| |
Transaction |
Six-month
period
ended
June 30, |
| |
|
2022 |
2021 |
| |
|
Profit
(loss) |
| |
|
Revenues |
| Other
Related parties |
Services
and advertising revenues |
175 |
208 |
| |
|
175 |
208 |
| |
|
Operating
costs |
| Other
Related parties |
Programming
costs |
(2,541) |
(2,757) |
| Other
Related parties |
Editing
and distribution of magazines |
(492) |
(599) |
| Other
Related parties |
Advisory
services |
(350) |
(423) |
| Other
Related parties |
Advertising
purchases |
(166) |
(344) |
| Other
Related parties |
Other
purchases and commissions |
(105) |
(126) |
| |
|
(3,654) |
(4,249) |
The
transactions discussed above were made by Telecom under the same conditions than would have been obtained from unaffiliated third
parties. When Telecom’s transactions represented more than 1% of its total shareholders’ equity, they were approved
according to Law No. 26,831, the Bylaws and the Executive Committees’ Faculties and Performance Regulation.
TELECOM
ARGENTINA S.A.
NOTE
25 – RESTRICTIONS ON DISTRIBUTION OF PROFITS
Under
the LGS, the by-laws of the Company and rules and regulations of the CNV, a minimum of 5% of net income for the year in accordance
with the statutory books, plus/less previous years’ adjustments and accumulated losses must be appropriated by resolution
of the shareholders to a legal reserve until such reserve reaches 20% of the outstanding capital (common stock) plus inflation
adjustment of common stock.
NOTE
26 – ECONOMIC ENVIRONMENT
The
Company operates in a complex economic environment, with a strong volatility in the main variables, both at the national and international
level.
Since
the World Health Organization declared COVID-19 a global pandemic on March 11, 2020, governments around the world, and in particular
the Argentine Government, have put in place various measures throughout the years 2020 and 2021 to curb the spread of the virus.
The implementation of such measures led to a marked decline in production levels and economic activity.
During
the first half of 2022, given the considerable decline in infection levels thanks to the large-scale vaccination campaigns that
reached the whole population, and that the current cases mostly entail mild symptoms, the Ministry of Health issued Resolution
No. 705 which waived the obligation to keep social distancing, establishing recommendations for general care at work, educational
and social environments and at public transport, which include the use of face masks and ventilation in indoor settings.
On
the other hand, the international conflict that started in March 2022 between Ukraine and Russia also led to a fall in financial
markets, an increase in the prices of raw materials and certain commodities (for example wheat and oil, among others), causing
an increase in inflation rates, fluctuations in the exchange rate of foreign currencies, and an increase in interest rates.
At
the national level, the impact of the situation described above and the prevailing political conditions had an adverse effect
on the Argentine economy in general and on the stock market in particular, mainly causing:
| i) | an
inflationary acceleration and higher devaluation of the Argentine peso, being the inflation
rate for the six-month period of 36.2% and the variation of the Banco Nación Divisas
$/US$ exchange rate of 21.9%; for the six-month period; |
| ii) | volatility
in the stock market in which the Company operates. The market price of its shares in
nominal values increased by 12.0% half-yearly, while in constant currency it decreased
by 17.8%, due to the fact that the market price of shares is not usually directly affected
by the inflation (It is important to note that the value of the shares has begun to recover
at the date of presentation of these unaudited consolidated financial statements); |
| iii) | greater
exchange restrictions on the access to the FX Market (MULC, for its Spanish acronym),
which could affect the Company's ability to access it and also affect the value of foreign
currency in existing alternative markets. The gap as of June 30, 2022 between the MULC
and the existing alternative markets (Electronic Payment Market “MEP dollar”)
amounts to 97.5%; and |
| iv) | an
increase in country risk and interest rates. |
These
situations generate various consequences in the economic and financial situation of Telecom, such as a decrease in sales revenues
(given the impossibility of transferring accumulated inflation to prices) and increases in labor costs that follow the inflationary
increase, despite the efforts of the Company in reducing its costs. This results in operating loss as of June 30, 2022 of $8,535
million, compared to a profit of $8,698 million as of June 30, 2021, showing a total decrease of $17,233 million.
On
the other hand, it is worth mentioning that, as mentioned in previous paragraphs, given that the market price of the company's
shares does not directly follow the inflationary increase, the Company value may occasionally be lower than the equity book value.
This occurs mainly because fixed assets increase their values based on the inflation rate.
The
fact that these situations are maintained and last over time, may imply the need to review the valuation of fixed assets.
Consequently,
the Company's Management will continue to permanently monitor the evolution of the aforementioned situations and the evolution
of the variables that affect its business in order to determine the potential impacts on its economic and financial position.
Therefore, the Company's unaudited consolidated financial statements must be read in the light of these circumstances.
TELECOM
ARGENTINA S.A.
NOTE
27 – RECENT DEVELOPMENTS CORRESPONDING TO THE SIX-MONTH PERIOD ENDED JUNE 30, 2021
| a) | Decree
No. 690/20 - Amendment to the LAD |
On
August 22, 2020, the PEN issued Decree No. 690/20 (“Decree N° 690/20”) amending the LAD. Decree No. 690/20 declared
ICT Services (which includes fixed and mobile telephony services, cable television and Internet) as well as access to telecommunications
networks for and between licensees as “essential and strategic competition public services”, and empowered the ENACOM
to ensure accessibility.
Decree
No. 690/20 further established that the prices of: (i) the essential and strategic competition public ICT Services, (ii) the prices
of those services provided in accordance with the Universal Service and (iii)the prices of those services determined by the ENACOM
for public interest reasons, shall be regulated by ENACOM.
Moreover,
Decree No. 690/20 established that ENACOM is the agency responsible for the enactment of any regulation related to the ICT’s
PBU.
Finally,
Decree No. 690/20 suspended any price increases or changes set or announced by the ICT’s licensees from July 31, 2020 to
December 31, 2020.
Decree
No. 690/20 has been ratified by the Argentine Congress under Law No. 26,122 and has been regulated through ENACOM Resolutions
No. 1,466/20 and 1,467/20.
Resolution
No. 1,466/20 allowed ICT licensees providing Internet access services, subscription broadcasting services through physical, radio-electric
or satellite link, fixed telephony services and mobile telecommunications services -in all cases in their different and respective
modalities- to increase retail prices for services up to 5% during January 2021. In order to establish the percentages approved,
licensees must consider the prices effective as of July 31, 2020 as the price of reference. Such Resolution also provides that
ICT Services Licensees may request a higher increase on an exceptional basis in accordance with the provisions of Section 48 of
the LAD.
Resolution
No. 1,467/20 regulated the Compulsory Universal Telecommunication Service (“PBU”) provided by Decree No. 690/20 for
the different services provided by ICT licensees, establishing the price and the characteristics of each service plan, namely:
| ● | PBU-SBT:
Compulsory Universal Provision of Basic Fixed Telephony Service; |
| ● | PBU-SCM:
Compulsory Universal Provision of Basic Mobile Communication Service; |
| ● | PBU-I:
Compulsory Universal Provision of Basic Internet Access Value Added Service; |
| ● | PBU-TP:
Compulsory Universal Basic Provision of subscription television services by physical
or radio-electric or satellite link. |
The
Company began to implement an increase in prices as from January 2021, in order to match the increase in its costs due to the
inflation. Nevertheless, it failed to transfer to the price of its services the inflation accumulated in the period March-December
2020, as a result of different measures provided by the PEN. Additionally, the Company initiated legal proceedings before the
Federal Court of Appeals on Administrative Litigation Matters challenging the constitutionality of Decree No. 690/20 and the aforementioned
ENACOM Resolutions, which was notified to the PEN on October 7, 2021.
In
this context, the Company sought to obtain a precautionary measure suspending the application of the aforementioned ENACOM regulations
and Decree No. 690/20. On January 29, 2021, the Company´s petition was denied and the precautionary measure rejected. The
Company appealed such decision and, on April 30, 2021, the Chamber of the Federal Court of Appeals on Administrative Litigation
Matters decided by majority to accept the Company’s appeal, revoke the first instance court’s decision and, consequently,
grant the preliminary injunction requested by the Company, ordering the suspension of the effects of sections 1, 2, 3, 4, 5 and
6 of Decree No. 690/20 and of ENACOM resolutions provided as a consequence and their non-applicability to the Company. This preliminary
injunction was initially granted for a period of six months and then extended for an additional six-month period until April 21,
2022, and an additional six-month period until October, 2022. As supported by the preliminary injunction granted, the Company
increased the prices of its services in order to continue to match the increase in its costs due to the inflation.
In
reaching its decision, the Court considered, that the “configuration of circumstances prima facie lead to serious and
founded questioning of Decree 690/2020's reasonability standard and legitimacy and of ENACOM's resolutions adopted as a consequence,
due to the direct adverse effects they have on Telecom Argentina's property rights, which derive from Information and Communication
Technology services provision, under a free competition system, ruled, authorized and granted (depending on the case), by the
National State itself”.
The
PEN and ENACOM filed appeals against the aforementioned decision of the Federal Court of Appeals on Administrative Litigation
Matters, which were denied on June 18, 2021.
TELECOM
ARGENTINA S.A.
On
June 29, 2021, the PEN and ENACOM filed an appeal before the Argentine Supreme Court of Justice. As of the date of these consolidated
financial statements, a decision on these legal proceedings remains is pending.
Additionally,
on March 18, 2022, the Federal Administrative Court of Appeals – Chamber II, obtained the first instance resolution dated
October 21, 2021 that had extended the term of the precautionary measure. Against said ruling, both the PEN and the ENACOM filed
extraordinary appeals, which are being substantiated.
The
Company, with the assistance of its legal advisors, is analyzing the actions that may be necessary in order to protect its rights.
The Company’s Management and its legal advisors, consider that the Company has solid legal arguments to support its position
and that there is a reasonable likelihood that this matter will result in a favorable outcome for the Company, notwithstanding
the fact that at this stage it is not possible to predict the final outcome of the claim.
| b) | Spectrum
incorporated to the Company under the corporate reorganizations of Telecom and the merger
with Cablevisión |
In
December 2017, the Company was served with ENACOM Resolution No. 5,644-E/2017, whereby that agency decided, among other things,
to authorize the transfer in favor of Telecom Argentina of the authorizations and permits to use frequencies and allocations of
numbering and sign-posting resources to provide the services held by Cablevisión, pursuant to effective regulations, and
the agreement executed by Nextel Communications Argentina S.R.L. on April 12, 2017 (IF-2017-08818737-APN-ENACOM#MCO), whereby
Telecom Argentina, in its capacity as absorbing company of Cablevisión, shall, within a term of two years as from the date
on which the merger was approved by the CNDC and the ENACOM, return the radio-electric spectrum that exceeds the limit set under
Section 5 of Resolution No. 171-E/17 issued by the Ministry of Communications.
During
2019 Telecom Argentina proceeded with a partial return of the radio-electric spectrum that exceeds the limit set (40 Mhz).and
completed it in March 2022 (40 Mhz).
Moreover,
on March 15, 2022, the ENACOM issued Resolution No. 419/2022 through which it accepted the return of spectrum by Telecom Argentina
under the terms of ENACOM Resolution No. 5644-E/2017.
Consequently,
the Company recognized as of June 30, 2022 an impairment of $1,853 million in Depreciation, amortization and impairment of fixed
assets line.
| c) | ENACOM
Resolution No. 798/2022 – On-demand allocation of spectrum blocks |
Through
Resolution No. 798/2022 published in the Official Gazette on May 19, 2022, the ENACOM began the process for the on-demand allocation
of spectrum blocks of the 2500-2570 MHz and 2620-2690 MHz frequencies for the provision of SCMA services. Through said Resolution,
the ENACOM also approved the bidding terms and conditions and the list of locations for which there is spectrum available for
the provision of SCMA services.
On
May 31, 2022, Telecom made a filing requesting the allocation of spectrum blocks under this process. As of the date of these unaudited
consolidated financial statements, said allocation request has still not been approved.
| ● | Offers
for Irrevocable Call Option on the minority Shares of Open Pass S.A. |
On
December 29, 2021, the subsidiary Micro Sistemas received from two shareholders of Open Pass S.A. (a company that provides IT
services related to software development and maintenance, with which Micro Sistemas has a contract for the use and development
of the electronic wallet platform) offers for irrevocable call options for a total of 6,999,580 of the shares (representing 15%
of total Open Pass S.A. capital stock). On January 4, 2022 Micro Sistemas accepted the offers by paying US$0.7 million as consideration
for the granting of said purchase options.
The
call options could be exercised by Micro Sistemas, at its sole discretion, during a period of twelve (12) months from the date
of acceptance.
The
call options include, together with the shares, the assignment and transfer of all the economic and political rights inherent
therein. If the options are exercised, the price to be paid for the shares has been determined at US$7.5 million.
As
of the date of these unaudited consolidated financial statements, the call options were not executed.
TELECOM
ARGENTINA S.A.
| 3. | Assets
classified as held for sale |
On
March 21, 2022, the Company executed a pre-sale agreement for its building “Costanera” located at Las Heras 2502,
Autonomous City of Buenos Aires, Argentina, for a total of US$ 6 million.
On
April 27, 2022, the Company’s Board of Directors approved the proposal for the sale of the building. Subsequently, on June
6, 2022, an agreement was executed for the sale whereby the granting of the corresponding conveyance deed for the ownership and
possession of property is subject to the condition precedent that the Company shall obtain ENACOM’s authorization for the
sale of the property due to the fact that said building is used for rendering ICT Services (the estimated term for obtaining ENACOM’s
authorization is 18 months as from the date of the sale agreement).
As
of June 30, 2022, the Company received an advance payment of US$ 2 million.
Due
to the fact that the carrying amount will be recovered primarily through a sale transaction, rather than through its continued
use, that the building is available as is for immediate sale, and that its sale is highly likely, the asset complies with IFRS
5 guidelines to be considered a non-current asset held for sale.
In
addition, considering that the carrying amount of the assets associated with the sale exceeds its recoverable value, the Company,
as of June 30, 2022, recognized an impairment of $ 1,250 million disclosed under Depreciation, Amortization, and Impairment of
Fixed Assets.
On
June 1, 2022, the Company acquired 100% of the issued shares of NYSSA (represented by 10,000 shares, of $1,000 per share and represents
one vote each), whose corporate purpose is to provide internet access services in Mendoza, Argentina, through a license granted
by the ENACOM.
The
acquisition is expected to position the Company in Cuyo region, Argentina, thus increasing broadband clients. Likewise, it will
be integrated with the investment in sites budgeted by the Company in the province of Mendoza for the mobile service, generating
the convergence of both products and unifying the Flow and Personal brands.
The
base price of the transaction was US$3.4 million. This price has been determined based on the number of NYSSA clients and is subject
to adjustments established in the contract.
As
of June 30, 2022 the Company has paid the equivalent of 40% of the base price for a total amount of US$1.4 million (equivalent
to $284.3 million). The remaining balance will be paid in four equal and consecutive annual installments, and will accrue an interest
on balances of 6% per year in dollars. The installments may be paid, at the option of the Company, in Argentine pesos determined
based on the variation between the quotation values of certain public securities in foreign currency and Argentine pesos established
in the contracts. The Company recognized the debt at fair value, considering that the payments will be in Argentine pesos. The
debt has been recognized as “Other liabilities” and the effects of the variation in its fair value will be recognize
in “Financial discounts on assets, debts and others” within “Other financial results, net”. As of June
30, 2022 the debt amounts to $512 million, of which $130 are current and $382 million are non-current.
The
Company's Management has made a preliminary determination of the fair value of the assets acquired and liabilities assumed (net
assets) as of June 1, 2022 and the determination of the goodwill. Consequently, the values of assets and liabilities shown below
are preliminary.
Acquisition-related
costs are recognized as expenses.
Details
of the purchase consideration, the net assets acquired and goodwill in currency of June 1, 2022 are as follows:
| Purchase
consideration | |
(In
millions of
Argentine pesos) |
|
| Cash
Paid | |
284.3 |
|
| Remaining
balance | |
426.4 |
|
| Valor
total | |
710.7 |
|
TELECOM
ARGENTINA S.A.
The
assets and liabilities recognized as a result of the acquisition are as follows:
| |
(In
millions of
Argentine pesos) |
| Cash
and cash equivalents |
0.8 |
|
| Trade
receivables |
44.9 |
|
| PP&E |
229.4 |
|
| Trade
payables |
(43.1) |
|
| Other
taxes payables |
(15.3) |
|
| Other
assets / liabilities, net |
(12.4) |
|
| Net
identifiable assets acquired |
204.3 |
|
| Goodwill
(i) |
506.4 |
|
| Total |
710.7 |
|
| (i) | Goodwill
recognized represents the excess of the preliminary purchase consideration transferred
over the preliminary fair value of the identifiable net assets acquired. The goodwill
is attributable to the synergies that are expected to arise after the acquisition of
the subsidiary. It is not amortized and its recoverable value must be tested for impairment
at least annually. Goodwill is not deductible for tax purposes. It has been allocated
to the Argentine UGE. |
Revenue
and profit contribution of NYSSA
The
acquired business contributed revenues of $41 million and net loss of $1 million to the Group for the period from June 1, 2022
to June 30, 2022.
NOTE
28 – SUBSEQUENT EVENTS TO JUNE 30, 2022
Term
Loan
On
July 18, 2022, the Company pre-paid the remaining balance under the contract Term Loan executed on October 8, 2018 for US$142.2
million (US$140 million of principal and US$2.2 million of interest). The pre-payments made by the Company during the term of
the contract did not generate penalties.
BBVA
Loan
On
July 13, 2022, the Company subscribed a loan agreement with BBVA Argentina Bank S.A. for a total amount of $211.4 million. Total
principal will be settled by one payment at maturity date, which will be in July 2025. The loan bears interest that will be paid
in a monthly basis from its issuance date until its maturity date at a fixed rate of 47.9%.
Number
Portability Regulation
Through
Resolution No. 1514/2022, published on July 26, 2022 in the Official Gazette, the ENACOM ordered a 60-calendar-day extension of
the period for postponing the start of operations and implementation of Number Portability for Services. of Fixed Telephony that
was established in Resolution No. 32/2022.
Banco
Santander Río Loan (“Santander”)
On
July 27, 2022, the Company executed an addendum to Santander loan signed on August 18, 2022 for a total amount of $4,000 million,
and agreed to change the amortization schedule of principal maturity that would take place on August 18, 2022, by deferring it
to July 27, 2023. Additionally, a new fixed interest rate of 55% annual nominal was renegotiated from July 27, 2022.
Interests
in Joint Operations
On
July 27, 2022, the Ministry of the Chief Cabinet of the Province of Buenos Aires, communicated the UTE Ertach S.A. – Telecom
Argentina S.A., the completion of the agreement, which was finalized on July 28, 2022. In addition, it requested to confirm which
links covered as of today by the UTE, could be covered by each company that is part of it.
| |
|
Carlos
Moltini |
|
| |
|
|
|
| |
|
Chairman
of the Board of
Directors |
|
| |
|
|
|
OPERATING
AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2022
(In
millions of Argentine pesos or as expressly indicated)
As
required by CNV regulations, the Company has prepared its unaudited consolidated financial statements as of June 30, 2022 under
IFRS.
As
provided under Resolution No. 777 issued by the CNV on December 28, 2018, this Report discloses the comparative balances for the
three and six-month periods ended June 30, 2021, restated to current currency as of June 30, 2022.
The
table below shows the evolution of the National Consumer Price Index (National CPI with the characteristics identified in Note
1.d) to the unaudited consolidated financial statements) of the last two years and as of June 30, 2022 and 2021 according to official
statistics (INDEC) and the Banco Nación US dollar exchange rate used for the preparation of this operating and financial
review and prospects and the accompanying financial statements:
| | |
As
of December
31, 2020 | |
As
of June 30,
2021 | |
As
of December
31, 2021 | |
As
of June 30,
2022 |
| | |
| |
| |
| |
|
| National
Consumer Price Index (December 2016=100) | |
385.88 | |
483.60 | |
582.46 | |
793.03 |
| | |
| |
| |
| |
|
| Variation
in Prices | |
| |
| |
| |
|
| Annual | |
36.1% | |
50.2% | |
50.9% | |
64.0% |
| Accumulated 3 months
since March 2021 / 2022 | |
n/a | |
11.0% | |
n/a | |
17.3% |
| Accumulated 6 months | |
n/a | |
25.3% | |
n/a | |
36.2% |
| | |
| |
| |
| |
|
| Banco
Nación US$/$ exchange rate | |
84.15 | |
95.72 | |
102.72 | |
125.23 |
| | |
| |
| |
| |
|
| Variation
in the exchange rate | |
| |
| |
| |
|
| Annual | |
40.5% | |
35.9% | |
22.1% | |
30.8% |
| Accumulated 3 months
since March 2021 / 2022 | |
n/a | |
4.0% | |
n/a | |
12.8% |
| Accumulated 6 months | |
n/a | |
13.8% | |
n/a | |
21.9% |
| 2. | Telecom’s
activities for the six-month period ended June, 2022 (“1H22”) and 2021 (“1H21”) |
| |
|
Variation |
| |
1H22 |
1H21 |
$ |
% |
| Revenues
|
264,577 |
295,198 |
(30,621) |
(10.4) |
| Employee
benefit expenses and severance payments |
(60,519) |
(57,727) |
(2,792) |
4.8 |
| Interconnection
and transmission costs |
(8,118) |
(10,898) |
2,780 |
(25.5) |
| Fees
for services, maintenance, materials and supplies |
(30,711) |
(33,625) |
2,914 |
(8.7) |
| Taxes
and fees with the Regulatory Authority |
(20,370) |
(22,854) |
2,484 |
(10.9) |
| Commissions
and advertising |
(14,765) |
(16,480) |
1,715 |
(10.4) |
| Cost
of equipment and handsets |
(12,456) |
(15,121) |
2,665 |
(17.6) |
| Programming
and content costs |
(16,719) |
(20,577) |
3,858 |
(18.7) |
| Bad
debt expenses |
(6,454) |
(5,105) |
(1,349) |
26.4 |
| Other
operating expenses |
(13,619) |
(12,366) |
(1,253) |
10.1 |
| Depreciation,
amortization and impairment of fixed assets |
(89,381) |
(91,747) |
2,366 |
(2.6) |
| Operating
(loss) income |
(8,535) |
8,698 |
(17,233) |
n/a |
| Earnings
from associates |
144 |
189 |
(45) |
(23.8) |
| Debt
financial results |
24,989 |
19,916 |
5,073 |
25.5 |
| Other
financial results, net |
13,702 |
10,569 |
3,133 |
29.6 |
| Income
(loss) before income tax |
30,300 |
39,372 |
(9,072) |
(23.0) |
| Income
tax |
1,579 |
(42,114) |
43,693 |
n/a |
| Net
(loss) income |
31,879 |
(2,742) |
34,621 |
n/a |
| |
|
|
|
|
| Attributable
to: |
|
|
|
|
| Controlling
Company |
31,260 |
(3,288) |
34,548 |
n/a |
| Non-controlling
interest |
619 |
546 |
73 |
13.4 |
| |
31,879 |
(2,742) |
34,621 |
n/a |
| Basic
and diluted earnings (losses) per share attributable to the Controlling Company (in Argentine pesos) |
14.51 |
(1.53) |
|
|
In
relation to the economic performance, adjusted EBITDA amounted to $80,846, representing 30.6% of consolidated revenues. Depreciation,
amortization and impairment of fixed assets totaled $89,381, consequently, the operating loss for 1H2022 amounted to $8,535. Financial
results and income tax were positive and amounted to $38,691 and $1,579, respectively, consequently, net income amounted to $31,879.
| |
|
|
Variation |
| |
1H22 |
1H21 |
$ |
% |
| Mobile
Services |
103,718 |
109,622 |
(5,904) |
(5.4) |
| Internet
Services |
59,308 |
61,551 |
(2,243) |
(3.6) |
| Cable
Television Services |
48,849 |
58,484 |
(9,635) |
(16.5) |
| Fixed
and Data Services |
33,404 |
42,445 |
(9,041) |
(21.3) |
| Other
services revenues |
2,248 |
1,888 |
360 |
19.1 |
| Subtotal
Services revenues |
247,527 |
273,990 |
(26,463) |
(9.7) |
| Equipment
revenues |
17,050 |
21,208 |
(4,158) |
(19.6) |
| Total
Revenues |
264,577 |
295,198 |
(30,621) |
(10.4) |
During
1H22 consolidated revenues showed a decrease of 10.4% (-$30,621 vs. 1H21) amounting to $264,577.
Albeit
the greater demand for services, consolidated revenues decreased mainly because the rate of inflation for the last twelve months
amounted to 64.0% and the Company did not transfer a portion of this effect to its prices.
Services
revenues amounted to $247,527 in 1H22 (-9.7% vs. 1H21) and represent 93.6% and 92.8% of consolidated revenues of 1H22 and 1H21,
respectively. Mobile Services revenues amounted to $103,718 in 1H22 (-$5,904 vs. 1H21), Internet Services revenues amounted to
$59,308 in 1H22 (-$2,243 vs. 1H21), Cable Television Services revenues amounted to $48,849 in 1H22 (-$9,635 vs. 1H21) and Fixed
and Data Services revenues amounted to $33,404 in 1H22 (-$9,041 vs. 1H21). Equipment revenues decreased 19.6%, amounting to $17,050
in 1H22 and represent 6.4% of consolidated revenues.
Consolidated
Revenues include $33,412 and $130,351 in 1H22 and 1H21, respectively, related to the effect generated by the restatement in current
currency as of June 30, 2022.
Mobile
Services
Mobile
Services revenues amounted to $103,718 (-$5,904 or -5.4% vs. 1H21), being the main business in term of service revenues (41.9%
and 40.0% of services revenues in 1H22 and 1H21, respectively).
The
effect generated by the restatement in current currency as of June 30, 2022 included in mobile services revenues amounted to $13,024
and $48,381 in 1H22 and 1H21, respectively.
Mobile
services revenues in Argentina amounted to $94,957 (-$2,639 or -2.7% vs. 1H22), due to a decrease in the ARPU, partially offset
by an increase of 4.2% in the number of customers.
Mobile
services customers in Argentina amounted to 20.1 million and 19.3 million as of June 30, 2022 and 2021, respectively. The main
ratios related to the services provided to these customers were:
| ● | As
of June 30, 2022 and June 30, 2021, 58% of total customers are prepaid customers, and
42% are postpaid customers. |
| ● | Mobile
Internet services revenues are equivalent to 87% of the total mobile services revenues
in Argentina. |
| ● | The
monthly average revenue per user (“ARPU”) is $779.2 pesos per month in 1H22
(vs. $861.2 pesos per month in 1H21), representing a decrease of 9.5%. The effect generated
by the restatement in current currency as of June 30, 2022 included in ARPU amounted
to $95.6 pesos and $379.9 pesos in 1H22 and 1H21, respectively. |
| ● | The
average churn rate per month positioned into 2.4% in 1H22 (vs. 1.5% average in 1H21). |
Regarding
infrastructure, the Company continued to enhance the mobile Internet experience of its customers through the deployment of its
4G and 4G+ network throughout the country, reaching more than 14.6 million customers with 4G devices throughout the country. The
traffic carried by 4G technologies in 1H22 corresponds to the 95% of the total traffic.
Likewise,
the number and variety of mobile offers with more data services to improve the connectivity of our customers were deepened, expanding
the benefits of the plans to increase performance and their use. In this scenario, during 2H22 the WiFi Pass service was launched,
which allows customers who are also subscribed to Internet service to activate free of charge gigabytes for exclusive use to share
Internet from their handsets with any other device, without consuming data from their original plan.
Mobile
services revenues generated in Paraguay amounted to $8,761 (-$3,265 or -27.1% vs. 1H21) due to decrease in ARPU in constant currency,
partially offset by the appreciation of the Guaraní against the Argentine Peso.
The
main ratios related to the mobile services in Paraguay were:
| ● | Núcleo's
mobile customers amounted to 2.3 million as of June 30, 2022. As of June 30, 2022, 81%
of total customers consist of prepaid customers and 19% consist of postpaid customers.
As of June 30, 2021, 82% of total customers consist of prepaid customers and 18% consist
of postpaid customers. |
| ● | The
monthly ARPU amounted to $653.8 pesos per month in 1H22 (vs. $915.0 pesos in 1H21), representing
a 28.5% decrease. |
| ● | The
average churn rate per month amounted to 2.7% in 1H22 (vs. 3.6% in 1H21). |
Internet
Services
Internet
services revenues amounted to $59,308 in 1H22 (-$2,243 or -3.6% vs. 1H21) driven mainly by the 5.3% decrease in broadband ARPU,
which amounted to $2,240 pesos in 1H22 (vs. $2,365.1 pesos in 1H21). The effect generated by the restatement in current currency
as of June 30, 2022 included in ARPU amounts to $281.7 pesos and $1,046.6 pesos in 1H22 and 1H21, respectively.
It
should be noted that customers with service of 50Mb or higher represent 78% and 64% of the total customer base as of June 30,
2022 and 2021, respectively. Within this range, there are customers who have plans of 100 Mb, 300 Mb and 1,000 Mb that as of June
30, 2022 amounted to 1,349,380, 249,688 and 11,480, respectively (+80.2% as a whole compared to 1H21). This evidences the significant
migration of clients with service of 50Mb to higher speeds in order to satisfy their demand for greater digitization.
Internet
services subscriber base amounted to 4.2 million 1H22 customers. Churn rate per month positioned into 1.5% and 1.7% as of June
30, 2022 and 2021, respectively.
The
effect generated by the restatement in current currency as of June 30, 2022 included in Internet Services revenues amounts to
$7,544 and $27,232 in 1H22 and 1H21, respectively.
Cable
Television Services
Cable
Television Services revenues amounted to $48,849 in 1H22 (-$9,635 or -16.5% vs. 1H21). The variation is mainly due to a 13.9%
decrease in ARPU, amounting to $2,239.3 pesos in 1H22 (vs. $2,602. pesos in 1H21). The effect generated by the restatement in
current currency as of June 30, 2022 included in ARPU amounts to $292.8 pesos and $1,108.4 pesos in 1H22 and 1H21, respectively.
Subscriber
base in Argentina remains stable amounting to 3.3 million customers as of June 30, 2022, of which 1.2 million are subscribed to
Flow. Churn rate per month of Cable television services positioned into 1.3% and 1.0% as of June 30, 2022 and June 30, 2021, respectively.
Flow
continue evolving with new facilities, innovative and quality content based on alliances with renowned national and international
production companies as Disney+, Paramount+, Star+, Netflix and Amazon Prime Video, making Flow the lead entertainment comprehensive
platform in Argentina. The services provided by Flow include TV, series, films and documentaries on demand and exclusive co-productions,
as well as music and gaming. In addition, the consolidation of Esports as a locally consumed entertainment platform continued
and will continue to grow as customer needs evolve.
As
part of the technological evolution of the Flow platform, the “Integrated Services Digital Broadcasting” (ISDBT) solution
for digitizing the service began to be progressively available to the pay TV analog customer base. This new solution allows customers
to have a digital service through their traditional cable connection without the need for a decoder. The deployment began in the
cities of Neuquén, La Plata, Córdoba and Mar del Plata and areas surrounding each city and will continue to expand
during the second half of 2022.
The
effect generated by the restatement in current currency as of June 30, 2022 included in Cable television services revenues amounts
to $6,171 and $25,870 in 1H22 and 1H21, respectively.
Fixed
Telephony and Data Services
Fixed
Telephony and Data Services revenues amounted to $33,404 in 1H22 (-$9,041 or -21.3% vs. 1H21).
The
effect generated by the restatement in current currency as of June 30, 2022 included in Fixed and Data Services revenues amounts
to $4,209 and $18,735 in 1H22 and 1H21, respectively.
The
average monthly revenue billed per user (“ARPU”) of fixed telephony services amounted to $1,015.1 pesos in 1H22 (vs.
$1,076.7 pesos in 1H21). The effect generated by the restatement in current currency as of June 30, 2022 included in ARPU amounts
to $131.7 pesos and $477.5 pesos in 1H22 and 1H21, respectively.
The
B2B segment developed new solutions to help companies to boost their business and continue to evolve digital transformation in
this new context.
Additionally,
the new security solution "Strengthening users" has been developed, which aims to reduce the risks of cybersecurity
attacks on companies. This solution is intended to raise awareness of computer security, while measuring and analyzing the results
to reduce the risks to which network users are exposed.
Furthermore,
during the last quarter the corporate segment launched a new comprehensive communication campaign for its Cloud vertical. It reflects
how the company continues to support companies in the process of digital transformation they are going through, helping in the
evolution and growth of their e-commerce, logistics and stock movement platforms, among other services.
Equipment
Equipment
revenues amounted to $17,050 (-$4,158 or -19.6% vs. 1H21). This variation is mainly due to a decrease in handsets sold as compared
to 1H21 (-17%), partially offset by an increase in handset average sale prices as compared to 1H21.
It
is important to highlight that the Company, in terms of devices, continued to promote the updating of the handsets with financed
offers and special discounts focused on the convergence of services.
The
effect generated by the restatement in current currency as of June 30, 2022 included in Equipment revenues amounts to $2,224 and
$9,295 in 1H22 and 1H21, respectively.
| ● | Operating
costs (without depreciation, amortization and impairment of fixed assets) |
Operating
costs (without depreciation, amortization and impairment of fixed assets) amounted to $183,731 in 1H22, which represents a decrease
of $11,022 or -5.7% vs. 1H21. These lower costs are related with the decrease in interconnection and transmission costs, programming
and content costs, cost of equipment and handsets, taxes and fees with the Regulatory Authority, commissions and advertising and
fees for services, maintenance, materials and supplies, partially offset by an increase in employee benefit expenses and severance
indemnities and bad debt expenses.
The
effect generated by the restatement in current currency as of June 30, 2022 included in operating costs amounts to $24,703 and
$88,016 in 1H22 and 1H21, respectively.
The
operating costs breakdown is mainly as follows:
Employee
benefit expenses and severance payments
Employee
benefit expenses and severance payments amounted to $60,519 in 1H22 (+$2,792 or +4.8% vs. 1H21). The increase was mainly due to
increases in salaries agreed by the Company with several trade unions for unionized employees, and also for non-unionized employees,
together with related social security charges, and higher severance payments, partially offset by a decrease in net payroll of
2.9% vs 1H21, amounting to 22,385 employees as of June 30, 2022.
The
effect generated by the restatement in current currency as of June 30, 2022 included in employee benefit expenses and severance
payments amounts to $7,228 and $25,496, as of 1H22 and 1H21, respectively.
Interconnection
and transmission costs
Interconnection
and transmission costs, which also includes charges for roaming, cost of international outbound calls and lease of lines and circuits,
amounted to $8,118 in 1H22 (-$2,780 or -25.5% vs. 1H21). The decrease is mainly due to the new dynamics of the business that implies
an optimization of links and sites partially compensated by an increase in the exchange rate in relation to the services fixed
in US$.
The
effect generated by the restatement in current currency as of June 30, 2022 included in interconnection and transmission costs
amounts to $1,018 and $4,829 in 1H22 and 1H21, respectively.
Fees
for services, maintenance, materials and supplies
Fees
for services, maintenance, materials and supplies amounted to $30,711 in 1H22 (-$2,914 or -8.7% vs. 1H21). The variation is mainly
explained by the efficiency and management of resources through which maintenance and material costs decreased by $2,717 compared
to 1H21.
The
effect generated by the restatement in current currency as of June 30, 2022 included in fees for services, maintenance, materials
and supplies amounts to $4,641 and $15,550 in 1H22 and 1H21, respectively.
Taxes
and fees with the Regulatory Authority
Taxes
and fees with the Regulatory Authority, including turnover tax, municipal taxes and other taxes and fees, decreased, amounting
to $20,370 in 1H22 (-$2,484 or -10.9% vs. 1H21). This decrease corresponds mainly to the effect of lower revenues in 1H22 vs.
1H21. Taxes and fees with the Regulatory Authority represent 7.7% of consolidated revenues in 1H22 and 1H21.
The
effect generated by the restatement in current currency as of June 30, 2022 included in taxes and fees with the Regulatory Authority
amounts to $2,555 and $10,097 in 1H22 and 1H21, respectively.
Commissions
and advertising
Commissions
(including commissions paid to agents, collection commissions and other commissions) and advertising amounted to $14,765 in 1H22
(-$1,715 or -10.4% vs. 1H21). The decrease is mainly due to lower advertising services costs, partially offset by a slight increase
charges for agent commissions.
The
effect generated by the restatement in current currency as of June 30, 2022 included in commissions and advertising amounts to
$1,808 and $7,249 in 1H22 and 1H21, respectively.
Cost
of equipment and handsets
Cost
of equipment and handsets sold amounted to $12,456 in 1H22 (-$2,665 or -17.6% vs. 1H21). The variation is mainly due to a decrease
in handsets sold of 17%, partially offset by an increase in the purchase prices of handsets, compared to 1H21.
The
effect generated by the restatement in current currency as of June 30, 2022 included in cost of equipment and handsets amounts
to $2,591 and $7,716 in 1H22 and 1H21, respectively.
Programming
and content costs
Programming
and content costs amounted to $16,719 in 1H22 (-$3,858 or -18.7% vs. 1H21), mainly due to operating efficiencies, partially offset
by price increases in almost all signals.
The
effect generated by the restatement in current currency as of June 30, 2022 included in programming and content costs amounts
to $2,137 and $9,141 in 1H22 and 1H21, respectively.
Bad
debt expenses
Bad
debt expenses amounted to $6,454 (+$1,349 or +26.4% vs. 1H21). Bad debt expenses represent 2.4% and 1.7% of total consolidated
revenues in 1H22 and in 1H21, respectively. The increase is mainly due to the deterioration of the economic situation in Argentina,
which has a direct impact on bad debt rates. The low percentage of bad debts over revenue in 1H2021 is related to post-pandemic
credit recovery actions. On the other hand, during 2Q22 the Company has improved the percentage of bad debts over revenue, amounting
to 2.1%.
The
effect generated by the restatement in current currency as of June 30, 2022 included in bad debt expenses amounts to $903 and
$2,241 in 1H22 and 1H21, respectively.
Other
operating expenses
Other
operating expenses, which include provisions, energy and other public services, insurance, leases and internet capacity, among
others, amounted to $13,619 (+$1,253 or +10.1% vs. 1H21). The increase is mainly due to higher provisions, partially offset by
lower energy costs, lower rentals and internet capacity charges.
The
effect generated by the restatement in current currency as of June 30, 2022 included in other operating expenses amounts to $1,822
and $5,697 in 1H22 and 1H21, respectively.
Depreciation,
amortization and impairment of fixed assets
Depreciation,
amortization and impairment of fixed assets amounted to $89,381 (-$2,366 or -2.6% vs. 1H21). The charge of the period includes
the impact of the amortization of the CAPEX subsequent to June 30, 2021, partially offset by the effect of those assets that ended
their useful life after that same date. On the other hand, impairment of spectrum and of the building “Costanera”
for $3,103 million were recognized in 1H22, as reported in Notes 27.1.b) and 27.3, respectively.
The
effect generated by the restatement in current currency as of June 30, 2022 included in depreciation, amortization and impairment
of fixed assets amounts to $60,187 and $68,159 in 1H22 and 1H21, respectively.
Operating
loss amounted to $8,535 in 1H22, representing 3.2% of consolidated revenues in 1H22, while in 1H21 it was an operating income
of $8,698 (2.9% of consolidated revenues).
| |
|
Variation |
| |
1H22 |
1H21 |
$ |
% |
| Interests
on financial debts |
(2,264) |
(10,913) |
8,649 |
(79.3) |
| Foreign
currency exchange gains (losses) on financial debts |
27,253 |
30,829 |
(3,576) |
(11.6) |
| Total
debt financial results |
24,989 |
19,916 |
5,073 |
25.5 |
| Other
exchange differences |
457 |
6,814 |
(6,357) |
(93.3) |
| Losses
on operations with notes and bonds |
(9,320) |
(1,540) |
(7,780) |
n/a |
| Other
interests, net and other investments results |
299 |
(1,693) |
1,992 |
n/a |
| RECPAM
|
26,311 |
12,705 |
13,606 |
107.1 |
| Other |
(4,045) |
(5,717) |
1,672 |
(29.2) |
| Total
other financial results, net |
13,702 |
10,569 |
3,133 |
29.6 |
| Total
financial results, net |
38,691 |
30,485 |
8,206 |
26.9 |
We
incurred in a financial gain, net of $38,691 in 1H22 (vs. a gain of $30,485 in 1H21). Financial Results, net in 1H22 mainly include
(i) foreign exchange gains measured in real terms of $27,253 as a result of a 21,9% devaluation of the Argentine peso against
the US dollar vs. a 36.2% inflation (vs. a gain of $30,289 in 1H21 – 13.7% devaluation of the Argentine peso against the
US dollar vs. a 25.3% inflation), and the effect generated by the restatement in current currency, which amounted to a gain of
$26,311 (vs. $12,705 in 1H21). These effects are partially offset by losses of (i) operations with notes and bonds of $9,320,
(ii) interest on financial debts, measured in real terms, of $2,264 (vs. a loss of $10,913 in 1H21) and (iii) other financial
results of $3,746.
Telecom’s
income tax charge includes the following effects: (i) the current tax payable pursuant to tax legislation applicable to Telecom,
(ii) the effect of applying the deferred tax method on temporary differences arising out of the Company’s asset and liability
valuation according to tax versus financial accounting criteria, including the income tax inflation effect and (iii) the effects
mentioned in Note 13 of the unaudited consolidated financial statements.
Income
tax amounted to $1,579 gain in 1H22 vs. $42,114 loss in 1H21. It includes the following effects: (i) current tax expenses, Telecom´s
generated $18,772 tax expense in 1H22 (vs. $8,788 in 1H21), (ii) regarding the deferred tax in 1H22, Telecom recorded a deferred
tax gain of $20,351 (vs. a loss of $33,326 in 1H21).
Telecom
Argentina recorded a net income of $31,879 in 1H22 (vs. a net loss of $2,742 in 1H21) and represents 12.0% of consolidated revenues
(vs. 0.9% in 1H21). Net income recorded in 1H22 is mainly due to the financial gains, net amounting to $38,691, partially offset
by the operating loss amounting to $8,535.
Net
income attributable to controlling shareholders amounted to $31,260 in 1H22 vs. a loss of $3,288 in 1H21.
| Consolidated
financial position analysis |
|
| |
June
30, |
December
31, |
|
| |
2022 |
2021 |
Variation |
| Financial
assets - current |
26,333 |
41,710 |
(15,377) |
| Total
financial assets |
26,333 |
41,710 |
(15,377) |
| |
|
|
|
| Financial
debt - current |
(92,751) |
(88,320) |
(4,431) |
| Financial
debt - non current |
(245,698) |
(275,097) |
29,399 |
| Total
financial debt |
(338,449) |
(363,417) |
24,968 |
| |
|
|
|
| Financial
liabilities, net - current |
(66,418) |
(46,610) |
(19,808) |
| Financial
liabilities, net - non current |
(245,698) |
(275,097) |
29,399 |
| Total
financial liabilities, net |
(312,116) |
(321,707) |
9,591 |
The
consolidated financial position, net (that is: Cash and cash equivalents plus Financial investments and IFD less Financial debts)
is debt and amounted to $312,116 as of June 30, 2022, which represents a decrease of $9,591 compared to December 31, 2021.
| ● | Capital
expenditures (CAPEX) and Rights of use assets additions |
CAPEX
and Rights of use assets additions composition 1H22 and 1H21 is as follows:
| |
In
millions of $ |
Variation
|
| |
1H22 |
1H21 |
$ |
% |
| PP&E |
36,813 |
52,209 |
(15,396) |
(29.5) |
| Intangibles
assets |
1,880 |
1,730 |
150 |
8.7 |
| Total
CAPEX |
38,693 |
53,939 |
(15,246) |
(28.3) |
| Rights
of use assets |
6,526 |
14,450 |
(7,924) |
(54.8) |
| Total
|
45,219 |
68,389 |
(23,170) |
(33.9) |
The
Company and its subsidiaries’ main PP&E CAPEX projects are related to the expansion of cable TV and internet services
in order to improve the transmission and speed offered to customers; the deployment of 4G services to support the growth of mobile
Internet services, improvement of the quality service together with the launch of innovative VAS services.
During
1H22 Telecom continued with the expansion of transmission and transport networks to join the different access technologies. In
order to continue bringing fiber optic to customers, we consolidated the deployment of the different fiber optic architectures
(mainly FTTH – Fiber to the home), substantially improving the possibility of offering high speed services. This deployment
encompassed residential and corporate customers, new neighborhoods, gated communities, high-rises and shopping centers. The FTTH
networks, allowed us to expand coverage of our services and also provide greater capacity to our customers. Additionally, we continued
with the deployment of 4G technology, to achieve increasing coverage and capacity in various cities of Argentina, through the
settlement in new sites, together with replacement and modernization of existing sites. Likewise, we continued with our investments
in the pricing, billing and customer relationship systems.
| 3. | Telecom
Group’s activities for the three-month period ended June 30, 2022 (“2Q22”)
and 2021 (“2Q21”) |
| |
|
Variation |
| |
2Q22 |
2Q21 |
$ |
% |
| Revenues
|
126,897 |
145,009 |
(18,112) |
(12,5) |
| Operating
costs without depreciation, amortization and impairment of fixed assets |
(93,783) |
(99,229) |
5,446 |
(5,5) |
| Depreciation,
amortization and impairment of fixed assets |
(43,124) |
(46,884) |
3,760 |
(8,0) |
| Operating
loss |
(10,010) |
(1,104) |
(8,906) |
n/a |
| Earnings
from associates |
3 |
40 |
(37) |
(92,5) |
| Financial
results, net |
12,486 |
18,166 |
(5,680) |
(31,3) |
| Income
before income tax expense |
2,479 |
17,102 |
(14,623) |
(85,5) |
| Income
tax |
1,547 |
(36,240) |
37,787 |
n/a |
| Net
income (loss) |
4,026 |
(19,138) |
23,164 |
n/a |
| |
|
|
|
|
| Attributable
to: |
|
|
|
|
| Controlling
Company |
3,664 |
(19,192) |
22,856 |
n/a |
| Non-controlling
interest |
362 |
54 |
308 |
n/a |
| |
4,026 |
(19,138) |
23,164 |
n/a |
| |
|
|
|
|
| Basic
and diluted income (losses) per share attributable to the Controlling Company (in Argentine pesos) |
1.70 |
(8.91) |
|
|
Revenues
in 2Q22 amounted to $126,897, operating costs (without depreciation, amortization and impairment of fixed assets) amounted to
$93,783, depreciation, amortization and impairment of fixed assets amounted to $43,124 (equivalent to 34% of consolidated revenues)
and operating loss amounted to $10,010 (equivalent to 7.9% of consolidated revenue in 2Q22 vs. 0.8% in 2Q21).
Services
revenues amounted to $119,224 in 2Q22 -equivalent to 94.0% of consolidated revenues-, and equipment revenues amounted to $7,673
in 2Q22 –equivalent to 6.0% of consolidated revenues.
Mobile
services revenues amounted to $50,490 in 2Q22 –equivalent to 42.3% of consolidated services revenues– which were mainly
generated by Personal’s customers in Argentina.
Internet
services revenues amounted to $28,295 in 2Q22 –equivalent to 23.7% of consolidated services revenues–.
Cable
television services revenues amounted to $23,296 in 2Q22 –equivalent to 19.5% of consolidated service revenues– and
they are mainly composed of services revenues provided in Argentina and Uruguay.
Finally,
Fixed and data services revenues amounted to $16,019 in 2Q22 –equivalent to 13.4% of consolidated service revenues.
Operating
costs without depreciation, amortization and impairment of fixed assets amounted to $93,783 in 2Q22, being the main components,
employee benefit expenses and severance payments (amounted to $32,111); fees for services, maintenance, materials and supplies
(amounted to $16,011); taxes and fees with the Regulatory Authority (amounted to $9,842); programming and content costs (amounted
to $7,925); and commissions and advertising (amounted to $7,228).
Financial
results, net amounted to a gain of $12,486 in 2Q22, mainly due to net foreign exchange gains, measured in real terms, amounting
to $10,456 and the net gain on restatement in current currency amounting to $12,329, partially offset by losses on operations
with notes and bonds amounting to $6,203, interests on financial debts amounting to $1,955, and other financial results amounting
to $2,141.
Income
tax gain amounted to $1,547 in 2Q22. Therefore, Telecom Argentina obtained a net income amounting to $4,026 in 2Q22, which represents
3.2% of consolidated revenues. Net income attributable to the controlling shareholders amounted to $3,664 in 2Q22.
| 4. | Summary
of comparative consolidated statements of financial position |
| |
|
June
30, |
| |
2022 |
2021 |
2020 |
2019 |
2018 |
| Current
assets |
71,710 |
133,966 |
188,795 |
150,921 |
162,913 |
| Non-current
assets |
1,330,881 |
1,406,510 |
1,445,645 |
1,462,542 |
1,440,384 |
| Total
assets |
1,402,591 |
1,540,476 |
1,634,440 |
1,613,463 |
1,603,297 |
| Current
liabilities |
216,573 |
206,187 |
316,062 |
216,344 |
342,665 |
| Non-current
liabilities |
440,721 |
542,533 |
450,008 |
420,645 |
286,919 |
| Total
liabilities |
657,294 |
748,720 |
766,070 |
636,989 |
629,584 |
| Equity
attributable to the Controlling Company |
734,470 |
780,007 |
855,732 |
964,403 |
959,989 |
| Equity
attributable non-controlling interest |
10,827 |
11,749 |
12,638 |
12,071 |
13,724 |
| Total
Equity |
745,297 |
791,756 |
868,370 |
976,474 |
973,713 |
| Total
liabilities and equity |
1,402,591 |
1,540,476 |
1,634,440 |
1,613,463 |
1,603,297 |
| 5. | Summary
of comparative consolidated income statements |
| |
1H22 |
1H21 |
1H20 |
1H19 |
1H18 |
| Revenues
|
264,577 |
295,198 |
323,044 |
333,178 |
376,504 |
| Operating
costs |
(273,112) |
(286,500) |
(287,354) |
(300,268) |
(309,198) |
| Operating
(loss) income |
(8,535) |
8,698 |
35,690 |
32,910 |
67,306 |
| Earnings
from associates |
144 |
189 |
531 |
580 |
618 |
| Financial
results, net |
38,691 |
30,485 |
(23,287) |
16,971 |
(68,979) |
| Income
(loss) before income tax expense |
30,300 |
39,372 |
12,934 |
50,461 |
(1,055) |
| Income
tax expense |
1,579 |
(42,114) |
(8,106) |
(26,800) |
12,910 |
| Net
income (loss) |
31,879 |
(2,742) |
4,828 |
23,661 |
11,855 |
| Other
comprehensive (loss) income, net of tax |
(2,721) |
(3,530) |
(2,619) |
(7,456) |
6,968 |
| Total
comprehensive income (loss) |
29,158 |
(6,272) |
2,209 |
16,205 |
18,823 |
| Attributable
to Controlling Company |
29,112 |
(6,008) |
2,151 |
17,274 |
16,293 |
| Attributable
to non-controlling interest |
46 |
(264) |
58 |
(1,069) |
2,530 |
| 6. | Summary
of comparative consolidated statements of cash flow |
| |
1H22 |
1H21 |
1H20 |
1H19 |
1H18 |
| Net
cash flows provided by operating activities |
75,760 |
92,388 |
116,441 |
114,701 |
92,850 |
| Net
cash flows used in investing activities |
(73,246) |
(96,697) |
(58,056) |
(62,415) |
(57,514) |
| Net
cash flows used in financing activities |
(6,049) |
(5,107) |
(11,513) |
(12,753) |
(33,913) |
| Net
foreign exchange differences and RECPAM on cash and cash equivalents |
(1,975) |
(1,743) |
2,643 |
(5,042) |
7,802 |
| Total
cash and cash equivalents (used) provided during the period |
(5,510) |
(11,159) |
49,515 |
34,491 |
9,225 |
| 7. | Statistical
data (in physical units in index-term) |
| |
06.30.22 |
06.30.21 |
06.30.20 |
06.30.19 |
06.30.18 |
| Cable
TV Subscribers (i) |
100.7% |
101.5% |
100.2% |
99.8% |
99.8% |
| Internet
Access (ii) |
104.1% |
104.2% |
101.1% |
101.7% |
101.0% |
| Fixed
telephony services lines (ii) |
81.0% |
83.6% |
84.2% |
89.4% |
96.9% |
| Personal
Mobile telephony services lines (ii) |
105.7% |
101.5% |
99.1% |
97.0% |
98.2% |
| Núcleo’s
customers (ii) |
102.4% |
96.0% |
95.4% |
97.5% |
97.2% |
| (i) | Base
December 2013= 100 |
| (ii) | Base
December 2017= 100 |
| |
06.30.22 |
06.30.21 |
06.30.20 |
06.30.19 |
06.30.18 |
| Liquidity
(1) |
0.33 |
0.65 |
0.60 |
0.70 |
0.48 |
| Solvency
(2) |
1.13 |
1.06 |
1.13 |
1.53 |
1.55 |
| Locked-up
capital (3) |
0.95 |
0.91 |
0.88 |
0.91 |
0.90 |
| 1) | Current
assets/Current liabilities. |
| 2) | Total
equity/Total liabilities. |
| 3) | Non-current
assets/Total assets. |
In
addition to the impact of the post-epidemiological situation on the world economy and the geopolitical scenario posed by the war
unleashed in Eastern Europe, Argentina has to face the effects generated by adverse macroeconomic variables, characterized by
uncertainties about the future of local economy.
The
acceleration of inflation, the devaluation of the currency and the increases in interest rates that are taking place in the country
in recent times, together with the fall in the price of sovereign bonds, make up a complex framework for the sector private sector
that should focus on ensuring business sustainability and maintaining employment levels, key factors for the future recovery of
the country.
Telecom’s
economic-financial results, as those of other companies operating in the country, reflect the impact of the inflationary processes
and exchange rate fluctuations, especially considering that our main source of income is in pesos, while our industry requires
intensive dollarized investments for the deployment of infrastructure and development of systems.
In
this sense, the economic scenario has forced us to strongly focus our management on achieving operational efficiencies to maintain
the high levels of investments necessary, not only to grow but also to maintain the quality of service that we provide to our
more than 30 million customers. And despite the complex local scenario, we continued to deploy a solid and ongoing investment
plan, which, favored by the Company’s financial health and the credibility in the local and international capital markets,
it generates in the local and international market for obtaining external financing.
The
uncertainty for ICT Services companies arising from the issuance of Decree No. 690/20, whereby the PEN declared that ICT Services
are considered as public services provided on a competitive basis, remains still.
Recently,
different courts have considered the rule, which proposed an untimely, arbitrary and unnecessary change in the sector regulation,
ordering the suspension of Decree No. 690/20 and the resolutions issued subsequently and derived from it. The preliminary injunctions
that are repeated in various parts of the country cover virtually the entire ICT industry, both large operators and SMEs.
In
Telecom´s case, the Chamber of the Federal Court of Appeals on Administrative Litigation Matters decided by majority to
accept the Company’s appeal and granted the precautionary measure requested. The precautionary measure opportunely granted
was extended for another six-month period in October, 2021, and again on April, 2022 for the same period.
In
this way, Court ratify that the entire ICT industry must have the capacity to set its trade policies and prices. Maintaining and
encouraging competition instead of setting artificial barriers is the only and best way for users to continue accessing to more
and better services.
In
Telecom, despite the complex macroeconomic context, we maintain our vision of continuing to consolidate ourselves as an ecosystem
of digital services, which are leveraged on connectivity and supported by a digital and cultural transformation process focused
on the experience of our customers. We continue to develop digital talent, aware that our evolution path from a network company
to a platform and systems company requires the reskilling of our employees. We are using agile methodologies and fostering a collaborative
leadership model, which allows us to generate a change of mindset that fits the company we are building, and which is also reflected
in new digital business products and services, primarily with IoT, smarthome and fintech solutions. We also encourage the incorporation
of talent from the market, which allows us to continue expanding the footprint of our operation towards new businesses and add
value to our activity.
From
a financial point of view, during the first six months of 2022, we issued new Notes for a nominal value of $5,233 and we executed
several lines of credit with multilateral organizations. This was possible thanks to the confidence of the national and international
markets in the company’s credit strength and in our business strategy.
Finally,
based on the powers delegated by Telecom Argentina’s General Extraordinary Shareholders’ Meeting held on April 27,
2022, on June 2, 2022 the Board resolved to distribute non-cash assets dividends of Global Bonds of the Argentine Republic amortizable
in US dollars maturing on July 9, 2030 (the “2030 Global Bonds”) for a nominal value of US$411.1 million and Global
Bonds of the Argentine Republic amortizable in US dollars maturing on July 9, 2035 (the “2035 Global Bonds”) for a
nominal value of US$103.9 million. The valuation of non- cash dividends was established at $ 31,634 million Argentine peso.
We
expect to continue our transformation process, consolidating our operating model and reaching new transformation milestones towards
the full digitalization of our operations to become more efficient, agile and digital, to continue boosting the growth of digital
economy and generating value for our customers.
| |
Carlos
Moltini |
| |
|
| |
Chairman
of the Board of Directors |
|
|
CORPORATE
INFORMATION
| ● | INDEPENDENT
AUDITORS Price Waterhouse & Co S.R.L. (member of PricewaterhouseCoopers) |
BYMA
| |
Market
quotation ($/share) |
Volume
of shares |
| Quarter |
High |
Low |
traded
(in millions) |
| 2Q21 |
215.95 |
139.55 |
9.9 |
| 3Q21 |
196.45 |
173.75 |
9.0 |
| 4Q21 |
236.25 |
190.50 |
5.0 |
| 1Q22 |
235.05 |
192.50 |
3.6 |
| 2Q22 |
246.90 |
202.60 |
4.2 |
NYSE*
| |
Market
quotation (US$/ADS) |
Volume
of ADSs |
| Quarter |
High |
Low |
traded
(in millions) |
| 2Q21 |
6.52 |
4.40 |
36.4 |
| 3Q21 |
5.80 |
4.91 |
13.6 |
| 4Q21 |
5.60 |
4.85 |
8.1 |
| 1Q22 |
6.01 |
4.82 |
7.3 |
| 2Q22 |
6.58 |
4.51 |
6.9 |
*
Calculated at 1 ADS = 5 shares
| ● | INVESTOR
RELATIONS for information about Telecom Argentina S.A., please contact: |
| In
Argentina |
| Telecom
Argentina S.A. |
| Investor
Relations Division |
| General
Hornos 690 |
| (1272)
Autonomous City of Buenos Aires |
| Argentina |
| https://inversores.telecom.com.ar/ar/es/contacto.html |
| Outside
Argentina |
| JPMorgan
Chase Bank N.A. |
| 383
Madison Avenue, Floor 11. |
New
York, NY10179
Attn:
Depositary Receipts Group
Tel:
+1 212 622 5935 |
| ● | INTERNET
http://institucional.telecom.com.ar/inversores/ |
| ● | DEPOSIT
AND TRANSFER AGENT FOR ADSs |
| JPMorgan
Chase Bank N.A. |
| 383
Madison Avenue, Floor 11 |
| New
York, NY10179 |
Attn:
Depositary Receipts Group
adr@jpmorgan.com
– www.adr.com |