Earnings Release • Nov 13, 2020
Earnings Release
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Announcement | Lisbon | 13 November 2020
PHAROL, SGPS S.A. hereby informs on the 2020 third quarter results disclosed by Oi, S.A., as detailed in the company's document attached hereto.
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This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and the applicable Brazilian regulations. Statements that are not historical facts, including statements regarding the beliefs and expectations of Oi S.A. – under Judicial Reorganization ("Oi" or "Company"), business strategies, future synergies, cost savings, future costs and future liquidity are forward-looking statements.
The words "anticipates", "intends", "believes", "estimates", "expects", "forecasts", "plans," "aims" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. There is no guarantee that the expected events, tendencies or expected results will actually occur. Such statements reflect the current views of the Company's management and are subject to a number of risks and uncertainties. These statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, corporate approvals, operational factors and other factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations. All forward-looking statements attributable to the Company or its affiliates, or persons acting on their behalf, are expressly qualified in their entirety by the cautionary statements set forth in this notice. Undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made.
Except as required under the Brazilian and U.S. federal securities laws and the rules and regulations of the CVM, the SEC or other regulatory authorities in other applicable jurisdictions, the Company and its affiliates do not have any intention or obligation to update, revise or disclose any changes to any of the forward-looking statements herein in order to reflect current or future events or their developments, changes in assumptions or changes in other factors affecting the forward-looking statements herein. You are advised, however, to consult any further disclosures the Company makes on related subjects in reports and communications that the Company files with the CVM and the SEC.
IN Q3, despite the pandemic, oi continued to deliver on both the operational and transformational fronts. Approval of plan amendment at gcm paved way to sustainability.
+2.4%
judicial competitive processes:
Towers: R\$ 1,067 Mn (Stalking Horse defined – date: Nov 26) Data Centers: R\$ 325 Mn (Stalking Horse defined – date: Nov 26)
Mobile: R\$ 16.5 Bn (Stalking Horse defined – date: Dec 14) InfraCo: R\$ 6.5 Bn minimum cash + R\$ 2.4 Bn debt with Oi
At least R\$26.9Bnin new money with the upcoming
FTTH customers
446 Monthly
3Q20 Oi Fiber net adds (Thousand)
Broadband AWARDS
Part of Broadband World Forum
Oi is at the forefront of the Fiber market. Adding 17% more customers than all other carriers combined…
thousand)
446
…putting into perspective, Oi is adding per quarter the equivalent to a customer base of a top 3 ISP… Oi Fiber net adds (3Q20, Top 5 isps fiber customer
…as a result, Oi was the only major operator to grow UBB* market share in 2020. UBB Market Share – ALL TECHNOLOGIES
Source: Anatel and public information provided by the companies *UBB = Ultra Broad Band, speeds above 34Mbps
Residential total net adds have become positive and Fiber already represents 40% of total broadband customer base
In one year, Fiber revenues increased from 4% to 24% share of Residential revenues, and is poised to become the largest component of residential revenues soon
For the 1st time in 3 years, Residential revenues increased QoQ. Annualized Fiber revenues at end of Q3 had already reached close to R\$ 1.7 billion
Quarterly revenue R\$ Million
Sep/20 revenue annualized R\$ Million
Mobile revenues resumed sequential growth, with great resiliency of postpaid results both QoQ and YoY, while prepaid experienced a fast recovery from the early days of the pandemic. Oi continues to charge ahead on mobile with 5g pilot launch in Brasilia.
* Information based on managerial allocation | 1 - Excludes interconnection revenues and handset sales.
B2B also RECOVERS FROM early impacts of COVID-19 CONSTRAINTS on traffic, SHOWING SEQUENTIAL REVENUE GROWTH on the back of IT services. WHOLESALE revenues also improved to stability, WITH RECOVERY OF NON-REGULATED REVENUES AND GOOD PROSPECTS WITH INCREASED SALES to ISPs.
+3 (+0.5%)
Revenue Opex reducer ²
R\$ million
+4
focus on simplification and efficiency continues to pay off, leading to progress on digital transformation, further opex reductions and return to annual ebitda growth
Capex allocation profile continues to evolve in full alignment with company's fiber strategy, with increasing allocation to ftth and large reduction in legacy investments
TO ENSURE SUCCESSFUL TRANSITION OF ITS MODEL, COMPANY IS CARRYING OUT AN integrated execution of 15 transformation programs
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| SEP/oct 20 |
NOV 20 | DEC 20 | 1Q 21 | 3q 21 | 4q 21 | Oct 21 |
|---|---|---|---|---|---|---|
| Holding of the General Creditors Meeting Confirmation of the GCM by Judicial Court |
Competitive Bidding Process for UPI Towers and UPI Data Center |
Competitive Bidding Process for UPI Mobile Assets Closing of UPI Towers and UPI Data Center |
Infra Co and TV Co UPIs auctions |
Closing of UPI Infra Co |
Closing of UPI Mobile Assets Closing of UPI TV Co |
End of the Judicial Reorganization |
Note: Timeline dependent on judicial, regulatory and competitive approvals
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Independent, complementary companies that do not compete with non-exclusive and nondiscriminatory business relationships
Broad range of solutions
High level of security
Operational efficiency
Integrated technology and digital services platform that helps people and companies transform theirlives and businesses.
NEW Oi
Infra Co: Neutral network player enabling all types of connectivity services, based on extensive fiber network Client Co: Digital Experiences Company leveraging on core telecom services strategy
| R\$ million | 3Q20 | 3Q19 | y.o.y. | 2Q20 | q.o.q. | |
|---|---|---|---|---|---|---|
| Brazil | ||||||
| Total Net Revenue | 4.648 | 4.955 | -6,2% | 4.490 | 3,5% | |
| Residential | 1.625 | 1.803 | -9,8% | 1.583 | 2,7% | |
| Personal Mobility | 1.706 | 1.763 | -3,2% | 1.619 | 5,4% | |
| Customers¹ | 1.623 | 1.667 | -2,7% | 1.549 | 4,8% | |
| B2B | 1.294 | 1.357 | -4,7% | 1.265 | 2,3% | |
| Other Services | 2 3 |
3 2 |
-28,1% | 2 4 |
-3,7% | |
| Routine OPEX | 3.212 | 3.552 | -9,6% | 3.025 | 6,2% | |
| Routine EBITDA | 1.437 | 1.403 | 2,4% | 1.464 | -1,9% | |
| Routine EBITDA Margin | 30,9% | 28,3% | 2,6 p.p. | 32,6% | -1,7 p.p. | |
| Capex | 2.005 | 2.060 | -2,7% | 1.751 | 14,5% | |
| Capex / Net Revenue | 43,1% | 41,6% | 1,5 p.p. | 39,0% | 4,1 p.p. | |
| Routine EBITDA – Capex | -568 | -658 | 13,6% | -286 | -98,5% | |
| Net Income (Loss) | -2.607 | -5.609 | 53,5% | -3.285 | 20,6% | |
| Cash Position | 5.686 | 3.192 | 78,1% | 6.073 | -6,4% | |
| Net Debt | 21.243 | 14.713 | 44,4% | 20.043 | 6,0% | |
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* Information based on managerial allocation | 1 - Excludes handset and interconnection revenues;
| 3Q20 | 3Q19 | y.o.y. | 2Q20 | q.o.q. | |
|---|---|---|---|---|---|
| In thousands of RGUs | |||||
| Total - Brazil | 52.156 | 55.191 | -5,5% | 52.326 | -0,3% |
| Residential | 11.823 | 13.532 | -12,6% | 11.786 | 0,3% |
| Copper | 7.339 | 11.362 | -35,4% | 8.140 | -9,8% |
| Fixed line | 4.908 | 7.202 | -31,9% | 5.364 | -8,5% |
| Broadband | 2.431 | 4.160 | -41,5% | 2.776 | -12,4% |
| DHT TV | 1.209 | 1.482 | -18,4% | 1.234 | -2,1% |
| Fiber | 3.276 | 689 | 375,5% | 2.411 | 35,8% |
| Fixed line | 1.578 | 278 | 467,5% | 1.146 | 37,8% |
| Broadband | 1.616 | 371 | 335,6% | 1.194 | 35,4% |
| IPTV | 81 | 4 0 |
104,3% | 7 2 |
12,9% |
| Personal Mobility | 33.738 | 34.703 | -2,8% | 33.988 | -0,7% |
| Prepaid | 23.840 | 25.670 | -7,1% | 24.269 | -1,8% |
| Postpaid | 9.899 | 9.032 | 9,6% | 9.719 | 1,8% |
| B2B | 6.438 | 6.702 | -3,9% | 6.395 | 0,7% |
| Fiber | 147 | 4 6 |
220,6% | 109 | 34,9% |
| Copper Voice | 3.121 | 3.342 | -6,6% | 3.202 | -2,5% |
| Copper Broadband | 358 | 475 | -24,6% | 389 | -7,9% |
| DTH TV | 14 | 14 | -2,7% | 14 | -1,4% |
| Mobile | 2.798 | 2.825 | -1,0% | 2.682 | 4,3% |
| Public phones | 157 | 254 | -38,1% | 158 | -0,3% |
| FTTH - Homes Passed (HP's) | 7.867 | 3.588 | 119,3% | 6.719 | 17,1% |
| FTTH - Homes Connected (HC's) | 1.747 | 408 | 327,7% | 1.300 | 34,3% |
| Take up (%) | 22,2% | 11,4% | 10,8 p.p. | 19,4% | 2,8 p.p. |
jR AMENDMENT APROVAL AT gcm ALLOWS OI TO GO ON WITH THE execution of its TRANSFORMATION plan while making possible a balanced capital structure with long term financial sustainability
CAPITAL STRUCTURE OPTIMIZATION AND ACCESS TO MORE FINANCIAL RESOURCES
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OPERATIONAL RISK REDUCTION ONCE TRANSACTIONS ARE CONCLUDED
| ToWERS | Data Centers | MOBILE ASSETS | Infra Co | TV Co | |
|---|---|---|---|---|---|
| scope | 637 mobile towers and 222 indoor sites (passive infrastructure in shopping malls, hotels and others) Revenue from other operators and Oi |
5 data centers Revenue/contracts for the colocation/hosting business with B2B and Oi customers |
Mobile operation, including active network, clients and spectrum Elements of the active or passive transmission network not included |
FTTH network, including equipment and operation, wholesale contracts (Oi being its main client) Long term contracts (IRUs) for backbone, backhaul and pipes of Oi SA and Telemar |
TV operation, including DTH infrastructure and equipment, customers and adjacent obligations to DTH and IPTV services (SeAC). Oi maintains IPTV and OTT platforms |
| sale | Binding Offer received (R\$ 1.067Bn) for 100% of the shares; Highline do Brasil made the highest offer during the M&A process and will have the right to match during the Competitive Bidding Procedure (Stalking Horse) |
Binding Offer received (R\$ 325MM, of which R\$ 225MM upfront and R\$ 75MM in installments) for 100% of the shares; Piemonte Holding made the highest offer during the M&A process and will have the right to match during the Competitive Bidding Procedure (Stalking Horse) |
Binding Offers received above the minimum price of R\$ 15Bn for 100% of the shares. Telefônica Brasil S.A., TIM S.A. e Claro S.A made the highest offer during the M&A process in the amount of R\$ 16.5Bn of which R\$ 756Mn refer to transition services to be provided by Oi, in addition to long-term agreements for services of transmission capacity, with net present value (NPV) of R\$ 819Mn. With that offer the group will have the right to top during the Competitive Bidding Procedure (Stalking Horse) |
Minimum value: R\$ 20Bn (EV, base date as of Dec 31, 2021), for the sale of 25.5% to 51% of total capital, enabling a competitive process to acquire control of InfraCo (51% of voting shares) Winning offer will be defined by the highest value per share (EV), with a minimum secondary payment of R\$ 6.5Bn in up to 3 installments, and a primary transaction of up to R\$ 5Bn, in order to guarantee the payment of the R\$2,4Bi obligations to Oi in up to 3 months after the closing and InfraCo investment plan. Highest offer may be granted with a right to top in the Competitive Bidding Process. Investors may offer assets or certain and liquid receivables (with a 55% discount) as part of the UPI payment. |
Sale of 100% of the shares of UPI TV Co for the minimum price of R\$ 20MM and assuming payment commitments for the use of satellite capacity until 2027, exempting Oi from its annual cost 50% revenue share with Oi on IPTV revenues provided by TV Co to customers of the recovery entities |
| Non Financial Creditors |
Labor (Class I): Payment in up to 30 days after the amendment ratification by court (limited to R\$ 50k/creditor) |
Small Business (Class IV): Option to receive up to R\$ 150k (and waiver of additional claims) in up to 90 days after the amendment ratification by court; |
||||||
|---|---|---|---|---|---|---|---|---|
| Financial Creditors |
Secured Creditors (Class II): The obligation of the buyer of UPI Mobile Assets of paying part of the transaction price directly to Secured Creditors doesn't exempt the recovery entities from the obligation to settle such credits as one of the closing acts of the sale ; Prepayment of 100% of the outstanding credits. Suspension of certain clauses until May 30, 2020, in order to implement the terms provided in the Plan amendment; Prepayment of post-petition Oi Móvel debentures |
Restructuring Option I (Class III): Prepayment with a 55% discount, in up to 3 installments (2022-2024). Conditioned to the closing of both UPI Mobile Assets and UPI InfraCo and to the maintenance of a minimum cash balance ("cash sweep") Reduction in the prepayment discount from 55% to 50% for creditors that opt for the Bank Guarantee option and offer a new line of letter of credits, up to the maximum restructured credits value (1:1), in the form of the RJ Plan and on condition that Oi reduces its total exposure in guarantee |
||||||
| Additional Creditors |
Anatel: Unsecured Creditors: Payment via Law 13.988/20 or more Option to receive up to R\$ 3k (and favorable new legislation to be waiver of additional claims) in up to published in the future 90 days after ratification by court; |
Class III and Class IV Creditors: Possibility of prepayment through the introduction of a reverse Dutch auction mechanism to repurchase credits at the lowest value and more favorable NPV to the company (voluntary option) |
||||||
| BRIDGE LOAN AND OTHER FINANCING |
2Bn (without flexibility to offer additional guaranties); Flexibility for additional funds guaranteed by InfraCo shares |
Possibility of partial anticipation of resources of UPI Mobile sale in an amount of up to R\$ 5Bn; Other Financing: R\$ 2Bn (with flexibility for offering guarantees) and R\$ | ||||||
| JR closure | Closing of the Judicial Reorganization in October 06, 2021 – this date may be extended in case it is needed for the implementation of measures for the disposition of assets provided for in the Amendment to the JRP |
+55 21 3131-2918
Investor Relations | November 12, 2020
Oi
| Earnings Release | November 12, 2020 |
|---|---|
| Conference Call in English |
November 13, 2020 11:00 a.m. (Brasília) 9:00 a.m. (NY) / 2:00 p.m. (UK) Webcast: click here Telephone: US: +1 (646) 843 6054 +55 (11) 2188-0155 Code: Oi Replay available until November 20, 2020: +55 (11) 2188-0400 Replay code: Oi |
| Conference Call in Portuguese SIMULTANEOUS TRANSLATION |
November 13, 2020 11:00 a.m. (Brasília) 9:00 a.m. (NY) / 2:00 p.m. (UK) Webcast: click here Telephone: +55 (11) 2188-0155 +1 646 843 6054 Code: Oi Replay available until November 20, 2020: +55 (11) 2188-0400 Replay code: Oi |
This report contains the operating and financial performance of Oi S.A. – under Judicial Reorganization ("Oi S.A." or "Oi" or "Company") – and its subsidiaries for the third quarter of 2020.
| in R\$ million or otherwise stated | 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY |
|---|---|---|---|---|---|---|---|---|
| Oi S.A. Consolidated | ||||||||
| Total Net Revenues | 4.706 | 5,001 | 4.544 | $-5.9%$ | 3.6% | 13,998 | 15,223 | $-8.0%$ |
| Routine EBITDA | 1,462 | 1.374 | 1,359 | 6.4% | 7.6% | 4.354 | 4,600 | $-5.4%$ |
| Routine EBITDA Margin [%] | 31.1% | 27.5% | 29.9% | 3.6 p.p. | 1.2 p.p. | 93.3% | 90.6% | 2.7 p.p. |
| Net Income [Loss] attributable to owners of the Company | $-2.638$ | $-5.747$ | $-3.409$ | $-54.1%$ | n.m. | $-12,328$ | $-6,738$ | n.m. |
| Net Debt | 21.243 | 14,713 | 20.043 | 44.4% | 6.0% | 59,417 | 37,393 | 58.9% |
| Available Cash | 5.686 | 3.192 | 6.073 | 78.1% | $-6.4%$ | 18,068 | 13.754 | 31.4% |
| CAPEX | 2,011 | 2.065 | 1,758 | $-2.6%$ | 14.4% | 5,563 | 5,851 | $-4.9%$ |
| in R\$ million or otherwise stated | 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY |
|---|---|---|---|---|---|---|---|---|
| BRAZIL | ||||||||
| Revenue Generating Units - ['000] | 52,156 | 55,191 | 52,326 | $-5.5%$ | $-0.3%$ | 52,156 | 55,191 | $-5.5%$ |
| Residential | 11,823 | 13,532 | 11,786 | $-12.6%$ | 0.3% | 11,823 | 13,532 | $-12.6%$ |
| Personal Mobility | 33,738 | 34,703 | 33,988 | $-2.8%$ | $-0.7%$ | 33,738 | 34,703 | $-2.8%$ |
| B 2 B | 6,438 | 6,702 | 6.395 | $-3.9%$ | 0.7% | 6,438 | 6,702 | $-3.9%$ |
| Public Telephones | 157 | 254 | 158 | $-38.1%$ | $-0.3%$ | 157 | 254 | $-38.1%$ |
| Total Net Revenues | 4,648 | 4.955 | 4.490 | $-6.2%$ | 3.5% | 13,837 | 15,087 | $-8.3%$ |
| Net Service Revenues [1] | 4.620 | 4.917 | 4.478 | $-6.0%$ | 3.2% | 13,776 | 14,960 | $-7.9%$ |
| Residential | 1,625 | 1,803 | 1,583 | $-9.8%$ | 2.7% | 4,862 | 5,541 | $-12.2%$ |
| Personal Mobility | 1.681 | 1,726 | 1.607 | $-2.6%$ | 4.6% | 4.968 | 5,116 | $-2.9%$ |
| Customer [3] | 1.623 | 1.667 | 1.549 | $-2.7%$ | 4.8% | 4.795 | 4.924 | $-2.6%$ |
| B 2 B | 1,292 | 1,357 | 1.265 | $-4.8%$ | 2.1% | 3,873 | 4,192 | $-7.6%$ |
| Net Customer Revenues [2] | 4,520 | 4,823 | 4,374 | $-6.3%$ | 3.3% | 13,476 | 14,641 | $-8.0%$ |
| Routine EBITDA | 1,437 | 1,403 | 1.464 | 2.4% | $-1.9%$ | 4,382 | 4,607 | $-4.9%$ |
| Routine EBITDA Margin [%] | 30.9% | 28.3% | 32.6% | 2.6 p.p. | $-1.7 p.p.$ | 31.7% | 30.5% | 1.1 p.p. |
| CAPEX | 2.005 | 2,060 | 1,751 | $-2.7%$ | 14.5% | 5,536 | 5,835 | $-5.1%$ |
| Routine EBITDA - CAPEX | $-568$ | $-658$ | $-286$ | $-13.6%$ | 98.5% | $-1,154$ | $-1,228$ | $-6.1%$ |
(1) Excludes handset revenues.
(2) Excludes handset and network usage revenues.
| Quarter | 9 months | Weight % | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| R\$ million | 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY | 3020 | 3019 |
| Consolidated Total Net Revenues | 4,706 | 5,001 | 4,544 | $-5.9%$ | 3.6% | 13,998 | 15,223 | $-8.0%$ | 100% | 100% |
| Brazil | 4,648 | 4,955 | 4,490 | $-6.2%$ | 3.5% | 13,837 | 15,087 | $-8.3%$ | 98.8% | 99.1% |
| Residential | 1,625 | 1,803 | 1,583 | $-9.8%$ | 2.7% | 4,862 | 5,541 | $-12.2%$ | 34.5% | 36.0% |
| Personal Mobility | 1,706 | 1.763 | 1,619 | $-3.2%$ | 5.4% | 5,027 | 5,240 | $-4.1%$ | 36.3% | 35.3% |
| B 2 B | 1,294 | 1,357 | 1,265 | $-4.7%$ | 2.3% | 3,876 | 4,195 | $-7.6%$ | 27.5% | 27.1% |
| Other services | 23 | 32 | 24 | $-28.1%$ | $-3.7%$ | 73 | 112 | $-34.8%$ | 0.5% | 0.6% |
| International Operations | 58 | 46 | 54 | 25.3% | 7.1% | 161 | 136 | 18.8% | 1.2% | 0.9% |
| Brazil | ||||||||||
| Net Service Revenues | 4,620 | 4,917 | 4,478 | $-6.0%$ | 3.2% | 13,776 | 14,960 | $-7.9%$ | 98.2% | 98.3% |
| Net Customer Revenues | 4,520 | 4,823 | 4.374 | $-6.3%$ | 3.3% | 13,476 | 14,641 | $-8.0%$ | 96.0% | 96.4% |
During 3Q20, consolidated net revenues totaled R\$ 4,706 million, showing a decrease of 5.9% y.o.y. and a growth of 3.6% q.o.q., which represents a reversal of the trend of the curve. Net revenues from Brazilian operations ("Brazil") totaled R\$ 4,648 million in 3Q20 (-6.2% y.o.y. and +3.5% q.o.q.), while net revenues from international operations (Africa and East Timor) totaled R\$ 58 million (+25.3% y.o.y. and +7.1% q.o.q.).
Net service revenues from Brazilian operations, which exclude revenues from handset sales, stood at R\$ 4,620 million in 3Q20 (-6.0% y.o.y. and +3.2% q.o.q.). Net customer revenues, which exclude network usage and handset revenues, came to R\$ 4,520 million in the period (-6.3% y.o.y. and +3.3% q.o.q.).
| 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY | |
|---|---|---|---|---|---|---|---|---|
| Residential | ||||||||
| Net Revenues [R\$ million] | 1,625 | 1,803 | 1,583 | $-9.8%$ | 2.7% | 4.862 | 5.541 | $-12.2%$ |
| Copper | 867 | 1.286 | 957 | $-32.6%$ | $-9.3%$ | 2.882 | 4.104 | $-29.8%$ |
| Copper Voice | 544 | 786 | 593 | $-30.8%$ | $-8.2%$ | 1,787 | 2,540 | $-29.6%$ |
| Copper Broadband | 323 | 500 | 364 | $-35.4%$ | $-11.2%$ | 1,095 | 1,565 | $-30.0%$ |
| DTH TV | 375 | 438 | 371 | $-14.3%$ | 1.2% | 1.148 | 1.295 | $-11.3%$ |
| Fiber | 383 | 78 | 255 | 387.8% | 49.9% | 832 | 142 | 487.4% |
| Revenue Generating Units [RGU] - ['000] | 11,823 | 13,532 | 11,786 | $-12.6%$ | 0.3% | 11,823 | 13,532 | $-12.6%$ |
| Copper | 7,339 | 11,362 | 8,140 | $-35.4%$ | $-9.8%$ | 7,339 | 11,362 | $-35.4%$ |
| Fixed Line in Service | 4,908 | 7,202 | 5,364 | $-31.9%$ | $-8.5%$ | 4,908 | 7,202 | $-31.9%$ |
| Fixed Broadband | 2,431 | 4,160 | 2,776 | $-41.5%$ | $-12.4%$ | 2,431 | 4,160 | $-41.5%$ |
| DTH TV | 1,209 | 1,482 | 1,234 | $-18.4%$ | $-2.1%$ | 1,209 | 1,482 | $-18.4%$ |
| Fiber | 3.276 | 689 | 2.411 | 375.5% | 35.8% | 3.276 | 689 | 375.5% |
| Fixed Line in Service | 1,578 | 278 | 1.146 | 467.5% | 37.8% | 1,578 | 278 | 467.5% |
| Fixed Broadband | 1,616 | 371 | 1,194 | 335.6% | 35.4% | 1,616 | 371 | 335.6% |
| IPTV | 81 | 40 | 72 | 104.3% | 12.9% | 81 | 40 | 104.3% |
| FTTH - Homes Connected [HC's] | 1,659 | 380 | 1.236 | 336.5% | 34.3% | 1,659 | 380 | 336.5% |
Residential net revenues totaled R\$ 1,625 million in 3Q20 (-9.8% y.o.y. and +2.7% q.o.q.). This sequential growth is the result of the structural recovery of the segment directly linked to the expansion of Fiber. In 3Q20, revenues from fiber services more than offset the decline in revenues from legacy services compared to the previous quarter, and the share of fiber revenue reached 24% of the segment's total revenue, already being the second largest revenue from Residential. This sequential growth in total segment revenue has not been seen since the third quarter of 2017.
Oi ended 3Q20 with 11,823 thousand RGUs in the Residential segment (-12.6% y.o.y. and +0.3% q.o.q.). Regarding fiber RGUs, we observed a significant growth of 35.8% over 2Q20 and 375.5% over 3Q19.
3Q20 Earnings Release Residential ARPU was R\$ 82.5 in 3Q20 (+4.3% y.o.y. and +3.7% q.o.q.). The annual growth was mainly driven by an increase in Broadband and DTH TV ARPU in the period, benefiting from the change in the profile of involuntary disconnections. The sequential increase was driven by the growth of Fiber ARPU, as a result of the higher share of plans with higher speeds and consequently higher ARPUs.
In 3Q20, the Company continued to expand the FTTH network and accesses, closing the quarter with 7.9 million homes passed with fiber (HP). In the quarter, the company added 1.1 million HP's to its base, a monthly average of more than 382 thousand HP's in 3Q20. This was the fifth consecutive quarter with increments of more than 1 million HP's to the FTTH infrastructure.
Oi closed 3Q20 with around 1.75 million homes connected (HC) to Fiber (1.66 million of which in the Residential segment) and a take-up rate of 22.2%. The exploration of FTTH opportunities has proven to be a promising reality. FTTH net adds totaled 446 thousand customers in 3Q20. Comparing the performances in the ultra broadband market in 2020, Oi has been leading with net additions approximately 19% higher than the second placed among the other large carriers.
The Company continued to monitor the evolution of investments in fiber and has been constantly expanding its installation, support, sales and marketing initiatives. The results can be seen in the take-up rates by HP cohort. The first cohorts, from September 2018 to February 2019, reached an average take-up rate of 21% by the end of 3Q20, while the cohorts from March to August 2019 recorded an average take-up rate of 29% by the end of the period. The average take-up rate of the cohorts from September 2019 to February 2020 was in line with more recent cohorts, at 24% by the end of 3Q20. The 2020 cohorts have average take-up rates of over 20% six months after the installation. The results of the more recent cohorts tend to improve as the learning curve progresses, also supported by a more granular analysis of viable HPs.
Fiber ARPU was R\$ 87.8 in 3Q20, up 3.3% from R\$ 85.0 (Pro forma ARPU of R\$ 85.0. Excludes the impact of 1st month promotion and adjusts the pro-rata ARPU of new customers who entered after the beginning of the month) in 2Q20 and down 0.8% from R\$ 88.5 in 3Q19.The year-on-year ARPU decline was mainly due to current offers with incentives for new customers to acquire FTTH products. The strategy of selling bundles is still in progress and has shown satisfactory results. Fiber already accounted for 40% of all residential Broadband customers in 3Q20, up from approximately 8% in 3Q19.
Fiber revenues reached R\$ 402 million in 3Q20, of which R\$ 383 million from residential customers and R\$ 20 million from B2B customers. Fiber revenue grew 374% over 3Q19, up 388% in the Residential segment and 203% in the B2B segment, and R\$ 134 million, or 50%, over 2Q20, up R\$ 127 million, or 50%, in the Residential segment.
Fiber revenues are driving the turnaround of residential revenues. While in 3Q19 Fiber revenues represented 4% of total revenues in the residential segment, in 3Q20 it represented 24%. As a result, Fiber is reversing the structural downward trend in residential revenues. The strong growth in fiber more than offsets the decline in legacy revenues (Copper + DTH). Based on September revenues, annualized fiber revenues already exceed R\$ 1.6 billion and tend to grow further.
3Q20 Earnings Release Oi ended 3Q20 with 4,908 thousand copper fixed voice customers in the Residential segment (-31.9% y.o.y. and -8.5% q.o.q.). In copper broadband, the Company registered 2,431 thousand RGUs in the segment (-41.5% y.o.y. and -12.4% q.o.q.). Finally, Residential's DTH TV base ended the quarter with 1,209 thousand RGUs (-18.4% y.o.y. and -2.1% q.o.q.).
The copper service follows the process of retraction in market demand and its increasing replacement by mobile services and more advanced residential service technologies, with less latency and greater reliance, as in the case of Fiber in broadband.
In addition to the process of natural reduction in demand for legacy products in the market, the Company continues to reduce the commercial focus on these services, contributing to the acceleration of this substitution of copper by fiber, redirecting the commercial and financial efforts to accelerate the FTTH project, with greater potential to generate value for the Company.
| 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY | |
|---|---|---|---|---|---|---|---|---|
| Personal Mobility | ||||||||
| Net Revenues [R\$ million] | 1.706 | 1.763 | 1,619 | $-3.2%$ | 5.4% | 5.027 | 5.240 | $-4.1%$ |
| Service | 1,681 | 1.726 | 1.607 | $-2.6%$ | 4.6% | 4,968 | 5,116 | $-2.9%$ |
| Customer [1] | 1.623 | 1,667 | 1,549 | $-2.7%$ | 4.8% | 4.795 | 4.924 | $-2.6%$ |
| Prepaid | 687 | 760 | 635 | $-9.6%$ | 8.2% | 2.004 | 2.313 | $-13.4%$ |
| Postpaid | 924 | 891 | 905 | 3.7% | 2.1% | 2.759 | 2.570 | 7.4% |
| Other | 12 | 16 | 8 | $-27.3%$ | 37.8% | 32 | 41 | $-21.8%$ |
| Network Usage | 58 | 59 | 58 | $-1.2%$ | $-0.5%$ | 173 | 192 | $-9.5%$ |
| Sales of handsets, SIM cards and others | 26 | 37 | 12 | $-31.2%$ | 117.6% | 59 | 124 | $-52.6%$ |
| Revenue Generating Units [RGU] - ['000] | 33,738 | 34,703 | 33,988 | $-2.8%$ | $-0.7%$ | 33,738 | 34,703 | $-2.8%$ |
| Prepaid Plans | 23,840 | 25,670 | 24,269 | $-7.1%$ | $-1.8%$ | 23,840 | 25,670 | $-7.196$ |
| Postpaid Plans 14 | 9.899 | 9,032 | 9,719 | 9.6% | 1.8% | 9,899 | 9,032 | 9.6% |
(1) Excludes handset and network usage revenues.
(2) Includes postpaid plans, Oi Controle, bundled mobile services and 3G (mini-modem).
Personal Mobility net revenues totaled R\$ 1,706 million in 3Q20, 3.2% lower than in 3Q19 and 5.4% higher than in 2Q20, returning to the level of revenue in 1Q20 (R\$ 1,702 million, +0.3% variation), the quarter before the beginning of the containment measures due to the pandemic. Customer revenues, which exclude interconnection and handset revenues, totaled R\$ 1,623 million in 3Q20 (-2.7% y.o.y. and +4.8% q.o.q.).
Network usage revenues totaled R\$ 58 million in 3Q20, in line with 2Q20 (-0.5%) and down 1.2% from 3Q19. Handset revenues totaled R\$ 26 million, a decline of R\$ 12 million from 3Q19 and an increase of R\$ 14 million over 2Q20, impacted by stores reopening after the softening of quarantine restrictions.
Oi closed 3Q20 with 33,738 thousand RGUs in Personal Mobility, down 2.8% from 3Q19, with 964 thousand net disconnections, resulting from 1,831 thousand disconnections in the prepaid segment, which were partially offset by 866 thousand additions in the postpaid segment. The number of additions fell 0.7% from 2Q20, with a decrease of 1.8% in the prepaid segment and an increase of 1.8% in the postpaid segment.
3Q20 Earnings Release Oi's total mobile customer base (Personal Mobility + B2B) came to 36,537 thousand RGUs, 2,798 thousand of which in the B2B segment.
The prepaid segment ended 3Q20 with 23,840 thousand RGUs (-7.1% y.o.y. and -1.8% q.o.q.).The main reason for the annual decline is the Company's policy of encouraging prepaid customers to migrate to the postpaid segment. Recharge volume decreased 9.9% from 3Q19 and increased 8.3% over 2Q20.
As in the total revenue of the segment, prepaid shows strong signs of recovery, when comparing the result of 3Q20 for revenue and top-ups, against the number of 1Q20, previous quarter to the effects of confinement, prepaid shows 0.9% revenue growth and 1.3% increase in top-ups. The growth observed both in the quarterly comparison and in the comparison with 1Q20, is mainly due to the reopening of stores and other points of credit insertion, combined with a recovery in the economy and government financial assistance to the neediest population.
Oi closed the quarter with 9,899 thousand RGUs in the postpaid segment, with an increase of 9.6% in the customer base and net adds of 866 thousand RGUs compared to 3Q19, mainly due to the strategy of encouraging prepaid customers to migrate to postpaid plans.
The positive results in RGUs reflected in revenues, which grew 3.7% over 3Q19 and 2.1% over 2Q20. Regional offerings, simplification, innovation, more aggressive sales and the refarming of the 1.8 GHz frequency range for 4G and 4.5G were the main drivers enabling the positive results of the postpaid segment, in addition to the strategy of accelerating the migration of customers from the prepaid to the postpaid segment and stores reopening.
Mobile ARPU stood at R\$ 16.3 in 3Q20, in line with 3Q19 (-0.2%) and 5.1% higher than in 2Q20.
3Q20 Earnings Release Table 5 – Net Revenues and RGUs of the B2B segment
| 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY | |
|---|---|---|---|---|---|---|---|---|
| B2B | ||||||||
| Net Revenues [R\$ million] | 1,294 | 1,357 | 1,265 | $-4.7%$ | 2.3% | 3.876 | 4,195 | $-7.6%$ |
| Corporate | 803 | 823 | 770 | $-2.4%$ | 4.3% | 2,350 | 2.547 | $-7.7%$ |
| IT | 189 | 121 | 158 | 55.9% | 19.5% | 485 | 325 | 49.5% |
| Data | 324 | 373 | 338 | $-13.3%$ | $-4.3%$ | 1,012 | 1,197 | $-15.5%$ |
| Other | 291 | 329 | 274 | $-11.6%$ | 6.1% | 854 | 1,026 | $-16.8%$ |
| Wholesale | 237 | 244 | 238 | $-2.9%$ | $-0.5%$ | 749 | 757 | $-1.1%$ |
| Small Enterprises | 253 | 290 | 256 | $-12.7%$ | $-1.1%$ | 776 | 891 | $-12.9%$ |
| Fiber | 19 | 6 | 13 | 219.8% | 50.7% | 43 | 11 | 309.9% |
| Other | 234 | 284 | 243 | $-17.6%$ | $-3.8%$ | 733 | 880 | $-16.7%$ |
| Revenue Generating Units [RGU] - ['000] | 6,438 | 6,702 | 6,395 | $-3.9%$ | 0.7% | 6,438 | 6,702 | $-3.9%$ |
| Fiber | 147 | 46 | 109 | 220.6% | 34.9% | 147 | 46 | 220.6% |
| Copper Voice | 3,121 | 3,342 | 3,202 | $-6.6%$ | $-2.5%$ | 3,121 | 3,342 | $-6.6%$ |
| Copper Broadband | 358 | 475 | 389 | $-24.6%$ | $-7.9%$ | 358 | 475 | $-24.6%$ |
| DTH TV | 14 | 14 | 14 | $-2.7%$ | $-1.4%$ | 14 | 14 | $-2.7%$ |
| Mobile | 2,798 | 2,825 | 2,682 | $-1.0%$ | 4.3% | 2,798 | 2,825 | $-1.0%$ |
Net revenues from the B2B segment totaled R\$ 1,294 million in 3Q20 (-4.7% y.o.y. and +2.3% q.o.q.).
The Company closed 3Q20 with 6,438 thousand RGUs in the segment (-3.9% y.o.y. and +0.7% q.o.q.).
With the launch of the new brand "Oi Soluções" for the Corporate segment in December 2019, Oi intends to integrate and provide digital solutions for Telecommunications and IT (Information Technology) with a customized and consulting positioning and offering a comprehensive portfolio of ICT (Information and Communication Technology) solutions.
The repositioning in the segment has been generating results, increasing the compound quarterly growth rate (CQGR) from 8% during 2019 to 14% in the first three quarters of 2020, being responsible for 24% of the total revenue of the corporate segment. Net revenues from the Corporate segment totaled R\$ 803 million in 3Q20 (- 2.4% y.o.y. and +4.3% q.o.q.). The sequential growth was mainly due to an increase of R\$ 31 million, in managed services and network security, this last one as a result of Home Office programs adopted by several client companies to suit confinement.
Wholesale net revenues totaled R\$ 237 million in 3Q20 (-2.9% y.o.y. and -0.5% q.o.q.). If we also include opex reducing revenues (infrastructure rental revenues, which are not generated by telecommunications services, but which decreases the Company's operating costs), Wholesale revenues totaled R\$ 483 million in 3Q20 (+0.5% y.o.y. and +0.9% q.o.q.).
3Q20 Earnings Release For the Small Enterprises segment, the Company has been adopting the same strategy used in the B2C segment, given their market similarities, and has just launched the Oi Seu Negócio product, focused on fiber as the network solution for small enterprises. Oi continues to market regional offerings and intensify its sales initiatives together with the "Network Reuse" approach for FTTH. The decline in net revenues (-12.7% y.o.y. and -1.1% q.o.q.) was due to high exposure to revenues from legacy services (94% of the total for this segment).
| R\$ million | 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY |
|---|---|---|---|---|---|---|---|---|
| Routine Operating Costs and Expenses | ||||||||
| Brazil | 3,212 | 3.552 | 3.025 | $-9.6%$ | 6.2% | 9.455 | 10,480 | $-9.8%$ |
| Personnel | 602 | 605 | 535 | $-0.4%$ | 12.6% | 1.734 | 1,788 | $-3.1%$ |
| Interconnection | 113 | 109 | 119 | 3.7% | $-4.8%$ | 343 | 349 | $-1.6%$ |
| Third-Party Services | 1,340 | 1.497 | 1,318 | $-10.5%$ | 1.6% | 4,072 | 4,477 | $-9.0%$ |
| Network Maintenance Service | 216 | 251 | 218 | $-13.7%$ | $-1.0%$ | 669 | 781 | $-14.4%$ |
| Handset Costs/Other [COGS] | 28 | 34 | 12 | $-18.0%$ | 122.5% | 61 | 125 | $-51.3%$ |
| Marketing | 94 | 148 | 66 | $-36.6%$ | 40.8% | 230 | 332 | $-30.7%$ |
| Rent and Insurance | 609 | 676 | 572 | $-9.9%$ | 6.5% | 1,762 | 2,009 | $-12.3%$ |
| Provision for Contingencies | 65 | 72 | 42 | $-10.5%$ | 55.0% | 131 | 186 | $-29.5%$ |
| Provision for Bad Debt | 67 | 160 | 127 | $-57.9%$ | $-47.1%$ | 333 | 427 | $-22.1%$ |
| Taxes and Other Expenses [Revenues] | 78 | 15 | 5245.7% | 408.3% | 120 | 5 | 2106.9% | |
| International Operations | 32 | 75 | 160 | $-57.0%$ | $-79.9%$ | 189 | 142 | 33.5% |
| Routine OPEX | 3,244 | 3.627 | 3,185 | $-10.6%$ | 1.8% | 9,645 | 10,622 | $-9.2%$ |
Consolidated routine opex, including international operations, totaled R\$ 3,244 million in 3Q20 (-10.6% y.o.y. and +1.8% q.o.q.).
Routine opex from Brazilian operations amounted to R\$ 3,212 million in 3Q20 (-9.6% y.o.y. and +6.2% q.o.q.).
As part of its strategic plan, the Company has been working on fronts to reduce costs and simplify operations, efficiency and digital transformation, towards a lighter and more agile company, contributing to annual EBTIDA growth.
Personnel expenses totaled R\$ 602 million in 3Q20, in line with 3Q19 and 12.6% higher than in 2Q20. The sequential increase was mainly due to the provision for variable compensation linked to the achievement of operational, financial and quality goals for 2020. These provisions generally occur in the second semester, when the Company has greater visibility of goals achievement progression.
Interconnection costs in Brazilian operations amounted to R\$ 113 million in 3Q20 (+3.7% y.o.y. and -4.8% q.o.q.). The increase over 3Q19 was chiefly due to a rise in regulated tariffs.
3Q20 Earnings Release Costs and expenses related to third-party services in Brazilian operations totaled R\$ 1,340 million in 3Q20 (- 10.5% y.o.y. and +1.6% q.o.q.). The annual reduction is mainly due to the decline in the TV customer base, such as content acquisition expenses and the positive impacts on costs of the automation and digitalization process underway in the company, impacting Customer Relationship and Billing.
Network maintenance service costs and expenses in Brazilian operations totaled R\$ 216 million in 3Q20, 13.7% lower than in 3Q19 and in line with 2Q20. This reduction was mainly due to copper de-averaging process. The reduction of the copper network plant, whether due to the substitution for fiber, or due to the company initiatives of granular analysis of the copper Central Offices (de-averaging), reducing the number of inoperative CO's and consolidating these services in other CO's, has contributed effectively to reduce plant maintenance expenses.
Handset costs in Brazilian operations amounted to R\$ 28 million in 3Q20 (-18.0% y.o.y. and +122.5% q.o.q.). The sequential increase was mostly due to higher handset sales volume after the reopening of stores, following the easing of quarantine restrictions.
Marketing expenses totaled R\$ 94 million in 3Q20, up 40.8% over 2Q20, and down 36.6% from 3Q19, as we did not run Prepaid and Postpaid campaigns in 2020, due to confinement. The sequential growth is due to the gradual economy's recovery, with the reopening of stores and a more emphatic return from commercial activities, especially the acceleration of broadband fiber sales.
Rent and insurance expenses in Brazilian operations amounted to R\$ 609 million in 3Q20 (-9.9% y.o.y. and +6.5% q.o.q.). The sequential growth is mainly due to the contractual readjustments of electricity pole renting posts. These contracts are linked to the IGP-M, which suffered a strong variation in the period.
The provision for contingencies in Brazilian operations came to R\$ 65 million in 3Q20 (-10.5% y.o.y. and +55.0% q.o.q.). The annual reduction was due to a decline in the number of new legal proceedings, especially in labor, small causes and corporate spheres. These decline in the number of new legal proceedings against the company, which have been recurring in recent quarters, are the result of the improvement in the quality of the service provided, also reflected in the reduction in the Anatel complaints rate observed and mentioned above.
The provision for bad debt totaled R\$ 67 million in 3Q20 (-57.9% y.o.y. and -47.1% q.o.q.). Both declines were concentrated in the retail segment, due to an improvement in collection actions and constant reduction in defaults observed in all products, as a result of continuous improvement in sales and credit analysis processes.
| 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY | |
|---|---|---|---|---|---|---|---|---|
| Oi S.A. | ||||||||
| Routine EBITDA IR\$ million] | 1,462 | 1.374 | 1,359 | 6.4% | 7.6% | 4.354 | 4,600 | $-5.4%$ |
| Brazil | 1.437 | 1.403 | 1.464 | 2.4% | $-1.9%$ | 4.382 | 4.607 | $-4.9%$ |
| International Operations | 26 | $-28$ | $-106$ | 191.3% | 124.4% | $-28$ | -6 | $-348.9%$ |
| Routine EBITDA Margin [%] | 31.1% | 27.5% | 29.9% | 3.6 p.p. | 1.2 p.p. | 31.1% | 30.2% | 0.9 p.p. |
| Brazil | 30.9% | 28.3% | 32.6% | 2.6 p.p. | $-1.7 p.p.$ | 31.7% | 30.5% | 1.1 p.p. |
| International Operations | 44.6% | $-61.2%$ | $-195.6%$ | 105.9 p.p. | 240.2 p.p. | $-17.7%$ | $-4.7%$ | $-13.0 p.p.$ |
| Non-routine Items (R\$ million) | $22^{1}$ | $-2.821$ | 0 | n.m. | n.m. | 389 | $-2.001$ | n.m. |
| EBITDA [R\$ million] | 1,485 | $-1.447$ | 1,359 | $-202.6%$ | 9.3% | 4.743 | 2,599 | 82.5% |
| Brazil | 1.459 | $-1,418$ | 1,464 | $-202.9%$ | $-0.4%$ | 4,490 | 2,605 | 72.3% |
| International Operations | 26 | $-28$ | $-106$ | $-191.3%$ | $-124.4%$ | 253 | -6 | $-4100.5%$ |
| EBITDA Margin [%] | 31.6% | $-28.9%$ | 29.9% | 60.5 p.p. | 1.7 p.p. | 33.9% | 17.1% | 16.8 p.p. |
Consolidated routine EBITDA totaled R\$ 1,462 million in 3Q20 (+6.4% y.o.y. and +7.6% q.o.q.).
Routine EBITDA from Brazilian operations amounted to R\$ 1,437 million in 3Q20 (+2.4% y.o.y. and -1.9% q.o.q.). The routine EBITDA margin from Brazilian operations was 30.9%, 2.6 p.p. higher than in 3Q19 and 1.7 p.p. lower than in 2Q20.
Routine EBITDA from international operations (Africa and East Timor) came to R\$ 26 million in 3Q20, versus -R\$ 28 million in 3Q19 and -R\$ 106 million in 2Q20.
Non-routine items totaling R\$ 22 million in 3Q20, refer to gain from the sale of real estate.
| Table 8 – Capex | ||||
|---|---|---|---|---|
(1) Includes Fiber + Wholesale.
The Company's consolidated capex, including international operations, totaled R\$ 2,011 million in 3Q20 (-2.6% y.o.y. and +14.4% q.o.q.). Capex in Brazilian operations amounted to R\$ 2,005 million in 3Q20 (-2.7% y.o.y. and +14.5% q.o.q.).
3Q20 Earnings Release A breakdown of investments by product shows the Company's focus on transformation plan aiming to massify the FTTH network in the country, bringing high-speed broadband to the customers' homes. Investments in Fiber totaled R\$ 1,389 million in 3Q20 (+59.4% y.o.y. and +24.0% q.o.q.).
| R\$ million | 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY |
|---|---|---|---|---|---|---|---|---|
| 01 S.A. | ||||||||
| Routine EBITDA | 1.462 | 1.374 | .359 | 6.4% | 7.6% | 4.354 | 4,600 | $-5.4%$ |
| Capex | 2.011 | 2.065 | 1.758 | $-2.6%$ | 14.4% | 5.563 | 5,851 | $-4.9%$ |
| Routine Operational Cash Flow [EBITDA - Capex] |
$-548$ | $-691$ | $-399$ | $-20.6%$ | 37.3% | $-1.209$ | $-1.251$ | $-3.3%$ |
| R\$ million | 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY |
|---|---|---|---|---|---|---|---|---|
| 01 S.A. | ||||||||
| Routine EBITDA | 1.437 | 1.403 | 1.464 | 2.4% | $-1.9%$ | 4,382 | 4,607 | $-4.9%$ |
| Capex | 2.005 | 2.060 | 1,751 | $-2.7%$ | 14.5% | 5.536 | 5.835 | $-5.1%$ |
| Routine Operational Cash Flow [EBITDA - Capex) |
$-568$ | $-658$ | $-286$ | $-13.6%$ | 98.5% | $-1.154$ | $-1.228$ | $-6.1%$ |
Consolidated routine operational cash flow (routine EBITDA minus capex) was negative by R\$ 548 million in 3Q20, while routine operational cash flow from Brazilian operations was negative by R\$ 568 million, mainly due to high investments in the FTTH expansion project, to ensure the execution of the transformation plan.
| R\$ million | 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY |
|---|---|---|---|---|---|---|---|---|
| Depreciation and Amortization | ||||||||
| Total | 1.740 | 1.752 | 1.725 | $-0.7%$ | 0.9% | 5.176 | 5.171 | 0.1% |
Depreciation and amortization expenses totaled R\$ 1,740 million in 3Q20 (-0.7% y.o.y. and +0.9% q.o.q.).
3Q20 Earnings Release Table 12 – Financial Result (Oi S.A. Consolidated)
| R\$ million | 3020 | 3019 | 2020 | 2020 | 2019 |
|---|---|---|---|---|---|
| Oi S.A. Consolidated | |||||
| Net Interest (on fin. investments and loans and financing) | $-484$ | $-386$ | $-534$ | $-1.510$ | $-1.016$ |
| Amortization of fair value adjustment | $-357$ | $-294$ | $-364$ | $-1.299$ | $-714$ |
| Net FX Result (on fin. investments and loans and financing) | $-440$ | $-645$ | $-669$ | $-3.766$ | $-617$ |
| Other Financial Income / Expenses | $-1.045$ | $-1.051$ | $-1.559$ | $-5.353$ | $-1.606$ |
| Net Financial Income (Expenses) | $-2.325$ | $-2.376$ | $-3.127$ | $-11.928$ | $-3.951$ |
Oi S.A. recorded a consolidated net financial expense of R\$ 2,325 million in 3Q20, versus a net financial expense of R\$ 3,127 million in 2Q20 and R\$ 2,376 million in 3Q19.
In the quarter, the reduction in financial expenses occurred in all income items. There were lower financial expenses under the "Net FX Result" line in 3Q20, due to the depreciation of the real against the U.S. dollar in the period (3.0% in 3Q20 vs. 5.3% in 2Q20). There was also a reduction in expenses in the "Net Interest" item, in line with the lower CDI in the period. The "Amortization of Fair Value Adjustment" line remained virtually unchanged. Finally, the reduction in "Other Financial Income/Expenses" line is mainly explained by expenses with monetary restatements on lower contingencies, in addition to less exchange variation on investment abroad and lower expenses related to onerous liabilities (data transmission contracts by submarine cables and satellites) reflecting the lower exchange rate variation in the period.
The year-on-year comparison, there was stability in the consolidated financial result, with the increase in "Net Interest" and "Amortization of fair value adjustment" being offset by a lower "Net FX Result". The increase in the "Net Interest" line reflected the disbursement of Oi Móvel's debentures in January 2020 and the higher expenses related to "Amortization of Fair Value Adjustment", reflected the appreciation of the U.S. dollar. The "Net FX Result", benefited from a lower depreciation of the real against the U.S. dollar between 3Q19 and 3Q20 (8.7% and 3.0%, respectively).
| R\$ million | 3020 | 3019 | 2020 | YoY | QoQ | 2020 | 2019 | YoY |
|---|---|---|---|---|---|---|---|---|
| Net Earnings (Loss) | ||||||||
| Earnings before interest and taxes [EBIT] | $-255$ | $-3.199$ | $-366$ | n.m. | n.m. | $-433$ | $-2.572$ | $-83.2%$ |
| Financial Results | $-2.325$ | $-2.376$ | $-3.127$ | n.m. | $-25.6%$ | $-11,928$ | $-3,951$ | n.m. |
| Income Tax and Social Contribution | -209 | $-1$ | n.m. | n.m. | 34 | -290 | n.m. | |
| Net Income [Loss] from Continuing Operations | $-2.580$ | $-5.784$ | $-3.493$ | $-55.4%$ | $-26.2%$ | $-12.327$ | $-6.814$ | n.m. |
| Consolidated Net Income [Loss] | $-2,580$ | $-5.784$ | $-3.493$ | $-55.4%$ | $-26.2%$ | $-12.327$ | $-6,814$ | n.m. |
| attributable to owners of the Company | $-2,638$ | $-5.747$ | $-3.409$ | $-54.1%$ | $-22.6%$ | $-12.328$ | $-6,738$ | n.m. |
| attributable to non-controlling interests | 59 | $-37$ | $-84$ | n.m. | $-170.096$ | $-76$ | n.m. |
3Q20 Earnings Release The Company's operating earnings (loss) before the financial result and taxes (EBIT) came to a loss of R\$ 255 million in 3Q20, versus a loss of R\$ 3,199 million in 3Q19 and a loss of R\$ 366 million in 2Q20. The Company recorded a net financial expense of R\$ 2,325 million and an expense of R\$ 1 million in the Income Tax and Social Contribution line, giving a consolidated net loss of R\$ 2,580 million in 3Q20.
| R\$ Million | Sep/20 | Sep/19 | Jun/19 | % Gross Debt |
|---|---|---|---|---|
| Debt | ||||
| Short Term | 195 | 139 | 454 | 0.7% |
| Long Term | 26,734 | 17.766 | 25,661 | 99.3% |
| Total Debt | 26.929 | 17.905 | 26,115 | 100.0% |
| Local Currency Exposure | 9,300 | 8,461 | 9,108 | 34.5% |
| Foreign Currency Exposure | 17.628 | 9.444 | 17,007 | 65.5% |
| Swaps | $\bf{0}$ | 0 | 0 | 0.0% |
| [-] Cash | $-5.686$ | $-3.192$ | $-6.073$ | $-21.1%$ |
| $I = I$ Net Debt | 21.243 | 14.713 | 20,043 | 78.9% |
Oi S.A. ended 3Q20 with consolidated gross debt of R\$ 26,929 million, an increase of 3.1%, or R\$ 814 million, over 2Q20 and 50.4%, or R\$ 9,024 million, over 3Q19, chiefly due to the depreciation of the real against the dollar (3.0% q.o.q. and 35.5% y.o.y.). There were also the usual effects of interest accrual and amortization of the present value adjustment, which have contributed to increasing debt with every passing quarter. The year-onyear comparison was also impacted by the disbursement of Oi Móvel's debentures in January 2020, whose balance totaled R\$ 3,758 million in September.
At the end of 3Q20, dollar-denominated debt accounted for 65.5% of fair value debt. The consolidated average term of debt remained at around nine years in 3Q20.
For yet another quarter, the Company's cash consumption slowed down year on year, totaling R\$ 5,686 million in September. As a result, net debt totaled R\$ 21,243 million in 3Q20. The reduction in the cash position was mainly due to continued high Capex, in line with the Company's Strategic Plan, and the payment of nonrecurring obligations related to the implementation of the Plan, including payment of half-yearly interest on the Qualified Bond. It is worth noting that this reduction was partially offset by the receipt of the last installment of the sale of PT Ventures in the amount of U\$\$40 million, in addition to the anticipation of the 28 remaining installments receivable related to the surplus of Fundação Sistel de Seguridade Social over the quarter, in the amount of approximately R\$ 460 million.
| Gross Debt Breakdown - 3020 | Face Value | Fair Value Adjustment |
Fair Value |
|---|---|---|---|
| BNDES | 4.180 | 4,180 | |
| Local Banks | 9.337 | [4, 226] | 5.111 |
| FCAs | 9.540 | [5,503] | 4.038 |
| Qualified Bonds | 9,495 | [913] | 8,582 |
| Facility "Non Qualified" | 531 | [168] | 363 |
| General Offering | 6,303 | [5,392] | 911 |
| Private Debenture [Bridge Loan] | 3.775 | 3.775 | |
| Other | [31] | [31] | |
| Total Gross Debt | 43,131 | [16, 202] | 26,929 |
| 2020 Cash Position | 6,073 |
|---|---|
| Routine EBITDA | 1.437 |
| IFRS16 | -447 |
| Capex | $-2.005$ |
| Working capital | 509 |
| Antecipation Sistel | 460 |
| Judicial Deposits + Taxes | 21 |
| Financial operations | $-101$ |
| Payments to Creditors JR | $-441$ |
| Non Core | 179 |
| 3020 Cash Position | 5.686 |
3Q20 Earnings Release Table 17 – Statement of Operations (Oi S.A. Consolidated)
| R\$ million | 3020 | 3019 | 2020 | 2020 | 2019 |
|---|---|---|---|---|---|
| Net Operating Revenues | 4.706 | 5.001 | 4.544 | 13.998 | 15,223 |
| Operating Costs and Expenses | $-3.221$ | $-6.448$ | $-3.185$ | $-9.256$ | $-12.624$ |
| Personnel | $-615$ | $-615$ | $-547$ | $-1,771$ | $-1,819$ |
| Interconnection | $-115$ | $-110$ | $-120$ | $-346$ | $-351$ |
| Third-Party Services | $-1.357$ | $-1.516$ | $-1.334$ | $-4.120$ | $-4.526$ |
| Network Maintenance Service | $-217$ | $-251$ | $-219$ | $-670$ | $-782$ |
| Handset Costs/Other [COGS] | $-33$ | $-36$ | $-17$ | $-73$ | $-132$ |
| Marketing | $-94$ | $-148$ | $-67$ | $-232$ | $-334$ |
| Rent and Insurance | $-613$ | $-677$ | $-577$ | $-1.775$ | $-2.014$ |
| Provision for Contingencies | $-65$ | $-72$ | $-41$ | $-128$ | $-186$ |
| Provision for Bad Debt | $-67$ | $-160$ | $-127$ | $-333$ | $-427$ |
| Taxes and Other Revenues (Expenses) | $-45$ | $-2.862$ | $-135$ | 194 | $-2.052$ |
| EBITDA | 1.485 | $-1.447$ | 1.359 | 4.743 | 2.599 |
| Margin % | 31.6% | $-28.9%$ | 29.9% | 33.9% | 17.1% |
| Depreciation and Amortization | $-1.740$ | $-1.752$ | $-1.725$ | $-5.176$ | $-5.171$ |
| EBIT | $-255$ | $-3.199$ | $-366$ | $-433$ | $-2.572$ |
| Financial Expenses | $-2.961$ | $-3.875$ | $-3.983$ | $-16.805$ | $-6,781$ |
| Financial Income | 636 | 1,499 | 856 | 4.877 | 2.830 |
| Net Earnings [Loss] Before Tax and Social Contribution | $-2.580$ | $-5.575$ | $-3.493$ | $-12.361$ | $-6.524$ |
| Income Tax and Social Contribution | 1 | $-209$ | $-1$ | 34 | $-290$ |
| Consolidated Net Earnings [Loss] | $-2.580$ | $-5.784$ | $-3.493$ | $-12.327$ | $-6.814$ |
| Margin % | $-54.8%$ | $-115.6%$ | $-76.9%$ | $-88.1%$ | $-44.8%$ |
| 3Q20 Earnings Release | ||
|---|---|---|
| TOTAL LIABILITIES | 72,664 | 73,152 | 72,867 |
|---|---|---|---|
| Current | 12.260 | 11,915 | 11,923 |
| Suppliers | 4.684 | 4.340 | 5,900 |
| Leases | 1,671 | 1,632 | 1,506 |
| Loans and Financing | 195 | 454 | 139 |
| Credit Assignment - Sistel | 197 | o | 0 |
| Payroll and Related Accruals | 942 | 810 | 942 |
| Provisions | 667 | 693 | 515 |
| Payable Taxes | 16 | 39 | 47 |
| Other Taxes | 1.635 | 1,766 | 956 |
| Dividends Payable | 6 | 6 | 6 |
| Liabilities associated to held-for-sale assets | 159 | 171 | 526 |
| Authorizations and Concessions Payable | 78 | 67 | 39 |
| Other Accounts Payable | 2.011 | 1.936 | 1.346 |
| Non-Current Liabilities | 54,402 | 53.074 | 40.862 |
| Suppliers | 3.943 | 3.780 | 3.255 |
| Leases | 7.017 | 7.110 | 6.725 |
| Loans and Financing | 26.734 | 25,661 | 17.766 |
| Credit Assignment - Sistel | 230 | 0 | 0 |
| Payable and Deferred Taxes | $\overline{0}$ | 0 | 177 |
| Other Taxes | 1,251 | 1,247 | 690 |
| Contingency Provisions | 4.542 | 4.713 | 4,600 |
| Pension Fund Provision | 675 | 658 | 621 |
| Other Accounts Payable | 10,011 | 9.904 | 7.026 |
| Shareholders' Equity | 6.003 | 8.164 | 20,081 |
3Q20 Earnings Release CVM INSTRUCTION 358, ART. 12: Direct or indirect controlling shareholders and shareholders who elect members of the Board of Directors or the Fiscal Council, and any other individual or legal entity, or group of persons, acting as a group or representing the same interests, that attains a direct or indirect interest representing five percent (5%) or more of a type or class of shares of the capital of a publicly held company, must notify the Securities and Exchange Commission (CVM) and the Company of the fact, in accordance with the above article.
Oi recommends that its shareholders comply with the terms of article 12 of CVM Instruction 358, but it takes no responsibility for the disclosure or otherwise of acquisitions or disposals by third parties of interests corresponding to 5% or more of any type or class of its shares, or of rights over those shares or other securities that it has issued.
| Capital | Treasury | Free-Float" | |
|---|---|---|---|
| Common | 5.796.477.760 | 30.595 | 5.796.444.654 |
| Preferred | 157.727.241 | 1,811,755 | 155,915,481 |
| Total | 5.954.205.001 | 1.842.350 | 5.952.360.135 |
Shareholding position as of September 30, 2020.
(1) The outstanding shares do not consider treasury shares or the shares held by the Board of Directors and by the Executive Board.
The main tables in this Earnings Release will be available in Excel format in the "Financial Information/Quarterly Reports" section of the Company's website (www.oi.com.br/ri).
Definitions of the terms used in the Earnings Release are available in the Glossary section of the Company's website: (https://www.oi.com.br/ri/conteudo\_pt.asp?idioma=0&conta=28&tipo=44320).
Rio de Janeiro - November 12, 2020.This report includes consolidated financial and operating information for Oi S.A. - Under Judicial Reorganization ("Oi S.A." or "Oi" or "Company") and its direct and indirect subsidiaries as of September 30, 2020. In compliance with CVM instructions, the information is presented in accordance with International Financial Reporting Standards (IFRS). Due to the seasonality of the telecom sector in its quarterly results, the Company will focus on comparing its financial results with the same period of the previous year.
This report contains projections and/or estimates of future events. The projections contained herein were compiled with due care, taking into account the current situation, based on work in progress and the corresponding estimates. The use of terms such as "projects", "estimates", "anticipates", "expects", "plans", "hopes" and so on is intended to indicate possible trends and forward-looking statements, which, clearly, involve uncertainty and risk, so that future results may differ from current expectations. These statements are based on various assumptions and factors, including general economic, market, industry conditions, and operational factors. Any changes to these assumptions or factors may lead to practical results that differ from current expectations. Excessive reliance should not be placed on these statements.
Forward-looking statements relate only to the date on which they are made, and the Company is not obliged to update them as new information or future developments arise. Oi takes no responsibility for transactions carried out or investment decisions taken on the basis of these projections or estimates. The financial information contained herein is unaudited and may therefore differ from the final results.
Marcelo Ferreira +55 (21) 3131-1314 [email protected] Bruno Nader +55 (21) 3131-1629 [email protected]
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