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Tim Participacoes SA  (NYSE:TSU)
Q4 2019 Earnings Call
Feb. 12, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to TIM Participacoes 2019 Fourth Quarter Results Conference Call. We would like to inform that this event is being recorded and all participants will be in listen-only mode during the conference presentation. There will be a replay for this call on the company's website. After chief participants remarks are completed, there will be a question-and-answer session for participants. At that time, further instructions will be given.

We highlight that statements that may be made regarding the prospects, projections and goals of TIM Participacoes constitute the beliefs and assumptions of the company's board of executive officers. Future considerations are not performance warranties. They involve risks, uncertainties and assumptions as they refer to events that may or may not occur. Investors should understand that internal and external factors to TIM Participacoes may affect their performance and lead to different results than those planned. [Operator Instructions]

Now I will turn the conference over to the CEO, Mr. Pietro Labriola, so he can present the main message for the fourth quarter of 2019. Please Mr. Pietro, you may proceed.

Pietro Labriola -- Chief Executive Officer

Good morning, everyone, and thanks for attending our results conference call. Less than a year ago, I arrived at TIM with the mission of direct leading growth and continuing with the sustainable evolution that the company started in 2016 when this new management team was being formed. I believe we are ending the year with solid results and on the right path to transform TIM Brazil into a 4.0 tech operator. Some adjustments were initiated along the way, but we achieved the important things with the back to the basic mindset and keeping the entire team focused on execution. The adjustments implemented in our strategy helped us to adapt to new realities, maintaining our DNA of innovation, our effectivity and efficiency.

I will walk you through the main highlights of the fourth quarter, and then the team will help to answer your questions. 2019 was a year of remarkable achievements. On the network side, we maintain our unquestionable leadership in 4G with the largest and best coverage. Our ultra-broadband service was recognized as the best in the country. Network efficiency has become a key area with the implementation of the initiatives, and we were the first to conduct live network test for 5G in Brazil.

We also adopted the go-to-market, adjusting our product and service portfolio while revitalizing the image of the company for the benefit of clients. With this, ARPU grew in all segments and TIM Live reaccelerated client acquisition. And efficiency mindset and focus on execution are helping the company to be more productive, while employee engagement and climate are showing positive improvements. All of this is being translated into our financial numbers with consistent developments in all areas. We started the year growing service revenue at 1%, but we managed to accelerate our pace and close 2019 with 3.2% versus fourth quarter of 2018. For the full year, service revenue summed BRL16.6 billion, up 2.4% compared to 2018.

EBITDA growth also accelerated, reaching more than 8% in the last quarter of the year and totaling EUR6.8 billion in 2019. The EBITDA margin was just below 43% in the fourth quarter, bringing the 2019 margin above 39%, a target that was supposed to be achieved only in 2020. Cash generation remained strong. EBITDA minus capex surpassed BRL600 million during the quarter, ending 2019 with over BRL2.9 billion, which means a 16% year-over-year growth. This cash generation profile combined with a strong balance sheet prepare us to participate in the development that our industry will certainly face in the near future. Affirming the solidity of our financial position, the company received a AAA rating from Fitch on Monday, another indication that our strategy is focused on the long-term sustainability of the business.

Despite the challenges faced in the first half of the year by still weak economy activity and tough competition, mobile revenues accelerated and cloud-generated revenues grew 2.3% in 2019 compared to 2018. This is a consequence of a solid annual growth in postpaid of almost 7%, with the fourth quarter showing an inflection point in the deceleration trajectory of this segment and the recurring prepaid-generated revenues. Fourth quarter was the first period with positive annual growth in the last three years. Our mobile blended ARPU increased by roughly 6% year-on-year, reaching almost BRL24, driven by improvement in both segments. Compared to 2018, postpaid ARPU excluding machine-to-machine grew by 0.6%, while prepaid ARPU was up 4.2%.

Looking at each segment more deeply. We see postpaid continue to transition to value with an improved proposition supported by TIM Black Familia and the renewed combo strategy of service plus device. The commercial approach was adjusted, maintaining solid sales number, but more importantly, reducing churn. As a result, net additions returned to positive in the fourth quarter, and we expect to maintain a reasonable level of client addition in the coming quarters but certainly not as high as in 2017, 2018. The prepaid segment is slowly improving and recovering. Recharge dynamics are showing the reversal of negative trends, and consumption is gradually growing. Consistency in communication strategy after the introduction of TIM Pre Top at the beginning of the year is positively contributing to revenue recovery, customer experience and brand positioning.

In sum, the mobile segment improved in the second half of the year. Price aggressiveness was not as large as in the first half. The macro environment showed the first sign of improvement, and our operation is on track and focused on what matters. Consistency is a key priority. So we will continue on this path, executing what is planned and adjusting when necessary. Changing gears to fixed. Fixed service revenue grew by more than 11% in 2019. TIM Live continued to be the highlight of this result, posting a very solid expansion of more than 30% versus 2018 while accelerating FTTH rollout to close the gap with the original plan.

The combination of 8% ARPU growth and 20-plus percent of customer base expansion were the drivers for this robust performance that led TIM Live to 50% of fixed service revenue in 2019. Client-based dynamics improved over the year with net addition accelerating in the second half and making FTTH technology represent more than 30% of our client base. We also maintained an OTT-friendly approach for content and improved the quality of the service, being recognized in two important broadband ranking as the best service in the country.

To support the evolution of our business, a solid infrastructure is key. This is why we apply a smart capex approach combined with the introduction of new technologies and implementation of partnerships. This strategy focuses on maximizing our assets to ensure a high-level customer experience while opening opportunities to further monetize our investment.

On the mobile side, I would highlight the following achievements in 2019. Our 4G coverage reached 3,500 cities, representing 94% of the urban population. And our 4.5G coverage is accelerating fast. Covered cities grew 44%, ensuring leadership in some state of the northeast and the south of the country. Additional capacity and coverage expansion are being achieved by acceleration of the 700 megahertz rollout, 60% more cities covered with these frequencies. And through the spectrum refarming project, that benefits around 80% of the urban population. Voice over LTE and narrowband IoT are available in almost all cities where we have 4G coverage, improving voice for human customer and connectivity for machine-to-machine solutions.

Once again, the network experience metrics showed the benefit of our strategy. TIM leads 4G availability, maintaining a solid distance from the number two and three players. In latency, TIM has the fastest response time, ensuring a very good experience for the customer.

During the biggest New Year's Eve celebration in the world, we explored the full potential of massive MIMO, an innovative technology that helps TIM plan a new and concentrated demand. Our clients consume 3 times more data with 6 times higher data throughput and the network MIMO 36 times more simultaneous connections. In 2020, we will be implementing massive MIMO in different areas of the country to improve the quality of the mobile network.

Innovation on the network front also comes in form of the infrastructure sharing agreement, which was with Vivo in December. This scope covers a single grid nationwide 2G network, a 4G shared network for new coverage in city below 40,000 inhabitants and a tower of a full single grid solution involving all technology in 50 cities.

For the fixed network, we are seeing acceleration of FTTH coverage, reaching 2.3 million households, twice the number in 2018. Total broadband coverage reached 5.5 million households. 12 new cities launched in TIM Live services in 2019. The expansion is using the cluster approach, cherry-picking the best areas. More than 100,000 kilometers of fiber is a major milestone for us in Brazil and reinforces that we are on the right path to continuously develop our transport network.

The IT side of our infrastructure is also being developed to support the digital transformation of the company with the goal of improving customer experience and gaining efficiency. However, the success of our digitalization journey does not depend only on new system. It also requires improvement processes to change the way we run our business. So to monitor the evolution of our digital transformation program, we focus on four areas: caring, billing and payment, acquisition of clients and prepaid recharge. In all of them, we are delivering changes that empower customers and bring us closer to our 3S goals; self-caring, self-healing and self-provisioning.

In the caring front, we closed 2019 with more customers using our digital channels to meet their demands, while the unique user of Meu TIM grew almost 20%, and human interaction fell by almost 20%. Electronic billing and payment grew by solid double digits, increasing the penetration of digital solutions for both. Digital fees also grew strongly. Thus, postpaid and control acquisition of electronic channel were up by 30% or more. For the electronic prepaid recharges, penetration is reaching almost 40%.

With the contribution of this and other traditional initiatives, we are managing well our OpEx level. OpEx ended the year down by 0.3%, well below inflation. The fourth quarter showed the usual positive seasonality with minus 0.7%, presenting the best performer of 2019. These solid results on costs could have been even better if it wasn't for bad debt. Normalized OpEx excluding bad debt decreased 2.3% year-on-year, even better than the target of our efficiency plan. However, fourth quarter marked the fifth quarter-over-quarter decrease since 2017, pointing to a possible change in trajectory in the coming quarters. 4Q, we are still very cautious. It seems that finally, our efforts on that front are materializing. Bad debt remains on an area of growth improvement opportunity for TIM Brazil in 2020.

The combination of a better trend in revenues with costs under control drove EBITDA to grow more than 80% [Phonetic] in the fourth quarter and almost 7% in 2019. Margin also expanded to 42.9% and 39.1%, respectively. This confirms the trajectory that started a year ago, which led the company to show margin improvement in the past six years. Also, our bottom line coming strong with the fourth quarter net profit grew almost 30%, while 2019 annual growth surpassed 32%.

Net profit totaled BRL2 billion for the full year. EBITDA minus capex increased 16% year-on-year, reaching 17% of total revenues, leading normalized free operating cash flow to BRL1.9 billion in 2019. As a consequence, the net financial position closed the year below BRL500 million, a significant reduction in net debt, leaving the company ready for future challenges. Shareholder remuneration is consistently evolving, ending 2019 with close to BRL1 billion in interest on equity, another promise we delivered.

In conclusion, 2019 was a year of great achievement despite the headwinds faced. We posted a solid fourth quarter, which contributed strongly for us to reach our guidance even though service revenue faced challenges. The second half dynamics were better with service revenue remaining above 3%, while in the first half, growth was below 2%. Nonetheless, we delivered on our promises. We were able to renew our operations with the focus on the basic, value rather than volume, quality, innovation, brand and customer satisfaction. We will update our strategic plan on March 11. But the pillars on which it will be built are already set, expand the scope of efficiency, seeking for more opportunities, increase the role of the Internet of Things in our B2B segment, accelerate the volume to value transformation, improve customer satisfaction and develop new sources of revenue.

Thank you. We will now open the floor for questions. Please, operator.

Questions and Answers:

Operator

Thank you, Mr. Pietro. Now we will begin the Q&A session. First, we will take questions from analysts, follow-up by journalists, both in English. [Operator Instructions] Our first question came from Vitor Tomita.

Vitor Tomita -- Goldman Sachs Group Inc. -- Analyst

Hi. Good morning, Pietro. Good morning all. Two quick questions on my side. So the first is but given the Q-o-Q decrease this quarter, if you could give us an update on how the initiatives to improve bad debt and collections have been progressing since last quarter and at what level we could expect this line to normalize, if it continues to improve.

And second question would be about G&A. The earnings release mentioned that G&A was mostly due to cybersecurity projects in IT. If you could elaborate more on this and on whether they could -- any specific goals or addressing any specific compare, this would also be helpful.

Pietro Labriola -- Chief Executive Officer

Thank you, Vitor. Before we go to the answer, we understood that some of you perceived some issue on the line. I really apologize, and we can go hold any gaps during the Q&A.

Related to your two questions, let's start from the second one that is related to our G&A and mainly to our cybersecurity expenses. Keep in mind that in 2020, TIM Brazil specifically in the month of August, we entered the new law, LGPD. These are, for people that are coming from other country, the new rules related to the data privacy. So we started to prepare the company for that moment. That is a key element. And people that are coming from other country understand very well how much is important of this activity.

Related to the first question, that is bad debt, we are proceeding exactly as we stated in the previous quarter calls. We highlight to everybody that the third quarter should be the worst one, but the fourth quarter could improve related to the third quarter. And we think that we can further improve during the next quarter, quarter-over-quarter. It's clear that it's a factor. And the early sign of improvement are coming, also looking at the collection result of the 1st month of January.

Vitor Tomita -- Goldman Sachs Group Inc. -- Analyst

Perfect. Thank you.

Operator

Mr. Marcelo Santos would like to ask a question.

Marcelo Peev dos Santos -- JPMorgan Chase & Co -- Analyst

Hi, good morning. Thanks for taking my questions. The first question is if you could please comment a little bit on -- give us a competitive update on the mobile market in Brazil.

And the second question is if you could comment how do you expect the 5G capex play out and the mix with the remaining of your capex. Do you expect any kind of expansion in that or capex should remain roughly as it has been trending? Those are the two questions.

Pietro Labriola -- Chief Executive Officer

Okay. First of all, competitive environment. As we stated, and the thing that is something that was reiterated mainly by all the operators, we saw a second half compared to the Phase 1 more rational. And the movement that was made by Vivo, if I'm not wrong, in September and October to increase price, was another sign of an improvement in this arena. I think that also the market consolidation that already started with the acquisition by Claro of Nextel is helping because it was clear that there were some players with a more aggressive approach. And so we are quite positive on the competitive environment. Also on the prepaid, we are starting to see some early sign of macro recovery that could be passed if they will be confirmed during the year.

Related to the capex, then I can leave the stage to Adrian and to Leo to elaborate more on that, but we are respecting our guidance in terms of capex. And we will release more information on the 11th of March when we will present our three-year plan. But as we stated several times, we don't see that to have specific difference from what we declared.

Adrian Calaza -- Investor Relation Officer and Chief Financial Officer

Yes. Thank you, Pietro. The thing is regarding the effect of 5G on our capex, we are not seeing significant effects going forward differently with what happened with the 4G during 2013 and 2014. If you remember, here in Brazil, the 4G deployment has been accelerated because the country was hosting the soccer World Cup and then the Olympics. So it has a specific effect in terms of rollout of 4G. The 5G probably will be more collaborative with the 4G. It will be more stable in time. You follow what the recommendations coming from the GMSA. There will be a lot of collaboration between the 4G and the 5G. Even the 4G will be operative even until 2030. So we are not expecting significant effects on capex coming from the 5G. Probably, yes, it will depend a lot on how the auction is designed but not something as it happens in 2012, 2013, will the company reach almost 27%, 28% of capex on revenues.

Marcelo Peev dos Santos -- JPMorgan Chase & Co -- Analyst

Thank you very much. Very clear.

Operator

Our next question comes from Mr. Fred Mendes.

Frederico P. Mendes -- Banco Bradesco BBI S.A. -- Analyst

Good morning everyone. Thanks for the questions. I have two questions as well. The first one related to the service revenue growth. I just want to get a better understanding of the dynamics of this line. I mean looking at the numbers, when I see the revenue generated by the client, it grew 3.8% in this quarter. Last quarter was 1.9%. But other revenues were slightly weaker this quarter. But I mean overall, when I look at this picture, it seems that the quality of the pipeline growth was much better. So I just want to understand the dynamics here and what you expect for the next quarters.

And I think for the second question, when I look at the cash COGS, I mean, a great job on this line. But that looks like a huge [Indecipherable]. So I'm just trying to better understand here to incorporate in the model. What kind of savings -- I know it is not a guidance, but if you can just give us a light what kind of savings we can somehow expect or anything that helps us to calculate and then eventually to incorporate in our models about this agreement with Vivo and how much more it could help for you to control your cash COGS. Thanks very much.

Pietro Labriola -- Chief Executive Officer

Thank you, Fred. Related to service revenue, I have to remember that what is happening is exactly what we stated also in the other quarter. We explained that also the other revenues as part of our business because mainly swap is an important component to control and help our company to further increase our network coverage, and it was something that it was healthy for us. In the meantime, we started to say that our service revenue could start to increase with the exception of other revenues also because the job that we did during the year should start to give us also better results. You can understand that the service revenue is the result of the increase of customer base and the work that we do on the ARPU. We said that during all the other quarters. And now we can say that we are back. We reported also finally positive net debt. January, we are again with positive net debt. If you look our ARPU, it's growing. So let me say we are proceeding exactly as we stated. The trend of other revenues is not -- we cannot define that there's a trend because they come based on the possibility to close agreements for the swap. What is important is the trend of the service revenue that is confirming that we are on the right track.

Related to the cash cost, independently from the MOU with Vivo, and then again, I'll leave the stage to Adrian and Leo to elaborate more on that, we think that we still have a crystal ball. Thanks to our control on cash cost, we reached in 2019 our goal that was for 2020. So I have to do my compliments to our own team that was able to continue to perform in the cost controlling. Second, we think that we still have margin to further improve our cost. Just to share with you, we still have at the customer care level a lot of calls that today are answered by human attendant. Each call, if it is prepaid, has a cost of BRL3. If it is a Controle call, it has a cost of BRL5. If it is postpaid call, it has a cost of BRL8. So we can image a good level of saving that we can reach with the continuous improvement of our digitalization and the use of the app Meu TIM. I mean I think that -- just to show that. There are other areas like that where we can further improve.

Related with the MOU with Vivo, I'll leave the stage to Adrian.

Adrian Calaza -- Investor Relation Officer and Chief Financial Officer

The effects of the MOU, we need to think that this agreement because it's not anymore an MOU because it's already agreements, are long term. And basically, you shouldn't expect significant reductions in terms of OpEx even if the third agreement is not put in place totally. But what you should expect is some capex -- future capex savings because at the end, if you consider -- first of all, the first agreement, the 2G agreement, yes, it will bring some effects on the cost side. But basically, what the 2G agreement gives is that we would need to focus less on that layer and will leave us space in order to focus on the future layer that will be the 5G, especially when we are talking in terms of space in our sites, in our radio stations. The second one is probably the most important in terms of savings, is the single grid. Today, what we are having with the second portion of the agreement is that we will increase our coverage in terms especially of the 4G because we are agreeing with Vivo to enter in those cities where the other one is not present. If we manage then after the trial that we're doing to put in place the full single grid in those cities below 30,000 inhabitants, that's where we're going to have the significant impact in terms of both of cost and also capex. This is more on the economic or financial side.

I think that Leo can give you the most strategic view in terms of network, but it's also extremely important on this side.

Leonardo De Carvalho Capdeville -- Chief Technology Officer

Thank you, Adrian. In fact, Fred, yes, we have to celebrate not just this contract. Remember that we are waiting for CADE and ANATEL approvement. But after that, what we have to celebrate is the new phase of the marketing that we mentioned for the collaborative environment and the maturity to share the infrastructure and to face all the possible, let's say, challenges that we have in the future with the new technology of the 5G, the new obligation of the coverage in rural, on federal roads, etc. So it's very important that now the marketing started to think together how to face this challenge and how to do that in a more efficient way. So again, we are celebrating not just this agreement, but this new mindset to collaborate in the infrastructure.

Pietro Labriola -- Chief Executive Officer

Fred, and if I may add something that is more a general statement, giving an answer to your question and to the previous one related to the 5G. Perhaps we are entering in a phase of market rationality. But we can say in the face of competition, that means that we'll continue to compete because this is our aim on all the core services. But we can cooperate with the other player on the next infrastructure but also on the development of new source of revenues because financial services and mobile advertising are two areas where the different player can cooperate more than compete.

Frederico P. Mendes -- Banco Bradesco BBI S.A. -- Analyst

Perfect. Very clear. Thank you, Pietro, Adrian and Leo. Thank you.

Operator

Our next question comes from Susana Salaru.

Susana Salaru -- Itau Corretora de Valores S.A. -- Analyst

Hi guys, good morning. Thank you for taking our questions. If you could elaborate a little bit more on what are the [Indecipherable] of the EBITDA margin next year, what are the main levers that we should expect to continue to support margin expansion. We get that we could see an improvement in bad debt and also on the prepayment recharges, if you see additional [Indecipherable], but we would like to hear from you.

And on the 5G auction, if you can elaborate on your expectations for the format of the auction and if you are aiming for the bigger or the smaller spectrum bands that's going to be there. Thank you.

Pietro Labriola -- Chief Executive Officer

Susana, about how we can further improve our EBITDA, perhaps we can take some vacation because we reached in 2019 the goal of 2020. Clearly, it's a joke, but for sure, there are different areas in which you can further improve. As we stated last time when we discussed about our, let me say, not best practice performance of the bad debt, this is one of the area in which we can add a further improvement to continue to perform on the EBITDA. Digitalization is a process that is not yet concluded. We will continue to proceed. I was mentioning the customer care is one of the area where we can further improve.

If we look at the speed with which we are transforming the recharge from traditional recharge to electronic one, this is another area where we can add further improvement. I think that one of the next challenge for our company that is something that between 2020, 2021 is perhaps some activity that we cannot define as traditional DPO but were in some areas that are not core, there are some players outside that are able to do automatization process that can be reflected in improvement of our EBITDA. What I mean is that we don't have one silver bullet to further improve our EBITDA. It's a job that we have to continue with our financial discipline culture better to try to work in all the lines. And I think that as we demonstrated also this year, what we promised, we delivered and we'll continue in this way.

Related to the 5G, I'll leave the stage to Mario that will give you more details. But on these things, I want also to put a general statement. It's quite difficult to define a road for 5G. One, it's not yet defined the market consolidation. If the market will be with five players, the rules for an auction are defined for five players. If the market will be of three players, the rules will have to reflects a market with three players. If this is not yet defined, I think that is really difficult to define what will happen. And I think that this factor would be a further accelerator on the market consolidation.

But I'll leave the stage to Mario for more details.

Mario Girasole -- Regulatory and Institutional Affairs Officer

It's working. Yes. Probably. [Technical Issues]

Operator

Our next question comes from Maria Tereza Azevedo.

Maria Tereza Azevedo -- Santander Investment Securities Inc. -- Analyst

Hi guys, thank you for the questions. So my first question is on the new revenue lines that you can deliver. So if you can comment a little bit on your handset strategy going forward, if you think you have some opportunities there as well as on TIM Pay and the advertising, what could be the business model that you are envisaging for the financial services revenue line. That will be my first question. Thank you.

Pietro Labriola -- Chief Executive Officer

Thank you, Maria. The 11th of March, we will have the presentation of the new plan, where we will disclose all the details related to all these area. As we mentioned also in the previous call, we think that financial services is one of the area where we can have further improvement. As for mobile advertising, we cannot go through too many details because as is our approach, we like to put on the table the element that we are safe, that is not only promised, but it's something that we can deliver. So I have ask you to wait three weeks to show more in detail all of the projects that we have in our portfolio.

Maria Tereza Azevedo -- Santander Investment Securities Inc. -- Analyst

Perfect. And then as a second question, I have to ask, what are your expectations in terms of the mobile consolidation process in Brazil? I mean players are being a lot more vocal about it, and there's some expectation that TIM could be a leader in this movement. We also have some talks about a potential joint bid. Is there anything that you can share with us in terms of what are your views in terms of the mobile consolidation process and if you think that it is going to happen before the 5G auction?

Pietro Labriola -- Chief Executive Officer

Okay. I think that some statement can be helpful for everybody. We clearly stated our interest in the market consolidation. Second, the market consolidation already started with the Claro/Nextel process. I agree with you that there are some signs that things are accelerating also because one of the player that is the trigger to accelerate this process seems that it is accelerating this process. We think that is something that could happen, in any case, could start in 2020.

Related to the 5G again, I expect that there's the interest of all the system to accelerate the market consolidation to permit then an acceleration on the 5G auction. Without the consolidation, I think that it's quite difficult to have rules well defined for an auction.

But I understood that before Mario was unable to answer to the question. So I leave the stage to Mario to further elaborate on the 5G.

Mario Girasole -- Regulatory and Institutional Affairs Officer

Can you hear me? Okay. Perfect. Now just to complement, of course, it is important first to notice that in this public consultation, there is a very important amount of spectrum available for 5G in Brazil. So I think this is a very good news, very good news because, of course, there are all the needed spectrum for an important investment in the new technology. The detail of the rules are not yet very known because the analysis was not yet published. But we can of course consider important to have some more information about the obligations, the minimum price, etc. But there is a point that, of course, will be discussed in the next months about the rule of the small players, the spectrum dedicated to the small players. In principle, there's nothing that we can consider in a negative way, but there is a condition that the spectrum should be considered an industrial asset, not a financial asset. So the idea of someone to buy spectrum only to resell spectrum does not belong to the telecommunication industry. So probably this is something that should be very, very well fixed by the government and the regulator.

Maria Tereza Azevedo -- Santander Investment Securities Inc. -- Analyst

Perfect. Thank you very much, Mario and Pietro.

Operator

Our next question comes from Mr. Rodrigo Villanueva.

Rodrigo Villanueva -- Bank of America Merrill Lynch -- Analyst

Thank you. Sorry. Good morning, Pietro, Mario and Leo. I have a follow-up on infrastructure sharing agreement with Vivo. Is it possible that an incomer will complain with CADE reducing the scope of this agreement, particularly related to the single grid? And if so, which could be the implications of this complaint?

And then a follow-up to 5G, the auction. Do you think it makes sense to have two 100 megahertz blocks in the 3.5 gigahertz band and one 80 megahertz block considering that new giga-band players are likely willing to get 100 megahertz blocks? Thank you.

Pietro Labriola -- Chief Executive Officer

Before I leave the stage to Mario to answer related to the CADE implication with Claro and the MOU between Vivo and TIM, it's important to clearly state that we always declare our availability to share this kind of approach with the other player, then always to be transparent. In the past, in the market, there were some trials to put on the table all the players at the same time. But it was quite complex. It's kind of a difficult exercise at the same time to find agreement between more players. It's just mathematics. So the idea was let's start with one player but to clearly state that we are more than happy to open this kind of approach to the other player because it will allow us to have further savings.

Now I'll leave to Leo and Mario to elaborate more on both the items.

Adrian Calaza -- Investor Relation Officer and Chief Financial Officer

So just to complement what Pietro said, we have to remember that the role sharing agreement in the past started with TIM and Oi. Somewhat Vivo showed that it has the interest to come with us. And in the rest of the agreement, we have a team Vivo and Oi. So we are completely open for that. Let's see how CADE and ANATEL will approve this agreement. But again, it's not some kind that we are blocking, but it's, let's say, interest to have more efficient on the share and the coopetition on the market instead of the previous mindset that everyone will build their own infrastructure in place that we know that there is no return.

So now I'll leave with Mario.

Mario Girasole -- Regulatory and Institutional Affairs Officer

Thank you, Adrian. A couple of comments on the network sharing agreement. This is nothing new. This is a kind of agreement that was already approved by CADE in the case of Oi and also other cases. So we, of course, understand that all the competitors, the players want to know exactly these agreements eventually to enter and corporate with us. We are open to this. And as soon as this agreement is approved by the authorities, of course, we can see and negotiate with other interested players. And this is our position, formal position written toward the authority.

On the 5G side, of course, again, this should be played with the understanding, of course, of who are the players and how many are the players. So the idea to having a correct number of blocks to be sold depends, of course, on the structure of the market that in the moment of the bid with the real situation. So apparently and arithmetically, we have a lot of spectrum to be sold. That means that we have the opportunity to buy this asset for the future development of the new technology. But the real game will be known only in the moment in which the bid will occur.

Rodrigo Villanueva -- Bank of America Merrill Lynch -- Analyst

Understood. Thank you.

Operator

Our next question comes from Vitor Tomita.

Vitor Tomita -- Goldman Sachs Group Inc. -- Analyst

Hello. Just an additional question, that's came up in our discussions here. We see that in the presentation, you mentioned that you might apply massive MIMO to network stress situations like the New Year's Eve in Copacabana. And one thing we're wondering is whether -- if you roll that out to more sites, if that could create an opportunity in fixed wireless assets and if there could be a good addressable market for this. Just if you could comment on this. Thank you.

Pietro Labriola -- Chief Executive Officer

Before to leave Leo to elaborate on that, it's important -- related to the element of the fixed wireless asset, massive MIMO with 5G, for sure, is an opportunity of, let me say, new source of revenue. But it's more related to the traditional telco services. And TIM is the player that can benefit the most from this approach because we don't have a legacy fixed network. Then about the possibility to increase with 4G the massive MIMO, this is something that you are among the first player in the world to experiment this technology. So thank you to Leo and the network team to continue to be at the leading edge of this approach.

Back to Leo, can you give more colors about that?

Leonardo De Carvalho Capdeville -- Chief Technology Officer

Yeah. Very well, Tomita the question because, in fact, we are seeing two different approach of the massive MIMO, one, is to see that we can improve the quality and the capacity on the network even with the existing spectrum and the existing towers. What it means, less capex and less OpEx in the future to face all the challenges that we have with the, let's say, data explosion still on 4G.

And second, about the WTTx or FWA, what we are seeing is that part of the difficulty of the 5G to explore at maximum this capacity is the kind of spectrum that we use on the 5G that is, let's say, higher spectrum in 3.5 gigahertz or even above that. The point is that with the massive MIMO being applied still on the 4G, we will have capacity on the lower frequency of 1,800 in 2.1 gigahertz. So it can be complemented, now capacity with the coverage. So again, you know that we are a company that have been very, very active. We know the usage of the new technology with the refarming and now with the massive MIMO. So we are seeing that in a very optimistic way in terms to, let's say, open new opportunities of business.

Vitor Tomita -- Goldman Sachs Group Inc. -- Analyst

Perfect. Thank you, all.

Operator

[Operator Instructions] Without any more question from analysts, we'll now start the Q&A session with journalists in English. [Operator Instructions] We have a question from Ms. Ana Lobo from Convergncia Digital. And she states, Pietro talked about an acceleration in the consolidation process through the 5G. And TIM is supposed to be ready for strategic movement. Is TIM going shopping? And would the Oi mobile be a target to be acquired? Pietro, please, can you answer?

Pietro Labriola -- Chief Executive Officer

Yeah. First of all, I think that the sentence that we repeat during all the calls at the end was that our financial position was constantly improving because we were preparing our company for the market consolidation. This is a journey that we started three years ago. And so now from the financial point of view, we are ready to approach the market consolidation. In the meantime, we are starting to perceive that there are all the elements that can allow to further proceed with the market consolidation because from what we are perceiving, some assets can be put on sales in the next month. From this point of view, we clearly stated that in the case of a market consolidation, we will evaluate the acquisition of frequencies and clients, evaluating if it can generate value for our shareholders. So the answer is yes.

Operator

Ladies and gentlemen, without any more questions, I'm returning to Mr. Pietro Labriola for the final remarks. Please, Mr. Pietro, you may proceed.

Pietro Labriola -- Chief Executive Officer

TIM Brazil has shown that it has solid fundamentals and is prepared to take full advantage of the economic recovery. This market is not easy, but it still has enormous potential, requiring focus and consistency to benefit from these opportunities. For this reason, I would like to thank the dedication and commitment of our team who played a key role in delivering those solid results, overcoming many challenges. I would definitely thank you, Adrian, Leo, Mario, Alberto, Renato, Bruno, Jaques and Maria Antonietta. And I'm thanking them in representation of all the TIM. Together, we can do more. [Foreign Speech] During the past year, we were also able to prepare the company to be a protagonist in the future development of the Brazilian market. This ongoing preparation is key as we expect the pieces to start moving in 2020 and the work being done will have passed the benefit from whatever shape the market takes.

Thank you once again for participating in our conference call. Have a great day, and I hope we can meet soon in the coming events we will be doing with the financial market. See you soon.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Pietro Labriola -- Chief Executive Officer

Vitor Tomita -- Goldman Sachs Group Inc. -- Analyst

Marcelo Peev dos Santos -- JPMorgan Chase & Co -- Analyst

Adrian Calaza -- Investor Relation Officer and Chief Financial Officer

Frederico P. Mendes -- Banco Bradesco BBI S.A. -- Analyst

Leonardo De Carvalho Capdeville -- Chief Technology Officer

Susana Salaru -- Itau Corretora de Valores S.A. -- Analyst

Mario Girasole -- Regulatory and Institutional Affairs Officer

Maria Tereza Azevedo -- Santander Investment Securities Inc. -- Analyst

Rodrigo Villanueva -- Bank of America Merrill Lynch -- Analyst

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