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

Good morning, ladies and gentlemen, and thank you for joining Oi S.A.'s conference call for the second quarter of 2000 -- for the fourth quarter of 2022. The event will be held in English with simultaneous translation into Portuguese. Please be informed that this video conference is being recorded, and it will be available later on the company's Investor Relations website. [Operator Instructions] After the presentation, we'll begin the Q&A session. Now I hand over to Mr. Rodrigo Abreu, Oi's CEO. Please, Rodrigo, you can proceed.

Thank you. Good morning all, and welcome to our Q4 2022 call. And as we have done in previous calls, I will open the call with a key comments on our results and then I'll ask our CFO, Cristiane Barretto, to also participate, presenting details on our financial results and cost strategy, and I'll come back to close the call. First of all, it is important to mention that the reason why we have delayed this call so much, and it has nothing to do with our results. As you know, we have provided key numbers when we communicated the delay, but rather the delay has a connection with the whole process of presenting our judicial recovery plan last week and conducting the restructuring discussions with the financial creditors. We needed to conclude several details of our plan before filing last year's results and thus, we had to delay the announcement for today. As you certainly have noticed last night, A few comments are in order to avoid misinterpretations of the results that were published. The first is about our auditor report, which brings, as you have noticed, a disclaimer of opinion because Pricewaterhouse is still waiting for the signature of the definitive documents of our restructuring support agreements with the group of financial creditors that we have started negotiating since last year. We expected to have concluded this signature before the release of the audited financial statements of Q4. But given all of the complexity involved in the discussions, this will still take another few weeks. And because of that, despite there are no issues with the numbers or with the results presented there is a disclaimer of opinion on Pricewaterhouse's report. With the RSA signature, which we expect to have in the coming weeks, we expect to come back to the regular auditor's opinion with the Q1 results, which will be published next month. The second disclaimer is about the net loss incurred in Q4, which, as you have seen, amounts to over BRL [ 17 ] billion. And it's critical to mention that this has no relationship whatsoever to operating results and no cash impact, but rather, it represents primarily a major accounting adjustment given the impairment of legacy assets that we performed during the last quarter of 2022. This impairment of over BRL 14 billion is related to recognizing the expectation of no positive results coming from the legacy copper assets, which were controlled and managed as a separate business unit for the first time following our reorganization last year. As we have mentioned multiple times, the concession, unfortunately, is today a money-losing business. And this impairment simply recognizes it from an accounting perspective. In order to counter that as we also have mentioned multiple times, we are in the middle of a very large arbitration process with ANATEL about the concession and the possibility of coming to an agreement to migrate it to an authorization model, with this in perspective, let's talk about Q4 and the 2022 results. 2022, was a year in which we made the shift to a completely new model. And 2023 will be the year where we start to ramp up this new model and where we'll be able to start assessing the operating progress towards future expected results. As we highlighted when we talked about Q3, even though the results from Q3 and Q4 last year start to represent the new Oi, we are still ramping up the run rate numbers we expect for the company, as we still need to wind down several legacy costs, continue to trim down the company's structure and continuously ramp up the core of the new Oi, which are the fiber and B2B businesses. At the end of the presentation today, we will also provide an update on the filing of our judicial recovery plan and also on other nonoperating updates, which are important to understand the full perspective of the company. As we know, we still have significant challenges ahead. With that, let's look at the highlights of Q3. So moving on to Slide 3. Let's start by talking about our progress on some core metrics. In Q4, the new Oi core operating metrics presented solid results with revenues continue to grow strongly in combination with a very strict cost control. As a first positive indicator, we see that the new Oi continues to grow, and we saw a 5.6% growth year-over-year in total revenues. With both fiber and B2B growing at a healthy pace, fiber with a 25.5% growth and Oi Solutions with a 3.5% year-over-year growth. And we reached this with close to 4 million homes connected and with ICT keeping its growth trajectory. This, while legacy continues to bring growth down and ex legacy, we could see that the growth of the new Oi would be significantly higher with a plus-23% year-over-year. On the efficiency front, results were also very important with the reduction in year-over-year OpEx of minus 25% and a reduction in CapEx of minus 73% associated with the new operating model, which is asset light and also an improved allocation of all of the CapEx the company has been using. If we excluded the infrastructure rental due to the new model and this infrastructure rental is basically the rental of the V.tal or fiber infrastructure. OpEx would be down close to 50%. The Q4 results were important to close 2022, and then we can recap the year in the next slide, Slide #4. As we mentioned many times, 2022 was a transformational year in which Oi completed some key M&A transactions, consolidated its competitive position and started to address our main financial issues. After all that was done since the beginning of the judicial recovery in 2016, and all of the amendment and plan in 2020. In 2022, we completed the transition process, with closing all of our key M&A transactions, in particular, the sale of the mobile unit and the creation of V.tal, the consolidation of the growth in FTTH and also reaching a national scale with the FTTH customer base. The consolidation of Oi Solutions as a key ICT player, the continuation of a very sharp cost reduction with very significant results and the beginning of negotiations with creditors to restructure our financial debt. The second half showed very strong revenue growth, and we can see that. And this was after all of the year reorganization took place already with the new Oi results in centerfold. And we also presented a significant reduction in CapEx plus OpEx while the asset sales and efficiency initiatives drove this reduction starting in the second half last year. So let's look at the detailed results of the core components of the new Oi, starting with a consolidated view in Slide #5. In Q4, we can see that the new Oi revenues were up 6% year-over-year, driven by the fiber expansion, which, as I mentioned, grew 26% year-over-year and represented already 46% of new Oi revenues. The numbers in the consolidated net revenues still includes around 11% of discontinued operations, in particular, the DTH results. But as we can see, 73% of the total revenue are already core revenues, while legacy responded for just 15% of total revenues in Q4 last year. On the new Oi revenue details, we can see that legacy, unfortunately, continues to bring the numbers down with a 37% decline, but that was more than compensated by the healthy growth of all of the other components, in particular, fiber. Talking about fiber, we can look at the detailed results on the next page, Slide 6. Our fiber revenue growth continued, as mentioned, in the Q4 2022 with Oi maintaining ARPU growth and market share leadership in fiber cities despite much stricter policies led to lower net adds overall. The growth occurred both annually and sequentially even in a more competitive Q4 from a market perspective and we have a 25.5% growth annually and a 2.3% growth sequentially. While net debt had a slowdown in Q4, and we saw that the whole market had a little bit of a slowdown in Q4, we can also see that Oi maintained its leadership footprint with a close to 31% market share in the cities where Oi Fibra is present. This is a very significant result, and we can see that coming after Oi, we have 20% of the top 10 ISPs and only 13% on the next large player. This happened with churn down 0.5 percentage point and ARPU up by 6%, and those are very important results to maintain the profitability of the growth of Oi Fiber. The fiber performance continues to be supported by the growing fiber network from V.tal as we can see on Slide 7. And with the growth in Q4, Oi reached 4 million homes connected and expects to continue growing the homes connected presence in 2023. V.tal's HP expansion already reached over 20 million HPs and surpassed 300 cities. In addition to investing in new revenue streams, as can be seen by the opening of a new data center in Fortaleza, which is enabling interconnection and edge computing as the services offered by V.tal. In the homes connected, we continue our ambition of a solid home connection expansion looking towards 4.7 million homes connected by -- approximately by the end of 2023. And we will grow always focusing on a profitable growth model, with a higher take-up of the new HPs and a better profitability due to lower unitary ONT CapEx and higher quality net adds on the expanded homes connected. And it's also important to highlight that this comes on the tails of significant market recognition of the quality of Oi's fiber service. We see that for the first time, ANATEL presented a survey on the vast fiber connections in Brazil according to the results of our net preference score from customers. And Oi was ranked as the best fiber connection amongst all of the large fiber services. In addition to that, in a recent survey, Oi also presented the lower level of complaints on its fiber service compared to the overall market. We also received an important recognition from the Mobile World Congress in Barcelona in an innovation award for Oi Fibra X which is our FTTR service, our fiber to the room service, given a very differentiated service strategy to expand revenues in addition to the basic home connection service. Now let me turn the presentation over to our CFO, Cristiane Barretto, who will talk about the progress on our cost efforts, our liquidity and our debt position. Chris?

Thank you, Rodrigo, and good morning, everyone. Starting on Slide 8. We can see the implementation of efficient initiatives such as simplification of process, renegotiations of contracts, reduction of Oi structure, among others, in addition to the cost out of mobile and InfraCo UPIs. These effects led a routine EBITDA to decrease by 50% year-over-year when excluding rent and insurance costs. Moving on the right side of the slide, we give more details on the evolution of the main OpEx line. Recurrent personnel fell 16.2% (sic) [ 18.2% ] year-over-year, reaching BRL 431 million as we had a significant headcount decrease of 15,000 employees in the period. It's worth saying that a large part of this layoff occurred after the closing of the M&A transactions. Third-party services also had a double-digit decrease in first Q 2022, down 33.6% year-over-year due to efficient measures, which drove lower sales commissions, energy and content acquisition. At the same time, leasing of fiber capacity from V.tal, which is a cost linked to growth in fiber connections in the new operating model, promoted a rise in rent and insurance expenses, which grew 70% when compared to fourth Q 2021, offset by a reduction in CapEx as a result of the new operating model. All in, this quarter, double-digit cost reduction in both yearly and quarterly basis all of Oi's best effort to become leaner and more efficient. Moving to Slide 9. You can see that we had consistent annual cost reduction throughout the year 2022, and especially on the second half of the year as a consequence of Oi's operating transformation and its initiatives on cost savings and simplification fronts to adapt the cost of the new Oi revenue generation. Third-party services and network maintenance fell double digits starting from second Q of 2022, with personnel catching up in the fourth Q, resulting in a stronger decrease each new quarter when excluding rent and insurance. Going forward on Slide 10, we show the improvement of Oi's margin and lower CapEx even with the current legacy burden. Top line growth and OpEx savings allowed our EBITDA to grow 54% quarterly over quarter, totaling BRL 345 million, with a margin of 13.2%, in line with the transition period of the new Oi. This evolution represents an improvement of 5.1 percentage points sequentially, even with the growth in fiber related to the OpEx offset by CapEx reduction. In fact, CapEx reduced by 16.2% quarter-over-quarter in light of the new operating model with V.tal combined with a focus on smart allocation, which should drive CapEx to sales to a level below 10% this year. In summary, new Oi's operating cash flow, EBITDA minus CapEx improved BRL 200 million quarter-over-quarter due to growth in revenues and improved EBITDA margin. I also would like to highlight that non-routine EBITDA reported in the financial statements included a noncash accounting impact of BRL 14 billion related to the impairment of the legacy/copper business unit as Rodrigo already mentioned at the beginning of the presentation. Now on Slide 11, we can see our cash position, which ended the fourth Q of 2022 at BRL 3.2 billion, reducing BRL 370 million when compared to cash balance at the end of the third Q of 2022. The consumption was driven by working capital due to higher supplier payments and one-off settlement of legacy disputes at year-end, partially offset by the cash in V.tal's secondary offer. Regarding financial debt on Slide 12. I want to highlight the important reduction we had since 2016. The financial debt restructured in the 2016 RJ plan in a conservative approach when accrued by inflation and adjusted by the exchange rate variation from 2016 to the actual period would have reached approximately BRL 70 billion compared to around BRL 30 billion by the end of 2022. The reduction resulted from the efforts of the previous reduced recognition and the repayment of debt funded by asset sales during 2022. It is so, external factors such as the macro environment, delayed approval of M&A operations and disputes regarding the relevant part of the mobile UPI value part of the better evolution. Now I'll hand over to Rodrigo to contain the presentation.

Thank you, Chris. So now let's talk about the key developments since Q4, which is, in particular, our restructuring process. As you know, since last year, Oi has been working very diligently with the help of advisers to address the restructuring of its financial debt, and we believe we have substantial progress. It's always good to remind that we announced this process in October of last year with the hiring of Moelis & Company as our financial adviser to assist in the discussions with the creditors. . And throughout the way, we have provided detailed information, including the blowout of all of the information disclosed to creditors under the context of all of the negotiations. In March with the announcement of the filing for the judicial recovery and the preliminary agreement with the financial creditors, we started to highlight all of the key important topics that we are considering -- we were considering and now have filed for in our current judicial recovery plan. Since March, obviously, several developments have also happened with the signing of the financing of $275 million, which we the first tranche to be disbursed in the coming days and the blowout of an updated long-term plan, which was used with creditors along all of the restructuring discussions. And obviously, we filed on last Friday, the judicial reorganization plan with the JR court. We are confident in the next steps ahead, including the signing of the RSA, the restructuring support agreement, with the majority of holders of some senior PIK toggle notes and the lenders of loans from ECAs. We also have deadlines to reach a majority for the approval of the judicial recovery plan and the ratification of the judicial recovery plan within the 150 days from its renting which is before, I suppose, the GCM. And we obviously expect that after the conclusion of the approval of the plan with the majority of the financial creditors approving, we expect that the new money coming in will be cash in the first quarter of 2024. So let's talk about the key characteristics of the proposed judicial recovery plan, starting on the next slide, Slide 14. As expected, the key objective of the plan is to create a sustainable long-term debt level for Oi, in line with the renewed operating plan to continue in developing the new Oi as has been devised since the beginning of the plan back in 2020. The main objectives we had in mind when designing this plan were obviously to reduce indebtedness, first and foremost, by reaching sustainable levels in the medium and long term. To focus on the financial creditors and on onerous liabilities, providing the least possible impact on the current operations of the company, to ensure short and midterm liquidity to sustain operations given that while we are still ramping down our legacy business and ramping up the new Oi results, we will still have a few years of negative liquidity ahead of us. The conversion of debt into equity to readjust our capital structure and obviously, it will be critical to have an adjusted capital structure from now onwards. And to reach consensus among the majority of all of the financial lenders to have the plan approved. And we are addressing these key objectives with the following key plan points. First, a differentiated treatment to creditors providing new money, which will result in a roughly 50% -- max of 50% overall debt haircut and a longer maturity of our financial debt. We also have proposed planned targets, restructuring our financial debt and the take-or-pay contracts that for the first time, we are including those contracts in a restructuring or else it would not be viable to have long-term sustainability of the company if paying for services that are no longer used. The signing of the DIP financing to provide short-term liquidity until the plan is finally approved, enabling the new money cash in to support growth and repay the debt when the plan is approved and as expected, in the first quarter of next year, as mentioned in the last slide. The dilution of 80% of the current shareholders through the capitalization of restructured debt and the signing of an RSA with the majority of bondholders and ECA holders to facilitate the implementation of the plan. The main features of this plan include, in particular, the treatment of the financial creditors. And we can look at the options to support the financial creditors in the next slide, Slide 15. In the proposed plan, we have highlighted that the commitment to providing new money is the main differentiation in terms of recovery for each of the financial creditor options with 2 main options available. Option 1 should be the one to drive a critical incentive to provide a new money without which, obviously, the plan is not sustainable. And in option 1, the creditors providing new money will commit to providing a 4 billion -- the greater of $4 billion or $750 million in new money. The creditors of the option 1, some of the creditors will provide a debt financing under market practices and conditions. And the debt will be converted -- the current debt will be converted into a rollout debt of up to BRL 10.75 billion guaranteed debt. The remaining credits above and beyond the BRL 10.75 billion roll of debt together with the remaining credits from option 2, we will be converted into 80% of the total shares of the reorganized Oi. On option 2 for other creditors, this remains as an option to other financial creditors who don't wish to contribute with new money for the new plan. And this will have an effect of having 30% of the face value of option to debt converted into what we're calling A&E reinstated debt, with the remaining 70% together with the remaining credits from option 1 converted into 80% of the total shares of the reorganized Oi. After the conversion of the equitized creditors from financial creditors, the current shareholders will own 20% of the restructured company's equity with a material reduction of financial debt and long-term take-or-pay obligations. As mentioned before, the focus of the plan is on restructuring the financial credits and some of the take-or-pay obligations. So let's look at how other creditors are treated in the next page on Slide 16. As you know, we have 4 classes of creditors and the plan also details the payment terms for each class of creditors. And detail is also the main guarantees for financial creditors and the assets have redemption priority in case of the guarantees. With a little more detail on the left-hand side, we can see the following main conditions by creditor class. Classes 1 and 4 and the net credits from the regulatory agencies. And this means labor credits, small and medium company credit Classes 1 and 4, and the credits that were renegotiated with ANATEL at end of last year. We foresee no impact in the maintenance of existing conditions under the previous plan or under the current conditions of preset renegotiated in the case of the regulatory agencies. On Class 1, which are the labor credits in an addition to the no impact for all of the illiquid credits, which are not still exigible. We do have on 180 days grace period with 5 monthly installment payments for all the credits, which are pre RJ but that will become eligible after the approval of the plan. On Class 2, which is the guaranteed creditors, we do not have any creditors listed in this class, given that in the last plan, we liquidated all of the Class 2 credits with BNDS, which was the only creditor in the class. On Class 3, which are end guaranteed of the credits, we do have several different types of creditors included, and we have different treatments for each of the different types of creditors. Starting with the small creditors in credits up to BRL 5,000, we are expecting a payment within 30 days after the approval of the plan, so no impact whatsoever. And the qualified and nonqualified financial creditors, we will have those creditors with an election of either option 1 or option 2, as demonstrated in the previous slide, or with no option, a default for a general clause, which continues to be the same from the previous plan, as I will explain further on. For take-or-pay nonfinancial creditors are still Class 3 creditors, we are foreseeing specific discount options of up to 50% of the credits according to existing guarantees and negotiation options, as I will detail in the next slide. And for the supplier, the partner suppliers in Class 3, we also have specific treatment with a relatively short payment schedule and an option for an integral payment with an advanced discount, which are present in the plan. We are splitting the partner suppliers into different categories depending on the size of the credit, all the way from the smaller creditors with minimum impact all the way up to creditors with over BRL 10 million in credits, which will be paid in 4 installments in a relatively short period of time. Finally, as a general option, the general option remains exactly the same as the general option in the previous plan. And the general credits foresee the maintenance of the existing conditions, which is to start payment in February 2038, with the company having a possibility of redeeming the whole credit with the 15% of face value before the credit expires in February 2038. In addition to that, it's important also to highlight the main guarantees for the restructured financial creditors. And the main guarantees, as highlighted in the plan are first, the Oi's shares in V.tal with the first lien for the new money providers, second lien for the role of debt, up to BRL 10.75 billion of roll-up debt; and the third lien to the A&E restated debt. And just to remember, the A&E are the 30% of option 2 credits. After the creation of ClientCo, then we will also have ClientCo which are the fiber operations of the company, which we are foreseeing to be created into a UPI just to give more flexibility to the operations of our fiber operations, including the possibility of an IPO or receiving additional capital injections. We will have the ClientCo as a first lien guarantee for new money with 100% of the shares and a second lien guarantee of the roll-up debt with a 90% of the ClientCo shares. And those are pretty much the key guarantees. In addition to some guarantees of assets while ClientCo is not created and the real estate, which will be sold during the period of the plan, which will also be an important guarantee for creditors. And in terms of the priority in sale of guaranteed assets, we have them as follows. In the case of sales of Oi's shares in V.tal, 100% of them will be used primarily for payment of the new money repayments. And then any residual value will be used for the role of debt. In the case of the sale of ClientCo shares, 100% of the proceeds will go to new money. And if all of the new money is already liquidated, then 60% of the residual proceeds will go to a payment -- roll up debt. And in the case of sale of other assets, we have a schedule of repayment of debt, in particular for the real estate sales. In the case of accumulated sales below BRL 200 million, 100% of the proceeds remain with the company for operating needs between BRL 200 million and BRL 400 million, we have 50% of the proceeds going to the repayment of the new money and/or of the role of debt in case new money is already liquidated and above BRL 400 million, we expect 100% of the proceeds for the repayment of both the new money and/or the roll of debt. And this guarantees that the company will have access to liquidity due to the sale of existing assets, in particular, the sale of real estate assets, which continue on a rolling basis. And we will also be able to reduce the adapt for the new money and the roll of debt. All of the main conditions that are listed here are 100% in line with the preliminary agreement that we had with the group of financial creditors that was announced early in the year. And this will also be the basis for all of the definitive RSA documents, the restructuring support agreement documents that we expect to be signing in the next coming weeks. Moving on to Slide 17. We can see what we should expect after the implementation of the new plan. We should expect the company with lower debt levels and lower owner of liabilities and improved debt amortization schedule and an improved value. In terms of debt, obviously, we do have just on financial debt circa BRL 30 billion, slightly more if we consider the general credits. And we expect a reduction of up to 50% of this financial debt with the conversion of debt to equity. In terms of maturities, this is an important feature of the new plan as well. We had a key maturity of the plan in 2025 for all the 2025 bonds. And now the maturities have been pushed to 2027 and 2028 for both the new money and the roll of debt. And for the remaining adapt of option 2, the maturities have been pushed to 2033. In terms of onerous liabilities, we did have before the plan, a strong cash consumption for the period of the plan of circa BRL 11 billion, a significant amount of money through the life of the plan all the way to the end of the plan. And obviously, with all of the renegotiations that we're doing, we expect a goal of circa 50% reduction of payments to satellite towers and submarine cables. And finally, in terms of equity, we know that the equity has a significant impact by the volume of financial debt, which could even lead to a negative equity consideration considering the current numbers. And after the plan, we expect a prospect of a sustainable company, leading to an improved equity position. The specific points about the plan are the take-or-pay liabilities and also what other areas we have to address to make the plan sustainable. And we expect to address them with important negotiations as we can see in Slide 18. Those negotiations to reduce take-or-pay obligations are a very important part of the planned discussions. And also, we do have progress in other negotiations occurring on both the regulatory front and the noncore M&A front as we will update you briefly. On the take-or-pay contract. So we start with the towers, and we are negotiating with the 3 key tower companies of our plan with the goal of getting close to 50% of payments from '26 onwards after the end of the STFC concession. And obviously, those negotiations are still ongoing. We are discussing and obviously, this will be a part -- an important part of this next step of the plan approval process. With the DTH satellite providers, we have a preliminary agreement regarding a potential 50% haircut of the future take-or-pay obligations upon the termination of satellite usage from 2025 onwards. It's important to mention that this termination of satellite usage is connected to the M&A activity that we have on the DTH. We will talk about them shortly. And finally, on the LTLA front, which are the submarine cables are coming from the globe net sale are way back in the life of the company. We have already announced that we are discussing a proposal in place with a reduction of up to 50% of our payments from '25 to 2028 and an additional offset of the LTLA debt of 22% with an agreement in exchange for Oi scrap expected by V.tal. This agreement is currently being discussed in remediation as part of the RJ proceedings, and we will be subject to all of the regulatory and governance approvals as part of the RJ process. To talk about some other updates, both on the regulatory front and on the M&A front. We start with the regulatory disputes. As you know, we have mentioned multiple times that we do have a big concession arbitration in place. And the key development that we have very recently was the closing of the concession arbitration case hearing with ANATEL which took place in May '23. And after that, we now have a commitment to partial decisions expected for the second half of 2023. This is very important because this is the first time upon the process of arbitration, in which it will be possible to estimate with a little bit more precision on what to expect of the decisions coming forward and how much the company should be awarded in this that we believe is a key feature of our plan to actually bring some stability and sustainability to what is today, as we mentioned, a money-losing business in the concession. In the meantime, the company continues to invest in discussions and productive discussions for a potential agreement aiming at the STFC concession from -- a migration from a concession to an authorization and those discussions occur in parallel with all of the arbitration. In addition to that, as we mentioned, we did have a recognition at the end of 2022 of an impairment of the BRL 14 billion of all the copper concession assets with no cash impact, which resulted from the negative future results expected from the segregated legacy business units. And this obviously comes from the impact of the declining customer base and the very high costs, which are fixed costs many times associated with maintaining the regulatory obligations in comparison with the value of the current residual fixed assets. On the M&A front, we would like to announce that we reached the signing phase of the sale of the Timor-Leste foreign operations. Those are small foreign operations that still remain from the period after the merger with Portugal Telecom. And this is yet another step towards the simplification and monetization of our foreign assets which should no longer be a focus for the company since the announcement of the amended plan back in 2020. And finally, the DTH negotiations, as I mentioned, are still in progress, but we see a potential of having the sale of those operations aimed at improving our future cash profile while we will continue to maintain the TV service with IPTV according to all the terms of the current negotiation in place, which are still related to the MOU that we announced a long time ago. But given all of the complexities involved in the negotiation, we expect to close in the coming future. So next, let's finally provides some quarterly updates on our ESG activities. And obviously, this is important for any company. And in our case, even in the middle of all of the transformation. We continue to demonstrate our commitment with ESG goals with the recognition in multiple fronts. On the A front, the focus on this quarter comes on the refurbishing the units. We have over 80,000 recovered equipment units for FTTH and data, and this represented not only a significant amount of CapEx savings in the fourth quarter of 2022, but also a reduction of electronic garbage coming to scrap. We also would like to highlight our efforts on recycling copper scrap, and we had a historic record in Q4. We're recycling 7.1 tonnes of copper cables and mixed scrap. And this, again, goes towards avoiding just waste and a significant environmental impact. On the S front, we have multiple developments on education and inclusions, such as the completion of our second class of female leadership program, the launching of the second course for educators in our Orbita platform. And were a finalist in the inclusive communication category, the Diversity in Practice Award. In addition to that, we had an important recognition in people management as the top employer in Brazil and on the top 25 best company in Brazil by Premio Gupy, which is a recognized HR award in Brazil. And finally, on the G scale, we have the definition of new committees after the election of the new Board of Directors, and we updated our disclosure in securities trading. We were also considered one of the top-rated companies by the survey Who Defends Your Data, in particular with the best position among the large telco operators, and we obtained our ISO 27001 standard certification for information security management. So let's close our presentation by providing you with a summary of our challenges in the next slide. As we have always mentioned, Oi is focused on implementing its recovery plan, doing everything which is required to do that. And this is, at the current time, aimed at the drastic, it's 3 key challenges, which are debt, the legacy equation resolving all the legacy issues, which continue to present significant negative results for the company and a continuous improvement in operations leading towards the build-out of the new Oi. Those are the key challenges of 2023. And I would dare say the main challenges of the company for the coming years. All of those have a significant importance in terms of what the new Oi will be capable of doing. Starting with the debt reduction and obviously here, the key focus is the progress of the new judicial reorganization plan. The plan was presented on May 19. We now will have the signing of an RSA, and we expect the renegotiation, as mentioned, of the take-or-pay contracts. And with all of that, it will be possible to bring back the company down to debt levels, which are sustainable in comparison with the capacity of revenue and results generation that we expect the company to have in the coming years. The second key component is the legacy equation and the legacy business here, in particular, the STFC concession has negative results that needs to be addressed in order for Oi to reach long-term sustainability. There is noise -- no sustainable Oi without actually resolving all of the issues coming from the legacy negative results. And the ANATEL arbitration is a key component adding to an agreement for the concession migration and the compensation of historical imbalances of the concession including some economic imbalances, which present a significant positive number for the company as part of the arbitration under discussion. And finally, the last and maybe the most important challenge is to continue with our operational improvements in building the new Oi. And those operational improvements refer both to growth, continuing our growth and scale of the fiber take-up and reaching higher profitability levels with the new fiber model, improving the scale of Oi Solutions and IT revenues and unlocking value with new revenue streams. But also efficiency, adjusting Oi structure to a lean and agile company, minimizing the legacy impact on EBITDA and cash flow by being super vigilant with all of the operating impacts of the legacy operation right now; having a continuous cost reduction effort through significant efficiency initiatives and having a smart CapEx allocation will focus on profitability. Those are the 3 pillars of our transformation. We know they are not minor tasks. We know that each and every one of them requires a significant amount of effort with some levels of uncertainty, it's important to highlight that, but which the team is addressing with a lot of effort, a lot of work and a lot of thinking, which is now crystallized in the recovery plan that we have just presented. We know that there are still significant steps ahead of us. We know that there will be still a lot of work to be done, but we are confident that doing what we are doing we are acting in the best interest of the company. And we envisage a future which can be sustainable for the company if we're able to address each one of those 3 pillars of challenges ahead. So with that, we conclude the first part of the presentation, and we can go to the initial Q&A session. Thank you.

[Operator Instructions] For our first question, it will be read by the company's management.

So Rodrigo, there is a question here that talks about the evolution of carbon, I know in the presentation, we talk about CapEx to sales below 10% is still leasing and also on the grow-out on a day when evolution of unitary ONT CapEx that has a continuous reduction. What are the drivers behind those evolutions?

Thank you, Well, we have actually 2 drivers -- actually 3 drivers to add an operational component to it. The first one is obviously just the technological evolution and the continuous price reduction that the technology has been having in the industry. When we started the whole plan way back then, we had ONT prices that were up to $90. Those were continuously reduced over time, and then they were reduced circa $50 and then to $40, now we're operating with certain types of ONTs, which can go all the way down to less than $30. And obviously, this will continue happening. What we have done in our strategy as well as to mix some types of different ONTs, some which are more aimed at premium service, which is a slightly higher cost, but still below the $40. And which are aimed at entry-level service, which will be below the $30. So this is a first component, which is very significant and which without a question, I mean a significant reduction in the CapEx estimates for the future. And by the way, we're already seeing that. We included that as part of our estimates for the plan, but we're already seeing that in practice. We have been seeing the prices for the ONTs dropping quite significantly. In addition to that, there is a very, very strong effort that the company is doing on increasing the percent of refurbished equipment in the network. As you know, this industry, unfortunately, still has overall, and I wouldn't say just for Oi, but overall, a relatively high churn rates. So we do have customers which migrate in and out of everybody's networks over time. And one particular element for us, which we have been focusing on improving is on the amount of the recovery of the used ONTs and by refurbishing those ONTs and recapacitating them to install new customers. So with this, we are installing new customers, obviously, with the mix of a new and recapture, reconditioned ONTs, which are perfectly functional ONTs. And now with this, reducing the overall cost even further. In addition to that, there is just a continuous operating evolution, which reduces the cost of installation, which actually creates techniques for rapid install including obviously, all of the new methods of installing a customer's premise equipment. And this obviously has also been significantly reduced since the start of the fiber operation. So we now can see that without a question, the initial estimates way back in 2019-2020, when we had the cost for installing a customer's home has been coming down quite significantly, and we still expect some reduction to come because of the factors that I just mentioned, in particular, the refurbishing of ONTs and the reduction of ONT costs.

[Operator Instructions] So our first question comes from Mr. Anton Anikst buy-side analyst from Knighthead Capital. So now we will begin the Q&A session with questions received by the company from individual shareholders. This section will be held in Portuguese. Now I hand over to -- I hand over back to the company. Please, you may proceed.

So now we're going to go to a different section -- we have an objective of representing the main concerns of individual shareholders in our results presentation. And what we did is we have been talking to the different groups of individual shareholders and also people who talk about the company and make an opinion about the company. And we received many questions, many demands and many concerns of different subjects that we're going to try to address in this specific section here. And also, we received around 500 mails per month in our IR mail, and we're trying to get the largest concerns also. So now Rodrigo will address some of the concerns and some of the questions. If you can go to the next slide. These 4 sections are the main concerns in respect to those individual shareholders. We're going to do it only in Portuguese, but these questions, these slides will be translated into our website, and we're going to have the transcript later also in English. But to address specifically those concerns, we're going to do that in Portuguese. [Foreign Language]

Thank you. That concludes Oi's conference call of the fourth quarter of 2022. For further information, please visit the company's IR website, www.oi.com.br/ri. You can now disconnect. And in Portuguese, [Foreign Language]