Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefonica Brasil Second Quarter of 2017 Earnings Conference Call. Today, with us representing the management of Telefonica Brasil, we have Mr. Eduardo Navarro, CEO; Mr. Christian Gebara, COO; Mr. David Melcon, CFO and Investor Relations Officer; 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 Engage-X platform. There will be a replay facility for this call on the website. [Operator Instructions] Please also note today’s event is being recorded. 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 management’s 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, sir.

Hello, everybody and thank you for joining us in this conference call for the second quarter of 2017 results of Telefonica Brasil. The call will be divided in three parts, as follows. In the first part, Eduardo Navarro, our CEO, will give you an overall view of our operating and financial results for the second quarter of the year. In the second part, Christian Gebara, our COO, will go over our commercial acceleration and CapEx evolution. Finally, our CFO, David Melcon, will discuss our efficiency commitment and financial results. We will then move to Q&A. I now pass the word to Eduardo.

Thank you, Plaster. Good morning to everybody on the call and thank you for joining us. Starting on Slide 3, in second quarter of 2017, we delivered yet another quarter for revenue acceleration confirming our longstanding trend that is unique to build and continues to strengthen our leadership. Our non-voice revenues continued to increase and we see in our quarters resilient mobile service revenue grow approximately 5% year-over-year followed by mobile data and digital services, which grew 32%. In ultra-broadband, we see another example of stability of the growth stemming at 12% year-over-year. In recurring costs, moving to the middle of the slide, the second quarter this year was the sixth quarter in a row, where we saw a drop, minus 0.6% year-over-year, taking our current EBITDA margin to 33%, up 1.6 percentage points higher, when compared to the second quarter of the previous year. This proves, once again, of our strong commitment to controlling costs and continued [indiscernible] efficiencies. In terms of operational cash flow measured EBITDA minus CapEx, we see another increase, plus 2.5 percentage points year-over-year, reaching a margin of 18.3% in the first semester of this year. Moving to the right hand side of the slide as shared with you in the previous quarter. Let me give you an update of our first improved differentiation and guarantee that legal continues to consolidate with leadership in key segments. Our improved commercial activity, once again resulted in 2.3x more postpaid adds – net adds than an year ago and the record FTTH net addition in the quarter 124,000. Our remarkable deployment of 4G in the quarter took us to an additional 657 cities, meaning that 71.4% of population can now count on our superior 4G mobile network. In 60 of those cities, we have already deployed 4G plus…

Thank you, Eduardo. Good morning, everyone. This was another very positive quarter for Vivo, reinforced our leadership in key segments. As Eduardo said, this quarter we grew 2.3% of revenues year-over-year. Before going through the slide, I would like to highlight our key operational initiatives and results for the second quarter. We maintained our focus on the expansion of 4G coverage, reaching almost 1,500 cities, of which 60 with 4G plus, including their main capitals. We continue to expand our high-speed data network, deploying FTTH in 5 new cities. We launched new bundling offers for mobile users with relevant digital services. Our mobile strategy focus on quality and data continued to encourage prepaid customers to adopt high-end offers as we increased significantly digital service revenues mainly driven by security and call services. Getting now into details of our main business. On Slide 5, we present the evolution of our mobile revenues, which increased 4.8% year-over-year, mostly driven by data and digital services that went up by 32.4%. I would like to highlight that Internet revenues had a strong growth of 44.1%. Moving to the right hand side of the slide, the graph on the top showed that mobile data revenues already represent 72% of total mobile service revenues. This is the result of our efforts in reducing our dependence in voice by launching new services, offering more attractive bundles and increasing data allowances on mobile plans. Our postpaid revenues grew 10% representing already 75% of our total mobile service revenues. The left hand side of Slide 6 shows that our mobile market share increased 1.8 percentage points in the last year, reaching 30.7% with 42.3% in postpaid. In postpaid, we had an impressive performance with 59% share of net adds this quarter, reflecting a good execution of our strategy and…

Thank you, Christian. Good morning everyone. Moving to Slide 11, we are pleased to announce that recurring cost reduced more than 2% in the last 2 years since GVT’s acquisition in the second quarter of 2015, in comparison to an inflation of 12% in the same period. In addition, this is the sixth consecutive quarter with cost reduction, demonstrating management commitment to control costs and continuous efforts in the pursuit of efficiencies, as Eduardo highlighted at the beginning of the presentation. Regarding personnel costs, increased 0.6% mainly due to the collective agreement, with base date in September ‘16, partially offset by savings from rightsizing initiatives that took place last year. Cost of service fell 5%, explained by the additional interconnection tariff reduction in February ‘17 and tendered it in TV content and network maintenance. Commercial expenses excluding bad debt increased 5.3% in the period, in line with our successful acceleration of commercial activity in key segments. Bad debt remains under control reaching 2.2% of gross revenues for the second quarter in a row due to the combination of credit and collection actions and granting its stability. As a result, we reported a very consistent growth of 6.9% in our recurrent EBITDA on a year-over-year basis and continue to improve our recurrent EBITDA margin reaching 33% and increase 1.6 percentage points when compared to the previous year. Turning to Slide 12, we have now completed 2 years of synergy acquisitions since GVT’s acquisition. The company has [indiscernible] by the end of this quarter an NPV of R$17 billion, more than guaranteeing the best case NPV of synergies calculated during the due diligence and already securing almost 80% of total NPV included in our best case scenarios of R$22 billion. An important point to highlight this quarter is that we have now…

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

Thanks for taking the question. My first question is on your quadruple-play strategy. Do you expect some more aggressive cross-selling strategy like a main competitor or will you use it more as a selective retention tool? And as a follow-up question, can you please comment on this FTTH expansion plans going forward? Will you wait for the pending TAC and the Telco Reform approvals to pursue such investments? And do you have any visibility on those? That will be it. Thank you very much.

Hi, Maria. This is Christian for the first question. We will be more selective. We are trying to give benefit to a customer, who is fixed annual buyer with Vivo. For the moment, we have all channels already fully integrated selling both services, mobile and fixed. But what we do is when a customer, he is with us in fixed and also in mobile, depending on the plan that they have, in fixed and in mobile, we give extra data – extra mobile data. So, it runs from 1 giga to 10 giga depending on the plans that the customer has in the fixed and in the mobile. So, we don’t do that only in retention, we do that proactively when the consumer is with both services of the company. We just started doing that in all channels, but again, do not discount it’s cross benefits and that’s our strategy for the moment.

This is Eduardo, Maria. Regarding your question about the FTTH deployment, there is a high demand for the product what we see now in every city [indiscernible] the demand is higher than our expectations. And we plan to continue this in the coming years. If you are going to have the tax rollout, it will condition if we are going to some cities or all the cities. In case, the tax is approved knowing that we are confident that there is a high probability that tax is going to be approved by Q2, we are going to follow that, because we have capability on that. In the case, it’s not approved, we will continue with the same number of installations, but we can concentrate in cities in which they have more commercial attraction. Concerning the concession last year, this is not in our short-term plan giving the [indiscernible] it will require some quarters in order to do all the necessary regulations. I do not see the law being approved. It’s not always like [indiscernible]. It’s not a top priority for the government. Seems to be now that the following involvement, are the national public reforms, we do the tax reforms and that they are the leaders. I hope that I am wrong, my plan A that’s not going to be a poor short. And I see it, I am convinced that we will seek time and more consensus on the society that was absolutely necessary income, I have no doubt about this. My doubt is much more and it is coming now and until the end of this year or during the next year, it depending more on political situation or political [indiscernible] absolutely condition that it’s necessary. In the meantime, what we are doing is we are doing our private firm independent of any concession change and everything that could come now would be an upside.

Perfect. Thank you very much.

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

Hi, good morning guys. We saw that the bulk of the synergies coming from EBITDA was already unlocked. So, it seems to be the case that margin expansion going forward will come much more from just utilization initiative. So based on Slide 13, I was just wondering first, how long should we expect for these initiatives to actually to be fully unlocked, the e-billing, e-care and e-commerce. And is it possible to give us some kind of quantitative metric or if you could quantify what would be the combination of these three utilization initiatives that could be – what they could be in terms of cost savings? That would be our first question. The second question is regarding the competitive landscape. We saw that – we have been seeing that the postpaid performance of Telefonica continues to be very, very strong, but we saw that the market has been changing in terms of postpaid focus. So, I was just wondering if there is any reaction that Telefonica is considering regarding the change in the competitive landscape specifically on the postpaid segment? Thank you.

Susana, this is Christian. I would start answering the first and the second, then I will pass to David to complement in the first question, okay. So, in digitalization, we have a strong focus in convert more customers to e-billing. So figures that you said, more than 70% of all the postpaid new customers that we have in our stores that most of them in store are postpaid. We are acquiring new stores. We have already and we are doing that also we have a very strong number for our fixed service [indiscernible] call center and also for our stores. So I think for the new ones coming in, digital billing is going to be strongly penetrated. No, we still have the base – the customer base to convert and we have a strong focus also any customer that gets to a store, any customer that calls our call center, try to convert the customers to the e-billing. The e-billing comes together, because to convince customer to use e-billing, we need to have a very good app for each year, and our focus here is for Meu Vivo or My Vivo, our app. We have it much better developed for mobile and we are working more for the fixed business and also for B2B. Every single quarter, we are bringing new features for Meu Vivo, to attract more customers and to increase usage. And also for instance, when we talk about data sharing, you can only assign data to the members of your family and in your plans using Vivo. If you want to schedule a visit to the store, only using our Vivo, and we are bringing new features in the next month to drive more consumers to Meu Vivo and then they get used to the app and…

Thank you, Chris. And Susana just to elaborate on the first question, we cannot give our guidance on what would be the savings for the future, but we can say that we believe that around one-third of our cost base, so we can talk about eight – something between R$8 billion or even R$9 billion per year could benefit from this digitalization. Here, we are talking about, as Christian mentioned, lots of initiatives that will not only reduce our cost but also improve our efficiency, also improve our quality of our services. In each one of those three fronts, we would like to give you the subject information every quarter to track the progress that we are doing on those areas. We are just giving a specific number on cost and this will help us to continue improving our margins quarter-over-quarter, despite the synergies. As I said before, I have already – are close to the run rate, particularly on the OpEx side.

Perfect. Thank you. Very clear.

Thank you.

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

Good morning. Maybe to Christian and Eduardo, the – both team and cloud [ph] have been very active trying to getting to the higher end of subscribers, postpaid, low end or higher end now, there hasn’t been based on your comments until recently, any significant impact in terms of increasing churn in postpaid or the rest of the subscriber base, just wondering if there has been any change to that, particularly given the update you have given to control plans recently? Thank you.

Hi Mauricio. Thank you for the question. Regarding like profitability, we kept a positive figure in the quarter, I guess all major players. In churn for postpaid, second quarter was 1.8%, so also better than previous year. So again, we are closely monitoring the movement of our competitors. As you said, I have seen it being very active in hybrid and also improved postpaid. So we are selectively moving in some products or in some regions. But again in the hybrid, I think we – each of the player is working in its own customer base. Again, we presented our numbers, increased a lot the hybrid customer base, increased a lot the volume of customers that are migrating from prepaid to hybrids, so maybe my competitors also, maybe also more successful migrating prepaid to hybrids. In the postpaid, I think the comparison is trickier. I think we have some attributes that the others don’t have. Not just talking about our superior network footprint for Internet, 3G, 4G, channel experience, whatever. But also we have some attributes and features in the postpaid, data sharing plans of our family plan that allow you to put more members in the same plan. So I think you need to calculate the price of the plan and when you consider that you can add members and something that the Vivo offers is that the possibility to assign data to each of the member and control it through our e-care app. So I think the comparison also should consider all this. So again, strong numbers, very control churn, good numbers in profitability and very strong share of net adds.

Thank you, Christian. And also on the revenue side specifically, the company seems to have reached the level of wireless revenue growth – service growth of somewhere between 4.5% and 5% for the last few quarters year-on-year, is that something you feel happy about or is that something, we – the market in general should expect that to improve and on the fixed line, there seems to be an inflection now with a lower decline in fixed line revenues of 1.3%, is that enough already this quarter to expect over the next few quarters that we are going to continue that trend towards eventually the positive number?

Look in the mobile we don’t give projections in numbers, but in the mobile, we have more inflation, so we are very like – it’s like it’s a very good number. What we can say about the mobile is, as I have said, we have 47% of our mobile customer base is postpaid and it continues migrating customers from prepaid to postpaid. So we believe we can do more. And also I talked a little bit about 4G penetration, no I said like smartphone over 80%, but only 37% in 4G, so there is room also to migrate customers from 3G to 4G. And when they migrate from 3G to 4G, they also want to consume more data. So also an opportunity for us to up sell data plan through any of the plans that a customer has. Prepaid also we are being very successful in migrating Vivo Turbo to high end offers. In hybrid, going up to the scale as well and of course also migrating hybrid to postpaid to pure postpaid, so we see room for growth and that’s our expectation, but again happy with the results of inflation. In the fixed business, we were like this quarter impacted by regulatory effects as I said before as well. So if I take it out, it would be slightly positive. There is still a strong pressure on B2B. B2B more dependence on voice and the macroeconomic environment is still very unstable, so we suffered more on this line that impacts the whole number for our fixed business. NPV, as also I think I said, during my presentation, we are like focusing much more in IPTV. Now also again it was showing very strong number of over 60% growth in revenues. And we are like if you compare TV revenues this quarter, it was slightly negative and last year it was 14% positive, why, because we are focusing in IPTV and not so much in DTH, especially DTH standalone. The return over the investment is much more positive for the company, but again the revenues of the fixed business will see a decline. Going forward, our focus, we will continue to be an IPTV, so only like trying to make us broadband and not selling DTH standalone. So and FTTH again or FTTx, strong number 20% growth even sales, 3.5% growth, continued focusing expansion of DTH, so also expecting growth coming from this line. So not giving any trend, but some of the elements of our fixed business and you can try to see what we have been able to having.

Mauricio, this is Eduardo. We have to complement actually question and answer. During the first quarter after many, many, many quarters of decreasing revenues in mobile at the market, yet we see these three major operators increasing their mobile revenues. Now, I m glad with massive results and – in our sales, I think in the both numbers, there is room for all and that issue are noted, there is high demand for mobile services and this should bring a regimen [ph] to the market, I think that there is room for all of us to recover in market now and to leave this tradition to be a machinery services and it started to grow high end today.

Okay. I appreciate it. Thank you.

Thank you, Mauricio.

And our next question today comes from Daniel Federle of Credit Suisse. Please go ahead.

Thank you. Good morning. Are you expecting any positive impact in the wake of the fact that the control plans are now embedding a larger amount of non-telecom services like the NBA, the English courses on the fiscal efficient side, I think it could bring some benefit on paying lower ICMS taxes in the coming quarter, is that correct?

Good question. I think if I expect what Daniel, tax impact?

Yes. If you are expecting a decline in the ICMS tax payments in the coming quarters in the wake of the control plans embedding a larger amount of non-telecom services, which are not taxed by ICMS like the NBA, content or English courses, right?

Yes, Daniel, because part of the plan now is related to value-added services, but our decision here to deploy value-added services in our offerings is much more of development of the services. And of course I need to see the market moving in the direction, so we also have to mention our customers to offer more – through having the same drive. Now so that’s why maybe it took longer to launch this service that we launched. We tried to look for exclusive deals, so NBA, as you said as an example, with exclusive deal with Vivo. We had another very strong deal, with a video for gold rate, so we have all the magazines available in some of the plans. And also we have a specific one that was also exclusive with Vivo, our language course app. So, we did that in May for hybrid, we did that in June for prepaid and we may do in the future for postpaid. But here what we are considering is the relevance of the service that we are offering and we are responding for a demand of value-added service from our customers.

Daniel, this is Eduardo. We have complemented in both cases, control and in prepaid. We have options that we felt to do [indiscernible] services. We saw our customers want to have a plan and [indiscernible] option. Okay, then we are going to have a fixed [indiscernible] but the main reason is to provide a more appealing offer to our customers.

And our marketing strategy now is very driven on highlighting the services and also stimulating customers to use them.

Okay, very clear. Thank you very much.

Thank you.

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

Hi, good morning. So my first question is postpaid net adds were super strong, I mean you continue to lead in that segment. So, my question is why did the company decided to cut prices over the controlling plans in mid-July? I mean, is there a big difference in performance when I compare controlling plans should appear postpaid. So I am trying to understand the strategy on the price cuts. That’s one question. And the second one is on the new cities, with FTTH you already did 5 out of the 19 for these years. How many cities would you open if the tax not approved at least? I guess, it’s somewhere in the middle, but I am not so sure? Thanks.

Hi, Carlos. This is Christian. Let me answer the first question and then I will go to the second one, okay. In the hybrid, I think there were some movements now that we need to mention. In the beginning of the year, we raised price. And then when you compared to all competitors, we became in the past, we were all very similar in the hybrid pricing. And in the beginning of this year, we raised price more than others. And then secondly, we also gave more data in the prepaid, also to response to both customer demand and also competitive movements. So, when you see the prepaid with more data than you used to have and also see our price much higher than the price of our competitors, we decided that we should also – not moving price, but increase the data allowance. So data allowance, because prepaid we are giving more, so we need to compensate that also in the hybrid, otherwise it’s difficult to migrate. And price, we used to be very similar to our competitors. So at least we cannot be – with such a price gap as we were 2 months ago. Moreover, if you see not only price, my competitor they are offering music for free, Whatsapp for free and some are also offering subsidies for hybrid, something that we don’t do. So, it is moving with much more for us to be able to continue to migrate and have like compelling offer to our customer that is using Vivo Turbo with that and also compared to our competitors having similar price considering that we don’t give so much off net minutes as they do. We don’t give it Whatsapp and we don’t give music for free. And in some cases, we also don’t give subsidies. So, that’s the explanation of the movement. Considering the fixed, for this year we had a plan that considered TAC. Also, we also had obligation for the purchase of GVT. So, we had in the end 19 cities that was for this year. Okay, so 7 coming from the GVT operation, 11 coming from TAC and another one coming from commercial reasons. The TAC, it’s like, as Eduardo said, maybe we expected the TAC to happen before. We had already 3 cities that we were almost finished the deployment, we couldn’t stop. So, we launched it in 3 cities. For the rest of the year, out of the 8 cities remaining for the TAC we won’t do date with the latter do 4, because some of them are already in very advanced work, but even in the cities when we focus in more premium areas than the areas that we agreed to focus before. And we are going to add another commercial city. We are going to keep the same number of the synergies, but instead of 19, we may end up with 16 cities this year.

Okay, perfect. Christian, thank you.

Thank you, Carlos.

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

Yes, good morning. Thanks for taking the questions. First one in terms of the competitive environment looking at the business/corporate segment, I remember a year ago about, when you held your Investor Day clearly leveraging the few concepts of GDP into your mobile assets outside of Sao Paulo was key to the strategy absolutely for growth. Some of your competitors are saying that competition has in fact increased on the corporate segment. So, I want to know how you are progressing there, if you are happy about the development, if you are taking market share. So, that’s the first question. And the second question kind of I guess more of a long-term question. As you highlighted you continue to rollout FTTH to new cities, you have an obligation to move out, but also for commercial reasons, but if you think into less attractive geographies that you don’t cover yet. How do you think about the alternative between something based on 4G and that could be an interesting way to tap customers with not a lot of CapEx against FTTH. I know you tried in the past fixed wireless and you kind of dropped it, but is that still something that you could consider for reaching these low density and poor economics? Thanks.

Okay, it’s Christian, Mathieu. For the first question, I think we were more interested in B2B outside Sao Paulo. Is that correct?

That’s absolutely correct.

So what we said like, of course, we did not have network outside Sao Paulo. Now, we have a GVT network to deploy. What I said maybe before or in other calls is the main focus of the GVT network outside Sao Paulo was B2C. That makes a difference in Brazil. You have some areas of some neighborhoods or some streets that are very residential and other that are very corporate related. So, what we have tried to do starting last year was to focus more the network also to get this customer that are corporate and are all residential. And I think some results are coming. We have seen very positive growth in broadband for small and medium companies outside Sao Paulo. That is a very positive movement and I think is going to help a lot in the results for B2B. Also, in the channel expansion outside Sao Paulo, we are reinforcing our commercial area both on workforce and second through indirect sales channel. Some of them are very focused in mobile. Now we are converting 100% in both mobile and fixed. So, we see a positive upside for B2B, especially SMEs outside Sao Paulo with both broadband and in the end also with bundled offers of benefits, cross benefits between mobile and fixed for a small one in the company. So, that’s our perspective and is positive. And also for the large corporation, of course, every place where GVT network is present, we have reduced this slice of [indiscernible] operator, now we are using GVT network. The footprint is not as huge as we need, but of course it’s helping us to be more precise and be more attractive in offering also for large corporations.

Yes, Mathieu concerning our question of our long-term goals in FTTH, what you see is that there is a huge market in Brazil, 75% of ABC households. They do not have availability on our B2B services. And what you see is that in most of this case, it’s – the 4G is not ideal significantly for the fixed and broadband. Once you are able to install the service in both cities, there is a clear plan for this. What is the question? Okay, profitability of this deployment. It follows objectives to be as much as reputation came as part of this if we are able to change the concession and we really are going to change with the modern labor that we can use in order to expand this. There is a huge amount of sale in the market. And of course, we have the CapEx indications. We are not going to expand more CapEx than you have at this stage of the market. There is some execution [indiscernible] you are entering in 19 cities and it nearly can double, but we cannot multiply by 2 or by 4, the number of new cities. And we will be looking forward is maintaining alternative models that you can leverage another infrastructure. There is a market there and we will finalize alternative models, wanted to invest CapEx in order to achieve these markets.

Thank you very much.

Thank you, Mathieu.

And our next question today is from Fred Mendes of Bradesco. Please go ahead.

Good morning, everyone. Thanks for the questions. I have two questions. The first one is expense on third-party services, which are likely higher than our estimates and most likely driven by commissions. How can I expect we have learned to perform in the next quarters? This will be my first question. And then the second one, have you observed any improvement in the prepaid recharge in the last months that will be – those will be my two questions. Thank you.

Hi, Fred. It’s Christian for the second question. We see like the prepaid as a percentage in last quarter, it’s a comparative growth this year with the growth that I had last year, it’s still negative, but it’s better than the year before. So, I think the prepaid, it comes strongly related to the economy. And I think in employment, we haven’t seen any big change in Brazil. So, I think it’s early to see that the prepaid is getting better because of the economy. So – and again, we had better performance than last year, but it’s still below what we would like to have. On the other hand, it’s also important to consider that. As you have a record number of migration of prepaid to hybrids also being very, very successful bringing the best prepaid customers to the postpaid plan. So again, only looking for the prepaid numbers, we double and we are immigrating if it’s maybe, it’s not at the best – the best analysis. And I guess, the good thing that we are seeing [indiscernible] that maybe it shows a little bit of a better performance is that, we have a strong number of customers already in our bundled offer, Vivo Turbo. What we are trying to do now is migrating them from low end of Vivo Turbo to high end of Vivo Turbo. And again, we have been very successful doing that and we have a very strong volume of customers migrating. We have seen prepaid before migrating to postpaid. We have seen prepaid. We see a lot of customers also migrating to high-end class. So again, it’s early to say that there is a strong improvement, but better than 2016. Good performance for migration and good performance for migrating prepaid from low-end to high-end Vivo Turbo.

Fred, this is Eduardo. Thank you for your question. And your question both started with in order commission expenses as most of these are commissions. As you have said in those presentation, the number of net adds in the postpaid this quarter was 2.3x higher than the same quarter of last year, the same in FTTH. Note, this higher commission activity is not just very good, what it implies and what commissions, now in more commission expense, maybe it’s why the third-party hasn’t increased this quarter compared to previous quarter.

Perfect. Thank you, Navarro. Thank you, Christian.

Thank you.

And our next question comes from Jose Quintana of Scotiabank. Please go ahead.

Thank you. Thanks for taking my questions. I was wondering if you can give just some idea of what impact we should expect from the Terra acquisition in terms of sales and maybe the margins, perhaps if you can give some idea. And also when we should expect the consolidation of Terra in financial results? And finally, also if you are having an idea of what impact labor reform could have on your numbers, if you are running analysis of the potential benefits of that reform? Thank you.

Starting off on second question, it’s hard to say not yet, [indiscernible]. We are running numbers, maybe now it’s too early to say. Your question about Terra, the impact will be very limited to us – Terra revenues and to be able to present less than 1%, it’s 0.5%, 0.7% of Vivo revenues. We are not going to do – perform another, because it’s absolutely nonmaterial. What we can expect and also we can expect some acceleration of our digital activity. From there it’s like advertising or some digital services to small medium companies. Terra has some tradition, some background of providing very interesting services. These are going to use now this [indiscernible]. The price, it would vary, the price hits up to R$150, we can get R$60 million, what means that the final price was R$109. With the deepest, while they will have a fight with prepaid and it will be multiple roughly flat but it’s very low. Now again, it’s not material recognition, but not believing that it can accelerate looking forward to all the growth just by that with the things that it brings to our operation.

Thank you.

Thank you.

And our next question comes from Andre Baggio of JPMorgan. Please go ahead.

Hi. So in interested in two things, what is the B2B strategy, we have seen a scaling down of the Pay TV strategy and I just wonder for the future is that something that Vivo could reconsider or this is something that’s really we should see fading away or maybe just migrating to the fiber-to-the-home?

Hi, Andre, this is Christian. We are like – as our strategy is to focus on providing fiber-to-the-home, our main focus would be in IPTV. Until today, we only have in Sao Paulo, we are considering expanding outside of Sao Paulo. Also in the Pay TV, when we don’t have IPTV and the customer wants the triple play, our solution is going to be DTH, the hybrid DTH that we have keeping on that solution. What we are not forcing anymore is to have a strategy that is focused for instance, in voice with DTH or DTH standalone. So we are going to use TV as a way to make customer loyal with Vivo and to be able to totalize the customers with all the communication request. It’s not a business by itself, there will be wanting to expand independently. So that’s the strategy going forward.

Okay. Thank you. And the second question is that we are seeing impressive number of Vivo alumni [ph] make it’s possibly running directly and indirectly out of companies, so now we could see some people that use to run Vivo at cloud and then indirectly [indiscernible], so is this a good thing like seeing the sense that other competitors may follow this strategy of more in the core and less on price or this could see as a threat because the competitors will have access to some valuable marketing information from Vivo than we could have – they could fear on the results for that?

Well, it’s difficult to say what the strategy they are going to follow. I think there are some more elements in other groups that are beyond one person or two people like the financial. Again it’s spark up the industry, some changes, people change. And let’s see, I think we have like our focus we are very confident that we have the best assets and then we have the combination of infrastructure of channel, of marketing experience, of brands, that in my opinion is difficult to replicate.

Alright. Thanks a lot.

So I would like to thank you all for the call and again, see you next quarter. Thank you.

Thank you. This concludes today’s Telefonica Brasil second quarter 2017 results conference call. You may now disconnect your lines at this time. Have a good day.