Telefonica Brasil S.A.(VIV) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The reported net income for Q1 2020 was BRL 1.1 billion, a reduction of 14% year-over-year due to increased depreciation and income tax costs, partially offset by continuous cost discipline and EBITDA expansion [46] - Free cash flow grew 81% year-over-year, reaching BRL 2.1 billion, driven by recurring EBITDA expansion and lower financial costs [48] - Recurring EBITDA margin expanded to 40.9%, an increase of 1.2 percentage points year-over-year, with recurring costs reduced by 3.3% [39][40] Business Line Data and Key Metrics Changes - Fiber revenues, including FTTH and IPTV, expanded by 38.9% year-over-year, now representing 24% of all fixed revenues [18] - The mobile postpaid subscriber base grew by 6.6% year-over-year, reaching 43.7 million customers, which constitutes 58% of total mobile access [17] - Prepaid revenue showed a decline of only 0.5%, marking the best yearly performance since 2015, driven by improved value propositions [23] Market Data and Key Metrics Changes - Vivo expanded its mobile market share to 33%, the highest since October 2006, despite the COVID-19 crisis [24] - FTTH access increased by 13% year-over-year, reaching 2.7 million accesses, which now represents 39% of the broadband customer base [30] - The company entered 22 new cities with FTTH in Q1, totaling 186 cities, while improving home connector penetration to 22.7% [32][34] Company Strategy and Development Direction - The company is committed to expanding its FTTH network and digitalizing customer care, aiming to enhance connectivity solutions for both businesses and households [15][29] - The strategy includes leveraging partnerships for fiber deployment and focusing on digital channels to improve customer experience and operational efficiency [35][94] - The company plans to continue its investments in advanced technologies, with 68% of CapEx allocated for growth initiatives [44] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of maintaining network quality and customer connectivity during the COVID-19 crisis, implementing various support measures for customers [10][12] - The company remains optimistic about its fiber results driving sustainable growth despite the ongoing challenges posed by the pandemic [18] - Management acknowledged the uncertainty surrounding the economic environment but expressed confidence in the company's strategy and ability to adapt [99] Other Important Information - The company has implemented measures to ensure employee health and job security during the pandemic, including remote work and health assistance [13] - The company is utilizing big data capabilities to assist government efforts in combating COVID-19 through mobility heat maps [14] Q&A Session Summary Question: Regarding the agreements between Telefónica and TIM - Management confirmed that the agreement has received approval from ANATEL and CADE, with implementation expected in the second semester of the year [53][55] Question: Update on the due diligence of Oi Móvel assets - Management stated that due diligence is progressing, but specific timelines cannot be provided due to the complexity of the process [58] Question: Changes in retail strategy for handsets and accessories post-COVID - Management noted that physical store closures impacted handset sales, but e-commerce is expected to gain relevance moving forward [62] Question: Trends in results for April amid COVID impact - Management indicated that results in April showed improvement compared to March, with a gradual recovery in customer engagement [64][68] Question: Sales and marketing expenses in relation to COVID - Management attributed cost reductions primarily to digitalization and simplification initiatives rather than COVID-related factors [74] Question: Risks of downgrading in postpaid plans - Management does not foresee significant downgrading in postpaid plans, citing the value-added services and ongoing demand for mobile connectivity [78] Question: Drop in ARPU and competitive impacts - Management acknowledged that the drop in ARPU was influenced by tough comparisons from the previous year and store closures impacting postpaid sales [84] Question: FTTH growth and market share dynamics - Management highlighted strong FTTH net ads and ongoing expansion efforts, while acknowledging competitive pressures in the market [88] Question: CapEx flexibility and potential cuts - Management confirmed ongoing FTTH expansion plans while also exploring partnerships to mitigate CapEx impacts from economic conditions [94] Question: Update on 5G auction rules and regulatory environment - Management indicated ongoing discussions with regulatory bodies and uncertainty regarding the timeline for 5G auctions [103] Question: Update on franchising and partnership with American Tower - Management reported that the partnership with American Tower is on schedule, while the impact of COVID on franchising initiatives remains uncertain [115][116]