Tim SA (TIMB) 2023 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to TIM S.A. 2023 First Quarter Results Conference Call. We'd like to inform you that this event is being recorded. There will be a replay for this call on the company's website. (Operator Instructions)

We highlight that statements that may be made regarding the prospects, projections and goals of TIM S.A. constitute the beliefs and assumptions of the company's Board of Executive Officers. Future considerations are not performance warranties. 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 their performance and lead to different results than those planned. (Operator Instructions)

Now I'll turn the conference over to the CEO, Mr. Alberto Griselli, CEO of TIM S.A.; and to Ms. Andrea Viegas, Chief Financial Officer to present the main messages for the first quarter of 2023. Please Mr. Alberto, you may proceed.

Good morning and thanks for attending our results conference call. I'm pleased to welcome here today Andrea Viegas, our Chief Financial Officer, who was recently promoted to this position from within our ranks. Her extensive knowledge of TIM and the industry will be a great asset to our C suite. And in her debut as CFO, we are presenting a set of some numbers to the market. This first quarter was again a reaffirmation of the new moment of the company with outstanding achievements due to the sharp execution of our strategic plan. We have completed 100% of the M&A integration process while overcoming many obstacles related to macroeconomic deterioration and dealing with the uncertainties of a noisy political environment. Our top line rose more than 20% year-over-year with EBITDA growing 23%. This combination led to a margin expansion and operating free cash flow to double versus the first quarter of 2022.

During the quarter, we closed a partnership with Way Brasil to cover 600 kilometers of highways in the country's midwest. This type of agreement makes sense economically and transforms people's lives in a perfect integration with our ESG strategy. Our coverage will benefit nearly 300,000 people, more than 100 public schools and over 40 health centers. We are also well positioned to reach our goals in decommissioning process with more than 1,500 sites dismantled since November '22. Going over the details of our business performance, I want to highlight our revenue dynamics. In the first quarter, total service revenues grew more than 20% year-on-year with a relevant contribution from mobile services that expanded beyond 21%. With a rational competitive environment and the end of the necessary post-M&A adjustment to our mobile customer base, ARPU is back to positive growth reaching nearly BRL 28 per month.

Analyzing the mobile segments individually. Postpaid revenues presented robust growth up by more than 21% year-over-year with an ARPU excluding machine-to-machine lines of BRL 48 in the first quarter. Prepaid revenues expanded soundly at a pace of more than 27% versus the first quarter of 2022 pointing to an ARPU of close to BRL 40. As mentioned earlier, ARPUs in postpaid and prepaid are starting to recover after the dilution created by Oi's former clients' arrival and after the clean-up of silent lines. We also reclassified lines from postpaid to prepaid in March to correctly manage those customers. Since I'm talking about Oi assets impact, it is worth giving additional details of the integration completion. In March, we concluded 100% of all the network integration steps. We are using the acquired spectrum and clients are benefiting from the additional capacity. The nonoverlap sites were integrated into our network helping to expand coverage and improve customer experience.

As for the client migration, we completed all the activities regarding those clients in April executing the major clean-ups and reclassification necessary to have a current and healthy customer base. Having finalized those actions, we are starting to see more and more of the benefits of these transactions. Synergies are becoming more apparent in our results with the exception of decommissioning process, which is still in the early stages. Also we had physically decommissioned more than 1,500 sites by March '23. The financial impact of this dismantling process will amount to a relevant size towards the end of the second half. In mobile, our 5G strategy is paying off. We are being able to combine positioning and efficiency to build our solid leadership in this technology. TIM has the highest availability 5G technology as a consequence of defining the most relevant markets and ensuring we have a large and meaningful coverage in them.

This leadership was achieved with almost twice the number of 5G sites than our competitors. Additionally, 5G's successful rollout is allowing us to reduce CapEx related to 4G capacity as traffic offloads from the older network to the new technology. As we advance from our volume to value strategy, we keep improving our clients' customers' experience. We still have a long journey ahead of us, but we are achieving relevant milestones. The number of complaints is reducing steadily and we are the least complaint operator in Sao Paulo Consumer Protection Agency with a 50% reduction year-on-year in the last survey and the least complaint in prepaid at Anatel. Additionally, we are by far the best performing operator in resolving clients' issues. We have been leading the Anatel Complaints Resolution ranking for more than a year now. More recently, we achieved the fourth position in resolution ranking across all sectors in all PROCONs, the consumer protection agencies.

In this resolution ranking of Reclame AQUI portal, we rank #2 among all companies in Brazil and the only recommended among operators. In the fixed services, the growth driver remained TIM UltraFibra with solid performance. Fixed broadband revenues presented a high single-digit expansion. Broadband ARPU grew year-over-year for the 17th consecutive quarter reaching almost BRL 93. Our broadband continues to be driven by the successful migration from FTTC to FTTH. Nonetheless, during the first quarter we also saw net additions to pick up after the launch of the pilots to expand coverage in Parana and Santa Catarina states. We closed the quarter with a client base beyond 730,000 connections and we are now present in more than 70 cities. This expansion is being achieved without losing the quality and focus on customer experience. For the sixth year, TIM UltraFibra was appointed the Best Fixed Broadband in the country by the tech portal Canaltech.

I will now pass the floor to Andrea to review the financial results.

Thank you, Alberto. I'm grateful for the opportunity to serve as the new CFO of TIM Brasil. I'm very excited to work with you and the rest of the leadership team to driving this company towards success. I also look forward to building a strong and lasting relationship with the financial community. Without further delays, let's talk about numbers. As Alberto explained well, the first quarter signals a robust performance in all relevant lines of our results. The country's macroeconomics challenges and the uncertainties have not impacted us at least yet. Our performance continues to be driven by the M&A integration and the organic growth. Despite inflationary pressure, our OpEx line started to decelerate as we are reaching the end of the integration process of Oi Mobile assets. As a consequence of this and the revenues robust pace, our EBITDA is rising more than 20% year-over-year reaching BRL 2.6 billion.

Under this scenario, the EBITDA margin is returning to expansion after a year of contraction due to additional costs related to the M&A transaction. In comparison basis the margin rose to 46%, an expansion of 100 basis points versus the first quarter of 2022. Regarding those 2 elements, this is the first quarter we have a fair comparison base for fiber last mile rental. On the other hand, the negative impact of the temporary service agreement with Oi was still present in first quarter '23. The contract ended only in April. From now on as of present in our guidance that we believe TIM will deliver margins above the 2022 levels. This excellent EBITDA performance is driving net income back to growth despite all the transitory impacts we have presented and explained to you in the recent past. We closed the first quarter with profits summing almost BRL 440 million, growing above 4% year-over-year. Those transitory elements are still present.

During the quarter, more than BRL 207 million were added between depreciation and the interest related to the leasing contracts we have got from Oi. Additionally, during first quarter '23 we saw negative impacts from a provision updated for our civil contingents. We did not announce IoC will declare the first tranche only last month. But the own deposits side, we had elements such as the negotiation of tower contracts and the useful life of assets that helped our performance. As mentioned last quarter, net income performance is still volatile. So a better way to understand our evolution is to use operation free cash flow metrics. EBITDA after leases minus CapEx grew more than 2x reaching more than BRL 530 million. Under this circumstance, we maintained a solid financial position and leverage level. The net debt to EBITDA ratio stood at 1.4x with a total net debt including leases of BRL 15.1 billion. Again this sustainable trend leave us comfortable in a scenario of high interest rates.

Now I hand the call back to Alberto to complete the discussion related to the first quarter.

Thank you, Andrea. We are completing 1 year from the closing of the transaction with Oi. During this period, our efforts concentrated on integrating the assets and executing the company's transformation plan and we are reaching an important milestone with the completion of the integration, but we still have a lot in front of us. Our focus for the coming quarters will be centered on having a healthy competition environment where we can recover inflation impact while using other tools of the marketing mix to differentiate from our competitors. We want to compete on value proposition and customer experience and 5G can help us do so while saving CapEx. As I mentioned during my speech, we are only beginning to start the decommissioning process. The plan is on track and we are committed to delivering on time and with all the expected benefits. For fixed broadband, we will continue to use the asset-light model to expand testing this approach in new markets while we complete the migration from FTTC to FTTH.

The coming quarters for customer platform initiative will be more exciting. We will soon deploy commercially our partnership with Cartao de Todos, our health partner, and new partnership will be launched. Lastly, we will continue to evolve our B2B verticals. We are expanding our activities in logistics with this like the one with Way Brasil bringing IoT connectivity and solution to Brazilian infrastructure. On the utility vertical, we doubled the number of smart lighting points since the third quarter of last year and the expansion will continue at exponential speed. Today, Engie is our main partner in these projects. And for our crown jewel, the agribusiness segment, we extended our coverage to 14.4 million hectares connecting fields, farms and countryside communities all over Brazil. I'm reaching the end of my comments and I want to thank the entire team because we are starting the year at a strong pace. Things will not get easier from here so we must keep up with the great work, maintaining the focus and the execution to reach our goals by the end of the year.

Let's open the floor for questions. Please, operator.

(Operator Instructions) Our first question comes from Marcelo Santos with JPMorgan.

I have 2 questions. The first question is could you please just explain the reason for the gap between the physical decommissioning of the towers and the financial impact? I think clarification would help. And the second question is on broadband adds. How much of the fiber adds you're doing are a replacement of fiber to the curb? And when you're done with your fiber to the curb, I mean at this pace eventually you will run out of fiber FTTC subs, should we expect kind of the same level of gross adds in fiber? That's the question.

I'll take both, Marcelo. So in terms of the gap between the physical decommissioning and the economic decommissioning, it's primarily related to the interworking among ourself and the tower company to get, let's say, the green light for the economic decommission. So it's like when you rent an apartment and you leave it, you need to take out all the stuff that you have inside. Then at the end of it there is an inspection and if the apartment is found clear, then we are good to go in terms of economic decommissioning. So the first step, which is the physical one, is taking all the equipment out of the towers whereby the second one is related to the interworking among ourself and the tower company to make sure that then a green light the fact that the tower is empty. So this in practice is a back and go of documents, picture and inspection to make sure that both us and our partner are clear that the tower is empty. So this is for the first one.

In terms of timing, it depends on the tower company, on the process, on the equipment that is there. But roughly the guidance that we gave is once we are done with the physical decommissioning, it generally takes among roughly 90 days to move from the physical to the economic decommissioning. Related to the second question in terms of net additions. As you correctly show, there is an acceleration of net adds on FTTH in this quarter. So this is a combination of the migration of copper to fiber, which is happening primarily or better exclusively on the I-System plant in Sao Paulo and Rio de Janeiro. So our share of FTTH was 60% 1 year-ago, it's at roughly 80% today. So we are moving faster, we are almost completing the process. When you look at the increase that we saw for example in this quarter and what we are going to expect for the following quarter, it's the combination of the 2 things.

So the migration of copper to fiber, which is almost finished and the increased coverage of new regions. So with the agreement with V.tal, we move to Parana and Santa Catarina in the South and a chunk of the net additions is coming from there as well. If you ask me how it will look going forward? It will look closer to what we are seeing in this quarter. So we moved to something like 15,000 net additions, 16,400 to be precise in this quarter. This number was a bit below this number in the previous quarters, year-on-year we moved from 5,000 to 16,000 and we are likely now to basically move steadily on this level going forward.

The next question comes from Marco Nardini with XP.

I actually have 2 on my side. The first one is regarding the expected dynamics of EBITDA margin following the end of the TSA with Oi. What should we expect here? And the second one is regarding neutral network. I was wondering if you could share your initial experience with V.tal and provide some insights into the expected growth in economics of this new partnership, please.

Okay, Marco. So on the first on the EBITDA margin, we said in our guidance for '23 that we were expecting to move up double digit. This implies clearly a margin expansion versus last year and so we are basically aiming to get to a level close to the one we have the previous year. The margin expansion is driven by a number of things. And so as you correctly mentioned, there is the conclusion of TSA that we remember it was something like BRL 70 million per quarter roughly. So we closed it at the end of the last quarter. And there are other additional opportunities related to the Oi customer base, which is in general less digitalized versus ours so in terms of digital billing, fixed payment and this sort of stuff; there is an opportunity there. And there is a number of initiatives that we are running inside our own operations that are related for example to the insourcing of e-commerce and many other activities that are expected to increase our productivity.

So there will be a margin expansion going forward and that's the reason why our EBITDA is growing double digit versus high single digit over our expected revenue growth. When we go to the neutral network, I can say that we are happy with both I-Systems and V.tal, the experience so far has been quite positive. We can say that now the model is working correctly so we are satisfied with the service level and the working of both agreements. In terms of how we are going to accelerate the 2 networks that we are using, it's in line with our plans and so they are complementary. So at the end of the day, we're going to use I-Systems to expand coverage in some areas and we are going to use V.tal where I-Systems is not present. So we're going to complement the rollout approach to avoid building a network where there is already another one.

Our next question comes from Lucas Chaves with UBS.

So I have 2 on my side too. The first one is related to ARPU. If you could please enter in more details in the dynamic that you saw in the quarter and what you expect going forward? And about raising prices, do you expect to perform any of it during the next quarters? And the second one is the decommissioning. So you already explained well in the first question about the decommissioning, but I also like to enter in details about the schedule and the timeline.

So Lucas, going to the ARPU dynamics. So the ARPU dynamics as you saw, we are back on track in terms of ARPU growth both for prepaid and postpaid and this is primarily the result of the clean-up of Oi customer base. So let's put this way, it's a sort of a mathematical effect. So we clean-up almost a big chunk of client that were not active and therefore basically we reduce the denominator while impacting the revenues. And we expected this and we commented this in the last quarter results also. When you look more in general in terms of the pricing dynamics, so I think that here we have 2 important milestones. The first one has already passed has been related to the fact that prices have been adjusted a bit above inflation on the entry prices what we call above the line. That means prices at retail stores and on the website for new customers. So this happened in March and it worked out quite well. So that was the first important milestone.

So we did it and (inaudible) did it partially so we decided to manage for the first time in many years to pass inflation on the enterprises. What is going to happen now in this quarter, as a matter of fact is happening, is the price adjustment on our side on our own customer base. So we did that last year in this quarter, in the second quarter. We are going to do this in the second quarter this year and so we are updating prices for control and postpaid this quarter. So you will see the results in the next quarter results. I think that important point that is going to be another key point to look at next quarter is the washing machine effect that generally happens when we do this price adjustment on the customer base. So the thesis is that since the market is more rational and since we moved up the prices on the entry levels, the washing machine effect in the second quarter is going to be this year milder versus last year. So we're going to comment on this in next quarter, but this is the expectation on our side.

Last comment is on prepaid. So we have been steadily increasing or remodulating the prepaid benefits and it's working out well as you can see in terms of our prepaid revenues. And so we are readjusting unit prices within face value and benefits with a positive effect on our revenues. When it comes to your second question related to decommissioning so we are on track, Lucas. So we end up March with 1,500 towers decommissioned physically. We are as this week at 2,100 so we are moving according to our plan. That means that we're going to reach 3,500 by the end of this year roughly. The economic effect is going to pick up in the second half because this is this difference between the timing when we decommission and the timing when the economic benefits kicks in. But so far, we are on track.

Our next question comes from [Luca Brendan] with Bank of America.

Two questions here from my side. First of all when we look at the impacts from the 5G expansion, were you able to see any signs of capitalization from this? I mean monetization from the 5G if you're gaining new customers or if you're being able to upsell customers with 5G, what have been the early impacts from the rollout? And then second, if you could give us an update on CapEx if there were any changes from what you initially expected for the year?

Okay. Let me go with the first one. I will pass on the CapEx guidance word then to Andrea. So in terms of 5G impact, let's put this way. At this point in time, we are deploying 5G in a quite different way versus our competitors meaning that we selected several markets where we go all-in or sort of all-in in terms of coverage. What is our aim with this strategy? On the commercial side is to get the leadership on 5G and close the gap that we currently have in the high value customer segment. So it's more of a positioning approach rather than a monetization approach at this stage and that's the reason why we selected capital like Sao Paulo, Rio De Janeiro; we've got almost full coverage. We provide a better service to our customers and we increase the appeal of our positioning for the market. So this is the idea on the consumer space. The storytelling is 5G is better than 4G. This is proved in terms of quality of service.

We are leading 5G so it will become more attractive for high value customers. We materialize this for example in big events like Rock in Rio, like the Maracana Today, like the Carnival and all the events that we are doing where generally customer experience for services and now with TIM we got a very good service. So this is more of a positioning approach on the consumer space and of course this is supported by deployment of 5G, which is faster versus our competitors. The more economic benefit of it in the short term is related to the 4G offload. So what does it mean? That when we put like for example in Sao Paulo or Janeiro, Curitiba, Recife; we are deploying new capital in new metropolitan areas as we speak; we move traffic from 4G versus 5G. That means that we can stop investing in these crowded markets 4G and move the investment with 5G. By doing this short shift of investment from 4G to 5G in these key capitals, we become more efficient in CapEx.

So this is more tangible in terms of economic impact at this pace. Then we have also the business segment where we are using 5G again as a differentiation lever in key verticals like agribusiness or the logistics like the partnership that we have with Sao Martinho, which is the 5G innovation center or the coverage of the Santos Harbor with BTP, which is again a way to monetize it. But at this point in time, it's the first industrial project that we are running on it so it's more. Going forward as coverage expand, as we move customers to 5G; the first opportunity to monetize 5G will be the data monetization itself and plus, as you probably know, we are putting services in our 5G packages like cloud gaming that as soon as the mass of customers are on 5G, we can start to monetize. Today it's more of an educational approach in terms of giving our customers 5G experience and for them to decide that it's worth or not worth paying for. On the CapEx guidance, I will pass it to Andrea.

Luca, regarding to CapEx, we are on track. This first quarter we have higher CapEx as a seasonality point, but we are achieving our guidance that is CapEx over revenue lower than 20%.

(Operator Instructions) Our next question comes from Daniel Federle with Credit Suisse.

The first one, we have been seeing mobile services revenues growth slowing down a little bit quarter after quarter. My question is if you expect this trend to continue in the second quarter this year especially because the second quarter last year was a very strong one so very hard comps. So first question is when do you expect to see growth stabilizing or reaccelerating? And the second question, Anatel has just published a few weeks ago actually the annual quality survey. It seems that TIM still ranks third. So my question is whether this is a point of concern for the company and if you have any expectation in terms of timing to close the gap?

Daniel, let me get the 2. So in terms of revenue dynamic, what you're saying is sort of correct. So if you look at the service revenue dynamics, we 44%, 22%, and now 21.1%. So there is a slowdown. A lot of this is also related to the fact that price movement -- there are 2 main factors here. So there is the effect of our Oi customer base. As you probably know, we bought 40% of it so there is some cancellation which is without revenue. So let's put this way so there is no revenue impact in reclassification and customer cancellation, but there is also a net leakage of customers that happened throughout the migration process. I think that the intensity of this migration of leakage of revenues is slowing down as people who didn't want to stay with TIM already left. On the other side you have our, let's put this way, organic dynamics which is positive and in line with previous trends.

So today when you look at for example the 21.1%, in the next quarter it's going to be lower because we won't have Oi in it and so we'll have just a month of Oi in it. So you will go down on a sort of organic performance and then moving from the third quarter and the fourth quarter, it's just going to be organic. So you will see a revenue deceleration because we're going to lose the inorganic drive that we had on the last quarters. So the guidance that we are giving is that we're going to grow above inflation. So this is a big change versus previous years when as I said we couldn't grow above inflation. So our expectation is to grow above inflation and this will result in a high single-digit growth this year. So it's correct that you're going to see revenue slowdown in next quarter, but it's more of the fact that we're going to lose a bit of the inorganic on a year-on-year basis. And you will see the real performance of the new organic TIM that is going to be in our expectation above inflation. Is that clear, Daniel, as dynamic?

Yes, totally clear.

So the next quarter is going to be good for this because you're going to have a pretty good sense in terms of what is organic and what was the Oi element of it. When it comes to the Anatel survey, I would say the following. I see this as a big opportunity on our side. So it's not an element of concern, but it's a big opportunity. It's a matter of fact that we are third and if you look at the difference between us and our competitors in prepaid, it's almost sort of very small, it's a bit higher in postpaid and that's exactly where we want to improve our position. So there are a number of initiatives within the company to address customer experience. So this is a key element of our strategic plans and a key area where we are putting a lot of efforts.

So when you look at the 2 main elements are generally the customer care quality and the network quality and we got plans on both sides to improve our relative positioning especially in the high value customers. And if you look at the progress that we are having at Anatel for example, if you look at Anatel complaints April, I think they're already public, we went 50% down year-on-year. If you look at our Resolvability Index at PROCONs, we are the best performer among our operators. At a certain point, this will translate in customer experience. So I would say that we have already a lot of hard elements with us. Now this would translate in customers' perception as well. So this is an opportunity where we can close the gap with our competitors. So it's not an element of concern, but it's more of an opportunity.

The next question comes from Felipe Cheng with Santander.

I have 2 on my side. The first question is related to dividends, if you could provide us an update for dividend distribution in 2023. It seems like you're on track to generate a lot of cash in 2023 probably at a much faster pace than the BRL 2.3 billion dividend guidance for this year. So just wanted to understand if there is room for potential upside here in terms of the distribution. So this would be my first question. And my second question is related to ultrabroadband. If you could provide us an update how the partnership with V.tal has been evolving. If there is in you view a significant upside risk here regarding ultrabroadband growth for the upcoming years.

Felipe, I confirm we are on track in our dividends and we still with the BRL 2.2 billion that we put in our guidance. For now, we have no further update in this information.

And Felipe, for the broadband, as we said, if you look at the competitive environment, it's tough. So there is a lot of competition in all key markets. And so what we are aiming in terms of our broadband expansion is to grow maintaining our -- let's say with coherence between volume and value. And this translates in a certain growth speed, which is in line with what we are looking at today, which is high single digit. We're probably going to accelerate a bit versus towards the year as the effect of increased net additions. But we're always looking at a good balance between growth in terms of volume and value. So we are very careful not to dilute our ARPU. We've been ARPU growing for 17 quarters now. We've got the highest FTTH ARPU in the market. And so we are happy at this point in time with the speed of our growth in broadband and so basically that's the balance that we are striking every quarter.

The next question comes from Carlos Sequeira with BTG Pactual.

My question is really a follow-up question on a few questions that were addressed on exploring V.tal's neutral network to grow the fiber business. I was just wondering if you can give us some more color on how the project is performing in the south and what is the next step. I mean if you're going to explore the agreement in the south of the country where TIM has a very strong brand and maybe then move to other regions. How you are seeing the project moving and how it is performing today, please?

Carlos, so the pilot in the south is proceeding well. So if you look at the net additions in those regions, you will see that we moved up quite fast versus our competitors. So the expansion that we are having in the south is the pilot so far is good. What are the elements that we still need to prove? Generally speaking when you enter a new area especially in an area that we selected because we've got a strong brand and a lot of credibility, it's quite positive in terms of net addition because you don't have churn. So you have a gross addition without the churn impact. So what we are really looking down there and it takes some time to get the final conclusion if it's positive or not positive, so far it's positive in terms of net. I think we've got the leadership in Curitiba in February already. The point is that we need to look at the quality of these acquisitions.

And so that's the reason we need another couple of months to wrap it up in terms of finally positive because that's quite an important aspect of the value balance. So putting inside customers that stay with us without impacting churn or our collection rates. And this process takes a few months because people enter and then you receive the first bill after a few months and then the time to pay. And so, so far it's good. We still need some time to look at this other aspect, which is related to the quality of the acquisition. The response from the market has been quite positive in terms of gross addition sales. This translated in a good net performance and we just need to check the quality of these gross additions. So far good and from there when we finalize this, we're going to disclose the next step.

Without any more questions from analysts, we will now start the public Q&A session from the webcast platform. The questions will be read. Please, Mr. Vicente, you may proceed.

So the first question comes from Tristan from GAMCO, it's buy side. So his question is how big of an opportunity is agro coverage? What is the total amount of farmland to cover? Will satellite coverage be needed to supplement? Alberto, please.

The opportunity is quite huge in terms of coverage because today we basically cover 14.4 million hectares and this accounts for something like 20% of the specific big farmers that we are aiming at. So we just cover 20% of the addressable market and so the opportunity in terms of coverage is quite high. The satellite can certainly be a complementary technology to provide coverage in those areas. It depends a lot on technical requirements for the customers. So to give you an example, we use ourself satellite as backhauling in some of our solutions, but it depends on the requirements especially in terms of latency of our customer base. So if they want a good responsiveness, then satellite doesn't work at least geostationary satellite. If they look for something where latency can be allowed for, then it works. But I think that given the nature of Brazil as a continental market, there is opportunity for mobile and for satellite as complementary technology.

Just a recap on the business model on our side. We make money by selling the infrastructure -- not selling, by buying infrastructure for our customers so our customers pay for it plus a markup and then we monetize the services in terms of connectivity and solutions on top of it. There is also an ESG implication because generally when we provide this coverage, we provide digital -- we provide coverage to a lot of people. They live there, work in the farms. So if you look at our current coverage of 14.4 million hectares, we have more than 1 million customers living in those areas that didn't have access to telecommunication services. And when we go there we get, let's put this way, some incremental consumer revenues from those customers as well besides providing connectivities for them and including them digitally.

Now we'll move to the next question that comes from Michael Hodel, analyst from Morningstar. And his question is can you comment on consolidation opportunities in the broadband and fiber infrastructure market?

So when you look at Brazil and you look at the number of operators there, you certainly see a lot of consolidation opportunities because there are too many players generally where there are a couple of them. So when we look at this, you see that you got a lot of ISP and so the first wave of consolidation that is already happening is among themselves. So there are large ISP buying a smaller ISP. I would say that we envisage a way where ISP will consolidate among themselves. That would be a first wave of consolidation. And then there will be a second wave of consolidation where big players will potentially or possibly or eventually consolidate ISP. Some of them probably be part of this process. Some of them are going to be out of the market. And the same consolidation process may happen also on the infrastructure on the neutral networks. As you know, there are several neutral networks there so ours, Vivo's, V.tal and doesn't make sense to overbuild or to have 2 infrastructure there so there might be some consolidation happening also at the neutral network level.

The next question comes from (inaudible), analyst from HSBC. And his first question goes can you talk about the net add trends with regard to why TIM lost subscribers this quarter and when we can see an inflection point on the total net adds? I think Alberto already comment on this, but if you have any additions to that, Alberto, please.

See [Fanny], this first quarter was more difficult to read because of all the clean-up and the leakage of our customer base together with our performance. You will see an inflection point in the second quarter. So in second quarter, we should be able to have a much less effect of the Oi customer base and the performance will be more in line with our organic performance. On the TFF...

Let me make the second question because the audience hasn't seen that yet. Fanny's second question is, is there any update on the TFF, which is the maintenance FISTEL payment that was suspended since COVID? Do you expect the payments to be in a single installment or will it be staggered? Andrea, please?

Related to the payment of TFF, the payment was -- the discussion about this is in the federal court and now is under analysis. We don't have any update about the date for payments.

The next question comes from [Hudson Cabral], he's an individual investor. And his question is how is going the installation process of the massive MIMO on TIM antennas? In this question, I will ask the help of Leonardo Capdeville, our CTIO, please.

We consider the massive MIMO as an active technology for the 5G or means that 100%-ish of our 5G antennas already include this technology. But we have to remember that we innovated and we anticipated the usage of the massive MIMO on 4G. So we installed the massive MIMO on 4G. We started that almost 3 years ago and we can see very difference in terms of capacity, quality where now we are using this kind of technology. So again in 5G 100% and in 4G we are using massive MIMO in place that makes sense for the reason for capacity or quality. So it's going very well.

I think with this, we finish our questions and answers. So operator, please.

Ladies and gentlemen, without any more questions, I am returning to Mr. Alberto Griselli for his final remarks. Please Mr. Alberto, you may proceed.

Thank you, everybody, for attending today conference call. I want to thank again our management team and all our team listening our result this quarter. We are in track in terms of delivering what we promised to the market in terms of guidance, remembering growth of inflation above -- growth of the top line above inflation, expanding EBITDA margin, increasing CapEx efficiency and a plan to double our cash flow in the planned 2023-'25. Thanks again to the team and I look forward to meeting some of you in the next interaction.

This will conclude the first quarter of 2023 conference call of TIM S.A. For further information and details of the company, please access our website tim.com.br/ir. You may disconnect from now on. Thank you once again.