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

Copyright