Good morning everyone, and thanks for joining us in this conference to discuss Oi's third quarter 2022 results. The event will take place in English with simultaneous translation to Portuguese. Please be informed that this conference is being recorded, and it will be available later on the company's IR website. Be advised that the current presentation is subject to conditions present in our disclaimer slide. During the company's presentation, all participants will have their microphones disabled. To get in line in order to ask questions, please click on the Q&A icon at the bottom of your screen and write your name and company. After the presentation, we will begin the Q&A session. Now, I would like to pass the floor to Mr. Rodrigo Abreu, Oi's CEO. Please, Rodrigo, you can now proceed.
Thank you, Luis. Good morning, everybody, and welcome to our Q3 2022 call. Today, I'll be conducting the call, but our CFO, Cristiane Barretto, will also participate, presenting details on our financial results and cost strategy. This quarter marks the beginning of a new period for the company as we start to operate what we are calling the New Oi. For the first time, the results shown, even though they still include some non-core components, which will go away in the future, such as our DTH operation, they represent the key operations the company remained with after the conclusion of its two structural M&As in Q2.
As we start in this new phase, we will start to present our results, highlighting the performance of each of our business components of the New Oi, both the core components, those which represent the future of the company, as well as the legacy ones, which still carry some negative weight and will need to be wound down in the years to come. Even though the results represent the purely rebranded New Oi, we are still not there yet in terms of the run rate numbers we expect for the company.
As even though the results do not carry the numbers from mobile or fiber infrastructure revenues as in the past, they still include some cost components, which should be reduced in the quarters to come, including the mobile transitional services we are still operating on behalf of the three buyers for the mobile operation and the gradual cost reduction of the overall company structure as we adjust to become lighter, simpler. At the end of the presentation today, we'll also provide some updates on important topics which are of interest to the markets, including the dispute on mobile price adjustments, the reverse stock split we proposed, our M&A activity, and our engagement with our advisors to address the company's capital structure for the future. With that, let's look at the highlights of Q2, moving to Slide 3.
As I mentioned in opening, we are now on a new model, and let's look at some of its highlights. We start with a positive indicator on the New Oi, which is that it has the capacity to grow. We can see that New Oi's revenues grew 10% year-over-year, with our core revenues representing 70% of total. On the heels of high numbers for homes passed and homes connected, both representing well, a significant growth with 36% year-over-year and 21% year-over-year respectively, we can see that all of our revenues components, but legacy grew significantly, including our core revenue with 39% year-over-year, our fiber revenue with 31% year-over-year, and our ICT revenues with 55% year-over-year. This new model continues to indicate a lighter company.
We know we have more to do still, but it's good to see that we achieved a routine OpEx reduction despite the higher variable cost links to the fiber revenue growth under the new model, and also a reduced CapEx, which we know, will still be changed in the future as it was impacted by seasonal O&D investments to support our fiber growth. Even though we know debt is still high, it's also important to mention that the significant reduction was achieved with all post RJ debt and a key piece of the pre-RJ debt repaid. This represented a 60% gross financial debt reduction since the start of the judicial recovery and a 35% reduction in gross financial debt since Q1, 2022.
Later on, we'll talk in more details about also four key updates, which are the hiring of Moelis & Company to optimize our capital structure, the mobile sale price adjustment discussions and the arbitration process initiated with the three buyers, the sale of non-core towers and DTH assets, and the proposed reverse stock split. Before we talk in more detail on the results, let's look at what is the new Oi in the next Slide 4. We can say in a simplified way that the new Oi has four key components with different profiles and different value generation capabilities. We start with Oi Fibra or Oi Fibra. Oi Fibra is our core key component for the future, and it represents today close to 43% of our revenues. We continue to grow very fast our FTTH accesses with the largest HP footprint in Brazil.
We are now at an 18 million homes passed level using the V.tal infrastructure with a 34 million expected for the end of 2024. We now are reaching close to 4 million homes connected in the third quarter, and this is, without a question, a booming revenue growth profile with an improved cash flow profile from the new structural separation model. The second component, Oi Soluções, represents close to 30% of revenues and is our B2B operation. It is a significant core business for us, which has started to regain share and now show very significant results by converting to an ICT player, leveraging on a leading B2B customer base that we have from the past based purely on connectivity. Oi Soluções already covers over 80% of Brazil's largest corporations as clients.
In addition to the long-term connectivity offers that we always had, we are providing ICT service contracts with more than 40,000 corporate customers and with an expanding portfolio. It is indeed a significant revenue mix shift driven by the strong sales of ICTs, coupled with the long-term contracts and lower CapEx profiles also coming from our structural separation model. The third block is actually a mix of several components which we can aggregate as new revenues and subsidiaries, representing 8% of revenues. Here, we are capturing additional revenue opportunities on digital services, the connected home. It's also important to highlight that we do have a 30%-35% share on V.tal, the largest neutral network fiber company in Brazil. We do not consolidate V.tal's results, but without question, they represent a significant value stake for us in the future.
On the subsidiary front, we do operate with two fully owned subsidiaries, Serede and Tahto. The first one operating on services and field services, and the second operating on call center operations. All of those have a high growth profile, in particular, V.tal. We can also focus on additional services with value upside potential in pretty much all of the holdings. Finally, we have our fourth block, which are the legacy services. Legacy represents today close to 19% of revenues, and it has a profile which, without a question, is a declining revenue profile. We are addressing many of its challenges, in particular by focusing on regulatory challenges with the regulator, looking at the arbitration that we have open for the concession imbalances with over BRL 16 billion in potential claims.
With that, we are also outbalancing a number of challenges we have for the future in terms of the potential costs to migrate our legacy operations to an authorization, and we expect to compensate those as the progression of the two projects go by. Our legacy will impact results until 2025 when the concession ends or until it is migrated to an authorization. After that, we expect still an impact, but much reduced compared to the past in terms of the financials moving forward. Now let's look at the consolidated results of all those components in the next Slide 5. In Q3, we can see that our new fiber model generates better operating free cash flow profile with a lower EBITDA margin, although results still penalized by legacy decline and the transition CapEx.
On the revenue front, on the left side, we can see that we are back to growth. Now, without Mobile and discontinued operations are there and still includes DTH. We can see that in Q1, this represented a significant number still. Last year, it represented a significant number still, the discontinued operations, in particular, those coming from Mobile. Now, the discontinued operations only includes our DTH TV business. On the EBITDA front, margins this quarter initially took a hit for starting to operate fully with the new fiber infrastructure rental model. We can see that Q3 has three full months of the V.tal expenditures, compared to only one month in Q2.
We know that the margin levels, even though when we consider this change, seem small with 8.1%, we see a significant improvement coming forward in the new years to come as we gain scale and reduce also the impact of our legacy operations, which weigh heavily on this lower margin for Q3. CapEx was significantly reduced, but still reflects some transition costs as we build the New Oi. For instance, we are building a completely new IT stack from zero, and this will replace the mishmash of legacy systems that we had in the company up until today, significantly simplifying our operational model and reducing costs in the future. Still, CapEx represented a significant reduction from the pure investment operating model that we had in the past with a 17.4% decline.
This new operating model drives a 50% reduction in operating cash needs in its initial phase, and we know that in the future, this equation tends to be improved even further. When we look at the legacy impacts, it's important to understand where are we? The numbers carry the weight of this impact, so let's look at our core revenues to understand this new picture. We can see that the consolidated revenues of BRL 2.7 billion have an impact of a declining legacy revenue of BRL 900 million, a -28% year-over-year. Still, we were able to grow in the core business over 33%.
It's another huge legacy decline with a direct hit on margin, but the high growth on all the core components help to compensate for that. When we look at recurring EBITDA without legacy, our EBITDA this quarter would be at the 14% range and climbing to where we believe it should be long-term, which is closer to the 20% range. Even though we reduced CapEx on legacy, we can see that legacy still consumes some CapEx there with BRL 62 million investment this quarter, which we expect to continue further reducing as time goes by. In the next slide, let's look at the different lenses to our revenue results. On Slide 6, as highlighted, our total revenues reached a double-digit annual growth, with both fiber and ICT sales as the main drivers of revenue growth this quarter.
Our core revenues already represent over 70% of our total revenues, as mentioned, and reached a 40% year-over-year growth. Strong revenue acceleration was driven by the core services, which represent 70% of our total in the third quarter of 2022. While legacy and non-core revenues declined almost at 27%. We can see there that, the composition of core and legacy and non-core services indicates that even with the huge declines that we face from legacy, we have the potential to keep growing. On our core revenues, we can see a healthy profile on the right-hand side with almost all of the components growing, except for telecom B2B, which is stable in the quarter. In the next slides, let's look at the different revenue components, starting with fiber.
On Slide 7, we can see that as we have seen for a long time, fiber continues to show excellent growth at a 31% year-over-year growth. With net adds maintaining a controlled base while ARPU and average speeds increase and churn decreases. The strong growth on the fiber revenue can be seen both annually and sequentially, +31% annually and +10% sequentially. Fiber has now reached over BRL 4 billion in annualized revenue. This is a sustained revenue growth above 30% for a long time, and it's very significant to demonstrate the growth potential of the company. In terms of net adds, we can see that we have remained stable, and they are maintaining pace despite a much tighter credit policy that we have started to apply to all of our new adds, in a much more competitive market.
It's important to highlight that we have significantly reduced churn from the increased rates that has started to appear at the end of last year, and our fiber broadband churn rate is back in control, and we expect that to continue reducing the churn rate, in particular, during 2023. Those results come as well with an increased average speed for new adds. We can see that the Oi Fibra 400 already represents the majority of our portfolio, with the average speed of the new adds reaching 416 Mbps. Very significant improvement from where we were just in March the same year. With that, our ARPU has presented another healthy growth metric with a 5%, 4.8% year-over-year and growing sequentially as well, 5.5%.
This fiber performance was sustained without question by V.tal growth and our good market share performance, as we can see in the next Slide 8. On the left-hand side, we see that, key to our strategy, V.tal continued to expand fast, consolidating its footprint leadership in Brazil with a 35% year-over-year growth on homes passed, now reaching over 18 million homes. There were lots of activity and expansion, both for the new cities as well as new contracts for V.tal. Over 50 contracts and + 28 new cities launched, now over 250 cities covered. This has supported our solid home connected evolution, which was further benefited by an improving churn as we mentioned in the last slides. Our homes connected have now reached close to 4 million just for fiber, a 20% year-over-year increase.
Despite a much more competitive market, Oi has been having an excellent market share performance in the overall broadband market, including fiber and all other means of access. Fiber now leads the market share of the entire country with over 60% participation in all of the broadband consumers. In our case, we are number one broadband provider in 11 states versus eight for another large player and one for the largest fiber provider, which concentrates in São Paulo. In addition to our leadership in 11 states, we can see that we are number two in the most other states and number three in just a few states, representing a very significant market share performance.
It's important to mention that as our strategy started in the entire country, with the exception of São Paulo, if we consider all of our performance outside São Paulo, we are by far the largest in net new adds for fiber with a significant market share, many times in excess of 30% in all of the cities where we operate. Now let's look at our Oi Soluções, our core B2B business units in the next Slide 9. Oi Soluções had a very good quarter, growing revenues at 40% year-over-year, led by our accelerating ICT sales as we expand our portfolio through new capabilities and partnerships. Again here, growth occurred both annually and sequentially at very healthy numbers. ICT represents now close to 20% participation in the overall B2B revenues and presented astounding growth of 55% year-over-year and almost 19% sequentially.
Those results of our growing our B2B revenues occurred even with the telecom revenues remaining relatively stable at a -1.2% sequentially and -2.4% annually as compared to last year. In terms of ICT highlights, we continue to expand our portfolio with several different launches, including our omni-channel hub products, which addresses a booming market in the mobile space, where we are now becoming a hub for messaging, tending to many different customers and managing the entire process of messaging for our customers. We also had an expansion of our video monitoring portfolio and an inclusion of several new products in pretty much all of our value chain of offers, including telco products, IT products, and ICT integration products.
In addition to Oi Fibra and Oi Soluções, we continue as well to invest in new revenue areas as can be seen in the next slides, Slide 10. Oi continues to invest in digital platforms to further accelerate our revenue growth and also to enhance customer management. The examples of our portfolio growth includes new services such as Oi Fibra X or Oi Fibra X. Oi Fibra X covers the entire home with an extension of the customer's ONT using a process called transparent fiber to bring the true speed of fiber to every corner of the home. We had very good results in our pilot city, with close to 7% of all of our new sales, including Oi Fibra X.
We expect to launch the service in another 10 plus cities during 2023, and are working on the economics of the products to make it be a significant addition to our portfolio in terms of growth and revenues generated. We also have great initial traction with our Oi Energia portfolio, where we are growing a distributed energy initiative in partnership with the two operators, 2W and Safira Energia, offering customers on both B2C and B2B with sustainable and more efficient power alternatives. We are also expanding our Oi Place marketplace platform to a service focus, meaning that in addition to all of the very carefully curated portfolio we had before for products, we are expanding on a service basis, and we intend to address a booming services market on a local scale.
On the right-hand side, we can see that digital continues to be a part of all of our customer experience initiatives as well. We increase our e-billing penetration, we increase the digitalization of our FTTH customer care, we increase our share of collections through digital channel. Today, virtually half of our FTTH customers interact with our Minha Oi virtual assistants. Now, let me turn the presentation over to our CFO, Cristiane Barretto, who in the next slides will talk about costs, liquidity, and our debt profile. Cristiane.
Thanks, Rodrigo. Good morning. Thank you all for having this, third quarter conference call. In the Slides, 11, we can see that this quarter marks the starting point of the new Oi cost structure for the future to address all the potential efficiency opportunities we have, adjusting to a lighter company. As we can see on Slide 11, OpEx reduced once again on this quarter, with a decrease of 16% year-on-year, even with the impact of 7.2% inflation and higher FTTH rents and variable costs. The reduction was mainly driven by the reduced costs associated with the sale of the mobile infrastructure assets, more than offsetting the growth in FTTH rent costs. This expense is a result of the new operating fiber model, which creates a new OpEx component for homes connected in fiber capacity for B2B and B2C clients.
On the other hand, this operating model drives a strong reduction in CapEx, supporting a future improvement in operating cash flow. On a quarterly basis, OpEx would have decreased 5.4% year-over-year, quarterly basis, when excluding rent and insurance costs, showing the company is solid and is keeping track of a continuous cost reduction delivery. Acelera Oi, the internal name of our efficiency program, will focus efforts on process improvements, which are represented mainly in third-party services, with approximately 40% of our cost base. On Slide 12, we deep dive some costs line dynamics, which present consistent reduction in main lines. Personnel costs was impacted by new costs after the sale of V.tal, related to this, our field service subsidiary, Serede, which was previously eliminated on the consolidation process and started to be recognized as costs, as well as revenues, impacting a year-on-year comparison.
In a normalized comparison, personnel costs decreased 22% year-over-year. The result was mainly driven by continuous headcount adjustment, minus 4,000 employees since third quarter of 2021. Despite the 8% inflation adjustment as of May 2022. We expect to continue addressing our personnel cost structure in the quarters to come. Costs and expenses related to third-party services reduced 27.1% year-over-year, mainly due to 49% decline in selling expenses, a 22% drop in content acquisition costs due to the exit of the mobile assets and also renegotiation with providers of TV content. A 37% reduction in electricity and a 32% drop in general expenses arising from many efficiency initiatives implemented in the period. On Slide 13, the company ended the quarter with a consolidated cash position of BRL 3.6 billion.
This reduction was mainly driven by important events in this quarter. The OLT CapEx, the payment of the qualified debentures, and the capital increase in V.tal. In the third quarter of 2022, there was a consumption of working capital of BRL 109 million, which dynamic is a level of liquidity management of the company. The quarter was impacted by an extraordinary BRL 156 million related to the register of OLTs. During the period of transition, V.tal continued to make the acquisition of OLTs for Oi, and in this quarter, it was necessary to register the CapEx of the OLTs as a result of the payment agreement defined in the final SPA.
Therefore, in this quarter, we registered the total OLT CapEx of BRL 243 million, of which BRL 87 million related to acquisitions of this quarter and BRL 156 million from other periods. Regarding CapEx, we first see a strong reduction in CapEx intensity as a result of lower OLT unitary costs, as well as other efficiencies regarding systems and consolidation. For 2023, we already foresee CapEx being reduced to around BRL 1.2 billion, including OLTs. In the financial operating line, which totaled approximately BRL 512 million, the main impact was the payment of semi-annual interest in the qualified debentures, bond 2025. The non-core line, which had a consumption of BRL 188 million in this quarter, was impacted mainly by V.tal's capital increase of BRL 160 million.
On Slide 14, we can see the consolidated gross debt that was BRL 21.9 billion in this quarter, reducing BRL 12.1 billion in the annual comparison. It's worth highlighting that the company paid 49 million BRL in interest in third Q, partially offsetting the increase in debt in the quarter. Year-over-year, just as the previous quarter, the reduction was mainly due to the closing of the sale of UPI Mobile Assets in April 2022, and the partial sales of the UPI InfraCo in June 2022. These two effects allowed us to prepare the expected post-JR debt instruments, as well as the NDS, as already disclosed in details in previous quarters.
The company ended Q3 2022 with consolidated cash of BRL 3.6 billion, resulting in a net debt of BRL 18.3 billion at a fair value. I would also like to highlight the hire of Moelis as our financial advisor to help us create the conditions for Oi to execute its long-term strategic plan. The main goal is to assist the discussions with the creditors to optimize Oi's capital structure, considering the JR plan amendment. Thank you, Rodrigo.
Thank you, Chris. Now let's talk about some important updates as mentioned before. Let's start with a key topic, which we know is an important topic for investors, and is our ongoing dispute with the three mobile buyers and a potential price adjustments for the mobile sale operation. Recalling the timeline, after we closed the operation, we received notification, two notifications from buyers in terms of requesting and claiming additional price adjustments that would make not only the entire retained value with them to be retained, fully retained, but also claiming additional price adjustments on top of the retained value. After those notifications from the buyers, Oi was granted a court decision requiring the buyers to deposit the full retained amount in an escrow account, and later counter-notify the buyers on both claims.
This happened in September 17, the receipt of the two notifications, and then the court ordered the buyers to deposit and retain the amounts at the beginning of October. This was complied with by the end of October. Oi on two dates in October responded to the buyers' claims, denying the adjustments and the retention claims from the two buyers. In terms of the disputed claims, Oi reaffirms its compliance with the KPIs set in the contract and is ready to discuss them either on an arbitration process or on a good faith basis with the three buyers. As you know, the claims include allegations on customer base differences, on revenues, on working capital, on CapEx expenditures, and on adjustments that should be applied according to them to the mobile inventory.
In Oi's views, the buyer's modifications are flawed in multiple ways for not complying with the contract conditions and also for presenting several material errors. In the case of the customer base, Oi's customer base informed in the deal was based on official Anatel data and followed all of Oi's policies throughout the period of the transaction. In terms of the mobile revenues, they also comply with the stated KPIs in the contract and should be considered exactly as they were provided by Oi. In terms of the CapEx and working capital claims. We simply understand that the buyers did not consider all of the documentation, the full documentation that we provided in the process, and with that, ended up presenting claims which are not supported.
Finally, in terms of the mobile inventory claims, we believe they can be fully dismissed also based on all the documentation that the company already provided the buyers. Remembering the values at stake, we received in the original transaction BRL 14.5 billion at the closing dates. In addition to that, there are now BRL 1.5 billion, which were initially retained with the three buyers and are now under a judicial deposit while this whole discussion is resolved. On non-core assets, a brief update. We continue to move forward on the two processes we have outstanding. On the fixed towers, we expect to sign our SPA with Highline in the coming days, and I will now wait for regulatory and competitive approvals from Anatel and CADE, with the cash closing expected for the first quarter of 2023.
On the DTH sale process, where we signed an MOU with Sky, as previously announced, the pre-filing of the operation with CADE already occurred, and due to the long approval processes, given that we are consolidating two important market players on the DTH space, we expect the closing for the second half of 2023. On yet another important topic, let me give you some updates as well on the two big concession processes that we have ongoing. The first one is our migration to an authorization according to what was previewed in the new general telecom law, which was approved back in 2019.
This process, as you all know, is under the final definitions on the agency, on the regulatory agency, to publish what would be all the migration conditions and eventual costs associated to it. They initially provided a figure of close to BRL 12 billion as future investments that should be committed by the company in order to compensate for the cost reductions due to the migration. A further analysis of TCU's technical team, remembering that this is not a TCU decision, just a TCU technical team report, TCU recommended this future balance to be increased in excess of BRL 12 billion.
Oi is strongly disputing the methodology applied by both Anatel and the technical team of the TCU, which it deems in violation of the new telecom law in several aspects, in particular in calculating all the outstanding balances of regulatory assets. Here we have to remember that Oi has the option, but not the obligation to migrate. As it was disclosed and highlighted by other players in the market as well, we do believe that the current value attributed to future investment commitments does not make sense and should be significantly reduced downwards. On the arbitration process, we do have an arbitration process against Anatel for all of the concession imbalances coming from the past. Anatel is now required to present its response to our initial allegations by mid-November.
We continue with the expectation that the arbitration can produce at least partial decisions in Q4 next year, in anticipation of the process conclusion by 2024. As a result of the balance between the two processes, the migration into an authorization and our arbitration with Anatel, we expect the arbitration results to fully compensate all of the migration obligations. For the last key update, let's move then to the next slide, where we can talk about our proposed reverse stock splits. This is on Slide 16. As you know, and it was formally communicated to the market last month, Oi has proposed a reverse stock split operation of 50 to one in compliance with B3's regulation to enable improved liquidity and to align our share price to best practices in the Brazilian market. Why did we do it?
We had several main objectives in mind, starting with the one, which was it is a mandatory operation to maintain the B3 trading to have our share price above 1 BRL. Obviously, we expect to convert all of Oi shares in the proportion of 50 to one in line with B3's recommendation and market practices. We believe that this will significantly reduce the volatility of the stock and improve the focus on the technical aspects from analyst coverage and institutional investors. We also believe that this can bring improved liquidity and pricing conditions by promoting a more stable market for the stock. We also prepare the share to access new indexes and create potential from passive funds. What happens with the impact to our share price after the proposed reverse split?
We can see there on the right-hand side that the number of shares would be reduced to 132.1 million. The OIBR3 price would move from BRL 0.25 approximately to BRL 12.50, and the OIBR4 price would move from BRL 0.63 - BRL 31.5. It is critical to say that the reverse stock split would not affect negatively the liquidity of the stock, since the average ticket of all of our transactions is considerably above the new lot prices, even if we consider the highest price of the OIBR4 stock.
Also, as we can see in the graph on the right-hand side, on the lower right-hand side, we see that the proposed reverse stock split would put us at a trading level in terms of stock price, which is very compatible with the current B3 pricing ranges, even slightly below the B3 pricing ranges at the BRL 12.5 mark for OIBR3. Now the proposal will be submitted to the extraordinary shareholders meeting to be held initially on November eighteenth, and if approved, it will be implemented. Next, let's provide our quarterly updates on our ESG activities as we usually do. On Slide 17, we see that ESG continues to be an important component for the New Oi, and we can demonstrate solid progress on most of its platforms with recognition, public recognition in multiple fronts.
On the environmental fronts, Oi Energia will help our customers also benefit from cleaner energy, as we have been doing for the company, and we reached over 20 distributed power generation plants already in operation, solidly on the path to becoming 100% dependent just on renewable energy for our entire operation. On the social part, it was with the great pride that we received the news on NAVE's recognition. NAVE is the model school that we have, one in Rio and one in Recife. The NAVE Recife was ranked among the top 10 state public high schools in Brazil, given an innovative program that was developed together with Instituto Oi Futuro. We also expect to expand the same recognition to additional education operations, as we try to expand the NAVE concept.
We also received an important recognition from Época Negócios as the company that, even in the middle of a very complex judicial recovery, was the company that advanced the most in HR management practices in the last five years. This is extremely adherence to our very high status that we put on the attention to our people. Finally, on the governance fronts, we continue our journey in improving our entire governance with important steps in terms of data privacy, in terms of adhesion to telecom sector practices, and adding a new transparency portal in line with the best practices in the market. Finally, we inform here that our 2021 sustainability report is available in our IR website. Let's close our presentation by providing you with a summary of our achievements and our challenges in the next and final Slide 18.
From all we saw of our Q3 results, we can definitely say that despite the challenges it has, the New Oi is already demonstrating a strong potential for growth and for value generation during this initial stage of its new operating model. It's critical to remember that we achieved a significant progress in pretty much all of our transformation plan milestones so far, including the conclusion of all of our key M&A operations with core and non-core assets, with still some M&A operations remaining. The successful migration to a structural separation model. The acceleration of our revenue growth targets, and we can see now that the company has gone back to growth and has a lot of growth potential ahead of it. The reduction and stabilization of our fiber churn, and we expect to continue doing that over the course of the coming years.
The transformation of our Oi Soluções revenue mix from pure connectivity model to an ICT integrator model. The generation of OpEx savings, which focus on discontinued operations and operational efficiencies, including becoming a lighter company. Finally, the reduction of our net debt. We know we must also address some very key challenges that we still have, and we are working heavily on all of them, including accelerating our fiber takeup, even in the middle of a more competitive environment. We saw from our market share numbers that we do have the potential to do that. Gaining scale and enhancing our new fiber model profitably. Here we know that increasing our fiber base and gaining scale as we progress on the growth of the FTTH model will be key to generating the margin levels we expect from the company.
Minimizing the legacy impacts both on EBITDA and cash flow, and we are taking all of the operational as well as regulatory measures to be able to address that. Continuously reducing our future CapEx. As you heard from Cristiane, we do have a CapEx plan for next year, which is already significantly below the CapEx profile that we presented this year. Even disconsidering all of the previous CapEx associated with the sold operations. Continuously improving our cost efficiency and adjusting the Oi structure to a lighter company. Finally, improving our capital structure in the process that we just initiated with the help of our financial advisors. We know that there's a lot to do, but we are confident in continuing to execute on our challenges and bringing a company with a sustainable future ahead of it.
That was it for the presentation, and I will now go to the Q&A session. Thank you, everybody.
We will now begin the Q&A session. Please remember that questions should be asked only in English. To get in line to ask questions, please click on the Q&A icon at the bottom of your screen and write your name and company. Now our first question comes from Leonardo Olmos from UBS.
Hi, everyone. Good morning. Thank you for taking my question. I have a couple of questions here. The first one, we saw a relevant quarterly reduction on the EBITDA margin. I imagine most can be due to seasonality, but going forward, should we expect EBITDA margins of the New Oi to get to 14% in 2024 and over 20% in the long term? That's my first question. My second one, if you could discuss the Oi Móvel sale, can you provide more details on the material errors that were presented by the buyers on the analysis of Oi Móvel? Also, if you could discuss what are the complaints regarding CapEx and working capital that the buyers are saying. Thank you very much.
Thank you, Leonardo. On your first question on EBITDA reduction, indeed, there was a reduction, and we presented in the presentation the numbers which show that there were two impacts to this lower EBITDA margin. The first one was the move to a completely new model in terms of how we actually go about expanding our FTTH business model. Obviously, in the past, it was a high CapEx model and then a higher EBITDA. This was the first quarter, Leonardo, where we have started to operate fully on the new model, and this meant that there was a significant increase in the OpEx associated with the FTTH, given that we are now paying the rental on the V.tal infrastructure.
As compared to last quarter, we only had one month in Q2, and this quarter we also had the three full months as rental expenses. In addition to that, obviously, there are still two things that are going on. They're part of the operational development of the company. The first one is that we are still taking a hit from the impacts of legacy, and legacy is still bringing the margins down. You saw that, without legacy, we are already at the 14% range, if you exclude the legacy impact on the New Oi operations. Obviously we expect not only to maintain that level, as you mentioned, but to increase to 20 plus on the run rates for the New Oi.
In addition to that, there are still in this quarter, and probably in the next quarter as well, some transition costs from the mobile. As I mentioned to you, we are still reducing our cost in several different areas. For instance, we are still operating the mobile transition services for the three buyers. While we are still operating them, we are not able to reduce a number of areas, which will be reduced for next year when we finish those services, which end up impacting the overall cost structure of the company. We also are still not done with our cost reduction efforts, in particular with streamlining our operational structure.
We are still doing things and movements which will bring costs down in this area significantly in the quarters to come. We are still migrating some of our systems and processes from the old Oi, including disconnecting and terminating all of these systems and processes associated with the mobile and with the infrastructure management to become a much lighter company. One example of that, as I mentioned during the call, is that we are in the middle of a transition process for our systems.
While we do that, we have eventually even in some cases a higher cost because we are developing and operating a new IT stack, which will be completely based on open software without any legacy hurdles, without all the complexity that we had from the past legacy systems. While we do that, and we still do not turn the key fully to this new IT stack, we have to operate both stacks, both the old and the new. We are still migrating the process of logistics for adapting to the whole new operation with V.tal.
We are still reducing all the costs associated with G&A, which used to be there up until very, very recently, because as you remember, up until the closing of the two operations, both mobile and infrastructure, we still had a significant cost in terms of G&A associated with those two operations, which we have started to reduce but are not fully there yet. Yes, we can expect to see in the long range a significant EBITDA expansion. The key points that we'll have to address, obviously other than all of those operational reductions, is to manage the impact of the legacy business in terms of reducing EBITDA.
This is pretty much from now on after we finish our transition process, this will be the key operation to pay attention to in terms of cost reduction, in terms of EBITDA impact. As to your second question on the mobile adjustment dispute, in terms of the errors that we see and we have communicated back to the buyers, as part of the process, there are several things which are associated with details in the contract. I believe there's not merits to go into a lot of detail here, obviously, because some of those discussions are private.
We do see that, unfortunately, the two notifications that we received did not include even some very critical material which was part of the requirements in the contracts to be able to present such a notification and which were not included as part of the notification. Impeding us to even start some of the analysis as part of the claims. In addition to that, we reaffirm, as I mentioned during the presentation, that we do have a very, very solid grounds, very strong arguments on pretty much all of the claims.
As far as some working capital and CapEx adjustments, for instance, there were, we believe, some material errors in the way that some of the working capital metrics were calculated, including errors in terms of wrong reference dates and disagreement, which was stated in the contract in terms of base dates to be considered and other small things, which again are very technical and probably would not merit going to a lot of detail here. We really reaffirm that we have a strong basis to dispute the claims, and we'll do that. We again have an intention of obviously trying to solve this on agreeable basis.
If this is not possible, obviously there is an arbitration process that could be used to resolve many of those disputes.
All right. Thank you very much. Have a good day.
Thank you.
Our next question comes from Soomit Datta from New Street Research.
Hi, guys. Can you hear me okay?
Yes. Hi, Soomit.
Excellent. Hi there. A few quick questions if I could, please. One on the legacy operating free cash flow losses, which I make at about 100 million BRL this quarter. How do we think about that run rate going forward? I think you mentioned the EBITDA losses would decline going forward. Just wondered if we could get some steer on the legacy as we run into 2025. That's the first question, please. Secondly, just kind of extending that a little bit. I just wanted to clarify. Did you mention CapEx run rate would be 1.2 billion BRL for 2023? I'm not sure if I made that up, but just wanted to check if that was the case. Thirdly, do you have the lease costs as well?
I guess a lot of the leases went over with the wireless sale. Just wanted to double check if you could kind of highlight what that lease cost is or what that will be on a kind of run rate basis. Sorry if I have got time, one more quickly. Just some detail. Where is that being booked? I was expecting that to be equity accounted, but I can't see that anywhere in the P&L. Do you mind just clarifying that? Thanks very much.
Thank you, Soomit. Several different questions there. I believe I captured at least four different questions here, starting with the legacy operating free cash flow or cash flow losses in this case. I understand that you did the calculation of the roughly BRL 100 million impact based on the EBITDA minus CapEx margins there from the presentation. We have to understand that in addition to those, there are still some cash components, and we have been highlighting this from for a long time, which have become owed towards other periods. In fact, even non-operational obligations that we have, they have become onerous liabilities that are fully attributable to the legacy business, including, for instance, the lease of fixed towers.
We do have some fixed contracts with the leasing of fixed towers that were signed in the very distant past and will still continue and are pretty much fixed costs for us on the legacy as well as obviously the G&A associated with that. With that, you mentioned BRL 100 million of EBITDA minus CapEx, but the impact could be significantly higher than that, especially if you include, for instance, all of the associated payments to onerous liabilities, including towers and GlobeNet. We should not forget that GlobeNet was coming from the legacy operation. With that, it's BRL 100 million plus the tower leases.
The leases on the towers, on the fixed towers, plus all of the onerous liability coming from GlobeNet. If you look at the second question, yes, you're right. We're talking about an expectation of at the max BRL 1.2 billion next year. Again, the long term, we intend to reduce both the overall absolute number of CapEx, but primarily and in particular, the CapEx over revenues numbers so that we can have a better free cash flow profile in terms of EBITDA minus CapEx. But BRL 1.2 billion is our best expectation for next year. You heard Cristiane mentioning, but we do have a few explanations of why CapEx is higher this quarter.
I mentioned at the beginning of the presentation, I gave an example on the previous question in terms of our investment in systems. We are still investing in systems which are pretty much creating the basis for a new company, and obviously those are initial CapEx investments which are not recurring. We had to do some catch up in terms of buying ONTs, which apply to previous periods, so they cannot be annualized. They were done at higher prices, and the prices are dropping at a very fast pace.
We can see that we reduce pretty much on all aspects, on IT, on systems, on the run rates of the legacy, which again, going forward, we still expect to reduce even further. That's the number. For the long term, we expect to have an even better relationship of CapEx to revenues. I'm not sure if I completely captured your question number 3 on the leases.
Yeah. I guess this is just. You know, when we moved over to IFRS 16 lease liabilities, lease costs got kind of stripped out of EBITDA and just ran through depreciation and, you know, financial costs, and we saw it in the cash flow. I mean, a lot of that is to do with towers, but I just wondered, you know, are there any other cash lease costs which are not kind of reflected in EBITDA?
Okay. Let me pass your question over to Cristiane, and then she can talk about leases and where we're recognizing detail.
Okay. The leases that we see here in the cash flow, the BRL 187 million, what we have from the fixed towers that we retained with us after the sale of the mobile assets. Regarding V.tal, V.tal is not consolidated anymore in our balance sheet since we sold in June. As of now, in this quarter, we just have an equity pickup since we don't have a controlling position over V.tal. It's not consolidated in our balance sheet. That's why you do not see the numbers of V.tal.
Just one detail, would that not be equity accounted for?
Yeah.
Ordinarily? But it-.
Yeah.
It's not in the P&L this quarter.
Yes. We have equity pickup, ratio in this quarter in the balance sheet. I can.
Okay.
I can ask the team to send you the detailed footnote.
Okay.
For the financial numbers. Yes. We have.
Okay. I don't see the P&L at all, but that's fine. Yeah. Maybe I'll follow up with that. Thank you.
Okay.
Okay, great. Thanks very much.
Thank you, Soomit.
Thank you.
Our next question comes from Carlos Sequeira from BTG Pactual.
Hi. Good morning, Rodrigo, Chris, Flavia. How are you? I will just make a follow-up question on the CapEx one that Rodrigo just answered. You know, given the situation, isn't it possible to just stop making investments in the concession? I mean, just stop these legacy investments, you know, given that this will have a pretty negative impact on the company in the future. And also on the normalized CapEx and looking here at. I was trying to make a pre-calculation here on dividing these BRL 1.2 billion CapEx per year that you mentioned for next year by what would be normalized revenues excluding the legacy businesses. We would be talking about a CapEx to sales of roughly 17%, which I.
You know, it looks high, no, for a company with you know, much less assets. I'm just wondering how much less you can do on CapEx if you really, like, squeeze everything to try to you know, to do a little less. That's one question on CapEx in general, right? What else can be done to bring this number even below this BRL 1.2 billion? Maybe if I can ask another one, I saw, you know, there was a big, nice improvement in churn rates in the fiber business, which is great. It's still relatively high, no?
I mean, you know, my point is the amount of sales push that you have to do to be able to gross add more than 400,000 clients a quarter and end up with, you know, less than 150,000 net. My question is, you know, can we expect churn to keep coming down and so that this ratio improves a little more? Thank you.
Thank you, Kadu. On your three questions, starting with the CapEx on concession. Absolutely. We obviously want to invest as little as possible, if anything at all, on the concession. But unfortunately, this is one of those things that we have to address both operationally, but primarily in this case, Kadu, regulatorily. Because if you look at the concession, even though yes, it's going down, yes, it doesn't make any sense to invest in multiple things that the concession still requires, given that it's a very fast declining customer base, which are actually not interested in the service anymore. It doesn't have the same social aspect, and value to the overall society that it had in the past.
Our regulation, while we do not migrate, it's still outdated, even without considering the migration. We are disputing with Anatel and pushing them very, very hard to actually do some updates on the regulatory or many of the regulatory components that would allow us to reduce our investments. Unfortunately, while this does not happen, we either voluntarily and willfully will not comply with the law, with the regulation, and this is not gonna happen or else it will be willful misconduct, and we're not gonna do that. We have to really count on their collaboration to eliminate some very outdated requirements in terms of the investments.
Let's remember that, even though, again, it doesn't make any sense in the world to have 120,000 payphones across the country, we are still pushing Anatel to not only allow us to reduce this number, but even to accept alternative technologies to reduce our costs in serving those places. If you just look at replacing many of those payphones, unfortunately, it's still a CapEx that's out there. Same thing as far as replacing in certain areas, theft of our copper cables. We unfortunately are still faced with a high volume of theft of copper cables, in particular last year. In some states, this is endemic, including Rio, including Paraná.
Obviously, whenever possible, we do not replace those cables or replace them with a much lower capacity cable, or even use wireless local loop to substitute the infrastructure there and continue providing service. In many areas, it's just mandatory that we do those repairs and end up investing at least some amount in replacing theft. The same thing on just the sheer maintenance of the overall infrastructure of cables in central offices. I mean, suffice to say, Carlos, and we have been discussing this for a while, that the whole concession doesn't make any sense anymore.
That's why we said that it is preposterous to really think about having a BRL 12 billion commitment just to replace something which shouldn't be there in the first place. That's why we're disputing very strongly with Anatel both to adjust the amount of costs associated with the future investments for the migration, as well as primarily on the dispute on the arbitration. We're also trying to make them accelerate some regulatory measures to reduce some of those obligations in whatever does not depend on a law change or on the migration. Let's see if we can do it as fast as possible. We're working on it.
Unfortunately, it's one of those things that, in reality, is a bizarre situation that really shouldn't be happening, but it happens. As far as your overall CapEx comment in terms of the CapEx percentages, we do have a guidance. In the past, we didn't have a guidance, which was below 10%. We are now trying to have a long-term pursuit of close to 7% CapEx over sales. Adding the ONT, which in the end contributes a little bit to higher margins in the future. Expanding a little bit from the previous margins that were included originally when we started giving long-term guidance.
If we look at the ONTs themselves, the one thing that's gonna happen is that the cost of the ONTs is dropping very significantly. The ONTs when we started the business were almost $100. Now, as of throughout the period that was the recent period, it has approximated the $50 range, still carrying some mix of different purchase dates, but a little bit above $50. Now, the ongoing price is already below that, already closer to the 40, 30-high dollars per ONT. In addition to that, we see that we will continue to work on even more streamlined versions of ONTs that for low cost offers.
On these low-cost offers, we believe that we're gonna be able to significantly reduce even the cost of the ONT compared to where it is today, working with the very low-cost models for a portion of our market, which we expect will be more than when expanding. This will help to bring our CapEx percentage over revenues under control. Again, we accept the ONTs. We really operate and try to operate with the long-term goal in mind of between 7% and 8% CapEx over sales. Okay. As far as the churn rates, yes, it has received a significant reduction. We have taken several different measures to continue reducing this churn.
We expect that the churn will be reduced throughout next year, even though we have been conservative with some of our metrics. But we expect to continue to reduce the churn over next year. In order to do that, there are several things that we have done. One is to combat fraudulent sales, which again generates a churn in the midterm. We have addressed the credit scoring system of the company, and we have just started to operate with a much improved credit score system based on the positive information that has just recently become available in the Brazilian market. We have started to create different credit scoring models and tailored specifically to our operational fiber.
We have also significantly improved the digitalization of our sales in order to be able to reduce ineffective sales, which ended up presenting a high churn rate. There are several different metrics. There's not a silver bullet in place, but we expect over time, we really expect to approximate at least towards the 2% range and even below that.
Okay, Rodrigo. Perfect. Thank you so much.
Thank you.
Rodrigo, we received many questions here regarding our expectations regarding the end of the judicial recovery process. Could you comment on that, please?
Sure, Luis. As we have disclosed to the market several times, and it's not different this time, we pretty much have been complying with all of the RJ requirements in terms of payments, in terms of milestones, in terms of fulfillment of the plan that was presented, including the amendment plan that was presented to the courts. As of today, and this continues to be the case since our last update, the decision to terminate the RJ actually is only with the RJ courts. We have said a while ago that it depended on them, and that it should be taken soon. We still expect that, but again, it's a timing that we don't control. It only depends on the RJ judge.
I mean, all the conditions for it to the end of the second amended RJ. It only depends on the judge. We should expect it soon. Again, we cannot commit on a formal date because it's not in our control.
Okay. Thank you. That concludes our Q&A session. I'll now hand over to Rodrigo Abreu, CEO of the company, for his final remarks.
Thank you, Luis. Thank you, everybody. Again, this starts the beginning of a new disclosure model for the company after all of the transitions from the previous quarters. As usual, our IR team is gonna be available to everybody in terms of follow-up questions, always with the public information available, helping you to clarify any questions that you may have on the earnings release. As usual, we expect to continue improving our disclosure model in the quarters to come as we adjust to the New Oi runway for the future. Thank you so much. Hope to see you in the next call.