Telefonica Brasil S.A.

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefonica Brasil second quarter of 2021 earnings conference call. Today, with us representing the management of Telefonica Brasil, we have Mr. Christian Gebara, CEO of the company, Mr. David Malcolm, 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 website www.telefonica.com.br slash IR. 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 this conference call, Please press star zero for an operator. Before proceeding, let me mention that forward-looking statements are being made under the safe 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 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 call over to Mr. Luiz Plaster, Investor Relations Director of Telefonica Brasil. Mr. Plaster, you may begin your conference call.

Thank you. Good morning, everyone, and welcome to Telefonica Brasil's earnings call for the second quarter of 2021. Today, the call will be divided in two parts. First, our CEO, Christian Gebara, will present Vivo's main financial and operating figures. as well as the digital ecosystem and ESG highlights. Then our CFO Davi Melcon will give you more information regarding our cost and topic structure, free cash flow and shareholder remuneration. Now I hand it over to Christian.

Thank you, professor. Good morning, everyone, and thank you for joining our earning calls. On slide three, we show that this quarter was marked by a positive evolution of revenues, customer acquisition, activations, as well as net profits. In mobile, postpaid access reached 47 million, up 9.2% year-over-year, taking the total mobile access base to 81 million, the highest level since 2015. In fiber, we posted 300,000 net additions and now have 4 million homes connected with FTTH, 41.3% more than the second quarter 2020. At the end of the second quarter 2021, We had a total of 97 million access, including mobile and fixed, which is a million more than the first quarter of 2021. Total revenues also continued to accelerate, up 3.2% year-over-year, with core revenues growing an impressive 8.2% and already representing close to 90% of the total. FTTH and mobile services revenues were the main drivers, increasing 49.7%, and 3.1% respectively. EBITDA grew 3% to R$ 4.2 billion with a margin of 39.7% and net profit totaled R$ 1.3 billion, jumping 20.9% year-over-year. As for shareholder remuneration, we deliberated R$ 1.3 billion of interest on capital so far this year, which translates into a dividend yield of 7.7% in the last 12 months. Furthermore, we registered an extraordinary tax gain of 2.1 billion reais due to the Supreme Court's decision to deduct ICMS from the basis of Pisco Fin's contributions, which we estimate will be an additional source for cash for the next 12 months. Moving to the next slide. The momentum for our core businesses is escalating, growing 8.2% in the over year, and they are clearly the driving force going forward. Vivo continues to set the pace for high-speed connectivity, mobile and fixed, and how to combine it with a complete offering of digital products and services for both B2C and B2B customers. As our top-line growth improves, we are also transforming the company to meet our customers' revamped demands and strengthen our relationship with them. Ultimately, this results in lower churn, higher engagement, Revenue recurrency and consequently improved lifetime value. Our core businesses represent a new chapter in Vivo's equity story, and we are convinced of the value that can be unlocked in the short term to the medium term. Turning to our wireless revenue performance on slide 5, total mobile revenues grew 5.6% year-over-year in the second quarter of 2021, with services revenues increasing 3.1%. Prepaid delivered another quarter of encouraging trends, up 8%, and postpaid returned to positive territory, growing 2.1% year-over-year. Handset sales also continued to recover, up 47.3% year-over-year. The temporary confinement measures applied in April resulted in lower commercial activity for that month, which negatively impacted the quarter-over-quarter comparison. With stores open now and the economy picking up, we see reassuring trends and are optimistic about the rest of the year. Moving to the bottom right-hand side of the slide, a quick update on the position of OIS mobile assets. The necessary regulatory antitrust approvals are advancing accordingly. We should have more concrete news around the end of the year. We are confident that the outcome will be a more sustainable environment for investments in infrastructure and innovation. Resulting in an improved mobile network and overall customer experience. We will keep you informed about the relevant progress. Turning to slide 6, the quality of Vivo's network and services is what brings our customers closer, allowing us to consolidate our leadership in the mobile segment with 33% market share as of April 2021. At the end of the second quarter of 2021, we had nearly 81 million mobile access, 6.6 million more than in the second quarter of 2020, a growth of 8.8% year-over-year. Prepaid, that has 34 million customers, grew 8.2%, and postpaid, that has 47.1 million, increased 9.2%. On the right-hand side, you can see the customer acquisition is being enhanced by migrations and elevated portability. That was 3.7 times higher than the second quarter of 2020. These customers are not only choosing Viva as their connectivity provider, but they are increasingly more loyal. Post-pay churn repeated similar trends in previous quarters and stood at a record level of 1.3%. Turning to core fixed revenues, we are proud to present a strong year-over-year growth of 16.4% given the demand for high-speed broadband and digital services. FTX revenues were up 14.3% with FTTH revenues advancing an impressive 49.7% year-over-year driven by ARPO increases, enhanced sales with OTT bundles, and the ongoing ramp-up of new activations. According with the expansion of our fiber footprint, we continue to see significant IPTV revenue revolution that was up 29.5% year-over-year. Like we saw last quarter, Data and ICT revenues are recovering, rising 14.8% year-over-year. This is a promising indicator that companies are effectively starting to invest again. All in all, core fixed revenues are growing double-digit, and we expect this trend to continue. Moving to slide eight, we're seeing the results of our fiber strategy as the number of FTTH homes passed add up. Thank you very much. while we had two years ago and over, 1.1 million more than second quarter 2020. We continue to focus on connecting more fiber customers during the rest of the year, maintaining an elevated volume of net additions. On slide nine, we give more color on FibraSeal, our neutral fiber network created in partnership with Telefónica Infra and CDPQ that's up and running and will deploy 500,000 FTTH home paths in the second half of this year. 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 FibraZil for the use of its network. FibraZil will start with 1.6 million home paths in 34 cities across Brazil that will be carved out from Vivo and is expected to reach more than 5.5 million home paths over four years, taking fiber to both greenfields and Brownfield Cities. The proceeds from the transaction will have a positive impact on Vivo's cash flow now and in the years to come, conditioned to pre-established targets. Additionally, part of the proceeds will go directly to Fee Brazil to fund its deployment strategy. On slide 10, you can see how we have been adapting to the ever-demanding improvement in connectivity. Over the last year, the average speed of gross ads has skyrocketed. Due to our focus of offering reliable ultra-broadband to our customers, the average speed went from 118 Mbps in the third quarter of 2020 to 238 Mbps in the second quarter of 2021. The extent of this increase in speed is an ongoing contribution to FTTH ARPU growth. By bundling high-speed broadband with digital services, we were able to decrease our FTTH churn by 29% and improve the mix of new customers. Around 40% of our fiber-gross ads have speeds equal or above 300 megabits, meaning that we are increasingly attracting high-value customers. Moving to slide 11, we show the progress of our objective to build a digital ecosystem and deepen the reach of our relationship with customers. Vivo has a unique set of key neighbors listed in the left-hand side of the slide that allow us to play a significant role on several fronts. All of which escalate our relevance in our customers' digital life needs. Through VivoMoney and VivoPay, we already offer a portfolio of financial services at a favorable price point, all accessible in digital format, and are seeing ramped-up demand. Our health and wellness platform, VidaV, starts off with telemedicine consultations and a mindfulness approach, and will evolve along the entire healthcare value chain. Shopping Vivo Our marketplace for tech-related needs and home office solutions is gaining awareness and will increasingly become a benchmark for this segment. Finally, we are putting together a platform that leverages on our leading pharma connectivity to offer home-related digital and automation services with equipment from leading national and international suppliers and will enhance our customers' lives. All these initiatives reinforce themselves and allow us to expand beyond traditional connectivity, putting Vivo on the path to become a digital champion in a continental-sized market like Brazil. Next, on slide 12, I would like to talk about Vivo's digital channels that are increasing in relevance as they improve the overall customer journey. Our main relationship channel, Meu Vivo, fosters 19 million unique users that carry out approximately five interactions per month. As a result, it's the platform for choice for our customers, and 78% of our contacts are made through the app. Moreover, Melvivo isn't only the present and future of our eCare platform, but it's also a lever to enhance revenues. In fact, around 50% of digital upgrades and mobile sales, 40% of marketplace traffic, and more than 50% of third-party app sales are already originated there. On the right, You can see also our net promoter score for stores, technicians, and WhatsApp support that are higher than those of the industry. People choose Navivo for its unmatched customer experience, and these figures attest that our efforts are making the difference. Lastly, on the bottom of the slide, you can see that the ramp-up of digital channels is multi-layered. Revenues from digital prepaid top-ups grew 27.7% year-over-year. Vivo Easy, our 100% digital mobile plan, more than doubled, and online FTTH sales rose 18.6%. Turning to slide 13, I would like to comment on Vivo's most recent ESGs initiatives as they continue to expand, generating a positive impact for all stakeholders. On the environmental front, Recycle with Vivo reached a new stage, aiming to accelerate the circular economy of more than 1.5 million broadband and TV equipment refurbished by the end of the year. In addition, we also expanded the distributed generation project that's 100% based on renewable sources. It will be able to power 30,000 consumption units around Brazil by the first quarter of 2022 through the generation of 81 average megawatts coming from 80 distinct clean energy power plants. In the governance sphere, Vivo obtained the ISO 27001 certificate for the vulnerability management process of its digital security program Vivo Segura, which ensures alignment with the best international practices. Also, we were rated in the 11th position in Merkle's ranking of the most responsible companies during the pandemic and in top position in terms of responsibility and governance. Finally, we were also recognized in the fifth edition of the best companies for women to work 2021 as having the best reputation of the sector. These initiatives are designed to enhance efficiency, environmental preservation, and contribute to the wellbeing of the society. I now turn the call over to Davi, our CFO, to take us through the financial highlights.