Brisanet Participacoes SA

BOVESPA:BRIT3

Earnings Call Transcript 2024-Q1

[Luciana Ferreira, executive]

Good morning, and welcome to Brisanet's First Quarter '24 Results Call. My name is Luciana Ferreira, I'm the company's IR head. Together with me, I have Roberto Nogueira, the Founder and CEO; and [indiscernible]. This video conference is being recorded and will be made available on the company's Investor Relations website, where you will also find the respective PowerPoint presentation. For those who need simultaneous translation, this tool is available by clicking on the globe and using interpretation. And then the English option, you can follow our call, fully translated into Portuguese and English. For those who are watching the videoconference in English, you can also silence the original audio in Portuguese by clicking on the mute.

For questions and answers, we request that you send the questions in the chat box, and you can also announce your name and your company name and ask your question by opening your mic. Or send it to me and I'll read it. If you prefer to ask the question, you can open your mic and ask questions. And I'll give you that information once again once we get to Q&A or you can ask us when it's Q&A time.

We would also like to tell you that the information on this presentation and throughout this call and any perspectives and projections that may be made throughout this call about Brisanet's goals and financial targets are based on the premises and beliefs of the company as well as the information available in the macro scenario. Future considerations do not assure that we will reach those targets. This involves the premises and predictions based on macroeconomic scenarios which may or may not change. Investors should understand that general macroeconomic conditions may change, affecting the future performance that Brisanet achieves over the next quarter and year and causing differences from those projections.

Today, we will go over the results in the first quarter '24 when compared to the same quarter last year. As I said, the information is available on the Investor Relations website, ir.brisanet.com.br, and you can also contact us through my e-mail or with [ Fali ], speak to RI by [ brisanet.com.br ]. And with that, I will pass the word to Roberto.

[Joao Nogueira, executive]

Good morning. I will always start by telling you a little bit of Brisa's history. We're a company that's different, we were born different in 1996 when dial-up Internet was in very few cities in the country of Brazil, and also the following year, 1997.

I ran my first test about how we could adapt 1 technology to another. So we created the first radio transmitted Internet in Brazil, practicing -- taking Internet to households or [indiscernible] phone lines. That was our first step, our first normative business step, and Brisanet then adapted the radio blades, which were installed in the [ batches ] and computers, reaching up to 30 meters distance and another 30-meter distance. We made changes and fine-tuned that by installing an antenna and connecting it to a television antenna, which is cost [indiscernible]. We also developed the 2.4 [indiscernible] to connect 30 to 90. So at the time, big companies were connecting at cost of $20,000, $30,000, and we were doing this with $30, $40, which was the cost of the antenna, plus another $110 or -- on the hardware. So an investment of $10,000 in 1998, Brisanet was doing something [indiscernible], and we then continued to fine tune the process to perfect things, always adapting our know-how to the reality. That's where Brisa was born, and that's how we worked moving forward.

In 2010, Brazil had 8,000 to 10,000 small Internet providers. Those Internet providers started to operate about 4 years after Brisanet, so 2001, 2002. And Brisanet was working alone in the world of radio internet, but we didn't have the resources to grow. We were only able to grow organically through our [indiscernible]. In 2010 to '11, Brisanet was already in this very disastrous scenario of Internet delivery because Brazil is a vast country. And in the interior, there was no big -- there were no big telcos. The countries that had no phone lines yet in the interior of the Northeast. So the radio access was being expanded throughout the country.

But the tech was very chaotic. And -- it was what was being used at the time was an indoor network, and we were doing metropolitan networks already. Brisanet was installing 5, 7 -- well, actually working in cities where there were 5, 7 other providers or a lot of interference. So we decided to go fiber at that time, 5 years before anyone else was doing it, before any big telcos or even small providers were doing that. At the time, the network of fiber was still being created in China, Korea and Japan. So with our team always innovating and investigating and researching, we started developing this in-house. The other companies started doing this in 2015, '16. So by 2012, '13, '14, we were doing cities in the interior of the Northeast.

Paulista and Sao Paulo started having big fiber networks in 2016, and that's for small businesses, but they were already providing to big companies and taking fiber directly to their city offices and headquarters. By 2015, Brisanet, as a balanced financial situation, we start being able to capture resources. So 2011 to 2015 was the most challenging period for us. We were working with a new technology. We had a huge demand for CapEx and didn't have credit with any banks, public or private. So we can get a loan so we could keep expanding. We were taking very small loans, always using the mortgage of our own building and headquarters as the amortization for that.

So after 2015, we're finally able to access credit, access to finances we need so we could start expanding, thanks to our solid growth and our positive and steady indicators. 2018 was another big year for Brisanet. We saw the future of telecom, and we saw that companies that didn't work with mobile would not be competitive. So we understood that the amount of data that the mobile universe was going to provide was going to grow exponentially year-by-year. And Brisanet would need to have not only fiber available, but also mobile broadband, so they could sell -- we could sell combos and synergizing the way we're competing in this very competitive market.

2021 was our IPO when we went public, and we also participated in the 5G tender in 2021 -- the end of 2021, December, we won for the Northeast and Central West region for 5G. Our growth then starting 2018 of growth in ports, we were able to grow 7.3x. So that was an important mark for us. Obviously, our well-structured accounting and our steady finances allowed us to access credit at a good price. And then we went from 1 million [indiscernible], net revenue 7x increase in years. EBITDA, 5x and -- 6x in 5 years' growth.

Okay. So here on the next slide, you'll see that most of our growth is organic. In the Northeast, Brisanet is the only big company that was born and continues to grow in the organic model. So we had an annualized growth of 40% versus 13% in the rest of the market in the region. If we look at 2023, 2022 and 2023 were years where Brisanet grew in the Northeast, the same or more than 2,000 other providers. So we grew more than 2,000 other providers together. So when you put big telcos together with small providers, those over 2,500 providers, Brisanet at the same speed.

Now in the first quarter of 2024, Brisanet has also added 32,000 new clients in the first quarter and has grown more, once again, more than all of the other operators in the Northeast region, which shows Brisanet's organic growth and maintaining our average ticket [indiscernible] prices. The same scenario, those 2,200 suppliers have very aggressive pricing, lower than BRL 50, below BRL 50 in the same city, there are lots of offers at that price. Big operators are also providing amounts lower than BRL 50. Even providers offering BRL 29 in the Northeast can be found in the South and Southeast. I don't know if that's the pricing, but in the Northeast, that's how aggressive the competitors are being.

Even with that competitive environment, Brisanet grows more than everyone else, maintaining our average ticket above BRL 50. And we don't put the price down. And wherever prices just because the market around us is doing it and just to bring in a bigger client base. Our focus is never just to increase the client base, but also to assure good and sound results. Our movement over the first quarter -- after the first quarter of 2022, which is where we saw a significant drop of the EBITDA because of the big growth after IPO. When Brisanet launched in the [ B3 ], we were doing 100,000 home HPs per month. Obviously, the lack of resources was our limit, was our ceiling. Soon as Brisa was able to receive more than BRL 1 billion in funding, Brisanet was already immediately building at about 250,000 [ ports ] per month. So between July 2021 and December 2021, Brisanet goes from 100,000 ports a month to 200,000 ports a month. With each port [ for 3, 2 ]. So Brisanet starts growing expressively, hiring people, buying a new fleet and obviously an increase in cost. So you'll see that in that quarter of 2021, costs go up. CapEx goes up, and there is a significant drop in EBITDA because of all the investments.

And in 2023, Brisanet then continues along the same lines of growth, and in the fourth quarter, we start contracting -- preparing for growth. In the first quarter of 2024, growth continues especially in the first few months, which was Brisanet's focus, not hiring in the beginning of the year because we weren't ready yet. We were still building our network. And so we could build our lungs, the lungs of our infrastructure. Brisanet, that arrives at this moment. Where 6 million inhabitants being covered. So 6 million inhabitants covered, but not generating expressive revenue yet.

But that preoperational investment from the last quarter of 2023 and the first month of 2024, we're preparing our ourselves for expressive growth because the network was being built. I mean, the network was being built ever since the beginning of 2023, and we reached this moment with those numbers. So those lungs that we invested in the group and invested to build as well the sales partner, which didn't follow that, only 2 years ago, reaching half of the population in the future is not going to happen anymore because we've invested in that infrastructure already. So starting in June, a tower that is built, the next day is already generating revenue. The first time at the beginning of building that -- those lungs, we were also in parallel, making all of the necessary adjustments and integrating our platforms. Brisanet was able to adapt to the new market on mobile. And we decided to accelerate growth and not necessarily include sales for generating revenue.

So starting in June, these lungs are now being fully explored. And commercially, our sales channels, which today a lot of different sales channels are going to start in June, not only to sell mobile ticket, but also in July, we will start -- end of June, we also start to sell. The network in the -- by the end of June to July, once you build a tower, the next day, it already starts generating revenue. So that's when we're going to see real growth.

This [ fall ] and the EBITDA of 42 is our -- different than fiber, which was [indiscernible] when more aggressively, we saw people [ mark call ] fiber. And 5G, let's maintain this equivalency with the tendency actually to increase in terms of 42. And the second quarter '24 is when we'll have some extra ports and points in terms of the first quarter of '24 because the lung is finally being explored, and we don't have to build towers, let's say, because once you build a tower, the next day, you already have a energy bill. And so, the building and investing in those lungs was an expressive cost, but starting June, it's going to be that once you install a tower, you are already selling. So revenue comes in immediately.

Different than at this stage, where we have to wait for all of this sales infrastructure to be ready, where we can now finally glean the commercial results from those investments. So this shows some of the synergy of 5G with fiber. Over these next few years, we have built 75,000 -- 77,000 kilometers of fiber networks, and now we're going to install a tower with the fiber, the tower is already there. So most of the towers or a good part of the towers have fiber. Ours always have 2 fiber networks, but especially in terms of fiber networks, the same [ time in the big telcos ]. So we had a difficult time -- the big telcos have a hard time implementing this, but Brisa already has the fiber structure for covering that. So we have more than 5 million options covered by fiber. And when 5G arrives there, once we install the towers, we don't have to invest in backbone and access to the tower. 40,000 kilometers of backbone, well structured, always up to date. Brisanet maintains this always up-to-date. We don't spend 1 year without updating our network. And this is the problem most companies and years sometimes without updating their backbones. We are always updating them so we can maintain our capacity beyond what our clients are able to consume. So you'll never see a blackout, if you look at Brisanet in terms of being caught by surprise.

So in the pandemic when everyone was caught by surprise, Brisanet had this culture of having -- of overestimating the network hour. When the pandemic came, our network was ready for those -- those levels of consumption. When people -- when the consumption increased from 1 day to the next, Brisanet was already structured for this, and there were no impacts to -- much to the contrary. There was a lot of immigration to our base. So a lot of the users from other operators came to us. And at that time, the market had to increase their networks very quickly, like they did in the pandemic. So many companies spent years with very slow networks.

The 250,000 data centers were built to reach our demand, but there is a huge potential for exploring this further besides the need for accommodating our equipment. So the synergy of the fiber with 5G is something that I think was very assertive. It was very good that Brisanet that was able to structure that network so well, and now 5G brings in its competitive event. Brisanet last month was the leader once again for the sixth year in satisfaction. So every -- the agency called thousands of people and verified their satisfaction of services, and Brisanet has been growing very quickly in terms -- and it's always far ahead, the other clients in terms of client -- the other companies in terms of client satisfaction.

Our components of [ between 7 and minus ]. The market in the Northeast, 55,000 inhabitants, 50-million inhabitants, 50 million cell phones, mobile devices in the northeast of Brazil. Today, more than 60% already of those phones are prepaid phones. So people have a high cost and don't get the significant connectivity returns.

Today, the world talks about significant connectivity. And in the Northeast of Brazil, for example, 40% of houses only have prepaid phones. And people spend between BRL 15 and BRL 20 to have 5 [indiscernible]. That's not significant. So Brisanet consumption in fixed broadband is that for 420 gigabytes per month and download. It looks like it's even an exaggeration, but that's what it is, 420 gigabytes a month. And in our perspective, 150 gigs would be enough -- gigabytes per month -- would be considered in our perspective, a high-quality or significant connectivity for the household. So Brisanet still has a lot of market to explore what the infrastructure has in place. I would say, even more than 40% of homes only have a mobile device and have insufficient connectivity. So we're going to bring them 5G with much higher connectivity, bringing benefits to the C and D classes, bringing -- offering them better broadband at a fair price.

The population that we're covering today of 6 million. You can see the numbers from the first quarter as well. Our growth in 5G was of 23,000 clients in mobile. Just to remind you that Brisanet is still not selling for the entire area of inhabitants. We're not selling to everyone yet. Only with a [indiscernible] in the second quarter of June, Brisa has more channels and in selling in the area of 6 million inhabitants. Since we already have 98 active cities, that includes small, medium-sized and capital for example, in [ Seara ], 6 million habitants with Brisanet coverage and 80% of our clients are not from the Brisanet space. So 80% of those 23,000 clients that came in are new clients, and that means that Brisanet's network is only covering 1/3 of the environment. So Brisanet's network is 400-and-something thousand, our network reach is [ 100,000 ] clients, which 1,200,000 inhabitants.

But our network's already much further than that. So 80% are new clients, new adds. We're not even calling that. We're not working with promotion or any sales efforts here at the moment. It's just P2P, which will reach clients -- regardless of the decline. Until [ December 2023 ], our investment was of BRL 411 million, BRL 411 million investment into 5G. First quarter, another BRL 109 million. So Brisanet has already invested more than BRL 500 million in 5G without significant revenue because sales are just starting now. If Brisanet had another focus, it was investing those BRL 500 million, for example, in the process of an acquisition, we could have acquired 350 -- 350,000 clients. And our revenue for the amount of clients brings us an annual revenue of BRL 300 million. Brisanet would have added up BRL 300 million in revenue. And our base today would be BRL 1,700,000.

But that's not our focus. We are focused -- we have another perspective of the market. We prefer to move forward organically. And we have been betting a lot on 5G. We've been betting ever since 2018, when we went to the auction, we understood we had to focus on 5G and the future would be 5G and fiber together. So our focus is still organic growth, building network and bringing [indiscernible]. Acquisition process is not necessarily our business model. But I bring this comparison because the market needs to look at Brisanet in a different way and see our history, how it was created, our process throughout this time as well as the robust nature we have and the ability to deliver end-to-end at every stage of technology.

Technology in our sector changes very quickly. Every 4 or 5 years, there is a new technological wave. Brisanet doesn't depend on external consultancies to let us know what's happening because when there is a new wave of technology, the fact is that no one has the necessary know-how to implement it. So Brisanet is an expert there, previewing what will happen at bringing in what's new in the market and maintaining and keeping our maintenance of technology. So our know-how that we've acquired through this process helps immensely to help us understand the future trends.

So what's coming in the future. Brisanet is already forward thinking. We're looking at what's happening in the next 5, 10 years. And then even now in the last 25 years, we've been much more assertive than the rest of the market. So moving forward, we will continue to be the same, continue to be the most assertive and innovative. That's our main challenge, being forward thinking and bringing the future to the present. So Brisanet has always been a step ahead. We've always been making the changes a few years in advance. That's why with 5G, we're starting now, but with the necessary know-how.

I will soon show you the video so you can see how aggressive -- how competitive and aggressive we've been. But you can see how expressive we've been and how when we reach a region, we have the competitive upper hand. We're not testing anymore. We're mature in the sector. We know what we're doing.

Passing to Romario now. Romario will go over the next slides.

[Jose Romario Fernandes Pinheiro, executive]

So just to continue along the lines of what Roberto mentioned, we're going to talk about the CapEx now. You can see, if you look at the CapEx and the [ 2023 ] overview in the first quarter '24, you'll see that we have a concentration of investments in 5G. This will probably maintain all throughout the year. As Roberto mentioned, our biggest volume of investment for '24 and investing BRL 800 million over there, being that we've already done 175 of that. So then we have investments in HC as the second biggest line to capturing new clients, which assures that fiber will continue to grow, continue to bring in revenue. And the other lines are growth and investments proportional to the company's growth. So that is the support we need to -- well, that gives us what we need to support this volume of clients and expansion of infrastructure, which will continue at an accelerated pace.

In the next slide, you can see a bar graph which shows [ new or ] net debt levels, and you'll see a slight growth in the net debt to EBITDA, which is what was expected for the company during this period of high investments. And it's also important to mention that when you consider these numbers, Brisanet has been changing short-term debt for long-term debt with maturing CDI and subsidized interest rates, which in this perspective, by the year of 2023, we hired BRL 190 million in credit from the National Development Bank, [ FINEP ]. Being of that amount, we paid 4 -- 100 by the end of the second -- the third -- second quarter, we have another 90 that will arrive now, by the second quarter. So these are -- this is TR3 and TR5 levels of interest, which gives us the necessary gas that we need to continue investing with this competitive cost of capital and long-term maturity.

It's also important to mention regarding this last year. We -- this last week, we signed a contract with National Bank of Development, BNDS, for BRL 6 million, [ BRL 96 million ] for investments in 5G in the region of Fortaleza and the periphery of the city. This credit line has a 3-year maturing date, and it's an investment which is already partial -- has been partially invested and which will help us to make good on the investments over the next few months with the necessary [indiscernible]. Obviously, we're always open to better opportunities and chances to improve our numbers and interest, always looking for more competitive cash. And this, as you can see and follow in the numbers we've reported and in this steadiness of the company's numbers over the last 2 years as well as the quality of the services and the client satisfaction, which allows us to keep growing. Those are our perspectives moving forward and throughout the year, where you see that our net debt will be back up to pace, nothing that runs away from the company's guidance.

[Joao Nogueira, executive]

Okay. Thank you Romario. So I want to make a few points regarding what Romario said about CapEx. So our funding that's been subsidized over time is accessed to invest in telco. So that's something that Brisanet is able to do, we're able to transform a difficult and challenging business opportunities. These -- our financing synergizes very well with our business plan. The credit from the BNDS is exactly aligned with what we need. And investing in this sector, where there's a lot of resources or there are a lot of resources being directed, considering that Brazil is such a vast country and has big cities with big peripheries where there's a need to implement backbone. There are a series of credit lines being directed to that level of infrastructure. And we have what it takes to implement that.

So Brisanet's know-how. Our speediness to answer to the need and also the fact that we have over 20 expert collaborators focused just on speedy deployment of the technology necessary as well as the infrastructure necessary. Working with environmental licenses is very challenging for those who don't have know-how. But Brisanet has specific capability for building the towers quickly. So our team is very agile with the implementation, with approvals, locating the tower, documenting the tower, approving the necessary licenses, especially in the environmental -- environment. So we have all the necessary relationships with the public environmental authorities. Brisanet has built these relationships over time. So towers are quickly deployed. And we're very well positioned to access the resources that we need from the National Bank of Development, and the Northeast is an area where these resources are readily available because it's an area which needs to connect and expand and improve.

So the BNDS resources are well aligned with our business plan to reach small cities, big cities, peripheries and the interior of the states. So this project of implementing 95 towers to reach 200,000 inhabitants in low-income regions, which had no connectivity, Brisanet was able to take those resources and reach 1,600,000 C, B and D layers of the population. Brisanet, in 2, 3 months, took those resources and of those 95, 85 of those towers have been built and deployed. So we surprised the bank quite a bit when they saw that 3 months after the credit was approved, the 3-year project had already been almost totally delivered. We are very agile and ready to implement that same way in all the capital cities interior or peripheral move into, Brisanet is always very quick. And the advantages of us having that know-how in-house is that it really brings a competitive upper hand in terms of the way we will be expanding and using those well subsidized resources. Thank you. Luciana?

[Luciana Ferreira, executive]

Thank you so much. With that, we close the presentation or today, and we'll open for a short question-and-answer session. Just to remind you, if you want to ask questions, open your mic, raise your hand or type in the Q&A box, sending us your question in written. Or type in the company's name, your name, and I'll read it out.

I have 1 question already in writing, and I'll start with that. I'll start by playing a video. I think it helps answer the question. I think there is some technical trouble playing the video. But -- the question comes from Bernardo from XP. And he's asking us 2 questions. One about funding. I think Mario actually just answered that about funding our credit lines and where we're accessing the necessary funding for infrastructure. Bernardo, if you have any questions about funding and how we will be accessing it and ask again, so we don't get too repetitive.

And the second question is about 5G. How are you evolving in terms of the development of the infrastructure and the capital? And what are your plans for rolling out? Also, if you could talk about your sales channels and how you're structuring to sell all of that infrastructure and connectivity? Roberto? Will you?

[Joao Nogueira, executive]

Bernardo, thank you so much. And in terms of funding, we're trying to play a video to you for you where Brisanet presents very quickly, how we built and expanded into Fortaleza, where we are almost at 100% coverage. So some of the buildings, the vertical building, the -- half a dozen of those buildings are missing connectivity at their highest end. But look at Fortaleza. In red, you'll see all the communities or favelas and [ Geros ] in Fortaleza, and you can see they're almost all connected.

So in the whole entire city, there are only 6 regions that still need to be covered. And 6 of those communities -- the top is coverage. And the second bubble, you'll see is regarding the [ fusing ] projects. And the total of the grana -- of the money and the total of the money was dedicated to reaching wider, greater Fortaleza, where you'll see there are still about 6 or 7 negotiations on the table about how we'll reach the top or highest buildings. So that coverage, that infrastructure, the coverage here is a signal. So where you see homes passed, everything is already reached.

I think this is 1 of the best structured networks in the world. You can look at any capital around the world and from the capital to the periphery, there's a lack of connectivity. We use the [ FUSE ] resources of BRL 145 million to implement those 95 towers in the most challenging areas of the city, which are the favelas and critical communities. And Brisanet built not only the [ 9530 ] towers, but that's what we did in Fortaleza, and we will continue to follow in the other capitals very much in the same way. Always getting the bank involved in funding our expansion into the ghetto regions of the city and assuring the city is 100% connected.

That's our format for expansion. And at this moment, we have an active sales effort in all of the city. And we don't have our sales efforts yet will structure, we're doing on P2P, but we will be deploying our sales efforts now and reaping those benefits. This year, we will have at least 2 other capitals added into the same way you just saw on the map. And Fortaleza and the sales departments all up and running by July, all active running and selling that 5G and fiber.

[Luciana Ferreira, executive]

Next question is from Christian. Christian, we'll open so you can ask the question, just open your mic.

[Unknown Analyst]

Can you hear me?

[Luciana Ferreira, executive]

Yes, we can, Christian.

[Unknown Analyst]

Good morning, Roberto. Good morning, Romario, Luciana. I have a few questions. First of all, about the issue of your sales force. You said you're going to start working strong with sales in June. I want to know how this compares to the sales force that we saw in the first quarter and second quarter -- last quarter of last year and also understand what we can expect in terms of the acceleration of those client adds, which is at about 20,000 already, even with a sales force which is doing less than what you expected.

Another question would be about your fiber. We know that the focus has all been on ramping up 5G, but fiber in April dropped a little in terms of the usual 10,000. So how do you see fiber moving forward? You mentioned the competitive scenario and -- you mentioned the fact that your price is not under BRL 50. So how does this dialogue well with the 5G, what are your offers on that end?

[Luciana Ferreira, executive]

Christian, I want to repeat your question back to Roberto. So you're asking how our sales channels will ramp up their efforts starting at the end of June and what we're expecting to see in terms of net adds and what we saw in the second quarter and third quarter. That's your question, right?

[Unknown Analyst]

Yes. And also, if you can try to help me understand what are the differences of the sales forces from the second quarter to what you saw -- last quarter, last year to what you saw this quarter.

[Joao Nogueira, executive]

Christian, we're not giving you the numbers yet, but just so you can have an idea of what we expect to see happen. Up until now, we were working just with 1 channel port to port and not reaching the entire area. So last months, we're doing 3 million to 4 million inhabitants. By 6 million, we'll start by the second half of June. So the sales channels, for example, digital. The digital sales channel has not been activated yet. Our most expressive sales points, which are our partners in person, those people, those have also not been activated yet. So in every city, we go to the IT stores, computer stores, and that will all be activated. Those sales channels will be activated in June. Then by July, the efforts will all be up and running.

And we will continue to build and expand that effort, of course. Brisanet is always looking at opportunities to accelerate more or less. Brisanet will always look at that. We'll look at what the built network is like, what the share is in our participation in the market. And with that, we're able to adjust our efforts for future investments. At the moment, we're still not giving you the numbers regarding that because that -- and what I can tell you is that we will be ramping up our sales efforts and our sales channels and that the network continues to be expanded so that we can -- in a way that can be extended or not according to the area which is covered.

The second question is about our client base for the next 10,000 clients. So our growth outdoes this. So it's not growth in terms of the amount of network, but we still grew more than all the providers in the Northeast of Brazil. Brisanet only last year, but the first quarter this year as well, still grew more than all the providers in the Northeast. So if the market improves, of course, then Brisanet will improve. Since we grow more than everyone else, we will see impressive growth and possible opportunities that we might see in the market. So we are always trying to do the best we can and be as competitive as we can without lowering our prices.

When I told you that in our region, there are companies that are very small and offer BRL 39, BRL 49 ticket. But there are big telcos as well that have big outdoors in the cities spread out throughout the capitals of the northeast, offering BRL 59. But in the port to port, we have found tickets being offered up to BRL 29, even by big telcos. So recently, there's a company in [ Sobral ], a big city in [indiscernible] in the northeast of Brazil, which is offering BRL 29.90. But we know that these prices have not impacted Brisanet because even when they are above BRL 50, small providers have always been fighting over prices. And even the most expressive regional providers. They have been doing this for over a year, and dozens of our cities are still offering at BRL 29, BRL 39. So this has also not impacted Brisanet's growth.

So we're on the right path. We're not going to put our prices down. And we have made big efforts along these lines, and we'll continue to make efforts, but our policy won't change. We always have a culture of implementing a good action plan, maintaining that action plan even when the market is putting prices down. We believe that putting prices down is not -- it doesn't assure the future, there's more companies that receive 20,000, 30,000 subscribers. If you're not offering for a fair price, then you'll be shutting down. Why? Because if you're offering your ticket too low, you're not investing in your network and it's impossible to provide the quality that clients need. So Brisanet has been making new investments every 6 months. Regardless of the client's approval of our products, we continue to invest. We're not going to ever spend 2 years -- so I -- that's not what we're saying. We're seeing that small and medium-sized providers are not investing in their network. They're just bringing in the revenue end. They're just trying to bring in and increase their client base instead of actually increase the revenue in an intelligent way.

We don't believe that there is a market for people who are not investing in their infrastructure for people who are not investing. Clients want better connectivity. They want higher speeds. And that has a price. So if you pay BRL 80 for your Internet today, that's -- not saying price in the interior in the capital and software to deliver a cheap, cheap product and then not invest in your network and just see the quality of that product to drop. The reason it doesn't work that way, we maintain the quality of our products, and we continue to be certain that we have the best average ticket in our region with the best growth. And if we look at the next 2, 3 years, we see a big opportunity that those networks don't have people practicing these prices, this pricing, will become more and more in debt and it will become more and more difficult to capture those resources. Any other questions?

[Unknown Analyst]

I know you were very clear, Roberto. Well, actually, 1 last question. I remember you mentioning that you started to offer combos. Another thing you said during the presentation was that 80% of the new clients that are coming to Brisanet through 5G are not old clients from fiber that you're bringing to 5G, so new organic growth. What do you see in terms of your strategy to sell to your fiber clients?

[Unknown Executive]

Look, our client base, it's even easier to communicate with them because when -- initially, our client base was more focused on the efforts of -- the sales channels were focused on that effort mainly, but now Brisanet's database will start being accessed. So we're going to have our salespeople call obviously, all of our clients and offer them the broadband and 5G chip combo. And in cities where we don't have fiber yet, we're going to offer just the 5G, but we're going to bring in the FWA and fixed comp. That's what we're going to be offering the clients starting June, second half of June.

[Unknown Analyst]

Perfect. Great answer.

[Unknown Executive]

If you allow me to collaborate on this answer. This is when we say that fiber sells 5G and 5G sells fiber. So we will actually be capitalizing this base -- this very well satisfied fiber base, which we see helping us to speed up and raise the potential of our 5G sales. So these numbers show you that even though we are very timid with our sales efforts, we are seeing accelerated growth. This will improve. We know the trend is that it will improve quickly. Then I will now pass to the next person, which is [ Eduardo ] from UBS. Eduardo, you can -- you'll receive a -- you can open your mic now and ask your question.

[Unknown Analyst]

Thanks for answering our questions. You have actually kind of answered my question already, but if you could tell us a little more of what we could expect in terms of the population that will be covered by the end of the year? And the second part of the question is, how can we see the leverage over the next 3 quarters?

[Joao Nogueira, executive]

Yes. So company leverage, as we mentioned, our target is to, by the end of the year, they are levered close to 2. Investment is according to demand. So the initial plan, close to 2. If demand drops, then we'll drop investments well. But initially, we are maintaining those levels so that by the end of the year, we'll reach leverage close to 2. Deleverage till we reach 2.

Eduardo. You also asked about the area coverage. Yes, the area of coverage evolves according to Brisanet's plan and guidance. Once we reach the leverage of 2 points, then by that time, our coverage will be close to 14 million population.

[Unknown Analyst]

Thank you, Roberto. Clear answers.

[Luciana Ferreira, executive]

Thank you, Eduardo. Now, [ Eduardo ] from [ JTE ].

[Unknown Analyst]

So I understand that there is a -- you give the clients an initial 3 months for free or very symbolic pricing to convince them. I want to know what has -- will be like once the price goes up? So once the ticket goes up.

[Joao Nogueira, executive]

Eduardo, this initial price of BRL 34.90 for the first 3 months is so that the client -- Brisanet can win the client over. Brisanet is not seen as a mobile operator. So we need to change our brand presence. Everyone understands Brisanet as a fixed broadband operator. We have to explain to clients that we are also mobile Internet. So that's what we will do initially. It's 3 months that we're offering our clients BRL 34.90, and that is enough to explain and reposition the brand, then we will probably bring the price up.

Initially, that's where we're going to keep the price. We're always going to be adjusting this according to what the market tells us. Once people understand that Brisa is an operator that offers this. So initially, we need to go to the clients' store, knock on their door, tell a story that Brisanet, besides being fixed broadband, is also doing mobile now. But once we arrive at a city, the experience in the first cities is that 2, 3 months later, things get easier and easier.

So people already know our name and they know that we do mobile. Once they're there, once the market is there, after 3, 4 months, clients have heard of us, and it makes it much easier to sell them the Internet. So once the communication goes -- so initially, that's where we're going to keep the price until we convince the clients.

[Unknown Analyst]

Roberto, just to understand. So let's say, a client that hires you in January is going to pay BRL 34.90 for the first 3 months, January, February, March. And then in April, May, he pays the normal amount? Does -- you'll bring him up to prices? Or how does this work? You're always going to follow this format, 3 months cheaper and then bring the price up? So let's say, the person that joins you in January will bring in revenue by April, May?

[Unknown Executive]

Eduardo -- we're going to start assessing this now, assessing this moment now in which the client starts. So we'll have a better precision of that of those indicators, starting July, August, we'll have a better precision of those indicators, how they behave after 90 days. How our clients behave after the 90 days.

Just 1 comment on that. Eduardo, we started to charge less in March. And you'll see that we're not sharing the churn yet because we're not there yet. We haven't seen any clients cancel because of the way I sold moving forward or because of the regulatory deadline. So we're not calculating churn yet, it's too early.

[Luciana Ferreira, executive]

Lucca from Bank of America. We're going to send you the invitation to open your mic.

[Lucca Brendim, analyst]

Perfect. Thanks, I would have a few extra questions. I wanted to understand more regarding the images for the next quarters. You said that it reached [indiscernible] and then you'll see an improvement soon. So what were the main lines behaved like? And in the last 6 months, you've seen a [ head ] of over 1,000 new employees in terms of the new employees. Where are those human resources going to be directed over the next few months?

[Joao Nogueira, executive]

Lucca, about those -- if our costs are going to increase. For example, in the fourth quarter last year and the first quarter this year, we hired -- there was a high level of onboarding, but there was no revenue that accompanied that onboarding. But the cost of those towers and -- because we needed those people to get the towers up. Moving forward, onboarding is only going to happen according to the growth of every location. So what you saw in terms of onboarding, it wasn't -- it's not the number you can consider because we needed that to get the initial infrastructure. So that's what brought our EBITDA to 42. That was a peak -- that's the peak of cost. So 42 by the second quarter -- actually the second -- yes, second quarter, go from the same to more positive. Or -- and by the second quarter -- by the second semester, you'll see that the cost does not follow the revenue. We'll see the revenue increasing, and the cost won't increase because we already reached the peak in terms of costs which were made in the initial investments.

[Lucca Brendim, analyst]

Thank you, Roberto, for clarifying that.

[Luciana Ferreira, executive]

Okay. Rodrigo from [ Kratos ]. Rodrigo, open your mic, please.

[Unknown Analyst]

Congratulations for the last quarter. I do have 1 question about the dynamic, Roberto. You mentioned that you're now joining the small cities, medium cities and even big cities like Fortaleza. So I would like to ask you what the dynamic is in terms of those clients? Do you see any difference in the clients' behavior moving into the big capitals of the Northeast? And also the profitability. We know that Brisa has an obligation to reach more than 1,000 municipalities of up to 30,000 inhabitants. So obviously, there's always that question at the back of our minds, will the cities be profitable? So if you know anything about the differences in numbers from small, medium, and big cities and if you could specify how this is moving forward, that will be great.

[Joao Nogueira, executive]

Thank you, Rodrigo. Regarding your question, are you -- so that's a question everyone always has. Are small cities opportunities, or are they just a weight? So our commitment is actually not 1,100 cities. We're doing 1,430 cities, bringing 5G to those cities. We have always understood that small cities are where Brisanet will have a much bigger share. And those indicators are showing up. So cities of up to 10,000, 15,000, 20,000 inhabitants, where we've already been for a few months, the share is aligned with this. We think we're going to reach 40% of share in those cities in the interior, exactly in those cities of over 30 -- of under 30,000 habitants. I think we're going to have a bigger share payback. We'll probably be lower, but will -- actually, payback will be faster than in the big capital.

So when Brisanet installs a tower in a small city, it's what's the investment for the capital, but the population that that tower will cover is also the same as a population that will be covered in the capital. So on the capital, we put in an amount of towers according to the amount of inhabitants in the cities. And payback from cities, smaller cities. Since Brisa has -- is more capital in the interior of the country, we'll have payback of -- quicker payback because we have 40% of the share and at the same time, 20% of the estimated share in CapEx. So in the cities where we are committed to bringing Internet and that's why we won the public tender because Brisanet understood what was behind it and when the market saw a problem.

So arriving with 5G 10 years before the rest of the telcos did it. We understood that most of those cities won't have 5G. So if you look at fiber in the Northeast, you can see the number of fiber, and -- most of those companies only have fiber in 62 cities of the [ 1,600 ]. So of those cities, only 62 of those cities have fiber. Of those 62, we only have all 3 in '26. So -- and now 1 city is an operator, another city is another operator. It's not in the entire city, it's only in the A, B part of the city and not in the periphery of those cities. So the 5G. We obviously have a much better numbers, higher numbers will be 62 cities, but I think that in 7 years, probably 200 cities of 5G because [indiscernible] enough, big telcos. I mean they're not wrong. It's better for them to invest in the big center of the [indiscernible], where the OpEx is much lower.

Now the interior OpEx is high if you're not in the interior. If we're already [ cable ], we already do fix broadband. We understand the interior, we're in that world, our know-how is focused on that. We do fix broadband there. So we don't see small cities as a burden. We see them as opportunities. So it's not a challenge. It's not a commitment. It's not a burden. It's a business for us. That's what we did in the past. That's what we'll do again. So we did this, taking higher technology and our ticket is cheaper. A much better network, a new network, a well-built networking network that's projected for those locations. Thank you for your question. Any last questions?

[Unknown Analyst]

Thank you, Roberto. Great answer.

[Luciana Ferreira, executive]

Rodrigo, when we look at total space, and it already has the mobile clients at Brisa, you'll see that cities of 30,000 inhabitants. Now we're following -- have a more expressive market share than we ourselves thought. We had the planning for that moment. And if you consider everything that Roberto just explained about the channels of distribution and the sales channels and how we will see us -- that will -- those will be the drivers to bring the numbers up.

So about the dynamic you asked us about, we are seeing very good acceptance of this product in small and large cities in small cities. We usually gain share much quicker, much better and quicker. And we are confirming that. Even with a very short operation time.

I'd like to also read 2 questions that arrived, and I'm going to join those 2 questions. Both to you, Roberto, 1 question is about with the expansion of the new channels, where we focus more on B2B instead of B2C? And also, if we can talk a bit about our FWA strategy and when it starts?

[Joao Nogueira, executive]

Brisa always operated differently in the broadband network when operators are building network only for B2B.

[Luciana Ferreira, executive]

Roberto, you're muted.

[Joao Nogueira, executive]

No, I'm not. Okay. So about B2B or B2C, reason that has always operated those 2 channels. In FWA, where Brisanet has fiber, our focus will first be to find B2B from the small to big. So small companies that need the redundancy. They already have fiber. Fiber gives you fiber -- is more vulnerable in terms of its drop cable, the cable that goes from the post to the home, and the cables that go through different post. After that, the fibers within the trees, for example, cables that run through trees and the people that are cutting the trees or are trimming the trees don't consider the cables. So there's a drop.

FWA is redundant in that sense. It improves the quality for small businesses and large businesses. And initially, it's offering the small businesses -- the PAP already does this as our collaborators. And in the port to port for fiber, already do the 5G port to port for mobile and FWA in cities where we don't have FTTH, then the PAT pays the fixed broadband 5G, FCPA -- FWA and mobile. So we will be following ahead of B2C and B2B at the same time.

The port to port sales channel is more in the A and B and C and D. Digital is for all layers and sales point in locations where you see A and B classes like shopping centers, neighborhoods for C, D. So appliance stores, IT stores, computer stores, lots of those sales points will be helping us sell our products. And we also have the corporate in which is responsible for doing the corporate sales. So B2C, a specific visit to companies and providing -- offering our products to those that are already our fiber clients, and we have our corporate sales team that's good at that. Thank you for that question.

[Luciana Ferreira, executive]

Okay. Then we wrap up. There is 1 more question. It's actually a question from 1 of our collaborators, and I think it would be interesting for us to maybe answer this question to everyone. There is a plan of introducing new products or services that will bring up the average ticket. Or if the services for fixed broadband, FTTH will be incorporated to services we already offer to date?

[Joao Nogueira, executive]

In the area where Brisa already works with broadband, we're going to obviously be careful to not cannibalize our fixed broadband clients. So every time it's a fixed broadband client, we're going to first offer the mobile plan for their cell phone. And even then, where we have fiber in areas where we have fiber. There will be an opportunity to sell FWA to our competitors' clients.

So let's say the reason that has fiber somewhere where we can still sell business plans with FWA. So today -- we can FTTH to those clients by the telco. Today, there are -- is a plan that goes up to 150 megahertz, but that will help us reach the clients that have smaller tickets and other companies, and Brisa will work on a combo then between FWA and chips -- mobile chips to offer them to the clients that are currently at our competitors. Anything else, or does that answer?

[Luciana Ferreira, executive]

I think that answers the question, thank you very much. So yes, synergy between fiber and mobile will be explored more deeply from a commercial point of view, but we take advantage of it from an operational point of view. And commercially, we're just getting started. So there's still a lot to be done and a lot to be seen and a lot of integration between those 2 services and the other services that we're already offering as well.

I also would like to ask if anyone has -- any last questions? If not, I will read the last question so we can close the Q&A. I can answer it myself, but that -- Lucca is asking about the ARPU in the quarter.

[Unknown Executive]

So the ARPU. When we look at the general ARPU, it remains at an average for B2B -- B2C at about BRL 95. And that's the way it was in the last quarters as well. We keep adding services for clients for fiber clients, keeping them loyal. And this is what has assured the same competitive scenario that Roberto just described, that we'll keep our ARPU where it was. And inflation and offering new products and our balance so we can continue organic growth.

[Unknown Executive]

Just a couple with that, Luciana. We see a big opportunity on that our clients are paying BRL 49, we already have accounts of chips. So 2, 3 cell phones account. So if you look at the near future, networks for those who are offering cheap broadband don't have -- are not being invested in. So the trend is that in the future, a degrading of services will really start happening because of a [ lack ]. And Brisanet has an opportunity to step in with our cheaper computer, our fixed broadband, 5G and a 2 to 3 cell phone combo, we will be able to bring in that revenue. So basically, those 2, 3 mobile phones for BRL 50 adds more and bring in quality into their broadband plus mobile, and that's a big opportunity for business as time passes. And the investment won't comply with the demand because clients are becoming more and more, obviously, picky. And not only because of the quality of the network, but also because of the way they use the Internet and the speed they expect.

[Luciana Ferreira, executive]

No more questions? Okay. So with that, I would thank you for coming, and I go back to close this call.

[Joao Nogueira, executive]

So just to close, like to say that we are always trying to help the market to understand Brisanet's business more and more. It's obviously a different business. There are not as many similar businesses to ours in the telco sector. But the fact that we have acquired spectrum, it's a scarce resource. You can't create frequencies, so Brisa acquired very valuable blocks. So in other countries, it was 100 billion frequence. Even lower than the consumers also. We have like 2 blocks of consumer norths very well equipped to spectrum to explore in a demand, a higher and higher demand for mobility with high performance with high data delivery presence in any location and stability. So we set up that network in record time, but it's a very mature network. A project that we put together for that frequency different than a project that was done specifically for spectrum of [ 2 1/2 point ]. Then using those locations for frequencies that have a lower reach. So we penetrated the way you saw, as you saw the graph within according to what the market, the telco sector and the specialists in the area said was possible. But only with the frequency which was connected, and we did this.

So we participated in the tender. We -- this wasn't a guess. This wasn't something that we bet on. It was the only 1 where I was able to -- we tested -- Brisa was the only 1 that went to the field that tested new technology that was not implemented anywhere else in the world. And we implemented things that we developed was implement. We have been very innovative, very future -- forward thinking. So no one was concerned with setting up a low-density network because there were the other frequencies to anchor. Brisa went to the auction, to the tender, we participated. We knew how to do it. We knew how difficult it was to have a low spectrum frequency.

So we were very -- we're very assertive, more assertive than the sector itself. And have had questions about how to set up in operation. The market sector specialists were asking questions at the time, will Brisa be successful? Well, Brisa went to the auction with responsibility. We didn't think we were going to buy the auction and then maybe it would work. We tested it before. Wasn't a small test. We actually tested most of those suppliers. We were testing if technology worked, if the reach worked, if there was penetration in door. But the choice and the bet we made, Brisa, it could make no mistake. So we were assertive in the structure of core network and equipment.

We had the choice of buying cheaper equipment. Many companies build their networks with cheaper equipment, not using -- the equipment as most capacity for delivery. So using it 5G, there's the ATX, there's the [ Arteris ], there is 32 -- 32 TX, 32 transmitters, 32 receivers. And we use 64 65. So we chose to aim high. We valued our technology. We multiplied our spectrum. When the company makes the structure for towers denser and installs the equipment that delivers more capacity, the same lack of frequency, and that's the same as what Brisa does when we win auctions. We double the frequency we have. So we basically multiply the capacity of delivery in terms of comparing with traditional projects.

Traditional projects that are carried out. The biggest companies specialized in building network, they don't dense the network that we do, and some would even suggest equipment with lower cost. Copies that decided to go high, test everything. We tested ATX 32, 64, different manufacturers. And we solved this challenge. We -- the market had a question we answered.

Thank you so much for your questions. Thanks for your participation. Send us emails, ask us questions. Luciana is our Investor Relations, and she is always there for you to clarify the questions you may have. And if you need, call me as well, and I can answer more specific questions if you want to understand the technology and the model behind all of this. Thank you so much, and have a really great day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]