Oi S.A. (OIBR4) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Oi S.A.'s conference call to discuss the second quarter of 2020 results. This event is also being broadcast simultaneously on the internet via webcast, which can be accessed on the company's IR website, www.oi.com.br/ri, together with the respective presentation. [Operator Instructions] We would also like to inform that the conference call will be conducted in English by the management of the company, and the conference call in Portuguese will be conducted via simultaneous translation. The conference call may contain some forward-looking statements that are subject to known and unknown risks and uncertainties that could cause such expectations to not materialize or differ materially from those forward-looking statements. Such statements speak only of the date they are made, and the company is under no obligation to update them in the light of new information or future development. We will now turn the conference over to Mr. Rodrigo Abreu, CEO. Please, Mr. Rodrigo, you may proceed.

Thank you. Good morning, everybody, and welcome to our second quarter 2020 call. And as was the case in last quarter, during this quarter, we also will have 2 sections to our conference call. The first one will be about our results in the second quarter and the second will be an update to the plan amendment that we announced last quarter. And now after several interactions with creditors and stakeholders, we are now introducing a revised version of that plan amendment in anticipation of our GCM that will occur in early September. On the results side, it's important to highlight that even though we had impact from the pandemics, in particular, in the case of revenues, also, we were able to perform much better on OpEx and preserve the EBITDA margin. So we had the impact of the pandemics felt, but our OpEx was controlled. And in the end, we were able to stabilize the results of the company. On the operational side, though, we continue to move in the right direction as we will be able to see in a couple of slides. On the plan amendment, we have introduced several small changes after numerous interactions with creditors, investors and additional stakeholders, including inputs that came from a mediation process conducted earlier this month. In this plan amendment change, we addressed our DTH, disinvestment that we are planning since the beginning of the plan. We have introduced a minimum price for our InfraCo. We have introduced the Stalking Horse for towers, and we also have introduced several new options for creditors. With this, we believe we will bring a much more balanced amendment, and we are ready for the GCM that will occur on September 8. So let's start with the highlights of the quarter in Page 3. As we can see, following the announcement of our long-term strategic plan amendment last quarter, in Q2, Oi continued to execute on all transformation fronts, demonstrating the solidity of the proposal it has not only for the present execution, but also for the short, medium and long-term changes the company will go through. Our strategic transformation plan is being successfully executed in pretty much all fronts. As we can see, starting with the FTTH project and the fiber operations, which are the core of our plan, during last quarter, we were able to come to the number of 6.7 million homes passed, 1.3 million homes connected and a decline of 4% in broadband service complaints. meaning that not only we are moving in the right direction and increasing dramatically the number of fiber consumers, but also improving our quality in the process and reducing complaints, highlighting the very good quality of the operations in the fiber front. We are now becoming the growth leader in homes connected, connecting more than the other 3 local operators combined. And now we foresee this trend to continue in the near future as we continue to execute our plan based on fiber. On the operations front, the mobile business showed resilience even in the middle of the pandemic with our postpaid revenue growing 6.5% year-over-year. We obviously had impacts on prepaid as we will see a little bit later on, but we were able to stabilize revenues even in the middle of a very tough period coming from the confinement due to the pandemic. On the B2B, we were able to increase our IT revenues, which reached 21% of our share of our total corporate revenues. And this is helping substitute legacy revenues and position our B2B business for stabilization and growth. And we are also greatly reducing our focus on copper and DTH which accelerates the cost savings that we said we would be looking for in terms of our legacy businesses. And this will help us bring financial resources to continue investing very heavily on our FTTH project. On the cost front, we continue to present the results of efficiency and simplification with a BRL 685 million cost reduction in 2020 year-to-date, which represents, in last quarter, a 12% reduction in OpEx. Several initiatives helped us do that, including simplification, reorganization, digitalization and the divestment of legacy businesses. With this, we are solidly on our path to the BRL 1 billion estimates annualized impact in cost savings for 2020. And finally, on the last leg of our strategic plan, we continue to move forward on our strategic options for the future. Our GCM is now scheduled to occur on September 8, and we have made progress in important areas on our plan amendment, including the definition of the Stalking Horse for towers, we have received binding offers for mobile and we started the structural separation -- the preparation for structural separation of our InfraCo and Client Co, in progress with our Jupiter project. In short, we are following through on all our commitments and paving the way for sustainable change, not only for the present, but for the medium and the long term as well. So now let's look at the details and start by looking at fiber in the next page, Page 4. And as we have always said, our fiber infrastructure was our key competitive advantage. And this now starts to show very, very clearly. When we said we had a competitive advantage in fiber, this is due to our gigantic fiber infrastructure that covers all countries with close to 400,000 kilometers of fiber, almost 45,000 kilometers of duct and over 2,300 cities with fiber. When we look at the results of that, combined with the investments on the FTTH front and all of the commercial acceleration we had, we start to see that we have the highest growth amongst all FTTH broadband operators in the last quarter. And we're able to achieve a number of net adds, which were more than all 3 operators combined in the last 12 months. This is a significant progress because, as we all know, fiber will be the future of broadband, and will not only be the future of broadband for the short term, but will be here for a long time to come. With this, we can see that we're lighting up the country, not only on the backhaul and backbone, as we already did before, but also on the residential side. And these 2 small pictures actually can show the difference of our fiber presence in terms of FTTH and one of our closest competitors in terms of fiber, looking at the national presence and where we are. These results can also be seen in numbers. And we can start to see that on the next page, on Page 5. On Page 5, for the fiber operation, even with the full impact of the pandemics in Q2, our deployments continue to accelerate. And now our projections to the end of the year already greatly exceed the expectations we had for 2020 at the beginning of the year. Starting with homes passed, we got to the number of 6.7 million homes passed in the second quarter. This is 4.3 million more HPs built in just 1 year. With that, we continue very solidly on our path to achieve between 8.3 million and 8.6 million homes passed by the end of 2020. This is due to a very successful increase in our monthly average of homes passed built, which came from 267,000 in the second quarter '19 and to 365,000 in the second quarter '20, almost a 37% increase. Obviously, with all of the commercial activity, those homes passed are translating into homes connected. And our homes connected number has also increased quite dramatically from second quarter last year, coming from 237,000 to 1.3 million homes connected in the second quarter. When we look at that and we make our projections for the end of 2020, we have already increased our projections for the end of 2020 to get between 1.8 million and 2 million homes passed, which would put us very, very close in terms of take-up to the numbers we said we would be able to achieve in our plan by 2022. This is almost 1.5 years advancements over 25% take-up rate projected for the middle of '22. And this shows to the strength of our fiber products, to the strength of our commercial operations, and to the quality of the fiber deployments we're making on FTTH. This comes with a very successful increase in terms of monthly average homes connected net adds, which reached 119,000 in the second quarter 2020. This also comes with an increase in our fiber ARPUs, which are now absolutely in line with the plan at BRL 85 a month. All of that combined, we were able to generate revenues of BRL 268 million in the second quarter, just coming from fiber, a 6.3x increase compared to last year, and now we have even more opportunities to not only continue this rhythm, but also bringing the residential success to B2B. B2B already showed an improvement in terms of small and medium enterprises on FTTH and represented a revenue, which is 4x larger than the revenue in '19, but we still have opportunities to increase this number even further. Our key objective with all of that is to replace legacy revenues. And we believe we're advancing very steadily in this direction as we can see next. On Page 6, we can see that even though our copper users continue to drop sharply, with record sales and net adds of fiber, we are now resulting in a reversal of the historical residential RGU declining trends, and this will position us very strongly in the ultra-broadband competitive scenario. In the last quarter, we launched our 400 megabits offer in FTTH, which was very successful, and we'll have a very positive impact of increasing our ARPUs in the sales to come. This contributed to our FTTH sales accelerating and breaking records. When we look at FTTH sales, we can see that we came in January from a number of 160,000 approximately of FTTH sales to over 230,000 sales of FTTH in July. This, in a period of just 6 months, a 46% increase. So it's a very impressive effort that our sales teams have been making and achieving. This is finally helping us reverse the declining trend of residential RGUs. If we look at just 6 months ago, we had a trend of declining RGUs in residential of more than 300,000 RGUs. This has been gradually reduced all the way to July, where we virtually sized the number of fiber net adds and legacy declines. And this certainly will position us for a very sharp recovery and for a future where the fiber will finally substitute all of the legacy revenues as it was the plan since the very beginning. This came also as an improvement in the quality of our broadband customer base. Obviously, when you launch a new product, it's expected that at the beginning of the project, there will be variations in terms, for instance, of the full rate and the survivability of the early customers but we have been improving that quite dramatically, and we already saw, from March to June, a significant decline in our FTTH customer default rates of minus 30 on the 30 to 60 and minus 20 on the 60 to 90. All of that is making significant progress towards our overall ultra-broadband leadership. And here, we would like to call your attention to something which is not only the comparison of our fiber performance with everybody else's fiber performance, but we now start to compare our fiber performance to everybody else's ultra-broadband performance in all technologies, cable included. And as we can see, for the first time in June, we were the leaders in all technologies, ultra-broadband net adds, with a plus 4% compared to player 2 with 137,400 net adds in ultra-broadband technologies. This position us very solidly to dispute the leadership in all technologies for ultra-broadband net ads and users in the future. Obviously, this will help us revert the trend in residential revenues as can be seen next. On Page 7, we can see that after a very long period of decline, the revenues from the residential segment reverted this trend in June, driven by the very strong expansion of FTTH, even, again, as we have highlighted with the sharp declines in copper. When we look at the left-hand of the page, we can see that our copper revenues continued to decline very fast with minus 31% on voice, minus 32% on copper broadband. And this is expected. This is not a performance issue. This is a structural trend that we know we're coming, and that is why we have the plan focused very strongly on substituting this legacy revenue for the copper -- for the fiber revenues we are now building up. As we can see, our fiber revenues grew 550% from the second quarter '19 to the second quarter '20, and we got to a BRL 255 million revenues in FTTH. With all of that, we can see that in June, we finally were able to revert the trends. And the revenues we lost in legacy, which was minus BRL 12 million, was compensated, fully compensated by the revenues we added in FTTH, which was plus BRL 14 million. And this is a significant step for the company because for the first time, even with our fiber base, though not as we want it to be because it will still grow significantly, we are now compensating the decline in copper revenues. With all of that, can see that our fiber revenues already generate more than BRL 1 billion of annualized revenue in June. If we just annualize the fiber revenues in June, we would get to BRL 1.1 billion of revenue. And obviously, this is the long-term trend of the company. So while fiber has had a stellar performance during Q2, unfortunately, as it was the case with the whole market, mobile was impacted by the pandemics. And we can see this in the next page, on Page 8. And talking about mobile revenues, we can see that the pandemics did have an impact in revenues, in particular, in the prepaid segment, even amongst some signs of gradual recovery that we can be seeing more recently. Starting with postpaid. Postpaid was a little bit of a bright spot in terms of the numbers because of the growth in customer revenues of 6.5%. When we look at net adds, following the trend of the entire market, for the first time in long sequence, there was a very small negative number of net adds in the second quarter, given the impacts of the pandemic and the reversion of some postpaid customers to prepaid. But as we can see as well in the bottom part of the chart, there was some recent softening of the confinement that led to some improvement in net adds again. So the sharp declines that we've seen in net adds in April were slightly reversed, even though they're still negative in May and June. And there was also a small recovery in customer revenues in the monthly comparison, starting with the declines that we've seen from March to May and now starting to soften up the curve again in June. On prepaid, we did have a significant impact, as the whole market in terms of revenues. And we've seen a 17.7% decline from second quarter last year or almost BRL 140 million decline in revenues given the impact of the pandemic. Again, when we look at the more recent trends on an intra-month comparison, we can see that the sharp increase in the decline of prepaid revenue occurred from March to April. And now from April to June, we already recovered some of that and expect this impact for the remainder of the year to be soft in a while. With all of that, we can see that our mobility revenues did suffer during the quarter with minus 5.2%. But again, with the bright spot that we did have a good increase of 6.5% on our postpaid revenues. So we can expect some gradual recovery to the end of the year, but we do have some gaps left by Q2, which will be hard to recover. So in the next slide, let's talk about our performance in B2B and wholesale. On Slide 9, starting with B2B. We can see that, again, we did feel the impact of the pandemics on both corporate voice and data revenues, but this was partially compensated by the growth in IT revenues. We see that the reduction in voice and data traffic was very important, in particular, for the voice traffic, given the effects of home office changes. And on the other hand, we can see that IT revenues grew significantly, 53% growth given the home office programs, the acceleration of IT revenues and additional products we introduced during the quarter. On the wholesale, we did see the same impact coming from regulated revenues, in particular, EILD and wholesale voice termination rates, which are the ones more impacted by traditional revenues impacted by the pandemics. On the bright spot, we did see during the quarter, a significant improvement in net sales compared to not only last quarter, but last year, and this number was quite sharp, achieving 136% growth in increase of net sales during the quarter, which may help us soften again the impact for the remainder of the year. With this impact on revenues, as we can see, very bright spot on fiber, reduction on residential copper, impacts on mobile and some impacts on B2B and wholesale, obviously, the costs continue to be a big focus for us. And as we can see in the next slide, on Slide 10, the trends of solid cost reduction continued in Q2. This was driven by the focus on efficiency, simplification and digital transformation. And with that, we always stabilize our sequential EBITDA. When we look at the OpEx drop, even with all of the revenue drops, which were at the range of minus 10%, we are able to reduce our OpEx even further with minus 12.5% with reductions pretty much across the board. The reductions came in third-party services, in rent and insurance, in network maintenance and in digital transformation. 2 things we would like to highlight here are: one, the digital transformation efforts as probably one of the main drivers of our cost discipline for the future. Some of the numbers highlighted here indicate that, as we can see in the 85% share of digital channels in all interactions with customers in June, with a 36% year-over-year increase in the use of our Virtual Technician App, of minus 26% call center calls in a year-over-year comparison and the increase of the use of our artificial intelligent agent, JOICE. There was a second highlight we would like to make here, which is on the network maintenance front, we had even a sharper reduction compared to the overall OpEx reduction of close to 15% drop. This already starts to show the impacts of what we call our deleveraging strategy to migrate customers from copper to fiber and to decommission legacy networks. This, without a question, will be a very important part of our cost reduction efforts for the future. And we started to execute, as can be seen for the numbers in the second quarter 2020. With that, the results on our routine EBITDA was that even though there was a reduction compared to last year, this reduction was smaller than the reduction in revenue, and it was pretty much a stabilization compared to a sequential basis. So we reached the BRL 1.464 billion in IFRS 16 EBITDA for the second quarter 2020. On the CapEx side, on Slide 11, we can see that we have been consistently changing the CapEx mix, as we said we would, and we continue to allocate massive investments to fiber and FTTH, which is the future of the company. And this also allows for greater network resilience during the whole pandemic. On the CapEx front, we can see that compared to the first quarter '20, we had an additional 4 percentage points increase on the fiber investments as a percentage of the total, while we were able to contain the investments in the legacy businesses, such as copper, from 15% to 11%. Compared to a year ago, those changes are indeed very dramatic with 64% versus 36% and 11% versus 28% on the 2 ends of the scale. This brought our CapEx mix in the first half of 2020 to 70% focused on expansion and new businesses and then 14% based on legacy. Obviously, this is a direction we need to go. Even though we must continue to invest very, very solidly on the fiber, bringing our overall CapEx to still the level around BRL 7 billion or slightly above BRL 7 billion a year. On the network resilience side, as a note, it's important to note is that even though we had a significant increase in the data traffic consumption in our network since the beginning of the confinement, close to 1/3 of network increase in traffic. We were one of the only operators to register a drop in the number of complaints in broadband service, even in the middle of the pandemic, with all the increase in usage. And this is a comparison to the second half '19. So this is a big step for us, not only showing that our strategy is focused on the right direction, but also that we're being able to do this and reduce our legacy exposure, while at the same time, keeping focus on customer quality, efficiency and attention to our infrastructure. Next, let's talk a little bit about cash. So on Page 12, we can see that despite all of the challenges, the company has successfully controlled its cash consumption during the second quarter to secure the execution of its transformation plan. On the cash flow front, we can see that we had a cash consumption of BRL 237 million, a lot less that would be expected in terms of run rate, while the recovery is going through. And this was allowed not only by the cost containments and the maintenance of the routine EBITDA, but also by the final installments received from the Unitel sale, which now is finally received in full. With that, we closed the quarter with BRL 6 billion in cash in June '20. On the debt side, we did feel the impact of the FX and the interest accruals and we had our gross debt increased to BRL 26 billion, and our net debt includes to BRL 20 billion -- increased to BRL 20 billion. We can see that most of that was due to the FX variation. With that, it's important also to highlight that our gross debt profile continues to be a longer-term debt profile. And we maintain a short-term hedge policy, we were able -- which we were able to protect our cash and our FX exposure, in particular, during 2020, which is a year where, obviously, there were significantly impacts nonetheless. With that, we can see that we continue to execute well on the operational front. We continue to execute well on the cost front. We continue to execute well on the strategic front but we still need to address our financial situation and our debt. And this is exactly the reason why we have proposed a plan amendment, and we are now perfecting this plan amendment with additional changes in preparation for our GCM on September 8. And this is the update that we start to provide next. So moving on to the second part of our presentation. Let's talk about the changes we proposed to the amendment and which will now be the version that will be voted for the GCM in September 8. We would like to highlight on Page 14, just initial changes to the plan. And we start looking at the UPIs or the isolated production units that we highlighted will be a key feature of the plan to allow the company the flexibility to perform the sale of some of its assets to bring cash, not only for reducing debt, but also to increase investments in the core businesses of the company. So when we look at the UPIs, let's highlight several different things that we introduced in this revised version of the amendment. Starting with the towers. We have finally been able to close on a Stalking Horse position after a binding offer that was received by Highline do Brasil. And with that, we included in the plan the Stalking Horse condition with the right to match to Highline increasing the number to BRL 1.07 billion for 100% of the shares. The introduction of Highline as a Stalking Horse, was already provided for in the revised version of the amendment that was filed last night. And now we have certainty of closure on the UPI towers. On the UPI data centers, as we had highlighted in the last announcement, no changes were brought to the table, but we already had certainty again, with the binding offer received and which was given the right to match as a Stalking Horse to Piemont Holding. And so for the 2 key pieces of the noncore assets we have the certainty, and we have Stalking Horses included in our plan, both for the towers and for the data centers. Moving on to the UPI mobile. On the mobile front, we had some news. And obviously, we have reflected those news as part of the amendment. And the primary news is that as we have been highlighting and communicating publicly, we have received binding offers to the UPI mobile, all above the minimum price of BRL 15 billion we set in the first version of the amendment for 100% of the shares. And with that, we were able to include in the plan the condition to define a Stalking Horse until the GCM given a Right to Top to the offer with the better conditions for the company. Given the UPI mobile, it's important to highlight that after the receipt of binding proposals during the last couple of months, we have been discussing and negotiating with the proponents of those binding proposals. And at the current moment, we are in an exclusivity agreement to discuss with one of the bidders, which is the consortium of the 3 other mobile operators in Brazil, to understand if we will be able to secure adequate terms and conditions for the company, to be able to grant the Stalking Horse to this proposal. This exclusivity period has been renewed once, and we are now in the middle of the second term of this exclusivity period and discussing on the UPI mobile conditions for us to, again, bring as much due certainty as possible to the GCM. On the UPI InfraCo, we have also moved forward with our competitive process. We finalized the first phase of our competitive process by accepting nonbinding proposals from many different players. And after that, with a wide demand for the assets in the preliminary phase of the process, we have decided to set a minimum price of BRL 20 billion for the firm value, which was a middle point between the 25.5% and 51% economic value participation that we have highlighted would be our goal in the first version of the plan amendment. This allows and ensures for a very competitive process in the second phase that we expect to conclude after the GCM and will allow us to extract the most possible value from our investment in the UPI InfraCo and the sale of the control of the UPI InfraCo, as has been highlighted. It's also important to mention that for the UPI InfraCo, we continue to maintain the conditions of a minimum secondary commitment of BRL 6.5 billion, a primary commitment of up to BRL 5 billion to guarantee, not only the payment of BRL 2.4 billion in debt with Oi by InfraCo and also the execution of the CapEx plan that we're bringing to the table. With this, we have managed to advance significantly in our view of the certainty -- of the ability to bring the InfraCo to fruition and to have a very solid plan moving forward to execute the structural separation we have communicated to the market in the first version of the plan amendment. And finally, on the UPI front, we are introducing yet an additional UPI, which will help us address something which we already highlighted very clearly in the beginning of our transformation plan, which is the deemphasizing the DTH infrastructure and the DTH business which we know is a declining business that in the future will probably only represent costs for the company instead of representing revenue growth, which was the original reason why the business was created in the first place. With that, we have created a UPI that we're calling TV Co. And this UPI, TV Co, brings the DTH infrastructure and equipment customer and some adjacent obligations to DTH and IPTV services, in particular, the assumption of 100% of the payment commitments for the use of the satellite capacity until 2027. The way we're going to structure this UPI TV Co is that there will be a sale of 100% of the shares of this UPI TV Co for the minimum price of BRL 20 million, but with the entire value actually falling on the assumption of payment commitments for the use of satellite capacity. And this will exempt us from this annual cost which would represent a significant cost for the several years to come. In addition to that, we will preserve or subside on the revenue share on IPTV by keeping all of the IPTV infrastructure with us and by defining a 50% revenue share with Oi on IPTV revenues and content revenues provided by TV Co to our customers in the provision of IPTV services to our fiber customers. So with that, we close and conclude the structuring of all of the UPIs we're going to bring to vote on our GCM, with a very significant progress on the UPI towers, on the UPI data centers, with a lot closer to view certainty on the UPI mobile, with a much better evaluation of where we are in the UPI InfraCo and with the structuring of -- a reduction of our DTH operation with the UPI TV Co. Coming to the second part of our adjustments to the plan, we can move on to Page 15, where we talk about the amendment proposal to the GCM plan in terms of the updates to creditor repayments. And here, we would like to highlight as well several small adjustments we made to perfect the plan. Starting with the non-financial creditors, there was an introduction of increasing the linear payments of the small and medium businesses on Class 4 to up to BRL 150,000 which will help us eliminate a bigger part of the Class 4 during the GCM. On financial creditors, we introduced some perfections to the secured creditors, Class 2 or the credit that now belongs to BNDES with a much firmer tie between the sale of the mobile UPI to the payment of the BNDES, completely liquidating this credit and again, making sure that we fulfill with all of our obligations to the only guaranteed creditor we have, which is the BNDES. On Class 3, for banks and ECAs, we have introduced the new options in addition to the one that was already there with a 60% discount. And these new options are an improvement in the differentiated option for creditors who provide a new credit line, and as we will see in a second, and also an introduction of a possibility of reducing the prepayment discount from 60% to 55% to creditors who offers bank guarantees at the maximum value of their restructured credit in a ratio of 1:1. Under the JR plan, we have a condition that we will reduce our current total exposure in guarantees to be able to assume the new guarantees that would then by its turn allow any provider of these new guarantees to reduce the prepayment discount from 60% to 55%. On additional creditors, one very important development that we had was with ANATEL, and we have now included in the plan that we will be paying our ANATEL credit under the Law 13,988/20, which actually brings not only more legal certainty for the company, but brings actually positive conditions for us to eliminate the discussion with ANATEL, which was in the court since the first plan and to bring this to something which is legally recognized by the agency and allow us to move forward without any further questioning. This was already allowed by the former plan and is now being solidified as an option here in the plan amendment. In addition to that, we have included yet another clause, which will allow us if any more beneficial conditions are published compared to Law 13,988, we will be able to adhere to that, and that's what we have been negotiating. In addition to including the terms in our new plan amendment, we have also filed and petitioned for the inclusion of our credits under Law 13,988, both with the agency and with AGU, and we have now started the negotiations to initiate the transaction of those credits under the new law. On Class 3, we have also included some changes to our reverse auction mechanics. And not only we have perfected the mechanics to allow the company to have the maximum benefit of conducting those reverse auctions by focusing on the lowest value and NPV for the company in terms of reducing as most as best as possible the values coming from the auctions. But also, we have introduced some conditions to give bondholders and suppliers and all of the Class 3, the ability to participate in the auctions with some certainty. And finally, as we have highlighted as an additional auctions to banks and ECAs on Class 3 or strategic creditors, we have perfected the option to open new long-term credit lines up to BRL 3 billion for all unsecured creditors, allowing counterpart a payment of the structured credit under JR plan at a ratio of 1:2 in the event that Oi effectively uses this credit line offer and to maintain the original JR plan conditions to 2.5x the new credit line offer by protecting their existing credits and not applying the 60% prepayment discounts. This is interesting because it brings new credit for the company, and it also helps some of the financial creditors to have better conditions for the payments of their existing credits compared to the 60% discount option that was introduced in the first version of the amendment. Finally, on the bridge operations, with the goal of financing the transition of our plan during the whole operational restructuring that we will conduct from here until the end of next year, we have introduced the possibility of partially anticipating the proceeds from the sale of the UPI mobile assets up to a value of BRL 5 billion and introduced some additional conditions for flexibility for the leverage, the additional leverage guarantee by the shares of InfraCo to have a continuity of our InfraCo investments even before the InfraCo clears, which is expected for next year. And the last condition, we actually updated in our plan amendment was for the JR closure. And with the current amendment, we are introducing a condition which states that the JR will be concluded by May 30, 2022, or in any other date in case there is a force majeure issue that is identified and approved by the JR court. With it, what happens next? So now on Page 16, we can see what is the expected time line for the plan amendment and the GCM and all of the operations that we expect will happen after that. And starting with the June '20 introduction of our first proposed amendment, now we are filing the adjustments to the proposed amendment in September. On 8th of September, we will have the GCM. We expect the tower and data center UPI auctions to occur in October or November '20. On December, we expect to conduct the mobile assets UPI and to close the towers and data centers. Then in first quarter '21, we expect to have the auction for UPI InfraCo and the UPI TV Co. We expect to close the UPI InfraCo in the third quarter '21 and to close the UPI mobile assets and the UPI TV Co in the fourth quarter '21. With that, by the end of '21, the company, again, will be a completely reconfigured company, way more sustainable, looking forward and focusing on its core infrastructure investments and its core abilities to serve the market. And we would be looking to an end of the JR in May 2022. In conclusion, as we can see already for -- from all of the conclusions we brought when we introduced the first version of our plan amendment, we continue to stabilize our operations. We continue to execute on our strategic model, and we continue to accelerate on our fiber optics business. This continues to be an ambitious model to accelerate growth. And again, we're looking at creating the largest infrastructure company in Brazil, but not only that, but to create the company in the case of Oi, which will fight for leadership in pretty much all of the segments in which it operates. This will benefit customers. This will benefit the market, and this will benefit pretty much all of the stakeholders of the company. We trust that this new amendment will be understood. It has been extensively discussed with many stakeholders, and we trust that it represents a fair representation of how the company could go forward in the best interest of pretty much all of its stakeholders, creditors and society and customers and shareholders. And this management team and the Board of Directors continue to be very committed to executing this new strategic model. We know that there will be a number of additional questions. We are prepared to answer them, but we also feel extremely confident that we're turning the page and really embarking on a journey that will allow us to have, by the end of next year, a completely transformed company, which is, at the same time, a very successful and very sustainable company for the long run. So this, in summary, is what we would like to introduce today, both talking about our results for the second quarter as well as our plan amendment changes in anticipation of our coming GCM. And now we would be ready to take on the investors' questions. Thank you.

[Operator Instructions] Our first question comes from Mr. Fred Mendes from Bradesco.

I have 2 questions here on my side. I mean the first one, just actually, I want to get a better understanding. At least, it seems to us that there was no agreement in the mediation of the banks, and now you are kind of updating the conditions for these payments, and that, obviously, including the banks and the ECAs. So I just want, number one, to make sure if this is correct, there was no agreement at first? And now as a second point, in the first option with ECAs and the banks, what would be the implied discount -- the implied hair count that we'll be given to them under these new conditions? This will be my first one. And then on my second one, also, trying to get an understanding here, it seems that the minimal value for the InfraCo was decreased from -- before it was something like BRL 26 billion. Now it's moved to BRL 20 billion despite all the demand, the supposedly high demand for this. So just want to understand the rationale behind this change as well.

Thank you, Fred. On your 2 questions. First, on the mediation process and the agreement with the banks and creditors in general, as you described, there was a mediation process. There were several options put on the table and there were -- the consideration of everything that was exposed from both sides. And as you can imagine, and as was the case in pretty much any process like this, there will be advancements all the way until the GCM. And it was because of the conversations and because of all of the discussions that we have opted to include new options as part of this revised plan amendment. And these new options obviously provide better conditions for our creditors that allow for adhering to some of those options, which, as you mentioned, would indeed reduce the resulting discount of the 60% hair count. In terms of your second question on what will be the resulting discount. This would greatly depend on what is the volume of either resources or additional finance that is brought to the table or guarantees. And obviously, when we look at just the bank guarantees, it could go all the way down to 55%. If we're looking towards the new resources, the new financing, it can be even lower than that. But depending on the volume resources that is brought forward and who actually gets what, right? So it's proportional to who brings this additional volume of additional credits to the table. So it's not a preset, but it follows a set rules that we will, obviously, depending on the volume of additional resources that is brought to the table, we will allow them to reduce the resulting discounts. On the minimum value for InfraCo, which you mentioned decreased, let me just correct that because in the first plan amendment, we had not set any minimum value. What we had set was that we were expecting a range of the economic value of the company for the BRL 6.5 billion between 25.5% and 51%, making sure, making sure and making very clear that, that was the range, that we had not introduced any minimum price at all in the first version of the plan. What we gave was an example with BRL 6.5 billion and either 51% or 25%. And obviously, this would provide a range in the first amendment. But as we were in the middle of our process, in our first phase of the process with the nonbinding proposals, which have not been received yet, in the first version of our plan amendment, we opted to not define a minimum price. We did that now after the conclusion of the first phase of our process for InfraCo. And we decided to use a value in the middle of this range, obviously, to maximize the competitive tension in the process and to guarantee for creditors, what is a minimum view that they should have on our existing plan. Obviously, our expectation of price and value has not changed, and we believe that the number can be obviously above -- significantly above that. But we're setting, again, a minimum value at the middle of the range. We'll allow for the ample participation of bidders in the second phase. And we certainly believe that we will be able to achieve our expectations. But as there is a number that needs to be set there, we decided to use this number in the middle of the range.

Our next question comes from Mr. Carlos Sequeira from BTG.

One, just following up on the question that Fred just did. So the minimum price for the InfraCo is BRL 20 billion. And in addition to that, there will be the BRL 2.5 billion dividend payment from InfraCo to Oi, right? That was a bit confusing in the way we -- at least the way we read the pen. So that's why I'm trying to clarify that if the price is BRL 20 billion in addition to the dividends that will flow from InfraCo to Oi? So that's the first question. And the second one, if I may, on ANATEL, my understanding is that the decision to remove ANATEL from the restructuring plan negotiated under the new legislation is already -- this is coming from the negotiations between the company and ANATEL, which means that ANATEL will be okay with the plan that is being proposed, the amendment to the plan that is being proposed. Is that a fair assessment?

Thank you, Carlos. Well, on your first question, on the minimum price, let's remember, the minimum price that we said is BRL 20 billion EV, enterprise value. And obviously, any debt will be discounted from that upon closing, right? So it's a BRL 20 billion EV, not a BRL 20 billion equity. So the BRL 2.5 billion will be included in that. But obviously, again, this is just the middle of the range. And as we have seen from the competitive process we believe that there is a potential to go significant beyond that. On the ANATEL decision, we have been discussing and negotiating this with ANATEL for a while because we know that this would bring not only deal certainty but it will bring conditions for the company, which are quite similar to the ones that we currently have in the JR. And as such, obviously, we believe that this was a way that is worth pursuing. We started our discussions with ANATEL remembering that it's a discussion both with ANATEL, but primarily with the AGU because the credits are being handled by the AGU at this point. And the Law 13,988, which was put in effect as of a few months ago, actually is conducted by the AGU, the negotiations are conducted by the AGU. And obviously, when we looked at that, we not only included the terms in our plan, and the old plan allowed us to do that because there was a clause in the old plan, which allowed us to adhere to any new legal rules that help us transact the regulatory agency credit. And that's exactly what we're doing. So we're using a former provision of the plan to actually bring legal certainty to the regulatory agency credits, and we have filed a petition to transact those credits. This petition is now with the AGU. It's being analyzed. We have provided all of the documents and all of the numbers and all of the information that is required to actually move forward with the transaction. You know that those transactions take some time to be reviewed and to be approved and to be formalized, but we're confident that this will move forward because we're pretty much adhering to all of the legal conditions of the new law. And this, as you mentioned, would provide a favorable scenario. We understand that in the previous plan, in the original plan, what happened was that there was a big questioning from ANATEL and the AGU about the legality of including the credits in the plan. After that, this was discussed and ruled by different courts in favor of the legality of having the credits included in the plan. But as we are looking for a view of certainty and plan certainty here regarding those credits, we opted to use the Law 13,988 to remove them from the current plan as it was already possible. We have to remember, by doing that, we pretty much would be removing the key obstacle, which is the questioning of the legality of having the credits in our plan. Obviously, as you saw, ANATEL has issued some statements about exactly this consideration. It has not advanced its voting position. And obviously, now this is up to ANATEL to discuss internally after all of the changes of the amendment that we have now introduced and made public. And also after the position that we already made public, that we are starting the process to transact the credit. And finally, it's very important to highlight that we also have the ability in the future to eventually adhere to any more advantageous option that comes out in terms of those credits after the credits have been transacted. And this has been a key discussion that we have been having, both with ANATEL and the PGF, okay?

Our next question comes from Ms. Maria Azevedo from Santander.

First of all, congratulations for the impressive acquisition, Rodrigo, Camille and team. My first question here is on CapEx, especially the CapEx for 2021. Can you clarify a bit, how will this be funded? Is it going to be under InfraCo or on the -- on the remaining Oi Co? Or do you have a minimum commitment in terms of how many homes passed with fiber you have to deliver to the InfraCo because the deal is only going to be closed in the end of next year, right?

Thank you, Maria Tereza. And yes, I mean, you're right in the sense that we will continue to maintain our rhythm of CapEx investment, in particular, for the HPs and HCs, which is obviously at the core of the plan. But let's remember, and you pointed out correctly that we would expect the InfraCo transaction to actually close only at the end of the year. And while doing that, we have -- in our plan, we have anticipated several options to actually fund this continued investment. In addition to, obviously, the generation of all of the current cost reductions that we're addressing, we have anticipated 2 additional options to allow us to do that. And one of them would come from a bridge of the mobile transaction, as we have just highlighted in our plan change amendments and also coming from a secure bridge coming from the InfraCo transaction. So we expect to already separate the investments from InfraCo in a separate entity. We're starting to do that. And this separate entity, obviously, will be responsible for the HPs and HCs investments under still the same company, still the same group so -- before the closing of the transaction, but already with the possibility of leveraging this operation separately from the entire company. And this would guarantee that we can maintain our rhythm for 2021 until the transaction closes. So it's a mix of, obviously, addressing the cost reductions we have with 2 additional components of financing.

Perfect. And then my second question is a follow-up on the discussions with ANATEL. As a creditor, the negotiations are evolving. But as a regulator, can you please update us on how you're seeing the concession burden for the next years? And is there any opening from ANATEL to alleviate a little bit the burden on the coverage obligations that you have? And on -- you mentioned in the past, becoming a carrier of last resort, how should we see your legacy business going forward?

Obviously. Maria Tereza, as you can imagine, we have been having constant discussions with ANATEL, have been joking with people that probably it was not for the pandemic, we could set shop in Brazil as well because we have been discussing intensely and continuously with them all of the discussion about the concession issues and what needs to change in the future, in addition to the discussion of the credits. And as we see it, there is now a process to be taken inside ANATEL of defining what will be the rule for the migrations between concessions and authorizations. And this is absolutely critical for us to define until the middle of next year, what should we expect and how we should react in terms of our ability to migrate. In the meantime, what we are doing, and we're very, very clear and transparent in communicating this to ANATEL is that we're doing everything we can under our control within the regulatory boundaries that already exist to reduce the exposure to copper. So we're obviously migrating as most as possible users from copper to fiber. We're communicating ANATEL about the relief for some of the metrics that don't make any sense, for instance, the metrics of having local presence in pretty much all cities for a copper customer service, for other metrics in terms of all of the costs associated, for instance, with all of the issues with stolen copper in our operations and other issues, which are actually just a regulatory relief and small measures before actually the big ones come in next year. We already believe that ANATEL is very aware of what needs to change, that ANATEL understands that if we look at the current copper requirements and the copper obligations, those current copper obligations would not be sustainable in a migration to an authorization and that any player would only migrate if we have a certainty that after the migration, there is a path to sustainability. So no, there is still no visibility of when this is going to be completely solved, but we're doing everything in our control, under our control to be able to reduce at least a significant portion of the cost. In our expectations, given the discussions that ANATEL has moved -- has put forward, we believe that until the end of the year, we would have a much clearer path in terms of time line and also in terms of what will be the obligation that we'll survive. But they're absolutely aware that this is a critical part of the regulation change after the approval of PLC last year, and they're executing on it with all of the due process internally to the agency.

Our next question comes from Mr. Marcelo Santos from JPMorgan.

It will be on the UPI TV Co. I just wanted to understand better how the sale of this asset would impact your strategy, for example, on offering IPTV services and the bundling that you would do at the Client Co? And also, what costs would go with the UPI TV Co, what costs would remain -- all this related to IPTV? Because I understand DTH is going in full with the sale. But I just wanted to understand better how things will shape after -- if UPI TV Co is sold? And the second question would be related to how much EBITDA should go with sale of the towers, data centers and mobile? And I don't know if you could speak on all of this, but if you could give some help on some of this will be very useful.

Thank you, Marcelo. On UPI TV Co., as you correctly pointed out, the key intention, the primary intention of UPI TV Co is to divest from the DTH business. We have said at the very beginning of our plan that it didn't make sense for us to continue investing in DTH for the long term, given that; one, we do not have the scale; and two, we believe that there was a declining trend overall for the market in terms of DTH. So the DTH would only make sense for a player if it has a significant scale that allows the player to not only breakeven, but to continue obtaining returns even in the middle of a significant decline for customers. And this is exactly what we have been done. The focus of the UPI TV Co is DTH. As for IPTV, there is 2 parts to -- there are 2 parts to the answer to your question. The first one is we will keep all of the IPTV infrastructure. So we will keep with the IPTV platforms. We'll keep with the IPTV set-top boxes, we will keep installing and deploying the IPTV to fiber customers' houses. And obviously, this is an important component of our fiber business and our residential broadband business because it allows us to be more competitive, it allows us more options to the customer, and it allows us to penetrate on higher income consumers for the residential broadband product. In addition to that, what we do is, we -- combined with the sale of TV Co, we enter into an agreement to purchase content from this new TV Co player, which will consolidate the DTH business. And by doing that, we expect to continue with an attractive price for content, which will be offered to our consumers. And so it's a hybrid operation where DTH goes entirely and TV Co actually stays -- and IPTV, sorry, platform stays with us, but with content being acquired at a much larger scale cost. And this is, in essence, a little bit of the best of both worlds because we reduce a significant cost that would be coming to the company in the coming years and we maintain our differential with the content offerings to our fiber consumers. In addition to that, it's important to highlight as well that we keep all of the OTT operations. So Oi Play, which is our OTT offering that does not depend on any linear TV platform, it remains at Oi, and it's something that we'll continue to be expanded, so we still remain with the future options for content as part of our offering. So we believe we achieved a very interesting proposition here because in the end, we reduce our costs, we maintain our offer, we maintain our bundles, and we start to focus as well on growing the OTT and growing something that will be, in our opinion, the future of content rather than linear programming. On your second question about the EBITDA for data centers and for towers. In terms of data centers, it's not a super significant. We're talking about a BRL 50 million EBITDA. And obviously, this will be more than compensated by what comes in. And if we just consider data centers and towers, it will be around BRL 150 million EBITDA, all combined. As for mobile, obviously, mobile is a different story, because it's one thing to consider what is the EBITDA that stays within the perimeter without all of the associated costs. But the other thing is, what would be this EBITDA inside the company. So it's kind of also having 2 different metrics here. One is what is the EBITDA that we sell? And the second is what is the EBITDA that goes out? Because, obviously, the EBITDA in the perimeter that we're selling is a higher EBITDA than EBITDA that approximates BRL 3 billion. And thus, which allows the market multiples, which are significant, and we have discussed it. But we have to remember that this internally to the company was associated with a lot of indirect costs. So the EBITDA inside the company was a lot smaller than that. Obviously, as part of the operation, we have a plan to optimize the costs associated with mobile. And so in essence, when we look at the EBITDA that goes out, it will obviously be significant below this number. I would say, we have not been disclosing this number in detail. But internally to the company, suffice to say, that our EBITDA was in the range of the mid-20s to lower 20s.

Perfect. And just a follow-up on the first question. So the users of IPTV and the company that determines the offer, what's being offered would be Oi. So you would still own the users in this IPTV Co in relation to the -- sorry, the TV Co in relation to the IPTV offering, they will only be kind of a wholesaler of content to you. So you will continue to have the full ownership contact with the users that will be still being done by you?

The users will be users of the TV Co, and we will be offering co-billing as part of our platform and our bundles. And obviously, we will be also remunerated by having the IPTV platform. We will manage the IPTV platform and the IPTV set-top boxes and controlling the customer experience to our fiber consumers.

As there are no questions, I would like to turn the floor over to the company for the final remarks.

Okay. So thank you, again, everybody, for this additional call for the second quarter and then for also the changes to the plan amendment before our GCM. We, again, are very confident in the GCM results that are to come next month. We are very confident in the future of the company. We're very confident in the execution that we have been demonstrating to the market. And after all of that, we look at, obviously, a significant path forward to having a sustainable company in the long run. So thank you very much. And hopefully, we'll talk soon either after the GCM or in the next quarter results.

This concludes Oi S.A. conference call. We would like to thank you for your participation. Have a good day.