Earnings Call: Q3 2018

Nov 9, 2018

Good day, everyone, and welcome to the Telecom Argentina CEO Third Quarter 2018 Earnings Conference Call. Today's call is being recorded. Participating on today's call, you have Mr. Gabriel Blasi, chief financial officer, and Ms. Salan's Farthi Denon, Investor Relations Manager. At this time, I'll turn the conference over to Ms. Salan's Farthi Denon. Please go ahead. Thank you, Brian. Good morning. On behalf of Telecom Argentina, I'd like to thank everybody for participating of this conference call. As mentioned by our moderator, the participants of today's conference call are David Vlastis, Chief Financial Officer and myself, and answer session. The purpose of this call is to share with you the result of the 9 month period ended September 30 of 2018. We would like to remind all those that have not received our press release, our press and that they kindly 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 flight presentation is being broadcasted to the webcast feature available in such section and can also be replaced with the same family. Before we continue with the conference call, I would like to go over some safe harbor information and other details to call. As we usually do in this type of event. We would like to clarify that the government's call and G and A session, we may produce forward looking statements about Telecom's future performance, land strategies and targets. Such statements are subject to uncertainties that could cause telecom's alter results and operate on truly fair materials. Such uncertainties include, but are not limited through the effect of ongoing industry and economic reservations, possible changes in the demand for telecom scholars and services and the effect of more general factors that have changed in general market or economic conditions, in legislation or in regulation. Our press release dated November 7, 2018, a copy of which was included in a Form 6K report furnished to the SEC describe certain factors that may affect any forward looking statements that we may produce in this session. Furthermore, We urge the audience on 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 refers to go over general macro overview, then Moving on to our industry trends and strategy, which will be followed by the discussion of our business highlights and immediately after We will go into the evolution of our financial figures. Finally, we will end the call with a Q And A session as it's customary in our quarterly calls with the financial community. Having gone through these procedural matters, I will now go over a brief characterization of the macroeconomic context in which we operate. Please refer to Slide 5 where we included a summary of the cash macro Revolution in Argentina's external front as well as domestic activity and inflation. During the third quarter of 2018, the macroeconomic environment has increased in complexity, strongly by a second round of turmoil in the foreign exchange markets, we can result in even further depreciation from the during the first half of twenty eighteen. Exchange rate experienced a resolution that stood at 100 and during the 1st 9 months of 2019 being written in fact, strongly concentrated in the second and third quarters of the year. A second round of volatility in exchange markets was reduced during August September. The FX rate experienced 42% increase in the third quarter of 2019. Yet again, a combination of terminal and local factors can be associated to this movement. In this context, the central bank exercise heavy prevention in our attempt to contain the foreign currency demand, thus affecting the international resource position with suffered a decrease in the quarter of almost $13,000,000,000 mostly associated to these interventions and also recommendment to the percent of the central bank to reduce the cumbersome stock of its notes, known as in the bank. In addition, the Monetary Authority applied a strong increase in interest rates in order to counter the disruptive dynamics coming from abnormal behavior of the exchange markets, which still remains in high levels as of this day. However, considering another perspective, it is worth noting that the real exchange rate is nowadays in a reasonable level above the long term average. This situation has not been verified since 2010. The current level of exchange rate should bump competitiveness. And therefore, it is expected that they will allow the recovery of the K balance which has already begun in September 2019. It should be mentioned that in October, we announced a recommendation of the monitoring 15, which included a strict control of monetary allude and the introduction of a set of nursing bands that define non residential zones for the Monetary Authority. The combination of these measures, together with the modification of the standby agreement with the IMF to enlarge the amount involved by $7,000,000,000 and to advance the disbursement for 2018 2019 Automantly led to some relief from the turbulence experience in the exchange market. As far as internal funds is concerned, Regarding inflation, during the first quarter of 2018, the CPI measure by the Buenos Aires City continued to sales further increased from the past quarter's reading, reaching 39.5% year over year in September 2019. During the last three months period, installation has been considerably impacted by transport and utility storage increases. As well as rise in food and beverage prices, which were impacted by VFX Evolution. Inflation during September was particularly high and it is expected to remain at high levels in October, while some levels of monthly figures should be feasible for the last month of 2019. In relation to the economic activity, aggregate output is decreasing monthly due to the strong underperformance in agricultural activity, which was affected by climate climate factors, while construction and commerce sectors reported downside in their activity too. Industrial production also suffered a decrease plunging deeper into a recession cycle and accelerating the pace of contraction during the last month. Economic consensus published by the Central Bank is expecting the contraction of the DVD in the order of 2.4% for 2018. Lastly, higher volatility and economic variables on the rise in inflation have impacted overall household consumption which is expected to remain depressed due to the adverse impact of inflation of real income and due to the high uncertainty captured by low consumer reasons, which in turn have fallen significantly. Turning to Slide 6. We would like to introduce a brief of Argentina's long term growth cycle. As shown, we can verify that Argentina's registered the highest rate of our after the sessions when compared with other South American peers. After the conclusion of the respective process, it is forcing that Argentina can be done actively to sustain sustainable growth path. Furthermore, as of June 2018, unemployment rate shows supply increase as GDP decreased in the last quarter, but it still remains low and stable despite of the contraction in the economic activity. Pointed out that the recession should be that are those episodes in our historical comparison. Moving to slide 7, We can find a summary of the impact of the economic context of durable goods consumption. Taking quantities of onwards into consideration, consumption remains slightly above 2017 as to June 2018. Probably, it will be heavily impacted during the remaining months of 2019 as a general slowdown in consumption is being observed. In context of this, handset sales have decreased in the same period, mainly due to the economic context and also due to the fact that the since our dollar rise, having this later effect, a direct impact on prices. As a summary, Telecom Industries are considered the the first city in nature, although there are not immune to changes in the economic cycle. Now outstanding the challenging macroeconomic context you have described, telecom Argentina has managed to turn The solid revenue growth and an operating profitability increase when compared to past years either. Having gone through this introduction of the market environment, let me pass the call to Gabriel Lassi, who will go over the industry trends and see on the business highlights section. Thank you so much. Hello to everyone. As mentioned in the prior call, remember that the merger between telecom and calibration was considered adverse acquisition of the IFRS free. Business combination. Luca Ryvizion being the surviving entity for accounting purposes. That was the purpose of preparing the consolidated financial statements of Telecom Argentina as of September 30, 2018, For the comparative figures as of December 31, 2017 September 30, 2017, were point to those that arise from the consolidated financial statements of Calabrasion and their respective days. And second, the corresponding information of the 9 month period ending September 30, 2018, incorporates on the basis of Filos corresponding in Gallegion effect on application of Telecom Argentina's method of acquisitions at its 1st budget in accordance with IFRS 3 guidelines and the operation of Telecom Argentina as of January 1, 2018. On the other hand, in order to meet the understanding and analysis of the earnings evolution by its users, additional figures of the income statements are included, exposing on a pro form a basis to compare figures for 9 months, 2017, as is the merger between Telecom and Calvivision has been effective during that period. Evaluations of result since 9 months, 2017, identified in this presentation, emerged from the comparison with Formational Performance formation. Additionally, you may find a detailed pro form a comparison in financial tables, 6, 7, 10, 11, 14, 15, including in our press release. Moving to Slide 9, We can find some industry trends that we would like to share with you in order to clarify the strategic approach that the company currently has. The goals of the company is to offer to its clients in the near future, a convergent offer of all our services. As you can observe, the previous quarterly experiences in European Countries registered a very positive effect as the number of households with these services has been increasing rapidly during recent years. In the sense, We believe that the company will be able to follow a similar path and to be the first option for the customer to a high quality Moreover, it is stated that there is going to be a strong environment in pricing in the near poultry subscribers in next year. Almost doubling at twelve figures by 2022. This growth of these subscribers will be accompanied by higher demand for fixed and mobile connection speeds. And the addition, it is expecting that consumption patterns to change towards a more intensive usage of mobile Internet. Additionally, it is worth to highlight the growing importance of IoT devices. In fact, in 2018, the number of devices connected in the world reached an estimated number of 9,100,000,000 integrated participation of consumer devices, such as electronics and smartphone appliances. It is specified in Samsung 35, the number of devices should increase 2.8x to more than SEK 25,000,000,000 with a stronger presence of industrial devices as our energy, manufacturing and shipping transportation. Let's move to Slide 10. We illustrate the challenges ahead for the company in order to address this industry trend. In this sense, we aspire without the best fixed mobile network in the country according to the consumer needs as described. With a superior quality and coverage. This infrastructure will provide a technical platform in which the company will leverage to achieve its major objective. To deliver in Net Promoter Score as well as the first option of value for the customer, working towards this aspiration, the company's focus on clear set of strategic avenues. First, we are taking a step further into content. We intend to transform flow into an integrating platform, the follow platform in the market. Furthermore, flow will become an available platform for operators in access service modality. And a provider of IP video service. In addition, we are focusing on the re launch of personal store as a marketplace of multiple video gaming and music apps. On the network front, we intend to develop higher quality and capacity for both through the development of DOCSIS 3.1 on the IHFC network and the conversion of software network of the CF TTH. Finally, it is important to remark that the company's mobile 4 g network is already the fastest in Argentina. And we are going beyond this, I improved the coverage by the south of the country. Moving on our business highlights, we can see that we are positively positioned today. Please refer to Slide 12 when we highlight some of our key achievements. In the first nine months, of 2018, Telecom revenues totaled ARS99.5 billion, increasing 29% year over year. Operating income before D and A totaled ARS 35,200,000,000 in trading a 35% margin of our revenues achieved in a challenging economy context. In addition, fixed voice ARPU and broadband ARPU were up to 2.47 66.05 pesos per month, respectively. Meanwhile, ATB ARPU reached ARS 675 and mobile ARPU reached ARS 170. Moreover, an aberration level subscribers over in Argentina amounted to 18,900,000 for which 11,700,000 subscribers were 40 clients. Pay TV sales remained stable amounting to 3,500,000 and fixed broadband subs totaled 4,100,000. Fixed voice reached $3,600,000. Regarding the customer base, It remains stable in relative terms. This is due to the growing use of telecommunication services, which increasingly affected area life of our customer. As allocating a relatively stable portion of their income for these services. As far as corporate matters, It is important to mention that on September 4, 2018, the record was informed that the merger with Carlos John for the system in the current registry of cobas under the responsibility of the Stexio Helge and the good news here. By this way, by analyzing all formal and legal steps related to the Turning to Slide 13, we can observe the revenue breakdown where mobile service increases still holds the main participation of our telecom revenues, followed by broadband and pay TV. We can highlight that the current revenue mix asset participation of mobile revenues of almost 35 percent followed by broadband revenues that apart from representing near 20 3 percent showed a fast growing rate as well as pay TV revenues which accounted for almost 22% participation. In turn, fixed telephony and data represented around 13% while devices achieved 8% of the total revenue. When compared with the 9 months 2017 consolidated pro form a results, You can see that service revenues grew by 29% year over year, reaching ARS 91,900,000,000. As we already mentioned, mobile and broadband are the segments that mostly contribute to the total revenues composition, generating revenues of ARS 34,500,000,000 and ARS 22,400,000,000, respectively. In addition, the pay TV revenues totaled ARS 21,400,000,000, followed by fixed and data revenues with the aggregate amount of ARS 13,100,000,000. To a lesser extent, we can highlight the contribution of handsets and fellows with ARS 3,600,000,000 and ARS 4,400,000,000 respectively. It should be observed. In general terms, the company revenues are still in the process of catching up in the acceleration in the inflationary context as we commented in our macro chapter. While the recovery in dollar terms should take a longer period of time related to a huge jump of the foreign exchange rate. We'll go to some details of this in the following slides. On Slide 14, we'll go evolution of the company mobile business in Argentina. As intensity data usage continues to increase, we can observe that there's a Finnish steady growth in postpaid subscribers, which represent our high value mobile segment. As of September 2019, The postpaid subscribers accounted for 38% of the total customer base, up 0.34% compared to the same period of 2017. In this sense, intensity of mobile internet usage continues to increase, which for the 9 months of 2018, as reached an average of almost 3 gigabytes per user per month, which is 52% higher than in the same period of 2017. While we're focusing the evolution of our 4G rollout, we can highlight that there has been an important increase of 4G subscribers, which totaled 11,700,000 as of September 2018. This rapid growth in subscribers that use the Porgy network as being the driver of increasing data traffic in 2015. Currently, the coverage of our Porgy network which is more than 41,500 locations and inclusive around 450 locations year over year. We can observe the differential in lower internet usage as lower internet connections still increase. A gigabytes per user per month for 4 gs uses than almost 1 gigabytes of our 3 gs. Please turn to Slide 15. Was including a review of our interment and pay TV services segment, which aims to differentiate us in to an enhanced customer experience. Related to our broadband segment, we can point out that the number of subscribers grew more than 70s out of year over year achieving 4,100,000,000 users. The aforementioned increase in subscribers was supported by the offer of higher connection speeds, As a consequence, subscribers will increase equal for about 20 megabytes have increased to 34% of the total client base versus 20% over a year ago. Financial effect alongside price adjustment applied contributed to the ARPU growth. In this sense, during the third quarter of 2019, the ARPU for broadband services increases by 35% almost ARS 648 per month focusing on pay TV services during the 1st 9 months of 2018, Payless TV subscribers remain stable, while flow boxes achieve 47,000 and almost 951,000 subscribers. Were used in the full application as of September 2018, increasing the previously from previous October over a year ago. Moreover, cable TV ARPU increased to more than 7.18 pesos per month in the third quarter of 2018, up 37% from the same period last year, while churn stood at 1.3% up from 1.2% in the third quarter of 2017. On Slide 16, we present the consolidated CapEx figures where we continue to focus our efforts to seek our competitive advantage in terms of productivity. During the first right now of 2019, the record has invested more than MXN 24,000,000,000, bringing this amount 50% higher at the same period of last year. The consolidated amount of capital expenditures represented 24% of total revenues increasing from 21% in the same period last year. I will assess our competitors in terms of investment size. Furthermore, we can verify that the important amount of returning to CapEx has allocated in the access network of which lower access is 2%, 55%, followed by fixed accesses with 36% and others accounted for the remaining 9%. The remaining custodial CapEx was mainly comprised of an average of our IP infrastructure and the transport network. And have investment done on our international operations in Paraguay and Uruguay. It is worth to highlight that during the 9 months period, the report continues with the efforts to improve both the fixed and mobile network. In order to achieve this goal, recompensify the development of its network in the northern parts of the country to the deployment of new sites and FTTH. Additionally, they come to nuclear plus the deployment of FTTH in Paraguay reaching around 40 cell phone calls passed by September 2018. I will go through these pieces highlights. Now I will pass the call to Salange, who will go with the financial performance. Thank you, Gabriel. We will go over the that this positive business plan have just described by Gabrielle generate over our operating income. Please turn to Slide 18 where we can analyze the consolidated revenues and EBITDA. For the 1st 9 months of 2018, consolidated revenues amounted almost 99,500,000,000, making a growth of 29% year on year. In terms Service revenues grew 29% thanks to the strong performance of paid TV revenues and interconnect revenues. Followed by mobile service revenues and more specifically mobile internet. Furthermore, EBITDA show a strong evolution driven by 36% year on year as we have concentrated in improving our revenue quality and profitability. The EBITDA margin increased substantially by 180 basis points to 35% for the 9 months period of 2018. It is important to highlight that the improvement of EBITDA margin is explained by a solid performance in cost management as we will analyze in the following slide. Please refer to Slide 19. When we show the performance of DaVita, our behavior of the different components of present and cost, The company has taken actions to gain operational efficiency and manage its cost structure, and these actions have positively impacted our profitability, our OpEx has grown below revenue growth and inflation levels. We can observe a positive evolution of labor costs over which the company is focusing heavily alongside with fee for services, maintenance and material, which in turn were affected by lower network maintenance costs. Additionally, effective cost management has delivered good results in interconnection costs through better negotiation in international interconnection and also enhanced cost mainly affected by the lower sellout. This effect has been partially offset by increases in programming and content costs and other costs which include bad debt expenses. Although these expenses have reduced a certain increase, they are in line with the noncash formalities observed in the financial system. The final outcome was the 180 basis points that described before. Let's turn to Play Traffic where we can verify the company operating income total more than 19,900,000,000 vessels with a 44% increase year on year. Every growth that we resulted higher than that of EBITDA can be explained by a slower growth in the increase of depreciation and amortization and is also an impairment of PPIani, which is 2.28% year on year. This contributed to the expansion in operating margins to 20 percent of consolidated revenues, increasing 200 basis points when compared with the 1st 9 months of 2019, 17, showing that the company was able to achieve solid operating performance through the course of this year. On the other hand, telecom, register and net loss attributable to the controlling of almost 18,600,000,000. Business loss was mainly explained by higher net FX losses of approximately MXN 45,700,000,000 in the 1st 9 months of 2018 which can be explained by the face of depreciation that impacted mainly our current net financial debt position denominated in US dollar. It is important to highlight that as of September 13, 2019, the restatement criteria of the financial statements published in last 39 have not been applied. The circumstance must be considered in the evaluation and interpretation of the financial situation and double facts presented by the company. If the comprehensive adjustment for inflation is applied, and increasing the values of your nonmonetary item if you set it up to the limit of the recoverable value with its consequent effect on the difficult task and an increase in the net equity of the company, including the contribution of the owner. Likewise with respect to the results and increase in depreciation and amortization due to the effect of the risk payment of nonmonetary assets is expected mainly those from the former Canadian business and an improvement in financial results due to the positive results from exposure to inflation due to the excess of monetary liabilities over monitoring assets. All of them with a consequent impact on the line of income tax. It is worth to mention that inflation adjustment will be done following local dialogue. Turning to Slide 21, We present some performance figures from the last 12 months as of the 1st 9 months of 2018 and the full year 2017. Company revenues are paid more than 128,500,000,000 for the last 12 months period ended September 28th. Meanwhile, EBITDA amounted more than 44,000,000,000 paper for the last 12 months period. Moreover, it is a margin rate of 35%. Regarding our gross debt as of September 2018, amounted almost 9 9 900,000,000, but as the company holds an important cash and equivalents and investment position, net debt reached ARS 168,000,000. In fact, net debt to EBITDA ratio remains very reasonable and in line with levels considered found within the telecom industry. Please move on to Slide 22 where we can analyze our adjusted maturity schedule. As we mentioned in our press release, in October 2018, the company refinanced $500,000,000 from the syndicated loan due 2019 through a new loan agreement this 2022. Additionally, $100,000,000 of the original syndicated loan work we paid using the cash position of the company, leaving a total outstanding amount of $400,000,000. Moreover, in October 2018, Telecom Argentina has also accepted a proposal from the IST from the to $350,000,000 with the purpose of financing investment needs, working capital and refinancing availability. Finally, in November 2018, the company was notified of the acceptance of a loan offer by Deutsche Bank loans loan owned brands for an amount of up to $350,000,000. At mentioned in previous calls, We have a manageable debt profile and many other sources of funds such as vendor financing, local bank lines, and access to Logan And International Capital Markets for the coming years. And as we mentioned, a very regional debt to the VA ratio. Moreover, the company holds a permanent optimization policy for the current rate and factor of its financial liabilities and it's always analyzing possibilities on this front according to the evolution of the market conditions. Before our Q and as stated, it's important to address the issue that the company has, the refinance almost completely to that very much better than our profile. We've been able during this breakup environment, to have a very significant improvement in costs, and it's important to alert the fact that this improvement in cost is starting because we are still in the process of deployment of all our new systems, especially on the back and the front. And yes, it's significant additional effects are going to come from there. But, in on the EBITDA, evolution in page 19 where we saw very different components, which is, it was very easily shown how we were able to go to the cost structure at a very lower pace, inflation pace, lower the exception of programming and costs, content costs, which are already related. But on the rest of the cost of the company, they have been below inflation, probably the only one that has been aligned to inflation in the tax. As it is shown there. And we are we've been able to to quickly offset inflation effects on our revenue side. Finally, we we continue to ahead, we're going deeper on the effects of the March. We are in our cost structure and our processes, in that event, next year will be very significant, the evolution, as I already mentioned, of the new platforms related to bank With this, I will open the session to questions prior. Thank you. If you're using a speaker phone, Please make sure your mute function is turned off to allow first question will come from Fernando Flores with AR Partners. Please go ahead. Hi, Gabriel on to lunch. Thanks for taking my question. Not that we, I saw that this quarter, Eduardo Fappo was the one with the highest increase. I like previous years who are wireless. I would like to better understand how are you going to price your services going forward, considering the the the economic terminal as in the the recent evaluation that we suffer? And where do you feel more comfortable to increase those prices? Well, I I I I gave you some state garbage, but but if if if I didn't understand properly, please So let's clarify, we have seen that, our, all the fixed business itself has been very, very very able to receive the price increases on the mobile, what you are serving is a very significant change in the fact that the company is able to grow moving customers from prepaid to postpaid. This may, at the beginning of the process, of course, to provide, I would say, some marginal effect in terms of that, to get that step done at the first stage, you need to provide a fixed service, not prepaid at, at, at, at, at, at, at, at, at, at, at, at, at, at, at, at, at, at, at, at, at, at low prices. But then, once the customer begins to have experience of the ability of the usage of more data, then you get more space for additional increases in price The second aspect that I will mention regarding, the behavior of the mobile is that at the beginning of all this movement in the market, stand largely on effect also was related to, like, to the, to the prepaid in a way that, when all the increases in the, in the tariff mentioned by Solar And Specialty Public Services, or utilities affected the consumption ability of the customers, a significant part of the prepaid universe what this was that they just fixed the expense to a fixed amount in pesos, meaning that in the past, that type of customers we have done to to the company let's say once a week, I'll make the recharge. But now once he gets there in terms of the total expense, he he doesn't use it anymore. This is a this is a temporary effect. We think that, as it has happened in the past, This effect is is going to recover. Once the initial hit of all these increases in prices gets my we are confident that the company is going to be able us in the past to, observe inflation effects in terms of the revenues. Of course, having said this, the question is depending on how the of the process continue to deteriorate. It might take some time longer. What we cannot expect is that the company is going to be able to price immediately movements like the 80% impact of the valuation. That type of movement takes longer for us to recover. But when you look at the long term pattern in the past, with similar movements, of all businesses, you will see that, at the end, because of this, aggregation constantly of adding services or additional capacity, the company is able to fully price that at revenue level. Great. And my second question was if you could please qualify the impact of the disconnection of frequent lights, that Enercon is forcing you to do. Is there any revenue reduction or cost reduction? Do you believe that maybe the overall measure have improved your client mix? I'm saying that some Should I upgrade your plan? I I I even did the last half of your question. She if if, anybody can, can we take it on on the on the interconnection cost? The reduction is is really a synergy. We are getting there a a a significant costs by putting really the 2 networks together. And this is a process that it has only started. And the reason is that we are yet, by the way, from the optimum point of how we make all this infrastructure interact. As you may recall, we have hired Bellabs from Nokia who are assisting us in developing this to the future. Additional service also are going to come from the automation of the administration of the network, there are significant advances in that in that event. And the company is, looking at that very carefully and very closely together with the labs. In terms of automized the the the the poor mutation of the network. I am not sure if I complete your question or there is some part they I missed top of the higher. I am not on the office. I am in a far away and and I I I I I had some some part of the message not called. Fernando, I I believe that Fernando is responding to the non military of the lines. That's why Fernando Yes. Okay. Sorry? Okay. When I get you to that, the ATP, as as you know, there was there is on the market. Many clients, that maybe could be was that that were not nominated. And therefore, there was a process starting in order to have the implications for such lines. The the government established a process, that black process, and to have the denomination of first line for October 31st. After that, what, and the Inagamo has informed that the the number of the lines that had been included in this process, and it was around 6 5% of the lines were nominated and basically are related to the the the ones that were not basically the properties that are suspended And, eventually, the person that has a buffet line and has a possibility to go to the commercial office and, ask, to be activated, meeting the the information requested. So it's a dollar that is yes. So basically, what I'm saying is it's a Sorry. Ma'am, regarding this is Metro positive is an net positive measure or the amount of disconnections to kind of damage some part of the revenues or improve their cost? No. No. Of course, of course, it's going to be positive because basically it's what we are going to have is basically the lines that are going to be in a way to active and eventually you're going to have even a in a going to be reflected in the levels of ARPU. Okay. Thank you very much. We will take our next question from Alejandro Arnada with ITau. Hi, good morning, Solana and Gabriel. Two questions. If I if I may, the first one on CapEx, if you could give us a little bit of of clarity on on what's left of topic for this year and what can we expect in terms of of CapEx in dollars for for total 2018. And then, what's the what's the split plan of that 5,000,000,000 going forward or at least for next year. And then when you were talking to Lance about inflation adjustments, there was some noise in the line. Could you give any this ballpark number on the amount that that adjustment could entail. That would be the 2 questions. Well, going to your 3rd question regarding the CapEx, we are thinking that, as far as most of the of the CapEx of the year has already been deployed. The final figure in US dollar at the end of the year would be close to 1,200,000,000. And this is this is maybe slightly less than that. We have a combined effect in terms of why we didn't reach the 1.5, of course, the evaluation has the margin affecting here. Also, the impact, very relevant is that, is this, the construction of sites, getting all the approvals and all the bureaucracy related to reduced sites, takes a very a very significant part of the time frame. The company is going to almost done with the amount of pipes that were built last year. And that is, it's a really big challenge for us. I can see that probably at CapEx level, the biggest challenge is to deploy, to physically deploy the money more than really to get the investments out regarding the future outlook that you asked for, we are just as person we are discussing and establishing our our, in the CapEx for next year, a just to give you an initial color, because I I I will not be able to give you the details because we have the process of of establishing that. But the the big picture is that the company has not thought in terms of not doing the 5,000,000,000 CapEx plan that we announced, we are moving in a direction the discussion and, and, and, and the, and the, the different uses of the different applications of that CapEx are, we have already disclosed. There are no changes in that because most of that CapEx is, really related to increase our coverage and to increase our level of service to our customers in terms of we are not changing that and the strategy of the company is the same. So having said that, what we are discussing, and this is related to the general environment of the of the country. And to the new size, let's put it that way for the new spin of the economy in Argentina, and it might bring up the decision to instead of doing the CapEx in 3 years, taking 1, 1.5 years longer period for for for fulfilling it. And the reason is that if everything goes slowly, including our competitors, which are investing much less than we are a person and and at at the same time, he got me as a phone. He won't have slowed down in a way. There is no need or probably it's not the wise decision to speed up the the theory of CapEx in that environment where the cost of capital has increased significantly. Having said that, as far as we are beginning to see some signs that the situation may not be so bad. And at the same time, that markets, especially on the on the external front, normalized, it allows us to finally design the annual size of the CapEx. But as I mentioned, to, for the time being, We have no thoughts in terms of stopping the process or, the most likely scenario is that we may have a couple of years instead of access to the original free ones. Thank you, Rauline. And on the internal adjustments? In terms only of adjustment of what? The inflation development, if you had, an instable pack number of how that will affect the balance Ah, well, the, yeah, we can comment on that. Well, the it's thank you for your question. Maybe we we were not very precise on this. As you probably know, this is a very important subject. As you probably know, it is mandatory for most of our Argentinian cooperation, because of the country having gone through, an inflation process, increasing 100% for a clear 3 years. According to IFRS International Rules of Accounting, it's mandatory to make a inflation adjusted account. We have most since rule was established a a validation for Argentine Corporation was publicly established since King. And the but there is a window, until December to present a complete adjustment. That's why at present, you will find most of the corporate a footnote in the balance sheet explaining the situation and explaining that the adjustment is to be done. What I can tell you is that because of the very particular situation that our company has, and the answer is completely related to our hedging, is that we will see a very significant effect of the inflation accounting. The reason to that is that the company has a very significant amount of fixed assets. We own more than 5000 pieces of real estate as part of our of our business. And this has a lot of implication in the financial environment, meaning that up to now, you have seen the mark to market of our liability side, and it's still pending the mark to market in the inflation terms of our asset side. And we might say that the impact may not offset completely the impact of the evaluation, but, it's going to be close to that, meaning that there are several aspects that get our skin to be cleared in terms of regulatory approach, in terms of possession in terms of the material picture, because of what I have already mentioned, it's very significant I I will have a very, a very important effect in the final result of the of the balance sheet. That is important to clarify because it's not the typical situation for the corporates and the listed companies in Argentina. About 70% of the total company the accounting situation doesn't provide a a a conditional result. And additionally, at 1 third of the companies, We are in that group and because of this special balance sheet, shape, have this positive effect. Okay. Just to see if I understood correctly. So with this inflation adjustment, you believe that you won't probably be able to reverse all the negatives that you have, but you will likely be close to that. Yes. I want to be clear on this, and and and I I don't want to be misleading. Imagine that this adjustment is a very complex calculations. It implies to adjust the value of almost all the assets and liabilities of the company, and personally, I'm referring to those that are not a a mark to market. And and and and and and and and it's a very complex calculation, which I've already done, of course, several trials on this, the information I'm giving to you now is not only fit. So might have a certain changes, but the answer is that the impact will be significant and we'll be very material compared to the evaluation phase. Okay. No, that's quite helpful. And oh, an additional question, if I may, sorry, I'm taking a lot of time. Given that you have the IFC loan, you announced this morning of that syndicate loan of EUR 300,000,000. You want me to tap the market. At least in the near term. Right? Well, thank you again for your for your questions. Well, just the the the the issues that the company has been has been speaking with investors all over the year. We have, as you mentioned, we have completed, yesterday, the the final approval of this additional loan of 300, and we have the mandate with IFC, meaning that, there is unlimited this way. There is no refinancing risk I hope at this moment for telecom. Having said that, the market may always deliver additional opportunities in terms of cost structure. Some of the loans that we have at present, I have a taxation that is less favorable that statement that locally we eat today, all the assyengers to the boss. And that's something a consideration that any criteria that we may have to prove not only our profile of maturity, but also our cost we are going to be there. The reason why the company has not passed the market again since February is very simple is that And when you look at the as as person market value of our 2021 bond, the 500 maybe a note that was originally issued by Fabienne. It has been traded on average 200 basis inside the sovereign. Now last week, this, this, a positive gap for us has reduced because of the improvement of the sovereign and, and not necessarily reflected in our bond. It takes longer because the bond is not so deeply in terms of daily trading. But in the medium, in the medium run picture, we can really assess that, the, the, that type of maturity has been trading 100 basis inside the sovereign, at least. Having said that the company understands that when we go to the market, to look for funds, we might be requested, additional spread or or basis for new money. That's logical. And we I'll I'll try and comply with that. But, because of the volatility of the market, I'll and because of the 5000 established by the sovereign risk, And of course, because of the general turmoil and and the situation of the portfolios we are generating time waste, the impact was and that the requested amount was too big for the consideration of our credit. So that's why we haven't been to the market. Our intention is to be in the capital market both locally and Internationally, but we will be there at the at the price that makes justice to the claim profile of the company, and and and through the ratios of the company, that deserve really a very, a very significant consideration. That's our perspective at least. Okay. Thank you so much, Ariel, and for lunch, and have a good trip. Thank you. Our next question will come from Andreas Agile with JP Morgan. Hi. I'd like to return to the point of the CapEx this year, CapEx has been around the 70% of the EBITDA in a company whose growth, it's it's more or less a reasonably inflation. So, when you look at the environment of Argentina head, what is the reasonable, capital allocation for this company in terms of the opportunities that I see in terms for for for growth? It's If I understood you properly, what works you are reporting is, how do we envision the future allocation of CapEx in in the following year. Well, as I mentioned, we are now in the process of discussing this because the first consideration is that, we need to to to have a clear, a clearer picture of what is our total EBITDA is going to be in the medium run, which is some extent because of the high movement that we have we we still don't don't have a clear picture if our PTA is going to be the the the the the the the fear as of September. Imagine that considering only in September, the comparison of that foreign exchange rate compared to the comparison of the foreign exchange rate today as a difference of ARS 7,000,000,000 in our final result, meaning that we closed the year today with the with the 1st and foreign exchange rate, which will be higher by 7,000,000,000 pesos. Having, and that's without consumers only related to effects, no operational consideration, no consideration on the adjusted inflation accounting. So having said that, uh-uh, we we would like to have a clearer picture to exactly make the same type of consideration that you have made in a way of what proportions of our cash flows are going to be devoted to, to the future investment. In terms of the mix of investment, as I mentioned, as we are regaining capacity in most cases and and and solving years of lack of investment on the mobile line, which it won't change significantly in terms of the shape, but it will change powering in the face of investment. We will very likely continue with excess CapEx in the range of 40% with a with a 55% devoted to the mobile with the receipts devoted to the things in general terms. What might change is that we might decide to focus more on the, just on the CapEx to grow, the CapEx to provide financial service to our customers. That's the part of the discussion that we are having today. Unfortunately, of course, we are in the middle of that. We we are going to have a clear picture by mid December where the process finalized. I cannot give you much more details on this. At least vessels. Perfect. Perfect. Just one more clarification. In Argentina, it's absolutely impossible to think about investment in pesos. They they all need to be negotiated with the suppliers in dollars. I'd say, using the peso plus inflation is not something can be done in Argentina? No. Because, well, she would be we can we can have a a very long conversation on this. The first product that you have is that you can't finance this in pesos to give you some color as you you know, it's probably better that we do. Uh-uh, all the funding available in the financial market in Argentina have demand deposits. That can be withdrawn from the banks in 24 hours and half is, 30 to 40 days payer deposits, meaning that is very positive for the banks because they are lending your own their own capital at the end to to to provide a sensible there's a long term financing, there is no funding available. When you move to Capital Markets, then it's it's like similar. The company will will consider, of course, pace of financing, but probably we cannot get it says it's longer than in in a very good environment, 2, 3 year, 5 year post, and on the when you go to that, for instance, when you look at what is being learned now at mortgages in Argentina, meaning the rural at the end, this inflation related correction, plus 10 points is is too high and the medium range have been really exposed to me. That's why all Argentine Corporations, especially the ones that invest 1,000,000 to long term switch to US dollars. As I mentioned, although is my fax in in the in Santani showed a a a a a a little exiting terms of cash flows when you look in the medium term, the situation is not like that. If you look at our case, in our case, we we have our operational income and operational revenues and operational expenses in U. S. Dollars are much the company is not enhanced on the operational side. The only enhanced accounts from the financial side which is, it it is offset by the long term investments that we are doing and mostly protected by our huge fixed asset base, as I've already mentioned, and for the CapEx, which by the way stands in the same equation, So at the end, as far as we tend to hedge our 12 month exposure in dollars, which is the the evaluation that we really pay in the long run. The other is a is a accounting issue. The and the exposure to operations on that when the when the movements are pretty strong. Thank you. Our next question will come from with Wellington Management. Ma'am, if your phone is on mute, please unmute it now. During no response from Sam's line, we'll move on to the next question. And that is from Julian Rios with Norma Securities. Good day. Thanks for taking my call. I have a couple of questions with respect to your recently announced financing transactions. Oh, I wanted to find understand that the IFC loan will be fully fully drawn by year end, to the full 300 and $50,000,000, or whether, you know, and if not, what is the length of the drawdown period? And with respect to the Deutsche Bank loan, I wonder whether that will be, expanded to $300,000,000 on whether it will be fully drawn by year end. Okay. Thank you very much for your question regarding the Deutsche Bank. Yes. It's going the 200 are for sure, going to be withdrawn prior to year end, and very likely the the the second was on the tranche too. We are an IFC It might be the case, but I cannot completely assure that, you know, that, like, most agencies ISC takes a longer time, to, to make the, the, the, the, the, the, the, all the analysis We already have an exposure to them that make us optimistic in terms that the process is not going to be prolonged. But by any but all the all the all the the the consideration that we have had and conversation that we have with them up to now, were clear that the the the withdrawal of the loan should be prior to the maturity of the original bridge this is at the end of January of next year. But as I mentioned, on the other hand, It is not a big issue as far as the company has a cash position of nearly $400,000,000 So, we although we are working towards the that happens as soon as possible, we don't have any type of liquidity risk in the sense with the withdraw of the of the funds of Deutsche Bank next week. The equation will be completely solved. Understood. Thank you very much. You mentioned you have nearly $400,000,000 in cash. Can you tell tell me, if, what proportion of that, cash position is is held in hard currency and whether it's held in Argentina or outside Argentina? Yes. Well, a a person is I mean, if I am not correct, one please correct me. But I think that we are in the range of $280,000,000 probably $200,000,000 are held outside Argentina and 90% of the total a consideration is held in in in in a dollar, as I mentioned, or near dollars the assets. By the end of dollars, I mean, that ways that we may have some short term securities that are not related but they are also have a, a, a, a, other type of a concierge. The the the rest special and it's related to our operational, movement. But This is a very important issue related to our credit, working with the company then to have a very significant liquids, not only low debt, but also very significant liquidity reserves. Regarding the the consideration of having the warrants, outside at Argentina, it's it's more, the cost issue that's a a risk issue at the time. We haven't had any type of of problem in terms of having ability to buy or sell a a dollars at all. We, of course, are very sensitive to that type of environment. But, at present, is more related to a cost equation and the circumstances, the transactions in dollars, of course, are cheaper abroad, I think, inside Argentina itself. Understood. And, and lastly, on the dividend front, what are your what is your policy for doing a distribution and what capacity do you have to distribute dividends, early in 2019? Well, this year, we have, we have distributed a very significant dividend at the beginning of the of the year as as as a measure of the the audience may go The reason was that we wanted to finalize any type of consideration related to the merger itself. At the same time, to get the more efficient capital structure because the company may have a extremely, extremely an efficient capital structure at that moment. Within those consideration, we paid a very significant dividend at the end of the year, a in serial settlement and in March, and the total consideration was in the ratio of $1,200,000,000. Having said that we haven't yet disclosed our dividend policy, although There are considerations in that sense that the country has been publicly disclosed to the market by by our controlling shareholders in terms of the intention. The reason why we haven't done that is because we want to communicate it once the stabilization of the environment allows it to be to be, complete the accomplish, or fully accomplished to give you some color regarding that consideration, but, I will make a a carve out for this year. And then we'll we'll refer to that. The consideration is the the policy that we, in the medium run, but still is it has to be confirmed. It's $300,000,000 per year or 50% of the free cash flow. This is the cash flow less the CapEx. As a serial consideration. For this year, we are in the middle, as I mentioned, of the discussion, of the of the final figures of the year. And we need to know what will be the the final result of the inflation adjustment another consideration because, we need to have a a positive result to be able to to to pay a significant dividend up to now at present with the type of loss that we show in our balance sheet is the dividend and cash can grow over $60,000,000 But once a all this accounting adjustment is fulfilled, the figure will be different. It will not be appropriate to leave more color on this as part of the question that we still are pending to directly review. Understood. Thank you very much. And before I let you go, on CapEx, can you tell me what proportion? I know that you you talked about the funding being dollar based, and that obviously, longer tenure funding can be had outside of Argentina. But what proportion of the of the total? I think you said potentially one point to $1,300,000,000 in CapEx for 2018 is is, actually, you know, local currency costs as opposed to cost of machinery or other types of things that would be dollar denominated. Okay. In general terms, our CapEx is 65% in U. S. Dollar and 35% in pesos. Perfect. Thank you very much for answering the questions. Oh, you're welcome. We will take our next question from Gabrielle Prazin with Bradesco BBI. Hi, Solange and Gabriel. Thank you for taking my question. I have your only one quick question. Do you have an expectations about 1 year telecon Argentina day, which will offer far plate plans? Sorry. Sorry. Go ahead. Do you have it? If you have any expectations What was that again? From Argentina. Expectations, if you have any ideas about Manu Telecom Argentina, be able to offer foreplay plans. I will repeat to ensure that I understood it properly. You're asking if if if we have an expectation in terms of offering, for paying, next year, that was your question. Yes. Yes. Exactly. Well, you know, the the company is working towards that. But we need to fulfill some some some regulatory regulatory the issues at present, we are able to do so, but, on the legal side, the that will be allowed at the beginning of the year, it's we probably we are going to start to offer different type of of bundling, but still we are discussing when we are going to do that because We need to have the implementation of our new front end to really provide a customer with a for experience, you know, this is a common platform that we allow you to to manage the whole the whole relationship with the company in a device in a single structure, and that is is going to be, probably available in parts, since March next year. And referring to the platform itself to our new CRM. Which is on the program alongside the 2000 as I see. We are going to have a small deployment a prior year just for testing purposes. Okay. Thank you, Gabriel. Thank you very much. Thank you. But appears there are no more questions at this time. Okay. There are no more questions. I would like to thank you all of you for for your time, and we'll see you on an annual call. Thank you. Ladies and gentlemen, This concludes today's teleconference. You may now disconnect your phone, and have a great day.