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

Good morning. Thank you for standing by, and welcome to Telefonica's January to June 2026 Results Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Torsten Ackman, Global Director of Investor Relations. Please go ahead, sir.

Good morning. and welcome to Telefonica's conference call to discuss January to June 2026 results. I'm Tors Netman from Investor Relations. Before proceeding, let me mention that the financial information contained in this document has been prepared under International Financial Reporting Standards as adopted by the European Union. This financial information is unaudited. This conference call and webcast, including the Q&A session, may contain forward-looking statements and information relating to the Telefonica Group. These statements may include financial or operating forecasts and estimates or statements regarding plans, objectives and expectations regarding different matters. All forward-looking statements involve risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such statements. We encourage you to review our publicly available disclosure documents filed with the relevant securities market regulators. If you don't have a copy of the well in press release and the slides, -- please contact Telefonica's Investor Relations team. Now let me turn the call over to our Chairman and CEO, Mr. Mark Mudra.

Good morning, everyone. I am here today with Emilio Rao, our COO; Juan Aqua, our CFO; Borgato, our CEO for Telefonica Spain; Santiago Argalic, CEO for Telefonica Germany; and Luke Schuler, CEO of Vito. At Telefonica, we have taken on the challenge of becoming the best gateway for citizens to access digital technologies. We are doing it through our Transform and Grow strategic plan with which, as we will explain in this presentation is turning our ambition to results through disciplined execution. This slide shows the strong execution achieved in the second quarter, delivering against our strategic road map and driving consistent and resilient growth. We accelerated year-on-year growth in constant terms and adjusted EBITDA and adjusted operating cash flow after leases at group level as well as in Spain and Brazil. In Germany, we continued to grow in adjusted EBITDA ex one-on-one. In addition to strict cost control, we continue to foster efficiency gains through redundancy programs, AI, automation, channel management, legacy shutdown, tech and operational excellence. We continued with commercial traction, leveraging network leadership. In Spain, recorded positive net adds in main services for 12 consecutive orders. In Brazil, we recorded growth in value accesses again and in Germany, churn remained at a low level. Free cash flow reached EUR 611 million in the quarter, EUR 278 million more than in the previous quarter. Free cash flow is back end loaded, accelerating in H2. We have further deleveraged to 2.68x, reducing net financial debt to EUR 25.3 billion. The improvement in operating leverage and in Spain and in Brazil gives us the confidence to upgrade our Group 2026 guidelines for adjusted operating cash flow after leases from our previous guidance of over 2% to over 3%. We are on track to fulfill 2026 guidance in all other metrics. Nevertheless, due to the weakness in handsets mainly in Germany, we expect to be at the low end of our revenue growth range. The more important service revenue growth is at a healthy 1.0% in the first half of the year. Whilst we maintain our adjusted EBITDA guidance, we expect to be on the high end of the range due to our good performance in Spain and Brazil. Finally, 2026 dividend of EUR 0.15 will be paid in June 2027. To note that we paid the 18th of June, the second tranche of 2028 dividend, EUR 0.50. On Slide 2, let me walk you through the progress we have made across the strategic pillars of our Transform and Grow plan. On customer experiences, access grew 5% on year-on-year and NPS remained sound at 34%. Spain and Brazil reached historical low levels of churn. In B2C, we delivered 1.4% year-on-year growth. In Spain, Movistar Plus launched plan liver Athena series and Movistar Fast Pass. Brazil is the first player offering complementary access to Google Gemini AI plus. Germany strengthened the convergent offering with new bundles. UK 02 satellite is now supported on iPhone and Google Pixel devices, and we launched a partnership. In B2B, we continue to build on our strong momentum with revenue growth of 6.7% year-on-year. In Spain, we strengthened our sovereign cloud proposition. While in Brazil, we launched a partnership with Ecovias in Germany with EWE and Dishman. In addition, our infrastructure expanded in 5 million to 77 million premises based on 5G coverage to 83% on average in our core markets while improving network quality. We completed the deployment of 17 edge nodes in Spain and are participating in the Spanish AI Gigafactory consortium. Fifth, on simplification, we are capturing the efficiencies from redundancy programs and legacy networks switch off. Notably, in Germany, we're starting an operational and strategic reorganization that Emilio will explain in more detail later. Overall, these achievements demonstrate in our view, the consistent execution of Transform & Growth Plan. I will now pass the presentation to Emilio for the operating business review.

Thank you, Matt. On Slide 3, we review our domestic business. In the second quarter of the year, Telefonica Espana continued to excel, delivering a strong commercial and financial performance. quarterly net adds were soft. Fixed broadband was supported by more connection in secondary homes. Contract attacks almost doubled quarter-on-quarter with top portability results well above 2025 average. TV accesses increased by 7%, supported by the broader and more defeated content proposition in the market. and by excellent retention of Sport customers, enabled by our unique offering of football leagues and tournaments, including Spain's recent World Cup victory. This commercial momentum is underpinned by our differentiated strengths. First, our 100th fiber and 5G stand-alone networks. Secondly, our focus on delivering excellent customer service resulting in the lowest ever volume of complaints, down 54% year-on-year. AI personalized campaigns are allowing us to increase up-selling, retention and sales by close to 20%. The use of AI is also improving network operations. reducing by 70%, the time invested in software upgrades and therefore, enhancing network and service quality. We continue to enhance our flexible and transparent B2C offer bringing innovation to our customers with AI solution and Mobistar FastPass, a new service that allows differential connectivity, while in high-density rams like concepts. In addition, our B2C ecosystems continue to gain traction with a business growing double digit and 3 out of 4 customers adding a device. These services increased customer engagement and revenue while reducing churn. We have registered the lowest churn rate ever 0.7%, while convergent ARPU grew slightly and remains above EUR 91 the highest in the market. In B2B, our premium digital services continued to fuel growth steadily and already account for more than 50% of B2B revenue. We have the best-in-class value proposition with services such as Type and Connect for business continuity for the recent launching of new managed cybersecurity services for the mid-market. These are examples of new levers that allows us to continue growing. We would also like to highlight 2 key strategic projects that strengthen our digital sovereignty. First, the deployment of our leading-edge computing network with 870 notes already activated. Second, the Spanish consortium that will be for the Spanish AI Giga factory, where we have a minority stake holding, and we are the best partner in the consortium. Regarding financials, spent achieving solid cash generation with growth acceleration across all KPIs. The revenue accelerate to 2.9% year-on-year, supported by better service revenue as a result of increased retail revenue that helped offset the expected decline in wholesale revenue. Adjusted EBITDA growth accelerated to 2.3% year-on-year due to higher revenue growth and savings from the redundancy pack. In addition, CapEx discipline and the more stable leases led to a 3.7% growth in adjusted operating cash flow after leases. In short, our domestic business is a strong operation delivering steady growth across the board, and we expect a better year-on-year performance in H2 versus H1 in key financials. On to Slide 4. Telefonica Brazil continued to deliver financial growth ahead of inflation, supported by a strong commercial execution and margin expansion. Operationally, we remain focused on growing our contract mobile and fiber accesses, while maintaining pricing discipline and delivering best-in-class customer experience. In mobile, content net ads grew 6% year-on-year. underpinned by our differentiated value proposition and unique assets as brand and network. Meanwhile, churn remained low at 1.1%, confirming the depth of our customer relationships and loyalty. Total mobile ARPU increased by 5.7% as customers migrated to higher-value plans and use more data. In fact momentum remain high with double-digit growth and continued demand for premium connectivity and digital services. Compared debt total trains up 29% year-on-year. This validates the attractiveness of our convergent proposition and its ability to capture even more customers. Revenue and adjusted EBITDA grew year-on-year were ahead of inflation, both accelerating from the previous quarter once again. Revenue mix continued to evolve with growing relevance in contract, fiber and new businesses. In B2C, performance showed the strong acceleration of new digital services, growing 33.6% over the last 12 months. This shows the sustained expansion of Vivo's ecosystem and the effectiveness of our strategy to deepen customer engagement, drive for selling and extract greater lifetime value from our existing base. Noteworthy, consumer electronics recorded the highest year-on-year growth in 3 years. In addition, we have scaled our financial services with [indiscernible] base new installment plan. simplifying device financing for customers while driving revenue and strengthening loyalty. In B2B, digital services, deliver outstanding performance with Cloud and Digital Solution revenues growing over 20% in the last 12 months. This growth, driven by the accelerating demand for digital transformation across multiple industries and has caused our evolution beyond more connectivity and positions Vivo as a trusted digital partner for enterprise customers. In this quarter, Vivo and EcoRodovias joining our partnership to expand mobile coverage in over 400 kilometers of interstate roads in the state of Gorgias and Mina Gerais, benefiting 1.4 million people Vivo remains committed to driving operational efficiency. Its largest ongoing initiative is the development of any power customer services conserve signed to enhance the customer experience across billing, retains and technical support, aiming for 70% of customer interaction to be resolved by digital items. All this, along with ongoing efficiency measures across both owned and leased infrastructure translates into adjusted EBITDA and adjusted operating cash flow after leases growth of 11% and 18% year-on-year, respectively. Overall, Vivo has informed its leadership position by combining a strong commercial momentum with sustained financial growth next, we expect similar trends to Q2. Moving on to Slide 5 to discuss Germany. Q2 financial performance reflects a combination of a continued weaker trend in handsets in select channels and headwinds in the partner business. Revenue in Q2 declined over 11% year-on-year. The decrease in revenue is mainly due to lower asset sales down 26%. We saw healthy consumer trends for [indiscernible] while supply chain and our focus on profitability resulted in a decline in third-party channel sales, typically with very low margins. Mobile sales with revenue continued to reflect the headwinds in the partner business. which for the most part is now behind us. By contrast, fixed revenue posted another quarter of solid growth, 6.5%. Adjusted EBITDA trend improved to minus 7.2% reflecting efficiencies, stringent cost management and better revenue mix. This measure led to a margin expansion, reaching 2.7%. As we move into H2, we expect comps to get easier towards year-end as we will have or already including most of the one-on-one customer migration effects in -- at the same time, we will continue to monitor the handset sales in third-party channels and the supply chain with a focus on value. Telefonica Bosland continued to execute a deeper strategic performation across the company to focus on profitable growth. First, on the commercial front, a suspending swift to a value over volume strategy with a deceleration in Contrait quarter-on-quarter. However, the O2 contract and remained at a low level of 1.2%, while the decline in ARPU reflects a higher share of second and third in tariffs. Let me highlight the launch of the O2 Mobiles bundle in June. These are further promoting our value focus by fostering compares. The combination of a first and second product ensure a minimum bundle price of EUR 30. We also continue focusing on ensuring support and leveraging our Mahani model to complement these offers. In Fits broadband, our momentum remains healthy with accesses growing for the fourth quarter in a row, driven by both demand for cable and fiber. We are also transforming our B2B business, having restructured and transformed our channel and strengthening our partnerships. For example, we have reached an agreement with Demand to expand the use of standardized SD-WAN infrastructure in nearly 5,000 shops across Europe. Also, we selected us as its partner for the digitalization of this 900 store in Germany. In B2B, we are working on upgrading our partners value proposition and continue evolving our partner base, launching a strategic mobile MVNO partnership with Kiwi. The company is also making progress in the execution of a new operating model to address technological change changing market condition and new customer demand. This enabled us to run a leaner operation. Telefonica Tesla has announced an operational organization that implies a reduction of around 1,100 full-time employees in 2026 and the closure of 60 existing underperforming on shops. The company will address further precising measures in '27, '28 with a focus on streamlining its customer service organization and several retail footprint. In this context, a provision of EUR 265 million has been recorded in Q2, and we expect additional restructuring provision of up to EUR 155 million to be booked most likely in H2 '26. As a whole, annual run rate savings of around EUR 185 million will be achieved in the 2028 starting at the end of the current year. This measure are part of the transformation we are implementing in Germany with no impact on our guidance. In summary, Telefonica Dodsland continued to progress in its transform and grow the strategy in Q2 and maintain it resilient underlying performance with the execution of the Transform & Grow strategy, we are preparing the company to return to profitable growth next year. Let's move to Slide 6. H2 results are negatively impacted by weaker handset trends and a market that is affected in fixed and in mobile, mainly by Anne specific impacts. Nonetheless, results are in line with our expectations. This backdrop, NOI, continues to execute against its strategic plan and achieved several strategic milestones during the quarter. supporting long-term value creation like an agreement with Minto to launch Monson Mobile, partly forcing O2's position as the trusted partner for MVNOs in the U.K. The new business brand, bringing together Viant's national network scale with basis expertise in connectivity and IT solutions to create a stronger proposition for business customers. Expanded network leadership with our most 9 million gigabit-enabled premises and the U.K.'s largest 5G stand-alone covering 87% of the population. From a commercial perspective, B&O 2 showed improvement in Q2. In fixed, we reduced year-on-year subscriber losses, while the consumer ARPU decline of 4.6% reflects competitive intensity in the broadband market. In mobile, consumer ARPU remained stable due to our focus on value management. In wholesale, we're maintaining our strong leadership and MVNOs while continuing to build capabilities in fixed wholesale. In addition, B&O 2 confirms 2026 guidance in both revenue and adjusted EBITDA, supported by on track first half performance. Service revenue declined 3.9%, mainly due to continued pressure on consumer fix and the streamlining of the product portfolio business. Adjusted EBITDA decreased 2.9% and remains at the high end of the guidance range. Finally, we progressed an atomiacquisition to a protract referral to Phase II to reach a final approval quicker. I will now hand it over to Juan, who will provide a more detailed overview of our financial performance.

Thank you, Emilio. Moving to Slide 7, let me take you through the financial details for the quarter and the first half of the year. Second quarter is the third consecutive one we are growing simultaneously at constant and current rates in key KPIs. Foreign exchange was a tailwind in Q2, mainly due to the Brazilian reais appreciation versus the euro. In constant terms, we would like to stress the positive underlying momentum of our business. At group level, revenue slowed down versus Q1 due to a greater decline in handset sales in Germany as Emilio previously outlined. Service revenue is the key metric. And here, we are maintaining trends with 9% growth year-on-year, mainly driven by acceleration in Spain and to a lesser extent, in Brazil. Looking at the revenue mix, B2B is up plus 6.7%. while B2C is up 1.4%, more than compensating the wholesale decline. Adjusted EBITDA and adjusted operating cash flow after leases ramped up to plus 2.7% and plus 2.9%, respectively, thanks to the increase in operating leverage. Operating cash flow after leases margin increased 0.4 points year-on-year in both Q2 and first half. CapEx over revenues stood at 11.6% and flat year-on-year versus the first half of 25%. Current free cash flow is EUR 611 million, improving EUR 278 million versus the first quarter but still reflecting the usual seasonability in the first half, reaching EUR 944 million. Net financial debt declined to EUR 25.3 billion. Moving to Slide 8. During the second quarter, free cash flow declined year-on-year, primarily due to working capital movements. However, as I just mentioned, Quarter-on-quarter, free cash flow improved due to an improved working capital. As such, it reached EUR 944 million in the first half of the year. We are confident about the free cash flow generation as it has been the risk and will gain traction heading to our target, which is reaffirmed today. The reasons are further acceleration in the second half due to its back-ended loaded profile, more predictable and less volatile free cash flow, and financial discipline on all the lines below adjusted operating cash flow after leases. In summary, confident in the free cash flow trajectory improvement in the second half coming. Moving to Slide 9. I would like to highlight our commitment to the investment grade credit rating with a key deleveraging strategy in place with a target of by 2028. We have made solid progress in the first half of the year to achieve such target. In the second quarter, our net debt-to-EBITDA ratio reached 2.78 million from 2.72 in March. On financing, Telefonica has demonstrated market execution this year, aiming to achieve best timing and results. During the second quarter, we diversified our funding sources with the Australian dollar inaugural bond issuance, having completed 5 financing transactions year-to-date. -- raising EUR 4.5 billion long-term financing at the group ahead of recent market volatility while maintaining an ample liquidity position. Finally, our interest cost payments decreased in the last 12 months from 3.23% to 2.95% as of June 26. In summary, leverage reduction, some liquidity and lower interest costs. See Slide 10 for the Board approved '26, 2030 30 sustainability plan, which will drive value creation across 4 dimensions: growth, efficiency, investment attraction and risk mitigation. The plan is structured around 3 pillars: environmental, social and governance deployed through 12 strategic lines that connect sustainability initiatives directly to operational management and business results on our quarterly progress to highlight -- we updated our climate action plan towards Netto, driving resilience and competitiveness while helping customers address environmental challenges such as reducing water use in water stress areas. We have supported Venezuela through free calls and Wi-Fi communications recovery and commenting assistance. We remain committed to integrity with an updated course of ethics and conduct and new training. Finally, our efforts continue to be recognized externally with inclusion in the Dow Jones best-in-class Europe Index, the CDP supplier, ALIS and Europe's best employers 2026. Now I would like to hand over to Marc, who will cover the main takeaways.

Thank you, Juan. Let me close with where we stand and where we're heading. Continued momentum in the second quarter is yielding results on consistent and focused execution of our transformer growth strategy. Again, growth is both constant and current at group level, alongside accelerated growth trends in adjusted EBITDA, adjusted operating cash flow after leases and expansion of operating leverage. We extended investments in leading networks, enhancing customer experience and commercial performance. This happened jointly with better financial performance in Spain and Brazil. While in Germany, we continue to execute a strategic transformation. Our free cash flow improved and derisked expecting a better H2 performance. We are upgrading our adjusted operating cash flow after leases to over 3% from over 2%, reiterating the rest of the metrics and our dividend of EUR 0.15. We are on track to be the best gateway for citizens to access digital technologies and to become a best-in-class telco worldwide by 2035. Thank you for your time, and we are now happy to take on your questions.

[Operator Instructions] And your first question today is from the line of Andrew Lee from Goldman Sachs.

I had 2 questions, 1 on Spanish competition and the second on capital allocation priorities. On Spain, clearly, good trends in the quarter. Could you just give us, obviously, you highlighted strong execution and you got upselling in the mid and high tiers, and we know there's a good macro backdrop. Could you just talk about the competitive intensity in the market. Do you feel competition at the lower end is reducing? Do you feel like your price rises are landing better? And on this front, I know you're saying you expect better year-on-year performance in H2 versus H1, which is already fairly strong. Do you think that the second quarter 2016 service revenue growth of plus 2.9% is sustainable into the second half. So that's on Spain. And then just on capital allocation, normal question really. Any update on priorities and specifically, on consolidation intentions? And then specifically on that, do you think it's helpful to wait to see how French consolidation approval is going? I know that's coming from French authorities. But likely that you will have a hand in that as well. Do you want to see how that's going before you -- before making any moves? And if so, when do you expect to get that insight.

Emilio will answer the first question. I'll answer the second question, Andrew. This is Mark.

Andrew, thank you for your question. Regarding the Spanish market. As we are seeing in the Q1, Q2, we expect the same trends in terms of competition in the next quarter. We are seeing that our strong performance and our strong asset permit has to compete very well in all the segments, especially in the high value but also in the low-value segment. We do look at the results. As you -- I would like to highlight the chunk. The churn demonstrates the strong engagement that we have with our clients and the strong position that we have in terms of customer service, network, brand channels and products. let me say, too, that we're offering the high value based on our superior content strategy permit us to maintain the highest ARPU in the market even in this quarter, being able to increase year-on-year. Then overall, we -- our performance is strong. we think that we are able to sustain this growth in terms of -- and in terms of B2B, we even are seeing better trends because we are able to develop different products and services even better than before. We are foreseen different new revenue stream that permit us to be very optimistic. Together with our proposition in cybersecurity, cloud, IoT zone, we have a strong position for the future revenues coming from severity or for defense. Then overall, together with our strong position in efficiency measures permit us to be confident in the improved the results compared to H2 with Q1 and to have a very sustainable business for the next quarters.

Regarding the second question, we think -- I mean we can see that the new documents that the European Commission has made public with regards to M&A guidelines. -- are a Copernican change. We can see and we can read that the definition of the market changes, and it's not so close, and it's an open definition. And they very clearly state that they will be looking into what sort of investment and technological know-how a potential consolidation creates. And we can hear political leaders talking about the social contract concept. So we can -- we read this as a change and all our peers read it as a drastic change and a very positive change. With regards to France, and our view is, as you know, we don't talk about specific M&A options till it is done. It doesn't make sense. And we think now we're in a phase where the market has to play its magic and this is not a 24-hour occurrence in any case. And for us, we need to -- any potential deal has to have very specific cost and network synergies. The price has to be right. Let me underline that the prices to be right and the potential accommodation with the regulatory authorities. With regards to France, -- and we can see that it has gone to the front to the French authorities, the French competition authorities. That is a very interesting sign. I think another reading we make is that the operation went ahead just after the April M&A guidelines interpretation was made public. But with regards to your question, no, we do not subject our timing on our doing to any specific operation like that. We do believe that such a large operation with 4 players is proposed if they see a clear path going forward. But this is just our reading, Andrew.

We will now take the next question. This is from the line of Carl Murdock-Smith from Citi.

That's great. Two questions, 1 on guidance, 1 on Spanish workforce restructuring. So firstly, I wanted to ask why there's no EBITDA guidance increase this quarter. from your guidance of 1.5% to 2.5% growth for the full year. So you've done 2.3% EBITDA growth in H1, including 2.7% in Q2. so above the range in Q2. And in H2, you'll increasingly lap the 11 drag in Germany. You've said that you expect Spanish EBITDA to be stronger than H1. -- and Brazil for the second half you seem to be similar to Q2, which was double-digit growth. So what's getting worse elsewhere in the group? Or are you just being conservative? And then secondly, to what extent will there be any incremental quarter-on-quarter benefit from Spanish workforce restructuring in Q3? Or was Q2 nearly at full run rate. So Q1, you commented that Q1 had seen EUR 20 million of the EUR 250 million of benefit workforce restructuring over the full year. So can you just provide an update of how much benefit you saw in Q2?

Thank you very much for your question. Regarding the first question about the EBITDA guidance. As you mentioned, we are seeing a very strong performance in our expanding operation. I explained in the question before, that is the reason for us is a strong performance. At the same time, we are putting on the table really an extraordinary set of results in Brazil and all the financial metrics. In the case of Germany, we are expecting to improve trends during the second half. But we are in the middle of a transformation plan. Transmission plan that tried to work over all the aspect. -- first in the commercial aspect, changing our strategy from volume to value. Secondly, in the operating model with the restructure plan that we have announced recently. We are saying that we are looking -- or we are -- we have the outlook to finish the year with the EBITDA and the high rents of the guidance. We want to be prudent at the same time, and we want to maintain some flexibility because the transformation of a company is not something that you can be sure when the things happens. We are very sure about the measures that we are doing, we are very confident with the execution of this measure, but the things can take more time than you expected at the beginning, can be some phasing in the different activities that we are doing. And it means that if you want to be a prudent manager and you want to be flexible to take the right vision in any moment is better to act in this way. Regarding the second question, as you mentioned, we have achieved in the Spanish operation, EUR 20 million in the first quarter. We are close to EUR 90 million in H1 and we expect to reach the EUR 250 million that we planned at the beginning of the Rose program at the end of the year. we are on track in even. I will say that slightly better than we expected, but we are on plan, and we feel that we will obtain the same for this year and the savings for the '27 and '28 that we have planned from the beginning of the Reunderogram.

We will now take our next question. This is from the line of Joshua Mills, BNP Pariba.

A couple of questions for me. One on the U.K. and 1 on Germany. So as we saw last week with the VMO 2 results, there are some quite tough trends in that market and the level now at 5.9x above the 4x to 5x range, which we targeted. On the conference call Liberty, made the point that you and they are very aligned about plans for that asset and discussed potential organic or inorganic deleveraging strategies. So my question is, given your previous commentary around the focus on the U.K. is a core market and the focus on infrastructure ownership. -- at a high level, how do you think about the potential for asset sales potentially inviting third-party financing and in order to bring that leverage down. And if we're not thinking about that, how do you look at the the future leverage profile of that business and your ability to take cash out of it in the form of dividends. Any high-level comments that would be very much appreciated, I think. And then secondly, on Germany, you talked about the financial trends improving in the second half. It does look like some of the operational performance on net adds and churn is a little bit weaker. And so as part of your cost-cutting plan and the plan to reduce store count, do you feel the need to lean a bit more heavily on third-party operators like freenet and specifically on the freenet point, given your negotiations around an MSP deal -- can you give us an update on how those talks are going Tech.

Okay. Thank you, Joshua, for your questions. I'll take the first 1 on the U.K. So as another action reflection, VMI is a strategically important U.K. asset. It's the largest mobile network and the second largest fixed provider in the country. Both Liberty and NS are fully committed to its success and are completely aligned. Dino has been investing in its future growth and competitiveness. I recognize that the current leverage, the 5.8x is not where we want to be, and we want to deleverage faster towards the 4% to 5% range that you mentioned. Both Liberty and NS are committed to be proactive managing the balance sheet, and we have the levers to pull to materially increase free cash flow and accelerate our deleveraging. We are working closely also with Emerus and on updating the company's long-term range plan including organic and inorganic options. Growth levers will include immediate and short-term OpEx and CapEx efficiency opportunities that we see longer-term opportunities such as the B2B, the fixed mobile competence or the wholesale opportunity. And then finally, I would like to remind you that we don't have maturities until refinancing maturities until '29. So we don't need to access the market right now. What we have to do is take action to create a plan that accelerated deleveraging that you're mentioning, and we plan to do so.

Regarding your question on Germany. So we continue focusing on our own customers and strengthening our value over volume strategy. However, we also have a strong partnership with a number of players, a number of partners in the German market. One of those is Freenet with whom we have ongoing commercial arrangements that we obviously discuss and try to improve over time on a continuous basis. We also have been working on strengthening the relationship with other partners like our historical partner, Alto but we are also opening the network to additional partnerships that we will be announcing in due time.

We'll now take our next question. This is from the line of James Ratzer, New Street Research.

Yes. A couple of questions, 1 on Spain, 1 on Germany, please. So on Spain, in particular, your retail revenues really strongly accelerated in Q2 from the trends we've seen in the past kind of 5 or 6 quarters. And it seems to also specifically comes from some of your kind of nonconverged services. So I was really interested in kind of digging in kind of what specifically kind of changed in Q2 that wasn't there, say, in Q1 or that drove that pickup? And how sustainable is that specifically going into the next couple of quarters? And then secondly, on Germany, I'd love to dig in a bit more about thoughts around revenue growth because you've talked here about a new cost reduction plan -- but what we see increasingly worldwide is the operators with kind of mobile capacity and lack of fixed infrastructure or pushing into SWA, and we've seen that being quite a big support for revenue growth for some other operators worldwide. -- you've obviously lost capacity utilization with the one-on-one migration. So why are you not being more vocal about wanting to push into FWA as a potential source of revenue growth in Germany?