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 2022 earnings conference call. Today with us, representing the management of Telefonica Brasil, we have Mr. Christian Gebara, CEO of the company, Mr. Davi Melkan, CFO and Investor Relations Officer, and Mr. Gabriel Menezes, IR Senior Manager. We also have a simultaneous webcast with slide presentation on the internet that can be accessed at the site www.telefonica.com.br. Thank you very much. Thank you. 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 the results to differ materially from those expressed in such foreign-looking statements. Now, I will turn the conference over to Mr. Gabriel Menezes, Investor Relations Senior Manager of Telefonica Brasil. Mr. Menezes, you may begin your conference.

Thank you very much. Good morning, everyone, and welcome to Telefonica Brasil's conference call to present the 2Q22 results. The call will be divided as follows. To start, our CEO, Christian Gebara, will comment Vivo's financial and operating highlights, followed by an update about our B2B and B2C digital ecosystems and ESG initiatives. Then, David Malcom, our CFO, will go through our cost and capex structure, net income, free cash flow, and shareholder remuneration. Now I hand it over to Christian.

Thank you, Gabriel. Good morning and thank you for joining our calls. We begin on slide three. In the second quarter of 2022, we incorporated assets coming from the acquisition of our share of oil model. The results originated by these assets that are being considered in our numbers since April 1st, 2022, coupled with an outstanding quarter in organic terms, led us to register double-digit growth in key performance indicators by which we measure our business performance. Access, Revenues, and Cash Generation. Our customer base totaled 114 million access as mobile call states reached an impressive level of 57 million lines, while FTTH connections grew 25% year-over-year to 5 million. With the remarkable acceleration of our operating figures, Our total revenues posted a growth of 11.1% year-over-year, boosted by our mobile service revenue that expanded 15.1%. Excluding the effects of OIST incorporation, mobile service revenue was up 9.4% in this period, considerably ahead in comparison to recent quarter's performance. Our EBITDA blew a court link up. 8.3% versus second quarter 21, offsetting impacts of the rising cost inflation, driving the operating cash flow generation of the first six months of 2022 to expand 3.3% year over year. Moreover, aligning our strong top-line performance with efficient financial management, our free cash flow rose 13.9% in the first half of the year, reaching 4.6 billion reais contributed to the distribution of 3.1 billion reais back to our shareholders that was further enhanced by 313 million reais in share buybacks. These results underscore people's leading position in the Brazilian telco landscape that can be recognized not only by our sound financial performance but also by the strength of our brand that was considered to be the fourth most valuable in Brazil among all sectors being worth almost 4 billion dollars. Moving to slide four, you can see on the left-hand side of the slide the continued improvement of our revenue mix, with core businesses increasing in relevance by 3.0% over the year, representing 2% of our top line. On the right-hand side, we show how the market is reaffirmed, as our total revenues yearly performance continues to improve quarter after quarter, Bear in mind that our improving growth pace is happening despite a more challenging macroeconomic environment highlighting the essentiality of connectivity and the inflation-proof character of our main services such as fiber and B2B solutions. On the next slide, we give more color on our core segments that continue to benefit from their positive momentum as mobile revenues expanded 16% year-over-year while fixed core was up 10.8%. We had double-digit growth across all mobile services, a byproduct of our superior level of net additions that will be further detailed in the next slides, with a healthier price environment. As a result, our mobile service revenues rose 15.1% year-over-year, the highest expansion of this line in over 10 years. Meanwhile, Corfix continues to boast sound results leveraged by the non-stop fiber expansion and by our myriad of B2B solutions that place Vivo as the only player in the market capable of offering to enterprise the best connectivity platforms, capital services, and applications from top global partners. Now on slide six, we present our superior operating results. Our mobile base grew 23% year-on-year, reaching 99.2 million access, with the addition of approximately 12.6 million coming from OI, on top of 1.4 million organic post-paid access. It's worth saying that in the second quarter of 2022, we registered our highest level of organic post-paid, excluding machine-to-machine net additions, in over seven years, with approximately... The remarkable outcome, along with the lowest level of post-paid journeys in Vivos history, is proof of our unmatched quality of services and brand positioning, as our customer base keeps expanding month after month. Regarding fiber, we reached 21 million home paths in 354 cities, totaling 5 million customers. The FTTH business is our main growth lever and we continue to move forward in this segment with our convergent offer, Vivo Total, while we expand our fiber footprint through organic deployment and through Brazil. Moving on, slide 7 gives an update on our B2B and B2C digital services. As you can see, on the left-hand side of the slide, the reference coming from the sale of digital B2B services continue to outperform. Thank you very much. Hi-performance connectivity and efficiency assurance services to farms. However, we gave an excellent opportunity to the sector, and thus we developed partnerships with specialized suppliers to create the biggest portfolio of solutions for the modern agribusiness. The results of what we're about to launch, new IoT products to revamp management tools and increase the productivity of our customers' operations, as they will be able, for example, to manage and track capital remotely and use drones to monitor perimeters or apply agricultural inputs on crops. Regarding our B2C ecosystem, VivoMoney continues to expand with more than 80 million reais in credit considered so far after originations grew more than sixfold this quarter on an early yearly basis. In the meantime, VivaE, our joint venture on the education front with Anima, is progressing according to plan. We have already defined the CEO and management team, having a target to launch a minimum viable product still in 2022. Lastly, Vivo Ventures, our corporate venture capital, is on its final steps towards its first round of investments, after the creation of a short list of the top 20 potential entities, selected according to their growth potential and fit with Vivo's digital ecosystem strategy. On slide 8, we present our first insurance of the ventures linked to ESG goals and the recently launched financing framework. The debentures issue helps us in taking another step forward into a more sustainable and diverse company, as it aligns financial, environmental, and diversity objectives. The debentures remuneration is subject to two ESG-related goals, the reduction of our direct greenhouse gas emissions by 40%, and having 30% of our leadership roles occupied by black people, both by the end of 2027. Moreover, the new financing framework unwraps people's approach to sustainability of investments and the market in general, allowing for a simplified emission and allocation of future investments with social impact and low carbon footprint. With that, we'll be able to continue expanding our contributions to the United Nations Sustainable Development Goals that underpins our ESG overall strategy. Now that we will take us through the financial highlights of the quarter.