Q4 2022 Tim SA Earnings Call

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.

The risks uncertainties and assumptions as they refer to events that may or may not occur.

Investors should understand that internal and external factors to Tim assay may affect their performance and lead to different results than those blend.

Should any participant need assistance during this call. Please press star zero to reach the operator.

Now I'll turn the conference over to the CEO .

Mr. Alberto <unk> CEO of TSA and to Mr. <unk> <unk> head of Investor Relations to present, the main messages for the fourth quarter of 2022.

Please Mr. Roberto you May proceed.

Good morning, everyone. Thanks for attending our results conference call.

On page 22 was an ear of relevant transformations in a volatile environment that require much focus on execution to deliver what we promised during the seamless ebay looking.

Looking at our results and what we accomplished I am sure. We did a great job our plan to be the next generation team is at full speed, let's recap some of those milestones of 2022.

In April we closed the deal with <unk> and we started the mens job of integrating the assets we bought.

In June the reclining our key web portal recognized also for our customer service Excellence and we were also awarded the great place to work certificate.

In July we started the <unk> journey for real but I see there was the first capital to be covered and we were the first operator to implement a stand alone <unk> network in Brazil.

In the subsequent months, we leveraged <unk> to differentiate in Brazil from our peers and to reinforce our innovation positioning.

We went for an all in coverage approach key Brazilian capital with.

We showcase the <unk> experience in key events in locations such as a rock in Rio and the Mark on a stadium.

In the business space, we pioneered partnership with industry leaders in several vertical such as agro business automotive and logistics during the year, we became the operator with the broadest mobile coverage in Brazil.

Those achievements and many other asset.

Accompanied by a robust set of financial results. Our top line grew close to 20% year over year. Our EBITDA also presented significant momentum close India growing more than 17% compared to 2021.

This performance led our margin to exceed 47%.

Proxy for operating free cash flow rose more than 26% yearly, which help us to fulfill our promise of 2 billion reais in shareholder remuneration, we fulfill all our promises to the market and our stakeholders.

In turn set of goals, we established in our guidance in May during our timber sale date was achieved.

These solid industrial and financial outcomes correspond to one more year of long term responsible progress towards an integrated ESG agenda.

That by the increase in all this is sustainability rankings.

Environmental management highlights the increasingly distributed clear renewable energy matrix and the continuous improvement of energy efficiency of network traffic.

We adhere to the highest international target setting and monitoring standards in this roadmap.

In the social sphere team is being recognized for the second consecutive year as the worldwide telco best practice in diversity and inclusion policies, which contributes to making our company one of the great place to work more over being the first and only Brazilian operator to have reached 100% of.

Brazilian municipalities covered is an undoubted contribution to digital inclusion.

Governance was enhanced by the international in recognition of our cyber security management and by the federal government's confirmation as a proactive company.

Additionally, we are using the power of technology to help develop communities under our partnership with the NGO and of course.

So when we see ESG is embedded in our strategy and everyday action isn't just a claim.

Now entering into more details of our business performance I want to highlight our revenue dynamics in the fourth quarter total net revenues grew more than 22% with a significant contribution from mobile services that expanded greatly to reach a speed of 23% year over year.

Fixed services maintain a solid performance going up by high single digit.

For the full year figures service revenues showed an excellent performance growing more than 19% year on year, driven by double digit growth in mobile and high single digit and fixed it is worth highlighting the contribution from customer platform partnerships and fixed broadband that now we call it.

Ultra fever.

Since the transactions closing with <unk> I've made this point every quarter seems revenue per four months was driven by more than the <unk> asset acquisition.

Our organic performance continues to be helped by the positive net effect of our commercial strategy benign macro environment and rational competition.

Analyzing the segments individually postpaid revenues in 2029% at a solid pace up more than 19% year over year with an Apple excluding machine to machine lines of 45 to <unk> in the fourth quarter.

Prepaid revenues expanded more than 21% versus 2021, pointing to an output of close to 14 Reais.

Nonetheless, it seems customer base and output was significantly affected by the acquisition of assets in 2023, we should see a normalization in the volatility seen in those two indicators as we complete the cleanup of our customer base from lines that do not generate any traffic or revenue.

<unk>.

It is essential to highlight that the underlying trends for both postpaid and prepaid are positive in postpaid we are sustaining our volume to value strategy, we offer innovations such as Amazon Prime and in flight connectivity and continuous improvement of service levels.

Matter of fact last quarter, we registered our best Black Friday.

In prepaid all operational indicators are improving the number of client recharging spending the total amount of top ups, our share of gross additions and our share of recharges.

All showing positive.

So those are clear evidence of our success with innovation, such as <unk> and Prime video.

Since I'm talking about <unk> impact on team indicators, let's go deeper into the integration details.

Integration is on track we have completed the two most relevant steps of network integration and we are well advanced in the last phase we expect to complete the full integration by the end of the first quarter.

As for client migration, we actually completed the prepaid transition with close to 8 million lines moved to our systems postpaid has a similar scenario where close to finishing the migration. We most of the remaining lines being machine to machine.

The last point regarding the arrival of always for my clients is related to the cleanup that I mentioned earlier.

As you saw in November and it'll figures with this connected $5 1 million lines, we'd see the traffic.

Now that the customers are in our systems that we will continue to analyze the behavior and profile eventually additional adjustment that will necessitate.

This quarter. We are also planning some migration of control lines to prepaid to reflect the real customers behavior. It is important to point that these actions do not impact our revenues.

The third element in the integration agenda is the commissioning process.

From the other tool this activity starting in October last year and will accelerate in 2023. Following the end of the antitrust required offering period.

The first 500 size was dismantled last quarter, and we foresee the financial impact to appear in the early second quarter.

Differently from what appear in some recent recalls the commissioning process is not delayed on the country is ahead of schedule and its financial benefits that will have to build up during the year to have a more pronounced impact in 2023.

Our scheduled point to 3000 sites been dismantled this year, leaving more than 1000 sites for 2024.

Still on mobile, let's discuss the evolution of our network.

<unk> 22 represented a major step towards becoming the leader in network quality.

During the year important milestones were achieved firstly, our indisputable leadership in <unk> was confirmed.

Secondly, we have started in <unk> and with the most available network and being leader in key capitals, such as San Paolo Rio de Janeiro, Curitiba and receiver.

The result of our all in five G deployment approach lastly in the second half of 2022, we achieved the broadest mobile coverage and enabling January this year, we reach 100% of Brazilian municipalities.

The journey to build a differentiated infrastructure to transform customer experience and create new assets for brand position has only begun.

Are on the verge of seeing the full benefits of closing the spectrum gap against our peers, while becoming much more efficient in deploying capex.

In the next couple of years that we will see the transformation materialize.

<unk> is a crucial role in the process as I said last quarter. The <unk> launch is a success the smart coverage approach and our device strategy of delivering competitive differentiation and customer experience improvements.

Additionally, the technology is starting to contribute to <unk> capex avoidance is traffic offload exceed 10%.

Please look for our communication on the 14th of this month, we'll update our guidance.

The next topic is an update on an area of the business that where we stood quieter in 2022.

Truth is that we have a lot on our plates and we had to prioritize as we move forward with our strategic plan would assume focus ongoing beyond the telecom core and today, we announce a new partnership in the sector.

In Brazil is joining forces with capped out at all dose group to address the massive opportunity created by population underserved by private health care services.

Approximately 165 million people in Brazil, do not have any health insurance.

When we analyze our client base more than 60% face the same situation.

I'm not sure if you'll knock after this others. They are a well established group with annual revenues exceeding 3 billion Reais.

They are the largest popular medical cleaning network in the country.

Present in all states grew more than 400 clinics covering 100% of the cities with more than 90000 inhabitants.

We plan to launch a digital solution to facilitate access to health services, starting with a freemium offer to help build a distinctive value proposition.

With this partnership and are following <unk> rules.

Can also offer and sell our telecom services to our client base of 80 million customers that use their clinics.

Let's change gears to the fixed services.

By now you all know that we have rebranded team live Tim Ultra Phaedra.

Then I'll, let the marks the beginning of a new moment in the history of team S. Dth services.

Elected six times as the best broadband in Brazil by <unk> Best Services Award.

The name change aims to bring the service even closer to consumers generating a clear and immediate association with its attribute of very high download and upload speeds.

A series of initiatives are planned to consolidate the new brand with a public following an expansion of the service to new markets that will be announced throughout the year. The first move starting in Parana state that where we launched in ultra IBRA and services will be available in 34 cities.

Back to 2022, our focus was to guarantee a smooth transition to the new operational model using IC stem as our network partner not impacting the growth profile of the broadband services.

It is fair to say we achieved that.

<unk> revenues at around 11% versus 2021, we expanded our client base by mid single digit while doing a massive migration from FTC to SPT H now we have more than 70% of our user which pizza Bowl, but 150 megabit per second better services and driving it.

<unk> in customer experience and satisfaction, while helping to reduce.

As a result of our efforts to grow sustainably with a high value service and portfolio.

Maintain a robust FTE th RP level of close to 90 <unk> despite competitive pressure.

Now I will pass the floor to the center, our head of IR to review the financial results.

Thank you Robert and good morning, everyone as explained earlier, the fourth quarter as well as the full year figures points to robust performance no relevant lines of our results even in the face of important challenges such as the high inflation level. In early 2022. This is the proof of teams.

Resilience and effective execution.

Our Opex line was impacted by these inflationary environment as well as other elements such as temporary service agreement to avoid additional costs and expenses due to a more extensive customer infrastructure base in the rental costs for the fiber last mile. Those elements are not new and we.

We've been talking about them for the entire past year, they drove opex to rise of more than 20% versus 2021 in the quarter and for the full year.

The good news is that most of those adverse effects will dissipate in 2023, because we will not face the same cost pressure from the TSA or because we will be comparing apples to apples on their behalf Dth asset light model. We also expect to start grabbing the additional opportunity to take.

The former <unk> clients to the same level of digitalization as our team customers in this context fourth quarter EBITDA sustained an excellent performance growing close to 20% year over year, combining organic evolution and M&A contribution.

For the full year EBITDA rose more than 17% margins stood at 50% in <unk> and 47 four in 2020 Q. If we excluded the impact of ice systems rental costs. The EBITDA margin would have been $51 two in the quarter and 49%.

<unk> for the year.

As we discussed in prior quarters, Tim Brasil is passing through transformations that impose transitory impact on its results. That's precisely the case for our below EBITDA lines.

They are receiving additional pressure from the leasing contracts, we got from the M&A transaction.

Short term elements will disappear in 2024, but improvements will already be noticed in 2023, our bath already gave some details of our site decommissioning program that will help us in this process.

Having said that.

Looking exclusively at our net income performance can be deceiving to put in perspective more than 1 billion highs was added between depreciation and interest related to the leasing contracts without necessarily the same cash impact so a better way of understanding or avoid illusion is to use Matt.

Tricks of operating free cash flow.

EBITDA minus Capex for example grew robustly by more than 26% versus 2021.

The percentage over and Thats revenues, representing a proxy for free cash flow margin expanded to 25, 5%.

Another metric that we see the market using EBITDA after leases minus capex.

This is a way to consider the lead these impacts as they were opex.

Similar to reverting Ifr 16 effect.

And these metrics once again, a solid double digit increase was seen.

As a result, despite posting a contraction in net income we were able to deliver on the 2 billion highest promise we made.

$1 4 billion highs was already paid and the additional $600 million are being proposed in the annual shareholders' meeting.

So as anticipated we will be using reserves to complete the distribution. It's worth remembering that Tim has more than 7 billion highs and distributable reserves.

Andy My comments I want to point out the strength of our cash position even in a year, we have relevant disbursements such as the payments of Hawaii and spectrum auction. This performance helped maintain healthy leverage level with net debt to EBITDA ratio, reaching one four times.

Below our guidance for this metric.

Now I will hand, the call back 12 after to wrap up our comments.

Thank you we center.

2022 was a remarkable year for us in Brazil, the number of things, we were able to deliver maintaining high standards and with great financial results is something to celebrate.

We fulfill our promises to the market and our stakeholders the entire set of goals. We established in our guidance in may during the theme, Brazil date was achieved.

Digit service revenue growth check.

Double digit EBITDA growth check investment of four 8 billion Reais check.

Free cash flow margin above 24% check in depth below two times EBITDA check.

<unk> 2 billion in shareholder remuneration finally check.

Those accomplishments confirmed that the first step to building. The next generation team was taken and we are on the right plan to transforming this company into the best mobile operator in Brazil.

The second step starts in 2023 and will require the same level of focus and commitment for the entire company. Nonetheless, despite the tough comps.

Our updated plan points to a better overall business dynamic when compared to our original expectation for 2023.

We are forecasting a significant expansion in free cash flow margin.

Some improvements in EBITDA margin, both driven by efficiency and synergy that will improve trends for revenues Opex capex and leases.

Making sure our shareholder remuneration will benefit from those gains means at the core of our equity story stay tune for February 14th when we share our renewed guidance with the market.

And reaching the end of my comments, so I want to share our grateful I am to close this first year as CEO of this fantastic company.

No doubt that build in this new chapter in <unk> history is taking a huge afford but I'm very confident we get there that is why I need to share the special moment that with the entire team and thank them for their outstanding work and commitment looking back it was worldwide going the extra mind.

With no further delays, let's open the floor for questions. Please operator.

Thank you Mr. Alberto now we will begin the Q&A session.

First we will take questions from analysts followed by general public both in English.

If you are listening through webcast youre questions can be sent by tech.

We would ask each participant to restrict yourself to two questions at a time.

To ask a question. Please press star one to re.

Move the question from the list.

Please press star two.

Our first question comes from Bernard Gutmann with XP.

Please Bernardo you May proceed.

The first question will come from Marcellus Santos with JP Morgan.

Hi, Good morning can you hear me.

Hello.

Okay, I hope I hope you can hear me.

The first question I wanted to ask is about the competitive environment in the mobile so if you could please.

Comment on how prepaid postpaid and hybrid are going to be great and the second question would be about the impacts of power. The commissioning 20th century, how could we expect the impact to be divided during the quarters of the year in terms of the financials.

How much.

What's the likely distribution of that impact. Thank you.

Okay ourselves. So let me take these two questions first of all on the first one regarding the competitive environment.

I think that when you look at the past months and you look at the.

The overall dynamics of both for prepaid and postpaid that the market has been a relative.

Relatively irrational and calma I would say over the last 18 months.

We expect this trend to continue.

As you know this is a market where it's a sector we were unable to pass through inflation for many many years to.

To the enterprises.

And there are some positive updates are in so we'll either as repaid.

The price adjustment there starting last year as we discussed.

In previous calls and this already benefit to our top line growth for prepaid airforce postpaid that there are some.

Positive news said that came along this this week actually.

There are some a price adjustment are happening.

The market leader are updated its a control and postpaid process. There was something that we were assessing also internally file on our future plans. So overall I think that these rationality is going to stay.

In the coming months.

When it comes to the lease or the commissioning plan now.

Here, it's so as you know we've got a quite ambitious the commission implant that started in October last year.

The commission would be more than 500 towers in 2022, starting October and we plan to the commission. Another 3000 towers are in the in the course of 2023 now how does it work the reset of physical activity that is required basically to dismantle the keep meant that his plays on the tower.

And these results are in our in our.

Economic savings.

After a few steps that are in between the physical decommissioning and the actual recognition of the saving in line of principle. I think you can we can say that it takes a roughly.

Three months to move from the physical the commission into the financial impact.

So when.

When you look at the quarter, which is the question that you asked the you will see the number are ramping up.

Overtime, so as we move for water with the physical the commission anger with a delay of a roughly 90 days on average you will see these are appearing in our lease payments.

So.

The first quarter is going to be the full value and when we move to the last quarter in the last quarter, we will accumulate this having the saving of the physical the commissioning of the report. So you can monitor the effectiveness of our plant looking at that decrease of the lease cost on a quarter by quarter basis.

Perfect very clear thank you.

Okay.

The next question comes from Fred Mendes with Bank of America.

Hello, Good morning, everyone can you hear me.

Brett.

Hello, and good morning, everyone can you hear me, yes threat, okay, perfect sorry, sorry, Okay. I have two questions here. The first one is about the the effective tax rate in our calculation here for this year is to remain at a single digits.

End of August we used to have the IOC for ourselves in 'twenty, three or a few fiscal benefit. So if we can expect these designs to remain somehow similar 2023 year over to <unk> and then the second one is about the Capex I know I know obviously you have you have the guidance, but just wondering in this scenario.

Is that what youre seeing with these these macro that seems more challenging if there is room to reduce capex for 2023. Thank you.

Okay for the light, let me start with the Capex question and that will move I will ask incentive to answer the tax rate the questions. So on the Capex one.

As you know our Capex last year and this year has been impacted by let's say a few things that are one offs like the primarily the all integration.

We're talking about something like 500 million divided in between the 'twenty one 'twenty two and there of course are the deployment of five G technology that they begin to use it the capex.

That we deploy the <unk> for a quick start where the revenues that tends to build up later on in that in time so when.

We commented in previous quarters, we already say that are at one of our when you look at the Oi acquisition of one of the.

Most important synergy comes from the infrastructure side. So we acquired the frequencies and that we close the gap that we had and these are frequency and towers that were getting from them contribute something like 70% of the overall synergy pack that we also commented that the deployment of five G.

It's driving four G offload the in excess of what we initially expected. So when you sum up these two main drivers or three actually the one off nature of sub investment that that we have in 'twenty one 'twenty two.

The fact that we close our frequency gap, but with the acquisition of all your assets and the fact that they're five G is delivering a four geopolitical faster than we expected we've already signaled that that we were expecting capex efficiencies.

Already coming in in the following years, that's all what we are talking here. It's a nominal reduction in Capex is driven by these effects that.

Our industrial effects.

And therefore are anticipating some of the previous plan targets like that going below the 20% marker of Capex on revenues. So the main dynamics out there so with the synergies from oil are materializing.

D. A forgery of law, there is happening faster than we expected and that the one off costs that we incur to integrate Ari basically are one off and so we're not won't be present in the following years visa will result in increased capex efficiency and you would see that number in a couple of days.

Hi, Fred This is this age so regarding the effective tax rate first of all I think it's important to highlight that we don't have a specific guidance for effective tax rates. So let's talk just about the drivers. So what is driving our effective tax rate today is and as you well mention is interest on capital.

Some credits that we have such as Saddam So Danny in other related to two prior credit. So basically the drivers will remain the same in 'twenty to 'twenty three are.

We don't want and don't expect any specific changes in regulation or our taxation rules for this year. So the broad framework that is driving our effective tax rate is going to be pretty much. The same. So that's basically what we can say right now.

Perfect Super clear, Thank Robert Bank of essentially.

The next question comes from Bernard Gutmann with X.

Hello can you hear me now, yes, but in Arizona, We hear you Hi, Greg Hi, Good morning, everyone. Thanks for taking my question I have one question related to the fiber business the company accelerated as the launch this month several of <unk>.

It is in part on a I suppose that most of this series are true the Vitol network in this sense I would like to understand if is this the pilot project and watch the rollout strategy towards this new partner, which regions should focus on.

Vitol has a very large capillarity, so how to scale faster through these new model. Thank you.

So bernardo.

As you correctly pointed out we are now working with two part in Orissa, Ice's termite and Vitol.

So the strategy is sort of an unchanged. So I sistema is focusing on deploying new class Thursday building.

Building out fiber, we launched the last year, a joint Vela and then we launched a campaign us more recently.

And so the the plan here is to deploy the new fiber deployment.

Generally speaking, where we do not find the additional net neutral on that also because we think this is an efficient way to move forward.

The Vitol partnership it's a growth optionality that we negotiated last year, whereby we can have access to a larger footprint.

Because the fiber is already built ARPA and generally or is their main tenant. So you are correct that we launched a pilot.

Few weeks ago in a in an area where we have.

A stronger commercial standing because we launch it but an ISO as you know, but it's a place where our we are leader in mobile both on postpaid and prepaid our brand recognition is high our commercial capabilities are quite stronger and so we are piloting it and your approach where we can address.

A larger area. So these are 30 something cities all at once.

So far our we launched a few weeks ago. So so far the pilot is proving a in line with our expectations and I think that the.

Going to be able to share with you a bit more detail in the next quarter. When we let's say we consolidated the results. So far the launch of the new brand and the offering and the commercial NATO is proceeding very well, but it's sort of early stages. Because we launched just a few weeks ago, but the idea is to use vitol as a compliment.

Third twice is them, where I system doesn't have coverage and doesn't plan to put coverage.

Very clear thank you all that though.

The next question comes from Victor he future with credit Suisse.

Hi, good morning Alberto of incentive.

I have one just one question on the mobile competition.

We recently saw.

Some competitors increasing the offers in store prices and we want to just.

Take your sense, if you plan to to fall.

Yes also Victoria, let's put this way there was a sort of an initial answer of the first question. So b as I was mentioning it's a it's a in the in the mobile market basically we do or will implement a more for more strategy generally speaking in our customer base to make.

This strategy is sustainable in the long term.

Of course, we're always discussing the opportunity to do these at the entry point as well so in stores for example on the websites.

Also because these prices have not been adjusted for many many years now and so we are not be able to pass inflation always on a more for more approach or at the point of sales. So as you correctly mentioned the the market leader in postpaid.

As they change a couple of days ago. This week and the we were planning we were studying these opportunity our itself and I think that the market is going in the right direction, we pioneer the sand price adjustment in prepaid where we are sort of co leader starting last year and there are always.

On a more for more approach of everything is going well. It's a we got the good effects on prepaid revenues that we didn't we don't see any.

Any counter effect in terms of our share level. So I think it's a it's a where the market is probably heading in the next months.

Great very clear thanks for that.

Ladies and gentlemen, as a reminder.

If you'd like to ask a question. Please press star one.

Okay.

Okay.

Without any more questions from analysts will now start the public Q&A session from the webcast platform and will be read by Mr. Vicente. Please mute the arithmetic you may proceed.

Okay. So the first question comes from menu from his spring capital Ah.

And he goes always subscriber cleanup, excluding oasis prescribed broken up there was a 1 million postpaid subs versus a negative vast is trickier 22, so $1 million of Disconnections what.

What was the driver of this decline in subscribers. Please go bad.

This is quite an important question because it gave me the opportunity to describe it in a better fashion the dynamics of our net additions so.

Basically when we look at these we have a number of phenomena that are taking place.

And so the the.

The first one that lets put this way in our organic business as well our organic base and said, let's put his priore is growing in net additions.

Constantly overtime.

As it was growing in the first quarter and in the second quarter. Then of course, we got a new layer, which is primarily related to all of you in the fourth quarter also to semi clean up that we do on our customer base.

On the oil side that basically we have three main effects.

<unk> are happening in the customer base. The first one is the cleanup of the customer base, which is around 5 million customers that we cancel in November we basically finalized the cancellation, but as we migrated the customers to our own say stem said there might be some fine tune.

In the first quarter. The second one at which is also happening is related to the reclassification of control lines as prepaid. So when you look at the oil customer base. They are called the they label the actually as a control at some customers that.

Our actually prepaid in behavior.

The number is it's a.

It's in the range of a roughly $1 million and.

The profile of these got somebody's actually prepaid so discussing it.

Recharge or to use their service.

Their spending is much lower hour.

Controle plans and so we are in the process of.

Ah Reclassifying these lines set control lines as prepaid and this process is going to end up in the first quarter. The reset in the first clean up scenario and in the.

Reclassifications scenario no impact on revenue because theyre in the clean up case, there is no revenue at all and the India reclassification the revenues or maintain it is just that they appear in prepaid rather that in control.

And that mapped by migrating our control customer to prepaid we are more effective in monetizing the prepaid customers as we move forward because our BTL marketing nice bed Exxon and offer our design for that specific customer segment.

In the third quarter and so I finally get to the question that has been asked.

The additional.

The additional of cancellation that we had that are related to D. A couple of business contracts.

If you look at the annual numbers and you split it up or by consumer in postpaid and the business you will see around the 5000 lines cancel this is because of 500000 lines cancer. This is because.

In the course of 2002 in 2001, some government launched the educational programs with a significant volume of lines at low audible there was sort of emergency contractor with a specific could you data. We came to the end of two contracts is summing up to roughly alpha.

A million customers and then as the last point there is some cleanup that we took the opportunity to execute on our customer base.

The next question comes from Ryan Gomez from guiding Vichy Mantas I would translate his question so is regarding bad debt.

The bad debts are seen and in your balance sheet.

Increase in it was originated by our clients from OE or there was a organic deterioration in the team clients.

Okay. So in terms of the the overall performance of bad debt.

Actually our bad debt as a percentage of revenues decreased.

And so we see an improvement of the overall kpis.

If this question has raised it on an annual comparison.

That there is an increase because there are some adjustment that we mentioned on the last quarter of last year on an year on year comparison, but our bad debt performance is improving over time and therefore, the weight of bad debt on our on.

On our revenues is going down.

Constant concert has been going down constant in Italy in 2022 now.

When we look at the collection curves and this is a very positive.

Piece of information in terms of the health of our business. The collection curves have been improving over time, therefore, showing the ability of collecting money from our customers the improvement of collection curves.

<unk> an improvement of bad debt in terms of revenues is correct that the customer is coming from our U S. A slightly higher bad debt versus our own customers. This is an opportunity for us to further improve our bad debt by bringing the efficiency of our collection process.

To Augusto MRSA in the course of this year.

Thank you Roberto we have I think an additional question from our webcast and it comes from my end, if you're doing investor called Bruno called data is congratulating. Our result, and is asking for additional information regarding the vitol contract how about if you could.

Elaborate a little bit on that lease while Bruno that there is not much actually that can Shannon on this contract because it's a commercial contract that is specific to us.

I would say that we have.

A contractor that it's provide us.

The payback, which is in line that with our business plan and expectations. So we close or what we think is a very good contracts are with vitol and <unk>, but in terms of our specific numbers of contractual terms are unfortunately.

We do not share these.

With the with our with the market and an important point that is worth mentioning is that since we are second Panther, we do not have a volume commitments or obligations or with our partner.

Okay, I think we have an additional one coming from Ondrej <unk> UBS.

And as regarding indebtedness level.

This level of indebtedness are close to 1.4 times that you'll see come out as ideal in this moment for the company or you believe that you could have room for improvement.

Or allocating capital differently.

Going forward.

I would take discretion.

Well under our will actually this 1.4 times net debt to EBITDA ratio is below what we expected the eye in the beginning of the year is actually below even what we expected for 'twenty 'twenty. Four. So we are ahead of schedule in terms of deleveraging the company.

And of course, we'll have a we expect to improve significantly our free cash flow. This can lead to opportunities for us to either have a better indebtedness level as well as distributing more to our shareholders I think Albert already mentioned this during the call. So basically that's what we can.

Say right now again are on the 14th next week, we'll be able to disclose more information regard guidance and future expectations, but for now I think that's it. The second question that comes from under them is regarding the rollout of five G.

Ah in its as we moved to Mark to smaller cities.

Do you see possibilities of Fi using other technologies, such as seeks to do either the axis to.

To complement the coverage of our fixed broadband.

You want to take this one Alberta, yes, yes, so when it comes to <unk>, we explain the way we look at it in our in our Investor day in that in May of last year.

I think that there are a couple of opportunities here. The first one and the Danish shallow auntie's on B to B. So as you know the first point is to have coverage and so are we at team.

As we mentioned we went out with an all in our coverage approach and main capital sales or for example to take some Palo revision Arrow, our five G coverage or it's already a pretty widespread that we cover the big majority of the population and every district in the city.

There the opportunities already existent, we're ready leveraging data in the business cases for example, we closed and announced an agreement with the Ito.

To put <unk> in all their branches in some of their branches and so we are working actively to extend this approach in the business segment in the consumer segment that besides coverage that is addressing some of the key capital.

One other aspects that today limit said the adoption of <unk> is the availability of CP at affordable prices now given to the increase of scale around the globe and the commitment of some equipment manufacturer in Brazil to reduce prices. These bay area is like.

It will be addressed by the end of this year at that point that we will be in the position to leverage this opportunity in the consumer segment, where we already have coverage and this is not necessarily just a suburban iressa, but could be capital as well so.

It's something that we're going to put in our pipeline are likely at the end of this year to be commercially active in that in 2024, and it's something that we're looking for and.

It could be interesting as a mobile complementary.

And complement to fiber.

Okay. We have no further questions out from our our webcast platform. So we are closing the Q&A.

Right now I'll pass the floor again to oberto for him to wrap up on his comments. Please Alberto. Thank you we center well everybody I think it is fair to say that we enter 2023 I said bigger and more robust in Brazil in a more favorable.

Alco environment and with a significant there.

Cash flow expansion opportunity in front of us.

In a couple of days and we are going to share with you the updated guidance.

And I'm very confident that we will deliver those guidelines once again this year I look forward to meet some of you in the one to one.

Meetings in the coming weeks and thank you for attending our conference call.

Thank you does we conclude the fourth quarter of 2022 conference calls Timothy for further information and details of the company. Please access our website at <unk>, but cannot be our slash IR you can disconnect from Taiwan. Thank you once again and have a nice day.

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