TEO

Business Context and Reporting Period

Company: Telecom Argentina S.A.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three months ended March 31, 2025 (Q1 2025)
Filing Date: May 13, 2025
Accounting Basis: IFRS (IAS 29 for hyperinflationary economies); figures restated to current Argentine pesos as of March 31, 2025.

The reporting period is significantly impacted by the acquisition of Telefónica Móviles Argentina S.A. (TMA) on February 24, 2025. Consequently, Q1 2025 results include TMA's operations from the acquisition date, rendering them not directly comparable to Q1 2024.

Key Financial Metrics

Note: Net income in Q1 2024 was heavily influenced by foreign currency exchange gains on borrowings ($1.24 billion). Q1 2025 net income reflects a more normalized financial result structure.

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 27.8% to $1.36 billion, driven primarily by the consolidation of TMA ($231 million contribution) and inflationary price adjustments.
• Profitability Shift: Operating income turned positive ($111.9 million) from a loss of $40.8 million in Q1 2024. However, Net Income decreased 91.1% to $93.2 million, primarily due to a $1.32 billion reduction in net financial results (lower foreign exchange gains compared to the prior year).
• Adjusted EBITDA: Increased 39.9% to $451.9 million, representing 33.1% of revenues, reflecting improved operational efficiency and scale.
• Balance Sheet Expansion: Total assets grew to $14.0 billion, with significant increases in PP&E and Intangible Assets due to the TMA acquisition. Total borrowings increased to $4.1 billion to finance the acquisition.
• Customer Base: Mobile customers in Argentina (Telecom Networks segment) grew to 21.4 million; Internet customers decreased slightly to 4.0 million; Cable TV customers grew to 3.2 million.

Guidance, Outlook, and Risks

Management Commentary and Outlook

Management highlights a commitment to strengthening the digital ecosystem through connectivity, entertainment (Flow), and fintech (Personal Pay). The acquisition of TMA is positioned as the largest private infrastructure investment in Argentina, aimed at expanding network coverage and capacity (4G/5G deployment).

Risks and Contingencies

• Regulatory Approval: The TMA acquisition is subject to final approval by the Argentine Antitrust Commission (CNDC) and the Telecommunications Regulatory Authority (ENACOM). A provisional measure currently prohibits the integration of TMA's business with Telecom's until approval is granted.
• Hyperinflation: Argentina remains a hyperinflationary economy. Financial statements are restated using the National Consumer Price Index (CPI), which increased 55.9% annually as of March 31, 2025.
• Legal Contingencies: TMA is subject to various labor, tax, and regulatory lawsuits. Provisions for these contingencies totaled $172 million as of March 31, 2025.
• Debt Covenants: The company is currently compliant with Net Debt/EBITDA and EBITDA/Interest Net covenants, but future compliance depends on operational performance and refinancing strategies.

Investor Verification Checklist

• TMA Integration Status: Verify the timeline for regulatory approval (CNDC/ENACOM) and the potential impact of the current prohibition on business integration.
• Debt Structure: Review the terms of the new $1.17 billion syndicated and bilateral loans used to finance the TMA acquisition, specifically interest rates (SOF 3 months + spread) and maturity dates (2028-2029).
• Inflation Impact: Assess the sustainability of passing inflation costs to customers (ARPU growth) versus the erosion of real value in cash balances and receivables.
• Working Capital: Monitor the negative working capital position ($1.6 billion) and the company's ability to manage liquidity through spontaneous financing from suppliers.
• Financial Results Volatility: Distinguish between operating performance (Adjusted EBITDA) and net income, which remains highly sensitive to foreign exchange fluctuations on debt.