Earnings Labs

Telecom Argentina S.A. (TEO)

Q2 2015 Earnings Call· Fri, Aug 7, 2015

$11.18

-0.36%

Key Takeaways · AI generated
AI summary not yet generated for this transcript. Generation in progress for older transcripts; check back soon, or browse the full transcript below.

Same-Day

+5.31%

1 Week

-3.27%

1 Month

-7.35%

vs S&P

-1.02%

Transcript

Operator

Operator

Good day everyone and welcome to the Telecom Argentina TEO Second Quarter 2015 Earnings Conference Call. Today's conference is being recorded. Participating on today's call we have Ms. Elisabetta Ripa, Chief Executive Officer of Telecom Argentina, Mr. Adrian Calaza, Chief Financial Officer; Mr. Pedro Insussarry, Head of Finance, Ms. Solange Barthe Dennin, Manager of Investor Relations and at this time I'll turn the conference over to Mr. Pedro Insussarry, please go ahead sir.

Pedro Insussarry

Management

Good morning to everybody on behalf of Telecom Argentina, I would like to thank you participating in this conference call. As stated by Josef our moderator the purpose of this call is to share with you the results of the six months period of fiscal year 2015 ended on last June 30th. We would like to remind all those that have not received our press release, our presentation, you can call our investor relations office to request these documents or download them from the Investor Relations section of our Web site located at www.telecom.com.ar/investors.htm. Additionally, this conference call and slide presentation is being broadcasted through the webcast feature available in subsection and can also be replayed through the same channel. Before we continue with the call, I would like to go over some Safe Harbor information and other details of the call, as we usually do in our quarterly conference calls. We would like to clarify that during the conference call and Q&A session, we may produce certain forward-looking statements about Telecom’s future performance, plans, strategies and targets. Such statements are subject to uncertainties that could cause Telecom’s actual results and operations to differ materially. Such uncertainties include, but are not limited to the effects of the public emergency law and complementary regulations, the effects of ongoing industry and economic regulation, possible changes in demand for Telecom products and services, and effects of more general factors such as changes in general markets or economic conditions in legislation or in regulations. Our press release dated August 3rd, 2015, a copy of which is being included in the Form 6-K report furnished to the SEC, describes certain factors that may affect any forward-looking statements that we may produce during this session. Furthermore, we urge the audience of this conference call to read…

Elisabetta Ripa

Management

Thank you, Pedro and good morning to everyone. Please refer to Slide 5, where we’ve summarized the main action items for what we have been executing recently. Going to our business despite the macro contest that Pedro just described our focus on a commercial strategy towards value customers and the stimulation of data Internet usage is reporting good result. This six months period we have achieved 44% increase in positive growth. Our smartphone penetration continued to increase reaching 37% of our customer base giving us a solid base to continue growing in Internet browsing usage in line with the smartphone sell out reach 98% offer of devices coming from vendors was limited by cost trends on importation. In line with the strategy we have initiated the process of scheme simplification where our plans are adding a progressive data centric approach. Moreover as we concentrate mainly on our resources in the development of the 4G project we are in line to meet the goal we have set for the year. We are on track to cover all of the most important cities in the country with an encouraging growth of customers and use of the 4G services, while the main CPIs are showing very good signs of network performance with the consequent positive effect on a consumer experience and perception of quality of services. Furthermore mobile Internet users increased more than 13% in second quarter of 2015 while data increased by [76%] resulting in ARPU growth of 73%. In the wireline broadband we continue to grow with the 33% increase with a significant expansion in the participation of high speed connection that currently 22% of our customer base, compared with 10% a year ago. In this case our ARPU grew more than 36% versus second quarter 2014. Moving to the financials,…

Adrian Calaza

Management

Thank you, Elisabetta Ripa. Please turn to Slide 16 where you see the evaluation of consolidated revenues and EBITDA. During the first half of this year consolidated revenues reached P$18.5 billion with a 19% year-on-year growth but with service revenues growing at a higher pace of 21%, thanks to a strong performance in Internet services both mobile and fixed broadband together with ICT corporate data service as we mentioned before. Moreover this year revenue performance was affected by the limitation in handset availability effect that we expected will be more moderate in the second half of the year. It is always important to remember that revenue growth is affected by frozen tariffs in the fixed services since 2002 in nominal terms on the regulated service that now account just 7% of total revenues. Moreover during this first half EBITDA showed a strong evolution year-on-year growing at the base of 25% maintaining in this quarter the same trend of the first quarter of the year. We must note that this performance has been achieved with high mergers in the handset business and that the growth of EBITDA coming from the operations in Argentina reached 26%. Please refer to Slide 17, where we showed the evolution on EBITDA with the breakdown of the components that impacted its evolution. In line with the actions taken in previous quarters we have continued with our efforts to control cost and to increase efficiency. In this context increased HR and labor related costs have negatively impacted our service revenue margin but thanks to our cost control efforts we have seen savings in interconnection costs and relative savings in fiscal services, maintenance and materials and taxes. As we have noted in previous quarters changes in the handsets business model drove to a significant reduction in handset subsidies…

Operator

Operator

[Operator Instructions]. We do have a question from Diego Aregao.

Diego Aregao

Analyst

So just want to understand, to better understand the trends on the 4G if you could you know give more colors on how ARPU is trending after the customer starts to use like your 4G network, I saw that the smartphone penetration is 37% right now, could you give more colors if those smartphones are 4G ready or this also considers 3G smartphones.

Elisabetta Ripa

Management

Thank you for the question, 4G definitely the upside of the market for the new technology is interesting, this is the position of personnel that historically is targeting youth generation and IM customers, I think we have definitely a very strong position in order to maximize the benefits and the results of our investment in this technology. Definitely the market has a strong willness of experiencing this technology and the quality has been really appreciate from our customers especially the black segment that have been sort of with the special attention of our CRM strategy and they're looking for to have a better coverage and a better IR penetration or availability of smartphone. Right now the 37% of smartphone penetration we have mentioned is referring to all that technology so we are referring to 3G and partially to 4G. The 4G availability so far that has been limited but in the second half of 2015 personnel will definitely distribute 95% of 4G in our portfolio we'll focus on the high penetration of the handsets that are definitely the enabler not only in order to experience the 4G network but also to move traffic from 3G to 4G network that a pre-commission in order to improve further the quality of our network, in order to that we’ll try to as I mentioned maximize the penetration of smartphone and we also maximize the bundles with new tariff plan and the new portfolio that will be focused 100% of data plan in order to segment more. The usage and the attitude of our market targeting especially the IEM customers serving well that show tariff all included or the voice and SMS and basically segmenting the market where the attitude of using data. The market definitely has a strong appetite for the 4G handsets and there are particularly that we cannot benefit from these opportunity adding more and more handsets on experiencing and using their latest model that are now available in the market, but definitely seeing that the business is going to improve in the next few months.

Diego Aregao

Analyst

And just to follow up is it soon to assume that those let's say customers that are enjoying the 4G technology are somehow -- let's say are you seeing some voice to data migration among those clients or it is too early to assume this migration?

Elisabetta Ripa

Management

I think that it’s definitely early to comment on this with the specific term. In marketing approach I think that we are segmenting the market and the customer base of 4G targeting the IM customers that you can easily understand and are not so focused on savings and are not so focused on limiting their experience in voice usage especially if we are referring to the ones that are or that cannot benefit from an unlimited packages on the voice traffic. So far the cannibalization in the market of voice is very limited, there are basically the evidence of the first three months of launch or complete launch of 4G, but it’s definitely more evidence is the cannibalization of SMS as we mentioned that effect that we have basically targeted and reducing the penetration of pay per use solution and we are moving forward bundled offer. The reduction and cannibalization is pretty much over and we basically reach the floor of the trends. We will answer you next time, in September we have some more time in order to experience the real trend.

Operator

Operator

[Operator Instructions]. And it seems we have no further questions at this time.

Elisabetta Ripa

Management

Thank you.

Pedro Insussarry

Management

Thank you everybody for participating this quarterly conference call. Please do not hesitate in contacting our Investor Relations department for any further inquiries you may have. Good morning to all and have a nice day and we expect to meet you soon. Bye, bye.

Elisabetta Ripa

Management

Thank you.

Operator

Operator

And that concludes today’s conference call. We thank you for your participation.