Earnings Call Transcript - TIMB Q1 2023

Operator, Operator

Good morning, ladies and gentlemen. Welcome to TIM S.A. 2023 First Quarter Results Conference Call. We'd like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. There will be a replay for this call on the company's website. After TIM S.A. remarks are completed, there will be a question-and-answer session for participants. At that time, further instructions will be given. 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. Should any participant need assistance during this call, please press star zero to reach the operator. 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.

Alberto Griselli, CEO

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 the team and the industry will be a great asset to our C-suite. In her debut as CFO, we are presenting a set of 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 margin expansion and operating free cash flow doubling compared to 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 economic sense and transforms people's lives in 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 the commissioning process with more than 1,500 sites dismantled since November 2002. 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 strongly 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 client arrival and after the cleanup of silent lines. We also reclassified lines from postpaid to prepaid in March to correctly manage those customers. Since I'm discussing the impact of Oi assets, it is worth giving additional details on the integration completion. In March, we concluded 100% of all the network integration steps. We are utilizing the acquired spectrum, and clients are benefiting from the additional capacity. The non-overlap sites were integrated into our network, helping to expand coverage and improve customer experience. As for client migration, we completed all activities regarding those clients in April, securing the major clean-ups and reclassifications necessary to have a coherent and healthy customer base. Having finalized those actions, we are starting to see more and more benefits from these transactions. Synergies are becoming more apparent in our results, with the exception of the decommissioning process, which is still in the early stages. Although we have physically decommissioned more than 1,500 sites by March '23, the financial impact of this dismantling process will become significant toward the end of the second half. Our TIM Mobile 5G strategy is paying off. We are combining positioning and efficiency to build our solid leadership in this technology. TIM has the highest availability of 5G technology as a result of defining the most relevant markets and ensuring we have large and meaningful coverage in them. This leadership was achieved with almost twice the number of 5G sites as our competitors. Additionally, the successful rollout of 5G 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 a volume to a value strategy, we keep improving our client's customer experience. We still have a long journey ahead of us, but we are achieving relevant milestones. The number of complaints is steadily decreasing, and we have the least complaints among operators in the Sao Paulo Consumer Protection Agency with a 50% reduction year-on-year in the last survey, and the least complaints in prepaid at Anatel. Furthermore, we are by far the best-performing operator in resolving client issues. We have been leading the Anatel complaints resolution ranking for over 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 the Reclame Aqui portal, we ranked number two among all companies in Brazil, and the only recommended among operators. In fixed services, the growth driver remains TIM Ultra Fibra with solid performance. Fixed broadband revenues presented a high single-digit expansion. Broadband ARPU has grown 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 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 of over 730,000 connections, and we are now present in more than 70 cities. This expansion is being achieved without losing quality and focus on customer experience. For six years, TIM Ultra Fibra was named 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.

Andrea Viegas, CFO

Thank you, Alberto. I'm grateful for the opportunity to serve as the new CFO in Brazil. I'm very excited to work with you and the rest of the leadership team to drive this company towards success. I also look forward to building a strong and lasting relationship with the financial community. Without further delay, let's talk about numbers. As Alberto explained well, the first quarter signals strong performance in all relevant lines of our results. The country's macroeconomic challenges and uncertainties have not impacted us at least yet. Our performance continued to be driven by M&A integration and organic growth. Despite deflationary pressure, our OpEx line is starting to decelerate as we are reaching the end of the integration process of Oi mobile assets. As a consequence of this and robust revenue growth, 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-based issues, the margin rolls to 46%, an expansion of 100 basis points versus the first quarter of 2022. Regarding those two 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 the first quarter of '23. The contract ended only in April. From now on, as presented in our guidance, we believe TIM will deliver margin above 2022 levels. With that said, 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 trends and elements are still present. During the quarter, more than BRL 207 million were added between depreciation and interest related to the leasing contracts we acquired from Oi. Additionally, during the first quarter of '23, we saw negative impacts from a provision opened for severe contusions. We did not announce IOC would declare their first trends until last month. But on their own deposit side, we have elements such as the negotiation of our 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 operating free cash flow metrics. Maybe it's definitely the better indicator, which grew more than two times, reaching more than BRL 530 million. Under this circumstance, we maintain a solid financial position; our leverage level, the net debt-to-EBITDA ratio stood at 1.4x with total net debt, including leases, of BRL 15.1 billion again, highlighting a sustainable trend lever 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.

Alberto Griselli, CEO

Thank you, Andrea. We are completing one year since the closing of the transaction with Oi. During this period, our efforts concentrated on integrating the assets and executing the company's transformation plan. We are reaching an important milestone with the completion of the integration. However, we still have a lot ahead of us. Our focus for the coming quarters will be centered on fostering a healthy competitive environment where we can recover the inflation impact while utilizing other tools in the marketing mix to differentiate from our competitors. We want to compete on value propositions and customer experience, and 5G can help us do so while saving CapEx. As I mentioned during my speech, we are only beginning to decide the commissioning process. The plan is on track, and we are committed to delivery on time and with all the expected benefits. Regarding fixed broadband, we will continue to use the asset-light model, testing this approach in new markets while we complete the migration from FTTC to FTTH. The coming quarters for our customer platform initiative will be particularly exciting. We will soon deploy commercially our partnership with Cartão de Todos, our health partner, along with launching a new partnership. Lastly, we will continue to evolve our B2B verticals. We are expanding our activities and logistics with partners like Way Brasil, bringing IoT connectivity and solutions to Brazilian infrastructure. In the utility vertical, we have doubled the number of smart lighting points since the third quarter of last year, and the expansion will continue at an exponential speed. Today, NG is our main partner in these projects. Regarding 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 am reaching the end of my comments, and I want to thank the entire team for starting the year on a strong note. Things will not get easier from here, so we must maintain our focus and execution to achieve our goals by the end of the year. Let's open the floor for questions. Please, Operator.

Operator, Operator

Thank you, Mr. Alberto. Now we will begin the Q&A session. First, we will take questions from analysts, followed by the general public, both in English. If you are listening through the webcast, you can send your questions by chat. We ask each participant to limit themselves to two questions at a time. Our first question comes from Marcelo Santos with JPMorgan.

Marcelo Santos, Analyst

Hi, good morning. Thanks for taking my questions. I have two. The first question is, could you please 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 edge you're doing a replacement of fiber to the curb? And when you are done with your fiber to the curb, I mean, at this pace, eventually, you run out of fiber FTTC subs, should we expect the same level of gross adds in fiber? That's the question. Thank you.

Alberto Griselli, CEO

I'll take both, Marcelo. So, a moment, okay? So, in terms of the gap between the physical decommissioning and the economic decommission, it's primarily related to the interworking among ourselves and the tower company to get the, let's say, the green light for the economic decommission. It's like when you rent an apartment and you leave it, you need to take out all the items inside. Then at the end, 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 removing all the equipment from the towers. The second one is related to the interworking among ourselves and the tower company to ensure that they agree and greenlight the fact that the tower is empty. So, this in practice involves embarks and go of documents, pictures, and inspections to ensure that both we and our partner acknowledge the tower is empty. In terms of timing, it depends on the tower company, on the process, and on the equipment that is there. Roughly, the guidance we gave is that once we are done with the physical decommissioning, it generally takes about 90 days to move from the physical to the economic decommissioning. Regarding the second question in terms of net additions, as you correctly pointed out, we are seeing an acceleration of net additions on FTTH in this quarter. This is a combination of the migration of copper to fiber, which is happening primarily, or better exclusively, on the I-System plan in Sao Paulo and Rio de Janeiro. Our share of FTTH was 60% one year ago; it is roughly 80% today. We are moving faster and are nearly completing the process. Looking at the increase we saw, for example, in this quarter, and what we expect for the following quarter is the combination of both things: the migration of copper to fiber, which is almost finished, and the increased coverage of new regions. With the agreement with V.tal, we have moved into Parana in Santa Catarina in the south, and a chunk of the net additions is coming from there as well. If you ask me how we see this going forward, it will look closer to what we are seeing in this quarter. So, we moved to something like 15K net additions, 16.4 to be precise, in this quarter, whereas this number was a bit below it in the previous quarters. We have moved from five to 16, and we are likely to maintain this level going forward.

Marcelo Santos, Analyst

Perfect, thank you very much.

Operator, Operator

The next question comes from Marco Nardini with XP.

Marco Nardini, Analyst

Hello, good morning. Thank you for taking my questions. I actually have two on my side. The first one is regarding the expected dynamics of the 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 and economics of this new partnership, please. Thank you.

Alberto Griselli, CEO

Okay, Marco. So, on the first, regarding the EBITDA margin, we indicated in our guidance for '23 that we expect to move up double digits. This clearly implies margin expansion versus last year. We are aiming to reach a level close to what we had the previous year. The margin expansion is driven by several factors, including the conclusion of the TSA, which we remember cost roughly BRL 70 million per quarter. So, we finished it at the end of the last quarter. There are also additional opportunities related to the Oi customer base, which is generally less digitalized than ours. There are opportunities for digital building, fixed payment, and other initiatives we are implementing within our operations that are expected to increase our productivity. So, margin expansions will happen going forward, which is why our EBITDA is projected to grow double digits versus the high single-digit expected revenue growth. As for the network, I can say that we are pleased with both I-System and V.tal; the experience so far has been quite positive. We can confirm that the model is working correctly. We are satisfied with the service level and the functioning of both agreements. In terms of how we will accelerate the use of the two networks, they are complementary. In summary, we are using I-Systems to expand coverage in some areas, while we will utilize V.tal where I-System is not present. So, we will complement the rollout approach to avoid building a network where there is already another one.

Marco Nardini, Analyst

Perfect, thank you.

Operator, Operator

Our next question comes from Lucas Chaves with UBS.

Lucas Chaves, Analyst

Good evening, everyone. Thanks for taking my questions. I have two short questions on my side. The first one relates to ARPU. Could you please go into more detail on the dynamics you saw in the quarter, and what you expect going forward? Regarding raising prices, do you expect to implement any during the next quarters? The second question is about decommissioning. You've already explained well in the first question about decommissioning, but I would also like to hear details about the schedule and the timeline. Thank you.

Alberto Griselli, CEO

Okay, Lucas, regarding ARPU dynamics, as you saw, we are back on track in terms of ARPU growth for both prepaid and postpaid. This is primarily a result of the cleanup of the Oi customer base. To put it simply, it's a mathematical effect: we cleaned up a significant portion of clients who were not active, thereby reducing the denominator while impacting the revenues. We expected this and also mentioned it in the last quarter's results. Looking at the overall pricing dynamics, I think we have two important milestones. The first one has already taken place; it has been related to the fact that prices have been adjusted slightly above inflation for the entry prices, what we call above the line. This means prices at retail stores and on the website for new customers. This adjustment occurred in March and worked out quite well. That was the first important milestone. We did this, Vivo did this, and Claro also partially made similar adjustments, so they decided to manage a price increase for the first time in many years to pass inflation on their enterprises. What is happening now in this quarter is the price adjustment on our side for our existing customer base. We made similar adjustments last year during this quarter, in the second quarter. We plan to update prices for control and postpaid this quarter, so you will see the results in the next quarterly results. Another key point to look at in the next quarter is what we call the washing machine effect that typically occurs when we adjust prices on our customer base. The expectation is that since the market is more rational, and we increased prices for entry levels, the washing machine effect in the second quarter this year will be milder compared to last year. We will comment on these in future quarters. Additionally, regarding prepaid, we have steadily increased or remodeled the prepaid benefits, which is working out well as you can see in our prepaid revenues. We are readjusting unit prices within face value and benefits with a positive effect on our revenues. Now, regarding your second question about decommissioning, we are on track, Lucas. We ended March with 1,500 towers physically decommissioned. This week we are at 2,100. We are following the plan; it means that we aim to reach 3,500 by the end of this year. The economic effect is expected to pick up in the second half, as this reflects the difference between the timing of when we decommission and when the economic benefits are realized. But so far, we are on track.

Lucas Chaves, Analyst

Many thanks. That was very clear.

Operator, Operator

Our next question comes from Lucca Brendim with Bank of America.

Lucca Brendim, Analyst

Hi, good morning. Thank you for taking my questions. Two questions 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 5G for gaining new customers, or if you've been able to upsell existing customers with 5G, what have been the early impacts from the rollout? The second question, could you provide us with an update on CapEx, and if there were any changes from what you initially expected for the year? Thank you.

Alberto Griselli, CEO

Okay, let me address the first question; I will hand over the CapEx guidance to Andrea. Concerning the impact of 5G, we are deploying it in a very different way compared to our competitors, meaning that we selected several markets where we are going all in, or sort of all in, in terms of coverage. Our aim with this strategy on the commercial side is to achieve leadership in 5G and close the gap we currently have in the high-value customer segment. Therefore, it's more of a positioning approach rather than a monetization approach at this stage. That's why we selected key markets like Sao Paulo and Rio de Janeiro, where we have nearly full coverage. We provide a better service to our customers, increasing our appeal in the market. The key messaging here is that 5G performs better than 4G, which is observable in terms of service quality. We are leading in 5G, making it more attractive for high-value customers. We are capitalizing on this at significant events, such as Rock in Rio last year and the Maracanã today, providing a quality service where customers previously experienced poor network conditions. Currently, the immediate economic benefit relates to the 4G offload; when we deploy in areas like Sao Paulo, Rio de Janeiro, and Curitiba as if we are establishing new capitals in new metropolitan areas, we transfer traffic from 4G to 5G. This allows us to halt investments in these congested 4G markets, shifting investment to 5G instead. By reallocating funding from 4G to 5G in these key capitals, we become more efficient in terms of capital expenditures, which is a more tangible impact at this stage. We also utilize 5G as a differentiation lever in critical sectors like agribusiness or logistics, partnering with organizations like São Martinho, which includes our 5G Innovation Center and coverage of the central harbor with BTP. This also opens up monetization opportunities. However, at this point, we are providing an introduction for customers to experience 5G, enabling them to evaluate its value. Now, to discuss the CapEx guidance, I will hand it over to Andrea.

Andrea Viegas, CFO

Hi, Lucca. On CapEx, we are on track. In this first quarter, we have higher CapEx due to sustainability projects; however, we aim to achieve our guidance, which is CapEx over revenue lower than 5%.

Lucca Brendim, Analyst

Very clear. Thank you for taking my questions.

Operator, Operator

Our next question comes from Daniel Federle with Credit Suisse.

Daniel Federle, Analyst

Thank you. Good morning, everybody. Thank you for taking my questions. The first one, we're noticing that mobile service revenues growth is 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 since the second quarter last year was particularly strong? So, my first question is, when do you expect to see growth stabilize or re-accelerating? The second question is related to the recently published Anatel annual quality survey, which indicates that TIM S.A. still ranks third. Is this a point of concern for the company, and do you have any expectations regarding timing to close the gap?

Alberto Griselli, CEO

Okay, Daniel, let me address both of your questions. Regarding revenue dynamics, you're correct. When you look at the service revenue dynamics, we've seen figures like 44%, 22%, and now 21.1%. So, there is a slowdown. Much of this is also related to the impact of customer churn from our Oi customer base. We acquired 40% of it, so there is some cancellation without any revenue impact during the migration process. On the other hand, you have the organic dynamics, which is positive and in line with previous trends. For instance, with the 21.1% in the next quarter, we anticipate it will decrease because we will only have a month of Oi's contribution, thus just presenting the organic performance. Therefore, we will likely see a deceleration in overall revenue, but it should reflect what is happening organically. The guidance we provide indicates we will grow above inflation this year, a notable shift compared to previous years when the sector couldn't achieve growth above inflation. We believe our performance will be in high single digits for this year. It's accurate that you will see a revenue slowdown next quarter, reflective of losing some previous inorganic contributions. You will have the opportunity to assess solid organic performance going forward. In terms of the Anatel survey, I want to clarify that I view this as a significant opportunity rather than a concern. Yes, we rank third, and the difference between us and competitors in the prepaid segment is quite small, while it's somewhat higher in postpaid. We aim to improve this position, and there are various initiatives implemented within the company to enhance customer experience, which are key to our strategic plans. This is a focus area, and we are actively working on both customer care and network quality. For instance, in the latest Anatel complaints report (April), we observed a 50% year-on-year reduction. Our resolubility index at PROCON indicates we are the best performing operator. Ultimately, many of these harder elements will translate into enhanced customer experience. So, I see this not as a concern but as a strong opportunity to close the gap with our competitors.

Daniel Federle, Analyst

Perfect, Alberto. Thank you very much.

Operator, Operator

The next question comes from Felipe Cheng with Santander.

Felipe Cheng, Analyst

Hi, thank you very much for taking my questions. I have two on my side. The first question relates to dividends. Could you provide us with an update on the dividend distribution for 2023? It seems like you're on track to generate substantial cash this year, probably at a faster pace than the BRL 2.3 billion dividend guidance for this year. So, I wanted to understand if there is room for potential upside in terms of distribution. This would be my first question. The second question is about ultra-broadband. Could you provide us with an update on how the partnership with V.tal has evolved? Is there, in your view, significant upside risk regarding ultra-broadband growth for the upcoming years? Thank you very much.

Andrea Viegas, CFO

Hi, Felipe. I confirm we are on track with our dividends. We still operate under the guidance of BRL 3.3 billion. For now, we have no further updates on this information.

Alberto Griselli, CEO

And, Felipe, regarding broadband, the competitive environment is indeed challenging. There is considerable competition across all key markets. Our strategy for broadband expansion is to grow while ensuring coherence between volume and value. This translates into a specific growth speed, which aligns with our high single-digit expectations today. We are likely to accelerate EBITDA towards the year due to increased net additions. However, we must ensure a good balance between growth in volume and value. We are very careful not to dilute our ARPU, which has been growing for 17 quarters. We maintain the highest FTTH ARPU in the market. Therefore, we are satisfied with our current growth speed in broadband.

Felipe Cheng, Analyst

Perfect. Very clear, thank you.

Operator, Operator

The next question comes from Carl Sequeira with BTG Pactual.

Carl Sequeira, Analyst

Hi, good morning. Good morning, Alberto and team. Thank you very much for the call. My question is really a follow-up to a few questions that have addressed the exploration of V.tal's neutral network to grow the fiber business. I was wondering if you could provide more context on how the project is performing in the south? What is the next step? Are you venturing into the agreement in the south of the country where TIM has a very strong presence, or are you considering other regions? How do you see the project moving and its current performance, please?

Alberto Griselli, CEO

Okay, Carl. The pilot in the south is proceeding well. If you observe the net additions in those regions, you will see that we have outpaced competitors significantly. The expansion we are experiencing in the south from this pilot has yielded positive results so far. There are elements we still need to evaluate, as traditionally, when entering a new area—especially one where we've selected based on our strong brand credibility—it tends to create positive results in net additions because there is little churn. We are experiencing gross additions without churn impact. We need a couple of months to evaluate the final quality of these acquisitions. The early response from the market has been highly positive in terms of gross additions, leading to improved net performance. We need to assess the quality of these gross additions, so while the short-term indicators are good, we require more time to determine their sustainability. Once we finalize that assessment, we will disclose the next steps.

Carl Sequeira, Analyst

Okay, perfect. Alberto, thank you very much.

Operator, Operator

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. Vincente, you may proceed.

Vicente Ferreira, Public Q&A Moderator

Good morning, everyone. The first question comes from Tristan from GAMCO. It's a buy-side question. His inquiry is, how big an opportunity is agriculture coverage? What is the total amount of farmland to cover? Will satellite coverage be needed to supplement? Alberto, please.

Alberto Griselli, CEO

The opportunity is quite substantial in terms of coverage because today, we cover 14.4 million hectares. This accounts for approximately 20% of that specific large farming segment we are targeting. Therefore, we currently only cover 20% of the addressable market. There is significant upside risk regarding coverage. Satellite coverage can certainly serve as a complementary technology to provide coverage in those areas. It depends a lot on the customer's technical requirements. For example, we ourselves use satellite technology in some of our solutions. However, it largely depends on latency requirements—the responses desired by our customer base. If they need a quick response time, then satellite might not be viable, especially if it's geostationary. If latency isn't as critical, then it could work. Given Brazil's continental size, there is an opportunity for both mobile and satellite technologies to work together. Just a recap on our business model: we generate revenue through the infrastructure we provide to our customers. They pay for the infrastructure plus a markup, and we then monetize the services in terms of connectivity and solutions. Additionally, there are ESG implications as well. When we enhance coverage, we provide digital access to communities living and working on farms. When we extend coverage across 14.4 million hectares, we serve over one million customers in those areas who previously lacked access to telecommunications services. By connecting them, we gain incremental consumer revenues while also facilitating their digital inclusion.

Vicente Ferreira, Public Q&A Moderator

Thank you, Alberto. Now, we move to the next question from Miko Hodo, an analyst from Morningstar. The question is: Can you comment on consolidation opportunities in the broadband and fiber infrastructure market?

Alberto Griselli, CEO

When you analyze Brazil's market, you indeed notice numerous consolidation opportunities because there are too many players. Generally, there are a couple of them. In this context, you see a significant number of ISPs, and the first wave of consolidation currently occurring is between them with larger ISPs acquiring smaller ones. We anticipate a scenario where ISPs will continue to consolidate amongst themselves, and as a second wave, larger players like ourselves might eventually consolidate ISPs. Some may become part of these processes, while others may exit the market. The same consolidation process may occur within the infrastructure sector regarding neutral networks. As you know, several neutral networks exist, including Vivo and V.tal. It doesn't make sense to overbuild infrastructure in these situations, so consolidation may also happen at the neutral network level.

Vicente Ferreira, Public Q&A Moderator

Thank you, Alberto. The next question comes from Phani Kanumuri, an analyst from HSBC. His first question asks: Can you talk about the narrative trends regarding why TIM lost subscribers this quarter, and when we can expect to see an inflection point in total net additions? I think Alberto already commented on this, but if you have anything to add, Alberto, please.

Alberto Griselli, CEO

Phani, this first quarter was more challenging to assess due to the cleanup and the loss of our customer base, combined with our performance. You should see an inflection point in the second quarter. We should have a significantly reduced effect from the Oi customer base in the second quarter, which will enable us to present a performance that aligns more closely with our organic performance. Regarding the second question, concerning the TFF, which has been suspended since COVID, do you anticipate payments will be made in a single installment or staggered? Andrea, please.

Andrea Viegas, CFO

Regarding the payment of TFF, the payment discussion is currently taking place in the federal court. It remains under analysis, and we don't have any updates about the timing of the payments.

Vicente Ferreira, Public Q&A Moderator

Thank you, Andrea. The next question comes from Hudso Cabrao, an individual investor. His question is: How is the installation process of the Massive MIMO on TIM antennas going? This question is directed to Leonardo Capdeville, our CTO.

Leonardo Capdeville, CTO

Good morning, Hudso. We consider Massive MIMO as an active technology for 5G, meaning that 100% of our 5G antennas already include this technology. However, it is essential to note that we were ahead; we integrated Massive MIMO into our 4G network almost three years ago. We have noticed significant differences in terms of capacity and quality as a result of this technology. As it stands, with 5G, our deployment is at 100%, and in locations where it makes sense for capacity or quality, we use Massive MIMO for 4G. Overall, the process is progressing well.

Vicente Ferreira, Public Q&A Moderator

Thank you, Leo. I believe with this, we finish our questions and answers. Operator, please.

Operator, Operator

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

Alberto Griselli, CEO

Thank you, everyone, for attending today's conference call. I want to thank again our management team and all our team members for their efforts during this quarter. We are on track in delivering what we promised to the market in terms of guidance, including top-line growth above inflation, expanding EBITDA margins, increasing CapEx efficiency, and a plan to double our cash flow within the 2023-25 plan. Thanks again to the team, and I look forward to meeting some of you in the next interaction.

Operator, Operator

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