Good morning. Thank you for standing by, and welcome to Telefónica's January-June 2022 Results Conference Call. [Operator Instructions]. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Adrián Zunzunegui, Global Director of Investor Relations. Please go ahead, sir. Good morning, and welcome to Telefónica's conference call to discuss January-June 2022 results. I'm Adrián Zunzunegui from Investor Relations. Before proceeding, let me mention that the financial information contained in this document has been prepared under the International Financial Reporting Standards as adopted by the European Union. This financial information is unaudited. This conference call and webcast, including the Q&A session, may contain forward-looking statements and information relating to the Telefónica Group. These statements may include financial or operating forecasts and estimates or statements regarding plans, objectives and expectations regarding different matters. All forward-looking statements involve risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such statements. We encourage you to review our publicly available disclosure documents filed with the relevant securities market regulators. If you don't have a copy of the relevant press release and the slides, please contact Telefónica's Investors Relations team in Madrid or London. And now let me turn the call over to the Chairman and Chief Executive Officer, Mr. José María Álvarez-Pallete. Jose María Alvarez-Pallete: Thank you, Adrián. Good morning and welcome to Telefónica's second quarter results conference call. With me today are Ángel Vilá, Laura Abasolo, Eduardo Navarro and Lutz Schuler. As usual, we will first take you through the slides and we'll be then happy to take your questions. During the second quarter, our continued focus on our strategic objectives resulted in improved momentum with accelerated revenue and OIBDA growth in reported and organic terms. Business performance was strong across our markets. In Spain, we improved OIBDA year-on-year. In Brazil, we strengthened our leadership after the Oi mobile asset acquisition, while improving financial and operational momentum. In the U.K. on the first anniversary of VMO2 integration, synergies are being realized. The company is back to revenue growth, has accelerated OIBDA growth and accelerated investments in digital infrastructure. Finally, Germany is progressing ahead of plan in 5G rollout, 50% population coverage while financial performance remained robust. In fact, our German colleague just upgraded OIBDA full year guidance. We have so far over-delivered and feel prudently confident for the full year. As such, and despite the uncertain macro environment, we are updating our 2022 guidance. We currently don't see a deterioration of our operation and financial momentum and now expect to be in the high end of the low single-digit growth range for revenues and in the mid- to high-end in OIBDA terms. On the opportunity side, we announced this week a new fiber vehicle in Spain that will allow us to capture further fiber opportunity alongside monetizing at various rich multiples. Telefónica Tech continues as a source of growth, successfully integrating acquisitions and reinforcing capabilities, which are attracting potential investors. Telefónica España's strong operational performance has increased optionality. In Spain, in-market consolidation is on track, and we should benefit from European recovery funds. Also, we believe there is room for an improved regulatory outlook in Europe, a potential tailwind for us and the sector as a whole. Within this context, after the kernel ecosystem, we are designing the company for aiming a bigger stake of the digital economy. And to note, the contribution to society via our network reach, our products and services and our social efforts to make technology more accessible. On Slide 3, you can see our improving organic trends with revenue growth accelerating by 2 percentage points, service revenue by 1.9 percentage points and OIBDA by 1.3 percentage points versus the first quarter figures. Let me further highlight that all businesses are back to revenue growth during this quarter. In reported terms, ForEx has been supportive in Q2 year-on-year, adding 5 percentage points in revenue and 1 percentage point in OIBDA growth. We are back to reported group revenue growth in the quarter for the first time since the third quarter of 2019 despite being still impacted by the consolidated effects while underlying OIBDA growth improved sequentially by 8.6 percentage points. In the month of June and under a like-for-like perimeter, we grew top line by 12.1% and OIBDA by 4.5% year-on-year. As for the revenue base, B2B revenue grew by 3.6% year-on-year in organic terms in the second quarter, whilst improving the mix with an increased contribution from the digital ecosystem development mainly in Spain and Brazil. Network wise, we expanded FTTH to 165 million premises passed as of June, being world leader ex China. And 5G footprint is enhanced in core markets, enhancing our premium quality proposition. Free cash flow improved sequentially in the second quarter to EUR 835 million and is up 44% year-on-year the first half of the year to more than EUR 1.3 billion. Finally, and on the debt side, we have strengthened our financial statements and guaranteed solvency, improving our funding and liquidity position as Laura will explain later on. Including post-closing events, our net debt stood at EUR 27.8 billion with a stable leverage ratio versus December '21. End of the period, ForEx OIBDA despite incorporating impact on Oi and BE-Terna acquisition. Turning to Slide 4. You can see financial key metrics for the group. In organic terms, and once -- aggregating 50% of VMO2 revenues, OIBDA and OIBDA [indiscernible] grew solidly by 5.2%, 3.4% and 4.1%, respectively. In reported terms, trends improved sequentially, though very still -- were still affected by changes in the perimeter, which deducted 11 percentage points from revenue growth and 3 percentage points from OIBDA growth. As I said previously, as from Q3 onwards, our reported change year-on-year will be on a like-for-like basis. Net income surpassed the EUR 1 billion mark in the first 6 months of the year with EUR 320 million in the quarter, and free cash flow was strong and a positive factor for net debt evolution compensating part of the EUR 1.4 billion impact, of course, that's related to the Oi Mobile acquisition and BE-Terna. Net debt stood at EUR 28.8 billion. On Slide 5, and as I highlighted at the beginning of the presentation, we posted growth in reported trends across all of our businesses despite a challenging macro context. On a sequential basis, there was an acceleration in year-on-year growth in most of our operations. Revenue and OIBDA in Hispam and Brazil are growing very strongly at double-digit rates. German growth remains steady. In Spain, we delivered improving performance, and the U.K. OIBDA is already growing in the mid- to high single-digit range on synergies realization. So we have reinforced our position and manage inflationary pressure as well. Looking at inflation in more detail, we have been able to partially mitigate its impact, thanks to the strong revenue management with a strong market position and pricing power. On the OpEx side, we are not immune, but having taken measures to offset inflation-related impacts. Our exposure to energy cost is 4% of our OpEx with a mix of valuable fixed and hedged contracts. We have renewable long-term agreements in place and 100% of our electricity is from renewable sources in core markets and Peru. We are pioneers in legacy shutdown and continue modernizing our network with fiber and launching 5G, which are more efficient in terms of energy consumption. Our wage cost base is well hedged across country. representing a group level of 13% of revenue, significantly lower than most of our peers, while these costs reached 6% of revenue. Finally, in CapEx terms, we have as well less than average capital intensity with up to 15% of sales in 2022. Moving to Slide 6, where we are updating our annual guidance. Our first half of the year results are above our guidance in terms of revenue growth, 4.2% and in the high end of expectations in terms of growth, 2.7%. CapEx to sales also stands below what we guided for 2022, 13% up to June. We have over-delivered despite a tougher-than-anticipated environment, and we remain prudently confident with our [indiscernible] targets. We see, in fact, sources of potential upside, even taking into account existing uncertainties and decided to update our guidance. We aim to comfortably set at the high end of the low single-digit guidance range in terms of revenues and at the mid- to high end of the range in OIBDA terms. Our shareholder remuneration -- we paid the second tranche of our 2021 dividend last month through a voluntary scrip dividend, in which 74.5% of shareholders opted to receive new shares. For the 2022 dividend, EUR 0.15 per share will be payable in December 2022 with another EUR 0.15 per share in June 2023, both in cash. Regarding treasury stock, the adopting of the corresponding corporate resolution will be proposed to the shareholders' meeting for the cancellation of the shares, representing 0.4% of the share capital held as treasury stock. Telefónica has made steady progress this quarter against our ambitious ESG goals. Here are some examples. On the environmental side, I would like to highlight that we are the first in the telco sector to have our net-zero target validated by the science-based targets initiative. We are first in the sector to have joined the World Economic Forum's 1 trillion Trees initiative and our solar power JV in Spain allow us to offer our customer greener choices. On the social side, we continue to connect the unconnected. For example, with Internet for All in Peru, 2.5 million people in rural areas now have access to 4G. In the last 6 months, we have provided employability training to almost 1 million people via our foundation. Meanwhile, we continue to mobilize our employees for social good with 29,000 taking part in our annual volunteering day. In governance, we remain committed to sustainable financing with two new bond issuance. We have also increased our ambition and aim to achieve around 25% of total financing linked to sustainable indicators by 2024. And we have launched a company-wide ESG training costs with our updated responsible business principles. We are proud of the progress we are making and continue to seek opportunities that bring value to the company and to society. And now I will hand over to Ángel.

Thank you, José María. Let me start with a review of our businesses. Telefónica Spain improved its commercial activity during the second quarter across all services with positive net adds in fixed broadband, thanks to our fiber expansion. I would also like to highlight the good reception of the new Mi Movistar portfolio launched in May, which already accounts for more than 10% of the convergent customer base. Convergent ARPU stood at EUR 90.1, up 3.1% year-on-year, while churn improved once again to 1.1%, its lowest level in the last 6 years. This is translated into the best ever NPS, improves our strong market positioning and the quality of our product offering. Revenue growth accelerated by 0.4 percentage points sequentially to 1.3% year on growth. The fifth straight quarter of growth driven by better service revenue growth and continued strong handset sales. OIBDA trend improved by 1.5% -- no, 1.5 percentage points sequentially to minus 3.4% year-on-year in Q2 '22. OIBDA trends improved despite the continued impact from higher energy costs, thanks to our focus on cost efficiencies, like the headcount reduction program and the wireline network transformation. Telefónica Spain maintains in second quarter '22 a benchmark cash margin, OIBDA minus CapEx of 25%. Moving to Germany on Slide 9, which delivered another quarter of strong operational and financial momentum whilst also celebrating O2's 20th anniversary in the German market. The 5G network rollout is making strong progress with 50% population coverage achieved well ahead of target. As a result, Telefónica Deutschland has raised its ambition for 5G population coverage to 60% by the end of this year, with no change to CapEx guidance due to roll out efficiencies. There has been continued commercial momentum on the back of strong customer demand for VO2 portfolio and a solid contribution from partner runs with churn starting to normalize following the introduction of the European electronic communications scope in the first quarter. Moving to financials. In the second quarter, revenue grew by 5.8% year-on-year and OIBDA by 3.1% year-on-year with improved operational leverage in both fixed and mobile on the back of own brand momentum and some support from the recovery of international roaming. The company continued to execute its investment for growth program, according to plan in its final year, with first half '22 CapEx up 9.5% year-on-year organically. CapEx-to-sale ratio peaked in and it is well on track to achieve normalized CapEx to sales levels at the year-end. Finally, Telefónica Deutschland's OIBDA outlook has been upgraded to low mid-single-digit percentage growth. We now move on Slide 10 to the U.K. and our joint venture, Virgin Media O2, which celebrated its -- its first birthday in June and continues to integrate and transform at pace whilst also investing heavily to expand and upgrade its fiber and 5G networks. In May, VMO2 launched its first sustainability strategy as a joint business, The Better Connections Plan, outlining its bold commitments to cut carbon, champion the circular economy, such as recycling devices and donating unwanted smartphones and tablets and support communities as it upgrades the U.K. This quarter, the company saw a sequential improvement in both mobile and fixed net additions following the successful implementation of price rises. This also helped VMO2 returned to revenue growth in the second quarter with accelerating OIBDA trends of plus 4.8% year-on-year, which were also supported by cost efficiencies and the start of the realization of synergies. Moving to Brazil on Slide 11. This quarter, we consolidated the mobile assets acquired from Oi, which allowed us to further strengthen the leadership in the market in accesses, spectrum and service quality. Commercial activity was strong leading to mobile contract accesses growth of 20% or 8% ex Oi impact, mainly thanks to improvement in churn that reached 1%, the lowest ever. Fiber-to-the-home connections increased 25% year-on-year. Fiber-to-the-home is the driver of the fixed broadband accesses growth, leading to the second quarter in a row with positive net adds. Fiber continues to expand to 21 million premises passed, well on track to the 29 million target by 2024 year-end. Organic revenue and OIBDA growth accelerated to plus 11.1% and plus same, 8.5%, respectively, and to plus 34.9% and 17%, respectively, in reported terms. Excluding the Oi impact, year-on-year trends accelerated organically in revenues to a 7.6% growth. And cash conversion remains very strong with OIBDA minus CapEx up 3.8% organically versus the first half of 2021. Moving to Telefónica Tech on the next slide. This is a growth story. We have continued to progress in our objective to build a scaled European champion in tech services in the first half of this year. Telefónica Tech has now around 5,500 highly skilled people, EUR 1.2 billion of revenue base in the last 12 months and higher geographic diversity. Solid year-on-year revenue growth continued, up 72% in the first half of '22, massively outperforming the market with also constant perimeter growth of 30%. Commercial activity remains robust in both Cyber & Cloud and IoT and Big Data, with bookings growing by 70% year-on-year in the first half in both units and increased weight of higher-value services. This will support a strong revenue flow going forward. In detail, in Cloud & Cyber, we strengthened our partner ecosystem with alliances with Netskope, Constella Intelligence, Cisco. And in IoT and Big Data, we are accelerating in specific sectors like water metering and smart stadiums, among others. Finally, we had several positive recognitions by industry analysts, have advanced global data, improving our competitive position in the EMEA region. Turning to Slide 13, our infrastructure portfolio manager, Telefónica Infra has strengthened its portfolio with this week's announcement. In Spain, we have signed an agreement to sell a 45% stake of BlueVia for EUR 1 billion in cash, valuing the company at EUR 2.5 billion, an implied high multiple in the fiber space of 27.1x over pro forma estimated OIBDA for 2022. Telefónica Group will keep 55%, and the consortium of Vauban and Credit Agricole Assurances renewed long-term investors, the remaining 45%. The target is to pass 5 million premises, of which 3.5 million brownfield premises as of June and to deploy the remaining 1.5 million greenfield premises in the next 2 years. The growth of this company is backed by Telefónica's commitment to switch off its retail copper network in 2024. In the U.K. we continue to work in our new fiber JV process. In Germany, [indiscernible] operations in multiple regions have reached more than 380,000 premises under signed MOUs as of June 2022. And meanwhile, FiBrasil maintained its rollout momentum reaching a total of 2.5 million premises passed as of June 2022. ON*NET FIBRA in Chile, further increased its deployment with close to 200,000 additional premises passed. And in Colombia, ON*NET passed just under 1/3 of 1 million premises in the second quarter 2022. During the first semester, Telxius subsea cables good commercial momentum, together with good cost management contributed to a year-on-year organic OIBDA growth of 6.4% and a high mid-teens figure on a reported basis. I now give the floor to Laura, who will review Hispam's operations and the group financial results.

Thank you, Ángel. Moving to next slide. On Hispam, we continue to maximize growth, capturing the high demand for connectivity in the region growing 19% year-on-year in FTTH and cable connections and 5% in contract accesses. Let me mention the significant recovery of mobile contract net adds in Chile and sustained growth in Colombia and increased connections of FTTH in Chile and Colombia of 31% and 62% in June. This was another quarter where our results have been very robust, posting revenue growth in every single country in organic and in reported terms. It is worth noting the supportive trend on LatAm currencies, which had a strong positive effect on year-on-year reported growth, driving revenue and OIBDA growth of 18.4% and 33.4%. Thanks to the transformation of operations, efficiencies and CapEx rationalization, OIBDA minus CapEx grew an impressive 27.9% versus the first half of 2021 organically. Turning to Slide 15. Net financial debt at the end of June 2022 stands at EUR 28.8 billion and will be reduced to EUR 27.8 billion after post-closing events, that include the net proceeds of the closing of Bluevia transaction, the FiberCo in Spain, the recovery of Telxius tax payments in advance and the acquisition of an additional stake in Telxius. We also strengthened our balance sheet at the firm's net worth level with shareholders' equity up 22 -- sorry, up 12.2% versus December 2021 to EUR 24.9 billion as of June '22. We are well positioned to face any new market dynamic. Telefónica maintains a strong balance sheet derived from a prudent debt management as we have been refinancing in advance near-term debt maturities with long-term financing at historical low interest rates. Average debt life stands at 12.8 years, and our debt is 76% linked to fixed rates for limiting the impact of the rise in interest rates on our financing costs in the coming years. Also, a robust liquidity position that excess maturities beyond 2024 helps us to comfortably face any market environment. Let me highlight Telefónica's pioneering position in ESG financing within the telco sector, surpassing the EUR 10 billion sustainable financing goal. In January, the company refinanced its flagship syndicated loan of EUR 5.5 billion in May, successfully issued its first senior sustainable bond for EUR 1 billion. And recently, Telefónica Brasil completed its inaugural, SLB debentures for BRL 3.5 billion. So we are truly committed to increasing our ESG financing in line with targets outlined before by José María. On top of that, we have increased local debt to align it more closely with our FX exposure. I will now hand back to José María, who will wrap up. Jose María Alvarez-Pallete: Thank you, Laura. Our results published today demonstrated our improved growth momentum both in reported and organic terms. And let me highlight again, we return to revenue growth in all business during the quarter. In addition, we have a supportive FX backdrop, and we are managing inflationary and macro challenges through efficiencies, activity level and proactive debt management. Commercial progress on FTTH and 5G are driving growth with our investment focus on these new technologies, adding to better churn management and customer satisfaction. To remark that we will continue to capture fiber potential growth with the announced vehicle this week in Spain. We are upgrading our guidance for 2022, pointing to the high end of the range in revenue growth and to the mid- to high-end in the range of the range in terms of OIBDA growth as we remain prudently confident in our ability to carry our momentum through the second half. This is both a prudent and balanced approach between sources of potential asset and the uncertain macro situation. We are taking steps forward in our ambition in telco industry evolution. We should move to common lasers to enable any technical capability from voice to a state-of-the-art digital services repositioning telcos into the value chain through digital enablers. The challenge is to make Network-as-a-Service, connectivity for the metaverse and the web-free worldwide available. And finally, and within these challenging times, we remain committed to help society, a cornerstone of our company mission, make our work more humane by connecting lives. Thank you very much for listening. We are now ready to take your questions.

[Operator Instructions]. And now we're going to take our first question, the question comes to line of Pilar Vico from Crédit Suisse.

I have two on my side. So first one is around the OIBDA margin in Spain. Your margins are the lowest as we can see in the historical chart. I would appreciate some color, please, around EBITDA margin outlook. What will we expect from here if you're balancing your cost cutting versus continued inflationary pressures and if the margin can actually rebound from here? And the second is around how much do you expect your energy cost to increase in 2023 versus 2022 at current spot rates? And also maybe we've seen some weakness in enterprise additions of [indiscernible] today. How is that enterprise business developing? Jose María Alvarez-Pallete: Hello, thank you for your questions. Regarding the outlook that we see for the Spanish business, and you were asking about the EBITDA margin, but let me give you the full view of the outlook now. First, on the revenue side, being prudently confident we see continued momentum in our revenue line. We aim for slightly year-on-year growing revenues in 2022. We see a market that is expected to remain competitive in the low end, rationale in the high end in this market, we see growth drivers on recovery of ARPU in consumer revenue. We see growth in digital services. And we also see it to be as one of the growth drivers driven by IT growth. Wholesale should remain quite stable despite the wholesale TV revenues being diluted from August '22. But all in all, we aim for a slightly year-on-year growing revenues for 2022. At the same time, to your question, we expect higher OIBDA in the second half than in the first half. Margin wise, we should remain in the high 30s, even expecting a pressure from energy costs, but those at some point will start annualizing compared to last year. Some of the levers of the revenue growth that I was talking before, such as IT or even handset sales have lower margin. This will be offset by inflation in the second half on football costs, the full kick-in of people cost efficiencies. And I said, lapping or annualizing of energy costs, and we will continue, of course, generating efficiencies to offset the potential pressures in OIBDA. So we expect margin to remain in the high 30s. And as for CapEx, we expect a similar weight of our revenues to 2021, which will allow us to have -- continue to have a benchmark operating cash flow for the full year. So summing up, we are prudently confident on our solid revenue performance that despite lower margin than 1 year ago, they are simply contributing to an OIBDA that will show a better second half than in the first half in absolute terms, and that would be the outlook. On the second question on energy costs, this has been clearly a significant element which is -- which we need to manage in all operations. In Spain, we have now covered with long-term agreements around 50% of our energy costs. In Germany, we have 80% hedged in 2022. In the U.K., we are nearly fully hedged. In Brazil through PPAs and distributed generation, which are fixed for the next 5 to 15 years, we are covered by more than 75%. So we are dynamically managing this element of our cost function, which clearly has been impacting our margins this year, and we are progressing towards coverage of the 2023 energy costs, but we have to be mindful of market conditions, not to lock in the record high prices that we're seeing now in the market. Sorry, you had a final question on B2B, I think. On B2B at group level, we are seeing resilient B2B growth, we are 3.6% up in the second quarter in organic terms and revenues. In Spain, the second quarter B2B revenues are growing. This is a combination of communications being flat and digital services growing high single digit. In Brazil, our B2B is growing also high single-digit. Germany is growing, but it's from a small base. In the U.K., we are suffering pressure with a decline of revenues of 15.6%, a decline but less than other competitors that have announced results today. And in Telefónica Tech, we are growing 72% in the second -- in the first half, 30% on an equal base growth. Europe, of course, as I was saying when I was reading my notes, we have a backlog of orders in Telefónica Tech that ensures the revenue growth in the coming quarters. And in some of our geographies, especially in particular, in Spain, we are seeing the benefit already of the European recovery funds in our accounts.

The next question comes from the line of Joshua Mills from Exane BNP Paribas.

It's the first one, I'd just like to get your perspective on Spanish commercial trends. And you talked about the high end of the market [indiscernible] being less so. Maybe in the past, you've given some detail on the shift towards the O2 brand. That would be interesting. And I also note that there has been a bit of a disconnect between your convergence and your broadband net adds with convergence doing negative and broadband positive. Is that because of second homes or product mix? So that was great. And then secondly, on a follow-up to Pilar's question around next year, lease expectations. You talked about the fact that these aren't all inflation rates, but it would be great to get us to steer on where you see cash lease costs settling down both for this year and that I know is that part of your official guidance that imported to free cash flow? Jose María Alvarez-Pallete: Okay. Sorry, we were trying to -- the line was not very good, and we were trying to understand the question. If I understood right, which I'm not sure, you were asking about commercial KPIs for Spain in the second quarter. In the second quarter, our commercial performance showed an improvement of type of accesses versus Q1. And we have to highlight the positive net adds in fixed broadband that we're leveraging our new competitive commercial proposal included in the Mi Movistar portfolio. So we are improving in the trend in our convergence -- in our convergence strength. And I should say that since we launched my Mi Movistar, the sales of convergence offers have been -- are to the tune and although it's early days of plus 10% compared to prior to launching this offer. In fixed broadband, we are in positive territory, both in postpaid and TV, we have improving trends. This has been also supported by the lowest churn that we have in the last 6 years, 1.1%. It's the best since 2016, excluding, of course, the quarter that we had a lockdown and we have the best NPS ever. Our strategy has been resulting in an ARPU increase -- convergent ARPU increase of 3.1% year-on-year in Q2 in spite of the fact that in the second quarter, we always experience a seasonal factor, which is the downgrade of the end of football season, that in this quarter has been less impacting than in previous years, leverage on our new conversion portfolio. I don't know if this response for your question. If not, please reformulate it because I was not able to fully understand it.

Yes. Sorry if I was unclear. I guess the only other base point I was going to ask about is the mix of product within your space in the past, you kind of talked about the shift suited O2 versus Mi Movistar. I wonder if you could give any color there as well. Jose María Alvarez-Pallete: As you know, we stopped giving the breakdown of high, medium and low value segments because the definition for us of those high, mid or low ARPU segments were different from our competitors. And in the end, they resulted in sharing some commercial sensitive information. What I can say is that maybe to help you understand the evolution of ARPU, what have been the moving elements on this. On the one hand, we had a more for more move in the first quarter that now is in the second quarter coming into full effect. We have a lower dilutive effect on promotions. We have a higher contribution of the SoHo portfolio, new digital services in our ARPU. At the same time, O2, and this may respond partially your question, has a growing penetration, which is slightly diluting the ARPU. And we had some rulings again, some of our advertising revenues that we had. So on the moving parts of the ARPU have led to an increase in the second quarter, which is higher than the increase we had in the first quarter year-on-year. And we have had quarter-on-quarter a slight deceleration of ARPU due to the seasonal downgrades that I insist has been -- have been less propitiated than in previous seasons, thanks to the new Mi Movistar portfolio.

Thank you for your question. I think it was related to lease inflation and impacting free cash flow. The increase in lease as we have seen in Q1, it's a natural consequences of the Telxius deal we closed in 2021. But as you are aware of, that effect is more than offset by the strong positives derived from the transaction, not only in reduction of net debt, or to -- and the ratio, of course, also because of the record multiple regarding in that transaction. You also have to take into account that in Q2, we are including some of the leases coming from Oi. Oi includes 2,700 sites, but half are expected to be divested to comply with the antitrust call remedy. On top of that, the FX in the same way helping revenue on reported OIBDA. It has the opposite effect in leases, and we have a high proportion of leases in Brazil. Also, interest rates are impacting and also obviously inflation. But please, let me remind you that not all our lease contracts are linked to inflation. They may be linked to other indexes, not all the renegotiations happen at once. So -- and we are actively negotiating with some of our long-term providers, everything related to that, not only inflation, energy pass-throughs and so on to minimize the impact. So basically, the bulk of it is the portfolio reconfiguration, with Telxius not being a third party, FX and interest rates. And despite that pressure, you have seen that free cash flow saw a very solid performance year-on-year, and we expect that to be the case for the remainder of the year.

The next question comes from the line of David Wright from Bank of America.

I have two, please. I guess the first one is a little more strategic. LatAm ex Brazil is performing well now. You've obviously gone through a process of decapitalization of the segment, but it is still classified a little more noncore for you. Could you give us your latest thinking on the future of those assets, whether maybe there's been a change of decision with the improved performance? My then second question, Lutz, just wanted to understand the revenue growth in the U.K. And if I'm looking at this correctly, the organic revenue growth only improved 30 basis points or so from Q1 to Q2, and that's despite the pretty substantial price increases in the consumer segment. Yes, your enterprises outperformed BT today, but it looks like your consumer is significantly underperformed? Or am I reading that incorrectly? Any color on the moving parts there would be appreciated.

Thank you, David. I'll take the first one on Hispam ex Brazil. Our strategy remains intact regarding Hispam. We remain committed to modulate our exposure to the region, aiming to increase our return on capital employed. But by the way, has been happening during the last 2 years. We have been able to approach the region with a disruptive new operating model, both from an organization and from an infrastructure perspective. And on that regard, allow me to say also that we have been able to perform the turnaround of the business and therefore, combining both things, we have been able to reduce capital employed in the region by 12% year-on-year and 33% since 2019. Looking forward, what you should expect from us is to continue executing our strategy. And overall, we think Hispam is a more favorable framework. So you should expect from us to keep focusing on modulating our exposure and significantly trying to increase our return on capital employed. Jose María Alvarez-Pallete: Regarding the U.K. revenues, if you could Lutz, take the question?

So you're right, our revenue overall has been grown by 2% year-on-year. When you look into the pieces. Mobile, we grew by 2.2%, and that was driven by the price rise. Now we apply the price rise to airtime while our competitors apply it to handset and airtime. And therefore, you see a bit of higher revenue growth coming out of that. I think the bigger delta, obviously, when you compare it with the numbers also today released with BT and not sure if I fully understand it, but I can give you my initial answer. There's a couple of differences, right? So first of all, to be clear, we have provided not the price in the terms and conditions, right? So we applied 6.5%. And that gives customers immediately 30 days after the time to react and the reaction was in Q1 and the reaction was pretty similar than a year ago. So -- and now we have also excluded a couple of customers, so a huge proportion were still in the promotion period. And so you will see over the term of the year that the price rise is kicking in. And I think when you compare that with BT, right, they have the price rise in the terms and conditions. The absolute number is higher. And also, obviously, the reaction has to be seen when the customers are coming off their minimum contract length. So while it was to us 30%. So you can expect our fixed ARPU to increase during the course of the year, not immediately, but also to be transparent here. We are seeing a higher demand from customers to negotiate harder when they renew their contracts, right? So retention discounts are a bit under pressure. And also when you look at the acquisition market, than more products around 30 pounds ARPU are driving the net adds. So I think there is some pressure in the market. We think we see it out of the cost of living prices, but you can expect from us to grow ARPU during the course of the year. I hope that helps, David.

It does. And just so I understand it was around 8% apply to mobile airtime, and it was about 6.5% applied, I think, to broadband pricing.

Almost correct. 8.8% -- 8.8% on...

I guess I understand the points you've made, but to see those percentages driving just a 30 bps delta from growth in Q1 just seems very unusual...

Well, there is -- obviously, we have exit -- on the mobile side, we have exited Dixons Carphone warehouse, as you might remember, yes. So this is still a drag in service revenue, David. And obviously, it's a growth in EBITDA. And this will wash out over the course of the year, right? So this is -- in service revenue, that's a direct -- a pretty material track, David, in EBITDA as a growth. And you won't see that repeating next year. Adrián Zunzunegui: We have time for 1 last question, please.

The last question comes from the line of Nawar Cristini from Morgan Stanley.

I have two questions. And so firstly, on the U.K., there were a number of M&A headlines. Could you talk a bit about your M&A strategy at VMO2 and maybe discuss the main objective you will keep in mind when assessing any M&A opportunity in the U.K. that will be has -- just as a general framework? And just following up on B2B. Effectively, we saw a number of tough prints from a number of global telcos in U.S. and Europe, but there were also some good prints and within your portfolio, as you mentioned, the mix is also different with the U.K. looking tougher than elsewhere. So could you discuss maybe why there is a disconnect between the U.K. and -- versus the portfolio in terms of B2B? Is that the exposure to legacy, which is -- should have an impact? Is it something to add? Any color to understand the mix will be very helpful. Jose María Alvarez-Pallete: Okay. Thank you for your questions. I will take the first one regarding potential inorganic moves in the U.K. I would address that on 2 fronts, on the infrastructure side. Liberty Global and Telefónica have initiated discussions with a number of potential financial partners regarding the opportunity to participate in the network build joint venture -- in a network built joint venture in the U.K. The focus of that JV will be built in a full fiber network of up to 7-meter premises in new greenfield areas by the end of 2027. What we can say at this stage is that discussions are ongoing, and we have had a good level of interest. There are no further new updates at this stage today. In case of further inorganic transaction, unfortunately, as you might imagine, we don't comment on market speculation.

Nawar, on your second question on B2B. I was saying before that at the group level, we are seeing a resilient B2B growth of plus 3.6% organically. And this is the result of very different situations across different markets. One of the differences comes from the market position, the strength of the fixed-mobile convergence and digital services position with the commercial force. We are very strong, for instance -- in markets like Spain, in Brazil in several of the markets in Hispam America. And these are markets where you can see us as growing. We started long ago the transformation of our B2B business. In the face of pressures on the traditional communications, we started developing and accelerating our digital services proposition for B2B, and this allowed us to create our specialist unit Telefónica Tech on areas that we identified early as growing areas in cloud, cybersecurity, IoT and Big Data. And we believe that this is a determinant factor under the performance that we are seeing in our B2B operations in those markets where we have a really strong established B2B presence, as I was saying before. In other markets like the German market, we have been more traditionally customer-centric and more mobile-centric. So it's a small base that we are growing. And in the U.K., maybe it has specific characteristics linked also to the dynamics linked to the concerns on the cost of living crisis. Before I hand it over to Lutz to give more color on the U.K. B2B, I should say that we see already results from the European recovery funds in our Spanish operation, we see a revenue opportunity in the coming years of close to that could even exceed the opportunity -- the whole opportunity, EUR 20 billion out of the EUR 70 billion that nonrefundable that will be devoted to digitalization. We are in a very strong position to -- for a share -- a relevant share of this, and we aim to capture across the coming years up to 2025, up to EUR 2 billion, around 10% of that opportunity. And we are already seeing results on this, not only on direct awards, but especially on awards that are being done to customers of Telefónica that then we provide digital services and in particular, and the digital kit project that has already started for SMEs digitalization. We have created specific products and specific processes to capture the share of digitalization of SMEs who get checks or bonds from the administration that then they have to spend in digitalization, and we are already materializing part of that money. So I would tend to think that in addition to our very strong capabilities and market position in certain markets. We also have this tailwind, which is coming to help us. On the specific U.K. situation, I'll pass it to Lutz.

Yes. Actually, the biggest drag is not the cost of living crisis, the biggest drag is that a year ago, so right, Q2 '21, we had massive dark fiber wholesale installations, right? So for instance, you use that for mobile backhaul linking 5G base station and so on. The character of these deals, a so-called sales-type lease deals are that you can recognize revenue and profit right away after installation. And that has driven a huge growth a year ago in terms of revenue and EBITDA. And obviously, it's nonrecurring. So -- and we are not installing on the same level this year, and therefore, you will see a big delta. I think the smaller piece is that we have had a bit supply challenge on devices for our smart metering program. So this was a bit -- inflation was a bit less, but we will make up for it during the course of the year. And then the last thing, as Ángel said, we see the same thing. The B2B digital services are growing more and more. And so I think you expect in the future, a different set of numbers. Cost in living prices is not directly impacting us as far as we can see in the B2B sector.

At this time, no further questions will be taken. Adrián Zunzunegui: Well, thank you very much for your participation, and we certainly hope that we have provided some useful insights for you. Should you still have further questions, we kindly ask you to contact our Investor Relations department. Good morning, and thank you.

Telefónica's January-June 2022 results conference call is over. You may now disconnect your lines. Thank you very much.