Tim SA (TIMB) 2020 Q4 法說會逐字稿

(presentation)

Good morning, everyone. This is Vicente Ferreira, TIM Brazil's Head of IR. I'd like to welcome you to our 2020 Fourth Quarter Results Conference. We would like to inform you that this event is being recorded, and the replay will be available on the company's IR website. After our CEO remarks are completed, there will be a questions-and-answer session for participants. Further instructions will be provided via chat message.

We highlight that statements that may be made regarding prospects, projections and goals constitute the beliefs and assumptions of the company's management. Future considerations are not guarantees of performance. They involve risks, uncertainties and assumptions as they refer to events that may or may not occur. Investors should understand that internal and external factors to TIM S.A. may affect its performance and lead to different results than those planned. (Operator Instructions)

Now I will turn the conference over to our CEO, Pietro Labriola, so he can present the main messages of our results.

Good morning, everyone, and thanks for attending our fourth quarter conference call. 2020 was marked by the COVID-19 pandemic, which posed major challenges to society with impacts on the public health and the economy. The measures to combat the pandemic through isolation and social distancing substantially affected the day-to-day lives of our clients and our operations.

For TIM, the impacts of the pandemic were mainly concentrated at the end of the first quarter and throughout the second and imposed on us: first, closure of points of sale with a reduction in commercial activity; second, transition to 100% virtual-work model; third, change in voice and data traffic in our network; fourth, change in the relevance of telecommunication services to the lives of customers; and last, fifth, lower economic activity and income availability.

To manage this situation and revert it in evolution for TIM, it was necessary a lot of focus on execution with agility in decision making, prioritization and digital coverage. As challenging as this context has been, the company proved to be anti-fragile, presented solid results at the end of 2020 and seeded significant transformation for the future such as the acquisition of the Oi mobile assets, the execution of the network sharing agreement and the beyond core new revenue stream, but above all, delivering what we promised.

As highlights of our fourth quarter, we maintained the recovery in revenue dynamics started at the beginning of the second half. We also managed to sustain a solid execution on cost and accelerated cash flow expansion. Net service revenue for 2020 showed positive growth on the back of the acceleration of revenue dynamics in the fourth quarter. Service revenues in the fourth quarter were up 1.9% versus last year, with ARPU growing in all segments. Bad debt was down sequentially and year-on-year, representing 2.3% of total gross revenues.

On the metrics, EBITDA margin and EBITDA minus CapEx over revenues for the full year, we overdelivered, surpassing our targets for 2022. Mobile postpaid net additions were positive in the fourth quarter as well, while TIM Live's client base continue to grow at a solid double digit.

By the end of the year, we have also reached important milestone. Our network was recognized once again as having the best 4G experience for Brazilian customers. The special project's front started to materialize with the signing of the deal with Oi and the equity stake in C6 Bank. And confirming our 360-degree approach, we also enhanced our governance with the creation of the ESG Committee. It is fair to say we have a pretty balanced performance uniting: financial recovery, operational improvement, network evolution and delivering other value-creation initiatives.

Going into more details of our revenues recovery in Q4, we saw positive contribution coming from mobile and fixed services with all major lines posting better performances. The second half service revenue growth was 1.6% year-over-year, while in the first half, it was a negative 0.9%. Mobile Service revenue accelerated to grow 1.5% year-over-year, while fixed service were up by 8%. Full year, flattish Mobile Service revenue and 28% growth at TIM Live led to total service revenue to grow 0.4% versus 2019.

All ARPU metrics grew sequentially and yearly, showing the ability of the company to extract value from all segments of its customer base in mobile and fixed. Again, this reinforces that our strategy from Volume to Value is bearing fruits.

The mobile acceleration in the fourth quarter was more pronouncedly impacted by the postpaid segment. Customer management and service quality focus were key to drive strong churn decline and revenue growth recovery. Postpaid revenues accelerated to 3.6% year-over-year growth, helped by a reduction of 100 basis points in churn rate.

In prepaid, we continue to experience a V-shaped recovery in recharges, although still slightly below 2019 levels. Improvements in the number of rechargers and spending per customer are driving this trend. It's worth mentioning our innovative offers launched during 2020: TIM Black Familia plan, the marketplace for entertainment apps, TIM Mais Vantagens, all of these are helping the company to differentiate from our competitors and move away from a price-based competition model.

Moving on to the fixed segment. TIM Live continues to perform at high level. We closed the quarter with this unit growing 25% year-over-year. TIM Live's ARPU grew high single digit, and we added close to 80,000 new clients in the last 12 months. Our fiber coverage grew more than 40% in the last 12 months, going above 3.2 million homes and 34 municipalities. For the fifth year, TIM Live ranked #1 in the Estadão newspaper ranking for broadband services. These awards confirm the success of our naked broadband with OTT friendly approach.

As a final element in our revenue discussion, I will comment on the important achievements we had during the quarter concerning our new revenue streams. In less than 6 months, we surpassed 1.1 million accounts opened in our partnership with C6 Bank. Our solid performance is rewarding TIM with 1.4% stake in the bank. This stake is being valued at more than BRL 160 million in our balance sheet.

Still, on the financial services front, TIM, together with other operators, closed a partnership with Central Bank to develop PIX-based solution for payment. Today, TIM is already #1 in invoice payment by PIX.

Mobile advertising and base monetization are developing fast. In the fourth quarter, TIM ads reached more than 12 million clients with opt-in in our third-party content platform, which translated into 450 million visits. For Informa TIM, a prepaid specific channel, we arrived at more than 1.8 million clients as addressable market for video ads. We closed partnership with Accenture, Juvo, Play2Pay and Quod in these past months. So we expect great developments in the short term.

For our IoT verticals, we are accelerating Smart Cities solution and Industry 4.0. Both are following the step we concluded in the connected car arena, where we have now more than 50% of vehicle sales as addressable market.

Moving to the infrastructure. We continued to develop our network, both for mobile and fixed services. Once again, our strategy was rewarded. The widest coverage, combined with smart spectrum management and deployment of new technologies build up as the best mobile experience. This was attested by the Opensignal report. If we were able to do this with the spectrum gap against our peers, imagine the possibility once the deal with Oi is concluded.

On the fiber front, we surpassed 1,000 cities with a drop of fiber, a great achievement for a latecomer like TIM. Our transport network is summing 108,000 kilometers in December 2020. It is always worth mentioning the TAC development as this is one of our priority in terms of investment. 2021 targets are being anticipated and being delivered in 2020, so we expect further customer experience improvements.

Our technological transformation is a combination of network deliveries and IT developments. 5G DSS deployment, network sharing agreement, open RAN and unplugged sites are projects to take the mobile infrastructure to the next level. On information technology, we are implementing important projects that should help us deliver scale, flexibility, reliability and efficiency. The plan is to have all IT assets running from the cloud in 2 to 3 years. While we are just starting our journey to cloud in the IT, we have already successfully implemented the new cognitive IVR and the TIM X project.

In the first, Taís, our artificial intelligence assistant, is helping reduce human interaction by 18%, while 22 million calls were answered. Under the TIM X project, we implemented a simplified dashboard from Google to help human attendants to improve their efficiency and quality of caring.

We are improving all our digitalization metrics, demonstrating the capabilities we are building with our digital system are helping to accelerate our digital transformation process. So much so that we are delivering in the 4 main pillars impacted by digital transformation very strong results. Human interaction falling almost 40%; adoption of repayment and e-billing above 75%; e-recharges penetration of close to 45%; and e-sales growing in all segments. In the past 2 years, the combined effect in those lines, among other elements, produced a reduction in costs of 10.5% on average, while overall OpEx reduced by 7.8%.

Following the impacts generated by the digital transformation at the company, I'd like to highlight the excellent performance in efficiency and cost control. In 2020, OpEx was down by 4% year-over-year, even absorbing higher infrastructure costs due to a larger and stronger network, proving that we will not be seeking cost-cutting initiatives that could backfire on the company. One key driver for that performance was the bad debt, which continuously improved throughout the year. Collection curves, as explained in prior quarters, are at their peak. Our effort from now on will be to sustain those levels.

When revenues are up and OpEx is under control, EBITDA presents solid growth. We accelerated the pace of the last quarter to 3% year-over-year and again, posted the best margin of the industry in Brazil, reaching close to 51% in the fourth quarter.

As for 2020, EBITDA grew 3.2% with a margin of 48.5%. It's worth noting, we closed the year above our guidance for 2022, once again delivering on our promises, but in this case, much earlier than predicted. In a pro forma view, we produced in the past 5 years, a 750 basis point expansion in EBITDA margin, while EBITDA minus CapEx grew, compounded more than 40%.

We closed the year with operating free cash flow showing very solid performance, summing more than BRL 4.6 billion, with positive contribution from EBITDA and working capital. The latter was positively impacted by the improvement in the collection curves and also the postponement of Anatel fees.

In 2020, TIM declared the distribution of more than BRL 1 billion in interest on capital, maintain the trend started in 2018. With that, and excluding the effects of financial leasing contracts, TIM stood net cash in the quarter by more than BRL 2.7 billion. Including the leasing effect, net debt declined by approximately 16%. The cash position of the company of more than BRL 4.6 billion is a real solid foundation for the financing needs for 2021.

On a quick recap, it is worth mentioning that our special projects are evolving according to our plans. After winning the auction for the mobile assets of Oi, we filed the petition for prior approval at Anatel on December 31. The signing of the sale purchase agreement was concluded on January 28, and we already filed the formal notification in Cade. This deal will transform the company, closing a historical gap of spectrum and putting TIM in a very solid position to compete in the market. We were able to do so much with our network development, having significantly less spectrum than our peers. So let's imagine the possibility with a much stronger position.

The process to find a partner with which to develop our residential fiber network continues to follow its course and is proceeding according to plan. We formally created the vehicle that will receive the assets from the carve-out. And we have entered the final phase of the project with the number of parties having submitted proposal that we are currently analyzing. We expect a signing of this transaction in the first quarter of 2021. We will keep you all updated on this topic in the coming weeks and months.

2020 was a year of solid achievements on all fronts, including ESG. It is always worth remembering that TIM's commitment to ESG didn't start yesterday. Our presence in the sustainability index for 13 years in a row is an example of our positive track record. On environmental, we are at a solid pace to reaching our growth for carbon neutrality, emissions and eco-efficiency. Our energy projects are developing well, and we have more than 60% of our energy consumption coming from renewable sources. And we closed the year back in the Carbon Index of B3.

For social, we are meeting the targets related to the commitment to our employees in terms of training and workplace climate. Additionally, we are investing more in diversity and inclusion projects such as our internship program.

Governance was marked by the creation of our ESG statutory committee, and our leading presence in the Teva index for women Board representation. TIM remains as the only telco company in Novo Mercado and the only one to receive the Pro-Ética certification from the Federal Comptroller General.

Concluding my comments, I point out the unprecedented challenges faced during the year, and how we have accomplished great things. Our from Volume to Value strategy proved to be solid, and helped us recover our revenue dynamics during the year, while cost discipline and efficient approach helped to cope with expenses pressures. The new avenues for revenue growth are becoming more tangible and materializing the opportunity ahead. And finally, we have very interesting opportunity to unlock value with different strategic projects.

When we look at our plan, we were able to deliver our main targets for 2020. EBITDA minus CapEx grew more than 5%. EBITDA minus CapEx on revenue reached close to 26%. CapEx stayed at low 20s level. EBITDA and service revenue growth rate, as expected and signaled during the year, were below our original target, but still showed solid performances. This performance led us to enter 2020 (sic) [2021] at a solid speed, and we are expecting the country to start recovering faster from the pandemic with the arrival of vaccines.

As I mentioned in the beginning, the anti-fragile stance of the company turned the challenges into opportunities to evolve further. As I always say, at TIM, we don't use shortcuts. We will maintain our focus on the sustainability of the business with a rational approach and solid execution.

Thank you. We will now open the floor for questions. Please, Vicente.

Thank you, Pietro. Good morning, everyone. Once again, I apologize for the technical problems that we had during the English conference call. We will now start the Q&A session. So the first question comes from Leonardo Olmos from UBS Bank.

Yes. My first question is regarding the infrastructure sharing agreement with Vivo. We saw in one of the last slides that it is going well. In the last week, we spoke with Vivo's CFO, and he said that you've reached all the targets that the 2 companies were expecting. So I was wondering if it could escalate in 2021, what we could expect? I know you can't give quantitative guidance in that sense. But maybe qualitative, what else could you do? Maybe share other parts of network, maybe share larger cities, 3G? Where could it escalate to thinking medium term?

Hello, Leonardo. Here is Leonardo, too. So let's see. Talking about the sharing agreement, we are going very well, as you mentioned before. In fact, we started last year with -- obviously, that is the improvement of coverage in the cities that was not served by Vivo or by TIM. So it was the first, let's say, phase. Now we are moving ahead with the 2G switch-off.

And the most important part of the project, this is what we call the single grid. The first step is to running a pilot with around 50 cities, and we are preparing all the rollout for 2021 to speed up that after this initial, let's say, test. The test is important that you guarantee that we still deliver, not at the, let's say, the same quality that we have, but we expect to improve the quality at the same time that we are reducing the cost.

So we really believe that we can speed up this project in 2021, the single grid agreement. As I mentioned, we will start with the target to serve the cities below 30,000 inhabitants. But proving that, I guess that we have, let's say, open space, for -- to be more aggressive on the next years.

So the most important on that is not just the result, but it is to establish a new, let's say, mindset among the companies that to serve in a shared infrastructure is a better way to be more efficient and to improve the quality of the network in Brazil.

Leonardo, Pietro speaking, if I can add some more qualitative elements. As Leo mentioned, the most important element is a confirmed trend in the Brazilian market that show that the growth of the network is coming also through this kind of network sharing agreement. With no boundaries, what we mean that we are open to discuss also with other telco player in Brazil this opportunity. This is an important path, not only for the component of the traditional mobile network, but also on the fiber side where the InfraCo. will allow all the operators to do further synergies.

And this is something that, in some way, is also below the line included in the 5G edital for the next auction. And last but not least, these are the basis to start the evaluation of the possible switch-off of 2G and 3G that further hired in the years is something that we have to start targeting.

Yes, I was going to ask you about other things, but then you just mentioned something interesting now, Pietro, the 5G edital. What type of infrastructure sharing or anything less than that, could you -- could the 3 players agree in that sense? Or maybe on a more broader sense, what type of sharing could happen in the 5G deployments? Could you elaborate on that, please?

Mario can give more detail. What is important to state is that nowadays, there's nothing that was fully defined. This is something that we understand from the edital that as a framework is in line with what we were expecting, then it's clear that devil is always in details. So we have to look at the number, the value, but the framework show some trends that could be really positive for the overall telco industry.

Mario, if you can...

Thank you. Just for the issue related to the network sharing, the current version of the auction scheme is open to all the possible sharing between operators, both in the transmission and in the access side. So as Pietro especially said, we have to wait about the detailed rules. And then, of course, we will analyze all the opportunities in that sense, considering that TIM in the last decade is really a pioneer in terms of catching the opportunity of network sharing since the first 4G in 2012.

Our next question comes from Marcelo Santos from banco -- Bank JPMorgan.

The first question is about the 5G auction. I wonder if you could comment a bit on some news regarding the need for the 5G network to be a standalone network. So what could be the implications? What's the current status of the negotiations now? That would be the first question.

And the second question would be on C6 partnership. What are the next steps? What are the next thresholds? Or anything you could say regarding how this partnership could evolve?

Yes, sure. Before to leave the stage to Mario and Leo to give you more details about 5G SA, I think that it's really important to explain the choices that other telco player did in the world until today and what is happening here.

It's clear that if I was back 3 years, SA wasn't yet a well-defined standard. So 3 years ago, it was risky to move to the SA standard. Once we are in front of an auction that will have the freeze installation by the end of 2022, SA is becoming a reliable standard that tell how to forge through to develop all the services we are discussing about for IoT with the low latency. So this is the reason for which TIM since the beginning was very supportive to move toward SA.

Now I'll leave the stage to Mario and to Leo to explain also because we don't think that the choice between SA and not SA is increasing the level of CapEx because at the end of the explanation of Leo, you will understand that there will be no difference. So why at the same price I have to buy a car that is 2 versions older than the new one? Leo, please.

Thank you, Pietro. Just to reinforce one information that Pietro brings, the standard for standalone was finished in July 2020. What it means that all the companies that are starting the network after that is already using the new standard. One example of that is T-Mobile in the United States that launched the network in November last year, and they started the network with the standalone standard.

The same has happened in China. China started 2 years ago when the standalone was not defined. And thereafter, the definition of the standard, they are now moving for standalone. Why we believe that the standalone is the target that we have to follow? The first, as Pietro mentioned, the network we will start in 2022. So it doesn't make sense that we start that with legacy.

The second, the investment in a standalone or non-standalone network is exactly the same. We are not talking about market information, but we are talking with internal information of security contract that we already have. So it means that 90% of the investment on the network is in the access, in the radio. The radio of standalone and non-standalone is exactly the same. The difference is just the software. And the software doesn't have to increase the price of this implementation.

And to finish this argument, when you're looking for the new stream revenues for the future or it means the new service, it is just possible to deliver with the standalone: low latency, massive connection, slicing of the network. So why to deploy 2 years ago was sometimes a doubt. But 2 years ahead, there is no doubt about to use the standalone for that.

Mario, please?

Thank you, Leonardo. Thank you, Pietro. Just one information, complementary information. The structure of the bid is like that. You have the value of the frequency, and this frequency is discounted of the long-term investments. So the point is not what kind of investments you will do. Of course, it's more efficient, making the future-proof investment, is to correctly and carefully calculate the value of the frequency. So this -- in our opinion, this standalone, non-standalone debate is quite a no-brainer debate. Of course, we have to invest in something future-proof, and we have the big opportunity to discount it from appropriately calculated value of the frequency.

Marcelo, can I switch to the second question?

Yes.

Okay. About C6, it's better to remember the different element. And we cannot go into many details because, as you can imagine, there are also some elements of confidentiality in the relationship between C6.

But first of all, starting from the next quarter, we will show more level of details to allow everybody to monitor better the evolution. The elements that we are considering are 2. First one, is more related to something that have impact on our revenues, that is the commissioning and the activation related to our sales activity that we do in the name of C6 when we sell our package of mobile services jointly with the C6 offer.

These values are mainly related to the lifetime value of the customer. So it's a monitoring that we have to have, in the next 3, 6 months from the acquisition of the use of the customer of the banking services. I think that this is something really fair. And this is something that we will show you through all the next quarter to better allow you to monitor the evolution.

The second step is related to the increase in capital. There are some thresholds always related to the lifetime value of the customer that will allow us to reach up to the famous 10%, 15% of participation in C6 that really depends from the speed with which we will be able to accelerate our acquisition because it's clear that it's in the interest of everybody to have a faster acceleration of the acquisition process.

Again, also in the next -- the 20 -- in the presentation of the plan in the TIM Day of the 1st of March, we will give more disclosure about the targets. And again, we will allow everybody to have a better understanding of the monitoring of the evolution.

We'll move now to the next question that comes from Diego Aragão from Goldman Sachs.

And by the way, thanks for hosting the presentation with Zoom. The quality looks much, much better. So thank you for that. So my first question is on the postpaid business. The business is really improving. And it's now pushing, let's say, the overall results of the mobile segment. But we are -- we've also observed that TIM is somewhat lagging its peers in terms of net additions. So I guess my question is what is behind this relative weak performance on the postpaid? And what are you guys doing in order to improve results in the near term?

Thank you, Diego. I really appreciate your question because it allow us also to elaborate more on that. I think that it's important to remember that one customer doesn't mean that it's completely equal to one other customer. We are not counting bottle, or in some way, we can count bottle, but there are some bottles with half a liter of water and some bottle with 1 total liter of water.

What I suggest you to understand the difference of the use of the leverage of the ARPU is to do a calculation, looking at the amount of net adds and the growth of revenue, not year-on-year, in quarter-on-quarter. If you have 4x net adds, you should grow 4x revenue. If it doesn't happen, the risk is that your ARPU diluting or you are spending too much in terms of cost acquisition.

What I mean? Our focus is not to increase the amount of customer at any cost, as we mentioned in the past. We don't think that is right for our shareholder to get customers with -- postpaid customer with BRL 20 ARPU because it's happened also during the pandemic period that there was some leilão, some auction, sorry, in some area where you were able to get sometimes up to 1 million customer with BRL 10, something closely with 20 giga because this is something that then will disappear.

I think, as I mentioned during my speech, we are not looking for shortcuts that allow to show wonderful number in a quarter. We think, and I think that the number that we are posting are showing that, that our strategy from Volume to Value is allowing us to guarantee the growth of revenues to keep a level of margin that is the highest in the market. So we will not accelerate just to post better net adds. We think that we'll continue to post positive net adds during all 2021 that will continue to be able to improve ARPU also because customers are asking for more data.

And this is the way to monetize our investment. This is the reason for which I repeat, from Volume to Value continue -- will continue to be our move. We will continue to work to improve the quality. We have shown in the presentation that we were able to reduce 1 percentage point the level of churn. We are growing on ARPU, not only year-over-year but also quarter-over-quarter. So I don't want to look at just one KPI, but I would like to give a look at the overall picture of our strategy. I don't know if I was clear, Diego.

It was, Pietro. I guess it makes sense. I mean it's more about thinking on this strategy to shift from volume to value, it makes sense. I mean it indeed brings you an interesting client base.

And I guess maybe a follow-up question on this point and also on Marcelo's question related to partnerships. I guess we are seeing TIM seeking to create, let's say, a kind of ecosystem with partners like C6 Bank in order to leverage this relationship with a quite interesting client base as we were talking about and also leverage on the network and connectivity.

So I am wondering what are the possibilities for you going forward? I mean I can see IoT, financial service, customer relationship but -- and customer experience, sorry, but I would like to understand how fast TIM can move on those new initiatives, as well as what are the main goals for you in the next 3 years in order to improve the monetization of your customer base?

Thank you, Diego. Again, what we build? You're right. We are trying to create an ecosystem where the key element is -- the customer is the key element in this strategy, both for our core business, both for new sources of revenue. This is the reason for which we are working to increase the level of loyalty of our customer on the core business. Once we have a customer that is satisfied with the quality of our network, the price of our offer, the giga that he has in our offer and the quality of service that we are offering them, he will be happy to stay with us.

So it's easier then to use the same customer base as a new way to create new value for us and for our shareholder. How? In some other way, we have a lot of digital start-up or other company that are looking for a fast growth in terms of customer base. We have already 50 million customers. So the use of TIM as a sales channel in some way is a shortcut if you want to grow fast. And also, all the digital companies know that Brazil is different from the rest of the world. In Brazil, the penetration of credit card is not at the same level that we have in the other countries of the world.

So I have the possibility to charge the customer through a bill or through a prepaid recharge. I have the possibility to have a customer management through our call center. I have the possibility to use more than 2,000 shops throughout the country to show something is a value. And companies that want to exploit this value are more than welcome to do partnership with us.

This is something that we did with C6, and we are trying to replicate, and we have in our pipeline other 2 or 3 partnerships like that in different area from distance learning to telemedicine, to other kind of services. But I think that this is a trend. And again, when we look for benchmark, sometimes what's happening is that we don't have benchmark because the Brazilian characteristics are completely different from the rest of the world.

In the meantime, the know-how that we have on our customer base in terms of customer behavior, respecting all the LGPD routes, it's huge. And our company that are looking for the possibility to exploit that geo-localization, customer behavior in the payment, and this is something that we have already shown. We have mentioned some of the contracts that we already signed. What we can expect in the next 3 years, this is something that we will show you in number also on the 1st of March during the TIM Day that will show you better that we're expecting a contribution to the growth of our revenues coming from this kind of services.

And the business model that we are putting in place is something similar for some of these deals with what we did with C6, a remuneration for the sales activity, let's -- or the go-to-market activity and the participation in the stocks of the company in case of quotation.

Coming back to IoT, and this is the opportunity also to explain why perhaps sometimes we are more vocal on SA. We strongly believe on the IoT business model. This is not the case that we started in advance compared to our -- the other player. You know that we are the player with the widest network narrowband IoT that is already leveraging the 4G network for that. We are a market leader in the agribusiness. I can say that we are also market leader in the car manufacturing. So moving toward SA is the possibility for us to exploit this market position to move to the next step, that is the possibility to habilitate a lot of new sources of revenue. Sometimes, we try to explain better how we foresee the 5G with SA. I'm used to compare to the application store of Google and Apple.

Ten years ago, they put in place an ecosystem where no one had very well in mind the amount of application that could be developed. But if you didn't put that in place, this application will be never developed. We think that putting in place an SA 5G network will allow to develop an ecosystem, mainly in Brazil that has no limits in terms of possibility of new sources of revenues.

Again, perhaps I can seem a little dreamer, but this is true. And again, what we are able to do in less than 9 months, because let's remember, we started to discuss about new sources of revenue in March of 2020 with 2 PowerPoint charts. Everybody were asking us, "What is the benchmark?" And we know the truth that I'm proud to say that now we are the benchmark.

This is Vicente speaking again. We'll now move to the next question that comes from Maria Azevedo from Santander Bank.

So another question on 5G. How are you going to see the 5G opportunity for TIM in terms of the fixed wireless access and also on consumer mobility? I mean you have all those upsides on industrial automation and IoT, but do you see room for ARPU growth on the back of 5G for ARPU? That will be my first question.

Okay. Thank you, Maria. For sure -- again, also thank you to you because you allow me to put on the table something that was missed in my previous speech that perhaps is one of the first business model on the traditional core business that can justify at least a part of the investment on the 5G. That is the fixed wireless access. We are testing in these days in 3 different areas, with 5G DSS already the fixed wireless access functionality.

If you remember, we have been working for 3, 4 years on the so-called WTTx, that is, let me say, the old father of the fixed wireless access just to improve our learning curve. Brazil is a country in which fixed wireless access will be a good alternative to FTTH. It doesn't mean that it's better of FTTH as FTTH is not the only solution. What we image is a scenario in which you will have FTTH coverage and fixed wireless access coverage. We are studying in details where it's more convenient, the one, the first or the last. And we think that TIM is the player that is best positioned to exploit this kind of opportunity because we have no legacy.

We don't -- we are not scared that we are going to cannibalize existing services, both on consumer or on business side. Because fixed wireless access put under discussions, sometimes also leased line solution, ultra-broadband solution for small, medium companies, so on and so forth.

So we believe -- we strongly believe that fixed wireless access is a business model in Brazil that is a complement to the FTTH solution. And with the new company that we are creating to further accelerate FTTH, and the fixed wireless access using the 5G technology, we are the player that can exploit the most this situation.

Then again, moving on the 5G on mobile, I think -- but in any case, we are looking and we are studying because also throughout the world, you don't have so many use cases to do a right evaluation. In the short term, the 5G ARPU increase will be much more driven by a further acceleration of the data consumption that's not from the possibility to put a different price for 5G. Again, we are still at an early stage of the analysis of this opportunity. But if you ask me, what we foresee is that fixed wireless access, for sure, will be an opportunity. On the mobile, 5G could be an accelerator of data consumption increase, and we must be clever enough to transform this data increase in ARPU increase and so data growth monetization.

Perfect. And my second question would be on the more short-term. How are you seeing the competitive landscape in the coming quarters? Do you see room for price increases in 2021? And more for the midterm, like with the early signs of market repair, should we also see lower industry churn in a more healthy environment?

About the environment, impossible to price up. I think that I'm receiving at my home several bills from different utilities, also from pay TV services that are already doing the price up related to what's happened.

Keep in mind that the trend that I'm experiencing in the Brazilian market is that everybody are telling that the theoretical price up should be aligned with IGP-M, but they will do something lower. So for example, in some of my bills, instead to have an increase of 23.5%, they are putting something close to 9%. This is something that I'm experiencing also in the ultra-broadband environment. So I think that this is something that we will apply.

On the mobile side, what we will do is to follow the traditional more-for-more approach, we will proceed with the price up. But in the meantime, we will put more giga for our customer because it makes a lot of sense. We are discussing about customer satisfaction. But in the meantime, we have to guarantee to all our shareholders the right return on investment. And the way to reduce customer claims of misperception is the more-for-more approach. I can talk for TIM for sure because again, then I'm unable to know and understand what will do the other telco player.

Then about the next step, what I think is that in the next year, we will have a competition because, again, it's important to state, we will continue everybody to compete because this is what we are paid for. This is what is important for the customer, but the difference could be that there could be a more clever competition base in the capability to offer the best quality at the best, at right price for the customer, that we think that it's something that's very useful for the customer. But in the meantime, in a rational way that we guarantee, the return on the investment that can guarantee the improvement of the quality of the service in a so huge country as Brazil. So it's not a country. It's a continent.

Now we'll move to the next question that comes from Cristian Faria from Banco Bradesco.

Okay. Okay, I had 2 related to the FTTH spin-off that will take place in the first quarter. The first one is related to the start of the journey, if you can share information regarding the primary offer and the secondary offer, if the company aims to sell just one part or just take the money in order to improve the growth and invest -- continue to invest in the growth of the FTTH deployment?

And second, since the company has already posted like 33,000 net adds per quarter, and what should we expect in terms of growth looking forward if the company seeks room to continue to grow this number? And what should be the strategy in terms of regions?

I'll leave the stage to Adrian to give you more details, he is leading all this process. But let me point out one element that sometimes we forget in our explanation.

We are the only player with no legacy base on fixed network. This is really important because if we increase the coverage with the project that Adrian will illustrate, we will have all delta revenues, while other players have some more problem related to the fact that having an existing customer base, the difference that they can have also a delta ARPU compared with what they already have. I think that this is an important point that show as our return on investment on FTTH could be completely different from the return on investment of players that have already in place an existing network.

Adrian, please?

Yes. Thank you, Pietro. Regarding the FiberCo. project, as we mentioned, we are in this final phase. We received several offers. So we are really satisfied with the evolution of the project. We are targeting to reach a signing by the end of March, probably in the first weeks of the second quarter. But the most important thing is that what we saw is a lot of interest coming from different parties.

Specifically in your question, for us, this is an industrial project. It's not a financial project. So what we are looking for with this spin-off with this FiberCo. project is to evolve on our fixed ultra-broadband business because we see that there are a lot of opportunities, as we saw in the last 3 years. You know that we are growing on revenues something between 25%, 30% year-on-year, always with our fixed ultra-broadband. We feel that there are still opportunities there. We need to continue to deploy our networks. And for that, that's the matter of this project.

So this said, we think that there will be primary and secondary proceeds. We need to be very equilibrated on this, always looking at the industrial side of the project.

So again, we are on the final stage of the process. Probably we can give you additional disclosure at the beginning of March in our TIM Day when we will be communicating our plan. But we are honestly very satisfied with what we have so far.

Now we'll move to the next question that comes from our chat. The question comes from Felipe Cheng from Crédit Suisse, and I'll read for you guys.

Can you please comment on what was the main reasons for a sharper decline in prepaid revenues versus the previous quarter? What do you expect in terms of prepaid growth for 2021? Could we see a negative impact coming from lower government aids?

Thank you, Felipe. Please, Pietro and Alberto.

Felipe, thank you. First of all, what's happened related to the fourth quarter, if you divide the fourth quarter in the 3 months, the concentration of the decline was mainly in December.

As you remember, December in Brazil for the prepaid, mainly the buzz was a month with a higher level of seasonality. In some -- usually, just to share with you, the level of recharge during the month start with the first 15 days higher and second 15 days lower.

December was an anomalous month because due to the decimo terceiro salário, I don't know how to say that in English, you have the first 15 days high and the second 15 days high because it's like people will get 2 salaries. What's happened is that this year, the seasonality of December was much lower compared to the previous year. And the concentration was exactly in the last 15 days of December. Some of the explanation that we have shared internally was also related to the fact that the so-called decimo terceiro, a lot of company paid previously during the year to support part of the necessity of their employee. So we don't think that this is something that will be or will continue during the year.

About the auxílio emergencial, I leave the stage to Alberto with which we are sharing in these days, an in-depth analysis to understand if the auxílio emergencial was an offense about that. But I leave Alberto the possibility to explain.

Well, a few comments on this. When we look at the outlook for 2021 for this year, there are a number of factors that need to be considered. The first one is that what we believe is that telecommunication is more important to customers than it was 1 year ago. And this is clearly a mitigating factor in terms of the trends for this year, meaning that when you look at the trade-off of telco versus other products, especially for prepaid, we see prepaid in a better position this year than it was 1 year ago.

When we try to correlate the effect of -- I think there are 2 main factors here impacting the trend of prepaid recharges that are the auxílio emergencial and the lockdown that came back into action this year, especially in some states. When we look at the correlation of the auxílio emergencial, it's difficult to say that there is no impact at all because we are talking about, on average, BRL 30 billion that the government put into the economy over the last 9 months, even though over the last 3 months, this number was lower.

The first step-down in this amount was in October, and we didn't see a material impact. As a matter of fact, the number of recharges, rechargers and the people who recharge have been growing last year after the first cut. And when we look at what is happening in January, we see a limited correlation. We see more correlation with lockdown in specific states. So when a state goes locked, we see that the recharge tend to decline, primarily because people are at home in our view and use more WiFi that don't have a need to recharge.

So I think that these 3 elements, the top of mind of telcos, lockdown are more relevant rather than the auxílio emergencial itself.

But our view for 2021 is positive, also on the prepaid.

So with this question, we are finishing our Q&A session, and we'll move to the closing remarks of our CEO. Thank you very much.

TIM Brazil, once again, showed it has very solid fundamentals. We continue to deliver on the promises we made. And we have a very clear strategy to guide our actions. As I always say, being focused and agile are key to reaching our goals. As I do every quarter, I really like to thank the dedication and commitment of our team who is overcoming great challenges and delivering great results, #juntossomosmais.

Thank you for participating in our conference call. Stay safe and healthy. I hope we can virtually meet soon in the upcoming events we will be doing with the financial market. Remember, on the 23rd, we will be disclosing the update of our industrial plan. After the Telecom Italia Group event on the 24th, we will host a TIM Brazil Day on the 1st of March to go into more details of our plans going forward.

Thank you, Pietro. So now we can conclude our fourth quarter results conference. For further information and details of the company, please access our website at tim.com.br/ir. You can disconnect from now on. Thank you once again.