Earnings Call: Q4 2018

Mar 8, 2019

Good day, everyone, and welcome to the telecom Argentina, TEO Fiscal Year 2018 Earnings Conference Call. Today's call is being recorded. Participating on today's call, we have Mr. Gabriel Blasi, Chief Financial Office sir, and Mrs. Solange Barti Denin, Investor Relations Manager. At this time, I'll turn the call over to Solange Salange Barti. Please go ahead. Thank you, Lauren. Good morning. On behalf of Telecom Argentina, I would like to thank everybody for participating on this conference call. As stated by Lauren, the purpose of this call is to share with you the results of the 12 month period ended December 31, 2018. 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 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 replaced through this same channel. Before we continue with the conference call, I would like to go over some say, harbor information and other details of the call as we usually do in this type of events. We would like to clarify that during the conference 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 Telecom's actual results as operations to differ materially. Such uncertainties include, but are not limited to, be a set of ongoing industry and economic regulation, possible changes in the demand for telecoms products and services and the effects of more general factors such as changes in general market or economic conditions in legislation in origination. Our press release dated March 7, 2019. A copy of which was included in the Form 6 K report furnished to the SEC, describes certain factors that may affect any forward looking statements 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 as seen in slide 3 is first go to over a general macro overview. Then moving on to our strategy, which will be followed by the discussion of our business highlights and immediately we will go into the evolution of our financial figures. Finally, we will end the call with a Q And A session, I'll take his customary in our quarterly calls with the financial community. Having gone through these procedural matters, Let me pass the call to Gabriel Nasse, who will go over brief characterization of the macroeconomic context in which we operate. Thank you so much. Good morning, everybody. Please refer to Slide 5 where we include the summary of the evolution of some macro variables in Argentina regarding FX rate, inflation and monetary policy. During the 1st 4 months of the year, the peso depreciated at the low rate of 10% approximately. In a movement that the market caused their normal laptop to that stage. Monthly inflation was relatively stable We only added 2.3% compound rate, while interest rates were also hovering at levels of 22%, 23% annual. Noninterest, some degree of concern was present due to the high accumulation of central bank of central notes, the bank's registered and also due to the fact that in turn, these instruments have lost some of their monetary regulation purpose, becoming an extended investment vehicle. And in context, a combination of external and local factors began to interact, increasing the level of volatility in exchange markets. Strong pressure depreciation was registered from May to September, defining a currency event. In this context, The Central Bank exercised heavy intervention in an attempt to contain the foreign currency demand, while also committing to reduce the cumbersome stock of its deduct notes. Which were reduced strongly in U. S. Dollar terms. In addition, the Argentine government negotiated a standby agreement with IMF mark on June 20, 2019. Meanwhile, inflation was considerably affected by transport and utility tariffs increases as well arises in food and beverage prices, which were impacted by the FX evolution registering a peak in month over month, increasing September 2018. Finally in October was announced a reformulation of the monetary policies team, which included extreme control of monetary aggregates and introduction of a set of floating bands that define a non intervention zone of the Monetary Authority. These measures, along with the modification of the IMF agreement, ultimately led to some relief from the Turbulex experience in exchange markets. Interest rates remained at high levels for the last month of the year, while inflates slowed down from abnormally high levels registered during the currency event. Nonetheless, the levels of inflation experienced in Argentina during the past 2 years 3 of the classifications of Argentina as highly inflationary by the ESSB standards and thus the application of inflation accounting determined by IAS 29. Turning to Slide 6, we can observe the behavior of activity and consumption during the stage defined previously. In relation to the economic activity and after the starting of the we are encouraging growth forecast during the 2nd quarter aggregated output decreased rapidly due to a strong underperformance in agricultural activity which was affected by climatic factors and due to the recessive effects of the currency event and a strong monetary tightening. Industrial site, the production also suffered an increase, plunging deeper into the resets in situ and accelerating the pace of contraction during the last month. According to last available data, the economy contracted around 2.6% during 2018. While looking at unemployment figures, although can we know that there was a rise in the year, it is expected that it should not suffer integration significantly higher remaining at a rational level when compared with other strong economic downturns in Argentina's history. Lastly, higher volatility in economic variables and the rise of inflation have impacted overall household consumption, which is expected to remain depressed due to adverse impacts of inflation or real income and due to the high uncertainty captured by local consumer confidence readings, which in turn have fallen significantly. As a summary, telecom industries are considered defensive in nature, although they are not immune to changes in economic cycle, notwithstanding the challenging macroeconomic context just described, Telecom Argentina has managed to generate solid operating profitability when compared to the past year figures. Having on through this introduction of the macro, I will go over strategy and business highlights sections. The merger between Telecom and Caledacion was considered an inverse acquisition under IFRS III business combinations. With Cablevision being the surviving entity for accounting purposes. Thus, for the purposes of preparing the consolidated financial statements Teleco, Argentina as of December 31, 2018. The comparative figures as of December 31, 2017 correspond to those that arise from the consolidated financial statements of Cablevision restated by inflation in terms of a constant measured unit of December 31, 2018. And second, the corresponding information for the annual period ending December 31, 2019 incorporates on the basis of figures corresponding to Carlosian, the effect of the application of Telecom Argentina's method of acquisition added as its fair value accordance with the IFRS 3 guidelines and the operations of Telecom, Argentina as of January 1, 2019. Moreover, the company has accounted for the effects of inflation adjustment enforced by the Commissioner National De Valores or CMB which establishes that the restatement will be applied to the annual financial statements for intermediate and special period ended as of December 31, 2018, inclusive. Accordingly, the reported figures corresponding to fiscal year 2018 include the effect on the adoption of inflationary accounting in accordance with EAS 29. On the other hand, in order to ease the understanding and analysis of the earnings evolution by its users, we present additional information containing figures non adjusted by inflation, which was used as the base for the information presented in constant pesos, a coaching on pro form a basis, the comparative figures from fiscal year 2017, as if the merger between telecom and Cal region has been a till as of January 1, 2016. Additionally, and with the aim to reach a better understanding the figures presented on our press release, We encourage our financial community to consider that we're using combination with this earning presentation. Turning to Slide 8, we can consider the strategic approach that the company had at the beginning of the merger process. At the beginning of the year, objective of the company was to become a convergent Quantplay provider as well as an Net Promoter Score leader, being this indicator, a proxy of the overall class customer satisfaction with the service. To achieve this goal, Telecom was focused on 3 main pillars, decrease of coverage and the capacity of the network. The convergence of systems and the transformation of its culture. Moving into Slide 9, we can illustrate how the company performed in order to fulfill the aforementioned goals. In this sense, we have reached some important milestone as of today, Over the coverage at network capacity front, the deployment of mobile sites have been the greatest in the history of the company. We continued with extension of our FTTH and HFC network and we carried out a special project with the labs in the definition of our preferred network, related to our convergence systems and services pillar, we have achieved an important goal as we completed the first stopes towards the convergence of systems with implementation of central finance and central payment, which was awarded the best SAP implementation 2018 worldwide and started with application of our fund project, our related CRM and billing system. As our culture, not only defines who we are, but who we want to be. For this, the company focusing on the personal and professional development of its collaborators, defining clear cultural principles on fostering leadership abilities evaluating the satisfaction of its employees, negotiating a new convergent labor agreement and promoting integration of diverse teams across the organization. Moving to our business highlights, we can see where we are positioned today in terms of the businesses. Please refer to Slide 11, where we highlight some of our key achievements. During 2019, Telecom's revenues totaled ARS 168,000,000,000 decreasing 2.5% year over year in real terms. This decrease is mainly due to the increase in fiscal year 2017 revenues as a result of its raised statement to the fiscal year 2018 currency, which considers the accumulated inflation of 2 annual periods. Operating income D and A totaled ARS 56,400,000,000 implying a 33.5 margin over revenues, achieving a challenging economic context. In addition, fixed voice ARPU and broadband ARPU were up to MXN 623 per month, respectively. Meanwhile Pay TV ARPU reached C 96 Pesos and mobile ARPU reached MXN 174. Moreover, in relation with our subscribers, mobile subs in Argentina amounted to $18,600,000 of which $12,200,000 were 4G clients. PayTV subscribers remained stable amounting $3,500,000, fixed broadband subs total $4,100,000 and fixed voice lines totaled $3,500,000. As for the total customer base, we can observe that it remains stable in relative terms. Increasing revenues is driven mainly through the growing use of telecommunication services, which increasingly affect the daily life of our customers thus allocating a relative stable portion of their income for these services. Finally, our regarding corporate matters, it is important to mention that on December 28, 2018, the local regulatory agency, CNB established the method to restate financial statements in constant currency to reapply the issuer subject to its oversight. In accordance with year 29 4 years of our period ended as of December 31, 2018. Turning to Slide 12, we can observe the revenues breakdown where mobile services business still hold the main participation of our telecom revenues followed by broadband and pay TV. We can highlight that the current revenue mix as a participation of mobile revenues of almost 34% followed by broadband revenues that apart from representing near 23% show a fast growing rate as well as pay TV revenues, which accounted for almost 82% participation. In turn, fixed telephony and data represented around 14%, while devices achieved almost 8% of the total revenues. When compared with the fiscal year 2017 consolidated results, we can see that revenues decreased by 2% year over year in real terms. Reaching AR168,000,000,000. As we already mentioned, mobile and broadband are the segment that mostly contributed the total revenues composition, generating revenues of ARS 57.8000000000 and ARS 37.7000000000, respectively. In addition, FITB Revenues totaled ARS 36,100,000,000 followed by fixed data and data revenues with the aggregate amount of ARS 23,200,000,000. To a lesser extent, we can highlight the contribution of handset and others with ARS 12,800,000,000 and ARS 500,000,000, respectively. It should be observed that in general terms, the company's revenues are catching up with the acceleration in the inflationary context that we refer on our macro chapter, while the recovery in dollar terms should take a longer period of time. We will go in some details in the following slide. In Slide 13, we will go through the evolution of the company's mobile business in Argentina. As intensity and data usage continues to increase, we can observe that there has been a substantial sustained growth in postpaid subscribers which represent our high value mobile segment. As of December 2018, the company achieved the greatest postpaid flow share in the market, as the postpaid subscribers accounting for 31 percent, 39% of the total customer base up from 35 compared with the same period of 2017. In this sense, the intensity of mobile internet usage continues to increase which as of the fourth quarter 2018 has reached an average of more than 3.2 gigabytes per user per month which is 54% higher than in fourth quarter 2017. 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 12,200,000 as of December 2018. This rapid growth in subscribers that use the 4 g network has been the driver of increase in data traffics in 2015. Currently, the coverage of our 4 g network reaches around 1530 locations and increase of almost four hundred locations year over year. We can observe the differential in mobile internet usage as mobile internet connection speeds increase as gigabytes per user per month from 4G users than almost 1.3 gigabytes about 3G users. Please turn to Slide 14 where we include a review of our internet and pay TV service segments which aim to differentiate and upscale through an enhanced customer experience. Related to our broadband segment, we can point out that the numbers of subscribers grew more than 50,000 year over year achieving 4,100,000 users. The aforementioned increase in subscribers was supported by the offer of higher connection speeds. As a consequence subscribers with a piece equal or above 20 megabytes have increased to 40% of the total client base. Versus 23% over a year ago. The Mention effect alongside with price adjustment applied contributed to the ARPU growth. In this sense, during the fourth quarter of 2018, the ARPU for broadband services increases by 34% to almost AR 6.77 per month focusing on pay TV services during the fiscal year 2018, cable TV subscribers remained stable while flow boxes achieved 550,000 more than 1,000,000 subscribers were using the flow application as of December 2018. Increasing notoriously from figures observed 1 year ago. Moreover, cable TV ARPU reaches almost CAD7.61 per month in the fourth quarter of 2019, up 34% from same period last year, while churn stood at 1.4%. On Slide 15, we present the consolidated CapEx figures where we continue to focus our efforts to give our competitive advantage in terms of connectivity. During fiscal year 2018, Thericom has invested more than ARS 42,400,000,000. Being this amount 6% higher in real terms at the same period of the year. The consolidated amount of capital expenditures represented 25 percent of total revenues, increasing from 23 registered in the same period last year. Furthermore, we can verify that an important amount of the technical CapEx was allocated to the access network, of which mobile access represented 60% followed by fixed assets with 31% and others accounting for the remaining 9%. The remaining of technical CapEx was mainly comprised of upgrades over our IT infrastructure and the transport network and of investment than our international operations in Paraguay and Uruguay. It is worth to highlight that during the full year 2018, the recon continued with its efforts to improve both the fixed and mobile network, In order to achieve this goal, the company deployed almost 900 sites during 2018, recording the highest deployment in its history. Moreover, the recovery of the development of each network through the stem cells of each HFC FTTH to more than 235 home pass. Additionally, during 2018, telecom through nuclear started the deployment of FTTH in Paraguay. When we look at the geographical deployment of the sites, we can notice that the company focuses for improved the quality of its mobile services in the Amber region. Which concentrates the greatest portion of the population in Argentina. Having go through these business 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 positive business trends just by Gabrielle generated over our financials. Please turn to Slide 17, where we present a summary of the effects of the of inflationary accounting in accordance with the F-twenty 9. F-twenty 9 established the conditions under which an entity shall restate its financial statements if it is located in an economy economic environment consider hyper inflationary. These standards require that the financial statements of an entity that reports in the currency of a highly inflationary economy shall be stated in terms of the measuring unit current at the closing date of the reported year regardless of whether they are based on a historical coast abroad or a current coast abroad. To determine the existence of a highly environment inflationary economy under the terms of US 29, the standards detailed a series of factors to consider, including accumulative inflation rate over 3 years that is close to or exceed 100%. It is important to highlight that the 3 years accumulated inflation rate as of December 31, 2018, which 147.8 percent. As a consequence of the RFO mentioned, the financial statements as of December 31, 2018 of Telecom Argentina were restated in accordance with the provision of US29. The company restate all the non monetary items in order to reflect the impact of the inflation adjustment reported in terms of the measured unit current as of December 31, 2018. Consequently, the main items received were property, plants and equipments, which includes the considerable position that Telecom holds in real assets such as commercial offices that are central, clinical basis, card, mobile sites and corporate buildings. Intangible assets, including goodwill, inventories, certain investments in subsidiaries, and the equity items. Each item must be restated in the date of the initial recognition in the company's equity or since the last revaluation. Monetary items have not been restated because they are stated in terms of the measuring unit current as of December 31, 2018. As far as with total concern, there was an increase in amortization and depreciation arising from the repayment of non monetary assets and an improvement in financial income and expenses due to the positive results of exposure to inflation from the excess of monetary liabilities over monetary assets with the consequent impact on income tax. This positive return from exposure to plate can be found within the financial results item in the income statement. Let's move to slide 18 where we can analyze the consolidated revenues and EBITDA. For the fiscal year 2018, consolidated revenues on current terms grew by 13% reaching more than ARS 137,000,000,000. When comparing in constant measuring unit terms, revenue amounted to more than ARS 168,000,000,000, showing a slight decrease in real terms. This reflects mainly the effort that the company has been putting through on offsetting the high inflation effects discussed in our macro chapter over the top line. In turn, service revenues grew also by data services revenues followed by mobile internet services. Furthermore, EBITDA showed a strong evolution growing by 32% year on year in current terms, while in real terms, EBITDA achieved a growth of 3%. EBITDA margin expanded substantially in real terms by 180 basis points to 33.5 percent for the fiscal year 2018. As we have concentrated in improving our revenue quality and profitability, driven down operating costs before the position amortization by 5% when accounting for inflation. 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 this action have positively impacted our profitability as we cannot how the company was able to cope with the cost structure and generate a reduction in real terms. It is important to remark that this has been achieved when going through an integration phase of the 2 merged companies, which involves the deployment of new systems and processes. We can observe a positive evolution of labor costs over which the company is focusing heavily alongside with fit for services, maintaining our materials, which in turn were affected by lower network maintenance costs. Additionally, handset costs contributed positively to EBITDA margin growth, mainly affected by a lower sellout, while costs management has delivered good results in interconnection costs through better negotiation in an international interconnection. These effects have been partially offset by increases in programming and content costs, which are in part dollar related and other costs, which include bad debt expenses. The final outcome was the 180 basis point expansion in real terms just described before. Let's turn to slide 20 where we can verify the company's current operating income total more than 24,000,000,000 with a 24% increase year on year. David growth in constant measuring units that results higher than that of EBITDA can be explained by slower growth in the grid of depreciation and amortization and disposal and impairment of PP and E, which decreased 5% in real terms year on year. Here, we can observe that inflationary effects over EBIT figures has turned negative as constant figures are lower than current ones because of the increase in the precision and amortization and as a consequence of the risk payment of non monetary assets. In real terms, Operating margins improved to 13% of consolidated revenues, increasing 300 basis points when compared with fiscal year 2017, showing that the company was able to achieve solid operating performance through the course of this year. Moreover, Telecom registered and net income attributable to the controlling company of almost ARS5.3 billion. The variation of the net income when comparing with the previous fiscal year can be mainly explained by higher FX losses associated with the net financial debt position denominated in U. S. Dollar and higher interest expenses due to the overall increase in the net debt position, which were partially offset by a higher inflation adjustment gain reflecting the positive effect coming from the disposal to inflation that we discussed previously. Moreover, And due to the positive evolution of net income and equity discussed before, the board of directors proposed to the shareholders meeting the distribution of cash dividends up to ARS 6,300,000,000. It is important to highlight that this proposed of distribution correspond to figures in constant currency as of December 31, 2018. But according to CNV research it must be treated in the currency of the date of the shareholders' meeting. This implies that shareholders' meeting that decides upon distribution of dividends will determine the final amount to be distributed. Having gone through the summary of financial figures, Let me pass the call to Gabriel, who will explain some key figures for the year and the composition on Telecom's debt. Thank you so much. Turning to Slide 21, we present some pro form a figures for the fiscal year of 2018 2017 in constant measuring unit. Company's revenues achieved more than ARS 168,000,000,000 for fiscal year 2018. Meanwhile, EBITDA amounted more than MXN 56,000,000 for the same period. Moreover, EBITDA margin reached 33.5%. Regarding our gross debt as of the end of 20 17, it amounting more than ARS 79.3 billion But as the company holds an important cash and equivalents and investment as an amendment position, net debt reached more than ARS65.6 billion. In fact, net debt to EBITDA ratio remained solid despite the significant devaluation of the currency that reached 102% in 2019. Cancellation of inflation and the relocation of the minimum wage to the pacing of services. Please move on to Slide 22, where we can analyze our maturity schedule. As we mentioned in our previous release, in October 2018, the company refinanced $500,000,000 from the syndicated loan due to 2019 through a new term loan agreement due 2022. Additionally, $100,000,000 of the original syndicated loan were prepaid using the cash position of the company. Leaving a total amount of outstanding of $400,000,000. Moreover, in November 2019, the company was notified entering to a loan agreement with Deutsche Bank AG London branch for an amount of up to $300,000,000. Furthermore, it is worth to mention that in February 2019, the company canceled the final amount outstanding of the original syndicated loan U. S. 100,000,000 with its own funds. Also worth to remark that 2 days ago, we announced that on March 4, the company has entered into a loan agreement with International Finance Corporation or IFC, for a total amount of up to $450,000,000 to finance capital investment for 2019. As mentioned in previous calls, which is 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 bank lines and access to local and international capital markets for the coming years. And as we mentioned at the loaded EBITDA ratio. Moreover, the company holds a permanent optimization policy for the term, rate and structure of financial liabilities, and it's always analyzing possibilities on this front according to the evolution of market conditions. Finally, turning to Slide 23, I would like to mention, which have been the greatest achievements of the company during the last year. Despite the adverse macroeconomic environment, the recom was able to increase margins while achieving an ambitious CapEx plan for the year. It is worth to highlight that the plan could be carried out due to the fact that the company was able to obtain the necessary funding through different sources. And at reasonable rate. As a result, we could see an important NPS improvement, mainly in our mobile services. Related to the merger, we should stand out that during 2019, the company has made an enormous progress in integration of its is accomplishing the implementation of central finance. The best SAP implementation of 2018 worldwide while negotiating a convergent labor agreement. Last, and not least important, the incumbency great effort to start a culture of unity and compromise among its employees. Finally, I would like to add regarding this last chart. The company has shown its ability to pass the inflation in this very strong environment. Showing a very significant resilience in its balance sheet and a strong hedging capacity against the valuation impact. Also, we were able to grow EBITDA by 3% in real terms. And keeping the debt between the target that we established priorly. With this, I will open the sessions to questions, having conclude the presentation, we are more than pleased to answer what you may have. Thank you very much. Thank you. We'll take our first question from Rodrigo Belanueva with Merrill Lynch. Thank you. Good morning, Gabriel Solange. My first question is related to other operating expenses and bad debts. We saw a significant increase in the 4th quarter And we would like to know what is behind this strong increase. What would you expect going forward? Then the second question is related to the integration process with Cablevision. You already mentioned that in 2018, you made significant achievements regarding the implementation of the combined system for 2 companies. And I was wondering if you could give us some details on what to expect in 2019. Okay, regarding thank you, Rodrigo, for the questions. Regarding the mentioned that you made on other operational expenses there, you have mainly the impact of the public services of all the utilities, which are related to the very high increase in tariff that Argentina is moving on for the last 2 years. Just as an example, when you compare the weight of, although it's a different measure, but just to give you an idea of what that means when you compare the impact to minimum wages of these increases, they have gone from 5% of the total disposable income to 30%. That reflected on the corporate side, reflects energy increasing cost, which affects, for instance, all the sites operation. And also, you have there impacts of other type of expenses related mainly to these Regarding, you made some comment on the bad debt. If I didn't get you right, yes, it is true that the company has suffered as all the Argentine environment, an increase in the evolution of the bad debt. But I would like to mention that we have a situation which is better than the financial system. The budget ratios of the company compared to the budget ratios of the banks are better as of November 2019, which is the last recorded in public information on Banco Central regarding but that prior sector that is represented 3% in our case. We are much, much better than that, at least 30% better. Finally, You may also, regarding the expectation of 2019. Well, first of all, I would like to stress again that the company is delivering what compromise is. We were able to keep cost control during a very tough environment in terms of inflation. We're able to pass through inflation to the total income, we have been able to protect our balance sheet and the result is a very clear example of that. In spite of having a $2,000,000,000 debt, we have a positive result. In terms of the integration, we continue to get a much more efficient, just to give you some color we are in the process of deploying the new processes that we are designing together with a center and Pricewaterhouse and SAP among others on the back office, meaning that, that will change very significantly. Many of the processes of the company, including robotization and other features that I see. We have more than 100 initiatives under study today. And probably during the next 60 days, we are going to define the order in which those initiatives are going to be deployed. That includes from the complete automation of our suppliers portal, important changes in our supplier management, enhancement on the working capital, just to mention a few. Regarding our front, regarding our CRM, well, last year, we haven't almost just deploy a very small test of it. During this year, the company will receive the full impact of the new CRM. In terms of getting the new billing system and the capacity to begin to deal with our customers on a quad play base. We have made some tests, a small proofs, not of what play yet. We are starting as you may recall, we weren't able to do that in the prior year. Now we are allowed to. So we have started to make some very promissory test on that. And you will begin to see in the next month, the full deployment of the new system which by the end of the year will leave the company big data capacity, which is something that almost an existence in Argentina with very few exceptions. In terms of our CapEx plan, we continue to to put a very strong amount of money, the company plan for this year, assuming that a situation is under an and our budget considerations, which are pretty similar to what we are seeing today is that we are going to invest near $1,100,000,000 continuing the improvement of our coverage of our capacity of our mobile, showing the increase in NPS of our gas which we already know, and there's a lot of track on that, that allows the company to sustain and increase the income by providing EBITDA service. Probably, we will continue to get a more efficient structure. As I mentioned, we have signed a convergent agreements with more of the unions that would imply very strong efficiencies. For instance, in terms of the availability in terms of time frame from some of our employees that weren't allowed because of those old agreements to do so. And that, that would allow us to improve the service by having a much better capacity to provide a continued service to our customers. I don't know if there is I think also that I would like to add Rodrigo if you allow me is that we are fully conscious that these financial statements are very difficult to understand, and we strongly appreciate the efforts like you and others of your colleagues are doing to cope with the inverse or reverse merge with the inflation accounting altogether. There are very, very few examples in the world. We are more than open to have all the necessary debates with all you and our all the investor community to assure that you can fully understand what does it means and what are all the implications that this change in the regulation implies in the company. Just to mention, remember that from our last call, our historic balance sheet was showing a loss of near ARS 20,000,000,000 and in a single quarter, the that we turn around that to almost ARS 6,000,000,000 in favor. That's very important to remark. And I think that if you need any further clarification from our side, all the team is ready to answer all type of questions about this. Also, I would like to add that we are planning an Analyst Day in the near future, that we are going to devote a specific timeframe and speakers to discuss about the strategy of the company and also to help you to get a better understanding what this new metrics means for Argentine Incorporated Environment. Okay, Gavin. You very much. Very clear, and thank you very much for your disposition to help us understand better the new accounting implement the company. Our next question comes from Andre Baggio with JP Morgan. Hi, good morning. I'm interested in the prospects of free cash flow for the company. So if you could talk about CapEx for 2019. And then what's the do you think that's going to be the route for a higher cash flow in the future? Hi. Well, regarding our CapEx for this year, the 1,100,000,000 we are not considering to increase our situation, furthermore the situation that we have today. So the company will comply with this with this CapEx with its own cash generation. Having said that, of course, that implies I will say a certain level of a vis a vis moving together inflation pace and the evaluation phase because we are not foreseeing for this year, a significant movement in that direction. That might change our CapEx stands. Also, it's important Antonio to recall that, and sorry, for the mistake, that to recall that our CapEx is completely modular in a way that we can adjust it very rapidly in any direction. This is that we are not committed to a single operation of CapEx in a way that we are not deploying $1,000,000,000 be fulfilled in 5 years. But on the contrary, we are putting very small pieces of CapEx of $200,000 $500,000 which implies that the company in 60 days can move accelerating or decelerating the CapEx plan very easily. And that provides us with a lot of with a lot of muscular in terms of managing the volatile. Regarding vendor financing, we are in the process of getting additional support of our vendors. You know that we have a very strong relations with some of them. And I cannot yet make any additional disclosure on this, but we wait from some, probably a good news about this situation in the near future. According to conversation that Juan, the rest of the team is carrying out with many of them in very positive situation. That would allow us to even in a process where the market can continue to be closed will allow us to fully finance our CapEx. In terms In terms of the market situation and being closed, it's important to address also that as you have seen, the company has been willing to refinanced in the last 100 days, more than $1,000,000,000, almost $1,600,000,000. And although we've been being offered and we have certain reverse inquires regarding our ability to issue some security. We haven't done it yet, mainly because until the market doesn't stabilize we are we don't want to establish a rate that will be unfair for the company. If you can see that we have a refinance all these $1,300,000,000, about 200 basis points below the sovereign. That puts a very good benchmark of of what our intention on that. In terms of cash generation, as I mentioned, we are on track we we are within our our plan. And we don't foresee for the time being, any significant matter to mention in there. It's important to address that this will depend. Of course, of that the economic environment in doesn't deteriorate much, much stronger, especially on the on what we have mentioned about bad debt, what we have mentioned about the income, income availability of the low customers in terms of giving us the possibility of continue growing as we have been doing up to now. But if situation gets much, much worse. Of course, that might mean that we might decide to invest some extent in keeping customer base instead of keeping growing in EBITDA margin as we have been up to now. Thanks a lot for the detailed explanation. If I may follow on. I'm sorry. I made a second question unrelated. Can you talk a little bit about competition, especially in the broadband sector? Because, like, say, when you're a go, we hear that other competitors, like, say, we're trying to deploy some fiber to the home, and in the past, like, say, telecom margin didn't have the, probably a better position in terms of her being the leader and so on, but is this leadership being attacked, do you have some meaningful challenges coming from the likes of America Movil from Telefonica and others? Well, yes, it's true that there are certain attempts of competitors to deploy fiber and in very specific areas, small areas that has been done by Telefonica also America Movil, another small players like telecenter, but they are very focused in small areas. For the time being, there is no like, I will say, some some type of big investment that may harm in a significant way. Our competitiveness there. Imagine that it took a Cablevision at least 15 years to deploy the fiber network that it has And if you compare the network of the old telecom company was very comparable, the fixed network to telephonic itself, So to replicate the positioning and the quality of the network that can deploy in the last 15 years. It's not only a matter of resources that although our competitors may have, they are not deploying at the same pace that we are in Argentina today, but also to the time to do it. So yes, it is true. They are scattered at terms of increasing the fixed networks, but they are not yet a significant risk for us. Perfect. Most of you are asking process. Our next question comes from Guayarmeh Haguagadia with Bradesco. Hi. Hello, Gabriel Solange, and thanks. Thanks for taking my question. We were just trying to understand better how margins could trend in 2019. And if I can divide it into questions. In terms of revenues, how can we expect real revenue growth in 2019? Considering the continued macro and political headwinds in the country, and on a second derivatives, how can you, keep costs and expenses under control, seeing high inflation as we saw in 2018, you did a very, very good job in terms of achieving real EBITDA growth despite the top line impression. Thank you, gentlemen. Well, probably what you have mentioned is one of the biggest challenges that we have for the next year. In a way, I think I didn't clarify it completely, but as you mentioned, it will depend probably our ability to grow in terms of margin EBITDA. We will be very tight to what you have mentioned in a way that if the market continues to deteriorate, which by the way, you have like a different behavior in Argentina here what is industrials and other type of concentrations. Industrials is really going down, it has gone down very deeply, but on the rest of the consumptions, you are beginning to see some flattening in the processes. Also consumer confidence has shown on a slight, a slight, also a slight change on the positive side. Having mentioned that, we will adapt in what in what way, if situations deteriorate for any reason. And that might mean that the company might choose not to continue to grow in terms of EBITDA margin but keeping the same margin and keeping our customers happy, which is the most important thing for us in the long run. If the situation requires different behavior, we might change pretty easily and put more speed in price adjustment and grow margins and invest less in terms of a, of a widening our customer race. Having said that, it is true that the cost will represent a very significant challenge this year. Is also expected. Remember that last year, we have a very important part of our CapEx not related to dollars. So that last year and as we mentioned on the first question to Rodrigo, to Rodrigo, the implications of the evaluation have been very strong in many ways. This year, we think that we will have a more aligned situation between the peso and the dollar And that might help in some way to deal with the cost structure. But of course, inflation impacts in terms of cost will be significant. Also, it's important to address that in general terms for all the economies that are specifically for telecom, But in this high inflation environment, you always the corporations tend to receive some additional saving in terms of salaries increases. Although this year, this might be more challenging because what you have mentioned regarding the political environment. This has been an election year. Okay, okay. Thanks. Thanks. That's interesting. And we have no further phone questions. I'd like to turn the conference back to solange Barthe for any additional closing remarks. Thank you very much for participating in our quarterly conference call. Pleased to not hesitate contact in order for better relations department for any further inquiries you may have. And of course, we will be more than pleased to you participate in the Analyst Day that we will arrange. We wanted to all have a nice day and we expect to meet again soon. And that does conclude today's conference. We thank you for your participation. You may now disconnect.