TEM Telefonica Moviles

The press release issued earlier today on Telefonica Moviles' first quarter 2005 results contains an error. The paragraph reading: "Service revenues totalled EUR 3,201 million, an increase of 41% from 1Q04, while handset sales rose 30% to EUR 479 million" should read: "Service revenues totalled EUR 3,201 million, an increase of 41% from 1Q04, while handset sales rose 29% to EUR 475 million." (Changing EUR 479 million to EUR 475 million and 30% to 29%). We regret any inconvenience this error may have caused. The corrected release reads: TELEFONICA MOVILES' CUSTOMER BASE SURPASSED 81.4 MILLION, REVENUES ROSE BY 39.3% AND OIBDA BY 19.1%; FIRST QUARTER 2005 RESULTS SHOW A STRONG INCREASE IN THE PACE OF THE COMPANY'S GROWTH Telefonica Moviles (NYSE:TEM): -- The company added more than 3 million new clients in the quarter, taking its managed customer base to over 81.4 million, an increase of 50% from the first quarter of 2004. -- The number of customers managed by the Latin American operators increased by 84% to 59 million, with significant organic growth in markets such as Mexico, Argentina and Colombia. -- In spite of strong commercial efforts to capture the growth in its markets, Telefonica Moviles posted significant increases in its results. Consolidated operating revenues rose 39.3% to EUR 3,676 million, with a 41% increase in service revenues. OIBDA (operating income before depreciation and amortisation) advanced 19.1% to EUR 1,318 million. -- Net profit totalled EUR 432 million. -- Telefonica Moviles Espana achieved net adds of more than 100,000 lines (surpassing 19 million clients) as it gained 219,000 customers in the contract segment, which now represents 50% of its total customer base. It also delivered a solid performance in service revenues, which rose 7%. -- The company diversified the sources of its results, with a growing contribution from operations in the Andean Region (Venezuela, Colombia, Ecuador and Peru) and in the Southern Cone (Argentina, Chile and Uruguay). -- The Latin American operating companies now contribute 43,6% of total Group revenues, as their revenues increased by 2.4x over the first quarter of 2004. The combined OIBDA of these operators grew 2.6x, reaching EUR 353 million -- Venezuela became one of the Group's main cash flow generators, contributing EUR 106 million to OIBDA, as a result of its operational soundness. NOTES ON THE PRESENTATION OF RESULTS This document contains financial information/data reported under IFRS. These data are preliminary, as only full compliance with International Financial Reporting Standards issued at 31/12/2005 is required, unaudited, and thus, being subject to potential future modifications. This financial information has been prepared based on the principles and regulations known to date, and on the assumption that IFRS principles presently in force will be the same as those that will be adopted to prepare the 2005 full year consolidated financial statements and, consequently, does not represent a complete and final adoption of these regulations. NOTE: The English language translation of the consolidated financial statements originally issued in Spanish has been prepared solely for the convenience of English speaking readers. Despite all the efforts devoted to this translation, certain omissions or approximations may subsist. Telefonica Moviles, its representatives and employees decline all responsibility in this regard. In the event of a discrepancy, the Spanish-language version prevails. Highlights regarding comparative information and changes in the consolidated Group: In Brazil, in March 2004, the tax credits used by Tele Leste, TCO, CRT and Tele Sudeste as a result of the amortization of the existing goodwill in those companies were capitalized, thereby increasing Brasilcel's shareholdings in these operators. In June 2004, the company increased its stake in Mobipay International to 50%, prompting a change in the way it is consolidated, from the equity method to the proportional method. In June 2004, Brasilcel increased its stake in Sudestelcel Participacoes to 100%. On 23 July 2004, the company acquired 100% of Telefonica Movil Chile. Since that date, Telefonica Movil Chile has been integrated within Telefonica Moviles' consolidation perimeter through the full consolidation method. Following the voluntary tender offers for Tele Sudeste Celular (TSD), Tele Leste Celular (TBE), Celular CRT (CRT) and Tele Centro Oeste (TCO) carried out by Brasilcel, directly and indirectly through its subsidiary Telesp Celular Participacoes (TCP) in October 2004, Brasilcel's stakes in the mentioned companies' share capital have increased to: 90.9% in TSD, 50.6% in TBE, 67.0% in CRT, and TCP's stake in TCO to 50.6%. Following the acquisition of 100% of BellSouth Group's stake in the mobile operators in Ecuador, Colombia, Guatemala, Panama, Nicaragua, Peru, Uruguay and Venezuela, these companies have been integrated within the Telefonica Moviles' consolidation perimeter since November 2004 through the full consolidation method. The capital increase carried out by Telesp Celular Participacoes (TCP) in January 2005 was fully subscribed for an amount of approximately 2,054 million reais. As a result of this transaction, the stake held by Brasilcel in TCP stands at 65.70%. In January 2005 the acquisition of 100% of BellSouth Chile and BellSouth Argentina (Movicom) was completed. Since January 2005, these companies are integrated within the Group's consolidation perimeter through the full consolidation method. For an easier understanding of Telefonica Moviles' financial statements, the economic stakes held by the Company in each of its subsidiaries, along with the consolidation method used in its consolidated financial statements in each period, are provided. With the acquisition of Bellsouth's Latin American operations completed in January, the first quarter of 2005 marked a starting point for Telefonica Moviles in its new dimension: as an operator with a presence in 15 countries, with an aggregate population of over 500 million, where the operators managed by the Company enjoy solid competitive positions (as the number 1 or 2 players in the principal markets). The financial statements for 2004 and 2005, and the corresponding comments regarding our operations included herein, reflect the current composition of Telefonica Moviles Group at each point in time. As a result, given the changes in the consolidation perimeter over the last 12 months, the consolidated results and those of some of our operators are not comparable between each period. During 1Q05 the Group's main markets of operation saw intense commercial activity (gross additions, migrations and handset upgrades) driven by the extension of the Christmas campaigns to the first week of January (Three Kings' Day) in most countries and as a result of ongoing competitive pressure from other operators. Against this backdrop, Telefonica Moviles ended March with over 81.4 million managed customers, after registering net adds of over 3 million in 1Q05. Of the total customer base, 59 million corresponded to Latin American operators, 19 million to Telefonica Moviles Espana and over 3 million to Medi Telecom (Morocco). Operating revenues grew 39.3% year-over-year to EUR 3,676 million in 1Q05, driven by the positive performance in service revenues. The organic growth of consolidated revenues (organic growth, including the consolidation of Telefonica Movil Chile and of the assets acquired from BellSouth in Argentina, Colombia, Chile, Ecuador, Guatemala, Nicaragua, Panama, Uruguay and Venezuela from 1 January 2004 and assuming constant exchange rates) stood at 13.8% vs. 1Q04. Service revenues totalled EUR 3,201 million, an increase of 41% from 1Q04, while handset sales rose 29% to EUR 475 million. By geographical areas, Telefonica Moviles Espana recorded year-over-year growth of 6.1% in revenues to EUR 2,075 million Of note is the favourable evolution of service revenues, which rose 7% despite stiffer competitive pressure and the reduction in interconnection tariffs implemented from November 2004. The consolidated Latin American operators recorded operating revenues of EUR 1,603 million (+135.0%), with an 17.8 p.p increase in their contribution to the Group total to 43.6%. The organic growth of revenues from operations in Latin America would be 25.3% versus the first quarter of 2004. Consolidated operating income before depreciation and amortisation (OIBDA) stood at EUR 1,318 million in 1Q05, an increase of 19.1% vs. 1Q04. This performance was driven by the intensification of commercial efforts by the Group's operators throughout their markets. Year-on-year organic growth of OIBDA would be 1.1%. The consolidated OIBDA margin stood at 35.9%, impacted by increased commercial costs resulting from the operators' strategic efforts to capture a significant part of the growth in Latin America -where total net adds in 1Q05 were 24% higher than in 1Q04- and to maintain its competitive position in aggressive commercial environments -which in Spain is marked by the continued strong activity in number portability, which started in 2004. By regions, OIBDA at Telefonica Moviles Espana stood at EUR 987 million in 1Q05 (-0.3% vs. 1Q04), representing an operating margin of 47.5%. OIBDA for the consolidated Latin American subsidiaries, in euros, reached EUR 353 million (2.6 times more than in 1Q04).Organic growth of OIBDA at the Latin America operators would stand at 5,2%. The depreciation charge increased by 50.7% compared to 1Q04, primarily driven by the changes to the Group's consolidation perimeter, including EUR 61 million of depreciation of intangible assets related to the acquisition of Telefonica Movil Chile and of the eight Latin American operators acquired to BellSouth in 2004. At the end of 1Q05 the allocation of the purchase price of the operators acquired to BellSouth in Chile and Argentina in January has not yet been carried out. These acquisitions have led to an initial goodwill of EUR 659 million. The price allocation will be carried out in the following months based upon the conclusions obtained from appraisals carried out by third party independent experts. Income from associated companies improved, as net losses from companies consolidated by the equity method declined by 31.6%, to EUR 8.6 million from EUR 12.5 million in the first quarter of 2004. Losses attributable to the Group from its stake in Medi Telecom were 12% lower year-over-year, while losses attributable to IPSE 2000 were 39% lower than in 1Q04. Higher negative net financial results, a line item which in 1Q04 was affected favourably by the evolution of exchange rates, which translated during that quarter into positive net forex results registered in intra-group loans. Had 1Q04 closed with similar exchange rates to those of 4Q04, financial results in the first quarter of 2004 would have changed sign and as a result, the year-on-year comparison with 1Q05 would have been positive. The evolution of exchange rates in the subsequent quarters of 2004 meant that for full-year 2004, greater financial expenses were booked under IFRS than under Spanish GAAP. For all of 2004, the results of exchange rates differences in intra-group loans were negative. Therefore, the effect of the comparison 1Q05/1Q04 will not be relevant for full fiscal year 2005. Interest expenses increased 44% compared to 1Q04, due to the greater average debt balance of net debt in 1Q05 (+106% vs. 1Q04). Consolidated net financial debt was impacted by the acquisitions made in the second half of 2004 and January 2005 (Telefonica Movil Chile, BellSouth's Latin American operators and the tender offers for shares in Brasilcel's subsidiaries). At the end of 1Q05 consolidated net debt stood at EUR 9,369 million compared with EUR 4,565 million at the end of 1Q04, while proportionate net debt stood at EUR 9,999 million, compared with EUR 4,404 million. The effective tax rate was 39%, mostly reflecting a higher tax rate in Venezuela, where fiscal consolidation does not exist. In all, net income totalled EUR 432 million in 1Q05 vs. EUR 448 million in 1Q04, impacted fundamentally by the higher negative net financial results. Consolidated investment in fixed and intangible assets reached EUR 311 million in 1Q05. SIGNIFICANT EVENTS The following significant events have taken place in the past few months: On 6 May, approval was given at the Telefonica Moviles General Shareholders' Meeting for all the Agreements Proposals, including the payment of a gross dividend of EUR 0.193 per share. The dividend will be paid on 15 June. On 20 April, Telefonica Moviles, via its wholly-owned subsidiary, TEM Puerto Rico Inc., carried out the conversion of the promissory notes representing 49.9% of the shareholder equity of the Puerto Rican operator Newco million Wireless Services Inc. once it had obtained the appropriate regulatory approvals. In April, a takeover bid was launched for the outstanding minority shareholdings in the Peruvian operator Comunicaciones Moviles del Peru, S.A. acquired from Bellsouth, where Telefonica Moviles, S.A holds a 99.85% stake. SPAIN The first quarter of the year was marked by both the end of the Christmas campaigns and the impact of the Holy Week campaign at the end of March (during 2004, it fell in April). As a result, the first three months of 2005 saw a continuation of the intense competitive activity seen in 2004, notably from the second quarter on, especially in number portability actions. By the end of 2005 the market had grown to an estimated 40 million lines, with year-over-year growth of 4.5% vs. 1Q04 and an estimated penetration rate of 90.3% (+3 p.p. vs. 1Q04). Against this backdrop, Telefonica Moviles Espana recorded a strong level of commercial activity during 1Q05, with a volume of over 2.5 million actions (+12.5% higher than in 1Q04). The good performance of net additions in the contract segment, which were up 40% over 1Q04, is worth highlighting in this context, as a reflection of the Company's growth strategy centred on preserving its leadership in market share of revenues. This performance, combined with ongoing prepaid to contract migrations (over 210,000 migrations in 1Q05), meant that the contract segment accounted for half of Telefonica Moviles Espana's customer base by the end of March, representing an 18 p.p. increase in three years and an 8 p.p. increase in the last year. Over 1 million handset upgrades were made during the quarter (+23% vs. 1Q04). Telefonica Moviles Espana increased its customer base by over 100,000 lines in 1Q05, to 19 million customers. As for usage, traffic carried on Telefonica Moviles Espana's networks in 1Q05 increased by 11,000 million minutes (+11% vs. 1Q04), with a sharp increase in on-net traffic (+13%). MOU stood at 133 minutes in 1Q05, an increase of 8.9% in comparable terms. The positive trend in voice usage ratios was significantly affected by the campaign launched in March to boost off-peak calls, a plan named "Ya Te Llamo Yo "or "Let me call you". This promotion enables both contract and prepaid segment customers to talk for free of charge to any other movistar customer during the evenings and weekends in exchange for a subscription fee. More than 850,000 lines have subscribed to this promotion to date. Regarding data services, it is worth highlighting the increasing take-up of content access services, with over 4.2 million customers using e-mocion internet portal during March, with half a million of them using i-mode technology. The number of MMS users stood at 1.4 million users by end March 2005, with monthly average usage levels of over 3 MMS. All of this led to total data and content services revenues of EUR 250 million in 1Q05 (+9% vs. 1Q04). We should also highlight the good performance shown by roaming-out services, driven by the introduction of the Single Global Tariff at the end of 2004. By launching this tariff, the company offers a much more transparent and simplified price structure, linking the price of calls to a specific geographic zone, regardless of which operator's network the client uses. Total ARPU for Telefonica Moviles Espana was EUR 32.9 in 1Q05, an increase of 4.8% in comparable terms, with data ARPU contributing EUR 4.4. In addition, the Company has launched a series of new products and initiatives since the beginning of this year aimed at consolidating new revenue growth drivers: -- Ruta moviStar, a pioneering service in the world, whereby mobile handsets serve additionally as an advanced online navigation tool, thanks to the incorporation of a GPS device and the browsing software included in the offer. -- Pagos moviStar services, whereby the Company's customers can pay with their mobile phone at food and beverage vending machines located in airports, train stations, shopping centres and universities. -- Mail moviStar Empresas , a new, on-line, e-mail service for corporate customers, having as main novelty its compatibility with mobile handsets using operating systems such as Symbian and Windows Mobile, thereby broadening the range of solutions which allow for handling e-mail on mobility, as proprietary handsets are not required. -- Addition into the UMTS/3G e-mocion portal of the latest Antena 3 Television news, through Canal A3 24 Horas, an exclusive news channel provided by Antena 3. This is the first time a national television broadcaster modifies its news content to a mobile telephony format so that it can be viewed by 3G handset users. -- Together with Lotojuegos.com, Telefonica Moviles Espana launched a pioneering mobile telephony betting service in Spain and Europe, where customers can use their handsets to make a series of lottery bets, paying for them with the Mobipay service. In parallel with the change of image of the movistar brand, a new product for all residential and professional customers of Telefonica Moviles Espana was launched at the beginning of April: Mi Favorito, which offers the lowest price available in the Spanish market, 1 euro cent per minute, for all voice and video calls to a Movistar number of their choice., plus a single and reduced price for SMS and MMS. This product launch clearly underlines the Company's commitment to its customers to provide attractive, simple and innovative products at affordable prices. As for financial results, operating revenues were EUR 2,075 million in 1Q05, a year-over-year increase of 6%. The proportion of handset sales in total revenues remained constant at 13%. Service revenues continued to show a solid pace of growth, increasing 7% year-over-year to EUR 1,815 million in 1Q05. Both the sharp (13%) increase in commercial activity and the increased weight of number portability actions in total gross adds have impacted commercial expenses, bringing the weight of subscriber acquisition and retention costs over operating revenues in 1Q05 to 11.2%, 3 p.p. higher than in 1Q04. In all, OIBDA stood at EUR 987 million for the quarter, 0.3% less than a year earlier. Excluding the impact of commercial and advertising costs, OIBDA would have registered year-over-year growth of 7%. The OIBDA margin stood at 47.5%. Capex in 1Q05 totalled EUR 135 million. Telefonica Moviles Espana continues to roll out its UMTS network, with more than 4,100 base stations installed to date. MOROCCO Medi Telecom's customer base continued to grow, ending 1Q05 with 3.2 million customers after achieving 297 thousand net adds in the quarter. In 1Q05 the accounting criteria adopted for Medi Telecom's customer base was brought into line the criteria applied in Latin America. As regards financial results, revenues in 1Q05 stood at 92 million euros (+26.8% vs.1Q04), driven by increases in the customer base and in traffic. OIBDA totalled EUR 34.7 million, leading to an OIBDA margin of 38% (42% in 1Q04), impacted by the strong commercial activity during the quarter. LATIN AMERICA BRAZIL The Brazilian market continued to grow strongly in 1Q05, albeit at a slower pace than in 2004. At the end of March, the penetration rate in Brazil stood at 38% compared to 37% in December 2004 and 28% in March 2004 (41% in Vivo's areas of operation). Against this backdrop, with continued intense competitive pressure by all operators, Vivo has maintained its market leadership, with a customer base of close to 27 million at the end of 1Q05 (+23.2% year-over-year). The estimated average market share in Vivo's areas of operation stood at 49%. VIVO continued to focus high-value customer acquisition and retention, aligning entry barriers in the contract segment to those of its competitors and driving prepaid to contract migrations. This strategy is reflected in the sharp increase in commercial activity in the contract segment, which increased 49% compared to 1Q04, leading to a 10% increase in contract customers, driven by the favourable performance in corporate customers (+31% in the last 12 months). As for customer usage and traffic, total MOU in 1Q05 was 80 minutes (93 minutes in 1Q04), impacted mainly by the evolution shown by incoming MOU. Total ARPU for the quarter reached 29 reais (35 reais in 1Q04). The trend in year-over-year usage ratios continues to be shaped by the growth in the total customer base, driven by the prepaid segment - which accounted for 80.3% of total customers at the end of 1Q05 compared to 77.9% in 1Q04 - traffic promotions and the impact on incoming traffic of the blocking of fixed-to-mobile calls by fixed-line operators. In addition, right planning in contract prices, due to greater aggressiveness by competitors, must be taken into account. Data services continued to perform well, with data revenues representing 5.5% of Vivo's total service revenues in 1Q05 (vs. 4.4% in 1Q04). Even more remarkable is the fact that more than 25% of these revenues were accounted for by downloads and browsing, highlighting the increasing use of internet access services and Vivo ao Vivo downloads. Regarding Vivo's financial results, 1Q05 revenues grew 1.9% year-over-year in local currency, boosted by service revenue growth (+5.2%) which was partly offset by lower handset sales. Operating income before depreciation and amortisation totalled EUR 142 million in 1Q05, leaving an OIBDA margin after management fees of 38.3% (40.5% in 1Q04). Year-over-year performance of both indicators is affected fundamentally by the increase in commercial and call centre costs, as a result of the intense competitive environment and Vivo's strategic focus on high-value segments and network costs. Finally, capex in 1Q05 stood at EUR 77 million, driven by increased capacity of the operators' networks and by the ongoing rollout of Vivo's 1xRTT and EV-DO networks. NORTHERN REGION MEXICO The Mexican market was marked by intense commercial activity in the first quarter of 2005, during which Telefonica Moviles Mexico extended its Christmas campaign until the first week of January (Three Kings' Day). These campaigns resulted in net adds at Telefonica Moviles Mexico of 422 thousand new customers during the quarter, representing a sharp year-over-year increase of 33% vs. 1Q04. Telefonica Moviles Mexico ended 1Q05 with over 6MM customers (+7.5% vs. 4Q04 and +61% vs. 1Q04), consolidating its position in the Mexican market, with an estimated market share of 15%. The performance of GSM net adds, driven by our service offerings, continued to be the main driver of customer growth. As of March 2005, GSM customers accounted for 78% of the total customer base, compared to 72% in December 2004. Within this context, MOU in 1Q05 stood at 54 minutes (61 minutes in 1Q04), while ARPU was 151 Mexican pesos (174 in 1Q04). The trend in usage ratios compared to 1Q04 reflects accelerated growth, as well as quarterly seasonality (as Easter holidays in 2004 fell in April). Regarding financial results, revenues grew 36.5% year-over-year in local currency vs. 1Q04, boosted by handset sales and service revenue growth (+27% vs. 1Q04), driven by the larger customer base. It is worth highlighting that operating losses before depreciation and amortisation in 1Q05 (EUR 49MM) were similar to those recorded in 1Q04 (EUR 47MM), despite a 60% year-over-year increase in commercial activity. Telefonica Moviles Mexico's GSM network now reaches 279 cities (vs. 248 at the end of 2004). ANDEAN REGION VENEZUELA The Venezuelan mobile market posted strong growth in the first quarter of 2005, driven by the improvement in the country's economic indicators (with lower inflation in 1Q05 than in 1Q04), along with the campaigns oriented to capturing market growth. At the end of March 2005, the estimated penetration rate was 34%, up from 30% in December, 2004 and surpassing initial expectations. In this context, TM Venezuela's customer base stood at 4.6MM at the end of the quarter, having registered 269 thousand net adds in 1Q05, with a significant growth in service revenues. In spite of intense commercial activity during 1Q05, the Company had a solid OIBDA margin of 40.7%, with operating income before depreciation and amortisation of EUR 106MM during the quarter. COLOMBIA Despite the seasonality typical of the first quarter of the year, the growing pace of commercial activity was maintained in Colombia during 1Q05, bringing the estimated penetration rate to 27% (vs. 23% in 2004) Customer acquisition initiatives at Telefonica Moviles Colombia were ongoing in 1Q05, continuing with the increase shown during the 2004 Christmas campaigns. Thus, net adds in 1Q05 surpassed 400 thousand customers, bringing the total customer base to 3.7MM. Regarding financial results, the OBIDA margin was impacted by the high level of commercial activity in the quarter, standing at 19.7%. PERU Telefonica Moviles' combined customer base in Peru -the aggregate of Telefonica Moviles Peru and the BellSouth operator acquired in October 2004-totalled nearly 3MM customers at the end of March 2005.Net adds for the quarter were 102 thousand, with another quarter of positive performance by the contract segment, which accounted for 22% of total net adds in 1Q05. Regarding financial results, it is worth pointing out that the results for 1Q05 include the contribution by the BellSouth operator acquired in October 2004. Revenues from our operations in Peru stood at EUR 83MM in Q105, boosted by the growth in the customer base and higher traffic. It must be taken into account that service revenues are negatively impacted by lower incoming traffic from fixed lines and the reduction in fixed-to-mobile termination tariffs. The OIBDA margin was 31.5%, despite higher initial costs driven by the co-existence of two networks, underpinned by the seasonality in commercial activity typical of the first quarter. SOUTHERN CONE REGION ARGENTINA The strong growth of Argentine cellular market seen in 2004 continued in 1Q05, leading to an estimated penetration rate of 38% at the end of March, compared to 34% in December 2004. Following the completion of the acquisition of BellSouth's operator in Argentina in January 2005, Telefonica Moviles has consolidated its position in the Argentine market. As a result, the total customer base at the end of March 2005 stood at over 6MM, with net adds during the quarter of 419 thousand. Regarding commercial activity, it is worth highlighting the ongoing increase in the contract segment, as a driver for customer growth. At the end of 1Q05, the contract segment represented over 40% of the total customer base. Regarding financial results, revenues for operations in Argentina reached EUR 205MM in 1Q05, boosted by the strong growth in the customer base and traffic. Operating income before depreciation and amortisation (EUR 24MM) was affected by the intense commercial activity during the quarter -which in 1Q05 nearly doubles the combined commercial activity of BellSouth and Unifon in 1Q04- by the strong competitive pressure as well as the costs associated with the rollout of the GSM network. Also of note is the impact of the integration costs of the two operators managed by Telefonica Moviles. As a results, the OIBDA margin stood at 11.9% in 1Q05. Finally, capex was EUR 17MM in the first quarter, driven by the ongoing rollout of the GSM network in 1Q05. CHILE Telefonica Moviles maintained its leadership position in the Chilean market in the first quarter of 2005, with a combined customer base -the aggregate of Telefonica Moviles and the BellSouth operator acquired in January 2004- of 4.9MM customers and an estimated market share of 50%. Net adds in 1Q05, a quarter marked by seasonality in commercial activity, totalled 156 thousand. Revenues for operations in Chile reached EUR 138MM in 1T05, while the OIBDA margin was 25.1%, affected by the integration costs of the two operators managed by Telefonica Moviles, as well as by the rollout of the GSM network. GLOSSARY ARPU (Average Revenue per User): Average monthly revenue per customer. This includes revenues from fees, monthly subscriber fees, traffic -without discounting traffic promotions-, outgoing roaming and interconnection fees. It excludes handset sales and revenues from incoming roaming. Loyalty programs are not considered as lower revenues in the ARPU calculation The ARPU figures appearing in this report refer to average ARPU for the quarter. The average quarterly customer base is calculated as the average of the average customers bases of the three months in the quarter. For the Brazilian operators, ARPU is calculated as service revenues (operating revenues - handset sales) divided by average customer base. MOU (Minutes of Usage): Average airtime minutes per customer per month. Airtime minutes include outgoing traffic (mobile to fixed, on-net mobile and mobile to other mobile operators) and incoming traffic (fixed to mobile and other mobile operators to mobile). Churn: Disconnection rate. This is calculated as the number of disconnections during the period among the average customer base for the period. Commercial actions: Includes gross additions, migrations and handset changes. Fixed wireless customer: Fixed customer using wireless infrastructure. Active MMS user: Any user who has sent or received an MMS in the last month, other than those who only receive promotional MMS messages. Active I-mode user: Any user who has accessed i-mode content in the last month during an internet browsing session. Consolidated net financial debt: Includes the financial debt of all the companies consolidated by the proportional and full consolidation method. Net financial debt is defined as: Long-term debt + Short-term financial debt, including current maturities - Short-term investments - Cash and banks. Proportionate net financial debt: Includes the net financial debt of the companies in which Telefonica Moviles Group has an economic stake and a significant influence in the management, weighted in each case by the economic ownership. A complete version of this press release, including related tables, is available on the company's website, at www.telefonicamoviles.com