Telefonica SA (TEF) 2014 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Telefonica's January to September 2014 results conference call. (Operator Instructions). As a reminder, today's conference is being recorded.

I would now like to turn the call over to Mr. Pablo Eguiron, Head of Investor Relations. Please go ahead, sir.

Good afternoon, and welcome to Telefonica's conference call to discuss January-September 2014 results. I am Pablo Eguiron, Head of Investor Relations. And before proceeding, let me mention that this document contains financial information that has been prepared under International Financial Reporting Standards. This financial information is unaudited.

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

We invite you to read the complete disclaimer included in the first page of the presentation, which you will find in our website. We encourage you 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 slides, please contact Telefonica's investor relations team in Madrid by dialing the following telephone number: 3491 482 8700.

Now let me turn the call over to our Chief Financial and Corporate Development Officer, Mr. Angel Vila, who will be leading this conference call.

Thank you, Pablo. Good afternoon, and welcome to Telefonica's third quarter 2014 results conference call. Today with me is Jose Maria Alvarez-Pallete, Chief Operating Officer. So, during the Q&A session, you will have the opportunity to address to us any questions you may have.

Telefonica published a consistent and solid set of results, reflecting further progress in our transformation strategy. We are particularly pleased with the very strong commercial activity recorded during the quarter, with a significant boost in key growth levers and record net adds in smartphones and fiber customers.

We kept improving our top-line performance, after accelerating organic growth to 2.8% in Q3, driven by enhanced strength in most of our operations. This evolution underpinned OIBDA evolution, which returned to growth in the quarter, and resulted in sequential margin expansion.

CapEx maintained its upward trend over the January-to-September period, speeding up network modernization, evolving towards a full IP company, and driving access growth that will translate in future revenue expansion.

We continued to deliver a sound cash flow generation of almost EUR3 billion up to September, which kept strengthening the balance sheet. Net debt stood at EUR41.2 billion at the end of September.

Let me note that the E-Plus acquisition will be impacting net debt level and financials in the next quarter, as it was closed on October 1.

In addition, we have reinforced our competitive edge in main markets through value-enhancing deals; the recently closed German transaction is the best example. And we are in the process towards closing the acquisition of GVT, expected for the first half of 2015.

Finally, we fully confirm our operating goals for 2014, and our dividend commitment.

Let me summarize key financials, on slide 3. In organic terms, revenue growth improved to 2.8% in July-September period, and 1.9% in January to September to EUR38 billion.

OIBDA amounted EUR12.3 billion; stable versus the first nine months of 2013, reflecting the 0.8% growth posted in the third quarter.

OIBDA margin stood at 32.5% up to September, and 32.8% in the quarter, both posting a limited year-on-year erosion.

Net income totaled EUR2.8 billion.

And EPS reached EUR0.61 per share in the January-to-September period.

Reported year-on-year change reflected the negative FX impact, and changes in the perimeter of consolidation. In the third quarter, FX headwinds softened, particularly in Brazil, dragging 6 percentage points to OIBDA year-on-year valuation, while the deconsolidation of Ireland, since July 1, increased the negative contribution of perimeter to 4.5 percentage points.

Finally, net debt declined to EUR41.2 billion, minus 11% year on year, not including yet the payment for the E-Plus transaction to be recorded in the fourth quarter; nor the already executed divestments of 2.5% stake in China Unicom, and the remaining 5% of O2 Czech Republic.

Turning to slide number 4, increased investments are fostering growth in the high value customer base, capitalized on a right pricing strategy, customer insight, and competitive tariffs. All this should contribute to improved customer retention, making the whole model more sustainable.

Commercial momentum remained high during the third quarter, and translated in the following data points. Smartphones' net adds reached 8.5 million, doubling versus last year, and 1.6 times versus the prior quarter, while fiber net adds further ramped up to almost 300,000; 1.8 times year on year, and 1.3 times quarter on quarter.

Pay TV continued gathering momentum and quarterly net adds surpassed 450,000; up fourfold year on year, boosting accesses growth to 41% year on year.

LTE further advanced, reaching 54% coverage in Europe, while in Latin America it is available in eight countries, being a key driver for data monetization.

On slide 5, we are particularly pleased with the improvement posted across the board in the third quarter, both in absolute levels and relative change versus previous year.

Organic revenue growth picked up in the third quarter to 2.8%; 150 basis points more than in the second quarter. This acceleration is based on increased growth rates in Telefonica Hispanoamerica; mobile data; digital services; and lower declines in Spain and Germany. Therefore, we keep improving our revenue mix towards a data and digital company.

Organic OIBDA growth ramped up also 150 basis points sequentially to 0.8%, supported by our continuous focus on efficiencies and strict cost control, amid intensified commercial investments, network and IT costs. This performance led to a stabilization in year-to-date organic trend, and to limited margin erosion of 0.5 percentage points versus the same period of last year.

Please turn to slide 6 for a fast review on how we are enhancing our network and IT capabilities. Telefonica global resources contributed with a rapid rollout of LTE and fiber; key tools to capture market growth. At the end of September, 12.5 million premises were passed with fiber, approximately 2 times higher year on year; and we had more than 16,500 LTE sites in service, 2.5 times from a year earlier.

Let me also highlight that more than 80% of 3G and all 4G mobile sites are already connected with ultra-broadband technology. We continue advancing in network development, as demonstrated by the launch of LTE Advanced in Spain, while the network in Germany is already prepared for voice over LTE.

In IT, we are delivering results on simplification. Year to date, we decommissioned approximately 300 applications, and reduced by 10% the number of physical servers, meeting in advance the target set by the end of the year.

Additionally, we continue working on consolidating data center services, and virtualization of IT.

Turning to slide number 7, let me go through the evolution of digital services. In the consumer segment, video continued to accelerate one more quarter, with a revenue growth rate of 24% year on year. The new agreement signed with Samsung in Spain is contributing to further reinforce service capabilities.

Regarding financial services, I would like to point out the launch of Yaap Money in Spain, a new mobile person to person money transfer app; and the nationwide spread of Movistar Dinero Movil in Peru.

In the global device management, the focus continued to be on the smartphone adoption, with a clear spotlight on LTE with already 72% of total Q3 shipments being smartphones, and 30% being LTE-enabled devices.

Additionally, in the B2B segment, machine to machine showed a solid performance with revenues up 44% versus January-September 2013, on solid access trend.

And cloud revenue accelerated its revenue growth up to 31%.

Finally, in the information security area, the Company continued to improve the value of its products and services with the launch of Sinfonier, and with sales reaching a 42% increase year on year.

Moving to slide number 8, let me highlight the progress made in Telefonica Espana, where we continue to lead the market on quality differentiation.

Commercial momentum accelerated in the quarter, despite summer seasonality. This operational strength is based on our differential infrastructure and superior value proposition, and has allowed us to increase or stabilize the customer base of high value services year on year; a remarkable goal that will underpin revenue going forward.

As such, compared to September 2013, Pay TV customers are 2.6 times higher; fiber customers are 2.2 times more; and mobile contract just declined 1%.

Meanwhile, Movistar Fusion TV continued to lead the conversion market growth, and to increase the value of our customer base.

Churn kept improving, and the customer mix continued to evolve towards higher value packages, as a result of an increased uptake of high-end bundles. As a result, Fusion ARPU is increasing; up 1.2% sequentially from Q2 to Q3, reaching EUR70.

Let me stress that we remain committed to further enhancing our long-term competitive advantage, mainly ultra-broadband coverage, reaching 8.8 million premises passed with fiber by the end of September, doubling last year's figure.

In terms of financials, let me underline that Q3 revenue posted a sequential improvement in its year-on-year trend to minus 6.6%; easing 2.5 percentage points quarter on quarter, and halving its drop in the last three quarters. This performance is mainly driven by the customer base stabilization, and the lower back-book impact, as a large proportion of the customer base is already convergent with Fusion ARPU increasing.

Regarding profitability, Telefonica Espana delivered a healthy Q3 OIBDA margin of 46%; improving 1.2 percentage points from previous quarter.

The main reason for OIBDA decline remains being revenue erosion. This is why, in the current market context, we have prioritized revenue stabilization. Hence, we can see that our plan to turn back Spain to revenue growth remains in place, and in the coming quarters should gradually reflect the benefits of Fusion ARPU increase, sustained trading momentum, and market consolidation.

Turning now to slide 10, Telefonica UK posted strong customer growth, outperforming the market, with total customer base reaching 24 million at the end of September.

Quarterly net adds were consistent and strong versus prior quarter, with record market-leading contract churn at 1%.

The strong commercial momentum was complemented by improving ARPU trends, supported by pricing stabilization, and data monetization; leveraged on the increasing data usage of LTE customers, 2 times, versus non-LTE, and high single-digit ARPU uplift.

As a result, revenue in mobile service revenues' performance continued to improve in the third quarter and grew 2.3% and 1.1% year on year, respectively, excluding the impact of O2 Refresh. As a result, Q3 OIBDA expanded 2.7% year on year, affected by a positive non-recurrent impact of EUR34 million, mostly due to the final settlement related to the disposal of the consumer fixed business assets in 2013.

To review Telefonica Deutschland, please turn to slide 11. In a dynamic market, we posted very solid momentum in the third quarter, with contract gross adds growing by 30% year on year, leading to contract net additions 3 times higher versus previous year.

LTE is gaining traction with close to 90% of shipments being 4G-enabled, and usage 3 times higher versus non-LTE smartphones, demonstrating that there is a strong demand for data in the market.

Revenue largely stabilized year on year in Q3, with a limited decline of 0.5%, after posting a consistent turnaround throughout the year. This improvement is the result of better mobile service revenue trends, driven by data and strong handset sales, following the launch of new high-end devices.

Increased commercial efforts to support better trading momentum, initial restructuring costs associated with integration of E-Plus, and non-recurrent transaction costs pressure profitability.

Lastly, I would like to remark the closing of the E-Plus transaction on October 1. As such, the fourth quarter results will incorporate the consolidated new Company figures.

In Brazil, turning to slide number 12, we continue strengthening our position in the most valuable segments capturing, for six consecutive quarters, more than 1 million contract net adds; and accelerating the adoption of data services. As such, quarterly smartphone net adds reach a record-high with almost 6 million new data plans, outperforming the rest of the market, and boosting data ARPU that already represents 37% of total ARPU.

At the same time, we kept pushing differentiation by expanding our 4G network, which is leading the market.

In the fixed business, we continued accelerating our transformation into fiber company, reaching 3.4 million premises passed, and 322,000 accesses as of September. At the same time, we are strengthening our position as a video player with growing net adds of 40,000 in the third quarter.

Financial performance is shown on slide 13. Outstanding commercial activity posted in the last quarters explain the consistent revenue growth trends, with positive contribution of both mobile and fixed businesses. The latest is growing for the first time in seven quarters when regulation is excluded.

Let me highlight that this steady revenue growth in mobile implies that we have captured 68% of incremental mobile service revenue market share in the last 12 months.

And, on top of that, ongoing efficiency efforts are leading to a year-on-year cost reduction of 0.2% in the third quarter, despite higher commercial costs; and results in an acceleration of OIBDA growth for the second consecutive quarter to more than 5% in Q3, with a margin expansion of 1.2 percentage points year on year.

In slide number 14, let me highlight the strong growth posted in Q3 by Telefonica Hispanoamerica.

Commercial momentum with levels of mobile gross adds above 11 million, and increasing weight of smartphones, is driving a consistent double-digit revenue growth. This performance is leveraged on the growing contribution of data revenues, already accounting for almost one-third of mobile service revenue, fostered by non-SMS data up 48% year on year in Q3.

On top of all of this, let me highlight the increased profitability across the board in Q3, and particularly in non-inflationary economies like Mexico, Colombia, and Peru. As such, when Venezuela is excluded, OIBDA ramped up year on year to 17.8%, and OIBDA margin expanded by 2.2 percentage points.

Turning to slide number 15, let me go through the progress achieved in Mexico. The combined benefits of our quality assets and the new pro-competition regulation are driving a significant improvement on operational and financial metrics.

Firstly, gross adds, year to date, are consistently higher versus previous years, growing by 45% when compared with the nine-months period of 2013, and 63% with the same period in 2012.

Secondly, revenues are steadily accelerating. Our mobile service revenues grew by 12.6% year on year; the highest growth in more than four years.

And finally, Q3 OIBDA rose by 50.6% year on year, showing the effects of the new regulatory framework, and the economies of scale we're achieving as a result of the strengthened commercial positioning.

In the rest of Telefonica Hispanoamerica, on slide number 16, steady growth is the main reference across the board. Specifically, let me highlight the sound Q3 OIBDA year-on-year acceleration in Peru, growing by 17.4%; and Colombia by 25.3%, on very solid revenue growth.

Margin in Colombia expanded by 5.6 percentage points year on year.

In Chile, regulatory changes continued to drag revenue and OIBDA performance; but profitability, as in the case of Argentina, also improved year on year.

In Central America and Venezuela, OIBDA year-on-year growth acceleration is explained by the highest net adds of last four quarters, and the effects of the inflation on costs.

Let me now move to the financial side, on slide 17. Net debt, as of September 30, stood at EUR41.2 billion with a leverage ratio of 2.39 times. This figure would stand at EUR44.9 billion, or 2.52 times including post-closing events, mainly the payment for the E-Plus acquisition; the sale of 2.5% of China Unicom; and the already completed sale of our remaining 5% stake in O2 Czech Republic.

Leverage is negatively affected by the FX impact on OIBDA, which has started to ease in the quarter. We are mindful on the need of executing further measures, such as the scrip dividend, and other inorganic actions. We expect to continue progressing towards the EUR43 billion net debt target.

Slide 18 highlights our diversified EUR14 billion funding exercise in the year with a more active role on the equity markets in the third quarter, as we have raised EUR2.25 billion through the issuance of a mandatory exchangeable bond into Telecom Italia shares, and a mandatory convertible bond into Telefonica shares. And we have executed the capital increase of Telefonica Deutschland for the E-Plus acquisition, reinforcing our capital structure, while raising EUR0.8 billion from equity investors.

This funding has allowed us to keep a very ample liquidity cushion, above EUR18 billion, even after paying for E-Plus. This has been complemented in October with the issuance of a EUR800 million bond with 15-year maturity, and only 2.93% coupon; the lowest ever achieved by Telefonica for maturities longer than 10 years.

The average cost of debt has increased to 5.73% as we have kept an average amount of cash in euros higher than in the previous year in anticipation of the E-Plus payment.

And the relative weight of debt in Latin American currencies has increased, following the amortization of debt in euros and Czech korunas. Though this effect will persist in the future, it will be partially offset by savings from floating debt in euros.

To recap, the successful execution of our transformation strategy is creating growth momentum into 2015. We delivered solid customer based growth, focused on high value, enhancing the customer's lifetime value, and building a more sustainable model.

Revenue growth accelerated in the third quarter, improving the top-line profile and enhancing profitability.

OIBDA returned to growth in the third quarter, and margin expanded versus Q2 thanks to Telefonica Espana, Mexico, Peru, and Colombia.

Our balance sheet remains strong, reducing net debt year to date, even after E-Plus payment.

We reinforced our CapEx effort, speeding up network modernization towards an all-IP company, and driving access growth that will translate in additional revenue opportunities, driven by further differentiation.

Finally, we are actively participating in the consolidation of two of our main markets: Germany and Brazil.

Thank you very much for your attention, and now we are ready to take your questions.

(Operator Instructions). Georgios Ierodiaconou, Citi.

Thank you for taking the questions. I have two; both financial related. The first one is around your capacity to issue hybrids. And here, I remember, in one of previous conference calls, you mentioned around EUR7.5 billion as being more or less your capacity for hybrid.

There was a report yesterday by one of the major rating agencies suggesting that could be as high as around EUR13 billion, so I just wanted to get a clarification whether you do have more capacity than the EUR7 billion we had in mind, and whether you are planning to use it at some point?

My second question is around E-Plus. It's commendable that you have stricter EBITDA recognition than some of your peers. But I just wanted to understand, once you've seen that there was actually a lower EBITDA and cash flow generation than perhaps was expected last year out of these assets, why you chose not to renegotiate the price, and whether that means you see more revenue upside or other types of synergies that maybe haven't been identified.

And if you could at all comment on GVT, and whether there could be some kind of adjustment we need to make on the numbers for GVT also? Thank you.

Georgios, on your questions, regarding hybrids, we have outstanding hybrids issued of EUR4.2 billion.

Regarding the capacity to issue additional hybrids, the treatment is slightly different between Moody's and S&P. We are taking the most prudent one, which corresponds to S&P, when we say that we have a limit of EUR7 billion, despite Moody's report issued yesterday that, indeed, it was getting closer to EUR13 billion.

We have been using hybrids in order to support the strategic decisions, such as M&A, acceleration on CapEx, and to protect from negative events, such as the devaluations like in Venezuela. And we would expect to continue using these type of instrument from time to time, and we may approach the market again in the near to mid future.

With respect to the E-plus accounting procedure, well, our colleagues in Germany have explained, both in the road show and the prospectus, and in the several Q&A sessions, which is the nature of adjustment that we have done to convert what used to be E-Plus, or potentially KPN's, accounting policies to Telefonica policies.

The different treatment has a clear impact at OIBDA level, but does not affect at the operating cash flow level, which, in the end, is what one would be looking at when thinking about valuation. Therefore, we decided that given that the synergies case was there, and that the cash flow generation was there, with a bigger customer base, and, therefore, potential for increased revenue going forward, we decided not to renegotiate the price.

Regarding GVT, we are not aware of any such type of adjustments that would be necessary to be made in the future. And, as you were saying, as we have seen in various deals, our accounting principles seem to be prudent, and potentially more conservative, than some of our competitors, which we feel proud of.

Thank you.

David Wright, Merrill Lynch.

A couple of questions from me. First of all, just on the Spanish ARPU, that's obviously a very strong number and to be able to stabilize is very encouraging. I think you said over -- there was a comment about gross additions over EUR60, so could you give us any idea on how the ARPU should evolve into Q4? Would you be looking at something a little more stable?

I notice your run rate of additions has stepped down now to sort of 170,000, or so, so clearly there is an ARPU premium you're now trying to collect. So should we be looking at ARPU stabilization in the next couple of quarters?

My second question is just a little more on the UK. We had Vodafone announcing yesterday its ambitions to launch a fixed product; I'm sure in -- as a pre-emptive move against BT. You obviously still stand as a mobile-only operator, having divested your fixed assets.

So are you feeling exposed, given Vodafone and EE are now both out there with a fixed product? Could that even prompt you to consider an exit, or even trying to consolidate the market for more scale? Thank you.

Thanks for your questions. Regarding Spain, in Fusion, we have seen a slight ARPU increase in the quarter, mainly coming from two major factors.

First, the gross-adds, the new or upselling customers keep growing; now they account for 78% of total gross-adds. And 69% of gross-adds are on packs about EUR60, which means that with the current, with the existing commercial trends, we are seeing a move towards not the basic product, and, therefore, some movement for accretion. A slight accretion for the first time in the second quarter, that we are seeing a move into that direction.

It is also important to note that churn has also stabilized in the neighborhood of 1% of the Fusion customers. Therefore, the lifetime of service value for a customer on Fusion is more than 2 times the ones of fixed broadband; and more than 2.5 times of a pure mobile contract.

So just Fusion, the trends are commercial, the underlying commercial trends of Fusion, even with a slightly lower net adds that in the previous quarter, are going to the region of a slight ARPU uplift. Considering that Fusion is roughly now more than 50% of residential revenues, and residential revenues are 50% of total Telefonica Espana revenues, this is a very sound anchoring factor for revenue stabilization in Spain.

We are also accelerating, as you know, fiber deployment and LTE coverage. Therefore, with the new data packages that we are putting the revised pure mobile offer is also helping to stabilize or to improve the trends of pure mobile ARPU.

Therefore, from both sides we are seeing better trends in the underlying revenues of Spain, and that explains the year-on-year improvement, or the decrease in the rate of decrease, so to say. So, for the fourth quarter, and according to the figures that we have for October, it looks like this is going to the right direction.

We have also a very sound move in terms of the TV commercial effort, even though we would like it to accelerate even further. It is going well.

Therefore, all the elements that need to be in place for a further ARPU uplift on Fusion, or on the pure independent offers, which is namely a data monetization through the video offer, and more data bundles, more data packages, are going to the right direction, both in wireline and in wireless.

And on the UK, well, convergence in the UK will depend on several factors; one of them being the strategy that BT will take on its mobile launch, the aggressiveness that BT will take on the mobile launch, and the kind of commercial offers that they would put on top of the table.

We do not see today the UK as a strong convergent market. And we anchor that statement into the fact that consumer behavior, for the time being, has shown limited interest on the convergent proposition.

Distribution of our wireline and wireless have different market structures and there is already some quadruple play offers on the market, like the one coming from Virgin, and it has been showing limited traction. But, as you said during your question, Vodafone and Everything Everywhere have moved into one direction. It looks like they are being prepared. In our opinion, this is just anticipation of a potential launch of BT, and we will monitor very closely the evolution.

Okay, thank you.

Luigi Minerva, HSBC.

First question is on Germany. The pricing momentum in the market seems positive. I know DT has refreshed their tariffs in September. Cable has raised their access prices. I wanted to get your view on these pricing dynamics, and whether you believe Drillisch has the ability to derail or disrupt these pricing dynamics on the back of the wholesale agreement with Telefonica Deutschland?

The second question is on Brazil. If you can elaborate, to the extent possible, when you say that you are actively pursuing consolidation opportunities. Thank you.

On Germany, you are right, we are seeing a much better commercial momentum with more rational commercial approaches by the different players. We are also seeing some stabilization of the increase of the ARPU uplift coming from LTE offers; and also, data volumes, data traffic is also going to the right direction.

So, for us, trading keeps positive in terms of momentum. The net adds were very sound. We have had this quarter three times more net adds than in the same quarter of the previous year.

It is true that we are also investing heavily in the market, and this is impacting OIBDA. We are also seeing a positive performance in handset revenues after the launch of the iPhone 6.

So, overall, yes, we see a sounder commercial momentum in Germany overall for the whole of the sector, and namely for us.

In terms of the potential disruptive movements coming from Drillisch after our bit-stream access agreement with them after the remedies agreed with the commission, remember that in our agreement with Drillisch, and agreed with the commission, is a variable pricing. Which means that prices applied to Drillisch for the wholesale bit-stream access contract is going to be depending on technology. Therefore, the potential impact that this is going to have on potential tariffs down to the market is significantly more limited that if that that agreement was to be at fixed prices.

What we wanted to prove with the German transaction was that four to three consolidation was doable in Europe without compromising data monetization for the future, we think is going into the right direction.

From our point, from our standpoint, we think that we all need to show a more rational behavior in terms of data prices. That's what we intend to do through our brand new Telefonica Deutschland, after their combination with E-Plus. So I think that you should not expect from us disruptive movements on that landscape.

Regarding Brazil, on M&A -- hi, Luigi; this is Angel -- our focus is getting the approvals for the GVT transaction. We are in the process of having a very constructive dialog with CADE on the technicalities of this transaction, and its interaction with a telco-demerger transaction. And we believe that this will be solved satisfactorily, and we would expect to close GVT in the first half of 2015.

In the meanwhile, we continue, as I said in the presentation, strengthening our position in Brazil, in the value segments, leading in the mobile market, growing in fiber and video. And we are accelerating growth, both in revenue and OIBDA. So we are in a very good position, and we expect to consolidate GVT and see the synergies flowing from that transaction.

Having said this, and we have stated many times in the past that we are very strong believers in the benefit of in-market mobile consolidation, and when, and if, that happens, we will be supportive of such a consolidation.

And if I may follow up, if there was something on the mobile side, would you play an active role, or a passive one?

We have been actively participating in processes in our core markets, so it would be our duty to explore actively any potential opportunity.

Okay. Thank you, Angel.

Fabian Lares, JB Capital Markets.

Two questions, please. In regards to the recent announcement in Mexico by AT&T that it was acquiring Iusacell, I was wondering if you can give us your thoughts on what the possible impact is on evolution of the Mexican market?

In the third quarter results we saw some positive evolution, really positive evolution, out of Mexico. And would this somehow undermine that by the increased competition, both from AT&T as a buyer of Iusacell, and the possible divestment by America Movil of some of its assets to a newcomer? That's my first question.

Second, with regards to a statement made by Angel with regards to the possible inorganic operations to reach the EUR43 billion -- below EUR43 billion net debt target, could you shed more light, if possible, as to what we should consider, outside from the scrip dividend? Would you consider divesting the remainder in China Unicom, for example, despite your strategic alliance? Would that be undermined in some way, shape, or form? Thanks.

Taking your first question about Mexico, first, let me focus a little, in the first part of my answer, on the operational trends.

We have seen significant commercial traction, which is boosted by the effort that we have done on our own network in terms of deploying a better network, and deploying also LTE. And that's why we have had a significant increase in gross adds, which I think is 45% in the first nine months of this year.

We have significantly improved our portability figures, we have 94,000 in the third quarter, and that has helped to boost the revenue growth. We are growing more than 12%, and accelerating compared to the second quarter.

Let me remind you that this is the highest growth that we have achieved since 2009. And this was almost independent of the regulatory changes, which should start to affect, commercially-speaking, from now on.

This growth has been basically around the prepaid segment, with poor traction on postpaid, which is [our pending] issue, and that has helped us to significantly improve our OIBDA evolution. OIBDA have increased 50% year on year.

I'm stating all of this because I wanted to make clear that the regulatory effects have not yet been flowing into our commercial traction. This is the effort that we were doing before the commercial regulatory changes, and, therefore, before any structural changes in the market.

We believe that a consolidation of four to three players is always good for the market, independently of who is going to be the third player, or the second player, in this case being AT&T.

We thought that the asset, Iusacell, at that price, was not providing value for us, because we would rather invest in our own platform because we were showing significant traction. Therefore, we were scared of de-focusing our team by doing an integration which was not providing clear value, compared to other examples that we have done in our footprint. So we are not de-focused by what we are doing now, because commercially we are having more traction.

The regulatory changes, for the first time, provides a much more level playing field, and, therefore, I think you should expect that our trends in Mexico to keep going into this direction.

Again, let me start that four to three would always be welcome; and namely, with this new regulatory framework, which should boost all the players to be much more rational and much more levelled in terms of commercial activity.

So overall, much more positive outlook on the Mexican market than we had before, mainly due to our own efforts by turning around our own operation. And we have significant expectations about the regulatory changes to further boost our performance.

To complement, if I may, Jose Maria's answer, I would say also that the price agreed for the Iusacell transaction clearly shows that our Mexican asset is undervalued in our sum of the parts valuation.

Moving to your second question on (technical difficulty) first, I would like to say that we envisage to continue working towards reducing debt, first, by free cash flow generation. That, you have seen, to September has remained strong, close to EUR3 billion.

Second, through financial measures. Here, the scrip dividend, we are expecting significant acceptance on the share side. It's a voluntary scrip. And potentially, as I said before, issuing some hybrid in the near to midterm.

And third, through portfolio management. Our portfolio management has been very active, and we have consistently been seeking to increase the value of our operations and improving our financial position.

To demonstrate our commitment towards progressing in debt reduction we have in the last weeks, or even days, sold our remaining stake in Czechy, and we have accelerated the payment of some of the pending amounts regarding services that we continue to provide to that company. And we have sold the 2.5% in China Unicom.

We reiterate our commitment to the alliance, and we see opportunities to do more things in innovation and digital services with China Unicom, so we would not envisage selling in the market additional shares, at least in the short term.

But we have several options, several additional options to reduce debt. And we are open. And we have proved that in the last quarters, that we are open to analyzing strategic alternatives in several markets to generate value and improve our financial flexibility.

Luis Prota, Morgan Stanley.

Two questions. First, on Spain, on the competitive landscape, I wonder whether you have noticed already any change for the better in the market since the acquisition of ONO and Jazztel were announced, particularly in the mobile space, helping the market performance and your evolution in this space in the third quarter.

And then on Venezuela, I don't know whether you have any update on currency, whether there's no -- any particular recent change from SICAD I to SICAD II. And if you could probably remind us how the rating agencies are treating your exposure to Venezuela.

What I'm trying to figure out is whether if tomorrow you decide, or you are forced, to move to SICAD II, or the currency is floating in the market, whether that's a big negative for rating agencies, or they are already treating this in a different way, or taking that into account. Thank you.

Luis, taking your question on Spain, the competitive landscape, too soon to see any major action coming from the recent consolidation of ONO into Vodafone, or potentially Jazztel into Orange.

But overall, in the market we see pressure in prices slowing down during 2014, due to a very high convergent penetration by the main operators. And that, if we were to project that through the consolidation processes that are already in place, suggests that a price stabilization should at least be expected in the midterm.

On top of that, as 4G is being deployed as we speak, and all the players are trying to accelerate the use of 4G data by increasing the data allowances, you will see another, in our opinion, stabilization of contract mobile, with an increased data usage proposition.

On top of that, subsidies have fallen deeply in the last two years. After it was first signaled more than two years ago, all other players have gone into that direction. And, therefore subsidies, which appeared to be a structural commercial feature three years ago, have now become much more tactical, and, therefore, also the commercial effort overall in terms of subsidy has become much more selective, including places like [Joygo].

So overall, if you ask me to give you an overall picture of the Spanish market, we see a much more rational behavior of the market. It has been painful, because we have been provoking this convergent process. But now, it looks that we are reaching a point in which the different players, namely, the consolidated or convergent players of the market, ourselves, Vodafone, and Orange, would have similar ARPUs to defend on the existing customer base, both on the wireline and on the wireless side.

So we forecast a more rational Spanish market. And this is starting to flow through the stabilization that you saw on the ARPU of Fusion.

So we think this is the way to go. This is the way we, as the leaders, are going to try to drive the market. And I think that the convergent -- the consolidation processes are going to be one more step into that direction.

Regarding Venezuela, we continue to record the figures, in full accordance with our auditor, at SICAD I rates. At this moment, we have at SICAD, which was at the rate of VEB12 to the $1 at the close of the quarter, we have the equivalent of EUR1.4 billion of cash in Venezuela.

SICAD II continues to be very liquid, and the volume of dollars traded not referential.

We see that the equilibrium rate of the bolivar, taking into account internal and external opinions, would be closer to SICAD I than SICAD II. But we do not disregard that given the growing scarcity, the inflation pressures, and the double-digit deficit, we not disregard the government allowing for a higher trading band in the coming months. So rather than a movement from SICAD I to SICAD II would be probably a movement in the rate of the SICAD I at which we would continue reporting.

Ratings agencies are already making several adjustments on these. In their liquidity ratios, they exclude doing a full on cash from liquidity, as we do in our presentation of our liquidity position that I presented before.

They also adjust partially in the ratios. When they calculate solvency ratios, they partially adjust for the cash in Venezuela. And they also increase the levels of the ratios that they put for us as a reference for a specific rating.

So we continue, obviously, to explore every alternative option that we can think of to invest and deploy that cash, and protect it from inflation as close as possible to SICAD I, and we will continue to do so.

It's quite relevant to see that in the results that we have presented we are posting growth acceleration and improvement in margins ex-Venezuela. And also, to take into account this market concern, we decided, at the beginning of the year, to set our guidance ratios excluding Venezuela so that, that impact would not be flattering our numbers.

We are not hiding from this exposure to Venezuela. We are managing it. We are trying to invest that cash in the way that would allow us to preserve the value. And this is it now.

If I may, Luis, complementing Angel on Venezuela, we have also decided, from an operational standpoint, to accelerate CapEx.

We will transform part of this cash flow generation into an accelerated CapEx deployment, namely, on 3G capacity, because we felt that, as we are accelerating our revenue growth in Venezuela, we are also improving our traction in terms of OIBDA. That return that we are getting by transferring that cash that cannot be repatriated, and, therefore, is not accountable for debt reduction purpose at the Group level. To transfer that into our CapEx deployment and accelerated CapEx deployment in Venezuela that is also helping us to foster the operational performance of the unit.

So overall, it's going better in Venezuela, and investing more than we were anticipating at the beginning of the year, precisely because we cannot repatriate the cash. And we generate more return by investing that into the business than having it at the bank.

Okay, thank you.

(Operator Instructions). James Ratzer, New Street Research.

The first question I had was just regarding your post-event net debt, which you quoted at EUR44.9 billion. I was wondering if you could let us know how you're going to be accounting for the spectrum purchases in Brazil, and also Argentina, which didn't seem to be included in that figure.

And from the comments you've made earlier on this call, is it right to conclude that you will need to do some form of hybrid issuance before year end in order to reach the EUR43 billion net debt target?

Then the second question I had was regarding O2 UK. This is the first full quarter where we've now been lapping the O2 Refresh launch, from April last year. It seems like underlying EBITDA in that business was down around 5% year on year. I was wondering if you could just let us know whether accounting effects are still being a drag on that performance. What do you think is a good steer for the underlying EBITDA performance within O2 UK? Thank you.

James, with respect to your first question, when we have been posting these post-closing performance, adjustments has always been regarding M&A transactions.

We are not trying to do what would be the pro forma, taking into account business evolution, spectrum, and everything else. We have just included, and we have been consistent across the last few quarters' presentation, just including M&A transactions, so because we thought that the EUR41.2 billion figure as of the end of September would have been not giving the full picture of the debt situation given that E-Plus was bought October 1. So here you only have the impact of M&A transactions.

With respect to spectrum in Brazil and Argentina, it will be part of the free cash flow calculation in the fourth quarter. As you see on slide 17, in the bottom part, we have all the waterfall that leads from operating cash flow to free cash flow. And there is one of the blocks which is spectrum accrued, which, up to September, has been a quite low figure this year compared to the previous year. But in the fourth quarter, as you rightly pointed out, Brazil and Argentina's spectrum is going to be a very significant component of the free cash flow calculation.

With respect to the hybrid, it's not that we need to do it. Depending on the market conditions, we will decide if and when is the appropriate time to make such a potential issuance.

But I agree with you, that in order to get to the EUR43 billion target we will need, in addition to free cash flow, given that in the fourth quarter we have spectrum, and we have the cash component of the dividend as it finally may be, we will need to comply with some inorganic options, be it portfolio management, or be it financial measures, like a hybrid. We don't need to necessarily. We may -- necessary to issue the hybrid, we may do it in a combination of other measures.

With regards to your question on the UK, O2 UK OIBDA margin and potential impacts of our non-recurring things and Refresh, let me state that for the fourth quarter, for example, we expect similar OIBDA margin performance versus previous quarter.

Excluding the positive non-recurrent events that we have had, mostly related to the disposal of the fixed business assets a while ago, and this is EUR34 million net impact in the third quarter of this year, and also remind that we have a EUR10 million impact in the fourth quarter of the previous year. And this is the only -- the major one-offs that we have.

In terms of Refresh and unwinding effects of Refresh on the accounting impacts, we think that the positive impact from the stabilization of top line in terms of revenue will be offset by the unwinding of Refresh accounting. Therefore, we foresee similar levels of OIBDA margin for the next quarter compared to the third quarter, once you net off this effect of the EUR34 million of the one-off.

Great. Thank you very much.

Fernando Cordero, Santander.

Thank you for taking my two questions. The first one is related with Spain. I know that it is going to be a progressive and long-term process, but I would like to know what are your views on the potential savings, and also potential realistic value, to show up with the progressive copper network switch-off in Spain, process that has already started in the third quarter.

And the second question is related with Germany, and again on convergence. Given your current spread between more market share, including obviously E-Plus, and your fixed market share in Germany, should we expect any kind of short or mid-term initiative to reinforce your market share in fixed, either organically or inorganically?

Taking your question on potential OpEx coming from central office's closure, well, it's totally true that the fiber network requires less central offices. Therefore, we should expect, as we deploy fiber, to have savings coming from the elimination of those stations; and, therefore, also less costs in energy, call centers, and potential service [paid attention].

But so far, we have just closed two small central offices, which have no unbundling local loop players; one in Barcelona, and another one in the (inaudible) of Madrid.

For 2015, we expect to close 152 additional central offices. But it is also true that it is too soon to disclose potential savings, because those are only be on the long run. And that's because the fact that, according to the regulations in Spain, we need to have just a small percentage of unbundling local loop players in each central office before being allowed to close the station.

So, yes, we foresee that in the next three to five years we'll have significant savings coming from that effort. You should not expect that majorly impacting 2015. It would require a significant effort, because of the current existing regulation in Spain, but it is totally true that in the midterm we need to do an effort to generate savings coming from that. Those are going to be generated, again, in the midterm, namely from three to five years.

And in terms of our situation in Germany, well, first of all, let me say that we do not see today a major threat of convergence in the German market because mainly of the situation of the leader on that market, Deutsche Telekom, which has signaled that have -- they are ready to offer some discounts on the potential triple play or quadruple play offers. But it is also true that the levels of ARPU are very high and discounts are limited.

So, in our opinion, it's going to be very focused on our own behavior on the mobile data monetization strategy. And they are showing that they are ready to go that route, if we were to become very aggressive on the other side.

We have already stated that we want to become a rationale player; that we want to be a rationale player, being the leader in terms of our customers in the German market.

It is also true that if the market was to become more convergent, we are technologically hedged, thanks to the agreement that we have reached with Deutsche Telekom when we sold to them our wire line business. And that agreement includes technological evolution; therefore, if the market was to move from VDSL to fiber, we will also have access to Deutsche Telekom potential deployment of fiber.

So we feel that we are in a good position in Germany for the current market structure. But also, if the market was to move more aggressively, we have a hedge from the indirect access that we will have signed through our contract with Deutsche Telekom.

Thanks.

Justin Funnell, Credit Suisse.

Just coming back to Brazil, and then a question on Spain, obviously, there's been a huge amount of press coverage of what sort of merger scenario we might get in Brazil. It appears there's a TI Board meeting next week.

But two scenarios which seem to be either TIM Brasil merging with Oi, or the famous break-up bid for TIM Brasil, I'm just wondering where your preferences lie these days. It would seem to be with the TIM/Oi merger you could get market repair without having to spend a penny, and would that now actually be preferable to the break-up scenario, and the breaking-ups in Brazil?

Secondly, in Spain, we've seen a phasing over the last two or three years. When Fusion was first launched, you were going to see a turnaround in EBITDA before revenues turned around. It was very much a cost-cutting story. And then during last year, and into the first half of this year, there was a sort of ramp again in marketing costs to turnaround the top line.

I'm just wondering where you are in that phasing. Now that, obviously, we're seeing a reduction of competition, is there now scope for the margins just to really start moving up again, potentially even outperforming the revenue trend, in Spain? Thank you.

Justin, regarding Brazil, we think we are in a comfortable position, being the market leaders in mobile, and with the GVT transaction that we have made.

When we finally close GVT, taking into account Vivendi's decision to take the Telecom Italia shares and the mandatory exchangeable that we issued, we will stop being shareholders in Telecom Italia. Therefore, there would be no time pressures on our side to participate in any process; which is a good position to be while we continue to have very strong momentum in the market, and acceleration in our magnitude, in our growth, in our revenues, in our margin.

So there could be several scenarios in -- have been speculated of potential consolidation in Brazil. It's very difficult to sift through all the noise, because there are lots of moving parts. And it's difficult to assess the timing and the format of transaction.

But in the two scenarios that you described, in both, we could be active, we could be passive beneficiaries of consolidation. I think we stand to be beneficiaries of any of the two scenarios that you describe.

We think that in such a big market, with such huge investments that -- or relevant investments that will be needed going forward, and we're already much progressed in our 4G compared to our competitors, much of them still need to be there, synergies of consolidation could be very important, and could create lots of value if the transaction was properly structured.

But, as of now, we are very focused on GVT; on closing GVT; on executing and delivering on the synergies we've committed to market on the GVT transaction; and monitoring, obviously, all the market developments that we can on what could be the evolution in Brazil.

As I said before, we would be supportive of a market consolidation. And in certain scenarios, we would be active. But if there are other scenarios where we are less active and we also benefit, so be it.

Taking your question on the OIBDA margin in Spain, and fine working that on the Fusion allowance two years ago, let me remind you that it started before.

Before launching Fusion, we did a significant price discount in all fronts; prepaid, postpaid, ADSL. Immediately after, we took out subsidies, it was the first quarter of 2012, and then we launched Fusion. It had another discount.

And that's why, for a while, we were combining the effort of restructuring our commercial effort, and even accelerating our revenue decline, in order to offset on a significant churn reduction. Because we were exporting the most valuable customers to the portability market, and we were bleeding supportability with significant commercial efforts to try to retain or to try to capture new customers with lower ARPU.

Once we did that, we have a first impact on OIBDA. And the first impact on OIBDA was thanks to the savings that we were generating. And at the same time, when we were launching Fusion, we still decline in revenues.

Mid last year, or the beginning even of this year, we realized that OIBDA margin was significantly picking up. But at the same time, we were still bleeding on part of our customer base; namely, on the pure mobile contract customers. And that's why we decided to invest part of the significant savings.

Because remember that before the launch of Fusion, and before this transformation effort, markets in Spain were in the very high 30%s, or in the very low 40%s. Margins went up to almost 50%; and now they are standing somewhere between 44% and 46%.

But thanks to the reinvestment of this 4 percentage point coming from 49% to 44%, or 46% that we stand right now, we have been able to stop the bleeding on the contract side as well. And that's why we have been able to stabilize the customer base, and to slightly grow in access for the first time in a lot of time, in a few -- in a long series of quarters.

And that is -- the effort is being based around the fact that we are [betting] for revenue growth in Spain as soon as possible. And for that, we need to stabilize two things. First, the customer base; and that we have -- why we have been investing in part of the margin. And second, and also importantly, the ARPU. And that's why stabilizing the mobile, the pure mobile, and also the Fusion ARPU, was so important.

So for the next quarter, for the fourth quarter we see levels of ARPU similar to the one that we have been showing -- seeing so far this year. And 2015 is going to be depending on the effort that we are going to be doing in content. And, therefore, at the end -- at the last -- on the conference call results of the fourth quarter of 2014, we will give you more guidance what could be the OIBDA margins in Spain.

This is a little bit the journey that we have been going through. We think that now we are staying at a point where OIBDA margin is pretty stable and compatible with the stable and slightly growing customer base, with some commercial effort, with more valuable customers coming from fiber, coming from contract, and coming from Fusion. So we think the journey has been worth the effort.

Okay. Thank you.

Thank you, Justin. Next question, please.

Jerry Dellis, Jefferies.

The first one is on the UK. Again, to the backdrop of BT's mobile launch, and the commercial cooperation that seems to be taking place between Sky and Vodafone. It feels as though your own attitude in the UK towards convergence is rather one of an observer, rather than proactively going out and pre-empting what your competitors might be about to do.

I just wondered why you've chosen to adopt that attitude, if that is the right reading; and whether, if the UK market were to consolidate perhaps behind a convergent trend, over the next couple of years, the UK is a market in which you might be prepared to deploy significant amount of capital, in order to participate in that consolidation theme.

And then secondly, in Spain, following up from Justin's question perhaps, but asking it a slightly different way. I think the trend in your operating costs has gone from net 20% year-on-year declines in the first part of 2013 now to around 3% increase. Accepting your point about the theme of higher content costs, is there anything else you can do within the cost base in order to limit the inflationary impact of those rising content costs? Thank you.

Regarding the UK, as Jose Maria stated before, UK is a very important market for us. It's at the forefront of innovation, of digital services, of optimization. It's not a strong convergent market, as we perceive it today, and Jose Maria also elaborated very much on that.

And, of course, we are monitoring the market trends, as you would expect that we should. Accordingly, we will be open to assess potential strategic alternatives, depending on how the market evolves, that would, as has been the case in all of our portfolio management, allow us to generate value and improve our financial flexibility.

And taking your question on what else could we do in Spain to try to mitigate the potential impact of the content strategy, or other impacts, let me step [outwards] a little bit before and state that the impact, this 3% increase in OpEx this year, is mainly coming from several factors.

Firstly, the contents; also, the impact on termination rates; and also, handset sales that have become very tactical; and then, the pension fund. You know that we have, one year, agreed with the unions not to contribute to the pension fund. And we have retaken the contribution this year.

So part of that content and pension fund is there to stay. Content, depending on the intensity that we are going to be applying, and is going to be depending on the kind of agreements that we are going to be able to close on that [front]. And that's why I would like to update you on that side at the fourth quarter conference call.

The effort that we are doing to try to absorb part of that internally are coming from major -- basically, two major fronts. First, is insourcing. As we have been able to eliminate significant amount of complexity by cutting down references of prices by switching of applications, by also (inaudible) servers, and by doing a much more efficient network deployment, we are now able to absorb -- to insource part of the activity, and, therefore, to reduce the weight of outsourcing costs in our structure.

And the second point in which we are focusing is significantly optimizing our distribution channels. We think that we need to reshape our direct -- namely, our direct distribution, but also the indirect distribution chain that we have in Spain. We think that we need to have a more efficient and different profile of distribution; namely, on the stores.

And we are aiming to have less capital, because we have now the most capital network in -- distribution network in Spain. We think we can do the same, or even more, with less stores, but displayed in a different manner. And that's why we think that there are significant savings, namely, on the commercial front, can come from the different approach to the distribution channel.

So the answer is, yes, we think we have still room to grow in cost structure in Spain; that we aim to absorb a significant portion of the different cost impacts that we have been having during this year. So we'll keep you updated. But the answer is, yes, we see further room for savings and efficiency in Spain.

Thank you very much.

Thank you, Jerry. Next question, please.

Mandeep Singh, Redburn.

Thank you, very much, for taking the question. I have a couple of questions, please. One quite specific one. Both Oi and America Movil have said their BTG Pactual is involved. Talk of discussions with third parties has been mentioned. Can you just confirm, or not, whether you have been involved in any conversations with BTG? That's the first question.

The second question is really just around cash flow. I note that you've improved your working capital EUR700 million year over year, through use of factoring and other initiatives. Yet, despite that, operating free cash flow is still declining in the high-teens percentage. Can you -- how much more room do you have on working capital initiatives? And what's the underlying free cash flow trends we can expect, once you run out of room on working capital improvement? Thank you.

Mandeep, on the first question, our Brazilian subsidiary has been asked, formally, from the stock market regulator, whether we were involved into any negotiations, whether we had mandated any advisor, and they have formally responded that we are not aware of any such agreement, and we have not mandated any advisor for Brazil.

Regarding free cash flow, what you should be thinking, looking forward for the full year, now that you have all the figures for the third quarter, should be as follows.

Regarding OIBDA and CapEx, we are reiterating our guidance, and you can make your assumptions on where we're going to be there. OIBDA is already growing, and is growing organically, and this growth has been accelerating in third quarter.

The drag that we have had is regarding FX, and regarding the reduction of perimeter. Both negative impacts are starting to ease. In the case of FX, and that probably should be a trend, given where the euro versus other currencies is trading right now, obviously, this is [explained] for Argentina; and the change of perimeter that has been adverse to us because of the exit of Chesky and Ireland from our perimeter.

Going forward, it's going to start adding because E-Plus starts from the fourth quarter, GVT from some point, around mid-next year.

So two impacts that you are seeing negatively affecting our OIBDA trend, and, therefore, the operating cash flow. Going forward, organically we are growing; perimeter will help; and also, FX is going to be less of a drag. That's one point. This will be seen across the following quarters.

Working capital, still, as of the end of September, was cash consumption. There was EUR773 million better than last year, less cash consumption.

For the full part of the year, we are expecting a positive contribution to cash flow from working capital, higher than the one we had last year. Just to remind you, last year it was around EUR700 million positive cash contribution from working capital. We are looking forward to something which is going to be higher than that; visibly higher than what we had last year.

Regarding the other components of free cash flow projection on the cash tax rate, you should be thinking of more something closer to 28% for the full year.

I spoke about, in response to a previous question, spectrum. Brazil and Argentina are going to be there.

And interest payments, you should be thinking that we're going to be in a 5% to 6% range, in the upper part of that range. Dividend to minorities is going to represent lesser leakage than what it was last year. We don't have, for instance, a Czech Republic minorities that we need to give dividend to. All in all, free cash flow will cover dividend payment.

Okay. Can I just quickly follow up on the first question, if that's okay?

Okay.

Mandeep Singh. Just, specifically, I appreciate you've filed that you've not engaged any advisors, but have you been approached by BTG, because they said they have approached third parties?

I don't think we are responding to this type of questions. Thank you.

Okay, thanks.

Thank you, Mandeep. We have time for a final -- for a last question, please.

Paul Marsch, Berenberg.

Maybe if I can be a little bit cheeky and ask three questions, instead of two. Firstly, can you repeat the statistics that you gave on the Fusion revenues as a proportion of total domestic revenues?

Secondly, on the dividend, would you intend also to offer a scrip for the full-year dividend?

Then finally, maybe could you give some comments on what's actually happening with mobile data revenues in Spain, which seem to be declining, even excluding SMS. Can you talk about the various moving parts that are going on there, and when might we expect to see that overall trend turning positive? Thanks.

On the percentage that I share on Fusion, I said that more than 50% of residential revenues have already kind of Fusion-ized, so to say. Which means that considering that, that part, that Fusion is showing for the second quarter on a row, a slight ARPU increase, means that at least 50% of their residential revenues are going to the right direction, considering as well that we have been able to stabilize the customer base.

I was trying to point out into the direction that a stabilizing residential revenues is essential if we want to stabilize the Spanish revenues are residential, is more than 50% of -- is in the neighborhood of 50% of total revenues of Spain.

I would take the mobile data revenue, and then I will hand it for Angel for the scrip.

On the mobile data in Spain, I don't think it's that relevant. Because the way we account for the Fusion, the more convergent you become, the more revenues you allocate to Fusion, or to the bundle that you include into the Fusion offer, the less relevant becomes the mobile data, excluding out of the package of Fusion.

So I think that if I may guide you on what is the relevant figures to follow in the case of the Spanish revenues, I would strongly suggest to focus on Fusion ARPU; total amount of customers; mobile contract, because this is where it's going to be pointed towards revenue stabilization in Spain.

Data traffic in Spain is literally booming, which means that we are not seeing in Spain a different pattern of behavior in other markets. In my opinion, it's just the way to allocate those revenues from the different elements and, therefore, I strongly suggest to focus on the Fusion revenues and KPIs.

Regarding dividend, the dividend for 2014 is fully confirmed; it's EUR0.75 per share. This is composed of two parts: the interim, which is EUR0.35. It's a voluntary scrip dividend, so shareholders can choose between cash or shares. This will be paid in the coming weeks.

On October 10, we made the public announcement regarding such scrip dividend. And on November 14, we will announce the details of -- next dividend date, and the period for the selection between shares and cash.

So the first tranche is interim, 35% voluntary scrip. The second tranche is a final dividend: EUR0.40 to be paid in cash in the second quarter of 2015. Not scrip, but to be fully paid in cash.

Thank you very much.

Well, thank you very much for your participation. And we certainly do hope that we have provided some useful insight for you. Should you still have further questions, we kindly ask you to contact our investor relations department. Thank you, and good afternoon.

Telefonica's January to September 2014 results conference call is over. You may now disconnect your line. Thank you.