Coronavirus leads Telecom Argentina to cancel capex increase

Telecom Argentina has decided to suspend a US$100mn increase in its 2020 capex because of the uncertainties caused by the COVID-19 crisis, according to CEO Carlos Alberto Montini.

The company has total capex of US$500mn earmarked for this year, which was already less than half that for 2019, when the telecom operator invested more than 70bn pesos (US$1.12bn).

Telecom Argentina’s latest strategic plan set out investments of US$5bn for 2018-21.

“In February and the beginning of March we were planning to increase our capex by US$100mn to US$600mn, and that was because the quarter was going better than we were expecting. That additional capex has been put on hold again,” Montini said in an earnings call with analysts and investors on Monday.

According to the executive, the capex reduction will not affect the company’s major transformation programs already underway, namely essential IT implementations and full management of OSS platforms. 

“We're trying to keep all the transformation programs alive,” said the CEO.

Company executives said they have not yet seen any major migration of clients from higher-end to lower-end plans as a result of the crisis, although this is being watched closely.

Nonetheless, the quarantine has reduced prepaid data consumption and people are generally preferring to use fixed networks (Wi-Fi) during lockdown rather than mobile services, Montini said.

According to the CEO, there has been a decrease in prepaid mobile traffic and only a 30% increase in general mobile traffic.

The company is also prevented by a presidential decree from cutting off services to clients due to non-payment of bills, which is likely to have an impact on its cash flow.

REVENUES REACH US$925MN IN Q1

Telecom Argentina reported net revenues of 62.8bn pesos (US$925mn) in Q1, down 4.5% year-on-year after an inflation adjustment of over 48%. 

Research firm IDC said in its most recent forecasts for the regional market that the telecommunications industry in Latin America is expected to suffer a loss of US$4.3bn in revenues this year compared to previous projections.

International rating agency Moody's now forecasts 6% dip in Argentina's GDP due to impact of the pandemic. Previously, it had projected a 2.4% drop. Analysts surveyed by Reuters at the end of April now expect an economic contraction of 7.0% this year, according the average forecast, versus a 4.3% estimated contraction in the poll released a month earlier.

The local government is also planning to spend 850bn pesos, equivalent to around 2.9% of the country’s GDP, on an economic aid package to counter the impact of the novel coronavirus on the economy. 

PARAGUAY

As regards the firm's Paraguayan operations, it plans to double its fiber-to-the-home (FTTH) deployment in the country this year.

Montini said COVID-19 was an important driver for fiber deployments in the country and led the telco to operate at "full capacity" locally.

Telecom Argentina is now growing at a pace of 10,000 new customers each month in Paraguay, compared to 6,000 a month before the crisis, said the executive.