Earnings Call Transcript - VIV Q2 2023

Operator, Operator

Good morning, everyone. Welcome to Vivo's Second Quarter 2023 Earnings Call. This conference is being recorded, and you will be able to access the replay on the Company’s website at ri.telefonica.com.br. The presentation will also be available for download. The call is available in Portuguese as well. We would like to inform you that all attendees will only be able to listen during the presentation and we will begin the question-and-answer session afterwards, with further instructions provided at that time. Before we begin, I want to clarify that any statements made during this call regarding the Company’s business prospects, operational and financial projections, and goals are based on the beliefs and assumptions of Vivo's Executive Board and the current information available. These statements may involve risks and uncertainties related to future events and are dependent on conditions that may or may not occur. Investors should consider events related to the macroeconomic environment, the industry, and other factors that could lead to results differing significantly from those in the forward-looking statements. Present on this call are Mr. Christian Gebara, CEO; Mr. David Melcon, CFO and Investor Relations Officer; and Mr. Joao Pedro Carneiro, IR Director. I will now hand the call over to Mr. Joao Pedro Carneiro, the Investor Relations Director of Vivo. Mr. Carneiro, you may begin.

Joao Pedro Carneiro, Investor Relations Director

Morning, everyone, and welcome to our second quarter 2023 earnings call. The presentation will be divided into two parts. First, our CEO, Christian Gebara will comment on Vivo's operational and financial performance, followed by an update on the progress of our B2B and B2C Digital ecosystems and ESG initiatives. Then our CFO, David Melcon will walk us through our cost and CapEx evolution, net income, shareholder remuneration, and free cash flow generation. Christian, I hand it over to you.

Christian Gebara, CEO

Thank you, Joao. Good morning and thank you for participating in our earnings call. We delivered a very strong result in the first like-for-like quarter after Oi Mobile's acquisition in April 2022. Total revenues grew by 7.6% year-over-year, well above inflation, mainly driven by the Mobile Oi service revenue that was up 10.4%. This outstanding performance is a result of our best-in-class value proposition in mobile and fiber, which translates to an expansion of postpaid access by 4.8% year-over-year, and homes connected by FTTH by 15.1% in the same period. The robust operating performance combined with cost discipline enabled EBITDA to grow at a double-digit pace, up 11.1% year-over-year, contributing to a 120 basis point margin expansion in the period. To summarize, a robust EBITDA expansion and a reduced level of CapEx intensity allowed us to deliver exceptional performance in operating cash flow, which totaled BRL6 billion in the first half of 2023, up 29.2% year-over-year. All these factors allowed us to reach BRL2 billion in net income in the first six months of 2023, an increase of 28.9% versus the same period of the previous year. As we continue generating substantial free cash flow as seen by the BRL5.6 billion produced year-to-date, we are committed to maintaining a strong level of shareholder remuneration. Up to July 12, 2023, we have declared BRL1.9 billion in dividends and interest on capital, while we also invested over BRL200 million to buy back our own shares. Turning to Slide 4, we show how our strategic decision to invest in core products during the last year is enabling us to deliver above-inflation top-line growth. Pricing rationality combined with continued upselling to postpaid plans allowed mobile service revenues to achieve a 100% organic double-digit expansion in the first comparable quarter since the acquisition of Oi Mobile. On the fixed side, FTTH and Corporate Data, ICT, and Digital services continue to be the main growth drivers as we continue to capture the growing demand for high-quality connectivity and digital services in Brazil. Revenues from these two business verticals are growing at rates around the mid-teens, contributing to the positive expansion of our fixed revenues. Moving to Slide 5, we can see the strengthening of our leadership in the mobile business. Despite the disconnection of almost 4 million inactive users received from Oi, we have consistently increased our market share since consolidation started. The improved customer mix coupled with our pricing strategy resulted in an 11% annual growth in ARPU with visible improvements also in the quarterly trends. While average spending increases, postpaid churn has reduced sequentially and reached its lowest historical level of 1% per month, which is almost half the level we had in 2019. These operational figures give us confidence that we will continue to post strong results going forward. On Slide 6, we detailed the operational performance of the fiber business. In the last 12 months, we added 3.7 million fiber-to-the-home premises which now totals 24.7 million homes in 439 cities throughout the country. In the same period, we continue to lead the market in terms of net additions, connecting 760,000 homes to reach a total of 5.8 million customers, an increase of 15.1% year-over-year. Besides being the absolute leader in fiber with the largest FTTH footprint, we've successfully reduced our FTTH churn, having reached in the second quarter '23, its lowest level ever, after reducing it by 20% since 2020. This demonstrates that the unmatched quality of our services, represented by the elevated and growing average speed of our FTTH customer base, coupled with the strength of our fiber mobile convergent offer, continues to give us the edge to maintain the fiber differentiation and leadership. Moving to Slide 7, we'll give an update on recent changes and results related to our portfolio. First in prepaid, we increased the level of our minimum top-up by 25% from BRL12 to BRL15, aligning this amount with the price of the entry-level plan we have in our Vivo Pre Turbo offer. This movement simplifies the prepaid portfolio structures and helps us continue to prove the pre-to-postpaid upsell lever by reducing the price gap from prepaid to hybrid. In Hybrid, we launched three new offers that bundle connectivity with health and entertainment options. Vivo Hybrid will help us scale Vale Saude, a healthcare startup that we acquired last quarter and to prove our value proposition by providing our customers access to a wide network of health service providers with national coverage. Moreover, Vivo Hybrid with Netflix or Vivo Play strengthens our portfolio with a broad catalog of content that contributes to reduce churn and increase customer lifetime value. Lastly, Vivo Total, our convergent offer that bundles FTTH with postpaid, continues to gain relevance. Today almost 80% of the FTTH sales in Vivo's stores originated from Vivo Total. This offer has an incredibly low churn of 0.39% per month, demonstrating the power of a single plan that can fulfill all of our customers' connectivity needs inside and outside their homes. Turning to Slide 8, you can see the evolution of our Digital B2B services, which are asset-light and help improve Vivo's return on invested capital. During the last quarter, revenues from these services added up to BRL800 million. Most of these revenues are recurrent and, as such, we have been able to maintain an annualized growth level of around 30%, even though in some quarters we may see lower or higher growth rates, depending on the capture of one-off revenues. I'm proud to share that Vivo was recently recognized by Microsoft as its partner of the year 2023, demonstrating how successful our partnership is in Brazil as a reseller of solutions such as Cloud, Azure, Microsoft 365, and Microsoft Teams to companies of all sizes. We are the first telco in Brazil to receive this important recognition. Moving to Slide 9, we update you on the evolution of digital services in the B2C segment. In the second quarter of 2023, financial services generated BRL95 million in revenues, up 39% year-over-year. Here we have an important contribution from Vivo Money, our 100% digital credit product that ended the quarter with a portfolio of BRL275 million, up 3.6 times year-over-year. Another important pillar of the B2C ecosystem is the distribution of video and music OTTs through our invoice bundled with connectivity plans or on a standalone basis. We currently have 2.5 million OTT subscribers, generating BRL137 million of revenues in the quarter, up 35% year-over-year. Vivo clearly stands out in terms of partnerships with content providers, allowing us to increase our share of wallet and customer retention. Let's move to Slide 10. On ESG, we highlight some initiatives across all fronts. First on the environment. We ended the quarter with six tons of electronic waste recycled through the Vivo Recicle program, targeting to double this amount by year-end. The Distribution Generation Program continues to evolve as we already have 59 renewable power plants functioning, spread throughout the country, taking us closer to our goal of 85 power plants. On the social front, we see the results of the actions we've been taking to foster diversity in the company. We launched the Jovem Aprendiz Program 2023 which targets public aged 16 to 22 and removes any age limitation for professionals with disabilities, directing 50% of the vacancies to black people. These initiatives, along with others, contribute to the increase of diversity in the company. By the end of June, black individuals represented 41.2% of our workforce, a 7.6 percentage point increase versus December '22. Additionally, Vivo sponsored the second year in a row, Sao Paulo's LGBT+ Pride Parade. Within the company, we also had an increase of LGBTI+ self-declared employees, which totaled 8.5% of our workforce, up 2.5 percentage points in six months. Finally, on governance, the Application Security and Data Protection Monitoring processes were certified by ISO 27.001, demonstrating our alignment with international standards for information security management. Moreover, Vivo was recognized by Merco as the leader in ESG responsibility in this sector, acknowledging our efforts to build a sustainable company. For more information on our ESG practices, I invite you all to check out our 2022 integrated report available on the Investor Relations website. Now David will take us through the financial highlights of the quarter.

David Melcon, CFO

Thank you, Christian, and good morning, everyone. On Slide 11, you can see our positive cost evolution. Cost of service and goods sold, which represent 30% of total OpEx, increased 6.4% year-over-year, reflecting the higher revenues from B2B Digital solutions and handsets. The most representative part, cost of operations, was up 5% year-over-year, a much lower piece than in the last quarters. This better performance is linked to the completion of Oi Mobile asset integration and our continuous efficiency and digital initiatives. In commercial and infrastructure expenses, we no longer have the transition service agreement with Oi, which represented BRL147 million over the last 12 months. Personnel cost is still impacted by the insourcing of activities in critical areas and greater commercial activity in B2B. Lastly, provision for bad debt increased in the quarter due to specific cases in the large corporate segment that should normalize in the second half of the year. In B2C, provision for bad debt remains stable, demonstrating that our customers prioritize the payment of their bills with Vivo. Moving to Slide 12. In the first six months of 2023, we have invested BRL4 billion, a decrease of 9.3% year-over-year, which represents a CapEx to sales ratio of 15.9%. This figure demonstrates that we are on track to keep 2023 CapEx below BRL9 billion as guided at the beginning of the year. Despite this CapEx reduction, we continue to invest in top-tier technologies such as 5G and fiber. As of June this year, Vivo was the 5G leader in Brazil with 112 cities covered with the new technology. Our operating cash flow expanded by 29.2% year-over-year in the first half of 2023, not only due to the reduction in CapEx but also driven by double-digit EBITDA growth. We continue to see opportunities to optimize our capital allocation as mobile traffic begins to flow from 4G to 5G and synergies from Oi's decision start to materialize. Turning to Slide 13. On the left-hand side of the slide, you can see the evolution of our net income, which added BRL1.1 billion in the second quarter this year, a growth of 47.2% year-over-year, reaching BRL2 billion in the last six months. This solid financial performance allowed us to declare, until July 2023, BRL1.9 billion in dividends and interest on capital and to invest an additional BRL213 million to buy back our shares. On July 18, we concluded the payment of the 2022 base shareholder remuneration with a cash outflow of BRL1.8 billion. We remain confident that Vivo would continue to be best positioned in the sector to translate this strong operating momentum into attractive shareholder remuneration. Lastly, on Slide 14, our free cash flow generation remains extremely strong with BRL5.6 billion generated in the first half of the year, expanding 21.7% on a yearly basis. This translates into a last 12-month free cash flow yield of 11.5%. These outstanding results coupled with efficient financial management allowed us to maintain a solid balance sheet and control levels of financial debt in this high-interest-rate environment. Thank you. And now we can move to Q&A.

Operator, Operator

Thank you. We are now going to start the question-and-answer section for investors and analysts. Our first question comes from Marco Nardini from XP. Please go ahead, Mr. Marco, your microphone is open.

Marco Nardini, Analyst

Hello, Christian, David and Vivo team. Thank you for taking my questions. I actually have two here on my side, if I may. The first one is whether you could give us a quick update on the ongoing status of the capital stock reduction by up to BRL5 billion? And the second one is regarding the FTTH expansion. If you could comment on the competitive environment in FTTH? So even though we saw once again a strong performance in top-line growth this quarter, it was a slower pace than in Q1. Can you please advise us on further details on that, please? And perhaps a comment on where you are in the American merger and what possible impacts mainly in the Sao Paulo region, which perhaps has fierce competition, please? Thank you.

Christian Gebara, CEO

Hi, Marco, this is Christian. As you may know, we have requested Anatel's authorization for the reduction you mentioned. The request was filed on February 15 and is currently under review by the technical team and Anatel's attorney. The next step involves presenting it to Anatel's council for a vote. We are confident about receiving approval because of our strong financial position. Following that, we can proceed with the necessary steps for this operation, including our General Shareholder Meeting and a creditor notification period. We are optimistic about the timeline and will keep you updated on any news from Anatel. Regarding your second question on market consolidation, we consider it a positive development. Brazil has over 5,000 ISPs, so any form of consolidation is beneficial. We are not concerned about competition; in fact, consolidation might reduce the number of national players we face when entering new cities. We believe our strategy is sound, as demonstrated by our growth in homes passed—from 21 million in the last quarter of 2022 to 24.7 million now. The number of homes connected rose from 5 million to 5.8 million, adding nearly 800,000 new customers, and we remain the leader in net additions in this segment in Brazil. We realistically expect to see more consolidation and are closely monitoring market movements for potential targets. However, we need to ensure any targets align with our technical, physical, and network overlap requirements, as well as the price we are willing to pay. To date, we haven’t identified anything that meets all our criteria. Therefore, we are moving forward with our goal of reaching 29 million homes passed by the end of 2024, continuing to connect customers rapidly, and maintaining a focus on connection quality. Notably, 93% of our FTTH gross additions during this period were for speeds of at least 300 megabytes, which is not something every provider can offer. Additionally, we achieved the lowest churn rate this quarter in the past three years. Lastly, it’s worth mentioning that 80% of FTTH sales in our stores were through the Vivo Total convergent offer.

Marco Nardini, Analyst

Perfect. Thank you, Christian.

Operator, Operator

Our next question comes from Marcelo Santos from JPMorgan. Please, Mr. Marcelo, your microphone is open.

Marcelo Santos, Analyst

Good morning, Christian, David, Joao, thank you for taking my question. I wanted to discuss mobile, as it was a very strong quarter. My first question is about prepaid pricing. You made an upward adjustment in the pricing. Are you satisfied with the current prices? Do you see potential for further increases? In the past, you mentioned that you believed there was room for increases in the overall market. I’d like to know your thoughts now that this significant change has been made. My second question pertains to postpaid and hybrid users. Are there still some users whose prices have not been adjusted that you need to address for the remainder of this year, or have you finalized price increases for your current base of postpaid and hybrid users? Those are my two questions.

Christian Gebara, CEO

Thank you, Marcelo. No, I think the price increase that we had in the first six months is all we will implement for the year. What we're doing here is upselling within our customer base, which is something we always do. We've highlighted the new plans we have for hybrids that we are now blending with healthcare or entertainment services, and we have new things to announce in the next quarter. Our strategy also involves migrating postpaid upsells, especially when they acquire 5G smartphones. Today, we have 22% of our customer base in pure postpaid with 5G and also migrating them to Vivo Total when they don't have fiber with us. That's our structure going forward. And of course, we're going to keep doing the annual adjustment when it's time. Regarding the prepaid you asked about, the new pricing strategies for the top-up mean we have a face value for top-up. We raised the minimum one from BRL12 to BRL15. That matches with our current offer of the bi-weekly BRL15 prepaid offer. Considering that, as we were able to pass through inflation in Hybrid and postpaid, we also see the possibility of doing that in the prepaid segment. This would involve a change in the promotional price. So far, what we did was adjust the face value of the top-up.

Marcelo Santos, Analyst

Okay. So we could see improvements in the prepaid line for the rest of the year? For postpaid and control you are already done for the year, but for prepaid, there's room?

Christian Gebara, CEO

Yes. For prepaid, yes, there is room. For hybrid and postpaid, again, there is room for adjusting offers, not increasing prices but adjusting offers with more value-added services, new offers, blending with fiber or adding digital services to the offer. Again, we will continue to accelerate the migration of prepaid to hybrid, which is also contributing to revenue growth.

Marcelo Santos, Analyst

Perfect. That's very clear. Thank you very much.

Christian Gebara, CEO

Thank you, Marcelo.

Operator, Operator

Our next question comes from Andre Salles from UBS. Please, Andre, your microphone is open.

Andre Salles, Analyst

Hi, good morning, Christian, David, Joao. Thanks for the presentation. Congratulations on the results. I have two questions here on my side. When we look at the ARPU and churn dynamics during the quarter, we see a very positive print. My question is how to read this, if there are any circumstantial aspects positively affecting this behavior, or can we interpret this as a more structural feature of the market moving forward? My second question is related to the B2B market. As Christian mentioned during the call, there are some one-off revenues in this line. My question is, can we get additional color on the recurrence of B2B revenues out of the BRL800 million you reported in the quarter? How much of that is related to one-off projects? That would be from my side. Thank you.

Christian Gebara, CEO

Andre, I thank you for your comments in the beginning. Let me go to the B2B. Yes, it's a small piece that is one-off. Most of our revenues are recurrent. We highlighted that there is still business of one-off revenues because sometimes you have big deals that may change a little the growth pattern, either positively or negatively, depending on the quarter that we're comparing. But most of it is on a recurrent basis, and there is a significant change in the mix. A few years ago, we had a larger concentration of one-off revenues. Now it's the opposite; it's a large concentration of recurrent revenues. We don't specifically open up details regarding the one-off, but most of it is recurrent. Regarding the other question about ARPU in mobile, I think there are many things contributing to that. Of course, there is price increase that we discussed earlier, significant migration from prepaid to hybrid, and an added contribution from digital services blended with both hybrid and postpaid plans. When we talk about the 2.5 million customers that we have with digital services, many of them are a combination of standalone and a lot bundled with postpaid and fiber. So ARPU has positively benefited from that as well. And there is a movement that is positive from our side to our sites. This contributes to the growth in ARPU and also the reduced churn. I think the reduced churn combines many factors including our perception of superior quality in all areas—network quality, customer service, and the strength of our brand. The brand that is progressively associated with being a digital player is putting customers at the center of this ecosystem. We have been able to increase lifetime value, which is enhanced by offering more services and customer loyalty.

Andre Salles, Analyst

Got it. Christian, that was very clear. Thank you.

Christian Gebara, CEO

Thank you, Andre.

Operator, Operator

Our next question comes from Frederico Mendes from Bank of America. Please, Mr. Frederico, your microphone is open.

Frederico Mendes, Analyst

Thank you. Good morning, everyone. I have two questions here as well. The first one is the working capital. Once again, there's a very positive dynamic, and once again, you're generating more cash than earnings. I'm wondering how we should expect this line will be forward, mainly inventory and other assets that you reduced. So how should we expect this line for the second half? The second question, I think Christian already mentioned, but I mean, there was a small decline in the ARPU for FTTH. I mean, nothing significant from BRL90 to BRL87, but I am just wondering if this indicates, in some way, a change in the competitive landscape or if it's based on a series of promotions that might impact ARPU.

Christian Gebara, CEO

Fred, I'll address the second question first. Yes, we launched in some new cities, and sometimes we offer promotions to enter a new market, and that can impact revenues but nothing that will be permanent. It’s more about us expanding significantly the number of premises last year. We're also entering new cities with a very positive commercial traction. That's why we see revenues growing at a pace of 14.3%, reaching BRL1.5 billion in the quarter. The net add levels have been the largest absolute number of new customers. Therefore, I believe the current trend is momentary, and we will be able to capture more customers while keeping churn low. Regarding the first question, I'll let David provide more insights.

David Melcon, CFO

Hi, Fred. As you have seen, we have shown strong free cash flow for the past few years, and some quarters this has also benefited from a positive working capital. This quarter, we experienced positive dynamics from a few drivers. The first one has to do with the tax asset we have in our balance sheet that we are monetizing. Just this quarter, this represents around BRL300 million related to ISMS, and we still expect around BRL150 million to come through cash in the third quarter. The second factor involves FISTEL due to which we haven’t made any payments this year, thereby creating additional BRL700 million. Thus, a positive working capital during this semester and in the quarter may be around BRL200 million. The third factor looks at the inventories; levels dropped significantly between March and June by more than BRL300 million due to efficient inventory management. This management should continue, so we expect further positive contributions. Overall, it is difficult to predict the next quarter’s working capital trend accurately, but we remain focused on generating a strong free cash flow, which should continue in the coming quarters.

Frederico Mendes, Analyst

Perfect, very clear explanation, David. Thank you. If I may, I have a quick follow-up on financial services. I know it’s a small line but it’s growing mostly. We see a lot of potential. Year-over-year growth is strong, but quarter-over-quarter it's basically flat in the second quarter. I'm wondering if you're making any adjustments to the product or anything, or if you think we have reached a level that we are comfortable with. Any insight here would be great.

Christian Gebara, CEO

Fred, I’ll take this one. Regarding financial services, we highlighted the revenue and then discussed Vivo Money and the loan platform. The financial services revenue is not solely dependent on Vivo Money; it consists of various businesses at different stages of maturity. One of the businesses contributing to revenue is the credit advanced to prepaid customers. When these customers run out of a balance or data package, we advance some credit to them. Since we’ve seen a greater effort to migrate these customers from prepaid to hybrid and postpaid plans, this impacts the revenues from those services. It is important to note that it is all part of the contribution to this quarter’s performance. Moreover, we have conducted a more conservative approach in credit concession for Vivo Money recently despite an increased number of customers receiving credit. We've become more selective regarding which customers were granted loans. Looking forward, we are confident because we are resuming a more aggressive approach to loans through Vivo Money. Also, we are developing new products in this credit portfolio—such as a consortium and products related to peaks. Many of these will come to market in the next quarter, giving us more opportunities to broaden our credit portfolio, leveraging our large customer base, and utilizing the big data we have and all the interactions we have with these customers. We are confident that this number will increase as all the components come together, including insurance contributions which will also enhance our financial services revenue.

Frederico Mendes, Analyst

Perfect, very clear. Thank you, Christian.

Christian Gebara, CEO

Thank you, Fred.

David Melcon, CFO

Thank you.

Operator, Operator

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

Vitor Tomita, Analyst

Hello, good morning all, and thanks for taking our questions. Two questions from our side. The first one following up on the fiber expansion point. Could you give us some more color on the typical profile of the new cities that you are entering with fiber at this point of the expansion? How large are those cities? What type of competitors are usually active in those cities? The second question from our side would be on personnel expenses. How advanced is the process of insourcing internalizing critical areas at this point? If I recall correctly, this has been impacting personnel expenses for about a year now, so should we expect personnel expenses to stabilize from now on or should they still increase to some extent? Thank you.

Christian Gebara, CEO

Sure. It's Christian. Thank you for the question. The fiber expansion is less related to new cities now, although we do expand into new cities through FiBrasil. FiBrasil is where we expand the greenfield footprint outside of the state of Sao Paulo. We do this in cities with around 100,000 inhabitants, some of them smaller—but we launched one in Espirito Santo that was smaller than 100,000, closer to 50,000. We look at some cities based on our market share in postpaid or prepaid. We focus on expanding into larger cities and capitals, as well as significant cities in the state of São Paulo. In some instances, we not only expand coverage with fiber but also look at overlaying FTTC where we have a presence and also, in cities in São Paulo where we still have copper systems. This is a combination of three strategies. We're focusing more on expanding our footprint where we see greater value from customers rather than merely increasing the number of many cities. We still aim to maintain the goal of reaching 29 million homes passed by the end of 2024 while executing the various strategies I've mentioned.

Vitor Tomita, Analyst

Yes, it's very clear. Thank you.

Christian Gebara, CEO

Regarding personnel expenses, we are still assessing insourcing, especially in three different areas: B2B, where we've been increasing our digital services business and managed service capability. We also acquired a company last year, Vita IT, specifically because they had a solid team focused on Cisco's implementation, blending with our existing team in network-managed services. The second area is IT and digital. We're bringing in-house some external experts as we focus on deploying not just our new IT architecture but also new channels, revamping our Vivo App, and enhancing e-commerce through a marketplace. Lastly, we’re expanding into new businesses—like healthcare, education, and smart homes—seeking experts with specialized knowledge to join our team. Each situation is considered individually.

Vitor Tomita, Analyst

Clear. Thanks, again.

Operator, Operator

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

Carlos Sequeira, Analyst

Hi, good morning, Christian, David, Joao, Gabriel, amazing numbers, I guess. My question, if I may, is on the migration process, the concessions authorization migration process. We just saw Anatel's decision, I think pushed by the TCU, raising the amount of money needed to migrate by almost 50%. I was wondering, what's your view on that? And what are the plans if Anatel really keeps that number high, please? Thank you.

Christian Gebara, CEO

Carlos, thank you for your words. We are very positive about the potential to find a solution through the TCU's consensus mechanism currently in place. The number you mentioned is rather high. We’d previously expressed our concerns regarding this number before the correction but, of course, the increase is significant. The correction in our case was not the largest one. However, we are considering a consensus-like discussion about sustainability, maintaining equilibrium of concessions. Now that we have the chance to discuss both topics together gives us optimism for achieving a solution in the near term. Rather than arguing solely about one number, I prefer to emphasize finding an overall solution. If we can merge these discussions, we can work on a consensus that encompasses both considerations, focusing on broadband services or other services that are more in demand today rather than being restrictive in terms of investment. So while the numbers present challenges, there is good news in the potential to develop a consensual agreement.

Carlos Sequeira, Analyst

Okay, thanks. So in a way, your view is that not much has changed in terms of the broader debate to adjust the two numbers that you've mentioned, nothing really has changed.

Christian Gebara, CEO

Yes, I believe it's a good thing that now we can discuss both matters simultaneously. Previously, there was concern about the timing of these discussions. Now the situation has changed, allowing for both discussions to occur together, which is a favorable development.

Operator, Operator

The question-and-answer section is over. We would like to hand the floor back to Mr. Christian Gebara for the Company's final remarks. Please, Mr. Christian, you may proceed.

Christian Gebara, CEO

Thank you, everyone, for participating. We are extremely happy with the results we presented, which are extremely positive across all lines and well above inflation. It is essential to note that this is a quarter marked by a like-for-like comparison with the quarter we had last year that already integrated the numbers coming from the Oi Mobile acquisition. This strong start of the year makes us confident about our full-year outlook. Under stable macroeconomic conditions, we are optimistic about all evolutions—revenue in mobile, fiber, and also in Digital services, both in B2B and B2C segments. Regarding CapEx, we have communicated that it should be below BRL9 billion, and we remain focused on expanding 5G coverage, enhancing mobile internet quality while securely positioning ourselves to capture the opportunities we foresee in FTTH expansion. Our commitment is to enhance customer engagement, providing more digital services to boost lifetime value while continuing to lower churn. That's what we have for today. The whole team is open for any additional questions. Thank you once again for participating in our call.

Operator, Operator

Thank you. Vivo conference is now closed. We thank you all for your participation and wish you a very good day.