Telecom Argentina has never been shy about raising capital for its investments, which have made it the dominant telecoms company in the country.
But it has also been savvy in managing its liabilities, affording it maximum flexibility throughout what has been a turbulent for years for the country.
The NYSE-listed company went to the market in July 2024, taking advantage of its track record and the country’s increasing appeal as Argentina’s economy begins to stabilize.
It was the company’s first international offering in five years, selling $500 million in 2031 notes with a 9.5% coupon. The company, which wins the award for Corporate Liability Management of the Year, used the proceeds of the sale to prepay multilateral debt with the IDB and IFC, as well as fund a concurrently launched capped cash tender offer for up to US$100 million of its outstanding 8.5% senior notes due in 2025.
“We wanted a transaction that would let us to tap the market, offer something attractive to investors and cancel more expensive debt,” says CFO Gabriel Blasi.
He says the company evaluated different options, including bank loans, multilateral and export credit agency funding – it received a $50 million credit line from Export Development Canada in 2024 – before deciding on the bond. It eventually upsized the bond with another $200 million in October 2024.
“Our constant attention on liability management helped create this opportunity and we were able to finish with optimal conditions, despite the context in Argentina,” Blasi says.
Telecom used the proceeds to refinance debt and for investment, which Blasi says never dips below $500 annually, so that the company can remain at the top in Argentina and continue to expand in Paraguay and Uruguay.
“We are always trying to push the limits, looking for opportunity. We want to work to grow the market, which is good for us and for other companies that want to raise funds internationally,” says Blasi.
The company had capex of $598 million in 2023 and $383 million in the first three quarters of 2024. It had a net debt of $2.39 billion as of the third quarter of 2024.
Fitch Ratings, in a July review, stated that the company’s “robust financial and operational profile is supported by its strong cash flow generation, relatively conservative capital structure, and competitive strengths in both fixed and mobile services.”
It had 21.4 million mobile customers in Argentina as of the third quarter of 2024, up 3.2%, and 2.5 million users in Paraguay, up 4.7%. It operates nearly 95,000 kilometers of fiber optic and has more than 8,400 towers, 70% of which are wholly owned. It is the market leader for pay TV in Argentina, with 3.2 million customers, up 1.6%. It is expanding pay TV operations in Paraguay, which it grew by 7% in the first three quarters of 2024, and Uruguay, where the market for pay TV continues to open.
Telecom anticipates faster growth at home as Argentina’s economy improves. While the economy will shrink close to 3% in 2024, it should rebound by 5% in 2025, according to the International Monetary Fund. Inflation will be in triple digits in 2024, but monthly inflation fell from 25% in December 2023 to an estimated 2.9% in December 2024. The government ran a fiscal surplus in October for the ninth consecutive month.
“We are optimistic that the macro numbers we started to see in 2024 are going to consolidate, leading to improved country risk a virtuous cycle that will open up financing for new project,” says Federico Pra, Telecom’s director of finance.
Joint Bookrunners and Dealer Managers: Deutsche Bank; JP Morgan; Santander
Passive Bookrunners: BBVA; BCP Securities; Latin Securities; UBS
Underwriter’s Counsel: A&O Shearman; Marval
Issuer’s Counsel: Cleary Gottlieb; EGFA Abogados
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