Ezequiel Nieto - Head of IR Fernandez Valbuena - CFO Antonio Viana - Head of Telefonica, Espana Julio Linares - MD of Coordination, Business Development and Synergies Jose Maria Alvarez-Pallete - CEO of Telefonica, Latin America Peter Erskine - Head of Telefonica

Ricardo Seara - BPI David Wright - J.P. Morgan Christian Kern - Lehman Brothers Mathieu Robilliard - Exane BNP Paribas Will Milner - Arete Research John Pearce - Dresdner Kleinwort Credit Research Robert Grindle - Dresdner Kleinwort Terence Sinclair - Citigroup Javier Borrachero - ING Luis Prota - Morgan Stanley Jonathan Dann - Bear Stearns Laurent Sierra - Redburn

Good afternoon, ladies and gentlemen and welcome to the Telefónica Second Quarter 2007 Results Conference Call. At this time, all participants are in a listen-only mode, until we conduct a question-and-answer session and instructions will be given at that time. (Operator Instruction). Just to reminder you, this conference call is being recorded. I would now like to hand it over to the Chairperson, Mr. Ezequiel Nieto, Head of Investor Relations. Please begin your meeting, sir and I will be standing by.

Thank you. Good afternoon, ladies and gentlemen. Welcome to Telefónica's conference call to discuss 2007 second quarter and year results. Before proceeding, let me mention that this document contains financial information and data reported under IFRS. The financial information contained in this document has been prepared under International Financial Reporting Standards. This financial information is not updated and therefore is subject to potential future modifications. This presentation may contain announcements that constitute forward-looking statements, which are not warrantees of future performance and involve risks and uncertainties. Actual 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 do not have a copy of our relevant press release and the slides, please contact Telefónica Investor Relations' team in Madrid by dialing 34-91-584-4713. Now, let me turn the call over to our CFO, Mr. Fernandez Valbuena, who will be leading this conference call.

Good afternoon, ladies and gentlemen, and thank you for attending Telefónica's conference call to discuss the first half of '07 financial results. During the Q&A you will have the opportunity to ask questions directly to our executive committee members. I have today here with me Julio Linares, our General Manager for Coordination, Business Development and Synergies; Jose Maria Alvarez-Pallete, Head of Telefónica, Latin America; Antonio Viana, Head of Telefónica, España; and Peter Erskine, Head of Telefónica all through Europe, all connected by the conference call. Our 2007 first half numbers show again our distinctive growth. Top line growth just exceeded 10.6% annually, pushing consolidated revenues to top EUR 27.8 billion in this first half. In organic terms, total sales went up by over 7% year-on-year. January to June operating income before D&A totaled just over EUR 11.3 billion or close to 22% up year-on-year. Even more impressive is the organic growth in operating income before D&A which stood at almost 7% year-on-year, accelerating more than 1 percentage point versus the first quarter of '07, thus showing the benefits of scale and increased efficiency. Operating income at the end of June exceeded the EUR 6.5 billion mark. This is equivalent to a general increase of 45% in nominal terms, which turned into almost 22% growth, which was pure organic and excludes Airwave capital gain. Operating cash flow went up by almost 30% year-on-year to surpass EUR 8 billion for the January to June period. Operating cash flow organic growth was just over 10% this first semester. Forex reduced revenues during this first half by only 1.4 percentage points, improving the trend versus the negative 2.6 percentage points of the first quarter. Let's turn to slide number 4 for the bottom-line review. All the operating income growth flowed directly into a very solid net income increase up by more than 66.4%. As such, net income for the first half amounted to more than EUR 3.8 billion. In slide number 5, we describe our strong progress in our most demanding commitment to double EPS by 2009, versus the EUR 0.913 per share of 2005. First half EPS grew by more than 63% to reach almost EUR 0.8 per share, and underlying EPS increased by 17.2% -- that is after taking out capital gains and losses of each share. Airwave is the most significant in other non-recurrent items, like differences in headcount provisions in Spain and Telefónica O2 Europe and the European Union EUR 152 million fine. The combination of 2006 and first half of 2007 EPS growth performance is ahead of our target if we compare it to CAGR distribution of the full-year period both at the reported and the underlying EPS levels. Our “O” balance improved growth profile by regions which is key for -- where some performance is best outlined in slide number 6. First, solid organic growth trends are taking place simultaneously in our three business lines, boosted by our successful customer expansion. Our client base grew more than 11% to total 213 million accesses driven by Broadband, Pay-TV and Mobile expansion, with a significant contribution from our double and triple-play commercial offerings across all markets. This explains the remarkable 7.4% organic revenue growth well ahead of our peers. Second, and from a regional perspective, we continued progressing well into the diversification of our asset base. European operations including both Spain and Gibraltar represented more than 60% of the gross sales and continue to grow in mid single-digit territory, servicing increasingly mature and competitive markets. Latin America emerges for another quarter as the key differentiating factor of our performance as the region's revenues grew almost by 13% in organic terms to account for 60% of Telefónica's top-line expansion. Turning to profitability in slide number 7, we show that the trend in annual growth in operating costs continues to decrease despite stronger commercial activity to stand just below this 7% level in the first half. Underlying margins stood at 35.8% at the end of June, almost flat against last year's figure. In nominal terms, margins for our key divisions range from the 25.5% posted by Telefónica, which is affected by increasing competition in mobile and the launch of operations in Slovakia, to the very solid 46.3% achieved in Spain excelling both in fixed and mobile. This very positive evolution of both financial and operating metrics during this first half of the year is behind our 2007 guidance upgrade for the most relevant financial metrics of the Telefónica Group. This means that first we will upgrade our 2007 revenue guidance from the former range of 6 to 9% to a more ambitious 8 to 10% growth target. Secondly, we also upgrade 2007 OIBDA guidance from the initial 8 to 11% to a new range of 10 to 13%. Consequently, operating income guidance moves up from 14 to 20% into the 19 to 25% growth range and finally, we will adjust CapEx from lower than EUR 7.8 billion to lower than EUR 8.1 billion. Just to help you reconcile from our guidance into reported metrics and the information we have just released, please turn to slide number 9; we show on this page -- since it’s an easy guide to calculate reported revenues in OIBDA from the guidance. Let me now start with business line reviews with Telefónica España on slide number 10. First quarter trends on both wireline and wireless have been reinforced during the second quarter in Spain and results showed again our sustained growth profile. Revenues grew by 5.4% to exceed EUR 10 billion, backed by a strong customer growth of 5.5% as a result of our successful commercial drive. OIBDA increased in excess of 10% to total EUR 4.7 billion and excluding a specific effect such as the Redundancy Program, the EU fine, and the Real Estate plan among others, underlying OIBDA growth stayed at a robust 6.3%. The OIBDA margin, despite high commercial activity, improved 2 percentage points year-on-year to reach 46.3%. Intense commercial activity by the Telefónica Spanish wireline business is paying off in the three main business areas, as you can see on slide number 11. In traditional access, line losses have been shrinking down to 14,000 in the second quarter, or less than 44,000 over the January through June period, posting the best six-month performance since the year 2001. Retail broadband connections grew by over 50%, adding almost half a million new accesses in the six months to June. Our broadband market share remained at the 56% mark although our quarterly result was even better with 60% of net adds captured during that period. Finally in the Pay TV market, we have also gained most of the market net adds listing our total share to close to 4%. Net adds during the second quarter were over 80% year-on-year and our Pay TV client base reached 450,000. This outstanding operational delivery flows directly into financials as you can see in the following slide. Topline performance has improved even more in the second quarter, with revenues growing 4% to 43 estimated growth in the first six months of the year. Broadband and data and IT remained as major growth contributors from the improved contribution of traditional access in voice business in the second quarter, from 2.8% revenue decrease in the first quarter to 2% in the January through June period, which also contributed to the positive outcome. Among the main growth drivers, just let me point out the most relevant. The expansion of the broadband customer base and the increasing contribution of bundles duo's and trio's; the rise of monthly fee and the increase from national profit pricing; and the lower line losses in the higher international long distance traffic. Moving now to the profitability of the wireline business in slide number 13, it shows that the almost 1 percentage point increase in the OIBDA margin excluding specific effects mainly in the headcount reduction provision shows the company's firm progress and efficiency. Margin growth is the result of underlying OIBDA expansion of almost 2 percentage points ahead of revenues. OIBDA improved its performance in the second quarter from the 4.7% mark in the first three months of the year. As a result, underlying OIBDA increased an impressive 5.6% in the general fee. Let's continue with slide 14 with our mobile operations in Spain, which remain value growth. During the second quarter of '07, a new set of innovative tariffs were launched to reinforce our exceedingly long-term as well as sustaining high level of commercial activities, which reached over 1.4 million gross adds in the second quarter of '07. We added close to 289,000 new customers during the period ahead of our main competitor, and our total customer base grew by 7% year-on-year. Churn remained at second quarter of '06 level, causing a slight decline versus the first quarter of 2007, with the economic churn at a significantly lower mark. Total number profitability figures suffered from strong competition, although we kept a good and positive contribution in the contract segment, which remains our ultimate target. Contract base growth went up by more than 13% forced by the stronger growth adds than last year. Please review on slide 15 the ARPU revolution, which remains almost flat in the second quarter year-on-year, but with customer revenues growing about 9%. Performance of outgoing ARPU was positive during this quarter, posting an over 1% increase backed by both voice and data usage. Outgoing voice ARPU changed trend from this no-decline posted in the first quarter of '07, nearly 0.4% plus 0.2% increase during this second quarter. To be even more relevant, business strong outgoing data ARPU growth that accelerated close to 9% on the back of the new innovative pricing schemes introduced last April. Let me mention as an example, the new tariff launched for occasional users, 10 megabytes download per day for one year. Total data revenue growth accelerated from the 14% positive in the first quarter of '07 to 17% with reinforced growth rates in all the categories. Non person-to-person SMS revenues are also performing well pushed by the connectivity revenues. Together, content and connectivity represented 47% of total data revenues, up 8 percentage points versus June '06. Incoming ARPU declined by 11.5%, impacted by the second termination rate cuts in the last 12 months, leading to a cumulative tariff decrease of 13.9%. Let me continue with financial review for our mobile operation in Spain, on slide number 16. Service revenues in the first semester of '07 increased by a healthy 6% over 2006 on a comparable basis, and retains by the 8.1% advance in customer revenue resulting from a sound customer base growth and the outgoing ARPU increase. Interconnection revenues went back to their usual declining trend up to the second termination rate cuts in the last 12 months took place last April. Roaming-in revenues impacted by highly competitive wholesale prices declined by almost 16% on year-on-year accumulative basis. In terms of profitability, OIBDA grew by 7% in the first half of this year, posting a healthy 44.5% margin, a slight decrease of just 0.2% decline versus the first half of ’06, despite the higher commercial activity involving concerts. To end up with Telefónica finance review, let me share with you in slide number 17 the upgraded guidance of the Spanish operations for year 2007 after we moved our remarkable first half performance. For Telefónica's financial plan when you guys had to trend revenue guidance its more than double to then 3.5 to 4.5% range, OIBDA will now -- we will grow in a 9 to 11% range, a full point ahead of initial expectations, and CapEx remains unchanged. Wireline business revenues we will grow in the 2.5% to 3.5% range and OIBDA in the 13.5 to 16% range. And wireless business – wireless business service revenues and OIBDA will not grow into 4 to 5% range, and we will recall this guidance is not considering the EUR 152 million fine from the European Union, which is fully provisioned in the second quarter. For the review of our Latin American properties, please turn to slide number 18. During the second quarter of ‘07, Broadband and Pay-TV continued growing, strongly reinforced by the extension of our double and triple-play portfolios in most of the countries where we operate. Our Mobile operations took their strong momentum, even accelerating their customer growth rate from 15.6% in March ‘07 to almost 19% in June ‘07. Our strong operating trends are well reflected in the consolidated financials of the group in Latin America. The top line grew by 10.6% in euro terms, 2.1 percentage points ahead of March's growth trend, a growth rate that stood close to 13% in terms of operating income before D&A and the service sold to margin expanded by 0.7 percentage points to pass the 35% mark. Revenues and OIBDA performance across the different countries are shown on slide 19. At the revenue level, all countries posted double-digit growth with the exception of Brazil and Ecuador, although both countries improved their performance versus the first quarter. This top-line growth coupled with efficiencies emerging from the integrated and regional management are behind the OIBDA growth posted by all countries with the exception of Ecuador. Let me now continue with Broadband and Pay TV development on slide 20. During the second quarter, Broadband net adds grew ahead of first quarter, adding close to 355,000 new connections in the second quarter, up 23% year-on-year. Total retail broadband connections reached 4.4 million, a 37% increase on an annual base. Growth in Pay-TV was even higher this second quarter. Net adds advanced by over 55% topping the 800,000 mark at the end of June, which is four times the number of accesses added in the second period of ‘06. Pay-TV is helping us maintain our market shares and increase ARPU in Chile, Peru and Colombia, thanks to the fresh group of play offers. Triple-play offers will be launched soon in Brazil, as we have recently obtained the final approval for the TVA acquisition. Let's now comment on our Mobile operations in the region starting with Brazil on slide number 21. Vivo's second quarter '07 results reflected the management measures implemented to turn around the operation and to look for profitable growth. Once the GSM network was launched at the beginning of the year, commercial activity was reintegrated along this second quarter obtained 65% of the gross adds in GSM. Business has been benefiting from the large churn reduction achieved during the semester, forcing a 23% gross adds increase to more than double net adds versus the first semester of '06. As a result we will add 30.2 million customers at the end of June, up 6% against June '06. Also stopping the market share erosion that has been suffered in the past. Pricing points introduced in recent quarters, our promoted usage with the almost 17% annual increase in minute of use, acting as a driver for the 11% growth in our fee excluding B&K. As a consequence service revenues increased by 3.5% on an incomparable basis. Revenue profit coupled with strict control measures resulted in long-term growth of 36% on the like-for-like basis, expanding margins by 7 percentage points. Let me continue with Mexican operations in slide number 22. Operating results were even stronger than in the last quarter. During the first half of 2007 we managed to increase gross adds by close to 60% and to surpass 3.3 million. Churn continued its good turn and failed during the second quarter 0.1 percentage points versus a first quarter another 1 percentage points on a yearly basis to reach 2.8% which is better than the market leader. As a result of the strong commercial activity and churn reduction, net additions increased more than threefold adding almost 1.7 million customers during the first semester. On a quarterly basis we gained over 900,000 new customers, a record 40% market share of net adds. This strong commercial performance led to a customer growth of 12 to 50%. Turning to key financial metrics, service revenues accelerated to 70% on a cumulative basis, forced by outgoing service revenues up at 91% as minutes of use more than doubled versus the second quarter '06 and ARPU grew by 22%. A steady strong commercial activity OIBDA passed the 16 million mark in the first semester benefiting from the increased scale gained with more than 10.2 million customers now. Now slide number 23; we will review all the other mobile operations. In the first half, Argentina, Venezuela, Central America and Uruguay all posted a strong customer growth fully accompanied by outgoing service revenue growth in margin expansion. Peru achieved traditional growth in customers, almost doubling the net adds of the second quarter of '06 forced by a very intense commercial activity in the period. Despite a strong revenue performance, outgoing service revenues outpaced customer growth by over 30 percentage points OIBDA margin contracted and stood at 25%. Team Colombia performed well during the quarter with outgoing service revenue growth accelerated by 4 percentage points versus the first quarter in growing ahead of customer growth in margin, which margins expanding slightly at the same time. Team Ecuador is still working on its turnaround and during this quarter it managed to improve its numbers. The company has launched a new set of refreshed tariffs to turn around its financials. Team Chile, a most mature market in the region to get with Argentina, both customer base and our key goal grew at 7% and 11% respectively, and therefore service revenues grew at a 20% pace. Despite higher commercial activity and retention efforts, margins expanded by almost 4 percentage points. To finish with Telefónica Latam review, revenue goals for the guidance upgrade of this business unit are in slide number 24. Both the revenues and OIBDA we have upgraded by 2 percentage points to bottom range previously provided causing the new revenue range between 13% and 16%. Our OIBDA will grow between 14% and 17%. Let's turn over to Europe in slide number 25. Operating revenues went up by 21.3% year-on-year in the first half to surpass the EUR 7 billion mark. The UK is the main growth engine driven by simultaneous customer and ARPU growth with a positive contribution from both online in the Czech Republic. OIBDA reached just over EUR 1.3 billion excluding the gain from the disposal of Airwave and including restructuring charges last year related to O2 Germany. These charges, along with increased retention activities in mature markets in the cost of the smaller operation, meant OIBDA margin was capped by close to 5 percentage points on an annual basis. In Germany, we are proactively facing competition in price and pressures, revamping the operations with the new management team and new tariffs. From Eastern Europe, broadband plus IPTV revenues are offsetting the decline in distributional based businesses in the Czech Republic and mobile growth remained healthy for postpaid. And the launch of operations in Slovakia has shown solid progress, servicing more than 450,000 clients at the end of June. Please turn to slide number 26 for the summary of O2 UK's performance. Both customer and ARPU growth were once again behind the healthy 10.4% rise in total revenues in the first half in an increasingly mature marketplace. O2 UK ended June leaving the market with 17.8 million mobile subscribers, up 5.8% on an annual basis. Purchase on time retention and contract customer growth has been the forefront of the commercial strategy, pushing the postpaid customer base grow by 8.5%. Contract now accounts for 55.8% of the total base. While the ARPU went up by 2.8% in the second quarter, reflecting a success of the customer value proposition with positive evolution of both usage and data services growing by 11.7% and 8.6% respectively. January to June OIBDA margin stood at 24.8%, recovering from the 24% flat first quarter level. Underlying OIBDA margin stood in the EUR 14.8 million, the restructuring cost was 25.2% in the first half. Slide number 27 represent O2 Germany results. From an operating standpoint, O2 Germany ended June with almost 11.6 million customers, up 11.8% versus June 06. The quarter shows some improvements versus the first quarter with 374,000 in net adds versus 159,000. Client growth was biased towards the pre-pay segment which posted a 12.6% annual increase. This weaker client mix coupled with price and pressure and a 20% termination rate cut lets to a 13.5% annual reduction in ARPU this second quarter. The new S,M,L tariffs continued to progress well with more than 1 million customers already signed up delivering higher minutes of use and ARPU. OIBDA margin stood at 15.2% during the first half impacted by the restructuring charge of EUR 96.5 million. Excluding this charge, OIBDA margin was 20.9%. Reduce in headcount was around 700, mainly from the central and support functions, which really enabled the business to be more flexible and position it to better attract future growth opportunities aided by the new management. We have also recently launched new postpaid tariffs, and re-launched our DSL product with further new propositions to come in the second half. Please move down to slide number 28 to complete a review of our European operations with the Czech Republic. Local currency revenues grew by 3.1% year-on-year, while OIBDA margin was broadly flat after excluding Slovakia's start-up costs. The business has gained more than 450,000 customers in just four months of operation. At Wireline, revenues have reached some point to show a positive performance the first time since Telefónica took the company over. Line loss improved its performance, while retail broadband connections increased by just about 41%, helped by the recently introduced bundles including double and triple-play. Retail broadband sales went up by more than 48%. On the Wireless side, revenues accelerated given the second quarter with contract customers up by more than 20% with positive evolution on both ARPU and minutes of use up 3.4 and 17% respectively. Please turn now to slide 29, which represents Telefónica O2 Europe's guidance. First of all, the most important, we reiterate all our growth guidance figures at Telefónica O2 Europe level. We also reiterate all of our targets for both O2 UK and Telefónica O2 Czech Republic. Due to the challenging conditions in the German mobile market, revenue growth is still expected to be in the 7 to 10% range, with positive service revenue growth year-on-year expected by the end of this year. To better position the business for the future additional investment in our growth plans will be brought forward into the second half of 2007, and consequently OIBDA growth is now expected to be in the range of 21% to 25%. Just before turning to financial expenses and debt, please move to slide 30 for an update on Group synergies. We have generated close to EUR 655 million of synergies during this first half of 2007, a figure which is totally inline with the EUR 1.25 billion we have committed for the whole fiscal year. Let me remind you that close to half of our 2007 target will come from convergence & integration, mainly related to the technology, operations and systems. The benefits of our enhanced scale, best practices and management of resources will be responsible for 30% of synergies while regionalization will account for 23% of expected economies. Now, let me briefly touch upon financial risk management in the first half of the year. We have focused on reducing cost of debt, adjusting the foreign exchange hedges and strengthening our debt profile. We have succeeded in decreasing our cost of debt in the semester to 5.45% of the total net debt plus commitments. The cost is more than 20 basis points below the first quarter level while exceeded 5.68% due to mark-to-market savings in the present value of the commitments as euro long-term rates have gone up. So, our first half of 2007 interest expense was close to EUR 1.4 billion. On the foreign exchange front, following the Airwave divestment we reduced accordingly the amount of sterling denominated debt. We also slightly reduced the amount of US dollar liabilities by swapping a portion into Argentinean pesos just before the recent foreign exchange move. And in the first half of the year Telefónica issued more than EUR 4 billion worth of bonds to fully guaranteed vehicles at short plus 41 basis points with 6.4 years average life to repaying debt with shorter maturity. This debt, coupled with net debt reduction with cost from operations, has led to an increase in the average maturity of our debt to reach 6.7 years. Slide number 32 will show that in the first half of the year both debt reduction and shareholder remuneration approached EUR 3 billion. This has been possible thanks to cash flow generation exceeding EUR 3.4 million into the EUR 2.8 billion net divestment coming mainly from Airwave sale. So, we are delivering in our financial commitments, first net financial debt moved below EUR 50 billion to reach 2.45 times annualized old debt excluding the Airwave sale result, while debt plus commitments stood about EUR 52 billion or 2.61 times annualized old debt, which is very close to the 2.5 limit targeted after the '02 acquisition. Second, in the date for last official filings -- last 23rd of July, we had already executed more than 92% of the amount of our buyback program fund for 2007, slightly below the EUR 1.7 billion mark. And finally, we have been respectful of our net acquisition and net divestments coming significantly ahead of investments. To sum up, first once again we delivered growth and returns well ahead of our peers in second quarter of '07, will come down at 12th consecutive quarter with simultaneous revenues, OIBDA, operating income and net income growth. Second, we are retaining benchmark organic growths. And third, we are benefiting from diversification and we are successfully boosting our client base. Before we have to get our outlook now with our guidance upgrade. Thank you very much for your attention and now we are ready to take your first question.

(Operator Instructions). Our first question comes from the line of Ricardo Seara. Please go ahead with your question announcing your company and location. Ricardo Seara - BPI: Yes, hi good afternoon. Ricardo Seara from BPI. I got a couple questions on the Spanish operations. The first one is, what is your expected impact, if any, from the recent agreement announced with Sogecable? Then, if given that the relatively low level of line losses in the first half 4000, if you expect a linear evolution for the full year. And then regarding mobiles, I would like to know if you have any indication of the market share of broadband internet through mobiles, and what you would be relative position of Telefónica on this market segment? Thank you.

Hello, this is Antonio Viana. Can you hear me Ricardo? Ricardo Seara - BPI: Yes.

Great. So, let me touch up on three issues that we mentioned with the Spain. The first one, or let me cover the last one. On data or mobiles, we do not have more data than the one that we are publishing in terms of market share, what I can tell is that what we follow is kind of approach, what is our share in terms of asset generating devices, it can be either email devices like radars or that can be PC and say that the cards for the PC in both of them we have a market share that is clearly above our average market share not only due to the pressures we are putting strongly on that front. But also due to the fact that we have a higher than average market share on [SOHOs], on professionals and on corporate market. On the low line losses, obviously, this has been posted by specific campaigns that we have addressed. We are optimistic on the way it's progressing, also due to the evolution of the Spanish economy. But we do not know what will happen for the rest of the year. So, we expect this number to be greatly ahead of our competitors in other European markets. On the expected impact of [the material in] Sogecable, let me just start by stretching the fact that part of the agreement to join commercialization of Trio Plus, which is a mix of ADSL plus [con] Ofertas, will only be enforced after November the 30th perhaps commence an impact. What this means for us is that we will be able to offer ADSL to a broader range of customers that today may be customers of con Ofertas, mainly in areas where, for us, we have not yet got any money. This in not new that we will advocate from the growth in terms of the Department of [Marketing], but it means that we can take advantage of this product for retaining most of its customers and providing them, from now on, immediately an adequate service. As marketing will keep on growing, obviously, we will keep on also deploying our own service for most of these customers. On the contents, obviously that by assuming caps with Sogecable, that will also be helpful for us, in the extent of acquiring companies jointly. We will multiply in a better position for content acquisition related to the major content providers. Thank you. Ricardo Seara - BPI: Sorry, Antonio.

Next question, please? Ricardo Seara - BPI: Sorry, just to follow-up. Regarding workforce reduction provision that you did 94 million in Q2 first half to say; do you have an estimate for the full year? Thank you.

We maintained the same target that we have. If you recall, the final year was a lengthy, more than three year program that was in more than, roughly 15,000 people. We are now north of 13,000. We maintain our objective of trying to finalize the program this year. That means that for, the whole of the year; we will need to reach roughly 2,200 for this year. As you have seen, we've already accounted for 360. Obviously, I think the decline stretch of a long program, there is more resilient new implementation on the program. But for the time being, we maintained the same objective, and the guidance has been provided according to that objective. Ricardo Seara - BPI: Okay. Thank you.

Okay. Next question, please.

Our next question comes from the line of David Wright. Please go ahead with your question, announcing your company and location. David Wright - J.P. Morgan: Yeah. It's David Wright at JP Morgan in London. Just on Mexico, just I came to understand what is driving the momentum, as that is a very strong momentum. The ARPU trends suggest it's not so much the pricing. The margins look to be holding up on a progressive basis. I am just wondering, is this to some extent American and VIVO perhaps opening the door a little to you guys? They are obviously under a lot of regulatory pressure ,or is this just something genuinely new that you are doing? And then on to Brazil to VIVO, I think previously you had indicated within your plan to acquire the other half of VIVO you are frustrated with the operational performance and management. I wonder now with the strong momentum, the new momentum, whether you are willing to wait a little more with that acquisition? Or, alternatively does it, I think you want to move faster given that I would imagine pretty well 99% external valuations of VIVO would have gone upwards over the last two to three months? Thank you. Jose Maria Alvarez-Pallete: David, thanks for the question. It was Maria Alvarez speaking. On the Mexican issue, we always said for a long while that Mexico will be a rather working than running. So that we have just pursuing the [airport] that were started years ago to restructure their operations first, very sound commercial distribution effort in terms of deploying new points of sales, as of improving the quality of net adds and improving quality of the distribution network per se. Now, I suppose we've been able to set the new systems that allow us to get more knowledge of the client base every year and to track ARPUs and to track trend and therefore be more able to detect other issues and therefore reducing churn. And third we have been deploying the new network, the new GSM network that have been allowing us to fully deploy our efforts in terms of quality of the network, already very top with, on quality and therefore we are very proud of having a lower churn than our more direct competitor in Mexico. So, on those fronts nothing new, we keep pursuing from the same trend. We have not been deducting any change of behavior from our competitor, nor or have we had any change in the regulatory side. So, we are working exactly with same scheme that we are working in year ago, two years ago, but yes, pursuing or following our dream even more in terms of our commercial and technical effort. And in terms of Brazil, well, we are -- those are two different issues. First of all, on operating standpoint we have always had a very good commercialist distribution network, and the fact is that we have been able to deploy in a very fast track thanks to the joint efforts of Portugal Telecom and Telefónica of the new GSM network deployment. We have been able to do that in a record time and at the same time at a competitive cost and therefore the most significant competitive disadvantage that we used to have in the Brazil market was the handset, the price difference in terms of handset has been eroded. As a result, we were able to be very efficient, already intense on the commercial side. During the months of May and June, we have able to reverse a trend in terms of loss of market share. There is nothing apart from that. And the other issue, well, we keep our channels of conversation open with Portugal Telecom, and we will keep you posted on any advance on that front. David Wright - J.P. Morgan: Okay. And just finally comment from Bill & Keep in Mexico--your view on that please? Jose Maria Alvarez-Pallete: Well, we would have to improve the penetration on the Mexican market, and therefore it cross their penetration and we have capacity to accelerate that… David Wright - J.P. Morgan: Yeah. Jose Maria Alvarez-Pallete: We are positive on that front. David Wright - J.P. Morgan: Okay. Thanks very much.

Thank you. Next question, please?

Our next question comes from the line of Christian Kern. Please go ahead with your question and announcing your company and location. Christian Kern - Lehman Brothers: Hello, this is Christian Kern from Lehman in London. Two or three questions if I may. The first one would be on the competition in the Spanish mobile market. Can you just give us a little bit of feeling what you see from your [Eagle], what you are seeing from Vodafone Spain. Vodafone indicated that the market in terms of the -- on the competitive front is increasing. Second point would be on the fixed line operations, you've seen recently decision on CMT increase in the access beyond '09 and results also you find, just any color on what the need for the future would be great and finally any update on the TI situation? Thanks.

Christian, this is Antonio Viana, I will answer the first few issues that are related to Spain. On the competition, on the Spanish mobile, clearly our objective remains to drive for, that the most high value. We maintain our strategy in terms of migration of customers from prepaid to postpaid and are being quite aggressive on the contract front. Even below a number portability, our numbers on the contract side are quite positive. We got a great number in terms of share of net adds on the contract side. If you run our numbers versus Vodafone, you see that the gaps increasing that we are gaining more customer in terms of contract on front. So, I'm very happy with that performance on that front. I see clearly other competitors, mainly more aggressive on prepaid. Orange keeps on having a stronger steps to be in terms of handset based on average. That may be only EUR 25 to EUR 30 range per handsets in terms of access as to, and therefore the -- one of the smaller operators like year ago honestly and the impact has been quite limited not only that the main advantage that we have there, mainly us and Vodafone is the fact, as we put a lot of emphasis on the community effect beyond that tariff. So, we could take it our on net tariff that we did well, we would stress basically our strategy and Vodafone also followed us, and also had a very strong strategy in terms of on net tariff that puts the drop in tariff as usual as quite and unattractive tariff. As a consequence, we don't see the small players they gain interaction, I think its kind of too little place sort of story for them here. And therefore also mobile operators, while some of them may have starting to gain some traction in terms of capturing customers, who is back on the marketplace is quite limited. On the fixed line comments that you made in terms of the regulation, all that regulators has announced at this moment was that he would see no increase on the monthly fee for the year of 2009. That does not mean that it is beyond 2009, it means that only for 2009 that will occur. As to remind you that the monthly fee had not been increased though so in the year of 2006, and we had a monthly -- we had an increase of 2% being at 2007 we expect to have an increase in 2008. So, we will analyze the signal of the regulator, but that is specific for the year 2009, so we should extrapolate as we could see on 2009 with that. On the European Union front, the only thing that I can tell you is that obviously we are conservative in terms of accounting. So, we provisioned the full amount of this. We are not saying it, we are providing advanced guarantee for it. We are appealing this to the European court. And we are confident that our arguments will be heard and that we will have a positive result obviously.

This is Erskine. In terms of the Telecom Italia closing that you were asking, we have nothing new to report. You know that this is a complex dealing building multiple regulatory authorities. We have a very secured number of those authorizations. But we are still pending one of the most complicated ones, which is in Brazil. We have no reason to take any complications there other than those of the regulatory authorities, I think, is sensible. Of course by the time, full clearance is given, we will continue to execute as fast as we can. Christian Kern - Lehman Brothers: Okay. Thank you.

Thank you. Next question, please.

Our next question comes from the line of Mathieu Robilliard. Please go ahead with your question announcing your company and your location. Mathieu Robilliard - Exane BNP Paribas: Good afternoon. Mathieu Robilliard, Exane BNP Paribas calling from Paris. Two questions, please. First in terms of the CapEx, you have increased the CapEx guidance for this year, and you have done the same thing last year. I remember some, but to grow your revenue and OIBDA faster than you need to probably put a bit more CapEx and again. My question is, is there beyond that extra growth something more going on and that is should we also expect the CapEx to be probably a bit higher in the following years going to just run ahead, and then we should expect a decline in CapEx? The second question has to do with debts. Two questions actually. Could you just update us on the percentage of your debt that is in fixed rate and the percentage of your debt that is invariable debts, and where there are no swaps? And also, what are the major refinancing events in the next 12 months? Thank you.

Thanks for the question, Mathieu. In terms of CapEx, there's nothing mysterious. We are witnessing an acceleration of the extension of broadband, and IPTV and Internet TV base. So, we were trying to keep pace with that. And we were also expanding significantly the networking capacity in Mexico in order to accommodate the fast growing number of clients and of traffic. So, those are among the very many factors that underlie as modest increase in 2007 CapEx guidance, that we have just provided. We will have the opportunity to tell you in much more detail when we meet at the Investor Presentation in October, when the longer-term range numbers will be given. In terms of the competition of the date, roughly speaking, we got 50% fixed digital scenario, all services taken together. 25% is the floating rate and 25% is what we call range bound. And therefore, it is a culture embedded in using caps and floors, so that we will free live within the bound, but we are fully protected outside of those bonds. We have zero net maturities in the remainder of 2007. So, we contemplated future especially given the current agitated state of the credit markets, peace of mind. Mathieu Robilliard - Exane BNP Paribas: Thank you very much.

Thank you. Next question, please.

Our next question comes from the line of Will Milner. Please go ahead with your question and announcing your company and your location. Will Milner - Arete Research: Thanks. It's Will Milner, Arete Research. Couple of questions on Latin America. You grew EBITDA about 30% in the first half. So, you are also implying a big pick up in margins in the second half to meet in the full year guidance or at least some pick up. On which operations that will you see the biggest pick up in the second half margins? And secondly, I think there are still exchange controls in Venezuela given the sort of increasing importance of our business, do you see any problems going forward of cash repatriation, and how do you sort of mitigate that risk? Thanks.

Yes, thanks for the questions. First, on the margins, Latin America improved the margins is mainly focus on the mobile business, especially taking into account expansion in time base and the fact that toward, especially in Mexico, we have been turning around significantly the company in the last months, in the last quarters, and that has a very significant impact in the global position in terms of margin consolidation. So, margin expansion is basically center on the mobile business, jointly we saw significant growth item and therefore, the scale is providing us with an additional -- most of growth in terms of OIBDA margins expansion. In terms of Venezuela for the time being, if I understand correctly your question, we have not been experiencing significant changes both in the competitive type scenario. It is true that the new owners of Cantera, the government has been launching some social studies that those have very limited, very focused on some segments where we already very competitive. So far the time being we have - we are not experiencing a significant change in the competitive environment in the Venezuela. Will Milner - Arete Research: Thank you.

Next question please?

Our next question comes from the line John Pearce. Please go ahead with your question announcing your company and your location. John Pearce - Dresdner Kleinwort Credit Research: Yes, this is John Pearce from Dresdner Kleinwort Credit Research in London. You've nearly reached the 2.5 times target ratio for your net debt and commitments to OIBDA. What should we expect happen to this ratio going forward? Should we think it will be roughly stable at around 2.5 times or should we expect due to keep on slowly deleveraging? Thanks.

Well, thanks for the question. We first have to meet the target before we can think of what the initiative should be. But remember that this is a simplification or an indicator of our strong commitment, which is to keep a company as close as possible to a BBB+ BAA1 rating anymore as we can. So, the 2.5 times total bp positive bp ratio was a convenient way of expressing that in such end from what we set it. Of course, credit condition and rating conditions may have changed, and we have to update that after we have the regulatory - I am sorry, the rating review. So far, we think we are very well on track to meet that target. And we think we are in a comfortable position and so seem to think the aid agencies which have now both major agencies has rate us now as a stable in the rating outlook. John Pearce - Dresdner Kleinwort Credit Research: Okay. Thank you.

Thank you. Next question please.

Our next question comes from the line of Robert Grindle. Please go ahead with your question announcing your company and your location. Robert Grindle - Dresdner Kleinwort: Yeah, hi there, it's Robert Grindle from Dresdner Kleinwort as well. Just on the UK, what was the impact, if any, on the loss of Hutchison roaming deal in Q2 or is that something that's is coming later on? And then just on the financial charges, you mentioned some marking to market benefit. What were the positive impact from the financial charges in H1? Thanks very much.

Its Peter Erskine. Can you hear me Robert? Robert Grindle - Dresdner Kleinwort: Yes, I can hear you, thanks.

Yeah, the impact the roaming that we were getting from Orange - sorry, from 3 has pretty much gone now. So, any impact is been taken. We didn't ever declare what we got from it, but it's frankly by March of this year any benefit was gone. They switched over to their other supplier. I think the financial charges question wasn't for me, is that right? Robert Grindle - Dresdner Kleinwort: Yeah, that's right. Thanks for that. Jose Maria Alvarez-Pallete: So, I'm sure, Peter could have answered that. Let me try and give my best of that Robert. The mark-to-market thing is related to the present value of our personnel commitments. That we have the redundancy therefore does that ones we've had in the first couple of years, we have to fully charge the account on the net present value of those commitments. Now that net present value is a change in multitude as interest rates have changed and fluctuate, that will higher the interest rates go below our net present value is and that is the bulk of what's recorded in Q2 as in mark-to-market gain because of the lower value of that commitment. So actually the opposite also holds true if that's exactly what's been happening throughout 2005 and early 2006. Robert Grindle - Dresdner Kleinwort: Okay. Is it possible for you to quantify the impact at all for the first half of Q2? Jose Maria Alvarez-Pallete: It's about EUR 80 million. Robert Grindle - Dresdner Kleinwort: Yeah, $80 million, thanks very much indeed. Jose Maria Alvarez-Pallete: Thank you, next question please.

Our next question comes from the line of Terence Sinclair. Please go ahead with the question announcing your company and your location. Terence Sinclair - Citigroup: Hi. This Terence Sinclair from Citigroup. Two questions -- am I right in thinking actually any difference in Latin America where on fixed side margins are going up, and I wondered that is true what the prospects are for the margin improvement elsewhere for example Argentina, Peru even Brazil? And quite separately I wondered if Peter would comment on the plans in previous situation in Germany, as he was a new manager in place, and I wonder what the steps are about to be taken, I am interested to know, of the 800 redundancy that I believe that the thing may and what kind of functions those positions are?

Well, thanks for the question. I will take this first one about the margins Latin America on the wireline side. First of all, it's true, Chile its improving margins. I think it's also to that Chile is a little bit ahead of Europe in terms of transformation of the wireline business, as the special plan being of package and non-intense of advancing at that front. In the other side, we are working severely in Peru, Argentina and Brazil by advancing in-depth, bundling voices product, voices plus broadband, and voices plus broadband plus TV. And therefore also adopting the workforce and other thing of course the structure of the different business. But basically in the others, margin is pretty stable also. So, we have not seen significant deterioration in margins in the other wireline businesses. So, we are working severely to intensify advancing the transformation with the wireline business, we're doing very well on that front. We feel confident that we can sustain these levels and even improve in the next. Terence Sinclair - Citigroup: Antonio, when you underline, do you think GSM transition in Brazil and Colombia something that at the moment is suppressing margins, but driving transition costs up or is it already something that is already benefiting margins?

Yes. In fact in the first part of the year, we might have been accelerating the client base; we are trying to accelerate the migration of the client base from CDMA to GSM and that's helped I think, margins there. And therefore, we think that in Colombia in the next quarter debt situation could be affecting possibly the margins in the next quarters.

Terry, its Peter here. Let me now talk to you of German question. Let's start on the cost side of the equation, you are quite right. We put a new CEO in. Jaime Smith, who is running our Czech business, and Jaime is quite an expert of conversions given the Czech business sold, broadband, mobile and television etcetera and he is also an ex-CFO before he ran the business in the Czech Republic. On the cost side, we have announced a little over 700 redundancies and in answer to your question where are they from, more the central functions. We want to lean down over the central functions, but leave the fire power in service and customer service and marketing although there is some small overlaps there as well. And we are in good shape on the cost programs, we started these earlier in the year and we are comfortable that we will deliver the, I think we said high double-digit millions of euros saving this year and low triple digit millions of euros savings next year. So we are going to have a more efficient linear business in that that's work in progress. In terms of the top line, we relaunched [PEN] with simple tariffs, small medium and large bundle effectively, November the 1st last year. I am encouraged that in the second quarter we actually had the best quarter in terms of net adds, the best second quarter we have had for I think pretty much ever. We put on 374,000 net adds and mix as well 191,000 of those were postpaid, nearly all of them in the gaming product and that volume of net adds 374,000 up from the same time last year by about 58%. Probably the most encouraging statistics to me, on the mobile front is that the minutes of use on the new gaming products and by now given we launched it in November 1. We got just over 1.2 million customers. The minutes of use are actually up 90% compared to our average postpaid customer. So, we are really driving up and the last perhaps although early sign of elasticity is there and we're getting also compared to our average post pay ARPU an uplift of 19 that's 19%. So, clearly whereas today we've got in total half of that allotment we got million bases postpaid we've got within that postpaid base now 1.2 million on gaming. And the elasticity in our pre-benefits coming through that also one of the reasons why the second quarter actually the ARPU is flat compared to the first quarter. Yes, it's down on the same time last year by 13 that's 13% but its flat and we do feel by the end of the year we can see it growing again. I think the final piece of the jigsaw when you say what are the plans to grow given our set costs are coming along well gaming and relaunches working to be giving a speed ARPU uplift. I think is the DSL launch we launched a DSL to our retail base to some of the time to test the systems there within so we needed to improve. We just started in June to relaunch effectively and therefore as we go into the second half of the year we will be truly starting to look like converged company. So not only relining on the good mobile movement to get the revenues growing again, but also the success with ADSL. I think it's too early obviously and seriously naïve to say we are home. But I want to tell you that the plans are coming together well and I'm encouraged that we connected this year we grow time to start to get back the kind of growth this business is being used to. Terence Sinclair - Citigroup: Thank you very much.

Thank you. Next question, please?

Our next question comes from the line of Javier Borrachero. Please go ahead with your question announcing your company and your location. Javier Borrachero - ING: Yes. Good afternoon, Javier Borrachero from ING, Madrid. Couple of questions on Latin America, first on Venezuela, it seems like the sequential progression of roaming revenues has improved quite a lot in the second quarter. And I was wondering if you are seeing a big elasticity effect in Spain from the reduction inbound roaming tariffs that you been charging? And then, just on the on broadband, it looks like just a simple calculation dividing revenues by number of users, it looks like your broadband ARPU is going to bit of a hit in this quarter having remained very stable of the last 18 months. I wonder if I am - well, I wonder if you give me explanation for that?

Hi, Javier. Thank you for your comments. On the roaming elasticity, I think that this summer will be probably the acid test for it. Until now, yes, we have seen some good elasticity, but we will have to see the consumer behavior on that front especially now in the summer season, if you are talking about roaming out to that to that extent, okay. As you know, the regulation on roaming from the European Union has been established and counters are known to everybody. What I can tell you is that on the upgrade of guidance that we have provided it is already incorporated the potential impact that roaming will have. Javier Borrachero - ING: Of course.

Okay. So that is the fourth point. On the ARPU on our broadband, honestly I don't see any significant news or any different sign. We keep on pushing for so I think more and more value added services together on a broadband. We keep on pushing for selling more and more of DUOs and TRIOs that these triple pay offering that obviously will also help in terms of retention of customers and in terms of quality of ARPU on that front. We are on the process of launching a new entry product at their lower level up to 1 megabit which is suppose to be launched soon as it is probably known it is efficient opportunity on that front, and also to launch a higher speed product and to do that for the next campaign. As you know, the back-to-school campaign is very important for us, and we are very optimistic on that. It is a crucial campaign for the year. So, I think that you have to be aware of the seasonality of the ADSL sales that obviously there are quarters that lower and people are not that keen to buy broadband before they go on holidays that they would been much more keen to buy it when they will be the back-to-school campaign in September. But there we see no major changes in terms of trends and ARPU on that front. Javier Borrachero - ING: Okay. Thank you very much

Thank you

Thank you. Next question, please.

Our next question comes from the line of Luis Prota. Please go ahead with your question and announcing your company and location Luis Prota - Morgan Stanley: Yes. Hello, its Luis Prota, Morgan Stanley, Madrid. I have two questions. First is in on Telesp on the revenue profile that we've seen sequentially second quarter '07 against the first quarter '07 and especially on the local service revenues where with in revenues coming down sequentially 20% against the first quarter '07, what I've seen in the KPI is that minutes per line have come down 20% sequentially as well, but in the first quarter '07 this decline was 10%. So, I wonder whether there is something that I am missing or something that has happened in the second quarter, so I would like to understand what's in this trend and whether it recover in near future quarters or not? And what will be the implication of EBITDA as well? And the second question is on the deal that you have recently signed with Sogecable. And I have a question on the conflict of insurance where as the whenever you have your own Sogecable network in areas where you have already or you are in the future going to offer the Sogecable product. What happens when you are having your own network are you trying to migrate Sogecable customers to the [marketing] network, which I think its some tricky or if you can tell me to understand the deal with the so would be nice? Thank you

Okay Luis, with the question on Telesp. First the revenue evolution of Telesp you have three main effect, affecting the slight decline year-on-year revenues. Firstly the negative price adjustment that we suffered in July 2006 was especially roughly 0.4% negative from the local baskets and roughly 3% along the net services as well for interconnection, first at the beginning of 2007, we had 20% reduction in general. So, we don't think that's separable. So, again, we have a 2.5% loss in traditional lines that has been mitigated recently and that we think this, we are going to decide for every single access. I mean, we are improving our efforts in that reserve. You know the last year we had this resolution from their side to the solution that was for the answering machine on net. And therefore, we established to provide some advice for the clients in order to sell that they will recharge from minute zero on that front. And these impacting us, and we have been able to mitigate those by launching significant effort on the growth of the new businesses among the bundles of products. First broadband is growing, and broadband revenues are growing probably 14.5%, and data been its source of growing slightly. In terms of the evolution of traffic, we are launching significant efforts in bundling of the device product. And therefore, we have flat seats on that data revenues, local revenues because we are bundling those revenues on the price of the bundle. So, those are the main estimation that they come to value with Telesp. On part of that in terms of (inaudible) remember that we have I'd say a non, I'd say an extraordinary bad debt effect coming from the commercial policy that we have been following last year that we raised the levels of the quality of the time last year and that has proven to be not a wise decision and we have reconsidered that at the beginning of this year, and therefore, the clients that we are having them not in our behavior, I think been in our base during this year. We have seen that one have shows still on our accounts for the second and third quarter of this year, but apart from that starting from that and take into consideration the new commercial policy that Telesp has been putting in place we think that that should be over by the last quarter of this year.

Luis, this is Antonio Viana. On the deal with Sogecable, let me try to reassess again. The rationale for it. There are on the -- whenever we launch a new marketing campaign that is roughly coming to our constant, let's say 30% of the cost are coming from customer that maybe interested on having a triple-play offer, but they are in areas where at the present moment we don't have the marketing coverage. So, I believe that, whenever we will be allowed to launch it from a legal standpoint that will be after November the 30th. That will be a good opportunity for us to deal with this amount of customers that are in there with, we have to say sorry on the time being we can not operate you a triple-play offer. We can offer then an alternative triple-play offer. That is not only useful in terms of optimizing our CapEx, but also in terms of fastering the deployment of broadband and increasing the penetration of broadband throughout Spain at a faster pace. Obviously there will be a situation that you may mention where there will be situation in areas where we already have marketing coverage and customer may say, but I prefer having the other one. Well, that will have to be discussed from the perspective of which offer had a better attraction for the customer. We hope to keep on differentiating immaterial on the merit of our platform and we will keep on fostering it and I will keep on making all the efforts for it to be a differentiated alternative. But I will not lose a broadband customer in any of the situation. And that is the fundamental thing for us, is to maximize any growth opportunity there. There will be situations where there may be some friction, not may be, we have to deal with that and that's a normal course of business, I would say. Luis Prota - Morgan Stanley: Thank you. If I can comeback to the question on Telesp, Jose Maria, the three effects that you are mentioning were more referring to the year-on-year trend that we've seen in the second quarter or first quarter. But the question was more on a sequential basis. I've seen 20% decline on minutes per line sequentially in the second quarter of '07 against the first quarter of '07 and that looks very high. I know if I missing something that you can explain to me? Jose Maria Alvarez-Pallete: There is nothing special that I comment to you. I have talked on the three years issue that we have commented on those. Therefore, we are not able to comment anything special from that source. So, if you want me to get back on that on more detail, I would refer to you to Investor Relations and try to cover your numbers in detail. Luis Prota - Morgan Stanley: Okay. Thanks very much.

Thank you. Next question, please?

Our next question comes from the line of Jonathan Dann. Please go ahead with your question announcing your company and location. Jonathan Dann - Bear Stearns: Hi. It's Jonathan Dann from Bear Stearns and I am in London. Three questions all around the UK. The first one, are you still planning to launch DSL broadband in the UK? And secondly, can you sort of remind us what the existing UK management incentive program is I mean, is there something still out there for October? And finally, I guess any talk of the UK wouldn't be right without some mention of the iPhone?

Right, it's Peter, and thanks for the question, Jonathan. Yeah, of course, we are planning to launch DSL. I think we always said we would be launching around about autumn and we are. That's all on plan. We will have by then about 50% population coverage. It will be a soft steady launch. By that I mean we won't be going all guns blazing all over the country, but we look forward to exiting the year with some sort of base in DSL and building on it next year. I don't really want to talk about existing UK management incentives, but I would say that all the team are pretty much the same as when we spun off from being a private - separate company and led my Matthew Key, highly motivated, and I think that's sort of showing in the results. They've got serious momentum still. They, as you've seen, got revenue growth of over 10% for the first half in the second quarter. Their margin in the second quarter is indeed back to the sort of levels we indicated without the one of restructuring, its over 26%. And the net adds were slightly lower than were that reported but the good news is that there was 74,000 positive postpaid. So, I think all of the ingredients good. Probably the best bet in the UK the ARPU is up, ARPU was up 2.8% on the same time last year and indeed 5% on the quarter. The iPhone, I appreciate you asking. Apple don't seek that there is announcements on this front. We think it's a very exiting product and we hope we can be involved, but more of that later and we will make announcements when it's appropriate for ourselves and the rest of the Group. Jonathan Dann - Bear Stearns: Thank you.

Thank you. Next question, please?

Our next question comes from the line of Laurent Sierra. Please go ahead with your question announcing your company and location. Laurent Sierra - Redburn: Good afternoon. Laurent Sierra from Redburn in London. The first question on Germany, do you think safe KPN this morning, do you think that the regulatory is unfair to O2 in Germany? And I would like to know if you would have selected Alcatel-Lucent to outsource your - the management of your network do you think that you would have reach higher margin and if not why? My second question is on O2 on Telefónica, what sort of synergies have you already reach in terms amount and where in order to extrapolate these kind assumptions with your partnership and with Telecom Italia going forward? Thank you.

I'll take the first part and then I'm sure Julio would talk much better to the synergies. I think it always difficult to say regulatory are unfair, you have to work with them. I think we thought the cut in termination rate towards the end of last year was harsh, as I think you all know that was 20% and takes about 4% out of our service revenue and we are still in debate on that, and I'm sure we are going to work that one to the finish. I think the third the Alcatel-Lucent thing. As you know we had a network share with T-Mobile for some three, four years now. That's worked really quite well for us. We look at outsourcing as one of this pluses and minuses. I think the short-term it gives you pluses. I mean, you basically look to somebody you say what are the saving over five years and would you upfront them. So, always look for long run on a deal, but I wouldn't want to comment on (inaudible) into the specific supplier, but talking more about the whole question about souring, we are looking at it across the business. But I think, the real trick is to get the efficiencies in-house first, and that's the path we are on, and then pursue the outsourcing appropriately. But we are, as you would have heard earlier in the call, attacking all areas of cost in our German business and we've got a good deal of comfort that the cost saving program is delivering. As I said earlier, we'll be delivering in the high double-digits of [EUR 1.2 million] cost saving this year, and low triple digits next year. I will handover to Julio for the synergy question.

Thank you, Peter. Well, according to our accounting, last year, we recognized our own EUR 200 million synergies because of the O2 integration in Telefónica. In the first half of this year, the number is around EUR 166 million. For the total year, we are expecting around EUR 300 million. It means that in 2006 and 2007, we will be roughly around EUR 100 million, which is approximately held for the total coming months for the four years. Regarding the kind of areas that mainly contributed to synergies are basically device procurement, technology procurement, roaming from international point of view, wholesales, retail, and some other corporations regarding the corporation around corporate activities. Laurent Sierra - Redburn: Thank you very much.

Okay. Ladies and gentlemen, and thanks a lot. This brings our conference call to an end. I hope that before we meet again for the third quarter results, you all will find the time to join us on October 11th in London for our investor presentation, until then, we wish you the best, and thank you for having stayed on the line for this hour-and-a-half. Thank you.

Ladies and gentlemen, and thank you for your participation today. This concludes today's conference. You may now disconnect your lines. Thank you.