Telecom Argentina SA (TEO) 2020 Q3 法說會逐字稿

Good morning. On behalf of Telecom Argentina, I would like to thank everybody for participating on this conference call.

The participants on today's conference call are Roberto Nóbile, Chief Executive Officer; Gabriel Blasi, Chief Financial Officer; Fernando Balmaceda, Director of Investor Relations; and myself, Solange Barthe Dennin, Manager of Investor Relations.

The purpose of this call is to share with you the results of our third quarter ended September 30, 2020. If you have not received our press release or presentation, you can call our investor relations office to request the documents or download them from Investor Relations section on our website located at www.telecom.com.ar. This conference call and presentation is being broadcasted and can also be replayed through our investor website at institucional.telecom.com.ar/inversores/.

I would like to go over some safe harbor information and other details of the call. We would like to clarify that during the conference call and Q&A session, we could mention certain forward-looking statements about Telecom's future performance, plans, strategies and objectives. 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 effect of on-going industry and economic regulations, possible changes in the demand for Telecom's products and services, the effects of potential changes in general market and/or economic conditions, in legislation and the impact of the outbreak of COVID-19 on the global economy and specifically on economies of the countries in which we operate, as well as on our operations and financial performance.

Our press release dated November 9, 2020, a copy of which was included in the Form 6-K and sent to the SEC, describes certain factors that may affect any forward-looking statements that could be mentioned during the call.

The company has reflected the effects of inflation adjustment adopted by Resolution 777 of 2018 of the Comisión Nacional de Valores, the CNV, which establishes that the re-expressions will be applied to the annual financial statements, for intermediate and special periods ended as of and included December 31, 2018. Accordingly, the reported figures corresponding to the 9 months 2020 including the effects of the adoption of inflationary accounting in accordance with IAS 29. In this presentation, we will also include figures in historical values, which are easier to understand.

Our press release is complemented by our earnings presentation. The audience should read the disclaimer contained in Slide 1 and 2 of the presentation. The agenda for today's conference call is described on Slide 3 and includes our business and financial highlights. So we will end the call afterwards with a Q&A session. So now let me pass the call to Gabriel Blasi, our CFO who will start with the presentation.

Thank you, Solange. Good morning and welcome to everyone. Slide 4 shows the summary of the company's figures as of September 2020. During the first 9 months of 2020, Telecom's revenue totaled $2.7 billion. Revenues measured in constant pesos decreased 4.6% year-to-year. EBITDA totaled $1 billion implying a 35.8% EBITDA margin, growing in constant pesos 2.4% year-over-year.

Our mobile subscribers in Argentina amounting to 18.7 million, decreasing approximately 150,000 subscribers when comparing with the previous quarter due to a decline of around 250,000 subs in the prepaid segment that was partially offset by an increase of close to 100,000 clients in postpaid. Broadband and pay-TV clients increased totaling around 4.2 million and 3.6 million, respectively. Fixed voice subscribers without considering IP telephone lines amounted 2.9 million. Thanks to our successful commercial strategy focused on the bundling and up-selling of our products, we currently have 1.8 million convergent unique customers with 43% of our broadband customers having a mobile bundle.

Going to Slide 6, we summarize our main achievements so far during this year. Telecom has been able to refinance and reduce an important portion of its debt exchanged its 2021 bond plus refinanced debt with multilateral agencies. Our capital structure has been improved and our future debt maturities have been extended with only $150 million approximately for 2021. OpEx has been reduced substantially and our collections have improved since 67% of our clients are paying digitally. Our collection period has been normalized when compared to the delays we had at the beginning of the pandemic.

The local soccer activity, which we stopped billing, will return in the fourth quarter thus improving our revenues. In addition, we are working on other projects such as IoT, Fintech and Personal Club that will be added to our revenues. We continue being under a scenario where we cannot increase prices until year-end. However, what we have done in our financial debt, CapEx, and relationship with our clients have allowed us to be resilient to this situation, keeping a sound EBITDA margin.

We continue with Slide 6 presenting our digital transformation road map. Telecom is undergoing a transformation process with the target to be 100% digital company. We are not only converting our systems in order to integrate all our operations but we are also creating an ecosystem of platforms leveraging on connectivity, which allows us to manage and upscale products and services with focus on the digital conversion customer experience and also to the B2B business. There is also a deep cultural transformation that promotes autonomy, collaborative work and the application of DevOps and Agile methodologies. An example of this was the recent implementation of Mi Negocio Personal, which was formed by a multi-disciplinary internal team.

We are working on a simpler architecture for our systems and platforms in order to achieve additional efficiency. During the last 3 years, we have cut in half our legacy system from the Telecom and Cablevisión merger. Moreover, in order to get a better understanding of our clients' consumption habits, we are adapting our system to incorporate analytics and big data capabilities. This will allow us to customize our commercial offers and enhance the customer experience. Finally, we are envisioning a future for the IoT business. Our target is to be the #1 exchange to exchange value provider of our IoT products and services in all segments. Currently, we have developed a strong portfolio of our IoT solutions and we have a strong partnership with Nokia supported by its worldwide IoT network grid, WING solution.

In the next slides, we go over the progress of our main IT transformation projects. Let's turn to Slide 7, where we present our Fan and Switch initiatives. Regarding our main BSS transformation projects Fan, we have continued with immigration process and 1.3 million lines have been added. We achieved 5 migrations during the pandemic, which were also the largest in the industry. Currently, a total of 6.7 million customers can enjoy this new digital experience which offers a unified invoice and service process. We expect to complete by the end of next year this process. Switch is our new digital channel front end that includes e-commerce and self-service solutions that give our B2C customers a convergent experience. It has an intuitive interface that summarize the clients' products and information in accordance with its profile. Through Switch, our clients use more our digital channels.

In Slide 8, we continue with a brief summary of our cloud foundation and 4UP programs. The objective of the cloud foundation project is to integrate the different public cloud platforms with Telecom's processes in order to achieve additional efficiency, process automation and business flexibility. The final objective is to enhance the company's physical data centers with higher virtual cloud capacity. We are also implementing a payment microsite hosted in the AWS cloud. Telecom is the first company in the world who successfully implemented S/4 HANA Central Finance, with central payments and grid management altogether. On July 1, we have concluded the digital core implementation and post go-live support has been done.

Slide 9 shows our products' evolution in Argentina. On the mobile segment, postpaid subscribers have increased 2.6%, while prepaid subs have decreased 4.5%, increasing our postpaid share. Fibertel, our customer base, increased 0.7% year-over-year mainly growing in the HFC and FTTH segments. Pay TV ARPU, pay accesses have grown 1.6% year-over-year mostly leverage on our Flow platform. Fixed voice ARPU, the reduction of accesses has continued mainly in traditional fixed copper lines, while Fibertel IP accesses have increased by almost 210,000.

Slide 10 shows the evolution of our service revenues. Service revenues totaled more than ARS 197 billion, decreasing 3.6% in real terms, versus 9 months in 2019, in a period where inflation reached 36.60% year-over-year. Our revenue breakdown as of September 2020, shows an increase in mobile revenue share and a lower share of broadband and pay TV revenues when compared with the previous quarter. The breakdown results are as follows: mobile revenues 38%, broadband revenues 21%, pay TV revenues 20%, fixed telephony and data 15%, equipment sales 5%.

Our main drivers of growth in mobile and broadband are explained on Slide 11. We can be able to keep almost constant our customer base and also register growth in the usage of our products. Postpaid mobile and broadband are 2 of our main pillars of our performance. As of September of 2020, postpaid subscribers amounted to 41% of our total customer base. The chart in the upper-left shows the evolution of the competition landscape, wireless per month during the last year. Personal is in blue color, positive numbers show incoming clients and negative numbers show client lost against the competition.

As mentioned, the growth in the segment has been mainly supported by our convergent offers to cable TV and Internet subscribers that were not mobile clients of the company before. Mobile Internet usage has also increased reaching an average of more than 4.1 gigabytes per user per month in first 9 months of 2020. We have continued increasing the speed and capacity of our broadband customer base, leveraging on our strong HFC network and responding to the higher usage of our fixed networks.

Considering our different broadband terminologies, we can observe that clients have been migrating to the more efficient ones. CapEx are managed here to continue upgrading our network, which have shown to be extremely resilient to the increasing traffic during the lockdown due to COVID. In addition, there has been an important growth in broadband speeds considering that 58% of total subs have speed between 50 and 300 megabytes as of the end of the third quarter of 2020 compared to 73% in the same period last year.

In Slide 12, we show the evolution of our Flow product and how we have been able to increase its penetration. Flow is our IP video platform with the better experience, as it has currently reached 94 million views during the third quarter of 2020, 5 million connected devices and a high level of usage as our customers use Flow for an average of almost 9.7 hours during the third quarter. We have almost 1.2 million Flow boxes inside homes and 1.3 million Flow apps, thus advancing towards the objective of network digitalization. Additionally, we continued to add value to our Flow path platform. Starting in November 2020, we are integrating the Disney streaming service. Flow and personal customers will be able to access Disney+ for the first 3 months free of charge.

Let's move to Slide 13, where we can find a summary of our international operations in Paraguay. We consider our presence in Paraguay, Nucleo a subtle drive to grow given our strong market share, Paraguay's improving economic situation, Nucleo's ability to finance itself in the local market, and the implicit hedge in dollar that we have, since there are no restrictions to convert Guarani’s local currency into dollars. Nucleo, our subsidiary in Paraguay on which we hold 67.5% stake, registered around $142 million and $62 million in revenues and EBITDA during the first 9 months of 2020, respectively. Browsing services accounting for almost 43% of the revenues, followed by voice with almost 21%, data with almost 10%, Internet 8% and TV services almost 7%.

As of September 30, 2020, mobile customers totaled 2.2 million, clients of Billetera Personal, a mobile financial service that our subsidiary provides, reached 275,000. Fixed Internet services subscribers amounted to 118,000. In the pay TV segment, Flow customer totaled 20,000 and Personal HD 62,000. The fixed network deployment in the main cities of Paraguay has been increasing rapidly during 2020, reaching 447,000 homes passed. Additionally, Nucleo's Internet subscribers totaled 118,000, increasing 3.5x versus the same period of last year.

I will now pass the call to Fernando Balmaceda, who will go over our financial performance.

Thank you so much, Gabriel.

Turning to Slide 14. We show the evolution of local inflation. As of September 2020, the year-over-year increase in inflation has been 36.6%. During the third quarter of the year, inflation has been 7.7%, accelerating slightly when compared to the last quarter, but still well below the third quarter of 2019. The breakdown that we are including shows that the most important percentage in index comes from food and beverage, transport, and clothing, among other items, while the share of communication services in the CPI amounts to approximately 2.8%.

In Slide 15, we can see that for 9 months of 2020, consolidated revenues on nominal terms grew by 38%, reaching almost ARS189.9 billion. When analyzing said figure adjusted by inflation, revenues amounted to more than ARS 208.2 billion, showing a decrease of 4.6% in real terms. Service revenues showed a 39% nominal increase in a context where prices have been frozen since May 2020, mainly driven by mobile revenues, which grew more than 6% in real terms when comparing 9-month 2020 with the 9-month 2019.

EBITDA increased by 46% year-over-year in nominal terms, thus generating an EBITDA margin of 36.2%. EBITDA margin in real terms was 35.8%. The company performed well in terms of cost controls. Operating costs before D&A decreased almost 8% in real terms versus the 9 months of 2019. The company performed a very efficient cost-reduction policy, the only exception being interconnection and transmission costs, which increased mainly to the rise in FX rates.

Slide 16 shows the company's EBITDA evolution and the impact of the reduction in operating expenses. It was a positive contribution to EBITDA margin due to the reduction in handset costs, which decreased 29% in real terms, mainly by a lower sell out. Operating efficiencies were also obtained both in programming and content costs, maintenance and material expenses, commissions and advertising. On the other hand, interconnection costs increased in real terms, mainly due to their dollar component, while bad debt expenses also increased above inflation. The final result was a 250 basis points increasing EBITDA in real terms when compared to the 9 months of 2019.

In Slide 17, we can show the evolution of our collections and non-performing debt. We can see that the collections during -- in digital channels have increased to 67% of total collections from 50% at the beginning of this year. Additionally, the gap of real collections versus our forecast has decreased substantially. In the beginning of the COVID-19 lockdown, the level was almost 30% negative. Currently, our collections are at normal level and have been possibly influenced by extraordinary collections in our B2B business. Despite the general level of non-performing debt in our retail business, debt has increased during this year due to the effect of the COVID-19 lockdown. As of the end of September of 2020, it has moved to more normal levels, decreasing 2.3%, being 2.7% in June 2020.

Slide 18, we can see the company's operating income totaled almost ARS 19.4 billion, EBIT has decreased 1% in real terms, as the decrease in D&A and this poses an impairment of fixed assets was slightly higher than increase in EBITDA. Operating margin in real terms was 9% of consolidated revenues, stable from the figure of several a year ago. Considering historical figures, the same margin has increased to 22% from 19% in 9-month 2019. Net loss registered in 9 months 2020 was [ARS 1.0 billion,] decreasing more than ARS 16 billion from the same period of last year, mainly reflecting lower FX losses due to diversification of the peso and the lower impact of income tax.

In Slide 19, there is a summary of the company's CapEx during the first 9 months of the year. Telecom has invested almost ARS 35 billion. This amount is 37% lower when compared to the same last year's period. I mean, almost finalized most of our system changes, catching up our infrastructure during the first 2 years after the merger. Our CapEx program will continue evolving according to Argentina's economic growth, network performance and customer requirements of new services. Technical CapEx were mainly composed of installations and customer premise equipment, or CPE. The balance was allocated network and technology and our 2 international operations in Paraguay and Uruguay.

During the third quarter of 2020, more than 50 new mobile sites were deployed and more than 300 existing sites were modernized. Moreover, we continued to increase the capacity of our HFC access network, mainly through segmentation of various focusing particularly in the AMBA region. 1,400 FTTH blocks were enabled, reaching more than 180,000 new homes passed with FTTH during the first 9 months of 2020. Personal's network has achieved the highest excellent consistent quality and fastest median download and upload speed in Argentina, and the second fastest mobile network in terms of download speed in all of South America.

Slide 20 describes our cash flow generation when comparing the first 9 months of 2020 with the same period of 2019. As of September 2020, the operating free cash flow amounted to approximately $509 million. The increase in EBITDA and the reduction in CapEx mainly explain the additional $71 million in free cash flow when compared to the 9 months of 2019.

Slide 21 shows our key figures for last 12 months as of September 2020, in constant measuring unit. Company revenues amounted to almost ARS 280 billion, while EBITDA amounted to ARS 96 billion. EBITDA margin was 34.3%. Our gross debt amounted to ARS 171 billion as of September 2020, decreasing 7.7% from December 2019. The company has been able to generate an important amount of cash and short-term investments amounting to ARS 39 billion, from which more than ARS 16 billion have been invested in local bonds and notes. Net debt amounted to almost ARS 132 billion. Our net debt-to-EBITDA ratio was 1.37x.

Slide 22 summarize the latest financial conceptions that the company has overtaken. On August 6, 2020, Telecom concluded an exchange offer of its outstanding 6.4% notes due in 2021. Holders validly tendered $362.2 million of notes due 2021. The acceptance rate was 77.74%, high enough to demonstrate our solid credit profile and structure of the exchange offer. An additional amount of $135.4 million of notes due 2025, new money, was raised to repay our loan with Deutsche Bank, London branch and CPPIB Credit Investments Inc.

In summary, the company issued $388.9 million of new amortized notes due 2025 with a new coupon of 8.5% payable on a semi-annual basis. Moreover, on September 22, the company announced that it has successfully refinanced its loans with IFC and IDB Invest for an amount of $129.3 million. In the case of IFC loans, 85% of principal that has to be paid in 2021, was extended between 24 and 48 months. As for the IDB Invest loans, 85% of principal that was to be paid in the fourth quarter in 2020 and in 2021 was extended to between 24 and 66 months. Overall, the company partially repaid $40 million of the outstanding amount and on the loans. Due to the above, the company has considerably optimized its capital structure.

Slide 23 shows a breakdown of our financial debt. Total outstanding debt as of September 2020, amounted to more than $2.2 billion. Our debt profile and capital structure has improved significantly after the exchange of our 2021 notes and the refinancing of IFC and IDB loans. Our maturities in U.S. dollars are in the range of $400 million to $500 million between 2021 and 2022, and is -- have been strongly reduced until the maturity of our 2026 notes.

Slide 24 summarizes the latest regulatory decisions regarding the telecommunications industry. In May, due to COVID-19, our industry has agreed jointly with ENACOM to freeze the price of our products until the end of August 2020. On the other hand, all companies in the industry were not required to increase salaries until August 2020. In August, Decree 690-2020 extended the price freeze until the end of 2020. The Decree also declared ICT services as an essential public service. And it has been approved by the National Congress, and today the regulation is still pending. Both inclusive and reduced services plans are being provided to clients.

In the case of the reduced services, they're only provided to clients who have not paid their service during a period of 90 days. It's worth mentioning that during March 2020, the Executive Power issued a decree which determined the temporary suspension of the interruption of fixed and mobile telephony, Internet and cable TV services in the case of non-payment until the end of September 2020. This was then extended until December 2020.

Having concluded with the presentation, and before going to the Q&A session, let me pass the call to Solange for a final remark. Thank you.

Thank you, Fernando. With the presence of our CEO, Roberto Nóbile, we are more than pleased to answer any question that you may have. However, before we start, we like to remind how you can address your questions during the Q&A session, which will be opened immediately. (Operator Instructions)

So the first questions that were received are from Rodrigo Villanueva, that made the following questions. Would you please share with us an update on potential conversation with the government to be able to raise price of telecom services in 2021?

The second question is, assuming the government does not allow you to increase prices to offset the negative impact of your cost structure from inflationary pressure, which alternatives are you considering? And then, finally, there is a third question that it says, would you please share with us your CapEx targets for 2021? Where will you be focusing your investments?

Okay. Good morning, everyone. This is Roberto. I will try to be very conservative on the information that we can share with you. We, as an industry, are having negotiations with the government with ENACOM, which is the regulator of the industry, trying to consider how to implement the decree in terms of giving the industry the incentives to keep on growing and to keep on investing. And that means that we, as an industry together with the government, are working on trying to define the targeted customers, where we should try to focus in terms of a special product, like an entry-level product, for certain services and trying to free of the public service decree to the rests like higher premium services such as broadband or mobile.

So we are optimistic that we will be able to increase prices. We do not know how far from the real inflation rate, we will be able to do the catch-up. But we're still working on that. But we're very optimistic that we will be able to increase prices during 2021 that is something that we all agree upon. We don't know yet how we will schedule those increases, and we need to keep on discussing the rates of increase.

Regarding the second question that was if we assume that we do not have any price increase, we do not assume that. And on the other hand, we still have a lot of room to grow in terms of reducing these promotional discounts. The industry has been very, very aggressive in terms of competition and trying to gain market share. In that, marketing activity, most of the other customer base are -- have a promotion or a discount in the price. So I believe that if by any chance formal prices will not be able to be increased, if that could be a possibility, which I personally don't believe it, we will have enough room to work in a less competitive environment, I would say and therefore, we will be able to increase prices through taking away discounts or being less aggressive in terms of promotions. The third one?

It related to CapEx. What do we want to do to...

CapEx target is around 76%, 77% of our revenues and we will try to keep it that way. We've been investing about 20% for the last -- 16% -- 17%, sorry. 17% of our revenues. We have been investing more than 20% over the last 2 years. This year, we -- and that was due to a catch-up of CapEx that was not done previously by the former Telecom company's incumbent, and also we did a lot of CapEx to integrate and make 1 network out of the 2 companies and trying to integrate also the IT platforms. That CapEx will be reduced to this target of 17%. We will love to make it 18% or 19%, but that will also be aligned to the possibilities that the company have in terms of financing and price increases.

The following question [has been requested], Marcelo Santos from JPMorgan.

My question was on the mobile performance, which -- if you look sequentially, I think it was quite good despite the price freeze. So, if you perhaps could comment on this and talk some of the initiatives that led to this performance? When I compare the sequential growth in mobile versus the fixed line, it actually was good. And the second question is about Paraguay. Would you share your longer-term goals especially when it comes to the fixed broadband product there?

On the mobile, we have been very successful in trying to convert prepaid into postpaid and that is probably the main reason why our performance has been good. If you take a look into the COVID, the lockdown period, prepaid customers have stopped charging their service, because they are at home, they are not commuting, they are not going to work by public transport because public transportation is locked down too. So basically, the strong thing is on the postpaid, where we have been working very heavily, trying to migrate pre into post and keeping the revenues pretty stable, I would say.

Going back to Paraguay, Paraguay today we have almost 33% market share in the broadband services that has been a successful story because we were coming from 0, and 1.5 years, we were able to grow to 120,000 new customers. And as far as we are moving forward, we believe that we can keep on growing very fast during 2021, especially considering the gap of service between our service, FTTH service and our FTTH network -- new network compared to the competitors.

The following question we received is from Fernando Suarez, who is asking one question on prices and cash flow. What was the impact of the decree 267 since December on the third quarter business? It is possible to have a better sense of that? And looking ahead, what are the company's perspective for 2021?

Probably we can share the answer with Gabriel. I will start and then Gabriel can complete it. The decree -- how to say, the decree is asking us not to -- no, no -- to keep customers that are not paying. That's the main problem that we and we have 700 -- between 600,000 and 700,000 customers in that situation. If we compare that number to the number that we have in 2019 in bad debt, that is probably around 30% increase. So basically the difference between last year and this year is that we are not eliminating the customer from our customer base and the customer is still using the service, but the amount is probably a 30% increase in bad debt compared to last year. If we look at the final numbers, we have come from 2.4% bad debt to -- from 2.7 to 3.8 bad debt. That's probably the number that we should look at and that's the main impact of the decree.

Moving to following questions were received from Andrew Deluca. He's asking, the 2021 bond maturity is beyond the CB measure but could you please provide us with an update on how you are thinking about the remaining 2021 maturity if the CB measures are extended? And the second question from Andrew is can you also provide an update on the competitive environment in Paraguay?

Okay. Well, regarding the maturity, the first thing is our interpretation is that the original maturity of that debt was $500 million and the present outstanding is $100 million. It is including -- that debt has been already refinanced. So the company has already comply with that rule although we are behind that reach as the rule is extended out to March and the maturity of the bond is after that.

Regarding how we can cope with that maturity, it's interesting to see that the only -- the total maturity that the company has next year is in dollars is that plus about something less than $50 million of transactions related to vendors, which in one case of them prefer a foreign exchange channel because it's related to a multilateral agency. So we think that first of all the risk on that is very low. Besides that, the company still has a lot in dollars in Argentina, $50 million and also has a very strong cash position and always the ability to go to the market and refinance as we have been doing all this year in probably the hardest environment that we can imagine. In parallel now we are also developing additional great lines that we expect to announce pretty soon that will also give us additional room not depending only from international capital markets or from the local capital markets, but we can issue very easily the amount related to the maturity of next year.

Okay. I will go back to the previous answer, previous question actually. The target for 2021 in terms of bad debt we are considering something closer to 3 instead of 3.9 because we believe that this whole situation of pandemic will go probably until April -- March or April next year and then slowly going back to previous levels. So we are targeting the 3.7% -- 3% bad debt this next year.

Now going back to Paraguay, Paraguay we have a very competitive market, basically 3 major competitors. We were the only one that were able to increase ARPU, increase revenues and increase EBITDA. When the competitors -- I'm not going to mention them, but they are losing basically EBITDA. They are very aggressive trying to sustain their market share and therefore been very aggressive in subsidizing devices and that type of things and we are very, very conservative in that. We are not that aggressive and we are making sure that we have a long-term business and we are trying to keep on growing month-after-month.

We have the following question is from (inaudible). What should we expect in term of dividends for next year?

Well, regarding -- as you know it is public information and that's simply is -- has been set and will take place next Friday. So I think that we'll need to wait to that event to see what's the decision of the shareholders' assembly about this.

Okay, going with -- we received another question from Andrew Deluca. What he says, cost-cutting initiatives were quite strong during the quarter. How much more room do you see to cut costs?

Thank you for the question. Not much, I think we have tried to squeeze all that we can. Of course, when you produce cost that much, you are losing something. The OpEx is not that -- we are reducing OpEx that is not necessarily, it is OpEx that is necessary, marketing, our brands are not speaking and we need our brands to start talking again and trying to reach all our customers with our value proposition.

So there are lots of things that's under this. I will say, prices have been cut down, many of they need to be invested in the time frame, but we have started to achieve synergies coming from the merger. For example, in terms of we have -- by the end of this year, we will have all our mobile customers in one platform, one certain platform that has lot of benefits in terms of cost, in terms of holding time, in terms of first call resolution. So there are a lot of good things that are coming out from the projects that we are deploying.

So I believe that these type of things we will keep on doing them as long as we keep on deploying the new systems and new applications. Probably by mid-2021, we believe we can finish the migration of all the converging customers into the salesforce platform and therefore that will allow us ask to keep on working on the synergies, that should be important.

Throughout the last 2 years, we have reduced headcount by 10% and we have a lot of third parties that we need to keep on reducing as long as we start deploying the new systems.

Just to illustrate what Roberto has mentioned, we can remember that prior to the big surge of the COVID in Argentina, the company margin -- EBITDA margin as of March was nearly 39%. That give you an idea in a different environment without that problem being completely exposed, an idea of the potential of the situation improvement in the economy in general and the normalization of activities. Thanks to all the investment done.

The following question we received from Cesar Medina from Morgan Stanley. He says, can you please quantify the current magnitude of promotion and discounts and what would ARPU would be if 100% of the system promotions are eliminated?

Thank you, Cesar, for the question. That is impossible because to eliminate the discounts 100%, that means that there is no competitors, there is no competition in the market and that is something that will not happen. Today, we used to have between 20% and 20% something discount on conversion services and today that the number is closer to 30%. So I believe we can reduce that gap, but you know that going into a conversion bundle needs a discount. It's part of the value prop and probably, we can reduce the whole promotion from 30 -- closer to 30 to closer to 20s.

The following question is from [Alex Revy], what he ask, can you discuss your plans for ability management in 2021?

Well, Alex. Well, in fact, as I mentioned for 2021, I will say that there is not too much to do from the original $1 billion of maturity, we only having [$150.] From that, $100 million is the bond. We have $50 million in our cash position today and we have the ability to go to the capital market, both locally and outside if that's the case. For the other $50 million is related to vendor financing which is a line that we have constantly renewing and also related to some agency. So we don't foresee a problem besides that. Also, we have the ability of tapping the local capital market where we can get, I will say, in the range of $100 million per quarter with the present liquidity equity situation pretty easily. And also we have all the -- most of the banking lines we are using today about 1/3 of the available banking lines, besides the position that we are really having cash in local currencies.

So we don't foresee a significant risk from the financial side for 2021. Of course, it will depend on the market -- it's always a constant point of analysis and if the market draws opportunity we will -- if the economy gets better in Argentina, the vaccine allows a better outlook in general, we can consider continue working on the future maturities. As of today, the total debt book of the company with the reduction of those $200 million, that Fernando mentioned, is yielding a 7% yield and we want to keep that type of cost control.

The following is question is from [Akbar Kausar.] And he asked, hi, I want to get a sense of the affordability level of your customers. What percentage of your customers do you believe is dollarized and can withstand significant price increases?

It's a difficult question. All our customers are in pesos. They are not dollarized because we have a pesos economy, a pesos-denominated economy. So it's not a dollarized one. For the most part of our customers, they are and they have been able to pay throughout the lockdown without any problem and basically the strongest thing about our services that we are really essential today and probably that need of connectivity will remain after the lockdown, after the pandemic. So I think that the service is resilient to I wouldn't say price increase, I would say price inflation adjustment because we are not working and we have -- as long as you have seen throughout the quarters, we have been always able to keep prices with inflation. We have not been going beyond inflation. Clearly, if we can change the mix of products and going to products of 1 gig or other premium products, we can increase the price because the value prop is increased, but if we take a look at the whole business we believe we will be able and our customers will be able to keep on the inflation adjustment. That has always been the real thing and what we have been able to demonstrate throughout so many years.

Thank you, Roberto. The following question we received is from [John Morku]. He said, how do you reduce services compared to those of your competitors? What kind of measures are your competitors taking in response to the tariff raised?

How do you compare?

How do you reduce services compared to those of your competitors? And what kind of measures are your competitors taking in response to the tariff raise?

No, basically, that's ruled by the decree, so all the competitors are reducing the product to the -- to the product that is requested by the government. So we are sharing the same reduced product as the entry level or the -- we should say that the non-paying product. So there is no difference in that. I don't see any other difference.

Thank you. The following question will be from Alejandra Aranda.

Just Roberto, I wanted to -- there was a little bit of break up in the line, could you confirm the percentage of your client base with promotions and the average discount? And then, I was hoping to get a little bit more color on the competitive landscape. You said that some of your competitors were not being quite rational. So I'm wondering even in a world where you could increase tariffs next year, what would be the pushback from your clients and the need to extend promotions going forward? And the last question that I have is on personal and severance cost and how should we think about it in the next few months?

Okay. You mentioned many things, Alejandra. The first one was...

The promotions.

The percentage.

Okay. We talk about a 30% average discount for our customer base and it has always been 20%, around 20%. So that's the gap that this whole thing has produced in the last quarters. The second one was the competitive landscape. On the mobile side a competitive -- as you saw in the presentation, month-by-month, the port-in and port-out activity has been important. We, I would say, are the less aggressive of the market and trying to keep balance, especially in this moment in time to not to push portability. Therefore, portability means discounts. So we are trying to pull down our own activity, but the real truth is that the other competitors are not cooling down the activity right now. I believe that they will start pulling the activity very soon because we are in a very difficult economic situation.

And on the severance, when I saw that one of the major cost reductions was in the labor force and that is due to a reduction in severances during the year. Last year, we have -- agree with many entities to accept or to negotiate leaving the company and this year that, that situation because the economy of Argentina is very bad, it's very difficult to find someone that wants to leave the company by its own sake and that is one of the reasons why the severances have been very low.

And going forward, what are you expecting for 2021?

The same as this year. As long as the whole economy of the country does not improve, it's very difficult to find people that wants to leave the company being paid a severance and trying to start a new business outside. People will try to keep it this way and without leaving. So I believe that the number will be very similar to this year.

So we have a final question from Nicolas Petrone. That is saying considering the price freeze and perhaps following perhaps question, does the regulation considers lowering discounts as changing prices or it is just points at the [net] price?

The decree is based on prices, general prices. The real thing is that with the new customers, will -- the major effect on the discount is that all the new customers will not have the promotions. Promotions are not part of the decree, promotions are still and always be part of the company's commercial decision. So you can sell a product at 100% price or you can sell a product on a 3-month discount price on -- at -- I would say 70% of the price, 50% of the price. So that's a commercial decision and that's not part of the decree.

Final comment for Andrew DeLuca. Thanks to everybody and congrats for the results.

Thank you.

Thank you very much.

So having no more questions. We thank you very much for participating in our 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 had a nice day.