Question-and-Answer Session
Operator
[Operator Instructions]. The first question comes from the line of Damien Maltarp [Cazenove]. Please go ahead with your question.
Damien Maltarp - Cazenove
Thanks very much, Damien Malta from Cazenove. Two questions, firstly just on the restructuring provision that you guided for the full year, you previously indicated ?630 million in Spain. Should we still be thinking about that number, if not, if its lower why might it be low, is there any slippage in terms of I guess signing people up to the redundancy plan? And the second question, just looking at your balance sheet, the short term provisions and other liabilities is gone up by about ?1.6 billion over the quarter alone, is there any thing in particular within, that you can point to? Thanks a lot.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
Damien, this Antonio Viana; good afternoon. On the redundancy plan, as you saw we have seen in the previous years, normally the fourth quarter is the stronger quarter in terms of closing most of the redundancies. I remind you that this is the end of a four-year program with a overall target of 15,000 headcount reduction.
We are already... from those 630 million... have already accounted for 116 million until now, and we expect to have a stronger than the other previous quarters activity in the last quarter. Nevertheless, we may be short of the overall targets since, as I was telling you, this is an overall program for four years and this is the final quarter of this four-year program, but be sure that we'll have a more stronger activity in this quarter, and we're still committed to try to reach that target although it seems difficult and we'll probably fall a bit short of that.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Yes on the second question, the balance sheet, we're unsure. Would you mind repeating the question so that we can locate the answer, please?
Damien Maltarp - Cazenove
Sure. Just looking at the short term provisions and other liabilities in your balance sheet, to say with course of the quarter looks to have gone up quite materially by over ?1.5 billion, just wondering if there's anything in particular you could point to, that was driving that increase.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Can I ask you to... I'll ask the question later on in the call because we're double checking the numbers, okay.
Damien Maltarp - Cazenove
Okay.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
I'll get back to you on the question during the call.
Damien Maltarp - Cazenove
Thanks very much.
Operator
Your next question comes from the line of Terry Sinclair [Citigroup]. Please go ahead with your question, announcing your company name and location.
Terence Sinclair - Citi
Hello. It's Terry Sinclair from Citi. Two things; first of all. I noticed there was some strike activity in Argentina, is that something that should be very concerned to? Are there any other... is there any other industrial action elsewhere in the group? Secondly, can you help me understand, what's happened with Chilean margins, they are poor, tend to be falling in fixed and going up in mobile?
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Yes. I'm seeing your question about the strike in Argentina. You know that the strike ended, and we're now underway of rating a normal operational activity in Argentina, and that is progressively happening and we have no other strikes going in around in regions, so we can tell you that negotiations came to an end at month's or something ago, and now we're trying to recover the normal operation on 20 in Argentina. Though it's taking us a while to recuperate that activity because we have a pending, waiting list both in traditional lines and in broadband, therefore we are accelerating this deployment. So, nothing on that front and with regards to the Chilean margins, I mean in terms of the wireline addition we are now entering... into our new business which is a TV business which has lower margins, that's affecting this first month, we started last year and it keeps affecting us this year, but we are progressively improving as we are achieving critical mass and that's the main effect on the wireline.
And on the wireless, I mean the commercial activity as we are reaching higher I am very I would say high degrees of penetration on the wireless, the commercial activity is more reduced. And then we are focusing more on loyalty programs on prepaid to postpaid migrations, and that's why margins are improving on the wireless, actually. Those are the main comments.
Terence Sinclair - Citi
Thank you very much.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Thank you, and next question please.
Operator
The next question comes from the line of David Wright [JP Morgan]. Please go ahead with your question announcing your company name and location.
David Wright - JP Morgan
Hello, its David Wright at JP Morgan, in London. I have three questions please. First of all on Latin America, the margin in Venezuela looked fairly exceptional with a very... looked exceptionally good, I should say, with a low number of additions, is that the kind of benchmark for underlying margin we should now be looking at for your Latin American mobile operations, in perhaps, the two player dominated market? Is that the kind of midterm margin you are looking for all of those operations to had to? Secondly, in the O2 business we saw strong net-adds in Germany but it dipped once again in service revenues, now, is this the case of most of those adds coming in late in the quarter, so perhaps we should see some kind of rebound in Q4? I think, Peter, you have mentioned in the past that you expect service revenue trends to go positive in Q4, is that still the case? And then just finally maybe some Santiago you could give us a bit of guidance on full year P&L tax, given that very low rate then normal? Thanks.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
Well I will take the question of Venezuela, and the answer is that each country has its own specialty, and therefore I don't think we can extrapolate one margin from one country to the other. In the specific case of Venezuela, you need to take into account the fact that there is a lower intensity in terms of handset subsidy in that country, and on top of that the beyond net effect traffic affecting our own network is very significant, and that's the two main leaders of why the margins are what they are in Venezuela. So therefore we, in Venezuela, we see no major movement that can allow us, that to change, but I don't think that we can extrapolate that to the rest of the region because each country has its own specific effect in terms of subsidies and in terms of traffic evolution.
David Wright - JP Morgan
Okay.
Peter Anthony Erskine - Head, Telefónica O2 Europe
As far as the German question, David, it's Peter Erskine here. Obviously, a business takes a while to swing around on its net adds throughout the year to drive it, so its not so much that they were net adds towards the end of the third quarter, its just that it was a very big number, three quarters the way through the year. I think we still stick with the guidance which allows either flat or ever so slightly minus for the whole year, but that will give us we believe in the last quarter, a quarter's total revenue and that includes the DSL business as well as the mobile business which is looking positive. But as to actually whether the service revenue or mobile will go positive. I think it will be around the guidance number for the year end.
And I just put Germany in the context. It's going to shoot, it's a good number, it wasn't just 610,000 customers that were full quality within that place to 40% were contract customers, and I think that plus our improving DSO performance, start to say that signs are slightly encouraging but obviously we will no more as subsequent quarters come along.
David Wright - JP Morgan
Okay.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Yes, David, in terms of the taxes, we do not provide any taxes guidance. The one significant number that we have produced this quarter is this tax shield increase as a consequence of Endemol disposal which is going to result in an increased tax shield going forward, and therefore lower cash taxes not this year but in the coming future, once the tax shield gets depleted again. But we don't have any specific... we don't expect, by the way, any big impact on the cash side of taxes until the yearend, and so we can make a best guess as to what the cash taxes is going be from now until the end of the year.
David Wright - JP Morgan
And in terms of the P&L tax, is that the kind of level, we are looking at the for full year, the nine months level or blended off a little.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Well Q3 P&L effective tax rate is very low as a consequence of the very large tax credit coming from the Endemol sale again. So you should not expect a 13.7% to be happening again. We should reverse back to an average more commensurate with the first half of the year.
David Wright - JP Morgan
Okay. Super thanks.
Ezequiel Nieto - Head, Investor Relations
Thank you. Next question please.
Operator
Your next question comes from the line of Robert Grindle [Dresdner Kleinwort Wasserstein]. Please go ahead with your question, announcing your company name and location.
Robert Grindle - Dresdner Kleinwork Wasserstein
Yes, hi, there, it's Robert Grindle from Dresdner Kleinwork, in London. Just on the Iceland and the UK, will your Iceland revenues be reported net or gross of payments to Apple and roughly what would that difference be. The second question is what's the plan for funding Telco, the holding company for Telecom Italia? Are you expecting still to contribute your share of any capital increase? And then just on mobile data in Spain... sorry if I missed it.... but is it possible just to know the absolute number for mobile data in Spain in Q3? Thanks very much.
Peter Anthony Erskine - Head, Telefónica O2 Europe
Thank you, Robert. Regarding your iPhone, I am sure you haven't intended it, but your question could reveal our revenue share. And I am not willing to do that. As to currently how we report the number, we're currently working with our auditors to make certain that as the revenues flow we report it properly. So, we will be telling you more of that to the end of this quarter.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Yes in terms of the integral increase in Telco, Bob, what's going to happen is that before the yearend the Telco deal has been completed, Telco will have to go through a couple of markets to fund an increase in shares. We are determined to contribute our shares, and whether it's going to be through a capital increase or it is going to be through further debt is not something which has been decided at the Telco level, where we are indifferent, either way it fits us and suites us but we'll have to discuss that with our Italian partners to understand what's best for all the Telco partners.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
And on the mobile data in Spain, Robert, the revenues for the quarter on mobile data in Spain was ?325 million to reach a cumulative of ?930 million for the whole of the year. The growth in mobile data revenues has been on the range of 13%, if I am not mistaken, on that quarter compared to the same quarter of last year.
Robert Grindle - Dresdner Kleinwork Wasserstein
That is very clear, thanks very much, indeed.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
Thank you.
Ezequiel Nieto - Head, Investor Relations
Thank you. And next question please.
Operator
Next question comes from the line of Mathieu Robilliard [Exane BNP Paribas]. Please go ahead with your question, announcing your company name and location.
Mathieu Robilliard - Exane BNP Paribas
Good afternoon. Mathieu Robilliard, Exane BNP Paribas. I had two questions please. First, in terms of your performance at the EBITDA level in Spain-Mobile. Could you give us a little bit more color as to what is behind the good progression of the margin, is it the lower FRC per unit or is there some structural improvement in cost efficiency? Second question has to do with the Telco deal, is that behind house and the fact that Telecom Italia mentioned potential synergies of up to ?500 million annually? I was wondering when in year-over-year we should start to see those synergies flow your side? Thank you.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
Mathieu, this is Antonio. On the mobile evolution in the case of Spain, both we have stated from the beginning that you would see as the year would go by the impact of the different interconnection rate decreases, and as a consequence if you add up the two decreases into one in October 1st and one in April. That has led to a decrease in the range of 14% on a cumulative basis. So, obviously that affects the level of revenue growth, and as a consequences of margin as well in terms of the third quarter. And on the other side you see also that this is the quarter where we have a stronger impact in terms of the roaming tariffs, but apart from that we do not see any structural relevant change.
Julio Linares López - Managing Director of Coordination, Business Development and Synergies
This is Julio Linares. Regarding your question in relation with the synergies with Telecom Italia, we had some exploratory discussions at the beginning of the year in order to identify the potential areas for synergies and to identify in each area the amount, readily the amount of synergies that we could reach both companies together. At that time we identify yearly range between ?100 million and ?500 million for both companies. Now that the deal is closed we have to go deeper in each area and with the right information and with the right people to analyze more closely. The potential synergies before we are able to close the program for the next year.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
If I can come back for a minute, this is Santiago, I want to come back to Damien's question in the beginning. I can now confirm that the ?1.6 billion increase in short term provisions is fully related to the payment of the dividend this Wednesday of ?1.67 billion. And the reason why it is sitting there is because what the dividend is announced and it was announced. It is no longer freely available for the company. So, it will be adjusted after the payment is completed this Wednesday.
Ezequiel Nieto - Head, Investor Relations
Thank you. Next question please.
Operator
Your next question comes from the line of David George. Please go ahead with your question, announcing your company name and location.
David George - Credit Suisse
Yes, thank you. It's David George at Credit Suisse, in London. A couple of questions, firstly on Spanish broadband, we heard some comments from Auna recently that they were seeing some more aggressive competition from yourselves in Spain, I think matching them a bit more closely on pricing and speed. We did see, I think, a fairly weak net sales figure for cable broadband in the quarter. I wonder is there a sort of particular change of strategy in terms of how you view cable in Spain, as compared to... can we see that trend continue. Secondly, just in Germany, Peter, I wanted to. Firstly, I am not sure if we got an exact number of the Fonic brand adds in Q3, and also wanted your expectations on the upcoming termination rate cuts in Germany. Is there a danger we could see the current amount of asymmetry in German termination reduce?
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
David this is Antonia Viana, on the Spanish broadband, I will not comment on Auna performance, I would rather comment on our performance, in the sense that what we have strived is to deliver what we promised our customers with probably a consistent delivery in terms of service, we have expanded our range of products going, as Santiago pointed out in the presentation, from the 1 megabit entry offer to the core offer at 3 megabits and to the upgraded offer at the 10 megabits. I think that also the number that we are providing in terms of in Endemol [ph] and the level of net assets we are having in Endemol on a market that is not growing as fast probably in the third quarter, due to all this soccer distribution wars that have occurred during that period in Spain, have also contributed for us to have a better performance than others. So, we are pleased with our performance, we want to keep on growing not only in the cable areas but all over Spain with an offer that is inconsistent in the rest of the country. And so while we are positive about the way our operations are growing. As I told you I would not make any comment on the overall performance.
Peter Anthony Erskine - Head, Telefónica O2 Europe
And David on your questions on Fonic, etcetera. We did 70,000 net charge with Fonic in September... it was only launched in September. And in fact since then, it continues to do very well, it is pretty close at the end of October to around a 100,000 mark. So it's going very well. It is also showing that in the quarterly cheapo [ph] operations hit 1.1 million customers, and actually did 191,000 net adds in the quarter. So as far as your question on German termination rates, we would... we will know at the end of November, we think, and we would certainly anticipate lower than last year's 20%, precisely, how much lower but we think significantly lower than last year's level is what we are anticipating but it's currently company ore is still in the melting pot.
Ezequiel Nieto - Head, Investor Relations
Thank you. Next question please.
Operator
Your next question comes from the line of Will Milner [Arete]. Please go ahead with your question, announcing your company name and location.
Will Milner - Arete
Thanks. This is Will Milner from Arete, in London. Within your longer term EBITDA growth forecast in Latin America, are you forecasting to less EBITDA returning to growth in the years 2010. And what should we expect to derive this return to growth? And then secondly on Spanish wireline, what percentage of your broadband base in Spain do you expect to ultimately take the lower ?30 offer? Thanks.
Julio Linares López - Managing Director of Coordination, Business Development and Synergies
On the long-term OIBDA brand of Latin America, we are considering slightly increasing... positive increasing their OIBDA from Telesp, and therefore... and that's why we were saying, during the slide that we are accelerating the transformation of the wireline. You need to take into consideration of the fact that, out of Telesp evolution of this quarter you have one significant event that was positively affect us here, were feel [ph] which was behind direct tax of fiscal fees effect, which was more than 300 million reais, and that significantly affected year-on-year comparison.
On top of that this year you have this [indiscernible] that we have been out during the whole year of the bad debt evolution. And those two are non-recurring events. And therefore we think that this jointly would affect that we are accelerating the transformation of Telesp in terms of deploying a network upgrade and in terms of diversifying the different platforms in other two offered... triple play offers, now we have the TV agreement being signed. We have the global contents and therefore we are very competitive in terms of the content, the content part of our TV offer in Brazil, and the continuous efficiency effort that we are carrying out effectively having reducing more than 800 people in the workforce here. We think that we should be able to turnaround the Telesp situation in the short run.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
On the broadband base and the 1 megabyte I think that the one megabyte offer has a very clear purpose which is to expand our broadband customer base. That is clearly the purpose of launching the 1 megabyte offer. From thereon what we want is that the customer has new sort of customer experiences using increased speeds. So, as we pointed out in the Investors Day, our target is to have around 6.1 million, 6.8 million customers on broadband by the year 2010. And I can't tell you what would be percentage of 1 megabyte but by 2010 having 1 megabyte will be the same as having narrowband today. So, it is really an entry product to increase the customer base and then the customer will by itself as it becomes a heavier user will require extra speeds.
Will Milner - Arete
Okay. If I can just follow-up you don't than see any canalization risk of your existing broadband base from this product?
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
Well obviously if a customer decides to abandon our service, this is also retention product to retain some of those customers, but as I told you the core of our offer is centered around the three megabit offer.
Will Milner - Arete
Okay. Thank you.
Ezequiel Nieto - Head, Investor Relations
Thank you. Next question please.
Operator
Your next question comes from the line of Stanley Martinez [Legal and General Investments Management]. Please go ahead with your question, announcing your company name and location.
StanleyMartinez - Legal and General Investments Management
Thanks. Good afternoon. It's Stanley Martinez from Legal and General Investments Management, in Chicago. I have two questions, if I might please, first to Pallete on Latin American ARPU; can you discuss the pricing power you have in local currency terms within Latin American countries with high inflation. Last quarter in Argentina, we saw some impressive ARPU growth in TASA and TEM Argentina, but less so in terms of Venezuela where ARPU is a higher percentage of per capita income. I am wondering if there is a further spike in local price inflation in these two countries or elsewhere in Latin America, say in the order of magnitude of 10%, for instance. To what extent you feel your local managers can pass along those costs so as to minimize any dilutive impact on Telefónica's Group results in euros?
And then I have a question for Mr. Valbuena on debt targets. When I look beyond the Q4 commitment and even when incorporating the new dividend policy announced in London three weeks ago, Telefónica has the potential to be sustainably below two times net debt to OIBDA over the next couple of years. Now you have been clear about targeting high BBB plus minimum ratings rather than trying to return to the A ratings you had prior to the mmO2 acquisition, should I presume that any excess debt capacity below two times leverage will divert to acquisition or might we actually see Telefónica's leverage below two times for a few quarters into the new fiscal year? Thanks very much.
José María Álvarez-Pallete - Head, Telefonica Latin America
Taking the first part of your question, in terms of the ARPU and the linkage with local inflation in each of the countries. I would like to say that, yes, of course we're influenced by the local inflation but in most of the cases this is much more linked to effort in terms of minutes of usage that we're doing every, in every single country. In order to be used an example, what you have stated about Argentina and Venezuela is true but ARPU is also growing, for example, in Brazil or Chile where inflation is much more contained, and that's much more linked to the fact that we have been able to put in the market an offer that is attractive to the customer in terms of elasticity, in terms of number of minutes versus price per minute. And therefore we have room playing with the elasticity and the value proposition that we're making to each of the countries to drive that up. So, yes, of course, it is affected by inflation but it is not directly affected, I mean, you're finding cases where lower inflation are low enough to have ARPU that's significantly above the inflation in each of the countries.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Okay, Stan, on the debt targets. We are very happy to have been able to reach the target that we had set for ourselves of bringing total debt leverage ratios below 2.5 and this has been accomplished already. We have said during the call that there might be a small pickup in that leverage ratio in Q4 of this year, as a consequence of paying the dividend and the recent payment of Telco. And medium term we feel very comfortable with a BBB plus rating that we have secured for the time being. And we see this is broadly compatible with a 2.5 times that of our OIBDA leverage ratio.
Should we have any reason to think that that ratio ought to be adjusted in permanent conversations with the rating agencies, we would review it, but we think this is not likely to happen. A revision to those targets, I mean, over the next couple of quarters. So while we get there, the priorities that we've set for ourselves in London were quite clear. Any excess cash flow, any excess free cash flow, I should say, is going to revert back to the top priority which is shareholder remuneration. And we will go down that ladder again by increasing shareholder remuneration in its various incarnations, then dealing with debt if that is needed and then attending the acquisitions. Shareholder remuneration continues to be our top priority once we have completed the latter.
StanleyMartinez - Legal and General Investments Management
Fair enough. Thank you.
Ezequiel Nieto - Head, Investor Relations
Thank you. Next question please.
Operator
Your next question comes from the line of Randall Pollock [Vanguard Group]. Please go ahead with your question, announcing your company name and location.
Randall Pollock - Vanguard Group
It's Randall Pollock, Vanguard Group, Philadelphia. Just a follow-up, do you expect to issue new debt next year in any market or to refinance or whatever and also second question, can you discuss how you are obtaining content for non-sports content for broadband in mobile phone and any comment on costs and its impact on margins?
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Yes, on the debt issue, we have net maturities of ?2.7 billion next year. It is not impossible but it's not set plan and more visited, more market that will crucially depend on the characteristics, the features and the timing. We have been calling on the capital markets since we financed the O2 acquisition, with just an intend to keep it otherwise, but the point I want to across is, we are under no pressure to dissolve because free cash flow generation would be more than enough to accommodate, plus the cash at hand to accommodate those maturities. But we want to be perceived as frequent benchmark issuers in the various capital markets, so again no set plans, but yes, a strong likelihood that if the markets are reasonably open we will be there in the major currencies including euro, sterling and certainly the dollar.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
Would you mind to repeat your second question please.
Randall Pollock - Vanguard Group
Could you discuss how you are obtaining your plans to obtain entertainment content for mobile and broadband and any comment on costs and backlog costs?
Julio Linares López - Managing Director of Coordination, Business Development and Synergies
Well, this is Julio Linares. Regarding your question on content, first of all we decide the kind of content we need depending of local markets. But in addition to that we have joined negotiations based on a centralized unit that this curve of all the content negotiations for any platform regardless it is Internet platform, TV or mobile platform. In our negotiations basically we are trying to reach agreements with the content providers based on revenue sharing or based on cost of the subscribers, user basis rather than to pay upfront content. We have just those kind of upfront agreements in very special cases like it could be soccer rights or some movies for our video-on-demand offer. So, basically we are always trying to reach agreements with the content providers based on sharing with them the risk we have in those markets.
Randall Pollock - Vanguard Group
Is there a central purchasing or is there separate purchasing in each country?
Julio Linares López - Managing Director of Coordination, Business Development and Synergies
There is central purchasing unit that these curve of all the negotiations for the different countries, in collaboration with local market but there is a central unit in our corporate center.
Randall Pollock - Vanguard Group
Thank you very much.
Ezequiel Nieto - Head, Investor Relations
Thank you. Next question please.
Operator
Our next question comes from the line of Guy Peddy [Blue Oak Capital Limited]. Please go ahead with your question announcing your company name and location.
Guy Peddy - Blue Oak Capital Limited
Yes, hello, gentlemen, it's Guy Peddy from Blue Oak, in London. Three very quick questions. I note in Telefonica Espana's Waters business a dramatic increase in prepay usage in the quarter, but actually a decline in contract. I wonder if you could explain what was driving prepay that wasn't driving contract usage growth? Secondly, interpreting Peter's comment about the O2 Germany turnaround, it would appear as if you are signaling, Peter, the big things like this don't turnaround quickly, so perhaps we should be waiting well into 2008 before we actually see a discernible turnaround of O2 Germany, is that the case?
And finally in Telesp, it seems like I'm reading your talk that there is an ongoing value shift from Telesp to VIVO, which from a Telefonica perspective is clearly the wrong way. I'm just wondering what you can do to actually reverse this, because it's fair to say that in IPTV, and triple play bundles in most countries haven't have the discernible change on any wireline operator? Thank you.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
Okay. This is Antonio Viana. Let me address the usage issue on Spain. What you see the third quarter had nothing of a long term trend, it is nothing but what occurs in the summer. What you have in the summer was a campaign clearly directed at prepaid, whereby by paying a small fee, you would be able to talk every night during the summer from 10 PM on at a flat rate. So, as a consequence that has increased, probably, the usage in the summer. We are extremely happy with the kind of results that they have achieved in terms of the acceptance of the customers for that sort of campaign, and for the results that they have... that those have in terms of maintaining a better churn, in terms of the prepaid side. The comparison that you are making with the contract side is that, obviously, in August, here in Spain, the consumption from corporations drops dramatically and if you would look at other third quarters in previous years, you would probably see a similar trend but there's nothing else but that that's just the effect of the summer, since there is a doubt in that front and there's nothing drastically different or structurally changing.
Peter Anthony Erskine - Head, Telefónica O2 Europe
Guy, Peter Erskine; regarding your German question. No, I didn't mean to say, well into 2008, I'm sorry, if I misled. It's an encouraging quarter we've just had, as well as a headline 610,000 net adds. Perhaps Fonic as a new brand kicking in, in its first six, seven weeks of 100,000 net adds but that does go into October at 70,000 in September is encouraging to have DSL now starting to give us an order bank of about 4,500 a week that we now need to be quicker to install on DSL is encouraging to have the Genion base. Now on the new tariffs we got about 1.7 million customers within our post-pay base who have a 40% more minutes produced and a 10% ARPU is encouraging. I think the fourth quarter is on the back of quite a good fourth quarter last year which had some big numbers in there, will be challenging. I think we, we definitely start to see continued improvement but zero debate. This isn't well into 2008, we have to see a quarter-on-quarter improvement. And I remain very confident that we're doing all the right things and by early next year we'll be starting to say yes it's well on the road to recovery and we're getting back to good revenue growth, and obviously working at improving the margin.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
I guess with regards to your third question about Telesp and the competitive environment in Sao Paulo and VIVO, I would rather say that we think we have the two best platforms in telecommunications, is how probably, both Telasp and VIVO. The competitive scenario in Sao Paolo is very aggressive in terms of pricing for... to the voice and from the mobile side, and we have been able to be fully prepared for that thanks to a turnaround of VIVO. So right now, compared with a year ago or two years ago, we have the opportunity to share that upward trend at a level of VIVO. And at the same time in Telesp, and that's a trend a bit unavoidable because that market competition scenario in Sao Paolo. But we have all the elements that were needed or that are needed to turnaround Telesp, that were not there a year ago. Remember that during the last year we have been able to complete this year-on-year process. We have been able to reach the agreement as of the content provider that is differential and that we need to have that for the offer to be compared, and we are delivering broadband in Sao Paulo. So we really think that we have the best platforms in the most attractive state of Brazil in order to be competitive and in order to be able to take advantage of what's happening there in terms of market dynamics. So, I think that we should be able to take the best out of the two worlds.
Guy Peddy - Blue Oak Capital Limited
Okay. Thank you.
Ezequiel Nieto - Head, Investor Relations
Thank you. Next question please.
Operator
Our next question comes from the line of Chris Kern. Please go ahead with your question, announcing your company name and location. This question appears to be withdrawn. Our next question comes from the line of James McKenzie [Fidentiis]. Please go ahead with your question announcing your company name and location.
James McKenzie - Fidentiis
Okay, it's James McKenzie calling from Fidentiis, I am afraid. This question on LatAm fixed volume generally. You seem to have seen a big fall in EBITDA margins this year. Not just in the third quarter which is obviously motivated by the tax recovery, but generally margin seem to fall from sort of high-forties to the low-forties this year. Now, I know it's something that you don't specifically guide upon, but what do you, I don't know if you can give us any idea of what you are expecting for these margins going forward? Particularly considering that in the two biggest countries you haven't actually rolled out any Pay TV as yet?
Julio Linares López - Managing Director of Coordination, Business Development and Synergies
Well, thanks for the question James. The margins of the wireline this year have been affected, and I would suggest, also to correct those by the bad debt impact of Telesp this year, which is supposed not be recurring and that we have been carrying out during this three quarters of the year. So, that's one of the effects. And the other effect, and probably the most, longer lasting one is the fact that we are entering into new markets, into new products like the one in broadband has a different margin and also, namely, in Chile, and starting to appear in Columbia, and also starting to appear in Brazil has lower margins, so I think that we need to, we need to focus on the kind of margins that the blended margins that we are getting these days.
And we are able to sustain those and able to trying to do those margin, thanks to regionization effort that we are carrying out. Most of the signatories [ph] are directly diverted to sustain the margins, necessarily on the wireline side. And also the efficiency effort that we have been carrying out during the year, and that either way has been fully reflected in terms of the OIBDA margin, those are included in the OIBDA margin has also there, and have also impacting the margins. So I guess that, the transformation effort that accounts for both the new offer of products and the efficiency effort that we are carrying out, jointly with the non-recurring event of the bad debt evolution at Telesp, are the key strength to margin evolution on the wireline.
James McKenzie - Fidentiis
Sure, do you have any sort of feeling for us going forward of whether margins are going to stabilize, rise or even fall from this point?
Julio Linares López - Managing Director of Coordination, Business Development and Synergies
I am afraid not, you are going to have different affects... one is as the peak operator, the peak client base which include... margins are improving and that's happening, for example, that's the case in Chile. Also churn is reduced, you will see that churn, both, in traditional and in broadband is slight favorable along this year in Latin America, and basically due to the royalty effect of the bundles of product. So, you have on that part margins being sustained. On top of that you need to add the fact that the regionalization efforts was in terms of central management supervision that is facing Telesp or the ITF, or that we have been carrying multi-nineties [ph], is also going to payoff, payoff during this coming months. So, I would say that we are continually focusing on that but I don't think we can guide you on the long term.
James McKenzie - Fidentiis
Fine, that's fine. Thank you.
Ezequiel Nieto - Head, Investor Relations
Thank you. Next question please.
Operator
Our next question comes from the line of Luigi Minerva [HSBC]. Please go ahead with your question, announcing your company name and location.
Luigi Minerva - HSBC
Yes, good afternoon. Luigi Minerva from HSBC. I just wanted to have an update on your discussions with the Spanish regulator on the NGA program you announced at the Investors Day; you told us that November was going to be the time for a first feedback. Thank you.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
Thank you. Luigi, for your question. Well, we have put our points of view as did other operators to the regulator in terms of how we think that the regulation of the new generation networks should be established in Spain, differentiating it clearly from the traditional network and also having a differentiation depending on the alternatives regarding different networks or alternative networks in specific regions upstream and as a consequence that, that sort of segmentation should be required while considering how to address regulation in that front. We are still waiting for the view of the regulator, we know that others have tendered their opinions and now we still have to wait for the, a regulator to come back with his own views. So I think that we better wait for his final view on this issue.
Luigi Minerva - HSBC
Okay. Thanks.
Ezequiel Nieto - Head, Investor Relations
Thank you. Next question please.
Operator
Our next question comes from the line of Jonathan Dann [Bear Stearns]. Please go ahead with your question, announcing your company name and location.
Jonathan Dann - Bear Stearns
Hi, it is Jonathan Dann from Bear Stearns, in London. And two questions. The first was could you disclose the year-on-year change in gross additions in the German mobile business? I think you have disclosed it for the others. And secondly, could you comment on when you'd expect the UK DSL business to be posting the type of weekly DSL adds that Germany is currently doing? And I guess, thirdly, do you think German DSL adds can accelerate for the O2 broadband brand?
Peter Anthony Erskine - Head, Telefónica O2 Europe
I'll take those in reverse order. The Germany DSL, yes, we are very certainly can accelerate, but we really only started to sell this pro-actively July, August. That also ran into the Deutsche Telecom strike which slowed it down a little bit on insulations of the usual sort of getting the systems refined. So we remain quite confident that we can ramp up the German DSL. We are not saying when the UK can get to those levels. I am to put it in a context, we have been selling DSL in UK now three weeks. We committed that we will do more than a million customers by 2010 and we remain very confident in that, but I think exactly when we'll start to hit the kind of run rates that we are getting in Germany, no, we are not the position to say. I've got people rapidly giving me the gross... sorry, hang on one second please... The gross year-on-year increased 79%.
Luigi Minerva - HSBC
Thanks very much.
Ezequiel Nieto - Head, Investor Relations
Thank you. We have time for a last question, please.
Operator
The last question comes from the line of Christian Kern. Please go ahead with your question.
Christian Kern - Lehman Brothers
Hello, it's Christian Kern from Lehmann, in London. Three questions, if I may, the first one would be on the roaming revenues. You pointed that domestic roaming revenues have been down 14%, that implies given the drastic price cuts you've seen, quite a strong elasticity, could you confirm then what you seen around that trend. Secondly, what do you expect from Brussels tomorrow and the final one does OT look more or less attractive after the transaction last Friday? Thank you.
Antonio P. Viana- Baptista - Chairman and Chief Executive Officer
Well Christian, on the roaming, what I mentioned regarding the 14% drop in terms of prices was really to termination, not to roaming, was really the termination prices. On the roaming front what we have seen in the third quarter is that you have clearly two different markets on the roaming in market. It has been traditionally a very competitive market with a different operator sharing Spain, trying to compete for the traffic of major operators in Europe. So it was already a competitive market to that extent. So the impact has been not that strong as probably one could expect.
On the roaming, I think that's the integral point dealt in one of the slides, that the major effect that it has was that they have now more roamers, more of our customers are doing roaming out, that is, that the number of roaming out customers has grown at a rate that this the double of the growth on the customer base, and that's quite a positive sign to the extent that people are getting used to roam out, to use their mobiles when they are out of the country. So, that has changed or is starting to change the perception of people that roaming is too expensive and people are starting to behave differently and that's obviously is translating into a better traffic. Usability higher than one throughout, for the time being now, but the, if the overall affect I think that it's already included in the kind of growth that we have provided, and that we feel comfortable with the economic scenario that it is translated on this roaming front.
Julio Linares López - Managing Director of Coordination, Business Development and Synergies
This is Julio Linares. Regarding your question on tomorrow's announcement of Euro Bank Commission [ph]. We believe that they are going to announce a new proposal for the review of their current telecommunication directives that will include new policy for a spectrum management, they will include some stressing of the European commission regulatory power... we don't know yet to what extent... and they will include some expansion of privacy and consumer protection rules.
In addition to that they are going to review the European recommendation on relevant markets. You know that today there are 18 relevant markets and it's very difficult right now to see whether that number, it is going to be reduced to 7, 8 or 9, we don't know right now, but we are expecting a significant reduction in any case. In addition to that is may happen that they announce a set of initiatives for 2008 regarding guidelines for optical fiber, the growing on investment month, guidelines or some national segmentation and guidelines for universal service. That's the kind of announcements that we are expecting tomorrow.
Santiago Fernández Valbuena - Chief Financial Officer and General Manager of Finance and Shared Resources
I know your last question of having to those correctly [ph], we do not see anything changing in the landscape relative towards the year or other target. We were quite clear in our Investor Day that the time has now come for us to strengthen the markets that we already have. We have already built on the strength, and it is building on that strength that has taken us to where we are, the scale is enough. And so I'm sure there will be very good, well, assets but those are going to be for many others to explore.
Let me with this bring this call to an end. Thanking you all for having attended, and expecting you over the next full year results which will take place in early 2008. Thank you.
Operator
Ladies and gentlemen thank you for your participation today. This concludes today's conference. You may now disconnect your lines. Thank you.
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