Oi S.A. (OTC:OIBZQ) Q1 2022 Earnings Conference Call June 29, 2022 10:00 AM ET
Company Participants
Rodrigo Abreu – Chief Executive Officer
Cristiane Sales – Chief Financial Officer
Marcelo Ferreira – Investor Relations
Rogelio Pacala – Chief Strategy Officer
Conference Call Participants
Leonardo Olmos – UBS
Soomit Datta – New Street
Operator
[Operator Instructions] The event to take place in English with simultaneous translation into Portuguese. Please be informed that this conference is being recorded and it will be available later on the company’s IR website. [Operator Instructions]
Now, I would like to pass the floor to Mr. Rodrigo Abreu, Oi’s CEO. Please Rodrigo, you can proceed.
Rodrigo Abreu
Hello, everybody. Welcome to our Q1 2022 Earnings Call. And as you can hear, unfortunately, today, due to a strong laryngitis. I really apologize but I’m unable to present our Q1 results. And as such, our call will be conducted by our Chief Strategy Officer, Mr. Rogelio Pacala and our CFO, Ms. Cristiane Sales. Mr. Jose, the floor is yours and I will be joining them later and trying to answer your questions. Thank you very much, everybody.
Unidentified Company Representative
As we start in the name of the company, we want to apologize for the delay in having this call. As we have mentioned in our last results call, the closing of our two large M&A operations in Q2 due to their size and complexity, involving the segregation of assets and results for the so-called discontinued operations had a significant impact on the auditing works.
And as such, we have to postpone our first two calls of this year. By a few weeks, we expect to return to a regular call schedule with our Q2 call next quarter. In order to give the market visibility previously to this call, we have already released some preliminary results. And today, we will go into more details on both our operational and financial results. So moving on to Page 3. We can start by summarizing where we are in our transformation path.
For those who are following the story, you know that we are almost at the end of a very long journey on our recovery program. In the last three years, now in July, we’re reaching the three years of our transformation plan, we’ve been working on several steps towards a more sustainable way. We started from reviewing completely our strategic perimeter of business. We decided to focus on the fiber business with the innovative approach of the fiber reuse. Then we went through to the general creditors’ meeting in order to approve our revised plan and had the approval to sell several of noncore and nonstrategic assets.
After that, we successfully sold our four UPIs, the tower, data center, mobile and lately the control of the V.tal. In addition to having signed the MOU to divest our DTH TV subscriber base. With the closing of V.tal deal in the beginning of this month, we are concluding the most critical step of our transformation plan. This will allow us to focus full attention of the management on the execution of the operational plan and on bringing a new way to a new growth phase. So let’s go through some of our key results on this quarter that I’m going to present on this slide.
On the core business side, we kept steady growth on all metrics, all operational and business metrics with sound double-digit growth of revenues on the fiber, connected homes and the ICT revenues for the B2B, the Oi resolution segment. Specifically this month, we launched the new shares based on the FTTR technology. I’m going to go through it a little bit more down on the presentation which we believe will address the new frontier of the residential and small, medium enterprise businesses, the customer premise. We will explain that in the following slide.
On the new revenue streams, we are starting to see the first results of initiatives to differentiate ourselves. For example, also this month, we launched the new Oi Play plate service. Oi Play is an OTT service which also includes some linear channels for those close to the TV market, a VMVPD service. We believe that this service will help us not only to differentiate our fiber offering on the core cutting environment but also to accelerate sales of the fiber as well as revenues and ARPU.
On the fixed telephony business front, we kept working on pursuing the business sustainability. We managed to disconnect 1,300 unsustainable central office only this quarter. We also successfully put in place process to migrate smoothly voice clients that today operate on the traditional corporate technology to technology fiber on a voice over IP and wireless with a fixed telephony solution. On the concession discussions, we are working very closely and very collaboratively with ANATEL in order to reduce the complexity of the regulatory framework, also preventing unproductive expenses for the consortium and working to allow the concession migration agenda to abate.
In parallel, our arbitration process is moving according to plan and we’ll be and will be a key component in reestablishing the sustainability of the business at the end of our process. On the client-centric front, a very key pillar of our strategy for the new way and the capacity to move forward and increase revenues.
We keep working on improving the CX through the digital transformation, not only using analytics and machine learning to know better our clients but also to improve process. For example, we wish to migrate the majority of interactions of our customers through these super channels, being the billing, the service, also the technical systems which is drastically improving customer satisfaction and also allowing at the same time to reduce some costs.
Finally, all this effort will be not enough if you do not have an efficient company, the team is working very hard on reducing the company complexity and unnecessary costs. When compared to last year, on the first quarter of this year, we managed to reduce more than 7% of our costs in nominal terms on a pro forma basis, more than offsetting inflation. With our new operational model of using V.tal as a neutral network, we invested BRL345 million on the new oil perimeter, a fraction of the investment required if we were a fully integrated company. This shows the potential of this model to fuel growth while requiring much less operating cash in the future.
In terms of organizational structure, we also managed to reduce the size of the company by almost 2,000 people this quarter alone. It’s never an easy move but necessarily. This is allowing the company to become much lighter, faster and more efficient. Now if you move to the next slide, let’s talk about the fiber business. On the current scenario, we are pursuing a smart growth approach, balancing growth and a tight control of the customer acquisition quality and profitability.
This quarter, we kept growth on the fiber business with a small deceleration as we adjusted our internal process to ensure accuracy of the Homes Passed rollout algorithm as well as a customer acquisition management process. On the revenues, we are looking for growth with a new and more accurate credit policy, so a more healthier growth, leaving less churn and higher customer lifetime value. On homes connected, we are refining even further the rational selection of the cities where we’re going to deploy our homes passed areas with high demand and good payment profiles, incentivizing our sales channels to higher quality, not only focusing on better neighborhoods but as well focusing on processes and higher score clients.
On the upper front, we kept improving analytics capability in order to be more very accurate in pricing and adjusting the price almost dynamically to allow us to maximize value without and keep being competitive. We know that the overall rate growth slowed a little bit in the first quarter but all of — for those chains were guaranteeing a better customer acquisition profile and also paving the way for resuming faster growth in the coming months, faster and healthier.
So moving to the next slide, let’s talk about the commercial front. Together with the financial results, Together with the financial results, on the commercial front, we’ve been very active on increasing our offer competitiveness, as we talked in the previous slide. We’re working with higher speeds, customer attrition reduction and sales quality improvement with — which is already starting to pay off. Additionally, to superior quality on the competitive price, we are also launching new products to capitalize on the strength of our oil FIBRA base and also helping the acquisition process.
And those include not only the differentiation in terms of content but also on the fiber installation model which will certainly bring significant improvement on our position on higher-value clients as well as increasing customer satisfaction. If we — if you look at the central part of this page, it shows where we are present. We already covered more than 50% of the Brazilian GDP and 42% of the population. We selected very carefully the 200 cities, we keep expanding but always with a very rational approach to identify where to deploy our homes passed, increasing not only sales but also the quality of the sales in terms of customer capacity for payment.
On those states that we are present, we are already a leader in the fiber access in 17 of these states. And if we consider the areas where we’re present, we have more than 30% market share. So if we move to the next slide, I’m going to detail a little bit one of these innovation that I just talked about. We launched this month the Oi Fibra X. It’s a new concept that is the first Oi is deploying first in Latin America. This concept also works on a tank that we identify with the customer that not always has to do with the quality of the fiber delivered. We identified that the internal coverage or the residential coverage sometimes impact the client perception of quality. And therefore, addressing this — the internal coverage will help not only to increase customer satisfaction but also to bring new opportunities for monetization.
The FTTR which stands for fiber to the home, it’s a patented solution developed by away but launched in exclusivity with in Brazil that works on a transparent fiber that allow us to deploy very rapidly with a very low impact in the customer premise, a fiber solution to each room of the house. That will increase speed, increase coverage and of course, guarantee the customer satisfaction in terms of functioning of high-speed fiber in all rooms of the house that client wants.
So moving to the next slide. Let’s talk a little bit about the retail dynamics. The retail segment, after our many changes, we see the residential business resuming growth quarter-on-quarter, confirming our recent trends. We know the market has become more competitive and that we need to keep advancing our efforts to resume a faster pace growth and all the actions are being taken for that.
On the SME segment, we have seen a similar trend and fiber has now become more than 30% of revenues of the entire segment. Let’s talk — last quarter, we talked about PagSeguro partnership which was launched a few months ago and it’s growing triple digit, already reaching 7,000 of clients in the initial months of this operation. Continuing with partnerships launched, we have also announced the action with the BTGs in order to offer PME — SME clients with cross benefits in our portfolio. The solution that we introduced with BTG allow the small medium enterprise to have access to credit which we know. It’s a very demanded in the market nowadays. We expect these partnerships will continue and bring higher stickiness with consumers and higher ARPU. On the next slide, we’ll move to the B2B operations.
On the B2B side, as we discussed on previous calls, we are transforming this business to become an ICT solution provider. We presented stable revenues on our core B2B revenues and the revenue profile has been shifting significantly. ICT service are now growing at a double-digit rate of 24% while core telecom revenues have been stable as we migrate clients from older technology to fiber. On the ICT portfolio, let me share some highlights. As we see, the reopening of off season and increased retail traffic, we’re seeing a higher demand for better WiFi coverage and our Wi-Fi offering revenues are already growing 50% year-on-year.
Also in this market, we’ve seen a very high demand for cybersecurity solutions. And it’s been a very strong growth area for us. Only this quarter has launched four new services including the betas and security assessment with huge commercial success. We are also adding value to the connectivity. On top of the fiber business that we have together with the Vital partnerships, we are also selling management service that allow us to grow faster on the revenue side on top of the connectivity part.
Finally, to speed up all this growth, we are increasing our distribution channels coverage through partnerships, mainly. Moving to the next slide, we can take a look on our consolidated revenue scenario. At the consolidated level, if we look at the left side of this page, we can see the green blocks of this graph as the perimeter of the new way after the sale of our mobile operation and wholesale business as well as the potential exit of the TV business.
The light green indicates the legacy for the noncore business, mainly running over copper service or legacy technology. Here, even if the revenues are declining due to technology substitution, we keep working on reducing costs and looking for the sustainability of this business. On the new business part of the new way, both oil Solesis and the fiber business are growing in the right direction and already surpassed the legacy revenues with 64% of the total share of revenues of the new way, as you can see on the numbers at the bottom of the slide, indicating that the new growth trend will arrive very shortly to the new wave. Finally, on the last slide, that includes our last view of the Vita operation which has now been fully closed.
As you all know, we finished the V.tal transaction at the beginning of this month. This operation will allow Oi to accelerate growth on the fiber-related business with very limited cash consumption. V.tal will focus on building and operating the best largest and unique neutral network in Brazil, while Oi will focus on clients and on accelerating the fiber connection growth at a much higher pace in a much less cash consumption. On June 9, the partial sale of the InfraCo UPI to Globe network comes to marine was concluded in the total amount of almost BRL13 billion. The transaction considered three installments related to the secondary contribution and other three installments related to the primary contribution, parking cash and part in Globenet asset contribution.
The secondary totalized BRL8 billion, of which BRL4.3 million was paid at the closing — and the remaining will be paid until 2023, offsetting Oi’s payment to GlobeNet until 2024. The primary contribution to total BRL4.9 billion. In addition, the company already received the Telemar dividend payment that was predicted in our RJ plan. In the closing instrument, the parties agreed also to adjust the FTTH capacity provision contract to reflect more favorable commercial conditions for Oi in the monthly price per homes connected and also in the readjustment index.
That’s favorable and we’re already translating that into competitive offering on the retail side. After the closing and considering some metrics already foreseen in the contract and commercial changes in the perimeter, the total Oi participation was 34.7%. The participation adjustment of 7.38% were related to OpEx and other financial metrics change of commercial terms. Additionally, the locked box cash adjustments are being calculated already still but we expect the amount to be approximately BRL1.2 billion.
Even after the participation adjustment, it’s very important to emphasize that the value creation of the remaining V.tal stake has the potential to reduce significantly or is leverage in the future, issuing medium- and long-term sustainability.
Now, I hand the presentation to our CFO, Cristiane Bahir. Chris, the floor is yours.
Cristiane Sales
Thank you, Rogerio. Good morning, everyone and thank you, Take, for leading our call today. On our financial results, we start by talking about the routine OpEx which increased 4.4% over last quarter but reduced 3.2% in a yearly comparison or 7.2% on a pro forma basis. Excluding the wholesale infrastructure revenue that as of January 2022, after the operational segregation of V.tal is accounted as revenue and before that was considered as a cost reduction, the routine OpEx reduced 7.2% year-over-year, would represent a real reduction of 18.5% considering inflation of the period. I’ll talk a little bit more about OpEx in the next slides.
The consolidated routine EBITDA totaled BRL1.2 billion in this quarter with an 18.1% reduction percent compared to the fourth quarter of 2021, an improvement of 8.1% in comparison with the first quarter of 2021. The EBITDA margin increased 2.2 percentage points in a year-over-year comparison, mainly as a result of cost discipline. In the first quarter of 2022, almost 80% of the infrastructure CapEx were force financed by the advance for future capital increase made by BTG as a result of the Lockett Box concept.
We demonstrated in this quarter the new level of investment of OE after the segregation of the infrastructure business and the slowdown of mobile CapEx. Moving on the next slide, we can look a little about details on costs. When segregating the blocks of routine OpEx between the cost of growth and other operating costs, it’s very important to emphasize the reduction of 80% in the costs linked to revenues and growth in the reduction of 7.6% in the other operating costs. The consistency of the reductions in costs year-over-year demonstrate our discipline in terms of focusing on efficiency to increase profitability on the new Oi. Some examples are directly related to our strong penetration in the digital journey with 71% being penetration in FTTH based, 5 percentage points more than last quarter, an increase of 8 percentage points in collection digital channels, 50% over 40% in the last quarter and a penetration of 86% in digital care in FTT Home.
As a result, the cost is printing post and collection reduced 22% year-over-year and the cost of call center reduced 46% year-over-year. Additionally, in this quarter, the decreasing of personnel costs of 10.9% reflects the reduction of 3,500 headcount compared to the same period of last year, a year-over-year reduction of BRL63 million mainly driven this quarter by a strong reduction of commercial mobile activities and the closing of our store as planned.
On the next slide, we can see more details on our cost reduction program. On the bottom side, we can see the consistent reduction of routine OpEx year-over-year in the last quarter as a result of our transformation journey with an 18.5% real reduction this quarter considering the inflation of the same period. As we have been disclosing in the last quarters, we described the main actions in this slide that we are focused on our cost reduction program and the main results captured so far that will guide our future and our commitment with simplification of our operating model.
The reduction of BRL234 million in this quarter in a year-over-year comparison, represents BRL938 million annualized demonstrate an accomplishment of 94% of our objective of 1 billion reduction in annualized costs. The main cost that supported the reduction were personnel already mentioned with more details in the previous slide.
In the box of marketing, digital, IT network efficiency and G&A, we also presented a total reduction of BRL123 million in the quarter, totaling almost BRL500 million annualized basis. We also foresee opportunities related to the legacy turnaround that are already in place within the regulatory agenda.
Moving on, we can talk about cash on the next slide. The company ended the quarter with a consolidated cash position of almost BRL2 billion, a reduction of 39% compared to fourth quarter 2021 and 34.5 percentage reduction when compared to the same period of the previous year. Cash flow was positively impacted by the results of operations and working capital, whose dynamic is our leverage for the corporate liquidity management.
The legal and noncore lines also contributed to the same direction to a lesser extent due to redemption of register deposits and the sales of properties, respectively. The reduction in cash in the quarter was due to a negative result of financial operations, the combined effect of the reduction in financial income from cash in foreign currency and interest payments with BNDS and mailing the same annual interest payment to the qualified bond and the senior bond.
In addition to the less payments of obligation to RJ suppliers provided for in the company’s reduced recovery plan which have been now fully completed in this quarter. Next slide, we can see the leverage scenario. After the end of this quarter, with the conclusion of the sale of the UPI mobile assets on April 20 and the conclusion of the sale of UPI InfraCo held on June 9 from the outstanding debt as of March 31, 2022, BRL4.4 billion was already paid by the company. Therefore, the total stand debt of BRL34 billion is already reduced to approximated BRL19 billion. One another important liability to manage an action, on May 31, 2022, the company and Nate entered into an instrument of renegotiation and transaction regarding nontax debt in the amount of BRL20 billion, including applicable fines, charges and late payment interest.
This negotiation which covers both the balance on debt, object of the transaction terms signed on November 27, 2020 and the renegotiation of new debts with ANATEL provides for a discount of 55% so that the total debt to be paid for the company is now BRL9.1 billion, from which BRL1.8 billion related to judicial deposits was already converted into income, resulting in a debt balance of BRL7.3 billion, to settle 126 non-mill installments. As a result, the less installment mature in April 233 million, representing a significant expansion of the payment term established in the previous transaction which would end in October 27.
Now I will turn the call back to Rogerio so you can make the conclusion [ph].
Rodrigo Abreu
Thank you very much, Chris. As we move to the finished letters point out, the continuation of our ESG efforts which have become, as we have been saying all along our way not only to recognize what we have always done in this front but also of doing what is good for the company and the society.
On the environmental front, we’ve been expanding our investments on renewable energy. In the first quarter alone, we implemented four new solar plants with more than 1.5 megawatts month. This put us on 50% of our energy coming from renewable energy by the end of this quarter but we expect to reach the 80% by the end of this year.
On the social front, we look at internally and externally, internally, mainly to our employees and working a lot during this pandemic period to take care of them. More than 2,000 participants engaged on such programs that went from nutritional service to mine phones groups and redrill support group. Also, on the external front, we kept investing on our social endeavors with the IFO Institute [ph], we recently published our social balance. And we keep working on expanding its impact. We have Nave which works on the preparation of the youth generation for new technology already covering more than 1,000 students and we are also starting a new front on the teachers and we believe that will impact several thousands of teachers to engage and learn on new technologies.
On the governance, also internal and external, we worked a lot on bringing our employees up to speed and engage with the high governance levels process, both on the privacy front but also on the business continuity management system. We also kept on this quarter as we close to the — and we reached close to the closing of the V.tal operation, very strict to the implementation of the governance separation issuing V.tal to be independent and neutral. So both people, process and systems have been separated finally by the end of that quarter. Moving to the final slide. I’m not going through all the points, as we mentioned in the beginning. We already did a lot on our recovery program and we are reaching the end of the majority of our steps that we put forward for the end of our registry recovery program.
But if we look only to 2022, what we did in this quarter, the first quarter, we managed to have the approval of both CAD and ANATEL the sale of the UPI of mobile. We also merged Oi [indiscernible] into Oi Solucoes which is was a very complex project but also allowed the simplification of the company. We introduced the V.tal Lockbox agreement. If you remember, since the first of January, we are working under the lockbox approach.
So all the financial results were already considering as the new controller. We — as the closing of operation was postponed a little bit in respect to what we initially planned, we managed to secure the funding to keep investing on V.tal to FC with the buyer. On the second quarter, already anticipating what we’re going to show in the next earnings release, we managed to close the sale of the mobile UPI.
And also together or a little bit a couple of weeks later, we begin the new positioning of Oi after the sale of the mobile operation. We also signed the term ship with Sky for the sale of the TV business and got the approval of ANATEL for the Vital operation. As Chris already mentioned, we managed to secure the multibillion reais transaction agreement with ANATEL and ended up with the UPI of InfraCo V.tal closing. So let’s look at the future. If we look at what’s going to start from now on in this quarter, one of the points that we would like to emphasize is that the closing of this operation and also the judiciary process will allow the management to be fully focused on the core business, looking for the acceleration of it.
We also expect to have the end of the judicial recovery in the few weeks now after the presentation of the final report of the judiciary agent in the beginning of this this week. We expect also in the third and fourth quarter, the conclusion of the final steps of the mobile UPI are certain, there is a retention that will be relieved after the closing of all the process of segregation as well as any assessment for potential adjustment that we do not expect to have any material impact.
New Oi Investor Day, we are also planning for this quarter, the third quarter — during the third quarter to host another Investor Day after the end of all these transactions. So during the pro forma results disclosure, of the new Oi perimeter, allowing investors to better understand the company and also to discuss his perspective with an updated equity story post the M&As that we are already finishing. Finally, the mobile asset transitions. These are a process that will probably take a year a little bit less than a year now that will move all the assets that were sold to the SPs to the buyer that will end our TSA with the team in Claro.
And finally, we keep — we’ll keep our project of the arbitration process and that will take a little bit longer but it’s absolutely in line with the plan. There have been many, many milestones achieved during this journey and a lot of effort and dedication from everybody in Oi but we’re not standing still. And they are now more challenged to overcome with a new company to build remain as for the entire process more committed than ever. Thank you very much.
Question-and-Answer Session
A – Marcelo Ferreira
[Operator Instructions] Our first question comes from Leonardo Olmos sell-side analysts from UBS. Solana, can you hear us?
Leonardo Olmos
I have two questions. Number one, can you confirm if Oi’s final stake on Pit will be 34.7%, are there any painting factors that can change its percentage for the upside, I mean, because there was the 38.5% in the material effect. That’s number one. And number two, can you confirm your expectation of net financial expenses in 2023 and onwards or at least provide a range for us, even if it’s a wide one. So we have an idea how the company will run in financial expenses after all the sales and most of the debt repaid.
Rogelio Pacala
Thank you, Leonardo. For now, we don’t have any visibility of new adjustments and we have already eliminated potential future adjustments for the ONT. So the 34.7% is the target number. In the long term, in the 2024, there is the possibility of certain future adjustments that were already forecasted in the agreement with Globe Net to the potential capital raise and some performance metrics which will depend on how well the company performs. For the second question, I will hand it to Cristiane.
Cristiane Sales
Thank you for the question. The net financial expenses in 2023 will depend on the final number of reduction of this year of the banks and see the debt prepayment as well as the exchange rate but the main component of financial expenses continues to be the interest of our existing bonds in the range of BRL1 billion this year and per year.
Marcelo Ferreira
So our next question comes from Matt sell-side analysts from inside research.
Unidentified Analyst
My question is related to operational margins for the next month. And if you can provide us, how do you see the profitability margin despite a tough scenario we are facing this year.
Cristiane Sales
We have mentioned we that we’re looking for EBITDA margins above 20% and that’s our aim for the operational regime. And we freely believe that we will be there as we can see for the blended results. When talking about operating expenses, we’re still ramping them down to the closings. And better to wait for the next quarter to provide with more information that’s going to be with the information more clean from the infrastructure business is also mobile. But as we have been highlighting in the last calls, we expect the EBITDA margins above 20% in the long run and between 15% to 20%, while we ramp up to that.
Marcelo Ferreira
Our next question comes from Oliver Kosters buy-side analysts from Pala Assets [ph]. Oliver, can you hear us?
Unidentified Analyst
I just had the same question as the guy before but maybe to follow up on that one, the BRL345 million in CapEx that you had in Q1. Are those indicative for the coming quarters? And as a second question, your banks and ECA debt, do you expect to repay by the end of the year with the haircut? Or do you believe to extend it?
Rodrigo Abreu
Okay. And on the CapEx side, we expect that part of that CapEx, as Cristiane indicated, is already related to some legacy obligations. So we believe that we will keep being a lighter company and the majority of the CapEx that will be related to the rollout of a new coverage of fiber as well as to the connect of customers will be taken by V.tal in their business. So that’s the beauty of the new model that — which is to operate with a neutral network company that allow us to keep the pace of growth but reduce drastically the cash partner.
Marcelo Ferreira
And can you repeat the second question, please?
Cristiane Sales
Yes, I got it. I got it. Okay. About the prepayments of banks in sales, we are still working on the final liquidity events to finalize the number of the minimum cash that we need to be, to have in cash in December. And we still need a couple of months to finalize all the discussions with the mobile business that we sold with the UPIs and also the infra company to finalize any of a possible adjustment of prices that will be reduced from our liquidity events to prepaid banks in CE. So I think that in a couple of months, we have more information about that, okay?
Marcelo Ferreira
So our next question comes from Carlos sell-side analysts from BTG. Carlos, can you hear us?
Unidentified Analyst
Can you hear me well?
Cristiane Sales
Yes. Yes, do.
Unidentified Analyst
So, I have a couple of questions. One is on the conclusion on the sale of the pay-TV operations to Sky, I was just wondering if the — if you can elaborate a little more on…
Rodrigo Abreu
We lost you.
Cristiane Sales
Carlos?
Rodrigo Abreu
Okay. Carol, just to maybe — I believe the question was related with — the sale of our TV assets where we stand, we already received, as you know and we signed a term sheet with Sky for the sale of the assets. We are working within the RJ process in order to ensure that we’re going to make this process within the parameters and also with the approval of the judge. So we are in the final discussions of the model of this transaction. In parallel, we’re discussing with the — this guy, the initial documents and procedures but of course, we are ensuring that we are within the process with the judge and we expect to have a clearance and more visibility in a few weeks. Cadu, I don’t know if you return here.
Marcelo Ferreira
So our next question comes from Stefan [ph], sell-side analyst from Bank of America. Stefan, can you hear us?
Unidentified Analyst
Yes? Can you hear me?
Marcelo Ferreira
Yes. You can go ahead.
Unidentified Analyst
My first question is around the impact to EBITDA margins. If you were to shift from a concession to authorization.
Rodrigo Abreu
Okay. Thank you very much for the question. Of course, we are still discussing not only the migration of the construction to authorization as we discussed in the presentation. We are also discussing on the obligations that eventually, as we see there will be already some reliefs in terms of obligations that will help us to be more sustainable. So elimination of unnecessary cost and simplification of the already complex or concession. But moving forward, we — on the long run, the numbers already considered that we will move from the concession to the authorization, moving from the 15% to the 20%, 25% range in terms of EBITDA impact.
Marcelo Ferreira
Okay. So our next question comes from [indiscernible]. Actually, One works with Cadu, maybe Kadus coming back from BTG. Carlos [ph], can you hear us?
Unidentified Analyst
So Cadu here, I’m sorry about that. Yes. I think I was connected to somebody else’s broadband, not voice broadband. That’s why the connection fell.
Cristiane Sales
That’s why — how can you do that.
Unidentified Analyst
Yes, exactly. There was some mobile connection from somebody else in Sao Paulo, sorry. But now I’m connected to the oil fibers, so it’s fine. That’s great. Okay. So I’m sorry. Again, going back to the question that was related to the PayTV sale. I was just trying to understand if the cash payment that was receiving and how it deals with the contract that we have signed with the satellite providers, the capacity satellite contract that you have, if the payment you’re receiving is going to compensate or compensate partially or fully for the contracts? That’s one question.
And the second one is a more of an overview of the FTTH market in the place in the market where we are, what we’re seeing now? I mean, it seems that at some point, a few months ago, the competitive environment was a little tougher with prices under pressure and increased competition and maybe now has changed a little bit for the better. So I was just trying to understand how the market is behaving now?
Rodrigo Abreu
Okay, Carl, regarding the TV operation, as you know very well, the TV business is a tough environment that requires scale, in particular, with the satellite, you also need scale and investment. Since the beginning, our idea and if you recall on our recovery plan, we forecast at BRL20 million which basically was the offset of the satellite costs with this operation in order to neutralize. As we evolved in the transaction and the satellite contract remain with Oi, what we expect from this transaction is that the cash inflow will be enough to neutralize the satellite impact. That was our aim since the beginning, okay?
And in terms of the FTTH environment, we keep seeing as a challenging environment and all the investments that were done in fiber across the country brought in several competitors. But we believe that after the closure of the V.tal transaction, we will also be able to resume growth being because of V.tal with a more capitalized balance sheet, we’ll be able to keep the base and eventually accelerate the speed of the growth of the homes passed. But as well, in our case, we’ll be able to enjoy a superior broadband service but with a much lower cash need for growth that, as you know, are very important part of our investment has been on the growth of the fiber business. Now with the movement to the new business, we believe will be more competitive.
In terms of regional competition, we are also seeing that the smaller providers are taking the heat of the macro situation which, of course, we hope will bring a more rational competition to the market.
Unidentified Analyst
Perfect. Can I like a follow-up question. In fact, it’s a question that you answered in the previous answer I gave in a previous question but just to make sure, in this process of this operating the old switches, can you now provide — can you provide fixed-line services using mobile technology in everywhere or is your like binded by the old concession contracts, you have to keep the copper networks operating in these regions?
Rodrigo Abreu
No. Cadu, we are free to provide anywhere. Of course, we are prioritizing areas the movement from copper to the wireless solution we are prioritizing areas where we see — we have a central office with a very low number of subscribers, therefore, bringing a negative cash flow contribution of that central office to the company. So we are prioritizing moving the subscribers that are in those switches into the wireless in order to allow us to disconnect the empty switches. As we mentioned during the call, this quarter alone, we managed to shut down more than 1,000 central offices.
Marcelo Ferreira
So our next questions come now from Soomit Datta from New Street sell-side analysts from New Street. Soomit, can you hear us?
Soomit Datta
Actually, it is [indiscernible] from sell side sides from a new stream. Can you hear me a?
Marcelo Ferreira
Now I can hear.
Soomit Datta
Yes, technological problems. Just a couple of questions, please. Just first on the fiber business which we’ve talked around a little bit. I mean, just in simple terms, the run rate for fiber additions has slowed a fair bit again into the first quarter. And again, we’ve seen the — I think we’ve seen the April numbers, ANATEL — from ANATEL as well. Is this sort of a reasonable run rate for fiber adds going forward, looking at the Q1 number, do we think this is the kind of new normal for the foreseeable future? Or when might that change, please? That would be — that would be the first question. And I guess, as a follow-up, we’re seeing the residential business declining in revenue terms, slightly just 1.8%. And I think it was in the first quarter. Are we likely to see that business return to growth over the course of 2022?
Rodrigo Abreu
Thank you very much for your question, Soomit. We are also expecting not only expecting but we are working on that. The first quarter, we saw a deceleration that was bought not only through the market but we also reduced several internal process as we managed the idea is to have a smarter growth, not a growth just per the growth but a sustainable growth. And of course, that impacted some adjustments on both the distribution channels as well as the rotation programs but we are already seeing an acceleration of both sales and also the reduction of the churn that will impact, of course, positively on the growth speed.
On top of our internal adjustments of process, we also expect that it will speed up the deployment of fiber with, of course, help us to have more room for growth.
Soomit Datta
Okay. Thank you. And maybe as a follow-up, just on V.tal, do you know — or do you have an expectation for the acceleration in growth coming from non Oi retail subscribers in the near term. Are we beginning to see take-up of non-Oi subscribers using that wholesale product. And what is your kind of broad expectation over the course of this year for that.
Rodrigo Abreu
Okay. As we discussed in terms of our governance, we’re already working as separate entities. But we already disclosed some internal expectations on the work they are doing. We’ve seen a stronger take-up rate that with only one tenant tends to reach between 25% and 30% but with more tenants that will allow to — V.tal to have a more efficient use of the network deployed and the take-up rate can reach levels around 40%. That is the V.tal expectation as of now.
Marcelo Ferreira
So our next question comes from [indiscernible] next buy-side analysts from Knighthead Capital Management. Anton, can you hear us?
Unidentified Analyst
Can you guys hear me?
Marcelo Ferreira
Okay. Go ahead.
Unidentified Analyst
Yes, just sort of an accounting question, curious about the restructured ANATEL obligation if that’s going to show up as a financial debt obligation and what the — what’s the present value that we should expect to see on the balance sheet as of June 30 and just with all the various cash puts and takes in the quarter, you gave us a pro forma gross debt number of $19.1 billion. I’m curious what your cash balance is today.
Cristiane Sales
Okay. Thank you for the question. The transactions with ANATEL is not recorded as a financial obligation. It’s accounts payable. The installments that’s going to be in the short term. and accounts payment short term and the months that are going to be paid installments after the ’23 in the long term. So it’s an accounts payable. If you want to — if you need any information exactly what account and where to find, you can call us — with our IR team and we can help you to find the information in the balance but it’s already there recorded. About cash balance, we prefer to discuss only in the official disclosure. So we can talk about that in the next quarter in the presentation of the June during the second quarter results, okay?
Unidentified Analyst
Okay, fair enough. But just if I were to come up with kind of March 31 pro forma cash given the various asset sales, all of the componentry should be in the deck in the release, right? I should be able to at least solve for you gave us a pro forma debt number but not a net debt number.
Cristiane Sales
Yes.
Unidentified Analyst
That’s what I’m trying to get at.
Cristiane Sales
Yes, because that depends on the cash. So the cash you prefer to — we have to disclose in the official disclosures. We just included the pro forma debt. We just got the debt in March 31 and took out what we paid after the close of mobile infra [ph] just to give an idea of what that would be. It’s not actually the debt in April and in May and in June because it depend on the accrual finance and other accruals that’s not included there. We just put out what we paid after the closing, just to give you an idea, in the additional cash components will stay with Oi other than the payments.
Marcelo Ferreira
Okay. So we are now finishing our Q&A session. Thank you all. And I pass the floor to Rogerio, so that he can do his final remarks. Please, Rogerio, you can move.
Rodrigo Abreu
Thank you, Marcelo. Thank you, everybody, for coming to our call and the interest. As we said in the beginning, from now on, will resume the schedule of the earnings release. And on the side of the management, we keep our high commitment to delivery of the operational acceleration and now the beauty of the new way. Thank you, everybody and have a good day.
Cristiane Sales
Bye. Thank you very much.
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