Ladies and gentlemen, thank you for standing by, and welcome to Telefonica's Terje December 2013 Results Conference Call. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Pablo Geron, Head of Investor Relations. Please go ahead, sir.
Good morning, ladies and gentlemen, and welcome to Telefonica's conference call to discuss January December 2013 results and Pablo Guido, Head of Investor Relations. And before proceeding, let me mention that this document contains financial information that has been prepared under International and reporting standards. This financial information is outdated. This presentation may contain announcements that constitute forward looking statements which are not guarantees of future performance and involve risk and uncertainties. And that certain results may differ materially from those in the forward looking statements as a result as a result of various factors.
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 filled with the relevant securities market regulators. If you don't have a copy of the relevant press releases and the slides, Please contact Telefonica's Investor Relations team in Madrid by dialing the following telephone numbers, 3 491428700. Now let me turn the call over to our Chairman and CEO, Mr. Pesa Alberto, who will be leading this conference call.
Thank you, Pablo. Good morning, everybody, and welcome to Telefonica 2013 Results Conference Call. Today with me are the members of the executive committee. So during the Q And A session, you will have the opportunity to address to them any questions you may have. Before starting, let me briefly explain to you the agenda for this conference call.
I will first playing the significant changes in our operating model that the board of Telefonica approved yesterday. These changes are not used to change in organization, but to go one big step further in the transformation process started in 2011, to become a total digital telco, a digital telco that will be a sector reference on revenue growth and efficiency. Jose Maria will provide some details on this new operating model and then Angel will explain 2013 results in detail. Please turn to Slide number 3 to start talking about the difficult opportunity. We have talked many times about the difficult revolution.
This revolution is more and more evident each day. And fast evolution is making us more confident than ever about the big growth opportunities the difficult revolution is putting in front of us. Classic, both fixed and mobile is already exploding in our networks. However, fiber and LTE deployment, the massive adoption of connectivity for every device, the growth of video and the new ticket services make it significant the grossing up to now. Because the volume of mobile traffic expected for the next 5 years, is going to case by 11 times the 1 in 2013.
Are we saw in the slide number 4? Pillcores have the privilege of being at the core of this digital revolution, but there are new as it is needed to optimize our response to this big opportunity. Our vision is very clear and has no chance. We need to become and we are becoming a digital telco combining our traditional assets with digital skills. To allow our customers to have a sex and enjoy or what technology can offer them to enrich their lives.
For this, evolution scheme. We have differential assets or network and systems or distribution capabilities and our custom knowledge are non replicable. At the same time, we need to transform our commercial proportions propositions to capture the growth of new dividend services. Slide 5 so the transformation journey towards the difficult telco and the next step to be taken. In 2011 with the creation of Telefonica Digital And Telefonica Global Resources, taking strategic decisions in advance.
As well as key initiatives in
of our results,
a significant increase of our financial flexibility and a reinforced asset portfolio. All of them improving our rapid position in the sector. Telefonica Decitan, Telefonica LatAm and Telefonica Europe had been key of this transformation. But now, we clearly need to move one step ahead. We need to accelerate the revenue and we need to accelerate our efficiency gains even farther.
Moving to slide number 6. You can see some details about what this acceleration means. We have very clear what are the 4 pillars to reach our target. First, we need to generate more revenues, and we are putting absolute focus on data traffic monetization. Digital services, customer insight, first time to market and new commercial channels.
These among others are basically need to succeed. 2nd, we'll become a more technological company. Accelerating network modernization by deploying more fiber and LTE, applying the IT transformation and increasing virtualization. 3rd, we need to be even more efficient and improve our execution. We are announcing today a new synergy program based on OpEx and CapEx savings that the new organizations will allow us to capture.
And 4th, we want to lead the sector to a new pool repositioning, changing the rules of the current volume change. It is very clear and evident that the new digital ecosystem requires clearly the elimination of outdated or duplicated regulations. The implementation of 11 playing field for all which will drive the increased investment and capacity and innovation will make the value chain of the digital ecosystem equivalent to each one real contribution. And I want to underline this to make the digital ecosystem equivalent to each one real contribution, which is not the case now. Thus privacy and security are fundamental for the uptake and use of the new digital service.
I'm very sure that the new single digital market in European Union, which I think we implemented in the very near future will make all of this a reality. And those, all this will accelerate our sustainability growth and self hold this value creation. On slide number 7, you can see the new group organization. Basically, we are creating a new chief commercial and digital officer to bring digital services to the core of the business. A new area to force the growth based on digital customer insight, which will clearly accelerate our revenue growth.
In addition, we are reinforcing the empowerment of the chief global resources officer to execute the needed changes in network transformation to maximize efficiency generation. We are also increasing the level of reporting of key market. Crossing distances between the strategic and operational decisions and increased visibility of key business. And now Jose Maria, We'll give you further details on this operational transformation. Thank you, Cesar.
Turning to Slide 8, we want to highlight the multiple advances at Telefonica Digital carried out in the last 3 years towards a differential, commercial proposition. Thus, when we established our digital unit, we were pioneers moving forward to the digital world, aiming at transforming the company to a digital telco with detail at the core of our operating businesses. Since then, all steps taken were focused on developing platforms, where our core capabilities are differential, finding opportunities alongside the innovation chain and partnering with category leaders to provide end to end solutions. Or in all, final target of enabling Telefonica to move one step ahead was clearly met as revenue growth trend showed accelerating to 19.4 percent organic year on year in Q4. Please move to Slide 9, where you can see how we believe the new Chief Commercial Digital Officer will ensure further data monetization.
The Chief Commercial Digital Officer is the main responsible for revenue growth, with the role to implement a single data monetization strategy for the whole group. Leveraging in market intelligence, channels, and so on. We will define the value proposition for the customers. Acting also as the single product factory for the group, including core and new digital products. All in all, with a clear focus on the market, increasing commercial traction of our differential proposition for Telefonica's customers.
Moving to global resources on Slide 10. Main accomplishments reached by global resources are based around network development, IT simplification, and value creation through global procurement. In terms of network transformation and to meet increasing customer demand for data traffic, both fixed and mobile, We have devoted around 68 percent of our investment to growth and transformation, including fiber LTE, 3 d capacity and transport. As a result, we have launched LTE services in main markets, and we have passed 5,000,000 homes with fiber in our 2 main markets, Spain and Brazil, 1.7 times more than a year ago. It is also to highlight the efficient deployment of ultra broadband with network sharing agreements, signs in markets such as UK, Germany, Brazil, Spain, and Colombia and on others.
In IT, we focus our efforts around simplification and consolidation. As such, we have closed 6 data centers, reduced physical service by 12% and increased mix of service virtual by 7 percentage points year on year. In addition, we have turned off more than 1000 unaudited applications in 2013. In Slide 11, we show our main priorities in terms of 2014 CapEx Deployment. First of all, to highlight that our main focus in 2014 is to increase the capacity of our networks to support data traffic growth and to build network differentiation by developing high speed infrastructure.
In this sense, In 2014, 70 percent of our organic CapEx will be devoted to growth and transformation, 7 percentage points versus last year. With investments in fiber growing 65 percent year on year. These CapEx will translate into approximately 2 times more home pass in a year to $10,000,000 at the end of 2014. In Spain, population coverage will stand around 40% and in Sao Paulo, with a coverage of approximately 25% of homes in urban areas. On LTE, The number of LP enabled base stations will be two times higher year on year.
And Europe, this will be translating to a population coverage above 50%. Lastly, mobile base station connected with Ultra broadband will increase more than 5 percentage points year on year. At the same time in IT, we will continue with the simplification process fostering transformation and generating synergies by reducing physical servers increasing virtualized servers, closing more data centers and cancelling applications. On Slide 12, you have detailed the savings we aim to capture with this new operating model. We will extract significant savings from network operation in an integrated manner by adopting global standards and designs for key networks elements.
By transforming processes and OSS. On IT, by implementing shared services, and global initiatives, we will be able to reduce cost and accelerate transformation in a digital telco by concentrating production in regional data centers. Increasing virtualization levels, while we continue decommissioning applications and legacy. Finally, in support areas, we will also be able to work in a more efficient way by concentrating activities to achieve higher efficiencies and improve execution. On commercial, we will optimize channel mix, developing best online platforms and building sustainable hardware models.
By applying these initiatives, we will be able to generate up to 1,500,000,000 OpEx and CapEx gross savings annually in the coming years. Additional to the ones we should capture in Germany and excluding Venezuela. Let me now hand the call over to Angel.
Thank you, Jose Maria. Let me start with the highlights of 2013 on Slide 13. It has been a year of significant progress in strategic transformation towards a digital telco. 1st, we are back to organic revenue growth in 2013. In the October December period, we posted the 3rd consecutive quarter of year on year growth in organic terms.
Increasing contribution from LatAm, mobile data, digital services and the very rapid expansion of value customer base explained this performance. 2nd, results up to December reflected business stabilization. With annual organic OIBDA flat versus last year, driven by the growth posted in the 4th quarter, consolidating the improved trend already seen in Q3. Cost transformation and efficiency gains are translating into a stable OIBDA margin versus 2012 both in the year and in 3rd, free cash flow generation was sound despite FX headwinds allowing both free cash flow per share and earnings per share to come affordably exceed our dividend per share. 4th, we improved further our financial flexibility, as reflected in the ongoing debt reduction in 2013 to EUR 45,000,000,000 or 2.36 times OIBDA.
Including post closing events, net debt would stand at $42,000,000,000 or 2.31 times. 5th, we successfully advancing our portfolio rationalization, focusing on our core markets to increase return on capital employed. And finally, we continue delivering on our commitments, meeting our 2013 guidance. Let me now summarize key financials on Slide 14. In organic terms, revenue growth reached 1.8% in October December and 0.7% in the full year to 1,000,000,000.
OIBDA amounted to EUR 19,100,000,000 stable versus a 2012 figure, reflecting the 1.2% growth posted in the 4th quarter. Profitability stood at 33.4 percent and net income at 1,000,000,000, 17 percent above last year figure, despite the reduction in the value of the telecom Italy investment of $245,000,000 in the year, of which $135,000,000 was in the quarter. 2013 reported figures, especially in the second half, are negatively impacted by ForEx and by changes in the perimeter of consolidation. Let me stress that the first factor FX, drag 7.5 percentage points to 2013 year on year evolution of revenues and OIBDA, but at the same time, reduced CapEx, interest tax and minorities payments in euros. As a result, about 2 thirds of FX, absolute impact on EBITDA is mitigated at free cash flow level.
I would like to highlight the outstanding debt reduction of EUR 16000000000 or close to 30% the last 18 months in June 2012, allowing us to regain financial flexibility and significantly improve leverage metrics despite dimension impact of FX. On the next slide, free cash flow generation remained very robust in 2013 and reached almost 1,000,000,000 or 1,000,000,000 before spectrum payments. Absorbing most of the already mentioned adverse FX impacts. Free cash flow per share up to December was EUR 1.19 comfortably covering the dividend of for 2013 and resulting in a free cash flow payout of 63%. EPS also improved on a sequential basis and reached EUR 0.31 in the period of October, December, and in January to December.
Please turn to Slide 16 for a quick review Even CapEx was just slightly above 2012 level due to the accelerated investments in Venezuela devoted to improved network quality and at the same time to improve the balance between real assets and cash position in the country. As I already mentioned, net debt ended the year well below the 1,000,000,000 mark that we set as a maximum target for the year 2013. Also, we met a 2.35 times leverage ratio target. These objectives were reached through both organic and inorganic means. Moving to Slide 17.
We continue to capture high value customers, reaching more than 89 1,000,000 contract accesses at the end of the year after growing 9% year on year, increasing the weight of our total base to 35% and representing 83% of total net adds in Q4. Smartphone growth is the main driver of this contract base, reaching a penetration of 27%. At the same time, we are proactively fostering Ultra broadband uptake with 1,500,000 connections at year end and a penetration equal to 34%. Looking into Slide 18, in 2013, we have improved year on year performance across the board versus 2012. It is also highlighted would be the group's evolution, excluding the negative contribution of Spain?
As Spain is starting its recovery, This will flow and this flows into speeding up growth at group level. As such, our diversification is key for this performance. Turning to Slide 19. Organic revenue growth ramped up progressively along the year. 0.7% up to December or 2.3% if we exclude the negative impact of regulation.
The me highlight that Latin America, representing 51% of group sales, grew at double digit rate in Q4, while our pushing mobile data has delivered a 22 percent annual organic growth in non SMS data revenues, also in the last quarter. Organic OIBDA year on year variation recorded the 2nd sequential quarter of improvement, growing for the first time since the fourth quarter of 2012. This was driven by sorry, this was driven by revenue flow and further efficiencies and savings despite intensified efforts on smartphone acquisition and higher network costs related to a more data centric business. As a result, year on year margin erosion was limited to 0.2 percentage points, 1.1 percentage point lower than the erosion in 2012 and the absolute margin exceeded the level of 33%. Please turn now to Slide 20 for an update continue transforming our networks, investing in high speed broadband, both fixed and mobile and building differential networks.
As a result, fiber CapEx increased 50% and investments related to TV increased 38%. On the mobile side, 3g and 4g spent was 38% higher, where we also advanced on data transport and invested 15% more than a year ago. It is also remarkable the effort done in acquiring spectrum in the last 4 years, to secure valuable spectrum in main markets of operations. So the bulk of spectrum investments is already behind us. In 2013, spectrum acquisition amounted to 1,000,000,000, more than 2x year on year.
Please turn now to Slide number 21 to review our operations in Latin America. 2013 will let second transformation towards data. We captured the most valuable customers, reaching 7,000,000 new customers in the contract segment and accelerating smartphone adoption to 22% of penetration over mobile accesses. Moreover, the process of transforming the fixed business is already delivering visible results, with net adds improving across services in both Q4 and fiscal year 13. This outstanding commercial activity is flowing into financials, with revenues accelerating to surpass once again the 10% mark this quarter and OIBDA growing by 6.1% despite more intense commercial activity.
Moving to the next slide. Mobile service revenues improved their year on year performance in 2013, growing at almost 12% rate fueled by booming data. It is particularly noteworthy that non SMS data revenue trend, gradually accelerating to increase more than 40% year on year in fourth quarter, and already contributing with more than 6 percentage points to mobile service revenue growth this year. At the same time, Fixed business revenue trend improved significantly, stable year on year in 2013, but growing 3% year on year in Q4. In Q4 on the back of increased contribution of fixed broadband and new services, growing by almost 13% in the quarter.
In Slide number 23, we review Telefonica in Brazil. In 2013, we have reinforced our market position. Posting record high net adds in the contract segment with 5,000,000 new customers after capturing almost 60% of the market growth. This is the result of a superior competitive positioning, leverage on the best quality proposition served by our best in class network and brands. In the fixed business, commercial turnaround started in the second half of twenty thirteen and is reflected in improved commercial dynamics with all fixed services posting positive net adds.
Going forward, we keep committed to the transformation process and will increase our fiber coverage in 2014 to reach 2,500,000 households, further reinforcing our commercial proposition. This commercial progression is delivering solid revenue and OIBDA performance as we show in slide number 24. Revenue trend along the year reflected a solid mobile service revenue performance with growth above 5% every quarter. Therefore, faster than the market. These market share gains will become more evident with the stabilization of the fixed business which in the fourth quarter shows a significant improvement in revenue trends.
Furthermore, margin erosion this year is mainly driven by the strong commercial activity devoted to capture quality growth. In Q4, sequential margin improvement illustrates the cost control efforts and the moderation of commercial expense increase. Moving to next slide, we review the performance of other operations in LatAm. Telefonica Peru keeps accelerating revenues to more than 10% in Q4 and we have been the 1st player launching 4G services to further differentiate ourselves in terms of quality and innovation. In Argentina, we reached best ever mobile net adds this year that are gradually fueling into revenue performance.
Meanwhile, OIBDA margin erosion is gradually easing, surpassing 30% margin again this quarter. In Chile, it's worth mentioning that new plants launched this year have bolstered commercial performance, resulting in better revenue trend in both 4g Services are available from Q4, twenty thirteen, reinforcing our market positioning. In slide number 26, Colombia is accelerating its revenue share gains on the back of the renewed regulatory framework implemented in 2013 that is fostering mobile service revenue growth to 10% in Q4. 4g Services were already launched in December. In Mexico, despite ups and downs in financial performance, there are positive advances already visible in Q4 results.
Commercial activity awakened in the quarter, reaching record net adds of 1,200,000 accesses. Also, voice traffic is starting to show clear sense of recovery, growing by 38% year on year in Q4. At the same time we keep committed to a more efficient use of our resources by signing wholesale agreements. Finally, In Venezuela, strong growth in volumes is the main driver of revenue growth. Thus voice and data traffic grew above 20% 30% year on year, respectively, driving revenue growth above 45% year on year.
Moving to Slide 27. Let me review the performance of Telefonica Europe where we have looked for strong momentum continued in the quarter, improved our right positioning in a very dynamic and competitive environment on the back of differential data centric propositions across the footprint. Amid this backdrop, ongoing efficiency measures such as deep simplification and lower commercial costs led to an organic OIBDA margin expansion of 1.3 percentage points in 2013 to 37%. Lastly, I would like to remark the reshaping of the European asset portfolio which improves our positioning to benefit from In Spain, on Slide 28, commercial activity has improved during the quarter, and especially in the most valuable segments, which seems to suggest incipient change in consumption dynamics. We are building a superior quality proposition to exploit this change in market dynamics Capturing in the quarter record net adds in pay TV and fiber to reach 600,000 fiber connected customers as of December doubling last year's figure.
In addition, a successful Christmas campaign drove a better contract mobile performance despite increased subsidies from competitors in the quarter. Movistar Pucci on traction continued. Surpassing 2,900,000 customers. It is worth to highlight that 64% of quarterly gross adds were new or upsetting customers. As a result, in the Consumer segment, more than 52% fixed broadband accesses and 45% contract mobile were within Fusion, so we could think that the bulk of the back book impact is already behind us.
Finally, we increased our quality leadership through the rapid deployment of LTE based of LTE based on our differential backhaul and the acceleration of fiber rollout in Q4 took over 20% of total homes. In 2014, we will double FTTH coverage to 7,100,000 homes. In terms of financials, Telefonica Espana showed a gradual stabilization across metrics throughout 2013. Revenue trend consolidated the recovery path, the recovery path started in the first quarter of 2013. Driven by improved performance of fixed revenue and handset revenue and despite a negative drag from regulation.
Please note that commercial momentum improvement was progressive along the quarter so its full benefits are yet to be seen in the coming months. The high level of profitability is remarkable. OIBDA margin reached 49% in 2013, 3.3 percentage points above 2012 figure organically, reflecting the large benefits of the simplification and transformation process. Moreover, ongoing efforts in an in sourcing simplification of CRM and the transformation of the distribution channel of some of the initiatives we are executing to continue capturing further efficiencies. Lastly, operating cash flow generation remained very solid 1000000000 in 2013 with an operating cash flow margin of 37%.
In Slide 30, Telefonica UK maintained momentum in the 4th quarter, underpinned by the contract segment up 8% year on year after recording a market leading contract churn in the year. Refresh continued gaining traction and reached over 1000000 transactions. The rapid rollout of LTE translated into an outdoor coverage of 38% at the end of the year, with a target of reaching more than 60% by 2014 year end. The data monetization opportunity ahead of us is based on increasing data consumption with LTE customers having 2 times average usage versus a 3 g customer. Total sales in the quarter increased 0.3 percent year on year, driving to a flat performance in the full year, while profitability continued to panned in the quarter to 25.4 percent.
As a result, operating cash flow, excluding spectrum, increased by an outstanding 19% year on year. To review an operation in Germany, please turn to Slide 31. Let me highlight that 2013 been a transition year in the German market with competition focused on smartphone tariffs and devices. In this regards, the share of LTE enabled handsets sold over total grew to 80% in the quarter and LTE coverage was above 40% at the end of the year. This operational performance has led to continued strong growth of non SMS data revenues, up 22% year on year in 2013 already representing 70% of data revenue in the 4th quarter.
Nevertheless, revenue pressure remained through the year, mainly on 33 renewals and further decline of SMS revenues. Profitability remained at similar levels versus 2012 ending the year at 25.1% if we exclude asset sales in the 4th quarter. Moving to Slide 32, a strong free cash flow generation, combined with an active portfolio management proactive refinancing has allowed us to continue to improve our financial flexibility in spite of FX headwinds. Reported net debt as of December 31st stood at 1000000000or2 36 times OIBDA, achieving our targets. Including the divestments of Telefonica Czech Republic already closed in January, and Telefonica Ireland, net debt would stand at 1,000,000 or 2.31 times OIBDA.
On Slide 33, I would like to emphasize the ample liquidity cushion above 1,000,000,000, which allows us to comfortably address the maturities going forward. The average debt life is above 7 years. We have executed a diversified financing activity across products and geographies raising above EUR 12,000,000,000 of when diversified long term financing. Effective interest rate cost stays at 5.34% in the lower half of our long term guidance. Let me now highlight our guidance for this 2014 is going to be the year when we will increase the investments to build network differentiation for fostering future revenue growth.
Allowing simultaneously to stimulate free cash flow generation and improve strategic market positioning and return in core markets. Our outlook for the year is on an organic basis and excludes Venezuela. So Regarding operating targets, we expect revenues to be in the positive territory on the back of continuing healthy growth in LatAm and improved trends in Europe. OIBDA margin will trend towards stabilization with an erosion around 1 percentage point to allow for commercial flexibility if needed. CapEx to sales ratio will be increasing to 15.5% to 16% as we will be accelerating network IT and digital capabilities transformation.
On the financial guidance, we will continue to deleverage in 2014, with a final goal of net financial debt lower than EUR 43,000,000 at year end. Let me also remark that we reiterate our commitment with a leverage ratio of 2.35 times. We will do all of this maintaining our dividend for 2014 at per share and further improving our financial flexibility. This year, the dividend will EUR0.35 voluntary scrip dividend in the fourth quarter of 2014 and EUR0.40 in cash in the second quarter of 2015. Script dividend will let us reinvest into business growth while CapEx growth crystallizes in higher free cash flow.
To finish, please move to Slide 35 to sum up the final conclusions. We are moving one step further in our evolution to the digital era. We are transforming ourselves to maximize returns from the digital opportunity. We will be stronger technologically, and we will have differential infrastructure that have non replicable advantages on the base. In 2013, we have done significant advances.
We recovered revenue organic growth, posted stable organic OIBDA and margin along with strong free cash flow generation. We have regained further financial flexibility increasing the focus in core markets and improved group's growth potential free market consolidation. In 2014, we will accelerate growth building stronger networks to improve our market positioning in key markets, coupled with increasing efficiency levels. Financial discipline and superior shareholder remuneration are our core principles, and we keep having capacity to further exploit our portfolio. Thank you very much and now we are ready to take your questions.
Ladies
and gentlemen, 1 to register question and 2 to cancel. We'll kindly ask you to ask a maximum of 2 questions per participant. And if possible, we recommend you not to use your cell or hands free phone. There will be a short silence while questions are being registered. Our first question comes from the line of Luis Breata from Morgan Stanley.
Please go ahead.
Yes, hello. A couple of questions, please. One is on your strategy in content in Spain. You have been, in the press recently been mentioned as having been buying rights to broadcast motorbikes and Formula 1, this year. I wonder if you could summarize a little bit what you've done, and what's the cost and how you're going to get returns out of that.
And Secondly, in terms of Venezuela and the currency, we've seen already a couple of companies moving to translate their accounts using this, kind of a parallel exchange rate closer to 12 believe at least per dollar. I don't know whether you have been looking into it or are you going to be sticking to the official exchange rate of 6.3% or planning to at some point move towards this other exchange rate? Thank you.
Thank you, Luis. Let me just give you a bit of overview of the pay TV and also content we mean for us from now on. First of all, as you know, since last year, we have managed to turn around, make a turnaround on our trading in pay TV and specifically that has happened during the fourth quarter. And as you know, this is from the back of our strategy of a positive impact of the Christmas campaign and our enhanced offer of Movistar Mini included in the in the Fusion fiber bundles. So as, you know, on the numbers, we had a record net adds of 63,000 we have increased, we have 73,000 in TV mini not accounted in our customer base with an upselling position.
So our strategy to invest in fiber to upsell into TV needed to have a third leg in which as we have been talking in the last few quarters, we wanted to add properly content. So as we see, all this stuff TV as a key lever for growth, going forward, this needs to be based on differential, content offer. So we have already, reached agreements to offer, for example, the Rolanga rose in exclusivity. We bought the rights until 2017. We have on the formula 1 together with, say, address media, Telefonica will live live broadcast formula 1 world championship.
Additionally, we will offer a known, inclusive, own, inclusive channel. We'll be called movistar F One for Mulano, to follow Old Grand Prix with the exclusive, exclusive reports, high definition, 6 cameras, and without advertising cuts. We will also have a joint running of the MotoGP rights with Telexinco and Telefonica wheel live broadcast in 'nineteen, Grand Prix of both OGP championship in high definition. And again, with 6 simultaneous cameras and the less in will offer in live broadcast of 9 of the races and then over 10 freaks, recorder. This is very exciting because also we have the right for the football league to broadcast the football the following football matches, and I can give you all the details if I have time, I can I can give it to you later?
But this all of them, your u f u f faz champion lead. I think that, again, we need to differentiate ourselves in this offering and the content and experience based on an improvement platform, it is increase versus the previous year, which is well included in the business case for increase of investment during 2014. Hope this clear?
Yes. Can you disclose the cost of these, contents recently acquired?
Luis, I'm afraid. I cannot do it at the moment, but maybe during the year, there will be more opportunities.
Okay. Thanks.
Thank you.
Hi, Luis. This is Angel regarding Venezuela in January. This year, some new local regulation came into force affecting the FX settlements of certain sectors and items, which will be settled at the FX rate that results from the allocations conducted a system called the CCAT. Although the rules and procedures applicable to this system have yet to be enacted, we consider that the settlements of the foreign currency will be conducted through CCAT and rates at which CCAT has been allocated, dollars so far in the year are above 11 polyvers per U. S.
Dollar. So what we plan to do is in the first quarter, to move from the official 6.3 rate to something closer to 11.4% and we would to this recording in the first quarter. So that among other impacts, the cash position that we have at year end, at the official exchange rate, that is equivalent to 1,000,000,000 would be reduced in something close to around 1.2 1,000,000,000. So would be converted from 1,000,000,000 to around 1,000,000,000.
That's great. Thank you.
Thank you, Luis. Next question please.
Our next question comes from the line of from Goldman Sachs. Please go ahead.
Thanks. Two questions, please. Firstly, in Spain, you said the bulk of the back book repricing is coming to an end, but when should we expect this translate into the stabilization of revenue and earnings. And secondly, it looks like you've retained the financial flexibility to consider either inorganic options after Germany. You still see the opportunity to participate in consolidation in
any of your other core markets.
K. I think I understood, you're talking about revenue stabilization and and the outlook that we have. Let me say first that the revenues have stabilized in Spain quarter over quarter, showing a very similar trend, excluding MTR. And underlying revenues actually are slightly improving as a result of 3 major things. We have had a very accretive contribution of Fusion, which is more visible in the 4th quarter.
Although we have had a much tougher market conditions in the 4th quarter, which have in active our performance in the non convergent mobile space, as you have seen in our net adds figures. The third factor is we have seen a much better trading in December due to a very strong, Christmas campaign, which actually are not yet reflected in our revenues. Let me say going forward that we expect top line trend to improve on the back of Fusion trading and also leverage on fiber and premium contact services as I explained earlier to Luis in order to capture growth from an improving environment. Frankly, what we are seeing is that the, in general, the the macro sentiment in Spain is slightly better. We are seeing our customer is starting to look at much higher end and more added value products.
That's obviously starting to to be part of our more intense commercial activity, we feel good investing in fiber and in an LTE And frankly, as in the next quarters, you will start seeing that, getting into the revenues more clearly in our numbers. Hope I answered correctly.
Okay. This is, I mean, it, I see what I see what I was saying, you know, the the situation in Spanish improving not only in our sector, but not the sectors. And we see clearly improving trend in consumption, and we see very improving trend in investment, by local companies. And this, we are totally ensured that every quarter is going to be a better preceding one. And, and this will be reflected clearly in Telefonica, Espana In regards to the consolidation of the market, let me tell you that Telefonica is the more global tilt operator in the world.
What I mean by that that we are the most diversified telco in the world. We are very well in Latin America, and we are very well in Europe. We are where we want to be. And we want to increase, our revenues in the markets where we are. We have the portfolio.
We want to have and, and the whole focus will be in the markets where we are. For us, I say the consolidation has been already done. We have stock alliances with our partners in, in telecom Italian and China Unicom. It is a lot. That I think are very important.
It gives new digital ecosystem in which, altogether, we will reach more than 1,000,000,000 customers This is going to be very important. So for us, the consolidation is done.
Thank you. Next question, please.
Our next question comes from the line of George Giordekono from Citi. Please go ahead.
Yes, hello. My first question will be around the leverage target of 1,000,000,000 for 2014. Obviously, there could be some potential for M And A and I'll be interested to hear your thoughts around Canal Plus and maybe in some of the other regions who are present. So I'm just trying to understand, from what I realized part of the a debt reduction will be down through hybrids. Is it possible to give us an idea of the level of hybrids you expect to have at the end of the year or if possible give us an indication, what will be the maximum amount the rating agencies will give you credit, if you would issue more hybrid bonds.
And my second question is around, the higher CapEx and the strong demand, you anticipate across your market. You give a lot of detail around the different technologies that the investment will go towards Is it possible to give us a bit of color around the regional breakdown, whether when we see 3G and 4G investments, whether that's in Latin America, when we see fiber, which markets we'll see most of this investment.
Hi, Georgios. This is Angel on your first question. When we set our financial policies, we have a firm determination to ensure compatibility of 3 interactive targets. First one being to maintain the adequate investments in the operation to accelerate growth and future free cash flow generation, the second one to continue reinforcing our financial flexibility and having full commitment to our target debt and rating levels, and third, to have, an attractive shareholder remuneration. This as we have seen in 2013, will be achieved by remains.
The first one clearly being organic, organic free cash flow generation. And the second one through continued portfolio management, and we will continue to focus on collaborations and looking at the options that are available to us to optimize the value position in the markets where we are present and optimize the return on capital employed. And third, So organic free cash generation inorganically continue managing our portfolio. And third, we are taking financial flexibility measures as the voluntary script partial voluntary script dividend that we have announced today and some hybrid issuance. The limit depends a little bit on agencies, but you could consider the figure of SEK 7,000,000,000 ish as the limit that we could have of hybrids As of now, we have issued around 1,000,000,000.
And you could expect some issuance during 2014 to the tune of EUR 1,500,000,000 to EUR 1,500,000,000 is depending on market conditions.
Taking your question on CapEx and geographical split, we try to provide some color on Slide 16, but basically it's going to be in both regions. Remember that, for example, we are going to be a significant fiber to the home, effort in Spain and in Brazil. That we are going to be basically increasing significantly the number of our base station. We're connected with ultra broadband capacity through the through the backhaul, more than 65%. And this is going to happen in both sides of the Atlantic, TV.
Airport is going to be significant in Spain and, in Brazil and in other countries of Latin America. So it would be an IT as well with probably some effort in the case of Latin America CapEx. Our sales ratio is going to be higher in Latin America than in Europe. But basically, the effort is going to be transversely done technology and in both sides of the Atlantic. So I would say that, it's it's it's not gonna be more biased to one place to the other.
Okay?
Thank you.
Thank you. Here's your next question, please.
Our next question comes from the line of Ybon Liao from BBVA. Please go ahead.
Hi, there. Good morning, everybody. My two questions. The first one is in Spain. What do you need to do to stop mobile line losses in Spain in 2014?
And if you foresee that, you can stabilize that this year. And the second one is in Brazil. I've noticed that there's a slight improvement on revenue trends on the fixed line in Brazil. So I don't know if you could share with us a bit what's going on there, whether it's driven by fiber or not and see what's maybe the outlook for 2014.
Thank you, Ivan. Let me take your first question. And I think it's quite clear that our contract net adds and net portability have improved campaign that I mentioned earlier, which has focused again quite a lot on our TV take up. And despite quite a strong, competition in the market with still high subsidies. So we are very confident that our mobile trading will continue to improve in following quarters.
And the main reasons, let me explain the following. First of all, we have been speaking about Spain being a market about convergence and we have a strong position there. We have completed a very competitive portfolio on mobile only, and we have addressed all customer, customer needs pretty much. As you know, we enhance our portfolio. Our contract portfolio and what what we aim is to give more value for the same price.
So we included the 4 g, TV, and that, I mean, it's on pages in the page in packages. I think that overall, we have seen as low or or less active, January, but very good February.
Fixed line, Brazil, we are happy that the trends that we thought would be in place by now are in place and that is show that is shown in the presentation that we just provided. Looking out, this is a slow moving animal that we now think that we have squared the circles, so to speak, by putting together the deployment, the sales, the provisioning and the customer service that this required, to make broadband, especially fiber, a viable product. Fiber still has the best to show, which means that the improvement you've seen in the quarter is not materially related to, to broadband. I'm sorry. It is related to broadband, but they're not yet to fiber.
So I would say that in terms of fiber, the base is still to come. So we are very positive on the outlook for broadband and specialty fiber going forward.
Thank you.
Thank you, Johan. Next question, please.
Our next question comes from the line of Fabian Lares from JB Capital Markets. Please go ahead.
Hi, good morning. Thank you for taking my questions. So the first one with regards to mobile again, I appreciate the answer to give to Yvonne in regards to, to the improvement in uptake, but I just wanted to clarify whether you foresee that despite the high competitive trend, you believe that as 4G becomes a greater reality with the digital dividend, you will have an opportunity start overtaking rivals as you're still a net portability loser to other players and you're still having a net gain or in lines on a monthly basis, at least with the data that we have, which is true only up to November. But, if you could give some color as to where you think this growth may come from, additional and whether we can more or less begin to think than of 2015 when Spain kicks into a greater recovery, whether you can foresee that revenue trend should be better. And the second question is regard to Brazil.
I know that you do not favor speaking much about things related to M And A, but I was wondering whether you had any additional news flow with regards to the, thing but I see the situation and the ruling by Kave that you have to make a decision between either introducing a new shareholder in Vivo or exit telecom italia? Thanks.
Well, thank you very much. And going back to the mobile, only in Spain, and and additional to what I answer, to Yvonne, let's talk about now for Gee becoming a reality. It is now, for us, a 40% coverage of population as of now, with the 1800 spectrum As soon as we get the 800 and it is a reality, we believe this is just a matter of deploying and adding into our cash a customer base. There's 2 components, one having the spectrum and 2 having the handsets. We've seen by experience in the other markets that we have in Europe, the UK and Germany, that the combination of both spectrum and, 4 g handsets make an important business case overall that we will see in Spain.
So we are very optimistic. We know that we are deploying faster than of our competitors in this country, which is great, but still it's not under the 800 spectrum, which we are expecting as soon as it is released by the authorities. We have, as you know, a target of 50% coverage for 2014. And we are confident to get more 4 gs handsets for our customers, that has been very clearly improving in the UK and, Germany. As you know, and we we probably will plan during the next 4 core next quarters, the ATE experience is very good.
Increases consumption of data and obviously, helps us to improve our ARPU ARPU uplift. So I think overall, it's a positive message to give for the next quarters, not just in Spain, but also for the rest of the markets.
Hello Fabienne. Regarding the question on potential M and A in Brazil, the first thing that we want to say is that in Brazil, we have a very strong position. We continue leading the market, especially in the higher value mobile segments, where we are having spectacular share of net adds month after month. It's a very attractive market. It's also competitive and would require substantial investments going forward.
In this context, you know, that we are firm believers in the benefits of in market consolidation, which can be a win win for operators and citizens alike. And we have demonstrated this belief, quite a few times in the last year, But, for these type of transactions to materialize, it is necessary that lots and lots of stars align themselves And this is definitely difficult and complex. And again, we have the strongest position in Brazil as we stand.
Thank you, Fabienne. Next question please.
Our next question comes from the line Frederick Boulan from Nomura. Please go ahead.
Hey, good morning. Gentlemen, thanks for taking the question. A couple of points. First of all, one on the UK, if you could clarify the impact of the refresh accounting on the on your EBITDA in the fourth quarter. And secondly, more broadly, if you can talk about it a little bit about your free cash flow expectations for 2014, versus what you produce this year, considering your increasing margin investment, increasing CapEx So where do you see group free cash flow going, ex Venezuela and after minority dividends?
To pay a dividend. And I would like to come back on your decision to offer a voluntary script levy. So what's kind of rational for maintaining a dividend a headline dividend at $0.75, if, if a significant portion of that, in the end, we'll end up being paid in shared if you could come back on the rationale a little bit, that would be much appreciated.
Well, Frederick, I think that, you know, all the data that we have provided on the trading activity continues being a very successful proposition to the market and we have continued gaining traction quarter over quarter, reaching, as you know, the 1,100,000 transactions since launch. I think that one of the most positive, effects is that the 56% of contract more commercial activity has been done under Refresh, while in previous quarter was 53% 20% in the 2nd quarter. We have an impact on revenues, as you know, which is positive on operating revenues, which comes from a higher handset revenues. And I think that the when you look at the OIBDA and the impact on OIBDA, as I mentioned last quarter, we cannot disclose that impact because it is commercially sensitive. In any case, just to highlight the acceleration of hardware revenues flows, into the bottom line, as mentioned earlier, and although there are maybe moving parts for the calculation of the impact of OIBDA, quarter by quarter, it becomes more difficult to give a precise figure.
Again, worth mentioning and stressing, that going forward, the effect of refresh will be unwinded along 2014, which we mean that we'll go back to a normalized rate. And I think that I would recommend and remind that we will start comparing, on a like for like basis. And just to remind you, it will be compared to when we started in April 2013.
In regards to the dividend, I want to tell you that we are fully, fully committed to our dividend at And as as I was saying, when when I mentioned it before, the script is in November is voluntary, and I want to underline is voluntary. So So how did I want to take green costs? We'll take green costs. So how did I want to take in shares? We'll take in sales.
And the reason to be voluntary in the script because there are many many shareholders that because of physical reasons, they prefer to take in shares than in cash. So it's a decision to each shareholder. But the decision is voluntary. And, the one that went in gas, we're having gas, and the one that happened in in surge, we're having in in surge.
Thank you very much. Thank
you very much. There was a question about 2014 free cash flow. We do not give, Fredica's guidance of free cash flow, but I can give you some directional indications that you can take in meeting your calculations. Regarding OIBDA, well, this, this can be devised or derived from the guidance that we're giving. And one would have to take into account that, that Chesky is deconsolidated.
Ireland at some point will be also deconsolidated Eplus at some point will be consolidated in our accountants. So those change of perimeter factors need to be included in the estimate CapEx will be intensified, but we have also given some indication in the guidance. The remaining lines to get from operating cash flow to free cash flow would be spectrum. Here, as I said, in the presentation, the big, spectrum outlays are behind us. And, you can estimate something which is lower than this year.
With respect to working capital, we are aiming to something which is in line with the positive impact that we had this year. And with respect to financial expenses, the trend of our debt and the trend of the cost of our debt would imply that there will be a decline, a decline in the upper single digit or low double digits with respect to cash tax. We have concluded, 2013 with 28.8%. You should, think going back to our guidance of 25%, 26%. And there will be less dividends to minorities because we don't have any more, for instance, the Czech Republic minorities.
And this is all the color I can give you with, I guess, should be enough.
Okay. Thank you very much.
Thank you, Frederic. Next question, please.
Our next question comes from the line of Singh Mandeep from Redburn Partners. Please go ahead.
Hi guys, it's Mandeep from Redburn. I had a couple of questions, please. First of all, on your new organizational structure, and the operating model, you've talked about 1,500,000,000 of gross cost savings. Can I ask if there will be any restructuring charges associated with achieving those cost savings? That's the first question.
The second question is really on your deleveraging profile with post closing events. You've said 1,000,000,000 of net debt. And you're guiding to be below 43 for the end of 14. Given that in absolute terms, given FX and Chesky and so on, the absolute EBITDA number for 14 will be lower than 13. Is this the end of the deleveraging for the company and is net debt to EBITDA actually going to be rising from here?
With regard to your first question in terms of, the figure that we have provided of, of synergy. This is a gross figure synergy, and therefore, it is not included in any potential restructuring. A significant part of that, figure is about the network, both OpEx and CapEx, 55% to 65%. IT is around 10% to 15% and, and the rest is, about support and, and commercial. We don't have, right now details of what be the impact on that in terms of restructuring costs.
We are working on a process by process basis. We'll give you more color, during the quarters to come But let me stress that this is a gross, a gross figure rather than an end because we think that you should include into the calculation, the run rate of that at the end of year 3. But again, we will be providing more color to a specific approach around the next quarter, so you can see the different projects in which we are working. Let me stress the fact that a significant part of that number is going to come from more efficiency in doing more things together in terms of common platforms, common purchasing of technology and a more coordinated deployment of technology. And those do not include or do not imply workforce reduction.
Thank you. With respect to the leverage and deleverage profile, are setting the target of 1,000,000,000 net debt by the end of 2014. And we remain fully committed to our target of leverage of 2.35, which is a midterm target that we are maintaining across the last years. And our rating levels. As I was saying before, we plan to achieve this via organic free cash flow generation, and I thought giving color on how to look at it in a previous response.
And then you can also factor what could be the impact of current already announced non organic situation. So for instance, if you look at the figure of, at the end of 1,000,000,000, the closing of Czech Republic and Argentina, Helsinki was already cast in January, could reduce debt by 1,000,000. The moment when we need to pay for free cash, we'll increase that in 1,000,000,000, but we have said that we will issue a mandatory convertible that for modeling purposes, you can, well, we already said when we announced the deal, but this could be around 1,000,000,001,000,000,000. So all in all, closing the current transactions, including the acquisition of Iplaz does not increase, rather slightly decrease as our debt level. And since all the OIBDA from a plus would come along the ratio would improve.
On the other hand, we have had or we will account for the Venezuela devaluation that I said before will increase our net debt in 1,000,000,000. And then we will continue managing our folio. And you can make some simulations on the partial voluntary sweep dividend trench of $0.35 in due to be paid in November, and you can get to how we construct our targets.
Thank you very much, Angel.
Thank you. Next question please.
Our next question comes from the line of Jerry Dallas from Jefferies. Please go ahead.
Yes. Good morning. Thank you for taking my questions. Two questions, please. Firstly, on the pace of cost reduction in Spain going into 2014, I suppose the 2 big drivers of cost reduction last year were commercial and personnel.
Looks as though the pace of commercial cost reduction sort of 21% in the 4th quarter, down from 31% the full year. Also mindful that I think the collective wage agreement ran to the end of 2013. So I wonder whether you could give any guidance on the sort of the direction of commercial costs in Spain in 2014 and where we stand in respect of potential wage inflation and perhaps also pension payments going into 2014? And then the second question, please, just on Brazil. I suppose on yesterday's teff Brazil core that highlighted a rather weak macro backdrop.
And I noticed that mobile service revenues declined to sort of 2% growth from 7% in recent quarters. Was that sort of Q4 trend rather odd? And then allied to that, the lighter commercial costs, which get the margin up in Brazil last quarter, should we see that as sustainable through the rest of the year? Thank you.
Let me go to the first question. And I think that you know that we already approving track record of delivering more than $2,400,000,000 of OpEx and CapEx reductions since 2011. And we have had, as you mentioned earlier, significant cost savings in 2013 from various areas included commercial savings redundancy plan and a part of the simplification and in sourcing activities. So, with that, already in our in our journey. Let me tell you what we expect to going forward.
I think that the we will continue managing our cost base in a very efficient way and we have room for maneuver still there. We obviously will have some fluctuation quarter over quarter depending on market dynamics, and that's related to your question on the commercial But looking at what happened in the last quarter of the 2013, we applied the increase in commercial costs just very tactically and driven by the market situations. When we talk about pure efficiency in 2014, 14, it is basically based on 3 pillars. 1st of all, on the call center simplification and on the width done quite a lot during the 2 years. We have been working to reduce claims.
We have put time down to less than half a 1,000,000 from 2,000,000 claims in 2012. And you know that, This reduction of activity has allowed us also to insure cold call centers. At the moment, we have 70% traffic already insured and we brought them back to Spain almost in the 85% of the positions already transferred to the regions. Without cost increase and improving the quality, which was one of our aims. This year, our objective is to simplify and also optimize its structure.
Secondly, we are looking for optimization of the distribution model with the aim to increase profitability and exclusive stores and improved customer experience. We are reducing more than 20% our points of sales, from 21100 to 13 to 1600 and fostering the online channel, which is, as you know, happened all across Europe. In Spain, specifically moving from a 7% online activity in 2013 to more than 20% in 2014. We will have further savings from insourcing activities, and we will continue working over our 1300,000,000 of outsourced cost. To achieve similar savings as we obtained, in 2013.
Specifically, when you asked me a pension plan. And and on the wages, I I don't think I can answer that question, but on the pension plan, we still have part of what we initiated last year. I think I can give you roughly. It's gonna be a 100 around 1 50,000,000 between still the the area, the the the the program that we had started a few years ago and also the pension effects. So hope hopefully, I I answered your question.
In terms of margins and commercial activity in Brazil, we are happy the way things are developing. It's not easy. And the headwinds from the macro side are certainly not helping. But as I think Angel mentioned in a previous question, we are probably taking the better part of this rise in the market. We have more clients.
We have better quality clients as the contracted way it is increasing. We've been able to capture higher ARPU and higher contract and data revenues than we had. This of course comes at a price and depending on what the competitors do, we will sometimes have to step on the accelerator. But we think that we are standing in a sustainable position And we do expect that this lead is probably going to be held if not increased as the year progresses.
You, Gary. Next question, please.
Our next question comes from the line of Justin Funnel from Credit Suisse. Please go ahead.
Yeah. Thank you. Hope you can hear me. Just following up on that last question, the macro effects in in Latin America. I'm just wondering if you could detail a little bit more what you're seeing.
Obviously, Brazil, but also some of the other markets, you know, what's actually going on on the ground in in Argentina, you know, how's it affecting your business? And then some of these smaller markets you know, you're seeing a a macro headwind across the region, or is it actually just just a couple of markets? Secondly, the the progress, in Mexico on the regulatory change, you know, it's good to see the turnaround in in Colombia. You know, how close are we now to seeing the same the same thing come through, in Mexico. And then finally on fiber in Spain, do you think most of these extra homes passed you're going to be doing on your own?
Or do you think JazzTel Orange, Vodafone will be part of, part of this, these extra fiber homes as well? Will it be a co build or would it be larger yourself just doing Thank you.
Justin, in terms of the FX and the macro environment, as we see it from the ground, let me just make general statements, without talking about Venezuela and Argentina, which are special situations that have to be analyzed on a case by case basis, I'd say one thing. That the weakness of the Latin American currencies has a lot to do with capital flows and very little to do with competitiveness and the product and services markets. So it's impossible to say when things will reverse, but we do expect some kind of proliferation to happen in the not troubled countries. And when the capital markets settle, as they eventually always do, we think the true value will out and that the products and services markets will take gain the lead. This is to say that headwinds are likely going to be with us, but volatility is unlikely to come down the next couple of quarters as we have events both from the political and from the economic scene.
But we do expect that this that volatility, the overall trend will continue being supportive.
Going into the fiber questionings pain, let me update, that at the moment, we have 3,500,000 households passed, which means 5,000,000 premises. And our commitment is to have 7,100,000 passed homes in 2014. Which mean close to, 10,000,000. This includes our commitment and agreement with, our partner Justel, and doesn't include any extension at the moment. Thank you.
Thank you, Justin.
I think we have time for just one final question.
Our last question comes from the line of Simon Doff from NNG. Please go ahead.
And one on Spanish MVNOs. On on LatAm debt, can you quantify the amount of debt issued out of Latin American on a nonrecourse basis at the moment and and how that compares to your previous 2 times operating free cash flow policy there. Can you just talk a little bit about the hedging policy around that that debt? And on the Spanish MVNO agreements, can you clarify whether Ono has 4G LTE access at the moment and whether you would or could consider refusing that access if they don't have
Hi, Simon. Regarding the first question, our benchmark in Latin America is to have 2 times free cash flow per interest hedging in the countries where one can hedge. In Venezuela, Argentina, we cannot hedge in those positions. And in the rest of countries, at this point, we have, maybe excess debt in Mexico and Colombia. With respect to this benchmark, And in Brazil, we are below it, with a basket approach to hedging the Brazilian real exposure, but we maintain the same benchmark across the region that we had and that we are committing to.
Okay. And the absolute amount is?
It's a 1,000,000,000
equivalent.
Well, thank you for your question. And I think that there are some MVNOs looking for 4 g access. In our case, we work very closely with our partners and the specific case of mono, I think we cannot disclose the information as it is a sensitive, say, commercial information.
Okay. This is Cecelierta. I want to please make my final comment. You're still in line with the first comment I made. We are totally convinced in Telefonica that the difficult world is there.
And we at the totally convinced is that the reason we made the new organization because we want to be leader in the difficult world and that's the reason we create the Chief Commercial Officer or whole business is going to be mentalized, to drive the revenues and the liquidity, but I want to make a couple of comments, you know. Which I think are extremely important. You know? Every country in the world, every country in the world wants to make the digital world a fact because it's needed not only for the economy, but for everybody. But to make it difficult, this is our reality, you need to make it possible investing.
And I'm going to give you some figures. In 2013, in Europe, we, the telcos We invested €60,000,000,000. 60,000,000,000. We employ 1,500,000,000 people. We pay 6,000,000,000 in Spectrum, and we pay a lot of taxes.
And our frameless colleagues, the oddities, invested in Europe, 30,000,000 dollars, $30,000,000 versus $60,000,000,000. They don't employ anybody. They don't pay any taxes and they don't pay any expected. And this and this, then the same numbers for Europe are in Latin America. So it is clear that the world has changed.
It is clear that the regulation we have in many parts of the world is related to an an an agent, which Bush was the important thing, and data was irrelevant. We all know that data is now the relevant factor. What it means in wins that clearly a fair living playing field in which only telcos are regulated and the others are not regulated is going to finish very, very, very, very soon. This is going to make a tremendous difference in the revenues in the value chain, and they will be becoming in the near future. And when I say that Europe is going to make a single digital market, and this is going to be a fair level of playing field.
It's because I see it's going to happen very soon because everybody sees that and that will happen in Latin America and the rest of the world. And we in Telefonica, we do the decision to be a very relevant player in this new digital ecosystem in which the rules are going to be be regulated on the same way, and this will make possible this fantastic difficult. If this is not changed, there will be no digital well in the way. Well, thank you very much for attending our conference call, and I hope to show in the near future. Thanks a lot.
Telefonica's January December 2013 results conference call is over. You may now disconnect.