Telefonica Brasil S.A.

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefonica Brasil 30th Quarter of 2020 earnings conference call. Today with us, representing the management of Telefonica Brasil, we have Mr. Christian Gebara, CEO of the company, Mr. David Melcon, 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 the company's remarks are over, there will be a question and answer section. At the time, further instructions will be given. Should any participant need assistance during this conference, please press Start Zero for an operator. Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Security 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 risks, 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. Luis Plaster, Investor Relations Director of Telefónica Brasil. Mr. Plaster, please begin your conference.

Thank you. Good morning and welcome to Telefonica Brasil's conference call to discuss third quarter 2020 results. The call will be divided as follows. First, our CEO, Christian Gebara, will comment on our operational performance and give an update on the steady recovery of our top line. Then, he will go over our commercial initiatives and accelerated FTTA expansion. Then, our CFO, David Melcon, will comment on cost management, investments, and financial highlights. To conclude, Christian will comment on our ongoing ESG initiatives and then move to the Q&A session. Now I hand over to Christian.

Thank you, Blaster. Good morning, everyone. Thank you for taking the time to attend the third quarter 2020 earnings call. I would like to start by talking about PIVO's strong operating performance in key segments that confirms our consistent operating improvement and our once again robust cash flow generation. In mobile, people's leading position in terms of quality and customer experience resulted in 844,000 postpaid net additions. Currently, our postpaid customer base accounts for almost 60% of our total mobile access. In this quarter, we also posted another set of impressive additions in Fiverr, a key lever for future revenue growth. that saw record net ads for the third quarter in a row, with 267,000 new customers, reaching 3.1 million homes connected. As you can see on the right-hand side of the slide, our mobile service revenues fell minus 1% year over year, and the impact of temporary confinement measures still lingers in some segments of our business. On the other hand, The same line grew 3.3% quarter-over-quarter, which supports our more optimistic view that this atypical effect will soon have less impact on our operations. Our fiber revenues made up of FTTH and IPTV increased 47.3% year-over-year and 14.5% quarter-over-quarter. This impressive evolution is fueled by our efforts to expand our fiber footprint and the strength of the product that proved its unique value in terms of best-in-class connectivity for our customers. Shifting to cost, we remain focused on our digitalization and simplification initiatives that helped to reduce recurring costs by 3.4% year-over-year, taking the EBITDA margin to 40%, advancing .3 percentage points quarter over quarter. Lastly, driven by the resilience of the business and our efficient and rational capital allocation, we registered solid cash flows throughout the year, boasting 7.5 billion reais in operating cash flow until September, expanding the margin 3.4 percentage points year over year to 23.5%. By aligning that with efficient financial management, we were able to deliver R$ 8.9 billion of free cash flow, 50% higher than the same period of the previous year. In fact, in the first nine months of 2020, we reached a higher level of free cash flow than in all 2019. On slide 4, I would like to show how Vivo has been able to consistently recover its revenue through its crucial role In the delivery of high-quality connectivity. Post-paid revenues showed an evolution of 1.2% compared to second quarter 2020, as net additions started to recover with the opening of stores and prepaid continues its sharp advance, increasing revenues by 13% quarter over quarter. In our fixed business, FTT sales continue to outperform and many more, growing 16.8% quarter-over-quarter, supported by the expansion of our fiber footprint that continues at full speed. Finally, handset sales rose 90.3% in comparison to the second quarter of 2020, since almost all our stores are now open. All things considered, we can see that Vivos' value On slide 5, you can see that our total mobile revenues remain stable, as we continue to feel the impacts of temporary confinement measures that were partially offset by the positive evolution of handset sales and prepaid. Headset revenues increased 10.1% year-over-year as the impact of the pandemic on stores operations started to ease. Mobile service revenues fell minus 1%, mainly because of a difficult compared space versus the third quarter of 2019, when we implemented significant price increases at the beginning of the and the rest of the team. Moving to the right-hand side of the slide, we show the post-paid that accounts for 57% of access and 80% of mobile service revenue is seen ARPU recover to prepaid COVID levels as we continue with our more-for-more strategy. Prepaid, which accounts for 43% of mobile access and 20% of mobile service revenue, shows ARPU growth to levels above first quarter trends and a strong level of net additions We allow for higher migration to postpaid going forward. Moving to slide 6. In the third quarter of 2020, we again reaffirmed our mobile leadership, supported by our superior consumer experience and quality of service. Our overall mobile market share stood at 33.3%, the highest in the last 14 years, and we had a significant improvement in postpaid churn that reduced Thank you very much. Postpaid reverted last quarter's trend of disconnections and posted strong additions in Q3. 427,000 as commercial activity started to pick up and migrations from pre- to postpaid posted stronger results. On slide 7, we show that our fixed revenues dropped minus 6.6% because of the maturity of voice. Our strategic decision to stop selling DTHB TV and CAPEX optimization for copper-based services. On the other hand, we see very positive trends in fiber business that continues to transform the mix. On the right-hand side of the slide, you can see that growing businesses were up 8.3%, increasing their relevance over fixed revenues, and now account for 60% of the total. This trend shows why we are confident that this segment will be the driver of future growth. Our FTTH and IPTV revenues confirm the success of our accelerated fiber deployment. FTTH revenues were up 56% year-over-year, while IPTV were up 26.9%, resulting in a combined growth of 47.3%. Now moving to slide eight. Our getting edge fiber products continue to attract more and more customers. As a result, we posted record FTTHnet additions for the third quarter in a row that now represent half of our broadband customer base. FTTHnet has totaled 267,000 in the third quarter of 2020, reaching 3.1 million access, a 34% year-over-year increase. Broadband ARPU rose 17% year-over-year to R$ 77.7, as FTTH customers have significantly higher ARPU than those from other corporate-based technologies. Moving to the right-hand side of the slide represents the growth of our IPTV business. IPTV access increased 26% year-over-year, I would like to highlight that these impressive figures are the combination of our accelerated FDTH deployment plan with the strength of the product we are delivering. Fiber connectivity is a future-proof technology whose demand is consistently growing, driven further by current home office and homeschooling needs. Moving to slide 9, this quarter I would like to present The distinct set of capabilities that Vivo has to capture opportunities and create value in the digital space. Vivo is the largest and most recognized telco in the country, with 94 million access and one of the top 8 most valuable brands in Brazil, estimated at 2.2 billion dollars. That summed with the almost 19 million unique users that access our e-commerce app, Meu Vivo, Our more than 1,600 stores that make us comparable to the largest retailers in Brazil, and the 200 million visits per month at our TerraMall portal show the potential, reach, and capability that the company has in the Brazilian technology market. Fibo is a gateway for the digital life of our customers, and for that reason we launched a digital marketplace that offers everything technology-related at our online store. Just to mention other examples of our ability to expand our reach, I would like to highlight the following initiatives. We recently launched VivoMoney, a digital loan platform that offers fast and simple personal credit to phosphate customers based on credit scoring that use our billing data to improve accuracy. Vivo also signed partnerships with various apps and OTTs to offer co-branded mobile plans Vivo Meditação A wellness app focused on meditation and mindfulness had more than 1.6 million downloads since its launch in July 2017. Another recent initiative is our strategic partnership with Diallo and Doutor Consulta to offer benefits in health services to vivo customers, which represents our first step towards a more relevant participation in that sector. Moving just like that, we had another quarter with impressive results regarding our fiber deployment that continues at full speed, adding an additional 1.5 million FTTH homes passed to our footprint. In Q3, we entered 28 new cities with FTTH, reaching a total of 244, and we expect to end this year with 268 cities. We continue our organic expansion, while also accelerating the overlay of corporate and FDTC networks that allows us to improve net edge and ultra broadband ARP while protecting our customer base. Additionally, I would like to point out that the creation of our neutral fiber vehicle is advancing as planned. Several investors have demonstrated their interest in the project and we are confident that the vehicle will be operational in 2021. Finally, as you can see on the right-hand side of the slide, we reached 14.6 million HPs home-passed in the third quarter of 2020, and we expect to reach approximately 16 million HPs at the end. With that, we will more than double the number of cities launched and homes passed when compared to 2019. Now I pass it on to our CFO, David Lebrun.