Good morning, ladies and gentlemen, and welcome to TIM S.A. 2024 Fourth Quarter Results Video Conference Call. We'd like to inform you that this event is being recorded [Operator Instructions] There will be a replay for this call on the company's website. After TIM S.A. remarks are completed, there will be a Q&A session for participants. At that time, further instructions will be given. Now I'll pass the word to Vicente, Head of IR. Please go ahead, sir.

Hello, and welcome to TIM S.A's. fourth quarter 2024 Earnings Conference. I'm Vicente Ferreira, Head of Investor Relations. This video highlights our recent performance and the updated 3-year guidance. Afterwards, we will have a live Q&A session with CEO, Alberto Griselli; and CFO, Andrea Viegas. Please note that management may make forward-looking statements in this presentation may contain them, refer to the disclaimer on the screen and on our Investor Relations website. Now let's review our results.

Hello, everyone. I'm Alberto Griselli, CEO of TIM Brasil. I'm pleased to present to you a robust set of results in a dynamic year when we overcame challenges and took advantage of our strengths to meet all of our targets. 2024 was marked by powerful cash generation, thanks to solid financial and operational results. We closed the year with service revenue growing 6.4% at the top of the guidance range. At this speed, we outpaced inflation even with the second half of tougher macro environment, an unfavorable comparison base. In the fourth quarter, service revenues grew 5.1%. Our revenues were driven by mobile services, which expanded by 6.6% compared to 2023. In mobile highlighted the excellent performance of postpaid rising close to 9% year-over-year as a consequence of an expanding customer base with migration and a low churn of 0.7%. Our EBITDA ended 2024, increasing by 8% when compared to 2023 with another year of margin expansion. This show the consistency and ability to operate efficiently. Our proxy for operating free cash flow grew close to 23% year-over-year. As a percentage of revenue, will reach more than 20% in 2024. Innovative offers, continuous infrastructure development and service improvements supported these strong financial results behind our 3B strategy lays an idea of delivering what clients value the most. We are focused on providing exceptional customer value through network quality, affordability and service excellence. Under best network, we focus on expanding 5G coverage across Brazil to migrate traffic and clients and start to impact client perception positively. We have more than 600 city cover, 20% more than the second player. As a result, 5G traffic has more than doubled compared to a year ago. For 2025, we will ensure consistency in network development while promoting the message of network quality leadership to…

Hello, everyone. I'm Andrea Viegas, CFO of TIM. I'm pleased to share that we ended the year with solid figures overall, confirming our capacity to increase cash generation and create more value for our shareholders. Once again, we delivered an EBITDA that grew more than inflation with a 6.2% year-over-year increase in the fourth quarter. This contributed to a strong year with an 8% year-over-year increase in a margin reaching 49.6%. After accounting for lease impact, EBITDA after lease rose by double digits in 2024, with the margin expanding by 1.7 percentage points. This was a consequence of our efforts to conclude the decommissioning tower projects faster than expected, and to renegotiate our contracts. It's worth mentioning that most of the fines were paid with only a small part remaining for 2025. Our net income grew double digits for the seventh consecutive quarter, consolidated a year delivering the highest organic net income in our history, reaching more than BRL 3 billion. Our shareholder remuneration achieved a new level totaling BRL 3.5 billion with a yield of 10%. Our consistent operational performance, combined with discipline in capital allocation result in CapEx over revenues reaching 17.9%. This drove strong growth in operating cash flow, which increased by almost 23% year-over-year with the margin expanding to 20.5% in 2024. Our balance sheet remains strong, supporting shareholders' remuneration and future projects. The 2024 results affirm our ability and commitment to fulfill our promise even in the face of challenge. Now back to Alberto.

Before we conclude our results discussion, it is worth recapping some ESG developments in 2024, confirming TIM's commitment and highlighting partnership and projects that generate positive social impact. Under the partnership with Gerando Falcoes, we have transformed Favela Marte into a fully connected 5G community, illustrated TIM's dedication to bridging the digital divide. As always, our ESG initiatives are embedded in the company broad strategy. So we are testing FWA solution learning how customers and network behave in an actual network condition. In addition, we continue to perform outstandingly in multiple indexes and certifications. By integrating social responsibility into its core strategy, TIM enhances its brand reputation and contributes to long-term value creation. To conclude this section, it is worth highlighting that we met all of our targets. We stood at the top of the service revenue guidance range with excellent postpaid performance, check, EBITDA grew above revenues with margin expansion. Check, CapEx remained flat in the middle of the range, check operating cash flow with a robust performance grew by more than 20%, check. Last but not least, shareholder remuneration is confirmed at BRL 3.5 billion, following our proposal for the shareholder meeting to approve BRL 2 billion in dividends, check. Looking ahead, setting the stage for TIM's strategic direction in the coming years, will enforce our focus on sustainable growth by adding new revenue opportunities and putting renewed efforts into efficiency, reflecting a commitment to long-term value creation. Our updated plan reflects changes in macro and telecom market conditions. We evolved our priorities to extract the most from our 4 strategic pillars, mobile, B2B, efficiency and broadband. Each area is supported by specific strategies aimed at enhance our value proposition in mobile, double down on B2B, extracting the most from our assets and resources, while monitoring for opportunities…

Thank you, Alberto. Before proceeding to the Q&A, I would like to pass the floor to Alberto Griselli for initial remarks. Please, Mr. Alberto, the floor is yours.

Thank you, and good morning, everybody. Before we start the Q&A, just a remark on the material fact we just disclosed about C6 Bank, basically went into an agreement that settles all the disputes, terminates the partnership and monetize our participation subject to some regulatory approvals. The settlement confirms that the strategic importance of customer platform initiatives in generating value of the company and its shareholders. We will continue to work to expand the ecosystem of partnership, including new opportunities now in the financial services. Additional details of the financial and economic impacts of this deal will be disclosed in due time. So we can now pass to the live Q&A session, please.

Thank you, Roberto. We will now start the Q&A session for investors and analysts. [Operator Instructions] Our first question comes from Marcelo Santos from JPMorgan.

I have 2. First, on the guidance, what are the main macroeconomic assumptions embedded, like perhaps inflation effect, what are you considering to put those numbers? And the second is if you could discuss a bit outlook for prepaid. And if there are relevant initiatives that you were targeting to perhaps improve the trends that you can control?

Sorry, Marcelo, I was in mute. So when we look at the guidance, basically, this has been elaborated -- our budget has been elaborated a few months ago when the situation was a bit easier on inflation, specifically on the other elements we are sort of aligned in terms of ForEx and GDP growth. But since the guidance has been issued basically today, over the last week, we've been working with more -- with assumption on inflation that are in line with the current trends, the one that we are seeing now. Of course, there is a lot of volatility of inflation. A few weeks ago, we were below 5. Now we are below 5. So we need to deal with this. We are used to deal with this since we operate in Brazil for a long time. But basically, the main difference was inflation when we prepared the budget and we updated this on more actual numbers as we issued the guidance today or yesterday night. When it comes to prepaid, so our performance are basically driven by a number of factors. The first one is related to the migration of customers from prepaid to control. So this is part of our strategy. And of course, this drain revenues from one side to move in a accretive way on the other side. So the benefits of doing this is that the revenue becomes a larger revenue in postpaid and our ability to monetize postpaid and control is better than in prepaid. Then there is another factor that is basically related to everybody, every -- ourselves and our competitors perform this strategy. So if you look at the recharge market as a whole, it's decreasing over time. And so this is decreasing as the market. So this is the context where we operate. In our case, in the fourth quarter, we have a tougher comparative base because in the same quarter of the previous year, we were issuing a price update from BRL 15 to BRL 17, so this is explained the intensitive of the decline for the last quarter. And just anticipating a bit, also the first quarter of this year, it's a tougher competitive basis versus the first quarter of last year, because this year, for example, we have Carnival in March, and this tends to reduce the number of available days for recharge. Having said that, we have been working for a while now on revamp or turnaround of our prepaid business. We launched a new offer, a new communication campaign as you probably remember, last year. And so we are working across the board on the offer, on the communication and on the channel and our own customer base to increase the performance of prepaid going forward. This takes some time, but our commercial team is fully focused on that.

Our next question comes from Bernardo Guttmann from XP.

Actually, I have 2 on my side. The first question is related to CapEx. Your guidance seems quite fair, but it's somewhat surprising that CapEx remains stable, leading to a decrease in CapEx to sales in the coming years. We have already discussed the topic of greater efficiency and the structural changes in the industry. But it would be interesting to understand more about the company's main efficiency levers. Is this level sustainable considering a higher exchange rates? And the second one is about your fiber operations. You mentioned that you are open to multiple options. I understand that the market is more challenging today and more competitive but valuations also reflect these dynamics to some extent. In this context, what is your appetite in this segment, would you consider selling the current operation as well? Or is that off the table?

Okay, Bernardo, let me go for the first one on CapEx. So when you look on CapEx, we have a number of levers. And I will start with the easiest one. So if you look at CapEx, first of all, a big chunk of this CapEx is network CapEx. So as you know, we have been able to reach the largest 4G coverage a couple of years ago. We closed 2024 with the largest 5G coverage also. And once you look at the drivers of this cost going forward, primarily it's less about coverage, and it's more about the quality of service and capacity. So this is the main driver. How do we address the efficiency of the CapEx deployment, while maintaining the leadership in quality of the network service that we offer because that's the trade-off. The first one is primarily related to the way we negotiated already with our main providers of the 5G and network services whereby we put together last year, we discussed this, I think, primarily one-to-one calls a quite competitive tender where we were quite successful in lowering the TCO of our network cost. And by doing this, of course, we took some execution activities on our side like the swap of the network in Sao Paulo that we are shifting from one vendor to another vendor. By doing so, and we optimize the TCO. And so when you look at the numbers, $1 in 2025 will deliver more than $1 in 2024 because of the economies that we achieved. So this is the first driver. And this is primarily achieved because it's something that we did last year. The second one, it's primarily related to the assertiveness of the investment. So we've got a quite strong methodology, whereby we allocate CapEx where we have or we expect to have commercial advantages. And we call this AAA approach, and so we align everything CapEx, commercial and communication in order to increase the efficiency of our capital allocation. Then you have your last comments about the risk of the ForEx related to our contract. I will pass this over to Andrea to just explain a bit how it works for us.

Bernardo, we have a minimum exposure to exchange rate consider that the majority of our contracts have an exchange rate band. So as I mentioned, we have a very little exposure to fluctuation of the exchange rates.

Going to your second question about fiber. So a few comments before articulating the answer on the nonorganic option. So if you look at the market itself, as you rightly pointed out, the market is very competitive. There are a number of reports from the sales side highlighting this every month. So there is a lot of competitive especially on price. So it's not very attractive, irrespective of valuation because it's difficult to address this without a stronger and widespread consolidation process. That is not happening at the end of the day. For us, it's a small business because it's below 4% of revenues, and it's dilutive on our free cash flow generation. So our organic stance is basically to optimize the operation. Of course, when we say that we are open at all options, you have the option, one extreme where we consolidate and on the other extreme, where we sell and there are a number of variety of options in the middle. And when we say that we are open on all of them, that we are looking at all of them. And so we just need to find the right target at the right moment to move forward with one of these options.

Our next question comes from Leonardo Olmos from UBS.

I have a couple of them. The first one is regarding the C6 partnership. I know you cannot disclose how much are you actually monetizing of that partnership. We understand that, but it will probably be below what was on the balance sheet, right? So we may see a write-off that may be purely -- that will likely be noncash, but could that affect dividends even though it is noncash, even in a nonrecurring base. So that's my question on the C6 impact on dividends. And the second one, unrelated is if you could discuss a leasing, how much of the leasing is adjusted by IGP-M? And what are other inflation metrics that are used to just leasing?

Leonardo, so I will take the first one, and then I will pass the floor to Andrea for the leasing question. On the first one, actually, the monetization factor is there. So we are talking about at BRL 270 million in gross revenues that have been accrued over the length of the partnership and the other BRL 520 million. And this is a positive impact on our cash. And I think that here, the answer is we always say that we are going to generate more cash over time. So our cash flow are expanding, and this is going to be a positive contribution on expanding. And when it comes to the expanding cash flow, as you see in our guidance, we are increasing shareholder remuneration, concentrated in dividend and interest on equity. And therefore, we got something more now coming to us over the course of 2025 that was not in our guidance. So the approach is always the same. If we don't distribute 100%, you know this because we are looking at opportunities in some verticals and some of our business lines, but it's a positive on our cash profile.

Leonardo, regarding to leasing, as you know, the -- these items, the major impact that we have in inflation. We are continuing to negotiate all our contracts, and now we have a part in EPCA and a part in [ EJPM ], but the major part is EPCA. But we are continuing to have negotiation considering that we ended the commission program with the sites that came from Oi, but Oi increased the network related to 5G. So we still have space to negotiate this contract.

So obviously, Andrea, the guidance already assumes all the current inflation situation, right?

Right.

Very good. And very good answer on the dividend, Alberto.

Our next question comes from Vitor Tomita from Goldman Sachs.

We have 2 questions from our side. The first one is on the guidance. If you could give us a bit more color on the drivers for further margin expansion given that your profitability is already quite high for the sector and given the inflationary pressures ahead? And our second question would be on the -- more on the balance sheet side. We have noticed the receivables increasing faster than revenue continually over the last 3 quarters, even though receivables had been growing more in line with revenue prior to that, could you give us some more detail on the dynamics for receivables?

Vitor, related to the guidance. As the previous guidance, we are confirming that we increased the EBITDA margin revenue. We will do this with the continuing of our productivity. We have a very good result in the last quarter in margin related. And the margin expense will continue to happen in 2025. This will come with our continued focus to work in zero-based approach. We are looking for new opportunity in digitalization our process. Also, as I mentioned, renegotiation of all the contracts that is related to inflation and continues to see opportunities in makeup our initiatives. Related to the free cash flow, the second question about the increase in receivables. This is the functionality of our dynamics. Remember that we have a first semester over the year with seasonality in the second semester with another seasonality. This is inside our expectations, we don't have any kind of extraordinary effects that affect this. I don't know if I address your question?

Just a quick follow-up. Looking at the previous quarters, there was already an increase in receivables in the second and third quarter. So thinking more about the underlying trends there than just the seasonality.

No, sorry, if the seasonality works now. The seasonality of the -- because you see an increase in the third quarter and the fourth quarter, right?

Yes.

So moving [indiscernible] the second semester, and we have -- also we have an increase in the IoT receivables plus we increased the B2B and the B2B have a very different dynamic from the mobile -- the consumer mobile. So we will see a near increase but this relates to the increase of the IoT revenues.

Our next question comes from Phani Kanumuri from HSBC.

So my first question is related to your revenue guidance. Is it fair to assume that most of this revenue growth that you have is coming from postpaid growth considering that your fixed segment and prepaid segment continue to be under pressure? And what part of -- what percentage is actually attributed to the new initiatives that you have in terms of the revenue guidance? The second one is, last year, there has been more challenges in terms of pricing up and giving more for more. Do we see that challenges continue this year? And is the price up possible for the next few years near you?

Okay. I will take the 2. So when it comes to the growth drivers for the revenues going forward, there are a number of drivers that we are considering. So one of the -- big one is clearly postpaid, we're being performing well over many quarters. And we foresee this to happen going forward, driven by the price adjustment that we do and that will come a bit more on this on the rationality of the market as we see it now. The prepaid to control migration and that will continue, and the intra postpaid migration that is happening at double-digit rates, and that continues to drive revenues up. So yes, postpaid it's an important driver for revenue growth. I think it is fair to add that there are 2 other important business lines in the revenue growth. One is related to the customer platform strategy that we just discussed at the beginning of the of the call, whereby we see monetization opportunities in the partnership that we are running plus the new one that we are building. If you look at Cartao de Todos, for example, this is something that we launched some time ago. We have been tweaking the value proposition. And in the last 6 months, we brought in at 160,000 subscribers. So it's a good numbers in our own assessment in terms of the progress of the thing that we are doing. We are open again to work on financial services. This is another large set of parties that we can work on. Then we got the energy. That is another priority. So the overall customer platform can contribute in our revenue growth going forward. The third one is the B2B business line, where we have been capturing revenues over the last 2 years, so it…

Our next question comes from Cesar Davanço from Santander.

First of all, congrats on the fourth quarter results. My first question is regarding revenue growth and your revenue growth expectations. I would like to understand how much of this guidance comes from -- would come from price increases? And regarding this, how do you see the company evolving in a competitive scenario, okay? So do you imagine TIM potentially be more aggressive? And my second question is regarding the C6 partnership. As you mentioned, this opened a path -- the end of this partnership opens a path for you to operate again on the financial sector. Do you have anything on mind, anything you can disclose on the stock?

Okay, Cesar. So let's address the first one. So as I said, we see the market rationality still in place with some more erratic behavior in the last half of 2024, we are not planning to be more aggressive. We tend to try to be more intelligent the way we monetize our customer base. And so I don't see on our more aggressiveness on our side. If you look at the drivers for revenue growth on mobile, especially on postpaid, we generally look at a balanced growth pattern that combines customer base growth and ARPU growth. And if you look at the way we grew in 2024, so if you look at the [ pay-per ] [indiscernible] analysis of the evolution of our revenues from -- in 2024, you will see that we moved on a quite balanced way in between the volume impact and the price impact. And you can see also that we managed to grow faster than our competitors in the postpaid. So price adjustments are important because they are an element of the P factor. But what we are aiming at is a balanced growth in between quantity, price within price, price adjustments are important as well as intra plan migration. You don't see this because it's not disclosed, but the number of pure postpaid is increasing significantly because we are moving control also to postpaid. And this has a positive impact on revenue growth for postpaid. So it's a combination of this fact. On [ fintech ], going to the second question is we just closed as we just said with C6. So we now analyze the options that are available in the market in the coming months. Clearly, the combination of financial services and telco is quite powerful. We believe it's powerful. So we believe it can be material again. And we will start working on this as the settlement with the previous partner is completed.

Our next question comes from Carlos de Legarreta from Itau BBA.

Two very quick questions. The first one on cost and expenses. You're actually decreasing the selling and marketing expenses both year-over-year and quarter-over-quarter while growing revenues. Can you help us make sense of that, especially in this particular competitive context? And secondly, just a follow-up on C6, do you have any timing as to when you can actually receive the proceeds from this ending of this partnership?

So I will take the first one, I will leave Andrea on the second one. When it comes to the sales and marketing in general, A lot of -- I will make some examples, a lot of improvement comes from digitalization. Digitalization is something that is proceeding across the board and across a number of activities. I will give you some example. This is basically primarily the main driver of the increased efficiency. When I talk about digitalization, I'm talking about digital recharges, digital sales, the -- one of the latest example has been quite important was the PIX adoption within our postpaid customer base. PIX it's a unitary cost that is lower than any other cost. And so we move from 0 to 50% over the last 12 months -- a bit more than 12 months over the last 18 months. And -- if you look at the call center, if you look at the ability for us to retain calls on digital channels are there. So this basically is the main driver behind the optimization of the sales and marketing cost. Looking forward, we still have opportunities and this is the opportunity that we are going to pursue going forward, an example, consider the customer relation. We are just issuing a new app. So the new app is being launched at the end of last year, it's in soft launch. So it doesn't address now 100% of our customer base and the functionalities that we are going to put in the new app are going to be effective in improving the relationship with our customers, like for complaints. And therefore, by launching this, we are going to reduce further our customer service cost on the human side. So we got all these packages of initiatives within sales and outside sales, but within sales, it was the main driver of the reduction.

Carlos, as Alberto mentioned, at the beginning of the call, we cannot give much detail on the effects of this statement. The BRL 520 million is pretax and all the balance sheet effects will come in the future quarters.

[Operator Instructions] Our next question comes from Daniel Federle from Bradesco BBI.

I had 2 questions, if I may. The first one, I would like to know if you are feeling any impact from [indiscernible] over the past 30 days since they started to onboard clients? Second question, if you see any structural reason for TIM to grow less than peers or more than peers in mobile revenues going forward? And third, just to understand the impacts of inflations in revenue growth in the future, should we expect the higher the inflation, the higher the price increases and then the higher the revenue growth, or that's a very simplistic and that's not the way you should think?

Okay, Daniel. So coming to the first one. In terms of the impact on new bank, we don't see it. If -- and so that's a simple answer so far. When it comes to our growth in mobile, as you know, we have more prepaid versus our competitors. And so when I say that the recharge market is shrinking, basically, this is something that -- since we have more prepaid revenues versus the others in the overall revenue composition of clearly this with more for us versus the others. And that's the reason why we are deploying a number of initiatives, the B2B one that we discussed or the customer platform that we've been discussing in this call to be able to maintain a sustainable revenue growth pattern going forward. When it comes to passing inflation to our customers, you know that we do this at specific times of the year. So we believe that it can impact inflation to our postpaid customer base. As a matter of fact, we are over the last years roughly the extent of inflation they have been passing over. Of course, there is then a limit that it depends on how much demand is impacted by these increases. And this, in turn, has to do also with the overall economic context. And so the -- what is available for customers to spend. We are executing for you to know the price adjustment in a similar fashion this year versus last year. And what we do is that we look afterwards a response of customers in terms of churn levels and collection curve, so our ability to collect. And this is a sort of empirical approach. As we go forward, we pass this and we check if demand is able to compensate for this adjustment. As for the year, we are going with the same intensity as of last year.

Ladies and gentlemen, since there are no further questions, I'm turning the floor to Mr. Alberto Griselli for his final remarks. Please, Mr. Alberto, you may proceed.

Thank you all. So I want to thank you, everybody, for participating in our call today. A special thank you to our team. We are fully focused on executing 2025, address the challenges that the macro scenario present and also pursue the upside risk that we have in our plan. I would like also to invite you at Telecom Italia, TIM Italia call the 13th, so in a couple of days, when we will have the chance to complement how we plan to create additional value to shareholders, addressing a topic that we get question frequently. So thank you for your participation today. And hopefully, we'll see you again in a couple of days on TIM Italia conference call. Thank you, everybody.

This does conclude the fourth quarter of 2024 Conference Call of TIM S.A. For further information and details of the company, please access our website at tim.com.br/ir. You can disconnect from now on. Thank you once again, and have a wonderful day.