Telecom(TEO) - 2024 Q4 - Annual Report

Economic Environment - The Argentine Peso depreciated at a monthly rate of approximately 2% in 2024, with an exchange rate of P$1,032 per US$1.00 as of December 31, 2024, reflecting a 27.7% appreciation of the U.S. dollar from P$808.45 on December 31, 2023 [118]. - The Argentine economy remains volatile, with risks including inflation, currency devaluation, and regulatory changes that could adversely affect the company's financial condition and operations [116]. - Inflation in Argentina reached 211.4$5,000 million, US$2,000 million, and US$3,000 million in different series [125]. - The Milei administration's economic reforms include a public emergency declaration until December 31, 2025, affecting various sectors and allowing legislative powers to be delegated to the executive [135]. - The Ley de Bases, approved on June 28, 2024, establishes a framework for state reform, privatization of public companies, and incentives for large investments [139]. - The PAIS tax was reduced from 17.5% to 7.5% for foreign currency acquisition for imports, effective September 2, 2024 [141]. - The Argentine government has historically influenced the telecommunications sector through regulations and ownership stakes, which may continue to affect Telecom Argentina's operations [150]. - The company faces risks from potential government interventions, including nationalization and changes in regulatory frameworks, which could adversely impact its financial condition [151]. - The BCRA has implemented new regulations limiting the flow of foreign currency into and from Argentina, affecting the transfer of securities and foreign currency transactions [269][270]. Financial Performance and Risks - As of December 31, 2024, Telecom Argentina had P$2,627,952 million in liabilities denominated in foreign currencies, indicating significant exposure to foreign exchange risks [128]. - Telecom Argentina's revenues are primarily in Argentine Pesos, making the company vulnerable to inflation that is not matched by price increases [149]. - The devaluation of the Argentine Peso and foreign exchange restrictions may hinder Telecom Argentina's ability to pay dividends and meet obligations in U.S. dollars [128]. - The total indebtedness of Telecom as of December 31, 2024, was P$2,878,004 million, representing a 37.9% decrease compared to the previous year [249]. - 71.3% of Telecom's debt is scheduled to mature within the next three years, with 37.3% maturing in 2025 [249]. - The company anticipates increased revenues from cable television and internet services, but growth may be hindered by competition from non-traditional technologies like OTT services [209]. - The market price of Telecom Argentina's ADSs increased by approximately 79% in 2024, 39% in 2023, and 7% in 2022 [263]. Competition and Market Dynamics - The company is subject to substantial competition in the Argentine telecommunications market, which may impact its market share and profitability [114]. - The company anticipates increased competition in Fintech Services from both local and global players, which may impact market share and revenue [198]. - An increase in churn rates for mobile telephony, cable television, and internet services could materially impact the company's revenues and operations [211]. Technological and Operational Challenges - The company is exposed to risks related to technological advancements, requiring significant expenditures to maintain competitiveness in its service offerings [114]. - The telecommunications industry is subject to rapid technological changes, requiring substantial capital expenditures to maintain competitiveness [206]. - The company must continuously invest in network upgrades and new technologies to enhance user experience and remain competitive in the internet and mobile markets [207]. - Telecom Argentina must comply with regulatory obligations related to the acquisition of 4G and 5G spectrum, requiring significant resources for network maintenance and refurbishment [197]. - Cybersecurity risks have increased due to the proliferation of new technologies, potentially leading to significant operational and financial impacts [226]. - The adoption of new technologies, such as AI, may introduce additional cybersecurity vulnerabilities that could adversely affect the company's business [229]. Legal and Compliance Issues - The company may face legal and regulatory proceedings that could result in unfavorable decisions and financial penalties [114]. - The company is subject to BCRA regulation for Fintech Services, and any non-compliance could result in regulatory sanctions and reputational damage [195]. - The Federal Court nullified Decree No. 690/20, impacting regulatory frameworks affecting the company [313]. - Related-party transactions exceeding 1% of shareholders' equity are subject to a prior approval process to ensure compliance with market practices [292]. Strategic Acquisitions and Investments - Telecom Argentina acquired 99.999625% of Telefónica Móviles for US$1.245 billion, financed through two loans totaling US$1.170 billion [187]. - The acquisition is subject to post-closing review by regulators, including ENACOM and CNDC, to ensure compliance with regulatory and antitrust requirements [188]. - Telecom Argentina acquired 100% of TSMA, previously holding 50.1%, and received US$5.5 million for the share transfer [306]. - Telecom Argentina exercised call options to acquire 100$42 million, consolidating its ownership of Manda and RISSAU [309]. - A new subsidiary, CrediPay, was established in Paraguay with a 67.5% ownership to engage in financial activities [310]. Stakeholder Expectations and ESG - Stakeholders' evolving expectations regarding ESG practices may impose additional costs or expose the company to new risks [114]. - The evolving expectations regarding ESG practices may impose additional costs and expose Telecom to new risks, affecting its reputation if not adequately addressed [235].