Telefonica Brasil Q2 2025 Earnings Report

Telefonica Brasil EPS Results

• Actual EPS: $0.15
• Consensus EPS: $0.16
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Telefonica Brasil Revenue Results

• Actual Revenue: $2.62 billion
• Expected Revenue: $14.48 billion
• Beat/Miss: Missed by -$11.86 billion
• YoY Revenue Growth: N/A

Telefonica Brasil Announcement Details

• Quarter: Q2 2025
• Date: 7/28/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, July 29, 2025
• Conference Call Time: 9:00AM ET

Telefônica Brasil S.A., together with its subsidiaries, operates as a mobile telecommunications company in Brazil. Its fixed line services portfolio includes local, domestic long-distance, and international long-distance calls; and mobile portfolio comprises voice and broadband internet access through 3G, 4G, 4.5G, and 5G, as well as mobile value-added and wireless roaming services. The company also offers data services, including broadband and mobile data services. In addition, it provides pay TV services through IPTV technologies; network services, such as rental of facilities; other services comprising internet access, private network connectivity, computer equipment leasing, extended service, caller identification, voice mail, cellular blocker, and others; wholesale services, including interconnection services to users of other network providers; and digital services, such as entertainment, cloud, and security and financial services. Further, the company offers multimedia communication services, which include audio, data, voice and other sounds, images, texts, and other information, as well as sells devices, such as smartphones, broadband USB modems, and other devices. Additionally, it provides telecommunications solutions and IT support to various industries, such as retail, manufacturing, services, financial institutions, government, etc. It markets and sells its solutions through own stores, dealers, retail and distribution channels, door-to-door sales, and outbound tele sales. The company was formerly known as Telecomunicações de São Paulo S.A. - TELESP and changed its name to Telefônica Brasil S.A. in October 2011. The company was incorporated in 1998 and is headquartered in São Paulo, Brazil.

Telefonica Brasil Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: EBITDA jumped 8.8% to a 40.5% margin and operating cash flow rose 12.5% to BRL7.3 billion, enabling over BRL5 billion in shareholder payouts so far this year.
• Positive Sentiment: Postpaid grew 7% year-over-year to comprise 67% of the mobile base, while FTTH accesses climbed 12.6% to 7.4 million, driven by a 63% surge in Vivo Total conversions.
• Positive Sentiment: Digital services revenue rose 14.7% year-over-year, with OTT subscriptions up 34.5% and VivoPay expanding into insurance and credit offerings.
• Positive Sentiment: B2B revenue increased 13.3% year-over-year, led by a 31.3% gain in digital B2B from cloud, IoT and cybersecurity services.
• Positive Sentiment: The 75.01% acquisition of CDPQ’s Fibrasil stake, pending approval, will consolidate fiber leadership and unlock BRL282 million in EBITDA synergies.

Presentation

[Operator]

Good morning, ladies and gentlemen. Welcome to Vivo's Second Quarter twenty twenty five Earnings Call. This conference is being recorded, and the replay will be available at the company's website at ri.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 on the lower right side of your Zoom screen and then choose to enter the Portuguese room. After that, select Mute Original Audio. To access, you can press the globe icon on the lower right side of your zoom screen and then choose to enter the Portuguese room. After that, select Mute Original Audio. We would like to inform that all attendees will only be listening the conference during the presentation, and then we will start the question and answer section when further instructions will be provided.

[Operator]

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 or 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 depend on circumstances that may or may not occur. 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 Gebara, CEO of the company Mr. David Melcom, CFO and Investor Relations Officer and Mr. Juan Pedro Soares Carneiro, IR Director. Now I will turn the conference over to Mr. Juan Pedro Soares Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference.

[Joao Pedro Soares Carneiro, Director - Investor Relations & Macroeconomics Director at Telefônica Brasil]

Good morning, everyone, and welcome to Vivo's Second Quarter twenty twenty five Earnings Call. Today, our CEO, Christian Gibara, will walk us through Vivo's performance in connectivity and digital services, along with the ESG highlights for the period. Then David Melcon, our CFO, will give more color on cost and CapEx efficiencies, free cash flow generation and shareholder remuneration. With that, let me pass the call over to Christian.

[Christian Gebara, CEO at Telefônica Brasil]

Thank you, Joao. Good morning, everyone, and thank you for joining our call. In the 2025, Vivo achieved another period of robust operational and financial results, underscoring the effectiveness of our strategic initiatives and commitment to sustainable growth. In our mobile segment, postpaid continues to set the pace achieving 7% year over year growth and now comprising 67 of our total mobile customer base. On the fiber front, we expanded our connected homes by 12.6% compared to last year, reaching 7,400,000 accesses.

[Christian Gebara, CEO at Telefônica Brasil]

Total revenue rose 7.1% driven by high single digit expansion in both mobile services and fixed revenues. This result highlights the strength of our diversified portfolio and ability to meet evolving customer needs. EBITDA grew an impressive 8.8% year over year with a margin of 40.5%, reflecting our disciplined cost management operational efficiency. By continuing to optimize our capital allocation and prioritizing high return investments, we generated 7,300,000,000.0 in operating cash flow in the 2025, up 12.5% year over year. So far in 2025, we have already paid billion dollars to shareholders.

[Christian Gebara, CEO at Telefônica Brasil]

Our strong free cash flow generation allow us to honor our shareholder remuneration commitments, while we continue to deliver double digit net income growth. Moving on to the next slide, we present how our evolving revenue mix continues to positively impact our top line. Our total revenue reached 14,600,000,000.0 in the quarter, up a robust 7.1% year over year significantly outpacing the inflation observed during the period. The main drivers behind the solid performance were postpaid and FTTH revenues revenues that grew 10.910.4% year over year, respectively. Together, these two segments now account for over 72% of our service revenues, highlighting our strategic focus on high value offerings and service convergence.

[Christian Gebara, CEO at Telefônica Brasil]

We also saw positive momentum in new businesses that represented 11.2% of our total revenues over the last twelve months. That's a 1.7 percentage point increase year over year, reinforcing our transformation into a broader digital service hub. Next on Slide five, we examine the key drivers behind our strong performance in mobile. Vivo's mobile strategy continues to deliver solid results. Hybrid plus pure postpaid access grew 7.1% year over year to EUR 49,000,000.

[Christian Gebara, CEO at Telefônica Brasil]

This growth is an example of our focus on value and customer experience. Currently, one in four of our mobile customers already experienced superior quality of five gs that's available in five ninety six cities across Brazil. This rapid adoption coupled with successful upselling efforts is driving ARPU upward, while churn remains very low. These metrics clearly reflect the strength of our customer centric approach and our ability to lead in innovation and network quality. On Slide six, we dive into the continuous strength of our FTTH and its growing convergence with postpaid.

[Christian Gebara, CEO at Telefônica Brasil]

FTTH remains a key growth engine for Vivo with access up 12.6% year over year. This rise is largely due to our flagship conversion plan Vivo Total, which surged over 63% in the same period as we see a clear trend of customers migrating to this all in one solution. After successfully reaching our target of 29,000,000 homes passed in 2024, we've kept the momentum going. Over the past year, we expanded our fiber footprint to more than 2,000,000 additional homes passed. Net additions are also accelerating as we bought in 201,000 new fiber customers just last quarter.

[Christian Gebara, CEO at Telefônica Brasil]

Also, we recently announced a significant move with the acquisition of CDPQ stake in Fyre Brazil, while still pending approval from Cadia and Anatel, this transaction will consolidate our leadership in fiber and unlock significant synergies. Moving to this next slide, I invite you to take a look at how our B2C new businesses are gaining traction and become increasingly relevant to our revenue mix. Our 57,100,000 individuals customers generated over R43 billion dollars in revenues over the past twelve months. That translates to an average monthly spend of R64 dollars per customers, a figure that is continuously evolving. In our new businesses segment, revenues are up 14.7% year over year, now representing 3% of Vivo's total revenues.

[Christian Gebara, CEO at Telefônica Brasil]

Let me highlight two standout initiatives that are driving this expansion. First, demand for music and video OTT subscriptions remains very strong with a remarkable 34.5% year over year increase. This reflects our ability to meet the growing appetite for digital content. Second, our VivoPay platform continues to expand its offering. It now includes a diverse range of insurance products and other credit alternatives such as the anticipation of FGTS peaks in installments and consortiums, each tailored to meet the specific needs of our customers.

[Christian Gebara, CEO at Telefônica Brasil]

These initiatives are not only boost monetization, but also strength our value proposition, improve customer retention, fully aligned with our strategy of making Vivo a one stop shop for our customers. Turning to Vivo's B2B performance on Slide eight, we explain how this segment continues to outperform, thanks to our comprehensive portfolio. This quarter, we recorded our strongest year over year growth of B2B revenues in the recent past, up 13.3% over the last twelve months. Digital B2B stood out within this segment growing 31.3% and now accounting for 8.2% of total revenues. Key contributors to this growth were cloud, IoT and messaging services.

[Christian Gebara, CEO at Telefônica Brasil]

Combined with cybersecurity and other digital solutions, these offerings not only strengthened our leadership in connectivity, but also raised the bar in portfolio diversification giving us a solid competitive advantage. Heading to ESG, on the next slide, we share with you Vivo's main accomplishments this quarter. We continue to be recognized for our leadership in sustainability. Vivo was named Company of the Year in Eisemi Magazine's Best in ESG Awards and remains the only telco ranked among the top 100 in the Merco responsibility ESG Brazil. On the social front, our annual volunteer day mobilized 10,000 employees who positively impacted around 45,000 people.

[Christian Gebara, CEO at Telefônica Brasil]

We also collected 27 tons of electronic waste, up 17% compared to the last year, demonstrating our commitment to social and environmental responsibility. Our supply chain is well aligned with our ASP goal. Through our Parcedo Plural program, over 1,300 suppliers completed self assessments since the beginning of the program. This initiative has helped us to maintain our leadership status in CDP's supplier engagement assessment on climate issues for the fifth year in a row. Last but not least, I invite you to explore more about our ESG journey in Vivo's 2024 integrated report.

[Christian Gebara, CEO at Telefônica Brasil]

You can assess it by scanning our care code in the bottom right corner of the slide or by visiting our Investor Relations website. With that, I turn the call over to David, who will walk you through our financial results. Thank you.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

Thank you, Christian, and good morning, everyone. On Slide 10, we present the evolution of our cost structure.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

Vivo's cost of service and goods sold increased by 8.3% this quarter. This was mainly driven by a 15.7% raise in service cost, reflecting the strong growth in digital solutions, particularly in our B2B segment. On the other hand, the cost of goods sold declined by 2.3% as sales of handsets and consumer electronics softened slightly. Cost of operations grew 4.9%, remaining below inflation for the period.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

Personnel expenses rose 8.8%, influenced by annual wage adjustments, benefits, and higher headcount in fast growing areas such as digital, IT, and new businesses. Our largest coastline, commercial and infrastructure grew 3.5% year over year. While commercial activity picked up during the quarter, we were able to offset much of the increase through network and energy efficiency gains. Thanks to our disciplined cost management, we achieved a 60 basis point expansion in EBITDA margin, reaching 40.5%. And notably, this was accomplished with minimal contribution from copper and real estate sales related to our migration to the authorization regime.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

That said, we remain confident in our ability to deliver 4,500,000,000.0 in asset sales over the coming years. Moving to Slide 11, we demonstrate how effective CapEx control coupled with solid EBITDA growth leads to a double digit operating cash flow increase. CapEx optimization continues to stand out. In the first half this year, CapEx to revenues ratio declined 0.7 percentage points year over year to 14.8%. Important to mention that 76% of our investments were directed towards growth initiatives, mainly in five gs and fiber expansion.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

This focused strategy is accelerating monetization and delivering tangible future proof results. Our operating cash flow after leases reached 4,700,000,000.0 in the first half, marking a 15.5% increase year over year. Looking at the last twelve months, we have seen consistent margin expansions, both before and after leases. In fact, operating cash flow before leases now represent more than one fourth of our total revenues. In the next slide, we show that our resilient operating performance translated into upscaling profitability.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

In the first half this year, Vivo delivered a 13.5% year over year rise in net income, reaching 2,400,000,000, driven by solid operating executions and finance discipline. Our net cash flow position stood at BRL 3,900,000,000.0 at the June, underscoring the strength of our financial management and protecting us from high interest rate scenarios. Including the effects of IFRS 16, our net debt totaled BRL 10,700,000,000.0 with a low leverage ratio of 0.4x EBITDA over the last twelve months. On the right hand side of the slide, you will see that our free cash flow generation remained robust, While it showed a slight year over year decrease due to some phasing effects, our fundamentals remain strong. Our free cash flow yield for the last twelve months remained close to 8%, and our free cash flow margin reached 17.6% year to date, reflecting our healthy financial position and cash generation.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

Finally, on the last slide of the presentation, we highlight our continued commitment to shareholder return. So far this year, we have already paid more than 5,000,000,000 to shareholders, reaffirming our commitment to distribute at least 100% of the net income. In addition to that, so far, we have declared another 1,700,000,000 in interest on capital this year. In the second quarter, we have also completed the reverse stock split followed by a forward stock split operation. The sale of the fractional shares generate close to BRL 1,000,000,000, of which around 80% came from inactive shareholders.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

This move unlocked significant value with our average daily trading volumes increased 77% after the operation. Looking ahead, our share buyback program remains at full speed. We still have around BRL 1,000,000,000 available for repurchase through February 2026. This give us confidence in our ability to meet our shareholders' remuneration guidance for the coming years. Thank you. And now we can move to the Q

[Operator]

Thank you. We are going to start the question and answer section for investors Our first question comes from Bernardo Gauchman with XP.

[Bernardo Guttmann, Sector Head TMT, Banks & Non-Bank Financials - Equity Research at XP Inc.]

Hi, good morning, everyone. Thanks for taking my questions. My first question is about leases. Despite the quarter over quarter growth, the company seems to be working on several initiatives to optimize and slow down this line. What can we expect over the next few quarters?

[Bernardo Guttmann, Sector Head TMT, Banks & Non-Bank Financials - Equity Research at XP Inc.]

And my second question is about the FiBrazil integration following the acquisition of the remaining stake. Are there any near term synergies you are already capturing? And what's your strategic view on M and A going forward? Thank you.

[Christian Gebara, CEO at Telefônica Brasil]

Sorry. Hi, Bernardo. This is Christian. So I'll go to the second and then I ask David to go to the first one, okay, if you don't mind. So as you said, now we announced the position of 50% stake that was held now by CDPQ in FABrazil.

[Christian Gebara, CEO at Telefônica Brasil]

So now we hold 75.01% of the capital, while Telefonica Infra, the infrastructure company of the Telefonica Group retains the remaining 24.99. So we still need to get it approved by Anatel and CADE. So it's difficult for you to now to say when we're going to start capturing these synergies. But what we see is that Fabrizio already built the network that was implied to build. So this 4,600,000 home pass.

[Christian Gebara, CEO at Telefônica Brasil]

So Vivo is almost the sole customer there. So we have like is a neutral network, but in the end more than 95% of the clients are from Vivo. So we are mostly the unique relevant customer. So as you can imagine, we can operate this network with our own resources. So if you look at their numbers, now the EBITDA that they had in 2024 of BRL282 million, That's part of the capture that we envision for this integration.

[Christian Gebara, CEO at Telefônica Brasil]

And add to that, that their penetration is around 16% home connected over home passed. We just end the second quarter with approximately 24%. So there is also the opportunity to accelerate penetration and bringing more revenues in. So in the end, we see that it's a very synergistic operation and also give us the flexibility to do what we just described, if you want to see more room for M and A in the future. As I said in many different occasions, we are always analyzing opportunities.

[Christian Gebara, CEO at Telefônica Brasil]

We need to find an asset that has no or not so much overlap with our network. We also want someone that has the network that is technically the same standard that we have in ours or at least similar to that and the right pricing. As I said in the beginning, we ended the quarter with over 31,000,000 home pass. Brazil, we may say over 30,000,000 home pass, point one. Brazil has around 60,000,000 homes that we could consider suitable for fiber connection provided by Vivo.

[Christian Gebara, CEO at Telefônica Brasil]

So there is room to grow. We may not reach this number. We've been building around 2,000,000 per year, but we see the opportunity to have more than EUR 30,000,000. And that we can do that organically or we could do that through an M and A if you find an asset that comply with the criteria that I just described. If you don't have more in the second one, I pass to the Vito to go to the lease one, Bernardo.

[Bernardo Guttmann, Sector Head TMT, Banks & Non-Bank Financials - Equity Research at XP Inc.]

Very clear, Christian. Thank you.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

Hi, Bernardo. Thanks for the question. So regarding regarding leases, we need to look for two different angles. One is accounting and the one second one is payments. No?

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

So the first one, accounting. If you look the evolution of of of the depreciation and interest accrual, you would see that EBITDA after leases is even growing on a faster path than than EBITDA, which shows all the initiatives that we are doing on on that side. No? And to complement on the payment angle, you would see that there is there is some volatility, particularly at the beginning of of last year and and perhaps even at the end of 02/2023. However, now it seems to be more stable in terms of payment, which are mainly linked to all the renegotiation that are going on with the towers company over the last few quarters.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

But here, I mean, it's important to highlight that the total amount we pay last quarter is 1,200,000,000.0 reais. It's the lowest number in the last four quarters, no, which shows that the results of all these initiatives. Looking forward, we have in one hand, we will need to continue working on the coverage of five gs. However, we already have 64% population cover. But in the other hand, we still have many initiatives to reduce the unitary cost of those towers.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

So we cannot give you a number for the future. But based on what we have done over the last four quarters, prove that the initiative to have this cost under control similar to what we have seen recently.

[Bernardo Guttmann, Sector Head TMT, Banks & Non-Bank Financials - Equity Research at XP Inc.]

Very clear, David. Thank you.

[Operator]

Our next question comes from Marcelo Santos with JPMorgan. You can open your microphone.

[Marcelo Peev Santos, Senior sell-side Equity Analyst - TMT & Education at JP Morgan Chase & Co]

Good morning, Christian, David. Thanks for taking my questions. I have two. The first question would be regarding the fiber to the home ARPU. That's a line that I think last year was growing a bit more and that has been changing trends.

[Marcelo Peev Santos, Senior sell-side Equity Analyst - TMT & Education at JP Morgan Chase & Co]

So I just wanted to understand how much of this is like company strategy driven, maybe you're focusing more on bundles or how much of this is like market driven to market environment? That's the first question. And the second question, if you could discuss a bit the mobile competitive environment, what you are seeing now in the beginning of the second half? What's your perception going forward? Thank you very much.

[Christian Gebara, CEO at Telefônica Brasil]

Marcelo, that's Christian. I will try to answer. Yes, I think most of the explanation of the upper performance is related to acceleration the Vivo Total customer base. As I described, out of our 7,400,000 customers in FTTH, 2.9 already in Vivo Total is a growth now in the Vivo Total customer base of 63.5%. That has a very positive impact in the churn reduction, but ARPU is slightly diluted due to the discount given to the convergent customers.

[Christian Gebara, CEO at Telefônica Brasil]

So that's the main explanation for this ARPU evolution. So quarter over quarter, it is very small, the reduction we're talking about 0.6%. But year over year, although we grew 63% in the customer base of Vivo Total, there is this ARPU impact of 2.1%. I think the very positive thing for that is the churn. Now if you look at the 2022, we were at 1.93.

[Christian Gebara, CEO at Telefônica Brasil]

Now the FTTH churn is 1.46 and that's a lot related to the Vivo Total, but I'll add to that all the quality and other things they've been doing to improve it. We had price adjustment in FTTH in January 4.5% price adjustment of 14% of our FTTH customers. June, we also had a price up of 9.7% of 22% of our FTTH base. And the VIVO TOTAU, we had a 2.99% price increase in 100% of our Vivo Total users. So that's the explanation that I have.

[Christian Gebara, CEO at Telefônica Brasil]

The second one was regarding what competition in mobile you asked or competition in general?

[Marcelo Peev Santos, Senior sell-side Equity Analyst - TMT & Education at JP Morgan Chase & Co]

Mobile competition.

[Christian Gebara, CEO at Telefônica Brasil]

Yeah. I think the market is similar to what we saw in the last quarter. There is of course a strong competition, the three players and other small ones also trying to capture markets. Our strategy stands then upselling data, digital services and totalization of customers that I just described, with a very disciplined monetization. So focus on the quality, of five gs, convergence with expansion of fiber and also the sale of FTTH and also controlling churn.

[Christian Gebara, CEO at Telefônica Brasil]

So churn is in very good levels in both services, mobile and fixed and the price adjustment that I described to you before were done in the front base and also in our customer base. So the front book, sorry, and in our customer base. So that's the reality that we face right now. And we've been growing, as I said also in the beginning, in the postpaid revenues, double digits and prepaid, it's a negative. But if you compare it quarter over quarter, we have a positive trend in the prepaid revenues.

[Marcelo Peev Santos, Senior sell-side Equity Analyst - TMT & Education at JP Morgan Chase & Co]

Perfect. Thank you very much.

[Christian Gebara, CEO at Telefônica Brasil]

Thank you, Marcelo.

[Operator]

Our next question comes from Gustavo Farias with UBS. You can open your microphone.

[Gustavo Farias, Associate Director at UBS Group]

Hi, everyone. Gustavo Farias here from UBS. Thanks for taking my questions. Two on my two on my end. The first one, net income came a little bit below consensus, and we saw financial expenses as the main detractor and quarter over quarter as well as year over year.

[Gustavo Farias, Associate Director at UBS Group]

So if you could comment a little bit on that and how you see those lines going forward for the full year '25? And the second question on OpEx, we also saw G and A and personnel expenses a little bit above inflation. If you could comment on that going forward as well as well as drivers for margin to continue expanding. Thank you.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

Gustavo. So thank you for the questions. So starting with the first one around financial expenses. Look, the the financial expenses in the quarter are mainly impacted when you compare year over year, but some seasonality effect. So last year, we had a positive one off of 330,000,000 linked to a reversal of a provision resulting from from a tax amnesty in the state of Sao Paulo.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

When comparing with the with the previous quarter, we are almost almost in line. What's really perhaps is driving this slightly growth, one have to do mainly with the fiscal liability that obviously now we have one more year accrual that we need to book all the the monetary accruals. And also we have some positives and negatives. So the positive also have to do with amnesty that we have this quarter, but we also have some contingencies in the other hand. So as you can see, Gustavo, we have around every almost every quarter, we have some down.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

But you can see that at the end of the day, thinking more about the net income. The net income is growing 10% year over year. But even if you look to the earning per share, it's more than that. It's growing to 12%. What could you be thinking for the next quarter?

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

I will have two main aspects. One, to do with depreciation. The depreciation this quarter is growing 8% year over year, but this is mainly as a result of the review of the useful lives that we did last year in the third quarter. That mean that this year, twenty twenty five million in the third quarter, this effect will be normalized. So the depreciation in the third quarter, we are expecting that will be almost in line in terms of previous year.

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

So this will help us in terms of the year year evolution. And also bear in mind that in July 2026, we will finalize the depreciation of all the legacy that have to do with copper. This again will be benefit of around 300,000,000 per quarters in terms of results before before taxes. No? So again, I think net income has been one of our key attribute and this should should continue going forward. Regarding the second question in OpEx, okay, please.

[Christian Gebara, CEO at Telefônica Brasil]

I can help with the second one if you don't have anything else. No. In the second, I think I would think I would first, Gustavo, highlight that our EBITDA grew 8.88% year over year with a margin of 40.5%. Going directly to the cost from operations that was your question about personnel and G and A. Cost from operation, we had an evolution of 4.9% year over year.

[Christian Gebara, CEO at Telefônica Brasil]

And here is the explanation mostly driven by personnel, as you said, point 8%. Here the explanation is mainly due to annual readjustment that we have in salary and benefits. And also, we increased headcount in some key areas for our present and future digital IT and new businesses areas. If you look to commercial infrastructure, the evolution was 3.5%, well below inflation. Here is that we had a lot increased commercial activity, but it was offset by gains that we had both in network and energy efficiencies, but also in the digitalization of most of our processes and interaction with customers.

[Christian Gebara, CEO at Telefônica Brasil]

In G and A, the 7.5% was due to higher costs with third party administrative services that were related to the speed of split that we had in the quarter before. I think also important to highlight here that we declared the EUR 4,500,000,000.0 that we will capture in Copel and real estate, that's very little capture in this quarter. So our number for asset sales in the second quarter twenty twenty five was only BRL5 million. When you compare to the second quarter twenty twenty four, this figure was BRL31 million. So we are very confident of our cost discipline and our ability to continue to grow EBITDA. David?

[David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil]

Yes. Just one comment, Gustavo, on that one. The net income in the coming quarter will also benefit from what Christian is saying. Haven't almost sell those real estate and corporate this quarter, but we are expecting a boost in the coming year, but also in the coming quarters. So this will be an upside.

[Christian Gebara, CEO at Telefônica Brasil]

For not only the OpEx reduction, but also in the net income improvement.

[Gustavo Farias, Associate Director at UBS Group]

Very clear. Thank you.

[Operator]

Our next question comes from Vitor Tomita with Goldman Sachs. He just left the oh, he joined back. Vitor, you are allowed to talk.

[Vitor Tomita, VP - Equity Research at Goldman Sachs]

Hello. Good morning, all, and thanks for taking my questions. So two from our side as well. The first one is related to that points that you just mentioned. You cited that the $5,000,000 asset sales this quarter were already related to the concession migration.

[Vitor Tomita, VP - Equity Research at Goldman Sachs]

Could you give an update more on the operational side on how the initiative to migrate concession users, remove copper cables, and dismantle them from copper for copper is advancing currently? Also, my second question would be on B2B. If you could give a bit more color on how the acquired operations from IPNET and VITIT are integrated into the general operation? How they have been operating alongside the other Vivo teams and on how those operations have been performing in terms of growth? Thank you.

[Christian Gebara, CEO at Telefônica Brasil]

Look, Victor, this is Christian, okay, and David can help me. We even before the immigration, we were able to sell real estate and copper. So that was my answer before was to explain that we announced the 4,500,000,000.0, that's 3,000,000,000 in copper and 1,500,000,000.0 in real estate. We haven't started in a very accelerated way as we will in the next quarter as David said and mainly in 2026 and 2027. So the impact on the OpEx reductions is still not taken this quarter and this quarter is even lower than what we had in the past before the migration, where we got authorization from sale for the sale of some real estate and also we could already be doing migrations in areas where we could be replacing copper to fiber when the customers agree to that.

[Christian Gebara, CEO at Telefônica Brasil]

Now, we have the ability to have this migration enforced because we have the right to migrate when we are able to offer similar service as the case of offering fiber. So the idea here is only to say that's going to be accelerated. The numbers continue to be the ones that we've described before. 3,000,000,000 positive cash effect in the net of extraction costs. So that's going to be for the copper and EUR 1,500,000,000.0 proceeds from the sale of assets net of the desmobilization costs before income tax.

[Christian Gebara, CEO at Telefônica Brasil]

So this remain the same and you'll see more of this effect in the next quarters, especially 2627. Considering the IPNET and VITA was much before IPNET is fully integrated, giving great results. The team is 100% integrated and been contributing a lot for our network sale and other service that they are responsible for. IPNET is the same, already contributing in the second quarter. IPNET, we still have it separate because they are focused on Google solutions.

[Christian Gebara, CEO at Telefônica Brasil]

So they contributed of over BRL65 million in our second quarter twenty twenty five results. It's in B2B, but it's also in the fixed business total revenues that you see in that we just presented. So they are fully integrated with the dependence that they need to have to keep their portfolio alive, their customer base alive, but also leveraging all the synergies and the contact that we have with many other customers that is helping accelerate their business, both Vita and also IP net as well as the other one that we bought in B2C that is i2Go for consumer electronic accessories. Don't know if there is anything else or Vitor if I answered both your questions.

[Vitor Tomita, VP - Equity Research at Goldman Sachs]

That's clear. Thanks.

[Operator]

Our next question comes from Fani Kanomuri with HSBC. You can open your microphone.

[Phani Kumar Kanumuri, Equity Research Analyst at HSBC]

Hi. Thanks for taking my questions. So I have a couple. Could you comment on the net adds that you have in mobile? They seem to have been a bit more weaker than you have historically done.

[Phani Kumar Kanumuri, Equity Research Analyst at HSBC]

So what are the steps being taken to improve the net ads in mobile? The second one is regarding your FIBREZIL and the fiber strategy. So in the comments, you said that you have 60,000,000 homes passed that you have potential for. But how do you see competition, and what is the addressable market? Do you think you could reach the 60,000,000 over the long term?

[Phani Kumar Kanumuri, Equity Research Analyst at HSBC]

And do you have plans to do what you have done with fiber as it is bringing outside outside capital for deploying fiber going forward? Thank you.

[Christian Gebara, CEO at Telefônica Brasil]

So, Fenny, going to the first one, no, I think evolution is very in line what we had before. It's like, as I said before, our strategy is very focused on the migration from prepaid to hybrid. This can be some variation quarter over quarter, but more importantly is the convergence that we are like keeping customers more loyal selling mobile with fiber and also selling mobile with digital services. We also increasing the five gs percent take up. If you see what we had in the second quarter, the five gs take up in our customer base was 13.3, is already close to 24%.

[Christian Gebara, CEO at Telefônica Brasil]

And our churn is around the 1% level. So pretty good evolution and ARPU is above like 5.1% if you compare the 2024 with 2025. So it's a very healthy and disciplined strategy. And I think we are capturing the value out of it because our mobile service revenue postpaid increased 11% year over year. So pretty good.

[Christian Gebara, CEO at Telefônica Brasil]

And if you'll add postpaid to fiber is already 73.4% of our total service revenue of the company. And year over year of these two services combined is 10.8%. In fiber, as we said, the idea is to continue to grow organically. We don't envision right now having any other financial partner to accelerate. I think it was needed at the time that we want to accelerate and to reach what we already declared more than 30,000,000 that we already reached this quarter, 30,100,000.0.

[Christian Gebara, CEO at Telefônica Brasil]

And I've told before that I see opportunity in more like millions of homes. It doesn't mean that we're going to reach all of them, but there is room to continue to grow. We could do that organically or we could also analyze M and A. That's the idea that we have going forward.

[Phani Kumar Kanumuri, Equity Research Analyst at HSBC]

Yes. Thank you, everyone.

[Operator]

Our next question comes from Pablo Ricaldi with Itau. You can open your microphone.

[Pablo Ricalde, Research Analyst at Itaú Corretora de Valores SA]

Good morning, Vivo team. I have two questions as well. The first one is on the competitive landscape you are seeing, especially if you think you will be able to push a new round of pricing for the second half of the year? And the other one is on the slide you mentioned about like the one stop vendor solution. I don't know if you can provide more details on the strategy you are planning to do to increase the percentage of cross selling.

[Christian Gebara, CEO at Telefônica Brasil]

Can repeat the second one? The strategy of what? Sorry, Pablo.

[Pablo Ricalde, Research Analyst at Itaú Corretora de Valores SA]

Like to increase the penetration of the cross selling.

[Christian Gebara, CEO at Telefônica Brasil]

In B2C and B2B, in both? Both. Okay. So going to the second one. Yes, we foresee that you increase as we described before, the percentage of these new services is 1.7 percentage points higher in the representation of the total revenue mix.

[Christian Gebara, CEO at Telefônica Brasil]

It went from 9.5% to 11.2%. If I look at it in separate, we can see that in the B2C, the growth was 14.8%. We are growing different verticals. And also we are started to show you like the B2C revenue divided by RQ, by unique users. So we also went from R60.6 to R63.7 dollars We gave some numbers about the number of customers with our health plan Vale Sao Ujid that is around R500,000.

[Christian Gebara, CEO at Telefônica Brasil]

We gave the number of OTT subscriptions at 3.7. Considering our customer base of more than 100,000,000 access in mobile, there is a lot still to be sold. So there is a great effort now to monetize our customer base and we're using our app that has 28,000,000 unique users as the best and like most like a profitable channel to upsell. So again, upselling starts with migrating prepaid to hybrid, but also to them drive convergence and of course after that digital services. Another example is insurance.

[Christian Gebara, CEO at Telefônica Brasil]

We have 600,000 smartphones insured by Vivo, but we increased a lot the number of customers that leave our store with the insurance with a new smartphone. It's now around 35%. It used to be below 20%. So we see many different areas where we imagine the possibility to increase penetration of our services. In B2B is the same, the number is much more relevant.

[Christian Gebara, CEO at Telefônica Brasil]

We are talking about revenues in the last twelve months of R4.8 billion dollars It's a growth of 31.3% year over year. It already represents 8.2% of total revenues. And again, here we see still low penetration. We have 1,600,000 customers. We have the best B2B channel reaching from the small to the largest companies of the country, but only 15% of them have a digital service acquired through Vivo.

[Christian Gebara, CEO at Telefônica Brasil]

So we see a huge opportunity, especially in the mid to low size companies to sell much more digital services. Regarding the mobile, I described what the increase that we have in our customer base. We still have in hybrid around one fourth of our customer base to have the annual increase and we still have also a small piece of our postpaid to have also their annual increase in August. So these are the two groups that we have price increase planned according to the annual adjustment that we have due to inflation.

[Pablo Ricalde, Research Analyst at Itaú Corretora de Valores SA]

Perfect. Thanks a lot.

[Operator]

Thank you. 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.

[Christian Gebara, CEO at Telefônica Brasil]

So thank you everyone again for participating in our call. It's one of the best quarter that we had in the last period. It's very strong in all lines, well above inflation, bringing more profitability, but also in optimizing our CapEx allocation. We also still have a lot to be captured with the sale of copper and real estate as I described in one of the questions. So we are very positive about the trend that we have in the next quarters, continue with our strategy of selling more servers to our strong customer base, acquiring more customers and more importantly, keeping their loyalty, reducing churn in a very positive way as we're doing in fiber and also in postpaid.

[Christian Gebara, CEO at Telefônica Brasil]

So if you have any more additional questions, please reach us through our IR team or directly to us. Okay. So thank you again and see you soon.

[Operator]

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

Participants

Analysts

• Joao Pedro Soares Carneiro, Director - Investor Relations & Macroeconomics Director at Telefônica Brasil
• Christian Gebara, CEO at Telefônica Brasil
• David Melcon Sanchez-Friera, CFO & IR at Telefônica Brasil
• Bernardo Guttmann, Sector Head TMT, Banks & Non-Bank Financials - Equity Research at XP Inc.
• Marcelo Peev Santos, Senior sell-side Equity Analyst - TMT & Education at JP Morgan Chase & Co
• Gustavo Farias, Associate Director at UBS Group
• Vitor Tomita, VP - Equity Research at Goldman Sachs
• Phani Kumar Kanumuri, Equity Research Analyst at HSBC
• Pablo Ricalde, Research Analyst at Itaú Corretora de Valores SA