TIM S.A.

Good morning, ladies and gentlemen. Welcome to TINASA 2025 First Quarter Results video 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 TINASA remarks are completed, there will be a Q&A section for participants. At that time, further instructions will be given.

Hello, I'm Vicente Ferreira, Head of Investor Relations. Welcome to TeamSA's Earnings Conference for the first quarter of 2025. This video highlights our recent performance and how we see the market evolving in 2025. Afterward, we will have a live Q&A with our CEO, Alberto Grizzelli, and our CFO, Andrea Viegas. Please note that management may make forward-looking statements and this presentation may contain them. Refer to the disclaimer on the screen and on our Investor Relations website. Now, let's review our results.

Hello everyone, I'm Alberto Griselli, CEO of Team Brazil. Despite a volatile external environment in the first quarter, we have seen a solid start to the year. We successfully implemented our strategy and delivered consistent numbers. Our mobile revenues increased by 6.2% year-over-year, driven by strong post-pay growth. Our EBITDA grew by 6.7% yearly, with margin expansion reflecting our efficient operational execution. We also saw a double-digit expansion in operational cash flow, reaching R1 billion. In the quarter, we announced R690 million as interest on capital. Our strategic initiatives are paying off. Following the launch of a fully updated version of the Mailteam app, we saw significant growth in users. We are boosting our presence in São Paulo with a 360° approach to customer experience, modernizing the network and revamping our go-to-market strategy in the region. The first quarter was also marked by notable development in the new business initiatives, with the launch of a new partnership and a special focus on the B2B utilities vertical. Service revenues started the year at a solid pace, growing 5.6% year-on-year. As mentioned before, the postpaid segment drove the revenues dynamics with close to 14% yearly growth. The 6.2% growth in mobile revenues results from robust human postpaid base growth, almost 7% year-on-year, and sound ARPU performance in postpaid and blended. The increase in mobile ARPU indicates effective customer monetization strategies, which emphasizes team's successful upselling efforts. Now, 50% of our base is composed by postpaid lines with revenues representing almost 70%. While we celebrate our post-paid performance, we continue to work on recovering the prepaid. Our three-step plan is designed for the medium term, so resilience and consistency are keys for the plan to bear fruits. San Paolo is the focus of a special project and aims to apply a 360 approach to translate our network leadership into customer experience and perception change. We are modernizing over 3000 sites which will significantly improve network capacity. In this network swap so far we have seen a 40% increase in coverage and capacity while energy consumption is falling 15%. This infrastructure evolution will expand further our network quality leadership. Attested by OpenSignal Network Consultancy, we already had the best quality in the state and were awarded the best experience during Carnival. Now we will have absolute leadership in all neighborhoods of Sao Paulo City. We are adjusting our go-to-market in the region to help bridge this evidence to perception. We just launched a flagship store on Oscar Freire Street, an area famous for its sophistication and luxury spots. It is the Brazilian version of Rio Drive. This marks a significant milestone for us, showcasing to customers a different positioning where quality and value are primed. Adding to this boost in presence in Sao Paulo, we had the first edition of Team Music event in the city. The results were fantastic. Tickets were distributed out in minutes. We achieved massive engagement levels on social media and it was a PR success. The concert was all over the media. The successful team music event and the new iconic store reflect efforts to boost brand perception and customer engagement. Sao Paulo is the country's richest state, so it's natural to be the focus of our attention, but we will apply similar taxes in other regions of the country. We are commencing a new stage of our 3B strategy. Changing gears to new revenue streams. Our B2B IoT strategy is performing well. We've seen substantial growth in contracted revenues, particularly in agribusiness, logistics, and utilities. Specifically, in the last vertical, we are ramping up our presence. We are expanding the services we sell on our own and with partners, showcasing the team's commitment to provide integrated solutions that enhance operational efficiency for clients in various sectors. In addition to our well-known solution for public smart lighting, we are now pricing in water management, gas distribution telemetry and energy distribution metering. We are committed to further developing the B2B opportunity, expanding our addressable market and opening new avenues of growth. Our digital ecosystem continues to expand, with significant growth in customer registrations and transaction volumes. Now we are launching new initiatives in the energy sector, partnering to create value in both B2B and B2C markets by exploring different energy distribution methods. We are set to initiate a pilot project in collaboration with Eletrobras. In this project team we will act as a channel for Eletrobras, selling its energy to corporate clients. With Toppen, we have just initiated a pilot project within the distributed generation model under a revenue share agreement. This initiative allows our B2C clients to participate in solar power plant cooperatives, enabling them to reduce their energy expenses. Our proactive approach to diversifying offerings and enhancing customer value through innovative solutions confirms our intention to take steam value proposition to the next level. Now, let's move on to the financial details with our CFO Andrea.

Hello everyone, I'm Andrea Viega, CFO of TIM. I'm pleased to share that we ended the first quarter with solid figures, reinforcing our progress in cash generation growth and shareholders' value creation. This quarter, I want to highlight our Efficiency Program, which will help us deal with the impacts of inflation, both this year and in the coming years. The program will have been implemented since last year, aims to improve productivity and customer experience, while ensuring smart expansion. The focus on technology and organizational levers reflects a commitment to innovation and operational excellence. Our OpEx running below inflation reflects an effective cost management strategy, key to staying competitive and reinvesting in activities that can more directly impact clients' perceptions. This approach supports team consistent EBITDA growth and margin expansion. Our EBITDA grew by 6.7% year-over-year, adding 80 basis points to our margin, which surpassed 48%. EBITDA after lease also presents a solid increase with margin improvement. Lease payments were stable compared to last quarter, but grew high single-digit year-over-year. We have specific initiatives to control leases, so we'll focus on this in the coming quarters. Our net income grew more than 50% year-over-year, marking the 80th consecutive quarter of double-digit expansion and reaching the highest net income level for our first quarter in Thin's history. To finalize our review of the financial results, it's worth highlighting our operational cash flow performance, another double-digit increase of almost 20%, with our cash flow margin reaching almost 16%. Despite seasonal effects, working capital improves significantly in the quarter. We also maintain a robust balance sheet with strong liquidity and manageable debt levels. Again, all these numbers reflect Thien's capacity to turn revenues into cash and demonstrate our strong financial health. Now back to Albert.

As we conclude, I want to summarize the team's strategic focus areas for the quarter ahead. First, our commitment to competitive rationality in the market is evident. We want to intelligently enhance our mobile value proposition. We are applying that to the prepaid recovery plan and expect progress in the coming months. Second, the emphasis on expanding the B2B IoT portfolio and growing our partnerships under the digital ecosystem reflects a proactive approach to innovation. Adding these new revenue opportunities will help us deliver sustainable growth. The focus on operational efficiency translates into a more conservative view of Team Ultrafibra evolution in a challenging broadband market. Fourth, this efficiency mindset permeates all the areas of the company. And as Andrea mentioned, we have a program in place that covers OPEX. For this one, we present the levers we have today. working capital, in this case we are finalizing a set of actions to help our performance throughout the year, and leases. As you know, since the days of decommissioning of oil towers, this is an area where we need to transform the sector. We need to change the relationship we have with our company. Before we conclude, I'd like to highlight that we have been listed on the CDP-A list for the second year in a row. Today, we are the only operator in Brazil with this status. This is a clear demonstration of our commitment to sustainability. In conclusion, we have started 2025 with solid momentum, paving the way to meet our annual guidance. Our strong cash flow evolution and commitment to operational excellence position us well for the challenges ahead. Thank you for your attention. Now let's move to the live Q&A session.

Before we start the Q&A session, I will hand the floor to Mr. Roberto. Please, Mr. Roberto, you may proceed.

Thank you. Good morning, everybody. Before we start our Q&A, just a quick remark. This morning, we were confirmed as the most sustainable company in Brazil. We ranked first among all companies in the Corporate Sustainability Index of the Brazilian Stock Exchange. This result reinforces our leading role in ESG among Brazilian publicly traded companies, and it's worth remembering that we have been in this selected group of companies for 17 consecutive years, the longest break for Atelco. Now we can proceed with the Q&A. Please, operator.

Thank you. We are now going to start the Q&A session for investors and analysts. If you wish to ask a question, please use the raise hand button. Wait, I'll pull four questions. Our first question comes from Bernardo Gutmann from XP. Please, Mr. Bernardo, your microphone is open.

Hi, good morning, everyone. Thanks for taking my question. Actually, I have two here. The first one is related to mobile growth. The postpaid segment remains quite resilient, but the prepaid continues to perform below expectation. Could you elaborate on the adjustment made and the levers for improvement in the prepaid segment? And my second question concerns costs in the current inflationary environment. What are the main efficiency levers for improving margins throughout the year? Thank you.

Thank you, Bernardo. So I will take the first one and pass to the second one to Andrea for the cost one. So on the revenue growth, we are seeing in this quarter a similar set of dynamics like the last quarter. Postpaid is the main driver of growth, primarily sustained by price adjustment and pre- to control migration and control to postpaid migration. That was pretty strong in this first quarter, whereby prepaid is suffering, Just remember, Fernando, prepaid is suffering in general. So the market for recharges is decreasing as all operators are migrating prepaid customer to control and there is some constraint on the demand side. So we put in place a plan on our side that is made up of a combination of the three levers that we discussed in the previous quarter, the offer itself that received a boost in this first quarter, THE COMMUNICATION THAT WE ARE TRYING TO MAKE IT MORE CONSISTENT IN TIME IN ORDER FOR THE VALUE PROPOSITION TO COME ACROSS TO OUR CUSTOMER AND SOME TACTICAL ACTIONS ON THE CHANNELS. The objective of these are twofold. From one side, increase the loyalty of our customers to us. As you know, the chain rates in Brazil are still high. And the second one is to get a larger share of the chain market to us. We have... in our plan a negative growth for prepaid throughout the years. And what we are working on is to slow down the decrease over time. So, Andrea, maybe you can take the one on cost.

Yes. Hi, Bernardo. Related to the cost and the margin, we are, as you know, always working very closely to reduction in cost and in our efficiency program. We have several initiatives, AI, digitalization, make or buy, and also a very cost-controlled approach in several initiatives inside the company. But considering the inflation, our biggest concern this year is related to leads, because leads have a direct impact from inflation. And we are working several initiatives related to leads for mitigating these impacts. renegotiations with the towers and other programs that we are putting in practice. And we are very focused in mitigating this specific line that is our biggest concern related to inflation.

Very clear, Andreia and Alberto. Thank you very much. Governor.

Our next question comes from Marcelo Santos from JP Morgan. Please, Mr. Marcelo, your microphone's open.

Hi, good morning, Alberto, Andrea, Vicente, Luisa. Thank you for taking my questions. I'll focus my questions on the growth, on the mobile service revenue growth. You already talked about prepaid, but I want to turn the attention a bit to postpaid. It was very strong, but I understand it was impacted by a different seasonality in the price increases. So I wonder if you could help us a bit understand, like, How much did bringing the price increase from April, May to March help the growth of postpaid in this first quarter? And if you could give more details, like when during March was this increase applied? How much of the base was affected? I don't know. Anything you could give there. What was the average increase? Just for us to understand how much of this increase could be propagated going forward. Thank you very much.

Okay, Marcello. So when you look at the revenue growth for postpaid, it's made up of three main drivers at the end of the day. So we are talking about the price adjustment, and at this point in time, we are talking about back book price adjustment. We are talking about prepaid to control migration, and we are talking about control to postpaid migration. So When you look at the combination of these three factors, they all impact what we are looking at in terms of the results of this quarter. They came out pretty strong. And the three elements are in place. So our postpaid customer base is growing healthy. This is the first note. We have a pretty strong intrapostpaid migration. It's a double-digit growth. And then we've got a dispensationality, yes, in terms of price adjustment that, as we mentioned in many one-to-one meetings, occurred in between the first quarter and the second quarter, with some anticipation of some cycles in the first quarter. So overall, all these effects, they sum up to the strong performance in the year. When you look at the drivers going forward, we intend to have, for mobile service revenue, the postpaid as our main growth engines in the coming quarters. And as generally happens, you will see that growth tend to slow down ON THE SUBSEQUENT QUARTERS, AND SO THIS WILL BE A TYPICAL TREND THAT WE ARE LIKELY TO SEE IN THE COMING YEARS. SO WHEN YOU LOOK AT THE OVERALL COMPOSITION, WE'RE GOING TO HAVE OR WE ARE WORKING ON SUSTAINING A SOLID GROWTH ON POST-PAID WHEREBY WE ARE WORKING TO HAVE A SLOWER DECREASE ON PRE-PAID GOING FORWARD.

Perfect. Just a clarification, was the full post-paid base and control affected by the price increases?

No, we generally don't impact, and this is as in every year, we do the price adjustment on a subset of the post-paid customer base. We tend to keep some of the customers out, depending on the level of propensity in insurance or complaints. And we generally also have... a few different moments in time when we do this adjustment. So there is a main one that occurred in between the first and the second quarter, but there are further adjustments down the line of minor intensity.

Perfect. Thank you very much.

Our next question comes from Victor Tomita from Goldman Sachs. Please, Mr. Tomita, your microphone is open.

Hello, good morning. Two questions from our side. The first one is a bit of a follow-up on Marcelo's question. I imagine that this price up still had a smaller effect in March. So thinking specifically about had a small effect in the quarter, given that it was only implemented in March. So we had some interesting ARPU improvement in this quarter. So do you believe there is room for the ARPU in post-paid to improve further in the next quarter and maybe be a bit more of a boost to revenues? And the second question, on the same note, How are you thinking about full year guidance for revenues at this point, given the good result in this quarter? Do you see rooms for upwards revision? Or do you believe it's more of a, you are still thinking more about the guidance target as it is now, given that, as you mentioned, you expect some deceleration in that growth in the next few quarters?

Thank you very much. So, Victor, let me take the second first because it's easier to respond. We are committed to deliver our guidance. We just communicated a couple of months ago. So that's our commitment is. So we're talking about roughly a 5% revenue increase over time. When it comes to ARPU, you need to remember that the ARPU has been growing in our ARPU has been growing over time, postpaid and compound. And you got a number of different drivers for this output to grow. And so we need to see how this play out in the coming quarters. Because you have something that is clearly accretive, like a back book price adjustment or a front book price adjustment, whereby there is something that is more dilutive, like a prepaid to control migration. So generally speaking, it's one key metric. We are number one in terms of ARPU. We still have to implement some front book price adjustment in the coming months. So we've got some forces pushing forward, but we also have some forces diluting the numbers, which is related to prepaid to control migration. So that's for the first question. Clear. Thank you very much.

Our next question comes from Gustavo Farias from UBS. Please, Mr. Farias, your microphone is open.

Hi, everyone. Good morning. Thank you for taking my questions to my end as well. So the first one, if you could comment a little bit more on leasing payments. I realized from last conference call that most of contracts are already tied to IPCA contracts. And I'd like to know if there's more room to negotiation, even considering this or any other levers that you are able to tackle to control these in payments going forward. And the second one related to working capital, we've seen a pretty strong performance from working capital, a contribution to cash generation. I'd like to know what can we expect a sustainable level of working capital and any other levers you are able to use to optimize it going forward. Thank you.

Hi, Gustavo. Related to the first one, the lease payment, the lease in this quarter was almost at the same level of the last quarter, but you are right, we have IPCA and AGPM that impact this contract, but the most part started in the end of the March and April and May. So, in the second quarter, you see the start of an impact on inflation, in our lease. What we expect and what we already declared as lease, we are working to keep the increase of the total lease in the year lower than our revenue. This is what we are working very hard to achieve. Besides the negotiation that you mentioned and I mentioned before, we also have another leverage that continues to our decommission where we see which towers that we have to are coming to the end of the contracts and try to negotiate these two or renew the contract or move it to another lower cost tower. With the second question about... Let me just add something on the list.

Sorry, Andrea. So, Gustavo, on the list, you have a set of levers. Which are these levers? So, as Andrea was saying, we've got the negotiation. Negotiation is something that is on the table once we need to deploy new towers. And as Andrea was saying, there are some towers that are getting to the end of the period, and we have the opportunity to renegotiate them. to a value that is in line with market values. On the other hand, you have another set of levers that are the decommissioning of towers that have been a focus of our company throughout 2024 with the commission, thousands of towers, so we get good to do it. We can move towers, and then we go partnership with other operators whereby we share the infrastructure, like the Rancheria Agreement with Vivo, for example. So we have a large set of levers in our place that we are going to deploy in order to keep these line costs in check is something that is not like super short-term, something that it's the effect sum up in years because there is some infrastructure required, but we are committed to use all the levers in place to meet the guidance that we share at the beginning of the year.

Thank you. And related to the working capital, we are working very hard with this working capital, with several initiatives also that we have. But remember, we have a seasonality. In the first half of the year, we have a negative working capital. In the second half, we have a positive working capital. We are still in this trend, but we improve a lot. As you can see, the first quarter this year relates to the first quarter of last year, and we still have some some initiatives to put in place and we can disclose it as we do. Once we do this new opportunity, we will disclose to you.

Very clear. Thank you very much.

Our next question comes from Felipe Chang from Santander. Please, Mr. Chang, your microphone is open.

Good morning, everyone, and thank you for taking my questions. My first question is maybe zooming in a little bit on the pricing dynamics, particularly here for FrontBook. our understanding is that your main competitors have already increased front book prices. So I was just wondering if Tim has any schedule here to eventually also implement price increases to the front book offers. And secondly, if I may also zoom in a little bit on Tim live, I just wanted to understand a little bit the dynamics this quarter, right? What were the main drivers or reasons here to see a decline in revenue growth? And eventually, if you are studying any potential M&As, be it via selling your Tim Live operation or potentially buying other assets here to fortify this business. So that's it. Thank you.

So, Felipe, going to the first question, we are fully committed to market rationality. And so we are actually working on our front book price upgrades. So they will come in the coming months. So that's something that we are going to do. For the second question, the main drivers are basically the following. Before going to our performance, I would like to stress again that the market remains highly competitive. And therefore, this pressure, both the ARPU, and we have quite a good ARPU, and churn level. When it comes to our performance, the second point of attention is that when we report our numbers, we need to remember that we have copper and fiber in the same numbers, differently from other market players. And copper is a technology that is fading out, so we are losing customers there. And the result that you see on this quarter is basically the effect of a customer base that has been decreasing over the last nine months until January this year. And there's some pressure on the output that has been going down a bit. On the positive side, you have on February and March a customer base that is growing. I can confirm that in April it's also growing. But we are not pushing hard on this because, as we mentioned in many occasions, it's ultra, team ultra, our broadband service is diluting on our numbers. Therefore, we are sort of moving sideline on this line of business while we are assessing all the options on the table on the inorganic front.

Very clear. Thank you.

Our next question comes from Fanny from HSBC. Please, Mr. Fanny, your microphone's open. Mr. Canemarie, your microphone's open. Seems there is a problem with your audio, Mr. Canemarie. I will ask you to rejoin to the conference and join the queue again. So, our next question comes from Luca Brindin from Bank of America. Please, Mr. Brindin, your microphone's open.

Hi, good morning, everyone. I have two questions on my end. I wanted to mainly double click on the OPEX dynamics for the company. First, we saw a reduction in terms of the sales and marketing expenses. It was down 2% year over year. You mentioned it was the reduction in fiscal fees, but the sales and marketing is down 2%. even more than the reduction in human user base. So I wanted to understand a little bit more on those dynamics, if that's something that should continue, if it's something that should go mostly in line with the user base expansion or any other dynamics here. And the second one regarding network and interconnection, It is going up considerably year over year. This is something that was happening in previous quarters already. But how can we think about this going forward? When will this stabilize and how we can think about it for the next years? Thank you.

Hi, Luca. Related to the second one, the interconnection and the roaming expenses increased in this first quarter, related to the content provided, because we launched a program in November. We stimulated the use of streams, so we have an impact in this quarter. And also the international roaming we launched. We simulate our... We put, as a benefit, we put roaming international in several plans in Postpaid, and the cost increase really reflects in these customers going abroad. So we have this true impact in relation to the roaming and the content provided in this first quarter. Related to the sales and market, this was a seasonality. The freestyle decreased a little bit related to the net ads, but it was a little bit. And also we have some only seasonality things, but we expect the sales expenses increase this year. As we mentioned, put efficiency in some parts of the cost for generators, a space for increase, something that we know that is important to us to increase like advertising. So when you see the full years, you see increase in this first quarter was just a point or decrease. I don't know if I address your questions.

No, very clear. Thank you for the answers.

Once again, Once again, if you wish to ask a question, please press the raise hand button. Wait while we pull four questions. Our next question comes from Mr. Fanny Canemuri from HSBC. Please, Mr. Canemuri, your microphone is open. Mr. Fanny, seems you still have problems with your microphone. Mr. Fanny, can you hear me? So I'll ask you to check your audio device and try joining again, Mr. Fanny. Our next question comes from Machi Hoblard from Barclays. Please, Mr. Hoblard, your microphone's open. Please, Mr. Mochi, just activate your microphone and ask your question. Just as a reminder, if you wish to ask a question, please use the raise hand button. Wait while I'll pull 4 questions. Our next question comes from Mr. Fanny Kenimori from HSBC. Please Mr. Fanny, if you want to try again, please. You sent your question through written form. Your audio isn't working yet, so I'll read that. Our next question comes from Fanny Canemory, and it is, how do you see the competition involved from new and regional operators like ReasonNet? Thank you.

So, Fanny, clearly the smaller players are gaining some traction in the region. I would say that so far the impact has been limited on us. And it didn't change our competitive dynamics in response. It didn't trigger specific response to them. We say that they are getting market share, but they're not changing the competitive environment as a whole. We are continuously monitoring if they are making an impact on our customer base. There is some, but it's not material to react at this point in time.

Thank you. Since there are no further questions, I would like to close the Q&A session and I will pass the word to Mr. Roberto Griselli for his final remarks. Please, Mr. Roberto, you may proceed.

Thank you. So, guys, we set off at a robust pace. Despite the external environment, we are successfully implementing our strategy and delivering consistent numbers. Although we expect a challenging year, we have a solid game plan in our hands that we intend to implement with confidence. So I would like to thank you for participating in our video call today. Special thanks to our team for its commitment and focus. And I look forward to meeting some of you or all of you in the coming one-to-one sessions. Thank you and ciao.

This does conclude the first quarter of 2025 conference call of GeneSA. For further information and details of the company, please access our website at gene.com.br. You can disconnect from now on and thank you once again and have a wonderful day.