Vittorio A. Colao - Group Chief Executive Officer, Director and Chairman of Executive Committee Andrew N. Halford - Chief Financial Officer, Executive Director and Member of Executive Committee Paolo Bertoluzzo - Chief Executive Officer of Italy & Southern Europe Operations Stephen Charles Pusey - Chief Technology Officer, Executive Director and Member of Executive Committee Nicholas Jonathan Read - Chief Executive Officer of Asia-Pacific & Middle East Region Philipp Humm - Chief Executive of Northern & Central Europe

Timothy Boddy - Goldman Sachs Group Inc., Research Division Simon Weeden - Citigroup Inc, Research Division Nick Lyall - UBS Investment Bank, Research Division Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division Will Draper - Espirito Santo Investment Bank, Research Division Stephen Howard - HSBC, Research Division Andrew Beale - Arete Research Services LLP Ottavio Adorisio - Societe Generale Cross Asset Research John Karidis - Oriel Securities Ltd., Research Division Christopher Nicholson - Oraca Ltd. Jeremy A. Dellis - Jefferies & Company, Inc., Research Division Justin Funnell - Crédit Suisse AG, Research Division Paul Marsch - Berenberg Bank, Research Division Emmet Kelly - BofA Merrill Lynch, Research Division Akhil Dattani - JP Morgan Chase & Co, Research Division James Ratzer - New Street Research LLP John Davies - Grupo Santander, Research Division

Good morning. Welcome. Thank you for coming this morning again to our half year results. What I would like to do now is to go, as usual, through the highlights of the first half results. Then I would pass, as usual to Andy, who will cover the financial review and a little bit of operational details on our main market. And then come back and take a broader view on the progress that we are making in our strategy and also talk about the context that we expect for the near future. And then, we will be joined by Steve Pusey and by the regional CEOs. Nick Read, whom you know, who manages the Emerging Markets; Philipp Humm, who just joined us and manages Northern Europe or Rich Europe; and Paolo Bertoluzzo, who manages Italy and Southern Europe. I didn't call it poor Europe. So here are the highlights of our first half results. Group organic service revenue in the first half declined 0.4%. In the second quarter, the decline was 1.4%, following a first quarter positive by 0.6%. Our adjusted operating profit in the first half increased by 8.5%. We had, in the last quarter, strong growth, continuing strong growth from data, 13.7% and emerging markets. And, of course, we had some challenging headwinds in Southern Europe. The company has generated in the first half GBP 2.2 billion of free cash flow after continuing investments in networks, technology, and especially, high-speed data networks. The board has resolved the increase in the dividend per share by 7.2% to 3.27p. And we announced, following yesterday's decision of the Verizon Wireless Board, to distribute GBP 2.4 billion of dividend. We announced that we are going to use GBP 1.5 billion of those for share buybacks. Finally, this morning, we confirmed the guidance for '12, '13 on both operating profit and free cash flow. But Andy will cover in more detail all of this.

Right. Good morning, everybody. Let me just provide some color to the numbers. So, the overall group revenues were just under GBP 22 billion for the half year. That is broadly stable on a like-for-like basis. The group service revenue at GBP 20.2 billion, as Vittorio has mentioned, was down about 0.4 percentage points after the impact of MTRs. So pre-MTRs, that was an increase of 1.4%. The group EBITDA was GBP 6.6 billion, which is down on last year primarily because of the significance of foreign exchange movements, in particular, the appreciation of sterling against the euro, which I'll come onto later. The EBITDA margin was down on an organic basis by 1.0 percentage points, but within that, we had restructuring charges, which were about 0.3. So excluding those, the margin was down by 0.7 year-on-year. The contribution from Verizon Wireless was very, very strong, and we had a 25% increase in the contribution from the U.S., with the consequence that the adjusted operating profit was up by 8.5% at GBP 6.2 billion. If I then move on to the sort of lower part of the P&L, net financing costs are slightly lower year-on-year, primarily due to lower mark-to-market losses than in the previous first half. The tax was an effective tax rate of 26.6%. That is slightly up on last year, primarily because of the higher proportion of our profits that are coming from the U.S. with the higher tax rates that we have there. Of note, we have looked very, very carefully at the situation in India with our tax case over there. And we have concluded that we will continue not to make any provision for that settlement. Halfway down the table in the prior year column, the GBP 3.2 billion number was the profit on…

Good. So in order to discuss how we are progressing in our strategy, let me start by recapping my take of the situation, regrouped by region and on a more qualitative way. So first of all, Northern and Central Europe. Here, I see more positives than negatives. These are stronger economies, more stable markets. We are still growing even if only by 0.7%. The margin pressure is there. There is a bit, which is, as Andy has said, restructuring. There is some A&R pressure, which, however, is mostly linked to an absolute increase in smartphone penetration, which, per se, we think is good. So it's a volume effect not a price effect. If I have to be critical, the real bad news is the collapse of the prepaid market, which goes down by 9.8% in Northern Europe, but, in general, it's a pretty solid region. Where I see, quite frankly, more negatives than positives is Southern Europe. I still see good data growth in Southern Europe. It's 11%, but there is pressure. There is pressure on pricing coming from MVNOs and no-frills operators. And more importantly, there is clear some economic environment-type of pressure, which is very visible in enterprise. Enterprise is down almost 12% in Q2 in this region. And then finally, the third region, the emerging markets. Reason here I really see are more positive and very important positives. First of all, as Andy has said, the EBITDA margin of this region is now 30.5%, which is in line with the group margin. And the weight of this region on revenues and EBITDA is 30%, and on operating free cash flow, is 33%. So strong performance over time growing in weight, very strong brand perception. If I have to find a small negative is that the growth is…

It's Tim Boddy from Goldman. A couple of questions, if that's okay. The first one, topically, on your relationship with Verizon Group, if you could comment a little. Obviously, as I think Andy noted, some people could look at the smaller dividend and see that as an indication of future intention. So if you could just talk about that relationship and where you think it now stands. Secondly, in terms of your comments around convergence, Telefónica noted in their results, for example in Spain, they're seeing a very strong inflection in their add momentum on the back of their Fusion tariffs. I just wonder if you could talk a bit more about how you intend to react to these converged offers and also, whether you'd consider, I mean I know you hinted at it, joining, either the Jazztel, Telefónica fiber rollout in Spain or the FASTWEB, Telecom Italia fiber deployment in Italy?

Yes, let me -- first of all, the relationship with Verizon is good, is very good. As Andy has noted, we see other 2 distributions: 1 in February, 1 in December. The second one is a little bit smaller because of the 1.5 months earlier data. We are accommodating their needs. We are accommodating -- they are accommodating ours. We work together well on the areas of co-operation. If you want, I don't talk about many new areas of co-operation, because honestly, they could mean the same. So we purchase together, we look at customers together. We discuss about 1 day, maybe we'll buy terminals together, but today is too early. And I mean it's more of the same. It's delivering good value, and I think it's a great relationship. We are very pleased with their performance, I have to say, and a bit jealous of their pricing. But we are moving, as you can see, so positive. On Fusion and convergence, listen, we are clearly watching. We are clearly -- we immediately matched their offer, so they went down; basically what was available from them at EUR 65.70, now is available at EUR 50. We immediately matched. I think it took 1 week to match. Whether this will create a trend in the market or not, we will see. In the consumer space, clearly, we want to deliver what we need to deliver to the customers. And whether we will join Telefónica and Jazztel or do something else, quite frankly, it takes 2 to dance, we will see. As I said, some incumbents in Europe see this as well, maybe, there's an opportunity to kind of all go together and improve the return on assets and going to some kind of sharing. Others say, "No way." Telefónica is more probably in the no-way camp. And if that's the case, we will ask -- we'll take a very strong regulatory position, but eventually, we will have to make moves ourselves. It's a very -- very market-by-market type of approach. Yes? Let's do Simon here and then we move there.

Well, I wondered if you could -- Simon Weeden from Citigroup. I wondered if you could elaborate a little bit more on Germany, where your relative share in terms of post-pay adds got quite a lot worse in this quarter versus the quarter before. And perhaps, in respect of Germany, and certainly, in respect of the group, could you talk a little bit about the outlook for growth in the second half given the quarter disappointed a bit against consensus. Are we going to see a sort of underlying further deterioration and will the price changes that have mostly been late quarter, late last quarter, early this quarter, will that have an impact? Is there a timing issue we should keep in mind as regards the adoptions of Vodafone Red tariffs in Europe?

Yes, sure. Yes, the Red plans, obviously, coming out have not particularly been picked up in the last quarter, so the strong hope is that we will now see the benefit of that coming through over the balance of the year. So time will tell, but hopefully, we'll see the revenue pick up a bit more on that front. The customer growth was a little disappointing last quarter and, in some respects, it was sort of in preparation for getting the new price plans actually launched out in the market. So we'd hope that, that will address both of those points.

James [ph], yes. And then we'll go back there.

Could you say a few words about how you look at a normalized spectrum cost when you're calculating the underlying free cash flow of the consolidated group? And then also on spectrum, can you just say what your base case is for re-securing your 2G spectrum in Italy and also Germany in a few years' time?

Yes, trying to do to normalized on something that is as lumpy as spectrum is not the easiest of things. I mean, our internal planning clearly is done on a country-by-country basis as and when there is either new spectrum or renewal coming up. As best we can, internally, we'll take a view as to what we think it is going to cost, but that of itself is not easy, because in advance of knowing the rules, in advance of knowing the number of competitors, et cetera, in an auction, there is still a fair amount of guesswork that goes into it. So what we've tended to do is run the balance sheet, I think, reasonably cautiously. The last 2 years and this next year are probably the peak of 3 years in spectrum since about 2000. We did sell some of the businesses. We did retain some of the cash in order to do it. And my hope would be very strongly that we'll come out of this 3-year period with the balance sheet in good shape, having bought significant amounts of 15, 20 years spectrum. And then we will just be down to the occasional renewals, some of which, I think, may be more paid for on an annual basis, rather than being paid for upfront. So hence, when we get more clarity on that as well, it'll give us a better basis for going forwards. But it is probably the most lumpy cash item we have got in the group.

And if I can make a general comment, I think that there is a little bit of an increasing awareness around the world that the lemon cannot be squeezed too much. So we start seeing rules, which make more sense in the options, we start seeing approaches, or at least, in some countries, approaches, which are more mindful also of the fact that in the end, this is an industry that creates a lot of economic benefit outside of it, just the pure intake from the auctions. Early days, but not as bad probably as some of you thought a few months ago, probably. Yes, there, then Robin, then -- yes?

It's Nick Lyall from UBS. Could I ask 2, please? Just on Spain, firstly, are you seeing any signs at all of regaining momentum given the new tariffs and the reintroduction of subsidies? And then secondly, back on Verizon Wireless, should we now view the payments as being more frequent than annual payments? And over any general period, should we also expect to be receiving more from Verizon Wireless rather than less versus of the $10 billion?

Yes, let me take the Verizon question. Maybe this is an opportunity for Paolo to talk a bit about Spain. Sorry, I would like maybe introduce Spain and then you talk about Spain. So on Verizon Wireless, I think honestly, I don't want to comment too much about the future, because we always said, and we have been saying this for the last 4 years, this is a company, which is very well managed. It creates a great amount of cash flow, and both shareholders work in the interest of the company. So we have been very accommodating on a number of issues when they need investment. And we would be accommodating on whatever schedule is necessary for them. Keep in mind; this is a Verizon-managed company. This is not a Vodafone-managed company. But I think it's a very, very positive relationship. I cannot comment about the future, but I can only say that again, we have demonstrated today, or yesterday actually, that when cash spikes up, cash gets paid, and it's relatively simple. It's the amount of cash, which is very good. On Spain, on Spain, I have a general comment, then Paolo can probably expand a little bit. On Spain, we have -- there was a lot of excitement about elimination of subsidies. We followed. Clearly, not the whole market followed, and it didn't really work. What we also found out is that some customers, a number of customers actually like to pay more for having the ability to have an answer and changing us then do that. So the real issue in Spain is the pricing of the price plans when you also get the answer how much higher they are versus the SIM-only one. That's the real issue. And we moved into a new scheme that I have illustrated, which I think gives the customers the choice. They've got GBP 35 if they want without, or GBP 40 or GBP 50 or whatever, GBP 70, depending on what they get. It's more about the choice and the pricing levels than an ideology of taking out or leaving in subsidies. Paolo, do you want to be more specific?

No, I think you said most of it on the subsidies cash on -- in terms of trends and performance and recovering there. I think since when we did reintroduce, on a promotional basis, subsidies at a lower level than before, in the summer, we have regained speed in terms of gross additions, and actually, became leader in market share on contract cross additions even if it was partially balanced by changes in regulation on the retention side of the business. I think it is clearly early days to comment on performance on the Red portfolio and the new approach there. I would add to the launch of the Red portfolio, what we are doing in the youth space where we're actually launching prepaid, very, very interesting and competitive tariffs with a completely different approach, which is somehow giving more value to the customers with a good entry level ARPU. And that's another important part of our strategy in Spain.

There's Robin, Will. Yes, Stephen and then I come there, yes. Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division: It's Robin Bienenstock from Sanford Bernstein. It seems to me that the risk for you with incumbents having to roll out more fiber is that they're going to get a bigger and bigger share of the higher-value customers with lower churn through integrated offers. And I guess the risk is that you become a high-cost wireless operator, with diminishing access to the best customers. And so I'm wondering how you've more fundamentally addressed this, because Red, if I look at it, addresses the problems of the past of wireless data and how to monetize wireless, but it doesn't really address the more fundamental risk.

It does. You can get a fixed DSL bolt-on as one of the ways to go up, which is why I said we matched the price. Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division: Okay. So I guess related to that then, 2 questions around my concerns. One is are you not a relatively soft target when it comes to regulation as you are the odd man out in most countries and indeed at the EU? And two, do you have the right organizational structure to allow you to really drive a much leaner organization, to deal with this sort of competition that you will likely deal with in the future?

So the second question is kind of an open-ended theoretical question, but let me first get the first, and then I will try to give an answer to the second. The Red is a part of our strategy. One of the components of Red in Spain is specifically also getting, as part of the plan, fixed DSL asset. The point that you still have which is valid is access to fiber. So once the market moves to fiber, if it moves to fiber, my information is that most of the connections are still on the 15, not on the higher level in Spain, but maybe I'm wrong, once it moves there, what happens? First point; keep in mind that regulation, contrary to what you say, actually, we are the darling on prices because we are only one that can really make sure that the countries behave. And so once we get there, the price squeeze test and the quality of input test have to be passed. Otherwise, those offers will not be legal in the European framework; first answer. Second answer, my job is not to hire lawyers to stop the others from doing what they want to do. I slow them down until we get what we need to get, which is going to be either access to their NGN or our own access to somebody else. There's cable. There's the possibility that we might decide to build ourselves somewhere, maybe with some of the others. There's not just incumbents; there's also other people in the market, who might have exactly the same interest. So I think that the picture that is being painted by the incumbents is a little bit -- it's very well coordinated, which tells you something. But also, it's a little bit too rosy, at least, relative to the timing. On the second question the kind of -- are you -- do you have the right -- I don't know what you refer to. As I said, our strategy is market-to-market. I think we have been doing different things. In Germany, we are deeper in fixed line; in other places, we are deeper in enterprise. In other places, enterprise is more mobile with third-party assets. So we have different strategies by market. I don't think that leveraging the cost advantage that we have is the wrong thing. So I'm not sure exactly what you refer to. Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division: If I may, what I'm referring to is the fact that you talk about scale in your business, but you don't actually end up with better margins than peers in most of your markets. So what I'm asking is, is it right to focus on the economics of the individual countries and to have a cost structure that replicates an awful lot in each individual country? Or should you think about your group organizational structure being really quite different in order for you to be leaner?

Yes, again, difficult to say should I not want to be leaner. I would just say that we want to reduce GBP 300 million of cost, 10% of coordination cost. But on the other hand, if I can share a big part of my IT cost, if I can share my network cost, if I can share what is not customer facing or not heavily customer facing and get an advantage, I think shareholders are happy if we do it. Life is not black and white. I said Bill, Stephen, and then we have to go there. Yes? I saw you.

It's Will Draper, Espirito Santo. One on cash flow and one on the U.S., if I can. On cash, you missed consensus free cash flow a little bit in the first half. So can I ask you what's consensus getting wrong on phasing? And what's going to come back in the second half that wasn't there in the first half? Might that -- that might be CapEx or working capital, but just something on the phasing of free cash to get you to the guidance number? And second, on the U.S., we've seen a couple of quite big deals recently. One involving DT, one involving Sprint. Just if I could ask what -- how you think that makes life at Verizon Wireless easier or harder going forward with the changes in the U.S. market structure?

Andy, you take cash, I take...

Yes. So I supposed 2 thoughts on the cash flow. One is, with all due respect, it is difficult for an outsider looking in to get consensus on cash flow accurate, because there are a lot of one-off items on tax and things like that where the phasing is less visible. However, the second point, which is the more substantive, is the largest part of our capital spend typically, for various perverse reasons, takes place in the last couple of months of each financial year. And that seems to be a truism of many telcos. The actual payment for that will typically go out in the first quarter of the following year. So actually, the first half tends to be weighed down by the previous year's CapEx, and the second half gets a benefit from it. So that is why you tend to get this higher cash generation in the second half than in the first half.

Yes, a comment on the deals in the U.S. Okay, the T-Mobile deal, with all due respect, is a fine deal, but it's not a game changer in the grand scheme of things. Sprint, SoftBank is more interesting. Again, I think very highly of Masa and his entrepreneurial ability. You have to keep in mind that the distance between Sprint, even Sprint with cash, and Verizon Wireless is pretty big. It's a different situation from Japan. The Board of Verizon Wireless has immediately received the analysis from management on what they can do and they cannot do. But there are some differences. I mean there is a kind of coverage and technology difference, which is very big, and the pricing in the market, at this moment in the U.S. is totally different from what it used to be in Japan when Masa took over. So with all -- I think very highly of him, it's -- wish him good luck, but I don't think in the short term, it will really be a game changer. But Verizon Wireless management is very focused and very alert as you would expect from such a successful group of people, so interesting to watch. I think we had Stephen, and then I need to go to Andrew. And then, yes, back there. And then I would come back here.

Stephen Howard here at HSBC. Couple of questions. Firstly, obviously, the Red tariffs look quite interesting. But I was wondering whether you had been tempted at all to be still more radical. And in that vein, just interested to know what you think of Swisscom's recent tariff initiatives where the segmentation is done purely on speed rather than the caps. Second question relates to the first of your points in the list of strategy objectives, namely to become a -- or to be a scale data company. Obviously, that's laudable, but I think it's fair to say it's proving difficult to demonstrate traction there so far. I guess what I'm concerned about is are you not worried that some of the network sharing arrangements that the industry has come to and the terms on which wholesale is made available, is there a risk that those factors have effectively undermined the opportunity here? In other words, that everybody in the market winds up thinking they're a scale data player?

Can you remind me the market share of Swisscom, please? Because I think there are some differences. I mean Swisscom, I don't know, I -- they're a partner in market, I should know, but what do they have, 56%, 60% market share? So you cannot exactly compare how radical you can be when you control 60% of 1 market from when you don't control 60% of our market. We looked at a variety of options. We were very -- also very mindful of what's the departing point, which is why the pricing levels would be different by market. Eventually, being a scale data company means we move from a meter, the classic telco mentality of premium pricing and scarce network provision to thick network precision and ARPU focus, which is a totally different type of company. It is a journey, as I said, because we are going there, but we still have 35% of our revenues, which are kind of mature, highly -- relatively highly priced voice. But the fact that we progressed enables us. The more we go along, the more we can do new things, which is why I'm very excited and very optimistic that the fact that despite the short-term difficulty of evolving, Vodafone is doing the right things for the future. And we are really getting ready for the future of data. On the wholesaling, scale data thing, I think you have absolutely a very valid point, and we are very aware of it. We are very aware that every network deal, every wholesale deal that we do has to pass some tests to make sure that we are not undermining our own strategy, which is why now everything has to be approved at the Executive Committee level, so that we are sure that we are not trading off the short term for the long term. You have a point, and we are aware of it. I think, Andrew, then we go back there and yes. We go that side, please, a bit and then we come back here.

Andrew Beale from Arete Research. A couple of questions around investment, if I could. You were talking a bit about the Global Enterprise division and how you saw that developing over time. I mean it sounded a little bit like there were some -- there might be some more capabilities that you needed in individual country operations to do that. I mean, perhaps, hosting capabilities in some of the geographies. Just wondering if you can talk a little bit about the investments that you might need to build up that global capability. And more broadly on investment, and I guess if I look at some of your competitors, I think it's increasingly likely that we're going to see rights issues from a bunch of them, as they need to sort out their balance sheets as their EBITDA declines a bit faster than they originally expected. I just wondered what your inclination is to start to put your foot on their throat a little bit more, to up the investment, to go for -- to try and create a sustainable network advantage, which might help your margins to perhaps, push into LTE, to drive fixed network substitution in the sort of 25% that might never get fibered; that sort of area to try and drive returns on a longer-term view?

Do you want to take...

Which one?

Well, I take the final point, to put the foot on the throat, I like that.

Okay. Well, let me start on the enterprise. Clearly, we see capability and potential in that space and, hence, the new organization. I think, compared with most of our competitors, we have got a spread and a control of network inputs that puts us ahead of the pack. Cable & Wireless brings some new skills, and particularly in the sort of hosting space and then starting to think more about cloud. There clearly is opportunity there. Now whether that's going to require sort of investment to acquire business or not, I think it is early days to say. I think we need to understand what we have got and what the capability is to move that forward organically. But certainly, in those sorts of spaces, we do see reach into new revenue pools that we have hitherto not been able to go for.

Yes, just to add to that, Cable & Wireless brings us some interesting and attractive additional product suite consistency, IP VPNs and hosting and just cloud, as you say. Some of the skills that we need to expand upon are the people side of things; the delivery capabilities and execution speed; some of the IT tools to make that consistent across all our properties as we standardize IT and some of the project management and the basics to get in a scale business rolling faster. So a nice set of product assets that we're acquiring. It's now the people and volume to get that rolled out as scale across all of our properties that we'll be adding to.

Yes, I integrate this question and then get to the second one. Enterprise is a journey. It's very important. When you talk about cloud services, I mean, cloud services is a massive type of thing. Do we want to get into software-as-a-service? I kind of doubt, to be honest. Do we see a strength in infrastructure-as-a-service for SMEs and the customers that are served by the 7,500 people that we have in the field? Absolutely, yes. And then on platform-as-a-service, I'm not so sure, but again, it depends by market because in Germany, we have a certain position and in U.K., we have another one. In U.K., it's easier to acquire capacity and capabilities from third parties who lease stuff. So the answer will not be a totally homogeneous answer. Back to Robin's point, every market will have to come up with -- given the catalog that group will make available, every market will have to come up with some kind of different thing, but everything that we can share, we will share. And this is a bit the reason why we need to put all these resources together to get maximum traction there. On the foot on the throat, I mean it's a very tempting and fantastic image. I don't think it's unfortunately as simple as that, in the sense that yes, we are using already ideas as a very powerful substitution in Germany, and we will use it. We launched in Italy, we launched in a number of other markets. For sure, Portugal is the next one. For sure, South Africa, in a complementary way, will be very important, so answer, yes. It's not just LTE. It's also HSPA+ plus, which is, in some environments, very competitive. Do we see the opportunity to increase investment? I would say, selectively yes, in some markets, but very selectively. Because we also have to take into consideration the fact that it cannot be a strong price-driven attack, because we have seen what happens when you do strong price-driven attacks into oligopolies that basically people just reset the profit level 1 level down and my objective is really to create value and not just to gain market share in absolute terms. The -- can we afford it? I think Andy said, I think we have a coverage of 1.8 now. So our debt level has nothing to compare to most of our competitors. We have money coming from the U.S., part of it we give it back, part of it, as I said, can be used for funding these investments. So we are in your space. I wish I could use the same iconography that you use, but unfortunately, I don't think the foot on the throat is exactly what we want to do. It's more of a progressive journey of gaining share and gaining traction. Now, I need to go down there and then I come back because you've been very patient for very long.

Ottavio from Société Générale. I've got 3 questions if I may. The first one is on pricing. Your strategy is pretty clear, but it looks pretty good on the spreadsheet. And when I look and try to make a few numbers together, what I see is that volumes in the most challenged part of Europe, Southern Europe, is actually going up. Italy year-on-year is 2.1%. I look at revenues, even excluding MTRs, it's down 8%. It looks to me that you have an issue of pricing more than probably macro over there. Similarly in Spain, volumes are down there 2%, but MTRs, taking MTRS out of the equations, 10% service revenue down. Again, it looks to me an issue of pricing. Data, of course, is going up on volumes. You don't disclose any sort of metrics how much it's going up by country, but I believe that volume is going up anywhere, service revenues, deteriorating. So it looks to me that it's an issue of pricing. You come with right [ph], so what's happened if I really want to sum up on my side, you throw up everything now into unlimited voice, unlimited SMS, so what's happened next if ARPU doesn't stabilize? Have you now shoot all the potential opportunities you can to stabilize ARPU because you're ready now to give everything now for a fixed price? Then, two questions, a bit more straightforward for Andy. The first one is on restructuring cost. It's good that you actually give the breakdown of restructuring cost for Germany, but reading the press release of full year last year, there was also another restructuring cost in Germany, but I didn't see how much it was. So if you can tell us. And the second question is on depreciation. Now again, you're one of the few, probably the only one telco that has a guidance on EBIT. Therefore, unfortunately you have to track what's happened to depreciation. Your depreciation is down 8% year-on-year. Amortized intangibles is down 28%. So first of all, what's going on there? And second, if you give a bit of color for the full year on how -- which sort of number you have to pencil down for depreciation?

Good. I'll take the question on pricing and I'm glad to pass the question on depreciation to Andy who has now time to prepare. On pricing, a couple of points; first of all, everything you said is, let me say, directionally right, but don't forget the impact of MTRs, which is particularly heavy for us because, of course, we lose the mobile component, but we don't pocket much of the fixed component or at least not as much as people who have 60%, 70% market share. So once you take the MTRs impact out and in a couple of years from now probably it will be totally out, then you get, quite frankly, a different picture, first point. But this is kind of a tiny point. It's not the big answer for the long term. But at least it mitigates the sense that you transfer of, oh my god, this is a lot of work for nothing, which is -- basically is what you said. So first point, take out MTRs, look at the broader situation. It is less bleak than what you describe. Second, long-term Red pricing; look at the U.S. case. This is -- and we are really convinced this is about ARPU. This is about increasing the revenues that you get from the account one day, the family, the company, and so on, more than the individual metered pricing. On the reason why the whole industry is actually on a -- in a difficult trend is because we priced voice very high and we priced data very low. Now we all know, it doesn't take to be an engineer, we all know that actually the whole telecommunication infrastructure is more into data. And, therefore, if you price voice high and you price data low, you are bound to years and years and years of decline. What, in many markets, Swisscom was mentioned, but Verizon can be mentioned, but the Asians can be mentioned, is happening is actually people see the transition to smartphone as a great opportunity to say, "Instead of giving me, what, at EUR 12, EUR 15 per month, you give me EUR 20, EUR 25," you give me EUR 40 if you want an iPhone but that's another story, and then you can really use this thing as much as you can. So there is a lift up of the low-spending customers, which in the long term is very healthy. Of course, in the short term, you have some kind of wobbles. I remember when Verizon launched in, what was it, June -- May, June last year, there were same type of objections but eventually, it's working out. So I really think this is future proofing more than small adjustments that we can look at. Now, on depreciation and amortization?

Yes, so restructuring is your first one. Second half, I haven't got numbers with me but by memory, we took a slightly higher charge of EUR 70-or-so million on the restructuring, but it was a second half charge last year, so first half on first half this year has got a charge in that wasn't there a year ago. The depreciation in intangibles; depreciation, that is an FX impact because, obviously, we're having to translate euro-denominated depreciation charges back into sterling. And on the intangibles, I'm just trying to think, the impairments for last year may have had a small impact upon the impairment charges, but I will have to come back to you on the detail of that.

Yes?

It's John Karidis here from Oriel Securities. Two questions, please. What needs to happen for Vodafone to start moving to shared data plans? And then secondly, next time Verizon gives out a dividend, how will you go about deciding whether to pay it out as a special dividend versus doing a buyback? What are the issues that you'll look at, please?

On shared data plans, there's a lot of different ways of applying them. They have a lot of different theories and it just take -- to your point, it just takes -- sorry, well, there are pros and cons and different things. The advantage is that we have inside views of what's going on in the U.S. and, as I said, it will be a market-by-market decision where and how, most importantly, to launch the shared plans. So I cannot give you a blanket answer because, again, we need to do what is right for each market condition.

[indiscernible]

I'm not -- I'm never talking about commercial initiatives ahead of them. I always talk once we have launched.

And on your future Verizon dividends, the way I'd look at it is this. At a point in time when we know we've got the dividend coming, we will have a look at the cash flows of the business, the debt level in the business, future spectrum or otherwise requirement and basically put it all into the melting pot. A year ago, we concluded that we would do it by way of a special dividend return. We already had a very significant buyback program underway at that point in time. This year is different. Clearly, the previous buyback programs had finished. All of our returns were completely dividend-related and our view was that actually to do some buyback and get the share count down was probably a good thing to do this time around. So I think it is very much going to be at points in time. In the next 12 months, hopefully, we'll go through, back to the previous question, the rump of some of the spectrum purchases, so that will be clearer. Hopefully, our stance on India and the tax there may become clearer. And maybe, in a positive way, we'll see what happens there. So I think we'll just have to judge it at that point in time.

Yes, I think we need to come back here, yes. Then...

Christopher Nicholson from Oraca. I wonder could you give us a little bit of refresher on Australia, where you are on that and just remind us what the problem is with the brand perception in the Australian market.

We have year Nick Read, CEO for emerging markets and Australia. Australia, not properly emerging.

Yes, so what I'd say about Australia, I think we have said several times for the last x number of quarters what we'd been doing operationally in terms of network, service improvement, et cetera. So I won't go through all of that. I think what my boss says on a regular basis is, "But is it translating into commercial performance and financial performance?" So just focusing on that, so if we take telecoms Ombudsman's complaints, they're down by 2/3 from the peak. If we take contract post-pay handset churn, it peaked around sort of mid-30s. It's now mid-20s and improving. Prepay active base is now stabilizing. So the really important data point is service revenue quarter-over-quarter. Quarter 1, we were down 4.5%, but this quarter, we've stabilized. So we're virtually flat quarter-over-quarter. So what I'd say is customers are starting to understand that there is a material improvement in the network. We've made good advances in the quality. Stabilizing revenue, improved customer value management is improving our A&R metrics and, of course, you heard our restructuring. So my view is next fiscal year, starting to get back into the double-digit EBITDA margins that we expect.

Is it still core? Is it still core to the business, Australia?

Is it still core? Our job is to turn around the operations. So we're absolutely focused on that. We've got a great management team under Bill Morrow. So I was down there July. I was down there September. I'm meeting again in November. I think that shows how much time and attention it's getting.

Jerry and Justin and then -- if you raise your hand, I try to. Jeremy A. Dellis - Jefferies & Company, Inc., Research Division: It's Jeremy Dellis from Jefferies. Two questions, please. I think your margin outlook calls for underlying margin trends to soften a bit in the second half. I just wanted to confirm that's the correct reading of the guidance. And I wondered what it assumes about Europe; specifically, how much room for maneuver are you leaving yourselves if competitive conditions were to deteriorate a bit further? And then secondly, there's some important cost-cutting initiatives, obviously, outlined, but in general terms, is it really possible to sort of stabilize controlled EBITDA or controlled free cash flow without really stabilizing the top line? What really is your outlook for the time that it takes between the point at which the short-term chart evolves into the long-term chart and the revenue trend really does stabilize?

Should I take the last bit and then you add? You're absolutely right. I mean, the reason why I said there are short-term cost initiatives, which are really going into kind of Robin's direction of being lean and being more efficient, which we have to do, first of all, because now we can do them and second, because there are short-term pressures. But in the long term, the reason why I first talked about pricing and about data and about what we want to do and the questions, the last set of questions about plans and so on, there's no doubt that is the way that our industry and, therefore, also Vodafone will get into a positive cash flow and EBITDA. There's only a certain amount of things that you can do on cost. I don't like the concept of room for maneuver because that's not the way I see things. That's not the way we have managed the company in the last 4 years. Even when we were under pressure, we have always invested what was required to invest. We have not cut CapEx, which is why we didn't end up in bad places from a technology point of view. We are where we need. Like in Germany, we are investing in smartphone penetration and improving. Germany was only 18% smartphone penetration, it's now 28%. It's still lagging. I mean, it's still behind. So we will continue to invest. I don't corner myself with the room to maneuver thing, but I still think that reducing cost is in the short term the right thing to do. Andy, on the softening trends and...

Yes, I'll try not to use too many double negatives in our reducing rate. Typically, over the last 3 or 4 years, the margin in the second half has been lower than in the first half. Probably last year, it was about 1.5% lower in the second half than the first half. Clearly, our endeavor this year is not to see such a big reduction in the second half and, hence, why we are still targeting the improving rate of margin deterioration overall for the year.

Yes, Justin, yes? Justin Funnell - Crédit Suisse AG, Research Division: I've two or three questions please. Just coming back to the pricing question again, obviously, moving to flat rate voice and SMS, but still with data tiers but more and more emphasis on the need to grow data. In the last few years, you've done a pretty job of controlling data growth and that's kept CapEx to sales down. Is there perhaps a stronger argument now to try and accelerate data growth even at the expense of CapEx perhaps by encouraging more tethering tablets, that sort of thing, and just sort of let it rip a little bit on data? Secondly, I'm just wondering if you have any views on the ongoing discussions in Brussels about consolidation in Austria and whether you see any sign that that's going to go in a direction that encourages you to try and consolidate the industry or, on the other hand, give up? Thirdly, any initial views on what the credit rating impact would be of this IFRS 11 move? It clearly would change debt/EBITDA. One would have thought it shouldn't change it, but you never know. And then finally, the fact that your dividends grown 7.2% not 7.0%, any signs that that's more bullish on dividends for next year or something?

I don't know, what's there behind the fraction of the pea [ph] that we can use to hit exactly?

If we'd done -- if we'd done it to the 0.01, we would have come fractionally below the 7.0%, and we didn't want to be accused of walking away from our 7% commitment.

Listen, on Austria, honestly, we don't have any insight because we are not part of that process. We read the same things that you read. We interpret the same statements. We have a sense that there is a little bit of a softening of what seemed initially a pretty hard position. Honestly, any consolidation case we could look at, we have to stand on its own feet and if we are convinced that it is a good chance of being pushed through, we will just pay some lawyers to make our case. I mean it's not a huge amount of read across different situations, different markets, different pricing levels. I wouldn't draw a conclusion from there. On the flat data rates tethering, to be honest, we have not been constraining usage. We have been eliminating abusage or excessive usage in markets where this was the case. But if anything, we are actually trying to encourage usage. And as I said, I'm very pleased that iPhone is going up, tablets are going -- tablets are starting to become the -- we are still behind the U.S. and if I look at the LTE results of Verizon in the U.S., we're much more behind, but this is a good sign because with more content, more applications coming, the data component will be appreciated and used much more with virtual-reality on maps, with all our augmented reality on maps and all the new things. We will all use more and more of these things. So I think we are going in that direction. There's no intention to constrain. There's a contention to actually to take away the psychological barrier. We did a lot of analysis on why the Europeans use less than the Americans, and it turns out that it was basically self-restraint, not the fact that we are pricing in a particularly wrong way. So that is what we are trying to do with the worry-free type of positioning that we are taking. Justin Funnell - Crédit Suisse AG, Research Division: And credit rating?

Don't think there'll be an impact there. I mean, they're more influenced by controlled cash flows, et cetera and I think the accounting rules here are slightly secondary to that.

Yes. Yes, you've been waiting for a while as well and then we can again, that side.

It's Paul Marsch from Berenberg. Point 4 on your strategy slide, you say if it's value-creating, you'll acquire assets to enable access to bandwidth. And does that include residential local access bandwidth? And then secondly, on the LTE uplift, you're saying an incremental EUR 10 as a premium ARPU. I guess what we really want to know is how does that compare or how does LTE ARPU compare to what those customers were spending before they migrated onto LTE? And particularly on services, once the handset recovery's stripped out?

Yes, maybe the second question, maybe between Paolo and Philipp on the pricing of LTE and the EUR 10 premium, which -- I think there is an interference between the 2 microphones, so you should shut one of the 2 off, or maybe I should from here, I don't know. On -- so the LTE question, I will pass it. The question about convergence or residential access, I mean the logical flow is very simple. If quadruple play, to use a simple equation, if quadruple play becomes the norm, if there is proved willingness of customers to pay for that type of thing, we are going to be there and we are going to be there with our own assets or third-party assets depending on the market. This is very simple, very simple statement. It is what we've done in Italy, when it started many years ago, in Germany, in Portugal, in New Zealand. In New Zealand, we acquired and we are integrating, tests are clear, so we are willing to go there. Now it says, "If value accretive," because some of it is proven to be value accretive, to be honest not the whole of it. So it would depend by market, depending on the value of this market, how much customers are willing to pay, what alternatives we have and so on. But this is to say a scale data company plays basically where the customer's needs are. Paolo, and -- or, Phillipp, do you want to have a comment on LTE pricing and the premium?

Yes, maybe just a comment on that. I think what we are seeing in the market now is more or less what our strategy is, which is try to place a premium on products which are currently in the market in Europe, which are basically mobile broadband for PC connectivity and tablets. I'll give you an example from Italy, both products are priced EUR 10 higher than their equivalent products on 3G. There is more data allowance on a promotional basis because we will all need to understand what usage is going to be on those type of products, but basically, that's the direction of the market; we see competitors in the same space. Same story would apply, for example, to Portugal where we did launch back some time ago. Obviously -- and the further is an ARPU increase versus the alternative that we currently would have in the market. Clearly, I think the interesting phases will become when we mobilize smartphones, LTE-based smartphones with packages having data included and actually, we see us taking a very consistent approach also on smartphones.

Yes, I think for the North and Central European part, we basically pursue the same strategy. So we have 2 products up and running. One is more of a DSL substitution product, which we employ in Germany also at a premium and the other one is our normal LTE included in our advantage plans, which also is at a premium in the market. We're trying with that premium to then make sure we have rental, we have products which are really worthwhile over time.

Shall we go back there? Yes.

Emmet Kelly from Merrill Lynch. Just one question, please, just coming back to the situation in Austria. It seems that the European Commission is still playing a bit of hard ball on in-market wireless consolidation, which is surprising because Austria is such a small market in terms of population. However, it does seem that they are willing to accept network sharing and deeper forms of network sharing. I know last year you signed a deeper agreement with Telefónica O2 here in the U.K. Can you just say how much scope there is to go deeper in terms of network sharing in the other countries in Europe, thinking in particular in Germany, Italy and Spain? I know the Commission has made noise about you being able to share spectrum as well in the future and how network sharing could fit in with your best network rollout in Europe as well.

Yes, it's not an answer that we can give in a blanket type of way. We need to go market-by-market. It's not an answer that can be given regardless of the departing condition, the EBITDA levels and who would that be the other party. So I think we need a lot of passive-sharing deals, which actually now amount, what, 50%, 60%?

For the whole group, 66% [ph].

For the whole group, 60%. If you take out India, it's probably 50% in Europe or?

46%.

46%, okay so it's more or less 50%. In Europe, that is fine. We did the deal in the U.K. for specific reasons linked to spectrum and linked to the profitability of the market and also, to be honest, the geography, the concentration in London. And by the way, in London we have not shared, so again, you how to qualify exactly what we are talking about. If you take a train up to Scotland, probably, doesn't make a huge difference whether you are fully alone or with somebody else, but, for example, in London, we want to -- we are very keen to keep our own control over what we do. In the other markets, honestly, it depends and clearly, there are discussions going on. Akhil Dattani - JP Morgan Chase & Co, Research Division: Akhil from JPMorgan. Just two questions, please. Firstly, on Germany and U.K. where we've seen a bit of a revenue slowdown this quarter, just wonder if you could comment on whether you feel that's a sign that the markets are worsening a bit in terms of competition or whether you just think your historical outperformance is unwinding, and whether we should expect that to continue over the next couple of quarters? And then, secondly, on the issue of restructuring charges. Given that you're guiding to a GBP 300 million cost reduction into next year, presumably, we should expect further restructuring charges. And, as such, if that's true, should -- would you be able to give us some sense of what the numbers might be into H2 and maybe into next year as well?

Can I pass the first question to Philipp, since we have been commenting this morning competitive performance in detail that will last?

So if we look at the 2 market, the first one, the U.K., we are, overall, from a market share point of view, pleased with our position as we are holding our market share, service revenue market share year-over-year in a very competitive market and the U.K. is very price competitive, as you all know. So I think, overall, we are doing okay, with minus 3.2% service revenue decline. Net of MTR and roaming, we are in the positives again. We launched in the U.K. specifically the advantage plans where we will obviously only see the benefits coming out over the coming quarters to strengthen the ARPU base and we also went in the postpaid area into a price increase, another way to strengthen our ARPU base going forward. If you look at the German market, on the other hand, in Germany, we still are ARPU accretive. So we're still growing our ARPUs by 5% year-over-year, and we basically use the concept of our Red plans also in other areas, for example, in the prepaid space and also now in the inflow starting to be ARPU accretive in prepaid as well. So we're very much focusing on the higher value parts of the market in prepaid and in postpaid, with the respective price plans to drive our service revenue up. This has, here and there, some negatives on the volume, but that's a negative we are very much willing to take as it really drives our revenue up. And we are leading -- continuing to lead the market from a revenue point of view.

I think we have time for a couple more questions. There? Anybody down there? No. Okay, so maybe yes, there. Yes, sure, sure.

James Ratzer from New Street Research. I had two questions, please. The first one was just regarding your EBITDA margin guidance; so looking for the second half to be a lower decline than in the first half. I was wondering if you could let us know specifically, which geographic markets we're going to see that improving trend. And if costs next year-on-year are going to start coming down in absolute terms, can we start thinking that year '13, '14 will actually start to see margins grow for Vodafone Group? And then the second question was just regarding the assumptions you made for your impairment tests. It looks like in Italy and Spain, your 5-year budgeting assumes CapEx to sales remain stable. Is that consistent with your thinking across the group that over a 5-year view, CapEx to sales should be stable?

Okay, shall I -- let me pick that up. So as I think I said earlier, in terms of the second half EBITDA, the things which will help us there, one will be the strong performance we've got in India and Vodacom flowing through further into the year, and the second those markets becoming a bigger proportion of the group will help as well. Thirdly, the things we are doing on the operating costs are taking costs out. And finally, the new pricing model, hopefully, will take some of the acquisition subsidy out. So it's a combination of those that give us the confidence that we can still get the rate of margin erosion down year-on-year. After next year, to be honest, I'd rather not sit here with a crystal ball. It would be nice to think we could get to a point when margins were going to pick up, but it is so dependent upon the top line and I think I'd rather handle that one nearer the time rather than forecast and speculate far ahead. On impairment, we have, as you say, got a fairly stable level of capital intensity assumed for the 2 markets that we have impaired. Obviously, that is flexed according to the sort of top line prospect by doing it as a proportion of the revenues. But overall, our view is that the direction of travel on the CapEx should remain fairly similar to that that we've seen recently.

We have time for probably one more.

It's John Davies from Santander. I have 2 questions, sorry. So first one is on data bundling. You said you want to give customers big bundles if they had the confidence to use all the services. Does that mean you've sort of moved away from the idea of potentially reverse billing content providers so they could 0 rate the traffic? And secondly, a couple of your competitors, over the last few weeks, have referred to the actions of some of your companies in terms of their tariffing as being irrational. Now, I'm sure you'll dispute that, but can you think of anything which your companies might have been doing which would make them think that? Is it that you're further down the track towards this flat-rate voice or whatever it maybe?

Yes, John, thank you for your questions. First of all, reverse billing or charging for contents-on, Vodafone has, quite frankly, never been really supportive of it as a mandated thing. So if somebody wants to come to us, but honestly I don't have people lining up out of my door and say, "I have this beautiful account and I really would like to push it to 500,000, 1 million, 10 million customers, it's a new movie, whatever. Can I get it 0 rated in exchange for something?" Yes, they tend to do it for free. So they request, "Can I push this for free?" Now, for free, I'm afraid we are not in that business. But we are not in the opposite business, which is I'm going to charge Google, I'm going to charge these people because we don't think that it's a -- it's neither a healthy nor a very likely model to succeed. And that's more of a, I think, fixed line point than us. On the irrational -- sorry, you had a point on the -- on data bundling? In general, we are doing it because we see a potential to really liberate usage and we see a great potential to really increase penetration at the lower level. If you think about it, the problem is never to convince the high end of the market to take the iPhone and spend the 40. It's to convince those who spend 10 or 12 to go to 20 or 25, but those who spend 10 or 12 are many more than the other ones. So it's a little bit about really becoming a generalized data company. It's a vision that we share with our colleagues in the U.S. In the U.S., it's much more visible. Penetration is much higher.…