Telecom Argentina (NYSE:TEO) has announced its financial results for the first half of 2024, showcasing a strong performance despite economic challenges. The company reported a significant increase in EBITDA and net income, with an EBITDA margin of 32.2% and a net income of ARS 859 billion.
Subscriber growth in mobile and broadband services, along with the expansion of its fintech business Personal Pay, underscored the company's resilience. Telecom Argentina also made strategic moves in debt management, issuing $500 million in notes and engaging in liability management transactions to improve its debt maturity profile and reduce costs.
Key Takeaways
- Telecom Argentina's consolidated revenues grew to nearly ARS 1.4 trillion, a 229% increase in nominal terms year-over-year.
- The company's EBITDA margin rose to 32.2%, with a 265% year-over-year growth, demonstrating financial health.
- Subscriber growth was evident with a more than 3% increase in the mobile customer base and stable broadband and pay-TV customer bases.
- Personal Pay, the company's fintech business, now boasts over 2.9 million clients and is the second-largest in Argentina in terms of remunerated account balances.
- The company successfully returned to international debt capital markets with a $500 million bond issuance and improved its debt maturity schedule.
Company Outlook
- Telecom Argentina anticipates a reduction in inflation and stable customer demand in the second half of 2024.
- The company expects to maintain a strong cash position, mostly in U.S. dollars, and continue generating solid and stable free cash flow.
- Management plans to continue improving the company's debt structure to gain tenure and decrease costs.
Bearish Highlights
- The company acknowledged challenges such as high FX depreciation and inflation, impacting margins and financial stability.
- There is an accumulation of commercial debt due to restrictions on paying imports, with $60 million still pending negotiation.
Bullish Highlights
- The company's liability management strategy has been effective, reducing maturities for the next two years and establishing a strong investor base.
- Positive portfolio growth, particularly in mobile services, supports the company's pricing policy and overall financial health.
Misses
- No specific misses were highlighted in the provided context.
Q&A highlights
- The company discussed the impact of seasonality and inflation on margins, particularly in Paraguay, where margin improvement was attributed to broadband business growth and cost compression in the mobile segment.
- Clarification was provided on the company's ability to increase prices, regardless of the previous administration's price increase cap.
- The management addressed cash flow and liability management plans for upcoming maturities, aiming to take advantage of the current surplus of pesos in the market.
Telecom Argentina's strategy of expanding its digital and fintech services while managing its debt profile effectively has positioned the company to navigate the macroeconomic environment with confidence. The continued growth in subscriber numbers and the successful issuance of international debt highlight the company's operational strength and financial acumen. With a focus on maintaining a solid cash position, managing liabilities, and capitalizing on market opportunities, Telecom Argentina is poised to sustain its momentum in the latter half of 2024.
InvestingPro Insights
Telecom Argentina's (TEO) latest financial results reveal a company that's not only weathering economic headwinds but also exhibiting significant growth potential. As per the InvestingPro Tips, analysts are expecting both net income and sales to grow this year, which aligns with the company's recent performance. With a strong foothold as a prominent player in the Diversified Telecommunication Services industry, Telecom Argentina's strategic moves in debt management and expansion into fintech with Personal Pay are noteworthy.
InvestingPro Data further complements this positive outlook. The company's market capitalization stands at a sturdy $4.22 billion, and it boasts a competitive P/E ratio of 8.55, which indicates that the stock may be undervalued compared to earnings. This is further supported by a PEG ratio of just 0.05, suggesting that the company's earnings growth could outpace its P/E ratio, making it an attractive investment for growth-oriented investors. Additionally, the gross profit margin is a robust 72.97%, highlighting efficient operations and strong pricing power within its market segment.
InvestingPro Tips also highlight that while the company does not pay a dividend, it has delivered a high return over the last year. Investors should note that there are 10 additional InvestingPro Tips available for Telecom Argentina, offering a comprehensive analysis of the company's financial health and market position. These insights could be particularly valuable for those looking to invest in a company with proven profitability and a promising growth trajectory. For more detailed analysis and tips, interested investors can visit https://www.investing.com/pro/TEO.
Full transcript - Telecom Argentina SA ADR (TEO) Q2 2024:
Luis Rial Ubago: Good morning. On behalf of Telecom Argentina, I would like to thank everybody for participating on this conference call. The participants of today's conference call are Roberto Nóbile, Chief Executive Officer; Gabriel Blasi, Chief Financial Officer; and myself, Luis Rial Ubago, Manager of Investor Relations. The purpose of this call is to share with you the results of the 6-month period in second quarter and then on June 30, 2024. If you have not received our press release or presentation, you can call our Investor Relations office to request the documents or download them from the Investor Relation section of our website located at inversores.telecom.com.ar. I would like to go over some safe harbor information and other details of the call. We would like to clarify that during the conference call and Q&A session, we could mention certain forward-looking statements about Telecom's future performance, plans, strategies and objectives. Such statements are subject to uncertainties that could cause Telecom's actual results and operations to differ materially. Such uncertainties include but are not limited to, the effects of ongoing and economic regulations, possible changes in the demand for Telecom's products and services, the effects of potential changes in general market and/or economic conditions and in legislation. Our press release dated August 12, 2024, a copy of which was included in our Form 6-K and sent to the SEC, describes certain factors that may affect any forward-looking statements that could be mentioned during this call. The company has reflected the effects of the inflation adjustment adopted by Resolution 777/18 of the Comisión Nacional de Valores, or CNV, which establishes that the re-expression will be applied to the annual financial statements for intermediate and special periods ended results and including December 31, 2018. Accordingly, the reported figures corresponding to the first half of 2024 included the effects of the adoption of inflationary accounting in accordance with IAS 29. In this presentation, we will also include figures historical values, which are easier to understand. Our press release is complemented by our earnings presentation. Please read the disclaimer contained in Slide 1 and Slide 2 of this presentation. Today, we will go over our business and financial highlights and end the call with a Q&A session. Now let me pass the call to Gabriel, our CFO, who will start with the presentation.
Gabriel Blasi: Thank you, Luis. Good morning, and welcome to everyone. Moving to Slide 3, it summarizes our highlights as of June 30, 2024. Our main operational and financial achievements were, our EBITDA margin for the first 6 months of the year was 29.7%. Thanks to our effective cost management and pricing strategy, we were able to improve our margins in a year-over-year basis despite the challenging macroeconomic environment. In the first half of 2024, our CapEx was approximately $246 million, equivalent to 13% of our revenues. The current focus of our CapEx is on the expansion of our fixed and mobile access network, focusing on our fixed FTTH network and 5G in mobile. Due to the real appreciation of the peso observed during the first half of 2024, we registered a net income profit of ARS 859 billion, associated with real exchange differences gains included in our financial results. This is mostly generated by the effect of the macro variables over our debt in U.S. dollars. Our mobile subscriber base continues to grow, increasing over 3% year-over-year. Mobile usage of data measured in average monthly gigabytes per user has grown 18%. In broadband, our FTTH accesses keep growing rapidly. And during the last quarters, they have contributed to increase our customer base, while our HFC network has remained mostly stable. Additionally, we have achieved a growth on broadband ARPU above inflation for the year-over-year period. Flow's unique customers reached almost 1.5 million, increasing 11% year-over-year. Additionally, our pay TV business continues to grow in Paraguay. Our fintech Personal Pay continues to grow, reaching almost 3 million onboarded clients as of June 2024 and achieving a relevant market position. During the first half of 2024, we registered a strong improvement in our financial net debt-to-EBITDA ratio, indicating a reduction of the relative leverage ratio and highlight the company's strong resilience to FX depreciation. Finally, during July 2024, we have returned to international debt capital markets with a successful issuance of our notes due 2031 for $500 million. Investor support for this transaction was very important as we reached a total amount of offers of over $1.3 billion, underlining the strong credit quality of the company. Additionally, we executed to liability management transactions, a tender offer for our 2025 notes and an exchange offer for our 2026 notes. We will provide a commentary afterwards. Slide 4 shows the company figures for 2024. Telecom's revenues totaled almost $1.83 billion. Revenues measured in constant pesos decreased 13% year-over-year, improving the trend registered during the previous quarter and registering growth in real terms of 5.6% quarter-over-quarter. Our EBITDA amounted to $543 million equivalent during the first half of 2024, while EBITDA margin increased 1.3 percentage points versus the same period of 2023. Telecom's mobile subscribers in Argentina amounted to 21.2 million, increasing more than 578,000 when compared to 2023. Broadband and pay TV clients have totaled 4.1 million and 3.3 million, respectively. Fixed voice subscribers considering IP telephony lines, amounting 2.8 million during 2024. Our regional operations remains very solid. We are the second most important player in the mobile market in Paraguay and in the pay TV market in Uruguay, with 2.4 million and 117,000, respectively. Slide 5 shows our pricing strategy during 2024. The accumulated inflation in Argentina for the first half of 2024, was 79.7%, while year-over-year inflation as of June reached 272%. We continue to adjust prices on a monthly basis during the first half of 2024. Even in the context where year-over-year inflation remained high, we managed to have a positive evolution of our service revenues in real terms quarter-over-quarter. They have grown 3.5% above inflation versus the first quarter of 2024. Additionally, due to our successful pricing strategy, we have observed important recovery of ARPUs in U.S. dollars in most segments, where broadband and fixed voice have reached growth above the levels as of June 2023. It is important to highlight that we are also focused on maximizing the stress that price adjustment rate over our subscriber base. And in that sense, we also performed retention actions, mainly discounts and promotions granted to our clients. Slide 6 shows the evolution of our products. As mentioned before, our pricing strategy has yielded positive results in terms of the evolution of our subscriber base. In our mobile segment, we have observed a total increase of more than 578,000 subscribers, representing an increase of 2.8% year-over-year. This was mainly related with the good performance of our prepaid segment, where we registered a stronger customer recharge rate. We managed to increase our subscriber base for the seventh quarter in a row. Our postpaid participations over the total mobile subscribers is currently 38% of our total mobile customer base. In broadband, we have observed growth in FTTH accesses, while our HFC accesses remain relatively steady. Our broadband subscriber base has registered more increase year-over-year, while we are focusing on retaining our subscribers in a challenging economic and competitive environment. In turn, we have observed reduction in xDSL accesses, which we are migrating to FTTH. FTTH currently represents 18% of our total subscriber base in broadband. In pay TV, our Flow platform continues to perform well, and our pay TV accesses have remained steady quarter-over-quarter. In the second quarter of 2024, Flow's unique customers reached almost 1.5 million, increasing by 141,000 total clients or 11% when compared to the same period in 2023. We observed a good performance for our Flow Flex (NASDAQ:FLEX) product, which currently represents around 6% of our pay TV subscriber base. Pay TV subscriber base trend continues with a similar evolution as of the previous quarter with an improvement in terms of net adds as of the end of the second quarter. Our fixed voice segment, continued to register a reduction in accesses mainly in our traditional fixed copper network, which we are replacing partially with the new IP telephony accesses over our HFC and FTTH networks. Slide 7 shows the breakdown of our revenues. Service revenues totaled over ARS 1.3 trillion, decreasing 12% in real terms versus the first half of 2023, showing a 235% nominal increase mostly due to the price adjustment we performed. Our revenue breakdown as of June 2024 show an increase in the participation of fixed and data services when compared to June 2023, mainly explained by the growth observed in data services in foreign currency, mostly corresponding to our B2B segment. During the first half of 2024, the participation of revenues in foreign currency including our subsidiaries, our total revenues was 20%. Mobile represents 40% of the revenues, while broadband and pay TV add up to almost another 40%. The rest is composed of fixed telephony and data revenues, representing 13% of our revenues, and equipment sales finally represents 6.8%. During this quarter, we have managed to increase our revenues in real versus the first quarter in our 3 most important segments: mobile, broadband and pay TV, reaching growth of 4%, 9% and 2%, respectively. Slide 8 shows our regional operations. Our operation in Paraguay continues with a good performance. We come with 2.4 million mobile customers which have grown 5% over year-over-year. Our fixed broadband and pay TV offering in that country also continues to show good results. Our broadband and pay TV subscribers amounted to 297,000 and 110,000 subscribers, growing 17% and 10% year-over-year, respectively. Personal Pay clients in Paraguay amounted to 291,000. This operation has a strong EBITDA margin of 54%, while remaining almost at level with negative net debt-to-EBITDA ratio of minus 0.32x. Our operation in Uruguay is currently focused on pay TV, and we have 117,000 paint case there. We have a potential to grow in the local broadband market as we are obtaining licenses to offer the services certain locations in the country.
Luis Rial Ubago: Thank you, Gabriel. Beyond our regional operations and core business, we are growing in the Fintech business in Argentina through our digital wallet, Personal Pay, which currently accounts with more than 2.9 million onboarded clients. We launched this business in 2022, and in an industry with exponential growth, we already have a relevant market position. In this sense, as of June 2024, the total payment volume of Personal Pay has multiplied by 61x while the total payment number has multiplied by 21x in comparison with the figures as of June 2023. Moreover, as of June 2024, the digital wallet comes with funds invested from its clients in mutual funds for ARS 311 billion. This positions our Fintech as the second most important in terms of clients' account balances in the market. On Slide 9, we provide an overview of our main financial figures. Consolidated revenues grew by 229% on nominal terms during 2024, reaching almost ARS 1.4 trillion. When analyzing the figure adjusted by inflation, revenues amounted to almost ARS 1.7 trillion, showing a decrease of 13% in real terms versus the same figure in 2023. We increased our prices, but we're also focused on maintaining our subscriber base. And in this sense, the lag versus inflation in our revenues is explained, among others, by the effect of certain discounts and promotions we grant after price adjustments to retain our customers in a strong competitive environment. This lag has been reduced during this quarter as we achieved growth of our revenues in real terms quarter-over-quarter. EBITDA increased by 265% year-over-year in nominal terms, generating a nominal EBITDA margin of 32.2% during 2024. In turn, EBITDA margin in real terms was almost 30%. In June of 2024, we reached the fifth quarter in a row maintaining or increasing our quarterly margin compared to the same period the year before. This is a good indicator that the pricing and cost management strategies are guiding us in the right direction. And in this sense, we were successful in improving the operational profitability of the company. Slide 10 shows the evolution of EBITDA year-over-year and the impact of different components of revenues and costs. During the first half of 2024, the company was able to contain the pressure coming from inflation in most of the cost lines, and this has contributed to generating an expansion of the EBITDA margin versus the same period of the previous year. The main expansion factors were the following, in terms of labor costs, we observed that in average during this half, salaries have increased below inflation. Salaries have started to decouple versus inflation since December 2023, and this has contributed positively to our EBITDA margin. We registered a good performance additionally in commissions and advertising costs mostly due to a reduction of commercial relations and collections commissioning and to some other items such as flat debt, which has reduced from 2.5% of sales as of the first half of 2023 to 2.1% in the first half of 2024. Handsets costs were also lower due to the lower quantity of devices sold. Slide 11 shows the company's net results and EBIT. Out EBIT increased in the first half of 2024 as we registered lower D&A expenses, The operating margin during the first half of 2024 was minus 3.7% of consolidated revenues and in historical figures, the same margin was 25.6%. Due to the result of high inflation and stable FX during the first half of 2024, the company had a net income of ARS 859 million. These results are financially mentioned. A strong appreciation experienced by the peso on real terms during the first half generated positive results, mainly in connection with our financial debt denominated in foreign currency. This led to positive exchange differences in real terms, which amounted to ARS 1,400 million during the first half of 2024. Slide 12 displays a summary of the company's CapEx in PP&E and intangible assets during 2024, which amounted to almost ARS 225 billion or an equivalent of $246 million at the official FX rate. This amount is 2% lower when compared to the previous year in constant pesos. In turn, our consolidated amount of CapEx for the first half of 2024 represented 13.5% of our revenues, increasing versus the same period of the previous year. Technical CapEx was mainly composed by investments in our access network and technology, representing 49% of the CapEx during the first half of 2024. During the first half of 2024, 44 new mobile sites were deployed where another 606 existing sites were upgraded. We are advancing in the rollout of 5G. We come with over 100 5G sites working in a 3.5 GHz bands, and we expect to come with 200 sites as of the end of 2024. We are essentially adding 5G equipment to our existing sites with additional bandwidth to mainly populated cities of Argentina for our first stage of deployment. In our fixed access network, we increased the employment of new FTTH over 4,300 new blocks, including the overlay over our HFC network. We also improved the upstream capacity of our HFC network by 7,000 blocks. Approximately 40% of our CapEx for the first half of 2024 was allocated to installations and customer premise equipment, or CPE, which are installations and equipment in the homes of our clients and 12% to our international operations. Slide 13 describes our cash flow generation during 2024 compared with the same period of 2023. Our cash flow generation remained robust. It has been affected mostly by an increase in working capital needs due to the normalization of our commercial vendor financing after the restrictions to access the official FX market observed during 2023. The remaining components measured in U.S. dollar terms are experienced little variation versus the first half of 2023. And this is good news since the huge devaluation of the FX that occurred in December of 2023. Our cash flow generation before dividends and interest payments was equivalent to USD 151 million. Slide 14 shows for key figures for 2024. A conversion to U.S. dollars is obtained dividing the figures in constant pesos as of the end of each period and using the end of previous full effects for each year. Our gross debt amounted to $2.8 billion as of June 30, 2024. As of June 2024, the company holds cash and equivalents for $411 million. Thus, our net debt was about $2.4 billion. We have been and continue to reserve in U.S. dollars denominated in sovereign bonds, which was partially applied to cancel local short-term loans. EBITDA for the last 12 months as of the end of the first half of 2024, using the aforementioned conversion method for figures invested in U.S. dollars, was equivalent to more than $1 million. Last 12 months of EBITDA as of June 2024 in U.S. dollars increased by 52% versus the same period as of December 2023. This important increase shows that the company has the ability to recover its operation profitability in U.S. dollars, and that is resilient to FX depreciation. In Slide 15, we give more insight regarding the impact of the macroeconomic situation on our figures and net debt. After the huge devaluation occurred by the end of 2023, our main figures, among others, revenues and EBITDA experienced a decrease when measured in U.S. dollars. Because of this, our net debt-to-EBITDA ratio increased temporary. Thanks to our effective pricing policy and the FX stabilization, we have been able to increase our main figures measured in dollar terms. Our EBITDA for the last 12 months as of June 2024 was equivalent to almost $1.1 billion, where our net debt was $2.4 billion. In this sense, the net debt-to-EBITDA ratio as of June 2024 was 2.2x, practically in line with levels observed before the December 2023 devaluation. Slide 16 shows the breakdown of our financial debt. Our total outstanding debt principal as of June 2024, amounted to more than $2.7 billion. We currently have a very manageable maturity profile. We have access to the official exchange rate market for all of our maturities scheduled according to our current Central Bank regulations. In fact, in August 6, we have made the scheduled amortization payments for our 2025 notes. But this was one of our main cross-border maturities for the year, the remainder maturities for this year are substantially low. In this sense, we expect to continue accessing the local capital markets for a potential financing need during this year as we have been doing lately. So now let me pass the call to Gabriel, who will continue with the presentation.
Gabriel Blasi: Thank you, Luis. We present the summary of the liability management transactions we conducted during July and August and the impact of our maturity profile. The credit quality of the company was made clear through the issuance of our 2031 notes. We managed to issue a sizable U.S. dollar-denominated bond of -- for $500 million will yield below this 9.7% yield, with an interest coupon of 9.5%. In fact, investor support was high and the total amount of offering was about $1.3 billion. The main use of proceeds for this issuance will be the repayment of certain multilateral loans with ITV (LON:ITV) and IFC and the payment of the considerations for the tender offer of the 2025 notes. This means that the transaction will be debt-neutral and will significantly improve our maturity profile. Moreover, this transaction was launched in connection with 2 other liability management operations. A tender offer for our 2025 notes, which concluded with the principal amount, tender post-amortization factor of $19.8 million. After having made the payment of the principal amortization on August 6 of $112.4 million remain outstanding. An exchange offer of our 2026 notes, of our 2031 notes, the principal amount tendered by the early participation date and affected foreign exchange was $115.3 million. This reduces the amount of maturity for 2026 and extends them over '29, 2030 and 2031. Additionally, we issued a local dollar-linked note for $81.3 million and $33.7 million with yields of almost 2.9% and 1.5%, respectively. This has contributed to extend our local short-term debt to a range of between 1.5 to 2 years with a very convenient cost of financing. All these operations taken together have yielded an improvement in terms of our maturity profile, and we estimate that we will be extending the average life of our debt to 3 years or in addition, improving the total cost of our debt. Finally, in Slide 18, we conclude with some financial remarks and highlights for this period. We achieved an expansion of our EBITDA margin in a challenging context. We managed to grow our customer base in mobile and stabilized our broadband and pay-TV customer bases in a very competitive environment. Our Fintech, Personal Pay, is currently a relevant market player with almost 3 million subscribers and the second most important player in terms of remunerated account balances. We have showed resiliency in terms of our business model with a strong recovery on top of line and EBITDA figures despite high FX depreciation and inflation. The company's financial management continues to -- on the right track. We have a solid and stable free cash flow generation before dividends and interest payments, generating between $400 million and higher than $500 million annually during the last years, considering ordinary CapEx for each year. Our cash position is strong and is mostly denominated in U.S. dollars, investment allowing us to lower the peso volatility risk. Finally, through a liability management transaction we discussed, we improved our maturity scale, extending the average life of our debt and what is more, we improved our financing cost.
A - Luis Rial Ubago: So thank you, Gabriel. With this, now we are more than pleased to answer any questions you may have. However, before we start, we would like to remind you that you can address your questions during the Q&A session, which we will open immediately. [Operator Instructions] We have a question from Marcelo Santos from JPMorgan (NYSE:JPM).
Marcelo Santos: I have 2 questions related to margins. The first is on the consolidated margins. When you look at the margin on a year-over-year basis, they had a great expansion. And when you look on a quarter-over-quarter basis, they declined a bit. And I wanted to understand this a little bit better because this is the first quarter that you post a sequential increase in real revenues for a while. So I think it would be more natural to expect a bit of margin expansion, but are there some seasonal factors that somehow pressure margins, some specifics? I just wanted to understand a bit better. And the second question is on Paraguay's margin. I think there was a strong year-over-year improvement in the margins. So I just wanted to understand better the factors that are driving this improvement.
Gabriel Blasi: Okay. Starting the first part of the question, I don't have a single answer. In fact, what happens is the mixture of different effects, Marcelo. Number one is that we have some type of seasonality. If you look at what happens to our margins on a yearly basis, you will see that typically, we start with margins on the upper part of the curve, and then they slowly come down. That will be like the normal situation. In this case, on top of that, you have the effect of the inflation that, during the period, has moved very differently. We started with a much higher inflation and the drop has been very significant. So the relative effect of this drop, remember what we always say regarding how the company behaves on the high inflation environment, and on the drop, that has helped a lot in terms of improving the margin. And that's why you also see a very significant change between quarters because during the first quarter, inflation was 2 digit and second quarter, we had inflation of 1 digit, and now, at present, inflation continued to drop below even 5%. And maybe we don't -- and this is just to give you some color, we don't think that inflation would probably drop to 0. There is some resistance on the core inflation and it's more likely to stabilize on the 2%, 3% area. But we expect that our margin generation will be more normalized from now to the end of the year. I understand that this has not been, for sure, very clear on the explanation over the fall. But I offer if you want, we can do a separate call and we can dig in the details to make you get a better understanding of what happened on a quarterly basis.
Roberto Nóbile: See -- sorry, Gabriel, I would add -- thank you, Marcelo, for the question. This is Roberto. There are several, I would say, important projects that has to do with our back-end modernization that were achieved by the last -- by the end of last year. So all the sales force implementation, we finalized that project on December of last year. And we have started to have the outcomes of having all our B2C customer base in 1 site, one billing, one way of contacting us. We have increased our digitalization. We have 60% of our contacts through -- that are going through our own digital platform. So there are a lot of outcomes that are coming from these type of modernizations that we have done during the last years. So we are reducing the amount of hours that we are buying from our contact centers. We are increasing our digital contacts. I mean, these are the type of things that are really improving our margins despite of any seasonal thing. Going back to the seasonal thing, if you take a look into the first quarter of last -- of 2023 and you compare it to the first quarter of this year, usually in the previous years, we will increase prices in January and then wait 2 or 3 months and then start increasing again. That type of things will make the first quarter look much better than the rest because we were increasing a lot in January. Since April of 2023, we started increasing prices every month on a monthly basis. So there is no seasonal thing. It runs -- there's a pass-through of inflation. We are trying to do the pass-through to inflation as fast as we can. So we are going on a monthly basis. So we are trying to get rid of any seasonal thing that we used to have. I don't know if I was clear.
Gabriel Blasi: So Marcelo, can you please repeat the second part of the question, please?
Marcelo Santos: The second part is Paraguay had a very nice margin increase on a year-over-year basis. I just wanted to understand what are the key elements driving this margin improvement?
Roberto Nóbile: The -- what is driving the margins are the broadband business. We are really -- we are -- we have achieved 35% of market share. We are still growing. And that is all new -- a whole new revenue stream that is adding to our P&L. And of course, it's expanding our EBITDA generation. Despite that, we are also -- we have been able to -- on the mobile side to compress costs and increase margins as well. So it's a mix between the mobile situation where we are very stable and the improvement on the FTTH business.
Luis Rial Ubago: We are moving to the next question from Ernesto Gonzalez from Morgan Stanley (NYSE:MS).
Ernesto Gonzalez: It's on your outlook for the second half, if you could discuss a little bit on any resistance that you expect from customers on potential price increases? And overall, any color that you can provide on your expectations for the second half?
Gabriel Blasi: Roberto, I don't know if you want to proceed or I can answer that?
Roberto Nóbile: I can start if you want, and you can -- okay. Sorry for the misunderstanding, but we are in different locations. That's why we are talking online. July and August are very, very good months. I would say that they are on the same trend as the first half. The -- we are working heavily on the sizing of the company. And that is something that you will probably see the results by the next quarter. That means that we are preparing the company for 2025 to be in good shape to keep on competing. On the revenue side, we -- the slowdown of inflation rate helps to supplant our customers' expectations and our customer needs. We have also launched a new promotion that sets the price for the next -- until the end of the year. That price is calculated in a way that it will give the customer enough observability or expectation on what the price will be month by month, but will also give us the chance of keep on increasing our ARPUs by the end of the year. So there is a mixture. We don't see customers -- we are seeing customers slowing down their request for promotions. And that's a very good sign, and I think it will keep stable until the end of the year.
Luis Rial Ubago: So we will move to our next question coming from...
Gabriel Blasi: Sorry, no. You also asked for some view in terms of our expectations for the rest of the year. I think I say something related to that on the prior question. As I mentioned, we foresee a reduction in the inflation. Maybe -- although the government is pursuing reaching 0 monthly inflation, probably that is not going to happen, it's difficult, but we think that it's likely that we are going to have a milder inflation in the range of -- with a floor of 2%. That gives you some better color on what type of a scenario we are foreseeing. Also -- and this is an interesting piece of data. If you consider, for instance, delinquency rates, what is happening in our services, our delinquency rates today are among the lower in the history of the company. Of course, we have improved our practices. We have had a lot of intelligence in what we are doing in terms of collection and in terms of credit scoring. But it's very interesting that in this environment, those rates are low. Other aspects that I would like to stress that maybe give you some color, and we may have a lot of discussion if it is a predictor or not, but the consumption of prepaid phones has increased significantly. We have grown in our portfolio. We have grown in prices and we have -- I mean, in usage. And this is also, I think, a good indicator, meaning that maybe not on a general way, but we are foreseeing some small green lights that allow to be cautiously optimistic about the closing of the year.
Luis Rial Ubago: So with that, we will move to our next question coming from Lorena Reich from Lucror Analytics.
Lorena Reich: My question is a bit related to the previous one because it's on prices. But given the removal of the cap on price increases, I was wondering what's the expectation for pricing increases going forward? And if you expect a positive impact on profitability because of that? Or you see that given the strong competitive environment in the industry, that's not going to happen? You've been doing a great job at reducing cost to keep very good profitability in spite of the price cut. But given these news, do you see any changes going forward?
Gabriel Blasi: Maybe, Lorena, there is some type of misunderstanding. What has happened on the legal front is that the Decree 690, which was an intention of the past administration to regulate prices in the sector has been declared new by the Supreme Court, but by the [Appellate] Court it gives you an idea that this reduced the ability of the company of increasing prices. But this situation never took place in terms of our restriction because the legal measure that the company took about 2 years ago, always allowed us to do so. So really, although the past administration intended to put some type of cap to the price increase, there was not -- they never it was binding for the industry as a whole. Having said that, what is driving our pricing policy is related to the evolution of our portfolio. As we have seen, we have been growing very positively on the mobile. We keep a stable portfolio on the broadband and TV with minor movements up and down. And we -- yes, we have a downtrend on the fixed telephone as everywhere in the world. So I will say, we don't expect a significant change to that.
Luis Rial Ubago: So we will move with another question coming from [Mariano Andre] from Clay Capital.
Unidentified Analyst: Two points I would like to clarify. One is when you mentioned the comparison of cash flows first half 2023 against first half 2024. If I'm not mistaken, you mentioned that part of the -- there was a component of not accessing foreign capital. I don't know if I picked that up correctly, but if you could clarify. And the second point is, to what extent do you intend to do further liability management for the maturities of '24, '25 and '26, which appear to be the heaviest commitments you have to honor?
Gabriel Blasi: Just -- I will answer maybe -- I am not quite sure if I understood properly the first part of the question, but I do my best. Regarding restrictions, what happened was that the last administration established between the different type of restrictions on the foreign exchange market, didn't allow the companies to pay for their imports. So a certain commercial debt was accumulated in Argentina as a whole. That debt was in the range of $35 billion. And we had -- during the last part of last year, we began to have restrictions to pay to our imports as part of the local systems, of course. Having said that, when this administration took office, they changed that. By the month of February, they established a mechanism allowing the company to pay those creditors by acquisition of specific bonds that were issued for that purpose, the name of BOPREAL. The company went to that system. We acquired with pesos those bonds, our total outstanding originally was $200 million. At present, we have less -- something in the range of $60 million pending of negotiation, the processes that you get in a negotiation with the supplier or you may give them the bonds directly. They are dollar-denominated or you can sell the bonds and -- we can sell the bond against dollars and pay for the dollars. Only difference between the present outstanding of 60 -- about $60 million, $100 million Yes, $100 million and the $200 million originally was already fully paid with no loss for the company, meaning there's no additional cost was paid for this. We simply get the bonds and we give those bonds to the suppliers. How that was possible? Well, this negotiation have like 3 different brackets or groups. One is the group of suppliers that we are constantly making transactions with them and we are acquiring -- and we have a very fluent relationship that's part of the business. Everybody understand what entails to do business in Argentina from time to time. The second group of suppliers might be more precise with other type of considerations. We will, I will say, is dividing with them and reaching the final agreement. Up to now, no price difference paid by Telecom. And the third group was the group that when we did the imports, which was probably the group of imports that were established in the last part of the year, the restrictions were already in place. So everybody has a clear picture and was already established in the original transaction what was going to happen in case the government didn't comply because the restriction was already there. So the good news in brief is that the situation is almost completely solved. It will be solved by the end of the month. And we don't expect any significant outcome on that. That explained mainly the most relevant variation of working capital that you can see in our figures because of this. The second part of the question regarding the liability management, the company has a very active position in terms of dealing with its debt book. We have stabilized it completely about -- something in a rate of 2 years ago or even more, probably 3 with minor movements. And the reason why we started to do liability management is that we want to orderly begin to change the structure of the debt to gain tenure and decrease cost, and that was what happened. The company -- about 1/3 of our debt, typical what like in the range of $1 billion prior to these liability management is multilateral debts with different type of loans, all of them are floating or pre cancel loans. Then we have about 1/3 of the debt is local debt in the local capital market, which has been issued during the last 2 years, minus something on average, minus 10% rate, dollar adjusted. The last issuance is you have them in the presentation, the rate has been -- or the yield has been in the range of 2% and 3%. That debt, we continue to use that debt as a way of taking the advantage of the surplus of pesos that we have in the market. But we cannot think that, that situation will last forever, as the monetary policy normalize and the Banco Central is getting more rational and more logical, the other rates are going to align and the surplus of pesos is going to be replaced by a more healthy demand on credit which is slowly happening. That's why the rate of those loans from minus 10 now are in the range of 2%, just to give you some color. And it was a good practice to tap to the market and do this liability management, reducing the maturities as you have in the presentation for the next 2 years. Was there an urgency to do that? Probably not, but we think that if we can do it timely, we are going to provide a good environment for our investors to keep everybody happy and with the exposure that the company has. Some additional color that I can add on this is that we have a very good participation. We were offered $1.3 billion of total consideration in Brazil. And more than half of the money that we received was real money, which is very positive. It is also important to address that we have a very strong investor base that really follows the company and that this transaction not only allowed us to increase our tenure about 1.5 years, but also we have a reduction in the total cost of debt of the company in the range of 25 basis points, meaning that our interest charge has been also lowered. So you might think that as Argentina becomes in better shape and the conditions get better, we might continue to be in the market as a part also. Important to address for our investor base is that the company listed a shelf registration program that allowed us to issue securities in the United States at any moment of any time. And that also gives us a lot of flexibility, taking into consideration that we have a very important individual base or private banking base of investors, it is also give us a lot of flexibility to cope with the different outcomes that the market might provide, not only because of Argentina, but also because of international volatility as a whole.
Luis Rial Ubago: So as we don't have any more questions. Thank you very much for participating in our quarterly conference call. Please do not hesitate to contact Investor Relations for any further inquiries you may have. Good morning, or good afternoon to all, and have all a nice day.
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