Spain remains under pressure, UK opportunity best played through LBTYA (+, USD35) The big announcement today is that the new VirginO2 JV plans to replace their existing cable footprint (14.3 mn homes) with FTTH and is working on new wholesale/ coinvestment partnerships to expand even further. This is a development we pre-empted with our report Digging into the Future of Fibre, which makes strategic sense and could lead to more value creation longer term. But we believe owning Liberty Global is a much better way of gaining exposure, given that the JV accounts for c. 50% of LBTYA FCF vs. just 20% at Telefonica. Meanwhile, we expect ongoing pressure on the Spanish business to be the main driver of Telefonica performance. What do we know that we didn''t know on Wednesday? Spanish EBITDA missed by 2.4%, net add trends remain negative and ARPU declines accelerated to -3% YoY. Whilst management pointed to the start of the football season, some roaming recovery and ''more for more'' price increases as supportive for ARPU improvement in 2H, the guide on 3Q EBITDA remains cautious and we believe that EBITDA margins are likely to be structurally lower in future thanks to the increasing share of digital and IT revenues in the mix. There was little new detail on the MandA front - TEF have sold the majority of infrastructure assets already and reducing investment in HispAm appears to be the priority in the absence of further asset sales. Has the investment thesis changed? Not really Our recent report New structure, old problems provides a detailed overview of each of TEF''s businesses and updates for all recent and upcoming MandA transactions (including in Brazil). These results bring more evidence that Spanish customers are shifting to lower end of the market - negative for TEF and a key driver of our Underperform thesis, whilst the UK FTTH upgrade strategy is in line with our expectations as well. Changes to estimates We make modest underlying estimate...