Ladies and gentlemen, thank you for standing by, and welcome to Telefonica us during December 2012 results conference call. And As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Pablo Egiron, Head of Investor Relations. Please go ahead, sir.
Good afternoon, ladies and gentlemen, and welcome to Telefonica's conference call to discuss January December and 12 results. I'm Paulo Leon, Head of Investor Relations. Before proceeding, let me mention that this document contains fine information that has been prepared under Financial International Financial Reporting Standards. This financial information is not audited. This presentation may contain announcements that constitute forward looking statements, which are not warranties of future performance and involve risks and uncertainties Answer and results may differ materially from those in the forward looking statements as a result of factors.
We invite you to read the the disclaimer included in the first page of our presentation, which you will find in our website. We encourage you to review publicly available disclosure documents filled with relevant securities market regulators. If you don't have a copy of the relevant press release and Please contact Telefonica's Investor Relations team in Madrid by dialing the following telephone number, 3 4914287. Now, let me turn the call over to our Chairman and CEO, Mr. Fazalietta, who will be leading this call.
Thank you, Pablo. Good afternoon, ladies and gentlemen, and welcome to Trefonica 2012 Results Conference Call. Today with me are all the members of the executive committee. So during the question and answer session, they will have the opportunity to answer the questions you might have. Let me start with the highlights of 2012.
We are in the middle of a strong operational transformation that is starting clearly to bear fruits. LATAM is delivering quality growth and has profitability. With Brazil as a cornerstone on expanding its market leadership. In Europe, 2012 has been a year of strategic change which is Spain at the forefront. Fusion is a clear commercial success.
New already reached margin breakeven in December net adds. In addition, there has been a strong EBITDA margin expansion and year on year growth in operating cash flow in the 4th quarter. All this is reflected in the Fallas Sequential Coast Costinoman and margin expansion across the whole group, allowing earnings per a free cash flow per share to continue expanding in underlying terms, which in 2012 are twice the dividends per share for with a strong delivery, which will continue clearly in 2013. If you turn to the next slide, you can see that 2012 has been a year in which we have adopted both decisions to transform our business across the board. One of the goals of this transformation effort is to lead the common, the company towards a very sustainable top line growth.
The creation of Telefonica Digital. The growing contribution of LATAM will more than 50% of our revenues. The innovation of our offers and the increase of data contribution are clear initiatives to recover or traditionalistra road map within this industry. We are also leading this sector in a new commercial model. Moving away from a model based on new subsidies, incentivizing customer rotation to a new one oriented to increase customer satisfaction, breaking the rules through new proposals.
Simplification has been one of our top priorities. Simplification across the board for a simple tariff to simplify the entire organization. This has allowed us among other things, to significantly reduce legacy, to increase the focus on core activities with immediate returns in terms of efficient In terms of CapEx Optimization has been key. We want to have the best network but we have a new approach with network sharing and coin investments. And at the same time, efficiencies from lower churn are at the center of our strategy.
Lastly, I also want to highlight that in just 6 months, we have regaining our financial flexibility. 1 visible consequence of all this is that we have recovered operating cash flow organic growth in the fourth quarter. In Slide 4, I would like to show the results that this transformation is already delivering. In the first place, The better organic revenue performance is driven by Telefonica LatAm and mobile data, accelerating organic growth trends. Some example of this business transformation are the astounding commercial traction for mobile broadband and fee broadband and the increase of digital sales.
Regarding OIBDA Margin, I would like to highlight or progress towards OIBDA stabilization on the back of a strong execution skills. Cost transformation by eliminating subsidies in Spain and other operating cost reductions in different areas. In addition, disciplined CapEx Management along the year has very positively impacted operating cash flow that reached an almost 1000000000 in 2012 and grew 6.2 percent year on year organic in the 4th quarter, reversing previous trends. As slide number 5 outlines Evings per share continued the progression quarter on quarter, reaching 0 point in the 4th quarter in underlying terms. Underlying earnings per share up to December 1 and the figure of 4% provides a strong comfort about the full to an instability of our cash dividend commitment for 2013.
In terms of financial flexibility, the reduction of our net debt figure to 1,000,000,000 as of December is very significant. Reducing leverage 0.3 times in just 6 months, demonstrate Telefonica capacity to deliver And also, the liquidity question at the end of the year is materially much higher than the last year. Moving to the line of assist. Our operational transformation is already begun in 2012, as shown by the EBITDA progression. In absolute terms, underwriting EBITDA grew sequentially, from the 3rd quarter in a row at the group and at the regional level.
EBITDA margin stood at 37% in the 4th quarter. And expanded close to 200 basis points quarter on quarter. Let me highlight that year on year margin improved 10 basis points in the 4th quarter, since in negative trends registered in the previous quarter, imported The first year on year improvements in the first quarter of 2009, even despite the lower contribution from total sales. As such, progress in margin recovery drove EBITDA stabilization year on year. And now let me hand over to our Chief Operating Officer, Jose Maria Valle Paiete, who will describe in a more detailed fashion operating transformation strategy.
Thank you, Stessa. Please move to slide 7. Where I will provide 2 examples of our operational transformation. In Spain, the new commercial model a clear example of our transformational approach. Which drove both to lower ARPU and lower churn.
The second step was to remove mobile subsidies and acquisition. Leading to lower commercial expenses simplification and focus on quality followed to end with aqua play offer, Movistar Fusion. Fusion implies lower ARPU at the beginning, but it brings also lower commercial costs, benefits from lower churn and higher value share gains. Is that not only work commercially, it also works very well in financial terms, leading to visible results. This demonstrates how acquisition of high value customers is compatible with a rational commercial model, making in addition the model more sustainable.
Another example of our focus on higher sustainability is in Latano, reflected in our data centric services. In this process, we are leading transformation. We have the best starting point because we have the largest contract base in the region. Our focus now is in leading smartphone adoption and thus to evolve the business towards data. This growth is more expensive, short term, but it is more sustainable as well, as is based in differential quality and higher customer loyalty.
Turning to the next slide. Let me review the progress made by Telefonica Digital. Our platform capture communication services in order to strengthen the telecommunication environment. Let me highlight that the first handset with Firefox OS will be launching Spain, Brazil, Colombia and Venezuela during summer 2013. 2nd, we have launched a number of digital services.
Leveraging our global approach and focusing financial services, cloud computing, machine to machine security and video communications. And third, now we have a larger billing relationship with our customers, which places us in a privileged position to maximize based value. These successes and skills are fostering the transformation of our core business, and they are already driving growth. Going forward, we aim to continue accelerating innovation, working on building on our own platforms, but also reaching agreements with third parties partnerships to fulfill our target of transforming Telefonica into the leading digital tech Moving to Slide number 9. We continue to invest to bring enhanced proposition to our customers.
These efforts have allowed us to grow our customer base by 3% year on year to 360,000,000 accesses. We recorded a strong acceleration in enhancing the fourth quarter of this year, especially mobile, driven by record smartphone sales, and the superior increase in the contract segment. At the same time, fixed broadband and fixed line improved momentum especially in Spain after the launch of our success with convergent offer Movista Fusion. Lastly, We are doing a selective deployment of ultra broadband services in the markets that meet potential demand, regulation and competition. At the end of the year, approximately 26 percent of our fixed 9% are already connected.
Slide number 10 details the evolution of Telefonica's revenue mix. We are increasingly capturing growth opportunities, allowing to offset headwinds in Europe. Latin America continued to be our margin growth engine and kept position posting growth acceleration in the 4th quarter to 7.5% year on year, purely organic. This performance led group revenues to show a sequential improvement of 0.8 percentage points. It is worth highlighting the remarkable performance of digital revenues in the 1st years of operation.
On the mobile data business, a key strategic area telefonica. We are recording strong results. 4th quarter non SMS data revenues continue to deliver a sustained ramp up in their year on year organic of a profitable data monetization strategy. It is worth highlighting the very rapid expansion of smartphone penetration that reached 19% at the year end, 6 percentage points more than a year ago. This represents a huge potential ahead, mainly in Latin America.
Let's turn to Slide 11 to talk about efficiency. I'd like to stress the substantial sequential reduction in OpEx in the 4th quarter, consistent with performance posted in the last two quarters. This is the result of efficiency improvements, cost control measures and significantly significant decline in commercial costs. You to a more, much more rational approach to subsidies across geographies, and in spite of record smartphone sales. As such, good progress of profitability along 2012 reflected firm actions on cost highlighting among others overhead simplification of processes, quality of services, outsourcing call center new data centers and synergies for integration of operations.
January December 2012 profitability stood at 34.9% with a very limited year on year declines, reflecting higher network cost to expand network coverage and capacity and commercial cost on the back of a very rapid smartphone adoption. Please turn to Slide 12 for an update of our investment profile. In 2012, CapEx in growth areas has significantly increased, especially in fiber, up 50% year on year, followed by mobile 3d and 4g networks and with higher effort executed in our Latin American region. Overall, total investment remains stable despite the increase CapEx in growth, thanks to the prioritization of deployments and benefiting from improved purchase efficiency and the positive impact from churn reduction. It is also important to highlight that we have a complete spectrum map in the most relevant markets.
With the last acquisition in UK, demonstrating our commitment to drive future growth in our countries, of operation at a reasonable price. As a result, in 2012, we have been able to continue transforming our networks. Investing in high speed broadband, both fixed and mobile, while keeping CapEx to sales ratio at 14.2 percent, flat versus 2011. With all this, I would like to highlight that operating cash flow grew 6.2 percent organically year on year in fourth quarter. Main accomplishment reached by Global Resources, Air Based are on IT, devices, global sources and networks and operations.
In IT, we have achieved significant savings in both OpEx and CapEx, mainly thanks to the efforts done around simplifications and new data centers. In devices, scale is playing a significant role in increasing the value of global negotiations and portfolio optimization. We aim to have in 2013 an even more balanced vendor map. Global sourcing was also central for increased savings, while the most visible results come from network and assets optimization. TGR is also contributing in our global position approach to multinationals, thanks to our scale benefits.
Let me now hand over to our group CFO, Angela, who will take us through the detailed group and regional results.
Thank you, Jose Maria. Please turn now to slide number 14 to start with a detailed review of full year results. Both in 2012 and 2011, we booked several significant exceptional items with 4 quarter numbers being particularly impacted by 1st, the reduction in the value of telecom Italy investment. 2nd, impairment recognized in the value of Telefonica Ireland, and 3rd, the devaluation in Venezuela. So To better understand the underlying performance of the company, we are providing a P and L, excluding those non recurrent effects and non cash impacts.
In those terms, revenue reached 1,000,000,000 in 2012, down 0.7% year on year. While OIBDA tapped 1,000,000, with a margin decline of 1.3 percentage points, a lesser margin decline compared to last year, and posting a better 1,000,000,000 with an EPS of per share. I would also like to highlight that although material items such as the asset write downs are flowing into the P and L, there are other transactions that are enhancing our equity, but not flowing through the P and L. For example, the restructuring of the Colombian operations increased shareholders' equity by 1,600,000,000. Let me now summarize our operations by region starting with Latin America.
In 2012, our selective commercial strategy delivered the results we aim to. Revenue growth outpaced accesses growth as we continue to leverage on booming mobile data and remaining opportunities on increased mobile voice usage. While continuing to transform our fixed operations. Hence, revenue continued accelerating in Q4 at 7.5% year on year organic terms. Whilst profitability remains strong, we saw EBITDA growing year on year at 1.6% Anoita margin above 40% in the quarter with a lower contribution of tower sales compared to 1 year ago.
Please turn now to slide 16 to review our Brazilian operation. 2012 was a key milestone in our transformation journey towards fix and mobile integration. While consistently improving the quality of our services and the satisfaction of our customers. In the fourth quarter, commercial activity in the high value segments of the mobile market remains strong, driven by our top service quality. In the fixed business, we are in the process of changing the dynamics as proven by the innovative services launched this quarter.
As a result, revenues accelerated in Q4 fueled by the outstanding performance in the mobile business which already represents almost 2 thirds of total sales. Our successful strategy resulted in a solid revenue trend outperforming the market and gradually expanding this gap. On the fixed side, Conversion offers are limiting erosion in the traditional business. Turning to Slide 17, let me stress that profitability of our Brazilian operation is consistently improving We kept gaining OIBDA market share quarter after quarter. As annual growth progressively improved along the year, reaching an outstanding performance in Q4.
OIBDA margin stood at almost 45% and expanded on a yearly and on a sequential basis on the back of efficiencies implemented throughout the year. On top of that, despite maintaining strong CapEx efforts at 15% of sales. Integration benefits continued flowing to bottom line with a strong cash flow generation. In the next slides, we review the operational performance of the rest of the countries in Latin America. In Mexico, we keep focused on the turnaround process that as Q4 showed is starting to deliver results.
With commercial activity progressively improving and financial metrics, also posting a gradual recovery. Mobile service revenues increased by 2.7% year on year in Q4. And OIBDA margin continued improving sequentially and reached 31.4%. Our operation in Venezuela showed an impressive operational performance amid increased profitability. And in Colombia, I would like to highlight that the benefits stemming from the integration of the fixed and mobile businesses are starting to be reflected on the results.
With operating cash flow growing by more than 30% year on year in 2012. Turning now to the southern region, let me highlight the positive results delivered in Peru, across all across all metrics with sustained commercial momentum, along with healthy sales growth and profitability. In Argentina, improved commercial activity from Q3 continued this quarter, while revenues and OIBDA margin accelerated. And in Chile, we continued posting solid growth and profitability amid a highly competitive environment. Let me now review the performance of our operations in Europe.
2012 has been a year of strategic change for Telefonica Europe, delivering the right balance between customer growth and profitability. Successful commercial moves in key markets led to sustained momentum in contract mobile throughout the year and a solid uptake of smartphones leading penetration to 35%, up 8 percentage points year on year. Growth strongly accelerated in Q4, thanks to Movistar Fusion in Spain. The good news is that we achieved this commercial traction with lower operating costs, down 7% year on year, thanks to the transformation initiatives put in place across the footprint focused on optimizing the allocation of strategic costs and investments. So Efficiency gains and the continued monetization of Tier data resulted in a sequential improvement of profitability with Q4 margin posting a year on year expansion despite continued revenue pressure.
No doubt we have laid the foundations for future growth. Please turn now to slide number 21 to start reviewing the Spanish business. The successful execution of our transformation, which started back in September 2011, has already delivered visible results, with clear improvement at both OIBDA and operating cash flow level throughout the year. Pressure and due to tariff repositioning and lower usage, with multiple initiatives of cost cutting across the board The strong focus on quality, increased customer satisfaction and lower claims and churn. Subsidies removal and portfolio simplification, processes and personnel have driven a sharp OpEx decline.
A result, OIBDA has been stabilized. While OIBDA margin year on year trend has sequentially improved to 47.2% in the last quarter, 5.5 percentage points above previous year. On top of that, we increased the resources devoted to fiber. And at the same time, efficiency gains of set revenue declines in Q4 and operating cash flow increased by almost 8% year on year, returning to growth. All in all, I would like to stress that this strategy that dramatically changed the business model has set the basis to keep commercial traction in 2013, while delivering sustainable cost savings.
Let me now update you on the progress made by Movistar Fusion, a key step in our transformation journey. Movistar Fusion is a revolution in the Spanish marketplace, where convergence is the new name of the game. Our priority was to recover leadership in the market. And in just five months, we have achieved this goal. Our quadruple play offer, leverage on our integrated profile, has made an estimated market to grow again in a more profitable way.
More than 1,500,000 customers have already signed to Movistar Fusion. As of December, more than 30% Fusion cash had contracted new mobile or fixed broadband services. But Fusion is not only helping to get new customers. It is also accelerating the take up of high value services such as fiber and mobile broadband. So, Fusion has improved our commercial performance, as shown by Q4 net adds, the lowest loss in fixed Elephant in 5 years and the highest additions in fixed broadband since Looking at the financials, top line dilution of Movistar Fusion is easing with an increasing proportion of upselling and new customer joining in.
So we are on track for Fusion revenue breakeven in 2013. On the cost side, savings in commercial costs are material on the back of no subsidies, lower acquisition and billing costs, and lower churn. All in all, Movistar Fusion is on the right path to be margin accretive. Considering just December, Net adds of Fusion have already reached margin breakeven. Turning now to slide number 23, Telefonica UK consolidated the success of the commercial strategy started in Q3 'eleven.
And regain momentum specifically in the contract segment with the contract mix up three percentage points year on year, reaching 52%. As a result, We continue closing the gap in terms of revenue performance versus competitors with market leading profitability. It should also be noted that we continue to gain high value to gain high value customers. With an expansion of more than 3% of the customer base and noticeable reductions in both prepaid and postpaid churn. The strong commercial traction flows into financials with underlying revenue trends moving towards growth by the last quarter of the year.
In parallel, we panel right equation of growth and profitability, with the first half of the year heavily impacted by the higher commercial activity, while in the second have, we saw more comparable trading. Lastly, let me stress that Telefonica UK has successfully secured two Blocks of 10 megahertz in the 800 megahertz spectrum band for a total investment of £550,000,000 starting. To review our operation in Germany, please turn to slide 24. Let me highlight our sustained trading momentum in the contract segment that is supported by the continuous improvement of contract churn as we focus on the right balance between growth and value. This, together with a successful amortization strategy led to grow revenues despite MTR cuts in December and to gain mobile this revenue share outperforming competitors throughout 2012.
The higher ARPU of new customers versus churners is the main growth lever. Though revenues show that had acceleration in Q4 year on year due to the increased renewals of the early launch integrated portfolio within the base. On the profitability side, continued sales growth and scale benefits flowing to OIBDA, up 5% year on year in Q4, leading to EBITDA margin expansion. CapEx grew, as we invested in LTE, reaching a 15% 4 g coverage end of 2012. And operating cash flow is up 12% year on year in 2012.
Let me let's now move to the financial side on slide 25. Net financial debt been reduced by 5,000,000,000 during the year, mainly thanks to our strong cash flow generation, jointly with our successful portfolio management execution As a result, our leverage ratio has improved dramatically to reach 2.358 times OIBDA. Minimally above our target leverage commitment. Importantly, we will continue our deleverage in 2013. Backed back by our cash flow generation as well as continuous asset rationalization measures.
To place ourselves comfortably below the 2.35 times net debt to EBITDA. We have delivered almost 1,000,000,000 of free cash flow. As a result of better operating performance and working capital contribution, as quarters were progressing. Free cash flow per share reached €1.55 comfortably covering our 0.75 cash dividend commitment. Slide number 26 shows our outstanding and diversified financing activity in 2012 where we raised close to 1,000,000,000, complemented by an additional 4,000,000,000 in the 1st 2 months of this year.
Our financial policy has placed our average debt life at 6 point 4 years and steadily reinforced our liquidity position up to 1000000000, covering well in excess of 2 years maturities. And we have also improved the quality of our with substantial cash balances and higher percentage of long term and use committed credit lines. Our access to percent decreasing from Q3 and standing at the lower part of our medium term guidance despite the burden of a high cash position. Now let me return the presentation to our executive chairman and CEO, Tesa Lirta, who will outline the guide and priorities for 2014.
Thank you, Angel. Let me now highlight our guidance for this year. 2013 is going to be the year when we will recover our growth D and while we keep reducing our leverage. We'll go back to revenue growth where revenue trends in Europe is stabilizing in the part of the year and is starting to recover again in the second part. In Latin America, revenue growth, we continued strong throughout the year.
Based on our customer base expansion, increased mobile brand presentation and data revenue growth. We We will also keep limiting the EBITDA margin erosion. Delivering Benchmark EBITDA margin leverage on which or a strong diversification and scale. Let me stress that we will do all that while maintaining our CapEx sales level. Allowing us to keep transforming the company.
On the financial guidance, the leverage will continue in 2013, with the final goal of net finance debt lower than €47,000,000,000 at the year end. In slide number 28, we summarize our 2013 priorities. In Europe, Spain lead the transformation and simplification of the commercial approach, and will continue accelerating this journey in 2013, which is already driving lower OpEx and CapEx. The commercial momentum seen in U. K, with innovative propositions, propositions, sorry, will continue, and we will do a rational deployment of the 4G network.
In Germany, we aim to continue at performing a mobile market sir, while improving the margins. Moving to Latin America and starting with Brazil, We are already working hard on the fixed business turnaround. We're keeping a full focus on maintaining the mobile business outperformance leverage on our top quality proposals. On the other hand, at a regional level, we are also focus on exploiting the benefits of further efficiency gains, where we will grab the advantages and opportunities that original footprint provide us. At the same time, Telefonica Digital will continue fostering digital growth leveraging our core assets and building powerful positions through partnerships.
On top of that, a scaled benefit from Telefonica Global Resources, we further contributed to Telefonica operating excellence. To conclude, let me highlight. 1st, we have reinforced our growth model in 2012, as solid execution of transformation initiatives is delivering visible results. 2nd, we have regained financial flexibility. 3rd, we have delivered on the 20 12th guidance and 4th, We are able to provide you with a very realistic outlook for 2013.
Thank you very much. And now all of us, the members of the Escond are ready to answer your questions.
Once again, that's 1 to register a question and 2 to cancel. We will kindly ask you to ask a maximum two questions per participant. And if possible, we recommend you not to use your cell phone or hands free. There will be a short question whilst, silence while questions are being registered. Thank you very much.
Our first question comes from the line of George from Citi. Please go ahead with your question, sir.
Good afternoon. I have two questions. My first question is on asset portfolio management. You've got an extensive portfolio of real estate assets and you started monetizing them the last couple of years. There are some reports in the Spanish press suggesting that you're planning 2,500,000,000 of disposals of towers in Spain and Brazil this year?
Is it something that you are considering? And should we think of these proceeds that come on hope of what you guided and therefore, the 1,000,000,000 of net debt position production end up being much lower. And if possible, could you give us an indication of the multiples you have received on the TAR sales last year in terms of the sale price compared to the lease rent that you pay? And my second question is related to pay 11 and the OpEx evolution in the fourth quarter. When I look at the guidance, it suggests that you have some margin erosion in 2013.
So I was wondering whether this is down to specific reasons having made the 4th quarter numbers look better perhaps on the underlying trend or whether you are leaving yourself with some room for commercial expenses to go up? Thank you.
Thank you. This is special. You know, first first, I want to make clear a very clear statement. When I see it, Now we are very, very realistic at our net debt by the end of 2013, we will be below 1,000,000,000. I have to say 2 things.
This will be, as I can say, will be basically done because we are going to have a strong graph regeneration. And the second thing which is very important and is unique to Telefonica. All the portfolio management we are going to do in the coming months which will result in a devaluation with, at the same time, increase the the probability of our business. The refining is in a position that we can have the portfolio management in which we will de leverage at the same time, we deliver it. We increase the the recording, the recording.
I want to just record and protect for profitability of our business. And in the coming months, you are going to see. So we feel so comfortable about it, you know, that you are going to to price when we announce how we do that, okay? This is unique in the industry and it's because the position Telefonica has. And now I'll hand it to Jose Maria to talk about towers.
Thanks for your question. On the on towers, I mean, we are not aware of any offer size on towers needed in Spain or in Brazil. So we are not contemplating that today. But we are open because we are very open in terms of capital allocation as we have been during 2012. That means that we are reviewing, the way we allocate capital.
That means that we are considering non strategic towers divestment, but always with the financial criteria that financially makes sense in terms of the lease commitments make sense compared to the financial expenses that we are right now, the financial threshold that we have right now. So no plans. Nothing is included on the guidance on that purpose. That doesn't mean that are not contemplated, but we will be very opportunistic and on a case by case basis just if it makes sense. And considering the page 11, the OpEx evolution, most of the effort that we have done in 2012 are sustainable.
That doesn't mean that they are recurring in terms that we cannot keep the level of improvement of those permanently because we will keep growing our commercial efforts in Latin America, but we do think that the commercial efforts consatement that has been done in Europe and namely in Spain, are there to stay. So in terms of, in terms of, the OpEx evolution, we feel that, that, the effort that we have done by changing the model, effectively changing the model, focusing on quality on churn reduction, on simplification, on making our billing much more profitable, are sustainable. And finally, we have guided that our margin, OIBDA margin, erosion is going to be more limited in 2013 than it has been in 2012. So you can make your own calculation and where we are pointing at.
And is it possible to give us a multiple on the power sales that you had in 2012?
No, we are not disclosing that information.
Sorry.
Thank you, Georgios. Next question please.
Our next question comes from the line of Yvonne Liao of BBVA. Just two questions my two questions on our OpEx in Spain. I don't know if you could give us a rough idea of what were the subsidy costs in 2011 2012? And the second one is on personnel costs. I think the the redundancy program was approved back in third quarter 2011.
So I don't know up to which quarter in 2015 we can keep on seeing that 12% decrease in in personnel costs that we've seen throughout 2012.
Thank you with regards to the redundancy program, I think that we stated that our large scale organizational structure in, which is particularly EUR 257,000,000 savings in 2012.
And that's supposed to continue throughout 2013.
Well, we we have, as you know, it was a 3 year program. So it's up to 2013, end of 2013. Okay. So it started in 2011. We completed the whole program in 2012, which was expected and we will finalize it in 2013.
So we are on track.
What about the subsidy cost?
Yes. In terms of savings in the commercial costs, we believe that there were more than 500,000,000 during financial year 2012, so mainly coming from a new subsidy policy. It.
And was the could you give us the number on the subsidy cost in 2012 just to see how much is left there?
Well, I'm afraid that I cannot disclose that information now.
You, John. Next question please.
Our next question comes from Tim Bodie of Goldman Sachs. Please go ahead with your question, sir.
Thanks for taking my question. Just some more, questions around physion, really. Just trying to understand a few of the statements you've made. And obviously the remarkable progress made on costs. First of all, to what extent does what do you mean by revenue breakeven?
Is that that the total revenues on the Fusion product, including new customers, either be the same as beforehand, or is this just on the customer's within your base adopting physion. And then I guess kind of around that, it would seem as we go into Q1 and Q2, particularly, you get a larger revenue pressure because more of the customer taking more of a discount, which is lasting for the whole quarter. So should we look to see a softer first half both in revenue and possibly EBITDA growth trends in Spain before we get to that point of stability. But the last question I have really is just more of a wider strategic question about Spain, where it's just really how you see the regulatory roadmap panning out And, and, you know, is it really in your interest to have Vodafone and orange build yet another fiber infrastructure as opposed to allowing them attractive access to your own Fiber. Many thanks.
Thank you very much. Just to clarify when we speak that we are working towards revenue breakeven in 2013, we talk about the totalized clients. So the format and the new. So, basically, the ones who are added to together with the ones that were already with us. That's the expression the same way we use it in the, what we call, breakeven, margin breakeven with ads, that were particularly happening in December.
With regards to your second question, again, just to reemphasize what we stated up to December, we had a new services accounting for around 30% of the totality. And that proved during the quarter. So I can say, that we were quite happy. Just to let you know, having that you, you know, that by the end of December, we've accounted for 1.1 total clients, and I think that the head of Spain already expressed that we were up to $1,500,000 in in February.
Jose Maria, I will take your question on regulation and deployment of fiber or basically a network sharing as a philosophical approach they're very open to that. We think it makes a major sense to have so many networks in Europe. So very open to share infrastructure at reasonable price and at reasonable condition. We have been doing that in Spain, namely with Jazzel, you know, that and his public information. So open to, open to conversation because we think that time has come more rationalized approach to CapEx and namely to effort to CapEx and networks deployment in Europe.
And just on the first half of twenty thirteen, should we see increased pressure on revenue and margin from physion before it gets better? Or do you think this is now a very linear type of improvement we should
is one of the components of the Total offering in Spain, and there are many moving parts in in that sense. If if we are ask ourselves what we want with Fusion is clearly we want to achieve the goal of revenue growth. And the first thing, we need to see that coming from the growth of our customer base. We are in fact seeing it as we have mentioned throughout our presentation And the beauty of this, offer is not just an offer. It's a concept which we can focus on specific situations in order to make the even more important into the offer.
Have to emphasize it's still early early days and we're still facing a strong competition, but the capabilities of working on particular efficiencies in each of the services and products that we offer, it is quite important. So I think that I answered.
Thank you, Tim. Next question, please.
Our next question comes from the line of Matthew Robilliard of Exane Vimpe Paribas. Please go ahead with your question, sir.
Good afternoon, and thank you very much. I just wanted to look for clarification on the guidance. I think that during the presentation, the chairman said that revenues in Europe were expected to stabilize and maybe grow in I just wanted to make sure I get that right because if that's the case, then you're basically expecting Spanish revenues to stabilize because of the size between Spain and the other European assets. And a second question had to do with Spain very impressive, decrease in line loss. Is that due to fusion fusions in one way or another?
And is that something you expect to continue into 2013 this low rate of decline? And finally, if I may, are you for the spectrum auctions in Brazil this year? Thank you.
Taking your question on the guidance, I mean, is start to predict, the environment, the evolution of the Spanish economy today, but we do foresee at least a better second half of the year than the first one. And Spain has a significant impact in the overall region. So we will keep you posted, but, it is true that the guidance implies a better second half of the year compared to the first part. Trends that we are seeing in the market, namely, in Spain, that is still challenging. We are improving in the in the UK.
We are doing, better. It will be better in Spain, but still challenging. So we will see. But it is true that our guidance assumes that the second half of the year is going to be better than the first one.
Gonna be, you know, the reality of the Spanish economy at this time is much better than it was last year. That's that's a fact that, point in the direction. So, you know, like, this is, it is a fact in this area. And, so it should be, anyway, it's in Oregon, we have been very conservative.
In terms of your question regarding if the reduction of a line loss was 22 Fusion. We believe so. It is 22 Fusion. Fusion has several impacts into the fixed line business. And I think it's important to highlight that we have obtained definitely better fixed line growth than in the last 5 years with very top positive fixed broadband net adds, which is probably highest in 4 years.
So Fusion is fostering growth in the fixed broadband market and that's something that we wanted to highlight in the third quarter.
In terms, hi, Mathew. This is Santiago. In terms of the possibility a new Brazilian spectral license. You know that it is under study at the government. We think it is unlikely that all the necessary status will be completed in this year.
The 700 frequency is filled with things that need cleaning up. And we would not welcome that spread process to take place this year while we are in the middle of the process of deploying LTE for all the sporting events coming out of Brazil. So we have no way of knowing, but certainly we think unlikely, and we would
not support it being anticipated. Thank you very much. Thank you, Matthew. Next question, please.
Our next question comes from the line
Good afternoon. Just following up on the improvement in terms of fixed line. Thanks to Fusion. I was noticing that we do not see these, let's say, inversion of the trend in terms of, new, full unbundling. Lines.
So I was just wondering if this means that a big share of the clients that are taking Fusion are coming from, let's say, mobile only households. Thank you.
Well, we believe there's a market growth in the that particular piece of the business. And we are proving so, with a new line. So there is market growth there. Are we capturing it?
Sorry. I may pull up off. But, sorry. Can you hear me? Sure.
Yes. Sorry. But is it correct to say that the big chunk of the the clients that are taking Fusion, do not have any, let's say, fixed broadband connection or fixed or not even a traditional fixed line because this seems looking at the trend of, old sale and bundling that is strong actually in this quarter is up versus last quarter. So there is no sequential investment in the trend of the old cell connections.
It's actually coming from both, but it is showing growth in the market.
Thank you, Giovanni. Next question, please.
Our next question comes from the line of Robin Binstock. From Sanford Bernstein. Please go ahead with your questions, sir.
Thanks very much. Two questions, if I may. First, I'm just wondering whether a deeper relationship with Katie G, would make sense for O2 Georgetown and whether that would be coherent with a longer term strategy towards more unified services. And separately, I'm wondering whether you need to accelerate your wireline investments as well in Brazil given GBT's access to Sao Paulo or whether it makes sense to do LTE first and then think more about fiber in Brazil afterwards. Thanks.
Well, thank you, Robin. And I think that basically, I don't think we can make any comment on the KDP a policy situation or that possibility, although I think that there's been some statement there. In our case, what we believe is that every market is particularly different and that in any case, as we have shown before, we have kept quite an open minded strategy for particular agreements. So if you look at what we are doing in in German particular, we have a special agreement with Deutsche Telekom on VDSL, which is working well. And we are doing fiber with data which in some somehow as well shows that we are open for those possibilities.
If you ask us about particular German market, as you know, is behaving a lot more rational than other European markets, but still knowing the formal app convergence we would be at least being actively responding to some of potentially the situations by agreements that we have so far.
Yes. This is Santiago Robin. In terms of fixed line investment in Brazil and especially in Sao Paulo, which is where we have an exposure, you know that we don't lose so much at competitor risk than to ourselves. We have a clear problem at Subsea 13 hold reviews resources with 2 revenue sources. That means VL cell and fiber.
And that's what we're doing. We thought that we'll be fast enough to compensate the secular decline in voice revenues remains to be seen. But it has nothing whatsoever to do with GBT because we have very limited in markets with GBT in Sao Paulo.
Yes. My question sorry, if I may follow-up, my question was really given that GBT now has more access to Sao Paulo and potentially enter a new owner, whether you thought that they would be more aggressive in places where they could overlap with you, in other words, whether the overlap would and therefore, whether you needed to build defensively against that?
Well, when they get there, we'll, we'll be there.
Thank you, Robin. Next question, please.
Our next question comes from the line of Frederic Boulanger. Please go ahead for the question, sir.
Hi. Yeah. If I can come back on, on Spain for a second. So you know, we've had a pretty strong decline contract mobile service. Is this acceptable and what can you do to limit market share erosion what makes you confident customers will remain with Movistar when they need a new handsets and, you know, we're just looking at the recent pricing we started now about 50% more extensions than Vodafone and Orange, including handset cost.
So do you think this premium is sustainable? And secondly, to come back on the revenue question, so revenue dropped 13% in Spain this year in 2012. Can you discuss a bit the impact of ongoing macro pressure on your business and where you can realistically improve this top line in, in 2013 considering the bridging up with dilution. Thanks a lot.
Thank you very much Fred. Basically, on the mobile performance in Fusion and in Spanish, in particular, I think that the market dynamics have changed significantly from the launch of Fusion. So basically we have seen the market increasing advertising from our competitors. We have seen competitors launching or trying to replicate our our offers. And very importantly, we have seen new handset and mobile offering.
In after 3, 4 months of we'll see on what we believe is that this is successful offering, but we need to there is room for improvement in execution and particularly, we need to work harder in all the channels to get the offer closer to our customers. We still are in early days for the an answering model, which I think is what you were referring particularly. I have to say that the month after month, we have seen the market and the customers' understanding a lot better. Offering in financing. This was better understood than the buyouts of Europe, but now we are seeing this as a reality as opportunity for, for adding a financing model and the handset of a financing model here.
We believe that still, there are market dynamics that are tough. It's not just the macro. It's the fact that we seen the market is shrinking overall. It's a cleaning of lines and so that is also need to be taken into account. In any case, we think the market can be profitable.
We are seeing offers in the market, which we believe are not sustainable. So we need to stick to our principle within Fusion with not handset subsidy and moving more and more into financing model.
Thank you, Frederic. Next question, please.
Our next question comes from the line of Vicky Minerva of HSBC. Please go ahead with your question sir.
Yes, good afternoon. The first question is on fiber in Spain. A couple of weeks ago, there was a statement that you would reach a 1,000,000 households by 2015. Does this imply that the co investment agreement with JazzTel will be extended beyond the current 3,000,000, I mean, we just sell or also with other players if they join? And the second question is on the flow.
And over the last couple of years, you benefited from a timing difference between reported CapEx and the cash CapEx, do you expect a similar trend in 2013 and in the same amount of 20 12 or 11. Thank you.
Thank you very much. With regard to your question, just to clarify that we compromised on a 3,000,000 numbers, households, until good in 2013, we just tell So just to to clarify that. And then as you know, the the agreement is flexible. It's a flexible investment approach in the coming years with the goal of reaching 8,000,000 Households by the end of 2015.
Hello, Luigi. This is Angel with respect to your question on cash flow. As you have seen, working capital has followed the traditional seasonal profile that has been happening in the last few years. And as we had indicated in previous conference calls, it's it has clearly improved in the second half. Part of this is due to the different phasing of accruals versus payment CapEx and that probably will be replicated.
Our next question comes from Jerry Bellis of Jefferies. Please go ahead with your question.
Well, character, I by very stable OpEx performance, particularly on commercial costs. I wondered how sustainable you think that is going into 2013. And what the implications of the tactical turnaround plan for the TV business that local management discussed on Monday might for the OpEx outlook in Brazil? 2nd question is on Spain. On the wireless business, you highlighted in the press release, house while the service revenues benefited from fewer retention upgrades in the fourth quarter.
I'm just wondering as we sort of wireless service revenues quarter by quarter going forward, was there a particularly higher volume of those redeemed loyalty points falling in the fourth quarter relative to what we can expect would normally fall into the Q1 and Q2?
Can you please repeat the first question?
Yes, of course. In Brazil, you reported a very stable operating cost performance in the fourth quarter. I think growth was just 1% on an underlying basis. And that was particularly characterized by quite tight control of the commercial costs of selling expenses. So my question is how sustainable you think that performance is going into 2013.
Clearly, there's a pretty competitive fixed broadband market. Lots of things that are not entirely within your control And there's also one specific issue in 2013, which I guess is the turnaround plan for the pay TV business. And I'm wondering what implications that that relaunch might have for cost trends going forward? Thank you.
Part of Brazil. Well, 1st of all, cons containment has received a greater focus at the end of 2012 and will continue to be one of the top priority items into 2013. We're talking subsidies, we're talking cost control headquarters and we're talking deepening all the synergies that were created by the combination of both companies last year. The fact on pay TV that you mentioned is important and it is one of our focal points of developing to the revenue line this year that we think it is going to be very likely associated with the variable cost model, meaning it is not going to be the case that we invest large amounts in acquiring customers without being in a position to dole out the amount of revenue that we would expect from them. So all in all, within those trends should continue well into 2013.
NTV is a focal point, but should not be detrimental to this cost containment effort.
With with regards to your question on the mobile service revenue in Spain, yes, the year over year trend improved. Mainly due to fewer handset upgrades. And that's specifically to highlight that there is no seasonality in these numbers. Which by the way, we're around -48 percent year over year. So the only question is we might act tactically.
We think it's necessary, but overall, the quarter shown already what it is our intention at what we do. If I may, Pablo, I think that, to answer, more completely to Luigi, Luigi, our commitment internally at Telefonica with regards to fiber passed through households is 8,000,000, but our commitment with just tell in the agreement with Justell is 3,000,000 co investment in 2013. I hope this is clearer now.
Thank you. Next question, please.
Our next question comes from the line of Jonathan Dan of Barclays. Sir.
Hi, there. The first question is on plans for network sharing and say what's actually happening in like Germany, but also plans to perhaps extend the model into Latin America. And then secondly, It's it's back on, I guess, the quarter by quarter, domestic margins. I guess my question, normally the full quarter EBITDA dipped, the margin dipped in Movelis. And I I guess, could you could you give some sort of sense of you know, in 2011, the ratio of commercial costs in the 4th quarter by comparison to the first, second, 3rd quarter.
And I guess I
guess what I'm really asking is, will we expect Q1, Q2, Q3 margins to be above the in 20 team above the level they were in 2012.
Okay. Taking your question on that we're sharing, overall globally. We are very, we are very, happy with the the situation that we have in places like, the UK, with Vodafone, we think it makes sense. We think it creates a huge amount of value We think that by investing mostly the same, we have a much better network in a much faster deployment effort and in a much more efficient way the same thing applies for Germany. For example, when we have this transport agreement with the Deutsche Telekom and the same thing applies for the agreement that we have here in So we are more than willing to do network sharing and to co invest with people that are really, focused on investing on creating network and investing on the networks.
We think it makes sense. And the answer is, yes, we are more than willing to extend that model Latin America. And in fact, it's already in place in some of our operations, namely, for example, in Argentina, historically. And yes, we are exploring ways of collaborating through network sharing agreements all along the region. So for us, it is strategic.
We think it makes sense. We think that having the best network is a must having the best network as a competitive advantage, only if it is sustainable, but if that network sharing is the answer.
And regarding your question, and on the margins in particular, as you know, and the question is, is this margin high margin sustainable. We believe these high margins are sustainable because, we have our cost reductions that are quite substantial sustainable. We are, 1st of all, focusing on quality. As you know, 56% of claims reduction just in 4th quarter and we have a further reduction expected in 2013. With regard to for portfolio and processes, simplification in IT and services savings are clearly part of our strategy.
And the most important is the new commercial model with the financing of handset and no subsidies already has that included in in in the model. We also believe that Fusion is not a margin dilutive concept, or a margin dilutive offer. And as we mentioned earlier, it's already margin by Kaiden in December net adds. So basically no subsidies, lower billing costs and lower marketing costs we've seen. Just to remember as well that the the 4 quarter, last year, sorry, yes, last quarter 2012, we had 1 offs of around 1% of the EBITDA margin.
We've long you believe that the market can be profitable and Fusion is helping us to maintain, these markets. But just to reemphasize that if necessary, we can take some tactic, moves if it's needed. With respect to the 4th quarter, in particular, if you remember, fourth quarter 2011, we had a strong marketing campaigns, so a lot of commercial costs also assigned to to that 4th quarter, while in 4th quarter 2012, we have already the new model, which is a different, completely different approach. So the impact, as you pointed out, is completely different.
Next question comes from the line of Luis Prota of Morgan Stanley.
Yes, thank you. Two questions, please. First is on Venezuela and on more specifically on margins, whether you see any kind of margin pressure coming from the weaker currency. I don't know whether you could give us the percentage of costs you have in hard currency. And also in this regards, whether you see any change following the devalue of the currency in terms of potential for repatriating any cash from that country?
And the second question is, is on the, potential IPO of LatAm, where we have seen some quotes suggesting that you had canceled this IPO, but to be very honest, I'm not sure whether that was an official view coming from the company or it was press article. So if you can confirm that, it would be helpful. Thank you.
As I said at the beginning, we are beginning our total financial flexibility. We are going to be way below 1,000,000,000. We have tremendous plan, and it's not a private anymore to IPO Latin American operations. And, that is clear. And,
In terms of what's going on in Venezuela, Luis, 2 observations. 1 is that margins continue to be very healthy. Continue to have the leading market operation in the country. The Venezuelan devaluation just happened, and so it's early days still to know what the final impact is going to be on, foreign currency denominated inputs, which are not a lot in the situation. It's not likely to be very different from what it was up until now.
So, certainly the translation is going to mean a different number, but I don't think the day to day businesses are going to be all that affected by the devaluation. Certainly, we see no sign of improvement anytime of the currency repatriation issues and we have nothing to report on that.
Our next question comes from Torson Ackman of JP Morgan. Please go ahead with your question, sir.
Good afternoon. The first one is on Brazil where you continue to outgrow competition, but overall, the market in mobile seems to be slowing down. The one is that due to partitioners due to the economy. And going forward, if do we have now reached a stable base and expect to grow from that over the next year? And the second question is on your net debt target of below 1,000,000,000.
Could you clarify in terms of potential asset sales, that is included and excluded and how many of them or if only a few of them would be included, what would that be? Thank you.
Yes, Thorsten. In terms of mobile growth in Brazil, 2 observations, One is that growth is still is there. We continue to expand both the customer base and the number of clients. And at the same time, we continue to upgrade the existing customer base into more expensive and more interesting products. So I think the growth rate is slowing down a bit.
But it is far from having stabilized or having reached maturity the way we see it. We're also happy to report that, we are being moderate to successful in upgrading our customers into the metro segments of the market. And within that process is at its early day, it's not at its final days. So you have both the expansion and the migration that are still have a lot of time to run.
1st, then this is Angel. With respect to the leverage and our target of net debt, we have established a target of below 1,000,000,000 net debt. And we are also stating clearly that, we aim to be comfortably below 2.35 times net debt to this is going to be done, free cash flow generation, to be in excess of of our dividend commitment that, that we are, confirming to the market, our cash dividend commitment to be paid this year. Also, we are going to be analyzing inorganic, transactions that would improve our strategic position in markets where we operate that would create, recurrent benefits while at the same time providing debt relief. So we expect to be, giving you news in the future on this as soon as these transactions and example, we're working on eventually materialize.
Our next question comes from Fabian Lares of JP Capital Markets. Please go ahead with your question, sir.
Hi. Good afternoon. Two questions. The first one with with regards to the current tendency to move towards convergence as you're implanting the Faucillon offer in Spain. I was wondering whether you foresee that this type of offering is gonna become prevalent throughout Europe.
And in this case, what would be, your strategy in in the country like the UK where you're, primarily mobile. And second, with regards to the ten to divestment that you carried out, when you are focusing so much on customer service and quality service. I was wondering if the fact that you no longer on your call centers is not gonna be a a a problem for that strategy. Thanks.
Okay. Thanks for your question.
Regarding convergence, data plus voice, plus TV offers, countries occuring different markets, through different ways. For example, you have access to unbundling in some places, or you can play with complimentary platforms like satellite that we think will also take a role in the global landscape. At the same time, remember that an accelerating LTE deployment in LTE, the first wireless technology that equalizes speed of access of data transmission speeds compared with ADSL or VDSL or even fiber, fluticating voice plus data, plus broadband or plus even plus ultra broadband offers can be done in different places, in different ways. So we think that just convergence in terms of a quadruple place or integrated offers are going to be the way to go the way this is going to be a structure in different markets. It's going to be different.
The turnaround in Spain, if that's the question, it's not just Fusion Fusion as a convergent offer. Fusion is much more, is position is the last step of a significant process that was starting by realigning our pricing strategy in Spain by focusing on quality, significantly improving the and therefore, reducing churn and reducing the number of monthly claims by more than half. At the same time, the subsidy removal strategy by getting into the financing and putting the bulk of the commercial retention effort on, the existing customer base and not on the acquisition. And finally, Fusion, which is a product more than a tariff. So the answer is, yes, we believe in quadruple playing in integrated offers, the way they are going to be a structure is different.
It depends on market dynamics. And by the way, we member that, roughly more than 80% of our cash flow is generated or is being generated in countries where we have integrated platforms. So, we are very well positioned any harm. And in terms of, of the quality, how we have been improving quality, and the call center role of that, We do not feel that at this advantage because we have been divesting in, in attempt. Simplification is the key.
We have too many products, we have become a too complex company. And therefore, when you have 1000, but literally 1000 of references of product in each company, you put a burden of interaction at the call centers at the IT part of your business, which make a huge, complexity transforming to a high operational, cost. Giving complexity, going into simplification is the key. Now, we can build our customers with 1 single line. The product doesn't deserve any more promotions.
So billing is much more easy number of cores that we're having to the core certain is being significantly reduced. So we do not feel that there is advantage at all because we don't have a tender anymore because the key is in the transformation of the company through simplicity.
Next question comes from the line of Justin Funnel of Credit Suisse. Please go ahead with your question, sir.
Just on the this mix of people who are up shifting, bringing back a line or a mobile phone on fusion versus downshifters, it's 30% for Q4. You said it got better through the quarter. I guess, it may have got better again into January. Can you give us a rough feel for what it might have been in January into the 40s now? And what level does it have to be for you to be at this revenue breakeven level?
And secondly, just looking big picture at your margin guidance, a little bit of mystery where this margin erosion is going to come from, if Fusion continues, good margins there. Brazil seems to be doing better. Is your guidance simply cautious, or should we be expecting some margin erosion in 1 or 2 operations and what might those be, please?
Okay. With regard to your first part of the question, just to reemphasize that what we are giving till December is a mix of 30% new services. And we are talking about working towards revenue breakeven in 2013, which is already a positive statement. In terms of margin breakeven, we have already caught the net adds in December in positive territory. Oh, that is clear.
Taking your question on the on the margin guidance. We get back to the issue if the trends that we have been experiencing in 2012 are sustainable or not. And we think they are sustainable because they are structure on the transformation of the operational model to be more precise. For example, TGR has raised more than 1,000,000,000 of OpEx and CapEx saving that has been transferred to the businesses. And therefore, this is playing the scale of the group that it is even increasing because now we are increasing the scope and decreasing the responsibility of TGR.
So, on top of that, are we being cautious or not we are, we think that we need to preserve the optionality of growing faster in Latin America if the market is there. And therefore, we are keeping some room of maneuver to accelerate the market in Latin America if the market is there in a profitable way. So we are keeping we are trying to keep both options. I mean, the sustainability of the transformation of the business that we are doing and the possibility of accelerating our growth.
Thank you, Justin. Next question, please.
Our next question comes from the line of Keval Quirouya of Deutsche Bank. Please go ahead with your question, sir.
I've got 2 questions. 1 on the UK and 1 in Spain. So the UK was less bad this quarter, but EBITDA is still falling 9% So how far do you think we are from revenue and EBITDA stabilization and what do you need to do to get there? And secondly, on Spain, just touching back on your business in a slightly different way. So how much further do you think commercial costs can fall in 2013 if Fusion continues with its current rate of success So could it be similar to 1,000,000 savings in 'twelve, or would it be higher or lower?
Thank you very much. With regards to the UK, as you know, we quite we happy with what happened in 2012, which is a combination of a very balanced commercial momentum and profitability. Reality that we are seeing a more rational market in the UK, and it's been illustrated so far by, income increase in in inflation with, in particular, our operation in the UK, Telefonica UK increased by 3.2% actually from today. The other thing which was to highlight is that we got close to 1,000,000 contract based growth in 2012. And very importantly, we continue to work towards growth in revenue and profitability on the back of the strong commercial that we have experienced.
We need to continue and we will continue stabilizing EBITDA, while we continue working in driving efficiency and obviously growing, our client base. That's the focus in in the UK. With regards to OpEx in Spain, as you know, we cannot release levels, cost levels, but just to give you idea that we believe the model is sustainable and that we have other initiatives in Spain, I. E. In sourcing, I.
E. Increase of productivity that our team led by Luis Miguel are working very hard on. So just to give you, that's the only thing I can say.
Thank you, Keval. We have time for the one last the last question, please.
Our last question comes from the line of Paul Marsh from Berenberg.
Back to Fusion again, you talked about 30% of new connections or new services rather. What about the proportion of new customers? Have there been any new customers or what proportion of new customers coming to Fusion? And then if I think about the services, if you signed say 500,000 new services, about 30 percent of the total 1,500,000. It looks from your churn on broadband and from the mobile ads that about 300,000 of those were broadband connections or broadband services and 200,000 on mobile services.
Is my calculation about right on that?
Well, just to clarify, when we speak about 30%, we talk about 30% new clients. So that is the figure I can give you specifically on the proportion clients within the totality of Fusion. And I think I'm not sure if I can give the other figures, but in terms broadband, we have already obtained 130,000 net adds in the quarter and we need to emphasize that that is the major important figure we provide in fixed broadband.
But I think from your churn statistics, I can work out that, your gross broadband ads were about 600,000, I think. So and that doubled by the looks of it. So can I, can I assume that, that the increase there is all driven by Fusion?
Well, I think that the main message can give here that it was an important increase in that and in because of Fusion, you have to count as well, the churn, but the reality is strong and very strong as particular in fish broadband.
Thank you.
Alright. Thank you everybody. This is Eliza. 2 years ago, we started the information of Telefonica. We created Telefonica Decital Service to grow revenue.
We created Telefonica Global Resources to reduce our cost and efficiency, and we created 2 ratios. As my colleagues in DexCom have said during this conference call, the key of Telefonica is transformation and simplicity. Transformation in C Priti and you have seen the ramp ups are flowing into an increase in the probability of our business clearly. 2012 was a great, a clear example, 2013, which meet be going to be much more clear. And I would like only add 2 comments.
There are things that are happening in this sector, which are extremely important, and we're going to be reflected in the porphyry or digital telcos like Telefonica, one which we think is extremely important is the fiber operating system, and everything that's going to be in the change in the value chain, and this is going to be reflected this year and next year. And one thing, which I think is extremely important for Europe, is the new approach by the European Union to have a single digital agenda, which is going to be the previous, we are going to be in a modular position for everything this year and the coming years. It is a fact that the 2 last comments are not reflected in your guidance, but let me tell you the result of these new policies are going to be vague very, very positive in the profitability in Arizona Telefonica are the real players of the difficult ones. Thank you very much. On behalf of my colleagues for this, for your question in this conference.
And I wish you a very good weekend. Thank you very much.
Teleconica's January, 2012 results conference call is over. You may now disconnect.