Telefonica SA

Good morning. Thank you for standing by and welcome to Telefonica's January to June 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 1 1 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 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 Torsten Achtmann, 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 Torsten 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 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 chairman and CEO, Mr. Marc Murtra.

Good morning, everyone. I am here today with Emilio Gayo, our COO, Juan Azcue, our CFO, Borja Ochoa, our CEO for Telefonica Spain, Santiago Arzalik, CEO for Telefonica Germany, and Lutz Schuller, CEO of VMO2. 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 into results through discipline, This slide shows the strong execution achieved in the second quarter, delivering against our strategic roadmap and driving consistent and resilient growth. We accelerated year-on-year growth in constant terms in 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 X101. 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, we recorded positive net ads in main services for 12 consecutive orders. In Brazil, we recorded growth In value accesses again and in Germany, CHERM remained at a low level. Free cash flow reached 611 million euros in the quarter, 278 million more than in the previous quarter. Free cash flow is back and loaded, accelerating in H2. We have further deleveraged to 2.68 times, reducing net financial debt to 25.3 billion euros. 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 15 cents of euro will be paid In June 2027. To note that we paid the 18th of June, the second tranche of 2028 dividend, 50 cents of Euro. On slide two, 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 MPS 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 Libre Cine y Series and Movistar Fastpass. Brazil is the first player offering complementary access to Google Germany AI+. Germany strengthened the convergent offering with new bundles. UKO2 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 ECOBIAS in Germany with EWE and Deichmann. In addition, Our infrastructure expanded in 5 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 deficiencies 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 and grow plan. I will now pass the presentation to Emilio for the operating business review.