Telefônica Brasil S.A. ($VIVT3)

Good morning, ladies and gentlemen. Welcome to Vivo's First Quarter 2026 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at ri.telefoneca.com.pr. The presentation will also be available for download. This call is also available in Portuguese. To access you can press the globe icon on the lower right side of your Zoom screen and then choose to enter the Portuguese room. After that select mute original audio. [Foreign Language] [Operator Instructions] Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company's business prospects, operational and financial projections and goals are the beliefs and assumptions of Vivo's Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors should be aware of events related to the macroeconomic scenario, the industry and other factors that could cause results to differ materially from those expressed in their respective forward-looking statements. Present at this conference, we have Mr. Christian Gebara, CEO of the company; Mr. Rodrigo Monari, CFO and Investor Relations Officer; and Mr. João Pedro Soares Carneiro, IR Director. Now I will turn the conference over to Mr. Joao Pedro Soares Carneiro, Investor Relations Director of Vivo. Mr. Carneiro, you may begin your conference.

Good morning, everyone, and welcome to Vivo's First Quarter 2026 Earnings Call. Today, our CEO, Christian Gebara, will begin by presenting Vivo's execution in connectivity and digital services. as well as highlight our key ESG accomplishments for the quarter. Then Rodrigo Monari, our CFO, will comment on our controlled cost evolution, free cash flow generation, profitability and shareholder distribution in the period. With that, let me turn the call over to Christian.

Thank you, João. Good morning, everyone, and thank you for joining us today. Vivo began 2026 at a strong base. Once again, we delivered growth above inflation across our core metrics, supported by customer base expansion, resilient revenue performance and continued margin improvement. On the operational side, postpaid remains a key driver of value creation. Our postpaid base grew 6.9% year-over-year, reaching 72.1 million access, representing 69.5% of our mobile base. This execution reflects a healthy combination of net adds, disciplined pricing and focus on customer experience. Fiber also remains an essential growth vector. We reached 8 million home connected, advancing 11.5% year-over-year, with our footprint expanding to 31.5 million homes passed. Beyond scale, fiber strength convergence deepens customer relationship reduces churn and supports a stronger revenue profile. Regarding our financial results, total revenue grew 7.4% when compared to the previous year. Mobile service revenues delivered a 6.6% increase, while fixed revenues grew 5.1% underscoring the sustained contribution from fiber and our B2B portfolio. In terms of profitability, EBITDA rose 8.9% year-over-year, lifting margins 40.2%. Operating cash flow reached BRL 4.2 billion, an 8.5% improvement, while net income expanded 19.2% to BRL 1.3 billion. Free cash flow generation totaled BRL 2.2 billion during the quarter. Our efficient operations allow us to remain fully committed to shareholder returns. So far, we have allocated BRL 7 billion for distribution in 2026, reaffirming our confidence in meeting our guidance for the year. Moving to Slide 4. We highlight the ongoing transformation of our revenue mix as it continues to drive positive impact on our top line. In the first quarter, total revenues grew 7.4% year-over-year, led by a well-balanced contribution from both mobile and fixed services as well as the growing relevance of our new business. Postpaid revenues rose 7.8% year-over-year, demonstrating the strength of our value proposition, balance pricing and enhanced revenues also improved advancing [ 9.2 ]%, driven by sustained demand for high-quality connectivity and convergence. It's also worth highlighting the strong performance of our handsets and electronics line that grew 26.6% year-over-year, fueled by a more competitive portfolio and a new go-to-market strategy that enhanced the availability of in-store devices, accessories and electronics in general. Our new business continued to play a central role in our strategy. They now represent 12.1% of total revenues, an increase of 1.8 percentage points versus first quarter '25 with meaningful contributions from both B2C and B2B solutions. This progress emphasize our long-term vision of revenue diversification, scaling of digital services and consolidation of our ecosystem. As a result of our commercial momentum, postpaid and fiber revenues now account for over 74% of service revenues, highlighting a structurally stronger and more resilient revenue mix as we begin 2026. On Slide 5, we show how our solid mobile operation once again driven by Vivo's differentiated network and superior customer experience. By the end of this quarter -- of the first quarter, our total mobile base reached 103.7 million access, representing year-over-year improvement of 1.3%. Postpaid, excluding machine-to-machine and [indiscernible] remains a key growth engine, expanding 7.2% to 51.6 million access, while machine to machine and Dungo also delivered a healthy increase of 6.4%. Commercial performance was particularly strong this quarter with postpaid net additions accelerating 22.7% compared to last year, further underlining Vivo's leadership in this segment. Importantly, this evolution comes with value. Postpaid churn remained well controlled at 1.0%, confirm the depth of our customer relationships and loyalty. At the same time, mobile ARPU reached a record level, up 5.7% year-over-year as customers continue to migrate to higher value plans and consume more data. In prepaid, while access growth is still negative, revenues gradually improving with the year-over-year decline narrowing to minus 1% this quarter. This is the result of ongoing efforts to stabilize the base, enhance monetization and prioritize customer requires. Overall, these results showcase the resilience and quality of our mobile platform, combining continuous postpaid expansion, record ARPU, low churn and consistent recovery of prepaid revenues. This gives us confidence in our strategy and support sustainable growth throughout the year. With that, let's move to fiber. Turning to Slide 6. We further highlight the strength of our fiber business and growing role of convergence as the key differentiator for Vivo. Fiber access demonstrate continuous momentum, maintaining double-digit year-over-year increase and reaching 8 million connections. This performance clearly reflects customer preference for high-quality connectivity and integrated solutions with Vivo total once again standing out. Growth is progressively driven by convergence. Vivo total access expanded 32.6% year-over-year, reaching 3.6 million customers and now represent 44.7% of our FTTA base, an expansion of more than 20 percentage points in just 2 years. This confirms the attractiveness of our convergent proposition and its ability to capture even more customers. Our fiber footprint also expanded with homes passed reaching 31.5 million, up 6.2% year-over-year, while the take-up rate improved to 25.4%. This combination strengths our conviction in achieving network penetration above 30% over time as we continue to translate fiber expansion into customer base growth. Moving to Slide 7, we give more color on the acceleration of our B2C business supported by stronger totalization of our customers' needs and growing relevance of service beyond connectivity. On a last 12-month basis, total B2C revenues reached BRL 45.7 billion, growing 5.9% year-over-year. This performance shows the resilience of our core connectivity as well as a strong acceleration in new business that expanded 31.5% and now account for 3.2% of total revenues. Monetization trends remain very solid. B2C revenue per RGU increased to BRL 67.2 underlining the effectiveness of our strategy to deepen customer engagement, drive cross-selling and extract greater lifetime value from our existing base. Looking specifically at new business, we continue to see robust and well-balanced growth across our main verticals. Video and music OTTs remained the largest contributor, growing 24.8% year-over-year. Consumer Electronics delivered another strong result with [indiscernible] up 56%, supported by higher demand during the period. Health and wellness continue to stand out as one of our fastest-growing categories. Revenue is up nearly 68% supported by the strong scaling of [indiscernible] that now exceeds 500,000 subscribers, up 13% year-over-year. This highlights our ambition to scale services that adjacency of our connectivity solution. In parallel, we maintain the expansion of our financial services capabilities. Through Vivo Pay, we launched our proprietary installment plan broadening access to credit and enabling a more seamless purchasing experience for handsets and electronics, while further supporting monetization and customer retention. Altogether, these developments emphasize Vivo's evolution into a broader digital platform, while connectivity remains our core foundation and increasingly diversified ecosystems of services in is enhancing customers' lifetime value, expanding opportunity and positioning us for sustainable growth over the long term. On Slide 8, we provide an update on the development of our B2B business and how the ongoing shift in our revenue mix to our digital solutions continues to gain traction. B2B revenues reached BRL 13.7 billion, growing 11.8% year-over-year, once again, delivering a remarkable performance. Digital B2B remains main growth lever advancing 23.8% and reaching BRL 5.4 billion over the last 12 months, while B2B connectivity also posted robust growth of 5.2%, demonstrating the solidity of our enterprise services. Within digital B2B, performance remains well balanced across the portfolio. Cloud Services expanded 29% year-over-year supported by rising demand for scalable infrastructure and hybrid environments. IoT and messaging advanced 17.3%, while Digital Solutions grew 21.1%, driven by broader adoption of customized enterprise offering. Cybersecurity also evolved at a healthy pace, rising 19% as customers prioritize data protection. In this context, B2B is gaining relevance within Vivo's overall revenue mix, reinforcing the segment's role as a key growth pillars evidenced by accelerating demand from companies undergoing digital transformation across multiple industries. A clear example of this strategic position is our partnership with [indiscernible] in the agribusiness sector. This initiative illustrates Vivo's leadership in enabling data-driven, sustainable and competitive operations tailored to customers' needs. More broadly, partnerships like this underline how our role is evolving beyond connectivity position in Vivo as a trusted digital partner for enterprise customers. Turning to Slide 9. We show how ESG remains a core pillar of VIVO's strategy with consistent progress across people, environment and governance translating into tangible outcomes for our stakeholders. Vivo continues to be recognized by major global benchmarks. We lead [indiscernible] Corporate Sustainability Index across all sectors for the third time, are still the only Brazilian telco included in the Dow Jones best-in-class voting index. And for the sixth consecutive year, were recognized by CDP for supplier climate engagement. On the people front, we continue to expand initiatives focused on employee well-being, including Hospital Purpura, that offers structured care journeys and has seen growing adoption since its launch. Today, the platform is available to more than 80,000 people, including employees and their relatives. In addition, Vivo was named the winner of Anatel's 2026 accessibility ranking, reinforcing our position as a leader in digital inclusion. From a governance standpoint, following the appointment of a new Board member in April, women now account for 42% of our Board of Directors, marking another important milestones as we continue to foster diversity across all those of the company. On the environmental agenda, we strengthened our external commitments by joining additional initiatives of the UN global company in Brazil, underscoring the credibility and consistency of our ESG road map. With that, I will hand over to Rodrigo who will walk you through the financial results. Thank you.

Thank you, Christian, and good morning, everyone. Moving to Slide 10. We provide more color on the evolution of our cost structure and how improvements in cost mix turned into EBITDA growth in the first quarter. Total costs reached slightly over BRL 9 billion, reflecting strong commercial momentum alongside continued control across our cost base. Looking at the composition, cost of services and goods sold increased 12% with higher volumes in handset and [indiscernible] sales as well as the expansion of new business revenues. This cost line is fully linked to revenue-generating activities and our ongoing business mix transformation. On the other hand, operating costs grew 3.9% year-over-year commercial and infrastructure, our largest cost component rose below inflation for the period, maintaining the trend for the 50th consecutive quarter. At the same time, we continue to assess opportunities to deploy AI across our operations, further enhancing the consumer journey and supporting gains in efficiency. Despite the progress already achieved, we remain focused on moderating the evolution of this line. During the quarter, copper revenues showed a slight deceleration, reflecting a tactical decision to polemic. Sales resumed in late April, keeping us on track to deliver the plan BRL 4.5 billion in concession-related assets by the end of [ '28 ]. With regard to bad debt, the overall trend remained stable, representing 2% of gross revenue. This favorable cost mix result in a high single-digit year-over-year EBITDA growth with the margin expanding to above 40% in the quarter. On Slide 11, represent the progress of our operating cash flow in the first quarter. CapEx totaled BRL 2 billion, reflecting continued investment in our network, consistent with our strategic priorities. This represents capital intensity in line with first quarter '25 and below the previous year's average as we continue optimizing CapEx allocation. Operating cash flow before leases totaling BRL 4 billion. That resulted in a 10% year-over-year increase in operating cash flow after leases amounting to BRL 3 billion. This performance demonstrates our ability to convert EBITDA into cash through a combination of efficiency initiatives in both on and lease assets. So this translated into further margin expansion, both before and after leases, confirming the resilience of our cash profile. Turning to Slide 12, we highlight how our financial management discipline results in a higher profitability. Net income in the first quarter had the highest yearly growth in over 2 years, confirming our operational execution diligence and reflecting the sustained evolution across our core business. Free cash flow was up around 4% year-over-year, with the quarterly comparison influenced by timing effects. Looking ahead, we remain confident in our capacity to deliver a strong performance year by end. Our net cash position advanced materially, up 65% year-over-year. Our net debt over EBITDA also improved, now reaching only 0.4x in the last 12 months, underlining the ongoing strengthening of our balance sheet. Overall was another robust cash generation quarter, keep Vivo in a very strong position to invest with responsibility while maintaining to achieve returns. Finally, on this level, on Slide 13. We would like to highlight that shareholder remuneration remains a priority of our strategy as we reiterated our guidance for the year. As of today, BRL 7 billion has already been confirmed to be distributed during the year. This amount includes the interest and capital declared in '25 and pay in [indiscernible] this year as well as the capital reduction schedule of our payment in July '26. In addition, we have declared BRL 890 million year-to-date to be paid by April 27. Also, that for [indiscernible] '26, our Board approved a new share buyback program of up to BRL 1 billion to be executed through February '27. This initiative is fully aligned with our efficient capital allocation strategy and our focus on long-term value creation for shareholders. To conclude, we reaffirm our commitment to distribute at lead 100% of the net income generated in 2026, supported by our strong cash generation and conservative leverage for [indiscernible]. Thank you. We are now ready to move to the Q&A session.

[Operator Instructions] Our first question comes from Luis Chagas with XP.

Thank you for the time here and this space to make questions. So from my side, I have 2 questions. So the first one regards broadband. Vivo is executing very well with it and is gaining clients consistently while the market is somewhat mature. So the question here is how do you see competition in the broadband segment? And if you see any room to increase prices in fiber and over the next 3 years, what's your goal in terms of Vivo total's penetration in your FTTH space? And the second question is about prepaid, which is virtually stable year-over-year while the front book prices have been stable for some time. Do you see any room to increase prices in prepaid?

So Luis, this is Christian. Okay. Many questions. I'm going to go for the ones that I remember the last one. So we increased around 25% of our customer base price in the back book of fiber in January. So we are following the right timing to do this increase. We also had Vivo Total price increase in April, okay? So we are following the annual price evolution that we normally have. And our focus is strongly in Vivo Total and then I will give you more detail about your first question before I'm going to go to prepaid that you asked also, yes, prepaid, yes, we do believe there is room for price increase. We are moving now more to the monthly tariff. We are not giving what's up. That's also a way to monetize and our revenues, if you compare to the first quarter of '25 decreased 1%. That is a much lower pace than it used to decrease before. So if you look back, for instance, in the first quarter of '25, we were declining more than 11%. Now it's only 1%. This is a combination of more customers and our ability to keep them engaged with Vivo and selling better plans in this case, is longer plans that can also increase the ARPU. Your first question were related to fiber. Yes, fiber is very competitive, as you described. Our strategy, it is to have more and more Vivo total customers for you to have an idea in the first quarter of '24 of our total fiber customers just 24% of our Vivo Total. Now it's closer to 45%. Apart from that, we have another 20% that are converged but not in Vivo Total. Yes, our strategy is to keep in vivo Total because churn is much lower of fiber customers when they are in this convergent plan. And apart from Vivo Total, we are also upselling more digital services as the one that I described, think successfully, the video ones that are more than 4.4 million customers already with that. So once we sell more services to the same customer, that's why also we highlighted the revenue per customer because we do believe it's a very relevant metric to understand the recurrency and how healthy our revenues are because they come from the ability to have more loyal customers spending more money with Vivo, increasing their lifetime value. Regarding fiber as well, the market is very fragmented. But in the first quarter, #1 player is Vivo and we get -- we've got 200,000 net adds, the second player, minus 80. Our market share is 19.2%. One year ago was 18.4%. So that gives us a very like clearness that we are following the right strategy, and that's the one that we're going to continue to follow. -- expanding more network, penetrating more network and selling more convergence and plus digital services.

Our next question comes from Leonardo Olmos with UBS.

So I want to discuss a little bit margin. So if you look at commercial and infrastructure, positive surprise, but bad debt was a negative one. And so I just wanted to check on if you're growing so much B2B and a few of revenues that have lower margin, but they are positive in terms of free cash flow. So the overall discussion I have is if you have a margin contraction, that impacts net income, but the free cash flow is positive but dividend is linked to net income. You see where I'm going. If you have lower net income and lower dividends, how can we see in dividends, the increase you're delivering free cash flow? I'm not sure I was clear, but just one question I have. So how can we see increasing dividends proportionate to the free cash flow is increase you are delivering?

Well, thank you for your question. I will try to answer, if I understood them correctly. But our net income is increasing 19.2% and we already have a commitment of distributing BRL 7 billion this year. That is way above what we distributed last year. So I don't see a concern about shareholder remuneration and apart from that, as you know, we already declared another tranche of interest on capital and also a new program for share buyback. Going to your question about costs that I don't know if the one that you are also elaborating, you are right. We had a very positive result in conversion and infrastructure. We have, as I said, increased in everything that is related and linked to revenue expansion. Our -- and talking about B2B, we have an increased commercial activity in digital B2B solutions because we're doing very strongly in these lines in all of them, cyber, cloud and et cetera. And of course, there are some cost of services linked to that. apart, I think, from the B2B digital services and also there's part of that, that is B2C, when I sell more OTT -- video OTTs, I'm also contributing to more cost of services sold. But I think goods sold is also an important driver of this quarter, but our revenues grew 26.6%. So again, costs linked to revenues. Going to other ones that the provision of bad debt. We are very clear. Our B2C bad debt has not changed. We have more or less the same level. Actually, I would say that if I exclude 1 single B2B customer, my bad debt would go to 1.88%. My average bad debt over revenues last year was 1.92%, so that's not a story about B2B not performing. I'm talking about one single B2B customer that didn't perform last year. So we're giving you full transparency in the bad debt line. All the rest B2C and all the rest in B2B is 100% under control. So that's more [indiscernible] the explanation that I had about cost and about -- I don't know if you have anything else about free cash flow that I can try to respond.

Yes. No, no. Actually, you answered more than I asked for, so thank you. I think those are all positive news and the net income increase, like you said, 19% goes to dividends. So quite positive.

I would add something though. You didn't ask it, but I got the opportunity about costs. Last quarter, by the end of last quarter, the quarter that we are talking about, there was -- we had to tactically stop the sale of copper. There was, for a moment, a change in the tax over copper sale. We tracked the copper, but we didn't sell. Fortunately, that tax change was reverted. So now we are able to continue in the increasing pace of selling copper as we said before, because some people may say, "Oh, you sold more copper in the fourth quarter than we saw in the first quarter." That's correct. I extracted a larger amount, but it didn't sell because I had a tax impact that I was not expecting that [indiscernible] was reverted. And here, we prioritize the return to our shareholders. So that's why we're going to see a better movement of copper sales this quarter, the second one.

Super clear, Christian. Thank you, and have a good day all. Thank you.

Our next question comes from Marcelo Santos with JPMorgan.

I wanted to go a bit back on Luis' question regarding the back -- actually, your answer to his question regarding the back book price. Could you please remind us when did you increase last year? And like what time for each product and so far what you did this year? I just wanted to recap here year-over-year to understand the calendar effect. And the second question is regarding CapEx. Could you provide us with considerations regarding the CapEx outlook for this year?

Marcelo, in the hybrid -- last year, we had price increase in back book, okay, April and August. And now we are going April around 76% of our hybrid customer base. The remaining we're expecting to do that in August, but it's to be confirmed. Postpaid last year, April remaining August this year, again, around 80% in April remaining probably in August. Fiber, it was more distributed along January and June. And again, we started fiber also in January. And again, probably June, the rest. Vivo Total last year, April. This year, April, 100%. Is that clear?

You gave some percentages for this year. Would it be something you'll be willing to open for last year? Like you said, 75%, you're going to do this April on hybrid. How much was you gave two numbers, 75% and 80%.

76% was in hybrid, 79% was in postpaid.

Okay. Super clear. Okay. Second question, CapEx, no?

Yes, CapEx you want to comment?

Marcelo, thanks for your question. First, we would like to highlight that our CapEx intensity remains in line with first quarter '25 and below the average of full year '25. As we are committed to deploying resources with discipline, most of the CapEx is focused on the mobile network enhancement along with fiber expansion and customer connections to sustain our leadership in our position, okay? At this point, there are no structural differences in composition of our CapEx strategy for this year.

What to highlight here. If you look to operating cash flow, EBITDA minus CapEx, we came from a margin in the first quarter of 24 -- 23.6%, went to 25%, and now we are in 26.2%. That is 100% align of our strategy of optimizing CapEx, but also having the ability to increase in new businesses, keeping EBITDA absolute evolution in a very strong positive way. So now our operating cash flow over revenues is 26.2%.

Just a quick follow-up here. I mean the first line, Rodrigo, you said is CapEx intensity remains in line with what happened. But for the year, in the past, you used to say that CapEx intensity should gradually go down like 2026. That was my understanding of previous calls. Is this something you're still committed to see capital in [indiscernible].

We always said that the annual CapEx [indiscernible] Yes, it's always we'll be discussing quarter-over-quarter. So over the year, we are committed to improve CapEx intensity. And that's going to do in 2026.

Our next question comes from Rogerio Araujo with Bank of America.

I have a couple here. First, on these asset sales from the concession migration. You reiterated the expected amount by [ 28 ], but how can we think about the level expected in the remaining quarters of 2026. So you resumed sales in end of April, should we expect something linear throughout '28 and also on the remuneration to shareholders regardless of the net profit, you committed with 7 billion. Just a follow-up here. Is this at least BRL 7 billion? Or is this -- so the absolute number, BRL 7 billion. This is first one. And then secondly is this your main peer has been engaged in negotiations with the tower companies in Brazil and this has been leading to reductions in lease payments. We haven't seen the same at Vivo. Is there room for similar negotiations? And how should we expect it to play out regarding magnitude and timing.

Rogerio, this is Christian. Yes, as I said before, we stopped for a while, the sales but resume the sales of copper, yes, you can expect increase in the number that we're going to present for copper sales along the year quarter-over-quarter. That's your first question. The second question was about -- yes [indiscernible] at least BRL 7 billion. That's our confidence that we're going to reach is, again, the guidance is at least 100% of net income. Since we have already declared and paid and will be paying the other tranche in July of BRL 7 billion, it means that it's at least BRL 7 billion for the year.

And regarding these negotiations with tower [indiscernible]?

Yes, we don't need like to give like what we are negotiating for everyone. But of course, we are negotiating with all of them. Our value related to leases. It's like there's always like some phasing related to the numbers that we presented, but it's very well controlled. I think our goal is always to keep lease payments growing below mobile service revenues. Don't we do that through coordinated efforts to reduce the unit cost and that's the negotiation that we have with the tower. We also need to increase coverage. You understand that we need to keep it like you are the #1 company with 40% of the postpaid market. So we cannot stop that. So if you look back at 2024, the amount we paid in the first quarter was broadly in line with the levels paid in the final quarter of 2024. So more than a year later, our lease disbursements remain very stable. So here, our challenge is to continue to grow it below the growth of revenues that we have in mobile. Of course, we are negotiating with our companies, but [indiscernible] not let Vivo not being the leader in coverage. So that's why we're also investing in more coverage because Brazil needs it. So that's our target, and we are coming -- we are complying with all of this since the first time that we talked about this.

Okay. So just a follow-up here. Do you -- So if you're not increasing the coverage, would it be dropping significantly.

It is going to be dropping, of course, because Brazil has many things. There's not only negotiation, there is co-location. We have a very low level of colocation in Brazil. It's around 1.4, while what we see in Europe is above 2. So if I stop my network as it is today, Rogerio, I would be negotiating to increase colocation for all the tower companies that I have. And of course, you would see it dropping but as we need to drop it at the same time, we need to expand coverage. So it's very difficult to get the right number every single quarter. But the trend going back to 2004, as I just mentioned, is extremely positive. And in the meantime, we're keeping our leadership in postpaid of 40%. We're #1 in 5G. So that's our strategy to keep the differentiating Vivo as the best network of the country. At the same time, keeping controlled our lease expenditure. And it's also important, I just said before when I was talking about the operating cash flow over revenues. Also, I think it's also good to see -- coming back to your question, operating cash flow after leases. I had 14.5% of margin in the first quarter of '24. I went to 15.8% of margin of operating cash flow after leases in 2025, and now I'm presenting 17.1% of operating cash flow after leases over revenues. So I do believe that we are in the right track.

Our next question comes from Leonardo [indiscernible] with Itau BBA.

I have two here. The first one about the equipment sales, it was a positive surprise compared to our numbers. Can you expect this level going forward? And if you could elaborate a little bit more on the dynamics of cell phone sales, it would be very helpful. And the second one about AI initiatives. Could you comment a little bit more on the revenue opportunities from B2B leveraged by these AI initiatives? And also regarding costs, are you -- how are the AI initiatives progressing and what are you expecting in terms of margin improvement, particularly in terms of cost centers and sales commissions dilution?

Leonardo, thank you for the questions. AI is in the beginning. So of course, we are exploring revenue opportunities. Imagine that Vivo has already a large number of customers that are buying cloud from us and AI is very connected to cloud. So we're going to leverage all this relationship and all these customer base that we already have and all the partnerships that we have with the largest cloud providers of the world to exploit opportunities in AI. I cannot share you a number right now. But of course, even when you talk about the big deals, that we had with [indiscernible], for instance, with [indiscernible]. They all have a base of AI that will be implemented because there's a lot of data being captured. There is a lot of automation being captured, and they will be driven by machine learning and AI, for sure. So we cannot give you the number right now, but we are very very positive about the opportunity of growing it even further. The impact in our OpEx of course, it will be seen. Just to give you one initiative that is in call center. We're going to launch in 1 month, the beginning of our call center AI agent project. As I think I mentioned last quarter, we're going to have a concierge handling all the calls. And then we're going to have 3 agents focus on billing in plants and the other one, technical support. Our aim here is to retain in the next quarters, over 60% of the calls using these agents. So there is a vast number of opportunities that we're going to capture with AI. Going to electronics, that was a great quarter for smartphones. But also, I want to highlight what is not smartphone that is consumer electronics, and that grew 56%. This is our ability. And then I'm talking about 12 months, the growth of the consumer electronics, and that's our ability to sell more of other things rather than smartphones. That are tablets, gaming devices, televisions, accessory to smartphones, we bought [indiscernible], we have [indiscernible]. So we have many things that are expanding our portfolio. We now are expanding our portfolio to all our stores, not only the own ones, but also the resellers. And that we see in a very positive way. Our ability [ to even more ] from this footprint of being a retailer of technological products. In smartphones, we're also growing. But of course, it still represents a lot of our total revenues. If you talk about 1.1 that 1 billion that we have for the quarter, the other consumer electronics that I told you is around 15% of this number, and the rest is smartphones. So both are growing. So that's why we are keeping 26.6. We don't give guidance, but we are having a very strong commercial start for the second quarter. So I don't see why we would change the trend.

Our next question comes from Phani Kumar Kanumuri with HSBC.

The first one is on are you seeing any impact from higher oil prices on your operations, whether it's on the cost or on the customer behavior? And the second question is regarding your -- the second question is regarding your ability to maintain the cost below revenue growth. You have been doing a good job. Is there a concern that this could grow above revenues in the future?

Thank you, Phani. No, no concern. We're going to keep the excellent trend in our cost dilution, as I explained, splitting what is linked to revenue and what is operational no concern. Regarding oil, no impact, no direct impact. So very positive for us for the moment, the macro is doing impacting our business. And as I said, about that either. So we're going to [indiscernible].

Next question from Daniel Federle with Bradesco BBI.

In the first one, I would like to hear your thoughts regarding the competitive landscape. If it's getting better, getting worse if it's stable. And specifically on the front book increases in the control plan I understand that the entry plan is one of the most important ones in the portfolio. And last year, we have increased prices in February. And this year, so far, I think there were no increases. And the second question is more like a follow-up because you mentioned that like back book prices, 75% were increased -- 76% was increased in April and the remaining by the end of the year to be confirmed. Just to understand if [indiscernible] to be confirmed, it means there are risks to not increase prices for the remaining of the existing clients.

No, to be confirmed is the date. I'm not going to increase 76% and not increase the remaining 24%. I just need to get to the right month of the increase. I said that it was in August. So it's to be confirmed, it's going to be in August. We're going to be in the end of July or in the beginning of September. I don't want to be precise about the exact date. But of course, if we increase 76%, I'm going to increase the remaining 24%. As competition, very competitive market, but we were standing out strong net adds, low churn, ability to sell more services, differentiating our value proposition -- so we're going to keep doing that. And that's the way that we decided to do to defend our positioning, offering more services to our customer base and try to attract more customers because we have a better value proposition that adds the best infrastructure with the largest portfolio of services. Regarding the control, the hybrid one, and some of the plans we had some increase in the front. And in the other ones like the entry one, we're still considering. But again, we have the highest price if you consider what we offer with this price. So again, we believe that we have our right portfolio for the moment. But again, we're going to always be attentive if there is the opportunity to move up one single plan in our control.

The question-and-answer session is over. We would like to hand the floor back to Mr. Christian Gebara for the company's final remarks.

So thank you, everyone. I understand that we are very clear in all the questions. But of course, if you have additional questions, we are all at our disposal to answer all of them. Again, we reaffirm our commitment of shareholder remuneration and growth of the revenue and EBITDA, both inflation and optimizing CapEx allocation. Thank you so much.

Vivo's conference is now closed. We thank you for your participation and wish you a nice day.