ARGENTINA. 1Q17 Earnings Release Conference Call Presentation

Transcription

1 TELECOM ARGENTINA 1Q17 Earnings Release 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 Vision& Strategy Business Highlights Financials Q&A 2

4 Macro: Reserves continue to strengthen with a nominally appreciated FX rate EXTERNAL FRONT Central Bank Reserves (Billion U$S) International Reserves showed an increase of U$S 11,7 Bn during 1Q17, mainly explained by inflows coming from sovereign, provincial and corporate debt issuances. 1Q17: Reserves surged to its highest level since mid Q17 FX Rate Pre-electionary period Official FX Rate Closing of the gap Blue FX Rate Exchange Rates have mantainedunified since Dec Official FX (CB) After a spike in Peso depreciation during 4Q16, in 1Q17 new debt issuances and tax amnesty s inflows pressed nominal FX downwards to Nov-16 levels. Central Bank allowed to market to freely establish the exchange parity., but applying a tight monetary policy. Trade balance posted a deficit of U$S 1.0 Bn during 1Q17, increasing mainly due to growth in imports of capital goods and transport materials during March ,23 16,05 Mean -1Q17 = Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 15,38 Managed Floating Exchange Rate Regime during 1Q17 Capital inflows press towards peso appreciation. CB continued to abide to its policy of low intervention on FX markets.

5 Macro: Activity improves mildly while inflation gradually declines DOMESTIC ACTIVITY & INFLATION Household consumption Revised official figures as of 4Q16 CPI (YoY) 3.5% -4.4% -1.4% -1.1% Q17e CPI measured by private consultants reached 35.0% YoY, showing a decrease from past year levels, although monthly figures showed certain level of acceleration. In particular, February and March measurements were influenced by increases in electricity tariffs that came into effect. In turn, core inflation measurements have experienced an increase during March mainly due to food price Economic increases. activity per sector Agriculture Construction Public Admin & Defense Social services & Healthcare Real Estate Electricity, gas & water Transport & Communications Retail & Wholesale commerce Manufacturer Industry Financial interm. Minery Total 4 Overall household consumption remains weak, showing some fragile signs of recovery from 4Q16 but still decreasing YoY. After some improvements observed during the end of 2016, consumer confidence has experienced an overall decrease during 1Q % CPI (Buenos Aires City) 26.9% 41.0% Inflation continues with YoY decline 35.0% Q17 Economic activity began 2017 with some slight improvements. Sectors performance remains mixed, with agriculture outperforming and construction reacting more slowly. Nonetheless, overall activity remains still depressed. Industrial production shows a fragile and unstable performance, with a smoother the rate of decline, but still remaining in negative territory, registering a fall of 2.7% in y-o-y comparison.

6 Agenda Macro Overview Vision& Strategy Business Highlights Financials Q&A 5

7 2017 The transformation process continues DIGITAL ERA Innovative offer of products and services Capitalization of investments in our networks Incorporation of new inter-functional work methodologies BEING A MULTIFUNCTIONAL TEAM Challenge market practices to become more profitable 6

8 Agenda Macro Overview Vision& Strategy Business Highlights Financials Q&A 7

9 1Q17 Highlights Mobile BUSINESS Sustained growth driven by Internet Continuous 4G rollout: Million customers are enjoying 4G - Data Consumption boost (+MBOU growth +79%) Data Penetration grew by 13% achieving 8.6 frequent users Churn improvement: 2.9% vs. 3.4% in 4Q16 Fixed Expanding position in key segments Steady growth in UBB: 15Mb subs = 13% of CB vs. 9% in 1Q16 - ARPU +33% vs. 1Q16 Voice: Tariff adjustment in monthly fee in retail and business segments Churn improvement: 1.3% vs 2.2% in 4Q16 As of March 31, more than 1 million customers migrated to bundled packs that include voice and BB services FINANCIALS Service Revenues growth of 28% in Argentina, mainly driven by: -Mobile Internet (+67%) -Fixed Voice + Internet (+35%) EBITDA increased by 36% reaching a 31% profitability, outperforming inflation for the first time in 5 years Net Income attributable to Telecom Argentina reached P$1,955 million. In April 2017, Personal and the Inter-American Investment Corporation, a member of the Inter-American Development Bank Group, entered into a U$S 100 million, six-year loan agreement CORPORATE MATTERS In March 2017, Sofora, Nortel, Telecom Argentina and Telecom Personal signed a Corporate Reorganization Agreement Acquisition of Nortel holding in Telecom Personal in order to become Telecom Argentina the 100% holder On April 11, 2017, the Board of Directors of CONATEL authorized TU VES S.A. (Chile) to transfer in favor of Núcleo 350 shares of Tuves that represent 70% of its capital. 8

10 Corporate Reorganization CURRENT SHAREHOLDERS STRUCTURE ANSES 24.99% Preferred B (Listed in NYSE) Floating shares (Class B Shares & ADRs) (Ordinary shares Sofora Telecomunicaciones S.A % Econ. Int % Econ. Int. (Nortel Inversora (Class A: 51% Telecom Argentina Class C shares Telecom Personal Núcleo (Paraguay) 100.0% 67.5% The Reorganization is subject to the terms and conditions set forth in the Preliminary Reorganization Agreement. The main purpose of the Reorganization is to absorb and consolidate the operations, assets and liabilities of the Absorbed Companies. - Class B 3.74%) 44.37% Econ. Int % Econ. Int. 0.03% Econ. Int. Telecom will be the surviving entity that will continue to be known as Telecom Argentina S.A. Telecom will assume all of the rights and obligations of each of the Absorbed Companies. Denotes companies that will be merged into Telecom Argentina 9

11 Group Revenues: Growth acceleration continued due to higher usage and price adjustments GROUP REVENUE MIX In P$ Million Handsets 16% 18% 10% In P$ Million RETAIL FIXED VOICE + INTERNET 41% Retail Mobile Wholesale Mobile Data Fixed Voice + Internet Paraguay 48% 4% 6% Service Revenues +27% 50% 5% 6% 22% 25% 4% 4% Retail In P$ Million 2,364 3,328 1Q16 1Q17 MOBILE -in Argentina- 22% Internet In P$ Million 67% 1Q16 1Q17 Traditional fixed services (% on Total Rev) 7% 10% 5,986 7,325 2,202 1Q16 3,678 1Q17 1Q16 1Q17 10

12 Fixed Consolidated growth in UBB connections ULTRABROADBAND SPEEDS SUBS EVOLUTION 15Mb subs % of Customer Base 45% 9% 10% 11% 12% 13% 1Q16 2Q16 3Q16 4Q16 1Q BB ARPU & CHURN +33% % 1.7% % 1.3% 1Q16 2Q16 3Q16 4Q16 1Q17 1Q16 1Q17 Fixed Data In P$ Million 64% 19% 2,919 1, FY15 FY16 1Q16 1Q17 Monthly Churn ARPU (P$) 11

13 Fixed ARBU increase driven by price adjustments in monthly fees ARBU DRIVERS OF ARBU INCREASE P$/Month % Price Adjustments BUSINESS SEGMENT February 2017 From P$115 to P$140(Δ22%) RESIDENCIAL SEGMENT February 2017 From P$38 to P$75 (Δ97%) 1Q16 2Q16 3Q16 4Q16 1Q17 LINES IN SERVICE Million of lines Q16 2Q16 3Q16 4Q16 1Q17 ARNET + VOICE AsofMarch31, morethan1 million customers migrated to bundled packs that include voice and BB services Cross selling opportunity in 80%ofourcustomerbase 12

14 Mobile in Argentina: Enhancing our value proposition with improved revenue quality DATA PENETRATION DATA USAGE SERVICE REVENUE MIX Monthly unique users in million MBOU/ month +79% Browsing Voice + Data 13% % 55% ,122 1,287 1,420 1Q16 1Q17 1Q16 2Q16 3Q16 4Q16 1Q17 34% 45% CUSTOMER BASE (Mill) 1Q16 1Q17 4G Users / total Monthly Unique Users ARPU Browsing Prepaid % Postpaid 6.4 Churn vs. previous quarter 4Q16 1Q17 33% 39% 56% 64% 76% 1Q16 2Q16 3Q16 4Q16 1Q Q Q17 3.4% 2.9% Figures may not sum up due to rounding Monthly Unique users and MBOU over Monthly unique users that consume more than 10Mb 13

15 Mobile 4G evolution 4G Subs Evolution Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 14

16 Capex: Network deployment to improve network capacity and quality CAPEX EVOLUTION Million of P$ TECHNICAL CAPEX BREAKDOWN * Core & infrastructure refers to network related capex, including quality and innovation capex Spectrum +13% 10,100 2,256 7,844-12% 11,386 35% 1,902 21% 25% 19% 1, ,472-5% 1,400 Intangible Assets PP&E FY15 FY16 1Q16 1Q17 4G sites % Revenues (without Spectrum) +45% Mobile Access Fixed Access Core & IT Infrastructure* Installed UBB +41% 19% 21% 15% 11% 1Q16 1Q17 1Q16 1Q17 15

17 Agenda Macro Overview Vision& Strategy Business Highlights Financials Q&A 16

18 TEO Group: Consolidated Results REVENUES IFRS, Million of P$, Percentage +31% % of Revenues In Argentina: +19% In Paraguay: +7% EBITDA IFRS, Million of P$, Percentage +33% 40,496 53, % 10,866 14, % 12,455 14,726 3,402 4,638 FY15 FY16 1Q16 1Q17 SERVICE REV GROWTH % of Service Revenues 34, % 45,354 In Argentina: +28% In Paraguay: +15% +27% 10,405 13,227 FY15 FY16 1Q16 1Q17 FY15 FY16 1Q16 1Q17 EBITDA Mg 27% 27% 27% 31% EBITDA Mg Trend 2Q15 3Q15 4Q15 1Q16 26% 25% 27% 27% 26% 26% 29% 31% 2Q16 3Q16 4Q16 1Q17 17

19 TEO Group: Consolidated costs and EBITDA evolution EBITDA Margin 27.3% +4.2% +0.3% -1.1% +0.3% +1.0% -0.5% +0.1% 31.5% As % of Revenues 8% 5% 19% 9% 8% 9% 10% *Others include bad debt expenses, provisions, VAS costs and others Figures may not sum up due to rounding 18

20 TEO Group: Consolidated Results OPERATING INCOME IFRS, Million of P$, Percentage NET INCOME (Attributable to Telecom) IFRS, Million of P$, Percentage Period D & A 3G/4G Spectrum Amortization Results on writedown of PP&E Total 1Q16 1, ,405 1Q17 1, , % in million of P$ 1Q17 1Q16 Δ Operating Income $ 2,893 $ 1,997 $ 896 Financial Results $ 124 -$ 557 $ 681 Income Tax -$ 1,051 -$ 505 -$ 546 Minority Interest -$ 11 -$ 10 -$ 1 Total $ 1,955 $ 925 $ 1, % +17% +45% +111% 6,229 7,843 3,403 3,975 1,997 2, ,955 FY15 FY16 1Q16 1Q17 O.Income Margin FY15 FY16 1Q16 1Q17 Net Income Margin 15% 15% 16% 20% 8% 7% 7% 13% 19

21 TEO Group: Net Income Evolution IFRS, Million of P$ in million of P$ 1Q16 1Q17 Net Interests -$ 310 -$ 216 Gains on Mutual Funds & other inv. $ 196 $ 67 FX results net of NDF instruments -$ 420 $ 290 Others -$ 23 -$ 17 Total -$ 557 $ 124 Price Effect on Financial Results NET DEBT +12% FX Rate -3% Avg. Interest Rate (BADLAR) -850bps Lower interest rates on debt FX Apreciationas of March17 since December 16 Quantity Effect on Financial Results Dec 15 - Mar 16 Dec 16 - Mar 17 1Q16 1Q17 Reductionin Net Debtlevels duetogrowthin Cash Flow generation 3,294 3,023 1Q16 1Q17 * Total Net Income includes the part attributable to Telecom and the non-controlling interest 20

22 TEO Group: FCF, Net Financial Position IFRS, Million of P$. Last 12 months ICC LOAN AGREEMENT On April 7, 2017, Personal and the Inter-American Investment Corporation ( IIC ), a member of the IDB Group, signed a loan agreement for an amount of US$100 million and for a six year period, payable in 8 equal semiannual installments commencing the first on the 24th month, with a 6 month LIBO rate + 400bp. The funds of this loan will be allocate to deploy the 4G network and for financing working capital and other financial needs. (1) OFCF: Operating Free Cash Flow before Taxes 21

23 Low leverage levels supported by sound financial strategy Net Debt/ EBITDA LEVERAGE 14,424 15, x 0.2 x 5,892 3, LTM 1Q17 EBITDA Net Debt Net Debt / EBITDA Telecom Argentina has maintained low levels of financial leverage, thanks to its strong cash flow generation FINANCIAL STRATEGY- FUNDING SOURCES DIVERSIFICATION Local & International Bank Loans Multillateral Credit Agencies Capital Markets Cash + Cash Eq. 6,020 6,185 ECA s Gross Debt 11,912 9,208 International Trade Operations Finance Interest Coverage 15,660 14, x 8.9 x 1,613 1, LTM 1Q17 During 4Q16 and 1Q17, through the IFC Loan Agreement and the issuance of Series III and IV Notes, the Company has managed to extend the tenor of its financial debt Debt Tenor 1Q16 1Q17 < 1 year 69% 9% EBITDA Interest Expense Interest Coverage 22

24 Agenda Macro Overview Vision& Strategy Business Highlights Financials Q&A 23