Good morning, ladies and gentlemen. Welcome to TIM S.A. 2021 third quarter results conference call. We would like to inform you that this event is being recorded and now participants will be in listen-only mode during the company's presentation. There will be a replay for this call on the company's website. After TIM S.A. remarks are completed, there will be a question and answer session for participants. At that time, further instructions will be given. We highlight that the statements that may be made regarding the prospects, projections, and goals of TIM S.A. constitute the beliefs and assumptions of the company's Board of Executive Officers. Future considerations are not performance warranties. They involve risks, uncertainties, and assumptions as they refer to future events that may or may not occur. Investors should understand the internal and external factors that TIM S.A.
May affect their performance and lead to different results than those planned. Should any participant need assistance during this call, please press star zero to reach the operator. Now, I'll turn the conference over to the CEO, Mr. Pietro Labriola, so he can present the main message for the third quarter of 2021. Please Mr. Pietro, you may proceed.
Good morning, everyone. Thank you for attending our results conference call. First of all, I'd like to give a warm welcome to Camille Faria, our new CFO. In August, she joined our team and is already getting her hands dirty to help us in multiple projects that either we are preparing to start or have already started and need to finish. I wish Camille all the luck and success because we have a lot to do. It is great to have her on board. Without delays, let's move to the results. In the third quarter, we consolidated our recovery with consistent numbers. It is true that despite a much better pandemic situation after a step up in vaccination, macro has been more challenging, but we have no reasons to complain.
This past quarter was solid, and in the fourth we will maintain the pace, which put us in a condition to reach our targets for 2021. Also, key events such as spectrum auction and Oi deal approval should take place until December, paving the way to a great 2022. In a nutshell, our high level execution led us to post healthy figures in the third quarter. Service revenue grew more than 4% year-over-year, driven by mobile ARPU, which also expanded over 4%. On the fixed broadband front, we have just launched the best high speed offer in Brazil to accelerate further our business. EBITDA was up 4.5%, and we are now at 21 quarters of positive yearly growth.
With some BRL 85 million in customer platform revenues, which left us very well positioned to reach our annual target for this line. This quarter was also marked by a remarkable achievement in the ESG arena. I'm proud to say that we are the first Brazilian company to be included in the Refinitiv Diversity and Inclusion Index, and we are the number one telecom in the world in this ranking. Detailing our revenue dynamics, we saw positive contribution coming from mobile and fixed services with all major lines improving. We also deliver a sequential expansion versus the second quarter, showing the consistency of our operations. Mobile service revenue grew 4.1% year-over-year. In parallel, fixed services also posted a solid evolution up by 5.5%, with TIM Live driving the trend, but temporarily at a slower pace as we expecting and mentioned during our last call.
Our nine-month numbers are rock solid, both in mobile and fixed services. That is why total net service revenue is growing more than 5% year-over-year. Those results, once again, show that our choice to focus on a value strategy is paying off. We are outperforming our peers in the ARPU dynamics. Until September, our ARPU grew high single digit, while the rest of the market fell mid-single digit. It clearly demonstrates our ability to produce additional revenues more rationally and efficiently. The main drivers behind the volume to value strategy remain a differentiated offer and the upselling proposition with migration to higher plans and improving the loyalty from clients. To add a new level, we've been working to improve the quality and value of our sales with broader and qualified distribution channels. The differentiation aspect of our offer is an ongoing effort.
We have been adding multiple differentiation layers in each segment. To keep ahead of the competition and sustain our leadership. In post-paid, we evolved from the entertainment tab to a one-stop shop content and service marketplace. In control, we are focusing on the benefits of our customer platform partnership to enable our clients to have new experiences. In the prepaid, we have been targeting convenience and loyalty since the launch of the TIM Pré TOP family. I just mentioned the importance of our customer platform partnership to well differentiate our offers. Since this part of our strategy is gaining more and more traction, it is worth remembering how we play this game of client-based monetization to generate new revenue streams and equity diversification. First, I need to remark that we have two business models of partnerships under this framework.
In the commercial ones, we have a more traditional approach where we are remunerated monetarily per video views and clicks for advertising campaign and data intelligence services. Any company seeking brand lift and consideration increase, lead generation, and app installs is a target for us. On the other side, the strategic partnerships are built under a more symbiotic relationship, and our targets are scale-ups seeking exponential growth. TIM is remunerated by CSC fees and equity stakes in return for our endorsement for giving access to our customer base and commercial capillarity, for being bundled with our core offer portfolio, and for data intelligence. Both models leverage TIM Insights and TIM Ads platforms to target the suitable clusters inside our base and impact them through channels within their journey as a client of TIM.
Under this framework, we listed some verticals as having great opportunities for being more directly connected to mobile phone services and having a higher evaluation than the telco companies. We are already operating in some of them, so we have clear results to show. As mentioned before, we sum BRL 83 million in revenues in the first nine months of the year. Mobile advertising is contributing with BRL 26 million, while financial and education services are adding BRL 57 million. We earn subscription bonuses equivalent to an equity stake of close to 4% in C6 Bank, following a record number of opened accounts. In less than two years, over 5 million clients accepted an offer from our partners via TIM channels, and we multiplied by 10 our app installs results between September and January. We continue working to grow this ecosystem of partners similarly to a private equity firm.
We are developing multiple fronts. For example, discussions with local content providers have accelerated, and this partnership is coming ahead of others taking longer to materialize. We are at the final phase to choose a partner for e-health initiatives with seven solid proposals on the table. Digital wallet and marketplace discussions are taking longer than expected, and we are refining our approach considering new market dynamics. Lastly, we continue to work on IoT verticals with large contract being negotiated. To complete our revenue drivers discussion, let's move to fixed services, specifically TIM Live operation. The highlights of this quarter are the completion of the FiberCop deal and the major launch of the best FTTH offer in the country. FiberCop closing is expected in mid-November. Under this deal, we'll receive BRL 1.1 billion in secondary, with the vehicle receiving BRL 600 million as primary.
TIM will remain with 49% of the capital. Remembering that the rationale for the deal was to accelerate the fiber rollout, we expect to do some catch up in new cities coverage. We are launching the 1 giga offer as we promised. Some of you may think there are already 1 giga offers in the market. Well, I must tell you, this is not the same things, and I'll explain why. We have the best download and upload speeds combination, 1 giga for downloading and 500 megas for uploading. The offer will be available in all cities we cover, meaning high-end markets that do not have access to this type of speed. We have an exclusive set of content embedded in the offer, such as Netflix, Paramount+, Deezer, and BandNews and BandSports. To complete, we are setting the offer price at an accessible level.
This is not an offer to just position TIM Live as having the highest speed. The goal is to give people access to the next level of experience in broadband. Meanwhile, we maintain a decent performance in TIM Live, even if the expected deceleration was confirmed. The fourth quarter is already showing signs of re-acceleration. Moving to infrastructure, we saw our 4G coverage leadership be reaffirmed with the sound expansion of 25 more cities. 4.5G coverage grew at the same rate. We continue working on the preparation of our network to receive the Oi customers. Massive MIMO and site modernization keep accelerating for this purpose. On the IT front, we completed another step of our journey to cloud transformation. Our CRM system was transferred entirely to the cloud, producing a 50% reduction in attendance time.
Another key accomplishment for team was the result of the trials with 5G standalone in Rio and São Paulo. We were the first ones to test the technology in the two most important cities of the country. We were capable of reaching very high speeds with low latency levels, but more importantly, we proved the technical feasibility of combining Release 16 with carrier aggregation to expand coverage by more than 69%. Talking about 5G, we are very close to the spectrum auction. It is scheduled to occur in the next week on 4 November . We've been saying since the beginning of the auction discussion, the choices made by Brazil on how to approach 5G were unique and wise. The focus on investments and network rollout will benefit the entire industry, but most importantly, the end user.
TIM is ready to participate in the auction and optimistic about the outcome. Leaving infrastructure discussions and moving forward to our OpEx and EBITDA trends. This quarter, we have a more comparable base for our costs and expenses. Our dynamics are way below inflation despite spikes in different indices. We saw a small yearly expansion of our OpEx of 1%-3% in the third quarter and below 6% year- to- date. As explained last quarter, the latter was mainly a consequence of the OpEx performance in the second quarter of 2020. If we compare to the first nine months of 2019, our year-to-date OpEx was flat. TIM continued to execute well on cost control, digitalization projects and bad debt handling while improving energy cost management further.
This, together with a solid revenue contribution, drove EBITDA to grow 4.5% in the third quarter with a margin expansion to reach 48%. Net income rose solidly more than 20% and CapEx was up 5.5%. In this context, operating free cash flow for the first nine months of the year grew more than 40%, surpassing BRL 3.6 billion, which drove our net debt down almost 30% and a cash position of BRL 7.4 billion. We have been preparing for the upcoming events of this year ends and 2022. Considering our free cash flow is performing better than expected, we should be able to sustain the level of remuneration to shareholders, even if we expect large disbursements in the next 12 months.
Closing my comments, I want to remark on the solid execution the team is delivering with robust results amid a lagging economic recovery. Our pace will continue in the fourth quarter, so we are very confident we will meet the guidance given to the market. Until September, we posted more than 5% expansion for service revenue and EBITDA. Customer platform is just BRL 17 million away from the BRL 100 million target. EBITDA minus CapEx over revenues stood at 24%. Finally, net income grew more than 70% year-over-year. By the end of 2021, we should have the FiberCop deal closed, the 5G auction completed, and we hope the Oi deal approved. We expect to enter 2022 with less uncertainties and ready for the sector transformations.
There is still room for more than another customer platform contract to be signed before the year end. Stay tuned. Thank you. We will now open the floor for questions. Please, operator.
Thank you, Mr. Pietro. Now we'll begin the Q&A section. First, we'll take questions from analysts, followed by the general public, both in English. If you are listening through webcast, your questions can be sent by chat. We ask each participant to restrict himself to two questions at a time. To ask a question, please press star one and re-star one, and to remove the question from the list, press star two. The first question comes from Mr. Bernardo Guttmann from XP.
Hi. Good morning, everyone. Thanks for taking my question. Actually, I have a few questions related to TIM Live. I would like to address the soft numbers this quarter. I wonder if you are facing greater pressure from competition, and if so, in which areas, any specific region? The last question in relation to the FiberCop deal, what are the next steps for closing the transaction? Thanks.
Thank you, Bernardo. Let's start from answering the second question, the good news. I leave the stage to Mario to put some more details, but what is missing is the approval by Anatel of the deal that if I'm not wrong, Mario communicated us that it happened yesterday night. If it is confirmed, Mario will give you live this news. We will have the closing by the 9th of November. On track with what we told. Mario, I don't know if you want to.
No.
Give some more comment.
It's correct. Yesterday was approved, and today we had the formal certification of the approval.
Bernardo, let's come back to the first question that is, let me say, a little more complex. First of all, I would like to highlight as we are always transparent with the market. If you remember, in the second quarter call, results call, I already explained to everybody that our expectation for the first quarter should be less positive than the previous one. It happened exactly what we were thinking, because if you manage a company, you should not discover things live, but you know, and you plan and understand the results. First of all, this quarter, as I mentioned in the second quarter, it's weaker than the previous one, but we are already seeing that the fourth quarter will show sign of improvement.
We'll be back close to a double digit, and we expect then the next year to further re-accelerate with a stronger double digit growth. The reason why was that our FTTC area suffered the most compared to other areas. We are accelerating also all the activity for what we call the brownfield activity, migration from FTTC to FTTH, to allow us to stay in a more comfortable situation in terms of competition. What is important to remember that is exactly what we mentioned since the second quarter, there's no surprise for anyone because we exactly told weaker third quarter, better fourth quarter and better 2022. Exactly as we mentioned in the last call, we were able to launch the first 1 giga offer.
Again, as I told during the speech, someone can say that this is not the real first offer to 1 giga. Let me say, it's the first real 1 giga offer with 500 Mbps of upload. Also on the fiber, everything is proceeding. The closing will happen the 9th of November. We show to the market that what we say, we deliver. On the operations, we are already back to recover from what's happened in the third quarter.
Very clear, Pietro and Mario. Thanks.
The next question comes from Mr. Diego Aragão from Goldman Sachs.
Yes, good morning. Thank you for taking my question. The first question is regarding the CapEx. Pietro, you mentioned that you have been making investments in order to prepare, you know, TIM network to receive the mobile business. Can you just help to understand what exactly are those investments and how much you have invested so far? The second question is regarding the tax credit recognized in the quarter. Can you just comment quickly on what exactly this is about and whether you expect more of these credits to come. Thank you.
Let's start again with the good news. I leave the stage to Camille to explain the good news related to the tax. Please, Camille.
Hi, Diego. Just to explain a little bit on the tax credit, there's been a positive outcome on a leading case to exclude taxation over interest on successful judicial tax disputes. It was actually not our case that got already judged. In our case, when our dispute is finalized, it will generate roughly BRL 535 million of recoverable tax credits. We have booked that already in our balance sheet. We expect to be able to start using those credits, probably within a year. It's a short-term positive effect.
Thank you, Camille.
I leave Leo to give some more details, but what I would like to highlight that the 24% CapEx on revenue, it's twenty-four because we put, as we declared in the plan, part of CapEx, if I'm not wrong, BRL 300 million-BRL 400 million were related to the preparation of the Oi deal. You can also try to do a pro forma, what could be our real CapEx if we shouldn't have spent this money to prepare. Last but not least, keep in mind, and I want to stress that, we are posting all this number in terms of EBITDA and CapEx. Absorbing all the difference that are related to the macro situation. Exchange currency rate, we were able to absorb an impact that was between BRL 50 million and BRL 70 million of exchange currency rate impact.
About inflation, about the so-called bandeira vermelha for the Portuguese people, it's quite clear what it is. For the other one, it's the increase in price of energy. All in all, we were able to offset the cost increase for inflation, exchange currency rate, and all the other issues for something close to BRL 200 million in the year. It means that if we shouldn't have been this divergence from what were planned at the beginning of the year, our EBITDA level should be much higher. It shows our capacity to deliver and continue to manage efficiency in our company. Now I leave to Leo to explain what we are doing.
Good morning, Diego. In fact, what we did this year was to prepare the network to absorb the spectrum that we are receiving from Oi. We need to prepare the electronic parts, the radios, to support our spectrum and the Oi spectrum. We can highlight that the most part of the investment to prepare the network is already done this year. What is the factor? In the next year, when we have the deal closed, we will receive the spectrum, and with that, we will be ready to support the customer that are coming from Oi. The second part of the investment will be rearrange the tower, let's say, field goal, because we need, in the second part, to switch off some towers in Oi and to absorb other towers in our network.
Again, the most part of the investment is done this year. It is good because, in fact, we are absorbing that, as Pietro mentioned, in our recurring CapEx. We do not expect a peak for the next year to finish the Oi integration.
can complement the question of Leo. We invest part of the money in the so-called Massive MIMO technology. We were the first player in Brazil to use this technology. This technology allow us to have a better level of efficiency on the frequencies. Why we do that? Because we will have to migrate the customer base of Oi before on our frequencies. Then once they will be migrated, the customer of Oi, I mean, on the TIM network, on the Claro network, on the Vivo network, we will have the chance to get the frequencies of Oi and add on our frequencies. These activity were something that we needed to be able to host the Oi customer base on our network. This is the reason for which we did that in advance.
That's clear. Thank you, Pietro and Leo. Maybe just a quick follow-up and to Leo. Any concerns with this shortage of semiconductors, Leo, that have been, I don't know, maybe affecting the negotiations with the vendors? I just want to hear from you, if you are seeing any impact, at this point for you and for your CapEx plan. Thank you.
No, Diego. Until now, we didn't have any kind of a constraint about that and any delay in terms of delivery. We are not suffering that because we planned that before. We filled the suppliers, so they are delivering what they promised. What we can see is that probably in 2022, for the 5G maybe, but not just for the semiconductor crisis, but for the demand, will require us to be more assertive on this planning. Again, we have the plan for the two years. We are, let's say, making all the forecasting with the vendors, and they are delivering as promised.
Diego, sometimes we have experienced some delay in the delivery on the handset, but this is market-wise, so there's no specific issue, and it was specific in some period of time. This is something that is not impacting our strategy.
That's clear. Thank you, Pietro. Thank you, Leo.
The next question comes from Mr. Marcelo Santos from JP Morgan.
Good morning. Thanks for taking my questions. I have two. The first one would be a follow-up of Bernardo's question on TIM Live. I was reading the notes from the second quarter, and indeed, you made it very clear that there was going to be a deceleration. You also commented that you expected revenue growth to re-accelerate towards 20% year-over-year in the first quarter of 2022, the beginning of 2022. Do you still think that 20% or close to 20% is credible? Or are you now a little bit more cautious? Just wanted some clarification on these previous comments.
The second question is about if you could make a general comment on the mobile competitive environment, how things are trending and in the three segments, post-paid, pre-paid, and control. Thank you.
Sorry, can you repeat the second question because I was unable to catch it?
Sorry. The second question is regarding the mobile competitive environment. If you could make a comment how the main segments, pre-paid, post-paid, and control are evolving.
Yeah. Let's start from the first question. For the next year, I told that we are going to re-accelerate, and we will be able to post a double-digit growth in the next year. We are now seeing if we'll be closer to the 20%, but for sure it will be double-digit. Perhaps could be closer to 15%, but let's see what is happening and which is the speed, the exit speed for the fourth quarter. In any case, as I told, we are going to re-accelerate and we'll be for sure above double-digit growth. About the competitive scenario, what is happening on the market? I think that I'll try to put also an answer to different question that you received.
Thanks to God, in some way, the three players in the market are playing different strategy. There's some that is more on volume or on integration, that someone that is much more on quality and premium. There's team that is working much more on innovation. I think to avoid any kind of misunderstanding that the market is still rational because each of us has a specific positioning. You can understand we are the innovator. I think that in this period, Claro is suffering something more because the integrated offer, fixed and mobile, is starting to find some more difficulties to proceed, also because they are losing much more on the ultra broadband, and so this is something that also the other are leveraging. Vivo, if I'm not wrong, did in the third quarter, a price up, that is a sign of rationality on the market.
This is mainly control and postpaid. What is happening is that, and this is important also to explain how we think that we can sustain the output growth in the next quarter, is that when you see postpaid and control, the amount of giga that we put in each of the two offer are different. Once the customer want and need a higher volume of giga or if they want a higher level of quality of service, they have to migrate from control to postpaid. This is exactly what we are doing in this period, that is allowing us to sustain the output growth. This is control and postpaid. As the prepaid in the past was the so-called, let me say, swimming pool, where we were fishing customer to migrate to control.
Now, the control is becoming the swimming pool where we are fishing to move customers from control to postpaid with a higher level of output. All in all, the market stays rational. Our strategy is different from the others, and the results are demonstrating that we are able to continue to deliver output growth. When we move to the prepaid, also the prepaid is still rational. Our performance is different from the others because what is happening is that we always declare that our prepaid customer base is much more sensitive to the macro. If you remember, we were the player that paid the most, the COVID situation in the second quarter of the last year, and we were the player that gained the most in the third quarter.
The comparison year-over-year in the third quarter shows us and puts us in a negative area. When we see quarter-over-quarter, we continue to grow. About the movement of the different players, Vivo did an increase in the face value from BRL 10-BRL 12. I think that also in the postpaid, oh, sorry, also in the prepaid, we are seeing signs of rationality. The market's rational. That doesn't mean that we are not competing. All of us have different strategy. Last but not least, I can anticipate also again some other question. I always repeat that we have to evaluate the team not just on one line on KPI, but on the overall result and performance.
Because we are posting revenue increase, we are continuing to post EBITDA increase, and we are continuing to keep a pace of EBITDA of 14%. It's quite difficult to find in the market a player so complete as TIM, putting all the KPI. Perhaps sometimes you are not the best on one of these KPI, but at the end of the day, you asked us to deliver continuous revenue growth, to continue to be efficient, to continue to put a level of EBITDA, and to continue to keep under control our CapEx expenditure. Last but not least, we are continuing to generate cash.
Perfect. Thank you very much.
The next question comes from Mr. Carlos Sequeira from BTG Pactual.
Hi, good morning, everybody. Thank you very much for taking my questions. Hi, Pietro, Griselli and team, Camille. My first question is on the fiber strategy, and I was just wondering here if it would make sense for TIM to explore other alternatives to accelerate growth in the fiber business. Maybe, I don't know, maybe looking into M&A opportunities involving the hundreds of ISPs that are operating in the market or maybe reaching a deal with Oi's InfraCo. Well, no longer Oi's, but with InfraCo, which is already covering millions of homes in the country. I was just wondering if you are considering exploring other alternatives to grow faster in the, you know, and take advantage of what's happening on fiber. That's the first question, please. Thank you.
Carlos. Thank you. Yes, I'm direct with the answer. As I told every time, I think that we are the player in the market with much more optionalities compared to the other. Carlos, can you switch off the microphone because we are hearing you while you are typing on the keyboard? Great. As I was mentioning also in the other call, we are the player with the highest number of optionalities. This is a market that will change in the next three, five years several times. To have the opportunity to have optionality to change and move our strategy is very important. For example, for the question that you asked, we can sign an agreement also with other player to use other InfraCo to increase and speed up our strategy to cover Brazil.
This is something that could be much more difficult for other player. I can sign agreement with V.tal. I could sign agreement with the InfraCo of Vivo. I could buy some infrastructure, or better rent some infrastructure from some ISP. What I can assure you that is not in our mind to buy any small ISP or big ISP. Also because as explained several times, their business model today is a business model that is sustainable because they exploit a fiscal advantage that we couldn't exploit. This is the main issue. Again, you know, sometimes you can have a discount or someone do not use ICMS and use just other taxes. They have a competitive advantage in terms of price of something close to 15%. That is something that the market will evaluate in the following years.
Again, we are open to discuss with other players to use other infrastructure, but we can assure that we are not interested to buy customer base or small ISP.
Oh, perfect, Pietro. Very clear. If I may, on a different subject, you know, we are all waiting for CADE's approval of the Oi transaction, the transaction involving Oi Móvel's mobile assets. There is a deadline, well, in theory, a deadline on November 18 for CADE to announce a decision. So my question is, would you expect them to do that and announce a decision by this first deadline, which is November 18? Or do you think they might ask for extra time and, you know, extend the time to 330 days, which would push the decision into 2022. Do you have any view or any sense on what to expect from here? Thank you.
I think that, again, I want to start with the good news. I don't know how many of you had the chance to see that during a public hearing in the commission of the Brazilian parliament, Anatel clear-
Again. Okay, perfect. During a public hearing, a representative of Anatel clearly stated that from the Anatel point of view, the Oi deal has no issue, could be approved with more remedies on MVNO and roaming. This is the first good news about Anatel. About CADE, you know, I continue to be optimistic, but we are in a situation which I don't want to push too much an institution as CADE on the acceleration or not, because I think that they are doing their job. They are analyzing everything. I think that the Anatel position will help also to clarify the point of view of another institution. Again, I continue to be positive about the fact that we can have by, let me say, the end of this year, an approval.
I don't want to stress too much because we have to leave the institution to do their job and their analysis. My position continue to be positive.
Thank you so much.
The next question comes from Mr. Leonardo Olmos from UBS BB.
Hi, good morning, everyone. My question is regarding 5G incremental revenue. I know we discussed that quite a few times in the conference call, but just could you provide an update on developments on I don't know, B2B clients that have sought you regarding projects or specific industry verticals that are looking for to implement 5G? Have you got additional attention on that matter? Or overall, can you provide a call on 5G incremental revenue? Thank you.
Leonardo, I think that we were discussing now with Camille, after the auction, perhaps it could be useful if we show to all of you the result of the auction, the reason why, and the business case that is related to each of the frequencies that we hope to buy. For sure, after the 4th of November, after the adjudication of the auction, we will spend much more time to give you more details. As we mentioned, also in the previous call, we foresee 5G as a good opportunity for sure to optimize our network CapEx, because 5G technology is able to gather, carry on a higher volume of data. Being the data growth one of the lines of monetization, this is an important element.
If I'm not wrong, 5G, a 5G antenna is able to carry 5 x a 4G antenna in terms of data. About revenues, again, we will have two different line. The first one is related to the traditional B2C business, because with Alberto, we are seeing that as moving from 3G to 4G, we have an increase of data consumption. We imagine that moving from 4G to 5G, we'll have too an increase of data consumption. If our bundle are controlled in terms of gigs that we put inside, this will be an opportunity to upsell. We are doing all the calculation, but it's clear that we are waiting some more months to see which is this amount of data traffic growth.
When we move on the B2B, and then I leave to Alberto if he wants to put some more color on that, there are two areas that are car manufacturing and agrobusiness, where we are perceiving an interest of different players to work on that. About the agrobusiness, again, we are evaluating if at certain point it will not be the case to create a separate company to exploit the opportunity that will arise from the agrobusiness. Keep in mind that with Camille, in the new plan, we will evaluate to create some internal business unit ready to be spun off to unlock value in some area that could be of interest, interesting. One of these areas is IoT, Internet of Things, mainly on the agro. I leave to Alberto if you want to put some more color on that.
Yes, thank you, Pietro. Yes, on the B2C, the monetization of higher data consumption is our main focus, as Pietro described. We're gonna, you know, in our network the average consumption is around 5 giga per client, and every time we put more giga, we see customer using it in our more for more strategy. 5G is gonna be another lever for this to happen. For what concerns B2B, we are discussing with some clients, primarily in logistics at this stage, the use of 5G to provide benefits to their plants. We are running a few pilots in the automotive. Now, of course, everything is restricted because the frequencies are not available yet. We see interest primarily in manufacturing and logistics.
For us, our objective is to win customers. We are doing the main verticals in 4G, because 4G already provide a lot of digitalization opportunity for our corporate customer processes, and to be therefore well-positioned when 5G mature to increase the benefits for our customers. At this point in time, its primary focus is 4G coverage for these customers, and with some of them we are discussing 5G pilots.
So yeah, we expect to give you some numbers, but I think that the answer of Alberto is quite clear. We want to increase our penetration on the corporate segment in IoT on 4G, because it will allow us to do upselling with 5G.
Quite clear indeed. Okay, thank you very much. Have a good day, everyone.
You too.
The next question comes from Mr. Fred Mendes from BofA.
Hello everyone. Good morning. I have two questions here as well. The first one, you already mentioned a little bit about the ARPU increase. But just to, you know, wondering, and I know ARPU is not a perfect metric to make this comparison, but still it is what we have. You know, you are already in line with Vivo pretty much, and 25% premium to Claro when I look at it. Again, there are a lot of things involving this ARPU, but do you see room for ARPU to continue to increase at the rates that we are seeing? Again, you are almost one of the highest ARPUs in the street. This will be my first one. Then the second one related to the platform revenue, again, continues to perform well.
When I look to the partnership with C6 Bank, are we about to reach a ceiling? You're seeing that? Or this strong trend that we are seeing the last quarters, you believe there is room to grow more? Okay, thank you.
Okay. About ARPU increase, yes, we foresee the opportunity to continue to ARPU increase. Keep in mind that, for example, next year, we have to recover in some way also on the price that we have on our customer, the inflation of this year, because we did our price up in March, and at that time we applied the inflation rate that we have reached until March. Next year in March, we are already planning to find a price up jointly with an increase of data consumption that will allow to keep the level of claims at the lower level to recover an inflation. On top of that, as I was mentioning at the beginning, the ARPU increase come also from the migration of customer from lower, cheaper plan to an higher price plan.
I was mentioning the migration from control to post, but sometimes we have also the migration from control to control. When you discuss about price again, you have to check also the base price that we have on the market from the so-called below the line. When you look at the ARPU of all the players, sometimes you can see that there is someone with a lower ARPU because in the so-called below the line offer, perhaps they are very aggressive. Sometimes happen that also to try to convince customer to embrace a convergent offer, the mobile price has been aggressive. That theoretically is exactly the contrary of what someone say about the convergence. Because if convergence is to put a much lower price to put things together, I don't understand where is the real value.
Again, each of us has a specific strategy. It's not me that have to evaluate which is the right one. Our strategy is to continue to increase the ARPU through the price up that we have to do every year to try to absorb the inflation in a period like that where inflation is, let me say, a challenge. In the meantime, with our market strategy to move customer from lower giga package to higher giga package and creating a kind of scale-up also in terms of quality of service. It is, for example, has happened with the credit card. If you have a black credit card, usually you have a concern. You have a level of service that is much higher than a traditional credit card. We are doing the same also with our postpaid and with our TIM Black offer.
About platform revenues, I leave Renato to talk, but again, you know very well how we are in this moment. We are in the middle of a discussion with our partner, and so we cannot do too much disclosure. Renato, please.
Hi, Fred. Thanks for the question. I think we have been very successful with the consumer platform partnerships and also in the financial services, leveraging our data intelligence in our I would say multi touch points approach that we have with our customer base. You know, in terms of messages that go not only text, but also video, GIF, images, using all our data insights that we have here. This has been a very successful I would say deploy. We're able to prove to the market how powerful it's a telecom as a channel for the new digital services. Specifically on your question, I think we will be able to hold the level that we have today in this quarter for the next quarters.
There was a lot of digitalization that happened in the last year, so of course, this has been leveraged by that. You know, there was a big movement because of the pandemic and other factors in the market. We believe we are able to hold that, given the market perspectives that we have today, for the next quarters in terms of digitalization.
Perfect, Renato and Pietro, very clear. If I may have a follow-up here, Renato. It's perfect about C6, very clear. But as you add more partnerships, obviously, let's say the addressable market expands, but just trying to figure out the size of this opportunity, do you believe there will be like a cannibalization between the offerings? For example, the same guy who buys Cogna eventually not buy a C6 Bank. Is there any kind of, or not really, right? You can, as you expand five , six, 10, whatever partnerships you may have, the addressable market just increases. Thank you very much.
It's a very good question, and we have been working very hard on building data insights and data intelligence to make the right offer to the right customer at the right time. Building up this intelligence here has been instrumental for us to build the new partnerships. You know, Pietro is always pushing me to have more partnerships as soon as possible, and I'm always holding a little bit back because I wanna make sure that operationally they're all possible at the same time. If you have seen our commercial launch plans, they are very scheduled. We avoid to launch partnerships at the same time. You know, the Cogna partnership came a year after the C6 took. The reason that we have done that was exactly to be able to digest the whole C6 partnership.
When we were mature on that, we were able to launch a new one. We believe now we are reaching the maturity in the next months, with Cogna, and we're gonna be able to launch the new ones early next year. There is a lot of intelligence in terms of data to make the right offer to the right customer at the right time. At the same time, there is a maturity of the operations in a rollout scheme that allow us to be able to play all of them at the same time.
I think that you perceived when Renato told new ones. He spoke in the plural. We have to commercially launch in the first quarter of next year, the other ones. Now we are joking with Renato, we will close the contract, one or two by the end of this year. Also because we are giving, and so don't take this one as an official target, but we are working to say that we would like, in our new plan, to put the target that we must have 8-10 partnerships that can generate a value in three, five years, about BRL 3 billion-BRL 5 billion. We are working on that, and we will formalize the target in the call with the financial market for the new year plans. Renato has a job for the next three to five years.
Thank you. Thank you very much.
Thanks, Fred, for the question.
The next question comes from Mathieu Robilliard from Barclays.
Good morning or good afternoon. I had two questions, please. The first one is around costs. Obviously you flagged that there are some pressures on some items such as energy, and we've also seen a personnel cost up in Q3, but you managed to increase your margin this quarter despite that. I wanted to know if you could give us a little bit more color looking ahead as to what are the positives and the negatives that will influence cost and whether you think conceptually you can continue to increase your EBITDA margin. Then the second question was around the 5G auction. Maybe you could remind us what is the exact deadline?
You mentioned the 4th of November, but I'm afraid I'm not entirely familiar with all the details in terms of when the bids are made, when the results are given. If you could give briefly some color on that would be super helpful. Thank you.
Sure, Mathieu. Let's start again from the easiest question. Tonight, Mario Girasole will deliver to the Anatel our envelopes with all our offers. The deadline is today. All the player that will participate to the auction will have to deliver their first offer. The 4th of November, there will be the auction that will be closed in the same day. There will be some time. Mario, can you give some more color about the next step of the auction?
Yes. Yes, of course. Thank you for the question, and actually it will be tomorrow, early in the morning. Tonight we will close our envelopes, and tomorrow morning we will deliver to the delivery session that is this tomorrow in Anatel. On November fourth, there will be the auction session in which these envelopes will be opened. Of course, if some competition occur on the several blocks, we will compete on it. The following steps is the you know, ratification of the results and then the call to sign the authorization documents. We think that this will happen within mid-December. We think that all the process will be closed still in 2021.
Then there are other steps, you know, with the creation of the EAF to clean up the spectrum and so on.
In terms of the payment, if you can remind us, assuming.
This depends because at the signature of the authorization, you have to pay a minimum 5% of the offered price. Then there are other payments related to the entity of this cleanup spectrum that will occur in the next year because the two installments are after the creation of the entity. Creation of the entity is within 75 days from the signature of the term. Summarizing, we will pay a minimum 5% of the price offered this year, and next year there will be the payment of the EAF.
Mathieu, if I can give you some more colors, and then after the auction we'll prepare specific presentation to give you all the details about the frequencies. From our quick calculation, because I think that you don't want to know the number in details, but the idea. We will have the highest level of payment in 2022 could be something close to BRL 2 billion, more or less. We'll have something very small by the end of this year if it will happen. We'll be progressively reduced because the auction is built in a way where we don't pay the frequencies. Part of the frequencies are paid in terms of commitment of network building. The cash out will be during the years until 2029.
This is not the case, for example, of other European country. If you see there are some report that show that the Brazilian auction is one of the most wise in the market because it's much more focused in network building and not in cash out in favor of the government. But again, with Camille and Vicente, we will work after the 4th of November to give you some more details and idea about the cash out. For sure, in our plan presentation, that will be the first week of March, we will give all the details and the impact in our three-year plan. We didn't forget your question related to the cost. It's clear that we will have some pressure that are related to the energy cost and inflation rate primarily and in part with the exchange currency rate.
On the exchange currency rate, our purchasing department, jointly with the other team, did a great job and we are starting to have contract in real, so with no index with the dollar. We were able to do that also with the international company. I cannot mention the name, but this is a new job that Bruno is doing to reduce our exposure to the exchange currency rate. The contract that we still have in exchange currency rate in dollar have also some range in which we do not apply any kind of movement. This is the reason for which the impact on the exchange currency rate was very low. Our challenge will be on the inflation and on the cost of energy.
We are working already for the next year plan, trying to offset this impact with efficiencies in other area. For example, we are doing a great job on the CRM, so we are reducing the time that our attendance stay on the phone with the customer because what we are doing, if you remember, Mathieu, our target is to become the best Brazilian player by 2023. We want to become the best player because this is not only a slogan. This allow us on the revenue side to justify with the customer a premium or a high price compared with the cheap offer. In the meantime, if we are able to deliver a good quality of service, we have less cost hidden and not hidden internally to manage the customer base.
All the costs for the CRM, our attendant, all these kind of things. This is a part on which we are looking for efficiency. On the other side, if you remember one year and a half ago, we were talking about business process outsourcing as a leverage to improve our cost base in some area where we have to further automatize. We didn't forget that. We were unable to proceed during the COVID because it was very difficult during the COVID period to proceed on that. By the end of this year, we will sign three or four BPO that will allow us to have a better cost base also for the next year.
Last but not least, when you see on the provision of the litigation, we did also with our legal department, with Jacques, a great job in the last two years to reduce the level of litigation with our customer base. Again, our strategy from volume to value and to increase the quality of service is paying off also on the cost base. There are still room in our cost base to continue to be efficient. It's clear that you cannot work only on the bottom line, you have to work also on the top line. For this reason it's very important that the activity that Alberto has put in place to continue to sustain our ARPU increase and with Renato to continue to sustain new sources of revenues.
Again, I think that we are doing a great job that put us in a very good position also to manage the challenges that the macro will put on the table. I hope that I was clear, Mathieu.
You were super clear. Thank you, guys.
Without any more questions from analysts, we'll now start the public Q&A session from the webcast platform and will be read. Please, Mr. Vicente, you may proceed.
Good morning, everyone. This is Vicente speaking, Head of IR. The first question comes from Cesar Medina from Morgan Stanley. His questions goes, "Was wondering if you had any comments from the recent trends in mobile number portability and mobile service growth that is a bit softer versus competitors. Thanks.
Cesar, I agree with you on the second part of the question because in terms of mobile number portability, it's not so bad. We are improving our mobile number portability. To be clear, for sure it's a part of the great job that Alberto is doing on the commercial side. The other slowing down, if you look at the EBITDA result and the cost base of other players, I think that the volume strategy is paying off on the contrary because they are increasing their costs that are not completely reflected in the revenue growth. If you look at the growth in terms of customer base and the growth in terms of revenues year-over-year, but it's also peculiar to look at the growth quarter-on-quarter, I think that there's something that is starting to not be so nice.
We had with an amount of revenue that is much lower than some other player, an absolute growth in terms of revenue quarter-on-quarter that is the same as another player that has a higher level of revenue and also a higher level of net adds and also a worse level of EBITDA. Again, as I mention all the time, it's clear that you have to do your job and you have to evaluate all the lines. If I look over the overall performance of TIM, it's much better than the other player. If you want, I can increase the amount of net adds. You have to accept that they reduce the percentage of EBITDA margin that they have to manage. How many percentage points will you accept that I reduce my EBITDA to put a higher level of net adds?
I think that the balance that we found with the positive net debt, the best EBITDA margin, the best cash generation, is the right mix of all the things.
This was the last question. Pietro, next we'll move to the final remarks, please.
Okay. Thank you to everybody. Again, I want to thank you all the team for the great job that they were able to achieve. Remember, we are reaching our guidance in a macro environment that for sure wasn't the one that we were planning to face. We are able to achieve the target, recovering also the challenges of the macro. It's important to thank you, our team. Again, we will start now the different meeting, virtual, and finally we are back to meet some of you in person. It leaves me very happy because human touch is always very important. I hope to meet you very soon.
Last but not least, after the auction, we will try to give you more details about what we are going to do, and I hope to give you soon good news about our Oi deal. Thank you to everybody.
Thus we conclude the third quarter of 2021 conference call of TIM S.A. For further information and details of the company, please access our website, tim.com.br/ir. You can disconnect from now on. Thank you once again.