Telecom ArgentinaTelecom Argentina
3Q15 3Q15 EarningsEarnings ReleaseRelease3Q15 3Q15 EarningsEarnings ReleaseRelease
Conference Call Presentation
This presentation is based on audited financial statements and 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
DDisclaimerisclaimer
1
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 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
2
Financials
Q&A
Financial interm.
Transport & Communications
Manufacturer Industry
Real Estate
Minery
Retail & Wholesale commerce
Social services & Healthcare
Public Admin & Defense
Electricity, gas & water
Agriculture
Construction
4.3% 4.3%
-0.5%
0.8% 0.7% 1.0% 12.28.0
6.7 6.7 4.62.6
2012 2013 2014 1Q15 2Q15 3Q15
Trade Balance (Billion U$S) Last 12 months
26.6%38.0%
28.0% 25.5% 24.0%
15.0% 14,4%
2013 2014 1Q15 2Q15 3Q15e
Consumer Price Index (GCBA) Consumer Price Index (INDEC)
23.9%
43.3
30.6 31.4 31.533.9 33.3
2012 2013 2014 1Q15 2Q15 3Q15
24.5% 25.9% 33.7% 32.7% 29.1% 29.6%
2012 2013 2014 1Q15 2Q15 3Q15e
Central Bank Reserves (Billion U$S)National Wages - ∆ % YoY
Economic activity per sector Wages Central Bank Reserves
““Slow economic activity with a challenging external sectorSlow economic activity with a challenging external sector””
Household consumption CPI (YoY) Trade Balance
Total
16.5%
2012 2013 2014 1Q15 2Q15 3Q15e 2012 2013 2014 1Q15 2Q15 3Q152013 2014 1Q15 2Q15 3Q15e
� The economic activity seems to have entered into a
slow recovery phase, mainly due to improvements in
Construction, that showed a notorious advance during
3Q15, and Agriculture, that registered a slowdown in
3Q15 coming from a record soybean harvest in
volumes at 1H15. Evolution of macroeconomic
scenario must be carefully monitored in the coming
periods to determine whether growth will consolidate.
� Industrial production Index (IPI) shows a positive
trend, with improvements in metalworking and Food
and a decline in Cars and Steel.
� Argentine external competitiveness was affected by
the FX depreciation in Latam and China, partially offset
by an upward trend evolution of AR$/U$S FX rate
3Source: MECON, INDEC , FIEL and Company Estimates
� Consumer confidence reflected an improvement in
9M15 coming from a weak 2014. It is expected that
household consumption will maintain a positive
performance during 3Q15.
� Fiscal accounts continue to deteriorate due to
increasing public expenditures and subsidies to
transport and energy. Fiscal revenues growth is not
sufficient to balance the expenditures trend.
� The CPI Index published by the Federal
Government reached 14% YoY meanwhile GCBA
measures 24.0% in YoY.
� As of September 2015, international reserves
showed a decrease vs 2Q15, mainly due to CB’s
interventions to offset further depreciations of the
exchange rate. During Oct-15 important maturities
(around 5,9B U$S) of sovereign debt (Boden 2015)
were cancelled using reserves.
� Relatively stable FX rate evolution, with a slight
acceleration of the nominal depreciation of ARS vs
U$S during Sep-15.
� Trade balance continued to decrease in 3Q15, as
exports accumulated 22 months of contraction,
due to lower commodity prices and a reduction of
volumes in certain items, i.e. industrial
manufactures. External sector continues to pose a
challenge.
AgendaAgenda
Market Overview
Business Highlights
4
Financials
Q&A
B U S I N E S S
HighlightsHighlights
CommercialCommercial OfferOffer orientedoriented towardstowards DataData && InternetInternet
� Solid performance in value segments in 3Q15
� Strong smartphone sell out of 98% in line with solid demand at 4G devices, but limited by constraints on
imports. Solid growth of alternative sources of devices
� Pricing scheme simplification with Data Centric Plans
� Strong performance in 4G: - More than 1MM users
- Data consumption 3.6x higher than 2G/3G
InternetInternet
� Internet Mobile users +10% YoY in 3Q15 (Usage +75%, ARPU +66%)
5
� Internet Mobile users +10% YoY in 3Q15 (Usage +75%, ARPU +66%)
� Fixed Broadband subs +3% YoY (10 Mb subs 25% of CB vs. 13% in 3Q14) - ARPU +35% vs. 3Q14
� Service Revenues up +21% (vs 17% in 9M14) driven by:
� Mobile internet in Argentina (+87%)
� Broadband (+40%) in the Fixed Business
� EBITDA increased by +24% with a positive trend in margins, reaching a 27% profitability.
� LTM FCF generation AR$ 1,338 MM. After paying AR$ 804 MM in cash dividends and AR$ 5,786 MM in Spectrum, in
Argentina ,NFP (debt) reaches AR$ 1.6 Bn, mostly in local currency
� Solid hedge strategy with more than 70% of FX exposure covered
F I N A N C I A L S
Total Revenues, Million AR$, %
TEO Group TEO Group –– Consolidated resultsConsolidated results
24,183 28,59027,287
9M14 9M15FY14
33,341
FY13
+22% +18%
7,664
6,186
8,702
7,564
+15%
+24%
EBITDA, Million AR$, %
6
24,968
9M15FY14
24,012
9M14
20,568
FY13
28,278
+21%
FY13 9M14 9M15FY14
EBITDA Margin
+18%
28% 26% 26% 27%
Lower quantity of handsets sold (-35% YoY vs 9M14) due to import limitation in Argentina
Service Revenues , Million AR$, %
EBITDA
Margin
1.649
Group Revenues Group Revenues –– focus on mix and trendfocus on mix and trend
Retail Mobile
Retail Fixed Voice
Wholesale 14%
BB and fixed data
12%
AR$, Million
49% 52%
14% 16%
9% 8%
Retail Fixed Voice
Group Revenue Mix
682 745
704 788
723 846
9M14 9M15
+13%
1Q
3Q
2Q
9%
17%
12%
+34%
3Q35%
Broadband & Fixed Data
Internet
Mobile
2,1092,379
3,408
4,563
4,283
1.045 1.380
1.141 1.534
1.222
1.649
9M14 9M15
7
Regulated Rev
% on Total Rev 7.4% 7.1%
Handsets
Paraguay
9M15
Wholesale
9M14
14% 12%
4% 4%
15% 13%
9%7%
Retail Mobile
1Q
3Q
2Q
32%
34%
3.776 4.735
3.921 4.826
4.119 5.207
9M14 9M15
1Q
3Q
2Q
+25%
25%
26%
23%
6441,188
781
1.501 869
1,594
9M14 9M15
1Q
3Q
2Q
+87%
83%
84%
92%
11,81614,768
2,294
4,283
1,707
1,771 1,750
1,804
FY13 FY14 3Q14 3Q15
1.3% 1.2% 1.3% 1.4% 1.4%
157.8167.3 178.5 201.6
217.4
3Q14 4Q14 1Q15 2Q15 3Q15
Monthly Churn ARPU (AR$)
Fixed Fixed –– UBB accesses increased significantly in 3Q15 propped by competitive offerUBB accesses increased significantly in 3Q15 propped by competitive offer
Thousand of broadband accesses, thousand of net adds
+54k; +3%
AR$/Month
BB Accesses
≥10Mb subs.
+38%+64k; +4%
~2x
BB ARPU & Churn
232 291 335
394 448
3Q14 4Q14 1Q15 2Q15 3Q15963
1,470
1,063 1,290
FY13 FY14 9M14 9M15
8
IFRS Million of AR$
+53%
+21%
≥10Mb subs.
≥10Mb
% of CB
+54k;
+14%
16%13% 19% 22%
~2x
25%
Data / ICT Revenues
4,106 4,093 4,077 4,064 4,054
Fixed Fixed –– ARBU sustained thru flat pricing + price adjustment in the monthly feeARBU sustained thru flat pricing + price adjustment in the monthly fee
Thousand of lines
AR$/Month
Lines in Service
ARBU
20%
In AR$
58.160.1 60.5
64.4
69.6
3Q14 4Q14 1Q15 2Q15 3Q15
3Q14 4Q14 1Q15 2Q15 3Q15
9
DriversDrivers ofof ARBUARBU increaseincrease::
� Monthly Fee Tariff increases for Business Clients (17%
of CB)
� The process of the tariff adjustment contemplated in
the Argentine Digital Law has started
� Continous increase in penetration of packs of services:
81% of customer base
Market
Share*46.4% 46.5%46.5%46.4% 46.5%
*Market share calculated based on Company estimates
Mobile Mobile –– 3Q15 postpaid migrating to a Data Centric offer3Q15 postpaid migrating to a Data Centric offer
13.2 13.5
6.3 6.3
3Q153Q14
Customer Base (Mln)
Prepaid
Postpaid 1
19.8 19.41
33%Market Share2 33%
TOWARDS
Hours of connection per user
Share of web traffic by device
Source: Stat Counter, Q1 2015
YoY
10
1 Figures do not sum up due to rounding2 Market share calculated based on Company estimates
2Q15 3Q15
>390K
POSTPAID GROSS ADDS
33%Market Share2 33%
4.4 4.92,7 4,2
World Argentina
Hours of connection per user
Source: GlobalWebIndex, Q42014
Users mix
Mobile: Focus on data opportunity and revenue Mobile: Focus on data opportunity and revenue securizationsecurization
9M159M14
PxQ
Bundle
33%
40% 40%
Prepaid
9M159M14
Postpaid
Prepaid
Postpaid
9M159M14
Mobile services revenue mix
Revenue Mix
Data penetration,
Monthly unique users in million
11
17%26%
43%33%
Browsing SMS + Content Voice
9M14 9M15
10%
8.1
7.4
126
220
9M14
+75%
9M15
1 Includes Dongles
Figures may not sum up due to rounding
9M159M14
Data Usage MBOU/month
9M14
+66%
9M15
ARPU Browsing AR$/month
Mobile Mobile –– Data Data CentricCentric PlansPlans
EVOLUTION SIMPLIFICATION
It is not only about EVOLUTION of It is not only about EVOLUTION of
Technology, it is about how people Technology, it is about how people
react to it.react to it.
New and simplified plans New and simplified plans
adapted for every need.adapted for every need.
New Concept
New Plans
As a As a platformplatform toto MakeMake EverythingEverything PossiblePossible
12
New Plans
Past Current
Focus
Product
Portfolio
Offering
Lever
Individuals
Entertainment, gaming, music, content
Individuals Residential Business
Voice SMS Internet Internet Pay TV / Video Voice
Other
Services
One on One
plansConnectivity
concept
“Enabling platform for customer preference”
Based on
Services
Based on
Platforms
Mobile Mobile –– Strong Positioning in 4GStrong Positioning in 4GMain cities with 4G coverage
Apr/May Jul/Aug Apr/May Jul /Aug
6%
Average ARPU 4G ARPU*
21%
13
�As of today more than 870 sites installed.
�Presence in 188 locations of 18 provinces.
� Offering higher speed and capacity.
� 4G/3G/2G integrated and modernized network with
state-of-the-art technology.
�27% of sites already with 700 Mhz.
NETWORK ROLLOUT
4G Customers
1Q15 3Q15
325
1,000
>200%
DL & UL Speed
Local Benchmark
21
3Source: Ookla Speedtest
* Corresponds to total ARPU of customers using only 4G technology
4,851 5,427 4,535
3,530
2,256
FY13 FY14 9M14 9M15
3,819
6,791
Capex Capex –– Highlighting Mobile accesses thru network deploymentHighlighting Mobile accesses thru network deployment
Million of AR$
Capex Evolution
% Revenues 16% 24%18%
8,957
+85%
27%
+78%Spectrum
+1.7X
Actual Dec-15
+1.6X
4G Sites
Coverage over total population
4G Targets
14% 9% 16%9%
52%
Mobile Access Fixed Access Core &
Infraestruct *
IT Others &
Spectrum
Note: *Core & infrastructure refers to network related capex, including quality and innovation capex.
14
Capex Breakdown
Actual Dec-15
Sep-14 Sep-15
3G: The frequencies acquired in the 2014 spectrum auction made
possible a relevant improvement of the quality of service adding a third
carrier.
FTTx Deployment
+2X
AgendaAgenda
Market Overview
Business Highlights
15
Financials
Q&A
3Q
+24%
6,186
7,664
TEO Group: Consolidated Results TEO Group: Consolidated Results
IFRS, Million of AR$, PercentageRevenues EBITDA
+22%
+15%
24,183
28,590+18%
IFRS, Million of AR$, Percentage
Service Revenues
14,0%
20,0% 21,9% 21,0% 24,4%
3Q14 4Q14 1Q15 2Q15 3Q15
Service Rev growth in Argentina
27,287
33,341
7,466 8,872
8,119 9,624
8,598
10,094
FY13 FY14 9M14 9M15
1Q
3Q
2Q7,564
8,702
2,112 2,634
2,007
2,501
2,067
2,529
FY13 FY14 9M14 9M15
6,186
16
EBITDA
Margin28% 26% 26% 27%Regulated
Revenues 8% 7% 7% 7%
+17%
+25%
+22%
+19%
+19%
24,183
+25%
1Q
2Q
+22%3Q
6,1864,375
7 328 231,290 442
487 378 612 7,664
21%0%
-11%1%
32%18% 21%
15%
28%
EBITDA 9M14 Ss. Revenues &
other incomes
Handsets
Sales
Handsets Costs ITX Costs Labor Costs Taxes Other Marketing
& Sales
Fees for services,
maint. and
Others* EBITDA 9M15
YoY
Variation+1,478; +24%
IFRS, Million of AR$EBITDA 9M14 – 9M15
TEO Group: Consolidated TEO Group: Consolidated costs costs and and EBITDA EBITDA evolutionevolution
other incomes Sales & Sales maint. and
materials
1717
EBITDA Margin
-2.0%+0.9% 0.0% -0.2% +0.3% 26.8%-0.7%25.6%9M14 9M15
* Others includes bad debt expenses, provisions, VAS costs and others* *Average of ~40 salary agreements
As % of Revenues 10% 10%5% 18% 10% 10%10%
TEO TEO GroupGroup: Net : Net IncomeIncome EvolutionEvolution
7,664
3,205 -192
1,489
2,778
In Million of AR$ 9M14 9M15 3Q14 3Q15
Net Interests $ 231 -$ 255 -$ 7 -$ 168
Gains on Mutual Funds &
other investments$ 224 $ 300
$ 77 $ 170
FX results -$ 205 -$ 194 $ 17 -$ 99
Results on NDF -$ 20 -$ 11 -$ 14 $ 36
Others $ 0 -$ 32 $ 3 -$ 12
Total $ 230 -$ 192 $ 76 -$ 73
9M15
18
2,778
EBITDA 9M15 D&A, Results on disposal
of PP&E and write-down of
PP&E
Net Financial Results Income Tax Expense Net Income 9M15
6,186
2,343 230
1,389
2,684
EBITDA D&A, Results on disposal
of PP&E and write-down of
PP&E
Net Financial Results Income Tax Expense Net Income
9M14
Variation +1,478 -862 -422 -100 +94
3,526
3,034 1,696
5,786107 90
861-1,586
IFRS, Million of ARS - Last 12 months
TEO Group: TEO Group: FCF, Net FCF, Net Financial Financial Position & Hedging StrategyPosition & Hedging Strategy
Free Cash Flow = 1,338
Operating free Cash FlowFree Cash Flow
Net Financial
Position
9M14
(Net Cash)
Net Financial
Position
9M15
(Net Debt)
Net Interest
& OthersFX
Variations
Operating
Free Cash
Flow2
Taxes Dividend
Payments3
Spectrum
Payment
10,180 6,143 1,003
EBITDA Capex Δ WK & others
19
Note:
(1) Includes Telecom USA
(2) OFCF: Operating Free Cash Flow before Taxes
(3) Includes $57 Million related to Nucleo dividend payments to third parties, net of income tax
Free Cash Flow = 1,338
In U$S million, September 2015. Argentine operations
U$S Dollar & Dollar
Link BondsNDFFX Cash
Exposure as
of 3Q15
Net Accounts
Payable & Debt
AgingAging ofof NDFNDF ((byby tenor)tenor)::
- 3 months or less = 13% over total
- From 3 to 6 months = 29% over total
- From 6 to 12 months = 58% over total
HEDGING STRATEGY
RELEVANT MATTERS
AgendaAgenda
Market Overview
Business Highlights
Financials
20
Financials
Q&A
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