Business Context and Reporting Period
Company: Telefónica Brasil S.A.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: May 2026 (Filing Date: May 11, 2026)
Subject: Disclosure of the amended "2nd Incentive Plan via Performance Units, with Cash Settlement."
This filing details the terms of a long-term incentive plan approved by the Board of Directors on June 12, 2024, and subsequently amended on February 20, 2025, and May 7, 2026. The plan is designed to align management interests with shareholder value creation and strategic objectives over a five-year duration divided into three independent three-year cycles.
Key Financial Metrics and Plan Structure
Note: This filing describes an executive compensation plan and does not contain the company's consolidated financial statements (revenue, profit, cash flow, or debt) for the period.
- Plan Duration: 5 years total, divided into 3 cycles:
- First Cycle: Jan 1, 2024 – Dec 31, 2026
- Second Cycle: Jan 1, 2025 – Dec 31, 2027
- Third Cycle: Jan 1, 2026 – Dec 31, 2028
- Settlement Method: Primarily cash settlement based on the value of common shares (VIVT3). Share settlement is possible if approved by the General Shareholders' Meeting.
- Performance Metrics (Cycles 1 & 2):
- Total Shareholder Return (TSR): 50% weighting
- Free Cash Flow (FCF): 40% weighting
- CO2 Emissions Neutralization: 5% weighting
- Gender Equality in Leadership: 5% weighting
- Performance Metrics (Cycle 3):
- Total Shareholder Return (TSR): 50% weighting
- Free Cash Flow (FCF): 50% weighting
Material Changes and Plan Amendments
The filing discloses amendments to the incentive plan approved on May 7, 2026. Key structural elements include:
- Shift in ESG Weighting: The Third Cycle (starting Jan 1, 2026) removes the specific weightings for CO2 emissions and Gender Equality from the primary formula, consolidating the performance criteria into TSR and FCF (50% each).
- Clawback and Malus Provisions: The plan includes strict provisions allowing the Board to cancel unpaid incentives ("Malus") or recover paid amounts ("Clawback") within 36 months in cases of financial restatements due to fraud, serious code of conduct violations, or inappropriate conduct.
- Termination Rules: Participants generally lose rights to incentives upon voluntary resignation or dismissal for cause. Pro-rated payments may apply in cases of death, disability, retirement, or dismissal without cause after 12 months of service.
Guidance, Outlook, and Risks
Management Commentary: The plan is intended to retain key managers and link incentives to sustainable strategic objectives. The Board retains discretion to adjust targets or the comparison group for TSR calculations in the event of corporate restructuring or market distortions.
Risks and Contingencies:
- Performance Risk: Incentives are not guaranteed. If TSR performance falls below the median of the peer group, the 50% TSR portion of the incentive is forfeited. Similarly, if FCF achievement is below 92% of the budget, the FCF portion is forfeited.
- Market Risk: The final payout value is directly tied to the share price (VIVT3) at the time of settlement.
- Regulatory Risk: The plan is subject to Brazilian labor laws and tax regulations. The Board may adjust the plan to comply with new laws.
Investor Verification Checklist
- Verify the specific FCF budget targets approved by the Board for the 2026, 2027, and 2028 fiscal years, as these are not disclosed in this filing.
- Confirm the composition of the "Comparison Group" (peer companies) used for TSR calculations, noting that the Board may adjust this list.
- Review the company's annual reports to assess actual progress on CO2 emissions and gender equality, as these were key metrics for Cycles 1 and 2.
- Monitor the share price (VIVT3) volatility, as it directly impacts the cash value of the performance units.
- Check for any future shareholder meeting resolutions regarding the potential shift from cash settlement to share settlement.