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Telecom Argentina S.A. announces consolidated six month period ('1H18') and second quarter results for fiscal year 2018 ('2Q18')*

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Telecom Argentina S.A. announces consolidated six month period ('1H18') and second quarter results for fiscal year 2018 ('2Q18')*

PR Newswire

BUENOS AIRES, Argentina, Aug. 8, 2018 /PRNewswire/ --

Note: The merger between Telecom and Cablevisión was considered an inverse acquisition under IFRS 3 (Business Combinations), with Cablevisión being the surviving entity for accounting purposes. Thus, for the purposes of preparing the consolidated financial statements of Telecom Argentina as of June 30, 2018: i) the comparative figures as of December 31, 2017 and June 30, 2017 correspond to those that arise from the consolidated financial statements of Cablevisión at their respective dates; and ii) the corresponding information for the six-month period ended June 30, 2018, incorporates on the basis of figures corresponding to Cablevisión, the effect of the application of Telecom Argentina's method of acquisition at its fair value in accordance with the IFRS 3 guidelines (see Financial Table No. 3) and the operations of Telecom Argentina as of January 1, 2018. On the other hand, in order to ease the understanding and analysis of the earnings evolution by its users, additional tables of the income statements are included, exposing on pro forma basis the comparative figures for 1H17 as if the merger between Telecom and Cablevisión had been effective during that period. The variations of results vs. 1H17 identified in this press release emanate from the comparison with the aforementioned "pro forma" information (see Financial Tables No 6, No 7, No 10, No 11, No 14 and No 15).

  • Consolidated Revenues amounted to P$64,179 million (+29.1% vs. 1H17); of which Service Revenues reached P$59,133 million (+28.3% vs. 1H17). Considering the breakdown of Service Revenues, Mobile Services amounted P$22,398 million (+17.9% vs. 1H17); Internet Services totaled P$14,435 million (+33.2% vs. 1H17), while Cable TV Services and Fixed Telephony and Data Services amounted to P$13,872 million (+37.2% vs. 1H17) and P$8,247 million (+47.5% vs. 1H17), respectively.
  • Mobile subscribers in Argentina: 19.1 million in 1H18, while Cable TV subscribers and Broadband accesses totaled 3.5 million and 4.1 million, respectively.
  • Mobile Internet revenues of Personal in Argentina increased 36.3% vs. 1H17; reaching 54.7% participation in Service Revenues.
  • Mobile ARPU of Personal in Argentina increased to P$165.0 per month in 1H18 (+21.9% vs. 1H17).
  • Broadband ARPU reached P$585.1 per month in 1H18 (+42.0% vs. 1H17). Monthly churn stood at 1.5% in 1H18.
  • Cable TV ARPU increased to P$653.3 per month in 1H18 (+26.3% vs. 1H17).
  • Consolidated Operating costs -including D&A and impairment of PP&E- totaled P$50,525 million (+24.5% vs. 1H17).
  • Operating Income before Depreciation and Amortization reached P$23,296 million (+36.6% vs. 1H17), 36.3% of consolidated revenues.
  • Net Loss amounted to P$4,872 million in 1H18. Net Loss attributable to the Controlling Company amounted to P$4,912 million during the same period. The mentioned Net loss mainly reflects the impact of FX losses over financial results, partially offset by growth in Operating Income before D&A.
  • Capex reached P$14,237 million in 1H18, equivalent to 22.2% of Consolidated Revenues.
  • Net Financial Debt Position: P$48,526 million in 1H18.


 

 (in million P$, except where noted)**

As of June, 30




2018


2017

Δ $


Δ %

Consolidated Revenues

64,179


49,705

14,474


29.1%

Operating Income before D&A  

23,296


17,048

6,248


36.6%

Operating Income

13,654


9,120

4,534


49.7%

Net (Loss) Income attributable to Controlling Company

(4,912)


5,028

(9,940)


-197.7%

Shareholders' equity attributable to Controlling Company

119,869


n.a.

-


-

Net Financial Position - (Debt) / Cash

(48,526)


n.a.

-


-

CAPEX *

14,237


10,563

3,674


34.8%

Fixed lines in service (in thousand lines)

3,679


3,861

(182)


-4.7%

Mobile customers (in thousand)

21,459


22,983

(1,524)


-6.6%

            Personal (Argentina)

18,631


19,529

(898)


-4.6%

Nextel (Argentina)

447


952

(505)


-53.0%

            Núcleo (Paraguay) -including Wimax customers-

2,381


2,502

(121)


-4.8%

Broadband accesses (in thousand)

4,083


3,974

109


2.7%

Cable TV Suscribers (in thousand)

3,484


3,511

(27)


-0.8%

Argentina

3,341


3,366

(25)


-0.7%

Uruguay

143


144

(1)


-0.7%

Average Billing per user (ARBU) Fixed Telephony / voice  (in P$)

204.8


140.9

63.9


45.3%

Average Revenue per user (ARPU) Mobile Services - Personal (in P$)

165.0


135.3

29.7


21.9%

Average Revenue per user (ARPU) Broadband (in P$) ***

585.1


411.9

173.2


42.0%

Average Revenue per user (ARPU) Cable TV (in P$)

653.3


517.0

136.2


26.3%

 

*(Unaudited information - figures as of 1H17 calculated as the sum of the parts of Telecom Argentina's and Cablevisión's CAPEX)
**(Figures may not sum up due to rounding)
***(Calculated considering the average subscriber bases according to the billing criteria of each product)

 

Telecom Argentina S.A. ('Telecom Argentina') - (NYSE:TEO, BASE: TECO2)), one of Argentina's leading telecommunications companies, announced today a Net Loss of P$4,872 million for the six month period ended June 30, 2018, a decrease of -196.3% when compared to 1H17. Net loss attributable to the Controlling Company amounted to P$4,912 million (-P$9.940 million or -197.7% vs. 1H17).

During 1H18, Consolidated Revenues increased by 29.1% to P$64,179 million (+P$14,474 million vs. 1H17), mainly driven by Cable TV Services, Internet Services and Mobile Services. Moreover, Operating Income reached P$13,654 million (+P$4,534 million or +49.7% vs. 1H17).

Consolidated Operating Revenues

Mobile Services

As of June 30, 2018, mobile clients amounted to 21.5 million.

In 1H18, services revenues represented P$22,398 million (+17.9% vs. 1H17). The commercial strategy was focused on promoting the consumption of mobile internet services through an integrated offer of plans suitable for all market segments. 

Mobile Services in Argentina

As of June 30, 2018, Personal reached 18.6 million subscribers in Argentina, where postpaid clients represented 37% of the subscriber base.

In 1H18, service revenues of Personal in Argentina (excluding equipment sales) amounted to P$19,386 million (+17.5% vs. 1H17), with 54.7% corresponding to mobile internet revenues (vs. 47.2% as in 1H17), as mobile internet revenues amounted to P$10,600 million (+36.3% vs. 1H17). In addition, equipment sales increased by 42.0% vs. 1H17, reaching P$4,798 million, equivalent to 19.8% of total revenues of Personal in Argentina.

The average monthly revenue per user ('ARPU') amounted to P$165.0 during 1H18 (+21.9% vs. 1H17).

As of June 30, 2018, Nextel reached approximately 0.4 million subscribers, where postpaid clients represented 82% of the subscriber base and prepaid clients represented the remaining 18%.

Commercial Initiatives

During the second quarter of 2018 and for mobile clients, the Company presented a special offer in international roaming for winter holidays, with the "Pack Mundo" bonus that includes free WhatsApp and data packs to navigate whenever the client is abroad.

At the same time, the promotion of the update of our clients' devices with discounts and special financing continued, such as the offer presented on Father's Day, and with new releases of innovative terminals, such as the Samsung S9.

As part of the mobile content and related with the new consumption modalities, the Company launched its webseries distribution platform through "Personal Play Webseries", offering short-term premium fiction content, co-productions and other content in this format.

Regarding to actions linked to brand positioning, Personal and Huawei sponsored the launch of Personal Fest 2018, announcing a prominent line up, and the realization of the festival in the cities of Córdoba, Buenos Aires and Asunción (Paraguay).

Personal in Paraguay ('Núcleo')  

As of June 30, 2018, Núcleo's subscriber base reached around 2.4 million clients. Prepaid and postpaid customers represented 83% and 17%, respectively.

Núcleo generated service revenues equivalent to P$2,090 million during 1H18 (+65.0% vs. 1H17). Internet revenues amounted to P$905 million (+55.0% vs. 1H17) representing 43.3% of 1H18 service revenues (vs. 46.1% in 1H17).

Cable TV Services

Cable TV service revenues reached P$13,872 million in 1H18 (+37.2% vs. 1H17). This increase was mainly explained by an up selling of value added services combined with price modifications. Total Cable TV subscribers totaled almost 3.5 million, while the Cable TV ARPU reached P$653.3 during 1H18, rising +26.3% vs. 1H17. Moreover, average monthly churn during 1H18 improved to 1.1%.

In the second quarter of the year, Cablevisión continued adding outstanding titles to its grid of content on demand. Among the most outstanding is: the "El Lobista" co-production, The Handmaid´s Tale and The Terror. In addition, the CINE.AR signal from the National Institute of Cinema and Audiovisuals Arts (INCAA), which broadcasts films, short films, documentaries and the latest news from the national productions, was added to Cablevisión´s high- definition grid.

On the eve of the World Cup in Russia, the Company through Personal and Cablevisión presented a value proposal for customers that included the possibility of watching through Flow the 64 matches of the tournament, without consuming the data of the Personal plan.

Fixed Telephony and Data Services

During 1H18, revenues generated by fixed telephony and data reached P$8,247 million in 1H18, +47.5% vs. 1H17. The increase in fixed telephony services was mainly explained by monthly fee price increases that came into effect for both corporate and residential fixed line customers, and additionally due to the bundled offer of packs that include voice and internet services ('Arnet + Voz'), that aim to achieve higher levels of customer loyalty and churn reduction.

As a result, the average monthly revenue billed per user ('ARBU') reached P$204.8 in 1H18, +45.3% vs. 1H17.

Meanwhile, Data revenues increase (services mainly offered to Corporate customers, SMEs, Government and to other operators) was mainly driven by FX rate variations that affected those contracts that were adjusted by the $/U$S exchange rate and due to the increase in the number of clients, generated in a context that evidence the strong position of Telecom as an integrated ICT provider.

In line with the convergent proposal of services and positioning the company as an integral provider of business solutions, the union of FiberCorp, Personal and Telecom brands was presented through a communication campaign, highlighting the power of the this unification for the segment.

Likewise, as part of the actions of the corporate business, FiberCorp participated for the sixth consecutive year as sponsor and technological partner of the OSDE Open Center in Cordoba, the golf tournament that is part of the PGA Tour Latin America.

Finally, in order to keep supporting the technological and innovative developments that take place in the country, Telecom was a technological supplier of Campus Party, the meeting of innovation, science and entertainment.

Internet Services

Internet services revenues totaled P$14,435 during 1H18, +33.2% vs. 1H17. As of June 30, 2018, total broadband accesses increased to almost 4.1 million (+2.8% vs. 1H17). Additionally, broadband ARPU amounted to P$585.1 per month in 1H18 (+42.0% vs. 1H17). Moreover, the average monthly churn rate for the period remained stable around 1.5%. On the other hand, clients with service of 20Mb or higher currently represent 29% of the total customer base as of 1H18.

Consolidated Operating Costs

Consolidated Operating Costs totaled P$50,525 million in 1H18, an increase of P$9,940 million, or +24.5% vs. 1H17 (including D&A and impairment of PP&E). Continuing with the trend observed during the lasts quarters, this overall increase is below inflation levels and moreover Revenue growth, which allowed a significant increase in the Company's Operating Income before D&A and to improve its margin. This was a result of a higher level of efficiency in the cost structure. Higher costs are mainly associated to the effect of higher revenues, a highly competitive environment in the mobile and Internet businesses, the impact of higher direct and indirect labor costs generated by the operations in Argentina, the increase in costs of services contracted with our suppliers, higher programming and content costs due to cost from the incorporation of broadcasting signals of football matches.

The cost breakdown is as follows:

- Employee benefit expenses and severance payments totaled P$11,054 million (+21.4% vs. 1H17), mainly impacted by increases in salaries to unionized and non‐unionized employees together with the associated social security contributions. Finally, total employees at the end of 1H18 amounted to 26,325 (vs. 26,992 in 1H17).

- Interconnection and transmission costs (including TLRD, Roaming, Interconnection, international settlement charges and lease of circuits) amounted to P$1,974 million, +8.1% vs. 1H17. This increase is mostly explained by higher TLRD costs.

- Fees for services, maintenance, materials and supplies amounted to P$6,239 million (+20.9% vs. 1H17), mainly due to greater fees for services, mostly related to call centers and to higher fees driven mainly by new Company projects and services linked to operational management in general. There were also higher technical maintenance costs and higher hardware and software maintenance costs due to the increase in prices, the FX fluctuations and the higher level of activity.

- Taxes and fees with regulatory authorities reached P$5,235 million (+31.1% vs. 1H17). The increase was mainly due to the growth in sales.

- Commissions and advertising (Commissions paid to agents, prepaid card commissions and others) totaled P$3,818 million (+20.9% vs. 1H17). The increase is mostly due to collections fees and higher advertising charges, offset by a decrease in CPP commissions and commercial channels.

- Cost of handsets sold totaled P$3,596 million (+21.9% vs. 1H17), this increase was for the most part a consequence of higher costs per unit due to the rise in participation of high-end devices.

- Programming and content costs totaled P$4,529 million (+53.4% vs. 1H17), largely due to the incorporation of the cost of signals to broadcast live football matches of the first division of the Argentine Football Association.

- Depreciation, amortization and impairment of PP&E amounted P$9,642 million (+21.6% vs. 1H17). Depreciations of PP&E totaled P$7,667 million, amortizations of intangible assets reached P$1,834 million, while the losses of PP&E reached P$39 million and the impairment of PP&E P$102 million. The higher charge is mostly due to a greater amortization and depreciation of PP&E and intangibles, corresponding to higher values allocated to the aforementioned assets resulting from the acquisition method under IFRS 3.

- Other Costs totaled P$4,438 million (+26.6% vs. 1H17), of which bad debt expenses reached P$1.273 million (+37.3% vs. 1H17), and whose increase is mainly due to the impact generated by the application as of the FY2018 of IFRS 9, partially offset by greater efficiency in the delinquency management, as well as other operating costs that totaled P$3,165 million, increasing by 22.8% vs. 1H17.

Net Financial Results

The Net Financial Results (including Financial Costs on Debt and Other Financial Results, net) showed a loss of P$20,847 million, compared with a loss of P$1,422 million in 1H17. The result was mainly due to FX losses of P$19,882 million (compared with a loss of P$696 million in 1H17), mostly due to the strong depreciation of the peso during the 1H18, followed by net interest losses of P$1,001 million (representing a greater loss of P$856 million vs. 1H17), which are partially offset by gains on investments of P$655 million (that generated greater earnings of P$682 million vs. 1H17).

Consolidated Net Financial Debt

As of June 30, 2018, net financial debt position (cash, cash equivalents plus financial investments and financial NDF minus loans) totaled P$48,526 million,
increasing when compared to the consolidated net financial debt position as of December 31, 2017 (calculated as the sum of consolidated net financial debt positions of Telecom Argentina and Cablevisión, which was P$9,580 million).

Capital Expenditures

During 1H18, the Company invested P$14,237 million, increasing approximately 34.8% from the sum of the parts of Telecom Argentina's and Cablevisión's CAPEX as of 1H17, focusing on projects that maximize the network capacity and on the development of products and services that contribute to address the customer's needs that today demand for connectivity and data availability. Moreover, transmision and transport networks has been extended to unify the differents access technologies, reconverting the copper fixed networks into fiber or coaxial-fiber  hybrid networks, in order to face the the increaseing services demand from mobile and fixed clients.  Likewise, significant investments have been made in the charging, billing and relationship systems with customers. In relative terms, CAPEX reached 22.2% of consolidated revenues.

In terms of infrastructure, the deployment of the 4G/LTE network continued throughout the country, reaching more than 1,400 cities, including all the capital cities of the provinces, reaching 11.1 million customers with 4G devices.

Simultaneously, anticipating the technological evolution, Personal and Nokia conducted a test of the 5G network under controlled environments, which achieved speeds of 10Gbps.

Relevant Matters

Acquisition of the entire remaining shares of the controlled company CV Berazategui S.A.

On April 4, 2018, Telecom Argentina informed that it had acquired representative shares of 30% of the social capital and votes of the company CV Berazategui S.A. ("CV Berazategui"), constituted in the Argentine Republic, for a total amount of US$ 8,968,000.-

The remaining 70% of the social capital and votes of CV Berazategui are owned by PEM S.A., company controlled by Telecom Argentina.

CV Berazategui is a licensee of Broadcasting Services provided by Subscription through Physical Link, license which was originally granted by Resolution N°630/COMFER/91, and provides the service in the Berazategui Department, Province of Buenos Aires to 21,392 Cable TV (CATV) subscribers and 7,190 broadband subscribers.

Contract with Vodafone

On June 14, 2018 Telecom Argentina announced the signature of a contract of strategic cooperation with Vodafone Sales & Services Limited ("Vodafone"), company with headquarters in the United Kingdom, which will allow Telecom Argentina to delineate its business strategies from sharing the best practices of a global reach telecommunications operator as it is Vodafone.

Merger by Absorption between Telecom Argentina S.A. (the Surviving Company) and Cablevisión S.A. (the Absorbed Company) – Resolution of the Secretary of Commerce

On June 29, 2018 Telecom Argentina was notified that the economic concentration operation which consists in the merger by absorption of Cablevisión S.A. ("Cablevisión"), as absorbed company, by Telecom Argentina, as surviving company, has been authorized by the Commerce Secretary in the terms of the item a) of the Section 13 of the Law N° 25,156 by means of the Resolution N° 374 APN-SECC#MP dated June 29, 2018, which was notified today, by which it was resolved, among others:

"SECTION 1.- (relevant part) Approve the assignment of ONE HUNDRED FORTY-THREE THOUSAND FOUR HUNDRED SIXTY-FOUR (143.464) residential clients from the internet service that is provided through the Arnet brand to the firm UNIVERSO NET S.A. implemented through FIVE (5) definitive contracts already signed (…), and in virtue of it, authorize in the terms of the subsection a) of the Article 13 of the Law N° 25,156 the merger operation by which TELECOM ARGENTINA S.A. absorbs CABLEVISIÓN S.A.

SECTION 2. - Accept the commitment of conduct submitted on May 21, 2018 by CABLEVISIÓN S.A., CABLEVISION HOLDING S.A., TELECOM ARGENTINA S.A. and FINTECH TELECOM LLC. (and as a continuation company of FINTECH MEDIA LLC.), which as an annex of joint signature N° IF-2018-30740468-APN-CNDC#MP forms an integral part of the majority opinion N° IF2018-30780664-APN-CNDC#MP, whereby TELECOM ARGENTINA SA "undertakes to limit until January 1, 2019, or until the possibility of requesting the registration of television by satellite subscription is enabled for all operators of ICT services, whichever comes first of these two events, the integrated marketing of the service of Television by Subscription by means of a physical link with the Mobile Communications service in all those locations where the Television by Subscription service is provided to date by means of physical link", understood as integrated commercialization "exclusively to the joint sale of the services indicated in the previous paragraph (Television by Subscription by physical link and Mobile Communications) with a single tariff or a single invoice", offering additionally " to extend the term of the limitation (...) until July 1, 2019, or until the possibility of requesting the satellite subscription television registration in enabled for all operators of ICT services, whichever comes first, in those locations where they provide the service of Subscription Television to date by means of a physical link excluding Area II, as defined in the provisions of Decree No. 1461/93 as amended, and the cities of Rosario, Province of Santa Fe and Córdoba, Province of Córdoba", clarifying that the "extension of the term offered will automatically cease, when in the same location, another provider makes an integrated offer of the Subscription Television Service through physical link with the Mobile Communications service."

SECTION 3. - Accept the commitment of conduct submitted on May 21, 2018 by CABLEVISIÓN S.A., CABLEVISION HOLDING S.A., TELECOM ARGENTINA S.A. and FINTECH TELECOM LLC. (and as a continuation company of FINTECH MEDIA LLC.), which as an annex of joint signature N° IF-2018-0740468-APN-CNDC#MP forms an integral part of the majority Opinion N° IF2018-30780664-APN-CNDC#MP, whereby TELECOM ARGENTINA S.A. "is committed to offering the possibility that any current or new ISP can provide the retail broadband service from the leverage of the use of its copper network under ADSL technology," stating that "this wholesale offer is open to any ISP under the same commercial conditions with the purpose of allowing them to offer products with speeds up to 6MB in all the capillarity of the cooper network of TELECOM" and that "only the 28 locations in which TELECOM divested the customers of the fixed broadband service that renders under the ARNET brand are excluded from this offer", clarifying that "this commitment allows any ISP to offer products with speeds up to 6MB in all the capillarity of the copper network of TELECOM" and that "the ISP will be able to offer its service with the same processes, systems and technological infrastructure that TELECOM uses for its final clients (such as Dslams and international departure)", according to the document that they have denominated as "Reference Offer of Wholesale Contract" which was attached and acts as Annex of joint signature N° IF-2018-30740468-APN-CNDC#MP to the referred Opinion."

*******

Telecom Argentina is the parent company of a leading telecommunications group in Argentina, where it offers, either itself or through its controlled subsidiaries local and long distance fixed-line telephony, cellular, data transmission, and pay TV and Internet services, among other services. Additionally, Telecom Argentina offers cellular services in Paraguay and pay TV services in Uruguay. The Company commenced operations on November 8, 1990, upon the Argentine government's transfer of the telecommunications system in the northern region of Argentina.

As of August 8, 2018, Telecom Argentina has 2,168,909,384 shares issued and 2,153,688,011 shares outstanding.

For more information, please contact Investor Relations:

Solange Barthe Dennin

(5411) 4968 3752

Luis F. Rial Ubago

(5411) 4968 3718

Nahuel Monsalvo

(5411) 4698 4448


Voice Mail: (5411) 4968 3628
Fax: (5411) 4968 3616
E-mail: relinver@teco.com.ar

For information about Telecom Argentina's services, visit:
www.telecom.com.ar 
www.personal.com.ar 
www.personal.com.py 
www.arnet.com.ar 
www.cablevisionfibertel.com.ar 
www.nextel.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:
Solange Barthe Dennin
(54 11) 4968-3752

 

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SOURCE Telecom Argentina S.A.

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