Earnings Labs

Telecom Argentina S.A. (TEO)

Q1 2024 Earnings Call· Sat, May 11, 2024

$11.18

-0.36%

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Transcript

Luis Rial Ubago

Operator

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 Nobile, Chief Executive Officer; Gabriel Blasi, Chief Financial Officer, and myself, Luis Rial Ubago, Head of Investor Relations. The purpose of this call is to share with you the results of the first quarter ended on March 31, 2023. If you have not received a press release or presentation, you can call our investor relations office to request the documents or download them from the Investor Relations 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 quarter. 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 economic conditions and in legislation. Our press release, a copy of which was included in a 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 Comision 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 as of and including December 31, 2018. Accordingly, the reported figures corresponding to the first quarter 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 next 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, CFO, who will start with the presentation.

Gabriel Blasi

Analyst

Thank you, Luis. Good morning, and welcome to everyone. Slide 3 summarizes our highlights as of March 31 of 2024. Our main operational and financial achievements were our EBITDA margin during the first quarter of '24 was 30.3%. Thanks to our effective cost management and pricing strategy, our margin remained steady in a year-over-year basis despite the challenging macroeconomic environment. In the first quarter of 2024, our CapEx was approximately $122 million equivalent to 15% of our revenues. The current focus of our CapEx is on expansion of our FTTH technology, as well as expanding our mobile network and developing 5G. Our cash flow generation remains strong. During the first quarter of 2024, we were able to generate approximately $116 million in free cash flow before dividends and interest payments. Due to the real appreciation of the peso observed during the first quarter of 2024, we've registered a net income profit of ARS675 million associated with real exchange differences gains included in our financial results. This is mostly generated by the effect of macro variables over our debt in U.S. dollars. Our mobile subscriber base continues to grow increasing over 3% year-over-year. Mobile data usage measured in average monthly gigabytes per user has grown 21%. In broadband, our FTTH accesses keep growing rapidly. And during the last quarter, they have contributed to increase our customer base, while our HFC network has remained mostly stable. Flow unique customers reached almost 1.5 million increasing 12% year-over-year. Additionally, our Pay TV businesses continue to grow in Paraguay. Our FinTech, Personal Pay holds a relevant market position reaching more than 2.5 million onboarded clients as of March 2024, while consolidating as the second player in the market in terms of clients' remunerated account balances. We registered a strong improvement in our financial net debt…

Luis Rial Ubago

Operator

Thank you very much Roberto. In Slide 10, we provide an overview of our main financial figures. Consolidated revenues grew by 207% on nominal terms during 2024, reaching more than ARS615 million. When analyzing said figure adjusted by inflation, revenues amounted to almost ARS684 million, showing a decrease of 18% in real terms versus the same period in 2023. We increased our prices, but we also focused on maintaining our subscriber base. And in this sense, the lack of inflation in our revenues is explained among others by the effect of certain discounts and promotions we granted price increases to retain our customers in a strong competitive environment. EBITDA increased by 228% year-over-year in nominal terms, generating a nominal EBITDA margin of 32.8% and '24. In turn, EBITDA margin in real terms was 30.3%. Additionally, our operating costs before D&A have also grown below inflation, decreasing 18% in real terms versus the 1Q of 2023. We have continued to manage our cost structure to reduce the impact of inflation. OpEx in U.S. dollars represented 13.5% of our total operating expenses as of the first quarter of 2024. In March 2024, we reached the fourth quarter in a row, maintaining or increasing our quarterly margin compared to the same period of the year before. This is a good indicator that our pricing and cost management strategies are guiding us in the right direction, taking into account the difficult macroeconomic situation in Argentina. Slide 11 shows the evolution of EBITDA year-over-year and the impact of different components of revenues and costs. During the first quarter of 2024, the company was able to contain the pressure coming from inflation in most of its cost lines, as most of them experienced a decrease or remained in line when compared with inflation. Particularly, we had…