Telefonica SA

Good morning. Thank you for standing by and welcome to the Telefonica January to March 2026 results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you'd like to ask a question, please press star followed by 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. We would kindly ask you to ask a maximum of two questions per participant. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Thorsten Achtmann, Global Director of Investor Relations. Please go ahead, sir.

Good morning and welcome to Telefonica's conference call to discuss January to March 2026 results. I'm Thorsten Achtmann 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 at 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 relevant press release and the slides, please contact Telefonica's investor relations team. Now let me turn the call over to our COO, Mr. Emilio Gallo.

Good morning and thank you for joining the call. With me today are Juan Acue, CFO, Borja Ochoa, Santiago Argelitz, Alud Suler, CEO of Spain, Germany, and U.K., We are pleased to report a good start to the year. We are growing in revenue, adjusted EBITDA and adjusted operating cash flow after leases, both in constant and current terms, with an appropriate capex to sales ratio to deliver this growth. At the same time, we are reducing net financial debt, despite the usual seasonality of free cash flow in Q1. As a market, year-on-year growth rates accelerated in Spain and Brazil, with a strong commercial performance. In Spain, we recorded the best ever churn. In Brazil, we achieved a record high mobile ad view. In Germany, O2 contract churn remained at a low level. And in the UK, fixed line net ads continue to improve. Revenue growth is driven by retail, with a steady growth in B2C and B2B. This performance more than offered the loss of one-on-one revenues in Germany, and the impact from the extension of wholesale agreements in Spain, which provide a more predictable and sustainable business long-term. I'd like to highlight the steady growth in service revenue, partially offsetting weaker handset markets in some European countries. On the operating model front, we are reaping the benefits for linear operations, including the first savings from restructuring plants in Spain and our global unit. and the corporate networks have done in Brazil. We are executing consistently against our transform and growth plan, making good progress. We remain confident in achieving our financial outlook for 2026 and reiterate our 0.15 euro cent dividend pressure. On slide two, let me share our progress across the strategic pillars of our plan. First, on customer experience, hyper-personalization and network quality initiatives are leading to lower chance and a sound MPS. Second, in B2C, we are sustaining steady growth. We are fostering convergence with a solid traction of our offering in Brazil and Germany. At the same time, we are enhancing our ecosystems. In Spain, we have enriched our premium content offering with a with the FIFA World Cup rights, and we are fostering digital security. In Brazil, we have reached more than 600,000 health subscriptions. We are also expanding the customer electronic business, recording significant growth in Spain and Brazil. Third, in B2B, we have seen strong momentum, with revenue growth close to 6%. Noteworthy is the launch of Titan Connect Portfolio, and the acquisition of Altin in Spain and the San Martino partnership in Brazil in the agribusiness. Fourth, we continue to enhance our infrastructure, expanding our fiber and 5G coverage while improving network quality. Fifth, on simplification, we are capturing deficiencies from redundancy programs and legacy network switch-off. At the same time, we continue to make solid progress on our system ethic with six assets sold in the last 12 months. Overall, this action reflects strong execution, positioning us well to continue delivering sustainable growth throughout the year. On slide three, we will review our domestic business. In the first quarter of the year, Telefónica España continued to deliver strong operating and financial performance. We recorded solid commercial KPIs, reaching the lowest trend ever, 0.7%, despite the tariff update in mid-January. This figure proves the high stickiness of our customers to our excellent service and superior network quality, our differential ecosystem, and our small segmentation. Such a competitive advantage is driving a positive balance in portability ratios. We have outperformed our competitors year-on-year, surpassing the 2025 average, and three times higher year-on-year. As a result, we achieved record customer base in fixed broadband and in contract mobile, a significant milestone. In B2C, conversion RPU increased about 91 euros, It remains at leading levels in the market, both in absolute and in relative terms. Our premium digital ecosystem continues to support the highest customer lifetime value in the market while driving revenues up. In B2B, we also started the year with strong traction. We are growing both incomes and IT services. I would like to highlight the recent launch of innovative service on network resilience for business continuity, advanced service security, drones in defense, and sovereign technology. They will drive further growth in this segment. Regarding financial, Spain is delivering a solid cash generation with growth acceleration across all financial metrics. Growth in revenues accelerated to 2% year-on-year, supported by service revenue. B2B digital services maintained robust growth. Adjusted Selipda grew over retail revenue, delivering a 56% margin due to revenue growth and savings from the Renunda Zip Plan. This more than offset the anticipated lower wholesale revenues. In addition, capital discipline and the more stable leases led to a 2.3% growth in adjusted operating cash flow after leases. In a nutshell, our domestic business had a strong start into the year and we are in a strong position to continue to excel. On to slide four. Telefónica Brasil's performance was once again remarkable. People recorded solid commercial momentum in the most valuable segments and grew above inflation across all key lines. We maintained a clear leadership position in the market, leveraging our strong commitment to quality and customer satisfaction, and our continued evolution in a broader digital platform. In mobile, we reached record levels both in content and ads and art view, with a sustained churn reduction. We added 850,000 new contract customers in the quarter, the highest figure of the last five quarters. Altium is the highest ever, driven by our value-driven growth in the increase in recharge frequency in preparation. In fact, we increased fiber connection to almost 8 million. This strong performance was driven by Vivo Total, resulting in a lower charge. Turning to financials, Revenue and adjusted EBITDA grew year-on-year well above inflation and accelerated versus the previous quarter. Revenue increased by 7.4%, supported by consistent growth in mobile service revenues and continued strength in the fixed business. In B2C, new digital businesses maintain strong momentum. Consumer electronics stand out. growing 56% in the last 12 months, thanks to the launch of new financing options. In B2B, digital solutions were once again the main growth engine, driven by cloud and IoT. Adjusted the data and operating cash flow after releases both grew 9%, boosted by solid revenue growth and continued improvements in OPEX. Overall, Vivo delivered another strong set of results. showing growth across key financial KPIs. Moving into slide five to discuss Germany. Telefónica's guidelines for business momentum showed resilience in a market with lower promotional activity. We have recently seen some positive price moves in the market, and since March, we have maintained or even increased prices across all promos, stopping or to mobile promos at price point below 30-20 euros. This is consistent with our strategy to prioritize profitable growth, focus on value over volume, while maintaining a low-chan level. This quality of our customer base is improving, with a growing number of customers with a second or third SIM card. This strategy impacts our view, but supports loyalty and higher net ads. Fixed round-up fixed broadband accesses grew for the third consecutive quarter, with a better mix in the base, lower chance and higher output. Notably, IoT accesses recorded another quarter of outstanding growth. Regarding financial results, the one-on-one customer migration continued to impact revenues, with the year-on-year peak of this effect in Q1. Additionally, following a record four quarters last year, handset set declined in a weak German handset market. Nevertheless, MSR trends slightly improved quarter on quarter, and fixed revenue increased 4% year on year. Adjusted EBITDA was likewise affected by the in-year peak of 1-on-1 impact. However, efficiency and cost control led to an increase in the adjusted EBITDA margin year on year. showing the solid performance of the healthier part of our business. To summarize, underlying performance remains resilient in Germany, with a high single-digit year-on-year growth in adjusted data excluding the one-on-one effect. We continue working to return to growth in 2027. Let's move to slide six. Building MediaO2 started 2026 making clear progress in the line with its strategy. During the quarter, we achieved several important milestones. O2 Satellite was launched, making us the first UK mobile network to switch on direct-to-device satellite connectivity. At the same time, we continued to advance our mobile network transformation. We signed new strategic grant update agreements and completed the second tranche of spectrum transfer from Vodafone UK. As a result, O2 now has the largest 5G standalone footprint in the UK, reaching 86% of the population. From a commercial perspective, we continue to show improvements in Q1. In fixed, we reduce losses supported by commercial initiatives, while the RPU remains impacted by the high promotional intensity in the market. Immobile contract chance decreased quarter and quarter, while ARPU remains broadly stable year on year. In wholesale, we maintain our leading position in the MD&O market and continue to strengthen our wholesale fixed credentials. Regarding financials, both service revenue and adjusted EBITDA trends are on track with our 2026 guidance. Service revenue decrease, mainly driven by consumer revenue, too, due to prior year customer losses and continued pressure on fixed output, business revenue declined, largely reflecting lower-margin products. This was partly offset by strong performance in wholesale supported by growth in MVNO revenue. Total revenues are also affected by reduced net cyber bill activity, compared with the year before, adjusted a bit that decreased mainly due to devolution of service revenues. Finally, we continue to progress as expected with the Netomi acquisition, which, together with a targeted network investment, pardoned Streffen's busy MediaO2 foundation for 2026. Now, I would like to hand it over to Juan, who will cover financial results with more detail.