Telecom Argentina S.A. Announces Consolidated Annual ('FY06') and Fourth Quarter Results For Fiscal Year 2006 ('4Q06')*

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: [phone]
  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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