Telecom Argentina SA (TEO) 2020 Q2 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 of 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 second quarter ended June 30, 2020. If you have not received our press release or presentation, you can call our Investor Relation office to request the documents or download them from the Investor Relations section of our website located at www.telecom.com.ar.

This conference call and presentation is being broadcasted and can also be replayed to our investor website at institutional.telecom.com.ar/investor.

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 ongoing industry and economic regulation, possible changes in the demand for Telecom's products and services, the effect of potential changes in general market and/or economic conditions and 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 August 14, 2020, a copy of which was included in our Form 6-K and sent to the SEC, describe certain factors that we may affect any forward -- that may affect any forward-looking statements that could be mentioned during the call. The company has reflected the effect of inflation adjustment adopted by Resolution 777 from 2018 of the Comisión Nacional de Valores, the CNV, which establish that the expression will be applied to the annual financial statements for intermediate and special figures ended as of and including December 31, 2018.

Accordingly, the reported figures corresponding to the first quarter (sic) [first half] included the effects of the adoption of inflationary accounting in accordance with IAS 29.

In this presentation, we will also include figures and 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 disclosed on Slide 3 and includes our business and financial highlights. We will end the call with a Q&A session.

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 an outlook of the company figures for the second quarter 2020. During the first half of 2020, Telecom's revenue totaled $1.8 billion. The revenue measured in constant pesos decreased 3% year-to-year. EBITDA totaled $679 million, implying [35.5%] EBITDA margin growing in constant pesos 5.3% year-over-year. Our mobile subscribers in Argentina amounted to 18.8 million, remaining relatively stable when compared with the previous quarters. Broadband and pay TV clients increased slightly, totaling around 4.1 million and 3.5 million, respectively. Fixed voice subscribers, without considering IP telephone lines, amounted to 3 million. Thanks to our successful commercial strategy focused on developing and upselling of our products, we currently have 1.8 million convergent unique customers with 43% of our broadband customers having a mobile bundle.

We continue with Slide 5, presenting our new IT transformation projects. During June with our digital core as part of our back-end transformation program, this has enabled us to operate under unified convergent and efficient systems and processes for the back office. With the implementation of SAP 4HANA (sic) [SAP S/4HANA] and Ariba, we have accomplished this objective in our operating model. Based on best market practices, it allowed us to work in a simpler and more collaborative and transparent way. More than 6,000 employees were trained through 150 virtual webinars and more than 50 virtual internal courses.

Regarding our main BSS transformation project, FAN, we have been able to complete the third and fourth migrations of mobile customers, adding 2.5 million prepaid and postpaid clients, during May and August, respectively. Currently, a total of 2.8 million customers can enjoy this new digital experience supported by 2,500 commercial advisers. We have also planned to end 2020 with all of our mobile customers migrated to our new CRM and to have our Quadplay NBP ready by October.

Slide 6 shows you the evolution of our service revenues. Service revenues totaled almost ARS 124.7 billion, decreasing 1.4% in real terms versus same period in 2019. In a period when inflation reached 42.8% year-over-year, the share of communication services in the national CPI is approximately 2.8%. Our revenue breakdown as of June 2020 shows an increase in mobile revenue share and a lower share of pay TV revenues when compared with the previous quarter. The breakdown results as follows: mobile revenue, 38%; broadband revenue, 22%; pay TV revenue, 20%; fixed telephone and data, 15%; equipment sales, 5%.

Our main drivers of growth are explained on Slide 7. We have been able to continue reducing the gap between inflation and real ARPU figures, which currently is around 1% below inflation, while being able to keep steady of our customer base. Postpaid mobile, broadband and our IP video platform called Flow are the main pillars of our business.

In the first half of 2020, postpaid subscribers accounted for 41% of our total customer base. The company has registered positive subscribers inflow during the first 6 months of the year, reflecting our effort to optimize the quality and capacity of our mobile network. As mentioned before, the growth in this segment has mainly supported by our convergent offers to cable TV and Internet subscribers that were not mobile clients of the company before, showing a net result of 27,000 customers coming from our competition in the first half of the year.

Mobile Internet usage has also increased, reaching an average of more than 3.9 gigabytes per user per month in the first semiannual period 2020. In addition, there have been important growth in broadband speeds considering that 55% of our total subscribers have speeds between 50 and [600] megabytes (sic) [megabits] compared to 18% by the end of last year.

Our product Flow has delivered solid results. We have almost 1.1 million Flow boxes inside homes, thus advancing towards the objective of network digitalization.

We keep on increasing the speed and capacity of our broadband customer base, leveraging on our strong HFC network and responding to the higher usage of fixed networks generated by COVID-19.

In Slide 8, we describe the latest regulatory decisions taken by the ENACOM and the Argentine Central Bank. In May, due to the COVID-19, our industry has agreed jointly with ENACOM to freeze tariffs of our products until the end of August 2020. Concurrently, all companies in the industry were not required to increase salaries until August 2020. Both inclusive plans and reduced services are being provided to clients. In the case of the reduced services, they are only provided to clients who have not paid their service on time.

It's worth mentioning that in March 2020, the executive power issued a decree which determined the temporary suspensions of the interruption of fixed and mobile telephone, Internet and cable TV services. Among others, in the case of nonpayment of 3 bills by a certain group of clients until the end of September 2020, this was then extended to 6 bills until December 2020. As of June 2020, clients with reduced services represents less than 2% of the company's subscriber base. Since the products have very limited capacity, as of June, we were recovering the same clients at the rate higher than 60%.

On May 28, 2020, the Argentine Central Bank decided that companies which have liquid assets abroad must first use sale funds to pay their dollars commercial and financial debt, thus not allowing in the local companies to access the FX market, official FX rate, unless they can prove that they do not have any liquid fund outside Argentina. Due to the above, the company decided to initiate the refinancing of its financial debt, which will be explained later in this presentation.

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

Thank you so much, Gabriel. In Slide 9, we show the evolution of total inflation. As of June 2020, the year-over-year increase in inflation has been 42.8% while during the second quarter of the year has been 5.4%. Regulated prices have increased 25.2% year-over-year and remaining flat during the second Q 2020, thus generating an increase in the [total] inflation index.

The breakdown that we are including shows that the most important weighing in the index comes from food and beverage, transport and clothing among other items, while the share of communication service in the CPI amounts to a very low percentage, which is 2.8%.

Going to Slide 10. For the first half of 2020, consolidated revenues on nominal terms grew by 43%, reaching almost ARS 125 million. When analyzing said figure adjusted by inflation, revenues amounted to more than ARS 131 billion, showing a decrease of 3% in real terms. The company has been trying to offset the inflation impact on its revenues and costs.

Service revenues showed a 45% nominal increase, while mobile revenues grew more than 8% in real terms when comparing the first half 2020 with the first half 2019.

In the case of pay TV, revenues related to local soccer league programming has not been generated considering that activity has been suspended.

EBITDA increased by 5 -- 54% year-over-year in nominal terms, thus generating an EBITDA margin of 37%. EBITDA margin in real terms was 36.5%.

The company performed well in terms of cost controls. Operating costs before G&A decreased almost 7% in real terms versus the first half of 2019. The company performed an effective cost management, and almost all cost lines experienced a decrease in real terms with exception of interconnection and transmission costs, which increased mainly due to the rise in FX rates and bad debt expenses that were higher as a consequence of the general economic situation.

In Slide 11, we show the company's EBITDA and the impact of the different components of revenues and costs. With the positive evolution of handset costs, we decreased 34% in real terms mainly by a lower number of sales. Operating costs were also 7% lower in real terms. Operating efficiencies were obtained both in programming and content costs. There were no costs related to the local soccer league because it has been suspended. Administration costs also registered a good performance, decreasing 9% in real terms. Commercialization expenses remained stable mainly as bad debt expenses included the rate increase above inflation impacted by the deterioration of the general economic context. Final result was a 20 -- 290 bps increase in EBITDA in real terms when compared with the first half of 2019.

In Slide 12, we show the evolution of our collections and nonperforming debt. Collections with digital clients have increased to 65% of total collections from the 50% observed at the beginning of the year. Additionally, the gap of real collections versus our forecast has decreased substantially. At the beginning of the COVID-19 lockdown, the level was almost 30% negative. Currently, our collections are at a normal level and have been possibly influenced by extraordinary collections in our B2B business.

During our second Q 2020, nonperforming debt in retail business increased mainly due to the effect of the COVID-19 lockdown from 2.4% to 2.7%. Since June, said trend is moving to more normal levels and has been benefited by the recovery rate of our reduced service clients.

In Slide 13, we can see the company's operating income totaled almost ARS 14.5 billion. The EBIT increase in constant measuring unit is explained by a lower increase in D&A and disposals and impairment of fixed assets vis-à-vis the increase in EBITDA, 4% in real terms year-over-year. Operating margins reached 11% of consolidated revenues, while in historical figures, the same margin has increased to 24% from 20% in the first half of 2019.

Net income in the first half of 2020 decreased more than ARS 7.6 billion, mainly reflecting FX losses due to the depreciation of the peso and higher interest expenses in the net financial results.

In Slide 14, there's a summary of the company's investments during the first half of the year. Telecom has investment -- invested almost ARS 34.4 billion, including rights of use of assets, bringing this amount 34% lower when compared to the same last year's period. Said decrease in CapEx is mainly explained by strategy to protect the company's cash position.

Technical CapEx were mainly composed of installation -- installations and customer's premise equipment or CPE. The balance was allocated to network and technology and to our international operations both in Paraguay and Uruguay.

During the second quarter of 2020, more than 39 new modern sites were deployed. Moreover, we continue to increase the capacity of our HFC network mainly through segmentation of areas, focusing particularly in the AMBA region in order to respond to our customers' high broadband usage due to the pandemic. 2,400 FTTH and 2,300 1-gigawatt (sic) [1-gigahertz] HFC blocks were enabled. Additionally, we completed the first phase of our cloud foundation initiative by uploading a set of business applications to the Amazon public cloud.

In Slide 15, we describe our cash flow generation and comparing the first half of 2020 with the first half of 2019. During the first half 2020, the operating free cash flow amounted to approximately $351 million. The increase in EBITDA and the reduction in CapEx mainly explained the additional $79 million in free cash flow when compared to the first half of 2019.

Turning to Slide 16. We show our key figures for the last 12 months as of June 2020 in constant measuring unit. Company's revenues amounted to more than ARS 265 billion, while the EBITDA amounted to almost ARS 90 billion. EBITDA margin was 32 -- 34%. Our gross debt amounted to ARS 183 billion as of June 30, 2020. The company has been able to generate an important amount of cash and equivalents, having a net debt of ARS 131 billion, reducing our net debt in real peso terms when compared with the December 31, 2019. Our net debt-to-EBITDA ratio was at 1.46x.

Slide 17 shows the breakdown of our financial debt. Total outstanding debt as of June 30, 2020, amounted to almost $2.6 billion. As mentioned, the Argentine Central Bank has not allowed companies to access the FX market at the official FX rate for commercial and financial debt payments in foreign currency unless they can prove that they do not have any liquid funds outside of Argentina. This was the main reason why the company decided to initiate a liability management strategy that we will cover in the following slide.

Slide 18 summarized the latest financial transactions the company has done. On August 3, 2020, Telecom concluded an exchange offer of the outstanding 6.5% 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 grade profile and structure of the exchange offer. An additional amount of $135.4 million of notes due 2025, which we consider to be 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 amortizing notes due 2025 with an 8.5% semiannual coupon. Due to the above, the company has considerably optimized its capital structure. Our next step will be to extend amortizations of our multinational loans, and we have already started with this process.

In Slide 19, we show our pro forma maturity profile as of June 2020 after the exchange we just mentioned. Our maturities in U.S. dollars are in the range of $100 million to $500 million between 2021 and 2022 and are reduced until the maturity of our 2026 notes.

Having concluded with the presentation and forwarding to the Q&A session, let me pass the presentation to Roberto Nóbile, our CEO.

Hi, everyone. Just to finish the presentation and opening to questions. We just would like to highlight that the COVID pandemia has been like a catalyst for the company in its digital transformation path, not only because we were able to sustain and hold the operation and the business but also grow significantly in terms of engagement.

If we take a look at Flow, our IP video platform, we reached 9.5 hours of average user per customer, and that's an amazing number considering the volume of transactions that are being -- passing through our platform. We hit 126 million views. We grew 30% in terms of users on the OTT platform. We grew 66% in terms of hours in VOD on our app, on our OTT platform too and more than 31% growth of hours in VOD in our box or set-top box video platform also.

We have also enabled to keep our transformation project on schedule. As Gabriel was mentioning, we were able to keep running our SAP project. And we have -- today, we have all the ledger in one ERP. It's SAP S/4 HANA. We were able to migrate more than 2.8 million customers -- mobile customers into the new Salesforce platform, and that's a great achievement. And we keep on rolling migration wave throughout the year.

We have given the company also a better outlook for 2021 and 2020 -- 2020 and 2021 debt maturity, reducing significantly the debt maturing next year. We have managed cash flow in a very conservative way to deal with the difficult business context to ensure the company's sustainability no matter the Argentine context as well.

And finally, we have been able to keep our customers connected in these critical times, which is something that we are proud of. So now we can open to questions.

(Operator Instructions) So the first question we have is from Andres Coello.

With regard to debt denominated in dollars, are you using the official FX to convert it into Argentine pesos? Can you remind us how many dollars you can actually buy at the official FX? Or what is the average FX at which you can buy dollars?

Thank you for the question. Well on the accounting for the company, all the dollarized assets are -- accounted are using the official foreign exchange rate unless those specific assets might have a market price. This is, for instance, if the company buys any security, you use the market price of the security. All the rest of the dollar assets are accounted at the -- for the official foreign exchange rate. Regarding the amount of dollars that the company may get from the local FX market, from the MULC, as we call it here, theoretically is unlimited in terms of -- as far as you comply with the regulations. Pertaining what type of payment are you willing to make, you go to the market and the market provides mostly with the authorization of Banco Central.

The restrictions are based in what type of conditions the payments must meet to be able to be channeled through this market. For instance, all the financial payments require that the debt should be registered prior with Banco Central. All the commercial payments have to meet certain technical relationship between the good.

For instance, just to explain this in brief, and we can go with this more detail in a separate call if you wish. You -- all the goods have been -- you cannot anticipate a significant amount of import. But as far as we comply with the obligations, there is no problem in accessing the foreign exchange market.

Okay. Now we have the follow-on question from [Pedro Sore].

It was on incremental CapEx the company has canceled in May. Does the company plan to restore the extra CapEx? How that's unfolding?

Yes. Well definitely, the conditions that made us took that decisions that were related to the general situation, really, it was very difficult to precise in March this year what would be -- what was going to be for the company the outcome of the pandemia plus all the uncertainty that was derived from the Argentinian negotiation of the day. With a much clearer situation regarding both issues, Argentina has already reached an agreement on the sovereign debt. And on the other hand, we have a clear picture of how the evolution of the company is behaving with the quarantine process. We decided to retake the original amount of CapEx. And also, we are considering some additional amounts regarding some aspects that are related to the new normality, let's call it that way, and might require a different type of attention.

At the end, we think that our CapEx will be over $550 million for sure and very likely over $600 million. All this, of course, calculated, as I mentioned, to the foreign exchange rate, which is the one that we effectively account and effectively paid.

Now we have our [Agustina Isidro] from [AR Partners].

I would like to ask about the status of the price update in your different segments. So the price risk expires by the end of the month in Argentina. So how are negotiations evolving with the ENACOM?

Thank you for the question. We have already communicated to our customers a price increase that, in average, is around 10.5%. That's going to be from September 1 on, and that's -- we have already communicated that to our customers with 1 month in advance because the local law requires us to do that. We have the negotiation with ENACOM that was between the March and August 30. That was the time frame where we have agreed upon freezing, let's say it that way, the prices. But we are able to increase them from September 1.

So now we have the following question from [Daniel Alsúa from Banco de Chile].

What he asks, "Do you have a specific leverage target for the short, medium term? Any additional initiatives you may be working on in order to tackle the upcoming maturities?"

Okay. Thank you for the question. Yes, definitely. The company, remember, has a long-term target in terms of relationship debt-to-EBITDA around 2x, and we are -- as Fernando explained, we are below that. For the time being, we do not think that is going to be a very significant change in that equation.

Regarding the next steps to keep up with the maturities, we have already refinanced more than $600 million of the maturities, especially of next year. And as you saw from the presentation, we have already started negotiations with most of our banking creditors, meaning that we -- I will say, at this stage, we have reached an informal commercial agreement with our banks, and we still are having additional conversations with multilateral agencies to bring on the same package and restructure the rest of the maturities.

Having said that, that will mean that, for the next 2 years, the company would have reduced the total amount of maturities in half, and that is considering the remains of the 2021 note that we exchanged recently. So really, the situation in terms of cash flow for the company or requirement of financial dollars for the company has changed significantly. And also, that implies a significant advantage for local [PCI rate, too].

The following question we received is from Santiago Petri from Templeton, who says, "Could you please repeat the explanation from the difference in the operating margin between historical 24% and inflation 11% adjusted figures in Chart 13?"

What does it mean is that the difference between the 2 is the effect of the inflation adjustment. The historical values, meaning with no consideration on inflation, has a growth of 71%. When you calculate the same amount of operating income related to the inflation figures, as you have costs that are related to a different base and your income is not necessarily adjusted completely by inflation but by your price adjustment, that -- there is, in this case -- the reality here is the company, during this process, went into a very successful, I would say, cost control. All the situations of becoming digital, as Roberto has mentioned, has -- and having a very significant part of our population working from home, means that, for instance, we have 5 corporate buildings, 3 of them completely closed. And also additional cost savings which are relevant have been taking place, as Fernando explained regarding the football. Also, you have a reduction in the sale of devices, which concurrently imply less cost too.

So there are several lines of costs that were very successfully managed, and as a result of that, the operating -- the EBITDA margin grew significantly, and the operating income also had a good behavior on this. Also remember that 10% of our revenues which are related to the corporate business are adjusted by dollar income.

The following question we have is from [John Maco].

What it says, "How much of the cost cuts are onetime in nature, handset sales or programming cost? How sustainable is the margin expansion you experienced in second quarter?

Well part of this is difficult to answer because it's more related, for instance, to the evolution of foreign exchange, freight and some other -- and the ability of many suppliers to pass through inflation to us. In terms of that -- I will say that in terms of the improvement of margin that we already have, we think that at -- not at the accounting level but on the MIS information, we grew about 6 points of EBITDA margin, which we think that at least 3, 4 -- 3 of them would be reduced when the quarantine process reopens.

But I think -- this is my personal opinion, and it's yet difficult to say that probably 1 or 2 points are going to be there, and our intention is to do so. We are really doing a very intensive cost control and learning for the cost reductions that we achieved in this process to keep most of them after these situation changes.

The following question we had is from Cesar Medina from Morgan Stanley.

I would like to hear your thoughts on competition on the fixed business since that some of your competitors have delivered a stronger growth rate in pay TV and broadband.

Thank you for the question. On pay TV, we -- our market share remains the same. So we don't see any -- even though there are competitors working on the video side, we are performing very, very well. And that's not a problem so far.

On the broadband side, we have very strong competition today that is heating on. We have already mentioned that in previous talks. We have an HFC network that's a hybrid coax and fiber network where we have HFC broadband customers. And we have the old copper network where we have xDSL customers.

We are losing -- and probably we have shown the figures. We are losing customers on the xDSL network because of the stronger competition with a better product, and we are retaining our market share on our HFC networks. So as long as we are able to upgrade our copper networks into FTTH networks that's part of our CapEx plan for the future, we will be able to increase our market share on those areas. But as long as we don't keep on with the FTTH deployment, that's not possible.

So anyone that interrupts in an area with copper network only, it's difficult to compete. So that's probably the way. Most of our customers are on HFC, and on HFC, we are growing. And for example in the last months, we are growing more on HFC than what we are losing on the copper areas.

Thank you, Roberto. The following question is from [Nick Ivanov].

What he says, "Is the U.S. dollar amount that the company can get on any day from the Central Bank limited even if it is needed for interest payment or debt amortization?"

No. No, it isn't. What we are doing -- but I will say, as [a segment issue], not as a requirement, we do not expect to the last day, and we try to make our acquisitions in 2, 3x to create the [minor noise] that we can on the market.

Thank you, Gabriel. The following question is from Rodrigo Villanueva.

Is it possible to -- what he says, "Is it possible to break down how much of the OpEx savings that you have had related frozen salaries and software commercial activity? And how much of the OpEx savings could be perceived as sustainable?"

Just to add, on the salary line, salaries increased -- were increased more than -- between 40.5% and 42.5% on the period July -- June-July 2019, June-July 2020. And 70% of our staff is -- belongs to a union, and we have agreed with the unions the salary increase, and we completed the negotiations, and that was the -- between 40% and 42% depending on the union.

So we have not had any salary freezing during this last year. And we are -- our approach is to move our salaries on the -- at the same rate as we increase our prices. That's the approach, and that's the negotiation we are running today with the unions together with ENACOM.

Thank you. The following question is from [Chelsea Collins].

This says, "Can you please discuss operations in Paraguay? Mobile customers are down 5% in the quarter. How is the situation evolving both in terms of the pandemic and competitive dynamics?"

It is true. Paraguay is struck by the pandemia also. We have been hit by the pandemia. Most of our customers are prepaid, and prepaid customers as well as in Argentina are not recharging as they often do. So that's one of the temporary reasons why customers are down.

But on the other side, we were able to deploy 16,000 square blocks of FTTH in Paraguay, especially in Asunción, and we have hit 100,000 -- more than 100,000 new customers on broadband on FTTH services. And that's a great job we're doing. We are achieving probably around between 25% and 30% of market share coming from 0. So we are doing a very good job, and we are going to keep doing that.

Thank you. The following question was received from [Gustavo Zana].

He says, "I would like to ask if you could provide a breakdown by currency of cash and equivalents and how much is held in overseas banking accounts."

Thank you for this question. Well as we explained regarding the new regulation, the company has, in dollars, about $40 million, which are held now in Argentina. We brought that money within the country to comply with Banco Central regulation, and none other currency is held abroad.

As part of the refinancing process that we are currently developing, we have established a structure that has no relationship with the company, that has paid the cash consideration for the exchange of the bonds and will also use the funds required for complete the refinancing of our banking debt, meaning that no additional funds are going to be required from that part.

On top of that, we have about $300 million equivalent dollars in pesos in Argentina, which are split between $200 million in dollars -- in pesos, specifically; and 100 -- an equivalent of $100 million held in dollarized securities. But all of that is held within the boundaries of the country. So what the company did was -- under this new regulation of Banco Central was use all the funds available to strengthen its balance sheet, changing the maturity profile with its creditor. And now we have plenty of cash to operate the company within the boundaries of Argentina.

Thank you. Now we have a request from Alejandra Aranda. So Alejandra, and you can go ahead with your questions.

Roberto, Fernando and Solange, congratulation on the debt deal. The communication was a little bit tricky. Maybe you answered this, but could you talk a little bit about the tariff increases by segment; and how are customers behaving, if you're having some pushbacks to increase tariffs or customers are looking for upgrades; and then if you have a CapEx guidance for the rest of the year?

On average, it's 10.5%. The -- on mobile, it will be 10%. And we have some -- a very thin gap, between 10% and 12% or 13% in the other services. But on average, it's 10.5%. So there's no change by segment. It's -- we have gone through a very flat increase for all prices and products except the reduced product that, by definition of ENACOM, is -- cannot be increased until October.

So -- and the next -- following question that we have is -- was one question received from Rodrigo. It says -- Rodrigo Villanueva from Merrill Lynch, which says, "With OpEx down by around 5% year-over-year in real terms or an EBITDA margin at around [37.9%] or more than 330 basis points higher year-on-year..."

[Can you repeat it?]

So with OpEx down by around 5% year-on-year in real terms or an EBITDA margin at around [37.9%] or more than 330 basis points higher year-over-year.

But -- and then if it's possible to break down -- I think we have already answered this. Is it possible to break down how much is the OpEx saving that had and related to frozen salaries and software commercial activity...

We already worked on this. As I mentioned, Rodrigo, just to give you some color in general terms, we think that there is -- about half of the improvement is related to the pandemic effect, to the quarantine and will be much difficult to keep. The other half is something that we think that we are doing our homework. We will try to keep on [staying].

Then the following from Rodrigo also is regarding salary raises. Do you expect to raise compensation and benefits from September? If so, how much -- by how much?

I have already said. It's [part and parcel] with price increases.

Then the follow-on question, it came from [Arthur Caralde].

And it says, "Do you expect any other price increases for the rest of the year apart from September increase? Or do you also need to negotiate with the ENACOM?"

We will be monitoring inflation rates and our own inflation of our cost and OpEx. We will need to understand what's going on. If we see the inflation as is right now, with this 10%, we are keeping track of inflation. We are not going over inflation, but we're keeping track, very close track of inflation year-to-date.

Nobody knows when the quarantine will be finished, how will the business context start developing September on. So we need to understand where we are going and see, and we will do the corrections that we need as long as we know them.

Another question from [Agustina] -- that was already mentioned in the presentation -- is, how many subscribers do you currently have on inclusive and reduced services?

As we mentioned, that was less than 2%.

Less than 2%, yes.

In the case of [Chelsea Collins], you have, "What is the CapEx guidance for the rest of the year?"

That's something that Gabriel already gave.

[Chelsea], in total thinking, of course, it is, to some extent, maybe [altered] on the margin because of the foreign exchange rate evolution. But assume something in the range of $600 million, probably.

Yes. And it will depend on the ability to -- most of our CapEx is imported goods. So it will take time to bring goods into Argentina. So once we have decided to move forward with the CapEx, it's not only money, it's only time. And we can be around $600 million, but we could be a little short. If we cannot bring things on, that will be a carryover for the next quarter of 2021.

Yes. Sorry, that's for the total year. The $600 million is for the total year.

Yes.

So we have no further questions. So we would like now to thank you for participating in our fourth teleconference call. And please do not hesitate in contacting our Investor Relations department for any further inquiries you may have.

Good morning to all, and have a nice day.