Earnings Call: Q1 2019

May 13, 2019

Good day, everyone, and welcome to the Telecom Argentina TEO 1st Quarter 2019 Earnings Conference Call. Today's call is being recorded. Participating on today's call, we have Mr. Gabriel Blasi, Chief Financial Officer. And Mrs. Solange Baras Denon, investor relations manager. At this time, I would like to turn the call over to Mrs. Solange Baras Denon. Please go ahead, ma'am. Thank you, April. Good morning. On behalf of Telecom Argentina, I would like to thank everybody for participating on this conference call. As mentioned by our moderator, the participant of today's conference call, Laura Ramirez, Chief Financial Officer, and myself, the line of Arthur Denin, Manager of Investor Relations. The purpose of this call is to share with you the results of the 3 months period ended March 31, 2019. We would like to remind all those that has 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 section of our website located at www.telecom. Com. Ar. Additionally, this conference call and slide presentation is being broadcasted through the webcast feature available in such section and can also be relayed through this same channel. Before we continue with the conference call, I would like to go over some information and other details of the call as we usually do in this type of event. We would like to clarify that during the conference call and in Q And A session, we might produce certain forward looking statements about Telecom's future performance, plans, strategies, on targets. Such payments are subject to uncertainties that could cause Telecom's actual results and operation to differ materially. Such uncertainties include, but are not limited to the effect of ongoing industry and an economy regulation, possible changes in the demand for telecoms products on services and the effect of more general factors such as changes in general market or economic conditions, conditions in legislation or in regulation. Our press release dated May 9, 2019, a copy of which was included in the Form 6 K, with both furnished to the describes certain factors that may affect any forward looking statement that we may produce during this session. Furthermore, we urge the audience of this conference call to read the disclaimer clause contained in slide 1 and 2 of the presentation. The agenda for today's conference call assumes slide 3 is first to go over general macro overview, then moving on to our strategy, which will be followed by various one of our business highlights. And immediately after, we will go into the evolution of our financial figures. Finally, we will end We will end the call with a Q And A session as a testimony in our quarterly calls with the financial community. Having gone through these procedural matters, Let me pass the call to Gabriel Lassis, who will go over a brief financial statement of the macroeconomic context in which we operate. Hi. Thank you so much. Good morning, everybody. Please refer to Slide 5. So we do the summary of the evolution of some macro variables in Argentina regarding FX rates, inflation and monetary policy. During January February of 2019, FX and monetary variables continue to stabilize, keeping with the trend observed during the last month of 2018. The peso depreciated less than 4% as of the end of February, an interest rate started to move downwards at an accelerated pace due to a quick reduction in the country's premium and stable inflation readings of sales up to that stage. In this context, capital inflows increased. And that's the Central Bank, the Antopoia foreign currency for the private sector as the FX rate moved downward to the lower band of the non intervention shown as defined. This contributed for the Monetary Authority to rate, keeping the stock of monetary regulation instruments with no variation. The mentioned scenario quickly changed first to relate February March. First, firstly, inflation readings for February came in higher than expected due to utility and transport tariff increases signaling for an equal behavior of inflation of 4 March, as additional inflation began to rise, mostly pushed by food and beverages. In turn, volatility in exchange market began to rise rapidly after the relative stillness of the preceding mines. The peso experienced appreciation of almost 11% during March on the Central Bank VIP quickly rising aggressively monetary policy interest rate. And exercising intervention in future markets. Country risks rapidly erase the reduction of sales during January February, and continued increase. March inflation, we confirm that March inflation was generated March inflation, sorry, a confirmed advance inflation was accelerating. The economic context deteriorated further in April with increased volatility in foreign exchange market and further increases of country risk premium to limit higher than 9 hundred basis points. In this scenario, the Central Bank reallocated announcing a virtual end to the nonintervention scheme being able to sell currency below the higher limits previously imposed and extending the maximum daily amount that we'll be able to sell if we finished its bridges. Turning to Slide 6, we can observe the behavior of activity and consumption during the period of analysis. According to last available data, economy contracted around 2.5% during 2018. The rate of deterioration of economic activity was higher during the last quarters of that year mostly due to the low performance of agriculture, Commerce, Industry And Construction sectors. At this stage, most of the economic consensus is effective that the context will stabilize and then very gradually begin to register economic growth. Most probably towards the second half of the year and finally consolidating in 2020, all affected by a political calendar. We're looking at unemployment figures, although it can be note that the rate has risen during 2018, And probably, we experienced some further deterioration during this quarter, but when compared with other strong economic downturns in Argentina, history shows a better evolution. Lastly, higher volatility, economic variables the continued rise in inflation have impacted overall household consumption, particularly in the case of durable goods at It is effective that it will remain the first due to adverse impacts of inflation on real income and due to the higher certainty captured by low consumer confidence readings, which in turn have fallen significantly. Notwithstanding a challenging macroeconomic context, as described, that Ekomargentina has managed to maintain a solid operative profitability. Having gone through this introduction of the macro environment, I will go over the strategy the business in sections. For the figures, including the financial statement, the company has accounted for the effects of inflation adjusted adopted by resolution $777,000,000 last 18 of the Consumer National devalores, or CND, which establishes that the expression will be applied to the annual financial statements for intermediates and a special period ending as of March 31, 2018 inclusive. Accordingly, the reported figures corresponding to first quarter 2019 include effect of the adoption of inflationary accounting in accordance with PS 29. Moreover, Over this presentation, we will discuss figures in historical value in order to reach the understanding and analysis of the earnings evolution by its users. In a similar way, as analyzed by the management of the company, with aim of reaching a better understanding of these figures in nominal terms. Additionally, we aim to reach a better understanding of the figures presented on our press release regarding our financial community to consider that release in combination with this earnings presentation. Let's introduce our strategy chapter alongside with some friends that are shaping the current market context in the industry. No longer is the main emphasis on traditional bundles for sample, fixed broadband bundles with fixed voice and full blown pay TV. In the slide 8, we can find some industry trends on how operators incentivize the new balances. Operators, Vivendi strategy that is relevant and incentivize the consumer not only to purchase but also to renew. In many cases, most operators, some OTT video and demand side driver. Nowadays, funding OTT video services, not only the differentiated feature operators bundle from another, it also entices users to the bundle. In this sense, OTC video in the bundle is a must have because OTC video is the number one service customers are adding to fix broadband bundles currently. In fact, it is expected that by 2023, The broadband bundles that include OTT will reach 50 percent of total broadband bundles in Argentina. On the other hand, the most prominent next generation bundle is expected to be fixed broadband with mobile. Mobile in the bundle is about locking up the household. The new baseline for with mobile is to leave the option of adding more than one line to the bandwidth. This strategy seeks to reduce churn rates and lock up as much as the household as operators are available in the industry. Meanwhile, building your own or CY O bundles emerges in 2019 2019, which will include pay TV, OTT video, and a student smart home. We will see in coming slides that the company is following some of these strategies, specifically in offers that include mobile banking. Moving to slide 9, we can illustrate how the company is planning to become a simple, agile, and customer focused content and to lead convergence without affecting market value, leveraging on experience as a differentiating target. In order to achieve leadership in the market share, revenue share and in the cross play market, seek strategy avenues were defined. The main guidelines behind this involves enhancing the commercial and operational model by product, region and segment. Leading converges and growth in value added services or VAS in the corporate market, the boosting of new businesses transforming into a digital company, promoting a high performance organization and developing the best convergent value proposal. The commercial and business vision will be possible by means of these ideas, but it is also important to develop the technological and operating infrastructure where they will invest upon. Precisely, in Slide 10, we present some guidance of the current strategy but the company is following to address the structural and future business challenges. In this regard, we are currently working over 4th transformation pillars because we categorize a series of initiatives and projects that are being undertaken. Firstly, we can analyze the client's people that can be associated with client satisfaction that ultimately drives increases in NPS ARPUs and market share. Over this, The company is currently working in a series of initiatives such as recent support system VSS, evolution through the fund project, also while upgrading the digital experience of our clients and generating better and more effective offers through commercial intelligence. Then comes the network pillars that aims to achieve higher network agility and performance. And at the same time, enable new business development by the use of cloud strategy and data center evolution projects and its operation support system. Or OSS improvement. The company pillars that seeks to attain operational excellence. And in this regard, the company has focused heavily It's back office transformation project for us, which seeks the integration of all the operations in the ERP platform, Sab Forjana, consolidating an agile and effective yacht model for operations. Lastly, cultural transformation is key across to the other initiatives as is the cornerstone of our culture pillar, which is centered on talent management, communication and the evolution of the processes within the operational model. Moving to the business highlights, you can see where we are positioned today in terms of the businesses. Please refer to Slide 12 where we highlight some of our key achievements. During the first quarter of 2019, Telecom's revenues totaled 44.3000000000, decreasing 9% year over year in real terms. Please bear in mind that the total revenues contain approximately MXN 1,900,000,000 and MXN 18,000,000,000 for the first quarter of 2019 1st quarter 2019, respectively. Related to the re expression in terms of the current measuring unit as of March 31, 2019. Operating income before G And A totaled ARS14.5 billion implying a 32.7 margin over revenues achieved in a challenging economic context. In addition, fixed voice ARPU and broadband ARPU were up to more than 314, sorry, MXN 314.819 per month, respectively. Meanwhile, pay TV ARPU reaching ARS 71.71 and lower ARPU reached ARS 125. It is worth to highlight that all of these were reached first in terms of me are showing units as of March 31, 2019. Moreover, and in relation with our subscribers, mobile starts in Argentina amounting to 18,400,000 of which 12,500,000 were a 4G client. Pay TV subs amounted to 3,400,000,000. Fixed broadband subs totaled 4,100,000 and fixed voice lines totaled 3,500,000. As for the total customer base, we continue to observe that it remains stable in relative terms by showing a change in the portfolio composition through actions that generate higher value such as product and services upgrade handling, allowing to increase the share of value customers and convergent clients in order to maximize ARPU in the future, once the discounts and promotions start to expire, and economic context helped to improve the household consumption. Increasing revenues is also driven mainly through a combination of price increases and the growing use of telecommunication services. Which more and more affect the daily life of our customers thus, allocate in a relatively stable portion of their income for these services. Finally, as regarding corporate matters, it is important to mention that the ordinary and extraordinary general shareholders meeting has on April 24, approved a cash dividend distribution of ARS6.3 billion that was made available to shareholders on May 7. This dividend payment represented an amount of $2.93 per share or $0.73 per ADR. This implies a dividend yield of approximately 2.3 percent at the record date price. Turning to Slide 13, we can observe a breakdown of service revenues, where mobile services, businesses still holds the main participation of our telecom revenues although verifying the selling trend in its share followed by broadband and pay TV. We can highlight that the current revenue mix as a participation for mobile revenues of more than 33% followed by broadband revenues that 10% in EMEA's 22%, continuing to register growth in share as well as pay TV revenues, which accounted for almost 22% participation. In turn, fixed telephony and data represented more than 15%, growing in this quarter, while devices achieved more than 6% of the total revenues. As we already mentioned, mobile and broadband are the segment that mostly contribute to the total revenues composition. Generating revenues of ARS 14,800,000,000 and ARS 10,100,000,000, respectively. In addition, the PayTV revenues totaled almost ARS 9,600,000,000, followed by fixed and data revenues with aggregate amount of ARS 6,900,000,000. To a lesser extent, we can highlight the contribution of hands and others with ARS 2,800,000,000, 1 and COP 1,000,000,000, respectively. It should be observed that in general terms that although the company's revenues are growing at the rate when looking at historical values during this quarter, the acceleration in inflationary context during the last quarter 2019 and the first quarter of this year discussing our macro chapter has posed a challenge. This is basically reflected in the figures we expressed for inflation. We will go into some details of this in the following slide. On Slide 14, We will go through the evolution of the company's mobile business in Argentina. As intensive data usage continues to increase, we can observe that there has been also sustained growth in postpaid subscribers, which represent our high value mobile segment. In fact, this segment has been growing steadily during the quarter due to a good result in the convergent offer to cable TV and internet subscribers that are in mobile clients of the company that's leading the mobile flow share in the market. During the first quarter of 2019, postpaid subscribers accounted for an impressive 40 percent of the total customer base, up to 36 compared with the same period of 2018. Additionally, the intensity of mobile internet usage continued to increase, which as of the first quarter 2019 has reached an average of more than 3.3g device per user per month, which is 48% higher than first quarter 2019. What we focus in the evolution of our 4G rollout We can highlight that there has been an important increase of 4G subscribers, which totaled $12,500,000 as of March 2019. This rapid growth in subscribers that use 4G networks has been the driver of increasing data traffic since 2015. Carving through the coverage of our 40 network, which is around 1540 locations, an increase of almost 4 hundred locations year over year. Moreover, persons for G Network is the fastest network in the country according to the results of international reference who measure the network standards through the experience of the clients worldwide. Please turn to Slide 15, where we include a review of our internet and Pay TV services segment, which aim to differentiate and upscale to an enhanced customer experience. Related to our broadband segment can point out that the numbers of subscribers grew almost 40,000 year over year, achieving 4,100,000 users. The aforementioned increase in subscribers was supported by the offer of higher connection speed. As a consequence, subscribers with speeds equal or above, 20 megabytes have increased to 44% of the total client base price of 27% over a year ago. ARPU was expressed in terms of the measuring unit as of March 2019 for broadband services decreased to more than ARS 8.19 per month. Price adjustment of 39% applied on average broadband plans compared with those as of the first quarter of 2018 continuously offset the ARPU decrease in real terms. In turn, churn increased slightly to 2% in the first quarter of 2019. For seasonal pay TV services, during the first quarter of 2019, cable TV subscribers decreased slightly While if your book is achieved 602,000 practical gatherings for 3 years of sales over a year ago. Finally, cable TBR puts with spreads in terms of the measured in unit as of March 2019, which in Poland 871 pesos per month in the quarter of 2019, while churn increased slightly to 1.5% in the first quarter 2019. On Slide 16, we present our consolidated capital figures showing a continuous investment effort to improve our network and quality services. During the first quarter of 2019, Telecom has invested more than ARS 9,000,000, 1,000,000,000, being this amount 3% lower in real terms at the same period of last year. Nonetheless, a consolidated amount of capital expenditures increases to 20% of total revenues from the 2019 registered in the same period last year. Furthermore, we can verify that an important amount of the technical CapEx was allocated to network and technology in the assets network, the most important company representing almost 50% of network and technology CapEx. The remaining of technical CapEx was mainly complete of installation and customer premise equipment or CPE and of investment done over our international operations in Paraguay and Uruguay. It is worth to highlight that during the first quarter of 2019, Telecom continued its efforts to improve both the fixed and mobile network. In order to achieve this goal, the company employed more than 140 sites in the first quarter of 2019 and additionally more than 850 sites were modernized and modified in corporate new frequency bands. Moreover, Telecom began to build up 600 new blocks of FTTH and 1000 blocks of two way, 1 Gigahertz at HSE network. Due to the recent evolution of macroeconomic variables, the company has decided to develop its investment plan and longer periods announced. With the objective of having greater financial flexibility and and being able to withstand the actual economic volatility passing from a 27% of CapEx of our revenue provision plan to 26% in our annual budget finally, after the aforementioned revision, further reduced it to around 22%, 21% depending on the pace of devaluation and inflation. Although it may return to a situation foreseen in the annual budget depending on market conditions. Concluding As we mentioned in previous 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 not huge projects involving large routes of investment. So it is very easy to manage the company CapEx in response to changes in macroeconomic context without harming its operational capacity competitiveness or its capacity to generate funds, meaning that the cash flow needs won't have to be stressed. Having gone through these financial highlights, now I will pass the call to Solange, who will go over our financial performance. Thank you, Gabriel. We will go over the impact that these business plans just described by Gabriel generated over our operating income. Let move to Slide 18 where we can analyze the consolidated revenues and EBITDA. For the first quarter, 2019. Consolidated revenues on current terms grew by 38%, reaching almost 42,500,000,000. When comparing in constant measuring and unit terms, revenues amounted to more than ARS44.3 billion, showing a decrease of 9% in real terms. The company has been increasing its effort on offsetting the high inflation effects this us in our macro chapter over the top line. In this sense, increasing the average cable to be Internet and mobile plans has been 39% when compared to those of the first quarter of 2018. In addition, the company is currently focusing on promoting higher usage of both fixed and mobile services focused mainly on higher mobile client capture in the Amber region, liberating in its conversion of her possibilities. In turn, service revenue grew even more reaching a 40% increase thanks mainly to a better performance of internet and intake telephony and data service revenues. Moreover, Although, EBITDA experienced lower growth, growing by 21% year on year in current terms, EBITDA margin remains stable on previous fiscal year figures. EBITDA in real terms experienced a decrease of 21% mostly affected by the performance of the top line real terms. In fact, operating costs before the position or amortization decreased of around 2% versus the first quarter 2018. EBITDA margin decreased to to 2.7%. For the first quarter of 2019, as the EBA of the first quarter of 2019, we impacted by temporary effects and one off related to the merger transaction. Please refer to Slide 19, where we show the performance of EBITDA and the behavior of the different components of revenues and costs. The company has taken actions to gain operational efficiency and manage its cost structure, and these actions have positively impacted our sustainability as we can observe how the company was able to generate a reduction in real terms of the cost structure. It is important to remind that this has been achieved while going through an integration phase of the 2 merged companies which involves the deployment of new system and processes. We can observe a positive evolution of handset costs that contributed positively to alleviate margin goals, mainly affected by a lower sellout, while cost management has delivered good results in international costs, Umbaita negotiation International International. On the other hand, commission and advertising decline is due to lower charges in Asian commuters and due to a slight decrease in advertising related to the synergies achieved after the merger that allowed to reduce costs even greater persons in media. This effect has been offset by increased in labor costs, mainly due to salary increases and greater severance payments due to the reduction of more than 1008 100 employees or 7% in total employees years over year. And but the expenses that reflect mostly the deterioration in the market situation reviewing our initial analysis. The final outcome was a 510 basis on reduction in EBITDA annual terms when compared with the first quarter of 2018, which, as we mentioned, were temporary savings and one off in advertised same labor cost and fit for service maintenance material and supplies. Let's turn to Slide 20 where we can verify the company's current operating income totaled almost ARS 4,500,000,000. The EBITDA decrease in cost and natural units that was higher than that of EBITDA can be explained by the increase in depreciation and amortization and the store on an impairment of CB and E intangibles and right of use, which increased almost 18% in real terms, over year. In addition, to higher depreciation and amortization due to the repayment of non monetary assets, the application of IFRS 16 since 2019 will have entailed an impact of more than ARS 600,000,000. Mainly because of the aforementioned increase in depreciation and amortization in real terms. Operating margin has decreased to 10% of consolidated revenues. Moreover, Telecom registered and net income attributable to the controlling companies of almost ARS 1,300,000,000, The variation of the net income when compared with the previous fiscal year can be made explained by both the previously mentioned decrease in operating income and by lower financial results explained by higher FX losses associated with the net financial debt position denominated in U. S. Dollar a lower high inflation adjustment gain reflected reflecting the positive effect coming from exposure to inflation and higher interest expenses due to the overall decrease in the net debt position compared to pesos. Having gone through the summary of financial figure, Let me pass the call to Gabriel Blasi who will explain some key figures for the year and the compensation on of telecom debt. Okay. Turning to Slide 21. We present some pro form a key figures for the fiscal year of 2019 and 2018 in constant measuring unit. Operating revenues achieved more than face of EUR 183,000,000,000 for the last 12 months as of March 2019. Meanwhile, EBITDA amounted for more than ARS 59,000,000,000 for the same period. EBITDA margin for the last 12 months period as of March 2019 was 32.2. Regarding our gross debt, as of the end of March 2019, it amounts more than ARS91.3 billion, but as the company holds an important cash and equivalents, an investment position, net debt reached approximately ARS 71,600,000,000. In fact, net debt to ETA ratio remains solidly levels of one 0.5 times despite the devaluation of the currency during the first quarter and the escalation of inflation. In Slide 3, we summarized the main milestones regarding the company's financial debt management. Regarding new debt obtained during the third quarter of 2019, in March 2019, the company entered into a loan agreement with International Finance Corporation or IFC for a total amount of up to $450,000,000 of which a disbursement for a total of $290,000,000 was received. Also worth noting our subsidiary in Paraguay Nuclear, completely successfully, an issuance of 2 series of notes for a total amount of approximately $25,000,000 with a year tenure. This issuance was also a year deal completed by our financial institution from the private sector in Paraguay. It was done in Gulf Perenias. Moreover, on May 7, we announced that the company has obtained a credit facility for an amount up to $96,000,000 guaranteed by the official export credit agency of Finland or Fincera, that's obtained an international loan at the rate that is LIBOR plus 100 and 4 basis points. Sorry, LIBOR plus one customer, a 4 basis points. When taken into consideration Argentina comes to risk with the final maturity in 2026. Finally, reflecting the active debt management that Telecom has been performing during the last quarters, we can observe that the maturity schedule going forward is continuously improving as tenors have been considerably extended. Mainly the concentrated principal repayment for year 2019 in spite of market conditions. Please move on to 24, where we can analyze the breakdown of the financial debt. As we mentioned in our previous press release, In February 2019, the company canceled the final amount outstanding of the original syndicated loan facility for a U. S. Dollar a $1,000,000,000 for its own funds. In addition, during March 2019, the company partially prepaid $100,000,000 of the outstanding amount under a term loan due to 1032. Moreover, AFC and IAC loans also started the amortization schedule, and that the outstanding debt position will reduce further to 62,500,000. Finally, the total debt outstanding of the company as of March 2019, considering the new debt operation and cancellation just described, before amounted almost $2,100,000,000, showing almost no variation when compared to 2018 year end. As mentioned in previous calls, We deem important to emphasize the manageable debt profile that the company has as well as diversified source of funds currently available. Such as vendor financing, local timelines, along with analyzing the possibility of accessing to local and international capital markets if market conditions being reasonable. And as we mentioned, I doubt debt to EBITDA ratio. In this sense, the company holds a permanent optimization policy for the term rate and structure of its financial liabilities. With this, I will open the session to questions, having conclude with the presentation. We are more than pleased to answer any questions you may have. Thank you very much. Tech. And we'll take our first question from Guillermo Aguilera from Bradesco. Please go ahead. Hi. Good morning. Good morning. Thanks for taking my question. The first one I have is, more related to the top line. And we have seen a a challenging outlook for Rio Grove considering, how how consumers are pressured And we were just wondering what can we expect in terms of real growth trends going forward and if we can expect any kind of real revenue growth for 2019 or or at least for, for later in the year. And after that, I'll have another question. Hi, well, thanks for your question. Well, in fact, it will really depend. We have made different scenarios, but it really depends on the shape. The final inflation come will show from now to the end of the year. If all the if all the provisions that are presently, I will say general consensus of the economy, really present that inflation strength becomes more normalized and began to go down. It will be quicker, the time frame that we need to cope with inflation and to fully price that inflation in our revenue. I think that a person Inflation adjustment is done almost on a monthly basis and the price increases have looked. We are not increasing prices at the same pace. But increasing prices, we'll say probably three times a year. So that means that in the meantime, you have these periods where you are not going vis a vis inflation. So through the evaluation of inflation in our own portfolio. Although when you adjust the revenues, you are showing that trend and the fact that is showing the partial, I will say a lose in real terms. Meaning that as the situation normalize and the effect that comes when you have local inflation, of increasing income in real terms from the population will help us in terms of gaining again to full recovery inflation in our revenues. If inflation continues to be high and continues to go up, that time frame will take longer. And if that's the situation at the end of the year, probably it will be harder for us to completely cope with that. Having said that, when you look at the general picture in terms of how the company has new pricing, inflation, we have been in Pizzeria, I will say pretty good. Conceering the fact that I mentioned that in one case, we are adjusting on a monthly basis. And in the other case, we are only adjusting probably on a quarterly basis for the time being. Okay, thanks. That's very helpful. My second question is on the EBITDA front. We were just wondering if how big was the impact of the adoption of IFRS 16 on the EBITDA and how margins would look on a more comparable basis and considering the the real, declines in revenue, and and also that the cost pressure seems to be are quite high in perspective. What margin levels can can we expect for 2019, and and what where are the main opportunities to to gain efficiencies? Yes. Uh-uh going to to to the 3rd part of the equation, I think that, just to be clear, I will repeat with part of the explanation. The comparison is, to some extent, that was possible because the first quarter of last year was extremely good one. We had a huge impact of the first part of the merge. And a part of that were synergies and part of that were one timers and temporary effects all that motivated as when you we are comparing with probably the best EBITDA, probably not with the best EBITDA, that we had during the last year. Having said that, going to the 2nd part of the question regarding IFRS 16, the total effect up to now has been 6 100,000,000, 600,000,000 pesos. And in a very, I will say, general drug picture because it is difficult to say. We are not quite sure how the rest of the year, the interest rate will evolve thing that we are really moving up with very strong nominal, nominal, very high ones. So really it's difficult to make an assessment on that. But just to give you some color, that might represent up to 1% of EBITDA, maybe also slightly higher than that. That will give you just a good color in terms of the of the things. And finally, you have another question. Your question had an additional answer. You've also asked for, for what will be our expectations in terms of EBITDA margin, but it is clear that the company is stabilizing upon this 130 percent devaluation and inflation over 50% that we have been suffer. We are stabilizing and still going on. This is still moving forward, we are stabilizing at a different level in terms of our operational figures. So when you look at the how the company is we probably, I will say, you should wait for the same type of trend that we went through during last year. But of course, at the lower stage, meaning that if you consider that David, the figures that we mentioned, about in the range has one timers and probably a normalized EBITDA for last year upon all these effects was in the range of of 35 or something like that. I would say, with the beginning of the synergies being put in place. Today, probably we are more on the area of 32, 32 something as a final EBITDA margin for the year. Probably, it is difficult, as I mentioned, to give you a final, a final year as nominal variables are having such a big distortion in terms of the amount of monthly variation that is difficult to give you a, I would say, a more precise outlook, but I will start from there. If you want to have a view on the rest of the year. We have a follow-up question from Guillermo Aguirre with Bradesco. Please go ahead. Hi. Thanks for taking my follow-up. On the topic of, a very strong depreciation in the peripheral. And, and, I appreciate your comment on the review of the the CapEx plan. And I would really appreciate if you could just give us some more granularity on I mean, how how the CapEx started is, for for the coming years and considering that there has been a balance with you. What were the the part of your your plan that that you were preserved more versus what, what did you kind of, had to cut a little here and there to absorb the, the currency volatility. Okay. Well, first of all, it's not an issue of foreign exchange rate. It's it's a combination because when you look at the general situation, you have a decrease in the level of activity of the economy, a decrease in the in the purchase power of the population, you have a huge increase in interest rate, but the economy turns to become overnight and a huge increase in country risk. With all that together, we haven't stopped our CapEx. In fact, if you look at at our CapEx to revenue ratio, we still are highly over our competitors in that sense. What we have decided is that we it will take longer, meaning that we have not interrupted or we have not stopped with it. So what you can expect is that We had 1 year from 12 to 18 additional months to the plan that we have proposed. What have we sacrificed? Well, mostly, although we have not yet shown that in our portfolio, what we have sacrificed is the ability of the company of going to new markets in the short run. This is a company that has improved very significantly that the existing network cameras, our NPS growing is a very direct result of that strategy by increasing our coverage and our capacity whatever we already are. But for instance, we are not deploying new sites in the southern part of Argentina. That is something that it will take longer than expected because at this moment, we prefer to strength what we already have is to provide the service to our customers as a strategy has been changed in terms of providing the way to get the best NPS and start from there as a way of pricing more. As I explained, when you look at the behavior, of the total portfolio, yes, maybe you can consider or it might be considered that we are not optimizing cash generation in the short plan. By increasing the most as we can. But we are having a very good behavior in terms of the shape and the quality of the portfolio that we are developing. As a result of the, of the strategy of bundling mobile with the perceived customers of fixed Internet, especially on cable. We are having a very, a very extremely successful result in terms of coming bringing up new customers from the best part to our postpaid mobile customer base. Of course, in the short run, This is not meaning an increase in ARPU ARPU or an increase in additional cash generation, but it is great in the days for us to allow us to do so as soon as the economy as the whole revamp. Finally, when you look at the average of the CapEx to the CapEx ratio of the company is available today. The range of 2018, 2022 is almost 20% or 15% to 20% higher than our competitors, meaning that that CapEx reduction it's not harming the competitive environment at all. And if I may add just one one question from my end, you mentioned the the migration of prepaid to postpaid consumers And we were just wanting to to have a better visibility on on how do you believe that price freezes, impacted your mobile revenue performance during the second quarter on the prepaid front. And if you have been seeing any kind of more aggressive behavior from your competitors in the commercial side with discounts or or any other type of incentives. Regarding regarding the evolution of the prepaid to postpaid in in in Canada. We are doing is very successful. It has been in the range of 90,000 customers per month during 2018 and continue showing a very positive trend during this year. Of course, again, as I mentioned, when we do that, you are not having a, it takes up to 1 year to have the ability to increase prices in a steady way. So what we are building up is the base is you are getting this customer used to be built on a monthly basis, used to be to have a a consistent payment, we have fixed frequency. All that takes time. And until that is well established, we don't begin to increase prices. That will take for each, I would say each new crop or each new group, it takes up to 12 months approximately to deliver a new capacity. And regarding I will say, I want to expect a significant changes in the next quarter upon this trend. And having said that, we are facing or we are seeing some better behavior in some indicators like the prepaid and also in delinquency rate, the market is showing like, I would say, flatter line in terms of it seems that the trend is not getting worse but instead of that, it's like the market has bought them, although it might be early to say. Okay. Thanks. That's very clear. And we'll move on to our next question from Tunde O'Hull with Harding Lovenir. Please go ahead. Yeah. Thank you very much, sir, for the presentation. Just a couple of questions for me. First is that Do you mind giving your thoughts on, your level of pricing power that you have, you know, across, the product? Given, the price control that has been announced, by the, by the government, recently. You know, does that in any way impact? Some of your products, I mean, if if so, which ones are impacted, that is it, and how does that future to your ability to, increase prices, you know, to sort of, compensate for the rising cost pressures that you experienced. The second question is on labor labor cost. Do you mind giving some sort of split between what is I have one off, maybe severance payments and then sort of the involuntary restructuring that you may have in that line item and and and what is sort of recording, in that cost base because it seems to be the largest, dragon on yours, and we can imagine, year on year. And and maybe in addition to that, we'll talk a little bit about sort of wage inflation that you've agreed with your staff for the year and on what to expect on that line item. And the last question for me is on, the synergy. That you announced during the merger with the commission. Are those measures? Are those synergy measures come through at all? Uh-uh, and if so, can you sort of quantify, what levels of experience, or have you been interested about it? How am I working on the environment? Just just interesting, we'll get an update on that. Price control at present at all. What has happened at least in our case, my billing situation has been different for certain products. Will serve the basket at supermarket level. But in case of our services, what we have done is we have agreed by a very specific group of customers, low income people is to leave a special condition for a certain period, but I will not tell it's a price control at all. And the it doesn't imply any specific regulation. It's just a way to take care of our own customers. Going to your second question regarding the different level cost composition, I will say, well, the big part of the big part, the advantage of the, of the, of the, of the, is the payroll. You have you have, like, like, one timers, I will say, probably it's like the 15 to 20%. In this case, no more than that. In this case, you have like more in the range of 10% of the total, sorry for that. I'd say 15%. In the first quarter, you have the effect of the, of the volume payment, which implies additional one timer. And the reason is that, because of the inflation processes, and because of the obligation of a sharp percentage is going to slightly over budgeted. In terms of the general picture for the year, or this is a process that is taking place, meaning that we are in the middle of that discussion, for me, will be really unfair to give you today some color about that because we are in the middle of the cash flow, although we have achieved last year, the success in terms of putting a single agreement between the 7 different unions that we have at present in the company. The way all that is reflected in each particular case might differ or might bring some misunderstanding what is fixed for it, but at the end, we move very, very similar with all the employees of the company. In terms of adjustment. What I can tell you advice in general is that this is not speaking from telecom specific case, but we knew some color on what has been the evolution of salaries increased in Argentina against inflation in this type of environment. Typically, this processes means that in the short run, you have like a gap between 5% to 3% in the inflation index in the medium run. This is not specifically in case of telecom. What I'm referring is that if you take the general waste in the seas, and you compare that with the inflation in the long run. That's the type of situation that you get to give you some color for any projection. Yeah. I'm regarding I'm sorry. I'm regarding regarding synergies that was not that are part of your question. Well, of course, we materialize a lot of them. It's very difficult. Really, this is a very difficult question. And the reason is that because of the huge transformation in terms of the nominal value of all the variable is very difficult to specify unless we have other unit to give you a comparison. For instance, in terms of interconnection cost at network level, we have achieved very specific synergies because we have dropped certain type of connections. We had a different bargain process with our suppliers. So, and from there, we have several examples beside the synergy that we have in terms of our human resources costs. But we are what I can tell you is that we are going there. We are achieving them implementation of our systems of the new systems. Have a lot to do with this just to give you some some considerations. Remember that a fund will allow us to provide a single billing. Now we provide 4 different type of billings We have different call centers paid to those customers achieved to each business line. All that is yet to come once we complete the go live of all the system. In the case of the lack of the same situation happens with, for apple implementation of is for Hannah and all what happens in the surrounding of SAP in terms of new system. We are we are implementing concealed for all the travels and operations related to the picture, which is in the street for the company in different cities. It covers a huge part of our population. Also, we are implementing or in the process of defining implementation of Ariba for the for the all the all the procurement. So really there are like many, many steps that are taking place Of course, when you ask me to give me a synergy today, it's very difficult to give you a number as of today and in the middle of where we have movements of salary cost of more more than 20% per year. But, believe me that the company is really, it's really working towards a direction and it will deliver. Probably it will take at least this full year to have a clear view in terms of the type of synergies that we can get from there. By the end of this year, we should have a much better picture and map of the implementation of each of each one of the systems what it will imply in terms of resources that are, that are a freezing or that we have, we can devote to a different to a different proposition or a different activity within the company. Sorry not to give you a deeper color on this but this is a work in progress. Believe me that the cost is one of is one of our biggest concerns. And we are very focused towards achieving additional efficiencies. That's very helpful. Thank you. Just a quick follow-up for me on the called today. Just wanted to get an update on the implementation or launch of that. Maybe if you could provide me any numbers in terms of, you know, both your customers, who are on court already, or what what's the level set as a progress on on that? Front? Well, in terms of testing the market, we are already there with daily minor proofs, but in terms of having they quite play full capacity in a way we go to the customer and in a way that we have relationship with them. Because of our CRM, you will begin to see some proximity to that by the end of this year, probably in the last quarter. Although we have like different stages of going live of a different part of the system, after the end of the year, you will not see a complete picture that you you will, from the other side, as a customer, you might say, oh, I'm I'm call play. When we are referring to call play, and meaning that having, I would say, digital platform in your mobile, that would allow us to manage all the services that the company will provide to you and to have a single building. That will take at least the rest of this year to be completed. Although we are going to deploy different stages of the system during this year. Got it. Thanks. And just just the last follow-up on the labor cost due to do you have a number for the amount of, severance payment that you had this year and it's at this quarter. Sorry. And is that something that is still ongoing? Sorry. Up to now, yes, you have that in the financial statement. On the on the on the on the 22 note, operational costs, you're having a specific item label cost and and and civilians, payments, you have the details. And, I think that what you see now up to now is a good proxy of what you can see for the rest of the year. And there are no further questions over the phone? Okay. So thank you very much for participating in our quarterly conference call. Please do not hesitating contacting our investor relations department for any further employers you may have. Good morning to all. Have a nice day, and we expect to meet again soon. Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect.