Telecom Argentina S.A. Announces Consolidated First Quarter Results
for Fiscal Year 2007 ('Q07') BUENOS AIRES, Argentina, May 10
/PRNewswire-FirstCall/ -- Telecom Argentina (BASE: TECO2, NYSE:
TEO), one of Argentina's leading telecommunications groups,
announced today Net Income of P$135 million for the three month
period ended March 31, 2007.* Highlights: - Continuing with the
positive trend observed in recent years, the Telecom Group confirms
the strong expansion of its business. 1Q07 showed a 28% growth in
net revenues when compared to the same period of the previous year
("1Q06"), totaling P$2.055 million. The most dynamic segments
continued to be cellular, Internet and data, which expanded 45%,
32% and 11%, respectively. - Cellular subscribers increased by 51%
while broadband subscribers grew 111%. In addition, fixed lines in
service increased 4%, when compared to March 2006. - As a
consequence of the general improvement of the business, Operating
Profit before Depreciation and Amortization ("OPBDA") reached P$688
million (+26% vs. 1Q06), equivalent to 33.5% of net revenues.
Operating Profit totaled P$358 million (+82% vs. 1Q06). - Finally,
Net Income totaled P$135 million. Shareholder's equity as of March
31, 2007 amounted to P$2,261 million. - Net financial Debt (before
NPV effect) declined to P$ 3,222 million (-P$804 million vs. 1Q06),
primarily as a result of the cash flow generated by operations. The
ratio of Net Financial Debt to OPBDA declined from 2.3x as of March
2006, to 1.2x. As of March 31 2007 2006 Change % Change
Consolidated Net Revenues (in MM P$) 2,055 1,611 444 28% Voice,
data & Internet 783 732 51 7% Cellular 1,272 879 393 45%
Operating Profit before D&A (in MM P$) 688 546 142 26%
Operating Profit (in MM P$) 358 197 161 82% Net Income (in MM P$)
135 3 132 Shareholder's Equity (in MM P$) 2,261 1,871 390 21% Net
Financial Debt - Before NPV effect (in MM P$) 3,222 4,026 (804)
-20% Net Financial Debt - Book value (in MM P$) 3,090 3,749 (659)
-18% CAPEX (in MM P$) 198 185 13 7% Lines in service (Fixed lines
in thousands) 4,117 3,966 151 4% Cellular customers (in thousands)
10,639 7,041 3,598 51% Personal (Argentina) 9,310 6,351 2,959 47%
Nucleo (Paraguay) 1,329 690 639 93% ADSL customers (in thousands)
526 250 276 111% Fixed line traffic (in MM minutes, Internet
Traffic not included) 3,983 3,947 36 1% Incoming/Outgoing cellular
voice traffic in Arg. (in MM minutes) 2,224 1,641 582 35% Average
Revenue per user (ARPU) Fixed Telephony/voice (in P$) 39 38 0 1%
Average Revenue per user (ARPU) Cellular Telephony Arg. (in P$) 37
36 1 4% * Non-financial data unaudited During 1Q07, Consolidated
Net Revenues increased 28% (+P$444 million vs. 1Q06) to P$2,055
million, mainly fueled by the cellular and broadband businesses.
Moreover, OPBDA increased by 26% (+P$142 million) to P$688 million,
equal to 33.5% of Consolidated Net Revenues. Company Activities Net
Revenues The evolution in Consolidated Net Revenues by reportable
segment was as follows: Voice, data transmission & Internet
Revenues generated by the Fixed-line Business (including voice,
data transmission and Internet services) amounted to P$783 million,
a 7% increase over 1Q06. Voice Total Revenues for this segment
reached P$619 million (+3%). Monthly Charges increased by P$6
million or 3%, reaching P$182 million, even though no increase has
been applied to regulated tariffs. Lines in service increased 4% as
a consequence of promotions and campaigns developed by Telecom.
Revenues generated by traffic totaled P$296 million, as a
consequence of the 11% decrease in Local Measured Service and
increases of 13% and 8% in Domestic Long Distance and International
Telephony, respectively. Interconnection revenues amounted to P$84
million (+22%), mainly driven by a higher level of mobile traffic
transported by and terminated in Telecom's fixed line network.
Internet and Data Transmission As a consequence of the
extraordinary evolution of broadband subscribers, Internet
continues to be the main driver growth in the fixed-line business,
with revenues of P$123 million (+32% vs. 1Q06). As of the end of
1Q07, Telecom's ADSL subscribers reached 526,000 (+277,000 or +111%
vs. 1Q06). Lines with ADSL connection accounted for approximately
13% of Telecom's lines in service. Regarding ISP services, Arnet
subscribers totaled 533,000 (+79% or +236,000 subscribers), due to
the increase of 262,000 broadband subscribers (+141%) and the
decrease of 26,000 dial-up subscribers (-23%). This positive
evolution is a consequence of Telecom's offering of high quality
products at accessible prices (for example, the product Arnet 640Kb
Flat, which showed an excellent performance), leveraging on
broadband-specific content, improving ADSL coverage, as well as
investing in promotional and branding activities for the portfolio
of Arnet products. Revenues generated by Data transmission amounted
to P$41 million (+11% or P$4 million, vs. 1Q06). Cellular Telephony
The Cellular Telephony business generated revenues of P$ 1,272
million in 1Q07. Telecom Personal in Argentina As of March 31,
2007, the total subscriber base totaled 9.3 million, 3 million
customers more than those registered in 1Q06 (+47%). Approximately
68% of the overall subscriber base was prepaid and 32% was
postpaid. Subscribers with GSM technology represented 91% of the
total subscriber base at the end of 1Q07. Total voice traffic, in
minutes, increased by 34% vs. 1Q06, while outgoing SMS traffic
increased from an average of 440 million messages per month to an
average of 762 million (+73%). Moreover, the proportion of
value-added services in the average monthly Revenue per User
("ARPU") reached 27% in 1Q07. In this context, revenues totaled
P$1,180 million, increasing P$369 million (+45%). Service revenues
increased by 48%, while handset sales increased by 25%. ARPU
amounted to P$37 in 1Q07. During the quarter, Personal continued
with its strategy of strengthening technological innovation by
launching the latest generation of value-added services, such as
"Personal Cam" (life images through the web portal); and "SMS to
fixed" (text messages that can be sent to a fixed line telephone).
Personal has also been the first operator offering Blackberry
Pearl, with more features and a latest generation design. In
addition, Personal continued its customer loyalty program Club
Personal with specific activities designed for the summer season.
Meanwhile, the development of the network and commercial channels
continued, mainly in the Southern Region, in order to improve
service quality and customer attention to Personal's subscribers .
Nucleo Personal's controlled subsidiary that operates in Paraguay,
generated revenues equivalent to P$92 million (+35% when compared
to 1Q06). The subscriber base as of March 31, 2007 reached
approximately 1.3 million, +93% vs. 1Q06. Prepaid and Postpaid
customers represented 88% and 12%, respectively while GSM
subscribers represented 80% of the overall subscriber base.
Consolidated Operating Costs The Cost of Services Provided,
Administrative Expenses and Selling Expenses totaled P$1,697
million in 1Q07, which represents an increase of P$283 million or
+20% vs 1Q06 with the following breakdown: Salaries and Social
Security Contributions: totaled P$214 million (+13%), affected by
wage adjustments and headcount increases generated by the growth in
the business. Taxes: amounted to P$161 million (+40%), mainly due
to direct taxes on sales. Agents and Prepaid Card Commissions
totaled $177 million, (+61%), as a consequence of the growth in the
subscriber base in the cellular business and increased prepaid
traffic sales. Advertising: expenditures reached P$62 million
(+72%), related to brand positioning campaigns and the acquisition
of new cellular and Internet customers. Cost of cellular handsets:
increased to P$197 million (+10%) due to the increase in handset
sales related to the subscriber growth and handset upgrades. TLRD
(termination charges in third party cellular networks) and Roaming:
increased to P$177 million (+42%) due to increased traffic among
cellular operators, in line with the significant expansion of the
market. Allowance for Doubtful Accounts: amounted to P$19 million
(+6%), remaining below 1% of net revenues. Depreciation of Fixed
and Intangible Assets decreased to P$330 million (+P$13 million in
the cellular business, -P$32 million in Voice, data & Internet
business). Consolidated Financial and Holding Results Financial and
Holding Results resulted in a loss of P$132 million, as compared to
the P$183 million loss registered in 1Q06. The difference is mainly
due to lower financial interest expenses related to the reduction
of the financial indebtedness Net Financial Debt As of March 31,
2007, Net Debt (Loans before the effect of NPV valuation, minus
Cash, Banks, Current Investments and Other credits derived from
derivative Investments) amounted to P$3,222 million, a reduction of
P$804 million as compared to March 31, 2006. Interest accrued on
financial debt totaled P$80 million. It is worth mentioning that on
April 16, Telecom Argentina cancelled the remaining 25% of the
principal amortization originally scheduled for October 15, 2009
and 31.8% of the principal amortization originally scheduled for
April 15, 2010 of its Series A and B Notes, in an amount
approximately equivalent to US$81 million. Consolidated Capital
Expenditures A total amount of P$198 million invested in fixed and
intangibles assets was allocated to the cellular business (P$94
million) and the Voice, data and Internet business (P$104 million).
In the Fixed-line business, the Company focused its efforts on the
deployment of a new generation network (NGN) based on IP
technology. Additionally, investments were allocated to the
development of important IT projects, such as the new ERP system.
In the Cellular business, expenditures continued to be focused in
the GSM/GPRS/EDGE network deployment in the South Region and the
extension of its capacity in AMBA and North Regions. In addition,
the Group continues with the development of value-added services.
Recent Developments Sale of Publicom As of April 12, 2007, Telecom
sold Publicom, the company specialized in Directories, for
approximately US$60 million. The operation of Publicom has been
consolidated in the Financial Statements in a special item as
discontinued operations. New Organizational Structure The Telecom
Group has implemented a new organization model in order to
facilitate the synergy among fixed communications, mobile,
broadband and contents. In this new scheme, the business management
gets a unified vision, under the responsibility of a Director of
Operations, with four units: Mobile Telephony, Network, Fixed
Telephony -- Residential and SMEs -- and Fixed Telephony -- Large
Accounts and Wholesale. The corporative functions were grouped
under the responsibility of the Director of Corporate Affairs. This
announcement does not mean mergers nor society changes. The changes
refer exclusively to a new management organization model. New
Chairman As of April 27, 2007, the Board of Directors of Telecom
Argentina appointed Lic. Carlos A. Felices as Chairman of the
Group. 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 March 31, 2007,
Telecom had 984,380,978 shares outstanding. For more information,
please contact the Financial Planning & Investor Relations
Department: Pedro Insussarry 54-11-4968-3743 Mariano Martire
54-11-4968-3718 Gaston Urbina 54-11-4968-6236 Astrid Burger
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/ 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. Contacts: Pedro Insussarry
Pablo Caride Telecom Argentina (54-11) 4968-3743/3602 DATASOURCE:
Telecom Argentina S.A. CONTACT: Pedro Insussarry or Pablo Caride,
both of Telecom Argentina, +011-5411-4968-3743, or
+011-5411-4968-3602
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