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spk02: good morning and welcome to cable vision holdings conference call my name is mj and i will 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 on the submit a question box on your screen today we will discuss cable vision holding second quarter 2023 results 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 SIG Corporate Communications following the call. I will now introduce our speakers. This is Samantha Olivieri, Head of Investor Relations, and Julian Paez, Senior Analyst. Additionally, Mr. Ignacio Joliet will be, excuse me, Executive Director and Chairman will also be available for today's question and answer session. The team will be discussing the results as per the earnings release distributed last Thursday, August 10th. 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. DBH has also posted a webcast presentation that can be found at www.cablevisionholding.com slash investors. Comments made by management may contain forward-looking statements about Cable Vision 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 Eastern Europe conflict, new or ongoing industry and economic regulations, possible changes in the demand for Cablevision Holdings products and services, and the effects of more general factors, such as changes in the general market, economic, or in regulatory conditions. Please refer to the disclaimer in the earnings report 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.
spk03: Thank you, MJ. Good morning, everyone, and thank you for joining us. Today's call will begin with a brief macro overview and continue with a review of the company's income statements and operating results, followed by a review of the financial position. Having gone through the agenda for today's webcast, I will now pass the call to Julian for the macro overview.
spk00: Thank you, Samantha. Please move to slide four. Argentina's economic performance during the second quarter of 2023 followed the trend of the previous quarter with acceleration of the inflation rate and the gap between the official and financial exchange rates continuing to increase, now over 100%, heavily conditioned by the effects of one of the worst drops in our history and the uncertainty related to the presidential elections in the second half of the year. In the first six months of the year, the inflation index surpassed the three-digit mark reaching 115.6% year-over-year in June, while the number for the year-over-year inflation of June 2022 was 64%. This acceleration, the distortion of relative prices, and the gap in the official and financial exchange rates are symptoms of the economic imbalance, while the root of the problem lays with the worsening of the central bank's financials, which present negative net reserves, and a higher excess of pesos in the economy. The central bank's reserve position is being challenged by the effects of the severe drought affecting agricultural exports. The unprecedented drought, as well as the stronger pressure on the demand of dollars, hinders the ability to maintain the exchange rate parity, while it also affects the central bank's capacity of generating net reserves, further difficulting the compliance of the goals set by the IMF. The extended fund facility agreement with the IMF is currently off track as a consequence of a considerable discrepancy when comparing the economic variables to the plan for 2023 and the lack of compliance of the three rules set by said organism. IMF officers and the government authorities have reached a staff-level agreement on the reviews underway, upon which completion, Argentina will have access to a new disbursement, which was delayed in June, to help ease the effects of the drought. In the meantime, the policies by the enacting government have been focused on the stability not only of the exchange rates, but also of the current level of gap to the financial exchange rate. However, the constant need of interventions to sustain said parties push against the rising vulnerability in the net reserves and the schedule of debt services of the sovereign debt. On this last subject, it is worth mentioning that the end of June maturities of $2,700 million with the IMF were deferred by 30 days. The central bank's growth reserves are at a minimum of the current mandate in $24,000 million, as well as the lowest level since 2016, and present a decrease of close to $20,000 million since the beginning of the year, while net reserves are close to negative $10,000 million. Under these constraints, the unexpected PASO results create further uncertainty, and with the current dynamic, Argentina's economy will reach October in order conditions. Now, I will pass the call back to Samantha.
spk03: Thank you, Julián. We will now continue with CBH Key Financials. Slide 6 shows the highlights for the first half of 2023. The company has reflected the effects of inflation adjustment adopted by Resolution 777-18 of the Comisión Nacional de Valores , which establishes 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 half of 2023 include the effects of the adoption of inflationary accounting in accordance with International Accounting Standard 29. For comparative purposes, the results restated by inflation corresponding to June 2022 contain the effect of year-over-year inflation as of June 2023, which amounted to 115.6%. In this presentation, we included some figures and historical values for the sake of clarity. CDH owns 39.08 stake in TIO and is controlling shareholder of Telecom Argentina It consolidates 100% of its operations. In constant currency, revenues for first half 2023 dropped 9.3% from 570.4 to 517.3 billion pesos, mainly driven by lower service revenues. Increasingly higher inflation is hard to fully pass through to prices for our services. EBITDA reached approximately 146.3 billion pesos in constant currency, a 15.8% decrease compared to first half 2022, driven by lower revenues partially offset by lower operating costs. EBITDA margin decreased from 30.5% to 28.3%. EBITDA in nominal pesos amounted to 126.2 billion pesos, 75% higher than nominal EBITDA for first half of 2022, while inflation for the same period was approximately 115.6%. Net income totaled $40.5 billion from $67.6 billion reported in the first half of 2022. The decrease in net income is mainly the result of lower positive net financial results and lower EBITDA, partially offset by lower depreciation and amortizations and higher positive income tax, including the effect of applying the deferred income tax method. Although FX still lacked vis-a-vis inflation in this quarter, preventing the impact of losses and results due to the revaluation of debt and dollars, as has been occurring in previous quarters, the variation of the FX rate came closer to the variation of the CPI index for the period, resulting in lower positive net financial results. The equity shareholder's net income for the period amounted to 15,079 million pesos, and is mainly the result of CVH's stake in Telecom. Now let's continue on slide 7 for a discussion of the operating results for the second quarter 2023. Revenues in the second quarter decreased by 8.1%, albeit price increases for our services, keeping up with the high level of inflation the Argentine economy has experienced over the past 12 months have been a challenge. Revenues in nominal terms increased 96%, while inflation for the same period as we mentioned was 115.6%. The main source of our revenues is our fixed infrastructure. Broadband, pay TV, and fixed telephony and data services amounted to 50.7% of the total. Mobile service participation increased, reaching 40.3% from 39.2% in the first half of 2022, driven by the increase in mobile subs. EBITDA increased by 100% year-on-year in nominal terms, representing an EBITDA margin of 27.4%, while EBITDA margin in real terms increased to 26.3%. The net income for the period attributable to equity shareholders was $2,026 million in constant pesos, mainly as a result of CVH participation in telecoms net income. Now let's move on to slide 8. Mobile revenues represented approximately 40.3% of our revenues and decreased 7% in real terms when comparing second quarter 23 to second quarter 22, mainly explained by lower ARPO, partially offset by an increase in subs. Personal Argentina clients increased 2.9% to 20.6 million, of which prospect clients amounted to 40%. Mobile Internet usage increased reaching an average of 5.5 gigabytes per user per month in second quarter 23. Thanks to the CapEx deployment, Telecom has been able to increase the number of its 4G subscribers. The rapid growth in subscribers that use the 4G network has been the main driver of data traffic increase. In Argentina, ARPU restated in constant currency, decreased by 7.1% to 1,561.1 pesos in first half of 23, and monthly churn decreased to 1.8% from 2.4% in first half of 22. The commercial strategy has been focused on achieving higher mobile portability through convergent offers and promoting the consumption of mobile internet. Currently, 48% of Telecom's broadband customers have a mobile bundle. Since the rollout of the strategic CapEx plan and the convergent offer, the company has turned around its trend of negative portability net addition in Argentina and has been increasing the number of subs over the last five years. Telecom's CapEx deployment has also allowed it to obtain the award for the fastest 4G network in Argentina from Ucla at the 2023 Mobile World Congress in Barcelona. Please turn to slide 9. Revenues for the fixed services, including broadband, cable TV, and fixed telephone and data services, decreased by 12.6% in real terms, mainly driven by the challenging inflationary dynamics. Legacy Copper fixed voice service continues experience a reduction in accesses, partially upset by an increase in IT telephony lines. Broadband subscribers decreased 3.4% to 4.1 million, while monthly churn increased to 1.7% in first half of 23, from 1.5% in first half of 22. Nonetheless, there is growth in the fiber-to-the-home segment, resulting in an increase in average speeds. 83% of our customers have accesses with speeds of 100 megabytes or higher versus 40% in 2021. ARPU, in real terms, decreased to approximately 4,270.5 pesos. Price increases during 2022 and 2023 and higher internet speeds sold to our customer base were not enough to fully offset the inflation. It should also be noted that due to our cross-selling strategy, Six products have been offered with some discounts to encourage the positive mobile portability. Moving to the cable TV subscribers, the customer base decreased to 3.4 million, while flow-unique customers achieved 1.3 million, a 6.9% increase from figures observed over a year ago. Through its proposal as a content aggregator, Flow includes not only linear TV, series, on-demand movies, documentaries, and co-productions, but also music, gaming, and exclusive events. In addition, Telecom continued activating the ISDBT digitalization service solution to its analogical customers, which allows clients to connect to a digital service from the traditional cable connection without a decoder. ARPO, in real terms, decreased by 12.7% to 4,470 pesos during first half of 23, and monthly churn increased to 1.9%. Please turn to slide 10. In August 2020, the Argentine government issued Decree 690-2020, later confirmed by the Congress, declaring mobile, fixed voice, broadband, and pay TV as public essential services, and freezing their prices until the end of 2020. while instating INACOM as a regulatory agency in charge of enforcing the decree and regulating the industry prices. Its legality has been challenged in court by the industry in general. In 2021, TELECOM was granted a preliminary injunction suspending the effects of several sections of the decree, which has been extended several times and is currently in effect. Although we feel that a final ruling regarding the underlining issue is imperative to guarantee the health of the industry, As a consequence of such injunction, Telecom can manage the pricing policy of its services as before the decree 690-2022. The company has been trying to offset the inflation impact on revenues and costs, but with price increases suspended in 2020 and the increasingly high inflation dynamic for the last two years, recovering terrain is a challenge. Year-over-year inflation as of June 30th of 2023 amounted to 115.6%, while inflation for the first half of 2023 amounted to 50.7%. During 2022, given the increasing inflation, our subsidiary Telecom increased prices of its services with greater frequency, five times per mobile and four times per fixed services, and continues with this policy during 2023. In response to the increasingly complex inflationary dynamic, it has begun increasing prices on a monthly basis, which has allowed it to close the gap between inflation and ARPUs. Prices for all services have increased by approximately 8% in June and will increase the same percentage in July and August. These price increases have resulted in higher ARPU in nominal terms across all services, as shown in exhibits 19 to 22. The nominal price increases, coupled with certain discounts and promotions to retain customers following these rises, is in a strong competitive environment were not enough to offset the interannual inflation, thus resulting in lower revenues when measured in constant pesos versus the first half of 2022, although the second quarter of 2023 registered the lowest interannual decrease in revenues measured in constant pesos since the first quarter of 2022, while interannual inflation increased 11 basis points quarter over quarter. 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 compensate for inflation and maintain sustainability. Let's move to the next slide for a discussion of cost structure before we discuss quarter-over-quarter EBITDA performance. Amongst the most significant operating costs and expenses are salaries, fees for services, maintenance materials and supplies, costs, and taxes and fees with a regulatory authority. On slide 12, we show the performance of EBITDA and the behavior of different components of revenues and costs. The company continues with its efforts to expand efficiencies and has shown some positive results despite a challenging economic context. Operating costs, excluding cost of equipment and handsets, decreased in real terms by 11.1%. All of the company's cost components decreased in real terms, reflecting efficiencies achieved by the company's management in terms of costs. Total operating costs decreased 8.4 percent in real terms, and driven by the reduction in revenues, EBITDA decreased by 7.2 percent in real terms, while margins stood at 26.3 percent. It is worth mentioning that this is the first quarter with a margin expansion since the first quarter of 21. Next slide, please. In second quarter 23, investments as a percentage of revenues was 15.6 percent or 12% before rights of uses from leases, lower than the same period of the previous year. Telecom's investment level was influenced by tighter import restrictions in second quarter 23. Its CapEx plan is flexible, and the company has been investing above the global average ratio of CapEx to revenues during the previous years in order to achieve its goals in terms of network performance and coverage, which is currently strong. Technical capex was mainly allocated to network and technology and customer premises equipment, or CBA. The balance was allocated to our international operations in Paraguay and Uruguay. During the second quarter of 2023, the company continued with the deployment and upgrading of existing sites and expansion of the fiber to the home network, including the overlay over the HFC network. Telecom has also pioneered the 5G deployment in Argentina. It currently has 225G sites, most under DSS technology. Argentina's government is working to auction 5G frequencies during 2023. The CAPEX program will continue evolving according to Argentina's economic condition, network performance, and its customers' requirements. Going to the debt financial position as per slide 15. As of June 2023, we have reported a total financial debt of 702.1 billion pesos and net debt of 619.7 billion pesos, equivalent to 2.4 billion in U.S. dollars. One hundred percent of the debt is at operating level in Telecom Argentina. Of the total debt, 58.3 percent is cross-border dollar denominated. 34.1% is in Argentine pesos, including dollar-linked local emission, and the rest is in Guaraníes and Ramíndi. Our average U.S. dollar cost of debt is approximately 7%. From 2023 to 2026, debt maturities remain manageable within the range of $500 to $600 million each year, and under current central bank regulations, Telecom has access to the effects markets to attend its maturities. The company has been changing the composition of its debt, increasing the participation of local financing, reducing cross-border risk. It expects to continue accessing the local capital markets for any future potential financing needs. Net debt to adjusted EBITDA coverage ratio as of the end of June 2023 was 2.3 times. That concludes our comments for today. We are now ready to take your questions. MJ?
spk02: 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. We will now pause for a few seconds in order to allow participants to write their questions.
spk01: Again, if you have a question please type it in the box.
spk02: It appears that we have no questions at this time. I would like to turn the program back over to Samantha Olivieri for any closing remarks.
spk03: Thank you, MJ. Thank you all for your participation in today's webcast. Should you have any questions, please do not hesitate to contact our IR team. Have a great day.
spk02: The conference has now concluded. Thank you for attending today's you for attending today's presentation. You may now disconnect.
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