Telecom Argentina SA (NYSE:TEO) This autumn 2021 Earnings Convention Name March 10, 2022 10:00 AM ET
Firm Individuals
Gabriel Blasi – CFO
Convention Name Individuals
Marcelo Santos – JPMorgan Chase & Co.
Unidentified Firm Consultant
Good morning. On behalf of Telecom Argentina, I want to thank everyone for taking part on this convention name. The members of at this time’s convention name are Roberto Nóbile, Chief Government Officer; Gabriel Blasi, Chief Monetary Officer; and myself [indiscernible]. The aim of this name is to share with you the outcomes of our fiscal 12 months 2021 and fourth quarter and December 31, 2021. You probably have not acquired our press launch or presentation, you may name our Investor Relations workplace to request the paperwork or obtain them from the Investor Relations part of our web site situated at inversores.telecom.com.ar.
I want to go over some secure harbor data and different particulars of the decision. We want to make clear in the course of the convention name and Q&A session we may point out sure forward-looking statements about Telecom’s future efficiency, plans, methods, and aims. Such statements are topic to uncertainties that would trigger Telecom’s precise outcomes and operations to vary materially. Such uncertainties embody, however are usually not restricted to, the consequences of mixing business and financial shows, doable adjustments within the demand for Telecom’s services, the impact of potential adjustments basically market and different financial circumstances in laws and the impression of the outbreak COVID-19 on the worldwide economic system and particularly on the economies, the international locations by which we function in addition to our operations and monetary efficiency.
Our press launch dated March 9, 2022, a duplicate of which was included in our Kind 6-Okay and despatched to the SEC, describes sure elements that will have an effect on any forward-looking statements that could possibly be talked about throughout this name. The corporate has mirrored the consequences of the inflation adjustment adopted by Decision 777/18 of the Comisión Nacional de Valores or CNV, which establishes that the re-expression might be utilized to the monetary statements for intermediate and particular intervals ended as of and together with December 31, 2018. Accordingly, the reported years similar to fiscal 12 months of 2021 included the consequences of the adoption of inflationary accounting in accordance with IAS 29.
On this presentation, we will even embody figures in historic values, that are simpler to grasp. Our press launch is complemented by our earnings presentation. The viewers ought to learn the disclaimer contained in Slide 1 and Slide 2 of the presentation. The agenda for at this time’s convention name contains our enterprise and monetary highlights, and we’ll finish the decision with a Q&A session.
Now let me go the decision to Gabriel, our CFO, who will begin with the presentation.
Gabriel Blasi
Shifting to Slide 3. Thanks, Luis. I’ll attempt to summarize our highlights for fiscal 12 months 2021. Our important manufacturers have been consolidated beneath private move and telecom. We elevated our costs throughout 2021 based on native inflation. Our 2021 annual CapEx amounted to $833 million, and our CapEx to income ratio was 20.1%, properly above business requirements. We’re investing in the very best know-how to take care of the strong efficiency of our community. We have now achieved an EBITDA margin of 31.2%, persevering with with our price discount initiatives regardless of the upper native inflation. Our unhealthy debt is presently 1.9% of our whole revenues, lowering considerably in opposition to 2020. This determine is presently beneath business requirements within the nation, too. Our fintech firm, Private Pay is now obtainable for android customers and presently has greater than 14,000 registered shoppers.
Supporting our workers by way of COVID-19 has been and can stay being a high precedence. We have now elevated the variety of shoppers versus fiscal 12 months 2020 in our 3 important merchandise. Núcleo, our subsidiary in Paraguay, continues to point out a strong efficiency as revenues and EBITDA proceed rising in laborious forex. Our important debt maturities in 2021 has been refinanced or repaid. Our money move technology is powerful. We have now been very profitable tapping the native market with each issuances in pesos, inflation-adjusted or dollar-linked bonds.
We proceed to investigate further drivers of development in relation with our business, each in Argentina and/or overseas. We’re very a lot targeted on enhancing our ESG requirements, making an allowance for finest tax practices. We have now launched a brand new IR web site, enhancing the way in which we talk with our buyers. We additionally improved our vendor financing sources, primarily via China Growth Financial institution, Export Growth Canada, Finnvera amongst others, in course.
Shifting to Slide 4 exhibits the corporate figures to fiscal 12 months 2021. Telecom’s revenues totaled $4.1 billion. Revenues measured in fixed pesos grew 7% year-to-year. EBITDA technology remained robust, totaling $1.3 billion. Our EBITDA margin was 31.2%. Telecom cellular subscribers in Argentina amounted to twenty.1 million, rising in virtually 1.7 million whole shoppers when in comparison with fiscal 12 months 2020. Broadband and Pay TV shoppers have additionally skilled enhance year-over-year totaling 4.2 million and three.6 million, respectively.
Mounted voice subscribers with out contemplating IP telephony strains amounted 2.4 million throughout fiscal 12 months 2021. Our industrial technique has allowed us to extend our whole convergent distinctive clients to 2.1 million from 1.9 million versus fiscal 12 months 2020, whereas presently 49% of our broadband clients have a cellular bandwidth.
Lastly, turning to our regional operations. We have now 2.2 million cellular subscribers in Paraguay and 135,000 Pay TV shoppers in Uruguay. Slide 5 present the evolution of native inflation. 12 months-over-year inflation in Argentina as of December ’21 has been of fifty.9%. As demand inflation in January 2022 was 3.9%, we envisioned that the native inflation will stay excessive throughout 2022. The impression of our business and inflation index is just 2.8%, as you may see within the decrease a part of the graph. Due to this fact, the impression of our sector on sale index isn’t significant.
Slide 6 present our worth adjustment throughout 2021 and in January 2022. In cellular, costs have elevated 50% for postpaid plans and in related share for pay as you go. Within the final half of December, primarily impacting 2022, the rise of our postpaid and pay as you go cellular are 15% and 16%, respectively. In broadband, the costs of our DXL Providers have elevated 42% throughout 2021 and 16% in January 2022. Costs of our HFC and FTTH companies elevated by 43% in 2021 and 13% in January 2022.
Our pay TV costs subscription have elevated by 43% throughout 2021. Extra companies, akin to soccer pack and premium channels have elevated as much as 49% throughout the identical interval. In January 2022, our subscription for our pay TV companies will increase by 13% whereas further companies elevated by 15%. Costs of fastened voice fundamental companies had been elevated by 29% on common in 2021 and 16% in January 2022.
Shifting to Slide 7, we present the evolution of our merchandise. On the cellular phase, postpaid subscribers have elevated in virtually 500,000 shoppers or 6.4%. Pay as you go subscribers have elevated in 1.2 million shoppers or 11.2%. Our postpaid and pay as you go shares are 41% and 49%, respectively. Broadband accesses have elevated in virtually 90,000 and a pair of.2 year-over-year, primarily rising within the HFC and FTTH segments. In pay TV, we obtained 700,000 new accesses, which signify a rise of 0.5%, principally leverage on the efficiency of our Circulation platform. In fastened voice, the discount of accesses has continued primarily in conventional fastened copper strains. Alternatively, our IP telephony accesses have elevated in additional than 370,000 strains.
Shifting to Slide 8 exhibits the evolution of our service revenues. Service revenues totaled virtually ARS 396 billion, lowering 7.7% in actual phrases versus fiscal 12 months 2020 in a interval the place inflation was 50.9%. Our income breakdown as of December 2021 present a rise within the participation of handset gross sales and a lower in fastened telephony and information companies when in comparison with December 2020. The breakdown is as follows: cellular revenues, 38%; broadband revenues, 21%; pay TV revenues, 19%; fastened telephony and information revenues 14%; tools gross sales income 7%.
If we transfer to the next slide, we describe the principle developments in our cellular and broadband companies. As of December 2021, postpaid subscribers amounted to 41% of our whole buyer base. The chart within the higher left exhibits the aggressive panorama wi-fi per 30 days. Private is in blue collar, constructive numbers present incoming shoppers and unfavourable numbers of shopper loss in opposition to the competitors. Throughout 2021, Private has a constructive internet influx of cellular shoppers. Cellular Web utilization has continued rising, reaching a mean of greater than 4.2 gigabytes per consumer per 30 days in 2021.
As well as, there was an vital enhance in broadband speeds. 70% of our whole subs have a break up between 50 and 1,000 megabytes per second evaluating with 59% throughout our fiscal 12 months 2020. This was primarily defined by the expansion in HFC and FTTH connections. The aggressive benefits of our community and merchandise are summarized within the following slide.
On 3 important strategic. Our 3 important strategic belongings are broadband, Circulation as our IP TV service and cellular. Our broadband community has the very best protection across the nation, persistently enhancing service. Common pace reached 85% — 85 megabytes per second within the case of our FTTH community and 81 megabyte of our HFC know-how, passing via 60% of whole houses within the nation.
Circulation is our premium IPTV product and is presently a gathering level for leisure, permitting shoppers to have direct accesses to video, music, gaming and a pair of different main streaming functions out there. Our cellular community is the quickest within the nation, reaching virtually 98% city protection and with the very best obtain, add pace as measured by pace take a look at throughout December 2021.
Slide 11 exhibits the evolution of our enterprise in Paraguay. Núcleo subsidiary producing $206 million and $100 million in revenues and EBITDA, respectively, throughout fiscal 12 months 2021, rising by 11% and 22% in laborious forex, respectively. Income breakdown was as follows: looking companies, 45%; voice, 16%; information, 7%; broadband 15%; TV companies 8% and different companies with roughly 9%. As of December 31, 2021, cellular clients totaled 2.2 million. Shoppers of [indiscernible] Private and cellular monetary companies that our subsidiary offers reached virtually 280,000. Mounted Web companies subscribers amounted to greater than 196,000, rising 50% versus the fiscal 12 months 2020.
The pay TV phase Circulation buyer totaled 33,000 and in Private HD 56,000. The fastened community deployment in the principle cities of Paraguay has been rising quickly, rising 25% throughout fiscal 12 months 2021 and reaching 569,000 houses handed.
I’ll now go the decision to [indiscernible], who will go over our monetary efficiency. Thanks, Luis .
Unidentified Firm Consultant
Thanks, Gabriel. On Slide 12, we offer an outline of our important monetary figures. In the course of the fiscal 12 months of 2021, consolidated revenues grew by 39% on nominal phrases, reaching ARS 357.3 billion. When analyzing mentioned determine adjusted by inflation, revenues amounted to greater than ARS 425 billion, exhibiting a lower of seven% in actual phrases. Service revenues present as 37 nominal enhance. It’s value mentioning that our costs had been frozen from March 2020 to December 2020. EBITDA elevated by 29% year-over-year in nominal phrases, thus producing an EBITDA margin of 31.9%. EBITDA margin in actual phrases was 31.2%.
Working prices earlier than D&A decreased by 2% in actual phrases versus fiscal 12 months 2020 as the corporate continued to handle the associated fee construction. Slide 13 exhibits the corporate’s EBITDA and the impression of the totally different parts of revenues and prices. Working prices had been 2% decrease in actual phrases. Throughout 2021, the corporate managed its price construction in an environment friendly method as virtually all of our prices announce expertise a lower or stay in line when evaluating inflation. The exception being labor and handset prices. Salaries will increase with unionized and nonunionized workers had been in step with inflation vary between 45% and 55%. Price of handsets bought elevated primarily as a result of enhance in costs and better gross sales gadgets in Argentina.
You will need to point out that our unhealthy debt expense decreased by 51.1% versus fiscal 12 months 2020, because of our robust technique adopted by the corporate to enhance its assortment effectivity. Our share of unhealthy debt associated to whole gross sales may be very low, 1.9% versus 3.6% in fiscal 12 months 2020, and our collections are performing usually.
In Slide 14, we present the evolution of our important enterprise drivers in 2021 in comparison with the evolution of inflation. Within the first half of 2021, our service revenues grew above inflation as we elevated our costs in a mean 20% in January and 10% in June. In the course of the second half of 2021, whereas inflation accelerated, we elevated our costs to match the evolution. New wage agreements for the 2021, 2022 interval elevated or had been closed and elevated our labor prices.
In Slide 15, the corporate’s internet revenue totaled ARS 9.9 billion when EBIT was unfavourable in actual phrases. The EBIT lower in fixed measuring unit is defined by the rise in D&A disposals and impairment of fastened belongings, which elevated virtually 9% in actual phrases year-over-year. The rise was defined by PP&E and intangible belongings out throughout 2021. Primarily as a result of D&A enhance and the inflation adjustment working margins had been minus 0.7% of consolidated revenues, whereas in historic figures, the identical margin was 18%.
In fiscal 12 months 2021, the corporate had a internet revenue of ARS 9.9 billion, primarily as a consequence of constructive important monetary outcomes ARS 45.6 billion, partially offset by an revenue tax cost of ARS 33.3 billion. The constructive monetary outcomes had been pushed by an enchancment in FX leads to actual phrases and inflation adjustment positive aspects whereas the revenue tax determine features a greater cost coming from the rise within the tax charge imposed by the native IRS.
Slide 16, exhibits a abstract of the corporate’s CapEx in PP&E and intangible belongings throughout fiscal 12 months 2021, which amounted to greater than ARS 85 billion for an equal of $833 million the official FX charge. This quantity is nearly 2% greater when in comparison with the identical final 12 months interval. Our consolidated quantity of CapEx amounted to twenty% of our whole revenues, which is an important ratio based on world business requirements. Technical CapEx had been primarily composed of installations and buyer tools or CPE. The stability was allotted to community and know-how and to our worldwide operations in Paraguay and Uruguay.
Throughout 2021, 212 new cellular websites had been deployed, greater than 2,216 present websites had been upgraded. We expanded our FTTH community over 10,600 new blocks. Moreover, we carried out an overlay with FTTH in 4,400 plus HFC networks. We additionally elevated the capability of HFC entry community, primarily into segmentation of areas. Moreover, we proceed with the deployment of the primary 5G community in Argentina on the new websites. We presently have 20 websites situated in Buenos Aires metropolis, Rosario and Atlantic Coast.
Slide 17 describes our money move technology throughout fiscal 12 months 2021 in contrast with the identical interval of 2020. Our money move technology is presently very strong. In 2021, the working free money move amounted to roughly $527 million equal. The variation versus fiscal 12 months 2020 is especially defined by the lower in our EBITDA in actual phrases.
Slide 18 exhibits key figures for the fiscal 12 months 2021 in fixed measuring unit. Our gross debt amounted to ARS 266.7 billion as of December 31, 2021, lowering 11.2% from December 2020. The corporate has money and equivalents for nearly ARS 31 billion, having a internet debt of ARS 236 million. Our internet debt-to-EBITDA ratio is 1.78x, remaining comparatively secure versus fiscal 12 months 2020.
Slide 19 exhibits our quarterly evolution of some key ratios. Our unhealthy debt to revenues ratio had a constructive evolution in 2020, the place it reached ranges of 4%, primarily as a consequence of COVID-19. CapEx revenues has been rising because the first quarter of 2020, remaining above 70% which is the typical ratio for the business. Gross debt to EBITDA remained in ranges decrease than 2x, whereas internet debt to EBITDA was decrease than 1.8x. Each ratios have been very strong compared with [indiscernible].
Slide 20 exhibits the breakdown of economic debt. Our legal responsibility administration transactions have been extraordinarily profitable. Whole excellent debt as of December 2021 amounted to $2.5 billion. As we now have completed in 2020, we now have refinanced our loans with IDB and IFC in December 2021. We have now prolonged our 2022 and 2023 maturities of [indiscernible] loans to new maturity [indiscernible] loans ending in 2024 and 2027.
Our 2022 and 2023 debt maturities are very managed with virtually 35% of our debt in these years being denominated in pesos. On account of worldwide capital market circumstances, we’re presently anticipating to proceed accessing the native capital markets for any vital financing want that we might have throughout this 12 months.
Slide 21 summarizes the monetary transactions that we now have completed in 2021, exhibiting how the corporate anticipate its financing wants, acquiring new sources of financing. Over the past 12 months, we efficiently accomplished the issuance of Class 8 to 11 notes, issuing peso denomination — peso inflation adjusted greenback bonds.
Núcleo Paraguay accomplished the issuance of Sequence 4 and Sequence 5 notes. We additionally closed 2 new export charge amenities. The primary one assured by Finnvera in Might 2021, and the second by the Export Growth Canada, or EDC, in January 2022.
Lastly, on December 15, 2021, we refinanced the loans with IFC and IDB altering the amortization schedule and greater than doubling the typical plant. With this, now we’re greater than happy to reply any questions you’ll have. Nonetheless, earlier than we begin, we want to remind you how one can tackle your questions in the course of the Q&A session, which we’ll open instantly. [Operator Instructions].
Query-and-Reply Session
A – Unidentified Firm Consultant
We have now a query coming from Marcelo Santos from JPMorgan.
Marcelo Santos
I’ve two. The primary one is in the event you may present a CapEx outlook for the 12 months of 2022 and what would that depend upon? Normally, you have talked about like relying on how issues go, you be greater or decrease. So in the event you may present that regular vary, that might be very helpful. And the second is in addition to this worth enhance that you’ve got performed in January, what could be the following one? Would that be one in June as properly this 12 months?
Gabriel Blasi
I will tackle the CapEx. Effectively, thanks in your query, Marcelo. Relating to the CapEx quantity for this 12 months, in fact, it will likely be very associated to the overall evolution of Argentina by way of what CapEx with international alternate charge and the reliability of {dollars}. Though we now have good entry so far to U.S. {dollars}, and we now have loads of sources of financing, we will not escape from the overall state of affairs of the native market. And that might be clearly one thing we have to regulate. Having mentioned that, I might say that we’re considering within the vary of $600 million as a basic rule. All the time keep in mind that as we now have this, I’ll say momentarily imbalances between inflation and the official international alternate charge, this will likely range considerably. However in the meanwhile, we’re not planning to have at CapEx. I’ll say, fairly totally different to what occurred final 12 months, relying on the overall evolution of Argentina. Right now, we now have an excellent information with the signature with the IMF within the Congress. And naturally, all that can assist to make clear the state of affairs.
The second, I would favor to not offer you simply a sign. We have to all the time advise prematurely our worth will increase with 30 days, that is one thing the corporate does. However I would say that we’re assured that we’re — would possibly find a way as of the current state of affairs to maintain on observe with related state of affairs to what occurred final 12 months by way of worth will increase. In fact, having mentioned this, 2 vital points to think about. One, is that we now have a spot that was generated throughout 2020 once we nonetheless could not get better, that signify about ARS 11 billion pending to totally get better. And the opposite side that you need to having consideration, in fact, is the overall state of affairs of Argentina relating to the pace of inflation.
If inflation quickens, it makes troublesome 12 months for us to catch up. If we predict that the federal government goes to deal with the signature of IMF and what’s proposed there, we would assume that, that state of affairs would possibly change barely within the development, and that can assist us to proceed restoration.
Unidentified Firm Consultant
We now have one other query coming from [indiscernible]
Unidentified Analyst
The primary query was partially answered. So I’ll go on to the second. EBITDA margin was, I imply, hit in 2021, right down to 31.2%, as you talked about. What’s your steering for 2022? I imply do you anticipate these margins to get better slowly and return to extra historic ranges of 24 — 34, I imply, 35%?
Gabriel Blasi
Inacio, thanks in your query. Effectively, though the corporate does not present steering, I’ll attempt to offer you some shade of how we strategy to the EBITDA margin. EBITDA margin is especially — or the form of the EBITDA margin is especially affected, as you for certain see in the event you observe the corporate quarter-to-quarter, it varies considerably once we elevate salaries, or we elevate our costs. These are the two important parts that have an effect on straight the EBITDA margin within the quick run. In such a very robust inflation atmosphere, as you can also think about, these 2 — if they aren’t fully synchronized and they aren’t fully balanced, they may carry sure imbalances within the margin concurrently.
I feel that it’ll depend upon how the inflation tempo within the nation follows. If the nation goes to an acceleration technique of inflation, it might be more durable for us to maintain up with the EBITDA margins as acknowledged. If not, if inflation will get milder, it is a lot simpler for us to go together with that. Having mentioned that, I might say that our expectations in sure method are to maintain EBITDA margins in good well being like final 12 months.
Unidentified Firm Consultant
We have now a following query from Alonso Mesa from [indiscernible]
Unidentified Analyst
I’ve two questions truly. So the primary one is, for me it’s not fairly clear what it says in actual time period, we’re virtually 8% decrease than 2020 [indiscernible] base enhance you had been capable of shut inflation costs. So maybe in the event you can make clear on that. [indiscernible] what are your ideas on subscriber evolution for 2022?
Gabriel Blasi
Effectively, thanks in your query, Alonso, though you have got some echo and I feel that I hear correctly, if not the case, please rephrase. Relating to — sure, as you talked about, whenever you evaluate with the inflation index, our evolution in actual phrases, the corporate revenue diminished 7% or 8%, however I’ll say that comparability isn’t fully honest. As you have got noticed within the presentation, the participation of our companies within the index is fairly delicate, it is lower than 3%, which means that whenever you merely alter by inflation and make the comparability, you might be placing plenty of further parts in inflation which have a really totally different outlook. As for example, meals, which is what has been continually transferring ahead in Argentina at a really robust tempo and has fueled a lot of the inflation tempo.
Having mentioned that, as I recall, it’s so far with sure limits we now have been in a position throughout 2021 to deal with inflation tempo, which means that we now have been fairly constant by way of transferring forward on the similar tempo at inflation. However nonetheless, we’re missing of recovering the hole that was originated in the course of the quarantine in 2020 that was with an entire freeze of costs. That hole nonetheless is pending to be recovered. As I additionally — I already talked about, if inflation tempo will get milder, it is simpler for the corporate to get better that. When the inflation comes down, it is a lot simpler for us to get better these imbalances in the long term. When inflation continues to select up, it is way more troublesome right here for us.
Having mentioned that, I’ll say that we now have — if inflation tempo this 12 months behaves in the same method than final 12 months, which means that it does not pace up its development stage, we predict that we could possibly proceed with this vis-a-vis development dealing with the inflation tempo.
Unidentified Analyst
So you’ll say that 100% of [indiscernible] in gross sales and EBITDA is defined by inflation?
Gabriel Blasi
Okay. Effectively, EBITDA isn’t 100% as a result of our — we even have greenback revenue and greenback bills that are fairly balanced. However 1/3 of the corporate price is labor price, which is straight associated to the salaries will increase and the inflation, the flexibility of the corporate to maneuver the costs may be very associated to how we deal with inflation tempo in our revenues, which this 12 months, 2021, we now have been fairly constant by way of dealing with our price. However as we talked about, when in comparison with the overall stage of inflation within the economic system, we lose 9%. However in the event you make that comparability, for example, relating to meals, the value enhance in meals in Argentina is way, a lot greater. It is in all probability doubling that.
Unidentified Firm Consultant
Effectively, in the meanwhile, we now have no extra questions, and we want to thanks very a lot for taking part in our quarterly convention name. Please don’t hesitate in conducting our Investor Relations division for any additional inquiries you’ll have. Good morning to all and have a pleasant day. Thanks very a lot.