Telefónica (NYSE:TEF) Q4 2025 Earnings call February 24, 2026 04:00 AM ET Speaker10Good morning, and welcome to Telefónica's conference call to discuss January to December 2025 results. I'm Torsten Achtmann from Investor Relations. Before proceeding, let me mention that the financial information contained in this document has been prepared under international financial reporting standards as adopted by the European Union. This financial information is unaudited. This conference call and webcast, including t ...

Financial Performance - Vivo's total revenues in Q4 2025 increased by 7.1%, with mobile service revenue growing by 7% and fixed services by 5.4% [7][8] - EBITDA rose by 8.1% year-over-year, with a significant 17.7% increase when excluding concession migration effects, resulting in an EBITDA margin of 42.9% [7][21] - Net income for 2025 reached BRL 7.2 billion, reflecting a double-digit growth, while free cash flow increased by 11.4% to BRL 9.2 billion [7][23] Business Line Performance - The postpaid mobile segment saw a 6.5% year-over-year increase, reaching 70.8 million customers, representing 69% of the mobile base [6][9] - Fiber connections grew to 7.8 million, with a footprint extending to 31 million homes, and a take-up ratio of 25.2% [11][12] - New business revenues surged by 27% over the last 12 months, now accounting for 12.1% of total revenues, driven by B2C and B2B solutions [9][15] Market Performance - Vivo's mobile base reached 103 million accesses, with a 0.7% year-over-year increase, and 5G customers grew to 23.1 million, improving the 5G take-up ratio to 27.8% [10][66] - B2B revenues amounted to BRL 13.5 billion, up 13.7% year-over-year, with digital B2B solutions growing by 29.5% [15][16] - The fiber market remains competitive, with Vivo increasing its market share from 18.8% to 19.3% in 2025 [77] Company Strategy and Industry Competition - Vivo is focused on enhancing its digital platform, integrating connectivity with a diversified ecosystem of services [15][17] - The company aims to optimize CapEx while maintaining leadership in infrastructure deployment, particularly in 5G and fiber [38][39] - Vivo sees potential for consolidation in the fiber market due to fragmentation, indicating a willingness to explore M&A opportunities [77][78] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in continued revenue growth, driven by effective customer retention strategies and the expansion of digital services [10][66] - The company anticipates stable net income growth for 2026, supported by reduced depreciation and amortization costs [31][32] - Vivo's commitment to sustainability and ESG initiatives remains a cornerstone of its strategy, with recognition in global rankings [17][18] Other Important Information - Vivo distributed BRL 6.4 billion to shareholders in 2025, achieving a payout ratio of 103.4% [24][25] - The company has approved a new share buyback program of up to BRL 1 billion, to be executed until February 2027 [25] Q&A Session Summary Question: Distribution strategy for 2026 - Management discussed the balance between buybacks, interest on capital, and capital reduction, emphasizing a commitment to distribute at least 100% of net income [29][30] Question: CapEx outlook for 2026 and competitive environment - Management highlighted ongoing CapEx optimization and planned price increases across various segments to enhance revenue [36][40] Question: Lease expenses reduction - Management explained the reduction in lease expenses due to ongoing renegotiations and a positive trend in lease costs [50][53] Question: Prepaid ARPU trends - Management noted improvements in prepaid ARPU driven by customer engagement strategies and migration to hybrid plans [56][58] Question: Mobile market share and B2B growth - Management confirmed stable mobile market share and strong growth in B2B revenues, particularly in digital services [66][68]

Financial Performance and Key Metrics - Vivo's total revenues in Q4 2025 increased by 7.1%, with mobile service revenue growing by 7% and fixed services by 5.4% [7] - EBITDA rose by 8.1% year-over-year, with a 17.7% increase when excluding concession migration effects, resulting in an EBITDA margin of 42.9% [21][7] - Net income for 2025 reached BRL 7.2 billion, reflecting a double-digit growth rate, while free cash flow increased by 11.4% to BRL 9.2 billion [7][23] Business Line Performance - The postpaid mobile segment saw a 6.5% year-over-year increase, reaching 70.8 million customers, representing 69% of the mobile base [6] - Fiber connections grew to 7.8 million, with a footprint extending to 31 million homes, and a take-up ratio of 25.2% [11] - New business revenues surged by 27% over the last 12 months, now accounting for 12.1% of total revenues, driven by B2C and B2B solutions [9] Market Performance - Vivo's mobile base reached 103 million accesses, with a 0.7% year-over-year increase, and 5G customers grew to 23.1 million, improving the 5G take-up ratio by 8.6 percentage points [10] - B2B revenues amounted to BRL 13.5 billion, up 13.7% year-over-year, with digital B2B growing by 29.5% [15] - The fiber market remains competitive, with Vivo increasing its market share from 18.8% to 19.3% in 2025 [75] Company Strategy and Industry Competition - Vivo is focused on enhancing its convergent offerings, with 62.7% of FTTH customers being convergent, and plans to drive more customers to the Vivo Total package [86] - The company aims to optimize CapEx while maintaining infrastructure leadership, with a CapEx to revenue ratio reduced to 15.6% [21] - Vivo sees potential for consolidation in the fiber market due to fragmentation, indicating a willingness to explore M&A opportunities [77] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about future net income growth, driven by stable EBITDA growth and reduced depreciation starting in mid-2026 [32] - The competitive landscape in mobile is stable, with Vivo planning price increases in line with inflation for various segments [40] - The company is leveraging AI to enhance operational efficiency and customer engagement, with expectations for significant cost savings [89] Other Important Information - Vivo's commitment to shareholder remuneration remains strong, with a payout ratio of 103.4% in 2025 and plans for BRL 7 billion distribution in 2026 [24] - The company has approved a BRL 1 billion share buyback program to enhance shareholder value [25] - Vivo's ESG initiatives have been recognized globally, reflecting its commitment to sustainability [17] Q&A Session Summary Question: Distribution strategy for 2026 - Management discussed the balance between buybacks, interest on capital, and capital reduction, emphasizing a commitment to distribute at least 100% of net income [29][30] Question: CapEx outlook for 2026 and competitive environment - Management highlighted ongoing CapEx optimization and plans for price increases in mobile services, indicating a stable competitive environment [36][40] Question: Lease expenses reduction - Management explained the reduction in lease expenses due to ongoing renegotiations and a favorable tenancy ratio, with expectations for continued improvements [50][53] Question: Prepaid ARPU trends - Management noted improvements in prepaid ARPU driven by customer engagement strategies and migration to higher-value plans [56][58] Question: Mobile market share and B2B growth - Management confirmed stable mobile market share and strong growth in B2B revenues, particularly in digital services [66][68]

Financial Performance and Key Metrics - Total revenues in Q4 2025 increased by 7.1%, with mobile service revenue growing by 7% and fixed services by 5.4% [6][7] - EBITDA grew by 8.1% year-over-year, with a margin of 42.9%, while excluding concession migration effects, EBITDA advanced by 17.7% [6][20] - Net income for 2025 reached BRL 7.2 billion, reflecting a double-digit growth, and free cash flow increased by 11.4% to BRL 9.2 billion [6][23] - The company paid out BRL 6.4 billion to shareholders in 2025, achieving a payout ratio of 103.4% [7][24] Business Line Performance - The postpaid mobile segment saw a 6.5% year-over-year increase, reaching 70.8 million customers, representing 69% of the mobile base [5][10] - Fiber connections reached 7.8 million, with a footprint extending to 31 million homes, and FTTH accesses grew by 12% year-over-year [11][12] - New businesses generated a 27% revenue increase, now accounting for 12.1% of total revenues, with significant contributions from B2C and B2B solutions [9][14] Market Performance - The mobile customer base reached 103 million, with a 0.7% year-over-year increase, and 5G customers grew to 23.1 million, improving the take-up ratio to 27.8% [10][11] - B2B revenues amounted to BRL 13.5 billion, up 13.7% year-over-year, with digital B2B growing by 29.5% [14][15] - The fiber market share increased from 18.8% to 19.3% year-over-year, with a net addition of 834,000 customers [77] Company Strategy and Industry Competition - The company focuses on convergence, with 62.7% of FTTH customers being convergent, and aims to drive more customers to the Vivo Total offering [86][89] - The competitive environment in the fiber market remains fragmented, with potential for consolidation to improve sustainability [78][79] - The company is committed to maintaining a disciplined capital allocation strategy while exploring opportunities for M&A to strengthen its fiber footprint [93][96] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about future net income growth, driven by stable EBITDA growth and reduced depreciation starting in mid-2026 [30][31] - The company is leveraging AI to enhance operational efficiency and customer engagement, with expectations for significant cost savings [90][91] - The management remains focused on optimizing CapEx and improving the ratio of CapEx to revenues while continuing to invest in infrastructure [36][37] Other Important Information - The company achieved recognition for its sustainability efforts, ranking among the top companies in various global assessments [16][17] - The board approved a new share buyback program of up to BRL 1 billion, to be executed until February 2027 [25] Q&A Session Summary Question: Distribution strategy for 2026 - Management discussed the mix between buybacks, interest on capital, and capital reduction, emphasizing a commitment to distribute at least 100% of net income [27][28] Question: CapEx outlook for 2026 - Management highlighted ongoing CapEx optimization efforts and the importance of maintaining a balance between infrastructure investment and revenue growth [35][36] Question: Competitive environment in mobile - Management noted a stable mobile market share and emphasized the importance of retaining customers and growing ARPU without engaging in price wars [94][95] Question: Lease expenses reduction - Management explained the reduction in lease expenses due to ongoing renegotiations and expressed optimism about future trends [50][54] Question: Growth in B2B segment - Management confirmed strong growth in B2B revenues and highlighted the importance of digital services in driving future growth [68][69]

Financial Data and Key Metrics Changes - Total revenues increased by 6.5% year over year, reaching R$14.9 billion, driven by mobile service revenues growing by 5.5% and fixed services by 9.6% [5][6] - EBITDA grew by 9% year over year, with a margin expansion to 43.4% [6][20] - Net income rose by 13.4% to R$4.3 billion, while free cash flow approached R$7 billion, with a margin of 15.6% [6][20] Business Line Data and Key Metrics Changes - Mobile postpaid segment grew by 7.3% year over year, now accounting for 68% of the total mobile customer base, which reached approximately 103 million connections [5][6] - Fiber business connected 7.6 million homes, a 12.7% increase year over year, with a total footprint covering 30.5 million homes [5][10] - New businesses accounted for 11.7% of total revenues over the last 12 months, up 2 percentage points year over year [7][12] Market Data and Key Metrics Changes - B2C revenues reached R$44.1 billion, up 5% year over year, with new businesses growing by 15.3% [11][12] - B2B revenues reached R$13.2 billion, up 15% year over year, driven by digital B2B growth of 34.2% [13] Company Strategy and Development Direction - The company focuses on diversifying and modernizing its revenue base to ensure sustainable growth in a competitive market [7][12] - Vivo aims to enhance its digital services and connectivity offerings, positioning itself as a comprehensive digital platform [12][40] - The company is committed to returning R$5.7 billion to shareholders by the end of September, reaffirming its focus on sustainable value creation [6][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the mobile service evolution despite a competitive environment, highlighting strong trends in postpaid growth and customer retention [24][48] - The company anticipates capturing cost efficiencies and synergies from the migration of concession-related assets, with benefits expected to ramp up by 2028 [39][59] Other Important Information - Vivo launched the Futuro Vivo Forest initiative aimed at environmental sustainability, which includes planting nearly 900,000 trees [15][16] - The company received multiple awards for its corporate governance and sustainability efforts, reflecting its commitment to shared values [16] Q&A Session Summary Question: Mobile services revenues deceleration - Management noted a 5.5% year-over-year growth in mobile service revenues, with postpaid growing 8% and prepaid declining by 7.6%, indicating a positive trend in prepaid [24][25] Question: Leasing efficiencies - Management discussed ongoing negotiations with tower companies to improve leasing costs, with expectations for positive trends in the coming years [28][59] Question: Prepaid trends and M&A appetite - Management highlighted a positive trend in prepaid services, driven by customer engagement and upselling, while expressing a cautious approach to M&A in the ISP space [34][37] Question: Competitive landscape in fiber business - Management acknowledged a competitive environment but emphasized strong performance in fiber revenue and customer acquisition, with a focus on convergence strategies [50][52] Question: CapEx evolution - Management indicated that CapEx is expected to continue its declining trend relative to revenues, even with the integration of FibraZio [52][54]

Financial Data and Key Metrics Changes - Vivo achieved total revenue of BRL 14.6 billion in Q2 2025, representing a 7.1% year-over-year increase, significantly outpacing inflation during the period [7][8] - EBITDA grew 8.8% year-over-year, reaching a margin of 40.5%, reflecting disciplined cost management and operational efficiency [7][20] - Operating cash flow reached BRL 7.3 billion, up 12.5% year-over-year, with a free cash flow yield close to 8% [7][23] Business Line Data and Key Metrics Changes - The mobile segment saw a 7% year-over-year growth in postpaid customers, now comprising 67% of the total mobile customer base [6] - Fiber connections expanded by 12.6% year-over-year, reaching 7.4 million accesses, driven by the Vivo Total conversion plan [6][11] - New businesses represented 11.2% of total revenues, a 1.7 percentage point increase year-over-year, with OTT subscriptions growing 34.5% [9][13] Market Data and Key Metrics Changes - The B2B segment recorded a 13.3% year-over-year growth, with digital B2B services growing 31.3% [14] - The company reported a strong performance in mobile services, with postpaid revenues increasing by double digits [46] Company Strategy and Development Direction - Vivo's strategy focuses on high-value offerings and service convergence, with a strong emphasis on customer experience and innovation [10][12] - The company is exploring M&A opportunities to enhance its network and service offerings, particularly in fiber [32][78] - Vivo aims to maintain its leadership in sustainability, being recognized for its ESG initiatives [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong financial results despite macroeconomic challenges [3][6] - The company anticipates continued growth in both mobile and fiber segments, with a focus on reducing churn and enhancing customer loyalty [94] Other Important Information - Vivo has already paid BRL 5 billion to shareholders in 2025, reaffirming its commitment to distribute at least 100% of net income [24] - The company completed a reverse stock split followed by a forward stock split, which significantly increased average daily trading volumes [24] Q&A Session Summary Question: What can we expect regarding leases and the FiBrazil integration? - Management indicated that lease payments have stabilized, with a focus on optimizing costs and capturing synergies from the FiBrazil acquisition, which is pending regulatory approval [27][30][35] Question: How is the fiber to the home ARPU evolving? - The reduction in ARPU is attributed to the growth of the Vivo Total customer base, which, while diluting ARPU, has positively impacted churn rates [40][42] Question: What is the competitive landscape in mobile? - The mobile market remains competitive, but Vivo's strategy focuses on upselling and maintaining low churn rates, with postpaid revenues showing strong growth [46][48] Question: Can you comment on financial expenses and OpEx? - Financial expenses were impacted by seasonal effects, but net income continues to grow year-over-year. OpEx increases were primarily due to personnel costs and G&A expenses, which are expected to remain controlled [52][58][60] Question: How is the migration from copper to fiber progressing? - The migration is set to accelerate, with significant cash effects expected from the sale of copper and real estate assets in the coming quarters [66][70] Question: What are the plans for increasing cross-selling? - Vivo is focusing on upselling digital services and enhancing customer engagement through its app, with significant growth opportunities identified in both B2C and B2B segments [85][89]