Supplemental Disclosure Material - Ono

We are subject to increasing operating costs and inflation risks, which may adversely affect our earnings.
While we attempt to offset increases in operating costs through a variety of measures focused on increasing
revenues, there is no assurance that we will be able to do so. Therefore, operating costs may rise faster than associated
revenue, resulting in a material negative impact on our cash flow and net profit.
We are also impacted by inflationary increases in salaries, wages, benefits and other administrative costs. In
addition, a number of our contracts are indexed to the consumer price index (“CPI”). Increases in the CPI could significantly
impact our payment obligations with respect to our suppliers.
Our capital expenditures may not generate a positive return.
The broadband internet, television and telephony markets in which we operate are capital intensive. Significant
capital expenditures are required to attract and retain customers to our networks, including expenditures for equipment and
installation costs and the implementation of new technologies such as Docsis 3.0 and next generation TV (TiVo). No
assurance can be given that our current or future upgrades will generate a positive return or that we will have adequate capital
available to finance future upgrades. If we are unable to, or elect not to, pay for costs associated with adding new customers,
expanding or upgrading our networks or making our other planned or unplanned capital expenditures, our growth could be
limited and our competitive position could be harmed.
We operate in a highly regulated market as a result of which we may be required to make additional expenditures or limit
our revenues.
We operate in a highly regulated market subject to the supervision of various regulatory bodies, including local,
regional, national and European Union authorities. Changes in these regulations may increase our administrative and
operational expenses or limit our revenues. We are subject to, among other things:
• Rules governing the interconnection between different networks and the interconnection rates that we can
charge and pay for fixed and mobile line connections;
• Regulations relating to accessing Telefónica’s network for offering fiber to the home (“FTTH”), ADSL and
indirect access services and regulations relating to accessing mobile network operators for the provision of
mobile line services to end-customers;
• Rules for authorization of renewals and transfers;
• Regulations on universal service obligations including recent developments on the National Universal Service
Fund and contributions to it with respect to previous year. (See “Regulation—Regulation of Electronic
Communications Services—Universal Service, Public Service Obligations and Other Obligations of Public
Character”);
• Regulations relating to customer privacy and data protection and other consumer rights;
• Regulations on intelligent network services;
• Taxes such as under the RTVE Financing Law as defined in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations of ONOMidco—Factors Affecting Our Business During the
Period Under Review—Regulatory Costs” and regulations requiring us to invest in content;
• Regulation and taxes on the use of the spectrum;
• Other requirements covering a variety of operational areas such as land use and environmental protection,
technical standards and subscriber service requirements and legal interception obligations;
• Significant market power regulations and other restrictions relating to competition;
• Changes in Telefónica’s regulatory rate (in light of which we determine the rate for our wholesale services);
• Regulations on television and other audiovisual communication services;
• Regulations relating to accessing content in the audiovisual market; and
• Other regulations.
One of our regulators, the CMT, is required under current regulations to define the retail and wholesale
telecommunications markets in Spain that are not competitive. The CMT has concluded all market reviews and adopted a
substantial number of decisions whereby, in compliance with the EU Network Regulation Framework and the General Law on
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