Operator: Good morning, ladies and gentlemen. Welcome to Vivo's Fourth Quarter 2024 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.

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. [Foreign Language] We would like to inform that all attendees will only be listening the conference during the presentation and then we will start the Q&A session 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, 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 those to differ materially from those expressed in the respective forward-looking statements.

Present at this conference, we have Mr. Christian Gebara, CEO of the company; Mr. David Melcon, CFO and Investor Relations Officer; and Mr. Joao Pedro Soares Carneiro, IR Director. Now, I will turn the conference over to Mr.

Joao Pedro Soares Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference. Joao Pedro

Soares Carneiro: Good morning everyone and welcome to Vivo's fourth quarter and full year 2024 earnings call. Christian Gebara, our CEO will walk us through Vivo's performance and connectivity and digital services as well as present our ESG accomplishments for the year.

Then David Melcon, our CFO, will give more details on cost and CapEx control, free cash flow generation, shareholder remuneration, and lastly, as an update on our fixed voice migration process. With that, let me turn the call over to Christian.

Christian Gebara: Thank you, Joao. Good morning, everyone, and thank you for joining us today. I'm very pleased to present the results for 2024.

We finished the quarter and the full year with an excellent performance driven by our best-in-class products and services that allow us to continue to increase the lifetime value of our customers with churn at historical lows. We reached 66.5 million postpaid access in 2024 with a growth of 7.6% reinforcing our capacity for strong mobile performance in 2025. In fiber, the number of homes connected grew 12.7% this quarter, totaling 7 million access. In total, Vivo reached the largest customer base in our history with over 116 million access. Total revenues increased by 7.7% in the fourth quarter with mobile still being the main driver, growing 7%, while fixed revenues grew 8%, the best performance that we have ever registered for this segment.

Our top line expansion was fully reflected through to EBITDA that increased by 7.8% year-over-year. We invested BRL9.2 billion in 2024, decreasing our capital intensity and with that, registered BRL13.7 billion in operating cash flow, growing 11% year-over-year, representing almost 25% of our total revenues. In 2024, we paid over BRL5.8 billion to our shareholders, as remuneration grew by an impressive 22% year-over-year that was equivalent to 105% of the net income generated in the period, thus meeting our guidance that we, hereby, reinforce for the next couple of years. On slide 4, we show how our performance has been positively impacted by the shift that has been occurring in our revenue mix with emphasis on postpaid, fiber and B2B digital services. The mobile segment ended the year representing 65% of our total revenues and still benefiting from our ever-improving customer base with strong prepaid to postpaid migration figures.

As such, postpaid revenues grew 9.1% in the fourth quarter, representing 84% of our total mobile service revenues. In addition to that, fixed revenues grew 8%, the highest annual growth ever, driven not only by the double-digit growth of 12.4% in FTTH, but also by the 21.1% expansion of data, ICT and digital services, as the take-up of digital solutions by our B2B customers accelerates. I would also like to highlight the replicable market position of our digital ecosystem. Our new businesses, combining B2B and B2C services, now represent more than 10% of our total revenues. With our one-stop shop proposition, we're moving further and further from being just a connectivity provider, while enhancing the overall lifetime value of our customers.

On the next slide, we highlight our main mobile trends. Our mobile base grew 3.3% year-over-year, reaching over 102 million access. Postpaid has been the main driver with a high single-digit growth of 7.6%, reaching over 66 million users. In fact, the number of postpaid quarter net additions, including M2M and ex-dongles was once again very high, nearing 900,000. We are not only attracting more customers, but also increasingly retaining the existing ones, being able to maintain postpaid churn below the 1% per month level for another year.

This fits coupled with expanding ARPUs provides a very robust combination to deliver strong results in any scenario. As such, our leadership remains intact, supporting by our inspiring brand, our best-in-class infrastructure, a broad, unique portfolio and powerful channels. Now moving to slide 6, where we can see more about our fiber operation. We reached our 2024 goal of delivering 29 million home passed with FTTH, which grew 11.2% year-over-year, while our homes connected expanded 12.7%, reaching seven million connections. We have been accelerating the number of quarterly net additions registering 220,000 new adds in fourth quarter 2024, 20% higher than the expansion seen in the same period of 2023.

At the same time, we reached our lowest FTTA churn level ever at 1.49% per month, powered mainly by Vivo Total's superior value proposition. By the end of 2024, 2.4 million FTTH access had Vivo Total, up 85% year-over-year with revenues from those plans growing more than 90% versus 2023. We have a significant portion of new fiber savings in our stores being convergent. We foresee fibers performance improving even further going forward. We continue to see multiple opportunities to generate considerable returns by investing in fiber.

Thus, going forward, we will maintain a selective expansion of our footprint while we step up the penetration of connections over our network. On Slide 7, we show you more details on the B2C revenues. We closed the year with 57.2 million individuals as Vivo customers, over a quarter Brazil's population. On average, our customers are generating a monthly net revenues of BRL 62.3, a number that has an evident improvement trend going forward as we are being successful in capturing additional share of wallet and increasing lifetime value, which translates into customer durance to the Vivos brand. B2C represents 76% of Vivo's top line and grew 7.2% in 2024 with our steady telco expansion combined with a 23.7% growth in new businesses.

Here, I would like to highlight the strong performance seen in the sale of video and music OTTs with revenue already surpassing BRL 700 million a year, growing close to 30%. We reached 3 million OTT subscriptions by year-end, boosted by our proprietary video platform, Vivo Play with access soaring 84% in the period. Also mindful of how important digital safety is to Brazil, as we recently launched Vivo Modo Seguro platform, including service and smartphone insurance, blocking of spam calls and tips of how to identify frauds and scams. With Modo Seguro, we want to ensure that our customers not only have the best connection, but also secure experience in the digital environment. On the B2B side, our revenue growth was even higher, up 8.5% year-over-year in 2024, led by the outstanding performance of digital B2B that expanded over 20% in the same period.

Among the vast number of digital B2B solutions that we provide to our clients, the main driver of this year's results were cloud solutions with revenues getting close to BRL 2 billion, up 32.6% year-over-year. This derives from our broad portfolio of providers as well services of hyperscale such as Microsoft, Amazon and most recently, Google benefited by the acquisition of IPNET, the main integrator of Google solutions in Brazil. The company was consolidated in our results in October 2024, contributing with BRL 64 million of revenues in the quarter. This showcases not only our ability to pick the right companies to join our ecosystem but also strength Vivo as a key cloud solution provider in the B2B market. Moving on to our ESG actions on Slide 9.

First, I would like to announce that we joined Dow Jones Best-in-Class World Index, which is considered the most important sustainability index in the world. We are the only Brazilian telco in list, being leaders in the Americas and having the sixth best telco sector performance globally, reaching a score of 88 points in S&P Global Corporate Sustainability assets. In our recycling program, Vivo Recicle, we achieved a new record of 37 tonnes collected, three times more than last year's amount. The social side from the San Telefonica Vivo that completed 25 years of activity in Brazil, invested BRL 50 million in 2024 and was able to benefit 2 million people across the country. Also, in Vivo, half of the internship and training programs positions were allocated to Black talent, which reinforces our diversity pillar and it stresses its importance of the company's growth.

With that, I will pass the word to David, who will comment on our financial performance. Thank you.

David Melcon: Thank you, Christian, and good morning, everyone. On Slide 10, we detail our cost evolution. Total OpEx grew 7.7% year-over-year, mainly driven by the 11% increase in cost of services and goods sold that expanded due to the continued double-digit growth in revenues from digital services and sale of smartphones and electronics.

These services require no CapEx and contribute to extending the lifetime value of our customers. Our cost of operations that represent 64% of our OpEx, grew 5.7% year-over-year, led by the cost related to our infrastructure expansion and a strong commercial activity in the period. These factors were partially offset by the reversal of provisions related to the migration from concession to authorization that positively impacted EBITDA in the amount of BRL 386 million in the quarter. On a year-over-year basis, this is compensated by the effect of BRL 292 million related to the reversion of provision for fines connected to the renegotiation of leasing contracts with tower cost that positively impacted previous year results. All in, we maintained our EBITDA margin at a high level of 42.5% in the last quarter last year, in line with the previous year, with EBITDA expanding 7.8% year-over-year.

Moving to the next slide. We closed the year with CapEx at BRL 9.2 billion, just 2.3% above previous year, reducing our CapEx over sales to 16.4%, with investment dedicated mainly to the expansion of our 5G and fiber operations. By keeping CapEx stable and constantly increasing our revenues, we continue reducing our CapEx intensity in almost 1 percentage point. We also maintained a positive evolution of our operating cash flow that grew 11% year-over-year with a margin of 24.6%. After leases, operating cash flow grew even more, 13.4% with over BRL 8.6 billion generated in the year.

On Slide 12, we see our net income closed in 2024 at BRL 5.5 billion, with a growth of 10.3% versus the previous year, resulting in BRL 3.38 of earnings per share, up 11% in the period. The low financial debt protects the company in high interest rate scenarios. We closed the year with a net cash position of BRL 1.4 billion and including leases and net debt of only 0.6 times EBITDA. In 2024, we generated BRL 8.2 billion in free cash flow, translating into a free cash flow yield of 10.8%. This robust result showcased how Vivo continues to invest in high return projects, while also having a space for attractive shareholder remuneration.

So let's talk about shareholder remuneration on slide 13. In 2024, we paid out over BRL5.8 billion combining capital reduction, interest on capital and share buybacks. This represents a growth of 22% versus the previous year, up more than twice the growth rate of our net income. As a result, we successfully met the guidance for the year 2024 by having a payout of 105% over net income. I would also like to reaffirm the guidance for the next year 2025 and 2026, stating that we will have shareholder distribution of at least 100% of the net income that we generate each year.

As such, we already started 2025 with around BRL4.5 billion committed to this year's shareholder remuneration. And to do more, we just renewed our share buyback program that will be in force until February 2026, with an investment capacity up to BRL1.75 billion. To conclude on this topic, I would like to comment that last month, our Board of Directors approved a reverse stock split operation followed by a forward stock split. Our main goal with that initiative is to facilitate the trading of our shares and improve the liquidity in Brazilian stock exchange. We will keep you posted on the next steps regarding this operation.

Finally, we would like to give you more information regarding the fixed voice migration process, a game changer in both Vivo's history and the telecommunication sector in Brazil. By the end of 2024, we signed a self-composition agreement with regulatory bodies to migrate our fixed voice model from concession to authorization. The process is in the last step and in the coming months, we will formally conclude at which point we will start to capture the benefits. With the conclusion of the process, we will execute projects related to the expansion of our 4G coverage and backhaul. With a net present value of BRL4.5 billion considering both OpEx and CapEx.

This will take quality connectivity to many underserved regions in Brazil, helping to reduce the technological gap that exists in our country. Having concluded all administrative and judicial proceedings related to the concession, we released provisions amounting to BRL792 million in the fourth quarter 2024, while also mitigating risk related to over BRL5 billion in regulatory contingencies. This groundbreaking process is not only beneficial for Vivo, but also for our clients and society as a whole. More than 1 million customers that we are currently serving with copper could migrate to cutting-edge technologies such as fiber or mobile, having access to better products and services. As we migrate these users, we will accelerate our network transformation in the state of Sao Paulo, freeing up around half of the 1,900 own or rented properties that we used to house our copper network, unlocking savings with energy, rent, property taxes, maintenance, security, among others.

These movements will also enable us to extract and sell around 120,000 tons of copper and cable cutting, simplifying our network. In 2024, we generated BRL1.3 billion in revenues linked to copper-based services. Due the high cost and CapEx associated with the provision of these services, the free cash flow coming from these revenues was negative, thus diluting the overall profitability of our business. Going forward, we estimate much better returns and we'll keep you informed about the effects and the benefits captured along the way. This is a huge step in Vivo's history.

And now more than ever, we are fully able to deliver best-in-class fixed services across the whole country. Thank you. And now we can move to the Q&A.

Operator: Thank you. We’re now going to start the Q&A section for investors and analysts.

[Operator Instructions] Our first question comes from Leonardo Olmos from UBS. Please Mr. Olmos, your microphone’s open.

Leonardo Olmos: Hi, everyone. Good morning.

First of all, thank you for the information on the benefits of the concession migration. The slide and the written information is quite helpful to us. Still, I'm going to focus my question on dividends for 2025. If you could discuss the perspective, so all the buildup of what could be the distributions in 2025, if you expect an increase versus 2024, because it already had a great increase versus 2023? We also saw that the benefits of the concession in terms of impacting net income, even though it's not cash, they stayed in 2024, right? So maybe the benefits of the concession will not be converted into dividends 2025 or just like, I don't know, if you could comment the construction of how you see dividends this year would be very helpful? Thank you.

David Melcon: Leo, thank you for the question.

So for 2025, as I said, we are committed to deliver a payout of 100% of net income or above for both 2025 and 2026. And so far, we have already underway capital reduction that will be paid now the 15th of July amounting to BRL2 billion. And also the outstanding interest on capital that were declared last year, and they will pay the 8th of April in the amount of BRL2.2 billion. So that's add up BRL4.2 billion. And on top of that, we continue with our share buyback program that we already acquired BRL200 million in shares in the first quarter, the first couple of months.

And we have just approved a total plan of BRL1.75 billion for the next month. So again, we are not giving guidance about the net income for the year, but you can see the strong trend that we have in our business and particularly in terms of also the cash generation. So we have all the elements to continue having an attractive shareholder remuneration. Regarding second question also, I mean, the provision that we released in Q4, as you say, it was mainly on accounting. But looking for the next few years, we -- as we have described, we have a strong plan to monetize both real estate and also the copper on top of also benefiting the cost lines that we have seen in those quarters that we have already implemented a plan that will be executed as soon as we have all the final approvals that we expect this to happen very early.

So we are just in a moment where the transformation of our cost structure, particularly in infrastructure will take place, and you will see a positive impact on the trends.

Leonardo Olmos: Very good David. Thank you very much.

David Melcon: Thank you.

Operator: Our next question comes from Camila Koga from Bradesco BBI.

Please Mrs. Koga, your microphone is open.

Camila Koga: Hi, thanks for the opportunity to ask questions. So, regarding the mobile service revenue, could you please give us more detail on the reasons for the quarter-over-quarter slight decrease and how you see it going forward? Thank you.

Christian Gebara: So, Camilla, this is Christian.

So, thank you for your question. First, I think it's important to highlight that we have a very strong growth of 7% in the fourth quarter. And if you see the growth that we had in the postpaid is even higher. So, that was a good outcome for the quarter. And if you compare your question quarter-over-quarter, it's true that we had a very strong third quarter.

So, the comparison when you go one quarter to the other, it's not maybe very fair because we grew 8.4% in the quarter before. If I'm not mistaken sorry, we grew -- in the postpaid, we grew 9.1% in the fourth quarter, and it grew 10.1% in the year before. When you got the price increase that we had in 2023, we had an average of 9% increase in the second half. And when you compare to the second half of 2024, we had an average price increase of 5%. So, again, when you compare year-over-year, we had a very strong increase in 2023 that we don't -- we couldn't repeat in the second quarter of 2024.

Postpaid, although it was very strong, 9.1%, we had a prepaid softer in the fourth quarter. Again, we do a lot to the migration, we've been migrating a lot of customers from prepaid to hybrid. If you know also you look in the fourth quarter, we had 18% more migrations, and you could see our net adds of the quarter, close to 1 million customers. That is also a very high performance that we've been having in the last quarter, but also to highlight in the fourth quarter. November 2023, also I want to give you some update about the prepaid.

That was when we increased our price from BRL15 to BRL17 and we couldn't do the same movement in the fourth quarter 2024. So, that's impacting also the evolution that we see in the prepaid revenues. Again, we are working in many areas to continue to grow our revenues in the mobile, and we are very optimistic, especially because we are presenting a churn rate that is below 1%. We increased front book prices of hybrid and grew postpaid now in February on average, 7%, 8%. We normally apply and will do so in the price for the customer base in April -- starting in April and going until August.

And our commercial performance is still the strongest one in the market, not only in terms of acquisition of customers but also the very low churn and especially in the ability to offer mobile plus fixed. So, that's maybe the full explanation, not only the explanation from the third quarter versus the fourth quarter, but again, highlighting the very strong number that we had in postpaid, 9.1%, and our ability of price increase that we started already with the front book and we'll continue to do in our customer base starting now in April. Camila Koga : Thank you.

Operator: Our next question comes from Bernardo Guttmann with XP. Please, Mr.

Bernardo, your microphone is open. Bernardo Guttmann : Hi. Good morning everyone. Thanks for taking my questions. Actually, I have two from my side.

The first one is related to margin. Excluding the one-off effect, the margin would have faced a year-over-year compression. What can we expect for this year considering the expectation of rising inflation? What elements could drive the margin up, considering cost pressures? And the second question is about the change in the concession regime. Trying to understand the company's approach regarding the sale of reversible assets. What we can expect in terms of the speed of selling copper and real estate assets? Thank you very much.

Christian Gebara: I start with the second question, and then David will jump to answer your first. We have a four-year plan for the concession. We're going to start this year. As David stated before, there is a lot of upside here, especially that we have -- starting with the migration of customers. Now we have 1.2 million customers using the copper network.

So we have here the opportunity now to migrate these customers to a cutting-edge technology that's going be fiber. Even here, we have like a revenue impact, then maybe we have a cross-sell opportunities when we migrate these customers to fiber. And also, the cost serve these customers will be lower because we're not going to use the copper that we kept until now, and now we can do everything with the fiber. Then we have like 120,000 tons of copper cables that we're going to be reducing. And of course, when we migrate, we are able to sell.

We're starting this year and during the next four years, we're going to be able to do everything. Now we have like to keep some customers where we are the carrier of less resource, but it's only until 2028. So apart from these areas, we all can do the migration in all rest of the state. That is also a vast area that we can do this migration. And of course, then, we have around 2,000 owned or rented properties in use.

We -- today, for the numbers that we have, you can imagine that 50% of this total could be freed up for sale or can have a lease cancellation. So that will also be able to give us a lot of savings and also upside in the sale of the real estate. So again, we have a great opportunity here to improve our results based on these operations that I briefly described to you. If you don't have more questions, I can give the David to talk about this one and EBITDA, if you want?
David Melcon : Yes. So regarding the first one, Bernardo, thank you for the question.

So for -- if you look to the evolution of our results, I mean, it's difficult to extrapolate one quarter any on trends or neither on margins. So even excluding the other, the other line that you mentioned, growth that we have on EBITDA for the full year, 9%. So it's a very strong growth, so 9%. In terms of margin, the full year, even excluding the others, is above 40%. So again, so very strong.

Even if we consider CapEx and even leases, so we are growing margin year-over-year in almost 1 percentage point, no, 0.8%. So that means that we have a very solid cost structure that allows us to continue having efficiencies and benefiting from digitalization and transforming the business. Also for the next year, what we are seeing is that some of the costs that we have, particularly in the second half of the year and this quarter have to do with preparing the company to benefit from the concession. So we have been running some of projects that obviously have a cost. These costs not only will not be for next year, but also we will have the benefit for what we have invested, particularly in this quarter.

So once we start having the -- as Christian mentioned, the sale of the copper and the real estate, what we will see is that for the future, we will see these others will also start to be positive, but not only in terms of net income and EBITDA, but also in terms of cash flow and in some cases, the cash flow will be even higher the amount that you will see in EBITDA. So trying to answer your question, we always look to margin, but not only EBITDA but also after leases and CapEx. And we are optimistic in terms of improving the trends. I'm not talking about EBITDA margin, I'm talking more about EBITDA after leases and CapEx for the future.

Bernardo Guttmann: Very clear.

Thank you very much, David and Christian.

David Melcon: Thank you, Bernardo.

Operator: Our next question comes from Felipe Cheng from Santander. Please Mr., Cheng. Your microphone is open.

Felipe Cheng: Thank you. And there are two questions from my side. The first one related to B2B revenues in the fixed line segment. Even if we adjust for the acquisition of IPNET’s, the growth was very strong at 15% year-over-year. I was just wondering if there is anything specific to this quarter or if we should expect the strong level of growth to carry over 2025? If you could maybe detail a little bit of what were the main drivers here for us to see such an acceleration versus the previous quarters? And my second question is related to the timing, right, of the migration of these 1.2 million customers, which are currently using the copper technology.

And what maybe we could expect in terms of revenue accretion and free cash flow margin for these customers once they are migrated? Any detail you can provide on that would be great. Thank you.

Christian Gebara: Felipe, I'll start with the first one. No, there is nothing specific. That's the pace of the business.

And apart from the BRL 63 million that you correctly highlight, is a small amount. You're talking about BRL 63 million of IPNET over BRL 1.9 million that we have now, the total cloud revenue for the quarter. I think we've been highlighting that for the last quarter. So, we have a strong focus in the digital services. And in B2B, it represents 7.3% of our total revenue and is 21.2% of the B2B revenue.

So -- and it's like we are growing a lot in these lines. We are going cloud. We are growing IoT messaging, and we are growing other different solutions. I think here is the result of our vast portfolio, partnerships and also acquisitions. As we highlighted here.

we also had another one of Vita that is a Cisco integrator some time ago. We have 5,000 sales people dedicated to serve our 1.8 billion B2B customers in all the different segments. And if you consider the penetration of digital services that we sell through Vivo to these customers is around 15%. So that gives us room to increase it, especially when you go down the pyramid to customers like median or small companies that have a very low penetration of digital services. So going forward, so over this BRL11 billion or BRL12 billion of revenue that we have in the quarter four, it's in B2B digital services.

So it's one-third. We grew 20%. But even the telco B2B revenues, apart from the loss that we have in voice, it grew 3.1%. So B2B, we think we have a structure that is difficult to replicate, and we could see growth going forward, both in telco and in digital services.

David Melcon: Hi, Cheng.

Regarding the question on the concession the 1.2 million customers that we have on -- currently on copper, a large part of those are already on our fiber footprint. So we have already defined a plan to accelerate the migration. We cannot talk about how many will be in each year. But what we can say is that we have an internal target to capture a significant part of all those benefits in the first four years. So you will start seeing the benefit from -- in a couple of quarters and in four years, a big part of the benefits.

Christian Gebara: We're going to start right now, as David said, because as we mentioned before, now we had some OpEx related to getting the company prepared for this accelerated migration. We did that last quarter. So now we are prepared to start doing that. So that's also we had this impact last quarter that I'm going to repeat. And now we're going to start capturing the benefits of the migration.

Felipe Cheng: Very clear. Thank you very much.

Christian Gebara: Thank you.

Operator: Our next question comes from Marcelo Santos from JPMorgan. Please Mr.

Santos, your microphone is open.

Marcelo Santos: Hi, Good morning, Chris, and David. Thanks for the presentation and opportunity to make questions. I wanted to touch a bit more about the concession migration and this 1.2 million customers. I think they generate BRL1.3 billion, as you wrote in the presentation.

How could we think about -- what are the elements that could think to understand what kind of potential margin they could have? Like today, you say they have a negative free cash flow margin and Vivo has a 15% operating free cash flow margin after leases in 2024. I mean, I understand you're not going to give a number, but what kind of the elements could we think to imagine where this could get to? And the second question also, related to the clients. I mean, I understand it, before the concession change, you could also migrate. You already migrated many corporate clients over your life. What changed now? Now, you can force them to migrate or to leave.

I mean, why are you going to accelerate now? Just wanted to understand better what kind of tools do you have now that you didn't have before? Thank you.

Christian Gebara: Thank you for the question. Marcelo, I'll answer the second piece and then David goes to the first and then repeat. Yes, you just highlighted. Yes, now we can see in a more precise way that they need to migrate before we gave the option.

Now, we have the mandate to migrate customers. And now we have a lot of incentives to do it very, very fast. So it changes the way we approach customers was that it's a legal decision that we can migrate them to the new technology. It changed completely, and it gives us the right to do it in a very accelerated way. That's mainly the main reason that we do that in an accelerated way and with results in the short-term.

Regarding the first, if you want to talk a little bit more?

David Melcon: Marcelo, regarding the first, I mean, we currently have a significant footprint of copper in Sao Paulo. So we cannot -- we don't share the number, but it's relevant. That means that the cost to maintain the -- these homes is expensive. Some -- we have a specific contract to maintain the copper different to the contract to maintain the fiber. So as I said, a significant part of the 1.2 million are already on the footprint of fiber, so we should be able to protect the revenues on fiber technology, that means the margin could be similar to a traditional telco, the commissioning, the infrastructure that we have today that is very expensive to maintain because as Christian mentioned, we also are subject to regulation that forces us to repair this old infrastructure in a very short period of time, which is -- at the end of the day, it's been very expensive.

So from now on, we should be released from those obligations, not only for migration, but also to maintain on a different condition. So this will have an impact from day one in OpEx and CapEx.

Marcelo Santos: Perfect. Very clear. Thank you.

Thank you both.

Christian Gebara: Thank you, Marcelo.

Operator: Our next question comes from Vitor Tomita from Goldman Sachs. Please, Mr. Tomita your mic’s open.

Vitor Tomita: Hello, good morning all, and thanks for taking our questions. Two questions from my side. The first one, you mentioned when talking about margins, some increased commercial activity as the major driver for further largest cost line in this quarter. Could you give us more detail on that and whether that level of commercial spend was related to any specific initiatives or should remain the norm in upcoming quarters? And my second question would be actually on the side of fiber ARPU. Fiber ARPU has been declining a bit sequentially.

Is this being driven by bundling discounts in Vivo Total or mostly just by competition, seasonality or other factors? Thank you very much.

Christian Gebara: Victor, I will start with the second part of the questions. And the fiber ARPU, I think first, let's highlight the growth in absolute numbers of revenues in fiber, 12.4%. So out of our total revenue for the quarter, note the BRL14.5 million, BRL1.8 million it's already fiber. And we're being expanded our footprint.

Now we went from 26 million homes in the end of 2023 to 29.1 million homes in the end of 2024. So when to expand so much also when you start selling to the new places, new neighborhoods, new cities, we have an entry point of customers in a lower price, then we are able to migrate them to higher speeds or we end the promotions of entering new markets. And that's impacting, of course, the ARPU. And then secondly, there is also the combination of Vivo Total. Vivo Total give us an upside in ARPU when you mix new customers that are coming in with both services with Vivo, customers that have only one of them with Vivo ended up having both of them.

So, our strategy of doing Vivo Total, it's better to see in the customer perspective, overall ARPU that is going up. And if you see the revenues coming from Vivo Total is also growing in a very strong way and we are very positive, that's the right decision. So, again, it may impact individually a little bit the ARPU of the fiber that keeps on a very stable level. That, combined with the new entries in new cities that I just described before, is also impacting there, but we have been able to grow in absolute numbers, more than 12% revenues that's already very relevant, 1.8% in the quarter, give you room of what we are doing and what we are able to do in the next quarters. Again, here also, it's good to highlight net adds of fiber customers in the last three quarters.

We had 183 that adds 1,000 customers in the fourth quarter 2023. We came to 192 in the third quarter 2024, and we reached now to 20,000 customers in the last quarter. And also, we highlighted churn, 1.49%. So, that's the right strategy. We're going to keep on doing that, expanding network, expanding penetration and expanding Vivo Total.

David Melcon: And Vitor, regarding the other question on commercial cost and infrastructure, I mean, it's difficult to look at the run rate of a quarter just for the full year. Because if you look to the trend on the line of commercial cost and infrastructure, even though in the quarter, we grew 8.7%, in the last 12 months, we grew 5.8%. Where the run rate that we are seeing is more close to the one that we have seen for the last 12 months rather than just in one quarter. The commercial activity Christian mentioned in terms of fiber, very strong, but also in mobile. But I would say that also this quarter, we will not maintain the level of growth, particularly on infrastructure costs.

As we said before, I mean, the last -- the second half of the year, particularly in the last quarter, we were preparing the company also with some specific investments to make sure that we can accelerate some of the benefit that we'll be capturing from the migration. So, as I say, the 5.8%, which represent last the 12 months makes more sense as a run rate rather than the 5.7%.

Vitor Tomita: Thank you very much.

David Melcon: Thank you.

Operator: Our next question comes from Lucca Brendim from Bank of America.

Please Mr. Brendim, your microphone is open.

Lucca Brendim: Hi. Good morning everyone. Thank you for taking my questions.

I have two here. First, also on the concession migration. Can you give us some more color on the numbers related to the copper cables? As we understand from the 120 tonnes, not all of it is copper, you also have other materials. Can we have like a rough estimate or any color on how can we think about how much of that is actually copper? And second, also on this point specifically, what can we think about the extraction cost and the margin that you'll be selling this, if this will be mostly related with the cost you're already be having to install the fiber and then they will both go together or if we can get any more color on that would be great? And second, you increased prices for hybrid and postpaid, but not for prepaid. So the gap for hybrid to prepaid continues to go up.

Do you have any plans of increasing prices on prepaid in the future? And do you think that this larger gap might be a problem for upsell in the future as well? So those would be my questions. Thank you.

Christian Gebara: Lucca, we are not giving details on the 120,000 tons of copper. Of course, most of it is copper. And that's going to give more visibility over the next months as soon as we also get into the more detail of the operation of tracking.

Of course, there is a lot of value in the copper. You cannot say that it's going to be mitigated by the CapEx related to the fiber. The CapEx related to fiber, today, the home passed, we are talking about less than BRL 200. So it's far from being what is penalizing as the migration. And also the migration will be with an upside in revenues.

Sao Paulo, the state of Sao Paulo is the key market for Vivo. We're going to get the benefit of extracting the copper, putting fiber and also connecting these customers to fiber and capture not only the voice, but broadband and even the TV, if it's the case. And also all the other their digital servers that are going to sell it. So of course, I don't have the number. But of course, it is much more positive for -- to Vivo than it could be negative, especially with the copper price.

Regarding the price of prepaid, yes, you're right. I think prepaid requires a price increase. Hopefully, we're going to be able do soon. And -- but we keep migrating customers in a very positive way. So if you see the numbers of our net adds, it's not only migration, but there's a lot of migration, but if you also look, portability is also positive.

So Vivo keeps being the most attractive value proposition of the market. So I agree with you. We have a challenge if there is difference in pricing in prepaid. Hopefully, it's not going to be like this for the rest of the year. So let's see our strategy going forward.

Lucca Brendim : Very clear. Thank you for the answers.

Christian Gebara: Thank you, Lucca.

Operator: Our next question comes from Phani Kanumuri from HSBC. Please Mr.

Kanumuri, your microphone is open.

Phani Kanumuri: Hello. Thank you for taking my questions. The first one is regarding the timeline for positivity due to the change of license agreement. So because of the change of migration -- because of the migration of the license, you have some obligations as well as you have some CapEx and OpEx savings.

So how do you see the impact on FCF? Is it going to be positive from the first year? Or is it going to take some time to be positive? My second question is regarding your use of cash. So Vivo generated about BRL 8 billion of free cash flow, but has provided about EUR 6 billion of shareholder remuneration. So is there some other use of cash other than shareholder remuneration for Vivo? Is it planning for some acquisitions going forward? Thank you.

Christian Gebara: So regarding the second question, yes, we are always looking at opportunities. As you know, our debt level is very low.

Even considering the leases, the IFRS 16. And we acquired a company in IPNET that I just described. And we are always looking at opportunities. We continue to accelerate fiber expansion organically through our neutral network and always also checking opportunities for M&A, in the digital arena, also in B2C and B2B. As we're expanding more than 10% of our revenues are coming from the services.

We also always very open to see opportunities that could add talent to our team, but also could also accelerate our revenue expansion. So yes, so your assessment is correct. Regarding the first question that we can answer you, but the investments are five to 10 years, and we consider OpEx and CapEx and I don't know specifically what was this, you could see that the business...

David Melcon: So the investment that Christian says will happen from now to the next 10 years. And the OpEx will be those 10 plus another 10, so 20 years.

As we said before, the benefit from the migration, we want to capture a big part of the benefits, real estate and copper in the first four years. So in terms of speed of benefit and investment, we will maximize the value for our shareholders and always maximizing the free cash flow in the coming years.

Phani Kanumuri: And a quick follow-up. Is there any change in CapEx envelop because of the migration? Thank you.

Christian Gebara: We don't give guidance, and we are working on, as we said before, growing revenue, EBITDA above inflation and reducing CapEx intensity over revenues.

And that's what we're going to continue doing.

Phani Kanumuri: Thanks everyone for the answers.

Christian Gebara: Thank you.

Operator: The Q&A session is over. We would like to hand the floor back to Mr.

Christian Gebara for the company's final remarks. Mr. Gebara, the microphone is yours.

Christian Gebara: So thank you, everyone, for participating. As I stated in the beginning, we are very pleased with the results and very optimistic with the quarters to come.

Based on our unique value proposition, focus on customer lifetime value and our strong ability to monetize our superior customer experience and leadership in all the segments, in all the products and in all the services. So if you have any additional questions, please you can reach all of us here in the Vivo team. Thank you.

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