Telefonica Brasil Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 1, 2023

Key Takeaways

  • Vivo delivered 7.5% year-over-year revenue growth and an 11.7% YoY EBITDA increase, achieving a record BRL 5.5 billion EBITDA with a 42.2% margin.
  • Postpaid subscribers surpassed 60 million and FTTH homes connected reached 6 million, driving ARPU up 11% and postpaid churn down to 1.09% monthly.
  • New digital revenue streams gained traction, with B2B digital services at BRL 3.2 billion (+28% YoY) and B2C fintech, OTT and electronics sales together accounting for 3% of total revenues.
  • Operating cash flow rose 27.1% to BRL 8.9 billion and free cash flow grew 16.7% to BRL 7.6 billion, while CapEx fell 5.3% YoY to BRL 6.7 billion, keeping CapEx/sales on track below 17.3%.
  • Anatel approved a capital reduction of up to BRL 5 billion, giving Vivo flexibility to optimize shareholder remuneration through dividends, share buybacks or interest on capital.
AI Generated. May Contain Errors.
Earnings Conference Call
Telefonica Brasil Q3 2023
00:00 / 00:00

There are 8 speakers on the call.

Operator

Good morning, ladies and gentlemen. Welcome to VIVO Third Quarter 2023 Earnings Call. This conference is being recorded and a replay will be available at the company's website atri.telefonica.com.br. The presentation will also be available for download. This call is also available in Portuguese.

Operator

To access, you can press the globe icon located on the lower right side of your Zoom screen and then choose to enter the Portuguese room. After that, select mute original audio for a better experience. We would like to inform you that all attendees will only be listening to the conference during the presentation, and then we will start the question and answer section when further instructions will be provided. Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company's business prospects, operational and financial projections and goals are the beliefs and assumptions of Vivo's Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore depends on circumstances that may or may not occur.

Operator

Investors should be aware of events related to the macroeconomic scenario, the industry and other factors that could cause results to differ materially from those expressed in their respective forward looking statements. Present at this conference, we have Mr. Christian Ciobara, CEO of the company Mr. David Malcolm, CFO and Investor Relations Officer and Mr. Juan Pedro Carneiro, IR Director.

Operator

Now, I'll turn the conference over to Mr. Jean Pedro Carneiro, Investor Relations Director of Vivo. Please, Mr. Carneiro, you may begin the conference. Good morning, everyone.

Operator

Welcome to Vivo's Q3 2023 earnings call. The presentation will be divided in 2 parts. First our CEO, Christian Jibada, will walk us through Vivo's financial and operating highlights followed by an update on our new sources of revenue an ESG Advances. Then our CFO, David Melcon, will comment on our financial performance and shareholder remuneration in more detail. I now hand the call over to Christian.

Speaker 1

Thank you, Joao. Good morning, everyone. Appreciate you joining us. I start by presenting the highlights of another very strong quarterly results. We delivered a revenue growth of 7.5% year over year an EBITDA increase of 11.7 percent year over year, both well above inflation.

Speaker 1

The customer base mix keeps Postpaid access surpassed the mark of 60,000,000 customers and Homes Connected with FTTH summed up 6,000,000 access. Our high value subscriber base is fueling our growth engine. This growth was combined with improved profitability. EBITDA was at an all time high, reaching R5.5 billion dollars in the quarter with a margin of 42.2 percent, leading to improved bottom line performance as net income reached R3.4 billion dollars year to date, up 15.9% year over year. As we continue to reduce our CapEx intensity to meet the level guided for the year of up to R9 $1,000,000,000 cash flow generation speeds up.

Speaker 1

Over the 1st 9 months of 2023, our operating cash flow grew 27.1 percent year over year to R8.9 billion dollars while our free cash flow expanded 16.7 percent to R7.6 BRL 1,000,000,000. As such, we are committed to keep an attractive level of shareholder remuneration. Up to October 2023, we already declared R2.6 billion dollars in dividends and interest on capital while we also invested R380 $1,000,000 to buy back our own shares. Moving to slide 4, we show the breakdown of our revenue growth. Our focus on best in class technologies contributed to total revenue growing 7.5% year over year, well above inflation.

Speaker 1

On the mobile side, the continuous upselling to postpaid plans coupled with pricing rationality allowed mobile service revenues to reach an organic expansion a range of 9.0% year over year in the 2nd comparable quarters since the acquisition of parts of Oi Mobile's assets. Handsets and Electronics posted a 13.5 percent annual increase as we outpaced the market in the selling of high value 5 gs devices and offer a broader portfolio of electronics. FTTH and corporate data, ICT and digital service continue to grow double digits, meeting the demand for high quality connectivity and digital services. These services are the drivers for the positive expansion of our fixed revenues. Turning to slide 5, we can see the improvement of our mix of customers as postpaid already represents 62% of total mobile access.

Speaker 1

Our mobile leadership has been reinforced as we continue to deliver an unmatched value proposition to our customers. This strong operational momentum combined with our pricing strategy resulted in an 11% annual growth in ARPU, reaching highest value in the last 3 years. While average spending increases, postpaid churn has reduced 39% in the last 4 years, reaching a a very low level of 1.09 percent per month. With customers staying longer and spending more with us, we see a clear pathway to deliver sustainable real growth on a consistent basis. On slide 6, we detail the advance of our top notch fiber operation.

Speaker 1

Vivos Fibers footprint is present in 439 cities throughout the country, totaling 25,100,000 homes passed, which keeps us on track to reach the target of 29,000,000 homes passed by the end of next year. In the last 12 months, we added 2,800,000 fiber to their home premises and connected 715,000 homes, increasing our network take up rate after reaching 6,000,000 users while also improving our ARPU profile. In addition, Vivo Total, our fiber mobile convergent offer, surpass the mark of 1,000,000 customers, more than doubling its base over the last 12 months. This offer has the lowest churn and the highest lifetime value, putting VIVO in a unique position to benefit from convergence in the long term. Going to Slide 7, you can see that the digital B2B services added up to R3.2 billion dollars in the last 12 months, up 28% year over year, already representing 6% of Vivo's total revenue, even though these services are currently provided by Vivo to only around 10% of our 1,500,000 B2B customers.

Speaker 1

Going forward, we a significant opportunity to increase the penetration of digital solutions in our existing B2B customer base, mainly in SMEs. With that in mind, has a new position and focus on integrated digital solutions for micro, small and medium enterprises tailored by size and sector. We offer accessible products related to cloud, sales management, web presence and efficient tools to help these entrepreneurs adapt their business to compete and prosper. Moving to slide 8, we give an update on the evolution of some of our new sources a few examples of revenue in the B2C segment. Financial Services generated BRL106 1,000,000 in revenues during the quarter, up 45% year over year.

Speaker 1

Here we highlight Vivo Money that ended the quarter with a portfolio of BRL307 1,000,000 in personal loans, more than doubling year over year. In the end of July, we announced that Vivo Money has a new investor, Polygonal, that has committed to invest up to BRL250 1,000,000 over the next 2 years to strengthen the expansion of our credit services. The distribution of video and music OTTs through our invoice totaled R144 $1,000,000 of revenues in the quarter, up 33% year over year coming from 2,800,000 OTT subscribers. Our partnership with the main content providers We broadened our electronics portfolio that includes notebooks, smartphone accessories, smart home devices, among others, to complement the experience provided through our connectivity services. These products generated BRL79 1,000,000 in revenues last quarter, up 28% year over year.

Speaker 1

We note that revenues from Financial Services, OTTs and Electronics beyond smartphones, Put together represented 3% of Vivo's total revenues over the last 12 months. As they keep this strong growth pace, We are confident that these new businesses will have a greater relevance over the next years. On Slide 9, we highlight some advances in environmental and social fronts. We have a target to achieve net zero emissions by 2,040 and to help us reach this goal, we established a program with 125 carbon intensive suppliers to diagnose, train and encourage these partners to move towards this commitment. On energy, it was the 1st company in the sector operating in energy's cell production modality.

Speaker 1

We announced a partnership with Valera in the state of Minas Gerais that comprises 4 solar parks. 2 important recognitions. First, Vivo was the only telco and Brazilian company in Fortune's Change the World list a few highlights due to the Vivos Recycles program, our main initiative in the siloque economy. We will also highlight it once again in the Great Place to Work ranking, being one of the top 10 best companies to work in Brazil. Now, David will walk us through our financial performance.

Speaker 2

Thank you, Christian, and good morning, everyone. On slide 10, we show the results of our commitment to an efficient cost structure. Total cost was up 4.6% year over year, well below our revenue growth. Cost of services and goods sold increased 5.9% year over year as revenue from B2B Digital Solutions, handsets and electronic increase Cost of operation, which represents 67% of total OpEx, was up 3.9% year over year, decelerating versus previous quarters and below inflation in the period. The performance is explained by the acceleration of commercial activities, continuous efficiency and digital initiatives, bad debt improvements and a positive net effect of BRL175 1,000,000 on matters related to the Oi Mobile acquisition.

Speaker 2

Moving to slide 11, our focus on top tier technologies Such as 5 gs and fiber is contributing to a better mix of capital spend. In the 1st 9 months this year, We invested BRL6.7 billion, a decrease of 5.3% year over year, representing a CapEx to sales ratio a range of 17.3 percent on track to reach our guidance of CapEx below BRL9 1,000,000,000 this year. As a consequence of a very strong operating performance, coupled with controlled investments, our operating cash flow sum up an impressive value of BRL8.9 billion year to date, up 27.1%. We are optimistic about the opportunities to further reduce our capital intensity going forward. On mobile, We already cover more than 40% of the population with 5 gs.

Speaker 2

While on fiber, a significant part of the HomePass a number of factors that we have already been deployed. On slide 12, you can see that our profitability metrics keep on improving as a result of a very positive operating momentum and solid financial execution. As such, net income and free cash flow increase every quarter of the year on an annual basis, reaching in the 1st 9 months this year BRL 3,400,000,000 and BRL 7,600,000,000 respectively, financial net debt decreased 76% year over year. Even considering IFRS 16 leases, Leverage remains well controlled at 0.6 times EBITDA. All these speakers Lastly, on the Slide 13, we update you on our capital reduction request to Anatel.

Speaker 2

In September this year, we had a positive outcome as Anatel granted a prior consent to reduce our capital stock in up to BRL5 1,000,000,000 in 1 or more events. With this approval, we have more flexibility to decide the best mix of shareholder remuneration for the next years through the combination portion of capital reduction, dividends, interest on capital and share buybacks. 2023 shareholder payments sum up BRL4.6 billion year to date, including our share buyback program. Our priority is to continue delivering a unique combination of growth, profitability and return to shareholders. Thank you.

Speaker 2

And now we can move to the Q and A.

Operator

Thank you. We are now going to start the question and answer session for investors and analysts. There will be our first question comes from Freddie Manges from Bank of America. Please Mr. Freddie, your microphone is open.

Speaker 1

Hello. Good morning, everyone, and thanks for the call. I have two questions here. The first one, it is on CapEx. You already mentioned a few times on the presentation that you keep below €9,000,000,000 for the year.

Speaker 1

But historically, the 4Q is the Strongest, highest in terms of CapEx. So just double checking because if we use the same numbers for the 3rd Q, you'll be slightly above $9,000,000,000 So just want to double check that. And how you see this number for 2024? In our calculation here, there is room for some decrease year over year in terms of CapEx, but obviously I would like it would be great to hear your view on that. And the second point on mobile, I'm assuming also you're already doing the budget for 2024 and obviously the macro scenario can always change.

Speaker 1

But with the information you have today, Do you think there is room for us to continue to see this real increase in terms of price? Or that's something that happened in 2023, more like a one off and should not happen in 2024 as well. Thank you very much. Hi, Fred. This is Christian.

Speaker 1

So going to your questions on CapEx, yes, what we said, no, we're going to be up $9,000,000,000 this year for CapEx. There is the seasonality of the CapEx, but that's confirmed, the target that we have for the year. Regarding 2024, we are not giving guidance right now. What I said in the past is that last year was the peak that we had in CapEx because of the whole integration and part of the 5 gs auction, some parts of the obligation that we had to invest. This year, as we said in the beginning of the year, this was going to be a more reasonable CapEx up to 9%.

Speaker 1

Next year, we're not going to see any peak. So I don't give guidance now, but I think it's continued to keep the trend. Regarding the revenues, yes, As we said, no, there is they're also not giving guidance for revenues. What we see here now that presented in this call is that we've been very successful at attracting customers, both mobile a few more questions. And fiber customers, so net adds being very strong.

Speaker 1

Churn is very controlled, actually using the lowest level In the mobile and in the fixed, if you consider Vivo Total that we have more than 1,000,000 customers today, we are talking about a churn that is lower than 0.5% per month. We've been very successful in adding new services to our services in both mobile and fixed. So you see the ARPU evolution that is also a good sign of our strategy of adding more services or migrating upselling customers within the same segment that they are. So combining all of this, I don't see any operational or competitive in our case, no, the value proposition that we offer to be different in the next months. Us so confident about the future, but not giving you a specific guidance.

Speaker 1

Perfect, Christian. Very, very clear. Thank you very much.

Operator

Our next question comes from Bernardo Gutmann from XP. Please, Mr. Bernardo, your microphone is open.

Speaker 3

Hi, good morning, everyone. Thanks for taking my question. Actually, I have 2 here from my side. The first one, When considering margin dynamics, you are experiencing a consistent growth trend. There seems to be significant potential in leveraging the OE customer base for digitalization a number of other opportunities.

Speaker 3

However, it would be available to understand the sustainability of this margin increase for the next year, Also considering the fixed part of the business. And the second question is regarding basically asking for an update on the network sharing agreements with TIM and if there is any discussion to expand the scope for 5 gs. Thank you.

Speaker 1

So, Bernardo, I will start and then David may continue with you once in the margin, then I come back to discuss the team. Look, we are growing EBITDA in a very solid way. So as we have been discussing with you in the past, we are growing inflation and EBITDA Sorry, revenues and EBITDA above inflation and that's a very positive sign. Actually, revenues is growing in all lines. We are growing mobile.

Speaker 1

We are growing in We call it Smartphones and Electronics and we are growing the fixed. Now in the fixed, if you take out what is what we call non core, that is voice and DSL, our growth would be at double digit. So positive growth. Part of this growth is also In digital services, I think I highlighted here 6% of our revenue is already in B2B digital services And you can calculate on average here 3% maybe in digital services in B2C. So our mix of revenues is changing.

Speaker 1

Some of the services, they have a different margin, but they have no CapEx. So So if you consider the operating cash flow margin that we are presenting here or even the free cash flow margin that we are presenting in 9 months, you can see a significant increase in these two margins. So our objective here is to continue to grow absolute numbers, revenues, EBITDA and improve the margins that we present both in operating cash flow and in the free cash flow, considering the new mix of products that we are selling that I just described here some of them. Having said that, of course, there's a lot of initiatives in reducing costs. We are driving the company to digital as digital interaction with our customers that has an impact in customer care, but also has a strong impact in commissions and many other commercial OpEx that should be we have then going to be reduced when you drive it even more digital.

Speaker 1

So a combination of factors. Obsession here is to increase in absolute numbers and obsession here is to have operating cash flow and free cash flow margin much stronger.

Speaker 2

And just let me also add Bernardo to a question about Oi. So we have the synergies. As we say, we acquired Oi 18 months ago. We say that we're going to have a synergies from OpEx and CapEx of BRL 5,400,000,000 equivalent to the amount we paid. And This is coming nicely every quarter.

Speaker 2

That's why you are seeing, as Christian said, an operating cash flow growth in the quarter of 22.9%. And in the 1st 9 months, we are growing operating cash flow in 27.1%. So this is the line

Speaker 1

Can I go to the rent sharing, Bernardo, any other question?

Speaker 3

Yes, please. Thank you. Very clear the first one. Thank you.

Speaker 1

Okay. So here we have like we are very keen on this initiative for a question from Tim. Here we have 3 dimensions of this initiative. The first one was expand 4 gs coverage. So we like that happen in 7 16 cities, approximately 3 to each of the operators that was successfully implemented, so cities that team had presence and we didn't or in the opposite.

Speaker 1

So we could do that And that was great and we may envision doing more in the near future, especially now that Apart from 4 gs, we may have also the 5 gs deployment. Then there was a single grid model. That is what the first a Tranche of this run sharing was focused in cities of less than 30 ks inhabitants. A year we had a plan to do more than what we did so far at the end of this quarter. We ended up doing that in 180 cities, but we are now preparing ourselves to do more cities.

Speaker 1

So it took us more time, technically speaking, especially because we also had the Oi deal in the middle of the process that will put our network focus in migrating customers and also integrating their frequency In our portfolio, Manao, we are again ready to expand the single grid to more cities. I don't give you a number right now, but there is opportunity to expand it. And then there is a third element of this agreement that is the 2 gs network that we want to consolidate and shut down. That also had a very good progress. We concluded now the rollout I think we have like more than 1,000 cities today that we have the 2 gs networks already consolidated.

Speaker 1

Here, there is also room to expand it. And once it's expanded, we are shutting down 2 gs for infrastructures as a whole. So 1,000 cities that we already have the consolidation in the future. Apart from having the consolidation, we may shut down the 2 gs and use the frequency to other technologies. So that's the status.

Speaker 1

Some progress, still room to come and the last year impacted by the integration for both operators.

Speaker 3

Very clear. Thank you very much, Chris and David.

Speaker 1

Thank you, Rolando, for the question.

Operator

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

Speaker 4

Hi, good morning, Christian, David, everybody from the VIVO team. Thanks for the opportunity for making questions. I have 2. The first you had some fines on the decommission of OE sites. So I just wanted to ask where you are on the process of decommissioning these sites And how much gain if you could give us an idea how much gain could we expect in leases going forward?

Speaker 4

And the second question is on fiber ads. The number of fiber ads you're having is growing. I wanted to see The outlook you have for this, I mean, you're approaching the levels of last year. So is it a good sign? Is this because of better competitive environment, better macro?

Speaker 4

I mean, could you give some color on the reasons for the improvement and the outlook? Thank you.

Speaker 1

I'll go to the second question, Marcelo. No, there is I think it is the result of a better value proposition. We are in 25,000,000 homes already. We're going to get to 29 by the end of next year. We'll have 6,000,000 customers.

Speaker 1

We've been able to sell, especially that I think I highlighted here in our stores, most of the customers buying fiber is buying Vivo Total That has the combination either the customer came with the mobile and acquired fiber or had nothing with Vivo and ended up being both fiber and 5 gs with the Vivo Total. We have more than 1,100,000. We've been very successful also adding digital service to this offer. We've been also very successful in providing a high speed experience to our fiber customers. That's also due to the technical network, the high quality technical network that we have and the high quality CPEs that we have.

Speaker 1

We also have investing a lot in our technicians. So customers buy not only fiber, but is only is also buying a Wi Fi experience We're expanding to smart home experience very successfully. So it's a combination of many factors. I hear there is no Gain because we are promoting anything. I think the gain of customers is related to a better value proposition leveraging.

Speaker 1

Now what we said before though, customer base, network quality, channel presence, physical and digital, the strength of the brand and the possibility to offer convergence in a way that no one can replicate at the moment. So all this give very strong results and we are very positive about the successful trajectory of this strategy going forward. I don't know if you have more questions in the queue. Otherwise, Davila will answer about the evolution of the

Speaker 2

Marcelo, thank you for the question. So first of all, I think the underlying OIBDA growth we have this quarter is very strong It's coming from a significant acceleration of the growth in revenues, but also on controlling the costs and deceleration of digitalization, Vivo app and so on. So we also as we explained last quarter, we also terminated with the transition service agreement with OE that is giving us OpEx savings are around BRL140 1,000,000 per year. So as you mentioned this quarter, we also have a couple of impacts coming from the oil acquisition. So we finally reached an agreement regarding the oil price.

Speaker 2

So we got $244,000,000 cash back plus $33,000,000 interest that are also receiving this also this quarter. And as you mentioned, we also are Still negotiating some of the towers leases that we received from Oi. So in total, we received 2,700 sites, Out of which, we are going to maintain 800 of those. So the rest, which is something like 1900, Are going to be canceled and decommissioning in the next I mean, the next quarters. So we are progressing well on the negotiation with the towers company.

Speaker 2

So We have already agreed with some of them cancellation in the Q3 and also we are progressing with the rest and we are hoping to have everything agreed in the next 2 or 3 quarters. So overall, I mean, that's it. So we are very efficient on managing those contracts. And as you mentioned, we had an impact of $69,000,000 costs this quarter, which are not are non cash As we are continuing negotiating, we will see at the end of the next couple of quarters the end of the negotiation, but this is what we have so far, but I want to mention that the underlying OIBDA growth is very strong.

Speaker 5

Okay, perfect. Very clear. Thank you very much.

Operator

Our next question comes from Leonardo Olmos from UBS. Please, Mr. Leonardo, your microphone is open. Hi. Good morning, everyone.

Operator

Hope you're all well. I got a single question. Can you please discuss the main potential tax change you're facing now? And how could that affect your earnings or other parts of your cash conversion? Thank you.

Speaker 1

Hi, Lael. David can give you more color if he wants, but there is no change right now. We are talking about I don't know if you are talking about their interest on capital that is still under the initial discussion. So, David can give you some color. But the other one, the other tax is still waiting to see what's going to be the outcome, the one more related to consumption.

Speaker 1

Here we are always advocating for the essentiality of our service. The possibility of having a better tax Over digitalization connectivity would help the country in many ways. That's what we try to advocate because as you know, we pay a lot of tax over the service that we sell to our end customers on average 35%. And when there was this decrease in ISMS in some State, they were very positive, I think, for inclusion and for many other things that we could calculate here during this period. So this is the text that we have right now, the one in Infresson Capital that we can give you some more color.

Speaker 2

Leo, thank you for the question. So at this moment, it's too soon to talk about any potential impact. This matter is not solved nor defined at the executive or legislature level. Anyhow, if the end of interest on capital goes through in anticipation of a border income tax reform, which we believe will also have target So we have relevant alternatives to maintain our solid levels of shareholder remuneration, Such as reducing our capital stock, leveraging the company, speeding up share buybacks, but anyhow, we are not expecting any change

Operator

Got it. Thank you. And since you're on regulation, can you talk a little bit about the secondary the use of secondary spectrum by local ISPs. How are you seeing all that? What do you expect?

Speaker 1

I don't know if there is. There is no demand. I don't have anything relevant to Sherif Urla right now. We haven't been demanded. And so I really don't have anything new to share about it or what's the specific question, if there is demand or Because so far, there is nothing new to share.

Speaker 5

No problem.

Operator

Thank you very much. Have a good day.

Speaker 1

Thank you, Alain. Thank you.

Operator

Our next question comes from Victor Tomita from Goldman Sachs. Please, Mr. Peter, your microphone is open. Hello. Good morning, all, and thanks for taking our questions.

Operator

We have two questions from our side. The first one is on your recent price up to prepaid plans. Did you notice any elasticity impact such as lower recharge frequency or other impacts after pricing up your plans on prepaid. And do you see room for pricing up other prepaid offerings this year or for making other movements on the pricing a replay. And that would be our first question.

Operator

Our second question would be on fiber to the home. This quarter saw not only some improvements in volumes for Fiber to the Home, but also some interesting improvements in transport Fiber to the Home ARPU with year on year growth turn Should we see that as a turning point with FTTH's ARPU now potentially maintaining a positive growth trends for more quarters. Thank you very much.

Speaker 1

Victor, going to the second one, we are not giving a trend That's what I said before, no, we've been very successful in increasing the penetration of digital service overall offer. So selling a lot of opportunities together with fiber. We also are increasing the speeds off our offer and also increasing prices related to that. And as you see, the average speed of our customer base is also going up. We shared numbers in the last quarter and we can share also in these numbers.

Speaker 1

So it's always positive, not only the entry level of the speed, but also the mix that we have in our customer base. And also we are selling more Vivo Total as a way to bundle more service to the same customers. So the trend is positive when you consider that we have a very low churn And customers are choosing our offer in a broader sense, fix more mobile and also adding digital service and I think also another room to grow is that we are going stronger in this concept of smart homes. So apart from selling the fiber itself, we are selling Wi Fi connectivity in different rooms. We are setting also the possibility of customers paying for service of installation of more devices of smart home.

Speaker 1

So all this area of home connectivity we see strategically room to grow. That was

Speaker 3

the first. I don't

Speaker 1

know if you have any more questions on this. In the second, the prepaid is we are moving the offer. I think we mentioned I think you mentioned that the top up face value that we increased. We're increasing the top up face value, but we're also increasing our we have different offers, but we're increasing the the value of the biweekly offer that was 15. We are moving already in many states to 17.

Speaker 1

And the idea is to go to 17 nationally along November. So 17 biweekly offer.

Operator

Our next question comes from Fannie Koonemuri from HSBC. Please, Fani, your microphone is open.

Speaker 6

Hi. Thanks for taking my questions. So I have a couple a couple of questions. So first one is regarding the timing of the process for the capital reduction process. When Nasdaq expected to complete the the capital reduction process and how would it benefit your shareholder remuneration?

Speaker 6

And the second question is related to the concession Agreement to have any updates on what is happening on the concession process? Thank you.

Speaker 1

Okay. I'll go to the first and go to the second. The first in the capital reduction, as you all know, we got Approved by Anatel up to BRL5 1,000,000,000 in capital reduction. So that's what we stand. We are planning to announce the first tranche of this reduction in the next weeks.

Speaker 1

To do so, we need to first know as a management or submit a proposal to our Board of Directors that we may do in the next weeks as I just mentioned. After that, we should call the general shareholder meeting that has to be realized in 45 days after this call. After the GSM, no, it is approved, the company should grant another 60 days as a period for opposition of creditors. So Considering that we may approve in the next weeks in our Board, then we're going to call the GSM, so we have to estimate another 120 days to have it executed. So this is the plan for next steps significant reduction in capital reduction.

Speaker 1

In the other question, specifically about the migration, and I don't know what is your question about it, because as you know, we have 2 things here going on. We have one that is a discussion about the value of the migrations That we discussed with Panatell, they came up with the number, the BRL8.7 billion We want to discuss this number because there is some not a convergence in the value. And on the other hand, we also have an arbitrage process, Vanatel, where we discuss a financial equation of the concession that's more the unbalanced of the regional contract and also the sustainability of the contract. For this, We are demanding more than the RMB8.7 billion. We don't give the number, but it's a high number where we see a possibility and the unbalancing of the concession.

Speaker 1

That is an arbitrage. There is now a solution or an alternative, not a solution, for an alternative that TCU opens up for a consensus solution, where we could put the 2 discussions on the table and try to come up with a consensus. And we are betting on that solution. So to do so, We have a suspension of the arbitrage process because we want to discuss with the TCO mediating it the solution consensus with Anatel. Anatel submitted this request to the consensus solution to TCU.

Speaker 1

We are now waiting to see to accept it. If they accept it, we're going to have a commission installed and we're going to have 120 days to reach this consensus. And after this final approval by the court, it may last up to another 90 days to get everything approved so to 110 days. So now what we are waiting for is Tissue to approve That we can establish the consensus solution or start discussing the consensus solution. So it's more or less where we stand in the process.

Speaker 1

Thank you. Thank you.

Operator

Our next question comes from Carlos G. Ligarito from Itau BBA. Please, Mr. Carlos, your microphone is open.

Speaker 7

Hi, thank you. Good morning. I have two questions from my side. The first one regarding your personnel expenses. I would like to understand what has been the driver Yes, year to date.

Speaker 7

And also how do you see personnel expenses evolving in 2024? And secondly, Talking about the B2B business, obviously, you've done very high growth, 28% in the last 12 months. Just going to get a sense if that is because you're adding new services or you're just overall growing faster than the market? Thank you.

Speaker 1

I'll go to the second Carlos and then I would let that you go to the first question, Okay. B2B is yes, we are always launching new services, but we are very focused on the verticals that you That is cyber, that is IoT, that is cloud and there is also sale of equipment. So that's the main focus as a product perspective. But within this family of products and services, We are always adding new ones, especially when you customize that to specific verticals that we are very structured now by verticals. So the agro business has some demand different from the retailers.

Speaker 1

So we also always try to adapt to the need of a specific a vertical and also the need of the different size of companies. As you know, Vivo has 1,500,000 customers in B2B, ranging from micro company, small company up to the largest companies of this country. So we have structured also our value proposition based on the size of the company. I think I highlighted in my speech Vivo, My Owned Gossos, Vivo, my business that is very focused to the small company and here we add cloud services, cybersecurity services very tailored to this size. So what we are doing here is always innovating, But increasing the penetration, I also said that we sell through Vivo digital services in these categories that I just mentioned to less to the 10% of our customer base.

Speaker 1

So there is room to sell to more customers and also room to sell more service to the existing customers. So the growth will come this way, more services to our customer base and always innovating in these categories And always also considering new categories if they come along in a relevant way for us to address digitalization. I think here what we see a huge opportunity for digitalization companies in Brazil, especially if you go to the mid bottom when the level is still very low after pandemic. These customers are very interested. They need someone to help them doing that.

Speaker 1

5,000 sales reps that can be very close to these customers and help in this digitalization process. I don't know if I answered your question, but that's what we have right now, EUR 3,200,000,000 annual basis of revenues, more than 6% of total revenue double digit growth in the last quarters one after the other.

Speaker 2

And Carlos, taking the first question I mean, the main driver for this growth is have to do with insourcing of activities. These are mainly areas related to IT and B2B and also accelerating the growth in new services and new businesses as, of course, we need to also to recruit the best people for to drive those businesses, no? And plus the salary increase that we normally have as I think regarding the trends, if you look to the number this quarter, I mean, we are growing less than we were growing The second quarter and also less than what we were growing on the first one. So we are seeing a positive trend. As we said before, total cost is what we are looking at.

Speaker 2

So no matter perhaps if it's in one line or another one. And we are seeing a very controlled cost and growing below inflation. So that's it.

Speaker 7

Thank you for the color. I guess as a follow-up to that, is that in sourcing process expected to finish in the near future? Or should we continue something I mean, this to be a driver to perhaps to drive personal expense growth above inflation for next year.

Speaker 2

I mean, this is something that we do, I mean, ad So depending of what we see the evolution, there is no big program for insourcing that could drive this cost up. But this, I would say, This end up being more as business as usual.

Speaker 7

Okay. So just an ongoing process? Yes. Okay. Thank you so much.

Operator

Thank you. Our next question comes from Carlos Siqueira from BTG back to all. Please Mr. Carlos, your microphone is open.

Speaker 5

Hi, good morning. And gosh, congratulations On the results we're meeting. I have a couple of questions really. One is, Bernardo asked earlier a question on rent sharing agreements. And I want to just make a follow-up.

Speaker 5

I saw that Angel put up for sale put up for public consultation rules that prevent the big telcos from executing run sharing agreements in cities with less than 100,000 people. And My question is does that change in any way your plans or capital requirement assuming it's approved, right, To deploy 5 gs in these small cities please? That's the first one. And the second one is a more straightforward one. All you put up for sale, it's fiber client base and I'm wondering if that makes sense for you eventually.

Speaker 5

Thank you.

Speaker 1

Ado, Thank you for the comments and the question. The first one is a public hearing note that Anatel has in place. Yes, I think we're going to give our opinion. I think rent sharing is a very positive way to optimize CapEx and to increase coverage. And I think the country that needs more coverage needs to find new models of network expansion, Especially now that we have 4 gs, 5 gs and in the future we're going to have different technologies.

Speaker 1

So our opinion here is that The brand sharing should be available and we are doing that in 2 gs. That is the technology that we can shut down. We are doing that in single grid. We are doing that in 4 gs with Tim, as I explained to Bernardo. And of course, We imagine doing that with different technologies in more places.

Speaker 1

And again, that's necessary to a country the size of Brazil to reach everyone. Now there is a lot of discussions also about schools being covered, suburban areas being covered, Remote areas in Amazonia being covered and we are keen on covering that, but we need to save CapEx in other places to be able to reach this coverage that is also demanded and we wanted to fulfill. So again, participating and having a very strong opinion about coverage and the need to optimize investments. A few questions. Second one, we're going to it's a new process now of the sale of We need to understand, especially because we don't have any detail, Understand that these customers today are using the infrastructure of a neutral network.

Speaker 1

So what is the relationship and what is the contract of these customers that oil has today with The Nutrane Company, not the VITAO in this case, who buys customer, buys the contract, what are the conditions of this contract. So I think there are many questions a question to be answered. We will participate in everything related to any opportunity in the fiber business. So far, we haven't been a buyer of anything. But again, being the number one company in network and in customers in Brazil, We need to see what is there and understand all the details, especially related to the contract of the usage of the neutral network that I mentioned before.

Speaker 5

Okay. Thank you, Christian. So On the rent sharing, my understanding is that you hope that this possibility will not To realize, right, Anatol will understand that there are bigger goals they should be looking at rather And preventing companies from doing bank sharing, right? That's your view?

Speaker 1

Yes. That's my view.

Speaker 5

Yes. And on the OA process, Do you have an idea on timing for that? Or it's so new that you don't have any idea? Just wondering. I don't have any.

Speaker 1

We don't have any official timing that was presented to us, only in the press, nothing official.

Speaker 5

Okay. Thank you very much.

Speaker 1

Thank you, Antonio. Thank you, Antonio.

Operator

Thank you. This does conclude the question and answer session. Would now like to hand the floor back to Mr. Christian Ibarra for the company's final remarks. Please Mr.

Operator

Christian, you may proceed.

Speaker 1

Well, thank you all for participating. We are very like satisfied with a very strong quarter, now the 3rd in this year with strong results in all lines. We'll keep on with our strategy note that it's based on having the best infrastructure for digitalization in the country And the ability to go beyond telco and add new digital services and I believe we've been able to prove that it's also successful and relevant part of revenue going forward. So again, we have all the team here available for any additional questions that you may have. And once again, thank you for your participation.

Operator

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

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