Earnings Call: Q3 2019

Dec 2, 2019

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to OSA's conference call to discuss the third quarter of 2019 results. This event is also being broadcast simultaneously on the via webcast, we can be accessed on the company's IR website, www.hoi dotcom.brri together with the respective presentation. We would like to inform that during the company's presentation, all participants will be only session. We also would like to inform that the conference call will be conducted in English by the management of the company and the conference call will be conducted via simultaneous translation. This conference call may contain some forward looking statements that are subject to known and are now 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 of the date they are made, and the company is under no obligation to update them in light of new information or future developments. I will now turn the conference over to Mr. Rodrigo Bill, COO. Please, Mr. Rodrigo, you may proceed. Thank you. Well, good morning, everybody, and thank you all for participating in our call. And, as you know, after a year as a board member, I accepted the challenge of helping to execute our transformation plan as an executive. And for the last 2 months at the the very beginning of Q4, have been working with the leadership team of the company, so we can accelerate all of the actions we announced part of our strategic plan a few months back. As part of this journey, we already had some changes in our leadership team. And today, I have with me and Nicole Camille Faria, our newly appointed CFO. Antonio Hadelo, who also just joined as our new legal counsel, as well as the other members of our executive team who will be here available during the Q And A session. The call today, we'll obviously bring our Q3 results but we will focus primarily on how they relate to the execution of our strategic plan and our long term objectives, trends and indicators. We know that we have several critical tasks ahead, but myself and the team feel confident on how we start the execution of the plan on the second half. Despite the challenging scenario, primarily due to the fast reduction of the legacy revenues based on copper, while we are still accelerating the new revenues based on fiber. So when we start on Slide 3, we would like to start by revisiting our strategic plan to understand the context of our execution and results on Q3. As stated in our plan, our scenario is still impacted by the legacy services and revenues or our path and the revenue has high exposure to the decline in services and products on copper, DTH, regulated services, and prepaid mobile, which used to be the focus of the company. But also in our transformation plan, we highlighted our future and the future focuses on our migration to higher value areas, including FTTH, which will be the lead service for residential services, on B2B, including both corporate segments and other small and medium enterprises. On the migration of TV to IPTV and OTT, on being a provider of transport network and 5G infrastructure acting as a wholesale provider and on the increase of our mobile operation with a focus on postpaid. To get there, we know that we must execute on 3 fronts simultaneously. The first one is obviously the strategic business initiatives. With an emphasis on the fiber acceleration to compensate the copper decline and the continuity of the mobile world strategy. The second area is obviously the funding of this journey with the sale of non strategic assets, the fundraising initiatives, and obviously the use of tax credits and other sources of funding. And the third one is the simplification and cost reduction efforts. Where we have projects being implemented with financial impacts already expected for 2020. So let's talk about some numbers, which reflect the highlights of our planned progress towards a new revenue base in the next slide. On Slide 4, we can see that we have positive numbers in most of the focus areas for our strategic plan. We start with a number of 3,600,000 homes passed with fiber at the end of September and expecting to reach $4,600,000 by the end of 2019 $16,000,000 by the end of 2021. By this number, we can see that we have a great rhythm of deployments. We also were able to reach 11.4 percent of homes connected over homes passed with fiber in September. Which is a very, very significant progress from the beginning of the fiber operation. This means not only a great rhythm of sales, but also of activations. We can also highlight the number of 36 percent market share of net adds in postpaid in 3 quarter in the third quarter of 'nineteen. Which is, an excellent performance on mobile, in particular, amidst the very competitive scenario, which positions Orie as one of the two players with the largest that performed the highest performance and on net adds of postpaid, in the last 12 months. We can also point out to the 13.8 percent year on year growth in our postpaid customer revenues And this is lean as back to revenue growth on mobile following a long period of deceleration. And finally, on the corporate turnarounds, we can point out to the growth of IT contracted revenue year on year of 192% contributing to the total corporate segment revenue growth, which is one of the priorities for the company in the mid to long term. So let's talk about some numbers in more details, which reflect the highlights of our plan, progress towards this new revenue base. On slide 5, we can talk about fiber, and we see that fiber already has a sizable positive impact on the overall picture of our revenues. The operational and financial indicators are in line with plans, confirming the good execution of the strategy aimed at replacing our legacy copper revenues. Starting in the fiber deployments, we can see that our number of homes passed with fiber continues to increase very rapidly, And, in October, we already reached close to 4 million homes passed with fiber. This obviously is followed by homes connected with fiber and we continue to present a fast growth of our customer base. By the end of October, this number was already approaching 500,000 and we expect to get to a much higher number by the end of this year. And this reflects in a steep revenue curve for fiber as we can see in the middle chart and our Fabler revenues during 2019 have already grown 4.2 times, confirming the performance of the fiber product, the fiber installations and the revenue performance. Obviously, this performance is aimed at compensating our legacy revenues, which continue to drop significantly as we can see by the chart during the 1st 9 months of 2019, we had a decline of 11% on copper voice revenues, copper broadband revenues and DTH which are the legacy services, which which we are deemphasizing from now on. Also, when we look at the complete picture, we start to give you details of our revenue composition, in particular on the residential revenues on the right hand side of the page. Where you can see that despite a decline of 13.5 percent on overall revenues, we can see that fiber already starts to appear in the picture as a positive contributor, which will eventually substitute the drop and compensate the revenue decline to revenue growth. Just on legacy services. It's possible to see that we had a $350,000,000 drop on revenue. Which obviously impacts revenue or the overall revenue picture on the short term. But when we look at contracted revenue, new sales we can see that the drop in contracted revenues on copper plus DTH was almost entirely compensated by the growth of contracted revenue in fiber. It's a minor difference for the 10 months 2019 and we expect this curve to invert in the coming months. When we look at broadband only, the impact is yet more visible, and we can see that in the next slide. On slide 6, we can see that cities with fiber already showing a significant improvement on all of the broadband indicators. And even with still a reduced number of cities, we can see where we are headed. We start by looking at the accelerated learning curve that we have been having in the deployments of fiber and the commercial strategy associated with them. The FTTH penetration per cohort of installation shows a great progress with our first cohorts taking several months to reach 10% of take up. And the most recent cohorts already starting at the 10% or higher take up rate level. As a result, we can see excellent sales acceleration on the right hand side and our broadband NIP sales mix has improved from the first quarter 2019 to, the third quarter 2019. From 12% to 42% and it continues to increase very, very rapidly as we expect November to have 71% of sales mix, skewed towards fiber. This leads to a stabilizing customer base on broadband. And with the 50 in the 52 cities with fiber, our FTTH base growth virtually offsets the large drop and the copper customer base. We can see that there is a marked difference from the cities without fiber, a drop of 14.5% to the cities with fiber in a drop of only 3.6% and only with 52 cities as the number of cities grow, this number will, obviously, stabilize. And also, this revenue base comes with a better ARPU leading to broadband revenue growth. The broadband ARPU from copper to fiber is increasing at the clip of 57% higher ARPU. And this leads to a, broadband revenue growth in the cities where we have fiber despite, obviously, the overall of broadband revenue as we are still with the reduced number of cities and growing for the future. In summary, We have great, great progress on residential fiber, which is one of the key pillars of our strategy. Now let's look at mobile on Page 7. On page 7, we can see that the mobility revenue reversal trajectory continues with very positive results in postpaid and better than market average performance. We are maintaining and increasing the value of our mobile operation by focusing a lot on all of the right leverages. On postpaid, we can see impressive commercial performance. We were 2nd in terms of share of net adds during 2019, by a very significant margin. And when we look at our growth of the postpaid customer base, we see a significant increase This consolidates the upward trend of our postpaid revenues and the improvement in the mix of mobile revenues after all. Our postpaid revenue trends are showing a 13.8 percent increase in 3rd in the 3rd quarter, leading to a revenue mix which is approaching the 53% of postpaid compared to prepaid. But also in prepaid, we experienced good results. Despite a highly competitive and overall shrinking market, we managed to increase our market share as well. By, having a less steep reduction of prepaid customers compared to the market average. With this, we were able to gain 1 percentage points of market share in the overall prepaid scenario. The good performance on both postpaid and prepaid has led us to an overall very positive result in mobile. With an increase in mobility market share and the start of the growth of mobile revenue comparing third quarter to 2nd quarter and a virtual stabilization compared to last quarter of the last year. And leading to, the expectation of our mobile revenue growth for the future. So now let's look at our other B2B performance, which is the 3rd pillar of our strategy. On page 8, we can see that our corporate revenue has grown and already starting to capture the first results of the execution of our strategic plan. B2B will also benefit from fiber is in the middle of a comeback. Which starts with the corporate segment net revenues. Our key segment is that of the corporate clients, and we returned to growth in Q3 with a 1% growth, which indicates a positive trajectory. This positive trajectory is being made possible by a new positioning or a solution which aims at creating higher value offers for our customer base and adding as a role of integrator and provider at both telecom and ICT information and communication solutions. Our strategy of bringing complete solutions to corporate clients is already starting to bear fruit. And we can see this in the great growth in contracted revenues with IT being already a key component. Obviously, IT grows as part of the total mix, and this helps compensate the pressure on traditional revenue which are based on voice and legacy services. On the small and medium enterprise segments, revenues continue to decline because the segment has varied in still very impacted by the reduction of legacy services in the same trend as residential. But soon, we expect to address the strength based also on fiber growth and specific offers focused as the SME segment. Our last area of focus is wholesale. So in the next slide, let's look at some key indicators for the segments. On Page 9, we can see that on wholesale, Our strategy starts to be focused on the unregulated market, leveraging our infrastructure leadership and offerings for areas of growing demand. The business here is also undergoing an important transition from legacy to new revenues. And we can see this when we break down the revenues in regulated and unregulated revenues. Our regulated revenues, have obviously continued to decline because they are based copper and low speed, the IELD, which is the regulated service offering. But our unregulated revenue started to grow again, including both the service offerings and the infrastructure rental revenues. Our areas of growth to continue spending on the performance of wholesale, our areas which will bring strong demand in the near future, including IP connections and fiber to the ISP, fiber to the tower, which will help the growth of 4.5 and 5G and infrastructure monetization. This will lead to an increase which with the ever expanding percentage of unregulated revenues on the total mix of wholesale revenues. Finally, an important action of wholesale will come in the form of the OI franchise model for ISPs in the regions where we will not be operating directly initially. This will help complement our FTTH coverage and will be operated as a wholesale business. So all of the transitions that are being made here are possible by the efficient investments, and we expect them to bear fruit in the coming years. So let's now look at our CapEx numbers in the next slide. On Slide 10, we can see that the company CapEx is in line with our strategic plan, focused on deploying homes passed with fiber and refarming 1.8 gigahertz size to 4g and 4.5G. This indicates the continuity of the good execution on our CapEx plan, which is fundamental to the success of the mid long term strategic plan. We can see that the CapEx rhythm in Q2 was sustained in Q3 and obviously compares much favorably to the investments in 2018. On HPs deployed, we are operating at the rate of almost 400,000 homes passed per month which is a significant level of operation and we expect to get to 4,600,000 in 73 Cities by the end of 2019. 1 of the largest FTTH projects globally is being deployed by OE, and this is the rhythm of deployment that makes it pass. On mobile, we continue to focus on the refarming on 4g and 4 point G sites. And, we have been having good track on the mobile CapEx using our AMPO 2G spectrum position for refarming. So next, I'll hand over the presentation to our CFO, Kamir Forreya. Who will talk about the efficiency and simplification initiatives and also the funding components of our plan. Camille? Thank you, Rodrigo, and good morning, everyone. Turning to Slide 11, during the third quarter of 2019, we managed most cost lines, allowing the company to focus on its new plan. We had an overall OpEx reduction, which could have been higher, but was offset by our investments in marketing support our strategic plan through sales campaigns, sponsorships, among others. We have reductions in important areas such as personnel, network maintenance. And we have the possibility to show additional improvement in other lines in the fourth quarter of 2019. The result of the revenue behavior described by Rodrigo and the costs that I just described led us to an EBITDA of $8,800,000,000 in the quarter, a challenging 3rd quarter for EBITDA with a 20.3% margin, but we still maintaining our guidance for the 2019 EBITDA, of course, now more towards the bottom of the range of $4,500,000,000 to $5,000,000,000. While OpEx was reduced in the third quarter of 2019, our OpEx efforts still do not reflect the ongoing structural initiatives of the simplification and cost reduction, which we will talk about in the next slide, Slide 12. We're talking about more structural changes in our OpEx. We have now 5 ongoing initiatives in key areas significant estimated impacts for 2020. Not only that, but we will start giving details on some key metrics for cost reduction that we will be following internally to help everyone keep track of the evolution of these efforts. So the first one is related to sales, marketing and customer service through which we expect to save between BRL 150,000,000 $200,000,000 a year. And it's related to pursuing for your simplification. So basically migrating our clients to flat rate plans, a reduction of our legacy portfolio of proactive selling actions in our legacy portfolio and the acceleration of sales through digital channels. Some of the some of the metrics that we will be following, just to give you an example of what we expect, we expect to have by the end of 2020, an increase of 46 percentage points in the percentage of fiber in broadband activations of the company. An increase of 23 percentage points of our residential base in flat rate, a reduction of 20% in the volume of calls that are answered by human customer services, and an increase in 14 percentage points of digital invoices. Our second key initiative here is process and organization. We already had a start in that area. The financial functions are now centralized under the new CFO myself. We also had a creation of an executive leadership position for business support and operational efficiency reporting directly to the COO. And more importantly, we just started a simplification project with the support of Diageo Consulting. Through the second effort, we expect to achieve an additional between BRL 100,000,000 $150,000,000 a year of cost savings starting in starting 2020. The 3rd initiative is related to business support, which I just described, the executive position that has just been created. This is a very relevant initiative because a huge portion of our costs are concentrated in supply chain energy, logistics, business management and infrastructure. So we have a strong focus in these areas. We expect to have back office reduction, energy efficiency initiatives that will allow us to achieve an additional between BRL 153,000,000 $300,000,000 of cost saving a year. Just as an example of potential of metrics that we will be following, we expect to have a 12% reduction in energy costs megawatt hour of the company and importance cost line for us. And also a reduction of 1.8 percentage points in bad debt as a as percentage of our revenues. The next initiative that we have is in IT. So we are starting a reduction or interruption of IT legacy projects and a development of a new IT start for fiber operations, which will reduce costs. And also our digital initiatives which used to be, focused on customer care only are now being elevated to a company wide effort. Through the IT initiative, we expect to achieve another 100 to R200 $1,000,000 cost savings starting 2020. And just to give you an example on metrics, we expect to increase the percentage of our agile IT projects by 26 percentage points in this initiative. The last one is related to network and operations. And of course, as a result of our accelerated customer migration to fiber, and reduction of legacy sales efforts, which will allow us to optimize and decommission the legacy network, so copper and DTH. With this initiative, we expect to achieve another $120,000,000 to $200,000,000 of cost savings. And just an example of metrics in this area, we expect to increase by 37 percentage points the percentage of fiber technical support through digital channels. With the cost reduction expected for the midterm, we need to execute our plan with funding alternative in the short term, which I would describe in the next slide. So both of Slide 13, we are working on multiple funding alternatives not to depend exclusively on any single option. So on the non core asset sale front, Unitau is expected to be concluded still in 2019 as the company has been communicating to the market. Other noncore assets, the sale of other noncore assets such as data centers powers and others that the company has described in the past are now ongoing processes after a somewhat long preparation processes this processes the sale process that are finally on the road. Real estate, we have several initiatives in place with some more immediate ones So on the polystyrene front, we are waiting a final dispatch for Manatel after its successful due diligence and we have an estimated sale value of $120,000,000 has for this particular piece of real estate. We are also focused on the sale of other 5 nonreversible assets in an estimated amount of CHF 300,000,000 over the next few months. Also on the fiscal fee front, All credits have now been recognized and approved. We have a total of R3.1 billion dollars with the and we are already realizing savings of roughly BRL 100,000,000 per month. This is already in progress in the 3rd in the 3rd quarter. On the funding activity, If you remember while, the our recovery plan allows us, 2 additional credit lines. 1 is a 2,000,000,000 credit line linked to the purchase of equipment. And the other one is a 2.5 broader credit line. Regarding the latter, the company continues to work towards a public best offering, and we expect to be ready to set the market quite quite soon. But as an alternative plan, we are working on a $600,000,000 bridge loan. The negotiations are ongoing with an immediate $400,000,000 firm commitment. This is aimed at giving the company flexibility, in case the capital market conditions are not deemed appropriate for us to issue a public debt right now. Regarding the first line that I mentioned, we have an ongoing negotiation process for this credit line linked to the purchase of equipment, but this is and somewhat earlier stages regarding to with respect to the 2.5. Looking at our cash flow, we had a BRL1.1 1,000,000,000 cash consumption in the third quarter of 2003, which lags led us to a R3.2 billion dollars cash position for September 2019. Our gross debt increased from 18.8% to 17.9%, reflecting the cash consumption in the quarter, supporting the strong CapEx that Rodrigo described. And we closed September 2019 with a 14.7 net debt position. Now I will turn the call back Jorge, who will conclude our presentation with some key messages. Thank you. Thank you, Camille. So As we have highlighted, not only during the presentation, our strategic plan, but also during the presentation of the Q3 results, To create the future OI, our focus now is on strategy, implementation, and investment capacity. And we are executing on multiple fronts to make it happen. Just to very, very briefly highlight all of them. We start with funding in the short terms with all of the initiatives that Camille has mentioned. We moved to a business execution as a must, and we have several strategic initiatives on this front, including the main one of pursuit of FTTH Leadership corporate wholesale and the maintenance and increase of our mobile value. We are looking for a structurally simpler company with several initiatives of efficiency and simplification, which will help us bring structural cost reduction. And all of this is enabled by a transformation effort based on people and leadership. We have already set up a transformation management office and we are making it happen based on a very, very significant follow-up and due diligence of execution on a daily basis. And this execution comes with a renewed emphasis on some of our key principles, starting with a customer at the center, being digital at everything and not only at 1 or other aspects of the company. Going back to innovation, which actually helped us create the OI that was successful in the past and maintaining and improving quality, which has been done throughout the year of DRJ and will continue to be down in the future. We know that our plan requires a lot of dedication, a lot of simultaneous tasks but we have been seeing progress in the areas where we dedicated our efforts initially. We are energized. We are confident in the great opportunities for the company in the near future, and we have a great team to make it happen. With that, I would like to open up the floor for Q And A. And for the Q And A, we have the whole executive team of the company here to help us respond to more specific questions. For investors and analysts. Remember that questions should be asked in English, and those questions sent via webcast will be prioritized. Session. Mr. Fred Vandes from Radesco would like to ask a question. Hey, good morning, everyone. Thanks, thanks for the call. I have two questions here. I mean, the number one, if you can just give us an update on. I don't know, of course, you mentioned the presentation that, for unitele, the, the, the, notional, if our guidance, but the view that, it be completed by the 4Q it is maintained. But also more I think my question here is more regarding the process, the progress of the process. When would you make an announcement to the market regarding this? Would you make an announcement, when you actually sign the deal, or you can only make an announcement maybe once the money enters your balance just to try to figure out the timing here. So this is my first question. And then my second question, I think it's more on the fiber front. The penetration of 12%. It is improving, but it's still relatively low. So just trying to wonder how we can increase this penetration. And also the other question is regarding the homes passed, I think the equipment is the most expensive part of that or something like R1000 dollars if I'm not mistaken per house. So just wondering if you have an agreement with Huawei or in other apply where they can anticipate the equipment and then you pay later, just how this dynamic works, because of course, it should be quite important for your CapEx that you use as you expand on the fiber. Thank you. Thank you, Fred. Well, on your two questions, let's start with Unital and as we have been stating for a long time now, and obviously, we believe we're getting closer to the conclusion of the process. We reiterate our confidence on closing the process by the end of the year. As far as details about the process, Fred, the reason why we have decided not to publish any details about the process, obviously, because it is, a, a complex process and Obviously, there are confidentiality issues associated with it. And so we have decided to announce only that we feel confident and we continue to feel confident that this process can be concluded. As far as an announcement, we'll know when an announcement is made, at the appropriate time. But important to highlight that obviously, the process, when we talk about the sale of, Unitil also relates, in in particular, so the sale of, not of Unitil likely, but BT Ventures in Portugal, not in Angola. And obviously we'll hear more news when we have the news to communicate to the market. As far as your second question on the take up rate of fiber, on one comment, which is The 12% is not a low rate at any measure. If we look at the comparable that we have been experiencing in terms of looking at other fiber operations, In some cases, we have seen companies taking almost 3 years to get to 20% take up rates. Our operation has less than 12 months And in 12 months, we're getting to the 12%. And if you look at the new cohorts, the cohorts that started to be deployed and implemented, in the most recent months. We already start the month with a take up rate above 12%. So the progress is very significant in the new cohorts. Obviously, it's a matter of fine tuning our commercial strategy fine tuning our deployment strategy, better selecting based on analytics and big data metrics so that we continue to monitor every day, where we're going to install next. And we feel very, very pleased with the results of the fiber take up rates so far. So much so that, as of last month, we already started to see that, the sales of fiber are bigger already than the sales of all the legacy products combined in terms of RGUs. This is a very, very significant And with this, we can only see the take up rates increasing very rapidly and going to where we believe they should be. If you remember, our guidance We talked about the 25 percent take up rates in 2 to 3 years. We are almost at the end of the 1st year or beginning of the very, very beginning of the 2nd year of operation, and we already are at the 12% mark. So we are feel very confident and we believe that this is a very good metric that we will continue to publish and track and communicate to you. As far as the agreements for, for equipment purchases. We do have a pay as you grow contracts in place with our 2 key vendors, both Huawei and Nokia. And, not only that, but we have been working with those 2 vendors. Not only to improve our And in the last rounds of technical architecture discussions, we have been revamping our technical architecture in search of cost reductions that can go up to 20%, 30% per home pass, which is very, very significant when we're talking about the project that aims at closing, at covering almost 16,000,000 to 20,000,000 homes passed. So We believe we are executing on this front. The strategic vendors have been good partners in helping us make it happen. And for sure they will continue to do so. Perfect, Rodrigo, very, very clear. If I just make just one question here. Follow-up. When you mean conclusion of Unitau, you mean cashing the bank, cashing the company's balance sheet or could be just defining of a deal. Now, when we talk about conclusion, we talk about a completion of the whole process. Okay. Perfect. Thank you very much. Ms. Susanna Salaro from it. Hi, good morning guys. Thank you for taking our questions. The first one, if you could elaborate about the competitive landscape for fiber. We see that the company is progressing strongly in deploying the fiber and in in the penetration. So how is the competitors reacting in those regions? That would be our first question. The second question is related to the dividend payments that were allow it to be paid to the PT ventures. I just if you could elaborate, explain that if there is any implications or positive implications for OE as well. Thank you. Thank you, Susanna. Well, first on the competitive landscape of fiber, I mean, this is a new scenario. Obviously, 5, the growth of, high speed broadband is the new frontier and fiber is obviously the the way to get to this new frontier. And as such, many companies, both big and small, have started to invest in this area. What we believe we have, when we compare ourselves to, the competitors in the multiple different areas where we have been focusing is the advantage of having the infrastructure already on the ground. And with this, we have selected the areas where we believe we'll have better traction first. And, obviously, this will help us not only achieve our results fast, but establish a stronghold in in most of those areas. What we have been experiencing and observing is the following. When we look the areas where we have, implemented fiber. Even when competing with established small ISPs and now we haven't seen this, I, myself, personally visited the fiber installation last week, in the state of IEA, we see that the level of quality that the OE solution, the OE fiber brings and the level of confidence in the brands allows us to take back share from small ISPs. The installation I went for instance, there was an installation where we took back share from an ISP that was supposedly delivering close to 100 meg but the away fiber was of much, much higher quality at approximately the same price. So it's not a matter of just eight price competition. It's a matter of a competition that will be a lot based on quality, confidence and customer service from now on. And we feel confident we can play against those players in the air as well. We do have the infrastructure. As far as competition with the large players, we have to remember 2 facts here. The first one is that the largest player of a broadband, in the country has, invested in strategy a long time ago, which was a very successful strategy, but based on HFC, not farther to the home. It was fiber to the curb and then a last mile connection with coax cables. This was very successful, but when we look at the future of our broadband, although this has, technical limitations. And as such, we feel very confident that we can, again, go to have with competition for higher speeds, for higher quality and be successful in playing against the HFC installations. And, this is also valid for, the 2nd largest player, which has acquired an operation in the past, which was not FTTH as well, which was FTTC with DSL last mile connections. So, a lot of the presence of this 2nd largest operator broadband is based on DSL connections on FTTC. And obviously, even though it allows for, interesting speeds and interesting service, 2 or 3 years ago, now they will start also to face limitations and we'll have to, to migrate the whole strategy and infrastructure to to fiber, to pure fiber if they want to compete. With this, we feel very confident that the competitive performance, even in the areas where there is already existing competition. And obviously, we are doing our analysis of deployment based on a big data analysis, which look at very very fine granularity of where we will install fiber next. Okay. So On your second question, regarding the dividends that you saw as part of the quarterly report, Obviously, when we look at a project, such as, unitel, we will not only focus on, the sale process, which we have been focusing and which we continue to reiterate the confidence that it can happen and it can be completed by the end of the year. But we also have been going at different routes of extracting value from the assets that we already have. And the repatriation of dividends based on the retained dividends position that we already have in the company. Is also a route that has been pursued and that is starting to bear fruit. So obviously, when we look at the funny initiatives, As Camille mentioned, we are trying not to depend on any single events. And I will do, every thing that is at our disposal in terms of looking for different funding alternatives. And this is a reflection of that just as we highlighted during the presentation. Perfect. Thank you, Rodrigo. Mr. Samith Veda from New Street, would like to ask a question. Yes, two questions, please. One, could you give a, an update on how we should be thinking about the CEO role going forward? And then secondly, in a slightly more conceptual question, the wireless business has been performing, strongly Obviously, there's very strong volume and data growth. How, for how long do you think that business can perform as well as it has done without a step up in investment and without further spectrum? Thank you. Well, on the first one, about the executive leadership, what we have been doing, Sumit, is really refer using the whole leadership structure of the company to execute the strategic plan. And, this started, when I came on board, in early October, And as part of that plan, we have revamped our executive team. So I started by bringing in Camille to act as the new CFO of the company consolidating multiple functions underneath. We also brought Habelo Antonio Jabelo as our new legal counsel. And Habelo has not only a deep knowledge of the company, but a very, very highlighted participation in all of the RJ process so far. So knows not only the company, but the process inside out. We have also created a new executive leadership position, for which I brought in, Mr. Danielle or Metro who used to be in the past, the supply chain director and now the wholesale director of, Telecom Italia Mobile team in Brazil, and we just brought Mr. Ahmed to work with us in one of our key areas for cost reduction and structural simplification for the future. And We continue to bring in new talent as we speak. And we believe that the leadership of the company is now much more prepared for the future in terms of implementing implementing the transformation plan that we announced in the middle of the year. Obviously, this will be a continuous process as we have announced that we are looking at an organizational simplification. And I will provide you with relevant updates as soon as they are ready to be announced. As far as your second question on the wireless revenue, how how far, how long can we sustain it. We believe, Sonadeta, because we are, the player with the largest amount of fiber infrastructure in the country. And the fiber is a significant component of any mobile investment strategy going forward. Our ability to sustain the good results from mobile goes a lot farther than what people realize or people think, people believe. Not only because by controlling the transport infrastructure, we have a control of 1 of the greatest components of a cost in a mobile strategy, which is the transport to backhaul and all of the associated cost of traffic, but also because it allows us to focus our access investments on mobile to the areas where there really matter for the company. And those areas are, twofold. The first one is where we do have significant market share to protect, and we are doing just that. We are spending 4 and 4.5G in the years where we have market share to protect, especially in certain parts of the Northeast and the south of the country. And at the same time, we can focus on being very aggressive commercially in areas where we do have a significant network capacity available because we have a less utilized network than the the the remainder of our peers. And with that, we can be commercially aggressive. We can bring in new customers who will not cannibalize our existing customer base. And At the same time, we can focus access investments, on these areas selectively, to improve quality and, to attract new customers on board. Our access has been focusing on refarming. It's not necessarily on just, completely brand new sites because we do have infrastructure sharing agreements with auto players, which help us complement our coverage infrastructure. So as you know, we do have a rent sharing agreements both with team and with Vivo. And, as such, we have also been using very selectively our investments in access to focus where it matters. With all of that, we do believe that we can continue our very positive traction in mobile results for the coming years. And obviously, we're doing that in a concerted effort with the commercial activity that goes to the postpaid segment and thus the very good results that we have been able to present. That's clear. Thanks. Can I just ask a quick follow-up, please? I'm just jumping back to, Angala a second. Can you confirm what was the USD amount of dividends you received, please? Was informed in our quarterly reports that we were able to repatriate 33,000,000, if I'm not mistaken here, I believe this is the the official number that is reported in the reports. Okay. Thanks. Sorry, I missed that. Mr. Carlos Cacada from BTG Pactual. My question is on the bridge loan that you mentioned in the presentation. Can you give us like more color on I know you mentioned like a firm commitment. So my question is, so you have already secured $400,000,000 out of the $600,000,000 that you're planning to to raise on this bridge loan. So if you can give us some more information on that front, that'll be great. Yes. So, we secured a $400,000,000 firm commitment for the bridge loan. There's a very high probability that it will be applied to $600,000,000, which will comprise the 2.5. And the idea is that we have this this facility in place in case we don't think that the market conditions for the public conditions are appropriate. But we do have a pending negotiation of final document, of course, but we have a $400,000,000 firm commitment for a bridge on. So just one more question. When do you expect the money to be in OEs when you expect to have the money drawdown? So we will be monitoring the market throughout December early January. To, if you if you will remember well, the 2.5 in our in our RJ plan has a, has a, drop that date. So we need to raise many until early February. So we'll book it monitoring the market throughout December early January to check, that capital markets conditions. And then we will make a decision whether to go ahead with our public offering or public that offering to be clear or or to draw, to draw the, the bridge loan. It's a it's a term loan that can be prepaid in, in the short term. Okay, perfect. Got it. Thank you very much. Thanks. Thanks for the call and thanks for taking my question. I think just following up a little bit on the financing side, you mentioned some reversible assets that are pending approval to get sold. There was also towers being discussed you maybe provide a little bit of color on that on progress with selling towers, or if that's still something that's expected in the short term? Thank you. Thank you, Guido. Well, when we talk about, reversible assets, we talk about, in particular, about real estate units, which are, available for sale. Obviously, when we look at the reversible assets in real estate, at this point. A lot of things have changed because of the new telecom law and the classification are reversible, non reversible asset is a a point that is being discussed by Anatel as we speak. But we have already selected, a handful of it to, be able to, initiate sales processes immediately. Some of them already have the release from Anatel for us to be able to sell them. Some of them are in the process of having those releases, granted to us. But the good part of, the highlight is that when we look at our overall 8000 pieces of real estate portfolio, when we focus on just a handful of assets, we're able to, in the very short term, be able to, draw something such as, 250,300,350,000,000 of a sales sale of real estate assets. This does not include the 120,000,000 that we have virtually concluded and is now pending just the final release from Anatel. So this would elevate the number in the short term to in the range of BRL300 million to BRL450 million of our real estate sales. And this is very positive because when people question our ability to sell 8000, units of, real estate assets. Obviously, it's it's very hard to do that in the short term. But when we focus on just a handful of assets, we can see that out of the number that we have provided in the past of between $1,500,000,000 2,000,000,000 sales of real estate. We see that a quarter of that is concentrated on a very small number of so thus making the process a lot easier to execute. Yeah. One follow-up. Yeah. On your second question about towers, obviously, the sale of towers is a much, much, more standard process compared to all of the other noncore, asset sales processes. And what we have done is we have decided to wait for the conclusion of our due diligence of the portfolio of towers that we're selling. So now we have a a, firm set of, results and and information about the portfolio that we're concluding what we're selling with the conclusion of a due diligence, which allows us to go for a process where we can extract a much, much higher value of this tower portfolio. And we have launched the process already And we expect this to be a fast process based on the traditional number of interested parties in the assets. Perfect. Thanks very much. One question that I had quickly here was just on the equipment. Potential BRL2 billion that could be raised as part of the RJ plan that is connected to the purchase of equipment. If you could provide a little bit more details on timing of that and do you expect or when do you plan to get that lined up? Well, on the equipment, as you know, all all telcos work with some form of a vendor financing of sorts. And, in our case because of the RJ process for the last 2 years, we have not done any transaction of this nature. And, as such, given that the company is going back to normality, We are, again, reopening. We have reopened the lines of conversation with all of our vendors, but not only with the vendors, but with other sources of finance, which are aimed at purchasing equipment. We have been having several of those conversations. We have, obviously, different stages of negotiation with different vendors and different providers of vendor financing. We expect that we would be able to tap this at the first half of next year. And obviously, we'll provide more details as those negotiations progress. Thank you. Mr. Salip Shen from Credit Suisse would like to ask a question. Good morning, everyone. Thank you for taking my questions. My first question is regarding, if you could comment please a little bit on the strategic value of the mobile business for the company as a whole. We have been seeing the company focusing a lot, right, on the fiber business, on the residential business. I'm just trying to understand what the company is seeing for the mobile business given that it has been performing pretty well. Right? Is there any discussions regarding a potential sale of Oi Mobile? And could you please comment a little bit on that? And my second question is regarding on the cost front, on the provision for doubtful accounts, okay, should we expect, okay, any increase, okay, in the coming quarters or throughout 2020, given that you guys have been adding a lot of postpaid and control additions, right, in the mobile segment. Those are my two questions. Thank you, Felipe. Well, starting with the value of the mobile business, as we have highlighted several times now, we believe that we have a very, very, accretive, mobile business, which has a significant market value. And obviously, recognition of that. We all have been seen and and and listening to, declarations of, peers that, in case this, asset was, was eventually available for consolidation. They would be interested in looking at it. Given those formal declarations of our peers. We have decided, with the help of our financial advisor, to initiate a market sounding process we are in the process of doing that with our financial advisors. So the true nature of the value of the mobile business can be understood. And as such, we'll see and be able to measure how much the value of the mobile business has been recognized and is able to generate value for the shareholders going forward. In order to do that, as I mentioned, we are using our financial advisors, but I'd like to highlight that there are still no formal risk or any negotiation in place at this point. As far as the bad debt, well, there are 2 components to, to do bad debt here. And I'll mention that, the key one is how will our performance on fiber actually reflect on that. That's and here, when we substitute copper users, copper subscribers, for fiber subscribers, we actually have a positive impact on bad debt our fiber subscribers have been presenting a much lower net debt than copper in particular because we have been selective towards the year as we have been, obviously selling it. And, as far as the mobile postpaid, we have, in introduced in the recent quarters, a several mechanism, a lot of mechanisms, several mechanisms to actually allows us to control to better control bad debt as far as credit scoring goes. In the past, the credit scoring was not as efficiently used. And we have been fine tuning our credit scoring capability to actually continue growing in postpaid without impacting that debt. And the result so far is in line with what we expected as such, with maintaining our mobile results in line with what we expected and using the fact that our fiber revenues will come with lower bad debts associated. We believe we'll have good news to tell about bad debt in the future. Yes. And I mean, just as a final remark, which I forgot to mention here, is that You were also asked about the control plans, and the control plans have no bad debts associated that they're almost fully prepaid. Okay. Mr. Andre Baixo from JP Morgan would like to ask a question. So I have a question with regards to EBITDA. EBITDA this year has been very weak, let's say, going down more than 20% and what to how can this trend be changed next year? Because I understand that you have a very interesting long term plan with fiber and so on. But how are we going to bridge this long term positive outlook to a more short term challenge outlook. Thank you Andrea. Well, you're right. EBITDA has been pressed by the decline of the legacy businesses, in particular, those related to copper. And now let's remember that it's a expected that we do have a deep in, in our revenues associated with legacy, not only because of the structural trends, but also because have invested and decided to invest in particular in fiber to transform the revenue components of the company. So We interrupted doing things such as proactive selling of very low quality, high churn, high bad debt areas with the copper broadband, for instance. So there is an associated initial impact on, on, revenues. And obviously, with reducing revenues, while you're still not completely substituting that with fiber revenues, we do have an impact in EBITDA. But if you look at what is happening with the EBITDA components on the fiber business, this year, the EBITDA, the revenues and obviously the EBITDA associated can be very small. We are just getting to the $100,000,000 mark as we mentioned. But when we look at next year, we see that we can expect a significant increase already of the fiber revenues which come with a much better associated EBITDA level. Obviously, there is a trajectory to compensate for that. In terms of pure revenues. And thus come the second part of the answer to your question, we try to structurally, the structural initiatives for cost reduction. When we look at the OpEx reductions that we had this quarter, they were probably smaller than in the past because obviously when you're just doing across the board cost cutting, you have a decrease in returns as time goes by. But what we're doing is we're adding on top of the normal cost reduction initiatives that any company has at any given time. We're adding the 5 structural components of cost reduction that we highlighted that Camille highlighted during the presentation. With that, then we can expect compensate part of the EBITDA and I'll be able to be in a position to start growing EBITDA again in a matter of a year, 1.5 years. So obviously, it is a significant challenge during the early period of the transformation plan. We know that. And that's the reason why we believe that the funding component is essential because it help us sustain the investment, which is required for the mid term. But we know we'll have a challenge in EBITDA during the 1st year of the plan. That is expected. And the significant growth of fiber associated also with the growth of is coming back to corporate, we need to be and the growth that is coming back to wholesale on the unregulated revenues. We have to compensate for And how do you go? You talked about some of the legacy business, which is a it's well known, but in essence, taking aside the fiber, which other areas do you have a EBITDA, which is at least more or less stable these days? Is mobile EBITDA also also stable and then maybe on more other areas today? Well, mobile is stable and I will grow because we will obviously follow the path of revenues and we're coming back to revenue growth in mobile. And as such, with all of the initiatives of cost reduction, we expect EBITDA and mobile to continue growing as well. We have to remember that mobile has not been a cash consumer for us. It has been contributing positive results to the company. We have not, greatly accelerated our, CapEx and obviously associated OpEx, with with the mobile front. We have been investing very selectively as I have highlighted in our response to a previous question. And now with this, we expect our EBITDA for mobile to grow, even if not at a very accelerated pace, but to grow based on the return to growth on the mobile revenue as well. Perfect. Thanks a lot. Hey, good morning, Roger, you've got Camille. A few questions. So following up on the earlier one, Rodrigo, can you provide any more specificity around the specific timing on the CEO trends there's been press reports that it may happen at the end of December or the end of January. So some specificity would be good there. Secondly, on the asset sales, I noticed that you raised, the range on the asset sales to approximately $8,000,000,000 from the strategic plan Could you talk about the phasing on the asset sales in the context of towers, data centers, fibers, etcetera? How should we we should expect that. And then two other questions, obviously a notable event that happened, in the quarter was PLC 79. If you could just talk about your expectations around that. And then final, just point of clarification on the dividends from Unitil, could you clarify that that was USD 33,000,000 and that that was received in November? Thank you, Pat. So multiple questions there. Let's try to address them 1 by 1. In respect to the timing of any transitions, as we have been, highlighting. We are, in the middle of a process to revamp the executive leadership of the company. When we have the new steps of this transition, we'll obviously communicate them when appropriate to the markets. We believe that the key focus at this time is really to have a complete management team in place to be able to help us execute the plan. And we're almost there in having this completed. As I highlighted, we do have a new CFO. We have a new legal counsel. We have a new business support director. And obviously, we continue to to count with the the core teams has brought the company here with a very good performance on the operations and the commercial and the wholesale front. So We are almost there as as far as completing what would be a core leadership team. And I'm obviously, when when we conclude this process, we will announce it immediately. On the asset sales, there is an associated timing with all of the assets which obviously go in parallel with the complexity of the sales, each of the sales processes. We expect, again, going back to Angola, even though it's the more complex and the largest of all of the noncore asset sales, We expect it to be completed still this year because it's a process that has started a long time ago and we have been communicating this to the market. So change any of that. The second one in terms of timing, would be the towers and the towers should be a very fast process. So now we have our tower due diligence fully completed. And with such, we can move with great speed. So we could expect the closing of the hours with the proceeds coming to the company in, at the end of the first quarter, give or take. The next one will be the sale of our real estate. And in the sale of real estate, so we have to understand that there's not any single one transaction that will bring all of the proceeds. But we have, at least 6, real estate units, which are up for sale. That we expect will constitute the $300,000,000 to $400,000,000 number that we mentioned during the presentation. And we expect those sales to occur as we as we go in the next several months, but we would expect the process of this $300,000,000 to $400,000,000 to be concluded by the end of the first half of next year. And then we have the data centers and the fibers. The data centers will be the next one to come, most likely in the first half of next year as well. And obviously, we have the process in place. Several interested parties already looking at the process and information that was put together. And finally, we have the noncore fiber process. And this will be the last one to go, most likely at the end of the first half, but still with, with some due diligence in place so we can completely finalize the structuring of the sale process. So there are many different components of the asset sales. Obviously, the company expects to start giving good news as we go by in the next few months. And immediately every time we have a good news to present to the market, we're going to provide a formal Okay. On your third question about PLC 79, you see that I have not talked at length about the PLC 79 approval during the quarterly results because we believe it's a very positive impact, but which is not short term. We don't expect any super short term impact of PLC 79 other than the one I mentioned when I was talking about the real estate sales because it a lot easier to qualify real estate assets as a nonreversible based on the approval of the new law. But apart from that, we know that there are still a number of steps to be taken as far as providing the regulation of the new law This regulation can take somewhere between 12 18 months to be fully completed And obviously, the results, the full results of the migration from concession to operate. And all areas that need to be regulated, we'll only start to produce results after that. What we have been doing and now we have highlighted this as part of the initiatives in the presentation is we have been very, very proactive stats in the regulatory front to try to anticipate some of those results as far as obligations on the legacy businesses, in particular, the SDFC, the fixed line fixed voice service business, which we believe don't make any sense anymore, even before the full regulation of the concession to authorization migration and PLC 79. There are several areas where we believe that by looking in detail at the existing regulation, which, can be, just, reviewed and and modified, if possible by Anatel without, in necessary correlation with the PLC 79. We have been working to try to make that happen as soon as possible because we know that, we are generating significant value with our strategy based on fiber and based on mobile and based on the growth of wholesale and the growth of the B2B segments. But Obviously, we know that the legacy will continue to be, a, an anchor and in results for some time to come. And, obviously, all of our efforts, not only on on the operational front, but also on the regulatory front, we will be aimed at, diminishing this impact, as much as possible. We know that there's a lot of details. There's a lot of granular work to be done there, but, obviously, there's a focus of our, of our operation going forward, not only on the operational front, but also on other regulatory front. And finally, as far as the unit sales dividends that you mentioned, Yes. They are, received, in USD, outside of Angola, and they are, readily available for the company to tap them. And that was received after the quarter, correct? That was received after the quarter. Yes. That's correct. Ms. Maria Tereza from Santander would like to ask a question. Two questions from my side. On top of the vendor financing agreements that you are in talks, do you also consider the point fiber through partnerships compared to what other players are doing? And my second question would be on your views on the 5G auction. Consider that you might consider selling the mobile assets, but you still want to be a 5G enabler for the wholesale through your fiber. Would you favor regional license and that the auction should happen as soon as possible. What are your views on that? And super quick, is it fair to assume that you are ruling out any potential capital increase in the midterm? Thank you very much guys. Thank you, Vanessa. Well, starting with the fiber partnerships, the possibility of fiber partnership Yes, you're right. As we highlighted in the slide about the wholesale, we are starting, an operation to allow for fiber partnerships in the form of franchise operations in the areas where we do have fiber, but which have not been prioritized by us to, to go directly to the end customer at the 1st years of the plan. And as such, we we are proposing a model of enterprise operations where, we would use the advantage of our fiber presence, in particular, the backbone and the, data network, and, transport networks in the regions to be able to provide a model where we participate in the end user revenue with the franchisees, but also we provide a cost reduction to that in the form of making our infrastructure available. This will some will then add up to other 2 initiatives that we have in terms of fiber partnerships. The first one, it's not necessarily a partnership, but it is the work that the wholesale team will continue to do and we will expand in providing service to ISPs. In areas where we will not operate directly and where we, we will emphasize our work as providers of infrastructure, not necessarily going directly to customers. And there is a model which, can work in some areas, but, in a restricted number of areas, which is called a neutral network or neutral fiber. And this model is a model where in order to accelerate investments, you partner with some infrastructure companies, which normally have financial investments to help accelerate in the regions. In our case, and and and as a a parenthesis here, you may have seen an served several announcements in this regard made by other operators, aware there are partnerships being announced to construct, fiber in regions where they are not present. The difference in our cases is that we are present in most of the regions. So for this model for us to make sense, economically and also strategically, it has to be concentrated in areas where we have the least presence of our our own infrastructure. And obviously, those are the discussions that we have been having. We expect to announce, some agreements in the near future as well in this model, but with an emphasis on focusing on the areas where we have the best return because we have infrastructure in place and we will simply not substitute a financial investment, for, for an operational investment because it doesn't make sense for us. As far as 5 g, yes, we do, look at the 5 g as an opportunity for, both a direct participation where we would be providing services as part of our mobile operation, as well as a provider of 5G infrastructure with the presence of fiber. We have included in our strategic plan. The, a purchase of 5 g licenses when they occur. Obviously, there's still a lot of discussion about, when and how the 5 g auction will be conducted. We know that there are several still pending definitions as far as the nature of the auction. If the auction will be regionalized versus nationalized, What are the size of, the auction of the spectrum blocks? What are the counterparts in terms of, investment versus coverage, etcetera. And, the only way we can actually issue an opinion about our preferences is when we have a full understanding and a much clearer picture of where Anatto is going with the auction. But we believe that, given all the discussions in place, most likely, we'll do we will have a delay, as as compared to what was being said earlier about when the auction would take place. Initially, obviously, everybody, was saying that it would take place at the first half of next year. Now most likely, the discussion is will it occur at the end of next year or at the beginning of 2021, we will be ready to operate in any the 2 scenarios. As, and as far as your last question, which was the capital increase, yeah, Well, we have stated this before, given where our stock is trading, given all of the options that we are pursuing as far as that financing and sale of noncore assets. At this point, we have initially ruled out the capital increase for the time being. Obviously, this is a tool that any company has to have in their tool kit if the timing and the conditions are appropriate. In our case, this is not the case. This point. I would like to turn the floor over to the company for final remarks. Okay. Thank you everybody again for participating in our call. We know that we are starting a long process. It's a long transformation journey. We believe that that there are very significant opportunities ahead of us. We know that we have challenges in many different areas, but we are confident in our execution as I have stated. We have a new and engaged motivated team. We are showing the first signs of execution on the key fronts of the plan We expect, as I mentioned, to start giving good news to the market in the coming months with the continuation of the execution of our plan. And obviously, we know that we are here for the long term and that we have to stay firm on our direction because only this direction, we went up generating significant returns to shareholders. So we feel confident on our execution. We thank you for being with us for the earnings call. And obviously, we will be with you again, with the results of Q4 when they become available. Thank you so much. Have a good day. This concludes OSA's conference call. We would like to thank you for your participation. Have a good day.