Telefonica Brasil SA (VIV) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Telefonica's January to June 2010 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

As a reminder, today's conference is being recorded. I'd 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, June 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 unaudited.

This presentation may contain announcements that constitute forward-looking statements, which are not guarantees of future performance and involve risks and uncertainties, and that certain results may differ materially from those in the forward-looking statements as a result of various factors. We invite you to read the complete disclaimer, including the first page of the presentation, which you will find 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 releases and the slides, please contact our Telefonica's investor relations team in Madrid by dialing the following telephone number 34-91-482-8700. Now let me turn the call over to our CFO, Mr. Santiago Fernandez Valbuena, who will be leading this conference call.

Thank you, Maria, and good afternoon, ladies and gentlemen. Thank you for joining Telefonica's 2010 First-Half Results Conference Call.

Today with me, I have Julio Linares, our Chief Operating Officer; Guillermo Ansaldo, Head of Telefonica Espana; Jose Maria Alvarez-Pallete, Head of Telefonica 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.

Telefonica has released today a strong set of results, based on execution of the management priorities established for 2010. Our results are consistently improving on a quarterly basis from top to bottom line, leveraging a solid underlying operating and financial performance and positive impacts from ForEx. Our wide diversification fully explains our sound results, despite challenging conditions in some markets.

Revenue growth in the second quarter picked up noticeably, led by improved trends across all regions on the back of a strong commercial push, focused on expanding the base of high-quality customers and robust growth in wireless data in our markets. We continue to post robust profitability with enhanced margins sequentially, despite reinvesting efficiency gains to fuel future revenue growth.

Operating cash flow generation remained strong, which is coupled with a solid balance sheet that allows us to face current headwinds from a comfort zone. Year-to-date performance is in line with expectations and we do confirm our 2010 guidance for all metrics, with faster OIBDA growth expected for the second half of the year. Let me stress that our growing dividend policy is fully reaffirmed.

Starting with a summary of P&L on slide three, we see that in the second quarter of the year we have posted improved trends sequentially in major metrics, reflecting a ramp up in growth across regions and material currency boost, mainly from the Brazilian real and the Mexican and Colombian peso, offsetting the sharp Venezuelan Bolivar devaluation.

Group sales grew by 5.4% year-on-year, to over EUR29 billion up to June, ramping up 3.7 percentage points quarter-on-quarter. In organic terms, revenue rose 2% in the first half, 1.1 percentage points more than in the previous quarter.

Six months' operating income before D&A reached EUR10.9 billion, virtually flat year-on-year in reported terms, which turned into a 2.3% decline rate in organic terms, driven mainly by the fast customer growth and the negative impacts from regulatory measures and non-recurrent effects.

Operating cash flow in the first half exceeded EUR6.6 billion, impacted by the recent EUR1.4 billion investment in spectrum in Germany.

Our disciplined management of non-operating results allows top-line growth to fully flow into net income, as slide number four shows. January through June, net profit topped EUR3.8 billion or 9.4% above last year's figure and 10 percentage points above operating income growth. All things considered, first half 2010 was -- reported EPS reached EUR0.83, equivalent to a 10% year-on-year increase.

Turning to slide number five, the strong customer expansion after June has been a key lever for our sound performance reflecting our strategy to build the foundations to better capture the economic recovery and set the basis for the new wave of revenue growth.

Good commercial momentum continued in the last three months, leading to net adds in the first half of the year doubling the volume recorded a year earlier. Growth in net adds was powered by higher gross adds as well as churn control across businesses. I would like to stress the 8.9 million organic mobile net adds recorded in the six months to June, 76% up year-on-year, with a particularly noteworthy performance in the contract segment and mobile broadband connections.

More than 56% of the net adds were in contract, well above last year's figure, while mobile broadband accesses have already surpassed the 17 million mark, that already accounts for 8% of our mobile customer base, mainly pushed by the growing traction of smart phones.

For the prepaid to contract migrations, the mobile broadband adoption will foster mobile growth in the coming years. Growth in fixed broadband is also to be highlighted, with first half organic net adds increasing 30% year-on-year, on the back of higher penetration of bundles, which also drove improved trends in the traditional fixed-line services.

Our commercial push on value and growth levers led us to reach 278 billion accesses at the end of June 2010. It was 7% more than a year ago, in organic basis, with a 110 basis points improvement sequentially.

Let's now turn to slide number six for the review of the top line. Year-on-year organic growth ramped up in the second quarter, marking the Company's third consecutive quarter with a sequential improvement boosted by the sharp increase and growth in accesses. Excluding the drag from MTR cuts, first-half organic sales growth jumped to 3.3% year-on-year, 90 basis points up on the first quarter.

The sound diversification of the revenue mix is to be highlighted, with growth driven by our businesses in Latin America and Europe that already account for over two-thirds of our revenues.

By services, growth businesses, namely broadband connectivity, are increasing its worth in our revenue mix. In addition, global initiatives launched a year ago to fully capture the benefits of our scale, in terms of roaming, global procurement and IT, are already bearing fruits, with these actions having a direct positive impact in the different businesses in terms of savings or better conditions.

Meanwhile, the centralization of procurement in TGS is being reflected at the regional level with an additional positive contribution from services to vendors of EUR90 million, Group revenue in the first half of 2010.

In reported terms, revenue growth is benefiting from a positive currency effect during the second quarter and the consolidation of Hansenet and Jajah from the first quarter of the year. And as I said before, revenue terms are improving simultaneously in our three regions of operations.

Despite the commercial drive to strengthen our future growth profile, operating profitability remained healthy as outlined in slide number seven. OIBDA declined 2.3% in organic terms year-on-year, affected by non-recurrent items and negative regulatory impacts, which dragged to growth by 2.7 percentage points.

Also our group operating expenses rose 5.5% in organic terms up to June, mainly driven by higher commercial expenses, 8.1% year-on-year, due to fast customer growth, higher commissions and handset subsidies. Increased network maintenance and expansion, mainly in Latam, drove higher network costs. On the contrary, interconnection costs remained virtually stable driven by MTR cuts across Europe.

Consolidated OIBDA margins stood at 37.5%, down 1.7 percentage points year-on-year in organic terms, but expanded 80 basis points quarter-on-quarter. Margin erosion eased in the second quarter on the back of the rebound in sales and the benefits of our scale with global initiatives contributing with EUR85 million up to June.

Continued solid cash flow is shown in slide number eight. Operating cash flow in nominal terms topped EUR6.6 billion in the first half of 2010, while stripping out investments in spectrum it would have reached almost EUR8 billion, posting a 3.5 -- 3.4% drop year-on-year, purely organic. Operating cash flow increased across Latam in Europe, while Espana delivered a sound operating cash flow at EUR3.5 billion, down year-on-year. Efficiency ratio stood at 75.3% for the six months ending June 2010, leveraged on disciplined cost management and focused CapEx.

Let's turn now to slide number nine for an update on guidance. First half results are fully aligned with year-end targets, with revenue increasing on the guidance criteria, 3.3% year-on-year and OIBDA still below our annual target but consistent with anticipated performance along the year.

OIBDA growth for the whole year will be within the outlook range, with a strong boost in the second half of the year as we will have less challenging year-on-year comparison in Telesp and Colombia fixed, and commercial activity increased from Q3 2009 onwards. We also maintain our CapEx target for the year with first half figures reflecting CapEx seasonality.

Let me now walk you through the operating and financial performance of the three regions, starting with Telefonica Espana. Let's now review our regional performance starting with Telefonica Espana on slide number ten, where results continued to be constrained by economic weakness in a very competitive market, though the trends show a gradual improvement in both top line and OIBDA.

In comparable terms, revenues delivered their full sequential and quarterly improvement since we reached the bottom in the second quarter of 2009 on the back of better performance in all businesses, driven by the increased commercial push in recent quarters and mild voice traffic recovery and a good growth in wireless data.

Disciplined execution and -- on OpEx initiatives allowed to support the commercial boost, while containing the OIBDA margin erosion to 1.2 percentage points in the first half of the year on a comparable basis. We continue to post healthy margins at 47.7% up to June in comparable terms. Regarding CapEx, the year-over-year rise was driven by increased investment in growing businesses like mobile broadband.

On slide number 11, wireless service revenues in Spain declined by 5.7% year-on-year in the second quarter, an improvement of 1.3 percentage points on the previous quarter pushed by robust growth in mobile data, strong customer growth and better usage patterns.

Telefonica led the market growth in the quarter, particularly in the contract segment, where we have added close to 450,000 customers since the beginning of the year, 3.6 times higher than a year ago, reflecting our focus on growth opportunities and allowing us to maintain our superior revenue market share.

The strong growth in contract net adds was driven by a 37% year-on-year rise in gross adds and stable churn. As a result, our customer base was up 7.4% year-on-year with the contract base already accounting for over 66% of the total. Voice traffic trends also improved sequentially with a stable pricing environment versus previous quarters and continued drag from MTR cuts.

On the very positive side, wireless connectivity revenues continued to grow sharply, 64% year-on-year as of June, on the back of the good traction of our mobile broadband offer. We have already exceeded 3.8 million mobile broadband customers, leveraging our focus on smartphones and data plans.

On the wireline business, revenues in the quarter also delivered a small improvement in trend with a 3.8% year-on-year decline in comparable terms in the second quarter, one percentage point higher than the previous quarter. This evolution is mainly driven by the sustained positive contribution from data and IT businesses, the slight recovery in traffic and lower line losses and the return to growth in broadband. Commercial efforts focused on the bundling strategy are delivering results with good gross adds and churn rate coming down across all services.

Let me highlight that retail wireline losses, despite having the lowest unbundled local low prices in Europe continued to decline both quarter-on-quarter and compared to last year. Additionally, due to growth in wholesale accesses, total wireline accesses limited their year-on-year decrease to 0.9% up to June.

In fixed broadband, with no major changes in our competitors' behavior, we maintain our leadership in the market with a customer share above 54% thanks to the 5.4% growth achieved in broadband customers. We continue to focus on quality and service improvements, which have allowed us to almost double net adds year-on-year in the first half.

The market -- competitive intensity continues with total broadband ARPU declining 7.4% year-on-year, despite the increased contribution from value-added services, especially Imagenio, which reached more than 20% of total broadband ARPU.

In Pay TV, we continued to gain market share to over 18% at the end of June on the back of the share production in churn, which led to strong net adds in the first half, compared to net losses posted in the previous year.

In summary, though slowly, we -- year-to-date we are seeing better trends in Spain across the business. Going forward, it's too soon to anticipate the potential impact from the government austerity measures and the recent increased value-added tax that could be an additional challenge from consumption starting in the third quarter.

We now move to slide number 13 to review our Latin American properties. I'd like to stress the solid results delivered in the second quarter highlighted by the improved trends in customer revenue and OIBDA year-on-year growth in organic terms, benefiting from better economic environments in the region.

Strong commercial momentum was sustained with 3.8 million net adds in the quarter and 7.5 billion in the first half, close to three times those of the year earlier, leading to ramp up in accesses growth to exceed the 176 million mark.

Revenues grew a healthy 6.2% in organic terms in the January through June period ramping up sequentially on improved growth in most markets. OIBDA up to June rose close to 4% year-on-year in organic terms, the 0.5 percentage points improvement on the previous quarter, with OIBDA margin reaching 37.2% in the first half sustaining a very healthy level, despite the stronger commercial activity versus last year and the negative performance at Telesp and Colombia.

As we already anticipated at the beginning of the year, year-on-year comparisons should improve for the next quarter on a much better performance from these two operations and more comparable commercial efforts across the region. On reported terms, operating cash flow increased by over 7% year-on-year to EUR3.2 billion in the first half, despite the Bolivar devaluation.

Let me now spend a few minutes on the performance of our Latin American wireless businesses. Up to June, year-on-year customer growth ramped up to 12.6%, topping 142 million customers led by the strong performance of the contract segment which grew over 23% year-on-year. Our focus to enhance customer value is reflected in the sharp reduction in churn to best-ever levels, the significant increase in prepaid to contract migrations and the push in mobile broadband.

As of June, we had more than doubled our mobile broadband customer base to around 4% of our mobile customers in the region. The growth potential is huge and we are well positioned to capture this opportunity in the region due to our best-in-class networks.

Let me highlight that 50% of the 7.2 million net adds recorded up to June were in contracts from 25% one year ago beating competition. 19% of our customer base is already in contracts, 160 basis points up year-on-year. The fast customer expansion drove traffic up close to 30% in the first half, which together with the very strong growth in mobile data allowed ARPU to remain pretty flattish versus last year in organic terms underpinned by the 3% advance in outgoing ARPU. As a result, revenues accelerated across all services posting double-digit growth, even on total revenue. Data revenue growth is impressive at close to 50% year-on-year.

In the wireline businesses, we're also delivering improved trends. The broadband business boasted an outstanding performance in the quarter, leveraging the bundling strategy and enhanced quality metrics. The second quarter broadband net adds increases 92% year-on-year and 28% quarter-on-quarter, driven by better gross adds and churn reduction to the lowest levels ever posted. Particularly remarkable is the evolution of retail fixed accesses, which returned to positive growth after six quarters of net losses, adding 56,000 accesses in the second quarter of 2010.

As I just mentioned, bundles are key, with 57% of our broadband connections being part of a duo or trio package, while 28% of our fixed line accesses are broadband. As a result, new revenues from Internet and Pay TV grew double-digit increasing its contribution to total revenues with an average weight of 22% in the region, up over 1 percentage point on last year's figure.

Let me now cover the performance of Telesp on slide number 16. For the third quarter in a row the Company is gaining commercial traction, capitalizing on the strong focus on quality, improved customer satisfaction and lower churn levels. In the traditional business, net adds turned positive for the first quarter since Q1 '06, adding 64,000 accesses in the quarter, leading to access growth since December 2009.

Performance in broadband was even more outstanding with net adds reaching a new record since the launch of the service ten years ago on strong gross adds and reduced churn. Better commercial results are starting to flow into financials, though gradually. Year-on-year revenue trend improved being virtually flat in the quarter on better traditional fixed line revenues sequentially, and growing contribution from broadband in TV revenues.

Reported OIBDA continued to grow up sharply, though in underlying terms the performance improved significantly quarter-on-quarter with the single-digit year-on-year decline in the second quarter and in margin expansion to 36%. Commercial trends show we're working in the right direction and this should become even more evident in the financial performance in the second half of the year.

On slide 17, our businesses in Colombia are also showing signs of improvement. In the wireline business, fixed broadband net adds remain strong in the second quarter growing significantly from a year earlier, while traditional access performance was very solid, virtually flat in the quarter versus 64,000 net losses in the second quarter of '09 and still negative figures in the previous quarter.

The improved trends in operating metrics are gradually translating into better financials as the graph shows. In the wireless business, net adds continue to post growth towards the -- good growth compared with negative figures a year ago. Being noteworthy the strong focus on the contract segment, driving 50% of the net additions recorded in the quarter. In addition, ARPU in local currency was 5.6% up year-on-year. In terms of financials, top line is back to growth, advancing 2.1% in the first half of the year.

Let me now quickly review the other hot topics in Latin America. In Mexico, we're focusing our efforts on postpay, driving contract customers up 48%. Service revenues grew close to 10% year-on-year on the back of strong data revenues with further advances in profitability, not only in terms of margin but operating cash flow. Mexico continues to be a key growth driver for the Group and the recent spectrum auction has allowed us to strengthen our position in this market.

In Venezuela, we are still posting sound financials despite the tougher trading condition and the Bolivar's devaluation. Data services are booming, driving a solid service revenue growth up to June. However, commercial activity is reduced as we maintain our selective customer acquisition approach and handset availability has become more limited. Though the OIBDA margin is hit by inflation and devaluation, it is still very sound at 45% level.

Finally, Vivo continues to deliver outstanding commercial international results. Vivo outperformed the market, gaining market share for the fourth quarter in a row with a strong focus on contract. Service revenue year-on-year growth ramped up in Q2 to double-digit growth, boosted by extremely robust data revenues and the boom in on-net traffic. Profitability improved to the 30% level, despite the strong commercial push.

To finalize with Latin America, let me stress that we are very pleased with the agreement reached yesterday with Portugal Telecom to get full control of Brasilcel. This agreement allows us to become the leader in the telecommunications market in Brazil, while at the same time we are removing any uncertainty that has been impacting our stock price. We are in the second-to-none position in the market to capture the significant growth potential of the telecom industry in this country and it gives us a quantum leap versus all the other players.

The entity resulting from the combination of Telesp and Vivo will be not only the largest integrated operation in the growing Brazilian market by operating and financial metrics, but also the most efficient player with a combined OIBDA margin of 35% in 2009 and further room to improve as a result of the very significant synergies that will arise from the combination of the two companies. And more importantly, this transaction is accretive in terms of both net income and free cash flow from year one.

Moving to slide number 20, the price conditions of the final agreement are substantially identical to the economic value of the offer supported by Portugal Telecom shareholders at the EGM, which included a cash payment of EUR7.15 billion, plus other conditions with additional value and we avoid a long litigation process.

Taking into account that 40% of the price agreed will be paid to Portugal Telecom in deferred installments and FPT will not receive Vivo's 2009 accrued dividends, the net present value is equivalent to EUR7.3 billion, which in turn leads to a EUR7.1 billion value, if you were to exclude the value of the call option on our stake in PT that the previous offer had included.

And all other obligations included in the previous offer disappear or are subject to a non-compete condition in Brazil. Let me say that on our stake in Portugal Telecom, we are happy holders and we will benefit from any appreciation of the stock in the near term.

Let's now turn to slide number 21, to review the financial metrics of the acquisition. The EUR7.3 billion net present value of the price we're paying for PT's stake in Brasilcel compares with the DCF valuation of Vivo in the EUR3.4 billion to EUR4 billion range, depending on WACC and G assumptions.

We are properly committing to generate the minimum value between EUR3.3 billion and EUR3.9 billion through operating synergies from the combination of Telesp and Vivo, benefits for Vivo from our regional management model, financial and tax synergies. In this sense, it is our intention to merge Brasilcel into a Spanish entity, so that direct interest in Vivo is directly held from Spain. From the closing of the deal, the Brasilcel structure becomes unnecessary and this could also lead to tax synergies significantly higher than initially anticipated.

The round figure of synergies will depend on the different structures and strategies implemented in the integration, but we are committed to give additional details after the closing of the transaction. We do also reiterate our intention to acquire the remaining voting shares of Vivo at 80% of the price offered to PT, which will allow us to average down the price to a 10.2 times fair value to 2011 EBITDA multiple ex-synergies. Obviously if we want to use our internal assumptions and synergies this multiple would be significantly lower.

If you consider the book value of our current stake in Vivo as a proxy for the historical cost of our investment in Vivo and that as a result of this transaction we will be the undisputed leader in Brazil, the equation becomes much more balanced. And we expect the Brazilian market to be re-rated on the back of the strength of its economy and all the structural reforms made in the past years.

Finally, let me just remind you of the key dates of the process in slide number -- on slide number 22. The closing should not take longer than 60 days from the signing of the agreement and therefore we expect to get full control of Brasilcel by the end of September, with the approval of Anatel within the closing period. Since we will take the control, the maximum period for closing the tender offer for voting shares will be 150 days. So the whole process should be finished by the end of February 2011.

To sum up, a key strategic movement for us that benefits both companies' shareholders and positions Telefonica in an unmatchable place in the Brazilian market.

Let's now turn to Europe in slide number 23. In Europe, we continue delivering good financial and operating performance in the second quarter of the year, consolidating our solid momentum in the UK and German core markets and also seeing signs of improvement in the Czech and Irish markets. The Company continued managing actively its portfolio of assets as the sale of non-core Manx Telecom demonstrates.

Year-on-year performance across key growth drivers were maintained, with total accesses achieving 54 million. Improved quality adds is reflected in the two percentage points increase in the contract mix over total mobile customer base at 48% at the end of June, while mobile broadband accesses increased year-on-year by 54% to over 8 million accesses, mainly on smartphones.

To highlight the strong year-over-year growth in the non-peer-to-peer SMS data revenue, 32% in the first half of 2010 in organic terms. As a result, organic revenue growth in the first half of 2010 ramped up to 6.5% year-on-year, excluding the impacts from MTR cuts. Profitability was remarkable despite the increased commercial activity across countries, with OIBDA margin of 28% in the first half, maintained over 20 -- 2009 in comparable terms. Operating cash flow grew 10.3% year-on-year, as well, in comparable terms.

Telefonica O2 UK continued to deliver steady growth in the second quarter of 2010, with mobile service revenues ramping up to 10.3% year-on-year, excluding the impact for mobile termination rates. The main driver was the 12% year-on-year expansion of the contract to customer base to reach 47% of the total base at the end of June. This combined with its record low 1.1% churn rate reinforces O2's status as the network of choice in the UK market for high-value customers.

Underlying ARPU evolution, positive at 2.2% year-on-year in local currency and excluding regulatory effects shows our success to drive demand for smartphones, which resulted in robust year-on-year growth in mobile non-peer-to-peer SMS data revenues in local currency of 43% up to June.

The recent move to tiered data pricing, to be applied from October for new customers signing in, is setting the standard for the industry and it is an important move in order to fully monetize the explosion in data traffic. Second-quarter revenue growth was also positively impacted by improved roaming trends. Finally, and despite increased commercial activity, O2 increased its OIBDA margin year-on-year to reach 25.9% in the first half of 2010.

Please turn now to slide number 25, Telefonica O2 Germany made further progress with its strategy to maintain its third position in the market with HanseNet integration progressing smoothly, the acquisition of additional spectrum in May setting the basis for future growth and benefiting from additional scale in the mobile broadband space.

The Company grew its mobile customer base 9% year-on-year up to June, on the back of solid growth in the contract base and an improved performance in the prepay segment in the quarter due to seasonal promotions launched through partner channels.

Mobile service revenue rose close to 3% year-on-year in the second quarter, driven by the success of O2O tariff and sustained progression in mobile broadband, which drove non-P2P SMS data revenues up 35% year-on-year in the first half of the year.

Please notice that service revenue growth up to June was dragged by MTR cuts with a negative 1.4 percentage points hit and also due to the My Handy product, which removes the handset subsidy component from service revenue. The Company also posted a solid increase in fixed service revenues.

OIBDA rose on increased the scale and higher efficiencies in most cost areas, growing 9.5% year-on-year in organic terms in the first half of the year with a reported 23.5% margin, stable over the previous year in organic terms. The higher margin achieved in the second quarter at 24.4% was driven by the above-mentioned seasonal campaigns, though it was lower year-on-year on different shaping of national roaming cost recognitions along the year.

Turning to slide 26, you see that our ratio of net financial debt to OIBDA stands at 2.2 times or 2.3 times when including debt-like cash commitments. Basically the same level as -- that we had at the end of the first quarter and the euro weakness has added EUR2.2 billion extra debt throughout the year, due to the translation into euros of liabilities denominated in Latin American and other foreign currencies.

We have continued reinforcing our liquidity position, our undrawn committed credit lines have reached EUR10.1 billion, EUR1.8 billion higher in the year, and we have continued our refinancing in July.

After relying in the euro and US bond markets, we have tapped the bank market and the Latam subsidiaries continue their financing activities in the local credit markets. We have signed an EUR8 billion loan, including the EUR3 billion five-year tranche for refinancing future loan maturities, while we raised since last quarter close to EUR800 million in Latin America, of which our Mexican subsidiary issued four-year and ten-year peso-denominated bonds for close to EUR362 million equivalent in July. This shows our ability -- the ability of the Group to diversify its funding sources in a tough credit market.

Our financial results including a foreign currency loss to commercial debt in US dollars in Venezuela, while our effective interest rate kept the improvement seen in the first quarter standing again just below 5% of our EUR47.8 billion average total debt.

To recap, we are fully exploiting our diversified profile, our scale and our strong execution capabilities to deliver strong earnings with significant sequential improvements in growth rates across the P&L, despite economic weakness in Spain. The increase in our stake in Vivo will further foster diversification and increase our exposure to the growing Brazilian market.

These solid results are highlighted by our superior organic top-line growth, our strong margins and robust cash flow generation, even in the context of reinvesting efficiency gains to foster revenue expansion. The focused commercial push, aimed at not just expanding our customer base but also enhancing customer value through an improved quality base and further broadband adoption, and CapEx focused on growth levers, like mobile broadband and new spectrum, reflect our strategy to deliver the next wave of growth in our markets.

At the same time, we maintained a robust balance sheet, a key differentiating factor in the current turmoil, and we are fully on track to meet 2010 and midterm guidance and we do confirm our dividend targets for the coming years. Shareholder remuneration continues to be our first priority for the use of free cash flow and year to date we have returned substantial cash to shareholders with close to EUR3 billion having been paid in dividends.

Thank you very much for your attention and now we're ready to take your questions.

(Operator Instructions) We would kindly ask you to ask a maximum of two questions per participant. (Operator Instructions). Our first question comes from David George from Credit Suisse. Please go ahead.

Yes. Thank you. Firstly, just on your M&A strategy. And post the Vivo deal and the expected Telesp merger, what are your remaining areas of focus, if any, and what the implications these deals have for shareholder returns or specifically buy-backs over the next 12 to 18 months?

And secondly, if I could just ask on guidance. Obviously you've reiterated all of your midterm targets today. But obviously the Vivo deal and the anticipated material synergies from the Telesp merger, does that actually give you scope to raise that midterm guidance? Or is this more about reassuring on the achievability of the existing guidance?

Yes, thanks, it's Santiago. Thanks, David, for the question. On M&A strategy, we're just following the path that we set out in October last year in our investor conference. We then said that we wanted to finalize our deals in Brazil with the Vivo transaction; this is pretty much completed. We wanted to buy spectrum in both Germany and Mexico, and this has been completed. And the only pending thing from that list is an increase in our China Unicom investment up to 10%, but that is indeed -- we are under no rush to do so. But eventually it might be complete.

Other than that, our scale diversification and in-market consolidation capabilities have been pretty much fulfilled and we're quite happy that we could do it ahead of the end of the year.

On Brazil, you know, we're not going to change guidance until the whole thing changes. Now this is going to be a multiple months' process. The combination of Telesp and Vivo will not be done overnight and we will regularly update you on when and if things change and what kind of an impact you should expect. We have certainly said that this combination is going to elicit a very significant synergies and we have already committed, today, to be much more precise after the closing of the deal.

Next question, please.

The following question comes from David Wright from Deutsche Bank. Please go ahead.

Yes. It's David here. I have a couple of questions. I guess the first one is a very simple follow-on from the previous. When do you think a Telesp transaction could potentially take place within the time line you've given? And just on the Vivo transactions at the moment, when could you give us some guidance on how you will treat goodwill, for instance?

Then my second question is on Spain. You had indicated both yourself, I believe, and also Guillermo there to me that from the middle of May or so you had seen a slow-down in consumer behavior following the announcement of the austerity measures. Is that what is driving some of the slower minutes of use growth? I also noted there was some pressure on DSL ARPU. Is there a need, perhaps, to -- or has there been a need to reduce pricing a little, just to retain some subscribers? Thanks.

David, Santiago again. On the Telesp-Vivo combination, we should first wait for the closing of the Vivo transaction, then for the execution of the mandatory tender offer for the voting shares.

This is, as I think we said in the presentation, unlikely to happen before the end of February and then we will run as fast as we can and most of the funds are literally already being built. It is not very easy to see that transaction having been completed, I don't know, before the end of the first or maybe the second quarter of next year.

But again, there are some gray areas that we have to work on in the coming weeks and we'll regularly update you on that.

On the goodwill question, by the closing of the transaction, we will know exactly in which way we've finally structured the deal. We now think that having the Spanish entity, buying or merging into the Brasilcel, a Dutch entity, might have some beneficial effects and if that is indeed the case, we'll certainly try and maximize them.

David, this is Guillermo. Regarding Spain, there are two separate issues. One is the shape of the consumption in -- across the quarter, as you remember very well and you mentioned. April was a great month for us, decent consumption in traffic and in sales and since mid-May we started seeing some slowdown and some decrease in the recovery of consumer confidence. We also seen some slight recovery by the end of the -- of June and July is coming better than May. So there was a slowdown.

And regarding austerity measures, remember they were announced in May. They were not implemented until July, so it's much more -- the shape of the (inaudible), much more expectations rather than on real impact. So we have to see, going forward, what happens on the consumption. I'm not that much concerned on our public sector revenues because it's multi-year, flat type of contracts, but consumption may be affected, for example, in the VAT increase. Prepaid customers tend to be more expense fixed than other segments.

Regarding ADSL ARPU, it's a different story. We have a 7.4% decrease in total ARPU in broadband fixed ARPU in Spain. It's a combination of factors. One, last year in the first quarter, for example, we have in the gross adds a EUR9.9 of promotion, while this year, in the first quarter, we have a EUR99.9. So the first quarter this year looked a little bit less stretched than previous year, but when you look at the second quarter last year, we have EUR29.9 as the promotion and this year, [EUR99.9]. So on the other side on the mathematics works from the other way around.

Also this quarter, we -- in April, we took the decision to decrease the price of our 10 megabits. It's a small portion of our base, but it's a decrease in price. And also, there's a series of small adjustments. So I expect the third-quarter evolution of ARPU will be better than the second one, but the ARPU of the ADSL, the shape in the second quarter is much more due to several factors rather than on consumption changes.

What is true, as you mentioned, is that in general, the broadband market is -- was slower in the second quarter than the first quarter, in general.

That's all very clear. Thank you.

Next question, please.

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

Yes. Hello. My question -- my first question is on the Portugal Telecom shares. You were mentioning something, Santiago, in the presentation that I was missing -- sorry, for that. But if you could give us an update on what's the current status, whether you physically own the shares already or what's this equity swap contract at the moment?

And whether -- I think you were mentioning some positive impact in the short term from that. If you could elaborate a bit more on that and whether there's a book gain as the difference against the book value to be recorded in the, potentially in the third quarter, I guess. That would be useful.

And then the second question is on the adjustments you made for hyperinflation in Venezuela. If you could -- I have seen that in the first quarter there was a negative impact of I think it was EUR8 million, EUR9 million, but then it was very, very positive, more than EUR100 million, in the second quarter. If you could just explain to me the math behind that, it would be useful. Thank you.

Thank you, Luis. On our PT shares, we hold physically, more than 2 -- slightly north of 2% of shares and we have equity swaps for just about 8%. So we are long PT stock and we are under no obligation to deliver it or we have finally not granted any call to anyone, which means that we are free to trade as we see fit.

That's the only point I was trying to raise in the call that we are now, as any other shareholder, interested in PT shares doing well. We hope that they certainly do well going forward. If and when, eventually they -- the full sale is done, and that is not something we're contemplating in the short term, it will be the time to record and book a gain because we bought the shares so long ago that we're now sitting on a profit here.

On your hyperinflation in Venezuela thing, there is a technicality involved and it is because the devaluation happened on January 7 technically we had seven days of 2.15 average rate and whatever, 30, 27 days or 17 days, of the new regime. And that's what makes it confusing.

Actually hyperinflation should be on -- in general, a small positive for the numbers, but it -- Q1 is the exception because there is a combination of average exchange rates coming from last year and two months and three weeks of the new regime. And that's what is confusing. It's difficult to arrive at an undisputable number that basically takes you from Q1 to Q2 numbers without any doubt. But we can try and walk you through the details if you so wish.

Okay. Thank you.

Next question please.

The following question comes from James McKenzie from Fidentiis. Please go ahead.

Hi. Good afternoon. A couple of questions. First of all, on the options, 150 million -- over 150 million shares that you mentioned in the previous presentation. I was wondering, could you give us any more detail about those options and do you still hold them?

And then, secondly, I think your guidance on interest rates for the year at the year-end conference call was 5.5% to 5.75%. In the year-to-date, we're looking at slightly below 5%. Would you be willing to revisit that guidance?

Thank you, James. On our 150 million calls [that also are] long dated, we still hold them and I'm sure that they will prove their worth in due course. And we have, of course, the intention of keeping them.

Okay.

On our interest costs, we guided at the beginning of the year for, I think, it was 5.75%. We have since improved that thing. It is now more likely than not that we will end up, say, below 5.5%, although the highly volatile marking-to-market of our pension liabilities and some FX movements make it difficult to be more precise because, of course, nobody knows what the exact shape of the currency markets will be in Q4. We are highly confident that a better than 5.5% number is going to be achieved by year-end.

Yes, sure. Okay, thank you.

Next question please.

The next question is from Tim Boddy at Goldman Sachs. Please go ahead.

Yes. Thanks. A question for Matthew, in fact, around the impact of VAT increases in Europe more generally. Obviously you have less color on that, but should we expect those to be passed through or would they have a similar impact to the one we have seen in Spain and really any color on those type of austerity measures across the European businesses would be very helpful.

Secondly, also, it would be very great to get a better understanding of your strategy in Germany now you've been successful in the auction for 800. Thank you.

Thanks, Tim. Let me kick off on the German question. As you know, we had a very clear strategy going into the auction to acquire the 800 spectrum that we wanted and some 2.6 as well. So we came out with this -- with the spectrum that we wanted. We're now launching our first commercial trial in 2010 in Munich and Halle, both in Germany.

Going forward, as far as network share and strategy is concerned, what we've done is put ourselves clearly in a very strong position to have choices. In principle, network share is something we would do and that's the case in, certainly, in all the countries in Europe.

What shape that takes, we'll wait and see. But it's clear, with the spectrum base that we've got and the network base that we've got, we've clearly got choices in terms of what we do and who we potentially partner with.

On austerity, I think we're relatively lowly exposed to government expenditure, apart from in the Czech Republic. And the good news in the Czech Republic is we've clearly now got a government there, whereas previously we have had a midterm government and so we expect that spending to return in the Czech Republic.

In Germany and the UK relatively lowly exposed. I guess my only concern would be consumer confidence and that's something that clearly we'll need to see in all the markets. Not overly worried in Germany. Maybe in the UK. From a VAT perspective, we would likely pass it through, but clearly we need to look at market conditions. But I wouldn't expect us to absorb any VAT potential increases.

Okay. Thanks.

Next question please.

We now have a question from Robin Bienenstock from Sanford Bernstein. Please go ahead.

Thanks very much. Just two questions. I'm wondering if you can give us any update on Venezuelan cash expatriation. And then really, I'm just curious about your debt. I'm wondering if you can update us on what percentage of your debt is variable and what currencies its split. And if you did increase in China Unicom, how would you think about doing that? Is that cash or shares? Thanks.

Robin, I didn't pick up your last sentence for the question. Could you please repeat it?

Yes, sure. The last question was really about your debt. I'm wondering what percentage is variable and in what currency is it split? And then also, were you to go -- were you to increase in China Unicom, I'm wondering how you would think about doing that. Is it shares or cash?

Okay. On Venezuelan cash, we are now sitting on roughly $1.8 billion worth of idle cash there. We have lower expectations for that to be repatriated now than we had at the beginning of the year. Two things have happened there.

The market for the parallel dollars had been shut down and now dollars are much more difficult to get for any purpose. And the economic environment in there has actually become more difficult and so the environment is now less conducive to the promises or the commitments that we had heard being able to be honored.

On the debt composition, we have now a 69% of our debt in euros, roughly 16% in Latin American currencies. The British -- I mean, sterling is 7%, US dollars trade 4%, the Czech crown is 4%. So you see not a major change, although a slight increase in euro relative to where we were.

Were we to increase our stake in China, it is more likely than not that it will be done through a cash commitment, but that decision will have to be made when and if that opportunity presents itself, which is still not the case.

On variable versus fixed, we have an active management of our maturity profile and we have, if anything, tried to be slightly shorter this year on some currencies. 46% is now fixed and the other is either bounded or fully floating, although there is some -- there are some differences depending on the currency you look at.

Thanks very much.

Next question please.

The following question comes from Ivon Leal from BBVA. Please go ahead.

Yes. Hello, good afternoon. A couple of ones; the first one in Spain for Guillermo. You say that you've made some efforts in pricing in the broadband prices in the second quarter, but actually if we look at the net share of -- the share of net adds in broadband in the couple of months -- in the last couple of months have decreased very much. Why exactly that is? Is it increased competition or maybe your strategy has changed and you are trying to sustain prices or -- I don't know if you could detail a little bit on that and detail if you're going to take any specifical step to rearrange that? That's the first one.

The second one, in Mexico, I think you've been very successful in the spectrum auctions, which just took place. I don't know if that changes your strategy in the market going forward in terms of I think that you had a target of sharing mobiles of 25% going forward. So I don't know if that's going to change a bit your CapEx going forward and your strategy going forward in the Mexican market.

Thank you, Ivon. This is Guillermo Ansaldo, I am going to answer this Spanish questions. First let me clarify what we did in pricing in the second quarter, is we changed the price of one of the services, the 10 megabits, which is a small portion of our base. We reduced this from EUR44.9 to EUR41.9, a EUR3 reduction for our base, and only for those people that will have 10 megabits connections in our base. The majority, as you know, in Spain is 6 megabits, no?

Now regarding our performance in net gains, two things. First, it's not churn. Churn, in fact, is -- has been improved from the last three quarters. It's more gross adds and regarding gross adds, you have to see two things. In the second quarter, the market was slower, so the growth of the market was smaller than in the first quarter and obviously in our case also we have a smaller share of these gross adds.

Basically we have, as you remember, a very strong campaign in the first part of the year that was very successful. In the second part of the year what we did is that we changed our brand, so we focused our communication, our advertising on the changes of our brand and bringing Movistar to our fixed portfolio and also trying to build brand values around Movistar.

Also, we see the competition, very, very active competition. For example, Jazztel and Orange with very, very aggressive promotions ranging from, for example, Jazztel's EUR7.95 as a promotion for a few months and also Orange with an EUR11.95 promotion for six months.

So it's a combination of factors; it's not churn, it's gross adds. The market was lower and we were much more focused in the second quarter on changing the brand and building our -- and our brand values around Movistar.

So you have to assume -- we have to assume that the -- you're going to do something to change that in the coming quarters? You're not comfortable with that 20% share of net adds that you've been delivering?

No. Obviously we prefer to have more share for net adds than less, but we are not going to do any wild move. We will continue with our strategy of trying to extract more value and for us to reduce churn is a value driver. It's better to get this performance with reduced churn than with more gross adds and more churns. So we are satisfied with this growth. Obviously I'd prefer more share of net adds than less, no? But it's not going to be any sharp change in the short term.

Okay.

Taking your question on Mexico, it is true we have been successful in getting a significant part of the spectrum we were looking for. Therefore we are very happy about that because we have been looking for a long, long while to get more spectrum and to -- and therefore to enlarge our beta capacity in the country.

In fact, that was part of our strategy of this year. Remember that we have been trying to focus on the contract part of the customer base and we have been able to get 35% of the net adds of the quarter on contract. That was already our strategy.

We needed to pursue that strategy, more spectrum, namely on the capital city. We have managed to get that spectrum and this spectrum has already been awarded to us which means that it's already operational. So our traffic is growing, our total traffic is growing. We think that we are on the right track and we will foster our prepaid campaign because we have been a little bit weak on prepaid in the second quarter.

But everything is being developed as we were planning on the budget. The only thing that we are missing is the spectrum and now we have it, so nothing else that I can tell you. Data revenues, by the way, are growing very nicely, almost 20% year-on-year. And they already represent 22% of total revenues so we are on the right track. Now we think to push a little bit more on prepaid and to keep going on this data expansion on the contract customer side.

Okay. Thank you very much.

Next question please.

The following question comes from Jonathan Dann from Barclays Capital. Please go ahead.

Two questions. One is on the stake in Portugal Telecom. Once you -- once Portugal Telecom has a stake in Oi, would you be allowed, under Brazilian regulation to hold, I guess, stakes in Telecom Italia directly in Vivo, Telesp and also an indirect stake in Portugal Telecom? And then my second question, if you had any thoughts on how the UK spectrum auction might change under the new government.

Jonathan, let me start with the Portuguese center. We have owned PT stake for 13 years. We have been together in Vivo for a long time. We in principal see no reason why that -- this new move, which is just an increase in our stake, not a beginning of a new stake, should mean any change. But if there is anything, we will, of course, study it in great detail.

On our Italian end, you know that it took the regulators in Brazil almost two years to clear that absence of conflict and we expect no change from that end. So we don't particularly see any reason why that could be changed.

Hi, Jonathan. I'll obviously pick up your UK question. The statutory instrument that the government announced yesterday, I think, was really focusing on creating a digital Britain. We welcomed it. I think the two key moves for us was clearly allowing 3G on 900 megahertz, which is a big thing for us, particularly virtue all of the smartphones that are coming now have got the in-built to the chip set, so that's a big positive. And also clearly the licensing extension on 3G.

As to the structure of the auction, I think the statutory instrument was less clear. It was really thrown over to Ofcom. Clearly what they've got to consider firstly is does [the disposal that] everything everywhere will have to do with their 1,800 spectrum as a result of their merger. And then the second question, of Ofcom clearly needs to approach is caps on the 800 spectrum. So we welcome 900 on 3G and the license extension and wait to see what happens on the auction.

Thank you.

Next question please.

We now have a question from Will Milner from Arete Research. Please go ahead.

Yes, thank you. A couple of questions. Just on the Vivo deal, you said yesterday, I think, you expected the deal to have a positive impact on earnings and cash flow. I just wanted to understand whether you still think the deal would be accretive if mobile termination rates get cut 20% annually as I think some recent rumors have suggested they might?

Looking at Vivo's results yesterday, I guess interconnect revenues' less, interconnect costs are about 20% of revenue and 60% of EBITDA. So it does look like doubling up your mobile exposure into a round of MTR cuts is a risk whether the deal is accretive or not.

And then secondly, to Matthew, on mobile data, you mentioned you're ahead of the learning curve in understanding customer behavior and usage patterns. And I just wonder if you could talk a bit more around that? It's quite an interesting topic, particularly given the decision to drop unlimited data bolt-ons from September. Do you think this is an inevitable shift that all operators will make?

And thinking further ahead, do you -- how do you sort of envisage the pricing model for voice and data looking, in say, five years' time? Thanks.

Let me take your question about MTR cuts in Brazil. Let me first say that the numbers that you are running are not the ones that we have in terms of net exposure to OIBDA. The net exposure to interconnection and the level of OIBDA is now below 20% at the level of OIBDA, therefore the exposure is much lower than the one you were contemplating. Now the question of when and how the MTR cut is going to happen is a big uncertainty.

Recent rumors were pointed to our fast decision on that but now it looks that it's again postponed. We think it's going to happen. We don't know when but we think it's going to happen progressively rather than a drastic initial cut.

Anyhow, remember that a significant part, the large majority of our traffic is already on net traffic and that the reduction of interconnection exposure to OIBDA has been going down progressively in the last year. And as I was telling you before, it is now below the 20% first call at the level of Vivo.

So we will, as you might imagine, keep you posted. But that was already embedded in the business plan that we were running when making the offer that that was going to happen. So it's no surprise when the only question is when and at what pace. So just on that side we will monitor that and we will let you know.

Let me try and pick up your questions, Will, because it was -- I think there was 3 or 4 in there. On the mobile data usage, clearly we've been through a massive learning curve in the UK, and particularly in London, that we're now using right across the Group from a Telefonica perspective.

I would say there were two key takeouts for us. The first is that I think the interactions with the network is a lot more, what I would call, snacking. So very quick interactions, in and out, the phone polling the network. Whether it's using Facebook or getting an update on the latest, I don't know, Tour de France results or whatever. So a lot of small interactions backwards and forwards. Clearly what we've done is with our network partners learnt an awful lot from that.

The second one on the mobile data is huge localized peaks. That's been all about getting the right site sharing process, which is why we've done the deal with Vodafone, or one of the deals we've done with Vodafone in the UK. Particularly if you use the phone at London Bridge, you'll recognize that there's network problems there because of the availability of sites.

From a data perspective and the amount of our tiering, I think it's inevitable. Any industry needs to match its revenue and its costs. And what was happening, I think, in the -- our heavy data markets is that traffic was exploding from a data perspective and therefore the cost to serve it, but revenue was staying flat because of the effective flat top.

So what we've clearly done is introduced, or will introduce, in October I think it is, that sort of tiering structure. Why and where? Well, the first thing to say is we've introduced it such that only 3% of our customers will be impacted by it initially. We've pitched it there on purpose. To give you a view, those 3% of customers actually use about 65% of the data going through our networks so a massive strain on the network there. And those customers will either end up paying more or going to another operator, either one is positive for us.

And the key for us is that actually where we've pitched it, people's data expansion usage is clearly expanding all the time. Over time, more and more of our customer base will move into that charging area that we've set.

Your third question was on data and voice and how I see it going forward. Clearly what's happening is data is expanding, voice is decreasing with voice competition and some Voice-over-IP minutes going off of our network. The real question for the industry is how quickly does data offset that voice decline.

Clearly what we're getting is a lot of access data at the moment and you can see it in our ARPUs, and our ARPUs excluding MTRs in the UK are actually going up now and hitting a positive trend. The more data that customers end up paying for, clearly, it ends up in a positive trend overall that will more than offset the voice decline. So hopefully I've picked up all of your questions in that.

Yes, very helpful. Thank you. Thanks a lot.

Next question please.

Our final question comes from Stanley Martinez from Legal and General Investment. Please go ahead.

(Inaudible - technical difficulty) first, returning to the (inaudible - technical difficulty) base case within the EUR3.3 billion to EUR3.9 billion? Or is there a minimum level of NOLs that can be applied to the Spanish and Dutch entity?

And second, on financing the Brasilcel transaction, on slide 20, you used a 5% discount rate to present value the cash outflows and that's equivalent to Telefonica's effective interest rate. However, Telefonica has EUR6.6 billion in cash and equivalents and I surmised that's perhaps EUR4 billion less than what's truly necessary to have cash to run the businesses.

The term facility that you agreed to last night probably has less than a 2% all-in cost including the commitment fees. So especially given the deferred cash payment schedule, is it very conservative to assume a marginal interest expense that's associated with the transaction as EUR7.5 billion at a 5% rate? Or is it more realistic that Telefonica can fund the vast majority of the Brasilcel buy-in just by using internally-generated free cash flows and not having a marginal interest expense?

Stanley, the connection was pretty bad, so I'm not sure we have picked up every detail. If this is the case, please either interrupt or ask the question fully. If I understand your question correctly, you are asking the appropriate discount rate to be used for discounting and projecting the cash flows to be had from Brasilcel.

The syndicated loan package that we finished last night is a euro loan and therefore on very competitive terms that Telefonica, along with some but not many, borrowers can take. So you may want to use that number. For conversion purposes, of the delayed payment to Portugal Telecom we have used around 5%. That's not to be confusing, but you can -- you may want to use your best guess or your best value for that number. We don't claim that to be the only discount rate possibly applicable there.

Other than that, as I mentioned in the presentation, we strive for a lower than 5.5% overall increase. We have cash, not idle, but actually earning interest in many places and if we don't repatriate it earlier, with the exception of Venezuela, it's because it doesn't make sense to do so for tax reasons.

So we try and run as tight a ship as possible. A lot of the cash that sits in some of our subsidiaries gets channeled upstairs through our cash treasury or cash treasury management programs and instruments. Again, with the exception of Venezuela. And where we don't have idle cash, we bring it home. But again, with the exception of Venezuela, everything we do is for a good reason. Most likely, coming on transaction -- I'm sorry, on taxes on short-term transactions.

We have time for one additional question.

The final question comes from Jesus Romero from Merrill Lynch. Please go ahead.

Thank you. I have two questions on the Vivo transaction. The first one for Santiago, if you could give us a detail of what level of net debt to OIBDA you expect to see in the next 12 months, in terms of what would be the peak? And then I don't know if you can give us any more detail on the -- what percentage of the synergies you've given us are coming from taxes? Thank you.

Well, the headline number that we expect in the increase of debt to OIBDA, especially taking into account that a lot of the OIBDA still remains to be generated in the second half, is 0.25. So that's the overall increase in the net debt to OIBDA ratio at current exchange rates that we think is sensible to program into the leverage ratios.

How much of that is going to be taxes, and again, it remains to be seen. Assuming that closing is a smooth process, which is what we expect, we will then know in which manner the final taking of Brasilcel shares has been done and whether or not a tax synergy can be taken from the transaction level.

Of course we have been very vocal in the process about what the combination process of Telesp and Vivo might entail in the form of agio or goodwill to be generated in Brazil. But that is not likely to come this year, but rather next year. Specifically, we'll keep you updated very in full when the transaction closes, especially by the Q2 results, and that should [done].

Let me take the opportunity to thank you all for having attending this summer conference call for Telefonica. We certainly hope that the second half of the year will be more benign, in both the economic environment and as balmy as the weather seems to be in most parts in the Northern Hemisphere. All the best to all of you who have still a few days off to go on holidays and we'll see each other or we'll listen to each other in a few months. Thank you.