Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefonica Brasil First Quarter of 2017 Earnings Conference Call. Today with us representing the management of Telefonica Brasil, we have Mr. Eduardo Navarro, CEO; Mr. David Melcon, CFO and Investor Relations Officer; Mr. Christian Gebara, CRO; and Mr. Luis Plaster, IR Director. We also have a simultaneous webcast with slide presentation on the Internet that can be accessed at the site www.telefonica.com.br/ir in the Engage-X platform. There will be a replay facility for this call on the website. After the company’s remarks are over, there will be a question-and-answer session. At that time, further instructions will be given. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the company’s management beliefs and assumptions and on information currently available. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the company’s future results and could cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Luis Plaster, Investor Relations Director of Telefonica Brasil. Mr. Plaster, you may begin your conference.

Hello, everybody. Thank you for joining us in this conference call for the first quarter 2017 results of Telefonica Brasil. As usual the call will be divided in three parts. In the first part, our CEO, Eduardo Navarro, will give you an overall view of our operating and financial results for the first quarter of the year. In the second part, Christian Gebara, our CRO, will go over our commercial strategy and CapEx evolution; and our CFO, David Melcon, will discuss our financial results and synergies. We will then move to Q&A. Now, I pass the word to Eduardo.

Thank you, Plaster. Good morning to everyone on the call. Good afternoon for those that are in New York. Regarding our first quarter 2017 results, I am very pleased to report another quarter of reinforced leadership and robust results. We continue to accelerate revenues, enhance our level of profitability and deliver outstanding cash flow generation. Going straight to the highlights of our presentation on Slide 3, let me start off by pointing out that the 2% growth of our total sales revenues was driven by an impressive 11 percentage point increase of non-voice revenues, which now represents 2/3 of the total. When you look at data revenues, we see a 34% year-over-year evolution, confirming that we are successfully executing our data-centric strategy and consistently delivering double-digit growth. In the mobile business, we see another quarter of acceleration with 5% jump in sales revenues, proof that we are continuing to outpace the market. Recurring costs moving to the mid of the slide, the first quarter of this year was the fifth quarter in a row where we saw drop, minus 1.1% year-over-year taking our recurrent EBITDA margin to 33.2%, a significant 1.8 percentage points higher when compared to the first quarter of the previous year. This is a clear sign of our commitment to a strict cost control, continued focus on synergy delivered and relentless focus on efficiencies. David, our CFO, will comment more on that later. Our operational cash flow measured as EBITDA minus CapEx grew a robust 3.5 percentage point year-over-year, reaching a margin of 12.6%. As you can see, our results for the quarter are inline with the perspective we shared with you during our last result call. Now let me shift your attention to the right hand side of the slide, so we have to share with…

Thank you, Eduardo. Good morning everyone. Before going through the slides, I'd like to highlight our key operational initiatives and results for the first quarter. This was another very positive quarter for Vivo, reinforcing our leadership in key segments. We continue to successfully expand the high-value segments with significant growth in postpaid and also broadband revenues. Our mobile strategy focus on the value and data has driven ARPU up in both segments: postpaid and prepaid. Broadband plays a key role in the fixed business revenues and FTTH continues to have solid increase in access. We maintain our focus on the expansion of our high-speed data footprint more specifically on 4G and FTTH network. Moving on to Slide 5, you can get a perspective for how we were able to increase our non-voice revenues, which had a significant growth of 24% year-over-year, and value our value represents 63.3% of our total revenues, 11 percentage points more than a year ago. The right-hand side of the slide shows that this increase came specifically or especially from mobile and fixed data services, which combined grew 33.9% representing now over 47% of our service revenues. Our efforts to encourage mobile data and digital service usage resulted in 37% growth, while the ultra-broadband increased 16.7%. Getting on to the details of our main businesses, on Slide 6, we present evolution of our mobile revenues, which increased 5% year-over-year or 7.3%, excluding regulatory effects, mostly, driven by data and digital service that went up by 37% as already mentioned on the previous slides. This is a result of our efforts on reducing our dependence in volumes by launching new services, offering more attractive bundles and increasing data allowances on mobile plans. I would also like to highlight that internet revenues had an impressive growth of 56.6%…

Thank you, Christian, and good morning everyone. Moving on to Slide 12, once again, we have been able to reduce recurrent operating cost by just over 1% despite inflation which reached 4.6% in the period. This is the fifth consecutive quarter with cost reduction, demonstrating the successful execution of synergies and efficiency initiatives. As Eduardo highlighted at the beginning of the presentation, we continue to execute our value-driven strategy based on commercial rationality, simplification and enhance use of digital channels that has benefited our commercial and customer care cost. Personnel cost decreased 0.9% mainly due to the savings from rightsizing initiatives that took place last year. Cost of service rendered fell 4.9% explained by the additional interconnection tariff reduction in February 2017 and synergies in TV content negotiated in October 2016. Commercial expenses increased 4% in the period due to the combination of our efforts to accelerate commercial activity in the key segments in line with our value driven strategy. Bad debt is under control reaching 2.2% of the growth revenues in the quarter due to the continuation of credit and collection actions and took a guaranteeing that bad debt remains stable. As a result, we reported a very consistent growth of 7.3% in our recurrent ADA on a year-over-year basis and continue to improve our recurrent EBITDA margin reaching 33.2%, increasing almost 2 percentage points when compared to previous year. Turning to Slide 13, we present an update on our synergy evolution, the usual breakdown that you have seen over the last few quarters. The company has already secured by the end of Q1 2017 and NPV of R$17 billion, more than guaranteeing the best case NPV of synergies calculated during the due diligence and already securing 76% of total NPV included in our best case scenario of R$22…

Thank you. [Operator Instructions] Today’s first question comes from Maria Azevedo of UBS. Please go ahead.

Hi, good morning. My first question would be on the competitive environment in the mobile business. If you can expand a bit on how rationale are you actually seeing the competition in the light of your recent move from other operators? And then my second question would be on FTTH. What is your expected level of FTTH penetration in the base over time? If you can please expand a bit on what drove the price reduction of FTTH deployment? If there is a new network or sector, digital customer care, how you’re seeing the margins and payback of that process? Thank you very much.

Hi Maria, this is Christian. We said during the call, we are very confident about our results in the mobile business. If you compare the results that we had this quarter with the similar one, in the first quarter 2016, you can see that our postpaid net adds now multiplied by 203. We will be able to migrate more customers to – from prepaid to hybrids, and we continued to have a very low churn level and portability continues to be very positive to Vivo. So I understand there are movements from another competition with different strategy, some of them more focused on voice. We continued to be very, very focused on data. And so we believe that we are in the right direction and the results that we just presented, they confirmed our belief. So we’re going to continue on that. We have very strong focus in postpaid in family plans, that we are giving more data but for a higher price, where customers can put up to 10 dependent on the same plan. They have the possibility to manage their data and allocate it to the dependents as much as they want. We also have carryover that is something very innovative and unique in a market that customers can use the data from the previous month to the current month. So in a way, I think, the competition is – everyone is like following its own strategy. And we are confident that we have the right one and very strong focus on data. Regarding FTTH, as you asked, also strong focus. We just like recently reached more than 1 million customers for this year. We have a plan to go to 19 cities. So it’s will increase our footprint. And we expect to be also increasing penetration. We also showed number of in FTTH of 38% increase in broadband access in FTTH. So we believe, they’re going to continue on these trends. And also in CapEx, as we mentioned, we see a reduction there in the last 3 years of more than 30% of FTTH CapEx deployment in [indiscernible] per unit. So that’s going to help us to comply with our CapEx and be able to reach more customers with a larger footprint and higher penetration over our home plans.

Perfect. Thank you very much.

And our next question today comes from Susana Salaru of Itaú. Please go ahead.

Hi, good morning, guys. We have two questions. The first one, if you could provide a little bit update into rollout of the synergies target in profiling? And it seems to be the one that you guys see some pace to be fulfilled, that would be our question. And the second question, if you could also provide an update on the digitalization process? How its evolving so far? And what are the main areas that are being already using digitalization and what we should expect going forward? Thank you.

Hi Susana, this is Christian. So we’ve been – I think, our cross-selling offering has been evolving as we planned. We have a very selective conversion strategy. So our focus as I think, we commented in previous calls is like, totally value-driven. We want to focus like increasing ARPU, giving more benefits to customers and improving their loyalty, we’re now looking for a very strong discounts. What we’re doing so far is trying to offer data bundles to customers that are fixed and also mobile. So today, we have offers in the hybrids plan that would give 1 giga, it is also a fixed business customer. And also, we go from 2 gigabytes to 10 gigabytes for customers – for postpaid customers that also convergence. So I think that’s going to be our strategy for the short-term. In the mid-long term, we’re going to be more convergent. We’re also doing some structural change, as we said also in previous meetings, that we are embarking in a full stack IT platform that will allow us to be much more unified in billing, CRM and information available about customers in real-time, and that will give us more opportunity to do more convergent. But so far, we are happy with the cross-selling initiatives that we have. And again, very value-driven, more benefits, driving loyalty. About the digital part and maybe someone else can also complement. As I said during the call, the first one is a strong focus in our apps, now you have Google apps that it’s our main focus as an e-care channel. We reached on an average of 4 million unique users per month, that is a good number. The downloads of the app that is something that we are following. We have more than 16 million apps already downloaded. So we’re going to continuing this effort to have people downloading app not only for queries but also for billing, for scheduling business to the store, to check the data consumption, to allocate data in our family plans. So it continues to be a strong focus. And also in the digital arena, also our strong focus, I also said, in selling more digital services, exclusive ones, strong partnerships between Vivo and big digital players, as I mentioned also NBA or any other ones. I don’t know if someone else…

I just can complement also some explanation on actually by Christian. I think that what a digital customer is expecting from us? Well, I think the first thing he is expecting from us is an offer on that. It’s a line what we are willing on to do. And I think, that the movement that went from voice, now that the fact that now two-thirds of our offer are fixed and non-voice as such. Digital customers, they don’t want voice anymore, they want data. Now we’re seeing that we have really very, very aggressive in adapting our offer to this digital customer not only gives us quality not only on the data, but leading the way how they can manage and they can – all the explains that Chris has mentioned that they can manage or they can distribute this data among the family, or they can rollover from one month to the other or the way they can buy, the way they can sell. I think the first thing is to better an offer. I’m very happy, the way we’re doing not only the data, but all this development and sales of every little piece. Everything that Christian has said and [indiscernible] care is very good to the customer. The customers don’t want to call out, the customers don’t want to receive letters from us. The customers want to have a digital interaction with us [indiscernible] now that Twitter has updated some numbers. They are very positive because at the same time, they create our customers a superior experience and they have the potential to dramatically reduce our costs. We are preparing now a set of key plans on that. I hope that from the next results presentation on, we can give you lump sum numbers, for instance, the evolution of our billing or evolution of our My Vivo usage, but we are very confident on this. This is a trend that we cannot stop. And it’s again, it’s a different time, very good to reduce cost, to reduce our churn, now to have more loyal customers and at the same time to dramatically increase the efficiency of the company.

And our next question today comes from Mauricio Fernandes of Bank of America Merrill Lynch. Please go ahead.

Hi, good morning everybody. Thanks for the question. So my question is on fixed line, Eduardo or Christian, please. Could you elaborate on initiatives given the fixed line business partially due to the reduction in mobile termination rates or interconnection rates? But on top of that, voice continues to decline outside of those effects, and B2B or corporate data has been declining as well on a year-on-year basis. So I was wondering, if you could elaborate on how – or which are the initiatives you’ve been taking to try to compensate for the secular decline that is inevitable to happen in the voice business with other businesses, and if there is any potential for us to see an inflection in the decline, again, outside of the regulatory effects? Thank you.

Thank you, Mauricio, this is Christian. So first, I’ll elaborate a bit in the number, the 2.2 that represented in the fixed. There is also the impact on TV. So the number of TV growth this quarter is 0.5% compared to what we presented like one year ago of 21%. That’s also part of our strategy, to be much more selective in deploying TV, more specifically on DTH alone that we are avoiding the strategy. We are driving much more, tripling for loyalty. So and much more focus in IPTV, and that’s why we also showed very strong numbers in IPTV. So that also some of the answers of the number that you see. The regulatory impact, as you said, the R$2.2 that we’d be giving as a stable number if we compare it without a regulatory effect. What we are doing is like packaging voice, but we’re not having like three minutes to charge but having customers with voice package of monthly fees to have a much more controlled evolution of the expenses on this service. So we have out today 78% of our voice already packaged. We’re also focusing, as I said, also in compensate voice decline, what is difficult to avoid, we try to compensate with much more data. And that’s also the number that we showed, with a strong increase of almost 17% in ultra-broadband. That’s a part – a very strong part of our strategy for this year as well. As I mentioned, we are going to 19 new cities this year. It’s, I think, the record of new cities of where we are deploying, in this case FTTH. So it’s going to also come with more customers and with a much higher ARPU. In B2B, as I think you also correctly point out, we have a strong – a stronger impact than B2C in voice. We had like difficult like renegotiations during the last quarter because of the economic situation and also impacting SMEs, and we’re very highly affected by the economic situation of the country. We think we went over it, we have a strong transformational program for B2B, trying to sell much more data and more digital services that is similar to what we do in B2C. We believe there is room to do more in B2B even considering the network outside Sao Paulo, the network now is going to be much more driven also to B2B customers. So our footprint in new deployments is also focused not only B2C, but strongly also in B2B. We are trying to sell much more digital service and have been successful, cloud services, security services, IT services. So the combination of that and many transformational things that we are doing in process and also in IT to deliver a better service for B2B, we believe that we’re going to be able to compensate our decline.

Thank you, Christian. And if I may follow up to the points raised by Susana and Maria. The – it seems that not only in voice but in wireless data, the plans offered by Vivo relative to the competition, there has always been a premium price. But it seems – and it’s always hard to compare these things that there is a higher premium today than it used to be, whether right or wrong. So first question is, is that right? Second is, how do you see that – again, not about voice but the comparison on data offered for the monthly fee in postpaid, how do you feel about that, whether you need to make adjustments to pricing plans or not? Thank you.

Yes, I think it’s difficult to compare, as you said. I think our family plans, you have to consider that you can add 1 to 10 dependents in the plan. You can control data assignation, you can use data from previous months. So I think the comparison need to be very well done to see if this price premiumization is a reality. Although we have a better internet coverage comparing to our competitors, summing up 3G to 4G. Good customer experience also in data as proven to last reports. So I think also the comparison should take into account the differentiation that we have in network. So again, I think, you need to see our plans, consider the inclusion of dependence; and secondly, the inclusion of some functionalities for data management that only Vivo can offer; and thirdly, as I said, the best customer experience on data. And comparing to other services, we are now improving some of our portfolio. As I said, also now offering value-added services in our hybrid plans. So I think, we will remain very competitive adding up all the attributes that I said before.

Okay Christian, thank you.

Thank you, Mauricio.

And ladies and gentlemen our next question comes from Fred Mendes of Banco Bradesco. Please go ahead.

Good morning. Thanks for the call. I have two questions. I mean, the first one, regarding what Mauricio had said and then Maria, the first question. But when you look into the Sao Paulo market, particularly regions one and two, one of your competitors, he decreased prices and when we look at his plan for the 2 gigabytes, the range of plan for the hybrid segment, it seems like he's charging 40% less than you are charging. When you look at historically, at least in my calculation it is something like 15% to 20%. So if you, particularly in this segment and this market, you can give us a little bit of color that will be great. That's my first question. And then the second question, I mean, when you look at the CapEx, of course, there are some seasonality even when compared to first Q, there's a significant decrease, and you're being quite aggressive in your 4G coverage, increasing quite a lot the number of municipalities you cover. Can we expect this CapEx for 2017 to be below R$18 billion [ph] billion or it should pick up during 2017? Thank you.

This is Christian, I'm answering the first. And Eduardo's answering the second. I think the hybrid plans, you work a lot in the migration from prepaid customers to hybrid plans. And I think these customers, they chose their telco operator when they are prepaid. So I think all of the competitors and ourselves' success here is to be able to convince the customer to change from a prepaid to a hybrid. And I think our customers are loyal to us. And so they're migrating as a prepaid to a hybrid and postpaid with that. So they are not looking for other offers. And again, of course, we are very careful about what our competitors are doing, but we are confident that as we are driving the number of customers, the volume of new customers are much more for the migration, that these customers are getting what they want from Vivo. That is the combination of data plans, as you said, but also for other attributes that I think we can only offer. So I think hybrid is a market, much more that you're working on own customer base than you're attracting customers from competition. I see that happens to us and to the others. Although, our portability ratio remains very positive against all the major players in the market. So again, we are bringing new things to our offer, we've said about the value-added service. We'll do many others in the future. I cannot anticipate but, again, I think we remain strongly competitive, what we have in the hybrid plan.

Hi Fred, this is Eduardo, thank you for your question. With the data that we have now, there is no reason to believe that we are not going to achieve the R$8 billion that we have set, that could be our rough estimate for CapEx this year. And although, like I said, we have accelerated the 4G coverage. There are always too many things to be done, especially in the fixed side. We have a – we are going to enter in 19 cities, an important part of this will be regulatory obligations based on the past – or based on the previous approval from the GVT acquisition. And again, we are, up to now, have no reasons to believe that we're not going to achieve this number. Of course, if you can do everything that you can do, we are not going to resign to the network play that we have for the year. But if there is opportunity for rationale, of course, we'll take this. But now, I'd say, it's too early to say.

Perfect [indiscernible] thanks Christian.

Thank you.

And our next question comes from Diego Aragao of Morgan Stanley. Please go ahead.

Hi good morning. Thank you for taking my question. Two questions, if I may. The first one is a follow-up question regarding your fixed business. If we could somehow separate your performance in the state of Sao Paulo and outside the state of Sao Paulo, how those two businesses would be trending at this point. And the second question is regarding the mobile postpaid segment. Without taking into consideration any potential disruptive movement from your competitors, for how long do you think you can continue to deliver strong net adds in the postpaid? I mean, I'm trying to quantify how many prepaid customers you could eventually migrate? And what could be the postpaid mix, let's say, three years from now? Thank you.

Hi Diego, this is Christian. For the fixed business, I think we have a different business now, to consider Sao Paulo and outside networks. So we are much stronger in Sao Paulo with FTTH, and we had a very positive performance as you've seen in our numbers. So it drove a lot of growth, at the same time, we're defending more voice revenues in Sao Paulo than we are outside Sao Paulo. We have only in Sao Paulo DTH standalone business, that's something that we're avoiding to do. So that's also something that is different from Sao Paulo or outside Sao Paulo. At the same time, outside Sao Paulo, you never had the possibility of having our stores selling fixed business. Now we have it. We never had the opportunity to have some cross-selling benefits, as I told Susana, in the beginning of giving more data for mobile customers that are also fixed business. So I think it's a combination of two factors. We are very happy with the performance in both regions, but they have different mix. Now going forward, in both regions, what we have in common, is a strong focus in FTTH. So of the 19 cities that we are deploying this year, some of them are in Sao Paulo, most of them are outside Sao Paulo. All of them we're going out with fiber-to-the-home. So that's the explanation for the first. For the mobile postpaid, again, the number that we're showing today compared to previous quarter of 2016 – first quarter of 2016 show that we were still outperforming the market, and also we are having more net adds in postpaid, we are migrating more with key portability ratio positive, we are investing more cities for 4G. We're already advancing the market of what we call 4.5G with carrier aggregation at already 60 cities where we can offer twice the speed of the 4G. So not anticipating what we see for the future, we are positive that we continue to be good numbers-aggressive and leading the market as we've been doing for the last five or six years.

Okay, thank you Christian. Just to be more specific, I mean, for the first question, are you saying that outside of Sao Paulo, Paulo, the topline is declining year-on-year?

We don’t see that. Just to compliment. No I've seen more difference between B2B and B2C than between Sao Paulo and outside of Sao Paulo. I think that, like Christian has said, I think that we are [indiscernible] to have on the B2C on the – when the fixed line came to the B2C – sorry, B2B. And I would say this is both Sao Paulo, Sao Paulo outside. There has been a huge pressure on [indiscernible], many of them had disappeared, now there's a recession because [indiscernible] asked to negotiate their contract. We try to attach more base on this B2B and B2C, we want to be at Sao Paulo and outside Sao Paulo.

Okay. Perfect, thank you.

And ladies and gentlemen our next question comes from Julio Arciniegas from RBC. Please go ahead.

Yes good morning. Thanks for taking the questions. Can you give us an update of the number of homes passed that you currently have with FTTH and FTTC? Plus, additionally, you have been mentioning that you're going to new cities. Can we quantify these in terms of the target of new homes of FTTH going forward? That was my first question. And the second question is related to selling expenses. As you mentioned they have increased because basically, the company has been making more efforts in key segments. Can you give us more color on what segments and what actions have you been taking? Thank you.

Okay. For the new cities, Julio, we don't quantify. We are going through different type of cities, okay, like as I said, some cities like last week, Volta Redonda, Rio de Janeiro, we're going Barra Mansa, Teresina, and there are like smaller and bigger and midsized cities, okay? So we don't quantify the number of adds that we're getting, but to say that they are 100% FTTH. At the homes passed, we have 17 million. Some of them still need some work in the building to be fully ready for connection. More or less four million to five million are in Sao Paulo and the rest is outside Sao Paulo. And you asked something else that I…

Okay. So it's basically the cost of processing and connecting the FTTH home is the same as FTTC?

Exactly. So from this number it’s what we’ve said, one-third FTTH and two-third FTTC.

And now we'll grow only in FTTH?

And only FTTH. But again, the cities are the ones that I said. That's more or less the size of the cities, for you to have an idea.

Julio, your last question was about incremental and commercial costs that has to do with, as we mentioned, to the presentation. The net adds for postpaid are doubled than the previous year and we also have better performance in ultra-broadband which explains the increase in commercial cost.

Okay. Thank you very much.

Thank you.

Thank you.

And our next question comes from Valder Nogueira of Santander. Please go ahead.

Good morning, guys. This is Valder. Let me shift gears here. More important than the price of the plans that we have been discussing so far in the call, I'm more concerned about the price or the cost that you generate the giga? And in this sense, I'd like to get some color from you guys on how Vivo can be even more efficient on that? How is the deployment of 4G going in the 700, how is that going? I believe, Christian mentioned in his initial statement regarding carrier aggregation. How is that working? And most important, initiatives to infrastructure, which is something that I believe the market is not properly looking into it.

Hi, Valder, thank you for the question. So in light of what you said, I think that we've been efficient in the 4G deployment by itself. So the price per deployment of giga is getting cheaper because of the maturity of the technology. And secondly, there is a 700, as you also said, that make us much more efficient in deploying especially in larger areas and also indoor penetration. And we are capturing all the possibility that we have in 700. And then, thirdly, there is a carrier aggregation that you also mentioned, and Vivo is going strong work in being able to offer that. We have today 66 cities. It's important also to highlight the leadership position that Vivo has on that. On the first 4G option, the 2.5, Vivo got 20 megahertz, then Vivo got the 10 megahertz, then there was a third 4G option of some important capitals of the country where Vivo was the only one getting, also additional 10 megahertz in 2.5 and then we also using part of our 8,100 spec frequency for also to do carrier aggregation in the cities that I mentioned. So with all this, I think we're going to be able to be more efficient in deploying, giving more speed to customers and be able to charge more. So I think that's a very brief summary of what we see in efficiency in deploying 4G, and what we call 4G-plus, that is the 4.5.

How much do you believe the playing field is not properly leveled in terms of these data cost generation vis-a-vis competitors? How much more efficient are you versus competitors?

Yes. I cannot tell you because I really don't know what to say to that. We have a very strong backbone because we are adding here what we had in the fixed business, more with the GVT. We deploy also a lot of fiber to the site, and we have I think a frequency portfolio that today is not replicable in the market for – what I, said in the auction. And also we have other combination of frequency that we daily use in the 3G that can be also useful to Vivo in the future. So I think vivo did a very good job being very active in all auctions that were happening in Brazil for the last 10 years. And today, gave us a portfolio that, I believe, is not comparable to anyone else.

I'll also say, I would add we have some scale advantage. We have much more customers using more data than – we still have some scale advantage.

And part of a very global group that also give us a lot of scale as well in network deployment.

Yes. We’re especially seeing this now, with much of the operation on FTTH. All decisions [indiscernible] have been able to achieve any span, now we're translating into Brazil, that's the reason why now we can be solo in FTTH because [indiscernible]

Okay. I believe these are important because, again, final price competition is just one side of it. And I believe, the cost side is not properly being addressed. Thank you for your answer.

Thank you, Valder.

And your next question comes from Carlos Sequeira of BTG Pactual. Please go ahead.

Thank you. Hi. Good morning. So I have a couple of questions. One is, you've been talking a lot about the 90 new cities this year. My understanding is that agreement improved from the tissue. So my question is, are you – I think, you are, but just to confirm, are you going to move ahead and deploy the cities even if that agreement is not approved by the tissue? If it takes longer much longer to get it approve it? And the other one is, you did accelerated lot of deployment of 4G cities in the first quarter, what is the goal for the year, please? You might have mentioned that before, but I'm not sure?

Hi, this is Christian. About the 90 cities, okay? Seven are for when we bought GVT, so they're not related to the TAC. One of them is a commercial decision. So we have 11 that they associate it with the TAC. And for these 11, we are still waiting the process of the TAC approval, okay. Then maybe Eduardo can elaborate a little bit on that. The second question was, sorry…

Number of city opportunity.

We’ve reached more than 1,000 cities in April, the end of April. And population coverage there, we are slight 1% different from the number one. So we're more or less the same. So of course, again, adding that to our 4G deployment. And now we have first-move advantage in 4G-plus. We believe that we will keep differentiation in mobile.

Okay, great. Thanks, Christian. And then just also – go ahead.

I think one more. Yes, I think, we're not [indiscernible] at the end of the year. We are not going to anticipate the number [indiscernible] strategic decision from Vivo. We want to gain fixed. Our ambition is to gain – deliver fixed from now on. And just on the TAC, as you know the TCU have asked to do some adjustments on the calculation and you have done these adjustments, the result was not material changes, 2% or 3%, the necessary CapEx. Now you come back to [indiscernible] and we are very confident that it will be approved soon. In the meantime, we're prepared for this. Of course, we're not starting aggressively on rollouts or installations. Of course, we will be part, more capital with installation. So we'll be cautious this confirmation with the [indiscernible].

And we're launching that last week, Volta Redonda and Barra Mansa, they are related to the GVT acquisition and not the TAC.

Okay. Thanks, perfect. Just a follow-up. I know, everybody talking a lot about competition in prices, and I just – and maybe this is a completely different market, but we saw the same moves that we're seeing nationwide, we saw Clara doing Rio, with specific market. And in the case of the Rio, at least, from our survey show that Vivo end up following and cutting prices. Last thing, Clara put a bid on postpaid and on the hybrid plans as well. Would you say that Rio is really a different market, and that's why you end up having to at least kind of falling Clara did? Just trying to understand the rationale in Rio and comparing to what might happen in the rest of the country?

Rio is a specific market. As I said, I think Brazil, we have a very strategy focusing on each tha what we call in Brazil. I think, you have some maybe Rio is where we have five strong competitors, not four competitor, five strong players, as you know, it's one market that players is also strong. Our fixed presence in Rio is more limited than other capitals of the country. So we can try a different strategy for Rio. And you're right, we're more aggressive. And I think, is a specific for Rio.

Okay, perfect. Thank you.

And our next question today comes from Mathieu Robilliard of Barclays. Please go ahead.

Yes, good morning. Thank you for taking the question. The first question has to do with the economic environment. So you highlighted that it had a negative impact on the B2B because you had to renegotiate some contracts. I guess, that's looking backwards. If we look ahead, certainly, on the B2C segment, are you already seeing positive impacts of improving macro? Is that something that is still ahead of us and then maybe baked in to your plans? And I'm thinking specifically about consumer mobile to start something that can bring another acceleration? Or you already seeing that in the numbers? And it is what it is? And the second question had to do with 4G network. Again, I was curious, if you could update us on how much of your 4G sites have high-bandwidth fiber connections? Thank you.

Hi, Mathieu, this is Christian. On the economic recovery, I think, it's too early to give any concrete feeling. What we see in our numbers for this first quarter in the mobile business, as you described, net adds in migration to prepaid to hybrids ensure we see a better number that we had 1 year ago. Even in prepaid, now, I think, 6% negative growth but it's a much better that we had one year ago. And again, that's also impacted by the migrations of the hybrid. So some indications that we give here, I don't think is only economy recovering, I think it's also part of the successful strategy that Vivo has been following the last years. So I cannot tell you what is coming from one side and what's coming from the other side. So I think it's a combination of many factors. In the 4G, I think the question is too strategic. So we don't give this information, unfortunately.

Thank you.

Thank you.

And our next question comes from Soomit Datta of New Street Research. Please go ahead.

Hi, yes. A question on the fixed business, please. In the fourth quarter – sorry, first quarter, I beg your pardon, it looks like a number of the FTTH subs were migrations from FTTx, or I guess that would be fiber to the cabinet, can you confirm that is the case, please? And then on the related question, perhaps, you could talk a bit about the different economics of FTTH versus FTTC in terms of ARPU differentials, cost of home connect, home passed, et cetera? Given, I guess, ultimately, you've pivoted the business slightly FTTC towards FTTH, it would be interesting to get a sense as to how those economics are playing out?

I think, in the migrations, it's not the case. We are growing a lot in FTTH, mostly the growth comes from Sao Paulo, where it's, today, 90% of our network. And that – in Sao Paulo, we don't have FTTC. So it's not the case. I think there is a lot of new customer there is a wingback. So mostly our new customer is coming to the ultra-broadband with Vivo. In network deployment, what we see in the deployment of the network today, we have more scale and better cost of deployment for FTTH versus FTTC. And city related, I think, prices are converging. So it's the situation that we face today.

Okay. So it's basically the cost of processing and connecting the FTTH home is the same as FTTC?

The cost of – in FTTH now is half of the cost on FTTC. It's cheaper now in FTTH than in FTTC. Connect is still more expensive in FTTH. But in the last two years, this cost has decreased at 35%. Now this is becoming each time more competitive when comparing both technology.

And that's why our decision is only to deploy FTTH from now on. And I think also the positive decision from GVT prior to the acquisition, new cities that they launched before the acquisition was only in FTTH.

Okay, that’s interesting. Thank you.

Thank you.

And this concludes the question-and-answer session. At this time, I would like to turn the conference – turn the floor back to Mr. Eduardo Navarro for any closing remarks.

Sorry, sorry. I would like to thank you very much for participation in the call. And again, thank you very much for your feedback, all of your opinion or your feedback is very important to us. Again, we are here open to listen from you and hope to be have nice growth in the coming weeks. Thank you very much. Thank you many of the team here and hope to see you soon.

Thank you, sir. This concludes today’s Telefonica Brasil 1Q 2017 results conference call. You may disconnect your lines at this time and have a great day.