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Telecom(TEO) - 2020 Q3 - Earnings Call Transcript
TelecomTelecom(US:TEO)2020-11-11 20:23

Financial Data and Key Metrics Changes - Telecom Argentina's revenue for the first nine months of 2020 totaled P$2.7 billion, with a year-over-year decrease of 4.6% in constant pesos [10] - EBITDA reached P$1 billion, resulting in a 35.8% EBITDA margin, which grew by 2.4% year-over-year in constant pesos [10] - Service revenues decreased by 3.6% in real terms compared to the same period in 2019, with inflation reaching 36.6% year-over-year [23][34] Business Line Data and Key Metrics Changes - Mobile subscribers decreased by approximately 150,000 to 18.7 million, with a decline of around 250,000 in the prepaid segment, partially offset by an increase of close to 100,000 in postpaid [11] - Broadband and paid TV clients increased to 4.2 million and 3.6 million respectively, while fixed voice subscribers totaled 2.9 million [11] - Postpaid subscribers accounted for 41% of the total customer base, with a 2.6% increase, while prepaid subscribers decreased by 4.5% [22] Market Data and Key Metrics Changes - In Paraguay, Núcleo, a subsidiary, registered revenues of around P$142 million and EBITDA of P$62 million for the first nine months of 2020, with mobile customers totaling 2.2 million [30][31] - The broadband market share in Paraguay reached 33%, with significant growth in fixed internet subscribers [67] Company Strategy and Development Direction - The company is focused on digital transformation, aiming to become a 100% digital company, integrating operations and enhancing customer experience [14] - Telecom Argentina is working on IoT, FinTech, and Personal Cloud projects to diversify revenue streams [13] - The company plans to maintain CapEx at around 17% of revenues, focusing on network integration and infrastructure improvements [62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about potential price increases in 2021, despite current price freezes due to government regulations [60] - The company is targeting a reduction in bad debt to around 3% for the next year, anticipating a gradual return to normal levels post-pandemic [73] - Management noted that the competitive landscape remains aggressive, but Telecom Argentina has managed to increase ARPU and maintain revenue growth [74] Other Important Information - The company has improved its capital structure by refinancing debts and extending maturities, with a gross debt of P$171 billion as of September 2020 [49][52] - Operating free cash flow amounted to approximately $509 million, reflecting an increase due to higher EBITDA and reduced CapEx [48] Q&A Session Summary Question: Update on potential price increases for telecom services in 2021 - Management is optimistic about negotiating price increases with the government, although the extent remains uncertain [60] Question: Alternatives if price increases are not allowed - Management believes there is room to reduce promotional discounts to maintain revenue levels [61] Question: CapEx targets for 2021 - The target is to maintain CapEx at around 17% of revenues, with a focus on network integration and infrastructure [62] Question: Mobile performance despite price freeze - The success in converting prepaid to postpaid subscribers has contributed to stable revenue performance [66] Question: Long-term goals for Paraguay's fixed broadband product - The company aims to continue growing its market share in Paraguay, leveraging its FTTH network [67] Question: Impact of the decree on customer base and bad debt - The decree has led to an increase in non-paying customers, with bad debt rising to approximately 3.8% [69] Question: Competitive environment in Paraguay - The market remains competitive, but Telecom Argentina has managed to increase revenues while competitors struggle [74] Question: Plans for dividend distribution next year - The decision regarding dividends will be made at the upcoming shareholders' assembly [76] Question: Cost-cutting initiatives and future potential - Management believes there is limited room for further cost reductions without impacting necessary operational expenses [77]