Earnings Call: Q1 2018

May 9, 2018

Good morning, ladies and gentlemen. Welcome to TIM Participacines 2018 First Quarter Results Conference Call. We would like to inform you that this event is being recorded and all participants will be in listen only mode during the company's presentation. There will be a replay for this call on the company's website. After TIM Participa's remarks are completed, There will be a question and answer session for participants at that time, further instructions will be given. We highlight that statements that may be made regarding the prospects, projections and goals of TIM Participacines constitute the beliefs and assumptions of the company's board of executive officers. Future considerations are not performance warranties. They involve risks, uncertainties and assumptions as they refer to events that may or may not occur. Investors should understand that internal and external factors to TIM Participa Science may affect their performance and lead to different results than those plans. Now, I'll turn the conference over to the CEO, Mr. Stefano De Angelis, so he can present the main messages for the first quarter of 2018. Good morning, everyone, and thanks once again for attending our early release conference call. As you probably noticed, we are changing our communication process with 1 single conference call that it's being simultaneously some tweet to our switch browser, and I will give a shorter presentation to leave more room for Q And A. With this, we are trying to address some recent feedbacks from the financial community. We hope it works well, and feel free to reach our IR team for any comments and further improvements. In this quarter, IFRS 915 were introduced. For the sake of comparison, we will discuss numbers on a pro form a basis, excluding the effects of this accounting change. You can find information on the new IFRS in our earnings release or financial statements. That being said, let's move to our first quarter results. We started the year at a strong pace with consistent service revenue expansion 6.4 percent year on year growth, reaching BRL4 billion. And the longer weighted and announced gap closer between gross and net revenues arise. Now the gap is only 50 basis points. This performance is a function of solid mobile service revenue and Vivo streamline revenues growth. The combination of higher value customer base expansion and ARPU uplift is taking the revenues, continuous and solid positive trend. Mobile AR was up close to 14% versus last year, with positive trends both in prepaid and postpaid segments. Our customer base shift to value content. 4g penetration is above 50% and 61% of our clients are in recurring trends. Migration from pre to post and new acquisitions continue stronger. That is why TIM is leading postpaid net addition with 3,000,000 clients excluding machine to machine in the last 12 months. We just announced an update in our mobile portfolio. With the content and OTT focused approach to differentiate even further and take key customer demand. We are adding to a strong offer portfolio of connectivity services, the most used app in Brazil. On Slide 5, we have a summary of the new offer. The SMB portfolio was also upgraded using a similar approach. TIM Live is delivering strong numbers, while we start to deploy commercially our FTTH products and to expand our into new regions. After March, a new city was accessed named Maua, in the metro area of Sao Paulo, 11th largest seed in terms of population of the state. Versus us looking very positive. Our broadband portfolio was relaunched with it now going up to 2 gigas. We also included value added services in the offers and video content strongly improved by a partnership with FOX, that we give access to 11 different channels in both live streaming and on demand. Meanwhile, our operation does stop. Our ultra broadband customer base reached more than 400,000 customers growing in excess of 27% year on year. At the same time, ARPU reached almost BRL 71, up 12.5% versus last year. As a consequence of this TIM Live, revenues totaled BRL85 million, representing a growth of more than 43%. One of the most relevant pillars of this positive result is our infrastructure that is always in the center of our strategy. We are transforming the entire company to seek a better customer experience, changing from our culture to our IT We need, however, to start with a solid network, and ours seems to be on the right path. We maintain our leadership in 4G coverage with more than 3100 Cities and 92% of urban population. Our coverage is not only the largest, but also the best being attested by all the major network analysis players to Tella, Ocala, and Open Sino, Just to make an example, Nudera actually granted the team the silo of best mobile network experience in Brazil. In the first quarter, we have completed the coverage of the entire state of Sao Paulo, 3rd operators to achieve that. And we are close to 1000 cities with 700 Megahertz layers. As we develop our 4 gs network in this frequency, we can start to accelerate our WBD coverage. This quarter is increased 3 fold to reach 67 cities. And in the second half, we will accelerate further. On the fixed side, our FTTH addressable households reached more than 200,000, starting strong, our best reach $3,000,000 in 2020. We know customer experience is not only network, That's why the results of Anatel's satisfaction survey were an important outcome. We improved in all metrics compared to last year. Mobile general satisfaction we see is above market average in postpaid and on impaired in prepaid, and in both segments, this is the 3rd year of improvement. For Broadband, TIM Live has a solid lead in general, as I said, and we continue to rank number 1 in Netflix survey. Customer experiences, this positively impacted by the digital transformation program we are putting in place. And the benefits are seeing in costs as well. OpEx remained under control, down 0.7 year on year, despite volume driven cost pressures generated by the positive commercial trends and strong network expansion. Also, our efficiency plan remains at relevant level control costs. It is worth explaining that bad debt in addition to the impact generated by the strong postpaid revenues growth at some temporary effects as worse than the annual comparisons. Last year, we had settlements with other telco operators, improving the results and in first quarter 2018, we had some negative impacts, increasing the nominal level of provision that should not occur going forward. Consistent revenue expansion and control costs, Airivas EBITDA of 1 0.47000000000up16.4percent year on year. 7th quarter of EBITDA growth while margin was propelled to 35.5%. CapEx was slightly down, summing approximately BRL 650,000,000. As a consequence, EBITDA minus CapEx expanded close to 40% versus last year. And represented 20% of our net revenue. Last but not least, our net income totals plus R50 million dollars, increasing twofold year on year. This opens the opportunity for us to announce BRL 230,000,000 in interest on capital that will be paid in excess Also, we decided to share our expectation for distribution this year. So If our guidance continue to be executed, we believe we can distribute between BRL800 1,000,000 $900,000,000 in interest on equity. Important to highlight that there is no change in our plans. We have just sharing with the financial market and our shareholders, something that was already set in our strategic plan disclosed in March. With this, I reached the end of my short but hopefully, helpful speech. Before we start the Q And A session, I like to say that we started the year with very positive results but we still have a lot to do going forward. We just launched a new portfolio in mobile for consumer and SMB segments. The acquisition of SMB is accelerating. We will start to sequentially improve our performance starting from the 2nd half twenty eighteen. New fixed products are also just how and the geographic expansion of TIM Live will accelerate in the coming months, giving additional support to our ultra broadband customer base expansion. Last but not least, we are planning the 1st real convergent offer for the second half. So as I say the last thing from Tovaz. With this, I close my speech to open the Q And A session. Thank you, Mr. Stefano. Now we'll begin the Q And A session. First, we'll take questions from analysts followed by The first question comes from Fred Mendes, Bradesco. Good morning, everyone, and thanks for the call. I have questions here. I mean, the number 1, solid pickup on gross revenue. I mean, we're seeing growth of 5.9% year over year, way above the last quarter. So just trying to understand how should you read this? I mean, does the FAS kind of reaching its peak, but in the other hand, stronger mix of clients and high ARPU should continue to drive these positive trends. This is the first question. And then the second question, EBITDA grew 16.5%. But if you adjust for the nonrecurring items on the bad debt expense, the growth should be something like 18%. So just wondering if you should expect a reversal of this bad debt in the next quarter. Thank you. Thank you. First question was about the gross revenues trend. So let's let me also thank you. Some color about this trend. We have shared along the last quarters this expectation that we have to close the gap between net and gross revenues. As we always stated that we were expecting this to enter a long 2019, and this is happening, the good aspect is that the conversion trend between the gross and that is happening in the net. No, it doesn't mean that we are maintaining our guidance in terms of growth, both for gross and net revenues now. This trend, will continue to improve because if you look at the details, we still have if you exclude this down, a gap of approximately from 200 basis points between the net and gross meaning that tissue forms just on the vaccine. But this, as we stated in the past, will continue to narrow and we close the gap along the second quarter. And looking forward, When we look at the ARPU of our customer base, and this is why we over I think that it's very important to understand where and how we expect to continue to maintain and also improve the trend in terms of gross and net revenues. If you look at our ARPU, starting from the old pages, you may see as with 4 airlines, we had very significant improvement for being competitive into the market and to upgrade and uplift our customer base. This is something that is happening. It's something that the market probably do not perceive because We are not just as we was our strong job along 20 '16 and 'seventeen working on the uplift between prepaid and postpaid by now. We are strongly working in complete the ARPU of the postpaid customer base, moving our customers from the lower plan into the control to the higher plan in the control, and moving, they control higher plan customers to the pure postpaid ones. This is a trend that is very positive in the last 6 months, and that is giving us the opportunity to increase the ARPU of the postpaid customer base. And we continue to be one of the main driver in Fortiva state customer base. On the other side, as you may see, Also in different days, we have a very significant, as I say, the best rooms are improving. We still have in the market a full usage from this segment in terms of connectivity, especially connectivity. So the prepaid customer base has to be managed with a 1 to 1 approach in order to give to any customers, depending from the ability to spend the best offers in more for more concept. And this is the focus that we are now working in order to maintain this trend in terms of this positive trend in terms of top line. Regarding the bad debt and the EBITDA, as I thought in the speech, we have some, but Let's try to differentiate the question in terms of the year on year comparison of what we expect looking forward because First of all, when we look at the year on year comparative, as you may see, I'm not talking on page 5 of the earnings release, we are, let me say, reporting is organic to compare it in terms of the debt where you can see that the debt growing 50%. The main driver of this is clearly the end of the day. You have also to consider one aspect that is more testing about the it's important to share. This control customer base is now using a very poor amount of money in terms of recharge, you know, how it works in the past. The bundle of the control plan was poorly when compared to the present 1. So some of the parts of this customer visits, some of the revenues comes from the free charge of these customers. Now the most of the revenues from the control comes from the invoice This means that on top of the growth of the revenue coming from these customers, we have a mix of this revenue in terms of generated by the rebate component of state components that is changing dramatically. Just to give you an idea, invoice figure of the control is growing 100% year on year. And this clearly creates a positive impact in OpEx in the Recharge Commission. And this is one of the drivers of the redact of the domestic cost. On the other side, it generates an increase in exposure to the risk of the debt. Moving back to the topic. So when you look at comparison with 2017, you may see that the figure of 2017 was impacted by some co billing wholesale adjustments that the so called thermosy to the sound that it's important in recurring proceeded that after each year in all the markets, in order to adjust the dispute on the empirical and compete. And this generated positive impact in the first quarter 2017 that reduced the let me say commercial retail that that presented as reported in the balance sheet. This year, we had some I wouldn't say not so significant, it is important, for you and for your mother. In fact, in terms of the best reported the first quarter 2018. So, well, nothing you might not expect to add going forward. The growth of 80% of the debt on a year in a comparable comparison. But you may expect to have a figure that is in the range of 100,000,000 per quarter. This is more or less, I think, a better guidance, not to give you not only a comparison, but it is better to give the guidance of these components in absolute terms. And our decision is to have this course of around BRL100 million per quarter in the forthcoming forces of this community. Perfect. Thank you very much. Definitely, very clear. The next question comes from Julio Arciniegas, Yes. Good morning. Thanks for taking my question. My question regarding the cost of acquisition, I see that the SAC has increased 15% versus the previous quarter and 40% increase year on year. However, seeing gross adds, they are actually declined versus Q4 and Q1 of twenty seventeen. Can you give us some color on what variables are driving the increase in the cost of acquisition And is this an industry trend that basically the cost of acquisition is is increasing for all the players? Thank you. Thanks, basically, the mix of the when you compare Eromia, you have to be reminded, 1st of all, along 2017, we start to introduce not that we've been a real amount, the locking offer that was something completed in your board team, and this was part of our strategy to attack the pure postpaid segment. So we started to introduce a long and the second part starting from the second quarter of 2017, the subsidies. Now we're locking off for the fuel postpaid segment. So now in the comparison for this quarter on a year on year basis, 1 quarter B is component in the acquisition, both when last year, it was not present. Then you have another impact that is the increase in improvement in the mix of our customer base. When you compare to last year, we have probably improving the, let's say, average ticket of our of our process, both for the increasing participation of pure postpaid and also because we have significantly increased the hardware of our control plan that enters into our our customer base. Am I together? Yes. Just remember some elements, to contain what several told. 1st of all, we are go 1st of all, we are going in terms of ARPU and of the value of the offer. Keep in mind that compared to the last year, this year we are the ARPU of our customer that is on the control and the postpaid close between 5 10% tires due to the press up that was made in the first quarter of the last year towards the end of the first quarter of the last year. And due to the fact that the value of the commission in the postpaid and the controller is related to the expenditure of the customer. It's clear that if the expenditure of the customer grew the commission can go. What is important to rely that in the application of our commissioning strategy it doesn't grow, proportionate because what we are doing is that moving and changing our commissioning plan what is happening that it grows less than the customer, expenditure. Keep in mind that another staff that it cannot be appreciated compared to the last year, for example, in our sales channel, that is the part where we have the highest level of the expenditure the offer that is most sale sale is the offer, the the so called controller. That the that has an ARPU that is close to 65. And it's worth for the 85% of the growth of our Shopices channel. 1 in the first quarter of the last year, it was exactly the contrary. The most sold offer was the 1 of 40. So this group is strongly related to the value of the customer that we are acquiring. But what is important, it doesn't grow in a proportional way, but it grows less than proportionally. Okay. Very clear. Thank you very much. The next question comes from Danielle Federling, Credit Suisse. Good morning, everyone. My first question is related to the prepaid market. If you could comment a little bit on the trends, if the macro recovery is already, benefiting prepaid recharge. I remember that the the recharge in 4Q were kind of soft. So, in the beginning of this year, you launched a new plan. So I would like to understand a little bit how the trends are going in the prepaid market. And the second question regarding the new control plan and postpaid plans with free access to several social medias. I would like to understand if you see this as a implied huge increase in data offices. And if it's possible to jeopardize future growth that was expected to come from planned upgrades. Thank you very much. Hi, Pietro speaking. 1st of all, related to the prepaid, we still don't see macro improvement impacting the prepaid. Perhaps this is also due to the fact that what is happening today is that Let me let me say the best part of the prepaid is moving faster to the control. So What is remaining, in the area that we paid are the social, the less rich social class in Brazil. Today, we are not still, appreciating some macro move. And this is something that we are looking also, taking a look at the overall number of the charge in all the markets, not only 14, but also for the, also for the other operator. When we move to the contract that was paid, I think that what is important to rely that first of all, we are not including in the existing package the unlimited solution. It's a specific package that the customer has to buy. So Let's try to explain better. We have the plan at 60 reais, but the customer have already 3.5 giga. If you want to experience this new offer, he has to pay R20 more. So this is a different way to try to monetize the data consumption. If you consider on top of that, that usually 70, 75% of the data consumption of the customer in Brazil is made on this app. And the first five apps work more or less for the 80% of the traffic. K? We think that this is a smart way to increase the customer expenditure. This is more true for Instagram, Facebook, this kind of social. When you move to the the offer that we included in the package that is WhatsApp and Messenger, We look at that as a big opportunity. What that? 1st of all, it's really well appreciated by the customer that in terms of customer experience today, think that it's much easier to place a call from WhatsApp or Messenger while they are chatting, then to close the window of WhatsApp go to the agenda, please call. But in the meantime, once our customers get bored, our unlimited voice package. Stop to use the traditional network and use WhatsApp and messengers to call us We are. We have on the safe side the ARPU for the unlimited call. And in the meantime, we are going to reduce our interconnection cost. Certain that, different from what could be perceived, it's better to look at the offer in in a better detail. Then when we move on the postpaid segment, what we put was to add YouTube in the higher package that today work in our customer base, percentage that is really, really marginal. It's more, let me say, a flagship than a real killer offer that will allow to grow in terms of net debt. I don't know if that was clear enough. The next question comes from Hi, good morning guys. Thank you for the question. And we have two questions from King Life. The first on the revenue performance, we saw a very good performance this quarter year over year. Would you consider that this was in line with what were budget for the year or or it was above your expectation for the year? That would be our first question. And the second question on King Life as well would it be, if the the book of the subscribers that are coming from July are through cross sell or actual new clients that team is is, attracting. I always see it. On the revenue side, I think that we are in line with the what which are our trend in terms of budget. As Stefano told at the beginning, the first quarter is just to start. There's a long way in the next three quarters. So we have to continue to deliver and execute our plan to guarantee the reach of the goal. Related to team live, what is happening today, and it show big opportunity for the future. As Stefano mentioned in this picture, We are going to launch our comeback and talk today. The sale is not based on cross selling. It's mainly new customer. So this is another area where we can explore it also in the future. And as we explain also in the description of our plan, team live going ahead can be also a clever way to offload also our network because once we can see that, with someone 10, we have a high user customer. We can reach these on 10, bid our team live access and do the cost value. So I think that is something that we are going to experience more in the second half of the this year and the first half of the next year. Thank you, Peter. The next question comes from Val De Nogueira. Good morning, guys. Two questions. First of all, we have seen recently news on, America Movil or Net Services moving into Fiber. What's your view on that and how that can impact a potential bid for these fiber assets, for example, like Simid Telecom or Copel Telecom from your, your, your end. That's the first question. The second question is, we're still on the public hearing for the new spectrum holdings legislation. Can you share with us your views on this new legislation? Thank you for holding, sir. About the FTTH extension, potential expansion coming from Omega Moi. This is here in it's been very very direct. We saw an opportunity in the low penetration and the or the presence offer in Brazil. It's clear that everybody is looking at this as an opportunity. We were counting on having some competition. We cannot accept network competition. So we have considered this, this is part of the game. So, I cannot say that this is a good news. Really, but it's part of the game. So we were honestly expecting to have both from from BIO with the new plan and both from Omega Mov and increasing competition in the FCD deviation. This is the technology of the future. So we should expect that all the players will run into, but we are not worried about this and we do not expect to change our guidance and our expectation because of this. Relating to the to the spectrum, get this cleared. That is a good news for us that this topic is becoming more and more a really month one and that something may be expected. Let me say in a short term, you know, that we want to increase our capacities in the network. This is something that is fundamental to have good customer experience and to sustain the growth of the data usage and the data penetration in our in our customer base. So net net is extremely positive, especially for us that notwithstanding the steps that we are moving into the implied FTTH, which continue to be not 100%, but we continue to be a relevant mobile player and newcomer in the wireline broadband market. On this movement of AMX, Do you see, do you see it that's trying to explore this potential market that is not being tapped or do you see the it as more of a defensive play, to the, strong competition that Net Services is facing. Both, and in my bachelor's view, this is the move of the industry when we look at the incumbents on the, the integrated players, they are doing this, and I think they are not in the in the valid jurisdiction, in the strategic decision, but I think that has to do both to defend existing market and to add new area of growth. Because they look at the opportunity. They need to add new customer base and they need to defend an existing customer base for the increases competition coming from us and from the other place that are improving the access net with the FTTH. So I think that's it's both. Okay. And, Stefan, do you see that change in the potential dynamics for M and A involving these fiber assets like cemidtolercone? I think that the 2 points are not 100% connected. It's clear that in terms of moving back to the to the topic of capacity, capacity will be the big driver for, for the future, not just in Brazil. So each asset that represents an increase on improvement in capacity of a telco player. It's the relevant one and has to be assessed. So this is part of the gain, but not necessary impact of the FTTH deployment because when you look, for example, at the outset of some of the company that having the rumors of being part of M And A that not necessarily access network. Their transport or distribution network order that is relevant, not just for expanding the access network for FTTH, but also to support the capacity of both mobile and wireline access networks. Yes, that's a good point. Thank you for your answers and congratulations on the numbers. Next question, Mauricio Fernandez, Bank of America. Good morning. Just wanted to touch on the topic of the loyalty. They will be paid now by a team in Brazil to Taracomitale for the use of the brands. Just to understand why now and, you know, why 0.5 percent of net revenue? Is it based on benchmarking? Is it something based on the assuming that it will be done in the past. And if there's any retroactive payment that will come as a result of the fact that it was it was not charged before whether it's going to be charged solely from now on. Thank you. Thank you, Mauricio. Sorry, but the audio was not so rude from your side. So I understood that you asked about the the trademark agreement. Yes. And first is your why now? Right now, let me try to address this point saying that this is something that should have happened 20th ago, to be honest, because the the trademark of TIM in Brazil was registered by there in Medallia. And this is something that at the not just for team, but for all the, let me say, the global Telco player, also in other industry. This decision was started for several years. And I think this is important to understand that this is not part of a strategy from Ceragonidalia. Our strategy has in Brazil was to grow to invest, to develop our customer base. And so this was not a very relevant topic. In devices, we should also not ask just why now, but why not before? And this is a positive news that this didn't happen before. This is something that is a benchmark also in terms of practice here in Brazil. You know, preferably that other companies have similar agreement also with higher value. And this move to the second question that is You were using a benchmark. Yes, you know, that for Royalties, you have benchmark that moves from 20% to 0.1%. We were looking at what was available in terms of comparison that we find that 0.5 was below some for example, regional benchmarks that we have here in Brazil. And this is a fair value. And this was also stated by the fairness opinion that we used in order to support the decision. I think that it's also important to clarify 2 other points. First of all, answering your question. This is not radioactive. So it will start to be paid when we will register the contract, and this will not happen. Before May. So we have took the decision yesterday. We will sign the contract in the next day. We will is the contract in the next week. And we will start today in starting from the last week of May or the beginning of June, so it would be part of the, for example, the 2nd quarter results just for 1 month. This and other verification, this do not affect our guidance. So we are strictly maintaining our full set of guidance. So this is not changed also because the figure, for example, for 2018, if you make some easy calculation. We are talking about R50 $50,000,000 for this year. Last but not least, it is also another important fact in the in the recent past the Taliban Italian was also assessed by the tax authority. Why they was not receiving a payment for this asset. That was a property rights of Pereco Bizarro, and they had to pay in a tax assessment 0.5 percent of this supposed, trademark agreement. So honestly, this is something that it's necessary don't forget that this was one of the relevant risk factor mentioned in our 20 F because we were using And we are still using, as of today, a trademark that is not an asset of in Brazil. So we have to regulate this situation And the one of the, again, the relevant part was also the telecom medallions not only was not received in money, but was paying money to deduct authority for this assessment that happened in the past. And this is also disclosed in the Telecomidalia financial statement. So it's not something that is a new one in the market. So this was part of the disclosure in the balance sheet of, of Telecom Midal. So if you want to find additional information on this tax assessment, Mr. You may look at the Italian balance sheet. Understood. Thank you very much. The next question comes from Andre Badio, JP Morgan. Good morning, everyone. So I have two questions. The first one is that, we're pleased to see the team and margins going up. So, right now, which leverages, I think that the next one's could be used by team to continue to improve the margins. Unfortunately, any of this, we did the the the starting part of the question because we didn't get it. Sorry. Yes, just additional things that you can do towards, continue to increase the margins. Not much, okay. We were not catching if it was marginal enough of revenue. Sorry, very positive. Yeah, yeah, yeah. So as as part of the answer that I did in the past, we have 2 levers in order to achieve, sorry, this is prepared because this is not will not be an easier, shorter answer. First of all, as you may see, we have in large rooms and and and to improve our cost base and to have situation where we can spend revenues without affecting the commercial and the other customer related costs. And this stands to the efficiency plan, the digitalization, but I would say not just the digitalization. So what is very positive for us, and this is something that I always say those in the past that the drivers of the profitability of the industry, especially in the mobile changing, and we are taking 100 percent of the benefits of this change. The interconnection cost is reducing the option that you have to move your effort in terms of customer acquisition is becoming more and more positively affected by the digitalization and by the dematerialization of the physical channel. And the cost when you compare non trust digital, but also for example, let's say, that we strongly use for the upsell of our customer base at completely different size of OpEx of SAC when you compare the historical and traditional sales channel. So this is the the the first one. I let's call it efficient structural efficiency. 2nd, we have, as I said before, very strong opportunity to upsell our customer base. And the goal for upsell after our customer base again is very low when compared to the cost that we have in order to manage day gross additions So we will continue to strongly work to capture new customers, but as you may see, looking at the segment that we have significant room for improving debt, spending per customer taking 100% of the benefits in terms of profitability. And I strongly believe that now that we have completely released our 1 to 1 IT platforms, that, as I told you in the past, 2 years ago, was an outsourced one that was not used in real time dead and now we are using 100 percent our internal resources. We have 100 percent of the process in our end, and we have real real time information that allow us to strongly increase the redemption of our one to one of, and again, the cost of this upsell is 0 And the benefit is 100% because the most of the upsell is for data plans that have no marginal cost associated. 3rd, as I said in the speech, we are just at the early beginning of the wave of clothes that I've mentioned in my strategic plan. So we are completely in line with our trend in terms of mobile service revenues. We know that we can maintain the trend. And we are at the beginning of exploring the opportunity of both the ultra broadband side of our business plan and fall to the SMB 1 and we expect coming from starting from the second half of twenty eighteen to have a contribution to growth terms of top line from this business that we go more and more month by month spending in line with our capacity and with our coverage, for example, for the So these are the main drivers that we expected. We continue to support our top line growth. Thank you. And I have a second question. We have seen a change in telecom Itale, the Board of Directors with Elliott's demanding more corporate governance and other stuff. What changes could we back in team Brazil based on what's going on in telecom in Italy. We, like, actually, we just saw this new value in fee, which is not something that investors really like, but what do you think it's could be other change that you could see in the kind of in theme as well? But honestly, we do not expect to have significant changes. So that all the shareholders of Perrigo Medallia continue to sit in Brazil as a core asset. We know that we have This opportunity that we mentioned to continue to have a growth story in Brazil. So it when I look at my last 2 year in Timberville, we are maintaining our strategic priorities. We are maintaining our effort without having any change in the direction coming from the situation in, in Tarigo Medallia. So at the moment, but I cannot suspend something different. Moving forward. The telecom industry continues to sit in Brazil as a core asset. We continue to maintain our strategic plan that was built up 2 years ago with this strong focus on turning around the company our balance sheet and the quality of our service for this payment to be the best Our next question Hi, good afternoon. Thanks for taking the question. I have two questions basically. One is related to the fixed broadband. If I remember well, you had a partnership with ZTE, I just wanted to know, if you can describe, I mean, the exposure to Zetti in terms of equipments, And if the if, I mean, you have contingency plan if there was any issue there. And the second question was about, the recent, recent issue between Vivo and Anatel on transforming the fines into investments. Janetel President was indicating that discussions were still ongoing with you and Claro. I just wanted to have an update on that. Please? Thank you. Yes, on the fixed, both in EDA, was and should be one of our supplier for the captivity H for the OSP to be very specific. At the moment, We are using other players technology because I don't know if you know the portfolio or clarity, but to go it's important to answer your question that is focused on what is the risk for in Brazil. I'm having to say that he as a provider We are not now buying, is that a TV, but also because they are developing a new OSC that is part of our projections starting from the end of 2018, but this was part of a did that when we have alternative providers, we are working with them. So we expect this issue to be solved on a 3, but if this issue will not be sold, we have 0 risk exposure to the topic for the deployment of our FTTH. Network. In terms of the vivo, what is it called, the 10 modules today. I I will move tomorrow. It's just for you. Not clear. All the players are at this discussion, in Anatel. So it's not not the topic that regards Vivo, you know, that the word is big. Back, that was discussed by Oi, then with the chapter 11. Proceed that it was stopped. Then there was the the Vivo 1. We are discussing our our stock with them. And then with that, a very reduced figure when compared to Woy and and they were one thing. Probably also the other play are doing, are doing the same. So I don't make my assumption to Mario Grosso. Hi, Nicholas Matthew. So it's responsible for regulatory affairs. Just just to compliment, we have some processes. We are interested for some process of business process to explore this possibility to convert this processes in some, some, some commitments, some investments. Of course, we are talking about, values very, very, very, very lower than discussed by the 2 concessioners Oi and Vivo. And we are confident as the president of Anatel True Forest Squas told that we can go to a successful negotiation for both parties So probably in the next month, we will have, a evolution in that sense. Can you just remind us the kind of, numbers we talk about for you, even if it's smaller than Vivo and O. We don't know because it depends on the processes that we will include in these negotiations. These, these boundaries are not yet defined. When we define the processes, then we will evaluate the the we will have the value of these processes. Today, we are talking about conducts and concepts, not only not not, we are not talking about values. We will talk about values when the technical area will transfer the process to the, to the board. Like the other 2 processes of 1,000,000 and not 1,000,000. Of course, yes. Our our units have millions, not billions. Okay. Understood. Thank you. The next question comes from Carlos Cicada, BTG Pactual. Hi, good morning. So my question has to do with the FTTH project piece. First of all, I can't find a year, and I don't know if you've made it public, but I'm looking for what is your expectations of homes passing with by the end of 2018 2019, please? And also, if you can give us a nice amount of how much will cost to pass a home and to connect a home with with FTTH, please. Thank you. Basically, then I move to level with that, probably on our plans in terms of FTDH. As you know, that our target is to reach 3,000,000. Do you know that our target is to reach to have additional, CD in terms of coverage. If you look at the of the expected trend in terms of We are here, we grow the way we spend to it. Let me take note the spike in any of the 3 years. So I would say we need. So it's well distributed along the, the 3 years that we have planned then again, Natleo can follow-up my question. Regarding this deposit, very important to know that when we discuss about that PTH, the cost of the architecture is completely different when we've talked about STD for FTD patients. So the cost for FTDH strongly depends on how much you are able in order to sell about your about your net. So because if you build a very huge happiness, let's go in this way, this is the O and D that a very strong capacity and take, let me take saturation in terms of last mile that, you know, that for the acid duration, that's a actually at last mile level. So you have the longer access when compared to FTTC. Stronger event, how much you can then use this course. That's clearly we expect this technology to be more efficient the long term loop in when compared to the existing gap at CTC in order to achieve this goal, really, we have to strongly sell and use our access network in fiber in order to gain to the to value the cost of the construction of the network. Hi. Just to highlight some points about the FTTH strategy In fact, we have to remember that we are reusing a big part of the mobile network. So all the primary network, we are reusing the fiber, the tower, and the cabinet that we already have deployed from the mobile perspective. So it help us a lot to reduce. It's specifically the cost of the home passage. It is below 500. And when you're talking about the cost of the home connected, it is around 1500 ais. What is very interesting to observe is that if you compare the business model of FTTC in FTTH, in FTTH, the home password is cheaper than the FTTC. In the other hand, it's more expensive to connect to the customer, but the point is that that when you connect to the customer, it means that the revenues is coming. So the payback of the FTTH is much better than in FTTC. And in the other point, the deployment, for the coverage in FTTH, what we have, observed is that is, including better than what we expect. So in the first quarter of this year, we achieved around 300,000 new home passenger in the market and reached the FTTH. And again, we are starting this project. What it means that probably, we can ramp up the speed and it should be faster in the in the future. So, again, summarizing we can see that, is faster to cover FTTH then FTTC. We are reusing the infrastructure of the mobile. What it means that we can be very, very efficient in terms of the cost of the home password and in the home connected, what is the most expensive part of the project it is aligned with the growth of the revenues. Okay? Without any more questions from analysts, we will now start the Q And A session with the press in English So we'll start with the questions from the webcast platform. First one comes from, Bruno from Teva Time. And he asks, what will be the impact of Estel postponement payments for 2Q18? Hi, Bruno. There is a note no impact at all. It's it's a matter of couple of days. The due date is normally between, a weekend it depends could be on a Friday or on a Monday. So, the thing is, this is, around the 31st March. So, normally, some years, it's from the first quarter and some other years is on the second quarter, but no impact at all. The second question also from the platform comes from Isabel Butcher from Mobile Time. She asks, in the financial statements of 2017, one of the highlights was data and content revenues. There was an increase of 43.2 percent in the 4th quarter. Did the first quarter of 2018 keep up with this growth? What are the expectations for the next quarter for these revenues? Hi, Isabelle. I think that the web start to speak less about, the, composition of the ARPU, and we have to start to speak more and more about the overall ARPU because compared to the past, when we have in the in the offer, mainly voice call, and then the customer should buy. Data and payment services. Today, all the offers, if you look at our consolidated fee, you have with 60 reais, data, voice, unlimited, and silent services. So the real distribution of this value start to be less and less important. For this reason, I think that we don't have to continue to commence the growth of the single component but we have to comment that the growth of the products, adding value to all the data of all And I repeat. The growth on single components that could be misunderstood. Another question now from Ana Paulo from convergente Digital, and she asks, an operator is offering unlimited data. The new team package offers unlimited white. Is the domain market prepared to have unlimited data. We will not, we will enter into the mobile situation unresolved already in the fixed broadband? So related to the so called unlimited data I think that it's important also to share something that drops is more a legend than the reality. When you look at the market where unlimited data is advertised. You can look in the bottom of the page of the other size in that there's an unlimited data, but with a specific amount of data. If you exceed that amount of data, there will be the troubling and so you will go to reduce speed. And so reality is not a real unlimited data. Due to the Brazilian regulation for us, to launch an unlimited data offer. Like, for example, the one that is used in US is forbidden. There is an operator that have launched and a limited, data offer, but with a huge promotion because the real price, if I'm not wrong, is above 150 rehash per month in promotion for, for a specific period. And I think that it's more to test what is happening for the market, that's not that's not for a long term sustainability. There are lots of reports that show that the Brazilian market, the market in which return on investment due to the quality of the frequencies, the density of the population, the dimension, the sites of the does of the country, it's very difficult to have one of the best return on investments, sir. So and unlimited data offer, I think that is not sustainable in the medium long run. Another question now from Andrea Loero. This time from IDC Consultancy. And he asks, could you elaborate on B2B strategy in IT portfolio for top enterprise segment, please? Let's start from the top, so the so called top segment. On the top segment, today, our approach is the main base in partnership with some player. Different me from what's happened with other player, we don't have in mind the short run to develop the IT functionality and infrastructure. Certain that this is an alternative approach because, the traditional IT provider look at us as the natural partner to address the large market. So it's more an opportunity that attract compared to the approach of some other players that are used to offers their own offer. When we move on the s SMBs on the small and medium business, We're starting, to start our team. I think that's in Brazil. It's one of the most difficult segments, And what we are doing today is to build a new approach because within that, looking at our market share, And sometimes in some area, we have the on the small and medium business, a market share that is also lower than the consumer 1 we have good opportunity to go. One of the main aspects that we are working on is to find a new sales channel, a new sales model with a more affordable price. I think that this is one of the main issue. And, this is the key for the success of our strategy on the small, medium business. Now the question comes from Pedro, B And A Americas. The question is related to reforming. The America mobile group has announced that it expects to complete the refining of frequencies in 1.8 gigahertz. For, process network in Brazil next year. What is the forecast for team? In the completion of this process, we'll allow the 2 g network shut down. Hi, Pedro. It's Leonardo. In fact, we start the refarming of 1.8, 2 years ago. We were the 1st company in Brazil to to use that. And, now, in fact, we are in a next step. We are preparing the refarming of 2.1 gigahertz. That is the frequency that is currently used for 3 g So as we get this opportunity to bring more customer, to 4 g, we are the leader in terms of, 4 g service in Brazil. We are seeing not adjusted the opportunity to refarming the frequency from 2 g to 4 g, but now to restart to refarming the frequency from 3 g to 4 g. Your question about the 2 g is relevant, but we have to think that, the point here is not just about the network, the infrastructure, but mainly for the device, from the smartphones, from the M2M that we have in Brazil that we have a large base that is still using the 2 g device. So what we have, what you're thinking about is if you will be or not some kind of incentive, from many different, let's say, involved in this process to accelerate the migration from this device to g to 3 g and the 4 g. In our perspective, the opportunity to switch off the 2 g is interesting. Not just for the cost, cost avoidance, but mainly for to bring this this kind of, of customer for the new data consumption, the the new data, the new data word. But, again, I guess that the most effective part of that It's mostly related with the device sites, then with the infrastructure. Ladies and gentlemen, without any more questions, I'm returning to Mr. Stefano Di Angelis for his final remarks. Please, Mr. Stefano, you may proceed. Thank you for the participation of our activities conference call. And we will further discuss about the results and our strategic goals. In the next meeting, we will participate in New York. Data conference. We will roll show in, in the next weeks. And I set for you in July for our second quarter results Thank you. Bye. Thus, we conclude the first quarter of 2018 conference call of TIMPA your lines can now be disconnected. For further information and details of the company, please access our website www.tim.com.brir/ir and take the opportunity to download team IRS. Available for download for Android and iOS platforms.