Telefonica Brasil S.A.

Good morning, ladies and gentlemen. Welcome to Vivo's second 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 the globe icon located 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 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 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 statements that may be made during the conference... Call regarding the company's business prospects, operational and financial projections and goals are the beliefs and assumptions of Vivos' 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 materially from those expressed in the respective forward-looking statements. Present at this conference, we have Mr. Christian Jabara, 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. Mr. Carneiro, you may begin your conference.

Good morning, everyone, and welcome to our second quarter 2023 earnings call. The presentation will be divided in two parts. First, our CEO, Christian Jabata, will comment on Vivo's operational and financial performance, followed by an update on the progress of our B2B and B2C digital ecosystems and ESG initiatives. Then, our CFO, Tavi Melcon, will walk us through our cost and CapEx evolution, net income, shareholder remuneration, and free cash flow generation. Christian, I hand it over to you.

Thank you, João. Good morning, and thank you for participating in our earning call. We delivered a very strong result in the first like-for-like quarter after all immobiles acquisition in April 2022. Total revenues grew by 7.6% year-over-year, well above inflation, mainly driven by the mobile service revenue that was up 10.4%. This outstanding performance is a result of our best-in-class value proposition in mobile and fiber, which translates to an expansion of post-paid access by 4.8% year-over-year and homes connected by FTTH by 15.1% in the same period. The robust operating performance combined with cost discipline enabled EBITDA to grow at double-digit pace, plus 11.1% year-over-year, contributing to a 120 basis point margin expansion in the period. By summing up a robust EBITDA expansion, if a reduced level of CapEx intensity, we were able to deliver an exceptional performance in operating cash flow, which totalled R$6 billion in the first half of 2023, up 29.2% year-over-year. All these sectors allow us to reach R$2 billion in net income in the first six months of 2023, an increase of 28.9% versus the same period of the previous year. As we keep on generating a massive amount of free cash flow, as seen by the 5.6 billion reais produced year-to-date, we are committed to maintain a strong level of shareholder remuneration. Up to July 12, 2023, we already declared 1.9 billion reais in dividends and interest on capital, while we also invested over 200 million reais to buy back our own shares. Turning to slide four, we show how our strategic decision of investing in core products during the last years is enabling us to deliver a both inflation top-line growth. Pricing rationality combined with continuous upselling to post-paid plans allows mobile service revenues to reach a 100% organic double-digit expansion in the first comparable quarter since the acquisition of MobileMobile. On the fixed side, FTTH and corporate data, ICT, and digital services continue to be the main growth drivers as we continue to capture the growing demand for high-quality connectivity and digital services in Brazil. As such, revenues from these two business verticals are growing at rates around meetings, contributing to the positive expansion of our fixed revenues. Moving to slide five, we can see the strengthening of our leadership in the mobile business. Despite the disconnection of almost 4 million inactive users received from OI, we have consistently increased our market share since consolidation started. The better mix of customer couple with our pricing strategy resulted in an 11% annual growth in ARPU, with visible improvements also in the quarterly trends. While average spending increases, post-pay churn has reduced sequentially and reached its lowest historical level of 1% per month. which is almost half the level we had in 2019. These operational figures give us confidence that we continue to post strong results going forward. On slide six, we detail the operational performance of the fiber business. In the last 12 months, we added 3.7 million fiber to the home premises, which now totals 24.7 million homes in 439 cities throughout the country. In the same period, we continue to lead the market in terms of net additions, connecting 760,000 homes to reach a total of 5.8 million customers, an increase of 15.1% year-over-year. Besides being the absolute leader in fiber with the largest FTTA footprint, VIVO has been extremely successful in reducing its FTTA churn, having reached, in the second quarter of 2023, its lowest level ever, after reducing it by 20% since 2020. This demonstrates that the unmatched quality of our services, here represented by the elevated and growing average speed of our FTTH customer base, coupled with the strength of our fiber mobile convergent offer, are elements that will continue to give us the edge to maintain the fiber differentiation and leadership. Going to slide seven, we give an update on recent changes and results related to our portfolio. First, in prepaid, we increased the level of our minimum top-up by 25% from R$12 to R$15, aligning this amount with the price of the entry-level plan we have in our Vivo Pre-Turbo offer. This movement simplifies the prepaid portfolio structures and helps us continue to pull the pre- to post-paid upsell lever by reducing the price gap from prepaid to hybrid. In hybrid, we launched three new offers that bundle connectivity with health and entertainment options. Vivo Hybrid Health will help us scale Vale Saúde, a healthcare startup that we acquired last quarter, and to improve our value proposition by providing our customers access to a wide network of health service providers with national coverage. Moreover, Vivo Hybrid with Netflix or Vivo Play strength our portfolio with broad catalog of content that contributes, reduce churn, and increase customers' lifetime value. Lastly, you can see that Vivo Total, our convergent offer that bundles FTTH with Postpaid, continues to gain relevance. Today, almost 80% of the FTTH sales in Vivo's own stores are originated by Vivo Total. This offer has an incredibly low churn of 0.39% per month, demonstrating the power of a single plan that can fulfill all of our customers' connectivity needs inside and outside their homes. Turning to slide eight, you can see the evolution of our digital B2B services, which are asset-light, and thus help improve Vivo's return on invested capital. During the last quarter, the revenues from these services added up to 800 million reais. Most of these revenues are recurrent. And as such, we have been able to maintain an annualized growth level of around 30%, even though in some quarters, we may see lower or higher growth rates depending on the capture of one-shot revenues. I'm proud to share that Vivo was recently recognized by Microsoft as its partner of the year 2023. demonstrating how successful our partnership is in Brazil as a reseller of solutions such as Cloud Azure, Microsoft 365, and Microsoft Teams to companies of all sizes. We are the first telco in Brazil to receive this important recognition. Moving to slide nine, we update you on the evolution of digital services in the B2C segment. On the left-hand side, you can see that in the second quarter of 2023, financial services generated 95 million reais in revenues, up 39% year-over-year. Here, we have an important contribution of VivoMoney. our 100% digital credit product that ended the quarter with a portfolio of R$275 million, up 3.6 times year over year. Another important pillar of the B2C ecosystem is the distribution of video and music OTTs through our invoice, bundled with connectivity plans, or on a standalone basis. We currently build 2.5 million OTP subscriber, having generated 137 million reais of revenues in the quarter, up 35% year over year. Vivo clearly stands out in terms of partnerships with content providers, allowing us to increase our share of wallet and customer retention. Let's move to slide 10. On ESG, we highlight some initiatives across all fronts. First, on environment, we ended up the quarter with six tons of electronic waste recycled within the Vivo Recycle program, targeting to double this amount year by year end. The distributed generation program continues to evolve, as we already have, Fifty-nine functioning renewable power plants spread throughout the country, taking us closer to our goal of 85 power plants. On the social front, we see the results of the actions we have been taking to foster diversity in the company. We launched the Joven Apprentice Program 2023 that targets a public economy with 16 to 22 years old, and removes any age limitation in the case of professionals with disabilities, and directs 50% of the vacancies to Black people. This initiative, together with others, contributes to the increase of diversity in the company. By the end of June, Black people already represented 41.2% of our workforce, a 7.6% increase versus December 22nd. In addition, Vivo sponsored, for the second year in a row, Sao Paulo's LGBT Plus Pride Parade. Inside the company, we also had an increase of LGBTI Plus self-declared employees, which totaled 8.5% of our workforce, up 2.5 percentage points in six months. Finally, on governance, the application security and data protection monitoring process were certified by ISO 27001, demonstrating our alignment with international standards and reference for information security management. Moreover, VIV was recognized by Merkle as the leader in ESG responsibility in the sector, recognizing our efforts to build a sustainable company. For more information on our ESG practice, I invite you all to check out our 2022 integrated report available on on the investor relations website. Now, David will take us through the financial highlights of the quarter.