Good morning, ladies and gentlemen. Welcome to TIM S.A. 2026 third quarter results video conference call. We would like to inform you that this event is being recorded, and all participants will be in a listen-only mode during the company's presentation. There will be a replay for this call on the company's website. After TIM S.A. remarks are completed, there will be a question-and-answer session for participants. At that time, further instructions will be given.
Hello, everyone, and welcome to TIM's third quarter 2026 results presentation. Following today's presentation, Alberto Griselli, CEO, Andréa Viegas, CFO, and the investor relations team will be available for the live Q&A session. Before we begin, please note that this presentation may contain forward-looking statements, which are subject to risks and uncertainties. I'll hand it over to Alberto.
Hello, everyone. Our third quarter results reinforce the consistent trajectory we have followed throughout 2026. During the first nine months of the year, we continued to grow revenue, improve profitability, and convert our operating performance into cash. This reflects the discipline with which we are executing our strategy while maintaining a solid financial position. Service revenue increased by 5.8%, normalized EBITDA grew by 6.8%, and operating cash flow increased by 11.6%. These results keep us on track to deliver our 2026 guidance. Looking specifically at the third quarter, service revenues reached approximately BRL 6.9 billion, an increase of 5.3% compared with the same period last year. In B2C, we continue to evolve our portfolio across mobile and broadband. We are developing propositions for different customer needs, creating more value for our clients, and strengthening our relationship with them over time.
Within mobile, revenue grew 4% year-over-year, supported by ARPU expansion. Postpaid continued a positive trajectory, while prepaid showed further signs of recovery, with higher value recharges and an improved revenue trend, despite a more challenging competitive environment. In broadband, Ultrafibra revenue increased by 12.7% year-over-year, while the customer base recorded double-digit growth for the third consecutive quarter. In B2B, revenue grew by 19.3% over the last 12 months, increasing their contribution to our revenue mix. We continue to broaden our portfolio through new partnerships and contracts in established verticals. In connected vehicles, for example, our partnership with BYD strengthens our position in the automotive segment, while in smart cities, the Smart Luz project expands our proposition beyond smart lighting into 5G-enabled public safety. TIM Cloud AI by V8.TECH also adds cloud, data, and artificial intelligence capabilities to our offering.
Together, these developments reflect the continued evolution of our B2B business beyond traditional connectivity. We are also making practical progress in the use of artificial intelligence. In customer care, AI agents already support billing and collection journeys, with our billing agent reducing average handling time by 86% compared to human interactions. We are now expanding their use to offers and sales. In our network, predictive maintenance has helped prevent, on average, 93% of failures at the sites identified by the model. Turning to our financial performance, revenue continued to grow faster than cost, with OpEx up 3.9% in the quarter. This supported normalized EBITDA expansion of nearly 7%, taking the margin above 52%. On an after-lease basis, the result was even stronger. EBITDA grew close to 8%, while margin expanded by around 1 percentage point to 41.3%, also benefiting from lease costs below inflation.
Our operating performance also continued to translate into cash generation. In the first nine months of 2026, operating cash flow reached almost BRL 5 billion, an increase of 11.6% year over year. The operating cash flow margin reached 23.9%, improving by 1.3 percentage points. Cash generation remains an important part of our performance. It supports our ability to invest in business while preserving financial flexibility. We ended the quarter with BRL 5.2 billion in cash, even after the full payment of V8.TECH and I-Systems. Gross debt declined by 3.7% compared with the previous year, and leverage remained at a lower level. This indicator showed that our operating performance continued to translate into a healthy balance sheet, solid liquidity, and controlled leverage. As we move into the final part of the year, our priorities remain consistent. In B2C, we will continue to evolve our value proposition across mobile and broadband.
In B2B, we will continue to expand our portfolio and develop our presence in established verticals. At the same time, we are renewing the Instituto TIM with a focus on technology-enabled education, digital and gender equity, contributing to a more inclusive and digital society. Our results reflect a business that continues to evolve, improve profitability, and generate cash. We will continue to execute our strategy with consistency and discipline. Thank you, and now let's move to the live Q&A.
Thank you, Mr. Alberto. We are now going to start the question-and-answer section of our call. To ask a question, please click on the raise hand button. You will then receive a request to activate your microphone. Please remember to use a headset to provide optimum sound quality. Our first question comes from Leandro Bastos with Citi. You can open your microphone.
Hello, guys. Good morning. Thanks. We have two questions on our side. The first one about mobile, specifically postpaid. We saw ARPU basically flattish on a year-over-year basis, and you guys even mentioned higher retention discounts and still competitive pressures. Just to get a sense of where we are, if you continue to see deterioration in the competitive environment into the third quarter and going forward, what is the environment you see for price ups and ARPU evolution, at least a direction? This would be the first one. The second also is still in mobile, but looking at prepaid, which we saw an improvement on the revenue trajectory. And you guys even mentioned a new offer for BRL 40.
Just to understand the traction we are seeing for these new plans and how you are seeing overall competitors reacting to these offerings as well. Those would be our questions. Thanks.
Hi, Leandro. It is Alberto speaking. Thank you for your questions. For the first one, when we look at postpaid, I would say that the competitive dynamics remains broadly unchanged versus the second quarter. There is not any specific new launches besides the typical promotional activities. In the second quarter, we said that the market was a bit more edgy and nervous. I think it remains as it was. There has not been a progress in that. This clearly reflects in the front book prices updates that for control did not happen so far. The situation is largely unchanged. This clearly impacts the ARPU dynamics to some extent in the sense that we had some pressure in the first, second quarter on churn that now is over the third quarter, as we reported in our churn rates that is on our presentation.
We saw some ARPU erosion at the beginning of the year because of this increased churn. When it comes to what we call contracted revenues that are based on the price point of the postpaid plans that we sell, they are pretty unchanged versus the second quarter. When we move to the prepaid, what is happening is that we are optimizing a bit our portfolio. As you saw, we launched a new price point that sits together with the existing one. In some areas of Brazil, we launched an offer whereby the prepaid offer is roughly BRL 30 days for a specific amount of gigabytes. In a number of regions in Brazil, we included a side offer whereby we offer BRL 40, 30 days, and a higher allowance of gigabytes.
The response so far has been positive, and you see some results appearing in our third quarter. What we are looking at in October and November is pretty consistent with what we are seeing in the previous quarter. In response to that, we saw that one of our competitors announced a prepaid offer of BRL 35. I do not think it is already implemented, but I would say that on prepaid, this is a positive news because we did not change the BRL 30 offer. We just added a BRL 40 on top of the existing one, and one of our competitors said that they were moving to 35, which is a positive outcome. On a more negative side, Claro apparently put back WhatsApp in their offering. Let us see. It is a mixed time. There is some positive ones and potentially some less positive one on one of our competitors.
Was it clear, Leandro?
Yeah, very clear. Thanks, Alberto. Good day.
Thank you. Our next question comes from Gustavo Miele with Goldman Sachs. You can open your microphone.
Morning, Alberto, Andréa, Vicente, Luiza. Thanks for the presentation. I also have two questions. The first one would be related to capital allocation strategy. Just to hear an update from you guys on how you're thinking priorities in terms of capital allocation for 2027, especially in a context of long-term rates in Brazil going up, as per what we saw in the last weeks here in the country. Just to make sure whether dividends or maybe potential M&As gain ground in the priority plan of the company for the upcoming year. This would be my first question. The second one would be related to bad debt expenses, as it happened in the last quarter. We saw some pressure on the year-over-year comparison. You mentioned some effects coming from B2B client, as it happened as well in the last quarter.
Just to make sure whether you're also seeing some pressure in the B2C segment as well amid the tough macro environment that we are going on. Those would be my two questions. Thank you.
Gustavo, let me take the first one, and then we'll leave Andréa to complement on the first and the second one. On the first one, I would say that our plan for capital allocation remained pretty much unchanged. When you look at our shareholder remuneration, our message and performance has been consistent over the last many years. The more we grow our cash flow, that is our priority number one, the more we distribute to our shareholders. That's something that has been happening for many years, and that's the guidance that we are likely to follow for the years to come. When it comes to the M&A activities, as you know, we executed this year a couple of operations. The first one was with V8.TECH on B2B, and the second one on I-Systems on broadband. I think that we're going to be selective and opportunistic on B2B.
We are doing well with the strategy that we are putting on the ground, so there might be something appearing next year, but nothing, I would say, it's more of a complement than something transformational. When it comes to the broadband, after the acquisition of I-Systems, we are deploying our organic strategy and accelerated broadband. As you saw on our results, it's something that is performing quite well. The organic plan is in place, it's nationwide, and we're going to follow on that. As we discussed in previous quarters, you all know that we are also looking at potential M&A activities in this area. I agree with you, Gustavo, that the situation for next year is going to be good for us, given our strength in terms of capital. We got BRL 5 billion in cash, so we can execute potential M&A activities in the area.
That is not undecided yet, but the strategy remains unchanged. As soon as we find a target that is at the right price and with the right commercial and technical synergy, we are going to pursue it.
Hi, Gustavo. Complement to the answer of Alberto. Alberto saying everything about the dividend and M&A. Just to complement that, we are confirming our guidance for 2026 related to the shareholder remuneration. On the bad debt, this quarter, when we compare the debt with the last year, we still have a pressure. We increased 30%. When we see in a quarter-over-quarter basis, we see this acceleration. We have the peak of B2B impact in the second quarter. Now, we continue with this increase related to the review years, but we expect this deceleration in bad debt going forward. I do not know if I answer your question about bad debts.
Gustavo, we just add another point on, let us say, the wider macroeconomic impact on our consumer operation. Of course, things may change in the coming quarters, so we are monitoring this on a regular basis, on a daily basis, especially on prepaid. We say, when you look at prepaid does not look impacted by this macro situation so far. As a matter of fact, you will see that our spending is moving up. I think that so far it is a sign of resilience. When you look at what we call the collection curves for consumer after the price up period that we experienced in the first and the second quarter, I would say they are pretty solid, both on broadband and postpaid. So far, we do not see a deterioration of those curves.
Clearly, the back book price that we are going to execute next year is going to put this a bit under pressure, but we know this, and we are building the countermeasures to treat our customers accordingly when we will execute it.
Great. That's clear. Thanks, Alberto. Thanks, Andréa.
Thank you. Our next question comes from Silvio Dória with Safra. You can open your microphone.
Hi, good morning, everyone. Thanks for taking my question. Just one question here about TIM brand royalties. The royalties agreement with Telecom Italia expires at the end of this year, if I'm not mistaken. Could the terms change in 2027, especially under post-control? That's my question.
Good morning, Silvio. No, we'll have no change related to the royalties agreement. This will continue. We are still under Telecom Italia, TIM Italia brand, so until there, we will continue with our royalty agreements.
Okay, thank you. Thank you.
Our next question comes from Luís Chagas with XP. You can open your microphone.
Hi, guys. Thank you for the opportunity. I have two questions here. The first one, I would like to go back to the broadband point that Alberto Griselli mentioned. Could you comment how the TIM Ultracombo has performed since launch, in terms of net adds and ARPU as well? The second question is about the change of controller. Could you share how the dialogue with the new controller is evolving and whether you expect any change in TIM's Brazil strategic priorities? Thank you.
Luís, thanks for the question. When it comes to broadband, I would say that the performance so far are quite positive. And are positive from a number of perspective. We are building it up. As for now, the offer is being available only in our point of sales, the physical point of sales. And what we see there is a number of things. The first one is that this is driving up our ability to grow broadband by itself. That's the first positive one. The second one is that besides the positive impact on broadband, we also have a positive impact on mobile. So we sell more mobile as a consequence of that. The third one that we generally are selling price, and we have a specific data point on our presentation, at the price point that it is not necessarily the one that we communicate.
As a matter of fact, more than half of the convergence bundles of conversion pack I've sold are at a price point that is significantly higher versus what we communicate. The only point that we still have to assess is the churn impact, because it generally takes more time. We measure it on a monthly basis. We got a couple of months now. We see that the results is positive there as well when we compare the curves in M0, M1 of the convergence products versus non-conversion one, but we need to wait more time. I would say that from this perspective, the experience been broadly positive. Now, what is going to happen over the next quarters is that we are fine-tuning specific aspects of the value proposition just to make the selling experience, activation, and everything smoother for our customers.
We are going to expand the breadth of the commercial channels that are providing this offering. So far it's been limited to the point of sales. We are on a track on this one, worked well, so now we're going to expand it a bit further on. Let's say, the Black Friday campaign is working in that direction. Is that okay, Luís, for the first question?
Yes. Just great. Thank you.
Okay. When we move to the second one, this is in the dialogue with Poste Italiane. I think maybe we discussed this on a one-to-one, but we have a representative of the new shareholder in our board, the Brazilian board, since March. We have been working with them now, and together clearly with our parent company for a number of months. Including a number of M&A operations already happened with them in our board and understanding and supporting our strategy. I think that I didn't notice any change in our priorities, and this related to the previous questions for [inaudible] in terms of capital allocation. Expanded dividends as we experienced over the last years, and appetite for growth in the areas that we discussed, B2B and the broadband, to complement our business portfolio in Brazil.
Thank you, Alberto. Very clear.
Thank you. Our next question comes from Livea Mizobata with JP Morgan. You can open your microphone.
Hi, Alberto, Andréa, Vicente, Luiza. Good morning. I have also two questions. The first one on your broadband strategy, I would like to double-click on this one. I understand that you are growing well with expectations, and 2027 should be also a year of acceleration, following the merger approval. How should we think here about margins and CapEx for next year, having in mind this acceleration? My next point is on the AI efficiencies that you brought up. I thought it was quite interesting, the initiatives on customer care and also network operations. Are we already seeing some gains in terms of margins, or is this still too early to tell? Could you tangibilize for us what level of gains do you foresee for the next years, given your studies in-house, and if this could potentially be a driver for the next margin expansion cycle? Thank you.
Do you want to go?
No, fixed broadband. Fixed broadband.
Okay. When it comes to fixed broadband, as you said, we are already accelerating our expansion, and it's going to continue in the coming years, clearly. We are managing so far to keep our ARPU under control despite the competitiveness of this market. Remembering, the broadband market is quite competitive, especially on a regional basis. So far, we've been successful in defending our ARPU. When it comes to the impact in margins and in CapEx, at the growth that we are experiencing, this is not going to impact the sort of messages that we have been delivering over the last years in term of expanding profitability and a conversion of revenue into free cash flow. This remains the main priority of the company.
This year, we commented the guidance just for one year, but if you look at the previous year, where you have a longer timeframe, you will see that we are providing for an expansion of profitability at all levels, and certainly at free cash flow level. We don't foresee any impact into this within the organic operations. For artificial intelligence, do you want?
Yeah. Good morning, Livea. Related to the AI, as we see in our presentation, we still have very good results in what we are working now, and we see space to increase more gains in the future. But some of the gains we will reinvest in our OpEx. We have another things that we want to do, and some of the gains will not achieve the margin, but will create space for more investors, especially in the customer experience. I don't know if this is what you want to.
I would just complement a few things, Livea, that basically what we see, as Andréa Viegas was saying, we have a number of initiatives within the company, and now we are in the process whereby some of them are scaling up. The two that we put into the presentation on the network side and on customer care side are gaining scale. Basically, when it comes to gaining scale, what does it mean? That nowadays, if you want to complain on an invoice or you want to query some kind of adjustment in your invoice, it's 100% AI-driven. Clearly, this is one of the most difficult ones.
We are gaining a lot of confidence that this wave of artificial intelligence can impact over the coming years a number of processes within the company, generating not only the efficiency that then we utilize either to increase our margins or to support the growth in areas where we want to invest, but also translate into quite positive outcome from the customer experience. When you look at the way that the system works, maybe we organize something by the end of the year to make it tangible, you see that the call is more assertive, it's clear for the customers, it's shorter, and the customer gets away with a solution at the end of the call. This is positive also for the quality of the service.
At the same time, I think that one of the important aspects that we've been tweaking, and now we are comfortable with it, is the sustainability of this initiative. You got the savings, but you got the cost, and so now we got the cost under quite good control in terms of how we manage it. We are quite comfortable that we have a net positive outcome of these initiatives at scale.
Perfect. Very clear. Can I just do a follow-up on this margin front, since we are elaborating on the topic? Could you discuss also any updates that you might have on Fistel? I've been seeing this process advancing on STF over the past days, so just wanted to know if there is anything new that you could share on this front. It would be interesting. Thank you very much.
Well, on Fistel, there is no relevant news so far. Clearly, there are a number of paths to reach a solution of this dispute. The first one is the legal one. This one is the longest one. Then there is the second one, that is the ADI. The ADI, it's with Alexandre de Moraes there, is due to be put into vote, has been, but since then it's disappeared. There is another one that is the congressional path that address the PFS. The sector has a positive outcome in the lower chamber. Now it went to the Senate, so there are three paths going forward. But I think that we will need to wait a bit more.
Perfect. Very clear. Thank you.
Our next question comes from Gustavo Farias with UBS. You can open your microphone.
Hi, Alberto and the whole team. Thanks for taking my questions. I'd like to start by talking about free cash flow. We noted that free cash flow grew 3% year-over-year, which is below the growth we saw in EBITDA. If you could comment, I believe the drivers were mainly working capital taxes, so if you could comment if there was any kind of timing effect on that line. A follow-up of that question related to leverage. If you could comment on at what leverage level do you feel comfortable in maintaining, especially in the light of potential further M&As in the future. I would also like to touch on a second theme related to sales and marketing expenses. We observed some decrease as percentage of revenues compared to previous quarters.
Just would like to see if there was any non-recurring event and what to expect going forward. If I'm not mistaken, you delivered this decrease in the intensity of this line despite the expenses related to Rock in Rio. Just wanted to know how to think of this line going forward. Thank you.
Good morning, Gustavo. Let's go to the first one. Related to the free cash flow, we have an increase in our working capital this quarter, basically two points. The first one, we have an increase in the inventories level due to the Black Friday purchases. We have higher purchases than the previous year, so we have an increase in the inventory. We also have an increase, as you mentioned, in the income tax cash flow, especially due to less interest on capital. This is why you have this difference between the EBITDA and the free cash flow. Moving to the levels of our leverage, if you ask me, I am confident of the leverage I have now. That is, considering the tax that we have in Brazil, I think we are in a very good position on the leverage today.
Of course, we have room to improve, but we are very careful where we are going forward, considering again the tax. The third point, the commercial cost, as you mentioned, we do not have any inorganic in this quarter. The commercial, yes, we have a little decrease in the advertising. This is due to efficiency, what we are doing. But consider that the impact of Rock in Rio happens in the second quarter because we have previous costs in the previous event. So the higher impact of the Rock in Rio occurs in the second quarter. In this third quarter, it is only efficiency and things that are going on. For the fourth quarter, the next quarter, you can expect the same level. Of course, we have Black Friday, and this impacts a little bit more.
Maybe it is worth adding that in this commercial cost, we have, besides the commercial cost, we got the call center cost as well. Since, basically you got a number of things going on there. Something is increasing, something is decreasing, so you see the net effect. So when you look at the operation of the call centers that we have, we just discussed in the previous question, you have a cost line that it is more efficient year-over-year. So it is going down in nominal terms.
That is pretty clear. Thank you, everyone.
Our next question comes from Maria Clara Infantozzi with Itaú. You can open your microphone.
Hi, everyone. Thanks for the opportunity. I have two questions here. The first one related to your pricing strategy, considering 2027, a more inflationary environment could somehow affect the pass-through of inflation to your back book clients next year. How do you balance pricing with churn given this macro context? The second question related to profitability, also taking into consideration the macro headwinds. Are you seeing further efficiency gains to absorb the more inflationary environment? If you could comment on that, it would be helpful. Thank you.
Maria Clara, let me go quickly over the two, then I will ask Andréa to complement also. When it comes to the pricing strategy for 2027, I would say that our back book approach is not going to be impacted. We're going to execute, and we're going to design, and we're going to always improving our processes to make it in a way that creates less attrition to our customer base. We put intelligence, more intelligence every year into the process. Clear that is all this market rationality scenario that we are looking at, and at the end of the day, we carried out a number of launches in the last quarters, and now we are 100% focused in make them work and enter 2027 at a more robust pace in terms of net additions versus this year.
If you remember this year, we enter at a slower pace versus our typical speed. This speed has been improving over the last three quarters. It's likely to improve in the coming quarters. We are working to improve volumes. When you look at the way we launch a number of new initiatives, they also work on prices in a smarter way. You look at prepaid, you look at the BetaCreator that we just launched. We are managing the tool to be better positioned in 2027. When it comes to the profitability, of course, a higher inflation has a direct impact on a number of cost categories. At the same time, we are used to this. It's a number of years that we enter the year with an expectation of lower inflation in our industrial plan, and then the inflation went up.
We got a number of initiatives, processes, and attention in how we manage cost, and that's the reason we've been increasing our profitability for the last, how many quarters we entered for? 15?
15.
15. It's, I would say, business as usual. Clearly, we need to find the new levers. We already have some of them mapped out. Artificial intelligence is clearly one of them.
Just to complement, Maria Clara Infantozzi, the answer of Alberto Griselli. Yes, we always have improved to increase profitability, but we also have to understand what happened with the tax reform because we need to understand what will happen with the inflation of this. But we are working in our plan now, and we will create rooms to try to don't have impact of the inflation. But again, we have to wait and see what will happen with the tax reform.
Very clear. Thank you.
Thank you. Our next question comes from Phani Kanumuri with HSBC. You can open your microphone.
Hi. Thanks for taking my question. The first one is regarding the building blocks for your service revenue growth. If you look at 2026, your client generating revenue in mobile has been well below inflation, but that has been offset by adjacent services and fixed broadband. Should we expect this to be the scenario going forward, or do you expect some re-acceleration in the client generation revenues in mobile? The second one that I wanted to ask is on how you're looking at satellites. Some of your competitors have, and also partnerships. Are you looking at partnerships with them going forward, and do you see any threat for disruption from them? Thank you.
Okay, Phani. I think that on the building block of revenue generation, you sort of given the answer in your question. We are, yes, working on three main building blocks. When it comes to, I think that two of them are smaller, and clearly we expect to keep on growing broadband and B2B. When it comes to mobile, when I mention we are focusing now to get a more robust entry pace for 2027, is clearly because when you look at our client generating revenues or mobile revenues, you will see that basically you have a couple of things that go together but shifted in time.
We want to If you look at this year, you see that our pace of volumes, let's put this way, at least for postpaid, has been milder at the beginning of the year, and therefore we are working to enter at a stronger pace in next year, because at the end of the day, revenue will follow with a number of quarters of delay. Our objective is to work the volumes and be more dynamic in the way we enter 2027. That's the reason we are moving up quarter by quarter, recovering ground.
As for price, this is a bit trickier given the overall competitive environment, but as you see, we are sought to maintain a certain rationality. Basically, we respond to some of our competitors if we do something that we think is a bit too aggressive, as in the case of the TIM feed, the discussion that happened last quarters, and it has been sorted out. For mobile, our main focus is to improve the KPI, the operational KPI. If we are successful in doing this, and we have been accelerating over the last quarters, there would be a positive impact on revenues with a few quarters of delay. As for broadband and B2B, we are already growing at a fast pace, and our plan is to keep on with this pace in the coming quarters.
When it comes to the satellite is, in my view, a complementary value proposition that is relevant for Brazil. Therefore, yes, we are looking at partnership for Brazil. I think that we have got something by the end of the year. The point is that basically you have two main value proposition in Brazil. One is with SpaceX, and the other one is with AST. Both of them have the specific benefits.
I think that it was a question in the last quarter from JP Morgan. I think that when you look at SpaceX, as of now, the trade-off between the cost and the value proposition is not good, because at the end of the day, what is being offered as we speak is the basic tech services, and the business model make this service, in my view, excuse me, the trade-off between these services and what is being asked by the satellite partner is not positive. When you look at the other opportunity in Brazil, it is AST that closed some deal with some operators in Brazil. It looks also an interesting value proposition in the future, because as of now, there are a limited number of satellites in place, and I think that the positioning is structurally more complementary to mobile operators.
While SpaceX basically at the end of the day has a network of its own end-to-end, AST designed its network to be complementary to us. Basically, they got a passive antenna in space, and they need to go through our network. We like this approach as well. Both services will be commercially capable of delivering value at the end of next year, so it is good that we have two options on the ground. We are discussing with both of them, and I think that we will announce something by the end of the year. Phani, was it clear?
Yes.
Let's assume so.
Yeah, it's very clear. Thank you. Maybe one quick follow-up. I mean, you did discuss about the impact of tax reform. Can you just give you some initial takeaways on what you think the impact of tax reform will be on TIM?
Hi, Phani. The tax reform we are working since the beginning of the year is a quite transformation because we have to see, review systems, all the contracts with the suppliers, tax credit, and so on. What we are focused is to maintain our margin and have a zero impact in the free cash flow. Until now, have some regulations still being discussed, so we have to see in the end of the year what will be the effective tax. We believe that we are prepared to do the transition, and we are working with zero impact in our free cash flow estimation.
Yeah. Thanks, Alberto, Andréa, and team.
Thank you. Our next question comes from Rogério Araújo with Bank of America. You can open your microphone.
Hi, all. Thanks for the opportunity. I have just one follow-up on MSR growth. It has slowed to 4%. Claro's MSR in Brazil accelerated to 7%. Could you please share with us, what is your view on these differences compared with a peer? Do you think that pricing positioning is sustainable between players, including them and your pricing strategy? Would it make sense to adjust prices versus peers to defend market share? Thank you.
Rogério, the first one. When it comes to pricing, I think that our pricing is competitive, so I don't see any major differences versus our competitors. Prepaid has been stable for many years, and now we are making an attempt to monetize our customer base. As a matter of fact, it's a more formal strategy, and it's working. When you look at control, we are on the same ballpark on the ATL offering. When you look at postpaid, I think that our view is a bit higher than us, and there might be an opportunity to increase it. We are not just doing it right now because we are working to increase our, let's say, pace of net addition going forward. I don't think that there is a need to change our pricing strategy because the three of us are pretty much aligned.
When it comes to convergence, if you refer to this, it's true that one of our competitors is aggressive regionally, and the other two are more, let's say, let's put it this way, are more consistent in terms of a nationwide offering. Since we are now upselling a convergence product to our customer base, we don't see a reason at this point in time to be as aggressive as our competitors because we are managing to grow at a quite interesting price point. That's the data point that we share with you in the presentation, the fact that more than 50% of our customers subscribe to a higher value versus the one we communicate.
So far we don't see the need to be more aggressive, if you take away the fact that on a promotional basis in some moments of the year, it's part of our business functioning that everyone is launching specific value proposition with, let's put it this way, a better price point, but it's temporary. Black Friday is a clear example of this. That's for your second question. If you look at the first question, I think that what I was saying is that when you look at postpaid, what we are focusing on is increasing the speed of growth in terms of net addition. We entered this year at a lower pace, and since then we've been growing with a number of launches, and our expectation that this trend may continue, and therefore this will result in a better outlook for MSR growth going forward.
When it comes to MSR or service revenue growth, I think we have a difference versus our players that we are concentrating on mobile, so how you treat convergence products is something that you may want to ask to our competitors versus us.
Okay, that's very clear. Thanks very much.
Thanks, Rogério.
Thank you. Without any more questions from analysts, we will now return to Mr. Alberto Griselli for his final remarks. Please, Mr. Alberto, you may proceed.
Thank you all for joining our call today. As the market continues to evolve, we are driving our strategy to accelerate mobile operational KPIs and enter 2027 at a stronger pace. As we said, at the same time, we continue to expand opportunities in broadband and B2B. I would like to thank again our entire team for the commitment and focus to deliver on our strategy, and we are all looking forward to meeting you in the coming days. Ciao.
As we conclude the third quarter of 2026 conference call of TIM S.A., for further information and details of the company, please access our website, tim.com.br/ir. You can disconnect from now on. Thank you once again.