Telefonica Brasil S.A.

Good morning, ladies and gentlemen. Welcome to Vivo First Quarter 2023 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 on the globe icon in 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 no lado inferior direito de 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 the conference during the presentation, and then we'll start the question and answer section when further instructions will be provided. Before proceeding, we would like to clarify that any statements that may be made during this call regarding the company's business prospects, operational and financial projections and goals are the beliefs and assumptions of Vivo's 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, the industry, and other factors that could cause results to differ maturely from those expressed in prospective forward-looking statements. Presented at this conference, we have Mr. Christian Gebara, CEO of the company, Mr. David Malcolm, CFO and Investor Relations Officer, and Mr. João Pedro Carneiro, IR Director. Now, I will turn the conference over to Mr. João Pedro Carneiro, Investor Relations Director of Vivo. Please, Mr. Carneiro, you may begin your conference.

Good morning, everyone, and welcome to Telefónica Brazil's conference call to present the first quarter 2023 results. The call will start with our CEO, Christian Gervana, commenting Vivo's financial and operating highlights. followed by an update on the progress of our B2B and B2C digital ecosystems and ESG initiatives. Then our CFO, David Melcon, will go through our cost and capex evolution, net income, shareholder remuneration, and free cash flow generation. I now hand it over to Christian.

Thank you, João. Good morning, and thank you for joining our running call. I start by presenting the highlights of a very strong first quarter for Vivo, a period when we reached our highest total revenue year-over-year growth in over a decade, expanding top line by 12.1%, driven by an expansion of 15.9% of our mobile service revenue and by further improvement of our fixed business. This off-the-charts performance was a result of yet another positive quarter in operating terms. with mobile postpaid access growing 15.4% on an hourly basis, while our FTTA subs base expanded 16.8%. We have been able to grow EBITDA above inflation for a few quarters in a row, and this one was no exception, as we presented a 9.6% year-over-year expansion. This result, coupled with the reducing capital intensity you should see throughout the year, allowed us to generate R$3.1 billion in free cash flow in the first three months of 2023, with a robust growth of 26.4% versus the first quarter of 2022. This confirms the conditions for us to maintain a leading shareholder remuneration in the industry going forward. Going to slide four. In the first quarter of 2023, our total revenue reached R$12.7 billion, the highest result the company produced in a single quarter in its history. More importantly, the 12.1% year-over-year evolution is the best we had in over 10 years, confirming that we are on the right track to continue delivering a bold inflation top-line expansion going forward. Our revenue mix keeps on improving as we see our core services expanding. On the mobile side, service revenues grew 15.9% year-over-year with a strong performance, both in pre- and post-paid. In addition, smartphones and other electronics, which were increasingly seen as key elements to enhance customer loyalty, accelerated 20.6% in the period. On the wireline business, FTTH and B2B data, ICT, and digital services continue to be the driver of information transformation. enhancing our growth profile through highly demanded products that only Vivo can offer on a large scale. On slide five, we present the main achievements of our mobile operations in the quarter. We closed March 2023 with 98.1 million mobile subs, of which 60% in post-bates. The 15% year-over-year growth of our customer base enabled us to further expand our market share, reinforcing our leadership in all mobile segments. One of the key elements behind the market outperformance is how successful we have been in controlling and reducing churn. Over the last five years, our post-trade churn reduced 37% to a monthly average of 1.09% in the first quarter of 2023. Churn reduction, jointly with the ARPA recomposition we have been experiencing over the last quarters, is a powerful platform to provide above-market results going forward. On slide six, you can see the key highlights of our initial 5G deployment. We closed the quarter with 58 cities covered with our 5G standalone network, moving forward to offer in the near future the technology in all top populated places in Brazil. Apart from being within our coverage area, to use 5G, our customer must have a 5G-enabled device. At the moment, almost 70% of the smartphones we are selling in our stores are are 5G ready for prices starting from as low as R$1,300. The device affordability coupled with our accelerated footprint expansion has been a driver for fast customer migration from 4G to 5G. As such, 20% of our pure postpaid users are already enjoying Vivo's 5G experience, and this take-up is much faster. than what we saw a decade ago when we launched 4G. This is important as the migration to 5G not only will enable us to be more efficient in terms of investment deployment, but also creates room for more data consumption, which in turn will serve as an important driver for product upsell and improved monetization. Turning to slide seven, we move to fiber. In the first quarter of 23, we added over 1 million fiber to the home premises to our footprint, which now reaches 24.4 million homes in 436 cities. Our second-to-none network reach allowed us to maintain the undisputed leadership of the fiber market in Brazil, with 5.7 million customers, growing 16.8% year-over-year. Apart from the infrastructure advantage, Vivo has a unique ability in Brazil as the only player being able to bundle, in a single plan, fiber and mobile POS pay. This bundling strategy is an extremely powerful tool to extend the customer lifetime value, protecting our investment to capture new users and improving our overall return profile. In fact, Vivo Total, which is our fully convergent offer, had a churn of only 0.39% per month in the quarter. Moving to slide eight. Here we can see that our digital B2B services generate 813 million reais of revenues in the quarter, up 32% year over year, representing 6.4% of our top line in the period. We have been consistently growing this pool of revenues to a tune of 35% per year on average over the past five years. As such, we are on the brink of seeing our digital B2B revenues be greater than our non-core revenues, demonstrating how efficient we have been in becoming relevant in new verticals to replace fading legacy technologies. Even so, we are just beginning this journey. As only a small fraction of our B2B customers are already using cloud, cybersecurity, and digital service from our portfolio of solutions. Therefore, by using the key assets we have, such as a strong brand and the 5,000 B2B sales reps with nationwide presence, we have a huge potential market to explore. Let's move to slide nine. Here, for the first time, we start to put numbers on some of the verticals we have been developing to consolidate our digital B2C ecosystem. But before that, I would like to point out that Brazil is a country with a low penetration of basic services such as health, education, and financial products. We firmly believe Vivo to be in a unique position to bridge this gap and accelerate inclusion through digitalization. relying on a low acquisition cost that takes advantage of a set of assets that includes a long-standing relationship with 112 million customers, massive big data capabilities, channels comprised of 1.8 thousand stores, and an app with over 22 million unique users per month, and one of the top 10 most valuable brands in the country. Now going to numbers. On the left-hand side of the slide, you can see that in the first quarter of 2023, the financial services we offered to our customers generated 94 million reais in revenues. So the financial services we offered to our customers generated 94 million reais in revenues, up 55% year-over-year. Here we have key contributions from VivoMoney, our personal loan platform, which closed the quarter with a portfolio of 239 million reais, up over five times year-over-year. We are also accelerating the sale of insurance for electronic devices such as smartphones, tablets, smartwatches, and laptops. At the moment, we have over 300,000 smartphones insured with us in partnership with Zurich Seguros. We are also moving ahead to go beyond tech and offer insurance for pets, bikes, homes, among others. Another important source of revenue and churn reduction has been the sale of video and music OTTs through our invoice, bundled with our postpaid and FTTH plans, or on a standalone basis. We currently bill more than 2.2 million OTT subscribers, generating R$101 million of revenues in the quarter, up 53% year-over-year. VIV is one of the top telcos in the world in terms of partnership with content providers. As we see, this is a key advantage in maintaining our customer loyalty and satisfied with a completeness of our portfolio. Moving to slide 10, in addition to financial services and OTT distribution, we are developing other verticals that will complement our digital ecosystem strategy, starting with health and wellness. In March, we invested 60 million reais to acquire Vale Saúde Sempre, a startup that provides access to over 5,000 labs and clinics nationwide and was already acting as a partner to our e-health initiative, Vida V. Now, we already have more than 70,000 lives covered by our subscription-based products. Moving to education, we recently made the commercial lounge of Viva E., the employability platform we have in partnership with Anima, offering over 400 hours of content packed in short-duration courses. On Smart Homes, we see space not only to sell virtual assistants, lamps, sensors, and other products, but also to have a recurring revenue stream through our VivoGuru solution, which offers our customers access to professionals dedicated to help with tech doubts and configurations. Additionally, We see the business of selling electronic devices beyond smartphones as very attractive as this generates important influence to our stores and allow us to be a one-stop shop for tech needs of our customers. In the first quarter of 2023, we registered 69 million reais in revenues from this vertical, up 95% year over year. Here, apart from being a smartphone, apart from the smartphone products, we sell laptops, wearables, and accessories, the latter being reinforced by a recently launched brand, Ovi. Moving to slide 11. On ESG, this quarter, we highlight that we are well on track to achieve the goal of having 40% of women occupying our leadership roles. As at the moment, 36.8% of the positions are held by them. We are not only fomenting the presence of women in the executive position, but also in field service operations through the program Mulheres de Fibra. Still on diversity, in the first quarter, we've sponsored the Lollapalooza Music Festival, allocating the largest part of its tickets to black people from peripheral communities and black influencers and entrepreneurs, through the Presença Preta, or Black Presence Movement. Going to the right-hand side of the slide, you can see that we continue to expand our distribution generation program, having inaugurated seven new power plants, totaling 55 plants in function out of the 85 we have as a goal. We were also recognized by the Carbon Disclosure Project for the third year in a row as a supplier engagement leader, helping implement sustainable practice throughout the entire value chain. Now, David will take us through the financial highlights of the quarter.