Telefonica Brasil SA (VIV) 2012 Q3 法說會逐字稿

Good morning ladies and gentlemen. At this time we would like to welcome everyone to the Telefonica Brasil Third Quarter of 2012 Earnings Conference Call. Today with us we have Paulo Cesar Pereira Teixeira CEO of Telefonica Brasil and Ms. Cristiane Barretto Sales, Controller Director of Telefonica Brasil.

Today we have a simultaneous webcast with slide presentation on the Internet that can be accessed at the site www.telefonica.com.br/investedores. There will be a replay facility for this call on the website. After the Company's remarks are over there will be a question-and-answer section. At that time, further instructions will be given. (Operator Instructions).

Before proceeding let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the Company's management beliefs and assumptions and on information currently available. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the Company's of future results and could cause results to differ materially from those expressed in such forward-looking statements. For comparative purposes the 9M '11 figures were prepared on a combined basis, thus the annual variations presented may differ from those reported in the financial statement filed with CVM through the form quarterly information-ITR.

Now I will turn the conference over to Mr. Paulo Cesar Pereira Teixeira, CEO of Telefonica Brasil. Mr. Teixeira, you may begin your conference.

Good morning ladies and gentlemen. I would like to thank you all for attending this conference for the third quarter 2012 results of Telefonica Brasil. These are the highlights of today's call.

In this quarter we continue to see the results of our quality focus. Vivo remains a leader in succession with the mobile and fixed customers. And for the last three months we have been one of the top players in attendance index IDA. The better perception combined with new offers that value the convergence like Vivo operators are already producing good results in fixed voice.

In mobiles we continue our move towards generating value and solidifying our leadership and higher revenue segments. Our results are showing the consistency of our strategy with healthy growth in the mobile and improving trends in fixed revenues.

The margin for the quarter reached 34.4% reflecting our consistent rational commercial approach, even in face of (inaudible) commercial movements from our competitors. Lastly, I will share with you an update on the actions included in our five strategic pillars I present to you last quarter with highlights to the recently announced commercial launch of our new IPTV platform.

On page five, our differentiated and growing quality is once again evident. On the left side you can see that our attendance index measured by Anatel maintains a large gap compared to competitors in mobile and account systems improvements in fixed. Additionally on the right side we see the perception of customers goes in the same direction. After Anatel's recent ban on sales for some of our competitors Vivo was able to maintain its high satisfaction scores while the competitors saw a big reduction.

Our lead has recognized top-quality operator increased recently due to the increase quality in fixed operation and the launch of the in Vivo brand for fixed service in April. We are working hard to continue improving our operations and delivering a differentiated experience to our customers.

Moving to page six, we have our growth in number of accesses especially for the mobile segment. We believe that the market is getting to a new phase where we need to be much more selective in our commercial activity, focusing more on revenues and profitability than on pure net additions. The chart on the left shows that in this quarter we had an 11.6% annual increase in accesses and in the period with 91.9 million accesses. The fixed segment customer base remained with 15.1 million accesses. The mobile segment grew 14.6% compared to the third quarter of '11 and reached 76.8 million accesses.

The chart on the right details our net additions which were 66% lower than in Q3 '11 mainly due to the selective approach we are taking mobile additions, hence connections. Our strict disconnection policy applies to customers which meet two conditions at the same time. No recharge activity for 60 days after expiration of previously charged and 60 days with no traffic. Our focus on value generation is creating better profitability for the Company without affecting our capacity to generate revenues as we will demonstrate in further slides.

On page seven we have the mobile commercial performance. In the quarter we improved our customer mix with an annual growth of 17% in the postpaid customer base, reaching a market share of 36.9%. This performance primarily reflects our share in postpaid net additions that total 44% in the third quarter. We also managed to increase the blended market share to 29.7% and achieved 40% of the net additions in the quarter, the largest share in the period. In data cards we still have almost half of the market with 48% despite increased competition in the segment. I underline the importance and value of our health growth in postpaid and data with original commercial strategies.

All of this in light of the tougher competitive landscape with higher subsidies and increased price plan aggressiveness from some of our competitors in this segment. As evidence, the subscriber acquisition costs, SAC, decreased by 30.5% annually reaching BRL51 in this quarter while our sales of smart phones as a proportion of individual postpaid activations increased from 55% to 78% in the same period.

On page eight, we show the efficiency of our mobile promotions. Vivo Sempre is proving to be very effective in driving a charge activity in our prepaid customers driven also by the increased adoption of our Internet packages, Vivo Sempre Internet. We continue to perform well recharge reaching record levels based on higher-quality customer base. As you can see on the top right, annual growth in recharge achieved 21% which is higher than the growth and accesses for the last year.

The better quality of our customer base is subtracted in the highest ARPU of the market which attributed BRL22.2 in third quarter '12 and increased 1.1% quarterly also driven by an improvement in data ARPU.

On page nine we can see the evolution of the fixed and corporate business. In fixed broadband we grew total accesses up by 5.7% year-over-year. As a result, the ratio of broadband over voice accesses keeps increasing steadily, reaching 35% in the quarter versus 32% in the third quarter of 2011. I would like to highlight mainly the improvement in our fixed voice net disconnections which decreased 50% over the last quarter, driven by better performance, both incorporate residential segments.

In the residential segment despite the loss in total lines we were able to leverage on our offer Vivo Favoritos to grow the number of customers with classic lines which can make long-distance and fixed mobile calls and therefore have higher ARPU.

It is also worth mentioning the performance in the corporate business because of our increasingly convergent structure we had an annual growth rate of 63% in fixed voice more 8 percentage points in the percentage of customers with data package and a growth of 40% in mobile accesses in the corporate segments.

Page 10 highlights our financial results. Our total revenue growth in the year-over-year comparison reached 2.1%, an improvement compared to the third quarter '11 even with MTR and VC cuts. The wireless service revenue presented a solid increase of 8.1% year-over-year, adjusting for the MTR cuts our mobile revenue would have grown 11%.

Other good news is the slowdown in the decline of wireline sales revenue due to our better performance in fixed voice. EBITDA registered an increase of 3.1% reaching BRL2.9 billion with a margin of 34.4%. We have the best margins in the sector even in a time of integration of our operations.

Net income totaled BRL935.8 million, a decrease of 29.8% year-over-year mainly due to the declaration of interest on capital in the third quarter of last year.

Now Cristiane will give you some details on the financials and after some slides I will come back to give you the highlights of our strategy.

Thanks Paulo. Good morning ladies and gentlemen. On page 12 we see that mobile net service revenue maintained a good growth in the third quarter of 2012. Sequentially, mobile service revenue grew 2.5% excluding MTR effects higher than the growth obtained in the second quarter of 2012.

In the year-over-year comparison, we increased 8.1%. If we exclude the regulatory impact, revenue growth would be 11% year-over-year. Access in usage in data grew 11.4% and 17.2% year-over-year, respectively and reinforce the success of our campaigns. The reduction in network users is explained by the MTR cuts of 14% made in February.

On page 13 we present data and VAS performance. The value added services recorded annual growth of 17.2% thus data and VAS already represent 28% of mobile net service revenue compared to 26% in the third quarter of 2011. The performance in this quarter was mainly driven by messaging revenue which recorded a growth of 18.5% in the third quarter of 2012.

Internet revenues increased by 16.4% over third quarter 2011. Current growth in mobile broadband remained healthy but growth is now based on a penetration of data service on postpaid smart phones and increased sales of data packages to prepay customers. Last year growth was mainly based on data cards with high ARPU which increases the basis of comparison.

On page 14 we have the evolution of wireline revenues. As seen on the left side wireline revenues increased 0.22% quarterly reversing a downward trend seen in the past quarters, mainly due to the growth in customers with class clients boosted by the launch of Vivo Favoritos.

Looking at the graph on the right side we see that voice revenue decreased 12.4% this year much lower than the reduction represented in the second quarter of 2012. The better performance is explained by the 50% lower disconnection of voice customers and the above mentioned successful migration to class clients.

Data transmission and pay TV revenues recorded an annual decrease of 2.1% due to a more competitive environment. The growing number of corporate and broadband customers contributed positively to partially offset the reduction of the pay TV business. We are proud to announce a big step in our TV strategy that should help reverse this trend.

Our new IPTV offer that gives customers a unique experience coupled with unbeatable speeds in broadband, now including 200 megabits per second. Other revenues increased by 17.2% when compared to the same quarter of 2011 due to reallocation of revenues from voice to other revenues beginning in the first quarter of 2012. Without this reallocation revenues would have grown 1.4%.

On page 15 we comment on operating costs comparing third quarter of 2012 versus third quarter 2011. Excluding the non-recurring costs, our costs would have increased only 2.3% compared to the previous year, showing a strict control of costs even in the context of our integration process. Recurring costs were quite stable with the exception of selling expenses which grew 90% year-over-year due to commercial activity but even so much, lower than the growth of access of 11.7%.

I would also like to highlight the stability of our costs in personnel, reflecting the capture of synergies from a workforce adjustment implemented in April. Total operating costs totaled BRL5.5 billion in third quarter of 2012 including the net effect of BRL40.4 million related to sales of nonstrategic assets to reduce expenses. If we compare our annual variation of costs in personnel and G&A to annual increase in the first half of the year, our cost control becomes even more evident. At the same time, you can see the commercial activity keeping a good pace of growth linked to our ration of growing customer with profitability.

On page 16 we comment on our EBITDA margin. Our -- according to EBITDA, excluding the one-offs has been consistently above 33% showing the high profitability of our company compared to this sector and reaching 33.9% in the third quarter of 2012. On the right side of the page EBITDA margins reached 34.4% with EBITDA totaling BRL2.9 billion in the quarter, an increase of 3.1% year-over-year.

On page 17, we analyze the evolution of the EBIT. It reached BRL1.5 billion in the third quarter of 2012, a 6.8% increase over the same quarter of 2011. As a consequence of the declaration of interest of non-capital in the third quarter of 2011, and the consequent fiscal benefit we present net income 29.8% lower in this quarter when comparing to the third quarter of 2011.

Moving to page 18 we comment on CapEx. On the left side of the page you can see we had CapEx of BRL3.3 billion in the first nine months of 2012, with an increase of 10% over last year excluding the 1.8 gigahertz spectrum acquired in the amount of BRL0.8 billion. Exclude the license, the CapEx per sales reached 13.1% in the period versus 12.1% last year. The net debt on the right reached BRL1.1 billion, a decrease of 44% year-over-year due especially to operational cash flow generated in the period.

Now Paulo Cesar will take us through the strategic highlights. Thank you to all of you.

Thank you, Cristiane. Moving to page 20, I present to you again the five pillars of our strategy. When I took over as CEO last year I organized that the success of our company depends on ensuring that we implement successfully our strategy maintaining the highest level of quality of our industry. From an investor standpoint my goal is to make sure that we deliver healthy EBITDA growth.

I will present to you in the next slide some of our main actions and achievements inside each of these pillars. A critical aspect of our success is offering a unique and integrated experience to our customers. Over the past year, I have been working very closely with our marketing and customer relationship teams to ensure that we are constantly evolving in delivering integrated services in our channels.

Our stores in [view port] channels are already selling fixed and mobile products and contain convergent information. Our customer care is already prepared to treat customers in a unified way. One thing especially that I want to do is to look at our customers in an integrated way to enlarge our community to all platforms of services. So we came up with two new initiatives.

First our new loyalty program Vivo Valoriza which rewards our customers for all products and services they have with us already has 11 million registered customers and is producing a higher satisfaction for these consumers. Second, our Vivo Favoritos campaign is creating great results, offering to customers the advantage of making calls from the fixed to three selected Vivo mobile accesses.

Moving to slide 22 regarding our second pillar, I want to improve the quality of power convergence infrastructure. We are so pleased that we just officially opened our new data center which will be very important in supporting our integrated business growth in the next 10 years. I am personally very proud that telefonica has such a beautiful state-of-the-art flagship facility.

Now moving to our third pillar, to continue fostering profitable growth. My goal as CEO is to guarantee that you are consistently profitable. Some of our competitors have been focusing on market share at the expense of profitability but it's not what I want to do. As an example, our experience with 3G has been unit. We rapidly expanded into almost 3,000 cities, had great discipline on pricing, offered third plans and negotiated successfully with providers. With this strategy we had a return on investment of over 30%.

In HSP Plus we had the same approach with good purchase terms in 3G we were able to rapidly expand our 3G plus infrastructure to 86% population charging customers rationally for higher speeds and capacity. Our 3G plus customers paid on average BRL15 more for the higher data throughput and capacity. In 4G we expect to replicate this experience, monetizing our investments with the same discipline as in the other projects. Using these different available technologies we have been increasing the attractiveness of data offers in post and prepaid segments.

In the postpaid it was launched a new portfolio of 3G plus and strong positive results were already registered. It was responsible for 42% of new smart phone plans in this quarter. In addition we increased the monthly franchise of the Vivo Sempre Internet offer and surpassed 1.2 million net additions in one month, reinforcing its attractiveness as the best Internet offer in the market for prepaid customers.

On page 24 we highlight the delivery results in corporate. In this segment I want to focus on offering the maximum number of products in order to improve profitability. I mentioned our outstanding performance in the first part of the presentation. We are also growing substantially in new services that will allow us to build complete solutions to our customers.

For example, Vivo [Geria 2] our push to talk services almost doubled the net additions in one year and the sales of M2M solutions grew 70% over the same period of last year. I'm working very closely with our corporate teams to develop several new products for this growing and very important sector.

On page 25 I would like to highlight two important events in the fixed side. The first is already mentioned, Vivo Favoritos which helps reduce fixed voice churn and produces high ARPU as customers migrate to our classic lines.

The second is the launch of our IPTV solution in October which is delivering a superior experience to our clients and allow us to have a differentiated product to compete for premium customers in our FTTH footprint. The IP TV solution is already available for 1 million homes and will reach 1.5 million during the first quarter '13 including fiber and cable. I am also proud to announce the recent launch of our new UBB plan of 200 megabits per second, the highest speed on the market.

On page 26 we move on to our fourth strategic pillar. My main goal for our company is to keep evolving especially in innovation and new opportunities. There are two of the latest innovations that I have been working on with our product teams and that our customers are really excited about. In corporate, we are evolving to new industries offering complete solutions in security and also using the convergence to offer flexible and efficient tools as differentiated services to our customers.

In consumer, our e-help solution already reached 210,000 clients and we are expanding our successful language course come to to French which is already given us more than 3 million customers in all language options.

On page 27, we move on the last strategic pillar. We continue to work hard to make operational improvements to turn our efficiency even stronger. During this quarter, we evolved in many fronts, optimization of network links increased productivity in our commercial channels, sales of fixed and mobile products and especially in creating a culture of quality with efficiency, looking for alternative innovative ways to do our day-to-day business.

In our aim to transform our operational model into an online company customer care is a key element. We are proud to verify that we achieved during the quarter a higher volume of customers attended through our new virtual channels. SMS, web, social networks have proven to be an efficient and preferred channel to our clients.

This completes my message for the quarter and now I would like to open for questions.

Thank you. The floor is now open for questions. (Operator Instructions). In case you are following the conference call via webcast, please click on question to the host to send your question. (Operator Instructions).

Our first question is Vera Rossi from Citibank. Sorry, actually our first question, Alex Garcia from Citibank.

Thank you. Morning everyone. Thanks for taking the questions. Paulo, can you detail a little bit what happened with the effective tax rates? I think it came a little bit higher than in what we saw in the past, and what should we expect going forward for how much taxes you are going to pay?

And the second question would be regarding the CapEx slowed. There seem to be a slowdown in Q3 so I was wondering what should we expect for these studies, a more permanent trend or is just a one-time thing and what we could expect from this line through the year? Thanks.

Okay, hi, thank you for the question. About the first one, about tax rates we had last year in the third quarter of 2011 declaration of interest to noncapital based on the interim results. We did not have this year until now, that's why even when you compare with the last year, the tax rates very different.

We -- the interest on capital is a board decision that is going to have to be taken until December 31st so we analyze the results of the year and decide the limits whatever we were going to pay or not interest on capital. The CapEx --.

No, no, it's very good. It was -- if I'm correct it was roughly 37% which is above the 34% and so I was wondering should we expect 34-something going forward? Is it a good assumption?

Yes, actually the 37% was closer but we have some permanent traditions not recurrent issues. So the normalized for the future would be 34%, 35% as would be presented in the past. Sometimes we'll have additions that are nondeductible, that's why increased a little bit more in this quarter.

Great. Thank you, very clear. And what about the CapEx?

Regarding CapEx, if you compare the accumulated numbers of the nine months of 2012 we are higher than last year. The reduction in the third quarter is normal seasonality of the contracts that we are facing and close with some suppliers, so it's normal trend, nothing different from that. But in accumulated we presented higher amounts from what we had in CapEx last year.

Can we go to -- okay that's it?

Sorry -- so we are good to -- so we could expect the $6 billion for the full year right, including license?

With the license, yes. We keep the guidance.

All right. We keep the guidance. All right, thank you.

Okay.

The next question is a Vera Rossi, Barclays, please go ahead.

Thank you. Could you talk about the main reasons why you have been able to grow your wireless service revenues ahead of your competition? And are you getting customers from Nextel? And when you say that your net additions in push to talk have doubled year-over-year, could you give us some numbers about how many customers you have with push to talk services, et cetera? Thank you.

Thank you, Vera for the question. I think we have some points that we are on better condition than our competitors. We have the best network in Brazil. We have the best customer care. We have the best brand in Brazil. We are focusing our space -- we are growing a lot in this segment. So have new offers now for postpaid, in pure paid in [control] plans too and in broadband, yes. And now we are implementing this and it's going very well.

I think if you compare with Nextel, I think the number -- internal numbers that we prefer not to disclose but we are focusing this segment and corporate segment with this offer. It's going very well too and we have a different approach because they have both -- they have more coverage because all the product of the (inaudible) phases, our 3G coverage that we have in the -- more than now [2,000] cities in total Brazil, okay.

Okay and just for me to understand one thing on the push to talk customers, you double your net adds year-over-year, correct?

Correct.

And then you started to offer push to talk if I remember correctly was third-quarter

Year ago.

-- was a year ago. So when you say double -- you double because your base was very low or when you launched like a year ago you already had --

We started selling this project for both segments, for individual and for corporate business but nowadays we are focusing corporate and it's going very well, just is, okay.

Going very well. Okay, thank you.

Our next question is Andrew Campbell, Credit Suisse. Please go ahead sir.

Hi, good afternoon. My question is about the PGMC, the competition plan that was approved by Anatal last week. And I was wondering if you could give us any feedback about how you view the plan, both on the wireless and the mobile side, how significant you think the impact will be and if you think it's more positive or negative for the Company? Thank you.

Thank you Andrew for the question. I think it's a very important question but I think it's too early to comment in detail before Anatel release the detail rules. I think that generally we see it more positive with because I think we have a lot of spending issues that are finally regulated and creating more visibility for our plans.

I think it's so early to have now a total visual about these decisions.

Okay, thank you.

The next question is Fernandes Mauricio, Merrill Lynch. Please go ahead.

Thank you, good morning, everyone and good afternoon. One question on the announcement yesterday, Paulo about the Memorandum of Understanding for the 450 megahertz -- for the use of the 450 megahertz frequency. Could you share, I'm not sure how much you can, but whatever you can share on the necessary CapEx to be done over the next few years. And in the partnership, who would be responsible for doing that and then how -- if this is going to be revenue-sharing proposition? So generally speaking if you could share any additional thoughts beyond what was announced last night? I would appreciate that.

Thank you Fernandes. (Inaudible) is in charge of this business to make comments about this.

Okay Mauricio, good morning and good afternoon. Thank you for the question. We are just starting the conversation with [ANMT] that is the owner of the brand, (inaudible) met in the [Nordean] countries and we plan to have a good partnership with these guys. These guys are the more experienced ones in 450 network and we plan to join forces here.

As always, when you build a partnership you save some money in cost and CapEx and this is also the case here. We are still working through all of the details and we expect to give you maybe more details and a couple of months.

Okay, thanks, [Harman]. One more thing -- speaking of the PGMC, can you share with us what is the export that the Vivo has to mobile to the nation rates today and how this is being progressing over the last few quarters?

Mauricio, we keep the exposure that we've been talking about MTR in Telefonica Brasil is less than 3% of EBITDA around 2 and 2.5 and that's what we have for the moment from the view end that was approved starting February of this year.

Sorry Christiana, can you repeat the number. I couldn't understand it.

We keep the exposure that have been talking since the beginning of the year of less than 3% of the EBITDA in the consolidated business.

Okay, thank you.

Welcome.

The next question is Michel Morin, Morgan Stanley. Please go ahead.

Good morning everyone. I just wanted to focus a little bit on the fix line trends. You had an improvement in the rate of disconnections there. So I just wanted to understand if that is something you feel can be sustained. And in particular, given that you just launched your IPTV offering I'm wondering if you can comment on any early results from that. I know it's early days but any indication that you can provide would be helpful, especially as it pertains to your ability to continue to sustain those fixed line trends.

Secondly the buyback announcement from last night, I just wanted to understand that a little bit better because a year ago you had also authorize the buyback but it does not seem like you ever executed it on it so I just wanted to see if there's any reason to think that this time will be different and if this is in addition to last year's authorization or if it essentially replaces last year authorization. Thank you.

Thank you Michel. It's a very important question. Thanks for the question. We have been working hard to implement the best strategy for the fixed business and the core of our strategy is our integrating -- our infrastructure that we have as fast as we can to serve all customer needs.

First we are leveraging our ability to bundle fixed and mobile offers to our customers and to generate value and more loyalties. In this sense our view of operators and cross-selling bundling promotions have produced good results that we show in this quarter.

The second, we have been consistently improving quality in the fixed business as a way to guarantee better experience to our customers and the results can be perceived in our attendance index, measured by Anatel and also in our customer satisfaction index.

Third, we have focused on fiber to the home delivering highest speed on the market, combined with our new top-edge IPTV offer to address premium customers. We now have more than 111,000 clients in fibers to the home. We have now an (inaudible) launch of IPTV solution and we have a plan to extend our FTTH infrastructure. In the next years focusing on the premium regions of the great Sao Paulo area.

And as an fourth step, in the other regions we are -- of the state of Sao Paulo we plan to improve our networks to VDSL as we can and use the mobile technology like 3G, 3G plus and 4G, as tools to capture and retain fixed broadband customers. Basically this is our strategy in fixed mobile -- fixed business in Sao Paulo.

Hi Michel. Hi Michel, I'm -- talking about the share back problem. As we disclosed when we present the first time the program, it's a program not an obligation to buy the shares back. It's just a program to protect from turbulence in the market. So that's why the level of usage was very low but we wanted to renew so if it's necessary we can use it again.

Okay, but just to clarify that percentage. So this is -- the one from last year is essentially expired, correct?

Yes, it was renewed actually for one year.

Okay, so you're -- okay got it. And then Paulo Cesar, just on your comments on the fixed line, you have just over 100,000 fiber to the home customers which frankly still seems like a very low number and I guess the question is when should we be expecting you to show an acceleration in fiber deployment? Frankly, are we going to see a time over the next couple of years where rather than having 100,000 subscribers you might actually be posting 100,000 net adds in a quarter? Is it reasonable to think that there could be that kind of acceleration?

Michel, we think it is premium services. We are this year the numbers in the -- if you compare with the previous years we increased more than 100%. We're focused on this. We have now the very important complement of this offer that is IPTV solutions. We just started to sell this. It's a soft launch that we are doing and I think for the next year we increased our coverage, our footprint in fiber and it's supposed to give big numbers like we usually have in Vivo, okay?

Okay, great. Thank you very much.

(Operator Instructions). Our next question is [Jose Filayo], GBM. Please go ahead.

Good afternoon. I have a question regarding the data ARPU. I was wondering where you see for the next year in terms of growth? Thank you.

Okay thank you for the question. We do not provide for guidance for ARPUs for the future. [What it been] in a year that we are perceiving more activation of data package, so would increase the ARPU. The more usage of smart phones in our penetration of the plans. But we prefer not to talk about guidance for the future. But we see a good trend.

Okay, thank you.

Welcome.

Our next question is a follow-up. Andrew Campbell, Credit Suisse. Please go ahead sir.

Yes, thanks for taking my follow-up and I apologize if I missed this in the opening comments, but under these six line revenues, can you explain once again the other services, what exactly was the accounting reclassification and what went from a wish category to where and if there was any cost implication from that as well?

Hi Andrew. Actually there was one amount that was classified in voice of last year. We can make as to what is the pro forma and send it to you and the impact was not relevant in the voice. So it was in no voice and not the revenue.

Okay, perfect. No impact --

The normalized growth of the other revenue would be 1.4% year-over-year but we can give you some numbers forward from the team the exact amount and you can make your pro forma from the back if you want.

Okay, thank you very much.

The next question is a follow-up. Michel Morin, Morgan Stanley. Please go ahead.

Thank you. I guess I will keep on going. I just wanted to touch on your comment on the recharge activity. So it seems quite strong of a growth in recharge and I am wondering is it fair for us to be assuming that this really suggests that we should see a re-acceleration in mobile service revenue growth in the fourth quarter?

Michel, if you compare with the baseline that you have in the last year, we are growing at a very good pace and now we are maintaining this growing. I think we are focusing Internet (inaudible) in our offer that we recently launched to increase the number of clients in this last month in a big number, more than 1 million and I think it's the main reason that we are increasing our prepaid. And since that we are a very good offer, we will say it's a very good offer and we are a healthy base that it's recharging a lot. I think it's a very good situation [virtually] why we -- our forecast that we've maintained the space, okay.

And given that this is a data point that you have not always shared with us, would it be possible for you to comment on when is the last time that you've seen this level of recharge activity? Is this the strongest it's been in two or three years? How does it compare to historical trends?

I would say we maintained this level. I think so. Our vision it supposed to maintain, very important, working for this.

Thinking about the past, we have been presenting a growth of recharge much higher than the growth of the average plans from the last three or four quarters. So it's not that different from what I'm doing the last quarters.

Right. Okay I just don't remember seeing a number north of 20%, but okay, thank you very much.

The next question is a follow-up. Alex Garcia Citibank. Please go ahead.

Thanks for the follow-up. I just wanted to touch base on the minimum broadband speeds that were set by Nextel. I was wondering if your network, the service that you are delivering right now is in compliance with those minimal broadband speeds and if not, how much time would you have to adapt your network and if possible how much that would cost. Thanks.

Thank you Alex for the question, it's a very important question. We are so prepared for this. We have all of the network in fixed and to mobile. This speed declared in the contract we have some points now in these new rules that we need to achieve. We start with 20% in this year and it's growing the next years but I think we are still prepared for this. No problem. Okay?

Okay, thank you.

Having no further questions, this concludes our question-and-answer section. At this time, I would like to turn the floor back to Mr. Teixeira for any closing remarks.

Thank you all for attending this conference and for your interest. I think this quarter is showing once again that we are on the right track to increase shareholders value. Our outstanding quality is being increasingly recognized by the market as well our first coverage efforts. Results of the quarter also reflect that we have a strong mobile growth and improved results in the fixed and our focus on profitability and efficiency are also reflected in our numbers.

We believe that we still have a lot to do and I expect Telefonica Brasil to keep evolving in the following quarters.

Thank you and I hope to see you again net year when we present results. Thank you.

Thank you. This concludes today's Telefonica Brasil Third Quarter 2012 Results Conference Call. You may disconnect your lines at this time.