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

So I guess we're ready. Good afternoon, everyone, and welcome to Telefónica's Q3 '23 Results. I'm Adrian Zunzunegui from Investor Relations. Before proceeding, let me just 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 presentation, 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 information, please contact Telefónica's Investor Relations team in Madrid or London. In the interest of facilitating an efficient Q&A session, we kindly request that those attending virtually, direct your questions on Q3 results to our inbox, CMD questions at telefonica.com, which has just been opened. Please note that for Q3 related inquiries, we would appreciate if each participant limits the queries to the maximum of one question per participant, and ensure that the questions pertains only to the matters concerning this specific quarter. For any other increase outside the scope of the Q3 results, we encourage you to reserve those for the dedicated session during the Capital Markets Day. Additionally, for those who're attending in person, please feel free to raise your hands and ask live questions during the Q&A session. As a reminder, today's presentation is being recorded. And now I'd like to pass the floor to our Chief Operating Officer, Angel Vila.

Welcome, everybody, to Telefónica's Third Quarter Results Presentation. With me today is Laura Abasolo; our Chairman and CEO, Jose Maria Alvarez-Pallete, will join later for the Capital Market Day session. This morning, we announced our Q3 earnings. We have delivered another quarter of particularly solid performance where we continue to progress in all of our key performance indicators. We maintained a strong market position, growing in high-value accesses such as fiber and mobile contract. Investments in next-generation networks like 5G deployment acceleration, allow us to grow an increasingly satisfied customer base with both leading NPS and churn levels. Profitable and sustainable revenue and OIBDA organic growth continued, while OIBDA minus CapEx accelerated its growth in Q3 to plus 9.3% year-on-year, growing 4.8% in organic terms during the first 9 months of the year. In Q3, top line grew 2.5% organic, with service revenue growing 3.1% year-on-year, again, showing our pricing power. B2B maintains a remarkable performance with growth of 4.6% year-on-year. OIBDA grew 3% year-on-year in organic terms, driven by efficiencies and consistent and disciplined execution. On a reported basis and despite FX headwinds, OIBDA performance improved in Q3 to plus 2.5% year-on-year, showing an improved operational leverage. Bottom line, active management of all free cash flow lines supported the conversion of this better operating performance to free cash flow, and helped us to reach EUR 1.1 billion free cash flow in Q3 and EUR 2.4 billion in the first 9 months of the year. Net debt declined to EUR 26.5 billion, while the leverage ratio declined to 2.5x during the quarter. In summary, we continued to deliver in all metrics. Moving to Slide 3 for the overview of quarterly key financials. In reported terms, OIBDA grew plus 2.5% year-on-year to EUR 3.3 billion, accelerating by 2.6 percentage points versus the previous quarter. Revenues surpassed EUR 10.3 billion mark, virtually stable year-on-year. Net income reached EUR 1.3 billion in the month -- in the first 9 months of 2023 or EUR 0.5 billion in the quarter. Free cash flow grew 0.4% year-on-year in Q3, reaching EUR 2.4 billion in the first 9 months. This strong free cash flow generation helped net debt to decline both quarter-on-quarter and year-on-year by 3.4% and 7.4%, respectively. As mentioned before, all key financial metrics show growth also in organic terms during the quarter, which added to an improved operational leverage results into stronger growth on the line. Revenue growth of 2.5% resulted in 3.5% OIBDA growth, and as much as 9.3% OIBDA minus CapEx growth. Moving on to Slide 4. Given the strong 9 months performance and expected evolution of our business, we are well on track and reconfirm our full year guidance, which we recently upgraded. Organic revenue year-on-year growth of around 4%, organic OIBDA year-on-year growth of around 3%, and CapEx to sales organic guidance at around 14%. The EUR 2.5 billion free cash flow ex spectrum for the first 9 months is on track as well to meet the ambition of around EUR 4 billion free cash flow mark ex-spectrum for the year. Our 2023, EUR 0.3 dividend per share, EUR 0.15 in December '23, and the second tranche in June 2024 is also confirmed. Regarding ESG on Slide #5, we are ahead of the regulatory curve with a solid and transparent road map to achieving our goals. We have published our second climate action plan, which follows TCFD guidelines, TCFD means Task Force for Climate-Related Financial Disclosures. This updated plan includes more details on our governance model and the risks and opportunities related to climate change. Another example is our human rights and environmental impact assessment, which we have published ahead of the new due diligence requirements. Finally, we continue to explore sustainable financing options, successfully issuing a green hybrid bond for EUR 750 million in the last quarter. We have also updated our financing framework to align with the latest market practices. Moving to Spain on Slide 6. Telefónica Spain Q3 results, again, confirm how a strong and improving commercial momentum positively impacts our financial trend evolution. Following the refreshment of the B2C portfolio and the launch of a new over-the-top proposal in August, conversion customers and TV accesses simultaneously grew year-on-year in Q3. Moreover, a benchmark low churn and industry-leading ARPU are boosting our premium conversion customer lifetime value. This is an important proof point of the successful commercial strategy of Telefónica Spain, which has been permanently adapting to market dynamics, allowing us to continue to lead the market with a great focus on value share. Service revenue growth increased sequentially in Q3, with retail revenue growth accelerating to plus 2.4% year-on-year with the stronger trading acting as the main leverage. OIBDA declined slowed to minus 0.5% year-on-year in the quarter, and continued the path to stabilization seen throughout the year. This stabilization, we expect to reach in Q4. OIBDA progressive improvement is mainly driven by the higher revenue flow, lower energy costs and network transformation efficiencies. OIBDA minus CapEx margin remained at benchmark levels, 24% in the first 9 months, with CapEx intensity to further soften year-on-year in Q4. Moving to Brazil on Slide 7. Once again, Vivo delivered a very strong operational and financial performance. Operationally, Vivo remains the clear market leader. In mobile, ARPU continued to grow almost double digit year-on-year, driven by progressive upselling and continued tariff upgrades in both contract and prepaid. While churn remains very low at 1.1%. In FTTH, we've accelerated new connections to 183,000 in the quarter. Revenue grew by 7.5% year-on-year in Q3, again, well above inflation, which, together with efficiencies, efficiency gains drove 11.6% OIBDA growth to a margin of 44%. The already anticipated reduction in CapEx intensity allowed OIBDA minus CapEx to increase 26% year-on-year in the first 9 months of the year. Moving to Germany on Slide 8, which delivered another robust -- another quarter of robust growth, driven by its value over volume strategy, and with commercial momentum building on its successful more-for-more portfolios and normalized churn rates. Since October 23, O2 customers can experience 5G Plus, which marks the beginning of a new technology era with this service being available to more than 90% of the German population. Moving to financials. Revenue grew by 2.2% in the quarter while OIBDA grew plus 3.6% year-on-year, supported by improved operational leverage, mainly in mobile, which was partly offset by some anticipated cost increases related to commercial activity in the quarter. We now move on to Slide 9 to the U.K. and our joint venture, Virgin Media O2, as it continues to invest in product services and networks to provide an enhanced customer experience. Despite an ongoing tough economic environment, VMO2 delivered an improved trading performance, growing the customer base in both fixed and mobile. The focus on network investment continued, with 251,000 premises passed deployed during the quarter, surpassing the 500,000 premises passed milestone in the first 9 months of the year, and with 5G connectivity now available in 3,200 towns and cities. In addition, VM O2 has reached an agreement to sell a 16.7% minority stake in the mobile tower joint venture, Cornerstone, to U.K.-based infrastructure fund, GLIL Infrastructure, for GBP 360 million. Looking at the financials, both revenue and OIBDA accelerated sequentially to 7.1% and 6.3%, respectively, supported by nexfibre construction and underpinned by the delivery of synergies, which remain on track to achieve their target. Slide 10 reviews Telefónica Tech, the leading provider of advanced next-generation solutions in B2B. Telefónica Tech outperformed the market again, delivering a 30% year-on-year revenue growth in the first 9 months of the year. On the back of its strengths, a highly skilled workforce and a well-established reputation for excellent delivery across Europe and the Americas. In constant perimeter, revenue grew by 23% year-on-year, and outlook is very positive, supported by 26% year-on-year increase in last 12 months bookings. The new organizational model recently put in place is consolidating with two new global service units created IoT and business apps. This will provide a global portfolio and service to maximize the opportunity in all markets and create synergies. Finally, let me highlight that Telefónica Tech has become one of the most relevant Microsoft partners in Europe after receiving Inner Circle award for outstanding sales and innovation and partner designation in security. In addition, Telefónica Tech was again named the leader in IoT-managed connectivity services worldwide by IDC, and Representative Vendors for 4G and 5G Private Mobile Network Services by Gartner. On Slide 11, we review our top-tier infrastructure portfolio, Telefónica Infra. Our well-established FiberCo portfolio, with first-class partners, reached 20 million premises passed as of September. Let me, let us highlight the U.K. this quarter, where nexfibre reached a rollout milestone of 500,000 premises passed, and VM O2 acquired Upp, U-P-P, a U.K. alternative fiber operator. The network assets will be transferred to nexfibre after integration works are completed, accelerating the deployment by 175,000 premises passed. In addition, we expect to update regulatory approval for the agreement with Entel in Chile in Q4 this year. Telxius maintained a solid profitability with margins above 50% in the first 9 months and Q3 and announced that it will be extending the submarine cable, Tikal, to land in Cancun, Mexico. I will now hand it over to Laura, who will review Hispam's operations and the group financial position.

Thank you, Angel, and welcome, everyone. Moving to Telefónica Hispam. In Q3 2023, we continue to take steps to improve profitability of the business. We continue growing very fast in the most valuable segments, like FTTH, where we posted an access increase of 12% year-on-year. We received the regulatory approval from the Colombian government for the integration of our mobile radio access network with Millicom. In fact, on Chile, is awaiting for the green light for operation with Entel that could allow for an increase in the size of the neutral fiber network, avoiding overlap and making the business more profitable. Results and mainly OIBDA continues to be affected by a difficult macro and competition backdrop in Peru. The impact of the FTTH access migration in Chile and Colombia and the network transformation efficiencies in Colombia in Q3 '22. However, we expect a better OIBDA minus CapEx trend in Q4 '23. Turning to Slide 13. Net financial debt declined to EUR 27.5 billion in June 2023 to EUR 26.5 billion in September 2023, mainly due to the solid free cash flow generation in the quarter. Net debt to EBITDA was significantly reduced from 2.62x to 2.51x as of September 2023. We maintained a solid position of EUR 20.8 billion, that together with a light maturity profile, allows us to cover the maturities over the next 3 years. Meanwhile, we have contained our debt-related interest costs at 3.61%, thanks to the very active refinancing exercise undertaken along previous years and the solid position at fixed interest rates in a strong currency that allows immunization to the environment of raising interest rates. Telefónica maintains about 80% of its debt linked to fixed rates, mainly in euro, with an average life of 12.3 years, which places us in a comfortable position to face any environment. I will now hand back to Angel, who will wrap up.

Thank you, Laura. Summarized on Slide 14. We delivered another solid quarter in Q3. Revenue and OIBDA growth remained steady year-on-year, supported by stronger KPIs and improved customer satisfaction, while OIBDA minus CapEx growth accelerated significantly year-on-year, driven by our operating leverage. We continued our ongoing technology transformation through the promotion of artificial intelligence, machine learning, bringing benefits in terms of minimizing costs and resources allocation. This has enabled us to reduce our net debt to EUR 26.5 billion while reducing leverage at 2.51x. Free cash flow ex-spectrum is progressing towards the full year target of EUR 4 billion, having reached EUR 2.5 billion during the first 9 months of the year. We are on track to fulfill our upgraded 2023 guidance, free cash flow ambition, and we confirmed the dividend for the year and 1.5% treasury stock cancellation in the next AGM. We continue to monitor ongoing industry and regulatory changes while keeping ESG priorities at the core of our business. Thank you very much for listening. Now we are ready for your questions.

Georgios Ierodiaconou from Citi. Maybe a question on Spain. And I've seen the KPIs are quite solid. But it looks like a lot of the acceleration in retail revenues comes from nonconversion revenues. So perhaps if you can comment a bit on what's driving that? And also, you mentioned the new tariff plans that are out, if you could comment both on whether this will improve the conversion ARPU going forward? And what competition is doing at the same time?

Thank you, Georgios. Well, we have had a third quarter which has been probably the most successful commercially in quite a long time. This was in the wake of back-to-school campaign, also in a quarter that is marked by the disconnections or suspension of football subscriptions at the beginning of the quarter, and then the reconnections. Again, the commercial improvement is the result of two measures: one, the configuration of the Mi Movistar portfolio that we need to make it more modular, and second, the launch of the new pay TV over-the-top offering that has reverted many quarter trend of negative net adds in pay TV that now have moved to positive. So we are doing this, while at the same time, managing to increase our ARPU year-on-year, okay? It declined quarter-on-quarter because of the football effects that we have always in the third quarter, but increased year-on-year, we are having the lowest churn ever, at around -- it's 0.9%, and this, combined with all the metrics we get to customer life time of 9 years, which is quite resilient. We are now in the fourth quarter. We're starting the typical back-to-school, the typical Black Friday promotions in this season. So you will see and some people like to write potential promos, but from what we're seeing so far and what we saw in the back-to-school campaign at the beginning of the football season campaign, no more intense promotional activity than what we had 1 year ago. I don't know if this is response to your question or I can elaborate.

Nonconversion revenues on the start of the quarter?

Sorry?

On the nonconversion revenues, was seem to be driving the retail revenue growth. Is that business? Is it sustainable? Just to...

Well, we're also having traction in part of our services that we have around the digital ecosystem, the pure conversions. And also, we are getting traction in -- we have the positive territory in postpaid mobile that we managed to achieve as compared to previous quarters.

Fernando from Santander. Just a quick question on wholesale business in Spain. Just to understand if the deceleration that we have seen in the third quarter is driven by, what is the reason behind that deceleration? Is coming from low-margin wholesale revenues like content, or is from high-margin wholesale revenues like, for example, fiber access and so on?

Well, the wholesale has also a seasonal impact in the third quarter linked to the resale -- or not resale of, for instance, the football content. It's less linked to fiber, which I continue to see good traction. But in the content resale, we always have seasonality. The same way that our subscribers of soccer, either disconnect or suspend their connection at the beginning -- or at the end of the football season, which is the beginning of the quarter and reconnect later on. The same happens with our resale to other players that buy the content from us.

[ Javier Borrachero, Kepler Cheuvreux ] On the EBITDA, domestic EBITDA, can you maybe walk us through the different items and the moving parts. I think in previous quarters, you mentioned some tailwinds, lower energy costs, lower content cost, it's probably a network phasing. Just maybe if you can comment on these different items.

Well, the first part is the revenue growth. As you could see in the slide, it's accelerating, both on service revenue and retail revenue. This is both on the B2C and it's higher on the B2B side. So the more we grow on the B2C side, the better margins because B2B has lower margin. In addition, we have seen annualization of some cost items like content cost. At the same time, we continue hedging on, and covering our energy costs, which are no longer a headwind, but a tailwind in the comparison with the previous year. And we continue working on all type of efficiencies linked to the progressive transformation of our network to a fully fiber network, which we're going to elaborate more later on today on what savings and to what level of OpEx or margins can take us and what level of CapEx, or revenues, we will be projecting in, particularly in the Spanish operation, and in general in the group.

If there's no further questions, then we can leave it here, and we'll reconnect at 02:00 p.m. for the...

Thank you very much. I'm sure we will have plenty of questions when we're reconnecting, half an hour time. Thank you. [Break]

[Technical Difficulty] Thank you all, and welcome to Telefónica's Capital Markets Day. Going through the agenda, our Executive Chairman, Mr. Jose Maria Alvarez-Pallete, will start guiding you through the transformation the company has undergone, and while we are truly a better and stronger company. He will also outline the new ambition. We have our CEO, Angel Vila, will then guide you through the details of our new GPS framework and how it reaches in all parts of the company. After that, Laura Abasolo, CFO, our Head of Hispam, will guide you through our free cash flow, our balance sheet and capital allocation policy. We will end the presentation with the guidance and closing remarks by Jose Maria, and we'll then take your questions. But before that, sorry, I know I did it before but lawyers asked me to repeat it again. Let me mention that the financial information contained in this presentation has been prepared on the International Financial Reporting Standards as adopted by the European Union. This financial information is unaudited. This presentation 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 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. So reminder, today's event is being recorded. And now the floor is yours, Jose Maria.

Good afternoon, everyone, and welcome to Telefónica. We are very pleased to have you here on the eve of the 100th anniversary of our company. We are here to introduce to all of you a stronger Telefónica, and while this stronger Telefónica demands a higher ambition. I shall say that when back in July, we decided to call for this Capital Market Day, we didn't know most of the things that have happened since then. And a lot of things have happened. But all in all, we feel that this is the right time to share with all of you what we see ahead of us, and why we think that we are prepared and that we have an attractive project. Let's focus on what today is truly about. Please keep these pivotal points in mind. Firstly, after years of massive transformation, we are back to solid trajectory of revenue growth in reported terms. This transformation has driven increased operational leverage that will translate into margin expansion. As a result of the above, we will deliver double-digit free cash flow growth over the next 3 years, to move decisively towards deleveraging and secure an attractive dividend to our shareholders. First question, you are probably asking yourselves, is why now? Because of three main reasons, because our transformation journey is yielding results. In 2016, we began our recent transformation journey. In 2019, we announced our plan which marked a significant change in the way we manage the company, and we have delivered on that plan and have transformed our business. Also because we have an exciting vision and because we are ready to increase our ambition. In 2019, we announced a strategic plan structure around 5 pillars, a plan which marked a significant change for us, and we delivered. We have strengthened our core units. Capital employed in Hispam has come down significantly through reduced capital intensity, asset-lighter models, local decisions and overall streamlining. We have developed Telefónica Tech both through its organic carve-out and inorganic measures, and is now a proven growth engine for our B2B activity. Telefónica Infra has been key to the growth of our core units through co-investment vehicles and also generating value. And we implemented a new operating model that further added to our effort towards improving our operating leverage. Today, 7 years down the road of our transformation, it is time to reflect on what we have built. We have invested significantly in building the most advanced networks in our markets. A brand-new network, radically improved, with state-of-the-art technology. Through this new network, we can offer advanced telecom services and adjacent products and services in a seamless way, and with a much faster time to market, we have become a truly online digital supermarket. And as a result, we have gained customer relevance. And we can now operate in a much more efficient way. Our operations are more agile, more efficient and ready for the future. Our transformation has also strengthened our commitment to sustainability. First, it is about connectivity. We have managed to build the best, or joint best network in all our core markets, both in terms of fiber coverage and in 4G and 5G. In fiber, we have deployed more than 15 million additional premises in 2016, reaching 72 million premises, the largest fiber network outside China and certainly the largest European. We started earlier and have made a significant investment effort, which allow us to face the future with ample margin. Our CapEx peak is well behind us. But network transformation goes beyond 5G and fiber rollout, it is really hard to convey the depth of the transformation. Our network today is more efficient, more productive and capable of carrying 6x more data traffic than in 2016, with less legacy. Spain, where more than 90% of our fixed broadband customers are already on fiber, will be the first EU country that switches off its corporate network. At the same time, we have reduced 2G and 3G coverage by 43%. With more distributed processing capacity, we increased our service by 30%, and have developed 294 internal APIs. Not many people is aware, but we are -- we have now processing and storageing capacity that allow us to be one of the top supercomputers in the world. Additionally, we have prepared our networks for the future, delivering high-performance connectivity to our customers, including low latency, high bandwidth and secure reliability becoming much more edge capable. [ Serverized ] and virtualized, thanks to disaggregated and cloud-based architectures to gain efficiency and scalability, and open to a collaborative ecosystem, enabling the integration with third parties. Our data-driven abstraction layer, our Kernel, represents a powerful tool and a clear competitive advantage to orchestrate and expose the capabilities of our network in a straightforward manner. As a result of this transformation, we can provide new products and services, reduce time to market and reduce OpEx and CapEx. The network becomes a differentiation element for our customers. we have 14% more customers now than in 2016, customers that are more satisfied and more loyal than they have ever been, and our churn and NPS are industry benchmarks. Finally, our customer service is also more efficient and engaging, with 47% of users regularly accessing our app, which shares a single engine at the group level, capturing economies of scale. Following this operational and customer transformation, our revenue mix has evolved. We have essentially changed. In 2016, 45% of our revenues were still coming from legacy products. Today, 76% of our revenues are coming from future-proof products and services. Our customers are more converged and are taking more and more services with us. We have been preparing our operations for the future, enabling us, not just to switch off legacy networks, but also to decommission 2/3 of our operating systems. The company we created is simpler and linear, with 85 of the process digitalized and automated, which in turn allow us to reduce by 18% of our head count and executive position by 31%. We have built the foundation for AI already impacting around 25% of our company processes, and deployed the Kernel as an abstraction layer that adds intelligence in the system. Together with less energy consumption, this led to an increased operating leverage of almost 4 percentage points of EBITDA minus CapEx margin from 2016 levels. By building those networks, and streamlining our operations, we are also building a much more sustainable model. First, a new world demands a new framework. The current regulatory regime is obsolete. It was designed for a sector that doesn't exist anymore. We are calling for a complete deregulation and the battle is on. Second, it is about collaboration among players to share resources and standards. Third, it is about a much more efficient use of the network, accelerating the way to net zero emissions. Fourth, it is about a much more balanced and diversified talent pool at all levels. And fifth, it is about reskilling and managing the digital transformation in a responsible manner. We have done a massive capital allocation effort. Since 2016, we have carried out corporate transaction worth more than EUR 80 billion, including the largest operation in our history, the merger of O2 with Virgin Media in the U.K. We have devoted EUR 57 billion in CapEx over the period. We have taken networks to the next level. EUR 18 billion have been distributed to shareholders via dividends and buybacks, and we have reduced debt in EUR 22 billion since 2016. Results are coming. We are back to revenue growth in reported terms. We have expanded operating cash flow margin by almost 4 percentage points since 2016. Meanwhile, our CapEx intensity has fallen. Sustainability has as well improved, achieving record churn rates and reflecting the strength of our business. It is a stronger company, we are back to growth, with increased profitability and in a more sustainable way. But there are more reasons to be excited about. We are at the brink of a new era. Deep disruptive innovation usually happens at the frontier between technologies. This is what happened 15 years ago at the confluence of mobile Internet and computing, a device conceived support mobile voice, turned into a smartphone, making these capabilities available to newborn digital platforms. Internet went social and mobile almost at the same time, and the first digital native companies were born. The world was changed. Today, we are at the doors of a new change of era driven by the intersection of telco, intra-broadband networks, computing, artificial intelligence and Web3. In all four fronts, we are leaving radical disruption, and this new era is already changing everything, everything again. There is a new wave of digital services emerging and already generating a new innovation cycle. Products and services that only us can enable through our network, share from any device at any location, at any time, requiring seamless, massive, fully interoperable communications and real-time computing. Best network quality is not good enough to cope with this world. We have amazing opportunity to improve people's lives again. Data traffic will continue to grow and is just one of the challenges. Apart from speed, mobility, embedded security and privacy, other attributes, we'll call our connectivity, such as latency, capacity and processing and storage capabilities. to which we need to add a significant degree of personalization to meet the wide spectrum of needs and requirements of our customers. The increase in traffic, together with the need for high-performance connectivity, will require access to more distributed computing capacity beyond the current cloud. There is no way this new generation of products and services can be served exclusively on cloud technology, it would be technologically impossible and very inefficient from an energy standpoint. And we have the unique responsibility to make it happen again. Connectivity is the foundation for everything that is digital. Today and tomorrow, we are no longer just telecom network. We have something different, something bigger, something even better. It means much more than transforming. It means that we need to reimagine ourselves. Moving from copper, 2G, 3G and 4G, to full IP fiber and 5G networks, evolving from hardware-based reactive network to software-based networks, from customized tailor-made integration to global platforms interconnected with open APIs. The traditional telco experience develops into an AI-driven customer engagement. One size fits all offerings are behind us. We move to a personalized digital supermarket. It is a brand-new factory. Again, it all starts with our networks, ultra-broadband and low latency, programmable and AI-based and cloud and edge computing are enabling efficiency, but also new business opportunities. We are breaking down network and IT components into individual micro services that can be sold through a developer-centric marketplace within the cloud ecosystem. Developers and software integrator can access code through these marketplaces, allowing them to embed micro services like premium latencies on -- and device location into their apps. Developers will be able to create configurable and scalable network quality and information-based products. We are still in the early stages so far, but very excited of what we are seeing. We are looking forward to share proof points with you and we will. Please do not miss the next congress in Barcelona. And this is happening as a collective effort from the sector. We are working on a new standard, in GSMA and camera, only through standardization and simplicity, we can at least be enormous value hidden in connectivity. This is a growing group, and we continue to add members. Today, 35 leading players are already on board. We serve a platform that reaches to 5.4 billion people daily. We are ready as an industry. But Telefónica is also ready. Telefónica is ready to go the extra mile and elevate our ambition further. It's time to outline where are we taking our company. Thanks to the increased relevance and loyalty from our customer base and differential capabilities such as Kernel, we are prepared to enlarge our addressable market. We target new markets that are twice the size of our traditional comps market and are growing faster. In 3 years, these revenues will become a relevant part of our mix. We see growth rates of 7% for consumer value-added services, where we are developing an ecosystem of API-based services around connectivity. In enterprise, where we hold a solid market position, leveraging Telefónica Tech capabilities, we see growth beyond 14% in the next years. Finally, nascent API market is expected to grow by 15% in the next 3 years, creating a new revenue streams. APIs are at the core of our B2C, B2B and wholesale business future. We are landing network-as-a-service into reality. First, on the technical side, we are actively developing a first set of APIs, enabling our first generation of services. We already have several APIs ready for service with commercial launch coming very soon in Brazil and Spain. Second, on the commercial side, we are proactively collaborating for the market to gain traction by working with customers and other carriers to develop use cases, by developing and testing different routes to market and by promoting a developer's base. In 3 years, we have an extensive portfolio of increasingly relevant API-based services, and we'll be reaping the benefits of what we have -- we are developing today, ensuring more sustainable growth in the long term. We are also leveraging this transformation to double down on efficiency and boost customer experience. During the next 3 years, we will be fully benefiting from massive legacy switch-off streamlining our business model. We'll be realizing the advantages of our proactive investment in platforms and artificial intelligence which will manifest as highly automated operations and content management, autonomous network management and cutting-edge customer engagement strategies. We will have rolled out a fully-programmable network infrastructure that will reduce operating costs and introduce a new wave of personalized and real-time services to our customers. And all this makes our service faster and more efficient. We are doubling down on capital allocation. We are taking it to the next level. We will manage two buckets of capital, organic cash flow to fund our business as usual. We have lower CapEx intensity and we have hence more capacity to reduce leverage whilst growing our dividend coverage. Inorganic opportunities and other sources to speed up deleveraging, improved shareholder remuneration and look for growth opportunity. You should expect from us to be very active on this front. Along with our capital allocation strategy, we reinforced our focus in one of our core markets. Yesterday, we launched a public tender offer to buy Telefónica Deutschland shares, at what we think is an attractive price of EUR 2.35 per share. Before Laura later runs you through the details, I would like to share our rationale and why we think it's a truly win-win for Telefónica Deutschland and Telefónica shareholders. Germany remains an attractive market and one of our core markets but the loss of the one-to-one contract created a special situation. We have a recovery plan in place to offset the impact, but that might take longer than expected, and we acknowledge it creates uncertainty. This change the investment proposition of Telefónica Deutschland shareholders, and we want to provide Telefónica Deutschland shareholders an exit opportunity at an attractive price. For the group, the transaction is accretive and increases our exposure to euro-denominated free cash flow. It supports our offer to simplify the group structure in line with our strategy to be simpler and stronger. And finally, it has no impact on our credit rating. We are committed as well to ensure the long-term sustainability of our business and our sector. And therefore, we are actively leading in four key topics. First, together with other key players, we are promoting collaboration to share resources and standards. Second, a new world demands a new framework. The current regulatory regime is obsolete. It was designed for a sector that doesn't exist anymore. We are calling for a complete deregulation. Third, it is about a much more sustainable use of the networks. We are promoting very relevant discussion as OTT fair share, to foster our responsible use of the network. And fourth, we will keep leading the industry on the ESG front. Since we think we are ready, we are launching today the GPS program. We are ready to introduce a new and transformative journey that will shape the future of our organization. That's why we are ready to face as well a higher level of ambition. During the next 3 years, we aim to grow reported revenues by around 1% and EBITDA by around 2%. This will result into average growth of EBITDA minus CapEx of around 5% over the period, which as a result of our improved operating leverage will result into free cash flow compound growth rate of more than 10% in the next 3 years. This elevated ambition leading to a higher than 10% free cash flow compounded average growth rate will help us to create significant shareholder value. To leverage reduction, we will bring net debt down over [ EBITDAL ] to between 2.5 and 2.2x. We will keep having an attractive dividend of at least EUR 0.3 per share. Again, this will come from organic sources of capital, excess free cash flow could fit potential share buybacks in the period and regained financial flexibility means increased strategic optionality. And that's why we are here today. In summary, we feel that we have a stronger company, and we think it deserves a higher ambition. Angel will now guide you through the details of the GPS plan.

Thank you, Jose Maria, and hello to everyone. Growth, profitability and sustainability are the objectives of the GPS that will guide our plan for the next 3 years. The GPS program is structured around five lines of action. The first one is to consolidate and sustain the revenue growth in the consumer segment in B2C. Second one is to continue outperforming in B2B with above-industry revenue momentum. The third one will ease to manage our wholesale revenue evolution and to evolve our partners' revenue business. In addition to revenue items, the fifth line of action is to reduce OpEx through efficiencies and also to optimize CapEx through efficiencies, while not losing differentiation. In the next slides, I will describe the priorities, the targets and the ambition along these lines. The first priority is to sustain B2C growth. Consumer accounts for 60% of our reported revenues, covering 260 million consumer accesses. After a few years under pressure, we have turned around B2C which is growing in reported terms, plus 1.9% in the first 9 months of the year. This has been possible, thanks to a growing customer base that is also more satisfied, consumes more products and stays with us longer. Let me describe the strategy that brought us here. One key element, which is often overlooked is the big strength, power and differentiation of our brands. We have very strong trusted brands in our key markets. Movistar and Vivo, both our super brands, not only the #1 brands in telco in their countries, but also among the most notorious brands across all industries in those countries. This, by the way, and we will see, is great for cross-selling. VMO2 combines two very well-established brands, Virgin Media O2 into a very solid #2 position, and O2 in Germany is closing the gap as well with the second one. Strong brands, drive customer loyalty. Strong brands also give us differentiation and market power. They are an essential building block for growth. But of course, a top brand can only be sustained on best product and best experience. This starts with having the best networks and offering attractive products with bundled services. Mi Movistar, Vivo Total and Volt are all compelling conversion bundled propositions for our customers. At the same time, customer experience is becoming more digital, as seen by the consistent increase in the percentage of our consumers engaging via our apps. As a result, through best product, and best experience, we are generating the highest customer satisfaction and achieving the best NPS scores. A satisfied customer is at the core of our business. Happy customers are more likely to buy more products beyond pure connectivity. This is why, as Jose María was saying, we are building digital supermarkets with products that range from entertainment, to security, to fintech and constantly evolving increasing and personalizing those. This gives us access to a bigger market that in turn is growing faster. We see significant potential for further growth, with an addressable market of EUR 40 billion across our geographic footprint. With our digital B2C ecosystems, we are growing customer engagement, customers spend more, stay longer, are more engaged, more loyal. These are much more valuable customers. Of course, all of this translates into KPIs. Our goal is to have more than 60% conversion customers in Spain, Brazil and the U.K., up from half of those today. Bundled services will also help us reduce churn even further, to below 1%. Our strategy is to attract and retain customers with compelling propositions that give us more share of wallet from them. As a result of all of this, we expect to grow B2C reported revenue by around 1.5% compounded annual growth rate between now and 2026. Turning now to our B2B segment, which represents 21% of our reported revenue and covers more than 5.5 million clients. This is where we see the strongest momentum in terms of revenues, with 6% growth so far this year and a big turnaround coming from minus 3% in 2019. We have transformed B2B, and with the help of Telefónica Tech, we have created a fast-growing segment. Our growth in B2B is differential versus other industry players, and key to this differential behavior is Telefónica Tech. Telefónica Tech is our specialist provider of advanced digital B2B solutions in the cloud, cybersecurity, IoT and big data fields. On top of Telefónica Tech's organic growth post carve-out, we have strengthened the unit with strategic acquisitions ranging from CANCOM, Incremental and BE-terna, which helped to more than double revenue in less than 3 years. Our aim is to reach EUR 3 billion Telefónica Tech revenues by 2026 which is an 18% compounded growth rate from today's level. All of this is because B2B customers' needs are evolving. We have moved from traditional connectivity to ICT services to next-generation ICT solutions. And with this move, the addressable market gets bigger and the growth accelerates, the weight of IP over revenue increases. This is why network transformation and Telefónica Tech services are so important. Our evolved revenue base, the combination of traditional B2B with Telefónica Tech services, gives us the confidence to expect B2B reported revenue to grow by around 5% compounded annual growth rate in the next 3 years. The third segment of revenues is wholesale and partners, representing 16% of our reported revenue mix. This is a valuable revenue stream that improves network utilization gives access to different customer segments and helps boost return on the significant investment in our networks. But traditional wholesale has become much more competitive, and we are seeing declining revenue. We have a tailored plan in each one of our core markets to strengthen the wholesale business. In Spain, we have well-established long-term contracts and we are prepared for market evolution, including potential remedy scenarios resulting from market consolidation. In Brazil, we see growth opportunities in the FiberCo space. In Germany, we have plans in place to mitigate the loss of the one-on-one contract and compensate and diversify those lost revenues. Finally, in the U.K., we see strong opportunity to be the second scale fiber wholesale alternative to BT, to build upon our already strong wholesale relationships in mobile and fixed backhaul. In our traditional wholesale business, we remain -- we'll remain rational. And we always keep the overall health of the market in mind as we continue to resell our products, our platforms and our content. But beyond the traditional wholesale business, we are adding new services and are entering fast-growing markets. With network-as-a-service, we will gain developers and software integrators as customers, allowing us to exploit the open gateway opportunity with an addressable market in excess of around EUR 4 billion. Despite this evolution of the partner revenue, we are expecting a low to mid-single-digit decline in the wholesale business in the next 3 years, but we expect to gradually offset this decline with new sources of revenues. Having spoken about where we see revenue growth, I would like now to turn to how the huge technological transformation that Jose Maria described is making our business more efficient. By next year, Spain will be the first EU country to shut down its legacy copper network. As you know, full-fiber networks are cheaper to run because they have fewer faults, less maintenance, consume less energy. We are also switching off costly 2G and 3G networks across our footprint, while energy efficiency is driving cost lower and we are freeing up spectrum that can be more efficiently used in 4G and 5G. We are sharing costs with partners on existing networks and when we roll out new ones. AI and automation means we will deliver these services more efficiently and faster, and we continue rightsizing the organization to adjust for the needs of the future. This technological long-term vision allows us to implement efficiencies, but we see efficiencies not only on the network side, also on commercial costs, via transforming the customers relationship into more digital ones, while we redesign, automate client processes and review channels strategy. Also, in other costs, we are continue always searching for additional efficiencies and support functions, overheads, real estate, among others. So the combination of revenue growth and efficiency initiatives will drive EBITDA growth. We expect an EBITDA compounded growth rate of around 2% in the next 3 years, meaning an improvement of EBITDA in the range of EUR 900 million. 1/3 of this improvement will come from revenues, net of debit costs that come with reaching that revenue growth. The second -- the other 2/3 of the EBITDA improvement will come from efficiencies in network, commercial and other costs. On the fifth lever, turning to CapEx, we started early to invest in fiber and 5G. And thanks to that, our CapEx peak is well behind us. Most of the 5G spectrum auctions are complete, and we continue to increase coverage. Our fiber deployment is most advanced in Spain, which is fully fiber, followed by Brazil and the U.K., where we are fast rolling out next-generation networks. Telefónica is a global leader in fiber to the home. We will sustain network differentiation while reducing CapEx, and Telefónica Infra has been part of this process. Telefónica Infra, our infrastructure management arm, helps us to reduce CapEx and accelerate fiber rollout through innovative partnerships. Telefónica Infra is building networks, fiber networks with its partners in Brazil, Germany, Spain and the U.K., and supporting Telefónica Hispam in Chile, Colombia and Peru FiberCo. Telefónica Infra also manages Telxius, our submarine cable business with 100,000 kilometer state-of-the-art network. We have the most developed international connectivity network with a FiberCo expertise second to none. We created Telefónica Infra to maximize value from our unique infrastructure assets and the unit has delivered. We sold Telxius towers at the right time, achieving a record high multiple. The unit main focus now is to accelerate deployment in fiber, primarily through co-investment with financial partners in FiberCos. Telefónica Infra is increasing its fiber footprint from currently 20 million FTTH premises passed to approximately EUR 30 million in 2026, contributing to achieve the group-wide target of well above 100 million premises passed by 2026. But reducing CapEx isn't just about hardware spend. It's also the consequence of transformation investments we have made in software, technology and AI, and you cannot underestimate what difference these investments make. We see, as a result, room to further shrink CapEx across categories. And today, we are guiding for CapEx intensity to fall from around 14% of revenue organic this year, to below 12% in 2026, in reported terms. To be clear, this means an absolute reduction in CapEx spend. I will now give a bit more detail on how we plan to implement the GPS network in our four core markets: Spain, Brazil, Germany and the U.K. Our strategy to focus on these four markets has worked. Our home market in Spain has returned to growth in B2C, with customers buying more products, leading in B2B and ahead in technological transition. In Brazil, we took part of in-market consolidation, we have successfully turned around the fixed business, reinforced and accelerated B2B. We have strengthened our network in Germany, which has seen solid commercial momentum. And in the U.K., our joint venture is delivering on the synergies so far as planned and continues to roll out fiber and converged products. On this slide, you can see that the momentum in sustained EBITDA growth in Spain, Germany -- sorry, in Germany, Brazil and the U.K. is very clear, and Spain EBITDA is heading towards stabilization as we indicated we would. 1 hour ago, in the Q3 call, I confirmed, we confirmed that we expect Spain EBITDA to stabilize in the fourth quarter this year. Our Spanish unit is best positioned to navigate everything that is happening in the sector. We have the best assets, with benchmark low churn, healthy ARPU. Our goal is to continue to grow in revenues in our consumer segment and accelerate B2B momentum with double-digit ICT growth. We do expect some effects from in-market consolidation, and we are prepared for potential outcomes. There is room to reduce costs further, and we see opportunities in OpEx from general efficiencies, legacy shutdown automation and rightsizing the organization. Our CapEx intensity is falling further to a benchmark 10% of sales by 2026. To sum up, we see continued revenue growth, also EBITDA growing starting from 2024. EBITDA minus CapEx growing faster than revenue and EBITDA, supported by CapEx to sales of 10%, declining to 10%. Our premium positioning in Spain within a segmented market puts us in a stronger relative position. This is a strategy that is not available to all players in the market. In Brazil, we maintain a premium position, a leadership position in a growing market, and we build on that leading position with a complete portfolio of digital services in B2C and B2B. Looking ahead, we expect strong growth in all segments, growing our customer base and increasing our share of wallet with expansion in margins. We are deploying a fiber network at pace, with network sharing models that allow fast and cost-effective deployment and allow us to accelerate legacy decommissioning. In Brazil, we expect revenue and EBITDA reported to continue to grow, and EBITDA minus CapEx to grow faster than EBITDA. Turning to Germany. Telefónica Deutschland is growing strongly, thanks to the improvement we made in network quality and attractive commercial propositions. Our goal is to maintain B2C growth while accelerating momentum in the B2B segment. We have put plans in place to mitigate the loss of the one-on-one wholesale contract. And CapEx to sales will decline over the next 3 years together with an accelerated transformation and simplification of the business. We expect revenue, EBITDA and EBITDA minus CapEx to grow in Germany through the execution of the recovery growth plan that was presented by the team. Yesterday, the offer that we presented is that reinforcing our focus in one of our four core markets. Finally, the U.K. is an attractive market, seeing potential consolidation, both on the mobile side and on the altnet side. VMO2 enjoys a loyal customer base, built on historic speed, advantage in fixed and customer care and customer service in mobile. We will continue to target B2C growth through fixed mobile conversions and continue to build differentiation through digitalization and AI. We see further scope for synergies with a GBP 540 million annual run rate by 2026, and we are optimizing CapEx to sales by leveraging nexfibre and by decommissioning legacy technologies like the 3G shutdown that we planned in 2025. As you all know, we do not fully consolidate the U.K. and receive annual dividends from VMO2. We expect to continue delivering strong free cash flow, along with execution of synergies and partners will decide on an annual basis, on the recap amount. In summary, returning to the GPS framework, growth, profitability and sustainability. We are focusing on five lines of action to deliver the ambitious goals of the GPS program to deliver in compounded annual growth rates of 1% in revenue, 2% in EBITDA, 5% in EBITDA minus CapEx and over 10% in free cash flow. Now I'll hand over to Laura, who will walk you through how the strategy will be to lead to free cash flow growth in the coming years.

Thank you, Angel, and good afternoon, everyone. This section is going to focus on how our strategy will deliver strong returns for our shareholders, and in our improved capital structure. But first, let me touch briefly on Hispam. Hispam is a self-sustained region, we reduced capital intensity and risk -- reduce risk. We have been delivering in this framework since the end of 2019, through both organic and inorganic measures. From the organic point of view, Hispam was carved out and is managed separately within Telefónica. With the regional, our lean model, we have improved our free cash flow potential, thanks to a laser focus on increasing efficiency. We have led the sector in share-in network costs wherever possible, shutting down legacy and we have also influenced in more rational spectrum auctions, and we have digitalized our commercial processes. This infrastructure strategy links very naturally with our inorganic moves where we have executed year-after-year successful co-investment on network models. CapEx has come down to just 10% of sales from mid-teens, and we have reduced capital intensity by 26%, more than a quarter since 2019. And we have also derisked by matching debt in local currency, which I will address a little later. Going forward, we have positioned Hispam to be prepared for full optionality. Our plan is to continue to focus on free cash flow growth in the region by optimizing costs and we'll continue modulating capital intensity. We keep our options open to reduce that exposure further either through potential divestments that could faster deleverage, but also in market consolidation, that could lead to a so much needed market rationality and synergies, therefore, fostering our free cash flow. Hispam is committing to this plan by contributing with a clear target to increase [ EBITDAL ] minus CapEx by 5% per year between '23 to '26 , and continue reducing capital invested by 15%. Let's move to the pure financial section. We are enabling our GPS framework with a strict and disciplined capital allocation where we are assigning capital with a segmented approach. We are managing our balance sheet prudently and proactively, liquidity, maturity profile, the interest and FX strategy, I will walk you through. We reinforce our balance sheet with the deleverage commitment and a clear target. And we are proposing a simpler or comprehensive reporting and guidance with growing free cash flow. Telefónica has a very clear and strict capital allocation hierarchy. Let me explain on this. We have split the resources in two parts: organic and inorganic. Organic cash flow is where we have the highest visibility. Execution is in our hands. We will invest in our business first to support growth and the strength of the platforms, and we are achieving that with a CapEx-to-sales ratio falling to below 12%. Organic cash flow will reduce leverage and pay a floor dividend of EUR 0.30 per share, which we are committing for the midterm. With organic free cash flow, we are covering these three needs and priorities. And in addition, we have inorganic sources, options, opportunities will arise, out of excess cash, asset recycling and other sourcing, we will allocate it to a speed at leverage reduction, share buyback and value-accretive M&A if it becomes available, and we are taking a holistic view on the opportunities and allocating capital to bring greater financial and strategic value. This strict capital allocation is allowing us to set a leverage target, which will be measured with net debt to [ EBITDAL ], and we are aiming to be in the range between 2.5 to 2x in 2026. From this capital allocation criteria, let me walk you through the details of the public offer we did to buy Telefónica Deutschland shares. We have launched a voluntary offer to buy out Telefónica Deutschland minorities for EUR 2.35 per share in cash, a 37 premium over Monday closing price, a 36 premium to last 3 months VWAP, and a 34 premium to the average broker target price of EUR 0.76 per share. We launched this offer yesterday. Let me talk about the calendar. Filing will be late November. Public offerings, acceptance will start early December, a recent opinion by Telefónica Deutschland and management will be around mid-December. And acceptance period will end in mid-January, followed by the settlement. There's no minimum acceptance level. We have no intention to conclude a domination and all profit and loss transfer agreement. This offer is funded fully with cash, and we don't expect any impact on our credit rating. We believe this is an attractive exit opportunity in cash for all Telefónica Deutschland shareholders. Financial resources management, definitely a priority for us. Our prudent balance sheet management gives us flexibility on when to access the market and reduces volatility to FX and interest rates. This is crucial in uncertain scenarios with step changes. Starting with flexibility. As shown in the page, we have ample liquidity of over EUR 20 billion. We also have an undemanding and smooth maturity profile in the next 3 years, with average gross maturities of EUR 3.4 billion per year. And we will continue with this prudent approach aiming for longer tenors in our refinancing. We have also been proactive in hybrid refinancing, and there's no need to tap the market in the short term either. Our balance sheet strategy is designed to shield us from FX movements by aligning currencies to reflect the business mix across geographies. You can see we have 75% of our debt in Europe, 15% in Brazil and 10% in HispAm and others, which is broadly aligned to our operations. Moreover, when we convert our accounts to euro, we have a natural hedge from FX volatility as it impacts revenue, but it also impacts OpEx, CapEx, other local currency payments. Thus, we are minimizing the FX impacts flowing to the final free cash flow to approximately just 15% of the revenue impact. And additionally, every year, we add tactical hedges to further offset such FX volatility. We are also protected in the scenario in which rates stay higher for longer. 85% of our debt is fixed, including the entirety of our euro-denominated debt. Meanwhile, the bulk of our floating rate is Brazilian real and HispAm and their rates have started to decline. To show that a 100 basis point change in rates will equal to just EUR 38 million to our interest bill, EUR 33 million of which is linked to Brazil where we may have an upside. And moreover, our euro cash position mirrors floating rates. So actually, we are benefiting short term from rising rates as we earn income on that cash. Our debt financial payments are going to evolve very gradually and they're going to be fairly stable. Aside from resources, financial risk management, we are also taking a step in simplification, market alignment and commitment. We listen to you and introduce new guidance KPIs will better allow to evaluate our performance against our GPS plan. We are making it simpler. We will, as from January 1, 2024, start reporting with statutory accounts and reported euro and move to industry standard metrics. We are guiding on a more extensive and comprehensive set of KPIs as well as committing to longer term. We will continue guiding on revenue, EBITDA growth and CapEx over revenues, although in reported terms, and we are adding 4 more metrics. EBITDA minus CapEx growth, free cash flow growth, a leverage target and our mid-term dividend commitment and with a clear focus on free cash flow growth under a new reference, as you will see in the next page. You have more detail on all these changes in the appendix of the presentation. I said, free cash flow is the focus. Under our previous definition, we committed to a free cash flow of around EUR 4 billion in 2023 that we will deliver. From '23 to '26, that figure is growing, will grow to EUR 5 billion. We are proposing a new definition for free cash flow, which is aligned to our capital allocation priorities and shows precisely the capital available for our commitment on dividend and deleverage. This new free cash flow all includes the free cash flow portion of the dividends from the U.K. and includes hybrid coupons and commitments. We will, of course, provide you also with a full bridge to do the calculation. Under this new definition, free cash flow will stand at around EUR 2.1 billion in 2023 and will grow by a CAGR of more than 10%, targeting around EUR 3 billion in 2026, improving dividend coverage and deleverage ability. This is just a rebasing exercise. Under any definition, we are delivering a strong free cash flow growth. And this strong free cash flow growth is which supports our commitment to our shareholders. At Telefónica Group, as we have already announced, we set a EUR 0.30 dividend floor during the '23 to '26 period. We may consider the EPS growth or share buyback as we regain financial flexibility. Telefónica Deutschland confirmed the EUR 0.80 (sic) [ EUR 0.18 ] dividend committed for 2023, the last of the 4-year dividend plan. On top of that, we launched, as I said, yesterday, a public offer to buy Telefónica Deutschland shares at what we think is an attractive price of EUR 2.35 per share. And at Vivo, we will continue to have an attractive shareholder remuneration with a payout of at least 100% of net income in the next 3 years, including a BRL 1.5 billion capital reduction proposal for 2024 as announced this morning. I will now hand over to José María for the closing remarks.

Thank you, Laura. Before finishing, let me recap. We have an exciting vision for the industry as we go through a promising transformation period. Telco connectivity, together with AI, cloud and edge computing and Web3 are key converging technologies, and this confidence will enable a new step forward future progress and growth. We will see an acceleration of major trends such as the next wave of digitalization, industrial automation or AR and VR immersive experiences. That will demand not only speed, mobility, security and privacy, but other high-performance attributes such as latency, processing and storage capabilities. It paves the way for new monetization opportunities. And with Open Gateway and CAMARA, we are bringing this new world to reality. In the last 3 years, we have prepared ourselves to be ready for this new era. The massive transformation we have undergone improving our networks, increasing customer engagement, making operations more efficient and ensuring business sustainability place us in a considerably improved position. We have our next-generation infrastructure ready. Ultra-broadband connectivity is already deployed. Our networks and IT are becoming sulfurized and benefiting from hyperautomation. Data-driven and API-based abstraction layers allow us to orchestrate and interconnect with the digital world in a seamless way. We are building a telco-orchestrated Earth computing stack, where we performed all the intelligence we spoke about. Data and automation of this layer make us smarter and faster to offer better and new services, which allow us to provide our B2C clients with high-quality connectivity and digital services, fuel the digital transformation of our B2B customers and provide wholesale connectivity to partners, including both other telcos and developers. But also this massive transformation gives us the confidence to fulfill the plan we have set ourselves for the next 3 years. This includes: to reiterate our 2023 guidance, to accelerate the free cash flow delivery for 2024 and to commit for an ambitious 2026. We started 2023 with a low single-digit organic growth guidance for both revenue and OIBDA and guided for 14% organic CapEx over sales. We then upgraded that guidance at our half year results moving to around 4% organic revenue growth and around 3% organic OIBDA growth. And we introduced an around EUR 4 billion free cash flow ambition for 2023. As you can see from our 9-month results, we are fully on track to meet this upgraded guidance. Today, we reiterate that guidance over EUR 4 billion free cash flow ambition and our EUR 0.30 per share dividend commitment. Despite still not having closed year 2023, we are also ready to commit for 2024. That shows our confidence not only in the medium term, but also since year 1 of the GPS plan. We will further detail this guidance with year-end results, as we usually do in February. But in the meantime, let me say that CapEx-to-sales should decline from 14% level guided for 2023. Free cash flow should grow more than 10% year-on-year. As usual, more details and other building blocks to come next February, but I can share with you that free cash flow growth will lie both on declining CapEx intensity but also on our ambition to grow revenue and EBITDA. This operational transformation process results into a higher ambition going forward. In the next 3 years, reported revenue will grow by around 1%. Reported EBITDA will grow more than revenues and EBITDAaL minus CapEx to even grow further to around 5% compounded average growth rate in the next 3 years. Thanks to declining CapEx over revenues to below 12% by 2026. Free cash flow under a new and clear reference will grow by a compound rate of more than 10%, helping to reduce our leverage ratio to between 2.5 and 2.2x in 2026 and allowing us to commit to a floor dividend of EUR 0.30 with improved dividend coverage throughout the plan. We are becoming a simpler but stronger company. New free cash flow growth rate of more than 10%, leverage target of between 2.5 and 2.2x and EUR 0.30 dividend commitment as a flow, sustainable and profitable growth. Let me summarize today's session with the 5 messages we introduced at the beginning. Our massive transformation has put us firmly on the path of solid growth in reported terms. This deep change has significantly enhanced our operational leverage, and it will be reflected into double-digit free cash flow growth in the next 3 years to move decisively towards deleveraging and secure an attractive dividend to our shareholders. Thank you very much for your attention, and we are now happy to take your questions. But before we start, let me greet our local CEOs that are here with us, starting with Emilio Gayo from our Spanish business; Christian Gebara, from our Brazilian business; Markus Haas from our German business; Lutz Schuler from our U.K. business; and Alfonso Gómez Palacio from our HispAm business. Also here are José Cerdán, CEO of Telefónica Tech and Guillermo Ansaldo from Telefónica Infra. Thank you very much.

So as José María said, we're now ready to address your questions for those received through the CMD inbox. Again, CMD questions at telefonica.com and those from in person asking this. Just one thing, the inbox would be grouping together those questions regarding similar particular topics. And for those online, also those would like to make the questions live, please be ready to connect your microphone whenever your name is mentioned. But we'll start with in person at this call, please on the right.

Sorry for the long pause. I was waiting for the microphone. Carl from Berenberg. Two questions, please. Firstly, on Slide 76, you've been very explicit, in terms of the cash dividend for this year, looking for clarification, in terms of the dividend floor for the next 3 years, can you confirm that, that will be a cash dividend floor of EUR 0.30 and that there won't be any script in relation to that. And then secondly, in terms of the more guidance that you're providing that you talk about on Slide 74. That's very welcome and great. I suppose what people would really be looking for is more country guidance and you provided the 3-year CAGRs. But specifically in relation to Spain, are you expecting after the OIBDA stabilization in Q4, are you expecting OIBDA growth in 2024?

Well, thank you very much for your question. And the first one is very straightforward. Yes, we can confirm that is a cash dividend and [indiscernible] is contemplated. So the answer is yes, we say it's the floor because if you run the numbers, you will see that overall the plan, the dividend coverage is improved compared with the existing levels so the existing cash, and we think dividend coverage will improve progressively and linearly over the period.

Okay. And the second question, of course, we do not provide guidance by country. But throughout the presentation, I've been trying to send a message of directional trends. So in Spain, we are expecting to accelerate revenue growth from '24 onwards. We already in growth. And if you look at the Q3 results we presented earlier today, you can see the trend that has been developing over the last quarters. EBITDA that we plan to stabilize in the fourth quarter of this year; we are projecting EBITDA growth across the 3-year plan and starting that growth already in 2024. So from year one of the plan. Not back-end loaded in any way. Regarding CapEx, we have been quite explicit that we are expecting through decommissioning, shutting down copper and so on. A ratio of 10% CapEx to sales in 2026, down from 12-ish percent that is going to be this year. Brazil, the arrows were also pointing in the direction of growth in revenue/EBITDA. By the way, I didn't say EBITDAaL minus CapEx in Spain growing over the 3-year horizon, the same in Brazil. Germany, revenue growth, EBITDA growth, EBITDAaL minus CapEx with a CapEx to sales decline. Those were the messages that I tried to convey in the slides. And that would be the indication on the [indiscernible]. The joint venture will deliver its annual guidance at the regular end-of-year moments.

Yes, Mathieu, please.

Mathieu Robilliard from Barclays. I had a few questions, please. First, along the lines of a bit more granularity. You mentioned some OpEx reduction over the next few years, but you haven't given defined a more precise [ pots ] where that could be applied. I think the Spanish press had talked about an important potential reduction in personnel in Spain. I don't know if you can confirm that it's part of the plan. And if you can give any granularity beyond that. The second one was about the German recovery plan. I fully realize that the loss of the one-on-one contract is very recent, and you don't turn around the strategy overnight. But I don't know if you have a little bit more details now compared to during the summer in terms of where you see areas of growth to maintain net revenue and OIBDA growth, which is going to be challenging because of course, there's a loss of revenues. And then very lastly, you don't mention it in the presentation, but I'm curious as to what this very good free cash flow growth target means in terms of ROCE. Do you think your ROCE will progress over the next few years? Do you think you'll be in a position to cover your cost of capital?

Thank you, Mathieu. On the cost and efficiency side, I think we have tried to dissect the different buckets of, of course, going forward, that lead to the reported 2% compounded annual growth rate in EBITDA. So 1/3 of that would come from revenues net of direct costs to get the revenues, the other 2/3 from efficiencies, and I was talking about 3 type of buckets: network, commercial and other costs. Network in turn was divided on switching off legacies, automation, sharing, benefits of scale and different efficiencies. As part of this, we are -- and José María was describing at the beginning, a huge transformation journey that we need to adapt our organization to both in terms of shape and size of the resources we have. So we are analyzing and -- different accommodations of our organization, not only potentially in Spain, but also in different OBs and geographies in the group. This means that we need to achieve new ways of working, diversity, attracting young talent, reskilling programs and at some point, rightsizing of organizations. We have always done these type of efforts in full collaboration with labor representatives. And for us, it's key to ensure the retention of key talent. In the projections that have been posted that underlie this guidance, we have included an estimate of the savings that we would achieve from workforce readjustments, also the cost to capture in terms of the commitments and the payments that we would have in those. We have not included the onetime provision that we take in the balance sheet. But this is still early days. We are still preparing. We are preparing the negotiations with employee representatives. As always, we will do this in absolute collaboration. We look forward to constructive engagement. And whenever there is agreements reached on this front, we would release them to the market as we normally do. But the projections I confirm that includes some estimates on the outcome of this potential plans. I think the second question was on the loss of the one-on-one contract, sorry.

Yes. Basically, how much have you been able to think about this [indiscernible]?

Yes, I will start the response and Markus, who is here, please feel free to complement and correct if I make any mistake, which is possible. So this contract during 2024, has very limited impact. Contract runs until mid-2025. So effects would be felt in 2026. We have been disclosing to the market an estimate of broadly EUR 200 million impact in free cash flow on 2026. And we have plans in place accelerated growth and efficiency plan. I think it's the name of the plan, Markus, where we plan to use levers that we didn't have before. All of a sudden, the loss of the one-on-one contract means that we have more capacity available that we can use for different sources. And second, that we are no longer by the remedies restrictions that we had in terms of pricing, bundling or whatever. So we are planning to use these levers to grow in B2C with the own brands. We also are planning to extend B2B or wholesale as contracts with existing partners, potentially with new partners. We are also planning in our German operation to be more active in the B2B that we have been underscored with the collaboration of Telefónica Tech and the BE-terna unit that work in the region. Of course, we now will have possibilities of agreements in infrastructure that maybe were not possible to do before that can give us efficiency in some deployments in CapEx and potentially efficiencies also in what the plans call accelerated growth and efficiencies as well in the operation. With this, our objective would be to minimize -- to minimize the impact that we have suffered from losing this contract. But of course, this has a different degree of execution risk. It's not the business as usual. The team is working really strongly. But of course, this will entail time to execute this and a different degree of execution risk. That's why we and maybe José María, if I may, we have offered a liquidity proposition to exist in Telefónica Deutschland shareholders that maybe have a different perception on the recovery plan, the execution risk, the higher preference for shorter-term liquidity. So that's why we offered that proposition to the Telefónica Deutschland shareholders. I don't know, Markus, what else you can give us color on this recovery plan in Germany.

Yes. I think we have more initiatives than the challenges so the funnel is full. But clearly now, the efficiency part that is fully underpinned now with CapEx and OpEx, as Angel mentioned, we are now working on the growth initiatives. And we -- clearly, Germany is a rational market, and we all benefit from that market. And we clearly want to fill up out the capacity that we now have in the most smartest way on the one time clearly to fill the EUR 200 million free cash flow [ after lease ] challenge that's still left. I think that's the number we have given to the market in August, and we work against that. It's clear, our ambition to close it. We have more initiatives to do that, and we are very confident on that. We have done first steps and step-by-step once we have delivered the proof points, we will announce them. That's the clear target that we are going to do. And I think, yes, step-by-step.

Mathieu, on the return of capital employed, we definitely have focused on it, and we definitely have an improvement target imply in the numbers we are showing today. We started this exercise with a clear focus on free cash flow growth, but we also demand every OB in our portfolio to improve return on capital employed. On average, we are fine, but we do have different return on capital employed per OB. But if you follow the guidance, you will see there's a natural improvement because EBITDA will be growing. So the numerator will improve. And we have -- we are reducing CapEx intensity as our peak is behind. So both numerator and denominator are going to improve, therefore, return on capital employed will improve at a group level, but it will also improve at every OB level as we are going for growth across the board.

Nawar and David.

Thank you very much for the helpful presentation. Nawar Cristini from Morgan Stanley. I have a number of questions. Firstly, starting by CapEx which is a key highlight from the presentation today. If we look at incumbents average CapEx to sales today, it's around 19%, those who are talking about peak CapEx in fiber are hoping to go to 15%. So today at 14%, you are already below that and going to 12%, the gap will increase, and particularly in Spain, where we are talking about 10%. So could you talk maybe about what differentiates you from the rest of industry when it comes to your capital intensity? So that is my first question. The second question is on Spain. The consolidation deal review is ongoing. So I'll be interested to hear, how have you thought about this event when constructing the guidance because it can have a significant impact on market structure? So it would be interesting to hear your assumptions, but also the degree of cautiousness that you have perhaps baked in the outlook? And lastly, on wholesale, clearly, a lot of moving parts. I would be interested to hear your risk assessment but also opportunities on the wholesale revenue. Are there any big or large wholesale contracts coming to moment of renegotiation. I have Digi perhaps in Spain, if you could talk about that, that would be helpful. But also interesting to hear the opportunities on wholesale, in particular, as you have showed an appetite to host Vodafone fixed business in your network?

Well, those are all the questions. If I look at...

Yes. I was proposing that because he's going to have a long answer for me to start on a global consideration on the -- I guess you were referring to the Orange-MásMóvil transaction. I mean, first, we are almost 18 months down the road, and we don't have an answer, which is somehow surprising. Despite -- we have stated since the beginning that this transaction should not have any remedies. We think it should -- should have been already been cleared without remedies. We acknowledge that there is a discussion around that. We have been defending that despite of the fact that this is going to create a stronger competitor for us in Spain. So the outcome of the merger will be a stronger competition rather than the opposite. Remember that Telefónica is not part of this process. I mean, and therefore, and remember as well that the statement of objections from the commission has stated that there was no problem on the wholesale market. So if we are not part of the transaction and there should be no impact on the wholesale market, it would be hard for us to understand that any remedies should impact us because we will be facing a stronger competitor. And at the same time, there is no impact on the wholesale market according to the statement of objection from the commission. So we are waiting. I mean, we keep waiting. But we have to be a rational player. Things happen to us in other markets. And the way we are reacting is a reaction from rational players. So we would expect everyone to be a rational player as well, especially here in Spain. And now for potential impact. I'll hand it over to Angel for the long, long, long answer.

Well, I think that nobody in this room would argue that Spain is a quite competitive market, especially Emilio who's sitting in front of me. And of course, we expect it continue to be competitive and in particular, in the wholesale segment. And in particular, after Zegona has said that they plan to be more active in mobile wholesale in their statements. This is something that Brazil should take into account when they look at this. So again, as José María said, we think this should not have remedies and in particular, should not have remedies in the wholesale, which is also part of your question. But the market will be evolving. And we are expecting no significant disruption. Why? First, because we have faced similar situations in the past. We have seen consolidation. We have seen changes of control. The players who are now involved in this new situation happen to be familiar faces. We have seen them in the past. We have seen them operate. So we have had in the past to adapt, and we have done it successfully in Spain. Second, because to do this, we are leveraging on our best assets. We have the strongest network by far in fiber, much more developed than the rest. We have mobile coverage second to none. And we have very strong long-term wholesale relationships with our partners, pretty well established, with clear terms, conditions, clauses, period. We are ready and prepared to evolve the wholesale business and to negotiate. Always with rationality in mind, as José María has said, but we think that we have the strongest assets in place, and that is basic for wholesale agreements. Third reason why we think this should not be a disruptive scenario is that all the players that we see in front of us. First, we'll need to defend our back book. It's kind of defending the old Vodafone back book, Orange-MásMóvil, if they close, also need to defend their back book. Digi, they have also their presence. But the 3 of these players are also very highly levered at the time of the highest interest rates, which can be higher and for longer. So we should expect financial rationality on behalf of these players. So this scenario that we cannot be precise about what the scenario we are included in our guidance. But yes, you have seen that the same way that we are guiding on B2C to grow 1.5%, around 1.5% across the group, 5% in B2B. We are guiding for a low to mid-single-digit decline in wholesale, while we are declining 0.9% today. So that can give you an indication of how we may foresee developments that allow us to both defend the health of our Spanish business, the growth of our Spanish business, and at the same time, cope with this movements in the Spanish market. In any case, we have additional levers, but of course, and contingency plans, but we should wait to hear what are the remedies before we can be more precise. And also linked to this, of course, you were asking about Digi. Digi is one of our long-term relationships in wholesale. That's a very well-established contract, and it would be part of these dynamics. And we also see opportunities of growing in other markets in wholesale. We think it's an opportunity in Brazil in fiber. It's an opportunity in the U.K. in fiber as well. CapEx, you were talking about how can we get to 10% CapEx in Spain. Well, the country is fully fiberized. We are closing down our retail copper network by our centenary in April next year in 2024. We have been receiving questions consistently across the different results conference call. Once you shut down the copper once you complete the 5G network, what could be a recurrent CapEx level. This is where we see the CapEx level. Possible to be in once we have completed, as you say in one of our slides, not only the fiber but substantially all of the 5G stand-alone network by 2026.

Yes, David, please. And sorry, I forgot to say please try and limit if there's any questions left to 2 questions per participant.

That comment arrives suspiciously...

Yes. Yes. Sorry, I'm late.

It's David Wright from Bank of America. Thank you so much for your new free cash flow definition, which is more relevant, I think, to what is available to shareholders. Half marks on the balance sheet, I'm afraid, Laura. It is not the way the rating agencies look at you, of course, which is what is perhaps more relevant. They are currently at about 4.0 against your 2.5. And 2.5 to 2.2 sounds good, 4.0 to 3.7 in 3 years, maybe not so much. That feels a little overlevered still. And what I couldn't understand was leverage today is 2.5. So why would the guidance range have 2.5 in it? That implies no deleverage at all over 3 years. And yet you're talking about better dividend cover share buyback availability, et cetera. I suspect that may be because it's consolidated in which case, you have to add EUR 2 billion for OTT. Maybe that's the answer. That's part one. Sorry, Adrian. And part 2, if I may, it's my little [ book bear, ] it's the VMO2 dividend leverage dividend. Your cash flow guidance is without it. And that's very fair. But why would it even still be considered? From your perspective, it is dilutive to borrow at VMO2 cost of debt, which is higher than Telefónica Group cost of debt. So I'm wondering why you would even consider that right now? And the only obvious answer I can think of is that your partner wants to do it. So is there a shareholder misalignment there that we should be considering?

On the leverage range, we are setting for 2026, several comments. First, 2.51 is indeed what we have in at the end of September. But you have to remember, we did a liability management of hybrids right after. So that will increase slightly. And then obviously, if -- depending on the outcome of the offer of Telefónica Deutschland, we did yesterday, could also increase the starting point. In that range, you have to capture several messages. First of all, the upper part of the range sits with the investment-grade thresholds. So -- but we don't want to stay with the previous guidance of just being investment grade. We want to commit further. And as we are setting a target, we agree with you, it has a pretty wide range because we are also talking about 3 years down the lines. We are saying that we are deleveraging, and we have committed to deleverage, and we have committed to a ratio. And I think that it's reconfirming -- it's not only just been investment grade is to reduce the deleverage, give it a lot of emphasis in our capital allocation. So I do believe we have further with that range and more clarity to our shareholders where we are going to see it. That's deleverage ratio, obviously, the bulk of it is going to be free cash flow, the organic free cash flow, which is in our hands. And you will see that with that above 10% growth and that EUR 3 billion, around EUR 3 billion, not only the dividend coverage increase, the deleverage capacity also increased. But we obviously have inorganic options, asset recycling. So the more inorganic options, the more we will position towards the end. So I think to set a corridor gives us optionality, but is complementing the investment-grade guidance you are up to now with a very clear target. It is a range, but it's target, it's a target in which the company is saying we are committed to further deleverage in these 3 years. And unfortunately, the free cash flow will allow to get to that range. On the dividend, we have taken it out of the free cash flow definition, what it has to do with recaps. We are not sending any message in that regard. We are not saying that we will not have recaps. They may -- we may have recap, and I hear you on the financial logic. But this is something we will decide on a year -- on a yearly basis. I mean, obviously, we will discuss with our shareholders, and we will come with the best solution. What I can tell you is that indeed, the JV has a leverage, which is higher than the one we have at Telefónica, but it's being managed very prudently from a liquidity position. It has a borrowing cost of around 5% at the moment. It has tapped the market successfully in September. So it's a growing EBITDA because it's not only the organic efforts, it's also delivering on the synergy as planned. So I think it's a different profile to the one we have at Telefónica, but it's a well capital structure, well-managed vehicle. But we don't want to send a message regarding recaps nor that they will not happen nor that will happen. I mean this is a yearly shareholder discussion that we will take, and we will let you know in due course. But we definitely want to send a message. Our free cash flow growth is regardless of what happens with the dividend in the JV with a recap.

And sorry, and I want to emphasize one thing, which is very important for us. There is no misalignment with our partner in the U.K. We get along very well with them. We have a very crystal clear agreement since the beginning, which included recaps. And therefore, I think that the success of the integration process lies on the fact that there is a very deep alignment between shareholders and that provides a lot of stability for the management team. So I really wanted to stress that.

We have now some questions from the virtual audience. Andrew Lee from Goldman Sachs wanted to raise a question. Andrew, please go ahead. Until Andrew comes, there are more questions from the virtual audience. Luigi Minerva from HSBC is asking about B2B-guided revenue growth, whether it includes or not any inorganic portion and also kiosk about profitability margins of the B2B business with some specific question on Telefónica take margin going forward?

Okay. So the first one is easy. The growth that we have guided does not include any inorganic move on acquisitions factoring into that growth rate. Regarding profitability, we don't disclose the margins by segments, profitability of B2B services since it entails impact, some resale of third-party services integrated into bundles can be lower than the one in B2C. But what I can say is that it is improving across the horizon of the plan, and in particular, the Telefónica Tech EBITDA margin evolution is projected to increase during the 3 years of the plan. These are businesses that entail very detailed CapEx. So when you look at the operating cash flow margin, it's not so dissimilar from the regular operating cash flow margins that we are used to have in each one of our operations.

Next. Yes, Georgios, please?

I've got 2.5 questions, so hoping it's okay for the threshold. The first question is on interest costs and leverage. Just trying to understand if for free cash flow, both in interest costs and tax, whether the Peruvian tax case is included in the pro forma numbers we are giving for '23? And also my understanding, given what you guided medium term, it looks like the minority acquisition of TEF Deutschland will be very accretive next year. So just curious, is that 10% growth that you've already highlighted is predicated on that? And the second question on the financing side is a bit similar to the previous one asked about [ Viemed ]. Obviously, now that you've gone to a free cash flow that includes the hybrid payments, it's much more accretive for you to look at perhaps reducing some of the hybrid options. I know it may be harder to do initially, but over the scope of the period, as you deliver a bit, is that part of the plan because I think that may have more meaningful impact to your free cash flow? And then a second question is maybe, José María, around regulation. So it was 2 half ones exactly, and now is the full one is around regulation. And there's been a change in sentiment in Europe, but no action that really has helped the industry. It looks like this fair share debate has been postponed, perhaps indefinitely. So what are the things that you are hoping to see change on? And I know that even in the U.K., there is a bit more neutral stance, net neutrality rather than the very aggressive stance we have in Europe. Is that something that's feasible? Do you even -- in for more through the changes in Europe?

Thank you for your 3 questions. On the Peruvian, you know there's still uncertainty on the amount, the date, the settlement, the interest that may apply, but we have included our best estimate in the life of the plan. We have included some in 2023 and is within the EUR 4 billion guidance we gave you. However, if that gets delayed, we may do here with other working capital measures. So I think you should think of the EUR 4 billion regardless of what happens with Peru. We have already included payments up to Q3, and there could be more. But we are managing our free cash flow, all the different lines in a way that we will deliver on the EUR 4 billion. And if that was -- that does not happen in -- by the end of 2023, we may have to include it more in 2024, but we will also compensate it with our working capital management. So the question is yes, with all the uncertainty, and we will definitely fight to defend our fiduciary interest and fight on the interest, we think, are not attributable to us and so on, but it is included. With regards to the Telefónica Deutschland offer, you may understand that this plan has been done a long time ago. And the offer was launched yesterday. So we have free cash flow growing by 10% -- more than 10% despite this offer. If this offer happens, it will be free cash flow accretive, definitely. But the plan was built prior to that, and we are committing to the above 10%. You also need to take into account that the dividend is payable in May. So it flows through 2024. But definitely plan was done ahead of this and all the very strong messages on free cash flow growth and the above 10% are prior to that. And on the hybrid, for the time being, we're comfortable with the EUR 7.5 billion layer, we've been very proactively in managing and anticipating the refinancing. And -- but we will obviously look at all the options at the given time. We have flexibility from the credit rating agencies of 10% in a year, 25% in 10 years. So we may use that flexibility. But for us, it's a layer of our capital structure. We have managed proactively. Cost is slightly above 4%, 4.4%, even with the latest issuance we did are obviously higher interest rates than in the past. And the life -- the average life is 4.5%. So similar management to the rest of the debt, but for the time being comfortable with that layer.

And on your question on regulation, asking a CEO of our telecom business about regulation, Europe is like a therapy session. I mean because we have been waiting for years to something to happen. I'm going to split my answer in 2. One is for Europe, and I will move to Angel for the more specific Spain situation that we are asking for. In terms of Europe and the current telco market in Europe is just unsustainable. It's just highly fragmented. It's very inefficient. I mean you have in Europe more than 40 gas mobile players, while you have 3 mobile operators in the U.S. I mean so it's unsustainable. We think that if we are talking about European strategic autonomy, there is no way we can reach that with our digital infrastructure. And if you compare the current level of CapEx deployment in Europe aggregated with the targets that the commission has set up for the digital compass there is a mismatch of roughly EUR 176 billion from here till year 2030. So it's time for Europe to take a stance. It's time for Europe to decide if they want to preserve this level of artificial competition or if we want to focus on an industrial policy. And also, we think that the regulatory framework that was reason over 30 years ago has made no longer sense. I mentioned that twice during the presentation, this regulatory regime is obsolete. It was decided for a sector that doesn't exist anymore. In the case of us, for example, it was a regulation that was designed for a copper incumbent monopoly. We are no longer copper. We are not an incumbent simply, and we are certainly not a monopoly. So most of the reasons why that was happening are no longer anymore. And on top of that, technology has been going further down the road than the regulator. The definition of relevant market is wrong. Here in Spain, we are supposed to be the leader in Pay TV, but the market share of Netflix, Amazon Prime or HBO or Disney+ is not even measured. So the definition of relevant market is wrong. With all that in mind, and I will come down to the fair share, but you trigger the therapy. So bear with me for the second me. I mean the good thing, and I think it's a good thing is that there is a debate and there is a debate in place. And Commissioner Breton has been pushing this public consultation. There is already an outcome of that public consultation and this public consultation goes much further than just the OTT fair share thing, which I will cover. It talks about what -- how do we see networks for the future, and we have designed here how we see networks for the future, this kind of earth computing stack. And if we want to have those network, what's the necessary regulatory framework for that. So it has opened the Pandora's box of different kind of thing. I don't think we are going to have time to have something solved before the parliament is dissolved. But Commissioner Breton has called for a white paper for a white book to be written in the next 2 to 3 months, and we are going to be actively participating and the battle is on. And then I'm going to go for OTT and then Angel will be much more specific. OTT per share. This is no longer the traditional debate of we want them -- we want their money because they are using our networks. It's not their money that we want. It's our money back. We devote 25% of our CapEx for capacity that serve no revenue and brings no value to my customer. So why should we be building a significant part of the network just for 5 players or 6 players, it makes no economic sense. So we want our money back. And that means that we are ready to give them a period of time, 2 years, whatever is necessary, or give them below the 5% consumption of the capacity of the network. And we are going to give them APIs. We were talking about APIs to integrate seamlessly and standardize APIs. So for 2 years, they will have the chance to compress their capacity signal. So we are able to invest less in capacity and more in coverage, we give us a return. If after 2 years, they are not there, then we are asking for an arbitrator to decide. So it's a much broader thing. It's not the traditional debate of -- that we lost 50 years ago, and it's not their money we are looking for. We are looking for our money back. We want to be free to decide where we invest in every year.

Well, José María is asking me to be precise, which is something that I try to avoid always. What can he do? So when responding before to Nawar's question on Orange-MásMóvil, I forgot to talk about potential upsides that I talked about defenses, an upside can be in the Pay TV rights that got deregulated already, linking to this regulation question, but Orange-MásMóvil going forward means that we would not be the leader in the market in terms of number of clients, yes, in all the financial metrics. But not in terms of clients. This should imply further deregulation, and we are loving actively for that in areas such as fixed broadband, pricing the fiber product applicability, access to that and other that would allow us to have more flexibility in tailoring our commercial offers and some efficiencies. So this would be regulatory angles arising from this transaction going through.

Let me finish my therapy. We are asking for a total deregulation. It makes no sense. It makes no sense for us to be regulated in the same way that when we were a copper monopoly 30 years ago.

Yes, I think James got a question.

It's James Ratzer from New Street Research. So I want to ask a question about your B2C growth targets you've given of 1.5% CAGR. I mean, you've exited the first 9 months this year at 1.9%. You put up a slide with some consultants numbers saying you expect 7% market CAGR over the next 3 years. So why only 1.5% growth, which is a bit lower than both of those figures. It would be helpful if you can kind of give us a mix of how are you're expecting price and volume to interact between those 2 that helps to drive the 1.5%? And then the second question I had was if we could just drill a bit further down into the CapEx question here in Spain. So I think that's going to be an area a lot of people are looking at. And to get to the 10% guidance in explicit millions of euros, you're guiding to that really going down to about EUR 1.3 billion from about EUR 1.55 billion today. So that's a kind of EUR 250 million reduction in absolute terms. Could you just help to then break down what are the levers that drive EUR 250 million of reduction? And how sustainable that is kind of beyond the end of the plan?

On the B2C figure, the 1.5 -- around 1.5% CAGR over the horizon in reported terms is the blend of all our geographies, except the U.K. So here, you are mixing very different realities. We have markets like Brazil, where we are experiencing very high rates of growth, the same that we are projecting in some of the countries of Hispanoamerica, in Spain, that growth rate would be potentially more modest. This has the 2 parts, the part of connectivity and the part of the digital ecosystem of services around connectivity. We are seeing a higher growth rate in those services our connectivity on that digital ecosystem, while it's impossible to the P x Q to get to this figure. But we are seeing and in particular, we are talking about Spain, the best commercial momentum that we have in the trend across the year. If you look at the slides of the third quarter results presentation, we are in a very clear progress and momentum. The third quarter was the most positive quarter in terms of net adds that we've had for a long, long while. We are back to net adds growth in TV. We are growing in conversion bundles, and we are growing also in mobile. I don't know if Emilio you will want to complement on it. On the CapEx, clearly, it comes from several buckets. One is the management of the technological cycle, which means the decommissioning of the copper and the completion of the 5G, then there is cloud and virtualization. This is going to happen in all of our operations. Then we have open and disaggregated architectures and automation and applications of AI in our CapEx. These are levers that in my slide on CapEx, we try to quantify with this, also consultant circles have full, quarter full or whatever to give an indication of which lever is going to be more intense and in particular, the lever of decommissioning is the one that accounts probably for half of this CapEx improvement. I'm being hinted that the 7% market growth that you were alluding to, it's only services beyond connectivity, not the connectivity. Emilio, I don't know if you want to give more color on...

On the B2C question. I wanted to remark to highlight that we have a very strong -- 2 brands very strong, both O2 in the low end and more starting the high end as the rest result in terms of churn in the performance of the ARPU in both of them. And this brand permit us to be sure that we are able to maintain this momentum and commercial momentum during the next coming quarters.

Next question from Fernando, please.

Fernando Cordero from Santander. Two questions, if I may. The first one is related with your comment on you are going to be very active on, let's say, on also pushing inorganic activities. And I would like to understand particularly for Telefónica Tech, if there is anything else that you want to add to the portfolio that Telefónica Tech is having today and particularly if you were looking to enlarge the -- let's say, the basics or the basic IT services proposal made by Telefónica Tech on the other words. There has been comments in the market regarding a potential interest in insight just to understand if this is on the table or not. And the second question is, at the beginning of the presentation, you describe what you believe is the next-generation telco. And in that sense, I would like to understand [ or wish to understand ] this vision is already changing the profile of the different assets that you are managing. In the past, you have considered towers as not core asset, and you have in your, let's say, core operating businesses, fiber is a core asset. I just would like to understand if this ranking of core assets within your perimeter is still valid in the new vision that you have on the sector?

On the first question of Telefónica Tech, we have been doing some acquisitions in Telefónica Tech either to complement skills and services or to get into geographies where we were more stronger in B2C than in B2B and in advanced B2B. So we have done acquisitions like Altostratus in Spain to get into Industry 4.0 or we have done acquisitions like the Cancom subsidiary in U.K. and another company called Incremental, which now have become Telefónica Tech, U.K. and Ireland. And then we bought BE-terna to be active in the -- basically based in the German region, but the overall region with Switzerland, Austria. We continuously get opportunities to enlarge the skills basically in these different countries. But we assess them as part of the capital allocation process when they come. You asked about a specific name, insight. We do not comment on market rumors, but I'm not sure it would fit the profile of what we would be looking at.

And in terms of the next-generation telco that we were describing. You need to understand that for us, what we have right now is no longer a telecommunication that is something much different is a massively decentralized super modular. And in fact, it's a supercomputer that has a terminal almost in every corner of every territory. And therefore, that gives us a commercial advantage in terms of time to market, in terms of efficiencies, but also in terms of integrating products and services. And that's why I define standardizing the APIs is so important. So that means that whatever give us power to give intelligence or to sophisticate our APIs, we will keep whatever is passive, it's no longer a differentiating factor going forward. So whenever you judge what elements, keep in mind the potential amplification of that as a competitive advantage and also the wholesale market. For example, fiber in Spain give us an amazing opportunity because we are everywhere, and it's a differential asset. So keep that in mind. The main message is that we don't longer consider ourselves just a telecommunication network. We have a mirror of the cloud, at least as powerful.

We have the next question from the virtual audiences, it's Andrew's question. He had a problem with the mic. And about the transformation program, whether it includes benefits from [ standardization ] and how much more specifically in Spain, how much more savings can we make in Spain? And I think that he got it wrong because he's asking whether none of the provisions in net debt guide are included and whether how would leverage look like should we include this efficiency program provision? So we should make that clear.

Okay. Since I made the comment, I should be precise. The estimate of the savings from potential people plan in Spain and other geographies and growth group are included in the projections. The cost to capture those including the commitments to employees are also included an estimate. What is not included is the onetime noncash accounting provision in the projections. Regarding the transformation program, again, I think that we have been giving the different levers that can impact how we get to the 10% CapEx of our sales in Spain. Again, the technological cycle management with all the decommissioning virtualization and taking to the cloud of the network, the open and disaggregated architectures, including OpenRAN, but not only OpenRAN, also Open Broadband, Open Transport and then benefits derived from automation. And with respect to efficiencies that could come from this transformation program into EBITDA. Well, we are indicating that after stabilizing the retail spend in the fourth quarter this year, we are expecting to see it growing over the next 3 years starting in 2024. I think that this is much more than we have ever been ready to -- not to guide, but yes, to indicate.

On the net debt evolution and the commitments impact, I'm glad we get the questions, so we can clarify. The commitments have always been included in the net debt evolution. So every year, we have to pay some commitments, and that increased the net debt that then is compensated with free cash flow and the like. So it's been always part of the net debt evolution. Accounting-wise, is not a free cash flow because what we are paying here is like if we were paying the principal of a debt. We are actually paying the commitments. And going forward, they will disappear. And in fact, may reach a peak now in this plan. But afterwards, we are going to see the commitments getting reduced more than EUR 100 million per year until they completely disappear. But even if this not accounting free cash flow, as we listen to you and we rebase the free cash flow, it is true that it's not available cash to pay for the leverage or for the dividend commitment. And that's why we have included in the free cash flow. But from a net debt evolution perspective, they were always there. It was a separate item is like we are paying the principal of a debt. We are paying the principal of the commitments. They will end up disappearing completely. And we are including it now in this new definition. So we want to resemble the cash, which is available for the leverage and dividend.

So we have time for one last question, Josh, please.

It's Josh Mills here from BNP Paribas Exane. The first one was just on the guidance. And if you'd be able to maybe give us guidance on an EBITDA after lease basis, versus the 2% guidance on an EBITDA, which I believe is reported. And the reason is that you'll tell us a bit more about what you're assuming for lease cost inflation going forward. I think the guidance on Spain, for example, for stabilization by Q4 is on reported EBITDA, but the EBITDA after lease guidance or growth at the moment is still running down mid-single digits, that would be helpful. And then the second question also on Spain. I know you don't give specific divisional guidance, but within the guidance for revenue growth, should we assume it's kind of 1% consumer, a bit higher B2B? And then on the wholesale business, are you assuming flat? Or have you actually assumed there will be wholesale losses either with or without the remedies that may come through in Spain?

Okay. On the second question, we are seeing continued revenue growth in Spain. We foresee this revenue growth to continue going forward in the period '23-'26 even accelerating. The trends that we're seeing both in the net adds and in the ARPU would indicate that the service revenue should be in the positive direction. In B2B, we have been posting now for a while, not only at group level, but also in Spain, a higher revenue growth than what we have seen in B2C. And the wholesale dynamics will be very much derived from the different moving parts that I was alluding to when I was responding to the question on potential impact of market reconfiguration, let's say. So we felt being able to confirm the order of magnitude of the numbers that you are talking about. Yes, conceptually, this should be the direction of travel. The other question was on...

[ EBITDA balance ].

Yes. And in general, I may start with a general answer, and then Angel complements with Spain. We gave it a lot of thought but we wanted to focus on EBITDA as it helps you see better historical versus future trends and because leases still have more volatility. However, guiding implicitly in EBITDAaL because we were very conscious that lease is an area of focus, and it's very important to follow. And that's why we choose EBITDA, but we choose EBITDAaL minus CapEx. So you can see what we are doing through CapEx and what we are doing through rights of use. So we've been fully transparent. And with a 2% EBITDA and the EBITDAaL minus CapEx of -- that we have provided. And on top of that, with the CapEx decreasing of 12% in 2026, you can deduct that we are also growing EBITDAaL, and we are also demanding each OB to grow EBITDAaL.

We are not guiding on EBITDAaL minus CapEx level in Spain. What we are indicating is that over the 3-year period 2026 EBITDAaL minus CapEx will grow more than the EBITDA and revenue growth rate over that period. That's as much as I can tell you on this one.

So thank you. Now José María, for closing the event.

Well, thank you very much. Thanks for being here. It was for us, a huge effort, but also a very motivating effort to put this plan together and for us to share that with the market in this way. So we really appreciate you being here physically or virtually. And we are ready to take your questions in the afternoon, if you have others. But if not, please contact Adrian's team, we'll be delighted to answer your questions. Thank you very much for being here.