Earnings Call Transcript
TIM S.A. (TIMB)
Earnings Call Transcript - TIMB Q4 2023
Operator, Operator
Hello, everyone, and welcome to TSA's Earnings Conference for the Fourth Quarter and Full Year 2023. Thank you for joining us. I'm Vicente Ferreira, Head of Investor Relations. Today, we'll share our highlights on video, and then we'll begin our live Q&A session with our CEO, Alberto Griselli, and our CFO, Andrea Viegas. Before we discuss our results and annual guidance, I remind you that management may make, and this presentation may contain forward-looking statements. So please refer to the disclaimer on the screen, which will also be available in our earnings materials and on our investor relations website. With that, we move to our results.
Alberto Griselli, CEO
Hi to everyone. I'm Alberto Griselli, CEO of TIM in Brazil. I'm very pleased that 2023 was an outstanding year with great achievements and record high results. As we explained during our Investor Day in November, the Brazilian mobile market is healthier than ever, supporting a more-for-more strategy. New market dynamics and favorable demand are driving our results to improve across the board. Our service revenues grew in 2023 by 10.7% year-on-year, totaling more than BRL23 billion. With costs under control, our EBITDA grew more than 14% to reach the highest number in our history, BRL11.7 billion. In this context, our 2023 margin expanded to almost 49%, the highest among large telco in Brazil and Latin America. Another metric that measures our efficiency in allocating resources is the CapEx to sale ratio. We closed 2023 with the best result ever, just below 19%, contributing to our operating free cash flow growing more than 58% year-on-year, summing to BRL4.2 billion. To complete this small summary, our net income rose to BRL2.7 billion after expanding more than 50% year-over-year. These results explain why we were confident in November in raising our shareholder remuneration target to BRL2.9 billion. To generate such strong numbers, we are developing the best value proposition based on the BBB strategy: Best Service, Best Network, and Best Offer. During 2023, we worked extensively to deliver improvements in customer experience. We seek the best service by digitalizing the interaction to accelerate and improve demand resolution. And we are best-in-class in all resolution rankings in Brazil. At the same time, if a human attendant services a client, the satisfaction with this interaction must be best-in-class, and we can deliver that. Call center metrics improved more than 40% in the fourth quarter. Meanwhile, we are consolidating our leadership in network coverage and quality in Brazil. We have the largest 4G and 5G coverage, being the only operator to cover all the cities of Brazil. Our network was also the most awarded among Brazilian operators. We ranked number one in consistent quality, the most relevant KPI to measure a customer's actual experience. To complete, we are innovating to create the best offer, leveraging new concepts and partnerships to generate novelty and distinctiveness. We have launched the first trial offer in Latin America to encourage customers to test our service. We expect this tool to be relevant in changing clients' perceptions of our quality. We just launched commercially our partnership with Ambev. We are expanding the benefits for prepaid customers using cash back in the Zé Delivery app as a loyalty tool, and it is working. Today, we have the highest blended ARPU in the industry, close to BRL30, and growing nearly 13% year-over-year. We saw a similar performance in post-paid and prepaid ARPUs, which expanded at mid-teen pace in 2023. At the same time, we are improving churn in post-paid, increasing upsell results with upward migrations, and seeing a rise in prepaid spending. Behind these financial and operational numbers is a clear strategy to craft the next-generation team. Under this framework, the four pillars, mobile, B2B, broadband, and efficiency, are developed integrating our people, society, and the environment into our business strategy. Examples of that are: the project in business B2B, where we develop a new growth avenue and bring connectivity to the countryside of Brazil, also producing positive social and environmental impacts. The partnership with Cartão de Todos helps us differentiate our offer to telco customers while providing access to affordable health services. This integration propels our ESG practices to be recognized as one of the most developed in the country. TIM ranked 12th among the best companies to work for in Brazil in the Great Place to Work selection. Sustainalytics also awarded us as ESG industry top rated. Standard & Poor's lists TIM among the most sustainable telco companies in the world. And last but not least, we are the most diverse and inclusive company in Latin America and the number one telco in the world ranked by Refinitiv. Our CFO Andrea will now provide additional details on our financial performance.
Andrea Viegas, CFO
Hello to all. I'm Andrea Viegas, CFO of TIM in Brazil. To reach some numbers and go above our original target for 2023, we closed the year at an excellent pace. In the fourth quarter, sales and revenue grew more than 7% year-on-year, with mobile raising 7.6%, while broadband spanned at 9.5%. With costs under control and reaping the benefits of the M&A transaction, our EBITDA grew in the quarter by 7.5% to reach BRL3.2 billion, with the margin expanding to 50.2%. Accounting for the leases, EBITDA after lease grew even faster at a 15% pace, amounting to BRL2.5 billion. This performance benefits massively from the sharp execution of our decommissioned projects. We ended the year with 4.4 thousand sites decommissioned and 3.8 with contracts canceled. As a consequence of a better depreciation number due to lease reduction and the tax shield generated by the interest on capital, our net income presents robust expansion of more than 50% year-over-year. With this, net profits reached one of the highest results in TIM's history, summing BRL900 million in the fourth quarter. Additionally, we saw vigorous cash generation in the fourth quarter, with operating free cash flow growing more than 50% year-over-year and margin expanding to nearly 19%. For the full year, EBITDA after lease and minus CapEx over revenues stood close to 18%. With a strong cash position, our net debt fell to BRL11.6 billion, taking our leverage ratio to one-time EBITDA. All those numbers confirm what a remarkable year we had in 2023. To wrap up this results discussion, I hand it back to Alberto.
Alberto Griselli, CEO
When we started the year, we set challenging but achievable targets. As we executed our plan, results began to come faster, which led to the best performance of TIM's history in many KPIs. We completed a quarter of a century of existence over delivering on every front. We set ourselves to grow high single-digit in service revenue and deliver double digits, proving our ability to operate multiple revenue levers. We forecasted low double-digit growth for EBITDA and closed 2023 with mid-ends showing significant operational leverage. Our CapEx on revenue was expected to go just below 20%. We delivered below 19% with the best coverage and largest mobile network in Brazil. This is a clear demonstration that we are improving our capital allocation strategy. The expectation for operating free cash flow was double-digit growth, and we delivered close to 60% expansion. We initially pointed to BRL2.3 billion for shareholder remuneration, but we decided to raise our target in November to more than BRL2.9 billion and delivered on that. These notable achievements have been made possible by the contribution of every TIM employee, and I'm proud to lead the team of committed and hardworking colleagues with an engagement level of above 90%. 2023 was an outstanding year, but we are already in 2024 and on a long journey to become the most preferred telco. We are updating our guidance to adjust to new market conditions in the macro environment. Service revenues are expected to grow above inflation and not faster than last year's plan. EBITDA is forecasted to sustain a solid growth pace with a positive margin contribution. Nominal CapEx should remain broadly stable with a clear focus on developing infrastructure to drive revenue growth. For operating free cash flow, we confirm the growth pace we set during the old plan. On March 7th, the TIM Group will host the Capital Market Day in Italy. We plan to disclose an updated target for shareholder remuneration there, among other elements that complement our strategic plan. Please join us in this event that will set the direction for a new TIM Group. Now let's move to the live Q&A session.
Operator, Operator
Thank you, Mr. Alberto. We are now going to start the question and answer session. Our first question comes from Marcelo Santos from JPMorgan. Mr. Marcelo, your microphone is open.
Marcelo Santos, Analyst
Hi. Thank you for allowing us to ask a question. Thank you for the presentation. My first question is regarding the sources of growth going forward in mobile revenues. In the past couple of years, in general, TIM didn't add much volume, and a lot of the revenue growth came from the ARPU side. Is this something expected to continue in the coming years? Or should we see more growth on the volume side and a little bit less on ARPU? Just wanted to see your thoughts there. And the second question is regarding the pricing environment. How do you see that for 2024? Thank you.
Alberto Griselli, CEO
Okay. Thank you, Marcelo. Let me address the two questions. So, when we look at the revenue growth dynamic, we've got a number of different levers in our hands. So, you got the volume, you've got the more-for-more strategy, and you also have the inter-plan migration that we carry out in our customer base, meaning free to control-to-control and control to postpaid. So, when you look at the way we want to move forward, it is basically a mixture of all these elements. So, when you say that we focus more on ARPU versus volume, it depends a bit on which temporary horizon you're looking at. So, if you look at the performance for postpaid after the migration that ended in the first quarter last year, you would see that our postpaid growth quarter-on-quarter. It's difficult to see still year-on-year. It's basically driven by the composition and the blending of all these three levers. So, we are growing in volumes. We are growing because of the more-for-more strategy, and then I will go into the second question. And we are growing impacting the ARPU basically by migrating customers to better plans where they have the right benefits for the price that they're paying for. So, looking forward, I see in postpaid a combination of all these three levers. In prepaid, the situation is a bit different because basically, the market is sort of evenly divided by the three operators. Therefore, I think that the price lever is going to be more predominant for that specific segment. So, when you go then to the competitive dynamics and what we are expecting to do in terms of pricing, basically, the main message is following. The competitive dynamics remain quite rational. If we look at what we did in 2023, it's something that we want to do in 2024. So just recapping what happened last year. Last year, in the second quarter, we applied our more-for-more strategy for postpaid, both on what we call front book and back book prices. So, this happened in the second quarter last year. By the end of last year, we decided to upgrade our prepaid offer. So, what we are going to do this year is roughly similar. In the second quarter this year, we are going to upgrade our front book and back book prices for postpaid. This has already been decided and is being coded in our IT systems. The decision has not been taken yet for prepaid. We just did a move recently. So, we need to see what the customer reaction is, what the competitors' reaction is, and then make a final decision. But the plan we are looking for is to do some further adjustment by the end of this year, similar to the timing we did it last year.
Marcelo Santos, Analyst
Thank you. And what about control?
Alberto Griselli, CEO
When I say postpaid, it's pure postpaid and control. So, we're going to do the two things together in the second quarter, as we did last year. It's going to be inflation plus on a more-for-more strategy. Just adding a bit more on that, you know that we provide extra benefits to our customers where we do these movements. So, it's going to happen in the second quarter this year for control and postpaid exactly as it happened last year in the second quarter.
Marcelo Santos, Analyst
Perfect. Thank you very much.
Operator, Operator
Our next question comes from Leonardo Olmos from UBS. Please, Mr. Leonardo, your microphone is open.
Leonardo Olmos, Analyst
Hi. Good morning, everyone. First of all, congratulations on beating the guidance. It was very positive. So, I've got a couple of questions here. The first one is a double-click on Marcelo's question on mobile. Where do you see the most opportunities to better monetize your plan? So, we heard you and competitors talking a lot about prepaid and social media having unlimited data allowance and maybe cross-selling with other subscriptions. Where do you see the opportunities in terms of products and how the packaging of your plans could be done in 2024? That's my first question. I'll do the other after you answer.
Alberto Griselli, CEO
Okay. So, Leonardo, thanks for your nice comments at the beginning of your question. If you look at what we shared at the Investor Day in November, essentially, we see favorable conditions on the demand side across all plans. Basically, we see essential services that are somewhat cheap, and utilization use is relatively low, especially in prepaid and control. So, there is actual opportunity to implement the more-for-more strategy. The more-for-more strategy is a combination of several elements. I think that basically, it's an extra data allowance, especially for lower-end plans, so prepaid and control because their use is limited when compared to other markets. There is an opportunity to monetize that. Additionally, there is another set of services related to the digital lives of our customers that we are continually including in our portfolio. The final item is OTT, which I will address. The more-for-more strategy in terms of increased data allowance is something we have been doing over the years, and I think we will continue to do this moving forward across the board. Even because when you look at prepaid and postpaid, we need to maintain a coherence of the plans among themselves. If we move something, we need to upgrade the other side of it. If we move control, then we need to upgrade prepaid to have the right incentives to migrate customers between plans. The more-for-more strategy on data usage remains unchanged. Another successful approach has been providing extra benefits to our customers without significantly impacting our margins, like, for example, the recent collaboration we launched with Ambev, whereby any prepaid customers recharging TIM's Brazil receives cash back for delivery products. Last year, we introduced Prime Video for prepaid. So today, if you recharge as a prepaid user, you gain access to Prime Video for the length of the recharge offer. Starting from January, you also qualify for redemption benefits from the delivery service. We monetize them such as providing extra benefits to customers, which ultimately leads to longer customer lifetimes with us and churn reduction. The other way to monetize is by engaging our partners in some kind of commercial terms, such as Cartão de Todos, which we launched last year. When we consider the similarities with C6 or with what we are doing with other digital services, we gain benefits of the partnership that we share between customers and additional revenues for us. Even when we give the benefits all to the customer like Ambev, part of those benefits can also be returned to us as equity or commission revenues. I'm hoping I've managed to clarify, but these are the levers we use.
Leonardo Olmos, Analyst
Perfect, Alberto. That was the point of my question. Happy to hear about the timing of the Zé Delivery promotions since we're so close to Carnival. My second question, if I may about leasing, a very positive surprise on the numbers, 7% below our projections. The cash generation was way above what we expected. But when we look at 2024, what's your expectations on decommissioning? And how can we consolidate that with the 5G increase in coverage? Thanks.
Alberto Griselli, CEO
Okay. I will ask Andrea to address this first, and then I will provide some general comments on the leasing aspect. When you look at the leases, several factors come into play. In terms of decommissioning, while that is somewhat of a one-off exercise, we have been decommissioning what was not useful to us quite rapidly. At the same time, you have contractual adjustments of the cost base because part of this cost needs to be adjusted by inflation. Additionally, you have an increased footprint. For example, we reached all municipalities with 4G; however, especially in the B2B segment, we need to add more sites. As you correctly mentioned, we have 5G implementation as well. Consequently, we need to add antennas to our towers, which includes extra wind space and additional costs, depending on the contract. You have potential downsides we have been discussing since our Investor Day related to our initiatives aimed at optimizing costs, from technical innovation to renegotiations with our partners. We have the 4G round-sharing agreement with Vivo that has been revived, which reduces resources. We have a set of movements—some are positive, and some are negative. Ultimately, we want to ensure sustainability for this cost line over time as we expand our footprint and utilize technology to enhance service quality. Therefore, we've put initiatives in place to compensate for cost pressures linked to price adjustments and increased network deployment. Lower inflation is an encouraging factor moving forward since it has been negative or rather unfavorable over the last few years.
Andrea Viegas, CFO
Alberto almost covered everything, but regarding the decommissioning in fiscal terms, we finished. We achieved commendable results in this quarter. We will continue to see good results in the first quarter. As Alberto mentioned, there will be price adjustments. In February and March, we will experience a significant effect from this price realignment. While 5G does not necessarily create new sites, we need more space for installation. Therefore, some cost adjustments can occur. However, our expectation is to find new ways to gain productivity on the leasing side as we continue negotiating with major contracts that we still maintain.
Leonardo Olmos, Analyst
Very interesting. Okay, thank you very much, Alberto, Andrea, Vicente, and everyone else. Have a great day.
Operator, Operator
Our next question comes from Fred Mendes from Bank of America. Please, Mr. Mendes, your microphone is open.
Frederico Mendes, Analyst
Hello. Good morning, everyone, and thanks for the call. I have two questions here as well. The first one is on CapEx, especially regarding the guidance; it was slightly above our expectations. I guess we are on the bullish side. But I am trying to understand if there is a specific line you're focusing on, let's say, IT or 5G that could explain this higher CapEx from our expectations or if it's basically for network improvement, business as usual. This will be the first one. The second question, if you can just comment Alberto, how is the structure shifting now that Leonardo has gone to TI? Are you going to have a new structure? Can you share anything on that? I think it would be great for us.
Alberto Griselli, CEO
Okay. Let me take the second one, and then I will ask Andrea to talk about CapEx. Regarding the structure of the CTO, that level has been removed. This transition has occurred either last year or the start of this year; I can't recall precisely. However, the important aspect is that Marco DiCostanzo, the former Chief Technology Officer, and Awana Matar, the former Chief Information Officer, now report directly to me. They are both experienced executives who have been with us for many, many years. This change in reporting does not alter our strategy; our focus remains on proper capital allocation and leadership in network service quality. In terms of IT, it's about innovation and robust support for our go-to-market strategy. This restructuring has already occurred, Fred. The executives promoted have been with us for approximately 20 years.
Andrea Viegas, CFO
Yes, let's look at our guidance. The CapEx is maintained at EUR4.4 billion to EUR4.6 billion. We continue to focus on the rollout of 5G and quality improvement. Remember that we have a component of CapEx related to IT, as well as OpEx associated with the Cloud.
Frederico Mendes, Analyst
Perfect. Very clear. Thank you, Alberto. Thank you, Andrea.
Operator, Operator
Our next question comes from Vitor Tomita from Goldman Sachs. Please, Mr. Tomita, your microphone is open.
Vitor Tomita, Analyst
Hello. Good morning, all, and thanks for taking our questions. Two questions from our side as well. The first one is regarding the 2026 revenue growth guidance. The longer-term guidance does that already assume a relevant contribution from your B2B strategy or other fronts? Or are those more like longer-term drivers? Over those three years, is growth likely to be primarily driven by mobile? The second question from our side is on the migration of users from prepaid to control plans, which you've mentioned previously. You've been doing that for quite some time. How much further room do you see for increasing the percentage of postpaid in your user base? How high do you believe that percentage could eventually get? Thank you.
Alberto Griselli, CEO
Okay, Vitor, regarding the first question, we do not share the exact breakdown of the various components of our revenue drivers. Let me provide you with some information. The assumption regarding inflation in our plan at this point is around 4% this year for PCA, then declining to 3.5% in the subsequent years. We primarily assume that we will be able to grow consistently above inflation in the short term and in 2025-2026. This growth is driven by our overall portfolio of revenue generation initiatives. Mobile is a significant contributor given its market rationality, and we foresee exponential growth in B2B, for example. We reported about EUR300 million in contracted revenues over the last 18 months. This year, we shared that we're targeting an additional EUR200 million in contracted revenues for 2023. However, these contracted revenues span a period of five years, and they will gradually build over time. As for your specific question regarding B2B revenues, they are expected to represent a small portion in light of mobile's prominent position but remain essential as part of our overall growth strategy. Concerning the migration from prepaid to control, we've been actively working on this for a while now, and I would state that there will always be room for growth. For instance, we have been intensively focusing on the OI customer base over the last 12 months. Churn in the telecom market tends to be quite dynamic, and many customers improve their economic circumstances, which gives us the opportunity to move them up. Considering the macroeconomic outlook, improvements in the purchasing power of Brazilians suggest ongoing opportunities for migrating prepaid to control customers at the pace we have experienced in the previous year.
Vitor Tomita, Analyst
Clear. Thank you very much.
Operator, Operator
Our next question comes from Marco Nardini from XP. Please, Mr. Nardini, your microphone is open.
Marco Nardini, Analyst
Hello. Good morning, thank you for taking my questions. I actually have two here on my side. This quarter, you delivered a solid EBITDA margin alongside the highest ARPU and also reported strong guidance in top line and EBITDA growth going forward. Could you provide insights into expected margin dynamics for the upcoming quarters of 2024? My second question is regarding fixed broadband. I understand that you reported 9.5% growth, but its contribution to consolidated revenues remains relatively low. What do you expect on fixed broadband growth in 2024? Can we expect some M&A here? Or do you believe that there is still room within this asset-light model? Thank you.
Andrea Viegas, CFO
Hi, Marco. Regarding the EBITDA margin, we continue to expect growth, particularly on the EBITDA after lease margin, where we anticipate more results because of decommissioning and the lease effects that we've already mentioned. We will continue to focus on growing with greater productivity.
Alberto Griselli, CEO
To add to this, you know that discipline in cost control, productivity, and capital allocation is truly part of our DNA. Revenues are growing above inflation, and certain variable costs are linked to that. We anticipate a scenario of lower inflation, at least in comparison to previous years, and we are committed to enhancing operating free cash flow, which will naturally break down at the EBITDA and EBITDA lease level and the CapEx allocation. Regarding your second question on broadband, let me first address the market dynamics and our current standing. When looking at broadband, we hold a 2% revenue share in the specific market. This remains competitive as one large player has recently lowered prices on entry-level plans, underscoring the fragmented nature of the market. Therefore, we don't see convergence as an issue for mobile operations given that over 50% of the market share is held by a handful of ISPs. This situation allows us to operate as essentially a mobile company, as our revenues and profits largely derive from mobile services, but we remain underrepresented in broadband. Given our established brand strength, the broadband segment emerges as a promising adjacent market where we could command a higher revenue share. However, we are not looking for growth for its own sake; we seek profitable growth that enhances our margins. The current market dynamics present challenges for such a value proposition. If you review our net additions over recent months, you will notice that we have decreased them slightly due to efforts to optimize our commercial footprint. This adjustment involved removing some of our partners who were more aggressively pushing; hence, we did not achieve the quality of gross additions we desired. We are currently rebalancing our commercial strategy, and while this may impact gross additions, the positive outcome—such as churn reduction—will materialize over the following months. Overall, we seek not just growth, but profitable growth, and our strategy is tailored accordingly. As noted in November, we maintain an active position regarding non-organic opportunities. Therefore, we remain open to attractive propositions.
Marco Nardini, Analyst
Perfect. Thank you.
Operator, Operator
Our next question comes from Carlos de Legarreta from Itau. Please go ahead, Mr. Carlos, your microphone is open.
Carlos de Legarreta, Analyst
Sure. I have a question regarding the equipment side. I understand that it's a small part of the business. However, I was trying to determine that in the fourth quarter, you seem to have a nice increase in handset volume sold, yet the revenue contribution is actually lower year-over-year. Conversely, for the full year, you recorded an increase in product revenue despite lower handset sales. I realize handsets aren't the only equipment sold, but could you shed light on how to reconcile this and share your expectations moving forward? My second question, double-clicking on broadband, the penetration of customers over total homes is relatively low. Do you conceptualize a target penetration rate as a target for TIM? If so, could you share what that target might be and the anticipated time frame? Thank you.
Alberto Griselli, CEO
Okay. Let me respond to the first part from a commercial perspective, and I'll hand over to Andrea for some numbers. Our commercial approach regarding handsets involves implementing various policies with three key objectives: first, to attract competitors' customers; second, to increase the lifecycle of those customers who apply for the offer with handsets included; and third, to boost ARPU uplift. Generally, we place subsidies in our highest plans where we can generate ARPU uplift. We often assess how these dynamic strategies perform and approach each quarter with flexibility. If we need to make adjustments, we do so accordingly. In the last quarter, we were slightly more aggressive with subsidies due to the specific performance of that quarter. As for the overall numbers for the year, I'll now let Andrea provide clarification.
Andrea Viegas, CFO
Yes, our last quarter saw substantial seasonality due to the Black Friday and Christmas periods, resulting in concentrated subsidies during that time. For the entire year, we achieved higher volumes compared to 2022. Thus, we see increased revenue and costs. However, the fourth quarter reflects the seasonality of these two significant commercial periods.
Alberto Griselli, CEO
On to your question about broadband penetration. As an MVNO when looking at our positioning, it’s important to note that we are functioning within an asset-light model. This means we can operate across a larger footprint and bring in customers without needing to fill the network quickly. It's a strategic capital-light advantage, allowing us not to have fixed asset occupancy rates to be met. We have adopted a mobile-like strategy that aligns with our strengths. Ultimately, our focus is on delivering quality and balancing revenue growth with profitability.
Carlos de Legarreta, Analyst
That’s super clear. I really appreciate your comments.
Operator, Operator
Our next question comes from Phani Kanumuri from HSBC. Please, Phani, your microphone is open.
Phani Kanumuri, Analyst
Thanks, everyone, for taking my question. I have a couple of queries. First, regarding your shareholder remuneration, you mentioned you would disclose on March 7. I want to understand if there are any remaining decision points, or do you already know the decision and are just awaiting the right moment to communicate it? Or are you still waiting on external factors to finalize shareholder remuneration?
Alberto Griselli, CEO
We are finalizing the numbers in internal discussions. The key message is that in our previous guidance, we emphasized continuous improvement regarding shareholder remuneration, which we have consistently achieved over the years. We've moved from 1% to 2%, then to 2.3%. Since our plans were advancing faster than initially anticipated, we raised our targets in November from 2.3% to 2.9%. We are opening 2024 at a quicker pace and are finalizing unified approaches to communicate the new standard on March 7.
Phani Kanumuri, Analyst
Okay. The second question relates significantly to your operating free cash flow after leases. The margin stands at around 18% this year, and your guidance suggests that this will increase significantly within the next two to three years. What do you think would be a comfortable margin to target in that time frame?
Andrea Viegas, CFO
We expect that the margin will grow in the coming years. Thus, similar to our guidance, we anticipate double-digit growth moving forward.
Alberto Griselli, CEO
To supplement Andrea's insight, we have provided extensive guidance including five to six KPIs to assist your financial modeling. We cannot provide guidance on every KPI. However, we trust that based on our expectations for revenues, EBITDA, and EBITDA post-lease minus CapEx, it will be relatively straightforward to calculate. Should you require any additional qualitative insights, we can facilitate further clarification in the coming weeks to enhance your understanding of our metrics.
Phani Kanumuri, Analyst
Perfect. Thank you, everyone.
Operator, Operator
Our next question comes from Gabriel Delima from Morgan Stanley. Please, Mr. Delima, your microphone is open.
Gabriel Delima, Analyst
Two questions from my end. First, is there anything noteworthy happening in the first quarter of 2021 worth discussing in terms of the market? You have the best drivers in place. I want to gather some insights into how you are performing. Secondly, regarding M&A, when you say you're active, does that mean you're looking at all potentials in the market, or is your approach more focused on smaller companies or specific types? I'm curious whether the OI assets for sale represent an opportunity for TIM as well.
Alberto Griselli, CEO
For the first quarter, traditionally it's a seasonal period with consumers returning from holidays in January and Carnival in February. We see everything proceeding according to our plans. There’s nothing out of the ordinary as we head into this quarter. Last year at this time, we had no promotional activities or communications. This year, we have initiated a summer campaign alongside our Zé Delivery promotions, launched in November. Consequently, we are engaging in more commercial activities, resulting in positive outcomes thus far. As for the M&A scenario, we receive interest from many companies seeking acquisition, meaning we don't actively seek them out; they're simply presented to us. We examine all opportunities presented, but we emphasize cautious assessments to ensure the initiatives align with our revenue and free cash flow growth strategies.
Phani Kanumuri, Analyst
Crystal clear. Thank you.
Operator, Operator
Our next question comes from David Lopez from New Street Research. Please, Mr. Lopez, your microphone is open.
David Lopez, Analyst
Hi. Hello. Thank you for taking my questions, and congrats on a solid set of results. I just want to touch on the balance sheet, please. Your net leverage is notably low now. I'm curious about your views on optimal future leverage levels. While I understand you cannot delve too deep into shareholder remuneration at this time, should we anticipate leverage to remain near zero, or is growth potential expected? What would you consider an optimal level?
Andrea Viegas, CFO
Yes, our leverage is indeed very low following the acquisition of OI, which is contributing positively to our results. Currently, we have no plans to change our leverage situation. We are considering the possible impacts of developments in income tax regulations from the government. Once we have clarity, we can start formulating our capital infrastructure strategy. But for now, we aren't looking to change our leverage position.
Alberto Griselli, CEO
David, just to add context, there has been a lot of discussion about interest on equity, which might trigger changes in our approach, especially with the discussion being postponed for any potential implementations not happening until 2025 at the earliest. This element factors into our deliberations as we weigh options around expanding shareholder remuneration and addressing tax benefits.
David Lopez, Analyst
Thank you very much. That's quite clear.
Operator, Operator
Our next question comes from Philip Chang from Santander. Please, Mr. Chang, your microphone is open.
Philip Chang, Analyst
Hi. Good morning, everyone. Thank you for taking my question. A quick one regarding any updates on FISTEL payment discussions. Are you still working with the assumption of not having to pay FISTEL this year? I just wanted to check if there are any updates on that front.
Andrea Viegas, CFO
I think we still maintain our existing position; nothing has changed regarding the FISTEL payment, so we uphold our prior stance.
Philip Chang, Analyst
Perfect. If I may just do one quick follow-up. I wanted to comprehend performance within the mobile segment concerning high-end consumers. Given that you now boast the highest ARPU in the market, has your overall growth among high-end customers been significant? Would you consider this an important driver for ARPU expansion and service revenue growth?
Alberto Griselli, CEO
Chang, this is a fantastic question because in the postpaid segment, we currently hold 22% market share, while the market leader possesses 44%. This means substantial growth opportunities lie ahead. I've already mentioned that we are performing well in the postpaid area. Basically, we see a double-digit growth momentum in pure postpaid numbers. Our commercial strategy, focused on best service, best network, and best offer, aims to enhance our value proposition for high-value customers. So, while we are seeing strong results in high-value segments, changing consumer perceptions takes time. We are aligning various initiatives together, like the test drive mentioned earlier, specifically targeting high segment customers. Monitoring our high postpaid plan's success, including our recent collaboration with Apple, is vital to repositioning ourselves effectively among high-value customers. Our updated offerings, including preferred airline status, measure against our postpaid performance. Given the competitive landscape, closing these performance gaps is instrumental to increasing our presence in this valuable segment.
Philip Chang, Analyst
Very clear. Thank you, Alberto, Andrea, Vicente, and congratulations on the strong fourth-quarter results.
Operator, Operator
Thank you. Ladies and gentlemen, since there are no further questions, I'm returning the floor to Mr. Alberto Griselli for his final remarks. Please, Mr. Griselli, you may proceed.
Alberto Griselli, CEO
So, thank you to everyone for staying with us. I hope you like the new format that we put together. I invite all of you to participate in the TIM Group Capital Market Day on March 7th. I look forward to meeting all of you in upcoming one-to-one meetings in the following days. Thank you, and to those who are celebrating, have a nice carnival.
Operator, Operator
This concludes the fourth quarter of 2023 Conference Call of TIM S.A. For further information and details of the company, please access our website at tim.con.pr/ir. You can now disconnect, and thank you once again. Have a wonderful day.