Luis Plaster - IR Director Amos Genish - Chief Executive Officer Christian Gebara - Chief Revenue Officer David Melcon - Chief Financial Officer Rodrigo Dienstmann - Chief Resources Officer Eduardo Navarro de Carvalho - Chief Commercial Digital Officer.

Richard Dineen - UBS Investment Bank Andre Baggio - JPMorgan Chase & Co. Susana Salaru - Banco Itaú Mauricio Fernandes - Bank of America Merrill Lynch Michel Morin - Morgan Stanley Fred Mendes of Bradesco - Banco Bradesco SA Daniel Federle - Credit Suisse Leonardo Olmos - Banco Santander, S.A.

Carlos Sequeira - BTG Pactual Mathieu Robilliard - Barclays Capital.

Good morning, ladies and gentlemen. At this time we would like to welcome everyone to the Telefonica Brasil Third Quarter of 2016 Earnings Conference Call. Today with us representing the management of Telefonica Brasil, we have Mr. Amos Genish, CEO; Mr. David Melcon, CFO and Investor Relations Officer; Mr. Christian Gebara, CRO; Mr.

Rodrigo Dienstmann, COO; and Mr. Luis Plaster, IR Director. We also have a simultaneous webcast with slide presentation on the Internet that can be accessed at the site www.telefonica.com.br/ir. 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. [Operator Instructions] Please also note, today’s event is being recorded. 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 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 call over to Mr.

Luis Plaster, Investor Relations Director of Telefonica Brasil. Mr. Plaster, you may begin your conference..

Thank you. Hello, everybody. Thank you for joining us once more in this conference call for the third quarter of 2016 results of Telefonica Brasil. As usual, our call will be divided in three parts. In the first part, our CEO, Amos Genish, will give you an overview of our operating and financial results for the quarter.

In the second part, Christian Gebara, our Chief Revenue Officer, will go over our commercial strategy; to our CFO, David Melcon, will discuss our financial results and synergies; and Rodrigo Dienstmann, our Chief Operating Officer, will explain our CapEx evolution; and finally, we will move to Q&A. Now, I pass the word to Amos..

Thank you, Plaster. Good morning, everyone. I’m very pleased to present our results for the third quarter of 2016. In this quarter we continued with the positive performance we had earlier in the year, with relevant revenues, EBITDA and cash flow growth. On the quarterly basis, service revenues grew 2.2% year-over-year.

Year-to-date service revenues growth reached now 1.6% year-over-year. During the quarter, top line growth was mainly driven by continued disciplined execution of our data centric strategy, which allowed non-voice services to grow 16% compensating for the decline in voice services, which was almost 12%.

Non-voice services already represent 57% of service revenues up from 51% one year ago. Mobile data and digital services continue to show slight growth to around 23%, which allowed our mobile business to grow by 4.9% in the quarter, while accumulating 2.6% growth year-to-date.

We maintain our leadership in the postpaid segment with a market share of 42.4% and the share of net additions slightly low. Premium services continue also to catalyze growth in the fixed business. Non-voice fixed services grew 10.4% year-over-year, driven by FTTx, which grew almost 20% and by IPTV which grew around 63%.

We own 55% market share in broadband speeds above 34 mega per second, and our IPTV grew, our customer base grew around 40%. On the cost side, we continue to contain costs by leveraging lean and zero waste programs as well as by continuing to capture benefits on synergies.

Recurring operating costs, which exclude restructuring charges, went down by 1.9% year-over-year on a quarterly and year-to-date basis, despite inflation that reached 8.5% in the last 12 months.

As a result of our consistent top line strategy and our cost contention efforts we report a healthy growth of 8.1% of our recurring EBITDA, with an EBITDA margin of 32%. Year-to-date EBITDA growth reached 7.4%. Currency product continues to benefit from efficiency and effectiveness programs as well as from an improvement in exchange rates.

Year-to-date, we have invested R$5.2 billion, which represents the CapEx of a net revenues ratio of about 16.4%. Even though the scheduling of our investment activities for the year, considering an increased acceleration in the fourth quarter, we expect still CapEx for the year, excluding spectrum license to be around R$8 billion.

As a result of our healthy EBITDA and CapEx evolution, operational cash flow, EBITDA minus CapEx has grown 600 basis around 43%. Year-to-date free cash flow, which include charges - changes in working capital net of financial expenses and taxes is higher than the last year by almost R$2 billion, equivalent to around 137% increase.

Finally, I would like to comment on the CEO transition process we recently started.

Incoming CEO is Eduardo Navarro has been already in Brazil since the announcement in October 10, and he is having quality interaction internally with myself, with executive team, as well with external parties as the head of Anatel, the communication minister, and other relevant partners and parties.

As I mentioned earlier, Eduardo has significant experience in Brazilian telecom market and within the Telefonica group. This is facilitating significantly the transition process, which we expect to be finalized earlier than originally planned, sometime in the near future.

As proven in other cases, as earlier the official CEO assume the role the better it is in order to feel certainty and confidence about the continuation of the strategy and the plan. Now, I pass it to Christian Gebara, who will go in details about our commercial strategy and results..

Thank you, Amos. Good morning, everyone. Before going to the slides, I’d like to highlight our key commercial initiatives and results for the third quarter. This was another very positive quarter for Vivo, reinforcing our leadership in key segments.

We were able to maintain our absolute leadership in high value segments, notably in mobile, postpaid, and ultra-broadband with expressive growth on both.

We continue to focus our efforts and reducing our dependency on voice revenues by intensifying 2G and 4G rendering, leveraging awareness and adoption of digital services, and increasing data allowances on mobile plans.

We continue to implement a complete commercial efficiency program covering all channels and customer segments, we are also enhancing our digital experience and focusing on excellence in customer services [this year key dealing] [ph] and digital services. We believe that going digital is key for our business and we are prepared for it.

Moving onto Slide 5 of the presentation, you can get the perspective about how we were able to grow 2.2% our top line. Our non-voice services revenue had a significant increase of 15.7% year-over-year, especially in key products like mobile data with 23.3%, ultra-broadband with 19.3% and Pay TV with 9.3% growth.

Non-voice services revenues represented this quarter 57% of our total revenues, 6 percentage points more than one year ago. This quarter we had 11.5% decrease in mobile and fixed voice revenues mostly affected by regulatory changes and macroeconomic environment.

To minimize these effects, Vivo has been consistently developing commercial initiatives such as bundles and migrating customers to flexi plans. Getting on details of our main business, on Slide 6 represent the evolution of our mobile revenues which grew 4.9% year-over-year or 7% excluding regulatory effects.

This growth rate is significantly higher than the previous quarter mainly due to double-digit growth in data, revenues on postpaid. Postpaid revenues grew 10.9%, now representing already 72% of our total mobile service revenues and 44% of our mobile customer base. Meanwhile, the prepaid revenues decreased 8.2%, less than previous quarter.

Part of this decline was due to our well-succeeded strategy of migrating prepaid users to higher rate plans. I would also like to highlight that our strategy to encourage the use of digital channels had very positive result this quarter. Prepaid migration to hybrid plans through digital channels increased more than a 100% year-over-year.

Meanwhile, postpaid users of our Meu Vivo app increased more than 150% year-over-year. The left hand side of Slide 7 shows that our mobile customer base declined 7% despite the strong revenue growth. This is the consequence of our strategy to focus on profitability and the base cleanup of nonproductive customers implemented by the end of 2015.

On postpaid, we maintain our leadership of 42.4% market share capturing 46.2% of all net-adds last August. I would also like to highlight our performance in portability with positive figures every month in 2016 as it was in 2015 increasing over 40% of our net ratio when compared to the previous quarter.

Despite the challenge [Technical Difficulty] Sorry, I think we had an interruption, so I’ll continue.

Despite the challenging economic scenario and the higher competitive pressure in the mobile segment we were able to maintain a healthy and stable 0.6% voluntary churn rate in postpaid, a direct consequence of our superior data centric value propositions, best network, inspirational brand, and high quality channel experience.

On prepaid, we continue to increase penetration and loyalty of our weekly bundled offering, Vivo Turbo, increasing the number of active customers by 37% year-over-year.

Also the higher penetration of bundled offers, more sales of additional data packages, and value added services associated with the cleanup of nonproductive customers drove up our prepaid outgoing ARPU by 15.1% in the last 12 months. On Slide 8, you can see how our 4G offer continue to gain relevance.

4G traffic grew almost 190% year-over-year, while the number of 4G devices in our base grew an impressive 137%, reaching 17 million handsets. We maintain our solid leadership in the segment with 36% market share, more than 8 percentage points ahead of the second player.

We perceive that customers are capturing valuable benefits from our 4G experience allowing us to consistently increase our data offers aligned with higher price. As a consequence, we continue to drive up our ARPU, reaching R$27.8 in the quarter, almost 15% more than a year ago.

Data already represents almost 60% of our ARPU compared to 50% of last year. We have also brought innovation to use of data plans. More recently we have enhanced MultiVivo that allows customers to distribute data allowances per dependent subscriber directly via Meu Vivo app.

Finally in the machine to machine business, we continue to expand our leadership with a solid 39% market share. Moving to Slide 9, you can see our performance on the fixed business. We had a slight decrease in service revenue up 1.4% year-over-year, but if regulatory effects are excluded, our top line grew 1.2% in the last 12 months.

We continue to be focused on premium services, which grew at a relevant rate. In ultra-broadband, FTTx, we reported 19.3% revenue growth year-over-year, while our pay TV revenues grew 9.3%, with 63% growth on IPTV.

On Slide 10, you can see that despite the decrease of 2% in our fixed customer base, we have improved our sales mix, increased the relevance of our premium products. Our FTTC customer base has grown 4% in the last 12 months, and FTTH increased 34%.

In 2016, we were able to capture 54% of all net adds in high speeds, equal or above 34 megabits per second, maintaining our leadership position with 55% of market share in this segment. We are able to increase by 8% broadband ARPU or 10% if you consider only FTTx.

On pay TV, we followed a more selective approach for new customers in order to ensure the best return on investment, especially in standalone DTH. We are able to increase 39% our IPTV customer base, while our total pay TV ARPU grew 12% in the last 12 months.

In B2B, we have been diversifying our revenues through digital services, growing more 46% year-over-year, mainly driven by IT, security and cloud services. In addition, we launched our Meu Vivo Empresas app to enhance B2B digital customer experience.

I now pass to our CFO, David Melcon, who will give a more detailed financial perspective on our third quarter results..

Thank you, Christian, and good morning, everyone. Moving on to Slide 11, in third quarter 2016, recurrent operating cost reduced 1.9% compared to the same period of the previous year, despite inflation, which reached 8.5% in the last 12 months.

This is the third consecutive quarter with cost reduction, mainly explained by the positive evolution on synergies and our selective commercial approach in addition to the enhanced use of digital channels that benefits our customer care costs. Without interconnection costs, the expenses were almost flat with 0.8% variation year-over-year.

As a result, we reported a very consistent growth of 8.1% in our recurring EBITDA on a year-over-year basis, driven by an acceleration of service revenues and by the cost efficiency measures adopted by the company, besides the synergies already captured from the acquisition of GVT.

Our recurrent EBITDA margin increased 2.1 percentage points, reaching 31.9% in this quarter. On the Slide 12, I will elaborate more on our cost evolution by concept. Service rendered and G&A cost were almost stable year-over-year.

Lower interconnection cost, energy expenses and reduction in third-party cost for fixed services, due to insourcing compensated for higher costs related to network expansion.

Commercial expenses decreased R$51 million year-over-year, influenced by the results of our rational commercial strategy and synergy generated by the branch unification done in every, eliminating communication redundancies that reduce advertising expenses.

In addition, customer care cost declined due to higher adoption of digital channels, such as our application Meu Vivo increasing by 37% since it’s launched in April 2016. Cost of goods sold reduced R$176 million as a consequence of the selective approach in handsets, focusing specifically on higher value customer, especially on the B2B segment.

During the third quarter of 2016, bad debt represented 3.2% of net operating revenues, 0.1 percentage points down on a year-over-year comparison. We continue to implement stronger credit controls by protecting our top-line growth.

Recurrent personnel cost evolution, which excluded provision for the restructuring program in the amount of R$19.2 million in third quarter 2015, grew 7.9%, still below the inflation in the period and affected by the collective agreement and the insourcing of field services and call center employees.

Now, moving to Slide 13, net income for the nine months of the year reached R$2.9 billion, 30% higher than the amount of the same period in 2015.

When excluding the net impact of one-time events, namely the tower sales in the first quarter of this year and the provision for organizational restructuring, in the third quarter last year and in the second quarter this year, net profit will have increased 17% mainly due to EBITDA growth in the period.

The negative variation in depreciation and amortization is driven by the higher level of investment in recent years in addition to higher software and a spectrum amortization. Now I will pass to Rodrigo Dienstmann to explain the execution of our CapEx strategy..

Thank you, David, and good morning, everyone. Now on Slide 14, as you know during the past nine months, we have been consistently pursuing the strategy of smart and effective CapEx allocation.

In strict alignment with the marketing and commercial teams, we allocate CapEx considering what we call the strategic intents for each geography customer segment and technology, always targeting the highest value markets. Also, the macroeconomic environment, especially the devaluation of the U.S.

dollar exchange rates helped us keep our unitary prices down on purchases under the initial guidance, mainly on the customer services equipment. As a result, our Q3 CapEx represented 18.2% of net revenues keeping our year-to-date figure to the level of 16.4%, down 2.5 percentage points, year-over-year for the nine months.

Out of our R$6.2 billion spent so far in the last nine months, the largest part was as always allocated to growth projects in the business units with increased revenues and to keep up traffic growth, mainly focused on 4G coverage, 3G capacity and fixed business expansion.

As mentioned in the second quarter conference, in Q3, we have accelerated the network deployment and structural investments, which included the deployment of new sites, mobile sites, 3G and 4G at a rate two times faster in Q3 than first-half; a faster fixed business expansion adding 200,000 ultra-broadband facilities in existing cities, and also launching in a new city, Timóteo in Minas Gerais.

And overall capacity increased in optimization of our optical and IP backbone. For the last quarter of 2016, we intend to keep speeding up the network deployment and structural investments, while maintaining a strong grip into CapEx effectiveness. This will help us prepare for the 2017 demands.

Investments will continue to be mainly focused on 4G coverage, 3G capacity, backbone and backhaul expansions, and the new FTTx footprint. We will launch one additional city, Caxias do Sul with FTTH, totally greenfield. And we also add more than a 130 4G cities to our current footprint until December.

Despite this acceleration, we are confident that the ratio of CapEx per net revenues for 2016 will be under the initial guidance pointing to an amount no higher than R$8 billion including licenses for spectrum..

Thank you, Rodrigo. Now, moving to Slide 15, thanks to our solid EBITDA evolution the result of the smart CapEx allocation that Rodrigo just described combined with a strong financial discipline, we are showing a very consistent cash flow generation in 2016.

In the first nine months of 2016, free cash flow achieved R$3.2 billion, doubling the free cash flow generated in the same period of last year with positive contribution in all lines and mainly in CapEx and EBITDA. When considering the extraordinary transaction, free cash flow represents 2.4 times the amount of the same period from previous year.

As of September 2016, net debt stood at R$3 billion down 35% year-over-year and representing just 0.2 times EBITDA given the company’s flexibility to navigate challenging economic scenarios. Turning to Slide 16, now we like to share with you the evolution on the synergy front.

Since last quarter, we evolved even further in the achievements of the key milestones that will guarantee the capture of synergies in the long run.

As a result, the execution of the activities already secured by the end of the third quarter 2016 show an NPV on R$14 billion fully guarantying the best-case calculated during the due diligence and securing 64% of total NPV included in our best-case scenario.

The increase in guaranteed NPV compared to the previous quarter was concentrated in OpEx savings, as we secure additional recurrent savings in personnel cost due to the corporate restructuring completed in July this year.

Even so, we continue to move further in all operational fronts and have already unified our TV content contract with all suppliers, liberating a newer scale to reduce costs.

Moving on to Slide 17, our solid execution on the synergy milestones allowed us to generate solid results already in the nine months of 2016, contributing strongly to our cash flow generation.

Incremental revenues and OpEx savings from synergy initiatives mainly cross-sell to fixed B2C customers and on rationalization of commercial expenses from channel integration contributed in R$576 million for the EBITDA in the year.

Including CapEx needed for the generation of synergies, especially in IT integration, our direct cash flow generation reached R$541 million in the year. Meanwhile, this cash flow generated from CapEx and OpEx avoidance reached R$362 million driven mainly by avoided investments in backbone routes using GVT’s infrastructure. Thank you.

And now, we can move to the Q&A..

Thank you. [Operator Instructions] Today’s first question comes from Richard Dineen of UBS. Please go ahead..

Thanks. Hi, good morning, everyone. Thanks for taking the question, a couple if I may. Could you maybe talk about virtualization of sales in customer care? Amos, I think you spoke last week of reducing call center staff from 30,000 to 10,000 by 2019.

Could you clarify if that’s a net impact or rather than insourcing? And how impactful could that be? Is it baked in to your margin expectations or is it upside? And secondly, just quickly, you mentioned about leveraging scale with TV content suppliers. Just wondering if that was reference to the global agreement, if you have any more details on that.

And if scale is so important in content, why wouldn’t you be interested in SKY Brasil, as I think was reported yesterday by the press, especially if that asset might have to be sold by AT&T for antitrust reasons? So any color on the above would be really helpful. Thank you. Thank you, guys..

Good morning, Richard. Thank you for the three questions, quickly on each one of them. About the call center reductions, I mean, from 30,000 to 10,000 until 2019, they have been mentioned in the past relating to part of our strategy plan to digitalize our business end-to-end.

Substantial effort has been done in the backend IT systems as well as in the frontend with the e-care, e-commerce and others that enable digital interaction with our customers. Our idea is to go from about 15% of digital interaction to date to about 60% by the end of 2019.

That’s a little transformation that we are fully committed as a company to invest the resources together at the output [ph]. Consumers are more digital than ever. And it’s clearly pro-efficient as well. We are working in digital environment today in Vivo.

We have a squad concept and a digital building that enable this kind of quick solutions for those apps, full-ownership, more disciplinary equipment teams. And it’s really moving very well. So we are confident that in our goals for 2019 will be achieved.

Again, this is part of our overall plan and within the concept of margin improvement as we mentioned year-over-year until 2019, so again, within the plan, but again an ambitious plan. I’m sure, it’s doable.

About contents in Pay TV, as you mentioned with relating to the synergies within GVT and Vivo earlier last year and some calls this year, one of the objectives of the synergies are relating to reduce TV content costs to our Pay TV operation.

The consolidation of GVT and Vivo enable to consolidate a base of about 1 million to each site, about 2 million. We’re negotiating with the contents provider in Brazil for a while, and we reached agreements with most of them.

And only lately with the last and most important one that’s enabling us to have the final reduction in cost relating to our Pay TV operation that is part within the R$25 billion tendency of NPV, we mentioned in last call. So again, within the plan, but finally we confirm it’s really happening with all the contents providers.

Relating to SKY and relating to scale why not to buy more assets and again more reduction in contents costs; generally, yes, volume in Pay TV means lower content cost. There is no doubt about it, yes.

However, our view about any acquisition in the Pay TV business is more about how we present, invest in our organic growth, which we believe is the right path to go, of all the assets we need to continue lead that market and continue to grow organically well, and more about as we get to Pay TV one should wonder if it’s the time when Pay TV having a tendency of decline in customer base and revenues.

Though having spread some OTTs, it’s the right time for us to go in a big acquisition, again, focusing more on OTTs and video streaming and so on. So IPTV for us is a bigger focus than DTH. So again, IPTV and OTTs are the direction we would like to go and know DTH just for the sake of scale. Hope this answers your question, Richard..

Yes. Thank you very much. Thanks for that, Amos, very helpful as always. Thank you..

And our next question comes from Andre Baggio of JPMorgan. Please go ahead..

Hi, Amos. So I’d like to know what have been the recent developments in terms of competition. How do you see the change in the marketplace? I see - we know that Oi is in the financial restructuring.

So how has that affected the business and growth for Vivo?.

Good morning, Andre. Related to competitive landscape, I will say that as we mentioned in previous call, we see a more rational involvement around us than it used to be maybe last year.

So that I think helpful, every company has its main reason why they’re back to focus on value and not volume, that I believe a positive catalyst for the competitive landscape.

Just related to Oi I will tell as in the past, we don’t see more deterioration or any deterioration in OE operation performance due to the judicial process they are going at this stage. So again, I think we should separate between the legal process Oi is in today and the operational performance.

I think operational performance did not change before and after. And I think Oi is a very valid competitor, especially on the mobile side. And I don’t think that current situation and uncertainty there is changing a lot the competitive landscape than what it used to be maybe a year earlier.

So I don’t think that’s something we should really build on as a positive factor by itself.

Did that answer your question, Andre?.

Yes, of course.

And just a final question, just to the recent move in the exchange rate with the dollar [ph] appreciating a lot, this is - how much that should help your ideas of generating cash flow or reducing CapEx and still generate some good free cash flow?.

As we mentioned in the call, we have positive effect of the exchange rate this year. I think, we have another - it was positive, I mean, it was not that significant. Remember, we signed the contract last year with vendors on kind of a fixed exchange rate. Thanks to hedge, of course, the situation in case the dollar will continue to climb.

Where we had the biggest benefits to capture on the setup box is which couldn’t really hedge or sign. It was really on a month-by-month basis. So there was some, maybe hundred-plus-million-reals benefit this year as a whole, not a big amount.

I think what might really would be a big benefit if that rate of [spot rate] [ph] will continue as it seems like for next year, negotiation with vendors would be in a very different platform than it used to be when we did it last year, October, November last year, when the dollar almost [picked it forward] [ph]. So again it’s not the leverage.

And I’m sure we’ll see this coming in our CapEx plan next year. And that’s why we reiterate that our CapEx plan for next year will continue to be around R$8 billion, reducing percentage, of capital, percentage of revenue. And that I think exchange rate is part of the benefits we see in capital, maybe David want to add one more point to that..

Yes, Andre, also let me show with you that we have around one-third of our total CapEx is exposed to dollar rate. So we will benefit from this for next year being able to invest, do more things with lower CapEx of this, will be a benefit for sure, yes..

Perfect. Thanks a lot, guys..

Thank you..

And our next question today comes from Susana Salaru from Itaú. Please go ahead..

Hi, good morning. Thank you for taking our questions. First one, we would like to discuss about the regulation. We have a bill 3453 being discussed in the lower house. We just were wondering if you could discuss, if you are happy with the guidelines that are in the tax of the deal.

What could improve and how do you see that involving? That will be our first question? The second question is related to the cost side. One of the few costs that are actually real was personnel costs and one of the reasons for that for the insourcing process.

So our question here is that already done this insourcing process or should we expect a little bit more to happen in the future? Thank you, guys..

Thank you, Susana, for the question. So on the regulation side of course we are pleased with bill 3453 or the proposed bill. I believe it’s in the right directions to resolve some key issues in the macro regulation of the sector. On the concession side, no doubt that it’s time to cancel concession concepts of voice services in Brazil.

It’s outdated on service, an outdated concept. Moving to authorization will allow more possibility by all operators. It relieves us from some substantial liabilities, operational liabilities that should have a positive impact on our P&L.

Resolving a more bigger issue I believe than the operational liability is the subject of the investible access of the concession to whom they belong and how to value them in the end of the concession in 2025.

[During the transactions] [ph] today will give more clarity to the concessionaries and I think will build a new wave of investments in broadband fiber, that was kind of a question that is a little bit on the legal side, if fibers we are building are part of the concession business just partially or none.

I mean, all of that could be discussed [when the matter is resolved] [ph] today giving more clarity and more certainty on those investments. So this is no doubt going in the right direction and enabling selling nonproductive assets at the same time to generate cash flow to be invested in productive business like broadband.

No doubt it’s a win-win to everyone else. So as we see the timeline is moving well, we cannot really estimate if we finish by the end of this year or sometime in the Q1 next year. But I think the process is going well at the congress and there is a clear alignment at the top of the Anatel, Ministry of Communications, as well the operators.

Again, nothing is but it’s within the reasonable expectation of everyone and I think we should really just hope it will go and approve.

On the mobile side, it’s resolving one of the key issues of renewal, automatic renewal of spectrum, which is not defined by regulator and it’s currently after 20 years, Anatel can take back the spectrum and bill it again, yes.

So you don’t have to guarantee that the spectrum you have would belong to you after the expiration of 20 years, and some spectrum in few years from now will get expired, yes. And I think having the fact, the automatic renewal, we can quite establish by yearly financial metrics of Anatel.

At least, it guarantee, it’s not said mainly, but this will guarantee that spectrum will come back to you and again continues the operational of the network, which is key of course to our customer as well. So that’s an important move. About the insourcing in call center, I think we have a positive one.

We continue insourcing both field operation and call center. I think tendency - we’ll continue as we are good in regard to the consulting. But again, it’s within the plan continuing as we expect in the next coming year. Thank you, Susana..

Yes, perfect. Thank you..

And our next question today comes from Mauricio Fernandes of Bank of America Merrill Lynch. Please go ahead..

Thank you. Good morning. Amos, the - or maybe to Christian as well, the fixed line revenues had a relatively significant drop in this quarter. It was actually without the cut in interconnection. It was up 3% year-on-year in the second quarter and now almost 5% down.

There is some I think comments in press release and then as you mentioned here on the corporate market, but just wondering what exactly drove it from a quarter to another. It seems like a big decline from a quarter to another.

And second, apologies for coming back on SKY, but I just wanted to understand based on your previous comments here, and as well as the headlines on the price. It seems that there is a really conceptual view against allocating capital towards Pay Television in the traditional form.

Just wondering, given that there is a price for everything if that would - that concept would be revised or reassessed in case, particularly the regulation in Brazil in case the potential valuation for the asset if it ever - it’s put for sale, becomes more attainable, more interesting? Thank you..

Hi, Mauricio, this is Christian. The fixed, as you mentioned, yes, we had the impact of the regulatory changes. Okay, so it is impacting. Of course, that was also in the other quarter, but it’s fully impacting this quarter. And we have some volatility in B2B, especially in voice traffic, okay.

So apart from the macroeconomic environment that is pressing us in this segment, in these more companies, even in the large corporation they are already negotiating their contract with us. We also saw some voice volatility in this segment. In the B2C, apart from the regulatory effect that you mentioned, we had a positive growth.

Okay, it’s like 1.2% growth on revenues. But the general service revenues for fixed was more impacted by the B2B, as you mentioned before..

Mauricio….

Again, Christian, just before - I am sorry, Amos, but Christian just before that, could you say how much, what percentage of B2B is on total voice?.

We have a strong dependence on voice on B2B that we have today in B2C. But we don’t give the number, no, but as I said the numbers that I can give you is that B2C had positive growth in general, not only voice, in everything together. And we have more bundled offers in B2C today than we have in B2B. So what we are working on that.

And as I mentioned in the beginning of our presentation, in bringing customers more to bundled offers with flat fees, that maybe the situation in B2B is not as good as it is in B2C..

I see. Thank you. Amos, sorry….

We can go - no, no, no, just said, of course, never say never. I think I have no, of course, any knowledge that SKY is for sale or will be on sale. But, of course, if any company would be on sale at that magnitude and importance in the market, this is clearly - Vivo would evaluate the opportunity. But again, the strategic business is the business.

That my chance depends on many factors especially relating to economic viability and return on investment, but I think too early to get into the details at this stage..

Thank you, Amos..

Thank you, Mauricio..

And our next question today comes from Michel Morin of Morgan Stanley. Please go ahead..

Good morning, thank you. So a couple of things in terms of trends that you are seeing during the quarter.

The first would be on interconnection where we saw really the revenues collapse sequentially, but your costs are flat sequentially, so I’m referring to the mobile revenue from interconnection, so if you can comment on what’s happening there and how we should be thinking about this going forward.

And then secondly, if I am doing the math right on your prepaid revenue trends, it looks like basically it’s been flat year-to-date. There was no real sequential increase in the quarter. So the improvement you are seeing on the year-on-year is really just because of easier comps.

So I just want to see if you could confirm that and if there is any reason to be a little bit more constructive about the fourth quarter on that? Thank you..

So on the second question as I mentioned, we see the prepaid decline, but better performance than we saw in previous quarter. Now, I think there are two reasons for that or maybe two reasons for that. First is, I think we’re being able to bundle more, our offer.

We have an offer that is Vivo Turbo and I think the first in the market that we launched like few years ago. And we’ve been able to bundle this offer to our customers in more aggressive ways. So we have like a percentage of customers actually they have this operating higher than it was one year ago.

Secondly, we are able so to offer more data and increasing some prices on this offer and customers are consuming data and also buy additional packages, that are was also helping us in our revenues for the segment. And that in a way is offset by our successful migration of prepaid customers to hybrid plan that is our control.

We’ve been - we have very good results in the last quarter, and that also in a way penalized the prepaid revenues by itself. Of course, it helps the revenues of the company in general, but it penalize.

So even with this effect the other two things that I told you that were positive for us were helping us to have a little bit more stable performance in the prepaid for this quarter. I don’t know if it answered your question or….

Well, not completely, sorry. So really the question was, I know that year-on-year is improving.

But really I was trying to understand if there is any momentum when you compare the third quarter versus the second quarter or even during the third quarter, have you seen really your prepaid revenues grow or is the improvement really kind of the statistical effect of having easier comparison?.

It is growing, it is growing, it is growing both the number of customer that are recharging with us. And the amount they are recharging is slightly increasing as well. So we see a positive trend..

Okay..

But as I said my revenues are impacted not only by that, but only by the volume of customers that I take out from prepaid and move to control. If I do this movement, if I take the best customer, even if they’re recharging more with me, but given that the possibility to have a control, taking them from their prepaid revenue.

So looking at it in an isolated way, maybe don’t give you the right perspective of the segment, this massive segment..

Got it, yes, thank you. And on the interconnection question….

Michel, I think the third quarter in terms of interconnection revenues is more what you should see and should look to project revenues. In the second quarter, typically, we have things like these like agreements with operators on use that are challenged.

Typically at the end of the year on the second quarter we had some of those that increase the interconnection in mobile in the second quarter. But the third quarter is more the recurrent line..

Great, thank you very much..

And our next question comes from Fred Mendes of Bradesco. Please go ahead..

Good morning, everyone, and thanks for the call. I have two questions here. The number one regarding the synergies, I mean, most of the OpEx, CapEx and tax synergies it is already secured while the revenue from synergies are quite modest.

So basically when should you see a pickup in the synergies from revenues? And if you could give us an update about the launch of the 4P, that’s the first question.

And the second question regarding CapEx, just wondering is this reduction in CapEx is 100% related to smart CapEx allocation or this is also related to the fact that competition is decreasing CapEx, and there is no reason it should be really aggressive now, and if there is no further cuts? Thank you..

Hi, Fred, this is Christian. Talking about revenues, as I said maybe in the last call, we’ve been like already like having all our channels selling both products fixed and mobile, so today like 100% of our stores of remote channels they are selling both services.

What we are doing for the moment is cross-benefits, some discounts for customers that are on fixed and they want to mobile and vice versa. For the next month, we continue doing that. We are not doing like an aggressive conversions bundle for the next quarter. What we are doing is cross benefit. So they’re going to change the way they give benefits.

And that we only can reveal when we do it commercially. But we’re continuing this trend, okay, gradually giving advantage for our customers to be both, for fixed and mobile. Even in our loyalty program, we are now integrating everyone in the same program for customers to be with Vivo.

Consume more with Vivo they’re going to get also benefits in points in both together in the same program. So it’s gradually doing it. And I think we are waiting for the right moment and responding to the demand of our customers..

Perfect. Thank you..

Fred, this is Rodrigo. Just answering your question on CapEx, of course, as you know CapEx is not one ingredient recipe, right. So I think the majority of the savings come from the smart allocation. But of course, we also closely monitor the network quality and traffic trends and customer acquisitions.

We also have some efficiency programs to recycle more customer premises equipment that reduce the CapEx. And of course, the competitive position also helps us. So it’s a mix. The thing is, the number one requirement for any CapEx allocation is to have quality service to the highest value markets.

So we’re keeping that and we are comfortable with the level of CapEx because of that..

Perfect. Thank you, Chris, and thank you Rodrigo, very helpful..

And our next question today comes from Daniel Federle of Credit Suisse. Please go ahead..

Thank you. Good morning. My first question is how are you seeing the migration of postpaid customers from old plans to new plans and maybe cheaper plans? And my second question is if you could elaborate a little bit more on the bad debt dynamics? Thank you very much..

Hi, Daniel, actually, we don’t see this strong migration for old plans to cheaper plans. Now, I think, we would see the positive moment for customers like migrating from 3G to 4G, and the opportunity for us to migrate these customers to new plans with more data allowance.

We’re actually being - working a lot and giving lot only more data, but also new features for the use of the data. Last quarter we talked about the carryover. I think there was a new innovation that we brought to the market, so customer could use in the next month, the data that they haven’t consumed.

And this month we launched what we call and enhanced MultiVivo data sharing feature that allows customers to share among the dependents, the allowance, and they can control how much data they want to give to each of them. And also that is in the postpaid. So we would see it’s more a positive and upwards trend that the downwards that you mentioned.

Of course, there are some case that when you increase price and give more allowances, there are some customers they may adopt themselves in a cheaper plan. But on the overall, we are being able to capture an upside and not the down side. And that’s not only in the postpaid as I mentioned, but also in the hybrid.

And in the prepaid, we are offering more data and increasing price with a good response, actually we are launching like more gigas per week and even for months. And we have customers adopting this new offer. And in the control, we’re also raising price and raising data, and customers going upwards.

So in general, it is positive movement more than negative one that you mentioned. I don’t know if I answered your question..

Hi, Daniel, just to cover the second question, so we have seen very good results on bad debt. And this is the result of the smart credit control processes. And this is about selling the right product to the right customers.

And we have seen as more increase in bad debt in B2B this quarter, even though this is not even for seasonality, and the levels we have for B2B this quarter are even below than the first quarter and this year. So we are very positive on this process, and we believe it’s helping us to maximize the top-line growth..

Okay. Thank you very much..

And our next question comes from Leonardo Olmos of Santander. Please go ahead..

Good morning, everyone. A question on your fixed strategy, more specifically on broadband, just some questions in that subject.

First of all, what is the concept to use FTTH versus FTTx, which kind of city you want to use those technologies and what’s the base for choosing each one? And going forward on some years, what’s the expectation of mix between those two in your broadband services, I am talking about B2C? And finally, thinking on the low-end client, how do you plan to monetizing probably on FTTx, what’s the plan they are, maybe selling pay tv or bundling something else? Thank you..

I will jump quickly and then Rodrigo and Christian can add. FTTx is in general terms to fiber to the cable, fiber to the home, yes. FTTC are still portion of this last-mile cutter [ph]. They’re really based on VDSL that enable speeds of 30 to 50 mega. FTTH is fully fiber, and again enabling still 100 mega and up.

And we have a different mix of FTTx in the base of Vivo. The GVT side came with mostly FTTx, a little FTTH. As GVT was involved to FTTx technologies since they launched in 2000. But in the last year, with two-third acquisition by Vivo moved to FTTH, while Vivo as a mix of DSL and FTTH, those are Vivo fiber.

So again a mix of technologies, each one of them has more efficiency. While we are planning, in the future we will move to FTTH, FTTC only of course, yes. And that depends on investment case we are doing, and in some areas, where we have a capital business in order not to invest in full FTTH.

And we’re finding out a total investment in FTTC will be better and so that’s where the direction we are taking. And of course in urban areas when the competitive landscape with the cable TV is more intense, FTTH is the only solution to go. And that’s where we see the difference.

But again, I would love Rodrigo to add his own view and Christian on the commercial side as well, yes..

Yeah, first of all, so we have three times of pay TV services, one is the DTH standalone that’s clearly targeted to cities where we don’t have ultra-broadband. So customers who have a standalone product for those cities where we have a FTTC or we have fiber to the home, but we don’t have scale.

We use a hybrid DTH with some VOD capabilities, interactivity and that’s proven to be a well-accepted solution. But that evolves, as we have scale we may also deploy a local head-end and then move on to IPTV. And then we have the third one which is the full IPTV over fiber. And again, we are working very intensively to reduce the unitary cost of a CPE.

A lot of the customer premises equipments and set-top boxes are moving more in software, and cloud-based services. So we are working on that and also to reduce the prices of head-ends, local head-ends, because of the requirement of a local content. So we can start gradually move more towards IPTV rather than DTH..

Okay..

Yes, I don’t know if it answered your question or not. If there is anything else, I can complement..

Yes, yes, the clarification you made was my point. Thank you very much for the….

Okay. Thank you, very good..

And our next question today comes from Carlos Sequeira of BTG Pactual. Please go ahead..

Hi, good morning. So I have a couple of questions. One is on the FTTC homes, you have deployed - I mean, my question is how many homes you have deployed this year in the city of Sao Paulo? And what is the goal for next year on FTTC. And I think I’m asking this question, because I think this could help accelerate broadband growth in Sao Paulo, right.

So that’s one. And the second one is on new cities outside Sao Paulo what is the plan for 2017, please? Thank you..

Okay. So to date we have pretty much deployed around 300,000 FTTC facilities. The idea for next year is really to double this number. So we are planning to have at least 600,000 new facilities for FTTC not to mention FTTH. We also have a number of cities that we’re going to launch next year.

Now, we have seven cities outside of Sao Paulo and then mix - we may come to 15 cities next year depending on the business case that are being rolled out. But you can expect that we’re going to speed up tremendously the rollout of both FTTC and FTTH for next year..

Wonderful, thank you very much..

And our next question comes from Mathieu Robilliard of Barclays. Please go ahead..

Yes, good afternoon. Thank you for taking the questions. So first with regards to mobile, if you could elaborate a little bit how you feel about your 4G network and proposition compared to your competitors. I mean, in terms of average petas [ph] you can measure them.

How do you think you fare against the main players in terms of cell-site fiber connectivity? How do you think you use that gap? So that should be the first question.

With regards to fixed, so related to the previous question, is it fair to expect because you expand more outside of Sao Paulo and you’re expanding in the city in Sao Paulo that we could see a reacceleration of the broadband dynamics or the fixed in general.

And thirdly, coming back to the mobile business, obviously, very strong performance and we can see that you have [20-years more for more] [ph] initiatives that are working well.

Is that something we should embed in the business model whereby you think that you can gradually continue to give more for more and that’s one of the key drivers for growth in the next few years? Thank you..

On the 4G I think, we are - we have a good coverage in population wise. I think there are like small difference between the players. So I think we are confident that we have the coverage that we need to be more aggressive.

And you can see the number of net-adds that we have, the last number that Vivo was the one who capture in the 4G, more than the 1 million customers. And we’re still leading in market share. And also in some of the surveys in the market about our quality, we position ourselves is good.

So we are happy with the coverage and of course we continue to do that. We are focusing 4G, as we believe that is going to be the key technology for our customers for the next year, and we are going to respond to the demand. Regarding the mobile as you said, like we don’t give trends for the future, but we believe it’s going to be good one.

We got a very positive result for this quarter in revenues and in net-adds. Last month of this quarter, we were like more than 46% of share in net-adds, increasing our market share. And if you look at portability, we were positive the whole year as I said before.

And in the last three months of the quarter, we are positive in the global number, and I guess, overall competitors. So I think it all puts us in a position of strong leadership that give us a positive trend for the future. I don’t if there is anything else that you….

Yes, okay..

Thank you so much..

And this concludes our question-and-answer session. I’d like to - at this time, I would like to turn the floor back over to Mr. Luis Plaster for any closing remarks..

Okay. Thank you all for your questions. Before we finish, I would like to give the word to our Chairman and future CEO, Eduardo Navarro, who like to leave you a message on this call..

Thank you, Plaster. Good morning. Good morning, everybody. As Amos mentioned already, I’m already meeting with him and the executive team of Vivo. By the way, it’s a fantastic team now that I’ve known very well. And we will continue with an intense agenda of meetings and discussions on a regular basis.

I will [overhead justometry] [ph] for relevant external parties. Due to my previous role, as Chief Commercial Digital Officer, Telefonica and as the Chairman of the Board of our Telefonica Brasil, I was already very familiar with the key elements of Vivo’s synergy [ph] plan and data-centric strategy.

I believe the plan and the strategy due to by Amos and Vivo’s executive team, it’s very solid and contains all the elements for the company to continue delivering solid results.

I would like to emphasize that I am very pleased what I have found now in Vivo, and then very still committed to continue executing on the company’s current strategy, and to continue delivering solid cash flow results to our shareholders, leveraging synergies and efficiencies.

As mentioned by Amos, we are investing very well in the transition process. I am very comfortable that we will be able to finalize the transition process in the near future. I am fully ready to assume this year the position and to work with Vivo’s executive team to continue delivering on the plans of the company.

I am looking forward to have a rich dialogue with all of you and to elaborate on our plans in future investor events. Finally, I’d like to thank very much Amos for the extraordinary work he has done at Vivo. And speaking as the Chairman of our Board of Directors, I wish he could stay for longer as CEO of the company.

In any case, I wish him good luck and success in his new endeavors. Thank you very much. And I hope that you can have the chance now to meet him personally in the short future. Now, I will pass to Amos for final comment..

Thank you, Eduardo. This is my last quarterly release for Vivo, especially coming on my birthday, interesting date. I would like to share my appreciation for you all on continued attention and feedback during the last two years. It was a pleasure to have such a rich and productive dialogue with investment community.

I would like also to thank Vivo Investor Relations team for their amazing support division during this period. I am really proud of giving the key in the near-future to Eduardo Navarro, a friend in the 12 years, a colleague in the last two years.

As I mentioned in the past, the right person in the right to lead Vivo for a new height, so I am leaving with very good feeling about what we did in the past, but not less about what Eduardo and the team I’m sure will achieve in the future.

And I would like to wish all of the team and people at Vivo and our partners, and all of our - and of course our clients and investors all the best and thanks for that amazing period I was - I had the privilege to lead Vivo. Thank you, all, and good bye..

Thank you. This concludes today’s Telefonica Brasil 3Q 2016 results conference call. You may disconnect your lines at this time. And have a great day..