Ladies and gentlemen, thank you for standing by, and welcome to Tele January March 2013 Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question If you should require any assistance during this call, press press star 0. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr.
Pablo Egiron, Head of Investor Relations. Please go ahead, sir.
Thank you. Good afternoon, ladies and gentlemen, and welcome to Telefonica's conference call to this co to discuss January March 2013 results. And Pablo Giron, Head of Investor Relations. Before proceeding, let me mention that this document contains financial information has been prepared under International Financial Reporting Standards. This financial information is an audited.
This presentation may contain announcements that constitute forward looking statements, which are not warranties of future performance and involve risks and uncertainties. And that certain results may differ materially from those in the forward looking statements 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, encourage you to review our publicly available disclosure documents filled with the relevant securities market If you don't have a copy of the relevant press release and the slides, please contact Telefonica Investor Relations team in Madrid by dialing the following telephone number 3 4914-8287, w. Now let me turn the call to our chief Financial And Corporate Development Officer, Mr. Angel Miller, who will be leading this call.
Thank you, Pablo. Good afternoon, ladies and gentlemen, and welcome to Telefonica's first quarter 2013 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. Let me start with the highlights enable growth. First, results up to March reflected business stabilization with similar organic OIBDA figures year on year, for the 2nd consecutive quarter, thanks to margin progression.
And with operating cash flow maintaining the organic growth trend, initiated last quarter. 2nd, we continue progressing in our transformation which is already delivering tangible results. As an example, profitability in Spain stood at 47% and movie star Fusion continues having strong traction in the market. 3rd, we keep on diversifying the business increasing exposure to Latin America, which accounts for over 51% of total revenues, while Brazil has already become the main market by revenues 4th, we continue taking decisive actions to reduce the offsetting nonrecurrent factors and seasonality, which impacted our net debt as of March. And finally, we are posting strong earnings per share growth of 22.2 percent.
Please turn now to slide number 4 for a quick by negative Forex effect, mainly due to Venezuela devaluation. By changes in the consolidation perimeter, and made a reduction in the value of Telpe investment that we worked in the first quarter of 2012. Revenues reached over 14 point 1,000,000,000 in the first quarter, down 1.6% in organic terms, while OIBDA was close to 1,000,000,000 almost flat organically year on year. Operating cash flow exceeded the billion mark, growing 9 0.6% organically. In summary, let me highlight that the Q1 results are fully aligned with our internal expectations and therefore, we reiterate our full year guidance.
In slide number 5, I would like to highlight the outstanding results of our focus on high quality customer base. Smartphone penetration has increased by 6 percentage points year on year to 20%. Driving contract based growth after adding more than 1,400,000 customers in the first quarter. As such, contract mix further improved by 2 percentage points year on year to reach 33%. In the fixed business, Ultra Broadband penetration has expanded to 27% of fixed accesses with connection rate increasing to 10%.
There is demand for higher speeds, and we are progressively adapting our networks to capture it. In Europe, we are launching innovative and simple propositions, offering the best value for money and with a progressive elimination of subsidies as a common denominator. This will allow us to capture the data opportunity with a sustainable model. In Latin America, we are clear market leaders in the high value segments, and we are in the best position to capture the data opportunity that lies ahead utilization, excluding calendar effects, was driven by 2 main levers: Latin America and mobile data, as shown in slide 6. I want to remark that Latin America continues its progression as the key engine to revenue growth and almost offsetting lower sales from our European businesses.
We continue to evolve our revenue mix, increasing our exposure to the fastest growth businesses as shown by the increasing weight of data revenues of mobile service revenues to 37% compared to 34% 1 year ago. Non SMS revenues are the main growth driver and already represent 62% of data revenues. 7 percentage points ahead of last year. Please turn to slide 7 to review our achievements with regards to profitability. This is the 3rd consecutive quarter of lower costs.
The successful delivery of cost control initiatives, leverage on scale and simplification are the main levers of this performance. Some costs control more than offset revenue pressure and drive OIBDA margin improvement of 50 basis points to 32.3%. Commercial cost efficiencies delivered by your new commercial model and further efficiencies achieved due to simplification and resources optimization led this performance. This is especially remarkable in a context of increasing smartphone penetration and growing network costs related to the data centric businesses. Lastly, And as I will explain in the next slide, I would like to stress our initiatives to capture the value of our scale.
Global Resources is further optimizing scale benefits, delivering savings and helping to maximize business profitability. As such, in Q1, the unit has been focused in certain priority projects. To consistently progress in transformation aiming to improve global operating and commercial processes. Examples. In networks and operations, step forward in supporting operations has been achieved, and we will ensure smooth implementation of network sharing agreements in Europe and extend them to LatAm.
A good example of this is the MOU with America mobile in Brazil. IT was key in the recent successful tariffs, refreshment in U. K. And Czech Republic We have also launched a new model for application maintenance in LatAm, and we have further advanced in executing infrastructure consolidation. In devices, we have simplified our catalog releasing references by 25% versus 2012, considerating 80 percent of value in 30 references.
Moving to slide number 9, let me highlight the progress made by Telefonica Digital to continue transforming Telefonica into a digital telco. Firstly, strong momentum continues around Firefox OS with a large industry support. The first handsets will be on sale in Spain, Colombia, and Venezuela in the coming months. Meanwhile, compelling content partnerships are already in place. Secondly, M2M capabilities were bolstered with introduction of a new platform for Managing M to M communications, while new innovative services were launched and new partnerships strengthened our position.
Telefonica Digital is also driving innovation in over the top communications with to go a service that will change the way people use their phone by allowing them to use a single mobile number across any of internet connected devices. Seamlessly. On top of that, Telefonica joined Sprint to create 1 of the largest mobile advertising alliances in the world and will become the 1st telco Latin America to deliver end to end services in the eHealth market. Please turn now to slide number 10 to review our operations in Latin America. In this quarter, commercial activity remains strong in the most valuable segments.
The profile of our superior customer base places us in an unparalleled position to capture the mobile data opportunity in the region. This is reflected in the strong growth of contract accesses with accelerated smartphone adoption. As a result, revenues grew strongly by almost 7 percent year on year in organic terms, doubling increases its contribution to total revenues. This reflects the quality and sustainability of our growth model. Let me also remark that despite the higher commercial activity in high value clients and the accelerated smartphone adoption, OIBTA growth continued to outpace revenue growth, resulting in a slight margin expansion as our efficiency efforts are delivering tangible results.
The next slide gives our view on the Brazilian business. We continued widening our mobile leadership in the first quarter. We base our market strength on the competitive advantage provided by our differential, freeze infrastructure, and our superior service quality. As a result, we capture 42% of market net adds in the contact segment in the first quarter, with smartphones growing strongly. Our contract customer base grew by 17% year on year, with smartphones rocketing by 88%.
Meanwhile, we kept strengthening our position with new innovative multi device data plans launched in April. In the fixed business, we remain committed to our action plan aimed to improve fixed quality, mainly enhancing the mix of broadband speeds, while increasing the uptake of Vivo Fiber. Positive commercial results translated into financial metrics as shown in slide number 12. Revenues accelerated this quarter on the back of the outstanding performance in mobile revenues. Growing by double digit year on year and bolstering top line growth as they account for 2 thirds of total revenues in Brazil.
Let me also highlight that to our strategy based on sustainable growth model centered on quality. Similarly, profitability continued to improve year on year, mainly driven by synergies derived from our businesses integration, along with ongoing efficiency efforts to bring further margin sustainability. And let me also highlight that once again, in this quarter, we let OIBDA market share, and we keep widening that leadership. Now please turn to slide number 13 to review the results of other businesses in LatAm. In Peru, very strong commercial momentum remained flowing into top line acceleration while maintaining stable EBITDA margin year on year.
In Argentina, revenue growth surpassed the 20% mark year on year, while historical record in net adds for the 1st quarter affected profitability but secured future growth. Meanwhile, Chile remains as one of the most competitive markets in the region with revenues impacted by market dynamics and pricing pressure. We reshaped our commercial offer, mainly to take advantage of a low penetration mobile data market. And in the meantime, we continue to work on the costs side gaining efficiency to offset revenue decline. Turning to our Colombian business in slide number 14.
Despite a tough competitive environment, we continue to boast handsy growth in contract customers, while enhancing our position in the fixed business. With the highest net additions in the last 4 years, in both fixed, traditional and fixed broadband accesses. On top of that, benefits stemming from the integration of our fixed and mobile businesses continued to flow to the bottom line. In Mexico, the new regulatory framework should improve the competitive landscape creating the conditions to exploit all with accesses growing after 4 quarters declining. And to end with our LatAm assets in Venezuela once again Once again, this quarter, operational performance remained impressive across the board.
Let me now and increased business efficiency, I mean, intensified competition and economic headwinds. We have been revisiting our commercial approach to reinforce our competitive position, launching an Empower portfolio tailored to local market conditions, but sharing a common philosophy of simplicity transparency, data centricity, and moving away from subsidies. Incremental savings derived from transformation initiatives led for a second consecutive quarter to an OIBDA margin improvement year on year of 210 basis points despite ongoing revenue pressure. Moving to Spain on page 16. I would like to highlight that our conversion offer, Movistar Fusion, continue to be the key lever behind the company's commercial activity in the quarter, sustaining strong market momentum.
MobiStar Fusion surpassed 1,700,000 customers as of March. It is especially remarkable that 47% of gross adds were from new customers, either new fixed or new mobile services, 17 percentage points more than in Q4. New revenues from these customers, along with upselling and increased additional mobile lines, allowed Movistar Fusion to revenue breakeven from January. Movistar Fusion is consolidating solid fixed broadband and fiber net adds. As well as reducing fixed telephony losses.
And on top of that, improving customer satisfaction and churn. Convergent offers in market and market shrinkage affected mobile quarterly net adds. In particular, MVNO's integrated offers, resulted in higher contract profitability losses. During April, we introduced new commercial propositions to better compete in the marketplace, completing our convergent portfolio in the entry level with Movistar Fusion Thero, and addressing different consumption levels for mobile only customers with Movistar 0 and Movistar Total. Turning to slide number 17, we review Telefonica Espana Financials.
Total revenues stabilized their year on year decline on a sequential basis ex handset sales, which were affected by the new commercial strategy against a difficult macroeconomic backdrop. Regarding profitability, I would like to stress once again the FELSEAIBDA margin of 47%, delivered by Telefonica, improving 5.1 percentage points in organic terms year on year. This reflects the ongoing savings on multiple initiatives of cost cutting across the board, like a rational approach to subsidies, redundancy program, simplification, lower churn, and lower customer care costs. In the coming quarters, results will reflect the benefits of the new social agreement in sourcing of activities in different areas and deeper transformation and simplification, which should lead to additional cost savings. On top of that, and despite increased coverage of fiber up to 2,300,000 households as of March, CapEx showed a 30% year on year reduction, flowing directly to operating cash flow generation which remains stable year on year in organic terms.
Turning to slide 18, in UK, we have maintained commercial momentum in a highly competitive market. Contract mobile solid. As the company continued capturing share of smartphones and the air force of retention led to a record low contract churn. As such, we have improved our customer mix with the contract segment representing already 53% of the mobile base, up three percentage points year on year. I would like to mention on the recent launch of an innovative, simple and transparent proposition, O2 refresh.
This tariff scheme offers the best value for money proposition and continues to be data centric while generating commercial efficiencies as it eliminates handset subsidy. Moment service revenue year on year trend, excluding regulation, improved for the 2nd consecutive quarter. Reflecting the better trading in 2012. With regards to revenues, I would also like to highlight the RPI price increase and the disposal of our fixed business that will start impacting from the second quarter. Top line performance and further efficiencies around network sharing focus on online customer care and the benefits of scale led to a margin expansion of 1.6 percentage points leading to OIBDA year on year growth for the first time since the third quarter of 2011.
In Germany, on slide 19, the first quarter has been impacted by tactical competitive moves on retention. This commercial environment led to lower trading volumes with strong focus on the existing customer base and upselling activities. Contract churn improved by 0.2 percentage points leading to a contract mix of 53%. To further monetize the data opportunity, the company has launched a new O2 Blue portfolio and is seeing encouraging adoption trends. I would also like to highlight the ongoing expansion of the LTE network, with the high speed metropolitan areas of Munich and Berlin already operational since the end of March.
Regarding the MOU signed with Deutsche Telekom, we see the fixed business as key levered to develop our convergence strategy, and this will allow more effective high speed bundle offers. In terms of financials, focus on smartphones led to strong non SMS revenue growth. Mobile service revenues, excluding MTR, grew 0.5%, accelerating their growth trends sequentially due to ARPU pressure as we continue our process of renewing the contracts of our customer base and as we have been impacted by lower SMS volumes. Lastly, OIBDA margin increased 0.5 percentage points to 23.9 percent, allowing OIBDA to remain stable year on year. Let me now move to Telefonica remains on track on its deleveraging process.
Net debt, including post closing events, decreases by 1,000,000,000 compared to December 2012 net debt adjusted by the devaluation in Venezuela. Positive free cash flow pre spectrum has contributed with 1,000,000, nearly 3 fold the Q1 2012 figure. This has been complemented with several measures, such as the sale of assets and stakes for 1,200,000,000, including the recently announced sale of a 40% stake in Central America, the divestment of U. K. Retail fixed business and is passat and the placement of treasury shares.
In the opposite direction, we have suffered exceptional items, such as the Venezuelan devaluation, the spectrum acquired in the UK, and seasonal ones like the traditional seasonality of working capital in the first quarter, which should reverse in the coming quarters. So We reiterate our target to reduce our net debt below 1,000,000,000 in 2013. On slide 21, I would like to highlight again that financing conditions are normalized for us. Several long term financing operations have allowed us to raise 1,000,000,000 year to date and to increase our average dead life to 6.75 years. This successful financing has contributed to an additional improvement in our liquidity position, reaching €21,400,000,000 as of March, 400,000,000 above the level of December 2012.
We have further strengthened our liquidity position by repurchasing and exchanging short dated bonds by an amount of 800,000,000 So we remain comfortably ahead of our target of 24 months of covered maturities. It is also worth mentioning the decreasing effective interest cost during the last six months, almost by nearly 30 basis points to 5.22 percent, close to the bottom of the range of our guidance, and despite the strong liquidity position. To conclude, let me highlight that in the first quarter, we continued transforming our model. We continued keeping strong commercial push, focusing in quality and innovation and avoiding subsidies, which will result in a sustainable growth model. We continue to stabilize in the business as reflected in the stable OIBDA and growing operating cash flow year on year.
And lastly, we continued with our debt reduction program after taking decisive actions to increase financial flexibility. Thank you very much, and now we are ready to take your questions.
To cancel your question, please press 2. We will kindly ask you to ask a maximum of two questions per participant. And if possible, we recommend you not to use your cell or hands free phone. There will be a short silence while questions are being registered.
Okay.
First question comes from the
Yes, thank you for the question. I wanted to ask a little bit about Spain where it looks like the general KPIs weakened fairly materially sequentially from the fourth quarter level. Obviously with slightly slower uptake of Fusion, you know, with significant increase in line losses and obviously the mobile contract adds Where do you see these trends going over the next couple of quarters? And is there a kind of tipping point in your mind where you have to think again about the need for incremental price cuts. And then the second point following that is really around the potential for ongoing cost saving in Spain, which you've highlighted, is there any way you can quantify the kind of sequential ongoing benefits through the year.
We can see to the cost base in Spain. Now.
Thank you very much, Tim. I think that your question, your first question is to send again the message around what we're trying to achieve in Spain and what we believe is a very good evolution of our transformation strategy in first quarter 2013. If we take first that message, the consolidation of this transformation strategy, what we want to highlight is that, first of all, Fusion on the base of the our sustained commercial momentum is very clear at the moment. We have continued having a very good traction of Fusion, which as you know, is more than 1,700,000. Customer We have improved our customer mix with 47% of gross adds that are new customers compared to the 30 end that we saw in the last quarter of 2012.
We have improved our customer satisfaction, which has logically impacted on lower churn rate, consequently. And importantly, as stated in our previous quarters, we have seen how we see on has continued helping us to outperform in the fixed business. For example, we have had a very solid fixed broad net adds with very much focus on value services and positive churn evolution. As you know, on the fuel fees brought by net adds, we have had $52,000 in the first quarter of 2013 with improvement in the churn rate, but importantly, the, the effect that we wanted to highlight in the last quarter is that the take in fiber, which is even higher value is higher than the pure fixed broadband with 60,000 in the first quarter. Again, and I know that you've seen this telephony net loss is below historical average and we are accelerating seeing acceleration of mobile broadband adoption What it is, very important to highlight, with, compared to the last quarter and to see evolution positive evolution on those KPIs that you think are below or decelerating is that we admit that in the mobile business, we are seeing some impact on the pure impact of those mobile net what we we have to address very clearly, what was the the reasons of that mobile impact in our business, and we have done so.
So when you look at what's happened, this is definitely a shrinkage of the market. And we have also seen that they are part of our loss to of those net adds were to MVNOs, and those were mainly happening at the low end at the very specific segment of the low end, both on the convergence and the pure mobile. So we addressed that specifically during the first quarter, and we adjust our parties in, in that specific segment. 1, within the convergence segment, just putting some, what we call, Fusion, which was introduced at the end of April. So we have a very little results yet.
And the others which were very much focused addressing the mobile only business, which were the movie star 0 and the movie star total, which were introduced at the beginning of the of the of the month of April. So we believe, that respect and we have managed to address specifically, the low end of the mobile business, which was affected so far. If I may, as as you asked me specifically for, going forward, what what we see, I can give you some of the of the results we are seeing in April, which consolidated trends we have seen in terms of revenue stabilization, which were very important as you remember at the beginning of the fourth quarter indefinitely during the first quarter. We have seen that April confirms revenue decline stabilization and we this trend to continue despite the ongoing challenging macro competitive backdrop, which is a reality. In terms of our EBITDA margin, I want to confirm that we believe it is sustainable despite the top line pressure and lower savings in commercial costs, but we are continuing with the simplification as pointed out in the we expect the commercial trading improvement in mobile and maintaining those focus and momentum in fixed business forested by Fusillon, the Fusillon effect.
And I think I could continue talking, but probably we should go into the next question.
That would be a great answer. Thank you.
Thank you, Tim. Next question please.
Our next question comes from the line of Georgios of Citi.
I'm
up to the first one is around the refresh tariff in the UK. Is it possible to give us an indication of the level of sub this you have today. And therefore, what could be a reasonable margin uplift on the back of these offers? And if you also give us an indication if you plan to do any factoring agreements. So we may even see a benefit on the net debt numbers.
As we progress through the year. And my second question is a follow-up on Tim's question earlier around Fusion. Right now, we've seen that most of your competitors replicated the offer. So I was wondering if you could, give us an idea of how you plan to use TV in a few are passed to differentiate. Right now, there's no discount for adding TV into the bundle.
Is there any specific train that will prevent you from putting a discount on TV? And is there any issues around programming costs that may be perhaps the barrier to that.
Thank you. That is, you know, that we launched these new tariffs on April 16th. And, as you know, they're quite bold and innovative proposition for a commercial offer in in the UK. Just to clarify on the refresh, tariff and in the refresh offer, customer can have, first of all, the latest phone whenever they want, customer must can also choose their device and the tariffs from the O2 refresh range that it is quite clearly updated in the offer. Also, the customers can make a decision about how much they want to pay up front and how much to spread over time, available over a 24 month contract.
The the truth is that it's a very early stage to give you a results, but what we believe the impact, so far is a positive one. We've seen people entering in understanding the tariffs In fact, I can tell you that probably out of 10, 9 are taken on the refresh tariffs. And although it's early days, we are seeing the positive the positive momentum. With regards to the factoring, yes, that's an absolute and probably going into the second question on the TV. When when we when you look at on and what we were trying to achieve, it is clear that we have managed to, convince the market with our converge first.
And now we look into, the the totality of the clients in a different way. We have to admit the Imaghenio or the what we call the pay TV within Fusion on the net adds front is under pressure and we believe there are a couple of analysis or reasons that we can take into account. No doubt that the macroeconomic environment is challenging and somehow people can look at the TV or pay TV as a luxury good, although we're trying to adjust that in order to make sure that we get closer to our clients and we adjust the The important factor is that ARPU has increased by 19% year over year due to the price increase that we had to implement in October 2012. But importantly, we analyzed as we promised in the 4th quarter very specifically, how to adapt to market conditions, the TV offering. So in April, exactly April 15th, Telefonica launched the promotional offer, which in Mahdenio can be subscribed at €10 up to September.
We've seen the right traction. We can confirm this and we are also expecting an improvement in the Macheno performance in the following quarters based on this attractive promotion that is already being well taken by our customers. Also, something that I stated in the last quarter of 2012, it was not just a matter of price, but also a matter of just in, to our platform, to a better look and feel, to a better technological offering, and that we're already working on that. And I think we're quite ready to announce soon. And importantly, as well as I mentioned in the last quarter, we have to improve our content, which we will be working on that.
The TV is something that is important to us, for the whole frame and very much on Spain as well. So we will continue working on it.
Our next question comes from the line of Dipon Lial of BBVA. Please go ahead with your questions.
Hello. Good afternoon, everybody. My two questions. The first one is in Spain, specifically on fiber. Are you satisfied with the 16% uptake?
How do you see in the fiber product? Is it, how we should look at the market going forward with, you know, 15%, 20% uptake in the product. Or eventually, you feel you have to do something this year in order more aggressively on that. And if it's the case, what you need to do and where you're going to do it. That's the first one.
The second one is on Mexico. I don't know how we should think about operations in Mexico going forward. Should that subscribers have, you know, performed a bit better in the fourth quarter, but it's expensive much lower ARPU. So, I don't know if you could share with us, if you can leave there with a mobile only business or eventually how the strategy changes after the perspective of a new regulation there.
Thank you, Von. I think if we offer to the fiber performance, we're very happy with the fiber performance, specifically with the continued commercial traction of the fiber net adds quarter after quarter. So just year over year, as you notice, a 23% increase, into the 1st quarter, And when you look at each of the variables that we are looking at, as I mentioned earlier, this quarter, we have had a positive net adds of 60,000. We have added a new promotional tariff at levels of for 12 months in order to foster even more the fiber adoption and this was launched as well on April 15th. I believe that it is important to highlight what Fusion, the important shape that Fusion is making into the take of fiber overall.
Fusion is, as we pretty much analyze from the very, very early stages, is fostering and improving the business into the fixed business with positive impact on the fixed broadband net adds, but even at a greater pace, the take on a fiber. We see the 16% take as a very positive one. But obviously, we will continue analyzing during the rest of the year and the quarters to come if they're sending it to foster even more the fiber, adoption. We believe it is important to see regulation being stable and being regulation forces and helps us to continue investing as you know in fiber. But so far, we maintain a flexible investment approach in the in years with the goal to reach as I stated last quarter, 8,000,000 households by the end of 2015.
Observations of Mexico, 1st on regulation and the change of law. 1st, it has gone through the all the Congress and the Senate, but the important things are still unknown those important things are, how are the bylaws or the lesser level laws going to be written, not because we expect anything different, of course, from what it says there, but because they need to agree to the minutiae of the detail is going to be very significant to achieve the purposes of the reform, which basically should be favorable to the non incumbents in Mexico. So we are going to have to wait for the better part of the remainder of the year for that to actually transpire. We do think, however, that this is going to be a positive development, both for the Mexican market and for our operations in Mexico. Addressing the quarterly numbers, as you're quite right, in pointing out that the lower ARPU numbers are a bit wearing.
I'm less worried than the numbers a show for 2 reasons. The strategy is working and it is working because it is, basically getting what we intended which is get stability in the newcomers, in the net adds to the base. The hit rate there is almost on target with our expectations. But it is having a negative effect on the existing or prior customer base, which is taking advantage of the more attractive features and the more attractive tariffs and therefore is trading down. And that's where the ARPU decline is coming from.
So do we think this is going to lapse throughout the year and that as the strategy unfolds, it will show itself that it has taken us away from a pure price war, which is alive and kicking very strongly in Mexico. You may have noticed that some of our competitors, especially the big incumbent, sacrificed and very severe part of their profitability just to counter that amount. So all in all, we think we're on the right track. It's going to take some time for it to show that with this indeed the case, and I urge you to look at the combination of the new addictions to the base and the old degrading customers that are taking advantage of the new tariffs.
Thank you, everyone. Next question please.
Our next question comes from the line of Frederic Poland from Nomura.
If we could go back to Spain, please couple of questions. First of all, at the time of the full year numbers, you had a message of an improvement in the business later in the year. So can you comment here on if you expect top line to start to get better at one point, specifically you know, what should we expect in terms of output dilution from migration to Total and 0, which are probably 50% cheaper than the previous price points. If you could clarify the exact impact of the loyalty program, we had asset sales decline doubling over, over Q4 'twelve. So how is that helping the top line?
And third point, can you explain the phasing of the EBITDA versus, what we saw in Q1 with much higher starting points in the margin, especially in the second half of last year at 40
Thank you very much. I think that if I may start with Let me go first to the, the question around the back book or even the ARPU deletion much better. Let me just make sure that the I address it was ARPU. It was loyalty. It was EBITDA.
Just to make sure.
Yeah, perfect.
Okay. Well, I would say that in terms of the revenue, the environment continues been tough. So no one denies that. But I would say that despite that revenue pressure, we see better evolution in market share and decisioning, we believe those are very much focused on very specific segments. And we believe that women from from global women are from the past.
When we look at the margins specifically, we cannot, or we believe that the improvement will be gradual and inter annual as we improve as well our commercial cost and non commercial costs. But to highlight that the simplification message measures that we are taking, and I can expand a lot on that the new negotiations with the unions in terms of personal situation. And very importantly, the insourcing capabilities that we are incorporating into the business that permit us to maintain a margin, confirm the sustainability of those margins. And that despite the current tough situation on revenues. I would like to, to go a bit on what it means simplification and what it means in sourcing in in in our operation.
I would to highlight that this is the number one priority for our operation in Spain and is done with discipline and day to day care. I think that we have stated in the past the level of simplification in our operation in Spain, but I would like to give you some details, for example, with regards to the portfolio. In terms of references, we have gone down by more than 40,000 references, which have been eliminated from our catalog. That is more than 60%, and we continue to do so. In terms of simplification of systems, more than 800 terabytes of information has been deleted from our system, and we continue to 100 service applications have been switched off just in 2012 and there are more to come.
And there's been clear switch off of obsolete networks. There are many other efficiency measures that are impacting positively our operation. And this is not 1 quarter or 2 quarters. As I mentioned to you, we look at this on a daily basis. And Luis Miguel and team take this a part of the daily activity.
So that is investing in quality of customer service and getting more rational commercial expense even in the advertising of our campaigns, we have reduced them substantially to just 5 during 2012. If USB, this is sustainable, I can tell you and I can confirm you that we have still quite a lot of room to continue doing this and more. And the is a matter of continuing this discipline and this way of working. When we speak about other things that we're doing that are quite innovative As you know, Telefonica Spain implemented at the end of 2012 what we call insourcing. Insourcing is innovative and is quite evolved movement in a country like the one we have today with staff, economic conditions in which you have to be creative in order to produce, not employment, but also being able to get more productivity in your operations.
What we call insertion, it is a matter of analyzing what were our outsourcing costs and our estimated OpEx related to that outsource. Just to get an idea, we have, targeted that we have analyzed 1 around 1,000,000,000 or more of OpEx, which is around 1,000,000,000 of OpEx, which is around 60% of our total costs and also CapEx of around $350,000,000. So $1,300,000,000 targeted in order to improve those costs and to get more in source than the outsourcing, critical in our operation. We have targeted and we have already included 100 activities that have been an in source in several areas, like commercial, technical, and support areas. We have already, in sourced 1000 FTEs into our operation of telephonic and we have already started to generate savings for the company.
I cannot give you a specific data yet, but I will be able to you will be able to see the impact on the next quarters. Just to give you examples of in source activities, from maintenance of that our house, quality audits, surveys to telemarket phone operators, design and maintenance of model for traffic behavior and many others. In sourcing at the moment, we will, and I think will be an example in this country on how we can help not only our companies, our company to improve profitability, but also to use our resources in a more efficient way. I think the second question, which is really spot on in your analysis, and we have read very carefully Yes, we have to say that the impact of the loyalty program is positive. And that you can compare ARPU and car based evolution versus service revenue and you can get the numbers.
But I would highlight that that the material impact on our revenues and figures is important. And I think that is 3rd, to highlight it, but it's not the only factor to take into account because we also know that subsidies have been removed. And so the combination of both is what will make the balance of the model. So the impact of loyalty program will definitely fail on following quarter as subsidies removal was implemented in March last year. So we will be still comparing with 2012 non homogeneous figures.
From 3rd quarter, we will have a comparable year year basis. With regard to mobile ARPAZ, those will be impacted by by Fusion and we will see that positive impact in the fixed revenues.
Thank you. Next question, please.
Our next question comes from the line of Paul Marsh from Berenberg. Please go ahead with your questions.
It mobile business. And I suppose the overall question is, is why is fusion not helping your mobile churn rate? I understood that was was gonna help the broadband side and the fixed side of the business, but I thought this was a trade off of, lower spend for therefore, or at least a neutral customer lifetime value impact. So, why is fusion not actually helping your mobile churn rate? And perhaps in your answer, you could, that you could maybe give the mobile contract churn in the quarter as well.
Thank you.
Well, thank you very much. I think that the when when you look at the the mobile business and what we we look at it from Fusion and from the non Fusion point of view, it is clear that is where we have to be more innovative and look at the the offer quarter by quarter, almost day by day and month by month. So we needed to turn to have a turnaround of visitation, but analyze first what was going And I think that there's a few things, to look at. We were really and when you look at the the net loss, it is primarily, 2 MVNOs and is primarily on the low, very specific segment. A very specific segment on the low end of the segment.
So we that's what we had, taken into account, and we have gone into looking, how to address, the issue. So we have launched the the tariffs, which are primarily different. 1 is on the converged offer, which is what we call Fusion Ferro at the end of April, and we have also addresses specifically the mobile business outside Fusion with the mobile starter and mobile start, Total at the beginning of April. Again, those are all around the segment in which we were losing from convergence and from convergence to low and the low consumption area or what you can call a very specific part of the of the whole chain. Our section, when I look and I speak with the Spanish team all the time is that we have now a completed, offer, in both mobile feeds including, as well TV.
And addressing a specifically mobile, we believe we have addressed, that with the new tariffs. Just to give you an example this weekend, when people enter to look into the Fusion, quite frankly, the the reality is that the people were to consume more data. So they ended up buying more into the €49 to the €50 offer. So it is quite an important factor to explain, to consumers what it means to have the or the specific, new mobile tariffs. Another point to to look at, and that's why we feel, optimistic about the future that once you have the completed, offering in all the segments, in all the tariffs and and all the customer needs, we also looked at the commitments.
And compared to competitors, yes, in the new tariffs, you have new commitments, above the 12 months, and that I believe also compares better with the rest of the market. Also when when when you look at what is happening in recent weeks, since the launch of the is that when when you look at the customers entering and trying to get new tariffs on the offers, more than 50% of them are now within the converge offering, which has is also a very positive sign. So I hope I answered the question.
So can I just follow on, do you think then that the second quarter will be the quarter, but we will see gross adds in mobile, actually benefiting and the churn rates and actually falling, as a result of these new developments around fusion?
Yes. We expect Solp Thank you very much.
Our next question comes from the
Yes, good afternoon. Thanks for taking my questions. The first one is on Germany. KPN CEO in the last conference call, he expressed his desire for a network sharing agreement and went as far as saying that they would be ready to reimburse you part of the spectrum cost. Is this something which will be of interest to you?
And is it better to get part of the spectrum money back and give some of the competitive advantage you gained through the spectrum auction? The second question is on Latin America. Do you organic revenue growth is 6.8%. But if I exclude Venezuela and Argentina, I'm left with 1.5% I'm wondering if this is a growth rate we should extrapolate for the next for the rest of the year and if you see an improvement where it could come from?
Thanks for the question. I'm taking your first one potential consolidation in Europe and namely on, in Germany. We do think, there are too many networks in Europe. We do think that consolidation makes sense, and we do think it will happen. We don't have ongoing conversation with KPN right now.
As you know, they're in the middle of of our ride issuer process. We do think that over 800 Megahertz spectrum is a significant competitive advantage in Germany. And therefore, we are not willing to give it away, at a marginal or at a limited price because we do think it's value even more at the time of the And at the same time, we keep improving, our competitive position in Germany. As you know, that we have been doing, reaching some, agreements, namely with the Jet Telecom with T Mobile on the transport side to connect with fiber or lower base stations. And more recently, this proposal to consolidate our wireline infrastructure into their infrastructure and renting back all the capacity that we need to bundle our products and services in Germany.
So we have been keeping advancing. We will, we will wait and we will be open and receptive to a specific proposal that might create value by the way, we think that on top of negotiating agreements, the value creation of a potential consolidation in Germany is on top just a negotiating deal, but to say that there is no ongoing conversations today with KPN.
This is Virginia. In terms of the, difference between, expected as well in Argentina and, the full line in organic, the numbers that you have mentioned are impeccable and no question about that. We do expect 3 things to happen. First, there to be revenue growth. So we're confident that the Latin American region will continue contributing over organic terms revenue growth.
That is a strong and firm statement. 2nd, we do not expect the gap between the more inflationary and the non inflationary markets to widen, but to shorten. The reason is threefold. Number 1, we will be able at some point to increase tariffs and to improve revenue growth in the more backward markets. I'm thinking of Chile.
I'm thinking of Mexico that I mentioned before, not thinking of the expected recovery in the Brazilian market. And then finally, because of the effect of the devaluation, having happened in the first quarter of this year, it is unlikely that there will be a sizable devaluation like that in each and every quarter factors, especially in Chile, Mexico should contribute along with Brazil. And finally, inflationary nature of the cost passing nature of some of these increases will be more visible as we go on. And certainly there will be growth.
Okay. Thank you.
Thank you, Rui. Next question, please.
Our next question comes from the line of Will Milner of Please go ahead with your questions.
Thanks. Just to continue the theme on Spanish mobile, I just want to come back to the impact of the loyalty programs. It does look for the last three quarters, if you enjoyed a very beneficial impact, on the mobile service revenue trend from writing back points accrued under the loyal programs that are no longer needed, given the elimination of subsidies. And I just looking at the sort of ARPU based revenue, so if I take your ARPU, and I multiplied through by the average subscribers. And it sort of suggests that revenue based on ARPU that is down 26% in the 1st quarter compared to the service revenue decline of about minus 13, minus 14.
And the difference is that the beneficial impact, as you say, of the loyalty points But I mean given that this is going to lap in the third quarter, would you expect the mobile service revenue trend in Spain to trend to a sort of minus 26% level without that benefit? Or is there a reason why it should be close to -14
Thank you, Will. I think that as I stated earlier, the loyalty program has had a material impact on on our revenue figures. But for us, looking into how our business it is today, we look now at 6 and mobile, revenues altogether. It's a totalized, comp component. Totalized, concept.
In any case, it is clear that mobile ARPUs will be impacted by Fusion, but on the other hand, what we see is a positive impact that comes from the fixed business. We we also are seeing that mean, if you look at the operating revenues versus the total revenues versus the fixed revenues, you see clearly the different lines in operating revenues minus 16.4% in the first quarter versus the operating revenues if you take out specifically the fixed business, which is minus 10.9%. So we see that balance that compensated factors, between the mobile reduction in in ARPU and increase of the fixed, date. Overall, we will be able to to see like for like from the third quarter. And I can tell you from, the the figures we are seen on the this weeks of April that the trend is the right one.
Have one follow-up again on Mexico.
I
appreciate there are uncertainties, I guess, in terms of what the telecoms reform act specifically what new laws drop out. But I guess the question would be what would you like to see dropping out from those reforms given your current position and given trends. Obviously, it looks a very difficult task competing with telcel. And then I guess, related to that, do you any potential acquisitions specifically in that market that could improve your position there that could add value? Or are you still very focused on disposals over acquisitions in the region?
Let me take the question on reform. And as I said, I was not trying to avoid the question. It's difficult to paint the whole picture until the full law has been and written down and explained in detail. What do we expect? We expect the level playing field to obtain, which is not what we think we have today.
And so any obstacle that now prevent us from competing fairly as we do elsewhere in the region, we expect them to be removed as the law is passed, just exactly what those things are, I'd rather not comment publicly, but it is not very difficult to look at to Mexico as an anomaly because sales were in the region. The difference between the first and the second and the air force that all of us have put into competition have yielded some except Mexico. Maybe Mexico is the rare as I said that many of these things will happen and exactly which remains an open and open thing. And as to whether or not in Mexico or elsewhere, there will be opportunities. It's probably not for me to say, but We continue to scan anything available.
And in due course, we will inform you if there is anything. But we do not think that a major combination is needed in order for us to make our, to fulfill our goals.
Thank you. We'll next question, please.
Our next question comes from the line of Justin Funnel from Credit Suisse. Please go ahead with your question.
Yeah, a couple of questions, please. Just first one in Brazil. You mentioned that you've introduced multi device plans in, in Brazil. That's been a very successful strategy VErizon in the U. S, could you just elaborate a little bit more on those plans and what you expect the effect could be on your growth over the next couple of quarters, please.
Equally on Brazil fixed line, your, your revenue trend got a bit worse there. As I understand it, now your focus is to speed up your broadband to build more fiber. Where do you think your fiber build will be by the end of this year? And do you think you'll have pretty much fixed the problem by then, or is it going to take longer? And finally, it was a slight sort of surprise to see the fund raising, the capital increase, the share issue earlier this quarter or earlier this year and understand that there's important to hit your debt targets, but the the stress on your balance sheet and your bond yields is far far less than it was a year ago.
So it seems you're pretty determined to to reduce coverage come up May. Just wondering what your priorities are here? Is it to perhaps create more of a gap between your credit rating and the credit rating in Spain? Is it to hit your dividend promise or actually starting to try and create more balance sheet capacity acquisitions in the future? [SPEAKER UNIDENTIFIED
COMPANY REPRESENTATIVE:]
Yes, this is Cinciado. Let me take the question on Brazil for still the two questions on Brazil. First, on the new plants, what Vivo continues to try and be at the forefront of innovation. And I think the latest plan, which is barely 3 weeks old is actually pointing in that direction. What it is, it's a combination of data plans that allow a single payer to exhaust multiple users, typically a family with 1 payer and multiple members in it, now being used, being allowed to combine, at the, per enterprise, the data usage with this is flying very well.
It is very early days, but it is flying very well. And we will continue and delve deeper into what is it that customers need expect or could have a better service with us for. Not everything will last forever. It needs to be successful products. Our plans are immediately copied.
We do expect that to continue being the case, but this plan is expected to be ARPU accretive. It's expected to be service enhancing And certainly, the first reaction from our customer show has satisfaction and high praise for the plan. So we are very happy with 1st 3 weeks of this product. In terms of fixed, the plan is the one you probably have already heard us talk about is to develop a broadband at the high end, including fiber. We do expect the Sao Paulo market to be covered with 1.7 1,000,000 homes passed, which is significantly better than what we have today.
That includes both fiber and the the cable that we have with the minor overlapping. So the rough numbers are, 1.2,1.3 in fiber, 0.7.18 cable, and the overlap is around 300,000. So by the end of this year, we should be able to access almost all the households that we think are worthy of the investment. And so it should be by theendofthisyear that if we have been successful, we should be able to raise the flag and say, here we are. And, at that time, broadband might, you know, be at a better position than it is today.
Thank you.
With regard to the second question, Justin, hello, this is Angel. We decided to place a treasury stock at the end of the quarter, just with the motivation to reduce debt. We had seen that, our net debt position increased due to the Venezuela devaluation. We also had the cash outlay in the 1st quarter in the payment of the UK spectrum, which came very nicely at around 50% of what the market had been estimating the bill would be, but still it had to be paid. And then, we have traditional seasonal elements in the first quarter, particularly, working capital consumption from CapEx accrued in the last quarter of the previous year.
And also, some impacts on, interest payments or financial payments ahead of accruals due to the concentration of some bond payments in the first quarter. And some fees from fees of new facilities that appear in the first quarter. So at that point, what we realized is that there could be a moment of increasing net debt compared to the end of last year. We wanted to send a clear that we remain committed to reducing our leverage and achieving our, target and commitment to market of less than 40 €7,000,000,000, to be below 2.35 times net debt to Toyota, and then we decided to place those shares. We also wanted to send a signal to the market that we were committed to pay the dividend in cash, and no scrip dividend to be completed.
And this was the reason of doing the transaction in a moment that was prior to the closing of the quarter so that we could record as you have seen in our net debt evolution, an evolution in the trend of the decline that we wanted. After the closing of the quarter, we have, continue progressing. We have managed to close the second tranche of this Passat divestment, which is now completely divested. We already, got the payment for the sale of our UK brought and it. And last week, we announced the sale of 40 percent, to financial investors and strategic investors in the Central American region of our assets.
And we have continued to reduce our stake in Portugal Telecom, which now lies below 2%. We continue committed to, to the leveraging, and this is the reason behind the placement of the treasury stock, which, was not a new equity raising. It was just a place of treasury stock.
Question comes from the line of Robin Binstock from Stanford Burstein. Please go ahead with your question.
Yeah. Hi. Thanks very much. Two questions, if I may. The first is that you're clearly working hard to improve your own balance sheet, but various press reports suggest that you're less enthusiastic Petrica Vitalia, improving its balance sheet with investments from Hutchshore, the CDP.
And I'm wondering to what extent there's a sort of growing conflict of interest you and the other stakeholders, in telco and whether or not that's sustainable. And my second question is, We set a clear desire from the European Union to see a reduction in pan European data roaming costs for consumers. And we think we're starting to see the beginnings of consortia likes for Star Alliance consortia in in airlines that could compete away a lot of those revenues. Is that something you're interested in participating in proactively in those sorts of here, or are you more interested in trying to resist the regulation? Thanks very much.
Hi, Robin. This is Angel. Let me take your question on on Italy. We have we're happy with our position in Telco. We have a very good, relationship.
I think we have a relationship of trust. With our partners in in telco and our position in in in telecom italia. And as such, we will be supportive of actions that improve the value of Telecom Italia because we are among the first beneficiaries in that situation because we are indirectly the largest shareholder in that company. Some of the topics which are being, widely speculated, in the media, it's difficult for us to, to give, clear details. Probably this is better as to to Telecom Italia tomorrow, but from our position as as Telco shareholders, for instance, with respect to a potential in market consolidation in mobile.
In Italy, I should say that no specific proposal has been made to Telkom, if and when such a proposal were to be made, Telkom would have to analyze its merits and its risk including, aspects such as valuation, deal structure, antitrust implications, credit rating implications, another. So but it's early to say, and we don't have information to to have an opinion with respect to network separation and a potential, CDP investment, situation is similar. We don't have as telco shareholders' information to give an opinion on that. It's clearly an unprecedented move in the telco space, particularly in Europe. And as such, when the standard telecom Italy is analyzing it very carefully as they should, probably the question is to be addressed to them tomorrow.
To your second question, and I will ask Jose Maria to complement my introduction in in the answer. I think when when we look at Europe, we are focusing on the new commercial activity on the new tariffs, which are pretty much data centric ATE taken, for those countries that are there. And there are incorporating roaming. For that effect, I think that that is what we have to do remaining regulation the way it is. Trying to to be very innovative and and focus on on commercial activity, that way.
And I think Jose Maria, maybe you want to add
Yes. Hi, Robin Kusumaya here. We remember that we already launched, in market on, on, on market coming tariff in Europe for our own customers. So we already have that in place and we already seeing the effects of that roaming data roaming products in our own catalog of products and services for our own units and business units in Europe. And for the reminder of the company's landscape, yes, we are looking to conversations within this something that needs to be a structure, jointly with the regulatory effect.
So part of the effort is already being done through our own products and service catalog. And yes, we are open to participate in a joint effort.
Our next question comes from the line of Fabian Lares from JP Capital Markets. Please go ahead with your question.
Hi. Good afternoon. Thank you for taking my questions. With regards to the Spanish, evolution, I know it has been mentioning that, they believe that the, margin is sustainable. I would like to focus more on the CapEx situation over the first quarter, the decline has been substantial.
Considering you have, ahead the, deployment of LTE and fiber to the home and exploration of it. Would you, what this figure is this a seasonal kind of figure that we should be expecting or how much of this should we consider to be sustainable going forward in order to project our operational cash flow estimates. And second, also in Spain, regarding the evolution of of pay TV you mentioned, over this week or whether it'll be relaunch of movie star television. Maybe if you could comment more exactly if it's possible to mention whether there's, any intention to to integrate further with, with your participation in in presets canal blue, so are you gonna get more content? What does that agreement that you have with presa and report to you in terms of not only being a minority shareholder in presa TV, but also being a shareholder in presa itself in the future.
Thank you.
Thank you very much for your question. And on the first part of your question, last year, we, or at the beginning of the year, we already said that CapEx would be, below the level of last year. For 2013, but the commitment of this year's CapEx will continue being intact. It is absolutely true. The 1st quarter get and takes some seasonality effect.
There is less during the first quarter that has been taken, but we in our commitment on all the investments that we wanted to do. And in fact, as you know, I stated earlier, important it is today, specifically in Spain, the investment on the new generation network and specifically in fiber. So just to confirm on that.
With regard to the second question on Digital Plus, as you know, we own 22% in the company along with Paris and Media set. We are happy with the investment. There are, continuously rumors from the market, but there is nothing, concrete to report on this front.
Thank you, Fabienne. Next question, please.
Our next question comes from the line of Luis Prota from Morgan Stanley. Please go ahead with your question.
Yes, thank you. Two questions, please. The first is on regulation and the request from Bodafone and Orange, to get access to the telephonic cyber network. I don't know whether you could give us some light on, what are exactly their requests on how this request or the agreement they want to achieve differentiate to the agreement you reach with Jastell and whether you expect any regulatory intervention on the back of this anytime soon. Pushing access to Telefonica fiber network.
And the second question is on is a follow-up on the debt fee on the debt target of being below 1,000,000,000 year end. The question is whether this target is achievable this year without further asset disposals or asset sales being required. So from what we know so far in terms of asset disposals, whether in an organic way, you can get to this, to this level and any further disposal be on top of. And I don't know whether you can, you can mention or recently, comments on potential IPO in Colombia, reduction of the stake in Chesapeake Telecom, selling Ireland, and are any of these contemplated? Thank you.
Thank you, Luis. I think that the question around regulation and about the some of our competitors messages, I think it's important to to clarify that the our existing agreement of co investment in with Justelle is happening and is happening in in in the terms that we agreed with Justelle. And as you know, we compromise in both players granting accesses for more than or for 3,000,000 premises in 2018. 1,000,000 a half each, and that is happening, and and we we got satisfied with that. This agreement was from the very beginning, open to 3rd or the 3rd party players.
I believe that it is very important to state in this market the conditions that we ask that you have to be willing to invest, and that's what we are just requesting that the our agreement is open as it would be a good idea to to get other 30 participants in in it. The willingness for them to invest is a must and that, I guess that wouldn't alter at all any of our plans of investing in the fiber business.
Hello, Luis. Regarding reduction of the towards the, the target that we have for the end of the year, we plan to achieve, that, debt reduction in 2 ways. 1 is organically. With free cash flow in excess of dividends. As you have seen, we are going and is formally proposed to the shareholder meeting.
We're going to pay in November of dividend in cash. This would be the 1st tranche the interim part of the dividend of the $0.75 that we committed to the market, the second tranche would be paid next year. Our SG estimates and most updated internal estimates of free cash flow exceed significantly the cash commitment that we have with dividends for it will be organic, debt reduction and deleverage, due to that, And second, we continue to very actively, manage our portfolio facets. We don't feel comfortable commenting on market rumors. And, we have, as you know, traditionally been shy about commenting on specific situations and transactions because it's, never easy.
Unless in the times that we're leaving to get deals to the finish line, so we do not want to create, uncomfortable situations in our operations. Having said this, we are managing our portfolio aiming to increase the value of the businesses where we are present. We are not in an expansion mode, but yes, we can be in a strengthening mode in some of the markets where we operate some of those markets could benefit from in market consolidation. And there are several examples So Mariana spoke about, one of them before. Ireland could be another one.
In Colombia, I want to stress that we are not sellers. In Colombia, we are seeing very good growth as usual in the presentation. In my remarks, within the presentation, And here, we are just initiating the talks with our partner, who is the Colombian government, about possibilities to capitalize the company to accelerate growth and in doing so providing liquidity to the partner. And the Czech Republic continues to be a very strong cash generator. You should expect us to to actively manage the portfolio, use for the Central America American transaction.
You saw the UK broadband. So you should expect us to continue doing things and therefore, reduce that organically and inorganic
Thank you, Carlos. If I can follow-up on this Colombian comment you made on the government talks with the government utilize the company foster growth. Would that imply that Telefonica is put in, or has to put more money? Or when you said you are not sellers, it could be that you are just giving insurance to the government putting more money and diluting your position, reducing debt, but keeping still the majority and reducing net debt at the end, like it happened last year? How could that struck sure.
Thank you.
It's it's too early to say. It's too early to say we are assessing different options. Obviously, we are, talking with partner on on that. And whenever there is, definite structure and and steps going forward, we will communicate to the market.
Our last question comes from the line of Jonathan Dan from Barclays. Please go ahead for your question.
Oh, hi there. It's it's two questions. 1, if if you look across the various assets, you've got, you know, multi in, you know, markets like Germany, Brazil, but not, for example, in the UK. And then vice versa, you have, say network sharing, in some countries, but not others. I mean, is there a plan to, for example, do multi devices in the UK and, you know, why why the delay and, and secondly, network in, say, beyond simply Brazil?
And then a final, I guess, philosophical question, in is the right way to monitor LatAm to ignore inflation? I mean, do you guys incentivize local manage with perhaps real revenue growth, you know, I guess otherwise, you're sort of better off managing Venezuela than, Brazil.
Hi, Jonathan.
Yes, with
regards of the multi device and the new potential in the UK market, definitely like in the other markets. For example, we could use that opportunity when trying to price LTE, profitably. On the other regarding network sharing, as you know, we have already shown that we are open for innovative network sharing situations. And in fact, we will not lose out any opportunity in order to give our clients a better service and better option. I think the beauty of current market in Europe is that the that is one way to continue having a good network and being open to also share it with the others, both sides as we are seeing currently in Germany Spain or in other markets.
I'm not sure if there was anything else for me.
Jonathan, on the philosophical question and that there is up stating the obvious 2 pieces of information. 1 is we assess the quality of local management and local currency. So the Venezuela charged on Bolivirus and the Brazilians are judged on reais as we think they should because we do centrally not headquarters, the currency risks associated with our investments and our operations. And then again, at the risk of stating the obvious, there are 2 as to how inflationary economies are treated. 1 is are you or are you not able to pass higher cost on to higher prices.
And their management is sometimes at odds with trying to pass on the increases in each course to the revenues and that's a highly regulated sector like ours, this is especially difficult. 1, if you look at a country like Venezuela, you see that all in all, is not having contracted. The second effect, which is more difficult to manage locally, it is managed centrally, is how many euros or dollars these highly inflationary economies actually delivering the way of FX. But that's not what we do locally, but that's what the currency risk management team does centrally. So managers are judged on local currency.
Passing inflation and cost inflation onto products. Products is difficult, but so far so good. And the risk of devaluation of is always present, but we try and manage that to the extent wanted or needed centrally.
Can't win the.
With this, we have, we'll have to finish the the call. Thank you very much for your participation. And we certainly do hope that we have provided some useful insights for you.
Monica's January March 2013 results conference call is over. You may now disconnect your line. Thank you.