Telefonica, S.A. (TEF) Q2 2019 Earnings Call Transcript

Telefonica, S.A. (TEF -0.68%)
Q2 2019 Earnings Call
July 25, 2019, 4:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Telefonica's January through June 2019 Results Conference Call. At this time My name is Adam and I will be your conference operator today. At this time, all participants are in listen-only mode. Later, we'll conduct a question and answer session. If you would like to ask a question, please press 01 on your telephone keypad. If you should require any assistance during this call, please press *0. As a reminder, today's conference is being recorded.

I would now like to turn the call over to Mr. Pablo Eguiron, Global Director of Investor Relations. Please, go ahead, sir.

Pablo Eguiron-Head of Investor Relations

Good morning and welcome to Telefonica's conference call to discuss January-June 2019 results. I'm Pablo Eguiron, Head of Investor Relations.

Before proceeding, let me mention that financial information contained in this document related to the second quarter 2019 has been prepared under International financial reporting standards as adopted by the European Union. From the January 1, 2019, we implemented IFRS 16. In organic terms, the effects of the accounting change to IFRS 16 are excluded and this financial information is unaudited.

This conference call 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 based on assumptions or statements regarding plans, objectives and expectations that make reference to different matters.

All forward-looking statements involve risk, uncertainties, and contingencies, many of which are beyond the company's control. 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 CEO, Jose Maria Alvarez-Pallete.

Jose Maria Alvarez-Pallete -- Chairman and Chief Executive Officer

Thank you, Pablo. Good morning and welcome to Telefonica's second quarter and first half results conference call. With me today are Angel Vila, Chief Operating Officer and Laura Abasolo, Chief Finance and Control Officer. Following our presentation, we will host a Q&A session and take any questions you may have.

I'd like to begin this presentation by highlighting that we have the widest and most advanced ultra-broadband network with 121 million premises passed with ultra-broadband or fiber to the home, the world's largest footprint excluding China. Our key areas of focus are first, business sustainability. This starts with unabated momentum in high-value accesses growing double-digit both in fiber to the home cable and LTE. With average revenue per access accelerating its growth to 4.4% year on year in the second quarter. The utilization translates into longer customer life-time value benefiting our customer satisfaction from a world-class digital experience.

Second, our growth is reliable and sustainable. Broadband productivity and service over connectivity already account for 55% of total revenues, it was 48% three years ago, an are increasingly less exposed to regulation. Efficiencies and the utilization savings serve to translate top-line growth into improved OIBDA trends in the second quarter with operating cash flow turning positive and free cashflow reaching almost 3 billion euros in the first half up 78% year on year. Third, we have the best technology and customer service with the most advanced networks in Europe and Latin America. Networks which are flexible, secure, and virtualized, sub-ware based, and with an open architecture that integrates an element of artificial intelligence. We are number one is virtualization and artificial intelligence and at the same time moving toward 5G though at the right speed.

Fourth, our balance sheet continues to strengthen with net debt coming down for the ninth consecutive quarter and standing below 39 billion euros including post-closing events at the end of June. This clearly reflects our focus on deleveraging and our ultimate goal to improve return on capital employed. Through all of this, we can continue returning value to our shareholders.

To review Telefonica's financial achievements in the second quarter, please move to slide number two. Reported headlines were positively affected in the second quarter by IFRS 16 accounting standards and some other special factors. While it's negatively impacted FX movement against the evolution, regulation, and perimeter changes. Consolidated revenue reached 12.1 billion euros growing organically 3.7% versus the second quarter of 2018. OIBDA exceeded 4.4 billion euros improving its growth rate to 1.6% year on year.

Operating cashflow ex-spectrum totaled 2.6 billion euros up 0.9% year on year back to growth after the decline seen in the first quarter which was mainly due to capex phasing. Net income reached almost 900 million euros in the quarter and free cash flow again is strongly expanded 35.1% year on year to 1.3 billion euros. Net financial debt stood at 14.2 billion euros at the final of June, 5.7% lower than a year ago.

Let's now move to guidance on slide three. We are well on track to deliver our full-year outlook across all three metrics as our first-half figures are in line with expectations. We reiterate our guidance of growing revenues and OIBDA by around 2% in the full year with capex to sales standing at levels of 15%.

Regarding our dividend, we paid the second tranche of 2018 dividend 0.2 euros per share in cash on the 20th of June. We confirm the 0.4 euros per share in cash for 2019. First tranche is payable on the 19th of December and the second tranche in June 2020.

On slide four we show how we again delivered robust financials in the second quarter. Revenues kept their healthy organic growth rate with all regions growing in the second quarter. Europe maintained its momentum and increased by 1.7% year on year. Latin grows by 6.2%. By components, service revenue grew by 2.3% with half its sales accelerating their annual growth rates to 16.7%. It is worth highlighting the performance posted by digital services and the B2B segment up 19% and 14.3% respectively.

Reported revenues were almost flat in the quarter improving the trend from 1.7% annual drop seen in the first quarter. OIBDA levels we show sequential improvements with Europe coming back to growth at 0.5% and Latin growing by 3.2% year on year. Excluding regulation and inorganic terms, revenues and OIBDA would have accelerated its growth trends to 4.5% and 1.9% versus the first half of 2018.

In reported terms, to note second-quarter revenues are almost flat year on year after eight quarters of consecutive decline. In reported terms, OIBDA growth is impacted by the second consecutive quarter by IFRS 16 adoption.

Finally, operating cashflow reversed the first quarter trend and shows annual growth, improving by 610 basis points due both to the better operating performance and lower capex intensity once phasing impacts fade away.

Turning to slide number five, let me share with you some more details for the B2C segment. Customer experience remains our top priority. Through simple, flexible, and tailor-made quality offers we deliver a better customer experience increasing user engagements and monetization. Video remains the key driver for value and loyalty improvement with total TV access up 5% year on year and over the top video service expanding by almost 60% after this launch in Mexico and Argentina last quarter. In June we launched our over the top Moviestar Lite in Spain which is delivering so far promising results. Ultra-broadband uptake is growing significantly in both retail and wholesale.

Worth spending some time on Moviestar leading position in Spain. We through differentiation continues growing in relevance among our client base. Not only total uses grew to 8 million this quarter but offer functionalities show as well increases in usage as best to ensure differed consumption and other features. All in, lifetime value for our customer improved through better churn versus non-TV fixed broadband customers, more than 30% lower and significantly higher ARPU.

Finally, our customized offers also client pre-paid and contract mobile with more personalized benefits such as data sharing or data transfers that help us to increase usage, satisfaction, and ARPU.

We now move to slide number 6 where we show how B2B representing 20% of group revenues maintains its pace of growth. Around 5% year on year on the back of strong trends incorporate as much as 8% year on year growth in the first half of the year and improving trend in SMEs 3% growth in the second quarter, namely in our Latin operations. The evolution of the B2B portfolio are on a digital core of communications, cloud, and security services with building blocks of best in class portfolio of own and third-party digital services deliver strong revenue performance. Worth highlighting, the agreement signed with Google Cloud and Microsoft during the last quarter further enriching our portfolio.

Fifth, on the best networks, the B2B profile evolves toward customer-centric end to end solutions with operational excellence. Let me just highlight cloud and security services and our virtualized IoT platform widely awarded and considered as an industry reference.

Moving to slide seven, in the first platform we already covered 121 million premises with ultra-broadband having the world's largest footprint ex-China. Further, up to 60% of processes are already digitized and managed in real-time and 30% of our customers have been migrated to full-stack. We continue to utilize our network making it more virtual, more converged, and scalable and more efficient with capex needs in core representing just 40% of what needed for the one legacy infrastructure. The third platform provides an enlarged offering with digital services revenue growing by 19% annually in the second quarter.

Lastly, the full platform enriches all of the above with artificial intelligence and open platforms. New functionalities are available in Moviestar Home and more use cases with big data and data analytics facilitator our decision-making process.

I now hand over to Angel to take you through a detailed review of the business performance.

Angel Vila -- Chief Operating Officer

Thank you, Jose Maria. On slide 8 we start reviewing the performance of our Spanish operations which showed remarkable commercial results in the quarter thanks to our premium quality differentiated offering. Once first quarter tariff upgrades effect was left behind, which had an impact on commercial trading, we improved net adds in each and every market segment during Q2. Worth highlighting is the net adds growth in the higher value with 326,000 net adds in mobile contract, 37,000 net adds in conversions, and 11,000 net adds in B2B despite the negative seasonality of the end of the football season.

B2B customers already make for 81% of our total conversion base a 3 percentage points increase from the same quarter last year. Further, churn improves as well in all segments proving our pricing power and backing our more for more strategy and above all increasing our customer's lifetime value. Conversion ARPU shows sequential growth and stands at 88.5 euros in the second quarter up from 88.2 in Q1. The year on year comparison is penalized by phasing effects of tariff upgrades which should nevertheless reverse as from Q3 and go back to one of growth once last year's football promotions expire and the impact from recent tariff upgrades in the higher end of our conversion base start to be felt. Finally, it is again worth highlighting that Telefonica Espana continues growing its share of net adds in Spanish fiber.

Putting together a retain on wholesale customers Telefonica Espana's share in fiber net adds during the quarter stands above its overall market share with uptake growing to a combined 27% in the second quarter bringing in visibility and sustainability to our business.

Moving on to slide nine, service revenues grew for the eighth straight quarter of Telefonica Espana. The sequential slowdown due to the mentioned negative phasing and tariff got in that effect in B2C and certain seasonality impacts in B2B will be reversed in the second half of the year mostly driven by an improving mix of customers and ARPU growth in B2C, on tariffs uplift, and promotions expiring.

B2B revenues have slightly increased year on year, growing for five straight quarters operating. While wholesale and other revenues continue showing an improving trend once deducts such as MTR cuts and agreements are removed. We should expect this trend to remain in the second half of the year.

OIBDA performance is similar to that seen in the previous quarter and organic margin improved quarter on quarter. Again, we should expect solid margin outlook in the second half once top-line trends improve and content comparison base eases.

Moving to slide 10, Telefonica Deutschland delivered a strong trading and operational momentum in both owned and partner brands. This commercial performance has been supported by recent industry tests in which O2 showed strong network and service quality improvements. During the quarter, Telefonica Deutschland boasted 301,000 mobile contract net additions with a significant contribution from partners with a focus on 4G. O2 continued driving to data growth as much as 41% year on year to 4.8 GB per month and user. A key development worth highlighting is MSR turnaround fueling sustained revenue growth of 1.6% year on year together with another quarter of strong handset sales up 12.9% year on year.

OIBDA trends reflect regulatory impacts as ongoing transformation and market investment for future growth. Capex strongly increased by 16,9% year on year in the first half mainly due to the front-loaded LTE rollout and network densification, a trend we expect to normalize over the year.

Moving to slide 11, Telefonica UK produced another robust set of results with healthy top and bottom-line growth on the back of solid commercial trading with 392,000 mobile contract net adds. The company demonstrated once again its market-leading position and remains the UK's favorite mobile network with a sector leading loyalty of 0.9%. Revenues grew by a healthy 4.8% year on year as a result of the ongoing success of O2's flexible tariffs leading to further direction enhancive sales and other revenues.

OIBDA delivered a robust annual growth of 9.2% in the second quarter. Operating cash flow strongly improved by 10% year on year in the first half while the company successfully continued its efficient investment in network capacity and customer experience.

On slide 12, we start reviewing our Brazilian operations where we continue leveraging on our unmatched assets to maintain and even grow our market leadership. First, and as regards to mobile business, Vivo led the latest connect mobile review and we are ranked not only as the best mobile network on a national basis, but also show the best voice and data coverage. This allowed us to increase our market share in the Brazilian mobile market to 32.2%. We have been able to improve our contract net additions from Q1 and also report a significant improvement in prepaid revenues trend which for the first time in the last seven quarters show single-digit annual decline.

Total mobile ARPU grows 1.5% year on year roughly in line with Q1 ahead of contract price increases of 9% effective in August. As for the fixed business, our efforts start bearing fruits. An improved customer mix results into fixed broadband ARPU growth accelerating to 16% year on year in Q2 from 14% in the previous quarter. We have already passed 9.5 million homes with fiber to the home, 2.2 million homes already connected. We offer our IPTV service in all cities with fiber to the home, 142 versus 130 at the end of Q1 which should be a further driving force to future revenue growth. Pay-TV ARPU including DTH ARPU grows already by 5.5% year on year in Q2.

Next slide shows that our strategy of seeking profitable value results into sound free cashflow growth despite investment efforts. Total service revenue of acceleration in mobile contracts is to be reversed as from Q3 on the mentioned tariff upgrades. Mobile prepaid revenues on their side improved significantly their trend which coupled with handset sales and a lower drag from the fixed business allow for 0.4% total revenue growth despite tariff calendar and a tough competitive environment.

Opex performance helped by digitalization savings stands out for another quarter, again being able to beat inflation. Opex growth by 0.4% year on year which compares with 3.4% inflation rate and showing as much as 2 percentage points sequential improvement. OIBDA margin stands about 40% in the first half of the year. This allowed for free cash flow growth of 13% in the quarter no matter capex to sales remains at 19% on the ongoing business transformation.

Moving on to the review of our Hispam operations and starting with South Hispam on slide 14, we would highlight service revenue trends improving in the quarter driven by strong growth in value KPI's with positive contract net adds in all countries. This is the seventh straight quarter of positive mobile contract net adds in the region. Our revenues grew by 17.6% year on year in organic terms with Argentina revenue growth accelerating on tariff increases and value accesses growth. In Peru, our convergence offer Moviestar Total the first and only true convergent option in the market is showing promising results so far with around 100,000 customers having already signed up. OIBDA shows a significant increase from the previous quarter thanks mainly to the better performance seen in Argentina and Peru.

As for North Hispam on the next slide, we continue seeing good commercial performance thanks to an acceleration in contract net adds in Columbia following a more for more strategy. And still improving commercial trends in Mexico that shows positive contract net adds for the third consecutive quarter. OIBDA performance remains penalized by recognition of spectrum fees as opex in Mexico. Should we exclude Mexica, OIBDA would have maintained a similar year on year trend versus the previous quarter growing plus 7.6% year on year in Q2.

On slide 16 we take the opportunity to review not only Telxius quarterly performance but also its success story over the last few years. Telxius has been steadily growing in value leveraging on its prime infrastructure and well-planned strategy that is bearing fruits and we wanted to share some of these conclusions with you. In terms of portfolio and after adding almost 800 new towers in the quarter, total number of sites stands at 17.6 thousand, 11% higher than 2016. Over this period, tenancy ratio has increased to 1.36 times with tenants other than the anchor tenants having grown by 43% since December 2016.

Revenues for OIBDA maintained their solid growth rates in the quarter boasting double-digit rates on a year on year basis. Telxius has been able to boast mid to high single-digit growth in revenue and OIBDA excluding capacity sales at the cable business for the last couple of years. We see room for further revenue and OIBDA growth on visibility provided by an enlarged portfolio and room for increased tenancy ratio. This should provide clear support to the value of case.

These strong results displayed by regions and OBs are supported by groupwide projects aiming to increase customer engagement, value, and efficiency. Today I would like to touch upon three of such projects; device relevance, digital transformation, and network optimization via sharing and legacy switch off.

Starting with devices on slide 17, we look in more detail at how we can improve customer value via hardware sales. Handset revenues that grow by about 17% year on year in Q2 already made for 11% of our total revenues. This does not only bring in revenue on OIBDA growth but also helps to increase customer engagement and loyalty and accordingly improve customer value. Looking at our experience and test cases running different markets, we can see that customers buying the devices in our channel show lower churn and higher ARPU. This is a sizable opportunity as only 30% of our customers renew their handsets with us.

Through Phoenix, our digital renewal program, we're starting to offer our customers a cyclic app-based renewal process. This does not only increase revenue as said before customer satisfaction improves and the weight of digital sales in our distribution channels hence efficiency increases as well. We are prompting a faster route of Phoenix and the program will be implemented in nine countries during 2019, being already active in five countries. The size of this opportunity is not limited to mobile handset renewal only. We aim to optimize our sale cycle and include other devices, accessories, and services with significant upside in all geographies.

Slide number 18 shows how we are advancing in our digital transformation program pushing for further engagement and efficiency gains. As such, the execution of the several initiatives set around sales, customer service digitalization, and process automation is translating into higher use of digital channels, better customer experience, and additional savings to the ones captured in 2018. Among all the relevant indicators in the first half of the year, digital channel operations are growing 28% from the year before while calls to contact centers are down 12%. As a result, we are progressing well on track and already capturing at the end of the first half 45% of the targeted savings for this year of more than 340 million euros.

Moving on to slide 19, we highlight our focus on optimizing networks. Network sharing agreements are an opportunity to reduce costs and investments while improving coverage and quality. Our customers will benefit from the faster roll-out of new networks and we capture resources which may be redirected to other investments. Worth to mention is the exclusive agreement signed in Germany with Vodafone to gain access to their cable networks and the recent agreement signed in Brazil and the UK to share both 2G, 4G, and 5G deployment with relevant efficiencies behind. We continue to be open-minded analyzing any potential opportunity on this front.

On the other hand, we already progressing in legacy shutdown, a result of our transformation journey. In mobile, we are reusing 2G/3G spectrum to 4G which has a much higher spectral efficiency. In fixed, investment in legacy technologies are reduced and we are pioneering in the copper central offices decommissioning having closed more than 400 central offices so far in Spain and announced more than 1,500 closures. All this is part of a six-year plan where we expect to hit a saving coming from asset sales, energy savings, and lower maintenance costs and capex savings coming both from deployment and maintenance.

I now hand over to Laura.

Laura Abasolo -- Chief Finance and Control Officer

Thank you, Angel. Moving to slide 20, net income reached almost 1.8 billion euro up 2.8% versus the first half of 2018 despite a negative impact of 4x and IFRS 16. Earnings per share stood at 0.32 euro cents, 12% more than in January to June 2018 reflecting the good operating performance and efficient financial management.

FX's movements continue waiting as slide 21 shows. The negative impact of FX was nevertheless reduced in the second quarter due to the Brazilian Real and Argentinian Peso improving trends versus the first quarter. Again, it is important to mention that the FX for us is naturally hedged in our business for local currency spending in capex, interest payment, working capital, and others. Two and up to June a negative FX impact of 332 million euro at the OIBDA level is mostly neutralized at the free cash flow level where we have the negative impact of just 91 million euro. Regarding net debt, FX helped to bring it down by 49 million euro in the last 12 months rolling.

On slide number 22, you can see how strong our free cash flow generation has been over the period. In the second quarter of the year, free cashflow surpassed the 1.3-billion-euro mark to reach almost 2.8 billion euro in the first half, 78% higher than in the same period last year. This significant growth rate is mainly driven by the better performance of operations and lower working capital consumption, taxes, and minorities. For the second half of the year, we expect free cashflow ex-spectrum to improve. As Jose Maria mentioned at the beginning of the presentation, free cash flow remains the sustainable driver for farther deleverage.

Let's now move to balancing metrics on slide 23. We present another quarter of debt reduction, nine in a row, thanks to our strong free cash flow generation that as mentioned before reached 2.8 billion euro in the first half of the year comfortably exceeding dividends, hybrid coupons, and commitments while helping to bring down net debt. Taking into consideration post-closing events related to inorganic measures all contributed to debt payment joining with free cash flow generation, net debt to OIBDA stand at 38.7 billion euro and implied net debt to OIBDA ratio that comes down to 2.56 times. Lastly, let me mention that under IFRS 16 net debt could be impacted by 7.5 billion euro worth of leases.

Slide 24 presents Telefonica's ample and diversified financing activity totaling 6.5 billion year to date contributing to both an extension of our average debt life to more than 10 years and robustly created position of close to 24 billion euro. Such financing activity has been executed at a historical low-interest rate that has allowed us to bring down our interest payment effective cost to 3.35% as of June 2019, 0.2 percentage points lower than in June 2018.

I will now hand back to Jose Maria for a final recap.

Jose Maria Alvarez-Pallete -- Chairman and Chief Executive Officer

Thank you, Laura. To summarize, second-quarter results prove again consistent business trends and execution skills and fundamentals. We continue putting the best technology into our customer service relying on our network leadership having the world's largest ultra-broadband fiber footprint ex-China. This allows for better customer experience and translates into higher revenue per access. The utilization also benefits our customer satisfaction while helping through efficiencies to translate top-line growth into improved operating trends. We can then continue posting good levels of profitable and sustainable growth in revenues, OIBDA, and operating cash flow. This helps leverage and we have been able to reduce again net financial debt for nine straight quarters already.

Finally, following these results, we can also say that we are fully on track to meet 2019 guidance. Thank you very much for listening and now we are ready to take your questions.

Questions and Answers:

Operator

Ladies and gentlemen, if you would like to ask a question at this time, please press 01 on your telephone keypad. To cancel your question, please press the 02. Once again, that's 01 to register your question and 02 to cancel. We would kindly ask you to ask a maximum of two questions per participant and if possible, we recommend you not to use your cell or hands-free phone. There will be a short silence while questions are being registered. Thank you.

Our first question comes from the line of Mathieu Robilliard from Barclay. Please, go ahead.

Mathieu Robilliard -- Barclays -- Analyst

Good morning. Thank you. I have two questions, please. First with regards to assets sales. So, you've done quite a number of asset sales in good conditions over the last few years and I was wondering if you're reaching the end of that process or you still think there are opportunities to sell assets that are not earning and the desired cost of capital don't have the prospect to? And second with regards to Spain. I think you mentioned in the presentation that you expect the revenues to improve in H2 which potentially in line with what you've been saying the past quarters. I was wondering in that statement is true also for the bid backs? I think in previous quarters you had indicated that you expect doing flexing maybe in the second part of the year. Thank you.

Jose Maria Alvarez-Pallete -- Chairman and Chief Executive Officer

Thanks, Mathieu. Regarding your first question on portfolio optimization. Over the last year, we have reshaped our portfolio actively managing assets and looking for profitable growth. We have been investing in Germany and Brazil and we have been divesting our optimizing capital allocation like the case of Telxius and tariff data centers of Central America including Rose. We are consistently reviewing our portfolio and in fact, we have classified all of our assets and geographies in infrastructure in three categories in order to project this process evolution. We are benchmarking the gross OIBDA from the organic managing with any potentially inorganic opportunity and that's why we have been taking the position of divesting in Central America.

At the same time, we think that we have been able to reinforce our balance sheet for nine quarters in a row thanks to our organic free cash flow generation and these inorganic moves. As a result, we don't feel forced to sell assets anymore just for deleveraging purpose. We will do so in order to optimize return on capital employed. We have a balance sheet that totals 122 billion euros and therefore we think we have still room to optimize return on capital employed. You should expect from us to stick to this classification of assets into these three categories, the ones at our core, that ones are to develop, and the ones that are to divest. That includes geographies, infrastructure, and products and services. Therefore, we are not in a rush, but you should expect from us to keep being very selective and very focused on return on capital employed and therefore we think we have room to go on this portfolio optimization.

Angel Vila -- Chief Operating Officer

Regarding the second question, first I would like to highlight that service revenues have been growing for eight consecutive quarters in a row in Spain at gross components. I said in the presentation, but I want to reiterate, we do see we return to growth in half two with accelerated growth on better comps sort of conversional to uplift coming from the tariff upgrade effective now in the summer and the end of the promos of last year football season that improved trading. In B2B growth, it's also expected to accelerate in half two once the total impacts of the second quarter. Our behind wholesale and others is very nice. We expect similar trends. So, Q2 is expected to be the lowest year on year growth in service revenues in Spain and we will recover a stronger growth in the second half.

Then moving to OIBDA. In the second quarter what we have seen is opex going up due to higher cost of TV content and IT offset by lower personnel and commercial costs. When we look toward the second half of the year, we're going to have a lower year on year growth in net content costs comparison in this H2 versus H1. We have farther efficiencies in commercial channels, call centers, network IT costs from the distillation of domination which will allow us to continue boasting benchmark margins. OIDBA margin has improved 1 percentage point from Q1 to Q2 and we expect to have margins in the second half of the year broadly similar to the average margins of the first half. This means as we've said before that we continue to endorse not the declining OIBDA in Spain in 2019 which would be an achievement not seen for the last years. So, we continue aiming toward OIBDA not declining in Spain.

Mathieu Robilliard -- Barclays -- Analyst

Thank you very much.

Pablo Eguiron -- Head of Investor Relations

Thank you, Mathieu. Next question, please.

Operator

Thank you. The next question comes from Jakob Bluestone from Credit Suisse. Please, go ahead.

Jakob Bluestone -- Credit Suisse -- Analyst

Hi. Good morning. Thanks for taking the questions. Firstly, just staying on Spain whereas you just pointed out Q2 was a slowdown in terms of service revenue growth and you mentioned during your presentation that it was largely ARPU driven. Can you maybe give a little bit more color on the deterioration in the ARPU? Your convergent ARPU went from growing slightly to shrinking slightly. Can you maybe just sort of help us understand how much of that is comps, how much of that is competition picking up, how much is dilution from no-frills brands or other factors just to sort of help us understand a little bit what lay behind that slowdown in ARPU? That's the first question.

And then secondly, you obviously in your presentation mentioned optimizing networks and I'd just be interested if you could update us on your thoughts on tower sales across some of your key assets what's sort of your thinking on that. Thank you.

Angel Vila -- Chief Operating Officer

Thank you, Jakob. On the first question, let me talk about all the moving pieces in the convergent portfolio. Convergent performance is measured by several PPIs; the customer base, the mix of the base, the churn, and ARPU that you were asking about. On the customer base, we are sustaining the commercial momentum. The customer base in convergence is up quarter on quarter and year on year and year on year plus 4.1%. We have 22.8 million accesses and 4.7 million customers. The mix also remains effective and skewed toward the higher-value packages which account for 28% of the customer base up 1% year on year. For sale churn, sales improved significantly from 1.7% in Q1 to 1.46% in Q2. And regarding the ARPU, it stands at 88.5 euros which is up sequentially 0.3% quarter on quarter but is down year on year on the following factors.

We have reported this impact from tariff upgrades, but the different calendar and the different size of the tariff upgrades are weighting on this year on year comparison. We have reported this impact from upselling. We have a dilutive effect from promos that have taken place in the last 12 months. We have also had a dilutive effect from mobile launch migrating to fusion multi-line backs and less out of ultra-broadband. And we have a dilutive effect from the move to grand conversion offers. We are not only offering conversion propositions in fusion but also in O2. ARPU ex-O2 would be growing year on year.

Jose Maria Alvarez-Pallete -- Chairman and Chief Executive Officer

Taking your question on mobile networks 5G and towers, potential network sharing. First, let me remind you that at a group level we have roughly 130,000 sites. 90,000 just on LTE and we have probably one of the largest, if not the largest, ultra-broadband fiber network in our territories. Therefore, we have still a significant room to grow and directly enhance return on capital employed by network sharing.

Focusing on towers, if we were to focus for example in the UK, CTIL owns and operates roughly 18,500 towers and already has two largest tenant customers. So high financial provides such as Vodafone and ourselves. Therefore, in the current market environment, it has a significant intrinsic value and we and Vodafone are aligning our intention to crystallize that value. We think that tower sales are probably no longer an effective way of executing SAT transaction because we the new accounting standards it becomes a very expensive way of financing and therefore, we think that there are a little bit more effective ways of executing such a transaction. But if you add to this amount of towers in the UK the fact that Telxius owns and operates roughly 17,500 towers and we have 20,000 towers just in Germany, you will have a better idea of the value that such an asset could have and the potential value creation and debt reduction if we are to share in crystalize the value of all those assets. So, you should expect from us to very focused on optimizing this value and at the same time preserving our competitive advantage wherever we have that competitive advantage. Yes, you should expect us to be very active on those fronts.

Jakob Bluestone -- Credit Suisse -- Analyst

Thanks very much.

Pablo Eguiron -- Head of Investor Relations

Thank you, Jakob. Next question, please.

Operator

Thank you. The next question comes from the line of Georgios Ierodiaconou from CITI. Please, go ahead.

Georgios Ierodiaconou -- CITI -- Analyst

Hi. Thanks for taking the questions. I have two and actually mostly follow-ups. I'd be interested in you could perhaps link the discussion around network sharing with some of the disposal options you have available. In particular, if you could give us a bit of an idea around the agreement you have in Brazil with TIM where there is access that repudiated in the rest of your footprint and how that links then with any monetizing options you have or on the tower side.

Then my second question is around network virtualization. There's been, obviously, talk about turning 3G in Europe in the next two or three years. If you do 2G sharing with other operators and networks virtualization, I just wanted to get an idea of what is the path that you see in the coming years in reducing perhaps both the cost and capital impact in the industry. If there are any numbers you could give us if there are numbers that are out there sound credible to you. Any help with that would be appreciated. Thank you.

Angel Vila -- Chief Operating Officer

Hi, Georgios. I will start with the first question. We announced an MOU in Brazil with TIM but open to other parties that have the objective of improving return on capital employed with allocating capex smartly in two ways. First, deprioritizing legacy technologies and second sharing the cost of investment in new technologies or higher-return technologies. So, one leg of this agreement is a full 2G network sharing in a single-grid format with the objective of switching one of the two networks or if other people want to join additional networks in each one of the regions. This is clearly in the way of deprioritizing and making more efficient the return on legacy technologies. These can be extended to any and all geographies in our footprint.

The second leg of the agreement that we announced in Brazil is sharing the deployment of 4G at this stage in a subset of cities. This has to be developed over the next 90 days between the parties and then has to be approved by regulators. Depending on the result of this analysis, this could be increased to more cities than the ones that are originally envisioned. We also contemplate as a result of the work in the next 90 days opportunities to share in other frequencies of technologies, but here we will as always be looking not to give away what we have a technological advantage and we will obviously include reduction opportunities regarding operations and maintenance across the networks of the different players. So, this is both on the deprioritizing legacy technologies and on making more efficient the investments in newer technologies.

Jose Maria Alvarez-Pallete -- Chairman and Chief Executive Officer

Taking your second question. As a sector, we think we have a significant opportunity to enhance profit through network sharing. Every network element that does not represent a commercial competitive advantage is a candidate for sharing. That includes infrastructure, access, transport, or roaming agreements. Those are all different alternatives that can offer a full range of possibilities. Passive or active sharing are both to be considered and depending on the markets and the relative market share that we have. It makes no sense to get ready to give access to a brand-new fiber network because it represents an opportunity to accelerate returns and at the same time to preserve four or five 2G or 3G networks per country. It makes no sense to start deploying 5G without radically simplifying through network sharing legacy technologies. And it is in this framework that you should read all the agreements that we have signed with Vodafone, TIM, or the sitting one with Millicom in Columbia. We are working as we speak on several other projects of the same kind.

In terms of virtualization for 5G namely, there are two parts of virtualization; the core virtualization or the run virtualization. Core is more advanced, and we are product market leaders on that regard with our UNICA technology. Therefore, we are also collaborating with suppliers and with some of our competitors to see which part of the 5G deployment we can optimize but also share in that part of that virtualization again if it doesn't represent a commercial advantage. And then on run, it's going to be depending on the evolution of 5G and therefore the views that we have on non-stand-alone 5G or stand-alone 5G.

As a summary, we think that going forward there is a significant opportunity of enhancing returns through sharing and it is an absolute no-brainer to share legacy technologies and to decommission as many networks as we can that are not sustainable for the future. This should represent a significant efficiency opportunity going forward. On that regard, it's not just mobile networks, also fiber networks are going to be essential. Remember that we have the largest fiber footprint and therefore accelerating the decommissioning of copper, namely in Spain, presents a significant efficiency opportunity.

Georgios Ierodiaconou -- CITI -- Analyst

If I could quickly ask a follow-up around Brazil. I'm guessing you have similar discussions for a single 2G grid in other countries. Why has Brazil been successful in the negotiation while other countries we haven't reached an agreement yet?

Angel Vila -- Chief Operating Officer

Well, Brazil has announced an MOU. They will be now developing it over the next 90 days. You need a willing partner. TIM has shown lots of interest, but you should expect us to be looking at this type of agreement in each one of our geographies. So, we will be working and in due course presenting to the market our progress on this front. As Jose Mariasaid, it's a no-brainer.

Georgios Ierodiaconou -- CITI -- Analyst

Thank you.

Pablo Eguiron -- Head of Investor Relations

Thank you, Georgios. Next question, please.

Operator

Thank you. The next question comes from the line of Michael Bishop from Goldman Sachs. Please, go ahead.

Michael Bishop -- Goldman Sachs -- Analyst

Thank you. Just two questions from me, please. Just moving to in Spanish content. As you go into the football season and we just had the Orange we're talking about potentially promoting more. It would just be good to get your high-level thoughts on how the content strategy has evolved over the last year and the sort of attach rates you're seeing from content customers that you're winning back from competitors. Secondly, just moving to the UK performance. I was just wondering if you could give us any indication on how much of the performance is being helped by the Sky MVNO. At least locally, it feels like Sky is really pushing mobile and that should be benefiting your trends. Thank you very much.

Angel Vila -- Chief Operating Officer

Thank you. Michael, on the first question on Spanish content. One year ago there was a lot of concern about the purchase of the sports rights, the cost of those whether we would be able to wholesale them, the potential to attract retail customers from those players not taking the content. Well, what we can say is that one year after we are stronger. We are in a much better place. We have been able to capture customers above the initial expectations we had from players that didn't have the football. This has been customers that have come with ARPU higher than our average ARPU and both in the base but also in the new customers that we have acquired. What we see is that these are customers that have significantly lower churn rate.

Now, we get into the third quarter scenario which we're going to start a new season of La Liga. Last year Vodafone managed to retain a certain number of customers because they still had eight weekly games from La Liga. From this month of August onwards, that would not be the case. So, football fans that stayed with Vodafone will have to look for football elsewhere. No? And we have control of the whole premium football rights which we have packaged now into one La Liga package, not any more separating the first match of the week and the others including the second division. And then we have the champions including the La Europa league. So, we believe that there's going to be an uptick in the back to school time, no doubt. Maybe promotional intensity could be lower than what was seen last year.

I need to ask you to please repeat the second question.

Michael Bishop -- Goldman Sachs -- Analyst

The second question was just around the impact of the Sky MVNO on the O2 UK performance because it feels like at least locally in the UK Sky is pushing quite aggressively on mobile. Thank you.

Angel Vila -- Chief Operating Officer

Thank you. Well, you have seen the results our UK operation which is having one more quarter of very robust results, outperforming the market. This is resulting in strong commercial traction. It's resulting in high single-digit increases both in revenues and OIBDA. This is coming mainly from our own commercial activity and I'm afraid we cannot, due to agreements we have signed in place with Sky, disclose figures regarding that MVNO relationship. You should have to ask them directly. I'm sorry.

Michael Bishop -- Goldman Sachs -- Analyst

Not a problem. That's all very helpful. Thanks.

Pablo Eguiron -- Head of Investor Relations

Thank you, Michael. Next question, please.

Operator

Thank you. The next question comes from Akhil Dattani from JP Morgan. Please, go ahead.

Akhil Dattani -- JP Morgan -- Managing Director

Hi. Good morning. Thanks so much for taking the questions. I've got two follow-ups as well, please. The first was just in relation to some of the comments you've been giving around network virtualization and tower sharing. If I understand correctly what you're saying, correct me if I'm wrong here. It sounds like you're saying that you're increasing list of views that network differentiation is maybe not as core in the way it once was perceived. You don't need to own all the different components to differentiate your network. Obviously, there are many different parts which you'd be happy to share, divest, etcetera. I guess what I'm trying to understand is as you look at the business going forward, what do you think are the key pillars to differentiating? Is the network still as core as it once was? Obviously, in Spain content is one of your key pillars to differentiating. There is digitalization. There's a lot of different pillars here. How do you think about differentiation and trying to protect your business and growth going forward? That's the first question.

The second one just following up on the various topics we've been discussing around Spain. Near-term you have been doing much better than your peers. Obviously, you're confident on H2. But the broader question I guess for me on Spain is that if we look at the Spanish market versus the rest of Europe, one of the big differentiating points is that the deployment cost of infrastructure is much cheaper. It's been one of the big advantages you've had in terms of your capital intensity. How do you think about your ability to protect your business against that backdrop? Obviously, we've got a change of management at Euskaltel where they seem to want to go national. You've got MASMOVIL being aggressive. You've got Vodafone struggling a lot in that market and Orange also had bad numbers this morning in Spain. I guess I'm just trying to understand differentiation in Spain and how do you maintain and protect your returns? Thanks a lot.

Jose Maria Alvarez-Pallete -- Chairman and Chief Executive Officer

Thanks for your question. I'll take the first one on network virtualization, on network sharing. We do think that network is a key differentiating factor and in fact, we have been pretty consistent on that because we have invested roughly 29 billion euros in capex during the last three years. Therefore, we are going through one of the highest capex investment cycles in the history of Telefonica. As a result of that, we have built the largest ultra-broadband network outside China. We have doubled the number of LTE sites. We have doubled the number of customization ultra-broadband. We have more than doubled our LTE customer-base and we have built the largest Spanish speaking pay-TV platform. We do think that network is a key differentiating asset and we are investing very heavily in transforming our network from legacy networks like copper or 2G or 3G into state-of-the-art last-generation IT network that is ready to be virtualized and subject to be run through artificial intelligence.

The factor that we stress around network sharing is the fact that it makes no sense to have four or five antennas in each roof when you can share and therefore that is not a differentiating factor. It makes no sense to preserve four or five 2G or 3G networks in every country where you can move the traffic, namely the data traffic, from those networks into 4G or to come 5G networks. So, we think that you need to preserve network differentiation when you have a competitive commercial advantage, but every other part of the network whether that is to be infrastructure, was that to be backbone that is not a differentiation factor is a candidate for divesting because it makes no sense to invest in seven different mobile technologies at the same time because that would significantly affect return on capital employed. So, my point is that network differentiation is a key factor but multiplying the number of networks by four or five when you don't have a competitive advantage makes no sense, namely on the legacy part of the network. So, we are investing very heavily, and we will keep doing that in order to preserve that competitive advantage, but we will be sharing anything that is not differentiating us from our peers. I hope that that answers your question.

Angel Vila -- Chief Operating Officer

Regarding how we keep differentiating in Spain. This has different components on the different segments. So, for instance on B2C, what we see as a market which is increasingly segmented and polarized as a consequence of the high convergence penetration. So, when you have a low end which is significantly more crowed with all four national players present, sometimes we sell multi-grams with somebody else and local players. But then you have the medium to high-end which is where we make most of our revenues on OIBDA which is less crowded. It's more rational this requires larger investments, spending on network, quality IT services, content and functionalities, and here we have lots of differentiating capabilities which allow us to continue applying a more formal strategy. Which by the way is also being applied by competitors. Orange raised prices both in all ranges of their brand. Vodafone, when they have redone their portfolio, is also doing more for more. MASMOVIL and Diego have been applying more for more too. Euskaltel you talk about them; they have raised prices in services of different brands. So, B2C market which is more segmented conversion more polarized and where we hit much higher in revenues for OIBDA than are shedding in accesses.

In B2B, we have a very strong position in Spain. We are clear market leaders here. We are focusing on digital transformation and helping our customers transform digitally. Here, being able to provide services like security, Cloud, IoT, big data, digital workplaces is something that differentiates us from our competitors and is allowing us to have the performance that you've seen with the business growing for the last five quarters. And then the third component is wholesale. Another where our base of fiber that we are wholesaling, and our network figures have grown significantly, and they are obviously revenue accretive to the old copper. And then the farther wholesale of content that we have are going to trigger our ability to differentiate us from our competitors. Our competitors fast presenting results this morning have been growing in previous quarters on the base of wholesale revenues that has been slowing down. For us, it's accelerating. We continue to be able to differentiate after having invested substantially in our business in all the platforms.

Pablo Eguiron -- Head of Investor Relations

Thank you, Akhil. Next question, please.

Operator

Thank you. The next question comes from David Wright from Bank of America. Please, go ahead.

David Wright -- Bank of America Merrill Lynch -- Managing Director

Thank you. A couple of questions. Firstly, just on Spain I just wanted to get my understanding of this right reviewing one of the earlier questions. We can expect the revenues to accelerate or to return to growth in H2 B2C, B2B a little better, wholesale similar. And you're also saying net content cost growth also slows. So, I'm wondering why if you're getting some relief from the pricing on the content costs that you're only really expecting the margin to be broadly similar. Why wouldn't it be better? And I'm really sorry. I just struggle with OIBDA not in decline. Does that mean stable? Does that mean growth? Not in decline I'm struggling with.

My second question just a little bit more high-level, probably Jose Maria, is you've seen a fairly precipitous drop in the share price of your German subsidiary over the past few months. Do you guys look at that and consider that in the whole framework of asset divestment but also asset acquisitions? Could there ever be an opportunity to take advantage of that share price and perhaps even look to buy more share in the market or even consider acquiring minorities given that the market I'm sure you would feel doesn't value that asset currently? Thank you.

Angel Vila -- Chief Operating Officer

Hi, David. On the first question, again I reiterate that we expect an acceleration of service revenue growth in the second half compared to what we have seen in the first half. And regarding the margin, you have different moving pieces. There will be lower year on year growth in net content cost in the second half versus the first half but still some growth in the growth cost. Deficiencies from the people who plan to do some supplementing in the last years have peaked in the first half of this year that is with the current or existing plans are not going to be improving or adding additional savings to the ones that we have achieved because we're already in the run rate. So, we have different moving pieces. For us, we have been able to achieve in the second quarter an improvement of one percentage point in OIBDA margin up to 39.8% organic ex-IFRS which is remarkable. Maybe we could have expected this to be a bit lower. So, what we see is that what we are achieving in the second quarter is again back to the pre-IFRS levels around or very close to 40% is a very strong OIBDA margin. So, that's why I think why we say that we expect margins to be broadly on that level.

And then we OIBDA which has been declining in Spain since 2009, we expect it not to decline in 2019. We have been declining for rate in revenues plus in the year 2019 we started increasing revenues in Spain. 2019 we'll accelerate the increase in revenues and what we're aiming to do is revert what we saw as decline. So, this could be stable maybe slightly positive OIBDA for 2019.

Jose Maria Alvarez-Pallete -- Chairman and Chief Executive Officer

Taking your question on Germany. The German Telefonica Deutschland share price has been affected in the last months by maybe three factors I would say. First is the KPN sell-off that now is over but has been pretty consistent on affecting the share price evolution during the last months, quarters. The second was uncertainty around the German auction, I mean what would be the outcome of the German auction in terms of how much spectrum we'll be gaining out of the auction and if that spectrum would be enough to maintain our performance. I think that concern is now over as well. And the third would be potential for them in know. All those concerns are progressively fading away and most of them were addressed just to the team in Germany during the conference call. We think that the share price of the Telefonica Deutschland will grow positively going forward. We are happy and strongly committed with our stake in Telefonica Deutschland and we are deeply versed in Telefonica Deutschland intrinsic value. So, for the time being, we are comfortable with the stake that we have.

David Wright -- Bank of America Merrill Lynch -- Managing Director

Gentlemen, thank you.

Pablo Eguiron -- Head of Investor Relations

Thank you, David. Next question, please.

Operator

Thank you. The next question comes from Kevel Khiroya from Deutsche Bank. Please, go ahead.

Keval Khiroya -- Deutsche Bank -- Analyst

Thank you. I've just got a follow-up question on Spain. You mentioned the high-end accounts for 28% of the overall customer base up 1% on the prior year. Could you tell us how the low and mid-end segments have compared versus one year ago as well? Would you also be able to comment on how large the O2 base is now? Last quarter you did say it's 50,000 to 60,000 subs. Many thanks.

Angel Vila -- Chief Operating Officer

Yes. Thank you, Keval. The high-end which is ARPU of 140 euros what we call the package for total is 28%. In the mid-end which is average ARPU of 85 euros is 32%, it was 42% one year ago. And the low-end which has ARPUs around 60 euros is 40%. It was 32% a year ago. So, the ARPU that we call low-end is the average ARPU of the operator which is closest to us. So, one has to bear in mind that we are using these terminologies of high, mid, and low-end but low-end is the average ARPU for our closest competitor and this is the result of our more for more strategies. We are describing these segments according to which package is going to each segment but the average ARPU of each one of these segments, high, medium, low has been going up in the last year. This is the detail.

Regarding O2, let me get the figure. One second. We have over 100,000 fixed broadband subs, over 185,000 mobile subs at the end of Q2 and we have the lowest churn at 0.8%.

Keval Khiroya -- Deutsche Bank -- Analyst

That's very clear. Thank you.

Pablo Eguiron -- Head of Investor Relations

Thank you, Keval. Next question, please.

Operator

Thank you. The next question comes from Carl Murdock-Smith from Berenberg. Please, go ahead.

Carl Murdock-Smith -- Berenberg Capital Markets -- Analyst

Hi. Thank you. I've got two questions on the UK. Could you help us understand the split of the handset and other revenue, the growth there between handsets and the smart metering program? Are you able to give any color regarding how much of the revenue growth you're getting from that smart metering program and how much of the growth is that and how long will it continue to be a growth driver before starting to flatten in time?

And then secondly, again in the UK in terms of the Ofcom pricing review, how much will it cost to reduce out of contract customers to the equivalent 30-day sim only deal? I'd just like to ask why have you only committed to your direct customers and not contracts taken out with third-party retailers? Thank you.

Angel Vila -- Chief Operating Officer

Thank you for your questions. First thing I would like to say is that mobile service revenue as a metric is now less comparable and applicable in the UK due to the increasing range for propositions that we have in the market. Basically, custom plans which are selling the device along with a plan. This has the biggest month life and these results through the new IFRS accounting into a classification of revenues into mobile service revenue and hardware. What we are focused on is looking at the total revenue figure and here also what we're talking is about the growth of our base, the top-line and the bottom-line growth of our UK operation. All three of these have been growing in the first half. What we see is very strong traction of custom plans which is allowing us to capture value and outperform the market. And for an accounting issue, we're not going to put the slowdown our commercial performance. The SMP is also adding to the growth in our revenue in our UK operation. We at this stage cannot disclose the detail on how much it is accounting.

Regarding your second question, I would again ask if you can rephrase it because I'm not sure I got all the details. It being so specific, I'm not sure I have the information to respond. But please, if you can repeat it. Thank you.

Carl Murdock-Smith -- Berenberg Capital Markets -- Analyst

Don't worry. It was asking around Ofcom and the actions they're doing at the moment regarding pricing reviews in the UK. So, O2 the other day announced that at the end of mobile handset contracts that you would reduce the pricing of customers automatically to the equivalent 30-day sim only deal. But it was also announced that you would only be doing that for customers that you sold to directly and not for contracts taken out with third-party retailers. I was just wondering why that decision was made to only do the favorable pricing move for direct customers and not those that you sell to through third-parties?

Angel Vila -- Chief Operating Officer

Okay. Thank you. In the UK in direct channels, we already sell handsets and service in two different contracts. So, once a handset contract is finished, we no longer charger for the handset. So, this has been an ability on a transparent proposition from our UK operation and I think that this differentiates us from some of our competitors. So, we will not be expecting any impact from this.

Pablo Eguiron -- Head of Investor Relations

Thank you, Carl. We have time for just one final question, please.

Operator

Thank you. Our last question comes from the line of Mandeep Singh from Redburn. Please, go ahead.

Mandeep Singh -- Redburn -- Analyst

Hi. Thank you for taking a final question from me. I'd like to come back to the German question in a different way similar to what David asked, however. I mean, obviously, if you look at capital allocation when you look at your portfolio of assets, you are leaking about 250 million euros of a 12% dividend yield from Germany to minorities. You've made so many great efforts across your portfolio to optimize returns. How is that an acceptable allocation of capital to leak that much dividend from Germany which has negative on yields to minorities? Thank you.

Jose Maria Alvarez-Pallete -- Chairman and Chief Executive Officer

Well, thanks for the question. We rank the capital allocation decision around the different returns. Therefore, we prioritize the ones that have the highest returns. So, for the time being, we think we have a better option that goes before the one that you were mentioning. We agree. As I was saying before, it's not just a question of financial or cash returns out of the dividend leakage. It also has to do with the productive value of the different assets. So, it is on our radar but we have priorities that go before the one that you were mentioning.

Mandeep Singh -- Redburn -- Analyst

Thank you.

Pablo Eguiron -- Head of Investor Relations

Thank you, Mandeep.

Operator

Okay. At this time, no further questions will be taken.

Pablo Eguiron -- Head of Investor Relations

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 as you to contact our investor relations department. Good morning, and thank you.

Operator

Telefonica 's January-June 2019 results conference call is over. You may now disconnect your line. Thank you.

Duration: 79 minutes

Call participants:

Pablo Eguiron -- Head of Investor Relations

Jose Maria Alvarez-Pallete -- Chairman and Chief Executive Officer

Angel Vila -- Chief Operating Officer

Laura Abasolo -- Chief Finance and Control Officer

Mathieu Robilliard -- Barclays -- Analyst

Jakob Bluestone -- Credit Suisse -- Analyst

Georgios Ierodiaconou -- CITI -- Analyst

Michael Bishop -- Goldman Sachs -- Analyst

Akhil Dattani -- JP Morgan -- Managing Director

David Wright -- Bank of America Merrill Lynch -- Managing Director

Keval Khiroya -- Deutsche Bank -- Analyst

Carl Murdock-Smith -- Berenberg Capital Markets -- Analyst

Mandeep Singh -- Redburn -- Analyst

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