Telefonica Moviles Posts Strong Client Growth In First Quarter
2004, As Net Profit Rises 17.9% To 423 Million Euros MADRID, Spain,
May 5 /PRNewswire-FirstCall/ -- - Telefonica Moviles reached 54.4
million managed customers (for year-on-year growth of 30%), after
acquiring 2.3 million new clients in the first quarter of the year,
of which 2.1 million were in Latin America. Including the customers
from BellSouth's Latin American operators, whose acquisition was
agreed in March, the total customer base would be 66 million. -
Operating revenue grew 20.2% to 2.561 billion euros, boosted by the
larger customer base and the increase in traffic carried.
Telefonica Moviles Espana reported a 17.4% increase in revenue and
Latin American operators recorded a 29.6% rise, in euros, which
accounted for 26% of total consolidated revenue. - EBITDA advanced
12.6% to 1.119 billion euros, despite strong commercial activity. -
Free cash flow increased to 640 million euros, higher than in the
first quarter of 2003 despite increased capex (213 million euros).
- Telefonica Moviles Espana obtained a net add of 278,000
customers, a similar figure to the first quarter of 2003, exceeding
19.9 million clients in total. At the same time, the company
continued to promote customer loyalty programs, with a 25% rise in
prepaid-to-contract migrations and over 848,000 handset upgrades. -
Sharp increase in commercial activity which positively impacted the
Spanish subsidiary's consumption ratios: MOU advanced 9% to 116
minutes and ARPU was up 7% (with a 10% increase in data ARPU). - In
Brazil, Vivo consolidated its leadership with more than 1.2 million
net adds in three months (an estimated 49% of total net adds in its
areas of operation) while data services' contribution continued to
grow, exceeding 4% of revenue after doubling its weighting. - In
Mexico, Telefonica Moviles accelerated the pace towards its goal of
reaching critical mass, as strong commercial activity brought net
adds of 318,000 customers (more than in the first nine months of
2003) and GSM coverage was increased to cover 112 towns and cities.
NOTES ON THE PRESENTATION OF RESULTS The consolidated financial
statements for Telefonica Moviles Group do not include the mobile
operators of Chile and Puerto Rico managed by Telefonica Moviles.
As regards changes in the consolidation perimeter, we would
highlight the following: After the acquisition of 61.10% of the
ordinary shares with voting rights -equivalent to 20.37% of the
total share capital- of Tele Centro Oeste Celular Participacoes,
S.A. (TCO) through Telesp Celular Participacoes, S.A., this company
has been fully consolidated in Brasilcel's financial statements
since 1 May 2003. Subsequently, and also in 2003, TCP increased its
shareholding in TCO to 86.58% of ordinary shares -which represents
28.87% of total share capital (without including treasury stock).
The sale of 100% of Telefonica Mobile Solutions' to TS Telefonica
Sistemas SA, a company belonging to the Telefonica Group, took
place in June 2003, with effect from March 31 2003. Since that
date, it is not included in Telefonica Moviles' consolidation
perimeter. In July 2003 Medi Telecom carried out a capital
increase, as a result of which Telefonica Moviles increased its
stake in the company to 32.18%. In December 2003 the Group's
Austrian subsidiary, 3G Mobile Telecommunications GmbH was sold to
the mobile operator Mobilkom Austria. Since then the Company is no
longer included to the Group's consolidation perimeter. In Brazil
in March 2004, the tax credits used by Tele Leste, TCO, CRT and
Tele Sudeste as a result of the goodwill provided by Telefonica
Moviles through Brasilcel were capitalized. This capitalization has
not resulted in any cash outflow for Brasilcel, but has led to an
increase in the shareholdings in these companies. For an easier
understanding of Telefonica Moviles' financial statements, the
economic stakes held by the Company in each of its subsidiaries,
along with the consolidation method used in its consolidated
financial statements in each period, are provided. Telefonica
Moviles reported net profit of 423 million euros in the first
quarter of 2004, an increase of 17.9% on the same period last year.
The year's first quarter saw strong commercial activity in the main
areas of operation despite the typical seasonal fluctuations of the
business. The companies managed by Telefonica Moviles achieved net
adds of over 2.3 million customers in the period, versus 383,000 in
the first quarter of 2003, with the consequent impact on commercial
costs. Telefonica Moviles ended March 2004 with 54.4 million
managed customers, 30% more than in March 2003 and 5% more than in
December 2003. Including the customers from BellSouth's Latin
American operators (customer data for BellSouth subsidiaries at the
close of the quarter ended 28 February, 2004), whose acquisition
was agreed in March, Telefonica Moviles' managed customer base
would reach 66 million. Telefonica Moviles achieved solid growth in
operating revenues of 20.2% year-over-year, to 2.561 billion euros.
Stripping out changes in the consolidation perimeter and assuming
constant exchange rates, the increase would have been 19.5%. By
components, service revenues advanced 15.1% vs. the first quarter
of 2003 to 2.270 billion euros, boosted by the operators' larger
customer base and the increase in traffic carried. Handset sales
rose 84% year-over-year to 290 million euros, thanks to the
stronger commercial activity in the year's first quarter.
Telefonica Moviles Espana posted operating revenues of 1.883
billion euros, with year-over-year growth of 17.4%. Operating
revenues from consolidated Latin American operators showed a
year-over-year increase of 29.6% in euros and accounted for 26% of
Group revenues in the first quarter of 2004. Consolidated EBITDA
advanced 12.6% to 1.119 billion euros. The EBITDA margin was 43.7%,
compared to 46.6% in the first quarter of 2003, due to the higher
commercial costs recorded in the period this year (+52%), in line
with the increased commercial activity. Telefonica Moviles Espana
obtained EBITDA of 1.003 billion euros in the first quarter of
2004, 13.4% more than in the same period last year, for an EBITDA
margin of 53.3%. EBITDA for the Group's consolidated Latin American
subsidiaries was virtually unchanged due to the commercial efforts
made during the period. Results from companies consolidated by the
equity method improved considerably, with losses being halved, to
12 million euros from 24 million euros in the first quarter of
2003. We would highlight the 52% decrease in losses attributable to
the Group through its stakes in Medi Telecom (5 million euros) and
IPSE 2000 (6 million euros vs. 11 million euros in the first
quarter of 2003). Net financial losses were 29% lower, mostly due
to lower net financial expenses deriving from the reduction in
debt. Consolidated net financial debt at March 2003 stood at 4.240
billion euros, 17% lower than at December 2003 and a 33% decrease
in the last 12 months. Proportional net financial debt at the end
of March 2004 stood at 4.950 billion euros, 15% less than at
December 2003. The amortisation of goodwill on consolidation was
stable at 21 million euros. Elsewhere, no significant extraordinary
items were booked in the first quarter of 2004. In the first
quarter of 2004, consolidated capex amounted to 213 million euros,
a 43% year-over-year increase, due to higher capex deriving from
the rollout of Telefonica Moviles Espana's UMTS network and the GSM
networks in Argentina and Mexico. Despite the higher capex, the
strong performance of operating results enabled Consolidated Free
Cash Flow (EBIT (1-t )+Amortization-Capex-capitalized Opex) to
increase to 640 million euros(excluding the acquisition of TCO and
the sales of M-Solutions and 3G Mobile in Austria). Starting in
March 2004, as a result of the commercial launch of the UMTS
service in Spain in February, the Group no longer capitalizes the
expense of the provision for the spectrum fee assigned to
Telefonica Moviles Espana for the operation of UMTS technology and
related capitalized expenses are now being depreciated. The
following significant events took place during the last few months:
On 8 March, 2004 Telefonica Moviles announced an agreement with
BellSouth to acquire all its cellular assets in Latin America,
which had a total of more than 11.6 million customers at the end of
the first quarter of 2004. The operation is subject to due
diligence and the pertinent regulatory and governmental approvals.
On 29 March, the mobile alliance formed by Orange, Telefonica
Moviles, TIM and T-Mobile announced its first tangible results,
outlined plans for the future and unveiled its new brand, FreeMove.
At the 16 April Telefonica Moviles General Shareholders' Meeting,
all the points on the agenda were approved, including payment of a
gross dividend of 0.1838 euros per share on June 16. SPAIN At the
end of March 2004, the Spanish cellular market numbered an
estimated 38.3 million customers, 11% more than the previous year,
with an estimated penetration rate for mobile telephony of 89.6%,
more than seven percentage points higher than in March 2003.
Against this backdrop, Telefonica Moviles Espana ended March 2004
with a total of 19.9 million customers (7% more than in 2003), with
net adds for the quarter of 278,000 customers, virtually the same
as in the first quarter of 2003. As regards loyalty measures, the
high pace of prepaid to contract migration seen throughout 2003
continued in the first quarter of 2004. In the first quarter of
2004 there were 310,000 thousand migrations (+25% vs. 2003), the
second highest figure in the Company's history after the fourth
quarter of 2003. This has helped the contract segment's weighting
of Telefonica Moviles Espana's total customer base to continue
growing, to 41.7%% (36.4% in March 2003). Handset upgrades totalled
848,000 in the first quarter of 2004, a similar figure to that for
the first quarter of 2003. Customer loyalty efforts have centred on
the contract segment, where there were over 570,000 upgrades in the
first quarter of 2004, 6.6% more than in the first quarter of 2003.
All this led to an increase of 17.5% in commercial activity
(including the sum of additions, migrations and retentions) vs. the
first quarter of 2003. We would also highlight the increase in the
weighting of portability initiatives in commercial activity in the
first quarter of 2004, after the introduction of more automatic
exchange processes at the end of 2003. Telefonica Moviles Espana
once again had a positive net portability balance(of more than
30.000 clients) in first quarter 2004, despite increasing
competition. The commercial effort was accompanied by solid growth
in usage and revenues. In the first quarter of 2004, traffic
carried on Telefonica Moviles Espana's networks was close to 9.865
billion minutes, a year-over-year increase of 17%. As for customer
usage ratios, the high MOU growth recorded in the previous five
quarters continued. In the first quarter of 2004, MOU was 116
minutes, 9% more than in the same period a year earlier. We would
highlight the stability of prepaid MOU despite the Company's
intensive migration to contract activity. Growth in contract MOU
continued to increase (1% vs. the first quarter of 2003). Total SMS
messages channeled through the company's network amounted to 2.355
billion in the first quarter of 2004, an increase of 10% on the
same period of 2003. Of this amount, 32% were related to content
access and value-added services. With respect to other kinds of
data services, we would underline the steady development of
Multimedia Messaging, the i-mode service and growth in users of
GPRS-based services. A new MoviStar brand handset was launched, the
'MoviStar TSM500', a tri-band mobile-PDA with GPRS data capacity,
Bluetooth technology, MMS and a built-in camera. In the area of
corporate services, we would highlight that more than 600 large
companies have signed up for the MoviStar Intranet service with
Telefonica Moviles Espana. Thank to all these efforts, total data
revenues generated by Telefonica Moviles Espana in the first
quarter of 2004 amounted to 230 million euros, 17% more than in the
same period of 2003. Quarterly data ARPU was 3.9 euros, 10% higher
than in the same period of 2003, confirming the growth trend for
this indicator in recent quarters. Of total data revenues
generated, 26.8% came from services unrelated to traditional SMS.
Average revenue per user and month (ARPU) continued to show solid
growth, with a year-over-year increase of 7% in the first quarter
of 2004 to 29.5 euros. And this despite results for the first
quarter of 2004 reflecting the full impact of the reduction in
termination fees approved at the end of 2003. Although traditional
seasonal factors usually cause ARPU to decline in the first quarter
of the year compared to the fourth quarter of the previous year,
this time the decline was only 2%. By segments, prepaid ARPU
performed very positively, showing year-over-year growth for the
second consecutive quarter (+2.7%). Contract ARPU was virtually
stable, only declining 0.6%, despite the larger weighting of
residential customers due to the flow of migrations from prepaid.
Alongside the performance of traffic and revenues, continued
efforts to streamline expenses and capex helped to produce solid
financial results. Operating revenues advanced 17% year-over-year
to 1.883 billion euros. This result was driven by the positive
performance of service revenues (up 13.4%) and of revenue from
handset sales (up 75.4%). The latter were fuelled by the increased
commercial activity and the change in inventory supply policies
from last year. Due to this last factor, the pace of growth in
revenues recorded in the first quarter is likely to ease in coming
quarters, in line with the target of achieving year-over-year
growth of over 9% for the whole of 2004. The weight of subscriber
acquisition and retention costs over operating revenues in the
first quarter of 2004 stood at 8.3%, one percentage point more than
a year ago, despite an increase of over 17% in commercial activity.
EBITDA was 1.003 billion euros, a 13.4% year-over-year advance.
This represents an EBITDA margin of 53.3%, maintaining Telefonica
Moviles Espana's position as one of the most efficient companies in
the sector. The 1.9 percentage point decline in the margin compared
to the first quarter of 2003 was due mainly to increased commercial
activity and the larger weighting of handset sales. Also, since 1
March, in line with the commercial launch of Oficin@ Movistar UMTS,
the fee for using the UMTS spectrum has no longer been capitalised,
nor have the other capitalisable expenses associated with this
technology. This had an impact of 3.8 million euros on EBITDA, and
the amount capitalised to date has begun to be amortised with an
impact of 4.5 million euros on amortisation. Capex totalled 137
million euros, a 23% year-over-year increase, boosted by the
rollout of the new UMTS network. MOROCCO Medi Telecom ended March
with 2.042 million customers, a year-over-year increase of over
21%. The customer base contracted slightly in the first quarter of
2004 due to the volume of customer acquisitions in the fourth
quarter of 2003 and fewer promotions for recharges. Nonetheless,
both revenues and EBITDA continue to advance, driven by traffic
growth and cost control. Revenues grew by 17% year-over-year and
EBITDA by 64%, to 31 million euros. More noteworthy was the 43%
EBITDA margin for the period, far higher than in any quarter of
last year. The positive performance of operating profit and the
cutback in capex enabled operating cash flow (EBITDA-capex) to
exceed 25 million euros, more than 76% of the total generated in
2003. The company expects that in the upcoming quarters, especially
during the summer, there will be an upturn in commercial activity.
LATIN AMERICA BRAZIL The Brazilian cellular market continued to
grow rapidly in the first quarter of the year despite the typical
seasonal fluctuations of the business in this period. Against this
backdrop, Vivo has led the growth of the Brazilian market in
general and in the regions where it operates, with an estimated
average share of net adds of 49% through March 2004. Accordingly,
its market share was virtually unchanged from December 2003 at 45%
for Brazil as a whole and an average of 56% in its areas of
operation. Vivo ended March 2003 with 21,875 customers, acquiring
more than 1.2 million customers in the first quarter. We would
highlight the strong commercial activity in TCP and TCO's areas of
operations, with Vivo achieving 815,000 net adds. In the first week
of April, Vivo's customer base surpassed 22 million. Despite strong
growth in recent months, mobile telephony penetration in Vivo's
areas of operation at the end of the first quarter of the year was
30%, well below figures for other markets with similar per capita
income, indicating the high growth potential that still exists in
the regions where Vivo operates. In the first quarter of 2004,
total MOU was 93 minutes (10% lower than the figure recorded in the
fourth quarter of 2003), while total ARPU was 35 reais (10% lower
than in the fourth quarter of 2003). This performance was shaped by
seasonal factors typical of the year's first quarter, traffic
promotions of adds during the Christmas campaign and the impact of
the sharp growth in the customer base. The comparison of the first
quarter of 2004 with the same period in 2003 is distorted by the
incorporation of TCO to the consolidation perimeter and the impact
of migration to SMP. The sustained growth in the contribution of
data services should be mentioned, as these represented 4.4% of
Vivo's service revenues, more than double the weighting in the
first quarter of 2003. As regards Vivo's results, operating
revenues in the first quarter of the year including TCO's results
from 1 May 2003 showed growth in local currency of 43% vs. the
first quarter of 2003, driven by service revenues (+40%) and the
increased commercial activity. Despite the stronger commercial
activity, improvements in efficiency and economies of scale enabled
the company to obtain an EBITDA margin after management fees of
40%, with absolute growth of EBITDA of 45%, in local currency
terms. MEXICO The first quarter of 2004 featured intense commercial
activity in the Mexican market, where Telefonica Moviles Mexico has
reinforced its position as the second-largest cellular operator and
made progress towards its goal of achieving critical mass in
customers. We would also note the advances made in the rollout of
the GSM network, which provided coverage for 112 cities in March,
compared to 96 in December 2003. Thanks to the efforts made in the
first quarter of 2004 (including the extension of the Christmas
campaign into the first few days of January), Telefonica Moviles
Mexico achieved net adds of 318,000 customers, higher than the
figure recorded in the first quarter of 2003 (11,000) and the
combined total for the first nine months of 2003. Therefore, at the
end of March, the operator had a customer base of over close to 3.8
million customers, 9% higher than at the close of 2003 and 55%
higher than in the first quarter of 2003. Growth was driven by adds
of GSM customers, which now account for 38% of total customers, 12
p.p. higher than in December 2003. In line with the strong growth
of the customer base, MOU in the first quarter of the year was 61
minutes, while ARPU reached 174 Mexican pesos. Against this
backdrop, operating revenues in local currency increased by 43.8%
compared to the first quarter of 2003, boosted by higher service
revenues (+21% vs. the first quarter of 2003) and handset sales. On
the other hand, costs deriving from the increased commercial
activity and the rollout of the GSM network led to an EBITDA loss
of 47.3 million euros. Total capex in the first quarter of 2004 was
26 million euros and capex committed at 31 March 2004 was 255
million euros. ARGENTINA The growth of the Argentine mobile market
continued to accelerate in the first quarter of 2004, with an
estimated penetration of 22% and outstripping the number of fixed
lines. Unifon's customer base ended March 2004 at 1.97 million,
with year-over-year growth of 27% (+8% vs. December 2003). We would
highlight the growth in net adds - more than 146,000 customers.
This figure, which compares to a negative performance during the
first quarter of 2003, even surpassed that of the fourth quarter of
2003, despite the typical seasonal fluctuations of the business in
the first quarter. Consumer usage indicators continued to rise,
despite the growth of the customer base, with the company
registering a sharp year-over-year increase in MOU (+27% vs. the
first quarter of 2003). The growth in MOU, coupled with the larger
customer base, boosted total traffic in minutes by more than 50%
vs. the first quarter of 2003. Meanwhile, ARPU registered
year-over-year growth of 26%, fuelled by the increase in MOU.
Unifon recorded a year-over-year increase in operating revenues of
54% in pesos in the first quarter of 2004, boosted by the larger
customer base and increased traffic, as well as higher handset
sales. Despite the increase in commercial activity vs. the first
quarter of 2003, EBITDA in pesos rose 9%, with an EBITDA margin of
22.7%. As was the case in previous quarters, we would highlight the
good performance of revenues in euros (+44%) despite the negative
impact of exchange rates in the last 12 months. Lastly, regarding
capex, we would point out that the rollout of the GSM network has
begun this year. Stages I and II were completed by the end of the
first quarter of 2004, providing coverage for nearly 9 million
people. Commercialisation of the service was launched at the end of
March in AMBA (the federal capital and greater Buenos Aires),
Mendoza and Mar del Plata. Total capex for Unifon in the first
quarter of the year was 25 million euros, with committed capex at
March 31 of 72 million euros. PERU The Peruvian mobile market ended
the first quarter of 2004 with an estimated 3.1 million customers,
with penetration of 11.4%, 3 p.p. higher than at the end of the
first quarter last year. In the country as a whole, mobile
telephony users now outnumber fixed lines. Telefonica Moviles Peru
continued with an aggressive commercial policy in the period,
achieving net adds of over 128,000 customers. It continued to lead
market growth, with an estimated share of net adds of 60%.
Telefonica Moviles Peru ended March with 1.6 million customers, a
year-over-year increase of more than 32%. Efforts in customer
acquisition led to growth in both the contract and prepaid
segments, of 7% and 39%, respectively. We would point out that at
the end of the first quarter of 2004, just four months after the
launch of the CDMA 2000 1xRTT network, 15% of the customer base had
handsets which use this technology. As regards results, Telefonica
Moviles Peru's operating revenues showed a 5.1% year-over-year
increase in local currency. This was mostly due to the positive
performance of revenues from outgoing traffic, which were partly
offset by lower interconnection revenues. . In line with the
increase in operating expenses deriving from the intense commercial
activity, EBITDA in local currency declined by 25.6% vs. the first
quarter of 2003, leaving an EBITDA margin of 25.5%. CHILE
Telefonica Movil (the subsidiary of Telefonica CTC Chile managed by
Telefonica Moviles, and whose CEO was appointed by Telefonica
Moviles) ended the first quarter of 2004 with 2.5 million
customers, 32.7% more than at the end of the first quarter of 2003.
The company was once again the market leader in customer
acquisition, with 230,000 net adds vs. 34,600 in the same period of
2003, thanks to the positive performance of GSM adds. As a result
of the success of GSM, the company now has 657,000 customers using
this technology, or 26% of its total customer base, enabling
Telefonica Movil to regain nearly 2 p.p. of market share. As
regards results, year-on-year growth in operating revenues is
driven by the increase in the customer base and total traffic.
Meanwhile, due to the increased commercial activity and the
reduction in mobile interconnection tariffs, the EBITDA margin
declined by 8 p.p. to 24%. GUATEMALA AND EL SALVADOR The progress
in customer acquisition in Guatemala and El Salvador in the first
quarter of 2004, underpinned by the buoyancy of both countries'
markets, led to net adds of over 55,000 clients vs. nearly 6,000 in
the first quarter of 2003. The total customer base managed by
Telefonica Moviles' operators in Guatemala and El Salvador at the
end of March 2004 was 460,000 customers (189,000 in Guatemala and
270,000 in El Salvador) vs. 334,000 at March 2003. As regards
financial results, we would highlight the 19% year-over-year
increase in revenues in euros assuming constant exchange rates,
fuelled by the growth of the customer base. Despite this commercial
effort, the EBITDA margin grew 5.5 p.p vs. the first quarter of
2003 thanks to the one-off expenses registered in the first quarter
of 2003. PUERTO RICO Movistar Puerto Rico, the wireless operator
managed by Telefonica Moviles, ended the first quarter of 2004 with
167,200 customers, a negative net add of 7,400 customers. This
reflects the tough competition in a market with six operators, most
of which are part-owned by operators present in the U.S. which have
integrated offers of mobile telephony and international
long-distance service, as well as flat-rate products with unlimited
usage. GLOSSARY ARPU (Average Revenue per User): Average monthly
revenue per customer. This includes revenues from fees, monthly
subscriber fees, traffic -without discounting traffic promotions-,
outgoing roaming and interconnection fees. It excludes handset
sales and revenues from incoming roaming. Loyalty programs are not
considered as lower revenues in the ARPU calculation. The ARPU
figures appearing in this report refer to average ARPU for the
quarter. The average quarterly customer base is calculated as the
average of the average customer bases of the three months in the
quarter. For the Brazilian operators, ARPU is calculated as service
revenues (operating revenues - handset sales) divided by average
customer base. MOU (Minutes of Usage): Average airtime minutes per
customer per month. Airtime minutes include outgoing traffic
(mobile to fixed, on-net mobile and mobile to other mobile
operators) and incoming traffic (fixed to mobile and other mobile
operators to mobile). Churn: Disconnection rate. This is calculated
as the number of disconnections during the period among the average
customer base for the period. Commercial actions: Includes
additions, migrations and handset changes. Active MMS user: All
users who in the last month have sent or received an MMS message,
other than those who only receive promotional MMS. Active i-mode
user: All users who in the last month have accessed i-mode content
during a browsing session. Consolidated net financial debt:
Includes the net financial debt of all companies consolidated by
the full consolidation and proportional integration methods. Net
financial debt is defined as: Long-term debt + Short-term financial
debt, including current maturities - Short-term investments - Cash
and banks. Proportionate net financial debt: Includes the net
financial debt of the companies in which Telefonica Moviles Group
has an economic stake and a significant influence in the
management, weighted in each case by the economic ownership. This
present document contains, and during the reading of it there may
be expressed, statements that constitute forward-looking statements
(as commonly accepted and within the meaning of the Private
Securities Litigation Reform Act (USA) of 1995) intentions,
projections, expectations or forecasts made by the Company at the
date of said document. These may refer to various aspects such as
the customer base and its development; growth in the Company's
business and the market share of its various lines of business; the
Company's results and other different aspects of its activity and
its situation. Such intentions, projections, expectations and
forecasts are subject, by their very nature, to risks and
uncertainties which could alter them, without the Company being
obliged to revise them in the event of unforeseen occurrences or
even if said alterations are due to changes in strategy. A complete
version of this press release, including accompanying tables, is
available on our website: http://www.telefonicamoviles.com/
DATASOURCE: Telefonica Moviles CONTACT: Direccion de Division de
Comunicacion, Tel: +34 91 423 4044, Fax: +34 91 423 4011, email:
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