Telecom reports strong profit thanks to rising peso

12 Aug 2003

Argentinian fixed line and mobile operator Telecom Argentina (Telecom) [NYSE: TEO] reported net income of ARS1.3 billion (USD440 million) for the first half of the year, reversing a net loss of ARS4.6 billion for the corresponding period of 2002. However, the upturn in fortunes was attributed to holding income totalling ARS1 billion stemming from a local currency appreciation and the positive effects of the company restructuring debt of ARS374 million. The underlying picture is not so rosy and Telecom has accumulated a net loss of ARS2.2 billion in the last 18 months. In the six months to 30 June 2003 it posted revenues of ARS1.75 billion, down 24% from 2002, with each of its main business areas reporting significant falls in income. Turnover from ILD services dropped 31% to ARS102 million, while interconnection, mobile and data revenues fell by 32% (ARS70 million), 13% (ARS512 million), and 14% (ARS166 million) respectively.

On a brighter note, Telecom said that despite falling revenues the volume of traffic handled over the six-month period had risen compared with last year. Local and DLD traffic grew by 1%, with local telephony witnessing a sharp upswing following a slump. Mobile usage also rose, climbing by 23% to 605 million minutes on the back of strong popularity for pre-paid cards. Since June 2002 Telecom said its fixed line subscriber base had fallen by a percentage point to around 3.58 million while the number of people signed up to mobile services in Argentina and Paraguay had risen marginally by 4% to 2.77 million. Telecom added that at the end of the period in review its debt had been trimmed by 41% to ARS7.5 billion, and that it was in ongoing restructuring talks with its principal creditors; negotiations are expected to be concluded by the end of the year.