Telecom Argentina S.A. Announces Consolidated Nine-Month Period ("9M08") and Third Quarter Results for Fiscal Year 2008 ("3Q08")

Share Name	Share Symbol	Market	Type
Telecom Argentina SA	TG:TEO	Tradegate	Ordinary Share

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	0.05	0.66%	7.65	7.50	7.75	7.65	7.65	7.65	1	21:00:05

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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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TEO Telecom Argentina SA