Telecom Argentina (NYSE: NYSE:TEO), a leading telecommunications company, has exhibited solid financial performance in the first half of 2024, despite challenging economic conditions. The company's EBITDA margin stood at 29.7%, underpinned by effective cost management and strategic pricing decisions. Consolidated revenues totaled ARS 1.83 trillion, reflecting a 13% decrease in real terms, yet a 5.6% growth quarter-over-quarter in real terms. The company's mobile subscriber base and digital services showed significant growth, contributing to its robust financial position.
Key Takeaways
- Telecom (BCBA:TECO2m) Argentina achieved a 29.7% EBITDA margin.
- Consolidated revenues reached ARS 1.83 trillion, with a 5.6% quarter-over-quarter growth in real terms.
- The mobile subscriber base increased by over 578,000 (2.8% year-over-year).
- Broadband FTTH accesses and Flow unique customers saw substantial growth.
- Fintech service Personal Pay expanded to nearly 3 million clients.
- The company successfully managed its liabilities, extending the average debt life to 3 years.
Company Outlook
- Telecom Argentina anticipates inflation to stabilize at 2-3%.
- The company plans to continue monthly price adjustments.
- Focus remains on customer retention and digital transformation initiatives.
- The company aims to maintain low delinquency rates and positive prepaid usage trends.
Bearish Highlights
- Revenues in real terms saw a 13% year-over-year decrease.
Bullish Highlights
- The company's strategic pricing and cost management led to a strong EBITDA margin.
- Significant growth was seen in the mobile subscriber base and digital services.
Misses
- The company did not mention any specific misses during the earnings call.
Q&A Highlights
- CFO Gabriel Blasi emphasized the resilience of Telecom Argentina's business model, highlighting a strong recovery in top-line and EBITDA figures.
- CEO Roberto Nobile hinted at the company's efforts in resizing, with expected results to be visible in the next quarter.
- Blasi also noted that the company's delinquency rates are among the lowest in its history.
Financial Strategy and Debt Management
- Telecom Argentina issued $500 million in notes due 2031 with a 9.5% coupon.
- The company executed tender and exchange offers for notes due in 2025 and 2026.
Regional Operations
- Paraguay operations demonstrated a 5% year-over-year growth in mobile customers and a strong 54% EBITDA margin.
- In Uruguay, the company focused on expanding its pay TV customer base to 117,000.
This comprehensive report on Telecom Argentina's earnings call for the first half of 2024 highlights the company's financial resilience and strategic growth amidst an economically challenging landscape. With a focus on customer retention, digital transformation, and effective financial strategies, Telecom Argentina positions itself for continued success in the dynamic telecommunications market.
Full transcript - Telecom Argentina SA ADR (TEO) Q2 2024:
Luis, Investor Relations Manager, 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 Nobile, Chief Executive Officer Gabriel Blasi, Chief Financial Officer and Marcel Bruce Villaluago, Manager of Investor Relations. The purpose of this call is to share with you the results of the 6 month period and second quarter ended on June 30, 2024. If you have not received a press release or presentation, you can call our Investor Relations office to request the documents downloaded from the Investor Relations section of our website located at ambersores.telecom.com.ar.
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 industry and economic regulations possible changes in the demand for telecoms products and services the effects of potential changes general market and our economic conditions and in legislation. Our press release dated August 12, 2024, a copy of which was included in our Form 6 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 7.70seveneighteen of the Comisionas Oriental de Valores, or CMB, which establishes that the reexpression will be applied to the annual financial statement for intermediate and special period ended as of including December 31, 2018. Accordingly, the reported figures responding to the first half of twenty twenty four included the effects of the adoption 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 1 and Slide 2 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 Blasi, Chief Financial Officer, Telecom Argentina: Thank you, Luis. Good morning, and welcome to everyone. Moving to Slide 3, it summarizes our highlights as of June 30, 2024. Our main operational and financial achievements were: our EBITDA margin for the 1st 6 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 first half of twenty twenty four, our CapEx was approximately 2.4 $6,000,000 equivalent to 13% of our revenues. The current focus of our CapEx is on the expansion of our fixed mobile access network, focusing on our fixed FTTH network and 5 gs in mobile. Due to the real appreciation of the peso observed during the first half of twenty twenty four, 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 onboarding clients as of June 2024 and achieving a relevant market position. During the first half of twenty twenty four, we registered a strong improvement in our financial net debt EBITDA ratio, indicating a reduction of the relative leverage and highlight the company's strong resilience to FX depreciation. Finally, during July 2024, we have returned to international debt capital markets with successful issuance of our notes due 2,031 for $500,000,000 Investor support
Luis, Investor Relations Manager, Telecom Argentina: for this transaction was very important
Gabriel Blasi, Chief Financial Officer, Telecom Argentina: 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 2 liability management transactions, a tender offer for our 2025 notes and an exchange offer for our 2026 notes. We will provide the commentary afterwards. Slide 4 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 first half of twenty twenty four, while the EBITDA margin increased 1.3 percentage points versus the same period of 2023. Telecom's mobile subscribers in Argentina amounted 21,200,000, increasing more than 578,000 when compared to 2023. Broadband and Pay TV clients have totaled €4,100,000 and 3,300,000 respectively. Fixed voice subscribers considering IP telephone lines amounting $2,800,000 during 2024. Our regional operations remains very solid.
We are the 2nd most important player in the mobile market in Paraguay and in the pay TV market in Uruguay with EUR 2,400,000 and EUR 117,000, respectively. Slide 5 shows our pricing strategy during 2024. The accumulated inflation in Argentina for the first half of twenty twenty four was 79.7%, while year over year inflation as of June reached 2 72%. We continue to adjust prices in a monthly basis during the first half of twenty twenty four. Even in the context where year over year inflation remains 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 Q1 of 2024. Additionally, due to our successful pricing strategy, we have observed important recovery of ARPUs in U. S. Dollars in both 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 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 7th 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 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 the 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 Q2 of 2024, Flow's unique customers reached almost 1,500,000, increasing by 141,000 clients or 11% when compared to the same period in 2023. We observed a good performance for our Flow Flex (NASDAQ:FLEX) 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 fixed 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 telephone accesses over our HFC and FTTH networks. Slide 7 shows the breakdown of our revenues.
Service revenues totaled over ARS 1,300,000,000,000, decreasing 12% in real terms versus the first half of twenty twenty three, showing a MXN235 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 Danish services in foreign currency, mostly corresponding to our B2B segment. During the first half of twenty twenty four, the participation of revenues in foreign currency, including our subsidiaries, our 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 represents 6.8%.
During this quarter, we have managed to increase our revenues in real versus the Q1 of 2024 in our 3 most important segments: mobile, broadband and pay TV, reaching growth of 4%, 9% and 2% respectively. Slide 8 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% over 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 197,000 and 110,000 subscribers, growing 17% and 10% year over year, respectively. Personal paid clients in Paraguay amounting to 291,000. This operation has a strong EBITDA margin of 54%, while remaining almost 11%, with a negative net debt EBITDA ratio of minus 0.32x. 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.
Luis, Investor Relations Manager, 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 21x 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 ARS311 1,000,000,000.
This positions our fintech as the 2nd most important in terms of clients' account balances in the market. In Slide 9, we provide an overview of our main financial figures. Consolidated revenues grew by 2 29 percent on nominal terms during 2024, reaching almost ARS 1,400,000,000,000. When analyzing said figure adjusted by inflation, revenues amounted to almost ARS1.7 trillion, 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 we achieved growth of our revenues in real terms quarter over quarter. EBITDA increased by 2 65% year over year in nominal terms, generating a nominal EBITDA margin of 32.2 percent during 2024. In turn, EBITDA margin in real terms was almost 30%. In June of 2024, we reached the 5th 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 first half of twenty twenty four, the company was able to contain the pressure coming from inflation in most of its cost plans, and this has contributed to generate 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 year contributed positively to our EBITDA margin. We registered good performance additionally in commission and advertising costs, mostly due to a reduction of commercial issuance and collections commissioning and to some other items such as flat debt, which has reduced from 2.5 percentage of sales as of the first half of twenty twenty three to 2.1% in the first half of twenty twenty four. 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 first half of 2024 as we registered lower D and A expenses. The operating margin during the first half of twenty twenty four was minus 3.7 percent 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 first half of twenty twenty four, the company had a net income of ARS859 1,000,000. These results are financial in nature.
The strong appreciation experienced by the peso in 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 ARS1400 billion during the first half of twenty twenty four. Slide 12 displays a summary of the company's CapEx in PP and E and intangible assets during 2024, which amounted to almost ARS225 1,000,000, or an equivalent of ARS246 1,000,000 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 first CapEx December 24 represented 13.5 percent 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 first half of twenty twenty four, 44 new Moen sites were deployed, while other 606 existing sites were upgraded. We are advancing in the rollout of 5 gs. We come with over 100 5 gs sites working in the 3.5 gs acreage pads, and we expect to come with 200 sites as of the end of 2024. We are essentially adding 5 gs equipment to our existing sites while additionally targeting the mainly populated cities of Argentina for our 1st stage of deployment.
In our fixed access network, we increased the employment of new FTTH over 4,600 new logs, including the overlay of our HFC network. We also include the upstream capacity of our HFC network by 7,000 blocks. Approximately 40 percent of our CapEx for the first half of twenty twenty four 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 first half of twenty twenty three, and this is good news since the huge devaluation of the FX that occurred in December of 2023. Our cash flow generation before dividends and interest payments was equivalent to $151,000,000 Slide 14 shows 4 key figures for 2024.
The conversion to U. S. Dollars is obtained dividing the figures constant pesos as of the end of each period and using the end of period spot effects for each year. Our gross debt amounted to $2,800,000 as of June 30, 2024. As of June 2024, the company closed 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. Dollars denominated sovereign bonds, which was partially applied to cancel local short term debt. EBITDA for the last 12 months as of the end of the first half of twenty twenty four using the aforementioned conversion method for figures in peso to U. S. Dollars was equivalent to more than $1,000,000 Last 12 months EBITDA as of June 20.34 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 operation from instability in U. S. Dollars and that is resilient to FX depreciation.
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 end of 2023, our main figures, among others, earnings and EBITDA, experienced a decrease when measured in U. S. Dollars. Because of this, our net debt EBITDA ratio grew 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 12 months as of June 2024 was equivalent to almost $1,100,000 while our net debt was $2,400,000 In this sense, the net debt EBITDA ratio as of June 2024 was 2.2 percent, 2.2x, practically in line with levels observed before the December 2023 evaluation. 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. We have access to the 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 2025 notes. But this was one of our main cross border maturities for the year, and 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 Ariel, who will continue with the presentation.
Gabriel Blasi, Chief Financial Officer, Telecom Argentina: Thank you, Luis. We present a summary of the liability management transactions we conducted during July August and the impact of our maturity profile. The credit quality of the company was made clear through the issuance of our 2031 notes. We managed to issue a sizable U. S.
Dollar denominated bond of $500,000,000 with yield below to this 9.7% yield with an interest coupon of 9.5 percent. 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 (LON: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 2 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 of $112,400,000 remain outstanding. An exchange offer of our 2026 notes of our 20 30 one notes, the principal amount tendered by the early participation date and accepted for the change was $115,300,000 This reduces the amount of maturity for 2026 and extends them over 29, 2,030 and 2,031. Additionally, we issued the local dollar linked notes for $81,300,000 $33,700,000 with use of almost 2.9% and 1.5% respectively. This has contributed to extend our local short term debt to a range of between 1.5 years and 2 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 3 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 stabilize 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 2nd 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 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 pace of 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 improve our financing cost.
Luis, Investor Relations Manager, 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.
Marcelo, Analyst: 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.
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 Q1 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.
Gabriel Blasi, Chief Financial Officer, Telecom Argentina: Okay. 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 1 is that we have some type of seasonality.
If you look at what happens to our margins on a yearly basis, you will see that typically we start with margins on the upper part of the curve and then they slowly came 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 Q1, inflation was 2 digit and second quarter, we had an inflation of 1 digit. And now at present, inflation continue 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 0. There is some persistence on the core inflation, and it's more likely to stabilize on the 2%, 3% 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 exploration over the phone, But I offer if you want, we can do a separate call. We can dig in the details to make you get a better understanding of what happened on a quarterly basis.
Roberto Nobile, Chief Executive Officer, Telecom Argentina: Sorry, Gabriel. I would add Thank you, Marcelo, for the question. This is Roberto.
Gabriel Blasi, Chief Financial Officer, Telecom Argentina: There are several,
Roberto Nobile, Chief Executive Officer, Telecom Argentina: I would say, important projects that has to do with our back end modernization that were achieved by the last by the end of last year. So all the sales force implementation, we finalized that project on December of last year. 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 first quarter of last of 2023 and you compare it to the Q1 of this year, usually, in the previous years, we will increase prices in January and then wait 2 or 3 months and then start increasing again.
That type of things will make the Q1 look much better than the rest because we were increasing a lot in January. Since April of 2023, we started increasing prices every month on a monthly basis. So there is no seasonal thing. It runs there is 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.
Luis, Investor Relations Manager, Telecom Argentina: So Marcelo, can you please repeat the second part of your question, please?
Marcelo, Analyst: 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 Nobile, 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 and 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.
Luis, Investor Relations Manager, Telecom Argentina: So thanks. We are going to the next question from Ernesto Gonzalez from Morgan Stanley (NYSE:MS). Ernesto, we will unmute you, so you can proceed.
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? Thank you.
Gabriel Blasi, Chief Financial Officer, Telecom Argentina: Robert, I don't know if you want to proceed or I can answer.
Roberto Nobile, Chief Executive Officer, Telecom Argentina: I can start. If you want, then you can sorry for the misunderstanding, but we are in different locations. That's why we are talking on live. July 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 the in good shape to keep on competing. On the revenue side, we the slowdown of inflation rate helps to supplement 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.
Luis, Investor Relations Manager, Telecom Argentina: Okay. So we will move to our next question coming from [SPEAKER UNIDENTIFIED
Gabriel Blasi, Chief Financial Officer, Telecom Argentina: COMPANY REPRESENTATIVE:] 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 0 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 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 freight scoring.
But it's very interesting that in this environment, those rates are low. Other aspect that I will like to stress that might be give you some color in we may have a lot of discussion if it is a predictor or not, but the consumption of prepaid forms has increased significantly. We have grown in our portfolio. We have grown in prices and we are 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.
Luis, Investor Relations Manager, Telecom Argentina: Okay. So with that, we will move to our next question coming from Lorena Raitt from Lucro Analytics. So Lorena, we will unmute you, so you can proceed with your question. Thanks. Lorena, I don't know if you are there.
Yes, we don't hear you.
Lorena Raitt, Analyst, Lucro Analytics: Sorry about that.
Luis, Investor Relations Manager, Telecom Argentina: No, it's all right.
Lorena Raitt, Analyst, Lucro Analytics: Good afternoon, everyone. 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 price 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 going to happen. You've been doing a great job at reducing costs to keep very good profitability in spite of the price cap.
But given this news, do you see any changes going forward?
Gabriel Blasi, Chief Financial Officer, Telecom Argentina: Maybe, Lorena, there is some type of misunderstanding. What has happened on the legal front is that the decree 6.90, which was an intention of the past administration to regulate prices in the sector has been declared new by the Supreme Court, by the provincial court, it gives you the idea that this release stability of the company increasing prices, but this situation never took place in terms of a restriction because the legal measure that the company took about 2 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 they 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.
Luis, Investor Relations Manager, Telecom Argentina: Okay. So we will move with another question coming from Mariano Andrade from Clave Capital. Mariano, we will unmute you and you can ask your question. Thanks.
Mariano Andrade, Analyst, Clave Capital: Thank you very much. So 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 2024. 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 2024, 2025 and 2026, which appear to be the heaviest commitments you have to honor? Thank you.
Gabriel Blasi, 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 do my best. Regarding restrictions, what happened was that the last administration established between the different type of restrictions on the foreign chain 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, 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 acquisition of specific bonds that were issued for that purpose, the name Bob Real. The company worked 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 a negotiation with the supplier or you may give them the bonds directly. They are totally denominated 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 $600,000,000 Yes, okay, okay, dollars 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, this negotiation, we have like 3 different brackets or group. 1 is the group of suppliers that we are constantly making transactions with them and we are acquiring.
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. We mean,
Ernesto Gonzalez, Analyst, Morgan Stanley: I will
Gabriel Blasi, Chief Financial Officer, Telecom Argentina: say, this debating with them and reaching the final agreement. To now, no price difference was paid by Telecom. And the 3rd 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 is 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 2 years ago or even more, probably 3, with minor movements.
And the reason why we started to do liability management is that we want to order leaving in to change the structure of the debt and to gain tenure and decrease cost. And that was what happened. The company, about a third of our debt, typical one like in the range of $1,000,000,000 prior to this liability management is multilateral debts with different type of loans. All of them are floating are pre cancelable loans. Then we have about a third of the debt is local debt in the local capital market, which has been issued during the last 2 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 2% 3%. That debt, we continue to use that debt as a way of taking advantage of the surplus of pesos that we have in the market. But we cannot think that that situation would last forever as the monetary policy normalize and among centralities 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 having 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 2 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 1.5 years, 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, we might continue to be in the market as a part. Also, important to address for our investor base is that the company listed a shell registration program that allowed us to issue securities in the United States at any moment of any type. 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 go with the different outcomes that the market might provide, not only because of Argentina, but also because of international volatility as a whole.
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