Telefonica Brasil S.A.

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefónica Brasil second quarter of 2020 earnings conference call. Today with us representing the management of Telefónica Brasil, we have Mr. Christian Gebara, CEO of the company, Mr. David Malkin, CFO and Investor Relations Officer, and Mr. Luis Plaster, IR Director. We also have A simultaneous webcast with slide presentation on the internet that can be accessed at the site www.telefonica.com.br There will be a replay facility for this call on the website. After a company's remarks are over, there will be a question and answer section. At that time, further instructions will be given. Should any participant need assistance during the conference, Please press star zero for an operator. Before proceeding, let me mention that forward-looking statements are being made under the saving harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the company's management beliefs and assumptions and on information currently available. Forward-looking statements are not guarantees of performance. They involve risk Uncertainties and Assumptions Because they relate to future events and therefore depend on circumstances that may or may not occur in the future, investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the company's future results and could cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Luiz Plaster, Investor Relations Director of Telefonica Brasil. Mr. Plaster, you may begin your conference.

Thank you. Good morning, everybody, and thank you for joining us in this conference call for Telefonica Brasil's 2020 second quarter results. The call, as usual, will be divided as follows. To start, Christian Gebara, our CEO, will present an update on the effects felt in this quarter due to the COVID pandemic and show how the situation is shifting our relationship with our customers. Then he will go over our operational and commercial performance, as well as our record FTTA expansion. Then, our CFO, David Melcon, will comment on our cost structure, efficiency commitment, investments, and financial highlights. To conclude, Christian will comment on our ongoing ESG initiatives. We will then move to Q&A, and now pass the word to Christian.

Thank you, Blaser. Good morning, everyone, and thank you for taking part in our second quarter 2020 results call. I will start by talking about the impacts of the pandemic on our operations. As you know, second quarter 2020 wasn't a typical quarter, with a drastic reduction of commercial activity in April, but starting to show early signs of recovery in May and June. Since the complete closure of our stores in March, we have gradually begun opening them up again, with reduced hours and limited capacity. In June, around 80% of our stores were already reopened to the public. This temporary shutdown had significant impact on postpaid additions and headset sales that typically take place in our stores. That said, we have perceived a recovery since May, and in June we only had 6,000 postpaid net disconnections and a softer reduction of minus 10% in headset sales year over year. In prepaid, we were able to revert the negative trend Having a slightly positive year-over-year growth of 0.8%, as connectivity across all segments remains essential. All in all, Vivo's top-quality value proposition continues to drive demand and sustain customer resilience. In fact, FTTH performed better in Q2 than in Q1, with record net ads. Additionally, churn decreased in all key segments. As customers are now giving more value to network quality and the overall experience. On slide 4, with the acceleration in the use of digital channels in recent months, the customer journey is changing fast, and Vivo is at the forefront of this transformation. By June, the acquisition of new mobile customers and migrations through e-commerce had increased 16.5%, while FTTA sales had gone up by 12.3% compared to March levels. Melvivo, our eCare platform, that reached 17.6 million unique users at the end of the quarter, saw an increase of 19.2% average daily users for mobile and 33.8% for fixed in the last three months. Meanwhile, Aura, our artificial intelligence platform, both had strong results when we compared March to June figures. The number of contacts via WhatsApp increased 74.6%, while revenues from prepaid top-ups through Aura increased 87.1%. As you can see, the use of digital channels expanded greatly during the confinement period, and these trends are here to stay creating a unique experience for our customers. Moving to slide five, through our ability to adapt, and our robust operating model focused on value and quality, we are able to deliver a solid operating performance and an elevated cash generation in the quarter. Fiverr, our main engine for future fixed revenue growth, boasted the highest level of net-end ever, even with the mobility restrictions facing the last months, as you can see. As a result, we increased our customer base by 31.9% year-over-year, reaching 2.9 million customers connected. In mobile, Evo's leading position in terms of quality and customer experience resulted in a 3.4% year-over-year growth of our postpaid subscriber base, reaching 43.1 million customers, which represents 58% of our total mobile access. Our mobile service revenues fell minus 1.5% year-over-year, which shows the limited effect caused by the pandemic on our operations. This is explained not only by the central role of connectivity, but also by our high-value client mix. In fact, 82% of our MSR is composed of post-paid revenues that are typically more resilient to macroeconomic downturns. Fiber revenues Made up of FTTH and IPTV, expanded 39.7% year-over-year and represent 26% of all fixed residents. This fast-paced evolution was unshaken by the COVID-19 crisis and we remain confident that it will be the main growth lever of the fixed business in the future. Looking at our costs, we remain focused on accelerating the savings coming from digitalization and simplification. In the quarter, our costs had a significant year-over-year reduction of minus 5.9%, leading our EBITDA margin to advance plus 0.5 percentage points. Lastly, we continue to expand our fiber footprint while having an efficient capital strategy focused on value. We reduced our investments on legacy technologies by minus 55% year-over-year and our capex oversales by minus 3.2 percentage points while maintaining intact the levels of investment on growth. The rational approach allows us, along with our strong revenues and efficient cost control, to generate solid cash flows. In Q2, operating cash flow margin reached 21.2%, expanding 3.7 percentage points year-over-year, and contributed to the increase of 62.6% of our free cash flow. The total 5.4 billion reais in the first half of the year. On slide 6, you can see that our total mobile revenue decreased minus 5.1%, mainly as a result of the sharp reduction in handset sales impacted by temporary confinement measures. The sale of handsets dropped minus 40.9% in the quarter and only began to improve when our stores gradually started to reopen. On the post-pandemic segment, the solid performance of hybrid in the quarter helped reduce the potential impact on revenues, that only fell minus 0.7%. Prepaid revenues tend to be more responsive to macroeconomic downturns and fell minus 4.9%. However, we were able to revert the trend due to the active management of our customer base and June figures showed an increase of plus 0.8% year-over-year. The result Our mobile service revenue declined minus 1.5% year-over-year. Moving to slide 7. In the second quarter, we again reaffirmed our mobile leadership, sustained by customer preference and gradual commercial recovery. Our overall mobile market share stood at 33%, the highest in 14 years. and a significant improvement of our post-paid churn that reduced 0.31 percentage points year-over-year, reinforced our leadership in this segment. Now, as you can see on the bottom left-hand side of the slide, prepaid registered the highest level of net ads in five years. We had 267,000 net ads as a result of our continuous efforts on client acquisition and active customer-based management. Boss Pays Brossettes, on the other hand, suffered from the closure of our stores, but with the gradual reopening, we saw a recovery throughout the quarter. Of the 206,000 net disconnections that we had in the second quarter, only 6,000 were in June. On slide 8, We present our fixed revenues that brought minus 51% due to the maturity of our legacy corporate-based services and our decision to stop selling DTHP TV, while we continue to see solid trends in the growing side of the business. On the right-hand side of the slide, you can see that the growing business were up 11% and continue to gain proportion over fixed revenues. This evolution demonstrates why we are confident that these segments will drive growth in the future. Our FTTH and IPTP revenues reflect the success of our accelerated fiber deployment. FTTH revenues rose 47.6% year-over-year, while our IPTP were up 22.3%. On the bottom right, to our effort to enhance sales of a diversified portfolio of service for B2B, You can see that data and ITT continues to increase its importance, and it now represents 18.6% of total fixed revenues, an increase of 1.7 percentage points year-over-year. Now moving forward to slide 9. The addition of higher value FTTH and IPTP customers continues to exceed expectations, improving the customer mix and driving ARPU growth. For the second quarter in a row, we had record FiberNet ads. 210,000, and a strong IPTV performance that contributed to the growth of broadband and BTP ARPUs. FTTH access in Q2 reached 2.9 million access, meaning a 32% year-over-year increase, and now represents 44% of our broadband customer base. As a consequence, broadband ARPU rose 18% year-over-year to 74 AI As FTTH, customers have significantly higher ARPU than customers from other technologies. Moving to the right-hand side of the slide, we present the evolution of our IPTV business. IPTV access increased 24% year-over-year, contributed to the improvement of PTV ARPU by 3%, reaching R$107. I would like to point out that these positive figures are the combination of our solid fiber expansion and attractive value proposition, with the slight quality trend accelerated by the mobility restrictions seen during the last few months. This will balance it out even more as time goes by. As customers, I am clearly demanding first demand rate connectivity for homeworking and homeschooling. JIV is ready to capture this opportunity thanks to our consistent investment in the largest We have record fiber deployment, adding an additional 1.3 million FTTH home paths to our footprint. In Q2, we entered 30 new cities with FTTH, reaching a total of 216 cities. We are expanding to fresh markets and E. Regis, while also accelerating the expansion process by overlaying our COPR and SDTC networks that allow us to improve NetEnt and Ultra Broadband ARPO. As you can see on the right-hand side of the slide, we reached 13.1 million home paths, a yearly increase of 37.4%, and we expect to surpass 14 million home paths at the end of the year. On slide 11, we would like to introduce our plan to create a new vehicle dedicated to fiber that will further enhance the capture of the ultra-broadened market. The objective is to be fully operational in 2021, including the carve-out of BIBO's 1.1 million brownfield FTTH homes path that will be complemented by the contributions of Telefonica Group and Potential Investors. This will allow us to create an independent and neutral wholesale network company that will reach more than 5 million home paths in 4 years. The focus will be on cities where the fiber of opportunities is still intact and will allow Vivo to have a less capex intensive deployment since we will manage the relationship with the customer and remunerate the new entity for the use of its network. This is a unique opportunity to unite Vivo's leading value proposition and superior customer care with Telefónica's Group's Fiber Expertise and Potential Investors' Financial Capability. As a result, FIVO will continue to expand its FTTH network through this new vehicle, through partnerships and organically, reaching more than 24 Bina Home Paths in 2024. I now pass it on to our CFO, David Balcon.

Good morning, everyone, and thank you, Christian. On a light list, We saw how our strong cost reduction helped us offset the revenue drag caused by the economic slowdown. Our cost reduced 5.9% year-over-year, which led to an increment of 0.5 percentage points to our EBITDA margin that closed the quarter at almost 40%. This quarter suffered from some atypical but temporary cost effects, mainly due to the COVID-19 crisis. But their provisions, for example, reached 3.5% of gross revenue, a 1.1 percentage point year-over-year increase, with payment delays more concentrated in B2B but with minimum cash impact. Cost of goods sold were down 34.6% as a result of lower handset sales in the period, while personal costs fell 6% The most significant factor For our consistent cost reduction and efficiency continues to be our digitalization and simplification efforts. In the second quarter 2020, we had 75% of our customers receiving e-bills. As well, percentage point geofeature increased and 60% of the payments were made through digital platforms. We have reduced by 21% the number of call center calls through the growing use of e-call channels like Meo Vivo and Aura. Those initiatives are critical, as they result in consistent OPEC reductions while also contributing to an improved user experience by customer demand. On July 13, you can see that we continue to invest in future-proof technologies while still expanding our operating cash flow margins that increased 3.7% year-over-year. Our capex contracted 90% year-over-year to R$1.9 billion as a result of our strategy to prioritize investments in growth that currently account for 70% of our expenditures. As you can see on the two graphs on the bottom right-hand side of the slide, the capex allocated to FIBES technologies increased more than 5% year-over-year, while legacy decreased 55%. I would also like to share with you that we are launching 5G DSS in eight major cities by the end of July, and that our network sharing agreement with TIM has been approved by both regulatory and competition authorities, with the first initiatives already underway. These accomplishments are a consequence of VIVO's strategy as they confirm that the company is on the vanguard of cutting-edge technologies and constantly focused on increased rationality. Now moving to 2014, here we present how our net profit generation maxed our superior shareholder remuneration. Our reported net income for the first half of 2020 stood at almost 2.3 billion Reais, which allowed us to distribute more than 1.3 billion Reais of interest on capital. Additionally, we are announcing a new share-by-fact program aimed to enhance even further the shareholder value. We also remind you of the payments that will be made in 2020 regarding the dividends based on 2019 net profit. for a total of 5.8 billion Reais. There are two tranches. The first of 3.6 billion Reais will be paid in August and the second of 2.2 billion Reais in December 2020. In terms of 2015, in the first half of 2020, free cash flow grew an impressive 63% year over year and reached 5.4 billion Reais. The results were impacted by EBITDA contraction affected by this quarter's economic downturn, partially offset by a strong cost reduction. Lower capex as we prioritize investments on growing technologies over legacies. Lower financial costs and income tax payments, mainly driven by the reduction of interest rates. Unworking capital improvements driven by the postponement of regulatory tax payments and lower capex and OPEX disbursements. This solid financial profile confirms that we are in a privileged position to capture the upcoming opportunities in the telco sector. Finally, I'm pleased to share with you that our new AAA local rating and pitch, effective since July 14, 2020, has completed the list of Brazilian AAA ratings that we currently have for Moody's and Standard & Poor's. Now, I would like to pass the word back to Christian, our CEO.

Thank you, David. I would like to conclude today's presentation by saying that besides delivering high-quality connectivity solutions to our clients and superior remuneration to our shareholders, Vivo also wants to contribute to society through its commitment to ESG by being socially responsible and helping to build a more sustainable environment. To achieve that, some of our efforts in the short term are our donations regarding the COVID situation. At VIVO, we are aware of the pressure on the health systems in terms of supply shortages and the families facing financial difficulties during the pandemic. For that reason, we donated 38 PNAIs to 12 states across Brazil for the purchase of hospital supplies, care equipment, and food provisions for vulnerable families. Another initiative already in place is Recycle with VIVO. that already collected 111 tons of electronic waste since 2006, through more than 1,600 collection points available at our stores and other strategic points across the country. Moving to our medium and long-term initiatives, we have just announced a comprehensive project of distributed generation using solar, hybrid, and biogas energy, which will provide 80% of our low voltage energy consumption covering 23 states and reducing costs while generating local development. Finally, I'm glad to say that Vivo is a carbon neutral company with 100% of our energy being renewable and 100% of direct emissions compensated by offsets. These are some of the many initiatives that Vivo performs Either on its own or together with the Fundação Telefônica Vivo, aimed at helping society navigate towards a more sustainable present and future. Thank you and we can now move on to the Q&A.

Thank you. The floor is now open for questions. If you have a question, please press star 1. If at any point your question is answered, please press star 2. In case you are following the conference call via webcast, please click on question to the host to send your question. Questions will be taken in the order they are received. We do ask that when you pose your question that you pick up your handset to provide optimal sound quality. Please hold. Our first question comes from Maria Teresa Azevedo, Santander.

Hi, thank you for the call, David, Christian, and Laster. My first question is on the fiber strategy. Is the idea here to sell the control, allow more leverage, and maybe buy regional ISP providers as well? And is it fair for us to assume that the strategy is going to be that you're going to keep your own fiber in the most strategic markets and then use a shared neutral network on the middle market, similarly to what you're doing on the mobile rent sharing agreements? Thank you.

Hi, my name is Christian. I couldn't get 100% of what you asked. The idea is that we want to continue growing fiber with different models. We continue with the organic growth that as you stated today we reached like 13 million home paths and we're going to add maybe another 1 million and end the year with 14 million home paths. We're going to keep the partnerships that we have with American Tower, for instance, in Minas Gerais, that we planned for years. Another 800,000 home paths. We do the franchising as well, as I think we announced one year ago that we already have three cities where we have a franchisee that's a different model because 100% of the capex is with the franchisee and we only get the royalty. We have also Fenix Fiber, another partnership in different states in Brazil where we have already more than 10 cities and now we are launching this vehicle that I just talked to you about that's going to be a neutral network as you asked. Yes, we're going to be the anchor client but we're going to have other clients also using this network. Our first contribution is going to be 1.1 million home paths that Vivo is contributing to this new company. Telefónica and our financial partner will make also their contribution. And we plan in four years to build through this vehicle more than 5 million home paths. So, in parallel, our organic growth and the growth that we're going to deploy with our partners. So, I don't know if that was more or less your question. Maybe you asked something else, and I can complement.

Perfect. Thank you very much, Christian. And my second question is on the mobile market segmentation and potential market repair. Can you please comment on the strategic value that you see for oil mobile assets? And is it mostly on the capacity and spectrum, or do you see any tracks to your high-end post-stage subscriber base in the case of a potential wholesale player? Thank you.

I think here we are like, as you know, we have a binding offer that we submitted a second one on Monday. They have a value there. We are doing that in conjunction with team at Collado. We believe there's a lot of synergy in the deal that's related to network management, customer management, I think the three of us together, we are able to mitigate them. We are talking here about three operators that have been acting in this market for decades. The new contribution of customers that we may inherit if this offer goes on. Of course, there are some other synergies in having more spectrum and also optimizing the situation or the spectrum map when we put together some frequencies that Oi has and we also have in our portfolio.

Perfect. Thank you very much.

Our next question comes from Marcelo Santos, JP Morgan. You may proceed.

Hi, good morning to all. Christian, David, Blatter, thanks for taking the questions. I have two. The first is on the fiber carve-out that you announced you're doing. Could you please provide a bit more details on what components of the network would actually be carved out? What's the target of the geographical expansion? This is the question on the fiber car vault. The second question would be about the DSL subscribers, which the pace of decline seems to be deteriorating. In the past I think you have mentioned that you thought that fixed revenues could start turning around maybe by the end of the year. I know this was pre-COVID, but I think that was more or less the expectation that you would have new revenue sources overcoming the legacy ones. Is this still reasonable to expect? These are my two questions. Thank you.

Marcelo, like so many questions, if I forget something, please remind me later on. So, we are carving out 1.1 million home paths that is from the central to the customer premise, including the CPE. So, we are taking out and we are adding this to the new vehicle. It's 1.1 million customers, our customers outside the state of São Paulo and in cities where we deployed FTTH and that's not when we have the combination of FTTC and FTTH. It means city that we built FTTH that were beyond GBT's previous food freight. So it's not from Paulo and it's not what we still have some FTTC that was inherited of the acquisition of GBT. So that's the 1.1 million home paths that we're adding to this vehicle. And going forward, The growth, we are not giving up the name of the cities. It's more than 200 cities. It is in every state outside São Paulo. Not all of them, but a vast number of states in different regions. We are not doing the very cold growth in the state of São Paulo. The state of São Paulo is going to be mostly 100% organic growth. So that's where we're going to build this adaptation. Then we can answer your first question.

Yes, thank you.

Second question. Yes, you're right. ESL is going down. We showed the number of the growth in broadband. We are doing overlay also over our DSL network and over our FTTC network. A part of the growth that we have is also because we are surpassing the copper network by our fiber network. We understand that we cannot be competitive with copper, so either we do it ourselves or someone else, another competitor will take out this customer. So we've been doing this over late. When you ask about when the mix would be as good enough to be the final result positive, and I think in the slide 8 we show that already we have 57% of our growth in fixed already what we call in new growth technologies that's growing 11% because here I'm adding not only the fiber but I'm also adding data and ICT from B2B and what is not the growth what's more legacy it represents 43% and is decreasing minus 20.3. Here there is We are now putting focus in CAPEX deployment of DSL, DTH, and MDTC. So that is also impacting our revenue performance, but I think that is much more Thank you very much very clear.

Next question comes from Rodrigo Villanueva, Bank of America. You may proceed.

Thank you. Good morning, Christian and David Plaster. I have a couple of questions. The first one is regarding accounts receivable. It seems to me that on a net basis, they declined by around 5%, both quarter on quarter and year on year. And it seems that you have not been facing any issue to collect despite the COVID crisis. I was wondering if you could provide more color on the performance of accounts receivable and if you would expect to see some sort of deterioration during the second half of the year. That would be my first question. Thank you.

Hi, Rodrigo. This is David. If you look to our balances, particularly the bad debt, that is something that is very relevant this quarter, I think there have been two different behaviors, one on B2C and another one on B2B. B2C represents 75% of the total revenues of the company, and it has been very resilient to the impact of the pandemic during this quarter. I mean, the bad debt for this segment is in line with previous quarters. and we expect this to continue going forward. As for B2B, which represents around 20% of the total revenues, has been more impacted, especially because of SMEs, but more related to companies optimizing and protecting the liquidity. Nevertheless, we are monitoring closely the evolution and adopting the necessary measures to minimize the impact, such as negotiating debts and offering The second question that I have is related to the use of Huawei equipment. We have seen different comments on press articles regarding the potential for Vivo to use Huawei equipment going forward.

So I was wondering if you could please clarify if you have already reached a decision regarding these, I mean, basically the use of Huawei equipment in your network?

Rodrigo, like, we are following it closely. As you may know, we follow and we have all the security and protection of our hardware already in place. For any vendor, we have like the highest safety standards and we are like closely monitoring everything that's going on regarding all this and any decision taken by our regulator, agency and government, of course, we need to fulfill with everything that may be decided. As you know, we work with a multi-vendor strategy, we think that it's very beneficial to have Thank you very much, Christian. Very clear. And one final question, if I may. When people think about new fiber to the home clusters,

Is there a minimum threshold in terms of population living in those areas that you consider? Thank you.

We have a different model for all different types of cities. When you consider the number of cities that we have today, we have more than 200 cities, as I stated before. We are talking about, in general, the larger cities. We are in most of the state capitals here in Brazil, with exception of some in the north. So we continue growing the way in the largest cities, mid-sized cities. With the vehicle itself, if you are asking about what is the vehicle itself, we are going to focus in mid-sized cities, because the smallest one that we consider below 50,000 inhabitants, We are trying to reach them through the franchisee model that I also explained in previous calls, so that there we have a franchisee that will be able to deploy the CapEx by himself and will pay us a royalty. So, more mid-size, smallest one will be through franchisee, but it doesn't take out of our radar if there is a small city close to a larger center that may be We are creating a cluster that should be also deployed if you have the backbone and infrastructure there. So it's going to be a combination, Rodrigo. We're going to check every opportunity, but we have a different model to each of them. Even in Minas Gerais, for instance, we are doing 40 cities, mid-sized in general. Some of them a little bit smaller than the number that I gave you, but as we have a partner that is American Tower that's reaching to deploy, they have the infrastructure, we're going to take the opportunity also to deploy it. And also we take into consideration Our next question comes from Fred Mendes, Bradesco BBI. Hello, good morning everyone and thanks for the call. I have two questions here as well.

I mean, the first one on the mobile front, I mean, we saw a decrease in ARPU, you know, 2.6% year over year. So I just want to understand this trend because, you know, historically the net ads or the post-paid ads being more toward the hybrid plans, you know, that does not seem to be, you know, we saw some weakness in these net ads over the last month, which was obviously explained by the pandemic. So I just want to understand if maybe during the pandemic Avivo focused more on downselling in order to keep Thank you very much.

Hi, França, this is Christian. Now, look, there are many things into consideration here of the quarter. Now, it is true that postpaid, the pure postpaid was impacted, the new acquisition was impacted because our stores were closed. So, most of our sales of pure postpaid, as you know, are through stores. So, in March, we closed all of them, we're talking about 1,600 stores, and we start reopening them through the quarter. So, if you look at net additions of POSPAY, and here I'm adding pure POSPAY to the hybrid, it was minus 134,000 in April, and it was already almost zero in June. So, of course, there is a recovery and that has a positive impact in our pool once this recovery is there and we are back to a level that we had before. We are not facing churn. Churn is very controlled, even better than it was before. But the ability to be more commercially active during this quarter was low, so we were not able to launch, we just launched like one month ago our new pure postpaid value proposition outside our family plan that we call Selfie, that is a plan that has a good article because it adds to the plan, the partnership with One Digital OTT, Netflix, Hubby, Spotify, and we are planning to launch more. But of course, we need to have stores and commercial activity to be able to do that. Migration was also impacted in the first moment because people were more concerned, they were at home, but we see also recovery in migrating customers. And as you can see, our net adding prepaid is very and strongly positive. That gives us room for more migration in the next quarters. And inflation Thank you very much. Cooper or FTTC in Cooper I think was your question DSL yes depending on the we have some different pricing situation in the DSL but normally ARPU can be improved because we have a possibility of selling different speeds and much higher speeds and also we can add IPTV that gives us a very good improvement in ARPU that sometimes the DSL that was pure DSL of TTH was not possible to do.

Perfect, Christian. Thank you.

Thank you.

Next question.

Next question comes from Mr. Tito Ferraz, Itaú, you may proceed.

Hi, good morning. Thanks for taking our questions. My question here is regarding CAPEX levels. So we've seen CAPEX levels decreasing and with less focus on deploying a copper network. Can you give us some more details?

Color on what would be a reasonable level of CapEx going forward as a percentage of sales?

Hi, Gito. This is Christian. Yes. As I said before, we are not stopping any investment in growth. So here I'm talking about 4.5 G. and FTTH deployment and deployment of HomePath and also connecting customers. So, as you can see in our presentation, the capex per technology, when you consider fiber, we had growth of 5.3%. In legacy, we'll be more conservative. Now, we were already very determined to stop DTH. Now we are much more selective also with other fixed technologies such as DSL and FTTC. We are not giving guidance to seeing what is going to happen in this quarter and in the last quarter of the year regarding the commercial activity, but we're going to be more conservative. Thank you. Just a quick follow-up question here. Looking forward at the agreement with Chin.

When can we start picking up some results on CAPEX and OPEX savings from the initiative?

Yes, good question. As you know, we got all the approvals in the regulatory agency and in the CADEC antitrust agency, so we are now ready to start working on this. This year is too early to see results. We are adapting, preparing our network, For cities that are below 20,000 inhabitants, as we said, the 2,000 inhabitants, as we said. So I think next year will be the first year where we're going to start capturing the optics and the capex related to this agreement.

Thank you. Thanks a lot. Very clear. Thank you.

Next question comes from Mr. Walter Pysik. Like said, please, sir, you may proceed.

Over to the fiber.

Is that the long-term game plan? Is there potentially an opportunity to sell those customers to AT&T's Sky business? And then even beyond...

Sorry, you were on mute. Can you start the question from the beginning because we just got the last words?

Sure, sorry. You said a lot on the call about taking CapEx or moving the DTH customers away. Obviously, we can see the subgrowth there going down from satellite and you're shifting to fiber. Is the long-term plan... to continue to do that. Is there an opportunity maybe to sell some of those customers to Sky? Conversely, could you, if you can get a really good deal on Sky, just buy them for the customers and then over time migrate them to ADSL? And then in general, you know, again, just thoughts on pay TV, like does it even make sense to offer a pay TV product? Isn't it better maybe just to become a, and many more. Thank you. Walter, look, as you know, we are not a leading pay TV player in the market. What we have in pay TV today is a combination of

800,000 IPTV customers and something more than 300,000 of DTH, 300 something DTH customers. Over, as I said before, already more than 13 million home paths and almost 3 million only to consider FTDs. So, our deal with Pay TV, especially in IPTV, that's what we are betting for the future because, as I said, we are not giving service to new customers in this age. It's to operate when the customer really wants a triple play. So sometimes the customer really wants to have a triple play and they want the full pay TV. That's not the majority of customers. Most of customers, and of course it has some different difference between cities, but most of the customers, they just bought broadband. And as you said, they may decide for a whole 50 model. And even in this sense, we just launched a fiber service and FTTH plus Netflix that we are selling our broadband with Netflix and not necessarily selling for So, going forward, we're going to have this hybrid model. We keep IPTV as an option for those customers who want to have the pay TV full service. These customers still exist. We are also willing to continue selling only broadband and broadband plus OTT. We are partnering with all of them and we want to be selling broadband. Sandos, Dale Service, Together for a Broadband, and here I can give you two names, Netflix and Amazon Prime Video, renegotiating some different deals with other OTTs, open to two with all of them, and in DTH, yes, it's going to be going down and down, because the churn is normal churn of a DTH service, and we are not adding new customers. If someone can come here and try to buy our customers, if it makes sense to our customers, if it makes sense to the way we operate, we're open to the discussion. But right now, we don't have this on the table.

That was very helpful, and that strategy seems to make a lot of sense. Just one quick follow-up. Can you give us a sense of what percent of your wireless subscriber base has LTE phones or is using LTE service today? Or maybe a mix of traffic, if it's not a mix of phones.

Over the smartphones, it's more than 50% for sure. I don't have the exact number, but it's growing up, but it's more than 50% over the smartphone customer base for sure.

Okay, thank you.

Thank you. This concludes the question and answer session. At this time, I would like to turn the floor back to Mr. Christian Gebara for any closing remarks.

Thank you all for participating in this call. We are always open for further questions if you want. You can reach our international relations team. Thank you all and good day for everyone. Bye-bye.

Thank you. This concludes today's Telefonica Brasil 2020 results conference call. You may disconnect your lines now. Have a great day.