Telefonica SA (TEF) 2010 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Telefonica's Conference Call to discuss January to March 2010 results. Thank you for standing by. At this time all participants are in a listen-only mode. Later we'll conduct a question and answer session. (Operator Instructions). As a reminder, today's conference is being recorded. I would now like to turn the call over to Mrs. Maria Garcia-Legaz, head of investor relations. Please go ahead, madam.

Good afternoon, ladies and gentlemen, and welcome to Telefonica's conference call to discuss January to March 2010 results. I am Maria Garcia-Legaz, head of investor relations.

Before proceeding, let me mention that this document contains 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 a complete disclaimer included in 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 market regulators.

If you don't have a copy of the relevant press release and the slides, please contact Telefonica investor relations team in Madrid by dialing the following telephone number, 34914828700. Now, let me turn the call over to our CFO, Mr. Santiago Valbuena, who will be leading this conference call.

Thank you, Maria, and good afternoon, ladies and gentlemen, and thanks for joining Telefonica's 2010 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 our Telefonica Latin America, and Matthew Key, head of Telefonica Europe. During the Q&A session you will have the opportunity to ask questions directly to any of them.

Before turning to numbers, I would like to stress that Telefonica's Q1 strong set of results reflects the priorities established for the year, being our first goal to boost revenues, capturing growth opportunities in our footprint. Top line growth has been outstanding, outperforming once again our peers, despite our exposure to Spain, where economic conditions remain difficult.

Our unmatched diversification and solid execution across businesses and geographies are paving the way. Revenue continues to trend up organically year-on-year, showing an acceleration versus the year 2009. And we are building foundations for further top line expansion for an increase in commercial activity and foster customer growth.

First quarter results also show our ability to retain top quality profitability and superior operating cash flow generation, despite reinvest in efficiency gains to stimulate revenue. And year-to-date results are aligned with our internal expectations and thus we are comfortably on track to achieve 2010 guidance, as growth will be ramping up throughout the year. Medium term guidance, including growing dividends, is fully reaffirmed, and our balance sheet remains strong, driving our high financial flexibility.

Let's now start the detailed analysis of our first quarter results with a summary of the P&L. Consolidated revenues grew 1.7% year-on-year, to just above EUR13.9 billion, reverting the 2.1% decline posted in 2009. Revenue stimulation was achieved despite the Venezuelan devaluations and the lower contribution of Telefonica Espana.

Organic sales growth stood at 0.9%, ramping up 0.7 percentage points versus 2009, driven by the very solid top line expansion recorded by both Telefonica LatAm and Telefonica Europe. As of March, close to two-thirds of our sales were generated outside of Spain.

Operating income before G&A topped EUR5.1 billion for the quarter, down 3.4% year-on-year in organic terms, reflecting the sharp increase in commercial activity and negative impacts from regulatory measures and non-recurrent effects.

OIBDA margin maintained a healthy level, 36.7%, leveraging scale economies and intangible synergies across the group. As a proxy to cash flow generation, operating cash flow reached almost EUR4 billion from end of January through March period.

Please turn now to slide number 4 for the bottom line review. First quarter net profit reached EUR4.7 billion, or 2% above last year's figure. Our active management of non-operating results is pushing annual growth rates up by 9.2 percentage points from operating income down to net income. Reported earnings per share in the first quarter reached EUR0.36 or up 3% year-on-year.

Our superior top line performance in this sector is best outlined in slide number 5 and drives our top quality cash generation and further improvement in the efficiency ratio. Organic revenue growth recorded the second sequential improvement, ramping up 70 basis points from 2009 yearend, underpinned by the faster customer expansion that reached 6.1% year-on-year organically up to March.

Excluding headwind from MTR accounts across our markets, organic revenue growth would have accelerated to 2.4%, close to 100 basis points up quarter-on-quarter. From a regional perspective, our Latin American operations emerged for another quarter as a key differentiating factor of our performance, contributing the most to revenue growth.

On top of that, Telefonica Europe is pushing sales up despite very challenging conditions in some of our markets. From a business perspective, growth on connectivity, fixed and mobile and applications in new services are the main revenue growth engines offsetting the [lower] contribution from the traditional business.

We are increasing our exposure to the highest growth businesses. Growth on connectivity and applications and new services revenues already represented 22% of total revenues in the first quarter of 2010.

In slide number 6, we show how we are successfully setting the basis for further top line stimulation. In Q1, commercial results were very strong. We focus our efforts on value and growth levers, recording an excellent performance in gross adds, which exceeded the 22 million mark in the first quarter, up 17% year-on-year.

Please notice that this figure is 6% higher than 2009 quarterly average, showing the sustained pickup in commercial activity we're noticing across markets. In addition, churn remains under control, improving 0.1 percentage points year-on-year on quality improvements. Churn contention has not only been outstanding, but also a differentiating factor in a very competitive environment.

Total organic net adds were 4.3 million in the quarter, almost triple last year's figure, and beat again the 2009 quarterly average mark. Especially positive was the performance in the mobile business, where we added 4.4 million customers organically, where more than half of them -- more have been in the contract segment, with a strong drive in mobile broadband.

We already have close to 16 million mobile broadband customers to the group. I'd also like to remark the over 50% year-on-year increase in fixed broadband net adds, mainly boosted by improved quality ratios in Latin America.

The chart on slide number 7 underlines the remarkable acceleration in customer growth rates recorded across most services, with solid increases in broadband accesses as we continue to actively manage current industry levers. 89% of our retail customers already have a broadband connection, either fixed or mobile or, in some cases, both.

On the mobile side, our focus on enhancing the value of our customers by fostering prepaid to contract migrations and mobile broadband adoption is already bearing fruit, as you can see, by the higher growth recorded in the two latter categories than in the total mobile customer base. Commercial [pulls] on retail fixed broadband is paying off, with a ramp-up in the organic customer growth rate to 8.7%.

The drive for revenue stimulation have some associated OIBDA margin pressure in the short term, as we decided to reinvest efficiency gains to revamp revenue growth. As you can see ion slide number 8, group operating expenses were up 3% in organic terms in the first three months of the year.

External services and personnel expenses drove the growth in cost on the back of higher commercial expenses, plus 5.5% year-on-year, derived from faster customer expansion, advertising and customer care, and constant improvements in the quality levels that have required traditional resources in our wireline businesses in Columbia and Brazil.

Increased energy costs, network maintenance and expansion drove higher network costs. On the contrary, interconnection costs were down year-on-year, driven by MTR cuts across regions. However, the bulk of the 3.4% year-on-year organic decline in OIBDA is explained by non-recurrent effects and negative regulatory impacts, which dragged 2.6 percentage points from OIBDA year-on-year change. As a result, group operating profitability remained robust, with solid OIBDA margins across regions.

Let me now quickly review our progress towards meeting our full year guidance on slide number 9. Up to March, on the guidance criteria, revenue growth was 1.7%, within our target range. As we explained, during our full year '09 results conference call, OIBDA quarterly performance wouldn't be linear throughout the year. Q1 of 2010 was below our annual target due to various factors.

First, a challenging year-on-year comparison in Spain. Second, HanseNet net results that have only been consolidated since the middle of February with a very limited contribution. And third, the weaker performance of TeleSp and Columbia fixed was recorded mainly from Q3 of '09. And in addition, in the first quarter of 2010 we were negatively impacted by the heavy rains in Brazil. And finally, we had non-recurrent and regulatory impacts that I have just explained.

However, OIBDA performance in Q1 was in line with our internal expectations and we can comfortably reiterate our full year guidance. Growth rates should accelerate throughout the year, especially in the second half, as we will have less challenging year-on-year comparisons in TeleSp and Columbia fixed, and commercial efforts started to rise in the third quarter of 2009. Please note that you are comparing TeleSp's best quarter of 2009 with what should be the worst quarter of 2010.

OIBDA growth in Q2 is expected to be within the guidance range, though first half performance will still be dragged by the items mentioned before. We continue to expect 2010 CapEx to be in the range of EUR7.45 billion to EUR7.65 billion, with Q1 figures reflecting CapEx seasonality.

Let's now review our performance in Spain, where revenue trends confirm that the worst is over. We continue to see a sustained gradual top line recovery in a challenging environment. In Q1, total revenues in Spain dropped 3.9% year-on-year in comparable terms, the lowest decline recorded in the last five quarters on the back of a better performance in the mobile business.

It is worth highlighting the very strong commercial KPIs posted in Q1 across businesses, with solid customer growth that should translate into a better revenue trend in coming quarters. Gross adds increased 25% on Q1 of '09 compared with 14% drop a year ago. Revenue performance is improving, with a healthy 47.3% OIBDA margin on a comparable basis, despite the higher commercial costs derived from our strategy to stimulate growth, which drove the OIBDA margin down year-on-year.

As we explained in the past and due to the integrated management of the fixed and wireless businesses in Spain and in order to avoid any distortions, which, without affecting the consolidated results of Telefonica Espana, may result in an erroneous interpretation of the individual performance of each of the businesses, especially at the level of operating expenses and investment, from the first quarter of 2010 we are only disclosing consolidated OIBDA and CapEx figures. Within this context, the Company operating cash flow generation remained solid at EUR1.8 billion in the first three months of the year.

On slide number 11, wireless service revenues in Spain declined 7.1% year-on-year, posting the largest quarterly improvement since we reached the bottom in Q2 of 2009, 60 basis points on the fourth quarter of '09, driven by the ramp-up in customer growth and improvement in ARPU. Commercial activity in Q1 rose dramatically year-on-year. Gross adds went up 31% and we maintained the lowest churn in the market at 2.2%, in line with the fourth quarter of 2009.

[For just] commercial efforts on the contract segment with 197,000 postpaid net adds in the quarter led to a close to 7% year-on-year growth in the customer base. By the end of March 2010, the contract segment already accounted for over 65% of total accesses.

It is also worth highlighting the improvement in traffic. In Q1 of 2010, for the first time since the last quarter of '08, traffic growth was positive. But outgoing voice yield performed in line with expectations and declined around 6%. As a result, in comparable terms and excluding mobile termination rate cuts, ARPU declined 6.7% year-on-year versus negative 7.1% in the fourth quarter of 2009.

Mobile broadband [structure] is rising and we already have more than 3 million customers, with monthly data flat rates reaching 2.3 million, more than doubling last year's figure. As a result, while as data connectivity revenues went up close to 70% in the quarter, driving non-peer-to-peer SMS data revenues to 65% of total data revenues, up 6 percentage points year-on-year.

On the wireline business, KPIs are also solid, with a significant acceleration in commercial activity versus the first quarter of '09. In fixed broadband we have a strong 55% market share after recording the highest net adds since the last quarter of 2008, driving the total customer base up 5.4% year-on-year compared to growth of 4.4% recorded in 2009.

Broadband connectivity ARPU stood at roughly EUR30, with a stable year-on-year erosion compared with previous quarters. And again, in line with our expectations. On pay TV we have expanded our market share to 18%, with Q1 net adds above the average levels recorded in 2009. On the traditional fixed line business, to highlight that we recorded a positive growth in our access base during the quarter, giving the year-on-year decline at 1.4%.

This is reflected on the positive quarterly net adds that compare with quarterly net losses along 2009. Retail line losses continue, although continue to be affected by new types of regulated wholesale accesses, improved significantly compared with Q1 '09, showing a year-on-year decline of 13.6%, while broadly stable quarter-on-quarter.

It's important to notice that the retail loss was more than offset by net adds in the wholesale segment and therefore the impact in revenues is lower, as these lines ultimately generate revenue for us. On the revenue side, the relative weaker performance versus previous quarters was affected by the lower contribution by the subsidiaries, like Teleco and TTP. This is a novelty of the IT business though these revenues continue to perform strongly and lower [voice] in access revenues. On the positive side, broadband revenue were back to growth in the quarter.

In summary, in Spain we are maintaining our leadership position while we set the basis for future growth. In a very competitive environment, Telefonica is a player with the widest gap between revenue and customer market share in Spain.

On slide number 13, we start reviewing our Latin American businesses. We are recording a strong rebound in commercial volumes across the region which have led to an inflection point in revenue trend. Our total customer base in Latin America expanded rapidly to over 172 million accesses, equaling 1% more than a year ago and 1.6 percentage points ahead of the growth recorded in 2009.

Higher gross adds in the first three months of the year in churn contention underpinned the robust rise in customers. As a result, in Q1 2010, organic revenue growth ramped up to 5.4% after the gradual deceleration recorded throughout 2009, while we expect an opposite trend for 2010. This solid performance was driven by double digit growth in mobile service and internet and TV revenues.

Organic OIBDA year-on-year growth reached 3.4%, impacted by higher commercial costs, up 12% on the strong activity in the quarter and aligned with the Company's priorities for 2010 of reinvesting efficiencies to boost revenue growth. OIBDA margins stood at 36.5% in the first quarter of 2010, or down 70 basis points in organic terms year-on-year and 165 basis points in reported terms.

This organic margin erosion is the reflection of two effects. On the (inaudible) side operational issues, mainly at TeleSp and the wireline operation in Columbia, which dragged 2.1 percentage points of margins, being partly offset by efficiency improvements in other countries with a 1.7% margin improvement. While on the [extraneous] foreign exchange front, a 3.9 percentage points negative impact of the Bolivar's devaluation was partly offset by the positive evolution of other currencies leveraging once again or high diversification.

OIBDA growth should ramp up in coming quarters as year-on-year comparisons for our wireline operations will ease. It is also worth highlighting the stability of our operating cash flow in euro terms, despite the Venezuelan devaluation.

Slide number 14, we are (inaudible) the evolution of our Latin American wireless businesses. Customer growth ramped up to 11% year-on-year in a region where penetration rate has reached 91%. Our focus on enhancing the value of our customer base is reflected in the faster growth in our contract base, plus 17%, and the rapid increase of mobile (inaudible) which have multiplied by 2.5 times since March of 2009, but only represent close to 4% of our base. Therefore, the growth potential is huge.

Q1 of 2010 net adds almost rose by 3 times year-on-year, which is significantly higher level than the 2009 quarterly average. Please notice that a year ago, net adds were down year-on-year. More remarkable is the fact that 45% of the customer growth in the quarter was in postpaid, more than doubling the figure of the first quarter of 2009. In parallel, the outstanding evolution of mobile data revenues and the strong traffic increase drove outgoing ARPU up 3.5% in organic terms year-on-year.

Thus, total organic ARPU performance improved from previous quarters, remaining virtually flat year-on-year, in spite of the strong customer growth posted in the quarter. Mobile service revenues went up over 12% organically, with steady acceleration along the quarter. This growth was underpinned by the robust 44% year-on-year increase in data revenues, which already account for 21% of service revenues, advancing over 5 percentage points versus March 2009.

Let me now share with you our progresses in transforming our wireline businesses in Latin America as a way to capture the growth potential in the region. Again, commercial KPIs recorded remarkable improvements versus previous quarters. On the one side, fixed broadband accesses reached 6.6 million in March, accelerating its growth rate to 7% year-on-year, fueled by the good performance posted across our operations once Brazil and Columbia are back on track on the operational front.

Fixed broadband net adds reached 215,000 in the quarter, more than doubling 2009 quarterly average and showing a much better year-on-year performance than in the first quarter of last year. This was achieved thanks to remarkable quality improvements, which led to the lowest broadband churn since we launched this service. On the other side, the traditional wireline business is improving, both in terms of line losses on the back of lower churn, and in terms of traffic, which is slightly improved year-on-year.

Our strategy to foster bundle penetration continues to get traction, and double and triple play bundles already represent 57% of our broadband connections, increasing by close to 6 percentage points year-on-year. As a result, internet and pay TV increased their contribution to total revenues, with an average weight of 21% in the region, up 1.6 percentage points in organic terms over last year's figure, with improvements in most countries.

Let's move now to slide number 16 to quickly review TeleSp's recent performance. I would like to highlight the significant recovery recording on the commercial front, where the companies again gain in momentum, despite challenging conditions due to heavy rains suffered in Brazil in January and February, which limited our commercial activity at the beginning of the year.

However, once the rains were over, commercial activity rose sharply, fueling quarterly fixed broadband net adds to 163,000, exceeding the volume recorded in 2009. Close to 50% of the net adds were achieved in March, with momentum continuing in April. And we are recovering market share in those areas where cable competition is strong.

The traditional business is also improving, with line losses coming down 27% year-on-year in the quarter, and even recording positive net adds in March and April. These results were achieved on the back of a strong quality improvement, as shown by Anatel indicators, which have led to drastic reduction in churn.

We have been able to turn around the operating performance maintaining a stable CapEx to sales ratio in the last 12 months, which means that TeleSp's problems were not derived from the lack of investment in the past. The better operational KPIs are gradually flowing into financials, with positive second derivatives, both in terms of revenue and OIBDA. Top line is consolidating the trend towards positive growth, but OIBDA year-on-year performance was impacted by the adverse weather conditions, which required additional resources to guarantee our services.

On slide 17, we outlined improved trend in operating results we are already recording in Columbia across businesses as a result of the initiatives implemented to reposition our commercial offer and enhance quality metrics. In wireline, broadband net adds ramped up strongly to 40,000 accesses, a 79% year-on-year increase and over 3 times the net adds recorded in the previous quarter.

The traditional business is also posting better results, reducing line losses dramatically to just 12,000 in the quarter. We expect these operating improvements to gradually translate into a better financial performance with the worst already behind us.

In the wireless business, churn reduction has been key to post over 320,000 net adds in the quarter, doubling Q4 of '09 figure and allowing us to regain market share. Let me remark the improvement in the quality of customer growth as contract net adds rose sharply to account for close to 50% of net adds in the quarter versus less than the third in the fourth quarter of 2009. Improved operating results are paying off in financial results, with a significant sequential improvement in mobile service revenues and an improved trend in wireless revenues.

Let me now highlight the main topics across other key operations. In Mexico, commercial activity is on the rise, with a focus on the contract segment outpacing the total base growth by 19 percentage points. Market share expansion continues (inaudible) in already 21%, while scale, with over 18 million customers, allows OIBDA margin to continue widening, despite the strong commercial activity in the quarter. Mexico remains the largest contributor to organic operating cash flow growth in the region.

Venezuela is holding very well the Bolivar devaluation. Our commercial strategy is focused on value, with a selective customer acquisition approach on higher handset costs. Organic service revenue growth remains strong at over 20% year-on-year, while a 46% OIBDA margin continues to be a benchmark in the region.

Vivo outperformed the market, strengthening its undisputed leadership for the second quarter in a row. Net adds marked a new record for a first quarter with a strong focus in contract, where Vivo achieved over 70% net adds market share.

Service revenue growth accelerated while OIBDA margin remained very strong at over 30%, stable year-on-year despite the strong commercial activity in the quarter. Argentina performance continued to be outstanding across both businesses, on the back of strong customer growth even in traditional accesses.

In Chile, the financials improved in the first quarter of the year, driven mainly by the mobile business, while commercial activity was strong despite a slowdown in March after the earthquake. Let me stress that related damages are covered by our insurance policies.

In summary, very strong commercial volumes across the region, boosted by better economies and churn reduction, which will foster revenue growth in coming quarters. And in parallel, we continue to leverage our scale and regional integrated management model to extract efficiencies and report robust profitability.

Let's now turn to Europe, in slide number 19. Telefonica Europe once again delivered strong revenue growth and increased profitability amid challenging economic environment and the negative impacts of mobile termination rate cuts. The group has further enhanced its portfolio with incorporation of HanseNet [Georgia] to the perimeter of consolidation up to 54 million customer mark at the end of the first quarter.

We maintained our excellent momentum across key growth drivers, with increased smart phone penetration in mobile internet usage. Mobile broadband accesses expanded 67% year-on-year, surpassing 7 million accesses and non-peer-to-peer SMS data revenue growth exceeded 35% year-on-year organically.

In addition, the mobile contract segment continues showing strong performance, growing its base by 12% year-on-year, accounting for close to 90% of total net adds in the quarter. As a result, organic revenue growth ramped up from the previous quarter to an outstanding 5.4% year-on-year, excluding the impacts from MTR cuts.

Profitability in the business was sustained in the first quarter, with Germany and UK being the key drivers of group's organic OIBDA year-on-year increase, close to 4% if non-recurrent factors were excluded in both periods, demonstrating the value of diversification and further efficiency.

And the increasingly competitive UK market also continued to lever solid results. Mobile service revenues continued to excel, with year-on-year growth accelerating to 9.4%, excluding MTR cuts, sustaining sequential trends. Our core belief in putting the customer first is paying off with the best-in-class churn of 1.1% in the contract segment, reflecting our clear ability to retain high value customers, regardless of any smart phone exclusivity. Our customer base quality continued to improve, with nearly half of our customers now in this segment, which has grown 12% in the last 12 months.

Telefonica 02 UK is ahead of the learning curve in understanding customer behavior, which allows offering great user experience. Independent tests are also increasingly naming 02 as the superior mobile data player. Furthermore, our focus on [customers in the] mobile internet opportunity to drive further revenue growth is increasingly showing up, as reflected by the 44% year-on-year increase in non-peer-to-peer SMS data revenues in the quarter.

Improved profitability of the business is differential in the market, with OIBDA margin advancing 1.2 percentage points over the previous year to 25.3%, thanks to a disciplined approach to customer acquisition and retention. And the Company continues investing in network transformation to increase our already high quality standards.

Please turn now to slide number 21 to review our German operation. The Company reinforced its challenger approach to incorporate HanseNet and addressing new market segments with the launch of 02on tariff for the SME segment. Trading momentum continued with 357,000 mobile net additions in the first quarter of 2010, or a 16% growth year-on-year, with 43% of net additions in the contract segment. This was driven by the continuous success of 02o tariffs.

The robust evolution of mobile service revenue is noteworthy, with year-on-year growth ramping up from the -- for the -- for the fifth quarter in a row in organic terms and excluding MTRs to 3.8%, leading also to the first year-on-year increase in reported terms since the first quarter of 2009. Key growth drivers were rapid growth in non-peer-to-peer SMS data revenues, plus 44% year-on-year, fueled by increased penetration of mobile broadband in the base and supported by customer base expansion.

The Company continued advancing in terms of profitability, growing OIBDA by 13% in organic terms up to March, and the expanding OIBDA margin 0.9 percentage points organically on the back of operational efficiency developed in 2009. Reported margin declined year-on-year due to the lower margin in HanseNet, which was over 1.3 percentage points dragging the OIBDA margin. Operating cash flow was over 7 times higher than the year earlier, driven by enhanced profitability and after the network rollout developed last year.

Turning to slide 22 to review our financial position, I would like to say that our debt level has increased by EUR1.7 billion since December 2009, mainly due to acquisitions, primarily HanseNet, and EUR1 billion reduction in the value of our cash in Venezuela following the devaluation of the Bolvar. This has pushed our net financial debt to 2.2 times OIBDA, or 2.3 times when included debt-like cash commitments. So the ratio stands in the middle of our target range.

I would like to highlight that we have reinforced our liquidity position, while pushing our interest expenses below our initial target level. Yet to date we have raised long term financing in excess of EUR5 billion. We have issued EUR4 billion in bonds in Europe and the US and signed bank credit lines and loans for EUR1.6 billion. As of March, we kept our total undrawn credit lines in the EUR8 billion range, with more than two-third maturing long term.

The effective interest rate has fallen by more than half a percentage point from 2009, benefiting from our floating exposure. The interest cost stood at 5% of our EUR46.5 million average total, which is better than the low part of the range for the full year.

Some backup is expected, as some of the savings will not be repeated in the coming quarters, as they are related to financial accruals of contingencies that we have avoided. Also, mildly upward sloping yield curves in general will raise the cost of our floating debt. All in all, we expect to beat our initial target for the year.

Let me now spend a few minutes on our EUR5.7 billion all cash offer announced for PT's 50% in Brasilcel. Our ambition is to materialize what has been our first M&A priority for several years. We are talking about a full value offer that represents a unique value creation opportunity for Portugal Telecom's and Vivo's shareholders that fully crystallizes Vivo value that cannot be replicated on a standalone basis at PT.

Further, PT's board unanimously rejected the offer without giving PT's shareholders the opportunity to be heard is indicative of PT's board priorities and should raise significant concerns about corporate governance in an international listed company that, according to its management, is shareholder driven.

We are offering an extremely generous premium to both last one month prices for Vivo's [owing] shares and the value of Brasilcel included in PT some of the [pont] valuation, as estimated by analysts. It is a full price because it includes the full this year valuation of Vivo and most of the synergies derived from a potential subsequent integration of Vivo and TeleSp.

The offer more than doubles the maximum market valuation ever achieved by PT's stake in Vivo, as seen at Bloomberg, and since Vivo's market cap is currently close to that maximum, the offer cannot be labeled as opportunistic. The difference between our offer and a standalone Vivo value is synergies that only we can create. We have over the years presented multiple alternatives to Portugal Telecom to access and share these synergies, with no answer.

Our offer proposes to share a vast proportion of these synergies. Under ideal circumstances, with PT's share of Vivo valued at our offer price and everything else valued at the market, PT's fair share of those synergies would be 31%. We are offering a substantially higher proportion of synergies than 31%.

PT's board decision to shrug off our proposal is even more perplexing, raising doubts about PT's directors' fiduciary duties to choose the best option for all shareholders. Our offer is full, fair and final. PT's strategic position will be enhanced, not constrained, by accepting our offer, as it would allow it to deal with debt, pension and dividend sustainability shows [of] major strategic significance. PT's past reputation as a shareholder [main] company is seriously at risk.

To finish my presentation and as a summary of Q1 of 2010 results, let me say that we have posted a very strong set of results despite challenging conditions in some of our markets, delivering on the management priorities we announced for 2010 by, first, accelerating revenue growth versus the fiscal year '09, to deliver once again a distinctive growth profile in the sector. This enhances the value of our diversification with close to two-thirds of our revenues being generated outside of Spain.

Second, ramping out the commercial activity across regions to further stimulate top line growth, posting a solid growth in customers focused on contract and broadband. Third, posting a healthy OIBDA margin and generating a high operating cash flow. Fourth, maintaining a solid financial position.

And finally, I'd like to reiterate that we are fully on track to meet our commitment, not only 2010, but in the midterm. We do confirm our 2010 and 2012 guidance, including dividends. Thank you very much for your attention. And now we're ready to take your questions.

(Operator Instructions). Our first question comes from David George from Credit Suisse. Please go ahead.

Yes, thank you. First question on the guidance for 2010, [reflect some] factors such as the year-on-year comparisons that helped the achieve ability of that. But I wondered in terms of the commercial activity, should we expect a clear step-down in the second half of the year perhaps in order to help achieve that EBITDA target for the full year.

And then secondly on the Vivo offer, a couple of questions here. Firstly, for PT, you mentioned obviously they haven't given shareholders an opportunity to discuss this. Would you consider or are you able to call an AGM PT to discuss the Vivo bid? And what is the scope, if any, to raise some of the EUR3 billion synergies you flag between Vivo and TeleSp under the current ownership structure?

David thanks for the questions. First, on the guidance, as we said in the full year of 2009, the year is going to be extremely nonlinear. We expect most of the contributions, especially on a year-on-year comparison term, to come in the second half. The ramp-up in commercial activity started in the third quarter of 2009, where we anticipated that the world would not come to an end and that we would be investing and keeping our customers well served.

So, yes, there is going to be an extremely nonlinear profile of the year. And we are very confident that not only in Spain but also in the recovery in our North American operations it will be highly visible in the second half of the year, which is why we have reiterated the guidance that we provided about three months ago.

On your Vivo question, well, shareholders have the right to call AGMs. I think it is not interesting whether it is one set of shareholders or other that calls the meetings. We understand that whenever an important thing is put to the board or directly to the shareholders, it should be analyzed there. Under normal circumstances, any shareholder should be able to call a meeting and we don't see why that wouldn't be the case this time.

As to synergy sharing, it's very hard to breed without mating, if you allow my expression. It's very difficult that those synergies, which have a lot to do with unifying saving cost and avoiding duplication, besides having financial and more non-operational savings, it can be achieved without really putting the assets together, which is why we have been so decisive in putting those numbers on the table. Within it, it's extremely difficult to achieve those synergies without proper integration. And certainly this is the kind of thing that we have spent a lot of time thinking about.

Next question, please.

Our next question comes from Will Milner from Arete Research. Please go ahead.

Thank you. Just a couple of questions on Brazil. Firstly, on Vivo, voice revenues were flat year-over-year despite the massive increase in traffic. So clearly voice pricing is falling pretty rapidly. I just wonder how you think about preventing data pricing going the same way, given you talk about the massive potential in data.

And the other question is on TeleSp. Just in TeleSp local results, it looked like both personnel costs and outsourcing expenses increased around 10% year-over-year. Now, partly the outsourcing, which [usually] faced the bad weather, but just looking forward, how do you see those cost buckets evolving over the course of the year? Thanks.

Thanks for the question. I will take the first -- the TeleSp one. On the personnel costs and on the outsourcing, the personnel costs we are recording in the first quarter of this year part of the [valuable] cost of remuneration of our team and corresponding to 2009 and therefore it should not be recurrent.

And you are right on the outsourcing part of your question. It is due to much more intensive maintenance and repair effort during the first two months of the year because of the heavy rain that occurred in Sao Paulo in these two months, the heaviest rain period in the last 63 years. So we were forced to increase the level of outsourcing support in order to preserve and even increase the quality levels that we have done.

In fact, we have prioritized repairs and maintenance compared to sales and we have put the whole team to take care of quality. And that's why the commercial activity only was effectively taking place during the month of March. So on -- that's on TeleSp.

And on Vivo, the evolution of service revenues even improving. Net adds are having as you know EUR2.2 million and therefore we should expect those adds to contribute to further growth in the remaining quarters. Churn is pretty stable at level 2.5%. In terms of the level of ARPU, it's declining, but it's declining slightly compared to the previous quarters. And in fact, service revenue has been accelerating and it has been stronger in the month of March than in February, and April has even stronger than in March.

So we are seeing service revenue acceleration, which should, in the coming months, should take away the concern of aggressive pricing campaigns among the different competitors in the region. The market is effectively becoming more rational, especially on the HanseNet subsidiary part of the business. And on the data market, we are seeing, I would say, a rational behavior in the market in terms of going to escalate tariffs, depending on data, on data limits.

So we will keep you posted. But as far as it stands for the first quarter, market is proven to be aggressive and very sound and very dynamic. But it's improving and it's improving both in terms of absolute numbers and in terms of profitability.

Thank you.

Next question, please.

Our next question comes from David Wright from Deutsche Bank. Please go ahead.

Yes, it's David here. A couple of questions. Firstly, on Vivo, I guess it's a two-part. I think you used to be -- there is a sort of representation at the PT boardroom level. Should I assume that you are not privy to those discussions?

And second of all, it does make sense, of course, to merge Vivo and TeleSp at some point? It does seem that PT didn't even reference the price, they just said they wanted to stay in Brazil. What is the opportunity to just continue the JV and try and inject TeleSp into that as an alternative?

And then I guess secondly my question is on MTRs. You've said quite frequently during the presentation and in the report that growth is better ex-MTRs, which of course have been fairly severe. But the outlook for them is perhaps even more severe and I'd be interested in Guillermo's view on how MTRs could move in Spain, perhaps also Matthew's view on how they could evolve in Germany. Thank you.

Yes, David, Santiago here. Let me take the first question. If I understood you correctly, the first part is about our board representation at PT. Certainly whenever anything is related to Vivo, especially in contentious terms, Telefonica representatives are absent, as they should be. So you can take it for granted that that's exactly the way it has worked in the past. Our relationship has been quite fluid and no problem has arisen on any term, including that.

On merging, I think I mentioned and indicated that we have tried pretty much everything else, including combinations of the sort that you seem to indicate. So if after eleven years of holding 10% of PT and eight years of Vivo combination, we are where we are is because we have not been able to find some kind of compromise between ownership and synergy extraction, which is why we decided to go this route. I think I should let Guillermo answer the MTR part.

Yes, David, regarding MTR, current regulation and in Spain, the light parts is defined -- has already been define until the beginning of 2012 and beginning of 2011, converging to US$0.4. They're roughly right now we are a little bit below the average in Europe. And let me remind you that the exposure that we have, the net exposure that we have for interconnection rates of our total revenues in mobile is 2% and that's because of the size of our operation in mobile and also the size of operation in the fixed business.

Hi, David, it's Matthew. So, in Germany, we've got certainty through to November 2010. And I certainly wouldn't expect the same level of proposed cuts that we've seen in the UK. And as you know, we and the other operators in the UK have been extremely vocal about Offcom's proposals, which we just see as unreasonable, particularly moving to lyrics, plus models. So debate's ongoing with Offcom in the UK. And Germany, more stability, and certainly we don't expect it to be as severe as the UK proposal.

Okay, thanks, guys.

Next question, please.

Our next question comes from Luis Prota from Morgan Stanley. Please go ahead.

Yes, hello. I have two questions. The first one is on Venezuela and whether you could give us an update on any likelihood of repatriating cash, as this is having some impact on the full year monetary adjustment. And also in this country, if you could give us any light on what percentage of the margin compression that we saw on a year-on-year basis this quarter is due to the higher cost of the handsets.

You are mentioning this in the press release, but I remember in previous conference calls you mentioning that because the level of subsidies is very low there and that the impact from devaluation was not going to be material here. So I'm surprised to see that in the press release now.

And the second question is on the tax rate, which is also related to the EPS target for the year. Santiago, you mentioned in the full year results the tax rate now is expected to be 25% to 27%. I understand that on a quarterly basis this changes, but this quarter is 30%. Is there something this quarter happening or should we still expect 25% to 27%. Anything that you can explain there would be useful. Thank you.

Thank you, Luis. Let me take the Venezuelan question first. Things have gotten slightly more complicated in Venezuela for internal reasons. And so we are getting [a lot] delay in the repatriation of those funds. There is also a risk, although not a much -- not a major one that part of the funds that we had there will not come as soon as we expected. But certainly the sooner -- as soon as we get full information for clarity, but when and at what rate, that will come, we will disclose it. It will be an important fact.

On the tax rate, we do reiterate the tax rate soft guidance that we provided. You should be aware that a lot of the deductions and tax relief positions that we take are one-off events. They happen to fall in one particular month. And those three -- the first three months of the year are not particularly abundant in a reach in tax events. So we do -- we do keep the guidance. It is going to go between 25% and 27%. And the first quarter results is just going to be a data point.

Hi, Luis. Taking your question on the margin compression in the (inaudible) could -- what percentage is due to handset, most of the effect is effectively due to handset costs. As you know, we are now buying the handsets not at the official rate but in the market. And therefore that's affecting both the costs, because we are accounting these extra cost -- these FX extra costs at the operating level, the operational level.

And this is also affecting the absolute amount of customers that we are able to get from the market because it puts a lot of pressure on the commercial effort. So we cannot disclose you how much of the margin compression is that, but it is mostly due to that. And we'll keep you posted whenever we are able to get some handsets at the official rate because that should help to alleviate this tension.

If I can follow up on the business that you are not passing on to the customers, increasing in the -- sorry, that you are passing on to the customer, increasing their cost of the handset.

Effectively. And that's why you will see that handset sale has been going down significantly during the quarter.

Okay, thank you.

Next question, please.

Our next question comes from Mathieu Robilliard from Exane BNP Paribas. Please go ahead.

Good afternoon. Two questions, please. First, on Mexico, service revenue seems to have slowed down a bit, although still a strong performance in Q1 versus Q4 and that's pretty much unlike what we've seen in a number of other countries. Is there anything specific that explains that? And are you expecting a reacceleration as we have seen in other countries in Latin America?

And the second question with regards to Portugal Telecom and the Vivo situation. Portugal Talk management has very clearly said I think in the past that they are very attached to Vivo. And in that context and given the fact that in the letter of proposals that you made to PT management, you highlight a number of ways PT management could create value for its shareholders. Why didn't you decide to [beat] right away for the whole of Portugal Telecom? Thank you.

I'm taking your question on Mexico. Revenue growth is effectively as you have mentioned, 40%. And it's lower than before. But you should also take into consideration the fact that the company's becoming bigger and bigger and therefore we are starting from a bigger base.

We see the market strong in Mexico. Service revenues are growing nicely. Handset sales are also growing nicely in Mexico. If we are lagging behind on something, we could be much more aggressive on the data part, on the mobile internet part. But we are constrained by the lack of respect, namely on Mexico City. And that's why we will be active on the option -- [expect] on option in the next -- in the next weeks.

But having said that, data revenues are still growing 24%. They already represent 22% of total revenues. Net adds are much higher than in the first quarter of 2009. Our churn levels are pretty stable and lower than those of our main competitor, the market leader. We have been able to increase market share once again in the first quarter. We are already up to 21% threshold and according to our estimate we have been getting 27% of net adds.

Traffic growth is pretty sound, 17% year-on-year versus a growth in the customers of 14.8%. So on MOU, minutes of use has been growing to 2.5%. So it is true that we are growing less than before, but it is also true that growth is still there, is pretty sound, and we see a very strong market dynamics and we hope we will take advantage of that.

As a result of all that, Mexico is becoming more and more important at the regional level. The contribution of revenue growth of Mexico in the first quarter of this year is much higher than in the first quarter of last year and effectively is taking the relay -- partially the relay of a lower contribution from Venezuela, for example. So we are -- we have very big expectations about Mexico and we are putting out for it to really speed up growth there.

[Yes Mathieu] on PT and Vivo situation. Our alliance with PT has always been centered on Brazil. That's how it all started. That's what we wanted. And that's what we are trying to complete with this offer that we've put on them. It has not been hostile to anyone and certainly not to PT or Portugal that we are interested in. before we said that this was a bridge to Brazil. And unfortunately, all the other things that we have tried over the years didn't seem to work out for very understandable but very unacceptable reasons.

A full bid on PT is plagued with all sorts of uncertainties. It is not the kind of thing that we would like to do. But certainly the economics of the deal would suggest that it probably would have been more financially viable to do so. But certainly it's not only about financial values, it's also about respect for Portugal, it's about respect for shareholders' decision that we decided to put all the pressure on one single, very attractive, a replicable offer.

Thank you very much.

Next question, please.

The next question comes from Simon Weeden from Citigroup. Please go ahead.

Thank you very much. I'd like to redirect your attention to Spain, if I may, and just ask you, having been through a pretty severe recession, what you think, based on this experience, might be the impact on the business if austerity measures are to be taken to bring down the Spanish government's funding deficit.

And also, if in the course of trying to deflate the economy somewhat to sort of rebase it in euros, the government might look at the cost of certain important items to consumers such as your line rental, for example, and ask you, as a theory, anyways, a hypothesis, to reduce your line rental slightly to help them accommodate lower pay, for example, in the public sector.

Thank you, Simon. This is Guillermo. First of all, it's too early to tell the impact of the measures that have been announced by the government, with type of effect it will have on our business. However, our overall comment is that we believe that that will help to create confidence in the financial markets and in the overall economy as a whole.

Regarding what we see in the business this last month and these last weeks, as Santiago mention in his -- in the presentation, we think that the worst is over. We see some early or slight signs of recovery, very, very early, very mild. But, for example, mobile traffic is, for the first time in many quarters, on the positive. Very small, 0.1%, but that's a positive. We see the market as a whole, not only Telefonica market but the whole market of broadband, of fixed lines growing.

Of course we are not in the level of two years ago, but they are growing and they are behaving better than a few quarters ago. Also, some maybe internal financial things, measures like bad debt provisions, we are recovering bad debt provisions. So that's a positive. So too early to tell. The measures of (inaudible) government.

And regarding our business with the public sector, let me remind you that the type of business we conduct is multiannual contracts with a strong ICT component. So many of this services are providing synergies and cost saving for the customers, and this case for the public sector. So too early to tell. But on that side we feel a little bit comfortable with our business.

Thanks very much.

Next question, please.

Our next question comes from Jonathan Dann from Barclays Capital. Please go ahead.

Two questions, really. One is could you -- I guess an observation. It seems that versus other integrated operators your pay TV growth seems relatively modest. Any plans to do anything there?

And secondly, I guess, what -- back to Vivo, it sounds as though the sort of marriage with Portugal Tel is sort of on the rocks. I mean what's the next steps if it becomes clear that shareholders will not back your bid?

Well, I would take part of the first question regarding the pay TV effort in Latin America. What has occurred in the first quarter and then I will pass it over to Guillermo for the -- for his comment on Spain.

In the first quarter we have been, as you know, focusing on (inaudible) the situation both in TeleSp and in Columbia. And on that side, in TeleSp we're mainly focus on the traditional business, the traditional line business and the ADSL. And that's why we have not been that active on fueling our growth on TV on the triple play side.

But in spite of that, we have been growing more in TV than in previous quarter, so it proves that the market is there and it proves that once we are setting up the -- we are fixing the basics of the market, bundling is effective, and therefore that's why we are focusing in the second quarter of this year, mainly in TeleSp but also in Columbia, to increase the quality of our offer on TV, both in terms of the number of high definition channels, in terms of the electronic guide, the interaction guide with the customers, in order to improve our situation.

So basically we have been more successful in the first quarter compared to the previous quarter on TV, but still we are not at full steam at all. We need to improve our offer,. Our churn, our TV churn has been significantly reduced in the region, so it's a pending matter to accelerate on that side for the second quarter of this year. And therefore we do see the market. We see that there is an opportunity.

We have been pretty focus on fixing the basics of this major two businesses. As you know, in Argentina we are refrained from selling TV because of regulation. And in the other two markets, in Peru and in Chile, we have been doing relatively well. So I guess that you will be seeing a higher activity on the TV, on the pay TV side, and we are -- we ambition to be a player and we think the market is there and these are growth opportunity.

Regarding the pay TV market in Spain, first, as a market, the market has been decreasing a little bit since the beginning of the recession. In our case, last summer we change our content offering, including a football channel in our offering. And since then we start growing again. Right now we have an increase in our customer base of 21%.

Our market share is 18%. It was 14% one year ago. And that's impressive taking into account that we don't cover the whole geography of Spain. We only cover 60%, 6-0% of the households because of the lengths of the [loop]. So we are growing nicely and reaching a 20% mark in a few quarters.

This is Jonathan and on the next steps, this software is worth about 80% of PT's market cap. We were surprised to learn that PT's board of directors, with the absence of Telefonica representatives, decided to shrug it off, to our discussion, with a two-line statement, with no other ways to proceed forward.

So we certainly think this is the kind of issue the shareholders should be directly consulted about, whether this can be done or it cannot, remains to be seen, but certainly our offer is still full, it is still fair, it's still valid. So there is always the chance that the issue might be revisited. Other than that, if shareholders are not interested, we have nothing else to add. But we do think that the shareholders ought to be heard in this process.

Next question, please.

The next question comes from [Mandeep Singh] from Berenberg. Please go ahead.

Thank you, given the nature of the relationship and how that may have developed and the bid, if the bid is not clearly accepted, which it appears it won't be, do you see your own partnership with Portugal Telecom as untenable? And the second question is why you're not using such proceeds to buy back your own shares.

Thanks for the question, Mandeep. It's not that our relationship with PT has gone through any rocks, it's that we have diverging views as to what the next step in Brazil should be. We jointly own and control 60% of the economic value of Vivo. We think there is a lot of value lying idly on the floor and we think it should be picked up. That's what we feel inclined to do. We think that's the overall mandate of our shareholders. But it is not a Telefonica, Portugal Telecom difficulty in understanding any other thing.

When this thing is over, we will (inaudible) what the other options are, including going back to where we were because if shareholders do not like our proposal, then that's fine. But I think it's shareholders that ought to decide and something which is worth so much and promises so much of the full value and then some of an asset probably ought to be directly studied in a more measured and in more detailed way than it has.

It's also not the case that we have inherited EUR5.7 billion and we want to do something with them. We do have the financial flexibility to accommodate this transaction. And if it doesn't happen, we will just have to go along with life, the life we had until one week ago. So it is not this or something else. In the same way that for PT it is not this or something else. It is either this or nothing. And I think that's the clear decision that shareholders of PT have to decide.

If I could just follow up, if you don't mind. I think you were asked the question earlier, but the quantum of synergies is exactly the same in aggregate terms if a deal was done at the Vivo level. Is that something you would consider?

What we've said in the presentation is that the share of synergies that should acc rue on a purely fair value mathematical equation is no higher than 31% in the best of circumstances. And what we are saying is that the number we're putting on the table is significantly higher than that 31% of the value of those shares. And that's a value creation opportunity because it is next to impossible to prove or to demonstrate that Vivo on a standalone basis can create through the current management as much value as we're putting on the table today. That's the reality that PT shareholders should be facing.

Thank you.

Next question, please.

Our next question comes from Tim Boddy from Goldman Sachs. Please go ahead.

Yes, I've got two questions, starting on Spain. It seems there's a separation now between GDP performance and revenue performance in Spain. Be helpful just to understand the extent to which you think that's a reflection of structural pressures as opposed to any macroeconomic issues.

And then secondly, moving on to some Apple related question, the iPad pricing that you announced in the UK looks somewhat keener than rivals. And I noticed that CapEx in the UK is up in the 30% year-on-year. Can you just talk through how you're thinking about the opportunity for mobile broadband in the UK and the CapEx implications? Thank you.

Tim, let me pick up the Apple question, then I'll hand over to Guillermo. Yes, we announced our pricing this week, I think. What we see as the iPad, it's a device that we think is going to get a lot of WiFi usage and effectively what we're doing is exploiting the agreements that we already have with the Cloud and BT Openzone on WiFi that we're structuring our iPhone launch. And we think that's a positive for customers and for us. If we can get more customers coming to us using the device, then all the better.

As far as network quality is concerned, you will have seen that our network spend in the UK went up in the first quarter. And as promised, to date the quality we're giving has been improving since the middle of December. We still watch it very closely, but certainly we're a lot more comfortable now than I was in the middle of December.

This is Guillermo. Regarding the revenues and GDP, so far in the case of Spain, in our opinion, our revenues are much more linked to macroeconomic consumption rather than overall GDP. That have been the case so far. I don't know in the future. So that's why we are trying to track closely what's going on with some of the [proxies] like the traffic or the minutes of use of our customers in mobile and also the overall commercial activity in the whole business.

And so far we see mild recovery of traffic. That should be confirm in the future. And that's why we are betting heavily on trying to get more customers because we see that the worst is over and that would -- should foresight some recovery in the rest of the year and in the next quarters.

Just to follow up on that, it seems that most forecasts suggest Spanish GDP should be roughly flat this year or slightly down. Is it just the case that your business is sort of lagging a quarter and this is now the bottom?

Yes, might be the case. Again, we're trying to track better the macroeconomic consumption because that's what, in our opinion, explain better what's going on in our revenue side. But that's why we are hoping or we're expecting that in the second half of this year we might start to see some more strong recovery in the revenue side.

Wireless, as you now, has been more elastic in the correlation with consumption. So we have gone down deeper in the beginning of the cycle and it's recovering better in the last few months. So that's -- and also we seen that in April and in the first two weeks of May, where we are seeing that wireless is starting to behave a little bit better. But again, it is our early warnings and we hope that we can confirm this in the next two quarters.

Thanks very much.

Next question, please.

Our next question comes from Luigi Minerva from HSBC. Please go ahead.

Yes, good afternoon. First question is on Telefonica Espana. I was wondering if you could give us more color on the intense commercial activity that you're doing just maybe going through the main initiatives and now that may translate in a positive impact on revenues in the second half of the year. And secondly, again on the Vivo offer, if we were to get to the AGM level, would Telefonica be able to exercise their voting rights, given that you have 10% in PT? Thank you.

Well, regarding Luigi's question about commercial activity in Spain, first of all, what we're trying to -- and we turn around, in fact, if you consider -- if you look at the numbers compared to the first quarter last year, is the growth was total accesses. [La] focusing on different businesses, the postpaid mobile business is the one that we are turning around more rapidly. Remember in the first quarter last year we have, I think, a negative number in postpaid and now we have almost 200,000 positive net gain.

Within that, particularly mobile broadband is the area where we are growing at the faster rate, more than doubling the base of customers. Pay TV, although has a lot of seasonality and seasonality is very much linked to the football season, we are showing growth despite, as I mentioned in previous question, the fact that the market overall is not growing. And also in fixed broadband, though we don't have the numbers we have two years ago as a market, every quarter the market is growing better than before and we have been defending very well our overall share.

So overall we're seeing that the market as a whole is becoming better so the number of total customers add in the different businesses is growing, is positive and is growing. And that's completely different to the situation we have in the first quarter of last year, where, obviously, commercial activity was lower and commercial expenses were lower.

Yes, Luigi and on the [PT] AGM, if it comes, we've always voted in the AGMs with our 10%. We do intend to vote in the next AGMs of PT, to the extent that we continue being shareholders, unless, of course, explicitly and decisively impeded or prohibited from doing so, which we are not aware is the case today.

Okay. Thank you very much.

We have time for one additional question.

Our final question today comes from Robin Bienenstock from Bernstein Research. Please go ahead.

Yes, thanks very much. Two questions. I guess my first question is you have a principle of keeping your average debt maturities around six years. And I've noticed that a lot of your debt recently has looked shorter term. So I'm wondering if you can tell me what the maturity is now and whether you'd be happy for it to drop below that six-year average if it needed to do that later this year.

And my second question was about your view on the case before the competition commission in Brazil about MTRs. You've talked a lot about MTRs in Europe, but your exposure through Vivo to MTRs in Brazil is obviously quite a little bit higher and I was just wondering if you have any views on that case.

Robin, on the debt question, average maturity is down 6.3 at the end of March, on a comfortable zone. Depending on the issuance, we take advantage of different currencies and different terms. Sometimes it's to five years that looks more attractive. Sometimes it is the 10-year tenure. We try and manage those opposing maturities to keep the average on balance. We are shortening or lengthening to the extent that those are temporary, is not major problem for us.

Taking your question on MTRs in Brazil, the exposure year-on-year has been decreasing at the level of Vivo. And as of today, it's effectively 4 percentage points lower than the previous year and it keeps going down. All the operators we are doing major efforts to force their on-net traffic and that's why you will see that on-net traffic is even growing more than the total traffic of Vivo.

Having said that and going specifically to Anatel position, starting this year in 2010, Anatel has the right to decide based on a cost basis and the cost is being communicated by the operators and their own service of internal research of Anatel. This can be apply if the operators do not reach an agreement amongst them. And therefore we think that until middle of this year what the effective revision of tariffs takes place, it would not be seen or not if there is an agreement or not between the different operators.

And therefore we see that the most likely scenario and is still yet to be seen, is of a progressive reduction of MTRs on a glide path matter -- pattern. But still we will need to wait for preferably the mid of this year to see what is the position of Anatel. So right now and starting in 2010, Anatel has already the right to decide based on cost. But it can only apply that right if there is a disagreement among the different operators.

I was really more interested in knowing what your view was on the [Cada] case, the case before the competition commission and how that might influence what Anatel will do.

We don't have a clear view on that yet. I think that for the time being, the most -- I think the most likely scenario is that we will all agree and that we will reach an agreement between the different operators. So I guess that is still to be seen. I think that the next two months are going to be crucial. So probably for the next conference call we will already know what is going to happen.

Thank you.

Well, with this we bring this conference call and the Q&A session to a close. I want to thank you for having taken the time to listen to us and ask all those questions. Next conference call will be end of July, as we publish our Q2 numbers that I'm sure will show an improvement over this bottom of the year Q1 numbers. And over in the coming weeks we will be either participating in events that you might attend or visiting you personally. Thanks a lot for your time and have a good evening.