Telefonica Brasil SA

BOVESPA:VIVT3

Earnings Call Analysis

Rayonier's Optimistic Financial Forecast

Rayonier reported $202 million in sales for Q3, with operating income of $35 million, net income of $19 million, and adjusted EBITDA increasing to $79 million from last year's $65 million. Full year adjusted EBITDA guidance is expected at the higher range of $275 to $300 million. In different segments, they predict at the higher range of $150 to $155 million for Southern Timber and $39 to $46 million for the New Zealand Timber segment. However, Pacific Northwest Timber adjusted EBITDA may lean towards the lower end of $30 to $34 million due to market headwinds.

Highlighting Financial Performance

The company reported $202 million in sales for the third quarter, a notch above with an operating income of $35 million and net income attributable to the company at $19 million, breaking down to $0.13 per share. Despite stable earnings, there was a dip in Cash Available for Distribution (CAD) to $114 million compared to the prior year, primarily due to a lower adjusted EBITDA combined with increased costs, such as higher cash interest paid and elevated capital expenditures.

Solid Timber Segment Performances

In the Southern Timber segment, Adjusted EBITDA was slightly up at $38 million, driven by higher volumes and non-timber income, offset by lower pricing and increased costs. Unfortunately, market conditions, especially for pulpwood, have been quite challenging this year. The Pacific Northwest Timber didn't fare as well, with Adjusted EBITDA down $5 million due to lower volumes and stumpage realizations alongside higher costs, whereas the New Zealand Timber segment saw an $8 million rise in Adjusted EBITDA, boosted by higher carbon credit sales, despite facing the obstacle of unfavorable foreign exchange impacts and reduced export sawtimber prices.

Real Estate's Strong Quarter

The Real Estate segment shone with $31 million in sales over approximately 4,300 acres, averaging a robust $5,800 per acre. This demonstrates a healthy demand for the company’s property offerings.

Positive Outlook and Guidance

Looking ahead, the company is on track for a sunny forecast, anticipating the higher end of its full-year adjusted EBITDA guidance, between $275 million to $300 million. The Southern Timber segment is expected to end the year on a high note, aiming for the top range of its $150 million to $155 million target. Conversely, the Pacific Northwest Timber segment forecasts adjusted EBITDA leaning towards the lower end of $30 million to $34 million due to continued end market softness. The New Zealand segment hopes to capture gains at the upper end of the $39 million to $46 million spectrum, with Real Estate slated for a fruitful finish in the $90 million to $100 million range.

Strategic Debt Management amidst Market Conditions

In an environment of rising interest rates, the company is intent on maintaining a lower leverage profile. This resolution mirrors the stark contrast between private market values and public market valuations, which significantly differ currently. Additionally, a significant debt reduction strategy is in play with the retirement of $150 million in floating rate debt expected immediately upon the completion of an asset sale.

Advancements in Land-based Solutions

The company isn't standing still in innovation, forging ahead with negotiations on carbon capture storage and solar projects. They've expanded their solar footprint by 2,000 acres, now covering approximately 28,000 acres in solar projects, signifying a clear stride towards land-based solution initiatives.

Capitalizing on Asset Sales

A recent transaction is poised to yield a substantial gain, reflecting the company's smart asset management. Although the gain won't mirror a book gain due to the assets being part of a pooled portfolio, it highlights the company's aptitude in investment and disinvestment strategies.

Earnings Call Transcript 2021-Q4

[Operator]

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Telefônica Brasil Fourth Quarter of 2021 Earnings Conference Call. Today with us, representing the management of Telefônica Brasil, we have Mr. Christian Gebara, CEO of the company; Mr. David Melcon, CFO and Investor Relations Officer; and Mr. João Pedro Carneiro, IR Director.

We also have a simultaneous webcast with slide presentation on the internet that can be accessed at the site www.telefonica.com.br/ir. There will be a replay facility for this call on the website. After the company's remarks are over, there will be a question-and-answer session. At that time, further instructions will be even. [Operator Instructions]

Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the company's management beliefs and assumptions and on information currently available. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the company's future results and could cause results to differ materially from those expressed in such forward-looking statements.

Now I will turn the conference over to Mr. João Pedro Carneiro, Investor Relations Director of Telefônica Brasil. Please proceed.

[João Carneiro, executive]

Good morning, everyone, and welcome to Telefônica Brasil's earnings call for the fourth quarter and full year of 2021. Today's call will be divided in 2 parts. First, our CEO, Christian Gebara, will present Vivo's main financial and operating highlights as well as an update on the digital ecosystem and ESG initiatives. Then our CFO, David Melcon, will give you more information regarding our cost and CapEx structure, net income, shareholder remuneration and free cash flow. Now I pass it over to Christian.

[Christian Gebara, executive]

Thank you, João. Good morning, everyone, and thank you for joining our earnings call. On Slide 3, we started with the main highlights of a quarter that closed 2021 on a very positive note. In the fourth quarter, we achieved our largest ever customer base with 99 million access as our postpaid reached the historical mark of 50 million customers, while the homes connected with FTTH soared 36% year-over-year to 4.6 million, with Vivo registering over 1.2 million net additions in 2021, 37% more than in 2020. Our strong operating performance allow us to unlock positive year-over-year evolution across all lines in the fourth quarter '21 as we were able to grow total mobile services handset and fixed revenues as well as EBITDA, net income and free cash flow.

On the revenue side, the fixed services grew 0.8% year-over-year, confirming that we were able to refer the negative trend that for several years pressure the top line of this business, with our core fixed revenues increasing 13.7% year-over-year, driven by a 31.2% growth of our FTTH revenues. In mobile, our revenues expanded 3.7% year-over-year in the quarter with handsets up 8.8% and services growing a solid 3.1% led by the acceleration of upsells within our customer base and improved postpaid portability figures. Our EBITDA grew 1.2% year-over-year in the fourth quarter of '21 as our revenue acceleration was able to offset impact stemming from double-digit inflation recorded in 2021. As a result, EBITDA margin stood at 42.9% in the quarter.

Finally, as our bottom line for the quarter doubled in comparison to fourth quarter '20, we were able to register a net income of BRL 6.2 billion in 2021, up 30.6% year-over-year, which will be fully distributed to our shareholders. On top of that, we bought back BRL 500 million of our shares during the year, leading to a treasury position of 14 million shares by year-end, which were canceled in February 2022.

Now moving to Slide 4. In the fourth quarter '21, our total revenues expanded 2.8% year-over-year, driven by the 6% increase seen in our core business revenues, which represented over 90% of our top line in the period. Our complete and up-to-date portfolio of connectivity and digital services solutions, which is fully meeting the demands of our B2C and B2B customers, has been generating top-notch results and will continue to drive our business forward over the next quarters and years.

Let's move to Slide 5, where we detail the evolution of our mobile revenue in the quarter. In terms of mobile services revenues, we had our best fourth quarter performance since 2017, with an expansion of 3.1% year-over-year. While we were able to maintain prepaid revenues flat over fourth quarter '20, our postpaid business expanded 3.9% year-over-year, led by the rational value-driven approach towards our offer portfolio and increasing customer base.

As a result, postpaid accounted for 81% of our mobile service revenue in the quarter, a very valuable asset in periods of high inflation since we have historically been able to pass through inflationary effects to our postpaid customers on an early basis. In handsets, we're able to grow revenues by 8.8% throughout the year in fourth quarter '21, positively impacted by successful Black Friday and Christmas campaign. As a result, our total mobile revenues expanded 3.7% year-over-year in the quarter.

On Slide 6, you can see that Vivo closed another year as a mobile market leader with the highest share in total postpaid and prepaid lines. Our reinforced leadership resulted from a 6.9% year-over-year increase in our -- of our mobile access base that led us to register our largest ever number of mobile customers, 83.9 million. The growth came mainly from our postpaid base that expanded 10.6% year-over-year while our prepaid lines grew for the second year in a row up 1.9% versus 2020.

On the right-hand side of the slide, we highlight some interesting aspects that underscore our solid operating mobile performance in 2021. Even though we increased hybrid plant price in the third quarter '21, our fourth quarter postpaid churn remained quite stable at a low 1.3% per month figure, up only 0.1 percentage points versus the previous quarter. The hybrid price increase not only helped in unlocking a positive revenue performance, but also prompt part of our users to upgrade their plans to our pure postpaid offers as seen by 87% year-over-year increase in hybrid to pure postpaid upsells in the quarter.

Moreover, our premium value proposition of innovative offers aligned with customer demand for connectivity and digital solutions, as perceived by 1.3x increase of data consumption in 2021, allow us to register in the fourth quarter a number of postpaid net adds coming from other operators that was 3x higher than in the fourth quarter of the previous year.

Moving to Slide 7. In the first 2 months of 2022, both Anatel and CADE approved the transaction involving the acquisition of assets for OI's mobile business by Vivo team and Claro. This will be a transformation operation for the Brazilian telecommunications sector, allowing for an overall improvement of quality for mobile users, especially those coming from oil network while enabling the creation of a fiber infrastructure player. The closing of the transaction is expected to happen over the next months with Vivo committing to pay approximately BRL 5.5 billion fully funded with our own cash to acquire a portion of access comprised of 43 megahertz of spectrum, around 10.5 million mobile customers and 2,700 sites. Over the coming weeks, we will keep you posted on the next steps and synergies we plan to capture from this deal.

On Slide 8, you can see that our core fixed revenues expansions, which stood at 13.7% year-over-year in the fourth quarter '21, allowed our total wireline revenues to grow for the second consecutive quarter at a 0.8% pace, consolidating the turnaround of a business that represents 1/3 of our top line. All 3 components of our core fixed revenues grew at a double-digit rate in the fourth quarter '21. FTTx expanded 10.4% year-over-year. IPTV was up 13.3%, while data, ICT and digital services increased 19.5%.

As a result, the revenues stemming from our core fixed products already represent over 70% of our total fixed revenues, 8 percentage points above the fourth quarter '20's figure. We're certain this ongoing shift in mix towards higher quality and value-added products will be the driving force behind accelerated revenue growth rates to be achieved over the next periods.

Going to Slide 9, you will see that the revenues coming from our fiber-to-the-home network closed fourth quarter '21 at over BRL 1.5 billion, representing 13.3% of the total revenues Vivo registered in the period after expanding at an average pace of 35.8% per year from 2019 to 2021. Our FTTH broadband continues to excel as the demand for high-speed connectivity remains as strong as ever. In fact in the fourth quarter '21, the average speed of our FTTH customers was 188 megabits per second, an increase of 77% year-over-year as half of our growth debts are currently coming from customers buying plans with speeds at least 300 megabits per second.

Moreover, fiber adoption should be further sped up by the recent launch of our fully convergent FTTH plus mobile postpaid plan, Vivo Total, that offers attractive benefits to clients that want to enjoy the best, most reliable data experience in and out of their homes. As a result, we are poised to continue posting strong revenue performance in fiber were to be further enhanced by the price up that we plan to implement during the year for our FTTH customer base.

On Slide 10, we show the evolution of our fiber home pass and home connected numbers, keeping Vivo on track to hit the 2024 target set for the FTTH business. We closed 2021 with 19.6 million homes passed with fiber by growing our network to 3.9 million new premises increasing our footprint 25% year-over-year. This robust expansion allowed us to register our highest ever number of FTTH net adds over the course of the year with 1.2 million new users added to our base, which now composed of 4.6 million access, growing 36.4% year-over-year.

As the year-over-year expansion of our user base exceeded the footprint growth in 2021, we were able to accelerate our FTTH take-up rate by 2 percentage points to 23.5%. We intend to reach by the end of 2024, a take-up rate of around 30% over the 29 million home passed we plan to have by then, thus leading us to set our target of almost doubling our FTT user base in 3 years. The footprint and user base growth will come not only through our organic efforts, which we continue to commend our fiber deployment, but also from FiBrasil, we should see an expansion of some 4 million homes passed over the 2022, 2024 period. This will lead us in our [indiscernible] vehicle to triple the number of HPs it had by the end of 2021, allowing Vivo to tap into new markets outside the state of Sao Paulo.

Moving to Slide 11. Last quarter for the first time, we disclosed information about our B2B digital services that have been one of the main drivers behind our improved top line performance. Now we update the numbers and give additional information on cloud and digital solutions. We ended 2021 with BRL 2.1 billion in revenues coming from the sales of services, including in our digital B2B portfolio that is composed by cybersecurity, cloud, IoT plus messaging and digital solutions as equipment. This amount grew 46% year-over-year, representing almost 5% of our annual revenue base.

A significant part of the growth came from the sale of cloud services. We registered around BRL 600 million in cloud revenues during 2021, which nearly doubled in size on an early basis. We provide our B2B customers with solutions from the main players in the cloud service landscapes such as Microsoft, Amazon, Google and Oracle.

In addition, in 2021 we had our revenue coming from digital solutions and equipment growing 29% through the year, reaching BRL 780 million. Vivo counts on a large range of suppliers that fully meet the IT demands of companies of all sizes, enabling us to be a one-stop shop for those investing in the modernization and digitalization of their businesses.

Now moving to Slide 12. Here, we update you on some of the initiatives we have been developing to address the digital service opportunity on the B2C side. I started with our entertainment vertical in which we partner with main OTTs available in the market, such as Netflix, Disney+, Amazon Prime Videos, Spotify and Tidal to complement Vivo's customer experience and access to content. We ended 2021 with 1.2 million subscriptions through Vivo of OTT content platforms, growing the number of access by 79% year-over-year. This includes both bundled subscriptions through our Vivo Selfie and FTTH plans, and stand-alone purchases.

In health and wellness, we just completed the rebranding of our Vivo Meditacao app, which is now called Atma. With low investment in markets, we were able to achieve 150,000 installations of the app, exclusively by leveraging Vivo's customer base. We plan to go further and rebranding of the first step to accelerate the adoption of this app.

In financial services, our 100% digital personal loan service, Vivo Money, drove the mark of BRL 13 million in credit considered to our mobile customers with originations and number of contracts seeing strong uptake year-over-year as we include part of our prepaid users within our targeting base.

In education, we took another significant step in our partnership with Anima Educacao by signing the contract for the constitution of a joint venture that will provide a live long learning platform with digital education courses focused on employability contributes to the development and improvement of the living conditions of its students.

On Slide 13, we present some highlights regarding our proactive approach to ESG-related topics. On the environmental front, we ended 2021 with over 9 tons of electronic waste collected at our point of sales, contributing to the safe disposal of those products. Moreover, we ended up the year with 21 active renewable net energy power plants on track to achieve the goal of 83 plants by the end of 2022, helping us reducing 19%, the number of CO2 direct emissions on an early basis.

Regarding diversity, we continue to move forward in increasing the representation of multiple groups within our workforce. By the end of 2021, 29% of our leadership was composed of women, looking more broadly of our total workforce 30% of our employees are black, while 4% are also declared to be LGBTI+.

We also play an important role within Brazilian society, not only by providing connectivity and stimulating the digitalization of the country, but also by sponsoring education from our Fundação Telefônica Vivo, which benefited 2.7 million people in 2021 with investments of more than BRL 64 billion. The efforts we take towards growing sustainably and with great emphasis on enhancing social quality through representation and education yielded us with a series of acknowledgments, both on local and global basis.

Locally in B3, we ranked as the third company with the highest score among all easy applicants, while also being the only telecom company chosen to be part of the newly created Great Place To Work index for our segment. In addition, we became part of a Bloomberg's Gender-Equality Index, while being the best Telco in LatAm and participating for the second year in a row in the S&P Global Sustainability Yearbook.

Now I hand it over to David to take us through the financial highlights of the quarter.

[David Sanchez-Friera, executive]

Thank you, Christian, and good morning, everyone. On Slide 14, you can see that we were able to maintain our costs under control in the fourth quarter with a 4% year-over-year growth during a period with a double-digit inflation.

Costs with service and goods sold that are enablers for many of the products and solutions we offer grew 15.9% year-over-year. The increase of this portion of our OpEx, which already represents 36% of our total expenditure is impacted by the fact that we have been able to accelerate our revenues coming from digital services and equipment, thus enhancing the monetization of our connectivity platforms.

On the other hand, our cost of operations, which represent 64% of our OpEx in the fourth quarter 2021, show a year-over-year decrease of 1.6%. Here, we have optimized customer-related expenses such as call centers, collection and bad debt, rely on the benefit of the ongoing digitalization of processes and points of contact. These efficiencies help us to more than offset higher costs with personnel, infrastructure and commercialization that have been impacted by high inflation, increased network usage and successful commercial activity.

Moving to Slide 15. Here, you can see that the fourth quarter, we post a 1.2% year-over-year increase of EBITDA to BRL 4.9 billion, achieving a 42.9% margin, supported by our core revenues expansion and by our efficient cost control. On an annual basis, our recurring EBITDA grew 1.7% year-over-year to BRL 18 billion with a margin of 42.9%.

Now going to Slide 16. In the fourth quarter, we invested BRL 2.3 billion, excluding licenses. This represent 20.3% of the revenues registered in the period, taking our total investment for the year to BRL 8.7 billion or 19.7% of sales. Our CapEx was mainly directed to growth and transformation projects supporting our FTTH footprint and customer-based expansions, our superior mobile quality and capacity and the modernization and optimization of our IT systems and platforms.

In addition, in November 2021, we participated in the auction for the acquisition of 5G frequencies. We acquired blocks on the 2.3, 3.5 and 26 gigahertz frequencies that will support the development of our 5G network on an nation-wide basis. Apart from the coverage obligations set by Anatel, which will be accounted as business as usual CapEx over the next years, in the fourth quarter, we booked an extraordinary CapEx of around BRL 4.5 billion composed of BRL 900 million related to the reserve price paid for the licenses that will be paid in the next 20 years and BRL 3.6 billion attached to the contribution to be made to the entities that will be responsible for the implementation of certain goals defined by the regulator and to be disbursed between 2022 and '24. 5G will certainly bring relevant opportunities going forward. And as mobile leaders, Vivo will be on the forefront when it comes to the provision of services and solutions enabled by this technology.

Moving now to Slide 17. In 2021, our net income grew 30.6% year-over-year to BRL 6.2 billion. Apart from the improved operational results, the bottom line was positively impacted by the recognition of our tax assets in the amount of BRL 1.4 billion, arising from a Supreme Court decision that defined as unconstitutional based incidents of income taxes over monetary updates received from past tax refunds.

Our robust net income allowed us to propose a shareholder remuneration of BRL 6.3 billion by means of dividends and interest on capital distribution based on 2021 results. This led to dividends per share of BRL 3.7 with a 7.7% dividend yield. In addition, during 2021, we invested almost BRL 500 million to buy back our own shares. By the end of the year, we had 14 million shares in treasury, which were canceled in February 2022 as approved by our Board of Directors.

Considering the value that we disperse to acquire our own shares, our dividend plus share buyback still reached 8.4%, reinforcing our strong shareholder remuneration profile between the telecom landscape. To help maintain the high level of returns to our shareholders yesterday, we announced the launch of a new share buyback program for the next 12 months.

Now turning to Slide 18. In 2021, we generated BRL 7.4 billion of free cash flow after leases or 16.9% of our net revenue, surpassing our net income result by BRL 1.2 billion. As a result, we closed the year with a free cash flow yield of 9.2%, putting us in a very strong position to fund the acquisition of Oi mobile assets, invest in 5G and a step up shareholders' remuneration. As such, even after booking BRL 4.5 billion in debt with Anatel related to the acquisition of frequencies, we closed the year with a net cash position at leases of BRL 500 million.

Thank you. And now we can move to Q&A.

[Operator]

[Operator Instructions] Our first question comes from Bernardo Guttmann, XP.

[Bernardo Guttmann, analyst]

I have 2 questions here. The first one about the deal with OI, what can we expect in terms of synergies now with the deal approved? I was wondering if you guys could give us some color in terms of numbers and the speed of capturing these synergies? And my second question is related to network sharing with TIM. How is the project evolving? And what we can expect in terms of OpEx and CapEx of guidance this year?

[Christian Gebara, executive]

Bernardo, it's Christian. Okay, I will try to answer both of them, okay. So on the deal with OI, we need to wait for the closing of the transaction to give you more color on the synergies. What I can try to anticipate is first, as you know, we have a very good track record in executing capturing the synergies. Now we did that before with the acquisition of Vivo and also with the same base with the acquisition of GVT. What we believe here, the synergies now, most of them will come from cost and CapEx optimization [ now because ] you're going to leverage, now whatever that what we have already, Vivo not only in the channels, but also in the network.

Now in the channels, we believe that we could serve these customers in a more cost-efficient way, especially because we have deployed and developed digital channels in a much more advanced way that they currently have with the current provider. In the network, considering that most of the clients that we are capturing from this transaction will be in the Northeast region. We have the largest and a better quality Internet mobile network in the region. So we could easily offer these customers a much better service in a very cost and CapEx efficient way.

If you add to that, that you're going to have also more frequency and the optimization of the usage of these frequencies blended together of the frequency that we already have will enable us to offer a very good quality and services in an efficient way, not only in the regions where we capture the customers, but also in the whole national presence because, of course, as you know, there is portability of some customers that will come to Vivo anyway.

So tower management is another way that we could also capture some synergies here. And the CapEx avoidance, especially as I said before, of the usage of more frequency. So that's more or less what we believe in timing, as the synergy should -- as integration should happen very rapidly in the short period, we've been getting prepared to do so. I think we could unlock no part of the synergies already in 2022. And as soon as we get to close, we could give you more color on that.

Your -- can I move to the second question, Bernardo, the second question.

[Bernardo Guttmann, analyst]

Yes, please Christian. It's related to the network sharing with TIM.

[Christian Gebara, executive]

Yes. So as you know, there are different fronts in the rent sharing with TIM. The 4G coverage that was the first one and that may be a very important one that we could expand our 4G in places where they are present that we are not and the same with them. Now they expand their coverage in places where we are present, and they are not. We did that already in 716 cities, now approximately half of it per operator. So I now have 360 new cities where I have coverage that did not have and TIM has coverage in 36 cities that they didn't have in the past. That's the first, and that's evolving well, and we may see more cities in the future.

In the single-grid model, that is when cities with less than 30,000 habitants that would offer the full -- we would illuminate the full frequency for both operators in the same tower. We already did that in 50 cities, 25 each. That's a pilot. It's more complex than the first one because now you're going to start offering something from your infrastructure to the other operators' customers. We did that. The pilot went well, and we are now mapping out the next steps. The potential that we see here is to implement in 1,600 cities, now and we may do 25% of it this year.

But again, we want to assure that the quality and experience of our customers and TIM's customers are the same when we do this rollout. And the third front is a true network 2G network shutdown, there is a lot of cost efficiency here and also the refarming of the frequency that can be used to other technologies, we expect to start it in 2022. It was a little bit delayed because we had some like systems development to do in IT in both companies to make it happen. And here, the potential is also very high. We could shut out all the 2G network in a few years. We are not giving a specific number. But in the 3 fronts, what we are doing here is either getting coverage that we didn't have or combining CapEx savings with CapEx [ advances ]. That is what I can share with you right now.

[Operator]

Our next question comes from Marcelo Santos, JPMorgan.

[Marcelo Santos, analyst]

I had 2 questions. First, if you could comment a bit on the outlook for the 3 mobile services in the year of 2022 and how the competitive environment is shaping? And the second question is regarding -- there was some deceleration in the fixed core revenues, including fiber-to-the-home and IPTV when you compare the third quarter growth with the fourth quarter growth. Could you please elaborate a bit more on that? And is that something sustainable or not?

[Christian Gebara, executive]

Marcelo, thank you for the question. The first one, the competitive environment. I think competition is still very, very strong in our market. It's a very competitive market. I don't think it changes anything with the acquisition because, as you know, the 3 players, they've been more advanced in the coverage and technology deployment, especially in 4G. So competition is still there. It's more rational in some services. Now we see -- now we are trying to move price up as we did in the third quarter of last year in the hybrid and in the pure postpaid. Some other operators follow us, maybe not at the same pace, but in a way, in a more rational approach.

In the prepaid, it remains more or less the same. We are trying to move either price up or trying to upgrade customers to biweekly offers with more data and with more ARPU or migrating them, it's due to hybrid. As you could see, we were very positive numbers also in the hybrid migration. So I believe that's the trend. I think there is inflation. We should be increasing prices as we did, and we did that in the mobile and we will do that in the FTTH as well.

Going to the fixed question, the first good thing is that our fixed business is doing pretty well. If you consider the growth that was 0.8% combined is the second quarter in a row that we are increasing the fixed revenues. So as I said in the beginning of this presentation today, what we call non-core that includes fixed, xDSL and FTTH, represents less than 10% of the total revenue of the company. It's still decreasing 20%, but it's not a very relevant when you consider the whole scenario of the fixed.

In the fixed FTTH, we in the previous quarter, we had much more aggressive in promotions. In this last quarter, we were not. So we keep prices and we are trying to drive customers to 300 and 600 megabits with a price point that is higher than the price point of entry offers from our competitors, some of them local competitors that have been aggressive in 100 and 200 megabits. We continue to grow that it's important to highlight the absolute number of revenues in FTTH in a very strong percentage we are like 31% growth of FTTH, and we are expanding to more and more cities. So here, our objective is to keep absolute numbers growing.

Of course, we want to get as much customers as we can. We want to control churn. So the quality of the customers that we're acquiring is very important. And also, we are measuring ourselves in the lifetime value of the customers blending the mobile with the fix also Vivo Total that is our offer now for convergent offer plus the digital service that we are putting together with FTTH, in this case, the video -- the OTT videos that are being very successfully received by our customers is the strategy going forward. So continuing the strategy, growing absolute numbers, expanding to more cities and reaching the number that we set today [ net debt ] 29 million home passed in 2024 and a take-up of 30%.

[Operator]

Our next question comes from Fred Mendes, Bank of America.

[Frederico Mendes, analyst]

I had 2 questions as well. Maybe the first one, I think a follow-up from the first question about OI. I mean, you'd be great if you could at least give us a ranking, for example, which line you expect to be more relevant in terms of synergies, for example, first, I think that we can get there, but the impact from spectrum and the inspection and the impacts for moving from 4 to 3 players is very hard to calculate. So not sure if you can, but if you may, it would be great, just [indiscernible] of the highest importance to the lowest, I think would help a lot.

And then the second question about the FTTH, you reach 20 million as of 4Q and expect to be 29 million by 2024, right? Give or take like 3 million homes passed year less than what you added in 2021. And when I look at the homes connected, we saw a slowdown throughout the year. Obviously, it's still growing a lot, but I slowed down to the beginning of the year. I think the point here is it fair to say that the highest growth stage of the FTTH happened in 2021? Or do you think there is room to continue to boost growth to accelerate growth for the next years?

[Christian Gebara, executive]

Fred, this is Christian. As I replied before, no, it's mostly in cost and CapEx avoidance. I think the competitive environment, as you know, to follow it very closely. It doesn't change that much. We are talking here most of customers in prepaid and low postpaid or hybrid. I think we've been very competitive in the last years -- the 3 large players, considering that in the case of OI, the deployment of 4G was already very limited. They have the 700 megahertz frequency. So I don't think in revenues, it would be the line that I would highlight here and because of the possibility of being less competitive. I think the environment will continue to be very competitive.

And again, here, there is also the appearance of a stronger fiber player. So if you consider the market as a whole, I don't see revenues. As I said before, I think in cost and CapEx avoidance in cost because if you take a 10 -- around 10 million customers, most of them are in the Northeast, where we have the lowest market share, and we have the highest -- one of the largest Internet mobile network deployed. So we have capacity to receive all those customers. We have channel, we have stores in all the places that we want to inherit the customers. And we have digital channels to serve these customers in a most efficient way. So I think that's the line that I would highlight for you and avoidance of CapEx more related of having more frequencies that we bought not only the ones in the 43 megahertz that we acquired from Oi, but also the ones that we're acquiring the 5G auction. Going to the FTT -- can I go to the FTTH?

[Frederico Mendes, analyst]

Perfect. As for the second part…

[Christian Gebara, executive]

Let's go to the FTTH. I think we have to see the big picture of the market, now who is the winner and award like losing momentum in the market. I see Vivo gaining momentum. No, I think there are decisions -- I'm not measuring ourselves by the number of cities and number of homes that we deployed every year, it is much more our ability to retain customers and our customer base and to drive revenues up. That's our objective. And I think we've been pretty successful doing that.

So the number of cities, I think when we enter the city that we're going to enter organically or through Brazil, we'll be very well selected. We want to be the winners in the city that we enter, and I think that's what we are gaining and what we are getting in the last quarters. I think we are getting much stronger than competition in the FTTH arena. And the idea is to continue doing so. The number, the 29 million is a very good number of home passed in 2024. If we drive our customer base from 4.6 today to the number that I told before, that's doubled in 2024, that's also a very strong positive number. And what I want to measure here is the other things.

First is the ability for me not only to get these customers, we are going to get these customers in a very good price point, and that's driving ARPU up with more speed and more digital services together with the FTTH offer. And secondly, as I said before, is reducing churn, not only the FTTH, but reducing churn of the mobile customers. We are #1 in number of customers in postpaid and prepaid. And I think with fiber, we are in a unique position to be the #1 blending fiber and mobile together. So I think that's Vivo Total.

And again, with the digital services on top of it. I know there may be there is some [indiscernible] of our ability to drive digital services up. I'm showing some numbers in the B2B. We show more numbers in the B2C very soon. Today, I'm just opening up the 1.2 subscriptions that I have for OTT videos. This number is growing, net add is growing every single month. And we also show some numbers very soon in education, in the marketplace, in health as soon as we get a relevant figure to share with you guys. So that's the idea that we have for the future.

[Frederico Mendes, analyst]

Perfect, Christian. That's super clear. And if I may, just a follow-up. When you enter [ and see ] a new city, usually the app is slower, which makes a lot of sense, obviously. And then just want to know how long does it take for you to bring this up to what you have in your portfolio? I mean, you look at -- I have 30% in market share, once I have 40% market share or after 3, 4 years, you look on an individual basis. What is the analysis here to bring this up for the new cities?

[Christian Gebara, executive]

Yes, the cities are different, and the ARPU is also changing for the new cities that we enter and the competitiveness and also the speed that we are able to sell. I believe that the idea here as I said before, is we are driving speed up of the customers are much more in 300 and 600 as they were before. And we are also able to add digital services in most of our sales. That's also very positive.

And going forward for this year, I think the other weapon that we have is the convergent offer, and Vivo Total that now is 100% ready to be offered nationwide. And I believe that's also going to drive the combined ARPU up. So that's where we see the ability to do more. And again, we are trying to deploy also some more connected home devices at every place that we enter. So we want to be also positioned as a technology provider, not only with the fiber, but also with the connected home. So selling devices and also selling technical support to these customers. So there are many ideas that I believe we are going to drive the total ARPU up. But again, I will see much more customer ARPU because we will see with more combined and combination of fixed, digital and mobile.

[Operator]

Our next question comes from Vitor Tomita, Goldman Sachs.

[Vitor Tomita, analyst]

Apologies if any speaker already answered since I had a few connection issues on my side during the beginning of the call. So our first question would be, given that you have been able to increase shareholder distributions above historical levels, even with 5G investments and the Oi acquisition coming in. Could you give us some more color on how you are thinking of capital allocation when it comes to the sizing between increasing payout versus potential opportunities to do further CapEx, further organic fiber rollout, other M&A or things like that.

And our second question would be a quick follow-up on the B2C digital ecosystem. How quickly do you believe you would be able to roll out offerings like Vivo Money to users migrated from Oi who could maybe have a good seat with this service? And would you consider any smaller M&A deals, for example, with tech companies in order to accelerate the digital fraud?

[Christian Gebara, executive]

Vitor, I will start with the second question, then I pass it to David for the first question. Yes, of course, the Oi customers are targets for our digital services. We need to wait for the closing and then after the closing, there is a period of the 12 months that we will migrate customers from their base or our base. So it's -- there is no rush at the moment to offer the digital services to this customer, but of course, they're going to contribute. Now we are talking here that we already have in our mobile customer base, more than 83 million customers.

So we already have a lot to fish in for to distribute the digital services. And then if you add the fixed, we are talking about almost 100 million access, with the possibility to add digital services. So the idea here is to deploy in the different areas that I talked before. We are very positive about education. We just signed a JV with Anima and we are still waiting for the approval of CADE. And that's -- the target here is prepaid hybrid. And of course, the customers coming from Oi will be totally addressable in this type of service. Vivo Money as well. We said we gave a number here of BRL 30 million in loans already given to customers. And once we have also the Oi's customers, and we can address the credit record we're going to be able to offer to them.

Now we just started offering to our prepaid customers that we didn't do in the past. We started doing that in the top of the prepaid while we have more information, more data being successful doing so. And the same with Vivo Pay, health and the other areas that we are deploying. We are provider, we've been investing in some startups. We did that with [ Olivia ] that was later sold to a new bank. We did that with Gabriel that is an artificial intelligence company, very focused and security that could add to our value proposition for the connected home as I discussed before. We invested in Alicerce that is an educational platform.

But now as for more precise to your question, we may consider another vehicle to invest more or even acquire a company, if we believe it fits with the portfolio of digital ecosystem that we see, both in B2C as in B2B. So it's not out of consideration. In B2B, we count on Telefônica's tech, that's 3 companies that Telefônica launched in Spain, and then we launched as well here in Brazil, focused on B2B, cloud, IoT and cybersecurity. And through this vehicle, we can also access M&A. So M&A is not out of the question, but it needs to have the right bid or we could consider have a minor investment through Wayra or through a vehicle that we may deploy for Brazil, okay, so that's the -- I don't know if you have more questions for the second. Otherwise, I hand over to David for the first one in capital structure.

[David Sanchez-Friera, executive]

Hi Vitor, this is David. Thank you for the question. So at the end of 2021, we have [ BRL 6 billion, BRL 6.5 billion ] cash, and this will allow us to acquire Oi's mobile assets without impacting our future, particularly around shareholder remuneration. We look back to the last 3, 4 years, so we have a payout above 100% now you mentioned. And this -- I mean, we do not see any reason why this will change. And on top of that, particularly this last year, we have been very active on the share buyback program. So we acquired BRL 500 million shares in the last 12 months. And now we are planning to continue very active. And we -- yesterday, also we launched a new program. And on top of that, we are canceling 400 million shares that we acquired in the past. Now we show that we are very healthy on this front. So in summary, I think, I mean shareholder remuneration has been a priority for Vivo and this will continue also in the future.

[Operator]

Our next question comes from Arturo Langa from Itaú.

[Arturo Langa, analyst]

I just have one question and it's more of a housekeeping item. But for -- related to 5G for 2022, I believe you have around BRL 2.7 billion of obligations. I just -- my question is basically, how does that tie into CapEx. You have run the company at around 20% CapEx over sales over the past years. Should we think of that obligation on top of the normal CapEx commitments? I know you mentioned that we should consider some ongoing business CapEx. But just wondering how we should think specifically about 2022 CapEx, should it be a little bit higher than usual?

[David Sanchez-Friera, executive]

This is David. Let me start the question and then also, Christian, if you want to complement. So in 2021, so we book at BRL 4.5 billion, let's say, one-off CapEx to cover the price for the frequencies and also the implication that we have that has to do mainly about creating a private network also to connecting [ Amatonia ] and also to connect the schools. So out of this BRL 4.5 million, BRL 3.6 million have to do with those obligations.

So those obligations will not impact our future CapEx because it's already booked and also it's already considered as a financial debt. So this will not prevent neither our CapEx in the future, neither our debt because it's already considered no, so the rest of the obligation that we have, have to do more with business as usual. And so we have an envelope in line with what we had over the last couple of years. And this is what we will have to be able to continue deploying fiber and also to accelerate the 5G. So at the end of the day, we are talking about moving investment from 4G, quality on 4G that we have in the past. Now we are going to shift into 5G, but we are not expecting any additional investment because of this.

[Christian Gebara, executive]

So the 2.7 million, if you're looking off the slide, it was already registered that we said, and it's not part of the annual CapEx of this year, okay, that's different. Other obligations that are more related to business because this obligation that we highlighted here are the ones that are the EAF that is the Frequency Management Entity that we need to put funds to clean up the spectrum. There is also the building of the government's private network, and there is also the fiber network for Amazon. And that these are in the numbers that we just said that it's not part of our annual CapEx. It's more of a license commitment that we registered last year. All the rest related of the deployment of the fiber obligation of cover, for instance, we are covering for -- by the end of July, we need to cover all capitals in Brazil, all state capitals. And we need to put one side for 100,000 new habitants, this is part of our current CapEx. That's not in the 2.7 billion, but it's part of the total envelope that we have for the year.

[Operator]

Our next question comes from Victor Ricciuti, Crédit Suisse.

[Victor Ricciuti Gomez, analyst]

I have 2 from our side. The first one is a follow-up on the B2C initiative. We see that you are investing in the consolidation of the digital ecosystem, providing clients more integrated services, both in mobile and fixed. But ARPU both in fixed and mobile are decreasing. How should we see monetization of success initiative going forward? And the second one is regarding FiBrasil. Are you seeing good adherence from Internet providers. And what type of clients do you see add in these initiatives?

[Christian Gebara, executive]

Victor, in the digital services question though. I think, as I said before, now we are starting with the sale of the services. What we highlighted here was the video -- the entertainment vertical. That is one of the verticals that I want to put focus. This one is the one more deployed. And yes, we see ARPU impact of selling fiber with Netflix fiber, with Amazon Prime or even Vivo Selfie our postpaid that we put together Spotify and many others. So here, the combination of -- there is an ARPU increase due to the sale of the digital service, but there is also some in the case of the mobile, a mix of customers.

So we are getting more -- this quarter, we've got more hybrid than pure postpaid. So the mix of the ARPU is more in the hybrid side. So the total ARPU is a little bit lower. And also, we've been able to capture a lot of new prepaid customers and some of them, the entry point is a lower -- in a lower offer. So that also can impact our total ARPU. But of course, the digital services will be able to help us in the near future to compensate it or even to increase the ARPU going forward. So we are doing that, and we are betting on that. So I don't have a lot of other examples in other verticals to give you a real sense of the contribution of the services in the ARPU rather than the ones in the video entertainment that I told you that we have 1.2 million subscribers today. Also, that's a good thing.

In the B2B on the other hand, we just gave more color on how the digital services are contributing not only to the ARPU, but most importantly to the total revenue. Now we are giving like a number that we didn't give before of more than BRL 2 billion per year in reference coming from digital services, the same nature of the B2C because you sell connectivity and on top of connectivity because you have the channel, because you have the relationship, we can sell cloud, we can sell cybersecurity, we can sell IoT, and that's growing 46% year-over-year. So the same strategy, we're going to drive to the B2C different services, different approach, but we believe we're going to be as successful as we've been in B2B.

The second question, FiBrasil, cannot answer about FiBrasil. I think that's a question, there should be more focus on a call that you may have with them directly. What I can say is out of the 29 million home pass that we're going to deploy up to 2024, 6 million will come from FiBrasil and the partnership is going so well, and we -- that's what I can answer. I cannot answer about the commercial activity because that would be not correct for me to share this information.

[Operator]

Our next question comes from Felipe Cheng, Santander.

[Felipe Cheng, analyst]

2 questions on my side. The first one is regarding the OpEx line of other operating income, right, which came in at BRL 547 million positive this quarter. So this line has shown a lot of volatility right over the past few quarters, but the 4Q '21 level seems to be unusually high. So I just wanted to understand if there was any nonrecurring elements this quarter specifically? Or if we should expect this line to continue running, right, at a similar level in the first half of 2022, for example? And my second question is regarding tax credits, right, of BRL 1.4 billion. Just wanted to understand what is your expectations right regarding timing to eventually consume these credits.

[David Sanchez-Friera, executive]

Felipe, so this is David. Thank you for the question. So regarding the other revenues and costs, I mean, it's important to me to point out that this line has been positive in almost all the quarters for the last 2 years, meaning that -- I mean, it includes concept that at the end of the day, we consider that are part of the business now. I mean, it's true that the last quarter, we have a slight increase compared to the previous. But at the end of the day, they have always been positive.

If we look backwards, the positive evolution over time is mainly due to the benefit from contractual fines, the sales from use of the copper which, I mean, recently, I mean it has been accelerating. And also, we have benefited from the exchange rate of the copper, which is in dollars. And we also have some tax recovery that also are part of our business as usual and also it's important, the continued reduction of civil and labor contingency that the claims have been reduced year-over-year. So we -- I mean, we hope it's difficult to predict. I mean, as you said, it's a big volatility. But I can say that all the elements that we have included here, we can consider the recurrence.

And regarding the second question, which has to do with the positive effect we have of BRL 1.4 million recorded this quarter. If we look to the carryforward losses that we have as of the end of the year, we have BRL 1.3 billion plus this BRL 1.4 billion. So in total, we are talking about BRL 2.7 billion of taxes carry forward that will be compensated as lower tax payments, and we expect this to last until 2025, '26. So there are still 4 years, those BRL 2.4 billion. And here, we are talking about this is not basis for pure cash that will be compensated in the next 4, 5 years.

[Operator]

We have now questions from the webcast. The first one comes from Emiliano Flores, Scotiabank. Can you give additional color on the tax asset recognition? Should we expect something similar for 2022?

[David Sanchez-Friera, executive]

Emiliano, this is David Melcon. So I mean, we cannot predict if there's going to be any positive effect in 2022. So we can only count what we have already registered now. So I cannot comment here as we have no visibility of any -- we do not foresee any other similar concept as we have recognized 100% for this specific content. We cannot predict if there could be any other tax gain here in Brazil. This is something that we will need to see in 2022.

[Operator]

Our next question also from the webcast comes from Phani Kumar Varma, HSBC. With high cash outflow in 2022 due to Oi acquisition and 5G CapEx obligation, would the cash flow impact the dividend distribution in 2022, can we expect a similar payout ratio in 2022 from 2021?

[David Sanchez-Friera, executive]

Look, as I said before, so at the end of 2021, we have more than BRL 6 billion cash in our balance sheet that will be used to pay the acquisition of Oi mobile. So this will not impact our ability to continue paying dividend. So the amount of the dividend to be paid in the future will be more linked to the net income. And the payout ratio, which is what you're asking, we do not see any reason why this should be different that has already been in the past, which is around 100%. But I mean, we are not giving guidance, but this is what has been in the past and we do not foresee any change. Plus the payback, which is also important that this will help also to have an attractive shareholder remuneration on top of the net income that we will have in 2022.

[Operator]

What is the expectation from the CapEx as 5G deployment has started, is the CapEx intensity likely to stay at similar levels as 2020, 2021?

[Christian Gebara, executive]

Yes, we could expect the same level of CapEx. Now we've been having CapEx from BRL 7.9 billion to BRL 8.7 million -- BRL 8.8 billion in the last 3 years. We envision CapEx to be around these figures, although we're going to spend more in the 5G deployment as you correctly said. We are avoiding CapEx in other technologies. So -- and also, we are looking for alternative models, not only rent sharing, but also in the fiber that can compensate some CapEx that we can dedicate to mobile using FiBrasil, our neutral network that avoid CapEx, creates some OpEx, but we could be compensated in operating cash flow. So yes, keeping the same level.

[Operator]

Thank you. This concludes the question-and-answer session. At this time, I would like to invite Mr. Christian Gebara for any closing remarks.

[Christian Gebara, executive]

So thank you all for participating in our call. Thank you for also following Vivo along this last year. It was a very positive year, as you could see in the results presented today. And moreover, it's an important year where we prepare our future with our neutral network and fiber network into Brazil, they have successful results of 5G and most recently, also the successful conclusion before the closing of the Oi deal. Also, we start giving some hints of our digital strategy going forward in the B2B with real numbers and growth. And in the B2C start giving more color in some of the verticals that we are betting for the future. So any other doubt that you may have, please follow on with our team, and thank you again for participating.

[Operator]

Thank you. This concludes today's Telefônica Brasil 4Q '21 results conference call. You may disconnect your lines. Have a nice day.