Please ensure Javascript is enabled for purposes of website accessibility

Tim Participacoes SA (TSU) Q1 2021 Earnings Call Transcript

By Motley Fool Transcribers - May 7, 2021 at 5:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

TSU earnings call for the period ending May 8, 2021.

Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Tim Participacoes SA (TSU)
Q1 2021 Earnings Call
May 7, 2021, 8:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to TIM Participacoes 2021 First Quarter Results Conference Call. We would like to inform that this event is being recorded. [Operator Instructions]. We highlight that statements that may be regarding the prospects, projections and goals of Tim Participacoes constitute the beliefs and assumptions of the company's Board of executives of 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'll turn the conference over to the CEO, Mr. Pietro Labriola, so he can present the main message for the First quarter of 2021. Please, Mr. Pietro, you may proceed.

Pietro Labriola -- Chief Executive Officer

Good morning, everyone. And thanks for attending our resource conference code. We started the year with the high hopes that the worst of the pandemic was behind us. Unfortunately, already February. The second wave started with some resiliency. This has spread more broadly during March. Of course, this time, we were more prepared to sustain the impacts from more strict measures to control the spread of the virus. Also, the fact that CDs implemented those measures in different moments of the quarter made a difference in our over attacted. In all, the consequences of the second wave in our business was smaller than the first wave a year ago. Considering these are not altering materially any part of our strategic plan disclose to you in our team Brazil day. Later the project, not the targets are going to be changed. We are confirming our entire guidance. The first quarter was marked by excellent execution. We accelerated our recovery started in the second half of the last year. And both revenues and ABA are growing more in our recent results. We closed the quarter with service revenue growing more than 3% year over year. ABA abga can in very solid up 4.5% versus last year, it some more than 2 billion, representing a margin of almost 47%. As you probably saw last night, we'll reach an agreement with HS completing the deal for our fabrico a great deal for both companies. As I said, our customer platform plan is moving forward. And we are much closer to announce new partnership for distance learning education and digital wallet on the technology front, which more than 4000 cities covered with 4g and more than 120 sites in the sky coverage project. We also signed the agreement with the vendors for our journey to cloud project.

These achievements show our commitment to improve the quality of our service implement more cost efficient solution, and last generate social and environmental positive impact as we detail in our ESG plan. Last but not least, this quarter there Tim live was appointed as the best broadband service in Brazil. detailing our revenue acceleration we still positive contribution coming from mobile and fixer services with our lines posting better growth rates. Then the fourth quarter mobile service revenue accelerated to grow to 8% year over year with postpaid segment growth, also spending up to reach almost 4% mobile service revenue is also receiving the contribution of customer platform projects. And this is the second quarter that we look revenue from this new revenue stream in this quarter, it some 17 million. In parallel pizza services are also growing faster up by 12% with a solid contribution from the lives of more than 20% year over year. ARPU improvements in all segments are a significant driver for both mobile and pix accelerations. The key element of our mobile recovery amid the second wave of pandemic is the ability to play our game of from volume to value. despite there being so close across the country impacting our commercial activity, our mobile app you grow almost 7% year over year with postpaid and prepaid contributing positively to the performance. We expected to improve even further our prepaid dynamics. In the first quarter, we increase the participation of Evie charges to 55% of the total and accelerating the adoption of team Mies van tarjan advantage problem in mostre. prepaid recharges were likely positive versus last year, back in every day I have by 9%. For postpaid churn reduction was a highlight once again.

At the same time, we continue to differentiate our offers with the Ott marketplace, and try to monetize data consumption with a more formal approach. Still in the mobile arena, but now talking about new initiatives on the customer platform name, our project are starting to bear fruit. Out of the 17 million realized revenues 11 were generated by financial services. 6 million were generated by mobile advertising. The latter was driven by the evolution in maths and implementing platforms. Besides data rewards for video ads, we are working on lead generation service and app installations in the second quarter, which sped even more after the launch of Tim farm, and our partnership with play to pay them us with Ico. Talking about the future, the customer platform roadmap is for what's in the second quarter, we expect to sign an MOU with any learning platform, and our digital wallet negotiation are speeding up. So we expect news by the end of the quarter. This time we either managed to bring other telcos on board or we doing Hello, Han we are starting the first negotiation. So it will be something for the quarter. Changing gears and moving to the fixed services. It's not a surprise that team lives consistent performance. combining our current customer base growth produce saw the result in the past year. And it's no different this quarter. Additionally, we are developing the connected concept to bring more innovation to our clients and sell intelligent devices. Regardless of the difficulties he posed by one year of pandemic, we managed to keep growing our coverage, reaching 3.5 million ohms pass with Father 40% against last year.

This is a remarkable achievement, but we believe we can do more. That is why our team is partnering with HS in the fabrico project. As we've been saying from the start this deal as an industry orientation, different from other deals you can find in the market. summarizing the day, the fabric cup will receive team lives last month network net DPH and FTC and the team will 14% of the capital of the new company team will drive the network's rollout but the father will be open to other players to the fact that coke was valued at 21 times in terms of enterprise value on a BGA multiple entity may receive 1 billion in proceeds from the transaction. As a consequence of the deal, will they consolidate a large portion of team labs capex and even if new costs emerge from the last night ran, the net effect will generate a positive contribution to pre cash flow. maintaining our discussion on infrastructure developments. I'd like to remark that it was not only the broadneck coverage that grill Storyville despite the challenges of the moment. Mobile coverage also expanded summary saving The last 5% more cities covered with 4g 27%. More in for the 5g, more than 40% growth in cities covered by surrounding magnets, and more than one on the 20 sites with the diskette coverage project to cover remote areas. But network developments didn't stop there. We are preparing our network for voice asset integration and planning the 5g rollout. In this context, massive mammal rollout side mode and the network sharing agreements with people play a crucial role in the next step of our infrastructure plan. Before moving to a cable solution, I wanted to remark that despite 5g DSS being the 5g or marketing, it has its spot its importance, and we know how to play this game.

That is why we are ahead of the competition on this front as well. Today we have the broadest coverage in this technology with LinkedIn cluster of cities and approximately 150 DSL station. Also our customer access the 5g DSL technology more frequently than our competitor clients. And to complete the 5g topic, the most the first Brazilian telco to test 5g stand-alone with commercial equipment, reaching speeds about one to 10 gigabit per second. Now on the IP front, I'd like to remark things prior more with the support of Microsoft and Oracle to be the first operator and one of the first company in Brazil to migrate 100% of its data center to the cloud. We already detained the project during our investor day. But I want to use this as an example of the importance of having an integrated approach to ESG. In this project, we combine innovation, cash flow, focus efficiency, and positive environmental impact to take came to the forefront of IT IT solution. It is essential to alive This is not the only example. When we analyze the outputs of our digital transformation, caring services, and now they positively impact NPS in different segments. It is becoming clear that technology will pass then with one of the most pressing ESG challenges protecting its customer satisfaction. One of the beauties of digital transformation is its newsletter. At the same time, it support customer experience, but it also helps to control and reduce costs. We're still in the middle of the process. So we have a long way to go. But this past year, digitalization speeded up for sure one of the consequences of the pandemic.

He recharges EBS epayment, he says and apodization are presented double digit increases versus 2020. On top of that peaks, which was launched six months ago, already has more than 2 million theme invoices paid. In this context, our objects continue to be under control, rising well below inflation. It went up just 1.7% versus doesn't 20. But that continue to show solid performance. But as we mentioned in the fourth quarter, the main structural changes were done. improvement would be more incremental than transformation. And we need to account that we're more than 60% of our revenue was paid. Clearly, that combination of revenues going up and costs under control is well known. It produced abga growth, in our case, a solid 4.5% year over year disease then think quarter with positive ABA growth. Additionally, it also generated margin expansion to reach 46.6% and net income rise of almost 60%. As I mentioned earlier, we are preparing our network for always asset integration and resuming project initially scheduled for 2020. So our investment totalize 1.3 beanery is growing more than 40%. Before I conclude my presentation, I'd like to highlight that the mobile sector is being reshaped by viewer acquisition on one side and the spectrum auction on the other aside, both are expected to call at a certain point in the quarter on the oil mobile deal, it is worth pointing that the transaction approval process is going according to expectation.

Wait for completing all the necessary steps with Canada and Annabel for both to conduct their analysis. Now, we must wait for the auction, we continue to view it as having a well designed structure, which will privilege investments to sell customer in the best manner. As we stated before, Tim's focus will be the 5g frequencies. We're waiting on tissues contribution to complete the details of our strategy for the auction. ending my comments, I want to remark on the sound result we are delivering amid a very complex environment, which confirms the company positive momentum and solid fundamentals. So we'll we'll continue to work on mobile growth acceleration, the expectation that vacillation can represent an upside implementation of the deal with HS to grow further our ftth business. continue developing our customer platform strategy to increase each contribution, transforming our infrastructure and preparing the company for the future. And lastly, maintaining the focus on profitability and financial discipline.

Thank you. We 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 followed by general public, both in English. If you are listening through webcast, your questions can be sent by chat. [Operator instructions]

First question comes from Matt Robbilliard with Barclays. Please, you may proceed. Please hold while we call for questions.

The next question comes from Leonardo Emilio with UBS.

Leonardo Emilio -- UBS -- Analyst

Hi, good morning, everyone. Can you hear me? Well?

Mario Girasole -- Regulatory and Institutional Affairs Officer

Yes, yes. Very well.

Leonardo Capdeville -- Chief Technology Officer

Okay. Thank you. Sorry about that. Well, I have two quick questions. The first one about the fiber could say to IHS ratio. First of all, congratulations. I wanted to know if you could share with us the data that these operation was generated. So we can understand a bit about the multiple and if there are any, are any long term clauses in the deal such as there are no thank you.

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

Okay, hi, Natalie. here so you know that It's not easy to disclose those kind of information in terms of EBIT, da. But I think that since Pietro mentioned the multiple that we arrive with, with the enterprise value that, that we're considering, you can do the math. And it's, it's almost pretty easy, then. Well, well, Pietro mentioned the Peter mentioned the 21 times enterprise value over over the 2020, pro forma ptdi. So the thing here is that that's the 2020. Every TDA, in terms of pro forma, clearly, what we had, it's a very challenging business plan, but is the internal business plan that we have, even before the transaction, what I'm trying to say is probably in the future, we can do more of what we put in the business plan, because at the end, that's the goal of closing this deal in specially with, with IHS buying them up on an industrial partner in this case, because, remember, we always said that this for us was not a financial deal. It's more an industrial deal, due to the fact that we wanted to be in the business of fixed ultra broadband. It's the opportunities that we that the market will have in terms of new connection of the ftth, in the next three years, up to 11, millions of new connections, you're going to send that there is a lot of space for many players. And we want to get a portion of that opportunity.

So internally with the actual situation, could have been a little bit difficult, because these will mean additional topics being depicted for Birdman, most most much more capital intensive than the mobile. So that's the first goal of the project. And then yes, of course. We can also mention the more financial side of the transaction, and then you arrive there to that to that multiple of 21 times every day. But it's not something that for us is the key. The key for us of this project is industrial. Then, of course this, this secondary that we mentioned, will help us in order to finance the deal with Oh, yes, of course. But be sure that the first word for us for this project was industrial. I think that you had a second question was?

Leonardo Emilio -- UBS -- Analyst

Yes. Thanks for that original. Yeah, and thanks for the answer. The second questions related to the agreement you made with Telecom Italia, I understand that you you've just the seven other companies to provide the foreign the submarine cable, the foreign connection. I just wanted to say before this deal, how which which company were you using? What were you doing before that get access to Safari internet from Brazil?

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

That I don't know if I got your question is regarding our contract that we signed with sparkle?

Leonardo Emilio -- UBS -- Analyst

Yes, yes, that's it. My question is you signed a contract with sparkle right for 2021 until 23. My question is before that, which company were using, what was the capacity? How much were you paying?

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

So this information was disclosed yesterday, in communication, all the information available about this contract with sparkle as it's related party is public.I will pass the floor to miss out there too. So he can explain the user since this is under our wholesale department, please you sort of after.

Alberto Griselli -- Chief Revenue Officer

Lonardo it's it's a quite a standard piece of business meaning that on a yearly basis, we review the terms of conditions of our peering internet traffic. And so we sound the market and we check out the best deal in terms of volume versus prices. And it's This specific contract was discussed yesterday. And yes, it has been awarded to sparkle because he provided to us the best technical scoring and the lowest price and extensive for the 12 months. Renewable.

Leonardo Emilio -- UBS -- Analyst

I'm not sure I got my question in 2020, who was the sparkle who was providing you capacity?

Alberto Griselli -- Chief Revenue Officer

Sparkle to.

Leonardo Emilio -- UBS -- Analyst

Alright, thank you very much.

Operator

The next question comes from Debbie [Phonetic] with JPMorgan.

Debbie -- JPMorgan -- Analyst

Hello, everyone, do you hear me? Well?

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

Yes.

Debbie -- JPMorgan -- Analyst

Okay. Thank you for the call. I have two questions on mobile, if I may, please. The first one you, Pietro mentioned during the the speech is moved from volume to value. And indeed, we can see that the post banner ads from from team have been softer in the past months. But on the other end, you've been able to increase our pools and increase postpaid revenues. I was kind of trying to understand the drivers behind that. Are you benefiting from price increases? Or our customers migrating for higher value packages such as control? And pyrophosphate?

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

Yeah, and the second question?

Debbie -- JPMorgan -- Analyst

The second question is still a mobile. If you could give us a color on competition, we we saw T for launching limited products, how are you seeing this strength or not? Thank you.

Pietro Labriola -- Chief Executive Officer

First of all, thank you, you catch the right point that is ready to our strategy. Let me declare since a couple of years to move from volume to value. As you have seen, we posted a growth year over year in this first quarter, mainly on the postpaid. And the growth is related also to the fact that we add softer net adds increase, but in the meantime, we were able to continue to increase the level of consumption in our package by our customer, what they mean that our package differently from what's happened for example, in some country like Italy, or us do not have a new amount of Giga during the pandemic customer for their increase their level of data consumption. And it will allow us Giga, to package to iron amount of Giga. What is important to realize is that in this number is not yet included the price drop that we did in the month of March, the impact of the ARPU increase coming from the prices will be more appreciable will be appreciated in the second quarter. What is important is that our precept is not the real price increase. But it's with our more for more strategy, what we do, we add more Giga for the customer exchange to our strategy, that we defined from volume to value is composed by package that have Giga that progressively time by time, our increase in terms of amount of Giga in front of a price increase. These will follow the data consumption increase from our customer that in 2020 was driven by the increase of consumption due to the pandemic, but it is a natural trend in a country like Brazil. To sustain this strategy, we have to further improve our quality of service. The fact that we were able also to reduce the level of churn as I mentioned during my speech is a folder element that confirm that we are on the right path.

So, when we will discuss the result of the second quarter we will show a further increase in the revenues of postpaid year over year. This time, they will be much more dream Buy an apple increase unless driven by a customer base increase. Coming back to the second question that is related to the competition, it's time by time, if you remember it up and also with next day, early 2019. There are some operators that are perceived in the market with a lower lower level of natural quality. They try they try to gain space, releasing on demand in the market offer with another volume of Giga to the good part of the market, and of the customers of these offer, and of these operators, what's happened is that they do not have impact in terms of strong increase of customer base of change of operator. So we do not foresee these offer as an issue that can change. So again, I don't know if you were able to catch all my answer, because he understood that there were some technical issue gabin I was able to play.

Debbie -- JPMorgan -- Analyst

Your good cut some times, but I got the answer. Thank you very much get prepared.

Alberto Griselli -- Chief Revenue Officer

Okay. I apologize for the issue. But if you want they can reverse.

Operator

The next question comes from Christian Ferdia with the Bradesco BBI.

Christian Ferdia -- Bradesco BBI -- Analyst

Hi, good morning, everyone. I have two questions regarding the fabric cope deal. So the first one, I'd like to understand the ex mated both in terms of home space. If the economic growth now we didn't see so much difference regarding the effective capital deployment. But we'd like to understand how much did the company cannot achieve in terms of homesteads in the future now with the new investment, a positive vest review previously. And second, my other point is that if the primary offer that the company will receive is enough to fully finance the growth expect in terms of capital gains.

Pietro Labriola -- Chief Executive Officer

Okay, Christian, I think that, first of all, it's important to remember that when we presented the new plan during the team day, we clearly stated in the market that the fabrico project. So once we close the deal with HS The first step of our deal was to use HS to fulfill what was included in our plan in terms of impasse. So, in this in this first phase, we are not adding food their own past that VAT through the vehicle of IHS, we are going to deliver what was already included in the plan. It's clear that that's what we have in mind. [Technical Issues]

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

Let's take the question from here because we haven't some some issues with with a connection. But cretin. I think that you heard with what Pietro was mentioning, we reach this agreement with IHS for for the local based on our actual plan for deployment of, of ftth and obviously, operational maintainers of the actual networks. Clearly, in order to reach the agreement, disagreement, we need to base it on what we already have in with what we are already projecting as I was mentioning in the first question, here, the goal obviously is to accelerate. As you know, the opportunities that we'll have the next few years are big. We want to catch a big portion of those of those opportunities. So yeah Obviously, the intention is to make more of what we were projecting what we have now. And the base of this agreement is the actual plan that we have. So that's why you see the figures of reaching almost nine millions of, of homepath in in four years, or what we're doing in terms of for the next few years.

The other part of your questions is regarding the component of the primary that IHS will be will be paying. If it is enough in order to finance Yes, it's enough to finance the first years of the operation remembering always that the good thing of this fiber call is that is born with an uncle customer that is steam. So the fiber co will have an ABTA since the since the beginning, probably something different in other cases, but again, we try to focus on on our project. So of course, with the DDA and the capital injection coming from HS that it will there will be enough cash will not finance to finance the the additional deployment. Obviously, every company could, can can be much more efficient through leverage. And we all obviously could consider this alternative. But again, we're we're very comfortable with the least with this level of primary, at least to finance the first three or four years of the of the of the five.

Alberto Griselli -- Chief Revenue Officer

Do you here me well now?

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

Yes, Pietro.

Pietro Labriola -- Chief Executive Officer

Okay, sorry, apologize. Just to complement what Adam was telling. I was telling before that, it is important to remember that when we presented during the hour, during the presentation, our tree as planned, we didn't include in our numbers, the father co operation, the father coding. So in this first page, what is happening is that we are replicating with Father code, the target of them past that they were in our plan, in our existing plan, it's clear that we have the flexibility to further accelerate, because our goal is to use this vehicle to have an acceleration in terms of coverage, the way in which this deal was built to give us the flexibility to do that, as Darren was explaining also from the financial point of view, there are all the elements that can allow us to have a further acceleration, what we'll do is that once we put everything in place from the operational point of view, the next step will be to evaluate the right speed up that we can add with this vehicle.

And again, as I'm saying also to the first question that received their own fabrico, it's really important not to discuss about which is the level of the day of this particle, because from our point of view, this is any industrial operation, and this is not a financial operation, because if we would like to have a financial operation that it was quite easy to increase the level of a BD of the company, increasing the transfer price of the cost of the local loop, we get these ladders at a low rate because this is a vehicle that will allow us to further accelerate our growth in the ultra broadband business. So again, I like to stress this point because this is not a financial deal. It is also important financial components but at the end of the day, it is an important industrial deal. It will allow us to further accelerate our ultra broadband development.

Christian Ferdia -- Bradesco BBI -- Analyst

And perfect thanks if the issue issue allows me to make it [Technical Issues] Aren't you gonna be pushy in terms of team branding, so the training getting done to homeschool for a day will be available to offer the infrastructure to other players. Perfect, perfect. I just want you to understand if the DDD growth game dot homes connected will be exclusive to use the chimp brain. So, he or the the the fiber company will be able to offer the order home spares to to other places.

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

Thank OK. Yeah, and as we mentioned in the material fact that we used yesterday there will be forever for every new deployment appeared of exclusivity 14 of six months. After that, yes, obviously, five ago, good start to offer the infrastructure to other players. That's the main difference when we talk about neutral or open vehicles. In this case, it's not unusual because the vehicle will have the anchor customer that is team and will have an an exclusivity period on every new deployment. But then then yes, these networks will be open to to third parties, that's probably what's interesting in this in this deal in any, we think that it's reflected in the in the value of the company. So, again, remembering always that we will keep all the management of the customers we will keep even the management of the of the home devices. So the modems, because we think that this is an extremely important touchpoint with our customers. So, again, the what we are putting here in this five what what we are dropping down is from the oil tea from the cabinet and the to the customer to the customer. So,answer to your question is yes, the networks will be open after a period of exclusivity.

Pietro Labriola -- Chief Executive Officer

If met because perhaps also do a comparison and as Christians to catch difference between other more than have intercourse is that it was he was explaining in the Brazilian market, you will see that you will have some cases in which the infocus model will be completely neutral. What it means that from the zero, the day where they've been infrastructure the last mile, the professor can be both by any operator, there will be no exclusivity of time for one operator to buy from this neutral infraco this is more or less the model of the old infocomm. Okay. It is more than that this view. Also, that there are some pros and some cons related to the fact that you don't pay an anchor operator customer.

Our model as other was explained was explaining is open what it means once we will will be built the private infrastructure for a certain period of time, six months, the only operator that could buy that infrastructure will be up after that period of time, it would be open also to other operators. Okay. So these are two more they're completely different because in the second one was one that was choosen. by him, it's clear that you can give a strategic indication in the area that must be developed and continue to be synergy with the team. Strategic Plan. This is the reason for week. I stress the stress and other time. It's more any industrial tailor than a financial deal.

Christian Ferdia -- Bradesco BBI -- Analyst

Okay, thanks.

Operator

The next question comes from Carlos Robles [Phonetic] with BTG International.

Carlos Robles -- BTG International -- Analyst

Hi, Pietro adron. Good morning. How are you? Thanks for taking my question. My questions. I will show that section the transaction with fiber company, I think by now I got it but I just took the team's backup backbone and not included in the assets that have been transferred right to the fiber core. They will remain controlled by Tim. Is that right?

Pietro Labriola -- Chief Executive Officer

You told the Carlos. backbone, is it right?

Carlos Robles -- BTG International -- Analyst

Yeah. backhaul and backbone. Yeah.

Pietro Labriola -- Chief Executive Officer

They will stay with him.

Carlos Robles -- BTG International -- Analyst

So you know, any any decision, by...

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

Yeah. As Peter was mentioning, we always said since said since the beginning that what we were interested in know that find a partner was on the last mile in why this was designed, because remember that backbone, and obviously, our backhauling are mainly for the mobile business yet, considering what we have, of course, as, as we say, in the beginning, the yield for government, it's always leveraging on these mobile infrastructure that we have. So for us, it was extremely key to maintain what we have in terms of bag one, and by calling a household. That's why the only thing that we're dropping down is the secondary network. It's at the end, as we mentioned, this is an industrial deal, and it's probably more strategic in the strategy is to maintain the backbone and the by calling in house, then there could be additional subsides in the in the deal in these five good deal, because five o'clock could be in the future, yes. Deploying infrastructure, not only on the ftth, but also on on what we call FTD. site. Because it could be also efficient that what we are dropping down to the company is limited to the secondary network.

Carlos Robles -- BTG International -- Analyst

Now, it's clear, and I think this is important to be clear to everybody, because we ourselves when we were doing the analysis, we mentioned an AV per homes passage and compare each year the Jews hadn't been totally different, right? Because they're the Jews included back home that we're not including you. So it's impossible to really compare the different transactions from a valuation standpoint, right.

Pietro Labriola -- Chief Executive Officer

Yeah, you are right, also, because some of the transaction that happened have also customer included in such a case, we are only including the last mile, is the fiber that go from let me say the oil tea, not to the customer? house?

Carlos Robles -- BTG International -- Analyst

No, perfect. And a different question. I mean, you know, the expansion plan is pretty, pretty aggressive. Right? My question is, we have geographies or, you know, the company will be expanding to Is there any specific target you can look for, you know, a type of market that you were going to target with the new company?

Pietro Labriola -- Chief Executive Officer

Carlos, it's clear that if we were just to in front of a coffee or a glass of wine, I can give you a lot of the things that now could be disclosure of our strategy, what they mean, it's clear that your question, try to understand if there's the risk of some overlap with that, with the other tivity that are quite similar, we took a lot of attention, it's our job market more than to evaluate to evaluate exactly where to go in our plan that would be for sure the sample that we can disclose, but the change of the fttc in ftth, what we call Brownfield they choose of the remaining area will be done based on our idea about the move and the strategy of the other player in terms of your marketing and analysis about what is the potentiality of each area. And is clear you have to consider that there are different factories that you have to keep in mind.

Also the strategy of the other player. So there is someone that evaluates the evolution of the cable technology. If an hour at which cost, cable technology is able to scale up to one gigabit per second, with the migration of copper to fiber from some other players. There are some small leagues that have fiber optics network, but with the level of of overbooking that do not allow in an easy way to upsell end up good rate, the network at highest level of speed. So these are all the different elements that we are evaluating to define exactly our show marketing approach in the different area, what is clear that we will try to avoid overlap. And we will never try to be the tail of the player to go to build a fiber optic network, because it makes no sense from the investor's point of view. But in some way, thanks to the sides of Brazil, the untapped market is huge. So I don't foresee in the next three, five years, huge issue in terms of overlap.

Carlos Robles -- BTG International -- Analyst

But it's clear. Thanks.

Pietro Labriola -- Chief Executive Officer

It's clear that you have to keep in mind that this is something that is a chess game, because you have to consider also what will be, as I mentioned, the strategy of the other player, they said to keep in mind that differently from team, they have some legacy. So the strategies, defend the legacy migrate the legacy, go for untapped market, but it can be difficult for them to do all of that. And then we must be clever, adding no legacy to try to fail this let me say get in there strategy that will be left on the market due to the fact that the increase of speed is a is a fact. We are already moving to offer four of foreign bid of 500 megabit per second. And you can imagine that there are some technologies that can add much more difficulties to follow this kind of strategy.

Carlos Robles -- BTG International -- Analyst

Yes, no doubt. Thank you, Pietro.

Pietro Labriola -- Chief Executive Officer

Very welcome.

Operator

The next question comes from Alehandro Veloster [Phonetic] with BBVA.

Alehandro Veloster -- BBVA -- Analyst

Hi, good morning, Pietro. Thank you very much for taking my questions. The first time the first one, I'm trying to better understand the strategy of the new fabric. The purpose of the of the fabric is to is to have all the homes passed with ftth in four years and having nothing with fttc. So that that would mean that you plan to upgrade your current fttc network to ftth and then increase the ftth footprint in order to reach the 9 million ftth holdfasts target within four years. Is that correct? We are talking about 9 million ftth plus 3.5 fttc. And then what will be the infrastructure deployment plan? So the level? That's my first question. And then the second question is, regarding the personnel expenses, have been reducing the number of employees at a faster pace in recent quarters. Were this trend continue as part of the digitization process? Or it is accelerating because you are permanently closing stores? And how much and how much reduction in the workforce should we expect going forward? And in addition related to this question, you mentioned in the press release that employees will be transferred to the new fiber core. So would it be possible to measure the number of employees that you will be transferring to a new entity when the transaction materializes. Thank you.

Pietro Labriola -- Chief Executive Officer

Okay, related to the questions before to live advantage in more detail, perhaps my previous speech wasn't clear. We are not starting to base off the FTC changing everything ever changing everything for ftth in our three year plan, what we'll do that we will partially substitute SMR fttc with ftth we don't have to do that once. So at the end of the three year we will continue to have a PTC customer but we will be great but of them. Not all the customer to ftth so if I know what I don't remember but today we are more than 300,000 fttc customer, if I'm not wrong, our number At the end of 2023, will be to reduce fttc customer from 20,000 to 200,000. Customer battalion can correct me if I'm wrong, it's related to the personal expenses. Keep in mind that first of all trostel. Employee reduction, we don't foresee employees reduction. Also, because we are already a lean company, we have more or less 9500 employees. If I remember, well, in 2015, we were 15,500. Okay, so we already did a huge job in terms of the use of external forces, outsourcing part of the activity. So we don't foresee these activities, what will happen is that the digitalization process that we put in place is allowing us to reduce costs that we have externally for some kinds of activity that are more human based, then automata.

Then in relation to the comparison year over year, if you look at the real labor costs increase, if you look at the overall costs increase from internal from 8%, year over year, but the real increase on what is exactly labor cost, it was only 3%. It is what more or less aligned with the inflation, the remaining parties rate is related to some contingencies. But again, are then placed if you want to integrate or correct something that they told.

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

No, you said didn't. You said correctly, Pietro, on the first on the first part of the question in terms of what we have four years from now, in terms of in terms of home past, clearly, we want to reach nine millions of home pastor on ftth. But there will remain still some mothers on fttc. What because we will be overlaying from from sea to age where we need to know. As always, we need to be extremely efficient now to maximize the return. So it's not that we'll be overlaying all the fttc in four years. On the second part of your question regarding the employees that will be going to the five ago. Remember that this is a very limited limited number of employees. We're not talking about something significant. Anyway, we didn't have any movement in or numbers of of employees in the past we think that we were very comfortable with it with the access doctor situation. We don't have it plans in order to reduce ism.

Alehandro Veloster -- BBVA -- Analyst

Thank you very much.

Pietro Labriola -- Chief Executive Officer

Alejandra. But Alejandra your questions allow me to do full the give another detail about why fabrico next year, but reality The truth is that already this year, we will have a big challenge that will be the integration batuu of the oil assets. So one of the reasons to create a father was also to create let me say, an a center of excellence in terms of sick operation for the last mile. What they mean until you discuss about backbone. They call it transport network. There are a lot of synergies managing a unique network sick and mobile. When we talk about last mile is something that is completely different from let me say the last mile of mobile, mobile is a delivery of a sim and everything works. Well the last mile it's a complete different job. So the creation of a father code will allow us to have a team that will be completely focused in this tough job.

And we are sure that we will benefit the most also from the operational point of view. We have a separate company completely focused on these activities every working on the fixed for a lot of years. Delhi. And I can assure you that I don't want to say that there's one simplest than the other, but for sure are two activity completely different. And it is difficult to let them come back. So the creation of this company we allow to our internal teams to be 100% focused on the integration, avoid and discussing about view operation activity. And we will add another theme that will be in the new code in the intercom that will be completely focused to build that this last month network, then our best when this team will be focused to sell big and mobile because at the same level, nothing changed. And we continue to manage the customer.

Alehandro Veloster -- BBVA -- Analyst

Very clear. Thank you very much.

Pietro Labriola -- Chief Executive Officer

Thank you.

Operator

[Operator instructions] Ladies and gentlemen, without any more questions on returning to Mr. Pietro Labriola. For his final remarks, please, Mr. Pietro, you may proceed.

Pietro Labriola -- Chief Executive Officer

I've been saying this for the past few quarters in team we don't use shortcuts. We maintain our focus on the sustainability of the business with the rational approach and solid execution. The anti fragile stance of the company is turning challenges into opportunities to evolve further. So we will continue to use our innovative approach and agility to make the right decision and be ready to take full advantage of the recovery of the economy. I want to thank the dedication commitment of our team will continue to overcome many challenges to deliver outstanding results. Once again, together, we can do more. Or, as we say internally xunta somos mice. Thank you once again for participating in our conference call. Stay safe and I hope we can visually meet soon in the upcoming events that we will be doing with the financial community, but they hope to meet you in person as soon as possible.

Operator

Thus we conclude the First quarter of 2021 conference call of TIM SA. Your line can be disconnect from now on. For future information and details of the company, please access our website, ri.tim.com.br. Thank you.

Duration: 63 minutes

Call participants:

Pietro Labriola -- Chief Executive Officer

Mario Girasole -- Regulatory and Institutional Affairs Officer

Leonardo Capdeville -- Chief Technology Officer

Adrian Calaza -- Chief Financial Officer and Investor Relation Officer

Alberto Griselli -- Chief Revenue Officer

Leonardo Emilio -- UBS -- Analyst

Debbie -- JPMorgan -- Analyst

Christian Ferdia -- Bradesco BBI -- Analyst

Carlos Robles -- BTG International -- Analyst

Alehandro Veloster -- BBVA -- Analyst

More TSU analysis

All earnings call transcripts

AlphaStreet Logo

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

TIM Participações S.A. Stock Quote
TIM Participações S.A.
TSU

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.