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spk01: Good afternoon. My name is Betsy and I'll be your conference operator today. After the speaker's remarks, there will be a question and answer session. You may submit your questions throughout the event by clicking in the submit a question box on your screen. This is Cablevision Holdings conference call, where we will discuss results for the first quarter 2021. This call is for investors and analysts only. Therefore, questions from the media will not be taken at this time. However, if you are a member of the media and have questions, please contact FIG Corporate Communications following the call. I will now introduce our speakers, Mrs. Samantha Olivieri, Head of Investor Relations, and Ms. Valentino Lopez, Senior Analyst. Additionally, Mr. Sebastian Bardengo, Executive Director and Chairman, will also be available for today's Q&A session. The team will be discussing the results. as per the earnings release distributed last Tuesday, May 11th. If you have not received the report or need any assistance during today's call, please contact Fig Corporate Communications in New York at 917-691-4047 or the company in Buenos Aires at 5411-4309-3417. CVH has also posted the webcast presentation that can be found at www.cvh.com.ar under the IR section. Comments made by the management may contain forward-looking statements about Cablevision Holdings' future performance, plans, strategies, and targets. Such statements are subject to uncertainties that could cause Cablevision Holdings' actual results and operations to differ materially. Such uncertainties include, but are not limited to, the effects of the impact and duration of the COVID-19 pandemic, new or ongoing industry and economic regulations, possible changes in demand for Cablevision Holdings products and services, and the effect of more general factors, such as changes in the general market, economy, or regulatory conditions. We ask that you refer to disclaimers in the earnings reports or presentation for additional information regarding forward-looking statements. It is now my pleasure to turn the call over to Mrs. Samantha Olivieri. Please go ahead.
spk02: Thank you, Betsy. Hello, everyone. As you all know, we are living through a challenging moment in history. I would like to start the call by expressing my hope that you and your families are all healthy and safe in these times of uncertainty. Before discussing our results for the quarter, Let me share with you the latest regulatory decisions by the Argentine government. Please move to slide four. The Argentine government issued the Decree 690-2020, later confirmed by Congress, declaring mobile, fixed telephony, broadband, and pay TV as public essential services, and freezing prices until the end of 2020, while instating ENACOM as a regulatory agency in charge of enforcing the decree and regulating prices. In December 2020, ENACOM issued two resolutions, Resolution 1466, which authorized price increases of 5% for all ICT services effective as of January 1, 2021, and also established that any further price increases must be informed and submitted to ENACOM for approval 60 days in advance. And Resolution 1467, which determined a series of basic universal services that should be provided by the operators for mobile, broadband, pay TV, and fixed voice services. These services target low-income individuals, beneficiaries of social programs, and nonprofit entities, all of which must file an application form with the ANACOM. In February 2021, a preliminary injunction requested by a cable TV operator from the province of Cordoba was accepted by a federal judge who ordered the suspension of Decree 690-20 and Decree 311-20. The injunction was later extended to all members of ATVC, that is the Argentine Association of Cable TV Operators, of which Telecom is a member. In addition, in May 2021, the Second Chamber of the Federal Court of Appeals on Administrative Litigation Matters granted Telecom a preliminary injunction suspending the effects of Sections 1, 2, 3, 4, 5, and 6 of Decree 690-20, and a Venecom resolutions number 1466-2020, 1467-2020, and 204-21. As a result of such injunction, Telecom may manage the pricing policy of its services as before the decree 690-2020. Now we will continue with an update of the tender offer process. Then we will move on to a brief macro overview and to the company's operating results, followed by a review of the financial position. Let's move to slide five, where we discuss a summary of the relevant aspects of the change of control tender offer. As we mentioned in our last call, by the end of December 2019, a first-instance judge of the Federal Administrative Litigation Matters Court admitted the claim filed by Mr. Burgueño in his capacity as the shareholder of Cabellet-Zion Holding S.A. and resolved that CVH is no longer an obligation to launch a mandatory tender offer as a result of the change of control in Telecom Argentina. While CVH did not appeal the court's decision and agreed with the position of the claimant, the CMV, that is the Argentine Securities Commission, appealed such a decision with the Court of Appeals. In September 2020, the court dismissed the appeal filed by the Argentine Securities Commission and confirmed the decision by the First Instance Court in favor of the claimant, Mr. Bulgenia. Later, in October 2020, the Federal Court of Appeals denied CMV's request to have a case heard by the Argentine Supreme Court and the CMB filed a complaint against the decision of the Court of Appeals directly at the Supreme Court. Now, the Supreme Court must evaluate if it will or not accept the case with no timeframe to do so. As per the original legal proceeding filed by CBH for the Federal Civil and Commercial Court regarding the price of the tender offer, it is still waiting for the first instance decision. we will keep the public informed about any news related with the tender offer process. Having gone through the discussion of the TEO process, please let me pass the call to Valentina.
spk00: Thank you, Samantha. I will continue with the macro overview. Let's move on to slide six. As we've seen in our previous calls, Argentina's economy is going through a deep recession worsened by the COVID-19 pandemic, which has caused, among other effects, two macroeconomic imbalances in the country, the highest fiscal deficit in the last decade, and a monetary overhang that the economy will have to process as a result of the monetary issue in 2020 to cover the fiscal deficit. Regarding the economic activity, GDP is expected to close the first quarter of 2021 with an increase of 2% as compared to the previous quarter, and of 1.5% on an annual basis registering a recovery after the plunge of 2020, despite its still weak condition. However, on a quarterly basis, we expect some contraction for the coming period, mainly due to the reinforcement of restrictions on the activity and the overnight mobility launched by the government in April 2021. It is worth noting that the improvement in the activity evolution has come with an increase in inflation, especially as a result of the economic recovery and the current monetary overhang and microeconomic policies that remain loose. Quarterly inflation was 40.6% on an annual basis, while the monthly variation was 4.8% at the end of March 2021, recording a higher than expected prices acceleration. Meanwhile, the government is tightening price controls raising utility prices marginally and reinforcing its intervention on the foreign market as the main way to anchor inflation. The reference rate stood at 38% at the end of March of 2021. Consensus is that the central bank will not increase interest rates before the elections despite an accelerating inflation, seeking to boost economic recovery and contain the fiscal deficit, which shows signs of worsening. The Argentine economy continues to show several difficulties, and more uncertainty is expected since legislative elections are taking place during this year, and no progress has been made on the new program with the IMF. The main challenge is that the current administration could face, in order to stabilize the economy and achieve a sustainable growth path, are the improvement of the health situation derived from the COVID-19 pandemic, the reduction of the fiscal and monetary imbalances, the ability to ease foreign exchange restrictions and contain inflation as the activity recovers, and a new agreement with the IMF. Now, I will pass the call back to Samantha. Thank you, Valentina.
spk02: We will now continue with CBH Keys Financial. Slide 8 shows the highlights for the quarter. The company has reflected the effects of inflation adjustment adopted by Resolution 777-18 of the Comisión Nacional de Valores, CMV, which establishes that the re-expression of figures must be applied to the annual financial statements for intermediate and special periods ended as of and including December 31, 2018. Accordingly, the reported figures corresponding to the first quarter 21 include the effects of the adoption of inflationary accounting in accordance with IAS 29. For comparative purposes, the results restated by inflation corresponding to March 2020 contain the year-over-year inflation as of March 2021, which amounted to 42.6%. In this presentation, we include some figures and historical values for the sake of clarity. TVH owns 39.08 stake in TIO and is controlling shareholder of Telecom Argentina. It consolidates 100% of its operations. In constant currency, revenues for the first quarter dropped 7.8% to 82.5 billion pesos, mainly driven by lower revenues from mobile services, broadband, cable TV, and fixed telephony and data services, partially offset by higher equipment sales revenues. The main source of our revenues is our fixed infrastructure. Broad-end pay TV and fixed telephony and data services amounted to 55.8% of total, while mobile service participation increased to 37.4%, gaining share over total revenues as compared to first quarter 20. The BTA reached approximately 30 billion pesos in constant currency, a 4.3% decrease compared to the first quarter 20. driven by lower revenues partially offset by lower operating costs. EBTA margin increased to 36.3%. EBTA in nominal pesos amounted to 29.9 billion pesos, 37% higher than nominal EBTA for the first quarter 2020, while inflation for the last 12 months was approximately 43%. Net income for the period totaled 8,955 million pesos from 3,958 million pesos reported for the first quarter of 2020. The increase in net income is the result of accounting profits from foreign exchange differences as per IAS 29. The foreign exchange lag prevented the impact of losses and results due to the revaluation of the debt in dollars, as had happened in first quarter 2020 when inflation was 7.8% versus 7.6%. percent evaluation. In first quarter 21, inflation was 13 percent, while the Argentine peso depreciation was 9.3 percent. The equity shareholders' income for the period amounted to 3,364 million pesos. Now let's move on to slide 9. Mobile revenues represented approximately 37 percent of our revenues and decreased 6.4 percent in real terms. when comparing first quarter 21 versus first quarter 2020. Total personnel Argentina clients remained steady, while postpaid clients increased 1.7% and amounted to 42% of mobile clients compared to 41% in 2020. The company has been increasing its postpaid subscriber base in order to improve its ARPU and reduce churn. Mobile subs in Argentina amounted to 18.9 million. Mobile internet usage increased, reaching an average of more than 3.9 gigabytes per user per month in the first quarter. Thanks to the CapEx deployment, Telecom has been able to increase the number of its 4G subscribers. This rapid growth in subscribers that use 4G network has been the driver of the data traffic increase. In Argentina, ARPU, restated in constant currency, decreased by 3% to 486 pesos in first quarter 21, a monthly churn decreased to 1.5% from 2.3% in first quarter 2020. The commercial strategy has been focused on achieving higher mobile portability through convergent offers and promoting the consumption of mobile internet. Since the rollout of the strategic CapEx plan and the convergent offer, the company has turned around its strength of portability net additions in Argentina and has been increasing the number of subs over the last three years. Please turn to slide 10. Revenues for fixed services including broadband, cable TV, and fixed telephone and data services decreased by 11% in real terms. The broadband business has been performing well despite the tough macroeconomic environment. The number of subscribers increased 2% to 4,157,000. Monthly churn decreased to 1.4%. Ad pool in real terms decreased to approximately 1,358 pesos. The price increase during the first half of 2020 and first quarter 2021 and higher internet speeds sold to our customer base were not enough to compensate for inflation. It should also be noted that due to our cross-selling strategy, fixed products have been offered with some discounts to encourage the positive mobile portability. Around 61% of our 4.2 million broadband customers reached in first quarter 2021 subscribed to services with speeds of 50 megabytes or higher. Moving to the cable TV subscribers, the customer base remains stable at 3.5 million, showing a slight increase year over year. Furthermore, Flow boxes achieved 1.2 million, a 22% increase from figures of March 2020. During the last 12 months, Flow, through its Flow app version, has continued to expand its penetration in areas where personal has a great presence, that is, in the northern region of Argentina. This has allowed an increase in the capture of cable TV subscribers in regions in which the company reaches through its XDSL and fiber-to-home network. Adful in real terms decreased by 13.6%, 1,541 pesos during first quarter 21, a monthly churn decreased to 1.2%. Please turn to slide 11. The company has been trying to offset the inflation impacts on our revenues and costs. The price increases were suspended in 2020 by the series of government decrees described before. Year-over-year inflation as of March 31st of 2021 amounted to 42.6%. As of January 2020, our subsidiary Telecom has made the following adjustments to the prices of its services. In mobile, prices of plans with one gigabyte of data were increased by 5%, while those with more than one gigabyte of mobile data were increased by 20%. All prices of pay TV services, including premium services such as HBO and Fox, were increased by 20%. The price of the soccer pack subscription was increased by 25%. In broadband, the prices of services with speeds up or equal to 25 megabytes per second, mainly fiber-to-light services, have been risen by 10%. Prices of services with speeds higher than 25 megabytes per second increased by 20%. Prices of fixed-voice basic services were increased by 5%, and Argentina digital services by 20%. These price increases have resulted in higher ARPU in nominal terms across all services, as shown in exhibits 15 to 17. The nominal price increases were not enough to offset the high inflation Argentina's economy has experienced, as we mentioned, 42.6% year-over-year as of March, thus resulting in low revenues when measured in constant pesos. The company will continue to monitor its cost structure, competitive environment, client behavior, and household income in order to decide on future price increases to help facilitate for inflation and maintain sustainability. Let's move on to the next slide for a discussion of cost structure before we discuss quarter-over-quarter FBTA performance. Amongst the most significant operating costs and expenses are salaries, fees for services, maintenance, materials, and supplies costs, taxes and fees for their regulatory authority, and programming and content costs. Holding costs are approximately 0.1%, showing a transparent corporate structure at CBH level. On slide 13, we show the performance of EBTA and the behavior of different components of revenues and costs. The company continues with its efforts to expand efficiencies. Most of the components have evolved positively despite a challenging economic context, indicating improvements in most of the cases. Operating costs were lower in real terms and bad debt expenses showed a significant reduction, representing 1.3% of total revenues in Q1 2021 versus a 3.6% in Q1 2020. Thanks to the actions company management has taken during 2020, such as the increased digitalization of customer payments, Moreover, operating efficiencies were obtained across almost every expense category. Interconnection and transmission costs and cost of equipment and handsets increased above inflation mainly due to a strong demand for data consumption and higher equipment sales. As a result, operating costs decreased 9.7% in real terms. Nonetheless, this was not enough to offset the reduction in revenues and evict a decrease by 4.3% in real terms with a margin expansion of 130 basis points in real terms compared to the first quarter of 2020. Next slide, please. In first quarter 21, CAPEX as a percentage of revenues was 23.6 percent, higher than the same period of the previous year, mainly as a result of investments in our network. Degenerado CAPEX was mainly composed of installations and customer premise equipment, or CPE. The balance was allocated to network and technology and to our international operations in Paraguay and Uruguay. During the first quarter of 2021, 43 new mobile sites were deployed and more than 410 existing sites were upgraded. In February 2021, we began with the deployment of 5G mobile sites in Argentina, which allow connection speeds up to 10 gigabytes per second, having a response 100 times higher than the 4G networks. This new technology allows the client to connect multiple devices at the same time. The CapEx program will continue evolving according to Argentina's economic conditions, network performance, and customers' requirements. Going to the debt financial position, as per slide 16, as of March 2021, we have reported a total financial debt of 225.5 billion pesos and net debt of 184.4 billion pesos. approximately $2 billion in U.S. dollars. 100% of the debt is at the operating level in Telecom Argentina. Of the total debt, 82.5% is in dollar denominated, 13.9% is in Argentine pesos, and the rest is in Guaranis and Renminbi. Our U.S. dollar cost of debt is approximately 6.5%. Over-adjusted EBITDA coverage ratio as of the end of March was 1.6 times. That concludes our comments. We are now ready to take your questions. Operator?
spk01: Thank you. At this time, we will open the floor for your questions. If you would like to ask a question, please type it in the box and click send. Again, if you have a question, please type it in the box. This concludes our question and answer session. I would like to turn the conference back over to Samantha Olivieri for closing remarks.
spk02: I thank you all for your interest in CVH. Should you have any further questions, do not hesitate to contact our IR team. Have a great day, everyone.
spk01: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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