Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefonica Brasil Third Quarter of 2021 Earnings Conference Call. Today with us, representing the management of Telefonica Brasil, we have Mr. Christian Gebara, CEO of the Company; Mr. David Melcon, CFO and Investor Relations Officer; and Mr.

João Pedro Carneiro, IR Director. We also have a simultaneous webcast with a slide presentation on the Internet that can be accessed at the website, www.telefonica.com.br/ir. There will be a replay facility for this call on the website. [Operator Instructions].

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 over to Mr.

João Pedro Carneiro, Investor Relations Director of Telefonica Brasil. Mr. Canero, you may begin your conference..

Good morning, everyone, and welcome to Telefonica Brasil's Third Quarter 2021 Earnings Call. Today's call will be divided in 3 parts. First, our CEO, Christian Gebara, will present Vivo's main financial and operating figures as well as initiatives on the digital ecosystem and ESG highlights.

Then our CFO, David Melcon, will give you more information regarding our cost and CapEx structure, net income, shareholder remuneration and free cash flow. We will then move to Q&A. Now I'll hand it over to Christian..

Thank you, João. Good morning, everyone, and thank you for joining our earnings call.

We start on Slide 3 with the highlights of a very positive quarter for Vivo, in which we had fixed revenues returning to year-over-year growth after 4 years, mobile service revenue boosting the highest rate of annual evolution in 6 years, and solid profitability results that led us to maintain a robust interest on capital distribution and accelerate the buyback of our shares.

In mobile, we reached 82 million accesses in September after growing 7.2% year-over-year. As a result of the accelerated expansion in accesses, our mobile service revenue expanded 5.7% year-over-the-year in the quarter. Both the number of accesses and the rate of mobile service revenue growth are the best since 2015.

The note in the strong momentum we are having on mobile with long-term, improved portability and market share leadership. In fixed, in third-quarter '21, we were able to post year-over-year growth for the first time after 4 years, up 0.4%, achieving a much-awaited inflection point in a business that represents approximately 1/3 of our total revenues.

The result was driven by the expressive growth of 14.8% of our core fixed business with our fiber-to-the-home broadband, expanding 37.2% versus third quarter '20 as we accelerate the rhythm of monthly net adds that during the first 9 of the year surpassed the 100,000 mark on average.

Our solid revenue performance allowed us to achieve EBITDA growth even during a period when inflation expanded double-digit. EBITDA was up 2.1% year-over-year with a margin standing at 40% as costs remain largely under control due to efficient financial management, leveraging on digitalization.

All of these factors led us to register a net income of BRL1.3 billion in the quarter, up 8.5% year-over-year, giving us the base to continue providing the best shareholder returns in the industry by means of dividend and interest on capital deliberation as well as share buybacks. Moving to Slide 4.

Our total revenue expanded 2.2% year-over-year in the third quarter '21, benefited by a solid performance of our core revenues, which grew 5.9% versus third quarter.

Looking at the service core revenue, thus excluding handsets, we see an expansion of 80% year-over-year, accelerating versus previous quarter as the demand from both B2C and B2B customers for high-quality connectivity and cutting-edge technological solutions, is allowing us to improve the revenue profile and access base mix, consolidating Vivo as a go-to player when it comes to the provision of a digital ecosystem.

Turning to Slide 5. Here we present our mobile revenue performance, which in the third quarter '21 are also markedly strong in comparison to previous quarters.

In fact, the 5.7% year-over-year growth of our mobile service revenue was the highest since the second quarter '15, driven by a 7.3% growth in postpaid that came in well ahead of earlier periods.

Postpaid was only not benefited by the robust customer base special, which we'll still on the next slide, but also by price increases in July and August 2021 applied to part of our hybrid and pure postpaid customers. Prepaid in return, saw slight 0.6% year-over-year decline in revenue in the third quarter of '21.

But it's interesting to note that on a sequential basis, we posted a growth of 3.9% as customer base increased and continues to shift to our weekly Vivo Turbo offer, which guarantees higher usage and recurrency than daily offers.

It's important to notice that in the third quarter '21, our Handset revenue dropped 19.8% year-over-year, partially hurt by the ongoing chipset supply shortage that impacts the whole smartphone industry, but also by a tough comparison basis versus the third quarter of 2020, which was typically high in terms of sales as most of our stores were closed during the second quarter 2020, thus creating higher demand for handsets in the third quarter of the year.

As a result of all these moving pieces, mobile revenues expanded 3.2% year-over-year in the quarter. Moving to Slide 6. We can see that according to the latest public conveyable data, Vivo continues to hold the top spot in terms of overall mobile market share, which is also true when looking at the postpaid and prepaid segments.

This is underscored by our best-in-class network, unique brand recall within the sector and widespread distribution channel. Our unchallenged advantage was strengthened during the third quarter '21 when we added 1.3 million new mobile customers, 996,000 in postpaid and 292,000 in prepaid.

As a result, we surveyed the mark of 82 million mobile access for the first time since second quarter 2015, growing 7.2% year-over-year.

It's important to point out that not only our customers are choosing to stay at Vivo and increase their lifetime value as we can see from the very low 1.2% postpaid churn rate registered in the third quarter of '21, but also that clients and other operators are increasing joining our base, as demonstrated by the 134% year-over-year increase we had on postpaid profitability net adds.

On Slide 7, we are very pleased to announce that our total fixed revenue grew 0.4% year-over-year in the third quarter of '21, expanding our early basis for the first time since the third quarter '17, allowing us to finally reach a growth inflation point in this very important portion of our business.

This is a result of years of investment in future-proof fiber-to-the-home technology that has placed us in the forefront when it comes to capturing the strong demand for high-speed connectivity and on the development of a comprehensive portfolio of solutions aimed at connecting and digitalizing businesses.

We are able to dedicate our full force to the core fixed business by taking in the past, assertive strategic decisions that accelerated the loss of non-core fixed revenues that allow us to focus on what will bring sustainable growth and positive shareholder impact going forward.

As such, while the non-core fixed business continued to drop to the churn of 21.3% year-over-year.

The core fixed business grew 14.8% as all services line, posted double-digit growth with FTTx broadband up 11.6%, IPTV up 23.4%, and corporate data and ICT up 17.1%, the latter reaching the impressive mark of almost BRL800 million of revenue in the quarter. Moving to Slide 8.

We highlight the performance of our fiber-to-the-home business, which in the third quarter '21 generated BRL1.5 billion in revenues, considering both FTTH broadband and IPTV.

To reach this result, third quarter fiber revenues have been growing at the rhythm of 40.3% per year over the past 2 years, mainly driven by broadband that posted a '19- '21 CAGR of 46.3% and already surpassed BRL1.1 billion, but also helped by a solid 25.1% CAGR in IPTV.

Moving to the right-hand side of the slide, we see that in the first 9 months of the 2021, we added 978,000 new FTTH broadband customers already outgrowing the total net add posted in 2020. This is happening as during 2021, we are having a very strong average of monthly net adds at 109,000, well ahead of figure posted in 2020 and in 2019.

It's interesting to note that while this fiber access base 19-21 CAGR of 32.3% is quite solid. It comes short of the revenue evolution by some 8 percentage points, noting that fiber top line is coming not only for new access but also from pricing power and improved customer mix.

On Slide 9, you can see that we are doubling down our fiber ambition as we believe FiBrasil represents an unparalleled opportunity in terms of the relevant symmetry between the demand for high-quality, high-speed, and reliable connectivity, which the long run can only be provided by players with pure fiber solutions like Vivo and the still faulting offer of infrastructure enabled to provide said services.

In this sense, we're updating our 2024 homes passed target to 29 million homes. thus proposing to add around 11 million new homes passed on top of the 18.3 million we currently have.

The organic portion of this expansion will be composed by the rollout of our FTTH network in new and existing cities and by the overlay of existing FTTC and copper networks in selected areas. Here, we are being benefited by a 60% drop over the past 2 years of our cost per home pass, which say, on average, is around BRL160.

The deployment expertise and efficiency coupled with the growing scale has enabled us to reach this important optimization.

The home passed expansion, we also have a partnership component with the usage of new infrastructure companies FiBrasil, which should contribute with almost 6 million homes passed to the $29 million target, thus accelerating our time to market in midsize city outside of Sao Paulo. Moving on to Slide 10.

Here, we would like to give you more granularity on what is behind one of the main levers of people's revenue growth, B2B digital services.

Over the last 12 months, 3% of our total revenue came from our B2B business, of which 20% or approximately BRL1.9 billion were generated through the sales of cloud, security, IT solutions and equipment, and IoT and messaging services with a growth of over 35% year-over-year, which is in line with the performance of high-growth B2B tech companies around the globe.

In Brazil, we are seeing companies of all sizes increasingly digitalizing their businesses as new ways of managing their processes that are related only with their customers arise.

As such, at Vivo, we want to move away from the model of being just a connectivity provider for our B2B customers by having in place a digital ecosystem of solutions offering both services designs as IoT and messaging, but also products on top-tier partners, such as Microsoft, Amazon and Cisco.

We firmly believe the B2B digital services, will continue to expand in scope, bringing as a quality, recurring revenue flow with a compelling growth profile and customers with a high lifetime face. Turning to Slide 11.

We present our most recent initiative aimed at implementing our B2C digital solutions ecosystem, which is comprised of verticals such as entertainment, financial services, health and wellness, connected homes, marketplace and education.

We've just signed a memorandum of understanding with Anima, Brazil's largest high-quality education company to form a joint venture aimed at creating a business platform to offer digital manual courses focused on lifelong learning and employability, in areas such as data science, programming, IT, among others.

The courses will be -- so not only to Vivo customers but to anyone who wants to enjoy accessible quality content that can help in building skills according to personal interests and career expiration. The JV will have a 50-50 co-control by both Vivo and Anima with a dedicated and fully independent team to run the operation.

Moreover, Vivo will be able to take advantage of important assets and expertise for experience companies to gain scale attractions such as Vivo's client acquisition, go-to-market and building capabilities, and Anima's educational content, academic operations and online learning platform.

This is another step we take to position Vivo as the company that goes beyond the offering top-notch telecommunication services. Using our assets, tools are to promote the decent inclusion through education. On Slide 12, I would like to comment on the evolution of initiatives including our ESG agenda.

We continue to expand our distributed energy generation program and now plan on having 83 renewable energy plants functioning by the end of 2022, of which 19 are already fully operational.

Here, we highlight the inauguration of our first biogas plant in the Northeast region in the state of Caruaru with the capacity to generate over 18,000 megawatts hour per year. On the diversity front, we just launched our new industry product, offering 750 internal positions, of which 50% we're issued by black students.

Moreover, we are striving to make our leadership team significantly more diverse. By the end of 2021, 20% of all leadership positions that will be occupied by women. We are also working with Wayra, the Telefonica's Group's innovation to support disruptive startup scale in the business and the year businesses.

Recent investees included Olivia, which offers an AI and machine learning-backed financial adviser solution, the security startup Gabrie that develops technologies focused on security and image monitoring. Alicerce, a social ad tech that delivers high quality affordable tutoring for tuition.

GamerSafer, a cybersecurity startup that provides user identification and antifraud services for online games. All of them present significant cross-sell opportunities with people.

As always, I believe it is important to stress that ESG themes are a centerpiece of all that we do as a company to great value for society and all other stakeholders in a sustainable and compliant way. Now I hand it over to David to take us through the financial highlights of the quarter..

Thank you, Christian, and good morning, everyone. On Slide 13, we show our recurring cost evolution in the quarter. As presented over the previous slide, Vivo is speeding up the growth of its revenue based on focusing on core businesses that deliver both connectivity infrastructure and digital solutions.

Our cost base is changing accordingly, but annual growth remains well below inflation due to our continued digitalization and simplification efforts. As a result, this quarter, our total cost grew 2.3% year-over-year, where inflation for the last 12 months reached 10%.

Cost of services and goods sold that are directly impacted by the siting revenues mix represented 28% of all costs we had in the quarter and contracted 3% year-over-year as cost of goods sold fell 18%, impacted by the lower volumes of handset sales in comparison to the previous year.

On the other hand, cost of services grew 8.7% as a result of higher volumes of licenses and digital content sales. Now moving to our cost of operations that represent 72% of the expenditure we had in the quarter.

Here, we saw a year-over-year growth of 4.5%, impacted not only by a double-digit inflation registered over the last 12 months, but also by the strong commercial activity posted by Vivo in the period. Now moving to Slide 14.

Here, we show how the year-over-year evolution of our revenues and cost base led to a recurring EBITDA of BRL4.4 billion, reporting an annual growth of 2.1% in this quarter with a margin of 40%.

This positive performance was delivered as we continue to strive with the capture of operating efficiencies through the digitalization of processes related to the client acquisitions, customer curve, billing, and collection among all others, giving us an edge, not only in terms of results but also when it comes to overall customer satisfaction and experience.

Here, we also showed that this quarter, we had a positive nonrecurring effect of BRL417 million related to the partial sale of FiBrasil. The fiber infrastructure company we created in partnership with CDPQ and Telefonica Infra. Considering this effect, we had EBITDA growth of 11.8% year-over-year in the quarter.

On Slide 15, we can see that this quarter, we invested BRL2.2 billion in our operations, representing 19.5% of the sales we had in the quarter and leading on a 9 months capital expenditure of EUR6.3 billion.

This quarter, around 88% of the amount we invested was directly to growth and transformation projects, meaning we continue to accelerate our fiber to the home deployment and hence, our mobile network capacity and quality have improved our IT systems and data platforms to optimize our day-to-day operations.

To update you on the network sharing agreement we have with the team during this quarter, we successfully completed the 50 cities pilot for the full network consolidation.

This was a very important step between the scope of this agreement and how both parties are negotiating the potential extension of the single grid initiatives to a much larger number of cities. Moreover, the joint 4G coverage expansion was concluded while the 2G switch-off continues to advance as planned.

We are also investing to prepare a network for the upcoming 5G technology. And at the end of the quarter, we had 5G DSS fully operating in 8 major cities by more than 90% of our sites were fiber in Brazil's 50 largest municipalities.

Additionally, almost 2,400 cities already have VIVO's 4.5G coverage guaranteeing an enhanced 4G experience that drives to higher data usage. Moving to Slide 16. During this quarter, our net income reached BRL1.3 billion after growing 8.5% year-over-year, taking our 9 months profit to BRL3.6 billion, up 3.6%.

This strong performance allowed us to maintain our trend of providing one of the highest and most consistent shareholder remuneration among Brazilian companies. During the first 9 months, this year, we declared EUR1.9 billion of interest on capital.

And when we consider all the dividend plus interest on capital deliberation that took place over the last 12 months, our dividend yield amount to 7.4%.

We are also accelerating the buyback of our sales, investing almost BRL400 million to repurchase 8.9 million shares between January and September this year, thus closing the quarter with 11.7 million shares in treasury, which translates into 0.7% of our total equity.

Note that in order to keep increasing shareholder returns, Vivo's evaluating canceling the shares in treasury in the near future.

On October 5, we also paid out the second tranche of the dividend plus interest on capital delivered through 2020 in the amount of BRL2.8 billion, totaling EUR5.4 billion in remuneration related to the last year results, a solid BRL3.19 per share. Now moving to the Slide #17.

As of September, we generated BRL6.7 billion of free cash flow, reinforcing our very strong balance sheet profile and allowing us to fund acquisition of both OI mobile's assets and the spectrum being auctioned next week. These figures represent a fecal yield of 10.2% and a free cash flow margin of 16.9%, even with CapEx growing in the period.

As a result, and to conclude, we closed the quarter with a net cash position at leases of BRL7.1 billion, representing a considerable and constant improvement year-to-date. Now we can move to the Q&A..

[Operator Instructions]. Our first question comes from Andre Salles, UBS. Please proceed..

I have a question on the business, digital segments.

How relevant do you see the digital revenues on the -- during the upcoming quarters? And how do you plan to sustain the current pace of growth on this opportunity?.

Hi Andre. It's Christian answering here. For the first time, we detail the digital service or B2B, now we have 2 segments, B2B and B2C. So talking first of B2B we saw the 12-month growth. That is robust growth and very accelerated. And here, we include what we call cloud security, IoT, messaging, IT, equipment, et cetera, that's all related to B2B.

So we believe that's continued to grow. We see the demand for this type of service is accelerating in companies, especially after the pandemic period, the companies want to be with the content online or on cloud and they want everyone to be accessing it.

So there is a lot of movement in this segment, and I think we are very well positioned because we have our own portfolio and leverage on Telefonica Tech that is the companies from the group but also in partnerships that we have solid ones with Microsoft, Cisco Amazon, just to mention some of them.

Going to the B2C here it's a different business model. We're going to do distribution of digital service as we're doing entertainment. So we've been very successful in distributing video OTTs over fiber, for instance, Around 30% of our fibres come with one of these OTT entertainment bundle.

So I mean here for Netflix, Amazon, Disney+, STAR+, among others. But we are also -- and also we do that also in the mobile plans. On the postpaid, Vivo cell they also come with one of these OTTs embedded, and we're also being very successful on this.

But we are also launching a sort of new business that has a more of an independent vision going forward. That is the one that we launched in health, that is a partnership with Teladoc that is focused on telemedicine in the beginning, but also with some other partnerships to create a health marketplace.

And the one that we've just announced in education that will be a new business as well.

In this case, it's already a memorandum of understanding to build together for any JV that we focus on having something very unique in the market that is an effort education that will be very focused in giving content, very short content to people to develop new skills, especially for those that don't have like a university degree and needs to get more knowledge to get a better employment.

So it's a matter of job. So that different type of business, how much they will represent of our revenues, we are not giving a figure run out, we may give more color on this in the future. But apart from having some business that by itself will have value. So in the case of education, we're creating a business that by itself may have independent value.

We are, for sure, not creating more loyalty to Vivo, so that the idea here is really to create a digital ecosystem around the 97 million access that we have, leverage on the channel that we have.

There's an omnichannel that's physical, but it's also my leverage or the big data leverage or the brand leverage on our billing capability and create an ecosystem that we can gain more engagement, more of the expenditure of the customers in digital services and for sure, more loyalty in the telco business as well..

Our next question comes from Marcelo Santos from J.P. Morgan..

I wanted to ask a question about the incremental -- the increase in the outlook for fiber homes passed. So now you're targeting BRL29 million.

Are these 5 million incremental homes passed to be done by Vivo and not FiBrasil because you continue to mention 5 million, 6 million homes in FiBrasil, which was what you said in the second quarter, but you had a different guidance for homes passed and Vivo.

So are these new home passed, being passed entirely by Vivo? A follow-up question is, what's the impact on CapEx that we should expect from this plan to 2024? And maybe the last one would be related to what are the target cities? What kind of regions or cities, could you share some description of what kind of cities that you'll be entering with this extra home path?.

Marcelo, thank you for the question. I will try to answer, what we can answer. The cities, as you may understand, we are like already in the large cities, we are just focusing now in the mid-sized cities. So we continue with this strategy widespread along all the regions of the country.

And in some of the cities that we already have presence, we may reinforce our presence in some neighborhoods that we still haven't risked.

And also considering these numbers, the overlay of DSL and FTTC that if we still have room to do that and that it's more focused in the state of Sao Paulo in FTTC, some of the cities that we have the acquisition of GPT. And this number that we accelerated, especially the CapEx will be the same trend. So there is no change in CapEx.

I think what we want to highlight here is the CapEx related to home passed that we are presenting a drop. Also, if you consider what we have as a number in the third quarter '19, was BRL400, representing now BRL160.

So as leverage on that scale that we have been able to capture a lower price in HP and also in home connected with still room to accelerate what we previously presented BRL24 million for '24, now going to BRL29 million. It will be a combination of the model that we have today, organic built by Vivo and FiBrasil.

At this moment, we don't share how much is going to be coming from each, but it's going to be a combination of both, also using the other partnerships that we have and the one that we have Minas Gerais with American Tower. So it's a combination of the 3.

What is not in this number is franchising that we are doing separately because we don't get all the full heavies, but just the franchisee payment of royalties. So it was the number that we are presenting here is that building on what we have as partnerships today, more on our organic and overlay over FTTC and DSL..

Our next question comes from Freddie Mendes, Bank of America..

I have 2 questions as well. The first one, you mentioned the network sharing agreement with team is doing well. So for '22, are you planning to give any disclosure about the NPV from this partnership. And I know you don't give a guidance for the digital initiatives on the B2C.

So just trying to measure here for '22, what do you believe will be more relevant, the impact this partnership with team, or all of the B2C partnerships combined, right? That would be my first question. And then my second question, when I look at the arc the FTTH, it's basically flat, right? It's very, very small decrease on this quarter.

Do you believe we are already reaching a peak with this BRL9 ARPU? Or maybe there is some things to see for this quarter with more competition and then a slight pressure on price. Thank you..

Fred, this is Christian. So the rest team goes according to plan. We are very positive about the opportunity that we may get from this and maybe the opportunity to even expand not what we're doing. So I think we've presented in the past that it has 3 big areas. The first one was the 4G in small cities.

We already know we already deployed it in 716 cities, 360 more or less for each operator. We are providing coverage in places where they don't have coverage, and they are providing coverage for us in places that we didn't have covered. So that's the first one that we did.

And that's a single grid model that is maybe the most complex one in terms of deployment. We did a pilot in 50 cities, 25 each operator. Results are being meted out right now. They are good. So we expect to do it in more cities. And then you have a plan for more than 1,000 cities next year.

This year, we may start deployment in maybe 100 seats each and having like this 1,600 cities for the future. In the 2G, there is the shutdown, here also, we are preparing our systems for doing something like this. The plant is again under the schedule that we defined before.

And the objective here is to do the shutting in some of the cities that we both 2G and the other one will be offering the solution to the other one in 2022. So that's basically how the plan is. And of course, all these initiatives will bring us CapEx and OpEx savings for both companies.

We don't give the figure, but we are positive and also to open at some fronts for the future, not only more 4G cities with larger sizes, but also considering 5G could also be an opportunity going forward. There is a second piece in this part. But going to the FTTH ARPU.

I think the FTTH ARPU if you see in the year, in the 9 months of year we are growing ARPU around 6%. If you go to the specific quarter, we may have some like promotions in a specific month that could be impacting ARPU and some smaller cities where the entry point will be a little bit lower in speed than we had in the previous quarter.

What we believe here is that we need to accelerate. We are gaining a lot of momentum. Our net adds are accelerating. Our total revenue is growing a lot, as you could see all the numbers presented. And we believe we all should be very rational about pricing in fiber.

So now with the inflation that we are seeing maybe next year, a price adjustment will be needed, and we are very open to do so and rational in a business that requires investment, and we should be very wise about how competitors also will behave because I believe we all need that.

We also reinforcing our presence in the convergence arena that I think we are the leader in this one. So offering attractive but not irrational. -- offer for customers that are both mobile and fixed with us.

And also, as I said before, accelerating the bundled offer with IPTV, all customer wants it, but also, if we are totally open because we're not defending the Pay-TV business because of our market share, but we are very open to fiber with video OTT being very successful. They had a good impact also in improving our ARPU.

So doing that with Netflix, Amazon, now launching Disney+ and Star+, and other business sorts and other offers will be coming in the next months..

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

So I will follow up on Fred's question on FTTH. And maybe I have a couple there. One is if you can give us an overall view of the competitive environment. I know a lot has been -- there's a lot of talk in the market after all the IPOs from the ISPs from some ISPs.

And maybe you can give us some overview of how you are seeing competition and how you're competing against these players that are becoming bigger and now with more money on their hands. And maybe another question on FTTH and expansion.

You were growing in basically 3 ways by doing investments yourself via FiBrasil and also with the partnership with American Tower. I'm wondering if there are any other avenues or partnerships you can cut to try to grow even faster, maybe exploring other neutral networks or maybe a partnership with larger ISPs.

Just wondering if there is any other thing you can do to make this expansion even faster, which, by the way, is amazing today..

Carlo, thank you for your question and your comments. Let's see, it's a lot of questions in one. Let me -- yes, there are many ISPs and there are different nature, the ISPs. Now some of them are very focused in very small cities, and our overlap is very limited. And there are others, as you very well described that may be competing face-to-face with us.

I believe we have assets that they don't have, I believe, our network in again, and I don't -- I won't give you names of the IS buses and there are different natures and different companies. Some of them, they don't have the same type of technology in the network that we have.

So I believe when speeds and the demand for high speeds come as a strong demand from customers, we are much better prepared to respond to the demand for the configuration of our net core and for the CPE that we are using. Then there is also the content part in the TV, IPTV, Still, there are a number of customers that require IPTV.

So only facing with this type of competition, we are better equipped to respond to these customers. And there is also agreements with OTT. They can offer OTT video, but we have, in most of the events that could offer to these customers a better value proposition. And then there is a mobile piece that we are not using it in a very aggressive way.

We don't expect to use this in a very aggressive way. But of course, again, it's another competitive advantage that we have, being the leading company in both postpaid and prepaid.

So all these planned and together with the channel capillarity that we have and all these new agreements that we are building with the digital ecosystem, I believe we are in a very strong position to compete and continue with these net adds, very, very good ones and again, being very wise in the price.

I don't want to -- although I can, I don't want to reduce prices. I think we should be all be careful about the ARPU of the fiber and be very rational not to get into award in price that I don't think is going to be beneficial to anyone, but specifically for the smaller ones, it will be even worse.

Going forward in the model, yes, we are very positive about our partnership with FiBrasil. And we are very keen on doing all the plan that we have defined with them. We continue with this one. We continue with the partnership for American Tower, as I said, Minas Gerais.

We continue with the franchising model that's building a lot of new cities, and it's good 1, 2 smaller cities, and we continue also betting on this and some of the partners that are our partners in the channel resellers are also investing in fiber.

So it's a good combination to strengthen partners because they're going to be a reseller of mobile, but also a fiber franchise. So it's a good one. But of course, we are open to see different type of partnerships.

The key partner is FiBrasil, but we are open to listen to other opportunities as we see now, there are other neutral fiber companies in the market. And regarding the smaller ISPs, it always depends on the quality of the assets. And I mean, quality in all terms, technical, physical and the customer rendition that they may have..

[Operator Instructions]. Our next question comes from Alejandro Gallostra..

Could you please provide a further explanation about how you managed to decrease the cost per home passed that much over the past 2 years? If those costs are exposed to FX fluctuations and how much you can decrease this cost in the future.

And I was wondering if this is the actual cost of passing a new home? Or if you're averaging that cost with the homes passed that you gained through partnerships as well.

And third, if I may, I was wondering if you could provide us with the additional cost of interconnecting each home once you acquire the customer?.

Hi Alex, The cost is our cost, it's not considering partnerships is the cost that we were deploying and the home pass. FX has a very limited impact.

And I think here is the combination of our expertise, the scale of the equipment that we are using our ability to be able to because now the expertise, not only local, but it's also international as we are one of the leading group in fiber in the world. So it's a combination of many things.

And also, we are very positive about the possibility of going down in the future. It's also important when we compare our number other numbers that it depends a lot in the city that we're deploying when deploying a very small city, maybe the cost may be a little bit lower than the one that I'm presenting here.

So that's why sometimes some companies present a number that's different from ours. Also, we are building infrastructure. We are not renting for instance, wholesale traffic or backhaul. So that's why we also are building on and also want to go to CPE and the home connected that you were describing here, we use top equipment.

And the price also is going down and is around BRL800 today, they're on connected, okay, without IPTV, fiber-connected..

Our next question comes from Marcelo Santos, JPMorgan..

I wanted to ask you about the prepaid to postpaid migration. You have been having a lot of success. And I think that's part of your strong postpaid revenue growth. How much more space is there for you to fish in the prepaid aquarium. And is the fact that the economy is deteriorating and the macro outlook is not good.

Does it slow down this process?.

So we're still being very positive commercially in acquiring new customers from prepaid. So the lake that we could use for migration is still very large. That's why we're still being very successful in migrating. So I see the possibility are still there. So we continue to do that.

And again, after all this movement that we have and the competitive moment that we are having in the market may also give us the opportunity to get more prepaid customers and also migrate to the future.

I think here, it's much more how do I migrate, and also there is a possibility to upsell within the hybrid that we are also doing that and also adding to this hybrid customer new digital services. So also, I think they see the opportunity to increase the ARPU. So positive that we still have room to go.

Of course, the economic situation of the country impacts the prepaid. Now we have the new government ad that was approved. That's positive for the prepaid. So once that's in place, it will be a positive impact in the prepaid.

So going forward, commercially, we continue to be strong and a possibility to migrate is still there, and we should consider incremental ARPU in the hybrid commercially successful in giving more services to the customers already in our customer base..

The next question comes from Carlos Sequeira, BTG..

Now switching to mobile and the 5G auction. We all saw yesterday that there were 15 bidders for the upcoming auction naturally Vivo's one of the bidders.

My question is, do you anticipate any increase in competition coming from these potential new bidders? Or do you think they are more -- they are going to focus more on maybe niche opportunities? Or how do you see -- I know it's early and the auction is only next week.

But how do you see the interest that was shown by these potential bidders in the upcoming auction, please? And one more, and I know this might be a little sensitive, but there are news in all newspapers talking about maybe a discussion between CADE ventures and the 3 telecoms that made an offer to buy way -- Is it -- my question is it a negotiation? Or how do you expect this to move forward? Or are you just waiting for CADE ventures probably in February next year?.

Carlos, for the second question, that's the standard process of an approval of operation that size. We've been interacting through lawyers in the normal process of the technical team in CADE, nothing different from what was expected.

Although the operation was very well designed, as I said before, both in the spectrum split and customer split, complying with all requirements, both from a regulatory agency and the CADE. So normal discussions in our operation this size. In the 5G, as you know, it's a large auction call it 5G, but it's a lot of things there.

Some of these blocks have a different configuration. Some of them start in national become regional, some of them are regional from scratch. We're also talking about the very high band, millimetric bands. So there are so many configurations and opportunities for players that the number of players don't stay a lot.

Also let's wait for the auction itself because we really don't know who is betting for what. It's that's something that we just find out on the day of the auction with the names that we saw our names that are already acting here in this market, in telecommunication way on another -- So let's see what their real interest are. I think it's an auction.

There are many different things and a lot of obligation. As you know, there is a lot of investment committed to the acquisition of any of the blocks. So I believe we have a very strong position to be very competitive because we've been investing in the country for so many years. We have a customer base that is unique.

And we have the infrastructure already in place that gives us much more scale and synergies going forward, comply with the new obligation that will be put in place. So let's wait till next week..

End of Q&A:.

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

So thank you, everyone. As final remarks, just to highlight that we are very excited about our fixed revenues, now growing now after so many quarters that we've been talking about this transition and reverse trend.

Also very optimistic about our business going forward, totalizing customers in mobile and fixed, but also in the digital opportunity that we see ahead, being a key player in a digital ecosystem in our country. So thank you all, and we are always here available for any further questions you may have..

Thank you. This concludes today's Telefônica Brasil 3Q '21 Results Conference Call. You may disconnect your lines at this time. Have a nice day..