Telefônica Brasil S.A. (NYSE:VIV) Q1 2025 Earnings Call Transcript

Telefônica Brasil S.A. (NYSE:VIV) Q1 2025 Earnings Call Transcript May 13, 2025

Operator: Good morning, ladies and gentlemen, welcome to Vivo’s First Quarter 2025 Earnings Call. This conference is being recorded, and a replay will be available at the company’s website at ri.telefonica.com.br. The presentation will also be available for download. This call is also available in Portuguese. [Operator Instructions]. [Foreign Language]. [Operator Instructions]. Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company’s business prospects, operational and financial projections and goals are the beliefs and assumptions of Vivo’s Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur.

Investors should be aware of events related to the macroeconomic scenario, the industry and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Present at this conference, we have Mr. Christian Gebara, CEO of the company; Mr. David Melcon, CFO and Investor Relations Officer; and Mr. João Pedro Soares Carneiro, IR Director. Now I will turn the conference over to Mr. João Pedro Soares Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference.

João Pedro Soares Carneiro: Good morning, everyone, and welcome to Vivo’s first quarter 2025 earnings call. Christian Gebara, our CEO, will walk us through Vivo’s performance and connectivity and digital services as well as present our ESG highlights for the period. Then David Melcon, our CFO, will give more details on cost and CapEx, free cash flow generation, shareholder remuneration, and lastly, an update on our fixed voice migration process. With that, let me turn the call over to Chris.

Christian Gebara: Thank you, João. Good morning, everyone, and thank you for joining us today. The first quarter of 2025 was marked by growth both in operations and financially. Starting with our postpaid service, we reached over 67 million customers, achieving a yearly growth of 7.7%. In fiber, we continued the trend of double-digit growth, increasing our customer base by 12.9%. Our total revenues increased 6.2% of mobile service revenue growing 6.5% and fixed revenues expanding by 6.2%. This consistent evolution showcase the growing demand for our services. Profitability remains a key focus with EBITDA increasing 8.1% during the period. Our operating cash flow reached BRL3.8 billion in the quarter, growing 12.7% year-over-year, accounting for almost 27% of our total revenues.

Furthermore, our net income grew remarkably by 18.1% year-over-year, reaching BRL1.1 billion. We began 2025 with a solid distribution to shareholders, with payments already amounted to BRL2.6 billion, this commitment underscores our confidence in sustaining strong financial performance and meeting our guidance for the upcoming years. Moving to Slide 4, we display how our revenues are outpacing inflation driven by double-digit growth of our flagship services. Our total revenues for the first quarter of 2025 reached BRL14.4 billion, with mobile service revenue being led by postpaid and fixed revenues by FTTH and B2B digital services. We highlight our postpaid and fiber revenues, which are the cornerstones of Vivo’s successful convergence story.

Together, they represent 73% of our service revenues, with both growing above 10%. Additionally, our new businesses are consistently gaining share in our portfolio and significantly contributing to our growth. This underscores our strategy of moving away from being solidly a connectivity provider to a hub of innovative services. These solutions drive net additions and enhance our market positioning, assisting us in meeting the demands of our customers. On the next slide, we dive into the impact of our successful performance in mobile. Our total mobile access reached BRL102.4 million in the quarter with the hybrid plus pure postpaid access growing by 7.6% year-over-year to over 48 million customers. This growth features the success of our up-selling initiatives, which have effectively transitioned a significant number of customers from prepaid to hybrid and from hybrid to pure postpaid plans.

Our 5G access have doubled since March 2024. This widespread adoption underscores our commitment to providing cutting-edge technology to our customers. Moreover, our postpaid churn has remained very low over the past year, reflecting our ability to retain high-value customers despite increasing prices. This reduced churn coupled with a steady increase in mobile ARPU highlights the positive financial impact of our strategic focus on postpaid services. Overall, our strategy of migrating customers to better plan is translating into customer loyalty and ensuring we remain at the forefront of the industry. On Slide 6, we provide our insights on the performance of our fiber operations and convergence with postpaid. We have categorized our FTTH line into three segments: Vivo Total customers convergent customers not in Vivo Total plans and stand-alone fiber customers.

Vivo Total is ramping up its shares in our FTTH customer base, achieving a remarkable growth of 77.4% year-over-year. Meanwhile, the other two categories are migrating to our fully convergent plans, bolstering both our fiber and mobile businesses as the lifetime value of Vivo Total’s users is much higher than that of customers in stand-alone offers. Recently, we introduced new Vivo Total plans that include partnerships with leading OTT platforms like Netflix, Globoplay and Disney+, adding even more value for our subscribers. In terms of homes passed with FTTH, we expanded to almost 30 million homes while boosting the rate of net additions. This achievement is driven by the lowest FTTH churn rates we have ever seen and by our commitment to offering the best services on the market.

Moving to the next slide, where we detail our B2C new businesses and the positive impact on average spend and lifetime value. Vivo’s 57.2 million digital customers generated over BRL43 billion in revenues in the last 12 months with an evolving monthly average of BRL62 [ph] per customer. Our new businesses segment has shown incredible performance across various industries, growing 18.6% year-over-year, reaching BRL1.7 billion and representing 3% of our total revenues. This growth confirms our commitment to diversifying our offerings and meeting the various needs of customers. Furthermore, we have made significant strides in the market of accessories for smartphones and other devices. On March 21, 2025, Vivo acquired i2GO for up to BRL80 million, reinforcing our presence in this segment alongside OVVI.

These efforts are part of our broader strategy to enhance customer lifetime value and ensure that our customers continue to benefit from our comprehensive and differentiated value proposition. Moving to Vivo’s B2B performance on Slide 8, we registered another double-digit growth, exemplifying how our focus of being a one-stop shop for businesses of all sizes is paying off, with BRL12.3 billion in revenues. B2B already represents 22% of our business. This outstanding performance is largely driven by our digital B2B segment that saw a yearly growth of 25.5% and now accounts for 7.7% of our revenues. Notably, the Cloud segment experienced a significant increase of 38% year-over-year as Vivo continues to prioritize the digitalization of customers.

The success of Vivo Empresas highlights our position as the leading technological partner of Brazilian companies, serving 1.8 million B2B clients with over 5,000 sales representatives who market and replicable portfolio that spans from mobile and fixed connectivities to state-of-the-art digital solutions and equipment. Now let’s move to our ESG highlights for the period. I’m excited to share that Vivo continues to excel in sustainability and social responsibility. We were recognized as the leading Brazilian company in the Dow Jones Best-in-Class Index and placed 6th among the Telcos in the world. Additionally, we are prominently featured in B3’s Corporate Sustainability Index, highlighting our leadership among Brazilian companies, the ESG practice as well as being part of CDP’s Climate A list highlighting our transparency and climate ambition.

On the environmental front, our Futuro Vivo platform showcases our commitment to environmental protection with a special focus on the Amazon Rainforest. We also launched a campaign at Lollapalooza 2025 called Raízes Vivas, which provided immersive experience on native Brazilian cultures as well as raise environmental awareness. In terms of diversity, our train new program has reached a new milestone with 56% of selected candidates being black employees and 11% having a disability. Vivo was also recognized as number one in ANATEL’s accessibility ranking for our efforts to support customers with disabilities. Lastly, I would like to invite you to check out on our Investor Relations website, the main ESG highlights of 2024. With that, I hand the floor over to David to comment on our financial performance.

Thank you.

David Melcon: Thank you, Christian, and good morning, everyone. Turning to Slide 10, we present the evolution of our costs. We began 2025 with costs growing less than inflation for the period. reinforcing our ability to maximize cost efficiencies. Our cost of services and goods sold increased by 4.8% year-over-year, where the cost of services grew 7.7% driven by the greater demand of our B2B services and the cost of goods sold remained almost flat as we are constantly improving the margin profile of the products we sell. Cost of operations grew 5% year-over-year with the evolution of all main lines under control. The Commercial & Infrastructure expenses returned to a normalized expansion level in the first quarter as it was expected.

Additionally, the growth seen in personnel and G&A was completely offset by the decrease of 3.6% year-over-year in provision for bad debt, thanks to improved collection processes and essentiality of our service. Moreover, the Other Revenues and cost line registered and expense in the quarter, mainly driven by reduced sales of copper. Looking ahead, it’s important to mention that the sale of copper and real estate will gradually resume in the coming quarters, providing a positive support to this line and to our result as a whole. Overall, our ability to maintain costs growing less than inflation led to an EBITDA margin expansion of 70 basis points. On Slide 11, we detail our increasing CapEx efficiency. In the first quarter this year, we observed a slight year-over-year decrease in investments with a significant reduction in CapEx over sales by 0.8 percentage points.

We also present qualitative research on our investment allocation as most of our mobile CapEx was dedicated to expanding our 5G presence, which now cover 62% of the Brazilian population across 519 cities. On the other hand, over 90% of our fiber CapEx is focused on connecting homes, thus accelerating our network monetization. We emphasize that around 76% of our investments are specifically allocated to business growth as we have a wide range of opportunities to generate shareholder value. Thanks to our CapEx efficiency, our operating cash flow have shown impressive growth, increasing 12.7% year-over-year and 15.4% when excluding leasing effects. Margins are also showing a positive trend, up considerably in both metrics. This consistent focus on efficiency and strategic investments position us well for continued financial health and operational success.

Turning to Slide 12. We present our outstanding net income growth at low debt level that protects us from high interest rate scenarios. Starting on the left, net income for the quarter increased by 18% to BRL1.1 billion, benefited by our strong operating performance and optimize financial results. Our financial debt remains under control with a net cash position of BRL2.7 billion at the end of March. Considering leases, net debt amounts to BRL12.1 billion, equivalent to 0.5 times the EBITDA over the last 12 months. Our cash flow generation remains extremely robust despite a year-over-year decrease. This annual comparison was mostly impacted by a timing mismatch related to the payment of regulatory fees that the previous year were partially paid in April, and this year are fully paid in March.

Our last 12 months free cash flow yield remained close to 10%. Our free cash flow accounted for 50% of the revenues were recorded in the quarter. These results highlight our continued focus on maintaining a strong financial position while generating substantial cash, ensuring we have the flexibility to invest in high-return projects and provide attractive shareholder returns. Turning to Slide 13. We discussed how we are meeting our shareholder remuneration guidance of distributing no less than 100% of our net income in the coming years. By the end of April 2025, we had already paid out BRL2.6 billion to shareholders through interest on capital and share buybacks. Additionally, we are committed to distributing another BRL2 billion from the capital reduction approved in December last year, beginning our 2025 remuneration to BRL4.6 billion so far with more to come in the year.

We also focus on increasing the liquidity of our stock. We are proud to announce that our stock is one of the top 50 most liquid shares in the Brazilian Stock Exchange raising 17 position in the B3 Negotiability Index since March last year. This ensure is of trading and a strong market presence. Lastly, as part of our strategy to enhance liquidity, we successfully completed an operation or a reverse stock split followed by a forward stock split on April 14 this year, doubling our share count and therefore, positioning a share nominal price on a more attractive range. This will keep you update on the final step of this operation. Moving on the last slide of our presentation, we are excited to share the successful conclusion of our migration to the authorization regime of our fixed voice service in the state of Sao Paulo.

This is a key moment for Vivo and the telecommunication sector in Brazil. On April 11, this year, Vivo and ANATEL signed a Single Term of Authorization, officially transitioning from concession regime to authorization. This milestone marks the beginning of a new area where we can fully leverage the benefit of this transformation. Financially, this transition unlocks significant value. We anticipate around BRL3 billion from the sale of copper based on current market prices, net of extraction costs. Additionally, we estimate to capture around BRL1.5 billion from the sale of a real estate asset net of demobilization costs. We also foresee the potential for recurring savings through cost efficiency related to the reduction of maintenance and network expenses mainly due to the complete decommissioning of our copper network and real estate premises.

These savings and benefits will be realized gradually reaching the full potential by the end of 2028, positioning Vivo for sustained growth and increasing profitability. The next step of the transition involves migrating copper-based fixed voice services to advanced technology that is already underway. All in all, this achievement is an evidence of our commitment to innovation and excellence, ensuring that we continue to provide unparalleled services to our customers across Brazil. Thank you. And now we can move to the Q&A.

Q&A Session

Operator: [Operator Instructions]. Our first question comes from Bernardo Guttman with XP.

Bernardo Guttman: Hi good morning everyone. Thanks for taking my questions. My first question is about the sustainability of margins. You had a solid margin increase this quarter. What are the key efficiency levers the company is working on to sustain or even expand margins? And my second question is on prepaid. We saw a significant drop this quarter, and it would be helpful to understand how much of that was driven by migration versus lower recharge volumes? What are the main reasons behind this weaker performance? Thank you.

Christian Gebara: Hello Bernardo, I will start with the prepaid. Yes, the main reason behind is the migration from prepaid to hybrid plans, so as you saw, we did it very aggressively. And so we reduced the prepaid customer base. And always, there is like a negative ARPU impact on that because normally, we migrated customers with more spending power to postpaid plans. And so that’s in the end it’s impacting the revenues in the prepaid. But if you look in the combined way, the evolution is very positive. And also, if you see how much postpaid is already representing also out of the BRL9.2 million that we presented this quarter as mobile service, we already have almost BRL8 billion in the postpaid revenues. So that’s the trend and the trend of continue to migrate.

I think we’ve been very successful doing so. And that’s the main reason behind the evolution of the prepaid revenues. And the EBITDA, as it was a very good quarter, as you just described, an increase of 8.1% in the absolute number of our EBITDA, reaching BRL5.7 billion. Here is, of course, there is the positive performance of our revenues. No, so we’ve been able to capture this revenue growth reducing costs. Now, I think here, the main reason is digitalization, both in the customer care and back office tasks that we are incorporating a lot of technology in AI, for instance, it’s part of it. But also we’ve been also very good in using our app, now that we reached 27 million users of our Vivo app that is driving not only customer care, but also sales.

There’s a lot of sales mostly of our migration is done through the app. We’re also increasing the sale of fiber. And we are also, as we described here also before, there is a lot of OTTs that we sold, and most of them are sold also through the app. So digitalization is still there’s room to grow. So we believe there is a lot to be still captured in our effort to reduce cost through digitalization and revenues continue to grow. So if you look also the – you asked about EBITDA, but even operating cash flow, that’s positive because the new business that represents more than 10%, we are growing sometimes is lower margin with no CapEx expenditure. So we are very confident that we are following the right strategy to continue to increase everything above inflation.

Bernardo Guttman: Very clear. Thank you, Christian.

Christian Gebara: Thank you.

Operator: Our next question comes from Marcelo Santos with JPMorgan.

Marcelo Santos: Hi good morning, Christian and David, thanks for taking my questions. The first question is regarding, if you could provide a bit more color on your back book price increases this year, how did this compare to the last years, like, I don’t know, maybe timing, magnitude, percentage of the base effect. So that will be the first question, some more color on these price increases. And the second question is, if I could get your current stance on M&A. So we see that you have been – sorry, can you hear?

Christian Gebara: Yes.

Marcelo Santos: The second question would be just the current stance on M&A. So you have been very active on like smaller deals with digital services with something in the broadband area also be considered by Vivo? Thank you.

Christian Gebara: So Marcelo, there is a lot of – you asked about the back book and also just to remind everyone, our front book, we made price adjustments in February 2025. So there was around 7.7% in postpaid and for brand, 7.3% in hybrid and 6.7% in Vivo Total. So that was the front. Going to the other one. Also, and postpaid hybrid. We started, now the price adjustment in the back book in part of our existing customer base in April. So we did around 78% of our customer base of postpaid, a 5.7% increase. in – so 78% of the pure postpaid, 5.7% in April. So you don’t see these numbers in March on this quarter. And then in hybrid, we did at 64% of our customer base, 7.2%. Okay in fiber, we did January, we applied an average price adjustment of 4.5% to 14% of our customer base.

We do more in June. And Vivo Total with the 2.9% of 100% of our customers in the first quarter of 2025. So compared to what we did last year, it’s – the percentage is smaller than because the incremental that we had next year was a little bit higher, but that’s what we did. So some of it is not still capture because it was in April, and most of the postpaid and hybrid and as part of the increase will be also done, as I said, in August for the – for postpaid and hybrid what we didn’t do in April and also in June for fiber that we didn’t do in January. So that’s the summary of – so the M&A can I go to the second one, Marcelo?

Marcelo Santos: Yes, very, very comprehensive answer on the first. Thank you.

Christian Gebara: Thank you. So yes, we are looking both small M&As and digital services. So as we just described, we bought IPNET. That was the one in cloud for B2B. We bought i2GO in accessories for smartphones and other devices. Yes, we are always looking for consolidation in the fiber market. We – there are different type of companies, small, mid-sized ones. Some of them are very regional, very local. Others are ready with a national footprint. And here, again, we need to focus on those that the overlap is not that high. The quality of the network is the one that we want and also the price point that is attractive for us. Now we’ve been saying that Homes Passed or average CapEx is BRL150 to BRL200 to connect is BRL800.

So in the year, the deal is more in the CapEx of connecting customers. We’ve been doing that very effectively. We’re expanding our footprint in the last quarter around HPs now, Homes Passed more than 500,000 – and we are connecting, we had the net adds of 211,000 fiber customers, continue to be No. 1, strong leadership in market share of net adds and reducing churn. So again, we do believe that there is room for consolidation, but we haven’t found so far a target that would comply with all the criteria that I just described to you.

Marcelo Santos: Right. Crystal clear. Thank you.

Christian Gebara: Thank you, Marcelo.

Operator: Our next question comes from Gustavo Farias with UBS.

Gustavo Farias: Morning everyone. Thanks for taking my questions. I have two on my end. The first one about the concession migration. We didn’t see it happen in Q1, but given the migration underway, do you anticipate any pressure on margins or CapEx in the short-term as a consequence? And the second one, looking at cash flow. If you could bring more color on the dynamics of leases and working capital, we saw in Q1 and if that should normalize in the full year? Thank you.

Christian Gebara: So Gustavo, no, there is no pressure on the financial indicators that you just described for the migration of concession to authorization, Actually, we decided to give you more color on what we expect of the positive impact of the sale of copper and the sale of real estate. So we estimated based on the quantity of corporate that we have, the quality of the corporate that we extract, and that’s why we gave this number of BRL3 billion starting this year, but with maybe the highlight of the impact will be 26%, 27%. And the same is real estate, now that we are talking about, say, of different type of real estate that we have. Depending on the migration that we have to make on the customers that still copper to fiber.

And – but anyway, very positive impact, and there is all the numbers that we just presented, that we just presented the over net of all the costs involved in migrating removing equipment from real estate and also doing distraction of the copper. So no other impact, as we just said before. Regarding free cash flow, Dave, you follow.

David Melcon: Yes. Hi, Gustavo. So regarding the question on free cash flow. I mean during the last few years, we have constantly show a very strong cash flow However, if we look across quarters, there is always some rationality [ph]. This quarter, we have a strong free cash flow margin of almost 15%, but the working capital is mainly impacted by some delay phasing of payments that have to do with regulatory taxes that the previous year will end up paying in April. And this year, we pay in March. That is something that should be compensated in the coming quarters. Regarding the – looking evolution the leases, the first comment I want to make is that if you look to EBITDA and EBITDA after leases, you see that both are growing very strongly, 8.1% both.

However, when you look to the payments, there is always, again, some volatility, and we are keep negotiating with the towers companies better conditions and sometimes that requires some cash payments. So it’s difficult to analyze the effect on one quarter for the last 12 months. But in this particular quarter, if you look to the total amount we pay in terms of principal and interest, we paid BRL1.249 billion that even though it’s higher than the previous year, this number is lower than the last two quarters. This gives you an idea of the trends that we might be able to achieve for the coming quarters. And just the last comment here is that we have some specific initiatives in place to reduce the costs have to do with tower leases and that should benefit future trends.

Gustavo Farias: Very clear. Thank you very much.

David Melcon: Thank you.

Christian Gebara: Thank you.

Operator: Our next question comes from Lucca Brendim with Bank of America.

Lucca Brendim: Hi, good morning, everyone. Thank you for taking my questions. I have two on my side. The first one is a follow-up on Bernardo’s question. He asked about what happened to prepaid in the first quarter. And what I wanted to understand is what do you expect for prepaid going forward? Are you guys seeing any space for price hikes in prepaid? Or is it still difficult? And in terms of revenues, what can we expect? Is this the level of decline we should expect for the remainder of the year? Should we see an improvement? How are you looking at this? And the second one, regarding broadband, how are you seeing pricing dynamics. We continue to see other competitors also having some trouble increasing offers in the front book. So how do you think this should be going forward? Do you see also for price hikes in the front book for broadband? Thank you.

Christian Gebara: So prepaid to, we believe it’s going to keep trend is not going to go worse. Always there is like opportunity for pricing as we have been doing in hybrid on postpaid, but I cannot tell you about any decision that we may take commercially speaking. So we’re going to continue working very hard on migrating customers, the best customers to hybrids. We’ve been doing that in a very good way. So they need to continue with the same strategy. and always trying to offer new services even for prepaid. So we’re expanding entertainment, we’re expanding health, we’re expanding financial services like insurance. So we are also working a lot on the CRM of prepaid to be able to capture more value out of not only the traditional core but also expanding the sale of digital service to this customer base as well.

So what we’re seeing is that we are gradually increasing customers that are recharging with us, so we can offer more and more benefits as well to keep loyalty. So we are doing many benefits with Vale Bonus a sample of one that just partnership with them giving points to customers who have a higher top-up with us and remain recurring. We remain with the same recurrence. So that’s part of the strategy. I cannot share a lot more about our commercial decisions for the future. But again, the migration will be the driver for us to keep customers in the – with the recurrence of the hybrid. Here, I don’t know the second question was about pricing. About sorry, can you repeat the second one?

Lucca Brendim: Yes. On the dynamics of pricing for broadband going forward, if you see space for front book offers and how you’re seeing also the competition in…

Christian Gebara: Sorry, continue – because I was, please – yes, please go ahead. Sorry, Lucca.

Lucca Brendim: Okay. Is about the dynamics for the pricing for broadband going forward? How do you see it on your end and also on competition…

Christian Gebara: Yes. I think from – we have a slightly different strategy from competitors. As I said, in January and January this year – we are just 4.5%, 14% of our customer base and may increase the second round in June. But as I said, also, Lucca, 87% of the sales that we have in our stores that represent an important part of the sales that we have with fiber. We are doing Vivo Total. So we are driving the market to a different dynamics. We are very focused on convergence. And of course, we are also selling with higher speeds. Now we are launching – now we have like the 600 went 700 now in some areas we are offering was also 1 giga as a speed. We are expanding also Wi-Fi with more devices when WiFi 6 as also differentiation of our offering.

So it’s difficult for me to answer in one line, what’s going to be our strategy is a very segmented strategy driven by the best experience of Wi-Fi and also with convergence. So I think we’ve been very positive at achieving that. And so that’s why our revenues in fiber – it already represents almost BRL2 billion of our quarter revenues, and it’s growing over 10%. That’s the same growth that we have also in postpaid. So the combination of the two is what is driving our revenues up and we will continue being very segmented and precise in the price increase, always benefiting customers who have more services with Vivo.

Lucca Brendim: Very clear. Thank you.

Christian Gebara: Thank you. And the front book also increased price. So that’s also important to highlight so. Thank you.

Operator: Our next question comes from Vitor Tomita with Goldman Sachs.

Vitor Tomita: Hello, good morning all and thanks for taking our questions. Two from our side. The first one is on the migration. Now that you have – now that you are starting to migrate concession customers to newer technology, to prompt them to migrate before dismantling the networks. Any initial view on how well that is being received initially on how it are to migrate and the base at which you are planning to go over these migrations. And our second question would be a bit of a follow-up on the fiber point. Besides the pricing point, do you see – sorry, any updates on your growth strategy for the fiber segment in terms of potential expansion of Homes Passed? Do you still see much room to expand coverage there either organically or by M&A as you discussed in another question? Thank you.

Christian Gebara: So Vitor, it’s been very successful that we are piloting a lot of migrations and it’s been very successful. As I said before, we have 1.2 million customers in copper – in basically voice because the ones that is still in xDSL is a very small part of it is we’re talking about 155,000 customers. So the ones that are with voice, when we have fiber, we’ve been working in a very industrialized model to migrate customers with minimal hassle to from copper to fiber. So very positive that we can do that in a very fast way. So up to now, it’s doing very well, and then we may give you more results in the next quarters. So very positive about our ability to do it very fast. So that’s why we are putting the highlight of the impact in 2026, 2027 because with our ability to migrate customers and liberate copper and the real estate that is assigned to provide these services.

Regarding expansion of our fiber network, we continue in a very accelerated pace. We had 26.8% in the end of first quarter. Now we have 29.6 million Homes Passed. Last quarter or the first quarter, the one that represented results, we built 500,000. We continue to penetrate our network, and we had accelerated net adds in the first quarter compared to the first quarter of last year. And we continue to build, but of course, we are very attentive of M&A opportunities. Again, Vitor it is not easy to find what we are looking for. So while we don’t find we built, if we find we may stop building so much. But at the moment, we continue building. But I think there are opportunities that we’re looking at them with a lot of focus and again, they need to follow and comply with the criteria that we have, overlap, technical quality of the network, but also of the CPE because if I need to replace all the CPEs, my CapEx is much more concentrated in CPEs and finally, the right pricing.

Vitor Tomita: Very clear. Thank you very much.

Operator: Our next question comes from Phani Kanumuri with HSBC.

Phani Kanumuri: Hello, can you hear me?

Christian Gebara: Yes, Phani. Please go ahead.

Phani Kanumuri: Yes. Thanks everyone for taking my question. So the first question is regarding competition in mobile. Are you seeing some kind of increased competition from regional operators or new sale at least on a regional basis? My second question is regarding the use of cash that you have from the – from sale of copper and real estate, what are the planned usage that you have for the cash that you’ll get over the next three years? Thank you.

Christian Gebara: So Phani, the mobile is always very competitive. But I think as we highlighted, now, we’ve been growing very positively in additions of postpaid. In the number of access of 5G, we also gave a good number that we are also getting going up. So if you look, for instance, now postpaid access compared to the other year, we grew 7.6%. In M2M and Dongles, we grew at 8%. We have a reduction prepaid, of course, because that’s due to the migration. No ARPU also is increasing of 3.5%. And the postpaid churn is again at the level of 1%. And our ability to migrate customers from prepaid to hybrid to hybrid to prepaid, postpaid to continue very positive and very accelerated. Now at what we migrated one year ago was increased by 18.3%.

So yes, it’s very competitive. But again, I think we have a right strategy very well segmented with all the portfolio that can give to customers a selection that is not only based in the mobile, it’s merged with the fixed, it’s merged with the digital services, and it’s merged also with the quality and the customer experience that we give in all points of interaction that we have with our customers. So that’s what we have. And of course, we have also MVNOs coming up, but I think Vivo had can differentiate itself by the superior quality and perception and value proposition that we offer. That’s what I would answer about the mobile. The second one was about the determination. Yes. Here, what I can share with you Phani is that we’re going to keep remunerating our shareholders a minimum 100% of net income.

So last year was above 1.05%, this year, we’re going to follow with the guidance of minimum 100%. Net income increased already 18%, we made many payments of interest this year and already also with share buyback. We already announced some other interest on capital for next year. So like for just this year in 2025, we already paid shareholders BRL2.6 million, BRL2.2 million in outstanding capital declared in 2024 that we paid in April. And we have 226 of share buybacks. And on July, we will pay BRL2 million of capital reduction. And we already declared, as I said, BRL500 million that we’re going to pay before April 2026. So that’s what we’re going to do with the proceeds. And again, we want to also have the flexibility, as was asked before, to continue to be active in M&A in digital services and why not in fiber assets, we find something that comply with the criteria that I described before.

Phani Kanumuri: Thank you. Very clear.

Operator: The question-and-answer section is over. We would like to hand the floor back to Mr. Christian Gebara for the company’s final remarks.

Christian Gebara: So thank you again for everyone to participate in our call. As you could see very strong results in line of our strategy of growing the new technologies, not highlighting that more than our 70% of our revenue. Service revenues is related to mobile and fiber. And in both, we are growing above 10%. Digital services in general, B2C B2B more than 10% and also with the double-digit growth. And again, with EBITDA growing way above inflation. And again, as we described here in the concession with good returns on the sale of copper and real estate for the next quarter. So if you have any additional doubt, please reach us and our investor relationship is also at our disposal. Thank you, and talk to you soon.

Operator: Vivo’s conference is now closed. We thank you for your participation, and wish you a nice day.