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

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Telecom Argentina S.A. (NYSE:TEO)

Q2 2014 Earnings Conference Call

July 31, 2014 11:00 AM ET

Executives

Stefano de Angelis – Chief Executive Officer

Adrian Calaza – Chief Financial Officer

Pedro Insussarry – Financial Director

Solange Barthe Dennin – Manager of Investor Relations

Presentation

Operator

Good day everyone, and welcome to the Telecom Argentina TEO Second Quarter 2014 Earnings Conference Call. Today’s conference is being recorded. Participating on today’s call, we have Mr. Stefano de Angelis, Chief Executive Officer of Telecom Argentina; Mr. Adrian Calaza, Chief Financial Officer; Mr. Pedro Insussarry, Financial Director and Ms. Solange Barthe Dennin, Manager of Investor Relations.

At this time, I’ll turn the call over to Mr. Pedro Insussarry, Please go ahead.

Pedro Insussarry

Okay. Thank you, Greg and good morning to everybody on behalf of Telecom Argentina I would like to thank you for participating in this conference call. As stated, the purpose of this call is to share with you the consolidated results of the Telecom Argentina Group that correspond to the first half of 2014 and ended on last June 30.

We would like to remind all those that have not received our press release or presentation, you can call our Investor Relations office to request the documents or download them from the Investor Relations section of our website located at www.telecom.com.ar/investors. Additionally, this conference call and slide presentation 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 traditional quarterly conference calls, we would like to clarify that during the conference call and Q&A session, we may produce 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 the public emergency law and complementary regulations, the effects of ongoing industry and economic regulation, possible changes in demand for Telecom products and services, and effects of marginal factors such as changes in general markets or economic conditions in legislation or in regulations.

Our press release dated July 29, 2014, a copy of which was included in the Form 6-K report 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 first go over our general market overview, followed by the discussion of the business highlights, an overview of our financial figures and finally, we will end the call with a Q&A session as we normally do with 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 a snapshot of the current Argentine macroeconomic environment. The second quarter of this year confirms the slowdown trend in the economic activity with a strong deceleration in the rest of the production that caused a domino effect in other sectors like retail wholesale commerce, transport and communication and manufacturing industry.

On the contrary the increase in interest rates contributes to growth of financial interrogation sector, and a good harvest season in the quarter supports the growth of the agricultural sector. This is not enough to offset the decline in the economy. Moreover, the level of potential was affected by these factors together with the decrease in real wages.

During the second quarter of 2014, new economic measures were implemented to support, for example, car sales mainly impacted by the decline in exports. We can say that after strong decline at the beginning of the year, the consumer confidence index showed a stable performance. Nevertheless, the decline in supermarket sales reached negative 1.3% in the first half of 2014, and in June specifically a decrease of 4.3%.

Additionally, the new CPI index reached a cumulative 15% in the first half of the year, in that the context, the collective bargaining agreements were settled rate increases on average of 31%. On the monetary front, some measures to reduce the loan interest rates and to mitigate the negative impact in the economy were taken. Moreover, central bank reserves showed a decrease of 21% year-on-year, but increasing since last April, mainly as a consequence of the liquidation of the liquidation of exports of the soybean harvest.

After having gone through this introduction of the macro context, let me pass the call to our CEO, Mr. Stefano de Angelis. Who will go over the business highlights. Stefano.

Stefano de Angelis

Thank you, Pedro. And good morning to everyone. Please refer to Slide 5 where we have a summary of the main achievements for the quarter. Our business continued with a similar revenue expansion trend registered in the recent quarters, achieving a 23% increase driven by the growth of 56% in mobile internet in Argentina. 55% growth in data and 26% increase in fixed broadband. In terms of clients, it is worth mentioning that as a result of our entrance strategy, during the quarter market penetration reached 30% of the total subs, while the mobile 3G customer base in Argentina continue to increase accounting 9.4 million.

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