Empresa Nacional de Telecomunicaciones S.A. (ENTEL.SN) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Entel's Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm Paula Raventos, Investor Relations Officer, and I'm joined today with Marcelo Bermudez, Entel's CFO. Please note that this event is being recorded. [Operator Instructions]. I would like to start regarding the main highlights of the year 2025. We delivered a strong performance in 2025, posting 9.7% increase in revenues and 5.9% increase in consolidated EBITDA, despite operating in a high competitive and dynamic environment in Chile and Peru. Our ability to anticipate market shifts and move the [decision] has allowed us to sustain a differentiated customer-centric value proposition supported by a disciplined and responsible financial management. In Chile, we maintain our position as the industry leader across all major mobile metrics that included market share, revenue share, ARPU, network quality, NPS and brand power, despite another challenging year for the industry and regulatory changes, Entel delivered positive results in Chile. While Peru, despite a challenging regulatory and competitive environment, Entel Peru delivered solid performance in 2025, leading in network quality and NPS, we consolidate our position as the second largest mobile operator in the market. While other highlights during this year, Entel officially launched the commercial Starlink Direct-to-Cell service in Chile and Peru, the only two countries in Latin America and the fifth worldwide to activate this technology, supported by a network of more than 650 satellites extending coverage. Another highlight is that Entel Peru signed a wholesale agreement with Wi-Net, gaining access to Peru's largest fiber network. This transaction enabled us to offer broadband services to initial footprint of 3.1 million home passes, significantly accelerating our increase in fiber-to-the-home. Another highlight is that the Board of Directors at Entel officially appointed Carlos Hurtado as the company's new Director, replacing Andrés Echeverría, an industrial civil engineer that holds an MBA from Oxford and with more than 25 years of track record in the global finance and investment sector. Another highlight also is that Moody's ratings affirmed our long-term issue rating. The outlook was changed to stable from negative. Moody's mentioned in the report that this rating reflects Entel's strong market leadership, resilient operational performance, disciplined financial management and enhanced liquidity position. Also of Fitch Rating affirmed our rating as an investment grade in BBB- as a robust also model of business. Another highlight is that during 2025, we strengthened our financial position through the execution of a comprehensive financial plan. This process includes debt payments and amortizations along with security new sources of financing that allow us to shorten our average duration in 5.2 years and reduce our rate. Regarding our highlights in ESG advances, during 2025, I would like to highlight that Entel secured its position among the 10 best performing companies in the telecommunications service industry in the S&P Global Corporate Sustainability Assessment, CSA. We achieved a total score of 82 out of 100, driven by a robust performance in social dimensional and also in corporate governance. that underscore the consistent progress in overall sustainability despite the challenging benchmark for the 10 year. Other highlights regarding ESG is that Entel was recognized as the top telecommunications company in Chile, ranking 7 in the Merco Empresas Chile 2025 Reputation Index. By climbing 2 positions, we reaffirm our leadership and maintain our presence among the top 10 most reputable business in the country. Entel also was awarded to the Iniciativa Mayor 2025 prize by Sello Mayor for its dedication to improving in customer held by and segment project to become one of the first Chile's population. The award specifies recognition, impactful initiatives such as for senior citizen plan aimed for enhancing inclusion for this important segment. Also, the award another award regarding Excelencia Energetica for the Reutiliza Chile initiative, while the Energia Circular, impacted in a collective of more than 300 [ uses ] cell phones in less than 2 months. Regarding with the macroeconomic environment where we operate, the economies -- the economies where we operate have a slow growth. The telco industry also are with modest growth in general, both in Chile and Peru. Chile and Peru continue to see inflation normalization, but the adjustment has been smoother and more stable in Peru, while Chile has experienced sharper swings over the past few years. Overall, we operate in an industry with modest growth, environmental of stabilization and inflation, moderate GDP recovery and continued ForEx volatility. Now regarding our performance in our activity despite competition, we continue to grow in postpaid, mobile and fiber during 2025. In Chile, the total mobile customer reached 10 million customers at the end of 2025, with net additions of 6.3% explained in addition in voice and EOT due to the increasing commercial activity through different sales channels and the commitment to offer the best network quality and customer experience, which has generated a 40% share of net postpaid voice growth in the industry despite this high competitive and new portability regulations that came into effect during 2025. In prepaid, meanwhile, we have a decrease of 31% due to mainly a database cleanup performed during the current period and also explained by a regulation that came into effect that requires E&T verification through biometrics face recognition. While fixed services in Chile grew 5.9% due to the expansion of fiber-to-the-home and OTT TV. We are growing in fiber in the home in a competitive market by implementing commercial strategies to attract convergent customers, which has allowed us to improve churn. While in Peru, in mobile customer revenues, we reached 10 million customers. Postpaid customer base expanded 11%. The growth is a result of an effective sales management with a new channel mix focused on in-person sales and supported by on-boarding models that ensure greater customer retention. Prepaid customer base decreased 12%, mainly to the base cleanup also and the decline in wholesale channels restricted by regulation, along with the positive migration of customers to postpaid. I will now turn the call to Marcelo Bermudez, who will continue with more details of our results. Please go ahead, Marcelo.

Thank you, Paula. Good morning, everyone. Paula just mentioned in mobile, both in Chile and Peru, a significant growth in postpaid, also in fixed, relevant growth in Chile, mainly due to convergent customers, the commercial strategies and also a better performance in terms of bad debt and collectibles. So you can see that is positively impacting our top line. We grew 9.7% revenue on a consolidated basis during the year, which is very significant as a proof of our successful strategy in terms of capturing growth in the market. As I mentioned, for the year with more than 7% growth in mobile services, which is very good news, and just noting that handset revenue coming from the sale of handsets and accessories, plus the revenue stream coming from interest related to the finance of those handsets has really made a difference during the year, growing more than 14%. That is a very profitable business segment for the company. We have been implementing successful strategies to grow healthy in that segment. So that is really supporting our revenue base, and on top of that, we can also see clearly that the fixed strategy, mainly the growth we deployed in Chile allow us to grow more than 6% during the year and also relevant growth in other services, mainly related to wholesale, which is also improving the top line. Same, when you see the quarter compared on a year-to-year basis, we still see handsets and postpaid growing significantly. So we're very proud of that. And on the right-hand side, just to note that in terms of share on revenues and also in EBITDA margin, Peru is growing. I was just remembering that last year, Peru accounted for 32%, 33% of revenues. Now it's already at 35%, just supporting the growth of the group as a whole. And not much significant changes in the share for each country of B2C to B2B. B2B is still very small in Peru, 18% compared to 35% in Chile. We expect to grow in that market in Peru, but still the whole of B2C is very relevant, especially in Peru with 82%. And in Chile, given the growth of fixed, mobile is decreasing a little bit, but B2C is also very relevant for the whole share of our revenues in Chile. And that hasn't changed in the margin because of the growth in fixed in Chile. We expect to grow, as I mentioned, in Peru more in the B2B side in the coming years. So good news for the whole picture on top line. And the issue now is just to try to understand what is going on more on an organic basis in EBITDA and EBITDA margin. You can see on the left-hand side on the top of the chart, there we put three boxes, gray boxes with the mobile margin from 2023, '24 and '25. That is only considering mobile, which is basically mobile service revenue plus handsets revenues are considered. So we put aside everything that is related to fixed and digital business. So you can see that if we just look at the -- on a consolidated basis, the mobile business, EBITDA margins kind of have -- it is very stable during '23 and '24 with a slight decrease in 2025, which is mainly explained by the impact of the agreement we made with SERNAC, which is the local customer service and is related to the price adjustment that roughly it's a figure around $10 million that we have to consider as impacting revenues for the year. This is a one-off impact that affected 2025, and that is roughly 0.3 percentage points that are impacting these mobile margins. So if you put that aside, you would say that in the last 3 years, mobile margins on a consolidated have remained kind of stable. But given that we are expanding in fixed, also, we are still trying to grow profitably in digital business. What really those two main areas are dragging our margin our EBITDA margin down. But we know and we have expressed that in previous meeting that is something that we expect to be transitory. We expect already in -- this is 2-year impacts, 2026 and 2027, growing in -- continue to grow in Chile with fiber. We will also start growing at the very end of 2026 in Peru with the recent agreement with Win (sic) [ Wi-Net ] in Peru. So we will have until the middle of '28, if you consider Peru of growth in fixed, which is CapEx-involved with the last-mile connections and other interconnections that we have to include as part of the investment needed to grow in that business, plus the initial -- because of the scale negative impact in EBITDA of that growth period. We will expect that in Chile, the negative drag of EBITDA will end by the end of '27, but we still have Peru. So as a whole, we would -- we're expecting that normalized situation in middle of 2028, which means positive EBITDA and still more than absorbing any CapEx related to the growth in fiber. Digital is a different story. We're trying to improve the return in the next 2 years also of the digital area. So we expect that just given some level of guidance in that way, we expect that not only in CapEx, but also in EBITDA margin, we expect to have a normalized year by 2028. So we have 2 years, 2.5 years of intensive CapEx and dragging of the EBITDA margin because of the growth in those 2 businesses. We believe, especially fiber are strategic, to support also our growth and position in the mobile market. And when we consider not only the -- even the stand-alone return on fixed is still positive, but we believe that also if we add the impact on lower churn, for example, mobile is very positive. So we will see that in the coming future. But it's worth noting that at least the mobile top line is growing and also the margin, if we take out the impact of SERNAC's its still almost in the same level of 2023. The good thing about the SERNAC's agreement is that leaves us with a very clear view of how the coming price adjustment will occur. The processes that were needed to be fixed in the margin were -- I mean, marginally, the way we deploy those price increases were already adjusted. So we expect that if it's needed in the future, we'll have a clean and process of price adjustment without any issues. So I would say that's kind of a good news because the future in terms of price adjustment will be -- shouldn't have any impact such as the one we already saw in 2025. So that's related to EBITDA and EBITDA margin. I wanted to spend a little time on that area because I think it's relevant to understand why the margins, the red line you see are going down in the year, in the quarter, what we should expect and what's the timing for leveling up those margins and going back to normal, I would say. And going also back to the right-hand side, which is also very relevant news about the net income impact. We -- if you remember, we published -- it was, I think, in November when we did the transaction, it was published that an explanation of the size of the impact. Basically, the net profit, although it was a good year and a good quarter, is impacted positively by the deferred taxes related to the transfer of shares within the group, within legal entities of the Chilean umbrella, I would say, and that generated deferred taxes that are accounted for us in whole during the year, actually during the third quarter -- fourth quarter. So that if we take out those impacts, and that is depicted in the chart, our normal net profit after tax line instead of CLP 191,000 million would have been CLP 108,000 million, which is worth noting the same figure as the net profit of the year 2024, also adjusted by extraordinary items. So if you just put the organic, I would say, we posted almost the same figure as last year taking extraordinary items and still a little bit higher than 2023. And for the quarter, if we consider just the organic net profit of the quarter, it's CLP 11,000 million, which is below the last year figure, which was CLP 32,000 million. But as a whole, the year was very positive and in line with the last year. I know the question will come, so I'll answer right away. We expect the -- normally the dividend distribution is -- although we keep our dividend policy of up to 80% of the last year net income, which is I'm talking about the year 2025 net income. But normally, the policy, and I'm sure the -- what will be sold by the shareholders' meeting at some point we will consider that the recurrent profits should be taken into account for the dividend distribution. So you shouldn't expect a very significant growth or triple in terms of dividends. We should keep normal in terms of the size of the cash flow similar to other years. That should be the normal situation because putting aside the extraordinary items, we are kind of in a normal situation compared to 2024. So just I wanted to clear that up because that could be misled. Anyways, the shareholders' meeting should be -- should decide that, but it's hopefully what should be considered even in that meeting to be held in April. So just a quick review of the top line and EBITDA and EBITDA margin separated by Chile and Peru. What we see, still growth in terms of revenues in Chile, I mentioned mainly related to mobile service and mainly related to postpaid, which is where we're growing in Chile, also where we're growing in Peru. Commercial strategies are oriented to high-value customers backed by -- and we will see that later, a CapEx intensity, specifically in the areas where we get those -- mainly those customers, but defending the rest of the market segmentation in every country. Chile and Peru is a [ second ] strategy. And also growing in handsets in Peru and Chile, which is very positive. That I mentioned already that we believe that growth is pretty healthy in terms of, we are expanding our sales of handset and financing in both countries to existing customers. Maybe we have some tailwind because of the normal regular changes in new iPhones and Samsungs and new models that come with higher price tags. So those high-value handsets also imply that we are backing and financing the regular change. Christmas season is always relevant in both countries. This year was very good also in both countries. So that is helping to sustain the revenues and the EBITDA as a whole. And I already mentioned the growth, specifically in fixed in Chile. And same story in terms of margins, some decrease in EBITDA and EBITDA after leases in Chile, mainly explained by the expansion in fiber. And it's also worth noting that in January, actually, this January 2026 in Chile, we already started the implementation of the price increase that was communicated at the end of last year. So we should expect that impact to be accounted-for during 2026. So that's good news also to try to expect to support the EBITDA margins in Chile, while we grow marginally in terms of postpaid during the year. And also, we will have the impact of further growth in fixed in Chile. So that will drag a little bit the EBITDA margin, but sure some more EBITDA generation during the year. And in Peru, very good news. It's really growing not only in terms of revenue, but you can see that we have been able to sustain the EBITDA margin above 25%, almost 26% with a growth of 7% year-on-year on the EBITDA and the same in the quarter, which is very positive. It's worth noting the growth in the last quarter, we believe that the going or the momentum we had in the last quarter will help us to grow in Peru during the next year. The year 2025 in Peru was a very strong competition from retail that was growing. [indiscernible] is always very competitive. Peru is a very competitive market, and we need to have very dynamic commercial strategies. So we expect that the next year will be a much positive year, but you never know in Peru. So we try to keep up in that very competitive market. Same in Chile. That level of competition is also always translated to our share in mobile services and compared to the market share. It's very relevant that service -- service revenue share in mobile accounts for our market share, but reflects the pricing difference and the pricing trend we have compared to ourselves and compared to the competition. So we have been able to sustain and grow in our share related to the whole revenues of the industry. The rest of the players have mainly sustained their position, one of them decreasing a little bit, but we have been able to really keep our gap with the rest of the industry and Chile is almost 19 percentage points. In Peru, we are below the market leader, but still at a much lower gap, which is still a significant difference, but it can be reached at some point, it's 15 percentage points. But if you compare to the market share, which does not account for pricing difference, even in that case, the gap we have with the rest of the industry in Chile is almost 10 percentage points. And in Peru, we are much closer from the leader. It's almost 7 points. So we need to tackle that in Peru, specifically try to capture more pricing, more revenue of good quality and try to narrow the gap with the leader in Peru. So in Chile, we're keeping the gap in both measures. And in Peru, we have to work on pricing. So try to narrow the gap in revenue share. And this is also reflected in the port-out, still very -- we have the lowest port-out compared to the rest of the industry, which is the blue line, 0.79 in third quarter. Although our gap against the industry narrowed a little bit during the year '25 that was mainly related to the portability and biometric regulation changes. And so we expect that, that should really during 2026 convert to the levels we saw in 2024. But that's the picture we have as of now, which is still very low port-out, but with some narrowing compared to the rest of the industry. But in Peru, very different market in terms of -- there are also some regulation issues like the anti-spam law but still our port-out gap is very close to the market and it's different than in Chile, which is really much aggressive in terms of competition. So it's very hard to really get figures too different to the one we're seeing, and we're trying to keep that. In terms of ARPU, Chile growing, sustaining the higher ARPU in the industry, 27% almost gap compared to the rest of the players. For the fourth quarter '25, you see that we already are anticipating above CLP 10,000 these are Chilean pesos, some growth compared to the last -- to the end of the year, but still very positive. And in Peru, actually, given the even lower inflation, the competitive dynamics, the pressure in ARPU is very strong. So it's very hard to see any changes in ARPU, and you see very flat lines in the last several quarters. And for the fourth quarter, we just put the picture, we are a little bit above the end of the third quarter with 6.3%, which is some increase, and we expect to keep that in the future. And finally, in terms of the market, just to note that in Chile, we have this picture just for Chile, mobile data is really growing. That also is very important. You see Entel, the share of Entel for every quarter is expanding, although the whole industry in terms of go -- this is measuring petabytes by month. It's growing and Entel is capturing a higher share of that growth. This is worth noting because of the CapEx intensity we'll review in the next slide. But before just to note that the trend in Chile and Peru of our network is measured by the ECQ Index, which is the basically the quality of the network. We are growing. We're growing even faster than the rest of the industry in Chile. We are really almost in the same spot compared to the rest of the industry in Peru, but keeping a good momentum with a very strong network with points of presence, almost 8,000 in Chile, almost 6,000 in Peru and growing specifically in Peru, not only covered, but also the quality of the network in certain and specific areas. And we always put the spectrum disclosure, which is a very strong position in spectrum, which assures our growth in the future. CapEx. This is also very relevant. This is total CapEx for 2024, '25 and '23. We know that in 2025, even in 2024, we already were able to reduce by the end of the year a little bit the CapEx intensity, specifically in mobile because of the competitive dynamics that already show at the end of '24 exacerbated in 2025. We were able to post a 15.1% of revenues, CapEx in total. You can see how much Chile has really lowered the mobile CapEx and total CapEx is significant compared to 2023. We are in the -- in the tail in the last part of the 4/5G implementation in Chile. So that we should expect that to go down while we are growing in Peru. In mobile, we increased already in 2024. We increased a little bit less in 2025, but we expect 2026 will be more aggressive in Peru, in mobile. On top of that, we have still in Peru and Chile to grow in fiber. So in total, if you see the 15.1% CapEx to revenues in 2025, we have mentioned that we should expect during the period '26 and '27 in the range of 2 to 3 percentage points on top of that. So we should be, I guess, in the range of 18 point something for a 2-year period going down and converging by the year 2028 into the range of 16.5% in that area, which at the moment, 17%. But it will be really a 2-year spike to the range of a little bit more than 18%, 18.5% and going down to 16.5%. So I would use that as a guide for any cash flow projection, et cetera. Cash flow for the year, you can see the beginning cash to CLP 174,000 million, ending with a CLP 249,000 million cash. Basically, stronger EBITDA. We have some room compared to 2024 because we had some lower CapEx, positive working capital, even though we grew in handset financing, which typically requires additional working capital, very stable leases, IFRS 16. So in terms and financing was basically neutral, but we have some more net financial cost compared to last year. Just to note that those CLP 128,000 million of financial costs include CLP 44,000 million of the hedge of our exposure in Peru. So if you take that out, we still grew a little bit in net financial cost, but mainly because our -- some -- a lower investment base and interest income related from -- coming from that investment sources. So I would say in terms of net financial cost of interest expense, it's actually very similar to the previous year and actually lower because of the lower rate of refinancing. So pretty stable cash flow. This is before, for sure, any other consideration. But still, we ended the year with a strong cash position, which also combined with the refinancing we did of the maturities we have in '25 and we prepaid some of the '26 bond, it allow us to really post a very strong net debt at the end of the year, very stable compared to the end of '24. Our gross debt actually decreased at a certain extent and with a net financial debt plus IFRS 16 to EBITDA ratio of 2.47x, which is a little bit lower than the end of '24. So this is good news. We were able to keep and sustain our investment grade with all our rating agencies. So we believe that in terms of the financial, so we post a very strong position. We feel comfortable with the refinancing we performed during the year, which leave us a very healthy room in the next 2 years, the next amortization that we have to worry about is 2028. We have time to do that, expecting very strong and good market conditions when we decide to do that. So this is very good news, I think, for our balance sheet and liquidity. And to finalize, just to repeat some of the things we already mentioned. Both countries, Chile and Peru are with 4 players that are strongly competitive. We face competition. And we have to be quick. We have to be really responsible and try to focus our commercial strategy where we can take the most significant return on that, maintain our EBITDA stable, but try to grow in the market segment where we see some room and good return also growing in fixed in Peru and Chile, just to support the mobile business. We have to take advantage of the strong embedded network we have built with the CapEx that we have performed during the last many years, try to monetize that in Peru, we are trying to do that. We have to advance on that in Chile, we are already comfortable with the ARPU. We are growing in ARPU. So we will continue, hopefully, to capture more value in that area related to the top line. And fiber, as I mentioned, grow very significantly trying to make it healthy, fast and healthy in the market segments that really provide value for the company. I already mentioned investment grade. And the CapEx intensity, as I mentioned, 2 years of 2 to 3 percentage points at the most of spike and then converging back to in the range of 16.5% for 2028. So that's a summary. I think it was a very good year, very challenging in both markets in Chile and Peru, significant changes in the players and the market strategies. We -- as I mentioned, we have been trying to be very agile, anticipate the changes and adjust our position and commercial strategies and financial strategies in that line. And I think we have been successful. So that's it from my part. Thank you.

Okay. Thank you so much, Marcelo. [Operator Instructions]. We have one question from Andres Coello regarding the new Direct-to-Cell service with Starlink. Can you share some statistics regarding how many Entel customers have used the Direct-to-Cell service? And also how much you are charging for the service?

We have the figures we have very recent figures and I think that we need more time because this is really new, Andres. For example, we were analyzing and this is out of the oven figures related to -- we just have some relevant events in Chile related to wildfires in the South. And it's very relevant, the growth and the usage that we saw in those areas that are affected by the wildfire while the regular connectivity was not working in certain areas. So we have big statistic. We cannot share them right now, at some time in the future, we might share that for sure. But it's really -- we are in the first weeks of really capturing the data, trying to really deploy and make the service available for our customers. We are in the initial frictions that every handset has, is really connected or recognized by the networks. There are some many challenges given the differences between the operating system of the different handsets and how we connect those to our system to have the SAT mode connected. So -- that is working, it's advancing. Our customers are using the services, but still need more work so to have a really stabilized full access to every customer in the coming few months, I would say. So at some point in time, we'll share those statistics. And in terms of pricing, we're not charging directly for -- but we are monetizing that, and we also have a statistic in terms of the lower churn and higher -- and capturing high-value customers that normally wouldn't be our customers if we didn't have the Direct-to-Cell service. So we are following those numbers, and we can also tie the monetization of the Direct-to-Cell service in the case, as I mentioned, that customer that we know that are preferring us because of that. And the lower churn is also can be measured. So -- but we cannot provide figures at this point. But let me tell you in summary that is very successful.

Very important for emergency cases like wildfires...

I'm just talking about Chile. And I think in Peru, because of the lower depth of connectivity in remote areas will be also a very relevant differentiator to our competition in Peru. And that differentiation will definitely imply a higher market capture of customers in those areas. So -- but we will see that, I would say, during the first half of the year, we need to stabilize the operation of the system, and we will provide to the market for sure those figures as soon as possible.

Thank you, Marcelo. We have another question from Olivia. On Chile mobile margin in the fourth quarter, a good reference for -- is a good reference for 2026. What element should be considered to think about the year? Can you talk about how are you seeing competition in this market?

Yes. I would use -- just consider that there were some extraordinary impacts in the fourth quarter, but I would say -- just know that it does not include the price increase that is being performed in January 2026. So I would be a little bit more optimistic and not use exactly the same fourth quarter mobile margin. That's for one. And the second part of the question was...

Competition.

Can you talk about how you are seeing competition. In Chile, I would say that if you see the slide where I showed the revenue share in Chile and the market share, you would see definitely [ Claro ] and you all know that since they got the 5G spectrum, they have been -- and that's very obvious, they have been growing and being aggressive commercially just to use the new spectrum and the quality that it implies. So I would say that they have been the drivers in terms of competition during the year. The rest of the players, I would say, more cautious. And if you see the market share, you will see the only line that really goes up during the year is the red one. But it doesn't mean that, that growth is captured in pricing. So you have to then look at the same chart in the left-hand side, which is the revenue share. And the revenue share, most lines are really flat and Entel is growing. That is also another way to look at it, the value that is captured after all the growth in terms of customers because you can lose customer, depending on the type of customers and time you can do efforts. But -- so I would say it was a competitive year for the industry, for sure, Claro. And the situation with other players is different. So -- and in Peru, as I mentioned, is always very competitive, by detail is growing. It's similar to the situation with Claro. They got this new 5G spectrum. They have been very aggressive. Although we have been able in Peru, it's worth noting to grow in postpaid and more high-value customer, but we haven't been very successful at keeping up. Actually, we are decreasing a little bit in prepaid. So prepaid is where we need to put more effort. It's going to be hard. We're not very good at prepaid in Peru, but at least we're trying to be very good in postpaid, which is the more value is.

There's another question regarding fiber. You posted an acceleration in Chile fiber-to-the-home adds. Can you elaborate on what are the new commercial actions implementing during the quarter? What do you expect in terms of adds to 2026?