Telecom Argentina SA (TEO) 2008 Q4 法說會逐字稿

Good day, everyone, and welcome to the Telecom Argentina fourth quarter and fiscal year 2008 earnings call. Today's conference is being recorded. Participating on today's call we have Mr. Franco Bertone, Chief Operating Officer, Mr. Valerio Cavallo, Chief Financial Officer, and Mr. Pedro Insussarry, Financial Director. At this time I will turn call the call over to Mr. Insussarry. Please go ahead.

Good morning, to everybody. Thank you for participating on this conference call. The purpose of this call is to share with you the consolidated results of Telecom Argentina corresponding to the fourth quarter and fiscal year ended December 31, 2008. The agenda for today, as seen in slide two of the presentation that we distributed today, is to go over, first, over the general market overview. Then we'll go over some business highlights. And after that we'll go over some specifics on the evolution of our financial figures. And we will end the call with a Q&A session.

Before we continue with the call I would like to go over some Safe Harbor information and other details of the call. We would like to clarify that during this conference call and Q&A session we may produce certain forward-looking statements about Telecom's future performance, planned strategies and targets. 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 effects of the general -- the public emergency law and the complementary regulations, the effects of ongoing industry and economic regulation, possible changes in demand for Telecom product and services, and the effects of more general factors such as changes in general market or economic conditions, [in licensation] and regulation. Our press release dated March 6, 2009, a copy of which will be included in 6-K form report furnished to the FDC, describes certain factors that may affect any forward-looking statement that we may produce during this session. Furthermore, we urge the audience of the conference call to read the disclaimer clause contained in slide one of the presentation.

As usual we'd like to remind you, for all of those that have not received our press release or our presentation, you can call our Investor Relations office or download them from the Investor Relations section of our website at www.telecom.com.ar.

Additionally, this conference call is being broadcasted through the webcast feature available in such section and can be replayed through the same feature.

Following with the conference call and as an introduction to general operating environment, I will go over some market overview describing slides three and four.

Some snapshots on the macroeconomic scenario that we can share with you are seen on slide three, that are that throughout 2008 the Argentine economy continued to show growth in real terms although at a slower pace than past years. The conflict with the agricultural sector and the global context has affected the level of activity. In the fourth quarter of 2008 the rapid expansion of the global crisis that has had an impact in the local economy through a decline in commodity prices and the higher risk aversion from investors caused a GDP decline of 0.3% when compared to third quarter while on the year-on-year growth rate in the last quarter reached 4.9%.

Moreover, the trade and fiscal balances are still positive although a decrease in commodity prices may affect a trend of both balances. In addition, the levels of consumption continue to expand. However, the economy continues its deceleration while inflation prices are showing descending trend. Despite this challenging economic context for Argentina, our company has well performed in the year both in terms of its business and operations.

And before entering into the development of each single business line it is particularly interesting to see the performance of the telecommunications market in Argentina vis-a-vis the evolution of the GDP between 1993 and year 2007. As you can see in slide four of the presentation, the elasticity analysis shows that the telecommunications sector in a period of crisis is less sensible to the GDP downturn. During the analyzed period the telecommunications output in constant prices can still sustain a positive trend despite a contraction in GDP. Consequently, these figures sustain the idea that the Argentine telecommunication industry constitutes a defensive sector in the economy.

And having gone through this introduction, let me pass the call to Franco Bertone, who will go over the business highlights. Franco.

Thank you. Good morning to everyone. It's a pleasure to meet with you again at this quarterly conference call.

The fourth quarter, the company was able to maintain growth in revenues and operational margins despite worsening economic conditions and fierce competition. This required rigorous operating and capital discipline. Consolidated revenues for the 12 months ending December 31, 2008 grew 17% to ARS10.6b. Fixed line growth was 11%. Mobile revenues grew 23% in Argentina and 20% consolidating the operation in Paraguay that was affected by local currency devaluations.

Operating profit before depreciation and amortization posted a 9% increase totaling ARS3.3b. Operating profit posted a 25% increase totaling ARS2b. Net income was ARS961m, posting a 9% increase. If Publicom, that was Telecom Argentina Yellow Pages sales effect on 2007 account, were not considered, net income increase would have been 23%. With ARS1.5b operating free cash flow, net debt dropped to an all-time low of 0.3% times EBITDA.

Cost control has been the name of the game in the fourth quarter together with a strong sales drive. Broadband second semester flow share was close to 34% versus a 30% market share in the first semester boosting the year end market share to 30.5%. Mobile second semester flow share was 39% versus a 28.8% market share in the third semester, boosting year end market share to 29.4%. 10% revenue growth in the fourth quarter and rigorous cost control delivered a 4% growth in the operating profit before depreciation and amortization and a 15% growth in the operating profit despite inflationary pressure in cost and regulated tariffs.

All fixed line, broadband and mobile businesses grew consistently as the company continued to address the market with innovative, value proposition for its customers. Please refer to slide six of the presentation we made to you this morning. Our fixed line service kept growing at moderate 2% although twice as much as the market. New adds delivered slightly higher ARPUs than existing customers. And 31% of new adds contracted both fixed and ADSL services proving that our fixed line business continues to offer growth opportunities.

In the context of frozen tariffs of regulated services and strong mobile growth, new fixed line handset sales, SMS and package pricing were able to stabilize ARPU. Flat pricing plan for local and long distance calls were launched together with voice and broadband product bundling combining package of minutes for voice services with Internet access.

Slide seven shows the growth of our broadband subscribers that hit the 1m mark in the fourth quarter posting a 33% annual growth. Improved network coverage, innovative offers, strong brand, product advertising and more effective call centers and customer operation delivered the results. We mentioned before a 33% fourth quarter flow share pushed our market share to 30.5% year end. An example of product innovation that we bring to the market is the first integrated fixed and mobile broadband Internet access branded [on the go], that features combined Telecom Argentina DSL and Telecom personal 3G data service. Effective promotion and pricing increased ARPU by 9% to ARS58 per minute.

Slide eight shows fixed line revenue evolution. Despite regulated tariffs being frozen at 2001 level, third party revenues grew 11% to ARS3.7b. Internet and data revenues posted a 39% and a 25% growth respectively, while other revenues including equipment sales grew 33%. Monthly fees revenues grew 7% due to customer base expansion, new services and increased penetration of supplementary services.

Major services revenues have marginally increased by 1% because of the impact of mobile over local traffic. Third party mobile operation has contributed higher interconnection revenues while public telephony revenues kept falling. Regulated service revenue dropped 62% to 56% of fixed line total revenues.

Slide nine shows that in the last 12 months we added 1.9m new subscribers to our mobile business, posting an 18% increase that outperformed the market. We mentioned before a 39% fourth quarter flow share pushed our market share to 29.4% with 623,000 new adds versus 503,000 new adds in the fourth quarter of 2007. SAC and SRC as a percentage of service revenues as well as compared with ARPU significantly decreased although we upgraded 884,000 customer handsets compared to 539,000 in 2007.

Slide ten shows that strong growth experienced in our customer base did not dilute customer value. We retained the highest market mix on prepaid and postpaid customers and the highest participation of value added services to service revenues. Value added service accounts for 30% of our service revenues. SMS volume more than doubled while messaging per subscriber posted a 75% increase. Personal strengthened leadership in brand recognition especially with new and high value customers.

Slide 11 shows the evolution of our mobile revenues. Service revenues increased by 23% as a result of expanded subscriber base, increased traffic and value added service usage that increased by 37% on their own. Handset sales including handset upgrade increased 22%. Nucleo revenues from our operation in Paraguay decreased by 10%, mainly due to local currency devaluation to the Argentinean peso.

2008 CapEx shown in slide 12 was ARS1.6b, equivalent to 15% of our revenues. ARS834m were invested in infrastructure to support both our fixed and mobile operation. ARS763m were invested in mobile access and core platform, of which ARS192m were allocated to 3G. These CapEx figures do not include the $32m acquisition of Cubecorp aimed to strengthening our data center and customized ICT service capabilities as well as accommodating our own requirements of existing businesses.

Finally, we like to share with you what we expect for our 2009 operation. Assuming that the current macroeconomic condition remains stable, we expect that consolidated revenues for year 2009 will grow in the range of 10%. We expect that inflationary pressure will be weakening as a result of lower level demand contributing to maintain costs under control. Our profitability margin will stay at similar levels as those experienced in 2008. Our fixed line service will grow by approximately 1% and broadband connection by 15%. Our mobile subscribers in Argentina will pass the 13m mark with stable ARPU. In Paraguay our customer base will approach 2m. CapEx will be in the level of 14% of consolidated revenues versus 15% in 2008.

Having gone through over our 2008 business highlights and share with you our 2009 expectation, I'll pass the call to Valerio Cavallo who will continue with the financial details.

Thank you, and good morning to everybody. The trends that Mr. Franco Bertone has just highlighted have resulted in a very good result in terms of revenue evolution while the level of profitability of our businesses has followed the trend of our commercial activity. Meanwhile, we have sustained the high level of cash flow generation showed in previous periods.

In slide 14 we can see the annual evolution of revenues and operating profit before depreciation and amortization. In terms of our revenue we have been able to achieve a growth of 17% in the period of fiscal year 2008. This was fueled primarily by the expansion of the mobile business that grew by 20% and now accounts for 66% of our consolidated revenues. This growth has allowed us to increase our operating profit before depreciation and amortization by 9%, reaching ARS3.3b with a margin of 31%. Moreover, the expansion of our OPBDA and the lower incidence of depreciation charges on revenues continue to positively impact our operating profit as seen in slide 15.

Operating profit grew by 25% with an expansion of 121 basis points in the margin. This has also resulted in a very impressive improvement of our return on net invested capital that soared from 29% to 36%. In addition, net income reached ARS961m equivalent to growth of 23% if we exclude the result of the sale of Publicom reported in 2007.

When we look into the performance of the last quarter of 2008, as seen in slide 16, we can note that the revenues grew at a slower rate than that evidenced in previous quarters, mainly due to the effect of a slower economic environment and to the impact of the Paraguay operation that we will explain later. In this context, we have reported lower margins in 4Q as a result of higher levels of customer additions and incremental commercial activity in both Internet and mobile businesses. But it's important to highlight that the trend of our operating profit before depreciation and amortization has changed where we were able to report a higher nominal figure in the last quarter of 2008 when compared to the previous quarter and to the similar period of 2007.

Finally, when we compare the net income for this last quarter to that of the same period of 2007, we can see that our bottom line was negatively impacted by three effects. The devaluation of the peso versus the US dollar and euro and we still maintain an exposure to foreign currency in our debt. Higher income taxes. I remember that in 2007 we used loss carry forwards generated in the crisis of 2002. And the last item, a one-time income of ARS69m reported last year that was related to the recognition by the regulator of certain credits income. In addition, when we compare the fourth quarter 2008 net income to the previous quarter, we can note that it was mainly affected by exchange rate losses related to the foreign exchange exposure of our debt.

Furthermore, as seen in slide 17, the expansion of our OPBDA and the controlled level of CapEx have allowed us to generate in last 12 months ARS1.5b of free cash flow. This resulted in a significant reduction in leverage of more than ARS1.1b to reach ARS912m of net debt as at the end of 2008. This has allowed us to cancel in the year all scheduled payments of Telecom Argentina until April 2012. Therefore, since the issuance date of the note the company has canceled almost 59% of Series A notes and all of Series B notes. In addition, Telecom Personal has cancelled the equivalent of ARS81m in debt.

We can point out that the strong cash flow that the Telecom Group is generating, the low level of leverage, the extended profile of maturities that result in low level of rollover risk, take us to the conclusion that the company has a very sound financial position, particularly important in the context of global uncertainty.

Slide 18 shows the unconsolidated income statement of Telecom Argentina and the detail of the evolution of our operating costs. The increase of labor costs of 25% was a result of wage increases granted to non-unionized employees and of the impact of salary increases related to the collective bargaining agreement settled in March 2008 but effective in July.

Meanwhile, the increase of 54% in advertising expenses was a result of the commercial actions to promote new services and pricing plans together with the effort to market our broadband service and reinforce our brand positioning through certain actions such as the official sponsorship of Argentine Olympic team. In addition, the inflationary context has impacted the cost structure in general.

Despite the evolution on the cost side of the business, we were able to maintain operating profit before depreciation and amortization stable in nominal terms at a level of around ARS1.6b. Finally, below the operating profit, the [ADI] level we can point out that the higher changes in the other income and expenses line are related to the increasing severance expenses of ARS55m. Furthermore, the one-time income of ARS59m reported last year, as we mentioned before, was included in this line.

In slide 19 we can see the unconsolidated income statement for Telecom Personal. In this case, total revenues grew by 23% to approximately ARS6.6b. Operating costs increased by 21% to ARS5b. Higher expenses are mainly related to the expansion of our operation and to costs related to customer acquisition and retention cost actions. Moreover this increase is also related to higher network access costs, labor costs, customer care, costs related to the new value added services, information technology, and taxes.

Therefore, Telecom Personal in Argentina delivered a 29% increase in OPBDA to close to ARS1.6b for the period of fiscal year 2008. It's very important to highlight that OPBDA profitability continues to expand reaching 24% of revenues for the year ended 2008. In addition, operating profit increased by 62% to ARS1.2b, mainly due to the OPBDA expansion mentioned before and by the reduction in depreciation charges as TDMA network was fully amortized in March 2008.

As a result, net income for Telecom Personal in 2008 climbed to ARS704m, up from ARS370m registered one year ago.

Finally, in slide 20, we describe the evolution of Nucleo, our mobile operation in Paraguay, and the effect that it had on the performance of our consolidated mobile business. The (inaudible) devaluated versus the US dollar by 23% in the last quarter of the year. And this had a strong impact in the financial figures consolidated into Telecom Personal. This resulted in a loss of ARS46m in revenues equivalent to a decline of 10% when compared to last year. Excluding this effect, revenues would have been substantially stable.

Nevertheless, Nucleo continued expanding its operations reaching 1.8m subscribers with an ARPU of $6 per subscriber per month. The company is currently engaged in the deployment of its 3G network, the expansion of the coverage of its network and the development of the Internet business. Despite this project, Nucleo is able to finance its CapEx entirely with internal cash flow.

And having concluded with this presentation, we are more than pleased to answer any questions you may have. Thank you very much.

Thank you, ladies and gentlemen. (Operator Instructions). We hear first from Alex Garcia of Raymond James.

Good morning, gentlemen. I just want to know if you guys could clarify a bit on what happened to all your expenses. We have seen ARS22m in December 2007. If I'm not wrong, around ARS50 on the 3Q and then this account increased to ARS127 on the 4Q '08. I just wanted to know if you guys could shed some light on that. Thanks.

Okay, Alex. Good morning. Basically what happened in that line was that in 4Q '08 we charged approximately an incremental ARS55m in severance charges. And in fourth quarter '07 we reported an income of ARS69m that was related to some credits that the regulator had granted to the company. So that's basically -- those are the two main items that affected the evolution of other income and expenses.

Okay, okay, thanks. And the second question, if you guys allow. I notice that there was some deceleration in net additions in the wireline and broadband and as well in Nucleo on the 4Q compared with the 3Q. This was something that did not happen on 2007 and I was wondering if you guys could give some color on if there was some seasonal effect? Or is some sort of indication of a deceleration in those markets? Thanks once again.

Hello, it's Franco Bertone to answer your second question. In general terms if we compare performance with fourth quarter 2008 versus 2007 we certainly have to consider the overall macroeconomic condition in the particular market we are operating in. And the fact that penetration percentage of services like broadband versus household and mobile [sets] versus population are approaching a higher level and close to maturity. So in general terms we have an overall economics that are certainly not helping the growth. And on the other hand, we are approaching a more mature market level in both cases.

Despite of this we grew in fourth quarter over our market share. Our flow share in broadband was 34%. That allowed us to hit 30.5% by the year end. And in the mobile markets our flow share in the fourth quarter was 39% versus a 29.4% that is our market share by the year end. So I would say in general terms we have been working in a slower environment both for macroeconomic condition and levels of penetration. But we have been performing strongly and certainly better than the market, improving our market share by the year end because of fourth quarter performance.

Okay. Thanks a lot.

You're welcome.

The next question comes from Mauricio Fernandez of Merrill Lynch.

Good morning, everyone. Two questions. First, if you could give us some light on capital expense for 2009, apologies if you've already done so. And secondly, we've seen something that I think you have been highlighting, some margin decline. Just wondering if we have reached that point at which the margin pressure should be lower going forward. That's the second question. Thank you.

Yes, Franco Bertone answering your -- both your questions. In terms of CapEx, we have envisaged something in the range of ARS1.6b, ARS1.7b for 2009 that would be equivalent of 1 percentage point compared to revenues below what we had in 2008. So we're looking at 14% of revenues versus the 15% of revenues of past year.

Second question was in terms of margin decline. Well, we certainly have expectations in that respect for 2009, as we believe that the inflation pressure that we experienced in 2008 is going to be lower than what we had last year. As a matter of fact, in the fourth quarter of 2008, we had quite a strong improvement in that respect. And the percentage of increasing costs that we had in the fourth quarter was less than half of the percentage we had in previous quarters, both because there has been some slowdown on inflation that was directly reflected into costs in -- of our main supplies. And on the other hand, we were able to be more cautious in cost control actions within the operation.

Okay, perfect. Thank you. And one more question, if I may. Can you give us an update on the shareholders' equity situation from the standpoint of a potential dividend payment? I understand that your losses on the balance sheet that doesn't -- that don't allow you to pay a dividend yet. So what's the status there? What's the size of the losses?

Well, Mauricio, this is Pedro Insussarry. Basically, in 2008 with the net income that we reported on Friday, we would have -- we are in the position of recreating or reconstituting, almost, the entire reserve -- legal reserve that we absorbed in 2005. We have a balance of approximately ARS24m that we would need -- additional ARS24m that we would need to allocate in future periods. So in general terms, the majority of the issue of the cumulative losses, plus the reconstitution of the legal reserves has concluded except for this balance of ARS24m that we still have pending for 2009.

Okay. Thanks, Pedro. And well from that I understand that there are no impediments for dividend payments from now on, right -- once the ARS24m is covered, right?

In terms of corporate issues, yes, exactly. Once we -- if we generate in excess of ARS24m, the Company is in the position of paying dividends. The only effect that we have is that with the current terms and conditions of the debt, we have the obligation to prepay ARS2.5 for every peso of dividend that we pay. But that's not a restriction in terms of dividends to shareholders.

Okay, and those -- I would say restriction, or those restrictions have -- well, so the question is, you have not paid the -- any of the restructured debt. So there's still -- of that [debt] they're still pending on the balance sheet.

Exactly. The restructured debt is still outstanding. And the Company, as long as it continues generating excess cash, it continues to pay the restructured debt.

Okay, understood. Thank you, Pedro.

Okay, thank you.

We'll go next to Deutsche Bank, Rizwan Ali.

Good morning. Two questions. One is that the CapEx that you're spending on wireline expansion, are you only expanding in areas that you already have a network or is this virgin territory? In other words, how much are you spending on adding a line, given that you have fairly low ARPUs for those wirelines?

And second is CapEx for '09. I know you've discussed it. I just want to get -- sorry to -- I may have missed it, but can you specify exactly what kind of CapEx you'll have in '09?

Hello. It's Franco Bertone answering your question about CapEx. I'd like you to understand that the vast majority of CapEx invested in fixed line in 2008 but also in -- previously, goes to strengthen our infrastructure that is both used for fixed line services and mobile services as well. So I mean, we are talking about increase in infrastructure capacity. It is rather quiet for the growth of broadband service being sold, as well as 3G data services being sold on the mobile side.

On the other hand, if you look into the mobile CapEx, you'll see that is quite clearly shown that under 3G and 2G we're spending, respectively, 25% and 9% of mobile CapEx as far as access is concerned, while there is a 31% spend on capacity of both core and access networks. I hope that this clarified the -- where our funds are going to.

As far as 2009 is concerned, we can anticipate that the split that you've seen in slide 12 for 2008 will broadly -- in broad terms, will still apply for the next one or two years.

And in terms of absolute CapEx for '09?

'09 I indicated ARS1.6b to ARS1.7b, 14% of revenue -- billion pesos, of course.

Okay, thank you very much.

You're welcome.

We'll move next to Jose Bernal of Standard New York Securities.

Hello. Congratulations on the results. My first question is related to the debt. If you can please remind me, what is the total amount, or the aggregate amount of the note due 2014, including the Japanese series in Japanese yen/euros Argentine pesos/dollars so the total amount for -- or the aggregate amount for those notes and also if the Company is planning to buy back more debt. Thank you.

Okay. With respect to the outstanding amount, we have in dollars approximately $105m. In euros -- sorry, $43m. In euros, EUR197m and JPY5b and [ARS50m].

And that's as of today, right -- recently or was that 4Q?

That is debt outstanding.

Okay.

Okay, with respect to the buybacks, well, it depends where the market is. We constantly monitor the market. And basically we'll see where the market is, in terms of pricing and opportunity.

Okay, thank you. Then I don't know if I may ask another question. What is expected subscriber growth for 2009 in the mobile business?

We are estimating for Argentina approximately 15% growth in terms of subscribers to 13m subs.

Okay, thank you.

You're welcome.

(Operator Instructions). We'll move next to [Rajnesh Cower] of JP Morgan.

Hi, thanks for the call. Question on your guidance on ARPU. You said you expect to have stable ARPU in 2009 in the mobile business. Why is that? What is your base case expectation for inflation and can you talk about the inability to pass on inflation? And in the past, you've generally seen some nominal increase in ARPU. Why shouldn't we expect that for 2009? And if you could give some color on the traffic that you're expecting in 2009. Thanks.

Yes, Franco Bertone answering on your ARPU question. We expect, as we say, to maintain a stable ARPU in the range of ARS40 to ARS42 per month, as this is the combined effect of the natural dilution, obviously, of ARPU as a consequence of growth on the subscriber base and increased penetration into the market.

On the other hand, the package pricing that we introduced this year for minutes of voice, data and Internet access has proven fairly successful and very well-received from our customer. And so basically, during 2008 these two effects has been counterbalancing each other. And we expect that we'll be continuing this pricing policy for the future. That's why we expect a stable ARPU for 2009 as well.

Okay, thanks a lot.

(Operator Instructions). We'll hear next from Marcelo Menusso of Deutsche Bank.

Hi. I'm sorry. I think I missed the aggregate amount of these 2014 notes. Would you please just quickly repeat the amount in euros?

Yes, Marcello, EUR187m.

Okay. And is there also any update regarding the Company potentially entering triple-play and offering digital service, or at least a timeline for that?

It's Franco Bertone answering to a complex question of course, because we are dealing with a regulatory framework that is not completely defined. As a matter of fact, the issue is regarding IPTV. It's not totally clear whether IPTV services will qualify, as service that do require a radio frequency license that was -- broadcaster and cable operators do have in our market.

We are, as we understand many others operator are preparing for the future. In 2008 we ran an extensive IPTV trial with several competing platforms, on our network. And we are really ready to make a commercial deployment of it once the profile of these services from the regulatory point of view will be more directly specified. We certainly are ready for deployment.

Okay, thank you very much.

You're welcome.

We'll now take a follow-up question from Mauricio Fernandez.

Thank you for the follow-up. I apologize for the repetition, but could you repeat the outstanding of the breakdown of the debt? I got the EUR187m from the previous question but what about the rest?

It's $43m, [ARS15m] and total JPY5.1b.

And that's as of fourth quarter 2008, right, Pedro?

Yes, that's outstanding December 31, 2008. That's in principal by the way.

Sure, thank you.

You're welcome.

(Operator Instructions). We do have a follow-up question from Rizwan Ali.

I have two quick ones. You said you gained market share in the fourth quarter in the wireless segment. Do you know who you gained market share from?

And second question is about the value-added services that represent roughly 25% of your revenues. Are they still primarily SMS and emails, or do -- are you seeing a lot more of Internet and other value-added services?

Yes, Franco Bertone answering your question about mobile market share. I must say that in the fourth quarter we have a strong acquisition result and the cost of both the other operations -- so the other operators. So I would say it's been quite an even relation between what we were able to achieve in that respect and what our competitors did.

As far as the 30% plus of value-added services -- percentage of revenue services, certainly SMS is still the lion's share that is in the range of 90% of that. The volume of messages last year doubled and the number of messages exchanged by each of our customers was 70% up with regards to the previous year. Certainly in the other 10%, there is a growing percentage of Internet access and other -- and content provision moving from -- ranging from ringtones to music and video downloads.

Do you think the SMS is cannibalizing your voice traffic and the second question is why is it so popular? Is the pricing lower than your voice calls?

It was a very successful pricing strategy when we launched the service. And I think we are still cruising on that initial step. I must say that the level of cannibalization of the voice traffic due to SMS is very marginal, almost undetectable, so in this particular market it seems to be that clients like to have that alternative way of communication, regardless of the fact that it may impact less on their monthly bill. Both traffic MOU is very stable. I think there is a slide -- there is a chart in slide 10 that is showing that we remain in the range of 83 to 85 MOUs, while the MSS -- SMS, sorry, increased strongly. So we can expect that to continue in the future.

Thank you.

Our final question in the queue is another follow-up from Mauricio Fernandez.

Thanks again. Just one more on the debt. Can you share with us what's the amount of debt that is hedged of all the different debt outstanding? Thank you.

Mauricio, basically the yen and the euros, we have entered into some derivative transactions in this first quarter of the year. Basically those -- in the case of the euros we have basically a collar contracted with the bank. And in the case of the yen, we have contracted basically a NDF forward. And together with that, we've also contracted a NDF for a total of approximately $108m.

So is this --

All those -- excuse me, all those transactions terminate or expire on April 15th.

Okay. So for now, are you fully hedged?

Not fully hedged, but a substantial part of the debt, it is.

Mauricio Fernandez. Okay, thank you, Pedro.

You're welcome.

There's no further questions in the queue. I'll turn the call back over to our presenters for any closing or additional remarks.

Right. We'd like to thank you for being at this conference. Please feel free to call us at any time you may wish, particularly our Investor Relations department, for any additional question you might have. Thank you very much.

Thank you. That does conclude today's conference. Thank you all for your participation and have a great day.