Earnings call transcript: Telecom Argentina’s Q2 2025 earnings beat expectations

Telecom Argentina, a prominent player in the Diversified Telecommunication Services industry according to InvestingPro, reported its Q2 2025 earnings, revealing a narrower-than-expected loss per share and a significant revenue shortfall. The company’s earnings per share (EPS) came in at -$0.0378, surpassing the forecast of -$0.074 by 48.92%. Revenue fell short of expectations, reaching $1.45 billion compared to the anticipated $1.65 billion, resulting in a 12.12% negative surprise. Despite the revenue miss, the stock experienced a 2.68% increase in after-hours trading, closing at $10.36. According to InvestingPro’s Fair Value analysis, the stock currently appears undervalued.

Key Takeaways

• EPS beat expectations by nearly 49%, demonstrating improved financial management.
• Revenue fell short by 12.12%, highlighting challenges in meeting market forecasts.
• The stock rose 2.68% in after-hours trading, signaling positive investor sentiment.
• Telecom Argentina maintained its quarterly margin growth for five consecutive quarters.
• The company is optimistic about managing inflation and cost controls moving forward.

Company Performance

Telecom Argentina showcased robust financial performance despite macroeconomic challenges. The company achieved a 229% nominal growth in consolidated revenues, reaching ARS 1,400 billion. EBITDA surged by 265% year-over-year to ARS 543 million, with a margin expansion to 32.2% nominally. The net income of ARS 859 billion was primarily driven by exchange rate differences. With an overall Financial Health Score of 2.59 (rated as "GOOD" by InvestingPro), the company maintained or increased its quarterly margin for five consecutive quarters, underscoring its resilience in a competitive telecom market. InvestingPro subscribers have access to 10+ additional key insights about Telecom Argentina’s financial health and market position.

Financial Highlights

• Revenue: $1.45 billion, down from the forecasted $1.65 billion.
• Earnings per share: -$0.0378, compared to the forecast of -$0.074.
• EBITDA: ARS 543 million, a 265% increase year-over-year.
• Net income: ARS 859 billion, largely due to exchange rate differences.

Earnings vs. Forecast

Telecom Argentina’s actual EPS of -$0.0378 significantly beat the forecast of -$0.074, marking a 48.92% positive surprise. This result reflects the company’s effective cost management and operational improvements. However, the revenue miss of 12.12% indicates challenges in achieving sales targets, possibly due to competitive pressures and macroeconomic factors.

Market Reaction

Following the earnings announcement, Telecom Argentina’s stock rose by 2.68% in after-hours trading, closing at $10.36. This positive movement suggests investor confidence in the company’s ability to manage costs and improve margins, despite the revenue shortfall. InvestingPro analysis indicates the stock’s RSI is in overbought territory, while the stock’s performance remains within its 52-week range of $6.60 to $15.54, with a recent closing price of $9.77, down 7.48% from the previous trading session. Get access to comprehensive valuation metrics and technical indicators with an InvestingPro subscription.

Outlook & Guidance

Looking ahead, Telecom Argentina remains cautiously optimistic about its year-end performance. The company expects milder inflation in the second half of 2024 and continues to focus on cost management and potential ARPU growth. While InvestingPro data shows net income is expected to drop this year, analysts predict the company will return to profitability. Forward guidance indicates a gradual improvement in EPS and revenue over the next fiscal years, with projected EPS of $0.07 for FY2025 and $0.13 for FY2026. Discover detailed analyst forecasts and more than 30 key financial metrics with InvestingPro’s comprehensive Research Reports.

Executive Commentary

Roberto Navile, CEO, emphasized the company’s growth in portfolio, prices, and usage, stating, "We have grown in our portfolio. We have grown in prices and in usage." CFO Gabriel Lasi highlighted the company’s financial strength, noting, "Our cash flow generation remained robust." These statements reflect Telecom Argentina’s strategic focus on sustaining growth and financial stability.

Risks and Challenges

• Macroeconomic pressures, including high inflation and currency fluctuations, remain significant risks.
• Competitive market dynamics in Argentina and neighboring countries could impact revenue growth.
• Potential regulatory changes in the telecom sector may pose operational challenges.
• Managing cost controls while pursuing growth initiatives could strain resources.

Q&A

During the earnings call, analysts inquired about margin fluctuations due to inflation dynamics and the company’s liability management transactions. Executives addressed these concerns by highlighting operational improvements and customer retention strategies, reinforcing their commitment to maintaining financial stability and competitive positioning.

Full transcript - Telecom Argentina SA ADR (TEO) Q2 2025:

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: Good morning. On behalf of Telecom Argentina, I would like to thank everybody for participating of this conference call. Participants of today’s conference call are Roberto Navile, Chief Executive Officer Javier Lasi, Chief Financial Officer and myself, Cristobal Duago, Manager of Investor Relations. The purpose of this call is to share with you the results of the six month period and second quarter ended on 06/30/2024. If you have not received a press release or presentation, you can call our Investor Relations office to request the documents and download them from the Investor Relations section of our website located at versodes.telecom.com.

I would like to go over some safe harbor information and all the details of the call. We would like to clarify that during the conference call and Q and 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 on ongoing industry and economic regulations possible changes in the demand for telecoms products and services the effects of potential changes in general market and our economic conditions and in legislation. Our press release dated 08/12/2024, a copy of which was included in our Form six ks 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 seven seventy seveneighteen of the Comicionna Sorialne Valores, or CNV, which establishes that the re expression will be applied to the annual financial statement for intermediate and special period ended as of and including 12/31/2018. Accordingly, the reported figures falling to the 2024 included the effects of the adoption of inflationary accounting in accordance with IAS 29. In this presentation, we will also include figures in historical values, which are easier to understand. Our press release is complemented by our earnings presentation. Please read the disclaimer contained in Slide one and Slide two of this presentation.

Today, we will go over our business and financial highlights and end the call with a Q and A session. Now let me pass the call to Gabriel, CFO, who will start with the presentation.

Gabriel Lasi, Chief Financial Officer, Telecom Argentina: Thank you, Luis. Good morning, and welcome to everyone. Moving to Slide three, it summarizes our highlights as of 06/30/2024. Our main operational and financial achievements were: our EBITDA margin for the first six 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 2024, our CapEx was approximately $246,000,000 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 five gs in mobile. Due to the real appreciation of the peso observed during the 2024, we registered a net income profit of ARS $859,000,000,000 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 unique customers reached almost 1,500,000, increasing 11% over year. Additionally, our Pay TV business continues to grow in Paraguay. Our fintech personal pay continues to grow, reaching almost 3,000,000 onboarded clients as of June 2024 and achieving a relevant market position. During the 2024, we registered a strong improvement in our financial net debt to EBITDA ratio, indicating a reduction of the relative leverage as Jan highlighted in the company’s strong Brazilian 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 $500,000,000 Investor support for this transaction was very important as we reached a total amount of offers of over $1,300,000,000 underlying the strong credit quality of the company. Additionally, we executed two 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 four shows the company figures for 2024. Telecom’s revenues totaled almost $1,830,000,000 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 $543,000,000 equivalent during the 2024, while EBITDA margin increased 1.3 percentage points versus the same period of 2023. Telecom’s mobile subscribers in Argentina amounted to 21,200,000, increasing more than five and seventy eight thousand when compared to 2023. Broadband and pay TV clients have totaled four point one million and three point three million, respectively. Fixed voice subscribers, considering IP telephony lines, amounting 2,800,000 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 €10,400,000 and €117,000 respectively. Slide five shows our pricing strategy during 2024. The accumulated inflation in Argentina for the 2024 was 79.7%, while year over year inflation as of June reached 272%. We continue to adjust prices in a monthly basis during the 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 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 minimizing the stress that price adjustment generate over our subscriber base.

And in that sense, we also perform retention actions, mainly discounts and promotions granted to our clients. Slide six 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 a 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 have remained relatively steady. Our broadband subscriber base has registered a more decrease year over year, where we are focusing on retaining our subscribers in a challenging economic and competitive environment. In turn, we have observed a reduction in ex DSL accesses, which we are migrating to FTTH.

FTTH currently represent 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 2024, Flow’s unique customers reached almost 1,500,000, increasing by 141,000 total clients or 11% when compared to the same period in 2023. We observed a good performance for our Flowflex 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 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 seven shows the breakdown of our revenues. Service revenues totaled over ARS 1,300,000,000,000.0, decreasing 12% in real terms versus the 2023, showing a ARS $235,000,000 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 2024, the participation of revenues in foreign currency, including our subsidiaries, over total revenues was 20%.

Mobile represents 40% of the revenues, while broadband and pay TV adapt to almost another 40%. The rest is composed of fixed telephony and data revenues, representing 30% of our revenues, and equipment sales finally represent 6.8%. During this quarter, we have managed to increase our revenues in real versus the 2024 in our three most important segments: mobile, broadband and Pay TV, reaching growth of 4%, 92% respectively. Slide eight shows our regional operations. Our operation in Paraguay continues with a good performance.

We count with 2,400,000 mobile customers, which have grown 5% 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 297,110 subscribers, growing 1710% year over year, respectively. Personal paid clients in Paraguay amounted to 291,000. This operation has a strong EBITDA margin of 54%, while remaining almost 11%, with a negative net debt to EBITDA ratio of minus 0.32 times.

Our operation in Uruguay is currently focused on pay TV, and we have 117,000 pay TV customers there. We have a potential to grow in the global broadband market as we are obtaining licenses to offer this service in certain locations in the country.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: 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 counts with more than 2,900,000 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 personnel pay has multiplied by 61 times, while the total payment number has multiplied by 21 times 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 three eleven billion. This positions our fintech as the second most important in terms of client’s account balances in the market. In Slide nine, we provide an overview of our main financial figures. Consolidated revenues grew by 229% on nominal terms during 2024, reaching almost ARS 1,400,000,000,000.0. When analyzing said figure adjusted by inflation, revenues amounted to almost ARS 1,700,000,000,000.0, 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 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 our 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 2024, the company was able to contain the pressure coming from inflation in most of its 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 good performance additionally in commission and advertising costs, mostly due to a reduction of commercial agents and collections commissioning and to some other items such as bad debt, which has reduced from 2.5 percentage of sales as of the 2023 to 2.1% in the 2024. Handset costs were also lower due to the lower quantity of devices sold. Slide 11 shows the company’s net results and EBIT.

Our EBIT increased in the 2024 as we registered lower G and A expenses. The operating margin during the 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 effects during the 2024, the company had a net income of ARS $859,000,000. These results are financial in nature. The strong appreciation experienced by the peso and 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 1,400,000,000,000 during the 2024. Slide 12 displays a summary of the company’s CapEx in PP and E and intangible assets during 2024, which amounted to almost million or an equivalent of ARS246 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 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 twenty twenty four.

During the 2024, 44 new mobile sites were deployed, while other six zero six existing sites were upgraded. We are advancing in the rollout of five gs. We come with over 105 gs sites working in a 3.5 gigahertz band, and we expect to come with 200 sites as of the 2024. We are essentially adding five gs equipment to our existing sites, while additionally targeting the main 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 locks, including the overlay of our HFC network.

We also improved the upstream capacity of our HFC network by 7,000 blocks. Approximately 40% of our CapEx for the 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 have experienced little variation versus the 2023, and this is good news since the huge devaluation of the FX that occurred in December 2023. Our cash flow generation before dividends and interest payments was equivalent to USD 151,000,000. Slide 14 shows our key figures for 2024.

The conversion to U. S. Dollars is obtained dividing the figures to constant pesos as of the end of each period and using the end of previous spot FX for each year. Our gross debt amounted to 2,800,000,000 as of 06/30/2024. As of June 2024, the company cost cash and equivalents for $411,000,000 and thus our net debt was about $2,400,000,000 We have built a liquidity reserve in U.

S. Dollar denominated sovereign bonds, which was partially applied to cancel local short term debt. EBITDA for the last twelve months as of the end of the 2024, using the aforementioned conversion method for figures in pesos to U. S. Dollars was equivalent to more than $1,000,000 Last twelve months, 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 operating profitability in U. S. Dollars and that is resilient to FX depreciation.

On 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 2023, our main figures, among others, revenues and EBITDA, experienced a decrease when measured in U. S. Dollars. Because of this, our net debt EBITDA ratio reached temporarily.

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 twelve months as of June 2024 was equivalent to almost $1,100,000,000 while our net debt was $2,400,000,000 In this sense, the net debtEBITDA ratio as of June 2024 was 2.2% 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 $2,700,000,000 We currently have a very manageable maturity profile.

Gabriel Lasi, Chief Financial Officer, Telecom Argentina: We have access to the

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: official exchange rate market for all of our maturity schedule according to our current Central Bank regulations. In fact, in August 6, we have made the scheduled amortization payments for our 2025 notes. This was one of our main cross border maturities for the year. The remainder maturities for this year are substantially lower. In this sense, we expect to continue accessing the local capital markets for our 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 Lasi, Chief Financial Officer, Telecom Argentina: Thank you, Luis. We’ll present a summary of the liability management transactions we conducted during July and August and the impact over our maturity profile. The credit quality of the company was made clear through the issuance of our 2,031 notes. We managed to issue a sizable U. S.

Dollar denominated bond of 400,000,500 million with a yield below two digits, 9.7 yield, with an interest coupon of 9.5. In fact, investor support was high and the total amount of offering was above €1,300,000,000 The main use of proceeds for this issuance will be the repayment of certain multilateral loans with 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 two other liability management operations. A tender offer for our 2025 notes, which concluded with a principal amount tender post amortization factor of $19,800,000 After having made the payment of the principal amortization on August 6 remain outstanding.

An exchange offer of our twenty twenty six notes of our 2,031 notes, the principal amount tendered by the early participation date and accepted for exchange was $115,300,000 This reduces the amount of maturity for 2026 and extends them over ’29, 2030 and 02/1931. Additionally, we issued a local dollar linked note for $81,300,000 and $33,700,000 with yields of almost two point nine and one point five percent, respectively. This has contributed to extend our local short term debt to a range of between one point five and two 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 three years while additionally 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 3,000,000 subscribers and the second most important player in terms of remunerated account balances. We have shown 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 400,000,000 and higher than $500,000,000 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 the liability management transaction we discussed, we improved our maturity schedule, extending the average life of our debt.

And what is more, we improved our financing cost.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: 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 how you can address your questions during the Q and A session, which we will open immediately. Please use the raise hand button to let us know that you want to formulate a question. We will let you know when it’s your turn to speak, and we will unmute you so you can proceed with your question.

Thank you. Hi. We have a question from Marcelo Santos from JPMorgan. Marcelo, we will unmute you, so you can proceed with your question. Thank you.

Marcelo Santos, Analyst, JPMorgan: Roberto, Gabriel, Luis, thanks for the opportunity. I have two questions related to margins. The first is on the consolidated margins. When you look at the margins 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 or some specifics? 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 just wanted to understand better the factors that are driving this improvement. Thank you.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: Okay.

Gabriel Lasi, Chief Financial Officer, Telecom Argentina: Thanks for the question. 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 base, you will see that typically we start with margins on the upper part of the curve and then they slowly get down.

That would 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 two digit and second quarter, we had an inflation of four 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 will probably drop to zero. There is some persistence on the core inflation and it’s more likely to stabilize on the 23% 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 phone.

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 base.

Roberto Navile, Chief Executive Officer, Telecom Argentina: Sorry, Gabriel. I would add thank you, Marcelo, for the question. This is Roberto.

Gabriel Lasi, Chief Financial Officer, Telecom Argentina: There are several,

Roberto Navile, Chief Executive Officer, Telecom Argentina: I would say, important projects that has to do with our back end modernization that were achieved by the end of last year. So all the sales force implementation, we finalized that project on December. And we have started to have the outcomes of having all our B2C customer base in one 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 this type of modernization 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 2023 and you compare to the first quarter of this year, usually in the previous years, we will increase prices in January and then wait two or three 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 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 high as fastest 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.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: So Marcelo, can you please repeat the second part of your question, please?

Marcelo Santos, Analyst, JPMorgan: Sure. And thank you for the first answer. 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 Navile, Chief Executive Officer, Telecom Argentina: 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 and L. 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.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: So thanks. We are moving to the next question from Ernesto Gonzalez from Morgan Stanley. Ernesto, we will unmute you, so you can proceed. Thanks.

Ernesto Gonzalez, Analyst, Morgan Stanley: 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? You.

Gabriel Lasi, Chief Financial Officer, Telecom Argentina: Roberto, I don’t know if you want to proceed or I can answer.

Roberto Navile, Chief Executive Officer, Telecom Argentina: I can start if you want and you can. Sorry for the misunderstanding, but we are in different locations. That’s why we are talking live. July and August are very, very good months. I would say that they are on the same trend as the first half.

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 at in good shape to keep on competing. On the revenue side, we the slowdown of inflation rates helps to supplant the 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 of 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’s 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.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: Okay. So we will move to our next question coming from

Gabriel Lasi, Chief Financial Officer, Telecom Argentina: I’m 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 inflation. Maybe although the government is pursuing reaching a zero 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 or with a floor of 2%. That gives you some better color on what type of 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, rates are low. Other aspect that I will like to stress that might 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 and 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.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: Okay. So with that, we will move to our next question coming from Lorena Reit from Lukro Analytics. So Lorena, will unmute you, so you can proceed with your question. Thanks. Lorena, I don’t know if you are there.

Yes, we can hear you.

Lorena Reit, Analyst, Lukro Analytics: Sorry about that.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: No, it’s all right.

Lorena Reit, Analyst, Lukro Analytics: 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 gonna happen? You’ve been doing a great job at reducing cost to keep a very good profitability in spite of the price gap. But given this news, do you see any changes going forward?

Gabriel Lasi, Chief Financial Officer, Telecom Argentina: Maybe Lorena, there is some type of misunderstanding. What has happened on the legal front is that the Decree six ninety, which was an intention of the past administration to regulate prices in the sector has been declared new by the Supreme Court by the appellation court gives you the idea that this released the ability of the company of increasing prices, but this situation never took place in terms of a restriction because the legal measure that the company took about two years ago always allowed us to do so. So really, although the past administration intend to put some type of cap to the price increase, there was not 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 on 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.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: Okay. So we will move with another question coming from Mariano Andre from Clave Capital. Mariano, we will unmute you and you can ask your question. Thanks.

Mariano Andre, Analyst, Clave Capital: Thank you very much. Hello, everybody. Two points I would like to clarify. One is when you mentioned the comparison of cash flows first half twenty twenty three against first half twenty twenty four, 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 heaviest commitments you have to honor? Thank you.

Ernesto Gonzalez, Analyst, Morgan Stanley: I

Gabriel Lasi, Chief Financial Officer, Telecom Argentina: just I will answer maybe I am not quite sure if I understood properly the first part of the question, but I’ll 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 $35,000,000,000 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.

And by the month of February, they established a mechanism allowing the company to pay those creditors by the acquisition of specific bonds that were issued for that purpose, the name Bop Real. The company went to that system. We acquired with pesos those bonds. Our total outstanding originally was $200,000,000 At present, we have less something in the range of $60,000,000 pending of negotiation, the processes that you get in negotiation with the supplier or you may give them the bonds directly. They are totally nominated or you can sell the bonds and we can sell the bond against dollars and pay for the dollars.

All the difference between the present outstanding of $60,000,000 about $60,000,000 you can, okay, 60,000,000 And the $200,000,000 originally was already fully paid with no loss for the company, meaning that 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, these negotiations have like three different brackets or group. One is the group of suppliers that we are constantly making transactions with them that we are acquiring and we have a very fluent relationship that’s part of the business.

Everybody understands what it entails to do business in Argentina from time to time. The second group of suppliers might be more precise or with other type of considerations.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: We will, will

Gabriel Lasi, Chief Financial Officer, Telecom Argentina: say, is debating with them and reaching the final agreement. Up to now, no price difference was 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 had a clear picture and it 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 no, we don’t expect any significant outcome on that. That explains 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 to something in the range of two years ago or even more, probably three, 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 and to gain tenure and decrease cost. And that was what happened. The company about onethree of our debt, typically, like in the range of $1,000,000,000 prior to this liability management is multilateral debt with different type of loans. All of them are floating are pre cancelable loans. Then we have about onethree of the debt is local debt in the local capital market, which has been issued during the last two years at minus something, in average, minus 10% rate, dollar adjusted.

The last issuances you have them in the presentation, the rate has been or the yield has been in the range of 23%. That debt, 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 would last forever as monetary policy normalize and Banco Central is getting more rational and more logic, all the 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 two 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 $1,300,000,000 of total consideration. 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 one years, point 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 also lowered. So you might think that as Argentina becomes better in better shape and the conditions gets better, might continue to be in the market as a part. Also important to address for our investor base is that the company listed a self 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 in 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.

Cristobal Duago, Manager of Investor Relations, Telecom Argentina: 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

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.