Q2 2022 Tim SA Earnings Call
Good morning, ladies and gentlemen, welcome to team of say 2022 second quarter results Conference call.
We would like to inform you that this event is being recorded and all participants will be in listen only mode. During the company's presentation.
There will be a replay for this call on the company's website.
After team. The same remarks are completed there will be a question and answer session. Four participants at that time further instructions will be given.
We highlight that statements that may be made regarding the prospects projections and goals of Timothy constitute the beliefs and assumptions of the company's board of executive officers future considerations are not performance warranties, they involve risks uncertainties and assumptions as they refer to.
Events that may or may not occur.
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Now I'll turn the conference over to the CEO , Mr. Alberto Chris Daly CEO of TSA and to MS. Camilla <unk> chief.
Chief Financial Officer, and Investor Relations Officer to present, the main messages for the second quarter of 2022.
Please Mr. Roberto you.
You May proceed.
Good morning, everyone and thank you for attending our results conference call.
All in all this is the first quarter with reported numbers after closing the deal with <unk>.
Most of the figures that we shared with you today are a combination of <unk> S. A.
And two months of course on the ISP created to hold the assets we acquired by the way. The integration process is evolving rapidly and we are ahead of schedule fortinet toward migration clients are already benefiting from better network coverage and quality.
Having this in mind I can see we had a great quarter.
<unk> is now a bigger and better company than ever before we are growing faster and maintaining our high level of profitability, while delivering transformational projects such as the launch of <unk>. This past month.
Stop for the next generation Piedmont.
In the second quarter, our top line grew more than 20% year over year. Our EBITDA also showed great momentum expanding more than 18% with EBITDA minus capex to rise more than 20% with a cash flow margin of around 27%. This is a very.
Set of numbers supporting the path to reach our shareholder remuneration guidance of 2 billion Reais, which includes the 270 million Reais in interest on capital that we announced in June .
Additionally, we maintain our focus on execution to achieve another relevant milestone in our customer platform program.
During the second quarter, we hit another target and now we are entitled to a five 2% stake in <unk> Bank.
Getting into additional details in our revenue dynamics that we saw mobile service revenues grow 23% year over year, while fixed services was up more than 7% consolidating our service revenues at an expansion of 22% year over year.
It is essential to highlight that this revenue performance was not only driven by the all your assets acquisition.
Our organic performance was also a great contributor.
Excluding the effects from Cassani Standalone net revenues expanded at a 13% versus last year wireless service revenues grew more than 12%.
Level of growth, we last achieved 10 years ago.
A result, mobile blended ARPA reached $28 five reais confirming our leadership in the Kpis versus peers. This level represents a double digit growth versus second quarter 'twenty, one receiving a positive contribution from both postpaid and prepaid.
In postpaid things Standalone revenues accelerated 12, 2% year on year with growing close to 6% as main drivers we had a better mix of plans for gross additions the price adjustments to cope with inflation following the usual more for more approach.
More rational competitive environment and proactive migration of.
Clients to our rate plans.
In prepaid revenues, excluding the impact of Cassani rose close to 7%.
So expanding more than 7% as main drivers we had a large number of clients that are charging higher spending per customer is stable competitive scenario and governmental income transfer programs.
These results once again show that our choice to focus on our value strategy is working well and paying off.
During the quarter, we added Amazon services to our content portfolio and evolution of our value proposition in prepaid people adopt our core offer at the Prime video mobile only subscription results. So far are very positive in terms of take up.
Postpaid.
Amazon Prime service catalog is available as a bundle or a plug in depending on the platform.
Daily mobile and as I mentioned earlier, the launch phase G in Brazil at the beginning of July we.
We deployed a larger cover has been required by the regulator to provide our customers with a meaningful experience already at launch we also introduced.
<unk> unique offer called <unk> booster that combines additional data allowance and cloud gaming and all these clearly supported by promotions on <unk> smartphones.
This approach makes tangible our innovation positioning reinforce our network leadership and pave the way to 40 traffic Offloading.
Last Friday, we launched three other states capital Bell resume drop we saw.
Porto Alegre again.
Again deploying more sites than the minimum regulatory requirements at launch and positioning ahead of competition.
Until the end of the year, we will have 27 cities covered with <unk>.
With respect to be front runners in multiple key markets, including San Paolo which is going to launch this week.
This strategy will support our capex allocation efficiency and help achieve the 600 million realized savings in 2023, and 2024 that we mentioned during our Investor day last may.
Let's now move on and go deeper into the integration of all these assets.
As I mentioned earlier net migration is ahead of schedule. It's a matter of fact, we are completing the roaming like faith in half of the time.
Clients are already reaping the benefits of better network coverage and quality the second phase called Retuning and the third one when full integration of course are also being implemented they are expected to be completed by October and December respectively.
It's interesting to look at the Brasilia case to understand some benefits of this transaction and opportunities that can emerge from it as well.
The city has already passed through the three phases from network integration.
Under this scenario or customer on our network in Brasilia and expediency, 60% higher download speeds.
<unk> customer enjoying a nitty plus percent improvement.
More spectrum and more sites can make a significant difference in customer experience and create opportunity for data monetization. Following agree then that broker availability.
On the IP side of our integration, which we call clients migration will start in the second half of July migration pilots and we are ramping up those stairs to initiate migration wave since September we plan to finish the transfer of clients to our platform in the first quarter of next year.
Changing gears to fixed services.
Life had a solid quarter immediate transition to a new operational model using <unk> system as the snap pro growth platform.
The double digit growth level was maintained taking second quarter revenues to almost 100 million is driven by the transition of client base to FTP age.
Fiber users represent close to 70% of the entire base now and this migration is helping the term level to reduce materially.
As a result of our efforts to grow sustainably with a high value service and portfolio. We maintain the highest broadband are among our listed peers.
Finally for the second half we plan to evolve our offer portfolio to provide an even better service, while sustaining our already competitive prices and tackling clients pain points.
Now I will pass the floor to come and how 'bout CFO to go over some details of our financial results.
Thank you Beth and good morning, everyone. As a bathroom described are there the second quarter was marked by large numbers on all fronts.
This is also the case for our EBITDA trend in the second quarter of 2022 with an expansion of more than 18%.
Did that to close to $2 5 billion yes.
Net of the system's path, which as you know it didn't exist in 2021. It would have had 22% EBITDA growth with a margin of 47, 7% flat when compared to a year ago of course cause record EBITDA was driven by service revenue growth kind of organic performance and M&A.
Environmental pressure and carrying a lot of transitory effects are.
Our opex, we named under control, despite the 22% versus second quarter 2021, when excluding the system at this time.
Looking ahead. It is always important to remember that we are carrying the burden of the temporary service agreement with OA that will end in April of next year, we expect a much cleaner opex dynamic in 2023 as both impacts from the TSA and systems will start to disappear.
If the ice systems deal negatively impact our costs it benefits us even more on the Capex side.
But it really affecting free cash flow this safe topics compensated a good portion of RFID rollout even in the accelerated scenario, we decided to implement.
Sequentially, our investments stood at the 1 billion the highest range and EBITDA minus capex grew more than 20% with the margin, reaching a solid 27%.
Despite this favorable context, our net income is showing temporary impact.
M&A transaction with a weight so under the circumstance at total $313 million.
Down more than 50% versus the.
The second quarter of 2021.
I think the patients progress and the synergies start to kick in we will see this line with me its usual trend.
The acquisition of four yes. It has other impact in our numbers our cash position for example, with significantly reduced after the M&A payment and the amount of $6 7 billion yet.
On top of that in the second quarter of 2020 to be also paid for it it <unk> auction licenses and contributions close to one 3 billion.
We closed the first half with approximately $2 3 billion in cash.
These disbursement and the registration of $2 9 billion yes.
16 that drove our net debt to a new level.
Below one eight times in the net debt to EBITDA ratio, a very healthy level for a company like Tim.
It's worth mentioning that this $2 9 billion comes from the reassessment of the site leases, we took on their transaction with a weight after applying the assumptions of the accelerated the commissioning plan and other adjustments.
After this closing these numbers, we can say that until now we are on track with what we expected from the M&A transaction, but there is so much analysis there'd be that.
And as the migration progresses, we expect to gain more control and uncertainty about the trends related to add to the assets we bought.
Now I hand, the call backfill backfill to complete the discussion related to the second quarter.
Thank you Camilla I believe it is clear to everyone that we are operating under uncertain times with an election cycle coming ahead to a volatility and with high inflation, putting pressure on the family's income.
That team is creating a new chapter three.
III and second quarter achievements support our evolution towards being the best mobile operator in Brazil.
Looking to the first six months of 2022 I'd like to highlight some of our accomplishments.
Closely with all and started to integrate the assets everything is proceeding according to plan.
Alive asset light model is implemented and generating operational benefits already.
<unk> launched <unk> technology into a state capital Brasilia, we are front runners.
Iot business has excellent momentum and solid pricing in agribusiness, while we build up new verticals. This will be a great source of opportunities for <unk> down the road.
ESG continues to be at the core of our strategy and execution, we continue to improve on the relationship with our employees and clients winning awards from a great place to work and achieving the highest C. Viva Colombia key Kerry Index finally, we posted robust finance.
Results in the first half, leaving us in a great position to reach all our guidance by the end of 2022.
In the second half we will maintain the focus on the M&A integration because this is the most important project of the year.
We will also expand the five zero rollout launch new customer platform partnership and address the Ics tax reduction to benefit our clients. So a lot to be done still.
Building the next generation team isn't immense afford so I'd like to thank the entire team for the great work and commitment. Additionally, we have a new executive team member probably have a lot of John gets to the Tim Brasil as the new Chief revenue Officer. He has more than 20 years of telecom experienced.
And the heat went around it in all the aspects of the business. So I like to give me a warm welcome and we hope the lack of success because we have a lot to do it is great to have him on board.
Now, let's open the floor for questions. Please operator.
Thank you Mr. Alberto now we begin the Q&A section.
First we will take questions from analysts followed by dinner Republic both.
English you for listening through webcast questions can be sent by check.
We ask each participant to restrict yourself to two questions at a time to ask a question. Please press star one and to remove the question from the list. Please press star two.
Our first question comes from Bernard Gutmann with.
Thanks Pete.
Hi, Good morning, everyone. Thanks for taking my question actually I have two questions here.
The first one about the solid growth in mobile, which seems to have been accelerated by the rationality in the segment. So if you could make a general comment on their mobile competitive environment, how things are trending in the true segments postpaid and prepaid.
The second one on the cost fronts. If you can comment a little on the expected dynamics of costs and margin for the check on behalf of <unk>. Thanks.
Hi, Bernardo.
So let's go to the first one which is the market.
The competitive scenario in postpaid and prepaid so about the competitive environment as being quite rationale over the last 12 months. So if you look at the movements are in terms of price are up or down.
Basically as being quite stable over the last months.
What we are.
Things could change a bit is our ability to pass inflation for customers as.
As you will probably remember in our conference call, we updated our according to our more for more strategy.
As for control and postpaid.
In the second quarter and this reflects in that in our results. So the overall competitive environment that it's a it's quite stable and positive with positive outlook.
When you look at our results and you look at the revenue growth. So it's worth a is worth mentioning that basically both in postpaid and prepaid were growing at 50 per center in terms of customer base and 50% in article in postpaid. This is clear from the numbers.
And so there are.
These two balance components that drive our revenues in prepaid that it's a bit less clear because.
You need to look at the number of recharging. So if you look at the number of recharging and spending but these beefed up our own little recharging and revenue. So we got the growth the growth is divided being 50% number of reach out.
And 50% spending. This is also the result of a number of actions that we're taking on our customer base to stimulatory charger and to increase spending. So we are as we mentioned in the second quarter, we're changing a bit.
Some of the structure of our prepaid offers when you look at Costa.
Of course, there are.
I'm going to the second question.
Of course, there are some inflationary pressure in some of our cost categories, namely energy passive in fraud and people.
We've got a number of action in place here and.
So we see it now.
Look there is a sort of positive for the second for the second semester.
I'll make some examples here to make it more tangible consider for example, the energy cost.
At this point in time, we absorb around 7000 towers from Oi and so we are paying energy for all of them.
We already implement in the plan whereby the site that we're going to the commission that we scaled down the energy consumption to the minimum level of requirement that and these will reflect in savings down the road.
If you look at people, we've got a number of business process outsourcing programs that have been implemented and the benefits would be fully available throughout the year and sold so if you look at the costs, we got pressures, yes, but we've got a number of actions to control and mitigate this pressure.
Very clear about that.
Our next question comes from Fred Mendes with Bank of America.
Oh, Hello, good morning, everyone and thanks for the questions I have two questions here as well the first one in terms of denim.
Our next question comes from Marcelo Santos. Please you May proceed.
Hi, good morning, Thanks for taking my questions I have two the first one you mentioned that Arcos <unk> sequential acceleration you saw in organic mobile was due to clients that migrated voluntarily from or would it be possible to break a little bit down like how much of the growth was actually.
Truly organic.
Say that and how much was a beautiful contribution for mortgage and the second question is about ICM mats whats the strategy of the company towards that I understand you're going to pass that to prices, but.
There are some strategies that you could use to try to capture some price elasticity offering more solutions offer a more a.
Weighted plans I don't know something to capture a bit of this reduction in price. Thank you very much.
Okay, and my fellow I will take both questions. So on the first one the reis.
So when you look at the oil customer base, we are working on our client migration massive client migration and that we are on schedule that is happening, but now it's happening at a pilot stage. So we are not migrating many customers. So we're just pilot in the process and nonetheless, there is a there are our clients.
We decided to voluntarily migrate from <unk> to other care in the era of draw number portability.
And we monitor these so I'll give you some numbers before you do have an idea you can build up your own.
And math around it.
The.
The number of clients supporting out from all <unk> to other care, we have some move to 150000 per month to around 250000 per month over the last months.
We have been working.
To increase our share of these number portability over the last months that were being quite successfully we are the operator grows the most in terms of increased share of portability and in our in our area and around the in our area of these numbers now well above our fair share.
So.
Let's say, let's put this way maybe 35% of our 250 vendors in azure or airports or this is the number that every month, we migrate them from <unk> to our network. It is not a big contributor of course in absolute terms.
But we're just anticipating some revenue said that when they come to us through the massive migration that later on.
Was it Korea Marcello.
Yes. Thank you.
So let's move to the ICM S. So there is a mess.
We decided to pass it over to our customers.
And Oh, we are going to implemented a new pricing.
We're going to deploy the new pricing plans in the next couple of weeks. So next week, both control and postpaid would be updated that nationally and so we pass.
These are price adjustment up to the customers that go into joined theme.
These four postpaid and called for control for prepaid that we are doing something different because it since our offerings are quite simple to explain to customers like it you buy a 15 re is a prepaid and you've got 15 days of recharge. It is difficult to change. So we decided to provide our customer with an extra allow.
Once the of one giga. So if you look at our offer today one of them is 15 Reais a gigabyte 15 days. These will become 15 Reais nine jig about 15 basis. So we've got to translate that.
The ECM as the reduction in term of a greater a larger allowance for our customers.
When you look at the positive effect that we see by doing this is a when we lowered the price for a controller for postpaid we are gonna to be able to access more customers in these plants because of credit policies and that we are going to be able to increase migration between plants for example for <unk>.
Paid for prepaid to control. So we got the error reduction at this stage, but we have a number of potential benefits from greater demand elasticity a bit further down the road.
I think that dcms, the reduction will be quite important for implementing or continuing to implement our more for more strategy. For example next year.
Thank you.
Our next question comes from Fred Mendes with Bank of America.
Hello, Good morning, everyone can you hear me.
We call it a threat.
Thank you okay. Thanks, guys okay.
Two our apologies for the connection I have two questions here. The first one is related to the edge of that net income obviously, there is an impact here from the lease.
Payments. So just wondering how is it going to be the curve here and how long should it take photos to see a major reduction this leaves our expense.
Expense through the commissioning of the towers. This will be the first one and then the second one I guess is linked to the first question when I look at the dividend the guidance circa 2 billion Reais, obviously that seems to be above a lot of gas you guys will be delivered in terms of net income for the year. So how should we recall.
So these two lines and what can be done here in order to reach the regardless of closer to be normalized in terms of dividend payments.
No.
Good point.
Can you hear me is the battery.
Perfect perfect. Okay, sorry, I was away from the microphone. So thank you for the question I'll start with the second one.
So in terms of dividends, we confirm the guidance that we gave to the market of 2 billion and that while we are still mitigating the theme with believes this up the towers that are like that I'll explain in a while.
We have means to distribute more cash, especially considering that we have a profit reserve was up $6 5 billion has that can be distributed the reserves are actually above that but we have $6 5 billion that can be distributed so way that's easily manageable.
The reserve. So we continue we confirm that 2 billion guidance that we are that we gave to the market before.
Regarding the net income Youre right.
Major effect on our net income comes from the powers as as you remember we received roughly 7200 towers from OE. We had already indicated that it is it is our plan to decommission more than 60% of all of these downturns, but as you probably also remember we have a commitment to try to sell a 50%.
All are up our antennas are that's our commitment with Skagit, we are in the process of doing so it's public.
We have six months to do that so while we are in that process. We cannot decommission any of any of these towers. So in 2022, who have let's say a full effect of the leases up to 7200 hours. After six months are expired a whatever and then as we don't sell and the antennas we sell it.
The ongoing with them, we will immediately start our accelerated decommissioning plan. So that we expect 2000 and when you'd be ready to be a much better year, but in any case. Our plan is to complete the full decommissioning plan until the end of 2024. So we will start feeling the effects of the decommissioning up the towers already in 2023.
Strongly and to finalize the pool.
Work in 2024, so that the impact that you see in our net income this quarter.
Will will dissipate or will be dissipated a fully dissipate until the end of 2035, but already heavily mitigated next year.
Perfect Super clear, thank you very much.
Yeah.
Our next question comes from geographic Hong with Goldman Sachs.
Thanks.
Bulgaria, where to community and good morning, everyone.
Actually I have two follow up questions. A year can you just confirm the amount of leases book in this quarter and whether we should expect a different number in the third quarter is would be the first question and the second question is actually also related to the competitive landscape I mean, if we would analyze markets regionally on a state by state basis.
You'll see us using competitive environment now that always overcome theory or are we still seeing some regional promotions made by eater evil collateral or even you.
Could eventually impact the overall dynamic in these markets. Thank you.
Okay Diego, let me start with the second one in terms of the competitive dynamics are so far out we are proceeding with the national offer and a national approach of course as you rightly pointed out we got some clients in area, where we were weaker and therefore.
For where we want to increase our.
Uh huh.
Our market share and our performance, but we.
Basically when you look at the overall go to market that we are doing this without touching the offers so we are primarily working on.
Our on our communication strategy and our channel strategy whereby on the offer side at least on our side that we are not.
Including any discount, though or any any more aggressive offers to gain market share we don't see happening on our competitors on size as well so for the time being the national offer has been in place of course due to the S. M and so we will see a reduction in prices.
Among all compared it goes by the that this is going to be something like even across the board. So.
There is no a worsening of competitive dynamics at the regional.
Regional La Scala at this point in time consider that a lot of our I T capacity, it's in now employ that to migrate the customers.
And that we implement the D. S M S changes.
He is quiet and F for that we need to put employees on our ITC and central to carry out these activities and so from an offer of the perspective.
There is nothing planned.
To with respect to changing of versa AR over the coming months as well.
Regarding the second.
Regarding your second question Diego so into in our on balance sheet terms I, probably I remember that we announced 4.1 billion highs that we expected in terms of increase in our net debt coming from believes it's off the towers actually after we got the detailed portfolio and we are the enemy.
We implemented or we deployed or D accelerated.
Accelerated decommissioning plan that we weren't able to drop that number to $2 nine which is the number that is affecting our June 30th balance sheet 2.9 increase is that coming from the leases after the decommissioning plan in.
In terms of cash flow are we still talking about six roughly 600 million highs of cash out and leases are in eight months of 2022, which leaves us when annualized number of 900 million that is for the full 7200 portfolio without considering that the commission now that will start happening in 2023.
Very very clear thank.
Thank you very much.
Okay.
Our next question comes from Alejandro Valdosta with BBVA.
Hello, Good morning, everyone I have a couple of questions.
The first one is regarding team alive.
I wasn't expecting that following the <unk> systems transaction, you would have more time to focus again on the ft th business in and perhaps accelerate each customer base.
But we're still seeing quarterly net actually five to 10000 range.
Achieved this is because you are now focusing the alibaba integration or are these just because the AR.
The competitive environment is getting more difficult or maybe both so I.
I would like to know if you believe that you could accelerate the ft th customer base.
Again in the short and medium term or maybe this is the new base that we should get used to going forward.
And my second question is regarding the <unk> rollout.
Could you please remind us who will be paying for the fiber to the tower interconnection Capex as you expand your <unk> coverage in the country.
Now will it be team or Ics teams, who will be paying for that last mile of fiber interconnection. Thank you.
Alejandro let me get the two well let me get the two questions here. So when you look at in live just a bit of recap and then we'll give you some figures or.
So basically what we're doing as you know we got two basis, we've got the FTC and the F. D T H.
So as we speak and there over the last quarters of your being quite active in migrating F. D. D C capitalized to F Dth.
And we because why these because F. DTC is more vulnerable to competition and so basically we want to.
Basically want to defend by doing that our customer base.
And we reach around now 70% of our overall customer base, which is F. Dth and we are aiming to get to 80% by the end of the year.
So this is one vertical a lot of activities that we're carrying out when you look at the net additions per quarter on F. D T H.
We are moving from something around the 27 key towards something around the 45 K per quarter. So are we the number that you see in the quarter is net because you need to some down that you need to satisfy their losses from FTE Tc saw in this quarter is out.
Our record high quarter of net at this juncture on S. Dth up so the number is around 45, and we moved from the following quarter there was 27.
Now we are by migrating the EF DTC to the FTP Asia web defending or limiting our exposure to a.
To be to a technology and an offer portfolio, which has been a negative net additions over the last two years or so.
This is one vertical all of expansion the other one is.
Expanding our footprint. So we launched a class last quarter, we plan to launch another quarter last quarter. So basically we are balancing the defense of the FTC why we bring down the conditions from a further growth on SDP Asia remembering that we got in this quarter.
Record high number of net additions.
When you move to your second question.
They deal with that we have with the ICC semi is just related to the secondary network.
Of our broadband operations saw all deployment related to S. P. D. Two five G. It's on us, meaning that we either build or Lisa our backbone and connection to the Bts.
By you know would be the overall release it thereby available players are wholesale players in the market.
Okay. Thank you so much so is it possible to them.
Can you quantify how much you'll be spending on in parallel to the tower.
In the year as part of these funds.
Allowed either this year or next year.
We don't give any sort of detail around or I'm, sorry about that this is already included in the guidance that we provided so okay got it. Thank you very much.
Our next question comes from under their salaries with UBS.
Hi, good.
Good morning, Thanks for the call and taking my question I have a couple of question on the sites coming from more in mobile acquisition.
We saw that one of your competitors book close to 700 million in decommissioning provisions.
And with plans to decommission between one and 2000 sites.
The commissioning blend because there is over 4000 decommission sites and we saw provision of around 280 million has on the balance sheet due to asset decommissioning.
How can we filed those figures or can you provide us a guidance on the penalty fees.
The commission of your sites and should we expect the provision to increase in the following quarters.
And that the the $2 9 billion has that we booked in our balance sheet is already the net present value of.
<unk> is already the net present value of the after the remaining time that we expect to have the powers for each each of the virus plus.
Penalties and the penalties that are included in the 2.9 are much larger than the number you just mentioned so they are much more in line with our with why we heard what you heard from the competition. So the 2.9 already includes a roughly 700 million horizon in penalties from that that was about going to the commission, but the yards in supply you want more.
You cannot get in touch with IR and let's see if they help you go through the numbers and reconcile them.
Sure sure Yeah. Yeah. My question was not on the on the <unk>.
<unk> 16 impact to it more on the bond.
Liabilities due to the commissioning of those assets, but yes, that's all right I can again follow up.
And I'm not a chance.
Our next question comes from Carter Cicada with BTG Pactual.
Hi, good morning.
Good morning, Alberto community with century hope our Israel, So yeah I have.
A couple of questions one is.
If you can you know there is always this debate and discussion and and non hotels present has has made some public.
Public comments about the roaming agreement that.
You guys are supposed to reach are related to the acquisition of <unk> and you know I'm.
I'm just wondering if you can give us.
Some some clarification on what is going on and what are the next steps in and what is behind the the discussion. Please.
And the second one I just wanted to confirm that.
When you when you're talking about the U shape I CMS a reduction you mentioned that for the prepaid plans you were now going to reduce prices, but increase the allowances I just want to make sure that this is an EM dia and increasingly on all along and she has only one gigabit per second one gigabit additional data I was just wondering if that is all.
Oh that is taking place in on the postpaid and.
And as you were reducing the prices just just to understand exactly how this is going to work and impact the numbers. Thank you.
Carlo Let me ask you then let me ask you to repeat the HMS doubt so we're passing over additional.
Allowance to to prepaid and we are our pricing down a control and postpaid what is already I was just wanted to confirm.
Wanted to confirm that that's what is happening because they felt pressure going to be reduce it right and it seems that for the prepaid clients who were not cutting prices you would just give you more more data to users yeah, yeah and the reasons behind this is because there is like there is 15 days 15, or you I said that would be like a 15 days a theory is $13 five.
So in order to make commercially viable we decided to increase the allowance which by the way. It's the one <unk>, although eight so it's even a bulb.
The actual the ICM S reduction because he has more than 10%.
Of course.
It will impact.
We would see in a in a few months.
Be recharged popped out on all of our clients because generally when we put additional gigabyte of course the declines in these two recharge less and we discussed this in previous quarters whenever we gave us additional gigabyte of where we are here somewhat in our in our recharge pattern. So at the end of these we're talking about the same stuff in terms of either price.
Reduction or a extra allowance, but it's correct that we are giving a N. ACM, we are giving a extra gigabyte for prepaid and a discount for controller for a port postpaid everything has gone up in that over the next couple of weeks when that when we go to the roaming agreement, yes, there'll be some.
The discussion in the press a honor the law.
The president of Annabel.
Suggested a few weeks ago.
If this thing doesn't go through with the Euro ideal could be we discussed we met the President Obama there last week.
He clarified that and we clarify within that is not the case I saw at Yahoo deal is not in the discussion at all what needs to be now a b agreed the among the three of US and Annabel is the right price for our for the roaming agreement.
Anatol I propose a number and then went onto their proposed this number we didn't have access to the number and the methodology used to get to this number we got it afterwards and so we accept that the some of the changes that annabel with Zynga.
Friday last week, we sent Duan at L. A.
<unk> proposal on our cider and so he's now for Annabel to decide that if our proposal is accepted or not that should happen. This weaker and afterwards, we will see what happens.
Okay perfect.
Be clear if I may can I make make just one more question on almost two six a stake I was just wondering what what are you know what are the strategic options for for that stake and what the company plan should all with these five plus percentage they can choose six weeks at it in our own space.
Hello here the point is that we added the middle of an arbitration process you and also we need to wait for this process to complete them and then we will see where we go with this take it depends on the outcome of it and the one the outcome is a is clear we will decide.
The next step in terms of monetization are continuing to biopsy tissue whatever whatever the outcome. It depends on the outcome. That's yeah. That's my answer.
Okay clear. Thank you. Thank you so much thanks a lot.
Without any more questions from analysts will now start the public Q&A session from the webcast platform and we will be red.
By the scientific data please Mr. Vicente you May proceed.
Good morning, everyone. So the first question from or a web chat comes from Gabriele <unk> from Citibank and here. It goes Ah Hi can you. Please comment about the size of the commissioning process. What is the total expected in fines to undo contracts of overlap. It powers why did you choose.
Who's not to provision for these in QQ. Thanks.
Oh, hi, good but now that this is chameleon, so D fines or in the range of 700 million highs as our as I mentioned before and it is provision it's part of the $2 9 billion has that we registered in our F.
16 that and is of course as you pay the fines desirable, we'll reduce our iron <unk> 16 debt. So it's there it's provisioned.
Thank you Camille.
Now the next cash and comes from Maharoof idea from Sul America. Good morning, everyone. Congratulations on the results I have two questions number one about the customers coming from Hawaii can you tell us. Please how the churn dynamics is behaving if there is any churn both in prepaid and postpaid.
Second question can you give us an update on your view on possible after the H M any movement.
Yeah.
Question. So the first one.
Rodrigo is we don't see any change it because at this point in time.
Lines are still within our it systems.
And then these are managed through the temporary service agreement and we are just out a thing of the process of migrating them to our systems.
It is itself is being quite successful so far by the way have the early stages that we are.
Piloting already live customers.
And so there is no change in churn dynamics, because the churn rate is there now since the number portability increased over the last months, we can say that the there has been there.
And acceleration of customers that voluntarily decided to leave the audience and to come to us or to our competitors. So we see these set by the.
Increasing that number portability.
The number portability to give you just an order of magnitude we're talking about the 250000 customer per month, a vertical or a customer base of 40 million. So you can do the math and see what impact insurance is.
When we go to the F D th M&A activities.
We repeat what we already said in our moments we are now fully focus on fiber deployment integration our customers. So we are not proactively looking for.
Yeah.
M&A activities related to ISP.
Of course, these opportunities come to us and we will assess them.
The next question comes from Mr. Again, somewhat Arnaud from brand is investments cannot tell us how much of depreciation is related to <unk> 16, and how much of interest expenses related to Ifr 16.
Thank you for the question. So in terms of the in terms of interest expenses that number is publix is it's in note 33 of our financial statements. We actually had 590 million highs are also expenses overall expenses that includes our towers is now our previous towers as well.
Our <unk> expenses in the quarter the percentage of the DNA that is related to <unk> 16 is not public but I can tell you. It's between 25 and 30% of our total depreciation and amortization.
Thank you Camille again.
The last question from me vessel comes from Hana Rick.
From a fine investment club called Infinity.
Good morning could you. Please give more details on the discussions we've I know are related to buoy.
In your opinion.
Does the existing any possibility for the I believe he was talking about actually Annabel. So if there is any possibility for these transactions will be reverted.
And what would be a solution viable for the discussion of the problem I'm, assuming he's mentioning related to the roaming offer that we just.
It gave to auto yesterday.
Ah the.
Oh, Renan Dee Ann Johnson I've answered the previous question. So we discuss these with Anna Taylor and that the let's say you're a winner of the ideal is not in our in the in the agenda.
And the solution, we pass through a negotiation of the new App data value for the ARPA as I was mentioning we submitted an updated proposal last Friday and then now the ball is on Amethyst kampa and they they will review our proposal and they will let us know if.
Well the feedback is.
I'll now move to the questions related to the press. The first question comes from Bruno Ahmad Al.
From Telit time did team had any feedback from Anna tell about the new roaming proposal I think our math to just mention but I might've. Please.
Thank you. Thank you.
Thank you Bruno is we Miss as Albert already mentioned, we submitted our proposal.
Last Friday, we are which is fully in line with the current regulation and with the principles of the approval of the Oi transaction that the point is quite technical knowledge is another appointed this agreement in principle on the Ramadan and application of the revenue spectrum, you got to understand what kind of cost structure.
Mounting we can consider to design the DRAM it and saw the the idea on our side is that the cost accounting should be considered.
As it was in the last decade that she's Oh.
As a top down approach based on the our AR balance on the other side I know, they're losing of aging with a bottom up approach with.
A theatrical costs and so this is the point that Oh will be discuss this week, but that as Alberto mentioned that there is no stress about the operation and our relation with the authorities.
The second question from the press comes from Pedro as orders from Visa Neil's Americas Good morning.
Everyone can you please comment on how you're seeing the evolution of five G. In the country. When do you expect to capture the first returns of the investment in three five gigahertz band and how is the say all five G compatible mobile devices on your base. Thanks.
So Pedro we are at the early stage of deployment at this stage.
The we launched a four capital side, So Brazil, Brazil, the suite of other island the other three last week.
This week on Thursday, we will launch it some paolo.
So it's a we are at an early stage of I can't comment on our strategy. So what we're doing here is we basically decided to build up a meaningful cover Asia in markets that are critical to us from a commercial and cost perspective, I will explain this in a in a in a <unk>.
We put together a value proposition with a five G booster that should give our customers the ability to.
Experiment, new services and of course that we are promoting five G. Smartphones that are required in order to use the service in.
In our point of sale around over 70% of models are already five G smartphones.
Basically we want to.
They want we want to trigger a virtuous cycle whereby coverage offer and thermal also give a reason for customers to migrate to <unk>.
And that we have two benefits here. The first one is to monetize this down the road when the coverage is going to be more let's say a widespread and are once again down the road that we're talking about 2023, we are going to be able to stop investing in four G and therefore.
Or be more efficient of our on our network deployment.
This is our strategy and our I think the opportunity to invite everybody to our press conference that is going to happen on Thursday. This week in Oscar freely at 11, where we will unveil our five G approach.
For example, and then we can take further question for Omar from journalists are related to this quarter results.
Ladies and gentlemen, without any more questions claim of returning to Mr. Alberto <unk> for his final remarks. Please Mr. Roberto you May proceed.
Thank you again for attending once again our.
Our results I want to thank once again, our team Brazil team for the solid results that we deliver in this quarter and guys look forward to speak to you all are in three months. Thank you.
You.
Thus, we conclude the second quarter of 2022 conference call of <unk> S. A for further information and details of the company. Please access our website at <unk> Dot Com BR Slash IR you can disconnect from now on thank you once again.
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