Conference Call Presentation

Transcription

1 Telecom Argentina 3Q16 EarningsRelease Conference Call Presentation

2 Disclaimer This presentation may include statements that could constitute forward-looking statements, including, but not limited to, the Company s and it s management expectations for the Company s future performance, revenues, income, earnings per share, capital expenditures, dividends, liquidity and capital structure; the impact of the emergency laws enacted by the Argentine government; and the impact of rate changes and competition on the Company s future financial performance. Forward-looking statements may be identified by words such as believes, expects, anticipates, projects, intends, should, seeks, estimates, future and other similar expressions, but they are not the only way the Company identifies forward-looking statements. Forward-looking statements involve risks and uncertainties that could significantly affect the Company s expected results. Due to extensive and rapid changes in laws and economic and business conditions in Argentina, it is difficult to predict the impact of these changes on the Company s financial condition. Other factors may include, but are not limited to, the evolution of the economy in Argentina, growing inflationary pressure and reduction in consumer spending and the outcome of certain legal proceedings. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as the date of this document. The Company undertakes no obligation to release publicly the results of any revisions to forward-looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in the Company s business or to reflect the occurrence of unanticipated events or as a result of new information or otherwise. Information included in this presentation is unaudited and may not coincide with that included in the financial statements of the Company, due to rounding, reclassification matters, and other reasons. Readers are encouraged to consult the Company s Annual Report and Form 20-F as well as periodic filings made on Form 6-K, which are filed with or furnished to the United States Securities and Exchange Commission and the Argentine Comisión Nacional de Valores. 1

3 Agenda Macro Overview Business Highlights Financials Q&A 2

4 Macro: Recovery lays still ahead, while inflation begins to reduce External Front Central Bank Reserves (Billion U$S) Q16 2Q16 3Q16 FX Rate Official FX Rate Blue FX Rate Closing of the gap Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul Pre - electionary period Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Unification of Exchange Rates Apr-16 May-16 Jun-16 Jul-16 International Reserves showed a decrease of U$S 0,6 Bn during 3Q16, mainly explained by net debt payments in foreign currency and a reduction of financial institutions minimum cash deposits in CB, partially offset by lower net foreign currency purchases 3Q16: Partial cancellation of Jan-16 Repo agreement of U$S 4BN (of total U$S 5BN outstanding) Aug-16 Sep Mean -3Q16 = Mean -1Q16 = Mean -2Q16 = Official FX (BCRA) Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Managed Floating Exchange Rate Regime during 1H16 Strong influence of monetary policy and interest rates. Average nominal FX was higher during 3Q16. The Peso showed some level of average depreciation, but with a stable trend around levels of AR$ 15 to U$S 1. CB was less prone to intervene directly in FX markets. Trade balance achieved a surplus of almost U$S 2,1Bn during, responding mostly to a decrease on cumulative imports YoY. 3

5 Macro: Recovery lays still ahead, while inflation begins to reduce Domestic Activity & Inflation Householdconsumption * 3.6% -4.4% 3.6% 1.6% * Revisedofficialfigures as of 2Q16-0.1% -5.0% Q16 2Q16 3Q15e CPI measured by private consultants rose to 37.9% YoY, signaling that inflation is beginning to slow down. Although measures were influenced by the reversal of gas tariffs increases due to a Supreme Court ruling, core inflation fell to 1.4% MoM as of Sep-16. CB announced its intention to implement Inflation Targeting in Overall household consumption continues to show a declining trend that can be observed from early 2016, explained mostly by important increases in prices, and changes in public service tariffs that affected real wages CPI (YoY) 26.5% Consumer Price Index (FIEL) 40.6% 27.2% 32.8% 41.7% 37.9% Still amid high levels, inflation began to decelerate Economic activity per sector Electricity, gas & water Social services & Healthcare Real Estate Public Admin & Defense Transport & Communications Minery Financial interm. Manufacturer Industry Retail & Wholesale commerce Agriculture Construction Total Q16 2Q16 3Q16 Economic activity continued to slowdown in, almost all sectors are decreasing their output with construction and agriculture leading the decline. Industrial production continues to show a weak performance, registering a decline of 5.0% in.

6 Agenda Macro Overview Business Highlights Financials Q&A 5

7 Highlights BUSINESS Mobile - Sustained growth driven by Data& Internet Maintaining Solid position in value segments: postpaid +4% YoY representing 33% of CB Internet consumption increase as MBOU up +65% to 1,033 Mb per user per month Successful 4G rollout continues: Million customers are enjoying 4G locations around the country - 4G users consumption +125% to 1,8Gb Data Penetration grew by 10% achieving 8.8 million monthly unique users Fixed Expanding position in key segments Growth in BB: 6Mb subs add 156k clients, an increase of 29% vs 2Q16; 10 MB subs = 33% of CB vs. 25% in 3Q15 ARPU +25% vs. 3Q15 Voice: ARBU amounted to P$105, +51% vs 3Q15 thanks to price adjustments in monthly fee in retail and business segments FINANCIALS Revenues up 36% in Service Revenues growth of 30% in Argentina, mainly driven by: -Mobile Internet (+77% in 3Q16: from 74% in 2Q) -Broadband & Fixed Data (+42% vs. ) EBITDA increased by 33% achieving a 26% profitability, in a challenging scenario, but reverting the trend of recent quarters Relevant improvement in dividend payment with an exceptional payout ratio of 59% and a P$2.06 DPS - A cash dividend distribution took place as from August 26, 2016 for an amount of P$1,300 million An agreement with the IFC was reached for a loan of U$S 400 million. This allows to change the tenor of the debt CORPORATE GOVERNANCE Pursuant to Argentine Law Nº 26,831, a Public Tender Offer was announced by Fintech Telecom, LLC ( Fintech ) as a result of a change of control Tender Offer in Argentina expired on Nov, 4 and US Tender Offer will end on Nov, 23 6

8 Group Revenues: Accelerated pace as a result of incremental usage and price adjustments Retail Fixed Voice GROUP REVENUE MIX 8% 9% Retail Fixed Voice 40% Broadband & Fixed Data +42% BB and Fixed Data 16% 17% 2,379 3,333 4,563 6,484 Retail Mobile 52% 49% Wholesale Handsets Paraguay 7% 6% 13% 15% 4% 5% Retail Mobile +28% Mobile Internet in Argentina +77% Traditional fixed services % on Total Rev 7.1% 7.5% 14,768 18,855 1,594 2,827 Revenues YoY +18% +36% 3Q15 3Q16 Figures may not sum up due to rounding 7

9 Fixed Upselling strategy pushes UBB connections Thousand of clients Most demanded Speeds 6Mb subs. 36% +156k; +29% BB ARPU & Churn +25% % 1.4% 1.4% 1.7% 1.4% 3Q15 4Q15 1Q16 2Q16 3Q16 3Q15 4Q15 1Q16 2Q16 3Q16 Data / ICT Revenues Monthly Churn ARPU (P$) 10Mb subs. 34% IFRS Million of P$ +21% +65% +47k; +9% ,470 1,780 1,290 2,133 3Q15 4Q15 1Q16 2Q16 3Q16 % of CB 25% 27% 28% 31% 33% FY14 FY15 Data / ICT RevenuesincreasedduetotheFX variationin contracts thatare set in dollars 8

10 Fixed Price Adjustments resulted in ARBU increase ARBU P$/Month % Drivers of ARBU Increase Price Adjustments 2016 Business Segment August 2015 February 2016 September 2016 Residential Segment May Q15 4Q15 1Q16 2Q16 3Q16 Lines in Service Thousand of lines PENETRATION (*) BB Accesses/ Total Lines in Service LATAM AVG ARGENTINA 44% 46% 60% 80% 3Q15 4Q15 1Q16 2Q16 3Q16 3Q15 3Q16 (*) Household Penetration Source: OVUM 9

11 Mobile in Argentina: Improved customer profile through growth in value customers and data centric plans Browsing SMS + Content Voice Customer Base (Mill) % 38% Postpaid Service revenue mix 33% 25% Prepaid % 37% Data penetration Monthly unique users in million Total Data Usage MBOU/month Data Centric Plans +6% +14% 10% +65% ,033 1Q16 2Q16 3Q16 QuotaResetsgrewby85% vs 2Q16 Figures may not sum up due to rounding 1. Includes Dongles 3Q Q16

12 Mobile 4G Rollout and KPIs COVERAGE CONSUMPTION COVERAGE OF THE TOTAL CAPITAL CITIES AND AMBA Average Gb per user COVERAGE OF POPULATION IN CAPITAL CITIES Type of clients Top Sites CUSTOMERS Evolution of 4G subs DOWNLOAD SPEED 3Q15 4Q15 1Q16 2Q16 3Q16 Location AMBA (*) BUENOS AIRES SANTA FE CORDOBA 24% 19% 11% 9% OF THE TOTAL TRAFFIC IS DONE BY 4G CLIENTS (*) AMBA: Metropolitan Area of Buenos Aires 11

13 Capex: Network deployment to increase capacity and coverage. 4G main driver of investment Capex Evolution Million of P$ Spectrum +13% 8,957 10,100 3,530 2,256 5,427 7,844 2,256 4, % 7,699 Total New Sites +78% FY14 FY15 % Revenues (without Spectrum) 16% 19% 16% 20% Technical Capex breakdown New 4G Sites FTTx * Core & infrastructure refers to network related capex, including quality and innovation capex +77% ~5x 45% 16% 27% 12% Mobile Access Fixed Access Core & Infrastructure* IT Figures may not sum up due to rounding 12

14 Agenda Macro Overview Business Highlights Financials Q&A 13

15 TEO Group: Consolidated Results Revenues IFRS, Million of P$, Percentage EBITDA IFRS, Million of P$, Percentage +21% +36% 38, % +33% 10,208 33,341 40,496 28,590 10,094 9,624 13,412 3Q16 7,664 33% 3,453 3Q16 35% 12,951 2Q16 2,529 10,866 8,702 2,501 37% 34% 3,361 2Q16 8,872 40% 12,455 1Q16 2,634 29% 3,394 1Q16 FY14 FY15 FY14 FY15 EBITDA Mg 26% 27% 27% 26% ServiceRevgrowthin Argentina (yoy) 24% 24% 30% 31% 30% EBITDA Margin Trend 1Q15 2Q15 3Q15 30% 26% 25% 27% 26% 26% 3Q15 4Q15 1Q16 2Q16 3Q Q16 2Q16 3Q16

16 TEO Group: Consolidated costs and EBITDA evolution EBITDA Margin 26.8% -2.2% +0.4% -0.1% +0.2% +1.2% +0.8% -0.8% 26.3% As % of Revenues 12% 5% 19% 10% 9% 9% 10% Others include bad debt expenses, provisions, VAS costs and others Figures may not sum up due to rounding 15

17 TEO Group: Consolidated Results Operating Income IFRS, Million of P$, Percentage Net Income attributable to Telecom 5,443-7% +14% +24% -10% 5,523 2,757 4,459 2,471 1,802 3Q16 37% 801-7% 1, ,229 3,673 1,724 3,403 1,468 17% 2Q % 800 3Q16 2Q16 1,680 19% 1,997 1Q16 1,028-10% 925 1Q16 FY14 FY15 FY14 FY15 O.Income Margin Net Income Margin 16% 15% 16% 14% 11% 8% 10% 6% 16

18 TEO Group: Net Income Evolution IFRS, Million of P$ Price effect on Financial Results NET DEBT Quantity Effect on Financial Results Spectrum payments (700Mhz Bands, Jun-15) Dividend payments (May- 15, May -16 and Aug-16) 1,586 7,157 ene-15 feb-15 mar-15 abr-15 may-15 jun-15 jul-15 ago-15 sep-15 Official FX oct-15 nov-15 dic-15 ene-16 feb-16 mar-16 abr-16 may-16 jun-16 Interest Rate (BADLAR) jul-16 ago-16 sep-16 * Total Net Income includes the part attributable to Telecom and the non-controlling interest 17

19 TEO Group: FCF, Net Financial Position IFRS, Million of P$ - Last 12 months Free Cash Flow Operating free Cash Flow 13,410 11,008 2,970 EBITDA Capex Δ WK & others Free Cash Flow = -2,277 DIVIDENDS On Aug-16, the second cash dividend payment to shareholders was completed for an amount of P$1,300 million. Total dividend payment for 2016 amounted to P$2,000 million which implied a payout ratio equivalent to 59% and P$2.06 per share or P$10.3 per ADR. Payout Ratio LATAM TEO 6-Year Avg* % 25% 43% 59% Steady retribution to shareholders throghout the years *Considering Payment Year, over period Notes: (1) OFCF: Operating Free Cash Flow before Taxes (2) Includes P$25 Million related to Nucleo dividend payments to third parties, net of income tax 18

20 Financial strength: Robust cash flow generation, strong balance sheet and solid coverage ratios Net Debt/ EBITDA Leverage 13,410 10,866 7,564 8, x -5, , x 0.2 x 0.5 x 7, LTM Regional Averages USA Europe LATAM TEO Net Debt / EBITDA Interest Coverage x 2.2x 2.3x 14.3x 10.0x 10.4x 2.8x 3.5x 4.2x 5.9x 4.9x 3.6x 0.9x 1.2x 1.5x 18.9x 9.8x 9.0x -0.7x -0.1x 0.2x 444.9x 290.1x 19.2x Interest Coverage EBITDA Net Debt Net Debt / EBITDA x x 8,702 7, ,410 10, x 9.0 x 1, LTM EBITDA Interest Expense Interest Coverage Telecom Argentina has maintaned low levels of financial leverage when compared to regional benchmarks Indebtnesshas increasedsincethe2 nd stage of frecuency allocation corresponding to the 2014 Spectrum Auction 19

21 Agenda Macro Overview Business Highlights Financials Q&A 20