Earnings Call: Q2 2020

Jul 30, 2020

Good morning, ladies and gentlemen, and welcome to TIM Participa Science 2020 Second Quarter Results Conference Call. We would like to inform that this event is being recorded and all participants will be in a listen only mode during the company's presentation. There will be a replay for this call on the company's website. After TIM Participa's remarks are completed, There will be a question and answer session for participants. At that time, further instructions will be given. We highlight that statements that may be regarding the prospects, projections and goals of TIM Participa Point, constitute the beliefs and assumptions of the company's Board of Directors of Officers. Future considerations are not performance warranties. They involve risks, uncertainties and assumptions as they refer to events that may or may not occur. Investors should understand that internal and external factors to team participants may affect their performance and lead to different results than those planned. Should any participant need assistance during this call, please press star 0 to reach the operator. Now I'll turn the conference over to the CEO, Mr. Pieto Labiola, so he can present the main message for the second quarter of 2020. Please, Mr. Pietro, you may proceed. Good morning, everyone, and thanks for attending our 2nd quarter conference call. This quarter was full of very serious and important events. We saw the pandemic impacting significantly the lives of everyone in Brazil as well as the economy. That team, we adapted quickly to the new reality and managed to keep focus on the business. More recently, new developments in the market consolidation front emerged. So we have a lot to discuss today on the organic side of our business, but I'm sure you have many questions concerning our binding offer on the mobile asset of Oi Group. So I will make some quick comments on this topic before we start. First of all, it is important to realize that despite the significant value we see in this potential transaction, for sure, This is not a do or die situation. Of course, we can benefit meaningfully from having more spectrum capacity more infrastructure and more scale. But in the past year, we succeeded in turning Tim Brazil around and developed our business quite well, managing the spectrum gap in a clever way, allowing us to have the best 4 g coverage experience in the country. You will notice during my comments and in our presentation that we have all the condition to try independent of the outcome of this negotiation. Having qualified debt, this nice to have transaction can generate significant value at the condition we are offering to all the parties involved. Anyway, we would like to wait for the conclusion since this is a long and complex process. Coming back to the organic quarter. Last quarter, I started my comments. Talking about the increase in the uncertainty level we need to operate nowadays. Despite that, I believe we, once again, showed our capacity to adapt and be resilient when facing the challenges posed by the external environment. Consequently, we are delivering positive numbers to our shareholders. We divided the presentation in the same way we are approaching our reality, managing the challenging presence but at the same time preparing for the future. So my comment will follow a similar flow. The second quarter was marked by a strong executional cost in order to feed the impact from the pandemic that is plateauing with high numbers of infection and death, while the economy start to reopen. It is always worth mentioning to our foreign audience, that vaccine needs to be understood as a continent with the sites of Europe, having states that are similar to entire countries. So it's quite logical to have regions in different stages of the pandemic and economic recovery that is also uneven. Our solid performance in cost efficiency led to OpEx declining almost 15% year over year. With a large contribution from the positive bad debt trend. Therefore, EBITDA growth remained positive up close to 1% versus second quarter 'nineteen and with a margin near 50%. ADD minus CapEx also had a strong performance, growing close to 50% year over year. Other remarkable achievements during the quarter were the signing of the Anatels TAC and the free software under the partnership with C6 Bank. As expected, mobile service revenue were down in the second quarter, but mobile ARPU remained positive growing close to 1% versus last year as a combination of positive human postpaid ARPU and negative prepaid ARPU. As explained in the first quarter, prepaid recharges were impacted by the pandemic, despite showing a recovery towards the end of the quarter. Trend that is being confirmed in July with the levels almost in line with same month of the last year. We expect to see a continuously recovery in recharger spending, as we enter the 3rd quarter, but we will have to understand how this recovery will hold after the federal aid checks are withdrawn. The postpaid also confirmed our expectation with commercial activities impacted by closed stores. Gross addition and upgrade declined when compared to the trade COVID level, but this was also the case for the balloon per churn. Today, we have approximately 80% of our stores opened, but considering the limitation presented by municipalities and states, we are running at 50% to 40% of our full capacity. On the fixed front, Tim large consistency in delivering solid performance was once again confirmed. We closed the quarter with this unit represents close to 4% of our service revenue. TIM LiveS ARPU grew almost 8% and we added 100,000 new clients in the last 12 months. This is a consequence of high value proposition and coverage expansion. As we did not stop the rollout of our fiber network because of the COVID crisis, we were able to launch FTTH coverage in Burrowizantes and Brazil, reaching a total of $5,700,000 household coverage in the country. Of which $2,800,000 with fiber technology. Other fiber based infrastructure also expanded such as our backbone and backhaul that grew to 104,000 kilometers and our fabric in the city project reached more than 900 Municipalities. The mobile network continued to be developed adapting to the changes in traffic profile. And one more since 4G coverage was evaluating as adding the best experience in Brazil with the highest availability and very well positioned in all the metrics. During this period of social distance measures, our digital transformation process at the company to face important challenges through the acceleration of our digital journeys project deliveries. During the pandemic period, we accelerated 100 plus initiatives to prioritize digital experience. As a result, we accelerated the adoption of e sales in all the product lines, postpaid, controlled, TIM Live and prepaid recharges. In the meantime, our caring processes become more self-service with not human interaction growing 75% driven by the new cognitive Iboar. The new system answered more than 3,000,000 calls after the launch. Usage of my team app grew double digit, helping e billing and repayment metrics also to grow solidly. Entering the future, I'd like to highlight the initiative that will contribute organically to a self sufficient development of our network infrastructure. We put forth a commitment to which 100% of Brazil's municipalities with 4G until 2023, bringing to those cities the great 4G team experience. To achieve that, we plan to leverage on 4 major projects that are starting to be implemented. The first one, the implementation of the measure agreed following the signing of the TSC or conduct adjustment term. Under this commitment, we will expand our coverage adding more than 1300 new cities and also implementing further the core to more than 1 utility cities. 2nd, as you all know, our network sharing agreement was fully approved, so we are moving to the free stages of implementation. It will be a step by step project with significant impact for mobile coverage and capacity. 3rd, The new project of unplugged site uses a network as a service approach to close coverage gaps in areas of difficult taxes or roads and highways. 4th, after several live network tests in the past year, we are moving to the implementation phase of 4 gmaximani. This project can boost our capacities by three times in area where it will be planted. We expect to have 200 city already benefiting from this in 2020. On another front and continue with our strategic approach to 5G, we expect to launch commercially our first three cities to explore opportunities with fixed wireless access and broadband services. For sure, we will leverage on the experience we gather from the trust with WTS. A high quality network will have the transition from volume to value that we expect to continue to execute in the upcoming quarters and years. As key pillars in the transition, a new brand signature was developed and the reposition of Portfolio is being implemented. We want to position our office away from the MELDI price per giga competition. So on prepaid, we will focus on convenience. On the control in the new experience. On the postpaid, we'll be further developed as a family entertainment and service hub. While TIM Live broadband will focus on the freedom to choose content. In the B2B, Our top client will be approached with integrated service under the strategic vertical defined in 3 year plan. As you will know, agribusiness is the most developed so far. For the D2C, We plan to leverage on the partnership with C6 Bank to develop differentiated. Already July we launched the free set of products combining telco and Financial Services. In the 1st 3 weeks, daily average new account were multiplied by 8 times, reaching around 200,000 new accounts. In share of the chart was boosted to more than 50% and our website visit reached a record high after the launch. In the next month, new developments will come to Timberlake's plant, always focusing on the combination of benefit. It is always worth remembering we intend to create value with this partnership in two ways. With direct compensation related to active accounts from coming from client base. This compensation comes in the form of activation fees and equity stakes subject to reaching certain goals. And with increased customer loyalty and consequently churn reduction, offering differentiation and cost savings with recharged and payment fees. Still under the section preparation for the future, we believe significant value can be created through 4 projects, 2 of them I have already mentioned earlier, the network sharing agreement and TAC. With the network sharing agreement, Besides the improvement in customer experience, we will create value in the form of CapEx And OpEx Savings. Each phase of the project will have its contribution But the last one related to the full single reading city below 30,000 in evidence is key to unlock material efficiency. And TAC, addition to the expansion of coverage, the company has agreed with Anatel speaks to change. R639 million dollars in sanctions for investments, reducing its contingency burden. Similar project concerns the creation and deconsolidation of a near term infrastructure vehicle to accelerate FTTH rollout. The process of funding a partner and signing an agreement is expected to happen by year end. Tim has received several indication of interest and we plan to shortlist them before entering in the retail negotiation. The last project is related to the final step of a long process of corporate simplification. With this project, the company plans to generate operational and tax efficiencies after the merge of TIM Participa SOX into TIM S. A. After the conclusion of this incorporation, TIM S. A will be the sole listed company. Quickly going over some financial trends. As I mentioned earlier, we were already expecting a decrease in revenues and our net service revenue confirmed this by coming down 3.4% versus last year. In order to compensate this performance, we reinforced cost control and efficiency measures, making OpEx to fall close to 13% year over year. This strong performance is explained by improvements coming from lower volume related to the pandemic. 2nd, better operational performance such as bad debt and the last reduction in discretionary expenses. But debt is worth growing in a little bit of detail. This line alone was down 15.6%. Bringing the nominal number back to 2018 levels. This can be explained by structural changes implemented and improvement in the collection curves since the end of the last year. Despite having revenues declining, OpEx performance more than offset this impact, maintaining EBITDA on the positive side, with 0.9% year over year growth. FDA margin also expanded by almost 400 basis points. The last 12 months, operating free cash flow grew more than 40% when compared to recent periods, showing a clear evolution on the cash generation side. I also take the opportunity to reaffirm our EBITDA minus CapEx over revenues guidance of above 20% with a mid single digit growth in EBITDA minus CapEx. Both metrics are being met in a year to date view. As I finish my comment, I'd like to and ability of the business with a rational approach and solid execution. The new reality emerging in the second half of the year we create significant challenges, but focus on execution, a clear strategy, we compete in solid organic path. Thank you. We will now open for Now we will begin the Q And A section. 1st, we will take questions for analysts followed by journalists, both in English. We ask each participant to restrict himself to two questions at times. To ask a question, Our first question comes from Mr. Fred Mendes from Bradesco Bebbe. Please, Mr. Fred, you may proceed. Good morning, everyone. Thanks for the call. I have two questions here. To start. The first one, we saw an increase in ARPU of almost 1% year over year. So I just try to understand, you know, how important are they stores that they were basically closed, throughout the quarter? You know, how important is, the fact that the stores are open for you to upsell, to your client base. And then obviously in this card, there was a negative impact. So that will be my first one. Then on my second one, I guess it's much more like a strategic question. Let's say in a hypothetical scenario, our team does not get the spectrum for voice mobile operation. Should we see some sort of change in the company's strategy? I mean, my main point here is, how can you compensate for the potential lower spectrum that you'd have versus the other players in this scenario? Hi, Fred. Let's start with the second question. It is our strategic path. It's important to remember that we already stated in the previous call that the possible market consolidation it's for us an opportunity, but it's not a do or die option. We always mentioned that we were proceeding in parallel with our strategy working, as I mentioned, during my speech, on the use of new technology, as is the case of Masimano, where we will be the first player in Brazil to use this new version of Masimo that can improve by three times the network efficiency. We are working with the the network sharing with Vivo that finally was approved by the card. Let's remember that we always told that, there are always the opportunity of the upcoming laylao sorry, auction for the 5 g and the 700 Megahertz. And what is important is, perhaps to underline that we have already demonstrated in the last 5 years as we were able in the past to exploit in the best possible way the frequencies at our disposal. So it's clear that if a market consolidation happens and there is a possibility to acquire from the sale of OI, mobile frequencies, it's for sure a good opportunity. But this is not the only way that can allow us to further proceed with, our strategy. But they leave the stage to Leo to give some more colors about, how we can express better the existing frequencies and how we can move in the future. Good morning, Fred. Just compliment what Peter mentioned, we have tested on field that the massive mine and the results were very, very interesting in terms of improved capacity with the existing network. We have to highlight that, I guess, that, in the let's say, last month, all the society and some public administration, considering telco as essential services. With that, we saw some kind of improvement in terms of rule in important cities let's say to give you more freedom for Neil Towers. What is good? Because we can use the data in the sense of for density where it makes sense. And we can highlight, for example, Bellorizaci or Curichiba, Brazil, and Puertolegg. That cities that now we are seeing, let's say, a very, very interesting opportunity to deploy sites. The last is Pietro mentioned about the new frequency spectrum auction. And it's interesting to highlight that we are seeing the 700,000,000, but At the same time, the 2.3 gigahertz is a very interesting, spectrum that will be available on this auction. Just that you'll give a number today, more than 20 percentage of our devices is smartphones already are supportive for these 2.3 gigahertz. So again, we have that on the past, about the refarming to use a new spectrum and to use, let's say, the most advanced technology and we are prepared to do that again. So I guess that our track record when we did the leap frog from the 2 g to 4 g we can use all these expertise to have, this, let's say, organic plan to support the, upcoming capacity. Fred, coming back then to your first question that is related to our capability to continue to upsell our customer base before to leave the stage to Alberto that is leading all this part in our company, I would like to point out some elements to remember our strategy. I remember that we started to talk about the importance to move from from volume to value. And we discussed in, unsusppected times that for us was more important to get new customer with a reliable profile than to get the net positive net adds at any cost. Why am I letting that? Because during the call, for sure, will arise question related to our improvement in the bad debt. And definitely remember that we started to told in the third quarter of the last year that our bad debt should be improved by an improvement of our processes, but also due to a rationalization of our commercial approach We did a great job in this period closing, sales channel with not the best trade off in terms of acquisition cost and quality of the customer. And it will be reflected also in the following months about our result. Last but not least, aim at that your question is coming also to understand better we can continue to grow in term of ARPU. It's important to remember that, on the postpaid in the comparison year over year, we were unable to apply our price up yearly price up that will arrive more ahead in the year. So the comparison with the last year in some way is not completely fair. But again, we are satisfied about our south, and they are completely in line with what we were imaging, but they leave the stage to Alberto to give you more details about, our channels. Alberto speaking, just adding on Petro's comments, basically, we work our customer base and try to cross sell and up sell across all channels. So they mean stores, of course, but all our BTL channels as well. So during this pandemic, of course, we lose traction in the store because they were closed, but we continue to work on, on this, on these activities of, cross upsell our customer base through our digital channels. In our inbound and outbound channels. And, this is something that the BTL marketing approach is quite a priority to, to our strategy. And these channels, they were up and working during the pandemic continue in this effort. Thank you. Thank you, Peter, Rommel, and I'll bet very clear important information. If you allow me just one very quick point on the bad debt definitely was impressive. Just how important was the improvement in dealing here? Or you think that was much more a choice of let's say a more robust customer base or you think that the Billy made a major contribution for this improvement? Thank you. Fred, I'm very happy to say that, we are confirming again what we told in the third quarter of the last year. We told that the third quarter should be the worst one. We try to explain as the best that process, need time to show the result because once you start to improve, it takes at least 6 months to see the final result. For sure, we were able to improve all our internal processes, sir, that is a good part of this of this activity. But in the meantime, as we mentioned, we we we didn't want to acquire customer at any cost. And I think that this is something that will be better understood by the market once we will be out from the COVID because we start to have also an improvement on the prepaid because if you remember, we always told that there are opportunity on the prepaid to have, an ARPU growth avoiding to transform all the customer and control customer. Our next question comes from Mr. Marcellus from JPMorgan. Mr. Marcelo, you may proceed. Hi, good morning. Thanks for taking my questions. The first question is a follow-up on Fred, on the bad debt So just to clarify, you improved your bad debt processes. You were being more cautious on acquiring clients. So assuming a normalization of the economy, now you would be feeling ready to, really accelerate customer acquisition. That's it. I mean, you would be willing to take more risk given that you improved your bad debt. Just wanted to clarify that. Mean, assuming a normalization of the economy. And the second question would be on the infrastructure business. So what kind of goals do you have in terms of deployment? What parts of the network could you put inside this neutral network If you could just provide a little bit more detail on this initiative, please. Hi, Marcelo. About the bad debt, as I as I was explaining to Fred, for sure, there's a main part of the improvement that is coming from our process improvement because the last year, we clearly stated that we have some problem in our processes, and now we are proceeding very well. I want to add also that if you look at the collection curves that we put in the presentation, it's quite clear that this is not an one time event because all the curves show a further improvement. So we expect to further improve the number in the next quarters. Related to the second part of your question related always to the bad debt, I shouldn't use the word conscious What we did was to improve also thanks to the new technology, artificial intelligence, big data, our capacity to better understand our customer profiling, reducing the level of risk, in this period, what we did was to further improve all our capacity. And what is important to show is that the result that we are having today It's not because yesterday we start to work on this technology, but it was the preparation that we did the last year that now it's showing it's resolved. But in any case, trying to leverage this COVID situation, we had also the time to look in a better way to all our sales channel mix. And, what we did with our verp modem was to have a better understanding about which are, by channel, the best trade off in terms of acquisition cost and the customer ARPU. And this is something that you will see and will be reflected in our numbers in the following quarters. About the infrastructure business, I leave the stage to Adrian that is leading the process to give the details. Hi, Marcelo. Good morning, everyone. Yes, regarding our open vehicle, we'll try to call it open and not neutral because they slightly different in terms of what it means because these vehicle will be driven or the deployment of the network that this vehicle will do will be driven by our needs in terms of which markets we want to address how we want to do it. So, then yes, after an exclusivity period, those network could be open, but it's different than a neutral vehicle at the end. So, basically, what we are thinking is to spin off all of our last mile network today on this new company. Basically today, all of our deployments of FTTC and the new deployments of FTTH. Starting from the uptick and obviously including the customer connection. After that, all the new deployments will be, obviously, in Greenfield. So It's basically our, the network that today is strictly dedicated to our team life business. We are not including any other assets. What we will have and we are, defining these in the following weeks, probably this new vehicle also will be able to deploy some FTTS or fiber to the site or probably also FTTCT fiber networks always in in greenfield. We will not include in the vehicle, our actual FTTS or FTTCD assets. Perfect. Thank you very much, Rick here. Our next question comes from Mr. Rodrigo Villanueva. Please Mr. Rodrigo, you may proceed. Yes, thank you. Good morning, Pietro, Adarian Vicente. I have a couple of questions. The first one is related to your wireless revenue growth. I was wondering if you could explain a little bit more on what could be behind the softer growth that you had relative to V1 Claro? And secondly, following the new binding offer for Oi Mobile earlier this week, Is there any potential timeline that you could share with us regarding next steps to watch? Hi, Rodrigo. About the wireless revenue growth and, which is the outlook for, the next quarter. It's important say that exactly as we mentioned, we are seeing a further improvement in the trend. Keep in mind that July I can share with you a first preview should be the 2nd best month in the year on the prepaid recharges, with the year over year that is going to close the gap and becoming very close to 0. We're discussing about something minus 2%. It shows, so the a fast recovery on this area. And we expect for the improvement because, in the middle of August, what we will do is that we will launch our new offer on the prepaid and always to share with you our strategy. It will be a new offer that is not based on a Jiga price competition, but more of of on a concept of convenience for the customer, adding some elements. This is in line with our strategy that is to compete not on price going beyond connectivity. Related to the postpaid, we think, and we foresee for the improvement in the next quarter also because we start to apply our yearly price up that we have to remember that we already communicated to the customer base in February. And so it will not be an issue to be repeated in the first quarter of the next year just to start to speak about the possible 2021, trend. In terms of evolution of our offer, the first signs that are coming from the offer that we had on the controller as they are very positive and I leave Alberto to give some more colors. And in the meantime, we are going to further improve our postpaid off where we are not discussing about a review because we are very happy that, what we launch 1 years and about 2 years ago with Tim Black family. They find that as an entertainment hub. It seems that it's becoming Marcus Sandard. So it confirms that we are on the on the right path in terms of the evolution. Before to leave the stage to Alberto, all in all, we see we foresee improvement in the following quarters, both on prepaid and on postpaid, with the strategy that is completely aligned with what we mentioned in our plan. Sualberto. Hi, Rodrigo. Just adding a few points on the control plan that we just launched, from a positioning, a strategic point of view, it follow this position whereby we try to add the incremental values to the customers beyond the Jiga. And, so we, we hit the number of record since the launch date. So Pietro mentioned the number of visit can add the number of digital transactions we, we've been quite successful both in growth ads. And on the customer base, So, we got more than 200,000 accounts open on our customer base overall. And it's difficult to have a metric in terms of comparison or gross addition because we have, the commercial footprint that open up and closes during this period. But all in all, on comparable basis, can share that we increased gross addition of our on a double digit percentage after the launch. Coming back to your second question related to timeline of the process. We don't foresee any delay in the process. We are imaging that in any case, the process will be finalized by the end of this year, and then they will go through the regulatory and anti trust step for the approval. So now everything is in the end of the seller that have to do its own evaluation. I have to confirm the date of the creditor meeting. And all the rest will proceed as was planned. Understood, Pietro. Thank you very much. Our next question comes from Mr. Diego Aragon from Goldman Sachs. Yes. Hi, good morning guys. Thank you for taking my question. Two questions, if I may. The first, the first question is regarding the network swap agreements between Tim and its peers. Particularly with OI, given that OI mobile business is in a sales growth the company's infrastructure will be part of a separate business unit. I would like to know the amount of network swap agreements between Tim and OI for instance, how much these agreements represent and understand what will happen, with this swap agreement when and once our mobile business is sold. Thank you. So about the swap and then I leave to Leo and Mario, to give, more details. Keep in mind that they are in place. What will happen is that once they will be extinguish or the when they will reach the expiration date, keep in mind that there is a possibility on both sides to renew them if both party and we have no interest to avoid renew that because, we are satisfied about the situation. Or we can evaluate to do the swap where it is possible with other players. So the swap is not is not in our mind, any kind of issue. It's business as usual, and it is in the interest of both parties to to proceed. But then they need to marry you and Leo if they want to add something. No. Just, bring some colors. The main, agreement that we have with Froy is related with the run sharing agreement. This, agreement has all the base terms of, KPI quality and some kind of obligation from the both sides. So, we have followed that. During the, let's say, the process, the chapter 11 process that OA is, is moving on. So, it's going well. We don't have perceived any kind of degradation in terms of quality. So, first, you'll be with all the attention to keeping to guarantee the quality for our customers. So we are, again, we are under, a certain conditions of quality in the both sides, we, and I, and we are followed that, day by day, but, you know, we don't have any kind of, let's say, new comments or new issues should be treated on that. Thank you, Leo Pietro. But just to follow-up and just make sure that I understood correctly. So when we refer to those swaps, are those swaps with Oi Mobile Business or do you have like agreements with now this Oi infrastructure? And let's say that, we've, you know, the group, formerly by Tim, Claro, and Vivo, by OI Mobile Business. I mean, I would imagine those swaps to disappear, but that might be like some costs related to beef, to eat, right? So I just want to understand, you know, how much, you know, those costs could be and how this should be treat in the case that for instance, you end up buying OI or if someone else buys OI mobile? Thank you. Well, what we can disclose from that is that first, the swap over fiber is not on the mobile business. It will be on the UPI infrastructure. Alright? So this is a one point. The second is the swap is, let's say, regard to buy balance. So, the swap, we receive and we offer the same amount of kilometers of fiber. So that is, let's say, a EBITDA neutral on this kind of, of agreement. So it's based again on balance sheet. And, this contract, I understand that we will be under the infrastructure UPI, not mobile UPI. So looking at that, we don't expect the any kind of, let's say, route tour or any kind of a issue over this contact. Because, again, we are receiving and offering fiber on the same amount of, quantity. Okay? So, we don't expect that any kind of, significant changing on this contract. Okay. Thank you. Thank you, Leo, for that. Look, my second question is just like a follow-up on Martellus, question. In fact, I, you know, I just want to understand how the current regulatory, framework talks to you know, they spin off of, of fiber. I'm asking this because now that we have all companies, you know, and all companies are working to launch or planning to spin off the fiber business. You know, I'm, I just curious to understand if there is any regulatory risk to that and also how the untrust agency could view eventually a consolidation in the fiber business in particular. Thank you. Hi, Diego. It's Adrienne. I will leave the end the floor to Mario in terms of the regulatory side of this possible deal, but there's no concession on our fiber business. So I think that there are no issues on that side. On the first part of your question, yeah, we need to remember that we started talking about this, our project, in the first quarter results conference call. We presented our plan on the with the presentation of our 3 years plan. So we are well, our project is going, it's going fine. We already signed more than 30 NDAs. So we think that we are in very good shape on this side. So we don't see any on the regulatory side, we are pretty happy with these with the project, how it's going, also in terms of timing, considering the context So that's why we think that we will be, having or signing a project before the end of this year. This is extremely important because, we think that we are could be somehow ahead of other projects. It's interesting. Then we will see how things go in the 2nd part of the year. But today, we are targeting designing by the end of this year, Mario, if you want to consider? Hi, Diego, Mario. Just to compliment in general, infrastructure sharing is a very well established public policy in Brazil just because, of course, the country needs this cooperation in order to to to develop connectivity all over the the territory. On the other side, historically, from a regulatory point of view, fiber is, a key playing field that is very likely regulated because a to to achieve, just to achieve this private investments boost. So what is happening with fiber is exactly what the regulatory framework aim to to have a a a different initiative in order to to both investment, the deployment of fiber. So we think we are perfectly in line with the public policy and the regulatory framework. We and the other initiatives, of course, of the same character. Thank you very much, Mario and Adrian. Yeah. No. Sorry. Yeah. Sorry for interrupt you. If you can just There you go. But we we would try to understand better your question and reading below the line, perhaps it's better to give a a full statement. The father of this work it's quite probable that is used both for the mobile UPI and for the peak API. So In case, oh, a certain point to sell all the mobile, I think that your question was, what's up? And to your swap if they can cancel that. We make that. It's not possible because this is something that is useful also for the fixed line business. I don't know if was if if this one was your question that you put in a too much polite way and so was it more difficult to understand. Yes. It was, thank you. Thank you, Pietro, for the follow-up. I guess, I was just, you know, I was just wondering if, you can comment on that because Ruth Matri, I mean, apparently, if, you know, the automobile business is the suite. And, for example, if you guys are buying it, it will no longer be like a EBITDA neutral as, Leo mentioned, right, but, at least now explaining that it's also, let's say, helps the fixed business or poised makes more sense to imagine that it will be like, no impact for you, but thank you for the follow-up. I really appreciate it. Don't worry. Next time, you can be employed. Don't worry. Our next question comes from Ms. Maria Tereso Velado from Santander. Please, you may proceed. Hi, thank you, everyone. Thanks for the call. My first question is still on the CapEx. Is it fair to assume that you can reduce the 2020 CapEx by 2030 percent due to, rationalization that are deals with the vendors. And if we include the rent sharing and other savings for next year, are you also going to keep it lower? And even after you spin off the fiber, what should be the sustainable CapEx intensity level after all those initiatives take place and open rent and so forth. And then my second question would be on the how do you see the entrance of a potential wholesaler in the mobile market? Do you believe you could rent spectrum capacity directly in this scenario? And do you see any threat from potentially stronger MVNO activity in Brazil? That would be all. And the first question, Adrienne, we'll give you some highlights. Hi, Maria. Regarding CapEx, No, we are not targeting a 20%, 30% reduction this year. Also because what we are foreseeing is that our EBITDA level shouldn't be highly impacted by this context. If you see what happened in the first two quarters, we are still on positive on the positive side in terms of EBITDA. Yes, probably the second half of the year will be more intense in terms of commercial activity. So you could have some additional impact on OpEx compared to the second quarter. Yes, but at the end, we are targeting on the EBITDA side, something or at least without any negative number. Then of course, we wanted to maintain our growth in terms of EBITDA minus CapEx, yes, that's our main goal. That's the main guidance and will be the objective for everybody in the company. But that doesn't mean that we will reduce by 2030% percent or CapEx also because we think that all the efforts that we are doing today shouldn't make any harm for the sustainability of the businesses. So if you need if we need to continue to invest in on our network on our FTTH business on a we shouldn't take decisions because of a specific quarter. Anyway, this clearly we will be reducing some of our slightly our CapEx, we will also probably will need to absorb some effect of the exchange rate because we know that some of our CapEx are also denominated in U. S. Dollars. So, we need to absorb also that, but it won't be on the 2030% range. The second part of the of your CapEx question was going forward with our project of, of the new vehicle, for, for TimLab Business, consider that today, the team life business consumes more than 10% of the CapEx between 10% 12%. So for us, in terms of CapEx of revenues, we are considering that business also. That's why that's why we're probably on the 22%, 23% range. Then without these CapEx on our balance sheet, which will be the level of our CapEx Yes, probably they should go down slightly, but we are also willing to do more on our mobile and transmission side. So, that's something that we are working on. Probably you should see some numbers going down on CapEx on revenues, but we are willing to do also, more on that side. Your second question was regarding, no, what's I'll give some more colors and Mario will help me on that. It is about the possibility of a newcomer that put in place a business model on a wholesale frequencies model. I think that this is something interesting because, in this market, there is there are always innovation both on the technology that, on the regulatory. To do any kind of evaluation, it's it's important to understand which is the regulatory framework. Up today, there are no details about that because if the regulatory framework change, perhaps we could do also some evaluation if, makes sense to have an integrated company that work on retail and management, of the frequencies. As is today, the regulatory framework makes a lot of sense to work in this integrated way. If the if it will change, must be done other kind of evaluation. But, from our understanding, this is something that is out of the scope in this moment. Then Mario will elaborate on that. A complete adding other two points that are important. The 2nd MVNO. Brazil is not the country without MVNO. There are a lot of MVNO. What is important to understand that at least for my knowledge, throughout the world, usually, the MVNO business becomes successful when, who manage the MVNO, is trying to bundle the traditional telco business with something that is related to their real business that could be large retailer or whatever. And the image that in the future, if you want to discuss about 5 g, Let's think what will do a car manufacturer in the future? Perhaps they will become a kind of MVNO of the 5 g and will bundle. The self driving car. So they will sell a car with the service, sir, that allow them to exploit the network. So This is something that is not necessary negative, but the business model as is today have seen success bundle, traditional telco services, with the other, because there are other players that were unable to reach the economy of scale. So you should, you know, is looking for the synergy coming from 2 different word. Last but not least, and I think that this is really important if we discuss about customer. If the if you want to become an MVNO, and use an amount of frequencies that up to date was unable to compete in terms of quality. It's not because you are an MVNO that you can transform these frequencies in something that allow to pick to keep the customer satisfied. I don't want to give any kind of details, but if you look at the report that, were releasing this day by some of the main players that do the evaluation of the network quality. You can see as in Brazil, there is a situation in which there are there is some player that is enabled to guarantee the same level of quality of the other. If you transform this player in several MVNO, these amount of frequencies will not improve the quality for the customer, but leave Marie to argue more on the regulatory framework. Oh, Marie speaking. Just, no, just a couple of information, MVNO regulation in Brazil is in force, since 2010. So, of course, it's is a is a business that is already in place with, it's on regulation. On the other side, an ideal full mobile wholesaler is outside of the scope of the current regulation because today to hold the mobile authorization and spectrum authorization imply necessarily, the activities towards the the the final customer. So it's not possible to hold spectrum without fulfilling retail offers and of course coverage obligations. Perfect. Thank you very much. Pietro, Adrian and Mario, very, very insightful. Our next question comes from Mrs. Susanna Salaro from Itau. Please, you may proceed. Hi, guys. Good morning. We have two questions here. If you will elaborate a bit more about your partnership with the Bank 6 C6, how is it building the full selling between clients and if you could elaborate a little bit more, how it's going to be the revenue share between the team and to seek that to be our first question. And then regarding the project team wise, you mentioned that we're going to take to 6 for our partnerships. If you could elaborate on this, what we're going to be the nature of this partnership if you have anything already in the pipeline, I will be met of those partnerships. Thank you. About C6, the business model, it's quite I cannot go too much in details because it's clear that it's another confidentiality agreement, but mainly it is made by two parts one part where we act as a sales channel. And in this case, we can get a kind of sales commission by customer that we were going to get. And the second part is, reaching some, well defined threshold. We can have an exchange, some shares of C6. This threshold is defined in a way that will not exceed the, the specific percentage could apply just to get responsibility and compliance related to the rules and the law of the financial market. That is a different business in which we don't have the competency to to compete. About the commercial result, they were very and, as Alberto to give some more, favor about the result of C6 Partnership. And then, Adrian will give you the answer related to the team live. Thank you, Cshedo. Hi, Susanna. So basically I was mentioning this sort of partnership, of course, to main object The first one is to, sell the services or bundle the services to our customer base with the objective of reducing churn, giving a better value proposition to our customer base, which at the end of the day, stage of development and market is our main objective. So the fact that in a very short time frame, we manage to penetrate or to upsell around 200,000 subscribers. It's very important to us. The second objective is the, of course, is to be more appealing to the customer, to the Brazilian customers for gross additions. In that case, the fact that we tied up together the C6 to a bonus bundle with Jiga with incremental Jiga. So basically if you subscribe to if you download C6 and pay our bill through them, the customer get a 4 giga bonus. This, of course, it's, in our view, a good way to give a gigabantal to our customers and getting a change, an increased use of digital services digital payments. And at the end of the day, uh-uh, a lower churn. And as I was mentioning, on a on a parity of comparisons before launch. And after launch, we increase the gross additions of double digit, which is quite which is a good result for us so far. Sorry, Adam. You increased the net addition double digit in which type of postpaid or in controller? Because the offer that we just launched, it's available for prepaid, but has not been widely communicated. So our prepaid customers get, Jiga bonus if they made the recharge through us. But the offer that we just launched was launched on the control plans And so when I mentioned that we increased our gross additions, we increased our gross addition double digit on control and the other good news that we increase as well on postpaid because at the end of the day, we get our customers to get into our shop so. And then, our sales representative managed to be effective either selling that plan or increase or move the customer to a most valuable postpaid plans. For postpaid and G6 and C6, the offer is going to be deployed in the coming months, as Basil mentioned, in the main present in the main stage. Okay. Thank you. Yes. Susan, on your second question, Madrien, answering here. What we are looking for, with our Tim Life project is to create a new vehicle that will bring give us infrastructure services for for a remuneration coming from our side. So we are working these days on the final definitions of how this will work, probably this will work with a combination of a fixed and variable remuneration. This infrastructure services will include also the installation of the customers. So at the end. Your question was, what are you looking for, for a partner here? We had we don't have any consideration at this point. Have in our least infrastructure funds. We have PLs. We have operational companies also interested So we will see, we are very advanced with our project. We think that we could be receiving some non binding offers by the beginning of September. And then we will start to decide which kind of partner we'll have. Today, we're wide open in what we could we can accept. But probably after September, we'll go down to a short lease. And that short lease probably will have different types of partners in order to choose. And then clearly, by the time of the pandemic, we will need to decide if we want higher proceeds or if we want lower, lower cost going going forward. So, but again, we have no any specific, kind of partner today that we want to choose Okay. Without any more questions from analysts, We will now start the Q And A section with the press in English. So this is Vicente speaking. Now I'm reading a question from Evony Santana from Valu. The question is related to the a potential partnership with Telefonica to launch a neutral network if that is the case. And if we have in also, an info call. If team would be interested or willing to offer proposition for this infraco. And if the market, also, can comport to, networks in Brazil. And she also mentions, Italy, and a potential pressure from the government to have, integration of these 2 networks that exist in Italy. And what is the difference of this fourteens project? To the last part of the question that is related to Italy, being Italian have a better understanding about the situation. I think that is not right to compare the Brazilian situation with Italian situation because keep in mind that in Italy, telecom intelligence was incumbent they had obligation to offer last night services in unbundling to all the other player. They were obliged to offer it to unbundle all the network components. So that's a verticals on and so forth. So it's a complete different situation. While when we talk about Brazil, we don't have that kind of regulation. Then the discussion is more related to the financial convenience to have 2, 3, 4 network because in this period of time, you are, we are hearing that Everybody want to build a a further neutral network. Okay? But what is important to understand of this model? That at the end of the day, all this business model look for an anchor customer. No one is going to build anything from scratch in a full greenfield situation without the guarantee that there will be at least one operator that will buy this asset. This is the reason for which we were the free player understanding well the situation and to try to build this new vehicle where we will be the main anchor customer. Then, and then Adrian and Mario can give some more colors, but what is important also to state this from your question is that, no, we didn't do any kind of offer for the infraco of OE. We're interested in the mobile asset. For sure, in the future, we can be customer of weather in Franco, they will be in Brazil. And every time we will do our trade off, if it is better for us, to build the fiber or to buy fiber when it is available on the market, mainly for backbone and backhauling. Mario Adran? On our team live project, it's important to to remember what's the situation in terms of infrastructure in the country. Today, ultra broadband services can only the 16% of the households. So there is a lot to do in terms of infrastructure in the country. We feel that there are several different opportunities out there. And what we are trying to capture is first of all, additional value with this infrastructure value. You know that also there is a matter of how these companies are evaluated. The second thing, what we are putting inside company also for the future is our plan for the next 5 years in terms of deployment of FTTH. Additionally, it will be also possible to include some FTTCD and FTT site as we were mentioning before. But it's not that it will be an infrastructure vehicle such as it will be the one that Oi wants to create with all the fiber networks, with all the transmission side, In this guide, it's different. Our project will be driven by our plans in terms of team live. And yes, after some exclusivity period, initially, those networks could be also open, but it's somehow what Pietro was mentioning will be the anchor of this project. And that's the best side of our live project. So This said, clearly, again, honestly, we are not interested in the in the infrastructure UPI that all will be created because it's not part of our strategy or it's not part of our over part. Then we'll be customers of this infrastructure UPI that will be created, definitely, yes. Thanks again. And we had 2 additional questions from Rafael Bouygues Telefinity in Bruno Domaro at the time that go exactly in the same direction. So we will assume that they were already answered by Pietro and by Adrian. So now we are closing the Q And A. So operator, please. Sorry. There is still another question from Rafael. Sorry, again. So there is still another question on file. And related to the operation of, TIM Participa Soins into Tienesia. And if that does it mean, to offer more stocks in the market in order Hi. It's it's Adrian. Rafael, no. We are not aiming to increase our capital, with this with this transaction. What we are looking for is to make more efficient our corporate structure. Today, the group has 2 holding companies, because team participants controls T Messia, that's the operational company with 100 percent of the shares. And then Timpa is, but at the same time, has a holding company that controls in Patricasone is for the 66%. So what we are trying to do today, we are not finding any reason to have this 2 companies, so team participants and TMSA. And we'll be much more efficient in terms in operational terms, in taxes, in taxes, terms So what we are doing is a merge of the companies of the 2 companies, but that doesn't mean that we will increase our capital. No, nothing at all. Ladies and gentlemen, without any more questions, I'm returning to Mr. Pietro Labiola for his final remarks. Please, Mr. Pietro, you may proceed. TIM Brazil, once again, show it as a very solid fundamentals. With several strategic initiatives being developed at the same time. Focus and agility will be key to reaching our goals. I would like to thank you the commitment and dedication of our team who are surpassing many challenges to make sure we serve the country in the best way during this moment of hardship. Thank you for participating in our conference call. Stay safe and healthy. If we can reach visually mid soon in the upcoming events, we will be doing with the financial market. This concludes the second quarter of 2020 conference call of TIM Particip. Your line can be disconnect from now on. For future information and details of the company, please access our website, ri.sing.com. Br. Thank you.