Q3 2024 TIM SA Earnings Call
Good morning, ladies and gentlemen and welcome to China's say 2024 Third Quarter Results, Peter Conference Call. We would like to inform you that these events has been recorded, and OPPORT's expense will be in listen only mode during the company's presentation.
There will be a replay for Gisko on the company's website. After China's save remarks are completed, there will be a question and answer section for participants. At that time, further instructions will be given.
Speaker Change: Hello everyone and welcome to Tinha's Phase Learning Conference for the 3rd quarter of 2024.
Thank you for joining us. I'm Vicente Ferreira, head of Investor Relations.
This video shares the key highlights of our recent performance in the strategic initiatives we are implementing to continue our sustainable cash flow growth.
Afterwards, we will host a live-quenation reaction with our CEO, Alberto Griselli, and our CEO Fowlondre, and Viegas.
Before we discuss our results, I remind you that management may make for the looking statements in this presentation may contain them Please refer to the disclaimer on the screen, also available on our earned smarteers and investor relations website
with that, let's move to our results.
Speaker Change: Hello everyone, I'm Alberto Griselli, CEO of Timbracil. Once again with the liver solid, financial and operational results in a quarter mark by cash flow generation.
But before we discuss our results in detail, let me introduce a relevant part of our effort improves our brand perception. In September this year, the Rockin' Reoffensive also plays.
Speaker Change: This is the biggest music festival in Latin America last in seven days and attended by more than 700,000 people Team is a master's sponsor which reinforces a connection between the company and music that dates back to 20 or 3
Since then, we have kept this connection, but now we are expanding this as a platform to achieve client perceptions of our brand.
Mobile Network of Aurete in Extrincondition during this type of event, so we use the music festival to showcase our 5G network's trends and reliability while innovating in our interact with our clients and customers.
This year's results were remarkable. Teamwood, the number one brand mention with an almost power ability and colossal brand exposure.
We expect that investment like this will help us close the gas in-brand perception and clear the way for future growth. Back to our financial results.
In the third quarter, we achieved a 6.1 growth in service revenues, outpacing inflation and maintaining the sustainability of our revenue dynamics in phase of a ready expected tougher second half of the year.
Our revenues were driven mainly by mobile services which expanded by 6.3% compared to 3.23%.
Speaker Change: Mobile Arfo is an important lever rising close to 5%.
While Post-Payed Customer Base improved with migration and a new record-load turn at 0.7%. Our ABITDA grew by 7.5% during the same period with another quarter of margin expansion.
Speaker Change: After 1224, we have 13 quarters of expanding margins confirming our ability to push the boundaries of efficiency. Our proxy for operating cash flow reach a record high for the third quarter.
Speaker Change: Growing above 20% E-Aroveria, as a percentage of revenues, we reached 25% in quarter 3 and more than 21% in the first 9 months of 2024. We have the highest cash conversion in the industry.
Speaker Change: These solid financial results are accompanied by innovation and our offer, consistent infrastructure development and improvements in our services.
Speaker Change: We continue to develop the 3B concert, so to build the best offers, we focus on the best value proposition. As we promised our score, we launched the best control plans in the market.
This comes as a part of a food revision of our post-paid portfolio.
Establish in new price points to facilitate upselling while reviewing benefits and smoothing customer journey. This proactive approach to managing our customer base is helping to increase loyalty and improved churn.
Our post-page customer base is sustaining a solid base growing close to 8% ear on ear and 2% quarterly.
In prepared we launch a new proposition with adjustment to our go-to market aiming to improve our performance in this segment and to open opportunities for future growth.
Speaker Change: The second B of Bethnet, or combines the largest coverage with the best quality and reliability. As you know, he meets the only operator to cover all cities of Brazil with 4G and it's also number 1 in cities with 5G, very close to 500 municipalities.
We are widening our leadership in consistent quality and we rank the first in reliability, a climatic for customer experience and more important than download space.
Speaker Change: To deliver the best service, we work on addressing today's challenges while building an evolutionary path with artificial intelligence.
Speaker Change: Tim is increasing first-call resolution rates and facilitating digital interaction to maintain service quality as the highest standard efficiently.
Speaker Change: The 4% R&PS is improving and we continue to perform the sector in a resolution rankings. Our AI initiative is continued to evolve. Team AIX is 100% rollout to more than 5,000 attendance.
Speaker Change: Speak and text analytics are producing insights into consumer complaints to improve and accelerate caring activities. Before Andrea joins us, I'd like to touch on an important topic for advancing our business.
Speaker Change: As we presented during our investor day a year ago, we have been working on expanding and developing new growth evidence.
Speaker Change: Such as our digital ecosystem and our B2B. The expansion of this digital ecosystem is focused on vertical such as health, mobile, data monetization and education using partnership with consolidated companies.
Speaker Change: Through Venture Capital Investments, we use our 5G funds with upload ventures.
Speaker Change: to explore other segments with startups and calums. Mobile ads and data monetization more than double the revenues in the past 12 months as we consolidate our position as a relevant player in this market.
Speaker Change: In health, after the soft launch, we learned and adjusted the go-to market and now we are bringing roughly 20,000 New customers to our partner. In education, since the beginning of the partnership, more than 700,000 people subscribe to courses.
Speaker Change: Our Fund now has two investors, we promising addressable markets to be explored. In the coming weeks, we will announce initiatives in a new vertical to open further opportunities for today. Regarding B2B, we are celebrating our execution to develop new IoT Market in Brazil.
Speaker Change: We close this quarter with more than 600 million reais in contractor revenues. We too very relevant and you contract signed.
Speaker Change: Additionally, we have a solid pipeline of potential clients for the coming months.
Speaker Change: Here we also expect to go beyond the already known aggregate, street lighting and highways vertical.
Speaker Change: Stadium for now it is before the year end. Now we move along to more financial details with our shift for Andrea.
Speaker Change: Hello everyone, I'm Andrea Viega, see you full of change. I'm a pleasure to share that our performance continues to be strong, with a clear highlight on our cash and ratio capacity, as we have anticipate and communicate over recent quarters. Supported by solid-deriving and grow-up inflation, our base demonstrates Robo's results, with a 7.5% increase in another quarter of margin expansion. After accounting for losing pegs, a beach that after leaves will nearly 9%. Our towering the commission and project no longer has a maturity impact. A few towers remain to be financial.
Speaker Change: with fine steel to the base. However, these numbers have significantly decreased. As a result, the Vista after the lead is managed and expanded by an additional 7.4-year-over-year. The reason by teens overall strong performance, our net income saw double-gitches grow, we are compared to 33. Despite our lower interest on equity, additionally, operation cash flow grew over 10%. We've managed and expanded to 25%. Despite the country's challenge, we've forest exchange pressure. We're managing to maintain our static levels with the...
Speaker Change: and Guides Man. Our nine months' results are also quite positive with operating cash flow nearly 30% growth and exceeding 21% as a percentage of revenue. This 30 quarter confirms what I highlight in our previous call. Season on negative impacts on working capital and copies have indeed reverted. Even with nearly two billion reais in depth and interest payment, we generate almost 2.3 billion reais in cash before dividend. This results underscore the strength of our strategy and confidence we are on track to meet our year and...
Speaker Change: Guided, even with a more challenging comparison based in the second half. Now, back to Alberto. To conclude our quarter discussions, it is worth recapping some developments in the past three months.
Speaker Change: We saw some new project moments from our peers, but competition remains healthy and we believe it will remain like that.
Speaker Change: So much so that we reformulated our post-paid portfolio without using the price in liver to improve the value proposition.
We are carefully looking into our pre-paid dynamics and adjusting our offer and good market to regain momentum We will implement our gen-eye use cases that prove to be promising for our customer experience and efficiency
Speaker Change: Will we keep developing our business while caring for our people, society and the environment?
Speaker Change: The third quarter was marked by outstanding cash flow performance. We were also pleased with the post-pay contribution and the efficiency of our operations.
Speaker Change: We are positive we will deliver on our promises on all guidance lines.
Speaker Change: Therefore, out of our three-year guidance we gave, we confirmed our intention to distribute an additional 2.7 billion reais in shoulder remuneration between dividends and international equity, totally 3.5 billion for 20.24. The journey towards our aspiration of becoming Brazil must refer mobile over it or requires firm commitment and consistently.
Speaker Change: I'm sure we have the right people to deliver these 12 hard work creativity and this way. Now let's move to the live Q&A session.
i
Speaker Change: Thank you, Mr. Alberto. We'll now start the Q&A session for investors and analysts.
Speaker Change: If you wish you ask a question, please press the raise and button. If your question has a red bin answered, you can exit the queue by clicking on the same button. You can also send written questions throughout the Q&A option. Wait, wow, pull four questions.
Speaker Change: and the first time I've seen this video, I've been watching this video for a long time.
Speaker Change: Our first question comes from Marcelo Santos from JP Morgan. Please Mr. Marcelo, your microphone's open.
Marcelo Santos: Hi, good morning, Alberto and Andrea. Thank you for taking my questions. I have actually two. The first question is on prepaid. I wanted to get a better assessment on how do you think you're doing in this market. Are you losing space? You mentioned in the release of lower retarders in some group.
Marcelo Santos: So just wanted to better understand the performance.
Marcelo Santos: The second question is more in general, both mobile service revenues, not all the peers reported yet.
Marcelo Santos: but you have been growing a bit below peers. So just want to understand the elements here. Do you think this is more of a value added services if you're growing a bit less or is this more on the prepaid that's dragging you who just wanted to get your assessment. Thank you.
Thank you, Marcelo, hi everybody. So let's go with the first one that it's somewhat related to the second one. So when it comes to pre-paid.
Marcelo Santos: So what we are observing in this quarter, in this last three quarters, that we are sort of going sideways. So if you look at our pre-paid revenue, you will see quite similar numbers, quarter, one, quarter, two, and quarter, three.
Marcelo Santos: and I hope you have a good number. I would like to see a similar pattern.
Marcelo Santos: When you look at the ear over ear performance, we had quite a good 2023 on prepaid, and therefore the comparison is a revenue decrease on a quarter from quarter, starting in second quarter this year.
Marcelo Santos: and this is basically due to a few factors. So let's recap what happened in the last quarter of last year when we did some price adjustment across the board.
Marcelo Santos: Once we did this price adjustment across the board, basically we made two things.
Marcelo Santos: We created a sort of a better incentive to migrate from prepay to control. And so in this 2024 we have a faster prepay to control migrations of our, and this is of course we pack our 3-based prepay into the same.
Marcelo Santos: and the same time we've found the outer.
Marcelo Santos: Some less frequency of rechargeers in specific group of free paid after the press adjustment.
and so a sort of negative elasticity that created an negative impact on our private revenue's growth potential. And so we got something that is intended and something that was not intended.
and this explain our previous performance in the first quarter, second quarter and third quarter.
Marcelo Santos: A couple of months ago, we launched an upgraded value proposition to improve our pre-based performance going forward that is basically centered around a tree concept. The first one is to be more appealing on pre-based in the marketplace. So if you look at the pre-based offering,
Marcelo Santos: It's quite similar and it's been quite similar for a while so we...
Marcelo Santos: Put on the market some innovation to be more appealing.
Marcelo Santos: The second one is to increase the frequency of rechargeers for some specific groups.
Marcelo Santos: and this primarily related to the WhatsApp benefit that we included. And the third one is to stimulate the download and usage of our afternoon team, which brings to us basically to benefit.
Marcelo Santos: and I greet several musical mechanisms and at better cost to serve.
Marcelo Santos: So when you look at its pre-paid performance at this driving phase is prepared to confirm a migration on one side and on the other side the lower recurrency on specific lowering and come a subsequent of pre-paid.
Marcelo Santos: So this is for the third question.
Marcelo Santos: When you move to the second question you look at our overall revenue performance, you would see that we are quite on the right track on post-paid in line with our peers. And what is a dragging asset and a lower speed versus them is primarily the pre-paid performance for us.
Marcelo Santos: So what I've just said to prepare the impact our overall revenue profile, and that's reason why we have been launching a new value proposition to capture the opportunities that we have on prepaid. Of course, then you have other revenue opportunities that are primarily related to our customer platform strategy and the business segment that are clear to you on our revenue growth.
Speaker Change: Perfectly, thank you very much. Yes, very clear, thank you.
Speaker Change: Our next question comes from Viter Tomita from Goodman's Sex. With Mr Tomita, Yamag Fonseo Pen.
Viter Tomita: Hello, good morning all and thanks for taking our questions.
Viter Tomita: Two questions from our side. The first one would be on the post-face side now. If you could give us an updated view on how you are seeing competition in post-pades, especially at the lower end of post-pades, the control of the plans.
Speaker Change: where you have been carrying out pre-page to post-page migrations and also recently launched a new plan portfolio. And my second question would be on the Mobile-Advertising Initiative.
If you could give us a bit more color on how that has been evolving, in particular what are the most common ways you usually display the edge to clients, if it's mostly commonly done via fire.
Speaker Change: Precious Notifications are via videos that they can watch or other methods. On whether your strong growth there in mobile ads has been more concentrated in your own ad inventory, or on sale of third party inventories. Those will be my questions. Thank you very much.
and the
Roberto: Roberto, Mr. Alberto Yamacfon, Smuted.
Alberto Yamacfon: Ok, can you hear me now?
Roberto: Yeah, it's working. Okay, so let's go on post-pade the first question and the competitive dynamics over there.
Roberto: on pure positive, that the pure positive, that roughly the higher positive plants with an initial price point of around 110-120, we see quite a rational environment, so there are not big movements or updates there.
and if you look at what we define as the mid-post-pado entry-post-pay which is the control plan or hybrid plan.
Roberto: We have been executing a prize adjustment from book and back book in between the first quarter and the second quarter Another competitor did something quite similar, quite similar time period, so in between the first quarter and the third quarter
and Clara did the same sort of movements in the beginning of July and they decided to roll it back at the end of July.
So they went back to where we were before the upgrade.
Speaker Change: I would say that is something related to something that didn't work out, so once you do a price adjustment, you are intentional on that, so the fact that it went back.
Roberto: and I'm taking a look at the results.
Roberto: and what I'm going to say is being on the prize in your reports over the last few days, is the launch of an MVNL by New Bank with...
Roberto: position the offer in this group of controls or the prices and a bit more aggressive, Alberto, Alberto's Asa.
We tend to look at this offer as a BTL offer that they intend to cross an upset to their customer base and to this respect, this offer is quite similar to our BTL offer So it's a bit more embracing in prices but the offer itself is doesn't present at this point in time at nothing special
When we look at our strategy, we are committed to the overall more for more approach, and to give you an example, Victor, we just launched our Black Friday party proposition for control whereby we are not actually in the price. What we are giving to our customer is an extra benefit if they subscribe to our promotion.
What is this extra benefit? It's one year of Netflix subscription. So we keep on playing on our side the more for more approach and the black traffic campaign that we just launched is a confirmation of this.
Um...
If we go to your second question which is related to mobile advertising, so the first point is today is primarily on our own inventory So we are working on our own channels and these channels are primarily
Speaker Change: We're up.
Ahhh...
Another subset of after we have our one-to-one communication mechanism and the casting portal is where the customer go when they...
Speaker Change: Spinish Richard Gint.
Speaker Change: and the format that is viable depending on the channel.
Speaker Change: so you can have video in some of them like the Apple, cup the portal, you can have images on it, you can have just simple messages and so we have been working over the last years to build inventory and we have been working to create the pipeline of advertisers, and been working on showing the advertising the efficiency of our communication mechanisms and inventory and this has been working quite well and that's reason why we have been able basically to expand the inventory within our own uh uh uh uh uh uh uh uh uh uh uh uh uh retailers or not upside before the time being and capturing more customer some more clients on our side.
Speaker Change: and very clean and thank you very much.
Speaker Change: Our next question comes from Gustavo Paris, for an UBS. Please Mr. Paris, your microphone's open.
Gustavo Paris: Hi everyone, can you guys hear me?
Speaker Change: Yes, it works.
Gustavo Paris: Oh, good. Well, thank you for taking my questions to from my end. The first one on prepaid and in the light of a last frequent recharging and a recharges in the prepaid market.
Do you guys see any impact relevant impact of bets in prepaid? And my second question if you guys could give us more color on the increasing lead and expenses quarter of a quarter. Thank you.
Speaker Change: Good morning, everyone. I'm here at the first one. The last frequency for pre-paid is related to a sub. When you look at pre-paid, you basically have different groups of customers and tons of profiles.
So from one side, one extreme, you have a lowering cam, castments, and on the other side, on the opposite side, you have people without any calm restriction, but people that prefer to be on a pre-page mode.
and so, when I say that the red light frequency, the light frequency, then to impact the lowering comma a segment and in our view is related to the price adjustment that we did last year.
Gustavo Paris: The best impact we don't have any data that suggests that is impacting in an negative way to profile a lot of researches.
Gustavo Paris: and I wish to have a great release to the release. We are at a spec and increased in the second half of the year. We have this increased major for three points.
Gustavo Paris: The inflation adjustment relates to our regular contracts. We also have new sites.
Speaker Change: that came from our 5G expansion, and also we have new concepts such as the solar, solar, the energy content that we have that all synapse in these.
Speaker Change: What we are working is in continuous true generator stations in design and we expect this line grow.
Speaker Change: Above the revenue of the grow of revenue will be higher than the growth of this list. So for the first quarter, the next quarter, you still have the impact, but the expectations to be under.
Speaker Change: and the control and lower them the increase of the revenues.
Speaker Change: and
Thank you very much.
Speaker Change: Our next question comes from Fanny Cure Morphron HSBC with Mr. Fanny, your microphone's open.
Fanny: Thanks for taking my questions. The first question is regarding how you please for privacy adjustments next year considering that Clara has taken back and rolled back its privacy adjustments here.
Fanny: and the second question is regarding topics guidance specifically for 2025-26 with the recent depreciation of BRLs as you as D2C, this to the guidance.
Speaker Change: Thank you.
Speaker Change: The first one, which is on price adjustment for the next year, I'm not sure I've got the second one correct, you got it, okay, so
Speaker Change: on the first one when it comes to the price adjustment, so the idea for next year is to repeat.
Speaker Change: and what we did this year in between the first quarter and the second quarter, which is finally the what we call the front book price adjustment and the back book price adjustment.
Speaker Change: and of course the distinction about this tool is a following. We have been doing this year in 2024 and 2023 the two movements together. So we increase the backbroke prices and the front-broke prices.
Speaker Change: and the for next year.
Speaker Change: When it comes to the death of prices, we're going to execute it anyway.
Speaker Change: and as we were executing before end.
Speaker Change: When it comes for the Strong Book Prize adjustment, at this, of course, it's impacted.
Speaker Change: by the oral movement of the industry.
Speaker Change: Now, if you look at the so on post-pader, we've been comfortable with the comfortable that we are at the right price points, or we should be able to execute both together. For control today we are at the price point where we will say 60, we are at a 57 and clarity of 55. So like the end surprises.
Speaker Change: So, they are very close to each other.
Speaker Change: We, therefore, are one-under-percenture on Beckbooprice adjustment and likely to do an inflationary adjustment also on-front book prices as we did in 2024 and 2023. Given the current competitive environment.
Speaker Change: Relations with the Catholics, we are in line with what we expect. The vision of a court is not the big vision we have to see the full year, and although we have a lot of decisions.
Speaker Change: and generated by our contract FIC, we expect to maintain our guidance in the cappuccine of four-year.
Speaker Change: and the lowest-yadrassuracquestion correct. My question was that since the adult has been depreciating. Griselli has been depreciating with the CWST. Does it impact the cap excites an exclamation rate of 225 and 226?
Speaker Change: Okay, the exchange rates we have in the good place, we relate to our conferences, the bands that we have for exchange rates until now we have no impact.
Speaker Change: [inaudible]
Speaker Change: Gretel is a two-day dollar.
Speaker Change: and I'm going to try to fight with working with the same range and beat.
Speaker Change: For now, with this exchange rate that we have now, we don't see any impact for Santa Texas 5. Maybe it's worth adding a funny that we just closed a new round and big RFQ with the 5G providers, which is a big chunk.
Speaker Change: of our capics or network capics a couple of months ago.
Speaker Change: and so the bands that we are looking at and we have the band that are compatible with the carlant and exchange rates of course.
Speaker Change: If it changed a lot then we may have an impact but in the current status we are okay even because we just closed the contracts for the next three years And so the real was sort of already I'll to appreciate the diversity of the rest of us
Speaker Change: i
Speaker Change: Thanks very much.
Speaker Change: Our next question comes from Gabrielle Vasileema from Morten Stanley. Please Mr. Vasileema, your microphone's open.
Gabrielle Vasileema: Hey, thank you for thinking my question. Good morning, Alberto Grismanning. My question is on 2025, girl, considering the macro and considering the new plans, large by moving bank, new use in Upris.
Speaker Change: of Groving Abelventation next year in Webster. So I'm Groving Abelventation for two months from playing the time.
Speaker Change: Well, our planet is to grow a boven flesh on that, and so far we see the elements being placed to be able to grow a boven flesh on that.
Speaker Change: The Grotes is primarily driven by if you look at post-pade.
Speaker Change: You look at an increase of customer base and increase of R4 which is in turn related to the price adjustment and we are planning to do this price adjustment as adjust
Speaker Change: and I just discussed on a funny question.
Speaker Change: and if you look at our performance on post-paid, you will see that we have a grow driven on post-paid primarily on customer-based growth and our growth. So why don't see this change in next year?
Speaker Change: on prepaid, we put in place the efforts and the commitment to provide to improve our performance. What I already mentioned is that if you look at Cortano Court, you will see that we are going sideways.
Speaker Change: and what we are looking at now is a month-over-month increase.
Speaker Change: and so we launched the offer a couple of months ago, in general it takes a few quarters to kick off. So we're looking now with the operational AKPI and we are positive on a number of them.
Speaker Change: So the trends should improve going forward.
Speaker Change: and we have another set of revenues, sir.
Speaker Change: like the customer platform revenue and the B2B revenue that is increasing constantly over time, not only in the contractor revenue but also in terms of the pipeline that we are looking at. And so when you look at the inflation projection for next year and yet for that we are putting in place, we are thinking for the both that we are going to grow above inflation as in our kind of guidance. That for next year, you see in between 5 and 6 percent just remember what is our target. So for this year was in between 5 and 7.
Speaker Change: and start the next year's is between 5 and 6.
Speaker Change: Thanks for your time.
Speaker Change: Our next question comes from immediate Rincone if rune it'll be VA. Plus, Marin Coney, your Mac phone's open.
Speaker Change: Hi, this is Carlos Learritt, actually. Thank you in good morning for taking the questions. So I have two on my end. The first one is...
Speaker Change: Look what up to hear your thoughts on our on
Speaker Change: on the evolution of the customer from Pipe to control it to both Pipe and maybe.
Speaker Change: If you can talk a little bit about the percentage of people who move to control it and how many of those are eventually maybe moves to pure post-pade
Speaker Change: and what are the different in turn rates between control and your post-babe?
Speaker Change: and how also price sensitive to different types of.
Speaker Change: Post-Pay with Consumer Sire.
Speaker Change: Adolfi, first question please.
Speaker Change: and on the second one.
Speaker Change: and May for Andrea, you know, the open control has really been remarkable. And I find from what you just mentioned, I've had to about the abobing inflation for next year.
Speaker Change: Is there any further room that you can see for savings in OPEX that you can deliver for their managing expansion? Thank you.
Speaker Change: I think you're me really loud at the top.
Speaker Change: Carlos, how are you doing alright? Yeah, so let's take the first one. So when it comes to pre-paid to control migration,
Speaker Change: Um...
Speaker Change: It's a good proportion of our net addition today, so it's something that's...
Speaker Change: It represents, I would say, on average, something like...
Speaker Change: 50%
Speaker Change: Olau Arro Nambar, as is growing double digit E-R over here. And one of these stimulus, that is the fact that we price a just prepaid. And the fact that we are...
Speaker Change: quite able to select the right customers to migrate from prepaid to control, as well as control to control and control to pure postpaid. So when we design this migration, what we look at is a very huge number of subgroups.
Speaker Change: We are talking about 10th and for each of them we provide the starting point and the ending point, which is different among different groups, to go to quite different, the landing point in terms of pricing and benefits.
Speaker Change: The way we design this migration strategy is roughly the following. We look at our twin creases, which is one of the drivers, and we look also at not increasing nature and bed that.
Speaker Change: So that's the reason why we got all these upsets, mansells that our marketing is working on the time. We select a group of people, we start migrating people from death offered to another one. We look at the overall effect in terms of art, to churn and bad data. And when we find a favorable equation, we scale it up.
Speaker Change: So we do the appointment is being quite cautious with potential negative impact of turn and or the dead.
Speaker Change: and so this is a fine tune and optimised on a daily basis by our marketing team. So this is the way we look at that and that's the reason why we keep on growing revenues without growing either bad depth which is quite stable at 1.9% of revenues or a turnover which is a record role. So we do this in a coach's way to increase the equity revenue.
Speaker Change: but without impacting negatively our cost or our other operational KPI lecture, so like creating a washing machine.
Speaker Change: Carlos, that was a killer, was a little up already, I'm not sure you got the points, so that you were after.
Carlos: Yeah, I mean on the first one, the record, thank you. And then on the second one, it's just thinking about potential margin expansion for next year. I was saying that the Opix control has been very remarkable, so maybe you can shed lighting to what items within Opix.
Speaker Change: You can have a little bit of control to take them down so you can deliver the actual margin expansion. I'll say from the Abelimpration pricing, please.
Speaker Change: Hi Carlos, working in the patients is always... it's a continuous acting in the team. We are always looking for another opportunity.
Speaker Change: and now we are working with some trials, a reference tool and this is a teaching challenge.
Speaker Change: to work special in the maintains of the network and the carrying of the customers, the all-saintest. So we always try to find another opportunity.
Speaker Change: Of course, we already have a very higher margin, but our intention is to continue to grow the office.
Speaker Change: Loved the growth of the revenue, so we are always looking for.
Speaker Change: and our focus is to deliver a list, the part of the market we have, and especially in the, in the, the research that is easy we think with action, Chris a little bit, our margin.
Speaker Change: Carlos, if you want to look at the difference, let's say, the categories you are looking at, you got disciplines, so having everybody.
Speaker Change: sort of committed to delivering to spend something and deliver something on top of the expenditure.
Speaker Change: and then we have a technology that Andrea just mentioned like artificial intelligence is the last weaver.
Speaker Change: that we are implemented. So where we stand? We demonstrate that we have the efficiency on a limited scale.
Speaker Change: and the sewage already moved these year from Limitus K to Full Deployment and so we are working to capture the synergy at Fulls K.
Speaker Change: The third lever that I think is more mentioned in the continuous mate versus by decisions.
Speaker Change: and for example we've implemented in the past several business process of sourcing initiatives.
Speaker Change: for the Tower, Frode and D-Linga.
Speaker Change: We just call another one for a piece of our infrastructure services and working on another one on customer value management. So, is this a plan, is technology and is a constant review or makes versus bi-activities in search of productivity increase and quality increase?
Speaker Change: i
Speaker Change: We're next question, comes from Danielle Fiddertly from British Cook BPI. Please Mr. Daniel, your microphone's open.
Danielle Fiddertly: Good morning, everyone. Thank you very much. Alberto, do you see room for making plans?
Danielle Fiddertly: More Simple Like
Speaker Change: [inaudible]
Speaker Change: and what the timeline for making those experiences much better if it's something that takes time or that you could change from one year to the next. And the second question is, even that we have new players coming to the Marques.
Speaker Change: Pure Old I-O-Players, how do you see the importance of a convergence?
Speaker Change: and Warrless. Thank you.
Speaker Change: Let's go to the first one. When it goes to the quality of the service that we provide.
Speaker Change: We, this is an incredibly valuable strategy and an important element of the more more strategy.
Speaker Change: So we say, okay, if we compete less on price, of course we need to compete more on the perceived quality and value perceived by the customers.
Speaker Change: So, when it comes to the more formal strategy, what we have been doing and what we did with the new postpaid portfolio, both pure postpaid and controlled portfolio that we just mentioned
Speaker Change: include benefits that the customer value and we generally fall into the categories of bundle
Speaker Change: And when we say that the customer value, we know that they value because we know how many of them are subscribed to something else versus a mobile service.
Speaker Change: So, if you look at our presentation, you will see that in Postpaid, we have been growing this penetration 11%.
Speaker Change: Let me say, OK, but what is the starting level? We are talking about something in the range of 30% to 40%, depending on the group, of bundle penetration in our customer base. So it's pretty high. And so customers value this.
Speaker Change: and this is about the benefits and the bundling of the benefits.
Speaker Change: The other thing that we are working on, so it's not just perceived value but perceived quality, is to simplify a number of processes. And so when you look at the control...
Speaker Change: plants and postpaid plants that we just reformulated, they have significant improvements in what we identified that we know that are some customers' hurdles.
Speaker Change: So it's a continuous process that started years ago, and we keep on working every month to improve the customer experience. You see this reflected in the increased NPS as it's presented in our results.
Speaker Change: It's a long journey, but it's epic.
Speaker Change: journey that is critical to us. So we've got different activities and levers that we are deploying to achieve our objectives.
Speaker Change: When you go to the app improvements, just an example that you mentioned, we are now working on a new app that we are
Speaker Change: going to deploy at the beginning of next year and the app and the captive portal. The captive portal is where you go if you are a prepaid and you finish your credits.
Speaker Change: This captive portal is already being implemented this year, and the app, with a much simpler interface and a better flow, is going to be implemented at the beginning of next year. So this is part of our strategy, an integral part, and we are quite committed to it.
Speaker Change: Just for you to have a reference, NPS is part of the management of the short-term incentive of all the leadership team and all professionals in our company, so it's quite an important KPI. When you go to the second question, which is related to the pure mobile approach,
Speaker Change: I think that this is something that, like FWA, every year we check and recheck.
Speaker Change: and the convergence today in Brazil, it's sort of limited in scope.
Speaker Change: and in intensity, depending on the segment where this is intended to and the geographical scope of it. At the end of the day, 65% of the broadband market is in the hands, on fiber, of somebody that doesn't have it.
Speaker Change: a mobile value proposition. So it's an offer driven by some players, but this player represents 35% of the overall offer. When you look at
Speaker Change: The potential results
Speaker Change: or the potential difference in results of a pure postpaid versus a convergent approach, I think it's important to mention that we are growing our postpaid customer base.
Speaker Change: faster than the market leader.
Speaker Change: and so we don't see any slowdown in that and when you look at churn we are delivering the best churn ever so from an overall strategic point of view I don't think this is something that is impacting us now and from a result point of view I just confirmed what I said.
Speaker Change: Thank you, Alberto.
Speaker Change: Our next question comes from Luca Branching from Bank of America. Please, Mr. Luca, your microphone is open.
Luca Branching: Hi, good morning, everyone. Thank you for taking my questions. I have two here from my side. The first one, usually working capital has a positive dynamic for team in the fourth quarter. I just wanted to confirm if that will be the case in a similar matter this year as well.
Speaker Change: and the second one, you had a very strong performance in other mobile revenues. This quarter it was up more than 20% year over year. You mentioned it was related mostly to some IOT projects.
Speaker Change: So we wanted to understand a little bit if that is something recurring, is that a one-off and if there are other initiatives in this line that could be helping results going forward. Thank you.
Speaker Change: Okay Luca, so let me start from the second one because you sort of you already gave the answer also besides the question. So other is something that is there to stay, it's intentional and it's part of our strategy.
Speaker Change: So when you go to others, you have a number of things inside, like the customer platform strategy, the IoT strategy. We discussed, I think it was the first quarter, the roaming revenues that, by the way, are coming because we have a better position in postpaid. So it's something that is growing, it needs to grow, it's intentional, and will keep growing.
Speaker Change: This is for the second question.
Speaker Change: For the first question,
Speaker Change: So, we will see in the four quarters the same dynamics happening, and this is basically we are talking about revenue growing above the inflation, margin expanding, and free cash flow growing.
Speaker Change: when it goes specifically to the revenue dynamics
Speaker Change: What is likely to happen at this point in time is that you will see what we are seeing today. So we will see the postpaid performing well, the others keep growing, and the prepaid sort of going sideways. And it is going to be a tough comparison because in the last quarter of 2023, we priced up.
Speaker Change: and so our prepaid revenue line is likely to perform a sideline on a portion of...
Speaker Change: So, sideline is probably not the right because there is some seasonality in the first quarter, in November and December, but nonetheless we got a difficult comparison because we priced up prepaid in the last quarter of 2023.
Speaker Change: Related to the working capital, we have this particular dynamic that in the first half of the year, we have a negative working capital. In the second part, second half, we have a positive.
Speaker Change: always being like this.
Speaker Change: I confirm that the fourth quarter we will have a positive working capital. If you look from the first one to the fourth, we're coming to increase the working capital. This is, like I mentioned, related to our dynamic, especially the dynamic with our major suppliers.
Speaker Change: Very clear. Thank you for the answers.
Speaker Change: www.cdc.gov.au
Speaker Change: Our next question comes from Carlos Sequeira from BTG Pactual. Please, Mr. Carlos, your microphone is open.
Carlos Sequeira: Hi, good morning guys. I have a few questions. One on pricing. Alberto, you mentioned that the price points in the Controlli package are very similar between Chin, Vivo and Claro, and that's true. But then came Nubank and made an offer that is like R$10 lower than the cheapest one out there.
Carlos Sequeira: My question is, do you think this price point, usually controlling plans especially the entry-level clients, they're price-sensitive, right? Do you think this price at like 10 reais less would be enough to
Speaker Change: like change the price dynamics going forward? I mean, how do you see that evolving? I know, maybe it's maybe too early. I don't know. But just how you think about now that we have these.
Speaker Change: This new guy out there, I know we'll have to blame Claude on that, but anyways, you know, it is what it is.
Speaker Change: So, if you look at, if you do the comparison like 60 versus 45, of course of 55 versus 45, there is a difference.
Speaker Change: I think that
Speaker Change: As always in life, you have different customer groups. So you've got people that value the more for more strategy. So the offers are not quite comparable because if you look at the...
Speaker Change: 55 offers, you've got bundles like the Netflix bundle that I was just mentioning. And so there is extra value there, and we know that customers like that.
Speaker Change: Of course, there are a subset of customers that are more sensitive to price.
Speaker Change: and for these customers, this sort of offer may be appealing.
Speaker Change: But Cadu, you need to remember that you are comparing a BTL offer to what we call a front book offer.
Speaker Change: because this step is too big, so he got a number of offers in between there.
Carlos Sequeira: And therefore, I think it's fair to compare BTL with BTL, and if you do that, the gap is not that big.
Carlos Sequeira: And therefore, we will need to see how this play off, for the time being, the scope is quite limited.
Carlos Sequeira: If you are a customer and you want to change, you can make a
Carlos Sequeira: A number portability is quite a difficult process, you don't make a number portability, you need to call, when you call we know what to do, so I don't think that with what we have on the table today, the pricing dynamics will change.
Speaker Change: No, perfect.
Speaker Change: Okay, and another question that I always wonder too is, I mean, you're growing top-line super nice above inflation for several quarters, which is amazing. We know how tough it is to grow.
Carlos Sequeira: above inflation in this sector, but then there are other maybe bigger growth opportunities out there on maybe broadband or B2B. How are you seeing these opportunities going forward? I think how meaningful you think that can be?
Speaker Change: So, let's start, the two that you mentioned, they are both meaningful, so let's start with the B2B1.
Speaker Change: So the B2B1, if you look at the contracted revenues, we are accelerating quite fast. We have a robust pipeline. We got a lot of actions going on. We identified nice verticals where we moved first. We got some kind of advantage. And when you look at that, you have the organic opportunity and you have the opportunity to announce our set of capabilities to capture a wider set of the B2B revenues. And this could go, as we say on our investor day and in many meetings, through organic growth, which is material and non-organic growth also, to announce the set of capabilities that will allow us to provide a larger portfolio.
Speaker Change: So on B2B I think that the answer is quite straightforward, it is important for us, it's an important pillar of our strategy. We are pursuing it with assertiveness and we want to succeed in that.
Speaker Change: When you go to broadband, the answer is a bit more complex, because you have a marketplace which is quite competitive.
Speaker Change: It keeps being competitive and it's a matter of fact.
Speaker Change: Competition is expanding because you have two levels of competition. You've got the national level.
Speaker Change: whereby everybody is sort of stable with the entry with the prize at around 100 Reais.
Carlos Sequeira: per subscription. But when you go on the regional level, you have a number of municipalities where the price competition is quite strong and you see prices going down to 50 reais or something like that. Then the number of places where this is happening is increasing.
Carlos Sequeira: So, you have a situation whereby the market environment is not attractive because of a lot of competition, that is threshold and churn, and ARPU.
Carlos Sequeira: So the point is, we, of course, have the opportunity to grow in a space where we have 2% market share, but the time is not right now to accelerate, and that's the reason we maintain our self-selective. And when it comes to non-organic opportunities, they need to have strategic fit at the right price.
Carlos Sequeira: So it's something that I think is less relevant in the short term versus the B2B focus that I just mentioned.
Speaker Change: Perfect, that's very clear. And if I may, one last question on capexual sales and you know it has been falling...
Speaker Change: part of the quarter year figure, right? I mean, we've been seeing that happening, not only team, other companies, other geographies as well. In your case, we are probably, you know, this year maybe capex sales will be a little higher than 17%, somewhere between 17, 17 and a half.
Speaker Change: And now we close 18.9, we are going down this year, another point likely. We see that our CAPEX are quite under control. So when we look at CAPEX, you know, you've got...
Speaker Change: You got the situation whereby we want to deploy our CAPEX and we want to maintain our lead in terms of network quality and reliability.
Speaker Change: and so we want to do both things together.
Speaker Change: It's playing.
Speaker Change: quite nicely on our side because in terms of coverage we sort of did a big chunk of the job already because we are the only operator with
Speaker Change: a 100 municipality covered with 4G, the second one I think it's if you are a 5,570 municipality, the second one I think is 4,900, so there is a big gap.
Speaker Change: On 5G we are deploying faster and so, you know, everything that we are doing is to increase quality and we are doing it.
Speaker Change: We are managing to keep a lead.
Speaker Change: And with the last negotiation we have with our vendors, we have an extra banner of security that the intensity that we have today is good to increase and to maintain a competitive advantage as we have today. We didn't have this in the past. So it's more an effort of communicating this to the customer base rather than delivery.
Speaker Change: delivering it on a technical point of view.
Speaker Change: So
Speaker Change: To make the story short, basically, we see our cap as constant over the next years, with revenue growing. And so, if you do the math, you will see that the ratio will keep going down in the next, in the medium term, in the next two to three years. And so I don't see significant risk that may derail this trend.
Speaker Change: Perfect. Thank you very much. Thank you, guys.
Speaker Change: Once again if you wish to ask a question please press the raise hand button or send it in written form via the Q&A button. Wait while we pull for questions.
Speaker Change: Our next question comes from Gabriel Guzan from Citi. Please, Mr. Guzan, your microphone is open.
Gabriel Guzan: A quick one on my side, kind of inverting the question from Carlos on broadband. If it doesn't make sense to invest and grow more in this market, would it make sense to sell this operation to someone else, help deliver the parent company, special dividends and things like this? Thank you.
Speaker Change: Today we got an optionality at the end of the day, right?
Speaker Change: So we are a telco player, we have 2% so we've got a quite credible brand, we've got a huge customer base.
Speaker Change: we've got a quite widespread commercial network, so if you look at broadband it's an agency that we may pursue with sort of ease.
Speaker Change: given our set of competencies.
Speaker Change: so it's an optionality.
Speaker Change: If we get to the conclusion that broadband...
Speaker Change: The current context won't change.
Speaker Change: We may want to sell it, but at the end of the day, if we don't see, from a consolidating point of view,
Speaker Change: and we believe that we can play a part on it and if we change the mind in terms of we don't want to play a part on it, the cell could be an option.
Speaker Change: Perfect, thank you.
Speaker Change: Ladies and gentlemen, since there are no further questions, I will return the floor to Mr. Alberto Griselli for his final remarks. Please, Mr. Alberto, you may proceed.
Alberto Griselli: So everybody, thanks for staying with us today. So we are nine months into the year. We have been delivering across the board in terms of revenue growing above inflation, margin expansion, expanding at the beta level, beta after lease level and the free cash flow level. We got a sound strategy going forward. We've got two months to go to finalize this year's results.
Speaker Change: I want to thank the entire team for the effort so far and the last couple of months to conclude 2024 according to our plans. Thank you, everybody.
Speaker Change: This does concludes the third quarter of 2024 conference call of ChinSA. For further information and details of the company, please access our website at chin.com.br slash ir. You can now disconnect and thank you once again.