Good afternoon, ladies and gentlemen, and welcome to Telefonica's conference call to discuss January March 2012 results. I am Maria Gracielerat, Head of Investor Relations. Before proceeding, let me mention on this document contains financial information that has been prepared the International Financial Reporting Standards. This financial information is unaudited. This presentation may contain announcements that constitute forward looking statements.
Internal guarantees for future performance and involve risks and uncertainties. And that certain results may differ materially condosing 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 on our website. We encourage you to review our publicly available disclosure documents filed with the relevant securities market regulator. If you don't have a copy of the relevant press release and this slide, please contact Telefonica's industrialization team in Madrid by dialing the following telephone number.
349148287, double 0. Now let me turn the call over to our Chief Financial And Corporate Development Officer, Mr. Angelo will be leading this conference call.
And welcome to Telefonica's 1st Quarter Results Conference Call. It is my pleasure to share this call. Today with me are the members of the executive committee. So during the Q And A session, they will have the opportunity to answer the questions you may have. Us year to date shows that we are delivering on our growth strategy, fully executing the priorities set for 2012.
First, on the commercial side, we have had a very strong start for 2012, leveraging the new propositions launched across markets, in second half of twenty eleven. Growth in the quarter was underpinned by the expansion of our mobile base, especially on the mobile broadband space. 2nd, top line has recorded a significant improvement year on year as increased commercial push is already flowing into revenue In the middle of the crisis, we are back to positive growth rates, despite material tax from regulation and Spain. Mobile data sales continue to post very swift growth and will drive further top line growth acceleration along the year. 3rd, our businesses in Latin America have delivered an outstanding evolution in the first quarter.
Ainable high single digit revenue expansion. To highlight, Brazil already accounts for about 1four of our total revenues, similar to Spain. And despite having our headquarters in Europe for the first time, over 50% of our EBITDA comes from Latin America. 4th, we are setting the new paradigm in the sector, working in several areas including commercial approach, devices and networks that they will spend further later on. Let me stress that we continue to invest for future growth with focused investments in more roadband and fiber, where the quantum dip in terms of coverage is particularly remarkable.
Finally, on the financial front, we have been proactive year to date. With 2012 maturities already been fully refinanced, more than 40% of 2013 maturities pre financed and the Colombian restructuring executed. And we are taking further actions to progressively reduce the leverage ratio and to protect the rating. Please turn now to Slide number 4 for a review of first quarter financial performance. Revenue reached over 1,000,000,000 in the first quarter, up 0 point 5 percent year on year, despite the adverse conditions faced in most of our European markets.
Excluding MTR cuts, revenue growth was 1.6%. Below the revenue line, both in 2011 2012, we have booked several material exceptional items, in particular, 2012 accounts include the non cash impact of the reduction in the value of our indirect investments in Tecomitalia, which a negative effect in net income of 1,000,000. While a year ago, we recorded the positive impact from the reduction in focus on the P and L, excluding those nonrecurring effects. As such, underlying OIBDA was close to 1,000,000,000, down 7.4% year on year, when underlying net income totaled almost 1,000,000,000. CapEx to sales was 11 percent higher than a year ago, though below our 2012 target due to different quarterly execution path along the year.
Finally, let me highlight that first quarter results are in line with our internal expectations and therefore, we reiterate our 2012 guidance. Slide number 5 shows the sustained ramp up in accesses growth to 7% year on year. The very strong performance in mobile, particularly broadband, underpin accesses expansion to over 309,000,000 in spite of the 2,000,000 mobile disconnections in Spain in Q1. Mobile net adds reached 4 $3,000,000 in the first quarter, 1.5 times higher than a year ago on the back of higher gross adds, churn control and a twofold rise in net adds in Latin America. We again posted record smartphone sales, accounting 41% of commercial activity in European first quarter of 2012.
Top line reacceleration was driven by 2 key strategic pillars, Latin America and mobile data, as shown in slide number 6. Revenues in Latin America posted single digit growth. With a remarkable 580 basis points acceleration quarter on quarter. This performance more than offset the decrease in top line in Europe. On the mobile data space, the growing demand of smartphones and the strong traction led to a 55% year on year increase in our mobile broadband time.
As a result, data revenues rose 15% year on year to reach over 1 third of mobile service revenues. Non SMS revenues already account for 55 percent of total data sales as we leverage tiered pricing to monetize the strong increase in data traffic with traffic and revenue growth rapidly converging. Let me now as the outstanding performance of our main growth engine Latin America on Slide 7. Our operations in the region keep posting growth acceleration on the back C Mobile. We have led the growth in the region with 4,700,000 net additions, posting a new record for the first quarter a more than doubling last year's figure.
We also continue to lead the mobile broadband adoption in the region with 2,300,000 mobile than quarterly net adds. As a result, and reflecting the state expansion of mobile service revenue, up 13% year on year, top line growth ramped up to close to 10% if we exclude the negative impact from regulation. Please notice that mobile revenues already account for close to 70% of our sales in the region. On the fixed business, it is worth to highlight the increased contribution of fixed broadband and new services, already accounting for over 40% of these sales. Clearly, our unique portfolio, Latin America, security, differentiator, factor, and a strong growth platform going forward.
48.5 percent of our revenues and over 50% of our EBITDA already come from this growing region. Please turn now to Slide number 9 to analyze OIBDA margin evolution. OIBDA was primarily affected by the rising commercial costs, which were up close to 11% year on year in organic terms on the strong push in volumes from the second half of twenty eleven and increased weight of smartphones on the mix. The higher focus on retention will drive future reduction in the coming benefiting also top line performance and revenue share as we keep the most valuable customers on board. Additionally, our initiatives to promote more rational markets and enhance mobile data monetization should lead to a more efficient commerce expenditure.
On top of that, we will benefit from easier comparison in the second half of the year. Secondly, network and C costs rose on the enhanced coverage and capacity of our networks, especially in Latin America. Moreover, inflation in some countries also drove higher costs. On the other hand, we are implementing cost initiatives across regions with savings from the headcount reduction in Spain already flowing in the P and L and other linked to recent redundancy programs in Brazil, Czech Republic and Ireland to come. We also continue to optimized capital allocation, selling non strategic towers in Brazil and in Spain, which were partially offset by the restructuring costs booked in the quarter.
We will deliver improved profitability along the year, leveraging cost contention measures and the benefits of Telefonica Global Resources. Let me now focus on the performance of our businesses by regions, starting with a more detailed review of Latin America on Slide 9. Looking at revenue growth components by geographies, I'd like to highlight that we delivered top line growth acceleration across all our footprint. Even in Mexico, where we are facing operating challenges due to the domestic MTR cuts, we are gradually around the business, coming back to positive revenue, revenue growth rates. OIBDA grew close to 1% with increased commercial due to higher activity volumes driving the EBITDA margin erosion.
Please notice that tower sales were virtually offset by restructuring costs in the quarter. Turning to slide number 10, to review the performance of our Brazilian business, mobile net additions reached a new record level in the first quarter allowing Vivo to gain market share in a highly competitive mobile market across all segments. We continued focusing on the high end segment, driven by strong smartphone with a smartphone base more than 4 times higher than a year ago. At the same time, new customer propositions further stimulated customer expansion in the prepaid segment. Fast Access's growth was compatible with best in class quality indexes as reflected by the lowest levels of complaints in the industry across services.
In parallel, Vivo is leading sector transformation. At the end of March, Evo had over 2700 municipalities covered with 3G, which is more than the rest of our competitors to their and allows Vivo to push strongly mobile broadband adoption. In parallel, Vivo is adopting a selective fiber deployment, a superior solution for fixed broadband, which allows faster speeds than the solutions provided by our peers, and we are rapidly increasing the numbers of households connected. On slide number 11, mobile service revenue in Brazil kept growing at almost 15% year on year, excluding MTRs, driving the contribution of the mobile business to over 60% of default revenue. It is worth to highlight that data revenues already account for 25% of mobile service revenue, reducing the company's exposure to further reductions in the nation rates.
In the fixed business, sales showed a marginal quarter on quarter improvement with excluding the impact of regulation. 1 clear evidence of the benefits of our integrated strategy is the strengthening of our position in the corporate segment, which of it represents 48% of our fixed revenues. Selectivity, higher weight of smartphones and restructuring costs led to margin erosion in the quarter. Nevertheless, we continue to focus generating further efficiencies and all the savings from the 10% personnel reduction in place and the April rebranding are still to come. Synergies crystallization is clearly visible below the EBITDA line, allowing for a sharp increase in free cash flow generation.
Turning to Slide of our Latin America footprint where commercial momentum since the second half of twenty eleven is delivering the results we expected. In the South Bay region, revenues are accelerating to reach double digit growth as we are maximizing the benefits stemming from our integrated assets, accelerating growth while transforming the operations. As an example, let me highlight that the agreement with the Colombian government to integrate the mobile businesses opens new opportunities ahead of us. Turning to Slide number 14. It is particularly noteworthy, the turnaround in the Mexican operation where we are starting to see the results of our efforts flowing into revenue performance.
The improvement in operational KPIs make us feel confident about the progressive consolidation revenue growth acceleration along the year. The performance in Venezuela continues to be very strong, not only in terms of revenues, but also in terms of benchmark margins. And finally, the evolution of the results in Central America also reflects strong revenue acceleration. And please let me remind you that OE is reflecting the startup impact from the recent launch of operations in Costa Rica. Let me now review our continued executing its strategy to regain momentum in key markets and to increase mobile broadband adoption among economic headway and strong competition.
The success of our enhanced commercial propositions launched from the second half of twenty eleven and our increased focus on retention push handset upgrades, up 16% year on year. Additionally, mobile button customers posted a solid growth of 27%, reaching close to 30% penetration over the total mobile services. The mobile broadband momentum and our strategy to monetize this growth engine, clearly flowed in revenues with non SMS data revenues up 21 year on year. Nevertheless, optimization of usage in a challenging macro environment lower price points and the ongoing regulation drag impacted overall service revenue performance. The efficiency front, I'd like to highlight that our focus on cost contention led non commercial expenses to decline 6% year on year, partially offsetting the significant increase in commercial costs, which resulted in a 33% OIBDA margin in the quarter.
In parallel, continue working to have more rational dynamics in our markets, with clear examples in Germany, the success with my handy model, and Spain the acquisition subsidies removal. If we move to been on Page 15, I'd like to highlight that we are executing our plan to transform and turn around the business. The first step was to refresh our tariffs across services to become more competitive, stop the loss of high value customers, and drive churn reduction. New tariffs are getting a strong traction in the marketplace. 50% of our fixed broadband customers and 57% of our mobile customers in the consumer segment are already enjoying the new tariffs.
Channel reduction is clearly visible, for example, in fixed broadband with a third basis points decline from Q1 twenty eleven to April 2012. Moreover, health implication early indications in mobile churn of those customers that have opted for the new mobile tariffs point out to a sharper production in churn. Regarding ARPU, every data on the new mobile tariffs shows a limited impact with positive elasticity in the low segments and a slightly higher year on year erosion in the ARPU of the higher end customers. Fixed work plan ARPU declined 9% year on year, as we actively migrated customers to the new tariffs to further reduce churn. The first expansion of our fiber network coverage to 1,300,000 households, 3 fold the homes passed a year ago, and the strong traction of the offering with 177,000 houses already connected, will drive further churn con contention and will help us manage ARPU.
In fact, in those areas where we have fiber results, where we have fiber results are very positive. The second step is the implementation of a new model to enhance market dynamics. And that is why we have gradually reduced mobile handset subsidies since February. Some of our those have already announced, they will follow us, and therefore, you should expect a more rational market going forward. The results so far show a system reduction in mobile number portability churn.
However, gross and net additions were penalized in the quarter as we were the only player in the market lowering subsidies at mid April. We are setting the stage for a redefinition of the value chain in the mobile business foster a return to profitable growth in the market. Finally, the first step is aimed at the increasing efficiency beyond commercial costs and delivering the best experience to our customers, leveraging best in class networks. Top line performance continued to be impacted by a challenging trading environment with pretty stable trends in the fixed business. Weaker performance, mobile service revenue was mainly driven by further usage optimization, lower prices, and our new commercial policy SMS premium.
Additionally, increased commercial efforts were also impacted mobile service revenue as loyalty points are accounted as lower revenues. Nevertheless, strong focus on the cost side has allowed to contain the deterioration quarter on quarter, despite increased top line pressure. The successful execution of the Neurial redundancy program led to savings of over 1,000,000 in the quarter. Roughly 4500 employees have joined sorry, 404,000 employees have joined the first two tranches of the plan, and 5149 have already left the company with the remaining leading before year end. As a result of all, our efficiency actions OIBDA margin expanded sequentially.
Turning to Slide number 18, in the UK, we are regaining commercial momentum in a highly competitive market. Contract mobile net adds were the highest since Q32010, underpinned by the strong volume upgrades around high end smartphones and 8% year on year increase in those sets. As such, we have improved our relative position versus other players, while also expanding our smartphone penetration to 41%. I would like to mention the recent launch of the new proposition on and on around Tier Data Tariffs to further reinforce our position on mobile broadband, which is centered to data revenue growth. This offer is an additional step to secure the level of market share.
With the right commercial initiative and lower incremental costs, I would like to highlight that unlimited data propositions launched by and competitors have not impacted our market share of gross adds, proving the success of our rational approach. Top line continued to be pressure, mainly impacted by usage optimization and contributors at lower price points, though stabilizing year on year growth trends as commercial efforts start flowing into revenue. OI's performance improved, while SMS trends stabilize with data revenues increasing their weight to 48 percent of mobile service revenue. Regarding profitability, higher activity around retention and acquisition explains most of the EBITDA erosion. Please notice that activity in first quarter 2017 was particularly low when we have also increased commercial efforts quarter on quarter.
Going forward, efficiencies derived improved contract churn and the lower volume of customers out of contract as the bulk of renewals were done in the quarter should translate into a lower year on year increase in commercial expenses. In Germany, on Slide 19, our growth story continued. We recorded a strong set of results, gaining value market share, with the best ever quarterly contract net adds at close to 300,000 on the back of consistent churn improvement continued growth of gross adds. It is worth highlighting our partner distribution channels activity as well as the strong business segment performance. Consequently, smartphone penetration increased five percentage points to 21% with a 95% full share of our total shipments.
This, combined with successful monetization of data services, and a better revenue mix led to a sequential acceleration of mobile service revenue growth to 10.5% in the first quarter, excluding the negative back from MTR cuts in Q4. OIBDA posted a robust double digit annual growth as revenue growth flows through, which comes higher efficiencies led to a margin year on year improvement of 2.2 percentage points to 23.4 Please turn to Slide number 20 to review our operations in the Czech Republic. Commercial momentum continued in the mobile value segment with a strong growth in the corporate base, up 6% year on year underpinned by better term and mobile broadband growth. In the fixed business, fixed broadband access has continued to increase with VV already representing 19% of the base. Revenues showed a sequential improvement for the 3rd quarter in driven by the continuous improvement of the mobile segment as well as increased contribution from Stravakia.
In parallel profitability remains strong with a 40.5 percent margin, showing a limited year on year erosion, leverage on ongoing efficiency agenda in the Czech Republic save of noncore assets and growing OIBDA and Slovakia despite higher commercial costs and different ICT projects phasing. Now to finalize the presentation, let's move to the financial site on Slide 21. We have been able to execute a well balanced financing exercise year to date, relying on both the capital markets, as well as the financial institutions jointly with alternative findings funding sources for an amount of up to 1,000,000,000. We have been able to successfully do so under quite difficult market conditions. Sensor refinancing allows us to see that 2012 has already been fully refinanced.
Taking into consideration, our extension option on the preferred shares that mature in December. Moreover, even the level of financing completed, we could apply resources to cope with more than 40 percent of the maturities for next year 2013. This proactive management has also allowed to improve our FEMCE liquidity position as we continue to increase our cash position, excluding Venezuela to EUR 6,300,000,000. More significantly, we have again increased by EUR 1,300,000,000, our undrawn committed credit lines reaching 1,000,000,000. It is also worth highlighting that we have been able to 1,000,000,000 bilateral lines maturities ranging from 2 to 4 years.
Effective interest costs have increased year on year, though we continue to remain at the bottom part of our guidance. Turning to Slide 22, we can see how we are able to reduce our debt thanks to our asset rationalization, mainly stemming from the agreement reached on Colombian restructuring and other assets, disposals such as ISpasat, BT, zone, resulting in 1,000,000,000 debt reduction. Nevertheless, this is offset by negative FX movements, nonrecurring financial expenses, commitment constitution and share repurchases. Going forward, we expect our free cash flow to enhance our financial flexibility The impact on higher payments versus accruals on seasonality and non recurrent effects recorded in the first quarter should not be extrapolated for the whole year. Working capital, secular seasonality will revert the consumption seen in the first quarter of this year.
Turning to Slide number 23, we remain mindful on the importance of enhancing financial flexibility and our focused towards improving our leverage ratio by yearend. We are in portfolio optimization mode and looking for selective monetization of our assets across geographies with 1,600,000,000 already achieved. We expect in excess of additional 1,000,000,000 proceeds from further asset sales already undergoing, including Atento, while we can need to actively analyze all the divestiture options to maximize the value of our portfolio. On top of that, adapted our shareholder remuneration to a sustainable trend under current market conditions providing us flexibility. To recap, we had a very solid commercial start for 2012.
Our top line has recorded a significant improvement. We have posted an outstanding performance in Latin America. At the same time, we are setting a new paradigm in the sector Finally, we do reiterate our 2012 outlook as we will deliver a progressive improvement along the year. Thank you very much
1 to register questions, and 2 to cancel. We kindly ask you to ask a maximum of 2 questions for participant. And if possible, We recommend you not to use your cell or hands free phone. There will be a short silence while questions are being registered. Our first question comes from Jesus Romer from, Maryland Lynch.
Please go ahead, sir.
Thank you. I I saw a question on, this Spanish mobile market. If you look at the number of customers you lost in Q1, I don't know if you could give us a detail of of how many of those customers were lost in the month of March. On the math, I do with the 2.5, you know, customers you lost, on a yearly basis, that's a at least 500,000,000 of revenues. Otherwise, you can give us a bit of detail on what is, that customer losing a and whether you're seeing any improvements in the month of May so far?
Thank you.
Thanks for the question, Jesus. Out of those $2,500,000 that you were mentioning, $2,000,000 are coming for the cleanup of the base. And out of that $1,300,000 is coming from prepaid because we have applied a different criteria. We have passed from a balanced criteria to an activity criteria because it was more realistic. And on the contract side, we have been cleaning up some customers that were not effectively using one of our services, and we'll provide an of churn when they realize that.
So we are actively cleaning up, and that accounts for $2,000,000. The other $500,000, we've had the real activity of of the quarter. If we focus, namely, on the trends of margin, which we are is decided to take away the handset subsidy. The bulk of those are coming from that math. And as Uber operators have started to be aligned.
This trend is significantly being improved in the month of April and in the first weeks of May. It is worth mentioning that, different players are having different, commercial approach. Some of them have decided namely, Vodafone have decided to to eliminate subsidies as well. It looks like, other places like Joey are going into the direction. And orange is, is sustained with a subsidy model.
So we think with a lower intensity. So we are closely monitoring portability figure to take our proactive performance with different players and we will have different tactical reactions depending on the different players. But, it is a, it is a, it was a hot, a hot quarter. We knew that. But the economical model in terms of, getting turned down and retaining high value added customers and putting the focus of our loyalty programs and subsidies effort.
On existing customer, which are the most valuable one, is starting to get some traction. And we are starting to have some, churn indicators that looks are going into the right direction, but it is still, soon. So this is a little bit of the color that I can share with you.
Our next question comes from Mr. Ataman from JP Morgan.
But I
think the first one is on Spanish Broadband Upwind. So in mobile, the growth has been slowing to 2.5% after plus 11% in the previous quarters. Is that a trend we have to assume is to stay, will we'll persist in the future as penetration has already reached 30%. Secondly, on fiber, in all of your markets where you roll out the success that take up is quite successful. Is there a case that you should accelerate the fiber rollout to capture more of that broadband market?
Thank you.
Yeah. I I didn't get the first question. I think it was on managed service revenue, like, since you are installing on the mobile side. And, there are 3 major. If that's the question, there are 3 major effects on the acceleration of the decline of mobile services revenue.
The first one is that we have cut a commercial practice based on SMS premium programs with partners that work creating a significant amount of quality, concerns and claims and significant amount of in IT. And in terms of bidding claims, we have cut and we have become much more selective on the SMS trading agreements and commercial understanding and promotions that we were doing with third party status planes, basically one worth of that drop. Then you have the loyalty programs, which are accounted as negative revenues. So to set, that are netted from revenues. Those loyal programs are increased compared with the previous quarter because that takes part of the commercial strategy of blending or make sure that we bring thanks the most valuable customers that we have.
And therefore, we invest on the loyalty programs to make sure that they stay with us and will be accrued as. And the and therefore are flowing through revenues. And then there are only, another part, which is a lower part of the effect is the new We have been effectively migrating, actively 3,300,000 customers from our total base of Residential contract customer of roughly $7,700,000, which is 40% of the base cash flow delivery migrated and that creates another tension in terms of our lower ARPU but again, with a significant improvement in churn. So the overall equation will be improving sequentially around the year. So that explains that drop on the on the mobile service revenue.
Considering the fiber on the fixed part of what is considering the fiber deployment, So far, results in terms of ARPU, churn, CSI, and, customer experience, basically, in terms of installation, time and the learning curve in terms of, the average cost of subscriber acquisition cost in terms of the investment of time in the household are improving significantly. And that explain why the take up ratio is improving so significantly. At the same time, we are trying to be very selective on the home passed criteria in order to make sure that before we pass 1, one neighbor on 1 city, we have a commercial traction before that their take up ratio is improved. And that's had through a very geographical approach has helped us to to be much more efficient. We are pretty positive on the on the deployment and the the commercial results.
And therefore, we'll keep with our current plan of significantly increasing our deployment and our of connections.
Our next question comes from to Ira Daconu from Citi. Please go ahead, sir.
Hello. Two questions, please. My first question is around the Libya effect and whether you can give an idea of how much your revenue growth benefited in Q1? And perhaps if you could comment as to how you expect to get more than 1% growth for the full year given the start up we have. And my second question, and I'm sure there may be more sessions on KPN later, but are more interested about general principles given your commitment to the leverage target.
Can you rule out either changing the dividend policy or using your shares as currency in order to execute any strategic transaction ones. Thank you.
This is regarding your first question. Generally speaking at group level, we didn't see, of course, there was a positive effect, but we didn't see a relevant effect though there is a different behavior for market on in some of them, the impact is bigger than others. But overall, there is not a big impact at group level.
This is Angel Abila regarding the second question. First, with respect to to KPN, we don't have any comments regarding that specific situation. We would only say that it evidences, the strong undervaluation of the European telco sector and the evaluations that the strategic play already to attach to European telcos. With respect to the dividend, we are not envisaging any change to the dividend policy that we announced in December of last year.
The next question comes from Mr. Prota from Morgan Stanley. Please go ahead, sir.
Yes, thank you. I have a couple of questions. First, on the UK, you've been mentioning something in the presentation on this. But I would like you to elaborate a bit more on whether there's a seasonality in spending in the quarter that has brought forward costs, and therefore, could drive better margins throughout the year. And your view on whether such a high level of spending is worth, and when revenues will turn around, that's my my first way And the second question is on the subsidies elimination in Spain, first thing, whether that was already included in your guidance or not?
And secondly, whether you're expecting a net positive impact on EBITDA from this year or the savings that you could get from subsidies will be fully offset by in subscriber retention costs and maybe also the attention is turning into lower tariffs from competitors?
Thanks, Luis, for your questions. I mean, taking the first one on the UK. And explain more specifically on the evolution of, of the margin in this first quarter. First message is that in the previews year, in the first quarter of the previous year, we have almost no retention cost, as we have no extra of almost no expiration of contracts with iPhone customers. And the bulk of those happened in the, namely in the fourth quarter of next year, first quarter of that year.
That means that we, we want to preserve those high valuable customers, which by the way, I would like to stress that the contract, the customer's life value of the contract is higher in average than any other segment. So we want to those. And that's why we have been investing heavily in, in retention costs in this first quarter of this year. What is that's recurring or not for the future? I mean, I would focus on the seasonality fact that most of the customers we're reaching the Iphone in the first ways of the Iphones.
And therefore, the bulk of those were have already been flowing through, but you will keep going through the giga probably at much lower pace in terms of that. Let me stress the fact that, thanks to that, therefore, churn is best in class. So we do not only have the best customers in the UK market, but we have the lower churn mark customers, thanks to that effort. And we taking your question, if that's worth the effort as well that in Spain, with exactly the answer is yes. We deeply think this is the right thing to do to create value and to serve the most valuable customers.
On top of that, there are other, effort that we have been doing in the first quarter in the in the UK. We have been investing a little bit more in advertising that will be phasing out somehow during the year. So basically, the comparison is not fair because the first quarter of last year, we have almost no retention in the cost and we have been having a if you can afford in this court. With respect to the subsidies in Spain, was that included in the budget or not? The answer is yes, we are it was designed that way.
We knew that the first quarter was going to be very tough. We knew that it would take a while till the others may consider to follow that path or not in terms of competition in Spain. But, we deeply think that the payback of that effort in terms of churn reduction is lower than a year. So we are positively monitoring we are monitoring on a weekly basis churn evolution, because thanks to the handset subsidy strategy, which by the way, we are not eliminate we are just focusing these handset subsidy efforts on our existing customers, thanks to the loyalty programs and thanks to the new tariff refresh, we think that we might be able to, get much better churn figures in the next month. And in fact, things are starting to go into that direction.
For us, it is key to monitor the profitability. So we make sure, that, that is reflected in not a heavy loss in customers. So very early stage, it was planned. It was designed that way within it is needed. At the sector levels are never in Spain with the current market circumstances, So we think this is the right direction, and we really want, to, we need to monitor that, on a weekly basis, but are deeply convinced this is the right direction.
Next question please.
The next question comes from Mr. Manava from HSBC. Please go ahead, sir.
Yes. Good afternoon. Two questions, please. The first one on Germany. Could you describe what you mean in your release by tier data pricing, driving growth in contract ARPU in Germany.
Is this the way that you design tariffs, which means that new customers are naturally taking the higher levels or, or are, should they be willing to pay more when they take a new a new tariff? Secondly, on the CapEx in Latin America, can you maybe elaborate a bit on the allocation of capital? Thank you.
Taking the question on the German market, on the German, what do we mean by data, year data pricing means that generally speaking, not just in Germany, we think that we can be competitive in the market, without having an all you can eat data tariffs. That means that if you have the right business intelligence measure in terms of reading your customer's database, knowing what are the normal user in terms of capacity and in terms of speed of download, you can design the right tariff including bundles of SMS and voice. That's what we have done in Germany. By the way, we have done exactly the same in, in the UK. And that's why we think we can be competitive in the market.
That requires a permanent reading on the download necessities or the or requirements from customers. And that's what we try to do. The message here is that we think you can be competitive in the market without having a noise. You can take that tariff, which by the way, put a significant pressure on your network. And that's why we think that with the current caps and maybe with the current information system that we're having by which we top up our customer demand.
If they want, if they require extra data capacity by without a beach hogs, I think that's the right strategy and that's what we're trying to
Yes, Richard. This is Santiago on CapEx in LatAm, the very few surprises actually. We significantly increased the amount spent on CapEx in Q1, although the seasonality effect makes always quarterly comparisons difficult to draw big conclusions from. Our priorities are well known. We want to cater to the data needs of the Latin Americans.
And in order to do that, we will expand coverage. We will participate in spectrum auctions and we hope to buy and provide the coverage and quality which is second to none. Now this is especially true the case of Brazil, where on top of mobile coverage, we are also extending gradually, but surely the fiber deployment in a similar one that Jose Maria was mentioning before on Spain. Other than that, there is no specific geographic allocation of capital. The budget is proceeding as expected.
And whether or not it is enough, I think the market will have to tell us in the year's time.
Our next question comes from Ms. Bienstock from National Research. Please go ahead.
Yeah. Hi. Two questions, I guess, for Santiago. Just a question on Mexican minutes. I'm trying to get to the bottom of Mexican minutes and what's actually gone on there.
The business is clearly turning around. Your off net minutes are now cheaper than your competitors. And so but minutes are down hugely. How much of that is about accounting? And, presumably, minutes are actually up if you didn't take into account the, accounting change of minutes to seconds.
And then secondly, is there a risk about your Brazilian business given the premium prices with MTR cuts coming and a lot of prices likely to fall? Are you concerned at all about sort of premium price, overhang in your Brazilian wireless business? Thanks.
Robin, I'm not sure I got well your second question, but let me try to answer a little bit of the Mexican minutes. What going on is a change in the shape and the form of the customers that we're attracting and the customers that we're leaving behind, that may have a confusion effect until the year lapses because of the different nature of the prepay that come in the prepay customers that go, not more than I can be explicit. And if you wouldn't mind going again for the second question where the sound was still very good, I would appreciate.
Yeah. Sure. No. The second question is that you're currently priced at a premium in Brazilian wireless to peers. So there's no determination where I can come and little wireless prices come, are you concerned at all that you're going to have a crossover hang and have to cut your prices substantially in Brazil on wireless
Okay, got you. Thank you for the, for going back again. The reason we have a premium price in Brazil is twofold. First, we are much better exposed to the fast growing and more valuable data traffic and that explains partial we have to price premium. And second, we tend to cater in excess of our overall market share to the upper half of the market, yes, because we have the better products, the better coverage the better customers.
So is that price premium going to converge? Well, I think the jury is still out. We're certainly have no signs, we can point to no signs of that being the case. If we are modestly correct about the market being tiered in mented, there will be different habitats for customers to live in. And to the extent that we continue providing good service and, again, the quality, experience.
I don't see why overall pricing should converge. The lower ranks of the ladder, those occupied by aggressive pricing entry level prepaid might be different, but it is a much more structured market than that statement will suggest.
Thanks. Next question, please.
The next question comes from Mr. Javier from BNP Paribas. Please go ahead, sir.
Good afternoon. Thank you very much. First a question on Latin America. You mentioned that there's been a lot of increase in commercial expenses, and that one reason why the margin diluted a bit. But when I look at, for instance, the press release of Vivo, and I look at, for instance, personal cost, which are growing 8% year on year on an adjusted basis, it does seem that there's also a little bit of cost inflation.
So maybe comment on that with regards to Brazil, but also in other countries in the region, are you generally seeing some cost inflation? 2nd, going to Germany, you, I mean, obviously, we're seeing probably one of your competitors, getting a new shareholder, with deep pockets. Does that change in any way the way you think about your strategic position in Germany, and how well you're positioned? You?
Matthew, Santiago again. On Brazilian cost increases, you parcel, right? There is a bit of cost inflation going on in the region. There is no way denying it, but I don't think that's the main explanation of why cost showed up in the first quarter. They are typically related to the expansion of our customer base, which as I think we mentioned in the presentation, record levels.
Brazil has added more customers in the first quarter than it has ever had. So the last areas of market capturing are still going on, and that had an effect on commercial expenditure. Also, I'd like to highlight the that because of the existence of data products and the higher cost, the unit cost of smartphones, it is only natural, but when you have a big increase, which is likely happening this year, in the adoption of these devices, you will have a unit cost increase that is not going to be permanent as a smartphone adoption is increasing, but it's not going to be doubling every year. So to components to that cost increase, one is in genuine cost inflation in some quarters. Most of them, however, related to the strong customer growth and partially related to unit cost increase as the customers turned away from feature phones into smartphones?
With respect to the to the situation that may having direct implications on the German market. We would like to reiterate that at this stage, we would not want to make any comments regarding that specific situation.
The next question comes from Mr. From Goldman Sachs. Please go ahead sir.
Yes, thanks for taking my question.
A couple of things that caught on page 23, towards the end of the presentation, you talk about opportunities under review for, I guess, faster deleveraging. And then there you talk about portfolio management, I guess we've seen a couple of situations recently where that operator is now able to settle into private equity at significant premium to current trading multiples. Is that something that you're you're thinking about? And can you give us a framework by which you decide what kind of asset to call and which ones you might look to selectively monetize? Secondly, I just wanted to ask a broader question about commercial cost.
Is this now a sort of change in the in the as to the company, which is going to last for a while? So you're going to continue to invest at this high level. In commercial costs, particularly in LatAm, and then look to get better revenues as a way of improving growth and profitability. Or is this is this time bound? Is this a period you're investing for?
And then you'll see the margins recover as you reduce the competitive intensity?
Thank you, Tim. This is Angela taking your your first question regarding slide number 23. As you have seen, even in taking into account the post closing, if related to the Colombia restructuring and so on. We would still be outside or above the target leverage that we have expressed and committed to the market of 2.35. This has come from increased CapEx payout from some negative FX movements and some other effects, which are explained on Slide number for Tito, but we remain committed to this leverage ratio, we remain committed to preserve operating.
We remain committed to our shareholder remuneration so clearly, we have to step up our efforts with respect, 2 activities for actions regarding the reduction we have already achieved 1,000,000,000. We have in progress, potential transactions that would have in excess of 1,000,000,000. We don't want to provide specific numbers, but our estimate and given the progress of those would be in excess of that. And then we are assessing a variety of potential options that we're reviewing. And we are, like, in the sense that we have multiple options to on which we can act.
We can capital markets with potential ideas of some of our assets. And we are assessing effectiveness of those. We are also analyzing, which, since if any, we could deem additionally to be in on core, and we can also use the deliver of selectively monetizing sticks in some of our operations. So this is what we're working. We wanted to highlight it to point out that we remain committed to our leverage, targets, our shareholder remuneration targets, and that we will continue to activate these actions, obviously, subject to market conditions.
Could you share anymore just on the framework of your thinking on that? Is it about long term market structure attractiveness, how you're thinking about making those decisions
Those decisions are linked to, obviously, market attractiveness. We are not looking at expanding our portfolio in other operations. We are looking at, options that can increase the value of operations that we have. I don't know, usually, to the return capital that we have employed in our operations.
Okay. Thanks. On the commercial side?
Having your second question. I do show from the last part of last year, I think we have a strong commercial push in most of our most, relevant markets because of that, you have seen,
a
commercial cost increase very much related with our, commercial activity that deliver very significant access growth. Regarding the the rest of the year, though we are going to keep a high level of activity, we will see positive impact because of the subsidies cut in some countries, and we will see a very positive impact because the iPhone impact dilution along the year. In any case, we will manage this commercial cost very much, in line with our revenue growth for the rest of the year.
The next question comes from Mr. Milner from Ahmed. Please go ahead, sir.
Thanks very much. I just want to come back to the Spanish service revenues fell 18% in the quarter. And I just want to understand what was the service revenue trend before and after the change in subsidy policy? And then second question moving to Brazil. I think the EBITDA fell in the quarter adjusted for restructuring and tower sales.
And just, I mean, thinking back to the large synergies that you anticipated at the time of the Vivo deal and obviously the good mobile growth that you're seeing, it seems quite disappointing. You mentioned some of the reasons customer smartphone take up and cost inflation, but I wonder if you can just talk in a bit more detail about how and when the sort of EBITDA growth trend might start to improve from here. Thanks.
Okay. Taking your question about the mobile service revenue in Spain, excluding MTRs, the increase year on year is 16.2%. Compared with a 12.4% in the previous quarter in quarter in Q4 twenty eleven. And again, three major sources of that deviation and none of them strictly linked to the handset subsidy. So we have not seen an acceleration of that because of the handset subsidy.
The SMS premium that we have been much more selective, much more selective because it was causing us a significant amount of bad revenues that we were forced to correct in in other quarters and claims and costs and IT and, and billing claims. The loyalty programs, which is the one that is somehow related to handset subsidies because we are increasing the handset subsidy activity in our existing customers because we consider to have the best, the most valuable customers. And therefore, we are increasing the loyalty efforts. The content part of the savings that we have in order some it in other subsidies, handset subsidies, below revenue in this revenue line. And the third one which is derived from the effect of the migration to the new tariffs.
Those are customer host promotions. We're expiring or we have been actively migrated and therefore, they have a lower ARPU. You have also, they are on that part, and a positive increase of the lead year of roughly 0.7% in the in the quarter. So the net of that is the evolution. None of them is strictly direct related to the subsidies except in the loyalty programs.
Yes, this is Santiago. In terms of when or if Brazilian OIBDA margin will recover. You rightly pointed out that there are number one off effects that are not going to be coming back. And so the remainder of the year, most of them related to personnel restructuring, I've also mentioned, mentioned cost inflation. I think it's fair to that despite the high temperature, competitive temperature in the market in Brazil, those trends will smooth out as the year progresses.
The reason being further one of nature of some of these movements. And also, a part of the savings that are going to come from the integration of our fixed and mobile businesses, which is already completed, will start transpiring as the year progresses. We have no way of knowing how strong the market will continue pushing. What we have been able to record last year is a slight increment in our OIBDA margin, I'm sorry, in our OIBDA market share. And your respective of what ends up happening, we would expect that to continue being the case this year.
So I think there are one of very clear effects that are not going to come back in the coming quarters. So that should be an improvement in growth rates relative to last year and the fruits of the integration are going to be highly visible probably in the second half.
Thank you.
The next question comes from Mr. Fana from Credit Suisse.
Follow-up questions, please. The strategy where you've got a a very large gap between your level of SRC per unit and or SAC is quite unusual when we look at the history of the industry. So that's a temporary phase that you're going through. And I know you're planning ultimately try and lower your SLCs over time as well. That's once you've locked customers into these new plans, something we can look forward to later in the year in terms of margin improvement.
Secondly, it's just more sort of of principle rather than specifically about KPN, do you think given your performance in Germany that you need to be involved in German mobile consolidation
Okay. Taking your question, even though it's global, I that, probably you are relying. You are referring to the Spanish market, namely, because it's the most,
Yes, sir.
I must
say. Yeah.
So I will say that, yes, we see that as a change of paradigm, which means that, we knew that it's gonna be, 1st phase, which is, which was gonna be, because, when you remove subsidies, you don't know what the other competitors are going to do. But do you think that being the market leader, you will have some effect on the market, and you will try to redress the margin trends of the whole industry. So we think that the retention cost was here through the handset subsidies or in the UK is something that you need to have because we have very valuable customers with, again, when you do the a present value of the chain of revenues of the different customers. We have an outstanding value by customer base that we need to retain. And therefore, subscriber acquisition cost of the existing customers, increases at the same
performance in Germany that you need to be involved in German mobile consolidation.
Okay. Taking your question, even though it's global, I think that probably you are relying, you are referring to the Spanish market name because it's the most,
Yes, sir.
I'm asking. Yeah.
So I would say that, yes, we've seen as a change of paradigm, which means that we knew that it's going to be, 1st phase, which is, which was going to be tough. Because, when you remove subsidies, you don't know what the other competitors are going to do. But do you think that being the market leader, do we have some effect on market, and you will try to redress the margin trends of the whole industry. So we think that, the retention cost, was it here through the handset subsidies or in the UK something that you need to have because we have very valuable customers with, again, when you do the present value of the chain of
performance in Germany that you need to be involved in German mobile consolidation. Okay.
Taking your question, even though it's global, I think that, probably you are relying. You are referring to the Spanish market, namely, because it's the most, So, I would say that, yes, we see it as, as a change of paradigm, which means that, we knew that it's gonna be, 1st phase is, which was gonna be tough, because when you remove subsidies, you don't know what the other competitors are going to do. But do you think that being the market leader, you will have some effect on the market and you will try to redress the margin trends of the whole industry. So we think that the retention cost was it here through the handset subsidies or in the UK is something that you need to have because we have very valuable customers with, again, when you do the a present value of the chain of revenues of the different customers, we have an outstanding value that we need to retain. And therefore, subscriber acquisition cost of the existing customers increases.
At the same time, Juliet on the churn reduction because, do you think that in Home Depot that you apply these loyalty programs to improve your quality indexes? And you put the right incentives in the distribution chain, you can drive that down to a much better churn include. Remember that at the same time, we have been totally refreshing the tariffs so that the entry levels are much lower than they were a year ago. And therefore, you'll also be you'll also be heated by the fact that the renewals are coming out of the lower ARPU, but they are not churning. So the full effect, you need to have a few months to see if the churn is applying the countermeasures, the positive countermeasures.
We think we are measuring that since the last the last 7 months since we are starting with this strategy. And this early stage of a month, of a churn, indicate those proof that we are going into the right direction, but still we need a few months to make sure that this is the case was with that to be the case, the payback of the FFO is less than 1 year.
General, consolidation, please?
Yes. This is Hatfield with respect to the second question. We are happy with our German asset, which is a core asset. It's an asset where we have invested substantially in the last years. The return on that investment is growing.
Companies growing at a subscriber level, revenue level, OIBDA, OIBDA margin operating cash flow. So we are is satisfied with, with our operation. And with respect to, something non organic on that asset, I can only reiterate that we're not going to make comments on this situation.
Mr. Marsh from Berenberg. Please go ahead, sir.
Yeah. Hi. I just wondered if you could quantify borrowers, how much Spanish EBITDA benefited in the quarter from the actions that you took on handset subsidies. And Secondly, would you be able to give us the actual change in Spanish mobile service revenues in March? Year over year?
Thanks for the question, but unfortunately, very sensitive commercial information that we do not disclose. I stress what I have said before. Things are going into the direction that we were planning at this stage. We started in March. And that's why the figures of customers in March were affected because all this followed back later.
Some of the others for letters, but unfortunately, I cannot be more specific because as you might imagine, this is highly commercial scientific information.
Our next question comes from Mr. Kira from Deutsche Bank. Please go ahead.
Yes, two questions if I can. So firstly, on still, your Brazilian fixed KPIs seemed quite mixed with a lot of pay TV subs and slowing broadband additions. To slow down and should we expect any improvements in the rate of fixed revenue declines for the rest of the year? And second, on Spain, you reduced to commercial expense by 3% in Q1. It should give you this level of reduction is sustainable for the rest of 12.
Hold.
Yes, sir. This is Satago again, and thanks for the question. On Brazilian fixed, I there are 2 opposing factors. One is that we continue having the erosion in both fixed lines and then single front of the contribution. At the same time, that we have an increase and a reasonable growth on the broadband product, including fiber, which is off to small in size, but very promising development.
So my expectation is that the contribution of fixed Brazil despite the high growth nature of the wireless asset, we will stabilize interim positive throughout the
Thank you. So, taking your question on Spain, the commercial cost in the first quarter. I mean, remember that the subsidy is is just, in March. It's just 1 month out of, of the 3 of the quarter. And it has already I mean, for example, at the same time that we were removing subsidies, we were less active on TV campaigns, on unconventional campaigns.
And therefore, base as well as some one offs in terms of commercial effort that we are going to be deciding very drastically if we need to renew or not. Having said that, and including churn. As I was telling you, the payback of the effort should be less than 1 year. And therefore, we are betting that, the churn improvement will be flowing through our accounts. And therefore, we'll be helping us to diversify as well as other commercial actions, whether in a much more tactical manner.
So the answer is yes. We want it to be, entered into that direction. But again, too soon to say that, the whole strategy is working, we need to monitor that. Okay, very clear.
Question, please.
The next question comes from Mr. Lyle from UBS.
Hi, there. I have
two questions, please. First on Spanish, mobile. Some press reports and distribution channels have suggested you'd have to reintroduce cities and increased discounts quite heavily for customers porting from Orange. Could you confirm whether you've had some of the change strategy a bit into April and maybe some of those things is Kibble so suggested there might disappear. And then second, just trying to get on the German situation.
You're emphasizing the on the financial flexibility you've got. Could you just confirm that there are no time or liquidity that restrict you from reacting to AMX's move if you decide to? Thank you.
Question on the noise on the distribution chain and getting back to subsidies, the answer is that we are pretty firm on our, on our strategy of, trying to change the paradigm of the sector, namely in Spain, with the subsidy strategy and therefore, the vote in the bulk of our effort to our existing customers. And therefore, trying to move away from, incentivating churn of customers in the financials. Having said that, practically, not just through subsidies, there are other actions that we can take also to make sure that in the portability field, we do not lose to the battery in a hard way or that we balance that situation. That doesn't have to be through subsidies. There are, actions that we can take.
But again, we, we are very firm on this new handset strategy. We need to try to to see if the chicken is going to the right direction. And again, we think it is. So we are not gonna be, we are gonna be, we are not gonna in that, for now.
Regarding the second question, I can only reiterate that we have no comment, to make on, on, on potential situations that may be evolving in the European echo area. Okay.
Thanks very much.
The next question comes from Mr. Petty from Macquarie.
Hello, everyone. Just a couple of things. I was just intrigued to know, are you doing anything different in Germany to what you're doing in the UK? Given a noticeable difference in performance? And secondly, in the UK, you talk about usage optimization.
Is that something that consumer is stimulating, or is it something that you're actively stimulating in need in the sense so that you
can actually secure your customer base? Thank you.
Okay. Thanks for the question. We know that both markets are different in terms of significant amount of features, was it on the distribution schemes or orders? But, namely, the only or the most important differentiator, in fact, that I would point out is that, in Germany, for example, we are away from a subsidizing high for a long, long while. We are financing them through a third party.
And therefore, architectural measure model is different Having said that, we have refreshed our tariffs in Germany as well as we did in the UK. We have a most of the database analysis in customer intelligence is shared in terms of best practices around the group. So, we don't see major difference apart from the specific reference of each market. On top of that, taking the out of bundle of the usage strategy in the UK, We are not necessarily fostering that every customer decides, but we have been refreshing our tariffs and we have been launching a new tariff that includes a much higher degree of SMS in limited SMS and limited voice and a significant amount of data capacity. Because we wanted to be competitive against the all you can eat data offer from other players.
For us, the important message is that thanks to these tariffs, we have been able to prove ourselves and the market that you don't need to have an all you can eat data tariff be competitive in the market if you have the right information about the usage demand, the capacity demand of your customers. And therefore, designing the right strategy, and designing the right product attracts the right customers and help us to, make a better and most efficient use of our network. So that's a little bit
comes from Mr. Lales from JP Capital. Please go ahead, sir.
Hi. It's Falia Lales from JB Capital Markets in Madrid. A two quick please. On the first one is regarding Argentina, surrounding the situation that happened with, Repsol AP YPF recently. Are you in any way, shape, or form concerned following the, the fine that you were imposed?
A possible, worse relationship with the government and any other, interference from the Argentine authorities. And in particular, how that could concern, aspects related to repatriation cash and possible treatment of the, of the amount in hyperinflation states. And second, regarding, Central America with the launch of the Costa Rican operation all all I understand that these are small. I was wondering if you could give us some kind of context of the expectations of what we should look forward to in terms of potential size of the market? And would this be a kind of operation similar in size and contribution to say Uruguay or something along these lines?
Thank you very much.
Thank you, Fabienne. This is Santiago. First on Argentina, I think I can go, I can go as far as saying that not much has changed on the telecom space in Argentina and certainly nothing has changed on our end. Whatever is happening sectors is certainly not for us to comment on. On the at least fine, we are going through the review of the wording, the exact wording of that number.
You may have seen that there are 2 very different components. 1 is the find itself, which is 6,000,006,000,000 or roughly 1,000,000. The remainder of the full amount being a 10 peso pro rata per customer compensation that the regulatory authorities suggest that we do for our customers. Two comments there. One is that the interruption of service is more likely than not going to be proven not to have been a problem of Telefonica, but something initiated for without the company, and that may have a final effect.
And we have we're cooperating with authorities on that investigation. And second and most importantly, after the 5 to 6 hours service interruption, we immediately reacted compensating our customers on the prepaid and on the postpaid or contract segments by other eroding that day from the charges, extending the of the top ups or in this case, because it was Easter week, giving them for free until that Friday. So an additional days free SMS and connectivity capabilities. So we think we've done more than what is required to 1st sort out the problem. 2nd, we're optimistic that the true nature of that interruption is going to be proven not to have originated from Telefonica, and that has an effect And third, on the compensation, we think that we have more than done our fair share of the whole thing.
On Central America, I think it's useful about the fact that the numbers are small, that doesn't mean that they are unimportant across the region because of its not a startup nature. Is likely to contribute negatively for a while yet. And the rest of the region, the full major, the Central American market behaving quite different ways. So certainly, we're making progress in some of those, as you may have seen. And the competition especially on tariffs and new products is accelerating.
We have the intention of completing the 3 g coverage there where we are lagging behind so that we can provide a, you know, as good a coverage as possible and as competitive service as any of our competitors can.
Well, how for the last question, please.
Our last question comes from Mr. Cook from Inter Investment.
Hi, good afternoon. Two questions, please. First, Did the 2 syndicated loans you raised this quarter better to expire in 2013? And secondly, with regard to the that you've got in progress, but you have interested parties for all of them. And if so, is that how you got to, we estimate of just over 1,500,000,000.
Thank you. On the
first question, the syndicated facility that was, refinanced and extended maturities are in 20152017. Could you please repeat the second question?
So the second question is with regard to the disposal in progress, so Portel, Rondo Atento, do you have interest interested is for each of those disposals? And is that how you got to your estimate of over €1,500,000,000?
Well, the you that we're estimating is in excess of 1,000,000,000. We are not attributing value to specific assets in we don't want to disclose that the bigger of these transactions, our estimates would be atento that process is progressing very positively.
Time, no further questions will be taken. Mister Angela Vila, I I turned the call back over to you for closing remarks.
Well, ladies and gentlemen, thank you for attending this conference call and looking forward to seeing all of you at today of Telefonica Digital that we will hold in early July. Thank you.