Pablo Eguirón - Head, IR Ángel Vilá - CFO & Corporate Development Officer José María Álvarez-Pallete - COO.

Georgios Ierodiaconou - Citi David Wright - Merrill Lynch Luigi Minerva - HSBC Fabián Lares - JB Capital Markets Luis Prota - Morgan Stanley James Ratzer - New Street Research Fernando Cordero - Santander Justin Funnell - Credit Suisse Jerry Dellis - Jefferies Mandeep Singh - Redburn.

Ladies and gentlemen, thank you for standing by, and welcome to Telefonica's January to September 2014 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 would now like to turn the call over to Mr. Pablo Eguirón, Head of Investor Relations. Please go ahead, sir..

Good afternoon, and welcome to Telefonica's conference call to discuss January-September 2014 results. I'm Pablo Eguirón, 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 guarantees 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 releases and the slides, please contact Telefonica's Investor Relations team in Madrid by dialing the following telephone number, 3(491)-482-8700. Now, let me turn the call over to our Chief Financial and Corporate Development Officer, Mr. Ángel Vilá, 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 José María Álvarez-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 a 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 trends 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 above trend over 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 continue to deliver a sound cash flow generation of almost €3 billion up to September, which kept strengthening the balance sheet. Net debt stood at €41.2 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 E-Plus 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 commitments. 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 €38 billion. OIBDA amounted to €12.3 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 €2.8 billion and EPS reached €0.61 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 the 1st of July increased the negative contribution of perimeter to 4.5 percentage points.

Finally, net debt declined to €41.2 billion, minus 11% year-on-year, not including yet the payment for E-Plus transaction to be recorded in the fourth quarter, nor we already executed divestments of 2.5% stake in China Unicom, and the remaining 5% offer to Czech Republic.

Turning to Slide #4, increased investments are fostering growth in the high value customer base, capitalized on a right pricing strategy, customer insight, and competitive tariffs. All these 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 four-fold 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 levers, 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's Hispanoamerica, mobile data, digital services, and lower reclines in Spain and Germany. Therefore we keep improving our revenue mix towards the 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, on amid intensified commercial investments, network, and IT costs.

This performance lead to a stabilization in year-to-date organic trends 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 two times higher year-on-year and we have 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/or 4G mobile sites are already connected with the 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 or reviews 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 #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 Móvil 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 perks and services with the launch of Sinfonier and with sales reaching a 42% increase year-on-year. Moving to Slide #8 let me highlight the progress made in Telefonica España where we continued 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 a 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 convergent 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 uptick of high-end bundles. As a result Fusion ARPU is increasing up 1.2% sequentially from Q2 to Q3 reaching €70.

Let me stress that we remain committed to further enhancing our long-term competitive advantage mainly ultra broadband coverage reaching 8.8 million premises past with fiber by the end of September doubling last year 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% using 2.5 percentage points quarter-on-quarter and following its drop in the last three quarters.

This performance is mainly driven by the customer base stabilization and the lower bad book impact, as a large proportion of the customer base is already convergent with Fusion ARPU increasing. Regarding profitability, Telefonica España 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 two times versus non-LTE on high-single-digit ARPU uplift.

As a result, revenue and 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 €34 million, partly due to the finance 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 three times higher versus previous year. LTE is gaining traction with close to 90% of shipments being for LTE-enabled and usage three 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 cost associated with integration of E-Plus and non-recurring transaction cost to ensure 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 #12, we continued strengthening our position in the most valuable segments, capturing for six consecutive quarter more than 1 million contracted 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 depreciation 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 quarter's 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 the relation is excluded.

Let me highlight that these 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 the Slide #14, let me highlight the strong growth posted in Q3 by Telefonica Hispanoamerica. Commercial momentum with levels of mobile gross adds about 11 million and increasing world 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 #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, revenue is steadily accelerating; our mobile service revenues grew 12.6% year-on-year, the highest growth in more than four years.

And finally, Q3 OIBDA grew by 50.6% year-on-year, showing the effects of the new regulatory framework and the economies of scale we are achieving as a result of the strengthened commercial positioning. In the rest of Telefonica Hispanoamerica on Slide #16, steady growth is the main reference across the board.

Specifically, let me highlight the sound Q3 OIBDA year-on-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 at profitability.

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 quarter 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 €41.2 billion with a leverage ratio of 2.39 times. This figure would stand at €44.9 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 a 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 discrete dividend and other inorganic actions. We expect to continue progressing towards the €43 billion net debt target.

Slide 18, highlights our diversified €14 billion funding exercise in the year, with a more active role on the equity markets in the third quarter, as we have raised €2.25 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 €0.8 billion from equity investments.

This funding has allowed us to keep a very ample liquidity cushion above €18 billion even after paying for E-Plus. This has been complemented in October with issuance of an €800 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 base growth, focused on high-value enhancing the customers 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 España, Mexico, Peru, and Colombia. Our balance sheet remained strong, reducing net debt year-to-date even after E-Plus payment.

We have enforced our CapEx effort, speeding up network modernization towards a non-IT 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]. We will now take our first question from Georgios Ierodiaconou from Citi. Please go ahead. Your line is open..

Yes, good afternoon and thank you for taking the questions. I have two, both financial related, the first one is around your capacity to issue hybrid. I heard I remember in one of previous conference calls you mentioned around €7.5 billion as being more or less your capacity for hybrid.

There was a report yesterday by one of the major rating agency suggesting that could be as high as around €15 billion. So I just wanted to get a clarification whether you do have more capacity than the €7 billion you had in mind and whether you're planning to use it at some point. And my second question is around E-Plus.

I mean 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 OBITDA and cash flow generation now perhaps was expected last year out of this asset, why you chose not to renegotiate the price and whether that means you see more revenue upside or other types of synergies that may be 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..

Hi, Georgios. On your questions regarding hybrids we have outstanding hybrids issued of €4.2 billion. Regarding the capacity to issue additional hybrids the treatment is slightly different between movies and SMP.

We are taking the most prudent one which corresponds to something when we say that we have a limit of €7 billion despite Moody's report issued yesterday that indeed was getting closer to €13 billion.

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

With respect to 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 then to convert what used to be E-Plus or potentially KPNs accounting policies to Telefonica policy is a different treatment, has a clear impact at creditor level but does not affect at the operating cash flow level, which in the end it is what one would be looking at when thinking about evaluation and before we decided that given that the synergies case was there and that the cash flow generation was there with a bigger customer raise and therefore potential for increased revenue going forward we decided not to renegotiate in 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 principle seem to be prudent and potentially more conservative than some of our competitors which we feel proud of..

Thank you..

Thank you, Georgios. Next question please..

We will now take the next question from David Wright, Merrill Lynch. Please go ahead. Your line is open..

Hello guys. Yes, couple of questions from me. First of all just on the Spanish ARPU, that's obviously a very strong numbers and to be able to stabilize is very encouraging. I think you said over those comments about gross additions over €60.

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 noticed your run rate of addition to step down now to sort of €170,000 or so. So clearly there is an ARPU sort of premium you're now trying to collect.

So should we be looking ARPU stabilization in the next couple of quarters? My second question is just a little more on the UK; we have Vodafone announcing yesterday its ambitions to launch a fixed product. I'm sure and as a preemptive 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 there with a fixed product, could that be even prompt you to consider I mean exit or even trying to consolidate the market for more scale? Thank you..

Well thanks for your questions. Regarding Spain we've seen a slight ARPU increase during the quarter namely coming from two major factors. First, the gross adds to new or upselling customers keep growing.

Now, we actually account for 78% of total gross adds and 68% -- 69% of gross adds at around packs of €60, which mean 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 is light, accretion for the first time in the second quarter that we're seeing moving to that direction.

It is also important to note that churn has also stabilized in the level with 1% on the Fusion customers. And therefore the lifetime of service value for customer is, on Fusion is more than two times on the ones on fixed growth and more than two-and-a-half times over pure mobile contract.

So just Fusion the trends the commercial then the line commercial trends of Fusion even with a slightly lower net adds that in the previous quarter are growing to the direction 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 España revenue this is a very sound anchoring factor for revenue stabilization in Spain.

We are also accelerating as you know fiber deployment and LTE coverage and therefore with the new data packages that we are putting a 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 a better trend in the other 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 few that we have for October it looks like it is going to the right direction.

We have also very sound move in terms of the TV commercial effort, even though we will like 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 fewer independent offers, which is namely a data monetization through the video offer, and more data bundles on 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 the BT would take on their 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's behavior for the time being has shown limited interest on the converge proposition.

Distribution of wireline and wireless has different market structure and there is already some quadruplet pay offers on the market like the one coming from Beijing and it has been showing limited traction.

But as you say -- as you said during your question I mean Vodafone and Everything Everywhere have moved into one direction it looks like they're being prepared. In our opinion this is the anticipation of their potential launch of BT and we will monitor very closely the evolution..

Okay, thank you..

Thank you, David. Next question please..

We will now take our next question from Luigi Minerva, HSBC. Please go ahead. Your line is open..

Luigi Minerva - HSBC:.

:.

Well on Germany you're right we're seeing a much better commercial momentum with more rush hour commercial approaches by the different players. We are also seeing some stabilization on the increase of the ARPU uplift coming from LTE offers and also data volumes, data traffic is also growing to the right direction.

So for us everything keeps positive in terms of momentum. The net adds were very sound because we have had this quarter three times more net adds I think the same quarter of the previous year. It is true that we are also investing heavily on the market and this is impacting OIBDA.

We are also seeing positive performance in handset revenue 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 mainly for us.

In terms of the potential disruptive movements coming from Drillisch after our Bitstream Access agreement with them after the remedies agreed with the commission.

Remember that in our agreement with release and agreed with the commission is a valuable pricing which means that prices applied to Drillisch for the Wholesale Bitstream Access contract is going to be dependent on technology.

And therefore the potential impact that this is going to have on potential studies down to the market is significantly more limited that agreement was be at fixed prices. So what we wanted to prove with the German transaction that was four-to-three consolidation was doable in Europe, without compromising data monetization for the future.

We think it's going to the right direction. From our standpoint, we think that we all need to show a more rationale behavior in terms of data prices and that's what we intend to do to our brand new Telefonica Deutschland after their combination with E-Plus. So I think that you should not spec from disruptive movements on that landscape..

Regarding Brazil on the money, hi Luigi, this is Ángel. Our focus is getting the approvals for the GBD transaction.

We are in the process of having a very constructive dialogue with CADE on the technicalities of this transaction and it's interaction with Telco, the merger transaction and we believe that this will be solved satisfactorily and we would expect to grow GBD 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 fiber and video and accelerating growth both in revenue and OIBDA. So we are in a very good position and we expect to consolidate BT and see the synergies flowing from the transaction.

Having said these and we have stated many times in the past that we are very strong believers in the benefit of a market, mobile consolidation and when and if not happens we will be supportive of such a consolidation..

And if I may follow-up if there were 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, Ángel..

Thank you, Luigi. Next question please..

We will now take our next question from Fabián Lares, JB Capital Markets in Madrid. Please go ahead. Your line is open..

Fabián Lares - JB Capital Markets:.

:.

:.

Taking your first question about Mexico. First, let me focus a little in the first part of my answer on the operational trend, we've 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've had a significant increase in gross adds, which have increased 45% in the first nine months of this year. We have significantly improved our portability figures with 94,000 in the third quarter and that helped to boost the revenue growth. We're 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 is almost independent of the regulatory changes. I mean which should start to effect commercially speaking from now on. This growth has been basically around the prepaid segment with good traction on postpaid, which has always been an issue.

And that has helped us to significantly improve OIBDA evolution. OIBDA have increased 50% year-on-year. I'm stating all of these because I wanted to make clear that the regulatory fix have not yet been flowing to our commercial attraction.

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 who is going to be the third player or the second player in this case being AT&T.

We thought that the asset Lusacell that price was not providing value for us because we will rather invest in our own platform, because we're showing significant traction and therefore we were scared of 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 be focused by what we're doing now, because commercially we're having more traction. The regulatory changes for the first time provides a much more level playing field, and therefore, I think that you should expect that our trends in Mexico to keep going to this direction.

And again, let me say that four-to-three would always be welcome and namely with these new regulatory framework which should boost all the players to be much more rationale and much more leveled in terms of commercial activity.

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

To complement, if I may, José María's answer I would say also that the price agreed for Lusacell transaction clearly shows that our Mexican asset is undervalued in our some of the past valuation.

Moving to your second question on operations, first, I would like to say that we envisage to continue working towards reducing debt first by free cash flow generation that you've seen through September has remained strong close to €3 billion. Second through financial measures.

Here, the scrip dividend, we're expecting significant acceptance on the share side, it's a volatile scrip and potentially, as I said before, issuing some hybrid in the near to mid-term. 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 we have sold our remaining stake in Čechy, 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 2.5% in China Unicom.

To 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're open to analyzing strategic alternatives in several markets to generate value and improve our financial flexibility..

Thank you, Fabián. Next question please..

We will now take our next question from Luis Prota, Morgan Stanley. Please go ahead. Your line is open. Hello caller, we are not able to hear you at this time. Please make sure your line is not on mute..

Hello, can you hear me now? Hello?.

Yes, we can, Luis..

Yes. Hello.

I have two questions, first on the 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 is 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? So 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 this floating in the market whether that's a bit negative for rating agencies? Or they are already treating this in a different way or taking that into account? Thank you..

Hi, Luis, José María here. Taking your question on Spain, the competitive landscape presume 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 the 2014 due to a very high convergent penetration by many operators and that's -- if we were to project that include a consolidation processes that are in place suggest that our price stabilization should at least be expected in the mid-term.

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 another stabilization of contract mobile with an increased data usage proposition.

On top of that subsidies have fallen deeply in the last two years after our first signal more than two years ago, all other players have gone into that direction and therefore subsidies appear to be kind of an structural feature -- commercial feature three years ago have now become much more practical.

And therefore also the commercial effort overall in terms of subsidy have become much more selective including places like Jiwang [ph]. So overall, if you ask me to give you an overall picture of the Spanish market, we see a much more rationale behavior of the market. It has been painful because we have been provoking this convergent process.

And now it looks like we are reaching a point with 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 rationale Spanish market and this is starting to flow through the stabilization that you saw in 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 SICAD, which was at the rate of 12 bolivers to the dollar, at the close of the quarter we have the equivalent of €1.4 billion of cash in Venezuela.

SICAD II continues to be very liquid and the volume of dollars traded is not preferential. We see that the equilibrium rate of the boliver 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 under double-digit deficit.

We don't know this regard the government allowing for higher trading band in the coming months. So rather than a movement to SICAD I to SICAD II would be probably a movement in the rate of the SICAD I at which we would continue reporting. Rating agencies are already making similar adjustments in these.

In their liquidity ratios they exclude the Venezuelan cash from liquidity as we do in our presentation of our liquidity position that they 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 increased 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, an improvement in margins ex-Venezuela, and also to take into account these market concern, we decided at the beginning of the year to set our guidance ratios excluding Venezuela so that impact would not be sort of be flattering our numbers.

We are not hiding from these exposure to Venezuela, we are managing it. We are trying to invest that cash in the way that would allows us to preserve the value and this is it now..

If I may Luis complementing Ángel on Venezuela, we have also decided from on 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 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 kind of repatriated and therefore is not accountable for debt reduction purpose at the Group level to transfer that into a CapEx deployment, an accelerated CapEx deployment in Venezuela, that is also helping us to foster the operational performance of the unit.

So overall, growing 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, Luis. Next question please..

[Operator Instructions]. We will now take our next question from James Ratzer, New Street Research. Please go ahead. Your line is open..

Yes. Good afternoon. Thank you very much indeed. First question I had is just regarding your post-event net debt, which you quoted at €44.9 billion. I was wondering if you could let us know how you are 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 €43 billion net debt target? And then the second question I had was regarding O2 UK.

This is the first quarter so its 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..

Hi, 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 this we have been consistent across the last few quarter's presentation just including M&A transactions. So because we thought that the €41.2 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 the 1st of October.

So here you only have the impact 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 that is one of the blocks which is spectrum accrued, which up to September have been quite low figure this year compared to the previous year.

But in the fourth quarter, as you rightly pointed out, Brazil and Argentina spectrum is going to be a very significant component of the free cash flow calculation. With respect to the high rate, is 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 potential issuance.

But I agree with you that in order to get to the €43 billion target we will need in addition to free cash flow, given that in the fourth quarter we have spectrum and we have 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 hybrid.

We don't need to necessarily. We may -- necessarily to issue a hybrid we may do it in a combination of other measures..

With regards to your question on the UK or the UK OIBDA margin and potential impact of non-recurring things and Refresh, let me state that we for the fourth quarter for example we expect similarity in margin performance versus previous quarter excluding the positive non-recurrence events that we have had mostly related to the disposal of the fixed business assets available.

And this is €34 million net impact in the third quarter of this year and also remind that we have a €10 million impact in the fourth quarter of the previous year and this is the only the major one-off that we have.

In terms of Refresh, and unwinding effects of Refresh, and the accounting impacts we have seen that the positive impact on the stabilization of top-line in terms of revenue will be offset by the unwinding of Refresh accounting and 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 €34 million of the one-off..

Great. Thanks very much..

Thank you, James. Next question please..

We will now take our next question form Fernando Cordero from Santander. Please go ahead. Your line is open..

Hello, good afternoon. 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?.

Thanks for your questions. I think your question on potential OpEx coming from central offices closure well its totally true that the fiber network requires less central offices and therefore we should expect as we deploy fiber to have savings coming from the elimination of those stations.

And therefore also less causing energy call centers and potential service failure attention. But so far we have just closed two small central offices. We have no unbundling local loop players, one in Barcelona and another one in the surroundings of Madrid. For 2015, we expect to close 152 additional central offices.

But it is also true that it is too soon to this slow 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 unbundling local loop players in each central office before being allowed to close the station.

So yet we foresee that in the next three years, three to five years we'll have significant savings coming from that effort.

You should not expect that majorly impact in 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 namely of the situation of the leader on that market Deutsche Telekom, which has signaled that they have they really do offer some discounts on the potential quadruple pay offers but it is also true that the level of ARPU is already high and discounts are limited.

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

So we have already stated that we want to become a rationale player that we want to be a rationale player in the leader in terms of customers in the German market.

It is also true that if the market was to become more convergent we are technologically hedge, thanks to the agreement that we have that would reach with the Deutsche Telekom when we sold to them our wireline business and that agreement includes technological evolution and therefore if the market wants to move from DSL to fiber we will also have access to the 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 wants to move more aggressively, we have a hedge from the indirect access that we have signed through our contract with Deutsche Telekom..

Thanks..

Thank you, Fernando. Next question please..

We will now take our next question from Justin Funnell, Credit Suisse. Please go ahead. Your line is open..

Thank you. 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 the two scenarios which seem to be either TIM Brazil merging with Oi, or the famous break-up bid for TIM Brazil; 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 it should be preferable to the breakup scenario and you're breaking up in Brazil.

Secondly in Spain, we've seen a sort of facing over the last two or three years when Fusion was first launched you were going to see it turnaround in OIBDA before revenues turned around very much a cost cutting story.

And then during last year and into the first half of this year there was a sort of a ramp again in the marketing costs to turn around the top-line, just wondering where you are in that facing now that obviously we're seeing reduction of competition, is there now a scope for the margins just to really start moving up again and potentially even outperforming the revenue trend in Spain? Thank you..

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

In -- when we finally close GVT taking into account then the decision to take the Telecom Italia shares and the mandatory exchangeable that we should, we will stop being shareholders in Telecom Italia and 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 consolation in Brazil.

It's very difficult to see through all the noise because there are lots of moving parts and it's difficult to access 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 we described.

We think that in such a big market with such huge investment set or relevant investments that we needed going forward and we are very much progressing our 4G compared to our competitors but some of them still need to be there. Synergies of consideration could be very important and could create lots of value to transaction was property structured.

But as of now we are very focused on GVT, closing GVT on executing and delivering on the synergies we have committed to the 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 the market consolidation and in certain scenarios we would be active but if there are scenarios where we are less active and we also benefit so be it..

Taking your question on the OIBDA margin in Spain and the fine working that on the Fusion launch 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 and I know the 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 get on a significant churn reduction because we were exporting the most valuable customers to the portability market and we were bleeding for portability with significant commercial efforts to try to retain or to try capture any customers with lower ARPU.

Once we did that we have our first impact on OIBDA and the first impact on OIBDA was thanks to the savings that we were generating and at the same time while we were launching Fusion will still decline in revenues.

Mid last year or the beginning even of this year, we realized that OIBDA margin were 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, margins in Spain were in the very high 30s and in the very low 40s. Margins went up were 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 long series of quarters.

And that is therefore is being pressure on the side that we're 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's why we have been investing part of the margin; and second, and also importantly the ARPU, and that's why stabilizing the pure mobile and also the Fusion ARPU were 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 for 2015 it's going to be depending on the effort that we're going to be doing in content.

And therefore at the end -- at the last conference call results of the fourth quarter of 2014 we will give you more guidance of what would be the OIBDA margins in Spain. So this is a little bit 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 a 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..

We will now take our next question from Jerry Dellis from Jefferies. Please go ahead. Your line is open..

Yes, good afternoon. Thank you for taking my questions. The first one is on the UK. Again, to the backdrop of sort 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, sort of 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 sort of limit the inflationary impact of those rising content costs? Thank you..

Regarding the UK, as José María 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 commercial market as we perceive it today. And José María 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..

I'm taking your question of what else could we do in Spain to try to mitigate the potential impact of the content strategy or other impacts. Let me step back a little bit before and say that the impact is 3% increase in OpEx ratio is mainly coming from several factors.

Firstly, the contents also the impact on the termination rates and also asset sales that have become very practical and then the pension fund that would have a one-year agreed with the unions not to contribute to the pension fund and that we have to take into contribution this year.

So part of that content on pension fund is there to stay content depending on the intensity that we're going to be applying and is going to be depending on the kind of agreement that we're going to be able to close on that one and that's why I would like to update you on that site at the fourth quarter conference call.

The effort that we're doing to try to absorb part of that internally are coming from basically two major funds. First, is insourcing as we have been able to eliminate significant amount of complexity by cutting down reference of prices by switching off applications by also virtualizing servers and doing a much more efficient network deployment.

We are now able to observe to insource part of the activity and therefore to reduce the weight of outsourcing cost 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 or direct namely or 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 kind of profile of distribution, mainly on the stores.

And we are aiming to have a 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 lesser stores but this plays in a different manner and that's why we think that significant savings namely on the commercial front can come from a different approach to the distribution channel.

So the answer is yes, we think we have still room to go in cost structure in Spain that we aim to absorb significant portion of the different cost impact 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..

We will now take our next question from Mandeep Singh from Redburn. Please go ahead. Your line is open..

Hi. 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 €700 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 sort of underlying free cash flow trends we can expect, once you run out of room on working capital improvement? Thank you..

Hi, 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 or for the full-year, now that you have all the figure for the third quarter, it should be as follows. Regarding OIBDA and CapEx, we are reiterating our guidance and you can make our assumptions on where we're going to be there.

OIBDA is already growing and this growth -- organically and this growth has been accelerating in the third quarter. The drag that we've 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 the 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 Čechy and Ireland from our perimeter.

Going forward is 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're seeing negatively affecting are 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 will be seen across the following quarters. Working capital, still as of the end of September was cash consumption. It was €773 million, better than last year. The cash consumption for the full part of the year we're expecting positive contribution to cash flow for working capital, higher than the one we had last year.

Just to remind you, last year it was around €700 million positive cash contribution for working capital. We're 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 a 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 our 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 -- we don't have for instance the 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..

So just specifically I appreciate you file that you've not engaged any advisors.

But have you been approached by BTG, do they said they have approached third -party's?.

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

Okay. Thank you..

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

We will not take the final question from Paul Marsch, Berenberg. Please go ahead. Your line is open..

Thank you very much. And may be 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? And then finally, may be 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 are already kind of Fusion eye so to say and which means that considering that that part that Fusion is showing for the first -- for the second quarter on a row the slight ARPU increase means that at least 50% of the 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 stabilizing residential revenues is essential if we want to stabilize Spanish revenues are residential, is more than 50% or 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 Ángel for the scrip.

On the mobile data in Spain, I don't think that's 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 this case of the Spanish revenues, I would strongly suggest to focus on Fusion ARPU, total amount of customer's mobile contract because this is where it's going to be point into towards revenue stabilization in Spain.

Data traffic in Spain is literally booming, which means that we are not seeing in Spain a different pattern or behavior in any other markets. So in my opinion, it's just the way to allocate 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 €0.75 per share. This is composed of two parts. The interim, which is €0.35, 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 ex-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 final dividend €0.40 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 insights 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..