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Telecom ArgentinaTelecom Argentina
FullFull--YearYear 2014 2014 PreliminaryPreliminary ResultsResultsFullFull--YearYear 2014 2014 PreliminaryPreliminary ResultsResults
Conference Call Presentation
This presentation may include 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 impact of the 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, uncertainties concerning
the impact of the emergency laws enacted by the Argentine government which have resulted in the repeal of Argentina’s convertibility law, the
devaluation of the peso, restrictions on the ability to exchange pesos into foreign currencies, the adoption of a restrictive currency transfer
policy, 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 and rapid changes in laws and economic and business conditions in Argentina, it is difficult to predict the impact of these changes on
DisclaimerDisclaimer
1
extensive and rapid 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 reduction 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 presentation, including, without limitation, changes in the Company’s business or to reflect the occurrence of unanticipated events.
Information included in this presentation is unaudited and may not coincide with that included in the financial statements of the Company, due
to rounding, reclassification matters, and other reasons. Readers are encouraged to consult the Company’s Annual Report and 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 and the
Argentine Comisión Nacional de Valores.
AgendaAgenda
Market Overview
Business Highlights
Financials
2
Financials
Q&A
Retail & Wholesale commerce
Financial interm.
Manufacturer Industry
Transport & Communications
Real Estate
Agriculture
Construction
Minery
Public Admin & Defense
Social services & Healthcare
Electricity, gas & water
8.6%
0.9% 2.9%
0.1%
2011 2012 2013 2014e
∆ YoY - constant prices
10.012.2
8.06.7
Trade Balance (Billion US$) Last 12 months
51.944.1 45.7
29.7
2011 2012 2013 2014e
Consumer Confidence Index of Durable Goods
46.4 43.3
30.6 31.4
29.4%24.5% 25.9%
33.9%
Central Bank Reserves (Billion US$)National Wages - ∆ % YoY
Economic activity per sector Wages Central Bank Reserves
Economic outlook: Economic outlook: ““Activity + Imports restriction + Reserves”Activity + Imports restriction + Reserves”
Real GDP* CCI Trade Balance
Total
2011 2012 2013 2014e 2011 2012 2013 20142011 2012 2013 2014e
� A depreciated Brazilian currency combined with
an appreciated AR$/U$S in real terms affected
the Argentine external competitiveness, thus
impacting industrial exports
� The January 2014 devaluation, that affected
local consumption, and the tax hike on the
automobile sector had an important effect on
the industrial activity
� A weak economic activity was registered in
2014: +0.8% in 1Q14, +0.0% in 2Q14 and -0.8% in
3Q14 YoY. It is expected +0.1% in GDP growth for
full 2014, a significant slowdown from +2.9% in
2013
3Source: MECON, INDEC and Company Estimates
*Official GDP YoY variation, constant prices
� Private consumption showed a weak evolution
in 2014 due to a reduction in real wages and a
more restrictive consumer credit environment
� Investment was significantly impacted, reflected
in a lower production of durable goods, as a
consequence of tighter restrictions on imports of
capital goods
� The new CPI Index published by the government
reached 23.9% YoY, stabilizing in a level of aprox.
1.1% per month during 4Q14
� During 4Q14 the government implemented new
measures to increase CB Reserves: currency
swap with China, loans from French CB and the
payment of spectrum auction
� As of December 2014, CB Reserves showed an
increase of +3% YoY, but suffered a strong
reduction in the first 9M14
� Continuous government monitoring of the FX
market aimed at dampening expectations of
devaluation of the peso
� Trade balance showed a decrease in FY14 due to
the weaker demand from the main commercial
partners, lower prices of commodities, while
increasing energy imports
AgendaAgenda
Market Overview
Business Highlights
Financials
4
Financials
Q&A
� Internet Mobile users +15% YoY (Usage +69%, ARPU+31%)
� Broadband wireline subs +4% YoY (10 Mb subs 16% of CB vs. 7% in
4Q13)
� Spectrum Auction payment: the equivalent of US$410.7 million for
the remaining 3G bands to complete 50MHz Cap and for AWS bands
� Aggressive 4G rollout plan:
� Competitive advantage in AWS Spectrum
� 180 sites (8 cities) in one and a half month
85% of population in 2 years
Business HighlightsBusiness Highlights
Business
� 85% of population in 2 years
5
Financials
� Revenues up +22% driven by:
� Mobile internet in Argentina (+60%) due to increase in
unique users, usage and ARPU
� Data (+53%) and Broadband (29%) in the Fixed Business
� Constant efforts in costs efficiencies to mitigate the effects of the
inflationary context
� Quarter YoY OIBDA Margin increase (+0.6 pp)
27,287 340 507733 -27 580 454 1,247
1,794 426 33,341
IFRS, Million of AR$, Percentage
Consolidated revenue growth fostered by Data, Internet & HandsetsConsolidated revenue growth fostered by Data, Internet & HandsetsEvolution of revenues FY13 – FY14
YoY
Variation +10% +53% +9% +6% +60% +57%
+6,054; +22%
+29% -34% +37%
MOBILE IN ARGENTINAFIXED NUCLEO
SMS-257MM; -5%
Impact of billing per second
FY13
Revenues
Voice Data Internet Equipments Voice Data Internet Handsets Nucleo FY14
Revenues
6
Note:
*Paraguayan (Nucleo S.A.) revenues expressed in AR$ and includes handsets.
Figures might not sum up due to rounding
0%10% 23%4% 10%% of total
Revenues15%
Variation +10% +53% +9% +6% +60% +57%+29% -34% +37%
11% 22% 5%
Mobile Mobile –– New Offers continue to show encouraging trendsNew Offers continue to show encouraging trendsPostpaid
Prepaid
131.8169.4
4Q13 4Q14
Postpaid
ARPU4
+29%
AR$/Month
Results of DIA FULL� Stabilizing CB� ARPU accretive� ~50% of Gross Adds in Dec 2014
Black
Other
Postpaid
7
38.6
40.5
4Q13 4Q14
Prepaid
ARPU4
AR$/Month
+5%
PrepaidResults of Superchip� Stabilizing CB� Expanding frequent users� Increase Usage of Voice & Data� Increase averagerecharge
Market share (%)2 33.1%33.0%
Postpaid Subs (%)132%32%
4Q14
Customer Base (Mln) 19.620.1
7.76.7
4Q 134Q 13 4Q14
1) Includes “Cuentas Claras” subscribers2) Market estimates of the top 3 providers in the industry – Exclude trunking services3) Monthly unique Internet Users4) Includes Dongles
Internet Users(Mln)3
Customers Prepaid recharges <30 days Customers Prepaid recharges <30 days
Dec 13 Dec 14
oct nov dec
Mobile Argentina Mobile Argentina –– Growth of mobile internet Growth of mobile internet
CUSTOMER
49.6
178.5
81.1
308.8
FY13
FY14
USAGE ARPU
Data Usage (MB/month)
35.2
46.1
4Q13 4Q14
Browsing ARPU (ARS/month)Internet Users (Monthly unique users)
6.77.7
4Q13 4Q14
GROWTH ENABLERS
Prepaid Postpaid
+15%+31%
4Q 13 4Q14
8
27%37%
4Q13 4Q14
S-phone
Penetration/CB S-phone
SelloutSpectrum ResourcesSectors / Mobile sites
Sites +12%
Sectors +35%
43 50
30
Pre auction Post auction
2G/3G* 4GBlack
Other
Postpaid
Prepaid
UNLIMITED
BUNDLE
x DAY
Price Schemes
Share
Data
Plans
Premium
Content
GROWTH ENABLERS
HANDSETS NETWORK OFFERING
73%91%
4Q13 4Q14
* Pre spectrum auction: North: 45 MHz, AMBA: 42.5 MHz and South: 40 MHz. Post spectrum auction: 50MHz per region
Mobile Mobile –– 4G competitive edge4G competitive edge
�� 44GG RollRoll OutOut
� 1H15e: 300 new sites
� InitialInitial NetworkNetwork RolloutRollout::
More than 180 sites
installed in:
� Buenos Aires
� Córdoba
� Rosario
� Salta
� Santa Fe
� Tucuman
� summer resorts
�� NetworkNetwork ModernizationModernization
Within 18 months:
� Single RAN in ~100% of sites
� High Speed backhauling in ~100% of
sites
Competitive advantage in Competitive advantage in
AWS SpectrumAWS SpectrumOutstanding Results in the Outstanding Results in the
first Launchfirst LaunchAn aggressive plan to surf An aggressive plan to surf
the wavethe wave
� 1st frequency 3G and AWS bands: allocated
in November and paid in December –
equivalent to U$S410.7 million
� 2nd frequency allocation 700Mhz to be
determined
9
� 1H15e: 300 new sites
� Capital and main cities in 18 months1
� 85% of population in two years1
Average UL & DL Speed
1.1 5.9
25.835.3
UpLink (mbps) DownLink (mbps)
3G
4G
AWS already assigned
700 MHz to be assigned
� summer resorts
�� 33GG EmpowermentEmpowerment
� New Spectrum usage
� +15% access nodes
�� HandsetsHandsets
� >1 Mn. 4G Smartphone and Tablets
� CustomersCustomers
200k customers can
experience the service
with no needs to
change SIM card
Note: 1 Taking into consideration the effective assignation of the 700 MHz spectrum.
178
Oct Nov Dec
1,707 1,714 1,726 1,750
1,771
4Q13 1Q14 2Q14 3Q14 4Q141.3% 1.3% 1.4% 1.3% 1.2%
134.0138.0 147.9 157.8 167.3
4Q13 1Q14 2Q14 3Q14 4Q14
Monthly
Churn
ARPU (AR$)
Fixed Fixed -- Growth of BB/UBB thanks to service provisioning and competitive offerGrowth of BB/UBB thanks to service provisioning and competitive offer
Thousand of broadband accesses, thousand of net adds
+25%
+64k; +4%
AR$/Month
BBAccesses
BB ARPU & Churn
>10Mb
% of CB 16%13%10%8%7%
40%44%
4Q13 1Q14 2Q14 3Q14 4Q14e
4Q13 1Q14 2Q14 3Q14 4Q14
583 735
963
1,470
FY11 FY12 FY13 FY14
10
IFRS Million of AR$
+26%
+53%
4Q14e: Market estimates of the top 3 providers in the industry
BBFlow share
Data Revenues
% of CB 10%8%7%
+31%
4Q13 1Q14 2Q14 3Q14 4Q14
3,530
15%
11%
19%
7%
48%
Fixed
Access
Core &
Infraest. 1
IT
Others &
Spectrum
Mobile Access
CapexCapex -- Focus on BB and UBB Fixed and MobileFocus on BB and UBB Fixed and Mobile
Capex Evolution
8,957
Spectrum
FTTx Rollout
+3x
Carriers
3,192 3,257
4,851 5,427
FY11 FY12 FY13 FY14
Note: 1Core & infrastructure refers to network related capex, including quality and innovation capex.
Million of AR$
11
% Revenues 15% 18% 16%17%
+12%
27%
+49%
Incl. spectrum payment
+2%
3Q13 4Q13 1Q14 2Q14 3Q13 4Q14
+33%
AgendaAgenda
Market Overview
Business Highlights
12
Financials
Q&A
Personal – Mobile 70%
5,993 6,570
1,799 2,112
1,825 2,007
1,930 2,067
2,010 2,516
FY11 FY12 FY13 FY14
7,114
8,598
7,460
9,158
OIBDA
Margin 32%
TEO Group: Consolidated Results TEO Group: Consolidated Results
IFRS, Million of AR$, Percentage IFRS, Million of AR$, Percentage
30% 28% 26%
+22%
+15%Revenues
OIBDA*
+20%
+10%
Fixed Business 15%
Broadband 10%
Nucleo – Mobile 5%
1Q
2Q27,287
33,341
+17%
+10%
7,564
8,702
3Q+21%
3Q+7%
+23%4Q
+23%
+25%+15% 4Q% of Revenues
27.5%
18,498 22,117
6,064 7,466
6,649 8,119
FY11 FY12 FY13 FY14
13
Regulated
Revenues 12% 10% 8% 7%
*Operating Income Before Depreciation & Amortization
1Q
2Q
+23%
+22%
-491-55
900
116 149198
437
FY12 FY13 FY14 1Q14 2Q14 3Q14 4Q14
Handsets Revenues – Costs
(in million of AR$)
Before capitalization of SAC & SRC
5.0%
18.2%
30.8% 27.5%
FY13 FY14
Handset
Margin
SS Revenue
Margin
Handset Margin - Mobile in Argentina
12% 15%Handset rev.
% of revenues
7,564 4,250
1,788
1,032245 1,439
608427 692 228 229 8,702
18%
55%
33%
13%
35%23%
15%
26% 32%
13%
YoY
Variation
TEO Group: Consolidated TEO Group: Consolidated costs costs and OIBDA evolutionand OIBDA evolution
IFRS, Million of AR$Operating Income Before Depreciation and Amortization FY13 – FY14
+1,138; +15%
756One-off Event;
AR$ 115 MM YE Bonus
18%13%
23%15% 13%
OIBDA FY13 Ss. Revenues &
other incomes
Handsets
Sales
Handsets Costs ITX Costs Labor Costs Taxes Other
Marketing &
Sales
Fees for
services, maint.
and materials
VAS Costs Others* OIBDA FY14
14* Others includes bad debt expenses, provisions, recovery (costs) restructuring and others
OIBDA Margin
-1.6%+0.5% -0.1% +0.6% -0.3% -0.2% 26.1%+0.5%27.7%
� Service OIBDA margin: 27.5% in FY14
� Fifth quarter in a row with positive margin in handsets business, improving the mix revenues
� Labor Costs includes an extraordinary bonus payment to employees for AR$ 115 MM. Excluding this effect, Labor Costs in FY14 vs. FY13 would
have increased +32% YoY
-1.0%
-0.5%+1.0% -0.7% +1.3% -0.2% -1.1% 27.7%+0.4%29.7% -2.2%
FY14
FY13
FY13
FY12
11%
23%
22%
37%
21%
9%
22%
35%
33%
12%
18%
30%
36%
39%
21%
Fees for services,
maint. and materials
Other Marketing &
Sales
Taxes
Labor Costs
ITX Costs
Handsets Costs
Revenues & Other
Income
3Q14 4Q14Results on OIBDAResults on OIBDA
YoY OIBDAgrowth
14%
25%
2%
35%
Others
VAS Costs
15
1Q14 2Q14 3Q14 4Q14
15
10.0%17.4%YoY
Growth7.1% 25.2%
Actions Items:
� Full impact price increase in 4Q14 (~14%)
� Appealing commercial offers (“Super Chip” & “Full
Day” packs) to enrich value proposition
� Constant efforts in costs efficiencies to mitigate the
effects of the inflationary context
-2.7pp-1.4ppΔ YoY
OIBDA
margin
-3.1pp +0.6pp
2,685 916
870 839
878
1,029
3,857 3,966
945
1,241
1,203
1,225
1,255
1,600
TEO Group: Consolidated ResultsTEO Group: Consolidated Results
IFRS, Million of AR$, Percentage
+3%
+20%
IFRS, Million of AR$, Percentage
Net Income attributable to Telecom
+7%
+15%
2Q
Operating Income
+31%
4,518
5,443
3,202
3,673
2Q
+2%3Q
3Q-4%
+27%
4Q
+14%
+19%+17%
4Q
in million of AR$ FY13 FY14
Net Interests $ 632 $ 265
Gains on Mutual Funds &
other inv.$ 124 $ 289
FX results -$ 279 -$ 178
Results on NDF $ 55 -$ 97
Others -$ 4 -$ 26
Total $ 528 $ 253
2,513 2,685
802 889
652 916
FY11 FY12 FY13 FY14
1,115 1,377
945
FY11 FY12 FY13 FY14
16
O. Income
Margin21% 18% 14% 12%17% 16% 12% 11%
+11%
Net Income
Margin
1Q+23%
+40%
1Q
2Q
� Net Income in FY14 and FY13 includes AR$25 and AR$187 Million charge related to disposal of PP&E respectively. Excluding this effect, Net
Income in FY14 vs. FY13 would have increased +11% YoY
5,354
1,610 2,277
3,530538
3491,299
745
IFRS, Million of ARS - Last 12 months
TEO Group: TEO Group: FCF, Net FCF, Net Financial Financial Position & Hedging StrategyPosition & Hedging Strategy
Telecom Argentina 219(1)
Telecom Personal 693
Nucleo (Paraguay) (167)
Operating free Cash Flow
Net Financial Position
Free Cash Flow
8,702 5,427 1,665
OIBDA Capex Δ WK & others
Net Financial
Position
FY13
(Net Cash)
Net Financial
Position
FY14
(Net Cash)
Net Interest
& OthersFX
Variations
Operating
Free Cash
Flow2
Taxes Dividend
Payments3
Spectrum
Payment
17
Note:
(1) Includes Telecom USA
(2) OFCF: Operating Free Cash Flow before Taxes
(3) Includes $53 Million related to Nucleo dividends payments to third parties, net of income tax
Nucleo (Paraguay) (167) Free Cash Flow = -667
387
2181 149
136
In U$S million, December 2014. Argentine operations
U$S Dollar
Linked NDFFX Cash Exposure as
of FY14
65%Coverage
Net Payables in
Foreign
Currency
(Net Cash) (Net Cash)
� Higher impact in FCF for capex
payment in FY14
� AR$3,530 MM paid for Spectrum
Auction
� Strong increase in mobile devices
financing to customers
�Net payables in FX: 65% of hedge
after spectrum auction payment
HEDGING STRATEGY
AgendaAgenda
Market Overview
Business Highlights
18
Financials
Q&A
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