The case for & against
Bull & Bear analysis
Telecom Argentina S.A. (NYSE: TEO) is a leading telecommunications provider in Argentina, primarily offering mobile and fixed-line telephony, broadband internet, and pay television services. In an environment impacted by significant inflation and competitive pressures, Telecom Argentina aims to maintain its position in the market through strategic acquisitions, such as that of Telefónica Móviles Argentina (TMA), while enhancing network performance and operational efficiency. With a growing emphasis on digital transformation, Telecom Argentina is participating actively in the evolution of ICT solutions in the telecommunications space.
Bull says
- ↑TMA acquisition lifted consolidated revenues 50% YoY to $4.1B.
- ↑EBITDA margin expanded to 30.5%, up 170bps YoY.
- ↑CAPEX rose 73% to $615M, funding fiber and 5G rollout.
- ↑Net debt/EBITDA at 1.9× underpins financial resilience.
- ↑Postpaid subscribers hit 20.3M; average mobile usage 6.4GB/user monthly.
- ↑Favorable growth momentum and positive dividend yield bolster outlook.
Bear says
- ↓H1 2024 revenue declined 13.3% YoY, failing to pass inflation.
- ↓Earnings yield turned negative, signaling weak profitability outlook.
- ↓Low liquidity may hamper short-term obligations and capex.
- ↓Fierce competition pressures ARPU and churn despite minor improvements.
- ↓Regulatory uncertainty could restrict margins and operational flexibility.
- ↓Elevated leverage risk may limit financial flexibility in downturn.
Investment themes with TEO
Emerging economy driven by commodities, agriculture, and energy
Earnings Call · Q2 2024 · Mgmt. Guidance
Transcript signals
Bull points
- even in the challenging macro environment, this is the fifth quarter in a row with positive emerging performance and the first quarter with both revenue and EBITDA sequential growth since first quarter of 21, reflecting the efficiencies achieved in terms of cost and the pricing policy executed to tackle the increasing inflation.
- In the second quarter of 24, investments as a percentage of revenues was 16.7% or 11.7 before rates of views from leases, higher than the same period of the previous year.
- The CAPEX program will continue evolving according to Argentina's economic conditions, network performance, and customers' requirements.
Bear points
- Revenues for the first half of 24 dropped 13.3% from 1,921.7 to 1,667 billion pesos, mainly driven by lower service revenues.
- Mobile revenues represented approximately 40% of our revenues and decreased 8.9% in real terms when comparing second quarter 24 versus second quarter 23, mainly explained by lower ARPU in a highly competitive environment and a change in the prepaid and postpaid mix, partially upset by an increase in sales.