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Presentation

Telecom Argentina S.A. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Luis Rial Ubago: 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 Nobile, Chief Executive Officer; Gabriel Blasi, Chief Financial Officer, and myself, Luis Rial Ubago. The purpose of this call is to share with you the results of the fourth quarter of fiscal year 2023 ended on December 31st of 2023. If you have not received a 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 quarter.

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 and economic regulations, possible changes in the demand for telecoms, products and services, the effects of potential changes in general market and economic conditions, and in legislation. Our press release announcing the company’s results as of the end of fiscal year 2023, 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 Comision Nacional de Valores, or CNV, which establishes that the re-expression will 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 fiscal year 2023 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 next presentation. Please read the disclaimer contained in Slide 1 and Slide 2 of this presentation. Today, we will go over our business and financial highlights and end the call with a Q&A session.

Now, let me pass the call to Gabriel, CFO, who will start with the presentation.

Gabriel Blasi: Thank you, Luis. Good morning and welcome to everyone. Moving to Slide 3, it summarizes our highlights as of December 31 of 2023. Our main operational and financial achievements were our EBITDA margin during fiscal year ‘23 was 28.1%. We managed to improve the margin on a year-over-year basis due to effective cost management initiatives and an improvement in the pass-through of inflation to revenues. In 2023, our CapEx was approximately $598 million, equivalent to 23% of our revenues. We have successfully executed our CapEx plan despite having faced certain delays due to tighter import restrictions in Argentina. The current focus of our CapEx is on the expansion of our FTTH technology, as well as expanding our mobile network and developing 5G.

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Our cash flow generation remains strong despite the challenging context. Without considering the 5G spectrum acquisition during 2023, we were able to generate approximately $400 million in free cash flow before dividends and interest payments. In real peso terms, this figure amounts to ARS324 billion and represents an improvement compared with 2022. Our mobile subscriber base continues to grow, increasing almost 4% year-over-year. Mobile data usage, measured in average monthly gigabytes per user, has grown 11%. In broadband, our FTTH accesses keep growing rapidly, and during the last quarter, they have contributed to stabilize our customer base, while our HFC network has remained fairly stable. Flow unique customer reached more than 1.4 million, increasing 10% year-over-year.

Additionally, our pay TV business continues to grow in Paraguay. Our FinTech, Personal Pay, has already achieved a relevant market position, reaching more than 2 million onboarded clients as of December 2023, while becoming the second player in the market in terms of client’s remunerated account balances. 5G rollout is underway. We acquired 100 megahertz of spectrum in the 3.5 gigahertz band and we currently count with more than 100 5G sites working in said band. During the year, we successfully paid down or refinanced all of our dead maturities during the year while improving the composition of our debt. Moving to Slide 4, it shows the company’s figure of 2023. Telecom’s revenues totaled almost $2.5 billion. Revenues measured in constant pesos decreased 9% year-over-year as we have improved our pass-through of inflation to our revenues.

We generated $716 million equivalent in terms of EBITDA. Our EBITDA margin was 28.1%. It is important to remark that the figures in dollars included in this presentation are obtained converting figures in constant pesos as of the end of a specific period using the same period of spot exchange rate. If you listen to some noise, we are having a huge thunderstorm in Buenos Aires. Sorry for the noise. Using the same end of period of spot exchange rate, these figures are included merely for the purpose of providing a general reference and are not obtained through any type of dual currency account in US dollars carried out by the company. Due to these, figures in US dollars as of the end of fiscal year 2023 had been temporarily affected by the abrupt devaluation of the peso that took place in mid-December.

Telecom’s mobile subscribers in Argentina amounted to 21 million, increasing in more than 760,000 when compared to 2022. Broadband and pay TV clients have totaled 4.1 million and 3.4 million respectively. Fixed voice subscribers considering IP telephony lines amounted to 2.9 million during 2023. During 2023, our total convergent unique customers amounted to 2.3 million, increasing from 2.1 million a year before. Up to date, 46% of our broadband customers have a mobile bundle. Our regional operations remain very solid. We are the second most important player in the mobile market in Paraguay and in the pay TV marketing in Uruguay with 2.3 million and 119,000 respectively. Slide 5 shows our price adjustments during 2023. The accumulated inflation in Argentina for the fiscal year 2023 was 211.4% and in January 2023, it has been of 20.6% for the month.

Since May 2023, we have adjusted our pricing policy responding to a rising inflation scenario. Moving to monthly prices increases. We have increased both the frequency and magnitude of our price increases to improve our passthrough of inflation to our service revenues in an increasingly complex environment. Thanks to these measures, we have been able to reduce the lag versus inflation during the fiscal year 2023. Slide 6 shows the evolution of our products. In our mobile segment, we have observed a total increase of more than 760,000 subscribers, representing an increase of 3.8% year-over-year. This was mainly related with the good performance of our prepaid segment, where we registered a stronger customer recharge rate. We managed to increase our subscriber base for the fifth quarter in a row.

In general terms, our postpaid customer base has been registering a down selling to prepaid, not affecting the overall mobile customer base. Our postpaid participation over total mobile subscribers continues to be strong, reaching 39% of our total mobile customer base. In our broadband segment, we have observed growth in FTTH accesses, while our HFC accesses have remained relatively steady. Thanks to this, we have been able to revert the trend registered during the last quarter of 2022 and the first quarter of 2023, and stabilize our broadband subscriber base in a challenging competitive environment. In turn, we have observed a reduction in xDSL accesses, which we are migrating to FTTH. Moreover, average speeds in our customer base keep growing.

85% of our subscribers have speeds of 100 megabytes or more. In pay TV, our Flow platform continues to perform well, and our pay TV accesses have remained steady quarter-over-quarter. In the fourth quarter of 2023, Flow’s unique customers reached 1.4 million, increasing by 133,000 total clients, or 10% when compared to the same period in 2022. Flow Flex, our broadband subscription modality, also delivered good results during fiscal year 2023. The reduction observed in our total pay TV customer base is in line with the decrease observed in the market as a whole for this segment. Thus, our market share has remained constant. Our fixed voice segment continues to register a reduction in accesses, mainly in our traditional fixed copper network, which we are replacing partially with the new IP telephony accesses over our HFC and FTTH networks.

Moving to slide 7, it shows the breakdown of our revenues. Service revenues totaled over ARS1.9 trillion, decreasing 10% in real terms versus fiscal year 2022, showing a 108% nominal rise, reflecting the strong influence of the price increase we perform. Our revenue breakdown as of December 2023 showed an increase in the participation of mobile services and equipment sales when compared to December 2022. Mobile and broadband are the segments where we have been able to greatly improve the pass-through of inflation to revenues. Mobile represents 40% of the revenues while broadband and pay TV adapt to almost another 40%. The rest is composed of fixed telephony data revenues representing almost 12% of our revenues and equipment sales 7.4%. Slide 8 walks us through our core businesses.

We have a very good quality of product in mobile and the fastest network in the country. We are the leaders in terms of revenue share as our ARPU were higher than the competition by approximately 20%, 30%. We also have better pricing power in mobile. Our strategy is to continue to uphold the quality of our service, improving our NPS, which has registered an improving trend since 2019. In this sense, 5G is a pillar. The deployment of 5G will be directed to the main high-density centers and large urban centers, seeking to maximize and prioritize investment with high-value mobile and convergent customers in these areas. It will evolve based on the consumption and evolution of 4G to 5G assets. Turning to our broadband segment, our network passes over 65% of the homes of the country, while the average speed of our network is over 100 megabytes per second.

Our FTTH deployment strategy consists in deploying fiber, specifically in those areas with xDSL connections which we are actively offered to migrate to FTTH while also performing overlay of HFC seeking to decompress that network and upgrade its performance. So, in fact, we are leveraging on the very good quality of our HFC network while actively migrating our legacy xDSL accesses. In the pay TV businesses, Flow is our IP video platform with the best experience. Our value proposition in pay TV aims to transform the video business into an entertainment platform. We are exploiting our Flow video platform, which we observe that has very good usage and NPS metrics in comparison with the legacy HD. In fact, we have seen good results in our pay TV during the fourth quarter of 2023, where we managed to stabilize our customer base while we are still observing encouraging growth in our growth platform, both in Flow Full and Flow Flex modalities.

Slide 9 shows our regional operations. Our operation in Paraguay is performing very well. We are the second most important player in the mobile market with 2.3 million customers. And we also have a fixed broadband and pay TV offering in that country with 274,000 and 106,000 subscribers respectively. We have a fintech business in Paraguay through our digital wallet [indiscernible] Personal, which comes with 288,000 clients. This operation has a strong EBITDA margin of almost 50% while remaining almost a level with a net debt to EBITDA ratio of only 0.03 times. Our operation in Uruguay is currently focused on pay TV and we have 119,000 pay TV customers there. We have potential to grow in the local broadband market as the local regulator is beginning to open into competition.

We are beginning to deploy a fixed broadband network in certain locations. During the last year, we started the cybersecurity business in Chile under the brand name Ubiquo. There, we are expanding our presence in the market and growing our customer base. In Slide 10, we present how we are building our digital business ecosystem. We offer B2B solutions and services to accompany the digital evolution processes of companies. Our main products include connectivity, cybersecurity solutions, cloud solutions, and data center services, digital tools to enhance productivity, and Internet of Things services, which include special custom tailored solutions for connectivity and remote monitoring. And we have a specific set of business initiatives for the agricultural segment, mining industries, and oil and gas companies.

During the last week, we presented first connectivity cluster in rural areas. The project aims to cover an area of more than 500,000 hectares with continuous connectivity where Telecom will enable new mobile sites with 4G technology and IoT networks. We are also present in the FinTech business with our digital wallet, Personal Pay, which currently counts with more than 2 million onboarded clients. We launched the year ago and in an industry with exponential growth, we have already have a relevant position. During this year, it has incorporated a new functionality of remunerated balances of all its users. As of December 2023, we have funds for our clients invested in mutual funds for over ARS110 billion and our fintech is the second most important in terms of client account balances in the market.

Additionally, we count with other initiatives such as personal and smart home where we provide the multi-services solutions and equipment for home monitoring, security, digital interconnection and automation. Tienda Personal, our retail store where our client can acquire a wide variety of electronic devices. I will now pass the call to Luis who will go over our financial performance.

Luis Rial Ubago: Thank you very much, Gabriel. In Slide 11 we provide an overview of our main financial figures. Consolidated revenues grew by 110% on nominal terms during 2023, reaching more than ARS1.1 trillion. When analyzing said figure adjusted by inflation, revenues amounted to more than ARS2 trillion, showing a decrease of 9% in real terms versus the same figure in 2022. The lag versus inflation is explained, among others, by the effect of certain discounts and promotions we grant after price increases to retain our customers in a strong competitive environment. As mentioned, this lag has been reducing during this year, thanks to a pricing strategy which delivered a strong pass-through of inflation to revenues. EBITDA increased by 120% year-over-year in nominal terms, generating an EBITDA margin of 29.1% during 2023.

In turn, EBITDA margin in real terms was 28.1%. Additionally, our operating costs before D&A have also grown below inflation, decreasing 10% in real terms since the fiscal year of 2022. We have continued to manage our cost structure to reduce the impact of inflation. During the fourth quarter of 2023, we managed to increase our margin for the third quarter in a row when compared to the same period the year before. This is a good indicator that our pricing and cost management strategies are guiding us in the right direction despite the headwinds coming from the macroeconomic situation in Argentina. Slide 12 shows the evolution of the EBITDA year-over-year and the impact of different components of revenues and costs. During fiscal year of 2023, the company was able to contain the pressure coming from inflation in most of its cost lines, as most of them experienced a decrease or remained in line when compared with inflation.

We observed good results in labor costs, programming and content costs, interconnection costs, and some other items such as bad debt. The company’s efforts have been very successful, as evidenced by most cost lines keeping the same share of our revenues, with almost every cost line decreasing more than our revenues in real terms. This allowed us to increase our EBITDA margin for 2023 in a year-over-year basis. Slide 13 shows the company’s net results and EBIT. EBIT registered an improvement in 2023 due to the fact that in 2022 the company recognized an impairment of goodwill amounting to ARS759 billion in cost as currency as of December 2023 that was allocated to depreciation and amortization and impairment of fixed assets. The operating margin during fiscal year 2023 was minus 6.1% of consolidated revenues and in historical figure, the same margin was 20.3%.

The company had a net loss of ARS249 billion in 2023, mainly due to the influence of the strong devaluation that the peso experienced in real terms, which affected our financial debt denominated in foreign currency. Slide 14 displays a summary of the company’s CapEx in PP&E and intangible assets during 2023, which amounted to more than ARS483 billion for an equivalent of $598 million at the official FX rate. This figure includes the investment in 5G spectrum for an equivalent of $214 million. This amount is almost 23% higher when compared to the previous year in context basis. Our consolidated amount of CapEx for the fiscal year 2023 represented more than 23% of our revenues when including the 5G spectrum and around 15% of our total revenues without considering said investment.

Our investment level was influenced by tighter import restrictions in fiscal year 2023. In overall, and despite this situation, we have fully executed our CapEx plan for this year and the performance of our network is currently very solid. Technical CapEx was mainly composed by investment in our access network and technology. Our investments are mainly geared to enhance our access network. During 2023, 229 new mobile sites were deployed, while 1,418 existing sites were upgraded. We have acquired 5G spectrum, 100 megahertz in a 3.5 gigahertz band that we are already using to provide this new technology. Additionally, up to date, we count with 100 5G sites working on the same band. In our fixed access network, we increased the deployment of new FTTH over 15,000 new [blocks] (ph), including the overlay of our HFC network.

We also improved the upstream capacity of our HFC network by almost 17,000 blocks. The balance of our CapEx was allocated to installations and customer premise equipment or CPE, which are installations and equipment in the homes of our clients and to international operations. Slide 15 describes our cash flow generation during 2023 compared with the same period of 2022. Our cash flow generation remained very robust, factoring in the macroeconomic situation in Argentina. It has been affected mostly by a lower EBITDA in real terms, a higher CapEx mainly associated with investment in 5G spectrum. Without considering this one-off investment, our cash flow generation before dividends and interest payments would have been equivalent to more than $400 million.

In dollar terms, total free cash flow generation experienced a reduction of approximately $330 million in 2023. In fact, without considering 5G spectrum, the reduction would have been of $115 million, mostly explained by the huge devaluation we already discussed. Slide 16 shows our key figures for 2023. The conversion to US dollars is obtained by converting these figures in constant pesos at the end of each period and using the end of period spot FX for each year. Our gross debt amounted to $2.6 billion as of December 31, 2023. The company holds cash in equivalent for $344 million, having a net debt of about $2.3 billion. EBITDA, as of the end of fiscal year 2023, using the aforementioned conversion method for figures in pesos to US dollars, was approximately equivalent to $717 million.

Slide 17 gives more insight regarding the impact of the macroeconomic situation on our figures and debt. The FX increase of plus 132% in December of 2023 impacted our figures measured in US dollars. The magnitude and timing of this evaluation did not allow us to fully pass it through inflation to our figures by the end of fiscal year 2023. As mentioned, we are converting cost and peso figures using the FX as of the end of this year and this means that the FX movement impacts fully on our fiscal year 2023 figures. In fact, our EBITDA in fiscal year 2023 converted to US dollars decreased by a fraction of the FX increase, minus 34% versus the last 12 months EBITDA as of September 2023, while our net debt remained almost constant. Also, given the 5G spectrum auction, we had to take an additional loan of $120 million to finance this strategic asset.

This was also a factor on our debt. Additionally, during 2023, the past administration imposed an error or restrictions to access the FX market to pay for imports. Given the options currently provided by the central bank, we are managing the stock of commercial debt that was accumulated due to aforementioned restrictions. During the last years, we have been very active in liability management, allowing us to improve the profile of our debt. In 2023 we successfully issued local notes for a total fair value of $480 million equivalent at an average negative yield of minus 6.5% and with an average tenor of three years. With these transactions, we reduce the participation of our cross-border debt with very convenient custom tenors. We continue to obtain cross-border financing even in this challenging contest.

We have entered into new loan tranches with IDB and CDB and a new export credit line with EDC. Slide 18 shows the breakdown of our financial debt. Total outstanding debt as of December 2023 amounted to more than $2.5 billion. We have successfully paid down or refinanced all of our financial debt commitments during 2023. We have refinanced more than $600 million in a very challenging year, of which more than 50% were cross-border maturities. During 2023, we turned mostly to local capital markets to refinance our maturities but we maintain a very good relationship with our main creditors such as the multilateral and expert credit agencies. As we have been working to the concentrate on maturity profile, the remaining maturities going forward remain manageable.

Slide 19, we summarize some important highlights regarding the company’s resiliency to FX risk. In our balance sheet, we come with physical assets such as a real estate and telecommunications infrastructure that are valued in US dollars and are both sold and leased in that currency. Also our position is composed mostly by US dollar denominated assets. Additionally, our income statement provides flows that give us a natural hedge. Our operation in Paraguay covers almost 50% of our consolidated interest payments. We are able to pass through most of the inflation to prices even with inflation accelerating and additionally we have the ability to increase our revenues above inflation when it begins to slow down as we manage our discounted promotion policies, leverage on the recovery of our clients’ purchasing power or wealth effect as inflation reduces.

In a context where FX stays relatively stable, this will allow us to increase our figures in US dollars. We are hedged in terms of our P&L, with more revenues tied to the US dollar than expenses in that currency. Turning to Slide 20, we conclude with some final remarks underlining some favorable highlights about the company. We managed to maintain our EBITDA margin in a challenging context in Argentina. In the fixed segment, we managed to stabilize our customer base in a strong competitive environment. We are investing in new technologies such as 5G and FTTH in order to improve our connectivity services. We increased the participation of local financing, which has allowed us to take advantage of a lower cost of financing and to offset the increase in the base rate of our floating rate debt.

Finally, we continue to provide long-term value for our investors. We have a solid and stable free cash flow generation before dividends and interest payments, generating between $400 million and $500 million annually during the last three years considering ordinary CapEx for each year. We paid a dividend every year since the merger and our weighted average dividend yield has been 7.7%. So with this, now we are more than pleased to answer any questions you may have. However, before we start, we would like to remind you how you can address your questions in the Q&A session, which we will open immediately. Please use the raise hand button to let us know that you want to formulate a question. We will let you know when it’s your turn to speak and we will unmute you so you can proceed with your question.

Thank you very much.

A – Luis Rial Ubago: Well, we have a question here from Ernesto Gonzalez from Morgan Stanley. I will read it. What trends are you seeing so far in the first quarter? And how are your clients taking price increases amid inflation levels? And could you please provide some color on CapEx for 2024?

Roberto Nobile: Okay, this is Roberto. Good morning everyone. Just to go back to the first and second quarter of last year, that we have a little impact on customer base. And we, at that moment, we said that we had a plan to keep our customer base at the end of the year at the same level as in 2022. And that was something that we could see in Slide 7 rate, I don’t know, that that trend was accomplished in a 200% inflation rate economy. So for this quarter, what we are seeing is the same trend. We are increasing prices on a monthly basis very aggressively. We have been able to pass-through around 75%, 80% of the inflation rate to prices, to ARPU, not to prices. Prices are increased by inflation, but ARPU is increased up to 75%.

So, what we are — we have like a factory behind the scenes that make sure that all the customers that cannot pay have the price that they can pay. And that’s the 25% margin that we are losing on the pass-through. That’s the reason why you will see that our price increases in terms of the least prices are a little higher than inflation because we are trying to pass through as much as inflation as we can. So, and that has been the trend for the last semester in 2023, and it keeps on going in 2024. We are very, very taking care of each customer, trying to give them the best experience at the price that they can pay without losing our trend. So that’s the whole idea. We are keeping our customer base at the same level. We have new customers getting into FTTH because we have like 5,000 blocks of FTTH already built by the last semester of last year that they are taking into production this quarter.

So that’s something that is, that’s the engine that keeps us moving forward. In terms of promotions, and the news is that we increased our promotion prices, promotional prices, especially for Internet, broadband, fixed access, and the combo, the bundle. And successfully we have been followed by some of our competitors except one that has not moved their promotional price, which is, I mean, they are giving away their broadband for $3. But we believe that we can make a better industry if we can increase the promotional prices a little bit. And we are the leaders, we move first. Other competitors are following us and we believe that finally this aggressive competitor will move also because it has nothing to lose. So we are seeking a better outcome for this semester, as well as we are also looking at the reduction of inflation that will help us recover prices beyond that.

So we are at the prospect inflation for — prospective inflation for March and April will go below 20% and that’s a good story to count despite that there’s a recession in the middle, but it’s a good story at the end. So finally, we believe that we will be handling inflation rates at the lower level and that will increase our capacity of trespassing and passing the inflation through prices. In terms of CapEx, our budget is around $500 million. That’s the basic maintenance CapEx that we need to keep this engine running at full speed. But we have been very cautious and we launched only $350 million. That’s something that we will monitor as long as we see that the numbers are there, that we have the cash and the inflation is lowering and the For exchange is stable.

So this is the forecast that we’re seeing and we are taking care of the use of the proceeds, cash proceeds.

Luis Rial Ubago: Hi, we have now a question coming from Marcelo Santo from JPMorgan. Marcelo, we will unmute you, so you can proceed with your question. Thank you very much.

Marcelo Santo: Hi, good morning. Thank you very much for taking my questions. I have two. The first question is regarding margin improvements. So you did a very strong job there in improving margins despite revenues declining in real terms. I understand that’s coming on cost cutting. Is there more room to improve margins that way or further improvements will probably come as inflation goes down and you’re able to have a recomposition of prices. That’s the first question. And the second question is just a clarification on CapEx. So you said that you will do 250 — I didn’t understand the difference between $250 million and the $500 million. You said $500 million is the basic maintenance, but actually you’re planning to do a bit less and see how it goes. I just wanted to understand a bit better the difference between the numbers. Thank you.

Gabriel Blasi: Thank you, Marcelo, for the question. I will start with the CapEx thing. $350 million is a maintenance CapEx. It’s the minimum that the company can do. That means being able, part of the CapEx are licenses, agreements, things that are currently paid. So there’s no way we can reduce CapEx beyond that. The difference between $350 and $500 million has to do with, for example, 7,000 blocks of FTTH that we have the equipment, but we need to invest in labor to put it in production. For example, that’s one thing. The deployment of 5G, we have already 100 sites using 3.5 gigahertz band, C-band, but we are thinking of postponing the implementation of more sites depending on our feasibility of doing so. So the $150 million in between means that it is CapEx that is needed, but we can postpone it.

For 5G, we remember, we can make you remember that we only have 8% of our customer base with 5G ready devices. So that’s not something that we really need to move so fast. If we don’t start, we will never have it when our customers have their devices ready. So we need to start, but we can postpone the timing of starting with this full deployment. This is just to let you know the type of things that we are trying to at least postpone in terms of trying to match cache flow and CapEx implementations. The first one?

Luis Rial Ubago: Was related about the possibility of greater cost cutting.

Gabriel Blasi: We — I mean, you can take a look into our cost base. If you take a look into licenses, licenses agreements, we have been very, very aggressive renegotiating all that stuff because that goes, those are contracts in US dollars. Therefore, they were fully impacted by the valuation and we have been able to renegotiate them. I don’t see on the dollar contracts any other space. In pesos, our structure in pesos, we’re always challenging that. I mean, we’ve been very successful reducing all our OpEx in pesos significantly and trying to match and keeping the margins up. Our main concern, not main concern, but main challenge is on the labor cost side. Labor cost usually runs at inflation rate. And we have been very successful with one of the successful with one of the unions on the labor cost.

And yesterday night, we finally closed the deal with one of the hardest unions that was making strikes. We’ve been very tough trying to make sure that labor is growing with inflation, but growing with inflation with at least with a month lag. So we are trying to push labor costs at a speed that we can support. Unions are trying to go beyond that, and we’ve been able to challenge that negotiation. And yesterday night, we closed the deal with this union, special union. But it is something that we are challenging on an everyday basis and this is — we can manage sustaining the margin. The upside of the margin will come from sales, from revenues.

Luis Rial Ubago: So we have another question coming from Andres Coello from Scotiabank. Andres, we will unmute you so you can proceed with your question. Thank you very much. Hi, you are muted, Andres. Go ahead, please.

Andres Coello: Okay, thank you. Yeah, I’m wondering how long do you think it will take you to catch up with FX depreciation from an EBITDA standpoint because clearly in the fourth quarter, the very sharp FX depreciation was so quick and happening at the very last month of the year that this impacted your whole EBITDA figure. But I’m wondering how long are you expecting or how many months it will take you to go back to EBITDA of over $1 billion? Do you think that that’s going to take a long time or do you think that maybe in the middle of the year you can catch up with the prior EBITDA level? Thank you.

Gabriel Blasi: Hi. Thank you for the question. Well, of course, it will depend on how successful the government plays the game with inflation. It seems up to now that inflation is decreasing. I will say it has begun with a medium 20s. Now we are speaking of in the range of 15s and going down. That will help a lot significantly, but it will take at least one year, one year and a half to fully outpace that inflation and translate that into prices. Also you must have in consideration that the ability to price inflation changes according to the size of the inflation. This is theoretical, but forgive me, but just to explain it easily, we have some behavior up to the high 20s or 30s percent, a different behavior from there to 100%, and then from 100% on, the behavior is pretty different.

My conclusion on that, I’m sorry if I am not more precise, is that if you look at how we have coped with that, the company has been pretty successful in terms of coping with the trend. Of course, there is a gap that we need to recover, but as you can see from the graph that we put in the presentation, when the inflation begins to come down, for us it’s easier to cope with that. And as I said, probably with the type of projections that we are seeing in presently, if the government is able to succeed with its program, it will take, in some extent, roughly something more than one year, 12 months to fully price that. But up to now, as you can see, the trend has been pretty favorable in terms of keeping up with these very high inflations.

Roberto Nobile: Andres, I can build on that. If you take a look into our broadband ARPU at December, it was between $6 and $9. $6 dollars I think it was. That was because the pricing pesos divided by the new foreign exchange rate totaled $6. If you take a look to the same product in March, in February, I would say, it’s around $15. You take the pesos and you divide it by the foreign exchange and the pesos have an inflation rate of 40% and you divide it by the foreign exchange that was almost fixed because the crawling peg was well behind the inflation rate and that creates something like you have increased your prices in dollars almost double, more than double, to $15. So this is the equation that we need to take a look. We need to make sure that the company is robust in pesos and making sure that we are able to translate inflation into prices.

Because if you take a longer term period, you will see that inflation and devaluation goes along. I mean, there’s no — there’s a match at the end of the story that keeps that two variables together. So this is going to be something that we will see probably in the first quarter that we will have a momentum of gaining dollars but actually you need to take a look into our pesos balance sheet because that’s what gives you the idea that we can, at the end, being able to be successful.

Gabriel Blasi: I will take advantage of this question. Although this is related to the period, the beginning of 2024, I would like to share with you some comments on our governance and financial ratio. As you may know, the part of the company related to multilateral agencies, which is mostly in the range of $1 billion. Here we have [creditors] (ph) like IFC, IIC, IDB, Finnvera from Finland government, EDC from Canada and CDB from China. As of December 31, that was roughly one third of our debt. These loans, among other provisions, have the obligation to comply with certain financial ratios which are calculated based on contractual definitions. The relevance are net debt to EBITDA and EBITDA over interest net. Those are calculated on a quarterly basis along with the presentation of the company financial statements.

Considering the complexity of Argentina’s economic situation which prevented the early and accurate estimation of the ratios, the company proactively requested and obtained from its lender a waiver to the enforceable rights regarding the compliance with the net debt to EBITDA ratio until March 15, 2024. This waiver was conditioned upon certain obligations during a certain period which have been met to date. Subsequently, the company continued negotiations with the creditors during 2024 at the beginning of the year with all the lenders and obtained a new waiver effective until March 31, 2025. This waiver allowed for an increase in the maintenance debt to EBITDA ratio above the originally established level, raising it to 3.75% for the calculation period between December 31, 2023 and December 31, 2024, also allowing a maximum consolidated net debt of $2.7 billion on each calculation date, among other matters.

On the other hand, during the terms of the waivers, the payment of dividends under certain conditions is permitted during the period from October 1, 2024 to December 31, 2024, while in compliance with the maintenance net debt to EBITDA ratio of less than 3% and for a maximum amount of $100 million. As of December 31, 2023, the company has complied with the aforementioned conditions. These waivers, which have already been granted, are specifically related to the extent that we have this situation, but because of the volatility of the FX, for exchange policy, the price adjustments and the FX adjustment not necessarily run at the same time. As the market normalization is getting there, but it should be, but as the closing of the year, if you take into consideration that Argentina went through the evaluation of [$140 million] (ph), 15 days prior to the closing of the period, there was not ability to price that immediately and that generates this type of situation.

So to avoid that, this waiver was granted by the creditors who have them, which are the ones that I have already described. Also, and although this is an audit, but just to give you some color between the relationship of the evaluation and this price adjustment, if we consider an audited calculation of the ratio of debt as of the end of January, it is below three. So this is a precautionary move that we deal with our creditors to allow us to move through all this situation until the market completely regularizes in good shape and with no bad surprises. But on the other hand, the company is working steadily to solve the situation as soon as possible. As part of these waivers, also we were granted the possibility of selling our Puerto Madero building, which is empty today.

As you may know, it has been empty since the pandemic and it’s a very important real estate asset and of course you those proceeds to [pre-cancel them] (ph). We will keep you on track of that all that it was released to the market yesterday. But in case you have any further consideration, we will be more than happy to provide additional information about this, that although it’s for the next period, it is very relevant information.

Luis Rial Ubago: So we have no further questions up to this moment. Thank you very much for participating in our quarterly conference call. Please do not hesitate to contact our Investor Relations department for any further inquiries you may have. Good morning to all and have a nice day.