Earnings Call: Q4 2019

Mar 11, 2020

Good morning. On behalf of Telecom Argentina, I would like to thank everybody for participation of this conference call. First of all, we would like to apologize for the delay, but we have problem with the service of women's academic international networks. The participants of today's conference call are Robert Tornoli, Chief Executive Officer. Doctor. Blasi, Chief Financial Officer, and myself, Salance Worked Ending Manager of Investor Relations. The purpose of this call is to share with you the results of the fiscal year ended December 31 2019. We would like to remind all those that have not received our press release or presentation that they can call our Investor Relations office to request the documents or download them from the Investor Relations of our website located at www.telecom.com. Ar. Additionally, this conference call and slide presentation in b is being broadcasted through the webcast feature available in such section and can also be replaced through this same chart. Before we continue with the conference call, I would like to go over some Safe Harbor information and other details of the call as we're usually doing this type of events. We would like to clarify that during the conference call and Q and A session, we may produce certain forward looking statements about Telecom's future performance, plans, strategies, and targets. Such statements are subject to uncertainties that could cause telecoms actual results and operation to differ materially. Such uncertainties include, but are not limited to, the effect of ongoing industry and economic regulation possible changes in the demand for telecom products and services, and the effect of more general factors such as changes in general market or economic conditions, unless installation or in regulation. Our press release dated March 9, 2020, a copy of which was included in our Form 6 K report earnings to the SEC describes certain factors that may affect any forward looking statement that we may produce during this session. As far as the figures included in financial statements, the company has accounted for the effects of inflation adjustment adopted by resolution, 777, 2018 of the commission as in Oliver Lopez, which established that the re expression will be applied to the annual financial payments for intermediate and special period ended as of December 31, 2018, inclusive. Accordingly, The reported figures correspond to fiscal 2019 include the effect of the adoption of inflationary accounting in accordance with US29. Moreover, over the presentation, we will discuss figures in historical values in order to ease the understanding and analysis of the earning evaluation by this user. In a similar way as analyzed by the management of the company, with the aim of reaching a better comprehension of this figure in nominal terms. Additionally, as we aim to read a better understanding of the figures presented on our press release, we encourage our financial community to consider such release in conjunction with this earnings presentation. We know analysts and investors are aware of the difficulties concerning team because inflation on advancing standard, but we are confident that at the end of the day, it is not a driver of value other than the derivative effect, like, for example, some distortion rate taxes. Furthermore, we urge the audience of this conference call to read the disclaimer clause containing slide 1 and 2 of the presentation. The agenda for today's conference call as seen in Slide 3 is first to go over general commentary of the macro environment which will be followed by the discussion of our business highlights. And immediately after, we will go into the evolution of our financial figures. Afterwards, we will end the call with a Q And A session as it's customary in our quarterly goals with the financial community. Now having gone through this introduction, let me pass the call to Gabriel Lassi, who will go over a brief characterization of the macroeconomic context in which we operate. Thank you so much. Hello, everybody, and then welcome to the call. Please refer to slide 5 where we included the summary of the evolution of some macro variables in Argentina regarding FX inflation interest rate and private consumption. During the fourth quarter of 2019, economic context still remain volatile even after the imposition of some initial capital control and highly influenced by the presidential elections against which was held in October. At that point, an important demand for foreign currency and the realization of special portfolios were registered prior to the election. Which was partially channeled. The alternative markets other than the Mercado Unicolor. That's widening the gap between the blue chip swap and the official effect. After the elections for health, demand for foreign currency is stabilized in the foreign chain market, only with an increased tightening imposed by the central bank and also due to renewed offer from agriculture products ordered during November. Totalizing a year to year devaluation of 59%. During 2019, the inflation rate stood at almost 54%, achieving the highest level since 1991. Inflation accelerated during September as it was impacted by the FX rate increase in August, earnings for the 4th quarter were about 3% mainly pulled by co inflation as utility tariffs remain unchanged during the period. The new administration further extended the tariff freeze imposed by the in government, at least until June 2020, while stabilizing the effects through the imposition of taxes to currency purchases and extension of capital controls, therefore, generating a temporary rainfall for inflation as shown in the general inflation figures. In terms, interest rates experienced increase as the withdrawal of deposits from the financial system diminished And while the central bank relaxed during the last month of 2019, the tight control over the monetary base that it can be maintained. The new administration in the context of ring fenced market through capital controls continue to reduce further interest rates came in to generate better financing conditions and encourage credit. Finally, and observing the trend of declining economic activity during 2019 it can be known that household consumption has decreased very rapidly. In particular, that has been the case of consumption of derivative goods which has been notoriously impacted, not only because of the reduction in the purchasing power, but also because of the higher difficulties to accept consumer financing. Although consumption has been strongly affected during the past year, the general rate of decrease is decelerating during the last quarter. Our recovery is still uncertain at this point, conditional to the evolution of the real income and general standardization of the economic variables. Aswithstanding the challenging macroeconomic context, just described, Telecom Argentina has managed to reduce the gap of its top line with inflation during the last two quarters while maintaining a solid operating profitability. Having gone through this introduction of the macro environment, let me pass call to Roberto, who will go over the business highlights section. Thank you, Gabriel, and good morning to everyone. We can see in slide 7, an outlook of the company numbers during 19 2019, telecoms revenue totaled 237,000,000,000 pesos in constant currency. That's about $4,000,000,000 in revenues with an EBITDA of ARS 77,000,000,000, around ARS 1,300,000,000, for the year. Getting a 32.5 percent margin over revenues in constant currency. This is achieved or has been achieved in a challenging and highly volatile economic context, as Gabriel was mentioning before. 19,100,000 mobile subs by the end of the year with 3,500,000 subs, in pay TV. Broadband and pay TV clients remain relatively stable, reaching 4,100,000, broadband subs. In turn, fixed voice subscribers among 2,300,000, re being reduced slightly throughout the year. Must be highlighted that thanks to our successful commercial strategy focused on the bundling and upselling the pro products. Launched during 2018, we experienced a churn reduction and a higher client, loyalty, reflected in 1,400,000 convergent unique customers by the end of the year, which the fact that 40% of them, of our broadband customers currently have a mobile, bundle. This is very important achievement for the company. As we all know, reaching a higher client base and increasing the share value customers that are going to be the driver for revenue growth and ARPU maximization in the in the coming months. On slide 8, we are going back to 2 main things. 1 is the purpose of the company and our vision. We have a purpose, which is empowering, your work, and that's, about customers and also about our employees. And we also have addition, and we would like to summarize our strategical, vision for the near future as future, as we mentioned in previous calls, one of the main things is to consolidate, ourselves as leaders in NPS, revenue share, and mark chair. And we will, take a look, later on that, we are achieving, this target. Provide solutions beyond connectivity, not only on the B2C, but also on the B2B. We need to go beyond connectivity and increase value for our customers, transform ourselves in a marketplace, we have already created a marketplace for entertainment, flow, which is our is our brand for IPTV services. Is actually, a marketplace for, music content, video and, and gaming. And we will, start incorporating new, new, things to the platform. We need to become agile, efficient, and digital. And this is a must for the company in the near future to move forward. We also want to be the best place to develop and work, as we mentioned before, not only our purpose for our customers, but also for our employees, and it's the way of conducting the company in the in in the next steps. And obviously, and most importantly, we believe in continuous growth, and this is something we, are taking seriously. On slide, on the next slide, we are able to deliver on what we committed. Based on our vision, we were able to, manage to increase our services NPAs, not only on the mobile, but also on the broadband side, as well as the market share of our mobile services leverage on the significant investment deployment that took place during the last 2 years. Furthermore, we were able to accelerate the convergence process speed up, speed conversions. That was the main focus for this year. And, obviously, therefore, carrying out the progressive price adjustment that allowed us to mitigate the effects of the inflationary context that we described previously. Dynamically, at adjusting prices, we were able to increase prices, more than three times throughout the year, and we keep on with that pace to, catch up inflation as quick as possible. Additionally, we service flow as an IP platform, which we gave the opportunity to expand the service to the northern region of the country and to our international operations abroad. Far away and Uruguay are already, serving, flow as their IPTV platform. And we keep on creating our future proof network, working with the labs, jointly to make sure that all the investments that we will keep on doing on our network will be done on the new network rather than on the legacy ones. And we expect that all these actions that we have taken will allow us to keep leading the local, telecommunication market. So we have done throughout the whole year. On slide 10, we summarized the competitive advantages. You of our product services and platforms that allowed us to attend the higher usage of our services during the year. Telecom's leadership in the Argentine Telecommunication Market is leveraged on the quality of its strategic assets. We have 3 strategic assets here, broadband, flow as our IP, TV series and mobile as our, 3rd, big asset. In this sense, our broadband network is currently the fastest and with the base coverage of the country achieving average speeds of 50 megabytes per second in the case of our 5 or 10, while 12 megabytes per second for the the cell product. Reaching a 65% participation of homes passed over total homes in Argentina. We need to remind you that, 50% of our network is HFC, and HFC is already fully implemented with DOCSIS 3.1. 1 gigabyte, per second, is available throughout the whole Fc network today. And we're, keep on deploying FTTH to upgrade our COVID network, into a good one. Additional flow is our IP video platform with the best experience as we already said. The usage of flow, is three times higher than any other comparison to the legacy, video platform. We also registered a lower churn churn, in these customers, churn has been reduced by 50%. Moreover flow is evolving the super content aggregator, as I have mentioned before, relevant to our customers, allowing access to video and music while gaming and other features, will be incorporated in the near future. In this sense, we have also, an, an agreement with Live Nations, where we are streaming online music, shows through our platform. And finally, our brand for mobile is personal, personalized, fastest 4 g mobile network in the country, and with the best 4 g quality in terms of availability, video experience, and download and upload speeds. This is not set by the company, by third parties, certifying this. These advantages have allowed us achieve an important network ability of new mobile accesses and to substantially increase and sustain our ATS. As you all know, on we are starting on moving to slide 11. We need to remember that we are coming from 2 different companies, big companies with different, systems, different IT solutions, different networks, different processes, and different back end. So throughout this last 2 years, we were committed to make these 2 companies, become 1. And Now, the fund, what we call 5, which is the our VSS transformation is coming through. One is, Salesforce, Salesforce project, that has started, just 1 year ago. And by June, 2020, we will complete the mobile migration. Today, we have more than 250 customers already on the platform on the new Salesforce platform. And we are taking this month to make sure that everything is okay, and we will keep on migrating customers and ending the migration of all our customers by June 20. On the other hand, as far as, you know, our back end transformation project, what we call for up, we're working with SAP, Esper Hanna, and the digital, administration of travel expenses, and so on. We are planning to finish and go live with the new ERP by, June 20, and that will allow us to finally get, very agile and very robust processes that will allow the company, to move, easily. We talked about, IT transformation. That's that is one of the pillars of the company transformation. This second transformation program or pillar is the network. And in slide and the following slide, slide 12, you will see our transformation program for our network. We're working with Bellabs, Nokia Bellabs, defining and designing the new network. What we call future proof. That's a that's a network that will allow new services in the near future. And reducing obviously TCO, which is total cost of operations and CapEx, in the next years. We have already, you can see it here that we have already accomplished, the implementation of the data inner core International Gateway. We have one network, since August, 2019. The network is 1 and there's logic unification. And we are still working on the outer core in Amba and other regions of the country. We're progressing, on, on this way, and we will keep on well, moving forward with the new, network. And finally, on slide 13, you will see the 3rd pillar of the transformation of the company, which is the culture. Culture is the way we do things, is the way we have our processes in place. And we need to remember here that 75% of our workforce is unionized. They belong, to different unions. And we have, worked very, close to the unions to make, this happen. As unions are supporting the transformation of processes, automation, and convergence, of networks and customer services, and we have been working to reach a convergent agreement with all of them. Or with the most part, we have the agreements in place we're still working on the call centers, representatives that we still have, different, agreements for different services that, but we believe that in the short run, we will, resolve that. On the other hand, as, as you see in our vision, we want to be a digital company, data driven, agile, and Therefore, we have a huge, challenge here facing the digital transformation, for this purpose and with the aim of becoming digital, We have been doing a great effort to optimize the recruitment and retention initiatives for digital profiles that will lead the the great change. Okay. Have having gone through this brief description on the evolution of some of the projects, we should move to the performance of our business. And on slide 14, we can observe the evolution of the ARPUs for each of the of our products. And we can see that ARPU has moved, favorably growing in the case of mobile, 64% in nominal nominal terms, at the fourth quarter 2018 compared to the fourth quarter 2018, meanwhile postpaid participation has increased, and as postpaid and prepaid accesses have increased 8% 2% due in 2018. This is, one of the biggest drivers of growth for the company. On the second, layer, you will see, fiber test. Pivotal ARPU grew 46%, with steady performance of, of customer space. You see, a very small reduction of 0.4% year over year. But if we take a deeper look here, we will see that, we are growing significantly on the HFC and FTTH broadband, customer base and, losing some of that on the ADSL network. Pay TV ARPU represented, through our brand. Cable is here, has also grown 46 percent, while we have been able to counter some of forecasting that we observed in the first quarters, of the year, through our offer offering of flow over the FTTH and DSL network in the northern part of Argentina. Finally, fixed voice ARPU has increased 6 75% compared with the 4th quarter of 2008, with the reduction of accesses continued, but there's, a slower pace. This 60, 75% year over year, increase in, in what we call the fix. It's also including, B2B, connections, that are, for the most part, polarized. Let's move to our drivers of growth on page 15, due finally, during 2019 postpaid subs, accounted for feed 40% of our total customer base. The company had registered subscribers inflow in the last quarter, which reflects it's effort to optimize the quality and capacity of our mobile network. In fact, this segment has been growing steadily over 2019 due to the good results as we already mentioned over convergent offer to cable TV and internet subs that were not mobile customers of the company, leading the mobile flow share, in the market. As you can see, we have 257, customers coming from other, networks especially from, well, it's part of from Movistar and part of from, Claro. Furthermore, the intensity of mobile internet usage continues to increase. By the end of the year, has reached an average of more than 3.4 gigabytes. Per user per month. Additionally, the average prepaid recharging frequency has increased to 3.1 times per month, as of the fourth quarter of 2019. This is this is actually, a result. We have implemented real time decision processes, working with, data scientists trying to make sure that the customer is, we're pushing the customer to consume more, every time online. Finally, we can see that, broadband speeds, 60 62% of total subs which fits between 23100 megabytes compared to 38 by the end of last year. And this is the way we protect our, core, our broadband, stock up customers. Making sure that they can move move to new, ways of using broad on higher speeds, and, obviously, with new, equipment CDs. Finally, flow, has delivered solid results. We have almost 1,000,000, flow boxes. In the homes. And that's a huge and a significant advance, towards the final digitization of the network that we really need in the future. Having gone through the business highlights, now I will pass the call to Gabriel who will go over our financial performance and I will stay here for further questions at the end of the conference. Thank you, Roberto. We will go over the impact that these business trends that described by Colorado generated over our financial figures. Let's move to slide 17 where we can analyze the consolidated revenues and EBITDA. For the fiscal year 2019, consolidated revenues of all nominal terms grew by 42%. Reaching almost MXN 194.2 billion when analyzing the figures in constant measuring unit revenues amounting to almost 230 7,000,000,000 pesos, showing a decrease of 8% in real terms, but further reducing the accumulated gap in inflation in approximately to have the basic point. We'll compare with the 1st 9 months of the year. In this sense, a company has been increasingly set forth on setting the high inflation effects over the top line and costs. In addition, it must be mentioned that adjusted figures contain effect of year over year inflation as of December 31 2019, which reaches 53.8%. It is important to highlight this impact on performing an analysis of the company operational performance, a situation adjustment as a considerable impact in terms of the re expression of 2018 figures. In turn, service revenue grew even more reaching a 44% nominal increase. In the sense, during the fourth quarter of 2019, the company was able to match the growth in service revenues with the level of inflation, which grew 0.4% year over year when compared with the fourth quarter of 2018. It can also be noted that mobile revenues have accelerated notoriously, reaching a nominal growth of almost 62% when comparing historical quarterly figures from, 4th quarter 2019 4th quarter 2018. On the other hand, EBITDA experienced slower growth, growing by 39% year on year in current terms and EBITDA margin which is 33.2%. The evolution of the ETA in real terms experienced a decrease of 11%, but improving almost 300 basis point compared with the 1st 9 months of the year while EBITDA margin in real terms were 32.5. The margin decrease in the year over year comparison in real terms reflects essentially different adjustment dynamics over time between cost and price increases. In fact, operating costs before D And A decreased 7% in real terms, basically, against fiscal year 2018. Please turn to Slide 18, where we can see in details the evolution of our service revenues and which revenues have grown the most. We can highlight that the current revenue mix as a participation of mobile revenues of almost 35%, which have increased their participation. Followed by broadband revenues that represented more than 22%. And after work by pay TV revenues, we accounted almost 21% participation. In shipping term, fixed telephone and data represented almost 16 while equipment sales achieved more than 6% of the total revenues. Still strongly impacted by defaulting consumption of 2 level goods due to the economic context and high interest rate, but is still in a positive market for distribution. In this regard, the sale of terminals was voluntarily reduced during third quarter and through the implementation of additional credit measures and and restrictions were were implemented successfully. Please refer to slide 19 where we show the performance of EBITDA and the impact of the different components of revenues and costs. As a reminder, operative costs, reducing real terms, in particular, is noticeable that some of the components evolved positively despite the challenging economic context indicating in this case is improvement or synergies. We can observe the positive evolution of handset costs, the positive margin contribution, which was mainly impacted by a lower sellout due to an aggregate decrease transaction, durable goods, and tougher financing conditions for consumer finance. While also, cost management has delivered good results in commissions and advertised The lower charges of origin commissions are a consequence of the sales channel reorganization. Lower handset sales and a slight decrease in advertising costs. On the other hand, other costs registered and increased mainly as a reduction in operating leases and was implemented due to the application of IFRS 16. Nonetheless, these effects have been offset by an increase in labor costs. As both recurring labor costs, reflecting essentially increases in salaries to unionize and non unionized employees. And nonrecurring labor costs have rising. In the case of bad debt expenses, a year over year increase will observe. But they show a better evolution when analyzing the second half of the year due to diverse actions taken in the sense. When analyzing fees for services, maintenance materials. We can highlight 2 opposite effects. This for services decreased as a result of synergies and process simplification, within the company transformation program, partially offset with increases in the prices of services contracted to 3 parties. Mainly to concenters, surveillance, and cleaning suppliers while maintenance and material cost increase offsetting its effect, mainly due to increases in the prices of service contracted to suppliers related of the maintenance of our networks and systems and connections and disconnection of of clients among others. And higher consumption of materials associated with the interior. The final outcome was a 100% PIP's reduction in EBITDA in real terms when compared with fiscal year 2018, mostly due to the impact of our adverse and volatile economic context during the last part of the year. Let's move to slide 20 where we can verify that the company covering operating income totaled almost ARS 15,800,000,000. The EBIT decrease in constant measuring unit that resulted higher than of the EBITDA have explained by the increase in DNA and disposals and impairment of assets, which increased almost 14% in real terms year on year. In addition to higher depreciation and amortization, due to their expiration of non monetary assets. The application of IFRS 16 since 2019 has entailed an impact of more than ARS3.3 billion while also I expect your impairment was registered for 2,500,000,000 cases. Consequently, mainly due to the aforementioned increase in DNA in real terms, operating margin reached 7% of consolidated revenues. Moreover, the company registered an ordinary income before tax of almost 10,300,000,000 in fiscal year 'nineteen, improving 147.8 percent versus the prior year, mostly reflecting lower losses from FX results measured in real terms from almost ARS44.8000000000, partially offset by higher negative net interest a lower inflation adjustment gain or brake pump or its electronic, the brake pump, a lower result of investment. Meanwhile, the company registered a net loss of almost 3,900,000,000 during the same period essentially flew due to the recognition of the restatement by inflation of the calculation of income tax for the first time. First turn to Slide 21, where we can highlight the company called to invest effort to improve the network and quality of services. During fiscal year 2019, the telecom has invested almost 70.9000000000 pesos, including the right of use asset this is referred specifically to IFRS 16, which accounts for a 5,400,000,000 basis. Being this amount, 8% higher in real terms at the same period of last year, the consolidated amount of impairment increased to almost 30% of total revenues for the from the 25 percent registering the same period last year. Taking into account the technical CapEx breakdown An important amount of the technical CapEx was allocated to network and technology. With the access network, one of the most important components, representing almost 45% of network and technology CapEx. The remaining of technical CapEx was mainly comprised of installation and customer premise equipment, LCD, and of investment done on our international operations in Paraguay and Uruguay. During fiscal year 2019, Telecom continued to expand its own position in terms of network infrastructure. In this sense, more than 4 104 in new sites were deployed 500 story of 40 new sites were deployed, enhancing the coverage of the mobile network. On the fixed network side, In terms of work has been performed all over the HFPC network, adding 2,400,000 way 1 Gigahertz 8 HFC blocks while more than 500 are under construction. Additionally, 2.4000 blocks of FTTH were enabled during the year, remaining 1,600,000 to be finalized during the first quarter results around trade. Additional, almost 1,700,000 new modems and models were activated thus allowing the upgrade to higher broadband connection speeds at 1,000,000. Sorry. 1,000,000 new TV decoders were activated to accelerating flow, HD, and IP. Concluding this remark previously, in other call conference sessions, one of the advantages of the company CapEx plan is that the investments are performed in a very modular way. There are no huge project involving large processing tests. In fact, it is expected that during 2020, the company's investment effort to be reduced to a half of what has been observed in the course of 2019. Absorbents of the lower economic activities. This reduction should be supported on the superior competitive position of its network which in turn has been increased during the past 2 years, and therefore, should not affect its operational performance of competitiveness in the short run. Let's move to slide 22 where we can find comparative of the cash flow generation between fiscal year 2019 and the prior year. In 2019, the operating cash flow increased notoriously, mostly due to a positive evolution of working capital mostly due to higher CapEx and better financing conditions obtained with our vendors in the second half of the year. In fiscal year 2019, operate free cash flow increased to more than $550,000,000. More than doubling when compared with the previous fiscal year. Additionally, during fiscal year 2019, a lesser impact of income tax pay was observed, allowing, as well to expand the company's free cash flow generation $425,000,000 for fiscal year 2019. Turning to slide 23, we sum up some key figures of the fiscal year 2019 in constant measuring unit. Company revenues achieved more than 237,000,000,000 pesos. We acquired EBITDA amounting for more than 87,000,000,000 peso for the same fiscal year, EBITDA margin was 32.5 percent due to a percent as investors take it more than $1,300,000,000 of EBITDA. Regarding our gross debt as of the end of December 31, 2019, it amounted almost 152,000,000,000 pesos as the company holds an like cash and equivalent positions as investment, the net rate reached almost more than 25,000,000,000 pesos. After the 3.6 in real terms when compared year over year. In fact, net debt to EBITDA ratio is currently levels of 1.6 times at at this stage. Lastly, on slide 24, we can analyze the breakdown of the financial debt. The total debt outstanding of the company as of December 31, 2019, considering the new debt operations and cancellations in the year, amounted to almost $2,500,000,000 remaining stable in dollar terms. It is important to highlight that during January of 2020, the company accomplished the success provisions official denominated notes for an amount of almost 4,400,000,000 pesos. We currently see a potential market opportunity in this sense where the local market is showing a clear interest of peso denominated rate of tires or funds. Additionally, we, February, the company received 2 new disbursements under the IDB financing agreement for a total of $125,000,000 composed of $50,000,000 maturing 2020 3 and $4.75 $1,000,000 in 20.32. Finally, a new disbursement for the VINBRA credit facility, which we see on 5, 2020, for $10,000,000. As mentioned in prior calls, we deemed important to emphasize the manageable debt profile that the company has for the implementation policy for the term, right, and the structure of its financial liability. Almost 60% of our debt book has been benefiting with a live or decrease. Having conclude with the presentation, but before going to general session, let me pass the call to Solange for a final remark. Thank you, Gabriel. 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 you may address your question in the Q And A session, which we will open immediately. Please send a message to IR Telecom Martinez for the Q And A menu identifying yourself and stating that you have a question or alternatively use the hand button to let us know that you want to formulate a question. We will let you know when it is your turn to speak, and we'll unmute you so you can proceed with your question. Thank you. Hi, Rodrigo. Please proceed. Thank you. Rodrigo, are you online? No. Hi. Before so the next question is from. So, Junior, are you there? You're asking what's the CapEx guidance for 2020? Okay. As apparently, we are facing some product with, with Cisco Works platform today. We are receiving the questions in written and, I'm not hearing the the questions of my voice. It's regarding this question, our guidance for for the year at present is $500,000,000 for a total capital of 2020. Having said that, it might depend on the general evolution of Argentina in terms of what happens with, with all the different variables of the economy. This decision might be changed, probably on the birth of the positive side. The following question will come You can proceed with one of your questions. Hi. Thank you, guys. Good morning. Does the company consider, up in its long term CapEx levels as a preparation for the future launch of 5 gnetworks in Argentina. Thank you. Let's see. If we are already considering, 5 g in the near few sure. We are, the the new design of the network, that we're working with Bellabs is already, is it's ready for 5 g. That's to say that it's working on latency. It's working on, on a design that allows to be very close to the customers. And and that's, the the the basis. On the radio basis, and on the core, everything that we have is already, Yes. It's very close to 5 g. We need to have new licenses and, but remember that 5 g will start on a non stand, alone, way. And that in place, that will use the 4 g 4. And that 4 g core is already in place and can can probably do that. 5 g for the near future, we'll start with enhance mobile, broadband. That's one of the 3 features for 5 g. The other two features will come with a 5 g 4 stand alones, stand alone core. That that will come in 2 or 3 years, not before that. Alright. Thank you. Thank you. Okay. The following question, so we have now the question from. So Rodrigo does send the following question. Are there any OpEx saving goals that you can share with us related to your IT transformation initiatives. Regarding use of free cash flow generation, is there any indication of terms of dividend distribution in 2020 would persist generated in 2019. Yes. We have, a goal of reduction of TCO on the network operations but it's not gonna be only 2020. It's along a 5 year, road map. That it will achieve 30 percent, TCO reduction, in the total run. On the IT, CRM, platform and back office, we we are working I mean, we are working very close to the, automation of all centers those are processes that are on their way, and it's very hard to to say a number because it it also involves unions. And so we're working on that. We are trying to the company to be ready for automation and for reducing all the OpEx in call centers. There's a huge, opportunity on third parties, and we will seek them. But we don't have, as of today, a very, sharp number to to say. Yes. We've we have already, reduced, more than 30000 people. When we start the the the merge of the 2 companies by January 2018, we were more than 26,000 people. And today, we are less than 23. And that's a process that it's coming through, and we are working very thoroughly and continuously trying to, set the the structure and the organization we need to drive the company forward. Okay. The following question is Alejandra? Alejandra, are you there? Yes. We can hear you. Yes. You're on the microphone. Thank you Do you have any question, Alejandra? Because we cannot hear you. Can you hear me better now? Oh, we we we we we couldn't get the question, Alejandra. I got rid of what you previously wrote. So you said, can you talk about client dynamic that you expect going forward? Have you reached the limit of cross sell into affluent clients of Cablevision, and can you continue with that strategy? And what's the limit to that strategy? No. We have not reached any limits yet. 40% of our broadband subs are already, it had become customers of, of, of our personal personal brand, on the mobile service. At the certain point, you have the 100% of your customers, that could be the limit, in terms of, we, we would like, and our vision is to to have all our fixed customers in terms of broadband, video and at a new phone, it become, mobile customers too. And then you have to add the the number of lines. That's something we're trying to make a API. We still I I just want to remind you that we still have several CRMs and several, databases so the the customers are there is a mismatch between the CRM. The mobile is on one CRM and the fixed customers and on another CRM. And therefore, the new spot play, that we are implemented on Salesforce will allow us to really understand who's who and what do they have. As of today, we're working in data lakes, trying to match, customers through their ID, through their addresses that it's not accurate. We believe that the quad play solution will allow us to really, enhance the information that we have and make it more effectively the the way we are selling. But we want, all of them to be public. Okay, Alejandra. Your second question was related of what can we expect in terms of ARPUs for 2020 as discounts and promotion, of course, selling face out. It's kinda on promotions. Face out. We we are, keeping I mean, At the beginning of the year, we were thinking, before when we started doing the plan, we were thinking of, an inflationary dynamic, that was easier than than 2019. We will keep track of inflation. We have worked to to make sure that we can keep that track. And we have shown that, we have been able to, to do it in last year. Having said that, we believe that, ARPUs should, keep as inflation with their ups and downs. And because of we cannot do it every month, we need to work ARPUs every 3 or 4 months. And we are working on, promotions, promotions, are there, and there there's not gonna be any change. The the convergent package it will keep when it is today. Okay. So the following question, is some of our questions that we missed from Rodrigo, the one that says regarding use of free cash flow generation. Is there any indication of potential living distribution in 2020 with proceeds in 2019? No. Not for the moment. Up to now, there has not been no no recommendation from the from the management regarding regarding a a dividend payment, and we should wait to the assembly of the company to finally re assess this. K. A new question we have from to the offer that says, how should we think about real growth expectation in 2020 as well as margin evolution Given the land of what play an ongoing transformation. Margins will, improve as long as, our fixed exchange rate, goes with inflation. If it goes higher, our margins will deteriorate a little bit, because we have, many cost and and expenses that are driven by foreign exchange. Therefore, that that's a variable that we we can manage, but we cannot control. So we believe that, real growth will come this year. But nobody knows the macroeconomic, context that we will have to to deal with in the next, we have some initiatives like, IoT, like, new services, for our customers, but those initiatives are in early stage, and we will be launching them throughout the year. As we mentioned before, in our vision, we are trying to go beyond connectivity, and that beyond connectivity needs, a new services, a new, revenues, streams, and we're working those. For example, we have, lunch a a new partnership with Nokia. We have the middleware of Nokia called Wing, and that middleware would allow us to move forward in the IoT business, for B2B and for B2C, there are a lot of new, revenue stream stuff, we need to to incorporate. Yes. Waiting if there are still any questions. So we appreciate if you have further questions, just in the following minutes. If not, we will end the call. Hi. We have, our team, Pavel. Are you there? Please let us know if you have any anyone. Yes. Yeah. Can you hear me? Yes. Perfect. Thank you. Just one quick question about the liability management. I mean, you have almost 60% of your debt maturing in 2020. 12022. And so where are your plans related to that? Okay. Well, Most of the, of the dollar debt of the company maturing this year, is that that is maturing, probably in the next, 3 to 4 months. We are planning to replace that debt with, if we did the issues or they keep it in the local market, meaning that we have available in the range of $400,000,000 of marketing, credit line, credit line company, that we can, we can use whatever we want to. On top of that, we have availability about, this is a calculation that the company makes, about, 3 to $400,000,000, from the local capital market in local instruments without that pesos without pricing, the, the, the, the prices. So what you would see is that during probably the first half of the year, we are going to replace, that debt locally. Regarding the, the, and that, that, and that, entails most of the maturity of the year, about 70%. Regarding that the the majority of the of this next year, remember that we have $400,000,000 in cash from that the the amount borrowed from $100,000,000 to $460,000,000 depending, the, different moments. We have no further plans to to use that money yet, and, and that allows us to to meet any any special situation. As you may know, the company has, gone to the market to different opportunities to offer several alternatives for the other half of the maturity of next year, the, the 2021 bond, but we have found out pretty difficult to generate a single deal that suites all investors. We have like several groups with very different interests, and on the other hand, nobody has willing to, to, to, to get off those bonds. That's very easily, appreciated, especially during this week. Where Argentina securities have come down, allowed to, to the 30% of, on average value and and the company wants to trade it over 95%. So, that that that has become, yeah, I would say, pretty difficult. If if it has to give you some guidance, we don't foresee the short run-in the short run-in the quarter, unless we have a very significant change in the market conditions for Argentina that we, we might, establish, a new transaction regarding liability market through international capital market growth on the acquisition side from the selling side. It will depends on what type of scenario we have from here. But, we are working constantly on, on, on, on this direction, generating new sources of funding as part of that. I can mention that we are, we are in the, in the process of a the process of, a measure of of requesting a great line from China Development Bank in, in renminbi, of $200,000,000, 7 year, 7 year tenure. That's, that's a, a, a project that we are, that we are, currently developed with, with, that financial counterparty. And as, as we have already done with IDB ISC, we are pretty close to to get that additional financing. It's still, we have pending from the, the IDB loan that we have just closed another disbursement of $25,000,000,000 And of course, we are always looking for additional, for additional alternatives. Of course, we understand, that, this might might must be perceived under the, the general situation, but, the company in terms of cash generation terms of availability of field funds in terms of grade available, has shown constant. Even in the last month, that, we, we have with the amount of options open and, and taking good care of that. As part of that, our cost of funds in fact has decreased instead of coming up because of how the the recovery is a structure at present, as the whole, the book of the company is yielding less than 7%. We have reduced the total cost of funds about 25 basis part. Okay. Perfect. Thank you. Okay. We will appreciate if you have one final question. And if not, we will end this conference call. Okay. What we have received, from a question from as it's connected for the fixed line, it's sending by written that there are physical hard questions. So it says how to funds the 2020, 2021 debt maturity? I believe that's That's alright. Has it just been answered by Gabriel? I'm related on Price increases, are there currently below inflation? Currently, they are not below inflation. We have, Much or it'll or we we match by Sorry. I I that that that question specifically was plans for price increases. It's a plan to offer prices. Are aligned with inflation, basically. We we we believe we can keep track of, step by step, not on a in a monthly basis, but on a regular basis, we we believe we can move, prices in nominal terms, trying to keep them real. As a proof of what Roberto has stated when we look at the revenue gap of the company, at the beginning of last year, was 25% collecting related inflation of the 12 prior month, and that same figure by the end of this year of 2019 was below 10%. And there was also, as I have already explained, acceleration of the reduction of that gap in the last quarter. In spite of all the, I would say, of the confusion or the, or the difficulties that we understand the evolution with the inflation accounting adjustment, the company has really shown that even in this type of environment with an inflation over 50% has the ability and the Moscow to close the gap. The following question is how much of the gas is in hard currency? Well, from the total position of cash that the company has, at, at the closing of the fiscal year 2019, there were $460,000,000 of, of that, more than 400 were placed abroad and only, I think, about 30,000,000 that are kept in pesos, locally. That is related to operational and side of the call. At present, on the dollar position of the company is held outside Argentina, and it moves, over $420,000,000 to $480,000,000. Oh, I believe that There are no further questions. So thank you very much for participating in our quarterly conference call. Please do not hesitate contacting our Investor Relations department for any further inquiries you may have. Good morning to all, and have a nice day.