Apresentação do PowerPointstatic.telefonica.aatb.com.br/Arquivos/Download/... · 30% take-up IPTV over FTTH IPTV Accesses Thousand Net Adds 76 82 128 2016 2017 TV ARPU R$ per month

Investor RelationsTelefônica Brasil S.A.

March, 2018

Corporate Presentation

Disclaimer

This presentation may contain forward-looking statements concerning future prospects and objectives regarding growth of the subscriber base, a breakdown of the various services to be offered and their respective results

The exclusive purpose of such statements is to indicate how we intend to expand our business and they should therefore not be regarded as guarantees of future performance

Our actual results may differ materiallyfrom those contained in such forward-looking statements, due to a variety of factors, including Brazilian political and economic factors, the development of competitive technologies, access to the capital required to achieve those results, and the emergence of strong competition in the markets in which we operate

For a better understanding, we are presenting pro forma numbers combining Telefônica Brasil and GVT results for all financial and operational indicators for every period as of January, 2015

2

FOUNDATIONS AND POSITIONING

MOBILE LEADERSHIP

FIXED: FIBER AS NEW GROWTH ENGINE

DIGITALIZATION

UNIQUE FINANCIALS AND SHAREHOLDER REMUNERATION

BACKUPS

Commitment to Shareholders

Upside opportunity

Starting Point

Value Drivers

Solid track record and an irreplicable position with unique assets

Sustainable mobile leadership

Fiber as new growthengine Digitalization

driving margin expansion

Strong foundation for a convergent future

Potential upside from external environment

Robust FCF generation and shareholder remuneration

44

31.4% 36.4% 39.3%48.9%

28.8%29.9% 27.1%

27.5%

19.4%13.7% 15.9%

13.2%20.3% 20.1% 17.6%

10.4%

Customers ¹ NetRevenue

RecurrentEBITDA

OpCF²

100%³

2017

Player 2

Player 3

Player 4

Largest and most profitable Telco in Brazil, with a unique set of assets...

~100 MillionCustomers¹

Vivo’s Share

_National presence

_Full portfolio for B2C and B2B

_Unique and highly admired brand

_Largest fiber operation in Latin America

_Integrated organization with great talents

551 - RGUs2 - EBITDA – CAPEX3 - Including Vivo, AMX, TIM and Oi

Solid leadership in Mobile

74.9

59.0 58.6

38.9

Player 2 Player 3 Player 4

31.7%

25.0% 24.8%

16.5%

Mobile accesses (million)

Strong position in Broadband

BB accesses (million)

8.47.4

6.3 5.9

Player 2 Player 3 Others

31.2%26.1%

22.1%20.6%

Superior quality perception

Net Promoter Score (NPS)

39

13 10 7

Player 2 Player 3 Player 4

Dec’17

…an undisputable leadership position…

8

-3

-34Player 2 Player 3

Mobile B2C

Fixed B2C

6

Dec’17 Dec’17

6

Market Share

Total Net Revenue Recurrent EBITDA

42.1 42.543.2

2015 2016 2017

R$ Billion

1.3%CAGR

R$ Billion

7.3%CAGR

12.713.7

14.7

2015 2016 2017

30.2% 32.1% 33.9%Margin

OpCF¹R$ Billion

4.45.7 6.7

2015 2016 2017

22.9%CAGR

…and able to deliver consistent and superior results even in challenging times

OpCF Margin² 2017

15.4%

10.5% 11.1%

5.9%

Vivo Player 2 Player 3 Player 4

CAGR 15-17

1.3%

-1.2%-2.7%

-5.0%Vivo Player 2 Player 3 Player 4

CAGR 15-17

7.3%

1.9%4.9%

-4.7%

Vivo Player 2 Player 3 Player 4

77 1- OpCF: EBITDA – Capex2- OpCF (EBITDA-Capex)/ Net Revenue



DIGITALIZATION


BACKUPS

MOBILE LEADERSHIP

Over the last years, Vivo generated strong results in the mobile business, especially in the postpaid segment and data services…

Net Mobile Service Revenues¹ R$ Billion

10.4 8.9 6.0

11.4 14.1 18.3

1.7 1.3 1.1

2015 2016 2017Outgoing voice Data and Digital Services Incoming voice

-24.4%

26.7%

-19.0%23.6 24.3 25.4 CAGR 15-17

Solid and consistent revenues growth in Postpaid² YoY

10.9% 8.6% 9.0%

2015 2016 2017

Data and digital services as the main lever for future growth

48% 58% 72%

33.5%

23.3%30.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2015 2016 20170.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

% Mobile Data over MSRData and Digital Services Revenues YoY

_4G potential still high as only 46% of our customer base is on 4G while we cover 85% of population

_Large opportunity for upselling data in Hybrid and Family Plans

_Rebound in prepaid with expected economy pick-up

3.6%

CAGR 15-17

91- Simplified view, the chart’s breakdown does not disclose other services revenues 2- YoY evolution does not include wholesale, M2M and other services revenues

39%

28.4% 30.2% 31.7%42.4% 42.1% 41.8%

2015 2016 2017 Total Postpaid

mobile revenue share

Absolute leadership in the mobile market

Mobile Market Share

2,719 2,3173,381

42.4% 45.3% 49.1%

0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%

0500

1,0001,5002,0002,5003,0003,5004,000

2015 2016 2017 Net Adds (thousand) Customer Mix

Supported by strongest level of postpaid net adds

Vivo Postpaid

postpaid share of net adds

Leading to unrivaled value proposition and ARPU

Prepaid Migration to Hybrid

2015 2016 2017

13%

18%1.87% 1.79% 1.76%

1.1% 1.0% 1.0%

2015 2016 2017

Voluntary churn

Postpaid Churn

24.527.6 28.5

2015 2016 2017

Total ARPU | R$ per month

13.0%

3.0%

11.8 16.0 20.5

2015 2016 2017

35.2%28.6%

Data ARPU | R$ per month

30%

Higher than competitors average

43%

…based on solid and consistent operational results, reflected in high market and revenue share, lower churn and improving ARPU

10

R$/client/month

Vivo created family plan concept, with all services available to all family members

% Prepaid with Vivo Turbo

PREPAID POSTPAID

36 59

2015 2017 Other offers Vivo Turbo

+50%

# of additional linesR$/client/month

Other postpaid Family Plans

+31%

Vivo’s strategy focused on offering “more for more” is paying off…

First operator with a completeweekly offer (voice, data and SMS)

11

2016 2017

4G Cities

% pop. covered

16 States

+ Leadership in 3G, with 93% of population coverage

5162016 Feb 18

4G Coverage Leadership Map*

*Leadership in number of 4G covered cities

60% 85%

2,667 248cities

…supported by our robust nationwide mobile network, which provides a unique network availability and the best customer experience…

12

_Nationwide coverage with 20+20MHz bandwidth 30+30MHz in 478 in cities such as São Paulo, Rio de Janeiro, Niterói and Florianópolis

_Spectrum optimization: 1,800MHz refarming and carrier aggregation

_Best positioned in premium spectrum bandwidth in Brazil

_700MHz already available in 472 cities, 1,356 expected in 2018

2,600MHz

1,800MHz

700/850MHz

…boosted by the best spectrum holding in the market, a crucial factor in fulfilling the exponential data consumption growth

13


DIGITALIZATION


BACKUPS


MOBILE LEADERSHIP

Voice and others¹

Pay TV ²

UBB

Data and IT4

xDSL³

9.3 8.6 7.7

1.7 1.91.9

1.9 2.3 2.8

1.6 1.6 1.8

2.4 2.6 2.6

17.0 17.0 16.7

2015 2016 2017

Net Fixed Revenues | R$ Bn

CAGR15-17

-0.7%

2.6%

5.0%

20.2%

5.1%

-9.0%

Despite historical decline in fixed voice, Vivo has been presenting double-digit growth in UBB and IPTV

FTTH Revenue | R$ million IPTV Revenue | R$ million

Strong momentum in key revenue lines

Reducing exposure to mature voice business

2015 2016 2017 2015 2016 2017

50.0% 53.4% 58.0%

2015 2016 2017

% of Non-Voice Revenues over Fixed Revenues

+40.5% +63.4%

CAGR 15-17

CAGR15-17

151- Includes voice, interconnection and other services. 2- Includes DTH and IPTV. 3- Includes other broadband revenues (VAS and installation fee). 4- Corporate Data and IT

46% 43% 39%

46% 45% 44%

8% 12% 17%

2015 2016 2017

FTTH

TOTAL

Average speed of 22Mbps (+24% yoy) for B2C customers

Strong performances in FTTH and IPTV are leading to customer mix and ARPU improvement

Broadband Accesses and ARPU

BB Accesses | Thousand CAGR15-17

xDSL

FTTC¹

2%

-6%

0%

48%

212 300 402

2015 2016 2017

FTTH AccessesThousand Net Adds

Pay TV Accesses and ARPU

90% 85% 76%

10% 15% 24%

2015 2016 2017

TOTAL

DTH

IPTV-6%

-14%

49%

1,732 1,713 1,588

30% take-up IPTV over FTTH

IPTV AccessesThousand Net Adds

76 82 128

2015 2016 2017

TV ARPU R$ per month

2015 2016 2017

+8.8%

BB ARPU R$ per month

2015 2016 2017

+10.9%

41.9

7,117 7,296 7,432

Pay TV Accesses| Thousand

CAGR 15-17 CAGR 15-17

45.1 51.6 81.7 91.3 96.8

CAGR15-17

161- FTTC (Fiber to the Cabinet) includes Cable accesses

… but already growing fast

UBB² penetration still very low…

Composition of Brazilian fixed broadband market (Million)

7.1%

-1.5%-2.8%

FBB TV Fixed Voice

Brazil subscriber growthYoY 2016-2017

33

61

24

4

PotentialMarket¹

Connectedwith BB

Connectedwith UBB²

NotConnected

UBB is a clear growth opportunity in Brazil…

17

UBB² +47.0% Only 7% of UBB²

penetration

171 - ABC Household and B2B2 - UBB: Speeds above 34 Mbps (FTTH, FTTC and Cable)

FTTH Expansion Accelerationin 2017:

_Superior FTTH deployment

_Scale and learning curve gains leveraging on TEF Group

_Field operations and channels prepared for quick launch

16New FTTH cities

Increasing Operational Know-How

-50%

Jan'17 Oct'17

Technical Complaints

Capex/ HP

-32%

2015 2017

ChurnFTTH

-9%

4Q16 4Q17

FTTH FTTC FTTx

87Cities

HPsmillion

128

7.0 11.4

215

18.419kvertical structures

2017 new cities

FTTH footprint

…and Vivo is expanding existing footprint and accelerating its learning curve for FTTH deployment

18

6% 8%13%

Mo.1 Mo.2 Mo.3

Network occupancyPouso Alegre - MG

MS UBB (>34Mbps)

3 months after launch

89%

10%

23%35%

Mo.1 Mo.2 Mo.3

Vitória da Conquista - BA

55%

Overall customerbase

Pouso Alegre

ARPUR$ / month

+39%

Overall customerbase

Vitória daConquista

Vivo had a successful track record in new FTTH cities launched in 2017, quickly leading the UBB market

+46%

19

Footprint EvolutionFTTH HPs (M)

_Cities above 50k inhabitants

_Selected neighborhoods in cities already covered

_Favorable competitive areas

_Cherry-picking based on IRR* 4,200 km additional backbone

2017 12m 24m 36m

7.0

In 2020_1.0 M additional clients(33% expected take-up)

_>R$ 1 Bn in additional UBB revenues in 2020

_EBITDA margin accretive

Acceleration Project

Base Plan

+3.0*

+1.0

R$2.5Bn

And to continue capturing the UBB opportunity, Vivo will invest an additional R$2.5bn in order to boost FTTH expansion in the next 36 months

20

_60% on Network Expansion

_40% on Installation and CPEs (variable to access growth)

_Leveraging on the Telefónica Group’s global scale and expertise and synergies on existing infrastructure

_Cities with >50k inhabitants

_Cherry-picking of high-potential homes

_Additional 3.0 million FTTH HPs

_Threshold of IRR >17%

_>R$1bn in additional UBB revenues in 2020

_90% of incremental revenues coming from new fixed customers

_Increased Capex efficiency and smart allocation

_Maintaining solid capital structure and flexibility

_Self-funding contribution

The Fiber Acceleration Project will be cash flow accretive from year 3

Maintain strong shareholder remuneration benefiting from growth profile

21

INVESTMENT CORRELATED TO REVENUE GENERATION

FUNDINGCLEAR GUIDELINES AND OBJECTIVES



BACKUPS

MOBILE LEADERSHIP

DIGITALIZATION


Digitalization Scope

Total annual OpEx (2017)

Perimeter of OpExinfluenced by digitalization

~1/3 OpEx

R$ 29 bn

R$ 11 bn

Prioritization of digitalization initiatives

Annual gross

Opexsavings

of at least

R$1.2 Billion

(by 2020)

Digitalization is a driver for margin expansion and improvement in customer experience

Advertising

Administrativeprocesses

Back office

Cost with own stores

Installation and Maintenance

Commissions

Billing and collection

Customer care

Top-ups

Improvement in customer experience +-

Pote

ntia

l for

dig

ital

izat

ion

+

-

2323

In the digital space, we already achieved promising results and have ambitious targets for the future

2020Fronts 2017KPIs

Enhanced customer care

experience

Fostering sales and top-ups

through digital channels

19% >30%_% of digital top-ups

14 million ~45 million_Unique users of Meu Vivo

-15% YoY -30% vs 2017_Call center calls

_Online FTTH B2C sales 24% >50%

_Online hybrid plan activations x5

24

More efficient and friendly payments &

collection

Robust IT and improved

technical support

_Digital credit scoring ~55% >65%

_Penetration of e-billing 43% >80%

_Collections through digital channels ~50% >75%

_IT legacy systems (B2C customers in Full Stack) <5% >90%

25

2020Fronts 2017KPIs

In the digital space, we already achieved promising results and have ambitious targets for the future

_Incidents solved remotely ~50% >70%


BACKUPS

MOBILE LEADERSHIP



DIGITALIZATION

In 2017, we presented real growth across all lines

2 0 1 7 N O M I N A L G R O W T H Y o Y %

Service Revenues¹ +3.6%

RecurringEBITDA

+7.3%

NetIncome

+12.8%

OperatingCash Flow

+17.8%

FreeCash Flow

+20.1%

>2.9% Inflation (IPCA)

A new cycle of real growth across all lines

Consecutive cost reduction in the last 8 quarters

Recurrent operating costs reduced almost 3% in the last two years vs. accumulated inflation of more than 9%

271- Ex-regulatory effects. Note: All figures presented are recurring

New Capex Guidance for the 2018-2020 Period

Up to

R$24 billionRecurring Capex focused on 4G, Fiber expansion and IT transformation

And to support our unique positioning, we will invest accordingly in the next three-year period to further improve quality, customer experience and accelerate revenue growth

28

Non-recurring Capex envelope does not change long-term

downward trend in Capex/Sales

R$2.5 billionIncremental, non-recurring Capex for

the execution of the Fiber AccelerationProject (2018-2020) aiming to speed

up our already successful expansion of FTTH

Investing in higher return growth projects while reducing investments in legacy

_Cost of FTTH deployment32% lower vs. 2015

_Cost of 4G expansionoptimized with 700MHz roll-out

Lower unitary cost of growth technologies

2 0 1 6 - 2 0 1 8

4G +44%

FTTH +174%

IPTV +108%

IT +8%

3G -27%

Copper -38%

DTH -53%

Additionally, the Fiber Acceleration Project Capex will be fully directed to growth in FTTH

Spectrum and larger technological cycles in mobile are behind us

_Vivo already has a superior spectrum portfolio in Brazil

_Optimization with 1.8GHz refarming and 700MHz roll-out

29

2/3 of R$24bn Capex plan

oriented for growth

2 0 1 6 - 2 0 1 8

Total Capex is clearly focused on capturing growth opportunities

…

As a result, Vivo’s ROCE should expand at a premium to the expected risk-free rate

8%10%

13.75%

7.00%6.75%

8.00% 8.00%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2016 2017 2018 2019 2020

Vivo ROCE Risk-Free Rate

RETURN ON CAPITAL EMPLOYED¹ EVOLUTION ABOVE RISK-FREE RATE

301- ROCE ex-goodwill

31

A strong financial discipline guarantees solid conversion of Operating Cash Flow into Free Cash Flow…

4.4 5.7 6.7 3.9 4.8 5.7

88.0% 84.4% 86.1%

2015 2016 2017

OpCF FCF from Business Activities Cash Conversion

1- FCF after taxes and interest

FCF +21.5%OpCF +22.9%C A G R 1 5 - 1 7

CONVERSION OF OpCF TO FCF¹ (R$ Bn)

+ 17. 6 %

…allowing Vivo to sustain a solid capital structure and boost shareholder remuneration

_Rating Ba1, Negative Outlook_One notch above sovereign rating

_Rating brAAA, Stable Outlook_One notch above sovereign rating

Net Debt/EBITDA YE2017

0.26x

4.6

4.1

3.3

- 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

2018

2017

2016

LOW LEVERAGERESULTING IN STRONG RATINGS

IMPROVED PROFITABILITY AS A FOUNDATION OF OUR SOLID SHAREHOLDER REMUNERATION

Payment of Dividends¹ (R$ Bn)

C A G R 16 - 1 8

R$20.5 billion distributed as dividends¹ since 2013

321- Includes Interest on Capital

_Acceleration of Total Revenues

_Sustaining solid Mobile Service Revenue growth

_Resuming Fixed Revenue growth

_>R$1bn in additional UBB Fixed Revenues in 2020 from the Fiber Project, further improving evolution

_Sustainable margin increase, maintaining the current pace of EBITDA growth

_Annual gross Opex savings of >R$1.2bn from digitalization by 2020

_2018-20 Capex: up to R$24bn + R$2.5bn envelope for the Fiber Acceleration Project

_OpCF margin, excluding the Fiber Project, consistently above 20% as of 2020

_At least +2 p.p. already in 2018 (vs. 2017)

_Continuous ROCE expansion

_Strong FCF and Net Income evolution with double-digit growth in 2018 (vs 2017)

_R$4.6bn to be paid as dividends¹ in 2018 (+13% YoY)

_Unmatched shareholder remuneration

Absolute leader in REVENUESin the Brazilian telco space

(70% share of incremental revenues in the last 3 years)

The most efficient Company with the largest OpCF in the

sector

(+5.0 p.p. in OpCF margin since 2015)

Second to none SHAREHOLDER REMUNERATION

in the industry(Dividend Yield ~6% in 2017)

In a nutshell, our past execution positions Vivo with a strong present and a brilliant vision for the future

TODAY TOMORROW (2018-20)

331- Includes Interest on Capital. 2- Based on gross dividends of R$2.82 per preferred share declared during 2017. Note: Trends excluding eventual non-recurring items.


MOBILE LEADERSHIP


DIGITALIZATION

BACKUPS


-3.8% -3.6%

1.0%2.8% 2.7% - 3.0%

2015 2016 2017 2018E 2019-20E

10.7%

6.3%

3.0% 3.8% 4.0% - 4.3%

2015 2016 2017 2018E 2019-20E

14.3% 13.8%

7.0% 6.8% 8.0%

2015 2016 2017 2018E 2019-20E

8.5%11.5% 12.6% 11.9%

9.5% - 10.5%

2015 2016 2017 2018E 2019-20E

% YoY

% annual rate %

Expectations for an economic recovery represent a potential upside…

GDP Growth% YoY

Inflation¹

Interest Rate¹ Unemployment¹

3535Source: Focus Bulletin (Central Bank of Brazil) 19/Feb/18 except Unemployment data (MCM Consultores) 1 - Average

…while a regulatory simplification trend might provide an additional upside

Reduction ofconcession’s obligations

Revision of quality goals

Potential to optimize real estate portfolio

3636

Highlights – 4Q17 and 2017

37

HIGHLIGHTS

Consolidated in R$ million 4Q17 4Q16 ∆% 3Q17 ∆% 2017 2016 ∆%

Net Operating Revenues 11,033.6 10,873.6 1.5 10,885.9 1.4 43,206.8 42,508.4 1.6

Net Operating Service Revenues 10,736.2 10,596.8 1.3 10,631.3 1.0 42,136.4 41,312.8 2.0

Net Service Mobile Revenues 6,552.7 6,315.8 3.8 6,355.5 3.1 25,387.9 24,342.7 4.3

Net Operating Fixed Revenues 4,183.6 4,281.0 (2.3) 4,275.8 (2.2) 16,748.5 16,970.2 (1.3)

Net Handset Revenues 297.3 276.9 7.4 254.6 16.8 1,070.5 1,195.6 (10.5)

Operating Costs (7,266.9) (7,250.3) 0.2 (7,209.0) 0.8 (28,720.9) (28,486.0) 0.8

Recurring Operating Costs1 (7,088.0) (7,197.8) (1.5) (7,209.0) (1.7) (28,542.0) (28,845.8) (1.1)

EBITDA 3,766.7 3,623.3 4.0 3,676.9 2.4 14,485.9 14,022.4 3.3

EBITDA Margin % 34.1% 33.3% 0.8 p.p. 33.8% 0.4 p.p. 33.5% 33.0% 0.5 p.p.

Recurring EBITDA1 3,945.6 3,675.8 7.3 3,676.9 7.3 14,664.8 13,662.6 7.3

Recurring EBITDA Margin1 % 35.8% 33.8% 2.0 p.p. 33.8% 2.0 p.p. 33.9% 32.1% 1.8 p.p.

Net Income 1,517.0 1,214.8 24.9 1,222.7 24.1 4,608.8 4,085.2 12.8

Recurring Net Income1 1,635.1 1,249.4 30.9 1,222.7 33.7 4,726.9 3,847.7 22.8

Capex (ex-Licenses)2 2,664.7 2,800.1 (4.8) 2,187.5 21.8 7,998.3 8,003.7 (0.1)

Operational Cash Flow1,2 1,280.9 875.7 46.3 1,489.4 (14.0) 6,666.5 5,658.9 17.8

Total Accesses (thousand) 97,797 97,129 0.7 97,639 0.2 97,797 97,129 0.7

Total Mobile Accesses 74,940 73,778 1.6 74,562 0.5 74,940 73,778 1.6

Total Fixed Accesses 22,857 23,352 (2.1) 23,077 (1.0) 22,857 23,352 (2.1)

1) Excluding the following non-recurring effects: non-cash regulatory provision in 4Q17, with a negative impact of R$178.9 million on costs and EBITDA and R$118.1

million on net income; the sale of towers in 1Q16, with a positive impact of R$513.5 million on costs and EBITDA and R$338.9 million on net income; the organizational

restructuring in 2Q16, with a negative impact of R$101.2 million on costs and EBITDA and R$66.8 million on net income; and the corporate restructuring in 4Q16, with a

negative impact of R$52.5 million on costs and EBITDA and R$34.6 million on net income.

2) Excluding the amounts related to the 2.5GHz licenses totaling R$185.5 million acquired at the Anatel leftover spectrum auction, accounted in 1Q16.

Financial Figures – 4Q17 and 2017

38

NET OPERATING MOBILE REVENUES


Net Operating Mobile Revenues 6,850.0 6,592.6 3.9 6,610.1 3.6 26,458.3 25,538.2 3.6

Net Service Mobile Revenues 6,552.7 6,315.8 3.8 6,355.5 3.1 25,387.9 24,342.7 4.3

Outgoing Voice 1,325.8 2,035.8 (34.9) 1,433.0 (7.5) 5,970.7 8,938.9 (33.2)

Interconnection 291.0 343.1 (15.2) 296.4 (1.8) 1,093.2 1,299.2 (15.9)

Data and Digital Services 4,916.2 3,934.2 25.0 4,630.5 6.2 18,305.9 14,055.2 30.2

Messaging P2P 335.9 357.1 (6.0) 350.5 (4.2) 1,427.0 1,506.1 (5.2)

Internet 3,250.2 3,008.4 8.0 3,289.9 (1.2) 13,464.9 10,297.5 30.8

Digital Services 1,330.1 568.7 133.9 990.0 34.3 3,413.9 2,251.6 51.6

Other Services 19.7 2.7 632.1 (4.3) n.a. 18.1 49.4 (63.4)

Net Handset Revenues 297.3 276.9 7.4 254.6 16.8 1,070.5 1,195.6 (10.5)

% Data and Digital Services Revenues / MSR 75.0% 62.3% 12.7 p.p. 72.9% 2.2 p.p. 72.1% 57.7% 14.4 p.p.

NET OPERATING FIXED REVENUES


Net Operating Fixed Revenues 4,183.6 4,281.0 (2.3) 4,275.8 (2.2) 16,748.5 16,970.2 (1.3)

Voice 1,616.6 1,889.0 (14.4) 1,658.5 (2.5) 6,850.0 7,624.0 (10.2)

Interconnection 46.2 62.6 (26.2) 41.3 11.7 181.6 280.0 (35.1)

Broadband¹ 1,253.3 1,021.4 22.7 1,165.8 7.5 4,579.8 3,923.2 16.7

Corporate Data and IT 630.7 659.6 (4.4) 758.8 (16.9) 2,578.7 2,560.1 0.7

Pay TV 472.6 485.7 (2.7) 486.6 (2.9) 1,910.1 1,932.5 (1.2)

Other Services 164.3 162.6 1.0 164.7 (0.3) 648.4 650.4 (0.3)

% Non-Voice Revenues² / Net Operating Fixed Revenues 60.3% 54.4% 5.8 p.p. 60.2% 0.0 p.p. 58.0% 53.4% 4.6 p.p.

1) Broadband revenue includes residential clients and SMEs.

2) Non-voice revenue includes revenue from Broadband, Corporate Data and IT, Pay TV and Other Services.

Mobile Operating Figures – 4Q17 and 2017

39

MOBILE OPERATING PERFORMANCE

Thousand 4Q17 4Q16 ∆% 3Q17 ∆% 2017 2016 ∆%

Mobile Total Accesses 74,940 73,778 1.6 74,562 0.5 74,940 73,778 1.6

Postpaid 36,772 33,391 10.1 35,664 3.1 36,772 33,391 10.1

M2M 6,321 5,013 26.1 5,854 8.0 6,321 5,013 26.1

Prepaid 38,168 40,387 (5.5) 38,897 (1.9) 38,168 40,387 (5.5)

Market Share 31.7% 30.2% 1.5 p.p. 30.9% 0.8 p.p. 31.7% 30.2% 1.5 p.p.

Postpaid 41.8% 42.1% (0.3) p.p. 42.1% (0.3) p.p. 41.8% 42.1% (0.3) p.p.

M2M 41.5% 39.4% 2.2 p.p. 40.4% 1.1 p.p. 41.5% 39.4% 2.2 p.p.

Net Additions 378 283 33.5 227 66.7 1,162 509 128.1

Postpaid 1,107 891 24.2 981 12.8 3,381 2,317 46.0

Market Share of Postpaid Net Additions 34.0% 31.9% 2.1 p.p. 35.1% (1.2) p.p. 39.3% 38.0% 1.3 p.p.

Market Penetration 113.5% 118.0% (4.5) p.p. 116.1% (2.6) p.p. 113.5% 118.0% (4.5) p.p.

Monthly Churn 3.3% 3.5% (0.2) p.p. 3.4% (0.1) p.p. 3.3% 3.4% (0.0) p.p.

Postpaid ex. M2M 1.7% 1.7% (0.0) p.p. 1.9% (0.2) p.p. 1.8% 1.8% (0.0) p.p.

Prepaid 4.8% 5.0% (0.2) p.p. 4.8% 0.0 p.p. 4.7% 4.6% 0.1 p.p.

ARPU (R$/month)¹ 29.2 28.6 2.2 28.4 2.8 28.5 27.6 3.0

Voice 7.3 10.8 (32.3) 7.7 (5.4) 7.9 11.7 (32.0)

Data 21.9 17.8 23.1 20.7 5.9 20.5 16.0 28.6

Postpaid ex. M2M ARPU¹ 52.9 52.3 1.1 51.5 2.7 52.2 51.2 2.1

Prepaid ARPU¹ 13.6 14.6 (6.9) 13.5 0.6 13.5 13.9 (2.9)

M2M ARPU¹ 2.8 2.6 6.8 2.8 (0.9) 3.0 2.9 1.6

MOU 165.7 169.3 (2.1) 160.4 3.3 160.4 160.0 0.3

1) ARPU data including intercompany revenue eliminations.

Fixed Operating Figures – 4Q17 and 2017

40

FIXED OPERATING PERFORMANCE

Thousand 4Q17 4Q16 ∆% 3Q17 ∆% 2017 2016 ∆%

Total Fixed Accesses 22,857 23,352 (2.1) 23,077 (1.0) 22,857 23,352 (2.1)

Fixed Voice Accesses 13,837 14,343 (3.5) 14,007 (1.2) 13,837 14,343 (3.5)

Residential 8,899 9,318 (4.5) 9,059 (1.8) 8,899 9,318 (4.5)

Corporate 4,498 4,580 (1.8) 4,503 (0.1) 4,498 4,580 (1.8)

Others 441 445 (1.0) 445 (1.0) 441 445 (1.0)

Fixed Broadband 7,432 7,296 1.9 7,452 (0.3) 7,432 7,296 1.9

FTTx 4,541 4,146 9.5 4,472 1.5 4,541 4,146 9.5

Others 2,891 3,150 (8.2) 2,980 (3.0) 2,891 3,150 (8.2)

Pay TV 1,588 1,713 (7.3) 1,618 (1.9) 1,588 1,713 (7.3)

Voice ARPU (R$/month) 40.1 43.3 (7.4) 39.3 2.2 40.8 43.0 (5.3)

Broadband ARPU (R$/month) 56.1 46.6 20.5 52.2 7.5 51.6 45.1 14.4

Pay TV ARPU (R$/month) 98.3 93.2 5.6 99.2 (0.9) 96.8 91.3 6.1

Income Statement – 4Q17 and 2017

41

INCOME STATEMENT


Gross Operating Revenue 16,536.8 16,712.6 (1.1) 16,582.8 (0.3) 66,243.2 65,006.7 1.9

Net Operating Revenue 11,033.6 10,873.6 1.5 10,885.9 1.4 43,206.8 42,508.4 1.6

Mobile 6,850.0 6,592.6 3.9 6,610.1 3.6 26,458.3 25,538.2 3.6

Fixed 4,183.6 4,281.0 (2.3) 4,275.8 (2.2) 16,748.5 16,970.2 (1.3)

Operating Costs (7,266.9) (7,250.3) 0.2 (7,209.0) 0.8 (28,720.9) (28,486.0) 0.8

Personnel (949.4) (988.2) (3.9) (948.4) 0.1 (3,725.8) (3,859.8) (3.5)

Costs of Services Rendered (2,828.4) (2,782.1) 1.7 (2,906.8) (2.7) (11,508.2) (11,906.2) (3.3)

Interconnection (371.5) (462.8) (19.7) (351.9) 5.6 (1,441.0) (1,924.1) (25.1)

Taxes and Contributions (437.6) (430.8) 1.6 (448.2) (2.4) (1,792.7) (1,861.2) (3.7)

Third-party Services (1,360.5) (1,320.5) 3.0 (1,426.9) (4.7) (5,591.3) (5,705.1) (2.0)

Others (658.8) (568.0) 16.0 (679.8) (3.1) (2,683.2) (2,415.8) 11.1

Cost of Goods Sold (534.6) (553.8) (3.5) (483.9) 10.5 (1,955.9) (2,118.9) (7.7)

Commercial Expenses (2,346.7) (2,290.3) 2.5 (2,366.9) (0.9) (9,315.8) (8,910.1) 4.6

Provision for Bad Debt (372.1) (344.2) 8.1 (380.4) (2.2) (1,481.0) (1,348.2) 9.9

Third-party Services (1,857.8) (1,845.6) 0.7 (1,890.6) (1.7) (7,438.9) (7,216.9) 3.1

Others (116.8) (100.5) 16.2 (95.9) 21.8 (395.9) (345.0) 14.8

General and Administrative Expenses (382.3) (473.7) (19.3) (378.2) 1.1 (1,492.7) (1,622.3) (8.0)

Other Net Operating Revenue (Expenses) (225.5) (162.2) 39.0 (124.8) 80.7 (722.5) (68.7) 951.7

EBITDA 3,766.7 3,623.3 4.0 3,676.9 2.4 14,485.9 14,022.4 3.3

EBITDA Margin % 34.1% 33.3% 0.8 p.p. 33.8% 0.4 p.p. 33.5% 33.0% 0.5 p.p.

Depreciation and Amortization (1,990.9) (1,815.2) 9.7 (1,962.0) 1.5 (7,853.7) (7,654.4) 2.6

Depreciation (1,303.1) (1,154.8) 12.8 (1,327.7) (1.9) (5,240.9) (5,054.3) 3.7

Amortization of Intangibles (342.1) (289.0) 18.4 (289.0) 18.4 (1,209.1) (1,180.0) 2.5

Others Amortizations (345.7) (371.4) (6.9) (345.3) 0.1 (1,403.7) (1,420.1) (1.2)

EBIT 1,775.8 1,808.1 (1.8) 1,714.9 3.6 6,632.2 6,368.0 4.1

Net Financial Income (177.8) (315.3) (43.6) (170.5) 4.3 (903.0) (1,234.5) (26.9)

Income from Financial Investments 111.6 210.1 (46.9) 173.7 (35.8) 655.5 719.4 (8.9)

Debt Interest (157.3) (220.3) (28.6) (240.7) (34.6) (932.7) (1,061.1) (12.1)

Monetary and Exchange Variation (79.8) (154.7) (48.4) (69.9) 14.2 (486.7) (183.5) 165.2

Gains (Losses) on Derivative Transactions 21.9 (32.8) n.a. (26.6) n.a. (41.9) (347.9) (88.0)

Other Financial Income (Expenses) (74.2) (117.6) (36.9) (7.0) 960.0 (97.2) (361.4) (73.1)

Gain (Loss) on Investments 0.2 0.2 0.0 0.0 n.a. 1.5 1.2 25.0

Taxes (81.2) (278.2) (70.8) (321.7) (74.8) (1,121.9) (1,049.5) 6.9

Net Income 1,517.0 1,214.8 24.9 1,222.7 24.1 4,608.8 4,085.2 12.8

Debt – 4Q17 and 2017

42

LOANS AND FINANCING

Consolidated Currency Annual Interest Rate Due Date Short-Term Long-Term Total

Local currency

BNDES UR LTIR LTIR + 0.00% to 4.08% 2023 657.8 931.1 1,588.9

BNDES R$ 2.5% to 6.0% 2023 77.1 164.9 242.0

BNDES R$ SELIC D-2 + 2.32% 2023 70.4 306.0 376.4

BNB R$ 7.0% to 10.0% 2022 15.1 54.7 69.8

Confirming R$ 101.4% to 109.4% of CDI 2018 607.2 - 607.2

Debentures 4th Issue - Series 3 R$ IPCA + 4.0% 2019 0.3 40.0 40.3

Debentures 1st Issue - Minas Comunica R$ IPCA + 0.5% 2021 24.1 72.3 96.4

Debentures 4th Issue - Single Series R$ 100% of CDI + 0.68 spread 2018 1,317.5 - 1,317.5

Debentures 5th Issue - Single Series R$ 108.25% of CDI 2022 64.4 1,996.5 2,060.9

Debentures 6th Issue - Single Series R$ 100.00% of CDI + 0.24% 2020 6.2 999.5 1,005.6

Financial Leases R$ - 2033 51.0 334.4 385.5

Contingent Consideration R$ - 2025 - 446.1 446.1

Foreign Currency

BNDES UMBND ECM + 2.38% 2019 142.3 83.0 225.3

Total 3,033.4 5,428.4 8,461.8

December 2017

NET FINANCIAL DEBT

Consolidated in R$ million 12/31/2017 9/30/2017 12/31/2016

Short-Term Debt 3,033.4 3,408.2 4,663.5

Long-Term Debt 5,428.4 4,648.4 4,560.6

Total Debt 8,461.8 8,056.6 9,224.1 2019 845.5

Cash and Cash Equivalents¹ (4,062.1) (5,582.7) (5,115.9) 2020 1,414.8

Net Derivatives Position (143.8) (18.8) (28.4) 2021 1,283.0

Contingent Consideration Guarantee Asset² (446.1) (440.4) (414.7) 2022 1,231.7

Net Debt 3,809.9 2,014.7 3,665.1 After 2022 653.4

Net Debt/EBITDA³ 0.26 0.14 0.26 Total 5,428.4

Year Amount

December 2017

L.T. OBLIGATIONS(R$ million)

1) Includes the investment in BNB given as a guarantee for the loan from that bank.

2) Alignment of the classification criteria for the asset backing the contingent consideration to calculate pro-forma net debt.

3) LTM EBITDA.

FOR FURTHER INFORMATION:INVESTOR RELATIONS

+55 11 3430.3687

[email protected]

www.telefonica.com.br/ir

Documents

Apresentação do PowerPointstatic.telefonica.aatb.com.br/Arquivos/Download/... · 30% take-up IPTV over FTTH IPTV Accesses Thousand Net Adds 76 82 128 2016 2017 TV ARPU R$ per month