Telecom Argentina Stet - France Telecom S.A. (TEO)

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Telecom Argentina S.A. (TEO)

Q3 2013 Earnings Conference Call

October 31, 2013 11:00 AM ET

Executives

Pedro Insussarry – Director-Finance and Head-Market Relations

Stefano de Angelis – Chief Executive Officer

Adrián Calaza – Chief Financial Officer

Analysts

San Dhillon – Barclays Capital Securities Ltd.

Michel Morin – Morgan Stanley & Co. LLC

Rodrigo Villanueva Bravo – Merrill Lynch

Presentation

Operator

Good day everyone, and welcome to the Telecom Argentina Third Quarter 2013 Earnings Conference Call. Today’s call is being recorded. Participating on today’s call, we have Stefano de Angelis, Chief Executive Officer of Telecom Argentina; Adrian Calaza, Chief Financial Officer; Guillermo Rivaben, Director of Mobile Business Unit; Solange Barthe Dennin, Manager of Investor Relations Division.

And now I would like to turn the call over Pedro Insussarry, Head of Finance. Please go ahead.

Pedro Insussarry

Okay, thank you Ann. As Ann just mentioned, the purpose of this call is to share with you the consolidated results of Telecom Argentina Group that correspond to the nine-months period of 2013 ended on September 30.

We would like to remind you that for all those that have not received our press release or presentation, they can call our Investor Relations office to request such documents or download them from the Investor Relations section of our website at www.telecom.com.ar/investors. Additionally, this conference call is being broadcasted through the webcast feature available in subsection and can also be replayed through this same channel.

Before we continue with the conference call, I would like to go over some Safe Harbor information and other details of the call, as we usually do in our quarterly conference calls. I would like to clarify that during the conference call and Q&A session, we may produce certain forward-looking statements about Telecom’s future performance, plans, strategies and targets. Such statements are subject to uncertainties that could cause Telecom’s actual results and operations to differ materially.

Such uncertainties include, but are not limited to the effects of public emergency law and complementary regulations, the effects of ongoing industry and economic regulation, possible changes in demand for Telecom products and services, and the effect of marginal factors such as changes in general markets or economic conditions in legislation or in regulations.

Our press release dated October 30, 2013, a copy of which is being included in the Form 6-K report to be furnished to the SEC, describes certain factors that may affect any forward-looking statements that we may produce during this session. Furthermore, we urge the audience of this conference call to read the disclaimer clause contained in Slide 1 of the presentation.

The agenda for today’s conference call as seen in Slide 2 is to go over the general market overview, followed by the discussion of the business highlights, a review of our financial figures and finally, we will end the call with a Q&A session that we normally do to the financial community

Having gone through these procedural matters, I’ll now go over a brief macro overview as an introduction to the general operating environment.

Please refer to Slide 3 of the presentation where we included some snapshots on the current Argentine macroeconomic environment. Levels of economic growth showed some signs of recovery, but at lower pace than that evidenced in recent quarters led by an upturn in the agricultural and construction sectors.

During this quarter, industrial construction was impacted by a reduction in car maker exports, but other sectors such as non-metallic mineral products continued to sustain growth trends. Commodity prices showed some adjustments, but the industrial production and public construction pushed the commercial activity up.

In the third quarter of 2013, real wages decreased, while private consumption remained stable, thanks to the income tax reduction, the expansion in public social expenditures and the increase in consumer lending. Moreover a slightly more positive consumer confidence was perceived during the quarter when compared to that registered 12 months ago.

On the external front, like I mentioned, despite increases in agricultural exports, rise in energy imports continue to effect the trade balance. The official exchange rate accelerated at deprecation pace, while continuity slightly improved external competitiveness.

Finally, tax collection postponed revenues up, however public expenditures continue to grow at the higher pace, deteriorating physical balance. Moreover, the assistance on the Central Bank to service debt and from the public pension fund system continued during the period.

Having gone through these significant reduction of the macro context in which we operate, let me pass the call to our CEO, Stefano de Angelis will go over the business highlights.

Stefano de Angelis

Thank you Pedro. Good morning to everyone. Please refer to Slide five, where we show the business highlights for the nine months period of the year. On the Mobile business, we continue to lead in the market in terms of revenue share, while we have optimized our commercial cost structure.

In terms of resources, we have focused our efforts in service quality improvement, strengthening 3G and the other access capacity. It is also worth mentioning that 3G penetration reached 41% of our customer base, while we had a remarkable performance in smartphone sellouts that reached 65% of total devices sold.

Regarding the fixed business, again note that we continued with the FTTx deployment to enrich our value proposition. It is remarkable that 19% broadband ARPU increased in the third quarter and the positive trend in quarterly net add both in fixed lines and broadband access through a significant improvement in provisioning of services.

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