Pablo Eguirón - Head of IR Ángel Vilá - Chief Financial and Corporate Development Officer José María Álvarez-Pallete - COO

Paul Marsch - Berenberg Nick Brown - Goldman Sachs Georgios Ierodiaconou - Citi Giovanni Montalti - UBS Mathieu Robilliard - Barclays Keval Khiroya - Deutsche Bank Will Milner - Arete Research Jonathan Dann - RBC James Ratzer - New Street Research Luis Prota - Morgan Stanley Justin Funnell - Credit Suisse Fernando Cordero - Banco Santander David Wright - Bank of America Mandeep Singh - Redburn Ivón Leal - BBVA

Ladies and gentlemen, thank you for standing by, and welcome to Telefónica’s January to March 2015 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. Pablo Eguirón: Good afternoon and welcome to Telefónica’s conference call to discuss January-March 2015 results. I’m Pablo Eguirón, Head of Investor Relations. Before proceeding, let me mention that financial information contained in this document related to first quarter '15 has been prepared under International Financial Reporting Standards. And then, this financial information is unaudited. This presentation may contain announcements that constitute forward-looking statements, which are not warranties of future performance and involve risks and uncertainties, and that certain results may differ materially from those in the forward-looking statements as a result of various factors. We invite you to read the complete disclaimer 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 security market regulators. If you don’t have a copy of the relevant press releases and the slides, please contact Telefónica’s Investor Relations team in Madrid by dialing the following telephone number, 3-491-482-8700. Now, let me turn the call to Ángel Vilá, our Chief Financial and Corporate Development Officer, who will be leading this conference call. Ángel Vilá: Thank you, Pablo. Good afternoon, and welcome to Telefónica's first quarter 2015 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. I would like to begin this presentation by highlighting how in Q1 '15 we are clearing starting a profitable growth cycle, which is underpinned by three main pillars. The first, which is the basis for the rest, is that organic growth is improving at a sustainable rate, improving both on top line and OIBDA, thanks to the high value customer base built on heavy investment in recent years. We aren't being complacent, however, and we will continue to invest in the next three years to enlarge our network differentiation. The second is the balance sheet, which we have deleveraged and strengthened to the point where net debt to OIBDA now stands at 2.13 times including the sale of O2 UK and cost of debt has been reduced year-on-year. Free cash flow has markedly improved 25.8% compared to Q1 ‘14, despite being affected by the normal seasonality at this time of year and the higher CapEx. The third is that we are reaping the early benefits gained from our proactive portfolio optimization, having been a bold catalyst of end market consolidation, which we continue to believe is beneficial for the industry and for the customers. We also just closed on April 30, the acquisition of the Digital Plus. All of these has allowed us to deliver growth at every level, and not just on organic basis. We are growing the top line, OIBDA, net income and EPS. Thus, we are on the right track to meet full year guidance. Moving to the next slide, let me briefly sum up our key financials for the quarter. These figures account for O2 UK as a discontinued operation. Results show the consistent improvement across P&L lines, returning to reported year-on-year growth in revenues plus 13%, OIBDA plus 8%, net income plus 162%, and EPS plus 164%. Both FX and changes in the consolidation perimeter had positive impacts this quarter. LatAm currencies have contributed year-on-year 3.2 percentage points to sales and 2.5 percentage points to OIBDA, while changes in perimeter have added 5.9 percentage points and 3 percentage points, respectively. Revenue surpassed EUR11.5 billion, growing 3.3% in organic terms while OIBDA topped EUR3.6 billion, an organic increase of 2.4% year-on-year. OIBDA margin stood at 31.3% virtually flat. Net income totaled EUR1.8 billion and EPS EUR0.38 benefitting from the EUR1.2 billion deferred tax asset derived from the O2 UK sale. Operating cash flow totaled EUR2.1 billion excluding spectrum. Finally, we are focusing our efforts in our key markets which are already bearing fruit as two-thirds of revenues now come from Spain, Brazil and Germany. I am also pleased to confirm that our Q1 performance is consistent with our 2015 outlook. In terms of shareholder remuneration, we just paid on May 12, EUR0.4 per share in cash corresponding to the second tranche of 2014 dividend. And our proposals for the voluntary scrip dividend on EUR0.35 per share to be paid in Q4 ‘15 and the amount of treasury stock to be are both included in the agenda of AGM which will be held on June 12. On slide 5, we show how our growth this quarter is driven by solid and sustainable basis. Our claim portfolio is rapidly changing, with more and more customers taking up higher value services such as LTE, Fiber and Pay TV, which have grown between 1.5 and 5.1 times year-on-year. This translated into an expansion of average revenue per access of almost 1% year-on-year, and reduced churn by 0.2 percentage points. Total revenue accelerated in organic terms, ex-Venezuela, on better performance from Brazil, Germany, and Spain. Data revenues, digital services, and video continued to improve sequentially at a very robust year-on-year growth rates. Breaking down the 12.6% reported year-on-year growth, let me remark that perimeter represented 47%, organic performance 28% and FX 25%. This quarter was strong on OIBDA execution, as we reaped value from our operating model, implementing simplification processes and starting to realize synergies from acquisitions. I would like to note that the latter will be higher in the second half of 2015. Meanwhile, our marketing investment rise in recent years and the focus on customer lifetime value are certainly paying off in revenues but impacting on year-on-year OIBDA margin erosion as commercial networks and system costs are growing. Slide 6 shows the solid growth of future key drivers, LTE and prepay data. Smartphone traction continued to grow and penetration expanded 11 percentage points year-on-year to 38%, while LTE customers reached 14.1 million, [indiscernible] last year's figure by more than 5 times. These factors together with growing average usage per smartphone of plus 25% year-on-year and LTE customers using 60% more data than 3G customers led to 52% increase in mobile data traffic. In the sense, I would like to highlight the strong upside we have in Hispanoamerica, where prepay smartphone penetration is just 21%, and on the other side, the multi-device opportunity. Solid operating results translated in non-SMS data revenue growing close to 20% as a result of LTE ARPU uplift double digit, data beyond the allowance driven by continued bundle breakage and new commercial schemes with a contribution of around 1 percentage point to Q1 2015 revenue year-on-year change and up selling dynamics as customers move to bundles with higher data allowance and new services. Maybe a good summary of LTE potential is that LTE traffic already represents 11% of total traffic while LTE penetration is still at 6%. On slide 7, you can see our progress on digital services. Revenues exceeded EUR680 million in the quarter and grew 34% year-on-year organically. First, I would like to highlight the visible results of our growth to become a video company, as 41% of our residential fixed broadband base already has Pay TV, 15 percentage points more than a year ago, which is reflected in the 57% year-on-year organic increase in Vivo revenues. And the future is looking very positive for us in this space as we leverage on our differential content and user experience plus the game changing deal after closing Digital Plus acquisition. In other areas, we continued to push forward with our innovative solutions for the digital era for both consumers and businesses. Through our affiliate Eleven Paths, we have launched the number of cyber security solutions to protect our customers’ identities and enter into the smart wireless [ph] arena. Revenues in security have grown 76% versus Q1 2014 in organic terms. Moreover, we have successfully converted cloud into highly appreciated value added service after launching products in Spain for the SME and enterprise segments. Lastly, M2M, machine-to-machine on financial services continued to gain global scale. And in devices, let me mention that we recently invested in Cyanogen collaborating closely with them for offering our consumers a wider range of mobile services in their smartphones. Global Resources is consistently contributing to network transformation and IT simplification. In networks, we are accelerating the deployment of ultra-broadband infrastructure in main markets. On Fiber, premises passed reached 16 million in March, almost doubling last year’s figure. While in LTE, our coverage reached 65% in Europe and 28% in Latin America. In addition, we are evolving towards an all-IP company with voice-over-LTE available in Germany and the proactive migration of customers to fiber in Spain, while we continue to improve customer experience with enhanced self-care and fast diagnosis in call centers. Regarding network innovation, we are performing trials around 3 carrier LTE-A and LTE-in-a-box private networks among others. With all these, we continue to advance towards having the best quality networks as our key differentiation tool. In IT, simplification is delivering results as we recomissioned more than 370 applications year-on-year, increased virtualized servers by 11 percentage points after closing 12% of physical servers. Lastly, full stack projects allow for business transformation with several countries in Latin America migrating customers are preparing for their migration. Please turn to slide 9 for an update on our operations in Spain. Commercial trends continue to be noteworthy, most significantly in high value services and churn reduction continued amid more favorable market conditions. This is leveraged on a clear strategy focused on enhancing our quality premium supporting differentiation and fostering upselling. Thus mobile data caps increased, digi [ph] content was enriched, and fiber speed will be tripled up to 300 megabytes in the coming weeks as recently announced. As a result contract mobile base grew by 2% year-on-year. Fiber net adds were close to 250,000 with an increased uptick of the 100 megabyte speed product. And Pay TV market share topped 40%. These factors drove Fusion ARPU to increase quarter-on-quarter to EUR70 remaining virtually flat year-on-year. Lastly, let me underline that delivering differential services is only possible on top quality networks such as our FTTH network, which is now the largest in Europe, both in terms of reach and connected customers. One the next slide, we dig you through the financial performance in Spain. Our upselling strategy coupled with low levels of churn is leading to a new phase of sustainable revenue evolution, which is set to continue, though it will be more evident in the second half when the tariff renewal will be fully reflected. Revenue year-on-year trend improved again in the quarter and was further intensified when excluding handset sales. In addition, OIBDA declined 8.4% organically as commercial activity was significantly more intense across the board and due to higher content and personnel costs. As such, OIBDA margin stood at 44.5% or 43.2% excluding tower sales. We had 2.1 percentage points organic decrease. It is important to highlight that year-on-year comparisons should ease from Q2 as it is [indiscernible] of the intensification of our commercial activity. To review Telefonica Deutschland, please turn to slide 11. Our approach to customer and customer value is reflected in higher retention efforts with better sequential churn and lower gross additions. I would like to highlight improved customer mix, especially in premium brands as 32% of our two consumer contracts have tariffs with more than 1 gigabyte allowance; that’s 17 percentage points year-on-year. We are still seeing very positive signs of LTE adoption with 86% of devices sold being LTE-enabled and encouraging data consumption patterns. With this and with the fast roll-out of the LTE network with the goal to reach 75% adherence, we are well positioned to further capturing and monetizing the data opportunity. Regarding synergies, important milestones have been achieved in the first quarter, including an agreement in February with the Workers’ Council for the redundancy program for 1,600 full-time positions until 2018, of which 50% will be this year. Furthermore, -- will take over 601 O2 UK shops in H2 ’15. Overall, we are fully aligned to deliver 2015 synergy targets, which will be more biased towards the second half. In terms of financial performance in Germany, turn to slide 12. Topline evolution is driven by the mobile business. On the one hand, mobile service revenues contributing to growth leverage on non-SMS data sales, which already represent 71% of data and on the stabilization of SMS declines. On the other hand, handset revenues grew close to 30% year-on-year on increased customer demand and the near approach to subsidies mentioned before. Revenue flow-through and value-oriented commercial approach resulted in a profitability expansion through the previous quarter with OIBDA growth improving to 4.4% year-on-year organic and excluding on the current FX. Margin expanded by 2.5 percentage points sequentially to 20.5%. With this, operating cash flow grew 6% organic and ex non-recurrent, EUR287 million [ph]. Let me now review the performance of Telefonica Brazil in slide number 13, where strategic focus on value growth delivered a strong set of results. As such, booming smartphone adoption and strengthened leadership in the contract segment are bringing an outstanding ARPU performance in Q1, with a year-on-year growth of more than 3%. It is also remarkable that this performance is almost purely based on data growth, making this differential performance sustainable. In the fixed business, our focus on the most profitable services is translated into growth of both fiber connections, plus 82% year-on-year, and Pay TV accesses, up 23%. In addition, and after the successful completion of its key milestones during last months, closing the GVT acquisition will take place in the coming days following the EGM, further reinforcing our positioning in the Brazilian market. Turning to slide number 14. We show how this quality growth is flowing into the P&L in Brazil. In Q1, revenue year-on-year growth accelerated to 4.3%. The highest rate in the last three years as a result of a strong improvement in mobile service revenues, up 8.4% year-on-year on our successful data monetization strategy and a better fixed revenue trend. On top of that and despite higher commercial costs and a more challenging macro environment, OIBDA delivered year-on-year positive growth. In slide number 15, let me highlight the progress made by Telefónica Hispanoamérica. First, commercial momentum remains solid in fixed broadband, Pay TV and mobile accesses, with a growing adoption of smart phones and accordingly data services. Second, financial performance remains strong with double-digit growth at OIBDA level based on a solid revenue growth coupled with margin expansion for fifth consecutive quarter, expanding by 1.8 percentage points in the first quarter organic and ex-Venezuela. Please turn now to slide number 16 to review our Mexican operation. The strong trading momentum continued in Q1 with gross additions reaching the second highest level ever and with smart phone net adds reaching a new record high, both despite negative seasonality of Q1. Commercial activity and data expansion continued supporting a high single digit revenue growth that this quarter was impacted by regulation. In addition, OIBDA maintained healthy growth at 70% year-on-year on larger scale, efficiency measures and benefits from changes in regulation in effect since last year. Turning to slide number 17, let me remark on the growth across the board posted in the rest of countries in Hispanoamérica. In Colombia, revenue performance and margin expansion drive solid OIBDA organic growth year-on-year. In Peru, we maintained our strong growth in higher value segments such as Pay TV, mobile contract and smartphones, along with a more intense competitive environment generates a 2.2% year-on-year organic decline in OIBDA. In Argentina, we're accelerating the 4G network deployment to continue providing the best service to our customers and we achieved an improvement in profitability of 3.3 percentage points year-on-year. Our slide 18, we give you a brief overview of our operation in UK, now booked as a discontinued operation in our accounts. Commercial traction continued, positioning O2UK as the fastest-growing mobile operator in the market, leveraged on the successful O2 refresh proposition. Contract net adds at 133,000 remain stable year-on-year, with an improved mix after recording 784,000 LTE net adds and reaching an LTE penetration of 22%. I would like to highlight once again the benchmark contract churn which improved 41 percentage points year-on-year to a market record of 1%, thanks to successful customer base management, leading to highest customer loyalty and popular commercial propositions. This and the turnaround of the Prepay segment with base growing for the first time in seven years lead to total net adds of 138,000 customers versus net disconnection of 73,000 a year ago. This was the base for consistent revenue increases ex-O2 refresh plus 5.8% year-on-year, with mobile service revenues up by close to 3%. Despite commercial activity, OIBDA excluding non-recurrent items grew by 6.1% year-on-year from continued efficiencies, namely marketing and overheads. As a result, OIBDA margins stood at 24.5% with O2 Refresh contributing 0.7 percentage points of margin. Let me now move to the financial slides on slide 19. Leverage ratio in the quarter has remained broadly stable, both before and after adjusting by the UK business disposal. The completion of the transaction will allow us to stay comfortably below our leverage target. Free cash flow year-on-year growth has reached 26%, benefiting from higher OIBDA and lower financial payments of EUR0.3 billion for interest and taxes more than offsetting higher CapEx payments. Moving to slide 20, our strict financial policy has led to reaching stabilization, most recently from Moody's. As part of this prudent approach, we have kept a healthy EUR17 billion liquidity buffer, following EUR11 billion of diversified financing activity. Substantial funds have been raised in the equity markets or with equity content. We have EUR4.2 billion through capital increases at Telefónica SA and Vivo for GVT acquisition and US$0.5 billion through hybrids from our Colombian subsidiary to meet its specific needs. This has been complemented with the renewal of EUR5.5 billion of unused syndicated credit facilities. Our financial expenses have benefitted from the EURIBOR rate reduction and intentionally decreasing fixed rate debt in euros. Higher debt in Latin American currencies has partially mitigated those benefits, but there has still been 18 basis points reduction in the financial cost to 5.27%. I would like to emphasize the success of the capital increases undertaken at Telefónica SA and Telefónica Brasiliaris as seen on slide 21. Telefónica raised EUR3 billion through a rights issue at a discount to TERP significantly lower than other European rights issues in the last two years. Subscription was very successful as the amount was 3.7 times the shares offered during the subscription period. In addition, Telefónica Brasil increased capital by BRL16.1 billion or EUR4.7 billion with Telefónica participating with approximately 75%. It was successfully priced with lower discount on present transactions. Market book was substantially over-subscribed at 2.7 times with high demand from quality institutional investors globally. In addition, it is the largest equity transaction in Brazil and Latin America in the last four years and the first public registered offering in Brazil in the last six months. We want to thank all of you who participated in these deals for your support. To conclude, our first quarter results reflected the solid start of the year and more relevantly represent the starting point of a new cycle of profitable growth. First, we are accelerating our growth across the board. Second, our clear commercial strategy focused on value is enlarging our differentiation with very high uptake of fiber, smartphones, LTE and Pay TV. Third, we are improving our positioning in main markets through our proactive portfolio optimization, leading the end market consolidation movements in Europe and LatAm. Fourth, recall our balance sheet strength. And finally, we confirm our outlook for 2015 and ambition for 2016 which remain unchanged. 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 Paul Marsch from Berenberg. Please go ahead.

Yeah, thank you very much. I wanted to ask about the Spain OIBDA trends, because last year there was a lot of talk about OIBDA stabilization and we didn't see stabilization I think sequentially for a few quarters last year, but obviously in Q1 we are still seeing an 8% decline. So what is your message now the timing of domestic OIBDA stabilization? Do you think that that can happen during 2015? And then, maybe just to put that within the Group contest, because your guidances clearly reserve the scope for maybe 1 percentage point of margin dilution for investments in commercial expenses, discretionary, I guess. So in the context of the group guidance, given that you have seen margin expansion in some other business units, is there a trade-off here between margin improvements elsewhere in the group that maybe leaves you with the scope to bear more margin pressure in Spain if you need to? Thank you. José María Álvarez-Pallete: Thanks for your question. Focusing on the OIBDA [ph] in Spain, let me remind you that this quarter, we have several effects that probably needs to be considered. First, the comparison with the first quarter of 2014 in which our commercial activity was still lower as we didn't see traction in the market at that time. We'd really started to be more aggressive commercially speaking in the second quarter of 2014. Second, the impact of content is progressively impacting the quarter-on-quarter and as we will have a growing base of TV customers, especially now that the last transaction has been approved, it would be progressively be diluted. Third, I would highlight the pension fund contribution that has been retaking and this having a full impact progressively this year. And fourth, and probably even more importantly taking the link with the second part of your question, we are seeing a sound market ahead of us and we have been accelerating commercially and that's why for the first quarter this year, since I’ve seen from the second quarter 2011, we have positive net adds at the level of Telefonica of Spain. And therefore we thought it was a good idea to accelerate commercially and to reposition, to upgrade our offers and to be more aggressive on the market. Thanks to this effort, we think that we are in a better position now to have a more visibility about revenue growth in Spain and that's where we have been accelerating. So it is not just a question of having more room at the group level, we are not contemplating that as being more aggressive in Spain, but again, in our opinion, the key issue in Spain is turning back to revenue growth as soon as possible and as we see profitable growth ahead of us, that's where we have been accelerating. We will keep you posted over the next quarters, but we are not taking advantage of room in terms of the guidance of the group to accelerate in Spain across the situation of Spain and that we see profitable growth ahead of us that we have been accelerating.

Maybe a follow-on, some of those drags on OIBDA annualized through the rest of the year, so you mentioned the pension fund contribution for example, I mean on content costs, do you start to hit scale benefits or breakpoints on the cost of content to the certain scale of customer base, does that benefit the second half of this year as well? José María Álvarez-Pallete: Well, in my opinion, we will have the bulk of the year for the content impact as you're saying all around the year and the pension fund as well and also the increase in other costs as well. But the sooner we get back to revenue growth or at least to revenue stabilization, the sooner that impact will be mitigated, because again the most important aggression to OIBDA and to EBITDA margin is the revenue decline. And on that side, upgrading our customers, the trend that we are seeing in Fusion ARPU should help us, so we are focusing on stabilizing revenues as soon as possible in order to make sure that we can build on our sound OIBDA margin revolution.

That's great. That's very clear. Thank you very much. Pablo Eguirón: Thank you, Paul. Next question please.

We will now take our next question from Nick Brown from Goldman Sachs. Please go ahead.

Thanks. If I can just follow up on your comments in Spain, do you still believe full-year revenues may be able to grow in 2015, excluding DTS or you're just looking for growth year-on-year in the third or fourth quarters? And then secondly, if you can just clarify we should expect margins to continue to climb at DTS, is that what you're saying once your expectation for increasing content costs from the changes [indiscernible]? Thanks. Ángel Vilá: Well, in terms of our revenue strength in Spain, even though our guidance is just at the group level, we have stated that we have the ambition to turn back to growth in Spain this year. Revenues in 2014 were roughly EUR12,023 [ph] million. Therefore, we need to generate slightly above EUR3 billion per quarter to turn back to revenue growth. We are not yet there in the first quarter of 2015, but we are in the neighborhood of EUR2,875 million [ph] I don’t remember correctly. So we need to improve. With this improvement – but we have improved, and we sequentially improved quarter-on-quarter, especially in this first quarter with traditionally seasonality would imply have implied a lower rate of growth in the last quarter of 2014 and we have been able to beat that. Therefore, the trend looks like growing into that direction. This improvement is even more noticeable if you exclude handset sales and fewer service revenues. So one of the main growth drivers is precisely upselling our customers and we have been upgrading our offers all along the chain in the first quarter of 2015, which was less on the assumption in order to be able to get back to revenue growth. And customers having positively reacting to that are moving up in the value chain. Starting in January and up to May, what we have upgraded our Fusion offers, we have upgraded the tariffs in one-play, double-play, triple-play in Fusion for data over allowances and for business on B2B. Unfortunately now, I’ve seen that all the players are moving into the same direction. So I think that all the assumptions that needed to be implemented in the first quarter to be able to be credible and therefore to turning back to revenue growth have been executed. It’s true that we have had some impacts like the strike that we suffered, but even though it has been called off in May, was unexpected and has impacted the installation efforts especially during the weeks in April and it is also true that we have been delayed in the approval process of Digital Plus. But overall, the revenue trends keep improving sequentially, beating seasonality quarter-on-quarter and all the factors that needed to be in place make sure that we will be able to deliver revenue growth in the next few quarters out there. If I may, I would suggest to focus on the absolute quarterly revenues, which is the closer we will get in the second quarter to EUR3 billion, the more clearly we will be on that ambition that we have. And again, in terms of OIBDA in Spain, what we’ve seen is that the sooner we get to revenue growth or to revenue stabilization, the easier will be seeing margins stabilizing. Because again, we have been able to reposition customers to upgrade to our customer base, to upsell our customers, to move up on the value chain to a slightly increased Fusion ARPU, so all the different elements of the equation looks like growing into the right direction.

Thanks, and just on the company cost..? Ángel Vilá: Thank you, Nick. Next question please.

We now take our next question from Georgios Ierodiaconou from Citi. Please go ahead.

Two questions on Spain, fortunately, I am guessing that it will be the topic of today. Firstly on the cost base, and I appreciate the cost made earlier. There was a EUR20 million increase in the cost year-on-year, so obviously most of the decline that was seen came from revenue. So I just wanted to ask firstly on the revenue side whether how did you arrive to the decision for the prices increases you announced earlier this quarter whether you see any risk of churn picking up on the back of that and whether you’re comfortable that the good KPIs you have managed to deliver the last couple of quarters will not unwind after the price increases? And secondly on the cost side, could you perhaps give us an idea of these EUR20 million growth that we’ve seen year-on-year in cost of which EUR15 million is the pension contribution, whether that is the run rate we should expect to see for the rest of the year excluding Digital Plus? And perhaps if you could comment on the impact of Digital Plus will have on your content cost. Thank you. Ángel Vilá: Thanks for the question. In terms of the impact of the upgrading our offers and the upselling effort that we are doing to our customers, the impact of the new tariffs. I mean first, it has been on gradual movement during the starting in January and with the final move being on the Fusion offer recently in April. And therefore, you have already some embedded effects on the first quarter churns, especially in the single offer and the one-play, the double-play, and part of the triple-play. And as you can see, churn levels have improved in the first quarter of 2015, which looks like saying that quality and the upgrading that has been going along with those upselling have been appreciated by customers. It is true that most significant term will be probably on Fusion and therefore we will need to show what is the impact on Fusion, one, it has been first up sell and then upgraded because we have moved to 300 megabit offer after increasing the price, the nominal price of Fusion and that has happened in April and therefore we need to focus on the second quarter, on the second quarter more. But I can tell you on the second quarter, is that, in April, we have this price increase in Fusion and the strike, and that has impacted us during a few weeks but most recent trends in May, they were checking just before entering here, looks like going to the same direction, to the right direction. Once we have been restoring the backlog that was created by the strike, now while the upgrade of the speed of connection to 300 megabits looks to be welcomed by customers. So we will update you in the second quarter but so far -- so far it looks in spite of some impact in April, May looks going into the right direction and the first quarter has been pretty good in terms of churn improvements. In terms of the cost structure of Spain, operational expenses in Spain is EUR1,755 million, in fact increased 1.2% year-on-year. Out of that, supplies is EUR604 million, it has been 3% up year-on-year and it has several effects. We have less handset costs, less interconnection, more content cost, labor force is at 6% because of the pension plan contribution, and others have been down 4.7% because of simplification. So just to tell you that we are trying to absorb at least part of the content cost and on the other costs that are going to be impacting us all along this year to be able to have a good evolution in terms of margins. But again, let me stress that the sooner we get back to revenue stabilization, the sooner that it will be even more not visible. So all the guidelines that we’re prepared when we were preparing the budget of Spain for this year are growing into the direction that we thought it would go in spite of some unexpected events like this delay in the Digital Plus approval and the strike. And in terms of the content effort or the content impact of Digital Plus, well, most of the content we already have those impacts namely the soccer arrived, because we were paying to Digital Plus and the Formula 1 rights and the MotoGP rights and the series so most of the impact we have already, we have already been affected by those and those are going to be increasing because of Digital Plus. But the most important thing of Digital Plus is that you have in my opinion two positive effects, first, we are going to be able to cross-sell to offer our services to the customer base of Digital Plus and secondly and probably more importantly, the TV customer base is going to be significantly increased and that should led to some optimization of the content cost going forward.

Thank you. Pablo Eguirón: Thank you Georgios, next question please.

We now take our next question from Giovanni Montalti from UBS.

Good morning, just a question on the fixed telephony lines. You have under 27,000 line losses this quarter, I was just wondering when do you expect this trying to improve farther and also how much of the line losses you think are still going mobile only in Spain, thank you. Ángel Vilá: Could you repeat because we barely, we were barely hearing the first part of your question. Sorry for that.

I think it’s probably a problem with my phone, can you hear me now? Ángel Vilá: Yes, much better.

So, about line losses, traditional fixed line losses. When do you expect this trend to improve farther during the year. What is the share of these fixed line losses that you're going mobile only and what is the, let's say the commercial driver behind this, why do you think we still have significant part of your line losses that is going mobile only in Spain. And finally, also always about these, if I look at your wholesale accesses in Q1, they are decreasing, this is pretty unusual trend, wanted to know if there is any specific element, any specific adjustment? Thank you. Ángel Vilá: Thanks for that, in terms of traditional lines in Spain is minus 5% year-on-year and is another sequential improve once we keep bundling with a moving customer towards Fusion. So, it’s the best net loss of wireline voice after Movistar Fusion launch in the fourth quarter of 2012 probably with one exception. So, it keeps improving. Too soon to say when that’s going to be ending. We keep improving but for the first time and let me stress that, we have been able to more than cover that with the older elements of our accesses in Spain mobile contract TV offer and fiber. So, it is hard for us to read right now how much of that is just to pure mobile substitution once it has become fully integrated and convergent market in Spain, but what I can tell you is that in the overall equation of accesses in Spain, we are growing for the first time in the last four years. And in terms of the wholesale decrease, I don’t have enough element of information right now with me because in terms of the wholesale revenues in Spain, we are increasing. I mean, we are doing much better than the previous year. So, let me try to focus where those lines are being lost and I will get back to you offline if I may.

Okay. Sorry, if I may very quickly follow-up about your fiber roll out. The decision of the CMT is still pending, can you give us maybe an update about let’s say what your discussion are with the CMT and about the way we’ll, let’s say, fine-tune your fiber investments if there is imitable flow of fiber roll outs that you will do in any case and how are you going to select the areas of the country where you want to let’s say target your fiber roll out regardless of the regulatory decision? Thank you. Ángel Vilá: Our roll out is not going to be independent of the regulatory decision. It would be totally a subject to the regulatory decision. What we are doing in 2015, we keep rolling out, but namely on the zones that have been already agreed as having enough competition and therefore in which regulation is providing, not going to be affected. I think that one of the most important positive news of this new regulation is geographical segmentation. Several regions of the Spain have been declared already competitive zones and therefore because they have more than three networks and what we are doing till we see how much the scope of geographical segmentation is increased, but we can see those we are biasing over coverage efforts in the zones that we know are not going to be affected by future regulation. So -- and as you might imagine, we keep having a significant amount of interactions with the regulator. So, I think that we keep aiming to deploy fiber broadly in Spain. Spain, in the middle of the crisis between 2011 and 2015, has become leader in Europe in terms of fiber coverage and connection, absolute leader in fiber-to-the-home. I am not taking out relative terms, I’m talking in absolute terms and this is new for regulation that was fostering investment. And therefore, we think this should go on and we think that in the meantime, we keep deploying our effort because we stay enough in terms of ARPU expansion, in terms of customer satisfaction and in terms of revenue attrition, but until we have our clear picture of what is going to be the final outcome of regulation, we are biasing over investment efforts towards the competition zones.

Thank you.

We’ll now take our next question from Mathieu Robilliard from Barclays. Please go ahead.

Good afternoon and thank you very much. [indiscernible] I had some questions in Latin America. In Brazil, very strong performance in terms of the revenues, but there was one element that was unwelcome, which was the increase of bad debt provisions and that have led you to the economy. I was wondering if that’s becoming or can that become a topic or an issue in other countries. And second and may be related to that, the trends in terms of EBITDA margin in Venezuela and Argentina, two high inflationary country were very different is Venezuela margin quite down and Argentina actually positively surprising. So, if you could give a little bit of color on these two countries and what’s behind the trend that will be helpful. Thank you. Ángel Vilá: Thanks for your question. In terms of Brazil as the Vivo team was covering yesterday on their conference call, we have been impacted in terms of bad debt in Brazil and we have been having somehow an impact. We are working in two fronts, as you know, in terms of commercially, we have become more demanding in terms of the credit scoring and also on the credit collection solutions. We are starting to see some results, but too soon to say and it is due to macroeconomic effects. It is also true that in terms of our performance, relatively to our competitors, we are doing better because we have a much, in our opinion, a much sounder customer base. But it is something that we are monitoring and we are already acting in terms of the scoring [ph] but also in terms of the migration of customers from prepaid to postpaid, for example, in order to be more demanding in terms of the stabilization of the customer base. And that explains as well why we have been more successful on prepaid and we have been slowing down our performance, even though it's still good, on postpaid, because we have been adding customers on prepaid, but we have not been moving aggressively customers from prepaid to postpaid till they demonstrate that they are stable customers. And that's exactly what we are doing in the remaining Latin America where by the way we are not seeing those impacts yet, either in Chile or in Peru or in Colombia or in Mexico. Our performance there is pretty sound and commercially speaking, we are accelerating. And in terms of Venezuela and Argentina, the OIBDA margin in the Argentina increased significantly, almost 3 percentage points year-on-year. It's due to lower commercial activity as we are seeing a weaker macro and we have seen less aggressiveness on the subsidies part of the market. On the handset part of the market we have been slowing down our commercial activity and that has been impact positively our margins there. And we have also been putting some efficiency measures in Argentina to offset the inflationary pressure in the Argentina peso, namely in terms of network, system and contracts, contracts that were linked to inflation. In terms of Venezuela, we have been having this quarter higher availability of handsets and we have become more aggressive on the market and it has been having a good commercial return. And as you might imagine, OpEx is clearly affecting because of forex. Even though our team is also doing an effort, we have been silent [ph] in Venezuela to be more aggressive commercially and that has an impact in OIBDA. We have been having some revenue, some price increases all along the quarter that will be fully reflected in the second quarter in the Venezuela and that explains the different performances between the Venezuelan and Argentinean operations.

Thank you very much. Pablo Eguirón: Thank you, Mathieu. Next question please.

We will now take our next question from Keval Khiroya from Deutsche Bank.

Thank you. Three questions please. The first on TEF Hispanoamérica. When you look at the mobile service revenues excluding termination rate cuts and the service revenue growth slowed in all of the markets other than Argentina and Venezuela. So could you give a little bit more color and what explains this slowdown, is it just you being more margin focused from now? And secondly, could you remind us how much cash you have in Argentina? Thank you. Ángel Vilá: Thanks for question. Taking the first one on revenue performance, we are still seeing solid growth both in revenues and in OIBDA and we are seeing an -- namely in OIBDA an accelerating contribution from Mexico and Colombia. What is the impact on revenues? Well, first, we are seeing, this is the fifth -- if I remember correctly, the fifth consecutive quarter of almost double-digit revenue growth and therefore comparables start to be much more demanding. Strong Q1 namely in Colombia, Chile and Mexico requires a much stronger Q1 in 2015, so year-on-year comparison are starting to get tougher. We have higher regulatory effects. There is a significant amount and I will look how much the relation is driving down of revenues, but it is pretty significant and in fact they have appeared [ph] I mean, regulation is driving out almost 2 percentage point of growth this quarter and is more than previous year. And then finally, it's a very intense competitive environment and namely Peru and Chile have become even more aggressive I think in the previous years. So those three effects, that becomes much higher regulatory effects namely interconnection and more severe competition, namely in Peru and Chile explains why we have been declining 1 percentage point, one and something [ph] percentage point of growth this quarter, but still we are almost at double-digit growth. Ángel Vilá: Regarding the cash in Argentina, we have the equivalent of EUR352 million in cash in Argentina, the equivalent of EUR294 million in pesos and the equivalent of EUR58 million in strong currencies, mostly dollars.

That's great. Thank you. Pablo Eguirón: Thank you, Khiroya. Next question please.

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

Thank you. I have a couple of questions again on Spain. I just want to focus on the price rises on Fusion that coming through this quarter, and just understand or clarify that those price rises apply to the entire Fusion base, those in contract, those out of contract and then also just get your thoughts, I understand there is a legal challenge on the Fusion price rises since when you launched Fusion, they were appetized as prices being fixed forever and I just wouldn't mind getting your thoughts on whether the changes you've made to the tariffs will get you sort of around any kind of legal question mark? And then also on Spain, just to understand in the fixed business, if you can explain the benefit you are getting from sort of large government contract. I think that's added about EUR70 million into the other revenue line and it's the second quarter we've seen that very large benefit. Just kind of remind us of the scope of that government projects and possibly the capacity you have to win more government contracts like that going forward? Thanks. José María Álvarez-Pallete: Well, in terms of your question about the update or the upsell of the Fusion customers is obtained and therefore if you want to have access to the 300 megabytes offer, you need to respond to one of the letter and if you go on the existing customer base, it was notified during the time of the bill of the billing process of -- at the end of April and they have one month to withdraw of the service if they do not agree with the price increase, so those started to effect as I was telling you, during the month of May, we are not seeing much of an impact yet. We saw some impact in April because of the two effects and also because of the strike impact, but May looks like retaking the good momentum on that side. So summarized for the existing customer base, they were notified during the billing process of April and they have one month to withdraw out of the offer, if they will not agree and on the 300 megabyte of the upsell offer, it's an off deal and therefore they will need to call us if they want to be upgraded on that offer. And in terms of the contract that you are mentioning, I'm not aware of any major contract that is restored in the -- the one that we were somehow commenting I think in previous quarter was a relatively small contract of roughly EUR1 million of the Spanish Parliament for two years, but I'm not aware of any major contract -- government contract that is distorting the revenue evolution. If you want more colour, more than happy to cover that offline with Investor Relations, but let me summarize that we are not aware of any major government contract that is distorting the trends here.

Okay. I will follow up. Thanks a lot. Pablo Eguirón: Thank you, Will. Next question please.

We will now take our next question from Jonathan Dann from RBC.

Hi, there. Of the four pillars, three of them, Spain, Germany, Brazil all seem to have reasonable network advantages and sort of parts back to growth, but I guess across the rest of Hispanoamérica, I mean places like Colombia, Mexico, they don't, I think it feels reasonably fair to say they don't seem to have best-in-class networks, I mean do you think, I mean is there a plan sort of next year with the improved balance sheet to begin to address some of those very large geographies? José María Álvarez-Pallete: Well, the answer to that is out of the -- as you were saying, both in Spain, Germany and Brazil, our aim is to have the best network and the best distribution network and therefore we are active in those regions and Brazil is quite of -- is pretty recent because we have become leaders on that market in terms of customer base very recently, but we are not an integrated player there. We are – being the leader, we need to act and send the right messages in terms of bundle subsidies, data allowances, tier pricing and so on and we are doing and it looks like competition is following us. So it’s not just the network is being delivered because of the scale and having the responsibility of showing the pace of our rational market and therefore of accretion of ARPU, accretion of services, more data allowances for customers and therefore data upselling. In the rest of the – in the countries that you were mentioning, namely -- that’s also the case in places like Chile or Argentina or Peru. So focusing on the ones that you were mentioning that were namely Mexico and Colombia, you know that in both countries regulation has for the first time moved, but was creating more competition, more real competition and therefore I have seen it recently happening and this is fostering our results and we are taking advantage of that move with an effort to significantly upgrade our networks. And upgrading our network doesn’t mean that we aim to replicate the incumbent network on those regions, but that we are significantly improving accelerating our move from 3G – from 2.5G to 3G, from 3G to 4G, network sharing agreements and wholesale agreements in order to increase our capacity. So the answer is yes, but it is not just the network, it’s also the distribution network and in both fronts, we are advancing and we are taking advantage of our symmetry to accelerate and to build the bases for the future. And that’s why you will see that out of the contribution, namely to OIBDA in this quarter, the largest contributor in Eastern America mainly Colombia and Mexico with the largest contributors because we are taking advantage of that to accelerate. So we are doing both things at the same time, we are accelerating commercially, we are significantly improving our popularity in terms of distribution and in terms of network. But you’re right, we need to accelerate, but we cannot behave in the same manner in those countries that we are behaving in countries where we are leaders.

Can I ask a follow-up? On all the other results goes, somebody has asked the CEO of Deutsche Tel et cetera, their thoughts on Pan-European consolidation, I mean, where do you guys stand given you have recently been exiting? Ángel Vilá: This is Ángel Vilá. We are happy with the scale that we have. We believe that with the trend that we on the scale that we have as Telefónica Group, there is no need for cross-border consolidation. We have been working a lot in in-market consolidation because we see clear benefits, be it mobile consolidation, be it conversion consolidation, and we have been leading in many of the markets on these front. But we are focused on delivering and strengthening our operations in our current footprint, on delivering on the synergies of the transactions that we have already announced and we have no ambitions for cross-border consolidation and player [ph] building and getting into any of such euphoria that some others seem to be thinking about.

Thanks very much. Pablo Eguirón: Thank you, Jonathan. Next question please.

Our next question comes from James Ratzer from New Street Research.

Yes, thanks very much indeed for taking the questions. I have two, please. The first one is just come back to Spain and the Fusion repricing, I was just wondering if you can help me quantify what the impact of that would be to revenues. I mean, it looks like Fusion is about – just over 25% of your domestic revenues and you’re putting through roughly 7% increase. So should that imply a 2% step-up in revenues from Fusion or do you think you will see some customers spin down to some of the lower packages? Just try to help quantify the impact of that please. And then secondly a question on Venezuela, we’re seeing a number of other companies this quarter switch away from the SICAD-II rate, some companies even saying that it actually no longer exists and moving to an another rate called SIMADI at a rate of around 190. So I am wondering if you could just give us your thoughts on that please? Thank you. José María Álvarez-Pallete: All right, taking your question on Spain, as you might imagine we don’t disclose in such a detail the impact of the upgrading of the Fusion offer. What I can tell you is that when we are calculating our budget for Fusion, we are assuming that the timeframe we will be upgrading our offer and that we are upselling our customers, it was an intrinsic part of our ambition to turn back to revenue growth in Spain. So, as I was telling your before, in the first quarter, we were below, slightly, but below the 3 billion threshold. On a monthly we account for those upselling to get us to the threshold that we need to turn back to revenue growth which is still what we are aiming at in this year in Spain. So it was a strategic pillar to get there, it was tough, as you might imagine, because we needed to put a lot of elements in place of the offer, but we were accounting at those extra revenues because of the upselling of our customers to make sure that were able to beat the – to confer on fourth quarter expectation to get back to revenue growth in Spain. That was strategic and that's why implementing that was easy on the paper, but then you need to go to market and commercially implement that and expect the competition to follow. It looks like competition is following. Therefore, all the assumptions that were embedded in our ambition to get back to revenue growth as soon as possible in Spain looks like going into the right direction, in spite of those unexpected events that I was mentioning before. So I am not going to be able to detail to you what is the impact of that upgrading of Vodafone and Fusion, but it was embedded in our assumption that we needed to have in order to increase our monthly revenues to get back to revenue growth in Spain as soon as possible. José María Álvarez-Pallete: We have in Venezuela there exist three exchange rates. One is called the CENCOEX which is at 6.3, which is very limited for some products and services and which paradoxically some companies still continue to use. Then the SICAD which substitutes the former SICAD-I and SICAD-II, which is still on the process of being regulated and then the SIMADI, which is a third system which really is not so representative, because it doesn't have liquidity and has a huge volatility. We decided at the end of last year to move from what used to SICAD-I to SICAD-II to the rate of 50. We are using the rate that applied to the last SICAD-II auction which was of 52 bolivars to the dollar which we think at this stage is still the most representative unless volatile. It's quite important to say that once we made the move to SICAD-II and to the 50 which is now 52 bolivars to dollar, we slashed pretty much our exposure to Venezuela. Our net cash in the country is EUR0.4 billion, our book value is EUR0.9 billion. So any subsequent devaluation or adjustment of the FX rate from SICAD to some other SICAD when we see the next auction or getting closer to SIMADI would have very small impact compared to the ones that you have seen in our accounts at the end of last year.

Okay, thank you. Pablo Eguirón: Thank you, James. Next question please.

Our next question comes from Luis Prota from Morgan Stanley.

Yes, hello, it's Luis Prota from Morgan Stanley. Two questions please. First is on the Digital Plus acquisition and the remedies with the obligation to wholesale 50% of the premium content, I would like to understand how you plan or how you could bundle the content to make propositions from your competitors not that attractive. And also whether you could share with us some analysis, I am sure you've done, on potential cross selling opportunities with the clients coming from Digital Plus relative to the risk of TV ARPU dilution as these clients are paying, my understanding is that, something like EUR40 for TV and any cross selling with TV products, I suspect might give rise to some kind of dilution. And related to this Digital Plus, something that is not clear to me. If you are going to start consolidating this from April, so for two months from the second quarter, what will be the revenue and EBITDA contribution from this, if you could give us some kind of order of magnitude and whether when you were in the last few quarters talking about some vision to go back to revenue growth in Spain, whether you were always considering and you are still considering or not whatever the contribution is in revenues on organic way from Digital Plus? Thank you. Ángel Vilá: Thanks, Luis. In terms of the remedies, there were several remedies in both, the ones on the premium. Firstly, the definition of premium content, which is more restrictive and it goes to some not all but some working events and major and therefore, and also the important things also this percentage, this 50% and therefore whoever what’s to have access to this wholesale offer and this premium content needs to chose and therefore they would contribute to have some exclusivity on some of the contents because our competitors will need to chose between 50% of the defined, predefined premium contents which are -- not all of them. So therefore we think that and if you also take into consideration that, part of the fixed cost of those contents specifically the premium content needs to distributed, again as a fixed part of the cost, not as a variable part among the ones that are going to be willing to have access to those content, that is going to help the first, makes those content stable in the market, namely Spanish league for example, but also in terms of distributing the effort among the ones that are going to be willing to have those contents. So I think that overall it's a pretty reasonable set of remedies that we think are going to contribute to distribute in a much more fair way because of those contents. In terms of the cost saving opportunities, yes, we were considering those but we are not considering the Digital Plus revenues to turn back to revenue growth, and in Spain, the Digital Plus revenues were non-organic and therefore we were not counting on those, on the Digital Plus revenues to turn back to revenue growth in Spain. But yes, we were aiming to have an update in terms of revenues in the second part of the year because of the cross selling possibilities for the Digital Plus customer base and that is going to help to precisely anchor the ARPU that those customers will have on TV and we aim to do what we have been doing on the Fusion part of our customer base which is upgrading those customers with attractive both wireline, wireless, voice and broadband. So we think there is room for maneuver, we think there are room to anchor the value of that ARPU, now we think there is room to contribute to revenues to new revenues on consolidated terms on the combined efforts. And then, in terms of consolidation, I turn to Angel. Ángel Vilá: Hi Luis, regarding accounting, we will start consolidating Digital Plus from May, initially it's been acquired by Telefónica [indiscernible] so would be if not decided otherwise under the other Company's caption but we will do our corporate, we're accessing the corporate organization to best allocate the wholesale and retail parts of the business. The retail part of the business probably to Telefónica España so that we optimize, not only organizational logic but also tax and accounting impacts. We will give -- we are still work on progress, we are going to give full detail on that by Q2 results or ahead of those, so that you can incorporate to your models.

Thank you. If I can just clarify something, José María was saying, José María did, did I understand well that what you said is that, what you were taking into account in terms of coming back to revenue growth was just the cross selling opportunity and not what we can call the legacy revenues from DTS or the existing revenue. Ángel Vilá: You’re right Luis.

Okay, perfect. Thank you. Pablo Eguirón: Thank you Luis, next question please.

Our next question comes from Justin Funnell from Credit Suisse.

Yes, hi, can you hear me? José María Álvarez-Pallete: Yes, we can.

Just wanted to ask about your medium term plannings, your balance sheet, obviously subject to the O2 deal getting done, you'll be down at 2.8 levered, which you know whenever dollar is shrinking it's probably the right number but if OIBDA is growing going forward, it would probably be a bit under levered. We've seen Deutsche Tel [ph] go through this journey and ultimately end up with dividend, full cash dividend, a dividend growth, do you think that's where you can end up as well on a one or two year view please? Thank you. Ángel Vilá: Yes, when -- well, first, we reiterate our objective of 2.35 times or lower, net debt to OIBDA, clearly with the O2 U.K. divestment, we're going to be below that and what we decided is to maintain financial flexibility. So, not imposing too stringent leverage target given the current environment of debt markets. Second, we want to maintain flexibility for growth to finance the growth of the Company with organic or inorganic in the places where it makes sense to consolidate and third, we decided to improve the shareholder remuneration by two ways. One is after the two transaction closes, the cash dividend of EUR0.75 would become 100% cash instead of the partial voluntary scrip plus cash that we have now in 2015. We have EUR0.35 voluntary scrip and then EUR0.40 to be paid fully in cash. In 2016, we would move to 100% cash dividend and also, we have taken the decision to cancel the treasury shares instead of facing those in the markets, so that we would improve the EPS. As you rightly say and going forward and post O2 UK transaction, there would be some margin between the leverage target and the position, but we think it makes sense to have financial flexibility in order to be able to take opportunities as they for sure would present themselves in the organic and inorganic arena going forward.

Okay, thank you. And just on a data question, Spain and you’ve probably answered this already, I just didn’t understand it. You’re content costs seem to be some of the key drivers of your slightly weaker margins in Q1. Where is the lot of your fixed costs now? Are they rising as you grow your IPTV customer base and when could we see these content costs no longer dragging on margin? Thank you. José María Álvarez-Pallete: Well, in terms of our content costs in the first quarter in this year, it has been 50% higher year-on-year and almost two-thirds of that is fixed and therefore, it’s not linked to the number of customers. So, in this part of the number of subscriber is going to be increased, the average cost per subscriber is going to decline. And this formal decision companies book annually, while TV channels’ contents are booked depending on the number of subscriber. First quarter, the costs grew quarter-on-quarter on more subs, on more TV channel. That’s a variable cost but also let me add that the [technical difficulty] TV customers we will have and that would be the case once we will consolidate in the Digital Plus customers, this variable part will be diminishing. And also, as part of the remedies, part of the fixed costs of those content will be distributed according to the wholesale offer. So, I think this trend should be -- is there, is there to stay, but is going to be diluted the more we grow on the TV side.

Thank you very much, thank you. Pablo Eguirón: Thank you, Justin. Next question please.

Our next question comes from Fernando Cordero from Banco Santander. Please go ahead.

Hello, good afternoon. Thanks for taking my two questions. The first one is related with the one-off accounted in the first quarter and I would like to know just this EUR1.18 billion one-off could be fully considered in terms of cash, fully considered as credit going forward in order to understand the cash impact of this event. And the second question is related with DTS as a follow-up and you have been describing what could be the potential synergies in topline but I would also like to know your views on the potential synergies in terms of the platform operations in that sense at which extent and excluding the content costs, where are the room or which is the room in order to obtain some synergies from the operation of Canal Plus, obviously not including the tax synergies that are present already in Digital Plus? Thank you. Ángel Vilá: Okay. Regarding the tax credit in the pricing from the sale of O2 UK, this arises from the fact that the book value of O2 UK is different for accounting purposes and for tax purposes. The accounting book value was reduced by the dividend received, including those dividends received before 2009 where the tax law change has been. So, this accounting book value will probably generate a capital gain when we close a transaction. Tax wise, the book value was not reduced by dividends received in 2009, so it will generate a tax loss. We already had referred tax asset in our books for this concept, but once the UK is recorded, the held for sale of this tax asset has to be taken to the P&L. This is an item that’s fully accrued to Telefónica. Although it’s reported in the line of discontinued operation, this will fully accrue to obviously to the parent company and shareholder and these will be converted into cash for use against taxable gains. Our current estimate is between year 5 and 8, because we have other tax loss coming forward that we can use ahead of that that this will fully go through our – to reducing our cash tax rate in the future. José María Álvarez-Pallete: In terms of the question about synergies, in terms of contents, let me also try to derive the fact that we aim to have synergies in country not just in Spain, we are going to be aggregating the content acquisition of all the TV platforms that we have all along the Group and remember that we are growing significantly TV in Brazil and the remainder of the Latin America. And therefore in terms of content synergies, we are going to be aggregating volume, not just because of the cash to measure the former Fusion offer in Spain, Movistar TV, but also because of the customers that we have in Latin America. Other source of synergy that we were excluding when we were doing the calculation of the value of Digital Plus includes for sure technology, namely the over-the-top platforms, I mean you know that they have a successful over-the-top platform that we intend to explore and to modify. I have been already detailing the cross-selling opportunities in terms of revenues on the Digital Plus customer base and on the Fusion customer base increases, but we don’t have TV capacity with our own network in Spain. But also mainly satellite capacity that we aim to put on top of the table to reach additional synergies. So there are revenues because of cross-selling in both customer base content, simplification in terms of systems and in terms of the offering to one platform [indiscernible] satellite capacity, that would be a largest chapter of synergies that we are analyzing and trying to implement.

Thank you. Great enough. Pablo Eguirón: Thank you, Fernando. Next question, please.

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

Hello, guys. Just a couple of simple questions for me to help with the modeling – hello, can you hear me guys? Hello, can you hear me? Pablo Eguirón: Hello, can we go to the next question please.

Hello, sir. Next question will come from Mandeep Singh from Redburn. Please go ahead.

Hello, thank you. Can you guys hear me? Hello, can you guys hear me? Pablo Eguirón: Yes, we can.

Okay, thank you. I have two questions, please. One, sorry to keep on coming back to Spain, I know it’s been a big focus of the conference call. But referring back to the transcript of the Q4 results, clearly Spain was guided, and it was guidance, not ambition to grow on a cumulative basis. So I am just wondering if you could give a little bit more color on the softening of that tone. Secondly, just wanted to ask your perspectives on Brazilian consolidation, whether you think there is any sense of urgency on your part or on the part of the consortium and where do you stand on Brazilian consolidation? Thank you. José María Álvarez-Pallete: On your question of Spain, we were aiming at revenue growth and we’re still aiming at revenue growth on cumulative basis this year. We have just one recent guide, which is the Group guide as we are not guidance – we are not guiding by regions and we just have guidance on the listed companies namely in Germany and in Brazil. But reiterating that we are still aiming to a cumulative revenue growth in Spain this year, we are just updating on the recent events. And in order to get there to that revenue growth, we needed to implement several things and we have been implementing during this first four months of the year and it looks like going into right direction in spite of unexpected events as I was mentioning before, the strike and the delay on the cross-selling activity on the Digital Plus customer base and in terms of consolidation in Brazil? Ángel Vilá: So in terms of consolidation in Brazil, our focus now is closing GVT which we expect by the end of May and executing a very smooth integration, capturing for synergies because with a combination of Vivo and GVT, we will have the best assets and the best management in Brazil. We have full optionality regarding potential consolidation. We are market leaders and we can benefit in many ways from potential consolidation, which we are believers we would be supportive, but we believe we have full optionality actively or passively in that process when it starts.

If I just follow up very quickly, previously, you referred to whether the stars have been aligned or not been aligned, sort of where are we now on cosmic activity please? Ángel Vilá: Well, we aligned one of the more shining stars that was in Brazil which was GVT. For the rest, it's gotten a bit cloudy, so we cannot really see the stars, but we believe at some point, it makes sense that the market may consolidate because there are potentially very strong synergies on that type of transaction for it to happen probably some people need to or some issues need to be addressed. One important item is the concession negotiation this year that affects different players and that can take one-off of the roadblocks and another possibility is to see whether there could be new entrants or those potential new entrants actually decide to divest out of the market, which could create other opportunities. So there are many moving pieces and where we will continue to monitor. We think we have positioning which we can have lots of optionality in any of the potential scenarios that could develop in Brazil and create value for our shareholders in doing so.

Thank you very much. Pablo Eguirón: Thank you, Mandeep. We have time for one last question please.

Thank you. Our last question comes from Ivón Leal from BBVA. Please go ahead. Ivón Leal: Hello. Good afternoon, everybody. Just coming back to Spain, so I would add that my question is on the mobile service revenues, given the price increase announcement in February, I would have expected slight sequential improvement in mobile service revenues where there is actually, the reverse trend is -- there is a slight deterioration versus four quarters, so if you could explain that, maybe is there any trend I'm missing and given that you guys have some visibility on the second quarter, I don't know if you could share with us if that price increases are already improving the trends for mobile service revenues on the second quarter and the second one is a very brief one on Digital Plus, do you have an estimate of what percentage of Digital Plus customers are already your broadband customers, just to give a sense of what is cross selling opportunity there? José María Álvarez-Pallete: Thanks, Ivón for your questions. In terms of mobile services revenue, we have been trying to guide you or to indicate to you during the last quarters that because of allocation, it makes less and less sense to follow those independently because of the allocation that we do namely on the Fusion, because Fusion has become so relevant in terms of size and strength in spite of the effort that we have been doing to upgrade the Vodafone in Spain, it's going to be less relevant to monitor in terms of mobile service revenue, because it has a very marginal impact considering the allocation of the bulk of the revenues. So I would strongly suggest to keep focusing on service revenues and overall service revenues, excluding handset, it has been improving roughly a little bit more than one percentage point quarter-on-quarter in spite of seasonality and again that drives us to the idea that their revenue growth in Spain -- revenue stabilization in Spain keeps growing in to the right direction and I think that there was a significant part or a very important part of our overall guidance at the group level in terms of accelerating our revenue growth all along this year. In terms of overall guidance, we said that we were growing above 7% if I remember correctly, we are growing close to 9% and therefore, I think that if you judge upon the trends in Spain and the trends everywhere else, you will see that all along this year, we should be updating you on our guidance evolution, because if we keep going into the right direction in Spain and it looks like we are going into the right direction in Spain and the remainder of the group, namely Brazil keeps going into the right direction, we are beating our competitors, we are doing better than competition and the remainder of [ph] Latin America. We keep executing the synergies and the rationalization of the markets in Germany. I think that we are on the right track to be able to update you on our guidance along this year. In terms of the cross selling opportunity in Spain, yes, we have an idea now that we have been able to get closer to Digital Plus, the customer base of Digital Plus, because were not able to do that before the approval. With the completion of the process, we have an idea that we are talking about several hundred thousands of customers. We've not disclosed that, but it's a significant part of the customers today that are still not with us and therefore I think that the upselling opportunity that we were selling there, contemplating there, is at least of the size that we thought it would be. So I think that there is opportunities there and now it's about execution. It's about how fast we are going to be able to offer an attractive proposition to those customers, but the size of the customer base that we thought would be there, we thought would be a subject to cross selling is the same size or slightly higher than what we thought. Ivón Leal: Thanks very much, José María. Ángel Vilá: Thank you very much for your participation and we do certainly hope to have provided some useful insights for you regarding the results of the quarter that represents the starting point of new profitable growth cycle. Should you still have further questions, we kindly ask you to contact our Investor Relations Department. Thank you. Good afternoon.

Telefónica January-March 2015 results conference call is over. You may now disconnect your lines. Thank you.