Telecom Argentina S.A. (TECO2) Earnings Call Transcript & Summary

Good morning. It's my great pleasure to welcome you to our Investor Day, celebrating Telecom's Argentina, 30th anniversary of listing on the New York Stock Exchange. Today is a significant milestone of our company, and we are truly grateful for the presence of our investor community as we celebrate this remarkable journey. We are delighted today to come with the presence of representatives of investment firms, law firms, banks, multilateral agencies, the GSMA and the Deputy Consul General of Argentina, Mr. Nelson Martin. So I would like to extend our special thanks also to our distinguished guest speakers who are joining us today and will be presenting besides Roberto, our CEO; and Gabriel, CFO. We are honored to have with us Federico Semeniuk, Director and Economist from Ecolatina, and we also have the privilege of welcoming the Chairman of the Argentine's Securities and Exchange Commission or Comisin Nacional de Valores as we call it in Argentina; Roberto Silva, who will share his value perspective. Today, we have a well-rounded agenda. First, Federico Semeniuk will present an overview of Argentina's economic outlook. Following that, Roberto will take the stage to provide a comprehensive strategic review of Telecom's performance, ambition for the future. Gabriel Blasi will then deliver a detailed business outlook, offering insight into our operational goals and long-term objectives. So finally, we will hear from Roberto Silva who will share his thoughts on the evolving regulatory landscape. So once again, thank you all for being here and for your continued support for Telecom Argentina. We look forward for a day of meaningful dialogue and we are excited to share a vision with the future with you. So without further ado, I'd like to hand over the floor to our first speaker, Federico Semeniuk. So thank you very much. A little introduction. So Federico holds a BS in Economics and a Masters in Finance, both from Universidad Torcuato Di Tella. He's an economist specialized in finance and accounts 20 years in consulting for multinational companies, both in local institutions such as Estudio Bein and Banco Mariva and Ecolatina. And International firms as Bank of America Maryland. In Ecolatina, he's responsible of the economic research team and client presentations on topic of economics and finance with focus on forecast modeling and economic analysis. Federico, thank you very much.

There we go. Well, thank you. Good morning, everyone. Always a challenging task to talk about our economy. But in this case, I put over my shoulders up for the challenge, which is considering the 30 years of Telecom at the Stock Exchange, talking also over the last 30 years of Argentina. In a couple of slides, okay? But of course, this is not a history class, we want to look at the future. So I'm not going to talk about Argentina for the next 30 years that would -- wouldn't be appropriate, but try to look forward, at least until 2030 in terms of the potentiality of Argentina. And to do so, I thought well, we have to go like into a time traveling machine, right? In order to make this time journey, well, we are getting into the DeLorean of the Back to the Future movie. So we're hitting first, going back to 1994, okay? Telecom at the NYSE. And in terms of our economical stance back there in terms of inflation, quite low with the convertibility but also quite low per capita GDP in Argentina. And that changed a lot during the last 30 years. And of course, as you probably are aware, the first years of the convertibility were successful in terms of battling against inflation. But in the second part, well, problems started to arise and we ended up in the famous crisis of 2001, 2002 and then rebounding with the twin surpluses in first part of the era. And we started to see after that, the first signals of problems in terms of inflation, rising inflation, but at least increasing in terms of per capita GDP. And we hit the peak in 2011 and what happened in that specific year. The first currency controls, currency controls, which we'll be discussing a lot during this presentation. And after that, of course, it's an oversimplification to say that currency controls are the costs and only costs of our economical problem, but higher inflation, a lower per capita GDP and so on and so on. The COVID shock, the rebound of the COVID shock, but the trend is going to a lower stance in terms of per capita GDP and higher inflation. And in 2023, things started to get really, really interesting. And we were the highest inflationary country in the world. A couple of months, I could say, the first one because we didn't have the fears of Zimbabwe yet, well, they are taking that away from us. We are the second highest inflation in the world in 2011, and things had to change in somewhere. Because in the last 30 years, we had 13 years of recession, 19 years of annual inflation above 10%, way above that figure, but 2-digit inflation, and 24 years of fiscal deficit. That is why with the current government there's a nominal anchor in terms of the policy approach towards the fiscal deficit. But if we talk about the inheritance of the last 30 years, we have to specify the one of the last year of 2023 because it's not only a matter of contraction of GDP, a matter of increasing inflation, but also we had the highest gap in the exchange rate market between the power market and the official rate since 1960, almost 200%, a poverty rate, which was 45% and nowadays is closer to 50% or above that figure. Multiple exchange rates, and I'm not talking here about the difference between the [ power one ] and the official, but also within the official market, we have several exchange rates, no access to credit market, negative reserves, a real FX appreciation. So you name it, you have it. And lastly, the controls over the economy that you are probably aware. Price controls, import controls and we are going to focus in the last one, currency control, which is the remaining one which we believe they are going to be gone. The discussion is when, not if, and how, but not if, okay? So that explains not only in the inheritance of 2023, but of the last 30 years of Argentina that Argentinians are voting for this total different approach in terms of the economic policy, what I call that, U-turn in that sense that if I have to summarize, would be the following: a geopolitical realignment more towards the U.S; a greater commercial openness; the elimination of all these controls in which we are advancing at a different pace; the central bank balance sheet normalization, which is increasing, again; the reserve eliminating the high liabilities; the elimination of the fiscal public deficit to the regulation of the private market; the structural reforms, labor, tax pensions, et cetera. But the thing of this is that not of them depend upon the executive branch. A bunch of them depend on the support over the Congress, a Congress in which Milei is quite weak, as you probably know. If we take into account the percentage of deputies and senators in the Congress, well, that 14%, 10%, respectively, which goes up to 30% and 18% if we consider the allies mainly from the party of Mauricio Macri, which was the first one since the return to democracy in Argentina in 1983 with minority in the both chambers. Well, Milei is the second one and even in our worst situation. That's why it took more than 200 days in order to approve this [ omnious ] law, but with a lot of changes against the original project. But that was done given that Milei has a political asset, maybe only one, which is the politic -- the social support towards his government, with a positive image that might be lower than the negative one, but considering the adjustment over the economy, the contraction of the GDP of the purchasing power, et cetera, is quite high. And it is quite high because people are still blaming the outgoing government. When we ask for the population who is primarily responsible for the current economic situation. Both, most of them are saying, given the imbalances of the previous government. But that high positive image that we are seeing here in terms of confidence over the government eventually is going to fade away if economic positive results do not come along as it happens every time. So it doesn't matter if it's Milei, if it's Cristina Kirchner, if it is Mauricio Macri, [indiscernible] are always there, and they always fade away without economic results. In fact we have the last figure of this specific index a couple of days ago, and it showed a great contraction. So things have to go a little bit better in terms of consumption, in terms of activity in order to be sustained over time. But despite of that, given the social support, the government was able to perform some initial measures which were quite costly in social terms with the support of the population given the acknowledgment of the need to do this surgery which we can summarize in the following: of course, the announcement of fiscal adjustment, which is going on, we are already seeing that since the first month of the mandate, the fiscal stance is already on surplus. And here, I'm talking about the fiscal financial is only the primary surplus after a deficit during the last 2 years of around 5% of the GDP. The correction of the exchange rate, we had that hike of 118% in 1 day. And the very positive news about that was -- and the fee of the market was of an increase in terms of the FX gap, and it happened the other way around, it decreased to the levels of 20% or around those figures. The release of the regulated prices which are not over. So still, there's a remaining of an inflationary effect, but most of the shop has already been done in that sense, if we consider the ratio between the regulated prices and the overall headline CPI and the flexibilization of import controls, which is an ongoing process. At first, we had a 4-installment access, 25% every 30 days. Now it's more flexible towards 2 installments. But to put in clear figures by the end of last year, companies were accessing around 17% of the dollars needed to pay the imports. And now that figure is above 90%. Still a lot to do, but we are go in there. But of course, this has an impact over the economy, over the society, a positive one and a negative one. Just to summarize, GDP contraction of around 6%, 9%, depending on how you measure it. In fact, if we look at GDP in the first half, it says 4% negative year-over-year, but this is considering the effect of the rebound of the agricultural sector in which we had a climate shock last year. So it has a quite important rebound. If we take that aside, well, the economy is contracting more on the order of 9% nowadays. Construction, 30% down; manufacturing production, 17% down. Retail sales, 20%, 25% and purchasing power or real wages, wages discounted inflation between 20%, 15%, depending if you take the overall wages of the economy or just the formal ones, which are not that shock against the level of inflation. But of course, we have the other side of the economy. The battle of inflation is there, and we moved from the initial shock of 25%, 20% in December -- in January, given that initial shock over the effects and the release of the regulatory prices and now moving more towards the level of 4%, which has been quite challenging for the government to cross that line, but it's happening. And also the recovery of those central bank reserves, which were in negative terms. The ones which are fully disposal for a central bank around $11 billion, well, a big recovery in that sense, but that already ended. So that's again an alarm signal in terms of the evolution of the FX. The improvement of the financial variables, the decrease in terms of the country risk, we had country risk around 2,500 points nowadays, [ 8 cut for 1000 ] points. The improvement in terms of the stock market in Argentina, measured correctly against the [ power effects ] of course and the contraction in the FX [ gap ], which is the thermometer in terms of the pressures in the exchange rate market in Argentina, which already is giving us some noise despite the recent days in which for some specific policies is in a downward trend. But still holding for this. So the government is in this position of, I'm going to do this by keeping currency controls, which was not what we expected. We expected by now to be talking about another thing and dismantling to be certain, but the government is not willing to take that cost at least for now. And hence, they are sustaining this 2% [indiscernible] overall impact of official exchange rate, which is moving way below the level of inflation, hence, accumulating FX appreciation and all these risks in terms of the capability of accumulating reserves. So this is only possible in a scheme of currency controls. You cannot move a price such as the official FX way, way below the level of inflation. Despite we have some conversions, but still inflation is doubling the level of pace in terms of our local currency. And given that what we gain in terms of exchange rate, competitiveness is getting lost. Here, in fact, we are looking at the accumulated depreciation of the exchange rate in Argentina. First, in December, we had that 118% hike, which month-over-month was this 124% and then the [indiscernible] impact of 2% while inflation is moving closer and closer, okay? So if the government keeps doing the same thing, keeps the 2%, even with the moderation of inflation, we expect most of this gain of competitiveness in terms of our currency to be lost by year-end or for sure, by the beginning of 2025. And the market is also reading this and is worried about this. So we're saying, well, until when are you going to hold this strategy, which might not be sustainable in the long term. Given that the 80% gain in terms of real exchange rate, which is part of the explanation of the accumulation of reserves in the first part of the market, nowadays is only 6% above the previous levels or the levels previous to that exchange rate hike. And that is aligned with the evolution of reserves, which is the other point of worry for the market. We had a big accumulation at first, given this gain in terms of competitiveness. We have a big increase given the previous scheme in terms of access for imports. But since May, since June, we are not accumulating results anymore. And in fact, we are going down. So that's why the challenge in terms of keeping this strategy for the government. But the government has an answer for this. What are they saying? They are saying, do not ask me to move the exchange rate because this is going to have an impact over inflation, over employment. So I need to be more competitive, not in terms of my exchange rate, rather in terms of reducing taxes, reducing tariff, in terms of deregulating the market, new rules for the economy, basically. And on a theoretical basis, we might agree with this. It's the correct approach, but it goes against time because our economy still, sadly, is far away from being competitive. So we should be more competitive on a systemic basis, but it requires time and probably more time that the market is willing to wait for. So we have a second answer for the government in this discussion between the market and government that I'm trying to show you, which is, okay, I'm going to stop losing this competitiveness in terms of our currency for this nominal downward conversions trying to catch up between the level of demand for inflation and the level of the FX depreciation, okay, in order to stop a further appreciation of my real exchange rate. And this does not go against time, but it goes against experience, against history. In fact, there's a famous paper, The Aftermath of Appreciations and -- there we go. And there's a lot bit of economic literature on this, that every country that suffered big processes of appreciation in terms of their exchange rate, they finally ended with nominal hikes, with nominal devaluations. It is the case not only for Argentina, but for the world. Can this time be different? Of course, but unlikely to be the case. We are not that different. This is interesting because this specific paper was written by Goldfajn and Rodrigo Valdes. And Rodrigo Valdes was one of the officials from the IMF in the negotiation for the new program, and he was removed from that. So this might explain a part. There's another political explanation about that. But maybe this explains a lot. So the big question is who will get there first in this discussion in terms of the strategy in order to be more competitive and in order to be able to accumulate results again. Because if we think in terms of this rally race, the structural reforms are on the back in order to gain the systemic competitiveness, but they are far away. As the process of this inflation, which is happening, but still way above the FX pace or nominal devaluation. And the FX appreciation is an ongoing process. The baton, it's already passed. And the market is already reading this process and the challenges that it might represent. But despite of that, the market consensus is buying that the government is going to still be foreseeing this 2% [indiscernible] impact which we are always asking ourselves when are we going to exit. And in fact, this was not always the case. What we are seeing here is the evolution of that monthly pace of devaluation, the dotted line, the solid line that [ 2.3 ] is the current one, but you can see at every previous month that always the market was expecting a hike in the next 2 to 3 months, and it did not happen and so on and so on. So now the market is convinced that this is going to be sustained over this 2024 at least. And that is why we had all these changes in terms of expectations about the effects and about inflation. With this previous hikes that the market was expecting, the market consensus was saying, well, by year-end, by December 2024, the official FX will be at that level [ 1,700 ]. And nowadays, the market is saying, "Well, maybe I was wrong." Now I think it's going to be [ 1,000 ] by December on average. And that explains also the changes in terms of inflation expectations. Companies reporting headquarters, inflation in Argentina is going to be [ 227% ]on by year-end. And now they are saying, well, now the consultants are saying that we were wrong. Now consultants are saying, well, we only expect only for Argentina, 123% by year-end. But on this long-lasting strategy of an official FX at a 2% accrual impact. And hence, the 2% is sustained in terms of market consensus for October, for November, for December, but this is not the case by the first month of 2025, in which on average, and this is a problem of consensus, we are taking average. So maybe if one puts a specific hike on a specific month [indiscernible] between the average of the month. But you can see that the abandonment of the 2% [indiscernible] impact, it's still among market consensus expectation and mostly in the first few months of 2025. And this is because we will see some new windows of opportunity in order to perform this hike, which would not be the announcement from the government saying, "Well, guys, from now on, the new level of the exchange rate is the following: it would be the consequence of eliminating or dismantling on a further basis the currency controls. And the FX hike is only the consequence of that." It's the negative part of the positive announcement of support dismantling of the currency controls. Windows of opportunity in order to do so that the government took on December with the beginning of their mandate, but did not take in the first quarter or in the second quarter of 2025, which was not a bad moment to do so because we had, for seasonality reasons, the big inflow of dollars from the agricultural sector. But back then, we were having the congressional discussion among this omnibus law, the regulation of the market, still quite high inflation. So we had a new window of opportunity during this September that also the government is not taking. And why I'm saying it's another opportunity in order to do so because we had the reduction in terms of the import tax, what we locally call, import price or price -- tax, which is not going to cancel the effect over inflation, but that still works as a buffer for that. Again, the government prioritizing the moderation of inflation. And given that, we do not expect as the market a further realignment of the exchange rate for the remaining of the year. But again, as the market consensus, we do expect that possibility to happen with a new window of opportunity in the first quarter of 2025. Why is that? Because that import tax is going to be eliminated. In fact, it's not eliminated. It expires legally. It's also the end of the current program with IMF. So we are going to need a new one and the government is pushing for fresh funds. And typically, the IMF is not willing to give fresh funds in order to control [indiscernible] level of FX. So that's why it's another opportunity that the government might or might not take. And if it does not take it, well, there's a window, but not of opportunity, a window out of opportunity in order to perform a new announcement in terms of currency controls and in terms of the level of the exchange rate, given that we are having the midterm elections, with a starting point quite weak for the government. So they cannot take the political cost in those months between the campaign and the moment of the voting in order to have better opportunities of strengthening in terms of the Congress. So in that specific case, we have to be looking at the last window of opportunity, which is after the elections. But with an uncertain outcome in terms of the election, and it is too far away. Are we going to get -- they are healthy in terms of our economy still with currency controls, which is a problem in terms of new investment in Argentina. So that's the risk of not doing in the first part of 2025, a little bit of adjustment in terms of the management of our currency in Argentina. So given that and given that analysis in terms of the windows of opportunity, we can think of different scenarios. Of course, we have the scenario which is the government plan. And that scenario, and I had to use that picture from the last day, all the newspaper use it. I'm not going to be the exception, but it's quite optimistic. It's a further gradual dismantling, I'd like to call it, in layers of this currency controls. So you do not have a hike. You still try to make these conversions between the pace of inflation and the pace of the FX, but we believe that at some point in time, we are going to need to turn on the GPS, which is our base case scenario. And finally, there's a hidden plan in terms of adjusting the level of currency controls and hence a correction of the official exchange rate in Argentina, most likely in the first quarter of next year. The risk is that if they keep forcing towards the optimistic scenario, they might deviate to the worst-case scenario, which is the alternative one. It's not recalculating. It's directly a deter from the planned dismantling, with an early correction of the FX given that you are forced by the market. It's still a government decision to eliminate the controls. But given the widening of the FX gap, given further loss in terms of reserves, you have to do it even earlier in time. And by that, we mean by the end of 2024. With the following trends in terms of the level of the FX for Argentina, of course, the light blue line is the optimistic scenario, which we keep the 2% per month, but we do expect some further adjustment during the first part of 2025 in this base case scenario and in the alternative scenario, it would be much higher given that it's not right away a decision of the government and rather it's forced by the market. And hence this different trends in terms of the level of the exchange rate in Argentina have their correspondent shocks or absence of shocks in terms of inflation. But even in the scenarios in which you perform that hike, you have the short-term cost, but then inflation goes back again, goes again towards the level of the optimistic scenario. That's why we are saying why forcing a scenario that might increase the likelihood of the worst one. So shoot to the middle. That's the idea of the base case scenario. Take the short-term cost in order to avoid a long-term cost over the economy, over inflation and also over activity, which it is what we are seeing here. These are the trends of activity for each one of the scenarios. And in all of them, we are seeing a recovery because we are rebounding, but not in all of them. We are going back to the previous levels of August, September 2023, which was the last recent peak. And after that, it was all going down. So we expect the rebound probably more like an L-shaped one rather than a V-shaped recovery in terms of activity, but both in the base case scenario and in the optimistic one, by September, October of next year, we are recovering the previous level. And after that, we can be thinking of GDP growth, which is not only rebound but more [indiscernible] alike. So in that sense, these are the figures that we just saw in the specific slides for each specific scenario. But it's good to show them all at the same time because even in the cases in which we are putting a hike over the FX into 2025, always inflation is above the level of depreciation of our exchange rate. So even in those scenarios when we are saying the FX is going to be corrected, it's not to have a higher real exchange rate. It's to avoid having an even lower one. It's to compensate the loss that we already have and we are going to have if we keep doing the same thing that we are doing. And in all the scenarios, the GDP is recovering but again, in the alternative one, in the red scenario, we have a positive fear in terms of activity, given the low base of comparison, but that's not sustainable over time given that it's also a scenario with higher inflation. So by the beginning of the presentation, we saw the last 30 years, now let's try to see if this happens the base-case scenario, the optimistic scenario, which are the most likely ones where are we heading in the next 5, 6 years. And of course, 2024, we already knew, with [ Milei ] with another candidate, we already were expecting a contraction of our activity, but it's happening with a moderation of inflation much faster also than expected, given this approach in terms of the exchange rate. But after that, 2025, again, if we think in terms of base case scenario, we start going back, 2025, 2026, 2030. So we are going to be if this happens in the same area that we were back in 2011 before the initial currency controls in Argentina and the last recent peak in terms of per capita GDP, hopefully, of course. So why are we saying that this is possible because in Argentina, we always said, "Well, why this time is different?" Well, we are not saying that this is going to be the case. But we are saying that we have some sectors that might provide support to the stabilization. Sectors that are not going to save Argentina. It's not that given these opportunities, things are going to go good. But what we are saying is that, if first, we have the stabilization of the economy, these sectors might provide support to that being more long-lasting in time. As you're probably aware, we have important resources in terms of oil and gas, in terms of the nonconventional oil reserves, fourth position in the world; second one in terms of nonconventional gas with Vaca Muerta. Also, the agricultural sector is always there, but very productive in Argentina, and you all know the ranking in terms of production, in terms of export worldwide, soybean, corn, wheat, et cetera. But also we have mining sector, which -- it's new for us. We have the third reserve in the world in terms of lithium and a low potentiality in the services sector and mostly in the knowledge-based services. We have around 11 [ Unicos ] in Argentina. We are the first software exporters in LatAm. In fact, if we look at IT communications, knowledge-based services, it is already the first sector in Argentina in terms of exports, but it goes under the radar after oilseeds and cereals, of course. And why is that? Because given the gap between the foreign exchange rate and the official one, a lot of dollar inflow goes to the [indiscernible] power market rather than the official one. And that's a problem, that should be eliminated as long as currency controls are eliminated, and we go into a unification of the exchange rate market. And this is quite important because we are greatly dependent upon the agricultural sector. This is our history. This picture is our history. Always, the agricultural sector with their surplus financing the deficit of all the other sectors in Argentina. So we need to diversify this matrix of free inflow of dollars as in Argentina. With these new sectors, which can provide a lot in order to avoid this recurrent crisis of the balance of payments in our country. Oil and gas and energy specifically, we already expect a surplus this year in 2024. I can sign that, that it is going to happen after 12 years of deficit in the energy trade balance in Argentina. Well, it could go up to $27 billion in terms of the trade balance for Argentina. The same goes for the mining sector export. And I'm not talking here about Disneyland. This is with the ongoing projects in lithium, in copper already under construction. It could go up approximately to [ $20 billion ] of exports by 2030. So other sectors could provide dollars for Argentina in order to this sustained over time. The agricultural and the agribusiness sector, we already know has a lot of potentiality, but it's already operating quite highly. So it could rise up to $60 billion, but we have a lot of higher increase and higher opportunities in terms of the increase of dollars an inflow of dollars for Argentina in the services. Nowadays is around $9 billion per year. It could go out to $25 billion driven by knowledge-based services, tourism, et cetera. The same for energy as we saw before, currently $5 billion exports on average in the last year, this is specifically for 2021. And the same goes to mining. So we could have another agricultural sector in Argentina, if we stabilize the economy and investments happen as we are expecting. Moreover, considering, this special regime how we call it locally, which promotes with some tax and custom benefits for large investments above $200 million. Still to happen, these are the announcements yet to be confirmed, but we already have $30 billion announcement mainly from the LNG plant with [ YPF ] which I'll see if Petronas is still there in that investment. But copper projects, the gas pipeline extension, eolic energy, steel plant, solar energy, and these are the main announcement that we had so far, that could be the basis of this potentiality of these specific sectors that we just looked, in order to have a greater performance, again, because going back for the last 10 years, we were in our own club in Latin America. We are one of the big countries, but with the worst performance possible. So we are in the middle, we have Brazil, we have Mexico, slow growth, but big size. We are medium to big size. But in the last 10 years, we lost around 12%, 13% in terms of per capita GDP, quite different from the smaller countries such as Uruguay, Paraguay, in which Telecom also is present, which had a quite important performance, but their market is also quite smaller. But we have to go that club in terms of performance. And for that, we need to normalize the economy. And for that, we have to reopen the access to credit markets, and for that, we have to eliminate currency controls at some moment in time. In fact, given our recent history, we are far away from the standpoint of Uruguay, Paraguay. Paraguay, in fact, was upgraded to investment grade back in July, and we are below Bolivia, we are below Ecuador in terms of our credit market rating. And that is why we do not have access to credit markets. But if we think, in terms of the future performance towards next year, towards the next 5 years, well, we already expect in 2025 for Argentina to have similar figures in terms of GDP performance, than Paraguay, than Uruguay, and the same goes if we look at the forecast from us, from the market, from the IMF, you name it, in terms of GDP in terms of inflation for the next 5 years. Of course, inflation, we are taking average. So given the starting point, we are always going to be for some years higher than these other countries, but we will be seeing a monthly inflation rate rather than annual figures. If they keep -- if the trend of moderation over inflation, it's still the case. So to round up the presentation, we made this time traveling trip during the last years and the next one. And to summarize that 2023 was the year of inheritance in terms of inflation, poverty, government controls, et cetera. And that explains the social demand for a change that has 2 parts. In the background, the structural reforms that take time, this deregulation, this reforms in the tax, labor, et cetera. system, but they will take effect next year 2026. So upfront, we have this painful correction of the economy. We already knew this was going to be the case in Argentina. But in order to have the medium-term benefits of that. So as we all saw already, the activity is expected to rebound. The inflation is expected to moderate. We will be expecting this new investment through this special scheme and a new IMF program that hopefully brings fresh funds in order to stabilize the exchange rate market sector. In order to work at full throttle in terms of the potentiality of the sectors that I just mentioned that would give support to the stabilization of the economy. And hopefully, 2026, if we meet again, we are going to be talking more in terms of our development agenda for Argentina rather than a typical survival agenda we're always discussing given the imbalances of our countries. The only one thing that yet we do not know in which year to put are the elimination of currency controls. But as I said before, they are going to happen later or sooner and that's the important thing because in this scenario we do not have to go back to the future. We have to go back to normal. Thank you very much. If you have any questions.

So thanks a lot for your attention. We're having our presentation from Roberto Nobile. But first, we are going to show a little [indiscernible]. [Presentation]

Hello, everyone. Thanks for coming. And we will talk about the magic trying to do business in these last 30 years really -- is really tough. So we will try to stop a little bit on the context, on the industry where the industry is leading and what are the main challenges that the industry has. The first thing to see is that we still have growth in our core business. Mobile data is believed to be growing at 6% a year base. Fixed broadband still growing, streaming -- video streaming is growing. All the digital things are still growing against the analog and the old things that are declining. And despite that, last year, there was a disruption. There was a Gen AI. Gen AI came into the world, into our world and most of us -- all our CSPs are trying to do POCs, trials and trying to work with GenAI, trying to improve efficiency in costs, process automation, improvement in customer experience and customization. And this is where we are heading, and this is what the industry is doing. But there is a problem, last -- in the past years, telcos have been made all the investment and collected the lowest ROI. And all the OTTs have been taking this away. This is something that we call the fair share problem. So there's no other way then. I want to check. No, it doesn't work. We need to move away from only connectivity. It's -- there's no way we can being a down pipe. So we need to address the fair share issue, but we also need to move up into this structure of businesses and trying to get into the digital video, ICT solutions, payments, gaming, you name it. So this is one of the biggest challenges that the industry has today. So in this context, #1 challenge for the telco is to become a technology company. Leave out all the telco analog process-oriented things and become a digital company, drive growth beyond the former commercial growth that we used to have. But we still have one big thing that is the technical debt, legacy. Legacy networks, legacy systems, legacy applications that we need to increase our energy to migrate those into the new things. We need to adopt platforms such as cloud, edge, AI software everywhere. We need to expose the network-as-a-service as a code in a simple way. We need to be data-driven, but not because it is nice. It is the only way we can drive GenAI experience. Without a platform, without a foundation of data, there's no way you can use GenAI. So data-driven is a must. And there's a new thing that we call API economy. And this is something that GSMA is pushing and sponsoring across the world. 30 years ago, GSMA was responsible for making a platform for roaming. Roaming has been possible because GSMA sponsored that and make it happen all across the world. So GSMA has, how to say, united, 60% of the mobile worldwide connections into 1 scheme trying to make this happen. And the idea is to give all the network assets and the services as a code for applications, for developers to use. So for example, Netflix in the near future, if they want to make a volumetric streaming they need low latency. If not, you get [indiscernible]. So the application could call an API and have low latency for that specific customer. So there is a whole bunch of new revenue streams come from these API economy that we are sponsoring and Telecom Argentina is one of the sponsors, we call it champions, to drive this throughout the country we are playing with. If we take a look into LatAm, on the assets that Argentina will grow. We will grow -- we see that we will grow from scratch. But the next 5 years, Argentina has a lot of potential in terms of growth together with Colombia. The rest of the Latin American countries are driving between 2% and 4% a year, Argentina has an opportunity there. And this is our ZIP code. This is where we are. We are in Argentina. 90% of our business is coming from Argentina. Argentina, we said in the recent presentation is reordering the macro. There's a possibility of growth, not only in ARPU, but also in consumption. There's an opportunity trying to digitalize all the SMBs and the small enterprises that has not done this in the past year. So there's a lot of potential I would see on B2B businesses that we can still move on. Paraguay is a very stable economy and a very stable country, pro-market. So it's a very good pace to do business in, and we see that we have really done a very good job there. And Uruguay has been protectionist for the last years, for many, many years. But this year was the first time that they are starting to open this up to new operators in the field. So going back to our vision, we want to transform our presence into a relevant ecosystem for our customers. And we have 4 main pillars. The first one is maintain, maintain our core leadership. We need to keep on being the best-in-class, the best NPS, the best in all the areas we work with in broadband, in mobile, in video. We need to grow, and this is why we need to start the digital businesses that we are trying to build. This is the case of pay. This is the case of IoT. We are doing a lot of things, smart home automation and so on. We need to transform ourselves. In order to become a technology company, a tech co, we need to transform ourselves and stop being process-centric, becoming agile and customer-centric and digital and the best place to work. And of course, we don't want to stop thinking big. We need to get more countries to play with. And basically, these are our 6 challenges -- strategic challenges that we have. We will go through them, the core business consolidation. This is to maintain our businesses as leaders in broadband, in mobile and video, launched digital businesses. This is the way we will grow B2B businesses. We are trying to work with enterprises to help them and partner with them to digitalize their businesses and growth. I mean, there is a lot of potential. It is said that TIC, which is telecommunication industry, can increase productivity in 2% -- GDP, sorry, in 2% over a year. So there's a lot of potential here for the country also. The cultural and technological transformation, we will talk about it, and there are 2 other things which are extremely important for us in terms of strategy, which are regulation. We are a regulated company. We are in a regulated business, and we are getting into new regulations like data protection, like when we go back to API's economy, we need to protect data. We are getting into the fintech. So there are new regulations coming in. And of course, working on the financial leverage that Gabriel will later talk how we do liability management and how we've been very successful in that. On our core, when we talk about mobile, we are the leaders in terms of coverage, in terms of quality. We have the highest NPS. We've been given the 5 year in a row prize for coverage and quality in Argentina. We are deploying 5G, but we are not deploying 5G across the country. We're deploying 5G in a surgical way where the demand is. We are trying to address our high-value customers, only 15% of our customers have a device that is 5G ready. So there's no need to rush, but we are prepared. We will be having our -- today's non-standalone, the core. But by the beginning of next year, we will have our own stand-alone core for 5G. So that core, that new core can give new services slicing can really address all the benefits from 5G. And this is -- when we talk about technical debt, this is one of the things. We are coming from a joint venture -- joint emerge between a cable company and a telco company. And we used to have 2 networks, copper and HFC. HFC has been good. It's going to last for many, many years. It gives a very good product, has very good NPS. But at a certain point, we need to move into FTTH. We need to go into fiber to the home. And so we are doing a strategy where we are deploying FTTH overlay HFC and trying to start migrating the customers from one network to the other. Without a rush, all the new ads are going to the new network, but we still need to keep on migrating customers into FTTH when there is an overlay, and we need to keep on deploying FTTH overlay to make sure that we cover this 65% of home pass in Argentina with FTTH. So this is one of the things we will need to address in the near future, too. And we believe that by 2026, we will have 2 million customers already on FTTH networks. We are transforming the video business into an entertainment platform. And this is a nice case because we have 3.5 million video customers typical pay TV. But we are transforming them into -- all of them have access has a second -- as a companion device to our IPTV platform, which is a flow. This flow has also been selected as 1 of the 10 most admired brands in Argentina. So we are really making a real push here and all 1.4 million of those 3.5 million already have their full package or flow with a set-top box and it's like a market place where you can see other OTTs, Disney+. You can integrate other OTTs into the same set-top box. So the experience is very easy to have. But the experience is very easy to have. But the core not only about revenue, it's also about efficiencies. And we have invested a lot trying to maximize the efficiencies, trying to reduce their network TCO. This has to do with shutting down legacy systems, shutting down networks that are not good anymore. We continue with the digitalization process. We are reducing call centers and agents. We have removed agents from our sales network. Those were 3,000 people that are not working with us anymore. We are implementing the first use cases for [ market]. We are working with Salesforce as a partner, and we are trying to personalize campaigns, trying to increase ARPU and increase NPS also. The experience of the chat with the customer is much, much better. Of course, we are reducing [indiscernible]. We have better tools for diagnostic -- diagnosing the network problems, and we are also working in a very close agenda with the unions, 70% of our employees are under unions. So we need to work very closely with them. And of course, we are still working on a sustainability plan, we are planning to achieve 50% renewable energy by the year 2030. These are some examples of what we did. We move from 16% of our sales on the digital platform to 48%, and we have been able to reduce from $2 to $0.75, $0.79 the cost per sale. So this is something that a tech co can do, not a telco, but it's a technology -- fully technology. And we have moved from 15 million hours of call centers to 11 million hours of call centers, moving from 27% of our contracts on the digital platform to more than 50%. And this is something we will still keep doing and introducing GenAI will also help this improve. Always keeping in mind NPS. We are always making sure that NPS, the customer experience is really good. We have also reduced -- this is own and third parties employees. We have been able to reduce all the sales and aftersales department from almost 60%, from almost 15,000 people to 8,600 people. And this has seen throughout technology, technology-driven. We have converted everything into a Salesforce platform. We ended up doing that last year. We have all our customers, B2C customers in one place, and that helps a lot the interaction and frictionless with the customers. And on the fulfillment side, all our field services technicians, we have moved from 18,000 to 14,000. And this has also been done with technology, with new tools, with new network improvements. And we still need to think big, and we are also in Paraguay and Uruguay when 5 or 6 years ago, Paraguay was a $50 million EBITDA company a year. And we've moved from $50 million EBITDA company to $100 million company in the last 12 months counting the first half of 2024. So that was not only good luck. It was -- we invest a lot. We invest $70 million a year in new networks. We deploy FTTH. We moved from 0 to 35% market share in less than 3 years. We are keeping 2.4 million customers in mobile. So we launched Personal Pay as our wallet. We already have 300,000 customers there, and we have flow with 100. We are improving margins, and we're improving the revenues there. And Uruguay, which is very small, has been very protective during the last years. We are deploying FTTH for the first time in 4 cities. So we are starting our broadband business -- fixed broadband business in Uruguay by the end of this year. Talking about the new digital businesses, we are trying to step in. We have created a new fintech platform. This fintech platform moved in -- back to 2 years ago, we launched a wallet -- a digital wallet, it was only friends and family and for us, I mean, for employees. And since then, in less than 2 years, we were able to reach 3 million customers onboarded on the platform. And this is one of the big numbers, more than $300 million are already in the wallet for what we call remunerated accounts in a very special environment with high inflation, you need to have your money being remunerated with interest rates. So we have provided this solution very easily. It's frictionless. The person put the money in the wallet and use it whenever they want it, they have no friction at all. He doesn't need to do anything. So we are #2 in remunerated balances. We have grown in the last year, 61x in total purchasing value and 21x in transactions -- in number of transactions. So it's growing and it's growing very fast. And this is a platform where we can start as a starting point for micro loans everything is around the ecosystem. I mean it's not apart from the ecosystem. Everything is trying to converge into our own ecosystem of products, of services, basically this is for prepaid customers. So we're trying to push prepaid charges coming through this wallet and we are reducing the cost of the -- charge of the prepaid money. So basically, we are trying to generate sustainable and scalable business, but it works within the ecosystem and really helps the ecosystem to have better NPS also. Moving to B2B. We have the same as B2C, we still need to maintain our market traditional services, which is connectivity. But there is an evolution of the connectivity. There are software-defined networks, SD-WANs. we are introducing 5G, we're introducing FTTH everywhere. So we need to keep that. We have 50% market share on connectivity in Argentina. So we need to keep that and evolving that. We need to grow and how? We need to grow in leading professional services. We -- internally, we have done an excellent job in the foundation of, what we call, cloud foundation, internally. We work with multicloud, we orchestrate all the clouds, our own cloud and the hyperscaler cloud. We have all the skills and the knowledge to manage this, and we are now selling this to our customers trying to help them to move into the cloud and reduce their CapEx. We have one of the best finops in services, I mean, internally, and we are also selling that. We are selling security services. We are working on the verticals that Federico was mentioning. We're working on energy, we're working on agriculture, and we are working on mining. On agriculture, we were able to -- I mean in Argentina, you will not cover areas where you don't have people. So we have 500,000 hectares of farming that were not covered by any network. We made a cluster, and we work with the whole value chain of agro to build the network for them and introduce IoT and improve the efficiency and improve the productivity of that farming area. So we are working with the agro business, and we are becoming a partner of them. We are working on public utilities and smart cities as well. We have -- we are working in water -- water supply. We are with an IoT platform. We are trying to control all the levels of water supply -- the pressure of the water supplies in the whole neighborhood. So we are very deeply working on that. And developing new markets, public safety. We are running the most important public safety network in Buenos Aires in City. So all the police is running in tetra services that we are providing them. And this is the amount of potential that we have. We're not going to go through this, but you can see that cloud, what we call data center exits, moving the data centers of the customers into the cloud will grow 20%; data centers will grow also 80%; security 35%; unified communications, 10%. So all the verticals are growing, and we think we have here the opportunity of taking a stake of this. And we are leading in Argentina, the open gateway initiative from GSMA. This is what we talked before. We have already 4 APIs that can tell SIM swap means if you have been -- changed your SIM, your device SIM in the last 24 hours. So if you're a bank, you can check if the -- your customer has changed the SIM. It has changed the SIM, you can increase the level of security because it could be a fraud. So these are the type of things we call anti-fraud APIs, and they are -- we have already sell this to BYMA, which is the Stock Exchange of Argentina and [ Banco Galicia ] is also in a trial on this. This is it? No, this is not it. We need a platform. We need where to expose. We need a catalog where to expose the APIs. We need a consent manager because we need consent from the customer that you can provide the information of his device to somebody else. So we create this platform, which we call it [ Open Expand ], is a platform that we created together with Intraway. Intraway is a technology company that provides OSS services. We create this new company, and we are creating this platform as a service, not only for us but for others telcos in Latin America. We are talking with Tigo, with Entel, with other operators in the region, and we are helping them to push this whole new initiative and make it real. I'm talking about transformation, and this is just -- we are trying to end. It's not only hard, it's not only technology, it's a lot of culture. And we've been -- we are coming from a merge. We were 27,000 people. Now we are 20,000 people. We've been from a merge and there were a lot of changes and trying to be customer-centric and agile has been very tough being -- trying to delayer the structure and compressing the -- and empowering people, and this is something we've been working and we still work because this is an evolution that's never ending. But we work on the technology side, preparing ourselves to allow scalability, regionalization and operational efficiencies. We work on platforms. We transform everything we touch into a platform that we can deliver not only for Argentina, but for Paraguay, Uruguay and hopefully, next. So we are trying to work on the back end to increase efficiency, digitalization at full. We have our data office, which is this foundation that we did on data. Data is a must. It's the input -- the necessary input for GenAI. Everything is already on GCP, using Google platform, not only our network information, but also our customer information has been moved up there. And we are trying to increase the experience of our customers at the front end. And these are the whole idea that we're working on. Finally, this is the whole idea, transform our presence into relevant ecosystem for our customers. It's not only about connectivity and entertainment. It's not only about Argentina and Paraguay. We are trying to get new emerging businesses from fintech, from APIs, is a [ B2B2C ] revenue stream, B2B, IoT, cybersecurity and all managed services for enterprises. But also we need -- we want to go to other regions or other countries like improving in Uruguay, where we have a position there, but it's very, very small, but we think we can do it better. why not next countries. Okay. Thank you.

Well, it's my pleasure to be here once again. Good afternoon to all our friends here and to the 100 that we have connected looking at the presentation even from Argentina. I will take some short minutes to share with you some main aspects of our business as a whole. As we have seen, the business environment in Argentina has not been easy at all, especially on the last year. But Telecom, in spite of this, has been able -- in the last 3 years, to provide a very positive total return to our shareholders, considering the comparison with the sector throughout all America. Why do we think took the consideration in the last 3 years. The reason is that after the pandemic and the lockup that Argentina have, the country suffered a very different environment and all the metrics have changed dramatically. But we compare the situation of Telecom in terms of total return to shareholders with the rest of the companies in Argentina, there is still room to grow. I will try to show you why this is possible in the near future. The company has a very attractive cash flow yield and a fair valuation multiple. Here you have, again, the comparison with other leaders in the industry and a devaluation also in terms of multiples compared with other leaders in the industry. So in spite of all the noise and all the difficulties of Argentina, we've been able to succeed in terms of providing all our stakeholders with a proper remuneration. We will try to share with you some opportunities that we are foreseeing and how we have managed this. When you look at what has happened in the ARPU in terms of the capacity of the company to recover it, look at the comparison of the different countries in Latin America. Argentina used to be more in the center of the equation, both in terms of ARPU for the mobile, and also on the broadband. So now we are beginning to recover the ability of the company to price more consistently its product. This has been a huge challenge during the last year, especially in 2023, because of the huge inflation and the impact that, that inflation has in salaries of the people. And in the way it impacted the general equation of the economy as a whole. So here, in terms of the capacity of the company to recover this and we are going to see that. We are able to at least recover our position historically, which was in the center of this graph, and probably, as Roberto explained by the addition of additional services, we will be able to increase the figure even more. When we look at this in terms of the perspectives in 2017 when we made the merge, we have gone on this rollercoaster in terms of the economy. These are our 4 business lines, the TV, the broadband, mobile and the fixed voice lines. And we have been recovering since the normalization of the economy of the country. We've been recovering our ability to price more correctly our products. So the outlook in this sense is very positive. We have seen this drop, mainly because of the huge distortion in the macro variables of the economy of Argentina. But in spite of this, we are going to fully recover this. Just to give you some context of this, although we have already seen in the economy presentation, at the end of last year, prior -- 10 days prior to the year-end, the country suffered a devaluation of 140%. That has a huge impact in the company figures at the end of the year. Why is that? Because we wouldn't be able to fully recover the impact of that devaluation immediately because they were only 10 days up to the end of the year and to closing our fiscal figures. But after that and with the normalization and appreciation of the peso, again, we are going to a more normal situation where we are recovering in real terms our income very consistently. Look at what was the real impact of what I have explained last 12 months, 3 quarter 2003, EBITDA of the company was $1 billion. The net debt $2.2 billion, and the leverage was $2.9 million immediately after the devaluation. Remember, a 140% devaluation, those figures went up to 3.2x leverage. Net debt was more or less the same, no significant variation only the impact of the devaluation and the EBITDA was reduced nominally by [ 1/3 ] that situation has completely changed in only 6 months. When you consider how the company looks today after the partial normalization of the economy that we are going on, we are -- having recovered our situation prior to the valuation and also in terms of cash generation. This is very important in a way we had a recognition of the market on this situation by granting Telecom. Telecom is the only Argentine listed company -- this is in the United States, domiciled in Argentina that the treatment of an investment-grade covenant in its debt issued in the financial -- international financial markets. And that's the recognition of the ability of the company to surplus all -- serve all of this business environment. How do we achieve this? Well, the company has been doing a very consistent pricing strategy. In general terms, as you can see from the left graph, when the inflation picks up very quickly, we like to be efficient. It's very difficult to translate continuously this inflation pace to our prices. So the company loses in real money or in real terms, loses against inflation pace. But when inflation decreases both because of the effect in the income of the people, but also because of the way the adjustments are carried out, will recover in real terms, our revenues, and this is what is happening today. You'll see that we have been very positively doing that. And the service revenues has been recovered steadily in the last part of the year as Argentina is normalizing and even the ARPU by different business segment is also beginning to recover steadily. So the impact or the positive impact of the recovery of the normalization of the economy in terms of variable instantly goes to our figures, thanks to this pricing ability. But it's not only a matter of pricing. We've been able to do this with very stable portfolios. When you look at how the impact of these prices increase or these price movements have been in our portfolio. You see that our portfolio in terms of mobile has continued to be growing in spite of all these as you see in the upper left, our net portfolio of mobile has grown more than 3% considering prepaid and postpaid in a very positive way. Broadband and pay TV have been pretty stable. And the other portfolio that really is coming down is, of course, fixed voice, which is a natural trend that is going throughout the industry over the world. But the subscribers are beginning to recover, and this is also a very good news, not only in terms of pricing but also in terms of portfolio, we've been able to go over all these a very tough business environment. Now as we have seen from the economy presentation and we are speaking of Argentina, always has been a real challenge in terms of how to cope with foreign exchange risk in account with this type of volatility. We have invested very heavily in terms of explaining our investors, which is the real exposure that the company has in terms of foreign exchange risk. We have listened many times that, well, you have a pace of business and you have a strong devaluation, you have debt in dollars, this type of risk. Why is that? The first thing is that the election of having debt in U.S. dollar is especially related to the ability of the country to provide long-term finance, this is an industry that requires a significant amount of capital, significant amount of investment. There is no, I will say, a consistent, permanent base of funds locally that allowed us to do this only with local financing. That's why the biggest companies in Argentina shift to foreign financing to fulfill the projects. What does imply that in Telecom balance sheet? When you look at the balance sheet of the company, in fact, our assets denominated in U.S. dollars represent 60% of our total assets. And the liabilities, less than 40%. So when we speak on the consideration of how the company faces foreign exchange risk, in terms of balance sheet, the company is fully hedged. Why is that? Because we have a huge amount of infrastructure that is mainly dollar based because it's all investment of import and all infrastructure required telecommunication plus a very minor part which is civil construction, which is about 20%. And all these provide a very good cushion in terms of the risk of foreign exchange in terms of our balance sheet. Also it's important to add that Telecom's roughly represent about 70% of the infrastructure of telecommunication of the country as a whole. And it is fully owned by the company. Then we will go over that. And that is a very distinctive situation compared with the rest of the industry. Most of the industry has sold to third parties, a very significant part of the towers or the fiber. Telecom is a company that fully owns all the infrastructure that operates, only about 20% of the towers that we have, or we operate or lease, the rest are owned by the company with no lean -- no type of restriction on top of that. And beside that, the company is one of the biggest real estate holders in the country, meaning that Telecom owns about 5,000 pieces of real estate. In a country like Argentina, those who are more familiar knows that real estate is bought, sold and is in U.S. dollar. So all that equation provides a very significant hedge in terms of balance. When we go to the flows in income statement, you see there that our revenues, about 20% of the revenues of the company are dollar-related. Meaning that we have a very strong operation outside Argentina, Paraguay and Uruguay. That operation provides around $100 million of cash generation. And our OpEx is only 12% denominated in U.S. dollars. So in terms of the interest, it's about half of the interest are related to U.S. dollars, and we hedged a significant part of that. When you put all that in terms of income statement, the exposure, the net exposure of the company to foreign exchange, is really very low. In terms of as you see on the low right graph, our revenues are 20% in dollars and our OpEx is only 12%. So in terms of operations and operational cash flow, the company is also fully hedged. Let's go deeper in terms of the infrastructure of Telecom. Our balance sheet represents about $2.8 million of infrastructure, which, as I mentioned, are mostly represented by the network itself. This network that is fully operated and owned by Telecom is mostly dollar denominated. This provides a huge cash and hedge to our debt. And it's really, I will say, in some extent, pretty unusual to find a telecom company that really has a big footprint in a country like the one that Telecom's in Argentina in terms of infrastructure. Besides that, we have the mobile network with more than 7,000 towers owned and operated by Telecom. There you have some valuation exercises that we have made compared to some multiples that very quickly show you that about 2/3 of the valuation of the company is only represented by the infrastructure. And the 20 million customers that Telecom has represented only less than 1/3 of the valuation of the company. So we really have a very strong balance sheet in terms of cope with volatility. Emerge in 2017, the company has done a very extensive work only on the revenue side to cope with volatility. But in terms of costs, if you look at the share of the different cost of the company, with the exception of the labor cost, the birth of the cost has reduced their share significantly. This is, as Roberto explained, thanks to the strong acquisition of technology and applying technology to all our processes. In terms of labor cost, you may know that during very strong inflation environment, salaries in Argentina tend to be adjusted automatically by the inflation rate. That means that we have a lot of pressure on that. But the situation changed when the inflation comes down because there is an effect of recovery of the salaries. If you look at the historical series in Argentina, the comparison between the index price and the inflation, and the salaries inflation adjustment when inflation goes below 30%, which is something that we can expect for the near future, according to the policy that present authorities are taking out, that means that there is a gap that represents about 5 to 10 points of difference of salaries lagging to inflation pace that is directly translated to our cost structure, where salaries represent 50% of the cost as a whole. So really, we also have here a very good outlook in terms of benefiting of the huge investment that we have been making all this year in technology. And in a way, all the volatility of the macro variables haven't allowed us to fully show the power of this. Regarding our capital allocation, the company has been investing very consistently all this year. Even this year, we are investing in Argentina, $600 million or maybe even more according to the variables. Maybe we've been, in some extent, quiet in terms of how we inform this, but the reality is that telecom is probably one of the companies that it has been concurrently investing more heavily in the country for the last years and it's continuing to do so. And that investment, for instance, as I mentioned there, doesn't include the 5G acquisition of the spectrum that we did at the end of last year. On cash flow generation, the company has a very, very steady cash flow. As you see there, our yield has been also very consistent. Our CapEx to revenues, compared to the industry, the industry typically invest 17% to 16% of its cash flow generation. Even in this environment, even with the all the macro variability and all the volatility we have been in that type of figures. And again, that doesn't include what we did in the spectrum. If we add up the spectrum acquisition of last year, that goes up to 20%. And in terms of dividend yield, the company being the only Argentine company that has been paying dividends since 2017 up to now. There is no other company listed outside Argentina that has been paying dividend concurrently each year. We have a very reasonable dividend yield considering the volatility of the country and the macro volatility that we have already been discussing. As I mentioned, we are improving our profitability. To put it very simple, look at the variation of the CPI, we took the second quarter of 2023 with the second quarter of 2024 to make a simple comparison. That was the evolution of the inflation. Service revenues in real terms, we have already recovered 1/3 of the gap in real terms in the same period. Operational costs in real terms have also been benefiting of our cost managing. And that, of course, implies a significant recovery of the margin. So as the economy is getting more normalized, the ability of the company to benefit from all the investment of all the efficiencies that we have generated is showing and paying off. Going to the financial side, sometimes it's difficult to consider how the Telecom did in all this environment in terms of its own debt. When you look at what has happened in the last year since our merger, locally and also internationally, to the consideration on the upper left graph, interest rate free risk rate for us, which is very important. You have seen here how the interest rates have peaked in the period by 3x. Country risk for Argentina has multiple by 5 in the same period. Our cost of debt has been stable, all this period, about 7% in 2022 when the huge jump in the risk-free rate went up but after that, we've been able to keep with that in a very positive way. And we have done this without harming or shortening the [ tenor ] of our debt. When you look at the average lifetime of our debt, we are at [ 3.2 ]. That's pro forma because we issued a transaction very recently that it has not been show in our balance sheet because it took place after the closing of our quarter report. How we achieve that? We changed the mix of our funding, increasing the funding on the local. Telecom has worked very strongly and very heavily in terms of having a very significant sources of financing, and we have been supported as we are going to see from many different -- from many sources that has helped us to keep this very control. This is our debt book looks today at $2.6 billion of debt we have very different tranches. The purple presented by international notes, [ 144A ] bonds that we have issued. We came back to the market about a month ago after being outside the market for some years. We have been very extremely supported by multilateral agencies. We have a very close a long relationship with multilateral agencies, IDB, IFC, [ Finnvera ] from Finland, EDC from Canada. CDB loan is a loan provided by China Development Bank. This is the first loan provided to a company, non-Chinese in Renminbis outside of China. So we really work very strongly in terms of getting different sources of financing, and that is helping us significantly to have a well-balanced and diversified balance sheet. And then you have the breakdown by currency, where, of course, as I have mentioned, dollar has a very strong presence. The reason is very simple. It's the longer financing and the main source of our imports where we have to keep investing to provide additional future for the company. In terms of the last transaction that we have made and here you have a maturity profile pro forma how our maturities are going to be, we issued a $600 million bond about a month ago, very successfully reopening the market for Argentina, as I mentioned, that bond has a structure of an investment-grade transaction. And then we have also issued concurrently in the local capital market where Telecom taps almost on a quarterly basis. They are a very convenient base. So we balance and keep all the sources of funding available to allow the company continue with its growth plans without interruption. So as final remarks, you have a company that is improving its EBITDA margin in a very challenging context. We are comfortable with that, and we have -- think that Argentina is getting to a better mood and to a better -- a more rational administration where the economy is more sensible. Just to give you an example, in a market where the company competes with other two operators like Paraguay. We have a more rational economy. Our margin is 47% just to -- the future implications on the regulation side on all the regulation that we need to have. And we managed to grow our customer base even with that environment. Roberto already mentioned about our Fintech business, our fintech business is a business that we built up in 15 years. Today is almost equal to the [ #30 ] bank in Argentina, almost from 0, from scratch with 3 million customers, $300 million of deposits that are channel to direct accounts in the local mutual funds. That money is not in Telecom balance sheet, has nothing to do with our balance sheet or we share is the customer. This is a very significant opportunity, and we are going to provide other services there very quickly. And we have a very resilient business, we have already shown that even in this type of harsh environment, the company has been very successful in terms of keeping pace, having good cash flow generation and keeping all stakeholders were remunerated both on dividend, on interest payments very constantly and with a very sound financial churn that allows us to go with volatility. If you look at our cash position, we tend to have a very strong cash position, mostly in U.S. dollar. The reason of that, of course, is part of hedge and part to cope with the volatility of the local market but also it means a huge opportunity in terms of the capacity that Telecom might have to even improve even further its financial figures in terms of having more efficient structure there. As the volatility of Argentina came down and it normalized, we don't need to have that amount of cash or cash investment available. And we continue to work constantly on improving our debt book with all the source of financing available. We are also preparing to issue a green bond when the market recognized the value of issuance like that. Still Argentina needs to improve its cost itself to get the recognition or the differential spread of that. but we continue to work consistently on this. Thank you very much.

Thanks so much for being here again and.

Be nice.

Yes, be kind. I hope you all enjoyed the food and beverage, so treat us kindly. So back then again, I would like to start here by -- if you have any questions, I can provide this microphone so you can ask them in live. Then we will over the ones that we have in the webcast. But I would like to address your questions first. So who wants to shoot?

Stefan [ Styk ] with Barclays. I had two questions. You mentioned increasing ARPUs. Just curious what you would think the reaction functions would be from your competitors? And then in terms of capital allocation, are your long-term plans to continue to hold your towers and other infrastructure? Will you consider selling them?

Okay. On the ARPU side, we are working on these use cases of mortgage. It's a way of providing the rep, the exact bundle -- not bundle, the exact price that he should give the customer in terms of retention and trying to sustain the -- when you increase prices 250% a year, that's what we have been doing. You have 1/3 of your customers will call for a rebate for the promotion because they cannot pay because you have 50% of poverty in Argentina. So every time a customer calls, you retain that given out the promotion. What we have done -- and that reduces the ARPU, okay? We have done with this use case recently is to -- you don't need to give the whole promotion to all the customers. You can be very surgical promotion to each customer based on data and based on the number of times he called, the number of promotions he has, what is he paying. So we are trying to increase ARPUs through technology, through data and through Gen AI. And this is nothing to do with the prices that you are listing on your website because that's the price that your competitors are looking at. Nobody is looking at your internal ARPU. So I hope that this is understood. And when you take a look into the competitors, the hint in the devaluation at the end of last year, really, for the first time, American Móvil was conscious and increased prices very, very heavily. So they've been lagging the increase of prices for many months. Probably when they take a look into the numbers of December, they were astonished and they moved on. So the market has been very, I would say, improving in terms of prices. Going back to towers, 20% of our towers today are on lease. This is something that Gabriel said. Today, the tower -- all the assets in Argentina have no price. I mean, there's no price for any asset. If you take a look into the benefits of selling the assets, we have discussed it internally a lot also with the shareholders. Today, there's no reason -- there is no economic reason to do that. I mean, we get financing at much better prices than we lease than the towers. Every time I talk with TIM Brasil, with Orange, with all the companies that have been forced to sell the towers, they are -- today, they are complaining because if you take a look into TIM, TIM was spending $1 billion in sales -- in leases of towers. 3 years later, is above $3 billion. So it's crushing the margins, I would say. So that's the other reason. But in Argentina, unfortunately, we hope that this government will have the right path and grow and increase. But Argentina is Argentina. And a few years ago, 2012, I think, there was somebody that says fiber divestment does not exist anymore. That was the government that issued a resolution saying that our broadband service was not legal anymore. And if you outsource your network to an American towers company or to A1 company or any company that you want, they cannot they cannot help to stop something like that to happen. We went to court for several months and years and finally got the license back and our services was never stopped. But if you give the infrastructure to another one that is compliance with the U.S. and it's legally corrected and so on, if a government says this network has to be shut down, they will shut you down. So that's something that we take into consideration when talking about Argentina. Argentina is what it is. So we need to be careful with that.

I would just add to complement what Roberto mentioned, very importantly, the -- as he said cap rate of the Telecom, our tower companies are much higher than our cost of debt. So for us, has a lot of additional value to keep the debt and the option for future sales.

That is always the option.

Absolutely. And it provides an additional hedge. And of course, the situation compared to the rest of the industry, the multiple level of the industry has been above where most of the companies sold their infrastructure, most of the companies were heavily in debt and the application of those funds has a lot of sense. At present, for us, the multiples are not good. the debt is in relative terms, it's cheap to the cap rate of the infrastructure company. So probably it's not a good time to think about that. But of course, from time to time, we discussed the situation.

There's one more comment. You have the -- all the leases are denominated in dollars. So when you have a big devaluation like the one we have our revenues are in pesos and your costs are growing in dollars. So it's very harmful. So we need to wait and see, and we will do it whenever it's good for the company, for the shareholders and to make sure that the company can run for many, many years more. Thank you, Stefan.

So anyone else?

This is Lee from [ Tirof ], just going back to the first 2 slides where you highlight the AI opportunity. Can you remind us like your data center infrastructure and then what you see in terms of increased need for more data centers in Argentina and help us understand that opportunity set?

We have a big data center. Today's I would say, almost full. We have all the hyperscalers nodes in our data center we I mean, we have our own cloud running in our data center, which is DC4. We call it internally. And it's a brilliant revenue stream that is coming with very good margins, much better than when we are reselling partners, clouds like AWS or Microsoft or Google. So that's a good spot. We have not decided whether to increase our data center capacity. We have not decided that. There are several projects that could help hyperscalers are willing us to invest and increase our capacity. But those are $20 million, $30 million CapEx. So we are really also waiting for the high scalers to do the move. We are not going forward without the contracts.

Roberto mentioned in the presentation that may be directly related, not specific to data center, but let me give the advertisement. We are foreseeing a very significant growth on the digitalization of the companies. Argentina has lacked of a lot of investment in that area. And improvement that comes from there is very relevant. Our B2B business, we are thinking that it's going to double in 3 years. And that's indirectly -- very related to this capacity that we have.

There is also an opportunity on the edge. We have a lot of owned data centers that are very close to where the customers are. Enterprise customers are, like banks. So we are reutilizing, I don't know if it would exist, we are reusing those edges for our customers also mainly banks that need low latency and need to have for -- sometimes for legal reasons, the data in the same location. So we're helping that.

Cesar Medina from Morgan Stanley. We are monopolizing the questions in this table. But I just wanted to get a sense in terms of how should we think of your CapEx to revenue in the future. You put a slide in there that you want to increase fiber-to-home penetration. You said that your 5G rollout is going to be a bit more surgical. But maybe help us understand how does that look at going forward? And in what time frame should we expect that spending?

Okay. Well, it will -- probably, you will see something very similar to what you are seeing now in the range of 15% to 17%. What might make that very significantly. It will depend a lot on the macro conditions of Argentina. If the recovery of the ARPUs accelerates and give us the opportunity -- the company has always, they're willing to invest. And as you have seen in the environment that we have described, we have invested very significantly after the merge, our year investment was in the range of $1.5 billion. So I will say there is not a bias in the company management of not investing on the contrary. But the bias is to make it sensible to what is happening in macro and what is the ability of fully recover that. As we think that the situation is going to improve, that it came out. We have the opportunity of 5G, the corporate opportunity on the growth of that and the digital asset as a whole. But for the time being, for the macro picture that we have today, you must think in figures very similar, pretty similar to what we are facing today.

One follow-up. One thing of the trends of ARPU, what is the big driver for the ARPU increase in the reduction of those discount? is it repricing higher, how should we think about it?