Ladies and gentlemen, thank you for standing by, and welcome to the Telefonica's January, June 2020 results conference call. At this time, all participants
session.
As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Pablo Egiran, Global Director of Investor Relations. Please go ahead, sir.
Good morning, and welcome to Telefonica conference call to discuss January, June 2020 results. I'm Paulo Leon, Head of Investor Relations. Before proceeding, let me mention that financial information in this document related to the second quarter 2020 has been prepared under international financial reporting standards as adopted by the European Union. And that this financial information is outdated. This conference call webcast, including the Q And A session, may contain forward looking statements and information relating to the Telefonica Group.
These statements may include financial or operating forecast and estimates statements regarding plans, objectives and expectations regarding different matters. All forward looking statements involve risks and uncertainties including risks relating to the effect of the COVID-nineteen pandemic. That would cause the final developments and results to materially differ from those expressed or implied by such statements. We encourage you to review our publicly available disclosure documents these market regulators. If you don't have a copy of the relevant press release and the slides, please contact the ConneGas Investor Relations team in Madrid during dollars.
Now, let me turn the call over to our Chairman and Chief Executive Officer, Jose Mr. Jose Maria Alvarez.
Thank you, Pablo. Good morning, and welcome to Telefonica's 2nd quarter results conference call. Today with me are Angel Mila, Chief Operating Officer and Laura Avasolo, Chief Finance And Control Officer. As usual, we will first walk you through the slides and we'll then be happy to take any questions you may have. We face extremely challenging operating conditions and unprecedented economic uncertainty still, we remain committed to our local markets and the long term potential.
An accelerated execution of our new Telefonica plant We have stayed true to our ideals, keeping in mind the long term vision without compromising neither our strategy nor our profitability. And we did so through different means, strengthening the value proposition in our coal markets that proved the resilience within such turbulent times with organic OIBDA minus CapEx growing 2% year on year in the second quarter. Staying also pay off with record NTS levels. Making our core business more sustainable in the UK through the deal ID with Liberty Global. As we are trying to pursue in Brazil, again, with the strongest possible partners or in Spain, with good commercial traction and historical levels of profitability.
Sustainability and long term profitability lie as well behind the steps we are taking his time, where we progress in all strategic ops including inorganic alternatives, as proven with the sale of Costa Rica only 3 months after Millicom refused to complete their deal. We on top optimize its business model, OIBDA minus CapEx improved 10 percentage points in organic terms in the 2nd quarter and neutralize FX impact via increasing debt at the local level. Securing key partners that join as well our fastest growing proposition in Telefonica Tech That grows double digit in the quarter despite COVID-nineteen impacts and had generated 1,000,000 in revenues in the first half. We also continue crystallizing value and monetizing assets at Telefonica infra, as proven by the 1,000,000,000 tower transaction Germany that doubles tells user scale to 33,000 towers. And as I said before, We can take all these actions, thanks to our new operating model based on the utilization, agility and efficiency.
We paved the way for the future, while improving cash per serving despite extremely challenging conditions. Our OOD and Escatex margin improved by 1 percentage point in the second quarter demonstrating the strong execution. Moving to the next two slides we present the swift and effective actions we have taken in response to COVID-nineteen. In these unprecedented times, managing commercial relationship becomes all the more critical, whilst introducing a wide range of measures to mitigate top line impact. We have been able to improve business efficiency and generate savings in OpEx And CapEx without compromising our business model.
This has first allowed to deliver strong results at the operating cash flow level. The good news is that our customers stayed with us allowing for a notable commercial and operational recovery since June, suggesting Q2 will likely be the worst quarter in terms of COVID-nineteen impact. How can you turn more efficient in the midst of the pandemics fostering significant growth in sales digital channels while relying in our secure and top quality networks. This, again, strengthened our customers' loyalty. Which improved both year on year and quarter on quarter with NPS reaching 24% in our core 4 markets.
OpEx was tightly controlled, declining 4.9% in the second quarter, year on year in organic terms. Slowdown as a result of COVID-nineteen resulted in a 22.3% annual organic decline. All in all, we have neutralized a negative shock of revenues of $1,800,000,000, reducing the gap gradually from top line to bottom and we have generated a very attractive free cash flow, while improved debt reduction versus previous year. On the next slide, we show the support we have provided to all stakeholders during the crisis, with actions taken in each and every market. For our customers, we provided additional entertainment and mobile data at no extra cost.
For our people, we focus on protecting the safety of all employees with 95% working remotely and appropriate safety measures enacted for key workers. For our suppliers, we acknowledge their need for liquidity and offer flexible payment options. For the wider society, we created a 25 and to provide medical equipment and monetary aid, make our technologically advanced buildings available for governmental and public use across the majority of our footprint, and undertook many other measures across our markets. To safeguard environment, we updated our target of 0 net emission in our 4 core markets bringing this forward to 2030 instead of 2050. And for shareholders, we maintain our dividend and offer a voluntary payments.
Finally, we are leveraging our state of the art infrastructure to support much needed economic recovery across our markets. Moving to Slide 5 to review our 2nd quarter performance highlights. As you can see on the left hand of the slide, revenues declined in the second quarter in organic terms, but excluding the COVID-nineteen impact year on year revenue growth accelerated. We continue to support this growth, leveraging our high quality access base, ultra broadband network, and growing our digital revenues which topped 1,000,000,000 in the second quarter. As mentioned before, effective operational management during the crisis, led us to increase OIBDA minus CapEx in our 4 core markets by 1.9% year on year in organic terms.
While the margin expanded by 1.3 percentage point, a remarkable achievement given the circumstances. To note, Our core markets represents more than 90 percent of Telefonica Group or FDA minus CapEx, which amounted to EUR 2,100,000,000 in the second quarter of this year. And importantly, we remain on a clear deleveraging path with billion reduction in net debt in the quarter, leading to a 7.5 reduction in the last 12 months. Moving now to guidance and dividend. Let me start with the 2020 dividend, which is confirmed at thanks to the hybrid resilience of the business and our solid liquidity position.
The dividend will be payable in to tranches, the first in December 2020 to a voluntary split dividend and the second tranche in June 2021. I would like to note that for the payment made last year, 63% of shareholders opted to receive new shares Corporate enhancing our financial flexibility as just EUR 371,000,000 were paid in cash. Regarding our 2020 outlook, we reiterate the target of a slightly negative to flat OIBDA minus CapEx growth year on year based on the signs of recovery of surge in June July and the market measures taken to reduce operational and capital expenses. Expenditure. For reference, the first half of the year figure was down 2.3%.
Also pleased to reiterate our targets for 2022 of year on year organic revenue growth and OIBDA minus CapEx over revenues expansion of two percentage points versus 2019. Based on the sustained demand and long term growth trends for connectivity and digital services. I will now hand over to Angel to take you with more detail to the group results.
Thank you, Jose Maria. Moving to Slide 7 and looking at our financial performance, The reported figures this quarter are significantly affected by 2 factors: currency depreciation and COVID-nineteen. You can see this impact at the bottom of the slide, and we will explain this in more detail later on. To a lesser extent, OIBDA was impacted by the absence of capital gains booked in second quarter 2019. Revenues amounted to 10,300,000,000, declining 14.8% year on year on a reported basis and 5.6% in organic terms.
In our 4 core markets, revenues declined by 3.8% from the previous year. It is worth highlighting the continued transformation of our top line, especially in the context of the COVID-nineteen crisis. With 67% of our service revenues coming from broadband and connectivity services, 4 percentage points higher than 1 year ago. OIBDA reached 1,000,000,000, down 25.3% year on year or 10% organically. This drop was significantly lower in our 4 core markets with a 6.6 annual decline in organic terms.
Thanks to our focus on profitability, OIBDA minus CapEx was practically flat, declining by only 0.7% organic terms and growing by 1.9% year on year in our 4 core markets, despite the challenging conditions. OIBDA minus CapEx margin also increased year on year for both the group and our core markets. Both in the second quarter and in the first half, thanks to the effective operational management mentioned previously. Net income reached 1,000,000 in Q2 and above 1,000,000 in hedging first half. Earnings per share stood at in underlying terms in the first half of the year.
Free cash flow performance improved sequentially in Q2 nearing 1,000,000,000. And finally, net financial debt stood at 1,000,000,000 as of June, declining 7.5% year on year, thanks to a 1,000,000,000 reduction in Q2. Slide 8 shows that financial and operational impacts in the 1st full quarter affected by COVID-nineteen with clear signs of recovery evident from June 2020. The estimated revenue impact in Q2 amounted to nearly EUR730 1,000,000, with a EUR 338,000,000 impact on OIBDA, attracting around 6 and 8 percentage points, respectively, from organic growth. The main impact on challenges at the revenue level in the form of lower overall commercial activity derived from lockdowns and travel restrictions.
We saw lower handset sales and lower service revenues as a result of almost absent roaming due to travel vans. Service revenues were also affected by a decline in mobile prepaid, a reduction in B2B due to delayed IT projects and certain contract renegotiations. Lower SME revenue and overall promotional activity and discounted tariffs. Nevertheless, during the quarter, we levered our strengths to exploit opportunities presented by the crisis. We took proactive steps to improve our OpEx.
With as much as 50% of the negative top line effects being absorbed through lower direct and commercial expenses, while successfully controlling churn that was down by 40 basis points versus Q2 twenty nineteen. CapEx savings, thanks to our flexible operating business model, also supported financial performance. And meanwhile, digitalization has proven key during the pandemic, as shown by the 12 percentage point increase in the digital channel mix in just 1 quarter to 39% in our core 4 markets. By the high rate of growth in the use of online apps in Brazil. I would like to note that today have seen a sharp recovery in post lockdown markets with a strong resurgence in commercial activity as stores reopen.
We also believe that the COVID-nineteen crisis is likely to significantly accelerate the digitalization shift and with already registering and increasing underlying demand for cloud cyber and health services. Moving to Slide 9. As previously stated, we have seen a clear path to recovery. Year on year revenue growth trends are getting better by the month, in line with the gradual lifting of COVID-nineteen restrictions, as you can see, in our Spanish operations. We can therefore identify me as the month was affected by COVID-nineteen.
As such, operating trends remain positive, ex COVID-nineteen. Looking ahead, our intention is to further leverage capabilities and infrastructure to capitalize on accelerating trends in aiotibic data and ICT among others. Moving to Slide 9, we show how a year on year revenue decline of 1,800,000,000 translated into a 1,100,000,000 drop at OIBDA level. As a result of measures implemented by the group to mitigate the negative effects of COVID-nineteen, resulting in outstanding cost management. As such, OpEx declined minus 13.7 percent in reported terms and minus 4.9 percent inorganic terms.
Moreover, the OIBDA decline was further reduced to 1,000,000,000 in terms of OIBDA Minus CapEx. Thanks for efficient and effective management of investments during the crisis. All this outlines the resilience of our business in the middle of the deepest economic crisis in this In Q2, we moved at pace in the operational management of our 4 core markets, delivering growth year on year, in APA minus CapEx to revenue ratio, despite the COVID impact. At a regional level, it is worth highlighting the growth posted in both Spain and Brazil our 2 largest operations. Turning to Slide 12, Telefonica Spain's Q2 Q2 results were impacted by strict government measures introduced in response to COVID-nineteen.
Throughout this period, we leverage the strength of the largest to the home network in Europe to provide reliable service for our customers, while leading efforts to support the wider society. Since the listing of restrictions and supported by a refreshed offering and football competition restart, commercial activity recovered throughout the quarter. Fiber net adds in May were 21 times higher than in April. And mobile and TV improved as well. This is reflected in net adds recorded across all types of accesses.
Our segmented offering and differential assets are reflected in the growth seen across different tiers of the retail market as well as in the fiber wholesale arena. On the other hand, despite the challenging environment, our strategy to offer added value to our customers, allowed us to maintain robust ARPU and limit churn in our conversion base. In Slide 13, the recovery in commercial activity was reflected in improving revenue trends throughout Q2 2020. For example, the year on year drop in service revenue in June was half of the level of the decline recorded during April May. In this environment, the company prioritized cash generation and showed significant resilience.
Thanks to strong OpEx And CapEx Management, we achieved year on year growth in both OIBDA Minus CapEx and nuclear minus CapEx over revenues for Q2. However, investments in growth continued at pace with 51% of total CapEx devoted to next generation deployment. 12 points above Q2 2019. Translating into 228,000 new premises passed in Q2. Given our drilling position in Spain, where we have a well invested and diversified business, we are confident that we are very well positioned to continue to deliver solid cash flow generation going forward.
Moving to Slide 14, Telefonica Dutschland delivered a solid operational performance. Despite experiencing some COVID impacts throughout the quarter. Following the reopening of all two shops from the end of April, footfall and trading dynamics have been experiencing a global recovery. O2 contract churn improved by 0.1 percentage point 0 year on year in Q2 and own brand ARPU grew by 0.7% year on year in the month of June. In terms of financial performance, The APA minus CapEx over revenues ratio remained broadly stable versus first half twenty nineteen despite the full COVID-nineteen impact demonstrating the robust profitability and cash generation to see awards during the quarter, including a very good rating in Connex magazine 2026 network test and best MNO in telecom handles readers choice awards.
Moving on to Slide 15 and the UK business. Despite being in lockdown for all of the second quarter O2 remains the UK's number 1 for customers, growing its base by 2.5% to $34,100,000. Contract churn stood at 0.9% as customers continue to value our award winning customer service network resilience, brand and unique propositions. Looking at our financial performance, revenue declined by 3.8% year on year, primarily due to COVID-nineteen impacts on roaming and calls. And EBITDA declined by 4.1% excluding special factors in the prior year.
Given the situation, we have maintained our OpEx and CapEx flexibility to manage operating cash flow, which remained broadly stable in the first half of the year, whilst continuing divest in our network to boost 4G and 5G coverage and capacity. Let's now move to the performance of our Brazilian operations on Slide 16. Individual commercial activity was highly impacted by lockdown restrictions during the quarter, With a gradual reopening of stores in June, we are starting to see signs of recovery. Mobile contract gross adds increased 73% in June compared to April, and we reached a new all time record in fiber to the home net adds in June. This confirms VIVOS high quality value proposition and demonstrates our ability to steer our business through a difficult environment.
In terms of our financial performance, despite COVID 19, we delivered a resilient service revenue trend. And notable improvements in profitability with an OIBDA minus CapEx margin above 25% for the 1st 6 months of the year. Especially remarkable is the free cash flow generation in Brazil, which has increased by 44.5% in the first half of the year, which means we that free cash flow in Brazil is growing at double digit in euros, despite the currency depreciation. Moving to Slide 17. During Q2, TELSIUS continued to deploy new sites mainly in Brazil and Spain with 91 new towers added in the quarter.
Its total tower portfolio reached over 20,400 and the tenancy ratio stood at 1.34 times. All these prior to closing the German deal. Revenues were up 8.1% year on year, excluding the exceptional capacity ceiling cable in Q2 2019, with the tower business growing at a higher pace of 9.7% year on year due to both the strong performance in Germany and the towers recently acquired in Latin America. OIBDA grew by 13.5% year on year, excluding the sale of cable capacity. A high level of profitability was maintained during the quarter with ultaminoscapex Solar revenues ratio of 56.2 percent as of June.
Up 0.8 percentage points year on year, excluding the exceptional capacity selling cable and CapEx related to inorganic acquisitions. On slide 18, tech services have become even more essential during recent months due to the heightened need for reliable access to communication networks among business customers and for remote management and collaborative work tools. While COVID-nineteen had a notable impact on SMEs, larger corporates, which account for 60% of our B2B revenue, were less affected. As a result, revenues from B2B Tech Services grew by a significant 18% year on year in the first half. In Q2, our cloud and cybersecurity segments continued to outperform the market, delivering high revenue growth rates of 27% 20% year on year, respectively.
This was achieved largely thanks to our largest distribution platform. High quality professional services and superior infrastructure, which is highly valued by our best in class partners, including Amazon, Google, Microsoft, or SAP, The combinations of these trends enhances our value proposition and increases our relevance in the global market. I will now hand over to Laura to cover his Pam and financial results.
Thank you, Angel. Moving to Slide 19. In Eastbank, our focus has been on improving and expanding connectivity and supporting local communities during the COVID-nineteen crisis, while Q2's performance was strongly impacted by the challenging economic and social environment, commercial activity has been gradually recovering throughout the quarter. For example, Neultra broadband connections doubled versus the previous quarter to 88,000. Despite a significant impact of COVID-nineteen on revenue and OIBDA trends year on year, increasing synergies and efficient management of OpEx and CapEx allowing OIBDA minus CapEx to improve 10% year on year in the quarter, in addition to preserving cash flow generation.
Slide 20 shows how currency headwinds were limited in terms of free cash flow generation through the effective hedging strategy implemented by the group. During the second quarter, COVID-nineteen crisis contributed to the depreciation of Latin American currencies versus the euro. FX effects increased driving down the 2nd quarter's year on year variation by 6.5 percentage points in revenue and by 6.7 percentage points in OIBDA. This was mainly due to the appreciation of the Brazilian real against the euro. The negative impact of 448,000,000 at OIBDA level was largely contained with free cash flow generation affected by a much lower 111,000,000.
A net debt level is had a positive impact of 1,000,000,000 in H1, or 1,000,000,000 when looking at net debt plus leases. On Slide 21, you can see the continuous decline in our net debt to 1,000,000,000 at the end of June 2020. Since June 2016, we have reduced our net debt by 1,000,000,000, mainly due to a strong free cash flow generation coupled with inorganic measures during this period. Free cash flow generation reached 1,000,000,000 in the first half and is expected to improve further during the second half of the year. Our decision to offer a voluntary scrip dividend payment which reduced our cash outflow by more than EUR 600,000,000 demonstrates our clear focus on net debt reduction.
Slide 22 shows Telefonica's proactive and broad financing exercise completed in recent years. With over 1,000,000,000 raised in total since 2016. This year, we have issued more than 1,000,000,000, benefiting from minimum costs, including a EUR 500,000,000 10 years Eurobond with a coupon of 1.864% a 500,000,000 U. S. Dollar 10 year bond out of Colombia and a GBP 4,000,000,000 sterling syndicated loan to back PO2 building media merger.
Telefonica's Aimon and diversified financing activity has contributed to almost doubling average debt life from 5.7 years in December 2015 to 11.2 years at June 2020 and to a robust liquidity position of to billion, which covers more than 2 years of upcoming maturities. On top of that, we have GBP 4,000,000,000 of additional liquidity to secure the financing of the JV of O2 with Virgin Media. This financing activity has been executed at historical low interest rates, enabling us to lower our total financial payment by nearly EUR 1,000,000,000 and reduce our total financial payment costs to 3.41%. 155 basis points lower than in December 2015. In summary, we have been successfully strengthening our balance sheet see de risking is to gradually change the FX mix of our capital structure.
We are working on 2 main levers: Firstly, we are reducing overall exposure to Eastbank by reducing capital employee and equity in the region. Secondly, We are going to gradually increase our exposure to Brazil reais taking advantage of the massive cuts in rates in Brazil to their current levels. We are currently working to reduce capital employed and equity exposure to the region via inorganic measures. Execution has been impacted by COVID-nineteen, but we remain on track to executing due course. And Costa Rica sale serve as a proof point of such execution.
In Brazil, debt in local currency amounted to 1,000,000,000 at the end of June. A reduction of EUR 900,000,000 equivalent year to date due to currency depreciation. In the context of the historic reductions in interest rates, we plan to gradually increase our leverage in reals. On Slide 23, you can see how CELIC and local 10 year swap have fallen by 1200 basis points and 943 basis points respectively since December 20 15 in both nominal and real terms, meaning it now makes sense to gradually increase our debt in reais. Moving to Slide 24.
Telefonica's credit profile continues to improve by means on. First, Robust cash flow generation with an expected improvement in OIBDA minus CapEx margin and a focus on prioritizing the investment. 2nd, a prudent financial policy based on a sustainable and balanced dividend policy, together with a smooth maturity profile and strong liquidity cushion. 3rd, a solid balance sheet as demonstrated by the significant debt reductions in June 2016 and a clear path to deleveraging. And finally, a de risked portfolio on reduced capital employee and improved return on capital employee.
I will now hand back to Jose Maria to give a brief update
Turning to Slide 25. With regard to our first pillar, we are able to clearly show how we are focusing on our 4 core markets and strengthening our positions. In Spain, we continue growing our fiber to the home network with 526,000 in premises past year to date, expanding the largest fiber to the home network in Europe. We offer attractive differentiated content based on own production, Disney plus and the UFA Champions League, which has been secured for the next three seasons. We are also leveraging partnerships to create unique proposition such as our Prosego joint venture in the smart security space our antennaeres media joint venture in Spain Language content, production, overwhelmed with Movistar car, Euro taller on connected cars, and with heavy games on worldwide gaming and ear sports.
In the UK, we announced a transformative deal with Liberty Global Back in May. To form a JV between O2 UK and Virgin Media that will create the UK's connectivity champion. But we will not remain idle until the deal is approved. We are deploying 5G now available in 60 cities. And leveraging partnerships, including our position as exclusive distributor of Disney Plus mobile content.
In Germany, we continue to strengthen the largest mobile network by boosting mobile coverage and increasing urban capacity. We are also strengthening our convergent proposition based on agnostic fixed access and partnership with a range of leading enterprises, including Ericsson and Kiromi. In Brazil, we are expanding the leading fiber to the home network with 2,000,000 additional premises past year to date. We have bid for OIS mobile assets to improve our spectrum position nationwide and increase our scaling subscale regions. We are also working on a strategic partnership such as our agreement with American Towers to offer fiber to the home service in Minas Gerais.
There is significant opportunity in our 4 core markets, and we could therefore see further consolidation or the acceleration of network deployment by coinvesting with the strategic or financial partners. We are also making progress in our plan to optimize our Eastbank portfolio and reduce capital employed. We have announced the sale of our Costa Rica operation to Liberty Latin America, only 3 months after Millicom walk away from their contractual commitment. We are monetizing assets including buildings and datacenters and towers. 2400 Towers have been sold year to date to Bellhews in Chile and Peru.
And to Phoenix Towers in Colombia and Ecuador. We are securing network sharing agreements to reduce our capital intensity and optimize investment And we are also increasing debt in local units to improve capital structure. In addition, we have a wide range of options to further reduce our exposure to the regions. All inorganic options are on the table, as well as a potential operational and financial spin off. We have achieved significant progress in launching Telefonica Tech.
We are creating a new company And at the same time, maintaining strong revenues with organic growth of 18% year on year in the first half of this year. We are reaching strategic agreements with the leading players in the ecosystem, like Amazon Web Services, Microsoft, and Google Cloud leveraging our premium infrastructure. We are also partnering with companies like GE Healthcare And 4 net and investing in companies like Nasami, a leader in industrial IoT cybersecurity. We are already completing the carve out of the cyber security business to create a separate entity with significant opportunity. Cloud and IoT big data will follow soon.
We'd also like to highlight the awards we are receiving in cloud and cybersecurity from the lights of deal W. M.
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As a separate entity, telefonica tech, we provide a dedicated platform for us to foster the growth of our large, We are looking at potential M and A targets with complementary capabilities to accelerate our growth. We are assessing new verticals to add to telephonic uptake and we have the potential to Moving to Slide 28. We are one of the largest owners of future infrastructure in this sector. The Ultra broadband network reached 131,000,000 premises passed, almost 60,000,000 owned 10% more than a year ago. With accesses connected increasing by 5% to almost $15,000,000, while we are analyzing new fiber vehicles in Brazil and Germany.
One of the largest transaction that the Seignor witnessed during the first half of twenty twenty was the sale of more than 20,000 towers by Telefonica by Telefonica Germane to Telxius. This sale will turn Telefonica infra into the controlling shareholder of 1 of the largest telco owned tower coast with close to 53,000 towers. Telefonica infra has a range of significant opportunities to maintain growth into the future. Telefonica owns 50 percent of CTIL the largest portfolio of towers in the can leverage the demand and capabilities in tech operation. It can develop new business lines like fiber to the home and data centers.
In addition to its successful submarine cable business. In short, a huge portfolio of highly attractive assets. Moving to pillar 5 on slide 29, we show how we are rolling out a new operating model that takes advantage digitalization and adapting our headquarters to reflect the new business portfolio. Digitalization has progressed significantly in the period. Digital sales increased 53% versus the second quarter of the previous year, while the number of robots automating internal processes reached over 1,800,000,000.
We have signed significant negotiating agreements, both in our core markets, like in Brazil with TIM and Eastern. To add to the highly structural ones we already had in the UK and Colombia. Our legacy shutdown is progressing with the closure of around 500 central offices in Spain over the last 12 months. And we are streaming our support functions, both in business lines and at our headquarters. Our headquarters building is being refitted with costs reduced by circa 6% during the first half of twenty twenty compared to the previous year.
All of these initiatives have contributed to 0.3 percentage point expansion in organic OIBDA minus CapEx over revenue ratio in the first half of this year. In line with the 2022 guidance announced back in November 29, to highlight organic margin increased to 20.8% in the first half of this year. And there is still room for further optimization on several fronts, namely centralization, in sourcing, outsourcing and more agile ways of working. Looking forward, our priority is to continue executing and creating value with our strategy. In our 4 core markets, our short term priorities are stabilizing operating cash flow generation to mitigate the impact of COVID-nineteen Closing the UK deal with Liberty Global is strengthening our competitive advantage via fiber to the home deployments and partnerships and continually assessing consolidation options.
In this pump, our focus is similarly on stabilizing organic cash flow generation to mitigate COVID-nineteen in impacts, closing the deals in Costa Rica and El Salvador and continuing to develop over strategic options. Telephonic uptake, our priority is maintaining a strong growth momentum, strengthening our capabilities through inorganic acquisitions, and finalizing trending carve outs. At Telefonica infra, our focus is on closing the German Towers acquisition developing the strategic option and increasing the tower's tenancy ratio. And finally, in regard to the new operating model, our short term priorities at accelerating digitalization, expanding network sharing agreements and maintaining a relentless focus on simplification and streamlining. For As we move towards a post COVID era, we are supporting sustainable economic recovery in markets based on 3 pillars, which are aligned with the United Nations Sustainable Development Goals.
1st, building a cleaner future, digital innovation to power a lower carbon economy. 2nd, helping society to thrive by supporting communities and customers. And third, leading by example and running an inclusive, fair and ethical business inside out. The future now more than we'll be built on networks and digitalization, and we are well positioned to support all our stakeholders on that journey. So in summary, first, we have delivered our robust performance for our stakeholders in the midst of an unprecedented global crisis.
2nd, Our commercial and financial performance has proven resilient in the second quarter despite adverse FX impacts and GDP trends, and we continue to focus on improving return on capital employed. 3rd, our outlook for OIBA minus CapEx and 2020 dividend has been confirmed. 4th, we have accelerated our delivery against our strategic priorities. And finally, we are well positioned to capitalize on the favorable long term trends accelerated by recent developments. Thank you very much for listening, and we are now ready to take your questions.
Thank you. We would kindly ask you to ask a maximum of two questions per participant and if possible, we recommend you not use your sale or hands free phone. There will be a short silence while questions are being registered. We'll now take our first question from Michael Bishop from Goldman Sachs. Please go ahead.
Your line is open.
Just two questions for me, please. Firstly, You had quite a solid, revenue and ARPU performance in Spain, particularly as you highlight in June and the exit run rate. So I was just keen to get your thoughts on the Spanish outlook for the second half, both for revenues, but in particular, the trajectory of Spanish EBITDA and the different moving parts there? And then my second question is just on free cash flow in the second half. And so for the full year, you delivered 1,000,000,000 in the first half.
But could you just give us an indication on whether you expect the usual seasonality in free cash flow in the second half? And in particular, whether you can give us any, verbal guidance on working capital for the year?
Thank you. Michael, for your question. I will take the 1 on the Spanish market. As you have seen the results we have had quite resilient commercial activity and quite resilient cash generation. COVID-nineteen was impacting the 2nd quarter because we had a lockdown in place for most of the quarter.
But if one, good, adjust For the COVID impacts, top line would have been growing 0.9%. OIBDA, if we take away the property sale of 1 year ago, would be at minus 3.4% and operating cash flow, positive 4.1% and growth. This, we saw with not our recovery along the quarter. So net adds positive across the line, which is great contrast to some of our competitors. And this was improving sequentially across the quarter.
We had a record net promoter score during the crisis. We increased 10 percentage points now stands at 28% and we are widening the gap versus competitors. All these we achieved while maintaining OIBDA margin at 40% levels and operating cash flow margin at 29.9, which is benchmark across operators in Europe. So we saw improving trends As bonds were going by in the quarter and what we're seeing also in July, the same improving trend that we saw in June. So when we look at the second half, we have positive expectations in B2C with commercial trading recovery sorry ARPU in the second half, we are expecting it to be higher than in the first half and churn, which in the quarter was at 1.2, but even in the last month of the quarter was below what we're seeing in we're seeing Q1 churn should also be controlled.
We are expecting now that over the tops are no longer going to be offering a soccer. We expect probably football subscriber games. And over which used to be an atypical month, for football competitions this year is going to be an active and active month. We're also launching new services, our launch of alarms we Rosago is getting very good traction. And we're exploring new lines like insurance and eHealth to contribute to top line.
On B2B, we're already capturing opportunities. You saw the growth in the digital services for B2B. And wholesale in the second half, we should show better, even better figure than in the first half. So we have good expectation on the trend of revenues. At the same time, the type of efficiencies that we have been capturing in the first half of the year, some of them are going to be continued and will remain.
So We remain potentially to even improve OIBDA margin, slightly versus the 1st half. And we'll continue with very effective CapEx Management. I hope this can provide you a view of the confidence we have in the resilience of our business, both commercially and financially regarding cash flow generation.
Mike, along free cash flow, as you pointed out, our free cash flow in the first half of the year has amounted to the 1,200,000,000 and it's been 1,000,000,000 in Q220. And it will be, in general, back loaded. So we expect free cash flow being strong. And higher in the second half of the year. We do not guide on free cash flow, but let me remind you, we do expect a robust free cash flow generation will comfortably exceed dividend payments, labor commitments and the hybrid coupons, and it will continue to be a sustainable driver for continuing deleverage.
In this situation, not only we are more resilient at revenue level, although not immune, but we have many levers to maneuver and we will closely monitor our free cash flow generation along the year. There's plenty of efficiency improvements and CapEx savings as you have seen in Q2 this year. We'll continue delivering a robust, which is a priority for us. Regarding working capital, it has been impacted by some COVID measures that will fade away in the 2nd part of the year. And in general, it's been higher due to CapEx phasing and some restructuring payments that took place in Q1 2020, although they were accrued in the previous year.
In general, working capital consumption will be slightly higher in 20202020 or in 2019, but we will also do a supply financing measures. So it will be of higher quality.
Thank you, Micah. Next question please.
Our next question comes from Jacob Bluestone from Credit Suisse. Please go ahead. Your line is now open. Please note, Jacob, we're not receiving any audio from your line. You may be on mute.
Yes.
Great. Sorry. So I have two questions, please. Firstly, on CapEx, which, as you alluded to, is down to to protect the cash flow generation. Can you maybe just help us understand how sustainable the lower CapEx will be?
Should we be expecting that maybe next year, there has to be a sort of a period of catch up or is this something that you can essentially keep at this lower levels. It's not just a delay in CapEx payments. And then secondly, just around the sort of prospects of of M and A and consolidation. I think you've made some public statements in recent weeks and months. Can you maybe just sort of share with us what your thinking is around the potential for consolidation in Spain specifically, do you think post the UK decision that's something which is more feasible?
With acceptable remedies. So just sort of any thoughts you can share on that topic?
I think we have been monitoring CapEx. First, there was an initial reduction due to the lockdown. That was immediate. But what we have done is through a strict capital allocation, a strict screening and approval processes, with a view to prioritize everything, which is related to customer service, customer quality and intra broadband development. So we have not stopped, which is really matters, and we've been much more strict on the RC and maintainers that could be deprioritized these circumstances.
So you can see the ultra broadband figures, how they have been progressing despite the situation. And you can also see that our revenue in the lines not affecting by COVID have performed well as the case in in Spain. So we don't envisage a potential catch up in the coming years. I think this reduction will be maintained through all the following months.
In terms of consolidation, overall, you know that our position is that, current market structure in Europe is unsustainable. They are, more than 400 mobile players, almost 1 mobile player per million inhabitants, which I don't think it's it's competitive, neither sustainable in the future. So we think that in market consolidation should be should be faster. In the case of Spain, we don't see any signs yet, but we think that, the undergoing transaction around, much more really something to monitor because the multiple, at which this transaction is being done, enhance the value of the Spanish market. And prove the sustainability of the value going forward.
So I think it's a good sign for the overall Spanish market. In terms of the UK, we the joint venture will create a stronger fixed and mobile competitor in the UK market. And then I think it has the scale to innovate in this very challenging landscape. This is a move toward convergence and won't reduce competition. So we think it should be we are confident that the deal should be quickly approved by regulators without significant remedies, as also approved by precedence on on that market.
The sooner this happens, the sooner we'll be able to transfer to consumers, a very large and ambitious investment program of more than 1,000,000,000 in the digital infrastructure over the next 5 years. So basically, we expect closing between the end of 2020 and meet 2021. It shouldn't happen without significant revenues, but we'll keep you posted. So same.
Our next question comes from Karl Murdock Schmidt from Berenberg. Please go ahead. Your line is now open.
Hi, thank you. I just wanted to ask about other OIBDA. In H1, it's come in at 1,000,000. Is there anything in H1 in particular that's causing it to run higher than normal run rates? Or should we expect it to continue at that kind of level going forward?
So maybe 1,000,000 in the year because that's currently about double where consensus currently sits. So any kind of color on where we should expect or EBITDA, in other to kind of be on a regular run rate because it certainly looks higher in H1.
Thank you for the question. I'd rather not guide on other for the next half of the year because it also depends on potential capital gains and inorganic moves. But let me explain that probably what it was high was first half last year twenty nineteen. You have to remember that last year was abnormally high the line of others because we have the capital gains of Nicaragua or Antalix, for instance. So what you are seeing in H1 2020 is more similar to what it should happen.
It was 100 negative in Q1 and 165 negative in Q2 variation versus last year is explained, as I said, mainly because of the capital gains changes in perimeter. And also as we are reducing CapEx, we have a little bit less revenue and OIBDA from our supply companies. So that will be it.
That's great. Thank you. So I take the points on the year on year, but that means that the current rate is kind of normal, which leads to you to around 1,000,000 a year, whereas I think consensus for next year is currently at
this line was actually, yes, below consensus because as I said, last year was abnormally high. So consensus is actually wrong in this line. You are more you are more right in your in your view for the rest of the year.
Thank you, Karl. Next question please.
Our next question comes from Joshua Mills from Exane. Please go ahead. Your line is open.
Hi, thanks for the questions. Just two from my side. First on Spain, I think you'd refer in the presentation to B2B revenues at group level being down about 3% It'd be great to get an idea from you on how the consumer versus B2B revenues in Spain have performed relative to one another. I know on the consolidated basis, you've reported down just over 3.5%, 3.4%, but that's going to be very helpful. And then the second question on Germany.
Think at the end of the presentation, you're saying that a new fiber deal could be under analysis. Could you give us a sense of what form that might take, whether this is a co investment scheme you're looking at other partners and your kind of bigger picture thoughts around the conversion opportunity in the German market right now.
Thank you. Joshua, for the questions on revenues in Spain. Revenues in Spain were affected by COVID. In the 2nd quarter, we saw handset sales declining by 50% on on the drop of COVID and service revenues, minus 3.9% on the back of lower conversion revenue and business communications, not compensated by the growth, both in IT and the wholesale. These service revenues were improving month by month in Q2.
So this was minus 2% in the month of June. We are also seeing that upselling has been contributing to revenue improvement. And, although the trend worsens in Q2 versus Q1, we have different COVID effects in retail. So in Consumer, to your question, It dragged 2 percentage points and in business, dragged 1.5 percentage points in the year on year trend. Also, we had lower wholesale growth.
We had positive wholesale revenues, but lower rate of growth. Mainly form, interconnection and roaming, roaming decline. So, if, one were to remove the impact from COVID, this top line would be growing 0.9%. No? But minus 3.9%, was 0.6 percentage points positive in wholesale and was 4.5 percentage points drag in what is retail services.
Combining consumer and B2B. The second question was on a fiber deal in Germany. Germany is a market which is underdeveloped in terms of fiber. We have very good position, from Telefonica Deutschland with wholesale agreements, to access the fixed network from Deutsche Telecomm an exclusive deal to access the cable network of Vodafone and with Telecolumbus, with this, we have access to the largest footprint of Ultra broadband in Germany. But we have also seen that there is an opportunity, which we're going to develop mostly from Telefonica Infra and potentially Telefonica Dutchland can take an equity stake, but it would be mostly developed by Telefonica Infra, an opportunity to develop fiber in areas which are underserved in Germany, aiming for a neutral model, absolutely wholesale, open to all the players.
With a very tight geographic segmentation going to areas which are not covered because we won't to avoid overrealt. And this would be done along financial partners. The philosophy is a neutral company, with a modular model of deployment, depending on the demand along with, financial partners, which would not be consolidated with full integration into Telefonica. And with limited financial exposure on our side, but at the same time, making Telefonica Dutchland an ENCORE customer of an ENCORE client of this wholesale company, but it being open to all the players in the market. We have launched already the process.
We have received indications of interest And as the process progresses, when there is more detailed news to give to a market, we will do.
Thank you. That's very clear.
Thank you, Jos. Next question please.
Our next question comes from Fernando Cordero from Banco Santander. Please go ahead. Your line is open.
Hello, good morning. I'll have for taking my two questions. The first one is related with also with a booking for asset in that sense, trying to understand if there has been any change on your views on what kind of assets be fully controlled and when I say fully controlled, it's 100% ownership within the group, namely, for example, the Spanish fiber and which asset can be open to have not only minority states, but also even losing the control of those assets. And then, and the second question is related with the Spanish OpEx looking into the second half. As far as I understand, you have been, including the full cost of the premium content, particularly the football during the first half of the year.
And I would like to know, I would just think we should see any kind of cost regularization during the second half given the lower content delivered by the different export properties, not only football bars, of course, unfortunately, sorry, formula 1 and so on. So in that sense, trying to understand if there is any kind of tailwind on the OpEx for the second half in the sense.
Thanks for your question. I'll take the first one. Our view hasn't changed in terms of the strategic ownership of strategic assets and the fiber being one of them, but it is also through the telecom infrastructure assets are generating lots of interest from new long term oriented capital. And Telefonica is one of the largest owners of our next generation network. Just in terms of ultra broadband assets, let me remind you some key facts.
We own 58,200,000 premises and this figure keeps growing every quarter. In the last 12 months, we have passed more than 1,000,000 additional ones. We have 14,600,000 homes connected, which means that despite these networks are relatively new, we are filling in them rapidly. As you know, This is the key for improving the profitability. In the last 12 months, we have connected 1.4 new homes.
Iman is on the rise and the current situation has, if any, brought forward that demand in the last quarter and despite COVID crisis, maybe as one of its consequences, we are seeing historical demand levels for customers willing to be connected. In Eastern demand for fiber has multiplied by 2 times, in one quarter. Brazil has its best month ever in June in terms of fiber to the home net adds or 80 percent of all markets next generation network net adds in the first quarter were connected in Telefonica's network in Spain. And in addition, we have been for years operating wholesale agreement with our peers in Fiber Du Homa. And this is another critical site of towards future profitability of these assets.
So we know how to implement long term profitable wholesale models without generating market distortions. And all these factors demonstrate basically 2 things. The first one is an unparalleled experience in executing fiber to the home business model. And probably second and second to non opportunity in terms of the size of the assets we have already up and running. Obviously, under these metrics, our assets are generating interest for these big pockets of capital that I mentioned before.
And it is now public that, as we have been saying, we are exploring options in Brazil and Chile, and there could be other projects on their analysis. It's also fact that, it has happened with all the tech infrastructure assets. There is big arbitrage opportunity by transferring these assets to private market. But we would always do it, do is analyze our options with long term perspective within these types of assets are critical. And therefore, control is essential.
And they have very long life periods. So we believe some financial models are probably underestimating that factor To sum up, we started before anybody deploying fiber. And at the time, a lot of people questioned But now we own 1 of the largest network worldwide, and these assets are attracting a lot of interest from capital providers willing to put capital at work. So we think that what we have ahead of us is a lot of optionality and we think this is a good place to be.
And regarding the second question, Fernando, on OpEx in Spain, first, we have seen in the second quarter OpEx year on year decrease thanks to efficiency measures and cost reduction in several elements like roaming and commercial. On personal cost, since we had the person and the people planned the PSI we already saw in Q2, the same savings as in Q1. When we look at the supply cost, which includes content. The 2nd quarter was having half the increase that we saw in the 1st quarter because the new cycles with deflation are starting to kick in. Commercial costs were sharply declined from lower activity And, we had in the rest of OpEx similar trends.
The content costs, to your question, and they are have peaked in the first half. And then we will see better trend or stability in Q4. It's very important to see that, we had previously achieved slight decline in Lallyga when we renewed the last cycle. Now we have achieved 15% deflation in the champions league and some other relevant sports, which are being at this moment, options, we will most likely be able to show double digit deflation as well. In addition to this, as you were saying, some, sports didn't take place.
So for instance, some tennis competitions different calendar and a structure for formula 1 races and so on. So we are managing each content as the situation clarifies in each one of the competitions. So initial savings have been achieved already and some more may come. All of these allows us, as I was responding before in a question about the outlook to be optimistic that the OIBDA margin in the second half could be slightly higher than the one we had in the first half.
Thank you, Fernando. Next question please.
Our next
question comes from David Wright from Bank of America.
Just to guess the first one, obviously, they're actually related. The first one is is about the dividend, really. You've obviously had huge pressure farm Latin American currencies, also the operations have deteriorated somewhat over the last couple of years. S and P sound very much like they're about to downgrade you, but even Moody's on the lowest level of IG, I think they have an outlook for EBITDA this year, 15,500,000,000 I think, your commentary this morning, from IR suggests that you're comfortable with levels below 15 right now. So does feel like the Moody's number could be missed, in which case, are you worried about the current, balance sheet rating?
And if so, if Moody's worth to take a more cautious view, does dividend become part of the equation? You've obviously moved to Script, but that does feel quite an expensive, offset right now given the current share price level. And then my second question, just on, I think you mentioned before, Angel, the ARPU growth in Spain H2, That seems, given the current trend, which has seen the ARPU declining year on year, an accelerated fashion Q4, Q1, Q2, that seems extremely difficult to achieve, especially given the current dilutive effect of the O2 app. Unless you're pricing some kind of planning some kind of price rises, could you confirm that? Otherwise, how do you expect ARPU to get better?
In the second half?
Thanks for your questions. I mean, I'll I'll start with the dividend. We feel comfortable with the current level of $0.40 per share. Even with our revised figures, reflecting full COVID impacts, our dividend shows very prudent organic free cash flow coverage, even if it was to be fully payable in cash terms, allow me to say that free cash flow will be significantly above current market expectation this year. These dividend levels allow us additionally to keep enough financial flexibility to keep reducing debt levels.
It is a strategic decision of the company to keep reducing debt levels and preserve a strong credit rating profile. As you know, we do not have a long term dividend policy as we think that, with the and volatile macroeconomic scenario, an additional level of caution is required, but we feel comfortable with the current dividend level. In order to preserve additional financial flexibility, you know, that our shareholders approved in our last shareholders meeting to introduce this creative and option to shareholders. And this option was approved for the last tranche of 2019 dividend, which was paid last month. And the first tranche of 2020,000,000,000 that we'll be paid in November this year, both tranches each of, 0 point 2 $0.20 per share each.
In the last June payment, 63 percent of shareholders decided to offer shares and 57 in cash. And that means that out of a total dividend of 1,000,000,000. 671,000,000 was paid in cash and 631 in shares. So in summary, we think that dividend is comfortably covered with expected free cash flow generation. Still allow me to express that our estimate for free cash flow for this year, it's significantly above our current market expectations.
And even if we were to include all COVID impacts, Screte has been introduced to produce, to provide additional flexibility. And The option, the scrip dividend option looks like having welcomed by investors by shareholders because 60% voted for shares. I'll hand it over now to Laura for rating outlook.
Hello, on rating. Let me remind you that we maintain a stable outlooks both with Fitch and Moody. So we have a stable outlook with Moody's at present. The negative outlook of S and P reflects the risk of downgrade. You are right.
If they no longer Ex, Telefonica will make significant progress in reducing its leverage in 2020. As an intermediate step for returning to comfortably below the maximum adjusted step to EBITDA under S and P methodology. Are in constant conversations with rating agencies. They have welcomed Telefonica's measures undertaken to protect the credit rating. They know our commitment to solid investment grade.
They have welcome also the scrip dividend, and it's also worth highlighting the strong financing activity that we keep undertaking with the maintainers on appropriate level of liquidity and the active portfolio management we have done. So many things we have done in North America as well. In the last year, partial disposal of TELSIUS agreements for the sale of Central America, sale of 11 data centers, sale of towers in Brazil, Ecuador, Colombia, but also in Q2 in the midst COVID, we have undertaken the sale of towers in Germany to Celsius and the sale of Costa Rica. Both reducing net debt is slightly below $1,000,000,000. Also, you mentioned FX as a reason for a credit rating And we have shown how FX has reduced free cash flow only by 1,000,000.
And we pay down debt with free cash flow, not saw it. We are not very fun of the OIBDA to debt ratio first because the FX moved in different rates in the numerator and denominator. And also because you have to look at the ratios in the light of the revenue prospects going forward and in the light of the CapEx commitments going forward. Ana Jose Maria explained, we are well ahead in fiber deployments. So our CapEx going forward should be lower than many, many of our competitors.
If
I make
a Sorry,
if I could just check then. So you're not expecting S and P to cut And if you do miss the Moody's EBITDA target, you're not expecting a more cautious outlook there. Is that correct?
I think we have to go to the facts. We have stable outlooks with Moody's, and we have a negative outlook refreshMP and that's obviously as a risk. If we are in negative outlook, there could be a downgrade. So is there is for them to and it's for us to explain everything we are doing in the leverage and confirm our commitment to solid investment grade. Allow me
also to remind, that we have an organic transaction that has been, that are under approval process and that would imply significant sources of fund and capital gains and would also accelerate debt reduction notably, out of the UK merger, when approved, it would generate between 1,000,000,001,000,000,000 of funds for Telefonica and a significant capital gain. We have announced today the sale of Costa Rica we have under the approval process in Salvador. And in addition, you know, that we have, Telefonica infra, which only tells you that, has a significant amount of towers that could put into value. Telefonica Tech is growing significantly and has a sizable size. And we are also looking at it as a potential source of value.
And then we have, Telefonica process of inorganic measures that will also be a source of additional comfort. So overall, we think that we have enough organic and inorganic measures to preserve a strong credit profile. And to make sure that all the components of the financial equation of the company, dividend, debt reduction and preserving a strong credit profile is preserved.
And can I just ask as a follow-up? I'm happy to drop my Spanish question, if given I'm taking some time here, but just on you mentioned about potential demerger optionality around the Hispam asset. It's hard to imagine that you could demerge the business, with the same level of credit that you currently have, but same level of leverage you currently have in Telefonica Group I would have thought way over three times. So could a demerger even be a re leveraging event for the ophthalmicore business? How are you thinking about that?
Thank you.
Yes, you're right. It will be very difficult to maintain our actual credit in an East Pan only vehicle, but the Eastern move the demerger movement will take a re leverage effort. And in fact, we are already working on a re leveraging effort in Eastbank because that's a non regret move and we can do it also organically. Thank
you guys.
Okay. I'll answer the Spanish ARPU question because as been preparing for it. So now I would like to respond it. So if one looks at the evolution of the convergent ARPU in the first half, it has had negative and positive impacts in this evolution. On the negative side, you have COVID-nineteen effects like downgrades.
Some promotions to hold the mix, some disconnections and also the closing down of social venues, bars, basically, that were, showing a football packages to their customers. Also, we had a smaller, a dilutive effect from multi brand options. And we had a consumer upselling of new services and higher ratio of additional high value lines. In the second half of the year, many of these impacts are not going to be there. Actually, downgrades regarding football probably will become upgrades because with the reopening of the season, also, others, which used to be a very muted month, even in which some customers disconnected and then rejoined this not going to be the case this year.
Also without, soccer on over the top, we are going to get a fair share of those customers that will improve the mix, the reopening of the social venues is also going to help us We are seeing big demand, for instance, of internet in Second Homes and all the services that go along with those. And we are expecting a less impact of promotions. Sort of these factors are the ones that make us confident in an improvement in the ARPU versus what we've seen in the first half.
Appreciate all the answers. Thank you guys.
Thank you, David. Next question please.
Our next question comes from Luigi Menera from HSBC.
Yes. Good morning. And thanks for taking my questions. The first one is on the announcement in Brazil. Yes.
Today about the option for a neutral fiber network available to wholesale customers, not perhaps a similar plan to what you described for Germany, but can you please elaborate on what it actually implies And then I was wondering, just following up on previous comments, I understand that the Spanish fiber is core and strategic, but whether you would be interested in the minority investors in the Spanish fiber? And second question is on what you are seeing in the business B2B segment. Whether there is some evidence of customers, for example, missing payments or downgrading their packages I presume, that the impact there will be will come with a lag. So it will be more important in the second half as the the government support starts to diminish.
Hi, Luigi on the Brazilian fiber call that was described yesterday in Telefonica Brazil's call. It's, it's a project which is also in motion. Brazil, our Brazilian operation, first is showing record levels of deployment and connections in fiber. We are at this moment connecting every month 100 and 40, 150,000 homes with fiber, which is above the highest we ever achieved when deploying in Spain, there is a very healthy demand. But of course, it's a huge market We cannot cover all the market with our CapEx.
So we have decided to segment 3 type of situations. There is a 1st year of cities and markets that we are investing directly from the CapEx, from Telefonica Brazil. Then there is a 2nd tier that we are looking to address with, new models that I will describe in a second. And then there is a 30 year of towns in Brazil that we are going to a franchise model. Which the CapEx is made by the local partners and we provide the technology and we have some revenue share.
But in the mid tier, we are doing different models. The first one, for instance, is the agreement that we've reached with, American Towers to deploy fiber in MENA URI. But also, we have launched the process to attract financial partners to do a fiber code that would not be consolidated, into our accounts. Here would be a joint opportunity or a joint project between Telefonica Brazil and Telefonica infra, aiming to being onboard a partner that would take 50 percent of that company. And between Telefonica, Brazil and Infra would have 50% The difference with the Chevron project is that the Chevron project is purely greenfield.
The project in Brazil will be mixed, will be having Park Brownfield by remission of some of the fiber, that Beboe has in the regions that are going to be object of this project. The rest will be a greenfield build out will be also a model which will be open to wholesale to all the players in the market. We think that there is a huge opportunity in Brazil. We are showing the high double digit growth in the fixed broadband, ultra broadband services in Brazilian again, we are, even with the cuts in CapEx that were commented before, we are deploying at the highest and connecting by the way at the highest level we've ever done in Brazil.
I may compliment, Angel, because we are also doing fiber projects in Espana, as you know, we are completely focused on Ultra broadband and we are progressing very well and having beaten previous quarters. This quarter despite COVID. We have agreements with ATC and ATP in Chile, Colombia and Argentina, but we are going to step further in the line of the other infra projects. And we have a we are working on the carve out of FTTH and related assets in the case of Chile. And we will sell a majority stake of that vehicle a way to monetize, but also, and more important, accelerate the transformational deployment plan in Chile and more projects of this kind could come in the rest of the Asia region?
Yes, regarding the B2B business, we are quite well positioned in markets like Spain, in Brazil, in this segment, and we are very well positioned to capture the post COVID opportunity, especially in services in IT such as cloud, cyber security, elements linked to smart working scenarios. And we leverage this on our bigger share in corporates. What we see or where we see more difficulty in some of our customers is in the SME segment. Here, we have been ready to financially facilitate life to those customers. Obviously, this, we are doing with a very thorough monitoring of the potential, but that risk, which is not an issue at this moment.
And with a progressive return of activity, we think that this segment should be performing nicely in the next quarters. So monitoring very carefully the some of the segments and the financial impacts that may come from those. But we think that there are opportunities that we're already capturing in, in cybersecurity, cloud, that you have seen in our presentation are growing at very substantial double digit.
We'll have time for one final question, please.
Our last question will come from Jerry Adelas from Jefferies. Please go ahead. Your line is open.
Just had first question was just following up on the Spanish sort of ARPU issue. And I just wondered whether you could clarify for me one particular point. I remember that in July last year, you applied a rather large price increase about to about 1,500,000 sort of high end Fusion customers, that seems to me to create a fairly difficult comp for the second half of this year. Is it correct to sort of think about that? Or is there some offsetting issue, particularly with reflect was in relation to the high end Fuzion base and the comp into the second half?
And then my second question is in the UK. To understand it, the Project Lightning investment is included within the proposed UK joint venture. What is your attitude to accelerating the deployment of project Lightning and perhaps investing more capital in that project? To get these to accelerate the current run rate of build above what's been achieved over the last 4 years?
Thank you for your questions. Regarding the Spanish ARPU, you're right. It's, we had price increase or an offer increase in the third quarter last year, which will not be repeated this year. And that is one of the the drags that we will have in the 3rd quarter, roaming potentially, will also be one of those. We think that there are some positives that I was describing before, and I would not need to repeat myself from the previous answer And I am very mindful that the answer that I was giving before was relating to the second half was not relating to the first quarter.
And regarding your question on project lining, our merger in the UK aim to build 1 of the leading converged players in the market. It was one of the main attributes that attracted us to combine our business with virgin media and project lining is a very important part in that. We have shown in our markets and in the markets where we are converged that we are firm believers in in fiber. So if and when transaction is concluded, now at this moment, each company is operating independently and we cannot share or revise or do anything with respect to making plans together. So once the transaction is disclosed, we will assess if there are opportunities to accelerate the deployment that are value creative for the shareholders, we will look at them.
I think it was evident in this call that not only we have one of the largest fiber footprint globally, but that we are analyzing vehicles to deploy fiber in operationally and financially effective way across our footprint and the UK should not be any different from that once the transaction is concluded. Thank you.
Thank you,
Well, thank you very much for your participation. And we certainly hope that we have provided some useful insights for you. You still have further questions, we kindly ask you to contact our Investor Relations department department. Good morning and thank you.
Telefonica's January, June 2020 results conference call is over. You may now disconnect