Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

 

For the month of May 2020

 

Commission File Number: 001-13464

 

 

Telecom Argentina S.A.

(Translation of registrant’s name into English)

 

Alicia Moreau de Justo, No. 50, 1107

Buenos Aires, Argentina

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F

X

 

Form 40-F

 

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes

 

 

No

X

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes

 

 

No

X

 


Table of Contents

 

Telecom Argentina S.A.

 

TABLE OF CONTENTS

 

Item

 

1.         English translation of the (i) Unaudited Condensed Consolidated Financial Statements of Telecom Argentina S.A., and (ii) Telecom Argentina S.A.´s Operating and Financial Review and Prospects as of March 31, 2020

 


Table of Contents

 

TELECOM ARGENTINA S.A.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TELECOM ARGENTINA S.A.

 

 

Unaudited Condensed Consolidated Financial Statements as of March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

Alicia Moreau de Justo 50

(1107) Ciudad Autónoma de Buenos Aires

Argentina

 

 

 

 

 

$: Argentine peso

US$: US dollar

$64.47 = US$1 as of March 31, 2020

 


Table of Contents

 

TELECOM ARGENTINA S.A.

 

 

 

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2020 AND 2019

 

INDEX

 

Unaudited consolidated financial statements

 

Unaudited consolidated statements of financial position

 

Unaudited consolidated income statements

 

Unaudited consolidated statements of comprehensive income

 

Unaudited consolidated statements of changes in equity

 

Unaudited consolidated statements of cash flows

 

Notes to the unaudited consolidated financial statements

 

Operating and Financial Review and Prospects

 

 

 

Corporate information

 

 


Table of Contents

 

TELECOM ARGENTINA S.A.

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In millions of Argentine pesos in current currency - Note 1.e)

 

 

 

March 31,

December 31,

ASSETS

Note

2020

2019

Current Assets

 

 

 

Cash and cash equivalents

2

35,205

27,577

Investments

2

807

462

Trade receivables

3

18,986

18,288

Other receivables

4

6,408

4,948

Inventories

5

2,991

3,463

Total current assets

 

64,397

54,738

Non-Current Assets

 

 

 

Trade receivables

3

63

89

Other receivables

4

1,762

1,814

Deferred income tax assets

13

294

316

Investments

2

2,327

2,289

Goodwill

6

199,416

199,581

Property, plant and equipment

7

259,885

265,184

Intangible assets

8

87,255

89,051

Right of use assets

9

10,401

10,181

Total non-current assets

 

561,403

568,505

TOTAL ASSETS

 

625,800

623,243

LIABILITIES

 

 

 

Current Liabilities

 

 

 

Trade payables

10

30,844

34,456

Financial debt

11

45,505

38,032

Salaries and social security payables

12

7,121

10,716

Taxes payables

14

2,766

3,571

Leases liabilities

15

2,891

2,845

Other liabilities

16

1,620

1,783

Provisions

17

1,141

1,284

Total current liabilities

 

91,888

92,687

Non-Current Liabilities

 

 

 

Trade payables

10

3,268

2,539

Financial debt

11

125,624

125,819

Salaries and social security payables

12

869

928

Deferred income tax liabilities

13

58,220

56,651

Taxes payables

14

12

15

Leases liabilities

15

4,180

3,958

Other liabilities

16

1,646

1,643

Provisions

17

4,677

4,990

Total non-current liabilities

 

198,496

196,543

TOTAL LIABILITIES

 

290,384

289,230

EQUITY

 

 

 

Equity attributable to Controlling Company

 

330,433

328,874

Equity attributable to non-controlling interest

 

4,983

5,139

TOTAL EQUITY(See Consolidated Statements of Changes in Equity)

20

335,416

334,013

TOTAL LIABILITIES AND EQUITY

 

625,800

623,243

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F-1


Table of Contents

 

TELECOM ARGENTINA S.A.

 

CONSOLIDATED INCOME STATEMENTS

(In millions of Argentine pesos in current currency, except per share data in Argentine pesos in current currency - Note 1.e)

 

 

 

Three-month periods
ended March 31,

 

Note

2020

2019

Revenues

21

62,762

65,735

  Employee benefit expenses and severance payments

22

(11,724)

(13,025)

  Interconnection and transmission costs

 

(2,016)

(2,174)

  Fees for services, maintenance, materials and supplies

22

(6,879)

(6,679)

  Taxes and fees with the Regulatory Authority

22

(4,778)

(5,165)

  Commissions and advertising

 

(3,570)

(3,734)

  Cost of equipment and handsets

22

(2,250)

(3,236)

  Programming and content costs

 

(4,726)

(5,060)

  Bad debt expenses

3

(2,248)

(2,147)

  Other operating expenses

22

(2,546)

(3,027)

  Depreciation, amortization and impairment of fixed assets

22

(16,259)

(14,822)

Operating income

 

5,766

6,666

  Earnings from associates

2

92

153

  Debt financial expenses

23

(3,094)

(6,006)

  Other financial results, net

23

1,570

6,163

Income before income tax expense

 

4,334

6,976

  Income tax expense

13

(1,693)

(5,079)

Net income for the period

 

2,641

1,897

 

 

 

 

Attributable to:

 

 

 

  Controlling Company

 

2,549

1,827

  Non-controlling interest

 

92

70

 

 

2,641

1,897

 

 

 

 

Earnings per share attributable to Controlling Company Basic and diluted

1.d

1.18

0.85

 

See Note 22 for additional information on operating expenses per function.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F-2


Table of Contents

 

TELECOM ARGENTINA S.A.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions of Argentine pesos in current currency - Note 1.e)

 

 

Three-month periods
ended March 31,

 

2020

2019

 

 

 

Net income for the period

2,641

1,897

 

 

 

Other comprehensive income - Will be reclassified subsequently to profit or loss

 

 

  Currency translation adjustments (no effect on Income Tax)

(1,004)

(724)

  NDF effects classified as hedges

(321)

(110)

  Income Tax effects on NDF classified as hedges

87

31

Other comprehensive income, net of tax

(1,238)

(803)

 

 

 

Total comprehensive income for the period

1,403

1,094

 

 

 

Attributable to:

 

 

  Controlling Company

1,559

1,160

  Non-controlling interest

(156)

(66)

 

1,403

1,094

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F-3


Table of Contents

 

TELECOM ARGENTINA S.A.

 

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

(In millions of Argentine pesos in current currency - Note 1.e)

 

 

Owners contribution

Reserves

 

 

 

 

 

 

 

Outstanding
shares -
Capital
nominal
value
(1)

Treasury
shares -
Capital
nominal
value
(1) (2)

Inflation
adjustment

Treasury
shares
acquisition
cost
(2)

 

Conntributed
Surplus

 

Legal
reserve

Special
reserve for
IFRS
implementation

Voluntary
reserve for
capital
investments

Facultative
(3)

Facultative
reserve for
future
dividends
payments

 

Other
comprehensive
results

 

Other
deferred

 

Retained
earnings

 

Equity
attributable
to controlling company

Equity
attributable
to
non-controlling
interest

Total Equity

Balances as of January 1, 2019

2,154

15

73,236

(2,976)

211,180

3,757

1,618

5,472

18,792

18,215

(1,244)

(588)

44,638

374,269

5,352

379,621

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Net income for the period

-

-

-

-

-

-

-

-

-

-

-

-

1,827

1,827

70

1,897

   Other comprehensive income

-

-

-

-

-

-

-

-

-

-

(667)

-

-

(667)

(136)

(803)

Total Comprehensive Income

-

-

-

-

-

-

-

-

-

-

(667)

-

1,827

1,160

(66)

1,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of March 31, 2019

2,154

15

73,236

(2,976)

211,180

3,757

1,618

5,472

18,792

18,215

(1,911)

(588)

46,465

375,429

5,286

380,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of January 1, 2020

2,154

-

72,207

-

211,180

4,198

1,618

5,472

40,921

1,685

(3,191)

(699)

(6,671)

328,874

5,139

334,013

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Net income for the period

-

-

-

-

-

-

-

-

-

-

-

-

2,549

2,549

92

2,641

   Other comprehensive income

-

-

-

-

-

-

-

-

-

-

(990)

-

-

(990)

(248)

(1,238)

Total Comprehensive Income

-

-

-

-

-

-

-

-

-

-

(990)

-

2,549

1,559

(156)

1,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of March 31, 2020

2,154

-

72,207

-

211,180

4,198

1,618

5,472

40,921

1,685

(4,181)

(699)

(4,122)

330,433

4,983

335,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) As of March 31, 2020 and 2019, total shares were issued and fully paid. As of March 31, 2019, 15,221,373 were treasury shares.

(2) Corresponded to 15,221,373 shares of $1 argentine peso of nominal value each, equivalent to 0.70% of total capital as of March 31, 2019.

(3) Correspond to the Facultative Reserves to maintain the capital investments level and the current level of solvency.

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F-4


Table of Contents

 

TELECOM ARGENTINA S.A.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of Argentine pesos in current currency – Note 1.e)

 

 

 

Three-month periods
ended March 31,

 

Note

2020

2019

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES

 

 

 

Net income for the period

 

2,641

1,897

 

 

 

 

Adjustments to reconcile net income to net cash flows provided by operating activities

 

 

 

  Allowances deducted from assets

 

2,471

2,371

  Depreciation of property, plant and equipment

7

13,013

11,634

  Amortization of intangible assets

8

2,144

2,135

  Amortization of rights of use assets

9

1,034

945

  Earnings from associates

2.a

(92)

(153)

  Disposals of fixed assets and consumption of materials

 

179

90

  Financial results and others

 

3,572

5,384

  Income tax expense

13

1,693

5,079

  Income tax paid

 

(427)

(516)

  Net (increase) decrease in assets

2.b

(5,237)

3,594

  Net decrease in liabilities

2.b

(4,861)

(9,447)

Total cash flows provided by operating activities

 

16,130

23,013

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES

 

 

 

  Property, plant and equipment acquisitions

 

(10,950)

(13,809)

  Intangible asset acquisitions

 

(383)

(437)

  Proceeds from dividends

2.b

22

116

  Proceeds from the sale of property, plant and equipment and intangible assets

 

-

1

  Investments not considered as cash and cash equivalents

 

(257)

1,616

Total cash flows used in investing activities

 

(11,568)

(12,513)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES

 

 

 

  Proceeds from financial debt

2.b

21,579

18,384

  Payment of financial debt

2.b

(12,431)

(17,865)

  Payment of interests and related expenses

2.b

(5,002)

(1,973)

  Payments of leases liabilities

 

(1,009)

(1,223)

Total cash flows from (used in) financing activities

 

3,137

(2,677)

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

7,699

7,823

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR

 

27,577

11,325

 

 

 

 

NET FOREIGN EXCHANGE DIFFERENCES AND RECPAM ON CASH AND CASH EQUIVALENTS

 

 

(71)

 

922

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

 

35,205

20,070

 

See Note 2.b for additional information on the consolidated statements of cash flows.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F-5


Table of Contents

 

TELECOM ARGENTINA S.A.

 

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2020 AND 2019 (*)

(In millions of Argentine pesos, except as otherwise indicated)

 

INDEX

 

 

Page

Glossary of terms

F-7

Note 1 – Basis of preparation of the consolidated financial statements and significant accounting policies

F-9

Note 2 – Cash and cash equivalents and Investments. Additional information on the consolidated statements of cash flows

F-13

Note 3 – Trade receivables

F-15

Note 4 – Other receivables

F-16

Note 5 – Inventories

F-16

Note 6 – Goodwill

F-16

Note 7 – Property, plant and equipment

F-17

Note 8 – Intangible assets

F-17

Note 9 – Right of use assets

F-17

Note 10 – Trade payables

F-18

Note 11 – Financial debt

F-18

Note 12 – Salaries and social security payables

F-21

Note 13 – Deferred income tax assets/liabilities

F-21

Note 14 – Taxes payables

F-22

Note 15 – Leases liabilities

F-22

Note 16 – Other liabilities

F-23

Note 17 – Provisions

F-23

Note 18 – Additional information

F-24

Note 19 – Commitments

F-25

Note 20 – Equity

F-26

Note 21 – Revenues

F-26

Note 22 – Operating expenses

F-26

Note 23 – Financial results, net

F-27

Note 24 – Balances and transactions with Companies under Section 33 - Law No. 19,550 and Related Parties

F-28

Note 25 – Restrictions on distribution of profits

F-29

Note 26 – Impact of Coronavirus in Telecom

F-29

Note 27 – Subsequent events to March 31, 2020

F-32

 

(*) By convention the definitions used in the notes are in the Glossary of Terms.

 

F-6


Table of Contents

 

TELECOM ARGENTINA S.A.

 

Glossary of terms

 

The following explanations are not technical definitions, but to assist the general reader to understand certain terms as used in these consolidated financial statements.

 

The Company/Telecom Argentina/Telecom: Telecom Argentina S.A.

 

Micro Sistemas/Pem/CV Berazategui/Cable Imagen/Última Milla/AVC Continente Audiovisual/Inter Radios: Names corresponding to limited companies or limited responsibility companies that are directly or indirectly controlled according to the definition of the General Corporations Law, or were controlled by the Company, directly or indirectly: Micro Sistemas S.A.U., Pem S.A.U., CV Berazategui S.A., Cable Imagen S.R.L., Última Milla S.A., AVC Continente Audiovisual S.A., Inter Radios S.A.U.

 

Telecom USA/Núcleo/Personal Envíos/Tuves Paraguay / Televisión Dirigida / Adesol: Names corresponding to foreign companies Telecom Argentina USA, Inc., Núcleo S.A., Personal Envíos S.A., Tuves Paraguay S.A., Televisión Dirigida S.A. y Adesol S.A., respectively, companies that are directly or indirectly controlled according to the definition of the General Corporations Law.

 

BYMA (Bolsas y Mercados Argentinos) /NYSE: Buenos Aires Stock Exchange and New York Stock Exchange, respectively.

 

Cablevisión: Company absorbed by Telecom since January 1, 2018, whose activities are continued by Telecom.

 

CAPEX: Capital expenditures.

 

CNV (Comisión Nacional de Valores): The Argentine National Securities Commission.

 

CPCECABA (Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires): The Professional Council of Economic Sciences of the City of Buenos Aires.

 

CVH: Cablevisión Holding S.A., controlling company of Telecom since January 1, 2018.

 

DNU (Decreto de Necesidad y Urgencia): Decree of Need and Urgency.

 

ENACOM (Ente Nacional de Telecomunicaciones): The Telecommunications Regulatory Authority of Argentina.

 

FACPCE (Federación Argentina de Consejos Profesionales en Ciencias Económicas): Argentine Federation of Professional Councils of Economic Sciences.

 

IAS: International Accounting Standards.

 

IASB:  International Accounting Standards Board.

 

ICT services (Information and Communication Technology services): Services to transport and distribute signals or data, such as voice, text, video and images, provided or requested by third-party users, through telecommunications networks.

 

IFRS: International Financial Reporting Standards, as issued by the International Accounting Standards Board.

 

INDEC (Instituto Nacional de estadísticas y censos): The National Institute of statistics and census.

 

LGS (Ley de General de Sociedades): Argentine Corporations Law No. 19,550 as amended. Since the enforcement of the new Civil and Commercial Code its name was changed to “General Corporations Law”.

 

NDF: Non-Deliverable Forward.

 

PEN (Poder Ejecutivo Nacional): The executive branch of the Argentine government.

 

PP&E: Property, plant and equipment.

 

RECPAM (Resultado por exposición a los cambios en el poder adquisitivo de la moneda): Inflation Adjustment Gain (Loss).

 

Roaming: charges from the use of networks of other national and international operators.

 

RT: Technical resolutions issued by the FACPCE.

 

RT 26: Technical resolution No, 26 issued by the FACPCE, amended by RT29 and RT43.

 

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TELECOM ARGENTINA S.A.

 

 

VAT: Value-Added Tax

VLG: VLG S.A.U. (formerly VLG Argentina LLC), a company that is a shareholder of the Company and controlled by CVH.

 

In these Consolidated Financial Statements, unless otherwise stated, Argentine peso amounts are stated in millions

 

F-8


Table of Contents

 

TELECOM ARGENTINA S.A.

 

 

NOTE 1 – BASIS OF PREPARATION OF THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

 

a)   Basis of preparation and significant accounting policies

 

As required by the CNV, the unaudited consolidated financial statements of the Company have been prepared in accordance with RT 26 of FACPCE (as amended by RT 29 and RT 43) that adopted IFRS as issued by the IASB, also adopted by the CPCECABA.

 

For the preparation of these unaudited consolidated financial statements, the Company has elected to make use of the option provided by IAS 34 and has prepared them in its condensed form. Therefore, these financial statements do not include all the information required in an annual financial statement and, consequently, they must be read jointly with the 2019 annual consolidated financial statements, which can be consulted at the Company’s website (https://institucional.telecom.com.ar/inversores).

 

These consolidated financial statements were prepared including in the consolidation process the following companies:

 

 

Company

 

Main Activity

 

Country

Telecom Argentina’s
direct/indirect
interest in capital
stock and votes

Núcleo

Mobile telecommunications Services

Paraguay

67.50%

Personal Envíos

Mobile financial services

Paraguay

67.50%

Tuves Paraguay

Distribution of televisión and audio signals direct to home

Paraguay

67.50%

Microsistemas

Services related to the use of electronic payment media

Argentina

100.00%

Pem

Investments

Argentina

100.00%

Cable Imagen

Closed-circuit television

Argentina

100.00%

Televisión Dirigida

Cable television services

Paraguay

100.00%

Adesol (a)

Holding

Uruguay

100.00%

AVC Continente Audiovisual

Broadcasting services

Argentina

60.00%

Inter Radios

Broadcasting services

Argentina

100.00%

Telecom USA

Telecommunication services

USA

100.00%

 

(a)        Includes the 100% interest in Telmas S.A. which holds interests in the following special-purpose entities: Audomar S.A., Bersabel S.A., Dolfycor S.A., Reiford S.A., Space Energy S.A., Tracel S.A. and Visión Satelital S.A.

 

The preparation of these unaudited consolidated financial statements in accordance with IFRS requires that the Company’s Management make estimates that affect the figures disclosed in the financial statements or its complementary information. Actual results may differ from these estimates.

 

These unaudited consolidated financial statements were prepared in current currency as of March 31, 2020 (see Note 1.e) on an accrual basis of accounting (except for the statement of cash flows). Under this basis, the effects of transactions are recognized when they occur. Therefore, income and expenses are recognized at fair value on an accrual basis regardless of when they are received or paid. When significant, the difference between the fair value and the nominal amount of income and expenses is recognized as finance income or expense using the effective interest method.

 

These unaudited consolidated financial statements as of March 31, 2020, were approved by resolution of the Board of Directors’ meeting held on May 14, 2020.

 

b)   Consolidated Financial Statement Formats

 

The financial statement formats adopted are consistent with IAS 1. In particular:

 

·      the consolidated statements of financial position have been prepared by classifying assets and liabilities according to the “current and non-current” criterion. Current assets and liabilities are those that are expected to be realized/settled within twelve months after the period-end;

·      the consolidated income statements have been prepared by classifying operating expenses by nature of expense as this form of presentation represents the way that the business is monitored by the Executive Committee and the CEO and, additionally, are in line with the usual presentation of expenses in the ICT services industry;

·      the consolidated statements of comprehensive income include the net income of the period included in the consolidated income statement and all components of other comprehensive income;

·      the consolidated statements of changes in equity have been prepared showing separately (i) net income of the period, (ii) other comprehensive income (loss) of the period, and (iii) transactions with shareholders (owners and non-controlling interest) if corresponds;

 

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TELECOM ARGENTINA S.A.

 

 

·      the consolidated statements of cash flows have been prepared by presenting cash flows from operating activities according to the “indirect method”, as permitted by IAS 7.

 

These unaudited consolidated financial statements contain all disclosures required under IAS 34. Some additional disclosures required by the LGS and/or by the CNV have been also included, among them, complementary information required in the last paragraph of Section 1 Chapter III Title IV of the CNV General Resolution No. 622/13. Such information is disclosed in Notes to these unaudited consolidated financial statements, as admitted by IFRS.

 

c)   Segment information

 

An operating segment is defined as a component of an entity that engages in business activities from which it may earn revenues and incur expenses, and whose financial information is available, held separately, and evaluated regularly by the chief operating decision maker. In the case of the Company, the Executive Committee and the Chief Executive Officer (“CEO”) are responsible for controlling recourses and for the economic and financial performance of Telecom.

 

The Executive Committee and the CEO have a strategic and operational vision of Telecom as a single business unit in Argentina, according to the current regulatory context of the converged ICT services industry (adding to the same segment the activities related to the mobile services, internet services, cable television and fixed telephony services, services governed by the same regulatory framework of ICT services). To exercise its functions, both the Executive Committee and the CEO receive periodically the economic and financial information of Telecom Argentina and its subsidiaries (in currency of the date of each transaction), that is prepared as a single segment, and evaluate the evolution of business as a results generation unit, administrating the resources in a unique way to achieve the objectives. Regarding to costs, they are not specifically appropriated to a type of service, considering that the Company has a single payroll and general operating expenses that affect all services in general (non-specific). On the other hand, decisions on CAPEX affect all the types of services provided by Telecom in Argentina and not specifically to one of them. Based on what was previously described and under the accounting principles established in the IFRS as issued by the IASB, it was defined that the Company has a single segment of operations in Argentina.

 

Telecom carries out activities abroad (Paraguay, United States of America and Uruguay). These operations are not analyzed as a separate segment by the Executive Committee and the CEO, who analyze the consolidated information of companies in Argentina and abroad (in currency of the date of each transaction), taking into account that the activities of foreign companies are not significant for Telecom. The operations that Telecom carries out abroad do not meet the aggregation criteria established by the standard to be grouped within the “Services rendered in Argentina” segment, and considering that they do not exceed any of the quantitative thresholds identified in the standard to qualify as reportable segments, they are grouped within the category “Other abroad segments”.

 

Presented below is the Segment financial information as analyzed by the Executive Committee and the CEO for the periods ended March 31, 2020 and 2019:

 

q         Consolidated Income Statement as of March 31, 2020

 

 

Services
rendered in
Argentina

Services
rendered in
Argentina –
Inflation
restatement

Services
rendered in
Argentina
restated for
inflation

Other abroad
segments

Other
abroad
segments –
Inflation
restatement

Other abroad
segments
restated for
inflation

Eliminations

Total

Revenues

57,209

1,654

58,863

3,986

116

4,102

(203)

62,762

Operating costs without depreciation, amortization and impairment of fixed assets

(36,696)

(1,530)

(38,226)

(2,638)

(76)

(2,714)

203

(40,737)

Adjusted EBITDA

20,513

124

20,637

1,348

40

1,388

-

22,025

Depreciation, amortization and impairment of fixed assets

(7,290)

(7,971)

(15,261)

(924)

(74)

(998)

-

(16,259)

Operating income

13,223

(7,847)

5,376

424

(34)

390

-

5,766

 

 

 

 

 

 

 

 

 

Earnings from associates

 

 

 

 

 

 

 

92

Debt financial expenses

 

 

 

 

 

 

 

(3,094)

Other financial results, net

 

 

 

 

 

 

 

1,570

Income before income tax expense

 

 

 

 

 

 

 

4,334

Income tax expense

 

 

 

 

 

 

 

(1,693)

Net income

 

 

 

 

 

 

 

2,641

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

Controlling Company

 

 

 

 

 

 

 

2,549

Non-controlling interest

 

 

 

 

 

 

 

92

 

 

 

 

 

 

 

 

2,641

 

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TELECOM ARGENTINA S.A.

 

 

q         Consolidated Income Statement as of March 31, 2019

 

 

Services
rendered in
Argentina

Services rendered in
Argentina –
Inflation
restatement

Services
rendered in
Argentina
restated for
inflation

Other abroad
segments

Other
abroad
segments –
Inflation
restatement

Other abroad
segments
restated for
inflation

Eliminations

Total

Revenues

59,324

2,607

61,931

3,980

178

4,158

(354)

65,735

Operating costs without depreciation, amortization and impairment of fixed assets

(39,329)

(2,413)

(41,742)

(2,737)

(122)

(2,859)

354

(44,247)

Adjusted EBITDA

19,995

194

20,189

1,243

56

1,299

-

21,488

Depreciation, amortization and impairment of fixed assets

(8,545)

(5,307)

(13,852)

(875)

(95)

(970)

-

(14,822)

Operating income

11,450

(5,113)

6,337

368

(39)

329

-

6,666

 

 

 

 

 

 

 

 

 

Earnings from associates

 

 

 

 

 

 

 

153

Debt financial expenses

 

 

 

 

 

 

 

(6,006)

Other financial results, net

 

 

 

 

 

 

 

6,163

Income before income tax expense

 

 

 

 

 

 

 

6,976

Income tax expense

 

 

 

 

 

 

 

(5,079)

Net income

 

 

 

 

 

 

 

1,897

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

Controlling Company

 

 

 

 

 

 

 

1,827

Non-controlling interest

 

 

 

 

 

 

 

70

 

 

 

 

 

 

 

 

1,897

 

Additional information per geographical area required under IFRS 8 (Operating Segments) is disclosed below (in current currency as of March 31, 2020):

 

i)               Sales revenues from customers located in Argentina amounted to $58,668 and $61,578 during the three-month periods ended March 31, 2020 and 2019, respectively; while sales revenues from foreign customers amounted to $4,094 and $4,157 during the three-month periods ended March 31, 2020 and 2019, respectively;

 

ii)            CAPEX corresponding to the segment “Services rendered in Argentina” amounted to $7,976 and $10,750 during the three-month periods ended March 31, 2020 and 2019, respectively; while CAPEX corresponding to the segment “Other abroad segments” amounted to $736 and $1,176 during the three-month periods ended March 31, 2020 and 2019, respectively

 

iii)         PP&E, Goodwill, Intangible assets and Rights of use assets corresponding to the segment “Services rendered in Argentina” amounted to $536,172 and $542,496 as of March 31, 2020 and as of December 31, 2019, respectively; while PP&E, Goodwill, Intangible assets and Rights of use assets corresponding to the segment “Other abroad segments” amounted to $20,785 and $21,501 as of March 31, 2020 and as of December 31, 2019, respectively.

 

iv)        Financial Debt corresponding to the segment “Services rendered in Argentina” amounted to $166,139 and $159,433 as of March 31, 2020 and as of December 31, 2019, respectively; while Financial Debt corresponding to the segment “Other abroad segments” amounted to $4,990 and $4,418 as of March 31, 2020 and as of December 31, 2019, respectively.

 

d)   Net income per share

 

Basic earnings per share are calculated by dividing the net income attributable to owners of the Parent Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income for the period by the weighted average number of common shares issued and common shares to be potentially issued at the end of the period. Since the Company has no dilutive potential common stock outstanding, there are no dilutive earnings per share amounts.

 

For the three-month periods ended March 31, 2020 and 2019, the weighted average number of shares outstanding amounted to 2,153,688,011.

 

e)   Financial reporting in hyperinflationary economies

 

IAS 29 establishes the conditions under which an entity shall restate its financial statements if it operates in an economic environment considered hyperinflationary.

 

To determine the existence of a highly inflationary economy under the terms of IAS 29, the standard details a series of characteristics to consider, including a cumulative inflation rate over three years that approximates or exceeds 100%.

 

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TELECOM ARGENTINA S.A.

 

 

The macroeconomic events that have taken place in the country during the year 2018 and the three-year accumulated inflation rate as of December 31, 2018, that reached 147.8%, evidenced compliance with the qualitative and quantitative factors provided for in IAS 29 to consider Argentina as a highly inflationary economy for accounting purposes. On the other hand, the FACPCE issued Resolution No. 539/18 on September 29, 2018 in which defined the need to restate the financial statements of Argentine companies for reporting periods ended after July 1, 2018, establishing specific issues in relation to the inflation restatement such as, for example, the indexes to be used (Resolution approved on October 10, 2018, by the CPCECABA through Resolution No. 107/2018).

 

In addition, Law No. 27,468 amended Section 10 of Law No. 23,928, and its amendments, providing that the repeal of all the laws and regulations that establish or authorize price indexation, currency restatement, cost variance and any other form of restatement of debts, taxes, prices or fees related to property, works or services, does not apply to financial statements, which remain subject to Section 62 of the General Associations Law, as amended. In addition, it repealed Decree No. 1,269/2002, as amended, and delegated on the PEN, through its oversight agencies, the power to set the date as from which those regulations will come into effect in relation to the financial statements that are presented to them.

 

Therefore, through Resolution No. 777/18, the CNV established the method to restate financial statements in current currency in accordance with IAS 29 for years/periods ended since December 31, 2018. Therefore, these unaudited financial statements are restated in current currency of March 31, 2020.

 

In relation to the inflation index to be used, according to Resolution No. 539/18, it was determined according to the Internal Wholesale Price Index (IWPI) until the year 2016, considering for the months of November and December 2015 the average variation of the Consumer Price Index (CPI) of the City of Buenos Aires. Then, from January 2017, the National Consumer Price Index (National CPI) was considered.

 

The table below shows the evolution of these indexes in the last two years and as of March 31, 2020 and 2019 according to official statistics (INDEC) in accordance with Resolution No. 539/18:

 

 

 

As of December
31, 2018

 

As of March
31, 2019

 

As of December
31, 2019

 

As of March
31, 2020

 

 

 

 

 

 

 

 

 

 

 

National Consumer Price Index (December 2016=100)

 

184.26

 

205.96

 

283.44

 

305.55

 

Variation in Prices

 

 

 

 

 

 

 

 

 

Annual

 

47.6%

 

54.8%

 

53.8%

 

48.3%

 

Accumulated 3 years

 

147.8%

 

136.4%

 

183.2%

 

187.1%

 

Accumulated 3 months since December 2018 / 2019

 

n/a

 

11.8%

 

n/a

 

7.8%

 

 

 

 

 

 

 

 

 

 

 

Banco Nación US$/$ exchange rate

 

37.70

 

43.35

 

59.89

 

64.47

 

Exchange rate annual variation

 

102.1%

 

115.1%

 

58.9%

 

48.7%

 

 

The Company followed the same restatement policies for items identified in the annual consolidated financial statements as of December 31, 2019. The main foreign currency exchange gains (losses) and accrued interest are determined in real terms, excluding the inflationary effect contained therein.

 

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TELECOM ARGENTINA S.A.

 

 

NOTE 2 – CASH AND CASH EQUIVALENTS AND INVESTMENTS. ADDITIONAL INFORMATION ON THE CONSOLIDATED STATEMENTS OF CASH FLOWS

 

a)           Cash and cash equivalents and Investments

 

Cash and cash equivalents and investments consist of the following:

 

 

 

March 31,

December 31,

Cash and cash equivalents

 

2020

2019

  Cash and Banks 

 

2,591

1,852

  Time deposits

 

176

758

  Mutual funds

 

32,438

24,967

Total cash and cash equivalents

 

35,205

27,577

Investments

 

 

 

Current

 

 

 

  Government bonds at fair value (a)

 

643

320

  Government bonds at amortized cost (b)

 

198

142

  Mutual funds

 

64

68

  Allowance for credit risk (c)

 

(98)

(68)

Total current investments

 

807

462

Non- current

 

 

 

  Government bonds at amortized cost (b)

 

2,005

2,130

  Investments in associates (d)

 

1,311

1,213

  2003 Telecommunications Fund

 

1

1

  Allowance for credit risk (c)

 

(990)

(1,055)

Total non-current investments

 

2,327

2,289

 

(a)          These bonds were given in warranty of securities’ cautions as of March 31, 2020 and December 31, 2019, respectively.

 

(b)          Includes $1,222 that were given in warranty of securities’ cautions as of March 31, 2020.

 

(c)          Constituted following the expected credit losses parameters provided by IFRS 9 as a consequence of a significant increase in these financial instruments’ credit risk.

 

(d)         Information on Investments in associates is detailed below:

 

Financial position information:

 

Companies

Main activity

Country

Percentage
of capital
stock owned
and
voting rights

Valuation as of
03.31.2020

Valuation as of
12.31.2019

Ver T.V. S.A. (1)

Cable televisión station

Argentina

49.00

741

671

Teledifusora San Miguel Arcángel S.A. (1) (2) (3)

Cable televisión station

Argentina

50.10

293

272

La Capital Cable S.A. (1) (2)

Closed-circuit television

Argentina

50.00

271

264

Other minor investments in associates at equity method

 

 

 

6

6

Total

 

 

 

1,311

1,213

 

(1)         Data about the issuer arise from extra-accounting information.

(2)         Direct and indirect interest.

(3)         Despite owning a percentage higher than a 50% of interest, the Company does not have the control in accordance with the requirements of IFRS.

 

Earnings information:

 

 

Three-months periods ended

March 31,

 

2020

2019

Ver T.V. S.A.

66

108

Teledifusora San Miguel Arcángel S.A.

19

44

La Capital Cable S.A.

7

1

Total

92

153

 

Movements in the allowance of current credit risk are as follows:

 

 

Three-months periods ended

March 31,

 

2020

2019

At the beginning of the fiscal year

(68)

-

Reclassifications

(65)

-

Uses (includes RECPAM)

35

-

At the end of the year

(98)

-

 

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TELECOM ARGENTINA S.A.

 

 

Movements in the allowance of non-current credit risk are as follows:

 

 

Three-months periods ended

March 31,

 

2020

2019

At the beginning of the fiscal year

(1,055)

-

Additions – Exchange differences

(75)

-

Reclassifications

65

-

Uses (includes RECPAM)

75

-

At the end of the year

(990)

-

 

b)          Additional information on the consolidated statements of cash flows

 

The Company applies the indirect method to reconcile the net income for the year with the cash flows generated by its operations.

 

For purposes of the preparation of the consolidated statements of cash flows, cash and cash equivalents comprise cash, bank and short-term highly liquid investments (with a maturity of three months or less). Bank overdrafts are disclosed in the statement of financial position as current financial debts and its flows in the consolidated cash flow statements as proceed and payment of financial debt, because they are part of the short-term financial permanent structure of Telecom Argentina and its subsidiaries.

 

Changes in assets/liabilities components:

 

 

March 31,

Net (increase) decrease in assets

2020

2019

Trade receivables

(3,058)

2,300

Other receivables

(2,431)

1,413

Inventories

252

(119)

 

(5,237)

3,594

Net decrease in liabilities

 

 

Trade payables

(20)

(4,548)

Salaries and social security payables

(3,637)

(1,022)

Taxes payables

(458)

(3,083)

Other liabilities and provisions

(746)

(794)

 

(4,861)

(9,447)

 

Main Financing activities components

 

The following table presents the main financing activities components:

 

Bank overdrafts

832

15

Notes

5,619

1,498

Bank and other financial entities loans

13,522

16,871

Loans for purchase of equipment

1,606

-

Total financial debt proceeds

21,579

18,384

Bank overdrafts

-

(1,464)

Notes

(29)

-

Bank and other financial entities loans

(12,023)

(16,044)

Loans for purchase of equipment

(379)

(357)

Total payment of debt

(12,431)

(17,865)

Bank overdrafts

(1,641)

(142)

Notes

(1,012)

-

Bank and other financial entities loans

(2,335)

(2,251)

By NDF, purchase of equipment and others

(14)

420

Total payment of interest and related expenses

(5,002)

(1,973)

 

Main non-cash operating transactions

 

Main non-cash operating transactions and that were eliminated from the consolidated statement of cash flows are the following:

 

 

March 31,

 

2020

2019

PP&E and intangible assets acquisition financed with accounts payable

14,781

11,774

 

14,781

11,774

 

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TELECOM ARGENTINA S.A.

 

 

Dividends proceeds

 

Brief information on dividends proceeds by the Company is provided below:

 

Three-months
periods ended
March 31,

Associate
Company

Dividends collected

Currency of the
transaction date

Current currency
as of March 31,
2020

2020

Ver TV

15

15

TSMA

7

7

 

 

22

22

2019

Ver TV

55

82

TSMA

23

34

 

 

78

116

 

Additional information required by IAS 7

 

 

Balances as
of
December 31,
2019

 

Cash
Flows

 

Accrued
interests

Exchange
differences,
currency
translation
adjustments
and others

Balances as
of March 31,
2020

Bank overdrafts

10,467

832

-

(551)

10,748

Securities’ caution - principal

332

753

-

(55)

1,030

Bank and other financial entities loans – principal

75,660

746

-

13

76,419

Notes – principal

43,686

5,590

-

(813)

48,463

NDF

404

(23)

-

440

821

Loans for purchase of equipment

4,517

1,227

-

(164)

5,580

Accrued interests and related expenses

28,785

(5,116)

3,166

1,233

28,068

Total current and non-current financial debt (Note 11)

163,851

4,009

3,166

103

171,129

 

 

Balances as
of
December 31,
2018

 

Cash
Flows

 

Accrued
interests

Exchange
differences,
currency
translation
adjustments
and Others

Balances as
of March 31,
2019

Bank overdrafts

3,774

(1,449)

-

(193)

2,132

Bank and other financial entities loans – principal

78,282

827

-

615

79,724

Notes – principal

31,229

1,498

-

(2,379)

30,348

NDF

166

(515)

-

349

-

Loans for purchase of equipment

3,448

(357)

-

36

3,127

Accrued interests and related expenses

14,629

(2,442)

2,331

5,626

20,144

Total current and non-current financial debt

131,528

(2,438)

2,331

4,054

135,475

 

NOTE 3 – TRADE RECEIVABLES

 

 

 

March 31,

December 31,

Current Trade receivables

 

2020

2019

  Ordinary receivables

 

24,718

23,134

  Contractual asset IFRS 15

 

103

130

  Companies under section 33 - Law No. 19,550 and related parties (Note 24.c)

 

131

147

  Allowance for doubtful accounts

 

(5,966)

(5,123)

 

 

18,986

18,288

Non-current trade receivables

 

 

 

  Ordinary receivables

 

48

57

  Contractual asset IFRS 15

 

15

32

 

 

63

89

Total trade receivables, net

 

19,049

18,377

 

Movements in the allowance for current doubtful accounts are as follows:

 

 

March 31,

 

2020

2019

At the beginning of the fiscal year

(5,123)

(4,392)

Additions – Bad debt expenses

(2,248)

(2,147)

Uses and currency translation adjustments (includes RECPAM)

1,405

1,237

At the end of the period

(5,966)

(5,302)

 

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TELECOM ARGENTINA S.A.

 

 

NOTE 4 – OTHER RECEIVABLES

 

 

 

March 31,

December 31,

 

Current other receivables

2020

2019

 

  Prepaid expenses

2,638

1,267

 

  Tax credits

2,702

2,045

 

  Financial NDF

4

176

 

  Companies under section 33 - Law No. 19,550 and related parties (Note 24.c)

141

124

 

  Receivables from sale of customer relationship

23

25

 

  Other   

943

1,348

 

  Allowance for other receivables

(43)

(37)

 

 

6,408

4,948

Non-current other receivables

 

 

  Prepaid expenses

345

235

  Tax credits

859

926

  Regulatory Credits (Núcleo)

220

224

  Receivables from sale of customer relationship

62

67

  Other

276

362

 

1,762

1,814

Total other receivables 

8,170

6,762

 

Movements in the allowance for current other receivables are as follows:

 

 

 

March 31,

 

2020

2019

At the beginning of the year

(37)

(25)

Increases

(29)

(1)

Uses (includes RECPAM)

23

-

At the end of the period

(43)

(26)

 

NOTE 5 – INVENTORIES

 

 

March 31,

December 31,

 

2020

2019

  Mobile handsets and others

2,073

2,424

  Radio equipment and others

2

1

  Fixed telephones and equipment

26

71

  Inventories for construction projects

1,211

1,211

Subtotal 

3,312

3,707

  Allowance for obsolescence of inventories

(321)

(244)

 

2,991

3,463

 

Movements in the allowance for obsolescence of inventories are as follows:

 

 

March 31,

 

2020

2019

At the beginning of the year

(244)

(221)

Additions

(74)

-

Uses (includes RECPAM)

(3)

22

At the end of the period

(321)

(199)

 

NOTE 6 – GOODWILL

 

 

March 31,

December 31,

 

2020

2019

Argentina

198,464

198,464

Abroad (1)

952

1,117

 

199,416

199,581

 

(1)             The decrease in the amounts with respect to balance as of December 31, 2019 corresponds to temporary currency translation adjustments.

 

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TELECOM ARGENTINA S.A.

 

 

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

 

 

March 31,

December 31,

 

2020

2019

PP&E

262,521

267,672

Valuation allowance for obsolescence and impairment of materials

(1,822)

(1,623)

Impairment of PP&E

(814)

(865)

 

259,885

265,184

 

Movements in PP&E (without allowance for obsolescence and impairment of materials and impairment of PP&E) are as follows:

 

 

March 31,

 

2020

2019

At the beginning of the year

267,672

250,422

  CAPEX

8,330

11,484

  Currency translation adjustments

(349)

(189)

   Net carrying value of decreases and consumption of materials

(119)

(90)

  Depreciation of the period

(13,013)

(11,634)

At the end of the period

262,521

249,993 

 

Movements in the valuation allowance for obsolescence and impairment of materials are as follows:

 

 

March 31,

 

2020

2019

At the beginning of the year

(1,623)

(595)

Additions

(202)

(67)

Uses (includes RECPAM)

3

-

At the end of the period

(1,822)

(662)

 

Movements in the impairment of PP&E are as follows:

 

 

March 31,

 

2020

2019

At the beginning of the year

(865)

(552)

Recoveries (Additions) (includes RECPAM)

51

(156)

At the end of the period

(814)

(708)

 

NOTE 8 – INTANGIBLE ASSETS

 

 

March 31,

December 31,

 

2020

2019

  Intangible assets

92,224

94,054

  Impairment

(4,969)

(5,003)

 

87,255

89,051

 

Movements in Intangible assets (without considering impairment of Intangible assets) are as follows:

 

 

March 31,

 

2020

2019

At the beginning of the year

94,054

101,306 

  CAPEX

382

442 

  Currency translation adjustments

(68)

(28)

  Amortization of the period

(2,144)

(2,135)

At the end of the period

92,224

99,585 

 

Movements in Impairment of intangible assets are as follows:

 

 

March 31,

 

2020

2019

At the beginning of the year

(5,003)

(2,693)

Recoveries (includes RECPAM)

34

-

At the end of the period

(4,969)

(2,693)

 

NOTE 9 – RIGHT OF USE ASSETS

 

 

March 31,

December 31,

 

2020

2019

Leases rights of use

9,532

9,325

Indefeasible right of use

618

583

Asset retirement obligations

251

273

 

10,401

10,181

 

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TELECOM ARGENTINA S.A.

 

 

Movements in right of use assets are as follows:

 

 

March 31,

 

2020

2019

At the beginning of the year

10,181

940 

  Incorporation by adoption of IFRS 16

-

7,001 

  CAPEX

1,273

1,520 

  Net carrying value of decreases

(60)

-

  Currency translation adjustments

41

(31)

  Amortization of the period

(1,034)

(945)

At the end of the period

10,401

8,485 

 

NOTE 10 – TRADE PAYABLES

 

 

March 31,

December 31,

Current

2020

2019

  Suppliers and commercial accruals

29,959

33,506

  Companies under Sect. 33–Law No. 19,550 and Related Parties (Note 24.c)

885

950

 

30,844

34,456

Non-current

 

 

  Suppliers and commercial accruals

3,268

2,539

 

3,268

2,539

Total trade payables 

34,112

36,995

 

NOTE 11 – FINANCIAL DEBT

 

 

March 31,

December 31,

Current

2020

2019

  Bank overdrafts – principal

10,748

10,467

  Securities’ caution - principal

1,030

332

  Bank and other financial entities loans – principal

17,205

14,552

  Notes – principal

2,360

-

  NDF

782

389

  Loans for purchase of equipment

1,809

1,617

  Accrued interest and related expenses

11,571

10,675

 

45,505

38,032

Non-current

 

 

  Notes – principal

46,103

43,686

  Bank and other financial entities loans – principal

59,214

61,108

  NDF

39

15

  Loans for purchase of equipment

3,771

2,900

  Accrued interest and related expenses

16,497

18,110

 

125,624

125,819

Total financial debt 

171,129

163,851

 

Most of the bank and other financing entities loans subscribed by the Company contain standard compliance ratios for this kind of agreements. As of March 31, 2020, Telecom has complied with them. Recent developments of such loans as of the date of these consolidated financial statements are detailed below:

 

Bank and other financing entities loans

 

Pre-cancellation of Term Loan

 

On October 17, 2018, Telecom had requested a disbursement of US$500 million in relation to the loan agreement with Citibank, N.A., HSBC Mexico, S.A.,Multiple Banking Institution, Grupo Financiero HSBC, Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch, JPMorgan Chase Bank, N.A. and Banco Santander, S.A., in its capacity as lenders and organizers, Citibank N.A. as an administrative agent and the Citibank N.A. branch established in Argentina, as agent of local custody, for a term of 48 months.

 

On February 12, 2020, Telecom proceeded to a partial pre-cancellation of the loan paying US$50.3 million (US$50 million of capital and US$0.3 million of interest). In addition, on March 30, 2020, Telecom proceeded to a partial pre-cancellation of the loan paying US$60.8 million (US$60 million of capital and US$0.8 million of interest).

 

As of March 31, 2020, an amount of US$140.5 million remained unpaid (equivalent to $9,059).

 

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TELECOM ARGENTINA S.A.

 

 

IDB Loan

 

On May 29, 2019 the Company subscribed a loan agreement with the Inter-American Development Bank (IDB invest) for a total amount of up to US$300 million.

 

On February 4, 2020 the Company subscribed a supplement to the original loan agreement with the IDB invest for a total amount of US$125 million. This supplement is composed of: i) a first tranch of US$50 million maturing on November 15, 2023 bearing interest of LIBOR plus 4.6 percentage points which will be cancelled in 8 consecutive semiannual installments since May 2020, and ii) a second tranch of US$75 million maturing on November 15, 2022 bearing interest of LIBOR plus a variable spread of 7% to 7.75% which will be cancelled in 6 consecutive semiannual installments since May 2020. The Company received a disbursement for a total amount of US$123.4 million, since US$1.6 million, corresponding to debt issuance expenses, were deducted from the initial disbursement.

 

As of March 31, 2020, an amount of US$225.9 million remained unpaid (equivalent to $14,564).

 

On April 7, 2020, the Company received a new disbursement for a total amount of US$25 million maturing on November 15, 2022. The Company received US$24.6 million since US$0.4 million corresponding to debt issuance expenses were deducted.

 

Bank Macro Loan

 

On March 16, 2020 the Company subscribed a loan agreement with Banco Macro S.A for a total amount of $4,000. Total capital will be settled by one payment at maturity date, which will be on September 16, 2021. The loan bears interest in a quarterly basis from its issuance date until its maturity date at a variable annual rate equivalent to Badlar plus spread of 6.75%.

 

As of March 31, 2020, an amount of $4,019 remained unpaid.

 

Other loans

 

a)           On January 7, 2020 Telecom proceeded to the total cancellation of a loan agreement with the Bank Macro, by paying US$4.6 million (US$4.4 million of capital and US$0.2 million of interest).

 

b)          On February 6, 2020 the Company proceeded to the total cancellation of a loan agreement with the Bank Itaú for financing imports, by paying US$1.08 million (US$1.07 million of capital and US$0.01 million of interest).

 

Global Programs for the issuance of Notes

 

Telecom Argentina

 

In connection with the Notes Global Program for a maximum outstanding amount of US$3,000 million or its equivalent in other currencies, on January 23, 2020, the Company informed CNV about the renewal of the period of placement of Notes in two series for a total amount of nominal value of $1,500, that can be increased to $5,000. The funds received will be used for working capital and refinancing liabilities.

 

The amount of the Notes finally issued and its main characteristics are detailed below:

 

Series 3

 

Issuance date: January 31, 2020.

 

Amount involved: $3,196,524,154.

 

Expiration Date: January 31, 2021.

 

Amortization: Capital will be settled by one payment in an amount equal to 100% of total capital, payable on its maturity date.

 

Interest rate and Payment Date: It bears interest in a quarterly basis from its issuance date until its maturity date at a variable annual rate (Badlar plus spread of 4.75%). Interest will be paid quarterly and the last interest payment date will be maturity date.

 

Series 4

 

Issuance date: January 31, 2020.

 

Amount involved: $1,200,229,180.

 

Expiration Date: July 31, 2021.

 

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TELECOM ARGENTINA S.A.

 

 

 

Amortization: Capital will be settled by one payment in an amount equal to 100% of total capital, payable on its maturity date.

 

Interest rate and Payment Date: It bears interest in a quarterly basis from its issuance date until its maturity date at a variable annual rate (Badlar plus spread of 5.25%). Interest will be paid quarterly and the last interest payment date will be maturity date.

 

The Company received a disbursement for a total amount of $4,374, since $23 corresponding to debt issuance expenses were deducted from the initial disbursement.

 

Núcleo

 

The Extraordinary Shareholders’ Meeting of Núcleo held on April 24, 2018 amended its bylaws in order to adapt them to the regulations of the securities market, becoming Núcleo in a Public Limited Company (SAE).

 

On January 4, 2019, Núcleo requested the National Securities Commission and the Stock and Products Exchange of Asunción to register the Global Issuance Program that foresees the issuance of Notes for an amount of up to 500,000,000,000 of Guaraníes (approximately $3,200 as of such date) under the conditions that are defined by the Board of Directors in each series. On February 5, 2019, the National Securities Commission of Paraguay authorized the Program, under Resolution N° 11E/19.

 

Under such Program, Núcleo issued a new Series of Notes with the following conditions:

 

Series III

 

Issuance date: March 12, 2020.

 

Amount involved: 100,000,000,000 of Guaraníes (approximately $948 as of the date of issuance).

 

Expiration Date: 60 months from its issuance date.

 

Amortization: Capital will be settled by one payment in an amount equal to 100% of total capital, payable on its maturity date (March 11, 2025).

 

Interest rate: It bears interest from its issuance date until its maturity date at a fixed annual rate of 8.75%.

 

Interest Payment Date: Interest will be paid quarterly in arrears since issuance date. The last interest payment date will be at the maturity date.

 

Loans for purchase of equipment

 

Finnvera

 

On May 7, 2019, the Company submitted a proposal for an export credit line for a total amount of up to US$96 million to the following entities: (i) Banco Santander, S.A. and JPMorgan Chase Bank, N.A., London Branch, as initial lenders, lead coordinators and guarantors of residual risk, (ii) JPMorgan Chase Bank, N.A., London Branch, as a financing agent and ECA bank, (iii) Banco Santander, S.A. as a bank of documentation and (iv) Banco Santander Río S.A. as a local custody agent, which was accepted on the same date. The line of credit is guaranteed by Finnvera plc, the official export credit agency of Finland, which granted a bond in favor of the lenders subject to certain terms and conditions.

 

On March 5, 2020, the Company received a disbursement for a total amount of US$10.5 million. This loan will be payable in 13 consecutive semiannual installments from November 2020 with maturity date in November 2026 and accrues an interest rate equivalent to LIBO plus 1.04%.

 

As of March 31, 2020, an amount of US$62.7 million remained unpaid (equivalent to $4,041).

 

Cisco Systems Capital Corporation

 

The Company has debt agreements related to purchase equipment financing with Cisco. During the three-month period ended March 31, 2020 the Company received from Cisco Systems Capital Corporation, additional financing amounting to approximately US$25.3 million under these agreements. Such agreements have an average maturity term of fifty months with partial repayments and accrue an average annual interest of 4%.

 

As of March 31, 2020, an amount of US$92.6 million remained unpaid (equivalent to $5,969).

 

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TELECOM ARGENTINA S.A.

 

 

Fair Value of Financial Debt

 

As of March 31, 2020, fair value of financial debt is as follows:

 

 

 

Carrying Value

 

Fair Value

 

 

 

 

 

Notes

 

63,275

 

53,018

Other financial debts

 

107,854

 

105,850

 

 

171,129

 

158,868

 

NOTE 12 – SALARIES AND SOCIAL SECURITY PAYABLES

 

 

March 31,

December 31,

 

2020

2019

Current

 

 

 

  Salaries, annual complementary salaries, vacation and bonuses

4,618

7,937

  Social security payables

1,898

2,003

  Termination benefits

605

776

 

7,121

10,716

Non-current

 

 

  Termination benefits

869

928

 

869

928

Total salaries and social security payables

7,990

11,644

 

NOTE 13 – DEFERRED INCOME TAX ASSETS/LIABILITIES

 

Deferred Income tax assets and liabilities, net and the actions for recourse tax receivable are presented below:

 

 

 

March 31,

December 31,

 

2020

2019

Tax carryforward

(6,291)

(9,260)

Allowance for doubtful accounts

(1,752)

(1,631)

Provisions

(1,463)

(1,648)

PP&E and Intangible assets

55,899

55,972

Cash dividends from foreign companies

537

555

Income tax inflation adjustment effect

12,353

13,309

Other deferred tax liabilities (assets), net

(487)

(24)

Total deferred tax liabilities, net

58,796

57,273

Actions for recourse tax receivable

(870)

(938)

Total deferred tax liability, net

(*)    57,926

56,335

 

 

 

 

 

 

 

 

 

Net deferred tax assets

(294)

(316)

 Net deferred tax liabilities

58,220

56,651

 

(*) Includes $28 of currency translation adjustments on foreign subsidiaries’ initial balances.

 

As of March 31, 2020, the Company and some subsidiaries have a cumulative Tax carryforward of approximately $20,970, calculated considering statutory income tax rate that represents a deferred tax asset of approximately $6,291.

 

The detail of the maturities of estimated Tax carryforward is disclosed below:

 

Company

Tax carryforward
generation year

Tax carryforward amount
as of 12.31.2019

Tax carryforward
expiration year

Inter Radios

2015

6

2020

Inter Radios

2017

2

2022

Inter Radios

2018

2

2023

Telecom Argentina

2018

7,175

2023

Telecom Argentina

2019

13,502

2024

Adesol

2019

283

2024

 

 

20,970

 

 

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TELECOM ARGENTINA S.A.

 

 

Income tax expense differed from the amounts computed by applying the Company’s statutory income tax rate to pre-tax income as a result of the following:

 

 

March 31,

 

2020

2019

 

Profit (loss)

Pre-tax income

4,334

6,976

Non-taxable items - Earnings from associates

(92)

(153)

Non-taxable items – costs valuation differences’ of foreign investments

(4,338)

-

Non-taxable items – Other

(444)

21

Restatement in current currency of Equity, goodwill and other

13,756

28,770

Subtotal

13,216

35,614

Weighted statutory income tax rate

25.3%

25.5%

Income tax expense at weighted statutory tax rate

(3,343)

(9,084)

Deferred tax liability restatement in current currency and other

4,520

4,029

Income tax inflation adjustment

(2,857)

-

Income tax on cash dividends of foreign companies

(13)

(24)

Income tax expense

(1,693)

(5,079)

 

 

 

 

 

 

Current tax expense

(43)

(62)

Deferred tax expense

(1,650)

(5,017)

 

NOTE 14 – TAXES PAYABLES

 

 

March 31,

December 31,

Current

2020

2019

Income tax  (*)

70

38

Other national taxes

2,229

2,764

Provincial taxes

45

324

Municipal taxes

422

445

 

2,766

3,571

Non- current

 

 

Provincial taxes

12

15

 

12

15

Total taxes payables

2,778

3,586

 

(*) The breakdown is as follows:

 

 

March 31,

December 31,

 

2020

2019

Núcleo

42

7

Adesol

21

29

Telecom USA

4

-

AVC Continente Audiovisual

2

1

Cable Imagen

1

1

 

70

38

 

 

 

 

NOTE 15 – LEASES LIABILITIES

 

 

March 31,

December 31,

 

2020

2019

Current

 

 

Argentina

2,634

2,529

Abroad

257

316

 

2,891

2,845

Non- current

 

 

Argentina

3,400

3,252

Abroad

780

706

 

4,180

3,958

Total leases liabilities

7,071

6,803

 

 

 

 

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TELECOM ARGENTINA S.A.

 

 

NOTE 16 – OTHER LIABILITIES

 

 

March 31,

December 31,

Current

2020

2019

  Deferred revenues on prepaid calling cards

708

766

  Deferred revenues on connection fees and international capacity leases

121

142

  Deferred revenues on construction projects

28

40

  Mobile customer loyalty programs

272

309

  Compensation for directors and members of the Supervisory Committee

86

83

  Companies under Sect. 33–Law No. 19,550 and Related Parties (Note 24.c)

3

3

  Other

402

440

 

1,620

1,783

Non-current

 

 

  Deferred revenues on connection fees and international capacity leases

250

282

  Pension benefits

385

353

  Mobile customer loyalty programs

568

508

  Other

443

500

 

1,646

1,643

Total other liabilities

3,266

3,426

 

 

 

 

NOTE 17 – PROVISIONS

 

Movements in Provisions are as follows:

 

 

 

Balances
as of
December
31, 2019

Additions

 

Decreases

(iii)

 

Balances
as of
March 31,
2020

 

 

 

 

Capital
(i)

 

Interest
(ii)

Reclassifications

Current

 

 

 

 

 

 

Provisions

1,284

-

283

(426)

1,141

Total current provisions

1,284

-

283

(426)

1,141

Non- Current

 

 

 

 

 

 

Provisions

4,306

52

242

(283)

(303)

4,014

Asset retirement obligations

684

-

58

-

(79)

663

Total non-current provisions

4,990

52

300

(283)

(382)

4,677

 

 

 

 

 

 

 

Total provisions

6,274

52

300

-

(iv)  (808)

5,818

 

(i)               $53 charged to Other operating expenses and ($1) charged to Other comprehensive income.

(ii)             Charged to Other finance costs, net, interest for provisions line item.

(iii)           Includes RECPAM

(iv)           Includes ($349) of payments of provisions.

 

 

 

Balances
as of
December
31, 2018

Additions

 

Decreases

(iii)

 

Balances
as of
March 31,
2019

 

 

 

 

Capital
(i)

 

Interest
(ii)

Reclassifications

Current

 

 

 

 

 

 

Provisions

1,234

156

-

277

(430)

1,237

Total current provisions

1,234

156

-

277

(430)

1,237

Non- Current

 

 

 

 

 

 

Provisions

4,928

261

329

(277)

(525)

4,716

Asset retirement obligations

823

-

73

-

(89)

807

Total non-current provisions

5,751

261

402

(277)

(614)

5,523

 

 

 

 

 

 

 

Total provisions

6,985

417

402

-

(iv) (1,044)

6,760

 

(i)               Charged to Other operating expenses.

(ii)             Charged to Other finance costs, net, interest for provisions line item.

(iii)           Includes RECPAM

(iv)           Includes ($312) of payments of provisions.

 

Possible Contingencies

 

Resolution No. 50/10 and subsequent ones of the Secretariat of Domestic Trade of the Nation (“SCI”)

 

SCI Resolution No. 50/10 approved certain rules to commercialize pay television services. These rules provide that cable television operators must apply a formula to calculate their monthly subscription prices. The price arising from the application of the formula was to be informed to the Office of Business Loyalty (Dirección de Lealtad Comercial), having cable television operators to adjust such amount semi-annually and informing the result of such adjustment to such Office. The Company filed an administrative appeal against Resolution No. 50/10 requesting the suspension of its effects and its nullification.

 

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TELECOM ARGENTINA S.A.

 

 

Additionally, according to the decision issued on August 1, 2011 in judicial cause “LA CAPITAL CABLE S.A. V. Ministerio de Economía-Secretaría de Comercio Interior de la Nación”, the Federal Court of Appeals of the City of Mar del Plata has ordered the SCI to suspend the application of Resolution No. 50/10 with respect to all cable television licensees represented by the Argentine Cable Television Association (“ATVC”). The precautionary measure ordered by the Court of Mar del Plata was notified to the SCI and the Ministry of Economy on September 12, 2011 and became fully effective. The National Government filed an appeal against the decision issued by the Court of Mar del Plata. Such appeal was dismissed, for which the National Government filed a direct appeal to the Supreme Court, which was also dismissed.

 

Notwithstanding the foregoing, between March 2011 and October 2014 successive resolutions were published in the Official Gazette based on Resolution 50/10 that regulated the prices that Cablevision should charge in monthly basis fees to users. These resolutions were challenged and suspended due to the aforementioned injunction. However, each Resolution had a valid period of three to six months, with the last one expiring in October 2014.

 

In September 2014, the Court issued a decision in judicial cause “Municipalidad de Berazategui V. Cablevisión” ordering the remission of the cases relating to these resolutions to the jurisdiction of the Court of Mar del Plata, that had issued the decision on the collective action in favor of ATVC. Currently, all judicial causes related to this issue are processed in the Federal Justice of Mar del Plata.

 

In April 2019, La Capital Cable S.A. was notified of the resolution issued by the Federal Court No. 2 of Mar del Plata in which declared the unconstitutionality of certain sections of a law on which the SCI was based for the issuance of Resolution No. 50/10 and the successive resolutions. The declaration of unconstitutionality means that these resolutions are not applicable to La Capital Cable and the companies grouped by ATVC. However, the National Government filed an appeal against that resolution.

 

On December 26, 2019, the Federal Court of Mar del Plata rejected the grievances of the National Government and confirmed the decision rendered by the court of first instance which declared the unconstitutionality of the sections of the law based on which the SCI issued Resolution No. 50/10 and the subsequent resolutions. However, the National Government could file an appeal against the decision issued by the Court of Mar del Plata.

 

These consolidated financial statements should be read considering the circumstances described and the decisions made based on these consolidated financial statements should consider the potential impact that such circumstances may have on the Company and its subsidiaries.

 

NOTE 18 – ADDITIONAL INFORMATION

 

Aging of assets and liabilities as of March 31, 2020

 

 

 

 

 

 

 

Date due

Cash and cash
equivalents

Investments

Trade receivables

Other receivables

Deferred income
tax
assets

Total due

-

-

10,814

19

-

Not due

 

 

 

 

 

Second quarter 2020

35,205

729

7,269

4,144

-

Third quarter 2020

-

13

426

490

-

Fourth quarter 2020

-

22

327

308

-

First quarter 2021

-

43

150

1,447

-

April 2021 thru March 2022

-

763

63

1,189

-

April 2022 thru March 2023

-

64

-

151

-

April 2023 and thereafter

-

188

-

115

-

Not due date established

-

1

-

307

294

Total not due

35,205

1,823

8,235

8,151

294

Total

35,205

1,823

19,049

8,170

294

 

 

 

 

 

 

Balances bearing interest

176

1,758

1,317

-

-

Balances not bearing interest

35,029

65

17,732

8,170

294

Total

35,205

1,823

19,049

8,170

294

 

 

 

 

 

 

Average annual interest rate (%)

(a)

(b)

(c)

-

-

 

(a)       Assets in argentine pesos bearing interests at annual rates between 0.05% and 2.25%.

(b)       Assets in foreign currency bearing interests at annual rates between 1.50% and 6.19%.

(c)       $1,105 bear interests at annual rate of 56.7%, $175 bear interests at annual rate of 36% and $37 bear interests at annual rate of 47%.

 

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TELECOM ARGENTINA S.A.

 

 

 

 

 

 

 

 

 

 

Date due

Trade
payables

Financial debt

Salaries and social
security payables

Other taxes
payables

Leases
liabilities

Other
liabilities

Deferred
income tax
liabilities

Total due

1,774

-

-

-

-

-

-

Not due

 

 

 

 

 

 

 

Second quarter 2020

27,665

15,570

3,683

2,717

1,458

1,138

-

Third quarter 2020

235

9,066

1,177

3

482

161

-

Fourth quarter 2020

807

6,353

1,140

3

559

161

-

First quarter 2021

363

14,516

1,121

43

392

160

-

April 2021 thru March 2022

2,975

60,277

386

10

2,024

810

-

April 2022 thru March 2023

234

30,503

241

2

718

161

-

April 2023 and thereafter

59

34,844

242

-

1,438

675

-

Not due date established

-

-

-

-

-

-

58,220

Total not due

32,338

171,129

7,990

2,778

7,071

3,266

58,220

Total

34,112

171,129

7,990

2,778

7,071

3,266

58,220

 

 

 

 

 

 

 

 

Balances bearing interest

-

142,240

-

22

-

-

-

Balances not bearing interest

34,112

28,889

7,990

2,756

7,071

3,266

58,220

Total

34,112

171,129

7,990

2,778

7,071

3,266

58,220

 

 

 

 

 

 

 

 

Average annual interest rate (%)

-

(d)

-

18.0

-

-

-

 

(d)              Liabilities in argentine pesos bear interests at the following annual rates: $1,031 bear at 9.06% and $19,511 bear between 36.25% and 49.33%. The remaining liabilities are liabilities in U.S. dollars bearing interests at annual rates between 2.99% and 8.42% and liabilities in guaraníes bearing interests at an average annual rate of 8.20%.

 

Foreign currency financial assets and liabilities

 

Financial assets and liabilities denominated in foreign currencies as of March 31, 2020 and December 31, 2019 are the following:

 

 

03.31.2020

12.31.2019

 

In equivalent millions of Argentine pesos

Assets

38,258

33,904

Liabilities

(182,457)

(182,312)

Net Liabilities

(144,199)

(148,408)

 

In order to reduce this net position (debt) in foreign currency, Telecom has NDF as of March 31, 2020 amounting to US$105 million, therefore the net liability not hedged amounts to approximately US$2,130 million at that date.

 

Offsetting of financial assets and financial liabilities

 

The information required by the amendment to IFRS 7 as of March 31, 2020 and December 31, 2019 is as follows:

 

 

As of March 31, 2020

 

Trade
receivables

Other
receivables

Trade
payables

Other
liabilities

Current and noncurrent assets (liabilities) - Gross value

19,523

1,297

(34,586)

(373)

Offsetting

(474)

(72)

474

72

Current and noncurrent assets (liabilities) – Booked value

19,049

1,225

(34,112)

(301)

 

 

As of December 31, 2019

 

Trade
receivables

Other
receivables

Trade
payables

Other
liabilities

Current and noncurrent assets (liabilities) - Gross value

18,549

1,750

(37,167)

(369)

Offsetting

(172)

(55)

172

55

Current and noncurrent assets (liabilities) – Booked value

18,377

1,695

(36,995)

(314)

 

Telecom and its subsidiaries offset the financial assets and liabilities to the extent that such offsetting is provided by offsetting agreements and provided that it is intended to make such offsetting, in accordance with requirements established in IAS 32. The main financial assets and liabilities offset correspond to transactions with other national and foreign operators including interconnection and Roaming (being offsetting a standard practice in the telecommunications industry at the international level that Telecom and its subsidiaries apply regularly). Offsetting is also applied to transactions with agents.

 

NOTE 19 – COMMITMENTS

 

The Company has entered into various purchase orders with domestic and foreign suppliers amounting to approximately $53,504 as of March 31, 2020 (of which $12,549 corresponds to PP&E commitments), primarily related to the supply of switching equipment, inventory, external wiring, infrastructure agreements, and other service agreements.

 

F-25


Table of Contents

 

TELECOM ARGENTINA S.A.

 

 

NOTE 20 – EQUITY

 

Equity includes:

 

 

March 31,

December 31,

 

2020

2019

Equity attributable to Controlling Company

330,433

328,874

Equity attributable