Earnings Call: Q2 2020

Aug 14, 2020

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to OI SA's conference call discuss the second quarter of 2020 results. This event is also being broadcast simultaneously on the internet via webcast, which can be accessed on the company's IR website, www.org.com. Br/ RI. Together with the respective presentation, we would like to inform that during the company's presentation, All participants will be able to listen to the call. We will then be in the Q And A session when future instructions will be given. We would also like to inform 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 simultaneous translation. A 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 deter materially from those in forward looking statements. Such statements speak only off the day they are made and the company is under no obligation to update them in the life of new information or future development. We will now turn the conference over to Mr. Rodrigo Gabriel, CEO. Please Mr. Rodrigo, you may proceed. Thank you. Good morning, everybody, and welcome to our second quarter 2020 call. And, as was the case, in last quarter, during this quarter, we also will have 2 sections to our conference call. The first one will be about our results in the second quarter. And the second will be an update to the plan amendment that we announced last quarter. And now after several interactions with creditors and stakeholders, We are now introducing a revised version of that plan amendment in anticipation of our GCM that we will occur in early September. On the results side, it's important to highlight that even though we had an impact from the pandemic, in particular, in the case of revenues, also, we were able to perform much better on OpEx and preserve the EBITDA margins. So we had the impact of the pandemic felt, but our OpEx was controlled. And in the end, we were able to stabilize the results of the company. On the operational side though, we continue to move in the right direction as we will be able to see in a couple of slides. On the plan amendment, We have introduced several small changes after numerous interactions with creditors, investors and additional stakeholders, including inputs that came from a mediation process conducted earlier this month. And this plan amendment changed, we addressed our DTH this investment that we're planning since the beginning of the plan. We have introduced a minimum price for our infra coal We have introduced the stalking horse for towers, and we also have introduced several new options for creditors. With this, we believe we will bring a much more balanced amendment and we are ready for the GCN that will occur in September 8. So let's start with the highlights of the quarter in strategic plan amendment last quarter. In Q2, OI continued to execute on all transformational fronts, demonstrating the solidity of the proposal it not only for the present execution, but also for the short, medium and long term changes the company will go through. Our strategic transformation plan is being successfully executed in pretty much all fronts. As we can see starting with the FTTH project and the fiber operations, which are the core of our plan. During last quarter, we were able to to the number of 6,700,000 homes back, 1,300,000 homes connected and a decline of 4% in broadband service complaints. Meaning that not only we are moving in the right direction and increasing dramatically the number of fiber consumers, but also improving our quality in the process and reducing complaints, highlighting the very good quality of the operation and the fiber fronts. We are now becoming the growth leader in homes connected, connecting more than the other 3 local operators combined. And we foresee the strength to continue in the near future as we continue to execute our plan based on fiber. On the operations front, The mobile business showed resilience even in the middle of the pandemic with our postpaid revenue growing 6.5% year over year. We obviously had impacts on prepaid as we will see a little bit later on. But we were able to stabilize revenues, even in the middle of a very tough period coming from the confinement due to the pandemic. On the B2B, we were able to increase our IT revenues, which reached 21% of our share of our total corporate revenues. And this is helping substitute legacy revenues and position our B2B business for stabilization and growth. And we are also greatly reducing our focus on copper and DTH, which accelerates the cost savings that we said we would be looking for in terms of our legacy businesses. And this will help us bring financial resources to continue investing very heavily on our FTTH projects. On the cross front, we continue to present the results of efficiency and simplification. With a $685,000,000 in cost reduction in 2020 year to date, which represents in the last quarter a 12% reduction in all this. Several initiatives helped us do that, including simplification, reorganization, digitalization and the divestment of legacy businesses. With this, we are solidly on our path to the 1,000,000,000 SMA's annualized IMVEXXA cost savings for 2020. And finally, on the last leg of our strategic plan, we continue to move forward on our strategic options for the future. Our GCM is now scheduled to occur on September 8, when we have made progress in important areas on our plan amendment, including the definition of the talking horse for Dowers. We have received binding offers for mobile. And we started the structural separation, the preparation for structural separation of our infra Proco and Clientsco in progress with our Jupiter project. In short, we are following through on all our commitments and paving the way for sustainable change not only for the present, but for the medium and the long term as well. So now let's look at the details and start by looking at fiber in the next page, page 4. And as we have always said, our fiber infrastructure was our key competitive advantage. And this now starts to show very, very clearly. When we said we had a competitive advantage in fiber, This is due to our gigantic fiber infrastructure that covers all countries with close to 400,000 kilometers of fiber. Almost 45,000 Kilometers of DUCs and over 2300 Cities with fiber. When we look at the results of that, combined with the investments on the FTTH front and all of the commercial acceleration we had, We start to see that we have the highest growth among all FTTH broadband operators in the last quarter, and we're able to achieve a number of net adds which were more than all three operators combined in the last 12 months. This is a significant progress because as we all know, fiber will be the future of broadband and will not only be the future of broadband for the short term, but we'll be here for a long time to come. With this, we can see that we're lighting up the country not only on the back of the hall and backbone as we already did before, but also on the residential side. And these two small pictures actually can show the difference of our fiber presence in terms of FPTH and one of our closest competitors in terms of fiber, looking at the national presence and where we are. These results can also be seen in numbers. And we can start to see that on the next page, on page 5. On page 5, for the fiber operations, even with the full impact of the pandemics in Q2, our deployments continue to accelerate. And now our projections to the end of the year already greatly exceed the expectations we have for 2020 at the beginning of the year. Starting with HomesPass, we got through the number of 6,700,000 homes passed in the second quarter. This is 4,300,000 more HPs built in just one year. With that, we continue very solidly on our path to achieve between 8.3000000 and 8.6000000 Homes passed by the end of 2020. This is due to a very successful increase in our monthly average of homes passed built which came from 267,000 in the second quarter 'nineteen to 365,000 in the second quarter 'twenty. Almost a 37% increase. Obviously, with all of the commercial activity, those homes passed are translating into homes connected. And our homes connected number has also increased quite dramatically from second quarter last year, coming from 237,000 to 1,300,000 homes connected in the second quarter. When we look at that and we make our projections for the end of 2020, We have already increased our projections for the end of 2020 to get between 1.82 medium homes passed, which would put us very, very close in terms of take up to the numbers we said we would be able to achieve in our plan by 2022. This is almost a 1 year and a half advancements of our 25 percent take up rates projected for the middle of 22. And this shows to the strength of our fiber product to the strength of our commercial operations and to the quality of the fiber deployments we're making on FTTH. This comes with a very successful increase in terms of monthly average homes connected net adds, which reached 119,000 in the second quarter 2020. This also comes with an increase in our fiber ARPUs, which are now absolutely in line with the plan at 85 All of that combined, we were able to generate revenues of $268,000,000 in the second quarter just coming from fiber. A 6.3x increase compared to last year. And now we have even more opportunities to not only continue this rhythm, but also bring the residential success to B2B. B2B already showed an improvement in terms of Small and medium enterprises on FTTH, and represented a revenue, which is four times larger than the revenue in 2019, but we still have opportunities to increase this number even further. Our key objective with all of that is to replace legacy revenues. And we believe we're advancing very steadily in this direction as we can see next. On page 6, we can see that even though our corporate users continue to drop sharply, with record sales and net adds of fiber, we are now resulting in the reverse of the historical residential RGU declining trends. And this will position us very strongly in the Ultra broadband competitive scenario. In the last quarter, we launched our 400 megabits offer in FTTH, which was very successful and This contributed to our FTTH sales accelerating and breaking records. When we look at FTTH sales, we can see that we came in January from a number of 160,000 approximately of FTTH sales to over 230 1000 sales of FTTH in July. Percent increase. So it's a very impressive effort that our sales teams have been making and achieving. This is finally helping us reverse the declining trend of residential RGUs. If we look at just 6 months ago, we had a trends of declining RGUs in residential of more than 300,000 RGUs. This has been gradually reduced all the way to July where we virtually saw the number of fiber net adds and legacy declines. And this certainly will position us for a very sharp recovery and for a future where the fiber will finally substitute all of the legacy revenues as it was the plan since the very beginning. This came also at an improvement in the quality of our broadband customer base. Obviously, when you launch a new product, is expected that at the beginning of the project, there will be variations in terms, for instance, of the full rate and the survivability of the early customers, but we have been improving that quite dramatically. And we already saw from March to June a significant decline in our FTTH customer default rate of minus 30 on the 30 to 60 and minus 20 on the 62.90. All of that is making significant progress towards our overall Ultra broadband leadership And here, we would like to call your attention to something, which is not only the comparison of our fiber performance with everybody else's fiber performance. But we now start to compare our fiber performance to everybody else's Ultra broadband performance in all technologies. Cable included. And as we can see, for the first time in June, we were the leaders in all technologies Ultra broadband net adds. With a plus 4% compared to player 2, with 137,400 net adds in Ultra Broadband Technologies. This position us very solidly to dispute the leadership in all technologies for Ultra Broadband net adds and users in the future. Obviously, this will help us revert the trends in residential revenue as can be seen next. On page 7, we can see that after a very long period of decline, the revenues from the residential segment reverted the trend in June, driven by the very strong expansion of FTTH, even again, as we have highlighted, with the sharp declines in copper. When we look at the left hand of the page, we can see that our copper revenues continue to decline very fast minus 31% on voice, minus 32% on copper broadband. And this is expected. This is not a performance issue. This is a structural trend that we know we're coming. And that is why we have the plan focused very strongly on substituting this legacy revenue. For the copper for the fiber revenues, we are now building up. As we can see, our fiber revenues grew 5 50% from the second quarter 2019 to 2nd quarter 2020. And we got to a 2 50 5,000,000 revenues in FTTH. With all of that, we can see that in June, we finally were able to revert the trend. And the revenues by the revenues we added in FTTH, which was plus 14. And this is a significant step for the company because for the first time, even with our fiber base, it was not as we wanted to be because it will still grow significantly. We are now already generate more than $1,000,000,000 of annualized revenue in June. If we just annualized the fiber revenues in June, it would get to 1,100,000,000 of revenue. And obviously, this is the long term trend of the company. So While fiber has had a stellar performance during Q2, unfortunately, as it was the case with the whole market, mobile was impacted by the pandemic. And we can see this in the next page on page 8. And now talking about mobile revenues, we can see that the pandemic did have an impact in revenues, in particular in the prepaid segment. Even among some signs of gradual recovery that we can be seen more recently. Starting with postpaid, postpaid was a little bit of a bright spot in terms of the numbers because of the growth in customer revenues of 6.5%. But when we look at net adds, following the trend of the entire market. For the first time in loan sequence, there was a very small negative number of net adds in the second quarter. Given the impacts of the pandemic and the reversion of some postpaid customers to prepaid. But as we can see as well in the bottom part of the chart, there was some recent softening of the confinement that led to some improvement in net adds. Again, So the sharp declines that we've seen in net adds in April were slightly reversed even though they're still negative in May June. And there was also small recovery in customer revenues in the monthly comparison, starting with the declines that we've seen from March to May and now starting to soften up the curve again in June. On prepaid, we did have a significant impact as the whole market in terms of revenues. And we've seen a 17.7% decline from second quarter last year or almost 1,000,000 decline in revenues. Given the impacts of the pandemic. Again, when we look at the more recent trends on an intra month comparison, we can see that the sharp increase in the decline of prepaid revenue occurred from March to April And now from April to June, we already recovered some of that and expect this impact for the remainder of the year to be soft in a while. With all of that, we can see that our mobility revenues did suffer during the quarter with minus 5.2% But again, with the bright spot that we did have a good increase of 6.5% on our postpaid revenues. So we can expect some gradual recovery to the end of the year, but we do have some gaps left by Q2, which will be hard to recover. So in the next slide, let's talk about our performance in B2B and wholesale. On line 9, starting with B2B, we can see that, again, we did feel the impact of the pandemics on both corporate voice and data revenues, but this was partially compensated by growth in IT revenues. We see that the reduction in voice and data traffic was very important in particular for the voice traffic given the defects of home office changes. And on the other hand, we can see that IT revenues grew significantly 53% growth, given the home office programs, the acceleration of IT revenues and additional products we introduced during the quarter. On the wholesale, we did see the same impact coming from regulated revenue. In particular, IIa EILD and wholesale voice termination rates, which are the ones more impacted by traditional revenues impacted by the pandemic. On the bright spot, we did see during the quarter a significant improvement in net sales compared to not only last quarter but last year. And this number was quite sharp, achieving 136 percent growth in increase of net sales during the quarter. Which may help us to soften again the impact for the remainder of the year. With this impact on revenues, as we can see, a very bright spot on fiber reduction on residential copper impact on mobile and some impact on B2B and wholesale. Obviously, the cost continue to be a big focus for us. And as we can see in the next slide on slide 10, the trends of solid cost reduction continued in Q2. This was driven by the focus on efficiency simplification and digital transformation. And with that, we always stabilized our sequential EBITDA. When we look at the OpEx drop, even with all of the revenue drops, which were at the range of minus 10% we are able to reduce our OpEx even further with minus 12.5% with reductions pretty much across the board. The reductions came in 3rd party services in rent and insurance, in network maintenance and in digital transformation. Two things we would like to highlight here are: 1, the digital transformation efforts, that's probably one of the main drivers of our cost discipline for the future. Some of the numbers highlighted here indicate that, as we can see in the 85% share of digital channels in all interactions with customers in June, with a 36% year over year increase in the use of our virtual technician app of minus 26% call center call in a year over year comparison and the increase of the use of our artificial intelligence agents join. There was a second highlight we would like to make here, which is on the network maintenance front, we had even a sharper reduction compared to the overall OpEx reduction of close to 15% drop. This already starts show the impacts of what we called our de averaging strategy to migrate customers from copper to fiber and to decommission legacy networks. This without a question will be a very important part of our cost reduction efforts for the future. And we started to execute as can be seen for the numbers in the second quarter 2020. With that, the results on our route in EBITDA was that even though there was a reduction compared to last year. This reduction was smaller than the reduction in revenue, and it was pretty much a stabilization compared to a sequential basis. So we reached the 1,464,000,000 in IFRS 16 EBITDA for the second quarter 2020. On the CapEx side on slide 11, we can see that we have been consistently changing the CapEx mix as we said we would. And we continue to allocate massive investments to fiber and FTTH is the future of the company. And this also allows for a greater network resilience during the whole pandemic. On the CapEx front, we can see that compared to the first quarter 20, we have an additional 4 percentage points increase on the fiber investments as a percentage of the total while we were able to contain the investments in the legacy businesses such as copper from 15% to 11%. Compared to a year ago, those changes are indeed very dramatic with 64% versus 36% and 11% versus 28% on the two ends of the scale. This brought our CapEx mix in the first half of twenty twenty to 70% focus on expansion and new businesses and then 14% based on legacy. Obviously, this is the direction we need to go even though we must continue to invest very, very solidly on the fiber, bringing our overall CapEx to steal the level around 7 or slightly above 7000000000 a year. On the network resilient side, as a note, it's important to note is that even though we had a significant increase in the data traffic consumption in our network since the beginning of the confinement, close to a third of network increase in traffic, we were one of the only operators to register a drop in the number of complaints in broadband service even in the middle of the pandemic with all of the increase in usage. And this is a comparison to the second half twenty nineteen. So this is a big step for us, not only showing that our strategy is focused on the right direction, but also that we're being able to do this and reduce our legacy exposure, while at the same time keeping focus on customer quality, efficiency and attention to our infrastructure. Next, let's talk a little bit about cash. So on page 12, we can see that despite all of the challenges the company has successfully controlled its cash consumption during the second quarter to secure the execution of its transformation plan. On the cash flow front, we can see that we had a cash consumption of 237,000,000 a lot less that would be expected in terms of run rate while the recovery is going through. And this was allowed not only, but the cost containment and the maintenance of the routine EBITDA, but also by the final installments received from the unit sales which now is finally received in full. With that, we closed the quarter with the 6,000,000,000 in cash in June 20. On the debt side, we did see the impact of the FX and the interest accruals. And now we had our gross debt increased to 26,000,000,000 and our net debt includes to 20,000,000,000 increased to 20,000,000,000. We can see that most of that was due to the FX variation. With that, it's important also to highlight that our gross debt profile continues to be a longer term debt profile And, we maintain a short term hedge policy. We were able which we're able to protect our cash and our FX exposure, in particular, during 2020, which is a year where obviously there were significantly impacts nonetheless. With that, we can see that we continue to execute well on the operational front. We continue to execute well on the cost front. We continue to execute well on the strategic front but we still need to address our financial situation and our debt. And this is exactly the reason why we have proposed plan amendments and we are now perfecting the splint amendment with additional changes in preparation for our GTM on September 8. And this is the update that we start to provide next. So moving on to the second part of our presentation, let's talk about the changes we proposed to the amendment and which will now be the version that will be voted for the GCM in September 8. We would like to highlight on page 14 just the initial changes to the plan. And we start at looking at the UPIs or the isolated production units that we highlighted will be a key feature of the plan to allow the company the flexibility to perform the sale of some of its assets to bring cash, not only for reducing debt, but also to increase investments in the core businesses of the company. So when we look at the UPI, let's highlight several different things that we introduced in this revised version of the amendment. Starting with the towers, we have finally been able to close on a stalking horse position after a binding offer that was received by Highline Du Brazil. And with that, we included in the plan the stalking horse condition with a right to match 2 high line, increasing the number to 1,070,000,000 for 100 percent of the shares. The introduction of Highline as a stalking horse was already provided for in the revised version of the amendment that was filed last night. And now we have certainty of closure on the UPI towers. On the UPI, they centers, as we had highlighted in the last announcement, where no changes were brought to the table, but we already had certainty again with the binding offer received and which was given the right to match as a stalking horse to P. M. T. Holdings. And so for the 2 key pieces of the non core assets we have the uncertainty and we have stocking horses included in our plan, both for the towers and for the data centers. Moving on to the UPI mobile. On the mobile front, we had some news and obviously we have reflected those news as part of the amendment. And the primary news is that, as we have been highlighting and communicating publicly, we have received binding offers the UPI mobile, all above the minimum price of $15,000,000,000 we set in the first version of the amendment for 100 percent of the shares. And with that, we were able to include in the plan the condition to define a stocking horse until the GCM giving our right to talk to the offer with the better conditions for the company. Given the UPI mobile, it's important to highlight that after the receipts of binding proposals during the last couple of months, we have been discussing and negotiating with the proponents of those binding proposals. And at the current moment, we are in an exclusivity agreement to discuss with, one of the bidders, which the consortium of the 3 other mobile operators in Brazil to understand if we will be able to secure adequate terms and conditions for the company to be able to grant destocking horse to this proposal. This exclusivity period has been renewed once and we are now in the middle of the second term of this exclusivity peers and discussing on the UPI mobile conditions for us to again bring as much deal certainty as possible to the GCM. On the UPI infraquel, We have also moved forward with our competitive process. We finalized the 1st phase of our competitive process. By accepting non binding proposals for many different players. And after that, with a wise demand for the assets in the preliminary phase of the process, we have decided to set a minimum price of CHF 20,000,000,000 for the firm value, which was a middle point between the CHF 25.5 and 51% economic value participation that we have highlighted would be our goal in the 1st version of the plan amendment. This allows and ensures for a very competitive process in the 2nd phase that we expect to conclude after the GCM. And we will allow us to track the most possible value from our investment in the UPI infraquel and the sale of the control of the UPI infraquel as has been highlighted. It's also important to mention that for the UPI infraquel we continue to maintain of up to $5,000,000,000 to guarantee not only the payment of $2,400,000,000 in debt with OE by infraquel. And also the execution of the CapEx plan that we're bringing to the table. With this, we have managed to advance significantly in our view of the certainty of the ability to brendeem for co supervision and to have a very solid plan moving forward to execute the structural separation we have communicated to the market in the first version of the plan amendment. And Finally, on the UPI front, we are introducing yet an additional UPI, which will help us address thing which we already highlighted very clearly in the beginning of our transformation plan, which is the deemphasizing the DTH infrastructure and the DTH business, which we know is a declining business that in the future We'll probably only represent costs for the company instead of reason why the business was created in the first place. With that, we have created a UPI that we're calling TV co And this UPI CVCO brings the DTH infrastructure and equipment, customer and some adjacent obligations to DTH NIPTV service. In particular, the assumption of 100 percent of the payment commitments for the use of the satellite capacity until 2027. The way we're going to structure this UPI Evico is that there will be a sale of 100 percent of the shares of this UPI Evico for the minimum price of BRL20 1,000,000, but with the entire value actually falling on the assumption of payment commitments for the use of satellite capacity. And this will extend us from this annual cost, which would represent a significant cost for the several years to come. In addition to that, we will preserve our upside on the revenue share on IPTV by keeping all of the IPTV infrastructure with us and by defining a 50% revenue share with OI on IPTV revenues on content revenues provided by T. V.co to our customers in the provision of IPTV services to our fiber So with that, we close and conclude the structuring of all of the UPI's we're going to bring to votes on our GCM. With a very significant progress on the UPI Towers, on the UPI data centers, with a lot closer to view certainty on the UPI mobile, with a much better evaluation of where we are in the UPI infraquel and with the structuring of a reduction of our DTH operation with the UPI TVCO. Coming from to the second part of our adjustments to the plan, we can move on to page 15 where we talk about the amendment proposal to the GCM plan in terms of the updates to credit repayment. And here, we would like to highlight as well several small adjustments we made to perfect the plan. Starting with the non financial creditors, there was an production of increasing the linear payments of the small and medium businesses on class 4 to up to 150 k which will help us eliminate a bigger part of the class 4 during the GCM. On financial creditors, We introduced some perfections to the secured creditors, Class II or the credits that now belongs to BNDS. With a much firmer tie between the sale of the mobile UPI to the payment of the NDS, completely liquidating this credit. And again, making sure that we fulfill with all of our obligations to the only guaranteed creditor we have, which is BNDS. On class 3 for banks and ATAs, we have introduced a new options in addition to the one that was already there with a 60% discount. And these new options are an improvement in the differentiated option for creditors who provide a new credit line, and as we will see in a second, and also an introduction of a possibility of reducing the prepayment discount for 60% to 55% to creditors who offers bank's guarantees at the maximum value of the restructure credit and a ratio of 1:one. Under the J. R. Plan, we have a condition that we will reduce our current total exposure and guarantees to be able to assume this new guarantees that would then by its turn allow any provider of this new guarantees to reduce their prepayment discount from 60% to 55%. On additional creditors. One very important development that we had was with Anatel and we have now included in the plan that we will be paying our ametel credit under the law 1398820, which actually brings not only more legal certainty for the company, but brings, actually positive, positive conditions for us to eliminate the discussion with Anatel, which was in the court since the first plan and to bring this something which is legally recognized by the agency and allow us to move forward without any further questioning. This was already allowed by the former plan and is now being solidified as an option here in the plan amendment. In addition to that, We have includes, yes, another clause, which will allow us if any more beneficial conditions are published. Compared to loss 13,988, we will be able to adhere to that, and that's what we have been negotiating. In addition to including the term in our new plan amendment, we have also filed and petition for the inclusion of our credits under law 13,988, both with the agency and with AGU. And we have now started the negotiations to initiate the transaction of those credits under the new law. On Slide 3, we have also included some changes to have the maximum benefits of conducting those reverse auctions by focusing on the lowest value and NPV for the company in terms of reducing as most as best as possible. The value is coming from the auctions. But also we have introduced some conditions to give bond holders and suppliers and all of the class 3 the ability to participate in the auctions with some certainty. And finally, as we have highlighted, as an additional options to banks and ECAs on class 3 for strategic creditors. We have perfected the option to open new long term credit lines up to 3,000,000,000 for all and accurate creditors, allowing counterpart a payment of the structured credit under J. R. Plans at a ratio of 1 to 2 in the event that O. Effectively uses credit line offer and to maintain your regional J. R. Plane conditions to 2.5 times the new credit line offer by protecting their existing credits and not applying the 60 percent prepayment discounts. This is interesting because it brings new credit for the company And it also helps us some of the financial creditors to have better conditions for the payments of their existing credits compared to the 60% discount option that was introduced in the first version of the amendment. Finally, on the bridge operation, with the goal of financing the transition of our plan during the whole operational restructuring that we will conduct from here until the end of next year. We have introduced the possibility of partially anticipating the proceeds from the sale of the UPI mobile assets up to a value of 5,000,000,000 and introduced some additional conditions for flexibility, for the leverage, the additional leverage guaranteed by the shares of VINFRECo to have a continuity of our infrequent investments even before the infrequent transaction clears, which is expected for next year. And the last condition we actually updated in our plan amendment was for the JLR closure. And with the current amendment, we are introducing a condition now, which states that the J. R. Will be concluded by May 30, 2022 or in any other date in case there is a force majeure issue that is identified and approved by the J. R. Court. With it, what happens next? So now on page 16, we can see what is the expected timeline for the planned amendment and the JCM and all of the operations that we expect will happen after that. And starting with the June 20 introduction of our first proposed amendment. Now we are filing the adjustments to the proposed amendments. In September. On 8th September, we will have the GCM. We expect the tower end data center UPI auctions to occur in October or November 20. On December, we expect to conduct the mobile assets UPI and to close the towers and data centers Then in first quarter 'twenty one, we expect to have the option for UPI, InfraCo and the UPI CVCo. We expect to close the UPI infra going to third quarter 'twenty one and to close the UPI mobile assets and the UPI t declined in the fourth quarter 'twenty one. With that, by the end of 'twenty one, the company, again, will be a completely reconfigured company, way more sustainable looking forward and focusing on it core infrastructure investments and its core abilities to serve the market. And we will be looking to an end of the J. R. In May 2022. In conclusion as we can see already from all of the conclusions we brought when we introduced the first version of our planned amendment, we continue to stabilize our operations. We continue to execute on our strategic model, and we continue to accelerate on our fiber optics This continues to be an ambitious model to accelerate growth. And again, we're looking at creating the largest infrastructure company in Brazil but not only that, but to create a company in the case of OI, which will fight for leadership in pretty much all of the segments in which it operates. This will benefit customers. This will benefit the market and this will benefit pretty much all of the stakeholders of the company. We trust that this new amendment will be understood. It has been extensively discussed with many stakeholders And we trust that it represents a fair representation of how the company could go forward in the best interest of pretty much all of its stakeholders predators and society and customers and shareholders. And this management team and the board of directors continue to be very committed to executing this new strategic model. We know that there will be a number of additional questions. We are prepared to answer them. But we also feel extremely confident that we're turning the page and really embarking on a journey that will allow us to have by the end of next year, a completely transformed company, which is at the same time a very successful and very a sustainable company for the long run. So this, in summary, is what we would like to introduce today, both talking about our results for the second quarter. As well as our plan amendment changes in anticipation of our coming GCM. And now we would be ready to take on the investors questions. Thank you. Ladies and gentlemen, we will now begin the Q And A session for investors and analysts Remember that questions should be asked in English. Our first question comes from Mr. Fred Mendes from Bradesco. You may proceed. For, good morning, everyone, and thanks for the call. I have two questions here on my side. I mean, the first one, just actually want to get a better understanding at least it seems to us that there was no agreement in the mediation of the banks And now, you are kind of updating the conditions for these payments, and then obviously including other banks and the ECA. So I just thought Number 1, to make sure that it is correct, there was no agreement at first. And now, as a second point, in the first option, with the case and the banks, what will be the implied discount of the implied haircut that we'll be giving to to them under these new conditions. This will be my first one. And then on my second one, also, trying to get an understanding here, It seems that the minimum value for the InfraCo was decreased from before was something that BRL1. Now it's moving to BRL20 1,000,000,000 despite all the demand, the supposed high demand for this. So just to understand the rationale, behind this change as well. Thank you very much. Thank you, Fred. On your two questions, first, on the mediation process and the agreement with the banks and creditors in general, as you described. There was a mediation process. There were several up put on the table and there were the consideration of everything that was exposed from both sides. And as you can imagine, and as was the case, in pretty much any process like this. There will be advancements all the way until the GCM. And it was because of the conversations and because of all of the discussions that we have opted to include new options as part of this revised plan amendment, And these new auctions obviously provide better conditions for our creditors that allow for a very some of those options, which, as you mentioned, would indeed reduce the resulting discount of the 60% hair count. In terms of your second question on what would be the resulting discount, this would greatly depend on what is the volume of either resources or additional finance that is brought to the table or guarantees? And, obviously, when we look just the bank guarantees. It could go all the way down to 55%. If, we're looking towards the new resources, the new financing, it can be even lower than that, but depending on the volume resources that is brought forward and, who actually gets what, right? So it's proportional to who brings this additional volume of additional credits to the table. So it's not a preset, but it follows a set asset or rules that will obviously, depending on the volume of additional resources that brought to the table, you will allow them to reduce the resulting discounts. On the minimum value for infraquil, which you mentioned decreased Let me just correct that because in the first split amendment, we had not set any minimum value. What we had said was that we were expecting a range of the economic value of the company for the $6,500,000,000 between a 25.5% and the 51% making sure, making sure and making very clear that that was the range that we had not introduced any minimum price at all in the first version of the plan. What we gave was an example with 6.5% and either 51% or 25%. And obviously, this would provide a range in the first, in the first amendment. But as we were in the middle of our process, in our 1st phase of the process, with the non binding proposals, with non binding causes, which had not been received yet, in the first version of our plan amendment, we opted to not define a minimum price. We did that now after the conclusion of the 1st phase of our process for Impreco. And we decided to use a value in the middle of this range obviously, to, maximize the competitive tension in the process and to guarantee for creditors what is the minimum view that they should have on our existing plan. Obviously, our expectation of price and our value has not changed. And we believe that the number can be obviously, above significantly above that. But we're setting, again, a minimum value at the middle of the range will allow for the ample participation of bidders in the 2nd phase. And, we certainly believe that we will be able to achieve our expectations. But as there is a number that needs to be set here, we decided to use this number in the middle of the range. Perfect, Rajil, very clear. Thank you. Our next question comes from Mr. Carlos Cicado from BTG. You may proceed. Thank you. Hey, Rodrigo. Camille, how are you, Marcelo? How are you? Thank you for taking my questions. 1, just following up on the question that President just did. So the minimum price for the InfraCo is BRL20 billion. And in addition to that, there will be the BRL 2,500,000,000 dividend payments from difficult to OE, right? There was a bit confusing in the way, in the way we initially the way we read the pen. So that's why I'm trying to clarify that is the price of $20,000,000,000. In addition to the dividends that will flow from infra cold to OE. And so that's the first question. And the second one, if I may, on Anatel. My understanding is that this decision to remove Anatel from the restructuring plan negotiated under the narrative legislation is already a business coming from the negotiations between the company and Anadel. Which means that Anatol will be okay with the plan that is being proposed, the amendment to the plan that is being proposed. Is that a fair assessment, please? Thank you, Kado. Well, on your first question, on the minimum price, let's remember, the minimum price that we set is TWD 20,000,000,000 EV enterprise value. And obviously, any debt will be discounted from that upon closing, right? So, it's a $20,000,000,000 EV, not a $20,000,000,000 equity. So the 2.5 would be included in that. But obviously, again, it's this is just the middle of the range. And, as we have from the competitive process, we believe that there is a potential to go significantly on that. On the Anatel decision, We have been discussing and negotiating this with Anatel for a while because we know that this would bring not only deal certainty but it will bring conditions for the company, which are quite similar to the ones that we currently have in the J. R. And as such, obviously, we believe that this was a way that is worth pursuing. We started our discussions with Anantel remembering that it's a discussion both with Anatel, but primarily with the AGU because it's a credit card being handled by the AGU at this point. And the law of 13988, which was, but in effect, as of a few months ago, actually is conducted by the AGU. The negotiations are conducted by the AGU. And obviously, when we looked at that, we not only included the terms in our plan and that the old plan allows us to do that because there was a clause in the oath plan, which allowed us to adhere to any new legal rules that helped us transact the regulatory agency credit. And that's exactly what we're doing. So, we're using a former a provision of the plan to actually bring legal certainty to the regulatory agency credit. And we have filed the petition to transact those credits. Dispetition is now with the AGU. It's being analyzed. We have provided all of the documents and all of the numbers and all of the information that is required to actually move forward with the transaction. You know, those transaction take some time to be reviewed and to be approved and to be formalized. But we're confident that this will move forward because we're pretty much the hearing to all of the legal conditions of the new law. And this, as you mentioned, would provide a favorable scenario We understand that in the previous plan, in the original plan, what happened was that there was a big questioning from Anatel and the AGU about the legality of including the credit and the plan. After that, this was cussed and ruled by different courts in favor of the legality of having the credits included in the plan. But As we are looking for a few certainty and planned certainty here regarding those credits, we opted to use the law 13, 98 days to remove them from the current plan as it was already possible. We have to remember by doing that, we pretty much would be removing the key obstacle, which is the questioning of the legality of having the credits in our plan. Obviously, as you saw, Anatel has issued some statements about exactly this consideration. It has not advanced its voting position. And obviously, now this is up to Anatel to discuss internally after all of the changes of the amendment that we have now introduced and made public. And also after the petition that we already made public that we are starting the process to transact the credit, And finally, it's very important to highlight that we also have the ability in the future to eventually adhere to any more advantageous option that comes out in terms of those credits after the credits have been transacted. And this has been a key discussion that we have been having both with Anatel and the PGF, okay? Okay, everybody. Thank you very clear. Thanks a lot. Our next question comes from Mrs. Maria Rucedo from Santander. You may proceed. Hi, everyone. Thank you for the question. And first of all, congratulations for the interest that execution, Rodrigo, Kamiliantini. My first question here is on the CapEx, especially the CapEx for 2021. Can you clarify a bit how will this be funded? Is it going to be under Imprecal or on the legacy on the remaining or coal? Or do you have to do you have a minimum commitment in terms of how many homes passed with fiber you have to deliver to the infra coal? Because the deal is only going to be closed in the end of next year, right? Thank you, Maria Theresa. And, yes, I mean, you're right in the sense that we will continue to maintain our rhythm of CapEx investment in particular for the HPs and Cs, which is obviously at the core of the plan. But let's remember, and you pointed out correctly that we would expect the infrequent transaction to actually close only at the end of the year. And while doing that, we have, in our plan, we have anticipated several options to actually fund continue the investments in addition to, obviously, the generation of all of the current cost reductions that we're addressing. We have anticipated 2 additional options to allow us to do that. And one of them would come from a bridge of the mobile transaction as we have just highlighted in our plan change amendments. And also coming from a secure bridge coming from the infrequent transaction. So we expect to already separate the investments from Impreco in a separate entity. We're starting to do that. And this separate entity obviously will be responsible for the HPs and HCs investments are under still the same company is still the same group. So, before the closing of the transaction, but already with the possibility of leveraging this operation, separately from the entire company. And this was a guarantee that we can maintain our Ribbon for 2021 until the transaction closes. So a mix of, obviously, addressing the cost reductions we have with 2 additional components of financing. Perfect. Thank you very much, Rodrigo. And then my second question is a follow-up on the discussion with Anatel. As a creditor, the negotiations are evolving. But as a regulator, can you please update us on how you're seeing the concession burden for the next tiers? And is there any opening from Anatel to alleviate a little bit the burden on the on the coverage obligations that you have and on you mentioned in the past, becoming a carrier of flash resort. How should we see your legacy business going forward? Thank you. Well, obviously, Marietta, as you can imagine, we have been having, constant discussion with Hanatel have been joking with people that probably if it was not for the pandemic, we could set shop in Brazil as well because we have been discussing intensely and continuously with them all of the discussion about the concession issues and what needs to change in the future in addition to the discussion of the credit. And as we see it, there is now a is to be taken inside Anatel of defining what will be the rule for the migrations between concessions and authorization. And this is absolutely critical for us to define until the middle of next year. What should we expect and how we should react in terms of our ability to migrate. Clear and transparent and communicating this to Anantel is we're doing everything we can in under our control within the regulatory boundaries that already exist to reduce the exposure to copper. So we're, obviously migrating as most as possible, users from copper to fiber. We're communicating on a tell about the relief for some of the metrics that don't make any sense. For instance, the metrics of, having, local presence in pretty much all cities for, for, copper customer service, for other metrics in terms of, all of the cost associated, for instance, with all of the issues with the stolen copper in our operations, and other issues, which are actually just a regulatory relief and small measures before actually the big ones come in next year. We already believe that Anatel is very aware of what needs to change that Anatel understands that if we look at the current copper requirements and the copper obligations those current copper obligations would not be sustainable in a migration to an authorization and that any player would only migrate if we have a certainty that after the migration, there is a path to sustainability. So, no, there's still no visibility of when this is going to be completely solved, but we're doing everything in our control under our control to be able to reduce at least significant portion of the cost. In our expectations, given the discussions that Anatel has moved has put forward, We believe that until the end of the year, we would have a much clearer path in terms of timeline and also in terms of what will be the obligations that we will survive. But they're absolutely aware that this is a critical part of the regulation change after the approval of PLC last year. And they're executing on it with all of the due process internally to the agency. Our next question comes from Mr. Marcelo Santos from JP Morgan. Hi, good morning. Thanks for taking the question. It would be on the UPI TV call. Just wanted to understand better, how say off this asset would impact your strategy, for example, when offering IPTV services and the bundling that you would do at the client co and also what costs would go with with the UPI CV call, what costs would remain, all these related to activity because I understand DTH is going in full with the sale, but just wanted to understand better how things will shape after if did you give the IT vehicles sold? And the second question, would be related to how much EBITDA should go with the sale of the tower, data centers and mobile I don't know if you can speak of all of this, but if you could give some help on some of these would be very useful. Thank you, Marcelo. On our UPI Silico, as you correctly pointed out, the key intention, the primary intention of the UPI TV co is to divest from the DTH business. We have said at the very beginning of our plan that it didn't make sense for us to investing in DTH for the long term given that, 1, we do not have the scale and 2, we believe that there was a declining trend overall for the market in terms of DTH. So the DTH would only make sense for a player if it has a significant scale that allows the player to not only breakeven, but to continue obtaining returns even. In the middle of a significant decline for customers. And this is exactly what we have been doing. The focus of the UPI TIVCO is DTH. As for IPTVs, there is 2 parts to that there are 2 parts to the answer to your question. The first one is we will keep all of the IPTV infrastructure. So we will keep with the IPTV platforms. We will keep with the IPTV set top boxes. We will keep installing and deploying the IPTV to cover fiber customers' houses. And obviously, this is an important component of our fiber business and our residential broadband business because it allows us to be more competitive. It allows us more options to the customer and it allows us to penetrate on higher income consumers for the residential broadband product. In addition to that, what we content from this new CVCo player, which will consolidate the DTH business. And by doing that, we expect to continue with an attractive price for content, which will be offered to our consumers. And so it's a it's a hybrid operation where DTH goes entirely and CVO actually stays, an IPTV or a platform stays with us, but with content being acquired at a much larger scale cost. And this is, in essence, a little bit of the best both worlds because we reduced a significant cost that would be coming to the company in the coming years. And we maintain our differential with the content offerings to our fiber consumers. In addition to that, it's important to highlight as well that we keep all of the OTT operations. So, OI plays which is our OTT offering that does not depend on any linear TV platform. It remains at OE and it's something that will continue to be expanded. So, we still remain with the future up for content as part of our offering. So we believe we achieved a very interesting proposition here because in the end, We reduce our costs. We maintain our offer. We maintain our bundles. And we start to focus as well on growing OTT and growing something that will be in our opinion the future of content rather than linear programming. On your second question about the EBITDA for, data centers, and, for towers. In terms of data centers, it's not super significant. We're talking about a $50,000,000 EBITDA, and obviously, this will be more than compensated by what comes in. And if we just consider data centers and towers, it will be around 150,000,000 EBITDA all combined. As for mobile, obviously mobile is a different story because it's one thing to consider what is the EBITDA that stays within the perimeter without all of the associated costs. But the other thing is, what would be this EBITDA inside the company? So it's kind of also having 2 different metrics here. 1 is what is the EBITDA that we sell? And the second is what is the EBITDA that goes out? Because obviously this EBITDA in the perimeter that we're selling is a higher EBITDA. It's an EBITDA that approximates 3,000,000,000 and thus, which allows the market multiples, which are significant and we have discussed it. But we have to remember that did internally to the company was associated with a lot of indirect costs. So the EBITDA inside the company was a lot smaller than that. Obviously, as part of the operation, we have a plan to optimize the cost associated with mobile. And so in essence, when we look at the EBITDA that goes out, it will obviously be significantly low this number. I would say, we have not been disclosing this number in detail. But, internally to the company, suffice to say that our EBITDA was in the range of the mid-20s to lower 20s. Perfect. And just to follow-up on the first question. So the users of IPTV and the company that determines they offer, what's being offered, would be OA. So you would still own the users and this IPTV call relation to the sorry, the CVCO, in relation to the HPGR, they will only be kind of a wholesaler of content to you. So you will continue to have the full ownership context with the users that will be still being done by you? The users will be users of the idico. And we will be offering co billing as part of our platform and our bundles. And obviously, we will be also remunerated by having the IPTV platform. We will manage the IPTV platform and the IPTV set top boxes and controlling the customer experience to our fiber consumers. As there are no questions, I would like to turn the floor over to the company for the final remarks. Okay. So, thank you again everybody for, this additional call for the second quarter and then for also the changes to the plenum and before our GTM. We again are very confident in the GCM results that are to come next month. We are very confident in the future of the company. We're very confident in the execution that we have been demonstrating to the market. And after all of that, we look at obviously a significant path forward to having a sustainable company in the long run. So Thank you very much and hopefully we'll talk soon either after the GCM or in the next quarter results. This concludes OSA's conference call. We would like to thank you for your participation. Have a good day.