BUENOS AIRES, Argentina, Nov. 6 /PRNewswire-FirstCall/ -- Telecom
Argentina (BASE: TECO2, NYSE: TEO), one of Argentina's leading
telecommunications group, announced today a Net Income of P$831
million for the nine-month period ended September 30, 2008 or +35%
when compared to same period of the previous year, which included
P$102 million that resulted from discontinued operations. --
Telecom Argentina Group continued with the expansion of its
business in the nine-month period ended September 30, 2008. Net
Revenues increased by $1,274 million when compared to same period
of the previous fiscal year ("9M07"), amounting to P$7,789 million.
Revenues generated by the Cellular business grew by 25% and the
Internet business increased by 36%. -- Cellular subscribers totaled
13.7 million (+18%), while broadband subscribers reached 976,000
(+44%). Fixed lines in service also increased by 3% to 4.3 million.
-- Operating Profit Before Depreciation and Amortization ("OPBDA")
reached P$2,502 million (+11% vs. 9M07), equivalent to 32% of Net
Revenues, mainly fueled by the growth in the cellular telephony. On
the contrary, fixed line telephony profitability continued to
weaken due to frozen tariffs of regulated services and the
inflation effect on the cost structure. -- Operating Profit
amounted to P$1,540 million (+28%), equivalent to 20% of Net
Revenues (+134 bps. vs. 9M07). -- Net Income reached P$831 million
(+35% vs. 9M07). -- Investments (excluding materials) totaled
P$1,156 million during 9M08 (+41% vs. 9M07), where P$581 million
were allocated to fixed telephony (+32% vs. 9M07). -- Net Financial
Debt (before NPV effect) declined to P$1,191 million (- P$1,325
million vs. September 2007). The Net Financial Debt to OPBDA ratio
declined from 0.8x as of the end of September 2007 to 0.4x as of
the end of September 2008. * Non-audited Financial data As of
September-30 2008 2007 change %change Consolidated Net Revenues (in
MM P$) 7,789 6,515 1,274 20% Voice, Data & Internet 2,683 2,420
263 11% Cellular 5,106 4,095 1,011 25% Operating Profit before
D&A (in MM P$) 2,502 2,252 250 11% Operating Profit (in MM P$)
1,540 1,201 339 28% Net Income (in MM P$) 831 614 217 35%
Shareholder's equity (in MM P$) 3,901 2,748 1,153 42% Net Financial
Debt - Before NPV effect (in MM P$) 1,191 2,516 (1,325) -53% Net
Financial Debt - Book value (in MM P$) 1,174 2,382 (1,208) -51%
CAPEX (in MM P$) 1,156 818 338 41% Lines in service (Fixed lines -
in thousands) 4,292 4,170 123 3% Cellular customers (in thousands)
13,759 11,665 2,094 18% Personal (Argentina) 11,941 10,161 1,780
18% Nucleo (Paraguay) 1,818 1,504 314 21% ADSL customers (in
thousands) 976 677 299 44% Fixed line traffic (in MM minutes,
Internet & Public Telephony not incl.) 12,190 12,546 (356) -3%
Incoming/Outgoing cellular voice traffic in Arg.(in MM minutes)
8,523 7,147 1,376 19% Average Revenue per user (ARPU ) Fixed
Telephony/voice (in P$) 39 39 - 0% Average Revenue per user (ARPU )
Cellular Telephony Arg. (in P$) 41 38 3 8% During 9M08,
Consolidated Net Revenues increased by 20% (+P$1,274 million vs.
9M07) to P$7,789 million, mainly fueled by the cellular and
broadband businesses. Moreover, OPBDA increased by 11% (+P$250
million) to P$2,502 million (32% 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 nine-month
period of 2008, revenues generated by these services amounted to
P$2,683 million, +11% vs. 9M07. Voice Total Revenues for this
service reached P$2,002 million (+5% vs. 9M07). The results of this
line of business are still affected by frozen tariffs of regulated
services. During 9M08, Telecom continued marketing innovative
handsets and value-added services, such as fixed SMS services and
video calls. Other products that combine minutes for local calls
and broadband internet access were also offered. Monthly Charges
and Supplementary Services increased by P$40 million, or 7% vs
9M07, to P$595 million, as a consequence of a higher number of
lines in service (+3%), that reached 4.3 million lines. Revenues
generated by traffic (Local Measured Service, Domestic Long
Distance and International Telephony) totaled P$919 million, an
increase of 2% vs. 9M07, as a consequence of a stable pace of the
national long distance and an increase in international traffic
compensated partially by the substitution effect of the mobile
service, that affected the local traffic volume. Interconnection
revenues amounted to P$287 million (+5% vs 9M07), 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$201 million (+14%
vs. 9M07). This evolution is the consequence of an increase in
billing and collection fees as well as in voice, data and internet
equipment sales despite a decrease in Public Telephony revenues
(-P$23 million), that was affected by the development of the mobile
service. Data Transmission and Internet Revenues generated by Data
transmission amounted to P$159 million (+26% vs. 9M07). Related to
SME's, during this period Telecom renewed its portfolio of services
with two solutions that contemplated a high level of value added
services: CRM On Demand and PABX 2.0. This reaffirms the position
of Telecom as a technological partner for its clients. CRM On
Demand is a solution where SME's can benefit from Customer
Relationship Management solutions, with an innovative model and
lower start up investment and maintenance costs. Therefore, now
customers can access to a solution that was originally only
available for the corporate market. PABX2.0 is an innovative
solution for professionals and SME's that integrates voice and
broadband in the same equipment. The benefit of this solution is
the easy way clients can program the equipment. Moreover, the
integration of all the communication services in the same equipment
allows cost savings. Revenues related to Internet reached P$522
million (+36% vs. 9M07), mainly due to the substantial expansion of
the broadband service, driven by a better network coverage,
commercial promotions and innovation of the service portfolio.
During this quarter, Telecom continued promoting Arnet Go, the
first broadband service that combines ADSL technology for the home
internet access using a Wi-Fi modem, and the mobile internet access
through Telecom Personal's 3G networks. Telecom's broadband
subscribers reached 976,000 as of September 30, 2008 (+44% vs.
9M07). Therefore, lines with these type of connections represent
approximately 23% of Telecom's fixed-lines in service. Cellular
Telephony Cellular Telephony continues with its expansion,
increasing its participation in the Group's total revenues (66% vs.
63% in 9M07). During 9M08, this business generated revenues of
P$5,106 million (+25% vs. 9M07). As of the end of September 2008
total subscribers reached 13.7 million representing an increase in
0.6 million subscribers when compare to the first half of 2008.
Telecom Personal in Argentina As of the end of September 2008,
Personal's subscribers reached 11.9 million in Argentina (+1.7
million or +18% vs. 9M07). In 3Q08 the subscriber base increased by
0.6 million. Approximately 66% of the overall subscriber base is
prepaid and 34% is postpaid. Total voice traffic increased by 19%
vs. 9M07 while outgoing SMS traffic increased from a monthly
average of 839 million messages in 9M07 to 1,239 million (+48%) in
9M08. Because of this enhancement in traffic and the incremental
use of value-added services, the Average Monthly Revenue per User
("ARPU") increased to P$41 in 9M08, compared to P$38 in 9M07.
Meanwhile, the ARPU in 3Q08 amounted to P$42 vs. P$39 registered in
3Q07. Revenues totaled P$4,780 million (+P$981 million or +26% vs.
9M07). Service revenues increased by P$859 million or 25% vs. 9M07,
reaching P$4,257 million; furthermore, value-added services totaled
P$1,257 million (+P$384 million or 44%, vs. 9M07), 30% of service
revenues. Additionally, handset sales grew by P$122 million (+30%)
compared to 9M07, reaching P$523 million. During 3Q08, Personal
continued developing its commercial efforts focusing on different
segments. That is how it launched the first SMS prepaid card with
an innovative and flexible format to respond the demand of youth
segments. Accompanying the evolution of smartphones demand,
Personal launched two exclusive models: HTC Touch Cruise and
BlackBerry Bold, globally recognized by their quality and service
capacity. Personal implemented a campaign to expand customized
plans with an "all inclusive" monthly charge to stimulate the usage
of value-added services of these smartphones. The fidelity program
Club Personal, highlighted Mother's Day celebrations with a limited
edition card with an offer of special benefits. Furthermore, in
network infrastructure, Personal continued to expand the 3G network
coverage. During this quarter, Personal launched 3G services in
more cities in the interior of the country such as: Tucuman,
Mendoza, Santa Fe, Parana and Mar del Plata. Moreover, Personal
expanded its commercial offices opening new customer centers in
Bariloche, Ushuaia and Comodoro Rivadavia. In International
Roaming, Personal, promoted "Tarifa Plana Mundial" or "World Flat
Tariff," a new model of rates that simplifies the tariff program by
dividing the world in five areas. This service offers a unique
regional tariff with a competitive price in international calls for
selected cities. Nucleo Personal's controlled subsidiary that
operates in Paraguay generated revenues equivalent to P$326 million
during 9M08 (+10% vs. 9M07). By the end of September 2008, the
subscriber base reached approximately 1.8 million, +21% vs. 9M07.
Prepaid and Postpaid customers represented 90% and 10%,
respectively. Consolidated Operating Costs The Cost of Services
Provided, Administrative Expenses and Selling Expenses totaled
P$6,249 million in 9M08, which represents an increase of P$935
million, or +18%, vs. 9M07. This was partially as a consequence of
the inflationary effect on the costs structure. The cost breakdown
is as follows: -- Salaries and Social Security Contributions:
totaled P$872 million (+22% vs. 9M07), affected by increases in
salaries and in personnel (+405 employees vs. 9M07) that
accompanied the evolution of the cellular business and the
absorption of 53 employees from Cubecorp S.A . -- Taxes: reached
P$613 million (+31% vs. 9M07), influenced mainly by a higher rates
in income tax and additional charges related to Universal Service.
-- Maintenance, materials and supplies reached P$387 million (+26%
vs. 9M07) due mostly to an increase in costs that followed
inflation. -- Network access cost (includes TLRD, Roaming,
Interconnection costs, cost of international outbound costs and
lease of circuits): amounted to P$1,006 million (+22% vs. 9M07)
generated by higher traffic between cellular operators that
accompany the increase in revenues. -- Fees for services: reached
P$271 million (+10% vs. 9M07), originated principally by the
evolution of prices that followed inflation. -- Agents and prepaid
card commissions and other commissions: were P$672 million (+13%
vs. 9M07), mainly due to the increase in commissions paid to the
commercial agents, and card distribution, due to a higher volume of
revenues. -- Advertising: amounted P$290 million (+46% vs. 9M07)
oriented to support the commercial activity in the cellular
telephony and Internet, and strengthen the brand positioning, such
as the sponsorship of Argentina Olympic Mission. -- Cost of
handsets sold: totaled P$731 million (+20% vs. 9M07) mainly due to
an increase in the number of terminals sold. Despite this, handset
subsidies were less than in 9M07 and represented P$173 million
(-P$19 million vs. 9M07). -- Others Costs: totaled P$445 million
(+30% vs. 9M07). This increase was due to the inflationary effects
on related services. -- Depreciation of Fixed and Intangible
Assets: reached P$ 962 million (-8% vs. 9M07). Fixed-line telephony
totaled P$606 million (-3%) and Cellular telephony P$356 million
(-16%), as TDMA technology depreciation charges ended in June 2008.
Consolidated Financial and Holding Results Financial and Holding
Results resulted in a loss of P$112 million, (-P$211 million vs.
9M07). Such improvement was due to the positive effect of foreign
currency exchange generated by liabilities and a reduction in net
interest expense. Moreover, during 3Q08 there was a loss of P$59
million, due to the adverse evolution of FX in the period.
Consolidated Net Financial Debt As of September 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$1,191 million, a reduction of P$1,325
million as compared to September 2007. Consolidated Capital
Expenditures During 9M08, the Company invested P$1,156 million
(excluding materials), in fixed and intangibles assets. This amount
was allocated to the Voice, Data and Internet businesses (P$581
million) and the cellular business (P$575 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. In relative
terms, capex reached 15% of the revenues, levels within industry
standards. Furthermore, due to careful management of capex, Telecom
reached a ratio of operating profit to net investment capital of
36% for 9M08. Other Initiatives Telecom, as Official Sponsor of
Argentine Olympic Mission in Beijing 2008, provided communication
and network technology that accompanied the Argentine Olympic team.
This technology not only assisted the members in logistic issues
related to the games (check in, medical schedule requirements,
meeting schedules, among others) but also permitted athletes to be
closer to their families, receiving their support which was key to
their physical preparation and performance. Moreover, as part of
the CSR (Corporate Social Responsibility) program, Telecom promoted
an ambitious educational project "Senti2 Conecta2" or "Connected
Senses" where the principal aim to integrate the ICT (Information
and Communication Technology) and school content, in order to
reduce the distance between systematic learning and extracurricular
activities of students. This project is totally free for schools
that want to participate and is geared towards students between 10
and 15 years old. More than 9,300 teachers from the cities of
Buenos Aires, Tucuman, Rosario and Santa Fe have entered the
program, and 70% of them are working on the content. Related to the
corporate market, during 3Q08, Telecom continued enhancing its
position as integrated provider of innovative ICT solutions,
conceived to satisfy specific needs of each business segments, such
as the medium and large companies and oriented to contribute to the
improvement of government administration at the different national,
provincial and municipal levels. During this quarter, Telecom
Argentina was selected by the INTA (the Argentine Agricultural
Technology Institute) as provider of its data network that will
interconnect the main agricultural stations located throughout the
country, where research projects are performed. Such projects allow
developments in technology and an increase in competitiveness of
the agricultural, forest and agro industry sector throughout the
country. In addition, Telecom continued to strengthen its market
position in datacenters with multisite solutions. During this
period, Telecom was distinguished by BDO Becher & Associates
with a certification that endorses the fulfillment of Communication
"A 4609" to be presented to the Superintendence of Financial and
Exchange Entities of the Argentinean Central Bank. Recent Relevant
Matters In October 2008, Telecom Argentina made a principal payment
of Notes in the equivalent to 55% outstanding of the principal
amortization payment scheduled for October 2011. Within this
payment, Telecom canceled the whole of Series B of its debt, with
original maturity on October 15, 2011. Since October 16, 2008,
Telecom Argentina and Telecom Personal purchased Notes pursuant to
market purchase transactions. In the case of Telecom Argentina, it
has acquired an aggregate principal nominal amount of Euros
32,349,000.00 of Telecom's Series A Regulation S Euro Notes Due
2014 (equivalent to an outstanding amount of Euros 13,314,848.00).
In the case of Telecom Personal, it has acquired an aggregate
principal amount of US$ 39,298,000.00 of Personal's Series 3 Medium
Term Notes due 2010. The Notes acquired will be cancelled according
with the terms and conditions of the respective Indentures.
Standard & Poor's Ratings Services announced yesterday that it
has downgraded to 'B' from 'B+' and placed on CreditWatch Negative
the foreign-currency ratings on Telecom Argentina and Telecom
Personal. The actions follow a change in credit rating of Argentina
to 'B-' from 'B+'. Additionally, Standard & Poor's has also
placed the local currency ratings 'B+' for both companies on
CreditWatch, pending their review of the impact of other country
risk factors. 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 September 30, 2008,
Telecom had 984,380,978 shares outstanding. (*) Employee Stock
Ownership Program For more information, please contact the Investor
Relations Department: Pedro Insussarry 54-11-4968-3743 Solange
Barthe Dennin 54-11-4968-3752 Evangelina Sanchez 54-11-4968-3718
Ruth Fuhrmann 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.telecom.com.ar/http://www.personal.com.ar/http://www.personal.com.py/http://www.arnet.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. DATASOURCE: Telecom Argentina
S.A. CONTACT: Pedro Insussarry, (54-11) 4968-3743, or Solange
Barthe Dennin, (54-11) 4968-3752, both for Telecom Argentina S.A.
Web site: http://www.telecom.com.ar/ http://www.personal.com.ar/
http://www.personal.com.py/ http://www.arnet.com.ar/
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