Good morning, ladies and gentlemen. Thank you for joining Oi S.A.'s conference call for Q1 2024. The original audio for this conference call will be Portuguese, and we will have simultaneous interpretation into English. To access the simultaneous interpretation feature, click on "Interpretation" using the globe icon at the bottom of the Zoom screen and choose the language of your preference: Portuguese or English. We also remind you that this meeting is being recorded and will be available at a later date on the company's IR website. During the presentation, all participants will have their microphones disabled. To enter the question queue, please click on the Q&A icon at the bottom of your Zoom screen and type in your name and the name of your company. After the presentation, we will begin the Q&A session. I will now hand it over to Mr. Mateus Bandeira, Oi's CEO. You may proceed.
Good morning, everyone. Welcome to our earnings call for the first quarter of 2024. I'm here with Cristiane Barreto, our CFO, Rogério Takayanagi, Director of Strategy and Transformation, and Thales Paixão, our Legal Director.
As I did last quarter, I will give you an overview of Oi's three transformation pillars for this first quarter. The first pillar refers to the focus on strengthening and growing our fiber operation, combined with a continuous process of improvements in search of a more sustainable and efficient operational model, both in B2C and B2B. The second pillar relates to that restructuring process and our court-supervised reorganization plan, which is a fundamental condition for Oi to balance its assets and liabilities to maintain its viability. The third and final pillar relates to the search for resolving the legacy business, mainly through the migration to an authorization model that allows us to seek significant efficiencies, reduction of costs, and resuming the arbitration process where we see compensation for historical imbalances in the concession. Now moving to Slide 4, we highlight the main results related to the first pillar.
In the first quarter of this year, the pace of revenue growth was significantly impacted by an accelerated dynamics of the reduced demand for legacy services, especially those linked to copper technology, and also by the prevailing macroeconomic conditions that impacted us last year and that has a direct effect on the pace of growth in the fiber industry as a whole. Nova Oi recorded revenue of BRL 2.2 billion, with a 12.9% drop compared with the first quarter of 2023, mainly due to the impact of the non-core revenue copper and DTH services. Even so, core revenue totaled BRL 1.6 billion, reaching 72% of our total revenue. The fiber revenue, the main growth driver for Oi, totaled BRL 1.2 billion, remaining practically in line with the previous year.
It's important to highlight that we are resuming growing in net additions in this first quarter with improvements in gross additions and multi-churn, especially from March onwards. In the case of Oi Soluções, in addition to the accelerated decline in revenue from our traditional telecommunication services, the company is adopting a more selective commercial strategy in search of healthy margins, which makes us more conservative in competitive processes, and that leads to impacts on the growth in our revenue but to pursue better profitability for Oi Soluções. Still, approximately 30% of B2B revenues already come from ICT services with high growth potential. In addition, we continue to achieve good results in our efforts to improve the company's operational efficiency, with generated positive results this quarter, as evidenced by the continued reduction in operating expenses. Expenses excluding infrastructure, rental expenses, and insurance had a notable reduction of 14% year-over-year.
Finally, I would like to highlight the enormous opportunity that we have to transform the cost base, making Nova Oi significantly more efficient by reducing legacy expenses as we migrate customers to new technologies and reduce copper infrastructure within a migration scenario to the authorization regime. On Slide 5 about our restructuring process, we made important progress with the approval of Oi's reorganization plan at the General Creditors' Assembly on April 19th. This is extremely important, and with the approval of the plan by the Supervisory Court, we will direct all efforts towards the plan's implementation, which we hope will occur soon. I divide our next steps related to restructuring into three main flows. First, regarding the reorganization plan approval, we hope to obtain it in the short term.
We will then have a deadline for creditors to choose their payment options within the plan, and finally, we will have capital increase to capitalize part of the credits from restructuring option one, as well as new common shares that will give Reais to changes in Oi's shareholder base. This will require the consent of Anatel and CADE Antitrust Authority. For the sale of the ClientCo UPI, upon approval of the plan, we will publish a public notice for the competitive process. ClientCo has around 4 million connected homes. It will bring high value to its potential buyers. We have divided this UPI in up to five regional lots. Proposals will be opened at a hearing in up to 30 days from the publication of the notice.
Proposals will be evaluated, and if necessary, if there is no winning proposal, we will have a second round of this competitive process, as provided already in the reorganization plan. After the deadline for obtaining relevant regulatory approvals, we will close the transaction. As for new resources, we expect in May the inflow of $133 million from the fourth tranche of the DIP, which will give us the liquidity in the short term to begin payment of creditors until new funds are raised for the company, totaling something around $650 million or $655 million. $655 million is probably more approximate.
On the regulatory front, Slide 6, following the process of an agreed solution for the existing points between Anatel and Oi, arising from the STFC concession contracts and the arbitration procedure, Anatel's board approved unanimously the out-of-court dispute resolution agreement presented by the Consensual Solution Committee in the Federal Accounting Court. The term approved by Anatel's board brings an important variety of conditions, investments, commitments to maintain essential services, connection of schools, among others. Something that is relevant to our interest, it authorizes the immediate migration to the authorization model. This is fair and expected by the company, as I said in our previous conference call. We will no longer be a concession, and this will enable us to demobilize activities associated to legacy. As a consequence, this will bring significant cost reductions for us.
We still have a governance right that has to be respected to validate the terms of the agreement by the parties. Then we expect that the accounting courts and the prosecutor's office give their opinion, and the company expects a definition of the accounting courts' board still in the first half of 2024. Obligations relating to Anatel penalties transaction will be addressed until the end of the arbitration, and investment commitments relating to the migration will be assumed in part, in significant part, by V.tal and reimbursed by Oi when the outcome of the arbitration is reached. In addition to the obligation to maintain the provision of services in regions covered exclusively by Oi, the company may undertake an additional investment commitment depending on residual balance from the arbitration in favor of Oi.
When the out-of-court dispute resolution agreement is signed, we will resume arbitration immediately, and we expect a partial decision in the short term. I now give the floor to our colleague Rogério Takayanagi, Director of Strategy and Transformation, who will talk about operations and revenue in the next Slides. Thank you, Mateus. Now moving to Slide 8 when we talk about the evolution of revenue. Core operations now account for 72% of our total revenue, highlighting the continued importance of fiber and ICT services in B2B in driving our growth trajectory and reducing dependence on legacy services that now represent just a fraction of our revenues. Consolidated net revenue fell 12.9% when compared to the first quarter of 2023, and this result, as Mateus mentioned, was impacted by non-core services, which followed the trend of accelerated reduction, especially in the non-copper-based technologies.
Core revenues also show a drop of 6.8% year-on-year. This decline can be attributed to two main factors. In B2B, the decline is associated with the evolution of traditional telecom services combined with a more selective commercial approach based on profitability in competitive processes we participated in B2B contract renewals. On the fiber side, growth stabilized due to the greater focus on the quality of the incoming customer base and repositioning of sales channels. As of March, we already see a resumption of growth in fiber. On the next Slide, Slide 9, we have the results and some important developments regarding Oi Fibra in the first quarter of 2024. Here we highlight the maintenance of revenue performance, which was practically in line in the year-on-year comparison, supported by a robust base of customers with more than 4 million connected homes.
As we mentioned previously, throughout 2023, the still challenging macroeconomic scenario led to a reduction in that industry growth and intensification of competition. Over the past year, we reduced commercial intensity, reviewed processes, launched a new portfolio at the end of the year, and focused on managing the customer base in line with the market dynamics. One impact of this movement was on the ARPU, which showed a reduction of 1.7% compared to the same period of last year. In this context, the company's focus on quality, repositioning channels, and strengthening of the brand were the main support to ensure the stabilization of revenue and resumption of Oi Fibra's growth in the first quarter of 2024. On the right side of the Slide, we show important data that highlighted this movement.
During this period, the total number of connected homes showed growth in net additions, with another 16,000 new customers added to the base after two consecutive quarters with reductions. This evolution was driven mainly by sales from digital channels, with an annual growth of 25%, and that accounts already for 35% of that. We were also the official sponsors of Big Brother Brazil 2024 program, and this action wanted to increase the reach of Oi Fibra and also improving our reputation. Due to the focus on quality, churn also improved in March 2024. We emphasized our continued commitment to providing a superior quality service to our customers. Oi stood out again as one of the main fiber companies in the country, leading in 296 cities that offered the fastest broadband service in 14 states, according to Anatel data from March.
In the 2023 satisfaction and perceived quality survey carried out by Anatel, Oi achieved high levels of satisfaction being the best-rated broadband operator among national operators. Finally, as I've already mentioned in the release of the fourth quarter results of 2023, our growth will continue to focus on areas with existing coverage, employing a multifaceted strategy that encompasses local and digital channels. We are also adapting our approach to regional dynamics, adapting price, channels, and marketing strategies to align with the specific local requirements and preferences. Moving to Slide 10, I would like to highlight Oi Soluções' performance. The revenues of Oi Soluções were impacted this quarter by the evolution of traditional services, which showed an accelerated decline due to the maturity of these services.
In addition to the adoption of a selective commercial approach during the negotiations and renewal of contracts, we keep focusing on seeking healthy margins for the company. Oi Soluções' total revenues fell by 18% year-on-year. The telecom line had a 19% reduction, while the others' line, which concentrates services based on copper technologies, had a 33% drop. ICT revenues correspond to about 30% of Oi Soluções' revenue in the first quarter of 2024, a 3 percentage point increase compared to the fourth quarter of last year. As you can see on the right side of the Slide, some ICT verticals had a significant growth. SaaS revenue increased impressive 69%, while the cloud revenue saw solid 42% year-over-year. We will continue to focus on capturing growth opportunities in these areas with more potential.
Now I'll turn over to Cristiane Barreto, our CFO, to present Slides on our cost structure and financial performance.
Thank you. On Slide 11, I would like to highlight that this quarter, the implementation of efficiency initiatives resulted in reductions in all direct costs items. On the left-hand side, routine operating expenses totaled about BRL 2.4 billion, in line with the previous quarter and with a growth of 3% compared to the same period of last year, due to variable lease expenses, mainly. Excluding rent and insurance costs, which reflect the dynamics of the current fiber model, based on the rental of V.tal's FTTH infrastructure, our routine costs and expenses had a reduction of 10.5% year-over-year. On the right-hand side, personal expenses had a significant drop of 12.8% to BRL 436 million. This reduction is mainly due to continuous efforts in structure optimization, leading to a reduction of 4,300 employees, or 19.4% compared to the previous year.
Third-party services presented a reduction of 15.6% year-on-year, showing significant savings in the acquisition of content and energy costs, due to the renegotiation of contracts of 20% in energy costs. Also, important reductions in other lines, such as general expenses, resulting in a major effort to renegotiate contracts and to capture additional benefits for the company. Finally, we achieved great results in Q1 in the network maintenance line, with a reduction of 66% compared to the previous year. This is a consequence of efficiencies from new initiatives to manage the legacy operation in line with current regulatory forecasts. In Slide 12, I will detail the opportunity we have in the legacy cost reduction plan. This program was initiated two years ago, and starting this year, with now the migration of the concession to the authorization models, we've intensified all efforts to capture these benefits.
These efficiencies will be captured as we migrate legacy clients into other technologies, and we switch off legacy structures that are not being used always according to legislation. Implementation will be done in sprints, prioritizing actions with greatest potential for cost reduction. Main lines impacted are telecom infrastructure, network maintenance, electricity, customer relations, and G&A. These items represent an annualized OpEx of around $3 billion Reais, with more than two-thirds of this cost made up of legacy expenses. For each of these costs, we will have specific actions with opportunities to reduce costs through this regime migration, improving Oi's cash consumption profile and EBITDA margin. On Slide 13, routine EBITDA continued to be penalized by the loss of legacy services, especially those linked to copper, which rely on maintaining expenses to comply with regulatory requirements.
There are also opportunities to improve margins through initiatives to reduce costs, most of them connected to the potential of savings in the legacy as we move into the authorization model, as we said previously. On the right-hand side, CAPEX in the first quarter totaled BRL 139 million, representing 6.4% of revenue, the lowest ever recorded by the company. Significant annual reductions of 36% and sequential reductions of 25% were leveraged by the gradual capture of efficiency, both in legacy services and in core operations through efficient allocation of resources with a focus on profitability. This level of CAPEX represents the company's new level, aligned with Oi's transition to a business model with low CAPEX needs. It reflects a discipline and strategic allocation of CAPEX aimed at promoting sustainable growth with opportunities for future efficiency.
Now moving to Slide 14, we focus on our cash position in the first quarter of 2024, which closed at $2.1 billion Reais at the end of the period, practically stable in relation to the previous quarter, benefiting from the entry of the third tranche of the DIP despite the operational consumption already expected for the period. Furthermore, there was generation of working capital due to a longer supplier payment term in the context of the reorganization plan negotiations. On Slide 15, we see that the gross debt of Oi reached $27.4 billion in the first quarter of 2024, impacted by the impacts of interest rate and exchange rate variations during the quarter. The company's debt profile will be completely changed with the approval of the plan approved at the General Meeting of Creditors on April 19th.
On the right side of this Slide, we list the new characteristics of the debt, achieving the objectives of ascending maturities, reducing interest, renewing debt, and obtaining new financing to provide liquidity to Oi. Through discounts, we will get capitalization of credits of option one and also issuance of participatory debt. And for option two, we will have longer terms and lower interest rates. Now I will turn over back to Matthias for his final remarks. Thank you. In conclusion, I'd just like to reinforce that we have made substantial progress on critical fronts with some important steps planned throughout this year and for the reorganization of the company. In the operation, we resumed growth of fiber-connected homes from March onwards, with improvements in gross additions and also churn. It's important to remind that we are balancing that with better control of our channels.
So we had a 25% growth in digital channels, for example. In the midterm, this will probably lead to more sustainable results. We will keep on focusing on the profitable growth of our operations and on Oi Soluções as well to accelerate the sales of ICT solutions. So it will be growth based on the migration of traditional telecom services to ICT solutions, also improving our coverage through our hub of partners and also mitigating the drop on core services. In terms of efficiency, we hope that throughout the year, we will capture significant savings with the legacy systems during the year because of the accelerated cost reduction we've had, especially after the approval of the agreement with Anatel.
On the regulatory front, after the approval of the out-of-court dispute resolution agreement by Anatel's board of directors, we expect that the next step will be the ratification of the terms of the agreement with the Federal Accounting Court, which will allow us to resume the arbitration procedure and to carry out the migration to the authorization model. Regarding this reorganization, the next expected steps in the short term are the receipt of the fourth tranche of the DIP and the approval of the reorganization plan in May, hopefully. We begin to direct all efforts to implement a reorganization plan with a capital increase for credit capitalization and the sale of UPI ClientCo as our main objectives for the upcoming month. Thank you very much, and now we can open for questions.
We will now begin the Q&A session. If you want to enter the queue and ask a question, please click on the Q&A icon at the bottom of the Zoom screen and type your name and the name of your company. After your name is announced, a prompt to activate your microphone will show on your screen, and you must activate your microphone to ask your question. If you prefer, you can also write down your questions in the Q&A box. We would like to remind you that if you want to enter the queue to ask a question, you should click on the Q&A icon at the bottom of the screen and type the name of your company and your name as well. After your name is announced, a prompt to activate your microphone will appear on the screen, and you must activate it to ask your question.
If you prefer, you can also write down your question in the Q&A box. I am going to hand over to Mr. Luis Plaster, IR Director, to answer the questions. Mr. Luis, you may proceed.
Thank you.
We have received some questions in writing. The first one is from Leonardo UBS. He asks if we can talk about the dynamic of net additions. He sees an important recovery in Q1 2024. What is this due to? What are the regions we believe that have more growth potential for 2024? And he would like us to talk about the pricing strategy for fiber for 2024. Yes, thank you, Leonardo, for your question. Actually, several questions in one. Well, as for regions, Oi is very strong. As we said, in 296, we lead in most of these cities, and we want to continue with this strategy. As we mentioned, we do not plan to expand into new cities. We want to increase our penetration in the households where we already have services available. That's already more than 20 million households.
From a results perspective, what we have today, the positive results for Q1, as we said, is due to not just an acceleration in sales, also our sponsoring of the Big Brother Show helped. But in processes, the quality of sales and the reduction in turn has also helped us to improve. Looking forward, the expectation is that this continues the same, the strategy still consistent, but of course, it will evolve. The focus is to ensure balance between growth and ongoing improvement of sales channels so that we have higher quality, and this is going to be very helpful for us in the long term. As for pricing, the idea is to keep a level of rationality, looking for profitability, a competitive portfolio that is according to the market, but always looking at regional dynamics. We adjust according to our needs. Thank you, Taka.
We also have a question about B2B, Oi Soluções. Leonardo says that Oi Soluções has these operations after ClientCo was sold, and we saw an annual decrease in revenues. Looking at ICT, what is the perspective? What is the strategy for this specific business for the next years? Yes, regarding Oi Soluções, we have defined our strategy some years ago. It's an important transformation strategy for a connectivity provider into a solutions provider. So this decrease is connected to connectivity, so telecom services and those connected to copper legacy. So this movement will continue, the contraction. But looking forward, the strategy is to transform, replacing this revenue coming from connectivity by an ICT revenue. We want to be a solutions provider, and we want to increase this portfolio.
As we provide new services, most of all those connected to ICT, we will replace this connectivity revenue by other, more sustainable revenue streams that demand less investments and therefore lead to greater profitability. Thank you. We have another question from Leonardo. What about the debt? The debt for this quarter has increased. Can we maybe discuss the expected impacts of renegotiation and also of the reorganization plan? How will that impact future debt levels? Yes, thank you for your question. Yes, there was a growth of $2 billion in debt. That has to do with interest rates, FX exchanges, and the DIP. So this was expected. We are not paying interest rates for the debt until negotiation is concluded. We expect to reduce by about 70% the debt. And with this volume and also generating more cash, we want to balance Oi's future.
That is the answer for this question. Thank you. We also have here on the platform a question from João Martin Barros and also from Guilherme da Lua. They ask whether Oi plans to monetize its share at V.tal, so divesting all shares that they have in that company, or do they expect to keep its shareholding position? Thank you for your question, João. In the feasibility study that was performed together with the reorganization plan, we plan to fully monetize our participation in V.tal. Of course, we are going to assess the best option to do to maximize the return of our participation, whether fully or partially. Thank you. Thank you, Matthias. I'm also checking to see if we have more questions. Here is a question by Juan de Oliveira Vasconcelos.
So he asks, are there negotiations underway to sell reversible assets, assets that will be returned to the state? And what about the Oi's participation in other businesses being negotiated? Thank you for your question. Regarding those assets that are to be returned to the state, we have nothing like that underway because we need to wait for the approval of the agreement. So we are not studying the sales of these assets at this point. As for the other business, the divestitures are relevant, are already part of our reorganization plan. Thank you, Matthias. We have a question about a topic that is not related to the earnings calls topics, but something that is going to be addressed at the assembly meeting of the company. The question is, what are the justifications for the overall remuneration budget that is being saved for 2024?
The one that is being going to be assessed and voted tomorrow at our assembly meeting. This is a question made by Yuri dos Anjos. Thank you, Yuri. You give us the opportunity to talk about this topic. It's a very controversial topic, we know. But this is something to be discussed at the assembly of shareholders, which is the forum to decide that. The overall remuneration budget relates to fixed remuneration, variable remuneration of the board, and also the severance payments that are not related to the leadership payments. Historically speaking, in the past years, Oi has always presented, as usual, as part of the administration proposal, the budget that is at the limit for the payment of bonus. Those are, for example, target-related. In the past years, the company has not paid those amounts at the levels that have been authorized.
Since 2021, we have executed payments way below the levels or the total budget approved at the assembly's meeting. But of course, we need to present the maximum budget, and that is going to be decided during the shareholders' meeting. In the past three years, we have not paid as much. Of course, this involves fixed payments and also variable payments to pay the leaders that are involved in the reorganization plan. But again, shareholders are the ones who decide on this topic, and this is not a matter for our earnings call. Thank you for your question. I'm just going to check whether we have any additional questions here on the platform. We have another question from Osvaldo Espolador Filho.
So when we get to the authorization regime with the proper governance, of course, after its approval, what will be the plan related to the copper-based services all over Brazil, which is widespread? This plan has not been approved yet. But once it is approved and once we are able to migrate to an authorization regime, the impact of Oi's commitment is to ensure the continuity of services at the sites where there are no alternatives to those services, to make sure that we are not going to have any lack of services there. So we have enough technology to ensure continuity of services, aiming at the maximum efficiency in terms of investments, but we will keep providing services to a wide range of sites and cities, considering this condition when there are no other viable alternatives there. Thank you very much, Taka.
Let me just check here if we have any additional questions on the platform. I have a question from Ozias. He says, with the proposal of regrouping 10 to 1, is there the intention of capitalizing funds to pay debt in the future through new shares? Thank you for your question. Yes, part of the credits that opted for option 1, this is subject to regulatory approval, and it will take place after the grouping, which will take place in the assembly that will be held tomorrow on May 10th. Thank you, Chris. One second, we're going to check the platform for more questions. Eu olhei aqui as perguntas. Já não temos mais perguntas. Acho que endereçamos todas as perguntas. There are no additional questions. We have addressed all the questions for this call, and I'll give the floor back to Matthias for his final remarks.
Once again, thank you all very much for joining in this conference call. I hope to see you the next time around with our new results and the next steps for our plan that will take place throughout May and June. Thank you very much. Thank you. Oi's Q124 earnings conference call is now closed. For more information, please visit the company's IR website, www.oi.com.br/ri. You may all disconnect now. Thank you.