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Tim Participacoes SA (TSU) Q4 2020 Earnings Call Transcript

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TSU earnings call for the period ending December 31, 2020.

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Tim Participacoes SA (TSU)
Q4 2020 Earnings Call
Feb 10, 2021, 8:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Vicente Ferreira -- investor relations Officer

Everyone. This is Vicente Ferreira, Brazil's, Head of IR. I'd like to welcome you to our 2020 Fourth Quarter Results Conference. We would like to inform you that this event is being recorded and the replay will be available on the company's IR website. After our CEO's remarks are completed, there will be a questions-and-answers session for participants. Further instructions will be provided via chat message.

We highlight that statements that may be regarding prospects, projections and goals constitute the beliefs and assumptions of the company's management. Future considerations are not guarantees of performance. They involve risks, uncertainty and assumptions as they refer to events that may or may not occur. Investors should understand that internal and external factors to TSU may affect its performance and lead to different results than those planned. Should any participant need assistance during this presentation, please reach out to our team via chat.

Now I'll turn the conference over to our CEO, Pietro Labriola, so he can present the main messages of our results.

Pietro Labriola -- chief executive officers

Good morning, everyone. And thanks for attending our fourth quarter conference call. 2020 was marked by the COVID-19 pandemic, which pose major challenges to society with impacts on the public health and the economy. The measures to combat the pandemic through isolation and social distancing, substantially affected the day to day lives of our clients and our operations.

For TIM, the impacts of the pandemic were mainly concentrated at the end of the first quarter and trough the second and impose on us. First, closure of point-on-sale with a reduction in commercial activity. Second, transition to 100% digital work model. Third, changing voice and data traffic in our network. Fourth, changing the relevance of telecommunication services to the lives of customer and last, fifth, lower economic activity and income availability.

To manage the situation or were in evolution for TIM, it was necessary a lot of focus on execution with agility in decision-making, prioritization and digital coverage. As challenging as this context has been, the company proved to be anti-fragile, presented solid result at the end of 2020 and see the significant transformation for the future, such as the acquisition of the Oi mobile assets, the execution of the network sharing agreement and the beyond core new revenue stream. But above all, delivering what we promised.

As highlight of our fourth quarter, we maintain the recovering revenue dynamics started at the beginning of the second half. We also managed to sustain a solid execution on costs and accelerated cash flow expansion. Net service revenue for 2020 showed positive growth on the back of the acceleration of revenue dynamics in the fourth quarter.

Service revenues in the fourth quarter were up 1.9% versus last year with ARPU growing in all segments. Bad debt was down sequentially and year-on-year representing 2.3% of total gross revenues. On the metrics, the EBITDA margin and EBITDA minus capex of revenues for the full year, we over delivered surpassing our targets for 2022. Mobile postpaid net additions were positive in the fourth quarter as well, while TIM Live clients base continue to grow at solid double-digit.

By the end of the year, we have also reached important milestone. Our network was recognized once again as having the best 4G experience for Brazilian customers. The Special Projects France started to materialize with the signing of the deal with Oi and the equity stake in C6 Bank and confirming our 360 degree approach we also enhanced our governance with the creation of the ESG committee. It is fair to say, we have a pretty balanced performance uniting; financial recovery, operational improvement, network evolution and delivering other value creation initiatives.

Going into more details about -- our revenues recovery in Q4, we saw positive contribution coming from Mobile and Fixed Services, with all major lines posing better performances. The second half service revenue growth was 1.6% year-over-year, while in the first half it was a negative 0.9%. Mobile service revenue accelerated to grow 1.5% year-over-year while Fixed Service were up by 8%. Full year flattish Mobile Service revenue and 28% growth at TIM Live led to total service revenue to 0.4% versus 2019.

All ARPU metrics grew sequentially and yearly showing the ability of the company to extract value from all segments of its customer base in Mobile and Fixed. Again, this reinforces that our strategy from volume to value is bearing fruits. The Mobile acceleration in the fourth quarter was more pronouncedly impacted by the postpaid segment. Customer management and service quality focus were key to drive strong churn decline, revenue growth recovery. Postpaid revenues accelerated 3.6% year-over-year growth up by a reduction of 100 basis points in churn rate.

In prepaid, we continue to experience a V-shape recovering recharges, although still slightly below 2019 levels. Improvements in the number of recharges and spending per customer are driving this trend. It's worth mentioning our innovative offers launched during 2020, TIM Black Familia plan, the marketplace for entertainment apps, TIM Vantagens. All of these are helping the company to differentiate from our competitor and move away from a price based competition model.

Moving on to the Fixed segment, TIM Live continues to perform at high level. We closed the quarter with this unit growing 25% year over year, TIM Live's ARPU grow high single digit and we added close to 80,000 new clients in the last 12 months. Our fiber coverage grew more than 40% in the last 12 months going above three to two million homes and 34 municipalities. For the fifth year, TIM Live rank number one in the Estadao newspaper ranking for broadband services. These awards confirm the success of our Naked broadband with OTT friendly approach.

As the final element in our revenue discussion, I will comment on the important achievements we had during the quarter concerning our new revenue streams. In less than six months, we surpassed 1.1 million accounts open in our partnership with C6 Bank. Our solid performance is rewarding team with 1.4% stake in the bank. This stake is being valued at more than BRL160 million in our balance sheet, still on the financial services front, team together with other operators, close a partnership with Central Bank to develop fees based solution for payment.

Today, team is already number one in invoice payment by fees. Mobile advertising and base monetization are developing fast. In the fourth quarter, TIM ads reach more than 12 million clients with opt-in in our third party content platform, which translated into 450 million visits. For Informa TIM, a pre-paid specific channel will have that more than one million clients as addressable market for video ads. We close partnership with Accenture, Juvo, Play2Play and Quod in this past months. So we expect great developments in the short term. For our IoT Verticals, we are accelerating smart city solution and industry for Brazil. Both are following this step we concluded in the connected car arena where we have now more than 50% of vacancies as addressable market.

Moving to the infrastructure. We continue to develop our network, both for mobile and feature services. Once again, our strategy was rewarded. The word is called average combined with smart spectrum management and deployment of new technologies build up as the best mobile experience. This was a tested by the OpenSignal report. If we were able to do this with a spectrum gap against our peers image, the possibility was a deal with Oi is concluded. On the fiber front, we surpassed 1000 cities with a drop of fiber, a great achievement for a latecomer like TIM. Our transport network is summing 180,000 kilometers in December, 2020. It is always worth mentioning that track development as this is one of our priority in terms of investment. 2021 targets are being anticipated and we -- being delivered in 2020. So we expect further customer experience improvements.

Our technological transformation is a combination of network deliveries and IT developments. 5G DSS deployment, network sharing agreement, open run and unplugged at sites are proud to take the mobile infrastructure to the next level.

On Information Technology, we are implementing important project that should that pass deliver scale, flexibility, reliability and efficiency. The plan is to have a quality asset running from the cloud in two to three years. While we are just starting our journey to cloud in the IT, we've already successful, implemented the new cognitive IVR and the TIM mix product. In the first, TAIS, our artificial intelligence assistant is helping reduce human interaction by 18%, while 22 million calls were answered.

Under the TIM mix project, we implemented a simplified dashboard from Google to help you human attendance to improve their efficiency and quality of caring. We are improving all our digitalization metrics, demonstrating the capabilities we are building with our digital system are helping to accelerate our digital transformation process. So, much so that we are delivering in the four main pillars impacted by digital transformation, very strong results.

Human interaction following almost 40%, adoption of E-payment and billing above 75%, E-recharges penetration of close to 45%and TAIS growing in all segments. In the past two years, the combined effect in those lines among other elements produce a reduction in costs of 10.5% on average, while overall opex reduce by 7.8%.

Following, the impact generated by the digital transformation at the company, I'd like to highlight the excellent performance in efficiency and cost control. In 2020 opex was down by 4% year-over-year, even absorbing higher infrastructure costs due to a larger and stronger network, proving that we will not be seeking cost cutting initiatives that could backfire on the company.

One key driver for debt performance was the bad debt, which continuously improved throughout the year. Collection curves, as explained in prior quarters are at their peak. Our effort from now on will be to sustain those levels when revenues are up and opex is under control EBITDA present solid growth. We accelerated the pace of the last quarter to 3% year-over-year, and again posted the best margin of the industry in Brazil, reaching close to 51% in the fourth quarter

As for 2020 EBITDA growth 3.2% with a margin of 48.5%, it's worth noting, we closed the year above our guidance for 2022. Once again, delivering on our promises but in this case much earlier than predicted. In a pro forma view, we produce in the past five year at 750 basis point expansion in EBITDA margin, while EBITDA minus capex grow compounding more than 40%.

We close the year with operating free cash flow showing very solid performance, something more than BRL4.6 billion with positive contribution from EBITDA and working capital. The latter was positively impacted by the improvement in the collection costs and also the post-payment -- the postponement of ANATEL piece.

In 2020, TIM declare the distribution of more than BRL1 billion in interest on capital, maintaining the trend started in 2018. With that, and excluding the effects of financial leasing contracts, TIMs stood net cash in the quarter by more than BRL2.7 billion, including the leasing affect net debt declined by approximately 16%. The cash position of the company of more than BRL4.6 billion realize is a real solid foundation for the financing mix for 2021.

On a quick recap, it is worth mentioning that our special projects are evolving according to our plans. After winning the auction for the mobile assets of Oi, we filed the petition for prior approval ANATEL on December 31st. The signing of the sale purchase agreement was concluded on January 20th, and we already field the formal notification in order.

This deal will transform the company, closing a historical gap of spectrum and putting TIM in a very solid position to compete in the market. We were able to do so much with our network development, having significantly less spectrum than our peers. So, lets TIM match the possibility with the much stronger position.

The process to find a partner with which to develop our residential fiber network continues to follow its course and is proceeding according to plan. We formerly created the vehicle that receive the assets from carve out and we have entered the final phase of the project with the number of parties having submit the proposal that we are currently analyzing. We expect a signing of this transaction in the first quarter of 2021. We will keep you all updated on this topic in the coming weeks and months.

2020 was the year of solid achievements on our phones, including ESG. It is always worth remembering that, TIMs commitment to ESG didn't start yesterday. Our presence in the sustainability index for 13 years in a row is an example of our positive track record.

On environmental, we are at the solid base to reaching our goals for carbon neutrality, emissions and eco-efficiency. Our energy projects are developing well. And we have more than 60% of our energy consumption coming from renewable sources. And we close the year back in the Carbon Index of B3.

For social, we are meeting the targets ready to the commitment to our employees, in terms of training and workplace climate. Additionally, we're investing more in diversity and inclusion projects, such as our internship program.

Governance was marked by the creation of our ESG statutory committee, and our leading presence in the diva index for women board representation. TIM remains as the only telco company in Novo Mercado. And the only one who received the party certification from the Federal Comptroller General.

Concluding my comments, I point out the unprecedented challenges faced during the year and now we have accomplished great things. Power from volume to value strategy proved to be solid and that path recover our revenue dynamics during the year, while cost discipline and efficient approach help to cope with expenses pressures. The new avenues for revenue growth are becoming more tangible and materializing the opportunity ahead. And finally, we have a very interesting opportunity to unlock value with different strategic products.

When we look at our plan, we were able to deliver our main targets for 2020. EBITDA minus capex grew more than 5%. EBITDA minus capex on revenue reached close to 26%. capex stayed at low 20s level. EBITDA and services revenue growth rate, as expected, as plan out during the year were below our original target but still show solid performances. This performance led us to enter 2020 at the solid speed. And we are expecting the country to start recovering faster from the pandemic, with the arrival of vaccines.

As I mentioned in the beginning, the anti-fragile stance of the company turn the challenges into opportunity to evolve further. As I will say, at TIM, we don't use shortcuts. We will maintain our focus on the sustainability of the business with a rational approach and solid execution.

Thank you. We will now open the floor for question. Please, Vicente.

Vicente Ferreira -- investor relations Officer

Thank you thank you Pietro. Good morning, everyone. Once again, I apologize for the technical problems that we had during the English conference call. We will now start the

Questions and Answers:

Vicente Ferreira -- investor relations Officer

So the first question comes from Leonardo Olmos from UBS Bank. So Leonardo we'll unmute you, and you'll be able to make your question. Thank you.

Leonardo Olmos -- UBS Bank -- Analyst

Okay, good morning, everyone. Can you hear me?

Pietro Labriola -- chief executive officers


Leonardo Olmos -- UBS Bank -- Analyst

Okay. Well, thank you for taking the question. Yeah. My first question is regarding the infrastructure sharing agreement with Vivo. We saw on the one of the last slides that it is going well. In the last week, we spoke with the Vivo [Phonetic] CFO, and he said that you reached all the targets that you -- the two companies were expecting. So I was wondering, if it could escalate in 2021, what we could expect? I know you can give quantitative guidance in that sense, but maybe qualitative, what else could you do? Maybe share other parts of network, maybe share larger series, 3G? What could it escalate to, thinking medium term?

Leonardo Capdeville -- chief technology officer

Hello, Leonardo. Here is Leonardo too. So let's see. Talking about the sharing agreement, we are going very well. As you mentioned before, in fact, we started last year with the -- obviously, that is the improvement of coverage in the cities that was not served by Vivo or by TIM. So it was the first, let's say, phase.

Now we are moving ahead with the 2G switch off. And the most important part of the project. This is what we call the single grid. The first step is to running a pilot Wi-Fi around our 50 cities. And we are preparing all the rollout for 2021 to speed up data after these initial, let's say test. The test is important that you guarantee that we still deliver not that they let's say the same quality that we have. But we expected to improve the quality at the same time that we are reducing the cost. So we really believe data we can speed up this project in 2021, the single grid agreement.

As I mentioned, we will start with the target to serve the cities below 30,000 inhabitants. But proving data, I guess that we have, let's say our open space for to be more aggressive on the next two years. So the most important on data is not just the result, but it is to establish a new, let's say mindset among the companies that to serve in a share the infrastructure is a better way to be more efficient and to improve the quality of the network in Brazil. Thank you.

Leonardo Olmos -- UBS Bank -- Analyst

Thank you.

Pietro Labriola -- chief executive officers

Leonardo, Pietro speaking. If we can add some more qualitative elements as Leo mentioned, the most important element is a confirmed trend in the Brazilian market that showed that the growth of the network is coming also through this kind of network sharing agreement with no boundaries what we mean that we are open to discuss also with our telco player in Brazil, this opportunity. This is an important path not only for the component of the traditional mobile network, but also on the fiber side where the Infraco will allow to all the operator to do for their synergies, and this is something that in some way, is also below the line included in the 5G Anatel for the next auction.

And the last but not least, these are the basis to start the evaluation of the possible,

Switch-off of 2G and 3G data further higher in DRC is something that we have to start to targeting.

Leonardo Olmos -- UBS Bank -- Analyst

Thank you very much Pietro and Leo. Yeah, I was going to ask you about all the things, but then you just mentioned something interesting now Pietro. 5G, so what type of infrastructure sharing or anything less than that? Could you -- could the three players agree that sense? Or maybe in a much -- more broader sense, what type of sharing could happen in the 5G deployments? Could you elaborate on that, please?

Pietro Labriola -- chief executive officers

I know that can give more detail, what is important to state is that. Nowadays, there's nothing that was fully defined. This is something that we understand from the Anatel that as a framework is in line with what we were expecting, then it's clear that they will is always in details. So we have to look the number, the value back. The framework shows some trends that could be really positive for the overall telco industry. Mario if you can.

Mario Girasole -- Regulatory & Institutional Affairs Officer

Thank you. Good morning. Just for -- just related to the network sharing, the current version of the auction scheme is open to all the possible sharing between operators, both in the transmission and in the access side. So as Pietro said, we have to wait about the detailed rules. And then of course, we will analyze all the opportunities in that sense considering that team in the last decade is really a pioneer in terms of catching the opportunity of network sharing since the first 4G in 2012.

Leonardo Olmos -- UBS Bank -- Analyst

Okay. Great. Thank you very much.


Our next question comes from Marcelo Santos from Bank JPMorgan. Please Marcelo, we will unmute you and you will be able to make your question.

Marcelo Santos -- Bank JPMorgan -- Analyst

Hi. Good morning. Can you hear me?

Pietro Labriola -- chief executive officers


Marcelo Santos -- Bank JPMorgan -- Analyst

Perfect. So thank you for taking my question. The first question is about the 5G auction. I wonder if you could comment a bit on some news regarding the need for the 5G network to be stand-alone network. So what could be the implications? What's the current status of the negotiations now? That would be the first question.

And the second question would be on C6 partnership. What are the next steps? What are the next thresholds? Or anything you could say regarding how this partnership could evolve? Thank you.

Pietro Labriola -- chief executive officers

Yes. Sure. Before to leave the stage to Mario and Leo to give you more details about the Fab ESA, I think that it's really important to explain the choices that other telco players did in the world until today. And what is happening here. It's clear that if it was back three years, SC wasn't yet a well defined standard. So three years ago, it was risky to move to the SC standard.

Once we are in front of an auction that will have the first installation by the end of 2022, SC, it becoming a reliable standard that allow for -- to develop all the services we are discussing about for IoT with the low latency. So this is a reason for which team since the beginning was very supportive to move toward SC. Now I'll stage to Mario, and to Leo to expand also because we don't think that the choice between SC and non-SC is increasing the level of capex, because at the end of the explanation of Leo, you will understand that there will be no difference. So while at the same price, I have to buy a car that is two versions older then the new one. Leo, please.

Leonardo Capdeville -- chief technology officer

Thank you, Pietro. Just to reinforce what information that Pietro brings. The standard for stand-alone was finishes in July 2020. What means that? All the companies that is starting the network after that is already using the new standard. One example of that is T-Mobile in United States that launched the network in November last year, and they started the network with a stand-alone standard.

The same is happening in China. China started two years ago, when they -- stand-alone was not defined it. And thereafter, the definition of the standard, they are now moving for a stand-alone. Why we believe that the stand-alone is the targeted that we have to follow.

The first, as Pietro mentioned, the network we start in 2022. So it doesn't make sense that we started data with legacy. The second, the investment in a stand-alone or non-stand-alone network is exactly the same. We are now talking about marketing information, but we are talking with internal information of security contract that we already have.

So it means that 90% of the investment on the network is in the access, in the radio. The radio of a stand-alone, a non-stand-alone is exactly the same, the difference is just the softer. And the softer doesn't have to increase the price offer these implementation and to finish this argument, when you looking for the new stream revenues for the future, what it means the new services. It is just a possible to deliver with the stand-alone, low latency; massive connection, slicing of the network. So, why should deploy two years ago, was sometimes a doubt, but the two years ahead, there is no doubt about the two years the stand-alone for that. Mario please?

Mario Girasole -- Regulatory & Institutional Affairs Officer

Thank you. Thank you, Leonardo. Thank you, in Pietro. Just so -- just one information complementary information. The structure of the bead is like that you have at the value of the frequency and this frequency is discounted of the long-term investments. So, the point is not what kind of investments you will do, of course, is more efficient making the future proof investment is to correctly and carefully calculate the value of the frequency. So, in our opinion, the stand-alone, non-stand-alone debate is quite a non-brainer debate. Of course, we have to invest in something future proof and we have at the big opportunity to discount it from appropriately calculated value of the frequency.

Pietro Labriola -- chief executive officers

Marcelo, can I reach to the second question?

Marcelo Santos -- Bank JPMorgan -- Analyst

Yes, thank you for the answering the first.

Pietro Labriola -- chief executive officers

Okay, thank you. About the C6, it's better to remember the different elements and we cannot go into many details because as you can imagine there are also some element of confidentiality in the relationship with between CCX, but first of all, starting from the next quarter, we will show more level of detail is to allow to everybody to monitor better the evolution. The elements that we are considering are two. First one is more related in something that have impact on our revenues that is the commission and the activation related to our sales activity that we do enable C6 when we sell our package of the mobile services jointly with the C6 offer.

This value are mainly related to the lifetime value of the customer, so it's monitoring that web in the next three, six months from the acquisition of the use of the customer of the banking services. I think that is something really fair. And this is something that we will show you -- show all the next quarter to better allow you to monitor the evolution. The second step is related to the increase in capital. There are some threshold always related to the lifetime value of the customer that will allow us to reach up to the famous 10%, 15% participation in C6.

That really depends from the speed with which we will be able to accelerate our acquisition because it's clear that it's in the interesting of everybody to have a faster acceleration of the acquisition process. Again, also in the next -- the 20 -- in the presentation of the plan, in the TIM Day of 1t of March, we will give more disclosure about debt targets and again, we will allow to everybody to have a better understanding of the monitoring of the evolution.

Marcelo Santos -- Bank JPMorgan -- Analyst

Great, thank you.

Pietro Labriola -- chief executive officers

Thank you, Marcelo.

Vicente Ferreira -- investor relations Officer

Thank you, Marcelo. We will move now to the next question that comes from Diego Aragao from Goldman Sachs. So Diego, we will move to you and we'll be able to make your question. Thank you.

Diego Aragao -- Goldman Sachs -- Analyst

Yes. Thank you, Vicente. Thank you guys for taking the question. And by the way thanks for hosting the presentation, we've seen the quality it looks much, much better. So thank you for that. So my first question is on the postpaid business. The business is really improving and it's now pushing, let's say, the overall results of the mobile segment. But we've also observe that TIM is somewhat lagging its peers in terms of net additions. So I guess my question is what is behind this relative weak performance on the postpaid and what are you guys doing in order to improve results in the near term? Thank you.

Pietro Labriola -- chief executive officers

Thank you, Diego. I really appreciated your question, because allow us also to elaborate more on that. I think it is important to remember that one customer doesn't mean that is completely equal to one other customer. We are not counting bottle. For example, we can count bottle, but there are some bottle with half-liter of water and some bottle with one liter of water. What they suggest you to understand the difference of the use of the leverage of the ARPU. If you do a calculation looking at the amount of net debts and the growth of revenue, not year-on-year and quarter-on-quarter, if you have four time net debts, you should grow four times revenue.

If it doesn't happen, the risk is that your ARPU is deleveraging or we are spending too much in terms of cost acquisition. What I mean, our focus is not to increase the amount of customer at any cost, as we mentioned in the past. We don't think that is right for our shareholder to get customer with -- postpaid customer with BRL20 ARPU, because it's happen also during the pandemic period, there were some auction, sorry in some area where we were able to get, sometimes up to one million customer with the BRL10 something closely with 20 giga because this is something that then will disappear.

I think as I mentioned during my speech, we are not looking for shortcuts that allow to show wonderful number in the quarter. We think and I think that the number that we are posting are showing that. Our strategy from volume to value is allowing us to guarantee the growth of revenues to keep a level of margin. That is the highest in the market. So we will not accelerated just to posted the better net debts. We think that will continue to post positive net debt during all 2021 but we will continue to be able to improve ARPU also because customers are asking for more data and this is the way to monetize our investment.

This is for which I repeat from volume to value continue -- will continue to be our move. We will continue to work to improve the quality. We have shown in the presentation that we were able to reduce a one percentage point the level of churn. We are growing our ARPU not only year-over-year, but also quarter-over-quarter. So I don't want to look at just one KPIs, but I would like to give a look at the overall picture of our strategy. I don't know if I was clear Diego.

Diego Aragao -- Goldman Sachs -- Analyst

It was Pietro. I guess it makes sense, I mean it's more about thinking on this strategy to shift from volume to value it makes sense, I mean it is indeed brings you an interest client base. And I guess maybe going to a follow-up question on this point. And also on Marcelo's question related to partnerships. I guess we're seeing, you know, TIM seeking to create, let's say, a kind of ecosystem with partners like C6 Bank, in order to leverage this relationship with, you know, a quite interesting client base, as we were talking about, and also leverage on the network and connectivity.

So, I am wondering, you know, what are the possibilities for you going forward? I mean, I can see IoT, financial service, customer relationship, but customer experience, sorry, but I -- but I would like to understand, how fast TIM can move on those new initiatives, as well as what are the main goals for you in the next three years in order to improve the monetization of your customer base. Thank you.

Vicente Ferreira -- investor relations Officer

Thank you, Diego. Again, what we build, you're right, we are trying to create an ecosystem, where the key element is the customer is the key element in the strategy both for our core business, both for new sources of revenue. This is a reason for which we are working to increase the level of loyalty of our customer on the core business.

Once we have a customer that is satisfied with the quality of our network, the price of our offer, the giga that has in our offer and the quality of service that we are offering them, it will be happy to stay with us. So it's easier than to use the same customer base as a new way to create the new value for us and for our shareholder. How? In some model work, we have a lot of digital start-up or other company that are looking for a fast growth in terms of customer base. We have already 50 million customer.

So the use of TIM as a sales channel in some way is a shortcut if you want to grow fast. And also all the digital company know that Brazil is different from the rest of the world. In Brazil, the penetration of credit card is not at the same level that we have in the other country of the world.

So I have the possibility to charge the customer through a bail or through a prepaid recharge. I have the possibility to have a customer, a management through our call center. I have the possibility to use more than 2,000 shops throughout the country to show something is a value.

And company that want to exploit this value are more than welcome to do partnership with us. This is something that we did with C6 and we are trying to replicate and we have in our pipeline other two or three partnership like that in different area from a distance learning to telemedicine to other kind of services.

But I think that this is a trend. And again, when we look for benchmark, sometimes what's happened is that we don't have benchmark because the Brazilian characteristics are completely different from the rest of the world. In the meantime, then while that we have on our customer base in terms of customer behavior, respecting all the LGPD rules, it's huge and our company that are looking for the possibility to exploit that geolocalization, customer behavior in the payment. And this is something that we have already shown.

We have mentioned some of the contract that we already signed. What we can expect in the next three year? This is something that we will show you in number also the 1st of March, during the TIM Day, that will show you better that we are expecting a contribution to the growth of our revenues coming from this kind of services. And the business model that we are putting in place is something similar for some of these deals with what we did with C6, a remuneration for the sales activity. Let's say our go-to-market activity and the participation in the stocks of the company in case of quotation.

Coming back to IoT and this is the opportunity also to explain why perhaps, sometimes we are more vocal on SC. We strongly believe on the IoT business model. This is not the case where that we started in advanced compared to our, the other players. You know that we are the player with the widest network narrowband IoT that is already leveraging the 4G network for that. We are market leader in the agro business. I can say that we are also a market leader in the car manufacturing.

So moving toward ESA is the possibility for us to reach these market position to move to the next step. That is the possibility to obtain a lot of new sources of revenue. Sometimes we try to splint better, now we foresee the 5G with ESA and used to compare to the application store of Google and Apple. 10 years ago they put in place an ecosystem where no one it very well in mind the amount of application that could be developed. But if you didn't put that in place, this application will be never develop.

We think that putting in place and ESA 5G network will allow to develop an ecosystem, mainly in Brazil, that has no limits in terms of possibility of new sources of revenues. Again, perhaps I can see a little dream, but this is true. And again what we are able to do in less than nine months because let's remember, we started to discuss about new sources of revenue in March of 2020 with two PowerPoint chart. Everybody were asking us where is the benchmark and do know the truth that I'm proud to say that now, we are the benchmark.

Diego Aragao -- Goldman Sachs -- Analyst

That's, that's super helpful Pietro. Thank you for the explanation.

Vicente Ferreira -- investor relations Officer

Thank you, Diego. This is Vicente speaking again. And we now move to the next question that comes from Maria Azevedo from Santander Bank. Please Maria, get ready. We will move to you and you'll be able to make your question. Thank you. Maria?

Maria Azevedo -- Santander Bank -- Analyst

Hi, sorry. Good morning everyone and thank you, Vicente. So another question on 5G. How are you going to see the 5G opportunity for TIM in terms of the fixed wireless access and as one consumer mobility? I mean, you have all those upsides automation in IoT, but do you see room for ARPU growth on the back of 5G for ARPU? That will be my first question. Thank you.

Adrian Calaza -- chief financial officer & Investor Relation Officer

Okay. Thank you, Maria. For sure, again lots of thank you to you because you allow me to put on the table, something that was missing in my previous speech that perhaps is one of the first business model on the traditional core business that can justify at least part of the investment on the 5G. That is the fixed and wireless active. We are testing in these days in three different area with the 5G DSS already, the fixed and wireless active functionality. If you remember, we have been working for three, four years on this so-called WTTX, that is, let me say the old father of the fixed wireless active just to improve our learning curve. Brazil is a country in which fixed wireless active will be a good alternative to FTTH. It doesn't mean that it's better FTTH as FTPH is not the only solution. What we meant is a scenario in which you will add FTTH coverage and fixed and wireless active coverage.

We are starting in the phase where it's more convenient the one, the first or the last, and we think that TIM is the player that is best positioned to exploit this kind of opportunity because we have no legacy. We don't -- we are not scared that, that we are going to cannibalize a fixed existing services, both on consumer or on business side, because fixed and wireless active put under discussion sometimes also this align solution, ultra broadband solution for small medium company, so on and so forth. So we believe -- we strongly believe that fixed and wireless active is a business model in Brazil, that is a compliment to the FTTH solution and with the new company that we are creating to further accelerate the FTTH and the fixed and wireless active is using the 5G technology, we are the player that can explore the most this situation.

Then again, moving on them 5G on mobile, I think and -- but in case we are looking, and we are starting because also toward you don't have so many use cases to do a right evaluation. In the short term, the 5G RP increase will be much more driven by a further acceleration of the data consumption that not from the possibility to put a different price for 5G. Again, we are at -- we are still at an early stage of the analysis of these opportunity, but if you ask me what we foresee is that, fixed and wireless active for sure will be an opportunity on the mobile 5G could be an accelerator of data consumption increase, and we must be clever enough to transform these data increase in ARPU increase and so data growth monetization.

Maria Azevedo -- Santander Bank -- Analyst

Perfect. Thank you, Pietro. And my second question would be on the more short term, how are you seeing the competitive landscape in the coming quarters? Do you see room for price increases in 2021 and now for the midterm, like with the early signs of markets repair, should we also see lower industry churn in a more healthy environment?

Pietro Labriola -- chief executive officers

About the environment and possible price up, I think that I'm receiving -- at my own several bills from different utilities also from pay-TV services that are really doing the price up related to what's happened. Keep in mind that the trend that I'm experiencing in the Brazilian market is that, everybody are telling that, that your record price up should be aligned with IGPM, but they will do something lower. So for example, in some of my bill, instead to have an increase of $23.5%, they are putting something close to 9% is something that I'm experiencing also in the ultra broadband environment. So I think that the something that we will apply.

On the mobile side, what we will do is to follow the traditional more-for-more approach. We will proceed with the price chart, but in the meantime, we will put more giga for our customer, because it makes a lot of sense. We are discussing about customer satisfaction. But in the meantime, we have to guarantee to all our shareholders the right return on investment then they wait to reduce. Customer cleaves of misperception is to the more-for-more approach. I can talk for team for sure, because again, then I'm unable to know and understand what we'll do the other tech player.

Then about the next step, what they think is that in the next year we will have a competition, because, again, it's important to stay. We will continue to everybody to compete, because this is what we are paid for. These, what is important for the customer, but the difference could be that there could be a more clever competition base in the capability to offer the best quality at the best at right price for the customer that we think that is something that's very useful for the customer. But in the meantime, in a rational way that we guarantee the return on the investment that can guarantee the improvement of the quality of the service in a so huge country as Brazil. So it's not a country, is a continent.

Maria Azevedo -- Santander Bank -- Analyst

Perfect. Thank you very much Pietro, and congrats for the numbers.

Pietro Labriola -- chief executive officers

Thank you.


Thank you, Maria. Now we'll move to the next question that comes from Cristian Faria from Bank Bradesco. Please Cristian, now we will unmute you and you can make your questions. Thank you.

Cristian Faria -- Bank Bradesco -- Analyst

Hi, everyone. Can you hear me well? Can you hear me?

Pietro Labriola -- chief executive officers

Yes, Christian. We are hear you.

Cristian Faria -- Bank Bradesco -- Analyst

Okay. Good morning, everyone. Thanks for taking my question. I have two related to the FTTH spin-off that will take place in the first quarter. The first one is related to the start of the year, if you can share formations with R&D the primary offer and the secondary offers, if the company to sell just won't bother, just take the money to do in order to improve the growth and invest -- continue to invest in the growth of the FTTH deployment.

And second, since the company is our POS like there is 3,000 net adds per quarter, and what should we expect in those growth looking for this, if the company sees room to continue to grow in this number. And what should be the strategy in terms of the regions. Thank you.

Pietro Labriola -- chief executive officers

I leave the stage to Adrian to give you more details. He is a leading all this process. But let me point out one element that sometimes we forget that in our explanation. We are the only player with no legacy base on pixel network. This is really important, because if we increase the coverage with the project that Adrian will illustrate, we will have all Delta revenues while other player have some more probably related to the fact that having an existing customer base, the difference that they can have also at Delta ARPU compared with what they already have. I think that this is an important point, they show as our return on investment on FTTH could be completely different from the return on investment of player that they've already in place an existing network. Adrian, please.

Adrian Calaza -- chief financial officer & Investor Relation Officer

Yeah. Thank you, Pietro. Regarding the FiberCo project, as we mentioned, we are in this final phase. We received several offers. And so we are really satisfied with the evolution of the project. We are targeting to reach assigning by the end of March, probably in the first weeks of the second quarter.

The most important thing is that, what we saw is a lot of interest coming from different parties. And specifically in your question, for us, this is an industrial project; it's not a financial project. So, what we are looking for with this spin-off with this FiberCo project, is to evolve on our fixed ultra-broadband business, because we see that there are a lot of opportunities, as we saw in the last two years, that we are growing on reminiscences of something between 25%, 30% year-on-year always with our fixed ultra-broadband.

We feel that there is still opportunities there. We need to continue to deploy our networks and for that, that's the matter of this project. So, this said, we think that there will be primary and secondary proceeds. We need to be very equilibrated on this and always looking at the industrial side of the project.

So, again, we are on the final stage of the process, probably we can give you additional disclosure at the beginning of March in our TIM day when we will be communicating or plan, that we are honestly very satisfied with what we have so far.

Cristian Faria -- Bank Bradesco -- Analyst

Okay. Thank you, both.

Pietro Labriola -- chief executive officers


Vicente Ferreira -- investor relations Officer

Thank you, Chris. And now we will move to the next question that comes from our chat. The question comes from Felipe Cheng from Credit Suisse. And I will read for you guys.

Can you please comment on what was the main reasons for a sharper decline in prepaid revenues versus the previous quarter? What do you expect in terms of prepaid growth for 2021? Could we see a negative impact coming from lower government aids? Thank you, Felipe. Please, Pietro and Alberto.

Alberto Griselli -- Chief Revenue Officer

Hi, Felipe. Thank you. First of all, what's happened related to the fourth quarter. If you divide the fourth quarter in the three months, the concentration of the decline was mainly in December. As you remember, December in Brazil, for the prepaid mainly the past was a month with higher level of seasonality, is some -- usually just to share with you. The level of recharge during the month start with the first 15 days higher and second 15 days lower.

December was an anomalous month, because due to the Decimo terceiro salario, the -- I don't know how to say that in English, you have the first 15 days high and the second 15 days high, because it's like if people will get two salaries.

What's happened is that, this year the seasonality of December was much lower compared to the previous year and the concentration was exactly in the last 15 days of December. Some of the explanation that we have shared internally was also related to the fact that the so called motor zero, a lot of company paid previously during the year to support the part of the necessity of their employee. So we don't think that this is something that will be or will continue during the year.

About the auxilio emergencial, I leave the stage to Alberto with which we're sharing in these days an in depth analysis to understand if the auxilio emergencial was an offense about that, but I leave Alberto the possibility to explain. Well, a few comments on this. When we look at the outlook for 2021 for this year, there are a number of factors that need to be considered. The first one is that, what we believe is that telecommunication is more important to customers that it was one year ago. And this is clearly a mitigating factor in terms of the trend for this year, meaning that when you look at the trade off of Telco versus other products, especially for prepaid, we see prepaid in a better position this year than it was one year ago. When we try to correlate the effect of -- I think there are two main factors here, impacting the trend of prepaid recharges that are the -- the auxilio emergencial and the lockdown that came back into action this year, especially in some states. When we look at the correlation of the auxilio emergencial is difficult to say that there is no impact at all. We will -- we are talking about on average 30 billion that the government put into the economy over the last nine months. Even though over the last three months, this number was a -- was lower. The first step down in this amount was in October, and we didn't see a material impact. As a matter of fact, the number of recharges -- recharges and people recharge have been growing last year after the first cut. And when we look at what is happening in January, we see a limited correlation. We see more correlation with lockdown in specific states. So when a state goes locked, we see that the recharge tend to decline, primarily because people are at home in our view and use more WiFi -- WiFi they don't have a need to recharge. So I think that these three elements, the top of mind of Telcos, lockdown, and are more relevant rather than the auxilio emergencial itself.

Pietro Labriola -- chief executive officers

But our view for 2021 is positive, also on the prepaid.

Adrian Calaza -- chief financial officer & Investor Relation Officer

Thank you, Philip. So with this question, we are finishing our quick Q&A session. And we will move to the closing remarks of our CEO. Thank you very much.

Pietro Labriola -- chief executive officers

TIM Brazil, once again, showed it has very solid fundamentals. We continue to deliver on the promises we made. And we have a very clear strategy to guide our actions. As I always say, being focused and agile our key to reaching our goals.

As I do every quarter, I really like to thank the dedication and commitment of our team with overcoming great challenges and delivering great result. Thank you for participating in our conference call. Stay safe and healthy.

I hope we can eventually meet soon in the upcoming events. We will be doing with the financial market. Remember, on the 23rd we will be disclosing the update of our industrial plan. After the Telecom Italia group event on the 24th, we will also have a Tim Brasil Day on the 1st of March to go into more details of our plans going forward.


[Operator Closing Remarks].

Duration: 69 minutes

Call participants:

Vicente Ferreira -- investor relations Officer

Pietro Labriola -- chief executive officers

Leonardo Capdeville -- chief technology officer

Mario Girasole -- Regulatory & Institutional Affairs Officer

Adrian Calaza -- chief financial officer & Investor Relation Officer

Alberto Griselli -- Chief Revenue Officer

Leonardo Olmos -- UBS Bank -- Analyst

Marcelo Santos -- Bank JPMorgan -- Analyst

Diego Aragao -- Goldman Sachs -- Analyst

Maria Azevedo -- Santander Bank -- Analyst

Cristian Faria -- Bank Bradesco -- Analyst

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