Telefonica Brasil S.A.

Good morning, ladies and gentlemen. Welcome to Vivo's fourth quarter 2022 earnings call. This conference is being recorded and the replay will be available at the company's website at ri.telefonica.com.br. The presentation will also be available for download. This call is also available in Portuguese. To access, you can press the globe icon on the lower right side of your Zoom screen, and then choose to enter the Portuguese room. After that, select Mute Original Audio for a better experience. Para acessar nossa conferência em português, clique no ícone do globo localizado no canto inferior direito da sua tela zoom e selecione a opção Portuguese Room. Ao acessar a nova sala, certifique-se de silenciar o áudio original para uma melhor experiência. We would like to inform you that all attendees will only be listening to the conference during the presentation, and then we will start the question and answer section when further instructions will be provided. Before proceeding, we would like to clarify that any statement that may be made during this conference call regarding the company business prospects, operational and financial projections and goals are the beliefs and assumptions of Vivo Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore depends on circumstances that may or may not occur. Investors should be aware of events related to the macroeconomic scenario and the industry and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Present at this conference, we have Mr. Christian Gebara, CEO of the company, Mr. Davi Malcolm, CFO and Investor Relations Officer, and Mr. João Pedro Carneiro, IR Director. Now, I'll turn the conference over to Mr. João Pedro Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference.

Good morning everyone and welcome to Telefonica Brazil's conference call to present the fourth quarter and full year 2022 results. The call will start with our CEO, Christian Gebara, commenting Vivo's financial and operating highlights, followed by an update on the progress of our digital ecosystems and ESG initiatives. Then our CFO, David Melcon, will go through our cost and CapEx evolution, net income, free cash flow, and shareholder remuneration. I now hand it over to Christian.

Thank you, João. Good morning and thank you for joining our earning calls. I start by presenting the highlights of the fourth quarter and full year. 2022 was a transformational year for Vivo in the telecommunications industry in Brazil, with the initial deployment of 5G standalone and the mobile market consolidation, both of which are bringing significant improvements to the quality of service and customer experience. We closed the year with 112 million access, up 13.7% year-over-year, reinforcing our position as one of the Brazilian companies among all sectors with the largest number of clients. Our 58.7 million access in postpaid and 5.5 million in FTTH give us a very solid recurring revenue base, protecting our results from inflation impacts. In this sense, our total revenue grew 10.1% year-over-year in the fourth quarter, driven by the expansion of 13.6% of our mobile service revenues and by the best fixed revenue results since the fourth quarter of 2015, with a growth of 2.9%. As a result, our EBTA expanded 6.1% year-over-year, reaching 41.3% margin. The strong operating performance delivered during 2022 was culminated by a relevant amount of free cash flow, closing the year with R$ 7.3 billion. The robust cash generation, which is one of the key elements of our equity story, allowed us to declare over R$ 5 billion in dividends and interest on capital during 2022, on top of the R$ 600 million invested in buyback our shares. We firmly believe our shares to be undervalued. Hence, we are starting a new share buyback program aiming to invest an additional R$ 500 million during the next 12 months. To continue enhancing and differentiating our shareholder remuneration capability, yesterday we filed with Anatel a request that, if approved, will allow us to potentially reduce our capital stock by up to 5 billion reais. This will give us further flexibility to decide on future cash distribution and how to improve our capital allocation. Now we go to slide four, where we can see that for the second straight quarter, our top line grew well above inflation. The 10.1% year-over-year expansion results from the 13% growth of our core revenues that already represent 93% of our total revenues. This is particularly important as our known core business, which for years served as a drag to our revenue performance, now weighs less than lines with protection to keep double digital growth rates for years to come, such as FTTH and B2B data, ICT, and digital services. Moving to slide 5. On the left-hand side of the slide, you can see that our mobile revenues increased 13.4% year-over-year, as postpaid, prepaid, and handset revenues all grew double-digit. The mobile market consolidation and our leading commercial performance have been the main drivers here. On the right side, we detail our fixed-core performance, in which we had revenues climbing 11.9% year-over-year. The core products already represent 76% of our wireline business, up 6% on an annual basis. As a result, our total fixed revenues grew 2.9% year-over-year in the fourth quarter, this being the best early growth rate we reached since the fourth quarter of 2015. As usual, the main drivers were FTTH and data and ICT and digital services. Services that are hard to replicate and provide us with a robust platform for continuing improvement of our fixed business going forward. On slide six, we detail their operating performance on mobile and fiber, closing a year that probably was the best in our recent history regarding our customer base evolution. On mobile, we added 14 million new customers during 2022, reaching 98 million access. 16.8% year-over-year, even after carrying out this connection of 3.4 million inactive lines coming from OEM Mobiles' acquisition, of which 339,000 were eliminated during the fourth quarter. Our post-paid base grew at an even higher pace, up 18.2% year-over-year, as the migration of prepaid users towards hybrid plans continues to be very successful, while churn remains at record low levels, close to 1%. Also, we continue to be net gainers in portability of post-paid lines, clearly leading with the best value proposition. As a result, we closed the year with a biomarker share of 38.9%, up almost one percentage point since April, which was the first month in which Anatel reported the consolidation of voice access with the buyer's basis. In fiber, we ended 2022 with 23.3 million homes passed with FTTH after rolling out the network to 3.7 million new premises. Moreover, we added 874,000 FTTH access during the year, expanding our customer base by 19% to 5.5 million home connected. Our convergent offer, Vivo Total, has been very successful, representing around 70% of the FTTH net ads we registered during the fourth quarter. Being the only player capable of providing 5G plus fiber for a unique offering on a nationwide basis is a key differentiator, enabling us to keep on improving our operating performance and reducing post-paid and fiber churn. Moving to slide 7. During 2022, our digital B2B revenues grew 29% year-over-year, reaching R$ 2.7 billion. These revenues that aggregated products such as cloud, cybersecurity, IoT, digital B2B solutions, among other, already represent 5.6% of our total top line and will soon outweigh non-core revenues. These services and solutions are in great demand as companies of all sizes are becoming more and more aware of how beneficial it is to invest in digitalization of their business. We will continue to lever on our leading brand Complete portfolio, channel and reach capabilities to be the preferred partner of Brazilian companies in their digital transformation, capturing this unique opportunity. Moving to the right-hand side of the slide, you can see that we continue to develop our presence as a digital finance hub, taking advantage of the dozens of millions commercial relationships we have with individuals through our connectivity services to increase our share of wallet and customer monetization. Apart from VivoMoney, which closed the year with a long portfolio of over 180 million reais, Growing by almost seven times year over year, we are also offering co-branded credit cards in partnership with Itaú and handsets and home insurance products. In addition to that, Vivo Ventures, our corporate venture capital fund, made its second investment in a fintech by investing 10 million reais in Clube that act as a consortium administrator with financing model that's become increasingly relevant in Brazil. On slide eight, we update you on our ESG initiatives. During 2022, we were able to deliver solid results on all fronts. In environment, we reduced by 50% year-over-year our direct greenhouse gases emission and increased by 20% the collection of electronic waste through our Recycle with Vivo program. On diversity, we reached a 22.4% occupation of leadership roles by Black people, growing 3 percentage points year over year. Also, during 2022, Telefónica Viva Foundation invested 58 million reais to support students and teachers of the public education system in developing their digital capabilities, benefiting 2.2 million people. We are also recognized as a leading telco company in terms of corporate sustainability by S&P in the 2023 Sustainability Yearbook. Finally, we are pleased to announce we had the second highest score among 83 participants in B3's EZ2022 process, being the only telco within the top 10 best qualified companies. This is an improvement vis-a-vis the fourth place achieved in 2021, reflecting the efforts we make to create a more inclusive, green, and sustainable company. Now the view will take us through the financial highlights of the quarter.