Quarterly sales fell 14.0% in real terms from a year ago, in line with our projections, which contemplate recessionary conditions until the third quarter of the year.
Even though the Telecommunications industry and the firm were less affected by the recessionary situation that started in June 2018, than other more cyclical industries, like Construction (see Annexe 1), this quarter´s sales drop was higer than industry and general activity figures.
The reason behind the drop in sales during 2Q19 is that the recession continued to affect disposable income after taxes and tariffs, and that TELECOM is applying an aggressive price strategy, with important promotions that last a year. This combined with high inflation, affects revenues in real terms. On the other hand, operating costs continue to decrease due to the merger synergies, but less than proportionally (8,8% y/y).
The different dynamic of revenues and costs produce lower profitability (ARPUs or Average Return per User) in the different business segments as follows: