NOS, S.G.P.S., S.A.

Hello everyone, good morning. Welcome to NOS third quarter 2025 conference call. I'll hand you over to our TFO, Luís. We'll deliver a short presentation and then we'll open for Q&A as usual.

Well, good morning and welcome to NOS third quarter conference call. We will begin as usual with the main highlights of this third quarter. A strong operational performance with the RGU trend significantly improving versus previous quarters. A consolidated revenue of 457 million strongly impacted by ANC decline despite resilient performance from Telco. An efficient cost management that is driving EBITDA growth and sustainable operational cash flow generation and a solid balance sheet and financial position with leverage below reference level of two times. So a quick overview of our main KPIs. This quarter, revenues declined 1.2% to 457 million, but EBITDA rose 2.7. This positive EBITDA performance, along with a CapEx reduction of 2%, led to improved EBITDA CapEx of almost 10%. Recurring free cash flow, excluding extraordinary effects, decreased 19%, and net income increased 25% reflecting the solid operational performance and our strategic transformation program. NOS proudly leads in global sustainability, having been recognized by both Time and Financial Times in their international benchmarking rankings as one of the world's most sustainable companies. This impressive achievement places NOS as one of only five Portuguese companies in both lists, and the only one from the telco sector. This highlights NOS' strong commitment and significant progress towards a sustainable future. Furthermore, NOS has received recognition from DECO Protest, the leading Portuguese consumer rights association magazine, being named best in test for its mobile internet, Wi-Fi and TV services. It's the first time any operator has secured ultra-record distinctions, underscoring NOS' strong commitment and investment in superior networks and quality of service. On the operational performance side, this was another strong quarter of Fibre2D Home expansion. More than 5.9 million households are now covered by NOS' Gigabit Fixed Network, with FTTH representing almost 88% of households' paths. This is a significant increase of 78,000 households quarter on quarter and almost 300,000 year on year. But despite the challenging competitive market, Nordstrom offers and commercial capabilities delivered a very strong third quarter with a 2% increase to 10.9 million RGU's. With 131,000 net ads, this quarter posted the highest level of net ads since 2023, driven by solid numbers in both fixed and mobile large use. With 12,000 net heads of unique accesses, this third quarter saw an acceleration of the operational momentum, driven by high levels of fiber deployment, low levels of churn, and competitive offers, particularly from Woo Brand and Naked Broadband, that are changing the mix of new customers. In mobile, we do... With 111,000 Net Hats in the quarter, mobile large use increased 3.3%, reflecting a stronger performance both in post-paid and prepaid. Post-paid had 160 Net Hats, posting very strong results driven by woo and non-competitiveness on convergent cross-sell. Prepaid net additions continued to improve since first quarter and just decreased 5,000 in the quarter, a clear improvement from Q2 seasonality despite competitive pressure. In summary, a solid operational performance and a strong improvement versus the previous quarters. Now moving to outdoor visuals and cinema business. The number of tickets sold declined by 28%. driven by the lack of blockbusters line-up this quarter, in contrast with Third Quarter 24, which featured several box office seats, including Inside Out 2, the most watched film ever in Portugal. The audiovisual segment was dragged down by cinema distribution, reflecting the lack of successful movies line-ups in this third quarter, as opposed to Third Quarter 24, where noise distributed Inside Out 2. Only three NOS audiovisual films ranked in the top 10 this quarter, harming NOS performance. Now on the financial performance side, NOS consolidated revenues decreased 1.2%, a reduction of 5.5 million, driven by a 6.8 million decline in the audiovisual and cinema division, and despite the resilient performance of the telecom segment. Telco revenues show a resilient 0.3% growth, primarily due to the performance of the enterprise sector, which posted a 4.4% increase driven by the corporate segment. The B2C segment experienced a decline of 1.2% due to increased competition impacting quite stronger operational activity. The new IT business showed a small decline of 0.4%, mainly driven by a reduction in the volatile resale of equipment and licenses. However, this was almost fully offset by a solid 8.4% growth in IT services. As previously explained, the audiovisuals and cinema division reported a 21% decline, driven by the 28% reduction in cinema attendance. So, North's operational performance and the solid results of North's transformation program, supported on GenAI-driven efficiency program, continue to deliver a solid 2.7 EBIT increase significantly above revenue, with a robust contribution from telco and IT, which recorded increases of 4.3% and 10.4%, and despite media segment decline of 21%. This quarter, NOS achieved a 4.6% OPEX decline, largely due to proactive cost management and GenAI-supported transformation program that continues to boost structural efficiencies organization-wise. Two significant examples of AI impact this quarter include the automation of call center and customer care service through LLM-powered voice virtual assistants and GenAI-based chatbots, which drove a 19% reduction in customer care costs. Furthermore, a 14% reduction in maintenance and repair costs was achieved by decreasing call times and intervention orders, also driven by AI. NOS CAPEX continues the structural declining trend, and this quarter dropped 2% to 91.5 million, mainly supported by the Telco CAPEX decline of 2%. In Telco, we saw a 2.4% reduction in customer-related investments and a 3.7% decrease in base CAPEX. Expansion CAPEX, however, saw an exceptional increase of 1.8% this quarter, driven by a temporary peak in NOS FTTH projects. IT CapEx increased by 300,000 to 1.9 million, driven by customer-related investment to support business growth, and audiovisuals and cinema CapEx declined 7% to 4.6 million, reflecting a return to a more normal spending level. As a result, improved operational performance and efficient CapEx management drove a 9.6% increase in EBITDA IL-CapEx. North saw the consolidated net income rise 25% to 65 million, a strong EBITDA growth supported by a solid operational performance and non-proactive cost management were key drivers, complemented by reduced financial costs and a 5 million contribution from tax incentives. Free cash flow declined by 56% to 51 million, primarily due to a reduction of almost 50 million in extraordinary effects. mainly related to tower sales to sell next and the tax receivable paid in advance in 2023, which positively impacted third quarter by 30 million. However, this quarter, we have a negative impact of 90 million in taxes from extraordinary gains in 2024 from tower sales and refund of activity fees. Without extraordinary items, recurring cash flow dropped 19%, driven by a 39 million increase in taxes that totally offset the positive impact of the strong operational performance, lower investments, a reduction in working capital, and lower interest rates. To finalize, this quarter, NOS debt decreased to 1,093 million, and the financial leverage ratio dropped to 1.6, well below the reference threshold of two times. Additionally, Norse benefits from a lower average cost of debt, now below 2.8%, representing a decrease of 0.2% quarter-on-quarter and 1.2% year-on-year. As of March, the company held $343 million in cash and liquidity. So with this, we conclude our presentation and we are now ready to answer to your questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue. Our first question comes from the line of Molly Whitcomb from Goldman Sachs.