Feb 9, 2012
Executives
Vittorio Colao - Chief Executive Officer, Executive Director and Chairman of Executive Committee Andrew N. Halford - Chief Financial Officer and Member of Executive Committee Michel Combes - Executive Director, Member of Executive Committee and Chief Executive of Europe Region Operations Nicholas Jonathan Read - Chief Executive Officer of Asia-Pacific & Middle East Region
Analysts
Akhil Dattani - JP Morgan Chase & Co, Research Division Nick Delfas - Morgan Stanley, Research Division Justin Funnell - Crédit Suisse AG, Research Division Nick Lyall - UBS Investment Bank, Research Division Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division Simon Weeden - Citigroup Inc, Research Division James Britton - Nomura Securities Co.
Ltd., Research Division Robert Grindle - Deutsche Bank AG, Research Division Ottavio Adorisio - Societe Generale Cross Asset Research Andrew Beale - Arete Research Services LLP Stephen Howard - HSBC, Research Division James Ratzer - New Street Research LLP Guy R. Peddy - Macquarie Research Maurice Patrick - Barclays Capital, Research Division Jeremy A.
Dellis - Jefferies & Company, Inc., Research Division John Karidis - Oriel Securities Ltd., Research Division Paul Marsch - Berenberg Bank, Research Division John Davies - ING Groep N.V., Research Division
Operator
[indiscernible] ladies and gentlemen, and welcome to the Vodafone Group Third Quarter IMS Conference Call. Today's call is hosted by Vittorio Colao, CEO of the Vodafone Group.
Please go ahead, Mr. Colao.
Vittorio Colao
Thank you, operator. Good morning, and thank you all for joining Vodafone's Interim Management Statement Call for the third quarter ended in December.
I'm here with Andy Halford, Nick Read and Michel Combes. I will start with few highlights on the quarter before passing to Andy who will take you through all the operating companies and then I will summarize, and we'll then open to questions.
So let me start on Slide 3, highlights of the quarter. Group service revenue grew 0.9%, which is just over 3% excluding MTRs.
This growth is less than the previous quarter, reflecting difficult conditions in a number of our European markets, offset by strong momentum from our AMAP regions and continued growth from operations in Northern Europe. In this context, we continue to deliver, in our strategic growth areas, the 3 areas of data, enterprise and emerging markets.
Data, specifically, grew 21.8%, led by the increasing smartphone penetration, which is now over 24% in Europe. Enterprise growth of 0.8% was a little slower than the previous quarter due to competitive and macroeconomic pressures in voice, but we still see a healthy and growing demand for enterprise data services.
And we continue to generate strong cash flows. Today, we report GBP 1.5 billion free cash flow for the quarter.
We are now over halfway through the GBP 4 billion SFR buyback program and over 70% complete against our GBP 6.8 billion commitment. And finally today, we confirm our guidance for the '11/'12 fiscal year.
So we can move to Slide 4. Here you can see our regional performance for the quarter.
Europe declined 1.7% on a reported basis. However, once we remove the impact of regulated voice termination rate cuts, Europe grew 1%.
Some of our markets in Southern Europe remain very challenging, as I said. And particularly, we saw a deterioration of trends in Italy, which Andy will cover a little bit later.
On the other hand, AMAP grew 7.6% on a reported basis, which would be 8.8% excluding voice MTR cuts, with momentum coming from 20% growth in India, 80% growth in Vodacom and not mentioned on the chart, but still worth mentioning, an excess of 30% in Ghana, which is small but we are proud of. I have mentioned the growth of 21.8% in data.
We also saw growth in messaging of 4.3% and 3.9% from our fixed operation. All of these offset the ongoing decline in voice.
CapEx and free cash flow for the quarter were both at GBP 1.5 billion, which Andy, again, will explore a little later. Net debt of GBP 25.5 billion includes the Polkomtel disposal proceeds of GBP 0.8 billion and the spectrum spend in Italy and Greece.
So moving to Slide 5. We can take a closer look at underlying service revenue -- service revenues.
Here you see the reported service revenue growth in the gray bars and the red show the revenue growth of our business when we exclude the regulated voice termination rate cuts, which continue to have a significant impact on our business. In the third quarter, this regulatory impact represented, as you can see on the right part of the chart, 2.2 percentage points of lower growth for the group, giving us an underlying growth of 3.1% instead of the 0.9% reported.
Of course, this also partially reduced our costs. During the quarter, we saw incremental voice MTR cuts in the Netherlands and in New Zealand, and we also lapped for one month the large MTR cut in Germany, which happened last year and boosted Germany a little bit in Q3.
Now if we go to Slide 6, here we have the drivers of our service revenue growth. You can see from this chart the loss in voice revenues, which is the first 2 gray bars.
Of these, 75% comes from regulation and this was more than offset by the growth in data and messaging, which is shown in the next 2 blocks in blue. Our data revenue grew 21.8% in the quarter, as I said, driven by the introduction of integrated tariffs, increasing smartphone penetration and growth of over 50% in mobile Internet revenues.
On an annualized basis, data is now a GBP 6.3 billion business and represents 15% of group service revenues. Messaging revenue grew 4.3% in the quarter, a little lower than last quarter, but still very strong demand.
The growth in messaging volumes and revenues was impacted this quarter by the limit on data SMS, which was introduced by the regulator in India. I will talk a little later about our progress and the move towards integrated tariffs, which, of course, offers us some protection from changing customer behaviors on the messaging front.
Fixed revenues grew 3.9%. It's down a little compared to the previous quarter with growth slowing in Germany and in Italy.
I will now pass to Andy to go through the detailed financial review.
Andrew N. Halford
Thank you, Vittorio, and good morning. Let me start by giving you a bit more color on the trends we saw in Europe during the quarter.
Service revenues declined 1.7%. While excluding MTRs, they grew by 1.0%.
Performance in Europe continues to see a north-south divide with the weak consumer and economic environments in our Southern European operations offsetting the growth from the U.K., Germany, Netherlands and especially in Turkey. In particular, we saw a deterioration of consumer trends in Italy during the quarter and conditions in Spain remain very tough.
So turning to Slide 8. Against the backdrop of continuing GDP growth, German service revenue grew 0.7%.
This growth includes the benefit of lapping the prior year MTR cut for one month in the current quarter. On an underlying basis, service revenue grew by 3.3%.
Data revenue grew 22%, reflecting strong smartphone sales in the quarter and a 67% data attach rate. Enterprise strength continues with strong demand in both the mobile and fixed segments.
We continue to see success with LTE and now have over 88,000 customers. Moving on to Italy on Slide 9.
As Vittorio has mentioned, the economic environment in Italy has deteriorated, and we have seen the impact of this reflected in our service revenue, which declined 4.9% or 2.8% excluding MTRs. Mobile-only service revenue declined 6.1%, offset by fixed revenues that grew 4.9%.
We have seen lower altered bundle usage along with intense price competition during the quarter. Against this, we continue to have positive mobile number portability, driven by the consumer segment.
Data revenue growth of 16% was supported by increasing smartphone penetration, and in particular, mobile Internet growth of 74%. Enterprise growth in Q3 was 1.9%, down 4 percentage points on the previous quarter.
We continue to have success with the Vodafone One Net proposition. Growth in both enterprise and fixed segments slowed sequentially due to lower usage.
And as a reminder, Italy is facing another MTR cut in the summer of this year. Now onto the U.K.
on Slide 10. Service revenue growth for the quarter was 1.1% or 4.8% excluding MTRs.
The U.K. has seen slightly weaker consumer confidence, translating to lower altered bundle usage and the reduction in roaming revenues.
Data growth in the U.K. of 13% continues to be led by strong smartphone penetration and data attach rates.
The U.K. continues to lead the way with the adoption of integrated tariffs, with 68% of consumer contract revenues coming from these price plans.
And in October, selective price increases were made in the consumer contract segment. We recently launched a data test drive trial with new consumer contracts.
This gives customer a 3-month window during which time they can establish which data plan suits them best. Early indications suggest this has increased data usage and is being well received by our customers as they transition into data services.
Moving on to Slide 11 for Spain. Service revenues declined 8.8% in Q3 or 6.9% excluding MTRs, a small improvement against the second quarter.
The economic environment remains difficult, and strong price competition continues. Against this tough backdrop, our commercial actions in Spain have started to yield early results.
As you can see from the slide, we have reported significant improvements in our smartphone penetration, data attach rates and transition to integrated tariffs over the last 12 months. Data grew 27%, led by the increase in smartphone penetration, and in particular, the growth in mobile Internet.
Fixed growth remains strong, driven by good customer growth. On Slide 12, we have Turkey.
Turkey continues to deliver very strong performance with service revenue growth of 23.5% for the quarter. Importantly, the business continues to improve the quality mix of customers, and the increasing strength of the brand has extended the Net Promoter Score lead against competitors.
Data growth was 77% in the quarter, driven by strong mobile Internet growth and increasing smartphone penetration. During the quarter, Turkey completed the acquisition of Koc.net, supporting the enterprise portfolio and driving further growth in this segment.
Vodafone Turkey already serves 58% of the top companies in the country. Now for a look of our AMAP region on to Slide 13.
Service revenue grew 7.6% in the quarter or 8.8% excluding MTRs. India and Vodacom continue to drive growth in this region, both driven by strong customer relations.
Performance in Australia remains weak as brand perception and consumer sentiment continue to impact service revenues despite our program to rectify network operations and customer service shortfalls. In the rest of the region, ongoing political and economic instability have reduced visitors to Egypt, and we saw a further MTR cut in the quarter in New Zealand.
However, as Vittorio has mentioned, successful brand repositioning in Ghana and growth in the customer base led to growth in service revenues of 31.5%. So India on Slide 14.
Service revenue growth was approximately 20%, both in the mobile-only business and also including Indus. Encouragingly, the price per minute actually increased for the first time in a long while in Q3 despite strong competition in the market, and we now have 56% of our customer base on the new higher price plans.
Good adoption of data services has led to strong growth in data revenues. There are now over 31 million data users in India, more than twice this time last year.
Last month, we received the good news that the Indian Supreme Court ruled in our favor on our longstanding tax case. And we now wait for details of the new telecoms policy to be confirmed, which has been delayed for the summer of this year.
Now to Slide 15 for Vodacom. Vodacom Group delivered service revenue growth of 8%, an increase on the prior quarter, due primarily to strong growth in the international operations.
All markets delivered very healthy customer additions in the quarter. In South Africa, successful summer promotions led to a good growth in voice revenues.
Data growth was also strong, supported by increasing data usage, and in particular, a strong increase in mobile Internet users, now at 3.8 million. The pricing environment for data does remain very competitive.
In the international businesses, improved pricing trends also supported the impressive top line growth of 39%. We continue to see success with M-PESA and now have 11.4 million registered customers in Tanzania.
Finally on operating businesses, let's look at Verizon Wireless on Slide 16. Verizon recently reported another very strong quarter for the wireless operations with 1.5 million retail net adds, driving service revenue growth of 6.8%.
Data continues to be the principal driver of growth as you can see from the chart on the bottom left. Data, including messaging, now represents 42% of service revenues and continues to be driven by web and email services.
Verizon Wireless recorded 7.7 million smartphone sales in the quarter and 2.3 million LTE devices as 4G services gained momentum. At the 31st of December, Verizon Wireless reported a net cash position of $0.7 billion.
The $10 billion dividend has now been paid to the partners, and we have returned GBP 2 billion of this to our own shareholders earlier this month. Now to Slide 17 for the group's free cash flow.
We generated GBP 1.5 billion of free cash flow in the quarter, bringing the year-to-date free cash flow to GBP 4.1 billion. Q3 free cash flow was higher year-on-year due to the phasing of tax payments.
Net debt of GBP 25.5 billion at the quarter end is stated after Polkomtel disposal proceeds of GBP 0.8 billion; GBP 1 billion spend on spectrum, principally Italy; and GBP 0.8 billion spend on share buybacks. During the quarter, we bid for spectrum in Greece and in Portugal.
The payment to the latter will be made in Q4. Finally, we have today confirmed our guidance for free cash flow and adjusted operating profit for the current fiscal year.
I will now hand back to Vittorio.
Vittorio Colao
Thank you, Andy. I would like to spend a little time now giving you an update on how our business is making the transition in the data world.
I'm on Slide 18, which I think is an important and is somewhat good chart. As you can see from the red and blue areas in the top part of the slide, we are increasing our exposure to the strategic growth areas of data and the emerging market and reducing our exposure to mature mobile voice, which is the gray part.
Today, 62% of our service revenue in the third quarter comes from the higher growth areas and this is, as you can see from the chart, an increase of 5 percentage points in the past year and 10 percentage points in the past 2 years, so progress continues. As a reminder, data grew 22% in the quarter; in the month, 7.6%.
I do believe that we have a considerable data opportunity ahead. There is still quite low data penetration in the majority of our emerging markets and also prepaid in our mature markets.
Today, we have 37% of our revenues in Europe from integrated tariffs. And as you can see from the pie chart at the bottom left, out of bundle customer contract revenues were 17% this quarter, reducing from 18% that we reported in the first half of the year.
So we are continuing our proactive improvement of mix, and we will continue to invest and maintain the quality of our network and CRM to support this mixed transition. Slide 19 gives you, again, a little bit more information on these key growth areas.
We are selling an increasing number of smartphones each quarter, and we continue to see higher ARPUs where customers migrated to a smartphone for the first time. You can see from this slide that our Europe region now has 24% smartphone penetration and 60% data attach rate, respectively left and right top.
These increasing trends, in turn, drive higher mobile Internet usage and revenue. As I have described, mobile Internet revenue for the group increased over 50% in the quarter.
In AMAP, our data customers continue to grow strongly, more than 50 million, bottom part of the chart, with particular success coming from the Opera Mini browser and services like M-PESA. In the quarter, we have expanded the reach of our operating -- operator billing system and introduced a range of new services to differentiate our propositions and drive the safe adoption of data usage across our customer base for Vodafone Discover and Vodafone cloud.
I will share more of all of these trends and services with you in the May presentation. So I would like now to wrap up, the last slide.
We are executing well against our strategy, particularly with our commercial performance in data as we continue to drive smartphone penetration and integrated tariffs across our customer base. Going forward -- going forward, we will continue to drive the Supermobile strategy and manage a profitable migration to the data world.
In the short term, we see tough trading conditions in a number of our European market, and therefore, we will be looking very carefully at how we can mitigate their impact in these operations. And finally, before we close, I will remind you that, as Andy has said, we have now received our share of the Verizon Wireless dividend and we returned the majority of this to our own shareholders earlier this month.
I'm also personally very pleased with the Indian Supreme Court did not find us liable for the tax on the purchase of our Indian business in 2007. I thank you for listening.
Now with Michel, Nick and Andy, we are very happy to take your questions.
Operator
[Operator Instructions] Our first question comes from the line of Tim Boddy of Goldman Sachs.
Vittorio Colao
Yes, Tim. Thank you for the question.
I would like to answer at the high level. I would say that definitely in Italy there was, in December, a kind of shock in the country and clearly there was some changing behavior in spending.
This is not really a Vodafone-only answer. It's more of a general country answer.
I perceive that the country is moving ahead in the right directions. This will probably continue to give a sense of a need for controlling customer -- family spending and household spending and will be a prolonged kind of austerity type of situation.
But possibly, possibly the general mood and the general trend is in the right direction. I think Michel might comment more specifically on the traffic trends or these things.
But I would say I don't see Italy, given the fact that we start from lower prices, given the fact that we start from a more flexible cost base, going in the kind of space where Spain has been for the last 3 years. Nonetheless, it will be a long and prolonged kind of austerity type of situation.
And then I would take that -- Michel, you want to add something, and then I take the mitigation.
Michel Combes
Just what you have seen in December is pressure on the core business. So all around the world, voice and text for consumer and enterprise, reflecting what Vittorio has just said, to governance, the macro environment which is extremely tough and the competitive situation, which remains quite active mainly in data, so which has on top of the volume, put some pressure on the pricing.
So that’s as Vittorio has said, let's say, the pressure has probably increased a little bit in December and we expect some pressure to remain in the months to come in this country. We have taken several initiatives, namely, in pricing in order to push our integrated tariffs, which has allowed us to post quite a nice growth in data as well in Italy, so -- which is good news for the future.
Vittorio Colao
On the mitigation question, I have to tell you that, again, as always, you work for the best scenario but you have to prepare for the tougher one. We are clearly looking at costs across Europe and particularly in Southern Europe.
We are just at the beginning of the budget process, so I cannot be more specific. I think we will be more specific in May.
But of course, we are looking at ways of running the cost structure of all, of course, but in particular, the ones that are under pressure in a slightly different way. I think we have room to leverage more on multi-country operations and not necessarily replicate our functions everywhere.
This has already happened and will be accelerated in the network area, so network and technology, more in general, is going to be clearly an area of acceleration in the kind of cost drive in the terminals area, in the logistics area and possibly in the staff functions area, so this is what we have in mind. The commercial costs are a more country-specific type of area.
It's not the case for Italy; it's more the case for Spain. Clearly, that's another area of focus but this is again more local and more related to competition.
Operator
Our next question comes from the line of Akhil Dattani of JPMorgan.
Akhil Dattani - JP Morgan Chase & Co, Research Division
A couple of questions please. Firstly on Australia, could we just get an update on your turnaround plans for that operation?
And with that, any color on the reports that we're hearing, that Hutch might be looking to exit that joint venture. And then, on the iPhone, 2 things of interest: Firstly, are you seeing any unusual or unexpected margin pressures market-by-market as a function of the iPhone 4S?
And with that, are you seeing any changing usage behaviors, particularly with regards to what had been very well aligned data volume and data growth trends over the last few quarters?
Vittorio Colao
I pass the question on Australia to Australia specialist sitting next to me, Nick Read. Just as an opening, I say that I'm not very pleased with the performance there.
Nicholas Jonathan Read
As always, a good entry and -- so basically -- yes. If we start with the foundation for the turnaround, which is the network performance where we have the significant issue was 3G metro performance.
And over the quarter, the 3G metro performance was within target parameters that we set on record volumes, whether it's cell availability, drop call rate, et cetera. So we got a solid performance on the network.
There were 2 major programs, if you remember, that we were progressing to strengthen the network. The first was the 850 rollout, which is now 2/3 complete, and we have 1,000 sites on 850.
And the second one was Huawei RAN swap, which is now 40% complete. Both of those will complete as targeted in the summer.
If we then go on to more around the brand recovery process, so we've been running a marketing campaign, connect on the new Vodafone network, and we will now, this coming quarter, move on to Vodafone Network Guarantee, which is something we've been successfully piloting over the last 5 weeks with good results. So then you look at customer performance.
The market obviously remains highly competitive with a lot of price pressure as it was before we had the problems. However, our active prepaid base is now stabilizing, and our Vodafone-branded postpaid base is now growing.
The main issue we're left with at the moment is just higher churn rates on the 3 base as we handle the migration, so that's where we're spending quite a bit of focus at the moment. And as you may have read, we are also looking at the cost structure of the business and optimizing that.
So clearly, we're not where we want to be. It's taking time to turn it around, but we should expect continued improvement next year.
Vittorio Colao
I think we have done the right things. It's taking longer than expected to kind of get the customers back.
On the iPhone question and more in general usual behaviors, let me tell you this, that with the exception of the Symbian environment, which is stable, all the other environments have a, I think, healthy, not massive, but positive increase in data usage. This is true across tablets, across RIM, across Android, across iPhone and across mobile broadband, of course, in different ways.
But I would call it healthy because there is an increase but it's not a massive increase i.e. it's exactly what we planned, exception Symbian because Symbian is kind of not a growing environment.
iPhone, specifically, it has to be managed. It has to be managed because clearly iPhone is great, because it produces incremental revenues if priced appropriately.
But of course, it has an incremental cost. I don't see it as an incremental pressure because the conditions are basically the same as stable, so it's just a matter of volumes and managing the associated commercial costs.
That's it. I would say positive, not incremental, but it has to be managed.
Operator
Our next question comes from the line of Nick Delfas of Morgan Stanley.
Nick Delfas - Morgan Stanley, Research Division
Maybe a question for Andy on termination rate drags. Could you just clarify what the outlook is for Q4 and FY '13?
And then secondly, a question on LTE rollouts. What are the plans outside of Germany?
And how, if at all, do you think that might affect your capital spending budget for Europe?
Andrew N. Halford
Okay. Nick, on the MTRs, I think next quarter -- quarter we're now in, the major impact is going to be the German MTR of December a year ago sort of coming out of the reckoning and that will probably help us by, I believe, somewhere around 30 basis points or thereabouts in the Q4.
Growth rates next year, which clearly is still a slightly moving feast, I'd suspect will be in a similar sort of range for next year, but some of the component parts there is still sort of becoming clearer. So a slight benefit in Q4 and sort of similar for next year.
Nick Delfas - Morgan Stanley, Research Division
So that includes the drag from Italy but despite that, the other countries will be getting better?
Andrew N. Halford
Yes, yes.
Vittorio Colao
Yes. And Nick, on your question on LTE, we're very pleased with the LTE rollout.
As Andy has said, we have 90,000 customers. The usage is good and healthy, i.e., intercepted or intercepted.
They received last night an enthusiastic email from the German CTO to the Head of Terminals on the performance of the first LTE terminals. So the phones, which, again, was heartwarming because it was really kind of wow, this is a good thing.
So -- and what we see in Verizon Wireless is also very positive. So our intention is to continue the rollout, to consider this a good business opportunity, today mostly for residential access, but tomorrow with new -- with the handsets and devices coming to the market also for handsets.
Again, I was last week in the U.S., I visited some shops. It's amazing how well positioned and what's the -- the user case in the shops for LTE phones, and Verizon is really presenting it very well.
So we will roll it out wherever we can, when we have the frequencies. As you know, the frequencies are coming in a phased way.
And so, of course, we have to do it in a phased way. We are preparing the network for it anywhere.
And in terms of CapEx spending, keep in mind that the network is -- and radio network, particularly, is not the majority of our spending so I think we have the room to deploy it as well as we can when we have the frequencies. So it's not an issue of CapEx, it's more an issue of having it and having the possibility to roll it out.
But we are positive.
Operator
Our next question comes from the line of Justin Funnell at Credit Suisse.
Justin Funnell - Crédit Suisse AG, Research Division
Two questions please. The first is on M&A in Europe.
Just wondering what you can take away from the process in Greece, whether the blocking of 3 going into 2 in Greece, it has wider implications. Does it, for example, stop being able to go from 4 to 3 networks in markets like Germany and Spain?
And secondly, on the U.K. business, you've had some fantastic contracts, net adds over the last couple of years starting around that's when you got the iPhone.
That seems to slow down in the quarter. Are we likely to see a sort of natural slowdown in that part of the business now as you get past 2 years from having the iPhone in the U.K.?
Vittorio Colao
Yes, let me pass the second question to Michel and get the first one. The M&A in Europe, I don't think you should -- I always said you should never read across situations.
So U.S., Greece, Spain, Germany, they're all different markets. And it's a bit more complicated than just 3 to 2 or 4 to 3.
It's about market shares. It's about power of a distribution.
It's about pricing levers. So there's a number of elements.
In Greece, we decided that the best thing was to look for operational cooperation rather than financial cooperation. There is also other elements, quite frankly.
Greece is not today the easiest environment to forecast for the future. So don't do too much read across for other European countries and especially not for the ones that you have mentioned.
On U.K., Michel?
Michel Combes
On the U.K. So you are right, slight slowdown but still a very strong performance in Q3, 174,000 contract net adds so which is consistent with what we have seen in the previous quarters.
You can expect obviously slight slowdown in the coming quarters as we have well penetrated the base. And again we start to face a slightly higher churn coming from the contracts that we took 24 months ago, but still a quite healthy growth in the U.K.
in customer contracts.
Operator
Our next question comes from the line of Nick Lyall at UBS.
Nick Lyall - UBS Investment Bank, Research Division
It's Nick at UBS. Can I ask 2 questions, please?
On the -- firstly, I know you don't like talking about guidance for Q3 -- on the medium-term guidance, that is. I mean, we know it's an annual -- season of annual numbers and we know Germany improves.
But also you've got weakening comps in a weakening Southern Europe. So could you just give us some qualitative reassurance, if possible, that you've seen in Q4 isn't enough to risk the guidance for the medium term?
And then secondly on Spain, the volumes are weak, but I have been quite surprised that the pricing or at least the outgoing pricing hasn't deteriorated further given your cuts in May. Is there any further impact expected from the Telefonica renewal cuts in November and December?
And could you just explain why that pricing has been relatively steady in terms of trend?
Vittorio Colao
I will turn the second question to Michel because what I know is that in Spain, we are quarter over last year, 15% down, so it's still pretty, pretty, pretty significant for me. But you're probably right that quarter-on-quarter, there hasn't been a huge movement.
But Michel, you'll take the second one. Nick, let me answer the first one.
You're absolutely right, we don't like to talk about guidance for the next year in a quarter call. So qualitatively, what can I say?
I can say that we are just at the beginning of the budget process, as I said. We had December, which was, especially in the second half, not particularly encouraging.
January is a bit better than December, not as good as Q2 or September or October. So we really want to go through the quarter, see how things develop and then we'll give you the number for next year.
For this year, I think we are confident with our guidance. Andy?
Andrew N. Halford
Yes, absolutely. I mean, the 1 to 4 range is always the sort of multiyear.
It wasn't a sort of by-the-week, by-the-month sort of type per guidance range. Clearly, we always said where we will be and the range will be influenced by the state of the macroeconomic environment and the MTRs, particularly both of those in Southern Europe, and the former remains tough and the MTRs, clearly, there's a number of those still working through.
So I suspect for a period going forward, we realistically will face those but we'll do an update on that when we get to May.
Vittorio Colao
Michel, explain why are you not cutting prices more in Spain?
Michel Combes
I'm not so sure that it was exactly the question. I would say that on Spain, we remain more or less on track with what we had announced now a few quarters ago, which is that we had to reprice our services for new customers and for our base, and that it will be quite a painful exercise for 7 quarters.
And when you look at our figures, in fact, as Vittorio was pointed out, we are still at minus 14.5%, minus 15% in terms of price per minute. That's true, that there is no deterioration quarter-over-quarter but we remain under pressure year-on-year, and it is what was expected.
I would say that what has been achieved in the past 3 months around the brand relaunch but many in terms of offers. So integrated tariffs, which in terms of gross adds, represent more than 30% of our gross adds.
And if I take just voice and data, it's even 60% of 24-months contract that we are pushing, so all that allows us to try to maintain those type of pricing. You're right to say that in December, some of our competitors have started to be again a little bit more aggressive.
We believe that we've all the measures that we've taken in terms of differentiation, in terms of new offers, in terms of pricing that were in the market. We are competitive today and that we can continue to drive the way we have driven the business in the past 12 months.
We have been the first to introduce those integrated tariffs in the market. So all in all, no major change quarter-on-quarter, and I would say on track with what we had announced 12 months ago.
Operator
Our next question comes from the line of Robin Bienenstock of Sanford Bernstein.
Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division
Two questions, if I may. The first is really about managing commercial costs of the iPhone.
And looking at the Netherlands, I'm wondering if the purchase of independent distribution just amplifies the commercial cost problem by creating a kind of distribution arms race as we're now seeing KPN build out lots more stores? And if so, how do you think about addressing that kind of problem?
And separately, the question about India. I'm just wondering if Telenor licenses are re-auctioned, whether you'd be interested and how you think about valuing that given that they obviously have the extra bonus of potentially kicking out Telenor from the Indian market?
Vittorio Colao
Yes, let me take the first one, Robin, because I prefer to pass the second one maybe to Nick. In my view, it's almost the opposite of what you say in the sense that what we are seeing is a very, very -- an increasingly more competitive alternatives to the iPhone, which is good because this is customer choice.
We are seeing very different -- starting to see very different price points for smartphones, including the kind of high end ones. And in order to optimize your commercial costs, you must have a distribution -- control over distribution.
In other words, you must manage customers at renewal. You must manage how to move around your spending, which actually you do much better when you control your distribution or at least when it's an exclusive distribution as opposed to when it is a shared indirect distribution.
So I see direct distribution, whether it is online or physical, as an advantage going forward in a smartphone world rather than a disadvantage. Michel, do you have anything to add on Netherlands specifically?
Michel Combes
No, I guess that you have mentioned. That's true that probably the Netherlands market has been a little bit more focused on iPhone than some other markets so what you are seeing on our ability to push different type of smartphones has been quite successful in Germany whereas in Dutch market has been a little bit more focused on iPhone for the first 3 months, but we are doing and we are pushing exactly in the same direction that what you have mentioned.
Robin Bienenstock - Sanford C. Bernstein & Co., LLC., Research Division
I think I'm not sure, I guess my question wasn't really clear. I think what I'm trying to ask you is do you think the risk is that you end up creating a kind of arms race with distribution where you all -- each of the operators has to continually up the ante and build more stores and spend more money on shops?
Vittorio Colao
No, I think you want to get control, more control over your own distribution policies. It's not an arm race.
It's getting control. And to some extent, I'm happy for my customers, and my competitors do the same.
It's not overbuilding, it's making sure that you have the distribution power to really implement your policies in the market.
Andrew N. Halford
So just regarding the 2008 licenses, I think our perspective would be there's potentially 3 benefits, of course, there's a long way to go before we really understand the process. But I'd say firstly, obviously, more spectrum comes into the market and are we interested in more spectrum?
Yes, we are. Secondly, that, that spectrum should be priced through an auction, and we've always been keen to get transparency and a more economically valued spectrum rather than just a obscure formula from the regulator.
And then finally, I think it will start the process of rationalization in the market. Now whether it's Uninor or someone else, I'd be surprised if it was still the same number of players afterwards.
Operator
Our next question comes from the side -- line of Simon Weeden at Citigroup.
Simon Weeden - Citigroup Inc, Research Division
I've got a couple of questions. One is whether -- how you feel about the balance sheet and maybe you think the buyback can be extended now you've passed the data fee -- well, passed the announcement from the Supreme Court in India with the next stage of the Japan money coming in, in April.
And then the second question is relating to the comment you made just a few questions ago that the second half of December was particularly weak. I think that was relating to Italy.
Just wondered if you could elaborate a little bit on what you think the causes of that are, if there's anything beyond the sort of general austerity since there's lack of economic well-being in the country.
Vittorio Colao
Alan -- Andy?
Andrew N. Halford
Yes. Simon, obviously, we had been careful with the management of the debt running up to the conclusion of the India tax case as clearly the outcome of that could have been somewhat different.
So that is a very helpful to have that sort of weight lifted from us. As we look forward, you're right, we've got the SoftBank proceeds coming in shortly.
We have got to remember the, while about half, just under a half, of the current buyback program commitments, I think we are GBP 2.3 billion out of the GBP 4 billion down at this point in time, so roughly the balance that we've got there actually does equate to what will be coming in from SoftBank. So I think when we come sort of later on in the year, we can have a look at exactly where we are on that.
But at this point in time, I think it is sensible to have the balance sheet in a good place, and I think that is where we are at.
Michel Combes
On your second question, I guess, that Vittorio referred to earlier on that second half of December, we have experienced some pressure on voice traffic. In most of the markets, I would say, there are probably 2 different type of reasons: One which is comparison with previous years, whereas some weather conditions can have effect to the period last year.
The second being more driven by macroeconomic situation that we are facing in some countries. And let's say exclusively we refer to Italy where it's more about consumption, which has been affected by the macro.
It's too early, let's say, to give precise trends for the future. What we've seen generally that we're probably more back to trends that we were facing beginning of December rather than what we have seen in second half of December.
Operator
Our next question comes from the line of James Britton at Nomura.
James Britton - Nomura Securities Co. Ltd., Research Division
First question on the U.K. Does it make it more difficult to force your data in the U.K.
and now that 2 operators are offering unlimited contract plans and no tiering? And then secondly, on the network, can you give us the data traffic volume growth for this quarter?
I think it was 19% last quarter. And on the network offload, how important is public WiFi going to be improving your overall customer experience in the future?
Vittorio Colao
Yes, the answer to the network is 20% is the answer, so kind of continuing. On the data, I have to say, as always, we keep thinking about our data pricing, we keep comparing very hard with what's going on, for example, in the U.S., which is an interesting case.
Honestly, we are, at the end of the day, customers on average in Europe take an iPhone, take an Android, they use whatever, 400, 420, 380 megabytes per month. Whether you offer 1, 2, 3 or infinite, at the end of the day, it doesn't make a huge difference.
But there are probably segments of customers where usage is interesting -- I'm sorry, where higher usage levels or allowances are interesting, and we might be considering alternative things. So we are not religious on pricing.
So far in the U.K., specifically, Michel, we have...
Michel Combes
Well, in the U.K., you're right that 2 of our competitors have offered unlimited. As Vittorio said, we are not religious but I guess that we have been quite successful with the data pricing that we have pushed up to now.
Specifically in the U.K., as there were maybe a kind of misunderstanding of the customers because they don't use unlimited but they don't know exactly how much they use. We have introduced what we have called Data Drive, which means that when a customer decide a certain data allowance for the first 3 months, we give him a free usage for any extra data request, so which allows him to adjust his bundle depending on his exact needs within those 3 months, and this has been extremely successful in the past 2 to 3 months.
Vittorio Colao
But then again, we are not religious. I mean, I think we will experiment different things in different markets.
James Britton - Nomura Securities Co. Ltd., Research Division
But just on the question on public WiFi. Do you need access to public WiFi to substantially improve your customer experience in the dense urban areas?
Vittorio Colao
For the time being, it doesn't seem to be a big differentiator. But again, on this one as well, we are not religious so we will -- we always said that we consider WiFi a complementary technology, and that we consider every kind of offload a positive because everything that can be taken out of the macro network eventually improves the performance for the remaining ones.
So strategy continues to be access-agnostic. Do what you need in order to optimize the network, which is what enables us to continue to have in Europe at least 39% utilization, 9% saturation, which is basically where we have been and more or less where we have been in the last 3, 4 quarters despite the fact that traffic continues to grow.
Operator
Our next question comes from the line of Robert Grindle at Deutsche Bank.
Robert Grindle - Deutsche Bank AG, Research Division
Sticking with the data theme. Your data attach rates seem to be increasing with increasing smartphone penetration, which is very good, of course, because it could've been going the other way if late adopters wanted data less.
But do you think there's some sort of virtual circle or network effect going on and if more people want to use data, the more people would get smartphones? Or do you think it's really about the way you're selling it, smaller tiers, for example?
Vittorio Colao
Robert, it's -- this is the way it should go and this is the way it will go because our vision is it's not about smartphones. Everybody is smart and everybody will have a smart device.
It's about data, it's about living your life in a different way. And I don't think anybody below the age of 20 would even consider a phone, which is not smart.
So to me, it's a one-way road. Now we have done few things on the commercial incentives side for our shops and our distribution.
Hence, my comment to Robin on the importance of having your own control distribution and on pricing to make sure that whenever we sell a smartphone, we have a very high attach rate. I think U.K., Michel, correct me if I'm wrong, is the record for this in U.K, 85%?
Yes, before, 85%. But ideally, my target is 100% in 100% of the market.
So it's a vision thing, which then gets rolled out into all the pieces of the business system.
Operator
Our next question comes from the line of Ottavio Adorisio of Societe Generale.
Ottavio Adorisio - Societe Generale Cross Asset Research
A couple of questions. The first one actually refer to your comment made earlier on the uplift from the MTRs, overlapping of the MTRs cut in Germany.
You've actually said that, that would likely persist in the following quarters as the large cut in Italy will be compensated by having improvements in MTR elsewhere. Actually, looking at the map of the MTRs cut, next year you'll be hit by a barrage of other cuts -- increasing cuts in Netherlands, Portugal, Spain.
And I was just wondering where the improvement actually will come in terms of the MTR trends? And the second one is actually -- I know you don't like about -- talking about guidance, but I need just a clarification.
You confirmed the guidance for operating profit -- adjusted operating profit. Could you just tell me if you still expect depreciation to remain in line with the previous year?
Vittorio Colao
Andy, these look like questions for you.
Andrew N. Halford
Yes, so -- sorry, to clarify on the MTR and saying in the fourth quarter, we will get a benefit from Germany so that will help it slightly. Next year, as you say, there are a number of moving parts in here, some of which are still settling down so we are still going to face big headwinds on the MTRs next year, but the fourth quarter will be slightly better.
Then next year, we've got others, including Italy, that will be coming through. We will incorporate that in the guidance when we give that in May.
On the depreciation question, to be honest, I can't think of a reason why depreciation will be particularly different this year to what we have expected. And therefore, that's sort of probably in a similar place to where we expect it to be.
And again, the profit guidance next year, we'll be giving in May.
Ottavio Adorisio - Societe Generale Cross Asset Research
So depreciation of GBP 8 billion, could you confirm that expectations for the full year?
Andrew N. Halford
Around that number.
Operator
Our next question comes from the line of Andrew Beale of Arete Research.
Andrew Beale - Arete Research Services LLP
Following on from your earlier comments on LTE, I'm just wondering if you could give us some latest thoughts on the pace of shift to single RAN and whether you see any merit in accelerating that to try and secure some sort of differentiation through network quality, sort of Verizon-like. And sort of linked to that, I'm just wondering if you've got some early thoughts from your German experience on the opportunity in rural or suburban broadband with LTE.
Vittorio Colao
Let me give -- let me give the kind of the second answer in Germany to Michel. The LTE, the single -- the move to single RAN is something that we are pushing throughout Vodafone because it's kind of logical to have it, to make a whole network more efficient and future-proof.
The rollout of LTE does not depend on that, as I said in my earlier question, but depends on when the frequencies are available. And as you would imagine, we prioritize single RAN in places where we are going to launch LTE earlier.
So I see single RAN as one piece of the LTE strategy, the second is frequencies, the third is terminals, the fourth is our local strategy in broadband. And on that note, I pass to Michel for the German-specific answers.
Michel Combes
So Germany, I guess that Vittorio referred to some of the figures earlier on so we are now approaching 100,000 customers, 1,700 sites which represent more or less 30% coverage. So as you know, the first focus of our deployment in Germany was to capture fixed-like type of revenue as a substitute to a DSL either in the place where there was no DSL or low-quality DSL.
The return that we have from the customers is very good. NPS is very high, ARPU is quite stable so we are happy with this launch and we are now entering in a few cities.
We are just starting in Düsseldorf right now to have a full LTE city in the next coming months.
Operator
Our next question is from the line of Stephen Howard of HSBC.
Stephen Howard - HSBC, Research Division
I just had couple of follow-on questions really from some earlier points raised. Firstly, in terms of commercial costs, at the interims, you had that rather interesting slide indicating that smartphone upgrades were very successful in terms of increasing your customer spend but didn't necessarily make them much more profitable.
And obviously, that does rather imply the SAC, S-A-Cs are out of line. I was just wondering whether there are any signs that this situation might be improving in any of your markets, in particular, given the macro pressures on rivals and so on.
And secondly, just following up on this interesting test drive approach. I appreciate it's pretty early, but I'd be very interested in knowing what customers are consuming in terms of data when they're less concerned about hitting a usage cap with respect obviously to service that they're pretty inexperienced with.
So do you sense that they wind up taking a larger package than they would otherwise have had you not offered this?
Vittorio Colao
Yes, I'll answer the broad question. I, again, turn to Michel for U.K.
I -- We monitor smartphone profitability, I believe, the economics or the thing every month by country and by operating system. We see some marginal improvements, small, quite frankly, but we see some marginal improvements, I will give you the details not on a quarterly basis, but at the May and November meetings.
Marginal improvements, as I said in my earlier comments, for example, with the wires this morning, that our markets where we can and we should as an industry work harder. Michel, U.K.?
Michel Combes
Well, so U.K., as I mentioned, it's obviously still early days because it has been launched just a few months ago. Early data suggest that we might have a kind of a place in data usage of around 20% to 25%, so which means that customers don't know precisely what they are shooting for when they enter into the data world and so that gives us -- gives them the freedom to adjust their data usage.
But again, we need a few months in order to see how, let's say, all that goes. It's clear that we proceed it as having been successful to, let's say, to attract some of customers with Vodafone.
Stephen Howard - HSBC, Research Division
Can I just ask a quick follow-on to Vittorio's response there? Do you sense that this slight improvement is a function in a firstly -- I mean, is it a function of your competitors deciding that they need to limit the degree of subsidy or is it a function of the greater diversity of choice that operators now have in terms of smartphone supplier?
Vittorio Colao
I sense it's more the latter than the former. And I wish it were more the former than the latter.
Sorry, yes, I think we're doing a lot of hard work to improve the yield, as we call it. But again, every time I go to the U.S.
and I talk to our friends at Verizon and I go into a U.S. shop and I see the price levels and the subsidy levels in the U.S., I always say I'm very jealous of that market.
Operator
Our next question is from the line of James Ratzer at New Street Research.
James Ratzer - New Street Research LLP
I had 2 questions please. The first one just following on from a couple of questions we've had before on your LTE experience in Germany.
I was just wondering if you could talk a little bit more about what you're seeing now you've moved into urban areas, particularly how was the network quality bearing up in more congested areas? And in urban areas, is it also being sold as a DSL substitution product or are you seeing other uses for LTE in Düsseldorf?
And then second question I had was on your fixed line business. I mean, this quarter, we've seen some diverging trends in Italy and Spain.
I was wondering if you could talk about those. And in particular, Spain we've suddenly seen a sharp acceleration in your fixed line revenues.
Could you talk about what's going on there and correspondingly we've seen a slowdown in Italy.
Vittorio Colao
I will kill easily your first question by telling you that we are not -- neither ready nor able today to talk about detailed results on urban LTE because it's too early. And as Michel has said in an earlier answer, we cannot yet comment on what we are seeing.
So it's early, I would invite you to keep that question for 3 months down the road. On the second one, Michel?
Michel Combes
So we have free patents in 6 lines. So in Germany, a slowdown, as you have probably seen more driven by cable competition.
In Italy, you have clearly pointed out a slowdown compared to the previous quarter, mainly due to a high level of churn within Tele2. As far as Vodafone Italy is concerned, I guess we still report quite a healthy growth there, capturing probably more than 40% of the gross adds still on the market.
And in Spain, we have pushed a little bit more from a commercial point of view, and you also a nice impact which is due that we exit from some of the rebates, which were given to our customers on the early months of subscription with Vodafone Spain so that will affect ARPU and commercials.
Operator
Our next question is from the line of Guy Peddy at Macquarie.
Guy R. Peddy - Macquarie Research
Just a couple of questions, more for Andy, I think. Andy, on the cash flow outlook for Q4, will it be working capital and taxes that are sort of one of the major year-on-year drag on the cash flow number?
And secondly, you talked to Simon's question on balance sheet about being in a good place. Can you just elaborate on what is good, what it is usually you're looking at on the balance sheet and how you're measuring it, et cetera?
Andrew N. Halford
Yes, Guy. I mean, the fourth quarter will usually get the benefit because the phasing of the CapEx in the first -- in the fourth quarter typically gets paid for in the first quarter following, so typically the fourth quarter is, in working capital terms, a big quarter for us, and hence, we're very comfortable with 4.1% after 3 quarters being in the 6% to 6.5% range by the end of the year.
On the balance sheet, I mean, there's a number of ways to look at this. We've obviously run the group against a single A credit rating, and in that sense we are in a comfortable position.
Mathematically, we're at -- I don't know, 1.8x EBITDA and that obviously is a calculation of [indiscernible] and Verizon Wireless and with cash starting to come through from there, then clearly that is sort of additive to it. So overall, I look at it as being sort of being sub-2 is a comfortable place to be at the moment, especially knowing that from time to time we should get cash coming through from Verizon Wireless.
Operator
Our next question is from the line of Maurice Patrick at Barclays Capital.
Maurice Patrick - Barclays Capital, Research Division
A quick question. I mean, you've gone from now out -- you're now outperforming your peers in most of your markets.
There were some cases of incumbents fighting back. They're not willing to lose market share anymore.
I wondered when you look across your footprint, which markets you're perhaps concerned that might happen elsewhere and also what you can do about it.
Vittorio Colao
I'm not so sure I can comment much because I think we are the first ones in this reporting cycle. So I'm not so sure I can neither say that I'm losing or winning market share anywhere nor which operators concern me the most.
So at least of the major competitors that we see in -- as our reference competitors, the kind of AT&Ts, the Telefonicas, the Bhartis, the MTNs and so on, we have a pretty good performance in South Africa. We have a pretty good performance in the known South Africa, African countries including the Vodafone ones against Millicom or the others.
I'm not so sure about MTN. I haven't heard about results from Telefonica.
I think against Bharti, we are doing fine and it's a solid situation, you are right. I mean the main competitors are the big ones, are solid companies with bigger resources.
So it's going to always be a competition. I cannot really comment.
I don't know. Does any of my colleagues -- it's too early, right?
We compete all the time.
Operator
Our next question is from the line of Jeremy Dellis of Jefferies.
Jeremy A. Dellis - Jefferies & Company, Inc., Research Division
A couple of points really on data that I just wanted to clarify. In Europe, it looks like overall data revenue growth was stable this quarter relative to last.
But within that, there was a big pickup in Spain, and it looks like Spain maybe benefited from rather low prior year comps. So I guess the question is whether the slowdown that we seem to be seeing in data revenue growth in the U.K.
and Germany is just a bit of a one-off or the start of a trend? And then the second question also on data is within your data revenue growth numbers here, how much do you think of this is customers trading up to higher tiers as they become a bit more sort of used to using smartphones and tablets and so on?
And how much is sort of mechanical effect of smartphone adopters moving onto integrated plans for the first time?
Vittorio Colao
It's easier to answer the second question. It's mostly penetration and it's mostly adoption.
I don't think that the kind of tiering up effect is on these numbers is noticeable yet. As Michel has said, we are watching very carefully what is happening in the U.K.
in terms of test drive and try to see how much the unconstrained usage impacts on first adopters. We are encouraged by the fact that people are going up.
But when I said that everything is going up other than Symbian, keep in mind that we are talking about moderate increases so we are talking about 6%, 7%, 8% to 10% increase, which means 20, 30, 50 megabytes per month. We're not talking about 500.
So it's still a fairly small on the total. It's much more penetration.
It's much more everybody should have the smartphone type of thing. On the different speed by market, Michel, I think...
Michel Combes
Three markets sold quickly. Germany is more or less flat, U.K.
is slightly down, mainly driven by data roaming, which in this quarter has been lower than in the previous quarter. And Spain, I don't know whether we can call it a catch-up but that's clear that the management has been focused, as I said earlier, on integrated data plans and which have quite significantly increased in the past 6 to 9 months.
It was a de-act of the turnaround that we are driving in Spain so we start to weather this nice effect. I get that on Internet on your mobile, we have grown by nearly 90% in Spain this quarter so which is a remarkable performance that I have highlighted previously.
Vittorio Colao
But again, it's still different things. I mean, we've got a very good performance of tablets, for example, in Germany and Italy, a little bit less good in the U.K.
In Italy, we are bundling content. We see whether this could make a difference.
As I said before, I think we are moving -- trying to move the mindset of being less religious about what is right, what is wrong, experiment more and then quickly move across countries where it works.
Operator
Our next question comes from the line of John Karidis of Oriel Securities.
John Karidis - Oriel Securities Ltd., Research Division
I just wondered whether there's any scope to be a little bit more specific with regard to the likely benefits you're getting or you stand to get from the corporation with Verizon Wireless. You have sort of talked about it in the past.
I just sort of wondered whether we should hope to get information on things like what are you doing, what are the benefits as a consequence of this partnership and what would the numbers be like without this partnership. And maybe just give us a timeline as to whether these benefits increase in the future or not.
Vittorio Colao
Yes, John. We had, I think I said in the November session that the benefits so far are in the range of low hundreds of millions and we want to bring them in the high hundreds of million each side.
They continue to be in the same areas. Again, last week, we just learned of it, kind of GBP 70 million, GBP 80 million benefit coming to one of the 2 partners from one supplier giving the same conditions to both.
It's a multitude of things like this. The big prize is the day when we'll buy exactly the same terminals, which will happen over time in the next years and listening to the question on LTE that we are asked before.
It's deeply operational and deeply fragmented, I would say, in many things. Our intention is to bring it in the high hundreds of millions but it will take time because, of course, it's to go supplier-by-supplier and situation-by-situation.
We're also working well on large accounts. Again, we keep winning one-by-one new joint accounts, more to be announced when we are ready.
It is a very long process.
John Karidis - Oriel Securities Ltd., Research Division
And so I can ask about the hundreds of millions related to cost benefits so...
Vittorio Colao
Yes, yes, you're right, you're right. When it comes to revenues, it's really about roaming and about large accounts.
On large accounts, as I said, we go one-by-one or actually 10s by 10s and not one-by-one. And in roaming, it's about changing pricing, changing tariffs and we have worked on that and you will see more in the future.
Operator
Our next question comes from the line of Paul Marsch at Berenberg.
Paul Marsch - Berenberg Bank, Research Division
Yes, I've just got 2 questions. Firstly, have there been any material changes in revenue allocation between data and voice, particularly given the growth in integrated packages?
And then secondly, just in Germany, maybe you could say what the broadband net adds were? And more specifically given what's pending with the Bundesliga rights auction?
Does that change the way that you're thinking about your choices in that market at the moment?
Vittorio Colao
Andy?
Andrew N. Halford
So revenue allocation, no. There is a methodology there for how we allocate within integrated bundles, and obviously, that is not the most precise science but it's a set of rules we apply those by market and there are no significant changes in the way that's been applied between periods.
Michel Combes
Broadband -- so in Germany, broadband customers are more or less flat, so as I’ve just said, there's slowdown due to the competition from cable, but more or less flat. In terms of content, whatever it is, I guess, that our only focus is to make sure that our customers can have access to any type of content through our DSL offers so that's what we are just, let's say, we are working on.
Operator
We have time for one more question, and that question is from the line of Johnson Davies of Santander.
John Davies - ING Groep N.V., Research Division
It's John Davies here. I have a question really about India.
I know the initial growth in India today was very much on a 2G focus. Can you give us an update on how the 3G program is progressing, please?
Vittorio Colao
Nick?
Nicholas Jonathan Read
Yes. Well, I'd say it's obviously very early days.
The network, we're now up to 10,700 3G sites so quarter-over-quarter, we were up 1,500. We've got about a 15% population coverage.
We are just in the process of rolling out some new billing functionality to give us a bit more flexibility around snacking and daily allowances, which, I think, will open up the opportunity, that along with more local content and greater handset penetration. And it's worth noting that the handset penetration is still around 3% so that is a key enabler going forward.
So good progress, but early days.
Operator
As we have time for no further questions, could I please return the conference to you?
Vittorio Colao
Yes, thank you, operator. Again, as I wrap up, I would say is solid -- continuing solid execution from us.
I see our geographic spread and mix as a positive. As I mentioned, we didn't talk much about South Africa, but Africa, India, Turkey -- we didn't talk about Turkey today, but Turkey continued to do well.
Ghana and within Europe, the kind of north, south thing with a little bit more pressure and challenges in Southern Europe which will require, in the coming quarters, attention and hard work on our side. Continuing successful data story.
We haven't talked too much about enterprise. Enterprise keeps growing, slightly slower than before because of roaming and because of Southern Europe, but still an area of strength and success.
And finally, confirmed guidance and distributions as planned. I look forward to talk to all of you in May for the full year results.
Thank you very much. Thank you, operator.
Operator
This now concludes our call. Thank you, all, very much for attending.
You may now disconnect your lines.