Conference Call Presentation

Transcription

1 Telecom Argentina 3Q15 EarningsRelease Conference Call Presentation

2 Disclaimer This presentation is based on audited financial statements and may include statements that could constitute forward-looking statements, including, but not limited to, the Company s expectations for its 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 or other similar expressions. Forward-looking statements involve risks and uncertainties that could significantly affect the Company s expected results. The risks and uncertainties include, but are not limited to, uncertainties concerning the impact of the emergency laws enacted by the Argentine government which have resulted in the repeal of Argentina s convertibility law, the devaluation of the peso, restrictions on the ability to exchange pesos into foreign currencies, the adoption of a restrictive currency transfer policy, the pesification of tariffs charged for public services, the elimination of indexes to adjust rates charged for public services and the executive branch announcement to renegotiate the terms of the concessions granted to public service providers, including Telecom. 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. 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 Market Overview Business Highlights Financials Q&A 2

4 Slow economic activity with a challenging external sector Economic activity per sector Wages Central Bank Reserves Construction Agriculture Electricity, gas & water Public Admin & Defense Social services & Healthcare Retail & Wholesale commerce Minery Real Estate Manufacturer Industry Transport & Communications Financial interm. 4.3% 4.3% -0.5% Total National Wages - % YoY 24.5% 25.9% 33.7% 32.7% 29.1% 29.6% Q15 2Q15 3Q15e Household consumption CPI(YoY) Trade Balance Consumer Price Index (GCBA) Consumer Price Index (INDEC) 38.0% 26.6% 28.0% 0.8% 0.7% 1.0% 25.5% 24.0% % 16.5% 15.0% 14,4% 43.3 Central Bank Reserves (Billion U$S) Trade Balance (Billion U$S) Last 12 months Q15 2Q15 3Q Q15 2Q15 3Q15e Q15 2Q15 3Q15e Q15 2Q15 3Q The economic activity seems to have entered into a slow recovery phase, mainly due to improvements in Construction, that showed a notorious advance during 3Q15, and Agriculture, that registered a slowdown in 3Q15 coming from a record soybean harvest in volumes at 1H15. Evolution of macroeconomic scenario must be carefully monitored in the coming periods to determine whether growth will consolidate. Industrial production Index (IPI) shows a positive trend, with improvements in metalworking and Food andadeclineincarsandsteel. Argentine external competitiveness was affected by the FX depreciation in Latam and China, partially offset byanupwardtrendevolutionofar$/u$sfxrate Consumer confidence reflected an improvement in comingfromaweak It isexpected that household consumption will maintain a positive performance during 3Q15. Fiscal accounts continue to deteriorate due to increasing public expenditures and subsidies to transport and energy. Fiscal revenues growth is not sufficient to balance the expenditures trend. The CPI Index published by the Federal Government reached 14% YoY meanwhile GCBA measures 24.0% in YoY. As of September 2015, international reserves showed a decrease vs 2Q15, mainly due to CB s interventions to offset further depreciations of the exchange rate. During Oct-15 important maturities (around 5,9B U$S) of sovereign debt (Boden 2015) were cancelled using reserves. Relatively stable FX rate evolution, with a slight acceleration of the nominal depreciation of ARS vs U$S during Sep-15. Trade balance continued to decrease in 3Q15, as exports accumulated 22 months of contraction, due to lower commodity prices and a reduction of volumes in certain items, i.e. industrial manufactures. External sector continues to pose a challenge. Source: MECON, INDEC, FIEL and Company Estimates 3

5 Agenda Market Overview Business Highlights Financials Q&A 4

6 Highlights BUSINESS Commercial Offer oriented towards Data& Internet Solid performance in value segments in 3Q15 Strong smartphone sell out of 98% in line with solid demand at 4G devices, but limited by constraints on imports. Solid growth of alternative sources of devices Pricing scheme simplification with Data Centric Plans Strong performance in 4G: Internet - More than 1MM users - Data consumption 3.6x higher than 2G/3G Internet Mobile users +10% YoY in 3Q15(Usage +75%, ARPU +66%) FixedBroadbandsubs+3%YoY(10Mbsubs25%ofCBvs.13%in3Q14)-ARPU+35%vs.3Q14 FINANCIALS ServiceRevenuesup+21% (vs17%in)drivenby: Mobile internet in Argentina (+87%) Broadband(+40%) in the Fixed Business EBITDA increased by +24% with a positive trend in margins, reaching a 27% profitability. LTMFCFgenerationAR$1,338MM.AfterpayingAR$804MMincashdividendsandAR$5,786MMinSpectrum,in Argentina,NFP(debt) reaches AR$ 1.6 Bn, mostly in local currency Solid hedge strategy with more than 70% of FX exposure covered 5

7 TEO Group Consolidated results Total Revenues, Million AR$, % EBITDA, Million AR$, % +22% +18% 33,341 27,287 24,183 28,590 7, % 8, % 7,664 6,186 FY13 FY14 Service Revenues, Million AR$, % 24, % 28, % 24,968 20,568 FY13 FY14 EBITDA Margin EBITDA Margin FY13 FY14 28% 26% 26% 27% Lower quantity of handsets sold (-35% YoY vs ) due to import limitation in Argentina 6

8 Group Revenues focus on mix and trend AR$, Million Group Revenue Mix Retail Fixed Voice BB and fixed data 9% 8% 14% 16% Retail Fixed Voice 2, % % % 17% 2,379 3Q 2Q 1Q Retail Mobile Wholesale Handsets Paraguay Regulated Rev % on Total Rev 49% 52% 14% 12% 9% 15% 13% 4% 4% 7% 7.4% 7.1% Broadband & Fixed Data +34% 4,563 3,408 35% % % Retail Mobile +25% 14,768 11,816 26% % % Q 2Q 1Q 3Q 2Q 1Q Internet Mobile 2, % 83% 92% 84% 4,283 1, ,188 3Q 2Q 1Q 7

9 Fixed UBB accesses increased significantly in 3Q15 propped by competitive offer BB Accesses BB ARPU & Churn Thousand of broadband accesses, thousand of net adds +64k; +4% +54k; +3% AR$/Month +38% ,707 10Mb subs. 1,771 1,750 1,804 FY13 FY14 3Q14 3Q15 ~2x +54k; +14% 1.3% 1.2% 1.3% 1.4% 1.4% 3Q14 4Q14 1Q15 2Q15 3Q15 Monthly Churn ARPU (AR$) IFRS Million of AR$ Data / ICT Revenues 10Mb % of CB Q14 4Q14 1Q15 2Q15 3Q15 16% 13% 19% 22% 25% +53% 1, , % 1,290 FY13 FY14 8

10 Fixed ARBU sustained thru flat pricing + price adjustment in the monthly fee ARBU AR$/Month In AR$ Lines in Service Thousand of lines 4,106 4,093 4,077 4,064 4, % Q14 4Q14 1Q15 2Q15 3Q15 Market Share* 3Q14 4Q14 1Q15 2Q15 3Q % 46.4% 46.5% 46.5% 46.5% Drivers of ARBU increase: Monthly Fee Tariff increases for Business Clients (17% ofcb) The process of the tariff adjustment contemplated in the Argentine Digital Law has started Continous increase in penetration of packs of services: 81% of customer base *Market share calculated based on Company estimates 9

11 Mobile 3Q15 postpaid migrating to a Data Centric offer Customer Base (Mln) TOWARDS Share of web trafficbydevice Postpaid Prepaid 3Q14 MarketShare 2 33% Q15 33% YoY Source: Stat Counter, Q Hours of connection per user POSTPAID GROSS ADDS >390K 4.4 2, ,2 World Source: GlobalWebIndex, Q42014 Argentina 2Q15 3Q15 1 Figures do not sum up due to rounding 2 Market share calculated based on Company estimates 10

12 Mobile: Focus on data opportunity and revenue securization Revenue Mix Users mix Mobile services revenue mix Bundle Prepaid Prepaid 40% 40% PxQ Postpaid Postpaid 43% 33% 17% 26% Data penetration, Monthly unique users in million 10% Data Usage MBOU/month +75% ARPU Browsing AR$/month +66% 8.1 Browsing SMS + Content Voice Includes Dongles Figures may not sum up due to rounding 11

13 Mobile Data Centric Plans New Concept As a platform to Make Everything Possible EVOLUTION SIMPLIFICATION New Plans It is not only about EVOLUTION of Technology, it is about how people react to it. New and simplified plans adapted for every need. Past Current Focus Individuals One on One plans Connectivity concept Individuals Residential Business Product Portfolio Based on Services Voice SMS Internet Internet Pay TV / Video Voice Other Services Based on Platforms Offering Lever Entertainment, gaming, music, content Enabling platform for customer preference 12

14 Mobile Strong Positioning in 4G Main cities with 4G coverage Average ARPU 4G ARPU* 6% 21% Apr/May Jul/Aug Apr/May Jul/Aug NETWORK ROLLOUT 4G Customers DL & UL Speed Local Benchmark As of today more than 870 sites installed. Presence in 188 locations of 18 provinces. Offering higher speed and capacity. 4G/3G/2G integrated and modernized network with state-of-the-art technology. 27%ofsitesalreadywith700Mhz. >200% 325 1Q15 1,000 3Q Source: Ookla Speedtest 3 * Corresponds to total ARPU of customers using only 4G technology 13

15 Capex Highlighting Mobile accesses thru network deployment Capex Evolution Million of AR$ +85% 8,957 3,530 3, % 6,791 2,256 Spectrum 4G Targets Coverage over total population +1.7X 4,851 5,427 4,535 FY13 FY14 % Revenues 18% 27% 16% 24% Actual Dec-15 4G Sites +1.6X Capex Breakdown 52% Actual Dec-15 14% 9% 16% 9% FTTx Deployment Mobile Access Fixed Access Core & Infraestruct * IT Others & Spectrum +2X 3G: The frequencies acquired in the 2014 spectrum auction made possible a relevant improvement of the quality of service adding a third carrier. Note: * Core & infrastructure refers to network related capex, including quality and innovation capex. 14 Sep-14 Sep-15

16 Agenda Market Overview Business Highlights Financials Q&A 15

17 TEO Group: Consolidated Results Revenues IFRS, Million of AR$, Percentage 3Q +24% 7,664

18 TEO Group: Consolidated costs and EBITDA evolution EBITDA IFRS, Million of AR$ 6,186 4, ,478; +24% 1, ,664 YoY Variation 21% 0% -11% 1% 32% 18% 21% 15% 28% EBITDA Ss. Revenues & Handsets Handsets Costs ITX Costs Labor Costs Taxes Other Marketing Fees for services, Others* EBITDA other incomes Sales & Sales maint. and materials EBITDA Margin 25.6% +0.9% -2.0% 0.0% -0.2% +0.3% -0.7% 26.8% As % of Revenues 10% 5% 18% 10% 10% 10% 10% * Others includes bad debt expenses, provisions, VAS costs and others * *Average of ~40 salary agreements 17 17

19 TEO Group: Net Income Evolution In Million of AR$ 3Q14 3Q15 Net Interests $ 231 -$ 255 -$ 7 -$ 168 Gains on Mutual Funds & $ 224 $ 300 other investments $ 77 $ 170 FX results -$ 205 -$ 194 $ 17 -$ 99 Results on NDF -$ 20 -$ 11 -$ 14 $ 36 Others $ 0 -$ 32 $ 3 -$ 12 Total $ 230 -$ 192 $ 76 -$ 73 7,664 3, ,489 2,778 EBITDA 6,186 D&A, Results on disposal of PP&E and write-down of PP&E 2,343 Net Financial Results Income Tax Expense Net Income 230 1,389 2,684 EBITDA D&A, Results on disposal of PP&E and write-down of PP&E Net Financial Results Income Tax Expense Net Income Variation +1,

20 TEO Group: FCF, Net Financial Position & Hedging Strategy IFRS, Million of ARS -Last 12 months Free Cash Flow Operating free Cash Flow 3,526 3,034 1,696 5, ,586 10,180 6,143 1,003 EBITDA Capex Δ WK & others Net Financial Position (Net Cash) Operating Free Cash Flow 2 Taxes Free Cash Flow = 1,338 Spectrum Payment Net Interest & Others FX Variations Dividend Payments 3 Net Financial Position (Net Debt) HEDGING STRATEGY In U$S million, September Argentine operations RELEVANT MATTERS Aging ofndf NDF(by tenor): Net Accounts Payable & Debt FX Cash U$S Dollar & Dollar Link Bonds NDF Exposure as of 3Q15-3monthsorless=13%overtotal -From3to6months=29%overtotal -From6to12months=58%overtotal Note: (1) Includes Telecom USA (2) OFCF: Operating Free Cash Flow before Taxes (3) Includes $57 Million related to Nucleo dividend payments to third parties, net of income tax 19

21 Agenda Market Overview Business Highlights Financials Q&A 20