Oi S.A.

Thank you. Good morning, everybody and welcome to our fourth quarter 2020 earnings call.

On this call, we will obviously focus on the results of the quarter, but also on the results of the year that mark the end of a very intensive year for us in the company in addition to all of -- everything that we’ve been doing as we all know. We had lots of objectives for the year, but we also had a very challenging year because we have to deal with the very relevant impacts of the pandemic.

But as we look back to last year, and as we ramp up execution on this year, I'm glad that we can say we are very, very pleased with the results of this transformative year. And we are now focused more than ever in completing our transformation.

So before we look into details of all the results of last quarter, let's first recap all the different challenges we have to address last year, and how do they fit in our transformation plan. And with that, we can move to Slide #3.

On Slide #3, we can see that when we started 2020, we had a very, very long list of objectives, ranging all the way from the traditional business as usual business and operations, all the way to funding to M&A activities to doing our RJ plan amendment. And when we look at all of that, we can say that this checklist is checked.

So starting with the funding and M&A as you know, we started the year with a focus on funding. We started completing the Unitel sale, completing our bridge loan that allowed us the tranquility to execute the plan throughout the year.

But we very, very closely followed with a lot of real estate sales with the funding coming from Sistel And then we focused on all of the M&A processes for the company. And this helped us pave the way for having the cash management discipline and the investment ability to execute on the strategic components of the plan.

When we look at the plan amendment, we had a significant focus on the long-term viability of the company with the plan amendment. And we started very early on in 2020, looking at this plan amendment and starting discussions with creditors and implementing or devise the instructional separation model, which then evolved to different components of the plan amendment, including negotiating credits with Anatel, negotiating what would be the restructuring of the depth that we would include as part of the plan, negotiating all of the amendments that would have to be part of the plan.

And we finally had this plan approved, that's our GCM in September. After that, we started looking at creating the UPIs and doing a number of other activities to set the plan in motion.

But all of that was done while we continue to focus on executing on our business strategy in multiple fronts. So, on the business and operation side, let alone the COVID-19 impact and we all know that there was a lot of emphasis in particular in protecting our employees and contributing to the society with providing very, very critical services to face the pandemics.

We continue to execute on pretty much everything we said we would do. We scaled HPs, we scaled HCs, we did a very good management of the cash.

We reduced our costs in copper, we optimized and started optimizing our organization. We focused on B2B IT revenue growth, we were able to sustain our mobile performance, we did a number of new projects, including procurement optimization, which saved the company significant amounts of CapEx and OpEx.

And we created new disciplines for us in wholesale and IT. And even we were able to turnaround a model which was in the past an issue in terms of cash consumption, which was DTH.

So, as we look back, we can pretty much say that we advanced in every single one of his objectives in line with the strategy we have presented to the market several times now. In the next slide, we can remember which were those phases of our transformation and now what is it that we're executing for.

So, on Slide 4, you can see that as we have said before, after stabilizing the company and plotting a strategic course from 2018 to 2019. In 2020, we started executing the third phase of our transformation, one that when completed, will deliver a new way, which is sustainable and with a different business model.

And this started all -- with all the strategy and the strategic movements that we communicated. And it was highlighted with the approval of the amendment to the plan in September, October.

So, let's start by looking at all of the 2020 results and how they relate to the objectives we have just described in the next page. So, moving on to Slide #5.

Here, we can see that before jumping to all of the details of every different business segment, we can see in general terms that we had a very good year in terms of numbers from pretty much all of the different areas of our strategy. Starting with the core of our strategy Fiber, we close the year with more than 2.1 million homes connected and more than 9 million HPs, meaning that the core of our strategy was really executed well during 2020.

So, this impacted residential revenues, this impacted the viability of our long strategy, this impacted the recovery on overall revenues for the company, and this sets the foundation for us to continue to execute on pretty much all of the different fronts. On the mobile front, even though we have announced that the intention and then subsequently the operation of signing on the sale of our mobile operations, we continue to sustain value.

And in particular, we were able to recover revenues on postpaid with a 6.3% revenue growth on postpaid compared to the previous year. And even with the impacts of COVID-19, which pretty much impacted the whole industry, we were able to return to a very interesting levels of performance by the end of the year.

And on B2B and wholesale, we have very positive indicators of our strategy. In B2B, this positive indicator was the growth of IT revenue, which was in excess of 50%.

And on wholesale, we really started acting as a neutral network. And now we announced the first two very large contracts in network capacity totaling over 300 gigabits per second capacity in over 200 cities across the country.

As a result, our net revenue trajectory continues its recovery. We can see that we were able to achieve a sequential growth, 1.5% sequential growth.

And we paved the way for 2021 year-over-year revenue growth. All of that was coupled with a very strict management of OpEx.

And in OpEx, we really achieved outstanding OpEx savings of over R$1 billion, and this driven -- has driven our routine EBITDA to increase for the first time in a number of years. And while we did all of that on the business front, we also started to execute or continue to execute on the funding fronts; beat on the M&A aspects of the funding fronts, beat on the injection of new resources of the funding fronts.

So, for all of this, we're going to check the details in the next pages. But for all of this a very, very positive year for Oi, which we believe paves the way for execution this year, and paves the way for a different company, a sustainable company completely transformed next year.

So, moving on to the next page and starting with fiber. Well, with fiber, we ended the year with a continuation of the excellent traction, and delivering all of the metrics that we devise in the plan.

As we -- I mentioned, we close the year with close to 9 million to 10 million -- over 9 million homes fast and close to 400,000 homes passed per month in a very impressive rate that will increase in 2021. This last two significant expansion again of homes connected, we reached 2.1 million homes connected, and we are now on track to be close to 4 million homes connected by the end of this year.

It's again important to mention that not only we have a very good absolute performance, but when we compare our performance to the peers, we added 59% more headcount in 2020, than the second player and 17% more has homes connected than the three other big players combined. Even with no fiber operations in the largest state of the nation, São Paulo.

And this yet, as we'll see a few slides down the road. When we look at this impact in terms of fiber, we can see that the fiber revenues really were impressive in the fourth quarter of last year.

We were able to get to over R$500 million of fiber revenues in the fourth quarter. And this not only with an increase in the number of homes passed and homes connected, but also with a significant increase in the ARPU.

So even while starting from a high level of ARPU, which was already very close to our plan, we were able once again to year-over-year present a 6% increase in ARPU in the fourth quarter. And this in particular, as a result of the new speeds, which start to gain traction.

In December, we had already 8% of our fiber customers with a base of 400 megabits per second speeds compared to 1% in the middle of the year. So, a very good jump from the middle of the year to the end of 2020.

And in the fourth quarter, we already had 20% of our net additions above 400 megabits per second. So, a significant amount of new customers coming from the higher speeds and conversely bringing much better ARPU for us.

In December alone, our fiber revenues were R$180 million, reaching an annual run rate revenue of over R$2 billion. So, this results not only sustain our core strategy, but they continue to help the recovery of our residential and of our overall revenues, as we can see in the next slide.

So, on Slide #7, we can see here that fiber has virtually taken over as residentials largest revenue component with a 30% share of revenue. So virtually tying with the revenues of legacy voice.

And this happened while stabilizing RGUs, we can see that the company was able to stabilize RGUs pretty much during 2020 and shifting the direction of the revenue curve. So, the direction of the revenue curve in residential shifted for the first time in years, and we started to go up on the second quarter and we continued to do that on the fourth quarter of 2020.

All of that led to a complete shift in the revenue profile, despite the continued decline of copper, which is a structural phenomenon and we have mentioned about that several times over. So, we can see there a 30% contribution coming from fiber and we can see the decline in copper broadband and in voice.

But another interesting aspect of this chart is that we have provided a shift in our strategy for DTH. And we can see that TV also presented very positive results in the quarter pretty much having a stabilization of revenue despite the overall market trends of TV revenues coming down.

So, this is a result of a strategy that we developed during 2020 and overly it's a good sign because it's allows us time to actually address the TV segment in order to achieve the best results for the company going forward. With such positive results, we believe it was time to expand Oi Fibers from tiers.

And in the next slides I'm glad to announce just that. So, in Slide 8, we can say that as of today, we are officially announcing that Oi Fiber will be available commercially in São Paulo, starting in the second quarter of 2021.

We have already did some -- done some business trials and some soft launch with in the first quarter. in the first quarter.

And in the second quarter, we will launch commercially, both B2C as well as B2B services for Oi Fiber. Obviously, this launch doesn't come out of nothing.

The launch is based on our extensive fiber presence in the state coming from previous acquisitions. With over 5,000 kilometers of fiber, we do have this infrastructure ready.

This infrastructure has been used in the past only for providing B2B services. But now we are going to use this strategy and this structure to deploy HPs in the most strategic locations in the state, following the successful model adopted in other areas of the country.

We plan for 400,000 households covered in 2021, and a potential to cover up to 2 million homes in 2022. So it's a very significant launch.

It's adding to everything we've done so far. It adds the potential of the largest state in the nation to everything we're doing with Oi Fiber.

And we're very excited to present this go-to-market strategy to all of you. With that, the launch of São Paulo, actually we emphasize even more our successful strategy of having a superior product and focusing very, very extensively on the customer experience components of our offer.

So next, let's talk about sustaining our value on mobile. So going to Slide 9, in mobile, obviously, we know that without a question this was the segment that was the hardest hit during the pandemic.

But we close the year with good recovery signs in particular, with sequential revenue growth and a higher contribution from postpaid. We know that the segment suffered during the year with closed stores with the reduction of mobile consumption, with the reduction of a prepaid capacity to top up.

But over the year, we had signs of this recovery and we can see that in particular in postpaid we resumed very good results at year end and the start of 2021. And we went back to the level of postpaid net adds that we had before this dip.

And we started the year with a very good share of net adds going back to the performance, we had in 2019, and we already started the year with a 26% share of net adds, which is well in excess of our market share in this segment, meaning that we are having a performance which is without a question very, very positive and very significant compared to what we said we would do in maintaining and sustaining our mobile business. Obviously, this comes with a significant growth of our postpaid customer base or close to 11% year-over-year, and with a 3% increase in postpaid revenues compared to 2019.

On the prepaid, we know that prepaid had a significant impact, especially in the second quarter of last year. But prepaid bounce back, that top up -- top ups actually bounced back over the third quarter and the fourth quarter.

We had, obviously a new segment here with the new peak of the pandemics at the end of the year beginning of 2021. But again, we have seen some bounce back and stabilization during the fourth quarter last year.

And we expect it to continue to happen during this year, which will be a year of maintaining positive performance for us in mobile. So next, moving on, we can talk about the results of both B2B and wholesale.

Starting with B2B. In B2B, we continue to execute on our strategy to become a true solution provider.

And while revenues remain roughly stable over the quarter compared to the previous year, we can see that IT revenues surged to over 25% of total in Q4. So, a very, very significant performance.

And this represents not only for the quarter, a very significant advancement, but for the full year, we see here that we had in 2019 just 13% of our B2B revenues coming from IT. And this jumps in 2020 full year to over 20% -- 22%, to be more precise of our overall revenues.

This is a step in the right direction. This helps to compensate the commoditization of some of the connectivity revenues.

This represents the continuing shifts to a new profile. And this year, we believe we'll be able to expand this shift in profile not only to the corporate segment in the larger clients, but also bringing some of the offers down so to the SME segment and helping to recover revenue in this segment as well.

On the wholesale front, we really started the implementation of our neutral network strategy and results show, in particular as we focus not only on the structural separation, but on looking at all of the different opportunities that the segment has, while operating as a true neutral network. In particular, last year, we did significant advancements in focusing on ISPs as a growth path for us.

And we had a really significant number of ISPs being served by all of our solutions, in particular, capacity solutions during the year. And now we start to focus on FTTH contracts as well.

And the number of people impacted by ISPs, who are served by our service really increased and surpassed 5 million last year. So really significant increase in terms of number of people impacted by our operations in the true network -- in the true neutral network.

As a result, we also had in the fourth quarter last year a significant revenue growth. So, it was 13, a single -- low double-digit growth of 13% and this increase was very relevant because it marks again the beginning of operating as a true neutral network.

And in reality, in the next slide, we can see that when we started implementing our structural separation model and presented the model as part of our amendment, we not only had said we would do so and approve that in our amendment to the plan, but we really started transitioning our wholesale business to becoming a true infra company. And this is virtually in place already, not only with a new model, with wholesale starting to operate as a completely independent entity with Chinese walls to everything we do on the commercial side of the retail of Oi.

But also by creating the InfraCo entity BTCM. And this InfraCo entity not only already exists, but it started receiving assets and drop of assets during the year it started receiving personnel.

So our entire wholesale operation is part of the InfraCo entity today. And in 2021, we obviously plan to accelerate that and have a complete InfraCo in place in sync with our model of structural separation and then achieving the promise of really making use of these extensive network and unparallel network of infrastructure we have in the entire country.

So, while we execute on all business fronts, I'm glad to say that we also have maintained the pace in the other aspects of our business -- in the back of our business and everything we must do to actually make this business viable and reliable. And we started by looking at what did we do in simplify and reducing costs as part of our business.

So moving on to the next page on Slide 12, we can see, first, that we have achieved a significant result for OpEx reductions during 2020. Remember, we said at the beginning of the year, that we plan to achieve at least R$600 million in OpEx reduction for 2020 and over R$1 billion in annualized savings.

And I'm glad to announce that we not only achieved but beat that by a big margin, actually announcing 1.2, almost R$1.2 billion, R$1175 million of a full year OpEx reduced and actually doing that during the year. So it's not an annualized number, it's a full year number.

So enter 2021 with that annualized number already fully achieved during 2020. We reduced our OpEx from R$13.9 billion to R$12.7 billion from 2019 to 2020 will results in pretty much every different area of the company.

This without a question help us drive, EBITDA expansion. And we expanded the EBITDA, again, not only sequentially, but in terms of margin expansion.

And obviously, this paves the way for, again, a significant performance during 2021. This discipline was coupled with a very tight management of cash.

And cash, as we all know, is a very critical metric that we have to follow in the course of our transformation. So in the next slide, on Slide 13, we can see that this cash consumption control was very critical to achieve what we have planned and how we're executing, especially during this transition years, where we have a high investment in CapEx to look for new business model, or new core strategy on fiber.

But also in years of revenue change where the legacy revenue comes down which are some revenue in terms of mobile will be out of the company starting next year. And then, with cash, we actually paved the way for this transformation.

We maintained the pace of CapEx. This was the first component of managing our cash, while reducing legacy costs and putting a huge emphasis on fiber.

So, you can see as how the profile of CapEx has significantly changed yet again from 2019 to 2020. We had already had a significant shift from '18 to '19.

But I would say that the shift from 2019 to 2020 is even more dramatic in terms of capital allocation. In 2020, we allocated 65% of our investments in fiber.

And obviously, I mean here all fiber components, including FTTH, including transport, including B2B, including everything we're doing on wholesale, while reducing our legacy cost and cash consumption in CapEx, especially on copper and from 26% of total to only 11% of total. This is still a significant amount of cash and CapEx invested in the legacy, but that we are addressing that with a very, very intense plan to reducing our legacy costs, as we have announced several times already.

When we look all of that, we can see that this allows for a good cash position by the end of last year. So, it was a year with which had a transition from 2020 to 2021 with a lot less issues than we had transitioning from 2019 to 2020.

Obviously, we still have to focus significantly on cash into 2021 as this is still a transition year. And this is exactly how we started the year.

We started the year with a focus on all of the funding and new resources component for the company, both from the sale of the UPI that were approved as part of our plan. And here I mean the data center, towers, mobile and selling of the controlling share of the InfraCo, but also in looking at the new resources.

So as part of our plan approval last year, we had said that we had approved a new resource injection for the company with potential new issuances. And we're doing just that in terms of financing.

We're looking for an InfraCo debt financing as we speak. We're looking to anticipation of resources from the UPI Mobile sale in an amount of up to R$5 billion with a mobile bridge.

And with all of that, we expect to actually navigate through 2021 with a cash position that can be managed to actually lead us to the closing of all of the structural transactions we're doing to implement our transformation plan. So as all of this is part of our transformation discipline, let's remind us what is exactly that we're doing to control this transformation execution in the next slide.

And on Slide 14, we can see that we continue to focus relentlessly on our 15 transformation programs, delivering pretty much on all fronts, all the way from the separation of the entities, the creation of the new entities, the reduction of costs in the digital transformation, or organizational transformation of the company to focusing on the regulatory agenda, which will be critical for us this year and the next with the migration from the concession to an authorization and also with all the different components that will help us alleviate the investment in areas which don't make sense to the company anymore. And finally, looking at all of the cost reduction measures, both in the regular course of business, but as well, when particularly in the legacy operations that we have.

All of that while focusing on the short-term financing and executing on the day-by-day business fronts. After that, in the end, we believe we will deliver a reconfigured company with InfraCo as a very, very significant company delivering infrastructure to the entire country and to all of the sector.

Within client call, will have close to 4 million homes connected by the end of this year, it will be the basis for the new Oi. And with legacy operations, which will be virtually and slowly incorporated into this new Oi to become part of a new future for the company with a focus on customer experience, with a focus on delivering new value, with a focus on adding to the connectivity component of our business to present more than telecoms to our clients.

So let's look now as the expected transformation timeline, and how will we execute during this year until the end of this transformation journey. So on Page 15, and as we had anticipated some times before, this is the timeline expected for the transformation of our transition process.

We had initially presented this during our GCM last year, and with a very few changes we are actually driving to it. So what was done in 2020, we all know at this point that we had the approval of the GCM in September, October.

We had the competitive bidding processes for both Towers and Data Centers, and also for the mobile assets UPI. We closed and sign on the UPI Towers and UPI Data Centers.

We also had the competitive process for mobile. We signed on mobile on the first quarter of this year.

And we are now at the end of the first quarter, really completing a very good part of those transactions with not only the caching of the UPI Data Centers, which was closed on March 16, but we're going to also close with the caching of UPI Towers still in the coming days of March -- still in March to be done in Q1. As part of Q2, as we know, we are in progress as we speak.

And as previously announced, with an exclusivity agreement with BTG to discuss the potential right to talk for the InfraCo UPI competitive process, which we expect to carry on in the second quarter of this year. And after that, in addition to obviously focusing on all of our operations and on our funding operations, we will work on the regulatory and competitive approvals of the large transactions that we have announced to the market, expecting to be able to complete them by the fourth quarter of this year.

And with that, we expect to have a company that for next year will be completely reorganized, completely transformed, allowing for the end of the JR process. So this is a significant number of milestones that we were able to complete last year.

This is still a very, very intense path for this year for 2021. And we are happy we are moving in the right direction.

We are extremely excited that with everything that we were able to deliver, but I wouldn't be able to complete this presentation and this call without actually trying to talk about something which is very important to highlight that even though sometimes a less visible aspect of our transformation, but which I believe will play an ever more important part and never more important role in everything we do going forward. So before concluding, in the next slide, I would like to talk a little bit about all of our actions and improvements in all of the ESG pillars of the company, which we all know are so critical for any company going forward.

And in particular, in our case, even everything we have been doing in the transformation of the company, we see with also a significant achievement, that it's important for us to highlight and to communicate, and for people out there to know what we are doing. So starting with governance, obviously, we believe that true change in the company started as we implemented and started to implement the new governance in the last 2 years.

And this true focus on governance has really paid off. And we now have a completely transformed company, a company that is adhering to the highest standards of corporate governance in B3 and which will soon aspire to be part of the Novo Mercado rules.

We have provided different engagements in different packs for integrity and against corruption. We have published a new code of ethics and conduct for the whole company with very simple, objective content that actually touches the entire company from start to end.

We have restructured our risk management policies and our governance structures. And we have a goal of becoming very shortly a pro-ethical company.

So we have finally continued to present a Board of Directors with several independent committees, with a vast majority 10 out of 11, independent more board members with a 21% participation of women in the board. So really, the governance is the force that has been helping shape the transformation of the company.

And that is behind everything we have been doing over the last 2 years. And we will certainly be part of everything we will continue to do in 2021 and beyond.

And on the other two pillars of ESG, starting with environmental on the e-board of ESG. We also had lots of progress, even though I'm not really so visible to many people outside the company, but in reality, we have been focusing on several different components of our environmental footprint, and working to reduce that significantly, starting with energy.

And we already have more than 50% of the energy consumed by the company, which is a lot coming from renewable sources. And we plan on having up to 80% of that in 2022 and 100% of that by 2025.

So a very significant commitment which we are executing on. In addition to that, in terms of disposals, we also have addressed reverse logistic challenges for collecting discarded materials by operations and by users.

And this recovery has already generated CapEx savings and obviously environmental savings, which are very significant in 2020. Over 150,000 units of FTTH equipment recover, over 7,400 units of data equipment recovery, and now have started an initiative to collect electronics equipment and batteries and discarded cell phones at our stores as well.

And in addition to that, we have been signatories to the Carbon Disclosure Project to the Global Compact since 2009. And we have been aligning all of our objectives with the objective with the [indiscernible] the sustainable development goals.

And finally, as the central pillar of ESG, on the social the company continues to act as it has always been. In reality this has always been a pillar for the company with Oi Futuro and all of our actions in education.

And we continue to do that even through the whole pandemics last year by impacting different groups and really focusing on Oi Futuro to bring social impact through education, innovation and culture. In addition to that, we also have focused very significantly on improving diversity in our company with numerous diversity and inclusion programs.

And we signed this year to the women on board initiative as well. So, all in all, we can say that in addition to this very significant transformation that the company has been achieving on the business side of the operations, the strategy, the financing of the company, we have more than ever been focusing on making sure that we are a responsible company acting in accordance with all of the ESG pillars that should be not only emphasized, but stimulated in the entire society as we move forward.

So, concluding on the next slide, we see that we continue to successfully stabilize and improve our operation and our strategic model as we accelerate the core of our plan. And as we have said before, after the approval of our plan amendment last year, we are now in full execution modes of our transformation plan to accelerate growth and to bring back the company to long-term sustainability.

Our innovative structural separation model, which was an idea last year is now already been implemented. And it's already showing results.

And this allows for conciliating, the strong growth that we have been presenting on the fiber side with financial sustainability for the future, both for Oi and for the new InfraCo to be created, which by the way, was already created. And as part of the plan, we are also now in the process of securing a significant injection of new resources into the company through the sale of the designated UPIs, helping us secure these investments not only for the short run, but for the long run, and coupled with a critical reduction of the company's long-term debt.

Our transformation continues to be relentlessly pursued. We are continuing to focus on the integrated execution programs.

And more than ever, I like to say that this management team, and this Board of Directors continues fully committed to executing the new strategic model with rigor and speed. So again, we're very glad that with the results we have in 2020.

We know that 2021 is a year with a lot of execution challenges, but we are already focusing very hard on it. And we're very excited about the future prospects of the company.

So, thank you, and we can now focus on the Q&A session. Thank you.

[Technical difficulty] margin of the remaining company has, we noticed you’ve republished …

I don’t [technical difficulty] you. You cut off a little bit at the beginning of the question.

Can you -- Leonardo, can you just start repeating that?

Sure. Yes, I'm going to use the phone.

Yes, my question is regarding the margins of the remaining company. Since you're now reporting all the asset phase as discontinued operation.

So the margin of the continued operations, we saw in the end of the press release that you republish something around 27% EBITDA margin, adjusting for non-recurring to get closer to 22%. My question is [technical difficulty] from the asset sales, so how much OpEx and CapEx could save them?

And then the steps, well, the phase out of copper of the average, you'd like to call, if you could explain that, and talk us through how, what are the sources of margin and CapEx savings from the second phase on the average of the corporate? Thank you.

Thank you, Leonardo. Well, in reality, this year is going to be a year where, as you imagine, with all of the transition of the UPIs to in terms of accounting classification of assets for sale, we're going to have to do a number of pro formas to actually understand what's going on with the margins, of the recurring margins of the company going forward.

But let me remind you that we have always mentioned that, in our plan, we were looking to creating two parts of the company; one the InfraCo, and the other the Client Co, where we had very different margins, very different EBITDA margins going forward, given the different intensity of CapEx investments in both. So on the Clients Co on the client company, which will be the new way.

We have always mentioned that we would be looking for an EBITDA margin in run rates, that would be between 20% and 25%. So this is our goal for the client company.

We know that there will be a period before we actually stabilize our legacy business where this will be appeared where probably will have some fluctuation of this margin. Because if you remember, we have to actually convert from the current concession that still consumes a lot of cash and conversely consumes some margin as well.

To be able to migrate to an authorization with lowest cost. And with that, we can go to the 20% to 25% run rate margin that I just described.

Obviously, when we look at what is it that's we're doing on the corporate side of the house, on the legacy side of the house, and to your question about the averaging, what does the averaging mean? And we've talked sometimes about that, but let me bring that back up, so everybody can understand what we're doing.

When we look at what is the structure, we have for copper right now, we have a structure which consists of lots of copper networks out there, lots of central offices out there, lots of stations out there, which are not only central offices, but all of the different pieces of equipment that we have on the street and our own buildings and spread throughout the country to serve an ever-diminishing number of users. And [technical difficulty] bringing revenue down, but not necessarily bringing OpEx down.

And that's what we started to address at the end of 2019 and beginning of 2020, which is to reduce the number of stations of copper stations throughout the country by consolidating many of those stations by changing some technologies. And we started doing things.

For instance, in areas where it's not where is impossible actual to maintain a sustainable copper infrastructure, we have started migrating some customers to wireless local loop and using our wireless infrastructure to provide services. And when we do this reduction, we actually helped to reduce the OpEx associated with all of the legacy services in line -- or trying to be in line with the reduction in revenues.

Obviously, there is a lag, because the reduction in revenues comes first. And the reduction in OpEx comes next because you need to have the users disconnecting to be able to actually act on the OpEx reduction.

But this is what we have been planning and executing significantly, since last year. We could -- you could see a part of that, by the change in Capex allocation that we already had for this year.

We have been allocating in excess of R$1.5 billion in CapEx, almost R$2 billion in CapEx for a number of years. And then this started going down last year.

And in 2019 it went down a lot more last year. We expect that it can continue to come down this year, as we reduce the infrastructure associated with the concession.

And with that, we're going to have a run rate where obviously, we're going to have a single-digit CapEx investment for the company because it's going to be mostly focused on developing products and on IT associated with developing those products and serving those products with a 20% to 25% EBITDA margin. So, all in all, it's obviously much smaller margin as the margin of a traditional integrated telco.

But let's remember that it is going to be a nimble, more efficient company that can have a significant cash conversion in run rate.

Thank you. Greetings.

Thank you.

Rodrigo, just one quick follow-up. This 20% to 25% were linked EBITDA margin, is that IFRS 16 or not.

Yes, IFRS 16.

All right. Thank you very much.

Thank you.

Hi, there and thanks very much. Just two or three quick questions, please.

One, on -- again, back to looking at the split of the business between the run from the under deconsolidated assets for a second. Just a couple of check.

It looks like that the continuing operations are generating about R$2.5 billion of EBITDA and when I look at the CapEx split in the presentation you gave, it's about 1.5. So, the ongoing, I guess Client co looks regenerating about a R$1 billion of cash.

I thought you may be mentioned, it was consuming cash. So I just wanted to check I was understanding that split properly, please?

That’s the first question. Secondly, again, can you give the lease liability that will be I guess, also deconsolidated or part of the discontinued operations.

So we can match that with the EBITDA, so the lease liability under IFRS 16, please. And then just away from the detail for a second, just on the São Paulo launch, please some kind of super intrigued by that.

I wonder is that something which is come about a bit more quickly than you thought? Or is that something that was not really planned?

And again, how are you thinking about winning share there, obviously it's a more competitive region with net and with Vivo [ph]? What is the right to win in São Paulo, please?

Thank you.

Thank you, Soomit. Well, as we have discussed, this year, as the accounting changes in how do we present the numbers is very complex, given the classification on the UPIs, we have to remember that, obviously, when we look at the numbers, the management numbers, we have to understand that it's not all about the counting, it's all that there's other things that we have to including there.

Beyond the CapEx, for instance, we have a planned payment. So we have financial obligations in terms of some of the obligations going forward coming for instance, from globe net.

And obviously, we're still doing this year, we were still doing a part of the CapEx of InfraCo to begin with on the backbone. So there's still different things that we have to stabilize as we move to a solid model of the separation next year.

And obviously, some of those things are purely an accounting separation. So it's very hard to read the company purely through the accounting separation of the numbers.

As far as the lease liabilities, just in general terms, Soomit, we do have a number of the liabilities that stay with the company, because they don't belong to InfraCo. Obviously, the operational liabilities, they go with InfraCo, and everything that is part of the actual operation of the InfraCo goal with the InfraCo.

But the financial obligations that are not part of the operation, per se, they stay with Oi, as it's part of the financing structure of the company in the past and has nothing to do with the creation of InfraCo. But I would advise you to go to our investment relations for details.

I mean, obviously, again, as I mentioned, we have an accounting representation of the numbers here, which is a very complex at the end of the year because of this separation of assets. But obviously, we know that by talking to IR, that's why you can have a lot of the details explained.

And last but not least, let's remember in this regard, in terms of cash, that InfraCo while it's being created, and it still does not have a new controller, it still consumes cash. It is an operation that we will be in a run rate, a huge generator of cash in the future.

But we know that we are still in construction years. Let's just remember what we said when we presented the plan.

We have to build close to 5 million each piece per year, or even in excess of that five to 6 million HPs per year with yet another number of HCs as well. So there is a big ramp up of both HP s and HCs for the next 3 years, 2020, 2021, 2030.

And then in 24, the situation stabilizes for InfraCo as far as cash generation. So we know that there's still cash consumption.

And part of this cash consumption during this year has still to be financed by oil. And obviously, we are in the middle of a process for admitting a new controller in InfraCo.

And this will help kind of separate the financing needs of the company at InfraCo alone now with no impact to void. But while we do not that and not close this transaction, it's a balance that we have to kind of fund as part of our overall financing structure for Oi as a whole.

As far as São Paulo, no, it's not something that was unplanned. It was something that was on our radar all together.

We obviously did not announce that until we were ready to actually move with it. But the thing is that we always had Soomit the fiber assets in São Paulo.

If you remember, Oi had two large fiber networks in São Paulo coming from Pegasus and Metro Red. And those -- as those two networks cover not only the CDO São Paulo, but good portions of the state of São Paulo.

And with that network, we always knew that that network could be a source of either making a separate assets for sale as part of a UPI, or for noncore disposal, or to be used as another element of our infrastructure presence to be able to actually make inroads into the São Paulo markets. At the very end of 2019, beginning of 2020, when we were analyzing our business case going forward and analyzing the success of what we had at the general launch of Oi Fiber, we came to the conclusion that it wouldn't make sense to actually let go have the fiber infrastructure in São Paulo.

And not only that, it would make sense to include that as part of the InfraCo business plan. But to represent a significant upside to everything we said we will do as part of our expansion plan on fiber.

And so we did just that. We started working at the end of last year in terms of planning for how could we structure our entrance into São Paulo market.

We started looking at the most promising regions where our fiber presence is already there, in both the state, the cities outside the capitol -- in the state capitol. And we started doing some friendly trials during the first quarter.

And now we are in a position to launch. Obviously, it's a controlled launch.

It's going to be a launch where we expect to have a significant number of HPs as a potential, but it's in addition to everything we have been doing. So yes, it had been planned for a while.

We were just waiting on the right time to announce it then to move forward.

Can I just as a quick follow-up please. Do you have some kind of cost advantage still over the competitors there?

I know that's part of the business case more broadly across the footprint, I think you can pass homes, something like 20, 30% more cheaply, I think that. Is that not the case in São Paulo, it's still the case?

So in São Paulo, we also have the same fiber infrastructure that we had in different cities across the country. So as far as a cost advantage, we can say that we can keep the same economics in São Paulo as we can elsewhere, because the fiber is already there.

And let's remember that we are not replacing an existing network. We don't need to take off copper to implement fiber, we're just launching fiber from scratch as we were never present in the retail market in São Paulo.

And as such, there's no legacy costs and legacy retrofits associated with that which sometimes tends to be a significant cost to whomever is substituting legacy infrastructure. So we do believe that our cost economics are relatively the same as the cost economics of the rest of the country.

And as such, we believe we do have a good business model to penetrate São Paulo. Let's remember that, when we look at the fiber in São Paulo, one of the areas that has grown the most is the naked fiber services.

Detached from bundled pay TV and detached from other services. And we bring this possibility to São Paulo as a compelling value, customer value proposition to actually penetrate the market, which is without a question the market with a higher GDP per capita of the entire country.

And as we have launched the higher speeds, we will also focus on those higher speeds in São Paulo. We have already launched the 400 to 500 megabits per second speed.

We can go beyond that, and an infrastructure is prepared to do just that. And in addition to that, as we have announced last year, we are shifting the entire IT strategy of the company for fiber to be based on a completely new IT stack, which is entirely focused on customer experience.

So, with this new IT stack that we're implementing, launching by the middle of this year, we will not be dependent on any legacy IT components for delivering oil fiber. And this is without question how we plan to really ramp up our presence in São Paulo this year as well.

Okay, great. Thank you.

Thank you.

Hi, good morning. Thank you for the questions and congrats Rodrigo for the excellent execution.

So, around 70% of the CapEx is now fiber. Can you run us through the unit economics for the fiber business in terms of the home fast topics, the connection and the maintenance CapEx?

And how should we think about the CapEx going forward for the Client Co. And then my second question would be a little bit on 5G.

You want to play 5G as a 5G enabler, do you see any risk of the 5G auction happening before the closing of the mobile SEO closing? Would that be a problem?

And should we assume that Oi InfraCo clients who will not have any direct or indirect interesting buying spectrum anymore? Thank you.

Thank you, Maria Tereza. Starting with the fiber question and the CapEx question.

When we announced the plan, we announced the plan with a unit economics for deploying HVs and HCs is poor roughly 300 guys for HB, plus an additional 900 highs for HC. And this was by the middle of 2019.

So by that time, all in all, if you consider one connected consumer with an HC, the entire -- the full cost of one HC, without actually diluting other HP costs, that was around that RMB1,200. What we said we would do when we launch the plan in '19 and that we actually did over last year was to greatly improve that economics by scaling the plan.

And scaling our presence, not only in terms of expanding the number of HPS. By expanding the number of HCs, both in terms of cost of equipment and by equipment here.

I mean, everything from fiber cables to connectors to all of the different electronics that are required both on our side and as well as on the customer premises, but also to a -- an economics that would be a lot more effective, given the increasing productivity of the deployments. So when we talk about productivity of deployments, obviously, you have the teams doing HPs and HCs.

And the key productivity rating for us was how many houses that can be connected by a single team per day. Obviously, this is something that we keep here with a lot of emphasis in terms of looking at this metric.

And without disclosing entirely the metric we say that we were able to improve this metric by at least 15% to 20% last year. And this is very significant, because this is one of the costs that no matter what you do, if you don't change the efficiency, you're not going to be able to reduce because it's basically associated with labor costs.

And so by doing that, we were able to significantly increase the efficiency. And we were able to add to that the fact that obviously, as we have the largest fiber deployment project in in the region, we were able to negotiate a very good long-term contract.

By the way, this was also part of our significant procurement effort that was done last year as the highlighted in one of our slides, where we were able to reduce CapEx costs significantly with the long-term negotiations and bringing Oi to the game has been a significant player to be contended within capex purchases. With all of that, I would say that that we maintained our commitment of reducing those costs.

Our unit economics without giving you a lot of details is obviously the execution of that is now in progress. But we have lowered that 300 number significantly.

But most, most importantly, we lower that in particular the home's connected cost. So we lowered the home's connected cost from the 900 to lesson 600 at this point, so it's really a very, very impressive reduction.

And with that, we can say that our cost of per home connected all in is a cost that sits below the R$900 now compared to the 1,200 hours we had at the beginning of our plan. And when we look at how this can go, in the coming years, obviously, there's still room for potential reductions in terms of equipment, there is maybe some room for reduction in terms of different architectures.

And obviously, we expect to continue with very good productivity that we have an efficiency in terms of the installation costs we have. So it's a very significant progress.

And in reality, this is one of the famous that allowed us to be more aggressive in terms of the number of homes faster that we looked for, and the overall plan. If you recall, we had originally talked about 24 million homes faster now, we're talking about 32 million homes fast up to 2024.

And this is, again, what has driven the expansion of the 4 million targets we had for HCS to a target of getting close to 7 million to 10 million HCs, if you consider both adjust oil as the client's company, and aim for go as the entire provider of neutral metrics. So significant progress, there, Maria Tereza.

This is in reality, what's been fueling the expansion of the business plan and allowing for everything that we've been doing. On 5G, obviously, we don't control the 5G schedule, we know that there are significant discussions about when the 5G will take place, there is an intention of both the communications ministry as well as the government in general of having the 5G option as soon as possible.

We know that the discussions for the RFP are mostly complete at this point, even though they're still the calculations of the overall value that is taking place at TCU. And we still don't have visibility of exactly what those values will be.

But still given that we don't control this timing, we should and that's what we have been doing, we should act as this is yet another part of the puzzle that we don't control and that we shouldn't depend upon. So we don't really believe that we depend upon the timing of 5G.

So if 5G section happens before the closing, obviously, we're going to look at what we need to do here in terms of participation. Obviously, given that we have a sale of the mobile company already being discussed and already subject to regulatory and competitive approvals.

This gives us a different strategy for participation in the 5G auction, if any, Let's remember that we still have several different angles to look at 5G, in particular, the one that looks at 5g as a big, big driver of a fiber capillarity demand. And this is good for us as part of the InfraCo strategy.

But we also look at how we could potentially use the 5G strategy going forward in particular for fixed wireless access and for future uses of 5g both on private networks as well as on long-term IoT operations. So we know that there is a possibility that it happens before the close of our mobile sale, or even before InfraCo.

But that's something we have to live with. And there's no dependency on that for us to move forward.

Perfect. Thank you very much.

[Indiscernible] very clear. Congrats again.

Thank you.

Hi, hello, everyone. Thanks for taking my question.

I would like just to understand the expansion point regarding the FTGG to São Paulọ. First, I would like to get a better view regarding the numbers of on HP.

So you mention 2 million, how much [indiscernible] for the São Paulo in 2021? And I'd like to understand if that number was considering in the business plan to reach R$40 million to R$50 million.

And maybe what the commission expected in the competition there. So are you guys mentioned already that you're being mainly focused on higher speed, but you did to complement what the players that they are most focused?

So they are mostly -- mainly regarding to the speeds or the telcos. And later, if [indiscernible] could give more info regarding the process, the structure of the separating assets of InfraCo.

So how do we should be -- how can we believe, how can we see the contract between Client Co and InfraCo already, since the company is already going to be a separate company for the next quarter? Thank you.

Thank you Christian. Just to make a correction there.

When we've talked about expanding to São Paulo, we said that we will target to reach out to meet households in 2022 -- by the end of 2022, not 2021. In 2021, we plan to get to 400,000.

households, okay, so and this is based on the existing infrastructure we already have, obviously, with the need for the buildup of secondary networks and secondary rings. But based on the extensive fiber network that we already have.

Now, in terms of competition, we know that São Paulo is the most competitive market for broadband and fiber in Brazil. But what we're doing is that we're bringing our extensive experience in launching accelerated fiber as part of our overall plan.

And based on the results that we had elsewhere, and then the entire country, we saw that there was a possibility for us to enter this, which is obviously the highest GDP per capita market in the country with a model that has been proven. It has been proven because it's a streamlined model.

It doesn't depend on legacy, it's 100% focused on customer experience. It allows for a bigger focus on just the pure broadband experience without having to be concerned with all of the different issues with legacy services.

And we know that there's still an increased room for penetration for fiber in São Paulo. Even that -- even though it is the largest market in the country, in one of the most competitive, it's also one where there are still a lot of legacy, a high-speed legacy customer.

So we know that there are still a lot of our cable customers, there's still a lot of DSL2 customers in São Paulo. And this is exactly the area which we believe is right for competition with penetration of fiber.

And if we just look at all of the fiber metrics, in terms of quality, in terms of stability, in terms of delay, and latency, obviously, there's no comparison between the fiber services and the legacy services. And this is exactly an area that we are keen to explore.

Let's remember that in the rest of the country is not that we play alone. Now we already face competition in most of the large cities.

And even with this competition, we have been growing at the pace we have been growing, growing more than that pretty much all of the other players combined. And so it would be just natural if the infrastructure was in place.

And it is to tackle the São Paulo market as an upside to our current business plan. Let's remember that when we presented our business plan back in 2019, we had not included São Paulo as part of the plan.

And this was the through as well, it was the same last year when we started carving out infrequent carving out the numbers for how should we expand our presence with InfraCo, but now São Paulo actually gives us a nice subside to that in an area which obviously every relevant telecom player in Brazil should play. So we're not afraid of competition.

We believe that yes, there will be a way of playing in the market.

Thank you.

Well, thank you again. As we highlighted at the beginning of the call, it's a pleasure to have you all with us and in particular to deliver to the market all of the results we had during last year.

We knew it was a very hard year. Unfortunately, it was not even a better year because of the pandemics.

Now here I mean not only in terms of financial or strategic results, but in terms of the costs the society that we all had to face. We hopefully played our part that well when helping to face the pandemics.

And we continue to do that we have not lost sight of that. We continue to work with our full team working from home.

We continue to provide services which are essential services to face the pandemics. And we will continue to do that.

We continue to implement and now observe that the strictest protocols for safety and security going forward. And we hope as well that at the end of this year, we'll have a much better picture not only for everything that has been going on with the pandemics, but to the continuation of the greater delivery on our strategy so far.

So we'd like to thank you all for being with us again, for one more quarter. Now, we start the execution of many of the things that we have planned and announced and able to achieve over last year.

And we believe it's going to be another very intense year, a year with a number of things that must be done throughout the year, both operationally as well as financially as well as strategically. But we hope again at the end of 2021 to deliver the same level of good news and good progress that we had achieved during 2020.

So thank you for being with us. And let's talk again next quarter.