Vittorio Colao - Chief Executive Officer, Executive Director and Chairman of Executive Committee Andrew N. Halford - Chief Financial Officer and Member of Executive Committee Michel Combes - Executive Director, Member of Executive Committee and Chief Executive of Europe Region Operations Nicholas Jonathan Read - Chief Executive Officer of Asia-Pacific & Middle East Region

Akhil Dattani - JP Morgan Chase & Co, Research Division Nick Delfas - Morgan Stanley, Research Division Justin Funnell - Crédit Suisse AG, Research Division Nick Lyall - UBS Investment Bank, Research Division Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division Simon Weeden - Citigroup Inc, Research Division James Britton - Nomura Securities Co. Ltd., Research Division Robert Grindle - Deutsche Bank AG, Research Division Ottavio Adorisio - Societe Generale Cross Asset Research Andrew Beale - Arete Research Services LLP Stephen Howard - HSBC, Research Division James Ratzer - New Street Research LLP Guy R. Peddy - Macquarie Research Maurice Patrick - Barclays Capital, Research Division Jeremy A. Dellis - Jefferies & Company, Inc., Research Division John Karidis - Oriel Securities Ltd., Research Division Paul Marsch - Berenberg Bank, Research Division John Davies - ING Groep N.V., Research Division

[indiscernible] ladies and gentlemen, and welcome to the Vodafone Group Third Quarter IMS Conference Call. Today's call is hosted by Vittorio Colao, CEO of the Vodafone Group. Please go ahead, Mr. Colao.

Thank you, operator. Good morning, and thank you all for joining Vodafone's Interim Management Statement Call for the third quarter ended in December. I'm here with Andy Halford, Nick Read and Michel Combes. I will start with few highlights on the quarter before passing to Andy who will take you through all the operating companies and then I will summarize, and we'll then open to questions. So let me start on Slide 3, highlights of the quarter. Group service revenue grew 0.9%, which is just over 3% excluding MTRs. This growth is less than the previous quarter, reflecting difficult conditions in a number of our European markets, offset by strong momentum from our AMAP regions and continued growth from operations in Northern Europe. In this context, we continue to deliver, in our strategic growth areas, the 3 areas of data, enterprise and emerging markets. Data, specifically, grew 21.8%, led by the increasing smartphone penetration, which is now over 24% in Europe. Enterprise growth of 0.8% was a little slower than the previous quarter due to competitive and macroeconomic pressures in voice, but we still see a healthy and growing demand for enterprise data services. And we continue to generate strong cash flows. Today, we report GBP 1.5 billion free cash flow for the quarter. We are now over halfway through the GBP 4 billion SFR buyback program and over 70% complete against our GBP 6.8 billion commitment. And finally today, we confirm our guidance for the '11/'12 fiscal year. So we can move to Slide 4. Here you can see our regional performance for the quarter. Europe declined 1.7% on a reported basis. However, once we remove the impact of regulated voice termination rate cuts, Europe grew 1%. Some of our markets in Southern Europe remain very challenging, as I…

Thank you, Vittorio, and good morning. Let me start by giving you a bit more color on the trends we saw in Europe during the quarter. Service revenues declined 1.7%. While excluding MTRs, they grew by 1.0%. Performance in Europe continues to see a north-south divide with the weak consumer and economic environments in our Southern European operations offsetting the growth from the U.K., Germany, Netherlands and especially in Turkey. In particular, we saw a deterioration of consumer trends in Italy during the quarter and conditions in Spain remain very tough. So turning to Slide 8. Against the backdrop of continuing GDP growth, German service revenue grew 0.7%. This growth includes the benefit of lapping the prior year MTR cut for one month in the current quarter. On an underlying basis, service revenue grew by 3.3%. Data revenue grew 22%, reflecting strong smartphone sales in the quarter and a 67% data attach rate. Enterprise strength continues with strong demand in both the mobile and fixed segments. We continue to see success with LTE and now have over 88,000 customers. Moving on to Italy on Slide 9. As Vittorio has mentioned, the economic environment in Italy has deteriorated, and we have seen the impact of this reflected in our service revenue, which declined 4.9% or 2.8% excluding MTRs. Mobile-only service revenue declined 6.1%, offset by fixed revenues that grew 4.9%. We have seen lower altered bundle usage along with intense price competition during the quarter. Against this, we continue to have positive mobile number portability, driven by the consumer segment. Data revenue growth of 16% was supported by increasing smartphone penetration, and in particular, mobile Internet growth of 74%. Enterprise growth in Q3 was 1.9%, down 4 percentage points on the previous quarter. We continue to have success with the Vodafone…

Thank you, Andy. I would like to spend a little time now giving you an update on how our business is making the transition in the data world. I'm on Slide 18, which I think is an important and is somewhat good chart. As you can see from the red and blue areas in the top part of the slide, we are increasing our exposure to the strategic growth areas of data and the emerging market and reducing our exposure to mature mobile voice, which is the gray part. Today, 62% of our service revenue in the third quarter comes from the higher growth areas and this is, as you can see from the chart, an increase of 5 percentage points in the past year and 10 percentage points in the past 2 years, so progress continues. As a reminder, data grew 22% in the quarter; in the month, 7.6%. I do believe that we have a considerable data opportunity ahead. There is still quite low data penetration in the majority of our emerging markets and also prepaid in our mature markets. Today, we have 37% of our revenues in Europe from integrated tariffs. And as you can see from the pie chart at the bottom left, out of bundle customer contract revenues were 17% this quarter, reducing from 18% that we reported in the first half of the year. So we are continuing our proactive improvement of mix, and we will continue to invest and maintain the quality of our network and CRM to support this mixed transition. Slide 19 gives you, again, a little bit more information on these key growth areas. We are selling an increasing number of smartphones each quarter, and we continue to see higher ARPUs where customers migrated to a smartphone for the first…

[Operator Instructions] Our first question comes from the line of Tim Boddy of Goldman Sachs.

Yes, Tim. Thank you for the question. I would like to answer at the high level. I would say that definitely in Italy there was, in December, a kind of shock in the country and clearly there was some changing behavior in spending. This is not really a Vodafone-only answer. It's more of a general country answer. I perceive that the country is moving ahead in the right directions. This will probably continue to give a sense of a need for controlling customer -- family spending and household spending and will be a prolonged kind of austerity type of situation. But possibly, possibly the general mood and the general trend is in the right direction. I think Michel might comment more specifically on the traffic trends or these things. But I would say I don't see Italy, given the fact that we start from lower prices, given the fact that we start from a more flexible cost base, going in the kind of space where Spain has been for the last 3 years. Nonetheless, it will be a long and prolonged kind of austerity type of situation. And then I would take that -- Michel, you want to add something, and then I take the mitigation.

Just what you have seen in December is pressure on the core business. So all around the world, voice and text for consumer and enterprise, reflecting what Vittorio has just said, to governance, the macro environment which is extremely tough and the competitive situation, which remains quite active mainly in data, so which has on top of the volume, put some pressure on the pricing. So that’s as Vittorio has said, let's say, the pressure has probably increased a little bit in December and we expect some pressure to remain in the months to come in this country. We have taken several initiatives, namely, in pricing in order to push our integrated tariffs, which has allowed us to post quite a nice growth in data as well in Italy, so -- which is good news for the future.

On the mitigation question, I have to tell you that, again, as always, you work for the best scenario but you have to prepare for the tougher one. We are clearly looking at costs across Europe and particularly in Southern Europe. We are just at the beginning of the budget process, so I cannot be more specific. I think we will be more specific in May. But of course, we are looking at ways of running the cost structure of all, of course, but in particular, the ones that are under pressure in a slightly different way. I think we have room to leverage more on multi-country operations and not necessarily replicate our functions everywhere. This has already happened and will be accelerated in the network area, so network and technology, more in general, is going to be clearly an area of acceleration in the kind of cost drive in the terminals area, in the logistics area and possibly in the staff functions area, so this is what we have in mind. The commercial costs are a more country-specific type of area. It's not the case for Italy; it's more the case for Spain. Clearly, that's another area of focus but this is again more local and more related to competition.

Our next question comes from the line of Akhil Dattani of JPMorgan. Akhil Dattani - JP Morgan Chase & Co, Research Division: A couple of questions please. Firstly on Australia, could we just get an update on your turnaround plans for that operation? And with that, any color on the reports that we're hearing, that Hutch might be looking to exit that joint venture. And then, on the iPhone, 2 things of interest: Firstly, are you seeing any unusual or unexpected margin pressures market-by-market as a function of the iPhone 4S? And with that, are you seeing any changing usage behaviors, particularly with regards to what had been very well aligned data volume and data growth trends over the last few quarters?

I pass the question on Australia to Australia specialist sitting next to me, Nick Read. Just as an opening, I say that I'm not very pleased with the performance there.

As always, a good entry and -- so basically -- yes. If we start with the foundation for the turnaround, which is the network performance where we have the significant issue was 3G metro performance. And over the quarter, the 3G metro performance was within target parameters that we set on record volumes, whether it's cell availability, drop call rate, et cetera. So we got a solid performance on the network. There were 2 major programs, if you remember, that we were progressing to strengthen the network. The first was the 850 rollout, which is now 2/3 complete, and we have 1,000 sites on 850. And the second one was Huawei RAN swap, which is now 40% complete. Both of those will complete as targeted in the summer. If we then go on to more around the brand recovery process, so we've been running a marketing campaign, connect on the new Vodafone network, and we will now, this coming quarter, move on to Vodafone Network Guarantee, which is something we've been successfully piloting over the last 5 weeks with good results. So then you look at customer performance. The market obviously remains highly competitive with a lot of price pressure as it was before we had the problems. However, our active prepaid base is now stabilizing, and our Vodafone-branded postpaid base is now growing. The main issue we're left with at the moment is just higher churn rates on the 3 base as we handle the migration, so that's where we're spending quite a bit of focus at the moment. And as you may have read, we are also looking at the cost structure of the business and optimizing that. So clearly, we're not where we want to be. It's taking time to turn it around, but we should expect continued improvement next year.

I think we have done the right things. It's taking longer than expected to kind of get the customers back. On the iPhone question and more in general usual behaviors, let me tell you this, that with the exception of the Symbian environment, which is stable, all the other environments have a, I think, healthy, not massive, but positive increase in data usage. This is true across tablets, across RIM, across Android, across iPhone and across mobile broadband, of course, in different ways. But I would call it healthy because there is an increase but it's not a massive increase i.e. it's exactly what we planned, exception Symbian because Symbian is kind of not a growing environment. iPhone, specifically, it has to be managed. It has to be managed because clearly iPhone is great, because it produces incremental revenues if priced appropriately. But of course, it has an incremental cost. I don't see it as an incremental pressure because the conditions are basically the same as stable, so it's just a matter of volumes and managing the associated commercial costs. That's it. I would say positive, not incremental, but it has to be managed.

Our next question comes from the line of Nick Delfas of Morgan Stanley.

Maybe a question for Andy on termination rate drags. Could you just clarify what the outlook is for Q4 and FY '13? And then secondly, a question on LTE rollouts. What are the plans outside of Germany? And how, if at all, do you think that might affect your capital spending budget for Europe?

Okay. Nick, on the MTRs, I think next quarter -- quarter we're now in, the major impact is going to be the German MTR of December a year ago sort of coming out of the reckoning and that will probably help us by, I believe, somewhere around 30 basis points or thereabouts in the Q4. Growth rates next year, which clearly is still a slightly moving feast, I'd suspect will be in a similar sort of range for next year, but some of the component parts there is still sort of becoming clearer. So a slight benefit in Q4 and sort of similar for next year.

So that includes the drag from Italy but despite that, the other countries will be getting better?

Yes, yes.

Yes. And Nick, on your question on LTE, we're very pleased with the LTE rollout. As Andy has said, we have 90,000 customers. The usage is good and healthy, i.e., intercepted or intercepted. They received last night an enthusiastic email from the German CTO to the Head of Terminals on the performance of the first LTE terminals. So the phones, which, again, was heartwarming because it was really kind of wow, this is a good thing. So -- and what we see in Verizon Wireless is also very positive. So our intention is to continue the rollout, to consider this a good business opportunity, today mostly for residential access, but tomorrow with new -- with the handsets and devices coming to the market also for handsets. Again, I was last week in the U.S., I visited some shops. It's amazing how well positioned and what's the -- the user case in the shops for LTE phones, and Verizon is really presenting it very well. So we will roll it out wherever we can, when we have the frequencies. As you know, the frequencies are coming in a phased way. And so, of course, we have to do it in a phased way. We are preparing the network for it anywhere. And in terms of CapEx spending, keep in mind that the network is -- and radio network, particularly, is not the majority of our spending so I think we have the room to deploy it as well as we can when we have the frequencies. So it's not an issue of CapEx, it's more an issue of having it and having the possibility to roll it out. But we are positive.

Our next question comes from the line of Justin Funnell at Credit Suisse. Justin Funnell - Crédit Suisse AG, Research Division: Two questions please. The first is on M&A in Europe. Just wondering what you can take away from the process in Greece, whether the blocking of 3 going into 2 in Greece, it has wider implications. Does it, for example, stop being able to go from 4 to 3 networks in markets like Germany and Spain? And secondly, on the U.K. business, you've had some fantastic contracts, net adds over the last couple of years starting around that's when you got the iPhone. That seems to slow down in the quarter. Are we likely to see a sort of natural slowdown in that part of the business now as you get past 2 years from having the iPhone in the U.K.?

Yes, let me pass the second question to Michel and get the first one. The M&A in Europe, I don't think you should -- I always said you should never read across situations. So U.S., Greece, Spain, Germany, they're all different markets. And it's a bit more complicated than just 3 to 2 or 4 to 3. It's about market shares. It's about power of a distribution. It's about pricing levers. So there's a number of elements. In Greece, we decided that the best thing was to look for operational cooperation rather than financial cooperation. There is also other elements, quite frankly. Greece is not today the easiest environment to forecast for the future. So don't do too much read across for other European countries and especially not for the ones that you have mentioned. On U.K., Michel?

On the U.K. So you are right, slight slowdown but still a very strong performance in Q3, 174,000 contract net adds so which is consistent with what we have seen in the previous quarters. You can expect obviously slight slowdown in the coming quarters as we have well penetrated the base. And again we start to face a slightly higher churn coming from the contracts that we took 24 months ago, but still a quite healthy growth in the U.K. in customer contracts.

Our next question comes from the line of Nick Lyall at UBS.

It's Nick at UBS. Can I ask 2 questions, please? On the -- firstly, I know you don't like talking about guidance for Q3 -- on the medium-term guidance, that is. I mean, we know it's an annual -- season of annual numbers and we know Germany improves. But also you've got weakening comps in a weakening Southern Europe. So could you just give us some qualitative reassurance, if possible, that you've seen in Q4 isn't enough to risk the guidance for the medium term? And then secondly on Spain, the volumes are weak, but I have been quite surprised that the pricing or at least the outgoing pricing hasn't deteriorated further given your cuts in May. Is there any further impact expected from the Telefonica renewal cuts in November and December? And could you just explain why that pricing has been relatively steady in terms of trend?

I will turn the second question to Michel because what I know is that in Spain, we are quarter over last year, 15% down, so it's still pretty, pretty, pretty significant for me. But you're probably right that quarter-on-quarter, there hasn't been a huge movement. But Michel, you'll take the second one. Nick, let me answer the first one. You're absolutely right, we don't like to talk about guidance for the next year in a quarter call. So qualitatively, what can I say? I can say that we are just at the beginning of the budget process, as I said. We had December, which was, especially in the second half, not particularly encouraging. January is a bit better than December, not as good as Q2 or September or October. So we really want to go through the quarter, see how things develop and then we'll give you the number for next year. For this year, I think we are confident with our guidance. Andy?

Yes, absolutely. I mean, the 1 to 4 range is always the sort of multiyear. It wasn't a sort of by-the-week, by-the-month sort of type per guidance range. Clearly, we always said where we will be and the range will be influenced by the state of the macroeconomic environment and the MTRs, particularly both of those in Southern Europe, and the former remains tough and the MTRs, clearly, there's a number of those still working through. So I suspect for a period going forward, we realistically will face those but we'll do an update on that when we get to May.

Michel, explain why are you not cutting prices more in Spain?

I'm not so sure that it was exactly the question. I would say that on Spain, we remain more or less on track with what we had announced now a few quarters ago, which is that we had to reprice our services for new customers and for our base, and that it will be quite a painful exercise for 7 quarters. And when you look at our figures, in fact, as Vittorio was pointed out, we are still at minus 14.5%, minus 15% in terms of price per minute. That's true, that there is no deterioration quarter-over-quarter but we remain under pressure year-on-year, and it is what was expected. I would say that what has been achieved in the past 3 months around the brand relaunch but many in terms of offers. So integrated tariffs, which in terms of gross adds, represent more than 30% of our gross adds. And if I take just voice and data, it's even 60% of 24-months contract that we are pushing, so all that allows us to try to maintain those type of pricing. You're right to say that in December, some of our competitors have started to be again a little bit more aggressive. We believe that we've all the measures that we've taken in terms of differentiation, in terms of new offers, in terms of pricing that were in the market. We are competitive today and that we can continue to drive the way we have driven the business in the past 12 months. We have been the first to introduce those integrated tariffs in the market. So all in all, no major change quarter-on-quarter, and I would say on track with what we had announced 12 months ago.

Our next question comes from the line of Robin Bienenstock of Sanford Bernstein. Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division: Two questions, if I may. The first is really about managing commercial costs of the iPhone. And looking at the Netherlands, I'm wondering if the purchase of independent distribution just amplifies the commercial cost problem by creating a kind of distribution arms race as we're now seeing KPN build out lots more stores? And if so, how do you think about addressing that kind of problem? And separately, the question about India. I'm just wondering if Telenor licenses are re-auctioned, whether you'd be interested and how you think about valuing that given that they obviously have the extra bonus of potentially kicking out Telenor from the Indian market?

Yes, let me take the first one, Robin, because I prefer to pass the second one maybe to Nick. In my view, it's almost the opposite of what you say in the sense that what we are seeing is a very, very -- an increasingly more competitive alternatives to the iPhone, which is good because this is customer choice. We are seeing very different -- starting to see very different price points for smartphones, including the kind of high end ones. And in order to optimize your commercial costs, you must have a distribution -- control over distribution. In other words, you must manage customers at renewal. You must manage how to move around your spending, which actually you do much better when you control your distribution or at least when it's an exclusive distribution as opposed to when it is a shared indirect distribution. So I see direct distribution, whether it is online or physical, as an advantage going forward in a smartphone world rather than a disadvantage. Michel, do you have anything to add on Netherlands specifically?

No, I guess that you have mentioned. That's true that probably the Netherlands market has been a little bit more focused on iPhone than some other markets so what you are seeing on our ability to push different type of smartphones has been quite successful in Germany whereas in Dutch market has been a little bit more focused on iPhone for the first 3 months, but we are doing and we are pushing exactly in the same direction that what you have mentioned. Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division: I think I'm not sure, I guess my question wasn't really clear. I think what I'm trying to ask you is do you think the risk is that you end up creating a kind of arms race with distribution where you all -- each of the operators has to continually up the ante and build more stores and spend more money on shops?

No, I think you want to get control, more control over your own distribution policies. It's not an arm race. It's getting control. And to some extent, I'm happy for my customers, and my competitors do the same. It's not overbuilding, it's making sure that you have the distribution power to really implement your policies in the market.

So just regarding the 2008 licenses, I think our perspective would be there's potentially 3 benefits, of course, there's a long way to go before we really understand the process. But I'd say firstly, obviously, more spectrum comes into the market and are we interested in more spectrum? Yes, we are. Secondly, that, that spectrum should be priced through an auction, and we've always been keen to get transparency and a more economically valued spectrum rather than just a obscure formula from the regulator. And then finally, I think it will start the process of rationalization in the market. Now whether it's Uninor or someone else, I'd be surprised if it was still the same number of players afterwards.

Our next question comes from the side -- line of Simon Weeden at Citigroup.

I've got a couple of questions. One is whether -- how you feel about the balance sheet and maybe you think the buyback can be extended now you've passed the data fee -- well, passed the announcement from the Supreme Court in India with the next stage of the Japan money coming in, in April. And then the second question is relating to the comment you made just a few questions ago that the second half of December was particularly weak. I think that was relating to Italy. Just wondered if you could elaborate a little bit on what you think the causes of that are, if there's anything beyond the sort of general austerity since there's lack of economic well-being in the country.

Alan -- Andy?

Yes. Simon, obviously, we had been careful with the management of the debt running up to the conclusion of the India tax case as clearly the outcome of that could have been somewhat different. So that is a very helpful to have that sort of weight lifted from us. As we look forward, you're right, we've got the SoftBank proceeds coming in shortly. We have got to remember the, while about half, just under a half, of the current buyback program commitments, I think we are GBP 2.3 billion out of the GBP 4 billion down at this point in time, so roughly the balance that we've got there actually does equate to what will be coming in from SoftBank. So I think when we come sort of later on in the year, we can have a look at exactly where we are on that. But at this point in time, I think it is sensible to have the balance sheet in a good place, and I think that is where we are at.

On your second question, I guess, that Vittorio referred to earlier on that second half of December, we have experienced some pressure on voice traffic. In most of the markets, I would say, there are probably 2 different type of reasons: One which is comparison with previous years, whereas some weather conditions can have effect to the period last year. The second being more driven by macroeconomic situation that we are facing in some countries. And let's say exclusively we refer to Italy where it's more about consumption, which has been affected by the macro. It's too early, let's say, to give precise trends for the future. What we've seen generally that we're probably more back to trends that we were facing beginning of December rather than what we have seen in second half of December.

Our next question comes from the line of James Britton at Nomura.

First question on the U.K. Does it make it more difficult to force your data in the U.K. and now that 2 operators are offering unlimited contract plans and no tiering? And then secondly, on the network, can you give us the data traffic volume growth for this quarter? I think it was 19% last quarter. And on the network offload, how important is public WiFi going to be improving your overall customer experience in the future?

Yes, the answer to the network is 20% is the answer, so kind of continuing. On the data, I have to say, as always, we keep thinking about our data pricing, we keep comparing very hard with what's going on, for example, in the U.S., which is an interesting case. Honestly, we are, at the end of the day, customers on average in Europe take an iPhone, take an Android, they use whatever, 400, 420, 380 megabytes per month. Whether you offer 1, 2, 3 or infinite, at the end of the day, it doesn't make a huge difference. But there are probably segments of customers where usage is interesting -- I'm sorry, where higher usage levels or allowances are interesting, and we might be considering alternative things. So we are not religious on pricing. So far in the U.K., specifically, Michel, we have...

Well, in the U.K., you're right that 2 of our competitors have offered unlimited. As Vittorio said, we are not religious but I guess that we have been quite successful with the data pricing that we have pushed up to now. Specifically in the U.K., as there were maybe a kind of misunderstanding of the customers because they don't use unlimited but they don't know exactly how much they use. We have introduced what we have called Data Drive, which means that when a customer decide a certain data allowance for the first 3 months, we give him a free usage for any extra data request, so which allows him to adjust his bundle depending on his exact needs within those 3 months, and this has been extremely successful in the past 2 to 3 months.

But then again, we are not religious. I mean, I think we will experiment different things in different markets.

But just on the question on public WiFi. Do you need access to public WiFi to substantially improve your customer experience in the dense urban areas?

For the time being, it doesn't seem to be a big differentiator. But again, on this one as well, we are not religious so we will -- we always said that we consider WiFi a complementary technology, and that we consider every kind of offload a positive because everything that can be taken out of the macro network eventually improves the performance for the remaining ones. So strategy continues to be access-agnostic. Do what you need in order to optimize the network, which is what enables us to continue to have in Europe at least 39% utilization, 9% saturation, which is basically where we have been and more or less where we have been in the last 3, 4 quarters despite the fact that traffic continues to grow.

Our next question comes from the line of Robert Grindle at Deutsche Bank.

Sticking with the data theme. Your data attach rates seem to be increasing with increasing smartphone penetration, which is very good, of course, because it could've been going the other way if late adopters wanted data less. But do you think there's some sort of virtual circle or network effect going on and if more people want to use data, the more people would get smartphones? Or do you think it's really about the way you're selling it, smaller tiers, for example?

Robert, it's -- this is the way it should go and this is the way it will go because our vision is it's not about smartphones. Everybody is smart and everybody will have a smart device. It's about data, it's about living your life in a different way. And I don't think anybody below the age of 20 would even consider a phone, which is not smart. So to me, it's a one-way road. Now we have done few things on the commercial incentives side for our shops and our distribution. Hence, my comment to Robin on the importance of having your own control distribution and on pricing to make sure that whenever we sell a smartphone, we have a very high attach rate. I think U.K., Michel, correct me if I'm wrong, is the record for this in U.K, 85%? Yes, before, 85%. But ideally, my target is 100% in 100% of the market. So it's a vision thing, which then gets rolled out into all the pieces of the business system.

Our next question comes from the line of Ottavio Adorisio of Societe Generale.

A couple of questions. The first one actually refer to your comment made earlier on the uplift from the MTRs, overlapping of the MTRs cut in Germany. You've actually said that, that would likely persist in the following quarters as the large cut in Italy will be compensated by having improvements in MTR elsewhere. Actually, looking at the map of the MTRs cut, next year you'll be hit by a barrage of other cuts -- increasing cuts in Netherlands, Portugal, Spain. And I was just wondering where the improvement actually will come in terms of the MTR trends? And the second one is actually -- I know you don't like about -- talking about guidance, but I need just a clarification. You confirmed the guidance for operating profit -- adjusted operating profit. Could you just tell me if you still expect depreciation to remain in line with the previous year?

Andy, these look like questions for you.

Yes, so -- sorry, to clarify on the MTR and saying in the fourth quarter, we will get a benefit from Germany so that will help it slightly. Next year, as you say, there are a number of moving parts in here, some of which are still settling down so we are still going to face big headwinds on the MTRs next year, but the fourth quarter will be slightly better. Then next year, we've got others, including Italy, that will be coming through. We will incorporate that in the guidance when we give that in May. On the depreciation question, to be honest, I can't think of a reason why depreciation will be particularly different this year to what we have expected. And therefore, that's sort of probably in a similar place to where we expect it to be. And again, the profit guidance next year, we'll be giving in May.

So depreciation of GBP 8 billion, could you confirm that expectations for the full year?

Around that number.

Our next question comes from the line of Andrew Beale of Arete Research.

Following on from your earlier comments on LTE, I'm just wondering if you could give us some latest thoughts on the pace of shift to single RAN and whether you see any merit in accelerating that to try and secure some sort of differentiation through network quality, sort of Verizon-like. And sort of linked to that, I'm just wondering if you've got some early thoughts from your German experience on the opportunity in rural or suburban broadband with LTE.

Let me give -- let me give the kind of the second answer in Germany to Michel. The LTE, the single -- the move to single RAN is something that we are pushing throughout Vodafone because it's kind of logical to have it, to make a whole network more efficient and future-proof. The rollout of LTE does not depend on that, as I said in my earlier question, but depends on when the frequencies are available. And as you would imagine, we prioritize single RAN in places where we are going to launch LTE earlier. So I see single RAN as one piece of the LTE strategy, the second is frequencies, the third is terminals, the fourth is our local strategy in broadband. And on that note, I pass to Michel for the German-specific answers.

So Germany, I guess that Vittorio referred to some of the figures earlier on so we are now approaching 100,000 customers, 1,700 sites which represent more or less 30% coverage. So as you know, the first focus of our deployment in Germany was to capture fixed-like type of revenue as a substitute to a DSL either in the place where there was no DSL or low-quality DSL. The return that we have from the customers is very good. NPS is very high, ARPU is quite stable so we are happy with this launch and we are now entering in a few cities. We are just starting in Düsseldorf right now to have a full LTE city in the next coming months.

Our next question is from the line of Stephen Howard of HSBC.

I just had couple of follow-on questions really from some earlier points raised. Firstly, in terms of commercial costs, at the interims, you had that rather interesting slide indicating that smartphone upgrades were very successful in terms of increasing your customer spend but didn't necessarily make them much more profitable. And obviously, that does rather imply the SAC, S-A-Cs are out of line. I was just wondering whether there are any signs that this situation might be improving in any of your markets, in particular, given the macro pressures on rivals and so on. And secondly, just following up on this interesting test drive approach. I appreciate it's pretty early, but I'd be very interested in knowing what customers are consuming in terms of data when they're less concerned about hitting a usage cap with respect obviously to service that they're pretty inexperienced with. So do you sense that they wind up taking a larger package than they would otherwise have had you not offered this?

Yes, I'll answer the broad question. I, again, turn to Michel for U.K. I -- We monitor smartphone profitability, I believe, the economics or the thing every month by country and by operating system. We see some marginal improvements, small, quite frankly, but we see some marginal improvements, I will give you the details not on a quarterly basis, but at the May and November meetings. Marginal improvements, as I said in my earlier comments, for example, with the wires this morning, that our markets where we can and we should as an industry work harder. Michel, U.K.?

Well, so U.K., as I mentioned, it's obviously still early days because it has been launched just a few months ago. Early data suggest that we might have a kind of a place in data usage of around 20% to 25%, so which means that customers don't know precisely what they are shooting for when they enter into the data world and so that gives us -- gives them the freedom to adjust their data usage. But again, we need a few months in order to see how, let's say, all that goes. It's clear that we proceed it as having been successful to, let's say, to attract some of customers with Vodafone.

Can I just ask a quick follow-on to Vittorio's response there? Do you sense that this slight improvement is a function in a firstly -- I mean, is it a function of your competitors deciding that they need to limit the degree of subsidy or is it a function of the greater diversity of choice that operators now have in terms of smartphone supplier?

I sense it's more the latter than the former. And I wish it were more the former than the latter. Sorry, yes, I think we're doing a lot of hard work to improve the yield, as we call it. But again, every time I go to the U.S. and I talk to our friends at Verizon and I go into a U.S. shop and I see the price levels and the subsidy levels in the U.S., I always say I'm very jealous of that market.

Our next question is from the line of James Ratzer at New Street Research.

I had 2 questions please. The first one just following on from a couple of questions we've had before on your LTE experience in Germany. I was just wondering if you could talk a little bit more about what you're seeing now you've moved into urban areas, particularly how was the network quality bearing up in more congested areas? And in urban areas, is it also being sold as a DSL substitution product or are you seeing other uses for LTE in Düsseldorf? And then second question I had was on your fixed line business. I mean, this quarter, we've seen some diverging trends in Italy and Spain. I was wondering if you could talk about those. And in particular, Spain we've suddenly seen a sharp acceleration in your fixed line revenues. Could you talk about what's going on there and correspondingly we've seen a slowdown in Italy.

I will kill easily your first question by telling you that we are not -- neither ready nor able today to talk about detailed results on urban LTE because it's too early. And as Michel has said in an earlier answer, we cannot yet comment on what we are seeing. So it's early, I would invite you to keep that question for 3 months down the road. On the second one, Michel?

So we have free patents in 6 lines. So in Germany, a slowdown, as you have probably seen more driven by cable competition. In Italy, you have clearly pointed out a slowdown compared to the previous quarter, mainly due to a high level of churn within Tele2. As far as Vodafone Italy is concerned, I guess we still report quite a healthy growth there, capturing probably more than 40% of the gross adds still on the market. And in Spain, we have pushed a little bit more from a commercial point of view, and you also a nice impact which is due that we exit from some of the rebates, which were given to our customers on the early months of subscription with Vodafone Spain so that will affect ARPU and commercials.

Our next question is from the line of Guy Peddy at Macquarie.

Just a couple of questions, more for Andy, I think. Andy, on the cash flow outlook for Q4, will it be working capital and taxes that are sort of one of the major year-on-year drag on the cash flow number? And secondly, you talked to Simon's question on balance sheet about being in a good place. Can you just elaborate on what is good, what it is usually you're looking at on the balance sheet and how you're measuring it, et cetera?

Yes, Guy. I mean, the fourth quarter will usually get the benefit because the phasing of the CapEx in the first -- in the fourth quarter typically gets paid for in the first quarter following, so typically the fourth quarter is, in working capital terms, a big quarter for us, and hence, we're very comfortable with 4.1% after 3 quarters being in the 6% to 6.5% range by the end of the year. On the balance sheet, I mean, there's a number of ways to look at this. We've obviously run the group against a single A credit rating, and in that sense we are in a comfortable position. Mathematically, we're at -- I don't know, 1.8x EBITDA and that obviously is a calculation of [indiscernible] and Verizon Wireless and with cash starting to come through from there, then clearly that is sort of additive to it. So overall, I look at it as being sort of being sub-2 is a comfortable place to be at the moment, especially knowing that from time to time we should get cash coming through from Verizon Wireless.

Our next question is from the line of Maurice Patrick at Barclays Capital.

A quick question. I mean, you've gone from now out -- you're now outperforming your peers in most of your markets. There were some cases of incumbents fighting back. They're not willing to lose market share anymore. I wondered when you look across your footprint, which markets you're perhaps concerned that might happen elsewhere and also what you can do about it.

I'm not so sure I can comment much because I think we are the first ones in this reporting cycle. So I'm not so sure I can neither say that I'm losing or winning market share anywhere nor which operators concern me the most. So at least of the major competitors that we see in -- as our reference competitors, the kind of AT&Ts, the Telefonicas, the Bhartis, the MTNs and so on, we have a pretty good performance in South Africa. We have a pretty good performance in the known South Africa, African countries including the Vodafone ones against Millicom or the others. I'm not so sure about MTN. I haven't heard about results from Telefonica. I think against Bharti, we are doing fine and it's a solid situation, you are right. I mean the main competitors are the big ones, are solid companies with bigger resources. So it's going to always be a competition. I cannot really comment. I don't know. Does any of my colleagues -- it's too early, right? We compete all the time.

Our next question is from the line of Jeremy Dellis of Jefferies. Jeremy A. Dellis - Jefferies & Company, Inc., Research Division: A couple of points really on data that I just wanted to clarify. In Europe, it looks like overall data revenue growth was stable this quarter relative to last. But within that, there was a big pickup in Spain, and it looks like Spain maybe benefited from rather low prior year comps. So I guess the question is whether the slowdown that we seem to be seeing in data revenue growth in the U.K. and Germany is just a bit of a one-off or the start of a trend? And then the second question also on data is within your data revenue growth numbers here, how much do you think of this is customers trading up to higher tiers as they become a bit more sort of used to using smartphones and tablets and so on? And how much is sort of mechanical effect of smartphone adopters moving onto integrated plans for the first time?

It's easier to answer the second question. It's mostly penetration and it's mostly adoption. I don't think that the kind of tiering up effect is on these numbers is noticeable yet. As Michel has said, we are watching very carefully what is happening in the U.K. in terms of test drive and try to see how much the unconstrained usage impacts on first adopters. We are encouraged by the fact that people are going up. But when I said that everything is going up other than Symbian, keep in mind that we are talking about moderate increases so we are talking about 6%, 7%, 8% to 10% increase, which means 20, 30, 50 megabytes per month. We're not talking about 500. So it's still a fairly small on the total. It's much more penetration. It's much more everybody should have the smartphone type of thing. On the different speed by market, Michel, I think...

Three markets sold quickly. Germany is more or less flat, U.K. is slightly down, mainly driven by data roaming, which in this quarter has been lower than in the previous quarter. And Spain, I don't know whether we can call it a catch-up but that's clear that the management has been focused, as I said earlier, on integrated data plans and which have quite significantly increased in the past 6 to 9 months. It was a de-act of the turnaround that we are driving in Spain so we start to weather this nice effect. I get that on Internet on your mobile, we have grown by nearly 90% in Spain this quarter so which is a remarkable performance that I have highlighted previously.

But again, it's still different things. I mean, we've got a very good performance of tablets, for example, in Germany and Italy, a little bit less good in the U.K. In Italy, we are bundling content. We see whether this could make a difference. As I said before, I think we are moving -- trying to move the mindset of being less religious about what is right, what is wrong, experiment more and then quickly move across countries where it works.

Our next question comes from the line of John Karidis of Oriel Securities.

I just wondered whether there's any scope to be a little bit more specific with regard to the likely benefits you're getting or you stand to get from the corporation with Verizon Wireless. You have sort of talked about it in the past. I just sort of wondered whether we should hope to get information on things like what are you doing, what are the benefits as a consequence of this partnership and what would the numbers be like without this partnership. And maybe just give us a timeline as to whether these benefits increase in the future or not.

Yes, John. We had, I think I said in the November session that the benefits so far are in the range of low hundreds of millions and we want to bring them in the high hundreds of million each side. They continue to be in the same areas. Again, last week, we just learned of it, kind of GBP 70 million, GBP 80 million benefit coming to one of the 2 partners from one supplier giving the same conditions to both. It's a multitude of things like this. The big prize is the day when we'll buy exactly the same terminals, which will happen over time in the next years and listening to the question on LTE that we are asked before. It's deeply operational and deeply fragmented, I would say, in many things. Our intention is to bring it in the high hundreds of millions but it will take time because, of course, it's to go supplier-by-supplier and situation-by-situation. We're also working well on large accounts. Again, we keep winning one-by-one new joint accounts, more to be announced when we are ready. It is a very long process.

And so I can ask about the hundreds of millions related to cost benefits so...

Yes, yes, you're right, you're right. When it comes to revenues, it's really about roaming and about large accounts. On large accounts, as I said, we go one-by-one or actually 10s by 10s and not one-by-one. And in roaming, it's about changing pricing, changing tariffs and we have worked on that and you will see more in the future.

Our next question comes from the line of Paul Marsch at Berenberg.

Yes, I've just got 2 questions. Firstly, have there been any material changes in revenue allocation between data and voice, particularly given the growth in integrated packages? And then secondly, just in Germany, maybe you could say what the broadband net adds were? And more specifically given what's pending with the Bundesliga rights auction? Does that change the way that you're thinking about your choices in that market at the moment?

Andy?

So revenue allocation, no. There is a methodology there for how we allocate within integrated bundles, and obviously, that is not the most precise science but it's a set of rules we apply those by market and there are no significant changes in the way that's been applied between periods.

Broadband -- so in Germany, broadband customers are more or less flat, so as I’ve just said, there's slowdown due to the competition from cable, but more or less flat. In terms of content, whatever it is, I guess, that our only focus is to make sure that our customers can have access to any type of content through our DSL offers so that's what we are just, let's say, we are working on.

We have time for one more question, and that question is from the line of Johnson Davies of Santander.

It's John Davies here. I have a question really about India. I know the initial growth in India today was very much on a 2G focus. Can you give us an update on how the 3G program is progressing, please?

Nick?

Yes. Well, I'd say it's obviously very early days. The network, we're now up to 10,700 3G sites so quarter-over-quarter, we were up 1,500. We've got about a 15% population coverage. We are just in the process of rolling out some new billing functionality to give us a bit more flexibility around snacking and daily allowances, which, I think, will open up the opportunity, that along with more local content and greater handset penetration. And it's worth noting that the handset penetration is still around 3% so that is a key enabler going forward. So good progress, but early days.

As we have time for no further questions, could I please return the conference to you?

Yes, thank you, operator. Again, as I wrap up, I would say is solid -- continuing solid execution from us. I see our geographic spread and mix as a positive. As I mentioned, we didn't talk much about South Africa, but Africa, India, Turkey -- we didn't talk about Turkey today, but Turkey continued to do well. Ghana and within Europe, the kind of north, south thing with a little bit more pressure and challenges in Southern Europe which will require, in the coming quarters, attention and hard work on our side. Continuing successful data story. We haven't talked too much about enterprise. Enterprise keeps growing, slightly slower than before because of roaming and because of Southern Europe, but still an area of strength and success. And finally, confirmed guidance and distributions as planned. I look forward to talk to all of you in May for the full year results. Thank you very much. Thank you, operator.

This now concludes our call. Thank you, all, very much for attending. You may now disconnect your lines.