Telefónica, S.A. (TEF) Earnings Call Transcript

Good morning. Thank you for standing by, and welcome to Telefonica's January-June 2025 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. Torsten Achtmann, Global Director of Investor Relations. Please go ahead, sir.

Good morning, and welcome to Telefonica's conference call to discuss January to June 2025 results. I'm Torsten Achtmann 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 Telefonica 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 Telefonica's Investor Relations team in Madrid or London. Now let me turn the call over to our Chairman and Chief Executive Officer, Mr. Marc Murtra.

Good morning, everyone, and welcome to Telefonica's second quarter results conference call. With me today are Emilio Gayo, Laura Abasolo, Markus Haas, Lutz Schuler and Eduardo Navarro. It is a pleasure to have you here as usual. We will first walk you through the slides, and we'll be then happy to take any questions. Six months ago, I joined to lead Telefonica with a clear goal, unlock the values that exist within the company. We're still early in our plan, but the pieces are starting to come together. Today's results show steady operational execution, continued progress on strategic initiatives on our strategic review, which we're expeditiously advancing on schedule for second half unveiling. Behind the scenes, we're making significant progress, working intensively to get this right. While I can't share the conclusions of our strategic review, I can ensure that every decision we're making follows four fundamental principles. First, customers are at the core of everything we do. Second, technology and operational excellence are fundamental to our business. Third, we apply an industrial rationale to our decision-making. Fourth, our ultimate goal is to create value across all our decision-making, all under strict financial discipline, prioritizing Europe and leadership in Brazil. Despite a variable macro environment, we're focused on managing what is within our control. We are confident that the transformation underway at Telefonica will create value for our shareholders and strengthen our competitive position. The strategic choices we are making will contribute to a stronger, more competitive telecom industry in Europe. On Slide 3, let me walk you through our second quarter operational highlights. We're maintaining momentum across customer growth, network expansion and portfolio optimization. Each of these areas is part of our future. Starting with customer focus. This quarter, we added 2 million accesses to reach 349 million accesses. Their experience and satisfaction remain a priority, and customer lifetime value is improving, with high levels of NPS and low levels of churn. We continue with portfolio renewals and new tariffs, like in Spain with Mi Movistar and O2. Our network build continues. We accelerated our fiber-to-the-home rollout, with 1.5 million premises added in the quarter, while our 5G coverage expanded by 2 percentage points. The completion of our copper shutdown in Spain marks an important moment. We're the first major European operator to achieve this milestone. This freeze up resources and focus for other endeavors. We're being disciplined on efficiency and portfolio management. We continue -- we'd continue to simplify Hispam. This allows us to concentrate resources and management bandwidth where we can build competitive advantages. In these 6 months, we've reshaped our Latin America footprint. We completed the sales of Argentina and Peru, signed a binding agreement for Colombia and recently announced binding agreements for Uruguay and Ecuador. These transactions represent approximately EUR 3 billion in firm volume. Our approach focuses on concentrating resources in select markets where we have competitive advantages. The speed of execution matters, and it allows us to be productive on other fronts. Each transaction strengthens our ability to invest more effectively in our core markets and has been structured to minimize execution risk. This approach is part of our capital redeployment. This approach is an example of what want -- we want our industrial rationale to be. We evaluate every market and every investment through the lens of industrial value. We aim for a simplified organization that can move faster and compete more effectively. Our work in Hispam is not over. Moving to Slide 5. Revenue reached off -- almost EUR 9 billion in the quarter, growing 1.5% organically, EBITDA almost EUR 3 billion, plus 1.2%, and EBITDAaL minus CapEx was broadly stable. Free cash flow turned positive to EUR 505 million in the second quarter, an improvement of EUR 718 million versus Q1. In the first half, free cash flow was EUR 291 million. Free cash flow will continue to prove -- improve in the back half of the year following our typical seasonality. Foreign exchange headwinds impacted reported figures slightly higher than in Q1. Net financial debt decreased 5.5% year-on-year to EUR 27.6 billion as of June. The first 6 months reflect free cash flow seasonality and the dividend payment in June. Lastly, earnings per share for -- from continued operations amount to EUR 0.07 in the second quarter and EUR 0.15 in the first half. Moving to Slide #6. Spain and Brazil, which together represents 70% of group EBITDA, showed improving trends this quarter. Spain delivered its best Q2 net adds since Q3 '18, while improving EBITDAaL minus CapEx. Brazil continues its good run with record EBITDA growth since Q4 '23, performing above inflation, although it was negatively impacted by foreign exchange movements. Germany is facing the effects of the B2B transformation, while maintaining solid consumer momentum. VMO2 is investing in its network, while EBITDA decline slowed on efficiencies. Hispam showed resilience and declining EBITDA softened and growing contract net adds. While we transform Telefonica, our operations must continue to deliver and improve. What we're seeing across our footprint is operational stability. This will give us space to execute our strategic initiatives while maintaining financial discipline. Our performance in Q2 is in line with expectations, reflecting different moving parts in the direction of business. Based on our first half performance, we reiterate our full year 2025 guidance across metrics. Revenue and EBITDA continued to grow, in line with our targets. EBITDAaL minus CapEx was stable due to phasing and will improve through the year. CapEx intensity remains within our target of being below 12.5%. Free cash flow already improved in Q2, and we expect the momentum to build through the second half, which is our typical seasonal pattern. Leverage is currently above guidance target. This temporary uptick is mainly due to free cash flow seasonality in the first half, the mix -- the FX mix impact on the ratio and the dividend payment in June. We're expecting it to improve over the course of the year. These results keep us on track to deliver our guidance. Let me now hand over to Emilio to take you through our operational performance in more detail.

Thank you, Marc. Let me start by giving an overview of the main themes in our core operating businesses. First, commercial momentum remains steady. We are showing very strong levels of net adds, low churn, and our digital ecosystems continue to gain traction. To highlight, in Spain, we achieved the highest quarterly net addition since the third quarter of 2018, and Vivo increased the number of OTT subscribers by 55%. Second, our networks are a key differentiating factor for the quality of our services, product offerings and customer satisfaction. As an example, in Spain and Brazil, we have superior NPS compared to our competitors. Also the lifetime value of our convergent customer is the best in our domestic market, to reach the figure of our closest competitors. Third, our performance in key markets and our investment in Hispam show our focus on execution. In Spain and Brazil, we have improved financial trends year-on-year in the second quarter. In Germany, we are focused on mitigating the impact of the migration of 1&1, showing growth in underlying terms. Finally, in the U.K., Virgin Media O2's declining EBITDA improved, reflecting cost efficiencies. On to Slide 9. Performance in Spain was excellent, with accelerating growth in customer and financials. Momentum in Q2 was again very strong, achieving the highest net adds in more than 6 years. The year-on-year growth of our key services accelerated. There were several drivers behind this. We saw a convergent churn reaching 0.8%, its lowest level in more than 11 years. There was an improved portability balance. And finally, we had 89,000 TV net adds, the highest number in more than 6 years. This has been possible, thanks to Telefonica Espana reinforcing its market position during Q2 with a cemented commercial strategy. We improved O2 and Movistar value proposition with additional features such as new TV content, increased the fiber speed and more mobile data. On top of this, we launched Movistar por ti, a personalized customer care plan that deeply change the way we serve our subscribers. This approach is a structural change in the market. It will drive a further expansion of our best-in-class NPS in Spain and a sustained reduction in claims, which were already on the decline. This proves our commitment to excel in customer experience in a market where trust and quality are a key loyalty factor to drive commercial performance. Meanwhile, convergent ARPU remained the best in the market, above EUR 90, despite the end of the football season and the higher O2 penetration. A strong financial performance continued, with improved growth across metrics. Q2 revenue growth increased year-on-year, thanks to sustained growth in service -- services and higher handset sales. Retail revenue increased above inflection, driven by customer growth, price upgrades and higher weight of services beyond connectivity. We delivered growth in both B2C and B2B. There was double-digit growth in IT sales, which already accounts for over 50% of B2B revenue with a record high IT backlog. As expected, wholesale and other revenue declined due to the renewal of wholesale agreements, which added long-term sustainability. The year-on-year growth in EBITDAaL in Q2 also accelerated. This performance is driven by several factors: revenue growth, stabilization of leases, efficiencies in network transformation and hyper automation. Also copper networks are done, was completed in May. EBITDAaL minus CapEx increased by over 2% in H1, showing our leading cash conversion in the domestic market. In summary, in Spain, we continue to leverage our solid fundamentals to deliver a stronger performance. On to the next slide. Telefonica Brasil's performance in Q2 was again marked by solid growth, both in operational and financially, thanks to our sustained leadership in a quality customer base. Upselling initiatives from prepaid to contract plans, our focus on convergence and our commitment to offer the best services led to a 6% increase in our contract accesses, a more than 60% increase in Vivo Total. Our ability to retain high-value customer despite increasing prices is reflected in postpaid churn, will remain very low in Q2 at 1.1%. The growth in TV accesses and the 42% increase in revenue from cloud services are two examples of the increasing traction of our digital ecosystem in Brazil. Revenue increased by 7% and continues to outpace inflation, thanks to two factors. Firstly, a strong growth in postpaid and fiber, showcasing Vivo's successful convergence strategy. Secondly, growth in real terms of our fixed and mobile revenue. Despite this strong commercial momentum, we were still able to maximize efficiencies, which resulted in OpEx growing below inflation. Vivo delivered the highest EBITDA year-on-year growth since Q4 '23 with margin expansion. In Brazil, we have expanded our fiber footprint to 30 million premises passed. To highlight, on July 10, Telefonica acquired the 50% stake of FiBrasil owned by CDPQ, strengthening Vivo's leadership in fiber. This cost BRL 850 million. In addition, we have integrated the IoT and big data businesses into the cloud business. This change will allow greater simplicity and increased efficiencies. In summary, I am happy to report that Brazil is performing excellently. We expect to maintain these results throughout the next quarters. Moving to Slide 11. Telefonica Deutschland reported financials were impacted by the migration of the 1&1 customer base and the partner business' transformation. While we continue looking for additional growth and efficiency measures to mitigate this impact, the underlying performance showed growth across revenue, mobile service revenue and EBITDA. Higher promotional activity continued across channel in what is a more mature market. In mobile, we saw robust commercial additions, with contract net adds increasing double-digit quarter-on-quarter. Additionally, O2 contract churn remained stable year-on-year at a low of 0.9%, reflecting the strength of the O2 brand. In the B2B segment, we signed a major new customer, a German and European market leader in shoe retail. Also Telefonica Deutschland announced a strategic partnership with Siemens. Together, both companies will transform the water industry with the first fully integrated connectivity solution based on 5G network slicing. On the financial side, revenue declined year-on-year, mainly due to lower mobile service revenue. EBITDA declined 6% year-on-year, reflecting the impact of the 1&1 customer migration. We expect this impact to continue as more customers migrate off our network. In summary, while financial reflect temporary pressures, Telefonica Deutschland continues to execute on its strategy to position the company for growth once the impact of the 1&1 migration is over. We aim to achieve this growth, investing in network leadership, applying efficiency measures and driving sustainable commercial performance through focused growth initiatives in all the segments. All of this will help drive profitable growth. Moving to Slide 12. The U.K. mobile market remained competitive in Q2, and Virgin Media O2 stays focused on customer loyalty and protecting value. O2 contract churn improved to 1%, driven by an enhanced customer experience and ongoing investment in network quality. In fixed, we are stepping up our retention efforts as we adapt to the evolving market conditions, including the implementation of One Touch Switch. At the same time, we expanded our fixed network footprint to over 18.5 million premises passed, with more than 7 million on fiber. Consumer fixed ARPU also grew year-on-year for the fifth consecutive quarter. During the quarter, we received regulatory approval to create a new B2B company, with the transaction expected to close on August 1. We also announced an agreement to acquire 78.8 megahertz of the spectrum from Vodafone U.K. for GBP 343 million. This acquisition will be partially funded by the last year's minority stake sale in Cornerstone. This transaction will bring our total mobile spectrum share to around 30%, strengthening our network capacity. It will also support greater balance across U.K. operators, enhancing competition, improving coverage and elevating the customer experience. Spectrum transfer is expected to begin in the second half of the year, subject to Ofcom's approval. Financially, revenue declined by 5.7% year-on-year, mainly due to three factors: the phasing of price increase under the new pounds and pence approach; lower handset volumes; and reduced nexfibre build activity. However, EBITDA declined due to the resolution in nexfibre construction. Excluding this, EBITDA growth accelerated in Q2, reflecting the cost of optimization efforts following the 2024 investment in IT and digital transformation. In summary, the U.K. business is progressing with a steady network expansion, early signs of financial stabilization and continued focus on customer value. Moving on to Slide 13 and the operating performance in Hispam, which now includes 4 countries. For the second consecutive quarter, we posted positive contract net adds in the region. These positive results are driven by the improved network quality in Colombia due to the launch of Movistar and Tigo's single mobile network, our great performance in Mexico and a better regulatory environment in Chile. On the fixed business, almost 100% of our broadband customers already have fiber. Revenue decreased year-on-year mainly due to sales of copper in Chile in the first half of 2024. EBITDA decreased 2.8% year-on-year, but improved sequentially due to Colombia. On to Slide 14 to review our transversal units. Firstly regarding Telefonica Tech, revenue growth rate improved quarter-on-quarter to over 12% year-on-year in Q2, with bookings growing in line with revenues. By sector, the performance is driven by the solid demand in financial services, health care and public administration. And we have also reinforced our AI and data capabilities to expand our offer. Secondly, on to Telefonica Infra. Our fiber costs have already reached 29 million premises passed, representing 35% of group deployment. Our submarine cable business delivered sustained profitability with margins of around 50%. Telxius has signed a partnership with Google to provide the necessary infrastructure to land the new subsea cable in Spain. In summary, consistent execution continue across our markets and businesses. I will now hand over to Laura for the main financial topics.

Thank you, Emilio. Free cash flow has improved by EUR 718 million to EUR 505 million in the second quarter and EUR 291 million in the first 6 months of the year. Free cash flow follows its usual seasonality in the first half, and this has been reflected in the evolution of the net financial debt and the leverage ratio, which has increased to 2.78x. However, as the year progresses, free cash flow will gain traction heading to our targets. Furthermore, our net debt will be reduced to EUR 26.0 billion after the sales of Telefonica Ecuador, Uruguay and Colombia and acquisition of the 50% of FiBrasil. We maintain ample liquidity, which covers debt maturities over the next 3 years. The average cost of debt has been reduced year-on-year from 3.64% in June '24 to 3.30% in June '25. We continue with our present financial policy and free cash flow management, which are key priorities for us. Turning to Page 16. This quarter, we have made significant strides in our sustainability efforts. On the environmental front, we have published an updated Climate Action Plan, marking a clear pathway towards our ambition to be net zero by 2040. Furthermore, Telefonica has been included as a supplier engagement leader by CDP for the sixth year running in recognition of our efforts to reduce value chain emissions. On the social side, our customer-centric approach has led us to launch a new personalized service model in Spain. We also remain committed to diversity and inclusion initiatives. And this quarter, we achieved 34% female executives. Looking at governance, we have been recognized for our transparency, receiving awards for both fiscal and sustainability reporting. Finally, I'm pleased to share that TIME Magazine considers Telefonica as the second most sustainable company in the world. I will now hand back to Marc, who will wrap up.

Thank you, Laura. To summarize, our second quarter offers data to show that -- how we're managing this transition period. We're maintaining operational performance, while we prepare for the changes ahead. We are making progress on portfolio focus with 5 Hispam transactions. Our networks continue to evolve, including completing the copper shutdown in Spain. We're on track to meet our financial guidance. Our strategic review continues on schedule. We're taking a hard look on how to position Telefonica in a changing industry. I look forward to sharing our conclusions in the second half of the year. Thank you very much for your attention, and we are now ready to take your questions.

[Operator Instructions] We will now take the first question from the line of Andrew Lee from Goldman Sachs.

I had two questions, one on Spain and one on the U.K. Just noting, I mean, I guess, pretty bullish comments on the strong KPIs in Spain, but revenue and EBITDA growth still remains pretty low versus peers across Europe. So the question is, do you expect growth to accelerate meaningfully organically to more encouraging levels? Or does Spain still need fixing? And what are the potential opportunities to fix that, if so? Secondly, on the U.K., the KPIs weakened again, but the cyber market looks right for consolidation. I know your NetCo creation process keeps stalling. But the question is, is VMO2 in a position financially to be able to pursue what it wants to do on fiber consolidation? Or are there still inorganic things that need to be done to put yourself in a position to succeed there?

Andrew, regarding the question about Spain, I will say that we aim to deliver revenue year-on-year growth higher than 2024 and fostered by the handset sales and retail. We see B2C growth ahead, right, driven by a better customer experience, best-in-class churn, January '25 price increase and solid mix of convergent KPIs supported customer life time value, new subscriber on O2 and direct-to-consumer Movistar+ and a solid new service, consistent increasing the traction of our portfolio. In B2B, we have a strong B2B momentum. As communication IT coverage, we have the pleasure with the best commercial offer. It is the growth engine, while communications are protected by portfolio revamps. In terms of wholesale, we expect wholesale and others to decline year-on-year. Nevertheless, we have a more sustainable wholesale businesses delivered from the agreement signed in 2024. And in terms of EBITDA and the part of the cost -- on cost, we expect to continue capturing savings from efficiencies such as network transformation, simplification of processes and systems and optimize commercial cost by -- from automation and higher use of online channels. And as a result, we expect 2025 EBITDA and EBITDAaL to show higher year-on-year growth than in 2024.

Regarding the VMO2 question, Andrew, so there are different opportunities in the U.K. market, some of which you have mentioned. And I think we have different ways of capturing the opportunities we're interested in. But I cannot comment on any specifics due to us wanting to keep confidentiality with regards to what we want to do on the M&A side and to maintain flexibility in -- with regards how we pursue those opportunities. So I'm sorry for the ambiguous answer.

And just on the Spain, just is 2025 being -- having a high growth than 2024 in revenue and EBITDA? I guess, that's the minimum that you'd want to see from that business. Would you expect further acceleration organically into 2026 and beyond? Or does something need to change in the market to you to be able to achieve that?

Andrew, we have commented that we have the strategic review during this part of the year. And we will talk about the objectives and the targets of 2026 at the end of this strategic review.

We will now take the next question from the line of Joshua Mills from BNP Paribas Exane.

I have 2 as well, please. Marc, I understand we won't get much more detail on this until we provide the strategic review. So I'd love to hear some high-level thoughts about the tech and cybersecurity opportunities for yourself and also telcos more generally in Europe. It's an area you've talked about, but it's also one investors have been skeptical around the ability for telcos to create value in historically. So the question is, when you talk about adjacent areas, the industrial rationale of your strategic review, what makes tech investments different now to in the past? And more specifically, what strength do you think Telefonica brings to the table versus some of your telco peers? That would be the first question. And then the second question, just on the U.K. If I come back to the results we saw this morning, it is slightly weaker revenue than expected. EBITDA still growing in absolute terms. But in order to meet the guidance for revenue growth for the year, you'll have to accelerate in the second half of 2025. What will drive that acceleration in revenue growth on a guidance basis with VMO2? And perhaps in that context, if you could give a bit of color around competition in the fixed line market as well, that would be great.

Okay. Thanks. So with regards to the first question, yes, markets have been skeptical, and I would say with good reason. In the past, with regards to what telecom operators can do in the tech and cybersecurity part of the world, I would say specifically in the product area, not so much in the integration area. What I do think or what we do think and what we're analyzing are two large changes that have happened, occurred in the last 6 to 12 months. The first is the invigorated notion of a strategic autonomy. Europe, under different nation states have stated, "We need technological strategic autonomy." And that in our mind means having cybersecurity technology in Europe, which does not exist. And the second are -- is the announced, I would qualify as huge defense investments. And a lot of the announced huge defense investments will be in creating technology. Cybersecurity, of course, is a twin brother of cyber defense. So with regards to the first point, we expect conditions regarding the cybersecurity market to change, driven by European political will. And if that happens, we would react accordingly. And on the second, we expect large investments in the area of cyber defense, which we think those that operate in cybersecurity can capture. What strengths do companies like Telefonica bring to the cybersecurity area? We have, and other large telecom operators, have a large, long and deep experience in integrating and managing cybersecurity products. So we are near the cybersecurity space. We are part of the cybersecurity space. But it is true, we haven't created cybersecurity products.

And regarding the revenues in U.K., during the conference call, we explained some factors that explained the evolution of the revenue. And I'm going to hand over to Lutz to give you more color about that.

Thank you, Emilio. Yes, so the fixed market in the U.K. is impacted by One Touch Switch and also by high promotions from Altnets and also some direct competitors. So as a result of that, we have the second quarter in a row negative net adds. So that is correct. What we are doing is, right, we have a very sophisticated machine to manage retention in the right way. And now we turn this machine to prevention. And we have made good progress in the second half year. Now to your question, how do we come to service revenue growth during the course of '25, so obviously, we have guided revenue, excluding hardware and construction revenue, which has been flat in the first half year. Within that, consumer has been growing. So consumer service revenue has been growing, and B2B revenue has been shrinking a bit. We have a pretty encouraging funnel on the B2B side, so we think we will get some bigger deals closed in second half of this year. And therefore, we stick to our guidance. Thank you.

We will now take the next question from the line of Akhil Dattani from JPMorgan.

I've got 2, please, as well. The first is just on the strategic review that you're running, and I guess I wanted to stand away from the industrial side where I appreciate it's going to be hard for you to comment specifically. But I wanted to ask a more philosophical question around the balance sheet. There's been a perennial debate in the market around leverage across the sector and whether that constrains the ability to invest freely or to take proactive measures on acquisitions to drive strategic growth. And I just wondered, now you're 6 months into the process of reviewing what you want to do, can you just talk us through how you think about the balance sheet? And I guess, the context being Telefonica is probably at the upper end of the peer group on leverage. Do you think that there's any sort of constraint? Do you think it is important to create more financial flexibility? Or conversely, do you think, given cash flow is improving, it isn't a relevant factor? So I'd love to understand that a little bit better. And then the second one is actually just in reference to a comment you made in the press on the industrial plan. I guess, I just wanted to understand how we should interpret it specifically. It was in Spanish, so maybe there's a translation-related issue here. But effectively, what the article seem to quote you are saying,is that you're looking to place a lot of bets to make sure that a few succeed. So I guess, what I was really trying to understand is, what is that in relation to? Were you talking about industrial journeys across different markets? Is that specifically in relation to M&A? Can you maybe just clarify what you meant by wanting to take a multitude of bets to make sure a few of these deliver?

Sure, Akhil. And actually, the philosophical questions are the ones I really enjoy. So regarding your first and philosophical questions, and I'd break it down to different points, the first one, we will not compromise our grade -- our net debt grade. We have, of course, net financial debt, we have hybrids, and we have other liabilities. So we're not going to move with regards to the ratios we have, and we have promised we will keep. With regards to operations, of course, operations also include acquiring EBITDA. So any acquisition can include the acquisition of EBITDA. If the target one is acquiring, has a larger leverage than our leverage, that is a leverage problem. If it has a lower leverage, that is not necessarily a leverage problem. And it is our technical belief that if we have good targets, we can -- the market offers good options to finance those. So with regards to your final subquestion, the way we see it and our leverage and being on the upper end of the leverage is a constraint. It is relevant, but we don't think it will be strategically limitating to us. We can find solutions for good operations. That is always under the initial constraint that we will always be investment grade. So that would be my answer to your first question, Akhil. With the second one, the answer that you read that was originally in Spanish, it has to do with assuming more calculated risks. So at the end of the day, risk goes with return. And the reason we want to acquire a larger scale is because there are larger economies of scale. We think that is good for Europe. And we think as part of the idea, please let us gain scale, let us consolidate the European market, and then we will be able to invest in technology. And investments in technology have a high risk. So I don't -- I'm not discussing launching huge operations with high risk because that is not the nature of what we do, but being having the balance sheet and the capability eventually of launching small operations that have -- that might have a higher risk profile, and then detecting those that have or create traction and being able to double down. So what I was saying is risk goes with return, and we need scale -- or we want larger scale to be able to take on a more calculated risks. Any high-risk operation that we ever take would be of limited scope initially. If that works, we would scale it up appropriately. So I was not referring to -- and wouldn't imagine like a large or significant M&A operations. It had to do with technology or more limited operations.

We will now take the next question from the line of Nick Lyall from Berenberg.

Could I ask 2 as well, please? Just firstly, on Germany, is it possible for you to give us the underlying ARPU of the remaining 17.6 million contract subs on the Telefonica brand, please? And then secondly, on Spain, you mentioned copper savings as you shut down the network, and you're first in Europe. Could you give us more details on what you found so far in terms of savings and maybe a few -- a bit of help on what future savings you might be able to take as you shut down copper?