Telefônica Brasil (VIV) 6-KCurrent report (foreign)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of July, 2024

Commission File Number: 001-14475

TELEFÔNICA BRASIL S.A.
(Exact name of registrant as specified in its charter)

TELEFONICA BRAZIL S.A.  
(Translation of registrant’s name into English)

Av. Eng° Luís Carlos Berrini, 1376 -  28º andar
São Paulo, S.P.
Federative Republic of Brazil
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

(Free translation from the original issued in Portuguese. In the event of discrepancies, the Portuguese language version prevails).

Independent auditors’ review report on the consolidated and individual interim financial information

To the

Management and Shareholders of

Telefônica Brasil S.A.

São Paulo - SP

Introduction

We have reviewed the consolidated and individual interim financial information of Telefônica Brasil S.A. (“Company”), included in the Quarterly Information Form – “ITR” for the quarter ended June 30, 2024, which comprise the balance sheet as of June 30, 2024, and the related statements of income and comprehensive income for the three- and six-month periods then ended and changes in equity and cash flows for the six-month period then ended, including material accounting policies and other explanatory information.

The Company Management is responsible for preparing the consolidated and individual interim financial statements in accordance with the accounting standard CPC 21(R1) – Interim financial reporting and IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), and for presenting the aforementioned information in accordance with the standards issued by the Brazilian Securities Commission (CVM) that apply to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on such interim financial information based on our review.

Scope of the review

We conducted our review in accordance with Brazilian and International Standards for reviewing interim financial information (NBC TR 2410 and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of the interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with audit standards and, as a result, we cannot provide assurance that we have discovered all the significant matters that could have been identified by an audit. Accordingly, we do not express an audit opinion.

Conclusion on the Company and consolidated interim financial information

Based on our review we are not aware of any facts that lead us to believe the consolidated and individual interim financial information included in the aforesaid “ITR” has not been prepared, in all material respects, in accordance with the accounting standard CPC 21 (R1) and IAS 34 applicable to the preparation of Quarterly Information – ”ITR”, and presented in accordance with the standards issued by the Brazilian Securities Commission (CVM).

Other matters

Statement of Value Added

The aforementioned quarterly financial information include the consolidated and individual Statements of Value Added (DVA) for the six-month period ended June 30, 2024, which are the responsibility of Company’s Management and are presented as supplementary information for IAS 34 purpose. This financial statement was subject to review procedures conducted together with the review of the quarterly financial information, for the purpose to conclude whether it has been reconciled with the interim financial information and accounting records, as applicable, and if its form and content comply with the criteria set out in the accounting standard CPC09 – “Statements of Value Added”. Our review did not detect any facts that lead us to believe that the DVA has not been prepared, in all material respects, in accordance with the criteria established in this accounting standard and consistently in relation to the consolidated and individual interim financial statements taken as a whole.

São Paulo, July 24, 2024.

Baker Tilly 4Partners Auditores Independentes Ltda.

CRC 2SP-031.269/O-1

Nelson Varandas dos Santos

Accountant CRC 1SP-197.110/O-3

Baker Tilly 4Partners, operating under the name Baker Tilly, is a member firm of the Baker Tilly International global network, whose members are separate and independent legal entities.

NOTES TO THE INDIVIDUAL AND CONSOLIDATED QUARTERLY INFORMATION

Telefônica Brasil S.A. (the “Company“ or “Telefônica Brasil“) is a publicly-held corporation whose main corporate purpose to render telecommunications services; the development of activities necessary or complementary to the execution of such services, in accordance with the concessions, authorizations and permissions granted; furnishing value-added services; offering integrated solutions, management and provision of services related to: (i) data centers, including hosting and co-location; (ii) storage, processing and management of data, information, texts, images, videos, applications and information systems and similar; (iii) information technology; (iv) information and communication security; and (v) electronic security systems; licensing and sublicensing of software of any nature, among other activities.

The Company's principal offices are located at 1376, Engenheiro Luiz Carlos Berrini Avenue, in the city and state of São Paulo, Brazil. It is a member of the Telefónica Group (“Group“), based in Spain which operates in several countries across Europe and Latin America.

Telefónica S.A. (“Telefónica“), the Group holding company, held a total direct and indirect interest in the Company of 75.29% on June 30, 2024 and December 31, 2023 (Note 23.a).

The Company is registered with the Brazilian Securities Commission (“CVM“) and its shares are traded on the B3. It is also registered with the U.S. Securities and Exchange Commission (“SEC“) and its American Depositary Shares (“ADSs“), backed by its common shares, are traded on the New York Stock Exchange (“NYSE“).

The Company renders the following services: (i) Fixed Switched Telephone Service Concession Arrangement (“STFC“); (ii) Multimedia Communication Service (“SCM“, data communication, including broadband internet); (iii) Personal Mobile Service (“SMP“); and (iv) Conditioned Access Service (“SEAC“ – Pay TV) and (v) Private Limited Service (“SLP“), throughout Brazil, through concessions and authorizations, in addition to other activities.

Service concessions and authorizations are granted by Brazil's Telecommunications Regulatory Agency (“ANATEL“), the agency responsible for the regulation of the Brazilian telecommunications sector under the terms of Law No. 9472 of July 16, 1997 – General Telecommunications Law (“Lei Geral das Telecomunicações“ – LGT).

In accordance with the STFC service concession agreement, every two years, over the life of the agreement's 20-year term ending on December 31, 2025, the Company will pay a fee equivalent to 2% of its prior-year STFC revenue, net of applicable taxes and social contribution taxes (Note 22).

Before Law no. 13.879 / 2019 came into effect, authorizations for the use of radio frequencies were commonly granted for 15 years and could be extended only once, for the same term. Following the normative changes in the aforementioned Law, successive extensions of authorization grants were allowed, though the current terms were only clarified by Decree no. 10.402 / 2020 which detailed the requirements related to the new successive extension regime; the current authorizations are also covered by the new regime.

The Decree defined ANATEL's parameters for evaluating the scope of extension requests, such as ensuring the efficient use of radio frequencies, competitive aspects, meeting the public interest and fulfilling obligations already assumed with ANATEL.

Currently, every two years, following the first extension, the Company is required to pay a charge equivalent to 2% of revenues earned through the SMP provision in the year prior, net of taxes and social contributions (Note 22), and for certain terms, in the 15th year, the Company will pay the equivalent of 2% of its prior-year revenue. The calculation considers the net revenue from Basic and Alternative Service Plans.

In July 2018, ANATEL published Resolution No. 695 with a new public spectrum price regulation. This Resolution established new criteria for the costs of extending licenses. The formula considers factors such as authorization time, revenue earned in the region and amount of spectrum used by the provider. In addition, there is provision for part of the payment to be converted into investment commitments. However, the applicability of the calculation methodology contained in the aforementioned Resolution in specific cases of extension of authorizations depends on an assessment by ANATEL. It is noted that ANATEL has recently been adopting different calculation methods for valuing authorization extensions; in November 2023, ANATEL submitted to public consultation the review of the Spectrum Use Regulation (“RUE”), approved by Resolution No. 671, of November 3, 2016. The draft submitted by ANATEL revokes Resolution No. 695/2018 and directly consolidates in the RUE the rules associated with the valuation of authorizations for the use of the radio frequency spectrum, establishing as a standard methodology for both, the Cash flow method discounted to net present value (“VPL”) .

Further details of the Company's licenses/authorizations are presented in Note 14.b.

c.1) Joint venture with Auren

On December 18, 2023, the Company signed an investment agreement with Auren Energia S.A., through its subsidiary Auren Comercializadora de Energia Ltda. (together, “Auren”), for the creation of a joint venture, in which each shareholder holds a 50% equity interest; Auren provides bespoke renewable energy solutions throughout Brazil (“Operation”).

On January 5, 2024 and February 7, 2024, the Operation was authorized by the General Superintendence of the Administrative Council for Economic Defense (“CADE”) and the European antitrust body, respectively. In view of the approvals, on March 15, 2024, the Operation was closed and the Company and Auren made capital contributions in the amount of R$10,319 each in the joint venture Gud Comercializadora de Energia S.A. (“GUD”) and, on March 11, April 2024, the procedure to obtain the licenses and regulatory authorizations necessary for the development of GUD's business began.

The joint venture leverages the experience of its two key brands: Auren, a point of reference in renewable energy generation and leader in energy sales in Brazil; and the Vivo (Telefônica Brasil's brand), leader in the Brazilian telecommunications market, with over 112 million accesses (as of December 2023), and a market reference for digital platform in technology and connectivity, with a growing presence in the B2C and B2B digital ecosystems. By inserting Auren's generation and commercialization of energy into the Company’s economies of scale structure, with its digital penetration and distribution capacity, GUD intends to position itself in the free energy market in Brazil. This market has been gradually opening and, since January 2024, is accessing business sector customers connected to the high voltage network with demand up to 500kW. The joint venture's potential operating market is estimated at over 72,000 large companies including industrial facilities, offices and commercial establishments; in the future it expects to operate in low voltage and residential businesses upon the opening of the Brazilian electricity market. The Operation reinforces the Company’s positioning, enhancing the experience by increasing the value proposition for its customers, as well as being an example for its commitment to Environmental, Social and Corporate Governance (“ASG”). 

c.2) Constitution of Vivo Pay Holding Financeira Ltda. (“Vivo Pay”)

On February 2, 2024, the Company formed a wholly-owned limited liability company Vivo Pay Holding Financeira Ltda., whose exclusive purpose is to hold equity interests in institutions authorized to operate by the Central Bank of Brazil, as a partner or shareholder. The Company made a capital contribution of R$5,000 to Vivo Pay, through the issuance of 5,000,000 shares with a nominal value of R$1.00 (one Real) each, in favor of the Company.

c.3) Reduction of the Company's share capital

On January 24, 2024, the Company's Extraordinary General Meeting (“AGE”) approved a return of share capital of R$1,500,000, reducing capital from R$63,571,416 to R$62,071,416, without canceling shares; thus, the number of shares and the percentage of shareholder participation in the Company's share capital remain unchanged (“Reduction”).

Upon having met all applicable legal requirements, the Reduction became fully effective and a refund was provided to those shareholders, as held of record, on April 10, 2024, in Brazilian Reais, in the amount of R$0.90766944153 per common share issued by the Company, through a payment made on July 10, 2024 (Note 34.a).

c.4) Investments from the Vivo Ventures Fund (“VV”)

On April 24, 2024, VV made an equity investment of R$24,500 in Conexa Health LLC, the controlling company of Conexa Saúde Serviços Médicos S.A. (“Conexa”). Conexa is the largest independent telemedicine platform in Latin America and a digital health ecosystem, connecting, through technology, patients, professionals, companies and operators, with the aim of democratizing access to quality healthcare. Prior to the acquisition of the equity participation by VV, Conexa had announced a merger with Zenklub, a digital services company for emotional health, still pending approval by competition authorities. This is VV's fourth investment since its creation, in April 2022. The objective of the investment is to reinforce the Company's presence as a digital services hub, in the health and well-being business.

On June 27, 2024, VV committed to acquiring a minority shareholding position of US$5 million in CRMBonus Holding, a company that operates in Brazil through its subsidiaries (“CRMBonus”). CRMBonus is a platform that uses artificial intelligence to maximize company-customer relationships, expanding on the gift-back concept in the Brazilian market. A solution offered by CRMBonus since the beginning of this year, has been the Vale Bonus, a benefit customers who receive digital money when topping-up credits or paying their bills on time, contributing to a higher retention of customers. This will be VV's fifth investment since its creation, in April 2022. The objective of the investment is to reinforce the Company's presence as a digital services hub for innovative solutions.

On December 20, 2023, Constitutional Amendment (“EC”) No. 132 was enacted, which establishes the Tax Reform (“Reform”) on consumption. Complementary Bills 68/2024 and 108/2024 regulating the Reform are being submitted to Congress. This is based on a dual VAT model being a federal set of taxes (Contribution on Goods and Services - CBS) and non-federal (Tax on Goods and Services - IBS), replacing PIS, COFINS, ICMS and ISS taxes.

A Selective Tax (“IS”) under federal jurisdiction was also created, which will apply to the production, extraction, sale or import of goods and services harmful to health and the environment, under the terms of LC; the law expressly states that the IS cannot be applied to telecommunications services. There will be a transition period from 2026 to 2032, when the two tax systems (old and new) will coexist. The impacts of the Reform will only be known once the process of regulating pending issues is finalized by LC.

As the changes will be applied prospectively, the Reform has no effect on the individual and consolidated quarterly information (“ITRs”) for the period ended June 30, 2024.

The individual (Parent Company) and consolidated (Consolidated) quarterly information (“ITRs”) were prepared and are being presented in accordance with Technical Pronouncement CPC 21 - Interim Statements, issued by the Accounting Pronouncements Committee (“CPC”) and with international standards IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (“IASB”), currently called “IFRS accounting standards” (IFRS® Accounting Standards), including interpretations issued by the IFRS Interpretations Committee (IFRIC® Interpretations) or its body predecessor, Standing Interpretations Committee (SIC® Interpretations) and the regulations issued by the CVM applicable to the preparation of ITRs.

Disclosures are limited to all information of significance to the individual and consolidated ITRs, being consistent with that used by management in the performance of its duties.

The individual and consolidated ITRs were prepared considering historical cost as the value basis, unless different criteria require adjustment of assets and liabilities to fair value.

Assets and liabilities are classified as current when it is probable that their realization or settlement will occur within the next 12 months (normal operating cycle). Otherwise, they are classified and demonstrated as non-current. The only exception refers to the balances of deferred tax assets and liabilities, which are all classified as non-current.

The Cash Flow Statements were prepared in accordance with IAS 7 / CPC 03 and reflect the changes in cash that occurred in the periods presented, using the indirect method.

The accounting standards adopted in Brazil require the presentation of the Statement of Added Value (“DVA”), individual and consolidated, in accordance with technical pronouncement CPC 09. As the IASB does not require such presentation they are being presented as supplementary information for the purposes of IFRS.

The ITRs present: (i) the balance sheets as at June 30, 2024 and December 31, 2023; (ii) the statements of income and comprehensive income for the three and six-month periods ended on June 30, 2024 and 2023; and (iii) the statements of value added, changes in equity and cash flows, for the six-month periods ended on June 30, 2024 and 2023.

The Company's ITRs were approved by the Board of Directors, at a meeting held on July 24, 2024.

Individual and consolidated ITRs are presented in thousands of Brazilian Reais (unless otherwise mentioned). The Company's functional and presentation currency is the Real/ Reais (R$).

Transactions in foreign currency are converted into the Real as follows: (i) assets, liabilities and equity (except share capital and capital reserves) are converted at the closing exchange rate on the balance sheet date; (ii) revenues and expenses are converted at the average exchange rate, except for specific operations converted at the rate on the date of the transaction; and (iii) share capital and capital reserves are converted at the rate on the date of the transaction.

Gains and losses resulting from the translation of investments abroad are recognized in the statement of comprehensive income. Gains and losses resulting from the translation of monetary assets and liabilities between the exchange rate in force on the date of the transaction and the end of the years (except the conversion of investments abroad) are recognized in the statement of income.

Equity interests in controlled or jointly controlled companies are valued using the equity method in the individual quarterly information. In the consolidated quarterly information, upon consolidation, the investment and all balances of assets and liabilities, income and expenses arising from transactions and equity interest in subsidiaries are eliminated in full. Investments in jointly controlled companies are maintained under the equity method in the consolidated quarterly information.

The information relating to direct and jointly controlled subsidiaries is the same as in Note 12 - Investments, disclosed in the financial statements for the year ended December 31, 2023 except for the: (i) formation of the joint venture with Auren (Note 1.c.1) and; (ii) incorporation of Vivo Pay (Note 1.c.2).

Other significant information about the investees is presented in Note 12.

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated on a regular basis by the chief operating decision maker in determining how to allocate resources to an individual segment and in evaluating the segment's performance. This is consistent with: (i) all decisions made by administrators and managers are made based on consolidated reports; (ii) the mission of the Company and its subsidiaries is to provide its customers with quality telecommunications services; and (iii) all decisions relating to strategic, financial planning, purchasing, investments and application of resources are made on a consolidated basis. Accordingly, Management's conclusion is that the Company and its subsidiaries operate in a single operational segment providing services telecommunications.

The information in the explanatory notes that did not suffer significant changes compared to December 31, 2023 have not been repeated in these ITRs..

The accounting policies adopted in the preparation of the Company's ITRs for the quarter ended June 30, 2024 are consistent with those used in the preparation of the consolidated financial statements for the year ended December 31, 2023, and should be analyzed in conjunction with those financial statements.

The Company has not early adopted any statement or interpretation, when the application is not mandatory.

The preparation of individual and consolidated ITRs requires the use of certain critical accounting estimates and the exercise of judgment by the Company's Management in applying its accounting policies. These estimates are based on experience, best knowledge, information available at the year-end date and other factors, including expectations of future events that are believed to be reasonable in the circumstances. Final settlement of transactions involving these estimates may result in values ​​that differ from those recorded in the ITRs due to the inherent nature of the estimation process. The Company reviews its estimates at least annually.

The significant and relevant estimates and judgments applied by the Company in the preparation of these ITRs have not changed in relation to those presented in the following explanatory notes to the financial statements for the fiscal year ended December 31, 2023: accounts receivable; income tax and social contribution; property, plant and equipment; intangibles; provisions and contingencies; loans and financing, debentures, leases and other creditors; pension plans and other post-employment benefits; and financial instruments and capital and risk management.

.

The consolidated balances of contractual assets with customers were R$108,883 and R$93,106 on June 30, 2024 and December 31, 2023, respectively.

Consolidated balances of non-current trade accounts receivable include:

On June 30, 2024, and December 31, 2023, no customer represented more than 10% of trade accounts receivable, net.

Amounts receivable, net of the allowance for expected losses, classified by maturity, are as below:

The changes in the allowance for expected losses were:

The June 30, 2024 and December 31, 2023 balances include R$228,208 and R$198,205, respectively, consistent with IFRIC 23 (Note 8.e).