Vodafone Group PLC VOD
Q1 2014 Earnings Call Transcript
Transcript Call Date 07/19/2013

Operator: Good morning, ladies and gentlemen and welcome to the Vodafone Group Conference Call. Today's call is hosted by Andy Halford, Chief financial officer at Vodafone. Please go ahead Mr. Halford.

Andy Halford - CFO: Good morning, and welcome to Vodafone's interim management statement for the first quarter. I'll take you through the financial highlights before handing over to Vittorio, who will update you on strategic developments, we'll then move to Q&A and for that we're joined by Philipp, Paolo and Nick.

Let me start on Slide 3, highlights for the quarter, Group organic service revenue was down 3.5% on our normal accounting basis or down 1.3% under the new statutory accounting basis, which excludes joint ventures like Italy. We've included both sets of numbers in today's press release, but I'll focus in this presentation on the numbers that include our joint ventures as I believe that that fairly represents the underlying operational performance of the Group.

The 3.5% decline was a slight improvement on the previous quarter. However, excluding the Leap Year benefit in Q4, our performance deteriorated slightly, partly due to MTRs. We continue to see strong growth in our emerging markets with India up 13.8%, Turkey up 15.5% and Vodacom up 3.2% however this was offset by conditions in Europe.

In the Verizon Wireless continued to perform strongly with service revenue growth of 7.2%, driven by strong growth in number of accounts and average revenue per account.

On Vodafone Red, we have now launched it in 16 countries and have 5.2 million customers. This is helping to drive in-bundle mobile customer revenue, which for the Group was up 9.5% year-on-year.

We've made strong progress in our unified communications strategy, having recently announced our proposed acquisition of Kabel Deutschland in Germany and we have signed an agreement to share vertical fibre infrastructure in Spain.

This week, we also announced through a wholesale access agreement in Italy. We will launch fibre base propositions in 27 cities by the end of this summer.

Net debt for the quarter fell to GBP24.9 billion, which is primarily driven by the receipts of the GBP2.1 billion dividend from Verizon Wireless. We now have completed the GBP1.5 billion share buyback.

On Slide 4, we have split out the overall revenue trends by region. In Northern and Central Europe, service revenues declined by 3% and in Southern Europe by 14.4%, reflecting continued economic and regulatory pressures and increased competition in some markets.

AMAP, which primarily comprises of our emerging markets continue to grow strongly at 5.9% with good growth in customer numbers, data and a more supported pricing environment, particularly in India. I'll go into more detail on each of these regions shortly.

Excluding MTRs, Group service revenues including joint ventures declined 0.7%. It's worth noting at this point that for Q2 we expect a similar MTR headwind with further cuts in Spain, Turkey and the Netherlands, offset by lapping effects in Italy.

CapEx for the quarter was GBP1.2 billion and free cash flow was GBP1 billion or GBP3.1 billion including the dividend received from Verizon Wireless.

On Slide 5, you can see the impact of favorable FX movements and M&A in the quarter. In addition to this, our new revenue reporting disclosure means that we have now moved away from voice, SMS and data and are instead reporting mobile in-bundle, out-of-bundle and incoming trends which better reflects the way in which we operate.

Strong adoption of our integrated plans, particularly Vodafone Red has driven up in-bundle mobile revenue, which now represents 46% of Group mobile service revenues or 56% of our European mobile service revenues. This is being particularly evidenced in Italy as customers have migrated from prepaid to integrated contract offers.

Our plans are also successfully driving usage volumes with voice and data up 9% and 60%, respectively. Offsetting this mobile out-of-bundle customer revenue has declined, reflecting the increase take-up of the integrated offers and the ongoing economic and competitive pressures in European markets. The decline in mobile incoming reflects the reduction in MTR rates, partially offset by increased voice usage as unlimited plans are causing customers to call more.

Turning to the next slide, let's look in more detail at each of our key regions. Firstly, Northern and Central Europe, which now accounts to 47% of Group service revenue. In Germany, service revenues declined by 5.1% or 2.8% excluding MTRs. This represents the deterioration on the prior quarter, reflecting increased price competition both in the consumer contract and enterprise segments.

However, smartphone penetration continued to grow up 11 percentage points year-on-year to 56% and mobile in-bundle revenue increase by 7% with strong demand for our Vodafone Red plans. In order to address the entry-level end of the market, we have launched new smart plans focusing primarily on SIM-only contracts and have introduced a new loyalty program the prepaid, with more than 450,000 customers now signed up. On 4G we have maintained our leadership position with population coverage now at 64%.

Turning to the U.K., service revenue trends improved quarter-on-quarter by 2.1% or 1% excluding MTRs. Just as a reminder, this is the preexisting business excluding Cable & Wireless. Economic conditions remained fragile and we experienced further competitive pressure in consumer prepaid and enterprise, which were partially offset by consumer contract. However, contract smartphone penetration increased by 9 percentage points to 76% and we now have 1.5 million customers on our Vodafone Red plans, which represents 16% on the contract base.

Following the integration of Cable & Wireless, we have launched converged offerings and enterprise now represents just under 45% of U.K. service revenues. Following the successful U.K. spectrum auctions, we are now on track to launch 4G services later this summer.

Moving to AMAP on Slide 7, which is the second biggest contributor to Group service revenue. In India we are seeing a much healthier environment enabling us to deliver service revenue growth of 13.8% compared to 7.8% in the prior quarter. As a result, India on a service revenue basis has become our fourth largest business.

Smaller operators have continued to scale back their activities and we have been able to maintain our long record of increasing market share. We have also seen less price discounting enabling outgoing voice prices to rise in turn driving higher ARPU. Customer growth was strong at 2.7 million, in part due to improved processing of subscriber verification requirements and we continue to attract quality customers shown by an activity ratio of 95%. Finally, we are really beginning to see data take off in India. Data users have grown by 33% year-on-year to 41 million. We now have 4 million 3G data users and smartphone penetration is already at 9%.

Despite positive market conditions, we continue to face several uncertainties on the regulatory front, particularly regarding spectrum pricing and availability. We may see some progress soon as the auction of 1800 and 900 megahertz spectrum may take place later this year.

Moving to the bottom of the slide, Vodacom Group service revenue grew by 3.2%, driven by an improvement in South Africa and the strong growth in the international businesses, albeit at a slightly lower rate.

In South Africa, the launch of a new value offering in the market to stimulate voice usage has been successful with a 21% increase in prepaid minutes. This combined with higher data prepaid bundles have offset other competitive pricing pressures.

In International, service revenue grew by 14.3%, which was supported by strong prepaid customer net additions of 0.9 million. M-Pesa is now live in all of Vodacom’s markets and now represents 19% of Tanzania’s service revenue.

So, moving to Southern Europe. In Italy, macro conditions have continued to deteriorate and pricing in the market, particularly on prepaid and enterprise, has been very aggressive. As a result, those revenues declined 17.6%. However, excluding MTRs, our performance was similar to the prior quarter.

Despite these challenges, we reported strong growth in consumer contract mobile service revenue of 8% supported by Vodafone Red, which represents 92% of consumer contract gross adds in the period. We now have 1.2 million customers on Vodafone Red plans representing 49% of the consumer contract customer base.

On restructuring and cost efficiencies, we remain on track to deliver materials cost savings. On fixed, we have extended our fibre agreement with Metroweb in Milan to a second region and agreed the wholesale fibre access agreement in Italy with Telecom Italia.

In Spain, service revenue declined by 10.6%, driven by continued macro weakness and competition remains intense with the increased popularity of discounted converged consumer offers in the market.

Vodafone Red is performing well, with over half the gross customer additions during the quarter being on integrated tariffs, which helped drive growth in mobile in-bundle up by 4%. Combined with our other targeted propositions, the decline in our customer base has improved.

Our bundled Vodafone Red plus fixed plans continue to have a positive impact on broadband customer numbers, which increased 43% in the quarter. Our fibre partnership with Orange is on track and we have now signed a vertical access agreement with the incumbent.

Finally, in May, we were the first operator to launch 4G services in Spain, initially launching in seven cities.

Turning to the U.S. on Slide 9; Verizon Wireless continued to perform strongly, with service revenue up 7.2%, led by strong growth in the number of accounts and rising average revenue per account.

In the quarter, Verizon Wireless added 941,000 retail postpaid connections, an increase of 6% year-on-year. In total, the Company now has over 100 million mobile retail connections. In addition, over 36% of retail postpaid accounts are now on Share Everything plans.

Average revenue per account increased by 6.4% year-on-year, driven by both increased smartphone penetration, now at 64% to the retail postpaid base and the take-up of 4G services. A third of Verizon Wireless' retail postpaid connections now have 4G device and 59% of total data traffic is now on the 4G network. Verizon Wireless has continued to maintain its leadership position in 4G adoption having now substantially completed the deployment of its network. The network now covers more than 99% of Verizon Wireless current 3G footprint and is available in 500 markets. This continues to represent a key point of service differentiation.

Now, on to Slide 10 for the Group's free cash flow and our financial position. We generated GBP1 billion of free cash flow during the quarter which was similar to the prior year.

Overall, net debt fell by GBP2.1 billion to GBP24.9 billion boosted by the Verizon Wireless dividend received in the quarter. On a statutory basis, which deconsolidates debt raised locally by joint ventures, primarily in Australia, the equivalent number was GBP23 billion.

We've also have completed our GBP1.5 billion share buyback program at an average price of just below (GBP1.80) with actual cash payments of GBP1 billion in the period.

So in conclusion, our financial position remains strong. As we highlighted at the time of the KDG announcement, that transaction is expected to take our pro forma net debt to EBITDA ratio from 2.0 to 2.4 times. Overall, our balance sheet headroom remains very comfortable.

With that I will hand you over to Vittorio, who will take you through the remaining slides.

Vittorio Colao - Chief Executive: Thanks, Andy. Slide 11, I would like to give you a brief update on our key areas of strategic and commercial focus. Firstly, positive news on bundling and on Vodafone Red.

I'm on the top left part of the chart that shows that 67% of consumer contract revenue in Europe comes from integrated plans and we now have over half of our European consumer contract base on such plans.

If you move down to bottom left chart, it shows how this is driving the Group towards in-bundle revenue away from the unprotected out-of-bundle revenues. Over half of our European mobile service revenue comes from bundles, where the contracts are prepaid. This is up 9 percentage points year-on-year and 2 percentage points quarter-on-quarter. These positive trends have been largely driven by the success of Vodafone Red.

Today, we have as Andy have said, over 4 million customers across 16 markets. We are on track to reach our 10 million target by March next year. If you take our largest European markets, Germany, Italy, U.K. and Spain, Red now accounts for around 14% of consumer contract revenues and – sorry customers and 22% of revenues. Red continues to be very popular amongst our customers. Across our markets, we have seen an increasing share of gross adds and we continue to see an improving trend in ARPU dilution, although this remains (mildly) dilutive. I am pleased to see a continued increase in data usage, which is around twice that of non-Red customers. Now, Red is just not only about voice, SMS and data. We have an increasing number of customers taking plans that include roaming, now over 15% of customers in our four markets.

If you move to Slide 12, you can see how we are also transitioning to what we call a scale data company. You can see here the data traffic growth is accelerating and we are now up 60% year-on-year, driven by both smartphones and 4G. We continue to see an increase take-up of smartphones, 57% of contract customers and 37% of whole customers in Europe now have smartphone. Usage per customer is also increasing; it's up 26% year-on-year.

Now, not on the slide, but as Andy has mentioned, we are also seeing the take-up of smartphones increase in our emerging markets with penetration in India doubling in the year to about 9%, which is driving an acceleration in India data usage as well up 128% year-on-year. We continue to invest in our networks to deliver a great data experience over both HSPA and 4G.

The chart on the top right shows the progress we have made in upgrading our base stations to support faster 3G speeds to deliver an excellent experience to our customers. We now have 98% of our footprint on 14.4 megabit per second and 49% of the footprint on 43.2 megabit per second.

We continue to see our customers use more data. As I mentioned, average usage per smartphone is increasing and we now have more and more customers on 4G, where the average usage is double that of 3G. 4G now accounts for 15% of European data traffic.

We are making good progress in this area. We are now live in 10 markets after three more launches in this quarter, including the thing I'm proud of, we were first to launch in Spain. We will extend 4G services to the U.K., to the Netherlands, to Ireland by the end of this summer.

So good progress on our mobile network that will help us to continue to differentiate and we're being increasingly strict here on the conditions for new MVNO deals to ensure that our advantage and our differentiation is protected.

Now, moving to our strategy on unified communications; you can also see here that we have made some progress. In Germany, on top of the offer for Kabel Deutschland, which we hope to complete in calendar four of this year or quarter four of this year, we now had a complementary wholesale agreement with Deutsche Telekom and of course we have the 4G offer.

In Spain, our co-investment with Orange is on track, helped by the recent vertical access agreement with Telefonica. In Italy, we have reached an agreement for wholesale fibre access. In Portugal, we have started the extension of our fibre-to-the-home program, where we aim to double the number of homes passed to around 1 million. We also have signed a wholesale agreement in Ireland. So, a lot of progress in this area.

Slide 13, my last one, is basically the wrap up. We have continued to develop Vodafone Red, 5 million customers. On this plans today, we have over 10 million by the end the financial year. Growth in emerging markets has accelerated. We continue to see a strong performance from Verizon Wireless, and both those things partially offset the regulatory competitive and macro pressure in Europe.

We are continuing the evolution of the Group in line with our strategy, with an increasing contribution from our key pillars of growth; data, as you see in the chart is now 18% of service revenue; enterprise is now 27%; and emerging markets, the third pillar of the growth strategy is now 30%.

I always like to stress this point. We are making the Group more future proof, both in terms of our revenues and our network, the proportion of European mobile service revenue that is in-bundle little has nearly doubled in the last three years and Vodafone Red, of course, will help with the drive of this trend further. Demand for data continues to increase and we continue to invest therefore in our network to deliver an excellent customer experience over HSPA and 4G.

Finally, as I just said, we are delivering our conversion strategy with organic and inorganic initiatives.

Thank you for listening. I'm now glad to ask Philip, Paolo and Nick to join and myself to take your questions.

Transcript Call Date 07/19/2013

Operator: Tim Boddy, Goldman Sachs.

Tim Boddy - Goldman Sachs: I wanted to ask a little bit about what's happening in Germany where it looks very much as if a new price war is beginning or a further intensification, if you could comment that would be very helpful. Secondly, I wondered if you could give us an update on regulation, where it seems disappointing to an outsider perhaps that the only concrete proposal we've seen so far is the cancelling of roaming fees. Perhaps as if you could generally comment on how you see EC regulation developing at present, and just quantify the EBITDA exposure to roaming fees, that would be most helpful.

Vittorio Colao - Chief Executive: Tim, I give you a quick answer on Germany, but maybe it's better if Philipp then expands on it and then I will – if I can, I comment immediately on roaming and regulation. So on Germany, I wouldn't describe it as a price war. I mean to me price war is more what's happening in Italy, that I call price war. I think in Germany there is more pressure to have changed tariffs and they are discounting plus is attacking more on the low-end even if not generating growth for them and Deutsche continues to subsidize heavy and we have actually increased also our investment in that area. We are still a little bit below them, but of course we cannot let market share sleep, but then Philipp maybe will be more precise. Let me go on the regulation point immediately. I have to say, first of all, keep in mind that roaming is not huge part of our revenues and a large part of it is outside of Europe and so of the 6%, 7% which is roaming large part is outside of Europe and large part is enterprises which anyhow, we did commercially. It is important we are watching, what is coming out of Brussels, of course, we are interacting with them. I share some disappointment that once again instead of letting the free market develop, we think regulation and regulation over multi-country as always has the risk of creating wrong unintended consequences and deterring investment. Having said that, we are engaged and most importantly, as I said, many customers in Vodafone Red now are taking roaming in Europe. 7 million customers take our daily tariff. So we are proactive in using roaming more to our advantage than to be an area that has to be regulated. Do you want to comment Philipp a bit on Germany.

Philipp Humm - CEO, Northern and Central Europe: Yes. Few words on Germany, as Vittorio said, we see some price pressure coming from the (third and first) player. And we also see that (Dutch) continues to be aggressive on handset offers in consumer and enterprise and we are obviously then responding to it. Overall, the market is a little bit soft in gross adds. Now, we are saying on strategy and start to see some pretty encouraging signs as we are reaching our 1.3 million customers with Red. We see our ARPUs stabilizing in the consumer area, which is good and we are also seeing first time net positives on contracts, which is also good. So we are saying on cost, continuing to invest in Red, continuing to invest in the network, and playing a defense game with our smart tariff rate plans in the lower end to offset potential enrolled from third and (fourth) player.

Operator: Nick Lyall, UBS.

Nick Lyall - UBS: Could I ask on the Italian comment you made on the low cost, could you expand a bit on the cost that you might be able to cut from the business, so we could see or at least try and calculate some potential effect on margins for the full year? Then secondly, on Spain, you mentioned again the access to Telefonica's vertical fibre. Do you have any idea of what price that Telefonica might be asking first or what price the CMT sets? Do you think that's reasonable?

Vittorio Colao - Chief Executive: Let me pass the question to Paolo, but let me tell you that by definition whatever price Telefonica asks is never reasonable being an incumbent. So Paolo, you might elaborate.

Paolo Bertoluzzo - CEO, Southern Europe: Yes, on the Italian cost structure, obviously we are taking all possible initiatives that do not affect our customers' experience in differentiation and competitiveness, which we believe is 100% important to maintain in the market. The areas where we are working and we are already having strong results are obviously the right-sizing of our workforce and in particular our support functions including marketing and those which are not facing the customer or delivering clear direct value to the customer. We have just finished our restructuring plan with 700 people exiting the Company just to give an example plus unitary cost of labor is going down at the moment through an agreement we had with the (indiscernible). We are going ahead with network sharing, passive network sharing with all the operators, which allows us not to dilute our differentiation on the network side, but still achieve the important OpEx and CapEx for cash cost reductions. We have pricing ahead on the customer service side that not are using the level of service, but actually increasing the level of services through very advanced self-care, mobile-based self-care which is giving a better service and higher interaction with the customer, but also making sure that we talk to the customer through our call centers when there is an important issue and we do it as professionally as possible to solve the problem. We are also looking at our commercial cost, as you can imagine, across the board. On Spain, as you know, we have reached an agreement on vertical sharing. The price attached with agreement had to be set by the regulator, because it was impossible to reach an agreement on this one with Telefonica for the moment and this is not final. The regulator is setting a price, which is above EUR170, which we believe is not the right price and therefore, we are challenging this as the pricing between Orange and Telefonica as far as we understand is around EUR150 and therefore, there is no reason why it should be higher. Our own view is that the real cost to build, which we are seeing in our own experience, is more around EUR80 and therefore, we are challenging this decision at the moment.

Operator: Simon Weeden, Citigroup.

Simon Weeden - Citigroup: A couple really. I wonder – I think you've perhaps done it on the cost side, but I noted in the text that the Italian commentary that you've referred to commercial performance has improved. Could you elaborate a little bit on what behind that and how is the outlook coming out of the quarter and second on India, I wondered if you could address the question...

Vittorio Colao - Chief Executive: Hello.

Simon Weeden - Citigroup: Hello. Can you hear me okay.

Vittorio Colao - Chief Executive: Yes.

Simon Weeden - Citigroup: Okay.

Vittorio Colao - Chief Executive: You're cut. I could hear India and then I didn't understand the question.

Simon Weeden - Citigroup: Did you get the Italy question?

Vittorio Colao - Chief Executive: The Italy, yes, the India one was cut.

Simon Weeden - Citigroup: India was – regarding spectrum and tax and whether or not, you have any concern that the expiry of the 900 licenses could be used as negotiating element in the discussions about future spectrum cost and tax cost with the government. '

Vittorio Colao - Chief Executive: Why don't I tell you, first of all, the settlement of the tax in India; as you know we are talking about the process that can lead to a discussion, so it's what is called talks about talks and I really don't feel that really we can tell you anything more than in good faith and with positive intentions. There are talks there. On the frequency thing, Nick, maybe you want to jump in.

Nick Read - CEO – Africa, Middle East and Asia Pacific Region: Just in terms of spectrum, as you probably know the EGoM has referred the issue of spectrum reserve pricing and both the 900 refarming to the regulator, so that (ride) a couple of months of process and consultation with the operators as well. So I imagine that the auction probably will end up being around November because, of course, they've got to get it in before the elections early next year. Just to your points of the 900 megahertz spectrum, of course we are legally disputing the fact that they are allowed to reform it and that will be heard in the Delhi High Court at the end of August. However, in good faith we engage with the DoT on the 900 license extension process and pricing and as you know, we put recently a proposal forward on what we felt was a fair and reasonable basis.

Vittorio Colao - Chief Executive: Paolo?

Paolo Bertoluzzo - CEO, Southern Europe: On the commercial performance in Italy. Yes, in fact in the quarter just to give you one element that we've been positive on net additions in consumer, which was a negative performance on the previous quarter. This has been enabled by the fact that we have right-sized our premium. We were – when the price (flow) began about a year ago, we did try not go into it and we'll let our price premium to increase a lot to try and cool it down, but then we have right-sized about four months ago, three months ago and suddenly our commercial performance improved again and we will be in a net positive on portability in the quarter.

Operator: James Britton, Nomura.

James Britton - Nomura: I've got a few strategic questions around smartphone costs. Are you seeing any deflation in average smartphone cost yet? What are the key drivers for this going forward? Is consumer interest in the flagship EUR500 devices starting to produce and what percentage of your European customer base might be attracted to the Vodafone Smart handset range? Then finally, is there a natural landmark when you might renegotiate your Apple contract on iPhones?

Vittorio Colao - Chief Executive: James, I'm not sure I fully understood all your questions because the line is a bit noisy. On the Apple renegotiation, I would not like to talk too much because these are confidential discussions and of course, the only comment I can make is that there is much more choice in the markets today than a few years ago and especially at the high-end, there are super high performing Android and also Windows phones now. So it is a better situation than the original one, but I wouldn't comment more than that. On smartphone price deflation, I would say that there is some deflation. But to be honest, the best thing is that there is much more choice to at all levels in the market and therefore, we feel more comfortable that the acceleration or the continuation of the smartphone penetration, which in Europe is progressing well, will continue to progress at affordable or logical acquisition cost. Does that answer your question?

James Britton - Nomura: Yes. I guess, you know the hope has always been that the mass market is drawn to perhaps less expensive smartphones, which might improve your smartphone economics over time. I just wondered whether or not that was evidence of that at this stage.

Vittorio Colao - Chief Executive: Yeah. There is a little bit of evidence, but I wouldn't describe it as a game changer because of course there are cheaper handsets, but also the value of the price of the high-end is coming gently down. So at the end of the day, there are some improvement, but you are not talking about a revolution in the economics of mobile broadband.

James Britton - Nomura: I have one last one on Vodafone Smart. You introduced a few handsets in that range recently. What's the target market for Vodafone Smart in both Europe and emerging, I guess?

Vittorio Colao - Chief Executive: I guess, it's people – it's fairly simple. People who want good, very well equipped and faster, which is the real theme of the Smart III phones at an affordable price level. So you first saw – the first time adopter of smartphones and in general, people who cannot afford a big commitment. Keeping in mind that what we are trying to do with Red is also to make customers choose the price plan that they need, which could be very generous and then select how much more they are willing to pay a to get a certain handset. So you want an iPhone, you are going to pay whatever, 10 more you want per month. You want just to have a great data experience, the same generosity of data, the same unlimited voice and SMS, but you are not willing to add another 10, you can still do it with the Vodafone Smart and you still have 1 gig per month or whatever. So it's a way to enable a lot of data and higher-end, let me call it, service plans without having to load the cost of a Galaxy or an Apple. So, again, good for the mid segments of the markets.

Nick Read - CEO – Africa, Middle East and Asia Pacific Region: Vittorio, it's Nick. Just in terms of emerging markets, probably worth just noting that in terms of price points for handsets on 3G, you go a year back and $100 in India, we had no handsets at all. Now we have about eight to 10 handsets, which is really opening up the market. So you're seeing that in the data performance. Browsing revenue in India was up 70% year-over-year. 3G was up 190% and 2G up 60%. So now 3G is representing 30% of the browsing revenues.

Operator: Akhil Datani, JPMorgan Cazenove.

Akhil Datani - JPMorgan Cazenove: Just three questions please if I may. Firstly on Southern Europe, if we look at the KPI trends that you report. We've seen what looks to be some sort of improvement in Spain, Greece and Portugal in terms of the voice and data traffic trends that you are reporting, so interesting quite a healthy pickup this quarter. Just wondered if you could comment on what you thought is driving that, is there any sort of hope within that that Southern Europe is stabilizing or maybe showing some signs of improving or do you think it's too early to make that read across at this stage? Second question is just in terms of mobile termination rates. If we look at the next few quarter, there seem to be quite a few big swing factors coming up, particularly with regards to Spain and Turkey. So just wanted if you could walk us through some of the big moving parts here and help us understand how that might shape the service revenue performance at the Group level over the next few quarters? Then very finally, we've had a few comments from some of the U.S. telco peers in the last few months, suggesting that from their standpoint wireless regulations clearly very severe in European space, they also feel that European wireless operators are under investing in CapEx. So, just keen to kind of get your thoughts on those comments and how you think about that? Thanks a lot.

Vittorio Colao - Chief Executive: Why don't I take the last one, Akhil, and then I pass to Paolo, the Southern Europe one and to Andy the MTRs one. In terms I don't know who are the peers who say that there has been under investment in wireless and I don't know whether they were referring to Vodafone or not. I mean, as far as we are concerned, we don't think we have underinvested anywhere. Percentage of investment, if anything, has gone up a little bit. The absolute amount, I always repeat it, for Vodafone has never gone down even in the years of darker recession. We have, as I said, about 100% of our footprint at 14.4 at least and 50% at 43.2, and I didn't do it today but I always report the congestion and the saturation – sorry, the saturation and the average utilization of the network. I didn't do it today because it is boring, because it is always the same two numbers; it is always 35 and 7. So I would say that all objective parameters for Vodafone say that we have a quality network, we invest the right amount and we give the right experience, which is why I said in my earlier remarks, we are becoming stricter in our approach to MVNO, wholesale, all these deals because if there is a value, the value has to be more and more under the Vodafone brand. Paolo, you want to comment about Southern Europe and Andy about MTRs?

Paolo Bertoluzzo - CEO, Southern Europe: Yes, honestly I believe it is too early to say that we've seen improving trends in Southern Europe, because the environment remains very difficult, both macroeconomic environment and competitive environment. Obviously, we are taking actions. We are taking important actions in each of the markets. I have just commented on Italy. Let me give you just a couple of comments on the others. Spain, we have Red which is helping a lot in our performance, both in terms of acquisitions, but also in terms of churn management and ARPU management. We actually had a good performance on ARPU in Spain, plus we are starting to have some positive results on fixed broadband where we are net positive in gaining market share month-after-month. Greece revenue market share in prepaid which is an area which has been historically weak for Vodafone. Portugal, again, we are learning how to compete in a more convergent market. We are slowing down our losses towards an incumbent and most importantly, we are starting to see a strong traction in our own fixed offers, in our own fibre-based fixed offers in the footprint that we are building and we see this growing week after week.

Vittorio Colao - Chief Executive: Andy?

Andy Halford - CFO: Yeah, on the MTRs, a lot of moving parts, Akhil, as you referred to in your question, the most significant impacts in the next quarter will be in Turkey and then in Spain and the Netherlands. Offsetting that, we've got a lapping effect of Italy, which will give us a little bit of relief. I think the way I’d look at this is, last year we had just over a 2 percentage point drag on our MTRs, the first quarter this year is 2.8%. I would be thinking the second and third quarters remain in the high 2s and then we should dropdown a fair amount in the fourth quarter and next year should be significantly lower.

Philipp Humm - CEO, Northern and Central Europe: Maybe to add to this one to specifically to Turkey, I mean we have a strong reduction on MTRs on SMS and voice, which basically means that we will have to expect going forward that the reported revenue will be obviously lower, but overall the move is for us EBITDA accretive. So it's from an EBITDA point of view actually positive in Turkey.

Operator: Jerry Dellis, Jefferies.

Jerry Dellis - Jefferies: Two questions, please. The first one is on customer costs. You mentioned that in Germany the need to defend market share has led you to respond to T-Mobile's higher handset subsides, and in Spain, I suppose you're now back to subsidizing and you're (ramping) last year when subsidies were withdrawn for most of the time. So I wondered if there are any markets where customer costs are actually now trending down and whether perhaps these are enough to offset the upward pressures in Germany and in Spain. Then secondly, just on roaming, there is clearly a very well-defined framework for roaming regulation within the EU. Yet there continues to be talk from (Escrow's) Office and from MEPs, seeming to mandate something more aggressive. There is obviously a resolution to be voted on in the European Parliament in September. Now, the question is really when you sit down and actually talk to these various politicians outside of the public case, what conclusions are you drawing about what practical measures they might actually be intending to implement?

Vittorio Colao - Chief Executive: I will pass to Philipp the question on customer cost versus T-Mobile and maybe Paolo you can also comment about Spain. Just a remark, let's be careful in not calling elimination of subsidies simply the splitting of subsidies from lower service revenues, because I can eliminate subsidy by simply lowering my service intake and then giving to a finance company the job of selling the handsets. So let's look at the bottom line, not just at the accounting presentation. But I'm sure Paolo will comment on that. Listen, on roaming I take it again, because this is my hobby of these days. Yeah, when you talk to them which of course we do almost on a daily basis at this point. You clearly see that roaming is I think out of – blown out of proportion if you look at how much customers really travel throughout Europe and how much this is already taken care of with commercial offers like the daily tariff that we have 7 million people on or the Vodafone Red, or the enterprise tariff. You and I from an objective point of view would get to the conclusion that it is a little bit blown out of proportion, but having said that, my impression, our impression is that over time roaming will go away, it would be more and more incorporated into price plans. The important thing to think we will fight for is to make sure that this does not become either a discouragement to new investment, i.e., people I would say, why investing when in any case I have to give away at very wholesale prices my own network, nor an incentive to basically kind of launch a European type of Maxi MVNO that again does not add any value, but simply arbitrages prices across countries. In all fairness, I do not have the impression that this is the objective of the Commission and I have the impression that the Commission is very aware that you need to preserve good conditions for investment, but also it's very clear that they want to find lower prices for people who genuinely travel. So our strategy will be to try to provide this. So lower prices for people who travel, but not destroying the investment to invest, and this is our, if you want, the negotiation line. Philip, commercial cost?

Philipp Humm - CEO, Northern and Central Europe: Yeah, so on Germany specifically, as you asked, Jerry, our strategy on subsidies is to be a fast follower to Deutscheland and we have and we will continue to spend less subsidies to their customers than Deutsche does. So whatever Deutsche does, we are following but we will always command, if you want, the premium or basically, subsidize less than they have as we believe that we have a stronger brand and a stronger distribution in the marketplace. Now you ask about which of the costs are improving and to compensate the softness in revenue and actually all costs are improving right now. Direct costs are improving, a lot of it volume-driven, obviously, but also MTR-driven. OpEx are improving and our A&R is improving less per unit but more simply because there is softness in the market on the overall volume side.

Paolo Bertoluzzo - CEO, Southern Europe: A quick comment then on Spain, which is also a market which have seen a lot of movement around the subsidy discussion. I think there's quite – the situation in Spain is (indiscernible). I have to say it's still a little bit confusing or confused because as Vodafone, we have maintained technical subsidy model, but there is a clear distinction between the price for our services and then price for the device that the customer can choose on top of it, and therefore, we see more and more SIM-only offers from us. Our competitors are trying different models; internal financing, external financing, but then they also add subsidies on top of it depending on the period of the year, depending on the segment. So I think it's still a moving situation. I believe that in any case if you compare the current environment with the environment that we had a couple of years ago before the shuffling started. For sure the unitary cost has gone down and I believe that the market conditions are actually stimulating all the players to continue to go down on this unitary investment side.

Operator: Stephen Howard, HSBC.

Stephen Howard - HSBC: I'd just like to, with apologies return to the question of roaming. I guess we've covered this from a number of angles already, but I was wondering if you could just perhaps be a bit more specific about the mechanisms that the Commission is proposing here. From your remarks a moment ago, Vittorio, clearly one of the options seems to be on the table is demanding lower wholesale roaming rates, but have they put any other options in front of you or alternatively, have you had any counterproposals for them that might take this issue forward in a more market friendly mechanism?

Vittorio Colao - Chief Executive: Yes, Stephen, I – first of all, keep in mind that we are talking about internal assumptions of different positions, so nothing is cast in stone yet. Keep in mind that we are talking about informal consultations and comparison of different position. So the answer to your question is, yes, I think we have a very clear idea of where we would like to go and to some extent, I think we have already indicated where we would like to go, because as I said, we have introduced data tariffs, we have introduced take your tariff abroad concept, we have Vodafone Red with roaming included for the high-end and we have enterprise plans with roaming included. So, it's very obvious that Vodafone like to get to a commercial, if you want a resolution of the roaming anxiety. But I cannot say what is the position of us and them and other operators, because these are very fluid talks at this stage.

Operator: Robin Bienenstock, Sanford Bernstein.

Robin Bienenstock - Sanford Bernstein: I guess first, isn't there a fundamental problem with your negotiating position vis-a-vis the EU and that you are asking for the end of free-writing and MVNO in wireless, but actually asking for more free-writing in wireline and doesn't that kind of cause you a problem. It looks like the current draft actually is giving you the opposite? Then a separate question completely, Verizon reported slightly weaker margins, AT&T has kind of forecast. So, I'm wondering if you are getting worried about the U.S. becoming increasingly competitive and whether or not that diminishes your desire to own those assets?

Vittorio Colao - Chief Executive: Robin, I hope I will answer your question, because unfortunately you came across a little bit noisy. Especially, I think I understood the second one well, it says, are we expecting tougher times in the U.S., was this the second point?

Robin Bienenstock - Sanford Bernstein: That was the second point. The first point, isn't there a fundamental inconsistency in your arguments vis-a-vis the regulator that you want a free-writing when it comes to the wireline infrastructure and you want no free-writing when it comes to wireless infrastructure and that actually this draft regulation gives you the reverse in both cases?

Vittorio Colao - Chief Executive: No, no, Robin I totally and strongly reject your definition of free riding. I almost do it ideologically; Vodafone is the result of opening to competition and is the result of an investment, courageous investment strategy country-by-country in Europe and outside of Europe. No issue whatsoever and we always have demonstrated it in competing and competing with anybody who gets decent conditions, we have no problems whatsoever with the fixed line operators having to get good returns on their investment. I always said I am actually happy if they have very good return. The problem is, of course, equality of competition and avoiding price squeeze. So I would say that actually contrary to your statement, our position is absolutely consistent, with say, mobile is competitive, mobile is open, people can access networks at very competitive rates. There is no need to get into regulated prices. Fixed, where it is less competitive, where there are dominant infrastructures, where there are naturally monopolistic infrastructures, we want fair conditions to be able to play the game. I have to tell you we are completely supported in this position. Those who few months ago said, the new regulation on fixed line is going to be bad for Vodafone now are recognizing with our position, was, no, as long as you have good equality of inputs and known price squeeze test, this is going to be good for us. I think it is going to be good for us and for the incumbents also. So, it is absolutely the opposite, it is consistency of position. Competition plus return on investment. Sorry, the second question was deterioration of the U.S. markets.

Robin Bienenstock - Sanford Bernstein: Yes.

Paolo Bertoluzzo - CEO, Southern Europe: Yes, listen, on that one, I have to say, for the time being I see structural conditions in the U.K. – in the U.S. markets which are pretty good. There is more consolidation on smaller players, there is very healthy competition between different operating systems and the adoption of price plans which as you know are the kind of same concept of Red. So family plans, multi device plans and so on is progressing very well. Could it be that the new ownership of Sprint can create a more competitive Sprint player? Yes, it could, but again this is not going to change structurally the market, it will make it a little bit more intense. But structurally I see a pretty attractive market for a number of periods in front of us.

Operator: Justin Funnell, Credit Suisse.

Justin Funnell - Credit Suisse: Few questions please. The first one is Germany, obviously nobody really wants an auction, but now there is, probably going to be auction. Just wondered to what you were thinking about the 1800 spectrum, obviously Deutsche Tel building LTE at 1800 in the cities, look so they will be outgrowing you this quarter. Do you think it's giving them an advantage and do you think that actually having some more 1800 at the right price would be interesting for you? Secondly, investors are saying now that because things have gone quite, about – so the discussions in the U.S. (about a stake), so that must be a sign that something is about to happen. Any comment on that? Thirdly, India returning to growth of 14% having slowed down, just wondering if you could describe a bit, the potential of that market. Is this a growth rate that we could – double-digit could continue for a while, could we see margins expand, could this achieve – finally provide some good upside for investors? Then fourthly – sorry for the number of topics – tiering as well, obviously tiering is starting to work really well in the U.S. LTE adoption is strong, usage growth is strong. It looks like you are getting in early sign of the same thing. Are you seeing any early sings of tiering starting to work better as well please?

Vittorio Colao - Chief Executive: Justin, on tiering, I am not sure we can really say that we have seen assuming that what you call tiering is really the upgrade to higher data plans, right? This is your question on tiering, I guess.

Justin Funnell - Credit Suisse: Yes, that's my question.

Vittorio Colao - Chief Executive: No, I don't think we can have a definitive conclusion that there is a positive financial uptake. I think from a customer perspective, they like it. So there is more usage. But I cannot say that I see a tiering benefit yet. Let me turn Germany to Philipp and India to Nick Read. On the U.S., to be honest, if there is noise, you think that something is going to happen. If there is no noise, you think that something is going to happen. The only thing I can tell you is if something happens, we will promptly inform you regardless whether it's noisy or quite. That's the only thing I can say. Nick?

Nick Read - CEO – Africa, Middle East and Asia Pacific Region: Yeah, just on India, I'd just say, yes, it was a very strong quarter as and it explains our average both was up 3% quarter-over-quarter and we're capturing more of the minutes on our primary SIM as the smaller players exit the market. So you're effectively getting consolidation. That's allowed us to harden pricing. So pricing is up 6% quarter-over-quarter and of course, we got the data revenue growth just under 50%. So I would say structurally, when you look at India, it looks very favorable. Of course, there is always pockets of competitive action. So we might have to defend our position in circles and the other thing is, of course, just regulatory noise. We've had three regulatory small hits, national roaming, SMS termination VAS, which might drag us about 1.5 percentage points of growth going forward from quarter two onward. So you know a little bit of downdraft there. In terms of margins, we said we will once hit in scale go up to a 30% plus margin and I think we're tracking well for improvements along that lines.

Philipp Humm - CEO, Northern and Central Europe: Last on but not least on Germany on LTE rollout. We don't see any capacity issues. At this point in time, we're focusing mainly on rolling out with 800 LTE and improving further coverage. We're covering more at now already more than 66% of population. So that's our main focus to do that and to continue to promote 4G services. As you know, we will have new auction for being effective in 2016, but it's still at a discussion stage. The discussion is to re-auction the 900, 1,800 and reserve part of it for the existing MNOs who are already spectrum holders. We are in intense discussion with the regulators to hopefully shape it in a way which is positive then for us from an economic and capacity point of view.

Operator: Nick Delfas, Morgan Stanley.

Nick Delfas - Morgan Stanley: Just a quick one on the roaming issue again. Do we know which data network other operators will have access to? So would it be to your 4G newly invested network? Or would it be to a slower network? Secondly, if commission persist in coming out with a low wholesale price without doing any cost methodology process or looking at whether you have significant market power, are there effective legal avenues open to you to bring that to judicial review?

Vittorio Colao - Chief Executive: Nick, I understand – as I said, this is the (hobby) of these days. As I said to my – in my earlier answer, I guess, to Stephen, this is still undefined. So I don't have any detail and these are talks. So I don't have any detail. I'm not even sure that people have thought. For sure I would expect that if governments want to sell spectrum and especially government in large countries want to sell spectrum at high prices, they will make clear to the commission that – then the commission cannot set up arbitrarily low wholesale rate on new technologies because the next option will be in Germany or in any country with 50 million people or 60 million will be a disaster. So, what probably will mitigate the more extreme (ADS) is also the fact that the member states might object to a reduction in value of the spectrum. I think common sense will prevail. Legal, of course, I mean, of course, there will be eventually some judiciary actions that I'm sure some operators will consider or potentially some member states might consider against the decisions, which are not just – or (intervention ISMA), a regulation which is not justified by spectrum auction conditions and another staff, but it's early to think about those things. As I said, I always like to think that our industry can find commercial solutions and not regulated or legal solutions to issues.

Operator: Andrew Beale, Arete Research.

Andrew Beale - Arete Research: First of all, a quick clarification. Data attach rates have declined sequentially in Northern Europe this quarter. Have you changed that measurement or is there something else that's going on in the market that we should be thinking about? Then, I wanted to come back to an earlier question around network investments in Europe. I mean, smartphone data usage is still low in Europe, around a quarter of the U.S. levels. I guess that low usage makes it more vulnerable to MVNO-based competition, (weaken) arbitrage, banking on low average data usage. I think at AT&T, that seasonality and accelerating CapEx for 800 LTE in Europe and vastly improving the data experience and that would drive data traffic pretty hard. So what is it that's wrong with Randall's announced his – of a missed opportunity for the European players have?

Vittorio Colao - Chief Executive: I would say, why don't we pass the question to Philipp on Northern Europe attach rate. I couldn't hear very well. Unfortunately, today there is a problem with some of you, not all of you, but some of you. I think you were asking again the question of, can more investment in data trigger more data usage in Europe. This was the question?

Andrew Beale - Arete Research: Yes, and it's Randall of AT&T, (that sees) merits in accelerating CapEx for 800 LTE, and really just what's wrong with his announcements of a missed opportunity?

Vittorio Colao - Chief Executive: I got it. I resist the temptation to give a flippant answer to the Randall AT&T thing, given the level of personal experience that they got last week in a remote area of the U.S. with the AT&T network. It seems to me that, if you look at our statistics of usage on 3G and you compare to – and performance, and you compare to the U.S. average data experience, Europe is much more advanced. So, I am not sure I understand where and what; much more investment would create a benefit, given the fact that today I regularly have in Rome, in London, in Dusseldorf 6, 7, 8, 9 megabit per second on my iPad and on my smartphone. Having said that, I am not in the opposite camp, which is the camp of people who say, you shouldn't invest because in any case it doesn't make any difference. So, as I said, constant investment, continuous upgrade of our network. Now half of our network is at 43 megabit per second, which is not the case of the U.S. networks as of the old generation and getting to a target of 50% – 40% to 50% LTE by 2015, I think is the right thing to do in Europe. Philipp on the other question.

Philipp Humm - CEO, Northern and Central Europe: Yeah, on the data attach rates, there is no change in our commercial nor our content policy. So I think the key drivers probably the country mix is Turkey is gaining more momentum relative to the other, let's say, traditional and also in European countries in the overall customer base that we will probably provoke some statistical impact. I think our IR team can give you more details thereafter to maybe verify that point, but I would think that should be the main driver behind it. On the point earlier on smartphone penetration, maybe just a few points. A lot of it is also an opportunity which we are focusing on which is why we drive Red, which is why we drive Red family, which is why we have launched in some markets Red prepaid, which is why we are looking at lowering with our own device lineup the smartphone entry devices, so that we can also offer them at attractive prices to prepaid customer, right. It is more of an opportunity for us going forward to be able to tap into that market as well. So it is not only India, which can basically grow smartphone penetration at low cost, but it's also Europe that can do that.

Andrew Beale - Arete Research: Can I come back to that data attach question, first of all? I mean the reported numbers are down in Germany, U.K., Holland and Turkey on an individual market basis. So it just seems that maybe that some of the change that has happened there. I am just coming back Vittorio to you on the sort of U.S. versus Europe experience, I mean it seems to me the biggest difference is rollout of 3G in U.S. it's sub-1 gigahertz, which gets you a better average experience wherever you are in building and so on. Whereas in Europe 3G is at 2,100 largely to the (MVNO), there is a bit of 900 HSPA and it's that difference that means the man on the streets experience is not as good, although, I totally understand that it works in Europe, it works pretty well.

Vittorio Colao - Chief Executive: I don't recognize what you say, I think the experience in Europe, I mean again at least I talk about the Vodafone experience, I don't know about the others, is on 3G with as I said half of our network being at 43 and with all the optimization techniques that we used is pretty good, to be fair it's not as good as the Verizon 4G when they have introduced 4G in a massive way, but to be honest from a customer perspective, you can watch videos, you can have uninterrupted streaming in most of the places where you need to do that. So I think we have a difference of opinion here and fine, we will keep debating, but I'm pretty convinced that we have a good experience in most and at least the customer reports are not about bad experience with data, so difference of opinions.

Andrew Beale - Arete Research: Anything on the data contracts or otherwise?

Andy Halford - CFO: back to your, no that one, must be statistic blimp.

Operator: David Wright, Deutsche Bank.

David Wright - Deutsche Bank: Just very briefly that the buyback is completed. Should we assume, there is no intention to launch an incremental buyback, obviously with a little bit more pressure on the gearing and just following onto that with the Kabel Deutschland deal completed, you've talked about the pro forma, 2.4 times leverage. I think on the historically you've said that, you are okay with that level and the BBB rating, but I guess if we do have cash flows down this year if we have potential spectrum payments in India, whatever might happen with the Verizon dividends not so clear, but maybe next year, they could certainly be a little be trimmed. Do you feel comfortable at that level or is there a sort of fairly accelerated need to bring that down and also does that 2.4 level now pretty well mean that there is not really M&A in terms of acquisitions on the cards?

Vittorio Colao - Chief Executive: Yeah, David, variety of questions, I guess in there, so first of all, buybacks, no current intention clearly having decided to make the investment in KDG with the gearing being higher then we will focus overtime on reducing the level of debt rather than on buybacks, and secondly the 2.4 times I think is a comfortable level if you look at the collective of the cash generation from the controlled operations to medium term, U.S. dividend flow et cetera. I think we are in a sensible space on that and hence a very comfortable with that. The balance sheet is not fully stretched to that level, but there is obviously a little bit more geared than where we are at the moment, so I look at this from a most angles and just say I think we are in a reasonable space even with the level of gearing a little bit higher and over a period of time, no doubt we'll (determine) it a bit, but I think we're in very comfortable position.

Operator: John Davies, Santander.

John Davies - Santander: I wonder if you could talk a little bit about the in-bundle revenues and specifically the typical contract length you have remaining and have that varied over time. So I'm wondering if you've managed to sort of extend the forward revenues you can expect over time as well as improving the proportionate revenues that are (uncontracted).

Andy Halford - CFO: Yeah, let me take that off. I mean over a period of time, if you go back over the last three or four years. I think we have moved from sort of 18-month contract as being the norm to 24-month, this has been much more than norm now and clearly, it takes a period of time for new customers to come on to new contract, so the weighted average has risen during that period. I don't have a specific number (to mind), but the average contract duration has over last three or four years risen slightly over time.

Operator: Mandeep Singh, Redburn Partners.

Mandeep Singh - Redburn Partners: I'd like to ask Andy a question relating to just the general trend that in Group service revenues. I recall at the last quarterly call, you know it was suggested that the minus 4.2 was hopefully the bottom and things would be improving. Clearly, there is 70 basis points improvement help somewhat by working days. Are you still confident we're at the bottom in terms of service revenue trends and – on a going forward basis?

Andy Halford - CFO: Yeah, I mean the thing that is clearly weighing us down at the moment is in part the MTR effect. As I said earlier to be in the high 2s is higher than our recent trend over the last two or three years. So, realistically, we are going to see more down draw from that over the next couple of quarters as I said earlier on. Thereafter, that does improve. I think as we have seen in the first quarter, there has been some ups, there has been some downs, churn has been more challenging, India has done really, really well. So if I sort of step back and look at it overall, I'd say for the second quarter, I think, we'll be sort of in the same range as we've been in the first quarter and then as we get to the backend of the year with the MTR effects starting to come off, that should pick things up a little bit.

Mandeep Singh - Redburn Partners: If I understand that, we're going to be sort of at this sort of level and then getting better fourth quarter and into next year?

Andy Halford - CFO: Yes.

Operator: James Ratzer, New Street Research.

James Ratzer - New Street Research: I had two questions please. The first one is just regarding your emerging market businesses. You've seen a very sharp acceleration in data volume growth this quarter and that's also led to a good improvement in revenue growth. I was wondering if it's possible to differentiate what you see is different in emerging markets, so those allow that acceleration to happen, whereas we're struggling to see that happen in Europe. The second question was a broader question. I was wondering if I could get your thoughts in Europe on what you made the potential for new competitors coming into the market, using small-cell technology, Wi-Fi, I think you're seeing some of the cable operators, potentially British Telecom in the U.K. How do you see that threat developing? How seriously do you think that could impact your business over the next few years?

Vittorio Colao - Chief Executive: Thanks James, two broad questions. Let me take both of them at the very high level and maybe Nick can add something. First of all, what is happening in emerging markets is what we told would happen. It's low voice prices and then data comes, and then there is no fixed infrastructure. So people spend a little bit more to use data applications, which are very useful because of the lack of fixed infrastructure, but this is not a replacement for voice and therefore one is additive to the other. In mature markets, instead high price voices, the same pickup of data is happening, but of course this is happening at the moment where voice actually goes down in revenue terms, because it was priced more expensively. So here, there is kind of a line going down, a ling going up and the net effect is stable or marginally declining, which is why we have always been very optimistic on emerging markets, because we knew that when 3G comes, actually the potential exploitment of the market is much higher because there is no replacement effect. On new competitors, Small Cell, Wi-Fi and so on, I would say that technologies are being mashed together. We are becoming – the whole industry is becoming much less religious on access technologies, we use ourselves Wi-Fi more. We will incorporate Wi-Fi into our new base station. So new generation base stations will have Wi-Fi incorporated. We are now today with an RFP or RFQ for Small Cells. So we will integrate all technologies, sometimes owning them, sometimes leasing them, and I suppose other players will do the same and the competition will be basically for the data needs of the customers, not necessarily for the mobile-only needs. So, more competitors, yes, but also more ways to reduce our cost and to manage our CapEx efficiently.

James Ratzer - New Street Research: Once you finish building out 4G over the next few years, do you then see small sales as being the major driver of your CapEx kind of looking forward on a five year view?

Vittorio Colao - Chief Executive: No, I mean that's not – in the scheme of things, it's not a big number. But you know, we will develop depending on the topology and density of usage. We will deploy all solutions and as always we will end up in different situation in larger urban dense areas versus rural. At the end of the day, all spectrum frequencies and all technologies will be matched up to deliver whatever is lowest cost solution for per gig, or per meg or for whatever. So, I think it's going to be a mix.

Operator: We have no more time for questions. So, may I please pass the call back to you to close it.

Vittorio Colao - Chief Executive: Yes. First of all, thank you very much for all of your questions and apologies if I couldn't hear some of them. Before concluding the call, I would like to recap the three key points; first, yes, there is some challenge in Europe, but emerging market businesses are recording strong growth in revenues in customers and in data. Second, we continue to make progress in future proofing our revenues through integrated price plans and Vodafone Red is central in that. Finally, again, in another, I think it's the third time in a row, our unified communication strategy is progressing and each quarter we are adding another piece of the puzzle. At this time, we had positive developments in Germany, Italy and Spain. So, thank you very much for participating in today's call. I look forward to meeting you in person.