NOS SGPS SA

ELI:NOS

Earnings Call Transcript

[Maria João Hewitt Carrapato Moura Landau, Head of the Investor Relations Department]

Hi, good afternoon. Welcome to our Third Quarter 2020 Conference Call. As usual, we have the full executive committee on the call, not in the same room, obviously, but we're all on the same call. And we'll go through a brief presentation on the results, and then the team will be available for Q&A. [indiscernible]

[Jose Pedro Faria Pereira da Costa, CFO, VP & Executive Director]

Okay. Good morning, everyone. We will start with Slide 2 of the presentation with the key highlights of the quarter. So in this third quarter, we have seen some strong underlying Telco performance, showing the business resilience through the pandemic context. We will see that operational performance in the Telco unit was quite solid.NOS operates in one of the most competitive and technologically developed market in Europe, and we would like to illustrate in the second chapter of this presentation some relevant data points to support this statement. Also, we continue to differentiate from our main competitors through innovative products and services in both the Consumer and B2B segments. And finally, we have a strong financial recovery quarter-on-quarter with the Telco unit recovering strongly from the hardly hit second quarter. Also EBITDA came almost flat in this Telco unit due to a strong level of cost control and efficiency. And also, finally, our already strong balance sheet was further reinforced by the sale of NOS Towering at the end of the quarter, allowing us ample financial flexibility.So moving now to Slide 4 of the presentation. And starting with the operating review. As referred and despite the context, we have a very solid operational performance. We managed to post total RGU net adds of 125,000 in this last quarter. In fact, this represented our best quarter in the last 5 years. Commercial activity in the quarter recovered strongly to pre-COVID levels. We have posted solid Pay TV net adds of close to 9,000, continuing to benefit from the fixed network expansion, relatively low churn levels and stable DTH numbers.We also had fixed broadband net adds of 12,000, similar levels to -- of last quarters. And finally, on the mobile front, we have posted a very positive 102,000 net adds number as a result of also very positive contribution from postpaid being driven by convergence and integrated offers. And also positive seasonal performance of prepaid still considerably higher than third quarter last year due to -- as referred to strong recovery in terms of commercial activity post the lockdown in the second quarter.On Slide 5, we have continued our FttH network expansion with a bit over 100,000 new greenfield homes passed. This continues to be the key driver of our fixed Pay TV growth. Also churn levels in the quarter recovered to more normal levels as a result of the higher commercial activity in the market. Although up from previous quarter due to the lockdown period from mid-March to end of May, churn levels continue at relatively moderate level.On Slide 6, we continue to grow in a nice way our convergent and integrated subscriber base. We have reached 967,000 subscribers, representing 61.3% of the fixed base, having added around 10,000 subs in the quarter. It's important to highlight that stand-alone mobile cards not sold within convergent or integrated packages represent for us less than 40% of total mobile subscribers. We estimate that for the overall market, the numbers shouldn't be that different. And for us, Telco revenues generated by the stand-alone personal mobile segment just represents less than 10% of total Telco revenues.As already referred, NOS operates in one of the most competitive and technologically advanced markets in Europe. We would like to share with you at this stage some relevant data points. And starting with Slide 8, first, Portugal leads in terms of penetration of NGN Fixed and Mobile services. On the mobile front, Portugal has 170% penetration, the fourth largest penetration way above the European average of 137%. In terms of penetration of higher than 100 megabits fixed broadband services, Portugal has the second highest penetration only after Sweden, 56% penetration, also significantly above the European average of 26%.On Slide 9, and Portugal is at the forefront of next-generation network coverage in Europe. In fact, Portugal leads in terms of coverage of fixed gigabit networks as a percentage of total households with 87% of households having today this type of broadband speeds available, again, significantly above the European average of just 30%. On the mobile front, Portugal has 99.8% mobile voice coverage and 96% 4G population coverage, well in line with the European average.On Slide 8, prices for -- on Slide 10, sorry, prices for telco services in Portugal are among the lowest in Europe. Prices for 4P bundles adjusted for PPP are the second lowest in Europe with around EUR 60 per month, only after France, and 20% below average European prices. And prices for 100 megabit fixed broadband are also the second lowest in Europe with a bit over EUR 20 per month versus average of EUR 26 in Europe.Now moving to Slide 12. Our continuous launch of innovative services is driving our differentiation in the consumer market. Taking advantage of our current context in which our customers value quite significantly a good and reliable broadband connection, we have been focusing our advertising campaigns on our more advanced broadband solutions, including our recently launched Giga router. To cope with the increasing needs of bandwidth and connectivity, we were the first operator in Portugal to launch the new Power Wi-Fi by Plume, a simple and quick self-install solution designed to ensure maximum broadband coverage within the household.Thanks to this technology based on cloud and artificial intelligence, the Wi-Fi signal can be extended to all rooms in the home, whatever the size or configuration, enabling multiple simultaneous connections without interruption. Prices vary according to lay out requirements, ranging from EUR 3 per month for 2 extenders to EUR 6 per month for larger homes requiring up to 4 extenders.Our more advanced TV services continue to gain market recognition with our UMA boxes being voted the TV Product of the Year for the third year running. At the same time, we got, again, this recognition, we continue innovating on the TV front. In July, we launched the Apple TV 4K box, integrating all the features and content of our NOS UMA interface, combining the best TV offer with the leading international brand in innovation and usability for an additional EUR 5 per month.And finally, we launched a new range of IoT tariffs in September, becoming the first to offer narrowband IoT for the consumer market with tariffs designed to connect intelligent appliances ready for future connection with the 5G network. The offer launched in September is designed primarily for using tracking and security-based services. Prices differ starting at EUR 3 per month for residential alarms and tracking devices and increasing to EUR 4.5 per month for smart watches.On Slide 13, on the B2B front, our focus during this challenging period has been on partnership with our business customers, helping customers to adapt for new ways of working. Our B2B customers need to adapt to new demands of remote working models and changes in customer habits. We aim to be a key enabler to support these companies in their own digital transformation process, and we have been focusing our offers, in particular, on cloud-based solutions and managed services.Along these lines, we reinforced our managed service portfolio, which is gaining momentum with offers providing unified communications, video conference as a service, security operations center and infrastructure as a service. Also, security systems management with particular focus on cybersecurity has been a key priority together with service dematerialization and contactless solutions.In the low end B2B segment, we are already seeing very encouraging results from the launch of our first block of non-telco digital offers, including Microsoft 365, digital menu targeting the restaurant segment and digital contact center, amongst others. Data and IT service revenues as a percentage of B2B customer revenues have been growing steadily quarter-after-quarter, now representing 6.5%.On the next slide, and to support our offers in these areas, we have secured strategic partnerships with major hyper-cloud platforms to provide hybrid and multi-cloud solutions. The idea is to position NOS as the preferred specialist partner for hybrid cloud solutions, allowing access to major public cloud providers like Google, Azure and AWS, but also providing access to private cloud solutions supporting the design of sophisticated hybrid architectures, high bandwidth direct connections framed in a high logical and physical security solution, therefore, allowing for end-to-end services capable to respond to our B2B customer needs.On Slide 15, and on the network front, the focus has been on upgrading the networks. Our FttH rollout increased pace in this quarter, reaching a total close to 4.8 million households coverage, with FttH representing a bit over 1.8 million homes passed. That is around 38% of total coverage, around 100,000 FttH households added in the quarter. This rollout continues to be developed under the current FttH sharing agreement with around 1.2 million households being exchanged. Since the start of the project in 2018, we are more or less halfway through this project.With our customers turning to remote working and learning, we continue to see high levels of traffic in our networks, fixed data traffic increasing around 15% versus pre-COVID, mobile data traffic increasing 25%. Our strong investment in best-in-class networks provide outstanding resilience in these increased traffic demands.On the next slide, and at the end of this last quarter, we have successfully completed the tower deal and long-term agreement with Cellnex, allowing for significant value creation and further reinforcement of the capital structure. The deal includes total cash proceeds up to EUR 550 million until 2026, with the sale of NOS Towering with around 2,000 sites being finalized at the end of last quarter, representing a cash-in of around EUR 375 million. We have started the execution of the MLA agreement with our new tower partner at that time as well. This transaction allows for ample financial flexibility to address future investment projects with the deal being closed with multiples in high end of range for comparable transactions and significantly above our own trading multiples.In the next slide, 17, as you may have seen already in October, we have announced the conclusion of the strategic mobile network sharing agreement with Vodafone which was announced back in February. This agreement will allow a more efficient deployment and operation of all technologies, current and future, more environmentally and socially responsible investments and increased coverage and network quality with significant synergies in both passive and active network elements.To be a bit more concrete, the agreement divides the Portuguese territory in 2 areas. On one hand, the so-called high-density areas where each company will operate independent radio access networks, but installed on shared sites either owned or leased, with independent transmission. On the other hand, we have the low-density areas where there will be only 1 single RAN, also on shared sites. Of course, the end result of this agreement for both partners will be a considerably higher coverage network with significantly less CapEx and annual OpEx to maintain, then it would be the case for the companies to build these higher coverage networks by themselves independently. So overall, very positive agreement for our customers and also for the economy and digital society as a whole.On Slide 18, on the Cinema unit, we have the most negative impact of the current pandemic situation. On the positive side, we have reopened the cinemas in the beginning of July with reinforced health and safety and social distancing measures, allowing for a maximum occupation of 50% of our theaters. The only blockbuster movie launched in the quarter, which was Tenet, at the end of August, achieved very positive results, meaning that if there are popular movies released and with the current safety measures in place, cinema customers will return.On the negative side, the studios have been postponing release dates for 2021 or releasing movies through their direct-to-consumer platforms, which means in practical terms that we have the cinemas open, but without the most popular contact to attract the audiences. With the postponement of movies like Bond and Fast 9 to 2021, the outlook we have for this last quarter and the Christmas season is quite poor. So it shouldn't drive very different attendance numbers when compared to this last third quarter. Of course, within this context, the Cinema team's priority has been to adjust costs in a scenario of revenues declining around 80%, and we will illustrate some of the initiatives later in the presentation.Before we move to the financial review on Slide 19, we would like to share with you some very positive news around our recent ESG rating from Vigeo, in which we had -- we have improved our results from a score of 40, meaning limited to robust in 2018, to a score of 60, meaning the highest advanced rating, positioning us already as a reference within the telco sector. We rank today as the fifth telco operator within 41 total telco companies in terms of ESG rating, covering areas like environment, human rights, community involvement and corporate governance, which compares against the rating in 2018 of 10th within 24 telco companies.Now moving to the financial review on Slide 21. We show in this quarter a very positive sequential recovery in the Telco unit with a 1.4% year-on-year revenue decline versus minus 7.8% in the second quarter, more affected by the pandemic. As you can recall, most of the negative impact in the second quarter came from premium sports channels, which have now been fully normalized with the restart of the major sports competitions.As we will see in the next slide, most of the headwinds are coming from roaming revenue line. If we were to adjust for these, Telco revenues would actually be growing 0.3%. Consolidated revenues were, of course, very much impacted by the Cinema and our new businesses decline of 67%.On the next slide, Telco revenue evolution adjusting for Roaming was a positive 0.3%, which shows well the resilience of our Telco unit. Roaming remains today the major source of pressure in terms of the pandemic context, other areas more significantly affected in the second quarter being now relatively normalized. We continue having some smaller magnitude areas of pressure, like more discretionary revenues like mobile data traffic and VoD, but nothing to do with the magnitude of what we have in the previous quarter.On Roaming, we have the impact of the significant decrease in international travel. Roaming revenues decreasing in the quarter close to 50%. The overall weight of Roaming in full year 2019 was about 2.4% of total Telco revenues with some strong seasonal variations, the third quarter being the strongest quarter Roaming, representing a bit over 3%, and the fourth quarter being the least relevant with Roaming representing a bit less than 2%.Roaming impacts in a more material way the B2B segment than the Consumer segment. And adjusting for Roaming, the Consumer segment posted year-on-year revenue increase of 0.5%, impacted positively by the premium sports recovery and also by the very positive trends in convergence, integrated bundles and personal mobile. Business segment had revenue increase of almost 2%, benefiting from good contribution across all segments from low-end SMEs to large corporates, namely IT and security. And finally, the Wholesale and other segment declined 6.8%. Major impact came from lower-margin areas like advertising revenues.On Slide 23, EBITDA in this quarter declined 7% at the group level. Impacted more severely by the Cinema and Audio businesses, EBITDA declining 67%. Telco EBITDA declined only 1% versus a 3.5% revenue decline in the second quarter, benefiting from a very strict management, in particular, in nondirect costs with a reduction of EUR 9 million, namely marketing and advertising but also several general and administrative costs.On Slide 24, Cinema EBITDA is, of course, impacted by the strong reduction, around 80% in revenue. Still, a lot has been done in terms of cost-saving initiatives. Cinema OpEx has contracted almost 70% in this quarter. Close to 50% of total Cinema OpEx is variable, movie royalties and cost of goods sold for bar products. In this case, there was an automatic adjustment due to the lower level of activity, but also fixed costs have contracted significantly, namely the most relevant rents through rental contracts renegotiated and wages and salaries through nonrenewal of temporary staff contracts. Fixed costs overall have decreased in the quarter close to 50%.On Slide 25, with EBITDA decrease of EUR 12 million, net income in the quarter just decreased EUR 3.8 million or around 8%, due basically to a positive impact at the tax level with the reduction of earnings before tax and an increase in tax incentives, also a reduction in other expenses and financial costs.On Slide 26, total group CapEx in the quarter, excluding leasing contracts, reached EUR 98 million, an increase of around EUR 6 million versus last year, reflecting an increase in technical Telco CapEx of around EUR 4 million, reaching EUR 52 million in the quarter, reflecting namely, strong recovery of our FttH expansion projects that had a slowdown in the second quarter. We also had an increase of customer-related CapEx reaching EUR 40 million due to a strong recovery of commercial activity versus the pandemic effective first half of this year, as shown in the RGU net adds we have posted this quarter. There was also some impact from the upgrade to last generation CPEs on the broadband and TV areas, driving some additional revenue uplift and potentially lower churn.On Slide 27, under the current challenging context, free cash flow generation continues to be at very healthy levels. EBITDA minus CapEx reached EUR 64 million. Operational free cash flow after lease payments and working capital variation reaching a robust EUR 51 million, which then converted into free cash flow after interest and taxes generated in the quarter, reaching EUR 382 million, of course, largely influenced by the NOS Towering sale represented a net cash inflow of EUR 354 million. This quarter, free cash flow level was negatively impacted by an unusually high level of cash taxes of EUR 17 million. This will also be the case in this last quarter. We expect to compensate this high level of cash taxes with a considerably lower level in 2021. So on average, between this year and next year, we should have our normal cash tax rate.And finally, on the capital structure. Net financial debt decreased in the quarter to around EUR 770 million, reflecting the contribution of free cash flow, strongly impacted by the sale of NOS Towering but also the payment of dividends, which took place in this last quarter. This net financial debt number represents 1.4x the EBITDA level adjusted for lease payments, which is well below our stated target of close to 2x. Average cost of debt decreased slightly in the quarter to 1.2%, remaining at very attractive levels. And cash and unused credit lines reached EUR 600 million at the end of the quarter. Our 1.4x leverage and high level of liquidity provides us with a lot of flexibility to address the investments in our core infrastructure projects that we have ahead of us, allow us to continue remunerating shareholders in an attractive way while keeping a robust investment-grade credit profile.And with this, we conclude today's presentation, and the team is now ready to start the Q&A session.

[Operator]

[Operator Instructions] And your first question comes from Michael Bishop from Goldman Sachs.

[Michael Bishop, Equity Analyst]

I'd just like to kick off on the spectrum auction rules. It's pretty clear, I think, from your comments today, in both in the press and on the call already that you still largely disagree with the new rules, in particular, the support for a potential [ fourth mention ]. But I was just wondering what are your logical steps from here given they are trying to push ahead with the auction in early 2021.And my second question is just on CapEx and the network sharing deal with Vodafone. I was wondering whether you could give us any insight into the annualized savings there, both perhaps OpEx and CapEx as we ramp up and need to deliver the synergies. And then the third part of the question is, with a view to next year, what are you thinking in terms of the potential levels of CapEx for the group?

[Miguel Nuno Santos Almeida, CEO & Vice]

Miguel Almeida here. In what concerns the auction rules, well, we believe these rules. Well, first of all, we -- clearly, it's something that is unprecedented. It goes against the law, both national law and European law in the sense that it discriminates between players in an outrageously way. New entrants have privileges never seen with no relevant coverage obligations. And on top of that, they have immediate access to the current networks years before they even have to set up a single base station. So it's clear that the national regulator is exclusively catering to a very concrete economic interest. And obviously, we will contest these rules in the national courts and also in Brussels.

[Jose Pedro Faria Pereira da Costa, CFO, VP & Executive Director]

Well, regarding CapEx guidance for next year, it's not yet possible to provide clear CapEx guidance given the uncertainty that still is surrounding the 5G auction process. What we can say is that, taking 5G apart, we expect to have a level of technical and commercial CapEx relatively in line with current levels, reflecting basically the current infrastructure projects around deployment of FttH nationwide through our own deployment and also in the context of the fiber sharing agreement with Vodafone. In what relates commercial CapEx, always dependent in terms of overall commercial activity. But in principle, it shouldn't be also that different. Also taking in context that we continue upgrading our customers with the next-generation CPEs, but shouldn't be that different from current levels as well.In what regards the mobile sharing agreement with Vodafone, we believe the sharing of both passive and active network elements provide significant savings. These savings are more in the future. They relate more to future OpEx and CapEx that we basically have less in the future. So less OpEx and CapEx avoidance in the future and less synergies from current operations. So it will, for sure, impact both partners when it comes to upgrade their networks, in terms of doing it in a more efficient way with less CapEx going forward and also less operating costs to maintain the networks.

[Michael Bishop, Equity Analyst]

Sorry, just to pick up on sort of, I guess, potential legal action against the auction rules. Can you essentially initiate that straight away? And do you have a sense whether there is legal action that would halt the auction in any way?

[Miguel Nuno Santos Almeida, CEO & Vice]

Yes, we will move straight away. Again, both in the national courts where we already filed one complaint, and we are filing a second complaint, but also in Brussels, because of the state aid. And so yes, we will move straight away on that front.

[Operator]

And your next question comes from the line of Mathieu Robilliard from Barclays.

[Mathieu Robilliard, Research Analyst]

First, I had a question with regard to the Telco revenue and margins in Q3. So clearly, an improvement in the Telco revenue trend, also an improvement in the EBITDA, but a bit less than what we saw on the revenue. So I was wondering if that's essentially due to the fact that you lost high-margin roaming revenues or maybe some of the revenue inflection in telcos was due to revenue lines with low margins. So if you can get any color on that.If I can come back to the 5G spectrum auction, with regard to the complaints you are filing and going to file, does that prevent, in your view, the auction from taking place or the 2 processes are independent and can run in parallel?

[Miguel Nuno Santos Almeida, CEO & Vice]

Well, we'll try to stop the process before it happens. But it's unclear, the probability of success of doing it in time. But the idea, yes, is to stop this process to make sure that we get a set of rules that makes some kind of sense. And again, we are very favorable to new entrants. That's not the point. We don't even challenge or would challenge spectrum reservation for new entrants. Again, we are pretty much in favor of new entrants. But the fact, the combination of not having relevant coverage obligation at the same time that the new entrant will have -- the new entrants will have access to the current networks.Look, they just have to build the first base station in 3 years' time. And until then, they are using the networks that were built by the current operators over the last 20 to 30 years. We don't believe this is fair. We don't believe this is acceptable. That's what we're challenging. But I cannot assure you that we will be successful in time to stop this process.

[Jose Pedro Faria Pereira da Costa, CFO, VP & Executive Director]

In what regards, to your question, Mathieu, in what regards Telco revenues, there hasn't been any relevant change of mix in terms of the services we sell. Of course, that roaming is a good margin business. So of course, this has impacted the EBITDA line. And to a certain extent, the third quarter is the strongest impacted quarter. So it's the one in which we concentrate the largest proportion of roaming revenues throughout the year.I mentioned in the presentation that the fourth quarter being the least impacted one. So we are expecting this fourth quarter to be less negatively affected by the current trends we see around roaming as well.

[Mathieu Robilliard, Research Analyst]

If I can follow up. I probably do not I understand correctly the new guidelines from ANACOM. But I thought that the new entrant would now have obligations to cover 25% to 50% of the population over maybe 5 years. But from what you're suggesting, that can be done by roaming at the moment? Or can you clarify?

[Miguel Nuno Santos Almeida, CEO & Vice]

Well, I'll try. Yes, the new entrant will have to cover 25% of the population at the first milestone that will be just in 3 years' time. And then 50% at the second milestone that would be checked on the sixth -- at the end of the sixth year. So they don't have to do anything until -- after 36 months. And just to give you an idea of what this means, when we entered the market, we were the third operator into the market many years after the other. We were obliged to cover 99% of the population in 4 years. And we didn't have any roaming, and they didn't have any access to other people's networks, and here we are. So this is absolutely unacceptable, this level of favor that the regulator is giving to you know who.And I don't think -- and the point is that since the first day, the new entrants will have access to our networks, and they just have to switch on the first base station in 3 years' time. So yes, there is that coverage obligation, but we believe that's not really relevant.

[Mathieu Robilliard, Research Analyst]

Okay. So that's very clear. So it means that in 3 years' time, you don't have to cover 25%. It's -- you have to start covering after 3 years. And after 6 years, you have to start going to 50%.

[Miguel Nuno Santos Almeida, CEO & Vice]

No, you have to reach 25% at this milestone after 3 years. So in 2024, beginning of 2024, the new entrants in January or March or whatever, 2024, will have to cover 24 -- 25% of the population.

[Operator]

And your next question comes from Jerry Dellis from Jefferies.

[Jeremy A. Dellis, MD & Senior Telecommunications Analyst]

Just to pursue the 5G auction topic. If your legal action were unsuccessful in preventing, in halting the auction, would you participate nonetheless? My second question is, what discussions have you managed to hold with the government related to the auction terms since February? And should we conclude perhaps that those were not very useful? And why might that be?And then the third question is, in the B2B segment, as we're in a sort of second lockdown situation, are you finding any sort of changes in behavior among your B2B customers in terms of higher price sensitivity or perhaps those customers preparing for redundancies? Is there anything to call out there, please?

[Miguel Nuno Santos Almeida, CEO & Vice]

Well, I'd rather not answer directly to your question about our participation in the auction. What I would say is that we have a long-term perspective. We have a consistent strategy to build a strong and sustainable position for the company, a position that will allow us to continue to deliver superior value to all the relevant stakeholders, namely our clients, present and future, and our shareholders, obviously and our employees, our business partners and society as a whole.So we are committed for the long term in this market. In what concerns government interactions, well, yes, we made our views known to the government. But I think what -- at the end of the day, what counts is the end result, and it's clear that the government did not take an interest in this subject.

[Jeremy A. Dellis, MD & Senior Telecommunications Analyst]

And related to the B2B question, please?

[Manuel António Neto Portugal Ramalho Eanes, Executive Director]

Sure. Manuel Eanes here. I have 3 notes. One is that despite the context, we've managed to post healthy revenue trends, ex-COVID, in all 3 segments of the market with good commercial momentum, especially in the corporate and mid-market segments where we were less commercially affected. We were more commercially affected in the SMEs that are suffering, I believe, more during these signs. Second note that I would like to stress is, of course, that this environment poses a lot of pressure in all segments of the market, but more relevant in the small companies. And of course, we are seeing not only requests for help, if you want, but also some real pressure coming from lower activity throughout the business segment.The third note is that despite this fact that we've managed to still post ex-COVID very healthy revenue trends. And that there is an underlying opportunity which is very relevant, which has this moment in this context has forced, if you want, allowed for a much faster digitalization movement throughout the business segment. And a lot of opportunities are coming from this movement, both in digital workplace and security and go to cloud, even in concentration of contracts and managed services. And I believe that we're in a very good position to take advantage of that movement since that we are very ready to help our customers in doing this digital -- accelerated digital transition.

[Operator]

And your next question comes from Roshan Ranjit from Deutsche Bank.

[Roshan Vijay Ranjit, Research Analyst]

Two quick ones for me, please. We saw good trend in your subscription revenues and good to see the return of Pay TV subs. I know typically around Q3, there is an element of churn during the summer. Is it fair to say that most of, if not all, maybe all of your customers who were taking a sport package are on the base -- or back on the base? Or could we expect more customers to come through during Q4 and support that premium TV revenue stream?And secondly, just on the network expansion, the fixed network expansion. And again, I appreciate it is fairly lumpy from quarter-to-quarter. But we did see a material pickup in the rollout this quarter. Is this just a function of the ramp-up of the JV with Vodafone or is there anything else going on there?

[Jose Pedro Faria Pereira da Costa, CFO, VP & Executive Director]

Okay. Starting with the network expansion. Basically, during this quarter, we managed to do what was planned to do in the third quarter and also to recover a bit what we didn't do in the second quarter. There was clearly a slowdown in the second quarter. So clearly, there was some element of recovery versus what we have done in the last quarter. And in terms of overall progress of the JV, we mentioned in the presentation, we have now traded, between us and Vodafone, around 1.2 million households. In total, we should trade between ourselves 2.6 million households. That's to be accomplished until end of 2022. So there's still a bit more to go, and I would say that there's going to be a bit of acceleration of pace in the next couple of years because we are now a bit less than 50% down the road in terms of the overall project.In terms of the premium sports, you're true that there is always the end of football season related churn. This year, it was a relatively abnormal year because the competitions almost didn't stop. So we have a couple of months or actually 2.5 months without billing services because of the full interruption of sports competition that was between mid-March until end of May. And actually, we didn't have the usual churn at the end of the football season because the football, for instance, the Portuguese National League ended end of July and restarted mid-September. So there was actually no time for customers to disconnect. So in that sense, it was a bit more positive and helped us to recover what we have lost in the -- during the couple of months or the 2.5 months that we didn't deal customers.

[Roshan Vijay Ranjit, Research Analyst]

Great. That's helpful. And if I could just quickly follow-up, sticking with the football theme. Could you remind us where we are with the process of potentially getting a refund on the rights paid for the, I guess, season 2019 to 2020? I think as part of the content JV, there was a process to try and came back on from the league, if I'm right. Can you just tell us what we are there, please?

[Jose Pedro Faria Pereira da Costa, CFO, VP & Executive Director]

Basically, in what concerns the most relevant content and the most relevant rights, which are the Portuguese Football League, the league actually ended last season. So it ended later than usual, but it ended. So all the matches were broadcasted. So there's no refund to get from the football clubs because the matches were played. The only thing is they were played between June and July instead of being played between mid-March and May. But there was no actual -- there was an interruption and then the competition resumed and ended in a completely normal way. And that's actually what we are seeing right now.So the new season started a bit later than usual, so it started in mid-September instead of mid-August. But all the matches have been played, so no match has been suspended or interrupted. So on that front, we believe that there are no basis to get any refunds on these football rights costs.

[Operator]

And our next question comes from Luigi Minerva from HSBC.

[Luigi Minerva, Senior Analyst]

The first one is on the tower's disposal. And I'm just wondering if strategically, you think that having now an independent tower company in Portugal will actually help the new entrant with their own network deployment, given they will have easier access to sites when they have to deploy. And then second question is about what sort of help/opportunity is there from the government in this macro context? So I was wondering if you can maybe help us with the kind of protection or incentives that the government has put in place to help small and medium enterprises in the context of your B2B business.And then lastly, whether some of the funds from the European Union for the recovery fund can help with your fiber upgrades in the HFC areas.

[Jose Pedro Faria Pereira da Costa, CFO, VP & Executive Director]

Well, I'll start with the tower's disposal. Let me just recall, Luigi, that there was already an independent company. Cellnex already owned towers sold by one of our competitors. So from that standpoint, our decision didn't change in any way the likelihood of a scenario like the one you mentioned, because there was already an independent company in the market.In terms of the government initiatives, basically, we have the typical type of layoff mechanisms that in the U.K., you name the furlough system. This has been helping some companies throughout, most notably throughout the lockdown period in terms of support of the wages and salaries bill of some of the companies, the companies that have been more hardly hit. Today, there's no support anymore. So unless we enter into a new stage driven by the pandemic context in which we have, again, a forced lockdown, which is not the case in Portugal. So there has been some more restrictions in terms of measures, but we are not now in a situation in which we have a similar lockdown to the one we had in the beginning of the year. So there shouldn't be any new initiatives.In terms of the EC Recovery Funds, we are, at this stage, have -- we are, at this stage, analyzing what type of opportunities may rise for us. But this is still -- we are still in a relatively preliminary stage. So there are no rules yet defined. So we don't expect any more clarification until probably the end of the first quarter of next year. So we might have some opportunities, which we are -- which we would like to address. But at this stage, we think that this is -- we are still in a relatively early stage to give you any concrete idea of specific opportunities.

[Operator]

And your next question comes from Fernando Coredo (sic) [ Fernando Cordero ] from Santander.

[Fernando Cordero Barreira, Equity Analyst]

The first question is, I'm sorry for that, again, on the 5G auction. And I would like to understand at which stand the potential national roaming service to which the new entrant could be having access to is having regulated or is already regulated. In other words, I would like to understand if there is any kind of price regulation in this national -- potential national roaming agreements. And what could be the rationale of this pricing regulation?And the second question is around the tower deal with Cellnex. I just would like to understand how many towers are you retaining. And why are you retaining some amount of towers after selling 2,000 to Cellnex? And the final question is on the performance of your new digital native brand. And I would like to understand at which stand and how is the performance. How is the reception of the offer from the market? And at the end, what is the impact in Europe for evolution from this new brand?

[Miguel Nuno Santos Almeida, CEO & Vice]

Well, on the -- going back to the 5G auction. There is no preestablished price on the national roaming. That is something that will be defined in the future. But let me just add one comment, not addressing directly your question, but one comment I didn't make in previous answers. I would like to stress that from a competitive point of view, NOS is the player in this market that is better positioned to address any challenge coming from a potential new entrant. Our position in mobile is less relevant than it is for our competitors, both competitors.So I would just like to remind everyone that to be clearly and significantly less -- will be less impacted by any challenge from a new entrant, which we don't believe will be very, very significant in this market given the levels of penetration and, more importantly, the low prices already that we have in this market, which is a market context quite different from other similar scenarios that you can analyze throughout Europe. Just would like to stress this.

[Jose Pedro Faria Pereira da Costa, CFO, VP & Executive Director]

Well, relating to the tower sale. Basically, we have retained some sites. Because when the deal was signed with Cellnex, we didn't have a complete clear picture around the mobile network partnership with Vodafone. So we wanted to keep a number of sites for ourselves. And the remaining sites we have kept, part of them are already contractualized with Cellnex as the second part of the transaction to take place, I'd say, beginning of 2022.And also post this mobile sharing agreement with Vodafone, most of the remaining sites will actually be decommissioned because those relate to sites that will be in what we call the less dense areas or the gray zone in which there will be a single RAN, with 1 single radio access network, and it supported in the same passive infrastructure. So we'll have a lot of sites that will be decommissioned. So that would have no value in this context.

[Miguel Nuno Santos Almeida, CEO & Vice]

On what concerns the digital offer that we have launched, we're very happy with it. Main objective for this first stage was and the need to make sure that we have all the processes, and we have the customer experience in line with our ambition. And we're very happy with the results. So we will be -- we are preparing ourselves to scale up the offer in the near future. But the first devaluation is very positive in the sense that we've managed to launch a truly digital offer in the sense that the customer experience that we are providing is very, very positively evaluated by our customers.

[Fernando Cordero Barreira, Equity Analyst]

Okay. Just a follow-up on the tower side. Jose Pedro, can you quantify us how many towers are you thinking to or planning to decommission as part of the Vodafone agreement?

[Jose Pedro Faria Pereira da Costa, CFO, VP & Executive Director]

Well, I'm not in a position to give out this number at this stage. So what we know is that in the context of the Cellnex deal, we have contractualized to sell some additional 400,000 sites. Some of them are sites that we already have and some others are sites that will be build along the way. So...

[Maria João Hewitt Carrapato Moura Landau, Head of the Investor Relations Department]

Okay. So thank you very much for all your questions and your attention today. As usual, we're available to answer if you want to get -- to reach out to us. Have a great afternoon and weekend. Bye.