Cablevisión Holding S.A. (CVH) Earnings Call Transcript & Summary

Good afternoon, and welcome to Cablevisión Holdings Conference Call. Today, the team will discuss Cablevisión Holdings First Half and Second Quarter 2026 results as detailed in the earnings release distributed on August 10. My name is David, and I will be your conference operator today. This call is intended for investors and analysts only. Questions from the media will not be taken at this time. Members of the media with inquiries may contact FIG Corporation Communications. Comments made during today's call may contain forward-looking statements regarding Cablevisión Holding's future performance, plans, strategies and targets. Such statements involve risks and uncertainties that could cause actual results or operations to differ materially. These uncertainties include but are not limited to the impact of industry and economic regulations, changes in demand for Cablevisión Holding's products and services and broader market economic or regulatory conditions. Please refer to the disclaimer in the earnings report or presentation for additional information regarding forward-looking statements. If you have not received the report or require assistance during today's call. Please contact FIG Corporation Communications in New York at 1 (917)-691-4047 or Cablevisión Holding in Buenos Aires at 54-11-4309-347. The webcast presentation is available at www.cablevisionholding.com/investors. I would now like to introduce today's speakers, Ms. Samantha Olivieri, Head of Investor Relations; Mr. [ Ignacio Solar], senior analyst. For the Q&A session, they will be joined by Mr. Ignacio Driollet, Executive Director and Chairman. It is now my pleasure to turn the call over to Ms. Olivieri.

Thank you, Dave. Good morning, everyone, and thank you for joining us. Today's call will begin with a brief macro overview and continue with a review of the company's income statements and operating results followed by a review of the financial position. I will now pass the call to Ignacio for the macro overview.

Thank you, Samantha. Good morning, everyone. Please move to Slide 4 for the macro overview. The economic program has continued to make significant progress on several fronts. The shift in economic policy built around fiscal discipline and a range of incentives for key foreign currency-generating sectors has held other [ some ] of Argentina's long-standing macroeconomic imbalances, stabilized the peso and bring inflation down substantially from the high levels incurred in previous years. At the same time, sustained foreign currency purchases by the Central Bank totaling just over USD 3.4 billion to date has helped improve its balance sheet and reduced some of its underlying vulnerabilities. Despite this progress, the program continues to face a degree of uncertainty regarding the protection advertise effects of the proposed ship in both the economic model and the country's productive structure, as well as the time to which these changes will gain widespread public support. During the first half of 2026, Argentina's economy remained resilient despite rising lower uncertainty linked to the escalation of tensions in Middle East. There is inflation process received during the second quarter, external accounts remain rated and sovereign financing conditions improved, although activity growth became increasingly concentrated in a limited number of sectors. After accelerating during the first quarter, inflation returned to a downward fab in the second quarter, reaching 1.9% in June with lowest monthly win in 10 months. The temporary research observed at the beginning of the year driven by regulated tariff adjustments, seasonal factors and higher energy prices gradually faded. As a result, the disinflation process regained traction despite a still challenging international environment and lingering pressures from relative price adjustments. Economic activity continued to display a highly uneven performance, while [ are ] indicators remain near historically high levels and the monthly economic activity estimator follow a volatile pattern and recorded contractions in the last 2 months of the series. Growth remained largely concentrated in agriculture, energy and mining sectors supported by federal external conditions and strong investment dynamics. Energy and Mining are becoming increasingly important drivers of economic growth and export performance. This trend reflects a broader transformation in Argentina's productive structure led by the rapid development of [ Bacamurda ] and expansion of mining sectors. At the same time, private consumption reached record levels, although an increase in share of demand came from imported goods and spending growth, reflecting both the appreciation of the Argentine peso and the necessary opening of the economy. As a result, despite strong average consumption indicators, many local goods and services sectors continue to face a challenging demand environment. Households have also been affected by a decline in purchasing power related to pre-adjustment levels despite the recovery observed in certain segments of the economy, real disposal income remains below 2023 levels reflecting the combined impact of lower real wages and a higher share of income both to utilities and other regulated services following the correction of relative prices. One key development was the return of 2 surpluses on both the fiscal and external fronts, something Argentina has not achieved in 2008. During the first half of the year, the government preserved its commitment to fiscal discipline as the primary balance posted a surplus of approximately 0.6% of GDP and the financial balance and a surplus of around 0.1% of GDP. On the same front, the cash-based current account posted a USD 2 billion surplus largely driven by a strong export growth of 24% year-on-year and a slight decline in imports compared to 2025, reversing the deficit recorded during the same period last year. The high level of foreign currency purchases by individuals remains an important factor to watch closely in a [ bimonatory ] economy such as Argentina, gross ESD purchases by households reached USD 42 billion in 2025 and amounted to USD 19.2 billion during the first 5 months of 2026. Financial conditions also improved during the second quarter the presentation of the government financing program for 2026 and 2027 combined with sovereign rating upgrades to B-, contributed to a further decline in country toward the 400 basis point range. Nonetheless, gains in market sentiment were partially offset by the escalation of the conflict between the United States and Iran, which increased global risk aversion. Looking ahead, the outlook for the second half of 2026 remains broadly constructed although significant challenges persist, maintaining balanced public accounts amid a year-on-year decline in tax revenues remains an important challenge for the months ahead. At the same time, the concentration of growth in a few sectors and the weakness of real household income highlight the need for a broader base recovery. Maintaining social support while advancing the stabilization program will depend increasingly on the ability of economic growth to generate tangible improvements in employment incomes and [indiscernible] standards across a wide range of sectors and regions. Having gone through the macro overview, I will now pass the call back to Samantha.

Thank you, Ignacio. Slide 6 shows the highlights for the first half of 2026. On February 24, 2025, our subsidiaries, Telecom Argentina announced the acquisition of shares representative of 100% of Telefonica Mobiles Argentina S.A. TMA, a company incorporated in Argentina, which provides mobile and fixed telephony, fixed broadband and video services nationwide in Argentina. As of this date and following the condition of resolution approving the acquisition of TMA issued on June 17, 2026, our subsidiary, Telecom, is working on the implementation of remedies and preparing the corresponding submissions to the regulatory authority. Driven by the increase in demand generated by the FIFA World Cup, there has been an increase in broadband and pay TV subs. Mobile ARPU has shown a strong growth in personal Argentina. Both telecom before the effect of including TMA and TMA stand-alone have shown significant margin expansions driven mainly by cost efficiencies achieved by the companies and by the effect of the deconsolidation of the subsidiary [indiscernible]. EBITDA excluding TMA increase compared to 2025, resulting in a higher EBITDA margin of 37.9% in first half '26, up from 32.2% in first half '25. Even considering the indebtedness from the acquisition of DMA, net debt-to-EBITDA ratios remain strong with a solid cash generation and an expansion of EBITDA. Slide 7 shows the key financials for the first half of 2026. The company has reflected the effects of the inflation adjustment adopted by Resolution 777/18 of the Comision endear CMB which establishes the re-expression of figures must be applied to the annual financial statements for intermediate and special periods ended as of and including December 31, 2018. Accordingly, the reported figures corresponding to the first half of 2026 include the effects of the adoption of inflationary accounting in accordance with International Accounting Standards 29. For comparative purposes, the results restated by inflation corresponding to June 2025 contain the effect of year-over-year inflation as of June 2026, which amounted to 33.5%. In this presentation, we included some figures and historical values for the sake of clarity. In addition, the reported figures corresponding to the first half of 2026 include the effect of the incorporation of results from PMA from the first of March 2025. Hence, the results for the first half of '26 are comparable to the results of first half '25. We included some figures, excluding the effect of TMA acquisition for comparison. CVH owns 39.08% stake in PO and as controlling shareholder of Telecom Argentina, it consolidates 100% of its operations. Revenues in nominal terms increased 50%. In constant currency, revenue for first half 2016 grew 13.4% from 4,477.6 million to ARS 5,075.5 billion mostly driven by the incorporation of revenues from TMA and by higher ARPU in real terms in mobile and cable TV services, thanks to the effective pricing policy and the stabilization of the inflation rate and the growth of Internet and pay TV subs, partially offset by a decrease in data services that are mostly denominated in U.S. dollars as exchange rate increased less than inflation over the same period and by the loss of control in the subsidiary, Microsystemas, which provides fintech services. EBITDA reached approximately ARS 1,854 billion in constant currency, a 35.1% increase to first half of '25, mainly driven by the incorporation of [indiscernible] EBITDA for the 6 months versus 4 months in 2025 and by lower expenses and higher revenues, excluding TMA, resulting in a higher EBITDA margin of 35.6% in first half '26 compared to 29.8% in first half '25. EBITDA nominal pesos amounted to PLN 1,753.8 billion, 78% higher than the nominal EBITDA for first half 25, while average inflation for the same period was approximately 32.9% on the end of period year-over-year inflation amounted to 33.5%. Net income resulted in a profit of ZAR 84.2 billion from a net loss of $107.1 billion reported during first half '25. This increase in net income is mainly explained by financial net results mainly due to positive FX differences as the exchange rate increased below the inflation for this period, contrary to what had happened the year before, by the effect of the incorporation of TMA's EBITDA and by the increase in EBITDA before this effect. These variations were partially offset by higher income tax. The equity shareholders' net income for the period amounted to $33.9 billion and is mainly the result of CVH stake in Telecom, the personal asset stack at CBH level following the change in criteria established by the fiscal authority in December 2024 regarding the basis for its cancellation and negative financial results from the holding of bonds collected from telecoms and [indiscernible] dividend payment during 2025 and negative FX results related to the effect of foreign currency assets at CVH level of the FX rate increasing below the inflation rate for the same period, partially offset by positive inflation adjustment. Now let's continue on Slide 8 for a discussion of the operating results for the second quarter of 2026 with both quarters reflecting the full incorporation of TMA. Revenues in the second quarter 2016 increased by 0.4% price increases for our services management of commercial discounts granted according to customer retention policy for some of the services and a stable inflation has had positive results in service revenues, which increased 2.6%. Fix telephony and data services revenues decreased 12.3% explained by lower data services, most of which are arranged in U.S. dollars as the FX rate increased below the inflation for the same period. Revenues from equipment sales decreased 35%, mainly as a result of prices of equipment sold, increasing below inflation and lower fronted sold. Considering the effect of incorporating PMA, the main source of revenues is mobile services. Its participation in total revenues has been increasing, reaching 52.7% from 49.6% in second quarter '25 driven by the decrease in share of equipment sold and fixed telephony and data services over total revenues and higher ARPU increases for mobile services. Broadband, pay TV and fixed telephony and data services amounted to 42.9% of the total. EBITDA in real terms increased 33.6% and margin increased to 36.6%, higher than the 27.5% margin of second quarter '25 mainly as a result of cost efficiencies obtained by the company and the increase in mobile, Internet and pay TV revenues. On Slide 9, we review some of the effects of the incorporation of TMA for the second quarter '26, net of intercompany and eliminations. As of June 2026, [ TMA ] had 19.5 million mobile subscribers, including machine-to-machine subs, 1.7 million [indiscernible] million fixed telephony subs, including IP lines and 435,200 pay-TV subs. Revenues of TMA included in the second quarter '26 consolidated figures amounted to ARS 922.4 billion, and EBITDA resulted in ARS 317.2 billion with a 34.4% EBITDA margin a significant improvement versus second quarter '25 attributable to the cost optimization plan implemented by the company. Now let's move on to Slide 10. Mobile revenues included TMA represented approximately 52.7% of our revenues and increased 6.7% in real terms when comparing 2026 to 2025 1st -- second quarter, mainly explained by higher ARPUs in real terms in this quarter, particularly in personal clients, thanks to the stabilization of inflation, the carry on effective price increases done during 2025 and the effective pricing strategy. Mobile prepaid subs, which generate less revenue and had decreased in 2025, following price increases at the end of 2024 were subsequently adjusted as a result of the change in criteria regarding how many days can last without a client were charging this credit before this discontinues with no effect on revenues for this service. Excluding the effect of TMA, mobile services revenues reached 2,756 billion in constant and increased 9.4% in real terms. Personal Argentina clients decreased 7.1% to ARS 19.4 million of which postpaid clients amounted to 41%, mostly the effect of the beforementioned change in criteria. In Argentina, in a highly competitive environment, personal ARPU restated in constant currency increased by 18.4% and to ARS 11,722 in first half '26. Monthly churn remained stable at 2.1%. As of June 2026, TMA has 19.5 million mobile subscriber subscribers, including machine-to-machine subs, 49.1% of them are postpaid, a slight increase versus second quarter '25, while ARPU for the first half of 2016 increased 2.3% and to ARS 9,800. Please turn to Slide 11. Revenues for fixed services, including broadband cable TV and fixed telephony and data services decreased by 1.2% in real terms, mainly driven by the decrease in fixed telephony and data services. Most of the data services contracts are denominated in U.S. dollars and the exchange rate increased to low, the increase in inflation rates, negatively affecting revenues measured in constant basis. On the B2B services telecom strategy is to position itself as an integrated service provider for large customers by offering convergent ICT solutions, including fixed and mobile voice, data, Internet multimedia data center and application services through sales, consulting, management and specialized and targeted cost sales customer services. Internet services revenues increased 3.7% year-over-year in real terms driven by the increase in subs in both personal and TMA clients and an increase in [indiscernible] in TMA broadband services. The [indiscernible] subscribers increased 2.7% to 4.2 million, of which 36% are fiber to the home as fiber rollout accelerates. Monthly churn increased to 1.4% in first half '26 from 1.2% in first half '25. As of June 2026, TMA's broadband subscribers increased 4.6% to 1.7 million, of which more than 97% are fiber to the home. The growth in Fiber to the Home segment resulted in an increase in average speeds. Personal ARPO in real terms for the first half of '26 decreased slightly to approximately ARS 30,587. 99% of customers have access with speeds of 100 megabytes or higher versus 92% in first half '25. Moving to the Cable TV subscribers. The customer base increased to 3.6 million, mainly explained by the success of Flow Flex, which is 100% digital with no decoder or installation needed and by the boost of demand for sports content generated by the strong performance during the FIFA World Cup. Flow unit customers achieved 1.9 million, a 17% increase from figures observed over a year ago. Through its proposal as a content aggregator, Flow [ into ] not only linear TV, streaming services, serious on-demand movies, documentaries and full productions, but also music, gaming and exclusive events. [indiscernible] real terms increased by 0.5% to ARS 21,870.6 during first half '26, mainly due to the stabilization of the inflation rate the carry-on effect of price increases done during 2026 -- 2025 and 2026 and lower discounts granted according to customer retention policy. Monthly churn stood at 1.5%. As of June 2026, TMA contributed 435,200 pay TV subs, also positively affected by the FIFA World Cup. Let's move to Slide 12, for a review of the cost structure before we discuss quarter-over-quarter EBITDA performance. Amongst the most significant operating costs and expenses are salaries, fee for services, maintenance materials and supplies costs and taxes and fees with their regulatory authority. On Slide 13, we show the performance of EBITDA and the behavior of different components of revenues and costs. The company continues with its cost management efforts and has shown positive results in gaining productivity. Before the effect of TMA, operating costs, excluding the cost of equipment enhanced decreased in real terms 7.7%. This is a result of efficiencies obtained by the company, mainly lower salaries and severance payments, lower fees for services, maintenance, materials and supplies mainly the result of the automation of the company's call centers, lower other operating income and expense, lower bad debt expenses, lower interconnection and transmission costs and lower commissions and advertising costs, mainly due to the deconsolidation of the advertising cost of personal pay, partially offset by higher expenses related to the increase in revenues such as programming and content costs and taxes and fees with the regulatory authority. Cost of equipment and handset before the effect of TMA decreased 14.4% as a result of lower cost of the handsets sold with lower quantities and total operating costs, including cost of equipment enhancements before the effect of the incorporation of DMA decreased 8.1% with an increase in revenues. Thus, EBITDA margin before the effect of the incorporation of TMA reached 37.8%, and higher than the 30.9% margin of second quarter '25. EBITDA from the incorporation of TMA for the second quarter '26 resulted in 317.2 million with a 34.4% EBITDA margin lower than the margin before this effect. Therefore, consolidated margin resulted in 36.6%, while EBITDA margin for TMA stand-alone has increased versus 2025 as a result of cost optimization efforts. Slide 14, please. In second quarter '26, investments as a percentage of revenues was 21% or 18.9% before considering rights of use from leases higher than the same period of the previous year, highlighting the commitment of the company with expansion of both fixed and mobile networks, particularly fiber-to-the-home and 5G infrastructure. Technical CapEx was mainly allocated to network and technology and customer premises equipment or CPE. The balance was allocated to our international operations in Paraguay and [indiscernible]. During the last quarter, the company continued with the deployment and upgrading of existing sites and the expansion of the fiber to the home network, including the overlay with HFC network and adding 5G sites. The CapEx program will continue evolving according to our Argentina's economic condition, network performance, expansion objectives and the customers' requirements. Going to the debt financial position as per Slide 16. As of June 2026, we have reported a total financial debt ARS 5, 603.4 billion and net debt of ARS 4,637.8 billion, equivalent to USD 3.1 billion. Mainly as a result of the strong cash generation, a reduction in peso-denominated debt compensated by increase in cross-border debt following the international bonds issued during the past year, and by the effect of a lower variation of the foreign currency versus inflation. Of the total debt, 73.3% is mostly cross-border dollar denominated, but includes the hard dollar local issuance of 2024. 14.9% is in Argentine pesos, including dollar-linked local emissions and the rest is in [ Guarani ] and renminbi. During the past years, Telecom has been accessing the local and international debt markets for its financing needs and will do so for future potential needs. [indiscernible] reflects the debt profile, which is highly manageable. The company will continue its liability management strategy aiming to reduce costs and expand tenors. Consolidated net debt over adjusted EBITDA coverage ratio as of the end of June 2026 was 1.4x a significant achievement considering the increase in indebtedness for the acquisition of TMA, a testament of the company's strong cash generation and the expansion of EBITDA. Next slide, please. Finally, it is worth mentioning that thanks to the efforts to increase productivity and efficiency and the ability to increase prices as macroeconomic variables improve with the disinflation process. Telecom continues with a positive year-over-year trend in both revenues and EBITDA, even before considering the acquisition of TMA. That concludes our comments for today. We are now ready to take your questions. Dave?

[Operator Instructions]. It appears we have no questions at this time. I would like to return the program to Ms. Olivieri for any closing remarks.

Thank you, Dave. Thank you all for your interest in CBH. Should you have any questions in the future, do not hesitate to contact our IR team. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.