telecom argentina presentation 1q17 vf€¦ · conference call presentation this presentation may...
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TELECOM TELECOM
ARGENTINA
1Q17 Earnings
ReleaseConference Call Presentation
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
DDisclaimerisclaimer
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
AgendaAgenda
Macro Overview
Vision & Strategy
Business HighlightsBusiness Highlights
2
Financials
Q&A
Official FX Rate Blue FX Rate
(Billion U$S)
Central Bank Reserves
Macro: Reserves continue to strengthen with a nominally appreciated FX rateMacro: Reserves continue to strengthen with a nominally appreciated FX rate
31.425.6
38.8
50.5
2014 2015 2016 1Q17
1Q17: Reserves surged to its highest level since mid 2011.
EXTERNAL FRONT
Mean - 1Q17 = 15.68
16,05Official
FX Rate
� International Reserves showed an increase of U$S 11,7 Bn during
1Q17, mainly explained by inflows coming from sovereign,
provincial and corporate debt issuances.
13.01 15.38
Official FX Rate Blue FX Rate
Closing of the gapClosing of the gapClosing of the gapClosing of the gapClosing of the gapClosing of the gapClosing of the gapClosing of the gapClosing of the gapClosing of the gap
Exchange Rates have
mantained unified
since Dec-15
Closing of the gapClosing of the gapClosing of the gapClosing of the gap
Pre - electionary
period
Closing of the gapClosing of the gap
3
� 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 2017.
Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17
Mean - 1Q17 = 15.68
15,3815,23
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.
Official
FX (CB)
-4.4%
3.5%
-1.4% -1.1%
2014 2015 2016 1Q17e
Macro: Activity improves Macro: Activity improves mildly while mildly while inflation gradually declinesinflation gradually declines
Household consumption
38.0% 41.0%35.0%
CPI (Buenos Aires City)CPI (YoY)
Inflation continues
with YoY decline
Revised official figures as of 4Q16Overall 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 1Q17.
DOMESTIC ACTIVITY & INFLATION
CPI measured by private consultants reached 35.0% YoY, showing a
4
38.0%
26.9%
41.0%35.0%
2014 2015 2016 1Q17Economic activity per sector
Minery
Financial interm.
Manufacturer Industry
Retail & Wholesale commerce
Transport & Communications
Electricity, gas & water
Real Estate
Social services & Healthcare
Public Admin & Defense
Construction
AgricultureTotal
� 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.
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
increases.
AgendaAgenda
Macro Overview
Vision & Strategy
Business HighlightsBusiness Highlights
5
Q&A
Financials
2017 2017 –– The transformation process continuesThe transformation process continues
6
Innovative offer of products and services
DIGITAL ERA
Capitalization of investments in our networks
Incorporation of new inter-functional work methodologies
Challenge market practices to become more profitable
BEING A MULTIFUNCTIONAL
TEAM
AgendaAgenda
Macro Overview
Vision & Strategy
Business Highlights
7
Business Highlights
Q&A
Financials
1Q17 Highlights1Q17 Highlights
Sustained growth driven by Internet
� Continuous 4G rollout:
- 6.5 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
� 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
BUSINESS
Mobile
FINANCIALS
8
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
� Churn improvement: 2.9% vs. 3.4% in 4Q16 Bank Group, entered into a U$S 100 million, six-year loan
agreement
� In March 2017, Sofora, Nortel, Telecom Argentina and
Telecom Personal signed a Corporate Reorganization
Agreement
� Acquisition of Nortel holding in Telecom Personal in
order to become Telecom Argentina the 100% holder
� On April 11, 2017, the Board of Directors of CONATEL
authorized TU VES S.A. (Chile) to transfer in favor of Núcleo
350 shares of Tuves that represent 70% of its capital.
FixedCORPORATE MATTERS
Preferred B(Listed in NYSE)
Floating shares(Class B Shares & ADRs)
Class C shares
Corporate ReorganizationCorporate Reorganization
CURRENT SHAREHOLDERS’ STRUCTURE
(Ordinary sharesSofora
Telecomunicaciones S.A.
(Nortel Inversora(Class A: 51%
- Class B 3.74%)
48.96% Econ. Int. 51.04% Econ. Int.
•The Reorganization is subject to the
terms and conditions set forth in the
Preliminary Reorganization Agreement.
•The main purpose of the Reorganization
is to absorb and consolidate the
operations, assets and liabilities of the
Absorbed Companies.
Telecom Personal
9
100.0% 67.5%
(Class B Shares & ADRs)
Telecom Argentina
Núcleo(Paraguay)
ANSES 24.99%
- Class B 3.74%)
44.37% Econ. Int. 55.60% Econ. Int. 0.03% Econ. Int. •Telecom will be the surviving entity that
will continue to be known as “Telecom
Argentina S.A.”
•Telecom will assume all of the rights and
obligations of each of the Absorbed
Companies.
Denotes companies that will be merged into Telecom Argentina
Wholesale Mobile6%
6%4%5%
48%50%
16%10%
GROUP REVENUE MIX
In P$ Million
2,364 3,328
1Q16 1Q17
41%
RETAIL FIXED VOICE + INTERNET
In P$ Million
Retail Mobile
Group Revenues: Growth acceleration continued due to higher usage and price adjustmentsGroup Revenues: Growth acceleration continued due to higher usage and price adjustments
Handsets
18%
Service
Revenues
+27%Wholesale Mobile
4% 4%
22% 25%
6%6%4%
1Q16 1Q17
10
7% 10%
MOBILE -in Argentina-
5,986 7,325
1Q16 1Q17
22%
RetailFixed Voice
+ Internet
Data
Paraguay
2,202
3,678
1Q16 1Q17
67%
Internet
In P$ Million
In P$ Million
Traditional fixed services (% on Total Rev)
+27%
Fixed Fixed –– Consolidated growth in UBB connectionsConsolidated growth in UBB connections
ULTRABROADBAND SPEEDS SUBS EVOLUTION
160
231
1Q16 1Q17
≥15Mb subs
9% 10% 11% 12% 13%
1Q16 2Q16 3Q16 4Q16 1Q17
% of Customer Base 45%
11
1,780
2,919
686 813
FY15 FY16 1Q16 1Q17
19%
Fixed Data
1.4% 1.7% 1.4 2.2% 1.3%
248.8 259.8 272.8 302.9 331.3
1Q16 2Q16 3Q16 4Q16 1Q17
Monthly Churn ARPU (P$)
BB ARPU & CHURN
In P$ Million
+33%
64%
P$/Month
80.9
93.7
105.1112.4
134.1
1Q16 2Q16 3Q16 4Q16 1Q17
+66%
Fixed Fixed –– ARBU increase driven by price adjustments in monthly feesARBU increase driven by price adjustments in monthly fees
Price Adjustments
BUSINESS SEGMENT
� February 2017 � From P$115 to P$140 (Δ22%)
RESIDENCIAL SEGMENT
� February 2017� From P$38 to P$75 (Δ97%)
ARBU DRIVERS OF ARBU INCREASE
12
4.0 4.0 3.9 3.9 3.9
1Q16 2Q16 3Q16 4Q16 1Q17
Million of lines
1Q16 2Q16 3Q16 4Q16 1Q17
LINES IN SERVICE
�As of March 31, more than 1
million customers migrated to
bundled packs that include
voice and BB services
�Cross selling opportunity in
80% of our customer base
ARNET + VOICE
Mobile in Argentina: Enhancing our value proposition with improved revenue qualityMobile in Argentina: Enhancing our value proposition with improved revenue quality
8.67.6
1Q171Q16
Monthly unique users in millionMBOU/ month
DATA USAGE
13%
+79%
DATA PENETRATION
794 918 1,122 1,287 1,420
1Q16 2Q16 3Q16 4Q16 1Q17 34%45%
66%55%
Browsing Voice + Data
SERVICE REVENUE MIX
13
12.8
6.4
Prepaid
Postpaid
19.2
CUSTOMER BASE (Mill)
Figures may not sum up due to roundingMonthly Unique users and MBOU over Monthly unique users that
consume more than 10Mb
1Q16 1Q17
33% 39%56% 64% 76%
1Q16 2Q16 3Q16 4Q16 1Q17
4G Users / total Monthly Unique Users
96142
1Q16 1Q17
+48%
ARPU Browsing
3.4% 2.9%
1Q174Q16
Churn vs. previous quarter
Mobile Mobile –– 4G evolution4G evolution
14
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
2.01.0
2.53.0
4.35.5
4G Subs Evolution
6.5
35%21% 25% 19%
Mobile Access Fixed Access Core &
Infrastructure*
IT
7,844
11,386
2,256
430 278
CapexCapex: Network : Network deploymentdeployment toto improveimprove networknetwork capacitycapacity and and qualityquality
*Core & infrastructure refers to network related capex, including quality
and innovation capex
Spectrum
10,100
CAPEX EVOLUTION
Million of P$
-12%+13%
TECHNICAL CAPEX BREAKDOWN
1,9021,678
Intangible Assets
15
Infrastructure*7,844 1,472
1,400
FY15 FY16 1Q16 1Q17
11%19% 21%
1Q16 1Q17 1Q16 1Q17
+41%% Revenues (without Spectrum) +45%
4G sitesInstalled UBB
15%
Intangible Assets
PP&E-5%
AgendaAgenda
Macro Overview
Vision & Strategy
Business Highlights
16
Business Highlights
Q&A
Financials
10,866
14,424
3,402 4,638
TEO Group: Consolidated Results TEO Group: Consolidated Results
IFRS, Million of P$, Percentage IFRS, Million of P$, Percentage
40,496
53,240
12,455 14,726
REVENUES EBITDA
+18%
+31%
+36%
+33%�In Argentina: +19%
�In Paraguay: +7%
% of Revenues
17
FY15 FY16 1Q16 1Q17
34,48045,354
10,405 13,227
FY15 FY16 1Q16 1Q17
FY15 FY16 1Q16 1Q17
27% 27% 27% 31%
EBITDA Mg
26% 25% 27% 27%
2Q15 3Q15 4Q15 1Q16
26% 26% 29% 31%
2Q16 3Q16 4Q16 1Q17
SERVICE REV GROWTH
EBITDA Mg Trend
+27%
+32%
% of Service Revenues
�In Argentina: +28%
�In Paraguay: +15%
TEO Group: Consolidated TEO Group: Consolidated costs costs and and EBITDA EBITDA evolutionevolution
EBITDA Margin
*Others include bad debt expenses, provisions, VAS costs and others
9% 8%5% 19% 9% 10%8%
18
+0.3% +1.0% -0.5% 31.5%+0.1%27.3% -1.1%+0.3%+4.2%
Figures may not sum up due to rounding
As % of Revenues
TEO Group: Consolidated ResultsTEO Group: Consolidated Results
IFRS, Million of P$, Percentage
OPERATING INCOME
+26%
NET INCOME
(Attributable to Telecom)
+17%
+24%
IFRS, Million of P$, Percentage
Period D & A3G/4G Spectrum
Amortization
Results on write-
down of PP&ETotal
1Q16 1,277 98 30 1,405
1Q17 1,588 85 72 1,745
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 $ 1,030
3,403 3,975
925
1,955
FY15 FY16 1Q16 1Q17
6,229 7,843
1,997 2,893
FY15 FY16 1Q16 1Q17
19
15% 15% 8% 7%16% 20% 7% 13%
+45%+111%
O.Income Margin Net Income Margin
TEO TEO GroupGroup: Net : Net IncomeIncome EvolutionEvolution
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
3,294 3,023
1Q16 1Q17
20
* Total Net Income includes the part attributable to Telecom and the non-controlling interest
‘Quantity Effect’ on Financial Results
�Lower interest rates on debt
� FX Apreciation as of March 17
since December 16
� Reduction in Net Debt levels
due to growth in Cash Flow
generation
NET DEBT
Dec 15 -
Mar 16
Dec 16 -
Mar 17
1Q16 1Q17
FX Rate Avg. Interest Rate (BADLAR)
+12%
-850bps
Price Effect on Financial Results
-3%
TEO Group: FCF, Net TEO Group: FCF, Net FinancialFinancial PositionPositionIFRS, Million of P$. Last 12 months
21(1) OFCF: Operating Free Cash Flow before Taxes
� 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.
ICC LOAN AGREEMENT
Low leverage levels supported by sound financial strategyLow leverage levels supported by sound financial strategy
� Telecom Argentina has maintained low levels of
financial leverage, thanks to its strong cash flow
generation
14,42415,660
5,892 3,023
0.4 x
0.2 x
2016 LTM 1Q17
EBITDA Net Debt Net Debt / EBITDA
Ne
t D
eb
t/ E
BIT
DA
LEVERAGE
Local & International Bank Loans
Multillateral Credit Agencies
Capital Markets
ECA’s
FINANCIAL STRATEGY- FUNDING SOURCES DIVERSIFICATION
Cash + Cash Eq. 6,020 6,185
Debt Tenor 1Q16 1Q17
< 1 year 69% 9%
22
� 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
Inte
rest
Co
ve
rag
e
14,42415,660
1,613 1,558
8.9 x10.1 x
2016 LTM 1Q17
EBITDA Interest Expense Interest Coverage
ECA’s
International Trade Operations Finance Gross Debt
Cash + Cash Eq.
11,912
6,020
9,208
6,185
AgendaAgenda
Macro Overview
Vision & Strategy
Business Highlights
23
Business Highlights
Q&A
Financials