Telecom Argentina S.A. announces consolidated results for the six month period ("1H20") and second quarter of fiscal year 2020 ("2Q20")
Telecom Argentina S.A. announces consolidated results for the six month period ("1H20") and second quarter of fiscal year 2020 ("2Q20")
BUENOS AIRES, Aug. 14, 2020 /PRNewswire/ -- Note: For the figures included in their FFSS, the Company has accounted for the effects of inflation adjustment adopted by Resolution 777/18 of the Comisión Nacional de Valores ("CNV"), which establishes that the restatement will be applied to the annual financial statements, for intermediate and special periods ended as of December 31, 2018 inclusive. Accordingly, the reported figures corresponding to 1H20 include the effects of the adoption of inflationary accounting in accordance with IAS 29. Finally, comments related to variations of results of 1H20 and vs. 1H19 mentioned in this press release correspond to "figures restated by inflation" or "constant".
* (in constant measuring unit.)
Telecom Argentina S.A. ('Telecom Argentina') - (NYSE: TEO; BASE: TECO2), announced today a Net Income of $1,961 million for the period ended June 30, 2020 (-79.6% vs. 1H19). The Net Income attributable to the Controlling Company was P$1,744 million.
It is worth mentioning, that the comparative figures for the previous fiscal year have been restated so that the resulting comparative information is presented in terms of the current measurement unit as of June 30, 2020.
The following table shows the evolution of the consumer price index (National CPI) for the last three fiscal years and as of June 30, 2019 and 2020 according to the official statistics (INDEC), which were used to restate the figures in constant currency:
During 1H20, Consolidated Revenues amounted to P$131,158 million, of which Service Revenues totaled P$124,658 million.
Consolidated Operating Revenues
As of June 30, 2020, mobile clients in Argentina and Paraguay amounted to 21.0 million. In 1H20, mobile services revenues represented P$49,433 million (+P$3,717 million vs. 1H19). The commercial strategy was focused on achieving higher mobile portability through convergent offers and promoting the consumption of mobile internet.
Mobile Services in Argentina
As of June 30, 2020, Personal reached more than 18.8 million subscribers in Argentina (-35 thousand vs. 1Q20). Postpaid clients represented 41% of the subscriber base.
In 1H20, mobile service revenues amounted to P$43,116 million (+8.2% vs 1H19). Mobile internet revenues reached 77% of mobile service revenues (vs. 78% in 1H19). The average monthly revenue per user ('ARPU' – restated in constant currency as of June 30, 2020) amounted to P$375.5 during 1H20 (+6.9% vs. 1H19). The effect generated by the restatement in terms of the measuring unit as of June 30, 2020, included in the ARPU amounts to P$18.6 and P$124.8, for the 1H20 and 1H19, respectively. Mobile churn was 2.2% (vs. 2.3% in 1H19).
As a result of the lockdown that the country is going through and according to the national authorities' dispositions, the company continues to reinforce its networks, systems infrastructure and service platforms in order to guarantee that its clients can be communicated and connected throughout the country. In this particular situation, the company works on a daily basis to take care of both its employees and its customers. In this sense, digital and telephone contact channels have been strengthened so that the greater volume of service and commercial requests could be carried out directly from the clients' homes, without needing to visit the company's commercial offices.
Personal in Paraguay ('Núcleo')
As of June 30, 2020, Núcleo's subscriber base reached 2.2 million clients. Prepaid and postpaid customers represented 83% and 17%, respectively.
Núcleo generated service revenues equivalent to P$6,317 million during 1H20 (+7.6% vs. 1H19). Internet revenues represented 50% of 1H20 service revenues (vs. 49% in 1H19).
Cable TV Services
Cable TV service revenues reached P$26,357 million in 1H20 (-P$2,218 million vs. 1H19). During 2Q20, revenues related to local soccer league programming have not been generated, considering that the activity is suspended. Cable TV subscribers totaled almost 3.5 million (+21 thousand vs. 1Q20). Moreover, the monthly Cable TV ARPU (restated in constant currency as of June 30, 2020) reached P$1,255.3 during 1H20. The effect generated by the restatement in terms of the measuring unit as of June 30, 2020, included in the ARPU amounts to P$62.5 and P$485.3, for the 1H20 and 1H19, respectively. Additionally, the average monthly churn during 1H20 was 1.0% (reducing from 1.3% in 1H19).
During the second quarter, the Company continued to promote new content and co-productions for its Flow platform. In May, the co-production "Los Internacionales" was released, and a new alliance with Atrescine, the world's largest distributor of Spanish cinema, was also announced.
Fixed Telephony and Data Services
Revenues generated by fixed telephony and data reached P$20,093 million in 1H20 (-P$972 million vs. 1H19).
As a result, the average monthly revenue billed per user ('ARBU' - restated in constant currency as of June 30, 2020) of fixed telephony reached P$519.4 (+6.5% vs. 1H19). The effect generated by the restatement in terms of the measuring unit as of June 30, 2020, included in the ARBU amounts to P$25.9 and P$173.2, for the 1H20 and 1H19, respectively.
During the second quarter, different initiatives were developed in the corporate segment to assist companies in the current healthcare context, providing them with solutions so that they can continue with their activities.
Among these actions, the "Cyber Defense Center" security solution was launched in May. It is designed to meet organizations' demand for online security. This solution, dedicated exclusively to cybersecurity monitoring, is a tailor-made and flexible service based on the needs of each company.
Internet services revenues totaled P$28,392 million during 1H20 (-P$2,231 million vs. 1H19). As of June 30, 2020, total broadband accesses reached almost 4.1 million (+21 thousand vs. 1Q20).
Additionally, broadband ARPU (restated in constant currency as of June 30, 2020) amounted to P$1,160.9 per month in 1H20. The effect generated by the restatement in terms of the measuring unit as of June 30, 2020, included in the ARPU amounts to, approximately, P$57.8 and P$438.6, for the 1H20 and 1H19, respectively.
Moreover, the average monthly churn rate for the period was 1.3%. It is worth noting that as of 1H20 55% of the total customer base had a broadband service of 50Mb or higher (increasing from 18% as of 1H19).
A new technology under the name of "INFINITE" was presented in June. It has an automatic switch between fixed and mobile networks that guarantees a secure connection and provides tools that enhance Internet connection's performance. This innovative solution complements the fixed broadband internet service and adds a wireless data line from Personal's 4G mobile broadband network.
Revenues from equipment sales
Equipment revenues amounted to P$6,500 million (-P$2,315 million vs. 1H19). This reduction was mainly due to a decrease in the quantities sold, partially offset by the increase in prices of handsets.
Consolidated Operating Costs
Consolidated Operating Costs (including D&A and impairment of fixed assets) totaled P$116,667 million in 1H20 (-P$5,244 million or -4.3% vs. 1H19). Excluding D&A and impairment of fixed assets, operating costs showed a reduction of 7.3%, which contributed to generate an increase of the Operating Income before D&A margin (36.5% in 1H20 vs. 33.6% in 1H19).
The cost breakdown is as follows:
- Employee benefit expenses and severance payments totaled P$24,419 million (-5.4% vs. 1H19). Total employees amounted to 23,415 in 1H20.
- Interconnection and transmission costs (including TLRD, Roaming, international settlement charges and lease of circuits) totaled P$4,601 million (+7.9% vs. 1H19). This variation was mainly due to higher FX affecting US$ denominated services, partially offset by lower traffic volumes, both nationally and internationally, and lower purchases of interconnection links.
- Fees for services, maintenance, materials and supplies amounted to P$13,739 million (-1.6% vs. 1H19). Fees for services remained stable during 1H20. On the other hand, maintenance and material costs decreased P$248 million compared to 1H19, mainly due to an optimization in the consumption of materials associated with the activity, partially offset by higher costs related to the maintenance of our networks, systems, connection, and disconnection of clients.
- Taxes and fees with regulatory authorities amounted to P$9,923 million (-7.5% vs. 1H19). This decrease is mainly due to lower sales in 1H20 vs 1H19.
- Commissions and advertising (Commissions paid to agents, collection fees and other commissions) totaled P$7,011 million (-12.0% vs. 1H19). This decline is due to the sales channel reorganization and to a decrease in advertising related to lower handset sales. All digital contact channels were strengthened, encouraging clients to carry out all their commercial requests by these means.
- Cost of handsets sold amounted to P$4,399 million (-33.6% vs. 1H19). This decrease is a consequence of lower handset sales in Argentina, which was partially offset by an increase in their purchase price.
- Programming and content costs totaled P$8,991 million (-11.8% vs. 1H19). This reduction is mainly explained by operative efficiencies and withdrawal of signals, some of which are related to sports, which were partially offset by price increases in almost all of the other broadcasting signals. Moreover, there were no costs related to local soccer league programming during 2Q20, considering that the activity is suspended.
- Other Costs totaled P$10,223 million (-0.4% vs. 1H19), from which bad debt expenses reached P$5,359 million (+41.0% vs. 1H19). Bad debt ratio was 4.1% as of June 30, 2020 (vs. 2.8% in 1H19). Additionally, other operating costs (including charges for lawsuits and other contingencies, energy and other public services, insurances, rents, internet capacity, among others), which totaled P$4,864 million (-24.8% vs. 1H19), decreased mainly due to lower charges for lawsuits and other contingencies.
- Depreciation, amortization and impairment of fixed assets amounted P$33,361 million (+4.0% vs. 1H19). This increase was due to the impact of the amortization of assets incorporated after June 30, 2019.
Net Financial Results
Net Financial Results (including Financial Expenses on Debt and Other Financial Results, net) generated a loss of P$9,455 million in 1H20 (vs. a gain of P$6,890 million in 1H19). This variation was mainly due to:
Consolidated Net Financial Debt
As of June 30, 2020, our net financial debt position (cash, cash equivalents plus financial investments and financial NDF minus loans) totaled P$131,032 million, increasing P$23,580 million or 21.9% when compared to the consolidated net financial debt position as of June 30, 2019, which totaled P$107,452 million (restated in terms of the measuring unit as of June 30, 2020).
Investments in PP&E, intangible assets and rights of use assets
During 1H20, the Company invested P$22,766 million (-33.9% vs. 1H19). These investments represented 17.4% of consolidated revenues in 1H20, and were focused on:
Thanks to the investments in infrastructure done in recent years, Telecom currently counts with the equipment and systems that allow its networks to perform efficiently, supporting the increase of up to 50% in home internet data traffic, 70% in mobile voice services and 30% in mobile data, plus a 75% growth in upstream.
Agreement with the Ente Nacional de Comunicaciones (National Communications Entity)
Within the framework of the emergency caused by COVID-19 and the prevention measures introduced by the National Government, on May 26 Telecom announced that it has entered into an Agreement with the Ente Nacional de Comunicaciones ("ENACOM"), whose main points are mentioned below:
The term of this Agreement will be until August 31, 2020.
Other Relevant Matters
Agreement with TMF Trust Company (Uruguay)
Due to the public offering of the Class 5 Notes that was announced on July 7, 2020 by the Company, to be subscribed and integrated in cash and / or in kind, through the delivery of the Class "A" Notes due in 2021 (the "Offer"), and in anticipation of certain additional refinancing transactions that could involve significant cash payments during the coming months, on July 15, 2020, the Company entered into an agreement with TMF Trust Company (Uruguay), in its fiduciary capacity, to facilitate the administration of said payments.
The purpose of the agreement is to ensure the timely availability of the funds required to make the cash payments related to said refinancing transactions.
Under the agreement, any assets that have not been applied to the cancellation of the Company´s cash payments mentioned above shall revert to the Company, as residual beneficiary, upon termination of the fiduciary administration agreement.
Exchange of Class A Notes due 2021 and issuance of amortizing Class 5 Notes due 2025.
On July 7, 2020, the Company announced the commencement of its offer to exchange its outstanding Class A Notes due 2021 (the "Class A Notes") for new amortizing Class 5 Notes, due 2025 (the "Class 5 Notes") and certain cash consideration. The offer involved an amount of US$ 700 to be received in nominal value of Class 5 Notes and US$ 320 to be received in cash, for each US$ 1,000 of nominal value of Class A Notes validly tendered.
The closing of the said offer took place on August 3, having the holders validly tendered US$ 362.2 million of the total outstanding amount of the Class A Notes, which represented an acceptance rate of 77.74% of the exchange offer. On that day, Telecom also announced the issuance of an additional amount of US$ 135.4 million of Class 5 Notes that were subscribed in cash. Funds arising from the mentioned issuance were used mainly to repay the loan agreement entered into with Deutsche Bank AG, London Branch and CPPIB Credit Investments, Inc., as lenders, on November 8, 2018.
In accordance with the exchange offer and said additional cash offer, on August 6, 2020, the Company issued an amount of US$ 388.9 million in Class 5 Notes, as follows:
Issuance Date: August 6, 2020.
Meeting of holders of Class A Notes held on August 5, 2020
A General Extraordinary Meeting of holders of Class A Notes of Telecom Argentina was held on August 5, 2020. In accordance with the Offer and Consent Solicitation announced by the Company on July 7, 2020, the following resolutions were adopted:
(A) the amendments and/or eliminations regarding the 2021 Notes and the respective Indenture described in the Prospectus Supplement dated July 7, 2020 published in the Buenos Aires Stock Exchange Daily Gazette and on the Argentine Securities and Exchange Commission´s website;
(B) the effective date for the abovementioned amendments and/or eliminations regarding the 2021 Notes stated in (A) above should be the date of the referred Meeting, subject to the execution of the Offer and Consent Solicitation, which occurred on August 6, 2020; and
(C) to authorize, empower and instruct Deutsche Bank Trust Company Americas, Banco Comafi S.A. and other parties to the 2021 Notes Indenture to establish and execute together with the Company the final draft of the documents that will reflect the amendments and/or eliminations of terms and conditions approved by the holders of Class A Notes, and to carry out any other action to make said amendments and/or eliminations effective (including, without limitation, the subscription of any other document, amendment, restatement and/or supplemental contract to the 2021 Notes Indenture or to the 2021 Notes that may be deemed necessary to that end).
Telecom Argentina is a leading telecommunications company in Argentina, where it offers, either itself or through its controlled subsidiaries local and long distance fixed-line telephony, cellular, data transmission, and pay TV and Internet services, among other services. Additionally, Telecom Argentina offers mobile, broadband and satellite TV services in Paraguay and pay TV services in Uruguay. The Company commenced operations on November 8, 1990, upon the Argentine government's transfer of the telecommunications system in the northern region of Argentina.
As of June 30, 2020, Telecom Argentina has 2,153,688,011 shares issued and outstanding.
For more information, please contact Investor Relations:
Voice Mail: (5411) 4968 3628
For information about Telecom Argentina's services, visit:
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SOURCE Telecom Argentina S.A.
Company Codes: NYSE:TEO, BuenosAires:TECO2
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