FCF growth promises, but we see cracks emerging in Spain Telefonica''s new guide for EUR 4 bn of FCF, and announcement of a CMD this November to outline plans for future growth, have sparked optimism. We expect new guidance to focus on cost reduction and lower capex as the transition from copper to fibre finally comes to an end, and TEF will be the first EU incumbent to reap these rewards. But we believe the bigger debates remain 1) performance of the domestic business and 2) the path back to sustainable deleveraging. On both points we find reasons to be more concerned following these results. What do we know that we didn''t on Wednesday? Spanish revenue and reported EBITDA came in line with expectations, but growth at the EBITDAaL level (not guided for by the company) actually worsened to -5% YoY (-4% last quarter). On the operational side the slowdown in ARPU growth to +1.3% from +1.7%, despite benefitting from a full quarter of price increases, should raise concerns around the ongoing spindown effect. Finally whilst FCFaL came in ahead of expectations (supported by higher VMEDO2 dividends) leverage was also higher, and we expect TEF''s fully-adjusted leverage to still be 3.5x at year end. Has the investment case changed? Management looking to reframe the debate... Putting these updates to one side, we believe mgmt. can point to some solid cost/capex opportunities at the CMD in November and we already forecast EUR 4 bn in FCF over the next few years. But there remain many factors beyond their control - not least the outcome of Spanish consolidation (decision due in September/November) where we believe most outcomes are likely to be negative for TEF - see Be careful what you wish for... for more. Changes to estimates We make limited changes to estimates - Spain/ Germany are broadly unchanged whilst earnings upgrades in Brazil are offset by cuts to the other HispAm businesses. Our 3 year cumulative FCF forecasts increase by c. 2%, and our EUR...