TIM S.A. (TIMB) Q1 2023 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Welcome to TIM S.A. 2023 First Quarter Results Conference Call. We'd like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. There will be a replay for this call on the company's Web site. After TIM S.A. remarks are completed, there will be a question-and-answer session for participants. At that time, further instructions will be given. We highlight that statements that may be made regarding the prospects, projections and goals of TIM S.A. constitute the beliefs and assumptions of the company's board of executive officers. Future considerations are not performance to warranties. They involve risks, uncertainties and assumptions as they refer to the events that may or may not occur. Investors should understand that internal and external factors to TIM S.A. may affect their performance and lead to different results than those planned. Should any participant need assistance during this call, please press star zero to reach the operator. Now, I'll turn the conference over to the CEO, Mr. Alberto Griselli, CEO of TIM S.A.; and to Ms. Andrea Viegas, Chief Financial Officer, to present the main messages for the first quarter of 2023. Please, Mr. Alberto, you may proceed.

Good morning, and thanks for attending our results conference call. I'm pleased to welcome here today, Andrea Viegas, our Chief Financial Officer, who was recently promoted to this position from within our ranks. Her extensive knowledge of team and the industry will be a great asset to our C-suite. And in her debut as CFO, we are presenting a set of some numbers to the market. This first quarter was again a reaffirmation of the new moment of the company with outstanding achievements due to the sharp execution of our strategic plan. We have completed 100% of the M&A integration process while overcoming many obstacles related to macroeconomic deterioration and dealing with the uncertainties of a noisy political environment. Our top line rose more than 20% year-over-year with EBITDA growing 23%. This combination led to a margin expansion and operating free cash flow to double versus the first quarter of 2022. During the quarter, we closed a partnership with Way Brasil to cover 600 kilometers of highways in the country's Midwest. This type of agreements makes sense economically and transforms people lives in a perfect integration with our ESG strategy. Our coverage will benefit nearly 300,000 people, more than 100 public schools and over 40 health centers. We are also well-positioned to reach our goals in the commissioning process with more than 1.5K sites dismantled since November 2002. Going over the details of our business performance, I want to highlight our revenue dynamics. In the first quarter, total service revenues grew more than 20% year-on-year with a relevant contribution for mobile services that expanded beyond 21%. With a rational competitive environment and the end of the necessary post-M&A adjustment to our mobile customer base, ARPU is back to positive growth, reaching nearly BRL 28 per month. Analyzing the mobile segments individually, postpaid revenues presented robust growth up by more than 21% year-over-year within ARPU, excluding machine-to-machine lines of BRL 48 in the first quarter. Prepaid revenues expanded soundly at a pace of more than 27% versus the first quarter of 2022, pointing to an ARPU of close to BRL 40. And mentioned earlier, ARPUs in postpaid and prepaid are starting to recover after the dilution created by Oi's client's arrival, and after the cleanup of silent lines. We also reclassified lines from postpaid to prepaid in March to correctly manage those customers. Since I'm talking about Oi assets impact, it is worth giving additional details of the integration completion. In March, we concluded 100% of all the network integration steps. We are using the acquire spectrum and clients are benefiting from the additional capacity. The non-overlap sites were integrated into our network, helping to expand coverage and improve customer experience. As for the client migration, we completed all the activities regarding those clients in April, it's secured in the major cleans ups and reclassification necessary to have a coherent and healthy customer base. Having finalized those actions, we are starting to see more and more of the benefits of these transactions. Synergies are becoming more apparent in our results, with the exception of the decommissioning process, which is still in the early stages. Although we had physically decommissioned more than 1,500 sites by March '23, the financial impact of this dismantling process will amount to a relevant size towards the end of the second-half. TIM Mobile, our 5G strategy is paying off. We are being able to combine positioning and efficiency to build our solid leadership in this technology. TIM has the highest availability 5G technology as a consequence of defining the most relevant markets and ensuring we have a large and meaningful coverage in them. This leadership was achieved with almost twice the number of 5G sites than our competitors. Additionally, 5G successful rollout is allowing us to reduce CapEx related to 4G capacity as traffic offloads from the older network to the new technology. As we advanced from volume to value strategy, we keep improving our client's customer's experience. We still have a long journey ahead of us, but we are achieving relevant milestones. The number of complaints is reducing steadily. And we have the least complaint operator in Sao Paulo Consumer Protection Agency with a 50% reduction year-on-year in the last survey, and the least complain in prepaid at Anatel. Additionally, we are by far the best performing operator in resolving clients' issues. We've been leading the Anatel complaints resolution ranking for more than a year now. More recently, we achieved the fourth position in resolution ranking across all sectors in all PROCONs, the consumer protection agencies. In this resolution ranking of Reclame Aqui portal, we ranked number two among all companies in Brazil, and the only recommended among operators. In the fixed services, the growth driver remains TIM Ultra Fibra with solid performance. Fixed broadband revenues presented a high single digit expansion. Broadband ARPU grew year-over-year for the 17th consecutive quarter, reaching almost BRL 93. Our broadband continues to be driven by the successful migration from FTTC to FTTH. Nonetheless, during the first quarter, we also saw net additions to pick up after the launch of the pilots to expand coverage in Parana in Santa Catarina states. We closed the quarter with a client-based beyond 730,000 connections, and we are now present in more than 70 cities. This expansion is being achieved without losing the quality and focus on customer experience. For the sixth year, TIM Ultra Fibra was appointed the best fixed broadband in the country by the tech portal, Canaltech. I will now pass the floor to Andrea to review the financial results.

Thank you, Alberto. I'm grateful for the opportunity to serve as the new CFO in Brazil. I'm very excited to work with you and the rest of the leadership team to drive this corporate towards success. I also look forward to build a strong and lasting relationship with the financial community. Without further late, let's talk about numbers. As Alberto explained well, the first quarter signals are both performance in all relevant lines of our results. The country's macroeconomics channels and the uncertainties have not impact us at least yet. Our performance continued to be driven by the M&A integration and their organic growth. Despite deflationary pressure, our OpEx line is starting to decelerate as we are reaching the end of the integration process of Oi mobile assets. As a consequence of this in revenues robust space, our EBITDA is rising more than 20% year-over-year, reaching BRL 2.6 billion. Under this scenario, the EBITDA margin is returning to expansion after a year of contraction due to additional costs related to the M&A transaction. In comparison-based issues, the margin rolls to 46% and expansion of 100 base points versus the first quarter of 2022. Regarding those two elements, this is the first quarter we have a fair comparison base for fiber last-mile rental. On the other hand, the negative impact of the temporary service agreement with Oi was still present in first quarter in '23. The contract ended only in April. From now on, as the present in our guidance that we believe TIM will deliver margin above the 2022 levels. With that said, EBITDA performance is driving that income back to grow. Despite all the transitory impacts we have presented and explained to you in the recent past. We closed the first quarter with profits summing almost BRL 440 million, growing above 4% year-over-year. Those trends that are elements are still present. During the quarter, more than BRL 207 million were added between depreciation and interest related to the leasing contracts we've got from Oi. Additionally, during first quarter '23, we saw negative impacts from a provision open-dated for severe contusions. We did not announce IOC will declare their first trends only last month. But their own deposit side, we have elements such as the negotiation of our contracts and the useful life of assets that help it our performance. As mentioned last quarter, net income performance is still volatile. So, a better way to understand our evolution is to use operation free cash flow metrics. Maybe it's definitely the microcapsules grew more than two times, reaching more than BRL 530 million. Under this circumstance, we maintain a solid financial position in leverage level, the net debt-to-EBITDA ratio stood at 1.4x with a total net debt, including leases of BRL 15.1 billion, again, the sustainable trend levers comfortable in a scenario of high interest rates. Now, I hand the call back to Alberto to complete the discussion related to the first quarter.

Thank you, Andrea. We are completing one year from the closing of the transaction with Oi. During this period, our efforts concentrated on integrating the assets and executing the company's transformation plan. And we are reaching an important milestone with the completion of the integration. But we still have a lot in front of us. Our focus for the coming quarters will be centered on having a healthy competition environment where we can recover the inflation impact while using other tools of the marketing mix to differentiate from our competitors. We want to compete on value proposition and customer experience, and 5G can help us do so while saving CapEx. As I mentioned during my speech, we are only beginning decide the commissioning process. The plan is on track, and we are committed to delivery on time and with all the expected benefits. For fixed broadband, we will continue to use the asset line model to expand testing this approach in new markets while we complete the migration from FTTC to FTTH. The coming quarters for customer platform initiative will be more exciting. We will soon deploy commercially our partnership with Cartão de Todos, our health partner, a new partnership will be launched. Lastly, we will continue to evolve our B2B verticals. We are expanding our activities and logistics with this like the one Way Brasil, bringing IoT connectivity and solution to Brazilian infrastructure. On utility vertical, we doubled the number of smart lighting points since the third quarter of last year, and the expansion will continue at exponential speed. Today, NG is our main partner in these projects. And for our crown jewel, the agribusiness segment, we extended our coverage to 14.4 million hectares, connecting fields, farms and countryside communities all over Brazil. I'm reaching the end of my comments, and I want to thank the entire team because we are starting the year at a strong pace. Things will not get easier from here, so we must keep up with the great work, maintaining the focus and the execution to reach our goals by the end of the year. Let's open the floor for questions. Please, Operator.

Thank you, Mr. Alberto. Now we will begin the Q&A session. First, we will take questions from analyst, followed by general public, both in English. If you are listening through webcast, your questions can be sent by chat. We ask each participant to restrict themselves to two questions at a time. [Operator Instructions] Our first question comes from Marcelo Santos with JPMorgan.

Hi, good morning. Thanks for taking my questions. I have two. The first question is, could you please just explain the reason for the gap between the physical decommissioning of the towers and the financial impact? I think clarification would help. And the second question is on broadband adds, how much of the fiber edge you're doing a replacement of fiber to the curb? And when you are done with your fiber to the curb, I mean, at this space, eventually you run out of fiber FTTC subs, should we expect the same level of gross adds in fiber? That's the question. Thank you.

I'll take both, Marcelo. So, a moment, okay? So, in terms of the gap between the physical decommissioning and the economic decommissioning, it's primarily related to the interworking among ourselves and the tower company to get the, let's say, the green light for the economic decommission. And so, it's like when you rent an apartment and you live it, you need to take out all the stuff that you have inside. Then at the end of it, there is an inspection. And if the apartment is found clear, then we are good to go in terms of economic decommissioning. So, the first step which is the physical one is taking all the equipment out of the towers. Or by the second one is related to the interworking among ourselves and the tower company to make sure that them agree and greenlight the fact that the tower is empty. So, this in practice is embark and go of documents, picture and inspection to make sure that both us and our partner are clear that the tower is empty. So, this is for the first one. In terms of timing, it depends on the tower company, on the process, on the equipment that is there. But roughly the guidance that we gave is once we are done with the physical decommissioning, it generally takes among roughly 90 days to move from the physical to the economic decommissioning. Okay. Related to the second question in terms of net additions, as you correctly saw, there is an acceleration of net assets on FTTH in this quarter. So, this is a combination of the migration of copper to fiber, which is happening primarily, or better exclusively on the I-System plant in Sao Paulo and Rio de Janeiro. So, our share of FTTH was 60% one year ago. It's roughly 80% today. So, we are moving faster, we are almost completing the process. When you look at the increase that we saw, for example, in this quarter, and what we are going to expect for the following quarter is the combination of the two things, so, the migration of copper to fiber, which is almost finished, and the increased coverage of new regions. So, with the agreement with V.tal, we moved to Parana in Santa Catarina in the south, and a chunk of the net additions is coming from there as well. If you ask me about how we really look at it going forward, it will look closer to what we are seeing in this quarter. So, we moved to something like a 15K, net addition, 16.4 to be precise, in this quarter, this number was a bit below this number in the previous quarters. Here, are we moved from five to 16. And we are likely now to basically move steadily on this level going forward.

Perfect argue. Thank you very much.

The next question comes from Marco Nardini with XP.

Hello, good morning. Thank you for taking my questions. I actually have two on my side. The first one is regarding the expected dynamics of the EBITDA margin, following the end of the TSA with Oi. What should we expect here? And the second one is regarding neutral network. I was wondering if you could share your initial experience with V.tal and provide some insights into the expected growth and economics of this new partnership, please. Thank you.

Okay, Marco. So, on the first, on the EBITDA margin, we said in our guidance for '23 that we were expecting to move up double digit. This implies clearly a margin expansion versus last year. And so, we are basically aiming to get to a level close to the one we have the previous year. The margin expansion is driven by a number of things. And so, as you correctly mentioned, there is the conclusion of TSA. We remember it was something like 70 million per quarter roughly. So, we close it at the end of the last quarter. And there are other additional opportunities related to the Oi customer base, which is in general less digitalized versus ours. So, in terms of digital building, fixed payment, that sort of stuff, there is an opportunity there. And there is a number of initiatives that we are running inside of our own operations that are related, for example, to the insourcing of E-commerce, and many others activity that are expected to increase our productivity. So, there will be margin expansions going forward. And that's the reason why our EBITDA is going double digit versus high single digit of our expected revenue growth. When we go to the network, I can say that we are happy with both I-System and V.tal, the experience so far has been quite positive. We can say that now the model is working correctly. So, we are satisfied with the service level and the working of both agreements. In terms of how we are going to accelerate the two networks that we are using, it's in line with our plans so they are complementary. So, at the end of the day, we're going to use I-Systems to expand coverage in some areas. And we are using - we are going to use V.tal where I-System is not present. So, we are going to complement the rollout approach to avoid building a network where there is already another one.

Perfect, thank you.

Our next question comes from Lucas Chaves with UBS.

Good evening, everyone. So, thanks for having my question. So, I have short on my side too. The first one is related to ARPU. And if you could please enter in more details in the dynamic that you saw in the quarter, and what you expect going forward? And about raising prices, do you expect to perform any during the next quarters? And the second one is decommissioning. So, you already explained well in the first question about decommissioning, but I also like finishing details about the schedule and the timeline. Thank you.

Okay. So, Lucas, going to the ARPU dynamics, so the ARPU dynamics, as you saw, we are back on track in terms of ARPU growth, both for prepaid and postpaid. And this is primarily the results of the cleanup of Oi customer base. So, let's put this way, it's a mathematical effect. So, we clean-up almost the big chunk of client that were not active. And therefore, basically we reduce the denominator while impacting the revenues. And we expected this, and we come into this in the last quarter results also. When you look more in general in terms of the pricing dynamics, so I think that here we have two important milestones. The first one is already post there, it has been related to the fact that prices have been adjusted a bit above inflation on the entry prices, what we call above the line. That means prices at retail stores and on the Web site for new customers. So, this happened in March. And it worked out quite well. So, that was the first important milestone. So, we did it, we Vivo did it and Claro did it partially, so they decided to manage for the first time in many years to pass inflation on the enterprises. What is going to happen now in this quarter, as a matter of fact is happening, is the price adjustment on our side, on our own customer base. So, we did that last year in this quarter, in the second quarter. We are going to do this in the second quarter this year. And so, we are updating prices for control and postpaid this quarter. So, you will see the results in the next quarter results. I think that the important point that is going to be another key point to look at next quarter is the washing machine effect. That generally happens when we do this price adjustment on the customer base. So, the thesis is that since the market is more rational since we moved up the prices on the entry levels, the washing machine effect in the second quarter is going to be this year milder versus last year. So, we're going to comment on these next quarters. But this is the expectation on our side. Last comment is on prepaid, so we have been steadily increasing or remodulating the prepaid benefits. And it's working out well as you can see in terms of our prepaid revenues. And so, we are readjusting unit prices within face value and benefits with a positive effect on our revenues. When it comes to your second question related to decommissioning, so we are on tracker, Lucas. So, we ended up March with the 1.5K towers decommission physically. We are so this week at 2.1. So, we are moving according to our plan, that means that we're going to reach 3.5K by the end of this year, roughly. The economic effect is going to pick up in the second-half, because this is difference between the timing where we decommission and the timing when the economic benefits kicks in. But so far, we are on track.

Many thanks. That was very clear.

Our next question comes from Lucca Brendim with Bank of America.

Hi, good morning. Thank you for taking my questions. Two questions here from my side. First of all, when we look at the impacts from the 5G expansion, were you able to see any signs of capitalization from this? I mean, monetization from the 5G for gaining new customers, or if you're being able to upsell customers with 5G, what have been the early impacts from the rollout? And then, second, if you could give us an update on CapEx, if there were any changes from what you initially expected for the year? Thank you.

Okay, let me go with the first one, I will pass on the CapEx guidance then to Andrea. So, in terms of 5G impact, let's put this way, at this point in time, we are deploying 5G in a quite different way versus our competitors, meaning that we selected several markets where we go all in or sort of all in terms of coverage. All these, our aim with this strategy on the commercial side is to get the leadership on 5G and close the gap that we currently have in high value customer segment. So, it's more of a positioning approach rather than a monetization approach at this stage. And that's the reason why we selected capital like Sao Paulo, Rio de Janeiro, we've got almost full coverage. We provide a better service to our customers, and we increase the appeal of our positioning for the market. So, this is the idea on the consumer space. The storytelling is, 5G is better than 4G. This is proved in terms of quality of service. We are leading 5G, so it will become more attractive for high value customers. And we materialize this, for example, in big events, like Rock in Rio last year, like the Maracanã Today, like the Carnival, and all the events that we are doing, where generally customer experience poor services. And now with TIM, we got a very good service. So, this is more of a positioning approach on the consumer space. And, of course, this is supported by deployment of 5G, which is faster versus our competitors. The more economic benefit of it in the short term is related to the 4G offload. So, what does it mean? That when we put like for example, in Sao Paulo, Rio de Janeiro, Curitiba as if we are deploying new capitals in new metropolitan areas as we speak. We moved traffic from 4G versus 5G. That means that we can stop investing in these crowded markets, 4G, and then move the investment with 5G. By doing this short shift of investment from 4G to 5G in these key capitals, we become more efficient in CapEx, so this is more tangible in terms of economic impact at this space. Then we have also the business segment where we are using 5G again as a differentiation lever in key verticals like agribusiness or the logistics like the partnership that we have with São Martinho, which is the 5G Innovation Center or the coverage of the center harbor with BTP, which is again a way to monetize it. But at this point in time, it's the first industrial project that we are running on it. So, it's more. Going forward, as coverage expand, as we move customers to 5G, the first opportunity to monetize 5G will be the data monetization itself. And plus, as you probably know, we are putting services in our 5G packages, like cloud gaming. As soon as the mass of customers are on 5G, we can start to monetize. Today is more of an educational approach in terms of giving our customers 5G experience and for them to decide that it's worth or not worth paying for. On the CapEx guidance, I will pass it to Andrea.

Hi, Lucca. In CapEx, we are on track. This first quarter, we have higher CapEx, it's a sustainability point. But we want to achieve our guidance that is CapEx over revenue lower than 5%.

Very clear. Thank you for taking my questions.

[Operator Instructions] Our next question comes from Daniel Federle with Credit Suisse.

Thank you. Good morning, everybody. Thank you for taking my questions. The first one, we're having seen mobile service revenues growth is slowing down a little bit quarter after quarter. My question is if you expect this trend to continue the second quarter this year, especially because the second quarter last year was a very strong one? So, very hard comps. So, first question is, when do you expect to see growth stabilizing or re-accelerating? And the second question, Anatel has just published a few weeks ago actually, the annual quality survey, it seems that the TIM S.A. still rank in thirds. So, my question is whether this is a point of concern for the company, and if you have any expectation in terms of timing to close the gap? Thank you very much.

Okay, Daniel, let me get the two. So, in terms of revenue dynamic, what you're saying, it's correct. So, if you look at the service revenue dynamics, we've got 44, 22 and now 21.1. So, there is a slowdown. A lot of this is also related to the fact that price movement -- there are two main factors here. So, there is the effect of our Oi customer base. As you probably know, we bought 40% of it. So, there is some cancellation, which is without revenue. So, let's put this way, so there is no revenue impact in reclassification and customer cancellation. But there is also a net leakage of customers that happened throughout the migration process. I think that the intensity of this migration of leakage of revenue, it's slowing down as people who didn't want to stay with them already left. On the other side that you have the - let's put this way, organic dynamics, which is positive and in line with previous trends. And so, today, when you look at, for example, the 21.1%, in the next quarter it's going to be lower because we won't have Oi in it. And so, you will have just a month of Oi in it. So, you will go down on an organic performance. And then, moving from the third quarter and the fourth quarter, it's just going to be organic. So, you will see a revenue deceleration because we're going to lose the inorganic drive that we had on the last quarters. So, the guidance that we are going is - that we're giving is that we're going to grow above inflation. So, this is a big change versus the previous years, when as a sector, we couldn't grow above inflation. So, our expectation is to grow above inflation, and this will result in a high single digit growth this year. So, it's correct that you're going to see a revenue slowdown the next quarter, but it's more of the fact that we're going to lose a bit of the inorganic on a year-on-year basis. And you will see the real performance of the new organic team that is going to be in our expectation above inflation. Is that clear, Daniel? As dynamic --

Yes, totally clear, totally clear.

Okay. So, the next quarter is going to be good for this because you're going to have a pretty good sense in terms of what is organic and what was the Oi element of it. When it comes to the Anatel survey, I will say the following. I see this as a big opportunity on our side. So, it's not an element of concern. But it's a big opportunity. It's a matter of fact that we are third. And if you look at the difference between us and our competitors in prepaid, it's almost very small. It's a bit higher in postpaid. And that's exactly where we want to improve our position. And so, there are a number of initiatives within the company to address the customer experience. So, this is a key element of our strategic plans and a key area where we're putting a lot of efforts. So, when you look at the two main elements are generally the customer care quality and the network quality. And we got plans on both sides to improve our relative positioning, especially in the high value customers. And if you look at the progress that we are having at Anatel, for example, if you look at the Anatel complaints, April, I think they are already public, we went 50% down year-on-year. If you look at our resolubility index at PROCON, we are the best performing among our operators. At a certain point, this will translate in customer experience. So, I will say that we have already a lot of harder elements with us. Now, this will translate in customer's perception as well. So, this is an opportunity where we can close the gap with our competitor. So, it's not an element of concern, but it's more of an opportunity.

Perfect, Alberto. Thank you very much.

The next question comes from Felipe Cheng with Santander.

Hi, thank you very much for taking my questions. I have two on my side. The first question is related to dividends, if you could provide us an update for dividends distribution in 2023? It seems like you're on track to generate a lot of cash right in 2023, probably at a much faster pace than the 2.3 billion dividend guidance for this year. So, I just wanted to understand if there is room, right, for potential upside here in terms of the distribution. So, this would be my first question. And my second question is related to ultra-broadband. If you could provide us an update on how the partnership with V.tal has been evolving, if there is, in your view, of significant upside risk here regarding ultra-broadband growth for the upcoming years. Thank you very much.

Hi, Felipe. I confirm we are on tracking in our dividends. And we were still with the 3.3 that we 2.2 that we - sorry, with only putting out guidance. For now, we have no further update in this information.

And, Felipe, for the broadband, as we say, if you look at the competitive environment, it's tough. So, there is a lot of competition in all key markets. And so, what we are aiming in terms of our broadband expansion is to grow, maintaining our - let's say, with coherence between volume and value. And these translate in a certain growth speed, which is in line with what we are looking at today, which is high single-digit. We're probably going to accelerate EBITDA towards the year as the effect of increased net additions. But they're always looking at a good balance between growth in terms of volume and value. So, we are very careful not to dilute our ARPU. We've been an ARPU growing for 17 quarters now. We've got the highest FTTH ARPU in the market. And so, we are happy at this point in time with the speed of our growth in broadband. So, basically, that's the balance that we're striking every quarter.

Perfect. Very clear, thank you.

The next question comes from Carl Sequeira with BTG Pactual.

Hi, good morning. Good morning, Alberto and team. Thank you very much for the call. My question is really a follow-up question on a few questions that will address it on exploring V.tal's neutral network to grow the fiber business. I was just wondering if you can give us some more color on how the project is performing in the south? And what is the next step? I mean, if you're going to explore, there's the agreement in the south of the country where TIM has a very strong branch, and maybe then move to other regions. How you were seeing the project moving and how it is performing today, please?

Okay, Carl. So, the pilot in the south is proceeding well. So, if you look at the net additions in those regions, you will see that we moved up quite faster versus our competitors. So, the expansion that we are having in the south, the pilot so far is good. What are the elements that we still need to prove that generally speaking, when you enter a new area, especially in an area that we selected because we got a strong brand, a lot of credibility, it's quite positive in terms of net addition because you don't have churn. So, you've got a lot of gross addition without churn impact. So, what we are really looking down there, and it takes some time to get the final conclusion, if it's positive or not positive, so far, it's positive in terms of net, I think we've got the leadership in quality by in February already. The point is that we need to look at the quality of this acquisitions. And so, the reason we need another couple of months to wrap it up in terms of finally positive because that's a quite an important aspect of the value balancer. So, putting inside customers that stay with us without impacting churn or our collection rates, and this processor takes a few months because people enter, and then you receive the first bill after a few months and the time to pay. And so, so far, it's good. We still need some time to look at this other aspect, which is related to the quality of the acquisition. The response from the market has been quite positive in terms of gross addition sales. These translate in a good net performance. And we just need to check the quality of these gross additions; so, so far, good. And from there, when we finalize this, we're going to disclose the next step.

Okay, perfect. Alberto, thank you very much.

Without any more questions from analysts, we will now start the public Q&A session from the webcast platform. And the questions will be read. Please, Mr. Vincente, you may proceed.

Good morning, everyone. So, the first question comes from Tristan from GAMCO. It's a by side. So, his question is, how big is of an opportunity is agri coverage? What is the total amount of farmland to cover? Will satellite coverage be needed to supplement? Alberto, please.

The opportunity is quite huge in terms of coverage, because today, we basically cover 14.4 million hectares. And this accounts for something like 20% of that specific big farmers that we are aiming at. So, we just covered 20% of the addressable market. And so, the opportunity in terms of coverage is quite high. The satellite can certainly be a complementary technology to provide the coverage in those areas. It depends a lot on technical requirements for the customers. So, to give you an example, we use ourself satellite as the becalling in some of our solutions. But it depends on the requirements, especially in terms of latency of our customer base. So, if they want a good responsiveness, then satellite doesn't work, at least geostationary satellite. If they look for something where latency can be allowed for, then it works. But I think that given the nature of Brazil as a continental market, there is opportunity for mobile, and for satellite as complementary technology. Just a recap on the business model on our side, we make money by selling the infrastructure - not selling, by buying the infrastructure for our customers. So, our customer pays for it plus the markup, and then we monetize the services in terms of connectivity and solutions on top of it. There is also an ESG implication. Because generally, when we provide this coverage, we provide digital - we provide coverage to a lot of people, they live their work in the farms. So, if you look at our current coverage of 14.4 million hectares, we have more than one million customers living in those areas that didn't have access to telecommunication services. And when we go there, we get - let's put it this way, some consumers, some incremental consumer revenues from those customers as well, besides providing connectivity for them, and including them digitally.

Thank you, Alberto. Now, we move to the next question that comes from [Miko Hodo] (ph), an analyst from Morningstar. And his question is, can you comment on consolidation opportunities in the broadband and fiber infrastructure market?

So, when you look at the Brazil - and you look at a number of operators there, you certainly see a lot of consolidation opportunities because there are too many players generally where there are a couple of them. So, when we look at this, you see that you got a lot of ISPs. And so, the first wave of consolidation that is already happening is among themselves. So, there are larger SP buying a smaller SP. I will say that we envisage a way where ISP will consolidate among themselves. That could be a first wave of consolidation, and then there will be a second wave of consolidation where big players potentially will possibly or eventually consolidate ISP. Some of them are probably be part of this processes, some of them are going to be out of the market. And the same consolidation process may happen also on the infrastructure on the neutral networks. As you know, there are several neutral networks there, so Vivo, V.tal. And it doesn't make sense to over build or to infrastructure there. So, there might be some consolidation happening also at the neutral network level.

Thank you, Alberto. The next question comes from Phani Kanumuri, analyst from HSBC. And his first question goes, can you talk about the narrative trends with regard to why TIM lost subscribers this quarter, and when we can see an inflection point on the total net ads? I think Alberto already commented on this. But if you have in addition to that, Alberto, please.

So, Phani, this first quarter was more difficult to read, because of all the cleanup and the leakage of our customer base together with our performance. You will see an inflection point in the second quarter. So, in second quarter, we should be able to have a much less effect of the Oi customer base. And the performance will be more in line with our organic performance. On the TFF --

Let me make the second question because the audience hasn't seen that yet. Sorry, Alberto. Phani's second question is, is there any update on the TFF, which is the FISTEL, FISTEL payment that was suspended since COVID? Do you expect the payments to be in a single installment? Or will it be staggered? Andrea, please.

Related to the payment of TFF, the payment was - discussed about this is in the court, federal court. And now it's under analysts. We don't have any updates about the date of the payments.

So, thank you, Andrea. The next question comes from [Hudso Cabrao] (ph), he's an individual investor. And his question is, how is going the installation process of the Massive MIMO on TIM antennas? In this question, it was asked the help of Leonardo Capdeville, our CTO, please.

Good morning, Hudso, we consider the massive MIMO as an active technology for the 5G, where means that 100 percentage of our 5G antennas already include this technology. But we have to remember that we innovated and that we anticipated the usage of the massive MIMO on 4G. So, we install the massive MIMO on 4G. We started that almost three years ago. And there you can see a very difference in terms of capacity quality, where are now we are using these kinds of technology. So, again, 5G, 100% and in 4G we use massive MIMO in place that makes sense for the reason for capacity or quality. So, it's going very well.

Thank you, Leo. I think with this, we finish our questions and answers. So, Operator, please.

Ladies and gentleman, without any more questions, I am returning to Mr. Alberto Griselli for his final remarks. Please, Mr. Alberto, you may proceed.

Thank you, everybody for attending today's conference call. I want to thank again, our management team and all our team listening our resolve this quarter. We are in track in terms of delivering what we promised to the market in terms of guidance, remembering growth of inflation above - growth of the top line above inflation, expanding EBITDA margin, increase our CapEx efficiency, and a plan to double our cash flow in the plan 2023-25. Thanks again to the team, and I look forward to meeting some of you in the next interaction.

Thus, we conclude the first quarter of 2023 conference call of TIM S.A. For further information and details of the company, please access our Web site tim.com.br/ir. You may disconnect from now on. Thank you once again.