Telefonica Brasil S.a. · BMFBOVESPA:VIVT3
Telefonica Brasil — SPAC Merger (November 2022)
72 slides from Telefonica Brasil's SPAC merger presentation, Nov 7, 2022
Slide 1: Business combination fair value notes
(1) Includes the write-down of property, plant and equipment (R$131,578). (2) Includes the fair value of licenses (R$2,518,836) and customer portfolio (R$96,195). (3) Includes the fair value of tax contingent liabilities (R$453,697). (4) Includes deferred taxes on contingent liabilities (R$154,257).
Slide 2: Segment reporting and significant accounting practices
Information on investees is presented in Note 12. e) Segment reporting Business segments are defined as components of a company for which separate financial information is available and regularly assessed by the operational decision-making professional in definition of how to allocate funds to an in
Slide 3: Financial investments notes and trade accounts receivable
(1) Refers to financial investments in senior shares of FOR-TE Fundo de Investimento em Direitos Creditórios. (2) Refer to financial investments in guarantees for lawsuits (Note 19). 5) TRADE ACCOUNTS RECEIVABLE
Slide 4: Trade accounts receivable by maturity
(1) The maturity schedule of the nominal amounts and the present value of the Vivo TECH product does not exceed five years. The following are amounts receivable, net of estimated losses for impairment of accounts receivable, classified by maturity:
Slide 5: Impairment losses on accounts receivable
(1) Includes the amounts of contractual assets. On September 30, 2022, and December 31, 2021, no customer represented more than 10% of trade accounts receivable, net. The following table shows the changes in estimated losses for impairment of accounts receivable.
Slide 6: Changes in estimated impairment losses
Balance at 12.31.20 ‘Supplement to estimated losses, net of reversal (Note 25) Write-off Balance at 09.30.21 Supplement o estimated losses, net of reversal Write-off Balance at 12.31.21 ‘Supplement to estimated losses, net of reversal (Note 25) Write-off Bussines combination (Note 1.c.2) Balance at
Slide 7: Inventories and prepaid expenses
(1) This includes, among others, mobile phones, Simcards (chip) and IT equipment in stock. (2) Additions and reversals of estimated impairment losses and inventory obsolescence are included in cost of goods sold (Note 25). 7) PREPAID EXPENSES
Slide 8: Income and social contribution taxes recoverable
(1) Substantially represented by the incremental costs related to sales commissions paid to partners to obtain customer contracts arising from the adoption of IFRS 15 / CPC 47, which are deferred to income in accordance with the term of the contract and/or economic benefit to be generated, usually f
Slide 9: Income and social contribution taxes payable
b) Income and Social Contribution taxes payable
Slide 10: Deferred taxes
The non-current amounts on September 30, 2022 and December 31, 2021 refer to taxes covered by IFRIC 23 - Uncertainties about Income Tax Treatment (Note 8.e). c) Deferred taxes Significant components of deferred income and social contribution taxes are as follows:
Slide 11: Deferred tax components, Company
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Slide 12: Deferred tax components continued
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Slide 13: Deferred tax components, consolidated
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Slide 14: Deferred tax notes
(1) Under Brazilian tax legislation carryforward losses may offset up to 30% of the annual taxable income but otherwise have no expiry date. In 2021, the Company recognized R$1,405,565 in deferred income tax and social contribution assets, arising from the decision of the Federal Supreme Court ("STF
Slide 15: Income tax reconciliation
Company ‘Three-month periods ended Nine-month periods ended 09.30.22 09.30.24 09.30.22 09.30.24 Income before taxes 4,667,813 1,632,264 3,394,767 4,468,234 Income and social contribution tax expenses, at the tax rate of 34% (667,056) (654,970) (1,154,220) (1,519,200) Permanent diferences Eaquity in
Slide 16: Uncertainties about income tax treatments
e) Uncertainties about Income Tax Treatments The Company and its subsidiaries are defending several assessments filed by the Brazilian Federal Tax Authority ("RFB") for allegedly incorrect deductions of expenses, mainly related to the amortization of goodwill, at various administrative and judicial
Slide 17: Other taxes recoverable
(1) Includes ICMS credits from the acquisition of property and equipment, available to offset during a period of 48 months; requests for refund of ICMS paid on invoices that were subsequently cancelled; for the rendering of services; tax substitution; and tax rate difference; among others. Non-curre
Slide 18: Escrow deposits
The escrow deposits (classified by tax balances) as on September 30, 2022, and December 31, 2021, are as below. The information regarding judicial deposits is the same as in Note 10) Judicial Deposits and Garnishments , disclosed in the financial statements for the year ended December 31, 2021.
Slide 19: Escrow deposits by tax
Tax 4231.21 Universal Telecommunication Services Fund (FUST) (1) 535,118 State Value-Added Tax (ICMS) (2) 358,916 Social Contribution Tax for Intervention in the Economic Order (CIDE) (3) 294,724 Withholding Income Tax (IRF) 76,832 Corporate Income Tax (IRPJ) and Social Contribution Tax (CSL) 54,072
Slide 20: Investments: information on investees
(1) On September 30, 2022 and December 31, 2021, includes R$369,880 and R$559,499, respectively, referring to the sale of FiBrasil, Cloud Co and IoT Co, which took place in 2021. (2) On September 30, 2022, and December 31, 2021, includes R$17,857 and R$90,538, respectively, referring to the distribu
Slide 21: Summary balance sheets of investees
30.09.22 34.12.21 ‘Subsidiaries Joint venture ‘Subsidiaries Joint venture ‘Summary of balance sheets: Current assets 1,899,173 845,558 552,110 1,147,933 Non-current assets 4.119.271 1,308,795 342,588 717.428 Total assets 3,018,444 2,154,353 894,698 1,865,361 Current liabilities 1,657,857 237,300 286
Slide 22: Changes in investment balances
b) Changes in investment balances
Slide 23: Property, plant and equipment
13) PROPERTY, PLANT AND EQUIPMENT a) C hanges in balances
Slide 24: Property, plant and equipment balances and changes
Balances and changes: Balance on 12.31.20 Adations ‘Write-ofs, net (1) Nettransfers Subleting Goods intended for sale (2) Depreciation (Note 25) Balance on 09.30.21 Additions Wiite-offs, net (1) Net transfers ‘Subleting Depreciation Balance on 12.31.21 Additions ‘Write-ofs, net (1) Nettransfers Depr
Slide 25: Lease assets and depreciation rates
(1) Infrastructure, includes R$31,332 and R$245,237 in 2022 and 2021, respectively, referring to the cancellation of lease agreements (2) Refers to the balance of assets used for the Company's corporate structure in FiBrasil in 2021. b) Depreciation rates Changes in lease balances, included in prope
Slide 26: Depreciation rates for lease assets
The following is a table of depreciation rates for the period ended September 30, 2022, for lease assets.
Slide 27: Intangible assets balances and changes
Balances and changes: Balance on 12.31.20 ‘Additions Wwite-offs, net Nettransters Goods intended for sale (1) ‘Amortization (Note 25) Balance on 09.30.21 ‘Additions (2) Write-ofs, net(3) Nettransfers Amortization Balance on 12.31.21 ‘Additions Wiite-ffs, net Nettransters ‘Amortization (Note 25) Bala
Slide 28: Intangible notes and amortization rates
(1) Assets used for the Company's corporate structure in FiBrasil in 2021. (2) Licenses refer to the acquisition of 5G licenses (in 2021) and extensions of authorizations for the right to use radio frequencies for SMP exploration in the Federal District and in the State of Rio de Janeiro (in 2021 an
Slide 29: Payroll and related charges
Social charges and benefits, Profit sharing Share-based payment plans (Note 29) Salaries and wages Company Consolidated 09.30.22 4231.21 09.30.22 4231.21 630,149 370,287 674,377 397,908 314,938 358,011 327,438 366,451 60,280 108,992 60,781 109,682 39,599 33,091 45,693 35,818 1,044,966 870,341 1,108,
Slide 30: Dividends and interest on equity
(1) Refers to the remaining balances for 2022, 2021 and 2020 which, according to decisions of the Federal Regional Court of the First Region, rendered on March 18, 2020, and March 10, 2021, the payments are temporarily suspended. In December 2021, the total amount was transferred to non-current due
Slide 31: Dividends and interest on equity receivable and payable
For the purposes of the statement of cash flow, interest on equity and dividends received from the subsidiary are classified as "Investing Activities". b) Dividends and interest on equity payable b.1) Balances:
Slide 32: Dividends payable balances
Telefonica Telefénica Latinoamérica Holding SP Telecomunicacdes Participacées, Telefénica Chile Non-controlling interest Total CompanylConsolidated 09.30.22 4,408,284 4,139,508 930,834 2,620 4,626,661 5,107,867 4231.21 4,146,019 927,324 787,508 2.132 4,432,734 4,265,715
Slide 33: Provisions and contingencies
For the purposes of the statement of cash flow, interest on equity and dividends paid to shareholders are recognized in "Financing Activities". 19) PROVISIONS AND CONTINGENCIES The Company and its subsidiaries are party to administrative and judicial proceedings and labor, tax, regulatory and civil
Slide 34: Changes in provisions for contingencies
Balance on 12.13.20, Adations (reversal), net uote 26) othe eeversal Wte-ofs due to payment Interest acrals (2) Balance on 09.30.21 Aaations (reversal), net Other adatons (eversat) Whte-ofs due to payment Interest accruals Balance on 1243.21 Adattons (reversal), nt (ote 28) roisions for contingencie
Slide 35: Provision notes and labor contingencies
(1) Refers to the amounts to be refunded to customers as a result of Complementary Law No. 194 of July 23, 2022, which dealt with the incidence of taxes on various sectors considered by the Law as being essential and indispensable goods and services, resulting in the reduction of ICMS rate on commun
Slide 36: Tax provisions
b.1) Tax provisions Management, under advice of legal counsel, believes that the following losses present probable risk of loss for the federal, state, municipal and regulatory (FUST) tax proceedings: Federal taxes The Company and/or its subsidiaries are party to administrative and legal proceedings
Slide 37: Loans, financing and debentures
a.1) Loans and financing - Financial Institutions On April 8, 2022, a foreign currency denominated loan was obtained from Citibank (US dollar), through Law No. 4.131, of US$ 213,413 thousand, equivalent to R$1,000,000, maturing on September 28, 2023, remunerated at 3.1546% p.a. Interest will be paid
Slide 38: Lease liabilities and 5G licenses
(1) On September 30, 2022, and December 31, 2021, the present value of balances payable, included R$60,084 and R$70,845, respectively, referring to lease agreements with Telefónica Group companies (Note 28). The weighted annual interest rate on lease contracts on September 30, 2022, is 10.72%, with
Slide 39: Maturities of non-current debt
c) Changes Balances by year of maturity of the non-current amounts of loans, financing, leases, 5G licenses and liabilities for the acquisition of a company (Garliava) are as follows:
Slide 40: Additions and payments
d) Additions and payments The following is a summary of additions and payments made during the quarter ended September 30, 2022.
Slide 41: Deferred revenue
(1) The additions have no effect on cash. 21) DEFERRED REVENUE
Slide 42: Deferred revenue and other liabilities
(1) Refers to the balance of contractual liabilities of customers which are, deferred when linked to performance obligations. (2) Includes the net balances of the residual values from sale of non-strategic towers and rooftops, transferred to income as the conditions for recognition are met. 22) OTHE
Slide 43: Equity: capital
(1) Includes the cost of renewing STFC and SMP licenses and SMP licenses and the extension of the authorization to use radio frequencies for the exploitation of SMP in the State of Rio de Janeiro and Federal District (Notes 1.b and 14). (2) Refers to payroll withholdings and taxes withheld from inte
Slide 44: Capital reserves and treasury shares
ü b) Capital reserves The information on the capital reserves, is the same as in Note 24) Equity, item b) , disclosed in the financial statements for the year ended December 31, 2021. Treasury shares changes in the in the nine-month periods ended September 30, 2022, were: · Cancellation of treasury
Slide 45: Interest on equity and dividends for 2021
d.2) Interest on Equity and Dividends for 2021 At the AGM held on April 26, 2022, the financial statements and allocations of income for the year 2021 were approved by majority vote of the holders of common shares. The details of the allocation of income are the same as those disclosed in Note 24) S
Slide 46: Unclaimed dividends and equity valuation adjustment
d.3) Unclaimed dividends and interest on equity Pursuant to Article 287, paragraph II, item "a" of Law No. 6404, of December 15, 1976, the dividends and interest on equity unclaimed by shareholders are subject to a statute of limitation of three years, as from the initial payment date. The Company r
Slide 47: Reconciliation of parent and consolidated net income
i) Reconciliation of parent company and consolidated net income A reconciliation of the Company and Consolidated net income for the nine-month period ended September 30, 2022 is presented below following the partial sales (49.99%) of the operations of CloudCo Brasil and IoTCo Brasil, which took plac
Slide 48: Net income reconciliation table
09.30.22 09.30.21 ‘Company's net income (Company) in the period 2,958,679 3,604,849 Participation of non-controling shareholders, (26,654) (3,070) Cloud Co loT Co Vivo Ventures Consolidated net income in the period
Slide 49: Net operating revenue, Company
Company ‘Three-month periods ended ‘Nine-month periods ended 09.30.22 09.30.21 09.30.22 09.30.21 Gross operating revenue 16,587,342 15,987,674 49,106,448 47,546,982 Senices (1) 14,984,732 14,601,245 44,133,713 43,200,862 Sale of goods 2) 1,602,610 1,386,429 4,972,735 4,346,120 Deductions from gross
Slide 50: Revenue notes and operating costs
(1) Includes telephone services, use of interconnection network, data and SVA services, cable TV and other services. (2) Includes sale of goods (handsets, SIM cards and accessories) and equipment of "Vivo Tech". (3) The consolidated balances in the nine-month period ended September 30, 2022, include
Slide 51: Operating costs and expenses, Company
Company ‘Three-month periods ended woz ‘Canara and ‘General and cost of ea admintratne Cost of ales ‘Seling administrate and senices expenses Total _and senices __ expenses __ expenses. Total Persea! 1236358) (168,357) (1.182437) (190,133) (659,738) (145,139) (995.066 Thid party senices (2047 595) (
Slide 52: Operating costs, nine-month periods
Tine-mont periods ended 022 wa071 ‘Canara and ‘General and cost of sales Sling administrate Cost of sles ‘Seling adeinistatne andsenices___ expenses, __ expanses Total and senices __expenses __ expenses. Total (658,165) (2.218520) (490,185) —(.36RG7O) (50570) (1.975.481) 404.296) 2830.47) (6.065.401
Slide 53: Operating costs and expenses, consolidated
Consolidated ‘Threesmonth prods ended wa071 ‘General and Cost of sales ‘Selingadministatne expenses expenses Total and senices _ expenses __ expenses. Total (703,771) (175.157) (247,913) (224640) (652521) (147,878) (1034.98) (1438987) (213835) G.387.211)— BOTESBS) — (1428712) RHI.A05) 768.381) (16,1
Slide 54: Other income (expenses)
(1) Includes consolidated lease depreciation of R$2,267,300 and R$2,018,407 in the nine months periods ended September 30, 2022 and 2021, respectively (Note 13.c). 26) OTHER INCOME (EXPENSES)
Slide 55: Other income (expenses) table
Recovered expenses and fines (1) Provisions for labor, tax, civil, regulatory and contingent liabilities (Note 19) Net income from the FiBrasil operation, including goodwill write-off Other income (expenses) (2) Total Other income Other expenses Total Company ‘Three-month periods ended ‘Nine-month p
Slide 56: Financial income (expenses)
(1) For the nine months periods ended September 30, 2022 and 2021, includes tax credits of R$301,442 and R$1,607,008, respectively, from decisions on legal proceedings, in favor of the Company, for PIS and COFINS tax credits (Note 9). (2) Includes net gains on disposal of assets (real estate, scrap,
Slide 57: Financial income and expenses, Company
Company ‘Three-month periods ended Nine-month periods ended 09.30.22 09.30.21 09.30.22 09.30.21 Financial Income Interest income 165,714 87,825 403,198 173,459 Interest receivable (customers, taxes and other) and other financial income 4.491 31,439 118,849 77.884 Gain on derivative transactions 87.4
Slide 58: Balances and transactions with related parties
(1) For the nine months periods ended September 30, 2022 and 2021, includes tax credits of R$796,991 and R$592,020, respectively, on legal proceedings, in favor of the Company, for PIS and COFINS tax credits (Note 9). (2) Includes consolidated leases charges of R$950,333 and R$589,591 for the nine m
Slide 59: Related party balances: assets
Omer Group companies Teleonia Global Soutons PariapacSes Teletéoca Veneotana Teleonica Moves spats Teleonia Factoring do ras Teleténica Goda! Solunons Teletonica Moles Argentina Teifsa Global Tebaus Cable Bras Teleténca na Flas inaestutrae Fea Oca Teletnicaot & BigOata Tech Teleonia Cybersecunty & C
Slide 60: Related party balances: liabilities
Companies Parent Companies SP TelecomunicagBes Patticipacses Telef6nica Latnoamerica Holding Teletnica Other Group companies Telefonica Global Solutons Paricipagies Teleténica Compras Electrica Telefnica Digital Espafia Telefonica Factoring do Brasit Telef6nica Global Technology Teletnica Global Sol
Slide 61: Management compensation and share-based plans
· Talent for the Future Share Plan ("TFSP"), for its Senior Managers, Managers and Experts at a global level · Perform Share Plan ("PSP"), for its Vice-Presidents and Directors at the global level b) Management compensation Consolidated key management compensation paid by the Company to its Board of
Slide 62: Pension plans and post-employment benefits
The details of these plans are the same as in Note 31) Pension Plans and Other Post-Employment Benefits , as disclosed in the financial statements for the year ended December 31, 2021. The changes in consolidated balances of the surplus and deficit plans were as follows:
Slide 63: Financial instruments and risk management
31) FINANCIAL INSTRUMENTS AND RISK AND CAPITAL MANAGEMENT a) Derivative transactions The derivative financial instruments contracted by the Company are mainly used for hedging against foreign exchange risk from assets and liabilities in foreign currency and the effects of inflation on leases indexed
Slide 64: Derivative transactions
(1) Foreign currency swaps (Euro and CDI x Euro) (R$135,564)) and (US$ and CDI x US$) (R$370,471) - maturing through November 21, 2022, to hedge currency risk affecting net amounts payable (carrying amount R$90,520 in Euros and LIBOR) and receivables (carrying amount R$110,540 in US$). (2) Foreign c
Slide 65: Hedge accounting and sensitivity analysis
For the purposes of preparing its financial statements, the Company adopted the fair value hedge accounting methodology for its foreign currency swaps x CDI and IPCA x CDI for hedging or financial debt. Under this arrangement, both derivatives and hedged risk are recognized at fair value. For the ni
Slide 66: Sensitivity analysis assumptions
The assumptions used by the Company for the sensitivity analysis on September 30, 2022, were as follows:
Slide 67: Financial assets and liabilities
Financial Assets Current Cash and cash equivalents (Note 3) Financial investments (Note 4) Trade accounts receivable (Note 5) Derivative transactions (Note 31) Derivative transactions (Note 31) Sale of realestate and other receivables (Note 11) Related-party receivables (Note 11) Non-current Financi
Slide 68: Capital management
c) Capital management The purpose of the Company's capital management is to ensure maintenance of a high credit rating and an optimal capital ratio to support the Company's business and maximize shareholder value. The Company manages its capital structure by making adjustments and adapting to curren
Slide 69: Guarantees
b) Guarantees On September 30, 2022, the Company had guarantees for several commitments with ANATEL, suppliers and legal proceedings:
Slide 70: Supplemental cash flow information
33) SUPPLEMENTAL CASH FLOW INFORMATION The following is a reconciliation of the consolidated cash flow financing activities for the nine months periods ended September 30, 2022, and 2021.
Slide 71: Reconciliation of financing activities
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Slide 72: Subsequent events
34) SUBSEQUENT EVENTS a) Acquisition of a company by an indirect subsidiary of the Company The Company, pursuant to and for the purposes of CVM Resolution 44/2021 ("CVM Resolution 44"), informed its shareholders and the market that, on October 3, 2022, its indirect subsidiary, Telefônica Infraestrut