Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefónica Brasil First Quarter 2021 Earnings Conference Call. Today with us representing the management of Telefónica Brazil, we have Mr. Christian 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.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] Before proceeding, let me mention that any 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 over to Mr.

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

Thank you. Good morning and welcome to our first quarter of 2021 earnings conference call. The call will be divided in two parts.

First, our CEO, Christian Gebara, will go over main financial and operating figures, initiatives in the digital space, and ESG highlights, then our CFO, David Melcon, will give you more color on our cost and CapEx structure, digitalization initiatives, free cash flow and shareholder remuneration. Now, I hand it over to Christian..

Thank you, Plaster. Good morning, everyone and thank you for joining our earning calls. We started 2021 with strong operational momentum and a return to total revenue growth. Consumption and overall market dynamics are beginning to improve and our core revenues are accelerating.

In the first quarter, we delivered 1.1 billion postpaid net additions, the highest since 2017 and our total postpaid customer base now stands at 46 million. In fiber, we posted another quarter of strong growth and take rate, thanks to our best-in-class broadband products.

FTTH net adds of 368,000 was the best performance ever for a single quarter taking Vivo’s total customer base to 3.7 million subscribers, 41% higher than the first quarter 2020. In total, we closed the quarter with 96 million access, including mobile and fixed. Core revenues up 4.7% year-over-year, already represent 88.1% of total revenues.

And this quarter, we saw FTTH revenues break the BRL1 billion threshold due to an impressive year-over-year increase of 61.2%. EBITDA grew 0.5% to BRL4.5 billion, a margin of 41.1% and free cash flow totaled BRL2.2 billion, up 3.7% year-over-year.

The combination of sustainable operating performance and financial discipline are the pillars of our elevated shareholder remuneration of its characteristic to Vivo. So far this year, we have deliberated BRL700 million of interest on capital, which represents a dividend yield of 7.9% in the last 12 months.

Furthermore, we continue to improve returns through our share buyback program. To-date, we have 5.4 million shares in treasuries, equivalent of 0.32% of the company’s total capital. On Slide 4, total records resumed a positive evolution this quarter due to continued traction of our core businesses.

They represent the main factors of growth going forward and are built on cutting-edge high-speed connectivity in mobile and fixed combined with a differentiated offer of digital products and services both for B2C and B2B customers. At Vivo, we want to offer more than just the best telco experience.

Our aim is to deliver on all our customer digital life needs, whether that that be advise, content, cybersecurity or cloud solutions for their business. Non-core businesses were down 24.1% year-over-year mainly because they are made up of mature technologies that have less and less relevance for our customers.

Turning to our wireless revenues performance on Slide 5, mobile revenues achieved BRL7.1 billion in the first quarter ‘21 with an increase of 1.1% year-over-year, driven mainly by prepaid revenues, which grew 4% and the ongoing recovery of the handset sales that were close to 11% higher than last year.

In Postpaid, we highlight Vivo Selfie, a set of co-branded plans that offer selection of quality content such as Disney +, Netflix, and Spotify increasing ARPU and driving a deeper relationship for our customers. Additionally, we focus on younger and increasingly digital mobile users, we co-created Vivo Easy plan together with DJ Alok.

Vivo Easy is 100% digital experience where we can customize the amount of data, voice, digital services and other benefits according to your needs. Looking at our prepaid base, we are seeing an encouraging trend of increased recurrence and a positive shift in customer behavior.

Digital top-ups jumped 28.8% in the quarter and the number of customers recharging was 8.3% higher year-over-year. Turning to Slide 6, Vivo’s network quality and focus on improving the customer journey allow us to maintain solid leadership in the mobile segment with 33.1% market share as of March 2021.

Our postpaid journey repeated similar trends seen in previous quarter and stood at record level of 1.1%. When looking at Convergent and family plan customers, engagement levels increased and churn is up to 50% lower boosting customer lifetime value.

The volume of postpaid net additions continues its positive trajectory reaching 666,000 this quarter, the highest level since the fourth quarter 2017. Turning to core fixed business revenues, we are proud to present a strong year-over-year growth of 72% given the demand for high-speed broadband and digital services.

FTTx revenues were up 20.3%, with FTTH revenues advancing an impressive 60.2% year-over-year driven by ARPU increases, enhanced sales of OTT bundles and the ramp up of new activations. Accordingly with the expansion of our fiber footprint, we continue to see significant IPTV revenue evolution that was up 25.9% year-over-year.

Another positive result in the quarter was a return to growth of data and ICT revenues that rose 9.5% year-over-year. This is a promising sign that companies are gradually starting to invest again.

Cloud revenues are gaining relevance and practically doubled year-over-year confirming the large opportunity in B2B with companies engaging in a profound digitalization process to thrive in this new environment.

Moving to Slide 8, Vivo is harvesting from a well-executed a strategy to capture opportunities in fiber and after sizable and rapid expansion of homes passed in the last years it experienced accelerated demand for its premium UBB offering. In the first quarter, we posted record FTTH net adds of 368,000.

This is more than twice what we had a year before and over 1.5 times what we saw last quarter. At the same time Vivo Fibra customers are demanding higher speeds and a wider variety of content options. In fact, around 30% of our gross additions were bundled with OTTs or at speeds above 300 megabits.

Moreover, more than 35% of our net additions were Convergent customers. With that, we are able to increase FTTH ARPU by 16.2% reaching BRL95.

In addition, on the top right hand side of the slide, we show the evolution of FTTH homes passed, up 4.6 million year-over-year that were further enhanced by our multiple expansion partnerships aimed at reducing time to market and CapEx allocation.

On Slide 9, we give more color on FiBrasil, our neutral fiber network that’s expected to be fully operational by the second half of the year further accelerating FTTH deployment. FiBrasil is partnership between Vivo, Telefonica Infra and CDPQ and the setup of the company is progressing according to plan.

On April 6 and 23, we received approvals from the Brazilian and European Anti-Trust agencies and we are now waiting on Anatel. This initiative will allow us to accelerate our fiber rollout and consolidate our leadership. We will manage all commercial and customer service activities while remunerating FiBrasil for the use of its network.

FiBrasil will start with 1.6 million homes passed and we carved out from Vivo and expect it to reach more than 5 million homes passed over four years, taking fiber to both greenfield and brownfield cities. I would like to add we showed the progress of our objectives to build a digital ecosystem.

Combining Vivo’s unmatched set of label, such as customer base, brand, channel capillarity, Big Data and building capabilities to mention a few ones with partnerships with some of the most relevant players in the digital space, we are creating new platforms that complement our telco services.

The aim is for capital growth and further engage our client base resulting in increased loyalty and higher recurrent revenues. One of those platforms is Vida V, which is centered on e-health.

We have just signed a binding agreement with Teladoc, one of the largest telemedicine companies in the world, which represents another step to our – the creation of a health marketplace around Vivo.

Our plan is to provide a set of services such as immediate and schedule doctor appointments, grant discounts in more than 27,000 drugstores nationwide, make pre-screening of symptoms through an artificial intelligence engine and give digital certificates, exam requests and prescriptions to patients.

The platform has been established to include and attract other players and partners and its initial focus will be on people without private health plans.

Moving to the right hand side of the slide, we present our strategic partnerships with Dotz, an engagement platform based on one of the most important loyalty program in Brazil and CDF, one of the key B2B2C marketplace for home assistance and tech support in the country. We are very excited about both.

Not only we are strengthening our grasp of customer’s digital life for the combination of our businesses but this is also executing its plan to have equity stakes in companies with great growth prospects that are the champions of their segment.

Talking about financial services on Slide 11, we are enthusiastic about the recent launch of our very own digital account Vivo Pay. This service allows customers to carry out banking transactions like paying bills and making cash transfer via Pay, recharge your prepaid plans and purchasing credits for mobile apps like Google Play, Uber, and Spotify.

This initiative allows Vivo to be part of a journey to promote financial inclusion, focusing on prepaid customers whose top up recurrence in that probably do not have a bank account. Additionally with Vivo Money, our 100% digital personal loan platform is delivering consistent progress, have been doubling its spread origination quarter-over-quarter.

Finally, we launched the Vivo Itaucard, a co-branded credit card created in partnership with Itau that offers up to 10% cash back and other important benefit that will help us scale our marketplace and stimulate in-store commercial activity.

On Slide 12, I would like to comment on Vivo’s most ESG highlight as we believe that having a social and environmental footprint is key to fulfilling our propose of digital life to bring closer.

To help the most vulnerable families still affected by the economic downturn, we are participating in the campaign, United Against Hunger with the NGO, Gerando Falcoes to raise funds for the purchase of food kits to support of Movimento Panela Cheia. For every donated kit by Vivo’s employees, Fundacao Telefonica Vivo donates two more.

Also in the social sphere, Vivo is the first Brazilian company of the sector with the ISO 26000 certificate to which validate the compliance of our initiatives on human rights, diversity and social impact with the implementation of the best practice in the market.

This alignment encompasses all the measures regarding our employees, partners, supplier and also the society. In addition, we are proud to announce our first solar power plant in the northern region of Brazil located in Maraba in the state of Para.

It has the capacity to generate 2,190 megawatts hour per year, which will be used to power 632 of our energy consumption units. This is the 16th out of 70 renewable power plants we plan on having up and running by the end of the year.

Finally, we are rated as having the best repetition of the sector by the poll conducted by Merco jumping 13 positions compared to 2019. These initiatives enhanced our performance and sustainability, which based on economic, environmental and social balance and contributes to our main purpose of bringing people together.

I now turn the call over to the David, our CFO to take us through the financial highlights..

BRL2.6 billion will be paid on July 13 this year and BRL2.8 billion on October 5. On the right hand side of the slide we show that year-to-date, we have already declared BRL700 million of interest on capital based on this year net income.

In addition, we continue actively executing share buyback program and have 5.4 million shares in Vivo Treasury representing 0.3% of the company’s total capital. To conclude moving to Slide 17, the first quarter free cash flow growth of 3.7% year-over-year due to sound operating and financial management.

The result is a solid balance sheet and improved metrics. Net cash as of March stood at BRL5 billion giving us a unique position to fund the acquisition of OI’s mobile assets expected by year-end.

This strong financial position allowed us to positively invest in our core businesses diversifying our portfolio, increase engagement and as a result, expand Vivo’s relevance in our customers’ digital life. Thank you. And now we can move to the Q&A..

Thank you. [Operator Instructions] Our first question comes from Marcelo Santos, JPMorgan..

Hi, good morning. Thanks for taking my questions. I had two. The first if you could please comment a bit on the competitive environment in mobile? You had a little bit lower growth this quarter.

So, I just wonder is there something to do with competition? And the second question is about the fiber-to-the-home adds, you had very strong adds, should we expect the strong base to continue throughout the year? And are these ads coming more from the competition or from conversion of fiber-to-the-curve and DSL subscribers? Thank you..

Hi, Marcelo, this is Christian. So, just talk a little bit about the mobile for your first question, I would highlight first, the strong commercial activity that we had this quarter; important that we are comparing this quarter with the quarter last year and that COVID was just impacting the last 15 days.

This year, we started with strong January and February not compared to what was pre-pandemia but then we also had a lockdown in March that impacted results mainly in postpaid and handset. But with all that said, I would highlight our growth in the prepaid is 4%. It’s important growth.

Also have to bear in mind that the government aid was not there in this first quarter. It has a direct impact in the profit. But even with this situation, we grew 4% and thereby I think we highlighted the decrease the top-ups and also the customers topping-up. So the percentage of customers topping-up also had a very good performance.

And the terminals, all the handsets and accessories, they also had a good growth comparing to the year that was before pandemia and all of the 2020 we could grow 11%, even considering as I said lockdown in the last 15 days of this quarter and 2021. The postpaid was more flat revenues, but the increase in net adds was very accelerated.

So if you look at the numbers without machine-to-machine it was close to 700,000. That is the highest number for net adds in postpaid since 2017. If I add to this number the machine-to-machine is 1.1 million, that’s also up very, very extremely high with churn very controlled.

So it’s more I think a situation of the market and there is also the impact of the price increase that was made in September last year. So, this year there was no price increase in this quarter that may vary a little bit the performance in revenues.

But considering what everything that I’ve just mentioned to you we are positive with the trend and the strong commercial activity, although we had lockdown in part of this quarter as well. Consider FTTH, if you don’t have more questions in mobile, then I go to FTTH. FTTH has been growing a lot.

As you know, I think every quarter we’ve been beating the previous number. There is two things here to consider. First, that we are expanding our network as we said, few years ago that we would expand our network. Today, we ended this quarter with 16 million home pass. Now we are occupying this network. So that’s the first mover.

Second, of course, people are now much more demanding very good ultra broadband connection in their homes and offices and Vivo stand out here because of our leadership and because we have reached that no one has in Brazil, giving us an accelerated demand that ended the quarter with 3.7 million customers in FTTH and a net debt of BRL368,000.

These customers depending on the city they come from, different nature. Some cities we are entering for the first time. It’s greenfield cities. Most of the cities that we launch are greenfield. So, these customers were not people before. So we are capturing new customer from competition, all type of competitors.

Some of them are in Sao Paulo that there is an overlay of DSL, some of them were already missed to our competitor and come back to Vivo, and there is also some overlay of FTTC. We don’t give the figure but is slanted.

Depending on the city you can assess more or less what is the nature, but there is a lot of greenfield and going forward with FiBrasil, they are going to be just new cities, new greenfield. So in this case, there is no overly and there is no substitution of legacy technologies..

Great. Thank you..

Our next question comes from Cristian Faria, Bradesco BBI..

Hi. Good morning everybody. Thanks for taking my questions. I have two. First is related to attributes and the like. So if – we saw that the increase this quarter compensated connection in other technology. If we can – looking for the credit to continue so if you can see a growth in the total user base for 2021.

And the other question is related to the new initiatives by the companies doing so regarding the Dotz and the new agreement with the telemedicine company. So what we can expect in the revenue, looking for 2022 in terms of the composition and the presentation in the total? Thank you..

Just one second Cristian, just getting better the first question, okay, I think the first question is about the – I think what I’ll try to answer what I got here Cristian if you have more questions about. I think when you see how much net what is non-core business, we call the non-core revenues and more legacy and mature technologies.

They are all in the fixed side of the business and they are reducing the relevance in our total revenue. And also if you consider that the fixed voice, xDSL and DTH it represented like 15% of our revenues – total revenues, not mobile fixed now in 2020 – now in 2021 in the same quarter it represents a little bit less than 12%.

So what is new and here it’s adding mobile and FTTH and advanced data from B2B is growing and is replacing yes, for your question, yes, it’s replacing revenues coming from what we call non-core businesses or legacy that’s fixed voice, DSL, DTH, the combined are decreasing 24%.

Our perspective and that’s why the figure that you see in the fixed business is improving quarter-over-quarter.

Here maybe there is something that changes quarter-to-quarter because of B2B deals, but the essence of the revenues, the core of the revenues you see a replacement of FTTH over what is legacy and this replacement is making each quarter more impact in the positive numbers that represented in the growth.

If you consider that just FTTH already represents RBL1 billion in the quarter in revenues, note that’s a very strong number. If I add to this number what is IPTV that is very combined with FTTH. We are already talking to the total revenue more than 10% or 13% coming from this service. So the replacement is there.

It’s going to happen because we continue to accelerate the footprint of our network with this partnership, not only the one that we signed with CDPQ FiBrasil, but the one that we also have with American Tower, the franchise and etcetera, is improving our reach and will give us more revenues related to fiber and all the services that go beyond fiber.

Now, so it relates a little bit to what the second question. When we signed a contract with CDF it gives technical support and they are very connected to people who have doubts and they need support in connecting their homes. So we are selling fiber. But we’re also selling a service to help customers to interact and to automate their whole.

So CDF comes with this perspective on what can I build beyond this fiber, beyond the connected home and that’s one of the deals that we are presenting today here. Dotz is a different type of deal, it’s more related to prepaid and hybrid customers. We want to give them more engagement in our platforms with our company.

So if you give the point it’s good because they are going to use Dotz and they are going to top-up and they are going to recharge and they are going to use more of my service to get Dotz. And then I have engagement and it’s profitable, because I have more customers with also up sell for the current expenditure.

The same can be said about our loan platform, Vivo Money that’s going to be also connected to Dotz. So give us opportunities to joint efforts of the two companies, both of us trying to generate value around our digital ecosystem.

And the third thing that we are announcing today is the health partnership we talked before, that we have interest in health and institution.

This time we are able to already share first communication about the binding agreement that we just signed with Teladoc, one of the largest telemedicine companies in the world is not going to be the only partner. We are open to other partners to create a real ecosystem.

Again, we’re going to leverage on our footprint, our customer base, our Big Data, our brand, our bidding capability to drive customers, engage customers and increase lifetime value of these customers with the Vivo platform.

So I don’t know if I answered all your questions, because the first one I missed maybe some of it, but that’s the general perspective, both fiber and new partnerships and the results of the new partnership is going to be the sum of different ones. So, just in this call, we are talking about health, Dotz, CDF.

We are talking about Vivo Money, Vivo Pay and also the co-branded with Itau. We are open to do more and we may announce more every single quarter because that’s the perspective that we have going forward to create this ecosystem around the connectivity that we are delivering.

So, connectivity in homes, offices, not to mention also cloud deals that we are doing the cybersecurity. So it’s home, offices and also beyond the mobile data and segments for Dotz. The same is for Vivo Easy on our digital plan that we are also blending to get also partnerships with large digital companies like Spotify, Uber, Rappi and many others..

Okay, thanks..

And the number of customers, it’s like we also ask about the customer base. I think it’s more the value of the customer base that we are bringing.

I think it’s important to say that we are bringing more customers for the net adds in ultra broadband, but beyond the positive number is also the ARPU that is increasing because we are combining new services together with our core connectivity service..

Thank you, Cristian..

Our next question comes from Victor Gomez, Banco UBS..

Good morning, everyone. Congratulations on the results. About the Vivo Easy partnership, can you give us any color how it worked for Telefônica? Will you have a stake in the new company? Will you earn a revenue – a revenue share for the company acquired? Thank you..

We just signed a binding agreement. It’s not a JV so far. What we’re going to do in the beginning now to check the market and to prove the value proposition is, sorry. What we are trying to say is to sell a service that’s going to have a monthly payment.

So what we’re going to try to adapt here is our ability to have a recurrent services and also to build customers. So the customer you have a monthly payment that will give them access to e-health platform.

Now, depending on the type of service that they hire when I have I don’t know small, medium and large, not only to give you some color on type of plans that we may have here.

And we may have some doctor appointments already included, all of them with telemedicine but they also get some benefits in other partners that we are putting together in this marketplace.

So, they have discounts in drug stores and they may have also any other type of benefits related to other services like a diagnostic or even physical doctors because we are also considering having partnership there.

So at this point, it’s a binding agreement, exclusive agreement having Vivo and Teledoc together with this perspective and objective in Brazil, bringing other partners together and depending on the results we’re also planning a possible JV where we’re going to have a stake in the company.

It’s too early to give you details about that, so for now is our position increased in this marketplace.

And Teladoc will be powering all the digital capabilities, because you can also give digital prescription, digital information the customers may use to buy, prescribe drugs or even also to do some analysis that they need in some of the partners that we putting together in the marketplace.

We’re going to also have content – content very related to health and well-being and we’re going to leverage all our channels capabilities, including our Alterra portal that – a portal that is also one of the largest in Brazil to promote and to create this ecosystem around the Vida V and the health and wellbeing content that we are just describing with some services included in the monthly payment of the customer..

That’s perfect. Thank you..

Our next question comes from Carlos Sequeira, BTG Pactual..

Hi. Good morning Christian, David and team. Thank you very much for taking my questions. I have a couple, please.

One is, I’m wondering if you can give us an idea – a question of what is the marginal cost for Vivo to increase the FTTH speeds to 1 gigabit per second, for instance? And depending on the costs and assuming that is not that high, why not just start promoting these type of packages, which as we know some competitors cannot match and that will put tremendous pressure on these competitors? So that’s the first one.

And the second one, on the – on leveraging Vivo’s gigantic client base, sharpen your service. You’re doing a great – fantastic job adding more and more services every quarter.

My question is, it’s not a question really, it’s if you can share with us your view for these type of services looking maybe 5 years down the road, how much you expect that to represent of Vivo’s business? Just an idea just what your goal is or you’re doing maybe on these type of services? Thank you..

Hi Carlos. For the first question, we just launched 600 megabits. And I think we will – there is additional cost to offer such a high speed to customers. So we need to be very rational how we do it and to which customers are willing to pay more to do so. So in B2B more room for 1 giga. We already have this as an offer to companies that require that.

Even SMEs, they can have it. In the B2C we are now in the 600 megabits and also not in every place. As you said, there is some cost involved and we need to be careful and also be also careful about the pricing. We need to depreciate pricing to give the value of the ones willing to pay for 600 megabits. In this case that’s our offer right now.

We’ve been very conservative and we hope the market is also conservative and the technology is impacted and the cost is important to be able to offer such speed to customer.

So we are doing that in a very thoughtful way and segmenting our customer base and offering that to customers who are willing to pay more, either because they live in places where they need, it’s more demanding.

And let’s talk about some country-side homes that people are now living and they are very large homes that they want to have a very high speed because there are offices there, the schools are there now because the kids are at home that maybe they need to pay more. And then we had to price in the right way and do so.

So balancing the additional cost with the real demand and not minimizing or taking value of the 100 megabits, 200 megabits and 300 megabits, that’s also very good speed much above other technologies and that respond to most of the demand of most of the customers that we have.

In the second one we’re going to start giving more color on digital services but I hear the difficulty that we have in the nature of the services are different. Not just defining B2C and B2B that’s already at a huge difference.

B2B, it’s hard to find a customer that we don’t have a digital service already as part of the relationship that we have with this customer. That goes from IT, pharma, cybersecurity solution to a call solutions. So we are leveraging and penetrating digital services in most of our B2B customers.

So there are different types of customers, size of customers in B2B. So it’s difficult to tell you the percentage, but I understand that the penetration will be very high almost in 5 years. I believe all our B2B need to have digital services that is build and sold and taking care by people’s workforce and both the sales rep but also the customer care.

In the B2C, I would also segment in the two types of customers. In the top of the pyramid I think we’re going to distribute services from very well-known brands. And if you look the number, the percentage of fiber already sold, Netflix, Disney+, we’ve just said 30% and this number is growing.

So, I think our ability to bundle together fiber services, service that are very connected to our core will be very high.

And I also think in 5 years that every single customer people may have something that they bought together with their connectivity that is not our core is the digital service and that goes entertainment, it can be gaming, it can ne also I just mentioned CDF. That’s a support, a technical support that we branded to Vivo Guru.

We also believe a high percentage of our customers should have this customer care. Vivo Guru already included in their plan and we will charge for that. In the base of the pyramid there we are –- I think we can launch new business that are totally not only – always connected toward the relationship that the customer has with us.

So when I launch Vida V, of course I’m selling to my customer base, but I’m not bundling it with a plan because I’m talking about prepaid hybrid customers that there is no bundle, because the value of this new service going to be similar to the value of the money they spent with a prepaid recharge. So it’s a new business.

So this new business you have value in two sides because I’m selling it and because I may have a stake in a new and different company that can add its value by itself. So I see financial service going this direction, maybe health for sure, education for sure. So it’s a different type of business.

I’m not combining; I’m launching new platform, the new ecosystem.

So once we have more clarity how to explain and to give you more detail and color about the numbers, we will certainly do that differentiated B2C, B2B, what it’s totally bundled because has value on the combined, that’s Netflix plus fiber and versus what is the new business like it’s Vivo Money there is a new business that is a long platform.

Vida V, that is a new business and many other things that we will be launching that in the fourth quarters, don’t know if I answered like I do, but it’s what I can share at the moment..

Thank you very much, Christian. Very clear. Thanks..

Our next question comes from Marcelo Santos, JPMorgan..

Hi, thanks for the follow-up. I have two questions. The first one is in the fiber expansion. We are seeing all players expanding in fiber with plans to expand fiber aggressively in the next couple of years.

What do you think is the potential market for homes passed to fiber in Brazil? And do you see the risk of overlapping networks or not be like difficulties for the players to execute their plans? And that’s the first question. The second question is you’re going to have the 2G shutdown.

How much savings could you get on that? And would that be more CapEx or OpEx? Thank you..

Marcelo, in the fiber, we announced that we aim to have at least 24 million home passed by 2024. We already have close to 17 million. We announced first quarter 16.3 million. We have the largest customer base and we have the highest market share in the mobile. We have the combination of all the assets to be the leader in this market.

So we are very confident about our plan. Brazil is huge. I think we have a gap in homes ultra-broadband digitalization. So if you consider target market of 60 million, 65 million homes and offices that’s going to be the market that’s addressable by fiber.

Some of this market discovered by the smaller players, some are on corporate today or they have a technology that is not fiber. So this is the number that may be we bear in mind. So we are now aiming for 2024 to get to ‘24. The risk of overlapping I think is there.

I think it’s not good, because some of these deals that you just mentioned there is someone behind that needs to occupy the network. They are neutral networks, but they need to have a tenant, an anchor tenant and additional tenants.

So for that to come through and to be profitable I think the ones controlling this network should be very wise and not overlap. So in our case, we have a company that we co-control. So we may define what are going to be the target cities and we will try to be as professional as we get.

Although as I said, we are the leader, we have the largest customer base and we have a lot at stake. And we’re going to do that because we’ve done that before and we are the number one doing that successfully.

The others should be also I think they are and they should be very attentive not to do or not to make a mistake of copying similar areas because I don’t see more than a one or two tenants covering different networks, neutral networks to give the profitability that’s regards for this type of business. That was your first question.

The second question was?.

The second, I would say the second one is about the savings that we are expecting with the ratcheting with team. So there is going be like three different savings, so one have to do with 2G switch off. It will bring savings but mainly on OpEx and this is something that we will start given this third quarter.

So it’s an area we see a ramp up in the next couple of years that is going to start right now. The second one, we are going to have – we already have 348 cities that’s already implemented with coverage expansion. So this is a CapEx savings that again this is something that we have already as we speak, we already having this savings.

And the third one, which has a big potential again it’s – that will be a de-commissioning in some of the network that today we are jointly with the team in more cities. So again this will bring both OpEx to run those networks and also CapEx to maintain those networks.

And also we see the 3 years as a big opportunity to focus on quality, particularly to cope with incremental traffic and also start to see what is – can we accelerate here within in the mobile space..

Perfect. Thank you, both. Thank you very much..

Thank you very much..

[Operator Instructions] This concludes the question-and-answer session. At this time, I would like to turn the floor back to Mr. Christian Gebara for any closing remarks..

So thank you all for joining us.

As I said before, it was like solid results, especially in the commercial performance in both the net debt that we had in postpaid and the net debt that we had in fiber that are core products and core revenue that give us optimism about 2021 as the situation hopefully is getting better if the vaccine and the economy recovering and we are in the right position to take advantage out of the accelerating growth that we see in these technologies and this business where we already have the leadership.

Added to that the new ventures that are started to be more concrete and I think give us room to create a real ecosystem around our brand and bringing loyalty and engagement involve our customers. So, if you have any more further questions about anything, you know our team is here at your disposal. Thank you and see you next quarter..

Thank you. This concludes today’s Telefônica Brasil 1Q ’21 results conference call. You may disconnect your lines at this time. Have a great day..