Status Update

Apr 13, 2021

Slides

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to OESIA's Conference Call. This event is also being broadcast simultaneously on the Internet via webcast, which can be accessed on the company's IR website, www.oi.com. Brri together with the respective presentation. We would like to inform you that during the company's presentation, all participants will be only able to listen to the call. We will then begin the Q and A session when further We also would like to inform you that the conference call will be conducted in English by the management of the company And the conference call in Portuguese will be conducted via simultaneously translation. This conference call may contain some forward looking statements that are subject to known and unknown risks and uncertainties that could cause such expectations to not materialize or differ materially from those in the forward looking statements. Such statements speak only as the date they are made The company is under no obligation to update them in light of new information or future developments. We'll now turn the conference over to Mr. Rodrigo Abreu, CEO. Please, Mr. Rodrigo, you may proceed. Hi. Good morning, everybody. Thank you for being with us for this call. And as you all know, we recently had our Q4 call. But when we had the call, we announced that we were still in negotiations with BTG for the infra coal process that we had started earlier This year with the exclusivity granting to BTG. And obviously, it was impossible to give more details about what was going on. It was a very intense negotiation process. As you all know, we had announced for a while now The structural separation model would generate a competitive process by which we would select a preferred partner to go to The judicial process later on down the road. And at that point, we still had not completed that process. But after that, over the course of the following weeks, we were able not only to successfully complete our negotiations with VTG, But as you all know as well, last morning, we announced that we had come to an understanding to accept BTG's binding offer for the infra cost structure. And as such, we have published a material fact detailing at least the Obviously, we know that this is a very large and complex transaction. It is a process that started last year at Our plan amendment announcement and later on at our GCM, when we announced that we would be creating a structure Obviously, this has generated a lot of interest, a lot of questions about how we would achieve that, how it would be possible to separate The structure from the Oey's future operations. And obviously, it was something that It's very important to understand in detail to be able to analyze what's going to happen with the company going forward and how it fulfills our strategy for the long term sustainability of the company. Obviously, now it's time to talk about The details of what we have accepted and the details of the structure and the transaction that we announced last morning. And at the end of the call, I will have time for Q and A as well to further answer questions that you may have. So The key aspects of our structural separation model which is part of the strategy. As we have announced several times before, In addition to refocusing the company to the fiber assets it has both in terms of infrastructure as well as in terms of the future business focus of the company, We had said that we would sell our mobile operations to concentrate on our key fiber assets. And in addition to that, We would create this structural separation model as a key part of our transformation to be able to generate value in the future. And if you recall, As we highlight on Page 3, the structural transformation model ends up generating 2 parallel companies, One which is the future of Oi, the new Oi and one which is a company in which Oi will have a relevant stake, This will be a separate infrastructure company in the current structural separation model that we already And by this model, on one side, The infrastructure company will be a true neutral network with a dedicated fiber infrastructure including Over 400,000 kilometers of fiber including the FTTH network and obviously focusing on the wholesale business which is to provide Infrastructure and Means to all of the operators in the country. And on the other side, we would have the new Oi and the new Oi will be a customer centric Company focused on its residential business, corporate, government customers, still maintaining The legacy network and all of the STFC, all of the fixed telephony obligations and networks as well, and doing All of the activities that have the customers at the center, including sales, marketing, customer care, product development, innovation, But that also has a very large presence in the corporate segment with OY solutions, with IT Services, with Cloud Services, with a lot of additional services to our corporate customers And also providing what we call digital experiences to our customers, more than telecoms including digital services, including a number of other services which will make the future a voice. And this strategy has been put to work last When we announced it at our plan amendment, it got approved at our GCM in September, And we started then to work to complete the process for doing the structural separation by actually going to the UPI That was presented to the market in a competitive process. This competitive process actually attracted a lot of Interested parties and the interested party was looking towards in Slide number 4, which is The possibility of creating the largest telecom infrastructure company in Latin America. It will be a true neutral network operator In our plan as part of the amendment last year and the GCN that got approved by the creditors, We have a plan to reach over 30,000,000 homes passed by 2025 with this new focus on the infrastructure company as a separate company. And this will allow us to magnify the presence of optical fiber along Brazil, Approximately over R20 1,000,000,000 in the next 4 years. And the way to do that, obviously, Oi will still be a relevant shareholder in the company, but the company will have a new controlling shareholder. And this controlling shareholder will have at closing 51% of the company. And this 51% will grant The company required network neutrality, needed neutrality to be able to provide services to all of the different operators in Brazil. Obviously, it will come with a complete portfolio of modular services. It will not only serve Oi as a key tenant, but obviously all of the other operators in Brazil. Starting with the basis that we already have a relevant wholesale business in Brazil and we serve all the other operators, But moving on to become a true neutral network serving Oi and the other operators with the massive infrastructure which will be available for all. We will move in this scenario all of our wholesale contracts to the new company and then it will become the first End to end neutral network solution in Brazil, in particular for FTTH Services. With that, we expect to have an infra code that we will start With an initial investment period with a lot of concentrated network expense expansion CapEx in particular for FTTH, But this will be financed with a more efficient capital structure without all the restrictions that we currently have for having to serve all The different needs of the company and obviously for being a part of the planned restrictions and the IRG restrictions in terms of Taking on that and having an optimal capital structure to finance our growth. And after that period of very high investments, The expectation for InfraCo will be that we'll not only generate a very high EBITDA in The run rate mode that we'll achieve after a few years, but obviously it will also provide a very high return phase with high cash generation. We have designed this company for the past 6 to 8 months. It's been put in place as we speak, And it will be really a true neutral company for pretty much all of the network requirements that Brazil may have in serving the fiber markets With that, we actually come to what do we mean by infraco in Slide number 5. InfraCo in reality is the structural separations of assets and we have to understand what infraCo is and what infraCo is not. So here we try to give a very resume the very, very executive view of what InfraCo and the new one will be in terms of the new parameter. So starting with the infra co, as part of the perimeter, we have all of the FTTH fiber assets and data Including our networks, including the Metropolitan Networks, including the data access networks, the data backbone, a fiber backhaul, And those were all investments that were done as part of BGCM already. BGCM, as you know, is our Vehicle is our entity that concentrates all of the investments and all of the activities for InfraCo. It was a vehicle that we I already had and as part of the strategy last year, we concentrated all of our infrastructure investments In addition to all of the FTTH fiber assets and data assets, we also will have all of the non fiber transmission assets, including long distance fiber routes, including the fiber backbone equipment for transporting SCM capacity, All of the data capacity, the network management operation centers. And with that, we complete all of the fiber That we have in place together with the FTTH fiber assets and the data assets. In addition to that, it will bring with it An IT infrastructure including all of the operating systems required for the operation of the fiber assets, the so called OSX systems, It will also complete the wholesale business support systems, which will comprehend the business support systems that currently provide services to the wholesale clients and additionally it will bring Traditional corporate support systems and support networks. With all of that, it will also have infrastructure sharing rights Provided by Oi, it will have the right to use Oi's real estate for equipment colocation and it will have access to the dedicated real estate which is today part of our infrastructure operations. On the commercial side, Obviously, all of our commercial operations for wholesale is moving on to InfraCo and this includes marketing, sales, wholesale, the business teams, All of the wholesale contracts with other operators and the network swap agreements we have in place. And obviously, The InfraCo will also comprehend the fiber technology and operations team. Good part of the fiber technology and operations team that we currently have. We will move on to the InfraCo side. And this is InfraCo. This is the deal perimeter, a simplified view of the deal perimeter. On the other end, it's important as well to understand what InfraCo And what will remain at Oi. And at Oi, we will remain and in particular it's very important to highlight that with all of the The FCS, meaning the copper distribution networks, the copper access networks, all the switching infrastructure, all the distribution equipment, The public the pay phone news, the public telephone news network, all of the SDFC network management systems and the associated transmission assets. So we have a So we have a legacy backbone, a legacy backhaul, a radio transmission network, all of the towers, the satellite capacity. So All of the STFC transmission assets remain at the new Oi. We will also Keep at Oi the legacy data networks. So the ex DSL assets and the legacy data networks remain with Oi And this includes the core networks, the BRAS which are the access concentrators and all of the associated assets that serve Velox and the low speed broadband Capacity and Services today. So those elements of infrastructure stay with Oey. Oey will also obviously maintain all The rights of way for STFC, the rights of way agreements, the infrastructure that we have there for STFC. And this obviously remains an important component of our STFC service. Oey also maintains all of the PTV assets including DTH, including IPTV and including the content management The traditional IT infrastructure including BSS for consumers, business customers, corporate customers, the legacy OSS And all of the associated IT infrastructure assets as well. We maintain all of the customer operations with As I already highlighted, so marketing, sales, product development, all the residential business and corporate customers, oil source, soy, customer care, and obviously all the support areas that we already have. It's also important to highlight that as part of the separation, Oey maintains Serhegi and Serhegi is our separate operation for field installation and maintenance services. This has been one of the reasons why we believe our expansion in fiber has been so successful. So we It's over 20,000 people operation in the field across the entire country. And we also maintain in house Tato is the former BTCC, which is the customer care company that we have at Oi as part of the Oi Group, which we will continue providing services to all of our customers across our operations. And we maintain Oey Futuro as well. So it's important to understand that the deal perimeter actually highlights that InfraCo concentrates all of the fiber infrastructure, All of the transport infrastructure for data and for non FTSE services and obviously all of the associated infrastructure to it and the wholesale operations and all of the remaining assets remain at Oi. With this, we will not only be to maintain its obligations to all the current regulatory services it provides to its customers, but it will maintain The customer facing operations for all of the services it will continue to operate. So in a nutshell, This is the deal parameter and this is how the proposal got structured when we first Sorry to interact with the potential bidders and how all of the assets that we will make part of the infra cooperation got separated To receive offers as part of the process that we conducted. And with that, we actually go through the operation itself on Page 6. And as we know, we have been talking about the value of this deal for a long time. When we announced our We mentioned that it would be an EV of a minimum of R20 $1,000,000,000 and that EV obviously came with a very complex infrastructure and a very complex operation to be put in place. And we're glad to say that after all of this process, We were able to actually attract an EV proposal of close to R20 $1,000,000,000 respecting the minimum that We set as part of our plan amendment last year and this by itself actually represents a significant achievement and materialize As we have mentioned last year, all of the value that we believe that Oi has unlocked inside of its operations. So we started by unlocking the $16,500,000,000 value of our mobile operations, which will help Oey really guarantee to the market and announced that we were able to secure the portion of the other portion of value that we believe was unlocked inside our operations, which is the unlocking of the EV of $20,000,000,000 for OE infrastructure operations. This in itself represents And EBITDA of close to 18 times, so it is a very, very significant multiple. It is one multiple that A view that we really have a very promising operation in front of us. So in the next step of our What I would like to do is to go through all the details of how we have structured this operation and how to calculate How we have incorporated all of the elements of the BTG proposal and how this will play out And actually executing this in terms of unlocking the value and how all the value components will be As I said, I would like to bring into our call our CFO, Camille Faria. And Camille, If you could please walk us through all of the calculation and how we're going to structure the transaction, it would be great. Thank you. Thank you, Rodrigo, and good morning, everyone. So going through the numbers of the transaction a little here. So on Slide 6, As Rodrigo mentioned, the binding offer which we have accepted and granted the right to top assumes An enterprise value of BRL20 1,000,000,000 for 400% of InfraCo. It also has the assumption of a debt at closing of BRL4.1 billion. This is as of December End of December 2021, which is the base date for the valuation and the expected closing date. Just to explain where the R4 $1,000,000,000 came from, it came directly from the amendment to the judicial recovery plan in which there was a 2,500,000,000 debt between InfraCo and Telmar that came from dividends declared by Oeymodule and not paid until the contribution of assets and liabilities to InfraCo And that piece of that is already in place and being adjusted by 100% 115% of CVI, sorry. And the $2,500,000 is the expected outstanding amount at closing. The plan also Allowed us to have an additional intercompany credit line with InfraCo of BRL1.5 billion in order to give us An alternative way of financing InfraCo's CapEx until closing, but up until now, Oey has not used that credit line. So the BTG proposal has under its assumptions the fact that we would Or that we will use $1,500,000 of Intercompany debt and that the equity value at closing We'll have we'll reflect both the 2.5 and the 1.5 line. And in the next slide, I'll show you what happens if we So we have an implied equity value pre money of BRL15.9 billion, but please keep in mind that the BRL4.1 billion of debt is entirely Intercompany, so it's ultimately cash flowing to Oi and BTG's offer. So at closing, what we will have is a primary capital injection in InfraCo of BRL3.3 billion by GlobeNet actually. And this will help fulfill all of the obligations that the buyer has under the plan of financing the company's strategic plan as well as repaying The outstanding debt of the company at the closing time and also there will be a secondary of BRL6.5 billion flowing to Oi to acquire existing shares. So that at closing, BTG will end up With 51% of voting and total company capital, Envoy will retain 49% of The total and voting InfraCo shares. At this point, we are estimating that InfraCo will only have Voting shares at closing, so will be comprised 100% of ordinary shares. The 49% stake that Oey keeps at closing, The number of shares representing this 49% stake will be maintained by Oi as a guarantee of the obligation of the There are additional steps in the transaction There are has been agreed and are ruled by the FDA in case, BTG is the winner of the competitive judicial process, which is an additional primary injection that will happen after that will happen 90 days after closing of BRL1.6 billion, again, And with that, BTG will receive newly issued shares, representing 7.8% of the company. And that will dilute all of the pre existing Stakes that both Oey and BTZ will hold or at that time GlobeNet will hold off of Intergroup. In addition to that, BTG will also contribute Globenet, so the entire Globenet operation to InfraCo so that InfraCo will be the surviving entity here and Globenet will be entirely comprised inside InfraCo. And the value for that contribution has been estimated at BRL1.5 billion and this value will need to be validated by an independent third party appraisal report that will be commissioned by Oi within the judicial competitive process. With the additional 1.6 primary and the contribution of Globenat, BTG will then increase its stake in InfraCo to 57.9 and will dilute Oi to 42.1 without altering the number of the effective number of shares that Oey will continue to hold after 90 days. If you move to Slide 7, we will detail a little bit each one of those components of the closing as well as 90 days post closing steps. So on Slide 7, This is where this is the provision for the case in which there is no additional intercompany debt on top of The already existing Oey 2,500,000,000 at closing. So in case the additional Oey 1,500,000,000 intercompany debt is not outstanding or not entirely outstanding at closing, Oey has the right Sandy, at closing, Oey has the right to move a portion of the primary component 2 secondary, at Oey's total discretion. So what we have illustrated here is the 2 extreme cases, 1 in which 100% of the 1.5% have been drawn and are outstanding at closing, which is BTG's buying the offer base case. And the second case is Today's situation in which we have 0 outstanding balance in this additional BRL1.5 billion credit line between Oi and Infraful. So in the case, we have no outstanding debt. The primary would drop to BRL1.76 billion and the secondary tranche going to Oi Would increase to roughly BRL8 1,000,000,000 with no effect on the cash out by BTG and no effect on the final stakes owned by BTG and Oey at closing. So we would remain at 51 and 49. It would basically be a reallocation of cash from the primary tranche to the secondary tranche because if that's the case, then InfraCo Would have less obligations at closing than what's implied in their base case binding offer. Regarding the secondary tranche, the 6.5 that can be increased, as we said, up to 1.5. In the 6.5, There is a 1st installment paid at closing for BRL2.762 billion, so paid immediately at closing. In case we decide to reallocate part of the primary, whatever portion we allocate to secondary, that will Add to the 2.7% installment at closing. And in addition to that, we have 2 other installments. So we We have a second installment in December 2022 for BRL1.3 billion and we have a third installment in December 2023 for BRL2.4 billion. Both the BRL1.3 billion and the BRL2.4 billion future installments, they are updated by Saliq From the moment of the valuation date date, so December 31, until effective So when the company receives this amount, it will actually have been increased by the sale during that period. And in addition to that, the Oey has the right to advance the December 2023 installment to 2022 By just merely informing BTG up to, if I'm not mistaken, 30 days, but it's November 2022. We just informed BTG that we would like to advance the 2023 installment and it has to be paid in 2022. Just giving you a little bit more light on the second and third installments and the relationship with Globenet. The 2 transactions, they are completely independent, but the company and BTZ have renegotiated the schedule and the terms of the 2022, 3 and 4 GlobeNet payments so that there is a full cash Slow match between our obligations with GlobeNet and GlobeNet's obligations with Boyd being assumed under the investment agreement. So basically, if you look at the chart on the right side, at Closing, Globenet will have to make a payment of $2,762,000 to Oi, that's entirely in cash. In 2023, Oi will owe and will make a payment to Globenet of the 2022 long term of The portion of 2022 of the long term lease agreement that Oey currently has with Globenet And what the company did is the company renegotiated so that the installment is now in Reais or will be in Reais if the transaction is closed. So it was converted to real at a pre agreed FX rate and then adjusted by CELIQ until payment. And the amount and that amount will be exactly equivalent to the cash amount owed by GlobeNet to Oi also in December 2022. So the 2 transactions don't offset each other. We are not getting future GlobeNet payables as Payments for the 2nd installment, but we have renegotiated so that there's a full cash flow match and there's no longer FX exposure Neither on the side of ClovNet nor Oi, we now both have obligations in here. The same thing for 2023, we have renegotiated the 2023 2024 long term lease agreements with Globenet, they are now they will be in house if closed EFTG is the winner of the competitive process And there is a closing to this transaction, and it will be adjusted by Selic. And the Payment date will be the same payment date at which GlobeNet has to pay the 3rd installment to Oey. So that again, we will guarantee in 2023 a cash Going to Page 9, just to give an overview of the renegotiated long term lease agreement between Oi and Globenet. And again, the renegotiation is only valid, so it only kicks in if BTT is the winner of the judicial competitive process End transaction reaches the closing date. But in case that happens I'm sorry, I forgot one So just a slight detail here. The 1.8 additional primary to be done 90 days post closing In accordance with the terms of the amendment to the plan, this value will be updated by IGP from closing until the effective contribution to the company. So there will be a slight increase in that number when it's contributed to the company to reflect the accumulated AGPM during that 90 day period. So going back to GlobeNet, as I said, just to give you a view of how The profile of the new obligation between OE and GlobeNet will be if the transaction moves forward with BTG. We would then GlobeNet was valued at 5.267 fair value, that's economic value of GlobeNet. But at that time, Globenet will have an obligation to pay Oey BRL3.749 This is the 2nd and third installment of the secondary tranche, so that the net contribution value of load net to Oi It will be BRL1.5 billion, again, to be validated by an independent appraisal report. And the profile of the renegotiated long term lease agreements with OeyglovNet will be an obligation in reais in 2022 of €1,300,000,000 an obligation in reais in 2023 of €2,400,000,000 Again, these two values to be updated by Saliq until In 2024, Oi will no longer have any obligations with Globenet under the long term lease agreement. And from 2025 until 2028, which is the remainder of the take or pay current agreements with 12 net, So with that, I will turn the presentation back to Rodrigo. Bear with us for a second. We're having technical problems. Rodrigo will be with us I will keep going here while Rodrigo tries to rejoin us. So going to Slide 10, we believe there are significant synergies between InfraCo and Globenet that we took into account When accepting GlobeNet as a contribution within the binding offer that has been accepted, GlobeNet is a wholesale telecom service provider, so much in line with InfraCo's strategy of being a wholesaler in this segment. Thank you very much. But in the end, it's important to highlight as she highlighted With the transaction, in terms of the financial metrics of the transaction and the cash flows involved, we have managed to get It's something that we have said from the get go that we will be achieving, which is not only to implement all of the strategic aspects Our recovery plan that was announced last year, thus to inject significant amount of cash back into Oi, So we can continue to recover during the long term sustainability. As we saw, not only the proposal we received with respect The minimum EPE value, but it brings the significant cash contribution components to Oi. And then Oi will become And with that, It's also important to talk about Redman that you can see in Slide 10. And one common question now we have started to receive since we announced the Transaction yesterday is, but why have you decided to actually go beyond the 51% stake in the company And now are maintaining 42% of the company instead of the 49% that we originally planned call for. And the reason for that is that in reality, when we look at the structure that the Camille presented, Oey, we will have 49% of our closing. And the infrastructure company alone, as it is today and as it was valued, will That provides us a share of 49% of this entire company. But when we received the proposal from BTG, It came with the GlobeNet Incorporation attached and as an opportunity. As Camille mentioned, not only this will increase the The value of the Empire Company, it will provide an opportunity for us to hedge some dollar costs that we will have in the future. And so it will bring certainty of cash flow to the company for the next 3 years. And by the way, which is the most important period for the company in It's operational stability and it will provide a significant synergy to the input companies going forward because of what Globenet represents. If we go back to Globen, Globen is a significant has a significant presence About 23,000 kilometers of submarine cable systems between North and South America, it continues to develop It's infrastructure and has here several in connection projects between Rio, Sao Paulo and Port Alleva. It is assessing opportunities to provide connectivity as well to the Southern Con. And as such, It brings significant strategic and operating synergies to become a reference platform complementing InfraCo assets that we currently So Interpol with the presence of GrowthNet will also become a one stop shop solution for international connectivity and global content. And we will have significant cross selling opportunities between the two operations, including data transmission, co locations, data centers and all of the other operations that Rodnan has. In addition to that, when we merge these companies together, We can see that this will provide for significant cost savings and synergies in terms of the operations of the company. We will come with an established operation. Instacomb is being formed as we speak and separating all of the operations we have at Oi. And all additional key resources that the company will have in the future. So in reality, what's going to happen after the closing It's that not only Oey will have taken its very significant stake at Efocal, but we'll be now We are well and shareholders of a much larger opening with the presence of Novus as well. So moving on to Slide 11, What's going to happen after we have implemented the transaction? And what will be the relationships we have between InfraCo and Oey? So when we see here that IncaGo will be an independent company, we will know that IncaGo will have Services provided at 2 Oi and Oi will have services provided at 2 Integral. The services that Oi will be integral will provide to Oi They compensate FTTH capacity, B2B capacity and management of the SPSC The network as part of the formal network management relationships that we will have, it will provide Capacity for Oey to operate its copper network and by Stern Clients or Serhazy will provide services as well in turn to InfraCo. Oey will provide infrastructure sharing and colocation. We'll provide right of way shares and Serhije, which is entirely an oil operation, will provide management, It will be regulated by a series of contracts. The contracts are part of the agreement that we have announced with BBG. And obviously, they will be part of the process that we will be conducting as the judicial recovery process later down the road. And they include FTTH access and capacity contracts, B2B access and capacity contracts, transmission capacity contracts and legacy network management contracts. And in terms of the infra core expenses that service is provided by Oeyo, we will have infrastructure sharing agreements. We will have the management, construction, maintenance and installation of FTTH contracts provided by Sirius. And with that, we have a A synergistic relationship between the 2 companies, which will allow them to really continue operating exactly as we have been in terms of how the services Gatara presented to its customers. Moving on to yet another very, very important aspect of the transaction on Page 12. Obviously, this is something that gets asked a lot when we started Talk about the operation. And so it's important to highlight some of the regulatory aspects here. Starting that by the fact that the infrastructure model is an obvious, is efficient, It promotes investments and we believe it maximizes the usage in copper shop of infrastructure nationwide. And as that, it will act as an enabler for the structural separation model to be implemented in Brazil. The structural separation model is something that has been discussed for a while As part of all of the regulatory aspects in Brazil, and we believe that we will present a very efficient way of really The second component is that When we designed the infrastructure company operation, all of the models that came attached to it, this Design took into account all aspects of the current regulatory model and the solution we implemented meets All of the regulatory requirements, including both those applicable to the FCM, neutral natural corporation, which will be the core of Instacosa model and operation as well as the continuation of the SPF C operation by Oey, the public satellite services operation by Oey With all the service continuity requirements, we know that this is an obligation, it's a very important one. It comes with a number of requisite And they will all continue to be named by us. And in this regard, it's also interesting to mention that after the transaction, Oey will be Oeyfico will be The first true neutral national connectionals here and by turn this will increase the competitiveness of the Brazilian telecommunication This will pave the way for the expansion of fiber the continuation of the expansion of fiber in the entire country. It will be available as well for 5 gs expansion because InfraCo will be an important player in providing fiber for the 5 gs expansion in the years to come. We believe this will make it an international benchmark as well. The Oey's difficult separation model, it's important to highlight as well, It's already substantially implemented. So we have already segregated the asset teams and operations as well as commercial activities. And this is already enabling the growth of business with the ISPs and other tiers across the country as we speak. So Intracorp is already doing performing operations and signing contracts with ISP, signing contracts with other operators in a neutral network manner. And this has started to prove that the model works and has started to prove that when we look Towards the future, with the company completely separated, not only this will be very important, but it's a model that's going With improvement model, it's not something that we're going to start to try to see if it works. It's something that is already working today. Another aspect of this note highlighting here is that this structure Preserves entirely the central strategy that we have for migrating our SDFC operation from the concession model To the authorization model, as you all know, there is a process going on at this point in Anatel within Anatel To present here all the requirements of this module when concessionaires in Brazil will be able We have a window to migrate from a concession to an authorization. And not only in our view, The structure that we put together does not interfere with any of the requirements for such migration, but it happens in parallel to everything we do to continue our SDFC operation. The SDFC service continuity by Stern, All of the obligations and all of the associated operational and regulatory requirements remain under the exclusive responsibility of Oey. So Oey will maintain the assets or we will maintain the services or we will maintain the operations of SDFC. And this It's a very critical aspect of the transaction because it does not interfere with the STFC service continuity, which we know is our responsibility And finally, upon conclusion of the operation, we will remain a relevant shareholder of Ithaca as we have highlighted So Ithaca will be a facility for all practical purposes, which will nonetheless have a commercial neutrality preserved by the presence of a new controlling So this ends up being the best of both worlds. Intragosa continues to be an affiliate of Oi for our purposes. Oi is a relevant shareholder. We will be able to use the infrastructure as it has been using since it started operations in a very efficient manner, but at the same time, we will have the commercial neutrality of interest preserved by the presence of this new controlling shareholder. So All in all, we believe that it's an operation that promotes investment, that promotes the ability to grow, that promotes The possibility of Oey to go back to long term sustainability that promotes the Inclusion of our new investors as part of the Brazilian infrastructure scenario and that in the end preserves and respects All the regulatory assets we have, in particular, those related to our current transaction. So moving on to Slide 13. And finally, This is where we'd like to give you an overview of what we expect out of the transaction timeline now that we have accepted binding offers. And as we start, we now that we have accepted our buying offer, there will be a 30 day period upon which there will be the Preparation of an RFP, a public RFP that will be submitted to the court. This RFP will have all the criteria for the judicial process that we expect to commit after the agreement of the group. They will bring things such as criteria such as the minimum value price, asset valuation criteria, The first 30 day period, after which there will be then the publication of the public RFP. And after which there will be another 30 day period to receive offers and to have The public hearing that we will use to determine now what will be the winner bid if additional bids are submitted. At the hearing at the public hearing that we will open this eventually we see during this next 30 days, years after the publication of the RFP. Then BTG will be able to exercise the right to talk if there is an additional data which is higher I've been referring to Gold in terms of price per share. And then after that, there will be the formal conclusion of what we call the judicial process and obviously the steps for signing and closing of the transaction. After the signing of the transaction, Obviously, this transaction will still have to be reviewed by regulatory and composition authorities, Dana Delmicari. So this normally takes A few months and then obviously for the distributor group used for the conclusion of the commission's press release as well. And with all of that, we would expect the closing of the transaction to occur either in the Q4 of 'twenty one or the Q1 of 'twenty two. In terms of the analysis of the transaction by the authority, there is one aspect that is worth highlighting here as well, which is ABBTG itself is not an operator in Brazil in the infrastructure scenario. And ABG GroupNet The provider of submarine capacity, which does not compete today with the activities of IntraCo. Certainly, the competitive analysis of this transaction will be much simpler than, for instance, the analysis of the global company transaction that we have submitted at the beginning of the year. So we would expect A shorter timeline to approve of this entire transaction given that on one end, all of the regulatory aspects have been respected and we are confident In the regulatory structure that we have put together for the entire model of Etraco. And on the other hand, we also have a much simpler competitive analysis given the fact that Any significant consolidation of players in Brazil other than adding Globemetera, which is a player in Submarine Caio's international capacity. So With all of that, again, closing would be received expected to be received by the end of the year or very beginning of next year. And this concludes, I believe, this first overview of what we expect for the transaction, a lot of the key components of the transaction, one of the key Ladies and gentlemen, we'll now begin the question and answer session for investors and analysts. Remember, the question It should be asked in English. Our first Question comes from Marcelo Santos with JPMorgan. Please Marcelo, you may proceed. Hi, good morning. Thanks for taking my question. The Question is, I wanted to know if there was any change in the net present value of the long term lease agreement. So Was it just a renegotiation of the timing of the payment or was there any change in the actual net present value? And the second, When would InfracoGas a separate management and truly start operating as an independent unit? We have to wait for the closing for that to happen or are we going to see a different management already working before that? These are the 2 questions. Thank you, Marcelo. Well, let me take the 2 questions and then Camilo, please compliment me if you're mean. On the LCLA and the long term lease agreement with Goldman, this is an existing contract that will continue to exist. So Goldman will continue providing Capacity to Oey and obviously there are aspects of the obligation that relate to Oey and not to Ensco Given the transaction that we've done in the past, so this obligation will continue. But in reality, The obligation did not change. What we did was just to do an adjustment to the inflows and the obligations So to match the obligations that Oey will have to Globenet with the obligations that Globenet will have to Oey. The NPD has not changed. The only thing that happened was that the timing, it got changed in a way that There is a possibility of matching the cash flows and there is a possibility of anticipating as well both the payments and The receipts of cash that we expected by the InfraCo transaction. So the side of the InfraCo transaction, if you recall and as Camille explained, There was a possibility not a possibility. There was an expectation of receiving the cash inflows of the secondary transaction in up to 3 Installment of 2024. And now what we have done then is that using the fact that Globenet has the long term lease agreement with Oey They also have annual payments. We were able to anticipate the possibility of not only receiving the cash from the InfraCo transaction, but also paying those long term lease agreement installments In anticipation as well. And with that, we matched the 2 cash flows. The key aspect of this transaction for us was not the NPV Change of the LCLA inflows or outflows. It was the matching of the obligations And the receipt of our cash flow from the InfraCo transaction. So With that, what we ended up doing, given that the long term lease agreement payments are dollar denominated payments, We were able to match the dollar denominated payments we have to make. With the real payments, we will repeat from And with that, it was an interesting way of giving certainty not only In terms of the cash cost of our long term lease agreements up to 2024, that's the gloom as well in terms of how it will be able to fulfill its obligations that we need for the transaction. In addition to that, On your second question, as we have mentioned, we have already started to separate the IntraCo operations. So The management of the wholesale team has already moved entirely to the infra co entity. The infra co is operating independently from a commercial standpoint from Oi. So we do not have any Relationship in terms of decisions, in terms of sharing information between our wholesale does and what the Oi retail operation does. So they are the 2 are already independent. And as we already have an independent company, We will be able to accelerate this operation to be able to operate as a separate company even before those. Actually, the plan is to have that operation separated before closing because then we would have more certainty in terms of all of the numbers of the In terms of the neutrality of the company, and gradually, we will migrate the entire team as well to this new operation along 2021. So at the end of 2021, even before the closing, the Instacor will already be operating as an independent Obviously, while the closing is not done, Oey continues to be a defining participant there at the And we will obviously have a say in helping run it, but we will be running with a separate management team and now with a separate operation. Our next question comes from Mathieu Robilliard with Barclays. Please, Mr. Go ahead. Yes. Good afternoon and congratulations for the deal. I have a few questions, please. With regards to InfraCo, you mentioned a CapEx of around BRL20 1,000,000,000 for the next 4 years. So I guess it's about BRL5 billion per year. And if I try to model that, it seems that first time, 5,000,000 homes Half the 300 BIs and you want 1,500,000 homes connected at 600 BIs. I get to a CapEx that is closer to BRL 2.5 €1,000,000,000 we ask per year. So could you give us well, maybe my math is wrong, but if they're not wrong, could you give us a little bit of color As to how you reached €5,000,000,000 maybe actually you are investing faster than I'm anticipating or there are some maintenance and core Investments in the network. The second quick question was on GlobeMed. So I can see on your slides that you put a fair value Before all the transactions of around €5,300,000,000 I'm just curious, it seems Not very high considering the big payments Globnet is going to receive from OY. So I was wondering if that was a source of potential value creation for the InfraCo, The fact that there are other assets that don't seem to be valued at the very high price. And then if you allow me and have the 2 very quick, in terms of the payments that Oi parent company will receive, so you have the first primary Is that kind of the right math? And very, very lastly, mobile, I know this is about infra code, but just Good question on mobile. So you're selling the assets for BRL16.5 billion. I see at the same time on your balance sheet, you have leases of BRL8.6 billion. And I was wondering if these leases would reduce materially once the deal is concluded, as in You're transferring also some of the levers to the purchasing party. So the impact on your accounts would be, 1st, the cash The first question about the infraCo CapEx. Obviously, we are giving approximate numbers in terms of CapEx around BRL 4,000,000,000 to BRL 5,000,000,000 a year. And you're right in saying that one of the key aspects of the CapEx investments or the HPs, but obviously we have to remember that the InfraCo is much more than just the FTTH. So we're talking about the significant investment in HP. So there will be a good development of new homes passed per year all the way to What we said is the approximate number of about 32,000,000 home stress potential that we believe this company has at least in Brazil, If not more than that, and this obviously will depend on how we see this developing over the course of the next 3 to 4 years. And so the HP components can amount from 2.5 to 3 years that you have mentioned. But in addition to that, we have to remember that there will be An HC components to all of that, so part of the home connection costs It will also be assumed by InfraCo and then Oey will use this as part of its monthly service. And there are all of the other cost components of the company such as the backbone investments because the backbone has to continue growing. It's not a direct result of the number of homes passed, but there is incremental investments in the back one as the company grows. And there's also the B2B CapEx investments. Let's remember that Oi currently has a B2B Business that is akin to almost BRL5 1,000,000,000 in revenues. And not only that B2B will continue to grow in our view to grow in our view, But we will require a new project in terms of the underlying infrastructure. And as part of the model agreement we had in the proposal and in model since the very start are part of those B2B investments as far as the infrastructure and the transmission capacity is concerned Will be made by InfraCo. So those investments and then you obviously have all the regular maintenance investments In terms of CapEx for IT and CapEx for the other aspects of the business. So it is an approximate number. But yes, it's more than HPs. It has B2B, The backbone and IT CapEx involved as well. As far as Globenet, obviously, when we look at Globenet, The GlobeNet value is not just the contract with Oey, even though the contract with Oey is a good part of the GlobeNet activity and has always been since when the transaction way back then was done in selling BTG to It's Ali Gordon to BPG. But in addition to that, we have all of the other revenues with other customers. We have additional investment In new routes, we have taxes and now we have all of the other aspects of the operation. The good thing here is that we believe that the assessment of the valuation of BTG was provided to us by BTG as part of their proposal. In our assessment within the proposal, we believe it was A fair value assessment, considering all of the flows and all of the rights and obligations and assets that Globant has, In addition to all of the synergies that it will be coming that they will be coming to the company in the future. And obviously, all of that will be validated by an independent operator. Actually, as part of the process since the plan amendment publication last year, We already anticipated the possibility of having InfraCo with additional assets contributed to it. In reality, it's part of the strategy of InfraCo. We believe that InfraCo will have a potential to grow by incorporating additional assets and becoming An even larger infrastructure provider than what it is today. And so because we already anticipated the possibility of having assets contributed to the company, We mentioned in the plan amendment that all of those assets would have to be validated by independent appraisal reports. And as I mentioned, the first evaluation that we received from BTG for GlobeNet, We understood it was a fair appraisal, but obviously, it will have to be validated by an independent appraiser. And in addition to that, It also helps create all of the different cash flows that we have mentioned concerning the LTLA payments and The hedge component that will come to the company is a potential good side effect of the transaction to us. And as such, we'll have a significant benefit for the overall structure of the transaction. As far as the inflows of and outflows of cash given the entire plan of the company, The one thing we do as we close mobile is that if you look back in time, we had We had a plan that had a 2021 with a significant requirement of cash given that it will be the last Here, where we will be funding the significant growth of the InfraCo operation in addition to maintaining our mobile operation in addition to Working on the reduction of the legacy costs and the legacy impacts of the diminishing number of STFC Subscribers of total telephony subscribers, we knew that this would be a year that would consume cash. And that's why We had already anticipated as well in the plan all of the different potential lines that we'll be able to assess during this year and that we are working As we speak to actually comply with the plan requirements in terms of funding for the year. But then when we look towards the end of the year With the contribution of the closing of both the mobile transaction as well as the InfraCo transaction, continue investing on the client cooperations and we have to remember then that from that moment on, all the cash requirements of the company We'll then be split in terms of infrastructure staying with InfraCo and all the rest staying with Oey. I'm not sure if you had any additional Question about the mobile operation, I couldn't quite get it, Mathieu. I'm not sure if I answered all of your questions. But Did you ask anything else about the mobile operation? Well, yes, maybe I wasn't clear, but I mean, obviously, you have a lot of leases In your balance sheet, at the end of 2020, it was BRL8.6 billion. I'm assuming a lot of that has to do with mobile. So I was just thinking, once the deal with mobile is closed, you received $16,500,000,000 from different purchasers, so that's cash in the bank. But in addition, probably your lead obligations have been reduced because they've been transferred together with the assets. I just wanted Confirm that I was thinking you were at the right time. If you think about the operational leases, yes, all of the tower That pertains to the mobile operation and will disappear with the transaction will become part of the mobile operation will stay as part of the mobile operation that Ends up getting transferred to the buyers. And then in terms of the financial obligations associated with the sale of mobile, The 2 key ones are the repayment of the BNDES financing contract we have and it will be paid It's entirely upon closing of mobile and also the pay down of the financing that we took at the beginning of 2020, which is already going to be taken down entirely by the closing of Mogo. So There's going to be 3 aspects of financial obligations that will disappear, the operational leases and towers related to the mobile operation, The BNDES debt and the debt financing takedown all upon closing of mobile. Thank you. Thank you very much. Thank you. Our next question comes from Maria Theresa Azevedo with Santander Bank. Please, Ms. Maria, you may proceed. Hi. Thank you, guys, and congratulations for the transaction. Rodrigo, can you comment, if you may, Britton, the unit economics for the residential FTTH business model? Is it going to be like a take or pay contract And should we also assume something like half the final user ARPU For the Ifracore revenue per connection, is it going to be identical to the relationship you're going to have with Avero? That will be my first question. Thank you. Thank you, Maria Theresa. Well, obviously, the unit economics, we believe they continue to work For us and for InfraCo, because of the separation and obviously because of the separation there are different The unit economics in terms of revenue, We expect that you're going to continue following the trend that we have today. It is the trend of an increase in ARPU given The increase in speeds over time as we have announced in our last call, so we have now close to 10 And of our new customers already migrating to higher speeds and then higher ARPU, and this will not change. Obviously, When we go down the integration of the unit economics with the separation of InfraCo, there will be a component associated to Just a monthly service that will be paid to Winfriedco to operate the FTTH networks and to provide the capacity. There is Also an additional component towards the all the installation costs and the home connection costs attached to it. So The home connection costs will be a responsibility of the InfraCo initially. And so this cash flow will be compensated by a client called by Oey 2 InfraCo as part of the model as well as one component of the model. And then we will have As far as the cost component for the unit economics, it will not change as much. Obviously, we're not giving all of the details here. There are some numbers that will remain confidential and up until the moment when we need We publish them if required by any of the regulatory requirements for the competitive process. But we believe that What we're doing here is that we're being close to international benchmarks, so the percentages in terms of how Do we spend with infrastructure and how do we spend with all of the other costs internally at Oi? They don't change that much. And as such, I don't believe that the unit economics for Oi Change that much if we separate what would be the infrastructure costs. Obviously, the infrastructure costs are not ours anymore. And in the end, of course, on the EBITDA of the company, as we have mentioned many times, will be lower. But obviously, The CapEx associated with it will be all within InfraCo. And so we don't see the unit economics in terms of EBITDA results So net of infrastructure investments to be so different from the past, especially because with InfraCo, we have We'll continue to have a gain in economics in terms of network scale. And as such, the economics remain relatively the same. Perfect. Thank you very much, Rodrigo. And the second question is on 5 gs. Can you Remind us on how Oi Clientco and Oi InfraCo can play the 5 gs game. Do you think that InfraCo could be even potentially interested In fixed wireless access services, how do you see Oi in this ecosystem of 5 gs? Thank you. No problem. Well, as we have said, obviously, our key focus of InfraCo in terms of 5 gs initially is the fiber infrastructure itself. It's not necessarily the spectrum. The fiber infrastructure is what It will be really key, really core to grow with 5 gs because of all the requirement for a capillarity of implementing the 5 gs base stations. As far as the usage of 5 gs spectrum itself, when we look at Oi, Oi has a non compete for the S and P for 5 gs services to mobile users as part of the sale of its mobile operation. But then, obviously, it doesn't make sense for us to just look at the 5 gs as a final service to users. On the other hand, on the 5 gs as A potential alternative to fixed wireless access, this will continue in our view. This will have to be an analysis made over time as well by InfraCo. We know that as the auction comes, there will be some opportunities to consider Other alternatives as part of the 5 gs in terms of, for instance, the millimeter wave potential with the 25 26 gig. And this will be able to be provided as well as the backhaul for small cells. So Intraco would potentially be able to use that as a backhaul for small cells as a means for fixed wireless access to customers of InfraCo, in this case, Oey as well, and this will be analyzed by InfraCo. But it's maybe too early to tell if considering this, we will participate as Oi in the 5 gs Auction, when it takes place or not. So we're still waiting to consider our options. We're still waiting to see the final version of the RFP as it comes out when it gets published. But in reality, all of the focus of Spectrum will be on those two components, on backhauling and on providing fixed wireless access services. Obviously, when we look at other operations, other infrastructure companies out there, not necessarily ours, There will be a potential eventually for using 5 gs spectrum to provide services to others, but that's not our focus at this current moment. Our next question comes from UJ Miller with GoldenTree. Please, Mr. Go ahead. Good morning, guys. How did you go on, Camille? Can you guys just help us understand how the intercompany debt Is being repaid as part of this transaction, the existing part, not the non drawn part? Sure, Julien. It's actually pretty simple. When you look at the components, we have the secondary and the primary. And as part of the primary components, actually a good portion of the primary components will serve to eliminate Existing debt and this debt is intercompany debt. So Camille mentioned that the transaction actually provides for the ability to settle intercompany debt up to BRL4.1 billion with the company. Out of those Up to BRL4,100,000,000 with the company, we currently have close to BRL2,500,000,000 with the company. So there's still Additional room for $1,500,000,000 to $1,600,000,000 intercompany debt and And this intercompany debt, if in the end, it gets used by InfraCo up until the closing of the transaction, We will then constitute the $4,100,000,000 of intercompany debt that Intrico would have with Oey. According to the plan and according to the proposal received, It is an obligation of the bidder and of Intrico to repay this intercompany debt in up to 90 days And that's why a portion of the primary receipts would then flow back to Oey in the form of a repayment of debt. And this obviously has nothing to do with the secondary. The secondary comes straight to Oey, But then a good portion of the primary can be used to settle this debt in the 1st 90 days after closing. That concludes our question and answer session for today. Now I would like to turn the floor over to the company for the final remarks. Well, thank you all for participating in our call today. We know that there will certainly continue to be significant conversations about the And what it represents for the company going forward. But the one thing I would like to highlight, and this is a particularly important one for us, is that When we set out to execute our transformation plan a few years back, there were a lot of things to be done. We put together a structure that had several different components, including the sale of the mobile operation, including the structural separation, including the sale of On strategic assets, including the sale of our international operations. And obviously, one of the most complex of those aspects was Exactly, the creation of an infrastructure unit and a structural separation of a UPI, which would still allow us to remain as a relevant participant of it. And I'm glad to say that looking back, we are pretty much completing or close to complete all of the core operations of our plan, including the receipt of a very good and very well structured proposal for our infrastructure the controlling share of our Infrastructure operation. And at that, we can see that in the future, our key challenge will now not be To understand if the elements that we put in place with the plan are to move or not, but simply to execute them. So obviously, it's still not a minor feat. There's a lot of things to be done. But in reality, we believe that this The reception of this last proposal for the UPI that we have structured, the significant UPI that we have structured as part of the plan Significantly materializes the realization of the plan we have in mind, and it confirms that the strategy was going in the right direction And obviously, it's also important to highlight that A number of people have asked, A, what do you expect in terms of valuation? Do you believe that the valuation that you put in the plan was a fair one? And Would it be possible to do something different? And my response to that has been that not only we were able to extract Both the primary and secondary components that Camille highlighted, but also we will continue to participate in the value generation of We believe that Inferco has the potential to become a much larger company. It has the potential eventually to get to Being a listed company down the road and I will remain as a relevant participant of this company. So we are capturing a good part of the Value of the company that was unlocked inside the current structure of Oey upon closing of the transaction, but we will continue to capture the value that we will generate as a relevant And finally, I believe it's worth highlighting as well for those to ask about the devaluation of the transaction That is successfully closed and we believe we are now in a very good track to close the operation. This will be the largest private equity transaction of all times in Brazil. So it's not small feet. We're very pleased with all of the structure We're very pleased with the agreements that we were able to reach with all of the different entities that are participating in our plan. And upon completion at the end of this year, beginning of next year, we're going to have a completely transformed company, a company that We'll have, again, long term growth prospects and long term sustainability prospects, and this is our ultimate goal. So thank you for all thank you all for being with us and let's talk to you. This concludes OESTR's conference call. We would like to thank you all for your participation and have a good day.