Telecom Argentina SA (TEO) 2025 Q3 法說會逐字稿

Good morning. On behalf of Telecom Argentina, I would like to thank everybody for participating of this conference call. The participants of today's conference call are Roberto Nobile, Chief Executive Officer; Gabriel Blasi, Chief Financial Officer; and myself, Luis Rial Ubago, Head of Investor Relations.

The purpose of this call is to share with you the results of the nine-month period and third quarter ended on September 30, 2025. 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 the Investor Relations section of our website located at inversores.telecom.com.ar.

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 effects of ongoing industry and economic regulations, possible changes in the demand for Telecom's products and services, the effects of potential changes in general market and our economic conditions, and in legislation. A press release dated November 10, 2025, a copy of which was included in a Form 6-K and sent to the SEC, describes certain factors that may affect any forward-looking statements that could be mentioned during this call.

The company has reflected the effects of the inflation adjustment adopted by Resolution 777/18 of the Comisión Nacional de Valores or CNV, which establishes that the re-expression would be applied to the annual financial statements for interim and special periods ended as of and including December 31, 2018. Accordingly, the reported figures corresponding to the nine months of 2025 included 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. Please read the disclaimer contained in slide 1, slide 2 of the presentation. Today, we will go over our business and financial highlights and end the call with a Q&A session.

So now let me pass the call to Gabriel, our CFO who will start with the presentation.

Thank you, Luis. Good morning, and welcome to everyone. Slide 3 summarizes our highlights as of September 30, 2025.

Before diving into the main variables and financial highlights, it's important to clarify that throughout this presentation, we are presenting consolidated financials including Telefonica Moviles Argentina or TMA acquired on February 24, 2025. As such, this presentation, we will mention consolidated figures that include seven months from March to September of 2025 of TMA's contribution, figures for Telecom's only, excluding TMA contribution and stand-alone figures for TMA for the nine-month period of 2025.

Having said that, our main operational financial achievements for the months of 2025 were as follows. Telecom's consolidated revenues totaled $4.1 billion, up to 50% year over year in constant Argentine pesos, mainly driven by the incorporation of TMA's results. Our consolidated EBITDA margin expanded 170 basis points, reaching 30.5% in the first nine months of '25 versus the same period in 2024. This margin would be even higher, reaching 32.6% if we exclude the increase in the run rate in severance charges registered in TMA.

Consolidated CapEx amounted to approximately USD615 million for the nine months of '25, a 73% real increase in pesos versus the nine months of '24. Investment continued to prioritize the expansion of both fixed and mobile access networks, particularly the rollout of our fiber to the home network and 5G infrastructure. Our net debt to estimated proforma EBITDA leverage ratio remains at 1.9 times in the first month of -- nine months of '25, underscoring our strengthened ability to sustain a solid credit profile even after incorporating the financing of the acquisition of TMA.

As will be detailed in the following slides, mobile subscriber base of Telecom TMA reaches 20.3 million and 19.1 million accesses respectively. In broadband, our customer base has been increasing, thanks to the expansion of FTTH accesses, while TMA's total broadband subscribers are also registered in significant growth.

Telecom pay TV subscriptions in Argentina have also registered an increase. Our fintech platform Personal Pay continued to scale, reaching 4.4 million onboarded clients as of September 2025, maintaining a strong market position. At Telecom, we are focused on enhancing our operational and financial efficiency, reinforcing our purpose of becoming a relevant service ecosystem and delivering the best possible experience to our customers.

Each of these priorities reflects our commitment to continuous improvement and to building a stronger connection with those we serve. Yesterday we announced a dividend payment to our shareholders. We were honored by LatinFinance Awards two years in a row. In 2024 we received the award of Corporate Liability Management of the Year, and in 2025 we were recognized with the Digital Infrastructure Telecom Financing of the Year Award, underscoring the effectiveness of our financial strategy.

From slide 4 onwards, we'll take a closer look at the performance of the businesses, highlighting operational trends, commercial evolution, and the impact of the recent acquisition of indicators. Slide 5 highlights the positive evolution in real terms of service revenues and ARPU trends, both for Telecom and the one provided by our subsidiary TMA.

Looking first at Telecom standalone performance, service revenue have reached $3.9 billion -- excluding the contribution from TMA, total service revenue grew by 4% year over year in real terms, reflecting a solid commercial execution.

Furthermore, mobile broadband and paid TV services revenue have been growing in real terms, while only fixed voice and data service revenues have been growing below inflation. In this sense, service revenue without considering fixed and data services are growing at a higher rate of 7% in real terms against nine months of 24%. If we include the contribution from TMA, total service revenues of the first nine months of 2025 increases over 50% year over year in real terms.

Considering TMAs on a stand-alone basis, service revenue grew 5% in real terms during the first month of 2025, reaching approximately USD1.6 billion. It is also important to clarify that Telecom does not determine TMA pricing strategy. TMA continues to define and implement its own commercial strategy independently in line with its specific market positioning and operational priorities.

ARPU evolution remained positive across all segments, with mobile, broadband, and pay TV showing consistent growth in real terms, reflecting our ability to sustain value and pricing. Slide 6 shows the evolution of our products. We will continue to observe growth in most segments of our subscriber base.

For Telecom, in the mobile segment during the first nine months of 2025, we continue to observe the effects of our updated disconnection criteria for new prepaid ads, which was implemented in July 2024. This change shortened the period of inactivity required to deactivate a dormant prepaid line, mainly explaining the 6.4% reduction in our prepaid subscriber base reaching 12.4 million accesses as of the first nine months of '25.

Postpaid declined 2.8% year over year, reaching almost 8 million accesses. It is important to highlight that both in prepaid and postpaid, the decrease is mainly due to the disconnection of lines with no traffic, thus not generating impact on mobile service revenues. The participation of postpaid subscribers over total mobile subscribers is currently 39% of our total mobile customer base.

In broadband, we have observed growth in FTTH accesses while our HFC accesses have remained relatively steady. Our subscriber base has registered an increase of 2.5% year over year, reaching 4.1 million accesses. FTTH now represents 28% of our broadband base with almost 1.2 million accesses.

In Pay TV, our Flow platform continues to perform well, and our pay TV accesses have grown year over year. During the first nine months of '25, Flow's unique customers reaching more than 1.7 million, increasing by over 180,000 total clients, or 12% when compared to the same period of the first month in 2024. Pay TV subscriber base in Argentina has grown 1.4% year over year, reflecting an improvement in terms of net adds, mostly due to the very good performance of our Flow Flex product.

TMA provided figures have shown solid results across its core segments, particularly in mobile and broadband. In mobile, we have seen strong growth in postpaid customers with an increase of 4% year over year, reaching over 9.4 million postpaid accesses. Postpaid customers now represent 50% of TMA's total mobile base. These figures include machine to machine connections, almost 2.9 million, increasing by 12% versus the first nine months of '24.

The broadband, TMA continued to demonstrate a solid expansion. Broadband accesses grew by approximately 6% year over year. Over 90% of TMA's broadband customer base is FTTH technology. In pay TV, TMA has seen a modest decline. The subscriber base decreased 6.9% year over year with a net loss of approximately 29,000 customers, bringing the total to 395,000.

When combining the evolution of both Telecom and TMA subscriber bases, we observe overall growth across most product segments, which is very positive achievement. Prepaid subscribers show a decrease for the reasons mentioned before, with no impact on mobile service revenues, while other segments continue to expand.

Slide 7 shows the breakdowns of revenues. Consolidated revenues total ARS5.6 trillion, increases 50% in real terms versus the first nine months of '24 showing a 119% nominal increase. The breakdown of our consolidated revenues is as follows. Mobile represents 49% of the revenues, while broadband and pay TV add up to another 33%. The rest is composed of fixed telephone and data service revenues representing 12% of our revenues and equipment sales, the remaining 6%.

For TMA, the revenue breakdown is slightly different, with mobile services representing the largest portion of 50%. This is followed by fixed data services at almost 16% and broadband, which accounts for 14%. Equipment sale represents 7%, while pay TV contributes almost 4% to TMA's total revenues.

During the first nine months of 2025, we managed to strongly increase our consolidated revenues in real terms versus the same period in 2024 in all main segments, where mobile broadband and pay TV reached a growth of 80%, 29%, and 16% respectively in a consolidated basis. In fixed voice and data, the consolidated increase in revenues was 44%. These increases are more explained by TMA's seven month contribution to consolidated ninth first month, the 25 years.

Moreover, when comparing the third quarter of 2025 to second quarter of 2025 in real terms, both periods reflecting a full three months contributing from TMA, we continue to observe positive trends across all service segments. Service revenue improving in real terms third quarter '25 versus second quarter '25, with growth rates ranging from 11% to 19%, underscoring the sustained strength of our commercial performance and effectiveness of our pricing and portfolio strategy.

Moving on to slide 8. We will review the performance of our regional operations. Our operation in Paraguay continues with good performance. Revenues have grown 3% year over year in US dollars, and we have almost 2.7 million mobile customers which have grown 8% year over year. Our fixed broadband and pay TV offering in that country also continues to show good results. Our broadband and pay TV subscribers amounting to 365,000 and 112,000 subscribers respectively.

Personal pay onboard clients in Paraguay amounted to over 950,000. EBITDA has grown 9% year over year in equivalent US dollars while also showing a stronger EBITDA margin of 53%. Our operations continued almost unlevered with a net debt-to-EBITDA ratio of 0.3 times.

Our operation in Uruguay is currently focused on pay TV, and we have 104,000 pay TV customers there. We have potential to grow with the local broadband market where we began adding customers at the end of '24 and anticipate a subscriber-based growth throughout 2025.

Personnel pay has reached 4.4 million onboarded clients, reflecting 33% annual growth. The platform achieved remarkable increase in total payment volume, TPV, which increases 2.2 times and a growth of almost 32% in total payment number, TPN, when compared to September 2024, achieving payment number, TPN -- achieving more than ARS337 billion in remunerated clients' account balances.

In slide 9, we provide an overview of our EBITDA margin evolution. During nine months '25, consolidated EBITDA increased by 123% in nominal terms versus nine months '24, generating a nominal EBITDA margin of 31.4% during the first nine months of '25. The EBITDA margin in constant currency was 30.5%, represented an increase of 170 basis points versus the margin reported the first time March of '24. We will make some special consideration in this regard in the following slide.

Slide 10 shows the evolution of EBITDA year over year and the impact of the different components of revenues and costs. As a result of the cooperation of TMA in our consolidated financials, our total cost increases in absolute terms.

However, it is at a slower pace than our revenues, which led to an improvement in profitability. In real terms, EBITDA increases by ARS663 billion pesos, or 58% year over year, reflecting both the positive contribution from TMA and our ongoing efficiency efforts. The lines that contributed the most to this margin and pension were fee for services, maintenance and materials, mainly due to lower cost of maintenance, materials and supplies, programming costs and content costs, and lower labor costs associated with resizing of our operations.

It is important to highlight that if we include the effect of increasing the run rate of surveillance charges of TMA during the first nine months of '25, the consolidated margin would reach 32.6%, just register an expansion of 380 basis points versus the first nine months of 2024.

Slide 11 shows that over the past years, we have been increasing our productivity, while also demonstrated our commitment to efficiency, innovation, and sustainable growth. In this sense, since 2017, we achieved a huge increase in the ratio of subscribers per employee considering Telecom in a standalone basis, moving from 1,200 in 2017 to 1,800 as of the first nine months of 2025. This reflects our ability to scale efficiently while optimizing resources.

On the right, you can see the evolution of our EBITDA margin. Despite severance charges impacting result in some periods, we have been able to register an important improvement in our margins, reaching 33% in the first nine months of '25. These improvements are supported by operational initiatives and digitalizing of transformation efforts, including our award-winning SAP cash flow optimization, which earned the 2025 ASUG Innovation Award.

In slide 12, we show the improvement in TMA profitability and the key figures as of the first month -- nine months of '25. TMA has been executing an efficiency plan aim and aligning its EBITDA margin with Telecom's margin. In this regard, TMA has implemented several measures, including elimination of management and brand fees, as well as optimization of handset and SIM card procurement.

Additionally, TMA is advancing initiative to reduce video platform operating costs. Looking ahead, the focus remains on further efficiencies in programming expenses and the optimization of its commercial network to enhance channel performance, reduce overhead, and streamline operations.

The objective of this plan is to bring TMA's EBITDA margin closer to Telecom's margin. This process is already delivering meaningful improvements as TMA's nine months of 2025 EBITDA margin, excluding the impact of higher surveillance charges stand above 28% versus 11% in the fiscal year '24.

Turning to the reported figures, as of the first nine months of '25, consolidated revenues and EBITDA for TMA reaching nearly $1.7 million and almost $0.4 billion, respectively. Looking at the figures on an annual basis as of the first nine months of '25, TMA generated over $2.2 billion in revenues and an EBITDA greater than USD500 million, against the USD255 million reported in the fiscal year '24. This underscored the strong execution of the efficiency plan by TMA, which has been able to almost double the EBITDA generated annually for the report this year as of fiscal year 2024.

Now let me pass the call to Luis, who will continue with the presentation.

Thank you, Gabriel. Slide 13 shows the company's consolidated net results and EBIT. Our consolidated EBIT increased in the nine months of 2025 as we registered an expansion of the EBITDA in real terms. We recorded an operating income for the nine months of '25 of more than ARS352 billion. The operating margin during the nine months of '25 was 6.3% of consolidated revenues in real terms, and in historical figures, the same margin was almost 25%.

During the nine months of '25, the company recorded a consolidating net loss of ARS272 billion compared to a net income of almost ARS1.25 trillion in the nine months of '24. The result obtained in the nine months of '24 was financial in nature. The strong real depreciation of the peso during that period generated significant gains, mainly related to our foreign currency denominated financial debt.

This appreciation led to positive exchange differences in real terms, which accounted for most of the net income reported in the nine months of '24. During the nine months of '25, conversely, the evolution was different, with inflation being lower than the peso devaluation and generating FX exchange losses that impacted our financial results.

Slide 14 displays a summary of the company's consolidated CapEx in PP&E and intangible assets during the first nine months of 2025, which amounted to over ARS849 million or an equivalent of almost $615 million at the official FX rate. This represents a consolidated intensity over revenues of 15.1%. This amount is 73% higher when compared to the previous year in constant pesos.

Technical CapEx was mainly composed by investments in our access network and technology, representing 56% of the CapEx during the nine months of '25. Over the course of these first nine months, 89 new sites were deployed, while nearly 337 existing sites were upgraded. We also added over 350 new 5G sites operating in the 3.5 gigahertz span during the year. In our fixed access network, we increased the deployment of new FTTH over 7,700 new blocks, and we performed overlay of almost 10,200 blocks of HFC network.

Approximately 34% of our CapEx of the nine months of 2025 was allocated to installations and customer premise equipment, or CPE, which are installations and equipment in the homes of our clients and 10% to an international operations.

Slide 15 describes our consolidated cash flow generation during the nine months of '25 compared with the same period of 2024. Our cash flow generation, net of payments for the acquisition of TMA included in investment activities remained robust. Free cash flow before dividends and interest payments during the nine months of '25 was USD0.4 billion or USD400 million. Compared to the free cash flow obtained as of the first nine months of 2024, we generate an expansion of over USD150 million, which could have reached an expansion of approximately USD220 million, excluding TMA's extraordinary tax payments.

Slide 16 shows or key figures for the nine months of '25. The conversion to US dollars is obtained dividing the figures in constant pesos as of the end of each period and using the end of period spot FX for each year. EBITDA was equivalent to almost $1.7 billion for the last 12 months as of September of 2025. This figure considers the sum of Telecom standalone EBITDA and an estimated pro form EBITDA for TMA.

Our gross debt amounted to $3.7 billion as of September 2025 due to the incorporation of financing of the acquisition of TMA. As of September 2025, the company holds cash and equivalent for almost $0.5 billion and thus our net debt was $3.2 billion. Consequently, our net debt to estimated pro forma EBITDA leverage ratio stood at 1.9 times in the nine months of '25.

In slide 17, we will address the company's resilience to FX fluctuations. As mentioned in other earnings calls, during December of 2023, the Argentine peso experienced a significant devaluation that impacted our fiscal year 2023 figures.

Subsequently, our equivalent EBITDA figure in US dollars recovered back to the levels of the third quarter of '23 in only six months, as reflected in the last 12 months, second quarter of 2024 EBITDA reported, showing a rapid rebound, thanks to effective pricing of our products in a highly competitive environment, demonstrating the solid resiliency of our business.

As shown in the nine months of '25 figures, the acquisition of TMA did not impact on our relative leverage ratio as the EBITDA contribution from a new business helped to maintain our financial balance, adding substantial contribution to Telecom's EBITDA. The recent FX depreciation during the third quarter of '25 had a low impact on our EBITDA figures and almost no effect over our leverage ratio.

Additionally, as seen in the graph depicting the evolution of the FX and inflation, the inflation rate is quickly matching the depreciation rate. This means that in this type of environment, where FX is more stable, we can dilute the effect of the FX depreciation as we did during 2024, following the trend which we discussed previously.

On slide 18, we highlight the substantial improvement in our debt maturity profile achieved through recent liability management transactions. Despite a challenging macroeconomic environment during the past years in Argentina and globally, we have successfully maintained a competitive financial cost while extending the average life of our debt.

Our strategy allowed us to keep the average cost of dollar debt relatively stable even as lower rates and risk premiums fluctuated significantly. At the same time, we extended the average life of our debt to four years compared to 2.8 years in 2024, reinforcing our long-term financial flexibility.

Additionally, during 2025, we have been able to obtain financing for a total amount of USD2.7 billion, which is unprecedented in the history of Telecoms since 2017. These achievements have also been recognized at the highest level of the financial community. During the CFO summit organized by El Cronista (inaudible) Telecom was honored with the CFO of the Year award in 2025, a distinction that has been received by our CFO, Gabriel Blasi.

Additionally, in 2023, he was also nominated and achieved second place for the same award also honoring Telecom Argentina. Furthermore, in 2024, Telecom received the LatinFinance Award for Corporate Liability Management of the Year. And in 2025, we were honored with the Digital Infrastructure Telecoms Financing of the Year award. These distinctions underscore the leadership and strategic vision driving our financial management initiatives.

Slide 19 shows the breakdown of our maturity debt profile. During 2025, the company executed transactions totaling approximately USD2.7 billion, including loans for the acquisition of TMA, the international bond maturing in 2033 for $1 billion local bonds, and loans for both local and international institutions. These transactions underscore Telecom's robust financial position and its ability to access diverse funding sources. As of September of 2025, our total outstanding debt amounts to approximately $3.65 billion in terms of principal.

Looking at our upcoming maturities, we remain focused on practively managing our debt profile. As our major financial commitments scheduled for 2025 have already been addressed, and we don't face any important debt maturities for the remainder of the year. Our maturity profile for the upcoming years remains manageable, and we will continue with our liability management strategy aiming to reduce costs and expand tenures.

Additionally, we maintain a very good relationship with the multilateral and export credit agencies and have availability of financing from local banks.

Thank you, Luis. And finally, we will repeat some key takeaways from this period. We deliver a strong improvement in EBITDA margin despite operating in a highly challenging environment. This reflects the resilience of our business model and effectiveness of our cost efficiency initiatives. We successfully expanded our combined customer base in postpaid mobile, pay TV, and broadband, even in a very competitive market. We were able to generate a significant improvement in topline performance in real terms, supporting revenue growth across all major segments.

We maintain some financial management with solid free cash flow generation and a strong cash position primarily in US dollar denominated instruments providing us with flexibility and stability. We continue to strengthen our debt maturity profile, extending the average life of our debt while preserving a competitive financing cost. This action position as well to navigate volatility and sustain long-term growth. Thank you very much.

Thank you, Gabriel. Additionally, we wish to make some takeaways regarding the dividend payment we announced yesterday. We announced a dividend payment equivalent to a total of USD150 million consisting of $130 million paid in kind with global bonds of the Argentine Republic denominated in US dollars and maturing in 2030, and ARS20 million in cash.

Such cash dividend distribution will be mainly applied to the recovery of the amount paid by the company in respect of the personal assets tax corresponding to the 2024 fiscal year. It is important to remark that Argentine companies such as us must assess and pay the personal assets tax corresponding to the shareholders that are Argentine individuals and non-Argentine resident persons.

Pursuant to the personal assets tax law, we are entitled to seek reimbursement of such paid tax from the applicable Argentine domicile individuals and our foreign domiciled shareholders. Therefore, any applicable deduction related to state tax will be only applied to the cash dividend where appropriate.

So for further information, we invite you to refer to 2024 20-F. The dividend in kind payment will be paid as usual with no changes in the procedure from previous distributions. And additionally, we would like to say that this dividend payment reflects the company's strong commitment as it has distributed dividends to its shareholders every year since 2017.

So with this, now we are more than pleased to answer any questions you may have. The Q&A session will be open immediately. Thank you very much.