. and Pontegadea Inversiones S.L. with indirect shareholdings of 40% and 9.99% in Telxius, respectively. The transaction will be implemented by spinning off the passive infrastructure and the associated rental and usage agreements to two wholly-owned subsidiaries of Telefónica Deutschland, which were founded specifically for this purpose and whose shares will subsequently be transferred to Telxius. The transaction will take place in two steps: Firstly, c.60% of the included locations are expected to be transferred to the first of the two companies by August 2020. The ownership in this first company is subsequently anticipated to transfer to Telxius before year-end 2020. A further c.40% of the sites will be transferred to the second company in mid-2021, whose ownership is subsequently anticipated to transfer to Telxius in August 2021. 85% of the respective proportionate purchase price will be due for payment following transfer of ownership in the respective company. The remaining 15% of both pro rata purchase prices will be due for payment on the fifth anniversary of the first transfer. At the same time, Telefónica Deutschland will lease space on the transferred passive infrastructure for the installation and operation of its active radio technology. The leasing rate is composed of the basic rent of the transferred tenancy agreements and an infrastructure top-up. The consideration to be paid by Telefónica Deutschland is within the range of comparable transactions in Europe. The initial term of both leases is eight years, starting with the respective spin-off. Telefónica Deutschland has the unilateral option to extend both lease agreements three times for five years each time. As part of the transaction, Telefónica Deutschland will provide Telxius with various services related to the operation of the passive infrastructure at cost-based rates plus a customary mark-up for a transitional period of up to three years. In addition, Telefónica Deutschland will provide maintenance services at rates derived from existing procurement contracts for up to eight years. As part of the cooperation, Telefónica Deutschland will also lease space from Telxius for the installation of active radio technology on a total of 2,400 additional sites, which will be built by Telxius over the next four years. This leasing consideration to be paid by Telefónica Deutschland is also within the range of comparable transactions in Europe. Independent external experts supported Telefónica Deutschland in the preparation of the transaction. In this context, Duff & Phelps provided a fairness opinion in accordance with IDW S8. The transaction is still subject to the approval of the responsible authorities, especially the Federal Cartel Office. With this transaction, Telefónica Deutschland monetises the currently attractive valuations for constructional network infrastructure and thus maximises shareholder value. Simultaneously, the company further enhances its financial flexibility. At the same time, Telefónica Deutschland secures access to important locations via the long-term lease agreements for the expansion of the 5G network in 2020. The transaction also ensures that Telefónica Deutschland has gained with Telxius a competent partner for further expansion of its network infrastructure. In December 2019, Telefónica Deutschland launched a growth-oriented two-year investment programme with a network focus. It is centred on boosting rural coverage primarily with 4G and accelerating urban capacity primarily with 5G. In accordance with this investment programme, the Capex to Sales ratio will be 17-18% in 2020/21 and normalises thereafter. Telefónica Deutschland started 2020 with good operational and financial momentum and results for the first quarter 2020 showed only limited COVID-19 impact. In Germany, the first relaxations of COVID-19 related restrictions are being implemented and the company constantly monitors and analyses the situation and its further development. On this background, Telefónica Deutschland confirms the company's outlook for the financial year 2020 as published in the 2019 Annual Financial Report. Further information: Telefónica Deutschland Investor Relations Georg-Brauchle-Ring 50 D-80992 München t +49 (0)89 2442-1010 f +49 (0)89 2442-2000 e ir-deutschland@telefonica.com

08.06.2020 The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Archive at www.dgap.de

Language: English Company: Telefónica Deutschland Holding AG Georg-Brauchle-Ring 50 80992 München Germany Internet: www.telefonica.de MDAX TecDAX End of News DGAP News Service

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