NOS, S.G.P.S., S.A. (NOS) Earnings Call Transcript & Summary

Good afternoon. Welcome to our first quarter 2020 conference call. As usual, we have the full executive team available for questions-and-answers after a brief presentation by José Pedro. Over to you, José Pedro.

Okay. Thank you, Maria, and good afternoon, everyone. We will follow, as usual, the slide presentation that we have presented this morning. So before we go through the main highlights of today's presentation, I would like to provide you with a short preliminary consideration. This quarter, we have deconsolidated NOS International Carrier Services, our subsidiary focused on wholesale international voice and SMS services, which we have agreed to sell. And as such, it was considered discontinued operation. We have restated 2019 numbers accordingly so that 2020 numbers are comparable on a like-for-like basis. We recall that NICS is quite material in terms of revenues, around EUR 140 million in 2019, but relatively immaterial in terms of EBITDA, around EUR 1 million last year. Starting with the highlights. Of course, the major highlight is how the COVID-19 pandemic has affected our performance this quarter, with the activity slowdown from early March, ahead of the lockdown declaration on March 18. The lockdown period did not impact so much in terms of operational KPIs, since the strong start of the year allowed for positive RGU growth with 20,000 net adds in the quarter, solid performance in pay TV and convergence, lower churn helping to offset lower sales activity in all segments. Financial results were more clearly impacted. Main impact was felt in the smaller cinema unit, with the closure of cinemas in March 16. Telco unit being clearly less impacted in the core consumer and business segments. As such, we have consolidated revenue decline of 3% year-on-year, still supported by a more resilient core telco unit, affected this quarter by the wholesale and others segment. Despite the positive performance in containing nondirect costs, this revenue decline has driven EBITDA decline of 4.6% at the group level and 3.4% at the telco level. Free cash flow generation continued to be robust with savings in customer-related CapEx due to lower activity levels being more than offset by the increased pace in technical CapEx deployment, which was a deliberate strategic decision to maintain our focus in having the best fixed and mobile networks in the market as well as to maintain levels of activity in our service providers in this infrastructure rollout. And finally, we would like to point to our solid capital structure with 1.9x net financial debt-to-EBITDA adjusted for leasings, continued -- confirmed through recent refinancing deals to be further reinforced with the proceeds from the sale of NOS Towering, which gives us ample liquidity and flexibility to continue investing in our core infrastructure projects and to navigate well through this more challenging context. Now turning to Slide 4 of the presentation and starting with the operating review. We had a positive quarter with solid performance in fixed pay TV and broadband, positive net adds in DTH and improved year-on-year performance in mobile despite COVID-driven decline in store traffic and door-to-door sales activity. Overall, we were able to post total RGU net adds of 20,000 in the quarter. Pay TV net adds were 5,000, taking advantage of the fixed network expansion, low churn levels and more positive trends in DTH. We also had fixed broadband and fixed voice net adds of 10,000 and 8,000. On the mobile front, we have posted a slightly negative 4,000 net adds number as a result of strong contribution from postpaid being offset by seasonally negative prepaid number, still better than last year. On Slide 5, we have continued to expand our greenfield expansion FttH footprint with close to 30,000 new homes passed. This expansion continues to drive our fixed pay TV growth. This quarter, we had net adds of 4,000 in fixed pay TV. And also churn levels in the quarter continued to be at very low levels, benefiting already by the slowdown of activity since the start of March, ahead of the lockdown. Still most of the COVID churn reduction impact should only come in the second quarter. Finally, we continue to operate in a competitive but overall disciplined market context. On Slide 6, we continue to grow our convergent and integrated subscriber base. We have reached 942,000 subscribers, representing a bit over 60% of the fixed base, having added around 11,000 subs in the quarter. The focus has been less on convergent and more on integrated offers through our pick-and-mix approach. The upsell of mobile cards continues to provide ARPU uplift on fixed customers, still, in this quarter, not enough to compensate the pressure from premium sports channel subscription, which we have suspended to invoice our customers since March 14, following the suspension of all the relevant sports competition, namely the Portuguese Football League. In Page 7, on the network front, the focus has been on supporting effectively our customers, both in the consumer and B2B segments during a lockdown period. With the challenges of coping with remote working is going through video conference platforms and also increasing demand of OTT platforms to get some additional home entertainment, the pressure in our networks has been huge. We have seen record levels of traffic in our networks, fixed data traffic increasing, on average, 70%; mobile data traffic increasing 45%. Our strong investment in next-generation networks in both fixed and mobile areas have clearly paid off in this challenging period with the best-in-class technological response, with NOS providing reliable connectivity and responding well to our customer needs, we can say, in an outstanding way. On the B2B front, our focus during the pandemic situation has been to support business continuity of our customers, to stay connected and ensuring agile and efficient responses. On the supporting business continuity chapter, we have reinforced remote work solutions, VPN, cloud services, collaborative tools and remote service desks, and we focus on implementing business continuity solutions for critical services. Also, our partnership with business customers for digital transformation was strengthening, leveraging internal skills and technological platforms by providing relevant crisis management information and guidelines, launching COVID-focused analytics platforms to support public institutions and companies and, finally, launching a smart city partnership. On Slide 9, on the consumer front, the focus has been also to support our customers during a lockdown period, being able to provide reliable connectivity services. In order to support customers during this difficult context on the offer front, we have launched a 10-gigabit mobile data package for free to all our mobile customers. Also, we have stopped invoicing, as we have referred, our customers for premium sport channels following the suspension of most of the sports competitions, still allowing the sports fans to get some nice entertainment for free while having to stay always at home. Finally, we created the #LetsStayConnected platform for integrated communications in the context of COVID-19. On Slide 10, also on the consumer front. The focus has been also on readjusting quickly to a new paradigm in terms of sales channels due to lockdown measures, imposing social distancing and shop closures. The transformation program we have been implementing towards creating a more digital way of selling and interacting with customers has been key for this readjustment. We had to close around 38% of our stores from mid-March. Traffic in the stores declined almost 80%. And finally, door-to-door sales team had to work from home. This, of course, brought overall sales down around 30%, but the positive news is that we managed to increase quite substantially the weight of sales channels like online and inbound, which are clearly much more efficient channels. Online sales have increased around 70% versus pre-COVID period; and inbound, around 60%. Finally, our customer service apps like the NOS app and the youth segment app have increased quite substantially the number of users, around 50% and 30%, respectively, to perform simple transactions like checking balances and invoices but obviously migrating interactions at the call center level to digital interactions. The forced migration to digital is obviously one of the positive impacts of the pandemic. On Slide 11, on the cinema unit, as referred before, we had the most negative impact of the pandemic with the cinema closures in March 16, but the considerable reduced activity since the beginning of March. We started the year quite well, with January revenues up by 9% and February up by 18%, but March revenues were down by 70%. Therefore, we have ended the quarter 17% down versus last year. The focus on the cinema unit has now been on preparing well the reopening of our theaters, which is planned for June, with the restrictions in terms of occupancy rates to cope with the need for social distancing and with reinforced cleaning procedures to ensure a safe experience to our customers. In the meantime, another priority has also been to adjust costs to a scenario of 0 revenues. Since around 40% of total OpEx is variable, in this case, there is an automatic adjustment. In the case of fixed cost, through adjusting the size of the workforce, which in our case is a lot based on flexible work with students, so easier to adjust over time, and also negotiating with the shopping center owners special rent conditions, exemptions during these exceptional circumstances. The audio business has just been affected by the pandemic in the movie distribution area, which is a sizable revenue business, but with low margin in which there is an automatic cost reduction of around 90% of revenue. So this is an area of considerably reduced concerns.

I'm sorry to interrupt. Jose Pedro, apologies for interrupting, but I've been informed by quite a few analysts and investors that they're not managing to get on the call. There are delays. They've requested a couple of minutes of pause on our side just to get on the call. Operator, could you explain what's going on?

Hello there. I see a few lines queuing at the moment, but I'm unable to say whether they're meant for our call or for somebody else's call because we have quite a big platform. So it could be that there's longer waiting time. Due to the pandemic situation, we've seen a very big rise in conference calls for today, which might account for the longer waiting times. I'm very sorry about that. We'll try to get them in as soon as possible.

Okay. And maybe wait for a couple of minutes. Just give a pause for a couple of minutes because then we'll be going into Q&A, and it's important people can participate. If you don't mind, we'll hold for just a couple of minutes. Operator, am I live on the call?

Yes, you are.

Okay. Let me just say something, and we'll carry on with the call. Okay. It seems as though there are some problems with some investors and analysts trying to connect to the call. What I suggest is the webcast is working, although in some cases, the sound doesn't seem to be very good, but you can follow the call on the webcast. [Operator Instructions] Okay. So Jose Pedro, would you like to take over?

Okay. So I was actually trying to highlight the sort of organizational response we had to the pandemic situation. So for everyone that is now starting the presentation, we are more or less mid part of the presentation on Slide 13. So we believe it's worth sharing what we think was an outstanding organizational response. In terms of employees and partners, the focus has been on ensuring remote work models and to preserve health of all the frontline and on-site employees. We managed to achieve 95% of our total employees and 90% of call center staff working on a remote model. To maintain similar levels of productivity and motivation, we implemented several means of communication with everyone through regular CEO e-mails, individualized HR contacts, daily team meetings in every organizational unit. We also shared some best practice examples to promote healthy habits while working from home. On the health and safety measures, we managed to create a robust PPE stock so that every frontline employee, either internal or outsourced, would have maximum levels of protection while working. As we speak, and following the government decision to lift the state of emergency on May 3, we started last Monday to a very gradual back-to-office work mode. We now have around 15% of employees on-premises, again, with very strict safety and protection measures to protect the health of everyone. On the government and community initiatives, our focus has been on keeping Portugal connected, contributing to public health care initiatives. A few examples are illustrated in Slide 14. We could highlight the support to the Stay Connected campaign, the support to health care workers through providing more data minutes and text messages allowances and the support to the National Health Service line. We believe we have performed at a very high level in terms of social responsibility during this challenging period. Now moving to the financials on Slide 16. As we said before, we have a 3% year-on-year revenue decline at the group level, very much impacted by the cinema and audio businesses. The Telco business declining 2.2% year-on-year or 2% adjusted for regulatory effects, with most of the negative impact coming from the lower-margin wholesale and others segment. Cinema revenues decreased in the quarter around 17%. Audiovisuals posted around minus 19% revenue growth, driven mostly by the low-margin cinema distribution business. On Slide 17, telco revenue has declined 2.2% year-on-year growth. Adjusting for the cap on prices of EU international cost, telco revenue decline would have been 2%. Still, the core consumer and business segments were much more resilient with flattish type of performances. Consumer segment posted year-on-year a flattish revenue decline of just 0.2%, mainly supported positively by the personal mobile segment, the residential fixed being affected by the premium sports revenues decline and international call cap and continued to have some pressure in the residential DTH segment. The business segment also posted a flattish revenue decline of minus 0.8%, affected primarily by some reduction in equipment sales and special projects with positive performance in service customer revenues, in large corporates and SMEs. Premium sports also affecting the lower end of the business segment. So overall, both consumer and business segment in the context of the pandemic effect in March, we believe they both have a positive performance. Of course, it could have been much better. If it was not the current context, they could be growing in line with previous quarters, around 1% to 2%. Finally, the wholesale and others segment represented the major drag to telco revenue evolution. Major negative impact came from the volatile low-margin mass calling services, representing around 60% of the decline and then smaller declines of equal magnitude in roaming-in revenues, advertising and others. On Slide 18, EBITDA in this quarter declined 4.6% at the group level, impacted more severely by the cinema and audio businesses declining 18% year-on-year. Telco EBITDA declined also 3.4%, with flat nondirect costs and the reduction in direct costs not enough to compensate the revenue decline. Still, one should note that the euro decline in telco EBITDA of around EUR 5 million in the quarter was partially compensated by the decline in customer-related CapEx as we will see shortly. Cinema and audio were strongly impacted by the closure of cinemas and reduced activity since the start of March. Still, we should put things in context. The audio business, which is impacted by the lockdown, is the movie distribution business that has relatively low margin as we referred before, so impacting EBITDA is not that material. In the case of cinema exhibition, this is roughly, in 2019, a EUR 60 million revenue business with 20% cash EBITDA margins post rent. So the impact is clearly more material but also not that great in the context of the group size. On Slide 19, net income in the quarter decreased year-on-year to around minus EUR 10 million due to a number of nonrecurrent noncash items below the EBITDA line, of which I would like to highlight the following. Other expenses increased EUR 42.4 million due mainly to the recording of a one-off noncash bad debt provision, which we decided to record as a way to reinforce provision levels in the context of the macro recession we are entering into as a result of the pandemic. This forward-looking exercise incorporates the latest official projections for GDP growth and unemployment rates for Portugal for the 2020 to 2022 period and reflects our best guess today of the percentage of bad debt we will have in the coming quarters. We also have a higher negative contribution of EUR 9 million from the share of JV results consolidated through the equity method, again, mostly due to one-off noncash impairment charges at Sport TV and ZAP. On Slide 20, total group CapEx in the quarter, excluding accounting impacts of leasing contracts, reached EUR 88 million, around same value of last year, reflecting an increase in technical telco CapEx of EUR 3.6 million, reaching EUR 44 million in the quarter, reflecting namely FttH expansion, which continued its strong pace, not being affected by the lockdown. We also have a decrease in terms of customer-related CapEx of around EUR 3.4 million. This EUR 3.4 million offsetting around 70% of the telco EBITDA decline due to lower levels of commercial activity we had in the quarter. On Slide 21, despite the tougher context, we have robust free cash flow in the quarter. Although below versus last year's numbers, EBITDA minus CapEx reached EUR 65 million. Operational free cash flow around EUR 44 million, which then converted into net free cash flow after interest and taxes of around EUR 35 million, a number which, being largely positive and significantly above the net income recorded, highlights the noncash items impacts we have at the net income level. On Slide 22, on the debt position. Net financial debt decreased in the quarter to around EUR 1,060 million. This net financial debt number represents 1.9x the EBITDA level adjusted for lease payments and in line with our stated target of close to 2x. Average cost of debt decreased further in the quarter to 1.1%, a level which may represent the floor going forward. As we have announced before, by the end of March, we refinanced ahead of schedule all the lines maturing in 2020. Therefore, we are very much covered in terms of liquidity for the next couple of years' maturities. Cash and unused credit lines reached EUR 415 million at the end of the quarter, therefore already ample flexibility to finance the investment needs ahead of us. This liquidity position to be further strengthened by the sale of NOS Towering. This is a good transition to our last slide of the presentation, Slide 24, where we highlight the subsequent events to the first quarter results. And here, I will just highlight the most relevant transaction, which is obviously the NOS Towering sale, comprising around 2,000 sites and the subsequent agreement to sell some additional 400 sites. This transaction is still subject to the Competition Authority review. So we wouldn't like to elaborate a lot more at this stage. But the potential total proceeds of EUR 550 million, upfront payment of EUR 375 million in 2020 provide us with a lot of comfort in having adequate financing for an investment plan which we intend to maintain in order to continue upgrading already best-in-class fixed and mobile networks, to continue remunerating shareholders in an attractive way, while preserving a solid capital structure. And with this, we conclude the presentation, and the full team is now ready to start the Q&A session.

Okay, operator. I'd just like to remind everybody on the call if you're having difficulty getting on the telephone line and you want to place a question, please send them through to either myself, Henrique or Clara, and we'll pass them on to the team in the Q&A session. We can go to the first question. Operator? Hello, operator? [Technical Difficulty]

[Operator Instructions] And the first question comes from Roshan Ranjit from Deutsche Bank.

Great. Two for me, please. You talked about the consumer business, telco business being flat and clearly the impacts on the premium sports channels. Is it possible to get a sense of the kind of underlying cable subscription revenues if we were to remove the premium content, which, I guess, is kind of nonexistent at the moment? So just to get the underlying basic cable subscription, please? And tied to that question, I saw a couple of days ago, I think there's going to be a resumption of the Football League -- or the top level of the Football League in Portugal at the end of this month. Is there scope for a refund or getting any money back from the clubs if it's not going to a full season of completion? And my second question centers around the NOS Towering deal. Is it right that the 2,000 sites that you sold are the total number of towers that you have? Or have you kept some towers back? And secondly, within -- if that's the case, within the 2,000, does that include the towers which was built in conjunction with Vodafone as part of your JV? And again, just tied on to that, you announced, I think, beginning of this year, a memorandum of understanding with Vodafone to try and establish something through the year. Is that still ongoing? Or where does that stand, given the tower sale?

Okay. I'll start with the last question. On the NOS Towering deal, the first part of the transaction involves the sale of the subsidiary, 2,000 towers. It doesn't incorporate the full perimeter of towers we have. So we are carving out some assets pre transaction. Part of those will be sold in -- potentially in the second part of the transaction. So the additional 400 sites includes some of the sites that we will hold. No sites jointly controlled with Vodafone. So there's no JV on the tower front with Vodafone whatsoever. And I guess that's it. So I -- Miguel, can you?

Yes. In what concerns the situation around football, as you are aware, the leagues were suspended in March. We have a long-term partnership with most of the professional clubs in this country, not just a few, most of them. And in light of that partnership, we are discussing what's the best way to answer to this unusual situation, making sure that we accommodate the interest of the different parts. Our expectation as of today is that the main league championship will resume by the end of this month.

About sport channels customer base, they are very stable because we are not invoicing customers, because there's no major soccer games. Customers are -- some customers disconnected, but some others have subscribed the services because it's for free. That's part of the reason why we have the customer base flat. So all the impact that we have seen, it's because we are not invoicing customers.

Your question comes from Michael Bishop from Goldman Sachs.

Yes. Just one question from me, please. It's just around the comments you made about cost and CapEx containment. If I could just ask, big picture, at a group level, given the revenue declines you've identified due to COVID, how do you see your ability as a company to offset some of those headwinds as you think about operating free cash flow and free cash flow?

Well, we mentioned several times during the presentation that a number of areas have relatively low margins, areas that have been impacted by the pandemic. So actually, there's going to be relatively substantial direct cost reduction associated with this loss of revenues. I could highlight a few, but selling equipments is a relatively low-margin business. And we also mentioned on the audiovisuals front, the distribution business is a relatively low-margin business. Even roaming-out and roaming-in is also a relatively low-margin business. So there's a lot of automatic adjustment of costs that's going to go basically through the direct cost line. So as part of the efforts to contain costs, some of them will be made, I would say, relatively automatically. On the other hand, and we have seen that through March and already through April, we are seeing a relatively substantial decrease in terms of commercial activity, which should impact lower levels of customer-related CapEx. So lower levels of equipment installed, lower sales commissions, lower installation fees. So that should also help to mitigate a big part of the loss that we have overall in revenue. So the outlook, clearly negative in terms of top line, less negative in terms of EBITDA line because there's going to be a lot of decrease in terms of direct costs. And in terms of EBITDA minus customer-related CapEx, we think that at the end of the day, the impact should be still negative but of relatively smaller type of magnitude. So that's what we are seeing to date. And of course, it's difficult to estimate how this could evolve during the year because it would depend pretty much on how prolonged the lockdown measures will be in place. So hard to quantify whatever impact for the remainder of the year.

Your next question comes from Ivón Leal from BBVA.

Yes. Maybe a couple of questions for me. I would like to understand, in the revenues you've lost due to the COVID impact, how that is going to be recovered. So on the one side, do you plan to start invoicing for premium pay TV channels as soon as the Football League starts again? Or do you think that is going to be postponed most likely to September? The second one, I understand that the negative impact on the B2B business comes basically from temporary disconnections. Do you think that is going to be recovered through the month of May? Because, I mean, I think you guys -- state of emergency is over since last Monday. And maybe do you have an idea when cinema and audiovisuals is -- has the chance to start picking up again?

Okay. Thank you, Ivón, and starting with the question on the Football League. So as Miguel mentioned, we expect the league to resume end of this month. So we'll start having some -- the core football competition live, we expect, for the full month of June and July. And yes, we expect to start invoicing customers because we are now offering a high-quality product, a product in which most of the sports fans will have the chance to watch through the TV because there will be some [ serious restriction ] of people, of fans for attending matches of the [ inter-stadium ]. So as far as the Football League resumes effectively by the end of May, we should be able to recover some of the revenues lost, but not fully because we shouldn't forget that 2.5 months, we have 0 revenues during this period. And so this will be lost forever. In terms of B2B, I'll start answering the question, and I'll ask Manuel to join in if there's some complement, but there hasn't been any disconnections. So we have -- haven't disconnected any B2B customer. So what we have today is customers asking for suspension of billing or discounts because they have their activity basically stopped or shut down. This is, by and large, the situation in a lot of companies or business customers we have in the tourism and travel sectors. And we expect this to last for some time. We don't know how much we will be able to recover. I mean that there's going to be a lot of these companies that won't be able to reopen again. So there will be some bankruptcies in the process. Manuel, I don't know if you want to add something to this at this point.

Sorry. But we had 2 kinds of requests: the request for delayed payment and those, of course, will recover until the end of the year; and requests for suspension or significant discounts in the services that were not functioning, that there was a shutdown in activity. I think this, we have, of course, very little hope to recover.

About cinemas, the government road map is June 1 to reopen cinemas. However, there are just relevant movie releases from July 16 onwards with Tenet and then on the 23rd with Mulan. So probably June 1, it's a little bit too early. Anyway, we will need some weeks to have gradual take-up. We will have marketing campaigns to bring people back to cinemas, and we will use the movies that were on the screen on March 16 when we closed.

Okay. Okay. Maybe a last one, if I may. You've provisioned EUR 42 million in the first quarter. I think part of that is related to bad debt, which is an estimate. But I think you mentioned part of that is related to a contractual issue, which -- could you tell us what exactly is that?

It's basically a provision of certain types of contracts in which -- which are close to maturity, which the future costs that need to be accounted under these contracts are not fully covered by the potential benefits of these contracts. And that's as much detail as we can give at this stage. We'll have to review the situation in the context of what actually happens in the next couple of months.

Your next question comes from Martin Hammerschmidt from Jefferies.

My first question is on the dividend. I mean you rebased it early in the year. I think you cited uncertainty in the market around spectrum auctions, new entrants, et cetera. So with COVID-19 now coming on top of that, maybe you could talk a little bit about your thought process on the dividend in this new environment, please. And then on CapEx, we have seen that the technical CapEx spend in the first quarter has increased year-on-year. How should we think about that line sort of for the remainder of the year? Should we expect a year-on-year reduction or similar levels compared to 2019? And maybe lastly, on churn, could you maybe quantify the reduction in churn on fixed and mobile that you've seen since the lockdown? I think in other countries, operators are talking about 50% to 60%.

Okay. Thank you, Martin. I mean last update on the dividends -- 2020 dividends to be paid on the basis of 2019 results is the Board of Directors' approval and proposal on February 20, approval of EUR 0.27 (sic) [ EUR 0.278 ] ordinary dividend per share representing 100% payout of earnings and free cash flow. We said that this was subject to final approval by the AGM. Given the current pandemic context, the AGM has not been called yet. Portuguese companies have a new, more long term to call the AGM until June 30. So we expect the AGM to have a final decision on dividends by that time. On technical CapEx, we mentioned that we are entering the phase in which we believe that we'll have important structural projects ahead of us. We are ramping up FttH rollout in the context of the agreement we have with Vodafone. We have clearly mentioned that we have 2.6 million households to be swapped between us and Vodafone until the end of 2022. We are more or less 40% down the road. So we have close to 1.6 million households to be divided by us and our partners for 2020, 2021, 2022. So this should put some -- a bit more pressure in terms of technical CapEx, which we expect to be a bit higher than the levels of last year. Of course, part of it is compensated by the lower levels of customer-related CapEx at least during this lockdown period.

Your next question comes from Fernando Cordero from Santander.

Can you hear me?

Yes, we can hear you.

Fernando, we can hear you.

Okay. Perfect. Fantastic. Thank you for taking my 2 questions. The first one is regarding the spectrum auction. And we know already that the regulator has delayed the auction. In that sense, I would like to know if there is any, how can I say, any conversations or any inputs on your side on how the regulator could be maintaining or changing the initial terms of this auction. And the second question is related with the channels mix during the lockdown. And in that sense, also, I kind of agree on -- at which extent the evolution of this mix during the current period could be an opportunity going forward. But in order to quantify the potential impact in your financials, what would be the impact in terms of EBITDA or of your subscriber acquisition cost if the current mix would be maintained once the lockdown would be over?

It concerns the 5G spectrum auction or the process of allocation of spectrum. The process was suspended in March -- end of March, and we don't know when it will resume and how it will resume. Obviously, the world has changed a lot, and we don't expect it to resume soon or with the same kind of regulation.

Okay. So about channels. In fact, online sales increased significantly, both in services and the equipment but for 2 main reasons. Obviously, some change in habits. But the second one, it's because of lack of competition from other channels because stores were -- 40% of them were closed. There was 80% less traffic. So part of the growth is coming from less competition from other channels. So what we expect in the short term is some correction as other channels come back. We hope, obviously, and we are confident that the growing trend of web sales will stay there, but it's too early to see the impact of the definite mix channel. So we -- it's too early to understand the impacts on financials.

We have one final question over the phone, and it comes from Antonio Seladas from A|S Research.

I have one question related with NOS Towering. If you can explain how it could evolve your payments -- your annual payments. So it will be related with inflation, or it will be related with traffic, for instance?

When we announced the transaction, we communicated that it's CPI-adjusted with a floor of 0% and a cap of 2%. So that's the type of yearly adjustment that we will have.

In regards to another question regarding the sale of towers to Cellnex, concerning the regulatory environment, obviously, we've done this operation because we believe there are no regulatory impacts. But nevertheless -- and the regulators are supposed to tell us what their view is on that. So it's still early to know what's going to happen. But I repeat, we believe there are no -- there aren't any implications in terms of competition regulations that would endanger this operation.

We have no further questions on the phone. Please continue.

Okay. Well, thank you very much for being on the call, and my sincere apologies for the technical issues that we experienced today. If you have any follow-up questions or anything wasn't clear on the call, please get in touch. As usual, we're always available. And keep safe. Bye.

Thank you.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Speakers, please stand by.