Telecom Argentina S.A. announces consolidated results for the first quarter of fiscal year 2020 ("1Q20")*
BUENOS AIRES, May 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 1Q20 include the effects of the adoption of inflationary accounting in accordance with IAS 29. Finally, comments related to variations of results of 1Q20 and vs. 1Q19 mentioned in this press release correspond to "figures restated by inflation" or "constant".
*Unaudited non financial data
Telecom Argentina S.A. ('Telecom Argentina') - (NYSE: TEO; BASE: TECO2), announced today a Net Income of $2,641 million for the period ended March 31, 2020 (+39.2% vs. 1Q19). The Net Income attributable to the Controlling Company was P$2,549 million (+39.5% vs. 1Q19).
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 March 31, 2020.
The following table shows the evolution of the consumer price index (National CPI) for the last three fiscal years and as of March 31, 2019 and 2020 according to the official statistics (INDEC), which were used to restate the figures in constant currency:
During 1Q20, Consolidated Revenues amounted to P$62,762 million, of which Service Revenues totaled P$59,559 million.
Consolidated Operating Revenues
As of March 31, 2020, mobile clients amounted to 21.2 million. In 1Q20, mobile services revenues represented P$23,127 million (+P$1,160 million vs. 1Q19). 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 March 31, 2020, Personal reached more than 18.8 million subscribers in Argentina (-245 thousand vs. 4Q19). Postpaid clients represented 41% of the subscriber base, growing versus the previous quarter due to a positive net portability.
In 1Q20, mobile service revenues in Argentina amounted to P$20,150 million (+5.0% vs 1Q19). Mobile internet revenues reached 78% of mobile service revenues (vs. 73% in 1Q19). The average monthly revenue per user ('ARPU' – restated in constant currency as of March 31, 2020) amounted to P$352 during 1Q20 (+5.1% vs. 1Q19). The effect generated by the restatement in terms of the measuring unit as of March 31, 2020, included in the ARPU amounts to P$10 and P$118.7, for the 1Q20 and 1Q19, respectively. Mobile churn was 2.2% (vs. 2.6% in 1Q19).
As a result of the preventive and mandatory social isolation imposed by the Government on March 20, the Company took all the measures necessary to ensure the communication and connection of its clients throughout the country. In order to continue supporting its customers and their families, the Company announced a series of connectivity and entertainment benefits for all its clients, including additional free-of-charge gigabytes for one month for the postpaid customer segment, extra credit for prepaid customers through the Recarga SOS service, extra gigabytes for clients who were abroad, unlimited WhatsApp and access to free educational content without consuming mobile data.
Personal in Paraguay ('Núcleo')
As of March 31, 2020, Núcleo's subscriber base reached almost 2.4 million clients. Prepaid and postpaid customers represented 84% and 16%, respectively.
Núcleo generated service revenues equivalent to P$2,977 million during 1Q20 (+7.0% vs. 1Q19). Internet revenues represented 54% of 1Q20 service revenues (vs. 48% in 1Q19).
Cable TV Services
Cable TV service revenues reached P$13,120 million in 1Q20 (-P$1,079 million vs. 1Q19). Cable TV subscribers totaled almost 3.5 million (-22 thousand vs. 4Q19). Moreover, the monthly Cable TV ARPU (restated in constant currency as of March 31, 2020) reached P$1,250.6 during 1Q20. The effect generated by the restatement in terms of the measuring unit as of March 31, 2020, included in the ARPU amounts to P$35.5 and P$479.7, for the 1Q20 and 1Q19, respectively. Additionally, the average monthly churn during 1Q20 was 1.4% (reducing from 1.5% in 1Q19).
During the first quarter, the Company continued to promote new content and co-productions for its Flow platform.
In addition, and in order to support the families during their isolation in their homes, Telecom allowed all its Cablevisión's customers to download the Flow application free of charge.
Fixed Telephony and Data Services
Revenues generated by fixed telephony and data reached P$9,478 million in 1Q20 (-P$702 million vs. 1Q19).
As a result, the average monthly revenue billed per user ('ARBU' - restated in constant currency as of March 31, 2020) of fixed telephony reached P$487.3 (+4.5% vs. 1Q19). The effect generated by the restatement in terms of the measuring unit as of March 31, 2020, included in the ARBU amounts to P$13.9 and P$165.3, for the 1Q20 and 1Q19, respectively.
At the beginning of the year, and in order to continue promoting the development of the IoT (Internet of Things) business unit in the corporate segment, the Company announced the strategic alliance with the global provider NOKIA to incorporate the WING (WorldWide IoT Network Grid) that provides the Company with a unique, comprehensive and scalable infraestructure. Telecom is the first Argentine company to sign an agreement with Nokia to offer IoT services to the corporate segment through this new service.
Likewise, towards the end of the first quarter, the Company participated in the agricultural exhibition ExpoAgro 2020, offering commercial solutions aimed to monitor poultry farms and groundwater, as well as animal and environmental supervision.
On the other hand, in the emergency and contingency scenario posed by the pandemic in Argentina, a series of initiatives were carried out in the corporate segment, such as to provide access to World Class collaboration platforms, working on a worry free concept so that corporate clients can connect remotely while disposing freely of their data consumption.
Internet services revenues totaled P$13,656 million during 1Q20 (-P$1,399 million vs. 1Q19). As of March 31, 2020, total broadband accesses reached more than 4.1 million (-49 thousand vs. 4Q19).
Additionally, broadband ARPU (restated in constant currency as of March 31, 2020) amounted to P$1,107.5 per month in 1Q20. The effect generated by the restatement in terms of the measuring unit as of March 31, 2020, included in the ARPU amounts to, approximately, P$31.4 and P$429.8, for the 1Q20 and 1Q19, respectively.
Moreover, the average monthly churn rate for the period was 1.6%. It is worth noting that as of 1Q20 66% of the total customer base had a broadband service of 20Mb or higher (increasing from 44% as of 1Q19).
Revenues from equipment sales
Equipment revenues amounted to P$3,203 million (-P$960 million vs. 1Q19). 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$56,996 million in 1Q20 (-P$2,073 million or -3.5% vs. 1Q19). Excluding D&A and impairment of fixed assets, operating costs showed a reduction of 7.9%, which contributed to generate an increase of the Operating Income before D&A margin (35.1% in 1Q20 vs. 32.7% in 1Q19).
The cost breakdown is as follows:
- Employee benefit expenses and severance payments totaled P$11,724 million (-10.0% vs. 1Q19). Total employees amounted to 23,472 in 1Q20.
- Interconnection and transmission costs (including TLRD, Roaming, international settlement charges and lease of circuits) totaled P$2,016 million (-7.3% vs. 1Q19). This decrease was mainly due to lower traffic volumes, both nationally and internationally, and lower purchases of interconnection links.
- Fees for services, maintenance, materials and supplies amounted to P$6,879 million (+3.0% vs. 1Q19). Fees for services increased P$226 million in 1Q20 due to higher costs of the call centers, surveillance and cleaning. On the other hand, maintenance and material costs decreased P$26 million compared to 1Q19, 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$4,778 million (-7.5% vs. 1Q19). This decrease is mainly due to lower sales in 1Q20 vs 1Q19.
- Commissions and advertising (Commissions paid to agents, collection fees and other commissions) totaled P$3,570 million (-4.4% vs. 1Q19). This decline is due to the sales channel reorganization and to a decrease in advertising related to lower handset sales.
- Cost of handsets sold amounted to P$2,250 million (-30.5% vs. 1Q19). 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$4,726 million (-6.6% vs. 1Q19). This reduction is explained mainly by operative efficiencies such as the withdrawal of the Spanish Football League signal, which were partially offset by price increases in almost all of the other broadcasting signals.
- Other Costs totaled P$4,794 million (-7.3% vs. 1Q19), of which bad debt expenses reached P$2,248 million (+4.7% vs. 1Q19). Bad debt ratio was 3.6% as of March 31, 2020 (vs. 3.3% in 1Q19). This increase in bad debt expenses is mainly due to the potential negative impact from the COVID-19 (which amounts to P$276 million). 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$2,546 million (-15.9% vs. 1Q19), decreased due to lower charges for lawsuits and other contingencies of P$364 million.
- Depreciation, amortization and impairment of fixed assets amounted P$16,259 million (+9.7% vs. 1Q19). This increase was due to the impact of the amortization of assets incorporated after March 31, 2019.
Net Financial Results
Net Financial Results (including Financial Expenses on Debt and Other Financial Results, net) generated a loss of P$1,524 million in 1Q20 (vs. P$157 million in 1Q19). This variation was mainly due to:
Consolidated Net Financial Debt
As of March 31, 2020, our net financial debt position (cash, cash equivalents plus financial investments and financial NDF minus loans) totaled P$134,098 million, increasing P$27,919 million or 26.3% when compared to the consolidated net financial debt position as of March 31, 2019, which totaled P$106,179 million (restated in terms of the measuring unit as of March 31, 2020).
We are currently analyzing alternatives to refinance its debt maturities during 2021. The number of possible alternatives will depend on the developments of the sovereign debt situation, which should be defined in the near future.
Investments in PP&E, intangible assets and rights of use assets
During 1Q20, the Company invested P$9,985 million (-25.7% vs. 1Q19). These investments represented 15.9% of consolidated revenues in 1Q20, and were focused on:
Thanks to the CAPEX made during the last years, Telecom was able to manage efficiently the significant increase in traffic generated by COVID-19.
In order to ensure that the network performance continues without inconvenience, technical measures to increase capacity were carried out:
Moreover, the capacity of the mobile network in certain smaller cities of the country was expanded, and a continuous preventive maintenance was performed on all the networks to ensure continuity of service throughout the country.
Issuance of Notes in Paraguay by Núcleo S.A.
Núcleo issued a new Series of Notes with the following characteristics:
Issuance Date: March 12, 2020.
Amount Issued: Gs.100.000 million (approximately P$948million as of the Issuance Date)
Maturity Date: 60 months as from the Issuance date.
Amortization: Bullet (March 11, 2025).
Interest Rate: 8.75% p.a.
Interest Payments: Quarterly.
Decree 311/20 – Health Emergency: Abstention of service interruption in case of delinquency or non-payment
On March 24, 2020, the Executive Power issued Decree No. 311/2020, which determined for a certain group of clients defined therein the temporary suspension of the interruption of services considered key for the daily life, such as the supply of electricity, water, gas, fixed and mobile telephony and Internet and cable television by radio electrical or satellite link, among others.
The Decree also established that, in the case of fixed or mobile telephony, Internet and cable TV services by radio electrical or satellite link, companies providing these services are obliged to maintain a reduced service for a period of 180 calendar days. In addition, the regulation established that mobile and fixed internet prepaid service users that that did not pay the corresponding recharge to access data consumption, should be provided with a reduced service. This obligation would be effective until May 31, 2020.
The regulation establishes:
a) Monthly benefits such as a reduced service of fixed, mobile, Internet and cable television, by radio electric or satellite link.
b) The suspension of preventive notices of service interruption for all users which will be determined by the Coordination Unit.
c) That these measures may be extended to other private users, taxpayers under the monotributo regime and civil associations that can demonstrate a decrease in their income.
The companies must inform the ENACOM of all the prices established for the reduced services. The companies must also inform the ENACOM of the terms and conditions of the payment alternatives.
Other Relevant Matters
New disbursement in connection with the financing agreement entered into with IDB Invest on May 29, 2019.
On April 7, 2020, the Company has received from IDB Invest a new disbursement for an amount of US$25,000,000, which matures on November 15, 2022.
Ordinary and Extraordinary General Shareholders' Meeting held on April 28, 2020.
The Ordinary and Extraordinary Shareholders' Meeting was held on April 28, 2020 with the Shareholders attending remotely. The Shareholders' Meeting adopted, among others, the following resolutions:
Additional actions under COVID-19
During the isolation, the continuity of all services was guaranteed and different high social value actions were taken in the context of the COVID-19.
Some of these actions were the following:
In order to guarantee the business continuity during COVID-19, the Company took the following measures:
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 March 31, 2020, Telecom Argentina has 2,153,688,011 shares issued and outstanding.
For more information, please contact Investor Relations:
Voice Mail: (5411) 4968 3628
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SOURCE Telecom Argentina S.A.