TELECOM ARGENTINA 3Q17 Earnings Release Conference Call Presentation

Transcription

1 TELECOM ARGENTINA 3Q17 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 & INDUSTRY OVERVIEW VISION & STRATEGY BUSINESS HIGHLIGHTS FINANCIALS Q&A 2

4 AGENDA MACRO & INDUSTRY OVERVIEW VISION & STRATEGY BUSINESS HIGHLIGHTS FINANCIALS Q&A 3

5 MACRO: RESERVES SHOW RESILIENCY DESPITE TRADE DEFICIT AND VOLATILITY IN EXCHANGE MARKETS EXTERNAL FRONT CENTRAL BANK RESERVES (Billion U$S) 50,5 48,0 50,2 38,8 31,4 25, Q17 2Q17 3Q17 International Reserves experienced an increase of U$S 2.2Bn during 3Q17. This was mainly associated with sovereign debt issuances in foreign currency, despite the fact that the Central Bank intervened in foreign exchange markets to avoid extensive depreciation of the peso. Additionally, the Central Bank has renewed its bilateral currency swap agreement with the Central Bank of China in July 2017 for an extension of 3 additional years. FX RATE Official FX (BCRA) Floating Exchange Rate Regime during 3Q17 Renewed demand in foreign currency markets generated a peso depreciation, mainly due to volatility experienced during the period before the primary elections. During 3Q17 the nominal Peso/Dollar exchange parity has experienced a rising movement that was already evident during the final days of June In this occasion, Central Bank intervened selling foreign currency in the exchange markets, trying to minimize volatility and potentially disruptive dynamics that could affect the floating regime. Trade balance accumulated a deficit of U$S 5.2 Bn during the first nine months of 2017, increasing mainly due to greater imports of capital goods, its accessories and passenger vehicles, combined with a stable evolution of exports. 4

6 MACRO: ACTIVITY RECOVERY ACCELERATES, WITH AN UNEVEN DECLINE IN INFLATION DOMESTIC ACTIVITY & INFLATION HOUSEHOLD CONSUMPTION 4,4% 1,4% Q17 2Q17 3Q17e CPI (YoY) 3,5% Construction Agriculture Retail & Wholesale commerce Financial interm. Real Estate Manufacturer Industry Public Admin & Defense Social services & Healthcare Transport & Communications Electricity, gas & water Minery Revised official figures as of 2Q17 0,9% 3,8% 4,0% CPI measured by the Buenos Aires City turned 26.2% YoY, in Sep 17, increasing from past quarter levels. YoY readings were mainly influenced by a low base of comparison due to temporary cancellation in August 2016 of gas tariff adjustments that had come into force in April of that year. Core inflation has practically maintained YoY variation figures that were registered in Jun 17. ECONOMIC ACTIVITY PER SECTOR Total 5 Overall household consumption continued its recovery, but at a stronger pace, and consumer confidence has risen notoriously during 3Q17, achieving levels significantly higher than those observed during Consumer confidence on durable goods leaded the way, growing rapidly during 3Q17. 38,0% CPI (Buenos Aires City) 26,9% 41,0% 35,0% Comparison base effect 23,4% 26,2% Q17 2Q17 3Q17 Economic growth accelerated during 3Q17, as the level of activity is set a well defined recovery path. Construction and Agriculture clearly continued to exercise a strong pull, but the majority of sectors showed positive signs. Industrial production is growing with more strength, registering an increase of 2.0% vs 9M16, mainly pushed by Non Metallic Minerals and Steel (in turn heavily influenced by Construction activity).

7 AGENDA MACRO & INDUSTRY OVERVIEW VISION & STRATEGY BUSINESS HIGHLIGHTS FINANCIALS Q&A 6

8 2017 ACTIONS TAKEN IN THE TRANSFORMATION PROCESS CUSTOMER CENTRIC VISION Evolution of systems and processes Customer Insight Successful migration of virtualized core system Better Performance in mobile NPS DIGITAL TELCO Connect digital consumers with multiple screens and devices Total Connection Organizing business according to the new DevOps concept: IPTV Mobile financial services Big Data and Analytics Cybersecurities First delivery of equipment for connectivity and IOT solution for City of Buenos Aires Security Services: successful implementation of DOS for cyber attacks Smartcities: Youth Olympic Games (YOG) contract to deploy fully connected buildings by 2018 CONTENT MANAGEMENT Concrete alliances of value with OTT according to the preference of the clients Relaunch of Personal Store New vendor was elected to provide the platform of content management for Personal Store CONVERGENT HOME Accompany the needs of the client in each stage of its life FTTH Rollout Relaunch bundle offer (Combo Unico) 80% in Convergence Services 7

9 DIGITAL ERA TRANSFORMATION CONVERGENCE CONVERGENTBUSINESS MULTIPLATFORMS7X24 CONVERGENTHOME TECHNOLOGY OPTIC FIBER INTERNET WI FI UNIFY COMMUNICATIONS IP TELEPHONY 4G NARROW BAND DATACENTER DIGITAL TRANSFORMATION Link people with things Transforming Data into Information SERVICES SECURITY TRANSPORT PUBLIC INFRASTRUCTURE HEALTH ENVIROMENT EDUCATION INNOVATION DEVELOPMENTOFSOLUTIONS,OTT AND IOT CONTENT TOGETHER WITH INDUSTRYVERTICALS Market Expected Evolution of IoT connections* 6 bn SERVICES 2.3x TECHNOLOGY COMMUNITY 14 bn IOT STRATEGIC PILARS *Source: Cisco Virtual Networking Index

10 AGENDA MACRO & INDUSTRY OVERVIEW VISION & STRATEGY BUSINESS HIGHLIGHTS FINANCIALS Q&A 9

11 3Q17 BUSINESS HIGHLIGHTS MOBILE Internet Services: +65% vs. 9M16 Data Usage: MBOU +80% vs. 9M16 Data Penetration: 9.4 M vs. 8.2 M vs. 9M16 Browsing ARPU : +46% vs. 9M16 4G Clients almost doubled times since Sep 16 Data: +22% vs. 9M16 ARBU: P$ with a 48% increase Yoy Lines in service remain stable FIXED FINANCIALS Service Revenues: +27% reaching P$41,646 million EBITDA: +40% in 9M17 vs. 9M16 Net income: (attributable to Telecom Argentina) reached P$ 5,641 million in 9M17 CORPORATE MATTERS August 31, 2017: Shareholders meeting approved: TA + Cablevisión merger, subject to the regulators approval The exchange relation between the ordinary TA shares to one CV shares Execution of the Final Merger Agreement between Telecom Argentina and Cablevisión ad referendum of ENACOM authorization UBB subs: +67% Yoy ARNET + Voice subs: +213% BB ARPU: +33% vs. 3Q16 BROADBAND NETWORK MATTERS 4G Subway experience: 90% increase in installed sites, +200% increase in 4G data traffic 2,6 GHz band: First 4G 2,6 GHz site available New 4G network was inaugurated in the Northern part of the country, extending the high speed mobile internet services to many cities and localities in the region. 10

12 GROUP REVENUES In P$ Million GROUP REVENUE MIX +22% MOBILE SERVICES IN ARGENTINA +24% INTERNET +65% Handsets 15% 12% M16 9M17 Mobile Data 52% Service Revenues +27% 53% 5% 5% 9M16 +33% 9M17 FIXED SERVICES FIXED VOICE + INTERNET +35% Fixed Voice + Internet Paraguay 22% 25% 5% 4% 9M16 9M TRADITIONAL FIXED SERVICES (% on total revenues) +8% +10% 9M16 9M17 9M16 9M17 Figures may not sum up due to rounding 11

13 FIXED HOME CONVERGENCE STRATEGY PUSHES UBB OFFER ULTRABROADBAND SUBS EVOLUTION Number of subs +67% HOME CONVERGENCE STRATEGY ARNET + VOICE Number of subs +213% evolution 3Q16 4Q16 1Q17 2Q17 3Q17 Launch (Dec 16) 3Q17 BROADBAND ARPU & CHURN +33% 272,8 302,9 331,3 356,6 362,2 1.4% 2.2% 1.3% 1.6% 1.5% 3Q16 4Q16 1Q17 2Q17 3Q17 Monthly Churn ARPU (P$) FIXED DATA In P$ Million Δ FX (P$/U$S) +64% +22% FY15 FY16 9M16 9M17 59% 12% 12

14 FIXED PRICE ADJUSTMENTS CONTINUE WHILE LINES IN SERVICE REMAIN STABLE ARBU DRIVERS OF ARBU INCREASE 105,1 112,3 +48% 134,1 147,7 155,2 P$/Month PRICE INCREASES AUG 17 BUSINESS SEGMENT $ % $ 168 RESIDENTIAL SEGMENT +20% $ 75 $ 90 3Q16 4Q16 1Q17 2Q17 3Q17 LINES IN SERVICE Previous Actual Previous Actual Lines in service remain stable 3Q16 4Q16 1Q17 2Q17 3Q17 13

15 MOBILE IN ARGENTINA: FOCUS ON VALUE SERVICE REVENUE MIX DATA USAGE MBOU/ MONTH DATA USAGE (4G subs) Browsing Voice + Data +80% 2x 51% 63% % 37% 9M16 9M16 9M17 4G USERS / TOTAL MONTHLY UNIQUE USERS M17 BROWSING ARPU +46% 55% 27% 9M16 9M17 DATA PENETRATION Monthly unique users in million 15% % 64% 76% 84% 92% 105,3 154,3 3Q16 4Q16 1Q17 2Q17 3Q17 9M16 9M17 Figures may not sum up due to rounding Monthly Unique users and MBOU over Monthly unique users that consume more than 10Mb 14 9M16 9M17

16 MOBILE 4G EVOLUTION 4G COVERAGE 4G CLIENTS MOBILE DATA TRAFFIC EVOLUTION 4G IN THE SUBWAY +89% 8.3x +90% sites +200% data traffic increase Cisco Visual Networking Index

17 CAPEX: NETWORK DEPLOYMENT TO IMPROVE CAPACITY AND QUALITY CAPEX EVOLUTION Million of P$ Spectrum +13% ,100 7, % 31% 10% 6, Intangible Assets PP&E Lower capex requirements as new regulatory goals and conditions were set. Redefinition of sites search and installation process in the mobile access network, with a higher participation of third party tower deployment. FY15 FY16 9M16 9M17 % REVENUES (WITHOUT SPECTRUM) 19% 21% 20% 14% Definition of a new IOT platform delayed its implementation. TECHNICAL CAPEX BREAKDOWN * Core & infrastructure refers to network related capex, including quality and innovation capex FTTH DEPLOYMENT In available commercial zones +200% 29% 21% 34% 16% Mobile Access Fixed Access Core & Infrastructure* IT 1Q17 2Q17 3Q17 16

18 AGENDA MACRO & INDUSTRY OVERVIEW VISION & STRATEGY BUSINESS HIGHLIGHTS FINANCIALS Q&A 17

19 CONSOLIDATED RESULTS REVENUES IFRS, Million of P$, Percentage Δ OF REVENUES IN ARGENTINA: +23% IN PARAGUAY: +7% EBITDA IFRS, Million of P$, Percentage +31% +40% +22% +33% 14,246 47,263 38,818 25% Q 10,210 42% % 2Q % % Q 36% FY15 FY16 9M16 9M17 FY15 FY16 9M16 9M17 3Q 2Q 1Q SERVICE REVENUE GROWTH Δ OF SERVICE REVENUES IN ARGENTINA: +27% IN PARAGUAY: +16% % REVENUES 27% 27% 26% 30% 34, % 45, % EBITDA MG TREND 26% 29% 29% FY15 FY16 9M16 9M17 3Q16 4Q16 3Q17 18

20 EBITDA AND CONSOLIDATED COST EVOLUTION EBITDA Margin 26.3% +2.1% 0.8% +0.4% +1.3% 0.8% +0.2% +1.4% 30.1% AS % OF REVENUES 9% 19% 10% 9% 9% 5% 11% *Others include bad debt expenses, provisions, VAS costs and others Figures may not sum up due to rounding 19

21 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 Disposal and impairment of PP&E Total 9M16 4, ,687 9M17 4, , % in million of P$ 9M16 9M17 Δ Operating Income $ $ $ Financial Results $ $ 276 $ Income Tax $ $ $ Minority Interest $ 24 $ 54 $ 30 Total $ $ $ % +63% 5, , % 2Q % 1Q FY15 FY16 9M16 9M17 OPERATING INCOME MARGIN 76% 3Q +17% , % 5, % 3Q % 2Q % 1Q FY15 FY16 9M16 9M17 NET INCOME MARGIN 15% 15% 14% 19% 8% 7% 6% 12% 20

22 NET INCOME EVOLUTION IFRS, Million of P$ in million of P$ 9M16 9M17 $ Var Net Interests $ 1,139 $ 388 $ 751 Gains on Mutual Funds & other inv. $ 254 $ 708 $ 454 FX results net of NDF instruments $ 748 $ 555 $ 193 Others $ 49 $ 41 $ 8 Total $ 1,682 $ 276 $ 1,406 MAIN DRIVERS FINANCIAL RESULTS NET FINANCIAL POSITION Lower interest rates on debt (Avg BADLAR decreased nearly 780 bpsin9m17vs9m16) Lower FX Depreciation as of September 17 since December 16 (Avg FX rate increased 9% in 9M17 vs 17% in 9M16) Reduction in Net Debt levels due to growth in Cash Flow generation Quantity Effect on Financial Results 503 7,157 9M16 9M17 * Total Net Income includes the part attributable to Telecom and the non controlling interest 21

23 FREE CASH FLOW, NET FINANCIAL POSITION IFRS, Million of P$. Last 12 months FREE CASH FLOW OPERATING FREE CASH FLOW EBITDA Capex Δ WK & others FCF GENERATION LTM Net Debt 9M16 Operating Free Cash Flow 1 Taxes Net Interest & Others FX Variations Dividend Payments 2 Net Cash 9M17 Free Cash Flow = 8,394 Δ vs. 9M16 8, ,982 LTM3Q16 LTM3Q17 PERSONAL DIVIDENDS & FX COVERAGE The Shareholders Meeting of Telecom Personal celebrated on November 6th, 2017 decided to withdraw the amount of P$1,500 million of the Reserve for Future Cash Dividends and to distribute that amount as cash dividends, that will be made available to Telecom Argentina (100% shareholder) as from November 14, Through investments denominated in foreign currency and NDF contracts the Company is hedging its FX exposure achieving ~60% coverage. (1) OFCF: Operating Free Cash Flow before Taxes (2) Includes $18 million related to Núcleo dividend payment to third parties 22

24 AGENDA MACRO & INDUSTRY OVERVIEW VISION & STRATEGY BUSINESS HIGHLIGHTS FINANCIALS Q&A 23