Earnings Call: Q4 2018

Feb 20, 2019

Good afternoon, ladies and gentlemen, and welcome to Chien Participa's 2018 4th Quarter Results Conference Call. We would like to inform you that this event is being recorded and all participants are in listen only mode during the company's presentation. There will be a replay of this call on the company's website. After searching for the customer's remarks are completed, there will be a question and answer session for participants. At the time for the instructions given. We highlight that statements that may be made regarding the prospect projections and goals of changes to justice constitutes the beliefs and assumptions of the company's board of indigenous officers. Due to your considerations are not performance warranty. They involve risks, uncertainties, and assumptions, and they refer to events that may or may not occur. Investors should understand that internal and external factors switching participants may affect their performance. And lead to different results in those plans. Now I'll turn the conference over to the CEO, Mr. Sami Folio, so he can present the main messages for the fourth quarter of 2018. Please, Mr. Sami, you may proceed. Good afternoon, everyone, and thanks for attending our conference call. Sorry for having our call right now, please, our competitor. This was the only possible regimen in time around. I hope you have a chance to grab a bite before connecting. Opportunity to discuss my vision of evolution. Viewing on a strong base should become the best operator in Brazil. The one customers love the most, the one with the highest engagement level of employees is the 1 with the highest returns to its shareholders. As we transform our case with more exposure to cost paid, an entire new set of capabilities under refinement. From existing collections to billing, digital distribution, art, logistics, on the surface, Our visit set capabilities are being put in place, and that only signals the long term potential we have ahead of us. I'm pleased to be here today celebrating stronger results. We call 2018 in a very solid way. Our focus on execution enable us to deliver record high numbers for pizza and margin and to generate solid cash while continuing to invest in our infrastructure. Call this amid an acceleration of mobile revenues in 4Q with great girlfriends in Team Life. We delivered our 2018 target. We are able to overcome obstacles imposed by much slower economic growth than originally expected in a much tougher competitive environment. Our 2019 annual plan was based on assumptions that began to turn in May. We hope that for 2019, Those two components will pose less of a challenge. Even if there are no improvements, we are confident we can sustain positive results. Going specifically to the 4th quarter, our EBITDA grew close to 6% with margins soaring to 42%. The highest margin, the history of our company. Our MSR growth accelerated to 3.6% year on year and TIM Live maintained its strong revenue growth trend, expanding more than 35%. We saw it 4Q led to strong numbers for the year. EBITDA grew above 10% and the margin expanding to about 39%. This drove EBITDA minus cap to 2,600,000,000 in 2018, reaching more than 50% of our sales. While net cash flow reached R1.2 billion dollars. SaaS revenue growth reached almost 5% with the contribution of mobile and TIM Live. The dynamics in both business reflected double digit ARPU expansion in resilient growth in high value offers. So bio is the largest portion of our revenues and a rapid challenge to become more pronounced since May. In prepaid, for instance, We had to deal with aggressive offers from competitors hindering a rational approach to the market. So far, we have been able to avoid the price war We have been focused on managing the natural slowdown in prepaid while we continue with the upselling process. Prepaid ARPU stood flat in 2018, support supported by an average recharge that grew quarter over quarter. Our apps are becoming more digital, which is an important element for cost reduction. With key regards penetration decreased by 5% reaching more than 30% of the total. At the end of the last year, we introduced a new concept in prepaid to simplify the existing offer. Facilitating customer understanding of their consumption while increasing their commitment. The new products hold seems to help. This innovative product links the recharge directly to the service package. The client always knows what one hell of recharge will provide in benefits. We expect this approach to address customer concerns on transparency and interface, therefore, improving customer experience. During the fourth quarter, we kept executing our multi segmentation migration strategy. Press control, control, control, and control to pure. Adjusting the way we started our base for this upselling movements to monthly grow with quality and profitability. We also took steps to increase loyalty using locksmith offers both in pure postpaid and in control. Working offers in the soup segment as a percentage of the gross additional represented 56% and 18% respectively. We expect this to help the long term churn levels and reduce the impact of competitive threats. We also had to dodge price competition movement in postpaid. To counter this, we combined innovative offers To keep a restriction to register a resilient postpaid ARPU. We expect that the recently announced price increases in postpaid can set the tone for 2019, depicting an environment with less price competition pressure. The industry should complete on service, products, innovation, quality, channels, That's what we deliver long term return on investment for our shareholders. This will also drive positive impact with more embedded service, private fashion, investments, coverage, employment and growth. Navigating well through turbulent skies of the mobile mark led us to a total ARPU of 22.4 highs. With strong growth of 11.3 year on year. A cost base represents 36% of total reaching December more than 20,000,000 clients and using a growth of almost 14% versus December 2017. Storage adoption was also very strong, 25% year on year, reaching more than 60% off the base. The mobile operation was marked by resilient partners on the fixed business front. We keep having outstanding results in team life. During the fourth quarter, we reached 14 Cities with ultra broadband service. Of which in line, we have rolled out FTTH. The geographical expansion boosted coverage to a total of 43,000,000 households. And helped us post solid net adds of 75,005, 2 thirds of which are connected by fiber. Following this expansion, our base reached almost 450,000 customer, a 20% increase year on year. The combination of high speed and streaming content is pushing the mix of sales towards high value offers. 40% of our clients have signed up for higher than 100 mega connections. This is driving strong ARPU performance. Which grew 14% year on year in the 4th Q. Global used to grow rates for the pay in ARPU led team live revenues to grow more than 35 percent year on year. This performance lift team live to become the largest portion of fixed revenue in 4Q. You know, I just proven to be a great opportunity, an important stream of revenue. Looking forward, we will maintain our comfort growth approach. Perfect in execution and making sure our path is sustainable. Building a robust network and IT infrastructure is the foundation for transforming customer experience. On the network side, we are executing very well our strategy to improve coverage and capacity, both in bio and fixed. Allow me to highlight some of GT initiatives. 1st, we have been training our leadership in Fort D. Covered with close to 3300 Cities. Exactly. Our Spectrum efficiency program continues to excel, helping us to scope with data traffic growth in a CapEx efficient manner. We are accelerating the 2.1 giga refarming, reaching almost 250 Cities. While finalizing the reutilization of the 1.8 giga, now in more than 2,200,000 unit fatalities. 3rd, to focus on deploying 4 g on the 700 Megahertz keep us in a unique position. Close to 65% of the urban population already has this additional layer of frequency that improves indoor coverage in a significant manner. 4th, We continue pushing the deployment of voice over LTE Technology, now with more than 2,500 Cities and 12,000,000 customers. Lastly, on the fiber front, we've reached more than 600 Cities in our FTC city program. The FTTH rollout is showing excellent speed, and we closed the year with more than 1,000,000 households covered with fiber to the home. As a consequence, in the fourth quarter, we celebrated once again our little shipping most important rank of network performance analysis. We took 1st place in the P3 Mobile Benchmark. We maintain our leadership in open finals 4 g availability test and continue our supremacy in Netflix ISP ranking. Taking 1st place fifty three times in the last fifty six months. It's worth mentioning that our network investments off today are already 5 g compatible. Brazil will not decrease its productivity gap without 5 g. The more we wait, let's hope that the country will turn. We embrace the idea of 5G Spectrum auction sooner rather than later. And also the privilege to cut the roll out of the network, enhance country development, and GDP growth. Team will be working with all stakeholders to support the best decision making process for the society. In law, we put Brazil on par with Global Development And Foster Investment, Innovation And Growth. On the digital transformation front, 4 gs demonstrated very consistent results. E billing doubled when compared to a year ago. Reaching more than 50% penetration. The number of clients using electronic methods of payments grew by 33%. My team app utilization also expanded heavily above 70% versus last year. And nonhuman interactions grew by almost 40%. Digital channels usage is accelerating to resolution of demands from our clients. Despite that, we're improving our capabilities to put us through all segments an early signs of premium, we are moving to the right direction. Satisfaction, NPS, and preference, all reflecting positive reaction. This is clear. We have a long road ahead of us. Have we changed the mix from prepaid to postpaid requires our continuous focus on processes and processes. Recent improvements reinvigorate our motivation and present an enormous opportunities to the future. I will continue to lead the evolution the company calls us towards a customer centric approach, and this will flourish in the upcoming quarters and years. Going to the sales of the financial results. As I mentioned earlier, the external environment both additional challenge to our business. Nevertheless, our consistent execution drove resilient dynamics for revenue in Apple. In the quarter, top line was up 5.2% with service revenues accelerating 3.7% up to 3.3% in the 3rd Q, driven by a small recovery in mobile. 4Q mobile ARPU showed a solid expansion of more than 8% to reach almost R24 dollars. Looking at the full year picture, top line grew 5% with service coming pre close to that level as well. It's worth highlighting how our revenue profile has changed over the past 12 months. Postpaid generated revenue sustenance a year on year growth of more than 20% while prepaid was down close to 15%. This led me to reach a speed of 63 to 37% increase. An increment of more than 8 percentage points versus 2017. Moving on to call dynamics. Normalized OpEx for the year grew only 2%. Blow inflation and better than expected in our original plan. We are over delivering on our efficiency program, having achieved almost 120 percent of the target for 2018. The digitalization process certainly a big contributor to this. Despite saying that the reasonable level, 2% of gross revenues That debt provisioning is the main challenge we are facing, and it is directly affected by the change in revenue mix. To put it into perspective, Excluding that app, our normalized OpEx would have remained flat in 2018. During the third Q call, I lit it I listed some of initiatives we've been committing to improve risk management, and some of them became active in the fourth quarter. This includes the collection portal and the call center to treat early delinquency as well as reinforces collections team. We expect to start seeing the benefits of this action plan in the second half of the year. It's worth telling the 2 nonrecurring items that impacted our results in the 4th quarter. 1st, We booked the first of our 2 court case related to the payment of peace and COFINS federal tax over I TMS state tax. The tax rate was monetary adjustment due to more than 350,000,000 has, roughly 160,000,000 possibly in tax office. While more than 190,000,000 was the quarterly tax of on net financial expenses. As taken for 2, the progress a total of R3.2 billion dollars from this tax increase. 2nd, in our reassessment of our contingencies, We revised the lost probability focus for a number of old case, mainly related to 3rd party label, which we don't expect to happen again. OpenText was in excess of 280,000,001 160,000,000 negative impact on office, and 130,000,000 on net financial expense. The summary of what I have described to you now, is a robust operation with resilient revenue growth and continued cost control. The combined is producing an outstanding The growth rate nearly 6%. Full year EBITDA grew more than 10% to 6 point 6,000,000,000 with margins reaching 42% in 4Q and 39% in 2018. Our beta figures are really impressive as they represent the highest levels in the company history. The bottom line was also very strong. For the full year, we posted normalized net income of almost 1,600,000,000 27% higher compared to 2017. CapEx was deployed according to plan, totaling 4,000,000,000 in 2018 representing 23 percent of sales up from 26 in 2017. EBITDA means CapEx totaled 2,600,000,000 by more than 40% year on year and leading free cash flow to almost 3,000,000,000 dollars, 24% higher than 2017. Following this improvement, the 950,000,000 ARS, amounting between IOC and dividends. We expect to continue using IOC as an efficient distribution tool. Before I conclude with the speech, I'd like to remind you that Telecom Estrella Group's industrial plan will be released tomorrow. Which will give us the opportunity to provide in Brazil's updated guidance. Although I, of course, cannot provide any numbers in advance. I can assure you that will be the solid, realistic, and coherent plan that we're focusing key areas of the business, managing the challenges in prepaid, evolving our B2C postpaid strategy to maintain strong performance, reinforcing team life's expansion without losing quality control B2B will receive additional attention to become a new source of growth, efficiency efforts will remain in place to maintain margin expansion. Advair is accruing further on digital transformation, or by more traditional means of controlling costs. And we will focus on developing our infrastructure. This will continue to be the base for improving the customer experience. In mobile, with much more focus on growing at During the fixed segment, coverage will remain the core of our attention. We will now open the floor for questions. Please, operator. Thank you, Mister Semi. Now we will begin the Q And A session. First, we will take questions from analysts followed by the journalist, both in English. We ask each participant to restrict themselves to two questions at a time. The first question comes from Susana Salaru with Itau. Hi, good afternoon guys. Thank you for the questions that we have questions. The first, is about the provided landscape who has been hearing that the market has been more, national. Actually, we have been seeing perception of the market. And if you have, contention of price increase going forward. That would be our our first question. The second question is related to the size the auction. What are your expectations towards the timing of the auction and the format of the auction? That's it, guys. Thank you. So for the first first question, just to recap, the question was about market competitiveness. Can you repeat, please, because it's not during your question? Sure. This is all the competitive competitive landscape for the market. We saw, the competitive increasing prices. Yeah. I I think that there are 2 different, aspects on that. On the prepaid, we unfortunately haven't seen any easiness in the competition. Actually, the competition is very strong. And we are positioning ourselves to a different product We just launched the the team at Top, which has a different value proposition, the innovative product for our client, transparent, customer friendly and not focused on price war. But unfortunately, we can see this behavior in the competition. On the postpaid, we see a much bet much better environment as, you know, good price hasn't been the focus of competition over the last few months. Question about 5 g. We are favorable of 5 g auction in Brazil. This is important for the country. 1 of the talks of the country is competitiveness, gap And without 5 gs, we will only increase. So it's not a matter of having or not 5 gs, how fast we can have a 5 gs. So we hope the option to be, 1 year from now. And then after the auction, there'll probably a 1 year Spectrum cleaning. But really the more it goes, the worst for the country for job generation for competitiveness. So this is the focus. And I I talked to Mario here if you compliment any any any of the comments. Mario Gera Sully, regulatory, and institutional affairs. Just to compliment, of course, we are, we we we have discussions in place. In terms of having a rational approach, 5 g. So fast and rational are just strategic. So we cannot the momentum, but, also, we cannot lose the rationality to have an option that gives us, of course, privilege to the investment to be done in order to foster the sector and the productivity of the country. Our next question comes from Fred Mendes with Bradesco. Good afternoon, everyone. And thanks thanks for the call. I have two questions as well. I mean, the first one is, I I as Sami mentioned, I do stand, the the the the the competitive landscape, you know, remains quite challenging, but we did see, at least here in my numbers, there was an improvement on mobile service revenue. So I was just wondering, you know, should, you know, something has changed. And I think on this line as well, uh-uh, how's the and that has any impact? How's the most of the WTTX, is this something already relevant in terms of match revenue? And if you think you're already being competitive against the other players on the on the broadband, the other players of your coppers, to the broadband. This will be my first question. And then my second question, in terms of the cost, looking at the bad debt, of course, you are increasing your your post grade days significant to you. But when I look at the bad debt, the increase of 80%. It does call the attention. You also mentioned that, you started a a new contact center sent back in September to reduce this line. So, I mean, just wondering, what are your expectations, for 2019, related to to buyback? Thank you. Hi, Fred. Hi, Madeline. Trying to answer your first question is a little bit of noise in the landfill. That'd be an incentive, but it's a good good question. Laura, talking about the mix of the revenues and the impact of the growth of the quarter. And the point that Sami mentioned in the first time, so It's a decent, competitive environment on the briefing and on the postpaid. On the credit, with a little more aggressive network, where we managed to cope the reduction of those revenues. If you see evolution of our future revenues, our our reduction was less than the third quarter. So that was positively impacted on the growth that you see, our top of the revenues was up for 4.5%. So, for us, it was positive in terms of we mentioned in the third quarter that we saw, the more stable curve in terms of corporate charges So that was a positive. And then you have on the corporate side, we did some some price increases already in November. We were, as a matter of fact, the first movers of of the cost base was a big effort on our side. As you know, we are trying to focus more on ARPU growth and quality, these days. So that was, were the key reasons that revenues this quarter were allowed to, upload the growth of the quarter. On the second question, resulting, bad debt. Clearly, this is So then, we've been working last in the last quarters. We always talk about this as It's something, maybe one of our our main concerns in terms of office. Clearly, there is an effect, on all the migration process that we did in the past. You know, we started this migration process from prepaid to postpaid in in the beginning, at the end of 2016, end of 2017, so clearly the effect of of the mix of our customer base creates effect on the year on year growth of the percent. Nevertheless, it's something extremely important for us, even if the rate is, it's aligned with with the rest of operations in this market. It's even below rates. As a matter of fact, of of of some banks, but, it's still something where we will be working a lot, if you see, there were some questions about the growth of our G And A, OpEx, that related also to increase our efforts in terms of, in terms of cost, contact center to, to grab this, this bad debt effect. So, again, it's more related to the new mix of our customer base. It's, it's an area where we wanna work a lot, for the next, from the next quarters. The big issue is the year and year of comparison. Yeah. As I may compliment, Adrian, here Fred, We we have implemented recently list of initiatives to start to to not to start, but to continue work on the bad debt or portal. The negotiation portal is already mentioned. So we bring for some operations We have a full team in our onboard, but also we are expanding our capabilities on the credit side. And as we know, there's a VPN game. Right? So the new Vintages are going better, worse according to our advertising and our capability in the collection side. It's a natural evolution, as I mentioned the call, you know, as we change our mix from more postpaid you know, there's a whole set of capabilities that will, and then we are developing. That's actually the only final deposit is upside ahead of us. So, we expect on the second part of the year start seeing the benefits of those initiatives. Perfect. And thank you, Eduardo. Thank you so much. I just I think the, you know, of the of the answer was be hard to to to understand you. Since I just made a follow-up here, uh-uh, looking at the, w t t x, is this something already already, the something that's becoming relevant, international revenue? You know, does this this line, they had an impact, in the in the mobile services revenue growth or or not yet. Thank you. WTTX is isn't yet relevant in terms of total revenues. The impact, it's still very low. It's not an easy business. We are reviewing, all the process of this of this business. We think that this contains us. It's it's an additional driving stream for the future. We're working a lot, but we think that you will see, in fact, in terms of, of a of a weight and revenues more in at the end of 2019, maybe beginning of 2020. So, no, it's it's not, a factor in this fourth quarter of 2018. Perfect. Very very clear, and I'll, Adrian. Thank you. Our next question comes from Maria Zaved with UBS. Hi. Hi. Thank you for the question. So I'm not saying you're really focused on convergence and converging offers. Did you expect to increase your presence allocation in the coming years to accelerate your 6 month strategy. I know you're gonna if you're gonna cover 50% more opportunity, rooms or higher CapEx. And if you want the conversion to do you, what is your strategy on content? I mean, we're seeing some competitors bundling Netflix, Global, Amazon, and content. How do you to bring the fuel approach back. That'll be my first question. Thank you. Yeah. In terms of CapEx allocation, for live business or for fiber, we are following, what we mentioned being in our duplication of the plan in last March. So, the the live business is is full on track. We believe there is as Sami mentioned in the speech, there is a lot of there are a lot of opportunities, on this business, but, it's always a business that we need to grow very carefully. You know, particularly well, the story of of this business in this company in the past year, in the past few years, it it needs to be very well managed and and very a very controlled growth. But again, a lot of efforts on our CapEx plan are, oriented to growth in fiber, not only FTTH, but also in FTDC, in FTTP, and fiber to the side. But clearly, it's gonna be, a key factor for the revenue growth in in the following years, in the following years. But, again, we are not changing any, point on our CapEx allocations that we already communicated at the beginning of 2018, you will see that, and then in in the next communication that we'll give it here by the line with what we said 12 months ago. The second part of the question was, I can see. Yeah. Somebody have talked about content. Especially on the on the on the Broadband on the FTP page. That's the components of this. First is our strategy. We have a selective approach. Okay? So we select place. You have to have the proper population mix in terms of GDP and low competition or no competition. So our strategy is not to enter the most competitive place with the double play or triple play on the contrary. We are being very successful in entering place that are underserved and start to offer outstanding products. In terms of broadband, broadband. So and we see over the next 3 years, a lot of opportunities to continue growing in that manner. 2nd, we we already have despite of this, we already have contents available in our our offering. So Fox, Carton, Natjell, you know, we we do have investment on our offers already content. Perfect. Thank you very much. As a follow-up question, if you if you could please comment, on the cost side, I mean, you've been instituting extremely well on cost efficiency. Do you have any, expectations on improving your your bad debt and disposed provision, or do you think that this is more a structural macro you on what status you can do and be more proactive on your on your on your upgrade from mobile to postpaid on the back of I'm Madrien. That, we said already a couple of times that we are already focusing more in terms of quality. So maybe it's made the made the starting point. Working a lot in terms of credit, and credit analysis. Focusing more on the better customers to migrate from prepaid, to postpaid. I think that, delinquency, it's, it's a structural factor. It's not really high in Brazil compared with other countries. Clearly, there is there is a there is a factor. What we we're seeing for the future is if you won't have this year on year growth, maybe you will you will still be in in the in the same nominal levels that that you're in this past quarters, that this will, will not be take you to additional growth, in in terms of what that would usually, the new customers need to have more much more functionality due to a better quality. Perfect. Thank you very much. Our next question comes from Diego Agnes with Goldman Sachs. Good afternoon. Bye. Thank you for taking my question. My first question is related to the acceleration on the mobile service revenue growth in the fourth quarter. How do you see this line trending in 2019? I mean, will this mark a turning point on your top line group, or we should see it more as an stabilization of the growth rate. And, and if you can just provide the outlook how should we be considering this, your top line growth in the coming year? That will be great. Thank you. So thank you, Diego. This goes back to the macroeconomic and competition environment. Right? So, there's a lot of expectations that the account count will we grow and it will develop. Some of the early signs for January are not so optimistic in terms of what's actually going on. So we we don't see so far, a real change in terms of GDP growth. That could allow us to a different scenario in terms of macroeconomic, k, either in terms of, more demand or less, debt or, you know, improving the prepaid that will come with high growth. So of course, if the growth come, it's only upside to everyone. And also in terms of competition, right, as we discussed here, I think the competition healed in the postpaid, we have a reprice, and we have test call fax in the postpaid over the last quarter. And we just announced the re pricing as well. Now in fact, we see the competition much more miles, if you wish, if it could be possible. In the postpaid, while in the prepaid, we haven't seen this. So I haven't seen any, real fundamental on what's going on over the last quarters. Okay. Thank you. And maybe the question related to the postpaid. I mean, we saw some deceleration, actually, on your net adds in the fourth quarter, especially in November December, which was right after, you know, this this increase on price. So, what is causing this pressure on recent funds? I mean, could this be a a reflection of your, the increase on price? Hi, Diego. This is Renato. Set of marketing. We have, elaborate a little more on our strategy on migrating a prepaid to post date and have start focusing on more quality. So what you have seen on our net adds is also Qualage of the net are better than what we had in the past. So there is a more focus on a selective approach, migrating prepaid to postpaid. And, also, we started the phase 2 of our migration inside of the segment of controller and also postpaid. So we're doing more controllity control immigration, controllity to postpaid, and also postpaid to postpaid. And you have seen, our main posted offer a year ago within the 99 reais target price. Our main offer now is in the 119. So, if by this, we are migrating the base, not only from prepaid to controller, but also interest in postpaid days. Overall. Perfect, Hanatsu. Thank you very much. Our next question comes from Valder Nogueira with Santander. Some of you mentioned, the logo, the still on road ahead, regarding, the mobile business. And there is milk yet to be taken from from from this business. Given the success that you have had on in fiber. And I believe low hanging fruits in the beachview arena. Would it make sense for you to speed up a little bit more your fiber deployment or fiber partnership or be more engaging to the business. This is the first question. Okay. Thank you. I thank you, father. This is Sammy. Thanks for your question. In December 2017, we have the 2 pilots, 2 pilots on FTTH with you know, a few clients. 1 year later, we have 11 cities with over 50,000 clients, you know, and a a big plan ahead of us. So what what's really been saying about in terms of efforts with FTTH is that, number 1, we are really accelerating, you know, the growth of 35% year on year. So it also is a total new business for us, and and we wanted to perfect execution. So that we grow in a controlled manner so that we actually generate positive value to to our clients and to our shareholders. So, that's number 1. In terms of your your second related question in terms of fiber, we we have been, and we are always open to analyze potential inorganic, moves. So far, what we have faced is that the organic path are are the preferred. We we don't have, examined something that would add more value to our shareholders and to our strategy. In a inorganic way. But, also, once you take the opportunity to present Machu Stefanum, he just joined a a few months ago the company. He's leading the B2B area in life. He's coming from long background. Each of those segments. And he will compliment, any comments about the growth did you be in in in in in what we see ahead? Oh, hi, Walter. As Sam said, we are studying a new way to approach the YouTube market. We do have here in, in team a very good infrastructure. A very ex advanced network with high quality and also focus as Sam mentioned, Sami mentioned, and a customer centric way. So there is a very good opportunity for us to increase our share in the digital marketing and with this approach. And also in the, team life, as Sammy said, we are being very focused students, you're studying, advanced regions to deploy our network and be more efficient in this deployment. So We do believe that this is a good path for growth, and we are going to see that in in the years to come. Well, not nice hearing it hearing it from you, the new house. And does it make sense? Making partnership with those players that have fiber that goes closer to these players, to this potential due to the B2B arena? No. Not necessarily going to organic, but making joint venture. So helping to finance these guys so you can have a a faster access to this fiber? We are starting here. Of course, the partner 52 Actually, we have partnerships also. Now we buy a lease line for many companies, and we are also studying here ways to increase the app and that's a a way to to to to go to new areas. Also, starting new products, but we can't move over this, these lines from 30 parties to increase our capacity or offer offering capacity So we we are, increasing this. We are looking to the market to see partners that can help us. So we took this today and we intend to grow them in this also. But ever looking at the qualities of service that we are delivering. I think that this is the the greatest differential that the company can give from the P2P to market. You've been very close to the customer, having high speed delivery and, having high quality service. So We we are looking at all possibilities here. Yes. Well, congratulations on your new challenge. Thank you. Our next question comes from Walter P h with BTIG. Yes. Hi. This is Joe Malone for Walter You you mentioned the ongoing refarming of Spectrum in 1.82.1 to LTE. And then there was also about 70 I think it was over 700% of data traffic is on the 4 g network at this point. So my question is, how far within those bands and push requarming or or the additional bands that you have. And and how little spectrum do you need to continue to serve the 2 g and 3 g subscribers at Jim. And and, also, maybe you've mentioned this before, but when when do you think you get to the point where, you maybe shut down 2 g or or 3 g. Thanks. First, we started to have the refarming 2.1, this year. So we are still, sorry, last year. We are still let's say, beginning this opportunity. We are seeing that, we have some, interesting point in our northeast say in other states like, but, we are trying to do the same in the following area. So what we are discovering is every time that we move your head with the refarming for one hand, we are seeing that we can capture more and more trash in the 4 g. You know, that we are, above 90% of the traffic already generated in 4 g device, and we are carrying on the network 4 g around the 76% of the amount of the address. So what we are seeing is that, we have this opportunity in choose up to 1, but, in the near future, you can see that the 850 can be the next wave. So we are forced to have the customer all the time in the 4 g. We are the leader in terms of the coverage. We started to use the Voci in Brazil, we have more than 12,000,000 subscribers already using Voci. In some cities, as in a receive fee and some call, we are above of a 25 percentage of the total calls already involved What it means is that this customer will be there in a 4 g for all the time, despite to use data or voice, when you look ahead, what we have is some opportunity in this event. It is a new band in 2.6 gigahertz. That we have in some region. So we still have some kind of, let's say, refarming and a new policy opportunity. And, you know, what we are seeing is that the technology is developing, and that we suggest all the time, we are discovered new way to use the sameacity in more efficient way. To talking about the switch off of 2 g and 3 g, It's not clear to us right now. What will you be in Brazil as a when? It will happen. Of course, it's difficult to work with a g, 3 g, 4 g, and start to just thinking about the 5 g. So what we are seeing is that the g and g will be, let's say, more per user technology, but it's also clear when we have the opportunity to make the switch off one of this technology. What we are trying to push in Brazil is some kind of a sharing agreement with the other companies to reduce the inefficiencies way of this legacy network. So we are going to move some kinds of of a new discussion, among the companies to have some kind of, single Greece or, run sharing in your technology to avoid the the maintenance cost. Our next question comes from Diego Aragao with Goldman Sachs. Hi. Yes. Thanks for the follow-up question. The industry is clearly benefiting from, this ongoing digitalization process in the region, which is producing a major on margin gains. So the question is, when do you expect margins to stabilize in a scenario where players will start using those decisions Tarine Vassen Grove. Thank you. Digitalization, it's, it's a key factor. It has been already this year in order to increase margins for the industry and you can see see it also on our on our numbers. I think it's as we discussed a couple of times, today, this industry is is everyday more, technical intent. So again, in terms of new customers, in terms of, of new networks. And clearly, digitalization is part of this, of this process. We've been improving margins already almost 3 years in a row. Or or even more. We reached already the the upper part of the curve. I don't think so. Maybe the the pace could be a little bit lower, in the future. But we'll still see some room in order to to to to improve, for the more. And Again, we need this improve in terms of, of margins because, we need more more investments in infrastructure in, in information technology, because the the industry has become much more, digital. And and, you know, that, we are still maybe a little bit, back in terms of digitalization with some other industry. So it's still an ongoing process. But we clearly see that there is still a bit of room in order to improve in terms of margins. That's, make a lot of sense, Adrian. Thank you very much for this. And, if I may, just very quickly, any thoughts on, on consolidation, I mean, after you've got the, let's say, the green lights from a telecom italia, to eventually pursue some acquisitions in Brazil, I think market, you know, was expecting to hear something about it. So is there anything, any progress that you can share with us? Thank you. Thank you for It's, no. As we mentioned also, couple of times. This company was supposed 3 or 4 years ago to be the target. And we are now in a completely different situation. If you see our our our financial situation is extremely healthy. Our leverage is extremely low. We've been working a lot in order to put us in this, in this, in this situation because we think that there will be a consolidation, in this market. If you see, all the mature markets, in almost every these countries, there are 3 operators. There are some some countries that didn't have 2 operators. So we think that this, consolidation will eventually come, and we want to be prepared. This set, we are not working on any process these days. We are analyzing everything. We have a deep knowledge of the numbers of each, of the competitors and on on every possible targets. But today, We are we are focused on what we need to deliver in in organic terms. But again, we'll see what happens in the in the in in the near future. Very clear. I understand. Thank you very much. Ladies and gentlemen, without any more questions, I am returning to Mr. Sandy Folger for his final remarks. Thank you. I want to congratulate our team for this strong performance. They work very, very hard to deliver these results. I also want to thank our clients who choose team every day of their lives and investors who share our vision of long term value generation. We are planning events over the next week, so I'm sure we will have the chance to discuss our results and new plans for the detail. Thank you all once again for participating in our conference call. Have a great afternoon, and I hope we can meet soon. This concludes now the 4th Quarter of 2018 Conference Call of Jenkins. Your line is now open. For further information and details of the company, please access our website. Ww.tting.com.br/ir. Thank you.