Strategic Plan

Jul 16, 2019

Slides

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to OI SA's conference call to present the company's strategic plan. This event is also being broadcast simultaneously on the internet via webcast, which can be accessed at home the company's IR website, www.oi.com.brri. Together with the respective presentation. We would like to inform that during the company's presentation all participants will be in a listen only conversation. We'll then begin the Q And A session and for instructions will be given. 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 in Portuguese will be conducted via simultaneous translation. This conference call may contain some forward looking statements that are subject to known and unknown risks and uncertainties. That could cause such expectations to not materialize or differ materially from those in the forward looking statements. Such statements speak only as 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. Carlos Brandon, CFO Please, Mr. Carlos, you may proceed. Good morning, everyone. Thank you for joining our conference call for the presentation of the strategic review. I have here with me the managing team and the board representative of Rodrigo who is the coordinator of the transformation strategy and infrastructure committee. Over the past years, important milestone were conquered. We have fully restructured our debt and capitalized the company. And as there's years of underinvestment, restricted by our financial capability, we are now able to accelerate the deployment of our fiber plan and take advantage of our unique infrastructure. As you know, OI started a transformational project the beginning of the year to review this strategy, balancing 2 key objectives: short term sustainability and long term value creation The board, the management and our independent advisors, including BCG, Oliver Wyman And Bank of America, have worked together in a true joint effort. In this process, we revisit our strategic positioning in all markets, considering market trends regulatory trends, short and long term financials, our assets, and our competitive positioning in all of them. We invested significant amount of time and deeply analyzed every single opportunity and all the combinations of viable models, making sure no tones were left unturned. Today, we want to present the results of the strategic review to you. This plan will be the foundational guide for the company in the upcoming years, and we will generate significant value for our shareholders and the company. Let us begin on slide 1, where I will summarize our transformation strategy focused in our suitable leadership position in fiber and infrastructure and in our ability to create significant value by pursuing strategic options. Oi is the undisputable leader in fiber and infrastructure. Our advantaged position allows us to be the national leader in fiber and the 5G neighbor in Brazil, leveraging our high capacity and popularity network two times larger network than any other player in Brazil. Fiber is the heart of our strategy. And we will continue strengthening our competitive advantage through the massive acceleration of fiber to the home. Our goal is to reach 16,000,000 homes passed until 2021, more than 3 times the 2019 plan. This goal represents a 50% increase over our previous plan for 2021. We also identified an opportunity of more than 30 million households with an attractive return, and they can be profitably served. Our fiber related revenues will grow over 30 of setting the downward trend in copper and stabilizing overall revenues by 2021. We will also accelerate our wholesale operations, leveraging our significant infrastructure advantage, so doubling our wholesale revenues over the next years to achieve market leadership. In mobile, we will capture all pockets of value to maximize the strategic optionality, leveraging our available network capacity to grow. We expect full year growth in mobile revenues this year while exploring all the strategic options to maximize shareholder value. To fund the plan and focus on infrastructure we work in 2 fronts. First, we are already implementing a material cost reduction program We expect this program to net over 1,000,000,000 on our annual cost base by 2020 above and beyond all existing efforts. These efforts, in addition to the early signs of revenue stabilization since February 2019, and our expected revenue growth 2nd, the company will divest non core assets estimated from R6.5 billion dollars to R7.5 billion dollars and release cash through non operational events, like the use of PISCOFINS credit of which 2,100,000,000 is already under a favorable decision. We will generate over R12.5 billion dollars with these initiatives. As of now, we are advancing in the negotiation process of some of these assets. With our operational cash flow, our cost reduction program, the divestment of noncore assets and cash inflows, we have the comfort to execute the plan. As you can see, there is significant value in the sum of the parts. The plan will lead to an increase of over 2x the enterprise value, focusing on financial and operational sustainability. The value potential could be even higher by excess adding some of our strategic options. Now let's move to slide 2. As mentioned, we revisited our business strategy and positioning with the objective to maximize the value creation for shareholders and for the company. Along the project, we assess it all of our business segments in visually and identify viable options from them considering a portfolio logic and focus on our strength and competitive advantage. We prioritize effective allocation of the capital, always keeping the discipline to guarantee the funding of the plan and the maximization of the value. This work was done with a extensive and heavy collaboration of the board with the management and our independent advisors, including Boston Consulting Group, Bank of America And Other environment guaranteeing a strong alignment for the execution of this strategy. Now moving to slide number 3. As mentioned before, our strategic focus in leveraging our indisputable leadership in fiber infrastructure will encourage us to be the 5 g neighbor in Brazil. We have a strong leading starting point to provide transport and access countrywide. Oi has more than 360,000 kilometers of fiber, more than 2 times the second player and we serve more than 2000 cities over 1000 more than the 2nd player. We are preparing to have all our IP core needs full field for the next 3 years. And we have 43,000 kilometers of depth, the highest integrated infrastructure in Brazil. All of these points illustrates that fiber will be the core of our strategy, having a critical role along We will seek market leadership in fiber both in retail and wholesale. We will migrate our TV products to IPTV and OTT platforms We will leverage our connectivity, popularity in B2B corporate, and we will be the 5G enabler in mobile. In Slide 4, we show our plan for broadband. We were aggressively targeting investments at fiber to the home deployment, expanding for tier markets and reaching 16,000,000 homes passed by the end of 2021, representing a 50% increase versus previous plan. We will deploy the fiber to the home using a reuse approach. This will allow faster growth and low costs. We are also assessing partnership models that will enhance our fiber deployment at a faster pace, mostly in attractive ris with lower infrastructure readiness. In addition, we also have the potential to double the total homes passed with additional funding and partner and in some of these areas, we can explore wholesale model as an opportunity. In terms of our execution, we are at full speed in fiber deployment. This year, we are pointing to an overachievement of homes passed above the targets of our initial plan in 2019. We are also deploying our fiber in a deaverage strategy, considering 3 different tires, depending on the original competitive contest. We will compete through environment, we will enable smaller cities with transport infrastructure and additional service. Our plan is to deploy a 1,000,000 homes passed between this year 2021, reaching a total of 16,000,000 homes passed by the end of 2021. Continue on Slide 5. We will show the key economics of our fiber deployment with a 40% IRR fiber, we will be the one of key drivers of future EBITDA and cash flow. Our business case based on Mac our results has shown some attractive numbers. We have a very low cost per homes pass, leveraging our polarity and cost advantage to build our network using the rear use approach. Our take up rate over the constructive infrastructure is expected to be higher than 25% in a steady state. And As you will soon see, early results are confirming a fast pace on our take up rate. We firmly believe in our commercial success. As we have a great customer quality perception and a solid NPS. Our fiber ARPU is already higher than copper, reaching more than 85 highs per month. This value is expected to increase over time and will enable to its most and fixed advice revenues decrease. Important to notice that our IRR calculation does not consider assumptions in ARPU increase, but considers a nominal discount rate. Lower versus copper ranging from 30% to 50%. In terms of customer lifetime, we see a healthier churn rate in fiber versus copper due to a superior speed and reliability. This will enable us to reach an average of 5 years of customer lifetime. We will be able to deploy cheaper and faster with a payback ratio of less than 4 years and IRR higher than 40% on a conservative projection. Moving now to slide 6. In this slide, we can see the results of fiber in practice. On the left side, we can see the revenues in the 10 cities where we launched our fiber offer in 2018. The results show a strong performance in revenues, which reverses the decline in copper. As of the first quarter of this year, fiber represented over 20 percent of revenues in those cities. These results were mostly driven by are mostly take up rates that reached 80% of average after 3 to 5 months of implementation and reaching up to 11% in best case cities. In addition, and in some of the cities, the reduction reached 80%. The members reiterate the solid performance of our fiber business, which would not be possible if you weren't for the quality and reliability of our network. Once again, Way was ranked 1st place in the Netflix Broadband ranking zone. We have been in this position since we started participating in the thinking, having increased the delta to the 2nd player over the past months. Now on the Slide 7, we show our strategy for the wholesale business. With the increase in data demand, our strategy is to become the national provider of transport network and enabler for the 5 g infrastructure in Brazil, making the network widely accessible to players and reducing duplicated investments in Brazil. We will do this by accelerating 3 estimated in approximately 9,000,000,000 revenues in 2018, mainly driven by last mild demand. We will expand the opportunity to exploit analyzing on our extensive and non replicable infrastructure. We will increase our commercial efforts to see IP connections to internet service providers and explore new technologies to enhance multi service capabilities. We will expand our fiber to the site reach to cope with the growing data traffic demand, and we will exploit our passive infrastructure sharing providing access of ducts and fiber to the other operators and ISPs. With all these initiatives, we expect the wholesale segment to become a very relevant business focusing on non regulated revenues and almost doubling revenues by 2024. Our strategy will preserve and emphasize OS leadership role in infrastructure in Brazil. Moving on to slide 8, let's talk about the B2B segment. We have consistently worked on our operational improvements in our traditional service and also to rebrand and reposition our business, which from now on, we will be referred to as oil solesence. Oil will become an integrator and provider of telecom and ICT solutions beyond service and products, adding value through an advisory and customized positioning. We are bringing a comprehensive portfolio of ICT solutions to the table, impacting the customer across the whole value chain from connectivity by providing reliable infrastructure and technology to our customers up to ICT solutions focusing on IoT out outsourcing professional service among other strategic service. As a result of this new positioning, we will revamp our B2B segment. ICT will be the main driver of growth, reaching 20% of the total corporate revenues in 2021 32% 2024, offsetting the revenue decline in the segment by 2021. We expect to grow 3.4% per year from 20 21 to 2024. On the next page, slide 9, we show our strategy in mobile. We will maximize the value capturing the segment, leveraging our available mobile network capacity with a competitive product portfolio. We will rationally investing 1.8 Gigabytes of spectrum refarming to defend our postpaid base using our AMPU spectrum available We will capture market share in high value segments using the excess capacity we have in one point 80 giga and maintaining the successful commercial strategy in postpaid. This strategy will lead to lower levels of CapEx in the mobile segment. Mobile revenues will grow already in 2019 due to the increase in the number of postpaid subscribers and postpaid market share. With this, we will capitalize on the postpaid momentum, leverage our infrastructure in operation for 5 g deployment, while we keep exploring all these strategic options to maximize shareholder value. On slide 10, I highlight the simplification plan of our operations. We will engage our predictive model with an efficiency focused mindset and digital transformation that will enable us transform the operations and the structural reduce costs. We are put in place a deep structural cost takeout and digital programs, which we divided in 5 work streams. Examples of initiatives we are developing in each of these work streams include the following actions, but are not limited to them. In sales and marketing, we will simplify our work portfolio. Our customer journey and review our channel print. In our organizational process, we will review and simplify our process, leverage the opportunity for digitalization and automatization. In IT, we will optimize our portfolio of products and service and simplify IT systems and architectures. In procurement, we are building a rigorous demand management system at the same time that we are rationalizing our suppliers and specifications. And in network, we are working on a value based rollout program, energy efficiency, the commissioning of corporate stations. These efforts will enable the company to reduce its cost base in over 1 1,000,000,000 per year achieved by 2021. Moving on to Slide 11. We highlight our focus on improving financial and operational performance that will lead the revenue and EBITDA increase with a sustainable business model. On the left side, we can see initial signs of revenue stabilization since February 2019. We are pushing our commercial efforts and this by the traditional pressure in our corporate revenues, we expect a 2% CAGR in our top line until 2024. As a result of our refinery investments, mobile strategy, wholesale growth and cost reduction efforts, we will expect our EBITDA to increase between 15 to 20 percent per year until 2021, with room to further improvement through structural transformation. For this year, EBITDA is being pressured by our increasing commercial efforts aligned with our strong momentum and traction in mobile and fiber, FX headwinds on foreign currency costs and the downward trend in corporate revenue, which will be offset by 2021. On our plan and we highlight our tremendous effort and commitment to improve our financial performance and deliver sustainable results for the company and shareholders. Now moving to slide 12, I highlight our strategy to fund the journey. We will die us on non core assets and release cash through non operational events. The potential impact will arrive from 12 0.5to14.5000000000. There are 5 known core assets that we list in the left side of the slide with an expected value between $6,500,000,000 to $7,500,000,000, including towers, data centers, unit health, real estates, and other non strategic assets. In addition to the divestment which was planted at our judicial recovery process. We are also in the final stage of approval of the PISCOFINS credits which we already received a favorable decision of 2,100,000,000 dollars, pending on legal decision to collect an additional 1,000,000,000 So in a nutshell, this comprehensive portfolio of noncore assets will fund the execution of plan. Now moving on to the last slide, page 13. Our investments will lead to a significant growth in our fiber related business. Which will drive the value Oi is transitioning from a traditional telco business model to a much focused fiber and infrastructure company. As we can see in the middle of this slide, this could lead to a significant higher valuation for the company. Our final message on the right hand side This model enable us to unlock significant value from our core competitive advantage. Such as our unique and non replicable infrastructure. There is a huge potential to increase our enterprise value in the future, and we are confident on our capacity to execute this plan. I would like to end this presentation of the strategic plan review by reinforcing the company's strategy for the coming years. We worked hard in this past month to identify the sources of value for a way. We studied the possibility in all segments considering our right to win in each of them and the feasibility to guarantee a successful implementation of this I have total confidence that this plan is the right path for Roy, and it will generate tremendous value for the company and the shareholder going forward. Our focus on fiber and our leadership position infrastructure puts us in a differentiated competitive position to place the company in a path of sustainable growth. We have a well defined strategy, a highly qualified team, and the company is now 100% focused on the keeping of this plan. We will now begin the question and answer session. Ladies and gentlemen, we will now begin the Q And A session for investor and analysts. Remember that question should be asked, getting English, and those questions sent via webcast will be prioritized. Good morning, everyone again. Here with me, I have to support the answers, the questions. We have here Roberto Bruger, our B2C Marketing Director, We have Carlos Landers, our regulatory and wholesale vice president, and we have the board representative Rodrigo who is also the coordinator of the transformation and its strategy and infrastructure committee. So please let's start with the question. We'll have a question by Via Webcast, Mr. Danielle Hung from Blue Mountain Capital asks. Can you discuss the cadence to take up great after passing homes, how long to get to 25% take up? I'll ask Roberto Bueger here to answer this question. Okay. Hello. The take up rate right now is running at 10% on average. But after we accelerated the deployment of fiber in third quarter of last year in the reuse model where we are deploying fiber where we already have infrastructure in order to minimize investments we've seen a very, a very fast growth in the take up rate we are running at 1.5% per month in the 1st 7 months of after implementing the fiber in a cell, specific cell. So if you do the math, it's going to be higher than 15% in the 1st year. Of course, the 2nd 3rd year will be slower. So we expect that after 3 years, we would reach or stabilize our take up rate around the 25%. Now the take up rate is very critical in our business case, of course. So, we have targets specific targets for each individual cell in our model, but on the other hand, the investment of each cell is also very important. So some of the cells are prioritized, not because we see a very high take up rate. But because we don't need to invest so much to deploy that sell. So take up an investment, the 2 key variables in our business plan for fiber. Ms. Zena Salado from Utah, we would like to ask Hi, good morning. Thank you for taking our questions. And the first question is related to the mobile one of those slides, you mentioned that, you want to explore all the strategic options to unlock value for shareholders. Among those strategic options would include the asset sales of mobile, That would be our first question. And our second question is on fiber. If you were to rank the fiber opportunities, FTTH wholesale or B2B by size and relevance, how would you list them? Thank you, Susanna. I'll ask Rodrigo to support me in this question regarding the strategic options on the mobile business. Hi, Susana. Good morning. Thank you for the question. And as Brandell presented, obviously, our strategic plan looked in a lot of detail, all of the business components of the company to evaluate the best possible path forward. And also the best alternatives for value generation. And so operations going forward. And in this case, as you correctly pointed out, fiber was pointed out as the key component of the plan for the long term value generation. Both sustain the strategy in FTTH wholesale and B2B, as you mentioned, in addition to being a key component for mobile. Mobile for us plays an important role given that we have a very valuable current assets, including spectrum, including a very solid customer base, including a good market position with the recent very positive performance. And you have been looking at that with the performance of postpaid throughout the last year or so. And our plan for mobile calls for maximizing the value capture initially through a very competitive portfolio, has been going on for a while. And this portfolio uses our network capacity and spectrum availability. But the good thing about the plan, the way we analyze is that it preserves multiple optionalities going forward, we believe. So, if any combination on other non or opportunity can generate significant value. Without a question, it would be seriously analyzing considered. But it's worth highlighting that the plan does not depend on a single course of action. That's the good thing about our plan and how mobile fits in our plan. So there are multiple sustainable models for the company going forward. If there is a very good opportunity to consider something different, we will look at it seriously. But we do not depend on it to have a successful plan going forward. Correctly at the capital allocation and how you prioritize the investments. I can say, is that correct? Actually, the opportunity size within fiber, which one, among the opportunities that we are going to pursue as TTH wholesale and B2B, which one is the most sizable one in terms of revenue generation and returns? In terms of revenue generation, no doubt about that is the FTTH approach. In terms of returns, the wholesale has attractive returns because it takes advantage on the existing fiber. And with our incremental investments, we have the ability to provide the infrastructure service. So it's a complementary approach. Just a follow-up questions on Rodrigo's answer. You mentioned that you want to maximize the value specifically on the pulp state. And we saw in the presentation that you guys are going to reform part of the spectrum My question is what about 5G auction next year? Are you guys prepared to participate in the auction? How would you deal not having the 4G and not participating or not in the 5G auction next year? Well, we have to understand it. Obviously, there will be 2 auctions 2 will be first, there will be the 700 auction and then we'll have the 5G auction. We are, as part of the strategy, we are considering, which situation in both auctions. Obviously, it will depend on how the plan is moving along, but the consideration for situation in both as part of our analysis. And obviously, as I mentioned, it fits into the whole mobile strategy for generating value. Anything that generates value, we will consider. And those two welcomes are no difference. Mr. Fred remind us from Bradesco Bank. Good morning, everyone. Thanks for the call. I have two questions as well. I mean, the first one, if you can give us an idea, I'm not sure if you have this information, but if you can give us an idea about the EBITDA stand alone for the mobile operations, this will be great. And then, and as a second point, also, if you could give us an idea in terms of CapEx to implement the plan. And to 2021, to be honest, that you don't find this information here, of course, you mentioned the possibility of selling assets between 12.14 point 5, so I'm wondering if all of these would be used for the CapEx. Thank you. Regarding the mobile information, it's not public. So unfortunately, I cannot provide to you. Regarding the CapEx, it's not a guidance in the plan, but it's close to our previous, announcement on a SEK 7,000,000,000 per year with the minor adjustments. This year, we expect a growth since we are increasing our ambition on FTTH. And I have just one more follow-up question, if I may. Just as a worst case scenario, let's say, if you are not able to sell Unitell until the end of February, of course, there's additional recovery process. And also the other sales of the other operations, they also do not happen. You do have a gap of CHF 4,500,000,000 in the plan that you should, that you should, let's say, close, right? So just wondering what would be the obligations you have related to this 4,500,000,000 and what would be the alternatives you have let's say, is our case scenario this year of the assets does not go through until February? Thank you. Thank you, Fred. Regarding this question, as you know, we have we highlighted in this plan, the portfolio of assets that we have, and we are on track on our strategy. So we don't see as a probable scenario that we miss these achievements. On the other hand, we are also in parallel discussing with banks alternatives quite aligned. So we have a very broad portfolio of alternatives to fund the company, to implement this plan. Very clear, Rodrigo. Mr. Carlo Sakata from BTG Pactco would like to ask a question. Two quick ones. One is, can you give us more information on the potential sale of Unit L or not only the potential sale, but if it takes a little longer. Would you is it reasonable to assume that you can get like some of the dividends that will retain in the company back to OA in the short term. And the second one, and I know you might not have too much information about it. Maybe Tadu can help. What is going on with the POC 79 and what are the expectations for it to move finally move in the Senate? Good. Regarding Unit L. What can I say about it is that we have, as you know, the plan A and plan B? The plan A is to sell the company. The plan B is to fluctuate the dividend. And I can say that on the plan A, we are having important developments recently, but you have 2 room for improve and advance in the negotiation and plan B we have our management there, and we are now assessing our alternatives to expatriate dividends if the FAA is not well succeed. So we are very on track on this management of this asset. So I have confidence that we fulfill this milestone that we have, plans in our strategic review. So I'll ask Tadu here to comment on the PLC 79. Hello, Kado. As you probably know, PLC 79 is a subject that's already to run from a lot of time. Since 2015, we had the public hearing in 2016. Hotel, putting broadband as the new and the resources from where the funding would come. To finance these new public lists and all the guidelines to reach it. In 2006, seen also, we had it approved it on the lower house, coming out from the constitutional committee. House and at the same year in the infrastructure committee at the Senate, the Upper House. So we had some problems on the Supreme Court, it was not approved, in the end. It came back for the CCT, the science and technology committee at the Senate. We are already in the 2nd reporter, writing the final report after the first first report made by Senator Flash And Ibero. So we think it's ready to run. It's feasible in 2019. It would, turn all the public license for the voice services in private license. And would give us the resource to invest in broadband for the new public policy. It was already done in places like Spain and Portugal. So there is no news about it. It was made here in Brazil also. You can remember that when we had the privatization in 1999, the mobile services were also public. In 2004, we had the migration from concession to authorization in mobile services. So there is no news about it. We need to have the same thing for the voice. We need to, put the broadband and infrastructure on the center of the public policy. And we think that it's ready to run. And also, This would be something that would help in the economic growth, that we need for other sectors too. So we think that, the PLC is feasible in 2019. We hope that when the recess is gone, it comes back and would be, put it to vote at the CCT after that in the plenary. Do you have any opinion on what is holding me back at this point, given that everything is ready. I don't think opinion would be feasible in the comics by year. Okay. That's fair. Thank you very much. To ask questions. Hi, there. Yes. And two questions on the guidance and then one on asset sales, please. On revenue guidance, can you give a sense of when you think revenues will stabilize? I think the chart you put in one of the presentation slides look quite promising on a monthly basis, but do we think 2020 or even 2019 is the trough year? I know you've given some longer term steer on revenues. And just as a follow on, what are you thinking about wireless expectations within that. If you don't give any explicit wireless revenue growth, I was just curious about that. Second question on guidance, please. Just on EBITDA, I think if I've got my maths right, the guidance implies absolute EBITDA in 2021 of between BRL 6,000,000,000 7,000,000,000. I just wondered what was the driver of that variation, is that, uncertainty of a revenue, or is that based around cost or macro environment. I just wondered what the why variation is based upon, please. And then finally, it's okay. Just one on asset sales you've talked about towers and data centers, real estate, etcetera, CHF 6,500,000,000 to CHF 7,500,000,000. What is the what would the EBITDA implication be of selling those assets? Obviously, potentially cash would come in, but I assume you would need to allocate some OpEx to some of those businesses. So how much EBITDA would that impact please? Thank you, Sumit. So I'll ask Rodrigo Bill to answer to you the first two questions and then I'll ask about the asset sales potential impact. Hi, Sumit. Good to talk to you. And so let's talk about the guidance first, both revenue and EBITDA. If you look at the revenue, we're obviously situation where we have to do a revenue substitution for the revenue to begin to grow again. And this is a fact of, obviously, we're having fixed revenues that are declining associated with copper, associated with other regulatory things that obviously bring the revenue down. While at the same time, we do have a very, very promising path forward in terms of revenue acceleration, on all of the fiber lines, including FTTH, including wholesale, including B2B, exactly as it was described as a focus in our revenue plan. If I look at the recent months, in fact, we have achieved a very, very solid stabilization. But we do see that, what will happen for us to really cross the threshold of having revenue growing again is exactly when we get to the point of the fixed decline, really being surpassed by the FTTH growth, which we are accelerating. And we expect that to happen sometime around 2021. And this is what's in the plan right now. Obviously, we're going to work to accelerate this as best as we can. And at the same time, try to work on the declining revenues on copper to the best extent possible. To try to accelerate that crossover. And in terms of implications for EBITDA and how mobile plays a role in that, First of all, obviously, mobile has been presenting a good revenue behavior as well in the recent months and, in particular, in the recent year. Because of the changing strategy that the company did, really going after higher plans, going after customers that can bring higher tickets for us. And this has been showing in our recent postpaid growth. With that, we will expect our subscriber revenue to go up in mobile. So contributing to, obviously, reverting this scenario of revenue downward trends, given particularly the fixed components. When we look at what's going to happen with EBITDA and the guidance that we put on the plan, We're obviously on the very beginning and the very beginning of the transformation plan, which is focused on the mid to long term value creation. But also short term sustainability. So we necessarily have to balance over time, the financial, the operation, the strategic goals, right? When we look at the guidance for EBITDA, so we have decided to work with ranges exactly because there's a lot of things going on at the same time. For 2019, we understand that it may be a little bit wider than expected, but we are starting an acceleration phase. And when we accelerate, obviously, we don't want to restrict ourselves of achieving our mid to long term objectives just to really be very, very precise in achieving a very short term EBITDA guidance. So we do see that we're going to have investments here, as Randall mentioned, in accelerating FTTH sales, We are accelerating some of the CapEx. We are working on with commercial efforts, which will also put some pressure on the OpEx there. And that's why we have decided to use a wider range for 2019 EBITDA. Obviously, we're going to work with all of the plan to try to approximate to the higher ends of the ranges, but we're working with this range. For 2021, Obviously, and you mentioned the wide range there of 6 to 7. Obviously, we're, as I mentioned, we are at the very beginning of the journey. And so we have to work with the cost programs and the structural transformation of the company. Obviously, it still takes a little bit of time for us to achieve the correct run rates in all of that. We have to execute on growing revenue. We have to execute on turning around some of the areas that we discussed over the presentation. And likewise, we have decided to work with this guidance because we believe possible to approximate of the higher end of the range, but it will depend on execution. And we're at the very beginning of execution. So I believe a little bit too early to actually point out to a very narrow range for 2020 1. At the same time, it's important to mention that some of things that may happen throughout the way are not considered as part of those, those guidances. In particular, if you look at what's happening with PLC, what can happen with the additional nonorganic movements that you just commented as well. And this is where we are right now, but we are very positive in general of having a sustainable plan and obviously trying to pursue the higher end of the target ranges? Regarding the impact, the potential impacts on the asset sales, specifically talking about the non strategic fiber, the other centers and the towers. We estimate amounts of $150,000,000 has impact per year. Sorry, do you mind saying that number again? I missed it. Mr. Adam Thikssonka from Knighthead would like to ask a question. So looking at page 13, you've got a 3.4 times multiple for OI versus, 11.7 for infrastructure comps. How do you guys expect to realize the That's a complex question, Adam. Well, thank you very much for the question, but it's a complex one. It depends on the valuation as it's run. We have our internal evaluation that we cannot make it public. So we are trying to provide the market of the elements to make the all evaluation, but in our internal analysis, it's significantly bigger than 3.4. Yes, if I may, Brendan, on one item, just complementing the answer, Although there's two steps here of potential valuation for the company in terms of value creation, value generation. The first one is just to bring it back in line with our comps, which obviously depends on a successful execution of our strategic plan, and we're presenting it right now. And we believe we have all of the potential to make it a reality in the coming years. And just by doing that, obviously, we have an important multiple change there, to approximate from the usual comps. And then in addition to that, by focusing and providing a lot of emphasis on the fiber and infrastructure components of our value creation generation options. We believe that it's possible to go beyond just the traditional comps of the 6.7 because it's not subject in many cases to the very volatile equations of a super high CapEx every single year. So we do believe that there's two steps near possible. The first one is just to bring back in line, the company with the sector. And the second one is with our focus that we're presenting with the right to win that we have in the infrastructure sector, which will be here no matter what, no matter where the telecom sector goes, the structure will be required will be a key component of anything. We believe that there's the 2nd jump possibility to providing higher comparables and higher multiples for the company. Would you guys consider providing results like EBITDA for fixed versus mobile so it's easier for the market to determine what the value of each side of the business is? We'll obviously, it's impossible to do that at this point, when we start to execute the plan, in and we have more clear details. Obviously, we can come back to this question, but at this point now. Ms. Maria Zavedo from UBS would like to ask a question. So following up on the mobile strategy, is this share of views on the importance of fixed mobile convergence and bundled offers to your plan? Or do you think that this is becoming less relevant even on an industry wide logic? And my second question as a follow-up would be if you can expand on your views for wholesale infrastructure sharing or even a potential unbundling of your non FTTH fixed network. Thank you very much. Hi. Thank you for the question, Maria. It's always been a key component of our strategy to to make use of our copper infrastructure and converge clients, selling more RGUs to those clients. So fixed mobile convergence is important. But it's not the most important strategy for us at the moment. The key component right now is really the quality of the net of the internet connections the fiber to the home or 4.5G. So more important than convergence, right now, is offering a better connection to the customer, be it mobile or fixed. Hi, Maria. This is Rodrigo. Just on your second question about wholesale and now we have Kado here as well. Obviously, when you look at wholesale, wholesale has been traditionally just to support components to the company. And I was not intensively explored as a very critical business unit and business component of the operation. Just because, 1st of all, obviously, we had to invest in our other areas of the company. We had some restrictions in terms of CapEx. There were some strategic decisions that had to be considered in terms of competitive movements. And as such, it was more a support side of the business, obviously, with some revenue generation. Based on the things that you mentioned in terms of infra sharing. When we look forward and we highlight that we believe that OE has the right in an infrastructure. Wholesale gains, a lot more importance. And this is absolutely apparent, not only cause of the infrastructure that we already have. But because we can make some definitions of actually deciding to explore some areas that we have decided not to in the past, And this is the case, for instance, of really understanding that in order to support the growth of FTTH and of broadband in Brazil, We have to pass through one of them, which we will pursue is to expand our own FTTH operations. And this obviously dramatically depends on infrastructure, but also we can provide wholesale infrastructure for areas where we decide not to invest or we decide to partner and collaborating instead of going directly. In addition to that, if you think about 5G, 5G will need infrastructure. And regardless, again, if it's for ourselves or for the entire market, We believe we are second to none, and we are uniquely positioned to be the national wholesale back from 4, 5G, considering the amount of fiber that will be required. And as such, wholesale gains the importance in the whole strategy, and that's why we believe that it's possible to double the revenue in a relatively short time compared to what we had before. But obviously, this requires a strategic decision, which we have already made. When you ask about Infra sharing and unbundling, in the case of Infra sharing, we do have some Infra sharing agreements that we'll in you, obviously, and it's part of the strategy that we have decided. But I believe that we'll see some things happening in complement to that as well. Because we have a lot of, wholesale capabilities that have not been explored and that can serve as alternatives to sharing agreements with us providing a wholesale as an option instead of just sharing. In the case of unbundling, Obviously, we have seen a lot of changes in the regulatory environment in the recent past. And right now, a lot of what we do on wholesale with non regulated, and we believe that the non regulated components of wholesale will expand even further. And this is, this is healthy for the market. And now we believe that is a part of the reason why we have decided as well to make wholesale such an important part of the strategy going forward. Perfect. Thank you very much. Question. Good morning guys. Thank you for the call and thank you for taking my question. First of all, first question, you talk about the strategic options for mobile. Of course, there is the spectrum value, there is a subscriber value, and there is a huge value of a potentially market consolidation if you decide to divest the business. But one important point for us to do this math to see this potential value lies on what is the size of the fiscal benefit that currently lie on OIMo bio business? That's my first question. On my second question, do you want to answer the first one? Yes, they can. You're talking about specifically on the, IR and CS credit that we have on the balance sheet on the mobile business? All type of physical benefits that you could have within the mobile business, either there already exists or you could allocate to it or even transferring that from from the consolidated side just the mobile business because that is very important in order for us to assess what could be the potential valuation for this type of asset if the choice is to divest it? Okay. Of course, since it's not a decision, we have lots of room to discuss it. Specifically regarding our credit benefits that we have fiscal benefits that we have. We have around R12 $1,000,000,000 on credit benefits on fix of business. So any sort of move in this direction will be a trigger to maximize the usage of this benefit. But it's not in the agenda today. We are now focused on implementing the strategic review we are sharing with the market. Yes. And if I may compliment while there, obviously any structure that would result from such a consideration would take this into a tailored consideration and we'll be structuring a way to maximize the usage of the benefits, obviously, right? So there's no fit there's no set answer to that because there's not a case in point at this moment, but this would obviously be a necessary consideration of any structure that we put together to think about something like that. Exactly. And in a typical process like this, We consider all the drivers that we have in order to maximize the value of the transaction. Certainly, we will consider this if that's the case. Okay. But when you mentioned the TRY 12,000,000,000, you're saying this is the consolidated amount, but how much of it is we think just the mobile business? No, in mobile, this is the credit IRMCS is around 1,000,000,000. Okay. That's really good, ma'am. Okay. That's my first question. My second question, I'm very happy that you spent a lot of time talking about the wholesale of the infra business. Because I agree with you. I see a lot of value on this. My question is on the Slide 7, on the Slide 13, you make very good arguments of how this is not properly valued within the structure of Oi as it is today. And you talk about non replicable infrastructure, you talk about the opportunities on 5G. I have asked this question to to you guys before, but it's good to ask this question also in the call. Why not think about speeding these off? I know there is a physical, a physical, angle to it in order to avoid double taxation, but why not? Because as you well presented in the presentation of Page 13, you talk about the implied multiples of infrastructure companies, traditional telco companies, and how oil looks like today. Why not pursue this or even IPO it or spin off it? Because you're talking about just on the wholesale revenues, a company that has revenues of over R3 $1,000,000,000 if the plane is properly executed. Thank you for the second question on wholesale. Yes, wholesale for us, it's a key piece of the strategy. Yes, you run some exercise in this direction spinning off wholesale. And yes, the fiscal impact, it barely annualized value created by these alternatives. So in our view, at this point, of course, we can always reassess and have we discussed this strategy. But at this point, the way we pick these elements of the plan that's the way we understand that maximize the value. Yes. And Valder, just complementing Brandone as well. I believe Brandone correctly pointed out, so we did a lot of analysis of each of the components of the business in detail, including the cash requirements, including the months, including the timing, including the possible fiscal and operational models. And that was no different with wholesale. With the way we have the plan right now, as Randall mentioned, it wouldn't make a lot of sense initially. Obviously, we have a lot of time to execute here in terms of how this is going to develop over the next 2 years. And so we will continuously says, if something makes sense or not. At this point, we have to remember as well that we do have a lot of integration, for all of the other fiber based activities. And when we look at FTTH, when we look at B2B, obviously, there is a very important component of using those resources for retail and B2B. And obviously, this is what ends up impacting potential results of doing a spinoff initially. But over time, we still have many things to happen. We have 5G And I mentioned, we want to have a permanent position in 5G as an infrastructure provider. We still have to understand how some of the projections are going to play out over time. And this will be always something to consider, but at the initial exercise, it didn't make sense. And as a follow-up question on this infrastructure, how fast the deployment with partners of deployment of infrastructure, not the sale per se, how fast has it been you're deploying the fiber with partners not necessarily by yourself and how in your strategy does the sale of this fiber will be done by you or by partners? Specifically, this number is not a public number. It's not in this deck that we have shared. We are in the beginning of the process of building up this sort of partnership. So we are not, at this point, mature to share with you the details of this strategy. But I can say to you that the important driver for the achievement of the $16,000,000 of homes passed? Yes. And if you look at page 4, Valder, when we go back to the number of households that we believe have a very, very positive economic potential for Broadband Deer. We see 3 buckets, right? One where we have, most of the existing layers, and obviously, those are the focus of the initial deployments. The second one where we have obviously, slightly less components, but still a significant advantage there in terms of infrastructure. Then a third layer where we do have a very important component, which is the transmission, but not necessarily the other layers in the network. When we look at this last one, this is the bucket where we expect to make most of the partnerships. And replying to you, if you look at the international models, you'll see that there's no single model out there. And probably what we're going to be doing is a combination of models. There are areas where you see models where the company, the infrastructure company enters with infrastructure only. There are areas where it enters with, infrastructure and products. There are areas where, part of infrastructure is done by the local partner, but the sales is done by the company. There's no single set model, and that's the beauty of it because probably In the case of Brazil, we should consider that we do have fiber infrastructure in over 2200 Cities. There's still a good amount of cities out there for us to partner and explore different models. And as it is a very diverse countries, not homogeneous, having one single model would not cut it. In this last bucket of 11 million homes, it's where precisely where we believe that there's a lot of space for partnerships and we're going to capture the space certainly with different models. That's a great answer, Rodrigo. That's exactly what I was trying to reconcile looking at that slide. So would this also involve potential partnership with existing ISPs? Yes, absolutely. Absolutely. Yes. Hi, guys. Thanks for your time. Just a couple of questions. I was just hoping to get a little bit more granularity on the EBITDA growth. In 2021? And what are the major drivers, if you could break that down? And then also on the, laying the fiber and the FTTH, you give us a point to some examples where you've seen this succeed in the past and what kind of data points we should look at as investors just to watch, or you do the same thing? Regarding the EBITDA, the main drivers for the growth are a more efficient capital location. So for example, we are accelerating the changing from copper to fiber, which brings to us a potential increase on EBITDA because the cost on fiber lower than the copper. We have the growth on wholesale, which typically has a higher margin than B2C operations. On the exchange of that, we are disaccelerating the DTH business, which will also release some cash for the company. And on top of that, we have the cost cutting initiatives that we are put in in place. So all these things together will drive the growth on EBITDA in 2021. So can you please repeat the question regarding the FTTH? Yes. Just any examples that you to give us in the past if you I mean, you guys clearly have a plan and you didn't do it in a vacuum. So where you've seen this in different places working executed? Oh, thank you for this question. I think on the page 6, we tried to address it highlighting the examples of the performance we are having in some of the cities that we have deployed FTTH. As you can see, Once we started the operation, we stabilized the revenues even on fixed business, fixed and broadband and with a lower churn higher customer experience. So we think we are in a very good position to accelerate and assist this strategy. That's where we rely our confidence on the success of this FTTH strategy. Okay, thanks. Mr. Danielle Fardelli from RIGIT Suisse Bank. The first one is related to asset sales, real estate sales, it says in the presentation that they are immediately available for sale, right, under the current regulatory environment. So why the companies expect is is planning to expect into the first quarter of 2021 to sell those real estate assets? That's the first question. And the second question related to the broadband business, I'd like to understand how much of this fiber clients are actually expected be a migration from copper broadband to fiber broadband and how the ARPU in copper compares with the ARPU in fiber. Thank you very much. Thank you for the questions, Daniel. Regarding the real estate, we are already working on the process of setting it We have, of course, we'll have to maximize the value and run a process aligned with the mark potential, not in order to induce the opportunities that maximize the value of its process. But we are now, as we speak, working on it. And for the second question, I'll ask Hovakia to support me. Hi, Danielle. The fiber, it's 75% of the new customers on FTTH are new to the plan. So they are not migrating from copper. So 25% are coming from copper, be it because they have fixed line or because they have a fixed plus a broadband on copper. The importance of migrating cannot be neglected. Because, once we migrate the customers, we can reduce the cost of maintenance of our copper network and improve, of course, the satisfaction of the customers. So on one hand, we don't have the new ARPU because the customers already have revenues with us, but we are able with the migration to reduce costs. So the ARPUs of fiber are significantly higher than the typical broadband by significantly, I mean, over 20% higher. Okay, perfect. If I may only follow-up on the EBITDA guidance. Is it under the new IFRS standards? No, it's not. Ms. Pilar Santos from Morgan Stanley would like to ask a question. Mr. Valder Nogueira from Santander would like to ask a question. Just a follow-up on the answer that you gave to Daniel. So 75% of the new broadband clients are Neil to FTTH while 25% are existing clients, correct? That's correct. And the price that you're charging FDT on FTTH is on average 20% higher than the DSL guys? Yes. The ARPUs are 20% higher. Okay. How does that ARPU compare with the ARPU that your competitors practice either through Eco or different technologies? We are very aligned in terms of prices in the marketplace. The competition is more on speed and availability of the fiber. So, from a market perspective, there's no significant difference at the moment? Yes, it's worth highlighting, Calder, that's obviously one of the things that the team has done because of jumping slightly late to the bandwagon on fiber is actually to have a better technical strategy and to having a very, very good quality And if we look at what's been happening with the Netflix index, it just proves that. I mean, there's a lot of care in terms of how we're positioning our fiber in terms of speed and latency and availability. And in reality, we believe we have a superior fiber quality compared to a competition at points, and this can be seen by the Netflix standards. So this is where the real competition is right now, obviously, is a relative alignment in the market for fiber. Okay. We've seen that we've seen those three layers of infrared that you put how are they pretty much dispersed with seeing your coverage area, where do you need to do more CapEx and then than in others, in other areas? Are you focused the initial deployment on large cities or mid cities, how it's being done? We initially focused the initial deployment into the areas where we had less CapEx involved. So in the first layer, and these areas are concentrated in large to midsized cities, Now what we're looking at after deploying those areas is that our penetration rate is suppressing our estimates in the suburban areas. So suburban areas, a large, large or midsized city in the outskirts of the of the larger metro areas are the cities that we are experiencing better results where typically we are facing ISB competition, for instance, in some areas outside of Bellevue DeSorcha in 4 months, we've managed to reach 22% take up rate. Or in some areas, in the south of Brazil and postal aggregate metro region, we managed to reach 10% after 2 months. So these are the areas where we're driving more of our investment at the moment. Let me just add Roberto and Paulo complimenting the answer. There's one interesting advantage here, which probably is not very visible. Which is given the fact that we already have a very good part of the infrastructure layer in place, we can be a lot more granular in our analysis to deploy fiber rather than having to focus all. I need to fiber this city. I need fiber net city. We already have fiber in many of those cities. And as such, we can be granular to the point of saying the best possible investment return is let's focus on this area and the city, that area in that other city, that's the 3rd area in the 3rd city and so on and so forth. We don't have to focus first on cities. We can focus first on the most attractive areas within the cities and work from there. Obviously, when you go to the second layer, then the conversation starts to change a little bit, but we still have a pretty, pretty ample room there in terms of the almost 13 million homes. To be very, very granular in how we address infrastructure investment in fiber. We don't need to fiber the whole city. Okay. Okay. And that's the beauty of that chart on page 4. Absolutely. Absolutely. And it's different than traditional players. Mean, and you know who I'm referring to, which, even with a good expansion strategy, they have to, 1st, consider which cities they will focus on regardless if it makes sense in the entire city or not. And then they have to go and look at the areas. So there is less granularity possible when you don't have all of the network layers that we do. Let me make a final final question then. How does this reconcile with the potential regulatory, let's say, benefit that the PLC 79 will demand demand you to make CapEx of broadband in more remote regions. How does this reconcile with this strategy here, especially the 11.6 part here? Well, it's Carlos speaking, the methodology, once the PLC is approved, will be defined as the methodology. We think that if you look at the PGMC of Anatel, you have the cluster 3 in cluster 4. We think that the cluster 3 will be the ones, potentially define it to spend some resources coming from the PLC 79 to broadband. And then we have to reconsillate this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, this, about it. But it tends to overlap with the 3rd layer, no, with the 11,600,000 home best. Potentially, yes. Thank you all guys. We'll have just run all the quick Q and A list here. I'd like to thank you very much to participate in this call. This is a very important milestone for the company, to reall prove both in this operational chapter in the company's agenda. So I'd like to thank you very much for participating in this milestone with us. Thank you all. This concludes OESA's conference call. We would like to thank you for your participation.