BUENOS AIRES, Argentina, March 8 /PRNewswire-FirstCall/ -- Telecom
Argentina (BASE: TECO2, NYSE: TEO), one of Argentina's leading
telecommunications groups, announced today a Net Income of P$244
million for the fiscal year ended December 31, 2006. Highlights: -
In a favorable market context, Fiscal Year 2006 showed a 30%
increase in sales, vs. the previous year ("FY05"), amounting to
P$7,437 million. The most dynamic businesses were cellular,
Internet and data, which expanded 54%, 25% and 11% respectively. -
Cellular and broadband subscribers grew by 41% and 102%
respectively, while fixed lines in service increased by 4%, when
compared to December 2005 - The positive evolution of the business
was supported with an important level of capital expenditures that
reached P$1,226 million, significantly higher than P$ 628 million
invested in FY05. - Operating Profit before Depreciation and
Amortization (OPBDA) reached P$2,304 million (+ P$302 million or
+15% vs. FY05). Operating Profit totaled P$912 million (+81% vs.
FY05). - Net Income totaled P$244 million (P$80 million for 4Q06),
as a result of the general improvement of the business, partially
offset by higher financial expenses (interest and foreign exchange
fluctuations). Shareholder's equity as of December 31, 2006 was
P$2,129 million. - Net financial Debt (before NPV effect) declined
to P$ 3,497 million (-P$1,039 million vs. FY05), primarily as a
result of the cash flow generated by operations. The ratio of Net
Financial Debt to OPBDA decreased from 2.3x as of December 31,
2005, to 1.5x. * Non-financial data unaudited As of December 31
2006 2005 Change % Change Consolidated Net Revenues (in Millions of
P$) 7,437 5,718 1,719 30% Voice, data & Internet 3,053 2,871
182 6% Cellular 4,319 2,797 1,522 54% Directories Edition 65 50 15
30% Operating Profit before D&A (in Millions of P$) 2,304 2,002
302 15% Operating Profit (in Millions of P$) 912 504 408 81% Net
Income (in Millions of P$) (1) 244 1,334 (1,090) -82% Shareholder's
Equity (in Millions of P$) 2,129 1,867 262 14% Net Financial Debt -
before NPV effect (in Millions of P$) 3,497 4,536 (1,039) -23% Net
Financial Debt - Book value (in Millions of P$) 3,351 4,259 (908)
-21% CAPEX (in Millions of P$) 1,226 628 598 95% Lines in service
(Fixed lines - in thousands) 4,095 3,950 145 4% Cellular customers
(in thousands) 9,589 6,801 2,788 41% Personal (Argentina) 8,425
6,150 2,275 37% Nucleo (Paraguay) 1,164 651 513 79% ADSL customers
(in thousands) 457 226 231 102% Fixed line traffic (in Millions of
minutes, Internet Traffic not included) 16,916 16,948 (32) 0%
Income/Outgoing cellular voice traffic in Arg. (in Millions of
minutes) 7,610 5,578 2,032 36% Average Revenue per user (ARPU)
Fixed Telephony/voice (in P$) 39 40 (1) -2% Average Revenue per
user (ARPU) Cellular Telephony Arg. (in P$) 40 36 4 11% (1) During
FY05 the Company registered P$1,424 million of non-recurrent gain
generated as a result of the closing of the debt restructuring
process. FY06 FY05 Change % Change Net Revenues (Millons of P$)
7,437 5,718 1,719 30% Net Income (Millions of P$) 244 1,334 (1,090)
(82%) Earnings per Share ($) 0.2 1.4 (1.1) (82%) Earnings per ADR
($) 1.2 6.8 (5.5) (82%) OPBDA* 31% 35% Operating Profit* 12% 9% Net
Income* 3% 23% * As a percentage of Net Revenues During FY06,
Consolidated Net Revenues increased 30% (+P$1,719 million vs. FY05)
to P$7,437 million, mainly fueled by the expansion of the cellular
and broadband businesses. Moreover, OPBDA increased by 15% (+P$302
million) to P$2,304 million, equal to 31% of Consolidated Net
Revenues. Net Income reached P$244 million during FY06 (P$80
million in 4Q06). Year- to-year comparison is affected by the
P$1,424 million non-recurring gain generated in 2005 as a result of
the closing of the debt restructuring process of Telecom Argentina
completed during the second half year 2005. Company Activities Net
Revenues The evolution in Consolidated Net Revenues by reportable
segment was as follows: Voice, data transmission & Internet
Fueled mainly by the increase in broadband penetration and an
increase in the number of lines in service, revenues generated by
the Fixed Telephony Business (including voice, data transmission
and Internet services) amounted to P$3,053 million, a 6% increase
over FY05. Voice Monthly Charges increased by P$40 million or 6%,
reaching P$716 million, even though no increase has been applied to
regulated tariffs. The number of lines in service increased by 4%
as a consequence of promotions and campaigns that Telecom has
developed during the year. Local Measured Service revenues
decreased slightly when compared to FY05 to P$511 million (-2%),
while Domestic Long Distance revenues reached P$453 million (+1%).
Overall traffic volume, measured in minutes, remained basically
stable. In addition, revenues generated by International Telephony
totaled P$243 million (+8%) due to an increase in traffic partially
offset by marginally lower prices. Interconnection revenues
amounted to P$312 million (+23%), mainly driven by mobile traffic
transported by and terminated in Telecom's fixed line network.
Internet and Data Transmission Revenues generated by Data
transmission amounted to P$167 million, an increase of P$17
million, or 11% vs. FY05. Internet continues to be the main driver,
with revenues reaching P$397 million (+25% vs. FY05), as a result
of the extraordinary expansion of the broadband subscriber base. As
of the end of FY06, Telecom's ADSL subscribers reached 457,000
(+231,000 or +102% vs. FY05). Lines with ADSL connections accounted
for more than 11% of Telecom's lines in service. Regarding ISP
services, Arnet subscribers totaled 470,000 (+68% or +190,000
subscribers), as a consequence of the increase of 221,000 broadband
subscribers (+136% vs. FY05) and the decrease of 31,000 dial-up
subscribers (-26% vs. FY05). This expansion is a consequence of
Telecom's strategy of offering high quality products at accessible
prices, and also providing specific contents for broadband
customers, in line with the needs of the market. Directories
Publicom sales amounted to P$65 million in FY06 (+P$15 million or
30% vs. FY05), due to the positive evolution of the sales campaigns
for advertising space in traditional directories and the launching
of new Internet and cellular based products. Cellular Telephony As
of December 31, 2006, the total subscriber base of Personal in
Argentina totaled approximately 8.4 million, 2.3 million customers
more than those registered in FY05 (+37%). Approximately 66% of the
overall subscriber base was prepaid and 34% was postpaid.
Subscribers with GSM technology represented 88% of the total
subscriber base at the end of FY06. Total traffic measured in
minutes increased by 36% vs. FY05. Furthermore, outgoing SMS
traffic increased from an average of 243 million messages per month
to an average of 566 million messages per month (+133%). Moreover,
the proportion of value-added services in the overall Average
monthly Revenue per User in Argentina ("ARPU") continued increase.
In this context, Telecom Personal's revenues reached P$3,964
million, increasing P$1,388 million (+54%). This positive evolution
is a result of a larger subscriber base and a higher ARPU, the
latter increasing to P$40 in FY06 (+11% vs. FY05), as a consequence
of the Company's focus on high value customers. In addition, higher
handset sales (+P$214 million or 66% vs. FY05) positively
contributed to the overall revenue growth. In a highly competitive
market environment, Personal continued with its strategy oriented
to strengthening its brand positioning, with a strategic focus on
quality of service. In this context, the commercial network in the
north region of the country was enlarged, and the commercial
channels were increased in the south in order to continue with the
commercial expansion in this region. With regards to its product
portfolio, Personal launched Personal Trip, with the most
innovative 3G products such as video call, new multimedia contents,
Personal Ticket, Foto Blog and Backtones. Moreover, Personal
continued increasing the capillarity of its customer loyalty
program Club Personal, where exclusive benefits and prizes were
increased. Regarding commercial agreements, Personal announced in
December one of the largest implementations of Blackberry in Latin
America serving the agriculture and livestock industry. This
agreement is a turning point in communications technology for this
market segment. Nucleo, Personal's controlled subsidiary that
operates in Paraguay, generated revenues equivalent to P$355
million in FY06 (+61% when compared to FY05). Subscriber base as of
December 31, 2006 reached approximately 1,164,000, +79% vs. FY05.
Prepaid and Postpaid customers represented 87% and 13%,
respectively while GSM subscribers represented 75% of the overall
subscriber base. Consolidated Operating Costs The Cost of Services
Provided, Administrative Expenses and Selling Expenses totaled
P$6,525 million in FY06, which represents an increase of P$1,311
million or 25% over FY05 with following breakdown: Salaries and
Social Security Contributions: totaled P$840 million (+23%),
reflecting wage increases and a headcount increase in line with the
general growth of the business. Taxes: amounted to P$540 million
(+37%), mainly due to increases in taxes directly calculated as a
percentage of revenues. Agents and Prepaid Card Commissions totaled
$548 million, (+42%), as a consequence of the growth in the
subscriber base in cellular telephony and to the effect of
increased prepaid traffic sales. Advertising: expenditures reached
P$228 million (+50%), related to the efforts implemented by the
Telecom Group to acquire new cellular and Internet customers. Cost
of cellular handsets: increased to P$973 million (+59%) due to the
increase in handset sales related subscriber growth and upgrade of
handsets. TLRD (termination charges in third party cellular
networks) and Roaming: increased to P$582 million (+51%) due to the
increase in traffic among cellular operators, in line with the
significant expansion of the market. Allowance for Doubtful
Accounts: amounted to P$64 million, and despite the increase in
revenues, continues to be below 1% of net revenues. Depreciation of
Fixed and Intangible Assets decreased to P$1,392 million
(+P$43million in the cellular business, -P$149 million in Voice,
data & Internet business). Consolidated Financial and Holding
Results Financial and Holding Results resulted in a loss of P$482
million, as compared to the P$306 million loss registered in FY05.
The difference is mainly due to foreign exchange fluctuations
(-P$489 million), while net financial interest expense decreased by
P$278 million. Net Financial Debt As of December 31, 2006, Net Debt
(Loans before the effect of NPV valuation, minus Cash, Banks,
Current Investments and Other credits derived from derivative
Investments) amounted to P$3,497 million, a reduction of P$1,039
million as compared to December 31, 2005. During 2006, Telecom
Argentina prepaid in April and October an amount equal to
approximately US$320 million, having paid all scheduled principal
amortizations up to 75% of the installment originally scheduled for
October 2009. Consolidated Capital Expenditures A total amount of
P$1,226 million invested in fixed assets and intangibles was
allocated to the cellular business (P$633 million) and the Voice,
data and Internet business (P$593 million). Within its investment
plan the Telecom Group continues to implement an important
transformation of its networks with the goal of developing a new
generation of services. In the Fixed line business, the Company
focused its efforts on the deployment of an access network based on
IP technology in order to increase its customer base and assure a
higher bandwidth. In this way, the Group has improved local and DLD
transport capacity according to its customers' needs. Additionally,
investments in IT projects (such as the new ERP system) to support
the business were performed. In the Cellular business the most
significant expenditures are related to the development and
expansion of the GSM network associated with the increasing demand.
In particular, the Company continued with the network deployment in
the South Region and the extension of capacity in AMBA and North
Region. In addition, the Group has continued with the evolution of
the network to provide new 3G services. Lastly the Group has
implemented new systems to support the business (i.e. CRM ). Other
relevant issues Sec. 404 Sarbanes-Oxley In accordance with
regulations, the management of the Telecom Group successfully
fulfilled the Sarbanes-Oxley certification process on December 31,
2006 meaning that internal control procedures for the generation of
financial reports for third parties are effective. Similar
conclusions were reached by the external auditors, which will issue
their report when financial statements as of December 31, 2006
(English version) are filed at the SEC. Conversion of Class "C" to
Class "B" shares In accordance with the approvals received at the
Shareholders' Meeting in April 2006, and the authorizations given
by the Bolsa de Comercio de Buenos Aires and Comision Nacional de
Valores, a new conversion of Class "C" shares into Class "B" shares
was implemented. As a result of this conversion, the capital stock
is composed as follows: Class "A" Shares 502,034,299 Class "B"
Shares 440,910,912 Class "C" Shares 41,435,767 Total 984,380,978
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. As of December 31, 2006,
Telecom had 984,380,978 shares outstanding. For more information,
please contact the Financial Planning & Investor Relations
Department: Pedro Insussarry Mariano Martire 54-11-4968-3743
54-11-4968-3718 Gaston Urbina Astrid Burger 54-11-4968-6236
54-11-4968-4448 Voice Mail: 54-11-4968-3628 Fax: 54-11-4313-5842
E-mail: For information about Telecom Group services, visit:
http://www.personal.com.ar/ http://www.personal.com.py/
http://www.arnet.com.ar/ http://www.paginasamarillas.com.ar/
Disclaimer 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. Gerardo Werthein Vice Chairman
in charge of Presidency DATASOURCE: Telecom Argentina S.A. CONTACT:
Pedro Insussarry or Pablo Caride, both of Telecom Argentina,
+011-5411-4968-3743 or +011-5411-4968-3602 Web site:
http://www.telecom.com.ar/
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