Telecom Argentina S.A. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Performance: EBITDA margin for the first half of 2024 was 29.7%. Revenues totaled almost $1.83 billion. EBITDA amounted to $543 million, with a margin increase of 1.3 percentage points year-over-year.
• CapEx: CapEx was approximately $246 million (13% of revenues), focused on expanding fixed and mobile access networks, including FTTH and 5G.
• FX Impact: Net income profit of ARS 859 billion due to real exchange differences gains from debt in U.S. dollars.
• Liability Management: Successfully issued $500 million notes due 2031, conducted tender and exchange offers for 2025 and 2026 notes, improving maturity profile.
• Fintech Growth: Personal Pay has almost 3 million clients, with significant growth in payment volume and funds invested in mutual funds.

Segment Performance

• Mobile: Telecom Argentina's mobile subscribers in Argentina totaled 21.2 million, increasing over 578,000 year-over-year. Mobile revenues account for 40% of total revenues.
• Broadband and Pay TV: Broadband and pay TV clients totaled 4.1 million and 3.3 million respectively. Broadband and pay TV together make up almost 40% of revenues. FTTH accesses in broadband are growing rapidly.
• Fixed Telephony: Fixed voice subscribers, including IP telephony lines, amounted to 2.8 million. There is a reduction in traditional fixed copper network accesses.
• Regional Operations: In Paraguay, mobile customers are 2.4 million (grew 5% year-over-year), broadband and pay TV subscribers are 297,000 and 110,000 respectively (grew 17% and 10% year-over-year). In Uruguay, focused on pay TV with 117,000 subscribers.
• Fintech (Personal Pay): Reached almost 3 million onboarded clients as of June 2024, with a relevant market position.

Guidance

• Revenue Growth: Revenues in real terms improved quarter-over-quarter with growth in mobile, broadband, and pay TV segments.
• Margin Expectations: Anticipate more normalized margin generation going forward, with expectation of milder inflation in the range of 2-3%.
• Liability Management: Continue to manage debt maturities to extend tenure and reduce cost, with flexibility through shelf registration for future issuances.

Risks

• Macroeconomic Uncertainties: Effects of ongoing economic regulations, changes in demand for products/services, general market/economic conditions, and legislation could impact results.
• FX Volatility: Resilience to FX depreciation but still exposed to currency fluctuations, especially with debt denominated in U.S. dollars.
• Competitive Environment: Intense competition in mobile, broadband, and pay TV markets could affect pricing and subscriber retention.

Question and Answer

Q: On consolidated margins, sequential decline despite real revenue increase.

A: Seasonality, inflation drop, and back-end modernization effects.

Q: Paraguay margin improvement.

A: Broadband business growth and mobile cost compression.

Q: Second half outlook, customer resistance to price increases.

A: Mild inflation forecast, low delinquency rates, and increased prepaid phone consumption.

Q: Pricing increases post-cap removal.

A: Legal cap never binding, pricing policy tied to portfolio evolution, and focus on cost reduction.

Q: Cash flow and liability management.

A: Resolution of foreign exchange payment restrictions, successful liability management to extend tenure and reduce cost.