CVH.BACVH.BABUE
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Operator: Good morning, and welcome to Cablevisión Holding's Conference call. Today, the team will be discussing Cablevisión Holding's First Half and Second Quarter 2025 results as per the earnings release distributed Monday, August 11, 2025. My name is Steve, and I'll be your conference operator today. This call is for investors and analysts only. Therefore, questions from the media will not be taken at this time. However, if you are a member of the media and have questions, please contact FIG Corporate Communications. Comments made by the management may contain forward-looking statements about Cablevision Holding's future performance, plans, strategies and targets. Such statements are subject to uncertainties that could cause Cablevision Holding's actual results and operations to differ materially. Such uncertainties include, but are not limited to the effects of the impact of new or ongoing industries and economic regulations, possible changes in demand for Cablevision Holding's products and services and the effect of more general factors such as changes in general market, economic or in regulatory conditions. Please refer to the disclaimer in today's call. Please contact FIG Corporate Communications in New York at (917) 691-4047 or the company in Buenos Aires at 54 (11) 4309-3417. Cablevision Holding has also posted the webcast presentation that can be found at www.cablevisionholding.com/investors. [Operator Instructions] I will now introduce our speakers, Ms. Samantha Olivieri, Head of Investor Relations; and Julian Brescia, Senior Analyst. Ms. Samantha Olivieri, please go ahead.
Samantha Lee Olivieri: Thank you, Steve. Good morning, everyone, and thank you for joining us. Today's call will begin with a brief macro overview and continue with a review of the company's income statements and operating results followed by a review of the financial position. Having gone through the agenda for today's webcast, I will now pass the call to Julian for the macro overview.
Julian Brescia:
Senior Analyst Investor Relations: Thanks, Samantha. By the end of [ 2023 ] program centered on a fiscal surplus by reducing public spending. We also focused on monetary discipline, including the improvement of the Central Bank's balance sheet, while also correcting relative prices, mainly through subsidy reductions and stabilizing the exchange rate. Key macro indicators have shown progress so far. However, the risks persist and require close attention, particularly in relation to the main pillars of the economic program. The fiscal anchor remains at the core of the stabilization program. So far this year, the national public sector has accumulated a primary surplus of 0.9% of GDP. The government has set a 1.6% target, which is 0.3% above the one agreed on with the IMF. This will be the second consecutive year with a fiscal surplus, something Argentina has not achieved since 2008. Inflation has also continued in market normalization. While the official rate has remained within the defined band, it is currently trading above the midpoint, reflecting some pressure in the lead up to October midterm elections and especially weaker supply of dollars for agriculture exports. In a high currency economy like Argentina, exchange rate dynamics remain a key variable for sustaining this inflation, which is the government's most valuable achievement. A point to be monitored is the performance of the current account and the priority move toward a more flexible foreign exchange system may help correct this imbalance over time. Regarding the purchase of dollars in the official market by the non-financial private sector after the partial listing of foreign exchange contracts in April, individuals have purchased more than $9.3 billion. Given this trend, the external sector is showing a dynamic that should be closely monitored. As a result of this stabilization program, economic activity during the year declined. Then it was improved, averaging a 1.3% decline in 2024. Data from the first 4 months of 2025 suggest that if current levels continue, GDP could grow by around 5% this year, mainly due to the carryover effect from the rebound that began in the second semester of 2024. We should also consider that this recovery has been highly irregular across sectors. The best performing sectors are agriculture and energy, while construction, industry and mass consumption are still lagging. Besides, household disposable income remains significantly constrained, because real wages have not risen enough to offset the higher cost of living. Finally, the focus of the market is clearly on the electoral cycle. The upcoming midterm election in October will be a critical moment to test if Argentina validate the direction of the economic program. The outcome will determine the level of political support for further structural reforms and will be a key factor in the evolution of Argentina's country risk index, which remains elevated, about 724 basis points, reflecting limited access to international capital markets even in a context where the Central Bank is rely accumulating reserves. This concludes our macroeconomic analysis. I will now pass the call back to Samantha. Thank you.
Samantha Lee Olivieri: Thank you, Julian. We will now continue with CVH's key financials. Slide 6 shows some highlights for the first half of 2025. On February 24, 2025, our subsidiary, Telecom Argentina announced the acquisition of shares representative of 99.999625% of Telefónica Móviles Argentina or TMA, a company in total reached USD 1,245 million and was financed by two loans for a total amount of $1,170 million. As of this date, our subsidiary, Telecom has made the regulatory filings and necessary procedures were initiated with the regulatory authorities in order to obtain the conformity of the Secretary of Industry & Commerce or such other authorities that succeeded as enforcement authority of Law #27,442 to the economic concentration produced as a result of the acquisition of TMA and the conformity of ENACOM to the change of control occurred in TMA as a consequence of the acquisition by the company. Both administrative proceedings are currently pending. Excluding fixed telephony services, all Telecom's ARPU presented significant increases. EBITDA, excluding TMA, increased compared to the first half of '24, resulting in a higher EBITDA margin of 32.2% in first half '25, up from 29.6% in first quarter -- in first half '24. Even considering the indebtedness for the acquisition of TMA, net debt-to-EBITDA ratios remain healthy. Now please move to Slide 7, where we review the recent updates on the regulatory approval process. On May 2, Telecom sent its formal response to the request for additional information issued by the CNBC. On June 5, the Chamber of the Federal, Civil & Commercial Court resolved to suspend the effect of the resolution that prohibited any act of integration with TMA until the appeal filed by Telecom is resolved. On June 19, Telecom was notified of a resolution issued by the Secretary of Industry & Commerce to which is informed of the technical report issued by the CNDC considered as a preliminary objection report under Article 14 of Law 27,442. This report does not constitute a final decision nor the imposition of sanctions, but rather a formal stage of the proceeding that enables the parties to exercise their right to defend, submit responses or proposed commitments to mitigate potential anticompetitive effects. According to the methodology adopted by the CNDC, the objection report constitutes a preliminary technical evaluation and in no way constitutes the final decision on the matter under consideration. On August 5, 2025, Telecom responded in a timely and proper manner to the transfer of the preliminary objection report issued by the CNDC. Along with this submission and without this being interpreted in any way as an acknowledgment that the transaction raises a competition defense issue, Telecom expressed its willingness to assume possible commitments that address the provision and concerns outlined in the company's business nor impair its ability to meet its financial obligations. The review process is still underway. And based on the experience in accordance to previous transactions, it may take up to 12 to 14 months. From day 1 of the acquisition, both companies have operated separately and independently, and this will continue until the regulatory resolution has been reached. Slide 8 shows the key financials for the first half of '25. The company has reflected the effects of the inflation adjustment adopted by Resolution 777/18 of the Comisión Nacional de Valores, CMV, which establishes the re-expression of figures must be applied to the annual financial statements for intermediate and special periods ended as of and including December 31, 2018. Accordingly, the reported figures corresponding to the first half of 2025 include the effects of the adoption of inflationary accounting in accordance with International Accounting Standard 29. For comparative purposes, the results restated by inflation corresponding to June 2024 contain the effect of the year-over-year inflation as of June 2025, which amounted to 39.4%. This presentation, we included some figures in historical values for the sake of clarity. In addition, the reported figures corresponding to the first half of 2025 include the effect of the incorporation of results from TMA from 1st of March 2025. Hence, the results for the first half '25 aren't comparable to the results of first half '24. We included some figures excluding the effect of TMA acquisition for comparison. CVH owns 39.08% stake in TEO and as controlling shareholder of Telecom Argentina, H1 '25 grew 44.4% from ARS 2,324.1 billion to ARS 3,357 billion, mostly driven by the incorporation of revenue from TMA and higher ARPUs in real terms in most of the services in Argentina, in part the effect of price increases implemented in 2024 and the decrease in inflation rates, partially offset by a decrease in fixed telephony copper accesses and the effect of lower FX rate versus inflation rate for the same period on data revenues, excluding TMA, resulting in a higher EBITDA margin of 29.8% in first half '25 compared to 29.6% in first half '24. EBITDA in nominal pesos amounted to ARS 985 billion, 113% higher than the nominal EBITDA for first half '24, while average inflation for the same period was approximately 54.2% and the end of period year-over-year inflation amounted to 39.4% -- sorry, profit area, and a loss of ARS 80.2 billion from a profit of ARS 1,193 billion -- from a profit of ARS 1,193.5 billion reported in the first half '24. This decrease in net income is mainly explained by financial net results, mainly due to negative FX differences as the exchange rate increased above the inflation for this period, followed by the partial liberation of the exchange restrictions in April, while in first half '24 and especially in the first quarter of '24, financial results were highly positive as inflation was high following the steep devaluation of the Argentine peso in December 2023. These variations in financial results were partially offset by lower income tax and higher EBITDA. Equity shareholders' net loss for the period amounted to ARS 37.4 billion and is mainly the result of CVH stake in Telecom, the personnel assets taxed at CVH level following the change in criteria established by the fiscal authority in December 2024 regarding the basis for its calculation and by negative financial results from the holding of bonds collected from Telecom's in kind dividend payment, which had an overshooting in their valuation before the end of the fiscal year 2024, partially offset by the revaluation of a foreign currency credit at CDH level. Now let's continue on Slide 9 for a discussion of the operating results for the second quarter '25, excluding the effect of the incorporation of TMA results. Revenues in the second quarter '25 increased by 3.2%. Price increases for our services in Argentina, management of commercial discounts grant registered a decrease of 19.8%, explained by a decrease in fixed telephony copper accesses and the effect of lower FX rate versus inflation rate for the same period on data services agreed in dollars. The main source of our revenues is our fixed infrastructure. Broadband pay TV and fixed telephony and data services amounted to 50.5% of the total. Mobile service participation increased slightly, reaching 43.5% from 40% in second quarter '24, driven by the decrease in share of fixed telephony and data services revenues over total revenues. EBITDA in real terms increased 6.8% and margin increased to 32.2%, higher than the 29.1% margin of second quarter '24, mainly as a result of the increase in revenues and cost efficiencies obtained by the company. On Slide 10, we review some of the effects of the incorporation of TMA. The consolidation from the moment of the acquisition by Telecom's TMA operation includes Telecom leads in the north of the country while Telefonica is stronger in the south and most of the overlapping occurs in the center. The strategic acquisition enhances Telecom's capabilities and positions and will allow us to expand coverage and service quality across the entire country. Telecom has the fastest mobile network and is the first operator to deploy 5G technology. Telefonica has the fastest fixed network in the country with a large fiber-to-the-home customer base with approximately 7,000 mobile noted that these results include the effect of new employment termination agreements and severance payments. Excluding this effect, the margins would have been significantly higher. Now let's move on to Slide 11. Mobile revenues included TMA represented approximately 49.6% of our revenues and increased 98.5% in real terms when comparing second quarter '25 versus second quarter '24, mainly explained by the incorporation of TMA and higher ARPU in real terms. In this quarter in Argentina, excluding this effect, thanks to the decrease in year-over-year inflation and the carry-on effect of price increases done during 2024, partially offset by a decrease in mobile revenues in the Paraguay operation due to a decrease in ARPU related to the greater discounts granted to its clients according to customer retention policies and a migration to less expensive plans. Mobile prepaid subs, which generate less revenue which had, had a decrease quarter-over-quarter in the first quarter of '25 following price increases at the end of 2024 and were subsequently adjusted as a result of the full effect of the change in criteria regarding how many days can we it without a client recharging his credit before it is disconnected. Excluding the effect of TMA, Mobile Services revenues reached ASR 522,051 million in constant pesos and increased 9.4% in real terms. Personal Argentina clients decreased 1.3% to 20.9 million, of which postpaid clients amounted to 39%, mostly the effect of the before mentioned change in criteria. As of March 2025, TMA has 19.3 million mobile subscribers, of which 48.4% are postpaid. In Argentina, in a highly competitive environment, personnel ARPU restated in constant currency increased by 12.6% to ARS 7,444 in first half '25. Monthly churn increased to 2.1% from 1.6% in the first half of '24. Please turn to Slide 12. Revenues for Fixed Services, including broadband, Cable TV and Fixed Telephony and Data Services increased by 33.7% in real terms, mainly driven by the incorporation of TMA. Excluding the effect of TMA, revenues for Fixed Services remained relatively stable, decreasing 3.2%, mainly the result of lower Fixed Telephony and Data Services related to the reduction in fixed telephony clients and the effect of the lower FX rate versus inflation rate on a year-over-year basis on Data Services agreed in dollars, partially offset by higher Cable TV revenues, higher other service revenues and higher Internet Service revenues. Legacy copper fixed voice service continues experiencing a reduction in accesses, partially offset by an increase in IP telephony lines. On the B2B services, telecom strategy is to position itself as an integrated service provider for large customers by offering convergent ICT solutions, including fixed and mobile voice, data, Internet, multimedia, data centers and application services to sales, consulting, management and specialized and targeted postpaid customer services. Internet Services revenues increased 32.4% year-over-year in real terms, mainly driven by the incorporation of TMA. Excluding the effect of TMA, Internet Services revenues increased 0.5%. Broadband subscribers remained stable at 4.1 million, while monthly churn dropped to 1.2% in the 6 months of '25 from 1.9% in the first half of '24. There is growth in the fiber-to-the-home segment, resulting in an increase in average speed. ARPU in real terms increased to approximately ARS 23,755.4. The effective pricing policy implemented low promotion in '25, TMA has 1.6 million broadband subscribers, of which 93% of are fiber-to-the-home. 92% of customers have accesses with speeds of 100 megabytes or higher versus 86% in the first half of '24. Moving to the Cable TV subscribers. The customer base increased to 3.4 million, mainly explained by the success of Flow Flex, which is 100% digital with no decoder or installation needed. Flow unique customers achieved 1.6 million, a 10.9% increase from figures observed over a year ago. Through its proposal as content aggregator, Flow includes not only linear TV series, on-demand movies, documentaries and co-productions, but also music, gaming and exclusive events. ARPU in real terms increased by 5.3% to ARS 16,297.1 during first half of '25, mainly due to the decrease in year-over-year inflation and the carry-on effect of price increases done during 2024 and lower discounts granted according to customer retention policy. Monthly churn decreased to 1.5%. As of March 2025, TMA contributed 408,600 pay TV subs. Let's move on to Slide 13 for a review of the cost structure before we discuss quarter-over-quarter EBITDA performance. Amongst the most significant operating costs and expenses are salaries, fees for services, maintenance, materials and supplies costs and taxes and fees with the regulatory authority. On Slide 14, we show the performance of EBITDA and the behavior of different components of revenues and costs. The company continues with its cost management efforts and has shown positive results despite a challenging economic context. Before the effect of TMA, operating costs, excluding cost of equipments and handsets decreased in real terms 0.2%. This is a result of efficiencies obtained by the company, mainly lower interconnection and transmission costs and lower fees for services, maintenance, materials and supplies, partially offset by higher expenses related to the increase in revenues, such as taxes and fees with the regulatory authority and programming and content costs. The rest of the expenses, while may increase slightly above inflation remain relatively stable on a -- with higher quantities. And total operating costs, including cost of equipment and handsets before the incorporation of the TMA decreased 2.1% with a slight increase in revenue. Thus EBITDA margin before the effect of the incorporation of TMA reached 32.2%, higher than the 29.1% margin of second quarter '24. EBITDA from the incorporation of TMA for the second quarter '25 resulted in ARS 154.3 million with a 21.7% EBITDA margin, lower than the margin before this effect. Therefore, consolidated margin resulted in 27.5%. It should be noted that these results include the effect of new employment termination agreements and severance payments. Excluding this effect, the margins would have been higher. Please move on to Slide 15. In the second quarter of '25, investments as a percentage of revenues was 17.8% or 15.4% before rights of use from leases, higher than the same period of the previous year related to the expansion of both fixed and mobile networks, particularly fiber-to-the-home and the 5G infrastructure. Technical CapEx was mainly allocated to network and technology and customer premises equipment, or CPE. The balance was allocated to our international operations in Paraguay and Uruguay. During this quarter, the company continued with the deployment and upgrading of existing sites and expansion of the fiber-to-the-home network, including the overlay with the HFC network and adding 5G sites. The CapEx program will continue evolving according to Argentina's economic condition, network performance, expansion objectives and customers' requirements. Going to the debt financial position as per Slide 17. As of June 2025, we have reported a total financial debt of ARS 4,416.4 billion and net debt of ARS 4,033.8 billion, equivalent to USD 3.3 billion, mainly as a result of the debt to finance, the acquisition of TMA, partially offset by the effect of lower FX variations versus inflation year-over-year. Of the total debt, 68.8% is mostly cross-border dollar denominated, but includes the hard dollar local issuance of 2024, 27.4% is Argentine pesos, including dollar-linked local emissions and the rest is in guaraní and renminbi. During the past years, Telecom has been accessing the local and international debt markets for its financing needs and will do so for future potential needs. During May, Telecom issued USD 800 million in Class 24 notes due 2033, followed by an additional $200 million issued during July when Telecom recapped the market. The proceeds were applied to these debt maturities remain manageable. Net debt to adjusted EBITDA coverage ratio as of the end of June 2025 was 2.5x, a significant achievement considering the new indebtedness for the acquisition of TMA and the adjusted EBITDA used in this prior calculation only includes 4 months of TMA EBITDA, a testament of the company's resilience to challenging macroeconomic conditions. That concludes our comments. We are now ready to take your questions. Operator?
Operator: [Operator Instructions]
Unidentified Company Representative: We have a question from Julia [indiscernible], Samantha. Which would have been EBITDA margin for TMA in 2Q '25, excluding severance payments? Should we expect further severance payments looking forward in TMA?
Samantha Lee Olivieri: Thank you, Julia. The severance payments for TMA in the second quarter impacted TMA's EBITDA margin in approximately 7 points. So it's 7 points above the margin for this quarter. And there is a plan in place. So we should expect some additional severance payments during this year. Because it's an ongoing retirement plan that was initiated in this quarter.
Operator: [Operator Instructions] And it appears that we have no questions at this time. I would like to turn the program back over to Samantha Olivieri for any closing remarks.
Samantha Lee Olivieri: Thank you, Steve. Thank you all for your interest in CVH and your questions. Should you have any further questions, do not hesitate to contact our IR team. I look forward to seeing you for the next quarter results. Have a great day.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.