Earnings Call: Q2 2019

Jul 31, 2019

Good morning, ladies and gentlemen. Conference Call. 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 and participants. At that time, further instructions will be given. We highlight that statements that may be made regarding the prospects projections and goals of TIM Participates, constitute the beliefs and assumptions of the company's worth of executives of this. Future considerations are not performance oriented. 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 shifting particulate may affect their performance and lead to different results than those planets. Now I'll turn the conference over to the CEO, Mr. Pietro Labriola, so he can present the main message for the second quarter of 2019. Please, Mr. Pietro, you may proceed. Good morning, everyone, and thanks for attending our results conference call. Quarter, we will put a lot of focus on execution and make some short term adjustment to regain results momentum. We will also return to our DNA of innovation and agility. I believe that we are achieving this step by step. And during the second quarter, we reported results and achievements, which denote we are back on track. I will walk you through the main highlights of 2nd quarter and then the team will ask to answer your questions. In the second quarter, we were able to post solid results despite the exceptional challenges of the slow economic activity and aggressive competition. Service revenues show a slight acceleration in growth, reaching 2.4% year over year, versus 1% of the last quarter. We still need to improve to reach our annual guidance, but we are on the right track. We continue to perform very well on the cost side, which combined with better revenues, led to an acceleration in EBITDA as well. Our growth reached 6.2% compared to last year, allowing margins to expand to 37. 9%. These solid results were supported by a renewed market approach always taking advantage of what was already working and changing what needed adjustments. In this context, Tim Black familiar was our major launch during the quarter. This set completes our portfolio of mobile offering, increasing our presence in the IAN segment and providing a clearer path for offer upgrades. As we were the last ones to launch a family proposition, we didn't want to just replicate the other players. That is why we brought the concept of an entertainment hub, which moves away from price competition, and that's the outstanding process. Well, actually, even more, we are creating for clients a reason why to upgrade. Imbreth familiar is the free software in Brazil to include the Netflix subscription. And we look forward to enriching our proposal with other content providers in the future. The plan offers all the features a common family plan would offer. As well as music content, in magazine, newspaper, social network, international roaming package with voice and WhatsApp. And that's for service. So far, the market response is very interesting, close to one period of our gross addition in triple speed, are coming from this family plan. After a long period out of the media, we launched a new campaign for our control plan focusing on the key features and making sure that we remain relevant in the minds of clients. While in prepaid, we started selective and retro response to our competitor with the goal of improving our acquisition rate and top up levels. In this segment, we are more expensive than the other players, but we are adding features to what they already had. For example, when we fell period of sale, this is, and, sponsor data. For the letter, we implemented the team as platinum platform. Our first move in this field where the most is yet to come. On top of that, we are improving our customer support channels, adding WhatsApp chatbot to prepaid users. The combination of this with other execution adjustment in the B2B segment, is helping us to sustain solid mobile ARPU growth of 5.3% year over year, with postpaid, excluding machine to machine, declining 1.9% and prepaid growing 2.9%. Customer based dynamics remain healthy with postpaid, excluding machine to machine, up by 4.8% and prepaid data user at nearly 22%. This last number denotes an interesting change in the profile of our customer base as we leave the position of champions of the second scene and become the first or unique SIM in more and more customers. Mobile has been a game of resilience, But as I've described, we are adjusting our go to market to help accelerate growth in the second half. And we look forward to a more competitive environment and the better economy as we as dairy farms are advancing. One of the main highlights of our business is TIM Live, which continue to show strong momentum In the second quarter, growth was once again driven by a combination of high single digit ARPU expansion, and a solid double digit customer base expansion. This represented an important milestone with TIM Live through passing 500,000 customers. As a result, TIM Live revenues grew more than 30% compared to the last year. CTH rollout has been below our expected expansion rate as we are to focus on addressing some issue with contractors in certain regions and tweaking feedstock processes. We understand that the major adjustments we're completing during the second quarter That is why we were able to close the quarter with 5 additional cities with FTTH, reaching 17 in total. We are now covering 1,600,000 households, and we should accelerate in the third quarter to offset the delays between January May. Since the last quarter, I started to point it out that we will look into other sources of revenue. So I want update you on some of the key initiatives we are working on outside the B2C work. We're exploring more and more internet of things solutions. I commented last quarter about the connector agro initiative, in which team is promoting 4g Technology on 700 Megahertz in the countryside of Brazil and partnering with major names in the country agribusiness segment. This quarter, we completed the migration of the machine to machine base of Porta Connecta, and MVNO that used to run over our network. Along with lines, we also bring expertise and system from the operation. And the last but not least, we are developing partnership for connected car application. We hope to have new pretty soon on this topic. Importantly, this vertical also offer opportunities for cross products. So while being financial is more today, the combined effect can be relevant in the next 2 or 3 years. To support all of that, we need to evolve our infrastructure, and we are working on several fronts. In mobile network, for example, our 4G coverage continued to expand, driven by 700 Megahertz roll out, We're covering more than 1.5000 Cities with this band at the same time as our 4.5g coverage, reached more than 57% of ILN population. We continue to gain additional capacity with our extra reforming projects at 1.8and2.1 gigahertz. As a result, our 4G network is the largest, most available, and that's the lowest latency in the country, bringing a high level experience to our customer. Still on the mobile network front, we are starting to implement techniques on our 4 gig network, okay, that were originally designed for 5 g, and we are adding a lot of success. Our tests show that Masimo can boost capacity by 2 to 3 times under real condition. On the fiber side, we're expanding our transport network to support both the mobile business and the FTTH rollout. In the past 12 months, we have increased highly capacity by core penetration by 5% points, reaching almost 70% of our sites. FTTH coverage also expanded significantly. We are now covering four times more households. As you probably saw last week, we signed a memorandum of understanding with Bigo to explore different initiatives to infrastructure. The goals of such discussion are to find opportunities for both companies to work together to improve customer experience while having more efficient spending of CapEx and OpEx, shifting resources toward the customer are most benefited. We will focus our discussion in the 2G single grid LTE at 700 Megahertz in Small Cities, which may be funded later, but we will also discuss other technology, Vans and other operation and maintenance initiatives. We think this is the right path for Smart Erica's. The 4th element of this equation is information Technology. The first start was a period of major development for our system. We know this may create some instability but they are certainly a fundamental basis for the evolution of the company. We implemented a new internet of things platform net into our network. We finished the migration of the machine to machine management system of porta connector. On the network with the virtualization front, we signed a new contract, implement 57 data center through 2021. And just completed the delivery of new charging and billing features to support new products and customer care activities. The progress of our infrastructure is key for pursuing elevated customer experience and satisfaction. That is why we need to solve issue of today while preparing for the future. Having this in mind, this quarter, TIM was the 1st operator in Brazil to initiate 5G test on real life network in 3.5gs band. We are testing in 3 different locations with 3 different vendor We are conducting trials with technology Institute to evaluate different products, solutions and new business model and to develop reference center on this new technology. The development of our infrastructure has been a key element to transform the company in many areas. The digitalization process, for instance, is helping to change significantly client experience and improve satisfaction. At the same time, as it positively impacts our OpEx. Our digital transformation program attacks 4 major fronts: caring, billing and payment, acquisition of clients, and prepaid recharges. And all of them we are delivering strong evolution, which helps to capture the savings forecasted in our efficiency plan of BRL1.2 billion between 2019 2021. Our efficiency plan is a combination of digital and traditional initiative and The rate implementation of buffer is generating robust savings. In the first half, they reach around BRL350 1,000,000. This led normalized OpEx to remain stable in the quarter and during the 3 6 months of 2019. Despite the overall positive dynamics in costs and regardless of seeing a 3% of gross revenue, but that still represents a challenge. To put it into perspective, excluding bad debt, our normalized OpEx will decrease by 2.1% year over year. Our expectation is that we reached an inflection point in this line during the second half of twenty nineteen. Moving on the other financial highlights. As I pointed out earlier, despite a tough macroeconomic environment and competitive landscape, the company was able to accelerate revenue growth when compared to the previous quarter. In the second quarter, top line grew 2.4% year over year. Definitely, compared to the first quarter was mainly driven by mobile revenues, which grew 1.9% combined with the low double digit fixed revenue expansion mostly reflecting team's lives' growth. Mobile service revenue performance was driven by ARPU dynamics as I mentioned before, showing a solid mid single digit growth. And this resilience is a consequence of the expansion of a high value customer base. Postpaid lines now represent close to 40% of the customer base, while postpaid revenues represent 66% Despite this, it's important to realize that we do not expect prepaid to HZERO. We believe that Brazil will always will always set a significant portion of revenue and base in this segment. Box segment are helping to produce a slightly better performance. Postpaid revenues, 5% year over year, while prepaid slowed its double digit decline in the first quarter, twice single digit in the second quarter. As described until now, our solid execution led to resilient revenues and controller costs that combined resulted in an EBITDA expansion of more than 6%. And once again, A record number for the 2nd quarter EBITDA margin increased by 140 basis points to another record of 37.9 percent. In the 2nd quarter, we posted a normalized net income of BRL423000000, 27 percent higher year over year. EBITDA minus CapEx increased by 4.1% to reach 60 percent of total revenues, while net financial position decreased by about BRL640 million in the last 12 months, leading to a leverage of 0.4 times net debt to EBITDA. In conclusion, we delivered a consistent first step that puts us in a position to reach On top of that, our tax disputes related to peace and confidence received favorable finance court decision, unlocking BRL3.4 billion in tax credits, of which 2.9000000000 was booked this quarter, term. Our board also approved the distribution of BRL370 million in interest on equity. And you are expecting to reach nearly BRL 1,000,000,000 in distribution. We will continue to focus in execution while we look for opportunities to accelerate value creation in the second half of the year that we expect to present a more positive external environment. Thank you. Thank you, Mr. Pietro. Now, we will begin the Q And A section. First, we will take your questions from analysts, followed by the journalists, both in English. Thank you. The first question comes from Susanna Salaro from Italo. Susanna, you may proceed. Hi guys, thank Thank you for taking our questions. We have 2. The first one is related to bad debt. What are the issues that are being taken to improve collections are to reduce the bad debt. That would be our first question. And second, I know Peter that you mentioned, but I couldn't actually fully understand that the homebuyer service revenue trend for the second half of the year you send it to Chorusco, you will, expect it to accelerate. Just if you could elaborate on that, if that's the case, you send it to Chorusco and what would be the driver first declaration. Thank you. We stated also in the previous call, we expect in the second related to the first question, that is bad debt. As we already mentioned in the call the first quarter. We expect it to improve our bad debt leverage in the second half. For sure, we are not side about the level that we have today. And, due to the fact that we are optimistic, usually, we see the area where we are not performing at the top as the area where we can have a a better level of performance in the future opportunity. So what we expect with the action that we put in place that we described also in the previous quarter, we expect an improvement on this area. For sure, we are trying also to work better on the marketing side. Keep in mind that this is a country where we reach penetration of postpaid as overall market of 108,000,000 postpaid customers. So what is happening today. That is important also to start to manage. Let me say, the customer that is at the boundaries between control and prepaid in a different way. What we did is that we have launched at the beginning of July also a new offer that is a kind of controller with payment in advance, but allow us to control better the risk on the credit when we have already reached in the market and high penetration of postpaid. Epic also the opportunity to explain better also what can happen on the revenue. Because I'm quite sure that when you tell that, market is reached 180,000,000 postpaid customers, someone think that there's no more growth in the market. This is not the truth. We have to work in the meantime on all the first of all, the growth of mobile revenues, and so I can answer to you also related to the second question, is coming, first of all, from the upselling initial plan. What do you mean? We can upgrade controller customer to postpaid and we're upgrading for speed customer to higher ARPU offer. This is one of the reason why, or the thin black familiar that fell out to increase the ARPU of our customers, where to continue to work on the controller as we are doing today in a rational way without push too much price because it should be irrational and will never drive a huge increase in terms of elasticity in the volume. And then we have to work on other two elements. The first one, as I was mentioning to you, that is the boundary between control and prepaid, what there are customers that are willing that have willingness to pay for but that can have some risk. And so in this area, a controller offer with a payment advance could help While on the prepaid, and this is the good news, the rechargers of July are flat compared to the rechargers of May. So we are starting to rebound our prepaid base. All in all, all this element will help us to continue to grow mobile revenues. And in the July number, we already see an improvement also in the revenues of the postpaid Our next question Hi, good morning guys. Thank you for taking my question. Regarding the MoU sign up with Sivo, what can you share with us regarding the potential savings in OpEx and CapEx in both 2G and 4G Technologies? Thank you. Diego, it's too early to give numbers. We got the commitment to work for the next 90 days. On our side, the makeup reveal that, you know, very well, it is our CTIO. We'll lead the project and we hope to come back, in the result of next quarter with some numbers, some more details. But what is important to think to to to say is that we think that this is the right path. Metro sharing that this level could allow to improve the level of efficiency of our network and further develop our investment narrow that will improve the customer experience of our customer base. Okay. Thank you, Pietro. And my second question, if I may, is regarding your cash flow profile. I mean, we are clearly seeing some great improvements on your cash flow as you mentioned, EBITDA less CapEx is growing more than 20% year on year. And now you are guiding to distribute for BRL1000000000 in IOC this year. So this marks a great improvement compared to 3 years ago. But my question is how prepare are you to pursue further in market consolidation if some opportunities presented, for instance, or you recently stated that, they can explore all the strategic options to maximize their shareholder value in the mobile business So in a hypothetical scenario where this asset is available, how preferred are you to pursue your further consolidation? Hi, Diego. If I can, Duke, the centers, we are exploring all the possible option to increase shareholder value. It seems as long as it was fixed. I'm not wrong. It was the same sentence that was used by Bebo in the conference call. But again, come back, to the reality. What is happening that we are entering in a period in which we have good opportunity? Because several things that are happening at the same time. The aim of you with Vivo is giving us an opportunity further improve our capacity to continue to increase our network quality in an efficient way. With that, we are going to have a bid for new frequency, allow us to do evaluation of what can be and can make sense for us. And in the meantime, the market consolidation that it seems will happen is giving us the opportunity to have not just one choice, but with the possibility to choose, we are preparing the finance the financial of our company to be able exactly, as you mentioned, to explore all the opportunity that can increase the for our shareholder the value of our company. Well, it will be an interesting period of time, the second half I think that will give us a lot of surprise. That's helpful, Peter. Thank you. Our next question comes from Frazimenez Bradesco. Good morning, everyone. Thanks. Thanks for the call. I have two questions as well. I mean, the first question is on the revenues in the front, I just want you to get a better understanding about the line of the revenues, especially, I'm not sure if you're giving this number, but if you could, any any color on about the the cancellations, the revenue from cancellations on this line, this would be great. That's my first question. And then on the second question, I think it's more broad, but Peter, what is the strategy of team today? I mean, the plan was really clear the company was focusing on improving its network and upside it to our base. Today, it looks like you're much more restricted or being upsetting also because of the impact on our on our bad debt. So just trying to understand team today will be focusing more on the prepaid client, especially as simply top is gaining relevance. So we continue to focus on increasing your postpaid days in ways where are you turning today, let's say, key for next 1 or 2 years? Thank you. Hi, Fred. Thank you. About other revenues, in the other revenues line we have a swap that is something that is for us also really important because it tells us in terms of cash flow, it's an important accelerator in terms of our network development. And so it is very helpful on both side. Let's remember, in any case, that we continue to post a real, very good, profitability number. My on the EBITDA with 57.9 percent, on the other point that is more easy to strategy that has all So again, to explain better what we can expect in the future. What we are doing, if I can tell, Let me say a program. We are, discontinuing in what I mean? For sure, the strategy of continuing to send prepaid customer base to postpaid is no more the only mantra of our company. So what we are going to do on the task and then I'll tell you some related to adjacencies. On the traditional services, what we have to do is that where to work very well on the quality, where to increase our level of service on the postpaid. Trying to create a better, continuity of the offer to continue to convince our controller customer to move to the postpaid. The creation of plan of Amelia was made to put something more on the postpaid is our customer base to migrate from control to postpaid just to give you some idea. On the postpaid, plan of familiar offer that will be also put on the other thin black postpaid offer with functionality as rollover or the possibility to have direct access to a human attendant. Whether because you have to justify for the customer why they should move from PTO 60 reais of controller to postpaid. And this is the part that we were mentioning, related to intra plan migration. On the control, I want to continue to migrate our customer base on from prepaid to control, but it's clear that, I can tell you that the volume that reached in the past cannot be maintained. So we have to work in a different way, trying to reduce the level of risk combat debt, working also with new kind of offer, as I mentioned before, where the payment is up front. Last but not least, on the prepaid segment, where we are going there. We have to continue to work with it because we have a huge opportunity of ARPU uplift with the consolidation of the 2nd SIM in our customer. On top of that, we have to consider that there are areas that we are going to develop, and then we will discuss more in the end of the year for the next 3 year plan. We are working to understand the opportunity that arise from mobile advertising and financial services. I don't have to mention to you, has other player, our competitor, adding these area revenues between BRL120 1,000,000. So I'm not telling that they can reach this amount of money in 1 month, but it show you that there are opportunity also in this area. So all in all, we have to continue to execute very well on the traditional services with something that we just know it's no more just one action, but it's treat for action in the meantime, where to improve all the quality and the performance in our customer base because the name of the game will be Chen Reduction, and we have to start to explore also adjacencies, as you mentioned, financial services, mobile advertising, internal things. Then in the medium long run, which we evaluate those the opportunity that can arise from fixed advance assets, because I think that we are the operator that is, positioned in the best condition to exploit this kind of opportunity being the operator with the lowest level of, legacy on fixed network. Just a little bit, hi, Marian. On your first question, related to others. As Pietro is mentioning, the main portion of these other revenues are related to network sharing. And most in this case of the 2nd quarter, to swaps, as we already discussed this in the past. So for us, it's also very important. It's not only a source of revenues. It's, multiple, it's it's a source of efficiency in terms both of CapEx and OpEx and those in terms of timing, because these swaps being a traditional, for example, fiber coverage, that if we need to construct it, it will take a lot, a long period of time. So Just to give you an idea of what importance of this, also these sorts of revenues for us. So Probably we'll see also in the future in different quarters, some jumps in terms of the other revenue mostly related to swap. On the other hand, then you have the rent sharing agreements that we have. Those are most stable revenues. Again, just in order to understand the land importance of this line. Just to allow me one just follow-up here on all the same or the same front. So basically here is, you are investing most in your infrastructure, you know, 9% of our CapEx is going on that way. So I mean, when you're modeling here, it makes sense to believe that, you know, with the infrastructure, the other things we use more of your network. And then, of course, this line should continue to go up and, and that's the information I'm assuming the margin of this line is relatively similar to, you know, selling plans to the B2C. You should not have a major change, you know, if this line increase in the future should not have a major change in margins. Is it is it correct? I'm not sure if I correctly your questions. Related in terms of margin, as you know, clearly this revenues are with, have very low margins. What brings you is additional efficiencies, mainly on CapEx and on future OpEx. Then, clearly, we are improving our infrastructure. These are additional, fiber coverage that we have. And those we we sell to other operators. Just remember that each operator uses a slow portion of a fiber deployment. So it's always important to have this network sharing. You saw that there are a lot of movements in the last, in the last years related to network sharing. It's imperative for the operators to be much more efficient in the use of infrastructure. So this is everything is related, you said. Our next question comes from Matthew Robilliard by Barclays. Mr. Matthew, you may proceed. Mr. Matthew, your line is open. Our next question comes from Valder Nogueira, Santander. Mr. Valder, you may proceed. First quick question, how much of the pace of postpaid has been curbed by what's happening in the bad debt side. Are you more cautious? Are you, you mentioned Pietro that you you were working on the customers that were on the boundaries of the two plans, but how much has bad debt curbed deal? That's the first question. Hi, Valder. Part of the bad debt is rated saturated for what he mentioned. We are more cautious and just to give you an idea about what's happening. Usually, you have the acquisition, then the customer that can generate bad debt appears terms of, cancellation, mainly after 6 months, and the bad debt continue to generate that effect, in 9 months. So this is the reason for which we are forecasting an inflection rate in the second half. What we are doing is that, we are doing some fine tuning in our strategy. We are not doing a big true, but it's something that makes a lot of sense to further improve our financials overall. This is the reason for which we expect also weak net adds in the third quarter that will not impact our achievement in terms of the revenues and the margin because, again, differently from what's happening in the past, we are able to manage the transition without generating impact in our numbers. Okay. Thank you for the answer. And second question is, lots have been said and some M and As are happening on the spectrum side. And we have an upcoming 5G auction. And we also have some frequencies can do, some already beginning next year and some in 2023. How do you play out your spectrum capacity vis a vis the spectrums that are coming due, not only of competitors, but yours. The possibilities that you have to do M and a, involving spectrum from other players. And and and how concerned are you with the renewal of the existing, mobile license and at which cost. Okay. Valder, at this stage, to Mario, Okay. But in this case, just just as a strategic deal, as we mentioned before, we want to say that we are entering in a period of time where acting in a clever and rational way, we have more opportunity to improve our position compared to what was happening in the past, but then it's Mario to better. Thank you for the question. You know, probably you can imagine this issue, but with 3 dimensions. First of all, of course, you will have, in some point of time next year. Probably a new spectrum available. This is not only 5 new spectrum because there there would be also the 700 Megahertz spectrum that is typically 4G. So the 700 Megahertz is 2.3 3.5 and Milli Mansi is expected. On the other side, today you have lot of agreements, among players in specific areas to share spectrum that increase also the capacity of the system. To to to manage this car's, Scars Resorts and, And then, what was the, the, the, the 3rd, the 3rd point you, you, you had, I don't remember. A new one. I, the license. Yes. The license. The is, of course, one of the key pillars of the PR 79. The PR 79 that, of course, is fundamental for the sector as the concession fixed concession side and as the mobile successive renewable side that we expect will be approved this year, because it's something, of course, that from a regular point of view, is of course, needed by the sector as a whole. So that we are 79 for the renewal, spectrum sharing for efficiency, and the new spectrum for the next year. But it's still on that question, Mario. Do you have an expectation, assuming that the PLC 79 may be approved? Okay? Assuming that is approved, then it comes with it, the the the ability to renew the license. Has has there been any any consideration of at which cost this renewal will take place? You know, the reference we have today is the cost that we have today for the renewal that is, is a 1% per year of the net revenues related to that spectrum. I think that the good news could be the fact that today, this is a cash out in the new scheme, we could have, for example, a pay or play, a possibility, not to cash out this value, but to invest this value in those, in those coverages of the the the the the the less part of the areas. So we think that the value reference, we think it's more or less the reference that we have today. The idea is to consider it as an additional CapEx possibility. Okay. This is a negative that I believe is not properly prior to to revert that money into into coverage. Yeah. I'm confident that that can fly. Are you confident that this possibility could this is the, what we are discussing at legislative level. This is clear. The the basis of the PL 79 is that all the resources created about PL 79 or will be available for the coverage that the country needs. So we think that also for the spectrum, we will have this, this new arrangement. Well, there is no doubt, we're just complementing, some part of this, spectrum strategy. As Marty said, we are focusing, let's say, TRIM main pillars. The focus is about the new spectrum. You are right. So we have a auction, ahead. But it's so important to us that with the PR 79, we have the spectrum trade. So maybe some opportunities can came from this from this line. The second is the opportunity, that we are facing from the sharing agreement Remember that in the past, we have agreement for sharing with Yoy and, we, let's say, make a site of the run sharing from Moran to Marquis and so is used to the spectrum sharing in a more disadvantaged way. The 3rd is very important to us that is that the technology is, suffering a very, very, let's say, optimized incremental for efficient users of this pattern. On that, I'd like to highlight that, we were the further company, let's say the word that you passed, the new technology for Messeas MIMO in 4 g, in our network. And the result was very, very interesting Just to point a number, we have a 2, 3 times more capacity on the same spectrum using this kind of massive mining. This is a technology that is native from our 5G round. And what some vendors is doing should anticipate that this technology must use MIMO on 4G. So we are seeing that on this front, we have a very interesting, opportunity to increase our capacity using the existing spectrum. Okay? Thank you, Leo. I was refreshing hearing you. Our next question comes Hi, good morning. Thanks for taking the questions. I have 2. The first one is, if you could comment a little bit more on how much space more do you see to gain margin on digitalization initiatives. So you have several, indicators that you put there that shows 2 space to grow. And the second question would be regarding key fiber. What has been, the main hurdles to grow? I mean, is this the sales team, it's is a personnel to install the equipment? So, I know you're growing fast, but what prevents you from growing even faster? These are the two questions. Okay. Thank you, Marcelo. About digitalization in initiatives. We think that we have still good rooms of improvement. Just to give you an idea, we have closed, I think, yes, we did before, yes, they, a bid internal to move part of our customer care, award functionalities, to artificial intelligence functionalities. I think that we'll be that in place, by September, October, and it it will allow us to have a further acceleration on the digitalization of the cost of our customer care. In the meantime, starting from just to give you an idea, We change also our IVR system. I don't want to go too much in detail, but just to give you idea that, is not as long, but it's the truth. We are changing our IVR system for the prepaid. And, in the DDD where we were able ready to do that, our capability to add the automatic automatic interaction with our customer base, move from 69% to 75. This gives you an idea of what we are going, and we expect to move all our segments with this, automatized IVR, a again, by the end of the year. The automatization is not only on the customer care. We are but we are working also to better understand all the activity today are still human intensive because for the next year, we are imaging to a specific project to work with artificial intelligence in the area where we have seen a lot of, activities that are human intensive. We still have good possibility of improvement also. On the recharge where we have already reached a good level, but we think that we can move forward. And I think that in this next quarter, we present also a new concept of a project in Germany is co is so called naked SIM that could further accelerate our capacity to be efficient using digitalization. Related to TIM Fiber, what's happened was that among some of the different player that we're using as for maintenance delivery with a company that was was unable to perform So what's happened that you have to change and change? This kind of company takes time. In fact, the issue today was mainly related not to our commercial performance because we have reached, the highest level of gross adds, but was more related to the level of service that we were guaranteeing due to this problem. In the meantime, another factor that was that obliged us to decelerate was that in some cities, exactly that has happened also for the mobile to put new antenna, we had problem to use the poles to put our fiber. We have learned the lessons learned on our side was that we had increased the double the number of projects that we have to manage because in this way, we are able to, with, if there are if there is a rejection of 50%, we are able to, in any case, deliver what within the plan we, we are quite sure about that because in the in the third quarter, we are recovering the part of the gap that was generating in the Freestyle. And we're sure about that because we already started installation. And the main part the main bottleneck that was the bureaucratic authorization was already passed. Our next question comes Hi, everyone. Thanks for the call and for taking the questions. I still have two questions on my side, following up on the previous CapEx questions. If you could please comment on how disruptive do you think 5G is going to be your strategy? If you're expecting more gradual rollout, if you see any disruptive CapEx cycle out of it if it's going to be more focused on B2B initially. And in the past, we're very vocal about WTTX. And fixed wireless broadband. How important do you think that's going to be for your 5 g and residential strategy going forward? So that'll be my first question. Thank you. Okay. Thank you. Maria, I'm sorry, in some ways, I'd like to answer to both the question. You were starting the second question was related to WTTIX, WTT issues. How much is important also in our future strategy? And, this is also confirmed what I told the before. We see in this market a huge opportunity coming from fixed Eduardo Accessas. The activity that we put in place with WTTs, was very useful for us because it's allowing us to better understand how to manage this kind of business that is not complex as a fixed deadline biz in terms of delivery and all this kind of stuff. But in any case, it's not exactly the same to sell a sim in a shop, and this is very useful. And I think that also, the position of some of the other player related to the strategy is also related to the fact that they see 5G and T cell wireless access as a threat to their business model. Related to the CapEx and the 5G, we do not image a disruptive approach, but it's more a grad, gradual approach in the development. It's clear that this too early to try to understand better the level of CapEx and all this kind of stuff because it's important understand better from what will be published by Anatel with the public hearing that will allow us to have a better understanding about what can be done. But what I told you is exactly the position of Sintech Brazil. The position above the operator that don't want an approach that could drive a huge amount of CapEx upfront and with the gradual development of that. I don't know if I was able to answer to your questions. Perfect. No, that's very good. And my second question would be on competition. You had located in the past, I've been higher industry should take a step back in terms of aggressive 0 rating offers. How rational do you see your competitors on that front. I mean, do you expect rationality to improve both in terms of pricing, but also in terms of bundles and decelerating apps? Now I can tell you that what we are experiencing is that with some small exception, but I see Claro Vivo more rational, and so more on the same line of us. The the two players that must be controlled in terms of rationality are Nextel and knowing. Why Nextel is very aggressive in below the line offer, and you understand that also looking at the balance of the mobile number portability. They are very aggressive also in the acquisition, that is something always risky in terms of the debt. But again, we think that is a momentum because it very difficult to take, that place with that amount of Jiga with that kind of network. So it makes no sense to react in any rational way. And we're starting to see some irrationality on the oil side, but I think that it's quite end of all. I don't think that is the strategy that can be sustainable in the medium long run. Yes, sir. On the TV, I saw an offer. It's 19 RIs, 50 giga. Now I don't have to tell you how is the network, of some players to understand that This is something that is sustainable in the short run for the for a small number of customers. All in all, I continue to see rationality And perhaps market consolidation, we like to continue with this rationality that we like everybody to improve. The quality of service for our customer to increase the quality of the network throughout the country. Our next question comes from Alejandro Levine from Citigroup. Mr. Alejandro, you may proceed. Thank you. Hi, good morning. Thanks for taking my question. Just a couple of quick questions on your guidance for this year. So the first one would be just to confirm, you are still confident on reaching all your targets for this year. And the second is would this be possible with the current pace of GDP growth or would you expect or would you need an acceleration in GDP in the second half to get there? Thank you. Okay. I think that it's important to realize exactly what you mentioned in the beginning. Our guidance was built with a GDP expectation that was 2.5%. And so we continue to restate that we are confident to reach our guidance in a tough environment. We hope also that the improvement that will be more, let me see psychological because the impact of the pension reform will not generate the flow of money in Brazil in the second half. But we generated psychological impact that could restart the, the willingness to spend ma'am. But, again, we are confident to reach our guidance also in this kind of environment that was changed compared to the beginning of the year. Okay. Understood. Thank you. Without any more questions from analysts, we will now start the Q and This is Vicente Ferjira. The first question comes from Mana from convergentia Digital. And the question is, like, could you detail the new contract to implement the 37 year data center still 2021? In a moment where your rivals are scaling down from those activities? It's Leonardo Captiviti talking. In fact, we needed to highlight that we are talking about a different data centers here. The data centers that our competitor is scaling now is about, the old one, this kind of our biggest data center and more focus on IT. The new data center that we are talking here in team is about the evolution for the visualization of the core on the network. This is smallest and is more applied for a future topology that will be very, very necessary for the 5G because in the 5G, we will need to have more let's say, power computing and the more, content delivery on the edge to use at maximum the low rate the technology came. One important point to highlight is that, now we are testing a 3 different region, the 5G in Brazil. One is one sitting in the south, other in South East and the other in North East. And the way that we are doing that is exactly used with this kind of a new concept of apology. And in a virtualization core, and our content caches. So with that, we can deliver a very important quality over the 5G. So the idea here is to increase this presence. Remember that in Brazil, we are talking about a country where it is some kind of, convenient territory. So it's very important for the customer experience that we have more on the edge, this power, capacity and the content The second question comes from, Marion from Telecy. And should like to know about the MOU with Vivo in in if in this MOU, we'll have as well, sharing all frequencies. Hi, Miran. It's on us again. In fact, the MOU, we is evil is focused on to have the most efficient, let's say, that amount and use the data for the best customer quality. In the experience. So, I guess that the details will be in the end of this working. We have 90 days to conclude that. But, it's possible that we use this kind of, spectrum sharing. Again, this is not new. We already, did that with you. Into that 6 gigahertz. So it is a kind of discussion that a technical group we will have to present the best way to use this spectrum. The last question coming from the press is from Mr. Alexander Melo valloteconomico. And he would like to know if, understanding on the sharing of infrastructure as a more advanced way means that in the coming auctions team and the other operators will proceed in forming a consortium to make bids together on the slots that are going to be sold by the government. For speaking. The participation options in EBITDA are written in the rules of the So we don't know what will be these fruits. In general, for the experience of the past, this the consumption option was not an option from a regulatory point of view. At the same time, in particular, the 4 GB 2.5700 Megahertz, create some incentives in network sharing, to implement the network that is what we did since 2015, and we are trying to book as a, a, a, you know, a business is in the last, in the last 10 minutes. Ladies and gentlemen, without any more questions, I am returning to Mr. Pietro Labriola for his final remarks. Thank you. I want to reiterate what I said during our last conference call. Tim Brazil as a strong fundamentals, and we are in a position to take full advantage of the economic recovery that should accelerate in the second half into twenty 19. With the go to market adjustment we are implementing, as we return to our DNA, we are already regaining momentum. The road will be bumpy, but we are back to the right track. Before we conclude this call, I'd like to say we have 2 great addition to our team that I'm sure will contribute significantly to our business. Mister Alberto Giselli has joined us on the executive team as chief revenue officer. We delivered 15 years in consulting teams. And Mrs. Florida Business Court as independent board member with many years of experience in telecom, banking, private equity, and consumer goods. Thank you once again for participating in our conference call. Have a great day, and I hope we can meet soon. This will conclude the 2nd quarter of 2019 conference call of TIM Participation. Your lines can be disconnected from now on for further information and details of the company, please access our website II. Team.com. Br. Thank you.