Telecom Argentina S.A. Announces Consolidated Six-Month Period ('1H08') and Second Quarter Results for Fiscal Year 2008 ('2Q08')

BUENOS AIRES, Argentina , Aug. 5 /PRNewswire-FirstCall/ -- Telecom Argentina (BASE: TECO2, NYSE: TEO), one of Argentina's leading telecommunications groups, announced today a Net Income of P$613 million for the six-month period ended June 30, 2008 , or +58% when compared to same period of the previous year, which included P$102 million that resulted from discontinued operations.

During 1H08, Consolidated Net Revenues increased by 20% (+P$849 million vs. 1H07) to P$5,051 million, mainly fueled by the cellular and broadband businesses.

Moreover, OPBDA increased by 19% (+P$273 million) to P$1,687 million (33% of Consolidated Net Revenues).

Company Activities

Consolidated Net Revenues

The evolution in Consolidated Net Revenues by reportable segment was as follows:

Voice, Data Transmission & Internet

During the first six-month period of 2008, revenues generated by these services amounted to P$1,764 million, +11% vs. 1H07.


Total Revenues for this service reached P$1,322 million (+5% vs. 1H07). The results of this line of business are still affected by frozen tariffs of regulated services.

During this three-month period, Telecom continued with the marketing of innovative handsets and equipment and value-added services, which before were available only for cellular telephony such as fixed SMS services and video calls. An example is the fixed-line handset that integrates photo frame, video and MP3. Bundling promotions of equipments plus SMS packages were also successfully marketed. Other offered products combine voice minutes packages and broadband internet access.

Moreover, during this period, Telecom continued with the deployment of the next generation network (NGN) in its fixed telephony network that will allow the offering of convergent state-of-the-art services.

Simultaneously, Telecom set up a project oriented to improve the quality of voice and data transmission services.

Monthly Charges and Supplementary Services increased by P$27 million, or 7%, to P$393 million, as a consequence of a higher number of lines in service (+3%), reaching 4.3 million of lines.

Revenues generated by traffic (Local Measured Service, Domestic Long Distance and International Telephony) totaled P$605 million, an increase of 1% vs. 1H07, partially affected by a slight decrease in local traffic volume.

Interconnection revenues amounted to P$190 million (+9%), mainly as a consequence of traffic originated in cellular lines but transported by and terminated in the Company's fixed-line network.

Other revenues, including public telephony reached P$134 million (+12% vs. 1H07). This amount is the consequence of an increase in billing and collection fees as well as voice, data and internet handset sales despite a decrease in Public Telephony revenues (-P$15 million).

Data Transmission and Internet

Revenues generated by Data transmission amounted to P$103 million, (+27% vs. 1H07).

Related to the corporate market, during 2Q08, Telecom continued enhancing its position as integrated provider of innovative ICT solutions or Information and Communication Technology, conceived to satisfy specific needs from each business segments, medium and large companies and oriented to contribute in the improvement of governmental administration at the different national, provincial and municipal levels.

In addition, Telecom Argentina was selected by the provincial government of Corrientes to implement the 911 Urban Emergencies Integral Management System and the Control & Tracing Urban System in the city of Corrientes. Both systems are turnkey integral solutions that include the reception and administration of police emergencies as well as the control and video- surveillance tracking. The solution also includes the subsequent capitalization of statistic information and capture of images in order to optimize the human and material resources and delinquency preventive actions.

Revenues related to Internet reached P$339 million (+36% vs. 1H07), mainly due to the substantial expansion of broadband service, driven by better network coverage, commercial promotions and innovation of the service portfolio.

Telecom recently renewed the offer of broadband products with two innovative options: one is Arnet Recargable (Arnet Rechargeable), the first internet service in the market that is prepaid and without monthly charge. The other product is Arnet Go, which makes possible both in-house broadband access and mobile internet. This is the first broadband service that combines ADSL technology with the benefit coming from the domestic internet access by Wi-Fi modem and the mobile internet access through Telecom Personal's 3G network.

Moreover, as part of the CSR (Corporate Social Responsibility) program, Telecom participates in the initiative Internet en Familia (Family Internet), developed by the National Ministry of Education, oriented to making parents aware of the importance of monitoring their children when they use internet. Telecom, as a company that supports the development of internet in Argentina , promotes the responsible use of this tool, which not only changes adult communication habits, but also that of today's youth, who were born into the modern technological world.

Telecom's broadband subscribers reached 902,000 as of June 30, 2008 (+50% vs. 1H07). Therefore, lines with this type of connection represent approximately 21% of Telecom's fixed-lines in service.

Cellular Telephony

Cellular Telephony continues with its expansion, increasing its participation in the Group's total revenues (65% vs. 62% in 1H07 and 0.5 million or 5% vs. 1Q08). During 1H08, this business generated revenues of P$3,287 million (+26% vs. 1H07). As of the end of June 2008 total subscribers reached 13.1 million.

Telecom Personal in Argentina

As of the end of June 2008 , Personal's subscribers reached 11.4 million in Argentina (+1.5 million or +15% vs. 1H07). Approximately 66% of the overall subscriber base is prepaid and 34% is postpaid.

Total voice traffic increased by 21% vs. 1H07 while outgoing SMS traffic increased from a monthly average of 784 million messages in 1H07 to 1,062 million (+35%) in 1H08. Because of this enhancement in traffic and the use of value-added services, the Average Monthly Revenue per User ("ARPU") increased to P$40 in 1H08, compared to P$37 in 1H07.

Revenues totaled P$3,072 million (+P$636 million or +26% vs. 1H07). Service revenues increased by P$580 million or 27% vs. 1H07, reaching P$2,749 million; furthermore, value-added services totaled P$790 million (+P$249 million or 46%, vs. 1H07), 29% of service revenues. In addition, handset sales grew by P$56 million (+21%) compared to 1H07, reaching P$323 million.

During 2Q08, Personal continued focusing its commercial efforts in customer caring outreach as well as in offers to stimulate consumption by existing clients.

Moreover, an upgrade handset campaign was implemented, helping clients to use the wide variety of value-added services offered by the company.

For the retail segment, Personal launched a line of packages for calls, SMS messages and internet, all within an innovative and flexible offer oriented to satisfy the client's communication needs yet without changing the subscriber's current plan. The launch, also furthered by the national communication campaign under the idea "Personal te conviene" (Personal suits you), was accepted positively by the market.

Regarding the corporate segment, "Personal Soluciones Express" (Personal Express Solutions) was introduced, an application oriented to SME's and large company sales forces. This tool covers connectivity and on-line information exchange needs among the company and its in-field personnel.

Personal also implemented a campaign oriented to expanding BlackBerry use permitting the increase of smartphone sales in customer offices.

In addition, Personal continued the expansion of its commercial network by opening two new customer offices (one in Posadas and the other in Bahia Blanca ), together with extension of 3G network coverage. Also, the remaining client migration from TDMA to GSM technology ended in June 2008 .


Personal's controlled subsidiary that operates in Paraguay generated revenues equivalent to P$215 million during 1H08 (+21% vs. 1H07).

By the end of June 2008 , the subscriber base reached approximately 1.7 million, +24% vs. 1H07. Prepaid and Postpaid customers represented 90% and 10%, respectively.

Consolidated Operating Costs

The Cost of Services Provided, Administrative Expenses and Selling Expenses totaled P$4,002 million in 1H08, which represents an increase of P$527 million, or +15%, vs. 1H07.

The cost breakdown is as follows:

-- Salaries and Social Security Contributions: totaled P$563 million (+22%), affected by increases in salaries and, marginally, in personnel (+364 employees vs. 1H07).

-- Taxes: reached P$402 million (+25%), in line with the general evolution of revenues.

-- Agents and Prepaid Card Commissions: were P$350 million (+3%), mainly due to the increase in prepaid card commissions, partially compensated by reduction in total commission paid to commercial agents.

-- Advertising: amounted P$190 million (+48%) oriented to strengthen institutional brand and to support the commercial activity in the cellular telephony and internet.

-- Cost of handsets sold: totaled P$448 million (+9%) mainly due to increased handset unit cost. Despite this, handset subsidy represented P$102 million (-P$32 million vs. 1H07).

-- TLRD and Roaming: P$449 million (+29%) due to increased traffic among cellular operators.

-- Depreciation of Fixed and Intangible Assets: reached P$ 638 million (-7% vs. 1H07). Fixed-line telephony totaled P$391 million (-7%) and Cellular telephony P$247 million (-8%), due to TDMA technology depreciation charges ended in 1H08.

Consolidated Financial and Holding Results

Financial and Holding Results resulted in a loss of P$8 million, (-P$210 million vs. 1H07). Such improvement was due to positive effect of foreign currency exchange generated by liabilities and a reduction in net interests.

Consolidated Net Financial Debt

As of June 30, 2008 , Net Financial Debt (Loans before the effect of NPV valuation, minus Cash, Cash Equivalents and Other credits from derivative Investments) amounted to P$1,330 million, a reduction of P$1,455 million as compared to June 2007 .

In April 2008 , Telecom Argentina made a principal payment of Notes in the amount equivalent to $822 million. Consequently, it has cancelled up to 45% of the principal amortization payment scheduled for October 15, 2011 .

In addition, on May 15, 2008 , Standard & Poor's International Ratings LLC upgraded the long-term debt rating of Telecom Argentina and Telecom Personal to AA- from A+ on the Local Scale.

Consolidated Capital Expenditures

During 1H08, the Company invested P$716 million (excluding materials), in fixed and intangibles assets. This amount was allocated to the Voice, Data and Internet businesses (P$337 million) and the cellular business (P$379 million).

Main capex projects are related to the expansion of broadband services and to the upgrade of the network for next generation services (NGN), the improvement of the network (capacity, coverage and 3G), and the launch of new and innovative value-added services.

Other Commercial Initiatives

Telecom, as Official Sponsor of Argentine Olympic Committee Beijing 2008, will provide communication and networking technology that will accompany the Argentina Olympic Mission. Such technology will not only assist in logistic issues related with the games (check in, medical schedule requirement, meeting schedule, among others) but will also permit athletes to be closer to their relative and friends, receiving their support which is the key to their physical preparation.

Recent Relevant Matters

Cubecorp Argentina S.A. ("Cubecorp) Acquisition: On July 15, 2008 Telecom acquired the shares of Cubecorp for a maximum amount of US$ 35 million (subject to a price adjustment process). As of the date of the Financial Statements, Telecom has transferred 5% of such shares to Telecom Personal S.A.

Within the brand positioning of the Company as an integrated ICT solutions provider for the corporate wholesale segment and for Government segment Telecom acquires with Cubecorp a Data Center that provides IT world class outsourcing services which include: equipment, connectivity, information security, monitoring, storage, backboard and data recovery, support, operation and administration.

Consequently, with this acquisition Telecom strengthens its market position, while it can count with world class infrastructure in Data Center services, which permits it to offer its clients high reliability, availability and scalability customized to their needs.

Telecom is the parent company of a leading telecommunications group in Argentina , where it offers directly or through its controlled subsidiaries local and long distance fixed-line telephony, cellular, data transmission and Internet services, among other services. Additionally, through a controlled subsidiary, the Telecom Group offers cellular services in Paraguay . The Company commenced operations on November 8, 1990 , upon the Argentine government's transfer of the telecommunications system in the northern region of Argentina .

Nortel Inversora S.A. ("Nortel"), which acquired the majority of the Company from the Argentine government, holds 54.74% of Telecom's common stock. Nortel is a holding company where the common stock (approximately 68% of capital stock) is owned by Sofora Telecomunicaciones S.A. Additionally, Nortel capital stock is comprised of preferred shares that are held by minority shareholders.


This document may contain statements that could constitute forward-looking statements, including, but not limited to, the Company's expectations for its future performance, revenues, income, earnings per share, capital expenditures, dividends, liquidity and capital structure; the effects of its debt restructuring process; the impact of emergency laws enacted by the Argentine Government; and the impact of rate changes and competition on the Company's future financial performance. Forward-looking statements may be identified by words such as "believes," "expects," "anticipates," "projects," "intends," "should," "seeks," "estimates," "future" or other similar expressions. Forward-looking statements involve risks and uncertainties that could significantly affect the Company's expected results. The risks and uncertainties include, but are not limited to, the impact of emergency laws enacted by the Argentine government that have resulted in the repeal of Argentina's Convertibility law, devaluation of the peso, various changes in restrictions on the ability to exchange pesos into foreign currencies, and currency transfer policy generally, the "pesification" of tariffs charged for public services, the elimination of indexes to adjust rates charged for public services and the Executive branch announcement to renegotiate the terms of the concessions granted to public service providers, including Telecom. Due to extensive changes in laws and economic and business conditions in Argentina , it is difficult to predict the impact of these changes on the Company's financial condition. Other factors may include, but are not limited to, the evolution of the economy in Argentina , growing inflationary pressure and evolution in consumer spending and the outcome of certain legal proceedings. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as the date of this document. The Company undertakes no obligation to release publicly the results of any revisions to forward-looking statements which may be made to reflect events and circumstances after the date of this press release, including, without limitation, changes in the Company's business or to reflect the occurrence of unanticipated events. Readers are encouraged to consult the Company's Annual Report on Form 20-F, as well as periodic filings made on Form 6-K, which are filed with or furnished to the United States Securities and Exchange Commission for further information concerning risks and uncertainties faced by Telecom.

SOURCE Telecom Argentina S.A.