Telefônica Brasil S.A. (NYSE:VIV) Q4 2025 Earnings Call Transcript

Telefônica Brasil S.A. (NYSE:VIV) Q4 2025 Earnings Call Transcript February 23, 2026

Telefônica Brasil S.A. beats earnings expectations. Reported EPS is $0.22, expectations were $0.17.

Operator: Good morning, ladies and gentlemen, and welcome to Vivo’s Fourth Quarter and Full Year 2025 Earnings Call. This conference is being recorded, and the 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] I would like to inform you that all attendees will only be listening to the conference during the presentation, and then we will start the Q&A session when further instructions will be provided. 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, depends 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 actual 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. Jo o Pedro Soares Carneiro, IR Director. Now I’ll turn the conference over to Mr. Jo o Pedro Soares Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference.

João Carneiro: Good morning, everyone, and welcome to Vivo’s Fourth Quarter and Full Year 2025 Earnings Call. Today, our CEO, Christian Gebara, will start by commenting on Vivo’s performance and connectivity and digital services as well as present our main ESG accomplishments for the year. Then David Melcon, our CFO, will walk us through Vivo’s controlled cost and CapEx evolution, free cash flow generation, profitability and shareholder distribution during 2025. With that, let me turn the call over to Christian.

Christian Gebara: Thank you, Jo o. Good morning, everyone, and thank you for joining us today. I’m pleased to share that Vivo’s 2025 performance was remarkable. We grew above inflation in all key lines, driven by solid commercial momentum and our continuous focus on offering the best customer experience in Brazil. Starting with mobile, the postpaid segment was a major highlight. Accesses expanded 6.5% year-over-year, reaching 70.8 million customers, now representing 69% of our mobile base. In fiber, we closed 2025 with 7.8 million homes connected and a footprint that extended to 31 million homes. This advance coupled with our commitment to quality and customer satisfaction reinforced our leadership in the fiber market and allowed us to accelerate fiber mobile convergence.

Turning to our financial performance. Total revenues in the fourth quarter rose 7.1%, supported by balanced growth in both mobile and fixed services. Mobile service revenue progressed 7%, while fixed services improved 5.4%, reflecting the sustained contribution of fiber and corporate solutions. EBITDA grew 8.1% versus fourth quarter 2024. Excluding the effects of the concession migration from both years, EBITDA advanced 17.7% year-over-year, reflecting the success of our day-to-day execution. Operating cash flow also showed solid expansion, up 13.4% compared to 2024, representing 26.1% of our revenues. Net income grew at a double-digit rate in 2025, totaling BRL 7.2 billion for the year, while free cash flow increased by 11.4% to BRL 9.2 billion.

These strong results enabled us to fulfill our promise of paying shareholders at least 100% of our annual net income. In 2025, we paid out BRL 6.4 billion, reaching a payout ratio of 103.4%. Next, on Slide 4, we illustrate how the transformation of our top line continues to advance, driven by diversified revenue mix and the rising contribution of our new businesses. Total revenues in the quarter reached BRL 15.6 billion, supported mostly by postpaid and FTTH that grew 9% and 9.8%, respectively. Notably, this quarter delivered the strongest growth in our handsets and electronics line in 3 years, up nearly 14% year-over-year, fueled by a broader portfolio, seasonal offers and a robust demand for electronics. Our new businesses also presented another standout year.

Revenues increased 27% over the last 12 months and now account for 12.1% of total revenues, an expansion of 1.9 percentage points compared to the previous year. Both B2C and B2B solutions contributed meaningfully to this evolution, reflecting the success of our strategy to diversify our portfolio and scale digital services. Moving to the next slide. We continue to see the solid momentum of our mobile businesses boosted by Vivo’s differentiated network quality and customer experience. By the end of 2025, our mobile base reached 103 million accesses, a year-over-year increase of 0.7%. Postpaid, including M2M and Dongles, remain the main growth engine, expanding 6.9% and surpassing 50 million customers for the first time. Adoption of 5G is accelerating rapidly.

Our 5G customer base rose to 23.1 million users across 716 cities in Brazil. This pushed our 5G take-up ratio to 27.8%, an improvement of 8.6 percentage points in 1 year. This reflects not only the strength of our network, but also the value customers perceive in transitioning to newer technologies. Postpaid churn continued stable at 1%, while ARPU grew 5.8% year-over-year. Together, these indicators highlight the effectiveness of our retention initiatives as customers adopt higher value plans and demand more data. Overall, these results reinforced the strength of our mobile platform, a combination of superior network quality, disciplined commercial execution and a customer-centric approach that drives continued sustainable growth. On Slide 6, we dive deeper into the strength of our convergent proposition and how it’s setting a new benchmark for quality and retention.

As our fiber footprint expands, so does our capacity to attract new customers. Over the last year, we passed an additional 1.9 million homes, bringing the total to 31 million, while our take-up ratio improved to 25.2%. FTTH accesses maintained double-digit growth, increasing 12% year-over-year and reaching 7.8 million connections. This performance is once again propelled by Vivo Total, our flagship offer that combines the best mobile and fiber, which expanded 41% compared to last year in terms of subscribers. Today, 62.7% of our entire FTTH base is already converted to postpaid, out of which 43% through Vivo Total, reinforcing customers’ clear preference for integrated solutions while also demonstrating the significant upside that we still have to further scale our convergent offer and improve customer loyalty across both postpaid and fiber services.

In fact, fiber churn remains on a downward trend, reaching 1.4%, the lowest level in our history. This sustained improvement reflects both the quality of our network and the stickiness of Vivo Total’s value proposition. Heading to Slide 7, we show how the evolution of our B2C segment is supported by the growing relevance of services that go beyond connectivity and positively impact our customers’ lifetime value. In 2025, total B2C revenues reached BRL 44.8 billion, up 5% year-over-year. This performance reflects not only the solid resilience of our connectivity services, but also the strong momentum of our new businesses that grew 20.7% and now accounts for 3.3% of total revenues. We also saw consistent improvement in revenue per RGU that hit BRL 65.8. This increase is supported by our ongoing efforts to expand customer engagement, drive cross-selling and extract higher value from our existing base.

Looking specifically at new businesses, we continue to see solid performance across all lines. Video and music OTTs remains the largest contributor, advancing 18.1% year-over-year. consumer electronics delivered another standout result, growing 36%, while the health and wellness category posted remarkable momentum with revenues rising close to 70% in the year. We are also strengthening the foundation for future expansion. Through Vivo Ventures, we approved an additional BRL 150 million for new investments with a particular focus on AI-driven initiatives, bringing the total investment capacity to BRL 470 million. And through our partnership with Perplexity, we are offering customers complementary 1-year subscription to Perplexity Pro, reinforcing our commitment to delivering differentiated digital experiences.

All these developments underscore how Vivo was evolving into a broader digital platform where connectivity remains at the core but is increasingly complemented by diversified ecosystem of services designed to enhance our value proposition and improve monetization. Turning to next slide. We’ll provide more details on Vivo’s B2B strategy and how the ongoing shift in our revenue mix is quickly gaining traction. In 2025, B2B revenues amounted to BRL 13.5 billion, up 13.7% when compared to 2024. Digital B2B was once again the main growth engine, advancing 29.5% and now representing 8.8% of Vivo’s revenues. Connectivity also maintained a healthy performance, rising 5.4% in the same period. Within digital B2B, all products continue to expand at a strong pace.

Cloud revenues soared 37.8% followed by IoT and messaging at 25.9%. Digital Solutions at 22% and cybersecurity at 8.4% year-over-year. B2B continues to gain relevance within our revenue mix, increasing its shares by 140 basis points year-over-year. This strong performance in 2025 marked the segment’s fastest annual expansion in recent years and reflects the accelerating demand from companies undergoing digital transformation. Altogether, these results underpin Vivo’s strategic goal as the trusted partner for companies seeking to modernize their operation, scale cloud and IoT adoption and strengthen their digital capabilities. On Slide 9, we reinforce our sustainability remains a cornerstone of Vivo strategy, supported by solid advances across environmental, social and governance dimensions, which is validated by our strong performance in global rankings.

According to Merco’s corporate reputation ranking, Vivo placed in the top 10 companies across all sectors and achieved the best position among telcos. We also achieved the fifth best performance in the sector worldwide in S&P Global’s Corporate Sustainability Assessment and earned a place on the CDP A-list for the sixth consecutive year. Additionally, we were recognized by Corporate Knights as the most sustainable company in Latin America on the list of the world’s 100 most sustainable companies. On the environmental front, we participated in COP 30 as a supporter for the first Planetary Science division, an initiative that brought together leading scientists to advance discussions on climate resilience and the future of life on the planet.

Regarding Funda o Telef nica Vivo, which reached over 2 million beneficiaries with BRL 47 million invested in initiatives focused on education, employability and digital inclusion. In governance, we expanded the scope of our Information Security Management certification under ISO 27001, strengthening the protection of data and systems that support our operation. I invite you to check out our 2025 ESG Highlights, which compile the year’s key indicators and achievements and outline the strategic priority for our ESG agenda. Now David will give you more color on our financial performance for the quarter ending. Thank you.

David Sanchez-Friera: Thank you, Christian, and good morning, everyone. On Slide 10, we provide an update on the evolution of our cost structure and highlight the strong EBITDA performance in the quarter. On the left side, you will see that total costs reached BRL 8.9 billion in the quarter. When excluding the effect from the concession migration, OpEx was flat with a year-over-year evolution of 0.4%. This reflects a balanced combination of commercial momentum and disciplined operational management. Cost of services and goods sold rose 9.7%, mainly driven by the higher contribution of B2B digital solutions, continued demand for music and video over the top as well as the share of handsets and electronics. Operating costs grew 4.4% year-over-year, led by a 6.4% evolution in personnel expenses, reflecting annual salary increase and a higher headcount in strategic areas such as digital tech.

Meanwhile, our largest cost line, commercial and infrastructure declined by 2.6% due mainly to some onetime infrastructure expenses registered in the same quarter last year. The results in both years were positively impacted by the effects related to the migration of our fixed voice concession to the authorization model. In the fourth quarter last year, we recognized a reversal of provision for contingencies totaling BRL 386 million. In addition to asset sales amounting to BRL 206 million. In the fourth quarter this year, we recorded BRL 96 million in copper sales and BRL 6 million in real estate sales, adding up to BRL 102 million. Excluding all these effects in both periods, our EBITDA grew 17.7% year-over-year with a margin expansion of 380 basis points, reaching 42.3%, while reported EBITDA was up 8.1% with a margin of 42.9%.

Moving to Slide 11, we present the evolution of our operating cash flow for the year. CapEx amounted to BRL 9.3 billion, a modest 1.1% raise year-over-year, while our CapEx to revenues ratio reduced to 15.6%. This reflects lower capital intensity and the continued prioritization of investment with the highest return. As a result, operating cash flow before leases reached BRL 15.6 billion, an increase of 13.4% compared to last year. After leases, operating cash flow rose 17.3%, totaling BRL 10.1 billion with margins expanding to 17%. This strong performance demonstrates our enhanced ability to convert EBITDA into cash, supported by disciplined CapEx allocation and softer lease cost evolution. Going forward, we remain focused on further optimizing our tower-related expenses and improving contract efficiency.

The trajectory of our operating cash flow margins underscore the strength of our return profile. On Slide 12, we highlight how our disciplined financial management continues to translate into profitability and strong cash generation. Net income for 2025 reached BRL 6.2 billion, an 11.2% increase versus the previous year. This growth was well balanced throughout the year, reinforcing the consistency of our execution and resilience of our business model. Our net cash flow position also improved, ending the year at BRL 2.3 billion compared with BRL 1.4 billion in 2024. When considering IFRS 16, net debt stands at BRL 13.1 billion, equivalent to just 0.5x EBITDA, underlying the continued strength of our balance sheet. Free cash flow rose 11.4% to BRL 9.2 billion in 2025.

This performance reflects both our disciplined CapEx allocation and the healthy fundamentals of our operations. As a result, our free cash flow yield reached 8.6% and free cash flow over revenues came in at a solid 15.4%. These results reaffirm our ability to improve profitability and cash generation while maintaining a very comfortable leverage profile. Lastly, on Slide 13, we highlight our continued commitment to shareholders’ remuneration. In 2025, we distributed BRL 6.4 billion to shareholders, an increase of 9.1% compared to the previous year, driven by higher share buybacks and capital reduction. Notably, we once again delivered on our guidance for the period this time with a payout of 103.4% of our net income. Looking ahead to 2026, we have already announced the distribution of BRL 7 billion, including the BRL 4 billion from capital reduction to be paid in July, and the interest on capital of BRL 3 billion declared in 2025 to be paid in April this year.

We also declared an additional interest on capital in February this year that will be paid before April 2027. Moreover, our Board of Directors approved a new share buyback program of up to BRL 1 billion to be executed until February 2027. To conclude, we reaffirm our commitment to distributing at least 100% of net income in 2026, maintaining a clear and disciplined capital allocation strategy focused on value creation for shareholders. Thank you. And now, we can move to the Q&A.

Q&A Session

Operator: [Operator Instructions] Our first question comes from Leonardo Olmos from UBS.

Leonardo Olmos: Congrats on the results. My question will be all centered on distributions, a little bit long, but all center on distributions. So if you could first discuss the drivers for the mix in 2026 between buybacks, interest on capital and capital reduction, which — what makes you pick more of one than another? For example, we noticed a small reduction, potential reduction buybacks, but a huge increase in capital reduction. Could that mean you are thinking about continuing on the path of increasing potentially leverage, changing the capital structure? And still on that topic, and the last part of my question, if you could discuss net income drivers for 2026. As we noted an increase in copper sales, maybe there’s upside for consensus estimates. And since you guide dividends on the back of net income, we want to know that.

David Sanchez-Friera: Leonardo, thank you for the question. So the first one, we have a commitment for the last 2 years to distribute at least 100% of our net income. So this is something that we have done in the last 2 years, ’24 and ’25. And we always try to combine between the — what you mentioned, capital reductions, interest on capital, also dividends and share buyback. If you look at our capital structure, we have more than BRL 60 billion capital. So we obtained 3 years ago authorization from ANATEL to distribute up to BRL 5 billion. This is something we have already done. We have already distributed BRL 3.5 billion. Now we don’t need any more approval — preapproval from ANATEL. So that’s why now we have also approved that will be paid in this year for another BRL 4 billion.

And the plan for 2026 is to combine and to continue. Today, we have also approved a share buyback program of BRL 1 billion that will give us flexibility to continue taking advantage of interest on capital. This is a situation unique in Brazil, together with also a capital reduction to maximize the value of shareholders. So for next year, we’re expecting, of course, to deliver more than 100% of our net income. So regarding capital structure, it’s something that we are always exploring potential opportunities. The leverage that we have today in Brazil is very linked to the high interest ratio that we have here in Brazil. And we expect that in the next future, the Selic will reduce. Today, it’s at 15%. The market is expecting this to reduce in the next few years.

So we could explore opportunities also to generate value and to maximize this opportunity. So I think this is — this will have a very strong cash flow generation and net income for next year, which was also your second question. We are seeing a very stable. We have been growing almost every quarter, double digit. For the next year, we’ll continue growing in EBITDA. We will also benefit from the reduction of the depreciation and amortization. Starting from the second quarter, we have included also on the financial statement. After July 2026, we will fully depreciate some of the legacy assets that we have in our balance sheet. And this will represent an improvement of BRL 300 million of profit before taxes, just coming out of this, plus potential benefit from interest reduction.

So we are positive about the evolution of net income. Next year, we will bring additional shareholder remuneration.

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

Marcelo Santos: I want to ask questions about two key topics. The first one is CapEx. So maybe, David, could you please discuss what are the puts and takes for the CapEx outlook in 2026? And the second question will be about competitive environment, how you’re seeing it, especially on mobile? And what is the outlook for passing price increases this year?

Christian Gebara: Marcelo, I will take the questions. Christian here. So CapEx, we’re not giving guidance. But as we said, now been stating in every call, we are working on CapEx optimization, when you consider CapEx over revenues. So as you could see, we came from 16.4% to 15.6% this year. That’s a combination of all the work we are doing to be more effective in the deployment of our infrastructure. Added to that, our ability to sell more services with no CapEx. So we already reached more than 12% of revenues coming off services that now require CapEx. So that’s why we have this strong evolution in operating cash flow. As we stated here now, we are increasing 13.4% year-over-year. And even when you consider operating cash flow after leases, this growth is even higher, 17.3%.

So we will continue to deploy 5G. As I said, we are following our customers and the penetration of 5G is going up. So we are deploying 5G where our customers are. We’ve been deploying fiber and penetrating more our network. So we also saw the take-up ratio going up in the fiber business. So that’s a good sign. Of course, it involves CapEx, but we are also saving in other lines. So the idea is this one, to continue to improve infrastructure keeping our leadership, but being better in the ratio CapEx over revenues. Going to competition. Can I go to the second one, Marcelo?

Marcelo Santos: That’s very clear. Thank you, Christian.

Christian Gebara: So competition. Here, we have different strategy for the different segments. We’ve been very strong in prepaid. Now it’s still slightly negative, but when you compare what we had in last quarter, revenues this quarter is higher than the previous one. And also when you compare the year-over-year evolution, we also have a better performance this quarter than we had in previous ones. We are increasing price according to the type of segments. So we are planning March for postpaid and hybrid. For front book, we are expecting customer base price increase in April for both hybrid and postpaid. FTTH, we had a price increase in January. We have planned a new one for June. And Vivo Total, we are planning 100% customer base price increase in April. So following the inflation ratio, giving more data and more services and also playing convergence. So that’s our strategy, and that’s why we are positive about the evolution of our revenues going forward.

Marcelo Santos: Okay. So the back book is on April, right, for postpaid and hybrid? Is that correct? Just to be sure.

Christian Gebara: Yes. Part of it is in April, the majority, and the rest is in August.

Operator: Our next question comes from Rogério Araújo from Bank of America.

Rogério Araújo: Congrats on the results. I have a couple here. The first one, there was a reduction in the lease expenses. If you could please provide some details on why and also expected trend. This is the first one.

Christian Gebara: Please ask the two questions, Rogério. And then we’ll answer both of them. What’s the second one, please? Rogério, please ask the second question. I don’t know if he is still in the line, so I don’t know if we’ll answer the question or we wait for him to come back.

Operator: He shows on the line. Rogério, can you please repeat the second question?

Christian Gebara: Okay. So we’re going to answer only the first question, okay?

David Sanchez-Friera: Okay. So Rogério, thank you for the question. The evolution of the lease depreciation and interest accrual remained consistent with previous periods. Even in both quarter and even the full year, EBITDA after leases has grown even more than EBITDA before leases. And regarding the payments, some volatility persists due to the ongoing renegotiation with the towers company that we do every quarter. And that’s why you mentioned the principal and interest payments that we have this quarter amounted to BRL 1.2 billion, which is lower than the previous year, but also lower than the previous quarter that shows we are very optimistic about the potential trend of this line. To give you more light here, the current tenancy ratio that we have in Brazil is 1.4 that we discussed last quarter, which is significantly lower than other comparable countries.

So we see a big opportunity to reduce the unitary costs of every tower to share more the towers and to fund the new deployment that we need to do here in Brazil to accelerate our revenues in 5G and also our coverage. So optimistic about the trend that we have started seeing this quarter. But even though we will need to continue renegotiating those contracts and this will be driving the potential acceleration of the reductions.

Christian Gebara: I would add, the operating cash flow after leases, no, margin. We went from 14.6% in 2023 to 15.5% in 2024 to 17% in 2025 — sorry ’24, 15.5% in ’24, 17% in ’25, aligned with what David just said. Also, we are going to capture the growth of our infrastructure. We’re going to renegotiate our contracts, and we’re going to still generate operating cash flow after leases that has a strong margin, as you could see the evolution over the last 3 or 4 years. I don’t know if Rogério to have the second question?

Rogério Araújo: Yes, sorry. My line actually was dropped here on, actually. You couldn’t hear me on my second one. It’s about the prepaid ARPU. It has reverted a negative trend versus the first 9 months of the year, also in line with our main peer in Brazil. So if you could please clarify what do you think were the main drivers for that and what you expect in the upcoming quarters?

Christian Gebara: Listen, Rogério. Prepaid has been performing better quarter-over-quarter. Of course, that’s also our ability to motivate customers to top up and also to consume the money that they have in the balance. So it’s part of our strategic behavior of the company, also being very able to motivate customers to higher average tickets and also the ability for us to monetize the tickets they have top up. On the other hand, we continue very strong in migrating prepaid to hybrid. So it’s even quarter-over-quarter that there is a positive evolution. And so we are extremely pleased with the mobile service revenue evolution, 7% over the last quarter, growing 9% in postpaid. That’s a combination of bringing new customers, but also migrating pre to hybrid or postpaid.

And also the prepaid absolute number of revenues that went from the fourth quarter — from the third quarter of ’25 of 1.364 to 1.394. So — and churn in the postpaid also in the lowest level. So that’s the result of a very well segmented and thoughtful strategy for different segments that we have here in the company.

Rogério Araújo: Okay. I may have a follow-up. If you could expect the prepaid ARPU to keep increasing year-over-year in upcoming quarters, if you have any color on that?

Christian Gebara: Rogério, what we expect is revenue to continue to grow the way it’s growing. We don’t expect — we’re not giving guidance per ARPU per segment.

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

Phani Kumar Kanumuri: The first question is on the total net adds and the market share in mobile. If we exclude Dongles and M2M, your number of subscribers has been coming down. Any reason for that? And your market share is down like 1 percentage point from last year. So what is — I mean, what is driving this trend? The second thing is that if you look at your B2B strategy, it has been growing really well. What are the further steps to maintain this growth in Brazil? And how is the penetration coming in the SME segment?

Christian Gebara: I don’t see mobile market share changing. That’s very stable. There are some corrections, maybe in prepaid. Some companies disconnect like later than we do. So we are very confident about our performance in market share, and actually in our performance in revenue growth. And also, we had — we measure our good performance in ability to increase net adds and fourth quarter 2025 was a record number, 930,000. That’s a combination of bringing in more customers, but also reducing postpaid churn from 1.3% in the fourth quarter of 2021 to the 1% that we’ll be keeping at this level for the last 4 years. So that’s important for us. And mobile ARPU is also going up if you compare it to what we had in the fourth quarter and what we had in the fourth quarter 2025, sorry ’24 and ’25, there was an improvement of 5.8%.

So we are not following like a small variation in market share. Important thing is to keep attracting customers, retaining customers and growing revenues. Regarding B2B, that’s a very strong quarter, as I said. We had in the year B2B as, I don’t know if you’re more interested in the digital service, at BRL 5.3 billion revenues, it’s a 29.5% year-over-year increase. It’s already know what’s digital service, 8.8% of the total revenues from Vivo and is 39.1% of the B2B revenues of Vivo. So it’s getting very fundamental for our strategy going forward. Penetration is growing in all segments. SMEs is where we have more challenges to penetrate more the digital services. But at the same time, we are growing a lot connectivity in the segment. We have a variety of products being offered to this segment coming from location like renting — rental of notebooks up to cyber solutions.

So that’s part of our strategy. We’re growing in all segments with more acceleration in the top. But at the same time, the volume that we have in the SMEs, we are very, very, very happy with the results that we are having also in these segments with a combination of connectivity plus digital services, I described it before.

Phani Kumar Kanumuri: Okay, yes. So maybe on the connectivity part, right? So you’ve grown like 5% year-on-year. So what is driving the growth in the connectivity part? The digital solutions was more understandable, but what is driving this growth in the connectivity part?

Christian Gebara: SMEs, but also in advanced data solutions for top to corporate customers, now, to going up in the pyramid. We also have other connectivity solutions up to very dedicated links. So we’ve been growing in all lines. Now I think we gave some color. Fiber, of course, it’s B2C, B2B. But when we said that we are growing 9.8%, that also includes our great performance in SMEs. And when we grow 10.2% of Data, ICT, digital services, it’s also including corporate data solutions. So it’s in both.

Operator: Our next question comes from Maria Clara Infantozzi from Ita BBA.

Maria Infantozzi: I have two questions here. The first one, can you please provide us an update on how you perceive the competitive environment in the fiber industry and also refresh us how you see any potential M&A in these industries? And the second one, could you please share your thoughts on how you see profitability expansion going forward? Are there any specific areas of the business in which you see some potential for further efficiencies? And how should we balance future efficiencies with the expansion of B2B?

Christian Gebara: Sorry, the second question is related to cost in B2B or cost in general?

Maria Infantozzi: Costs in general and how you balance this with the B2B expansion as it has a lower margin?

Christian Gebara: Okay. B2B doesn’t have a lower margin, but we can address this. Let’s go to the first one. So Maria Clara, the market is still very fragmented. If you see the performance of the fiber business in Vivo, we went from 18.8% market share at the end of 2024 to 19.3% market share in the end of 2025. So 0.5% increase in market share. Our net adds for the whole year was 834,000 customers. If you look other competitors, some of the leading ones had very strong negative net adds for the year. So it’s still a very competitive environment with too much fragmentation in our opinion. If you compare, for instance, we are the leading company in fiber in Brazil. We have 19.3%. When I see the leading company in Spain has 34% of market share.

When I see the leading player in France has like 39%. If I go to Japan, the leading company has 57%. So I think there is room for consolidation. I don’t see any rational reason to have so many players competing in same geographies. So we have 31 million home passed. We aim to have more. We see addressable 60 million, but we don’t see ourselves reaching this number, but we could reach something more closer to 45 million. We could do that building ourselves or we do have consolidating. Consolidating is still a question mark. We have to find the right target with the right pricing, we have the right network not overlapping too much with ours with the good quality. But I see that clearly, we require more consolidation in this market because it’s not — doesn’t seem to be sustainable for most of the players who presented negative net adds over the last year.

Regarding costs, I think we’ve been showing a good, very good number in cost of operations. The evolution was 4.4%. That includes all the personnel growth that we had, like because we want to be more digital in some areas. We want to expand our penetration in some commercial areas. So even increasing 6.4% in personnel, we were able to just increase 4.4% in the cost of operations because we are bringing more efficiency in different areas, especially in our customer care that the app and other initiatives that we are deploying now. Even using AI is helping us to reduce other commercial and customer care costs. So the combination of both that presented this 4.4% that is below, very well below what we presented in revenue growth. In the cost of service and cost of goods sold, both of them are very related to our sale of services.

Most of this, like I can give examples of video OTTs that I said before, or goods sold that is related to everything that we’ve been performing so well that also presented our strong growth in this quarter in handsets and consumer electronics in general. Going forward, we’re going to still focus in digitalization. And now with AI, we are very positive of bringing great results in cost efficiency. Sorry, in B2B, you stated. Now B2B, depending on the product, we have very, very positive margins. As I showed, we are growing 5.4% in connectivity. Connectivity B2B represented in the year, BRL 8.2 billion. That has a very good and positive margin. And digital B2B, it depends. We have also gone through markets in some of the services. When we say — when we sell cloud, yes, the margin is not that high.

But when I have managed services over cloud, the margin is much, much better. And the same I can tell about cyber and even IoT. So also very confident on our ability to grow. And all these services, some of them even having lower margin, they are very positive operating cash flow since they don’t require CapEx. So again, we should look at the bottom of the results where operating cash flow and free cash flow, operating cash flow after leases or free cash flow, we presented a very strong positive trend.

Operator: Our next question comes from Daniel Federle from Bradesco BBI.

Daniel Federle: Congrats on the strong results. I just want to hear your thoughts on how important it is for a telco to have a convergence operation at the moment in Brazil. We see, Vivo focusing on the Vivo Total. It seems to be a big success. So how important is this for the whole strategy? And second, if you could just provide a little bit more information about your expectation for AI as a source of savings for costs in the upcoming years.

Christian Gebara: Daniel, thank you for your initial comments. I cannot answer for all the other operators because I think we have different strategies. I can answer about convergence for Vivo. Convergence has always been our focus. And if you look at the numbers that we have today, we have 7.8 million FTTH customers, 62.7% are convergent. Out of the 7.8% in Vivo Total, we have 43.2%. So there is still this number between the 43% and the 62% that are convergent but are not in Vivo Total, and we are working to drive them to Vivo Total. Why? Because I think when you are Vivo Total, I think switching cost for customers is even high — higher sorry, and we also have the ability to have a closer relationship with these customers and monetize even better, selling also the digital service.

When you see the number that we presented of the new ventures in B2C, you see our ability to cross-sell not only mobile and fixed, but also the ability to sell video OTTs, to sell health services and also to sell smartphones plus consumer electronics, only to give you some examples. Our churn ratio is also proving that is the right decision. FTTH churn is 1.4%. If I look years ago, it was 1.6%, 1.8%. When I compare the churn rate of fiber customers that are in Vivo Total, it’s 1 percentage point lower to those that are independent fiber customers. So for us, it makes a lot of sense. And also even having record addition of new customers in mobile, our churn is also in the lowest level of 1%. So our strategy continue to be the one who can have the customer with more services with people.

That’s why we’ll also be presenting this number that we call services for RGU. So we get a customer, and we try to add all the revenues that we have in B2C, divided by the number of customers of RGU, and we see also a positive trend there. That’s convergence, but it’s also added to that the ability to sell the new businesses. So that’s the strategy that Vivo is following. So I cannot answer for others, but I think for us, that’s the right one and the one that we are going to still continue to put all our efforts. And then wanted to complement the Vivo Total, 84% of the sales that we have of fiber in our stores get out of store with 84% in Vivo Total. So it makes a lot of sense. And gross ARPU of Vivo Total in the fourth quarter was BRL 230.

So that’s also a great measure to follow. And the average in Vivo Total, we have one fiber connection and 1.7 postpaid connection. That also makes sense to see it that way. So it’s proving the customer wants to be loyal to Vivo in all the access. AI, we are in the — we used to have very well deployed AI here before the Gen AI. So WhatsApp was already driven by AI Vivo and was one of very important channel. We had 4 million customers interacting with us per month in WhatsApp using AI. Now with Gen AI, I think the possibilities are even higher. We are using that to optimize internal processes. For instance, when we need to go to a B2B public visitation, there was like this deep complexity to understand what was required by the operator in some of these auctions.

We now have AI to understand it much closer to what we have here as inventory, and then we have a response that is much faster and our ability to participate in many more visitation than we used to do before. We’re also using AI as copilot to all our call center agents and store agents. And now we are piloting AI agents to answer directly to customers. So that’s a very important project that we’re going to start having the first results in May this year that we are doing with partners. And also, we are doing many other things in network optimization. So it’s a variety of actions that we are taking here to implement AI as core for our business. And again, answering to the second — the first question that I had before, I think from Maria Clara, in efficiency, we also believe AI will bring a lot of efficiency for us as well.

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

Gustavo Farias: The first one, maybe a double-click on the previous question about M&A. So we’ve been exploring M&A in fiber, in most of our recent notes. And Vita obviously stands out particularly now without Oi as a shareholder. So my question is, would you consider a large M&A to strengthen your fiber footprint? And the second question, we’ve seen stronger portability figures for Claro in the fourth quarter, mostly impacting TIM and likely related to new sales. So my question is, how are you perceiving this competition driver in mobile? And if this, by anyhow, changes your commercial strategy?

Christian Gebara: Gustavo, thanks for the question. No, it doesn’t change our strategy. We have competition, and it’s a very competitive marketing — market, sorry. And I cannot point out a specific player and the evolution of portability due to this player. Now I think that’s the market that we face. I think there is a lot of variation of portability month-over-month. What is important that we keep growing net adds, and we keep ARPU going up because also getting more customers with ARPU decreasing is not the strategy that we are following. So if you look, we had 4.4% increase in postpaid net adds if I compare the year-over-year quarter. And also, we have a 5.8% ARPU evolution if I compare again the year-over-year ARPU, keeping churn level at 1%.

So we’re not going to get into this war if someone is trying to put the service in a lower value or try to use our service to acquire other services in different sectors. No, we shouldn’t get to that because we are here, preserving the quality and the experience that we offer to our customers. So a positive evolution of net adds, positive evolution of ARPU and extremely positive evolution of our churn. And again, we’re going to face competition of different types. And that’s normal. It’s a very competitive market, and telecommunications has always been very competitive in Brazil. Going to the question of — can I go to the other one, M&A?

Gustavo Farias: Yes, of course.

Christian Gebara: Yes. M&A is what I said, again, Oi’s still has a stake at Vita. They are in the process, but they still have a stake. I think the market is very fragmented, as I said before, I think there is room for consolidation. But in our case, it’s not the size. None of the players is large enough not to allow us to integrate because, as I said, they have 19.3%. The next one has 8.2%. And I think adding the second, the third, we’re still going to be below what we see as market leader in markets like Spain, France, Korea or Japan. It’s more of the quality of this network, the quality of the customer base, the overlap with our network and the price. We have the ability to deploy network. And as I said before, much more of the CapEx is related to connecting the customer than passing the fiber.

But we don’t want to be passing fiber where we see so many players. So that’s why we are open for analyzing targets. So far, we haven’t been able to get to an agreement or getting to the real interest in any of the targets that we see in the market. So let’s wait, Gustavo, but the trend seems positive for consolidation.

Operator: The question-and-answer session is over. I would like to hand the floor back to Mr. Christian Gebara for the company final remarks. Please, Mr. Christian, the floor is yours.

Christian Gebara: Okay. Thank you, everyone, for participating, and for so many questions. As I stated in the beginning, we’re extremely pleased to share such a strong set of results in all dimensions of our company. And again, we are always here at disposal to answer any additional questions that you may have. Thank you so much for your participation.

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