Good morning, ladies and gentlemen. Thank you for standing by and welcome to Oi S.A.'s conference call to discuss the first quarter of 2019 results. This event is also being broadcast simultaneously on the internet via webcast, which can be accessed on the company's IR website, www.oi.com.br/ri, together with the respective presentation. We would like to inform that during the company's presentation, all participants will only be able to listen to the call. We will then begin the Q&A session when further instructions will be given. Questions sent via webcast will be prioritized. In case you need any assistance during the conference, please request the operator's help by pressing star zero. 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 the date they are made, 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 Brandão, CFO. Please, Mr. Carlos, you may proceed.
Good morning, everyone. Thank you for joining our conference call for the first quarter of 2019. I have here with me Eurico Teles, our CEO, José Claudio Gonçalves, Operation Officer, Bernardo Winik, Commercial Officer, Carlos Eduardo Medeiros, Regulatory and Wholesale Officer, Silvio Almeida, Administrative Officer, Marcelo, and the IR team. We will begin our earnings conference call on slide three, which shows the main highlights of the first quarter. We began 2019 with the completion of the capital increase in the amount of BRL 4 billion, an essential step towards maintaining growing investments present in the judicial reorganization plan. As I am going to explain later in details, we continued to significantly accelerate the pace of implementation of our CapEx plan, which is focused on popularizing fiber and expanding 4G and 4.5G coverage as the main drivers of the company's full positioning, seeking to resume business growth.
In the mobile business, the work started last year with the review of the offering portfolio and intensification of the commercial activity continues to present impressive results. It is worth noting that our market share of net adds of postpaid plus control customers, which accelerated the pace of growth, which is 31% in the first quarter. This consistent growth in our customer base translated into a 9.3% year-on-year growth in postpaid plus control revenues. Regarding the fiber project, which is the heart of our business strategy, we already had important and exciting results. At the end of March, we reached 1.7 million homes passed with 145,000 connected fiber customers and a take-up rate of 8.7% of the homes passed. As you will see later on, Oi's take-up rate is outpacing the market rates, especially when analyzing the reuse regions take-up, where we achieved 11.2% of occupation.
In addition, our Oi fiber broadband was ranked first in Netflix ISP Speed Index for the third consecutive month since joining the index and increased its difference for the second place. This result reinforced the value creation and quality differential of our products in terms of both financial returns and the customer experience with returns for the Oi brand. Let us move to slide four with the results and good performance of our mobile segment. The expansion of our commercial activities since the beginning of last year, together with the launch of new offers more aligned to the consumption profile of the customers, has been contributing to the robust and consistent performance of the postpaid and control products in the recent quarters. Our postpaid customers' base grew 20% year-on-year, boosted by both the migration of prepaid customers and the acquisition of new clients.
In this quarter, we accelerated even further this improvement, capturing 30% of market share of net adds for the postpaid and control. This continued good performance in RGUs has been translated into acceleration of the postpaid and control customer revenue, which posted 9.3% annual growth in this quarter. As a result of this evolution, for the first time ever, the postpaid revenue mix reached 51%, becoming the most relevant part of our mobile revenue. In the prepaid, a market that is in the contraction stage, we have been able to grow market share in the annual comparison, which is a positive sign for the company since we still have a lot of opportunities to work on our prepaid customer base, gradually migrating the right customers to the postpaid and control plans.
Supported by postpaid revenue growth, total mobile customer revenue is reverting the declining trend as we are reducing the reliance on prepaid revenue, which is declining, and increasing the share of postpaid revenue. By continuing with this pace, we expect to present annual revenue growth in the mobile segment in the coming quarters. Let's move to slide five, where I will present our B2B results. We presented revenue decline in B2B in line with the trend of this market, which is highly dependent on the macro environment and the economic activity levels in the country. However, as we look at the evolution of B2B quarterly revenue, we are beginning to see a trend toward improving the curve. This is happening because, one, in the corporate segment, we are managing to increase the share of IT revenues in the total corporate revenue.
As this is a high added-value service, we will accelerate investments even more, focusing on enhancing capabilities in cyber data center, IoT, security, and big data as key pillars to resume corporate and B2B growth. Two, in the wholesale, we have managed to succeed in the transition from regulated to unregulated revenues. As we deploy our fiber project, we will also expand wholesale opportunity to become the potential national infrastructure provider, leveraging our extensive and non-replicable fiber network to support the increasing 4G and 5G traffic demand. Moving on to slide six, let's discuss the residential segment. The exposure to declining revenues such as fixed voice and copper broadband has been crucial for the pressure on our residential revenues. The fixed voice has long been suffering from the substitution for the mobile and with the migration to data service.
On the copper broadband side, in the context of increasing demand for higher speed broadband, combined with our under-investment in the recent years, local Internet Service Providers, ISPs, have been capturing opportunities to offer a competitive product in the market. Today, approximately 4,000 ISPs operate in the country, many informally, and have been relatively successful over our copper customer base. To revert this scenario, we are investing heavily to accelerate the expansion of our fiber footprint. In the chart on the right, we show that in the end of March, we reached 1.7 million homes passed, and we are present in 38 cities with Oi Fibra. Likewise, our customer base of Oi Fibra reached 145,000 customers, and we are with 8.7% of take-up on the homes passed. Moving on to slide seven, I will give some colors on the potential of fiber to Oi.
As I said in the previous slide, the growth of OTT products has created an enormous demand for high-speed broadband. In that sense, Oi, with 360,000 kilometers of fiber, has a unique and non-replicable advantage to match the fiber in the country and capture these opportunities in expanding market. Fiber in Brazil has low penetration. Only 7% of households are connected with fiber. However, given the high demand, fiber is currently increasing its share in the house of clients at a CAGR of 53% per year. With a presence in 3,600 municipalities, of which 2,300 with fiber backhaul, Oi now has twice as much fiber as any other operator.
Expanding this capillarity to the access, we can not only offer high-speed broadband in the households but also deliver high-speed service to B2B and government, as well as capturing opportunities in the wholesale market as a major transportation infrastructure provider, especially considering the evolution to 5G technology. That reaffirms our view that the fiber projects represent a strategic umbrella to a cross-segment business approach. To accelerate the growth in our fiber, we adopt the reuse approach where we take advantage of the idle capacity in existing network layers, building only the missing layers, substantially reducing our cost of construction and increasing the speed of deployment. Through the reuse and with unrestricted investment capacity, we have the potential to build 32 million homes passed. We are now initially focusing on 12.5 million HPs, where we need to build only the secondary fiber network.
Through our strategic review with BCG, we are analyzing alternatives to accelerate even more this deployment. Moving to slide eight. If on one hand, we're accelerating the expansion of our fiber footprint, on the other hand, we are doing this in the most granular way possible, trying to maximize the return on invested capital. In this way, we migrate our strategic model of analysis by cluster to a tactical model of micro analysis, looking for neighborhood, cell, and census sector. Instead of analyzing the NPV of 10,000 clusters, as we were doing before, we are now analyzing the NPV of 322,000 census sector. This way, we can be much more agile, efficient, and accurate in our fiber deployment strategy.
This strategy has generated encouraging results in the first cities we implemented. Where, even with a relatively recent deployment, aging over 3 months, and fiber coverage in more than 10% of the households, we have already been able to revert or at least smooth the downward trend of broadband customer base. On slide nine, we will see some important indicators of fiber with very positive results. We show in the first graph the speed of expansion of our homes passed, growing approximately 4 times in a year, and with more intensity since 4Q results, when we actually started the implementation through the reuse approach. In the second chart, we present the take-up on the total base of homes passed, which reached 80.7% in March, and we have good expectation to accelerate this penetration even further in the upcoming quarters.
This expectation is supported by the third chart, where we present the take-up only over homes passed via reuse approach. Through the reuse approach, we are more efficient, not only in the construction of HPs, but also in selling fiber, since our sales team goes to the field together with the operations technicians who are building the HPs. In this view, we already have a take-up of 11.2% in 7 months, representing a monthly average of 1.4%, higher than the market benchmark, which is around 1% per month. Turning to the charts at the bottom of the slide, we show the financial advantage that the reuse approach provides. Where in a traditional approach, the CapEx by HPs is approximately BRL 500. Through the reuse, our estimate is around 30% lower, that is approximately BRL 360.
As we are initiating fiber deployment in regions where we need to build only one network layer, this CapEx has been even lower than expected by approximately 20%. As expected, our gross adds has been growing solidly and consistently, and our churn has remained at very low levels. Finally, for the third consecutive month since joining the index, Oi Fibra is ranked first in Netflix ISPs index and increasing the gap to the second place. This demonstrates the quality differential of our products in front of the others and put us in a position to offer a better broadband experience to our customers. Moving on to slide 10. We continue to invest heavily, focused on the acceleration of the rollout of fiber. Our CapEx had 53% of annual growth, representing 33.8% of our net revenues in 1Q 2019.
The expectation is to end 2019 with BRL 7 billion in CapEx. This amount of CapEx, combined with our capacity and speed of deployment, are the factors that will contribute for the acceleration and the spread of our fiber footprint. In 2018, our average monthly homes passed deployment speed was 54,000. We ended March 2019 with 174,000 HPs deployed, one month with fewer business days due to the carnival. In April, we already made more than 200,000 HPs, and if we did not have CapEx restriction, we could expand the deployment speed to 500,000 HPs per month. Let us move now to slide 11 to discuss costs and routine EBITDA. In terms of costs, we achieved a nominal annual cost reduction of 5.1%, affecting practically all line of costs.
Our routine EBITDA remains relatively in line with the previous quarter. With an annual decline, mainly driven by the revenue decline, especially in the residential segment. The worsening of the revenue trend reinforced the urgency to accelerate our fiber project, which we believe is the best solution to reverse the scenario. We continue to work and identify opportunities for cost reduction, working mainly in the digitalization front and in the simplification of our business process, where there are great opportunities for structured reduction of expenses. Since 2017, we have been enhancing our digitalization service, making recurring deliveries, and accelerating the transformational process for an entirely digital company. Moving to slide 12, where I present the company's cash and debt position. We end in March with BRL 6.3 billion in cash position, highlighting, 1, the acceleration of CapEx.
It is natural to expect a negative cash generation since we are investing more. 2, the CapEx increase of BRL 3.9 billion. 3, the payments of creditors of the RJ with approximately BRL 700 million of bond coupon payment and BRL 450 million of payment for the suppliers. Our gross debt at fair value remained stable at BRL 16.4 billion compared to the 4Q 2018 due to the payment of interest of the bond. A result, we had a net debt at the end of March of BRL 10.1 billion. Moving to slide 13. In the previous quarter, we had talked about the role of three consultants which are working together with the company to support the execution of the strategic plan. Oliver Wyman, involved in the management of fiber deployment at a level of extremely high granularity to capture higher returns.
BCG within Oi's strategic plan, looking at the company in the long term and drawing up the execution plans to ensure the achievement of our goals. Bank of America, working on the sale of non-core assets and M&A opportunities, guaranteeing the necessary fund for the implementation of the strategic plan. We are in the end of the process of the strategic review. We expect to disclose to the market the results of this revision model until mid-June. We will keep the market informed about the next steps. I would like to end today's presentation by making a summary of what we have discussed. In the mobile segment, we recorded market share gains despite the shrinking market, creating a great opportunity for us to work with this base in order to enable a future migration to the postpaid segment.
In the postpaid plus control segment, we have been recording excellent results with growth in both customer base and revenues, which have been helping reverse the trend of the total mobile revenues. In B2B, we saw an important improvement on revenue trends in line with growth in IT revenues in the corporate segment and reduced dependence on regulated revenues in the wholesale segment. These are signs that the segment is only beginning to improve. In residential, we saw the fierce competition in the market from regional broadband providers, putting pressure on our revenues and reinforcing that the fiber expansion strategy as the main alternative to reverse this scenario. A result, we are focusing our efforts and resources to accelerate our fiber expansion plan. We have the capacity with the existing funds to build approximately 250,000 HPs per month.
Given our reach and capillarity, access fiber will not only be the driver of growth in the residential segment, but also a very important driver of value creation for B2B through the provision of high-speed service for companies and the government, or by being the main provider of infrastructure service with the arrival of the 5G. We are accelerating the project implementation as much as we can, but it is natural for the fiber to take some time to begin producing significant impacts on our financial results. At the same time, we are working to accelerate the company's digital transformation process, leading the process automation, simplification of our operation, and deep restructuring of the cost structure. We are just trying to mitigate the impacts of the decline in revenues in the short term as we restructure our business models.
Finally, I would like to thank everyone, all our shareholders, employees, customers, suppliers, and other stakeholders for their commitment and dedication throughout this process of construction of a new Oi in the first quarter of 2019. We will now begin the question-and-answer session.
Thank you. Ladies and gentlemen, we will now begin the Q&A session for investors and analysts. Remember that questions should be asked in English, and those questions sent via webcast will be prioritized. If you would like to ask a question by the telephone, please dial star one. If at any point your question has been answered, you may remove your question from the queue by pressing the pound key.
Let's start with a question from our webcast platform. Actually there are two questions. They are connected to the revenues. What are the main reasons for this quarter revenue decline? The other one is, given the investment the company has been doing, when can we expect to see the reversal of the decline trend to revenue growth? Let segment this answer. Starting with the mobility. As we reported this quarter, the mobility business has delivering important results recently. We are starting to expect short-term growth in the mobility revenues since we are now with more than 50% of our revenues with the postpaid, and we are being very successful in the migration from prepaid to postpaid and with the repositioning of our offerings. On B2B has been pressured by two main elements.
First of all, is the exposure of our B2B revenues to declining revenues such as fixed voice and data. The other one is the negative macroeconomic scenario that is impacting the customers. To compensate that, we are accelerating and being successful on the growing of our IT revenues, which are much more value added. In another segment on the B2B, accelerating the migration from regulated revenues to unregulated revenues on a wholesale. On residential. Residential business has been very impacted by the small local providers competition. They are taking advantage, as we said, of our lack of investment in the recent years. We are now accelerating the fiber investments as we demonstrated on our presentation. We are very positive on the perspective to achieving growth again on the revenues of this segment.
Of course, it will take some time, and we expect in 2019 to report a decline on a consolidated base on the residential segment. In the next year and so on, and the stabilization returning to growth. Another question we have here is regarding the OpEx. After a long time of cutting costs, are there still significant cost-cutting opportunities in the company? The answer for that is that, yes, there are opportunities. We are always focused on optimization of our P&L. We continue to accelerate the digitalization of our process and business models, and we have important opportunities on the simplification of our cost structure and the business process, as together with the improvement in quality and operational efficiency. That's an important piece of our revisited equity story that we will communicate to the market in June.
Mr. Rodrigo Aguiar from Bradesco would like to ask a question.
Good morning, and thanks for taking my question. My first one is regarding the mobility segment, and I appreciate your comments on the top-line trend you expect. Following the encouraging postpaid net adds figures, I just want to clarify, when you mentioned we should see top-line growth in the near term, if we can expect the postpaid revenues to be enough to offset the declines in the interconnection revenue as well, and to what extent can we expect this? With the growing postpaid subscriber mix, if we can expect any pressure in terms of bad debt over the coming quarters due to this change in your portfolio of clients? That would be my first question.
Thank you, Guilherme. Regarding the compensation of the postpaid revenues in the mobility business, regarding the impact on the interconnection. Today, the interconnection rates are so low that the impact on the P&L are not so material anymore. We expect, yes, by the end of this year, we have a growth on a consolidated basis, specifically on the mobile business. Sorry, what was the other question?
What should be the impact of your growing postpaid subscribers? Yes.
Oh, yeah. Well, at this point, we have no indication that we will have some issues with the postpaid. The recent growth that we had a good performance in terms of payment and control and postpaid plans. We track this in our weekly results discussions in the company, and at this point, we have nothing that concerns the company regarding the bad debts.
Okay, thanks. My second question is regarding Unitel. If you could share with us an update of your expectations regarding the proceeds from the judicial decision in the case. Is there any timeline in which we could see cash coming into the balance sheet, and what is the total value you expect to recover considering both the legal decision and a potential divestiture of this asset?
At this point, what I can tell about Unitel, last week, we had the first board meeting with the new board. We have our managing director in place in Angola. We don't have, at this point, a clear view on the perspective of the expectation of the dividends. Certainly, that's something that will be much focused in the short term. As soon as we have more clarity on the process and the timing, we will communicate to the market.
Okay, thanks.
Mr. Sumit Datta from New Street Research would like to ask a question.
Hi, yes. Sumit from New Street Research. Two or three questions, please. Firstly, just thinking about CapEx, it sounds like you're keen to accelerate the deployment of FTTH where possible. I think CapEx is the main, and financial ability seems to be the main constraint there. Can I just check, in terms of liquidity, you've got 6.2 billion BRL cash on the balance sheet at the moment. What is your threshold for liquidity? What is the level you don't really want to drop below? Just to confirm, it's only really finance which is impacting that decision, or do other factors come into whether you want to accelerate the FTTH deployment? That's the first question, please.
Hi, Sumit. Thank you for the question. Regarding our CapEx plan and the liquidity that we need to fund these investments, we are fully funded for this first year of CapEx deployment needs with the capital raise of BRL 4 billion in the beginning of the year. We have, as we have already communicated to the market, a list of assets to be monetized, which we are working some with Bank of America, some with other banks. We have, on a total basis, around BRL 6 billion to BRL 7 billion of non-core assets to be monetized. We are having important progress on that. We don't need the funds for the short term, and we have the adequate process to monetize these assets in the midterm.
Okay, thanks. To follow up, the plan is in place for this year, but absent any asset sales, you would not be in a position to increase CapEx in 2020. Is that the right interpretation?
In our actual plan, which is being reviewed with the pre-BCG project, we have BRL 7 billion of CapEx expected for this year and next year. For these investments and with this asset portfolio, we have more than enough funds to invest in our CapEx plan.
Okay, clear. Thank you. Just a follow-up question, please. Just on fiber, obviously from sort of early beginnings, the pace of growth is improving nicely. Can you give us a sense as to the ARPU on those customers you're adding? I think your residential ARPU is disclosed at BRL 77.5. Are you offering promotions at the moment, or are those customers coming on at relatively full price? And how does that compare to the underlying ARPU? Thank you.
Typically, the products of fiber that we are selling right now, that has a 20%-25% ARPU increase regarding the copper products in the same area. We expect an important increase in ARPU in the mid to long term. As I said, the fiber investments will take some time to have an impact on our total revenues. As I said, the KPI that we have tracked after the first pilots we did in the cities that have more mature of these investments are very encouraging and give us the sign that we are on the right direction.
Okay, great. Thank you.
Mr. Mathieu Robilliard from Barclays would like to ask a question.
Good morning. I had three questions, please. First, if you could maybe characterize a bit the competitive environment you're seeing. In Brazil, in fixed mobile, we've seen a few price increases on postpaid and mobile. I think prepaid remains competitive. I was curious to see what is your view on that, and how do you expect the year to shape out? Second, you show a very interesting slide on the fiber take-up, the cohorts analysis. I was wondering, what is a hand target you think is realistic in terms of take-up of fiber in the areas where you're rolling it? And finally, the eternal question on PLC 79. I don't know if there's any update or anything you want to share with us on that process. Thank you.
Hi, Mathieu. Thank you for the question. Regarding the competitive environment on mobile, we see a more rational environment, which is very positive for the whole industry. We expect a price increase across the board in all operators. In the short term, we have some signs of the market that is being implemented. In the short term this year, we expect a positive impact due to this more rational, competitive environment. Regarding our targets for take-up in our fiber project, we expect that in a mature area of our deployment, we expect a take-up of 30%-35%. Regarding PLC 79, I'll ask Cadu to comment his view on the status of the process.
Hello, Mathieu. We think on the recent news we heard about the PLC 79, we think it's going in a positive direction. We expect to hear some more good news sooner. It's hard to predict what the timeline is going to be in the PLC process at the CCT, and then after to go to the plenary of the Senate.
Is that still your expectation that it could happen this year, or is it too hard to say?
We think it's a very good chance of happening this year, yes. Very high probability. We cannot assume any timeline because there is some process to run inside the CCT, the Committee of Science and Technology of the Senate, and after at the plenary.
Great. Thank you very much.
I would like to turn the call over to the company for the final remarks.
I'd like to thank you very much for participating in this call. Looking forward to our communication of the new equity story, which will happen in the very short term. In the short term, we will communicate to the market the process and how it will be communicated. Thank you very much and have a good day.
This concludes Oi S.A.'s conference call. We would like to thank you for your participation. Have a good day.