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Telecom Argentina S.A. Announces Consolidated Annual Period (‘FY10’) and Fourth Quarter Results for Fiscal Year 2010 (‘4Q10’)*

BUENOS AIRES, Argentina Feb. 22, 2011

  • Argentina
  • Argentina
  • Argentina
  • Mobile ARPU reached P$44 in FY10 (+9% vs. FY09) and P$49 in 4Q10 (+17% vs. 4Q09).
  • ADSL ARPU increased to P$76 in FY10 (+15% vs. FY09); churn decreased to 1.4% from 1.8% in FY09.
  • Operating Profit Before Depreciation and Amortization ("OPBDA") reached P$4,555 million (+17% vs. FY09), 31% of Net Revenues.
  • Operating Profit amounted to P$3,201 million (+16% vs. FY09).
  • Net Income reached P$1,821 million (+30% vs. FY09).
  • Net Cash Position: P$1,224 million, an increase of P$755 million vs. FY09 after having paid P$1,053 million in dividends in FY10.

(in million P$, except where noted)

As of December, 31

2010

2009

Change $

Change %

Consolidated Net Revenues

14,679

12,226

2,453

20%

           Voice, Data and Internet

4,640

4,157

483

12%

           Mobile

10,039

8,069

1,970

24%

Operating Profit before D&A  

4,555

3,900

655

17%

Operating Profit  

3,201

2,762

439

16%

Net Income

1,821

1,405

416

30%

Shareholders’ equity  

6,237

5,436

801

15%

Net Financial Position – Cash

1,224

469

755

161%

CAPEX (excluding materials)

1,974

1,703

271

16%

Fixed lines in service (in thousand lines)

4,107

4,060

47

1%

Mobile customers (in thousand)

18,212

16,281

1,931

12%

           Personal (Argentina)

16,333

14,475

1,858

13%

           Nucleo (Paraguay) -including Wimax customers-

1,878

1,806

73

4%

Broadband accesses (in thousand)

1,380

1,214

166

14%

Fixed line traffic (in MM minutes, Internet & Public Telephony not incl.)

15,317

15,644

(328)

-2%

Incoming/Outgoing mobile voice traffic in Arg.(in MM minutes)

18,830

16,461

2,369

14%

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

43

41

1.9

5%

Average Revenue per user (ARPU) Cellular Telephony Arg. (in P$)

44

41

3.8

9%

Argentina Argentina December 31, 2010

During FY10, Consolidated Net Revenues increased by 20% (+P$2,453 million vs. FY09) to P$14,679 million, mainly fueled by the Mobile and Broadband businesses. Moreover, Operating Profit increased by 16% (+P$439 million vs. FY09) to P$3,201 million.

Consolidated Operating Revenues

Mobile Services

December 2010 December 31, 2009

The activities developed to increase the usage of the value added services ("VAS") and to retain high value segments allowed Personal to increase consolidated net revenues to P$10,039 million (+24% vs. FY09).

Argentina

December 31, 2010 Argentina

In FY10, Net Revenues reached P$9,501 million (+P$1,873 million or 25% vs. FY09) while Service Revenues (excluding handset sales) amounted to P$8,483 million (+24% vs. FY09), with 40% corresponding to value-added services (‘VAS’) revenues. VAS revenues increased vs. FY09 by 46%.

During FY10, the overall voice traffic minutes increased by 14% vs. FY09. Meanwhile, SMS traffic performance (charged incoming and outgoing messages), climbed to 4,614 million in FY10 from a monthly average of 3,034 million messages in FY09 (+52% vs. FY09). Due to this increase in traffic and VAS usage, Average Monthly Revenue per User (ARPU) increased to approximately P$44 during FY10 (+9% vs. FY09) meanwhile ARPU in 4Q10 reached P$49 (+17% vs. FY09).

Initiatives

During the last quarter of the year, Personal continued to extend its Personal Black portfolio incorporating exclusive handsets (such as Motorola Milestone II, Motorola Defy and Nokia N8, among others) and the launching of new promotions to its subscribers. In this sense, the focus on market position and innovation in Smartphones leverage by its strategy of Personal Black, allowed Personal to lead in Smartphones handsets sales with more than 53% of participation.

Furthermore, with the consolidation of the 3G network, that already covers 82% of population, Personal continued launching different connectivity plans that provide alternatives for the need of each client type with limited time or data volume packages, both for 3G modems and handsets.

Mother’s Day

During FY10, Personal continued with its strategy of fostering benefits such as service packs and recharges to its client base (double and triple credit).

Finally, Personal presented the second experience in development and investigation in fourth generation technology (4G) in the country. With Personal 4G, high definition video streaming tests, video calls, high speed files transfers, among others services were tested, where speeds of 50 Mb per second were exceeded. In this way, Personal continued to be distinguished as pioneer in innovation by offering the new technologies that would revolutionize mobile services.

Paraguay

December 2010

Paraguay

Fixed Services (Voice, Data Transmission & Internet)

During FY10 revenues generated by fixed services amounted to P$4,640 million, +12% vs. FY09; with internet revenues growing in relative terms the most in this segment (+30% vs. FY09), followed by Data (+23% vs. FY09).

Voice

Total revenues for this service reached P$2,928 million in FY10 (+4% vs. FY09). The results of this line of business continue to be affected by frozen tariffs of regulated services and lower interconnection revenues.

Monthly Charges and Supplementary Services increased by P$42 million, or 5% vs. FY09, to P$884 million, as a consequence of a higher number of lines in service (+1%), which surpassed 4.1 million, and a 17% increase in supplementary services.

Revenues generated by Local and Domestic Long Distance Measured Services and International Services totaled P$1,341 million, an increase of P$66 million or 5% vs. FY09. In relative terms, revenues from local calls increased the most, with 9% vs. FY09, mainly due to the incorporation of flat rate packs and, secondly, by domestic long distance traffic (+5% vs. FY09). Meanwhile, revenues from international services remained at similar levels, compared to the same period from last year.

Interconnection revenues decreased to P$435 million (-3% vs. FY09), mainly due to lower traffic derived by the incorporation of new interconnection points with mobile operators.

Public telephony decreased to P$61 million (-P$9 million vs. FY09). Finally, other revenues totaled P$207 million (+9% vs. FY09) mainly due to higher income related to billing and collection services and fixed line equipment sales.

During FY10, the Company launched new Aladino handsets, coupled with more services to continue innovating in fixed services.

Data Transmission and Internet

Data transmission revenues amounted to P$338 million (+23% vs. FY09), where the focus was to strengthen Telecom’s position as an integrated ICT provider.

During FY10 the Virtual Central service was launched, a communications platform that combines the traditional PBX service (Transfers, rerouting of calls and redials) with advanced functions that incorporate the integration with IT tools. This IP technology based service allows savings in infrastructure costs and also updates clients’ communications.

During the 4Q10, commercial offers to promote Data services were intensified in the SMEs segment. As a result, there was an annual increase of 42% in Internet and Virtual Private Networks (VPN) accesses. In this period, sales from ArnetBIZ Plus offered to professionals and businesses through a connection experience, proprietary inbox domain and presence in the web, increased by 68% vs. FY09.

Revenues related to Internet totaled P$1,374 million (+P$316 million or 30% vs. FY09), mainly due to the continued expansion of broadband services.

December 31, 2010

Internet en Todo

Following this initiative of promoting Internet as the main communication tool, the bundling offer Arnet 3 Mb Wi-Fi at home plus Arnet Mobile was launched during the 4Q10.  More than 15% of Arnet Broadband customers hired also Arnet Mobile.

To motivate the online sales channel, specific offers as Pack Arnet (Internet plus local calls) were launched and well accepted: in 4Q10 more than 50% of broadband adds occurred packed with local calls.

Consolidated Operating Costs

The Cost of Services Provided, Administrative Expenses and Selling Expenses totaled P$11,478 million in FY10, an increase of P$2,014 million, or +21%, vs. FY09. The increase is a consequence of higher commercial costs due to a higher volume of revenues, inflationary effects on the general cost structure, and greater expenses related to competition in the industry.

The cost breakdown is as follows:

  • Salaries and Social Security Contributions totaled P$1,880 million (+25% vs. FY09), mainly affected by increases in salaries due to the new labor agreement and the increase in employees. Regarding personnel, in the same period the incorporation of 563 employees in the mobile business was partially compensated by the decrease in headcount in the fixed line business (-234 employees vs. FY09). Total headcount at the end of the period was 15,629 employees.
  • Taxes reached P$1,261 million (+26% vs. FY09), impacted by higher rates in turnover taxes and higher municipal and provincial rates and fees paid to regulatory entities that mainly were influenced by a higher volume of revenues. It was also affected by taxes related to debit and credit tax associated to the dividend payment and the cancellation of the Notes of Telecom Personal.
  • on-net
  • Agents, prepaid card commissions and other commissions were P$1,286  million (+20% vs. FY09), mainly due to the increase in commissions paid to commercial agents associated with higher revenues from more sophisticated handsets, higher costs associated with a higher volume of acquisitions and retention of customers and higher cards sales and prepaid recharges.
  • Advertising amounted to P$451 million (+25% vs. FY09), oriented towards supporting the commercial activity in mobile and Internet services and to strengthen the Telecom Group brand position.
  • Cost of handsets sold totaled P$1,541 million (+36% vs. FY09) due to a change in the mix of handset sold, increased sales of high-end handsets and a higher number of handsets upgrades, this to stimulate VAS usage. These effects resulted in the increase of the average cost of handsets. Additionally, this was affected by the increase in Internal Tax, better known as the Technological Tax.
  • $663 million
  • Depreciation of Fixed and Intangible Assets reached P$1,354 million (+19% vs. FY09). Fixed-line telephony totaled P$719 million (+8% vs. FY09) and mobile services totaled P$635 million (+34% vs. FY09), due to higher investment in fixed assets.
  • Others Costs totaled P$1,652 million (+19% vs. FY09). This increase was mainly due to general increases in services such as maintenance, materials and supplies, transportation, freight, and rental expenses. The decrease in bad debt expenses of 9% vs. FY09 is notable. There was also an increase in cost related to VAS, such as content offers, similar to that evidenced in recent periods.

Consolidated Financial and Holding Results

Financial and Holding Results resulted in a loss of P$34 million, a decrease of P$295 million vs. FY09. This was mainly due to losses for FX results of P$99 million in FY10 (losses of P$211 million vs. FY09); and a gain in net financial interest of P$68 million in FY10 (+P$84 million vs. FY09), partially compensated by losses in holding on inventories by P$15 million in FY10 (+P$8 million vs. FY09).

Consolidated Net Financial Position

December 31, 2010 December 2009

US$173 million

Consolidated Capital Expenditures

During FY10, the Company invested P$1,974 million (excluding materials). This amount was allocated to Voice, Data and Internet businesses (P$943 million) and Mobile services (P$1,031 million). In relative terms, capex reached 13% of net consolidated revenues.

Main capex projects are related to the deployment of 3G services to support the growth of mobile Internet together with the launch of innovative VAS. Moreover, with these investments, the Company foresees the expansion of ADSL services to improve transmission and speed available to clients together with the expansion of backhaul networks to meet the growing services demand of our fixed and mobile clients.

Other Relevant Matters

November 30, 2010

Recent Relevant Matters

The Board of Directors of Telecom Argentina proposed to the Shareholders’ Meeting a cash dividend payment proposal of P$915.5 million (equivalent to P$0.93 per share).

Complementary Information –IFRS

With the aim to provide complementary information, in Annexes 9 and 10 of this release a detail of the Income Statement and Shareholders’ Equity under the new International Financial Reporting Standards ("IFRS") were included.

Additional information on the application of IFRS is included in Note 14 of the Consolidated Financial Statements.

Argentina Paraguay November 8, 1990 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 whose common stock (approximately 68% of capital stock) is owned by Sofora Telecomunicaciones S.A. Additionally, Nortel’s capital consists of preferred shares held by minority shareholders.

December 31, 2010

(*) Employee Stock Ownership Program

For more information, please contact the Investor Relations Department:

Pedro Insussarry

(5411) 4968 3743

Solange Barthe Dennin

(5411) 4968 3752

Ruth Fuhrmann

(5411) 4968 4448

Horacio Nicolas del Campo

(5411) 4968 6236

Voice Mail: (5411) 4968 3628

Fax: (5411) 4968 3616

E-mail: [email protected]

For information about Telecom Group services, visit:

www.telecom.com.ar

www.personal.com.ar

www.personal.com.py

www.arnet.com.ar

Disclaimer

Argentina Argentina Argentina

Enrique Garrido

Chairman

Contacts:

Pedro Insussarry

Solange Barthe Dennin

(54-11) 4968-3743/3752

SOURCE Telecom Argentina

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