Brisanet Participacoes SA

BOVESPA:BRIT3

Earnings Call Analysis

Brisanet's Growth and Future Prospects in Mobile and Broadband Markets

Brisanet reported strong growth, with organic subscriber additions surging to 14,000 in the last month, reaching 1,415 accesses in total. The company achieved net revenues of BRL 364 million and an EBITDA of BRL 150 million for the quarter. With a robust CapEx plan, projected at BRL 900 million for 2024, Brisanet aims to expand its 5G network, covering 9 million inhabitants. They expect cash generation to be 50% above EBITDA, leading to improved profitability as operational barriers are addressed. Specifically, the focus will be on integrating new FWA services alongside traditional offerings, marking a significant shift in the company’s growth strategy.

Solid Growth in Broadband and Mobile Access

Brisanet Participaçôes continues to show robust growth in broadband services, achieving 1,415 organic accesses—an impressive 100% year-over-year increase. Over the past three months, the company has accumulated approximately 40,000 new subscribers, with 13,000 added in the most recent month alone. Notably, in the Northeast region of Brazil, Brisanet has grown by 109,000 subscribers in a month, outperforming all other operators. This growth highlights Brisanet's unique position and its focus on expanding its customer base in a competitive market.

5G Network Expansion and Future Revenue Potential

Brisanet's investment in 5G is expected to yield significant returns, particularly with the network now reaching over 9 million inhabitants. The company reported a trend toward an estimated BRL 364 million in net revenue and an EBITDA of approximately BRL 150 million as a result. This indicates a strong future cash generation potential, significantly improving operational performance once the initial barriers to mobile services are fully addressed.

Impressive CapEx and Operational Cash Generation

In Q3 2024, Brisanet's capital expenditures (CapEx) amounted to BRL 900 million, aligning closely with expectations. Despite the high investment volume, the company continues to generate operational cash that exceeds EBITDA levels, demonstrating Brisanet's effective management of resources. The strategic focus on expanding its mobile networks and infrastructure while optimizing client acquisition has positioned Brisanet well for future growth.

Addressing Industry Challenges and Market Dynamics

Brisanet faces industry challenges, including competition and regulatory hurdles, with the added complexity of shifting market dynamics. The company has noted that the actual growth in the broader market has been negative, with a reported decrease in fixed broadband subscribers across the sector. Yet, Brisanet has successfully maintained a growth trajectory, primarily due to innovative sales strategies and an ongoing commitment to service expansion.

Optimizing Debt Management and Future Outlook

Despite an increase in net debt from 1.54 to 1.74, Brisanet maintains a healthy debt structure with an average maturity of 5.7 years. The company is actively seeking additional credit lines to support its expansion efforts in mobile networks and infrastructure, particularly in less saturated regions of Brazil. This strategic debt management reflects Brisanet's commitment to operational sustainability and growth.

Revenue Expectations and EBITDA Margins

Expectations for 2025 indicate a continued improvement in sales, with anticipated cash flows expected to exceed previous quarters. The management has guided toward stabilizing EBITDA margins as the business scales and operational efficiencies are realized, projecting a normalization effect from the substantial CapEx investments made previously. Investors are encouraged by the prospect of increasing margins as operational costs stabilize relative to rising revenue.

Focus on Diverse Service Offering and Market Differentiation

Brisanet is not only focused on broadband services but is also branching into more diverse offerings, including the development of a fully integrated service model that combines telecommunications with value-added services. This includes partnerships in cybersecurity, telemedicine, and entertainment, positioning Brisanet advantageously against larger operators who are less flexible in catering to diverse market needs. The growing product portfolio is expected to enhance Brisanet's market relevance and customer loyalty.

Conclusion and Investor Consideration

Brisanet's strategic focus on expanding its network, optimizing costs, and enhancing service offerings positions it favorably in a competitive telecommunications market. The company’s substantial growth in subscriber base, coupled with its proactive investments in infrastructure, provides a solid foundation for future revenue and profitability. Investors looking for opportunity in the telecom sector should consider Brisanet's unique market position and its innovative approach to consumer engagement.

Earnings Call Transcript 2024-Q3

[Luciana Ferreira, executive]

Good morning, and welcome to the video conference for the results for the third quarter of 2024 for Brisanet Participações S.A My name is Luciana Ferrera and I am the Director of Investor Relations for the company. I have Hobert with me, Founder and CEO; Joan Pallara, the Controller. This video comes being recorded and will be made available on the company's Investor Relations website as well as the presentation we use.

For any of you who need simultaneous translation, we have the tool available on the icon of the globe and you can find it next to the word interpretation. Please choose your preferred language, Portuguese English. For those who are listening to us in English, you can also silence the original audio by clicking new original audio. For Q&A, we ask that you drop your questions in the chat box also name your company and where you're coming from. If you don't want to ask your question out loud, you can put in the chat box or raise your hand and ask out loud. For those who want to -- for anyone who wants to, there will be a option for activating your audio and asking your questions about Alberto can go to the next slide. We would like to say that the information contained in this presentation and any possible declarations that may be made throughout the video conference regarding our perspective for business, our financial and operational goals are based on the beliefs and promises of the company as well as the information that's already available.

Future considerations are not assurances of performance. They involve risks, certainties and premises as they are connected to future activities, investors should understand that general conditions, market conditions and other operational factors may affect Brisanet's future performance and take us in other directions. Today, we're going to explore a few of the results of the third quarter of 2024 when compared to the same quarter of the last year. The information is on the Investor Relations site [e-mail]. If you have any desire to ask other questions, send us in the e-mail also. You can talk to us in chat brisanet.com.br. We start with Roberto, the word is with you.

[Joao Nogueira, executive]

Good morning, everyone. Thank you for your presence with us that go straight into the results on the third quarter, 24 for broadband. Present has made 1,415 accesses, 100% organic growth -- just to remind you, the company does not work with M&A in the third quarter together with -- over the last 3 months, we accumulated 40 house subscribers, great results given the current scenario, the last month, 13, 000 almost 14,000 subscribers. When we consider growth, I would like to know what is being announced in [ Anatel's ] I would like you to know the numbers on Anatel's website don't always reflect the reality. So there are lots of mistakes. And the way that's filled out by small providers, just so you can understand, from 4 different Internet providers, there is a mistake of 900,000 subscribers.

So some providers have presented 1,000 clients a month. And this month, 169,000 came out or were published on the website. Another one where we've seen recurrence in the base, 25,000, 26,000 presented 540,000. So for 4 of those providers, there was an announced on [indiscernible] extra 900,000. So here in the Northeast. Brisa's growing 109,000 and a month, which is more than all the operators together. The problem is that there is this possibility for mistake. So Brisa grows more than other providers even with acquisitions, but there is a number that was inflamed given this notification who take up the page we've built over time. We arrived at 27 million ports occupied. So homes passed actually HP. Brisa has a different number than the rest of the market. The number the market announces is the amount of homes covered resaseparate homes that our network covers from the ports that are occupied at 4,700,000. So other companies will always announce the amount of homes passed and this may actually only be 25% to 30% of real core occupation.

So there's -- Brisa has a very high number of actual ports occupied Mark average is 3 million, 2.5 million, the number of 7 million homes passed. Now the advantage of this is that we had CapEx over the years and Brisa has been able to grow month by month without having to make any new investments in the last 2 years. After Brisa invested in 5G, our growth in broadband, which is higher than all the other operators in the Northeast is having higher CapEx. And over the next few, Brisa will continue to grow without new CapEx into the expansion of the network. You can see our number is well aligned in this quarter of 40,000 per quarter. One point that would be interesting to talk about in the other months of September and October, September, the division of 1,500 for broadband and 2,600 users in the first month of FWA. Moving forward here, you'll see and new expansion. So new numbers show up here, which we should look at every month, and we should continue seeing this curve grow also in the month of October. [indiscernible] reached 800. This expansion of fixed broadband continues at the same level.

And now we have the new curve, which we're going to separate and show you, we're actually going to have a separate graph for the next presentation to isolate this number and give it special attention. The world of mobile reason by August has grown on month-by-month has seen a curve of its growth as well for the month of September and October. If we observe this for the month of September and October, -- we had announced in our last call that there was a new product, the FWA, a new product is ready, and we have sold it starting September. For the new product, which was unknown needed to join massively. Our AP sales are the most expensive -- so the most important point is PAP, the store, the partner be strength in sales is its need to reach clients, digital which I'll talk about moving forward. We might have -- we have some common barriers. So 40% of cell phones don't work on our network. So for the digital we still can't sell automatically. So we initially we decided to sell physically, you put the chip into the cell phone if it works, it works.

So this approach where we used to sell only the chip -- now PAP is also selling with the FWA. That is where we'll see the growth curve month by month now, starting November this year. We recover August sales for the chip. We sold 34 to 37, 30.3 million -- so given this new product, where we've all well, there's the case where we've already been inside the client's house and presenting a new product, which the market still doesn't know, obviously, that decreases the growth when you're selling chips, so growth for chips has dropped. The trend this month is that we will reach the number that we reached in August. And every month, we're going to present another growth curve. The trend of overcoming the last month with the chip. Our EBITDA ever since the beginning of the year, the trend of our EBITDA, equalizing close to 42 million is already stabilized. This month, it reached 41%. And we arrived at a trend for EBITDA. In the future, when all of the 5G network, which was already built, has reached more than 9 million inhabitants. And there was sales in every street and every quarter. In the future, it -- we reached BRL 364 million in Net revenue EBITDA of BRL 150 million. And cash generation, 50% above EBITDA -- those are the EBITDA results 5G with 215,000 new chips -- active chips.

And another important point that we should -- we started September last year. But the first month are usually more complex barrier to overcome the city doesn't yet have the understanding that Brisa is also a mobile operator. So it takes time to change that culture in people's minds in their heads Brisa sees itself as a fixed broadband provider is seen as. So for the first few months, there is always a greater barrier in the cities, which are already activated for over 2 months, Brisa is arriving share overcoming 10%. So the coverage of -- so this was built, but sales are close to even and reach into a city where the door-to-door salesmen will sweep through the house. So this means that 9 million is being sold. So there's a delay and then we sweep through the whole city. And that's when new opportunities come for selling our base, which is -- we're just starting that initiative now.

So sales are being made of the asset and that has -- so the chips can't be sent to the mail through the mail. You need to send someone to actually substitute the chips. SWA has positive results -- in terms of the investments over the next few years, our 5G investment and the growth of FWA, so [indiscernible] 6,350 million. So just repeating what I said before, Brisanet grows more than all of the operators together. The growth -- actual growth was negative, so there was no market positive growth -- if we look at the BRL 4 million less than that already overcomes the growth per month. So just by removing those 4, growth is negative for all of the base that Anatel has announced almost 50 million broadband fixed broadband subscribers and 900,000 less. Now going to our CFO, Romario is going to share the numbers with you. Thank you.

[Jose Romario Pinheiro, executive]

Good morning. Here, you can see the company's CapEx and how it has behaved over the last quarter, it's important that I mention that regardless of the volume of investments, which were made and the expansion plan expressive expansion plan, the company continues to generate a lot of operational cash, much higher than EBITDA. So we see the performance of investment online that are very close to what was expected in the other quarters, 50% of the investment in mobile networks, for 5G and another in infrastructure to support this plant in the one. And with the expressive part directed to our new clients, it sees. This means the company continues to increase.

It's fixed broadband and the fiber network that was built 2, 3, 4 years ago. That's important. So it's because it's what the company has always provided where it would become profitable for some of the following years. We see this to continue -- continuing through '23, '24 and the next few years, this will continue to performing. This is also thanks to the additional CapEx. Last mile for new clients, being that the networks are already set up and ready to just gain CapEx. In the third quarter, we have the highest volume of investment in the series that was presented here and we continue to reach [indiscernible] the hopes of reaching BRL 900 million investment for the year, a bit more or less well aligned with our expectations and our investment plan.

If you could also go to the next point where we talk about the company's level of indebtedness. The net debt performs positively spending level that goes from 1.54 to 1.74. The highlight here is to the average time of the company's debt is 5.7 years. 2 years ago, this average was significantly lower. And with interest rates that are much more attractive in specific lines for the telco sector both like the Bank of Development, Finep, NDS and then the company approved a new line of credit to expand its back how networks. So it is the second line of credit of this size that was approved throughout 2024 continue to observe and work on opportunities of this nature for the rest of the year in 2024. It's also important to highlight that the resources and especially boost resources are synergizing synergized very well with net project. for mobile networks and infrastructure in the interiors of the country as well as in the backhaul networks.

That is how we see things evolving of this type of research resource and also every whenever possible, complementing it with additional credit debentures and according to whatever the best option is for every moment. That's what I have to say about CapEx. And this is for now. Thank you.

[Unknown Executive]

Thank you so much. We will open to questions and answers.

[Unknown Executive]

Just to remind you that to ask questions you should please use the Q&A box and write your name, so we could open the audio. So we will start with Marikana from Itau Maria, the floor is with you. You can ask your question.

[Unknown Analyst]

Thank you for this opportunity to ask a question. My question is very much related to 5G and WA. I'd like to ask you to please comment on the perspective or the sales dynamics for each of these categories and understand what we can expect in terms of new adds to 5G in September, you talked about the normalization of the trend you make new ads. And I'd like an update on how you have -- so this -- what has happened and what you expect moving forward divided by is doing

[Unknown Executive]

[indiscernible] is growing beyond what we expected in August, we have reached 3,000,004 and September, October had this movement of new products for 5G FWA for Brisanet. We understand will be a very relevant product for revenue, especially for next year's company -- we're building -- expanding the 5G network. -- into the cities where Brisa brings fiber as well as in cities in which [indiscernible] doesn't bring FDH.

So only 5G -- so on cities that only have 5G, we're going to more expressively FW mobile. And in cities where there is cyber more expressive mobile and FWA is a place where there's more appeal for the corporate client initially. That's what we see especially because of the businesses where there's no redundancy in 5G, FWA and reduces costs. So small companies have fiber and they'll now have FWA. Those are 2 worlds, 2 scenarios in which FWA and mobile, so places where there's fiber and leaders and fiber, where we don't have fiber, we will won't cannibalize or be using or installing Wnt residences, but also -- but with plans of moving into the corporate, which we haven't started yet. So it's one of the products that will move forward with the journey of FWA, the corporate world. So there is an expectation that recovers in August. These 2-year months have made it very clear to us -- so the same salesperson who makes a FWA chip will approach almost half of the houses a day. So in the 2 months, we have already recovered it. So the vendors are sales people are selling FWA. And in the first 2 months, they see the growth from 200, 300 with the growth of [indiscernible] -- the level. So we're always going to report what Brisanet is going to make clear in the first semester of 25, and we will have a growth peak and all of the analysts can then project.

The base is growing and Brisanet wouldn't make any acquisitions of new collars by the end of the year. But just those that are already involved in the sale are -- we're not representing any expectations of the base we're going to work, so we can always present a number that's higher than the last number.

[Unknown Executive]

So now we're going to hear Hamsika from OBS from Audi please go ahead.

[Unknown Analyst]

On my end, I would like to ask 2 questions. So first of all, I'm interested in knowing more about -- so we saw a strong expansion of CapEx and CapEx numbers. I would be interested in understanding where did that CapEx flow and understanding an affirmation you asked at the beginning of the presentation for the first period, CapEx would be directed to reacquiring client and not expansion. I would like to confirm that information as well.

Second question is about EBITDA margin. So we would wait for a normalization of the EBITDA margins on the 5G sector arrives. So or the short term, this year, what do we -- what can we expect for the EBITDA margin for the return of these investments?

[Unknown Executive]

It's divided by into the expansion of the 5G network and in the acquisition of clients, broadband clients, fixed broadband clients in the next year. the similar CapEx, but the expansion of broadband and FWA will be very significant. So talking about good part of the investment and similar investments for '24 and '25. There will be expressive -- we consider EBITDA stable or the scenario of sales that we have today. The trend is that these 9 million inhabitants that were covered by 5G in which will reset quite well the next year.

We had this these [indiscernible] that needed to be built because there was a construction of the network and sales obviously don't move at the same rhythm in which you expand the network for sales. There are a series of barriers, chips, SMSs, the update of the software of hundreds of cell phones over this 1.5 years -- every manufacture every model, every manufacturer has hundreds of models, so updating the software and understanding the Brisanet network. So that's why the sales of Digital sales is in our portal when you request a chip, and they may have a negative experience when their cell phone is not compatible. So some models, you need to install the chip in, see if it works or doesn't work. So there is this initial phase of transition, but the market of 9 million inhabitants with 9 million cellphones of that market where our network has been installed is already starting to adapt. We have our sales starting to boost up. All costs are already included in this.

The rent is already included the CapEx, financial CapEx is also already included sales top are also already under -- ready to sell each tower. So the cost has already been included. During the time in which the network was built, if we were being receiving every tower since the beginning would be another EBITDA now -- we're going to start with the new action of building towers and then selling them becomes clear to us that results are well improved. It's not that they have improved. They will improve because all of the costs are already included and sales are already happening. As I mentioned, month by month, we will present results higher than the past month. So we're just not clear. It's just not get us what the EBITDA will be.

[Unknown Analyst]

Just to understand, one last point on my question. this expansion effort for FWA will it impact the commercial efforts on 5G in general. Is it the same team that will be making those sales on one item?

[Unknown Executive]

We have a salesperson selling one item. And then you tell that salesperson this and you're selling one, you have to sell 2 and you have to explain to them prepare them the expert information. Obviously, what the salesperson would tell the client about in 5 minutes, they're going to talk about it for 15 minutes. So there was a retraining when you add a new product, you're going to extend that 15 minutes. So the more items that this salesperson needs to explain to clients, the longer the approach becomes -- these are all new technologies, new products. So there's this lower-end productivity. The value of lower productivity, which is also what happens. We're not going to hire new professionals to SoBe. Same team, which was Salinas.

We WA, so training in rooms when they go to the field. The approach was just for the chip. Now they also talk about FWA, talk about the different boxes that are available plug into the person's living room and teach them about the box Look, this box. They walk around with it. plug in and they have Internet like fiber. So that's what we're teaching people to teach. It's the transition of the network. But the recovery of chips was lower, but there was the compensation of WA with a really positive result. Thank you, guys.

[Unknown Executive]

Yes, I just wanted to also mention -- this is an adaptation. So obviously, it will always impact the sales of the chip. I'm going to now pass the word to Rodrigo Azevedo and Rodrigo, you can ask your questions.

[Unknown Analyst]

Roberto, Luciana, Romerio, I would like to understand Roberto in the last presentation, you talked a lot about this difficulty of opening new channels for selling to partners and online sales. So you also mentioned this in the presentation, but if you would also want to share with us if you have any expectations of when those new channels will be open. And when we'll have a more relevant adherence to 5G than what we have now of 30,000.

So if you could also share us a bit of numbers that we had in this third quarter, where we saw cash flow a bit stronger than we had seen, and I would also like to understand if this strong generation will be maintained over the last -- next few months. And if this can somehow help us to capture new credit and new loans. So when its cash generation somehow decreases some of the need for capturing new credit, new loan.

[Unknown Executive]

Sure. So starting by online sales in different channels, online sales -- we'll focus on that until the end of the year, but in this channel with online sales, we haven't yet. We don't deposit strong hopes. As I mentioned, there is the barrier of cell phones where every day, every new stuff which is acquired by the market, facilitates things for Brisa.

So every model that Samsung, that Motorola that manufactures update the software on this also facilitates things. so that the client can in fact check our website, check the plan for the chips, and the chips can come in the mail through Motorrad they can then enable that and we will start giving or providing more support to the channels. So the channel -- our point of sale in the supermarket, in the shopping center and our electronic stores, those are our partners. And every time we've reached the channel like we said, did a few months ago, we have the possibility of having a very big amount in point.

But when the platform is actually ready -- but we won't be able to open that without the product being ready or not having a platform. So the platform is ready, and then we start having this group -- most of these channels are okay. Then the platform already comes, but with sales that will be built in the ramp-up of -- so the main channels that represent sales. Given the physical presence or 100%. Obviously, the platform brings improvements every day. The improved the management of sales and the clients' journey in which sales will happen regardless of other digital channels and will then improve. Digital channels will give us the response when physical channel approaches when the salespeople go to clients in the shopping center on the street, then that will facilitate things -- every day, presenter is getting more and more well known in the cities in which it spent time and the culture in which presents also mobile.

Reach is this number in the Northeast where 70% of the cells are prepaid, only consider the interior and for very small cities even more. The user doesn't have the culture of [indiscernible] every month. They recharge for operators, and it was always the biggest channel for transforming the prepaid to postpaid. Brisanet has been able to work with and change those clients prepaid to postpaid, so you can already consider a victory. We have the cultural shift of changing your prepaid to a postpaid base.

[Unknown Executive]

About cash flow generation, I think we have a peak moment Rodrigo. Last year, that was already larger than EBITDA should continue that way for a few more months. But it's important that we understand that the company's investment supports itself on the higher cash generation given the growth of revenue and not only this momentary situation. And also with the capacity the company has to higher over the last 24 months, the time we have hired and also taking advantage of more than of credit and low cost, but 50% of that amount still needs to be paper.

So we have -- we continue to work in these fronts of other projects and other perspectives throughout 2025, we will continue to work and soon we will be accessing the market. And if we do need to make a more traditional loan to complement this investment, we will. But most of it is supported of this market credit mix credit from investment development. We have done this over the last few months. We have strengthened and built this possibility, and we'll continue to work with this format and overcome this investment plan in mobile. Thank you.

[Unknown Analyst]

I would just like to say if you allow me to about new capital, you have mentioned 3 capitals this year. So into moving into Fortaleza, Natal and the third capital? Do you think it will happen this year or will it be pushed on to 2025?

[Unknown Executive]

Thanks for that question. I actually forgot about talking about expansion. But we talked about the $9 million in covered area, the capital of Fiera Fortaleza. We have moved into and 90% of the population is in the interior. So for [indiscernible] we have recently moved into Natal. When I mentioned Natalia -- we also moved into Natau and its metropolitan region. So sales can happen at any point of the peripheries of that's also moving into the capital is also moving into the surrounding areas. And we have had also interesting cities from the interior most of all, and smaller as well.

In December, we will start selling to a good part of Jones on the metropolitan region will begin sales in December, 100% of the capital will not be reached yet by 2024. So there will be work to do so, but in the month -- the maximum by 1 or 2 months into 2025, we should be at 100% of a [indiscernible] So in December, a good part of the cities in [ JomPasoa. ] And by February, we should be 100%. We concluded and moved into lumps.

[Unknown Executive]

So when we talk about the cities in the interior and all of the big cities in sea, which are covered -- so that we'll move into 75% of the urban population in untidy the city of Campina Grande is also delivering -- we're also moving into that this year. So it's a very big city in Paraiba Caruaru Big City in Verano we're also already selling into Carat and Rita by some of the cities in the Pena. Doing very well with expansion and building there I don't know if you understand that Prisa is the only operator in Brazil, where we project the tower, we hire local -- we then are careful with all of the environmental part of licenses and operate. So we have a line of construction which I think that no one has a line of construction like present does.

So verticalizing a platform for 100% internalization and bringing all this knowledge of production in-house. That was something we were able to do and we'll continue to do I think there is not yet anyone that is integrating that and to the rhythm we have already learned. So it's more mature in this 5G expansion than any other operator. That's price.

[Luciana Ferreira, executive]

Okay. Thank you for your questions, and those were our answers. Going to read a few of the questions that are in the chat, Eric wants to know how the big operators are behaving in terms of the aggressive pricing strategy that BIVA has presented for -- so have they had to reduce prices to keep plants.

[Unknown Executive]

So I'm not going to talk only about 5G, but also fixed broadband. In cities where the big operators build new networks and big cities in the interior, which are also not alone in all of the Northeast are only 70-something cities built by all -- for fixed cropland, we have plans today -- well, today now, but for more than 1.5 years, 2 years, there are plans that are up to BRL 50. So BRL 42, there are subscriptions for that price. -- but Brisa has really moved away from -- for 2, 3 years now. We compete with this low price of broadband, which is half of Brisa's price but Brisa keeps growing. So we see that people are not able to deliver what they are promising.

In terms of the mobile world where we just started, there have still not been any actions to reduce price after Brisa joined, but Brisa has a different style of working. That's present. Not only in big cities, but small cities, freeze is there. It's at the doorstep. It's close. It's physically present. We also have a really robust network, our network today has a capacity of delivery and our plans are more gigs for a lower price. Our gigs are cheaper. Our network is more dense for 5G. So we have more presence for every city you need our network. We have 100% covered for 5G as well. And none of the competitors can offer this. So their coverage has really a lot of gap.

[Luciana Ferreira, executive]

Next quick shift comes from Alina she wants to know why does the chip not work on so many of the cell phones? Why is there any problem that we can fix technologically. So I think it will be interesting to explain again what the [indiscernible] was of the check.

[Unknown Executive]

Samsung had some cell phone models or Motorola models, which were sold 4, 5 years ago and 10 Motorola phone -- sorry, Samsung S10. Percentage of the models like this represent 2%, 3%, and I'm not going to reengineer any updates for the software of these phones or this just device, but doesn't even update. If it doesn't update, then it won't work for Brisa. Could work just with the data plan, but you can't portability, you can't do SMS that -- so you have to -- it only works with the data plan.

So clients don't want to migrate just with that cellphones that don't work are the older so 2-, 3-year-old cell phones where there's more volume and every manufacturer in the Brisa had 200 in this network where there was only -- we Brisa more than 1 million accesses. So our clients are accessing more than 1 million accesses on the app. Brisa's very successful, and we have more than 2,000 models of cell phones. About 200 of those models are covering 90% of the population. Of those 200 models of cell phones, 40% of those are those older models, which don't talk or dialogue well for the network. Some cell phones, then there's a [indiscernible] area where some cell phones work, if the chip is correctly installed and then the client works somewhere, but it doesn't work. roaming doesn't work and our clients need to work anywhere they go, being on the Brisa network.

When they leave the Brisa network, then they need to use roaming and use -- is telco network, but there may be models where this function doesn't work. So that is our concern with this negative experience of these older model cellphones that don't adapt well. That's why we're only selling to the models where the manufacturer, in fact, updated the software, but there are going to be many models maybe 20% to 25% where manufacturers are not going to update software, and we will be able to reach those clients. We need to wait for them to update their phone because it's a natural process. Cellphones cost about BRL 800 where 5G works. So there is a trend for the consolidation of these clients even low income of families changed their stand cell phones are the most desired item in the world.

So even if you're receiving both family grant -- family welfare you still dream of changing your cell phone and you will as soon as you can. So if you are able to do 5G with Freeze, then you'll get more gigs than you're getting when you pay for 4G. So for these 2 years, over the next 2 years, we think that this 40% may drop to 25% as people change and uptake their phones as manufacturers decide to update their software, we keep pressuring them, obviously. We pressure the regulating agency in Brazil. So they pressure the manufacturers that they need to update their software and that the software -- the cellphone companies can hold their users' hostage by updating their software. Some people don't want to update their software and some people can update their phone. But we're talking, if we already dialogue well of 60% of these cell phones after one year of 10% of the share for Brisa, that's a good number.

It takes a while for cultural shift for cell phone shift trends over the next 2 years are more manufacturers updating their software and more people changing cell phones for new phones. So that's probably when we'll see the numbers improve a lot.

[Luciana Ferreira, executive]

Thank you very much. Eric wants to know if Reza is concerned with new technology, new data technology, like, for example, satellite Internet.

[Unknown Executive]

Eric, I think we've talked about this quite some time now. Satellite like Starlink, which is the most [indiscernible] , they have about 6,000, 7,000 satellites and may reach up to 40,000 satellites. All of that is to reach the most remote parts of the planet. They will be the greatest operator in the world. They will be successful, but it won't impact any of the rural reach and users. So the cost today, which is being studied -- it's still more expensive than a small internet provider can offer in regional and rural regions.

Brisa fiber plan is obviously highly superior. There are plans in about BRL 80 at about BRL 80, which are much higher much superior to starting. StarLink also needs to find a corporate market, better market use capacity more. So let satellite, we'll never to deliver into the capital. The capital like Fortaleza cannot be reached or have 40% of its shares from satellite. We can't concentrate. We can't have enough -- they wouldn't have enough spectrum for all of those users offering the same quality. So satellite technology has its place, but it was used -- it was created for a more pulverized 200-kilometer on service reaching out in a more pulverized way. So if we're looking for a lean millions and millions of satellites, you'll still have problems and you won't be able to deliver.

So one doesn't substitute the other. Starlink takes Internet, it will be a massive obviously, company and then plan it and take Internet to remote places, but it won't impact providers. Internet providers will always have their place. In fact, we think that it may even help us to reach into very remote areas through Starlink, but today, it's too expensive. Even the corporate Starlink of theirs is expensive. [indiscernible] to have 60, 70 gig. The corporate world StarLink is always selling little gigs at a very expensive price. And in the future, it will be maybe a backup, maybe a redundancy, global redundancy. But as a massive use in big cities, it's not possible to think of starting. And then the interiors also fiber networks are present everywhere.

[Luciana Ferreira, executive]

Okay. I'm going to join 2 questions here, which arrived from Vinicius and Alexandre, they are very much correlated. So the question about CapEx for 2019, 2025. And if there is any feeling on EBITDA net debt where the CapEx for the fourth quarter is lower than the fourth quarter?

[Unknown Executive]

We see investment of BRL 800 million by 2026. We're not making full predictions yet prospects of investment, but our trend is that this will be slightly higher than 25% on a global level than what we saw in '25 on a global level and about the level of indebtedness, it does increase 1.74 million is not the largest number we will see in the 24, 25 interval. So we'll see the increase of debt it grows within Panorama, the company definitely supports and definitely makes sense. So we don't have a specific limit with that. We still have room -- wiggle room for our debt covenants. So we think that over time, the [indiscernible] will go down. We had a debt with a cost which was lower than CDI. And I hope that we will be more efficient through 2025 and reducing the cost of debt. as we have in the past done and also broadening over the last 15, 20 years. The debt that Romeo just mentioned are 15, 20 years, a lot of them with at 3% a year.

So Brisa is a company that is in this part of the Northeast of the country. synergizing the policy plans of bringing infrastructure to the most remote regions. So we have this trend to capture more resources and like Jomari mentioned, even though we can't reach 3.5%, we have our Brisanet commitment of not always thing as close as possible to 2. So it's always time for Brisa to connect the results. We have already made large investments and we continue hearing about the response of revenue of having to initially invest highly into Brisa's network. We understand it was a heavy investment. We understood it would happened it was planned for visiting moved forward more quickly than was expected, so that this larger lung of network, but then it does decrease also. So we're always going to look closely at the investment that was realized and what is happening. So in the future, when Brisa looks at and sees that investment will accelerate that if there is a scenario in the future, we do so. So always a concern of not exaggerating in terms of debt always looking at CapEx versus the revenue.

[Luciana Ferreira, executive]

I have 2 last questions. I'm just going to put them all together here. Just to remind you, if you want, you can ask Q&A. Paolo was asking about -- it says you're born in moving into the interior, you strengthen local economies. And today, when we look at the trend of big operators diversifying their offers, microcredit, et cetera, and other partnerships, how does Brisa assess these new revenues of its current client base? Are there any specific sectors that the company sees as potential to make up its portfolio?

[Unknown Executive]

So Paolo, Brisa has in its DNA ever since the beginning, only connecting -- so only connecting one company fund products, one product, broadband. Today, our menu has dozens of products and Brisa's going to try to strengthen. We have the most well-structured network in the Northeast and there is no company where we have 5 to 6 cables in all of these cities. And it's an infrastructure where Brisa makes it possible for -- to reach the doorstep of every company not only offering the best broadband but what is coming to the future. So it's on this we start moving into the set of products in a more competitive way.

Today, we have 288 many data centers. If we look to the future, the content needs to be more and more -- is to be closer to users. So 5G and the reality of 5G and its low latency and AIA, which will demand that between devices I'm count. So we're preparing for all of that. Today, Brisa has a lot of services, not only in the capital but also in the interior. So moving into house and bringing everything that household needs, all of the demand that they may have. Transfer it through something that we call fiber and 5G. So all of those -- that technology will transport technology products. So in the future, maybe a house, may be a home, maybe our client for 10, 15 products, and that's what we're strengthening. We have our DNA of moving into houses of our technicians that are not outsourced and those experts are consultants regarding what the house needs and what the house is offering, same as small companies.

Today, small companies are outside of the cybersecurity world. So cybersecurity is only in big company. So the rest is all vulnerable, and we are starting to structure the company for the B2B world. And for products, dozens of services also providing residence. So we have telemedicine today being offered. We have breezes music platform. Netflix, global play outsourced platforms, partner platforms that we all that we bring to you already with a profitable negotiation. So Brisa will always be forward-moving when compared to the rest of its competitors and the amount of services that are running on the network. Brisa, as we'll build the tracks of the train, the train cars, which are services we want to participate in services that are running along those trails and today have a very big barrier, those products are not going to small companies

This has been launched around the world. There's a huge amount of solutions. But this is missing around the world. So the trend is that these solutions will be implemented online until they make it small business. So this is very competitive and which big companies don't do what we do today, they will be left outside the market. So we are leading the way We will keep our DNA always having one foot in the capital, one foot in the interiors. That is our DNA interiorizing technology, bringing it into the deep regions of the country but also having a strong presence in the capital.

[Luciana Ferreira, executive]

There's another question here from Jefferson cost of expansion, 5G and 4G network has impacted our profit in the next -- last quarter. So is there a clear plan for how people for how the company will compensate this on margins and profit margins over time. How does the company intend to control these costs without losing quality.

[Unknown Executive]

Jason, I think I've already commented with that, and what will happen into people reached -- there's just a lot of towers. These towers are already included the cost of investment in CapEx, it's the energy and our let mills go up every year, rent goes up. So there has been pressure on OpEx to keep all of this running to have enough people maintaining this sustainability or the base for the business collaborators that were hired to sell and have had a delay. The volume that we hired until it makes up its productivity.

So all of this cost is already included. It's calculated, it's covered. So in the next month in 2025, throughout 2025, when Brisa is creating revenue for these 9 million inhabitants new revenue then automatically results will improve. So all the results should improve. But we're just not including numbers but we will understand that the results will improve as we improving sales to build that base.

[Luciana Ferreira, executive]

Thank you. I have no further questions in the chat box. No one else if they're hand raised. So I think that with that, I will pass to Roberto Renato seebeck. Thank you for coming. Thank you for asking your questions, for the chitchat about what the company is going through about our numbers and new things. And we're here to answer your questions by e-mail. I just want to thank everyone for coming. Thanks for following Brisanet closely.

[Joao Nogueira, executive]

We all need to understand that with a huge challenge. For a company to move forward in such a short time and set up a mobile operator, the way we're doing it without outsourcing, creating a network, et cetera. There is a very competitive upper hand to that, and we are building all of that with a reduced cost once we implement that -- the from rents, the format, the approach in every tower approach by our teams and where all of this fiber is already in the OpEx of fixed broadband and it's a different model.

I look around the world, I don't see anything similar to Brisanet an outlier -- sometimes the market has these questions because they're like, "Oh, there are so many small providers around the world. We're totally sure that present will be a big company in mobile. It's just a matter of time. We have a series of hurdles to leap that we didn't have with fixed broadband, but that will be there. And we will solve year-by-year. So we have to solve quickly SMSs, 1-year problems with [indiscernible] where we had to solve this with hundreds of companies. I have to talk to hundreds of companies about the SMSs working. This was already said done by hundreds of companies, not centralized, not controlled -- even our barriers are always being sent to the regulatory agency that should be under the radar of the agencies and the world we're undergoing right now is the real, really wild. We're solving these barriers.

And for other colleagues in other regions that are doing some other way, building their networks. Everyone who's falling behind will find a path that we have trailed before them, a highway that we have built allowing the sector to understand Brisa, to value the network we've built our unique network, our -- which is our own network. It's not outsourced. The know-how is in-house. It's robust. It's very high potential and Brisa has a huge capacity to reach the B2B market from small to large to more competitive pricing than any company that as capital as ours. So those are the points that need to be valued and understood today. Shares are much lower than company's net value, and we hope that, that will improve over time. And we'll have a better reaction from the public. But I understand that the market has its rhythms, the market needs Brisa to show numbers. So we're in that transition phase.

Numbers are going to get more clear over time. We're going to understand where everyone can project into the future with the new data, we're going to feed into them month by month. Thank you.

[Luciana Ferreira, executive]

Thank you for coming.

[Statements in English on this transcript were

Spoken by an interpreter present on the live call.]