Telefônica Brasil announces its results for 2Q24

Rhea-AI Summary

Telefônica Brasil (B3: VIVT3; NYSE: VIV) reported strong 2Q24 results with above-inflation growth in revenues, EBITDA, and net income. Key highlights include:

- Net Operating Revenue: R$13,679 million (+7.4% YoY)
- EBITDA: R$5,455 million (+7.3% YoY)
- Net Income: R$1,222 million (+8.9% YoY)
- Earnings per Share: R$0.74 (+9.5% YoY)

Growth was driven by strong performance in Mobile Service Revenue (+8.8% YoY) and FTTH Revenue (+17.1% YoY). The company's FTTH network now covers 444 cities with 27.3 million homes passed. Telefônica Brasil has committed to distribute at least 100% of net income as shareholder remuneration for 2024-2026.

Positive

• Net Operating Revenue increased by 7.4% YoY to R$13,679 million
• EBITDA grew by 7.3% YoY to R$5,455 million
• Net Income rose by 8.9% YoY to R$1,222 million
• Mobile Service Revenue increased by 8.8% YoY
• FTTH Revenue grew by 17.1% YoY
• Postpaid customer base increased by 7.2% YoY
• FTTH network expanded to 444 cities, with 27.3 million homes passed (+10.5% YoY)
• Operating Cash Flow increased by 14.0% YoY to R$3,114 million
• Company committed to distribute at least 100% of net income as shareholder remuneration for 2024-2026

Negative

• Other Revenues decreased by 15.3% YoY
• Total Costs increased by 7.5% YoY to R$8,224 million
• EBITDA margin slightly decreased by 0.1 percentage point YoY to 39.9%
• Free Cash Flow for 6M24 decreased by 3.0% compared to 6M23

Insights

Financial Analyst

Telefônica Brasil's Q2 2024 results demonstrate robust financial performance, with notable growth across key metrics. The company's net operating revenue increased by 7.4% year-over-year to R$13,679 million, driven primarily by strong mobile service revenue growth of 8.8%. This growth was underpinned by a 9.7% increase in postpaid revenue, reflecting successful customer acquisition and retention strategies.

The fixed revenue segment showed its strongest growth since 2015, up 3.9% year-over-year, largely due to the impressive 17.1% growth in FTTH (Fiber-to-the-Home) revenue. This highlights the company's successful expansion of its fiber network, now present in 444 cities with 27.3 million homes passed and 6.5 million homes connected.

EBITDA grew by 7.3% to R$5,455 million, maintaining a stable margin of 39.9%. The company's focus on operational efficiency is evident in the 14% increase in Operating Cash Flow, which reached R$3,114 million with an improved margin of 22.8%.

Net income rose by 8.9% to R$1,222 million, translating to earnings per share of R$0.74. The company's commitment to shareholder returns is noteworthy, with R$4,137 million already distributed in 2024 through various mechanisms.

Overall, Telefônica Brasil's Q2 results reflect a company effectively capitalizing on market opportunities, particularly in mobile and fiber services, while maintaining financial discipline. The sustained growth across key metrics positions the company well for continued success in the Brazilian telecommunications market.

Telecom Industry Expert

Telefônica Brasil's Q2 2024 results underscore its strategic focus on high-value services and network expansion. The standout performance in mobile services, particularly in postpaid, reflects the broader industry trend towards higher-value subscriptions. The 7.2% year-over-year growth in postpaid customer base, coupled with a remarkably low churn rate of 0.99%, indicates strong customer satisfaction and effective retention strategies.

The company's aggressive push in the fiber market is paying dividends, with FTTH revenue growing at an impressive 17.1%. This aligns with the global trend of increasing demand for high-speed, reliable home internet connections. The expansion to 444 cities and the 12.7% growth in homes connected demonstrate Telefônica Brasil's commitment to capturing market share in this lucrative segment.

It's worth noting the slight decrease in CAPEX (-0.5% YoY), which, combined with revenue growth, led to improved cash flow metrics. This suggests the company is entering a phase of harvesting returns from previous investments while still maintaining network quality.

The growth in corporate data and ICT services (8.3% YoY) indicates Telefônica Brasil's success in diversifying revenue streams beyond traditional telecom services. This is important for long-term sustainability in an industry where core services are increasingly commoditized.

Looking ahead, the company's commitment to distribute at least 100% of net income as dividends for the next three years signals confidence in sustained cash generation. However, this strategy will require careful balancing against future investment needs in emerging technologies like 5G and edge computing.

SÃO PAULO, July 29, 2024 /PRNewswire/ -- Telefônica Brasil - (B3: VIVT3; NYSE: VIV), announces its results for 2Q24.

2Q24 Results: Telefônica Brasil S.A.

Strong operating performance leading to above-inflation growth in revenues, EBITDA and net income.

R$ million	2Q24	2Q23	% Y-o-Y	6M24	6M23	% Y-o-Y
Net Operating Revenue	13,679	12,733	7.4	27,225	25,454	7.0
Mobile Services	8,907	8,184	8.8	17,609	16,149	9.0
FTTH	1,757	1,501	17.1	3,474	2,997	15.9
Corporate Data, ICT and others	1,128	1,042	8.3	2,260	2,135	5.9
Electronics	817	743	9.9	1,698	1,597	6.3
Other Revenues¹	1,070	1,263	(15.3)	2,184	2,575	(15.2)
Total Costs	(8,224)	(7,648)	7.5	(16,493)	(15,426)	6.9
EBITDA	5,455	5,085	7.3	10,732	10,027	7.0
EBITDA / Net Revenue Margin	39.9 %	39.9 %	(0.1) p.p.	39.4 %	39.4 %	0.0 p.p.
EBITDA AL	4,216	3,927	7.3	8,263	7,711	7.2
EBITDA AL / Net Revenue Margin	30.8 %	30.8 %	(0.0) p.p.	30.4 %	30.3 %	0.1 p.p.
Net Income	1,222	1,123	8.9	2,118	1,957	8.2
Earnings per Share (EPS)	0.74	0.68	9.5	1.28	1.18	8.8
CAPEX ex-IFRS 16	2,341	2,353	(0.5)	4,215	4,039	4.4
Operating Cash Flow (OpCF)	3,114	2,732	14.0	6,517	5,988	8.8
OpCF/ Net Revenue Margin	22.8 %	21.5 %	1.3 p.p.	23.9 %	23.5 %	0.4 p.p.
Operating Cash Flow AL (OpCF AL)	1,875	1,575	19.1	4,048	3,672	10.2
OpCF AL / Net Revenue Margin	13.7 %	12.4 %	1.3 p.p.	14.9 %	14.4 %	0.4 p.p.
Free Cash Flow	3,089	2,508	23.1	5,469	5,638	(3.0)
Total Subscribers (Thousand)	114,683	111,940	2.5	114,683	111,940	2.5

^{1 – Other Revenues includes Voice, xDSL, FTTC and IPTV.}

Net revenue grew (+7.4% YoY), driven by the strong performance of Mobile Service Revenue (MSR) (+8.8 YoY), which was boosted by the growth of Postpaid Revenue (+9.7% YoY). Postpaid's strong performance is related to the increase in customer base (+7.2% YoY), both due to migrations from prepaid as well as to the acquisition of new customers, annual price adjustments, and by maintaining postpaid's (ex-M2M) churn in historical low levels, 0.99% per month.

Fixed revenue had the biggest increase since 2015, +3.9% YoY, mainly driven by the increase in FTTH Revenue, which continued to expand strongly (+17.1% YoY) in 2Q24. FTTH network is currently present in 444 cities (+5 cities YoY) with 27.3 million homes passed (+10.5% YoY) and 6.5 million homes connected (+12.7% YoY).

EBITDA totaled R$5,455 million (+7.3% YoY), with a margin of 39.9% (-0.1 p.p. YoY), due to the strong service revenue performance.

Operating Cash Flow totaled R$3,114 million (+14.0% YoY), with a margin of 22.8% (+1.3 p.p. YoY) over net revenue. In 2Q24, Capex ex-IFRS16 totaled R$2,341 million (-0.5% YoY) or 17.1% of revenues (-1.4 p.p. YoY), directed towards strengthening our mobile network.

Net income attributed to Telefônica Brasil reached R$1,222 million in 2Q24 (+8.9% YoY). Shareholder remuneration paid up in 2024 reached, so far, R$4,137 million, of which R$2,190 million in interest of capital, R$1,500 million from the resources resulting from the capital reduction, while R$447 million were invested in share buybacks. For the years 2024 to 2026, the Company has committed to distribute an amount equal to or above 100% of net income for each fiscal year.

To download the complete version of the Company's earnings release, please visit our website: https://ri.telefonica.com.br/en 

View original content:https://www.prnewswire.com/news-releases/telefonica-brasil-announces-its-results-for-2q24-302209110.html

SOURCE Telefônica Brasil S.A.

FAQ

What was Telefônica Brasil's (VIV) net operating revenue in Q2 2024?

Telefônica Brasil's net operating revenue in Q2 2024 was R$13,679 million, representing a 7.4% increase year-over-year.

How much did Telefônica Brasil's (VIV) FTTH revenue grow in Q2 2024?

Telefônica Brasil's FTTH revenue grew by 17.1% year-over-year in Q2 2024.

What was Telefônica Brasil's (VIV) net income in the second quarter of 2024?

Telefônica Brasil's net income in Q2 2024 was R$1,222 million, an 8.9% increase compared to the same period in 2023.

How many cities does Telefônica Brasil's (VIV) FTTH network cover as of Q2 2024?

As of Q2 2024, Telefônica Brasil's FTTH network covers 444 cities, an increase of 5 cities year-over-year.

What is Telefônica Brasil's (VIV) shareholder remuneration policy for 2024-2026?

Telefônica Brasil has committed to distribute an amount equal to or above 100% of net income as shareholder remuneration for each fiscal year from 2024 to 2026.