Good morning, and welcome to Telefonica's conference call to discuss January Jan, June 2019 Results and Pablo Regional Federal Relations. Before proceeding, let me mention that financial information contained in this document related to the second quarter, 2019 has been prepared and their international financial reporting standards as adopted by the European Union. From the 1st January 2019, we implemented IFRS 16 in our terms, the effects of the accounting change to IFRS 16 are excluded, and this financial information is outdated.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 based on assumptions or statements regarding plans, objectives and expectations that make, reference to different matters.
All forward looking statements involve risk, uncertainties and contingencies, many of which are beyond the company's Coron. We encourage you to review our publicly available disclosure documents filled with relevant securities market regulators. If you don't have a copy or relevant press release and the slides, please contact Telefonica's investor relations team in Madrid or London. Now let me turn the call over to our Chairman, CEO, Jose Maria Alberto.
Thank you, Pablo. Good morning, and welcome to Telefonica's second quarter and first half results conference call. With me today are Angel Villa, Chief Operating Officer and Laura Avasolo, Chief Financial Officer. Following our presentation, we will host a Q and A session and take any questions you may have. I'd like to begin this presentation by highlighting that we have the widest and most advanced ultra broadband network, with 121,000,000 premises passed with ultra broadband or fiber to the home, the world's largest footprint, excluding China.
Our key areas of focus are: 1st, business sustainability starts with unabated momentum in high value accesses, growing double digit, both in fiber to the home, cable and LTE. With average revenue per access accelerating its goal to 4.4 percent year on year in the second quarter. Digitalization translate include longer customer lifetime value, benefiting our customer satisfaction from a world class digital experience. 2nd, our growth is reliable and sustainable. Broadband connectivity and service over connectivity already account for 55% of total revenues, was 48% 3 years ago and are increasingly less exposed to regulation.
Efficiencies and the utilization savings help to translate in positive and free cash flow reaching almost 1,000,000,000 in the first half, up 78% year on year. 3rd, we have the best technology at the customer service with the most advanced networks in Europe and Latin America. Networks, which are flexible, secure and virtualized, software based, and with an open architecture that integrates of artificial intelligence. We are number 1 in virtualization and artificial intelligence and at the same time, moving towards 5G. Though at the right speed.
And 4th, our balance sheet continues to strengthen with net debt coming down to 4 9th consecutive quarter and a standing below 1,000,000,000, including post closing events at the end of June This clearly reflects our focus on de leverage and our ultimate goal to improve return on capital employed. Through all this, we can continue returning value to our shareholders. To review Telefonica's financial achievements in the second quarter, Please move to Slide 2. Reported headlines were positively affected in the second quarter by IFRS 16 accounting standards and some other special factors, whilst negatively impacted by FX movement against the euro, regulation and perimeter changes. Consolidated revenues reached 1,000,000,000, growing organically 3.7% versus the second quarter of 2018.
OADA exceeded 1,000,000,000, improving its growth rate to 1.6% year on year. Operating cash flow, ex spectrum totaled 1,000,000,000, up 0.9% year on year, back to growth after the declines in 900,000,000 in the quarter and free cash flow, again, strongly expanded 35.1 percent year on year to 1,000,000,000. Net financial debt stood at 1,000,000,000 at the final of June 5.7% lower than a year ago. Let's now move to guidance on Slide 3. We are well on track to deliver our full year outlook across all three metrics as our first half figures are in line with expectations.
Reiterate our guidance of growing revenues and OIBDA by around 2% in the full year, with CapEx to sales standing at levels of 15%. Regarding our dividend, per share in cash on the 20th June. We confirm the per share in cash for 2019 1st tranche payable on the 19th December and the second tranche in June 2020. On Slide 4, we show how we gain we again deliver robust financials in the second quarter. Revenues kept healthy organic growth rate, with all regions growing in the 2nd quarter.
Europe maintained its momentum and in increased by 1.7% year on year, and LatAm grows by 6.2%. By components, Seadis revenue grew by 2.3%, with handset sales accelerating the RANNA growth rates to 16.7% It is worth highlighting the performance posted by digital services and the B2B segment, up 19% 4.3%, respectively. Reported revenues were almost flat in the quarter. Improving the trend from 1.7 percent annual drop seen in the first quarter. At the OIBDA level, we show sequential improvements with Europe coming back to growth at 0.5% and LatAm growing by 3.2% year on year.
Excluding regulation and in organic terms, revenues and OIBDA would have accelerated its growth trends to 4.5 and 1.9% versus the first half of twenty eighteen. In reported terms, to note 2nd quarter revenues are almost flat year on year after 8 quarters of consecutive decline. In reported terms, OIBDA growth is impacted by the 2nd consecutive quarter by IFRS 16 adoption. Finally, operator cash flow reversed the 1st quarter trend and shows annual growth, improving by 610 basis point due both to the better operating performance and lower CapEx intensity once phasing impacts fade away. Turning to Slide number 5.
Let me share with you some more details for the B2C segment. Cash customer experience remains our top priority. Through simple, flexible and tailor made quality offers, we delivered a better cash experience, increasing user engagements and monetization. Video remains the key driver for value and loyalty improvement. With total TV accesses up 5% year on year and over the top video service, Movistar Play expanding by almost 60% after its launch in Mexico and Argentina last quarter.
In June, we launched our over the top Movistar plus light in Spain, which is delivering so far promising results. Ultra broadband uptake is growing significantly in both retail and wholesale. Worth spending some time on Movistar Plus leading position in Spain, which through differentiation continues growing in relevance among our client base. Not only total users grew to 8,000,000 this quarter, but offer functionalities show as well increases in usage as that audience share. Deferred consumption and other features.
All in, lifetime value of our customer improved through better churn versus non TD fixed broadband customer. More than 30% lower and significantly higher ARPU. Finally, our customized offers also apply prepaid and contract mobile, with more personalized benefits such as data sharing or data transfers that help us to increase usage, satisfaction, and ARPU We now move to slide number 6 where we show how B2B representing 20% of group revenues maintains its pace of growth. Around 5% year on year on the back of strong trend in corporates as much as 8% year on year growth in the first half of the year and improving trend in SMEs, 3% growth in the second quarter. Namely in our LatAm operations.
The evolution of the B2B portfolio are on a digital core of communications, cloud and security services with building blocks of best in class portfolio of owned and third party digital services, delivers strong revenue performance. Worth highlighting the agreement signed with Google Cloud and Microsoft during the last quarter, further enriching our portfolio. Fit on the best networks, the B2B proposal evolves towards customer centric end to end solutions with operational excellence. Let me just highlight cloud and security services and our virtualized IoT platform widely awarded and considered as an industry reference. Moving to Slide 7.
In the first platform, we already covered 121,000,000 premises with ultra broadband, having the world's largest footprint ex China. Furthermore, up to 60 percent of processes are already digitized and managing real time. And 30% of our customers have been migrated to full stack. We continue to utilize in our network, making it more virtual more converged and scalable and more efficient with CapEx needs in core representing just 40% of what needed for our legacy infrastructure. The 3rd platform provides an enlarged offering with digital services revenue growing by 19% annually in the second quarter.
And lastly, the 4 platform enriches all the above with artificial intelligence and open platforms. New functionalities are available in Movistar Home and more use cases with big data and data analytics facilitate our decision making process. I now hand over to Angel to take you through a detailed review of the business performance.
Thank you, Jose Maria. On Slide 8, we start reviewing the performance of our Spanish operations, which showed remarkable commercial results in the quarter, thanks to our premium quality differentiated offering. Once first quarter 35 grades effect was left behind, which had an impact on commercial trading, We improved net adds in each and every market segment during Q2. Worth highlighting is the net adds growth in the higher value with 326,000 net adds in mobile contract. 37,000 net adds in convergence and 11,000 net adds in pay TV despite the negative seasonality of the end percent of our total conversion base, a 3 percentage points increase from the same quarter last year.
Furthermore, churn improves as well in all segments, proving our pricing power and backing our more for more strategy and overall increasing our customer's lifetime value. Conversion ARPU shows sequential growth and stands at EUR 88.5 in the second quarter, up from 88.2 in Q1. The year on year comparison is penalized by phasing effects of tariff upgrades. Which should nevertheless reverse us from Q3 and go back to annual growth 1 last year's football promotions expire and the impact from recent tariff upgrades in the higher end of our conversion base start to be felt. Finally, it is again worth highlighting that Telefonica Spania continues growing its share of net adds in Spanish fiber.
Putting together retail and wholesale customers, telefonica Espana sharing fiber net adds during the quarter stands above its overall market share. With uptake growing to a combined 27% in the second quarter, bringing in visibility and sustainability to our business. Moving on to Slide 9, service revenues grew 48th straight quarter at Telefonica Espana. The sequential slowdown due to the mentioned negative phasing and tariff calendar effects in B2C, and certain seasonality impacts in B2B will be reversed in the second half of the year. Mostly driven by an improving mix of customers and ARPU growth in B2C on tariffs uplift and promotions expiring.
B2B revenues slightly increased year on year, growing for 5 straight quarters already, whilst wholesale and other revenues continue showing an improving trend. Once the next such as MTR cuts and MVNO agreements, are removed. We should expect this trend to remain similar to that seen Again, we should expect solid margin outlook in the second half, once top line trends improve and content comparison base eases. Moving to Slide 10. Telefonica Tochland delivered a strong trading and operational momentum in both own and partner brands.
This commercial performance has been supported by recent industry tests in which O2 showed strong network and service quality land posted 301,000 mobile contract net additions, with a significant contribution from partners with a focus on 4G. Auto continued driving to data growth as much as 41% year on year to 4.8 gigabyte per month end user. A key development worth highlighting is the MSR turnaround fueling sustained revenue growth of 1.6% year on year. Together with another quarter of strong handset sales, up 12.9% year on year. OIBDA trends reflect regulatory impacts as well as ongoing transformation and market investment for future growth.
CapEx strongly increased by 16.9% year on year in the first half, mainly due to the front loaded LTE rollout and network densification a trend we expect to normalize over the year. Moving to Slide 11, Telefonica UK produced another robust set of results with healthy top and bottom line growth on the back of solid commercial trading with 392,000 mobile contract net adds. The company demonstrated once again its market leading position and remains the UK's favorite mobile network with a sector leading loyalty of 0.9 percent. Revenues grew by a healthy 4.8 percent year on year as a result of ongoing success of O2's flexible tariffs, leading to further traction in handset sales and other revenue OIBDA delivered a robust annual growth of 9.2% in the second quarter. Operating cash flow strongly improved by 10% year on year in the first half, while the company successfully continued in sufficient investment in network capacity and customer experience.
On Slide 12, we start reviewing our Brazilian operations, where we continue leveraging on our unmatched assets to maintain and even grow our market leadership. First, and as regards to mobile business, Vivo led the latest connect mobile review, and we are ranked not only as the best mobile network on a national basis, but also show the best voice and data coverage. This allowed us to increase our market share Brazilian mobile market to 32.2 percent. We have been able to improve our contract net additions from Q1 and also report a significant improvement in prepaid revenue strength which for the year on year, roughly in line with Q1, ahead of contract price increases of 9% effective in August. As for the fixed business, our efforts start bearing fruits and improved customer mix results into fixed broadband ARPU growth accelerating to 16% year on year in Q2, from 14% in the previous quarter.
We have already passed 9,500,000 homes with fiber to the home. 2,200,000 homes already connected. We offer our IITV service in all cities with fiber to the home, 142 versus 130 at the end of Q1, which should be a further driving force to future revenue growth. Pay TV ARPU including DTH ARPU grows already by 5.5% year on year in Q2. Next slide shows that our strategy sound free cash flow growth despite investment efforts.
Pump12 service revenue acceleration in mobile contract is to be reversed as from Q3 on the mention that it upgrades. Mobile prepaid revenues on their site improved significantly their trend. Which coupled with handset sales and the lower drag from the fixed business allow 40.4% total revenue growth despite tariff calendar and a tough competitive environment. OpEx performance helped by digitalization savings stands out for another quarter, again, being able to meet inflation OpEx grows by 0.4% year on year, which compares with 3.4% inflation rate. And showing as much as 2 percentage points sequential improvement.
OIBDA margin stands above 40% in the first half of the year. This allows for free cash flow growth of 13% in the quarter, no matter CapEx to sales remains at 19% on the ongoing business transformation. And starting with Southeast, but on Slide 14, we would highlight service revenue trends improving in the quarter. Driven by strong growth in value KPIs with positive contact net adds in all countries. This the 7th straight quarter of positive mobile contact networks in the region.
Our revenues grew by 17.6% year on year in organic terms, with Argentinean revenue growth accelerating on tariffs increases, and value accesses growth. In Peru, our convergent offer Movistar Total, the 1st and only truly convergent option in the market is showing promising results so far with around 100,000 customers having already signed up. OIBDA shows a significant increase from the previous quarter thanks mainly to the better performance seen in Argentina and Peru. As for North Hispam, on the next slide, we continue seeing good commercial performance, thanks to an acceleration in contract net adds in Colombia. Following a more for more strategy and still improving commercial trends in Mexico that shows positive contract net adds for the 3rd consecutive quarter.
OIBDA performance remains penalized by recognition of spectrum fees as OpEx in Mexico should we exclude Mexico, OIBDA would have maintained similar year on year trend versus the previous quarter, growing plus 7.6% year on year in Q2. On Slide 16, we take the opportunity to review not only Telstra's quarterly performance but also its success story over the last few years. Telxius has been steadily growing in value. Leveraging on its prime infrastructure and a well planned strategy that is bearing fruits, and we wanted to share some of these conclusions with you. In terms of portfolio and after adding almost 800 new towers in the quarter, total number of sites stands at 10,600,11 percent higher than 2016.
Over this period, tenancy ratio has increased to 1.36 times with tenants other than the encore tenant having grown by 43% since December 2016. Revenues at APA maintained their solid growth rates in the quarter, posting double digit rates on a year on year basis. TelSures has been able to post mid to high single digit growth in revenue and OIBDA, excluding capacity sales at the cable business for the last couple of years. We see room for further revenue and OTA growth, on visibility provided by an enlarged portfolio and room for increased tenancy ratio. This should provide clear support to the value case.
These strong results displayed by regions and NOVs are supported by group wide projects aiming to increase customer engagement, value and efficiency. Today, I would like to touch upon 3 of such projects: device relevance, digital transformation, and network optimization via sharing and legacy switch off. Starting with devices on Slide 17, we look in more detail at how we can improve customer value via hardware sales. Handset revenues that grow by about 17% year on year in Q2, already make for 11% of our total revenues. This does not only bring in revenue and OIBDA growth, but also helps to increase customer engagement and loyalty and accordingly improve customer value.
Looking at our own experience and test cases running different markets, we can say that customers buying their devices in our channel show lower churn and higher ARPU. This is a sizable opportunity as only 30% of our customers renew the handsets with us. Through Phoenix, our digital renewal program, we are starting to offer our customers a This does not only increase revenue as said before. Customer satisfaction improves and the weight of digital sales in our distribution channel fence efficiency increases as well. We are prompting a fast rollout of Phoenix and the program will be implemented in 9 countries during 2019 being is not limited to mobile handset renewal only.
We aim to optimize our sales cycle and include other devices, accessories and services with significant upside in all geographies. Slide number 18 shows how we are advancing in our digital transformation program. We for further engagement and efficiency gains. As such, the execution of the several initiatives set around sales, Customer service, digitalization and process automation is translating into higher use of digital channels, better customer experience and additional savings to the ones captured in 2018. Among other relevant indicators in the first half of the year, Digital channel operations are growing 28% from the year before, whilst calls to contact centers are down 12%.
As a result, we are progressing well on track and already capturing at the end of the first half, 45% of the targeted savings for this year of more than 1,000,000. Moving on to Slide 19, we highlight our focus on optimizing networks. Network sharing agreements had an opportunity to reduce costs and investment while improving coverage and quality. Our customers will benefit from faster rollout of new networks and we capture resources which may be redirected to other investments. Worth to mention is the exclusive agreement signed in Germany with Vodafone to K access to their cable networks.
And the recent agreement sent in Brazil and the UK to share both 2G 4G and 5G deployments with relevant efficiencies behind. We continue to be open minded, analyzing any potential opportunity on this front. On the other hand, we are already progressing in legacy shutdown as a result of our transformation journey. In mobile, we are using 2, 3G June to 4G, which has a much higher spectral efficiency. In fixed, investment in legacy technologies are reduced and we are pioneering in the copper, central offices, decommissioning, having closed more than 400 central offices of Farin, Spain, and announced more than 1500 closures.
All this is part of a 6 year plan where we expect OIBDA Savings savings coming from asset sales, energy savings and lower maintenance costs and CapEx savings coming from both from deployment and maintenance. I now hand over to Laura.
Help. Moving to Slide 20, net income reached almost 1,000,000,000. Up 2.8% versus the first half of twenty eighteen despite the negative impact of ForEx. And IFRS 16. Earning per share stood at 12% more than in January to June 2018.
Reflecting the good operating performance T1 shows. Negative impact of FX was nevertheless reduced in the second quarter due to the Brazilian real and Argentinian peso improving trends per the first quarter. Again, it is important to mention that spending in CapEx, interest payments, working capital and others. 2, an up to June, a negative FX impact of 1,000,000 at the OIBDA level is mostly neutralized at the free cash flow level, where we have a negative impact of just 1,000,000. Regarding net debt, FX helped to bring it down by EUR 49,000,000 in the last 12 month rolling.
On Slide 22, you can see how strong our free cash flow generation has been over the years. In the second quarter of the year, free cash flow surpassed the billion mark to reach almost 1,000,000,000 in the first have 78% higher than in the same period last year. This significant growth rate is mainly driven by the better performance of operations and lower working capital consumption, taxes and minorities. For the second half of the year, we expect free cash flow ex spectrum to improve. As Jose Maria mentioned, at the beginning of the presentation, free cash flow remains the sustainable driver for further deleverage.
Let's now move to balance sheet metrics on Slide 23. We present another quarter of debt reduction, 9 in a row, thanks to our strong free cash flow generation that has mentioned before reached 1,000,000,000 in the first half of the year. Comfortably exceeding dividends, hybrid coupons and commitments, while helping to bring down net debt. Taken into consideration, post closing events related to inorganic measures also contributing to debt payment jointly with free cash flow generation, Net debt is a good stand at 1,000,000,000 and imply net debt to EBITDA ratio that comes down to 2.56 times. Lastly, let me mention that under IFRS 16, net debt could be impacted by 1,000,000,000 worth of leases.
Slide 24 presents telefonica's ample and diversified financing activity, totaling 1,000,000,000 year to date, contributing to both an extension our average state life to more than 10 years and a robust liquidity position of close to 1,000,000,000. Such financing activity has been executed at historical low interest rate that has allowed us to bring down our interest payment effective cost to 3.35 percent as of June 2019, 0.2 percentage points lower than in June 20 team. I will now hand back to Jose Maria for a final recap.
Thank you Laura. To summarize, 2nd quarter results proved to gain consistent business trends and execution schemes and fundamentals. We continue putting the best technology at our customer service relying on our network leadership, having the world's largest ultra broadband fiber footprint ex China. This allow us for better customer experience and translates into higher revenue per access. Digitalization also benefits our customer satisfaction, whilst helping through efficiencies to translate top line growth into improved operating trends.
We can then continue posting good levels of profitable and sustainable growth in revenues, OIBDA and operating cash flow. This helps leverage, and we have been able to reduce again net financial debt for 9 straight quarters already. And finally, following these results, we can also say that we are fully on track to meet 2019 guidance. Thank you very much for listening.
You. We will kindly ask you to ask a maximum of two questions per participant. And if possible, we recommend you not to use your cell or hands free phone. There will be a short silence while questions are being registered. Our first question comes from the line of Mathieu Robilliard from Barclays.
Please go ahead.
Good morning. Thank you. I had two questions, please. 1st, with regards to asset sales, so you've done quite a number of asset sales in good conditions over the last few years. And I was wondering if you're reaching the hand of that process.
So you still think there are opportunities to sell assets that not earning and the desired cost of capital don't have to prospect to? And second, with regards to Spain, I think you mentioned in the presentation that you expect the revenues to improve in H2, which is prevently in line with what you've been saying in the past quarters. I was wondering if that statement is true also for the EBITDA because I think previous quarters, you had indicated that you expect an inflection in EBITDA in the 2nd part of the year. Thank you.
Thanks, Latir. Regarding your first question on the portfolio optimization, Over the last year, we have reshaped our portfolio actively managing assets and looking for profitable growth. We have been investing a few years ago in Germany and Brazil. And we have been divesting or optimizing capital allocation, like the case of Telshoes and tariffs, data centers, or Central America, including raw proceed. We are consistently reviewing our portfolio, and in fact, we have classified all our assets and geographies in an infrastructure in 3 categories in order to project this ROSA evolution.
And we benchmark, we have benchmarked the ROSA derived from the management with any potentially inorganic opportunity. And that's why we have been taking the decision of divesting in Central America. At the same time, we think that we have been able to reinforce our balance sheet for 3 quarters, for 9 quarters in a row, thanks to our organic free cash flow generation and this in organic And as a result, we don't feel forced to sell assets anymore just for deleveraging purpose, but we will do so. Order to try to optimize return on capital employed. We have a balance sheet that totals 1,000,000,000.
And therefore, we think we have still room to optimize return on capital employed. So you should expect from us to stick to this classification of assets into these 3 categories. The ones that are core, the ones that are to develop and the ones that are to divest. And that includes geographies, infrastructure, and products services. And therefore, we are not in a rush, but you should expect from us to keep you in very selective and very focused on return on capital employed.
And therefore, we see think we have room to go on this portfolio optimization.
And regarding the second question First, I would like to highlight that, service revenues has been growing for 8 consecutive quarters in a growing pain across components. And I said in the presentation, but I want to reiterate B2C will return to growth have 2, with actually growth on better comps, solid conversion uplift coming from the tariff hybrid effective now in the summer and the end of the promos of last year, football season and improved trading. In B2B growth is also expected to accelerate and have to once the punctual impacts of the 2nd quarter are behind wholesale and others is growing nicely. We expect similar trends. So Q2 is expected to be the lowest year on year growth in service revenues in Spain, and we will recover stronger growth in the second half.
Then moving to FDA. In the second quarter, what we have seen is OpEx going up due to higher cost of TV content and IT offset by lower personnel and commercial costs. When we look towards the second half of the year, we're going to have lower year on year growth one will have further efficiencies in commercial channels called centers, network IT costs from digitalization automation, which will allow us to continue posting benchmark margins. OIBDA margin has improved 1 percentage point from Q1 to Q2, and we expect have margins in the second half of the year, broadly similar to the average margins of the first half. So this means, as we've said before, that we continue to aim towards not declining OIBDA in Spain in 2019.
Which could be an achievement not seen for the last years. So we continue aiming towards or if they're not declining in Spain.
The next question comes from Jacob Bluestone from Credit Suisse. Please go ahead.
Good morning. Thanks for taking the questions. Firstly, just staying on Spain, where as you just pointed out, Q2 was a slowdown in service revenue growth. And you mentioned during your presentation that it was largely ARPU driven. Can you maybe give a little bit more color on the deterioration in the the ARPU.
So your convergent ARPU went from growing slightly to shrinking slightly. Could you maybe just sort of help us understand how much of that is comps, how much of that is position picking up, how much is dilution from no Frills brands or other factors, just to sort of help us understand a little bit what say behind that slowdown in ARPU? So that's the first question. And then just secondly, I mean, you obviously in your presentation, mentioned, optimizing networks. And I just sort of interested if you could update us on your thoughts on tower sales across some key assets?
What's sort of your thinking on that?
On the first question, let me talk about all the moving pieces in the convergent portfolio The comparison performance is measured by several KPIs, the customer base, the mix the base, the churn and the ARPU that you were asking about. On the customer base, we are sustaining the commercial momentum customer base income versions is up quarter on quarter year on year and year on year plus 4.1 percent. We have 22,800,000 accesses. And 4,700,000 customers. The mix also remains attractive and skewed towards the higher value packages, which account for 28% of the customer base, up 1% year on year.
Fusion churn has improved significantly from 1.7% in Q1 to 1.46% in Q2. And regarding the ARPU, it stands at 1,000,000, which is up sequentially 0.3 percent quarter on quarter, but is down year on year on the following factors. We have a positive impact from tariff upgrades, but the different calendar and the different size of the tariff upgrades is waiting on this year on year comparison We have a positive impact from upselling. We have a dilutive effect from promos that have taken place in the last 12 months, we have also had a dilutive effect from mobile add ons migrating to Fusion multiline packs and less out of the bundle. And we have a dilutive effect from the multi brand conversion offers.
We are not only offering conversion propositions infusion, but also in O2. ARPU XO2 would be growing year on year.
Taking your question on the, on networks, mobile networks, 5G and tower. Hand towers, potential network sharing? Well, first, let me remind you that at the group level, we have roughly 130s 1000 sites, 90,000 just on LTE. And therefore, and we have probably one of the largest, if not the largest ultra broadband fiber network in our territory. So therefore, we have still a significant room to go in terms of to enhance return on capital employed by network sharing focusing on towers.
I mean, and if we were to focus, for example, in the UK, CTIL owns and operate roughly 18,500 towers and already has 2 largest tenants customers of high financial profiles such as Vodafone and ourselves. Therefore, and in the current market environment, it has a significant intrinsic value and we and Vodafone are aligning our intention crystallize that value. We think that towards ourselves are probably no longer an effective way of executing the SATron action because with the new accounting standards, it becomes a very expensive way of financing. And therefore, we think there are other more effective ways of executing such transaction. But if you add to this amount of towers in the UK, the fact that Telxius owns and operate, probably 17,500 towers and we have 20,000 towers just in Germany.
You will have a better idea of the value that such an asset could have and the potential value creation and the reduction if you were to share and crystallize the value of those assets. So you should expect from us to be very focused on optimizing this value. And at the same time, preserving a competitive advantage, whatever, we have that competitive advantage. So yes, you should expect us to be very active on those fronts.
Thank you very much.
Thank you. The next question comes from the line of Georgios Yerodiacono from Citi. Please go ahead.
Hi. Thank you for taking the questions. I have 2 and actually most of the follow ups. I'd be interested if you could, perhaps link, the discussion around network sharing with some of the disposal options you available. In particular, if you could give us a bit of an idea around the agreement you have in Brazil with team, whether that could be replicated in the rest of your footprint and how that links them with any monetization options you have.
On the tower side. And then my second question is around network virtualization and There's been obviously talk about, turning off 3G in Europe in the next 2 or 3 years. If you do 2G sharing with other operators and network virtualization. I just wanted to get an idea of what is the path that you see in the coming years in reducing perhaps both the cost and capital intensity of the industry. Is there any numbers you could give us if there are credible to you.
Any help with that will be appreciated.
Hi, Georgios. I will start with the first question. We announced an MOU in Brazil with Tim, but open to other parties that has the objective of improving return on capital employed with allocating CapEx smartly by 2 ways. 1st, the prioritizing legacy technologies And second, sharing the cost of investment in new technologies or higher return technologies. So one leg of this agreement is a full 2G network sharing in a single grid format.
With the objective of switching off 1 of the 2 networks or if other people want to join additional networks in each one of the regions. This is clearly on the way of deprioritizing and making more efficient to return on legacy technologies. This can be extended to any and all geographies in our footprint. The second leg of the agreement that we announced in Brazil is sharing the deployment of 4G at this stage in a subset of cities. This has to be developed over the 90 days between the parties that has to be approved by regulators and depending on the health of this analysis, it's could be increased to more cities than the ones that are originally envisioned.
We also contemplate, as a result of the work in the next 90 days opportunities to share in other frequencies at technologies. But here, we will, as always, be looking not to give away where we have a technological advantage. And we will also include reduction opportunities operations and maintenance across the networks of the different players. So this is both on the deep prioritizing legacy technologies and on making more efficient investments in new technologies.
Taking your second question, as a sector, we think we have a significant opportunity to enhance Royal Rose through network sharing. Every network element that does not represent a commercial competitive advantage is a candidate for sharing. That include infrastructure, access, transport or roaming agreements. Those are all different alternatives that can offer a full range of possibilities. Passive or active sharing are both to be considered, depending on the markets and the relative market share that we have.
It makes no sense to be ready to give access to a brand new fiber network because it represents an opportunity to accelerate returns. And at the same time, to preserve 4 or 5, 2G or 3g networks per country. It makes no sense to start deploying 5G without radically simplifying through network sharing legacy technology. And it is in this framework that you should read all the agreements that we have signed with Vodafone team or the sitting one with Midicom in Colombia. And we are working as we several other products at the same time.
In terms of virtualization for 5G namely, there are 2 parts of virtualization. To the core visualization or the run virtualization. Core is more advanced. And we are probably market leaders on that regard with over technology. And therefore, we are also collaborating with suppliers and with some of our competitors to see which part of the IV deployment, we can optimize, but also sharing that part of that virtualization with, again, with this doesn't represent a commercial advantage.
And then on run, it's going to be depending on the evolution of 5G. And therefore, the views that we have on non standalone 5G or standalone 5 But as a summary, we think that going forward, there is a significant opportunity of enhancing returns to sharing, and it is an absolute no brainer to share legacy technologies and to decommission as many networks as we can that are not sustainable for the future. And this should represent a significant efficiency opportunity going forward. And on that regard, it's not just mobile networks, also fiber networks are going to be essential And remember that we have the largest fiber footprint. And therefore, accelerating the decommissioning of copper, namely in Spain presents a significant efficiency opportunity.
If I could quickly ask a follow-up around Brazil, I'm guessing you had similar discussions for a single Suji grid in other countries. Why has Brazil been successful in the negotiation? Why are other countries where haven't reached an agreement yet?
Well, Brazil has announced an MOU. They will be now developing it over the next 90 days. You need a willing partner. Team has shown lots of interest, but you should expect us to be looking at this type of agreement in each one of our geographies. So we will be working and in due course, presenting to the market or progress on this front.
As Jose Maria was said, it's an operator.
Thank you, Julius. Next question please. Thank
you. The next question comes from the line of Michael Bishop from Goldman Sachs. Please go ahead.
Just moving to Spanish content, as you go into the football season and we just heard that Orange, we're talking about potentially promoting more It'd just be good to get your high level thoughts on how the content strategy has evolved over the last year and the sort of attach rates you're seeing from content customers that you're winning back from competitors? And then secondly, just moving to the UK performance, I was just wondering if you could give us any indication on how much of the performance is being helped by the Sky And at least locally, it feels like Sky is really pushing mobile, then that should be benefiting your trends.
Thank you. On the, Michael, on the first question on Spanish content, one year ago, there was a lot of concern about the purchase of the sports rights, the cost of those whether we would be able to wholesale them, the potential to attract retail customers from from those players not taking the content? Well, what we can say is that 1 year after, we are stronger. We're in a much better place. We have been able to capture customers above expectations we had from players that didn't have the football.
This has been customers that have come with ARPU higher than our average ARPU and both in the base, but also in the new customers that we have acquired, what we see is that this our customers that have significantly lower churn rate. Now we get into the 3rd quarter scenario in which we're going to start a new season of La Liga. Last year, Vodafone managed to retain a certain number of customers because they still had 8 weekly games from La Liga, from this focus onwards, that would not be the case. So football fans that stayed with Vodafone will have to look for football elsewhere. And we have control of the whole premium football rights, which we have packets now into 1 la liga package, not anymore separating the best of the week and the others, including the 2nd division.
And then we have the champions including Europa League. So We believe that there's going to be an active and dynamic back to school time, no doubt, maybe promo intensity could be lower than what was seen last year. And I need to ask you to please repeat the second question.
Yes. The second question was just around the impact of the Sky MVNO on the O2 UK performance because it feels like at least locally in the UK skies pushing quite aggressively on mobile.
Thank you. Well, you have seen the results of our UK operation, which is, having one more quarter of pretty robust results, outperforming the market. And this is resulting in strong commercial traction. It's resulting in a single digit or high single digit increases both in revenues and OIBDA. This is coming mainly from our own commercial activity.
And I'm afraid we cannot due to the agreements we have signed in place with Sky disclosed figures regarding that MVNO relationship. You should have to ask them directly. I'm sorry.
No, no problem. That's all very helpful. Thanks. Thank you, Michael. Next question please.
Thank you. The next question comes from Akyo Tatani from JPMorgan.
I've got 2 follow ups as well, please. The first was just in relation to some of the comments you've been giving around network utilization and tower sharing. I mean, if I understand correctly what you're saying, obviously correct me if I'm wrong here, it sounds like you're saying that you're increasing with the view that network differentiation is maybe not as, let's say, core in a way it once was perceived, you don't need to own all the different components to differentiate your network. And obviously there are many different parts, which you'd be happy to share, divest, etcetera. I guess what I'm trying to understand is, as we as you look at the business going forward, what do you think are the key pillars differentiating?
I mean, is the network still as core as it once was? Obviously, in Spain, contents, one of your key pillars, differentiating there's digitalization. So there's a lot of different pillars here. How do you think about differentiation, and trying to protect your business and growing going forward? So that's the first question.
And then the second one, just really following up on the various topics we've been discussing on Spain, near term, you have been doing much better than your peers, obviously your on H2. But the broader question, I guess for me on Spain is that, if we look at the Spanish market versus the rest of Europe. One of the big differentiating points is that the deployment cost of infrastructure is much cheaper. It's been one of the big advantages you've had in terms of your capital intensity, how do you think about your ability to protect your business against that backdrop? Obviously, we've got change of management that you could tell whether you seem to want to go national, you've got Masimo being aggressive unless you've got Vodafone struggling a lot in that market and Orange also had bad numbers this morning in Spain.
So I guess I'm just trying to understand differentiation in Spain and how do you maintain and protect your returns?
Thanks for your question. I'll take the first one on network utilization, on network share We do think that network is a key differentiating factor. And in fact, we have been pretty consistent on that because we have invested roughly 1,000,000,000 euros in CapEx during the last 3 years. And therefore, we are going through the 1 of the highest CapEx investment cycles in the history of Telefonica. As a result of that, we have built the largest Ultra broadband network outside China.
We have doubled the number of LTE sites We have doubled the number of customer base in Ultra broadband. We have more than doubled our LTV customer base, and we have built the largest Spanish speaking pay TV platforms. So we do think that network is a key differentiating asset and we are investing very heavily in transforming our network from legacy networks like copper or 2g or 3g into state of the art last generation IP network that are ready to be virtualized and subject to be run through artificial intelligence. The factor that we stress around network sharing is the fact that it makes no sense to have 4 or 5 antennas in each roof when you can share and therefore, that's not a differentiating factor and it may no sense to preserve 4 or 5, 2G or 3G networks in every country, what you can have, you can move the traffic, namely the data traffic from those network into 4G or to come 5G networks. So we think that you need to preserve network when you have a competitive commercial advantage, but every other part of the network, was that to be infrastructure, was that to be backbone, backhaul that is not a differentiated factor.
It's a candidate for divesting because it makes no sense to invest in 7 different mobile technologies the same time because that would significantly affect return on capital employed. So my point is that network differentiation is a key factor, but multiplying the advent of network by 4 or 5 when you don't have a competitive advantage makes no sense and namely on the legacy part of the network. So we are investing very heavily. And we will keep doing that in order to preserve that competitive advantage, but we will be sharing anything that is not differentiating us from year. I hope that that answers your question.
Listen, regarding how we differentiate in keep and keep differentiating in Spain. This has different components on the segments. So for instance, on B2C, but we see some market, which is increasingly segmented and polarized as a consequence of the high convergence penetration. So you have a low end, which significantly more crowded with all 4 national players present, sometimes with multi brands, with MVNOs and local players. But then you have the medium to high end, which is where we make most of our revenues and OIBDA, which is less crowded.
More rational. This requires larger investments, spending in network, quality, IT services, contents and function abilities. And here, we have a lot of differentiating capabilities, which allow us to continue applying more, for, more strategy, which by the way, is also being applied by competitors, foreign service prices, both in orange and just their brand Boulevard when they revamp their portfolio are also doing more for more. Masmobil and Diego have been applying more for more I'll tell you, talk about them. They have raised prices in services of different brands.
So me to see a market, which is more segmented, convergent, more polarized and where we hit, much higher in revenue. So, EBITDA than our share in accesses. In B2B, we have had very, a very strong position in Spain, we are clear market leaders. Here, we are focusing on digital transformation and helping our customers transform digitally and here, being able to provide services like security, cloud, IoT big data, digital workplaces is something that differentiates us from our competitors and is allowing us to have the performance that you've seen with the business growing for the last 8 quarters. And then the 3rd component is wholesale another where our base of fiber that we are wholesaling and our NEBA figures are growing significantly and they are obviously revenue accretive to the old copper.
And then the further wholesale of content that we have are going to trigger our ability to differentiate us from our competitors The competitor fast presenting results this morning had been growing in previous quarters on the base of wholesale revenues that has been slowing down for us accelerating. So we continue to be able to differentiate after having invested substantially our business in all the
platforms. Thank you, Aki. Next question please.
Thank you. The next question comes from David Wright from Bank of America. Please go ahead.
Yes, thank you. A couple of questions. Firstly, just on Spain, I just wanted to get my understanding of this right, just reviewing, I think, one of the earlier questions. So we could expect the revenues to accelerate or to return to growth in H2, B2C, B2B, a little better wholesale similar. And you're also saying net content cost growth also slows.
So I'm wondering why if you're getting some relief from the pricing and the content costs, that you're only really expecting margin to be broadly similar. Why wouldn't it be better And I'm really sorry to struggle with EBITDA not in decline. Does that mean stable? Does that mean growth not in decline I'm struggling with? And then my second question, just a little bit more higher level, probably Jose Maria is, you've seen a fairly precipitous drop in the share price of your German subsidiary over the past few months.
And I think, do you guys look at that and consider that the whole framework of asset divestment, but also asset acquisitions. Could there ever be an opportunity to take advantage of that share price and perhaps even look to buy more share in the market or even consider acquiring minorities given that the market I'm sure you would feel doesn't value that asset correctly.
Hi, David. On the first question, again, I reiterate that We expect acceleration of service revenue growth in the second half. Compared to what we have seen in the first half. And regarding the margin, you have different moving pieces. There will be lower year on year growth in net content cost in the second half versus the first half but still some growth in the gross cost.
Deficiencies in from the people plans that we have been applying in the last years have peaked at the in the first half of this year. That is with a current or existing plans and not going to be improving or adding additional savings to the ones that we have achieved because we are already in the run rate. So we have different moving pieces. For us, we have been able to achieve in the 2nd quarter improvement of 1 percentage point in OIBDA margin to 39.8% Organicx, IFRS, which is remarkable. Maybe we could have expected this to be a bit lower.
So what we see is that what we are achieving in the second quarter is, again, back the pre IFRS levels around or very close to 40% is a very strong OIBDA margin. So that's where I think that our way we say that we expect margins to be broadly on that level. And then we expect OIBDA, which has been declining in Spain since 2009. We expect it not to decline in 2019. We had been declining for a decade in revenues.
Last year of 2018, we started increasing revenues Spain, 2019, we're accelerating the increase of revenues. And what we're aiming to do is revert and what we saw as decline. So this could be stable, very slightly positive. OIBDA for 2019.
I'm taking your question on Germany. The German Telefonica Deutschland, share price has been affected during the last months by, mainly three factors, I would say First is the KPN sell off and now it's over, but has been pretty consistent and affecting the share price evolution during the last month's quarters. 2nd was uncertainty around the German option. I mean, what would be the outcome of the German option in terms of how much spectrum will be gaining out of the auction. And if that spectrum will be enough to maintain our performance, and I think that that concern is now over as well.
And the third would be the potential 4th MNO. All those concerns are progressing fading away. And most of them were addressed yesterday by our team in Germany during their conference call. So we think that the share price of telephonic acid is actually evolved positively going forward. We are happy.
I'm certainly committed with our stake in Telefonica Deutschland. And as and we are deeply deep believers in Telefonica Doz and its intrinsic value. So for the time being, we are comfortable with the state that we have.
Thank you, David. Next question please.
Thank you. The next question comes from Kevin Quiroga from Deutsche Bank. Please go ahead.
Thank you. I've just got a follow-up question on Spain. You mentioned the high end accounts 28% of the overall customer base at 1 percentage point the prior year. Could you tell us how the low and mid end segments have compared versus 1 year ago as well? And would you also be able to comment on how large the O2 base now is I think last quarter you did say it's 50,000 to 60,000 subs?
Many thanks.
The high end, which is ARPUs of what we call the package for Santodal is 8%. In the mid end, which is average ARPUs of 85 is 32% was 41% 1 year ago. And the low end, which has ARPUs around is 40%. It was 32% year ago. So The ARPU that we call low end is the average ARPU of the operator, which is closest to us.
So One has to bear in mind that we are using this terminology of high meat and low end, but low end for us is the average ARPU for our closest competitor. And this is the result of our more for more strategies. We are the scribing these segments according to which package is going to each segment, but the ARPU of the average ARPU of each one of these segments, high medium low, has been going up in the last year. So this is the detail. And regarding O2, let me get the figure.
One second. Regarding O2, we have over 100,000 fixed broadband subs, over 185,000 mobile subs, at the end of Q2. And we have the lowest churn at 0.8%.
Thank you, Kevin. Next question please.
Thank you.
The next question comes from Karamurdexmidt from Berenberg. Please go ahead.
Hi, thank you. I've got two questions on the UK. Could you help us understand the split of handset and other you, the growth there between handsets and the smart metering program. Are you able to give any color regarding how much revenue growth you're getting from that Smart Metering program and how much of the growth is that and how long will it continue to be a growth driver before starting to to flatten in time? And then secondly, again, in the UK, in terms of the Ofcom pricing review, how much will it cost to reduce out of contract customers to the equivalent 30 day SIM only deal.
And I'd just like to ask, why have you only committed to that for direct customers, and not contracts taken out with 3rd party retailers.
Thank you for your questions. First thing I would like to say is that mobile service revenue and symmetric is now less comparable and applicable in the UK due to the increasing range of propositions in the markets that we have in the market, basically, custom plans which are selling the device along with the plan. This has 36 months life. And these results through the new IFRS accounting into a reclassification of revenues into mobile service revenue and and hardware. So what we are focused on is looking at the total revenue figure And here, also what we're looking is about the growth of our base, the top line and the bottom line growth of our UK operation and all three of these, have been growing in the first half.
What we see is a very strong traction of custom plans, which is allowing us to capture value and outperform the market. And for an accounting issue, we're not going to slow down our commercial performance. The SMIP is also adding to to the growth in our revenue in our UK operation, we at this stage cannot disclose and the detail on how much it is accounting. Regarding your second question, I would sorry, again, ask if you can rephrase it because I'm not sure I got all the details and it being so specific. I'm not sure I have the information to respond.
But please, you can repeat it. Thank you.
It was asking around Ofcom and the actions they're doing at the moment regarding pricing reviews in the UK. So O2 the other day announced that at the end of, mobile handset contracts that you would reduce the pricing of customers automatically to the equivalent 30 day SIM only deal? But it was also announced that you'd only be doing that for customers that you sold it directly and not for contracts taken out with the 3rd party retailers. And I was wondering why, that decision was made to only do the kind of favorable pricing move for direct 3 third parties?
Okay. Thank you. In the UK, in direct channels, we already sell handsets and service into different contracts. So once hands contract is finished will no longer charge for the handset. So This has been a very clear and transparent proposition from our UK operation.
And I think that this differentiates as from some of our competitors. So we would not be expecting any impact from this.
Thank you, Carl. We have time for just one final question, please.
Our last question comes from the line of Mandeep Singh from Redburn. Please go ahead.
From me. I'd like to come back to the German question in a different way, similar to what David asked. However, I mean, obviously, if you look at sort of capital allocation, you look at your portfolio of assets, I mean, you are leaking about 1,000,000 of a 12% dividend yield from Germany to minorities. I mean, you've made so many great efforts across your portfolio to optimize returns. How is that an acceptable allocation of capital to leak that much dividend from Germany, which has negative bond yields to minorities?
Well, thanks for the question. And we rang the capital allocation decision around the different return and therefore, we prioritize the ones that have the highest returns. So for the time being, we think we have a better option that goes before the one that you were mentioning. We agree. And as I was saying before, it's not just a question of financial or cash returns out of the dividend leakage.
It's also has to do with the relative value of the different assets.
So it
is an accelerator, but we have priorities that go before the one that you were mentioning.
Thank you.
Thank you, Mandeep.
You very much for your participation. And we certainly hope that we have provided some useful insights for you. Should you still have further questions, we kindly ask you to contact our investor relationship department.