Earnings Call: Q4 2019

Feb 19, 2020

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefonica Brasil Fourth Quarter of twenty nineteen Earnings Conference Call. Today, with us representing the management of Telefonica Brasil, we have Mr. Gebara, CEO of the company Mr. David Melcon, CFO and Investor Relations Officer and Mr. Luis Plaster, IR Director. We also have a simultaneous webcast with a slide presentation on the Internet that can be accessed on the site, www.telephonica.com.brir. There will be a replay facility for this call on the website. After the company's remarks are over, there will be a question and answer session. At that time, further instructions will be given. Before proceeding, let me mention that forward looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward looking statements are based on the company's management's beliefs and assumptions and on information currently available. Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the company's future results and could cause results to differ materially from those expressed in such forward looking statements. Now, I will turn the conference over to Mr. Luis Plaster, Investor Relations Director of Telefonica Brasil. Mr. Plaster, you may begin your conference. Good morning, everybody, and thank you for joining us in this conference call for Telefonica Brasil's twenty nineteen fourth quarter and full year results. The call will be divided as follows. To start, Christian Gebara, our CEO, will give you an overview of our operational and financial performance and then go over our commercial and CapEx evolution. After that, our CFO, David Melcon, will comment on our cost structure, efficiency, digitalization initiatives and financial results. We will then move to Q and A. I now pass the word to Christian. Thank you, Blaster. Good morning, everyone, and thank you for taking part in our fourth quarter and full year twenty nineteen results call. I start by commenting on the highlights of the quarter and year on Slide three. Fiber continues to be our main growth lever, benefited by the footprint expansion seen throughout the year. In the fourth quarter, our FTTH customer base increased by 30.8%, while our revenues grew 37.6% year over year. We are confident that our fiber results will drive our fixed business back to sustainable growth in the near future. In mobile, our leading position in terms of quality and customer experience culminated in a year over year growth of 6.9% of our postpaid subscriber base in a year that we applied both price increases that contributed to a 4.1% increase of our postpaid revenues in the quarter. Our top line increased by 2.6% year over year in the quarter four, maintaining the good pace of growth reaching in the previous quarter, driven by an above inflation increase of 5.7% in mobile revenues. On the cost side, our efficiency program that relies on digitalization, simplification and automation initiatives continues to produce significant results. OpEx as cost of goods sold decreased 1.9% year over year in Q4, enabling us to reach the highest EBITDA growth of the year, 5.4%, with a recurring margin of 38.2, the highest ever for the company. In 2019, we are able we're also able to generate our highest ever level of free cash flow, billion dollars growing 19% year over year, representing a free cash flow yield of 9% despite our higher investment in the year. That allow us to propose a shareholder remuneration of R5.8 billion for the year with a payout of 116% over our R5 billion dollars of net income, resulting in a solid 6% dividend yield. In addition to this positive result and no less important, we recently redefined and stressed our company's purpose, which is digitalize to bring closer. At Vivo, we are determined to digitalize Brazil, so as to offer best in class connectivity and distribute digital services, resulting in unique experience for our customers. Through technology, education, security, entertainment and other services, we want to approach companies to customers, people to premium content and drive closer human interactions. All of this based on an inclusive and diverse internal culture built around the principles of sustainability aimed at balancing our economic, social and environmental impact. Moving to Slide four, you can see that our mobile revenues grew 5.7% in the fourth quarter, including handset sales that were up by 46.2% year over year. If we exclude handsets, mobile service revenues increased 2.2%. Mobile service revenues growth was driven both by a solid performance of our postpaid revenues that increased 4.1% year over year as a result of the upselling of services combined with price increases applied during 2019 and by the gradual recovery of prepaid that presented a quarter over quarter growth of 2.8% leading to a year over year drop of 3.1% in Q4. In fact, we are pursuing a more for more strategy prepaid and in January 2020, we increased the price of our entry level Vivo Turbo offer by 20% nationally from R9.99 dollars to R11.99 dollars per week going the direction of a much needed rational approach for prepaid offers. Moving to Slide five, in 11/09/2019, we had 32.9% of all mobile customers in Brazil, our highest market share since 02/2006. That undistricted leadership reflects Vivo's superiority in terms of network quality, customer care, branded channels, contributing to an outstanding overall user experience and maintaining churn levels under control. In Q4, we reached our peak in the year in terms of new postpaid customers with 875,000 net adds, even after increasing prices in Q3 that led to an ARPU increase of 1.7% year over year to dollars demonstrating that we have a solid and rational value proposition. Such strong seasonal sales were also seen in our handset business. The promotional activities implemented during Blank November and Christmas led to a 20% year over year increase in the number of handsets sold with an important unitary value increase of 35%. That not only contributed to a very good result in handset revenue, but also to an increase in our in store traffic improving the sale services. Moving to our fixed business on Slide six. In Q4, fixed revenues decreased 2.8% impacted by voice decline and the strategic decision to stop selling which contributing to a significant decrease of Pay TV revenues. Despite that, in Q4, we were able to decelerate the pace of year over year reduction and quarter over quarter fixed revenues expanded 1%, the best results in the year and in many other years. The performance of our growing business fiber, VTV and Data plus IT continued to push us further ahead in terms of the transformation of our revenue mix. These products already represent 52% of our total fixed revenues and were up by 12.8% year over year in Q4. We are getting closer to an inflection point of fixed, where we'll be able to resume growth of a business that represents 35% of our top line. FTTH and IPTV revenues now represent 21% of overall fixed revenues with FTTH reaching R586 million dollars growing 38% year over year and IPTV BRL244 million increasing 22% year over year. On Slide seven, you can see the customers with fiber based service already accounts for almost 40% of our broadband plus Pay TV subs allowing us to build a fixed base with higher ARPU and superior lifetime value. In 2019 FTTH access grew 31% representing 36% of our broadband customer base, 11 percentage point increase versus a year ago. As a result, broadband ARPU increased 14% year over year to BRL72 as FTTH customers have significantly higher ARPU than customers from other technologies. On the right hand side of the slide, we present the evolution of our IPTV business. In 2019, IPTV access increased 23% year over year and for the first time represent more than half of our pay TV of overall pay TV consumer base contributing to an ARPU improvement of 5% reaching dollars moving to Slide eight, 2019 was the year in which we performed the largest ever expansion of our FTTH network, building 2,300,000 home passed and adding 43 new cities. We are now present in 164 cities across the country with 11,000,000 home passed. In Q4, we launched the first city in partnership for American Tower, Barbasena in the state of Minas Gerais, which was a success in terms of integration of network systems and platforms. We also entered in new cities by both expanding geographically and overlaying our existing FTTC network to defend and upgrade our customer base. Not to mention our franchise model through which two cities in Goias were already launched with strong initial results in terms of take up. Our strong FTTH expansion not only give us the tools to transform our fixed business by capturing the demand for high quality fixed net connectivity, but also helps us defend our postpaid customer base. On Slide nine, we present the CapEx for the year that reached BRL8.8 billion, below our R9 billion dollars guidance as we have been efficient in deploying our resources. Investments in fiber increased 13% year over year amplifying our presence to 164 cities with FTTH. Additionally, CapEx related to four gs and 4.5 gs grew 51% year over year, allowing us to further improve both quality and coverage consolidating our mobile leadership. The network sharing agreement signed with TIM last December is pending approval to start being implemented and produce efficiencies. I now pass it on to our CFO, David Melcon. Good morning, everyone, and thank you, Christian. Moving to Slide 10, cost efficiency continued to be one of our main strengths, leveraging on the implementation of initiatives related to digitalization, simplification and automation that took our annual EBITDA margin from 32% in 2016 when we started to accelerate the optimization of our cost structure to 36.2% in 2019, increasing our margin by four percentage points. In the fourth quarter of twenty nineteen, our cost increased by 1%, well below inflation of 4.3% leading to an EBITDA margin of 38.2% in the period. If we exclude the cost of goods sold that grew 25% due to the ongoing acceleration of handset sales, our expenses decreased by 1.9% year over year. Personnel costs, which represent 14% of total OpEx, increased 4.5% as a result of the insourcing of IT and security activities that leads to important gains in quality and productivity. The insourcing of such activities had as a counterpart a positive impact on the evolution of our cost of service rendered, which accounts for 38.6% of our total OpEx and decreased 4% year over year. In addition to the insourcing, the performance was benefited by lower costs with network maintenance, interconnection and TV content. Commercial expenses, excluding bad debt, decreased 7.3% in the period, driven by lower expenses with call centers, back office, billing and posting benefiting from the continuous digitalization of our customer care. In the fourth quarter of twenty nineteen, commercial expenses represent 24% of our total OpEx. On Slide 11, you can see the improvements of our digitalization and automation initiatives that continue to optimize our OpEx structure and improve our customer experience and relationship with company. At the end of twenty nineteen, we had 73% of our customers receiving eBills and more than 50% of the payments were made through digital platforms. Our digital channels are being used by more than 16,000,000 unique users, contributing to an impressive 25% year over year reduction of incoming calls to our call centers. We are also improving the productivity of our back office operations by implementing automation in many processes. We have more than 500 robots running across the company with a very high level of accuracy in their functions. The automation of processes helps, for example, to reduce the number of visits to the field to solve technical problems. Currently, 62% of all technical support queries initiated through our app, Meovivo, are solved digitally without human interaction. All these initiatives allowed us to consistently reduce our OpEx in absolute terms year over year. In 2019, all the digitalization initiatives allowed us to capture R452 million dollars savings when compared to the 2018 cost base and R846 million dollars reduction compared to the 2017 cost base. These savings represent an achievement of 54% of the BRL 1,600,000,000.0 target expected for the end of twenty twenty one. Now moving to Slide 12. Reported net income for 2019 reached BRL 5,000,000,000. If you exclude the non recurring figures, it reached BRL 5,400,000,000.0, 2.5% up in comparable terms versus the previous year. The result was impacted by EBITDA expansion backed by solid top line growth and contention of costs, lower financial costs driven by the reduction of interest rates, higher depreciation and amortization expenses related to the expansion of our asset base and higher recurring taxes resulting from positive results and a lower distribution of interest on capital versus the previous year. We are proposing a shareholder remuneration based on 2019 results of BRL 5,800,000,000.0, representing a payout of 116% over our reported net income for the year. This is equivalent to BRL 3.53 per preferred share, a robust dividend yield of 6%. In addition, we have just declared $270,000,000 of interest on capital based on our initial results of 2020. Turning to Slide 13. In 2019, free cash flow grew 19% year over year to an all time high of BRL 8,200,000,000.0, in a year in which we accelerated our investments and operating cash flow as well as reduced our interest and income tax payments and improved working capital. As a result, we have been able to increase investment in cutting edge technology such as fiber and 4.5 gs, which will support our leadership in Brazil and revenue growth going forward. And we also maintain a high level of shareholder remuneration, which is unique among LATAM telcos. Thank you. And now we can move to the Q and A. Thank you. The floor is now open for questions. In case you are following the conference call via webcast, please click on the question to the host to send your question. Questions will be taken in the order they are received. Our first question comes from Maria Theresa Azevedo with Banco Santander. Hi, everyone. Thank you for the call and for taking the question. So I would like to ask what are your initial views on the proposed five gs auction? It's a structure, it's expected timing, the number of national licenses and how valuable you think that spectrum is for your strategy? And is it fair for us to continue to assume that five gs in Brazil is not going to bring a disruptive CapEx cycle ahead, especially considering a much stronger collaboration activity between the players? And if I may, if you can please also share your views on the network sharing agreement that you have, what are your expectations in terms of savings? And if you see any further collaboration deals in Incyte? Thank you very much. Hi, Maria Theresa. This is Christian. Thanks for the call for the question. So yes, as you said, the public hearing just started for the five gs. What we see today is better than was talked before. So I think that's a good sign for the five gs that we have more spectrum available for the 3.5. And then it's going to be 400 megahertz. That is good because we believe that five gs, we need to have at least 80 megahertz to 100 megahertz minimum to have the good experience in the five gs. We also have the 90 megahertz in 2.3 that also can be needed and it's more defining the regions that are the Brazilian regions and not some of the regions that were talked before. We have the 700 megahertz that's going to be in two rounds. So also good to know that in the second round, those like people that don't have the possibility to beat in the first one will be able to beat in the second one. So overall, what we see, we still need to wait for the public hearing and the final definition of the auction. But so far, it looks reasonable. And also there is this attempt to have much more obligations associated to the sale of the frequency rather than having it in the price of the beat. So we've been working to have this as the way for us to optimize our investment, bringing more connectivity to Brazil rather than paying for the license itself. So, so far it seems good. We still need to wait what's going to be the final document and the official rules for the auction. So that I think was the first part of your question. About five gs, yes, we still need to wait for the ecosystems to be in place. I don't know if it's something in Brazil, but I think it's worldwide. We still are developing this ecosystem for five gs. Brazil is a continental country and there is still a challenge to cover with four gs and 4.5 gs. We're doing that and we did a lot in 2019. We continue to doing that in 2020. We will do much more fiber in our backlog. That's also going to allow us to be much more competitive in quality for the five gs. So we are doing all the infrastructure investment that is needed to give a better experience in 4.5 gs and be prepared for the five gs when it happens. So I think that was the second piece of your question. And the third one, the sharing, I think sharing will be needed not now, but also for the future. So we are optimistic about the approval of the sharing that we have proposed. It has different areas of the sharing, this two gs, two gs, I don't know it's going to bring a lot of savings, but allow us to be much more focused in the future technologies four gs and five gs rather than two gs and share infrastructure with the other player. There is also the single grid that is in place. The single grid will also be good and give us OpEx savings in the future once it is implemented and approved. And there is the four gs piece that will for the proposal that is in the table right now give us new coverage in cities that we are not present and it will give to our partner presence in cities that we are present and they are not. So we do believe the sharing is the way to go forward, especially in five gs that more sites will be needed and not only sharing, but also loss in municipalities that allow us to implement more infrastructure to be able to be competitive in five gs. And then if I answer all your questions, but Perfect. Thank you very much, Christian. Next question comes from Rodrigo Villanueva, Bank of America. You may proceed. Thank you. Good morning, Christian, David, Plaster. My first question is related to the wireless business. With several wireless price hikes in 2019, why you see that wireless service revenue is only growing by around 2%? And is there a level where you see wireless voice revenue stabilizing? And the second question is a question more related to the rhetoric between the U. S. Government and Huawei. With the increased escalation, is this something that could prevent Vivo from using Huawei equipment in the future? And how relevant is Huawei as a vendor provider for Vivo? Thank you. Hi, Rodrigo. This is Christian. So thanks for the questions. Our price increase were in the as you know, in the third quarter mainly and a little bit in the fourth quarter. So this movement that we first did in the market like helped revenues for third and partially in the fourth quarter. That movement was partially followed more in the postpaid and in hybrids from our competitors. We now just started a new movement if price increase in the prepaid. So we now nationally, we changed our price $9.99 to $11.99 in our weekly offer. That is another bold move that we are leading in this market to rationalize pricing here in Brazil. So again, I think mobile business is doing pretty well. You may see some volatility quarter by quarter because we always compare to different quarters in the previous year where we had or not have a price increase. So I think that's the reality that we're going to see going forward. In the last quarter, our net adds in postpaid was a good one, was the best one in the year. And also our churn seems to be controlled. So hopefully, rationality that we start seeing hybrid from some players in postpaid, we may see and we should see in the prepaid. All need to be more rational and not give so much benefit with no price change in the prepaid because that's the base for hybrid and postpaid going forward. And also the economy needs to help us. If unemployment gets reduced as we expect, we're going to see more consumption. And if you see more consumption, we're to see more revenues. So that's the piece in mobile. If you have more questions later on, you let me know when I complete. In Huawei, yes, Huawei is an important provider for Vivo in access and also in core. We are not going to speculate what's going to happen because we are following all the security measures that we need with any provider that's used in the Telefonica Group and in vivo. So far, we've been totally comfortable with the situation that we have. But of course, we are monitoring any future decision that may happen. So far, how it is relevant for us as to any other player in this market, and they are very advanced in the five gs technology as you know. So we keep monitoring and if there is any change, we need to react upon this change. Understood, Christian. Very clear. Thank you. Next question comes from Diego Aragao, Goldman Sachs. You may proceed. Yes, good morning all. Thank you for taking my question. First, you reported lower than expected investments in 2019 of BRL8.8 billion, which was also lower than your initial plans. Even though I would agree with you that you can definitely enjoy some efficiency on CapEx, what's driven you to use the excess, let's say, cash to speed up investments in growing four gs and FTTH areas? I mean, why don't you anticipate some of your future investments and maybe as a compliment, any initial thought on the franchise business model? You. I think we have a plan to deploy four gs, 4.5 gs and FTTH for the year. Now these are the key drivers of our CapEx expenditure and what we decided to increase it when we went from eight to nine as you point out in the beginning. So we wanted to deploy 2,300,000 at Home Pass. We wanted to reach a certain number of cities with 4.5 gs and we accomplished everything that we had planned. So the economy that we got in CapEx was our ability to do that with a lower investment that we first forecasted. Why we didn't use the remaining $200,000,000 because we're just talking about $200,000,000 over 8.08 it's because sometimes we don't have time to do that execution. We need to get licenses, we deploy all the workforce to do it. And then we why do we have the savings, why not be more efficient and bring more free cash flow. So we wanted to be 43 cities, we are there. Wanted to deploy 2.3 home pass, we are there. We wanted to reach a percentage of 4.5 gs and we are there. So and we are doing all the IT transformation that we also want to have. So no need to expand money that is not needed to comply with the objective that we defined for the company two, three years ago. The second question, I don't know what you want to know about franchising that I don't know if you want a specific answer, but we launched it as we said in the last quarter. Two new cities already in place in Goias, very good results, take up on track. Some of them I think one of them are both our business plan. We have many in process of being deployed or new franchisees to be enrolled in our program. We cannot share which cities will be the next, but it's going on track and with good results. As the American Tower deal as well, there is a franchise in a different one. We launched the first city that's Barbaseni Minas Gerais and we are planning to launch a series of new cities with them this year as well. That's very helpful, Christian. Thank you very much for this. And maybe just the second question. As you know, M and A remains a super hot topic at this point. And I remember we discussing some of M and A scenarios at our global telco conference in New York, I guess, back in September. And at that time, my perception was there were a few steps that had to be taken before you or someone take the lead in this process. So that said, we saw important moves taking place since then. And I was wondering if you can share your views on M and A now and how do you see the prospects for consolidation in the short term and what would make sense for Vivo you know, if this time comes? Thank you. We're talking about mobile consolidation or fixed consolidation, Diego? Well, you tell me Christian. I guess we can definitely start with mobile. I guess it's a kind of consensus that this is the area where it would make more sense in the short term, but happy to get your thoughts on the fixed side as well. Okay. In mobile, I think the consolidation started with the position from Claro, not Nextel. So it's the first if you consider Nextel as the fifth player in the market, the consolidation started. We're still monitoring, as you said, of course, we are the leading company in the mobile business in Brazil. If there is any asset on sale, we will need to analyze it and we are always interested in seeing if there is a fit for what we need. In case that there is this process officially starts, we'll be there as one interested part for sure. Now we really don't know the outcome and which type of asset that will be sold, if anything is going to be sold, what is implied with the asset. So we need to analyze and in very good detail. Also, of course, if there is anything in mobile on sale, the current players, especially the leading one that's Vivo, will be interested in analyzing it. So let's wait and we keep monitoring this process. In the fixed, as I asked, as I mentioned, because of course there are many small players in the market. I think the franchising movement that I just mentioned is one first movement that for companies that wanted to launch a new fixed fiber network in a small city. They can do that together with us. That's the case of some of the franchise that we have here interested in being one of our partners. Maybe before they wanted to open up a new brand by their own, now they see Terra and Vivo as an option for them to deploy their network. And of course, there are also some players in the market that today work with a different brand that they want to change to Teva brand, pay our royalties and be part of our umbrella or our network. So we are doing that. And also there are some companies that may targets for M and A in the fixed that we are also analyzing. We haven't found anything that fits with the quality of the network that we need, the usage of FTTH as we have and in the markets that we cannot do in a more economically way by our own. But if you find something like this, we also be monitoring and analyzing as well. That's super helpful. Thank you, Christian. Thank you, Jerome. Next question comes from Chiro Ferhat, Itau. You may proceed. Hi. Good morning. I would like to know a little bit more about your FTTH network rollout. It's it's been going quite well. So if you could please give us some some more intel on your goals for 02/2020. And also looking at your handset sales business, do you believe that this you've achieved a very healthy level? Or can we expect to accelerate even further in the future? If you please could elaborate on the strategy for handset sales, that would help, please. Okay. In FTTH, as I said before, no, we ended the year with 164 cities. No, that was additional 43 cities. Here there are two ways of growing in FTTH. Now we are doing new cities, but we are also doing overlay in some areas of our FTTC footprint, where we believe we need to upgrade the speed and the quality of the service that we offer to our customers. So this year, with that, we managed to deploy 2,300,000 new home passed that the mixture of organically expanding in new cities and organically overlaying FTTC cities. For this year, we are not giving guidance, but we may keep the same pace. You can imagine like 2,000,000 home pass. Here we need to also add what we are deploying with franchising that is not in this number, but I don't think this year is going to be a significant number of new Home Pass, but start building on the volume of Home Pass with people technology behind. And also we have the American Tower that is included in the $2,000,000 first that I told you that is deploying in Minas Gerais. So keeping this space of $2,000,000 for this year is going to be a reasonable deployment for 2020. The way to do that, as I said, is by our own individually, independently as we did with all the cities that we entered with Vivo, with American Tower in the cities in Minas Gerais where we're going to split the investment in part of the network and with the franchisee where they deploy most of the network only connect to our backbone, but the customer in that is their customer and we get our royalties. So that's the way that we're going to go forward, but it will also open to analyze different models and that's what we're going to do also for this year, next year as we launched American Tower and Terra, we are analyzing other models to finance our expansion and even accelerate it if it's possible. That was the first question. The second question, as said, we showed also a very strong number. Now for the quarter, we increased in more than 46% of our revenues in handset. Now we have a very important volume, so growth over a very strong and more solid base is not going to be the same. But we keep investing and betting on this business of a way of bringing more customers to our stores to give a much more complete value proposition to customers that go beyond only handset. Now we are selling a lot of accessories and now we're starting also to sell home automation as part of our strategy to get technology hub. So we're now selling things for homes with five gs coming up is going to be much more useful Internet of Things. So we want to be selling technology, not only in handset and accessories in B2C, but also in B2B, they're expanding partnerships with hardware provider, but also the digital service providers such as Microsoft that we have one of the most important deals for Brazil. We're increasing also our presence in selling these services to B2B customers. Okay. Thank you. Next question comes from Marcelo Santos, JPMorgan. You may proceed. Hi, good morning. Thanks for taking my question, Christian, David and then Plaster. The first question would be about the strong ARPU that we are seeing the fiber to the home broadband. So a lot of sequential improvement. Could you just help break down that? And are you upgrading the users raising prices, new regions have different prices? Just could help to throw some a little bit more color there. And the second question would be about postpaid, which saw some slowdown in the fourth quarter versus the third Could you just help to explain a little bit better this trend? Thank you. Hi, Marcelo, this is Christian. FTTH, you're right, we are increasing prices. We are focusing on high speed also when selling FTTH. So price increase and focusing on one hundred and three hundred megabits rather than 50 megabits. So our strategy going forward is to focus in high speed broadband and also not giving more discounts. We used to have also discounts for first months. We are being much more rational, increasing price and taking out discounts and focusing on high speed broadband. So that's their answer for the increase in ARPU. In the mobile, as I said, we had a price increase in the third quarter, mostly the third quarter, hybrid that was the main one and very, very lateral increase in the first month of the fourth quarter. So that's why when you compare and also need to compare with previous year, this comparison will always bring some changes in the growth rate of one quarter versus the other quarter. So that's been the key answer for this slightly change that we had in the revenue growth. That can be happening in future quarters because depend on the quarter you compare and when we decide to do price increase. So commercially speaking, November and December were very strong months for our mobile business, not only in handset sales, but also net debt. As I said before, close to $900,000 best results for the quarter compared to the other quarters in the same year. Perfect. Thank you very much. Next question comes from Matthew Robilliard, Barclays. You may proceed. Good morning and thank you. I had a question about the fixed line. So obviously, you pointed out earlier, very strong performance in broadband with good ARPU growth. Also, the corporate segment is doing very well. But when we look at the KPIs, they remain quite depressed. And I was wondering, when we look ahead, do you need to post better KPIs to start to see a stabilization of the fixed line? Or you think that thanks to better value and good growth again in B2B, you can start to stabilize that division? And more specifically, what is for you a realistic timetable for a return to stability in fixed line? And then a second question on OIBDA. So very good performance in Q4 and largely driven or partly driven by cost cutting. And I was wondering if you could maybe share initiatives you have for 2020 and what is the outlook for the cost trajectory in 2020? Thank you. Hi, Matthieu. This is Christian. I will answer the first and then part of the second and Steph, you want to complement. You're right, very good performance in what we call the growing business. Now so if you split our fixed business in two, what we call more legacy business and what is the new business and the growing business, you can see that what is the growing business and I think we have in our presentation used to represent 45% of our revenues and this year we end up representing 52%. So in a year, we went from 45% representation to 52% of representation. And this business is the one that is growing 12.8% in the quarter. And if you take out only FTTH, the growth was 38% and IPTV was 22. So going forward, we see the representation of this growing business being higher than 52% and it is higher and keeping the pace of the growth pace that we have. We can see this compensating the loss that we have in what we call traditional business. The traditional business is driven down by two key products. One is voice. As you know, is declining. So that's something that's been replaced by other technologies broadband and we're trying to keep it as much as we can, but we assume that's going to decline and we need to compensate that. The other one is DTH. DTH, we decided to stop selling it, okay? If we continue selling it, it would have a positive impact in our revenue, but a negative impact in our cash generation because that's CapEx intensive. So as a company and not believe in the technology going forward, we decided to stop selling it and just betting in IPTV. And as you see in our IPTV figures, the representation that we have today of IPTV of our total TV customer base is already 54%. If you look two years behind the 2017, IPTV represented 24% of the customer base. So it's already 54%. So we're going to continue on that. And also you mentioned that you gave good results. We had a growth of both data and IT of 17.8%. That is a very good result and we intend to keep this space. Although it depends on some deals that we may close with companies, large companies that may give some variation in the quarter by quarter comparison. But we are very positive that we keep growing in data, IT and all digital services related to cybersecurity cloud to big and medium corporations. So when we're to be the trend switching, when this new growing business will be much more relevant than the legacy and the positive number we can see. We're not giving a specific timing. By the end of this year, beginning of next year, we see that happening. So let's see what the economy works. But we are positive that maybe in any moment of this year, we could see that on the beginning of the next year. And second question about costs. Yes, you're right. We are reducing costs because of the digitalization. I think we had this target of EUR 1,600,000,000.0 to be captured along three years. We are 54% of the target. We still have 2020 and 2021 to reach the target that we put to ourselves two years one year and a half ago. And that's driven by digitalization. We are doing a lot of ePing. We are doing much more customer care. Milvipa is already 16,000,000 customers using our channel. We are doing cognitive call centers, reducing calls. So now more than 30% of our calls is handled by Aura, our artificial intelligence agent. We are doing automation with usage of robots internally. So going forward, we see that we're going to capture what we promised the 1.6 and cost will be going down everything that we could digitalize. Although we're going to see price increase in the sale of handsets and all hardware related to B2B as well. So I think this year, we took out the cost of goods sold to show in different lines what is our cost evolution. And also when we talk about partnership in fiber, when we took partnerships as the one that we did with American Tower, We have some relief in CapEx, but we generate a new OpEx because that might be for home connected. So depending on the future deployment model that we defined for fiber, we could save some CapEx or deploy more with the same CapEx, but may generate new OpEx. So it's important to see the absolute growth of our EBITDA and we're going to be explaining to you quarter by quarter if there is any change in any model for our deployment. So that's mainly what we have for cost. Otherwise, we'll have a different question that I ask Duffy to help or if it's already answered. No, it's great. Just if I could follow-up on B2B. Do you think you're gaining market share in that segment? Or is it the market that is very dynamic? Or is it a mix of the two? I think the market is growing in total market because I think companies are recovering for very difficult years with a very economic downturn and this segment was highly impacted. But I do believe we are gaining market share in all lines of B2B. Thank you very much. Next question comes from Maria Theresa, Avedo, Banco Santander. Hi, thanks for the follow-up. So just one other point that is we would like to hear views on the financial services, advertising and other value added services that you can use in order to monetize your user base. Is there anything you can share about the Vivo Money initiatives? Thank you very much. Hi, Maritereza, this is Christian again. Yes, we are looking different areas of monetizing data and also much more than monetizing data to create a hub of digital service distribution that we are doing both in B2C and B2B. We really see ourselves as a hub of digital service distribution, as I said in the beginning of the presentation today and a part of our company's purpose. And we're going to do partnerships with different kinds of verticals. So we are doing entertainment, we are doing education and we are going to do also financial services as you mentioned here. So people money, we started with a pilot. We're still piloting to understand better of this market, but we are very confident with the results that we've got so far. And we may launch it in the second semester of this year, a definitive model for Vipomone. So again, here we'll be lending money to our customers, focusing on customers that don't have access or other types of financing in banks, because maybe they don't have a bank account, but they can be our hybrid or prepaid customers. So confident with the results of the pilot, not launching anything officially this quarter, but planning to the second semester to have an official Vivo Money working for the model and all the customer approach that we're planning to do with the service. Not only money, but we also have other initiatives that we may launch in the next quarters in other verticals, in other areas. So we also launched the Vivo car. That is our way to automate and to digitalize cars. And there's a series of new initiatives that we put in place. Advertising has also asked, we keep growing with this, with Vivo advertising and that's different area, but also important one for our distribution leverage always in our brand, customer base channel and also in our billing capability for some services that require a bill that we can offer to a partner. So that's basically the answer if you have any additional questions. Perfect. Thank you very much. At this time, I would like to turn the floor back to Mr. Christian Gebara for any closing remarks. You may proceed please. Okay. So thank you all for following the call. We are open for further questions with our teams in Vivo. And hopefully, we're going to meet in any outside meeting or in the next call that we may have in April for first quarter. So thank you very much to everyone. Thank you. This concludes today's Telefonica Brasil 4Q twenty nineteen results conference call. You may disconnect your lines at this time. Have a great day. Thank you.