Results January December / Resultados 3T14 Telefônica Brasil S.A.

Transcription

1 Results January December / 2017 Resultads 3T14

2 ACCELERATION OF DATA REVENUES AND EFFICIENCY IN COSTS AND INVESTMENTS DRIVE SUBSTANTIAL EBITDA GROWTH AND ROBUST CASH GENERATION FOR VIVO IN 2017 HIGHLIGHTS Leader in Pstpaid Net Additins in 2017 Launch f FTTH in 16 new municipalities in 2017 Efficiency and digitalizatin initiatives reduced recurring csts fr the eighth cnsecutive quarter Recurring EBITDA grew 7.3% y--y in 4Q17 Free Cash Flw frm Business Activities came t R$5.7 billin in 2017 (+20.1% y--y) Dividends prpsed fr 2017 grew 12.8% y--y, with a prpsed dividend payut f 100% Ttal accesses came t 97.8 millin in December 2017, 74.9 millin f which in the mbile business (+1.6% y--y) and 22.9 millin in the fixed business (-2.1% y--y); Mbile market share f 31.7% in December 2017 (+1.5 p.p. vs. Dec-16); Pstpaid mbile accesses grew 10.1% y--y, reaching a market share f 41.8% in December 2017 (18.7 p.p. higher than the secnd player); Mbile ARPU recrded y--y grwth f 2.2% in 4Q17, fueled by a higher share f pstpaid clients in the mix and the increased adptin f data packages, whse ARPU increased 23.1% y--y in 4Q17; Bradband accesses ttaled 7.4 millin custmers in 4Q17 (+1.9% y--y), with FTTx¹ cnnectins accunting fr 61.1% f the base, thanks t y--y grwth f 9.5% and 92 thusand new net FTTH additins in the quarter. Bradband ARPU climbed 20.5% y--y in 4Q17; Net Operating Service Revenues grew 1.3% in 4Q17 ver 4Q16 (3.5% up y--y, excluding regulatry effects). In 2017, Net Operating Service Revenues climbed 2.0% y--y, cntinuing the psitive trajectry bserved thrughut the year; Mbile Service Revenues cntinued t rise abve inflatin, climbing 3.8% y--y in 4Q17 (versus 3.7% y--y in 3Q17). Data and Digital Services Revenues increased 25.0% y--y, accunting fr 75.0% f Mbile Service Revenues in 4Q17; Recurring Operating Csts² declined 1.5% y--y in 4Q17 (LTM IPCA: +2.9%), cntinuing the cst reductin stemming frm ur fcus n efficiency and digitalizatin; Recurring EBITDA² ttaled R$3,945.6 millin in 4Q17, 7.3% up n 4Q16, accmpanied by a recurring EBITDA margin² f 35.8% (+2.0 p.p. y--y). In 2017, recurring EBITDA² ttaled R$14,664.8 millin, accmpanied by a recurring EBITDA margin² f 33.9%; CAPEX ttaled R$2,664.7 millin in 4Q17 and R$7,998.3 millin in Operating Cash Flw (EBITDA Capex)², ³ increased 46.3% y--y in 4Q17, reaching R$6,666.5 millin in 2017 (+17.8% y--y); Free Cash Flw frm Business Activities grew 20.1% in 2017, t R$5,739.3 millin, driven by greater cst efficiency and ptimized capex allcatin; Accelerated 4G cverage expansin, reaching 2,600 cities, with 84.5% f the ppulatin cvered, and 118 cities with access t 4G+ technlgy in December, imprving custmer experience; Launch f FTTH technlgy in 16 new cities in 2017, ttaling 87 cities in December 2017; Net Incme std at R$4,608.8 millin (+12.8% y--y) in 2017, while Interest n Capital and Dividends came t R$4,608.5 millin 4 (+12.8% y--y)in the perid, resulting in a Payut f 100% ver Adjusted Net Incme. (1) FTTx includes custmers with FTTH (Fiber t the Hme) and FTTC (Fiber t the Cabinet) technlgies, as well as cable custmers; (2) Excluding the fllwing nn-recurring effects: nn-cash regulatry prvisin in 4Q17, with a negative impact f R$178.9 millin n csts and EBITDA 1 and R$118.1 millin n net incme; the sale f twers in 1Q16, with a psitive impact f R$513.5 millin n csts and EBITDA and R$338.9 millin n net incme; the rganizatinal restructuring in 2Q16, with a negative impact f R$101.2 millin n csts and EBITDA and R$66.8 millin n net incme; and the crprate restructuring in 4Q16, with a negative impact f R$52.5 millin n csts and EBITDA and R$34.6 millin n net incme; (3) Excluding the amunts related t the 2.5GHz licenses ttaling R$185.5 millin acquired at the Anatel leftver spectrum auctin accunted in 1Q16; (4) T be ratified at the 2017 Annual Sharehlders Meeting, t be held n April 12, 2018.

3 (B3: VIVT3 and VIVT4, NYSE: VIV) disclses tday its results fr the furth quarter f 2017, presented in accrdance with the Internatinal Financial Reprting Standards (IFRS) and with the prnuncements, interpretatins and guidelines prvided by the Accunting Prnuncements Cmmittee. Ttals are subject t differences due t runding up r dwn. HIGHLIGHTS Cnslidated in R$ millin 4Q17 4Q16 % 3Q17 % % Net Operating Revenues 11, , , , , Net Operating Service Revenues 10, , , , , Net Service Mbile Revenues 6, , , , , Net Operating Fixed Revenues 4, ,281.0 (2.3) 4,275.8 (2.2) 16, ,970.2 (1.3) Net Handset Revenues , ,195.6 (10.5) Operating Csts (7,266.9) (7,250.3) 0.2 (7,209.0) 0.8 (28,720.9) (28,486.0) 0.8 Recurring Operating Csts 1 (7,088.0) (7,197.8) (1.5) (7,209.0) (1.7) (28,542.0) (28,845.8) (1.1) EBITDA 3, , , , , EBITDA Margin % 34.1% 33.3% 0.8 p.p. 33.8% 0.4 p.p. 33.5% 33.0% 0.5 p.p. Recurring EBITDA 1 3, , , , , Recurring EBITDA Margin 1 % 35.8% 33.8% 2.0 p.p. 33.8% 2.0 p.p. 33.9% 32.1% 1.8 p.p. Net Incme 1, , , , , Recurring Net Incme 1 1, , , , , Capex (ex-licenses) 2 2, ,800.1 (4.8) 2, , ,003.7 (0.1) Operatinal Cash Flw 1,2 1, ,489.4 (14.0) 6, , Ttal Accesses (thusand) 97,797 97, , ,797 97, Ttal Mbile Accesses 74,940 73, , ,940 73, Ttal Fixed Accesses 22,857 23,352 (2.1) 23,077 (1.0) 22,857 23,352 (2.1) 1) Excluding the fllwing nn-recurring effects: nn-cash regulatry prvisin in 4Q17, with a negative impact f R$178.9 millin n csts and EBITDA and R$118.1 millin n net incme; the sale f twers in 1Q16, with a psitive impact f R$513.5 millin n csts and EBITDA and R$338.9 millin n net incme; the rganizatinal restructuring in 2Q16, with a negative impact f R$101.2 millin n csts and EBITDA and R$66.8 millin n net incme; and the crprate restructuring in 4Q16, with a negative impact f R$52.5 millin n csts and EBITDA and R$34.6 millin n net incme. 2) Excluding the amunts related t the 2.5GHz licenses ttaling R$185.5 millin acquired at the Anatel leftver spectrum auctin, accunted in 1Q16. 2

4 MOBILE BUSINESS OPERATING PERFORMANCE Thusand 4Q17 4Q16 % 3Q17 % % Mbile Ttal Accesses 74,940 73, , ,940 73, Pstpaid 36,772 33, , ,772 33, M2M 6,321 5, , ,321 5, Prepaid 38,168 40,387 (5.5) 38,897 (1.9) 38,168 40,387 (5.5) Market Share 31.7% 30.2% 1.5 p.p. 30.9% 0.8 p.p. 31.7% 30.2% 1.5 p.p. Pstpaid 41.8% 42.1% (0.3) p.p. 42.1% (0.3) p.p. 41.8% 42.1% (0.3) p.p. M2M 41.5% 39.4% 2.2 p.p. 40.4% 1.1 p.p. 41.5% 39.4% 2.2 p.p. Net Additins , Pstpaid 1, ,381 2, Market Share f Pstpaid Net Additins 34.0% 31.9% 2.1 p.p. 35.1% (1.2) p.p. 39.3% 38.0% 1.3 p.p. Market Penetratin 113.5% 118.0% (4.5) p.p % (2.6) p.p % 118.0% (4.5) p.p. Mnthly Churn 3.3% 3.5% (0.2) p.p. 3.4% (0.1) p.p. 3.3% 3.4% (0.0) p.p. Pstpaid ex. M2M 1.7% 1.7% (0.0) p.p. 1.9% (0.2) p.p. 1.8% 1.8% (0.0) p.p. Prepaid 4.8% 5.0% (0.2) p.p. 4.8% 0.0 p.p. 4.7% 4.6% 0.1 p.p. ARPU (R$/mnth)¹ Vice (32.3) 7.7 (5.4) (32.0) Data Pstpaid ex. M2M ARPU¹ Prepaid ARPU¹ (6.9) (2.9) M2M ARPU¹ (0.9) MOU (2.1) n.a. 1) ARPU data including intercmpany revenue eliminatins. Share f Pstpaid Net Additins reached 39.3% in the year Ttal accesses came t 74,940 thusand at the clse f the quarter, 1.6% up n 4Q16. The pstpaid segment cntinues t stand ut, grwing 10.1% ver 4Q16, t 36,772 thusand accesses, equivalent t 49.1% f mbile accesses, 3.8 p.p. mre than in 4Q16. Ttal market share came t 31.7% in 4Q17 (+1.5 p.p. y--y). In the pstpaid segment, Telefônica Brasil accunted fr 39.3% f ttal net additins in 2017, reaching a market share f 41.8% in December. The Cmpany als has a relevant market share in 4G-technlgy terminals, maintaining its leadership psitin in this technlgy (33.6% in December 2017) and reflecting the quality f the custmer base and the Cmpany s strategy fcused n data. In the furth quarter, mbile net additins came t 378 thusand accesses (+33.5% y--y), with pstpaid net additins f 1,107 thusand accesses (+24.2% y--y) and net prepaid discnnectins f 729 thusand accesses, as there was significant migratin f prepaid clients t cntrl plans. The prepaid custmer base decreased by 5.5% between December 2016 and December 2017, due t the Cmpany s nging strategy fcused n the migratin f prepaid clients t cntrl plans and the strict plicy f discnnectin f inactive clients within the criteria established by ANATEL. 3

5 Mbile ARPU increased 2.2% y--y in 4Q17 In the Machine-t-Machine (M2M) market, the access base cntinued t grw substantially, reaching 6.3 millin custmers in December 2017, 26.1% up n December Telefônica Brasil is the leading cmpany in this business and clsed 4Q17 with a market share f 41.5%. Ttal ARPU rse 2.2% y--y in 4Q17, fueled by the perfrmance f Data ARPU, 23.1% up n 4Q16. Excluding MTR reductins in the perid, ttal ARPU wuld have climbed 5.0% in the perid. NET OPERATING MOBILE REVENUE Cnslidated in R$ millin 4Q17 4Q16 % 3Q17 % % Net Operating Mbile Revenues 6, , , , , Net Service Mbile Revenues 6, , , , , Outging Vice 1, ,035.8 (34.9) 1,433.0 (7.5) 5, ,938.9 (33.2) Intercnnectin (15.2) (1.8) 1, ,299.2 (15.9) Data and Digital Services 4, , , , , Messaging P2P (6.0) (4.2) 1, ,506.1 (5.2) Internet 3, , ,289.9 (1.2) 13, , Digital Services 1, , , Other Services (4.3) n.a (63.4) Net Handset Revenues , ,195.6 (10.5) % Data and Digital Services Revenues / MSR 75.0% 62.3% 12.7 p.p. 72.9% 2.2 p.p. 72.1% 57.7% 14.4 p.p. Net Mbile Revenues climbed 3.9% in 4Q17 ver 4Q16, due t higher Mbile Services Revenues (+3.8% y--y), driven by grwing Data and Digital Services Revenue. On the ther hand, lwer Vice Revenue and the effect f the MTR reductin in February 2017 negatively affected revenue grwth. Excluding the regulatry effect, Mbile Services Revenues wuld have increased +6.7% y--y. Mbile Service Revenues grew 3.8% in 4Q17, fueled by data Outging Vice Revenue fell 34.9% frm 4Q16, mainly reflecting the migratin t data services and data cnsumptin. In additin, the prepaid segment cntinued t be influenced by lwer tp-ups vlume in annual cmparisn, mainly due t macrecnmic cnditins, whse imprvement has nt yet been reflected in the segment. Intercnnectin revenue fell 15.2% frm 4Q16, mainly due t the MTR tariff reductin in February 2017 (-45.6%). 4

6 Data and Digital Services Revenue rse 25.0% y--y, accunting fr 75.0% f Mbile Services Revenue in 4Q17 Data and Digital Services Revenue rse 25.0% in 4Q17 ver 4Q16 and cntinued t be the Cmpany s main surce f revenue grwth, reflecting ur strategy fcused n data. This perfrmance was influenced by the upselling f data bundles, particularly in pstpaid ffers, grwth in family plans and a strng upturn f ur Digital Services Revenue. In 4Q17, Data and Digital Services revenue increased 12.7 p.p. y--y, t 75.0% f Net Mbile Services Revenue. SMS (P2P Messaging) revenue fell 6.0% y--y in 4Q17, reflecting the lwer cnsumptin f this service due t its maturity. Mbile Internet Revenue grew 8.0% y--y, accunting fr 66.1% f data and Digital Services Revenue in 4Q17. This perfrmance was directly linked t the grwth f pstpaid data accesses, particularly in 4G plans, which bsted the cnsumptin, and the expansin f the smartphne custmer base. In December 2017, 82.7% f ur custmer base already had smartphnes, 3.7 p.p. mre than in December Digital Services Revenue climbed 133.9% in 4Q17 ver 4Q16, mainly due t the inclusin f value-added services in the hybrid and prepaid segments in the third quarter and in the pstpaid segment in the furth quarter f Other Services Revenue rse R$17.0 millin ver 4Q16, mainly as a result f adjustments f the prtfli related t the adherence t and use f ur lyalty prgram, Viv Valriza. Mbile Handset Revenue increased 7.4% ver 4Q16, due t the change in the Cmpany s strategy, placing greater emphasis n handset sales as f 4Q17. 5

7 FIXED LINE BUSINESS OPERATING PERFORMANCE Thusand 4Q17 4Q16 % 3Q17 % % Ttal Fixed Accesses 22,857 23,352 (2.1) 23,077 (1.0) 22,857 23,352 (2.1) Fixed Vice Accesses 13,837 14,343 (3.5) 14,007 (1.2) 13,837 14,343 (3.5) Residential 8,899 9,318 (4.5) 9,059 (1.8) 8,899 9,318 (4.5) Crprate 4,498 4,580 (1.8) 4,503 (0.1) 4,498 4,580 (1.8) Others (1.0) 445 (1.0) (1.0) Fixed Bradband 7,432 7, ,452 (0.3) 7,432 7, FTTx 4,541 4, , ,541 4, Others 2,891 3,150 (8.2) 2,980 (3.0) 2,891 3,150 (8.2) Pay TV 1,588 1,713 (7.3) 1,618 (1.9) 1,588 1,713 (7.3) Vice ARPU (R$/mnth) (7.4) (5.3) Bradband ARPU (R$/mnth) Pay TV ARPU (R$/mnth) (0.9) The FTTx Bradband Base reached 4.5 millin custmers in 4Q17, accunting fr 61.1% f Ttal Bradband Accesses The fixed base ttaled 22,857 thusand accesses in 4Q17, 2.1% dwn frm 4Q16, mainly influenced by the perfrmance f Vice and Pay TV accesses. Fixed Vice accesses ttaled 13,837 thusand in 4Q17, 3.5% dwn frm 4Q16, mainly reflecting the fixed-t-mbile substitutin and the vice-t-data migratin. Vice ARPU fell 7.4% y--y, reflecting the negative impact caused by lwer intercnnectin tariffs. Fixed Bradband accesses ttaled 7.4 millin custmers in 4Q17, 1.9% mre than in 4Q16. The FTTx custmer base grew 9.5% in 4Q17 ver 4Q16, reaching 4.5 millin accesses, 1.3 millin f which using FTTH technlgy, 45.3% mre than in the previus year. FTTx custmers accunted fr 61.1% f ttal bradband accesses, fueling ARPU, which grew 20.5% y--y in 4Q17. Bradband ARPU grew 20.5% y--y in 4Q17 Pay TV accesses declined 7.3% y--y, clsing 2017 with 1.6 millin subscribers. Hwever, IPTV accesses grew 50.8% y--y in 4Q17 and TV ARPU increased 5.6%, reflecting the Cmpany s strategy f fcusing n higher-value clients. 6

8 NET OPERATING FIXED REVENUE Cnslidated in R$ millin 4Q17 4Q16 % 3Q17 % % Net Operating Fixed Revenues 4, ,281.0 (2.3) 4,275.8 (2.2) 16, ,970.2 (1.3) Vice 1, ,889.0 (14.4) 1,658.5 (2.5) 6, ,624.0 (10.2) Intercnnectin (26.2) (35.1) Bradband¹ 1, , , , , Crprate Data and IT (4.4) (16.9) 2, , Pay TV (2.7) (2.9) 1, ,932.5 (1.2) Other Services (0.3) (0.3) % Nn-Vice Revenues² / Net Operating Fixed Revenues 60.3% 54.4% 5.8 p.p. 60.2% 0.0 p.p. 58.0% 53.4% 4.6 p.p. 1) Bradband revenue includes residential clients and SMEs. 2) Nn-vice revenue includes revenue frm Bradband, Crprate Data and IT, Pay TV and Other Services. Net Revenue frm the Fixed Business fell 2.3% y--y in 4Q17, impacted by lwer Vice Revenue and fixed-tmbile tariff (VC) and fixed intercnnectin tariff (TU-RL and TU-RIU) reductins in February 2017, partially ffset by the increase in Bradband Revenue. Excluding the negative effect f tariff reductins, Net Fixed Services Revenue wuld have decrease 1.1%. Vice Revenue fell 14.4% y--y in 4Q17, mainly due t the maturity f the service and fixed-t-mbile substitutin. Excluding VC reductins (-17.7%), vice revenue fell 12.2% y--y. Nn-Vice Revenue accunted fr 60.3% f Fixed Net Revenue in 4Q17 UBB and IPTV Revenues grew 22.4% and 64.6% y--y in 4Q17, respectively Intercnnectin Revenue decreased 26.2% y--y in 4Q17, due t the reductin in TU-RL (-35.3%) and TU-RIU (-50.9%) in February Excluding this effect, Intercnnectin Revenue fell 11.4%, due t lwer incming traffic. Bradband Revenue rse 22.7% in 4Q17 ver 4Q16, fueled by the increase in ultra-bradband revenue, which accunted fr apprximately 60.2% f this line in the perid and grew 22.4% ver the previus year, reflecting the Cmpany s effrts t expand the base and client migratin t higher speeds, fueling fiber accesses, whse ARPU is higher, as well as the expansin f the FTTH netwrk t 16 new municipalities in Crprate Data and IT revenue drpped 4.4% y--y in 4Q17, due t the vlatility arising frm the negtiatin f majr whlesale cntracts and agreements with large cmpanies. Pay TV Revenue fell 2.7% y--y in 4Q17. The Cmpany cntinued with its selective strategy fr this service, fcusing n higher-value prducts, such as IPTV, whse revenue grew 64.6% y--y, in rder t imprve custmer experience and increase prfitability. 7

9 CONSOLIDATED OPERATING COSTS Cnslidated in R$ millin 4Q17 4Q16 % 3Q17 % % Operating Csts (7,266.9) (7,250.3) 0.2 (7,209.0) 0.8 (28,720.9) (28,486.0) 0.8 Persnnel (949.4) (988.2) (3.9) (948.4) 0.1 (3,725.8) (3,859.8) (3.5) Csts f Services Rendered (2,828.4) (2,782.1) 1.7 (2,906.8) (2.7) (11,508.2) (11,906.2) (3.3) Intercnnectin (371.5) (462.8) (19.7) (351.9) 5.6 (1,441.0) (1,924.1) (25.1) Taxes and Cntributins (437.6) (430.8) 1.6 (448.2) (2.4) (1,792.7) (1,861.2) (3.7) Third-party Services (1,360.5) (1,320.5) 3.0 (1,426.9) (4.7) (5,591.3) (5,705.1) (2.0) Others (658.8) (568.0) 16.0 (679.8) (3.1) (2,683.2) (2,415.8) 11.1 Cst f Gds Sld (534.6) (553.8) (3.5) (483.9) 10.5 (1,955.9) (2,118.9) (7.7) Cmmercial Expenses (2,346.7) (2,290.3) 2.5 (2,366.9) (0.9) (9,315.8) (8,910.1) 4.6 Prvisin fr Bad Debt (372.1) (344.2) 8.1 (380.4) (2.2) (1,481.0) (1,348.2) 9.9 Third-party Services (1,857.8) (1,845.6) 0.7 (1,890.6) (1.7) (7,438.9) (7,216.9) 3.1 Others (116.8) (100.5) 16.2 (95.9) 21.8 (395.9) (345.0) 14.8 General and Administrative Expenses (382.3) (473.7) (19.3) (378.2) 1.1 (1,492.7) (1,622.3) (8.0) Other Net Operating Revenue (Expenses) (225.5) (162.2) 39.0 (124.8) 80.7 (722.5) (68.7) Recurring Operatinal Csts¹ (7,088.0) (7,197.8) (1.5) (7,209.0) (1.7) (28,542.0) (28,845.8) (1.1) 1) Excluding the fllwing nn-recurring effects: nn-cash regulatry prvisin in 4Q17, with a negative impact f R$178.9 millin; the sale f twers in 1Q16, with a psitive impact f R$513.5 millin; the rganizatinal restructuring in 2Q16, with a negative impact f R$101.2 millin; and the crprate restructuring in 4Q16, with a negative impact f R$52.5 millin. Recurring Operating Csts, excluding Depreciatin and Amrtizatin expenses, ttaled R$7,088.0 millin in 4Q17, a decrease f 1.5% ver 4Q16, in a perid when inflatin was +2.9% (LTM IPCA). When including the nn-recurring effects f the prvisin fr regulatry issues in 4Q17 and the crprate restructuring in 4Q16, csts edged up 0.2% y--y, als belw inflatin. Recurring Operating Csts declined 1.5% y--y in 4Q17 Persnnel Csts fell 3.9% in 4Q17 cmpared with the same perid last year. When including the nn-recurring effect f the crprate restructuring in 4Q16, csts increased 1.1% less than inflatin fr the perid, mainly due t the cllective bargaining agreement f September 2017, partially ffset by savings frm rightsizings in the last years. 8

10 Cst f Services Rendered increased 1.7%, due t the expansin f the mbile netwrk and FTTH ftprint Selling Expenses rse 2.5% y--y in 4Q17, due t strng cmmercial activity in higher-value segments Cst f Services Rendered increased 1.7% in 4Q17 ver 4Q16, mainly as a result f the expansin f ur mbile netwrk cverage and the increased FTTH ftprint, partially ffset by MTR/VC and TU-RL/TU-RIU reductins in February Cst f Gds Sld (COGS) fell 3.5% y--y in 4Q17, reflecting the Cmpany s strategy f fcusing n higher-value clients and increased prfitability. Selling Expenses climbed 2.5% y--y, mainly driven by higher cmmissining expenses assciated with service upselling and grwing additins in the higher-value segments (pstpaid and ultra-bradband). Prvisins fr Bad Debt (PDA) clsed 4Q17 at R$372.1 millin, 2.2% dwn frm 3Q17, reflecting the Cmpany s credit and cllectin effrts in the cnstant pursuit f higher efficiency in the identificatin f custmer risk prfile. As a result, Bad Debt level remained in line with 3Q17, representing 2.3% f grss revenue in 4Q17. Third-Party Services climbed 0.7% y--y, due t higher spending n telesales, partially ffset by efficiency gains arising frm digitalizatin, mainly in billing and cmmissins. General and Administrative Expenses fell 19.3% in 4Q17, due t the Cmpany s strict cst cntrl plicy. Other Net Operating Revenues (Expenses) increased 39.0% y--y, t R$225.5 millin in the quarter, as a result f the nn-recurring effect related t the nn-cash prvisin, in the amunt f R$178.9 millin, related t regulatry fines*. * Ttal prvisins related t regulatry fines issued by ANATEL and part f the scpe f TAC (Term de Ajustament de Cnduta) amunted t R$592.2 millin, already including the R$178.9 millin prvisined in 4Q17. 9

11 EBITDA Recurring EBITDA ttaled R$3,945.6 millin in 4Q17, accmpanied by an EBITDA margin f 35.8% and y--y grwth f 7.3% Recurring EBITDA (earnings befre interest, taxes, depreciatin and amrtizatin) ttaled R$3,945.6 millin in 4Q17, 7.3% up n 4Q16, accmpanied by a recurring EBITDA margin f 35.8%, 2.0 p.p. up n 4Q16. Cnsidering the nn-recurring effects f the prvisin fr regulatry issues in 4Q17 (R$178.9 millin) and the crprate restructuring in 4Q16 (R$52.5 millin), EBITDA grew 4.0% ver 4Q16. The increase in EBITDA was due t revenue grwth and cst-efficiency measures adpted by the Cmpany in the perid. DEPRECIATION AND AMORTIZATION Cnslidated in R$ millin 4Q17 4Q16 % 3Q17 % % Depreciatin and Amrtizatin (1,990.9) (1,815.2) 9.7 (1,962.0) 1.5 (7,853.7) (7,654.4) 2.6 Depreciatin (1,303.1) (1,154.8) 12.8 (1,327.7) (1.9) (5,240.9) (5,054.3) 3.7 Amrtizatin f Intangibles¹ (342.1) (289.0) 18.4 (289.0) 18.4 (1,209.1) (1,180.0) 2.5 Other Amrtizatins (345.7) (371.4) (6.9) (345.3) 0.1 (1,403.7) (1,420.1) (1.2) 1) Amrtizatin f intangible assets generated by the incrpratin f Viv as f 2Q11 and GVT as f 2Q15. The Depreciatin and Amrtizatin line rse 9.7% between 4Q16 and 4Q17 and 2.6% in 2017, driven by the increase in the asset base, resulting frm sustainable investment levels in the last few years. 10

12 FINANCIAL RESULT Cnslidated in R$ millin 4Q17 4Q16 % 3Q17 % % Net Financial Incme (177.8) (315.3) (43.6) (170.5) 4.3 (903.0) (1,234.5) (26.9) Incme frm Financial Investments (46.9) (35.8) (8.9) Debt Interest (157.3) (220.3) (28.6) (240.7) (34.6) (932.7) (1,061.1) (12.1) Mnetary and Exchange Variatin (79.8) (154.7) (48.4) (69.9) 14.2 (486.7) (183.5) Gains (lsses) n Derivative Transactins 21.9 (32.8) n.a. (26.6) n.a. (41.9) (347.9) (88.0) Other Financial Incme (Expenses) (74.2) (117.6) (36.9) (7.0) (97.2) (361.4) (73.1) Net Financial Expenses fell 43.6% y--y (R$137.5 millin) in 4Q17. In 2017, Net Financial Expenses declined 26.9% y--y (R$331.5 millin). This imprved perfrmance was caused by reduced interest rates and lwer mnetary crrectin expenses. Net Incme Net Incme grew 24.9% y--y in 4Q17 Net Incme ttaled R$1,517.0 millin in 4Q17, 24.9% mre than in the same perid in Net Incme grwth was mstly driven by increased EBITDA, higher Interest n Capital declared and the imprved financial result recrded in the perid. Capex Cnslidated in R$ millin 4Q17 4Q16 % 3Q17 % % Ttal 2, ,800.1 (4.8) 2, , ,189.1 (2.3) Netwrk 2, ,240.2 (7.7) 1, , , Technlgy / Infrmatin System (5.0) Prducts and Services, Channels, Adm. and Others (5.8) Licenses n.a. 0.0 n.a n.a. Capex (ex-licenses) / Net Operating Revenue 24.2% 25.8% (1.6) p.p. 20.1% 4.1 p.p. 18.5% 18.8% (0.3) p.p. Capex fell 4.8% y--y, t R$2,664.7 millin in 4Q17, representing 24.2% f net perating revenue. In 2017, the Cmpany invested R$7,998.3 millin, equivalent t 18.5% f Net Operating Revenue, in line with the R$24 billin prjected average annual investment fr , in accrdance with the Material Fact released n Nvember 21, The Cmpany invested mainly in expanding its netwrk capacity and 4G cverage, intrducing FTTH technlgy in new cities, increasing FTTx penetratin and IT, supprting the Cmpany s digitalizatin prcess. 11

13 The Cmpany led the 4G netwrk expansin in Brazil, adding 2,084 new cities in 2017 and reaching a ttal f 2,600 cities, equivalent t 84.5% f the cuntry s ppulatin, as shwn in the chart belw: The Cmpany als expanded its FTTH ftprint t 16 new municipalities and we have becme the leader in bradband at speeds abve 34Mbps in all the cities where we have been perating this technlgy fr mre than three mnths, with an average market share f 79.0%. CASH FLOW¹ Cnslidated in R$ millin 4Q17 4Q16 R$ 3Q17 R$ R$ Recurring EBITDA 3, , , , , ,002.3 Investments (CAPEX) (2,664.7) (2,800.1) (2,187.5) (477.2) (7,998.3) (8,003.6) 5.3 Payment f Interest, Taxes and Other Financial Exp (Rev) (442.7) (199.4) (243.3) (529.7) 87.0 (1,626.6) (1,094.4) (532.2) Wrking Capital Variatin (521.2) (615.9) Free Cash Flw f Business Activity 1, ,542.0 (359.3) 1,920.1 (737.4) 5, , Payment f Spectrum (185.5) Receipt f Twer Sale (562.5) Nn-Recurring Items² 0.0 (49.1) (655.1) (150.2) (504.9) Free Cash Flw after Extrardinaries 1, ,492.9 (310.2) 1,920.1 (737.4) 5, , ) The criteria used fr cash flw excludes amunts paid as incme tax frm the allcatin f interest n capital, which were previusly included in the calculatin. 2) Payment related t the cleaning f the 700MHz 4G spectrum, ttaling R$655.1 millin in 1Q17, expenses with the prvisin fr the rganizatinal restructuring amunting t R$21.8 millin in 2Q16 and R$79.3 millin in 3Q16, and crprate restructuring expenses ttaling R$49.1 millin in 4Q16. Free Cash Flw frm Business Activities grew 20.1% y--y in 2017 Free Cash Flw frm Business Activities came t R$1,182.7 millin in 4Q17, a reductin f R$359.3 millin frm 4Q16, but a substantial increase f 20.1% in 2017 (R$961.6 millin) cmpared with 2016, due t the imprved perating result and the fact that investments remained at a sustainable level. In 2017, Free Cash Flw after Nn-Recurring Items increased by R$79.7 millin, als influenced by the imprved perating result. 12

14 DEBT LOANS AND FINANCING (R$ MILLION) Lcal currency Cnslidated Currency Annual Interest Rate Due Date Shrt-Term Lng-Term Ttal BNDES UR LTIR LTIR % t 4.08% ,588.9 BNDES R$ 2.5% t 6.0% BNDES R$ SELIC D % BNB R$ 7.0% t 10.0% Cnfirming R$ 101.4% t 109.4% f CDI Debentures 4 th Issue - Series 3 R$ IPCA + 4.0% Debentures 1 st Issue - Minas Cmunica R$ IPCA + 0.5% Debentures 4 th Issue - Single Series R$ 100% f CDI spread , ,317.5 Debentures 5 th Issue - Single Series R$ % f CDI , ,060.9 Debentures 6 th Issue - Single Series R$ % f CDI % ,005.6 Financial Leases R$ Cntingent Cnsideratin R$ Freign Currency December 2017 BNDES UMBND ECM % Ttal 3, , ,461.8 NET DEBT Cnslidated in R$ millin 12/31/2017 9/30/ /31/2016 L.T. OBLIGATIONS (R$ MILLION) December 2017 Shrt-Term Debt 3, , ,663.5 Lng-Term Debt 5, , ,560.6 Ttal Debt 8, , , Cash and Cash Equivalents¹ (4,062.1) (5,582.7) (5,115.9) ,414.8 Net Derivatives Psitin (143.8) (18.8) (28.4) ,283.0 Cntingent Cnsideratin Guarantee Asset² (446.1) (440.4) (414.7) ,231.7 Net Debt 3, , ,665.1 After Net Debt/EBITDA³ Ttal 5, ) Includes the investment in BNB given as a guarantee fr the lan frm that bank. 2) Alignment f the classificatin criteria fr the asset backing the cntingent cnsideratin t calculate pr-frma net debt. 3) LTM EBITDA. Year Amunt The Cmpany clsed the furth quarter with Grss Debt f R$8,461.8 millin, 2.7% f which denminated in freign currency. The reductin in grss debt is related t the settlement f lans and financing in the perid. Currently, freign exchange expsure f debt is cvered by hedge peratins. Net Debt ttaled R$3,809.9 millin at the end f 4Q17, representing 0.26x f LTM EBITDA. Cmpared with 4Q16, net debt mved up R$144.8 millin, as in 1Q17 the Cmpany settled cmmitments related t cleaning f the 700MHz 4G spectrum assumed at the 2014 auctin, ffset by strng cash generatin in the perid. 13

15 Capital Market Telefônica Brasil s market cap was R$78.0 billin n December 31, 2017 Telefônica Brasil's cmmn (ON) and preferred (PN) shares are traded n B3 under the tickers VIVT3 and VIVT4, respectively. The Cmpany's ADRs are traded n the NYSE, under the ticker VIV. VIVT3 and VIVT4 shares clsed 2017 at R$41.20 and R$48.62, respectively, appreciating 13.2% and 10.3% in Ttal sharehlder return (TSR) reached 20.2% fr cmmn shares and 16.7% fr preferred shares in The Cmpany's ADRs ended the year at US$14.83, 10.8% up in The daily traded vlume f VIVT3 and VIVT4 in 2017 averaged R$924.6 thusand and R$80,306.6 thusand, respectively. The daily traded vlume f ADR averaged US$20,248.1 thusand in the same perid. The chart belw shws the Cmpany's stck perfrmance: 14

16 Capital Stck Capital Stck Breakdwn December 31, 2017 Cmmn Preferred Ttal Cntrlling Cmpany 540,033, ,207,855 1,244,241, % 62.91% 73.58% Minrity Sharehlders 29,320, ,131, ,452, % 37.09% 26.28% Treasury Shares 2,290, ,291, % 0.00% 0.14% Ttal Number f Shares 571,644,217 1,119,340,706 1,690,984,923 Bk Value per Share: R$ Subscrib ed/paid-in Capital: R$ 63,571.4 millin Dividends IOC declared based n 2017 results ttaled R$2,416.6 millin In the furth quarter f 2017, the Bard f Directrs meeting held n December 14, 2017 apprved the payment f interest n capital related t fiscal year 2017, ttaling the grss amunt f R$1,486.6 millin. Payment will be made by the end f fiscal year 2018, n a date t be defined by the Bard f Executive Officers, t cmmn and preferred sharehlders f recrd n December 26, Dividends declared based n 2017 results ttaled R$2,191.9 millin At a meeting held n February 16, 2018, the Bard f Directrs f Telefônica Brasil S.A. apprved dividends related t fiscal year 2017, ttaling the grss amunt f R$2,191.9 millin. The amunt will be ratified by the Annual Sharehlders Meeting n April 12, Payment will be made by the end f fiscal year 2018, n a date t be defined by the Bard f Executive Officers t cmmn and preferred sharehlders f recrd n April 12, As a result, the Cmpany clsed 2017 with a payut f apprximately 100% f the prfit fr the fiscal year. The table n the fllwing page shws the amunts t be distributed per share: 15

17 2017 Deliberatin Sharehlding Psitin Grss Amunt (BRL millin) Net Amunt (BRL millin) Shares Grss Amunt per Share (BRL) Net Amunt per Share (BRL) Dividends ON /12/ /12/2018 2, ,191.9 (based n Dec-17) PN IOC ON /14/ /26/2017 1, ,263.6 (based n Nv-17) PN IOC ON /18/ /29/ (based n Aug-17) PN IOC ON /19/ /30/ (based n May-17) PN IOC ON /20/ /31/ (based n Feb-17) PN IOC ON /13/ /24/ (based n Jan-17) PN Payment Beginning Date Up t 12/31/2018 Up t 12/31/2018 Up t 12/31/2018 Up t 12/31/2018 Up t 12/31/2018 Up t 12/31/ Deliberatin Sharehlding Psitin Grss Amunt (BRL millin) Net Amunt (BRL millin) Shares Grss Amunt per Share (BRL) Net Amunt per Share (BRL) Dividends ON /26/ /26/2017 1, ,914.0 (based n Dec-16) PN Payment Beginning Date IOC ON /19/ /30/ /13/2017 (based n Nv-16) PN IOC ON /19/ /30/ /22/2017 (based n Aug-16) PN IOC ON /17/ /30/ /22/2017 (based n May-16) PN IOC ON /18/ /29/ (based n Mar-16) PN IOC ON /18/ /31/ (based n Feb-16) PN /13/ /22/ /22/2017 IOC ON /19/ /29/ /22/2017 (based n Jan-16) PN

18 INCOME STATEMENT Cnslidated in R$ millin 4Q17 4Q16 % 3Q17 % % Grss Operating Revenue 16, ,712.6 (1.1) 16,582.8 (0.3) 66, , Net Operating Revenue 11, , , , , Mbile 6, , , , , Fixed 4, ,281.0 (2.3) 4,275.8 (2.2) 16, ,970.2 (1.3) Operating Csts (7,266.9) (7,250.3) 0.2 (7,209.0) 0.8 (28,720.9) (28,486.0) 0.8 Persnnel (949.4) (988.2) (3.9) (948.4) 0.1 (3,725.8) (3,859.8) (3.5) Csts f Services Rendered (2,828.4) (2,782.1) 1.7 (2,906.8) (2.7) (11,508.2) (11,906.2) (3.3) Intercnnectin (371.5) (462.8) (19.7) (351.9) 5.6 (1,441.0) (1,924.1) (25.1) Taxes and Cntributins (437.6) (430.8) 1.6 (448.2) (2.4) (1,792.7) (1,861.2) (3.7) Third-party Services (1,360.5) (1,320.5) 3.0 (1,426.9) (4.7) (5,591.3) (5,705.1) (2.0) Others (658.8) (568.0) 16.0 (679.8) (3.1) (2,683.2) (2,415.8) 11.1 Cst f Gds Sld (534.6) (553.8) (3.5) (483.9) 10.5 (1,955.9) (2,118.9) (7.7) Cmmercial Expenses (2,346.7) (2,290.3) 2.5 (2,366.9) (0.9) (9,315.8) (8,910.1) 4.6 Prvisin fr Bad Debt (372.1) (344.2) 8.1 (380.4) (2.2) (1,481.0) (1,348.2) 9.9 Third-party Services (1,857.8) (1,845.6) 0.7 (1,890.6) (1.7) (7,438.9) (7,216.9) 3.1 Others (116.8) (100.5) 16.2 (95.9) 21.8 (395.9) (345.0) 14.8 General and Administrative Expenses (382.3) (473.7) (19.3) (378.2) 1.1 (1,492.7) (1,622.3) (8.0) Other Net Operating Revenue (Expenses) (225.5) (162.2) 39.0 (124.8) 80.7 (722.5) (68.7) EBITDA 3, , , , , EBITDA Margin % 34.1% 33.3% 0.8 p.p. 33.8% 0.4 p.p. 33.5% 33.0% 0.5 p.p. Depreciatin and Amrtizatin (1,990.9) (1,815.2) 9.7 (1,962.0) 1.5 (7,853.7) (7,654.4) 2.6 Depreciatin (1,303.1) (1,154.8) 12.8 (1,327.7) (1.9) (5,240.9) (5,054.3) 3.7 Amrtizatin f Intangibles (342.1) (289.0) 18.4 (289.0) 18.4 (1,209.1) (1,180.0) 2.5 Others Amrtizatins (345.7) (371.4) (6.9) (345.3) 0.1 (1,403.7) (1,420.1) (1.2) EBIT 1, ,808.1 (1.8) 1, , , Net Financial Incme (177.8) (315.3) (43.6) (170.5) 4.3 (903.0) (1,234.5) (26.9) Incme frm Financial Investments (46.9) (35.8) (8.9) Debt Interest (157.3) (220.3) (28.6) (240.7) (34.6) (932.7) (1,061.1) (12.1) Mnetary and Exchange Variatin (79.8) (154.7) (48.4) (69.9) 14.2 (486.7) (183.5) Gains (Lsses) n Derivative Transactins 21.9 (32.8) n.a. (26.6) n.a. (41.9) (347.9) (88.0) Other Financial Incme (Expenses) (74.2) (117.6) (36.9) (7.0) (97.2) (361.4) (73.1) Gain (Lss) n Investments n.a Taxes (81.2) (278.2) (70.8) (321.7) (74.8) (1,121.9) (1,049.5) 6.9 Net Incme 1, , , , ,

19 BALANCE SHEET Cnslidated in R$ millin 12/31/ /31/2016 % ASSETS 101, ,066.2 (0.7) Current Assets 16, ,398.9 (9.1) Cash and Cash Equivalents 4, ,105.1 (20.7) Accunts Receivable frm Custmers 9, , Prvisin fr Dubtful Accunts (1,366.7) (1,232.5) 10.9 Inventries (15.0) Recverable Taxes 2, ,027.2 (15.3) Escrw Depsits and Frzen Assets Derivative Financial Instruments Prepaid Expenses Other Assets (26.9) Nn-Current Assets 84, , Accunts Receivable frm Custmers (28.0) Prvisin fr Dubtful Accunts (66.7) (167.4) (60.2) Financial Investments Recverable Taxes Deffered Taxes ,250.5 Escrw Depsits and Frzen Assets 6, , Derivative Financial Instruments (46.7) Other Assets Investments Prperty, Plant and Equipment, Net 33, , Intangible Assets, Net 43, ,483.5 (2.6) LIABILITIES 101, ,066.2 (0.7) Current Liabilities 17, ,438.5 (12.6) Payrll and Related Charges (4.9) Suppliers and Accunts Payable 7, ,611.2 (2.2) Taxes 1, ,770.7 (2.2) Lans and Financing 1, ,543.0 (36.3) Debentures 1, ,120.5 (33.4) Dividends and Interest n Sharehlders Equity 2, , Prvisins 1, , Derivative Financial Instruments (97.2) Deferred Revenues (13.3) Authrizatin Licenses (85.2) Other Liabilities (15.9) Nn-Current Liabilities 14, , Payrll and Related Charges Taxes Deferred Taxes n.a. Suppliers and Accunts Payable n.a. Lans and Financing 2, ,126.8 (25.8) Debentures 3, , Prvisins 6, , Derivative Financial Instruments ,000.0 Deferred Revenues (31.5) Lincence f Authrizatin Other Liabilities Sharehlders' Equity 69, , Capital Stck 63, , Capital Reserve 1, ,272.5 (4.6) Prfit Reserve 2, ,475.0 (0.5) Additinal Prpsed Dividends 2, , Other Cmprehensive Incme Accumulated Prfits n.a. 18

20 CONFERENCE CALL English Date: February 21, 2018 (Wednesday) Time: 11:00 a.m. (Brasilia) and 09:00 a.m. (New Yrk) Telephne: +1 (412) Access Cde: Telefônica Brasil Click here t access the webcast. A replay f the cnference call will be available ne hur after the event, until March 5, Telephne: +1 (412) Cde: # Telefônica Brasil Investr Relatins Eduard Navarr David Melcn Luis Plaster Jã Pedr Carneir Av. Eng. Luis Carls Berrini, º Andar Cidade Mnções SP Telephne: ir.br@telefnica.cm Infrmatin available n the website: This dcument may cntain frward-lking statements. Such statements d nt cnstitute histrical facts and merely reflect the expectatins f the Cmpany's management. Such terms as "anticipate", "believe", "estimate", "expect", "fresee", "intend", "plan", "prject", "target" and similar, are intended t identify such statements, which evidently invlve risks and uncertainties, bth freseen and unfreseen by the Cmpany. Cnsequently, the Cmpany's future perating results may differ frm present expectatins and readers shuld nt place undue reliance n the infrmatin cntained herein. These frward-lking statements express pinins frmed slely n the date n which they were issued, and the Cmpany is under n bligatin t update them in line with new infrmatin r future develpments. 19