TIM S.A.TIMBNYSE
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Operator: Good morning, ladies and gentlemen, and welcome to TIM S.A. 2025 Fourth Quarter Results Video Conference Call. We would like to inform you that this event is being recorded. [Operator Instructions] There will be a replay for this call on the company's website. [Operator Instructions]
Vicente Ferreira: Hello, everyone. I'm Vicente Ferreira, Investor Relations Officer of TIM Brazil. Welcome to our earnings conference for the fourth quarter of 2025. Today, joining me to discuss the highlights of our results, I have the CEO, Alberto Griselli and the CFO, Andrea Viegas. As usual, we close our call with a live Q&A session. So let's get started. Alberto, great to have you here. What can you tell us about the main highlights of the 2025 results?
Alberto Griselli: Thank you, Vicente. Hello, everybody. It's a pleasure to share results that represent more than another solid quarter. They depict a consistent execution of our strategy and full delivery of our promises confirming the track record of TIM Brazil in meeting its target. From a financial standpoint, service revenue grew above inflation with a year-on-year expansion of 5.2%, check. EBITDA margin expansion, reaching 51% as EBITDA increased 7.5%, check, as well. CapEx was essentially flat versus 2024, check. Operating cash flow grew at double digit, closing the year expanding at 16%, check. And with the dividend anticipation, we closed the shareholder remuneration at BRL 4 billion in cash, plus BRL 750 million in share buyback, check. In all, guidance was delivered with a combination of strong cash generation and disciplined capital allocation.
Vicente Ferreira: Really impressive financial performance of Alberto. But beyond the numbers, what can you tell us in terms of operational results and other achievements that the company made during 2025?
Alberto Griselli: Sure, Vicente. You're right. We had many deliveries that go beyond financials. In 2025, we continue to reinforce our strategic position. TIM remains the leader in 5G in Brazil with coverage of more than 1,000 cities, 52% more cities than our second player. And we, once again, the most awarded operator in Opensignal latest report, winning in key categories such as consistent quality and reliability. In B2B, we surpassed BRL 1 billion in total contracted value across all verticals and for the third consecutive year, TIM was featured on the CDP A list, confirming our leadership in climate and ESG practices. On top of that, we continue to capture productivity gains, applying digitalization, artificial intelligence and strict discipline in capital allocation.
Vicente Ferreira: Great list of achievements. But Alberto, what can you tell us in terms of the contribution of each area of the company and the support that those different areas were able to deliver for our results as a whole.
Alberto Griselli: Okay, Vicente. When we look inside the business line, 2025 tells a coherent story. In mobile, we strengthened the pillars that have been driving our performance in recent years. Net service revenues grew at a solid pace, supported mainly by mobile services, which increased 5.4% in the year. Postpaid was again the central engine. Postpaid revenues grew 9.5% in the fourth quarter, and our base expanded by 8.4% with another year of positive net additions. ARPU in postpaid, excluding machine-to-machine, reached almost BRL 55, growing 3.1% year-on-year, which reflects our ability to combine volume and value strengthening value capture across our customers, migrating them to higher value offers while keeping churn under control. At the same time, the prepaid segment began to show more encouraging signs. The revenue decline has accelerated for the third consecutive quarter, indicating that our actions to stabilize this space through more targeted offer, better segmentation and improved customer experience are starting to gain traction. The combination of robust postpaid expansion and more stable dynamic in prepaid, supports a healthier, more balanced growth profile of our mobile business. None of these achievements would have been possible without the strength of our network. Throughout 2025, we further consolidated what has become a structural advantage for TIM, our leadership in coverage and technical quality. We maintain the broadest 4G and 5G footprint in Brazil and delivered tangible benefits for our customers. TIM's excellence was recognized in the latest Opensignal report, where we took home 6 national awards demonstrated that our investments are not just expanding coverage, but actively enhancing customer experience. One of the year's more significant milestones was the completion of our network modernization project in Sao Paulo, which has transformed the experience in the country's largest market by modernizing every site in the state, we expanded 5G and 4G coverage, increase capacity and improve overall quality performance. We are now extending this modernization to other cities with a plan that includes around 6,500 sites to be swapped in major capitals until 2027, establishing new standards of holiday and experience of our customers across Brazil. In fixed services, 2025 was a turning point for our broadband operations team, Ultrafibra. After a period of adjustment and portfolio optimization, broadband revenues returned to growth in the fourth quarter, supported by an improvement in net additions and nearly complete migration from FTTC to fiber. By the end of the year, we reached 850,000 customers and FTTH ARPU of roughly BRL 95. TIM Ultrafibra revenues grew 6.2% year-on-year in the fourth quarter. This shows that our strategy of focusing on quality, rationality and operating efficiency is working. And we are building a more sustainable broadband business for the future. Another significant milestone in 2025 is our progress in B2B our solution have achieved meaningful impact across key industries. In Agribusiness, TIM coverage surpassed 26 million hectares enabling precision agriculture, automation and greater productivity across vast rural areas. In logistics, we expanded to more than 10,000 kilometers of highways connecting major corridors and enabling monitoring, safety and operational intelligence. In Utilities, we sold nearly 470,000 smart lighting points, helping cities modernize infrastructure at scale with efficiency and control. And in mining, our advanced connectivity spanning 4G, 5G and IoT support safer and more automated operators. These verticals combined allow us to surpass our important milestones of BRL 1 billion in total contracted revenues since the beginning of this journey, confirming B2B as a structural growth engine for TIM, not a future possibility. It is already real, scaled and part of our core. Vicente, in sum, we saw relevant contribution and strong support from every single line at TIM Brazil.
Vicente Ferreira: Thank you, Alberto. We'll come back to you for your final remarks later on. Now our CFO, Andrea will walk us through the details of our financial performance. Andrea, thank you for joining us.
Andrea Palma Marques: Thank you, Vicente. Hello, everyone. We closed the year with another strong set of financial results reflecting the disciplined execution of our strategy in 2025. This quarter reinforced a story that has been present all year long, cost optimization, expanding profitability and a clear focus on sustainable value creation. Over the last 12 months, our efficiency program has continued to reshape our cost structure. Operation costs again grew well below inflation with OpEx rising just 1.8% year-on-year in 2025. This reflects the structural initiatives underway across the company, showing that this approach is not a temporary effort for a core part of how we operate. This strongest execution contributes to another year of high level improvement in productivity with EBITDA increasing by 7.5% and our margin achieved 51%, making an important milestone. We also advanced a lease-related efficiency initiatives already contribution to a strong result in 2025. EBITDA after lease grew 8.3% year-on-year, supported by continued optimization of our industrial cost structure and margin sustainability. This operation year-on-year. In total, we delivered what we committed, BRL 4 billion in dividends and IoC plus BRL 750 million in buybacks reaching 139% payout ratio. This demonstrated not only our strong financial performance, but also delivered another quarter of double-digit expansion in operation cash flow, grew 15.7% year-on-year in 2025 and lifting the margin to 22.7%. Throughout the entire year, we maintained a solid cash conversion, supported by margin expansion and well management CapEx. Finally, our balance sheet remains a source of stability and resilience. Our leverage remains highly comfortable giving us the flexibility to continue investing with discipline while sustaining attractive shareholder returns. These results give us confidence as we enter 2026. We've seen well positioned to continue creating value for all stakeholders. Back to you, Alberto.
Alberto Griselli: Thank you, Andrea. So as we step back and look at 2025, the conclusion is clear. It was a year of execution, consistency and evolution. We delivered exactly what we promised and build the foundation for advancing our strategy in 2026. Our direction is that we will drive value creation through mobile, B2B and broadband, supported by 3 key enablers that run across the entire company. Artificial intelligence, efficiency and ESG. In mobile, our focus remains on strengthening profitability through a customer-first approach, continuously improving the experience and reinforcing the values of our offerings. In B2B, we are ready to capture a new wave of opportunities with a wider and more scalable portfolio that integrates connectivity, infrastructure and digital services. The acquisition of V8 was an important step to enhance our capabilities. And in broadband, we entered 2026 with a more efficient operation, a more reliable service and portfolio aligned with sustainable expansion. Supporting all this, artificial intelligence becomes a transformational layer in our operating model helping us automate, simplify and accelerate decisions across every area. Our efficiency agenda remains a hallmark of execution ensuring discipline in capital allocation and allow us to explore new growth avenues while protecting margins. And ESG continues to be a structural component of who we are shaping our culture and guiding long-term value creation. Confirming this long-term deal in 2025 after many years, we finally reached an important milestone for our shareholders and the financial community. Our return on capital is higher than the consensus cost of capital. Now let's move to the live Q&A session, Vicente.
Vicente Ferreira: Thank you, Alberto. See you a bit, guys.
Operator: Before proceeding to the Q&A session, I will pass the floor to Alberto Griselli. Please, Mr. Alberto, the floor is yours.
Alberto Griselli: Introductory note, -- good morning, everybody. Today, we took an important step in our broadband strategy by acquiring full control of I-Systems. This will allow us to improve the efficiency of our broadband operation to deliver a better end-to-end customer experience and position ourselves for future movements. Now we can actually proceed to the live Q&A session.
Operator: [Operator Instructions] Our first question comes from Bernardo Guttmann from XP.
Bernardo Guttmann: Congrats on the solid results. again. Actually, I have 2 questions here. The first one on margins and efficiency. You delivered strong margin expansion this quarter with EBITDA growing much faster than revenues. How much of this efficiency is structural and how much was more temporary or specific to this quarter. And if I may, the second one on I-Systems. With the consolidation of the company, how should we read this strategic move? Does this suggest a stronger long-term commitment to the asset and a lower probability of a potential sale of the fiber business. And looking ahead, what would be natural next step? Does it make sense to revisit M&A opportunities, maybe looking at regional fiber players? Or is the focus now fully on organic growth?
Alberto Griselli: Bernardo, let me go with the second one, and then I will pass to Andrea for the margin expansion. So the -- when you look at our broadband operation, I think that this quarter has been marked by a positive news on the industrial performance because after the fine-tuning, we managed to get to a revenue growth. So we are back on track on something that has been underperforming in the previous quarters for last year. So in the last quarter, we managed to return to a growth pattern and consolidate and optimize our model. At the same time, we need to recognize that the neutral model that we wanted to implement face a number of challenges. And so the benefits of scale that were supposed to happen as a matter of fact, that didn't happen. So the acquisition of control of a system provides us a number of benefits. The first one is that we get control of the end-to-end operation of our customers that support one key indicator that is churn management and customer level of service. The second one is that we will be able to increase our efficiency of operations. So this measure is going to be accretive on the margin expansion and a bit dilutive on CapEx, but overall, it's going to be to be neutral on free cash flow generation. And the third and most strategic one is that we position ourselves for our next step. So the question is what is our next step is and we addressed this in previous calls, whereby we said that we are looking at a number of different options. And as a matter of fact, the sale of our -- the sale of our broadband operation has never been actually on the table, right? So we say that we have extreme opportunities. We are assessing them but all of these opportunities have the intention to increase the value generation of our business. Sale was not there as an option since you mentioned, we just want to clarify this.
Andrea Palma Marques: Bernardo. Refer to the margin efficiency. This is the consequence of the cost optimization that we are working for the past years. This year, we mentioned several times. We have an efficiency program that's in place and the result is the structure, the major parts. This quarter, we have some effects that first one is the visitor, the interconnection cost for visitors. This is effect in this quarter. If you look in the first quarter, we have increase in the visitor interconnection. And in this quarter, we have a decrease. Remembering that the cost of interconnection refers to the full year. So we have this balance between quarters. Another effect in this quarter was in the reduction of our taxation in the overtime pay. But again, these 2 effects affect this quarter, specifically the fourth quarter, but the results is the efficiency that we have in the structural way and as a consequence, we are delivering what our commitment to expand the margin.
Operator: Our next question comes from Gustavo Farias from UBS.
Gustavo Farias: First of all, congrats on the results. So my first question regarding margins. We saw a decrease in the network and interconnection expense, which was really a highlight to us. If you could comment on the main drivers behind that. You mentioned in the release a cost optimization of digital content providers? And how to think about this line going forward? My second question is on mobile competition. We've been seeing some less positive figures on mobile portability in Q4 based on data from the regulator compared to past periods for TIM. How do you see this competition, especially given this mobile portability numbers we have been seeing lately? And if this -- you think this comes from any new cell impacts?
Alberto Griselli: Okay, Gustavo. So let me take, again, the second, and then I will pass the word to Andrea for the first one. So when it comes to the dynamics of portability, the -- when you look at our report, you see that our churn level is almost stable over the quarters. And therefore, the increase of portability means as a matter of fact, that the share of portability within our churn is increasing. And this depends on a number of things. One of them being the commercial practices of our competitors. But our churn level is fairly stable during the quarters of last year. When we are looking for order, you will see that in the first quarter, we are executing our price adjustments, and this tends to pressure a bit the churn level as normal. So we are executing it as a matter of -- we started with messaging and informing our customers in December. And as a consequence, churn is going to be a bit higher in the first quarter, resulting in softer net additions. When you go to the new cell impact in market dynamics. I would say that if you look from a general perspective, I believe that the market is pretty rational and keep on being rational. And that our ability to attract customers remain as it was as a matter of fact. Unfortunately, Anatel stopped sharing the number of new cell subscribers. And therefore, we cannot rely on an independent source to measure the growth of the numbers. So what we see, it's our internal view and our internal view is based on a number of KPIs that we use and the impact is not material at this stage.
Andrea Palma Marques: Gustavo. Related to the network and interconnection. We have some items that are increasing and others that are decreasing. Once that is decreasing is the visitors that I just mentioned. What is increasing -- for example, the content provides that is related to the offers that we launched last year where we put a stream for our customers. So we have an increase in this item and we also have an increase in the network related to the expansion of the 5G.
Operator: Our next question comes from Marcelo Santos from JPMorgan.
Marcelo Santos: I just wanted to zoom in a bit more on the personnel expense, the tax the overtime hours. Was there any retroactive recognition of this gain? I just wanted to understand better this understanding, like, is this something that's going to change going forward? And did the fourth quarter include changes that were, let's say, retroactive to previous periods. Just to understand the sustainability of these gains over time or how enough is they are. I think that's the first question we have. The second question is there was an improvement in broadband ARPU. Does this sign away more rational market in your view? Or is it more like TIM-specific effect?
Alberto Griselli: So I'll start, Marcelo with the second one. The ARPU dynamics. I think this is as a matter of fact, in our numbers a bit more our doing in terms of ARPU expansion. So we optimize throughout 2025, a number of things in order to serve better our customers and increase the efficiency of our operations. As we discussed in previous quarters, one of the things that we did was to evolve our commercial distribution in a way that is today more pull and less push. And the results of this is beneficial in a number of ways because at the end of the day, but at the end of the day, the quality of the customer that we are getting in is better. So it is one driver. Then there is a second benefit that the pull channels tend to be less expensive than the push channels. So this is one driver. The other driver is more related to the, what we call below the marketing activities, whereby we manage our customer base and move it as mobile from one plant to another plan or when they call to renegotiate. So it's a number of commercial activities related to customer management and we have been tweaking things in the right direction. And this result, it's a positive effect on the ARPU. So it's more how we're doing than the overall market dynamics that remains competitive.
Andrea Palma Marques: Marcelo, the impact of the overtime pay is affect the past and the future. But in the fourth quarter, the impact is higher because concentrate the past -- of the past few years. So in the future, we will continue with this impact, but will be a small amount considered the fourth quarter. But bear in mind, these gains are not that sizable in our overall OpEx.
Operator: [Operator Instructions] Our next question comes from Rog�rio Ara�jo from Bank of America.
Rogério Araújo: I have a couple here. First, on tower leases, if you could mention how the negotiations are evolving with lessors? And are you renegotiating terms ahead of maturities or mailing upon renewals? Also, incentives stepped up in the 4Q. What has driven that? And how should we think about incentive trajectory in the upcoming quarters? And last on tower leases, what is our latest view on lease expenses as a percentage of revenue over the next 2, 3 years? And can ongoing renegotiations offset incremental 5G and tower needs? This is the first one. And the second on Brazil's tax reform. Do you have any early estimates to share with us about the impact of the effective sales tax from 2027 onwards. And also, if an increase is expected, how much of that do you believe is passed through to consumers versus absorbed by the company?
Andrea Palma Marques: Rog�rio, let's talk about -- first about the tower lease. The tower lease is at the end, reflects is what the results reflect what we are doing in the past years. We are working very hard in several efficiency levels in the lease. We -- this year was a challenge because we have the impact in the increased towers and also impact inflation and saying that we delivered an expansion of margin in EBITDA after lease. So moving -- this continues -- this efficiency continues. We have a lot of agreements doing with the TowerCo. We announced one of them a few weeks ago. What we expect about the ratio between the lease and revenues is main things with a slight decreasing considering that we are continuously expanding our network related to 5G. Moving to the tax.
Alberto Griselli: Andrea, just a few complement, Rog�rio, on the tower. So when you look at our lease costs, there are a number of things inside. So you have -- the big chunk is clearly is the network cost. But there are other elements. Complementing Andrea, we finalized the negotiation with American Tower in the last year. When we look forward, and so challenges and objectives for this year. We have another ongoing negotiation that is in our -- on the table that is quite important. And there is -- this is part of our plan. And there is -- as you know, the network sharing discussion that are proceeding where I see that there is opportunity in the future to do more. So this initiative is a part of the overall portfolio besides the buy initiatives that we put together. So when you look at our guidance and what we shared with the market is that besides the network deployment that is a pressure on our cost besides the inflation, there is a pressure on our cost, we're going to manage to keep these leases growing a maximum with inflation and so slower than revenues. So when it comes to the share of this cost versus revenues, this is the answer, looking forward. That's what we have been sharing and implementing over the last years, and we plan to do this in 2026 as well. For the tax, I will hand it back to Andrea again.
Andrea Palma Marques: Regarding the tax reform, what we can say now is 2026 has no impact and 2027, that's the year that we already put in our guidance is neutral on free cash flow.
Rogério Araújo: Okay. And can you share maybe after all the transition period by 2033, if there is any early estimates on the impact?
Andrea Palma Marques: Rog�rio, we didn't announce yet our guidance. So we are talking only about the numbers -- the years that we already announced and that's '25 to '27.
Operator: Our next question comes from Daniel Federle from Bradesco BBI.
Daniel Federle: Congrats for the strong results. The first one is just if you could provide more color on the price increases in the first Q. If it's front book, back book and the magnitude, if possible. The second question regarding CapEx. CapEx end up a little bit closer to the top of the range. So any update in terms of CapEx demands, requirement pressure from FX, I think it's helpful.
Alberto Griselli: Okay. Daniel, let me go to the price increase first, and then we'll hand it over to Andrea for the CapEx one. So when you look at the more for more strategy, just recapping generally what we do, we upgrade our back book prices and front book prices. The back book prices for postpaid is happening as we speak. So it's the -- it's the one that I mentioned in the previous answer. So it's underway as it was last year, so we're executing it. And the magnitude is fairly similar to the one that we had last year. The -- of course, it's not 100% of the customer base we discussed we -- it happens in a couple of phases throughout the year. But the mechanics in the first is fairly similar to the amount that we executed last year. We are also discussing the -- internally, the front book prices adjustment in control, we executed this June last year. So we are planning to follow a similar pattern this year. And we are pretty confident that we can do something on postpaid as well this year. For the CapEx, Andrea.
Andrea Palma Marques: Daniel, we are on track in CapEx. We maintain the CapEx that we announced in the guidance. The point here is when we see an opportunity to anticipate CapEx, we have -- if we generate some efficiency and we have an opportunity to anticipate CapEx, we are going to. But again, 2025 was exactly what we expect in the investments. I don't know if I answer your question. And we also -- we are always controlling CapEx. We focus on the free cash flow. I don't know if I answer your...
Operator: [Operator Instructions] Since there are no further questions, I will now turn the floor back to Mr. Alberto Griselli for any final remarks. Please, Mr. Alberto, the floor is yours.
Alberto Griselli: Thank you all for joining today's video call. I would like to share a big thank to the effort to our entire team for the great results that we achieved together 2025...
Operator: This does conclude the fourth quarter of 2025 conference call of TIM S.A. For further information and details of the company, please access our website at tim.com.br/ir. You can disconnect from now on. Thank you once again and have a wonderful day.