Ladies and gentlemen, thank you for standing by, and welcome to Telefonica's January March 20 Results Conference Call. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Pablo Egeran, Head of Investor Relations. Please go ahead, sir.
Good afternoon, and welcome to Telefonica's conference call to discuss January March 2015 results. I'm Pablo Yaron, of Investor Relations. And before proceeding, let me mention that financial information contained in this document related to quarter 15 has been prepared under international financial reporting standards. And that this financial information is an audit This presentation may contain announcements that constitute forward looking statements, which are not warranties of future performance and involve risk and uncertainties. And the certain results may differ materially from those in the forward looking statements as a result of various We invite you to read the complete disclaimer included in the first page of the presentation, which you will find in our website.
We encourage you to review our publicly available disclosure documents filed with the relevant security market regulators. If you don't have a copy of the relevant press release and the slides, Please contact the Telefonica's Investor Relations team in Madrid by dialing the following telephone number 3 4914-828700. Now let me turn the call the call to over, Angel Villa, our Chief Financial And Corporate Development Development of who will be leading this conference call.
Results conference call. Today with me is Jose Maria Varez Pagiete, Chief Operating Officer So during the Q And A session, you will have the opportunity to address to us any questions you may have. I would like to begin this presentation by highlighting how in Q1 'fifteen we are clearly starting a profitable growth cycle which is underpinned by 3 main pillars. The first, which is the basis for the rest, is that organic growth is improving at a sustainable rate, improving both on top line and OIBDA. Thanks to the high value customer base, built on heavy investment in recent years.
We aren't being complacent, however, and we will continue to invest in the next 2 years to enlarge our network differentiation. The second is the balance sheet, which we have deleveraged and strengthened to the point where netted to OIBDA now stands at 2.13 times, including the sale of O2 UK. And our cost of debt has been reduced year on year. 25.8% compared at this time of year and the higher CapEx. The third is that we are reaping yearly benefits gained from our proactive portfolio optimization.
Having been a bold catalyst, often market consolidation, which we continue to believe is beneficial for the industry and for the customers. We also just closed on April 30, the acquisition of Digital Plus. Has allowed us to deliver growth at every level and not just on organic basis. We are growing the top line OIBDA, net income and EBS. Thus, we are on the right track to meet full year guidance.
Moving to the next slide. Let me briefly sum up our key financials for the quarter. These figures account for O2 UK as a discontinued operation. Results showed a consistent improvement across P and L lines, returning to reported year on year growth in revenues plus 13%. OIBDA plus 8%, net income plus 162% and EPS plus 164%.
Both FX and changes in the consolidation perimeter had positive impacts this quarter. Latin currencies have contributed year on year, 3.2 percentage points to sales and 2.5 percentage points to OIBDA. While changes in perimeter have added 5.9 percentage points and 3 percentage points, respectively. Revenue surpassed 1,000,000,000, growing 3.3% in organic terms. While OIBDA topped $3,600,000,000, an organic increase of 2.4% year on year.
OIBDA margin stood at 31.3 percent, virtually flat. Net income totaled 1,000,000,000 and EPS 0.38, benefiting from the 1,000,000,000 deferred tax asset derived from the O2 UK sale. Operating cash flow totaled 1,000,000,000, excluding spectrum. Finally, we are focusing our efforts in our key markets, which had already bearing fruit as 2 thirds of revenues now come from Spain, Brazil, and Germany. I am also pleased to confirm that our Q1 performance is consistent with our 2015 outlook.
In terms of shareholder remuneration, we just paid on May cash corresponding to the 2nd tranche of 2014 dividend. And our proposals for the voluntary scrip dividend of per share to be paid in Q4 'fifteen and the amount of treasury stock to be canceled are both included in the agenda of the AGM, which will be held on June 12. On slide 5, we show how our growth this quarter is driven by solid and sustainable basis. Our client portfolio is rapidly changing with more and more customers taking up higher value services such as LTE, fiber and pay TV, which have grown between 1.5 and 5.1 times year on year. This translated into an expansion of average revenue per access of almost 1% year on year, and reduced churn by 0.2 percentage points.
Total revenue accelerated in organic terms. On better performance from Brazil, Germany and Spain. Data revenues, digital services and video continue to improve sequentially at a very robust year on year growth rates. Breaking down the 12.6% reported year on year growth, Let me remark that perimeter represented 47 percent, organic performance 28% and FX 25%. This quarter was strong on OIBDA execution as we reaped value from our operating model implementing simplification processes and starting to realize synergies from acquisitions.
I would like to note that the latter will be higher and the focus on customer lifetime value are certainly paying off in revenues, but impacting on year on year OIBDA margin erosion as commercial networks and system costs are growing. Slide 6 shows a solid growth of future key drivers, LTE and prepaid data. Smartphone traction continued to grow and penetration expanded 11 percentage points year on year to 38%. While LTE customers reached $14,100,000, multiplying last year's figure by more than 5 times. These factors, together with growing 25% year on year, and LTE customers using 60% more data than 3 g customers led to a 52% increase in mobile data traffic.
In this sense, I would like to highlight the strong upside we have in Espana America, where prepaid smartphone penetration is just 21%. And on the other side, the multi device opportunity. Solid operating results translated in non SMS data revenue growing close to 20% as a result of LP ARPU uplift, double digit, data beyond the allowance driven by continued bundled breakage and new commercial schemes with a contribution of around 1 percentage point to Q1 'fifteen revenue year on year change and upselling dynamics as customers move to Bandwidth with higher data allowances and new services. Maybe a good summary of LTE potential is that LTE traffic already represents 11% of total traffic while LTE penetration is still at 6%. On Slide 7, you can see our progress on digital services.
Revenues exceeded 600 1,000,000 in the quarter and grew 34% year on year organically. First, I would like to highlight the visible results of our drive to become a video company. As 41% of our residential fixed broadband base already has pay TV, 15 percentage points more than a year ago, which is reflected in the 57% year on year organic in video revenues. And the future is looking very positive for us in this space as we leverage on our differential content and user experience plus the game changing deal after closing Digital Plus acquisition. In other areas, we continue to push forward with our innovative solutions solutions for the digital era for both consumers and businesses.
Through our affiliate 11 paths, we have launched a number of cybersecurity solutions to protect our customers' identities and enter it into the smart wearable arena. Revenues in security have grown 76% versus Q1 2014 in organic terms. Moreover, we have successfully converted cloud into highly appreciated value added service after launching products in Spain for the SME And Enterprise segments. Lastly, M2M Machine to Machine And Financial Services continue to gain global scale. And in devices, let me mention that we recently invested in Cienozen, collaborating closely with them for offering our consumers a wider range of mobile services in their smartphones.
Global Resources is consistently contributing to network transformation and IT simplification. In networks, in almost doubling last year's figure, while on LTE, our coverage reached 65% in Europe and 28% in Latin America. In addition, we are evolving towards an all IP company with voice over LTE available in Germany and the proactive migration of customers to fiber in Spain, while we continue to improve customer experience with enhanced self care and fast diagnosis in call centers. Regarding network innovation, we are performing trials around 3 carrier LTEA and LTE in a box private networks among others. With all these, continued to advance towards having the best quality networks as our key differentiation tool.
In IT. Simplification is delivering results as we decommissioned more than 370 applications year on year increased virtualized servers by 11 percentage points after closing 3% of physical servers. Lastly, Full stack projects allow for business transformation with several countries in Latin America migrating customers or preparing further migration. Please turn to Slide Commercial trends continue to be noteworthy. Most significantly in high value services, and churn reduction continued amid more favorable market conditions.
This is leveraged on a clear strategy focused on enhancing our quality premium, supporting differentiation and fostering upselling thus mobile data caps increased. If the content wasn't reached and, fiber speed will be tripled up to 300 megabytes in the coming weeks as recently announced. As a result, contract mobile base grew by 2% year on year. Fiber net adds were close to 250,000, with an increase uptake of the 100 megabit speed product. And PTV market share topped 40%.
These factors drove Fusion ARPU to increase quarter on quarter to remaining virtually flat year on year. Lastly, let me underline that delivering differential services is only possible on top quality networks, such as our FTTH network, which is now the largest in Europe, both in terms of reach, and connected customers. On the next slide, we dig you through the financial performance in Spain Our upselling strategy coupled with low levels of churn is leading to a new phase of sustainable revenue evolution which is set to continue, though it will be more evident in the second half when the tariff renewal will be fully reflected. Revenue year on year trend improved again in the quarter. And was further intensified when excluding handset sales.
OIBDA declined 8.4 percent organically as commercial activity was significantly more intense across the board and due to higher content and personnel costs. As such, OIBDA margin stood at 44.5%. Or 43.2 percent, excluding tower sales, with a 2.1 percentage points organic decrease. It is important to highlight that year on year comparisons should ease from Q2 as it is the anniversary of the intensification of our commercial activity. To review telephonic at Deutschland, please turn to slide 11.
Our approach to customer and customer value is reflected in higher retention efforts with better sequential churn and lower gross additions. I would like to highlight improved customer mix, especially in premium brands, as 32% of O2 consumer contracts are tariffs with more than 1 gigabyte allowance. Plus 17 percentage points year on year. We are still seeing very positive signs of LTE adoption with 86% of devices sold being LTE enabled and encouraging data consumption patterns. With this and with the fast rollout of the LTE network, with the goal to reach 75% at year end, we are well positioned to Important milestones have been achieved in the first quarter, including an agreement in February with the Workers Councils for the redundancy program for 1600 full time positions until 2018, of which 50% will be this year.
Furthermore, Drilish will take over 601 O2E plus shops in H2 15. Overall, we are fully aligned to deliver 20 15 synergy targets, which will be more biased towards the 2nd half. In terms of financial performance in Germany, turn to slide 12. Top line evolution is driven by the mobile business. On the one hand, mobile service revenues contributing to growth leverage on non SMS data sales, which already represents 71% of data, and on the stabilization of SMS declined.
On the other hand, handset revenues grew close to 30% year on year on increased customer demand and the new approach to subsidies mentioned before. Revenue flow through and value oriented commercial approach resulted in a profitability expansion versus the previous quarter with OIBDA growth improving to 4.4% year on year organic, and excluding nonrecurrent effects. Margin expanded by 2.5 percentage points sequentially to 20.5%. With this, operating cash flow grew 6%, organic and ex non recurrent, 2 1,000,000. Let me now review the performance of Telefonica Brazil in slide number 13, where strategic focus on value growth delivered a strong set of results.
As such, booming smartphone adoption and strengthen leadership in the contact segment are bringing an outstanding ARPU performance in Q1. With a year on year growth of more than 3%. It is also remarkable that this performance is almost purely based on data growth. Making this differential performance sustainable. In the fixed business, our focus on the most profitable services is translated into growth of both fiber connections, plus 82% year on year and pay TV accesses, up 23%.
In addition, and after the successful completion of its key milestones during last month, closing the GBT acquisition will take place in the coming days, following the ECM, further reinforcing our positioning in the Brazilian market. Turning to slide number 14, we show how this quality growth is flowing in the P and L in Brazil. In Q1, revenue year on year growth accelerated to 4.3%, the highest rate in the last 3 years as a result of a strong improvement in mobile service revenues, On top of that and despite higher commercial costs and the more challenging macro environment, OIBDA delivered year on year positive growth. In slide number 15, let me highlight the progress made by Telefonica Espana America. 1st, commercial momentum remains solid in fixed broadband, pay TV and mobile accesses, with a growing adoption of smartphones and accordingly, data services.
2nd, financial performance remains strong with double digit growth at OIBDA level based on a solid revenue growth coupled with margin expansion for 5th consecutive quarter expanding by 1.8 percentage points in the first quarter organic and ex Venezuela. Please turn now to slide number 16 to review our Mexican operation. Strong trading momentum continued in Q1, with gross additions reaching the 2nd highest level ever and with smartphone net adds reaching a new record high, both despite negative seasonality of Q1. Commercial activity and data expansion continue supporting a high single digit revenue growth that this quarter was impacted by regulation. In addition, OIBDA maintained healthy growth at 70% year on year on larger scale, efficiency measure and benefits from changes in regulation in effect since last year.
Turning to Slide 17. Let me remark on the growth across the board posted in the rest of countries in Espana America. In Colombia, Revenue performance and margin expansion drives solid toy plus organic growth year on year. In Peru, We maintain our strong growth competitive environment generates a 2.2% year on year organic decline in OIBDA. In Argentina, we're accelerating the 4G network deployment to continue providing the best service to our customers, and we achieved an improvement in profitability profitability of 3.3 percentage points year on year.
On slide 18, we give you a brief overview of our operation in UK, no booked as a discontinued operation in our accounts. Commercial traction continued, positioning of 2 UK as the fastest growing mobile operator in the market. Leverage on the successful O2 refresh proposition. Contract net adds at $133,000 remains stable year on year with an improved mix after recording 784,000 LTE net adds and reaching an LTE penetration of 22%. I would like to highlight once again the benchmark contract churn, which improved 0.1 percentage point year on year to a market record of 1% thanks to successful customer base management leading to highest customer loyalty and popular commercial propositions.
This and the turnaround of the prepaid segment with the base growing for the first time in 7 years led to total net adds of 138,000 customers versus net disconnection of $73,000 a year ago. This was the base for consistent revenue increases X-two refresh, plus 5.8% year on year, with mobile service revenues up by close to 3%. Despite commercial activity, OIBDA excluding non recurrent items grew by 6 point percent year on year on continued efficiencies, namely marketing and overheads. As a result, OIBDA margins stood at 24.5 percent, with auto refresh contributing 0.7 percentage points of margin. Let me now move to leverage ratio in the quarter has remained broadly stable, both before and after adjusting by the UK business disposal.
The completion of the transaction will allow us to Free cash flow year on year growth has reached 26%, benefiting from higher OIBDA and lower financial payments of EUR 300,000,000 for interest and taxes, more than offsetting higher CapEx payments. Moving to Slide 20. Our strict financial policy has led to rating stabilization most recently from Moody's. As part of this prudent approach, we have kept a healthy 1,000,000,000 liquidity buffer, following 1,000,000,000 diversified financing activity. Substantial funds have been raised in the equity markets or with equity content.
With 1,000,000,000 through capital increases at Telefonica SA and Vivo for GBT acquisition, and $500,000,000 through hybrid from our Colombian subsidiary to meet its specific needs. This has been complemented with the renewal of 1,000,000,000 of unused syndicated credit facilities. Our financial expenses have benefited from the Unilever rate reduction and intentionally decreasing fixed rate debt in euros. Higher debt in Latin American currencies has partially mitigated those benefits, but there has still been 18 basis points reduction in the financial cost to 5.27%. I would like to emphasize the success of the capital increases undertaken at Telefonica SA and Telefonica Brasil levels as seen on Slide 21.
Telefonica raised 1,000,000,000 through a rights issue at a discount to TERP significantly lower than other European rates issues in the last two years. Subscription was very successful as demand was 3.7 times the shares offered during the subscription period. In addition, Telefonica Brazil increased capital by BRL16.1 billion or 1,000,000, with Telefonica participating with approximately 75%. Was successfully priced with a lower discount and present transactions. Market book was substantially oversubscribed at two point seven times, with high demand from quality institution investors globally.
In addition, it is the largest equity transaction in in the last 4 years and the 1st public registered offering in Brazil in the last 6 months. We want to thank all of you who participated in this deals for your support. To conclude, our first quarter results reflected a solid start of the year. And more relevantly represent the starting point of a new cycle of profitable growth. First, we are accelerating our growth across the board.
2nd, our clear commercial strategy focus on value is enlarging our differentiation with very 3rd, we are improving our positioning in main markets. Through our proactive portfolio optimization, leading the in market consolidation movements in Europe and LatAm. 4th, recall our balance sheet strengths. And finally, we confirm our outlook for 2015 and ambition for 2016, which remain unchanged. Thank you very much
you.
And start to to we will We will now take our first question from Paul Ma from Berenberg. Please go ahead.
Yes, thank you very much. I wanted to ask about Spain OIBDA trends. Because, last year, there was a lot of talk about, OIBDA stabilization. And, we did see stabilization, I think, sequentially for few quarters last year, but obviously in Q1, we're still seeing an 8% decline. So what is your message now on the timing of domestic OIBDA stabilization.
Do you think that that can happen during 2015? And then maybe just to put that within the group context because you've, your guidance has clearly reserved the scope for maybe 1 percentage point of margin dilution, for investments in commercial expenses, discretionary, I guess, So in the context of the group guidance, given that you have seen margin expansion in some other business units, is there a trade off here between margin improvements elsewhere in the group that maybe leaves you with the scope to bear more margin pressure
Thanks. Thanks for your question. I'm focusing on the OIBDA in Spain. Let me remind you that this quarter, we have several effects that probably needs to be considered. 1st the comparison with the first quarter of 2014, which in which our commercial activity was still lower as we didn't see a traction in the market yet that time, which really started to be more aggressive commercially speaking in the second quarter of 2014.
2nd, the impact of content is progressively impacting the quarter on quarter. And as we have a growing base of customers, especially now that the digital class transaction has been approved, it will be progressively diluted. 3rd, I would highlight the pension fund contribution that has been retaking and is having a full impact progressively this year. And, of course, I'm probably, even more importantly, taking, the the link with the second your question. We are seeing a sound market ahead of us and we have been accelerating commercially.
And that's why for the first quarter, this year, since I think it was the second quarter of 2011, we have positive net adds at the level of Telefonica of Spain. Therefore, we thought it was a good idea to accelerate commercially and, to reposition to upgrade our offers and to be more aggressive on the market. Thanks to this effort, we think that we are better in a better position now to have a more visibility about revenue growth in Spain. And that's why we have been accelerating. So it is not just a question of having more room at the group level.
We are not contemplating that as being more aggressive in Spain. But again, the key, in our opinion, the key, issue in Spain is turning back to revenue growth, as soon as possible And as we see profitable growth ahead of us, that's what we have been accelerating. We'll keep you posted over the next quarters. But we are not taking advantage of room in terms of the guidance of the group to accelerate in Spanish because of the situation of Spain and that we see profitable growth ahead of us that we have been accelerating.
Maybe a follow-up. I mean, as some of those drags on OIBDA annualized through the rest of the year. So you mentioned the pension fund contribution, for example, mean, on content costs, do you start to hit scale benefits or break points on the cost of content at a certain scale of customer base? Does that benefit the half of this year as well?
Well, in my opinion is, we will have the bulk of the effort of the content impact. As you are saying, all along the year and the pension fund as well and also the increase in other costs as well. But the sooner we get back to revenue growth or at least to revenue stabilization the sooner that impact would be mitigated because again, the most important aggression to OIBDA and to if the margin is the revenue decline. And on that side, upgrading our customers, the trend that we are seeing in on our push will help us. So we are focusing on stabilizing revenues as soon as possible in order to make sure that we can build on a sound OIBDA margin evolution
That's great. That's very clear. Thank you very much.
Thank you, Paul. Next question, please.
We will now take our next question from Nick Braun from Goldman Sachs. Please go ahead.
Thanks. If I can just follow-up on your comments in Spain, do you still believe full year revenues may be able to grow in 2015? It's including DTS? Or are you just looking for growth year on year in the 3rd or 4th quarters? And then secondly, can I just clarify if we should expect margins to continue to climb with DTF?
Is that is that what you're saying? What's your expectation for increasing content costs from the changes to sports rights?
Well, in terms of, in terms of revenue strength in Spain, even though our guidance is just at the group level, we have stated that we have the ambition to turn back to growth in Spain this year. Revenues in 2014 were roughly 12,000 and EUR 23,000,000. Therefore, we need to generate slightly above EUR 3,000,000,000 per quarter to turn back to revenue growth. We are not yet there in the first quarter of 2015, but we are in the neighborhood of 2018 75, if I remember correctly. So we need to improve.
We this improvement in even, and but we have improved and we have sequentially improved quarter on quarter, especially in this first quarter with traditional seasonality would have implied a lower rate of growth than in the last quarter of 2014, and we have been able to beat that. The trend looks like going into that direction. This improvement is even more noticeable if you exclude handset sales, in pure service revenues. So one of the main growth drivers is precisely upselling our customers, and we have been upgrading our offers all along the chain in the first quarter on 15, which was on the assumption in order to be able to get back to revenue growth. And customers have been positively reacting to that and moving up in the value chain.
Starting in January and not the to May, what we have, upgraded towards Fusion offers, but have upgraded the tariffs in 1P in 1 play, double play, triple play and Fusion for data over allowances and for business on B2B. Unfortunately enough, I think that all the players are moving into the same direction. So I think that all the assumptions that needed to be implemented in the first quarter be able to, to be credible on that effort to turning back to revenue growth has been executed. It's true that we have some, impacts like the strike that we suffer, but even though it has been called off in May was unexpected and has impacted installation efforts, especially during weeks in April, And it is also true that we have been delayed in the approval process of Digital Plus. But overall, the revenue trends keep in improving sequentially, beating seasonality quarter on quarter and all the factors that needed to be in place to make sure that we will be able to deliver revenue growth in the next few quarters are there.
Which is the closer we will get in the 2nd quarter to 1,000,000,000, the more credible we will be on that, on that ambition than we And again, in terms of OIBDA in Spain, what we are seeing is that the sooner we get to revenue growth or to revenue stabilization, the easier it would be to see margins stabilizing because again, we have been able to reposition customers to upgrade our customer base to sale of our customers to move up on the value chain to a slightly increased Fusion ARPU. So all the different elements of the equation looks like going into the right direction.
Thank you, Nick. Next
question please.
We will now take our next question from Georgios, Geraldine Acono from Citi. Please go ahead. Hi.
I've got two questions on spare, unfortunately. I'm guessing that will be the topic of today. Firstly, on the cost base, and I appreciate the color as earlier. There was a 1,000,000 increase in the cost year on year. So obviously most of the decline that we've seen came from revenue.
So I just wanted to ask firstly on the revenue side, whether how did you arrive to the decision for the price increases you announced earlier this quarter, whether you see any risk of churn picking up on the back of that, and whether you're comfortable that the good KPIs you've managed to deliver the last couple of quarters will not unwind after the price increases. And secondly, on the cost side, could you perhaps give us an idea of this million growth that seen year on year in cost of which 15 is the pension contribution, whether that is the run rate we should expect to see for the rest of the year including Digital Plus. And perhaps if you could comment on the impact of Digital Plus we'll have on your content costs.
Thanks, for the question. In terms of the impact of the upgrading of award offer and the upselling effort that we are doing to our customers, the impact of new tires. I mean, 1st, it has, it has been a gradual movement during, starting in June, in January. And and with the final move being on the Fusion offer, recently in April. And therefore, you have already some embedded effects on the first quarter churns, especially in the single offer and there were one play that the double play and part of the triple play.
And as you can see, churn levels have improved in the first quarter of 2015, which looks like saying that quality and the upgrading has been going along with those upselling have been appreciated by customers. It is true that most the most significant trend will be probably on And therefore, we will need to show what is the impact on Fusion 1. It has been 1st, upsell and then upgrade it because we have moved to 300 megabit offer after increasing the price, the nominal price of Fusion, and that has happened in April. And therefore, we to focus on the 2nd quarter, on the 2nd quarter, moved. But on and the strike, and that has impacted us during a few weeks, but the most recent trends in May that I was checking just before entering here looks like going again into the same direction, into the right direction.
Once we have been installing the backlog that was created by the strike. And once that the upgrade of the speed of connection to 300 megabytes looks to be welcomed by customers. So we will update you on the second quarter, but so far, so far. It looks like in spite of some impact in April, May looks going into the regulation and the first quarter has been good in terms of churn improvements. In terms of the cost structure of Spain, operational expenses in Spain is 1735,000,000, and it has increased 1.2% year on year.
Out of that, supplies is 604,000,000. It has been 3% up year on year. And it has several effects. We have less handset cost less interconnection and more content costs. Labor force is, at 6% because of the pension fund contribution.
And others have been down 4.7% because of simplification. So just to tell you that we are trying to absorb at least part of the content cost. And on the other calls that has been that are going to be impacting us all along the year to be able to have a good evolution in terms of margins. But again, let me stress that the sooner we get back to revenue stabilization, the sooner that, therefore, would be even more noticeable. So all the guidelines that were prepared when we were preparing the budget of Spain for this year are going into the direction that we would thought it would go, in spite of unexpected events, like the a delay on the digital plus digital plus approval and the strike.
And in terms of the content effort or the content impact of digital plus, Well, most of the context, we already have those impacts, namely the soccer rights because we were paying to the Ita Plus and the Formula 1 rights and the and the MotoGP rights and the series. So most of the impacts we have already, we have already been affected by those and it's going to not going to be increasing because of digital plus. But the most important thing of digital plus is that it will have, in my opinion, 2 positive effects. First, We are going to be able to cross sell, to offer, our services to the customer base of Digital Plus. And secondly, and probably more importantly, the TV customer base is going to be significantly increased, and that should lead to some, optimization the content cost going forward.
Thank you, Georgios. Next question, please.
We now take our next question from Giovanni Montelli from UBS.
Good morning. Just a question on the fixed telephone lines. You have 127,000 line losses this quarter. I was just wondering when do you expect this trend to improve further? And also, how much of the line losses you think are still going mobile only in Spain?
Could you repeat? Because we barely we were barely hearing that the first part of your question. Sorry for that.
A problem with my phone. Can you hear me now?
It's much much better.
Okay. So, about live losses, traditional fixed line analysis. When do you expect this trend to improve further during the year? What's the share of these fixed line losses that is going mobile only? And what is the, let's say, the commercial driver behind this, why do you think we still have a significant part of your line losses that is going mobile only in Spain?
And finally, also always about these. If I look at your old sale, accesses in Q1, they are decreasing This is pretty unusual trend. I wanted to know if there is any specific element and specific adjustment there.
Thanks for that. In terms of our traditional lines in Spain, it's minus 5% year on year and is order sequential improve once we keep bundling with and moving customers towards Fusion. So it's is the best net loss of wireline voice after Movistar was younger probably with one instruction. So it keeps improving too soon to say when that's going to be ending. We'll keep improving.
But for the first time, and let me stress that, we have been able to more than cover that with the other elements of our accesses in Spain, mobile contract, TV offer, and, and fiber. So it is hard for us to read right now how much of that is due just to pure mobile substitution once it has become a fully integrated and convergent market in Spain. But what I can tell you is that in the overall equation of accesses in Spain, we are growing for the first time in the last 4 years. And in terms of the wholesale decrease, I don't have enough, element of information right now with me because in terms of the wholesale revenue Spain, we are increasing. I mean, we are doing much better than the previous year.
So let me try to focus where those lines are being lost. And I will get back to you offline if I may.
Okay. Sorry, if I may, very quickly for about your federal route, the decision of the SMC is extending. Can you give us maybe an update about, let's say, what your discussion are with the CNC and about the way you will, let's say, fine tune your fiber investments if there is a minimum floor of fiber rollout that you will do with any case? And how are you going to select the areas of the country where you want to, let's say, target your fiber rollout for the rest of the regulatory decision? Thank you.
No, it's our rollout is not going to be independent of the regulatory decision. It would totally subject to the regulatory decision. What we are doing in 2015, we keep rolling out, but mainly on the zones that have been already agreed as having enough competition and therefore in which regulation is probably not going to be affected. I think that one of the most important positive news of this new regulation is geographical segmentation. Several regions of Spain have been declared already competitive zones and therefore, because they more than 3 networks.
And what we are doing till we see how much this scope of geographical segmentation is increased. While we see those, we are biasing or coverage efforts in the zones that we know are not going to be affected by future regulation So as you might imagine, we keep having a significant amount of interactions with the regulator. So I think that, we keep aiming, to deploy fiber, brought in Spain, Spain in the middle of the crisis between 112015 has become leader in Europe in terms of fiber coverage and connection. Absolutely. In fiber to the home.
I'm not talking about relative terms. I'm talking in absolute terms, and this is due to a regulation that was fostering investment And therefore, we think this should go on. And we think that in the meantime, we are we keep deploying our effort because it's paying off in terms of ARPU expansion in terms of customer satisfaction and in terms of revenue accretion competition zones.
Thank you, Giovanni. Thanks for watching, please.
We'll now take our next question from Matthew Rubio from Barclays. Please go ahead.
Good afternoon. Thank you very much. I'm crossing Atlantic actually. I had some questions in Latin America. In Brazil, a very strong performance in terms of the revenues, but there was one element that was unwelcome, which was the increase of bad debt provisions.
And apparently it's due to the economy. I was wondering, is that becoming or can that become a topic or an issue in other countries? And second, and maybe related to that, the trends in terms of EBITDA margin in Venezuela, and Argentina too high inflationary country were very different with Venezuela margin quite down and Argentina actually be positively surprising. So if you could give a little bit of color on these two countries, and what's behind the trend, that would be helpful. Thank you.
Thanks for your question. In terms of Brazil, as it or as the legal team was covering just at the under conference call, we have been impacted in terms bad debt, in Brazil, and it has been having somehow an impact We are working in two fronts. As you know, in terms of commercially, we have, we have been, we have become more, lending in terms of the credit scoring and also on the credit collection solutions. We are starting to see some results, but too soon to say, and, it is it is due to macroeconomic effects. It is also true that, In terms of our performance, relative to our competitors, we are doing better because we have a much, in our opinion, a much sounder cash interface.
But it's something that we are monitoring and we are already acting in terms of the scoring, but also in terms of the migration of customers prepaid to postpaid, for example, in order to be a more demanding in terms of the stabilization of the customer base. And that explains as well why we have been more successful on prepaid. And we have been slowing down our performance, even though it's still good on postpaid, because we have been adding customers on prepaid, but we have not been moving aggressively customers from prepaid to postpaid till they demonstrate that they are stable customers. And that's exactly what we are doing. The remaining Latin America, by the way, we are not seeing those impact jet, neither in Chile or in Peru or in Colombia or in Mexico, our performance there is pretty sound and, commercially speaking, we are accelerating.
And in terms of Venezuela and Argentina, the OETA margin in Argentina increased significantly almost 3 percentage year on year. It's due to lower commercial activity as we were seeing a weaker macro, and we have seen less aggressiveness on the on the subsidies part of the market on the handset part of the market, we have been, slowing down our commercial activity, and that has been impacting positively our margins there. And we have also been putting some efficiency measures and also to offset the inflationary pressures in the Argentine Aperso, namely in terms of network system and contract contracts that were linked to inflation. In terms of Venezuela, we have been having this quarter higher availability of handsets and we have become more aggressive on the market. Has been having a good, commercial return.
And as you might imagine, OpEx is extremely going to be affecting, because of, of Forex. Even though our team is also doing an effort, we have been deciding in Venezuela to be more aggressive commercially and that an impact in OIBDA. We have been having some revenue, some price increases all along the quarter that will be fully reflected quarter in Venezuela. And that explains the different performance between the Venezuela and the Argentinian operations.
Thank you very much.
Thank you, Nadia. Next question, please.
We'll now take our next question from Keval Khiroya from Deutsche Bank.
Thank you. I've got two questions, please. The first on TAF, Hispanic America, when we look at the mobile service revenues excluding combination rate cuts, and the service revenue growth slowed in all of the markets other than Argentina and Venezuela. So can you give a little bit more color on what explains slowdown? Is it just you being more margin focused from now?
And secondly, could you remind us how much cash you have in Argentina?
Thanks for the question. I'm taking the first one on, on revenue performance in We are still seeing solid growth, both in revenues and in OIBDA. And we are seeing an namely in OIBDA and accelerating contribution Mexico and Colombia. What is the impact on revenues? Well, first, we are seeing this is the 5th I remember correctly, the 5th consecutive quarter of almost double digit revenue growth.
And therefore, comparables start to be much more demanding. Strong Q1, namely in Colombia, Chile and Mexico requires a much stronger Q1 in 2015. So year on year comparison starting to get tougher. We have higher regulatory effects. There is a significant amount, and I can I will look how much regulation is dragging down of revenues, but, is pretty significant?
And in fact, I have it here. I mean, regulation is dragging down, is dragging out almost a 2 percentage point of growth this quarter and it's more than the previous year. And then finally, it's a very intense competitive environment. And, namely, Peru and Chile, have become, even more aggressive than in the previous year. So those three effects, tougher comps, much higher regulatory effects, namely interconnection and more severe competition, namely in Peru and Chile explains why we have been declining one percentage point of or 100 and something percentage point of growth this quarter.
But still, we are almost double digit growth. Ma'am.
Regarding the cash in Argentina, we have the equivalent of 1,000,000 in cash in Argentina, the equivalent of 1,000,000 in pesos and the equivalent of 1,000,000 in strong currencies, mostly dollars.
Amer Sverdrup comes from Will Milner from Arete Research. Please go ahead. Thank
you. Have a couple questions again on Spain. I just want to focus on the price rises on Fusion that are coming through this quarter and just understand, or clarify those price rises applied to the entire fusion base, those in contract, those out of contract. And then also just get your thoughts. I understand there's a legal challenge, on the fusion price rises since when you launched fusion.
They were advertised as prices being fixed forever. And I just wouldn't mind getting your thoughts on whether the changes you've made to the, to the tariffs will get you sort of around in kind of legal question mark. And then also on Spain, just to understand in the fixed business, if you can explain the benefit you're getting from the sort of large government contract. I think that's added about 1,000,000, into the other revenue line. And it's the second quarter we've seen that very large benefit.
Just to kind of remind sort of the scope of that government project and possibly the capacity you to win more government contracts like that going forward? Thanks.
Well, in terms of the question about the upgrade or the upsell of the Fusion customers is opting. And therefore, if you want to have access to the 300 megabytes offer, you need to respond to one of the letter. And if you want to, if you don't want to, on the existing customer base, it was notified at the at the time of the bill of the billing process of, at the end of paper. And they have 1 month to withdraw of the service if there not agree with the price increase. So those are the 2 effects.
As I was telling you, during the month of May, we are not seeing much of an impact yet. We saw some impact in April because of the 2 effects and also because of the strike impact but may looks like, retaking, the good momentum on, on that, on that side. So, customer for the existing customer base. They were notified during the billing process of April, and they have, and they have, 1 month to withdraw out of the offer if they do not agree. And on the 300 megabytes of the up sale offer, an opt in and the form, they will need to call us if they want to be upgraded on that offer.
And in terms of in terms of the contract that you are mentioning, I'm not aware of any major contract that is distorting the one that we were somehow commenting, I think in previous quarter was a relatively small contract of roughly 1,000,000 of the Spanish parliament for 2 years, but I'm not aware of any major contract, government contract that is distorting the revenue evolution. If you want more color, more than happy to cover that offline with investor relationship, but let me summarize that we are not aware of any major government contract that is distorting the trends. Year on year.
Okay, no follow-up. Thanks a lot.
Thank you, Will. Next question please.
We'll now take our next question from Janet and Dan from Abby.
Hi, there. Of the 4 pillars, 3 of them, Spain, Germany, Brazil all seem to have reasonable network advantages and sort of paths back to growth. But I guess across the rest of Hispanic America, I mean, places like Colombia, Mexico, they they don't I think it's it feels reasonably fair to say they don't seem to have best in class networks. I mean, do you think I mean, is there a plan sort of next year with the improved balance sheet to begin to address some of those very large geographies?
Well, the answer to that is, out of the major, as you were saying, both in Spain, Germany and Brazil, our aim is to have the best network and the best distribution network. And therefore, we are acting in those in those regions. And Brazil is is is is quite of, is quite of, is is is pretty recent because we have become leaders that market in terms of customer base very recently, but we are not an integrated player there. We are being the leader, we need to act on send the right messages in terms of, bundled subsidies, data allowances, tier pricings, and so on. And we are doing and it looks like competition is following us.
So it's not just the network. It's being the leader because of the scale and having the responsibility of showing the pace of our rational market and therefore, of accretion of ARPUs, of accretion of services, more data allowances for customers and therefore data upselling. In the rest of in the countries that you were mentioning namely, that's also the case in places like Chile or Argentina or Peru. I mean, focusing on the ones that you were mentioning, namely Mexico and Colombia. You know that in both countries, regulation has time move that was creating more competition, more real competition.
And therefore asymmetry is really happening, and this is fostering our our results. And we are taking advantage of that move or that therefore to significantly upgrade our networks. And, upgrading our network doesn't mean that we aim replicate the incumbent network on those regions, but that we are significantly improving accelerating our move from 3G from 2.5G to 3G 3g to 4g network sharing agreements and, and, and wholesale agreements in order to increase our capacity. So the answer is yes. But it is not just the network.
It's also the distribution network. And in both fronts, we are advancing, and we are taking advantage of asymmetry to accelerate and to build the basis for the future. And that's why you will see that out of the contribution, namely to OIBDA, in this quarter, the largest contributor in namely, Colombia and Mexico, both the largest contributors because we are taking advantage of that to accelerate So we are doing both things at the same time. We are accelerating commercially. We are significantly improving our popularity in terms of distribution and in terms of network, but you are right.
We need to accelerate, but we cannot behave in the same manner in those countries that we are behaving in countries where we are leaders.
Can I ask a follow on? On all the other results calls, somebody has asked, the CEO of Deutsche Tele, etcetera, their thoughts on Pan European consolidation I mean, where do you guys stand given given you've recently been exiting?
This is Angel. We are happy with the scale that we have. We believe that with the footprint that we have and the skill that and that we have as Telefonica Group. And the no need for cross border consolidation. We have been working a lot in end market consolidation because we see clear benefits be it mobile consolidation, be it conversion consolidation.
And we have been, leading in many of the markets on this front. But we are focused on delivering on strengthening our operations in our current footprint. On delivering on the synergies of the transactions that we have already announced. And, we have, non B for cross border consolidation and buyer building and getting into any of such euphoria. That's some others.
Seem to be thinking about.
Thanks very much.
Thank you, Jonathan. Next question please.
Our next question comes from James Ratzer from Research Research.
Yes. Thanks very much indeed for taking the questions. I have 2, please. The first one was just to come back to Spain and the Fusion repricing. I was just wondering help me quantify what the impact of that would be to revenues.
I mean, it looks like few is about just over 25% of your domestic revenues and you're putting through roughly a 7% increase. So should that imply a 2% step up in revenues from Fusion or do you think you will see some customers spin down to some of the lower packages. I'd just like to help quantify the impact of that please. And then secondly, non Venezuela, we're seeing a number of other companies this quarter switch away from the SICAD II rate. Some companies even saying that it actually no longer exists and moving to another rate called SIM adi at a rate of around 190 I was wondering if you could just give us your thoughts on that, please.
Thank you.
While taking your question on Spain, as you might imagine, we don't disclose in such a detail the impact of the app grading of the Fusion offer. What I can tell you is that when we're calculating our buy for this year. And we were assuming that at some point, we'll be upgrading our offer and therefore, upsetting our customers. It was, as classic part of our ambition to turn back to revenue growth in Spain. So as I was telling you before, in the first quarter, we were below slightly, but below the 3,000,000,000 first call.
On a monthly basis, we account for those upselling to get us to the threshold that we need to turn back to revenue growth, which is still what we are aiming this year in Spain. So it was a strategic pillar to get there. It was tough, as you might imagine, because we needed to put a lot of elements in place of the offer, but we were accounting on those extra revenues because of the upselling of our customers to make sure we were able to beat in the 2nd third and 4th quarter expectation to turn back to revenue growth in Spain. That was strategic and that's why implementing that was see on the paper, but then you need to go to the market and commercially implement that and expect the competition to follow. It looks like competition is following.
Therefore, all the assumptions that were embedded in our ambition, to get back to revenue soon as possible in Spain looks like going into the right direction in spite of those unexpected events that I was mentioning before. So I'm not going to be able to detail to you what is the impact of that of that upgrading of our offer and Fusion, but it's it was embedded in our assumption that we needed have in order to increase our monthly revenues to get back to revenue growth in Spain as soon as possible.
Regarding Venezuela, that exists 3 exchange rates. 1 is called the Senko X, which is at 6.3, which is very limited for some products and services. And which paradoxically some companies still continue to use. Then the, CCAD substitutes the former circa 1 and circa 2, which is still, on the process of being regulated. And then the SIMADI, which is third system, which really is not so representative because it doesn't have liquidity.
It has a huge volatility. We decided at the end of last year to move from what used to be CCAD 1 to CCAD 2 to the rate of 50. We are using the rate that applied to the last CCAR 2 option, which was of 52 Bolivar's the dollar, which we think at this stage is still the most representative and less volatile. It's quite important to say that once we made the move to circa 2 and to the 50, which is now $52 or reversed $2, which slashed, pretty much our exposure to Venezuela, our net cash in the country is 1,000,000,000. Our book value is 1,000,000,000.
So any subsequent devaluation or adjustment of the FX rate from CCAT to some other CCAT when we see the next auction or getting closer to Simale would have a very small impact to the ones that you have seen in our accounts at the end of last year.
Great. Thank you.
Thank you, James. Next question, please.
Our next question comes from Luis Porter from Morgan Stanley.
Yes, hello. It's Luis Brotta from Morgan Stanley. Two questions, please. First is on, the Digital Plus acquisition. On the remedies with the obligation to wholesale 50 percent of the premium content.
I would like to understand how you plan or how you could bundle the content to make propositions from your competitors, not that attractive? And also whether you could share with us some analysis, I'm sure you've done on potential cross selling opportunities with the clients coming from Digital Plus relative to the risk of TV ARPU dilution as these clients are pain. My understanding is that something like just for TV and any cross selling with TV products, I suspect might might give rise to some kind of dilution. And related to this digital plus, something that is not clear to me, is if you're going to start consolidating this from April, so for 2 months from the 2nd quarter, what will be the revenue and EBITDA contribution from this if you could give us some kind of order of magnitude And whether when you were in the last few quarters talking about this ambition to go back to revenue growth in Spain, whether you were always considering and you are still considering or not, whatever the contribution is in revenues in an organic way from the total plus? Thank you.
Thanks, Luis. In terms of the remedies, There were several remedies imposed, the ones on the premium versus the definition of, premium content, which is more attractive. I need to go to some, not all, but some 14 events, and some may years. And therefore, and also the important thing is also this percentage, this 50%. And therefore, whoever wants to have access to this wholesale offer on this premium content is to choose And therefore, that would contribute to have some exclusivity on some of the countries because our competitors will need to choose between 50% of the defined predefined premium contest, which are, again, not all of them.
And, therefore, within that, and if you also take into consideration that I a part of the fixed cost of those contents, specifically the premium contents needs to be distributed again, as a fixed part of the cost, not at a variable part among the ones that are going to be, willing to have access to those content that is going to help first makes those content stable in the market, namely Spanish lead, for example, but also in terms of the of, distributing the effort among the ones that are going to be willing to have those countries. So I think that overall, a pretty reasonable set of remedies that we think are going to contribute, to, to distribute in a much more fair way the cost of those contents. In terms of the cross selling opportunities, yes, we were considering those, but we are not considering the digital plus revenues back to revenue growth in Spain that the digital revenues were non organic, and therefore, we were not counting on those on the digital plus, revenue to turn back to revenue growth in Spain. But yes, we are aiming to have an uptake in terms of revenues in the second part of the year because of the cross selling abilities of the digital plus customer base.
And that is going to help to precisely anchor the output that those customers will have on TD. And we we aim to do what we have been doing on the Fusion part of our customer base, which is upgrading those customers. We with, with attractive both wireline, wireless voice and, and broadband. So we think there is room for an Uber. We think there are room to anchor the value that ARPU.
And we think there is room to contribute, revenues to new revenues, on the on consolidated terms, in, on the on the combined effort And then in terms of, consolidation, I turn to Angel.
Yes, by Luis, regarding accounting, we will start consolidating digital class from May. Initially, it's been acquired by Telefonica Continidos. So, would be if, not decided otherwise under the other company's caption, but we will do a corporate. We are assessing the corporate the organization to best allocate the wholesale and retail parts of the business, the retail part of the business, probably to Telefonica Espana so that we optimize the not only organizational, logic, but also tax and accounting impacts. We will give, we are still work on progress.
We are going to give full detail on that by Q2 results or ahead of those so that you can incorporate to your models.
Thank you. If I can just clarify something Jose Maria was saying Jose Maria did I understand well that what you said is that what you were taking into account in terms of coming back to revenue growth was just the cross selling opportunity and not what we can call the legacy revenue from DTS or DTS? Okay, perfect. Thank you.
Thank you, Luis. Next question please.
Our next question comes from Justin Funnel from Credit Suisse.
Yeah. Hi. Can you hear me? Thanks. Yeah.
Just wanted to ask about your, your medium term planning for your balance sheets, obviously, subject to the 2 deal getting done. You'll be down at 2.8 times levered, which, you know, whenever that was shrinking was probably the right number, but if ever that's growing going forward, would probably be a bit under levered. We've seen Deutsche Tull go through this sort of journey and ultimately end up with dividend a full cash dividend and dividend growth. Do you think that's where you can end up as well on a 1 to 2 year view, please?
Yes. When, when first, we reiterate our objective of 2.35 times or lower net debt to Toyota. Clearly with the O2 UK divestment, we are going to be below that. And, what we decided is to maintain financial flexibility. So not imposing a too stringent leverage target given the current environment of of, debt markets.
2nd, we want to maintain flexibility for growth to finance the growth the company, be it organic or inorganic in the places where it makes sense to consolidate. And third, we decided to improve the shareholder remuneration by 2 ways. 1 is after the 2 transaction closes, the cash dividend of would become 100% cash instead of the partial voluntary scrip plus guys that we have now, in 2015, we have $0.35 voluntary script and then $0.40 to be paid for in cash. In 2016, we would move to 100% cash dividend. And also, we have taken the decision to cancel the treasury shares instead of placing those in the markets, but we would improve the EPS.
As you rightly say, going forward and post O2 UK transaction, there would be some margin between the leverage target and the position, but we think it's, it's, makes sense to have financial flexibility in order to be able to take opportunities as they for sure will present themselves in the organic and inorganic arena going forward.
Okay. Thank you. And just on a detailed question on Spain, you've probably answered this already. I just didn't understand it. Your content costs seem to be sort of one of the key drivers of your slightly weaker margins in Q1.
Are those largely fixed costs now? Are they rising as you grow your IPTV customer base? And when could we see these content costs no longer dragging on margin?
Well, in terms of our content costs in the first quarter of this being this year, it had been 50% higher year on year. And almost 2 thirds of that of that is fixed. And therefore, it's not linked to the number of customers. So, in in this part, that the number of subscriber going to be increased. The average cost per subscriber is going to decline.
On the sport multisystem content is booked annually, while TV channels contents are booked depending on the number of subscriber. First quarter, the Coast blue quarter on quarter on more subs and more TV channels and that's a variable cost. But, also, let me, let me add that, the more TV customers we will have, and that would that would be the case once we will consolidate in the digital plus customers, this variable part would be, will be diminishing. And now also parts, part of the remedies, part of the fixed cost of those contracts will be distributed according to the wholesale offer. So I think this trend should be is there, is there to stay, but it's going to be diluted, the more we grow on the TV side.
Thank you very much. Thank you.
Thank you, Justin. Next question please.
Our next question comes from Fernando Cordero from Banco Santander. Please go ahead.
Hello, good afternoon. Thanks for taking my two questions. The first one is already with the one off accounted into the in the first quarter. And I would like to know, I would just end this 1,000,000,000 one off could be fully considered in terms of cash fully consider as credit going forward in order to understand the cash impact of this event. And the second question is related with with TTS as a follow-up.
And you have been describing what could be the potential synergies in top line, but I would also like know your views on the potential synergies in terms of the platform operations in that sense, at which stand and excluding the content of cost, where are the room or which is the room in order to obtain some synergies from the operation of Canal Plus, obviously not in the tax synergies that are personnel ready in the ATLAS. Thank you.
Okay. And regarding the tax period in our pricing from the sale of UK. This arises from the fact that the book value of O2 UK is different for accounting purposes and for tax purposes. The counting, book value was reduced by the dividend received, including, those dividends received before 2009 where the tax flow change in Spain. So this accounting book value will probably generate a capital gain when we close the transaction.
Tax wise, the book value was not reduced by dividends received in 2009. So it will generate a tax loss We already had a deferred tax asset in our books for this concept, but once the UK is recorded as held for sale, this tax asset has to be taken to the P and L. And this is an item that fully accrues to Telefonica, although it's reported in the line of discontinued operations that fully accrue to, obviously, to the parent company and shareholder. And this will be converted into to cash or used against the taxable gains. Our current estimate is between year 5 and 8 because we have other tax laws carry forwards that we can use ahead of that, but this will fully go through our to reducing our cash tax rate in the future.
In terms of your question about synergies, in terms of contents, let me, let me also try to, to stress the fact that we aim to have synergies in not just in Spain. We are going to be aggregating the content acquisition of all the TV platforms that we have all along the group. And remember that we are growing significantly TV in Brazil and in and the reminder of Latin America. And therefore, in terms of, content synergies, we are going to be aggregating volume, not just because of the customers of the former Fusion offer in Spain, Movistar TV, but also because of the customers that we have in Latin America other source of synergy that we were exploring, when we're doing the calculation of the value of digital class includes for sure, technology, namely the over the top platforms. I mean, you know, that they have a successful over the top platform that we intend to explore and to diversify.
I have been already detailing the cross selling opportunities in terms of revenues on their digital plus customer base. And on the Fusion customizing places, which we don't have heavy capacity with our own network in Spain, but also namely satellite capacity that we aim to put on top of the table to reach additional synergies. So there are revenues, because of cross selling in both customer base, content, simplification in of systems, I mean, in terms of the offering, so on, platforms, as I have been covering our satellite capacity, that would be the largest chapter synergies that we are analyzing and trying to implement.
Question please.
Our next question comes from David Wright from Bank of America. Please go ahead.
Hello, guys. Just a couple of simple questions for me to help with the modeling. If you could just give
us oh, hello. Can you hear me, guys? Hello? Can you hear me?
Hello?
Hello. Can you hear me?
The next question please.
Hello. So the next question will come from Mandeep Singh from Redburn. Please go ahead.
Hello? Can you guys hear me?
Yes. We can.
Okay. Thank you. I have two questions, please. 1, sorry to keep on coming back to Spain. I know it's been a big focus of the conference call, but referring back to the transcript of the Q4 results.
Clearly, Spain was guided and it was guidance not ambition on a growth on a cumulative basis. So I'm just wondering could give a little bit more color on the softening of that tone. Secondly, just wanted to ask your perspectives on Brazilian consolidation, whether you think there's any sense of urgency on your part or on the part of the consortium and where do you stand on Brazilian consolidation?
On your question of Spain, we were we were aiming at revenue growth, and we are still aiming at revenue growth on cumulative basis this year. We have just one written guidance, which is the group guidance. We are not guidance by by regions. And we just have guidance on the listed companies, namely in Germany and in Brazil, but three that we are still aiming to a cumulative revenue growth in Spain this year. We are just updating on the recent events.
And in order to get there to that revenue growth, we needed to implement several things. And we have been implemented during this 1st 4 months of the year. And, and, it looks like going into the right direction, in spite of unexpected events, as I was mentioning before, the strike and the, and the delay the cross selling activity on the digital plus customer base. And in terms of consolidation in Brazil,
In terms of, conservation in Brazil, our focus now is closing GBT, which we expect by the end of May and executing a very smooth integration, capturing 4 synergies because with the combination of Veeva and GBT, we will have the best assets and the best management in Brazil. We have full optionality regarding potential consolidation. We are market leaders. And we can benefit in many ways from potential consolidation, which we are believers. We would be supportive but we believe we have a full optionality actively or passively in that process when stands?
Yes, please. Previously, you've referred to whether the stars have been aligned or not been aligned. The way where are we now on cosmic activity, please?
Shining stars that they were in Brazil, which was a GBT. For the rest, it's gotten a bit cloudy. So we cannot really see the stars. But we believe that at some point, it makes sense that, that the market may consolidate because there are potentially very strong synergies on that type of transaction for it to happen. Probably, some people need to or some issues need to be addressed.
One important item is the concession negotiation this year that affects different players And that can take one off of the roadblocks. Another possibility is to see whether there could be new entrants for those potential terms actually decide to divest out of the market, which could create other opportunities. So there are many moving pieces. And we obviously continue to monitor. We think we have a position in which we can have lots of optionality in any of the SLS scenarios that could develop in Brazil and create value for our shareholders in doing so.
Thank you very much.
Thank you, Mandeep. We'll have time for one, one last question, please.
Thank you. Our last question comes from Ivan Lee from BBVA. Please go ahead.
Hello. Good afternoon, everybody. Just coming back to Spain, sorry about that, but my question is on the mobile service revenues, given the price increase announced February, I would have expected slight sequential improvement in mobile service revenues, while there is some actually the reverse trend is there's a slight deterioration versus four quarters. So I don't know if you could explain that maybe is there any trend I'm missing And given that you guys have some visibility on the second quarter, I don't know if you could share with us if that price increases already you know, improving the trends on mobile service revenues on the second quarter. And the one is a very brief one on Digital Plus.
Do you have an estimate of what percentage of Digital Plus customers are already your broadband customers just to give a sense of why it's a cross selling opportunity there?
Thanks, Ivan, for your questions. In terms of mobile services revenue, we we have been trying to guide you or to indicate to you during the last quarter is that because of allocation, it makes less and less sense to follow those independently because, because of the allocation that we do, names on the Fusion and because Fusion has become so relevant in terms of size in Spain, in spite of the effort that we have been doing to upgrade our offering in Spain, it's going to be less relevant to monitor in terms of, of mobile service revenue, because it has a very marginal impact considering the allocation of the bulk of the revenues. So I would strongly suggest to keep focusing on, on, service revenues, on overall service revenues, excluding handset, it has been, improving roughly a little bit more than 1 percentage point quarter on quarter in spite of seasonality. And again, that drives us to the idea that the revenue growth in Spain of revenue stabilization is in Spain keeps going into the right direction. And I think that, that was a significant part or a very important part of our overall guidance at the group level in terms of accelerating our revenue growth all along this year.
In terms of overall guidance, we said that we will grow in above 7%. If I remember correctly, we are growing close to 9%. And therefore, I think that if you judge upon the trends in Spain and the trends everywhere else, you will see that all along this year, we should be updating you on our guidance evolution because if we keep going to the right direction in Spain, and it looks like we are going to the right in Spain. And the reminder of the group, namely Brazil, keeps going into the right direction. We are beating our competitors.
We are doing better than competition and the remainder of Latin America. And we keep executing the synergies and the rationalization of the markets in Germany I think that, we are on the right track, to be, to be able to update you on, on our guidance year. In terms of the cross selling opportunity in Spain, yes, we have an idea now that we have been able to get closer to digital plus, to the customer base of digital plus, because we were not able to do that before the approval or the completion of the process. We have an idea that we are talking about several 100,000 of customers. We do not disclose that, but it's a significant part of the customer's rate that are still not with us.
And therefore, I think that the upselling opportunities that we were selling there, concentrating there is at least of the size that we thought it would be. So I think that this opportunity is there. And now it's about executing, it's about execution, it's about how fast we are going to be able to offer an attractive proposition to those customers. But the size of the customer base that we thought would be there and we thought would be a subject to cross selling is is the same size or slightly higher than what we thought.
For your participation. And we do certainly hope to have provided some useful insights for you regarding the results of a quarter. That represents the starting point of our Investor Relations department. Thank you. Good afternoon.
Telefonica January March 2015. Resid's conference call is over. You may now disconnect your lines.