VIV

Business Context and Reporting Period

Company: Telefônica Brasil S.A. (Vivo)
Filing Type: Form 6-K (Interim Financial Statements)
Reporting Period: Three months ended March 31, 2026
Auditor: PricewaterhouseCoopers Auditores Independentes Ltda. (Review performed)
Business Overview: The Company operates fixed and mobile telecommunications services, broadband internet, pay TV, and integrated IT solutions in Brazil. It is a subsidiary of the Telefónica Group (Spain), which holds a 77.13% interest.

Key Financial Metrics (Consolidated)

*EBITDA calculated as Operating Income + Depreciation & Amortization (R$3,883,815).

Material Changes vs. Prior Period

• Revenue Growth: Net operating revenue increased by 7.4% year-over-year (YoY), driven by growth in both services (R$14.14B) and sale of goods (R$1.32B).
• Profitability: Net income rose 19.0% YoY to R$1.26 billion. Operating income increased 17.1% to R$2.32 billion.
• Cost Management: Cost of sales and services increased 6.0% to R$8.51 billion. Selling expenses rose 6.3% to R$3.59 billion.
• Financial Expenses: Net financial expenses increased to R$720.5 million (from R$569.2 million in Q1 2025), primarily due to higher interest charges on leases and debentures.
• Balance Sheet: Total assets increased to R$130.5 billion. Cash reserves grew significantly to R$9.06 billion, up from R$7.03 billion at year-end 2025.

Guidance, Outlook, Risks, and Unusual Items

Management Commentary and Outlook

• Capital Allocation: The Company approved a new share buyback program for 2026-2027 with a maximum budget of R$1 billion. A capital reduction of R$4 billion was approved to return capital to shareholders, effective July 2026.
• Dividends: Interim interest on equity (JSCP) of R$525 million was declared for Q1 2026. A subsequent JSCP of R$365 million was declared in April 2026 for payment in 2027.
• Investments: Continued investment in infrastructure, with R$1.9 billion in additions to Property, Plant, and Equipment (PP&E) in Q1 2026.

Risks and Contingencies

• Regulatory Environment: Significant exposure to ANATEL regulations regarding interconnection fees, spectrum usage, and consumer rights. The new General Competition Goals Plan (PGMC) was approved in September 2025.
• Tax Reform: Brazil's consumption tax reform (IBS/CBS) is in a transition phase. Pro-forma charges apply in 2026 with no financial impact; full impact expected from January 2027.
• Legal Provisions: Total provisions for legal claims, regulatory fines, and contingencies stand at R$7.36 billion. Significant tax contingencies (possible risk) total R$51.3 billion.
• Environmental Risks: Climate change poses risks to network infrastructure (extreme weather) and increases cooling costs. The Company maintains insurance coverage for operational risks up to R$900 million.

Unusual Items

• Copper Sales: A net gain of R$86.3 million was recognized from the sale of copper, resulting from the migration from the STFC concession regime to a private authorization regime.
• Acquisitions: The Company consolidated results from recent acquisitions including FiBrasil and CyberCo Brasil, impacting segment balances.

Investor Verification Checklist

• Debt Covenants: Verify compliance with Net Debt/EBITDA covenants (specifically the 3.5x limit for FiBrasil debentures).
• Tax Reform Impact: Monitor the implementation of the new IBS/CBS tax regime starting January 2027 and its effect on margins.
• Regulatory Changes: Track ANATEL's enforcement of the new PGMC and any adjustments to interconnection tariffs or spectrum fees.
• Cash Flow Sustainability: Assess the impact of the R$4 billion capital reduction and R$1 billion buyback program on future liquidity and dividend capacity.
• Legal Provisions: Review the status of major tax and regulatory contingencies, particularly those related to FUST and ICMS disputes.