Good morning. Thank you for standing by, and welcome to Telefónica's January-June 2024 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. Adrian Zunzunegui, Global Director of Investor Relations. Please go ahead, sir.

Good morning, and welcome to Telefónica's conference call to discuss January-June 2024 results. I am Adrian Zunzunegui from Investor Relations. Before proceeding, let me mention that the financial information contained in this document has been prepared under 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 group. These statements may include financial or operating forces, and estimates or statements regarding plans, objectives and expectations regarding different matters. All forward-looking statements involve risks and uncertainties that cause final developments and risks to materially differ from those expressed or implied by such statements. We encourage you to review our publicly available 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 Investor Relations team in Madrid or London. Now let me turn the call over to our Chairman and CEO, Mr. Jose Maria Álvarez-Pallete.

Thank you, Adrián. Good morning, and welcome to Telefónica's second quarter conference call. With me today are Ángel Vilá, Laura Abasolo, Markus Haas, Lutz Schüler and Eduardo Navaro. As usual, we will first walk you through the slides, and we'll then be happy to take any questions. We are pleased to report solid Q2 results that demonstrate the continued success of our strategy. Our top line growth has accelerated, with revenue up 1.2% year-on-year, driven by sequential improvements in both our B2B and B2C segments. Notably, all our main markets are growing revenue. Our key markets are showing positive commercial momentum. In Spain, we are achieving annual growth across all main customer segments, Germany is expanding in all main access categories and Brazil is hitting record customer levels. This confirms our commitment to putting customers first. Importantly, we have seen robust growth in EBITDAL minus CapEx, which increased by 11.5% year-on-year. This impressive double-digit growth this quarter puts us year-to-date already trending above our full year guidance and position us well for the second half of the year. The strong performance was supported by the solid CapEx-to-sales ratio of 12.1% in the second quarter, reflecting our efficient capital allocation. This performance is also driven by our focus on operational efficiency. Our OpEx reflects the full impact of Spain's personal restructuring program and ongoing efficiencies for the decommissioning of legacy copper another legacy network within our portfolio. We continue seeking further efficiencies within our strategic goal to modulate exposure to Hispam while creating value for our shareholders, we have signed a nonbinding MOU with Medico for a potential corporate transaction of our operations in Colombia. In Spain, we have also signed a nonbinding MOU with Vodafone for the creation of a FiberCo that should bring further rationality and network optimization to the CTH market. Accordingly, we continue making good progress and remain confident in achieving our financial outlook for the full year 2024. Moving to Slide 5, we show how this strong momentum translate into tangible financial results. Starting with growth. Our top line growth accelerated to 1.2% on strong service revenue that grows by 2.2%. All main units showed revenue growth despite some weaker FX rates. This momentum is driven by high-quality customer addition across our fiber and mobile accesses, with premises passed by fiber to the [indiscernible] 13% year-on-year. Profitability remains core. This healthy top line expansion is driving profitability growth, with our EBITDA rising 1.8% year-on-year in the second quarter. We are seeing a virtuous cycle of growth and efficient outflows to operating cash flow. Our EBITDAL minus CapEx growth has elated by as much as 15 percentage points versus the first quarter, supported by our ongoing capital expenditure discipline. Our CapEx over revenue ratio stands at 12.1% for the quarter, demonstrating our commitment to efficient capital allocation. Importantly, this growth is slowing through to the bottom line. Adding facility, our second quarter free cash performance keeps us firmly on track to meet our full year targets. Excluding extraordinary tax payments in Peru, our free cash flow is growing by over 20%. We had a timing-related EUR 279 million payment in the second quarter. It was already factored into our guidance and doesn't affect our outlook. We remain confident in achieving our free cash flow objectives for the year. Laura will provide more details later. Going into greater detail on Slide 4. Our network transformation continues at pace. In the second quarter, we expanded our fiber-to-the-home footprint by an additional 2 million premises. Fiber coverage now reaches 66% of the population across our core markets, a 3 percentage point increase this quarter. Spain and Germany led the charge with average 5G coverage exceeding 90%. Our customers remain at the center of our transformation journey. We closed the second quarter with 392 million total accesses, adding 4 million new customers, which is an eight-fold increase from the previous quarter. Churn continues its downward trend, while our industry-leading NPS saw further sequential improvement. We are laser focused on operational simplification to profitable growth. The workforce restructuring program in Spain is already delivering full cost savings, fueling higher EBITDA growth as we have made significant progress in our nationwide copper net switch-off, with over 4,000 central offices closed since 2014. This strategic shift is a key driver in reducing CapEx, boosting our operational cash flow and free cash flow growth. And AI is embedded in our business and how we do business. Our networks are becoming more open and more intelligent through softwarization and automation. We are digitalizing to be closer to customers, enhancing offers with increased personalization. AI is also helping to streamline our CapEx deployment and boosting efficiency across the organization. We are fundamentally changing how we operate and deliver value to customers and stakeholders. In summary, our strategic initiatives, building next-generation networks, prioritizing customers and creating leaner future-fit operations are yielding tangible results. This progress reinforces our confidence in delivering on our ambitious goal for growth, profitability and sustainability. This quarter, Telefónica continues to consolidate its leadership sustainability, as shown on Slide 5. In June, we have published the annual update on our Climate Action Plan. It details our road map to net zero and the tangible steps we are taking to decarbonize across the value chain. With 392 million accesses worldwide, Telefónica continues to bridge the digital divide. We are connecting people and raising awareness about the responsible use of technology. Being a responsible technology company also means building a strong code of ethics with regards to artificial intelligence. Our pioneering AI code of ethics was first published in 2018. We have now updated it to include a new commitment to the environment while broadening responsibility and traceability across the value chain. Finally, on ESG, I'm very proud that Time Magazine has ranked Telefónica among the Top 10 World's Most Sustainable Companies. I will now hand over to Angel.

Thank you, Jose Maria. On Slide 6, we review our execution during the last quarter. At the time of the Q1 results, we shared with you near-term catalysts and positive opportunities we saw ahead of us in all of our core markets. In Spain, back in May, we said -- we have signed an MOU for a new long-term mobile network agreement with Digi, which we expected to complete in a few weeks. The full, final and definitive agreement, which spans over 16 years and includes both national roaming and running was announced 3 weeks ago. This confirms our ability to provide high-quality services over our infrastructure, which is further reaffirmed with the signing yesterday of a nonbinding MOU with Vodafone to enter into exclusive discussions to create a joint fiber code that would cover some 3.5 million premises with fiber-to-the-home, with a targeted take up higher than 40%. In Brazil, we said negotiations were underway to potentially migrate to an authorization regime. During May, we have reached the agreement with ANATEL and the Ministry of Communications, which we expect to complete in the coming months. In Germany, we expect the spectrum extension, and this was later confirmed by BNetzA. A 5-year extension is a step in the right direction. At the same time, we have progressed in the development of our wholesale agreement with Freenet. Finally, in the U.K., we anticipated the fiber will acceleration as projected, and the NetCo was receiving strong interest from intra-investors. Investor interest has continued during the second quarter and the fiber build continues to ramp up, with 5 million premises passed as of June, whilst the operational and financial network design remains well on track. In addition, in the U.K., the mobile network sharing agreement with Vodafone has been extended to 2030. We are delivering tangible and clear progress in all core markets. On Slide 7, we review the consistent positive performance of our Spanish operation. Progress across commercial KPIs and financials further increases the growth, profitability and visibility of our domestic business. We are in a well-segmented market with [indiscernible] positioning. Sound commercial momentum continued and translated into the fourth straight quarter of positive net adds in main services, with all customer bases showing year-on-year growth in the quarter. In convergent, the combination of increased net adds and superior NPS and ARPU, not only reflects the high value of the base but a right balance to sustain revenue growth. All of this resulted in revenue growth in Q2, with an acceleration in retail revenue, up to 2.6% year-on-year and improving EBITDA growth helped by the full contribution from the redundancy program savings. The inflection point of the EBITDAL trend is also noteworthy, showing a sequential improvement, which is expected to continue throughout the year. To highlight, as proof of our superior network in actual quality, we extended the valuable wholesale agreement with Digi, securing wholesale inflows beyond the next decade at an operating cash flow margin similar to the previous contract. And we continue to seek new win-win agreements with our existing wholesale partners. So we are very pleased to announce that yesterday, we signed a nonbinding MOU with Vodafone Spain to enter into exclusive discussions to create a 3.5 million premises passed FiberCo to add further visibility and stability to the broadband market, which we continue reshaping. On top of which, opportunities will open up from the ongoing deregulation process. On this slide, let me explain in a bit more detail our recent wholesale agreements, both [indiscernible] rationality in the wholesale market. The new contract with Digi has evolved to provide national roaming and partial range sharing for the next 16 years. Infrastructure sharing will boost the effective use of our mobile network, while Digi benefits from efficient use of its new spectrum. The range sharing agreement includes spectrum utilization in the 3.5 gigahertz band. This will be progressively deployed and help us to release own resources devoted to this high frequency band. Additionally, yesterday, we announced the signing of an MOU with Vodafone Spain to the joint FiberCo. In this fiber sharing agreement, Telefónica will contribute 3.5 million premises passed of its fiber to the home network, and joining with Vodafone Spain will connect an estimated base of around 1.4 million customers at closing. This model increases our fiber network returns and adds long-term visibility to wholesale revenue via long-term MSA agreements. As both parties will independently compete in retail and wholesale markets, network utilization will be optimized. We will also crystallize value to the valuation of part of our fiber at attractive terms, and further monetization may be realized with a potential sale of a stake in such FiberCo. Finally, optionality increases with the NetCo becoming a vehicle to share the fiber operating cost and a source to unlock additional funds in a potential market consolidation. All in, these 2 new agreements are value accretive for Telefónica Spain as they allow us to monetize our networks, increase the visibility and sustainability of our wholesale revenue function and also bring efficiencies. Regarding Brazil, Vivo maintains its leadership in both mobile and fiber-to-the-home business as a result of a very strong operating momentum. At the same time, our customer value increases, with contract ARPU growing 2.7% year-on-year, whilst churn is maintained at very low levels of 1%. Accordingly, mobile revenue grew 4.7% year-on-year, reflecting market rationalization and increasingly boosted by digital services, which are growing double digit. Whilst on the fixed business, fiber recap reached 24% and convergent customers more than doubled year-on-year. Strong execution helped main financial KPIs to continue posting near growth in euro terms even despite Brazilian real depreciation. In local currency, revenue and OIBDA posted a year-on-year addition to plus 7.4% and plus 7.3%, respectively, way higher than inflation growth. To note, the improved operating leverage margin to 15.3%, 1.2 percentage points increase year-on-year. Vivo continues also to reform its ESG commitments and has announced new targets for 2035. Finally, an important milestone was achieved during the quarter with the agreement with regulatory and administrative bodies to progress migration from concession to authorization, which is value accretive and will be finalized in the second half of the year. Our German operations maintained ongoing operational and financial momentum in Q2, as shown on Slide 10, driven by the focused execution of the accelerated growth and efficiency plan. Our core business continued to demonstrate robust commercial traction, with contract net additions increasing 37% quarter-over-quarter, supported by a low O2 contract or rate of 0.9%, which reflects our strong brand appeal and ongoing network enhancements. Revenue remained flat year-on-year, with growth in handset sales and fixed services, partially offset by decline in mobile service revenue, impacted by regulatory effects, changes in the parts business model and lower roaming. However, we achieved sustained EBITDA growth through ongoing momentum and effective cost management. In the first half of 2024, progress on 4G network densification and 5G deployment was significant, with over 550 new operational sites and approximately 3,400 expansion measures completed, resulting in our 5G population coverage reaching 96%. Other business fundamentals saw significant derisking as well during the quarter. The spectrum extension was not only already signaled by the regulator, but the position from the German government and its vendors was finalized. [indiscernible] that falls within our expected CapEx envelope, hence being neutral to our long-term guidance. Moving now to Slide 11 to review our U.K. JV, VMO2. In the U.K. we have remained committed to our strategy of being in key drivers for future success despite the competitive landscape. We continue to focus on delivering value to our customers while transforming and simplifying our business for long-term sustainability. We maintained our position with the highest fixed ARPU in the market, achieving 3.1% year-on-year growth driven by recent raising prices. Additionally, our combined consumer fixed and mobile revenue, excluding handset, remains stable, with O2 contract churn maintaining stability at 1.2%. Furthermore, fiber deployment has significantly accelerated with VMO2's full fiber footprint now reaching 5 million premises passed. Looking ahead, our [indiscernible] network sharing agreement with Vodafone UK totally strengthens our successful relationship but also strategically positions of VMO2 for the potential approval of the Vodafone VMO3 merger, including a prospective spectrum agreement. And finally, the NetCo is progressing well, perimeter established and we see continued interest from investors. Telefónica Tech on Slide 10 showed another strong quarter. Since Creation T Tech is delivering quarterly double-digit year-on-year revenue growth. In the last 12 months, TTech has generated EUR 2 billion of revenues, showing a 14% annual increase. Both funnels and bookings are showing good growth and revenue so far, mostly driven by the private sector with large contracts awarded. For example, 2 weeks ago, multinational financial player, BBVA, chose TTech to boost the cybersecurity of its operations on a global scale with incorporation of the most technologies in AI and process automation. We also recently closed large and relevant deals with Digi and Children's Health Hospital in Q2. Hence, this solid trend will continue to called into revenue growth, which we expect to accelerate throughout the remainder of the year. We have seen growth that is well balanced with increased completion from higher value-added services, longer-dated conducts, a wider customer base and better customer mix. We continue to gain relevance in higher growth markets, and our capabilities continue to be recognized by industry partners and analysts. This should allow TTech to continue growing ahead of its peers. Telefónica Infra on Slide 13 is driving profitable growth, leveraging a capital-efficient deployment of pure-proif infrastructure. Our fiber-to-the-home base continues its momentum after passing more than 1 million premises this quarter to 23 million. Telxius, our global connectivity provider that combines next-generation subsea cables with terrestrial backhaul systems and communication hubs, maintained considerably high profitability of around 50%, and is expanding colocation capabilities across U.S.A., Spain and Latin America. And as you may be aware, after looking at recent media comments, interest on Nabiax, the data centers business where we own 20%, is mounting. This provides us with optionality. I will now hand it over to Laura, who will guide you Telefónica's financial performance and the main financial topics.

Thank you, Angel. As for Hispam on Slide 14, we return to growth in main financial KPIs, service revenue, EBITDA and EBITDAL minus CapEx. As such, service revenue grew in Q2 year-on-year. EBITDA was up 2.7% year-on-year, driven by Argentina, Colombia and Mexico. To highlight, the 67% EBITDA growth of our operations in Mexico on very good contract performance and network efficiencies. EBITDAL minus CapEx accelerating on EBITDA evolution, stabilization and CapEx decline. CapEx to sales stood at 6.6% in the first half of the year. Lastly, Telefónica Hispam is making progress in achieving greater rationality market, avoiding network overlap through different agreements on fiber and mobile. To continue seeking market rationality, we entered into a nonbinding memorandum of agreement with Millicom for a potential corporate transactions of our operations in Colombia that may imply the sale of our stake take in Telefónica Colombia. Slide 15 shows free cash flow performance in the first half of the year. Our free cash flow performance remains strong and fully on track. We are confident on our trajectory and our ability to meet our full year guidance of more than 10% growth. Let me address that we've been managing a tax dispute in Peru for some time. In fact, December 2022, we made a full provision of EUR 0.9 billion for this tax litigation. The exact amount and timing of payments have been uncertain, but we're consistently incorporating our best estimates in our guidance. In Q2 of this year, we made a EUR 279 million tax payment to Peru. This amount was larger than initially expected for the quarter. However, this is primarily a timing issue. The payment was already contemplated in our full year guidance, which remains unchanged and 10% growth for the full year. With this behind us, we have taken greater clarity on our free cash flow generation outlook, putting us in a stronger position for the second half. Importantly, this situation is fully contemplated not just in our 2024 guidance, but also in our 2026 targets, wherein our control acquisition is strong and our commitment to deliver on our free cash flow performance remains unwavering, both for this year and through 2026. As of June 2024, as net financial debt stood at EUR 29.2 billion, translating to a net debt-to-EBITDA ratio of 2.78x. This anticipated increase from year-end 2023 was primarily driven by our strategic move to raise our stake in Telefónica Deutschland and, to a lesser extent, free cash flow seasonality in the first half. We are committed to reducing leverage and remain on track to meet our targets. We are delivering a strategic focus on 4 key areas. First, driving EBITDA growth for operational efficiencies and revenue expansion, starting with Spain, our highest cash conversion market that we'll see EBITDA growth acceleration from Q3. Operating cash flow measured as EBITDAL minus CapEx is already growing above the guidance range of between 1% and 2%. So we see the usual CapEx pacing implying higher intensity in the second half of the year, EBITDA should keep improving. Accelerating free cash flow generation, which, as usual, will be back-half loaded, even more this year. And continued disciplined capital allocation. You should also remember that in the second half of 2024, a couple of deleveraging events will take place. We received the proceeds from the stake in CTIL and expect regulatory approval for the FiberCo in Peru. All in all, both will help bring down debt by EUR 7.4 billion. And both are set line, close events, just waiting to receive the proceeds. Furthermore, we lowered our debt-related interest cost to 3.58% versus 3.80% in December last year, thanks to the active refinancing exercise undertaken in previous years, the robust position at fixed interest rate in a strong currency and the [indiscernible] interest rates in Brazilian real. I will now hand back to Jose Maria, who will wrap up.

Thank you, Laura. All operating metrics are either aligned with or exceeding full year guidance. Revenue growth of 1.1% aligns with our full year target of around 1%. EBITDA is growing [ 1.9% ] year-to-date at the high end of our 1% to 2% guided range. At the first quarter results, with EBITDAL minus CapEx would resume its -- our trajectory from the second quarter. Indeed, it grew 11.5% year-on-year in the second quarter, bringing first half growth to 3.1%, above our 1% to 2% full year guidance. This is driven by full benefits from Spanish workforce cost savings, [indiscernible] passed Q1 impact from lease inflation and accelerated IT deployment and excellent CapEx management. CapEx to sales stands at 11.3% year-to-date below our up to 13% full year guidance. [indiscernible] phasing should increase CapEx intensity in the second half. We are increasingly comfortable towards 2024 CapEx guidance. We'll provide more details on the next slide. As Laura mentioned, free cash flow generation is on track to meet full year guidance. It's back-end loaded as usual, so we expect acceleration in the remaining two quarters of 2024. This will allow us to resume our delivering trajectory. After the first year uptick from the Telefónica Deutschland offer and our second quarter dividend payment, we expect net debt and leverage ratio to decline, keeping us on track for our 2024 targets. Our strong first half performance supports our 2024 target and long-term strategic goals. As stated in previous slide and as we showed on Slide 18, CapEx is among the main drivers of our fixed as flow growth towards our 2026 targets. Let me give you a view of how we are approaching capital reach industry-leading levels of less than 12% capital intensity. Our strategy revolves around 3 key areas. First, business evolution. We grow more in low CapEx businesses, such as B2B and digital services within B2C, changing our CapEx profile. Legacy shutdowns, particularly copper decommissioning, significantly reduced our maintenance CapEx. This allows us to continue to invest in both, passing more premises with fiber-to-the-home and increasing 5G coverage. Both have high efficiency than legacy technologies. Second is network optimization. We are levered to open and disaggregated network virtualization, go-to-cloud strategies and AI and automation, increasing deployment efficiencies and flexibility to adapt to demand, open run and open broadband models are key to this transformation. And for strategic investments, we are passed the network [indiscernible] and now focusing tech cycle optimization. We are exploring ways to reduce capacity CapEx, such as our extended collaboration with Meta for video optimization, aiming for more responsible network use and reduced resource usage. No single initiative alone will be sufficient to achieve our ambitious targets. It's the combination of all 3 areas that creates a powerful synergy, driving us towards our goal. As such, this will take us from our '23 CapEx to sale ratio of 13.3% to our '26 guidance of less than 1%. This reduced capital intensity is an important lever to help achieve our target of more than 10% free cash flow growth CAGR through 2026. While the second half should see usual phasing with some higher CapEx allocation, our first half progress makes us more confident in our 2024 CapEx guidance than before. To summarize on Slide 19. Telefónica's second quarter 2024 performance demonstrated again solid execution as we continue to deliver against our strategic road map. We reported a solid set of results consistent with our full year 2024 guidance across all key metrics as well as our overall in CPS plan, which targets more than 10% free cash flow growth CAGR between 2023 and 2026. In fact, operational leverage improved significantly with EBITDAL minus CapEx standing above the guided range for the full year. Our core markets showed robust commercial and operational trends. In Spain, we are achieving annual growth across all main customer segments. Brazil and Germany maintained consistent profitability growth and Hispam showed sequential improvement. Our strategic has been in fiber and fiber infrastructure enhanced Telefónica's customer engages, positioning us for continued commercial momentum and top line expansion. CapEx intensity remains well contained, with legacy network shows free up resources for growth, which coupled the streamlined operations by digitally transforming processes and friendly focused capital allocation priorities, will allow us to deleverage going forward towards our target ranges and further sustaining our dividend. Finally, we continue seeing positive near-term catalysts in all our markets. Starting with deregulation, in Spain, we expect full FTTH wholesale deregulation and the renewal of certain rental obligation, which should result in increased commercial flexibility. At a EU level, we progress as well in 3 main key topics, including market definition, open Internet and fair share. As for the latter, we are starting to sign large commercial agreements with large traffic generators to optimize video for a more efficient use of network resources. In Hispam, we have entered into a nonbinding memorandum of understanding with Millicom for a potential corporate transaction of our operations there. And as said, we have signed a nonbinding MOU with Vodafone Spain to enter into exclusive negotiation for the creation of fiber co that should bring further rationality to the market, optimize never

Please standby, your conference will resume shortly. [Technical Difficulty]

These, coupled with our focus on execution and combined with further wholesale and consolidation opportunities will allow us to keep building on our momentum and demonstrating the continued success of our strategy. Thank you very much for listening. We're now ready to take your questions.

[Operator Instructions] Our first question comes from the line of Andrew Lee from Goldman Sachs.

I had two questions, one on Spanish EBITDA growth and then the next on the group wholesale revenue growth outlook. On the Spanish EBITDA growth, you said you expect this to improve through 2024, but I think you delivered around 0.5% decline in the second quarter if we strip out the litigation effects. I might be wrong there, so happy to be corrected. While consensus still models FY '24 declines and investors are noting your negative ARPU trends in Spain. So I wondered maybe you now have better visibility to give us idea on your expected Spanish EBITDA growth run rate into the end of 2024, and what you think the structural sustainable EBITDA growth should be in Spain longer term? Any incremental color there you can give on that Spanish EBITDA outlook would be really helpful. And then on the wholesale revenue growth, how has your group wholesale revenue growth outlook changed in the medium term, given you've now -- as you stated through the call, you've now signed a new Digi wholesale contract. And I'm guessing there are positive externalities to your Spanish fiber wholesale business from the Vodafone Zegona MOU you've just signed. Any color you can give on your exit impact of that fiber MOU on wholesale revenues and the broader declining group wholesale revenue out would be really helpful there.

Thank you, Andrew, for your questions. The first one on Spanish EBITDAL. I got a similar question in the first quarter. And as I said, back then, EBITDA and EBITDA performance in Spain in the beginning of the year were to be the weakest you would see this year. The factors that affected leases in Q1 and partially in Q2, which were volume additions, inflation and rates affecting accounting of recurrent leases are starting to phase out. So even if we have some nonrecurring factor affecting the year-on-year EBITDA in Q2. EBITDA growth has been improving from, plus0.2% in the first quarter to plus 0.6% growth in the second quarter. And year-on-year EBITDAL performance has improved further by 1.8% -- 1.8 percentage points quarter-over-quarter moving from minus 3.5% in Q1 to minus 1.7% in Q2. We are expecting further EBITDA and EBITDAL sequential improvement in the following quarters already starting in Q3, not only a higher EBITDA growth but all on lower leases annual increase, which is going to help EBITDAL to stabilize in the second half of the year. Then regarding the evolution of Spanish wholesale revenues, given resources is going to be a drag in 2024, we have a reliable network, we are protected by solid commercial agreements, as proven by the deal -- the definitive deal with Digi and the MOU just announced with Vodafone. What are the drags that we're seeing as headwinds, mobile termination rates prices are having since the first part of 2024. By the way, this also affects our German operation. Some international traffic services were impacted by declining voice traffic. We don't resell Formula 1. It's a content that we don't own, although this was EBITDA neutral because we are selling it as per the cost that we had on it. Roaming prices also decreased. And then the pass-through that we have on energy to some of our clients that were colocated in our central office with the decline of energy prices is no longer supporting us. On the other hand, MVNO revenues are growing. So we have lots of moving parts here that are putting pressure on the wholesale revenues in Spain. There are agreements that we have signed with Digi, if you take into account the conditions of price and expected volumes should be going forward at least, the level of revenues that we had with the old contract and also at the level of operating cash flow. The MOU that we have signed with Vodafone would be accretive for additional to the wholesale revenues that we're getting with our partners. So lots of moving parts, but the two agreements that we have signed are supportive of the wholesale revenue function for Telefónica Spain at rational prices that would not necessarily or will not produce erosion in the conditions of the retail market. So supportive to the wholesale revenue line, but also to the retail revenue line.

Can you give us any sense as to the materiality of the expected boost on the Vodafone MOU on wholesale revenues? Or is it too early to say?

It's too early to say. It's an MOU, so let us move to definitive agreements, and we will be able to give a bit more color.

We will now take the next question from the line of Andre [indiscernible] from UBS.

I have two, they are quite similar but from different ends. So maybe if I just look at the EBITDAL minus CapEx guidance for the year and where we've progressed thus far. So you're targeting more than -- or roughly 5%, and you are 3.1% year-to-date with CapEx to sales running below the kind of 2024 run rate about 2 percentage points. So if you can just maybe talk to us about the building blocks if CapEx goes up in the second half, where the acceleration, the material acceleration in the EBITDAL maybe across the group coming from to get to the 5% in EBITDAL minus CapEx guidance, please? Any clarity on that? And then just looking at the deals that you're signing in Spain specifically or maybe just to focus on staying from that perspective. Looking at just returns, because, obviously, you're enhancing the usage of your networks. You're avoiding some overbuild, your kind of finding partnerships to different operators. So just from a returns perspective, if you can kind of give us any color on midterm kind of return on capital or something improvement you expect from these deals side from there? They're pretty positive.

Thank you very much. We were not sure if the question was around Spain or in general. But if it's in general, we have a midterm guidance of EBITDAL minus CapEx of 5% in life of the plan. However, the guidance for the specific 2024 is more in the range of 1% to 2%. And at the moment, we are about 3%. So we are doing better versus guidance. The reason behind we explained when we gave the year guidance as part of the GPS plan, it improves leases though grows slightly throughout the life of the plan. And that growth is higher at the beginning of our plan because of the network growth impacts remaining CPI who is decreasing interest impact of the new contracts and new grow additions. So all of that in place that, that EBITDAL minus CapEx growth is back loaded in our long-term plan. Having said that, we are super focused on lease monitoring. We are working on all mitigation measures. We are serving, as you know, we are reducing the quantity. We are renegotiating the agreements, and you can see that it's basically linked to the 5G expansion being more acute in the first years. We have some regions like Spain where leases are completely on the downward trend. Spain, as Ángel explained at the beginning, the lease impact was higher. It was the highest in the first part of the year. So you should be comfortable with our long-term EBITDAL minus CapEx guidance, and with the guidance for '24 which is lower than the full year. I hope I answered the question with that.

And regarding your second question, you have to frame the deals that we are announcing within the restructuring of the Spanish market that has followed some consolidation or some M&A in our market. So this continues to be a very segmented market in which you have in B2C premium positioning like we have in the mid-high end of the market, which is very rational market, some more competition in the bottom end. In B2B, we continue growing very substantially with a very strong positioning. And in wholesale, which is where your question I understand was focusing on these deals, the whole market is reconfiguring. And under a principle of rationality that we are perceiving on the side of all the players. There is clearly, as you were saying, an objective to optimize the return on capital employed by avoiding overbuild risk. Also, at the same time, there is a need and there is a willingness from the different players to optimize network utilization. And doing this in such a way that the market retains a healthy level of competitiveness, but without putting undue pressure on the market. We have been -- and we were describing this on Slide #8, we have been very active in sharing not only on the mobile centers on the fiber side, our infrastructure, and we believe that these are win-win agreements for the different players. I don't know if this responds to your questions or you needed some additional detail.

No, that is helpful. If I may, just maybe -- sorry for the confusion with the first question. I was maybe are basically trying to understand by which means does the growth in lease costs, especially in Spain, maybe moderate? And I was maybe going to follow up with asking or by asking in terms of the corporate shutdown that is happening over this year and next year maybe, is that a big part in terms of moderating leases?

Yes. Sorry, I'm not sure I understood exactly question because your third question was on group level, and now you're asking for some specific detail on Spain. Could you please repeat?

Yes. So maybe just in terms of the lease moderation, because I guess a little of the growth, as Laura was already addressing, it's coming in Spain. So I was just trying to understand the growth rate in leases should therefore moderate, and I was going to follow up specifically on the copper shutdown over this year and next year as the big part of how containing the lease growth in the midterm as well.

As you are listening to my first answer, maybe you didn't -- maybe I want to explain in myself dealer, because I said exactly the opposite about the Spain. I said leases are under control. They are slightly increasing at a group level. We have certain places such as East Panera downward trend. Others, like Brazil, with the oil transaction and the 5G regulation maybe in the upside train, although very much under control. And in the case of Spain, it's exactly the opposite. We have the highest level in the first half of the year and should be annualizing during the year. So EBITDAL minus CapEx won't be a problem at Spain level. And the worst quarter has been actually Q1, and that could be annualized. Maybe now it's more clear. Otherwise, you can ask our Investor Relations and I can provide you full detail. But the message in Spain will just the opposite.

Yes. I said in a previous response, this growth in Spain should continue easing quarter-to-quarter to reach EBITDAL stabilization in the second half.

We will now take the next question from the line of Mathieu Robilliard from Barclays.

I had a question on the free cash flow. So as Laura pointed out, there is a one-off payment in Peru. And as you said, initially, there was a EUR 900 million for that item. I understand you may not want to share your expectations for what will be the final total payment [indiscernible]. But in case all the remainder of what you -- could have to pay was to be done in 2H 2024, and again, I'm not sure you have this in your numbers, but I think so far you've probably paid more than half of it. So if you have to -- theoretically on the rest in 2H 2024, would your full year guidance still be [indiscernible] for 2024? That's my first question. And then I had a second question on LatAm. Hispam America, so as you flagged, CapEx is very low. I think you said 5.6% of revenues. I understand that in a country like Mexico, you're essentially operating like a MVNO. But in countries like Peru, Chile, Colombia or even Argentina, you do have a network. So I was wondering how it was possible to maintain the quality of the network with such a low CapEx that, that number would spike back again in H2? Or you thought this was something sustainable?

Thank you, Mathieu, for the question. I'm very happy to talk to about Peru, so I can clarify. As you said and I said, there's a provision of around EUR 0.9 billion, specifically the very EUR 845 million are the specific ones to '98 to 2001 that have taken so long, and there's so much related to interest. Some of that is still under discussion. The payment, you were right. We have paid approximately half already because on top of the EUR 279 million payment we did in 2024, we had an outflow of around EUR 123 million in '23. But the remaining is going to be paid in 2024. The Peruvian law allows for fractioning, and the fractioning will start from 2025 beyond. So it will go then beyond the GPS plan. But we are fully in control on the situation. Obviously, the timing of the payments so far have been uncertain, with the fraction in the agreement with the Peruvian authority will be much more certain. But the punchline here is this has been included in our guidance and in our estimates, both for 2024, both for the midterm guidance. So it doesn't affect whatsoever the 10% growth in '24, nor the 10% growth all the way through 2026. I could give -- I mean, it has been much concentration in Q2, which is not ideal. But on the other hand, as I said, now we have certainty. And it does not put in jeopardy at all our free cash flow guidance. We are very confident on the free cash flow growth trajectory and completely on track to meet our full year guidance. On the Hispam situation regarding CapEx, usually, CapEx is also backloaded in the case of Hispam. So you shouldn't expect 6.6% of our revenue we have at the moment. We run Hispam within a 10% envelope approximately. We can be a little bit up and down, but that would be the figure you should have in mind. But that doesn't mean Hispam invest 10%. We invest in different ways. In the case of the fiber, this goes through the fiber costs. So we are addressing to the best ultra-broadband technology in the region through those vehicles instead of doing it through CapEx. We have just gone through a very, very successful run negotiations for 5G in region. And in some cases, we are sharing network, as we did in Colombia, and we are happy to share network elsewhere in the region. So you should expect us to do it in a very disruptive way asset-light, sharing through vehicles. But the 10% in that framework allows us to put a good technology at the service of our customers.

We will now take the next question. From the lane of David Wright from Bank of America Merrill Lynch.

Another two, please. So first of all, just on guidance, you chose to guide in moving currency, which I guess was always a risk that could perhaps be back-firing a little now with the Brazilian real just gapping out a little. And I guess if I just did a simple back of the envelope, Brazil is, give or take, 30% of your group EBITDA. I think the currency had been very stable around 5.5 to the euro. Looks to be now around 6 to the euro. So there's a 10% depreciation on something that contributes 30% of group EBITDA, which, I guess, math says 3% drag over time, given your group outlook is around 2% CAGR to 2026. I'm just wondering how that can be captured, that risk, or whether your guidance does assume that the Brazilian real winds back in a little. And then I guess just my second question, just a little bit of a mix-up from my understanding. You said that U.K. bill was all on track. That's not quite what was said in the Liberty Global call, where I think it was made clear that the Nexi fiber build had actually lagged our expectations a little and that the -- if I'm right, I still don't think -- I think you're behind the curve monetizing some of that fiber infrastructure. So contradicting messages there if might be one for loops to maybe resolve.

David, on the Brazilian real, I think it's soon to see how we'll finish the year, because we think the fundamentals are solid. Solid GDP growth, external accounts remain consistent. And I think it has to do with certain things regarding domestic fiscal and monetary policy, but it would definitely improve. In any case, we protect ourselves from the FX in different ways. I mean we protect the solvency and the ratio, the net debt to EBITDAL by putting debt in local currencies, as is the case in Brazil and some Hispam OBs. There's a natural hedge as the revenue impact is much higher, and it diminishes until it gets all the way to free cash flow. And on top of that, for the given year, we hedged 20% or above of the free cash flow that comes from Brazil. And this case has not been a -- this year has not been an exception. And we have hedged that free cash flow at better rates than the ones we have [indiscernible]. What is definitely true is that consolidating -- once we consolidate into euros, if -- it's not only the Brazilian real impacting, it's every currency. And up to June 2024, the FX impact has only been EUR 11 million in revenue and EUR 2 million in EBITDA. So our guidance, as you correctly said, is in euros, because we think we have to grow in euros. But it's also true that we gave the FX attached to that guidance. And sometimes, the FX in a given year may not reflect the fundamentals. So if that could divert in a huge amount, then we will need to reconcile a bit the effects of the guidance and the actual FX. But the punchline here again is that we think the fundamentals behind the reais are strong, and it will convert to the assumptions we use for when we gave the long-term guidance, and this is a long-term game.

Regarding your second question, I'll pass it to Lutz to make sure that we don't incur in any inconsistency in the messages. Lutz Schüler: Yes. Can you repeat the question?

Yes. No. The message from [indiscernible] was that U.K. fiber build is all on track, but I don't think that was the message on Friday's call. I thought that there was a bit of -- you were lagging targets perhaps a little with some of the conversion. I think it might have been more the nexfibre footprint. Lutz Schüler: No, we are on track with the build on nexfibre. We had a record quarter in Q2 with almost 300,000 homes released, right? And we are also on track with FiberUp. I think what I said on the call was that we are a bit behind our ambition in selling into the fiber homes with nexfibre, right? So because here, we are investing and we want to generate more customers in the second half of this year. But with the build, we are fully on track.

Okay. And maybe, Laura, just to double check. So I guess if the currency does remain a little weaker than the potential situation we're looking at, is that you could see sort of revenue EBITDA impact. The point you're making is that it's protected at free cash flow because of the variating mechanisms and CapEx. That's the point here, is the cash flow is secure?

Yes. That's exactly the point, David. Thank you. That's why we are so confident on our free cash flow guidance for the year and our ability to deliver the 10% growth.

Yes, we have time for the last question, please.

We will now take the last question from the line of James Ratzer from New Street Research.

I have two questions, please, both actually on your wholesale agreements that you've just signed. So the first one on the Digi contract. I'm intrigued by the line in your presentation where you say the revenue will also be driven by traffic-driven growth. I was wondering if we could just kind of go through the economics of the deal a little bit more. Predicting how data pricing is going to develop over a 1- or 2-year, let alone 16-year view is very difficult. So we saw in Germany when Vodafone signed an NRA was 1 and 1, it was actually linked to network costs to give a bit more security to the market. I mean how can you help to give us some confidence around the price that Digi get with this wholesale agreement that they can't be disruptive or more disruptive on market pricing? And then the second question I had, please, was you're announcing here today as well that you've expanded your wholesale agreement with [indiscernible] Germany, which I think is a new announcement today. Could you kind of run through a bit more of the economics on that in more detail? Are you expecting freenet now to bring more traffic over from Vodafone and Deutsche Telekom? Would just love to hear a bit more of the details of how that agreement will work.

Thank you, James. I'll take the first one on this, and I'll pass the second question to Markus Haas who's also connected. First thing I would like to say is that we move swiftly from an MOU to a full hedge definitive contract in 2 months with [indiscernible] because we have those of experience in wholesale contracts and a very long-standing relationship, I think. The case that you alluded to in Germany is taking a little bit more time. Another difference of the two cases is -- really is not a capacity deal whatsoever. We need to be very clear, we are expecting and we have expected some volumes and we have a pricing mechanism, which is structured with payments that depend on the number of subscribers, and their consumer traffic not based on the cost of our network. And regarding the rent sharing, it will depend on the number of sites that will be shared and there will be a payment on that one. Markus, if you can take the [indiscernible], please?

Thank you, Angel. Thanks, James, for the question. I think we renewed our agreement with Freenet. It's a 10-year deal with a steep customer increase, and we foresee the full run rate of this strong increase of customers on our network coming from Freenet already in 2026, clearly compensating some of the effects that we will see from 1 and 1. So while it's a win-win deal that we signed, it's long term and it's a substantial increase of the relationship and partnership that we have with Freenet going forward.

Markus, on that, I mean you mentioned the increase in customer numbers. I mean are you able to just quantify that a bit more? What are you expecting for customer growth from Freenet then on your network out to 2026 or future revenue growth from the deal?

It's a significant increase. I think we should respect that Freenet is also a listed company, and what we can share on this call. So from that perspective, is a significant increase of our partnership. This is what I can say. And it's a fast ramp-up, so we will see already the full run rate effect reflected in our 2026 numbers in Germany.

Okay. So that's a binding agreement from them to migrate more customers over to your network from Vodafone, Deutsche Telekom? Okay. Then Ángel, could I just follow up on -- just on the traffic growth point? I mean traffic growth is growing at kind of 30% to 40% per annum in Spain. But presumably, the Digi wholesale revenues aren't to grow in line with traffic growth. So there must be some price deflator baked into your contract. How does that work to just offset traffic is, please?

I'm afraid I cannot disclose commercially sensitive information, but the projection and the figures that we have is that the yearly revenues will be roughly in line with the current ones. And that is as much as we can say on this agreement.

At this time, no further questions will be taken.

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 Relationship department. Good morning, and thanks.

Telefónica's January-June 2024 Results Conference Call is over, you may now disconnect your lines. Thank you.