Telefonica Brasil SA "Distribution Concerns Eased, but Margin and Lease..."

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Telefonica Brasil SA "Distribution Concerns Eased, but Margin and Lease..."

Global Research

13 May 2026ab

Telefonica Brasil SA Equities

BrazilDistribution Concerns Eased, but Margin and

Lease Dynamics Still Limit FCF growth Wireless Communications

12-month rating SellOutlook; Post-Q1 Update

12m price target R$33.00

Prior : R$36.00

Maintain Sell; PT down by 8% Price (12 May 2026) R$36.33

We updated our TEF-BZ model incorporating a soft Q1 print, highlighted by 1) an RIC: VIVT3.SA BBG: VIVT3 BZ

EBITDA margin miss vs. UBSe/St, roughly flat excluding the Other Revenues line, and

2) a worse-than-expected lease cash outflow, which grew above MSR and could Trading data and key metrics

pressure FCF for longer if the current trend persists. However, given management's 52-wk range R$43.18-27.51

stated target to keep lease outflows at or below MSR we forecast some moderation Market cap. R$116b/US$23.7b

in coming quarters. The company also eased concerns on shareholder distribution, Shares o/s 3,196m (PREF)

reiterating that at least R$7bn has already been committed for payment in 2026, Free float 63%

while also pointing to a pickup in asset sales going forward. Management also Avg. daily volume ('000) 4,962

showed a constructive tone around mobile competition, citing back-book price ups Avg. daily value (m) R$201.7

applied in April and signalling room for further increases. This only partially eased

Common s/h equity (12/26E) R$68.6b

our concerns on competition, which we view as marginally tougher especially at the

P/BV (12/26E) 1.7x

lower-end — with entry-level plans gaining traction — and likely reflected in the

Net debt to EBITDA (12/26E) NM

muted margin expansion observed across the sector in Q1. In our view, a marginally