4Q23 and 2023 Results: Telefônica Brasil S.A.

Rhea-AI Summary

Telefônica Brasil (VIV) reports strong financial performance in 4Q23 and 2023 with a +23.1% YoY increase in net income. The company's net operating revenue, core revenue, and mobile revenue all show positive growth. EBITDA and operating cash flow also demonstrate significant improvements. Shareholder remuneration and commitment for future distributions are highlighted.

Positive

• Net income rises by +23.1% YoY in 2023 for Telefônica Brasil.
• Core revenue increases by 10.8% YoY, driven by strong mobile and fixed core revenue growth.
• EBITDA grows by 9.9% YoY, with a margin of 42.5%.
• Operating cash flow improves by 25.9% YoY, with a margin of 25.5%.
• Net income attributed to Telefônica Brasil reaches R$5,029 million in 2023, showing a significant increase.
• Shareholder remuneration in 2023 amounts to R$4,786 million, with commitments for future distributions.
• Capex ex-IFRS 16 totals R$8,960 million in 2023, meeting investment guidance.
• The company commits to distributing at least 100% of net income to shareholders for the next three fiscal years.

Negative

• None.

Financial Analyst

The reported increase in Telefônica Brasil's net income of +23.1% year-over-year (YoY) in 2023 is a significant indicator of the company's financial health and operational efficiency. The growth in net income is particularly noteworthy given that it surpasses the net operating revenue growth of 8.4% YoY, suggesting that the company has effectively managed to enhance its profitability margins. This is further evidenced by the expansion of the EBITDA margin by 1.1 percentage points (p.p.) and the EBITDA After Leases (AL) margin by 0.5 p.p., indicating a robust control over operating costs and successful leverage of economies of scale.

Investors may find the Capex reduction of 6.0% YoY and the commitment to distributing an amount equal to or above 100% of net income in dividends for the years 2024 to 2026 particularly attractive, as it reflects a shareholder-friendly policy. However, the decline in Free Cash Flow (FCF) by 27.5% YoY could raise concerns about the company's liquidity and its ability to sustain such high dividend payouts without affecting future investments. The strategic focus on expanding the FTTH network, indicated by the growth in homes passed and connected, aligns with the increasing demand for high-speed internet services and may contribute to future revenue streams.

Market Research Analyst

Telefônica Brasil's performance in the mobile segment, specifically the increase in Mobile Service Revenue (MSR) by 8.7% YoY, driven by postpaid revenue growth of 11.3% YoY, reflects a competitive edge in customer retention and acquisition strategies. The reported lowest historical churn level of 0.97% per month and the highest Average Revenue Per User (ARPU) in the last four years suggest a strong customer value proposition and effective pricing strategies. The company's ability to maintain a positive trajectory in fixed revenue, particularly with a 16.5% YoY increase in FTTH revenues, indicates a successful pivot towards high-growth areas within the telecommunications sector.

From a market perspective, the focus on fiber technology and corporate data services may position Telefônica Brasil advantageously in the face of increasing demand for digital transformation and remote work solutions. The expansion of the FTTH network to additional cities and the growth in homes connected showcases the company's commitment to infrastructure development, which is essential for sustaining long-term revenue growth in a highly competitive market.

Economist

Telefônica Brasil's financial results reflect broader economic trends, such as the increasing reliance on digital connectivity and the importance of telecommunications infrastructure in supporting economic activities. The company's investment strategy, marked by a decrease in CAPEX while still expanding its FTTH network, suggests an optimization of capital allocation towards high-return projects. This strategic approach may bolster investor confidence in the company's economic stewardship and its capability to adapt to market demands.

The company's financial performance, particularly the growth in net income and operating cash flow, indicates a positive economic contribution not only to shareholders but also to the broader Brazilian economy through employment and network infrastructure development. The commitment to shareholder remuneration reflects a distribution of wealth that can have multiplier effects on the economy. However, the sustainability of such remuneration policies should be monitored, especially in light of potential economic downturns that could affect consumer spending and, subsequently, Telefônica Brasil's revenue streams.

SÃO PAULO, Feb. 20, 2024 /PRNewswire/ --Telefônica Brasil - (B3: VIVT3; NYSE: VIV), announces its results for 4Q23 and 2023. 

Net Income expands by +23.1% YoY in 2023, led by real top-line growth

R$ million	4Q23	4Q22	% Y-o-Y	2023	2022	% Y-o-Y
Net Operating Revenue	13,535	12,659	6.9	52,100	48,041	8.4
Core Revenue	12,790	11,771	8.7	48,910	44,151	10.8
Mobile Revenue	9,643	8,899	8.4	36,669	33,070	10.9
Fixed core revenue	3,146	2,872	9.5	12,241	11,081	10.5
Non-core Revenue	745	888	(16.1)	3,190	3,890	(18.0)
Total Costs	(7,783)	(7,425)	4.8	(30,782)	(28,760)	7.0
EBITDA	5,752	5,234	9.9	21,318	19,282	10.6
EBITDA Margin	42.5 %	41.3 %	1.1 p.p.	40.9 %	40.1 %	0.8 p.p.
EBITDA After Leases (AL)	4,461	4,110	8.5	16,572	14,940	10.9
EBITDA AL Margin	33.0 %	32.5 %	0.5 p.p.	31.8 %	31.1 %	0.7 p.p.
Net Income attributed to Telefônica Brasil	1,601	1,126	42.1	5,029	4,085	23.1
Earnings per Share (EPS)	0.97	0.68	42.8	3.03	2.44	24.0
CAPEX ex-IFRS 16	2,295	2,489	(7.8)	8,960	9,530	(6.0)
Operating Cash Flow (OpCF)	3,457	2,746	25.9	12,358	9,752	26.7
OpCF Margin	25.5 %	21.7 %	3.9 p.p.	23.7 %	20.3 %	3.4 p.p.
Operating Cash Flow After Leases (OpCF AL)	2,167	1,622	33.6	7,612	5,410	40.7
OpCF AL Margin	16.0 %	12.8 %	3.2 p.p.	14.6 %	11.3 %	3.4 p.p.
Free Cash Flow	592	816	(27.5)	8,148	7,289	11.8
Total Subscribers (Thousand)	113,001	112,330	0.6	113,001	112,330	0.6

Net revenue grew +6.9% YoY led by the increase in Mobile Service Revenue (MSR) (+8.7 YoY), that was driven by Postpaid Revenue (+11.3% YoY), which was positively impacted by the customer base increase, lowest historical churn level, at 0.97% per month, and highest ARPU in the last 4 years, R$51.3 (+8.1% YoY).

Fixed revenue maintained its positive performance, increasing +3.5% YoY, driven by FTTH revenues (+16.5% YoY) and Corporate Data, ICT and Other revenues (+9.9% YoY). FTTH network is currently present in 443 cities (+34 cities YoY) with 26.2 million homes passed (+12.4% YoY) and 6.2 million homes connected (+12.6% YoY).

EBITDA totaled R$5,752 (+9.9% YoY), with a margin of 42.5% (+1.1 p.p. YoY), due to strong performance of core revenues (+8.7% YoY) and ongoing control of costs (+4.8% YoY) in the quarter.  

Operating Cash Flow grew (+25.9% YoY), with a margin of 25.5% (+3.9 p.p. YoY) over net revenue. In 2023, Capex ex-IFRS16 totaled R$8,960 million (-6.0% YoY) or 17.2% of revenues (-2.6 p.p. YoY), thus accomplishing the guidance of investing less than R$9 billion in the year.

Net income attributed to Telefônica Brasil reached R$5,029 million in 2023 (+23.1% YoY). Shareholder remuneration paid in 2023 hit R$4,786 million, of which R$2,471 million were in interest on capital, R$1,827 million in dividends and R$489 million in share buybacks. For the years 2024 to 2026, the Company has committed to distributing to its shareholders 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/4q23-and-2023-results-telefonica-brasil-sa-302066672.html

SOURCE Telefônica Brasil S.A.

FAQ

What was the percentage increase in net income for Telefônica Brasil in 2023?

Net income attributed to Telefônica Brasil rose by +23.1% YoY in 2023.

What is the EBITDA margin for Telefônica Brasil in 4Q23?

The EBITDA margin for Telefônica Brasil in 4Q23 was 42.5%.

How much did the operating cash flow improve by in 2023 for Telefônica Brasil?

Operating cash flow for Telefônica Brasil grew by 25.9% YoY in 2023.

What is the total shareholder remuneration amount paid by Telefônica Brasil in 2023?

Shareholder remuneration paid in 2023 by Telefônica Brasil amounted to R$4,786 million.

What is the commitment of Telefônica Brasil regarding future shareholder distributions?

Telefônica Brasil has committed to distributing at least 100% of net income to shareholders for the years 2024 to 2026.