Conference Call Presentation

Transcription

1 Telecom Argentina Full-Year2014 PreliminaryResults Conference Call Presentation

2 Disclaimer This presentation 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 Economic outlook: Activity + Imports restriction + Reserves Economic activity per sector Wages Central Bank Reserves Electricity, gas & water Social services & Healthcare Public Admin & Defense Minery Construction Agriculture Real Estate Transport & Communications Manufacturer Industry Financial interm. Retail & Wholesale commerce YoY -constant prices 8.6% Total 0.9% 2.9% 0.1% National Wages - % YoY 29.4% % 25.9% Consumer Confidence Index of Durable Goods % Real GDP* CCI Trade Balance 29.7 Central Bank Reserves (Billion US$) 46.4 Trade Balance (Billion US$) Last 12 months e e A depreciated Brazilian currency combined with an appreciated AR$/U$S in real terms affected the Argentine external competitiveness, thus impacting industrial exports The January 2014 devaluation, that affected local consumption, and the tax hike on the automobile sector had an important effect on the industrial activity A weak economic activity was registered in 2014:+0.8%in1Q14,+0.0%in2Q14and-0.8%in 3Q14YoY.Itisexpected+0.1%inGDPgrowthfor full 2014, a significant slowdown from +2.9% in 2013 Source: MECON, INDEC and Company Estimates *Official GDP YoY variation, constant prices Private consumption showed a weak evolution in 2014 due to a reduction in real wages and a more restrictive consumer credit environment Investment was significantly impacted, reflected in a lower production of durable goods, as a consequence of tighter restrictions on imports of capital goods ThenewCPIIndexpublished bythegovernment reached 23.9% YoY, stabilizing in a level of aprox. 1.1% per month during 4Q14 3 During 4Q14 the government implemented new measures to increase CB Reserves: currency swap with China, loans from French CB and the payment of spectrum auction As of December 2014, CB Reserves showed an increase of +3% YoY, but suffered a strong reduction in the first 9M14 Continuous government monitoring of the FX market aimed at dampening expectations of devaluation of the peso TradebalanceshowedadecreaseinFY14dueto the weaker demand from the main commercial partners, lower prices of commodities, while increasing energy imports

5 Agenda Market Overview Business Highlights Financials Q&A 4

6 Business Highlights Internet Mobile users +15% YoY(Usage +69%, ARPU+31%) Broadband wireline subs +4% YoY (10 Mb subs 16% of CB vs. 7% in 4Q13) Business Spectrum Auction payment: the equivalent of US$410.7 million for theremaining3gbandstocomplete50mhzcapandforawsbands Aggressive 4G rollout plan: Competitive advantage in AWS Spectrum 180sites(8cities)inoneandahalfmonth 85%ofpopulationin2years Revenues up +22% driven by: Financials Mobile internet in Argentina (+60%) due to increase in unique users, usage and ARPU Data(+53%) and Broadband(29%) in the Fixed Business Constant efforts in costs efficiencies to mitigate the effects of the inflationary context Quarter YoY OIBDA Margin increase(+0.6 pp) 5

7 Consolidated revenue growth fostered by Data, Internet & Handsets Evolution of revenues FY13 FY14 IFRS, Million of AR$, Percentage 27, ,054; +22% Impact of billing per second SMS -257MM; -5% 1,247 1, ,341 FIXED MOBILE IN ARGENTINA NUCLEO YoY +29% -34% +37% Variation +10% +53% +9% +6% +60% +57% FY13 Revenues %oftotal Revenues Voice Data Internet Equipments Voice Data Internet Handsets Nucleo FY14 Revenues 11% 4% 10% 0% 22% 23% 10% 15% 5% Note: *Paraguayan (Nucleo S.A.) revenues expressed in AR$ and includes handsets. Figures might not sum up due to rounding 6

8 Mobile New Offers continue to show encouraging trends Postpaid Black Other Postpaid Results of DIA FULL Stabilizing CB ARPU accretive ~50% of Gross Adds in Dec 2014 Postpaid AR$/Month ARPU 4 +29% Q Q14 Prepaid Customers Prepaid recharges <30 days Prepaid Results of Superchip Stabilizing CB Expanding frequent users Increase Usage of Voice & Data Increase average recharge Prepaid ARPU Q13 +5% AR$/Month Q14 oct nov dec Dec13 Dec14 4Q 13 4Q14 Market share (%) % 33.0% Postpaid Subs (%) 1 32% 32% 4Q 13 4Q14 Customer Base (Mln) Internet Users(Mln) ) Includes Cuentas Claras subscribers 2) Market estimates of the top 3 providers in the industry Exclude trunkingservices 3) Monthly unique Internet Users 4) Includes Dongles 7

9 Mobile Argentina Growth of mobile internet CUSTOMER Internet Users(Monthly unique users) USAGE Data Usage(MB/month) ARPU Browsing ARPU (ARS/month) +15% FY % FY Q13 4Q14 Prepaid Postpaid 4Q13 4Q14 GROWTH ENABLERS HANDSETS OFFERING NETWORK S-phone Sellout 73% 4Q13 91% 4Q14 S-phone Penetration/CB 27% 4Q13 37% 4Q14 Price Schemes Black Other Postpaid Prepaid UNLIMITED BUNDLE x DAY Share Data Plans Premium Content Sectors / Mobile sites Sectors +35% Sites +12% 4Q 13 4Q14 Spectrum Resources 2G/3G* 4G Pre auction Post auction * Pre spectrum auction: North: 45 MHz, AMBA: 42.5 MHz and South: 40 MHz.Post spectrum auction: 50MHz per region 8

10 Mobile 4G competitive edge Competitive advantage in AWS Spectrum Outstanding Results in the first Launch An aggressive plan to surf the wave 700 MHz tobeassigned AWS already assigned 1st frequency 3G and AWS bands: allocated in November and paid in December equivalent to U$S410.7 million 2nd frequency allocation 700Mhz to be determined Average UL & DL Speed 3G 4G 1.1 Initial Network Rollout: 25.8 UpLink (mbps) More than 180 sites installed in: Buenos Aires Córdoba Rosario Salta SantaFe Tucuman summer resorts Customers 200k customers can experience the service with no needs to change SIM card Customers DownLink (mbps) Network Modernization Within 18 months: SingleRANin~100%ofsites High Speed backhauling in ~100% of sites 4GRoll Out 1H15e:300newsites Capitalandmaincitiesin18months 1 85%ofpopulationintwoyears 1 3GEmpowerment Handsets New Spectrum usage +15% access nodes >1Mn.4GSmartphoneandTablets Note: 1 Taking into consideration the effective assignation of the 700 MHz spectrum. 9

11 Fixed - Growth of BB/UBB thanks to service provisioning and competitive offer BB Accesses Thousand of broadband accesses, thousand of net adds +64k; +4% BB ARPU & Churn AR$/Month 178 1,707 1,714 1,726 1,750 1, % Oct Nov Dec Monthly Churn 4Q13 1Q14 2Q14 3Q14 4Q14 >10Mb % of CB 7% 8% 10% 13% 16% 1.3% 1.3% 1.4% 1.3% 1.2% 4Q13 1Q14 2Q14 3Q14 4Q14 ARPU (AR$) BB Flow share Data Revenues IFRS Million of AR$ 40% 44% +26% +31% +53% 1, Q13 1Q14 2Q14 3Q14 4Q14e 4Q14e: Market estimates of the top 3 providers in the industry FY11 FY12 FY13 FY14 10

12 Capex-Focus on BB and UBB Fixed and Mobile Capex Evolution Mobile Access FTTx Rollout +3x Others & Spectrum 48% 15% 11% Fixed Access 7% 19% Core& Infraest. 1 8,957 4Q13 1Q14 2Q14 3Q14 4Q14 IT 3,530 Spectrum Carriers Million of AR$ +2% 3,192 3, % 4, % 5, % FY11 FY12 FY13 FY14 % Revenues 17% 15% 18% 16% Incl. spectrum payment 27% 3Q13 4Q13 1Q14 2Q14 3Q13 4Q14 Note: 1 Core & infrastructure refers to network related capex, including quality and innovation capex. 11

13 Agenda Market Overview Business Highlights Financials Q&A 12

14 TEO Group: Consolidated Results Revenues IFRS, Million of AR$, Percentage % of Revenues Personal Mobile 70% Fixed Business 15% Broadband 10% Nucleo Mobile 5% 18, % 22, % 33, % 27,287 7,460 7,114 6, % +21% 9,158 8,598 8,119 6, % 7,466 FY11 FY12 FY13 FY14 Regulated Revenues 12% 10% 8% 7% *Operating Income Before Depreciation & Amortization +22% 4Q 3Q 2Q 1Q OIBDA* OIBDA Margin 32% SS Revenue Margin Handset Margin Handset rev. % of revenues IFRS, Million of AR$, Percentage +10% 5,993 6,570 7, % 2,516 4Q +25% 2,010 2,067 3Q +7% 1,930 1, % +10% 8,702 2,007 1, % 2,112 FY11 FY12 FY13 FY14 Handsets Revenues Costs (in million of AR$) 30% 28% 26% 30.8% 27.5% 5.0% FY FY14 12% 15% Handset Margin- Mobile in Argentina Before capitalization of SAC & SRC % FY12 FY13 FY14 1Q14 2Q14 3Q14 4Q14 2Q 1Q 13

15 TEO Group: Consolidated costs and OIBDA evolution Operating Income Before Depreciation and Amortization FY13 FY14 IFRS, Million of AR$ +1,138; +15% YoY Variation 7,564 4,250 18% 1,788 55% 756 1, ,439 One-off Event; AR$ 115 MM YE Bonus ,702 33% 35% 26% 32% 23% 13% 15% 13% OIBDA FY13 Ss. Revenues & other incomes OIBDA Margin Handsets Sales Handsets Costs ITX Costs Labor Costs Taxes Other Marketing & Sales Fees for services, maint. and materials VAS Costs Others* OIBDA FY14 FY % -1.0% +0.5% -1.6% -0.1% +0.6% -0.3% -0.2% +0.5% 26.1% FY14 FY % -2.2% +1.0% -0.5% -0.7% +1.3% -0.2% -1.1% +0.4% 27.7% FY13 Service OIBDA margin: 27.5% in FY14 Fifth quarter in a row with positive margin in handsets business, improving the mix revenues Labor Costs includes an extraordinary bonus payment to employees for AR$ 115 MM. Excluding this effect, Labor Costs in FY14 vs. FY13 would have increased +32% YoY * Others includes bad debt expenses, provisions, recovery (costs) restructuring and others 14

16 Results on OIBDA YoY OIBDA growth 3Q14 4Q14 Revenues & Other Income Handsets Costs 9% 21% 22% 39% ITX Costs Labor Costs Taxes 36% 21% 30% 37% 18% 22% Other Marketing & Sales 12% 23% Fees for services, maint. and materials 11% 33% VAS Costs 25% 35% 1Q14 2Q14 3Q14 4Q14 Others 2% 14% YoY Growth 17.4% 10.0% 7.1% 25.2% Actions Items: ΔYoY OIBDA margin -1.4pp -2.7pp -3.1pp +0.6pp Full impact price increase in 4Q14 (~14%) Appealing commercial offers ( Super Chip & Full Day packs) to enrich value proposition Constant efforts in costs efficiencies to mitigate the effects of the inflationary context 15 15

17 TEO Group: Consolidated Results Operating Income IFRS, Million of AR$, Percentage Net Income attributable to Telecom IFRS, Million of AR$, Percentage +3% 3,857 3, % 4,518 1,255 1, , % +27% +2% +31% +23% 5,443 1,600 1,225 1,241 1,377 4Q 3Q 2Q 1Q in million of AR$ FY13 FY14 Net Interests $ 632 $ 265 Gains on Mutual Funds & other inv. $ 124 $ 289 FX results -$ 279 -$ 178 Results on NDF $ 55 -$ 97 Others -$ 4 -$ 26 Total $ 528 $ % 2,513 2, % 3,673 3, % % -4% +40% +11% 1, Q 3Q 2Q 1Q FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14 O. Income Margin Net Income Margin 21% 18% 17% 16% 14% 12% 12% 11% Net Income in FY14 and FY13 includes AR$25 and AR$187 Million charge related to disposal of PP&E respectively. Excluding this effect, Net IncomeinFY14vs.FY13wouldhaveincreased+11%YoY 16

18 TEO Group: FCF, Net Financial Position & Hedging Strategy IFRS, Million of ARS -Last 12 months Free Cash Flow Operating free Cash Flow 1,610 2,277 8,702 5,427 1,665 5,354 3, ,299 OIBDA Capex Δ WK & others Net Financial Position Net Financial Position FY13 (Net Cash) Operating Free Cash Flow 2 Taxes Free Cash Flow = -667 Spectrum Payment Net Interest & Others FX Variations Dividend Payments Net Financial Position FY14 (Net Cash) Telecom Argentina 219 (1) Telecom Personal 693 Nucleo (Paraguay) (167) HEDGING STRATEGY In U$S million, December Argentine operations Higher impact in FCF for capex payment in FY Net Payables in Foreign Currency 21 FX Cash U$S Dollar Linked NDF 136 Exposure as of FY14 65% Coverage AR$3,530 MM paid for Spectrum Auction Strong increase in mobile devices financing to customers Net payables in FX: 65% of hedge after spectrum auction payment Note: (1) Includes Telecom USA (2) OFCF: Operating Free Cash Flow before Taxes (3) Includes $53 Million related to Nucleo dividends payments to third parties, net of income tax 17

19 Agenda Market Overview Business Highlights Financials Q&A 18