Earnings Call: Q1 2020

May 6, 2020

Good morning, ladies and gentlemen. Welcome to King Price Pla Twenty Twenty Twenty First Quarter Results Conference Call. We would like to inform you that this event is being recorded and all parts of the English and only mode during the company's presentation. There will be a replay to this call on the company's website. After June 5th, the claims are must be completed, there will be a question and answer session for participants. At that time, further instructions will be given. We highlight the statements that may be made regarding the prospect's projections and goals of King High School Funds, Coaches, beliefs, and assumptions of the company's board of executive officers. Future considerations are not promised to guarantee. They involve risks, uncertainties, and assumptions as they refer to events that may or may not occur. Investors should understand the internal and external factors to simple staff clients may affect their performance and lead to different results and then those planets. Should any person need assistance during this call, please press star 0 to reach the operator. Now I will turn the conference over to the CEO, Mister Thiago Labriola, so we can present the name message for the first quarter of 2020. Please, Mister Prieto, you may proceed. Good morning, everyone. And thanks for attending our results conference call. Last day, 2 months ago, on March 16th, We were presenting our strategic plan and what's expected for the coming years. At this moment, the Italy was already suffering the consequences of the pandemic. While in Brazil, we were starting to see the 3 feedback. Social distance measures, sir, were in the very early stage. Our team, we were focused on ensuring business continuously and reducing risk for all our stakeholders. Hello, this change since then. Some of our assumptions were right in dollars, turn it out to be wrong. However, the most important one in addition to the resilience of the telco business was right. The sector and team, specifically, are demonstrating resilience in their numbers. For sure the level of uncertainty under which we need to operate today is much higher. Again, I'm happy with both the accomplishes so far under such unprecedented conditions. I believe we've done a great job to adapt ourselves to the new environment. And we are raising advantage of being an entire company. I will start my comments with a review of our results, and then I will give a more complete update on the pandemic effects and what you expect to happen going forward. Do you mind all the figures are now shown under IRS fixing standards? The first quarter was marked by a solid execution, mostly in line with our original plan until the outbreak That's it. We closed the quarter with service revenue up 1.7% year over year. Which would that be 3% if it wasn't there for the COVID testing to pay. Coming very solid, up 8% versus last year under IPRS 16. In your standard, growth was 4.5%. We continue to show it's dissipating cost control and capacity to find more efficient ways to operate. Meanwhile, continue to shine bright with another consecutive quarter of 50% growth in revenues. Another product that is also developing very well is our family plan which surpass the 500,000 customer partnership with C6 Bank is announced in March. It's been developed, and we should see the free product being launched this year. We also closed another important agreement with Google, taking our big data in cloud. In front of me, our network continue to do. We had 2 additional states, but a nice Santa Echinina, to our list of 100% 2 g coverage. Although, our radius for the fixed cost. Did not expand as process we expected due to the COVID vaccine campaign. We were still able to deliver resideo in the group thanks to a solid team like performance and a better revenue mix in paid versus postpaid that led positive contribution from mobile client generate revenues. On the mobile side, it took a lot to grow close to 5% year over year. We keep it and proceed up with pausing solid mid single digit expansions, stating that our transition from volume to value is underway. The environment change will pose additional challenges, but we are working to have better value proposition and to give additional incentives to deepen the engagement with our customer while we shift to a more digital relationship. On the tip of the trunk, okay, in large consistency, delivering a solid performance, it's a very good use. In the beginning of the pandemic in Brazil, estimating that we could face Samardo to sell and install. We were able to sustain a positive dynamic. Digital channel to sell and, helping people attempt to receive the visit of technicians. Already in the acquisition process. In TIM Live, we closed the quarter with ARPU growing more than 6% and customer base up 20% versus first quarter 2019. As a veteran, in life coverage almost doubled versus a year ago. During the pandemic, we managed to launch 2 new cities in the state of manager eyes, or any new classes to be developed. We didn't do not stop the rollout of our network because of the COVID crisis. Of course, our next few things are working much more carefully. But under this new condition, we managed to strengthen our mobile access network increasing our coverage in 4 g and for the 5 g. While we expanded our presence with father post transport psychosis, and for FTTH in your regions. A flexible approach to our network based on cell commission self healing and self care strategy is proving to be the right choice. We are coping with the new demands of the moment. Such as increase in use of video conference options, maintaining a high level user experience. Despite these items in the industry are growing concern about 0 rating gaps. This is because it's just in light on risk for network management, sir, that all mobile operators face with these offers. In the first quarter, we continue to develop initiatives to go beyond our core and to innovate in our capital deployments. The partnership with C6 will represent a daily interest in opportunity for payment to benefit from potential growth of the digital service segment. The combination of 2 types of remuneration, money in the form of activation, please. And equity attached to targets, create the possibility to generate value in the short and long term. Develop the cash in standard revenues continue to do it slowly. More than 70% this quarter. Meanwhile, we continue to develop new initiatives and capabilities. The partnership with the ministry of health was another trial of data reward for prepaid customers. As I mentioned earlier, because contracting with Google that will allow us to increase our big data capacity with more application intelligence and analytics application. While at the same time, taking advantage of cash cost efficiencies. We received important approvals for rental and cover for the sharing agreement with you. This project, take on the necessity to continue this strengthened our infrastructure and enhance our customer experience in the most efficient way. Our newest project related to TIM Live. Which consists in finding the partners to accelerate the expansion of AT and T network and consequently the growth of the business unit. Is it already signed more than 20 NDAs with potential partners to go into more detail? We expect to form a shortlist in the next couple of months so we can start deepening negotiation in the second batch of the year. Continuing with innovation initiatives that are changing the way we operate, sir, I won't realize our digital transformation program. We've been talking about it for a sacrifice, but it's important was supported by the scenario we are facing today. We should look at this from 2 perspectives. 1 related to the evolution the company made so far the third team so that they pass to the new environment, ensuring no service disruption or quality utilization. Into the new opportunities that are being opened because of outbreak. Things that will take months for years to be implementing it. We're in 17 weeks to cope with the demand of this new work. The outbreak crisis treat its limitation to avoid physical charges for safe, caring, and payments. But at the same time, it is driving faster and deeper adoption of digital channels. This transition is that the efficiency gain that dealing with other improvements. OLED calls to decrease by approximately 5% versus fiscal year 2019. It is worth mentioning the evolution of our debt. Confirming the trend we discussed in the last results call. Nominal numbers were showing a substation while collection was including until the start of the charges. We haven't seen a major deterioration since then, but it is possible to have some pressure coming from delinquency in future months. 1, if revenue are growing and costs are down, the consequence is a solid 8% growth in EBITDA. With a margin expansion of 300 basis points, which close to 46%. EPG Manu's capital reached a solid number of 1,000,000,000 reais, while net profit grew more than 8% year over year. As you finish this overview of the 1st quarter trends, I will go into more details of the consequences of the pandemic and how we are reacting to it. As I mentioned during the opening of this event, the outbreak started with the country in the second half of March. When some regions initiated implementation of the grantees. Despite the growing number of cases and less, exper se, the social distancing measure at Dubai, sometimes for the city to have some level of preparation. And that the peak of the update could occur in May. As it happened in our countries, the quarantine completely changed the economic dynamic. In the case of Brazil, GDP consensus for it has been moved from 2% growth to a 3.6% contraction for 2019. Monitoring the situation in Italy We started to contemplate a contingency plan based on business continuity in February. So one COVID that it, Brazil, We were able to quickly responder. We focus our action on chief executive, our people, our customer, and society as a whole. Yes. Getting for our employees and kids, party expert 14. We managed to have 99.9 percent of our workforce working from home in just 1 week. We were also the free operator to add 100% of its internal call center working remotely. And for the external ones. Social distance measure were implemented. And with the help of our partners, we reached more than 65% and the remote working. 100% of our souls were closed across the country, but we didn't not play off any of our commercial personnel. We use one of the programs launched by the Brazilian government to suspend the contact that you complimented your salary to guarantee the fee income there. 2nd, for our clients, The focus was resilience, reliability, and customer engagement. We adjusted our network is up to the new shape of traffic. More dispersed during the day and more concentrated in residential areas. We also enforced mobile coverage in areas near hospitals. Our digital channels received an additional attention in order to better support the customer demands. And some projects and their implementation accelerated to improve their support. Clients are being incentivized to use digital channel with benefit in offering and easing of collection rules. The goal is to keep customers connected during the pandemic. Thank you. We also supported the society in in the fight against the COVID 19 in a circumstance. It was entirely in giving access to anonymize data to help monitor the effectiveness of social distance measures. King also joined a combined dashboard with those operators to provide completion movement instruments. As a sector, generators managed to discuss with those stakeholders including what it is. To have advanced and approach to data consumption. And finally, we quickly implemented measures throughout government's address communication channel for the population. What pandemic so far has provoked mixed impacts on the company? Some metrics are positive, some mental, and of course, others are making. For sure, we will leave this page a much more difficult company. And the relationship with our customer will be even more detailed. The resilience of our network is also something that we mark this moment. The REDUCE IT Commercial Academy postpaid works both ways, negative per se, positive for churn and commercial costs. But that hasn't materialized as an issue yet. Team live is a positive surprise after this point with gross addition and installation with no major impact. Clearly, the most significant impact so far from the prepaid recharges. In early days of one time, were done by 25%. By the end of March, we declined the salary to a minus 20%. And now we are seeing a mid 10 drop. The impact on our revenues today is much more modest than what it would have been years ago. So the shift in revenue mix is not in payment, but it's not enough to completely zero out yet. During this period, we received a lot of questions related to concern of the liquidity position of the company. Having a strong balance sheet and the conservative approach to in the business in this moment. It is true that delinquency is an important risk for the sector. Therefore, a team, we have decisions to strengthen either further our position. We have sizable standby facility which we can access at any moment, and we took an additional loan at a competitive cost. Another important element comes from the government through the flexibility of fixing and condition of payments. Untalk of all of that, my business performance in terms of cash generation, give us confidence that we are a comfortable position to face the challenges of the moment. Summarizing the work I've commented so far. The call of our strategy will not change, so we will push forward with the initiatives and projects yet in our plan. We were adjusting our approach and adapting the company for the UReanity in the short term. It was too late to update under a much risk environment that's been anticipated. The resilience of the business does not mean we are in move to the crisis. Our initial GDP assumptions are not valid anymore. The duration of this advantage and the volatility of events only adds more uncertainties. So we expect to have more clarity on impact of COVID 19 on revenues and potential ABA versus 2020. Only at the end of the second quarter. Meanwhile, we confirm our focus on free cash flow, reiterating the guidance of ABD, minus CapEx on net revenues of about 20% for 2020. All this, EBITDA minus graphic should grow year over year in the mid single digit range. I have the sector to learn the benefits of cooperating as we are doing during this pandemic. We are competitors, but if you work together to create positive impact for all of society, generate value for all our customers, Thank you. Who will now open the floor for questions? Please, operator. Thank you, Mister Pietro. Now we will begin making more instructions. First, To repeat questions, analysts followed by the journalists, both, and English. Mr. My cell will send this phone just a bit more than would like to make a question. Charging lower commercial expenses and how much would the normal efficiency gains? Maybe you consider by how much improved in the last 2 weeks? And the second question is if you could comment, it is also on the postpaid sequential deceleration. The complete is clear from COVID, but what's the postpaid also driven by COVID or, are there other factors playing there? Hi, Marcelo. This is Vincent speaking. Thank you for questions. If you can, I'd like you to repeat your first question because, I think it was a little bit good, from our end here. And we just heard the the the very last part of your question. So if you can repeat the first question, please. The question is if you could help us understand how much of the margin improvement came from profit So, lower, cheaper channels recharge for to recharge the pay, lower commercial expenses on COVID, And how much was from your normal efficiency gains initiatives? Okay. Thank you again. Those questions will be answered by Pietro. Please, Pietro. Receipt. Yes. Yes. Thank you. Let's start from, the last one is due to the commercial expenses. On the first quarter, the efficiency mainly come from, our efficiency plan because the impact of the COVID 19. It was only in the last 2 weeks of March. So it isn't if the students give us an important impact in terms of efficiency, why would you say that, for example, in the 2nd quarter, or based on the experience of that bill, it will allow us to offset, the part in which we could be on the on the revenues. Related to the first question that is, on postpaid, what is important to remember that, Last year, we did the price up at the beginning of February. This year, we showed the price up, our cash on a basis starting from the beginning middle of March. But due to the COVID situation, we took the decision to postpone the press up at the end of the outbreak. What is important to share with you is that in any case, the communication to the customer base related to the price after happened. So we communicated to our customer base, at the be between the beginning of February andendofFebruary, the price up. It will allow us to do the price up as planned at the end of the outbreak. So in the postpaid deceleration, so to impacted by the comparison with the the first quarter of the last year when at the beginning of February, we started the price up. Okay. Just to follow-up, if I cannot break, you mean, when the the social mobility restrictions are over, like, May or June, or, we're talking, like, much more months beyond when there's no impact to sell to make any more? I think that we will be back at the at 1st level of normality. So when the restriction in probability will be canceled, it would be possible to apply that. Keep in mind, to be clear, our best, we we are used to apply and work for more approved. So it's not just, a press up. It's a press up adding more giga to our customer base. This is really important because I think that a lot people are experiencing today during the outbreak is how much is important the connection to stay connected with the rest of the world and to communicate with the friends and family. So I think that, at the end of the outbreak, there will be Let me see a better feeling, with, towards the tech operator. Perfect. Thank you very much. Good morning, everyone. Thank you. Thank you for taking our questions. We have, 2 questions. First, on on the presentation, you mentioned that, you are looking for a partner of 14 lives to celebrate a bit what would be the role of that partner and what kind of office are you looking for? That would be our first question. And there's a confession, on on on infrastructure. If you could let us know how much the traffic change before the the the COVID files and doing COVID cards, the traffic increase are, stable. Or if you anticipate, additional trust increase in data. Thank you. Hello, Susanna. This is Vincent again. So your first question, I will pass to mister Allen Kalaz, our CFO. And the second one will be answered by Leon had passed the bill, our CTIO. Hi. Good morning, Susanna. Yes. You know that, we are pretty happy with the results of our ultra broadband business unit. So team live, we grew significantly during this last year's, we're maintaining this almost 30% growth, in terms of revenues, because, you know, very well that there are a lot of opportunities in order to to service with Ultra broadband in the country, the penetration of fiber, it's still below 20%. So, we we believe a lot, on this basis, especially for us that it's almost everything, greenfield. So the contribution to growth of King Price Business is extremely important. But even though, today, these revenues account only for So at about 3% of our total revenues of the company. At the same time, this business today means a significant effort in terms of CapEx is almost 10% of our CapEx today. Dedicated to to the deployment of, FTPA. So, that's the main reason that we are trying to apply the concept that Pietro brings of smart products. So, we study a lot in the in the last, the last year, especially. So we decided to, to go to this project of creating an infrastructure vehicle, where we will allocate, all these secondary assets of last mile, and installation. In order to search for a partner that will help us to increase the deployment. So the main, goal that we are pursuing with this new project is to increase the deployment of, of FTTH going forward, which is, we believe, in this business. This vehicle, will be pure infrastructure. Yeah. It won't be exclusive for us. After a series of time. And, and what we are trying to find is, it's the right partner in order to to allow us to increase infrastructures because there is a need of infrastructure, for everybody. So it's as we design it that we showed in in our in our plan communication, we will be, we are ready, on a market time phase. We have, as Peter mentioned, we have signed a lot of NDAs, almost more than 20 we are very happy with the with so far with this project. Hopefully, we can we can close the project by the end of this year. Hope I answered your first question and then I'll leave the floor to Leo for the second one. Thank you, Adam. Hi, Susanna. Good morning. Let's see. From a bio perspective, you can say that the draft is almost flat, but we see a huge change in terms of profile. And, I define Delta in 3 different ways. The first is geographically. We can see that the mobile traffic move from the traditional, let's say, downtown and commercial areas to residential areas. The second one is a a deep change in terms of the usage. We can see that the apps that are now we are most seeing the inquiry. We're also related, recently, streaming and some video conference apps. This training, we can, appointment on Netflix and YouTube. So you can see the reducing of the VJETs, like, ways, of course, and, others like, social network. It's already changed. It is, we can see that, there are some kind of off load for the Wi Fi. So the people that has Wi Fi at home is, using more depth. But on the other side, you can see that, who depends, from the mobile only connection, has been used that in more intense way. So we fill this change. Let's say we can see that we are compensated to press to just move it to a Wi Fi with the increasingly of the user for people that has just mobile connection. So, overall, we can say that it is set in a problem. We can see the increase in our voice usage on mobile side, And the and, in a fixed index, we see, increasedly for around 30 percentage of usage. Preparing the period before and after, the COVID installation, social isolation. So overall, we can see that all the adjustment that we are promoting on our network, is, let's say, handling data and keeping the quality is the most important. So, the big pressure now is not just the volume on mobile, but is the changing of the usage. And what we are seeing, you know, let's say, very good way, if that's the network, it's performing very well. Over this new new challenge of, profile changing. Thank you very much. Very to you. Mr. Friday, so that the school would like to make a question. Hello. Good morning, everyone. I have two questions as well. The first one, I think in line with with Marcelo asking the beginning, but just to understand, when I look here at the presentation in the very, first is live. You mentioned that, if it was not for COVID, you'd be in line with the target for the year and then 3 cents. So I was just wondering if the impact really from COVID on this one is is 1.3%, on on this card coming give or take. I do understand that you postpone the price increase, but it still looks like a significant, impact for for basically 15 days. Alright? This will be the the first one. And then my second one, on on your fixed front, when I look at the G and A, it looks like that, you increase your IT team to make the company more digital or projects on on this line. So just wondering if you can give us a bit of the financial impact on on on on this G and A, if this is correct, this statement, and about this project as well. Thank you. Hi, Fred. This is Vincent again. Thank you for your question. First question will be answered by Pietro. On the revenue side. And then, related to the cost, G And A, I applied to other in Colorado, our CFO. Thank you. Hi, Fred. I think that the impact in terms of revenue that we claimed in the first chart of our presentation, uh-uh, to easily understand if you remember that on a on an average basis, sir, the 50% of our revenues come from prepaid. As we clearly stated, in the last 2 weeks, of March, we have an impact of the 25%. So if you transform the percentage in absolute value, the one got 1.2% of difference, 1.3. Is exactly the impact on prepaid that was around 40,000,000 dollars, $50,000,000. Again, you need to get the the the revenues are prepaid on a quarterly basis. She divided by 3 to have 1 month. She divided by 2 to have the last 2 weeks, and you are tied to 50%. The number that came out is this 40,501,000,000 riaz that is approximately what is missing gas related to the COVID 19. So we didn't put, in this calculation to do something very easy. The fact that you didn't apply the price up. So, again, if we if we shouldn't have been impacted by COVID, our performance perhaps could be much better than 3% as we mentioned in the first chart. Then I leave the stage to Arjan about the digital, but it would like where life has sometimes this kind of event of events allow us to understand as we can make much more challenges in the process of digitalization of the digitalization of the company. And I think that this is a lessons learned that we are applying. And, at the end of this COVID, we will have the new lines of efficiency in our plan. 1 of which would be digital work. But today, now I leave the state to Adrian to elaborate. Yes. Thank you, Pedro. And hi, Fred. Regarding G and A costs, I noticed that this could be One question is coming from you. The the the fact is that, G And A is in it's a mix of different costs. Clearly, IT, maintenance is one of it. But I repeat it's IT maintenance. What's what's happening? Our company, as Pietro mentioned, and as we've been mentioning a lot, in the in the last years is becoming much more digital. It's not that we started to be digital now because of it. We've been working since a since a long period of time, what time of this of this area. And, of course, our our industry has been switching a lot of importance, from network also to the IT side. So, of course, our infrastructure in terms of metrics is really important. Today, the industry and our especially, we are much more intense in terms of IP. So it's a kind of, of logic issue that you will also have, additional impact in terms of maintenance of IT. If you saw what happened in the last years, we used significantly the optics and network, but at the same time, we did a lot of efforts on topics on the IT side. Well, of course, this IT, projects or infrastructure needs to be maintained. So you will find additional maintenance going there. G And A has also an additional impact such as consultancies or search of different issues that also can hit specifically in in some quarter rather than that. But you should expect some additional or or some, this level going forward because the grouping up of accounts that we do inside G And A, course includes a key. Anyway, G and A account for 7% of our people open. You know? The, the growth of the decrease on this on this line, we've got reviewed less than 1% in each quarter. But, again, this shows the importance for us of the IT infrastructure. This is Maria Perez from September. Would like to make a question. Hi, guys. Thank you for the call. My first question is to lay out on the CapEx flexibility. How much do you think you can cut the CapEx 2020, depending on on how long this is, the economy headwinds grow. And how relevant is the network agreement with TiVo in terms of, OpEx, but also especially in terms of CapEx savings. So is it gonna and flexibility to your CapEx already in 2020. Hi, Maria. Let's see. In fact, we have a a north in our plan, in terms of my infrastructure, how we are planning to get, let's say, a structural, solution for the for the future. What can happen in 2020? And, again, I guess that, we analyze that quickly because of the environment can change if, Anthony, is how will you, let's say we'll move all the logistics chain. So I'm just talking about the CapEx. We we have to understand the debt that we dependent from our suppliers. That depends not for, let's say, lock on manufacturer, but sometimes abroad. So we needed to understand how it will be worth during this period of the COVID semester death. At the same time, we are seeing, as the previous question, that the traffic stop at the the explosion growth and now is more, let's say, flat. We need to understand how you'll be the connecting back after the COVID crisis because probably it will you, let's say, bring some kind of change in terms of a growth. So we are discussed every week about what this plan can be heat or simply change. So I guess that is uncertainty right now. She's talking about what happened on the next mall. Because the environment is not so, let's say, clear. But, again, what we are seeing is that some kind of an appointment can be postponed or have a dispute of a data from the, supply chain. Again, we are talking about something that happened 5 weeks ago. So it's very difficult, to demand that. The second point about, about the Vivo, we are waiting for the final answer from the, regulator and the the the project. And after that, we really believe that we you position this project, because, again, the opportunity for reducing not just the CapEx but, mainly, the OpEx is very interesting for the both side. So, it is part of our smart CapEx approach. We are keeping data on our north. And, we hope data after this official, let's say, answer, we can start with the project, sir. If that if we will take, let's say, a very important, piece on our second half employment. Perfect. Thank you very much. And my follow-up question is on the M and A strategy. If, you guys can comment a bit on your initial views on the timing, how this intelligence process is working, if you have any funding strategy and expected synergies that you can share with us as of now. Thank you very much again. Thank you, Maria. This will be sent again. I will pass the call to to Mister Pietro Gabriel, and then, Mister Adam can also give some some of his views. Thank you. Hi, Maria. You very well understand that, we are covered by NDA, so we cannot disclose too much. You can think that, Also, in your sentence, there were some key elements. We are proceeding with the So it means that the things are moving on. And I think that this is the most important part. We imagine that 15 proceed and what we find during the due diligence, sir, is what we were expected in the following month, you can think that we can move forward. But, again, I think that the most important element that, we are proceeding with the diligence. Before to leave the stage to Adam, just to complement what the layout of 4 related to the topics. I would like to highlight that, first of all, the MOU with Vivo is not just a way to do efficiency between 2 telco play in Brazil. That is an important sign for all the market that there are rooms to cooperate to put and to do is to spend money, CapEx in a more efficient and intelligent way where there's no need to compete. And the thing that, we will be everybody open to fool their player that's going to participate to this kind of approach in the future, giving a sign of a better maturity of the market. The second that at the beginning of the ZR, we completed the bid to choose our supplier for the mobile network. That were finalized at the beginning of April. So I think that we'll have a further saving that will come out from this important bill that was announced also by Mister Gubitosy during the call of our Michelle. Now I'll leave the stage to Thank you. Yeah. Thank you. Hi, Maria. Here, regarding your first first question, about about CapEx and if we we could we'll be able to to take CapEx this year. Just let me compliment, only one thing. Our CapEx plan, it's it's not yearly CapEx plan. Of course, it could be extremely difficult to project your infrastructure development only in 1 year. Our CapEx plan is of 3 years. Yep. And, on top of what, Leo and Pietro mentioned, this is something that it could it's extremely important. So if the if we need to postpone something we can do. It's not that, the end of infrastructure plan is in the 31st December of 2020. So, it's important. Anyway, as Peter mentioned, in his speech, our package, it's already a microscopic thing. And we know how to work in terms of efficiency. On the M and A side, regarding I think it's April, I'll see. Answered, very well, the question. The the important thing here is that we are doing the due diligence of, owing mobile assets. And it's not a valuation. This situation today of everything, everything with everyone in virtual. It's not creating any issue. It's not the the data room, the zedigens vehicle. So, we're, managing the things very well. We'll see. We have, like, information and we'll see, in terms of timing, what could be, in the following months to to have some more news. Okay? Cents. Yes. Okay. Thank you. Good morning, Pietro. Adriane, Leo, essentially, I hope you're well. Your thumbnails as well. I have a couple of questions. The first one is related to potential savings in commercial activity. I was wondering if you could please quantify any potential savings that you could achieve. I don't know if in the 2nd quarter or in the I mean, the, you know, the quarter's remaining of the years, given the coronavirus brought down and also the potential recession. And the second question is related to bad debt. I know that it has taken several measures already in order to keep bad debt under strict control. However, the macroeconomic environment that we are facing today is completely different that we have seen in the past. So I was wondering if there are some measures to present budgets to materially increase that you are already taken as we speak. Thank you. Thank you, Rodrigo. So both questions are related to OpEx on, commercial, savings, potential business savings, and then add that. So I will leave, the answers to to Pietro and Adrian so they can elaborate a bit on this topic. Hi, Rodrigo. Related to the potential savings on the commercial area. I think that, what you can expect are material setting, in the period of this kind of lockdown also, you cannot say that you guys were in lockdown last But in any case, you can email just, for example, adding an acquisition. The saving on the acquisition cost is more or less 100% on the physical channel, and you know better than me that on the digital, the cost is much lower. We are receiving that something close between minus 10 and minus 20 percent of code to the call center. And so this will be reduced. But in the meantime, we're experiencing an increase of the user of the use of the digital application. Advertising. It's clear that, in this period that you cannot call people to come in the shops. Makes no sense to spend all the money of the budget that you have on advertising. So also, miss Zaria, we are reading significant reduction. So I think that these are material settings that can allow us to offset the risk that we have or mainly offset the risk that we have on the first on the top line. Related to the bad debt, we must be satisfied because with the exception of what can happen now with the COVID, we promised and we talked to all the market that we were putting under control this area of cost for our internal procedure, and this is something we were delivering. Now going ahead, it's difficult to say what you can expect. Also, because in the month of April, we had the same situation. It seems that the customer trucks, reduced the payment in the 5th 17 days from the expiring date of the bill and then recovered. It's like if everybody understood that perhaps, telecommunication now is in the short list of the things you cannot miss. And so it's better to pay to avoid to stay without. Now, if Adrian wants, you can better elaborate and compliment what is all this. Yes. Hi, Rodrigo. I think that Pedro answered Perfectly. Well, on on on the first, question, if I can put something on top of that, is that of course, there will be significant savings on the commercial, on commercial costs. But at the same time, we are also considering a lot, the the the medium and long term, you know, because, all the commercial costs, a portion of those are related to our distribution channels. And Most of these distributors are partners and some of them are in exclusivity. So everything we are doing everything we are doing. It's so it's so so considering, not only this quarter or the next quarter, but also in in in the in the medium long term. So, this is extremely important because we are talking of, of our strategy going forward. On the second side of the debt, I think that information, everything, it was extremely important in these days, what happens with a lot of initiatives, in the Congress and some states of, declaring our service as an essential service as and that, the the service cannot be suspended if the customer was obtained. We managed to solve issue, it was extremely important the resolution against the state of Sao Paulo in this area. So, we are it's not that that we are pleased with with the situation that, we think that the the impact at least doesn't extend significantly, it shouldn't be, shouldn't be, important. Anyway, it's something that, as you know, we monitor, we monitor every day. We have every day with the collection, numbers. But, again, the the good thing here is that all we've been doing last year in terms of in terms of of systems in terms of processes on the collection side, put us in a different situation. Sorry. If I had the one point that you can add once again to Eurorigo to my operation to Fred. I think that Adena stated very well, we are not disposed to shut down cost and CapEx that turn up the future of our company. What we are doing, we are managing in a clever way, our costs and CapEx base. Remember that we come out from this outbreak, and we will continue to complete and grow. So to avoid any kind of misunderstanding, we have not kept cost or CapEx that can hurt us in the medium long term? Understood. Very to you. Thank you very much. Pietro. Call, we'd like to make a question. Hi. Good morning, everyone. Thanks for the call. I hope you're all safe and well. My question is in the follow-up on the on the Ultra Brothers strategy, please, and and also trying to clarify. So there are more than 60,006,000 ISPs in the country, and and other operators are doing deals with them now trying to work on franchise models and some type of partnerships. Are are you looking at that possibility too under this strategy for for this vehicle that you are, you know, together will be funded by a partner, and and that money would allow for the the fetch deployment of of of fiber. And then this this partner will be a shareholder in this new van. Thank you. Thank you, Kado, this question, I'll pass to to Arlene as well. So, Arlene, if you can elaborate a little bit on it's in my project, please. Hi, Tadu. How are you? No, clearly, it's the second, it's the second, We know that, yes, there are a lot of ISB small ISB's in the country. They their approach, is different than ours. Won't say that it's, worse or better. It's different. We feel more comfortable, of growing on on greenfield because as we were saying before, there are still a lot of opportunities on those transactions in the country. And, and we think that there is a lack, of infrastructure. So if this vehicle could work initially for us, but then without this exclusivity, it could be much more efficient. It's always oriented to our growth, taxes, taxes, and strategy. So yes, these partners should help us to increase the deployment of fiber, probably also with higher focus So in terms of the payment of the last mile, so it's our designed of this growth in subs of fiber. And we think that, yeah, it could be, it could be extremely interesting in terms of infrastructure. The the fact that we signed a lot of NDAs, more than that, as we mentioned before, that probably we are in the right direction. For now, any more questions from analysts, please do not reply to Q And A section, leave the press and each individual member in English. So the first question, comes from, Gabriela from Hoitzers. And she's asking, what is the percentage of the impact from, COVID to the prepaid recharged. I think we already addressed that during the the the canary with analysts, but, feel free if you can maybe elaborate a little bit more. I think we'll help Gabriela. Please get through. Yes. Thank you, Gabriela. As we stated back, it's just to also try to understand what we think was the impact. In the 1st in the last 2 weeks of March, We experienced a reduction of the recharges year over year at around 25%. I think that, perhaps, also, there was a kind of, let me say it on top of the misunderstood panic mode that put people on a too much safe side. During the month of April, going ahead experience and an improvement. So we reached something close to 20%. And between the end of April and the beginning of May, This reduction is further improving. So I think that people are coming back to normality. In the meantime, I think that there were also two behaviors that, car did this kind of situation. The first one, it's an higher use of the Wi Fi, because everybody's 82 more in are keen to exploit more Wi Fi. And the second, the fact that some of the traditional channel were shut down and so it was more difficult for a part of our customer base to recharge. In the meantime, it push a lot also. Our free customer base to move towards digital shine, and they are much more efficient. What we think that in the medium, long term, what will happen is that, all the people that are experiencing digital today We think that we'll continue to be digital, how or when it would be out from, the COVID situation. And this will be a real good news for us for the season because a more digital system, I mean, generally speaking, economic system, it's much more efficient. And it will open opportunity for new way of working and the new business model. Okay. The second question that we received from a journalist comes from Rodrigo Cajou from Valua. This paper. And it's related to the progression in the negotiations for the acquisition of service of mobile. Again, I think we we addressed it to a certain extent. This question, would I ask Pietro to to give some additional words in in in this topic as well. Rodrigo, as I mentioned, 4. I think that the real, good use is that, finally, we were able to access with that room and to proceed with the the details. Until now, there were a lot of discussion, but nothing was materialized. The fact that's finally thanks also to the collaboration, boy, We were able to enter. We are starting the element. And as I stated before, if everything proceed, we think that in the next month, we can do the next move, if everything happens in the right way. Thank you, Pietro. Now we have a question from an individual investor, Albert at Tavares and, maintaining the same topic related to M And A. He's asked if the COVID crisis So a certain extent has changed our interest in acquiring the mobile port of voice. No. Absolutely not. Also because what we told, we do not expect that COVID would be forever. It's just, a window, a terrific window in our life experience, but it's something that is going to end. That would be strange. And when you manage a company, you want to create value for your shareholders, you have to look always in the medium, long term. And in the medium, long term, the the M and A process makes a lot of sense for us for all the tech markets in Brazil, and I think also for, the country of Brazil. 3 strong player can allow to Brazil to be a better place and to be a more digital country. Thank you again, Pietro. We have, the last question from a individual investors from Madridbo Patinato, and he asked about the perspectives for team, for 5 g in in Brazil. And if we have any preference in terms of the technology to be adopted, in the roll out of 5 g. I think Pietro can elaborate a little bit on this topic and then Lel Capital Village is CIO as well. So, guys, please go ahead. Thanks for the question. And I think that, I will do no mistake if I report what all the types of players telling, to to the market. 5 g at this stage. Is more a choice for the economic system and not an opportunity for a tech supplier. What do you mean? We invest in we put money on the 4 g. We are still exploiting the the 4 g. I read that yesterday, an interview of our sister to share the. That was declined. It's actually the same. Today, they are investing a lot on 4.5 g, but we found enough, handsets to exploit that too. They serve you in the technology that can open new business model and that can allow to the Brazil, to the economic system of Brazil, develop new business model to create new jobs, new opportunities. Why? For the type of player, the risk is that, is not directly something that can generate better revenues. So for this reason, as we speak with the Constantly, let's take a player. We can follow what can be an help for the country if we will have an option that will be not expensive. And we can take commitment about the coverage. But what is important is at this stage of technology, I think that the 5 g is more an important for the economic system. That's not for all the tech players. Now I leave the stage to Leo to elaborate more on the technology side. Thank you, Pedro. Rodrigo, just one important statement that we did was our contribution for, from Anatel for the 5 g auction. And, we start, exactly in the line with the information in a situation when we bring again, one reported that was done by, mini state of the economy, economy minister about what can be the impact for the general economy of the country. And it's talking about the 24023 you're gonna have ice. The the, let's say, the lower part of debt is related to the risk to health operators. But all the economy can be impact, positively, about that. Talking about technology, we have, let's say, talk that, in the last 3 years, all the investment, the debt that we have moved on the network is already thinking about to the future. And Yeah. Let's say, preparing the network for the 5 digit generation, we have to remember that we did last year, 3 different lives pilots in Brazil in 3 different cities with the 3 different technology about how the 5 g can work. And how our network is prepared to deal with that. So if we add this, if the new part of the core virtualization the new data center, we are, let's say, very particularly, that we are in the direction to prepare the network for the 5 g. And then we are deal with all the technologies. So we are preparing our network, to work with independently what, what kind of technology we have to to finish on the future. So, I guess that, it can be a very good opportunity. Again, not just for us to support the country. Thank you, Bill. So now we have some other questions. I will put them together as they are all related to, our partnership, the partnership that we are looking for, in the team live project. So The questions come, from Bruno, from Teletime, and from Unalobo, Convergentle, Basically, what they would like to understand is if we are not following the path of franchisee, in the model that we are studying. So this is the first part of the question. And the second one is about the exclusivity of, of of a potential agreement that we would have in this project. So I will leave the that questions to to Adrian. I think he addressed those two points as well. But maybe I don't know if you can clarify a bit on, the franchisee topic and as well as exclusivity or non of this potential project. Regarding the exclusivity, clearly, this will be infrastructure vehicle that we will create. And, of course, we will, we would like to have an initial exclusivity period in terms of the use of its infrastructure. At the end, we are interested in in the growth also of this of this, vehicle. So it's important that it would be also efficient in in the in the usage of the of the fiber. You know that one operator only uses a small portion of the capacity. So, at the end, it will be, of course, an initial period of it, the CVT in terms of the usage of infrastructure, but the purpose is that after this year, we'll be open, to other, phrases. So, I think this is the, is the is the most important issue. So on our side, this is the most, direct approach in order to increase the the infrastructure. Thank you, Adrian. So now, please, operator, we can proceed. Any more questions. I am returning to mister Pietola for his final remarks. Please It's a very solid fundamentals to face these, universities, focus, innovation, and agility. With the key to making the right decision to protect the company for the reopening of the economy. We will be ready to take full advantage of the recovery in the content of the shape, it will take. Until then, we will maintain our focus on execution. I would like to thank you the dedication and commitment of our team who are overcoming the challenges to make sure we serve the country in the best way during this moment of worship. Together, we can do more. Zoom cost some of my Thank you once again for participating in our conference call. Please take advantage. I hope we can virtually meet soon in the upcoming events, we'll be doing with the financial market. See you soon. It's a first quarter of 2020 conference call. Of 15.5%. Your line can be disconnected from now on. For further information and details of the company, please access our website, ri.t.com/gr. Thank you.