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

Good morning, and welcome to Entel's First Quarter 2026 Results Conference Call. Thank you all for joining us today. I am Paula Raventos, Investor Relations Officer, and I'm joining us today with Marcelo Bermudez, Entel's CFO. Please note that this event is being recorded [Operator Instructions]. We delivered a strong first quarter 2026 with 7% revenue growth and double-digit EBITDA expansion despite a high competitive and dynamic environment in Chile and Peru. Postpaid voice and fiber broadband continue to be the engines of our growth, supported by a differentiated customer-centric value proposition. Our ability to anticipate market shift and move decisively combined with discipline and responsible financial management translate into margin expansion and net income growth this quarter. One of the most distinctive milestones of the period, is our leadership in direct-to-cell satellite connectivity. Thanks to our strategic partnership with Starlink, Chile and Peru became the first countries in Latin America and among the first 5 globally to commercially launch direct-to-cell satellite service with Chile now ranking as operator with the highest direct-to-cell penetration worldwide relative to its subscriber base. This enables our customers to connect direct from their phones in remote areas, and we recently expanded the service to applications like WhatsApp and Google Maps, delivering on our brand promise on connectivity where others can't. The initiative is both strategic and practical, financial materially with scale with adoption, while strategically, it reinforces Entel differentiation, resilience and leadership in network innovation with clear commercial traction already visible. Around 10% of our customers porting into Entel say they choose us specifically because of Starlink. On April 22, we held our Annual Shareholder Meeting, where 3 new directors were appointed, Maria Ignacio Hurtado, Ignacio Ossa and Christian Arnolds, and a final dividend of CLP 255 per share was approved, in line with our policy distribution. The approval dividend bring our average yield to approximately 6.6%. Also at yesterday's Board meeting, the Board elected the Chairman -- Vice Chairman and the members of the Directors' Committee for the next 3 years with Luis Felipe Gazitua appointed as Chairman and Christian Arnolds as Vice Chairman. Other milestones to highlight during this period is that we launched our first integrated annual report, which provides a comprehensive overview of our operation performance and sustainability initiatives for the year 2025. And on sustainability, other highlight is that Entel was included in the S&P Global Sustainability Yearbook 2026, ranking 12th globally in telecom and achieved also its first dual ESG certification in the SSINDEX 2025, with 75% of our stakeholders rating our ESG performance favorably. Regarding the performance of our activity, despite competition, we continue to grow in postpaid and fiber. In Chile, postpaid remains the engine of quality growth, increasing 5.4% year-on-year and 1.2% quarter-on-quarter, supported by our differentiated value proposition and improved customer experience, while prepaid continued to decline, largely reflecting the ongoing impact on regulatory changes, the cleanup of inactive SIM cards and the migration to postpaid. At the same time, our fiber strategy in Chile keeps delivering. Fiber connections and fiber-based RGU continue to grow. This quarter, we grew 8.1% quarter-on-quarter and 17.9% year-on-year, supported by a strong commercial execution, a rising share on convergent customer and improving churn. In Peru, we are seeing a similar pattern in mobile. Postpaid is expanding strongly, increasing 12.6% year-on-year and 3.4% quarter-on-quarter due to a solid commercial execution through essential channel, which now dominate net activations. Prepaid is contracting in line with target security-driven regulation and channel restrictions. On fixed, Peru remains in a transition phase today. However, following the agreement we signed with Wi-Net in December '25, we expect to launch fiber Peru in the second semester of this year, expanding our convergent proposition and positioning us to capture incremental growth with more attractive fixed offering. Now, Marcelo will continue with the detail of the results.

Thank you, Paula. Good morning, everyone. Basically, pretty strong start of the year with the first quarter posting growth, 7% in terms of consolidated revenues compared to same quarter of last year. As you can see, we not only posted a very, I would say, promising growth of 4.6% in mobile services, but also an outstanding growth in handset revenues and financing that is supporting the growth of the consolidated figure, both in Chile and Peru. That's very interesting to mention that we're growing not only at the similar paces, but in both services and terminals in both countries. And also with really sustained revenues coming from fixed. As you can see, and we will mention later in detail that even though we're expanding in fiber in Chile, -- and there is some lag in fixed services from B2B that are really offsetting the growth in fiber and home connections basically. But in total, it's a very strong start of the year. And already Peru, which is also worth noting, is already 35% of consolidated revenues growing compared to last year. And Peru has roughly 10 million customers, pretty similar to the Chilean mobile customers and Chile continue to be the most relevant part of the revenues with 65%. In general terms, there is not really a significant change compared to the last meetings in terms of the revenue stream from B2C, B2B in Chile and Peru, pretty much the same figures, although we are trying to grow more aggressively in the digital and B2B in Peru, which is a line that we started at the end of last year, promoting especially, but the rest of the B2C services are basically unchanged. Interesting to analyze a little bit the performance of the EBITDA and EBITDA margin. Putting aside for a while the fourth quarter of '25, which is typically because of seasonality, much stronger because of Christmas sales in the operations in Chile and Peru. But if we compare the quarter to the third quarter of '25 and even the first quarter of '25, there is a significant growth of at least we are sustaining a very strong organic EBITDA with margins. Normally, they decline in the fourth quarter because of Christmas season and the huge growth of handset revenues and because of the lower margins that handset normally bring, you would expect a slight seasonal drop in EBITDA margin. But if you see the more long-term view, there is still strong sustained, I would say, of the EBITDA margin around 27.5%. So normally, we would think as the fixed business in Chile start to continue to grow as it has been doing, we should expect an EBITDA margin around 27.5% to 28% in that area, which is normally what we have seen. The only thing that I normally mentioned is that as we grow and we have been growing very aggressively in the handset financing and selling that because of the mix, because of the lower margins that business had normally could drag a little bit the EBITDA margin. But in nominal terms, it's a strong business, and it provides a lot of positive cash flow for the company. It's worth noting also that in the third quarter of '25, there are some extraordinary impacts on B2B, mainly because of the contract with MINSAL. So the third quarter of '25 is a little bit impacted by that. So taking that out, we would even see a sustained growth in EBITDA generation per quarter, putting aside the fourth quarter '25 that has the, as I mentioned already, the seasonal impact. So I would say that we're positive on the EBITDA nominal growth, and we are positive on the sustained margin around 28% roughly, 25.5%, 28% will be normal as we continue to improve in the fixed fiber growth. And the same, we can see in the EBITDAaL margin after lease is still pretty much stable. And that also goes down to the net income posting a growth of almost 20% year-on-year, which is still positive. Just remember that we -- since we already fixed the volatility that came with our exposure in the investment in Peru, which we normally hedge through the year '24 and '25. Now we -- since we structurally fixed that issue, normally, you see a more stable quarterly net profit just reflecting the actual business, not impacts on our investment in Peru because of the exchange rate, which is the issue we have in the previous years. So we would expect that to continue in the coming quarters. More in detail, Chile, in terms of revenues, as I mentioned before, significant year-on-year growth in services. That's a mix of higher growth in the customer base, which is very positive, but also the impact of price adjustment. We performed one increase to the base roughly 2 million customers that were impacted in January. And also, we adjusted to the new customer, the new entrants, the entry base since March also, we adjust the prices for the new customers. So basically, it's a mix of a larger customer base plus some price adjustment. Just to give you an idea, the adjustments are normally -- if you take reference our plans that are roughly $11 per month, we grew to $12 per month. That's roughly an 8% increase in prices. to the base, similar roughly rough figure for the entry customers. So that is really impacting positively our revenue walk. And in terms of margin, as you can see on the right-hand side, that impact is a little bit offset by the payments we have to do for the Starlink service. So we would say that our improved in revenues, customer prices, which has a positive impact in EBITDA is partially offset by the payments related to the Starlink services, which we started in September of last year paying monthly or accounting monthly. It was prepaid already, but it goes to the P&L as an incremental cost. So even though there is this Starlink effect in Chile, the net effect is positive because of the impact on customer base and prices. That's in mobile services and very strong also quarter growing 23% compared to last year and handsets growing very-- in a steady pace. We have been capturing a lot of the growth in the industry in that market segment, especially from taking market from retail operators that normally provide sell handsets to the customer base. So we have been increasing our share in that segment with a very really healthy customer base just remember that we provide not only selling but finance to our existing customer base, customers that we know that we can really measure properly the risk -- the level of risk. So we have been selling every quarter more handsets and our bad debt or provisions for that debt have been going down. That is something we have been seeing in Chile and the same in Peru. So that's very positive news. And as I mentioned, fixed is a little bit in the range of 0% growth because of the net effect, as I mentioned before, which is expanding fiber offset by some seasonal decline, I would say, in fixed IT and data services. So -- but we're positive that B2B actually is growing, is posting incremental EBIT compared to last year. So I would say this is more like a seasonal impact, and we'll expect to see also growth in B2B fixed coupled with the growth we will see in fiber from the home side. In Peru, pretty much the story is similar to Chile, growth in mobile services. There's a mix of growth in customer base, coupled with a quarterly growth compared to last year in handsets growing almost 14%. And that is really levering and providing a strong support for our growth in on a consolidated level and providing also room for further investment in both countries, in Chile and Peru. So in summary, we have a very healthy mobile service, mostly postpaid in both countries growing, although we have mix impacts of growth in prepaid with Peru being very challenging in prepaid, but the most high-value postpaid customer base is growing in both countries. Chile, also, as I mentioned, pushed positively by price increases, coupled with a strong growth organic in terminal sales and financing in both countries. So it's a very still positive view. And that, as you can see in this chart, is impacting or at least sustaining a very strong position in terms of revenue share compared to the rest of the industry in both countries. And as you can see in the right-hand side, postpaid market share in Chile has been really 34%, very strong against the other players. And in Peru, we have been able to sustain levels above 25% in postpaid market share. So even though the industry is still very competitive, very active, we see that in both countries, we have been able to sustain our market position. And that is very important to note that the reason behind that, and we will mention the impact of CapEx in the next slide. But before going to that, I just wanted to point out that the -- really the port-out rate is a very strong measure of how we're doing as an overall service for our customer, not only the experience that brings the infrastructure, but also the other aspects of the experience with our customers. Price is one of that really factors that impact positively or negatively the port out and the churn in general. And we have been able to really have the lowest port-out rate in the industry, and we're very happy about that, keeping our gap, actually expanding our gap in Chile compared to the rest of the industry. And in Peru, also, we have really much lower portal than the rest of the industry. That allow us, as you can see in the right-hand side, in the top chart, growing the mobile ARPU for Chile with a significant almost 27% gap compared to the second and third player. That's a very strong gap that we have been able to sustain and even widen in the last quarters, almost a little bit above CLP 10,200. That's the first quarter and end of first quarter figures. In Peru, although we are below the leader in the market, we still have a very strong gap compared to the other players, being second in terms of ARPU and growing in the margin for the first quarter of 2026. So although we have mentioned before that the Peruvian market is very competitive, there's lot of intensity and revolving of customers, which is a lot of the net churn in that segment, but we have been able to sustain our prices and really still have very low port-out rates, and that's good news for the future. What is happening in the fixed side related to connections of fiber to the home, as you can see in the charts, although we have been growing in general terms, FTTx connections in total for the first quarter are 645,000 customers. That is a significant growth of almost 18% compared to last quarter -- or same quarter of the last year. We have been around 12% of market share. If you see the blue line in the left-hand side. The other players, normally, they have been adjusted -- we have been growing since the end of '23, where we started to actually -- at the beginning of '24, we started deploying and growing and expanding in fiber on top of the on-net network. And recently, the spike in the red line is basically VTR, VTR that is really transitioning, we understand those -- their customers from HFC to fiber, which is basically a transition from one technology to the other plus, I guess, some level of growth. So still, we have a strong position in fiber growing. We expect that level to grow in the coming quarters. And going back to mobile, still very strong position in terms of presence for 4G and 5G Entel leading in 4G with 81% and also 5G with 60% of the presence compared to the rest of the industry, pretty strong position. And all the measures we have ECQ and mobile network experience put and rank Entel in the top, even growing and widening the difference compared to the rest of the industry. Even in Peru, which is a market where we are putting our -- speeding up some investment, we have been growing. In 5G, you can see 34% of presence level compared to the rest of the industry, is 10 points of difference. And the ECQ rank us in the first place coupled with the leader in Peru, which is Claro and still very strong position. So we are confident that we will be able to sustain that. But that require CapEx. Normally, we get a lot of questions, what's the expectation for the CapEx level. We mentioned that last year 2025 was kind of a transition in both Chile, especially some in Peru because of the normally, we consider CapEx intensity as a competitive lever depending on the level of competitiveness and investment from the other players. We are adjusting the level of investment, mainly mobile. And so for the year 2026, we already are expanding our investment. We are aiming this year and next year to be around 18% of revenues. As of March, we are below that figure. But depending on the -- how the market and the industry evolves during the rest of the year, we might keep the pace we have posted as of March or actually speed it up a little bit and reach the figure of 18% globally consolidated that we are included in our plan. For mobile, there's a 16.3% for the quarter, and the rest is mainly fixed. So in summary, we will be reviewing the competitive dynamics. There are some new players, especially in Chile. There's also some changes in the investment intensity from other players, both in Chile and Peru. So we are always measuring that. But at least we know that 2026 and 2027 will be years of a little bit more CapEx than the long-term goal, mainly because some additional investment and development in Peru for additional reach in certain areas and market segments in Lima and outside Lima and also in Chile, also to -- not only to improve our mobile network, but continue growing in fixed. So we have these 2 years. And normally, we would expect after 2027, converging to a CapEx to revenues in the area of 15%, 16% of revenues. That's all we have these 2 years of kind of extraordinary CapEx level. Just quickly, in terms of cash flow, we have still a strong growth compared to last year same quarter in cash flow from operations. We have positive cash flow, even though we are pushing a little bit the working capital since we are growing in terminal financing that is used normally a significant resource from working capital, but it is very profitable in terms of returns and also returns pretty fast. So this is kind of something that we are putting our additional resources to really capture that profitable market. After interest payments and even the -- some cash flow from financing activities that those CLP 50,000 million negative are mainly the payment we have to do in January related to the hedge of the Peru investment that we did in 2025. That was at the very beginning of the year. That explains why we used that cash in the first quarter. But still our total cash position, which is CLP 250,000 million is very strong. That put us in a very liquid position for the rest of the year, even after the dividend payment we just did at the end of April. So in terms of debt, we have been reducing marginally our net financial debt divided by EBITDA, LTM, posting a 2.34%, which is below last year in every measure. And we still have because of the refinancing we did last year, a very healthy room of amortization of different bonds and debt for the -- at least for the end of 2028, we are very healthy and room for having time to think on those refinances in the future. So basically, that's the news. And as final remarks and takeaways, I would just really would focus on the growth we have been posting in mobile services that are supporting our revenue growth of 7% year-on-year on a consolidated basis, both growing year-on-year in Chile, 4.6%; and Peru, 5.6%. That's very good news given the competitive environment in both countries and also supported by strong handset sales and financing. Also, it's worth noting that postpaid, especially, which is the most profitable business line in mobile is expanding 3% and 11.9% year-on-year in Chile and Peru, respectively, with record low port-out rates, and that's also very important. I would always say, supported by our strong customer experience, strong network, which is part of our strategy of supporting that expansion and margins. And also fiber is still growing. Last year, we adjusted a little bit during the second half of the year, a little bit the growth to provide more healthy customer capture during the second half. We did that also, we adjusted the way we were applying discount. This first quarter of the year, we started to grow again as we did in the first half of the last year, but we're growing very healthy with very good levels of churn, strong levels of convergent customers in the range of 60% to 70% of our customers are in fixed also customers from mobile that has -- is having a strong impact in reducing churn. In every market segment, high middle to lower income segment, really the churn rate could be half of the normal if the customers are converged. So we are very optimistic in continued growth in fixed in Chile and also in Peru once, as Paula mentioned, the network with that is ready to operate by the end hopefully, of this year. And as I mentioned, a strong balance sheet, a slightly reduction in leverage ratio. And as always, very important, really having a very strong gap in terms of NPS compared to the second players and the rest of the industry and same in brand power, strong gap and alongside our home fiber, which we are leading in terms of market and brands in Chile as Entel Fiber is already having a space in the market. So basically, that's it. Now there's time for Q&A.

Thank you, Marcelo. So now we are open the session for questions. You can send it through the chat, please. We will wait a couple of We will wait a couple of minutes. We have some questions that Marcelo Santos is sending. Please Marcelo, send it. Could you please comment a bit more on the competitive environment post the change in players in Chile? What kind of churn reduction do you experience when you have a convergent client versus a stand-alone broadband one?

Yes. Thanks, Marcelo. Basically, the first question is, I mean, as I mentioned in the first quarter, we have seen at least a market and an industry that's been in terms of competitiveness, pretty stable. We believe that given the -- already we have experienced and expect to continue to see some higher levels of inflation in the country because of the war. And so I would say that most of the players and includes Entel are being very cautious in terms of keeping cost control and trying to be also very responsive with pricing. And pricing has also an impact in the way we can control our margin and sustain our margin. So as of now, we see the competitive environment really promoting or trying to promote a more healthy industry. I would say it could be too early to see what will be the deployment in the rest of the year. But as of now, we are, I would say, cautious and doing what we know we do the best, which is investing smartly, trying to provide good service. But at least for now, the industry is really backing a healthy strategy for our company. In terms of the impact of churn rate of convergence, it's significant. I would say the -- depending if you look at for the mobile side or the fixed side, but it may have a reduction of -- depending on the customer segment, but between 20% and 35% reduction in churn rate. It's kind of significant. It's not 5%. It's more than that. So we're optimistic that just remember that when we started to invest in fiber, the -- actually, we always mentioned that we see our investment and deployment of fiber in both markets as a way to support our existing mobile customer base. And we are seeing kind of that impact, coupled with other impacts and strategies always mentioning Starlink and other similar. So it's different products that make the value proposition of Entel a broadened one, a more sustainable one.

Okay. We have another question from Santiago. Could you please expand on the regulatory fines in Peru that are mentioned in the earnings release, please?

Regulatory fines?

Yes. I thought that they are the ones that regarding prepaid.

Yes. You can mention that -- I mean it's not actually fines.[Foreign Language]

There are the changes of regulatory that we mentioned through prepaid in Peru, it's mainly the restrictions regarding the sale of ambulatory in street. That's the main changes that has stopped the selling in streets and make it more in present or in-person sales through stores or express stores that we have.

Yes. That's very important because at the same time that a new regulation is forbidding the -- that any of the operators in Peru sells mobile services or chips in the street, which was a normal practice in Peru actually have salesman selling different brands. That has a positive impact in Entel because we were already expanding our network of stores owned by Entel or Express stores that are owned by us or franchises. So the expansion, the capillarity we have already started 1.5 years ago with more than 200 stores throughout Peru is very positive. So we have been able to continue to grow, continue to grow with better customers, so reducing churn rates. And normally, the difference in quality of sale of the different channels is significant. It's not the same selling through [West] and the street in an owned store. So the customer that use one channel or the other are very different. So we have seen a positive impact at the end of these measures, which is, I would say, level the field of competition in a very aggressive market like Peru.