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Oi S A : Transcription 1Q21 Conference Results

05/17/2021 | 04:08pm EDT

1Q21 Results

Conference Call Transcript

Oi (OIBR3 and OIBR4 BZ)

May 13, 2021


Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Oi S.A.'s conference call to discuss the 1Q21 results.

This event is also being broadcast simultaneously on the Internet by webcast, which can be accessed on the Company's IR website, www.oi.com.br/ri, together with the respective presentation.

We would like to inform that, during the Company's presentation, all participants will be on listen-only mode. We will then begin the Q&A session when further instructions will be given. In case you need any assistance during the conference, please request the operator's help by pressing *0.

We would also like to inform that the conference call will be conducted in English by the management of the Company, and the conference call in Portuguese will be conducted by simultaneously translation.

This conference call may contain some forward-looking statements that are subject to known and unknown risks and uncertainties that could cause such expectations to not materialize or differ materially from those in the forward-looking statements. Such statements speak only as of the date they are made, and the Company is under no obligation to update them in light of new information or future developments.

We will now turn the conference over to Mr. Rodrigo Abreu, CEO. Please, Mr. Rodrigo, you may proceed.

Rodrigo Abreu:

Good morning, everybody. Welcome to our 1Q21 call. And due to all the intense activity we have been having, the call is just a short while after our last 2 calls, the first on 4Q last year, and the second on the details of the InfraCo transaction we announced just recently.

Our 1Q was, as everybody knows, again, impacted by the second wave of the COVID pandemic. And in this topic, our thoughts go to those who have been personally impacted by that.

And obviously, the Company continues to be very diligent with the protection of our entire team of professionals and their families. And we hope to continue contributing to providing resources and all of the means possible for all of us to face the impacts of it. On the business front, we continue to focus relentlessly on the Company transformation above everything else.

And we believe we move forward on pretty much on all of the initiatives, which will contribute to making it happen. On the results, we did feel some of the impacts of the


1Q21 Results

Conference Call Transcript

Oi (OIBR3 and OIBR4 BZ)

May 13, 2021

pandemic on the business in the 1Q, especially in comparison with the 1Q20 when this impact was just starting.

But we were able to maintain all of our key operating metrics on track, even if impacted on some revenue components, in particular, mobile and on some higher costs during the quarter.

But all in all, we feel we continue to move forward as planned. So let's take a look at the results, moving on to Page 3. On Page 3 as a summary and key notes, we can point to the excellent results on fiber again, while delivering pretty much on all of the key components of the transformation. On the fiber, the massive expansion continues to happen even with all of the economic challenges, and we have been accelerating both on HCs and HPs, and we got to new record highs on both.

We also entered the São Paulo market, which was the last large capital in the country, which did not have the presence of Oi fiber. And now we have officially started operations there in April with commercial sales.

And all of that led to a great recovery on the residential revenue trends, as we will see in detail. But this is obviously one of the most important, if not the most important revenue components for us in the future. So the trends here are very important to signal what will happen with the new Oi in the years to come.

On Oi Solutions, we launched several new products and continue to shift revenues. And we did have a quarter, which is preparing for, again, a year where we are doing a great transition of our revenues and launched several different new areas, including one, which was a rebranding of our own operation Tahto which was the former BTCC call center to include offering this to our own corporate clients.

On wholesale, we are moving forward towards becoming a true neutral network, and we have already started closing contracts, both with ISPs and with large telcos and delivering infrastructure to connect more than 5.2 million households with fiber, in what marks the true beginning of what will be the new InfraCo for Oi. On the execution of our plan and our judicial recovery, we move forward with several actions on the UPI sales, and pretty much all of the M&A processes have advanced as expected and are on track for us to get to where we need to be to completely transform the Company and to start a new structure next year.

And finally, on the funding front, we are close to fulfilling our 2021 needs. And those are necessary before we complete all of the transactions and the move to a new structure that will be in place by next year. And we finally recently obtained the consent from the 2025 bondholders to implement what will be the most important funding alternatives to us, in particular, the drawing of the hybrid contract that had been signed back in February and now will be disbursed. And the preparation to get to a bridge to UPI Mobile, which will bring an additional R$2 billion to R$2.5 billion to the Company and is currently under negotiation.


1Q21 Results

Conference Call Transcript

Oi (OIBR3 and OIBR4 BZ)

May 13, 2021

So pretty much, we have executed on all fronts. So next, let's look at details of the performance on all of those. So moving on to Page 4, starting with fiber. Our fiber performance remains unabated. And we had new record highs, both on HPs built and on the takeout of the homes connected.

And as we have been highlighting, service quality, speeds and our capacity for rapid deployment have continued to be key pillars of our strategy. On the homes passed front, we got to a new record high. We had an average of close to 500,000 new homes passed built per month in the 1Q, and this is almost 30% more than what we did on the 2020 average. And we reached here 142 cities. So we are already getting very close to where we need to be when we look at the end of the year, and we expect to close this year with close to 15 million homes passed, which coming from where we were last year is a significant improvement and on track to our long-term plan as well.

On the front of the homes connected, we have kept up the numbers, and they keep coming, in particular, in terms of the homes connected per month with a pace of 122,000 net homes connected per month. And this is higher than pretty much all of the other players, even with the entire growth of the market and the ISPs. And we expect to be on track here to our numbers for the end of the year to get between 3.5 million and 4 million homes connected. As we speak, obviously, we have already advanced, and we are close to 3 million homes connected as we continue to operate in a very fast pace of sales.

And in terms of the homes connected, I believe it's very interesting to highlight one aspect of the story, which actually confirms everything we have been telling about our long-term plans, which is the take-ups.

We can now, with a little bit more time of history, analyze of all of the recent cohorts of fiber deployment that we have been implementing, we can see, as this middle picture here shows, that we have been able to very successfully advance the take-up percentage on our cohorts. And if we look at the cohorts that were started in March 2019, we have been already getting to 34%, 35% take-ups, which is way above what we said in our plan that we would be able to achieve and stability to actually make the numbers for the whole fiber print of 25%.

And it's interesting to see that if we look at the cohorts of March 2020, which is just slightly over a year ago, we have already gone above the 25% take-up with 26%. So all of the take-ups have been extremely positive, and they give us the confidence that we will continue moving forward pretty firmly on our fiber strategy.

All of that happens with ARPU moving up, yet another bit from the 1Q last year to the 1Q this year, even considering all of the implementation of new homes. And we are now at the R$87 per month ARPU, which is a 2.4% increase compared to last year.


1Q21 Results

Conference Call Transcript

Oi (OIBR3 and OIBR4 BZ)

May 13, 2021

This has translated to yet a new sequential revenue growth of multiple times of almost 3x, and we have gotten in the 1Q 2021 to R$592 million of revenue, which is more than R$2 billion on an annualized basis and on track again to starting next year with a number, which will be more than enough to compensate what's going on, on copper as we will see in a second.

Obviously, all of that has been happening with yet other positive indicators, in particular, that of quality. Oi has been consistently ranked first on the Netflix ISP Speed Index since August 2020, and our NPS is 25% higher than the world telecom benchmark on this front. So the quality here is a central pillar and will continue to be a central pillar for our expansion.

And we have turned the page on the quality issues with copper in the past, and now Oi fiber is without a question, pretty much a poster child of Oi fiber in the future. And in the 1Q 2021, just on track with what we have mentioned about the ARPU moving up and the quality and the speed being central pillars, we already had 14% of our net additions coming in now to Oi fiber with speeds over 400 megabits per second.

And if you recall, 9% of the fiber customer base has speeds over 400 megabits per second in the 1Q, but 14% of the net additions are already above that. So it's a great track. It means that our ARPU will continue moving up. It means that the quality is paying off.

And all of this led us to accelerate our national expansion, as can be seen on slide 5. And with that, we are using our expertise of implementing fiber to enter finally São Paulo. And with this, we have expanded our presence to all state capitals. And we aim at nothing less than national leadership in first in fiber and then in ultra-broadband. We know it's a very competitive market, but we know we have the network, we have the presence, and we have the performance to actually take us there. If we look at the fiber market share, the market share in the areas where we are present is significantly up.

And if we look at all of the capitals and all of the municipalities where we are present, in 14 state capitals, we are already market leaders, even if we have started operations with fiber just recently. And we can point to areas, such as in the north and the northeast, where the market share numbers are extremely high for us with fiber.

But we can also point to cities, very important cities such as Rio, Salvador, Belo Horizonte, where we do have significant market shares even in face of a very, very fierce competition. And all in all, in the municipalities with Oi fiber, which in the 1Q, were close to 130, in 1 year, Oi decreased the business to the leader from 11 percentage points to 6 percentage points here. So we look at the broadband market share.

We are already with close to a 27% market share in those markets and fastly approaching the #1 position here. As for São Paulo, we have commercially launched São Paulo late last month, actually on the 27th of April. And our current coverage of


1Q21 Results

Conference Call Transcript

Oi (OIBR3 and OIBR4 BZ)

May 13, 2021

Oi's fiber exceeds the limit of the São Paulo capital. We are looking at the São Paulo state. And we have a plan of getting to 400,000 homes passed covered in 2021 with a potential to get to 2 million for 2022.

And obviously, São Paulo is the most competitive state and the most competitive city in the country, but we believe our good performance will allow us to have a good presence there, starting afresh and starting with a very focused strategy, which will use all of our learnings in the rest of the country.

So this good performance comes with a renewed focus, not only on the fiber connectivity but on digital services as well as we can see in slide 6. We have mentioned to everybody that the Oi transformation starts with the focus on fiber and fiber is at the core of our transformation and will be, obviously, our core product and assets going forward. But we are adding to connectivity also what we call our digital positioning, and we will move beyond connectivity to digital experiences. And here, we can see an example of the moves that we have been doing, starting with Oi Play, which is a content hub for on-demand and live channels through several different content partnerships.

Oi Play will be a very interesting aggregator. It has been growing up pretty nicely, and we expect it will eventually be a mainstay of content for pretty much any consumer on core fiber connectivity. We have also launched Oi Place, and Oi Place, which is a marketplace covering very, very carefully curated content for electronics and for communications continues to grow, and we have expanded services and solutions not only to B2C but then starting with small enterprises and eventually B2B.

We have launched Oi Conta Zap. Oi Conta Zap is a free digital wallet focused on B2C, and it's a digital wallet, which uses WhatsApp transactions. So it does not depend on OI's mobile base. But obviously, we are accelerating our presence based on our existing customer base. But the good thing is that it does not depend on us continuing on mobile to move forward and to remain as one of the financial alternatives and financial services that we offer to our entire base.

On the Oi Soluções front, which, by the way, was the first to initiate this journey of digital positioning and transition to IT, our portfolio continues to grow. We have cloud, security and managed services as the 3 main areas, and we are securing everyday new revenue streams in particular, within all of the multi-cloud managed services and security environments.

Interesting to point out that we have Serede, which is our field services operation company, and we are now starting to use Serede as well as the logistics capabilities for pretty much any business demand all over the country, both on B2B as well as on B2C.

And one example of that is the Oi Expert service we have launched, which is a service platform for B2C needs of installation, technical support and repair assistance. And obviously, we rely on the national presence of our field technicians based on Serede.


This is an excerpt of the original content. To continue reading it, access the original document here.


Oi SA em Recuperação Judicial published this content on 17 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 May 2021 20:07:07 UTC.

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