Hello, everyone and welcome to TSA’s Earnings Conference for the First Quarter of 2024. Thank you for joining us. I am Vincent Ferreira, Head of Investor Relations. Today, we will share our highlights on video and then begin our live Q&A session with our CEO, Alberto Griselli; and our CFO, Andrea Viegas. Before we discuss our results, I remind you that management may make forward-looking statements and this presentation may contain them. Please refer to the disclaimer on the screen, which will also be available in our earnings materials and in our Investor Relations website. With that, we move to our results.

Hello to everyone. I am Alberto Griselli, CEO of TIM Brazil. I am very satisfied that we started 2024 at a solid pace. We are reaping the benefits of a well-designed plan and sharp execution. We continue to see a healthy mobile market supporting a more-for-more strategy. We are taking advantage of favorable market dynamics to develop our 3Bs approach further and deliver solid results across the board. We have a solid above-inflation expansion in service revenues growing above 7% year-on-year. With costs under control, our EBITDA grew double-digit and the margin expanded by more than 100 basis points. Our proxy for operating free cash flow reached a record high for the first quarter, growing approximately 60% year-over-year. These solid financial results are accompanied by consistent improvement in our services, offering innovation and consistent development of our infrastructure. The 5G rollout continues to be the main focus of our network strategy. As I mentioned, our best service, best network, and best offer are at the core of our strategy and serve as the foundation for building the best value proposition. Consequently, we continue to work on these three fronts. Still, we have also intensified activities related to convincing clients and potential clients of the transformations we are implementing at the company. During the first quarter, in the best service category, we consolidated our efforts to improve customers’ experiences with several achievements, such as the Efficiency Award from the Consumer Protection Agency of São Paulo. I remind you all that it is now almost a year since TIM is the only company in Brazil to have received such important recognition. In the best network, we expanded our 5G coverage, increasing the number of cities and, more importantly, broadening coverage inside the cities for a better experience. In March, we were recognized by OpenSignal as the operator with the best reliability experience in Brazil, besides consolidating our number one position in network quality. In the best offer, we boosted our in-flight connectivity package, adding support for streaming services. We combine all these initiatives and others to deliver the best value proposition in the market to help change customer perception and improve brand recognition. This is a long and challenging process, but it is the only way to achieve our aspiration of becoming Brazil’s preferred mobile operator. Gradually and consistently, things are moving in the right direction. In mobile, we saw improvement in postpaid churn, with a rate of 0.8% per month in the first quarter, which reflects improved customer satisfaction and loyalty. At the same time, postpaid net additions totaled 415,000 new lines with solid sequential improvement quarter-on-quarter, while migration from prepaid to postpaid increased by 11%. Total ARPU expanded close to 9% year-over-year, surpassing the BRL30 mark. Maintaining the value strategy with improvements in volume, we were able to achieve solid growth in mobile service revenues of 7.4% in the quarter. Our B2B endeavors continue to evolve fast. We are now putting all our efforts under the umbrella of a TIM IoT solution brand. To start on the right foot, we launched the first offer in partnership with CNHI, bundling our connectivity with cases machinery. We also closed a large partnership with BP Bunge. As for fixed broadband, we are performing well despite a very tough environment. Our revenues grew more than 9% year-over-year, while our base increased by more than 10%. We maintain focus on the right balance between growth and profitability. And this is how we build the next-generation team, bid by bid.

Hello, everyone. I’m Andrea Viegas, CFO of TIM. Alberto highlighted solid and consistent results. The implementation of our plan is bearing fruit as the long-term benefits of the consolidation become increasingly clear. In the first quarter, the top line grew 7.3% year-on-year with positive contributions from all revenue lines. With costs under control, our EBITDA grew by almost 11%, with the margin increasing by 140 basis points to reach 47.4%. Regarding leases, EBITDA lease grew even faster by 20% and amounted to BRL2.2 billion. This performance continues to benefit from the decommissioning projects, which has reduced recurring lease payments by BRL100 million since the first quarter of 2023. The EBITDA after leases margin grew significantly by 400 basis points due to efficiency in OpEx and leases. Despite the negative impact of our financial expenses, our net income grew by 19%, benefiting from the tax yield provided by interest on equity and a consistent performance in G&A. In addition, we recorded a strong increase in operating cash flow of almost 6%. Seasonality had a negative impact on working capital and CapEx, but this is no cause for concern as they are developed in line with our plan, and we will improve as we move forward this year. In this scenario, we maintain a strong balance sheet while navigating the uncertainties of the Brazilian macro and political environment. While there are challenges, I’m pleased with the figures we are delivering, which makes me confident that we will achieve our guidance by the end of the year.

The first quarter also marks the moment to disclose the evolution of our ESG initiatives and update our plan to all stakeholders. In the updated plan, we are committing to, one, increase black employees in leadership with a target of 25% to be reached by 2025; number two, address the digital divide by covering rural areas in a total of 32 million hectares by 2026; and three, expand our solid waste treatment with reuse and recycling to above 95% until 2026. In April this year, Great Place to Work recognized us in diversity and inclusion rankings. We were ranked among the top companies in Brazil in four categories: ethnic ratio, women, LGBT, QI Plus, and people over 50. We are the only telecom company to have such a solid position. In our journey, we have achieved ESG targets, valued diversity, and promoted inclusion. We set out the year at a robust pace. We posted the best third-quarter numbers in the history of TIM Brazil, sustaining a solid financial performance as we accelerate our commercial speed. We expect to see additional development in our B2B in the coming months, seizing the opportunity we uncovered. We will continue to push forward to maintain our network leadership and, with the help of 5G, improve customer experience. AI pilots are confirming the potential to improve service delivery, so we will continue testing the models to start full implementation. As for the offers, we are preparing for the arrival of new partnerships and the evolution of our portfolio to keep pushing the bundling of innovation. We are on a long journey to become the most preferred telecom company in Brazil. This can only be achieved with an outstanding, highly committed, and focused team like ours. Now, let’s move to the live Q&A session.

Thank you. Before starting the Q&A session, I will pass the floor to Mr. Alberto Griselli for the initial remarks. Please, Mr. Griselli, you may proceed.

Good morning, everyone. I would like to start this call with a few words about the emergency that we are facing in Rio Grande do Sul and also anticipate possible questions that might arise during the call. In the face of such a dramatic event with loss of life and families whose lives have been disrupted, we organized a crisis group to address four main fronts. The first one was to confirm that our employees are 100% unarmed, in safe places, and without risk to their health, and this has been achieved already. The second, which is ongoing, is the tireless effort of our technical team in the field to guarantee the recovery of our infrastructure and the minimization of outages due to the extreme conditions and power loss. The third one was meant for our own clients to guarantee the possibility of keeping in touch with their families and being updated throughout this period. Therefore, we awarded additional gigabytes to our customer base to enable their communication services, and we opened roaming across all operators to increase the availability of networks in the region. Finally, we are working with the authorities at all levels and supporting the purchase of materials and products for what is required by the people in Rio Grande do Sul. We have been using our TIM institute to achieve this goal. I would like to thank everyone for their efforts, particularly my colleagues from all the other operators who are united with us in this time of crisis. So, we can move now to the Q&A session, please.

Thank you, Mr. Alberto. Our first question comes from Marcelo Santos from JPMorgan. Please go ahead, Mr. Santos, your microphone is open.

Hi, good morning. Thanks for taking my questions. I wanted to ask a first question about growth. I mean, you’re growing a bit above the guidance you gave for the year. Is there upside to the guidance or is there something that you think might wait more in the second half or in the rest of the year? So that’s the first question. And the second, if you could do a deeper dive on the subscriber versus ARPU dynamics. So when we usually look at Anatel numbers, you tend to have a little bit fewer adds, especially on the postpaid. I’m talking more on the postpaid, a little bit fewer adds on the postpaid, but the ARPU has been coming pretty strong. So just wanted to understand what’s the dynamics? Why do the results come like this, if you could enlighten us? That would be great. Thank you.

Yes. So Marcelo, let me take this question. In terms of guidance, we had a good quarter all in all. It’s a bit early to comment on potential upside because we’re just in the first quarter, and there are a number of moving pieces ahead of us. I think that we are actually in line with what we plan to do. So increasing revenues above inflation in the range of 5% to 7%, we are coming out at 7-point-something and increasing EBITDA faster than this and double-digit on free cash flow. So, I would say that we need to wait another quarter to give you a more profound answer. When it comes to the subscribers versus ARPU dynamics, what we aim to do is grow in a balanced way regarding ARPU growth and customer base growth. This is how we look at it, so increasing both levers to support our postpaid revenue growth. If you look at our track over the last quarters, you will see that we have been slightly increasing our speed across quarters. So in the first quarter of – in the second quarter of last year, which is the first quarter, cleaned of Oi consolidation, we were growing on postpaid at roughly 1.3% versus our own customer base. We increased the speed and reached 1.8% in the first quarter of 2024. So I think we are on the right track to slightly increase the component coming from postpaid customer base growth. For ARPU dynamics, there are a number of initiatives we are undertaking to increase ARPU. Firstly, there’s the more-for-more strategy that we are implementing in this quarter. We also migrated customers from one plan to a plan which is a bit more expensive but with better benefits. This is demonstrated in our presentation, which shows a 10% increase from prepaid to control, but it’s also happening from postpaid controlled to postpaid. The third lever is primarily advanced. When you sum this up, you get the drivers of the ARPU increase. Therefore, you will notice that our postpaid revenue growth is balanced between growth in customer base and ARPU growth due to these levers. In the first quarter this year, there were no price adjustments besides the migration and the plug-in sales.

Okay, thank you very much.

Our next question comes from Marco Nardini from XP. Please, Mr. Nardini, your microphone is open.

Hello, Alberto, Andrea. Thank you for taking my questions. Regarding CapEx, we observed higher-than-expected investments in the first quarter, particularly due to 5G. Are there any adjustments anticipated to meet annual CapEx guidance or do you have confidence in maintaining your original forecast? Regarding 5G, can you walk us through any updates on the rollout and how this can contribute to top-line and margin growth going forward? Do you believe that FWA could also have a positive impact on that matter, please?

Okay. So Marco, on the CapEx side, it’s a bit seasonal. We will maintain our guidance, and that’s our commitment. The fact that we anticipated the 5G deployment this year is because we wanted to have a head start. This comes to your second question. We anticipated 5G deployment because it brings us some important benefits. We wanted to have more quarters ahead of us with these benefits already in place. The benefits basically relate to the perception and delivery of better network experience. When we deploy 5G, we aim to support the increase of customer quality in the cities where we deploy this technology. We know that 5G is an important lever to achieve this objective. Once you look at the metrics that confirm the improvement in customer quality, you will see that this is happening. If you look at network quality across Brazil and major capitals, we are number one. Additionally, we received recognition from OpenSignal for having the most reliable experience in Brazil. We are taking measures to achieve these metrics essential to our network superiority. Thus, we anticipated a big push for 5G. Regarding how this supports the top line, the best answer at this point is that it supports our more-for-more strategy by providing better service to our customers and improving retention. This is crucial for growth in postpaid as changing customer perception of our network quality puts us in a better position to attract them. There's also a network efficiency benefit, already captured in our guidance. Overall, better quality for our customers translates into reduced churn and a more appealing value proposition for Brazilian customers.

Thank you, Alberto.

Our next question comes from Andrea Salis from UBS. Please, Mr. Salis, your microphone is open.

Hi, guys. Can you hear me?

Yes, we can hear you.

Okay. Thank you. So good morning everyone. Thanks for the presentation and for taking my questions here. I have a couple of questions on the tower renegotiation process. Recently, we saw some news related to IHS towers reportedly considering exiting Brazil. Do you see this as a potential risk for the renegotiation of tower contracts? And could this impact the I-System operation on your end? Thank you.

Andrea, the tower renegotiation process is quite structured. Let’s say, when you look at the towers, we have an existing and new portfolio. The existing portfolio relates to the decommissioning we’ve been discussing over the last quarters. This decommissioning is almost completed. If you look at this quarter's results, they already capture all the optimizations that have been made over the last 12 months. Regarding the portfolio going forward, you have two dimensions: the existing portfolio is subject to adjustments. This adjustment occurs just after the first quarter. There are also initiatives to optimize negotiations with tower companies. The second aspect is the new towers and deployments. When we deploy new towers, we want to ensure we get the best conditions. IHS is our partner, primarily in the existing portfolio and some challenges together with other stakeholders. So, nothing has changed in our relationship with them so far. We don't foresee any impact on our existing or new portfolios due to these potential changes with IHS.

That was pretty clear, Alberto. Thank you. And could you comment on the I-System operation? Do you anticipate any impact on that or – I mean, anything that you can comment on would be helpful for us as well?

Yes, Andrea, for the I-System, we don’t see any operational impact so far. We decided to operate with an ultra-network approach. We have two partners we are using to reach our commercial objectives, I-Systems and VTel, focusing on different geographical areas. We don’t have any noticeable operational impact currently. If they decide to sell, there will be another entity that will take over, and we will work with the new stakeholders. Therefore, I don’t see any change in our strategic positions or operational activities related to IHS's potential exit from Brazil.

Our next question comes from Vitor Tomita from Goldman Sachs. Please, Mr. Tomita, your microphone is open.

Hello. Good morning, all, and thanks for taking our questions. Two questions from our side. The first one is on prepaid; if you could give us a bit more color on prepaid ARPU trends and how you expect those to develop going forward? A second question, somewhat related to the previous question, is if you could provide an update on the fiber business, specifically on your strategy of expansion using the neutron network I-Systems and VTel in some areas and how that has been faring, how that has been benefiting our overall commercial efforts? Thank you very much.

If you look at this quarter, it tends to be a bit seasonal. Therefore, if you compare our growth speed versus the previous quarter, we witness a slowdown. This setback is driven by a few factors. Firstly, on a year-on-year basis, we don’t have a favorable comparison because last year we migrated 1 million control customers to prepaid. Consequently, prepaid numbers were relatively strong in the first quarter of the previous year. Secondly, as generally occurs, the first quarter has inherent negative seasonality compared to the last quarter of the preceding year. Additionally, we are actively migrating prepaid customers to control. So, considering all these factors, you can explain the pacing discrepancy between prepaid and the fourth quarter, for example. As we look ahead, some factors will persist, like the migration from prepaid to control. Others may subside. The seasonality of the first quarter could differ in the second quarter. When we look at ARPU, it’s a blend of customer base dynamics and revenues. Overall, spending is increasing. Given that we are maintaining a constant cancellation policy, we should see a positive trend in ARPU growth in the upcoming quarters. However, our primary metric remains spending patterns rather than ARPU alone. Therefore, I believe this is where we are at. Regarding the fiber business, our year-on-year performance is positive. Nonetheless, when comparing quarterly performance, customer base growth has slightly slowed. There isn't a real change in strategy versus what we communicated in our Investor Day. The market remains challenging. Thus, we continue being selective about our coverage expansion while adapting our commercial model to foster efficiency in this competitive landscape. This means we are shifting our commercial operations from a push model to a pull model, which offers superior quality. We maintain a solid partnership footprint with VTel and I-System. We are consolidating our position in key cities and fine-tuning our commercial machine to remain competitive. We will consider expansion when the conditions are favorable, but that will depend on the competitive dynamics present.

Very clear. Thank you very much.

Our next question comes from Luca from Bank of America. Please go ahead, your microphone is open.

Hi, good morning, everyone. Thank you for taking my questions. I also have two questions. The first one is more of a follow-up from the previous question. On prepaid, specifically regarding the plans, I know that in some regions, you introduced your 30% higher monthly offer on prepaid. I just wanted to know how you are seeing the dynamics for prepaid going forward. Is there an opportunity for price hikes on the actual plans? If any, have the price modifications we implemented previously had any impact on the upsell strategy? Secondly, regarding margins, you have had a very positive trend in margins for the past few quarters. I would like to understand how you view this trend moving forward. As long as we see real growth, should margins keep increasing, or how do you foresee this in the long-term? How high can margins go, or if we see a deceleration in growth, can you maintain margins at current levels?

Let me address the first question and then pass the margin question to Andrea. In the prepaid segment, we’ve seen significant developments in recent quarters, which continue. Operators have been adjusting their offers across the board, including our movements last year. As for price hikes, we price-hiked prepaid in the last quarter. We charge BRL17 for our biweekly offer, which was previously BRL15. We have executed this across regions for both our biweekly and monthly offers. We analyze customer perception in various regions to understand the effects on customer uptake and recharge behavior. Recently, Claro made similar moves in their pricing strategies. They operate monthly offers at different price points, and we observe them increasing pricing in certain regions and providing more gigabytes. Our pricing adjustments in the previous quarter may cause an initial rise in spending followed by a slight decline in recharge rates. However, these effects tend to be temporary. With multiple competitive maneuvers happening, we will be better positioned to assess long-term trends after this quarter as the market stabilizes. Regarding the margins, Andrea can take the floor.

Regarding margins, we had robust results this quarter with EBITDA growing faster than revenue. This comes from our continuous efficiency efforts. Moving forward, we are returning to levels seen before the Oi acquisition. We will continue to see some margin improvement, primarily in EBITDA after lease due to efficiency gains. Our team is consistently working to enhance productivity and grow our margins.

Okay, very clear. Thank you.

Our next question comes from Carlos Sequeira from BTG Pactual. Please, Mr. Sequeira, your microphone is open.

Hi, thank you. Hey, Alberto, Andrea, Vincent, good morning. How are you? So we were discussing the bidding here among us here at BTG, regarding mobile service revenues, the dynamics are intriguing. When you look at postpaid revenues, they grew more than 7%, but prepaid was basically flat. Overall service revenues grew almost 8%, when you might have expected a growth correlated to both segments. Can you clarify what drove the differences? Also, can you expect similar performance from these additional revenues in the next quarters? What's your perspective for modeling this?

Carlos, let me address the first question and then we’ll proceed to the second one. You are correct. Our commercial strategy has undergone improvements targeted at specific segments, especially postpaid. We previously noted that we enhanced our roaming services specifically for postpaid customers, which increased our outgoing roaming revenues since the third quarter. This change has had a positive effect, increasing digital revenues because our roaming package became more attractive. Previously, we didn’t enjoy these results due to the lack of robust offerings. Regarding the future trajectory, we anticipate ongoing positive dynamics in the coming quarters. There will be some seasonality based on travel patterns, but overall, since our offers are now markedly improved, we should realize stable upward trends.

Very clear. Thank you. So we should expect it to keep coming, right? It’s a structural change.

Yes.

Okay. And my final question, which might be early in the analysis process. Brisanet just launched 5G operations in Fortaleza, a significant market for TIM. Have you noticed any shifts in competitive dynamics since their launch?

Not really. Brisanet's deployment is primarily concentrated in smaller cities rather than Fortaleza itself. They focus more on areas with populations under 30K. The outskirts of larger cities have seen some movement. However, we haven't experienced any significant competitive impacts thus far. Analyzing the metrics provided by Anatel, it shows that Brisanet is primarily deployed in less populated areas. We don’t foresee adverse impacts on our competitive stance.

Okay, perfect. Thank you very much. Thank you, guys.

Our next question comes from Gabriel Vaz de Lima from Morgan Stanley. Please Mr. Vaz Lima, your microphone is open.

Hi, thank you so much. Most of my questions were already answered. Just wanted to get a sense in terms of the second quarter; anything relevant we should keep in mind? I know we’re a month in, but any seasonal effects or highlights you would mention for us to keep in mind? Thank you so much.

Looking at the second quarter, one of the significant activities we generally undertake is the implementation of the more-for-more strategy for control and postpaid, as we did in the second quarter last year. This year, it is being executed at a lower intensity, but it remains a key focus in our commercial operations. The primary objective is to foster ARPU increase through additional gigabytes, influencing control recharges and potentially affecting churn rates. Our goal is to implement this strategy positively for customers, avoiding a material increase in churn. So this is what you should keep an eye on.

Additionally, some commercial expenses may rise related to our investments in advertising as we ramp up our market presence.

Crystal clear. Thank you.

Our next question comes from Felipe Cheng from Santander. Please, Mr. Cheng, you may proceed.

Good morning everyone, Alberto, Andrea, Vincent. Thank you so much for taking my questions. My first question relates to working capital dynamics this quarter. We saw deterioration on both the quarter-over-quarter and year-over-year comparisons. I’d like to understand a bit more about what we should expect in the coming quarters. I understand there is a negative seasonal impact in this first quarter, but could you provide more detail on working capital? My second question is related to price increases in control and postpaid. If you could remind us of the schedule and the expected magnitude of price increases throughout the year? Thank you so much.

Hi, Felipe. Regarding working capital, we typically experience a seasonal negative impact in the first semester, with a positive shift in the latter half of the year. This occurs mainly due to agreements with our major suppliers. This quarter, we faced additional impacts, such as higher inventory due to the handset mix, particularly with the introduction of 5G devices. Accounting receivables were also affected by an uptick in our roaming and international operations. It’s significant to highlight that this first quarter deterioration in working capital was anticipated. We are aligned with our expectations, and we will observe improvements as the year progresses. Regarding the price increases?

For the price increases, we implemented changes for postpaid and control, both in our front and back book this quarter. Especially, the annual adjustments we perform. Similar to last year, we did this in the second quarter applies to a portion of our customer base. However, this year, the adjustments will be milder owing to the inflation dynamics compared to last year. That’s the outlook for price adjustments moving forward.

Perfect. Very clear. Thank you so much.

Ladies and gentlemen, since there are no further questions, I will turn the floor back to Mr. Alberto Griselli for his final remarks. Please proceed, Mr. Griselli.

Thank you. So thank you to everybody for attending our call today. I think we had a good discussion regarding our start to the year. I want to thank the entire team for delivering such solid results across the board. A special thanks to the commitment and effort of those involved in supporting Rio Grande do Sul during this disruption and for keeping our services operational. Thank you, everyone, and we will meet for one-on-one calls following today’s call.

Thank you.

This concludes the first quarter of 2024 conference call of TIM S.A. For further information and details of the company, please access our website at tim.gov.br/ir. Thank you once again, and you can now disconnect your line.