Good morning. Thank you for standing by, and welcome to Telefónica's January-June 2023 results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If you'd like to ask a question, please press star followed by one, one on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one, one again. We will kindly ask you to ask a maximum of two questions per participant. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Adrián Zunzunegui, Global Director of Investor Relations. Please go ahead, sir. Good morning, welcome to Telefónica's conference call to discuss January-June 2023 results. I'm Adrián Zunzunegui from investor relations. Before proceeding, let me mention that the financial information contained in this document has been prepared under International Financial Reporting Standards, as adopted by the European Union. This financial information is unaudited. This conference call and webcast, including the Q&A session, may contain forward-looking statements and information relating to the Telefónica Group. These statements may include financial or operating forecasts and estimates or statements regarding plans, objectives, and expectations regarding different matters. All forward-looking statements involve risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such statements. We encourage you to review our publicly available disclosure documents filed with the relevant securities market regulators. If you don't have a copy of the relevant press release and the slides, please contact Telefónica's investor relations team in Madrid or London. Let me turn the call over to our Chairman and CEO, Mr. José María Álvarez-Pallete. Good morning, welcome to Telefónica's second quarter results conference call. With me today are Ángel Vilá, Laura Abasolo, Eduardo Navarro, and Lutz Schüler. As usual, we will first take you through the slides, and we'll then be happy to take your questions. During the second quarter, we continued to focus on our strategic objectives and delivered on our goals. We improved our position in all core markets. In Spain, retail revenue growth improved, and we progressed towards OIBDA stabilization. In Brazil, OIBDA minus CapEx performance was outstanding, with more than 30% annual growth. W hile revenue grew above inflation, thanks to a strong operational performance. In Germany, the first- half results showed a strong performance and continued momentum, with excellent progress in 5G deployment to 90% pop coverage in a normalized CapEx to sales envelope. Finally, in the U.K., we accelerated the network rollout in ultra broadband and 5G, along with a sequential improvement in revenue and OIBDA growth based on synergies, we are executing above plans. We see opportunities from e-market consolidation in Spain and the U.K. over the next years. In Spain, copper switch off in April 2024 is an important milestone. In Brazil, we focus on growth and lower capital intensity and the B2C ecosystem opportunity. In Germany, good customer demanding of more for more tariffs underpins future growth ambitions I n the U.K., we will benefit from synergy realization until 2026. Group-wise, Telefónica Tech continues to outgrow its market with solid revenue growth and continue to be a source of value, while Telefónica Infra further develop our Fiber vehicles and looks for consolidation opportunities. Telefónica HISPAM announced two important deals: the MOU network sharing agreement in Colombia with Tigo, and the agreement with KKR and Entel Chile to create the largest neutral wholesale Fiber Co. in Peru. 32 telcos have already joined Open Gateway initiative, and we are fostering the development of artificial intelligence-based use cases. Finally, from a regulatory point of view, the next months are key for Fair Share regulation and consolidation, among others. Please turn to slide three for our second quarter results that show increasingly profitable and sustainable growth. This is the fifth consecutive quarter of reported revenue growth, thanks to a strong commercial momentum in value accesses, backed by increasing coverage of next-generation networks that helps us strengthening the relationship with our customers. With sustained high NPS levels, along these lines, service revenue grew 3.4% year-on-year, showing the pricing power we built in our business. B2B, that grows 6.9% year-on-year, remains a strong driver as well as we continue to outgrow both our peers and the markets in which we operate. The above also results into low churn levels, coupled with cost efficiencies and digitalization measures, helps to improve organic OIBDA growth sequentially, as much as 2.4 percentage points versus the last quarter to 3.5% year-on-year growth. This trend is visible in all core units. This operating leverage in the business is the main driver behind the higher margin. Contained capital intensity and active management on all free cash flow items, notably in our debt cost, helps operating performance to flow through free cash flow, which is almost twice what we generated in the first quarter of the year, and grows year-on-year to EUR 842 million, for a total of EUR 1.3 billion in the first six months of the year. To sum it up, improved OIBDA and free cash flow momentum. Moving to slide four for detailed financial update. In organic terms, revenue, OIBDA, and OIBDA minus CapEx grew in the second quarter by 3.3%, 3.5%, and 3.4% respectively. In reported terms, revenue grew 0.9% year-on-year, and OIBDA was stable despite the negative FX impact this quarter. Net income increased 44.5% in the second quarter of this year to EUR 462 million, reaching EUR 760 million in the first half of the year. Free cash flow reached EUR 842 million in the quarter, and EUR 1.3 billion in the first half of the year, while June net financial debt declined 3.9% year-on-year to EUR 27.5 billion. Moving to slide five, we show a strong first half of the year performance and the expected evolution of our business. Thanks to a strong commercial and operating momentum, give us confidence to upgrade our group guidance for this year. We are moving up from our previous guidance of low single-digit growth for both revenues and OIBDA to organic revenue year- on- year growth of around 4%, organic OIBDA year- on- year growth of around 3%, while we keep our CapEx to sales organic guidance unchanged at around 14%. This upgraded guidance at both revenues and OIBDA, coupled with unchanged capital intensity levels, make us extremely confident with free cash flow generation for the year. We expect to stand above latest consensus estimate and generate significantly more free cash flow in the second half of the year for a full free cash flow figure that, excluding spectrum, should not be far from the EUR 4 billion mark. We will propose to the shareholders meeting the adoption of the corresponding corporate resolution for the cancellation of 1.4% of shares held as treasury stock at the 13th of June 2023. This, together with our confirmed EUR 0.3 per share dividend, implies a very attractive shareholder remuneration scheme, a consequence of our strong confidence in our free cash flow generation capacity. Turning to slide six, I would like to provide a glimpse of our progress across the pillars of ESG. On the environmental side, VMO2 's net zero targets has been validated by the renowned science-based targets initiative, a validation received by Telefónica Group last year, the first in the sector to achieve it. We have also introduced takeback, reusing, and recycling targets in line with a sector push to address the circularity of devices. With regard to the social pillar, we continue to connect more people directly and via network agreements to improve and extend coverage. We also help to boost around 1.2 million people's employment prospect via our foundation. Within the company, women now represent just over 32% of executives, positioning us well on track to achieve our 2024 target of 33%. On the governance side, we highlight the award by GlobalCapital for our sustainable finance issues, the launch of our ESG Academy to provide training for our employees, and that we are protecting our customers from cyberattacks. I will now hand over to Ángel to give you an overview of the progress across the operating business. Thank you, José María. Moving to slide seven, we review Telefónica Spain performance. Q2 results again confirmed a stronger commercial momentum, an OIBDA trend improvement. Fixed broadband and contract customers simultaneously grew year-on-year for the first time since the pandemic. Our leading churn remained at historic lows, and our industry-leading convergent ARPU kept growing year-on-year. NPS remains best in class and increased by 10 percentage points year-on-year to 48%. This allowed us to increase customer lifetime by 23% year-on-year to nine` years. All this proves the leading position of Movistar in a competitive but rational market, and the benefits of our strategy to focus on value share. As such, we continue to build on our smart bundling experience and premium assets. Recently, we have announced the update of our conversion portfolio, adding more value and the launch of a new over-the-top proposal, another step to further boost commercial activity and top-line growth. Service revenues in the second quarter maintained momentum, while retail revenue year-on-year growth accelerated by 0.2 percentage points versus the first quarter on the back of tariff updates, improved commercial activity, and sustained double-digit growth in IT revenues. OIBDA decline slowed to -1% year-on-year, and it is progressively stabilizing, +0.7 percentage points improvement versus Q1, driven by lower content costs and network transformation efficiencies, all of which gives us confidence to continue aiming for stabilization at some point in the second half of the year. OIBDA minus CapEx margin remained at benchmark low levels, despite a higher CapEx intensity in Q2, which will soften in the second half of the year. Moving to Germany on slide eight, which continued its robust growth path with another quarter of good operational traction and sustained financial performance. The company implemented its more for more strategy across all brands and portfolios, which has been well- received by customers. There has been good commercial traction on the back of strong own brand momentum and normalized churn rates. Telefonica Deutschland made good progress with the densification and further rollout of its 5G networks, all within a normalized CapEx envelope. As a result, 90% of 5G pop coverage target set for the year was already achieved in Q2. Organic revenue was up 4.4% year-over-year, while OIBDA grew 2.8% year-over-year, accelerating 1.1 percentage points quarter-over-quarter, supported by improved operational leverage, mainly mobile, which was partially offset by anticipated cost increases. Finally, the company narrows the full year 2023 revenue and OIBDA outlook to upper range of low single digit growth on back of strong first half performance and continued momentum. We now move on to slide nine, to the U.K. and our joint venture, Virgin Media O2, that continues to focus on expanding the ultra broadband network, which now covers a total of 16.4 million premises, and with 5G connectivity now available in over 2,800 towns and cities. Amidst a tough economic climate, fixed and mobile price rises were implemented during April and May and are starting to flow through to Q2 figures. O2 mobile contract churn showed improvement to 0.9%, driven by loyalty initiatives. Revenue growth accelerated to 6.2%, while OIBDA reached 3.7%, both sequentially improving, underpinned by Nexfibre construction revenue and the implementation of price increases. OIBDA performance reflects ongoing synergy realization, which stands above plans and which will support future OIBDA growth. VMO2, within its ambitious Better Connections Plan, has announced a reduction in carbon emissions of 29%, Scope one and two, against the 2020 baseline, and its net zero targets across the value chain were validated by SBTi. Moving to Brazil on slide 10. Vivo continued to achieve very strong results despite Oi deal annualization since Q2 2023. We have been consistently increasing our market share since the Oi mobile acquisition, reaching a mobile market share of 39% or 44% in the contract segment. The improvement of the access's quality, coupled with upgrading and price increases, results in 8% growth in mobile ARPU, while contract churn continued its declining trend to 1%, its lowest level ever. Revenue grew by 7.6% year-on-year in Q2 2023, well above inflation, which, together with cost discipline and the reduction in CapEx intensity, allows us to deliver an exceptional +29.2% year-on-year growth in OIBDA minus CapEx in the first half of the year. Slide 11 reviews the performance of Telefónica Tech, our leading IT provider for B2B digitalization. T-Tech has completed a three-year cycle as a fully operational company, achieving a leading position as a provider of high-value integrated solutions in EMEA and the Americas. Telefónica Tech is now entering a new cycle with a new organizational model. In Q2 2023, businesses and portfolios have been unified to provide the best service and maximize the opportunity in all markets. Cloud will be the enabler of IoT, Big Data, and AI, and cyber security will be embedded in all the processes. This new operational model, together with the global extension of capabilities, will create synergies and make Telefónica Tech more efficient and further increase its contribution as a key differential growth driver for Telefónica's B2B revenue. In Q2, Telefónica Tech outperformed the market again with 36% year-on-year revenue growth. In constant perimeter, revenue growth accelerated by 2 percentage points to 29% year-on-year. Our highly skilled team of over 6,000 professionals, with close to 4,000 certifications in strategic partners' technologies, continue to be the key asset for Telefónica Tech to deliver a differentiated digitalization journey. Our visibility of future revenue is high, supported by an increase in last 12 months' bookings of 35% year-on-year. On slide 12, at Telefónica Infra, we crystallize the value of our assets and capabilities. First, we continue to execute and scale up our Fiber plans and have already passed 19 million premises in underserved and/or low-density areas after incorporating PangeaCo in Peru. Telefónica Infra continues adding to Telefónica Group leading worldwide position in Fiber-to-the-home deployment. A few weeks ago, Telefónica HISPAM reached an agreement with KKR and Entel Perú and will hold 36%, 54%, and 10% stakes, respectively, in the new Fiber company. It will be the first nationwide open-access wholesale Fiber Co., with a target of passing 5.2 million premises at the end of 2026, doubling the current footprint. To highlight also that Nexfibre in the U.K. is since June commercially live, and consumers can already connect to Nexfibre's hyperfast network with the latest XGS-PON architecture. Telxius, the critical digital infrastructure with seven next-generation subsea cables built since 2018, posted the sixth consecutive quarter of organic OIBDA growth and expanded OIBDA margin by 1.7 percentage points to 53% in the first half. I will now hand it over to Laura, who will review HISPAM's operations and the Group financial results. Thank you, Ángel. Moving to Telefónica HISPAM. We continue with the execution of our strategy to reduce the exposure to the region and make the business more profitable. On June 12th, Telefónica Colombia signed an MOU with Millicom for sharing the mobile access network in Colombia. This agreement will help improve the quality of mobile services and lead to a more efficient use of resources. Telefónica HISPAM reached an agreement with PangeaCo in Peru, as Ángel mentioned before. Overall results were solid. Revenues were virtually stable year-on-year, despite the tough competitive environment, while OIBDA continues to be affected by the growth of commercial costs driven by Fiber commodity. We expect a better OIBDA trend in the next quarters, and we maintain our ambition to grow OIBDA minus CapEx in 2023. Turning to slide 14. Telefónica maintains above 80% of its debt linked to fixed- rates, mainly in Euro, with an average life of 12.4 years, which places us in a comfortable position to face any market environment. We maintain a solid liquidity position of EUR 20.2 billion, that, together with a light maturity profile, allows us to cover debt maturities over the next three years. Net financial debt declined from EUR 28.6 billion in June 2022 to EUR 27.5 billion in June 2023. Net debt to EBITDA ratio improved from 2.79- 2.62 times in the same period. We have also contained our debt-related interest costs at 3.47%, thanks to the active refinancing exercise undertaken along previous years and the solid position at fixed interest rates in strong currencies that allows immunization to the environment of raising interest rates. I will now hand back to José María, who will explain the completion of our transformation journey and wrap up. Thank you, Laura. At the end of the presentation, let me talk about the transformation process we have gone through, enabling us to deliver these strong results and allowing us to update the guidance and making us feel optimistic about the future. As Telefónica, we have always been at the forefront of technological change to ensure our success in the future. Change is on our DNA. We transform the way we serve our customers, turning our customers into next-generation infrastructure that transport more and more data with systems that store more and more information with massive processing capacity. We were early to invest in Fiber and 5G, and are now the first scale telecom operator to shut down its copper network, that is just the most visible technological change. We have virtualized and softwarized our networks and used AI since several years ago. We are now at a stage where we can do real-time service customization and are able to offer Network-as-a-Service and network- slicing. Technology has helped us transform our revenue functions, and we now generate 75% of our revenues from ultra broadband connectivity and digital services, up from 46% in 2015. We made our organic revenue grow again for the last nine quarters. We grow in B2C, where we hit record lows in churn levels, when at the same time, NPS has never been higher, thanks to this new way to interact with customers. We build digital ecosystems to capture new revenue opportunities. We have outgrown both our peers and the market in B2B, and we have increased our wholesale capacity. We have as well transformed our OpEx and CapEx functions. 83% of our processes are now digitized from 50% back in 2016. We have taken huge steps in virtualization, softwarization, and automation towards zero-touch networks. Capital intensity continues trending downwards from 16.7% back in 2016 to 40% at the end of 2023. Deployments are mostly behind and legacy shutdowns are mostly digested. With this technological transformation, we have positioned ourselves to fully benefit from the next wave of growth and emerging business opportunities. We are ready for the future. Moving to slide 16, we have further confidence in our ability to continue to deliver a strong and growing free cash flow generation in the coming years. To be precise, we are projecting free cash flow growth in the next three-year strategic plan, which we plan to detail in a Capital Markets Day to be held in Madrid on November 8th, together with our Q3 results release. As said, free cash flow growth is the ambition behind this new plan, on which we have been working since late last year. Based on these three main pillars: Our company and sector vision, including a new company program based on growth, profitability, and sustainability. With our customers at the center, through technology and automation, we will continue to have a better understanding of our customers' needs and create better customer experiences, always aiming at long-term satisfaction with customer empathy at the core. Technology and AI to continue the transformation process of Telefónica. We have been using technology for years to shape our company for the future. We will continue doing so, both internally and externally, with efficiency at the, as the ultimate driver of decisions and a clear focus on free cash flow growth to increase financial flexibility, reduce leverage, and reward shareholders. Key levers behind free cash flow growth are the following: revenue growth. We are growing again our revenue since the 2Q 2021 organically. We aim to maintain this strong momentum back by a growing digital business, including tech and digital B2C ecosystem. The ARPU up policies across our B2C operations, our differential B2B growth, and a new API-based ways to monetize next generation networks to allow us to continue this path of profitable growth — a gain, efficiency. We continue exploring sources of efficiency at both the OpEx and leases level, deriving from legacy decommissioning, AI-driven softwarization of networks and CRM, content optimization, and others, which we will share with you at our Capital Markets Day. We also aim to continue to optimize CapEx via legacy switch-offs, traffic optimization, AI softwarization, sharing, and others, that should allow us to further reduce capital intensity. We are very much looking forward to greeting all of you in our premises on November 8th, where we will share all the details. To recap, on Slide 17, Q2 posted good earnings momentum and continued to deliver value for our shareholders. First, we remain confident in our strategy and in our ability to maximize value for shareholders. Revenue and OIBDA grew organically, and OIBDA improved sequentially on the back of our operating leverage. Second, we continue to build on our network leadership and remain on track to expand our Fiber-to-the-home and 5G coverage. Thanks to our pioneering in digitalization and AI applications, we are in the best position to increase efficiency and capture new opportunities, such as Open Gateway. Free cash flow improved in the second quarter. We expect this to continue along 2023. As such, we remain committed to maintain an investment-grade credit rating and to leverage reduction. Third, guidance for 2023 is upgraded based on the strong revenue and OIBDA momentum. We will amortize 1.4% of treasury stock. We confirm our dividend for 2023. We expect this strong momentum to continue going forward. Save the date for the Capital Markets Day. We are calling for the next November 8th, where we will present our new 2023- 2026 strategic plan and company vision with a clear focus on growing free cash flow. We have been working on this plan for several months, and we are excited about what we are seeing. Full details will be shared then, but we have a solid starting point for a bright free cash flow outlook for the next years. Thank you very much for listening. We are now ready to take your questions. Thank you. If you would like to ask a question, please press star, followed by one on your telephone keypad. Once again, that is star one to register a question. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star one again. We will kindly ask you to ask a maximum of two questions per participant. We will now take the first question. From the line of Yemi Falana from Goldman Sachs, please go ahead. Morning, everyone. Thanks for the opportunity. A couple of questions from me. Firstly, the Spanish macroeconomic picture is beginning to look uniquely strong in a European context with improving growth and low inflation. How does that impact how you're thinking about pricing into 2024? Secondly, maybe a bit more big picture. Free cash flow remains strong, and I believe you're now targeting EUR 4 billion this year, which looks ahead of consensus, as far as I can tell. Into the CMD, how are you thinking about rewarding shareholders alongside that free cash flow growth? Any kind of high-level kind of thought processes there would be super helpful. Cheers. The first one on the Spanish macro, we are seeing no impact of the current economic conditions on any significant way on our performance. You have seen that the first, the second quarter or the first half of the year, we have had positive momentum, commercially. We have had the highest NPS and lowest churn, in spite of what could be the highest price increases we have passed on to our customers, historically. We see this commercial momentum, if anything, improving in the second quarter, and revenue clearly has been accelerating, or EBITDA has been on a track clearly towards the stabilization that we're aiming at for this year. On the B2B segment, we are also, in particular, which could be in or has been in other moments, in the past, feeling the impact of macroeconomic implications. We are seeing very solid growth in the B2B business. We feel that our business is well adjusted to manage the evolving macro conditions. Regarding potential pricing implications, going forward in the next year or so, we will adjust to market conditions as we see fit. Taking your questions on the free cash flow. As we have been stating, we are starting from a very solid position this year, and we have been mentioning our vision of approaching the EUR 4 billion mark this year, excluding the spectrum. According to the job that we have been doing, we are projecting free cash flow growth for the next year based on the level that we have also shared with you, and we intend to use this free cash flow to keep reducing debt, to gain financial flexibility, and for sure reward our shareholders. Details will be shared on the Capital Markets Day. Awesome. Thanks very much. Thank you. We will now take the next question from the line of Keval Khiroya from Deutsche Bank. Please go ahead. Thank you for taking the questions. And I have two, please. Firstly, Q2 showed modest conversion to ARPU growth in Spain, perhaps impacted by the temporary switch off of the football packages. Should we expect conversion ARPU growth to accelerate in H2 versus the 1.5% growth you delivered in the first half? Secondly, can you share with us how you're currently thinking about leverage? On slide 16, you highlight reduced leverage and increased financial flexibility within the pillars. Where would you like leverage to trend to, and to what degree can inorganic actions help you get there? Thank you. Thank you, Keval, for your questions. Regarding conversion ARPU, which is 91.5 EUR growth, 1.5% year-on-year in the second quarter, driven by the pricing up-update and fewer promotions. Some other issues remain a drag as the lower out-of-bundle consumption, the growing O2 penetration and less advertising contribution. If you compare it quarter-on-quarter, which I think was your question, the trend in Q2 is lower than in Q1, due to the more evident decline of out-of-bundle revenues, some mix erosion, but in particular, it's the end of the football season. We see this every season when summer disconnections take place at the end of the season, and most of the customers join again at the start of the season. We are aiming to see ARPU to continue having year-on-year growth in the second half. Keval, on your question on leverage, as we, you know, we have a very strong public commitment to maintain an investment-grade credit rating. Leverage, as also José María said, de-leverage remains a priority for us. Our main driver is going to be free cash flow, and not only is very strong and will be very strong this year, but we also see a growing trajectory for the coming years. That's based on a steady organic OIBDA improvement and a CapEx peak being definitely behind us. You should expect that free cash flow to be the main revenue and also the most sustainable driver for de-leverage. It's also very important to mention that we prioritize this balance sheet, the strength with a very prudent debt management that has allowed us to be very resilient in the current environment. We have a very strong liquidity position and alignment with the profile, and we are anticipating much of the liability management, and we really tap the markets at the right moment. On top of that, obviously, we will continue with a very strict capital allocation, and inorganically, we could also complement the deleveraging path because we have a top quality asset base. The main driver is going to be that resilient and recurring free cash flow that you've seen in the past years, and it won't be the exception for the coming years either. Thank you. Thank you. We will now take the next question. From the line of Georgios Ierodiakonou from Citi. Please go ahead. Yes, good morning, and thank you for taking my questions. My first question is on free cash flow, and I know probably a lot more details are yet to be given at the CMD, but you did highlight the potential for growth going forward. Laura, you spoke about the EBITDA and CapEx drivers. I was wondering if you can also give us a couple of insights as to how we should think about financial costs, which are coming down, even the rate is coming down, whether that is sustainable and what is behind it. If you can comment a bit about the recap in the U.K., which is a significant driver of your cash flow in 2023, whether that is something we should expect going forward, and any comments on working capital as well will be greatly appreciated. My second question is about the U.K. market, I know Lutz addressed this at the conference call the other day around the churn for Virgin being lower than expected in broadband, given the scale of the price increases. I'd just curious to follow up, given that we have more data points from some of your main competitors, it does look like the market, as a whole, might be shrinking or the alt-nets making more inroads, perhaps on previous quarters. Just curious to hear your thoughts, which of the two explanations sounds more credible to you? If it is a case of market growth stalling, whether there's any insights you can share about the timing of any recovery. Thank you. Thank you, Georgios, for the question. On free cash flow, indeed, in Q2, it has improved. It has grown year-on-year, almost doubling the Q1 figure, and this year is not exception. Free cash flow is usually back-end loaded, and we see free cash flow growth accelerating to the end of the year. OIBDA minus CapEx will be according to our improved guidance, so that's going to be a main contributor. Below that, we will continue optimizing every line as we do. Working capital, which had a negative impact in this first half of the year, will have a positive impact in throughout the year. That's very much linked to our commercial activities. On financial payments, you should expect us to optimize it as we have done in the past. I mean, the cost per se is one of the KPIs to follow, no doubt, but we also have to find a balance between currency, the life of the debt, the liquidity position, and the smooth path of maturity refinancing that we are always aiming for, no. I think you should expect us to keep on optimizing them, as we have done in the past. We have an 80% fixed, and what is variable is more in Hispanic and Brazilian currencies, and that should start going down in terms of interest rates. We feel comfortable with the management we have at the moment, and that being able to continue. Regarding the U.K., no changes. We have guided the JV to stay at the upper end of a 4-5x net leverage range. It's a cash-generating business with organic and synergy-driven opportunities to grow. It has a strong current capital structure. The debt tenor is 6.5 years, excluding vendor finance, and the cost of that debt is 4.7%. It's not forced either to go into the markets and in opportunity times, no? It's going to have a growing EBITDA, which will lead to a natural deleveraging. As you know, that's going to be in the line we set at the beginning of the year. In that EUR 4 billion reference we gave for free cash flow in 2023, the cash distribution to shareholders is anticipated to be between GBP 1.8 billion-2 billion, and that's included in our outlook for the free cash flow we provided this morning. Yeah. On your question regarding the UK, Georgios. A year ago, we had a growth of 7,000 customers in Q2 after price rise of 6.8%. This year, we have a price rise of 13.8%, so more than double of it, and we are shrinking by 15,000. The delta is 22,000 between the two years while doubling the price rise. As you know, the impact of it in our case, it has materialized entirely into Q2, right? Because customers are having a 30-day cancellation right, and this obviously is not the case anymore from Q3 onwards. Having said that, when you look at gross ads, I think your observation is right. The gross ad market is slightly smaller. As I said in the Liberty Global call, we are actually doing better because we have expected a bit higher reaction on the price rise. All in all, we are pretty pleased with the overall number. I hope that helps. Maybe last comment, alt-nets. Right, in areas where they are offering sales at very aggressive promotions, we see some of these impacts that our share and gross ads are lower in these markets. We see it significantly less on term, and we think the reason for that is that the majority of our customers have more than one product, right? As you know, then the convergence game is that people are not necessarily switching broadband if they don't have a the nice video product or mobile product. Thank you. All right. Okay. Thank you. Thank you. We will now take the next question from the line of David Wright from Bank of America. Thank you very much, guys. I guess just it's two follow-ons from Georgios, but just picking on the detail a bit. I mean, when we think about this free cash flow you guys are generating, a lot of it is borrowed, right? Effectively from VMO2, with a borrowing cost of debt, as you've just said, Laura, at the high fours. I'm struggling to understand that contradiction with the need to de-lever, but borrowing at nearly 5% at O2 to support cash that you're paying out to investors. Does it not make more sense to reduce the leverage at O2, which is at a higher blended cost of debt? Also, given that they arguably have a requirement to accelerate the CapEx to build Fiber over time. It just seems a contradiction to me that you're borrowing in the U.K. to pay out in Spain, when you should be potentially looking to de-lever. I guess, Lutz, I'm also not understanding your answer there. I thought that the data that you've given us is only the Q2 customer losses. I think a lot of those price rises in the U.K., the announcements were made in May. There will be more customer losses following in Q3, will there not? You said it was the full impact in Q2. I think you'll probably get more customer losses in Q3, as that price rise is phased in. Is that not the case, too? Just a couple of clarifications there, please. Thank you. David, thank you for your question. On the U.K. and the impact in free cash flow, it is a part of our free cash flow, no doubt. Not a significant part. I mean, we are guiding on EUR 4 billion. This will be about EUR 1 billion, and you have seen the results of Germany or Brazil, or... I mean, we have very strong core assets- generating very resilient and recurring free cash flows. That's the bold part, as I said at the beginning, and the main driver for deleveraging. As you rightly mentioned, I mean, obviously, the agreement we have among the shareholders on the leverage range was done in a different scenario in terms of interest rates, definitely we will reevaluate that. It's worth mentioning, the capital structure of the JV is prudent in terms of life, in terms of cost, in terms of not going in a rush. We were successfully financing ourselves in the first part of the year at good cost in the current scenario. That's something that within our strategic capital allocation decision and free cash flow drivers, we will evaluate going forward. More important, O2 is growing their and they have a lot of synergy still, as we haven't achieved the run rate yet. We are in a very, very good trajectory, and synergies are being delivered as expected. That's. A very important thing, David, is that from a leverage perspective, you know, S&P and also Moody's looks at that number as well. They account for the debt we have in the U.K. in proportionate basis. If we had a different mix between dividend and a less leveraged JV from a rating perspective, it will be very much neutral from Telefónica side. It is consistent. Whether we continue with a 4- 5 or we make any changes there, that should be agreed with our, or share with our partner in the JV, that will not affect our rating quality. If I may add, it just seems perhaps a little imbalanced, because you're effectively keeping... you know, you're borrowing at 5%, your blended cost is 3.5%. Liberty's objectives may be a little different, 'cause they're using the cash to buy back their shares. You're just paying out a dividend. It just feels that every time you're boosting your cash flow with the distribution, you're actually blending your cost of debt upwards, 'cause you're borrowing that cash at 5%. Arithmetically, you are right. That's why we will definitely take a look at this, no? Okay. So far, the JV is de-levering. So far, the JV is committed to the dividend we had for the year. Obviously that will be evaluated. It was very important to mention that this is not the way to deleverage the company. We are not deleveraging the Telefónica side throughout the dividends from the JV. First, it will change the dynamic. We will have a less leveraged company from an S&P rating position, so we will be very neutral. Second, our core assets plus growing business units are delivering, and they are the bulk of the free cash flow of the Telefónica Group. Okay. Thanks, Laura. maybe, Lutz, just a clarification, please. Sorry for the confusion, David. I think we have to distinguish a bit here. We have sent the price increase letters to customers in April and May. Customers do have then a 30-day extraordinary cancellation right. Therefore, all of this has happened in Q2. Now, 60 days after the customer has received the price increase letter, the higher prices will be charged, with the exception of customers who are still in their promotion period, so they get it then from the beginning of the promotion period. They don't have another cancellation right when they are getting charged with higher prices. Therefore, both actually fit very well together. The churn has materialized out of it into Q2, while the vast majority of the revenue is coming in across H2. I hope that helps, David. Yeah. That really does clear it up. Thank you very much, Lutz. Okay, thanks. Thank you. We will now take the next question. From the line of Mathieu Robilliard from Barclays. Please go ahead. Yes, good morning, and thank you for the presentation. I had a question about the copper switch off, which, obviously you are leading in terms of that process in Europe. You've mentioned in the past that it could lift EBITDA margins by 1.8%. I was wondering what would be the impact on CapEx, if you could give us also a little bit of color there? As a follow-up on the copper switch off, I realize that means that you get your hands on a lot of copper, and my understanding is that you're selling it. I wanted to understand how material that was in terms of the contribution to EBITDA for the Spanish or the group business. A very last one, on free cash flow. When you talk about the free cash flow, excluding spectrum, getting close to EUR 4 billion. I just want to clarify how we should compare that to consensus, because indeed, I think the latest consensus you published was for EUR 3.3 billion of free cash flow. That would be materially higher, but my understanding is that consensus includes spectrum. I don't know if you can give a little bit of clarification here, what would be a like-for-like comparison? Thank you. Thank you, Mathieu, for your questions. I'll take the first one on the copper switch off. As you said, in the past, we have quantified that we have already captured what an estimate of 0.8 percentage points in EBITDA margin from permanent deficiencies from copper decommission up to 2022. We expect further improvements in the next few years, which we could quantify on at least an additional 1 percentage point on EBITDA. You were taking then the question, what does this imply to CapEx? We already clearly passed the CapEx peak in Spain. You have seen that the CapEx intensity of our Spanish operation is well below the one in the group. If I may, if you allow me not to spoil some of the messages of our new Capital Markets Day, we will be quantifying the target of CapEx going forward, which will lead to this free cash flow growth that José María was highlighting in his speech. Fair enough. Mathieu, on your free cash flow question, you are right, when you mention EUR 3.3 billion, that is including a spectrum with the estimates that the market may have, which could be around EUR 200 million, EUR 300 million. That's the consensus figures on the spectrum. I cannot disclose any of our own view on that. If we exclude the spectrum, consensus is more between EUR 3.6 billion-EUR 3.7 billion. That's why we say we are extremely comfortable with that, and even we are going further to a EUR 4 billion mark. Regarding the spectrum that could come, part of it is already flowing because it derives from previous auctions and the main one in Germany that you already know the figures around that. In Spain already happened. Certainty there, it was at the reserve price. Uruguay already happened. It's being paid only 25% this year, and it was also at reserve price. We have some uncertainty about the Ecuador concession renewal, because, you know, because of the political changes, it may be delayed. Argentina, there's the 3.5 GHz. We are not sure if it will be end of this year or maybe a year from now. In Colombia, we are asking for a very short period renewal on AWS, linked to the agreement we are going to sign with Millicom, because we need less spectrum in that scenario. On those that are still pending, I'm not sure that will happen in 2023. I remind you that in HISPAM, in general, but you've seen in HISPAM, we are being very pragmatical and financially driven to a spectrum. That's going to be quite limited as well. Going to the first question, the EUR 4 billion mark compares with the EUR 3.6-EUR 3.7. We will be out well above the consensus at this moment. That's very clear. If I can come back to the question about the sale of copper, if that's material in any way in terms of the contribution to the group EBITDA? Well, the efficiencies from the copper switch off and the sale mitigate the expenditure effort of doing that, it's not significant in the numbers that we have been posting. Thank you very much. Thank you, Mathieu. We have time for one last question, please. No problem. We will now take the last question from the line of James Ratzer from New Street Research. Please go ahead. Yes. Good morning. Thank you very much indeed. Two questions, please. The first one coming back to the EUR 4 billion free cash flow figure, which undoubtedly is very strong. Looking at the Q2 results, it looks as if your interest payments are quite low. You know, my understanding is you're maybe generating now some interest on your cash balances. I was wondering if you could give us any more guidance on what sort of interest you're actually now receiving on your cash balances? Within the EUR 4 billion, do you assume you might have to pay in Peru on the tax and interest charges? You know, to what extent is that in your EUR 4 billion figure? The second question I had, please, regarding the European recovery funds. I mean, it's something Vodafone, I think, talks a bit more about in Spain than you do, but would just love to hear your thoughts on how you think that could potentially be a positive impact on your business and forward if at all? Thank you. Yeah. On your question on free cash flow for the remainder of the year and financial payments, the financial debt-related cost that has decreased versus the previous year, it's a combination of the mix of currencies, and it's also that we are being, as you said, rewarded for our cash position. We are around Euribor, and that's been part of that. Not only that, I mean, as I said, the fact that we had a very resilient 80% fixed, plus the 20%, as variable, has also contributed, and this is also the result of our very prudent financing policy and our liability management over the years. We are indeed being rewarded for the cash balances at market prices. With regards to Peru, we had already some payments included in this first half of the year. Going forward, it could be the case, and we are considering that, within our outlook of reaching the EUR 4 billion mark. There's still a lot of uncertainty around that. We are waiting from the tax authorities on the final amount and settlement indications. Some recent rulings are questioning the embedded interest charged in similar proceedings. That would be good news for us, so we still need to wait and see. We are having our own estimate on this. We are also working on different payment alternatives, fractioning of payments, and all of that is being embedded in our aim to reach that EUR 4 billion mark. I cannot be more precise on that because it's confidential, it's work in progress, and we still have uncertainty around the different rulings and the actual payment dates. Regarding the European recovery funds, the non-refundable aids for Spain reach EUR 77 billion to be executed along five years, with EUR 20 billion dedicated to digitalization. By the way, the period to execute is 2021- 2026. We still have significant horizon ahead of us. This focuses on three lines: public administration, SME digitalization, and connectivity. Telefónica is gradually securing a reasonable share of these funds. In public administrations, which could be, in this period, an opportunity of EUR 5 billion, we are getting relevant share, mainly in central administration projects, such as defense and economy ministries projects. In SME digitalization, which is an opportunity along this period of around EUR 5 billion, the execution, or maybe this is what other competitors are talking about, the execution is a bit low to date. We're already capturing on the digital grid projects, we are capturing part of this opportunity. The connectivity opportunity, which is around EUR 4 billion in this period, these are direct subsidies to NGN investments in Fiber and in 5G. We have already been awarded significant amount. We are committed to extend the network deployment across the national territory. On 5G and mobile projects, there have been some limitations regarding high-risk vendors, which are not present in the Telefónica network. Those should be accessible to us, and maybe they are not to some of the competitors that you were alluding to. Thank you, Angelo. Do you know, of the EUR 20 billion figure you mentioned there for the whole project, how much of that has actually been allocated so far, and how much is still to come by 2026? Let me see if I have this figure. I don't have that number here, but I'm sure IR will be able to give it to you. Sorry, I don't have this number. No problem. Conceptually, I'm understanding there's still a relatively low number that's been allocated, hasn't it? There's still more, quite a bit more to come. Yes. Yes. Yeah — in the SME digitalization, this has been the slowest to execute. There have been awards, but the execution of those awards is flowing slower. On the connectivity side, the awards have been substantial already, and in the public administrations continues ongoing. Thank- I would say that, more than 50%, or far more than 50%, is still to come. Thank you. Very helpful. Thank you. At this time, no further questions will be taken. Thank you very much for your participation, and we certainly hope that we have provided some useful insights for you. Should you still have further questions, we kindly ask you to contact our investor relations department. Good morning, and thank you. Telefónica's January-June 2023 Results Conference Call is over. You may now disconnect your line. Thank you.