Ladies and gentlemen, thank you for standing by, and welcome to Telefonica's January to December 2017 Results Conference Call. And as a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Pablo Egiron, Head of Investor Relations. Please go ahead sir.
Good morning and welcome to Telefonica Conference Call conference call to discuss January, December 2017 results. I'm Pablo Riedon, Head of Investor Relations. Before proceeding, let me mention the financial information contained in this document related to the fourth quarter 2017 has been prepared under International Financial Reporting Standards as adopted by the European Union. This financial information is unaudited. 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 risks, uncertainties and contingencies, many of which are beyond the company's control. We encourage you to review our publicly available disclosure documents filed with the relevant securities market regulator If you don't have a copy of the relevant press releases and slides, please contact Telefonica's investor relations team in Madrid. Now, let me turn the call over to our Chairman and Chief Executive Officer, Jose Maria Alvarez Paliete.
Thank you, Pablo. Good morning, and welcome to Telefonica's 4th quarter results conference call. With me today are Angel Villa, Chief Operating Officer and Laura Abasolo, Chief Financial And Control Officer. And during the Q And A session, you will have the opportunities to address us with any questions you may have. I'd like to start this call sharing with all of you my reflection after almost 20 months as a Chairman and CEO of Telefonica.
More specifically about the essential building blocks guiding our efforts. If we look around, we see that the world in which release is defined by one concept, connections. Across the world, economies and societies are being fundamentally transformed by digitalization. Far from decelerating, we should expect further technological disruption and digitalization across every sector, to be one of the global trends determining the future. To grab this huge opportunity, we need to be open minded and ready to transform.
We see digitalization as the key lever for this radical transformation and to unlock value for all stakeholders. We articulate this purpose across 3 strategic priorities: 1st, to enable people with the power of connectivity second, operating countries where we can have an impact and create value. And third, optimize our capabilities for a sustainable digital future. With these actions, we want to bolster a strong financial performance and shareholder returns. Looking at the 3 of them in detail.
Ultra broadband connectivity tailored to each market is a key enabler. Driving an integrated offer and the best customer experience, redefining the way we interact with our customers, and cognitive intelligence is a new tool to apply to this goal. Operations will be centered in markets where we can have an impact and create value leaders in convergence, leaders in mobility and in having successful challenger positions with the structural growth opportunities ahead. In addition, we believe that being sustainable for the long term. This is our commitment to our almost 345,000,000 customers over more than 120,000 employees.
The citizens of the societies where we operate and our almost 100 years of successful history. To do that, optimizing our capabilities is a must, building a platform company, being pioneers in digitalization, by our nearing the new technological wave, but at the same time, with a relentless focus on efficiency and maximizing group synergies. All in all, this has to be reflected in financials in growing numbers. And 2017, we had a good start as we will explain now. Now let me turn to page 4.
2017 was the year in which we achieved an excellent execution of our priorities as demonstrated by: 1st, growth. Revenues, OIBDA and operating free cash flow grew simultaneously in organic and reported terms, and free cash flow posted a double digit increase. 2nd, capturing the benefits of the digital transformation with significant investments in Ultra broadband to have the most innovative, smart and efficient networks. As a result, we are number 1 in fiber deployment in Spain and Latin America, and we are pioneers in cognitive power. Moreover, we are monetizing the data traffic explosion, turning volumes into revenues.
And third, we strengthened our financial position addressing the debt level, which was reduced by 1,000,000,000 through both organic and inorganic measures. As such. Our free cash flow was 1,000,000,000, and we sold a 40% stake in Telhesives. Slide 5 shows the business accelerating growth in 2017, thanks to our efforts in the past years. Service revenues surpassed 3 percent organic growth with high single digit growth in Latin America.
And a positive result in Europe if we exclude the negative impact of regulation. OIBDA accelerated to mid single digit with LatAm growing by double digits and Europe ex regulation 2%. This growth fueled by a lower capital intensity than previous years, has enabled operating cash flow to grow 12% with both regions growing at double digit ex regulation. And free cash flow reached almost 1,000,000,000, 13% more than in 2016 and leverage ratio decreased 0.3 times. Moving to Slide 6.
Revenues and service revenues and service revenues accelerated growth in the 4th quarter to 4.8% and 4.3%, respectively, in organic terms. With both Europe and LatAm yielding improvements ex regulation. Total revenues for the year increased 4.5% ex regulation. We continue to improve data monetization as mobile data revenues improved sequentially to close to 20% organically. Contributing to the change in the revenue mix.
In 2017, more than 50% of our revenues came for broadband and service beyond activity. Revenue flow, cost actions, efficiencies across different lines and merger synergies all explained the strong profitability we posted in 2017. Digitalization is at the core of what we do. Our operating model is centered on 2 growth initiatives, which will propel us forward on this journey. Data monetization and our digital transformation.
We are improving monetization and sizing the opportunity presented Fake. We are attracting more high value customers. We are bundling, and by doing so, protecting our revenues and increasing customer loyalty, And we are also upselling across many elements: speed, allowance, additional lines, content, value added services, digital services, devices or elements of the digital home. To fully capture the digitalization opportunity, we are building leading smart networks to allow for the radical automation of our processes. This means we are creating a world class digital customer experience through Ara and No one.
And a distinctive digital value proposition built on real time offers responding to customer needs. Monetization opportunities are ongoing, as shown on Slide 8. In the speed and capacity wave, we are obtaining a price premium from the ultra broadband networks deployed and ARPU accretion from innovative tariffs launched like O2 Free in Germany and flexible data geographies in the UK. In the service beyond connectivity wave, ARPU Aflips continued to be key with TP as the main driver along with other service like security in the B2B segment. In the cognitive power wave, aura is the new customer relationship model based on trust, with key experience principles, natural language, single point of contact and personalized answers.
Moreover, it will be launched in 6 countries during the Mobile World Congress. Over the last years, we focused our efforts on transforming our business into a digital company, identifying new market conditions and adapting ourselves as the technological evolution presented new opportunities and requirements. As a result, we have been carrying a targeted and return on investment based CapEx investment to secure future growth and now the CapEx speak is behind us. As an example, we have the largest ultra broadband footprint owned among peers and spains private to the home deployment is more than 75 percent of 2020 target. Once again, we are ahead.
Turning to Slide 10. We can see growth across all fronts, highlighting double digit growth in euros versus 2016 in operating cash flow, EPS and free cash flow. Revenue stopped 1,000,000,000 underlying OIBDA 66 1,000,000,000, underlying EPS of per share. And net financial debt down to 1,000,000,000. Leverage ratio came down to 2.66 times after a billion reduction in net debt.
We have comfortably beating our outlook for the full year 2017, as you can see on the slide 11. Revenue grew 3.4% despite a 1.1 percentage point drag from regulation. OIBDA margin expanded 0.6percentage. And CapEx to sales reached 15.8%. The second tranche of the 2017 dividend 0.2 euros per share will be paid in June 2018 and complemented the first tranche of additional EUR 0.2 last December.
Calendal payments in the year amounted to EUR 0.4 per share. And now, let me hand it over to our Chief Financial And Control Officer, Laura Vazolo.
Thank you, Jose Maria. Moving to Slide 12. 4th quarter results were solid, strengthening trends versus Q3 in main metrics. A relentless focus on operational execution led to an expansion in OIBDA margin year on year and into standing growth of more than 20% year on year of operating cash flow boosted by OIBDA and lower CapEx intensity. Reported P and L was affected by noncash factors, including restructuring charges, contingencies and capital gains.
FX and European regulation also drag on top line growth and profitability. On Slide 13, you can see the details how the different factors affected the quarter. I would highlight specifically the restructuring charges, which will further improve future profitability and cash flow. This factor deducted $317,000,000 $319,000,000, respectively from OIBDA and net income. Moving to Slide 14.
Here, we detail how FX is impacting at different levels on the numbers. And how its impact is structurally neutralized. FX is having a negative impact in reporting figures in recent years, the more you go down on the free cash flow ladder, the lower impact you have. So the negative impact in OIBDA is not really hedged due to lower CapEx taxes, interest, minorities and others. But at the same time, our debt is also reduced in a multiple of free cash flow reduction.
To provide more color on the currency exposure in the graph of the bottom left side of the slide, our free cash flow per share in 2017 total with cash flow from European operations representing 0.9 before interest payments. The conclusion is that European free cash flows significantly exceeds dividends and total interest payments. Therefore, we can consider LATAM all upside. And again, currency exposure is well managed. Let's move now to the financial metrics on Slide 15.
Net debt has been reduced by EUR 4,400,000,000 to reach EUR 44,200,000,000 at year end. And the net debt to OIBDA ratio has come down to 2.66 times as of December 2017. That is a 10% ratio improvement in 1 year. The main driver for our leverage improvement has been a strong free cash flow generation, nearly EUR 5,000,000,000, up 13% versus 2016. On top of that, Telefonica has successfully complemented its leverage within organic measures tells you partial disposal and other levers, the hybrid issuance.
Slide 16 shows how Telefonica continues to strengthen its balance sheet with long term financing. Our average day's debt life was 8.1 years at the end of December, up almost 2 years from December 2016. We keep on tapping different markets at historically low rates, maintaining a significant liquidity cushion, currently close to EUR 20,900,000,000. To face comfortably next 2 years of maturities. The interest payment effective cost stood at 3.32% of December 2017, 62 basis points lower than December 2016.
This positive evolution is mainly due to refinancing in Europe at very attractive rates and lower cost in Latin currencies. Additionally, In 2017, we increased 20 percentage points up to 71% our debt with fixed rates. As a result, as of December 2017, we have reduced by more than 50%, the potential impact of a 100 basis points increase in interest rates compared with December 2016. I will now hand back to Angel to explain in more detail segment performance and transformation.
Thank you Laura. Starting on Slide 17, telefonica Spain improved operational momentum in the 4th quarter amid the usual promotional activity of the period. Fusion net adds recovered previous volumes. Fixed Broadband was back to growth. And mobile contract maintain a strong performance.
Our leading assets have become key levers to increase returns. Fiber wholesale accesses are accelerating their growth and have strong potential as they account yet for just 20% of the total wholesale base. At the same time, the focus on quality and the increase in the average number of services per Fusion customer resulted in more high end customers, 27% of the base and a 6% year on year growth in Fusion ARPU. There are already more than 20,000,000 accesses in Fusion growing double digit. In 2018, continue to make progress in our more for more strategy with more data and higher speeds.
Continuing with Spain, let's move to financials. Service revenues accelerated sequentially in the quarter to 0.7% year on year. Continued cost containment led to an improvement in OIBDA trend quarter on quarter, growing 0.5% versus fourth quarter 2016, while margin reached 40%, up 0.2 percentage points year on year. Having rolled out the largest NGN network in Europe, 2017 CapEx is falling 9% year on year to 13% of sales, supporting a 3% year on year growth in operating cash flow to EUR 3,400,000,000. Turning to Slide number 19.
Telefonica Tochland continued to drive strong operational momentum with O2 Free and the partner business. The O2 Free portfolio fueled data growth in a dynamic environment with average usage above 7 gigabytes per month. Mobile service revenue, excluding regulatory effects, returned to growth in Q4, plus 0.8% year on year. And OIBDA was 6.3 percent, up year on year, reflecting successful synergy capture. Partially offset by regulatory headwinds and commercial investments for future growth.
These improving trends combined with efficient CapEx spend, boosted operating cash flow growth to 27.4% in 2017. Moving to Slide 20, Telefonica UK has once again posted a positive performance, driven by its customer centric approach. And great brand, as seen in the introduction of new innovative propositions. Contract customer base continued to grow. Driven by market leading churn with accelerating net adds, excluding machine to machine.
Plus, mobile service revenue grew 2.7 percent year on year in the quarter after excluding the Roam Lake At Home impact. Which dragged 1.6 percentage points and driven by the higher value tariff mix. This along with an increasing contribution from wholesale and higher handset sales, led to a solid increase in revenues and 3.7% in OIBDA. Furthermore, Telefonica UK continued to deliver market leading margins. CapEx was down 4.8% versus 2016 as we met our LTE indoor coverage objective, of 98%.
So operating cash flow grew 6.9% to reach 1,000,000 in 20 17. On Slide 21, we show the performance of the Brazilian business, the best positioned telco in that market. Throughout 2017, BMO has continued to widen its quality differential with 84% LTE coverage and 18.4 fiber premises passed, reflecting the best network and the best brand. In mobile, we reached the strongest quarter V net adds over the last 3 years, while our customers are accelerating their adoption of high value plans, which in the end resulted in a remarkable year on year ARPU growth of 2.6% in 2017. In fixed, we are achieving excellent results in the cities where we are expanding our fiber reach.
With a take up of between 40% to 60% just 6 months after deploying. And with a growing adoption of new capabilities, as shown by the more than 50% growth in IPTV. Moving on to Slide 22, we show how this successful strategy resulted in a solid revenue growth of 1.4% year on year in 2017. In spite of regulatory effect, dragging 2 percentage points. As a result of this positive revenue performance, together with an impressive cost discipline, which drove the 8th consecutive quarter of year on year OpEx decline We reached the highest OIBDA margin in 2 years, surpassing the 35% mark.
At the same time, Amid year on year stable CapEx, we are posting an outstanding double digit operating cash flow growth of 13.6 percent in organic terms. In Espana America, moving to Slide 23, sorry, The penetration of value services continues to gain traction. In contract, we posted marked improvements in Argentina, Mexico, Chile and Peru, In LTE, the highlight was the strong uptake across our footprint and penetration rose by more than 10 percentage points year on year. In addition, let me point out the positive results of our focus on deploying best in class fixed networks in the region with penetration of fiber accesses increasing by more than 11 percentage points, after consistently adding strong financial performance, which more than offset As such, full year reported figures showed profitability expansion, with operating cash flow rising by more than 22% to reach 1,000,000,000. By countries, in Argentina, full year operating cash flow rocketed plus 67% in reported terms.
We are seeing progressive recovery in Mexico, with revenues back to growth again in the second half of the year. And in Peru and Chile, better commercial momentum is driving a gradual improvement in revenue performance. Slide 25 shows the solid performance of Telseus, our leading infrastructure unit. First, it has been addressing the growing demand across its businesses. In the Towers unit, we have increased the scope by more than 4400, sorry, towers throughout the year and grown colocation rates across all geographies to reach 1.33.
In the cable business, the priority has been to tackle growing traffic demand, while completing the rollout of new cables Maria Maria and Brusa to capture further market growth. And second, terms you see delivering robust revenue growth with a balanced contribution from both business units, while the full year profitability above 47% reflects the operating efficiency after its 1st full year of operations. After explaining the evolution of the different business units, I would like to go back We will give you some details on where we are today and what is the expected future evolution to help you extrapolate future trends and efficiencies. I would like to start by going over LT coverage of more than 90% in Europe, 9 countries with voltage technology and more than 8,000,000 voice over IP customers. 2nd, in data monetization, digital revenues surpassed the 1,000,000,000 mark with video as the main driver and contributor.
But also leveraging on new ecosystem opportunities like cloud, machine to machine security, big data, advertising and artificial intelligence. And 3rd, we clearly move towards we clearly move forward in digital transformation. In network virtualization with our proprietary Unica infrastructure. In customer apps, we doubled the number of unique users on our platforms such as MIMO Vistar, Mio Vivo, Mio II and Mio II. We are migrating 15 countries to full stack deployments.
And on the back of all of these, we continue simplifying our operations, minus 6% physical servers, minus 8% applications, -2 percent data centers. Slide 27 shows how our high quality base has expanded as demand for fiber and LTE remains very strong. We continue to progress in customer based monetization based on 2 levers. The first bundling, voice and data. The second upselling, thanks to higher speeds, data sharing plans, value added services, etcetera.
So protecting revenues through bundling and then upselling them to increase the ARPU, monetizing data and fostering loyalty. As such, we are obtaining more value. With average revenue per access 4% higher than in 2016, and with churn stabilized. Slide 28 shows some insights on how mobile data monetization and connectivity are boosting growth. We are leaving an era of exploding data traffic, the challenge, but at the same time, the huge opportunity is to monetize such traffic growth.
We continue to apply more for more strategies to improve our offering with higher value for money to increase ARPU. And to do so, we employ different levers, offering more mobile data or fixed speeds, introducing mobile tariffs, including data dedicated to certain apps, and extending family plans to combine usage. In addition, increased penetration of recurrent prepaid data in Spanish, and successful deployment of neuropricing techniques are improving the value mix. Of this, translated into 1st mobile data revenue growth of close to 20% year on year in the quarter. To represent 60% of mobile service revenue.
And second, steady usage and ARPU uplift due to higher fiber adoption in fixed data. Overall, data monetization is a key growth driver with further upside. Moving to Slide 29. Digitalization is a key lever for our transformation center on the whole customer lifecycle. It is structured around 5 priorities, which focus on direct sales through digital channels, making payments easier and enhancing service provision and post sales technical support.
We have set ourselves concrete targets for each one of these 5 priorities for the coming years, which will bring further efficiencies to our cost structure. Out of our total OpEx, we have an addressable cost base for these digitalization initiatives of EUR 11,600,000,000, and we expect a run rate of gross savings of more than EUR 1000000000 by 2020. Digitalization also brings CapEx Optimization Opportunities as shown by the strong decrease of 47% in our unit cost per household pass with fiber. We will continue to apply data analytics to invest in network smartly focusing on return on investment. In addition, digitalization will bring higher customer satisfaction and loyalty, and it will define a closer relationship with our customers within innovative digital channels and new interaction models such as our new AODA platform.
On slide number 30, our own transformation and digitalization journey is critical to be competitive to be sustainable and opens up multiple efficiency sources. The accelerated investment in future proof connectivity is the key enabler for our business sustainability. Our extensive experience in Spain allows us to industrialize fiber deployment, thus LatAm Countries now benefit from shorter and more efficient deployments. So it is not that we're investing less. It is that we are being more efficient in the deployment.
In other words, we are passing more homes with the same investment meaning that we can capture the growth at a lower cost. Network Transformation And Legacy Management is another reality where we are ahead. Just to give you an example, we are projecting the decommission of approximately 650 central offices up to 2020. So again, not only better networks, but also more sustainable business. In addition, as we have already explained, customer centric digitalization will deliver more than 1,000,000,000 savings and more initiatives will be added to this figure.
And the restructuring plans already executed will continue generating additional savings. All of these will underpin our superior cash flow conversion. Now I will hand back to Jose Maria.
Thank you, Angel. Now on page 31, let me outline the 2018 guidance. We aim to retain sustainable profitable growth. Revenue growth of around 1% despite regulation dragging 0.9 percentage points. Applying prior organic criteria, guidance would be 2%.
OIBDA margin continues expanding around 0.5percentage. In line with 2017, despite regulation dragging minus 1.6 percentage points on OIBDA growth. CapEx will continue with its rate of decline with a CapEx to sales ratio of around 15%. One percentage point lower than in 2017. We will push additional deleverage, while we improve return on capital employed.
This will allow us to maintain a solid balance sheet and investment grade rating credit rating. Regarding the dividend, We are maintaining a stable and sustainable amount of per share to be paid in 2 tranches of 1 in December and 1 in June 2019. And like in 2017, total payment will be per share. To recap, please move to Slide 32. 1st, in 2017, our results were solid.
Growing across all fronts. We continued a firm progress in deleverage. 2nd, and for 2018, we will be exploiting a more sustainable business model. With increasing revenues, margin spending and control CapEx. At the same time, value creation will be enhanced through digitalization, which will enable us to achieve greater revenues, but also be more efficient.
Improving return on capital employed, and our financial flexibility will be also key. And finally, our focus is on profitable and sustainable growth, with technology as a key enabler going forward. Leveraging on our massive transformation over the last 7 years, which has led to us being at the forefront of the digitalization process. Thank you very much. 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 to use your cell or hands free phone. There will be a short silence whilst questions are being registered. Our first question comes from the line of Joshua Mills from Goldman Sachs.
2 for me. First on digitalization, so the cost saving target of 1,000,000,000, which you lay out on Slide 29 is obviously a gross number. What would that be do you estimate on a net basis? How much do you think you're going to have to reinvest in provisions or pass on in the forward competition? Just trying to get an understanding of how this would translate through to a kind of midterm EBITDA margin expansion target from your perspective.
And then secondly, I'm just wondering if you could give us a bit more detail on today's announcement of the fiber to the home wholesale agreement with Orange in Spain. How many homes does this apply to? And, will you be extending the same access terms for Massimo Ville, which is obviously working with Orange? Ultimately, just trying to understand whether or not this is likely to reduce Orange's current 5% to the home rollout target of 18,000,000 homes by 2020. Thanks very much.
Thank you, Joshua. On your first still on digitalization, the target that we are publishing today is a target that has to do with the items regarding OpEx that you can see on Slide 29. This figure, first, does not include revenue benefits, does not include also CapEx benefits. This would be applying to OpEx. It's expressed in terms of run rate of savings that we expect to capture by 2020.
But we're also expressing that for 2018, we are aiming to already reach around 1,000,000,000 of those savings in this year. We prefer to give this figure in terms of gross savings because there's going to be moving pieces across the different P and L items. So giving an OIBDA indication would be probably difficult to give at this moment. But we are committed to achieving these savings plus additional benefits that we will get at the revenue and CapEx levels. And then regarding Orange, we have announced today an agreement we demonstrate Telefonica's competitiveness in the wholesale market.
This will generate sustainability of wholesale revenues for us and will improve the profitability of the investment made to build the largest fiber network in Europe. This will cover. It's a 5 year commitment that we're entering entering into, which will apply to all Telefonica's footprint, both in regulated and non regulated areas. This will not affect our plans to deploy. We will continue to deploy on our own means.
And we continue to expect to reach 25,000,000,000 premises by 2020. But here, we are showing our will to reach commercial agreements with competitors We are aiming to improve the long term profitability of our infrastructure investments. It's similar to the agreement we signed with Vodafone. It will help our wholesale service revenue line, which is progressing as you can see in our results. And very importantly, this will also benefit customers and citizens in general because they will enjoy a wider fiber coverage with alternative options being able to advance in the digital economy in Spain.
Thanks. Maybe just one very quick follow-up on the digitalization point. I think if you go through the presentation, it's clear that a lot of the savings you're targeting are focused on the network side. Is there is there scope to reduce your personnel expenses as well as part of this, is that a large component of the billion cost saving target? And if so, would you expect that you'd have to take further up front provisions in the near term to deliver those savings?
If you look at Slide 29, you will see that the benefits or improvements that we're seeing or we are aiming to in the horizon of the next few years are quite significant in not only network, but also in commercial activities. So we remain to increase, direct customer interaction. And in self assisted channels, we to plan to more than double the sales in self assisted channels. This has benefits in terms of lower commissions, for instance, to the channel. So you should not think, necessarily everything in terms of personnel.
There are many other commercial expenses, which are not linked to personnel debt, will improve. The top ups, which is the 2nd block, that we're going to do through our apps and through digital channels. We expect to more than double online to perhaps. The payments in self assisted channels and collections. These are also going to improve, and this also reduces commissions that we're paying to some of the payment systems And we will continue from a very high level to solve incidents remotely.
And we expect to to improve or to progress further in customer care experience, which will lead to a reduction in calls to that, you know, what you see in the slide, to our call centers. So there are many levers on saving, not only linked to network items, lots of the commercial activities and all the customer journey with potential for savings that are clear in across different levels the challenge.
Thanks very much.
Thank you. We will now take our next question from the line of George Sirajak Tono from Citi. Please go ahead.
Hi. Good morning, and thank you for taking the questions. I have 2. First one is a follow-up on George's question earlier around digitalization. From what we understood yesterday, California graduation and implied that there are some costs being invested at least Germany in 2018 in order to get more of the savings in the latter years.
Obviously, my understanding of this gross savings is that they exclude the costs that may run for the next couple of years to generate the savings. Is it possible to give us an idea across the group how much would that number be roughly for 2018? And whether in the next couple of years, we should assume most of it goes away or whether it's replaced by other types of investments? And then my second question is around the CapEx guidance and the reduction in CapEx that you highlighted. And I can see on Slide 29, you show that fiber cost rollouts have come down a lot.
But at the same time, if I flip this argument around, that means the returns are even better. So I'm just trying to understand why about the pace of the rollout of fiber outside of Spain, especially in Latin America, and why you're not accelerating more the rollout, given the efficiencies that you are managing on the fiber unit Thanks.
Thank you Georgios. On the first question, Regarding digitalization, we have given guidance on margins for 2018. So you should not be thinking of provisions that may affect the numbers. Those the investments that we need to make to achieve this digitalization benefits that we're posting are already included in the guidance that we are giving to you for 2018. And regarding CapEx, we are clearly CapEx in Latin America into fiber, we are accelerating into that.
You are seeing in our results in different units in Latin America. That we're growing. And we have given the figure in ispam, but also in Brazil, we are growing the deployment of fiber. We are enjoying a very efficient deployment, thanks to what we call the industrialization of the process, given the extensive experience that we have gained in Spain. We're accelerating fiber in Brazil.
We're accelerating it in Argentina. We're investing also parting in cable, but also in fiber in Peru and Chile and also selectively but also accelerating in Colombia. We are seeing a big demand, a very interesting rates of take up, and you should be expecting us to be investing along along this line.
If I
could follow-up on the first one. I didn't mean exceptional provisions. It's more my understanding in the case of O2 that's suggesting and we'll find out tomorrow the numbers, obviously, that there are one off, IT investments perhaps, which will affect the cost line. Is that something which will be part of the recurring, or EBITDA obviously Is that something we are seeing in other countries? Is it term specific?
Well, first, I want to reiterate that the CapEx needed for transformation and digitalization is included in the CapEx envelope. So even with that, we expect CapEx to revenue to continue reducing and we have left our CapEx peak behind. Regarding investments in IT, we have made huge progress already in moving to full stacks across all our footprint in Espana America. We are upgrading those efforts. We are quite advancing those efforts already in Spain and in Brazil.
And maybe Germany because they have been focused on the synergies of integration. Have been more focused on integrating the systems from O2, WIFI plus and now they have to invest a bit in transforming those systems. But that is a very German specific situation. But to reassure you, the CapEx needed for transformation for digitalization, the CapEx in systems is already included in the envelope that we are putting in front of you and which signals that CapEx speak is behind.
Thank
you. I may compliment, I would like to say that we may keep in mind that we have done several integration process during the last years, the GBT process and the German process. And that has required upfront investments as well. To accelerate the transformation. And those were one off becoming out of the acquisition process.
So that's why we think that we can do a highly significant effort in CapEx deployment with less level of capital.
Thank you.
We will now take our next question from the line of Giovanni Malte from UBS. Please go ahead.
Thank you and good morning. If I may, a couple of questions, can you share with us some date about the way you think about football rights, the renewal and then a quotation with MediaPro for additional league in particular. And following your, announced restructuring, sorry, Can you share with us some thoughts about what is core in terms of geographies and what you may be more pragmatic about either for disposals IPOs or any other strategic option. Thank you.
Thank you, Giovanni. I'll take the first one on the soccer rights. Regarding soccer rights, You should expect us to analyze the cost benefit equation in a very rational way and to take decisions accordingly. We have a note that the recent developments and dynamics in the soccer league auctions in places like the UK and Portugal with we think point in the right directions. And bear in mind that given our customer base, And given data analytics and actual content consumption, we probably are very well placed to accurately assess the value of each content.
So taking all of this into account, we should say that there is a distinct possibility that we may not renew the Champions League contract. Current rights run until the season 2018, 2019. So it's the season and the next. An auction could be held in the first half of twenty eighteen for the rights of the season starting in September 2019 for 3 years. Here, the key question of whether to beat or not to beat in such auction will be determined by the conditions and the minimum prices eventually set.
But again, with a rational cost benefit analysis, we are going to exert financial discipline
as we always do. Taking your question on the on the new structure of the group, we have decided to separate the days from countries in two fronts. The south, which are mainly, leaders integrated incumbent players on the north in which we are attackers, because we think that those deserve different management styles, different approach, different levels of CapEx intensity. And therefore, we wanted to really focus on enhancing the management performance of both units in order to make sure that we have the best return out of that. But that also means that, as you know, over the last years, we have reshaped our portfolio.
We have been actively managing our assets and because we want to finance profitable growth. And therefore, we are constantly reviewing our asset portfolio in order to reinforce our strategic positioning significantly enhance our return on capital. So evaluate, we evaluate the assets through a fact, a set of factors included including operating cash flow margin and market share with the aim of optimizing. So you should expect for us to have a very active approach to enhance our return on capital employ and therefore to reshape our portfolio.
Sorry, can you hear me?
Yes, Giovanni, please go ahead. Sorry, apologies.
If I may follow-up on this point, Can you share with us some thoughts in terms of timing in terms of how, let's say, do you see this as a priority for the group in terms of your capital strategy, how important in your view is to move forward in terms of reviewing your portfolio. The share price does not factor in any M and A optionality, any strategic optionality for As a matter of fact, there's a lot of opportunity there. So maybe if you can share with us some thoughts about this, that would provide some more ground to investors to to recognize this optionality? Thank you.
Well, and considering improving our return on capital deploy is top of mind of the Board of Directors of Telefonica and of the management team. And therefore, you should expect from us to be very demanding internally with our own assets in terms of execution because we are committing significant amount of capital for CapEx. And therefore, you should expect from us to be very, very demanding internally. On that front. I'm not going to comment on timings or processes, but you should be expecting from us to be much more, demanding on that front.
Thank you. We'll take our next question from the line of Akhil Dattani from JP Morgan. Please go ahead.
Yes, hi, good morning. Two questions from me as well, please, if I may. Firstly, just on the other revenues in Spain, Angle, you mentioned the strong growth you're seeing in that segment from wholesale. And I just wanted to understand a bit better how we should think about that performance as we go into 2018. Key moving parts, I guess I'm keen to understand is, how and when the orange contract phases through.
So when does that start to contribute? And then secondly, the other moving part we have is the Yogo contract loss. If you can remind us again how that would phase as well, just to give us some sense to whether this strong momentum we're seeing in other revenues can continue to flow through to 2018? And then the Second thing I wanted to just really point on was the Spanish pricing environment. There's been a lot of news flow in the last couple of months around your price increase, which seems to have followed very well by your peers, Massimo seems to have taken up their bottom end price point by eliminating and therefore effectively indirectly raising prices too.
Do you feel that this has been broad based enough yet? There's some questions where the vote matching here or not. And so how do you more broadly just think about how pricing is developing right now?
Thank you, Akhil. There are 3 main drivers on the other and wholesale and other revenues. On the one hand, you have the wholesale MVNO, which we are forecasting the loss of of the mass mobile unit, our units revenues, you can still use our network for as long as they need it and they have been migrating slower than initially envisaged, but we are forecasting during 2018, the loss of those revenues. Then we have wholesale of content rights. We are wholesaling the rights of the best match of La Liga.
We are wholesaling the international series channel. We're wholesaling the movies channels. So here, you have another element and very important, the wholesale of fiber. As you've seen in the slide, fiber wholesale keeps ramping up the growth. Both on recent agreements and regulation and penetration.
It's still very low. The fiber accesses in Neva have multiplied almost by 3 year on year. And the migration from a copper and bundle local loop to Neva is revenue accretive and it improves the return on investment. So In this segment, we will aim to mitigate the MVNO revenue loss and the regulatory impacts by growing the volume of accretive migrations from copper and bundle local loop to fiber wholesale. Regarding the competitive situation in Spain, well, here, we've seen a 4th quarter that has traditionally has had a strong promotional activity.
But Even in this strong promotional activity, we have been able to make progress both on commercial and on financial terms. So we had positive commercial momentum following the launch of convergent bundles and targeted promotions. And you can see on Slide 17, improvements. We are 5% up in the year in accesses and TV, fiber accesses are at a fixed broadband are back to growth in the fourth quarter. We are growing in mobile, pushing customer basis 2% up.
So commercially, we're doing fine or we're doing very well, even in a very competitive quarter. And service revenue trends were back to we're back to growth. OPA was back to growth. And maintaining a margin of 39.9%, which is materially in the 40% level and converting very strongly in our our cash flow conversion is quite strong. So following this, 4th quarter in which Although there was additional, commercial activity, we have done quite nicely in the market.
What we see now in 2018, rationality is back. Market is cooling down. Promotional activity is diminishing. And there are new more for more tariffs and tariff upgrades which are being applied by almost every player. Here it's a it's a all of us are investing heavily and we need were not returned on our investments.
So rationality is back in the start of 2018.
Thanks very much. Can I just clarify one point on the wholesale comments that you made? I understand on a lot of these buckets, they're commercially sensitive, so you can't probably quantify the numbers that are behind each of those pillars. But on the MVNO loss specifically, are you able to talk about what the total envelope is that MassMutual is paying so we understand how much might fall out this year?
I'm not sure that we disclosed this figure. And I will check with the IR team and maybe they can get back to you.
No worries.
By the way, I will use your request to or your second question to comment something that I missed in my previous comment. In addition to the volume in wholesale fiber, you also need to factor the pricing of the never wholesale pricing regulated in regulated areas. And also, obviously, and I spoke about it in the first question, the new orange agreement that we have announced today. The pricing never is, is based on recability. It used to be based cost oriented, now it's based on replicability.
It means that every retail offer from Telefonica must be replicable with profitability by competitors but also means that the price will be reviewed every 6 months. And more for more strategies will be reflected in the revisions of the price of the NIMA price increases. So this creates a positive and constructive environment for earning returns on the fiber investments in this country. We're expecting there was some consultation on the grace of this wholesale. We're expecting shortly announcements by the CNMC, which should be in the line of fostering investment in the country in the networks.
We'll now take our next question from the line of Mandeep Singh from Redburn. Please go ahead.
Hi, thank you for taking the question. I have to the first one's really building on Akhil's question. Again, appreciating the moving parts. Is it fair to say that the migration of, DSL to Never fiber will not be enough to offset the loss of the Masimo Villgo contract. So if I was to look at your revenues in Spain, if you take other and wholesale out, you've moved from plus 0.9 percent revenues in Spain to minus sorry, from, to minus 0.1% if you were to take that line, that's a lot of the improvements come from that line.
Consumer sequentially worsened versus Q3, B2B, sequentially worsened versus Q3. So if wholesale gets worse because of the loss of the MVNO contract, is it reasonable to think that Spanish revenues can be held flat in 2018? And as a follow-up to that question, whether you think the 40% margins are sustainable. So that was the first question. And the second question was on hybrids.
You issued some hybrids in 2017. Is it a reasonably expensive form of debt? Can you just sort of give us a bit more color why you still continue to view hybrids as an attractive form of financing and have any further plans to do so?
Thank you, Mandeep. I'll take the first question. I was saying we are seeing a rationality and we expect in 2018 rationality in the market. We would expect commercially, foresee on positive net adds in 2018 with ARPU growth. Mobile growth to continue.
And we expect the take up of fiber to continue increasing. And growth in TV, which is solid is also expected. As you know, we do not guide revenues by the regions, but try to help you with the moving pieces, we can extrapolate from 2017 trends. In B2C, As you were pointing out, in your question, service revenues have been steadily improving throughout 2017. We have seen increases both in volumes and prices.
So we exceed the year well in positive revenue growth territory. In B2B, we have seen more irregularity through the quarter's trend. The trend should be better as growing IT revenues will mitigate the decline in traditional communications. And we are aiming to sell more digital services, IoT, cloud security, So we will aim for stabilization in B2B in 2018 in wholesale and other area already commented. So, although we do not guide on revenues, we are reasonably optimistic.
And I think you had a question about margins. We think that 40% margin levels are around 40% should continue to be sustainable CapEx should be below 2017, so operating cash flow should be growing in Spain.
With regards to your question on hybrids, we don't consider hybrids like expensive debt. We could call them achieve equity. But I think given that the last hybrid issuance we made in November was at a cost of 2.62% pretax. We could even say that highways today, at least in our last issuance, was actually even cheap debt not even expensive. But going forward, we do intend to maintain access to this source of funding.
And depending on market conditions, we plan to replace existing hybrid with instrument of similar seniority. In fact, our first call date will be September 2018, and we do plan to replace it.
Thank you Mandeep. Next question please.
Thank you. We'll move on to our next question from the line of bear with me. From the line of David Wright from Bank America. Please go ahead.
Yes, thank you very much guys. I think, some of my questions was answered there on B2B, which maybe just stood out, as being a little bit weaker. I guess, just following on for a couple of questions, on the content. Could you consider or would you always want to consider a stand alone perspective or could you consider partnering, with other parties possibly OTT parties, for example, on content. And then if we could just talk a little bit back about the UK business, which was recovering very well until I think the Q3 roaming impact looks to be back on track now.
Is it purely the market condition and volatility that holds you back from an IPO consideration there? Or are there any other factors?
Thank you, David. I'll take the one on the potential partnership with over the top players. In fact, over the top players are seen by consumers, complementary to our bundle TV and therefore, we are also open to partner with them for different things. We think we have built a state of the art third platform on top of our networks and our systems. And therefore, we have become a very efficient technological distributor of products and services, digital products and services.
And that includes over the top content players. So, as we speak, we are having several conversation with some of them in different fronts. We don't have anything to announce yet, but we see also as an aggregator and distributor of content, being produced for us by us or being just produced by others with with distribution agreements. So we will be keeping you posted as soon as we have any news to announce. And in terms of the IPO of the UK asset, the IPO is still an option.
I mean, we, we, and in fact, we keep working on that option. We are preparing the asset as we speak The performance the operational performance of the company during 2017 has been just outstanding. Our team in the UK is doing a fantastic work We do think we have the best mobile asset in the UK. And in fact, judging upon customer loyalty, we do have the best mobile asset in the UK because we have the lowest churn. We are growing in all fronts.
And therefore, as soon as we are clear out of the spectrum auction, we will explore, we'll take the possibility of of the IPO. In fact, we have been working all along these quarters to be prepared as soon as there is a window of opportunity. But allow me to remind you that we do think we have the best mobile asset in the UK and that the working has been doing a fantastic job operationally speaking in the previous year.
Very clear answers. Thank you very much.
Thank you. We'll take our next question from the line of Sam McHugh from Exane. Please go ahead.
Good morning. Just one question for me. Thanks guys. You talked about the industrial experience you have in rolling out fiber and you mentioned the UK IPO just now. Clearly, we've seen a load of news deals signed between different operators, for wholesale fiber in the UK, often with actually very low upfront capital commitment.
Wonder if there's anything you have thought about doing. Have you been in talks with some of these guys regarding these kind of builds? Would just love to get your view on fiber rollouts in the UK?
We are in a mobile centric mode in the UK. We have, as Jose Maria was saying, fantastic operation in the UK. We are obviously getting fiber for the backhaul of our mobile operations, which is very important for 4G and moving in a few years into 5G. We don't think that the UK is a market driven by strong convergence. So we are not investing at this moment in in fiber or but we will monitor market dynamics and we will be able to adjust our position accordingly.
Thank you, Sam. We have time for one last question, please.
Our last question comes from the line of Keval Kuroya from Deutsche Bank. Please go ahead.
Thanks. I just got two questions. So firstly, on Spain, I guess we would have fairly clear picture of how the football rights inflation has evolved, but can you just talk about the level of inflation you've been seeing on other types content in Spain or whether that's been accelerating or not? And then secondly, Chile and Peru have obviously been slightly more problematic from market stretch perspective. Have you seen any improvement in the competitive environment there?
Thank you.
We are not seeing relevant inflation in other cost of other content. We have renewed some motor, contents without significant inflation. And then we actually have them the factoring exclusivity because our competitors have not requested those contents. We are investing in improving the delivery of some of the content that we have. So for instance, in basketball, we are now giving lots of technical features for viewers while they are watching demands to have added information on what they are watching on the mic.
So no inflation on the content. We are adding value to that content in order to provide better experience for our customers. We're investing in a moderate level in own production in series, which are being very successful. The last series that, that we launched has had 50% more viewers than the 7th season of Game of Thrones 4 series that we've launched have been between the top 10 of the series in terms of audience. And all of these within limited budgets.
So we are not seeing inflation in other contents. We are adding value to those contents and getting better customer satisfaction. Regarding, I think your question was on Chile and Peru or just Peru, please? Yes. On Chilean Peru, the situation continues, to be very competitive although with slight difference across the two markets in Chile, we are seeing we're seeing progress and positive commercial progress focused on value.
We are having a positive contract portability balance We have a positive healthy and fiber adoption. So we are seeing revenue year on year trend stabilizing and profitability still, reflecting the commercial efforts. Our Chilean operation adjusted quickly in terms of, of, fidelization of the customers. These two some impact on ARPUs, but stem the churn and they are in a position to start recovering. And regarding the situation in Peru, again, we also have better operational trends in mobile.
Still competition is very tough. But for instance, our loss of postpaid had a slowdown imprepaid the base with frequent to pups grew for the 2nd conservative quarter. And in fixed, we continue to to the wealth. So, it continues to be challenging, but we are seeing some gradual revenue and OITA and commercial recovery, but still both markets continue to be competitive.
At this time, no further questions will be taken.
Thank you very much for your participation. And we certainly do 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 Good morning and thank you.
Telefonica's January to December 2017 results conference call is over. You may now disconnect your line.