Telefonica SA (TEF) 2009 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to Telefonica S.A's January to March 2009 results conference call. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the call over to Ms. Maria Garcia-Legaz, head of Investor Relations.

Good afternoon, ladies and gentlemen, and welcome to Telefonica's conference call to discuss to 2009 first-quarter results. I am Maria Garcia-Legaz, head of Investor Relations.

Before proceeding let me mention that these documents contain financial information that has been prepared under International Financial Reporting Standards. This financial information is audited.

This presentation may contain announcements that constitute forward-looking statements, which are not guarantees of future performance and involve risks and uncertainties. And that certain results may differ materially from those in the forward-looking statements as a result of various factors.

We invite you to read the complete disclaimer, including the first page of the presentation, which you will find on our website. We encourage you to review our publicly available disclosure documents filed with the relevant securities markets regulators. If you don't have a copy of the relevant press release and the slides, please contact Telefonica Investor Relations in Madrid by dialing the following telephone number, 34-91-482-8700.

Now let me turn the call over to our CFO, Mr. Santiago Fernandez Valbuena, who will be leading this conference call.

Thank you, Maria, and good afternoon ladies and gentlemen, and thank you for joining Telefonica's 2009 first-quarter results conference call. Today with me I have Julio Linares, our Chief Operating Officer; Guillermo Ansaldo, head of Telefonica Espana; Jose Maria Alvarez Pallete, head of Telefonica Latinoamerica; and Matthew Key, head of Telefonica Europe. During the Q&A session you will have the opportunity to ask questions directly to anyone.

In a more difficult economic environment Telefonica has again posted very solid earnings, showing our corporate strategy and our trends. As of today we are delivering on the management priorities announced in February.

We are pursuing major growth opportunities in our markets, which combined with the benefits of our high geographic and business diversification and our leadership in key markets, sometimes underappreciated, allow us to post industry leading organic topline growth.

Revenue growth in Latin America continues to be very strong, but Telefonica Europe has shown an outstanding performance. We are also leveraging our scale and execution capabilities to actively manage OpEx and CapEx to further enhance efficiency and increase cash flow generation.

And this is bearing fruit. We continue to expand margin across geographies and operating cash flow growth well ahead of revenues. And we are fully committed to [have the various] (inaudible) shareholder remuneration with growing dividends and share buyback programs (inaudible).

As we announced in 2009, dividends per share will increase 15% year over year to EUR1.15 per year. At the same time, with the first quarter of 2009 we have recorded a strong 13% year on year increase in earnings per share, while we have reinforced our solid financial position, enhancing our debt maturities profile.

The positive results recorded in the first months of the year allow us to reiterate our 2009 guidance for all metrics, revenue, OIBDA and operating cash flow growth. And we do also confirm our previously stated EPS and (inaudible) targets for 2010.

In slide number 4, we show a summary of our first-quarter earnings. In organic terms we continue to post healthy growth rates driven by Telefonica Latinoamerica, which contributed the most to the growth, and Telefonica Europe, which outstripped the lower contribution of Telefonica Espana.

As a result, organic sales in the first three months of the year grew 2.8% year on year, while OIBDA growth fell 2.5%. OIBDA margins stood at 39.1%, so with the benefits of scale and higher efficiencies achieved. Operating income growth stood at 3.9% year on year purely organic.

Turning to cash generation. Organic operating cash flow grew by 4.5% year on year to reach for EUR4.2 billion at the end of March. Please note that reported growth rates are negatively hit by forex, in fact, a major financial metric there is 1.3 to 4.7 percentage points.

Net income amounted to EUR1.7 billion, showing an outstanding 10% growth versus the last year's figure. Organic revenue growth is driven by the continued expansion of our customer base. We ended March '09 with more than 261 million accesses at the group level, or 4% above last year's figure. Growth rates bolstered by mobile, especially in mobile broadband, fixed broadband and pay TV ought to be highlighted.

We are delivering very strong growth, not only in terms of cash, but also in terms of earnings-per-share. Reported earnings per share reached EUR0.37 per share, up around 13% annually. If we exclude the impact from purchased price allocations, earnings-per-share would have reached EUR0.14.

Free cash flow per share totaled EUR0.28 in the first quarter of the year, recording a notable 57% year on year growth.

[The stats] on guidance execution is presented in slide number 6. Taking into account the seasonality of CapEx, we are fully on track to meet our growth target. And the guidance criteria, consolidated year on year growth rates in revenues and OIBDA were 3.3% and 2.9%, respectively, within the guidance ranges announced last February. CapEx up to March stood close to EUR1.3 billion.

As a result of the guidance criteria operating cash flow growth reached 5%. However, growth will accelerate along the year, as we recorded lower investments in Q1 '08 to Telefonica 02 Germany due to timing differences, higher investments in Q1 '09 in Vivo that should not be extrapolated for the full year, and the three key licenses accounting in Q2 of '08 in Vivo.

Turning now to slide number seven, we show that our strategy has adapted to market conditions in each of our geographies, and we are successfully executing our priorities in each region to deliver [sub]group results, combining a solid topline performance with an even higher cash flow generation.

We are fully capturing our organic growth potential in those markets that keep growing, mainly in Latin America and Europe. While in countries like Spain, where trading conditions are more difficult, we are focused on increasing cash flow.

I would like to highlight that operating cash flow organic growth exceeded by close to 2 percentage points the growth rate of sales, on the back of our larger scale and the execution of our OpEx and CapEx efficiency measures. This is true not only for the group as a whole, but for every single region of operations on a comparable basis.

In slide number 8, we show our ongoing focus to increase cash flow generation, with an active management of a OpEx and CapEx. The key message I want to pass is that we have flexibility to manage them without jeopardizing growth opportunities.

Total group CapEx increased 4% year on year in the first quarter of '09, with reductions across most items, mainly due to the high investments already made in past years in GSM in Europe, and lower commercial activity in the traditional fixed line business. However, we continue to invest in growth platforms such as fixed and mobile broadband and pay-TV.

These investments represent 30% of our total CapEx year-to-date, and are increasing 10% year on year, with an outstanding 36% rise in 3G CapEx versus last year's figure.

Two key data points show our flexibility to manage CapEx. First, 75% of the CapEx planned for 2009 is related to business transformation and growth projects, which could be managed and adapted to respond to changes in demand, competitive pressures, and the economic environment. Second, at the end of the first quarter CapEx committed was only 30% of our annual target.

We do also have a relative high -- a relatively high flexibility to retain control of our costs, as a significant part of our expenses could be manageable in the short term to respond to changes in demand. This ability is reflected in the 4% organic annual drop in total operational costs on the back of lower handset subsidies, advertising and billing costs, and on the year over year decrease in interconnection costs, mainly driven by lower usage and tariffs in Spain.

As we explained in our previous conference call, we are also developing global initiatives to further sharpened OpEx and CapEx efficiency at the group level, leveraging on the advantages of the higher scale of our operations.

The global initiatives already launched in the first quarter of '09 will generate more than EUR100 million savings for the whole year, while we keep working across areas to accelerate the transformation of the company's operating model and obtain further efficiency gains.

Let's now review the performance of our operations, starting in Spain. In a more challenging environment Telefonica Espana has been focused on maximizing operating cash flow and retaining value customers. Efficiency measures implemented have allowed to limit the OIBDA erosion despite revenue pressure.

Let me remark the increased OIBDA margin in wireless and the flattish margins in wireline reflecting the [relative] flexibility to adapt our cost base to the current situation.

Investment rationalization, leveraging our integrated approach has driven CapEx significantly down by 28%. Our OpEx and CapEx discipline have led to a strong performance in cash generation, with operating cash flow increasing by 0.2% year on year on a comparable basis in the first quarter, offset in topline decline across businesses.

Turning now to slide number 10, let me summarize the major trends we are seeing on the topline. In a weaker economic scenario we continue to see positive drivers. IT services are growing by almost 25% on contracts won over the quarter, while wireline data revenues are also showing a sound performance. Wireless data revenues keep growing by a notable 7%, boosted by sustained strong performance of connectivity revenues, up 50% in the first quarter.

On the negative side, the current environment is more noticeable in lower usage patterns across businesses, decreased roaming revenues, roaming (inaudible) revenues, as we have a lower number of visitors in our network, but also due to regulated price cuts.

Additionally, the different phasing of wireless handset shipments through the channel are behind the declining handset revenues. We are also seeing a greater impact from regulatory decisions. [Regulatory], the same is happening in other European markets full ULL prices have been cut by 20% this year, and the PSTN monthly fee has remained unchanged versus 2008. In addition, we are being hit by the accumulative 17% cut in MTR in the last quartile.

It is true that in terms of commercial activities during the quarter we have not led the growth of the market, but will remain focused on revenue share, and with some success, I should say.

In wireless we have seen over the last 12 months a positive gap between our customer revenue share and our access market share widening. And our estimate for the quarter is that this gap continues to stand at between 4 to 5 percentage points. In the wireline, we think that the gap should also have improved in the first quarter.

On slide number 11, we review the main KPIs of our Spanish operations. In Q1 we took a more rational commercial approach, which was not followed by other players in the market. With the slowing wireline Internet broadband market, as in other major European markets, we have posted over 9% growth in accesses, maintaining a leadership in the market with an estimated share at 56%.

In the wireless business we posted [a solution] of wireless data flat rates, doubling last year's figure. In the wireless business we keep our focus on the value segment, expanding our (inaudible) customer base ahead of the total.

The mobile market continues to grow, albeit at a slower pace. The competition stays very demanding. In this environment we kept under control churn at 1.9%, practically unchanged versus last year's figure, with the economic churn being well below this figure.

ARPU reflected lower usage patterns, mainly in voice and in the residential segment, and lower [NPR], though our strong ARPU performed better underpinned by the solid data ARPU increase. Data ARPU increased its rate to 19% of total ARPU [4.5] percentage points more than generally (inaudible) 2008, showing a very healthy performance.

Fixed telephony lines go up 5.3% year on year, which is still one of the best performances across many European markets despite the tougher economic environment. It is worth mentioning that, first, 53% of lines crossed are now Telefonica wholesale lines, and therefore generate revenues for the company.

Second, the ARPU of these customers is lower than the average ARPU, but most of the disconnections are single (inaudible). The remaining 47% of lines lost are related to the lower market growth and higher [bandwidth] activity.

To finish up with Telefonica Espana's review, I would like now to provide some more color on how we are managing our OpEx and CapEx ratios. Now we are starting -- we are doing a good job with our efficiency ratio results. For the OpEx, while CapEx [operating] has gone down by 1.3 percentage points over the March '09 plans. For the sake of (inaudible) we are using a 12-month rolling figure to avoid CapEx seasonality effects.

In the first quarter CapEx went down 28% year on year, explained by overinvestment in GSM, the fact that the deployment of traditional routes has mostly halted, as construction basically is frozen. And growth in demand has slowed down, and related investments has been adjusted accordingly. And we have adapted our fiber to allow to the current economic environment.

These, together with those initiatives, means that increasing CapEx efficiencies such as wireline, the wireless network integration, IT systems rationalization, and also per unit cost reductions on delivering group purchasing power, and vendors adjusting prices to adapt to economic situation will continue benefiting us in the coming quarters. At the same time, we keep investing in growth platforms such as mobile data, without jeopardizing future growth prospects.

On the OpEx site, reductions came to 6% on a comparable basis, with the commercial costs down 11%, handset supplies 24%, and interconnection 4%. Also, last year's headcount reduction, together with lower CPI, is putting less pressure on personnel costs. As with CapEx, initiatives being deployed will also provide some OpEx relief in the future. Energy efficiency, rationalization programs, [statistic] simplification mobile network are among others.

Moving now to slide number 13, to review our Latin American properties. I would like to stress the very solid performance we are posting across businesses, balancing growth and profitability.

During the first quarter customer organic growth across the region reached a healthy 13% year on year to surpass the 159 million accesses, mainly driven by broadband and mobile services.

The strong fundamentals of the businesses have led to an over 10% revenue growth ex FX, and 9% up to March in organic terms, supported by the further expansion of mobile service revenues, and Internet and (inaudible).

OIBDA performed even better, posting a 14% organic growth. The OIBDA margin reached 38.5%, improving over 2 percentage points versus March '08 in organic terms, driven by the strong advance in the mobile business as we endeavored to scale economies and further commercial efficiencies. While the OIBDA increased 6 percentage points year on year to 38.2%.

Improved profitability boosted operating cash flow generation, which despite higher CapEx to support the growth platforms, rose more than 12% year on year in organic terms.

Let me quickly sum up the evolution of our Latin American wireless businesses. Customer growth remains very strong in the quarter, registering double-digit growth rates in most operations in a region where the average wireless penetration has increased in the last 12 months, 12 percentage points, to 83%. Further potential is still to be captured with the two largest markets, Brazil and Mexico, still lagging behind.

Gross adds were lower than in the first quarter of 2008, but net adds in Q1 reached 1.3 million customers as we capitalized on churn improvements year on year.

Our strategy to stimulate usage through new commercial offerings led to a 17% increase in traffic. However, ARPU performance was negatively impacted by the strong customer expansion and MTR costs.

In terms of financials, I would like just to highlight that mobile sales posted a sound evolution, mainly explained by the remarkable growth of outgoing service revenues. Mobile data services, and in particular data connectivity and constant SMS continue to gain traction, and already represent 17% of service revenues up to March versus 14% last year. This area is a huge growth opportunity for us. And we will further exploit it along the year with a push on our 3G networks and mobile broadband offerings.

On slide 15 we show the advance in the transformation of the wireline business. In the first quarter of 2009 broadband net adds were 142,000 to reach a total retail broadband access base of 6.2 million in March '09, or a 19% increase on an annual basis. This strong expansion was driven by our strategy to foster bundled, and the deeper market segmentations growing out of this proposition.

Pay-TV, the three triple play solutions is also key to limit the pressure on the traditional fixed line business. These accesses identify over 30%, topping the 1.6 million market at end of March. As a result, Internet and pay-TV revenues continued increasing their weight quarter on quarter to top 20% of total wireline revenues, 2.6 percentage points more than a year ago, being the driver of wireline topline expansion.

In summary, our operations in Latin America continued to record a very healthy topline growth rate across most markets, despite the slowdown in some of the economies. In our scale integrated management model and further efficiency gains continue to bear fruit with margin expansion across markets.

Let me outline the main topics across the key countries. In Mexico, with a market share north of 19.5%, service revenue continues growing ahead of customer growth and doubling our main [competitive] growth rate. And we have posted a strong increasing profitability with close to 10 percentage point margin expansion, and an over 40% increase in local currency in operating cash flow.

In Brazil, Vivo is consolidating its leadership in a very competitive market, expanding its customer base by 19% in organic terms year on year, with service revenues growing ahead in organic terms and further margin advances.

Telesp has reinforced its strategy of bundling and segmentation, fostering local flat rate and doubling triple play offers with high broadband speeds in this first quarter, though Q1 performance was impacted by the introduction of a new call center [rule].

In Argentina we are posting very robust double-digit revenue growth both in mobile and wireline, on the back of a strong bundling and on net traffic strategy. In addition, operational leverage and further growth control measures drive OIBDA up by more than 30% year on year in local currency.

Finally, in Venezuela, the business is showing a very strong performance on all operating and financial metrics. Profitability continues to improve, reaching margins over 52% despite a double digit growth in customers.

Turning now to slide 17, we show that Telefonica Europe continues posting a strong financial performance in the first quarter, maintaining market momentum with a steady revenue growth in constant currency, while delivering a year on year organic 12% growth in operating cash flow. It is worth mentioning the improved balance in our European business portfolio, particularly Germany, and the increasing revenue contribution from DSL activities.

Total customer base was up 9% to 47 million, highlighting an exceptional performance in the wireless contract segment, built on propositions around flat rates, SIM-only, and mobile broadband, as well as successful retention activities across markets. Ongoing focus on efficiency programs and flexible management of CapEx are also key to adapt business to an increasingly tough trading environment.

In the UK Telefonica O2 business again outperformed in a slower market. After adding close to 300,000 contract customers at the end of March, contact customers made up 43% of the mobile base on the back of healthy gross adds and market-leading contact churn rate at 12.2%. The company's evolving range of innovative propositions and its leadership in customer satisfaction across all sections segments continue to drive marketshare gain.

Revenue growth remained solid at 7% year on year in local currency, driven by the 5.2% price in wireless service revenues. The increased number of mobile broadband connections and continued success of high-end phones, such as the BlackBerry and the iPhone, driving non-peer-to-peer estimated data revenue year on year growth of 42%. Voice ARPU declined, a reflect of the current trading environment.

The company was able to keep margins in the quarter at 24%, averaging on efficiency optimization of customer investment cost, continuous operational efficiencies in noncommercial cost, and improved contribution from the DSL business that helped the business maintain a momentum in the market.

On a side number 19 we show that Telefonica O2 Germany is on track to realizing it full potential in Europe's largest telco market. The business continued to deliver profitable growth in the quarter, with total revenues increasing 3.6% year on year on sustainable mobile business and fixed mobile performances. A significant 38% growth in contract data quarter on quarter already shows the benefit from the ongoing investment in our own network buildout and increased distribution channel.

The recent introduction of the [O2-1] proposition in the German market, based on a clear, simple and transparent structure, helped to drive momentum in the German market. The clear outcome from building foundations of the business is the 24% year on year growth in OIBDA, to top 23% margin in the first quarter of 2009.

Turning now to our financial profile, we show that it remained steady. In the first quarter our debt has been reduced by EUR500 million, and our debt ratios stand below 2 times OIBDA, or just above it when we include other cash commitments.

In the first quarter we have further improved our financial profile, acting both on the short and on the long term. We have raised EUR3 billion from the bull market for pre-financing debt maturing in Telefonica S.A. in 2009. And we have extended EUR4 billion of our syndicated facility maturing in 2011, more 50% one year later and 50% two years later. As such, our existing cash balance exceeds gross maturities for the remainder of 2009.

Our average debt life exceeds 6.4 years in March '09, registering a 0.5 year increase thanks for our financing activities.

Our financial expenses stat at 5.95% of our average total debt of EUR45.1 billion. As 45% of our debt remained exposed to floating rates, we expect a decreasing [plan] as new, lower rate [fixes] gradually replace the old ones.

To sum up, we continue to post strong results, capitalizing on our highly diversified asset portfolio, and delivering on the management priorities that we announced for 2009.

First, we are capturing growth opportunities in our markets, allowing us to post benchmark organic growth rates. Second, we increased our strong cash flow generation across regions. Third, the 2009 dividend per share will increase 15% against the fiscal year of 2008. In addition, we have a sound financial position, and we have posted double-digit earnings per share growth.

Finally, I would like to reiterate our confidence to deliver again on our commitments. We are fully on track to meet 2009 guidance, and we do confirm our 2010 EPS and free cash flow per share targets.

Thanks very much for your attention. And now we are ready to take your questions.

(Operator Instructions). Mathieu Robilliard, Exane.

I have two questions please. First with regards to Telesp, the trends deteriorated quite a bit for fiscal Q4. There is still obviously positive revenue growth, but we note that in traffic the terms are much worse than throughout 2008. I was wondering if you could give us a bit of color here? And is this quarter an anomaly versus 2008, or is this the trend we should expect for this year?

Second, about your performance in Venezuela. I know that [cut through] all traffic is up 7%, yet ARPU is up 22%. So I was wondering if the increase in ARPU was merely due to the fact that you're able to pass the high inflation in the country to your customers, or is there anything else in terms of new product introductions, etc.?

Good afternoon and thanks for the question. On Telesp I would like to outline that part of the performance has been driven by the impact that we have been having on the new [law] call center. That have been large enough to focus our main activity in addressing quality concerns and sustaining the number of lines. Therefore, we have been frozen some other commercial activities until those problems were fixed.

It is true that this new call center law was issued in December, but the main impacts have been flowing in January and February. On top of that, it is true that we have been first to adopt the commercial offer, in order to focus on new products and bundles. But mainly the impact in telephony in the first quarter is driven by this fact that we have been focusing our main activity in addressing the impact of these new call center rule.

It is also true that the figures of last year were impacted by the [DEA] incorporation, and therefore growth last year appears to be higher than the organic growth. But mainly the impact has been on that, and therefore we are focusing all our efforts in addressing the situation, and we are confident that the situation will be improving gradually in the next quarter.

On top of that, Brazil is sending some signs of recuperation in terms of industrial activity, in terms of credit activity, so we do think that the Brazilian market can offer some additional possibilities in the next quarters.

In Venezuela, we have several effects. It is true that we have been increasing tariffs, but it is also true that we have been focusing on the mobile traffic, on net traffic and contract customers. It is also true that the handset activity in Venezuela (inaudible) has also been very high.

And therefore there are several effects that are mixing in Venezuela, not only the pass-through of inflation. We are also driving the quality of our customers and that is why you will see that our share of revenues is higher than the share that we have now -- our market share on customers. So I think that there are several effects that are being mixing in Venezuela.

Mitchell Collett, Cazenove.

Three questions please. Firstly, the CapEx level in Spain is very low this quarter. I wondered whether that was sustainable going forward?

And secondly, you have mentioned the roaming effect and what that does to service revenues. Can you perhaps quantify how much of the revenues are roaming, and also perhaps give us an indication of what sort of effect you would expect in later quarters, presumably it's got a greater effect in Q2 and Q3?

Finally, performance in Colombia looks a touch light. I think you probably lost subscriber market share. Can you perhaps talk to us about what has happened there?

This is Guillermo Ansaldo. Regarding your questions in CapEx, yes, it is a low level, but has several levers that is playing that level. First, we are reducing CapEx on 2G and we are focusing on 3G. That is a strategic move and that will be sustained.

Second, the lower level of commercial activity in some CapEx intensive accesses, like broadband or pay TV, is bad news on the revenue side, but on the CapEx side we are able to obviously save money on that front. Obviously also, third, we are adapting the fiber rollout to the current environment. That means whenever we have a case where we see a positive NPV and a very short repayment period we will do it, but otherwise we will postpone it where we think -- for future times.

So some of these -- and also, sorry, another strong very strong factor is that we are getting better prices on the purchase and vendor site, profiting from the scale of the group and our industrial alliances. So that is our very sustainable reasons.

Obviously, I hope that the trading conditions improve, and I will be able to spend more money on the commercial side. But -- and also that quarter per quarter we have some seasonality in the way we spend the money, but the savings due to model our spending to the commercial activities is something that is very natural. And the purchasing savings and the scale savings, they will be there to remain.

Regarding your roaming questions, let me see if I got it right. You want the number. Let me give you all the numbers, then see if I answered your questions. Total service revenues -- you know, service revenues is revenues without handset revenues, is EUR1.921 billion. There is a table in the information we published. Out of that, EUR29 million is roaming. And that has a decrease of 32%.

And that is based on two factors. One is approximately a 7% decrease in the visitors -- 7.7% decrease in the visitors. And also there is a decrease in the traffic linked to the visitor of 5.9%. And the rest is price reduction. So the price reduction on some of these savings are in line also with the expense reduction related to roaming costs. But roughly EUR29 million in the quarter for roaming.

I guess what I was trying to get at, is that going to be a greater impact in Q2 and Q3, if we have the same trend?

Well, it is EUR29 million out of almost EUR2 billion, not EUR1.921 billion. So that is basically the level of impact that we get. On the OIBDA level, remember that on the roaming expense all the price reductions we also get some reduction on volume reduction and the expense. So it is not that relevant. I am much more concerned on the customer revenues than on the roaming one.

Okay.

Taking your question on Colombia wireless, it is true that the private [rates] has been increasing in the first quarter, because we have been cleaning up parts of our customer base after the Christmas campaign, which is I would say normal. And our main competitor did the same in the same period.

It is true that on the contract site we need to replace the offer, and we are focusing on that on the prepaid. While we have a, I would say, an attractive offer on the market, we need to strengthen our commercial distribution networking in Colombia, and that is what we are doing.

Let me state that in the same time we are highly focusing on profitability. We are having reducing handset subsidies. And we are having much more focus on profitability on our traffic campaign. And as a result of that, let me stress that OIBDA has increased by 28%, and that operating cash flow has been increased by roughly 70%. So it is a mix of looking for more profitability and replacing and refocusing our commercial campaigns there.

Jesus Romero, BAS-ML.

I don't know if you can provide us a bit more detail on traffic in Spain in mobile. I know you're not reporting MOU anymore, but if you can give us some thoughts of what the numbers look like?

And then a question on Venezuela, what is the cash position by now at the end of Q1? And what can you do to get that money out, if there's anything you can do.

This is Guillermo Ansaldo. Regarding traffic in Spain in the mobile business, two comments first. You see, service revenues are decreasing, but the GAAP is half the GAAP of the total revenues because of the handset sales.

By focusing on client revenues, roughly again 75% is up. A reduction on 25% present is less access growth. And in ARPU reduction obviously we are seeing a multi-deceleration, particularly in prepaid. Postpaid is decelerating the same way as in the fourth quarter, but prepaid is the one that has changed shape in this quarter.

Say roughly in terms of amount to give you the actual numbers, we are decreasing 6% total minutes. And again, if you take away the two things that we usually take away, like the data-only SIMs and campaigns where we can compare the same level, that number goes down to, I think, 4.4. So basically a 6% reduction in MOU, and 4.4 reduction if you take away these two effects.

Again, it is much more focused the change in trend in prepaid. So the pop-ups in the quarter, particularly in March, were lower than expected. And obvious that it was hitting the MOU and obviously hitting the ARPU.

This is (inaudible). In terms of the cash position in Venezuela, as you know, the Venezuela operation there are currency controls, so you have to ask permission to the CADIVI, the local currency agency, to repatriate dividends or other payments.

Currently we have asked for the 2006 dividends to be repatriated. And on top of that we have a cash position which is roughly equivalent to the dividends that we would expect to claim to go home for 2007 and 2008. The net cash position is roughly equivalent to $2 billion as of present, which is also roughly the amount that the two dividends, the two net profit figures for 2007 and 2008 should look like.

If I could follow up, the black-market rate of the bolivar is what -- 8 VEB against the euro right now, against the official price of 3, more or less?

It is not a black market. It is actually a so-called parallel. It is a very thin market, and has been going from 4 to 8, depending on when you look at it.

Certainly Venezuela is under severe inflationary pressures, and that is not a secret. But it is anybody's guess exactly to where the currency issue that should be aligned if the market were to be burst open.

What we can say, what we have been saying all along, is that tensions are significant, but so far we have been repatriating at the official exchange rate with some delay. While the cash is there, it is not simply sitting idly. It is earning interest. And so this has a mitigating impact on the time delay relative to the terms when we request the repatriation.

Terence Sinclair, Citi.

Could I ask you two questions? First of all, in Spain I am keen to know whether the slowdown, or shrinkage rather, got worse during the quarter, or whether the exit rate from the quarter was similar to the beginning of the quarter?

Secondly, I don't really understand why Argentina did so well from a profit point of view, given the slowdown in revenue growth. I wonder if I could ask you to link the answer to the level of inflation in Argentina? What was the real ex inflation rate of sales and profit growth, please?

It is Guillermo Ansaldo. If I understood correctly your question, you want to know the shape of the slowdown across the quarter. March was worse than the first two months in terms of traffic, in terms of all buying patterns and consumer patterns.

Good news is that April is better than March. And so we're still trying to understand what happens in the minds of the consumer, but March was a very low month for trading in Spain in general. A long story now in our business.

April was slightly better than March in some categories -- much better in some, slightly better, but it is a different month, so we will see. But March was the worst month in the three months of the quarter.

Could I just follow up? I was unclear whether you were claiming that you have taken or lost revenue share during the quarter?

You know that -- two things. First, in the quarter we have an estimation, because we don't have all the companies publishing their results. So for example, up to now, if I am correct, Vodafone has not published their results.

Also we do estimation -- we have [lightening] quarter type of estimation. So in mobile our estimation -- again, this is our estimation -- we have -- and you can compare that to the first quarter of last year, we have improved. That is our estimation.

In fixed, you know, we tend to decrease, because we are losing -- we are the incumbent and we lose more fixed lines. So we are defending very well, but with a trend going [lowing] down. I will estimate to give you a flavor that we lost in one year 1 percentage point in the fixed business in revenue share. But you combine both, we are pretty stable.

Basically first quarter compared to first quarter is better in mobile. Again with an estimation, because we don't have all the public figures for all the companies. Add in wireline, we are slightly decreasing, but due to the fixed line. When you can combine both we are flattish, and you know these are estimates.

In the case of mobile what we tend to measure is outgoing traffic. The other categories are very harder and tricky to estimate.

Taking your question out Argentina, let me say that with inflation, which is in the neighborhood of 16%, all our consolidated revenues in the countries are growing 20%, and our EVA is growing like roughly at 31%. So it is more than inflation.

And let me remind you that on the wireline business, 50% of our revenues are subject to a tariff frozen for the last eight years. So on the wireline business we had revenue growth of 17.4%. You need to compare that with half of our revenue base being frozen for eight years, and [late in the year] increased by 14.3%.

We have been able to basically maintain flat the number of our traditional lines through an increase in ADSL, roughly at 25% year on year. And the margin of OIBDA has been flat on the wireline side year on year.

On the wireless side it is even, I would say, more outstanding on the operational side. Revenues are growing 21.4%, OIBDA 46%. Margins are expanding therefore. Operating cash flow roughly growing 50%. And we have been able to increase further on our share of revenues. So it is not inflation which has mainly driven the operation outperformance over our business in Argentina. We are highly focusing on quality in both wireline and wireless, on customer base, migrating prepay customers to contract customers, unbundling and with ADSL and pushing up the speed of access of ADSL. (multiple speakers). So I would outline that it is more than just [an effect] of inflation.

A pretty modest positive inflation, but the EBITDA expansion has been much greater than it was in the fourth quarter. I just wondered if there were any one-offs or nonpermanent effect there?

We have been more rational in terms of subsidizing handsets, for example, on the wireless side. Much more focused on value-added campaigns on the traffic side. And the contract base of our customers is the highest in the region, because we are, I would say, successfully migrating upwards prepay customers to contract customers. So it is a mix of different things, but let's say that from an operational standpoint we are highly focused on improving the performance in Argentina and it is going well.

Robin Bienenstock, Sanford Bernstein.

I just wonder, you have been pushing for more enterprise contracts, I understand, through O2, and I was just wondering the contribution of your growth -- what contribution that made to your numbers in this quarter?

Can you repeat the question please?

Yes, I understand that you have been pushing for more enterprise contracts through O2, and I wanted to know what contribution that made to your growth in this quarter -- large enterprise contracts as opposed to retail contracts?

Just to be clear, are you talking about multinational corporate work we have been doing?

Yes.

As far as in the quarter is concerned, it is absolutely immaterial, because the one big contract that we signed was with DHL, which we declared the amount of revenue which was EUR350 million, but actually we haven't started earning revenue on that in the quarter. And just to be clear, it is a groupwide contract, so it is not just a European contract.

Okay. So far not much.

David George, Credit Suisse.

First question is just on the Spanish mobile. I think we have seen some new tariff plans from Orange in recent weeks, where they have halved the call setup fee. I wonder if that is a trend that Telefonica or other operators might follow?

Then secondly, just on Germany, we did see a slight slowdown I think in the service revenue growth trends compared to Q4. Now obviously, we've got quite a big termination rate cut impacting from the start of April. I wondered is it still realistic to expect positive service revenue trend for O2 Germany this year?

Regarding Spain, the type of -- we are focusing our commercial activity in mobile in three areas -- with three objectives. The first one is to stimulate usage. As I mentioned in other questions -- in other answers -- we did suffer from usage from our existing customers in our first quarter. So we are focusing a lot of the promotions on trying to stimulate usage with our customers. Examples are pop-up promotions, special rates for international calls, flat rates, some on the weekend, some during the day.

Those are plans that are in some cases are massive, in some cases are targeted to specific groups. But the idea behind business that handles those plans are to stimulate usage, to get more traffic, for example, more activity from our existing customers.

The second objective is a very specific need, which is the SIM-only offers. That is a trend that we have adapted from the success in the UK. These are specific low tariffs, but SIM-only. That means that we are not investing in subsidizing handsets and so on. So we are giving away on tariffs, but saving on the subsidies.

The third area obviously is trying to boost mobile data adoption, which is going very well. We are much more focused on flat tariffs. In that sense, we have basically doubled the number of flat tariffs that we have both for small screen and large screen. That is roughly 1 million customers. And so we are not trying to enter in a price war and we are not in a price war.

Basically I think that the wise thing to do is try to stimulate usage and try to push up the mobile data adoption, which is a trend that is positive even in this scenario. And obviously to address the specific segment needs.

It is Matthew here. A very marginal slowdown. I think the quarter four number year on year was 0.8 and the Q1 number is 0.6. If I had to point to anything, it would be actually giving customers extra value in the tariffs.

When I look forward, you are right, the MTR cut comes in from the start of quarter two. That will approximately take out a couple of percentage points out of revenue growth in Germany.

The key offset to that is we have just launched a new tariff in Germany called O2O. We launched it at the start of May. And from our perspective we've got great hopes for the tariff, because we think it is actually revolutionary in the German market. So we think that is going to get some great traction, hopefully to offset some of the MTR downside.

David Wright, Deutsche Bank.

Just a quick question on the EPS guidance, please. The EPS stress test guidance in particular. Was that based around trends we saw in Q3 and Q4 in Spain, for instance, because it would seem like trends into the beginning of the year have further deteriorated, and indeed you have just indicated that perhaps March once again has slipped. So does the EPS stress test guidance reflect this Q1 dynamic? Does it reflect these pressures, certainly in the Spanish market?

And then just another couple of questions, please, to Jose Maria. It looks like in Mexico the 3G license auctions have been pushed back again. And you guys I think are sort of scrambling for capacity there. Is that proving to hold you back now, AMEX, indicating that it is looking to price closer to you guys to take some share away?

It is Santiago Fernandez Valbuena. Let me answer briefly the EPS, the 2010 question. What we meant when we said that the stress test included the prevailing trends was exactly what turned out to happen in Q1. That is the weak economy portion put a lot of pressure on the top line, but us being able to counterattack by first managing costs, and second adapting CapEx deployment to the environmental condition. This is basically what we meant. And as you probably have seen in the Q1 numbers, we are right on track, both on the EPS and on the free cash flow front.

Of course, you can always design a scenario whereby the doomsday is foreseen and everything falls apart. We certainly do not think that the current environment is conducive to that kind of outcome. But we certainly will continue to monitor the outlook. But so far, so good is what I would answer.

I would say that you also may also have noticed that the currencies that were a dragging factor have actually turned for the better. And it is only a matter of time, should they stay where they are, that they start contributing in a small positive way.

So just to check on that, Santiago, the EPS stress test then assumes that this kind of pressure in Spain, the kind of materially sort of negative service revenue growth and the line loss trends, are we assuming they continue or are we a assuming they recover until 2010?

We have way down the line from October '07 long-term guidance towards the end of 2010. So let's take the game as it comes. And what we can say is what we have said. That is so far we do not see that our EPS and free cash flow guidance is at risk. We have no reason to believe, despite the relatively weak-ish March, which has been probably more than compensated, as Guillermo explained, by a not so weak-ish April. I am sure we are going to see a couple of these months, some good, some not so good.

That's cool. And Mexico?

Thanks for the question. It is Jose Maria speaking. In Mexico we do not have an issue on the voice part of our offer. And the only thing that we would require is more scheduling in order to modify wireless broadband. That we think it could be an opportunity, and therefore we keep looking for later to do this option in our traditional spectrum.

But let me stress that from the voice point of view, we are in good capacity terms. And in fact, after the first quarter we will become a little more aggressive in terms of doing more voice offers in the second quarter, because we do think there is room for that in Mexico.

That's great. Thank you.

Jonathan Dann, JPMorgan.

Three questions. The first one was just could you dive into the change, or the improvement, in margin between the first quarter '09 and the first quarter '08? And could you just clarify whether or not you included a savings from, I guess, not paying Deutsche Telekom for their network? I think Deutsche Tel had mentioned not receiving EUR42 million from you guys.

My second question is if you could provide an update on what you expect to be announced in the next weeks from Ofcom on sort of beyond 2011 MTRs? And the same for Spain, would be the third question. Obviously, the CMT, not Ofcom.

It is Matthew. Let me pick up your first two. I presume your first question was specifically related to Germany, was it?

Yes.

Firstly, let me say that I actually don't recognize the numbers Deutsche Telekom quoted. But it just happens to be about the same as our year on year OIBDA from Germany, which I think it is circa EUR40 million.

I would point to four things as far as the increase in Germany year on year. The first is we are getting more throughput through Telefonica Deutschland, which is our DSL wholesale business. That is simply through more customers. And that has now moved into a positive situation.

Secondly, we are benefiting from the rollout of our increased retail stores. So we are getting a higher proportion of our connections direct, and therefore not paying the indirect channels.

Thirdly, we have moved our commercial model move to SIM-only and away from pure handset. And fourthly, we are certainly using less of the minutes that we have committed to T-Mobile, because they are a better quality network.

If I break those four down, very roughly, you can take about 25% of the improvement on each of the four. So put EUR10 million alongside each of those four items. Whereas T-Mobile, that EUR42 million comes from, I don't know.

Do you want me to pick the Ofcom NCR answer? That was a UK question?

If you could pick up the Ofcom NCR, and also the sort of Kip Meek spectrum cap document this morning?

I don't know how many days you have got for me to go through the Kip Meek spectrum.

About one to two minutes.

Let me try. Effectively, what Kip Meek's proposals are, it suggests that there is a way forward on the UK spectrum, such that the potential outcome is us and Vodafone hold on to our 900 megahertz spectrum, but we are blocked for a period from buying 800 megahertz spectrum, but the all the operators are allowed to buy 2600 spectrum.

We welcome Kip's approach. We think it is a great proposal for Digital Britain to give a USO potential. And from our perspective, we will be supporting the proposal through the next five weeks of consultation process, which will happen with all the networks.

As far as Ofcom MTRs post 2011, it is pretty difficult to say actually, because clearly it is in the future, and it very much depends on what happens from an European perspective. But also it seems related clearly with the spectrum question from a cost perspective. But the current environment actually kicks in back end of this year, so we will wait and see what Ofcom are going to do post 2011.

Regarding MTR in Spain, as far as we know, we expect news in July. And you know the (inaudible) ended this last April so (inaudible). We don't know if the TMT is going to issue a three year or four year (inaudible) year by year. We do know or we expect two things.

First, continuous reduction of symmetry. We want to converge to similar tariffs. That is good for us. Second, we expect -- we hope to continue with nondisruptive (inaudible), so a reduction, but a nondisruptive reduction.

Do you think similar to the current percentage, your cuts?

Yes. I mean by (inaudible) similar to the part we had in the past.

Thank you.

Luis Prota, Morgan Stanley.

I have two questions. The first one is on domestic mobile revenue trends in the second quarter. I'm trying to figure out what could be the impact from the new tariffs that you were launching late first quarter?

And more specifically, I would like to understand whether this new low-cost tariff and subsidies that you're giving are going to be revenue accretive or revenue dilutive? And how do you address the risk of other customers migrating to this cheaper tariff by looking out? So I wonder whether figures like percentage of customers already benefiting from on-net or bundles at cheaper prices could help us understand this risk?

Then the other question is on mobile data revenues, the spend which are up 7% this quarter, which is around half the rate of the last few quarters. I'm interested on hearing on SMS revenue trends with the (inaudible), and whether this is affected mostly by volumes or pricing, and any change in dynamics that you have seen here?

Regarding the impact of new tariffs, well, you know we have a long tradition of launching savings tariffs in mobile in Spain, numbers like (inaudible) which are savings models to one specific number, [Mi Cinco], which is why is five specific numbers, a lower tariff, the on-net and so on. And without (inaudible) flat rates in our portfolio.

Obviously, you always run a risk of cannibalization, but the way we try to deal with this is that we try to target more aggressively with outbound marketing, for example, customers where we believe there is a trade up. So we can improve revenues, while giving customers a lot of value.

Obviously, we monitor, we measure, week by week how we are advancing. And if we see that any specific trend is not generating the elasticity we expect, or the cannibalization is higher than expected, we do what we have to do. We change the promotion or we change the product.

So far, it is too soon to tell about these new products. Because some of them have been launched in February, some of them in April. Some of them are doing very well and above our expectations. Some others, like the [weekend fun] tariffs has only two weeks of life, so it is too early to tell.

As you have seen, some of them has TV campaigns and some not. The ones -- those that don't have TV campaigns are the ones that are much more open market driven. So it is something that we tend to manage in all our operations. And we monitor week by week. So we are not expecting a disruptive effect on cannibalization because we monitor that. And if we have a problem we will try to compensate or change the product.

Regarding data revenues, one thing to -- one comment. I don't know if you are tracking that, but you have seen that we are improved in data revenues. We are at 7% up this quarter with -- compared to the first quarter. While the fourth quarter last year we were up 14%. That is explained exclusively due to this premium SMS grand contest that we have. This quarter we have only 15 days of one of these super (inaudible). And while the last -- the first quarter last year was up almost the whole month. So if you take away these premium SMS grand contest, the rate will be 11% and 11%, so basically the same rate.

If you take away person-to-person SMS, the data revenues are above 20%, and connectivity revenues are up 50%. So we see that data revenues are growing very healthy. And obviously this (inaudible) for premium SMS contest, depending on the seasonality on when specifically they are done, they affect the quarter measures. But if you take that effect away, we are the same growth in data and we are improving in ARPU.

Tim Boddy, Goldman Sachs.

Two questions. The first on Latin America, similar to the earlier question on Spain. If you could just talk about the trends through the quarter -- the trend in March relative to the earlier months, and how it has continued into April, that would be helpful. Obviously, there is concern about growth continuing to slow.

Secondly, just to clarify the comments earlier about cash held in Venezuela. Would it be possible to understand at what rate that is hedged, and whether -- I guess, when the hedge runs out, and whether it is possible to rehedge it at that point? My understanding is the hedging market is becoming a lot less liquid.

Taking your question on trends in Latin America, those are not homogenous. Those depend country on country. But globally speaking let me tell you that we do think that the situation is improving in Brazil, which is the main economy in the region. It has showed some signs of (inaudible). And generally because of the (inaudible) campaign there and another economic impacts, but it is getting better. All their macroeconomic indicators in the country are showing outward strength. It is too soon to say those are sustainable, but Brazil, being the main economic division, is doing better.

Our operation there, both in wireless, and mainly in (inaudible), I covered the fact that we have some impact of the new call center law, that we are stabilizing. And therefore we tend to think that the situation in Brazil should get improved month after month.

But that [isn't] to say. Let me stress the fact that in May we have the Mothers' Campaign in most of the countries. And that is going to be the first real sign of evolution. It is too soon to say, but according to preliminary indications, it proves to be okay. But too soon to say.

Generally speaking, let me express the fact that in these economic environments and with different patterns of behavior in different countries, thanks to the diversification of our portfolio, we have been able to grow roughly 9% in revenues and roughly 14% in OIBDA. So if that is an indication of how we are experiencing the current economic situation in Latin America, I think it is a good test.

It is true that in terms of customers, especially on the mobile site, we have been a little bit weaker. But it is also true that we have been reducing handset subsidies because of the movement in the currencies and because we are also focused on reserving profitability. So part of the deceleration in the customer base has been caused by our less active way of subsidizing handsets. And also mainly in Mexico, for example, we have been doing less profit campaign.

I would say that we are running normal business in (inaudible). And Mothers' Campaign is going to give us the of sign of the year.

This is Santiago again. There is no hedging instrument or market for the Venezuelan Bolivar, neither onshore nor offshore. So for all practical purposes, you can assume that we go naked on the Venezuelan Bolivar exposure. There is no other way to run this game.

James McKenzie, Fidentiis.

I am just following up on the question on domestic business. What sort of factors do you think could hat influence coming quarters, either up or down? Particularly, I can think of a couple of the negatives on mobile with the Easter affecting the second quarter, with these new tariffs. And then obviously in the summer, the roaming may actually bring revenues down. Is that reasonable or are there any other countering effects that might mean that the service revenue decline in the first quarter was the lowest of the year?

In the coming quarters usually we have history in April -- when I said that April (inaudible) taken away obviously the Easter effect, looking at the underlying trends.

Factors in the mobile business usage will be key, meaning what type of traffic -- SMS, data usage, our existing customer would happen during the quarter. That in my opinion is key.

Obviously, second in mobile -- in the second degree will be access growth. We saw a low access growth in the first quarter. As Santiago explained in the presentation, we tried to play too much on rational commercial efforts on getting new results. We were successful on the churn. Churn is stable, but we are not very successful in (inaudible) in the gross adds, so we hope to improve in gross adds.

But the key factor in mobile, to be honest, is the usage. If we get some elasticity on our customers, if we convince them through these tariffs and so on that they can spend more money on mobile, that will be key on the revenue side.

In the fixed business, a different story. It is much more scattered through different lines. First quarter you saw three revenue lines going down, which were basically accesses, fixed access, voice and broadband. And two going up, data and IT.

The two going up basically means that we are focusing on high-value customers, so in large corporate. And in the large companies we are continuing focus (inaudible) value. And again, voice traffic is something that is not as relevant as in mobile, but also we have a negative evolution in the first quarter, so usage again will be key. And also demand for new broadband lines is also another indication of improvement or not.

But if I had to sum up, there are many factors, but usage in general is the main factor that we are going to try to foster. And that will help to explain much of the revenue side.

On the margin and on the operating cash flow, we have done very well in the quarter. Obviously, it is an easier task if the topline goes -- will go better. We will continue pushing for savings and efficiencies. And obviously we will try to be prepared for different scenarios.

So again, as with your question, usage in the first time and then keep on working on efficiency. And also as you notice, we are keeping a very close eye on revenue market share as a health indicator that we are not losing track with the market.

Understood. Thank you very much.

Will Milner, Arete Research.

A couple of questions on Latin America. Firstly again, Venezuela. I guess just looking at a 33% revenue growth, it is obviously a great result in a market over 100% penetrated. I just wondered to what extent you're taking revenue share in that market? And then if you can talk just around the sustainability of that trend as you see it?

Secondly, on Mexico, I wonder if you could help me understand the 16% growth in service revenues in the quarter. I can't quite reconcile that with the 20% growth in the average mobile customer base with a 10% ARPU decline, because I think that gets you to around 8% service revenue growth. So I guess I'm missing something.

On the Venezuela question, the rates we are publishing [value] marketshare rather than customer market share. We have reviewed (inaudible) the handset subsidy, and that is taking out a good source of revenue there. Because (inaudible) in terms of service revenue and in terms of handset revenues.

On top of that, we only could take the revenue that we are (inaudible). We are [following] high rating customers and (inaudible) to contract. And the highly (inaudible) churn, and having reducing churn again this quarter.

Jointly with the fact that we are a fully integrated company, I would say, in Venezuela because we are providing also fixed wireless and wireless broadband. We have not defined the wireless broadband in Venezuela, and therefore wireless broadband is also helping us to boost revenues. I would say it is a mix of issues of issues in Venezuela, and all of them are helping us to boost revenues and to increase profitability.

Also without (inaudible) it is too soon to say how we are going to be doing our TV and satellite TV offering (inaudible) part of a bundle. Remember that in Venezuela you have all services. You have [bundled] telephony, fixed wireless, and also wireless, a very complete wireless offer. Wireless broadband and bundling taking upward (inaudible) our customers (inaudible). There is a full amount of I would say initiatives going on.

ARPU have been going up 22%. So in Venezuela it is a mix of issues. I remember also we are not subsidizing handsets. The handset activity is also helping us to boost our revenue there.

Taking your question of ARPU and service growth in Mexico, let me remind you of a few things. First, on the basis of escalation of ARPU, the difference between the total customer base at the end of the period and the average customer base, that helps to reconcile a little bit the numbers.

But mostly, the fact that some revenue, some service revenues are not included in ARPU calculation, mainly roaming or wholesale revenues for the fixed wireless activity that we have there in Mexico. So these factors explain the difference, or reconcile the difference between the service revenue growth and the ARPU growth.

We have time for one more question.

Luigi Minerva, HSBC.

A follow-up question on Telesp. The margins weakness was explained as a spike in TV content expenses. Can you give us some guidance on how the margins will develop over the year? Are they going to go more down, or as the business gets more scale, we have seen the bottom of it?

Second, on Spain, your running on a CapEx over sales ratio of around 4% in mobile and 8% in fixed line. Shall we assume that it is a floor, so no more room to go below that? So if you need more CapEx flexibility that has to come outside Spain?

Thanks for the question. Taking the Telesp one, as you know, we don't -- we don't give any guidance for markets. But let me comment on some issues that we have tried to help you in understanding the evolution.

First thing, in this first quarter we have been increasing the call center expenses in order to match the requirements of the new call center law, which the initial impact has been higher than the one that we were estimating, and therefore have forced us to increase the number of attendants in order not to destroy the quality levels. And that has also drive us to reduce the commercial efforts, because we have been putting retention and quality efforts before trying to do additional commercial efforts on the call center. So that will help us to -- that will help you to understand part of the trends.

On top of that, the trends in March in last year were driving to stabilization. We think that with the effort that we are doing those, and the transformation effort that we are doing in order to simplify the offers that we have in Telesp, and the new contracts that we are having with the [house] contractor activity should help us [throughout] our present situation. So I don't think that you should extrapolate the initial impact of the call center law in the margins. We are working very hard to address that situation.

But let me add, that Telesp in the meantime, for example, in terms of net adds for ADSL, the quarter has been pretty stable compared with the previous one. In fact, we have been adding roughly a little bit more than 100,000 ADSL lines. This is slightly above last year's figure of the first quarter. And it is above the figure that we have in the Christmas campaign.

So we tend to think that, even if it is true that we have been having an impact on margins on the first quarter, we should be able to address or stabilize the situation.

This is Guillermo. Regarding your question of CapEx, well, you know the combined CapEx for revenues for the quarter is 6.9. Obviously always first quarter saw a little bit lighter than next quarters in general. But if you look at the split between mobile and fixed, two comments.

First, a lot of the common infrastructure, like transport and so on, even that we are an interrelated business units, are then on the fixed or fixed tend to be a little bit more loaded with transport and connection, also due to base stations and so on.

Second, the mobile number in this case is low. It is going to increase a little bit over the year, not a lot. And the fixed number maybe is there or reducing a little bit. So you will see the evolution during the year. You will see a lot of reduction compared to previous quarter -- to last year, in similar quarters this year. But the photograph -- the photo for the first quarter is a little bit skewed to the lower part in mobile, and will increase a little bit during the year.

Is there the floor in fixed? Well, we think that we can continue with using CapEx. We will see. Maybe some reductions are easy to get than others, but I think in fixed we can do more.

At this time no further questions will be taken. Mr. Santiago Fernandez Valbuena, I turn the call back over to you for closing remarks.

Thank you. Just a reminder that we will be holding our Investor Day in October, as we previously announced. We confirm that. It is going to be held in Madrid. And we hope to see you at the end of July for the presentation of our Q2 numbers.

Thanks all for attending this call. And we certainly do hope that we have provided some useful insights for you. Good afternoon.

Telefonica's January to March 2009 results conference call is over. You may now disconnect your lines. Thank you.