Telefônica Brasil's Q3 2025: Contradictions Emerge on Mobile Revenues, Leases, Prepaid Strategy, Concessions, and Fiber Expansion

Business Commentary:

* Revenue Growth and Mixed Mobile Performance: - Vivo's total revenue rose by 6.5%, driven by mobile and fixed services. - Mobile service revenues grew 5.5%, while fixed services saw a 9.6% increase. - Growth was supported by strong performance in the postpaid segment and the expansion of fixed services, particularly fiber-to-the-home (FTTH), which accounted for 12.7% year-over-year growth.

• Postpaid Segment Strength and Customer Retention:
• Postpaid access grew 7.3% year-over-year, reaching nearly 50 million customers, with a 68% share of the total mobile customer base.
• Postpaid churn remained low at 0.98%, indicating high customer loyalty, and ARPU rose 3.9% to reach BRL 31.5.

• These results are attributed to effective customer-centric strategies, upselling, and demand for data services.

• Fiber and Convergent Strategies:

• FTTH access grew 12.7% year-over-year, with 7.6 million homes connected, and the footprint now covers 30.5 million homes nationwide.
• The Vivo Total convergent offer saw a 52.7% increase, with nearly 62% of all fiber access subscribers using the offer.

• This growth is driven by the success of the Vivo Total bundle, which supports higher ARPU and customer retention.

• B2B Digital Services Expansion:

• B2B revenues increased 15% year-over-year, with digital B2B growing 34.2% and accounting for 8.6% of total revenues.
• Key verticals contributing to growth include cloud, IoT, and cybersecurity services.
• Expansion is driven by strategic partnerships like the large IoT deal with Sabesp and a focus on leveraging Vivo's connectivity with digital services.

Contradiction Point 1

Mobile Service Revenue Growth

It involves differing perspectives on the growth trajectory of mobile service revenues, which is a critical revenue stream for the company and an important indicator for investors.

Can you explain the slowdown in mobile service revenue and the impact of the competitive environment on your performance this quarter? - Luis Chagas (XP Investimentos Corretora de Câmbio, Títulos e Valores Mobiliários S.A. Research Division)

2025Q3: Mobile service revenues grew 5.5% year-over-year. - Christian Gebara(CEO)

What caused the slight quarter-over-quarter decrease in mobile service revenue, and what's the outlook? - Camila Koga (Bradesco BBI)

2024Q4: We saw a strong 7% growth in mobile services in Q4. - Christian Gebara(CEO)

Contradiction Point 2

Lease Efficiency and Optimization

It highlights contrasting views on the company's approach and progress in optimizing lease costs, which directly impacts operational expenses and financial health.

Can you explain lease efficiencies and their timing impact on payments? Also, update on asset sales related to concession migration? - Gustavo Farias (UBS Investment Bank, Research Division)

2025Q3: Lease payments remain consistent, reflecting positive trends. - David Sanchez-Friera(CFO)

What is driving the fiber-to-the-home ARPU performance? How is the mobile competitive environment changing? - Marcelo Peev dos Santos (JPMorgan Chase & Co)

2025Q2: We manage leases through accounting and payments. EBITDA after leases growth shows efficiency. - David Melcon Sanchez-Friera(CFO)

Contradiction Point 3

Prepaid Strategy and Customer Migration

It involves the company's strategy regarding prepaid customers, particularly the approach to migration and the impact on ARPU, which are key indicators for revenue and customer retention.

Can you elaborate on the positive trends in prepaid and your interest in M&A within the ISP sector? - Marcelo Santos (JPMorgan Chase & Co, Research Division)

2025Q3: Prepaid trends are positive due to increased customer base recharging and digital services. - Christian Gebara(CEO)

What caused the decline in prepaid revenue this quarter and are there plans for price increases in prepaid services? - Bernardo Guttman (XP)

2025Q1: The decline in prepaid is primarily due to a strategic migration from prepaid to hybrid plans to capture more spending power. - Christian Gebara(CEO)

Contradiction Point 4

Concession Migration and Financial Impact

It involves the company's expectations and financial impact of migrating from the concession regime to the authorization regime, which has implications for costs, revenue, and cash flow.

Can you detail lease efficiency gains and their timing? What's the updated outlook for asset sales related to concession migration? - Gustavo Farias (UBS Investment Bank, Research Division)

2025Q3: The migration to authorization is expected to be financially positive. - David Sanchez-Friera(CFO)

Is there pressure on margins or CapEx due to the shift from concession to authorization models? - Gustavo Farias (UBS)

2025Q1: Real estate sales have started, with BRL 198.7 million in Q3, up from BRL 32 million last year. - Christian Gebara(CEO)

Contradiction Point 5

Fiber Network Expansion Strategy

It involves differing views on the company's strategy for fiber network expansion through acquisitions, which affects growth prospects and competitive positioning.

What are the positive trends in prepaid services and how open are you to M&A in the ISP space? - Marcelo Santos (JPMorgan Chase & Co, Research Division)

2025Q3: Regarding M&A, Vivo aims to expand its fiber network organically and via strategic acquisitions. - Christian Gebara(CEO)

How does the fiber strategy align with the potential addressable market, and are there external capital plans to support growth? - Phani Kumar Varma Kanumuri (HSBC Global Investment Research)

2025Q2: The fiber strategy targets the 60 million homes passed in Brazil. Growth will be organic, with potential for M&A if assets align with Vivo's network standards. - Christian Mauad Gebara(CEO)