Q3 2021 Tim SA Earnings Call
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Good morning, ladies and gentlemen.
Welcome to King of E 2021, third quarter results conference call.
We would like to inform you that this event is being recorded in all participants will be listen only mode. During the companys presentation.
There will be a replay for a discount on the company's website.
After <unk> remarks are completed there will be a question and answer session. Four participants at that time further instructions will be given.
We highlight today's statements that may be made regarding the prospects projections and goals of genius <unk> constitute the beliefs and assumptions of the company's board of decorative officers.
Future COVID-19 duration or not for pharmacy warranted.
Volker risks uncertainties and assumptions as they refer to future events that may or may not occur.
Investors should understand the internal and external factors.
May affect their performance and.
Lead to different results than those Glenn.
Should any participant with a system. During this call. Please press star zero to reach the operator.
Now I'll turn the conference over to this yield it's Pete.
<unk>. So he can present the main messages for the third quarter of 2021. Please.
Please Mr. Pietro you May proceed.
Good morning, everyone.
Thank you for attending our results conference call.
Please go wrong I'd like to give a warm welcome to <unk>.
Our new CFO.
She joined our team and is already getting our hands Dirty Grandpa multiple broadly a bank.
We are preparing to start or.
<unk> already started and need to TD.
I wish them.
All the luck and success because we've got lots to do.
It is great to have her on board.
Well without delays, let's move to the results.
In the third quarter, we consolidated our recovery, we can see some numbers.
It is through that despite a much better pandemic situation up there as the party vaccination macro has been more challenging.
We have no reasons to complete this past quarter was solid and in the fourth but we will maintain the peace, which put us in a condition to reach our targets for 2021.
Also key events, such as spectrum auction and OE deal approval should take place until December paving the way to a great 2022.
In a nutshell, our iron level execution led us to both LPTA.
This quarter.
Service revenue grew more than 4% year over year, driven by mobile output, which also expanded over 4%.
On the fixed broadband front, we have just launched the best ice cream golfer in Brazil proximity, Florida our business.
EBITDA was up four 5% and we are now at 21 quarter of positive yearly growth.
We some 85 million re IC customer broadcom revenues, which lets us be well positioned to reach our annual target for the line.
This quarter was also marked by a remarkable achievement in the E S Arena.
I'm proud to say that we are the first Brazilian company to be included in the affinity diversity inclusion index and we are the number one pet coke in the war in this ranking.
Detailing our revenue dynamics, we saw positive contribution coming from mobile and pizza sub niches with all major lines, improving will also deliver a sequential expansion versus the second quarter showing the consistency of our operations.
Mobile service revenue grew four 1% year over year.
In parallel fix of services also posted a solid evolution after by five.
Five 5%.
With Tim live driving the trend back temporarily.
Your piece as we expected and mentioned during our last call.
Our nine month numbers are rock solid both in mobile and pizza sub niches that is why total net service revenue is growing more than 5% year on year.
Those results once again showed that our choice to focus on our value strategy is paying off we are outperforming our peers in the auto dynamics until September our output grew high single digits, while the rest of the market.
Mid single digit is clearly demonstrates our ability to produce additional revenues more rationally and efficiently.
The main drivers behind the volume to value strategy remain a differentiated offer and the up selling proposition with me duration to our plants and improving the loyalty from clients.
The new lever will be working to improve the quality and value of our seats with broader and quantified distribution channels.
The differentiation aspect of our offer is an ongoing effort, we have been adding multiple differentiation layers in each segment to keep ahead of the competition and sustain our leadership in.
Input speed, we're both from the entertainment tab to wear one stop shop content and service marketplace.
In control, we're focusing on the benefits of our cost consumer platform partnership.
<unk>.
Our clients were new experiences.
In the prepaid we have been targeting convenience and loyalty since the launch of the deep breath top family.
I just mentioned the importance of our customer platform partnership to web differentiate our offers.
This is part of our strategy is gaining more and more traction. It is worth remembering how we played this game of client based monetization to generate new revenue streams and equity diversification.
First I need to remark that we have two business model of partnerships under this framework.
In the commercial ones, where a more traditional approach where we are removing our rig monitor per video views and clicks for advertising campaign and that intelligence services.
Any company seeking relief and constellation increased lead generation and at the stores.
Is there a target for us.
On the other side the strategic partnerships are built and there are more symbiotic relationship and our targets are scale ups seeking exponential growth theme.
Team is regulated by GAC fees and equity Stakes in return for our endorsement for giving access to our customer base and commercial capillarity for being bundled with our core offer portfolio.
For data intelligence.
Both modest leverage premium sites and team hats platforms to target the treatable clusters inside our base and impact them through channels within their journey as a client of team.
Under this framework, we have listed some bursty cogs as having great opportunities for being more directly connected to mobile phone services and adding a higher evaluation then the telco companies.
We are already operating in some of them. So we're clear results of shoe.
As mentioned before with some 83 million Reais in revenues in the first nine months of the year.
Well advertising is contributing with.
$26 million, while financial and litigation services had the 57 million Reais.
We arent subscription bonuses, if we run into an equity stake of close to 4% is physics bank. Following a record number of opening accounts.
In less than two years all of the 5 million clients accepted an offer from our partners by our 10 channels and we multiply by 10 hour episodes result between September and January.
We continue working to grow this ecosystem of partners Similarly to a private equity firm. So we are developing multiple fronts. For example discussion with look our content providers and accelerated and this this partnership is cutting ahead of others taking longer.
To materialize.
We are at the final phase to choose a partner for he asked initiatives with seven solid proposals on the table.
Digital wallet marketplace discussions are taking longer than expected and we are refining our approach considering new market dynamics.
<unk> will continue to work on Iot best because with large contract be negotiated.
To complete our revenue drivers discussion, let's move to fix as savages, specifically Tim live operation.
The highlights of this quarter are the completion of the fiber co deal and the major launch of the best F. Dth offer in the country.
Tribeca closing is expected in mid November.
Under this deal will receive $1 1 billion reaction secondary with the vehicle receiving 600 meter <unk> primary.
Tim will remain with 49% of the capital.
Remembering that the rationale for the deal was to accelerate the fiber rollout, we expect to do some catch up in cities coverage.
We are launching the one giga offer as we promised.
Some of you may think they're already one giga offers in the market.
I must tell you. This is not the same thing and I'll explain why.
We have the best download and upload speeds combination one giga for downloading and prevent these mega upload.
The offer will be available in all cities, we cover meaning I end markets that do not have access to this type of speeds.
We have an excess of set of content embedded in the offering such as Netflix, but among class visa and venues and best path.
And to complete we're setting the offer price at an acceptable level. So this is not an offer to just position Tim live as having the ISP the.
Goal is to give people access to the next level of experience in broadband.
Meanwhile, we maintain a decent performance in July even if the expected deceleration was confirmed.
The fourth quarter is already showing signs of re acceleration.
Moving to infrastructure, we saw our <unk> corporate leadership be reaffirmed with the sound expansion of 25 most cities.
For the five <unk> coverage grew at December.
We continue walking on the preparation of our network to receive deal with customers.
Massive mimo and cyber modernization keep accelerating for this purpose.
On the IP front, we completed another step on our journey to cloud transformation.
Our CRM system was transfer enter entirely to the cloud producing a 50% reduction in attendance time.
Another key accomplishment 14 was the result of the trials with <unk> Standalone in Rio and Sao Paolo.
We were the first ones to peg the technology in the two most important cities of the country.
We're capable of Ritchie VDI speeds with low latency levels, but more importantly, we proved the technical feasibility of combining <unk> with carrier aggregation to expand coverage by more than 69%.
Talking about strategy.
We are very close to the spectrum auction.
Is scheduled to occur in the next week on November 4th.
We have been saying since the beginning of the auction discussion the choices made by Brazil on how to approach strategy, we're unique and why.
The focus on the investments and network rollout will benefit the entire industry, but most importantly, the end users.
<unk> is ready to participate in the auction and optimistic about the outcome.
Leaving the infrastructure discussions and moving forward to our Opex and EBITDA trends.
This quarter with a more comparable base oil for our cost and expenses.
Our dynamics are we below inflation despite spikes in different industries.
We saw as more early expansion of our Opex of one 3% in that this quarter and below 6% year to date.
As explained last quarter. The latter was mainly a consequence of the Opex performance in the second quarter of two.
2020, if we compare to the first nine months of 2019, our year to date Opex was flat.
<unk> continued to execute well on cost control digitalization projects and bad debt and then while improving energy cost management towards there.
This together with a solid revenue contribution drove EBITDA to grow four 5% in the third quarter with a margin expansion to reach 48% net income rose solidly more than 20% and Capex was up five 5%.
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In this context operating free cash flow for the first nine months of the year grew more than 40%, surpassing $3 6 billion Reais, which drove our net debt down almost 30% and a cash position of $7 4 billion Reais.
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We have been preparing for the upcoming events of this year and 2022.
Considering our free cash flow is performing better than expected, we should be able to sustain the level of remuneration to shareholders. Even if we expect large disbursements in the next 12 months.
Closing my comments I want to remark on the solid execution. The team is delivering with robust results amid this luxury economic recovery.
Our pace will continue in the fourth quarter. So we are very confident we will meet the guy that's given to the market.
<unk>.
We posted more than 5% expansion for service revenue and EBITDA.
Customer platform is just that.
17 million react the way from the one that didn't meet our revised target.
EBITDA minus capex over revenues stood at 24%.
And finally net income grew more than 70% year over year.
By the end of 2021, we should add the fiber core deal close the February auction completed and we hope the OIBDA electrodes.
We expect to enter 2022 with less uncertainties and ready for this sector transformations.
There is still room for more than another customer platform contract to be signed before the year end.
<unk>.
Thank you.
We will now open the floor for questions. Please operator.
Yeah.
Thank you Mr. Piazza now we will begin the Q&A section.
First we'll take questions from analysts followed by the general public Olsen English Mr of listening to the webcast questions can be sent by <unk>.
Yes.
We ask each participant to restrict yourself to two questions at a time to ask a question. Please press star one.
One and to remove the question from Delhi Press the Star Chip.
The first question comes from Mr. Tanaka Goldman from XP.
Hi, Good morning, everyone. Thanks for taking my question actually I have a few questions related to change lives and I would like to stress the sorts of numbers. This quarter I Wonder if you are facing greater pressure from competition and if so in which areas and specific.
Region and then the last question in relation to the fiber co deal what are the next steps for closing the transaction. Thanks.
Thank you Bernardo, let's start from answering to the second question. So the good news. So then any decision to Mario to put some more detail, but what is missing is the approval by Anna <unk> of the deal that if I'm not wrong, a module communicated that debt.
It happened yesterday night.
So if it is configured but Mario will give you the.
Alive. These new we will have the closing by the month of November So on track with what we told Mario I don't know if you want to just our model is correct yesterday was a prudent today, we had the formal certification of the approval.
And then Donato, let's come back to the first question that these are let me say a little more complex, but first of all I would like to have life. As we are always transparent with the market. If you remember in the second quarter core results call I.
You already explained to everybody that our expectation for the first quarter should be less positive than the previous one so it happened exactly what we're thinking because if you manage a company you should the not discover things lie.
Alive, but you know and you plan and understand the results. So first of all this quarter as I mentioned at the in the second quarter, it's weaker than the previous one but we are already seeing that in the fourth quarter with so we show a sign of improvement that will be back close to.
Double digits and we expect then the next year to further reaccelerate with the stronger double digit growth. The reason why was that our ft. D. C area suffered the most compared to other areas, but again, we are accelerating on so.
All the activity for what we call the brownfield activity migration from <unk> to a dth to allow us to stay in a more comfortable situation in terms of competition, but again what is important to remember that is exactly what we mention <unk>.
Since the second quarter, there's no surprise for anyone because we accept retold.
We kept this quarter better fourth quarter, and better 2022, and exactly as we mentioned in the last call. We were able to launch the first wonky golfer again as I told during the speech someone can say that this is not the real first offered one giga.
Let me say, it's the first real one giga offer with 500 Megabits per second of upload. So also on the fiber everything is proceeding the closing we lachman the ninth of November So we show to the market that what we say, we deliver and the on the operations we are already.
Back to recall there from what's happened this quarter.
Very clear peer threat Mitra. Thanks.
The next question comes from geographic go from Goldman Sachs.
Yes.
Thank you for taking my question. The first question is regarding the Capex.
With regulation that you have been making investments in order to prepare and OTT network to receive for a global business. So can you just help to understand what exactly are those investments and how much you have been invested so far.
And the second question is regarding the tax credit recognized in the quarter can you just comment quickly on what exactly it is about in the winter.
Oh.
You expect more of these credits to come thank you.
Let's start from again, the good news so I leave the stage to Camille let me explain the good news related to the taxes.
Camelot.
Hi, Diego, So just explain a little bit on the tax credit there's been a positive outcome on a leading case to exclude taxation over interest unsuccessful judicial tax disputes.
It was actually not arcades that got already judge.
Judge, but in our case when our dispute is finalized it will generate roughly 535 million highs of effects of recoverable credits and we have booked that already in our in our balance sheet, we expect to be able to to start using those credits probably within a year. So it's a it's a short term positive impact.
Thank you.
I leave layer to give you some more details, but what they would like to allow that.
24% Capex on.