Telecom Argentina S.A.
Q4 2018 Earnings Call Transcript

Published: 12 Mar 2019

[Operator:]

Good day, everyone, and welcome to the Telecom Argentina TEO Fiscal Year 2018 Earnings Conference Call. Today's call is being recorded. Participating on today's call, we have Mr. Gabriel Blasi, Chief Financial Officer; and Ms. Solange Barthe Dennin, Investor Relations Manager. At this time, I'll turn the call over to Solange Barthe.

[Solange Barthe Dennin:]

Thank you, Lauren. Good morning. On behalf of Telecom Argentina, I would like to thank everybody for participating on this conference call. As stated by Lauren, the purpose of this call is to share with you the results of the 12-month period ended December 31, 2018. We would like to remind all those that have not received our press release or presentation that they can call our Investor Relations office to request the documents or download them from the Investor Relations section of our website located at www.telecom.com.ar. Additionally, this conference call and slide presentation is being broadcasted through the webcast feature available in such section and can also be replayed through this same channel. Before we continue with the conference call, I would like to go over some safe harbor information and other details of the call, as we usually do in this type of event. We would like to clarify that during the conference call and Q&A session, we may produce certain forward-looking statements about Telecom's future performance, plans, strategies and targets. Such statements are subject to uncertainties that could cause Telecom's actual results and operations to differ materially. Such uncertainties include, but are not limited to, the effect of ongoing industry and economic regulation, possible changes in the demand for Telecom's products and services and the effects of more general factors, such as changes in general market or economic conditions, in legislation or in regulation. Our press release dated March 7, 2019, a copy of which was included in the Form 6-K report furnished to the SEC, describes certain factors that may affect any forward-looking statements that we may produce during this session. Furthermore, we urge the audience of this conference call to read the disclaimer clause contained in Slide 1 and 2 of the presentation. The agenda for today's conference call, as seen on Slide 3, is first go to over a general macro overview, then moving on to our strategy, which will be followed by the discussion of our business highlights and immediately after, we will go into the evolution of our financial figures. Finally, we will end the call with a Q&A session, as it is customary in our quarterly calls with the financial community. Having gone through these procedural matters, let me pass the call to Gabriel Blasi, who will go over a brief characterization of the macroeconomic context in which we operate.

[Gabriel Blasi:]

Thank you, Solange. Good morning, everybody. Please refer to Slide 5, where we included the summary of the evolution of some macro variables in Argentina, regarding FX rate, inflation and monetary policy. During the first 4 months of the year, the peso depreciated at low rate of 10% approximately, in a movement that the market considered normal up to that stage. Monthly inflation was relatively stable, growing at a 2.3% compound rate, while interest rates were also hovering at levels of 22%, 23% annual. Nonetheless, some degree of concern was present due to the high accumulation of Central, Banco Central notes, NOBACs, registered and also due to the fact that in turn these instruments have lost some of their monetary regulation purpose becoming an external investment vehicle. And in context, a combination of external and local factors began to interact increasing the level of volatility in the exchange markets. Strong peso depreciation was registered from May to September, defining a currency event. In this context, the Central Bank exercised heavy intervention in an attempt to contain the foreign currency demand, while also committing to reduce the cumbersome stock of fixed NOBAC notes, which were reduced strongly in U.S. dollar terms. In addition, the Argentine government negotiated a standby agreement with IMF on June 20, 2018. Meanwhile, inflation was considerably affected by transport and utility tariff increases as well as rises in food and beverage prices, which were impacted by the FX evolution, registering a peak in month-over-month increase in September 2018. Finally, in October, was announced a reformulation of the monetary policy scheme, which included a strict control of monetary aggregates and introduction of a set of floating bands that define nonintervention zones of the monetary authority. These measures, along with the modification of the IMF agreement ultimately lead to some relief from the turbulence experienced in exchange markets. Interest rates remain at high levels for the last month of the year, while inflation slowed down from abnormally high levels registered during the currency event. Nonetheless, the levels of inflation experienced in Argentina during the past 2 years triggered the classification of Argentina as highly inflationary by the IASB standards and thus the application of inflation accounting determined by IAS 29. Turning to Slide 6, we can observe the behavior of activity and consumption during the stage defined previously. In relation to the economic activity and after starting of the year, we had encouraging growth forecast. During the second quarter, aggregated output increased rapidly due to a strong underperformance in agricultural activity, which was affected by climatic factors and due to the recessive effects of the currency event and the strong monetary tightening. Industrial cycle production also suffered an increase, plunging deeper into the recessive cycle and accelerating the pace of contraction during the last month. According to last available data, the economy contracted around 2.6% during 2018. While looking at our employment figures, although it can be noted that there was a rise during the year, it is expected that it should not suffer integration significantly higher and remain in a rational level when compared with other strong economic downturns in Argentina's history. Lastly, higher volatility in economic variables and the rising inflation have impacted overall household consumption, which is expected to remain depressed due to adverse impacts of inflation on real income and due to the high uncertainty captured by low consumer confidence readings, which in turn have fallen significantly. As a summary, telecom industries are considered defensive in nature, although they are not immune to changes in economic cycle. Notwithstanding the challenging macroeconomic context, just described, Telecom Argentina has managed to generate solid operating profitability when compared to the past year figures. Having gone through this introduction of the macro, I will go over strategy and business highlights sections. The merger between Telecom and Cablevision was considered an inverse acquisition under IFRS 3, business combinations, with Cablevision being the surviving entity for accounting purposes. Thus, for the purposes of preparing the consolidated financial statements of Telecom Argentina as of December 31, 2018, the comparative figures as of December 31, 2017, correspond to those that arise from the consolidated financial statements of Cablevision, restated by inflation in terms of a constant measuring unit as of December 31, 2018. And second, the corresponding information for the annual period ending December 31, 2018, incorporates on the basis of figures corresponding to Cablevision, the effect of the application of Telecom Argentina's method of acquisition at its fair value in accordance with the IFRS 3 guidelines and the operations of Telecom Argentina as of January 1, 2019. Moreover, the company has accounted for the effects of inflation adjustment enforced by the Comision Nacional de Valores, or CNV, which establishes that the restatement will be applied to the annual financial statements for intermediate and special periods ending as of December 31, 2018, inclusive. Accordingly, the reported figures corresponding to fiscal year 2018 include the effects of the adoption of inflationary accounting in accordance with IAS 29. On the other hand, in order to ease the understanding and analysis of the earnings evolution by its users, we present additional information containing figures, non-adjusted by inflation, which was used as the base for the information presented in constant pesos, exposing on pro forma basis the comparative figures from fiscal year 2017 as if the merger between Telecom and Cablevision has been effective as of January 1, 2016. Additionally, with the aim to reach a better understanding, the figures presented on our press release, we encourage our financial community to consider that release in combination with this earnings presentation. Turning to Slide 8. We can consider the strategic approach that the company had at the beginning of the merger process. At the beginning of the year, the objective of the company was to become a convergent 4Play provider as well as a Net Promotor Score leader, being this indicator a proxy of the overall customer satisfaction with the service. To achieve this goal, Telecom was focused on 3 main pillars

[Solange Barthe Dennin:]

Thank you, Gabriel. We will go over the impact that these positive business trends that described by Gabriel generated over our financials. Please turn to Slide 17, where we present a summary of the effects of the adoption of the inflationary accounting in accordance with IAS 29. IAS 29 established the conditions under which an entity shall restate its financial statements if it is located in an economy, economic environment considered hyperinflationary. This standard requires that the financial statements of an entity that reports in the currency of a highly inflationary economy shall be stated in terms of the measuring unit current at the closing date of the reporting year regardless of whether they are based on the historical cost approach or a current cost approach. To determine the existence of a highly environment, inflationary economy under the terms of IAS 29, the standard detailed a series of factors to consider, including a cumulative inflation rate over 3 years that is close to or exceeds 100%. It is important to highlight that the 3 years cumulative inflation rate as of December 31, 2018, reached 147.8%. As a consequence of the aforementioned, the financial statements as of December 31, 2018, of Telecom Argentina were restated in accordance with the provision of IAS 29. The company restate all the nonmonetary items in order to reflect the impact of the inflation adjustment reported in terms of the measuring unit current as of December 31, 2018. Consequently, the main items received were property, plants and equipment, which includes the considerable position that Telecom holds in real assets, such as commercial offices, data centers, chemical bases, cars, mobile sites and corporate buildings, intangible assets, including goodwill, inventories, certain investments in subsidiaries, and equity items. Each item has been restated in the day, the date of the initial recognition in the company's equity versus the last revaluation. Monetary items have not been restated because they are stated in terms of the measuring unit current as of December 31, 2018. As far as results are concerned, there was an increase in amortization and depreciation arising from the restatement of nonmonetary assets and an improvement in financial income and expenses due to the positive results of its total to inflation from the excess of monetary liabilities over monetary assets with a consequent impact on income tax. This positive result from exposure to inflation can be found within the financial results item in the income statement. Let's move to Slide 18, where we can analyze the consolidated revenues and EBITDA. For the fiscal year 2018, consolidated revenues on current terms grew by 30%, reaching more than ARS137 billion. When comparing in constant measuring unit terms, revenue amounted to more than ARS168 billion, showing a slight decrease in real terms. This reflects mainly the effort that the company has been putting through on offsetting the high inflation FX discussed in our macro chapter over the top line. In turn, service revenues grew also by 30%, thanks to the strong performance of Internet revenues and fixed telephony and data services revenues, followed by mobile Internet services. Furthermore, EBITDA showed a strong evolution, growing by 32% year-on-year in current terms, while in real terms, EBITDA achieved a growth of 3%. EBITDA margin expanded substantially in real terms by 180 basis points to 33.5% for the fiscal year 2018 as we have concentrated in improving our revenue quality and profitability, bringing down operating costs before depreciation and amortization by 5% when accounting for inflation. Please refer to Slide 19, where we show the performance of the EBITDA and the behavior of the different components of revenues and costs. The company has taken actions to gain operational efficiency and manage its cost structure, and these actions have positively impacted our profitability as we can observe how the company was able to cope with the cost structure and generate a reduction in real terms. It is important to remark that this has been achieved, when going through an integration phase of the 2 merged companies, which involves the deployment of new systems and processes. We can observe a positive evolution of labor costs, over which the company is focusing heavily alongside we achieved for services, maintenance and materials, which in turn were affected by lower network maintenance cost. Additionally, handset cost contributed positively to EBITDA margin growth, mainly affected by a lower sellout, while cost management has delivered good results in interconnection costs through better negotiation in an international interconnection. These effects have been partially offset by increases in programming and content cost, which are in part dollar related, and other costs, which include bad debt expenses. The final outcome was the 180 basis points expansion in real terms just described before. Let's turn to Slide 20, where we can verify the company's current operating income totaled more than ARS24 billion with a 24% increase year-on-year. The EBIT growth in constant measuring unit that result higher than that of EBITDA can be explained by slower growth in the increase of depreciation and amortization and disposal and impairment of PP&E, which decreased 5% in real terms year-on-year. Here we can observe that the inflationary effects over EBIT figures have turned negative as constant figures are lower than current ones because of the increase in depreciation and amortization and as a consequence of the restatement of nonmonetary assets. In real terms, operating margins improved to 13% of consolidated revenue, increasing 300 basis points when compared with fiscal year 2017, showing that the company was able to achieve solid operating performance through the course of this year. Moreover, Telecom registered a net income attributable to the controlling company of almost ARS5.3 billion. The variation of the net income when comparing with the previous fiscal year can be mainly explained by higher FX losses, associated with the net financial debt position denominated in U.S. dollar and higher interest expenses due to the overall increase in the net debt position, which were partially offset by higher inflation adjustment gains, reflecting the positive effect coming from the exposure to inflation that we discussed previously. Moreover, and due to the positive evolution of net income and equity discussed before, the Board of Directors proposed to the shareholders meeting a distribution of cash dividends up to ARS6.3 billion. It is important to highlight that this proposal of distribution correspond to figures in constant currency as of December 31, 2018, but according to CNV resolution, it must be treated in the currency of the date of the shareholders meeting. This implies that shareholders meeting that decides upon the distribution of dividends will determine the final amount to be distributed. Having gone through the summary of financial figures, let me pass the call to Gabriel, who will explain some key figures for the year and the composition on Telecom's debt.

[Gabriel Blasi:]

Thank you, Solange. Turning to Slide 21, we present some pro forma figures for the fiscal year of 2018 and '17 in constant measuring unit. Company's revenues achieved more than ARS168 billion for fiscal year 2018. Meanwhile, EBITDA amounted more than ARS56 billion or the same period. Moreover, EBITDA margin reached 33.5%. Regarding our gross debt, as of the end of 2018, it amounted more than ARS79.3 billion. But as the company holds an important cash and equivalents and investment, as investment position, net debt reached more than ARS65.6 billion. In fact, net debt-to-EBITDA ratio remains solid despite a significant devaluation of the currency that reached 102% in 2018, the acceleration of inflation and the reallocation of the minimum wage to the payment of services. Please move on to Slide 22, where we can analyze our maturity schedule. As we mentioned in our previous press release, in October 2018, the company refinanced $500 million from the syndicated loan due 2019 through a new term loan agreement due 2022. Additionally, $100 million of the original syndicated loan were prepaid using the cash position of the company, leaving a total amount of outstanding of $400 million. Moreover, in November 2018, the company was notified enter into a loan agreement with Deutsche Bank AG, London Branch, for an amount of up to $300 million. Furthermore, it is worth to mention that in February 2018, the company canceled the final amount outstanding of the original syndicated loan for US$100 million with its own funds. Also worth to remark that 2 days ago, we announced that on March 4, the company has entered into a loan agreement with International Finance Corporation, or IFC, for a total amount of up to $450 million to finance capital investment for 2019. As mentioned in previous calls, we deem important to emphasize the manageable debt profile that the company has as well as the diversified source of funds currently available, such as vendor financing, local bank lines and access to local and international capital markets for the coming year and, as we mentioned, at the low debt-to-EBITDA ratio. Moreover, the company holds a permanent optimization policy for the term, rate and structure of its financial liabilities and is always analyzing possibilities on this front according to the evolution of market conditions. Finally, turning to Slide 23. I would like to mention which have been the greatest achievements of the company during the last year. Despite adverse macro economic environment, Telecom was able to increase margins, while achieving an ambitious CapEx plan for the year. It is worth to highlight that the plan could be carried out due to the fact that the company was able to pay the necessary funding through different sources and at reasonable rate. As a result, we could see an important NPS improvement, mainly in our mobile services. Related to the merger, we will, it should stand out that during 2018, the company has made an enormous progress in integration of its processes, accomplishing the implementation of Central Finance, the best SAP implementation of 2018 worldwide, while negotiating a convergent labor agreement. Last, and not the least important, Telecom made a great effort to start a culture of unity and compromise among its employees. Finally, I would like to add regarding this last chart that the company has shown its ability to pass through inflation in this very strong environment, showing very significant resilience in its balance sheet and a strong hedging capacity against the devaluation impact. Also we were able to grow EBITDA by 3% in real terms and keeping the rest between the targets that we established priorly. With this, I will open the session to questions, having concluded with the presentation. We are more than pleased to answer what do you may have. Thank you very much.

[Operator:]

[Operator Instructions] We'll take our first question from Rodrigo Villanueva with Merrill Lynch.

[Rodrigo Villanueva:]

My first question is related to other operating expenses and bad debt. We saw a significant increase in the fourth quarter. We would like to know what is behind this strong increase? What would you expect going forward? And then the second question is related to the integration process with Cablevision. You already mentioned that in 2018, you made significant achievements regarding the implementation of the combined system for 2 companies. And I was wondering, if you could give us some details on what to expect in 2019?

[Gabriel Blasi:]

Okay. Regarding, thank you, Rodrigo, for the questions. Regarding the mentioned the major and other operating expenses, there you have mainly the impact of the public services of other utilities, which are related to the very high increasing tariff that Argentina is moving on for the last 2 years. Just as an example, when you compare the weight of, although it's a different measure, but just to give one idea of what does it means, when you compare the impact in minimum wages of these increases, they have gone from 5% of the total disposable income to 30%. That reflected on the corporate side, reflects energy increasing cost, which affects, for instance, all the sites operation and also you have there impacts of other type of expenses related mainly to this. Regarding, you made some comment on the bad debt, if I didn't get you right. Yes, it is true that the company has suffered as all the Argentine environment an increase in the evolution of the bad debt. But I would like to mention that we have a situation which is better than the financial system. The bad debt ratios of the company compared to the bad debt ratios of the banks are better. As of November 2018, which is the last recorded public information on Banco Central regarding bad debt of prior sector, that is a percent of 3%. In our case, we are much, much better on that, at least 30% better. Finally, you gave me also, regarding the expectation of 2019. Well, first of all, I would like to stress again that the company is delivering what compromise is. We were able to keep a cost control during a very tough environment in terms of inflation. We were able to pass through inflation to our income. We have been able to protect our balance sheet and the result is a very clear example of that, despite of having a $2 billion debt, we have a positive result. In terms of the integration, we continue to get much more efficient. Just to give you some color, we are in the process of deploying the new processes that we are designing together with Accenture and Pricewaterhouse and SAP among others on the back office, meaning that, that will change very significantly many of the processes of the company, including robotization and other features that are analyzing. We have more than 100 initiatives under study today and probably during the next 60 days, we are going to define the order in which those initiatives are going to be deployed. That includes from the complete automation of our suppliers portal, important changes in our supplier management, enhancement on the working capital, just to mention a few. Regarding our front, regarding our CRM, well, last year, we haven't almost, just deployed a very small test of it. During this year, the company will receive the full impact of the new CRM in terms of getting the new billing system and the capacity to begin to deal with our customers on a 4Play base. We have made some tests, a small proof, not of 4Play yet, we are starting. As you may recall, we weren't able to do that in the prior year, now we are allowed to. So we have started to make some very promissory test on that, and you will begin to see in the next month the full deployment of the new system, which by the end of the year will give the company big data capacity, which is something that is almost unexistent in Argentina with very few exceptions. In terms of our CapEx plan, we continue to put a very strong amount of money, the company planned for this year, assuming that situation is under our budget considerations, which are pretty similar to what we are seeing today, is that we are going to invest near $1.1 billion, continuing the improvement of our coverage, of our capacity of our mobile, showing the increasing NPS of our customers, which we already know, and we see a lot of track on that, that, that allows the company to sustain and increase the income by providing a better service. Probably, we will continue to get a more efficient structure. As I mentioned, we have signed a convergent agreement with more of the unions. That will imply very strong efficiencies, for instance, in terms of the availability in terms of time frame from some of our employees that weren't allowed because of those old agreements to do so. And that will allow us to improve the service by having a much better capacity to provide a continuous service to our customers. I don't know if there is something, also I would like to add, Rodrigo, if you allow me, is that we are fully conscious that these financial statements are very difficult to understand, and we strongly appreciate the effort like you and others of your colleagues are doing to cope with the inverse or reverse merge with the inflation accounting all together. There are very, very few examples in the world, and we are more than open to have all the necessary debates with all of you and our, all the investor community to assure that you can fully understand what does it means and what are all, the all implications that this change in the regulation implies in the company. Just to mention, remember that from our last call, our historic balance sheet was showing a loss of near ARS20 billion. And in a single quarter, we turn around that to almost ARS6 billion in favor. That's very important to remark, and I think that if you need any further clarification from our side, all the team is ready to answer all type of questions about this. Also, I would like to add that we are planning an Analyst Day in the near future that we are going to devote a specific time frame and speakers to discuss about the strategy of the company and also to help you to get a better understanding of what these new metrics means for Argentine corporate environment.

[Operator:]

[Operator Instructions] Our next question comes from Andre Baggio with JP Morgan.

[Andre Baggio:]

I'm interested in the prospects of free cash flow for the company. So if you could talk about CapEx for 2019? And then what do you think that the, going to be the route for a higher cash flow in the future?

[Gabriel Blasi:]

Well, regarding our CapEx for this year, the $1.1 billion, we are not considering to increase our, the situation further more than the situation that we have today. So the company will comply with this CapEx with its own cash generation. Having said that, of course, that implies, I will say, a certain level of vis-à-vis moving together inflation pace and devaluation pace because we are not foreseeing for this year a significant movement in that direction that might change our CapEx plans. Also, it's important, Antonio, to recall that, Andre, sorry, for the mistake, that to recall that our CapEx is completely modular, in a way that we can adjust it very rapidly in any direction. This is a, we are not committed to a single operation of CapEx in a way that we are not redeploying $1 billion, that must be, if we feel in 5 years. But on the contrary, we are putting very small pieces of CapEx of $200,000, $500,000, which implies that the company in 60 days can move accelerating or decelerating the CapEx plan very easily, and that provides us with a lot of muscle in terms of managing the volatile. Regarding vendor financing, we are in the process of getting additional support of our vendors. You know that we have very strong relations with some of them, and I cannot yet make an additional disclosure on these, but we wait from, some probably good news about this situation in the near future according to conversation that Juan, the rest of the team is carrying out with many of them in very positive situation. That will allow us to even in a process where the market can continue to be close, which allows us to fully finance our CapEx. In terms of the market situation and being close, it's important that there is also that, as you have seen, the company has been willing to refinance in the last 100 days more than $1 billion, almost $1.3 billion. And although we've been offered, and we have certain reverse inquires regarding our ability to issue some security, we haven't done this yet, mainly because until the market doesn't stabilize, we don't want to establish a rate that would be unfair for the company. If you consider that we have refinanced all this $1.3 billion about 200 basis point below the sovereign that put a very good benchmark of what our intention on that. In terms of cash generation, as I mentioned, we are on track, we are within our plan, and we don't foresee for the time being any significant matter to mention in there. It's important to address that this will depend, of course, of that the economic environment doesn't deteriorate much, much stronger, especially on what we have mentioned about bad debt, what we have mentioned about the income availability of the low customers, in terms of giving us the possibility of continue growing as we have been doing up till now. But if situation gets much, much worse, of course, that might mean that we might decide to invest some extent in keeping customer base instead of keeping growing in EBITDA margin as we have been up to now.

[Andre Baggio:]

If I may follow on, I'm sorry, maybe a second question, unrelated. Can you talk a little bit about competition, especially in the broadband sector? Because like, say, one year ago, we hear that other competitors likely were trying to deploy some fiber to the home. And in the past, like say Telecom Argentina had probably a better position in terms of being the leader and so on. But isn't it this leadership being attacked? Do you have some meaningful challenges coming from the likes of America Movil or from Telefonica and others?

[Gabriel Blasi:]

Well, yes, it's true that there are certain attempts of competitors to deploy fiber and in very, in very specific areas, small areas. That is being done by Telefonica, also America Movil and other small players like TeleCentro, but they are very focused in small areas. For the time being, there is no like, I will say, some type of big investment that may harm in a significant way our competitiveness there. Imagine that it took Cablevision at least 15 years to deploy the fiber network that is fast. And if we compare the network of the old telecom company, was very comparable, the fixed network to Telefonica itself. So to replicate the positioning and the quality of the network that Cablevision deployed in the last 15 years, it's not only a matter of resources that although our competitors may have, they are not deploying at the same pace that we are in Argentina today, but also to the time to do it. So yes, it is true. There are scattered attempts of increasing the fixed networks, but they are not yet a significant risk for us.

[Operator:]

Our next question comes from Guilherme Haguiara with Bradesco.

[Guilherme Haguiara:]

We were just trying to understand better how margins could trend in 2019. And if I can divide it in 2 questions. In terms of revenues, how can we expect real revenue growth in 2019 considering the continued macro and political headwinds in the country? And on the second derivative, how can you keep costs and expenses under control seeing high inflation, as we saw in 2018, you did a very good job in terms of achieving real EBITDA growth despite the top line compression?

[Gabriel Blasi:]

Thank you, Guilherme. Well, probably what you have mentioned is one of the biggest challenges that we have for the next year. In a way, I think I didn't clarify it completely. But as you mentioned, it will depend probably our ability to grow in terms of margin EBITDA will be very tied to what you have mentioned, in a way that if the market continues to deteriorate, which by the way, you have like a different behavior in Argentina here, one is industrials and other type of consumptions. Industrials is really going down, it has gone down very deeply. But on the rest of the consumptions, we are beginning to see some flattening in the processes. Also consumer confidence has shown a slight, also a slight change on the positive side. Having mentioned that, we will adapt in what way? If situations deteriorate for any reason, that might mean that the company might choose not to continue to grow in terms of EBITDA margin, but keeping the same margin and keeping our customers happy, which is the most important thing for us in the long run. If the situation requires a different behavior, we might change pretty easily and put more speed in price adjustment and grow our margins and invest less in terms of widening our customer base. Having said that, it is true that the cost will represent a very significant challenge this year. It is also expected, remember that last year, we have a very important part of our CapEx related to dollars. So that last year, and as we mentioned in the first question to Rodrigues, to Rodrigo, the implications of the devaluation have been very strong in many ways. This year, we think that we will have a more aligned situation between the peso and the dollar and that might help in some way to deal with the cost structure. But of course, the inflation impacts in terms of cost will be significant. Also, it's important to address that in general terms for all the economy, not specifically for Telecom, that in this high inflation environment, you all, the corporations tend to receive some additional saving in terms of salaries increases, although this year this might be more challenging because as you, because what you have mentioned regarding the political environment, being an election year.

[Operator:]

[Operator Instructions] And we have no further phone questions. I'd like to turn the conference back to Solange Barthe for any additional or closing remarks.

[Solange Barthe Dennin:]

Thank you very much for participating in our quarterly conference call. Please do not hesitate contacting our Investor Relations Department for any further inquiries you may have. And of course, we will be more than pleased to you participate in the Analyst Day that we will arrange. Good morning to all. Have a nice day, and we expect to meet again soon.

[Operator:]

And that does conclude today's conference. We thank you for your participation. You may now disconnect.