Telecom(TEO) - 2025 Q1 - Quarterly Report

FORM 6-K Filing Information Telecom Argentina S.A. filed Form 6-K for May 2025, including unaudited condensed consolidated financial statements and an operating and financial review - Telecom Argentina S.A. filed Form 6-K for May 2025, including unaudited condensed consolidated financial statements and an operating and financial review[1][4] Unaudited Condensed Consolidated Financial Statements This section presents the company's unaudited condensed consolidated financial statements, including the statement of financial position, income, comprehensive income, changes in equity, and cash flows - The unaudited condensed consolidated financial statements for Q1 2025 are prepared under IAS 34 and include key financial statements[5][6] Glossary of Terms This section defines non-technical terms like ADS, ADR, CAPEX, and IFRS Accounting Standards to enhance reader comprehension of the financial statements - The glossary defines key financial and company-specific terms to aid reader understanding of the financial statements[7][16] Consolidated Statements of Financial Position Total assets increased by 18.15% to $14,035,721 million, while total liabilities rose by 35.28% to $7,941,066 million as of March 31, 2025 Consolidated Statements of Financial Position (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :----------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Total Assets | 14,035,721 | 11,879,362 | 2,156,359 | 18.15% | | Current Assets | 1,499,097 | 819,544 | 679,553 | 82.92% | | Non-Current Assets | 12,536,624 | 11,059,818 | 1,476,806 | 13.35% | | Total Liabilities | 7,941,066 | 5,870,299 | 2,070,767 | 35.28% | | Current Liabilities | 3,105,798 | 2,126,231 | 979,567 | 46.07% | | Non-Current Liabilities | 4,835,268 | 3,744,068 | 1,091,200 | 29.15% | | Total Equity | 6,094,655 | 6,009,063 | 85,592 | 1.42% | Consolidated Income Statements Net income for 3M25 significantly decreased by 91.15% to $93,202 million, primarily due to a substantial decline in financial results Consolidated Income Statements (Three-month period ended March 31, 2025 vs. 2024) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Change (millions ARS) | % Change | | :------------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Revenues | 1,363,353 | 1,066,430 | 296,923 | 27.84% | | Operating income (loss) | 111,899 | (40,771) | 152,670 | n/a | | Financial results from borrowings | 85,634 | 1,244,078 | (1,158,444) | (93.12%) | | Other financial results, net | 15,322 | 180,130 | (164,808) | (91.49%) | | Income before income tax | 212,947 | 1,381,318 | (1,168,371) | (84.59%) | | Income tax expense | (119,745) | (328,741) | 208,996 | (63.57%) | | Net income for the period | 93,202 | 1,052,577 | (959,375) | (91.15%) | | Earnings per share (Basic and diluted) | 41.35 | 486.73 | (445.38) | (91.51%) | Consolidated Statements of Comprehensive Income Total comprehensive income for 3M25 decreased by 90.39% to $85,592 million, driven by lower net income and reduced other comprehensive loss Consolidated Statements of Comprehensive Income (Three-month period ended March 31, 2025 vs. 2024) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Change (millions ARS) | % Change | | :------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Net income for the period | 93,202 | 1,052,577 | (959,375) | (91.15%) | | Other comprehensive loss, net of tax | (7,610) | (161,760) | 154,150 | (95.30%) | | Total comprehensive loss for the period | 85,592 | 890,817 | (805,225) | (90.39%) | Consolidated Statements of Changes in Equity Total equity decreased by 1.69% to $6,094,655 million as of March 31, 2025, influenced by comprehensive loss and non-controlling interests Consolidated Statements of Changes in Equity (March 31, 2025 vs. March 31, 2024) | Metric | March 31, 2025 (millions ARS) | March 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Balances as of January 1 | 6,009,063 | 5,308,736 | 700,327 | 13.19% | | Total Comprehensive income (loss) | 85,592 | 890,817 | (805,225) | (90.39%) | | Balances as of March 31 | 6,094,655 | 6,199,553 | (104,898) | (1.69%) | Consolidated Statements of Cash Flows Operating cash flows remained stable, while investing activities saw a 259.83% increase in outflow due to acquisitions, and financing activities generated substantial inflow Consolidated Statements of Cash Flows (Three-month period ended March 31, 2025 vs. 2024) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | | :------------------------------------------------ | :------------------ | :------------------ | :----------------------- | | Total cash flows from operating activities | 273,544 | 266,997 | 6,547 | | Total cash flows used in investing activities | (1,258,015) | (349,624) | (908,391) | | Total cash flows from financing activities | 1,059,501 | 43,124 | 1,016,377 | | Net increase / (decrease) in cash and cash equivalents | 75,030 | (39,503) | 114,533 | | Cash and cash equivalents at the end of the period | 412,345 | 234,836 | 177,509 | Notes to the Unaudited Condensed Consolidated Financial Statements These notes provide detailed context for the financial statements, covering accounting policies, asset/liability changes, and significant events like the TMA acquisition - The notes provide detailed context and breakdowns for the financial statements, covering accounting policies, asset/liability changes, and significant events like the TMA acquisition[32][34] Basis of preparation and significant accounting policies (Note 1) Financial statements are prepared under IAS 34 and IAS 29 (hyperinflationary economy), with new policies adopted post-TMA acquisition and revised segment reporting - Financial statements are prepared under IAS 34 and IAS 29 (hyperinflationary economy), making them non-comparable to prior annual statements[34][35][36] - New accounting policies were adopted for financial assets, investment properties, and termination benefits due to the TMA acquisition[37] - The company now reports two main segments: 'ICT Services provided in Argentina – Telecom Networks' and 'ICT Services provided in Argentina – TMA Networks,' with 'Other segments' for minor operations[47][51] National Consumer Price Index (National CPI) and US$/$ Exchange Rate Variation | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------------------------------------ | :------------- | :---------------- | :------------- | | National CPI (Dec 2016=100) | 8,353.3 | 7,694.0 | 5,357.1 | | Variation in prices (Annual) | 55.9% | 117.8% | 287.9% | | Variation in prices (Accumulated 3M) | 8.6% | n/a | 51.6% | | Banco Nación US$/$ exchange rate | 1,074 | 1,032 | 858 | | Variation in exchange rate (Annual) | 25.2% | 27.7% | 310.5% | | Variation in exchange rate (Accumulated 3M) | 4.1% | n/a | 6.1% | Cash and cash equivalents and Investments (Note 2) Cash and cash equivalents increased by 19.31% to $412,345 million, while total investments rose by 178.77% to $142,832 million as of March 31, 2025 Cash and Cash Equivalents (March 31, 2025 vs. December 31, 2024) | Category | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :--------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Cash and Banks | 63,390 | 132,186 | (68,796) | (52.05%) | | Time deposits | 123,715 | 113,969 | 9,746 | 8.55% | | Mutual funds | 225,240 | 99,441 | 125,799 | 126.51% | | Total | 412,345 | 345,596 | 66,749 | 19.31% | Investments (March 31, 2025 vs. December 31, 2024) | Category | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Current Investments | 106,483 | 36,462 | 70,021 | 192.06% | | Non-Current Investments | 36,349 | 14,775 | 21,574 | 146.02% | | Total Investments | 142,832 | 51,237 | 91,595 | 178.77% | Goodwill (Note 3) Goodwill saw a slight increase of 0.50% to $3,662,411 million as of March 31, 2025, primarily due to currency translation adjustments Goodwill Movements (March 31, 2025 vs. 2024) | Metric | March 31, 2025 (millions ARS) | March 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :-------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | At the beginning of the year | 3,661,699 | 3,650,303 | 11,396 | 0.31% | | Currency translation adjustments | 712 | (6,008) | 6,720 | n/a | | At the end of the period | 3,662,411 | 3,644,295 | 18,116 | 0.50% | PP&E (Note 4) Properties, Plant, and Equipment (PP&E) increased by 5.31% to $5,454,136 million, significantly driven by the TMA acquisition and capital expenditures PP&E Movements (March 31, 2025 vs. 2024) | Metric | March 31, 2025 (millions ARS) | March 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :-------------------- | :------- | | At the beginning of the year | 4,751,539 | 5,429,029 | (677,490) | (12.48%) | | CAPEX | 156,651 | 153,109 | 3,542 | 2.31% | | Acquisitions through TMA business combination | 827,331 | - | 827,331 | n/a | | Depreciation of the period | (259,832) | (277,463) | 17,631 | (6.35%) | | At the end of the period | 5,454,136 | 5,179,373 | 274,763 | 5.31% | Intangible assets (Note 5) Intangible assets increased by 11.61% to $2,448,672 million, primarily due to the TMA acquisition and capital expenditures Intangible Assets Movements (March 31, 2025 vs. 2024) | Metric | March 31, 2025 (millions ARS) | March 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :-------------------- | :------- | | At the beginning of the year | 2,139,084 | 2,223,198 | (84,114) | (3.78%) | | CAPEX | 20,070 | 10,100 | 9,970 | 98.71% | | Acquisitions through TMA business combination | 323,310 | - | 323,310 | n/a | | Amortization of the period | (32,909) | (32,547) | (362) | 1.11% | | At the end of the period | 2,448,672 | 2,193,982 | 254,690 | 11.61% | Right of use assets (Note 6) Right of use assets increased by 29.11% to $655,559 million, mainly due to the TMA business combination and new additions Right of Use Assets Movements (March 31, 2025 vs. 2024) | Metric | March 31, 2025 (millions ARS) | March 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :-------------------- | :------- | | At the beginning of the year | 533,421 | 509,947 | 23,474 | 4.60% | | Increase | 43,688 | 63,626 | (19,938) | (31.34%) | | Acquisitions through TMA business combination | 126,888 | - | 126,888 | n/a | | Amortization of the period | (46,541) | (53,618) | 7,077 | (13.20%) | | At the end of the period | 655,559 | 507,760 | 147,799 | 29.11% | Borrowings (Note 7) Total borrowings increased by 31.88% to $4,120,718 million, driven by new loans to finance the TMA acquisition, with the company remaining covenant compliant Borrowings (March 31, 2025 vs. December 31, 2024) | Category | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :-------------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Current Borrowings | 1,198,136 | 1,164,665 | 33,471 | 2.87% | | Non-Current Borrowings | 2,922,582 | 1,959,958 | 962,624 | 49.12% | | Total Borrowings | 4,120,718 | 3,124,623 | 996,095 | 31.88% | - The acquisition of TMA was financed by two loans totaling US$1,170 million (net US$1,142 million), with maturities in 2029 and 2028-2030, and variable annual interest rates (SOF 3 months plus spread)[78] - The Company complies with its financial covenants, including Net Debt/EBITDA and EBITDA/Interest Net ratios, as of March 31, 2025[80] Income tax and Deferred income tax assets/liabilities (Note 8) Income tax liabilities surged by 3809.29% to $193,549 million as of March 31, 2025, while income tax expense decreased significantly in 3M25 Income Tax Liabilities (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :---------------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Provision for income tax | 243,869 | 15,908 | 227,961 | 1432.99% | | Income tax withholdings | (50,320) | (10,957) | (39,363) | 359.24% | | Total | 193,549 | 4,951 | 188,598 | 3809.29% | Income Tax Expense (Three-month period ended March 31, 2025 vs. 2024) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Change (millions ARS) | % Change | | :-------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Income tax expense | (119,745) | (328,741) | 208,996 | (63.57%) | | Current tax | (238,918) | (2,710) | (236,208) | 8716.16% | | Deferred tax | 119,173 | (326,031) | 445,204 | (136.55%) | Provisions and allowances (Note 9) Total provisions increased significantly by 376.70% to $293,683 million, primarily due to additions from the TMA business combination for legal claims Total Provisions (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :-------------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Total provisions | 293,683 | 61,596 | 232,087 | 376.70% | - Additions to provisions were significantly impacted by the TMA acquisition, contributing $225,395 million, primarily for legal claims and asset retirement obligations[86] - TMA is subject to various lawsuits and claims in labor (e.g., joint and several liabilities, occupational accidents), tax (e.g., municipal fees, national/provincial taxes), and civil/regulatory matters (e.g., damages, regulatory claims, fines)[90][96] Additional information of financial assets and liabilities (Note 10) Net financial liabilities in foreign currencies increased by 54.41% to $(3,809,623) million, with financial instruments classified by fair value hierarchy Financial Assets and Liabilities in Foreign Currencies (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :-------------- | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Assets | 228,297 | 385,933 | (157,636) | (40.84%) | | Liabilities | (4,037,920) | (2,853,144) | (1,184,776) | 41.52% | | Net Liabilities | (3,809,623) | (2,467,211) | (1,342,412) | 54.41% | - Financial instruments are classified into a fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[99][100] - The fair value of Notes traded in active markets is Level 1, Notes not traded in active markets are Level 2, and other borrowings are Level 3 (based on discounted cash flows)[109] Purchase commitments (Note 11) Total purchase commitments increased by 9.80% to $1,182,058 million, including significant obligations for fixed and intangible assets with 'take or pay' clauses Purchase Commitments (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | Change (millions ARS) | % Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :-------------------- | :------- | | Total Purchase Commitments | 1,182,058 | 1,076,541 | 105,517 | 9.80% | | Fixed and intangible assets commitments | 200,727 | 205,906 | (5,179) | (2.51%) | - Purchase commitments include 'take or pay' clauses, obligating the company to purchase or pay for a specified quantity of products or services[108] Revenues (Note 12) Total revenues increased by 27.8% to $1,363,353 million in 3M25, driven by strong growth in Mobile Services, Internet Services, and Equipment revenues Revenues by Service Type (Three-month period ended March 31, 2025 vs. 2024) | Service Type | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | % Change | | :---------------------- | :------------------ | :------------------ | :----------------------- | :------- | | Mobile Services | 620,179 | 433,997 | 186,182 | 42.9% | | Internet Services | 322,420 | 262,797 | 59,623 | 22.7% | | Cable Television Services | 172,674 | 158,150 | 14,524 | 9.2% | | Fixed and Data Services | 154,859 | 149,301 | 5,558 | 3.7% | | Other services revenues | 15,350 | 12,219 | 3,131 | 25.6% | | Subtotal services revenues | 1,285,482 | 1,016,464 | 269,018 | 26.5% | | Equipment revenues | 77,871 | 49,966 | 27,905 | 55.8% | | Total Revenues | 1,363,353 | 1,066,430 | 296,923 | 27.8% | Operating expenses (Note 13) Total operating expenses increased by 13.0% to $1,251,454 million in 3M25, with notable increases in employee benefits, taxes, and equipment costs Operating Expenses by Function (Three-month period ended March 31, 2025 vs. 2024) | Concept | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | % Change | | :------------------------------------------------ | :------------------ | :------------------ | :----------------------- | :------- | | Employee benefit expenses and severance payments | (286,847) | (246,095) | (40,752) | 16.6% | | Interconnection costs and transmission costs | (44,275) | (39,120) | (5,155) | 13.2% | | Fees for services, maintenance, materials and supplies | (172,012) | (155,988) | (16,024) | 10.3% | | Taxes and fees with the Regulatory Authority | (113,911) | (82,175) | (31,736) | 38.6% | | Commissions and advertising | (71,288) | (55,366) | (15,922) | 28.8% | | Cost of equipment and handsets | (57,005) | (37,200) | (19,805) | 53.2% | | Programming and content costs | (71,825) | (58,405) | (13,420) | 23.0% | | Bad debt expenses | (25,650) | (26,539) | 889 | (3.3%) | | Other operating expenses, net | (68,592) | (42,558) | (26,034) | 61.2% | | Depreciation, amortization and impairment of Fixed and intangible assets | (340,049) | (363,755) | 23,706 | (6.5%) | | Total | (1,251,454) | (1,107,201) | (144,253) | 13.0% | Financial results (Note 14) Total financial results, net, significantly decreased by 92.9% to a gain of $100,956 million in 3M25, primarily due to reduced foreign currency exchange gains Financial Results, Net (Three-month period ended March 31, 2025 vs. 2024) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | % Change | | :------------------------------------------------ | :------------------ | :------------------ | :----------------------- | :------- | | Total financial results from borrowings | 85,634 | 1,244,078 | (1,158,444) | (93.1%) | | Total other financial results, net | 15,322 | 180,130 | (164,808) | (91.5%) | | Total financial results, net | 100,956 | 1,424,208 | (1,323,252) | (92.9%) | - The significant decrease in financial gain was mainly due to less negative devaluation measured in real terms (4.1% in 3M25 vs. 30.0% in 3M24)[190] Balances and transactions with Related parties (Note 15) This note details trade receivables, payables, and service transactions with associates, joint ventures, and other related parties, all conducted on an arm's length basis Balances with Related Parties (March 31, 2025 vs. December 31, 2024) | Category | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | | :-------------------------------- | :---------------------------- | :---------------------------- | | Current Assets - Trade receivables (Associates/JV) | 49 | 50 | | Current Liabilities - Trade payables (Associates/JV) | 371 | 742 | | Current Liabilities - Other liabilities (Associates/JV) | 3,203 | 3,269 | | Non-Current Liabilities - Other liabilities (Associates/JV) | 2,931 | 2,992 | | Current Assets - Trade receivables (Other Related Parties) | 2,863 | 2,036 | | Current Liabilities - Trade payables (Other Related Parties) | 13,761 | 13,184 | Transactions with Related Parties (Three-month period ended March 31, 2025 vs. 2024) | Transaction Type | 3M25 (millions ARS) | 3M24 (millions ARS) | | :------------------------------------ | :------------------ | :------------------ | | Services revenues (Associates/JV) | 159 | 63 | | Operating costs (Associates/JV) | (495) | (282) | | Services and advertising revenues (Other Related Parties) | 2,115 | 1,665 | | Operating costs (Other Related Parties) | (17,295) | (13,002) | Recent developments corresponding to the three-month period ended March 31, 2025 (Note 16) Telecom Argentina acquired 99.999625% of TMA for US$1,245 million on February 24, 2025, financed by new loans, with regulatory approvals pending - Telecom Argentina acquired 99.999625% of TMA on February 24, 2025, for US$1,245 million, financed by two loans, to enhance service quality and network coverage[119][121] Assets and Liabilities Recognized from TMA Acquisition (March 31, 2025) | Category | March 31, 2025 (millions ARS) | | :------------------------------------ | :---------------------------- | | Cash and cash equivalents | 155,260 | | PP&E | 827,331 | | Intangible assets | 323,310 | | Deferred income tax assets | 325,698 | | Right of use assets | 142,124 | | Provisions | (225,395) | | Net identifiable assets acquired | 1,231,504 | - A preliminary PPA was conducted, with no goodwill recognized yet, as valuation requires additional time and information[123] - Regulatory approvals from CNDC and ENACOM are pending, and a provisional measure restricts the integration or consolidation of TMA's business with Telecom's, including personnel and sensitive information exchange[125][127] Subsequent events to March 31, 2025 (Note 17) Shareholders approved allocating retained earnings to Legal and Voluntary Reserves, with the Board authorized to distribute up to US$300 million in dividends - Shareholders approved allocating $54,958 million to Legal Reserve and $1,044,198 million to Voluntary Reserve for capital expenditures and solvency from retained earnings[129] - The Board of Directors can reverse the Voluntary Reserve to distribute up to US$300 million in dividends (cash, non-cash, or combination) before December 31, 2025[129] Operating and Financial Review and Prospects This review analyzes Q1 2025 performance, highlighting the impact of hyperinflation and the TMA acquisition on financial comparability and future prospects - The review analyzes Q1 2025 performance, emphasizing the impact of hyperinflation and the TMA acquisition, which makes comparisons with Q1 2024 non-comparable[130][132] General Considerations Financial review is presented in current currency due to Argentina's hyperinflation, and the TMA acquisition significantly impacts comparability of 3M25 results - Financial information is restated to current currency as of March 31, 2025, due to Argentina's hyperinflationary economy (IAS 29)[130] - The acquisition of TMA on February 24, 2025, makes 3M25 results non-comparable to 3M24 due to consolidation from the acquisition date[132] Telecom's Activities (3M25 and 3M24) Telecom's 3M25 performance saw 27.8% revenue growth but a 91.1% net income decrease, while Adjusted EBITDA grew by 39.9% due to TMA consolidation Key Financial Performance (Three-month period ended March 31, 2025 vs. 2024) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | % Change | | :------------------------------------------------ | :------------------ | :------------------ | :----------------------- | :------- | | Revenues | 1,363,353 | 1,066,430 | 296,923 | 27.8% | | Operating income / (loss) | 111,899 | (40,771) | 152,670 | n/a | | Net income for the period | 93,202 | 1,052,577 | (959,375) | (91.1%) | | Adjusted EBITDA | 451,948 | 322,984 | 128,964 | 39.9% | - Net income decreased significantly by 91.1% in 3M25 compared to 3M24, primarily due to a $1,323,252 million decrease in net financial results, partially offset by increased operating income and lower income tax expense[134] - Adjusted EBITDA increased by 39.9% to $451,948 million in 3M25, representing 33.1% of revenues, driven by a $296,923 million increase in revenues, partially offset by higher operating costs[135] Revenues Total revenues increased by 27.8% to $1,363,353 million in 3M25, driven by TMA consolidation and strong growth in Mobile, Internet, and Equipment services Revenue Breakdown and Growth (3M25 vs. 3M24) | Service Type | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | % Change | | :---------------------- | :------------------ | :------------------ | :----------------------- | :------- | | Mobile Services | 620,179 | 433,997 | 186,182 | 42.9% | | Internet Services | 322,420 | 262,797 | 59,623 | 22.7% | | Cable Television Services | 172,674 | 158,150 | 14,524 | 9.2% | | Fixed and Data Services | 154,859 | 149,301 | 5,558 | 3.7% | | Other services revenues | 15,350 | 12,219 | 3,131 | 25.6% | | Subtotal services revenues | 1,285,482 | 1,016,464 | 269,018 | 26.5% | | Equipment revenues | 77,871 | 49,966 | 27,905 | 55.8% | | Total Revenues | 1,363,353 | 1,066,430 | 296,923 | 27.8% | - TMA consolidation contributed $231,343 million to total revenues in 3M25[136] - Mobile ARPU in Argentina increased by 13.2% to $6,837.1, and the customer base grew by 0.9% to 21.4 million[140][141][142] - Internet ARPU in Argentina increased to $22,538.2, but the customer base decreased by 1.1% to 4.0 million[147][148][149] - Other services revenues increased by 25.6%, mainly due to fintech services like 'Personal Pay,' which saw a 55% increase in users to 3.9 million[161] Operating Costs (without depreciation, amortization and impairment of Fixed and intangible assets) Total operating costs (excluding D&A) increased by 22.6% to $911,405 million in 3M25, significantly impacted by TMA consolidation and higher taxes Operating Costs (excluding D&A) Breakdown and Growth (3M25 vs. 3M24) | Cost Category | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | % Change | | :------------------------------------------------ | :------------------ | :------------------ | :----------------------- | :------- | | Employee benefit expenses and severance payments | (286,847) | (246,095) | (40,752) | 16.6% | | Interconnection and transmission costs | (44,275) | (39,120) | (5,155) | 13.2% | | Fees for services, maintenance, materials and supplies | (172,012) | (155,988) | (16,024) | 10.3% | | Taxes and fees with the Regulatory Authority | (113,911) | (82,175) | (31,736) | 38.6% | | Commissions and advertising | (71,288) | (55,366) | (15,922) | 28.8% | | Cost of equipment and handsets | (57,005) | (37,200) | (19,805) | 53.2% | | Programming and content costs | (71,825) | (58,405) | (13,420) | 23.0% | | Bad debt expenses | (25,650) | (26,539) | 889 | (3.3%) | | Other operating expenses, net | (68,592) | (42,558) | (26,034) | 61.2% | | Total operating costs | (911,405) | (743,446) | (167,959) | 22.6% | - TMA consolidation contributed $162,927 million to operating costs[165] - Employee benefit expenses increased by 16.6%, with TMA contributing $43,492 million, despite a 6.1% reduction in the Company's headcount[166] - Bad debt expenses decreased by 3.3% due to ongoing credit recovery actions[180] Operating Income (Loss) The company transitioned from an operating loss of $40,771 million in 3M24 to an operating income of $111,899 million in 3M25, with TMA contributing $24,904 million Operating Income (Loss) (3M25 vs. 3M24) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | | :--------------- | :------------------ | :------------------ | :----------------------- | | Operating income (loss) | 111,899 | (40,771) | 152,670 | - TMA consolidation contributed $24,904 million to the operating income in 3M25[188] Financial Results, Net Total financial results, net, decreased significantly by 92.9% to a gain of $100,956 million in 3M25, primarily due to reduced foreign currency exchange gains Financial Results, Net (3M25 vs. 3M24) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | % Change | | :-------------------------------- | :------------------ | :------------------ | :----------------------- | :------- | | Total financial results from borrowings | 85,634 | 1,244,078 | (1,158,444) | (93.1%) | | Total other financial results, net | 15,322 | 180,130 | (164,808) | (91.5%) | | Total financial results, net | 100,956 | 1,424,208 | (1,323,252) | (92.9%) | - The lower gain was mainly due to less negative devaluation in real terms (4.1% in 3M25 vs. 30.0% in 3M24)[190] - TMA consolidation resulted in a $(14,150) million impact on financial results[189] Income Tax Benefit (Expense) Income tax expense decreased significantly to $119,745 million in 3M25, including a current tax expense and a deferred tax gain, with TMA contributing $35,158 million Income Tax Benefit (Expense) (3M25 vs. 3M24) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | % Change | | :-------------------- | :------------------ | :------------------ | :----------------------- | :------- | | Income tax expense | (119,745) | (328,741) | 208,996 | (63.6%) | | Current tax expenses | (238,918) | (2,710) | (236,208) | 8716.16% | | Deferred tax gain | 119,173 | (326,031) | 445,204 | (136.55%) | - TMA consolidation contributed $35,158 million to the income tax benefit (expense)[193] Net Income Net income decreased by 91.1% to $93,202 million in 3M25, mainly due to a substantial decrease in net financial results, despite improved operating income Net Income (3M25 vs. 3M24) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | | :--------------- | :------------------ | :------------------ | :----------------------- | | Net income | 93,202 | 1,052,577 | (959,375) | - The decrease was mainly due to a $1,323,252 million decrease in net financial results, partially offset by increased operating income and lower income tax expense[194] - TMA consolidation resulted in a $24,404 million loss[196] Adjusted EBITDA Consolidated Adjusted EBITDA increased by 39.9% to $451,948 million in 3M25, representing 33.1% of revenues, with TMA contributing $68,416 million Adjusted EBITDA (3M25 vs. 3M24) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | | :--------------- | :------------------ | :------------------ | :----------------------- | | Adjusted EBITDA | 451,948 | 322,984 | 128,964 | - Adjusted EBITDA represented 33.1% of total consolidated revenues in 3M25, up from 30.3% in 3M24[198] - TMA consolidation contributed $68,416 million to Adjusted EBITDA[199] Liquidity and Capital Resources Telecom's liquidity relies on operating cash flows and third-party financing, primarily used for CAPEX, operating expenses, and debt payments, with new loans secured for TMA acquisition - Telecom's liquidity depends on operating cash flows and third-party financing, used for CAPEX, operating expenses, dividends, and debt payments[200] Sources and Uses of Funds Liquidity is sourced from operating cash flows and third-party financing, primarily used for capital expenditures, operating expenses, dividends, and debt repayment - Main liquidity sources are operating cash flows and third-party financing (domestic/international capital markets, financial institutions)[200] - Principal uses of cash are capital expenditures, operating expenses, dividend payments, debt repayment, and general corporate purposes[200] - Telecom plans to refinance outstanding debt to extend terms and achieve lower financing costs[200] Borrowings Developments during 3M25 The TMA acquisition was financed by two new loans totaling US$1,170 million, a syndicated loan and a bilateral loan, both with variable interest rates - TMA acquisition financed by two loans totaling US$1,170 million (net US$1,142 million)[201] New Loans for TMA Acquisition | Entity | Currency | Principal Residual Nominal Value (millions) | Maturity Date | Amortization | Interest Rate | Spread | Interest Payment | | :------------- | :------- | :---------------------------------------- | :------------ | :----------- | :------------ | :----- | :--------------- | | Syndicated loan | US$ | 970 | 02/2029 | In one installment at maturity date | Variable annual rate: SOF 3 months | 4.00%-7.00% | Quarterly basis | | Bilateral loan | US$ | 200 | 02/2028 and 02/2030 | Semiannually from 02/2028 | Variable annual rate: SOF 3 months | 4.00% | Quarterly basis | Cash Flow Cash and cash equivalents increased to $412,345 million, with significant outflows from investing activities (TMA acquisition) and substantial inflows from financing activities Consolidated Cash Flows (3M25 vs. 3M24) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | | :------------------------------------------------ | :------------------ | :------------------ | :----------------------- | | Cash flows from operating activities | 273,544 | 266,997 | 6,547 | | Cash flows used in investing activities | (1,258,015) | (349,624) | (908,391) | | Cash flows from financing activities | 1,059,501 | 43,124 | 1,016,377 | | Net increase (decrease) in cash and cash equivalents | 66,749 | (142,908) | 209,657 | | Cash and cash equivalents at the end of the period | 412,345 | 234,836 | 177,509 | - Investing activities included $1,076,244 million for the TMA acquisition and $189,733 million for PP&E and intangible assets[209] - Financing activities included $1,420,063 million from borrowings, partially offset by $360,562 million in payments for borrowings, interest, DFI, and leases[211] Working Capital Telecom maintains a negative working capital of $(1,606,701) million, typical for a capital-intensive company, with TMA consolidation contributing to this position Working Capital Breakdown (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (millions ARS) | December 31, 2024 (millions ARS) | Variation (millions ARS) | | :------------------------------------ | :---------------------------- | :---------------------------- | :----------------------- | | Operating working capital - negative | (929,865) | (525,996) | (403,869) | | Net Current financial liability | (679,290) | (782,607) | 103,317 | | Negative working capital (current assets—current liabilities) | (1,606,701) | (1,306,687) | 300,014 | | Liquidity rate (current assets/ current liabilities) | 0.48 | 0.39 | 0.09 | - Negative working capital is typical for a capital-intensive company that obtains spontaneous financing from suppliers for longer terms[216] - TMA consolidation contributed $121,570 million to the negative working capital[217] Compliance with Covenants As of March 31, 2025, Telecom Argentina is in compliance with all financial covenants, including EBITDA/Interest Net and Net Debt/EBITDA ratios - The Company complies with all financial covenants, including EBITDA/Interest Net and Net Debt/EBITDA ratios, as of March 31, 2025[224] Capital Expenditures Total CAPEX and Right of use asset additions decreased by 2.8% to $220,409 million, with significant investments in network expansion and digital services, and TMA contributing $21,759 million CAPEX and Rights of Use Assets Additions (3M25 vs. 3M24) | Metric | 3M25 (millions ARS) | 3M24 (millions ARS) | Variation (millions ARS) | % Change | | :------------------------------------ | :------------------ | :------------------ | :----------------------- | :------- | | PP&E CAPEX | 156,651 | 153,109 | 3,542 | 2.3% | | Intangibles assets CAPEX | 20,070 | 10,100 | 9,970 | 98.7% | | Total CAPEX | 176,721 | 163,209 | 13,512 | 8.3% | | Rights of use assets additions | 43,688 | 63,626 | (19,938) | (31.3%) | | Total CAPEX and Right of use asset additions | 220,409 | 226,835 | (6,426) | (2.8%) | - Main CAPEX projects focus on expanding cable television and Internet services, deploying 4G/5G networks, and improving mobile site connectivity[226][227] - TMA consolidation contributed $21,759 million to total CAPEX and Right of use asset additions[228] Trend Information Telecom focuses on strengthening its digital role amid macroeconomic stabilization, with the TMA acquisition reinforcing commitment to national technological development and sustainability - Telecom is strengthening its role in customers' digital lives amid macroeconomic stabilization and decelerating inflation[229] - The acquisition of TMA (US$1,245 million) is the largest private infrastructure investment in Argentina, reinforcing commitment to national technological development[231] - The company continues to invest in digital services, growing Flow and Personal Pay platforms, and leading regional initiatives like GSMA's Open Gateway[233][234] - Sustainability is a strategic pillar, focusing on energy efficiency, circular economy practices, and digital talent development[235] Corporate Information This section provides market quotation data for BYMA shares and NYSE ADRs, along with contact information for Investor Relations and the ADS Depositary - Provides market quotation data for BYMA shares and NYSE ADRs for the past five quarters[238][239] - Includes contact information for Investor Relations and the Deposit and Transfer Agent for ADSs[240][241] BYMA Market Quotation This section presents the high, low, and volume of shares traded for Telecom Argentina on BYMA for each quarter from 1Q24 to 1Q25 BYMA Market Quotation ($/share) and Volume (millions) | Quarter | High ($) | Low ($) | Volume of shares traded (in millions) | | :------ | :------- | :------ | :------------------------------------ | | 1Q24 | 2,073.15 | 1,333.80 | 8.5 | | 2Q24 | 2,191.65 | 1,489.10 | 10.9 | | 3Q24 | 2,090.00 | 1,560.00 | 12.3 | | 4Q24 | 3,175.00 | 1,850.00 | 18.7 | | 1Q25 | 3,400.00 | 2,515.00 | 17.0 | NYSE Market Quotation This section presents the high, low, and volume of ADRs traded for Telecom Argentina on NYSE for each quarter from 1Q24 to 1Q25 NYSE Market Quotation (US$/ADR) and Volume (millions) | Quarter | High (US$/ADR) | Low (US$/ADR) | Volume of ADRs traded (in millions) | | :------ | :------------- | :------------ | :---------------------------------- | | 1Q24 | 7.97 | 6.53 | 8.7 | | 2Q24 | 9.65 | 6.89 | 15.9 | | 3Q24 | 8.56 | 5.86 | 11.3 | | 4Q24 | 13.81 | 7.49 | 14.7 | | 1Q25 | 14.18 | 10.19 | 12.7 | - Each ADR represents five Class B Shares[239] Investor Relations This section provides contact information for Telecom Argentina's Investor Relations Division in Argentina and JPMorgan Chase Bank N.A. for international inquiries - Contact information for Investor Relations in Argentina (Telecom Argentina S.A.) and outside Argentina (JPMorgan Chase Bank N.A.) is provided[240] Deposit and Transfer Agent for ADSs This section lists JPMorgan Chase Bank N.A. as the Deposit and Transfer Agent for ADSs, including its address and contact details - JPMorgan Chase Bank N.A. serves as the Deposit and Transfer Agent for ADSs[241] Signatures This section confirms the report was signed by Luis Fernando Rial Ubago, Responsible for Market Relations, on May 13, 2025 - The report was signed by Luis Fernando Rial Ubago, Responsible for Market Relations, on May 13, 2025[243]