Telefonica Brasil S.A.

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefonica Brasil First Quarter 2021 Readiness 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 on 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 session. At that time, further instructions will be given. Should any participant need assistance during the conference, please press Start Zero for an operator. Before proceeding, let me mention that any 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. Luiz Plaster, Investor Relations Director of Telefônica Brasil, Mr. Plaster, you may begin your conference.

Thank you. Good morning and welcome to our first quarter of 2021 earnings conference call. The call will be divided in two parts. First, our CEO, Christian Gebara, will go over main financial and operating figures, initiatives in the digital space, and ESG highlights. Then, our CFO, David Melcon, will give you more color on our cost and CAPEX structure. Digitalization Initiatives, Free Cash Flow, and Shareholder Remuneration. Now I hand it over to Christian.

Thank you, Blaster. Good morning, everyone, and thank you for joining our earning calls. We started 2021 with strong operational momentum and a return to total revenue growth. Consumption and overall market dynamics are beginning to improve, and our core revenues are accelerating. In the first quarter, we delivered 1.1 million post-paid net additions, the highest since 2017, and our total post-paid customer base now stands at 46 million. In Fiverr, we posted another quarter of strong growth and take-raise, thanks to our best-in-class broadband products. SPTH net ads of 368,000 was the best performance ever for a single quarter. Taking People's Fever's total customer base to 3.7 million subscribers, 41% higher than the first quarter 2020. In total, we closed the quarter with 96 million access, including mobile and fixed. Core revenues of 4.7% year-over-year already represent 88.1% of total revenues, and this quarter we saw FTTH revenues break the $1 billion The combination of sustainable operating performance and financial discipline are the pillars of our elevated shareholder remuneration, which is characteristic to Vivo. So far this year, we have deliberated R$ 700 million of interest on capital, which represents a dividend yield of 7.9% in the last 12 months. Furthermore, we continue to improve returns through our share buyback program. To date, we have 5.4 million shares in Treasuries, equivalent of 0.32% of the company's total capital. On slide 4, Total Revenue resumed a positive evolution this quarter due to continued traction of our core businesses. They represent the main factors of growth going forward and are built on cutting-edge high-speed connectivity in e-mobile and fixed, combined with a differentiated offer of digital products and services both for B2C and B2B customers. At Vivo, we want to offer more than just the best telco experience. Our aim is to deliver on all our customers' digital life needs, whether that be advice, content, cybersecurity, or cloud solutions for their business. Non-core businesses were down 24.1% year-over-year, mainly because they are made up of mature technologies that have less and less relevance for our customers. Turning to our wireless revenue performance on Flight 5. Mobile revenues achieved R$ 7.1 billion in the first quarter of 2021, with an increase of 1.1% over the year, driven mainly by prepaid revenues, which grew 4%, and the ongoing recovery of handset sales that were close to 11% higher than last year. In post-paid, we highlight VivoSelfie. A set of co-branded plans that offer selection of quality content, such as Disney+, Netflix, and Spotify, increasing our pool and driving a deeper relationship with our customers. Additionally, we focus on younger and increasingly digital mobile users. We co-created the Vivo Easy plan together with DJ Alok. Vivo Easy is 100% digital experience where we can customize the amount of data, voice, digital services, and other benefits According to your needs. Looking at our prepaid base, we are seeing an encouraging trend of increased recurrence and a positive shift in customer behavior. Digital pop-ups jumped 28.8% in the quarter and the number of customers recharging was 8.3% higher year-over-year. Then into slide six. People's Network Quality and Focus on Improving the Customer Journey allow us to maintain solid leadership in the mobile segment with 33.1% market share as of March 2021. Our POSPAY churn repeated similar trends seen previous quarter and stood at record level of 1.1%. When looking at convergent and family-planned customers, engagement levels increase and churn is up to 50% lower The volume of post-pay net additions continues its positive trajectory, reaching 666,000 this quarter, the highest level since the fourth quarter 2017. Turning to core fixed business, revenues are brought to present a strong year-over-year growth of 72% given the demand for high-speed broadband and digital services. FTTX revenues were up 20.3%, with FTTH revenues advancing an impressive 61.2% year-over-year, driven by ARPA increases, enhanced sales of OTT bundles, and the wrap-up of new activations. According with the expansion of our fiber footprint, we continue to see significant IPTV revenue revolution that was up 25% 0.9% year-over-year. Another positive result in the quarter was the return to growth of data and ICT revenues that rose 9.5% year-over-year. This is a promising sign that companies are gradually starting to invest again. Cloud revenues are gaining relevance and practically doubled year-over-year, confirming the large opportunity in B2B with companies engaging in a profound digitalization process to thrive in this new environment. Moving to slide 8, vivus harvesting from a well-executed strategy to capture opportunities in fiber and after sizable and rapid expansion of home past in the last years is experienced accelerated demand for its premium UBB offer. In the first quarter, we posted record FTTH net ads of 368,000. This is more than twice what we had a year before and 1.5 times what we saw last quarter. At the same time, Vivo Fibre customers are demanding higher speeds and a wider variety of content options. In fact, around 30% of our gross additions were bundled with OTTs or head speeds above 300 megabits. Moreover, more than 35% of our net additions were convergent customers. With that, we're able to increase FTTH ARPO by 16.2%, reaching R$95. In addition, on the top right-hand side of the slide, we show the evolution of FTTH HomePath, up 4.6 million year-over-year, that were further enhanced by our multiple expansion partnerships. aimed at reducing time to market and capex allocation. On slide 9, we give more color on PI Brazil, our neutral fiber network that expects to be fully operational by the second half of the year, further accelerating FTTH deployment. PI Brazil is partnership between FIVO, Telefónica Infra, and CDPQ, and the setup of the company is progressing according to plan. On April 6th and 23rd, we received the approvals from the Brazilian and European antitrust agencies, and we are now waiting on Anatel. This initiative will allow us to accelerate our fiber rollout and consolidate our leadership. VIVO will manage all commercial and customer service activities while remunerating VIVO Brazil for the use of its network. VIVO Brazil will start with 1.6 million home paths And we carved out from Vivo and expected to reach more than 5 million homes past over four years taking fiber to both greenfield and brownfield cities. On slide 10, we showed the progress of our objectives to build a digital ecosystem. Combining Vivo's unmatched set of enables, such as customer base, brand, channel capability, big data, and billing capabilities to mention the key ones, With partnerships with some of the most relevant players in the digital space, we are creating new platforms that complement our telco services. The aim is to capture growth and further engage our client base, resulting in increased loyalty and higher recurrent revenues. One of those platforms is VidaVie. We have just signed a binding agreement with Teladoc, one of the largest telemedicine companies in the world, which represents another step towards the creation of a health marketplace around vivo. Our plan is to provide a set of services such as immediate and scheduled doctor appointments, grant discounts in more than 27,000 drug stores nationwide, make pre-screening of symptoms through an artificial intelligence engine, and give digital certificates, exam requests, and prescriptions to patients. The platform has been established to include and attract other players and partners, and its initial focus will be on people without private health plans. Moving to the right-hand side of the slide, we present our strategic partnerships with DOTS, an engagement platform based on one of the most important loyalty programs in Brazil, and CDF, one of the key B2B2C marketplaces for home assistance and tech support in the country. We are very excited about both. Not only are we strengthening our grasp of customers' digital lives through the combination of our businesses, But VIV is also executing its plan to have equity stakes in companies with great growth prospects that are the champions of their segments. Talking about financial services on slide 11, we are enthusiastic about the recent launch of our very own digital account, VivoPay. The service allows customers to carry out banking transactions like paying bills and making cash transfers via PICs. Recharge your prepaid plans and purchasing credits for mobile apps like Google Play, Uber, and Spotify. This initiative allows Ziva to be part of a journey to promote financial inclusion, focus on prepaid customers with top-up recurrences that probably do not have a bank account. Additionally, VivoMoney, our 100% digital personal loan platform, is delivering consistent progress, having doubled its credit origination quarter over quarter. Finally, we launched the Vivo Itaú Card, a co-branded credit card created in partnership with Itaú that offers up to 10% cashback and other important benefits that will help us scale our marketplace and stimulate in-store commercial activity. On slide 12, I would like to comment on Vivo's most recent ESG highlights. as we believe that having a social and environmental footprint is key to fulfilling our purpose of digitalize to bring closer. To help the most vulnerable families still affected by the economic downturn, we are participating in the campaign United Against Hunger with the NGO Cheirando for Coins to raise funds for the purchase of food kits in support of the Movimento Panela Cheia. For every donated kit by FIBO's employees, Fundação Telefônica FIBO donates two more. Also, in the social sphere, FIBO is the first Brazilian company of the sector with the ISO 26000 certificate, which validates the compliance of our initiatives on human rights, diversity and social impact, for the implementation of the best practices in the market. This alignment encompasses all the measures regarding our employees, partners, suppliers, and also the society. In addition, we are proud to announce our first solar power plant in the northern region of Brazil, located in Maraba, in the state of Pará. It has the capacity to generate 2,190 megawatts hour per year, which will be used to power 632 of our energy consumption units This is the 16th out of 70 renewable power plants we plan on having up and running by the end of the year. Finally, we are rated as having the best reputation of the sector by the poll conducted by Merkel, jumping 13 positions compared to 2019. These initiatives enhance our performance and sustainability, which is based on economic, environmental, and social balance, and contributes to our main purpose of bringing people together. I now turn the call over to David, our CFO, to take us through the financial highlights.