Edgar Filing: TELECOM ARGENTINA SA

Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of May 2013

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

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes ¨ No x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

Telecom Argentina S.A.

TABLE OF CONTENTS


Item

1.		Telecom Argentina S.A. Unaudited Condensed Consolidated Financial Statements as of March 31, 2013

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2013

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2013 AND 2012

INDEX


Operating and financial review and prospects as of March 31, 2013			I

Unaudited condensed consolidated financial statements

Unaudited consolidated statements of financial position			1

Unaudited consolidated income statements			2

Unaudited consolidated statements of comprehensive income			3

Unaudited consolidated statements of changes in equity			4

Unaudited consolidated statements of cash flows			5

Notes to the unaudited condensed consolidated financial statements			6

Limited review Report on the condensed interim consolidated financial statements

Corporate information

TELECOM ARGENTINA S.A.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF MARCH 31, 2013

(In millions of Argentine pesos or as expressly indicated)

1.	*General considerations*

As required by CNV regulations, the Company has prepared its consolidated financial statements as of March 31, 2013 under IFRS. Additional information is given in Note 1 to the consolidated financial statements.

2.	*Telecom Group’s activities for the three-month periods ended March 31, 2013 (“1Q13”) and 2012 (“1Q12”)*

Total revenues and other income for 1Q13 amounted to $6,073 (+18% vs. 1Q12), operating costs – including depreciations, amortizations and gain on disposal of PP&E – amounted to $4,958 (+21% vs. 1Q12), operating income before depreciation and amortization amounted to $1,799 – representing 30% of consolidated revenues – (+9% vs. 1Q12), operating income amounted to $1,115 (+8% vs. 1Q12) and net income amounted to $813 (+15% vs. 1Q12). Net income attributable to Telecom Argentina amounted to $802 in 1Q13 (+15% vs. 1Q12).


							Variation
	1Q13			1Q12			$			%
Revenues		6,064			5,126			938			18
Other income		9			4			5			125
Operating costs without depreciation and amortization		(4,274	)		(3,483	)		(791	)		23

Operating income before depreciation and amortization		1,799			1,647			152			9
Depreciation and amortization		(691	)		(615	)		(76	)		12
Gain on disposal of PP&E		7			1			6			600

Operating income		1,115			1,033			82			8
Financial results, net		135			61			74			121

Net income before income tax expense		1,250			1,094			156			14
Income tax expense		(437	)		(386	)		(51	)		13

Net income		813			708			105			15


Attributable to:
Telecom Argentina (Controlling Company)		802			698			104			15
Non-controlling interest		11			10			1			10

		813			708			105			15

Basic and diluted earnings per share attributable to Telecom Argentina (in pesos)		0.81			0.71

•

Total revenues and other income

During 1Q13 consolidated total revenues increased 18% (+$938 vs. 1Q12) amounting to $6,064 mainly fueled by the Broadband, data transmission and mobile businesses, while consolidated other income increased 125% (+$5 vs. 1Q12), mainly due to penalties imposed to vendors in the Fixed Services segment.


					Variation
	1Q13		1Q12		$			%
*Services*
Voice – Retail		629		607		22			4
Voice – Wholesale		185		175		10			6
Internet		575		458		117			26
Data		213		163		50			31

Subtotal fixed services		1,602		1,403		199			14

Voice – Retail		1,214		1,077		137			13
Voice – Wholesale		448		425		23			5
Internet		391		276		115			42
Data		1,615		1,323		292			22

Subtotal Personal mobile services		3,668		3,101		567			18

Voice – Retail		87		86		1			1
Voice – Wholesale		22		18		4			22
Internet		62		26		36			138
Data		78		63		15			24

Subtotal Núcleo mobile services		249		193		56			29

Total services revenues		5,519		4,697		822			18

*Equipment*
Fixed services		14		18		(4	)		(22	)
Personal mobile services		518		405		113			28
Núcleo mobile services		13		6		7			117

Total equipment revenues		545		429		116			27


Total revenues		6,064		5,126		938			18


*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF MARCH 31, 2013*

I

TELECOM ARGENTINA S.A.

Services revenues amounted to $5,519 (+18% vs. 1Q12) and represented 91% of consolidated revenues (similar to 1Q12). Equipment revenues increased 27%, amounting to $545 and represented 9% of consolidated revenues (similar to 1Q12).

Fixed services

During 1Q13, services revenues generated by this segment amounted to $1,602, +$199 or 14% vs. 1Q12, where Internet revenues have grown the most (+$117 or 26% vs. 1Q12), followed by data transmission (+$50 or 31% vs. 1Q12) and voice retail services (+$22 or 4% vs. 1Q12).

•

Voice

Voice retail revenues amounted to $629 in 1Q13 (+4% vs. 1Q12). The results of this line of business are still affected by frozen tariffs of regulated services. Revenues from regulated services reached approximately 34% of the segment revenues in 1Q13 (vs. 39% in 1Q12).

Monthly Charges and Supplementary Services increased $17 or 7% vs. 1Q12, to $269, as a consequence of an increase in supplementary services (not regulated), mainly due to an increase of their prices and of the subscriber base.

Revenues generated by measured services (Local Measured Service, Domestic Long Distance and International Long Distance services) amounted to $329, (+$13 or 4% vs. 1Q12), mainly due to the increase of domestic plans and the positive effect of the flat rate packs sales. In relative terms, revenues from local measured service increased the most with 7% vs. 1Q12 and followed by DLD revenues (+5% vs. 1Q12).

Voice wholesale revenues (including fixed and mobile interconnection revenues, together with the revenues generated by the subsidiary Telecom USA amounting to $15) amounted to $185 in 1Q13 (+6% vs. 1Q12). Interconnection fixed and mobile revenues amounted to $113 (a slightly increase vs. 1Q12 as a result of an increase in the domestic traffic). The other wholesale revenues amounted to $72 in 1Q13 (+18% vs. 1Q12).

•

Internet

Internet revenues amounted to $575 (+$117 or 26% vs. 1Q12) mainly due to the expansion of the Broadband service (+4% of customers vs. 1Q12) and an increase in average prices resulting in an improvement in the Average Monthly Revenue per User (“ARPU”), that amounted to $114.9 pesos in 1Q13 vs. $95.6 pesos in 1Q12). As of March 31, 2013, Telecom Argentina reached approximately 1,626,000 ADSL customers. These connections represent approximately 40% of Telecom Argentina’s fixed lines in service (vs. 38% in 1Q12).

Internet revenues represent 10% of consolidated revenues (similar to 1Q12) and 36% of fixed services segment revenues (vs. 33% in 1Q12).

•

Data

Data transmission revenues amounted to $213 (+$50 vs. 1Q12), where the focus was to strengthen Telecom Argentina’s position as an integrated TICs provider (Datacenter, VPN, among others) for wholesale and government segments. The increase was mainly due to the growth of Integra and VPN IP services (private data networks services that replaces the point to point services).

Personal Mobile Services

During 1Q13, total services revenues amounted to $3,668, +567 or 18% vs. 1Q12, being the principal business segment in revenues terms (60% of consolidated revenues in 1Q13 and 1Q12). Personal reached 19.1 million subscribers in Argentina (+3% vs. 1Q12) thus improving its market position related to subscriber’s base and maintaining the leadership in revenues in the mobile industry. Approximately 67% of the subscriber base is prepaid subscribers and 33% is postpaid subscribers (including “Cuentas Claras” plans and Mobile Internet dongles).

•

Voice

Voice retail revenues amounted to $1,214 in 1Q13 (+13% vs. 1Q12). The increase was mainly due to the increase in the lines billed, the increase in the average price of different plans and an increase in the subscriber base, specially “Cuentas Claras” subscribers.

Voice wholesale revenues amounted to $448 in 1Q13 (+5% vs. 1Q12). The increase was mainly due to higher traffic in SMS and GPRS roaming in the national segment and an increase in the GPRS traffic in the international segment.


*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF MARCH 31, 2013*

II

TELECOM ARGENTINA S.A.

•

Internet

Internet revenues amounted to $391 (+$115 or 42% vs. 1Q12), mainly fueled by the increase in the offer of services, plans and packs (including VAS) launched by Personal. This growth was fueled by new subscribers and the migration of existing ones to higher value plans.

•

Data

Mobile data services revenues amounted to $1,615 (+292 or 22% vs. 1Q12). This increase was mainly due to the constant SMS sales increase as a result of several campaigns launched by Personal and the growth of the offers of SMS consumption, which represented an inter-annual increase of $252 vs. 1Q12. This increase was reflected both in prepaid or postpaid customers and is mainly due to the increase in the subscribers base.

As a consequence of the voice traffic increase and the VAS use (Internet and data), ARPU increased to $62.1 pesos in 1Q13 (vs. $54.9 pesos or +13% in 1Q12).

VAS revenues (data and Internet) amounted to $2,006 (+28% vs. 1Q12) and represented 55% of Mobile Services – Personal services revenues (vs. 52% in 1Q12).

Núcleo Mobile Services

This segment generated revenues equivalent to $249 during 1Q13 (+$56 or 29% vs. 1Q12) mainly due to the increase in the subscriber base (+6%), the appreciation of the Guaraní respect to the argentine peso (+20% inter-annual) generating an effect in revenues conversion and the increase of Mobile Internet revenues (+138% vs. 1Q12) related to the increase in the subscriber base. As of March 31, 2013, Núcleo’s subscriber base reached 2.3 million customers. Prepaid and postpaid subscribers (including “Plan Control” subscribers and mobile Internet subscribers) represented 81% and 19%, respectively in 1Q13.

VAS revenues (data and Internet) amounted to $140 (+57% vs. 1Q12) and represented 56% of Núcleo Mobile Services segment services revenues (vs. 46% in 1Q12).

Equipment

Revenues from equipment amounted to $545, +$116 or 27% vs. 1Q12. This increase is mainly related to the Personal Mobile services segment with an increase of $113 vs. 1Q12. The increase was mainly due to lower handsets sold (-25% vs. 1Q12) and an increase in their average prices (+68% vs. 1Q12). This situation was mainly due to a reduction of subsidy policy, the increase in average prices related to higher-value handsets demand and the business strategy to attract high-value subscribers. In the Núcleo Mobile Services segment the increase was mainly due to a higher number of handsets sold as a result of the launch of targeted promotions to capture new subscribers and retaining existing ones, associated to the effect of the appreciation of the Guaraní respect to the argentine peso.

Operating costs

Consolidated operating costs – including depreciation, amortization and gain on disposal of PP&E – amounted to $4,958 in 1Q13, which represented an increase of $861 or +21% vs. 1Q12. The increase in costs is mainly a consequence of a higher revenues, higher expenses related to competition in mobile and Internet businesses, higher direct and indirect labor costs on the cost structure of the Group in Argentina, the increase in the average rates of the turnover tax and the effect of the appreciation of the Guaraní (+20% inter-annual) respect to the argentine peso, affecting the operations in Paraguay.


							Variation
	1Q13			1Q12			$			%
Employee benefit expenses and severance payments		(868	)		(677	)		(191	)		28
Interconnection costs and other telecommunication charges		(484	)		(408	)		(76	)		19
Fees for services, maintenance, materials and supplies		(556	)		(477	)		(79	)		17
Taxes and fees with the Regulatory Authority		(602	)		(462	)		(140	)		30
Commissions		(605	)		(525	)		(80	)		15
Agent commissions capitalized as SAC		103			76			27			36
Cost of equipment and handsets		(661	)		(543	)		(118	)		22
Cost of equipment and handsets capitalized as SAC		103			106			(3	)		(3	)
Advertising		(154	)		(164	)		10			(6	)
Cost of VAS		(131	)		(60	)		(71	)		118
Provisions		(40	)		(40	)		—			—
Bad debt expenses		(93	)		(69	)		(24	)		35
Other operating expenses		(286	)		(240	)		(46	)		19

Operating income before depreciation and amortization		(4,274	)		(3,483	)		(791	)		23

Depreciation of PP&E		(467	)		(426	)		(41	)		10
Amortization of SAC and service connection costs		(219	)		(183	)		(36	)		20
Amortization of other intangible assets		(5	)		(6	)		1			(17	)
Gain on disposal of PP&E		7			1			6			600

Total operating costs		(4,958	)		(4,097	)		(861	)		21


*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF MARCH 31, 2013*

III

TELECOM ARGENTINA S.A.

The costs breakdown is as follows:

Employee benefit expenses and severance payments

Employee benefit expenses and severance payments amounted to $868 (+$191 or 28% vs. 1Q12). The increase was mainly due to an increase in the headcount and increases in salaries agreed by Telecom Argentina with several trade unions for the unionized employees and also to non-unionized employees, together with related social security charges. With a total headcount of 16,752 by the end of 1Q13 (+164 vs. 1Q12 – including temporary employees), lines in service per employee reached 371 in the Fixed Services segment (slightly lower than 1Q12), subscribers per employee reached 3,642 in the Personal Mobile Services segment (-2% vs. 1Q12) and subscribers per employee reached 5.354 (+5% vs. 1Q12) in the Núcleo Mobile Services segment.

Interconnection costs and other telecommunication charges

Interconnection costs and other telecommunication charges (including charges for TLRD, Roaming, Interconnection costs, cost of international outbound calls and lease of circuits) amounted to $484 (+$76 or 19% vs. 1Q12) mainly due to higher traffic volume.

Fees for services, maintenance, materials and supplies

Fees for services, maintenance, materials and supplies amounted to $556 (+$79 or 17% vs. 1Q12), mainly due to higher maintenance costs of radio bases and systems in the mobile services segments as a result of an increase of system licenses and higher costs of technical assistance of radio bases. There were also increases in other maintenance costs and fees for services, mainly due to higher costs recognized to suppliers in all segments.

Taxes and fees with the Regulatory Authority

Taxes and fees with the Regulatory Authority (including turnover tax, IDC, municipal and other taxes) amounted to $602 (+30% vs. 1Q12), influenced mainly by the increase in revenues of fixed and mobile services, higher equipment sales and higher turnover taxes in Autonomous City of Buenos Aires, Córdoba, Chaco, Jujuy and Mendoza.

Commissions

Commissions (including Agent, distribution of prepaid cards and other commissions) amounted to $605 (+$80 or 15% vs. 1Q12), mainly due to the increase in commercial agents’ commissions (associated to higher revenues) as a result of higher customer’s acquisition and retention, higher cards sales, and prepaid recharges and the increase in collections.

In the other hand, agent commissions capitalized as SAC amounted to $103, +$27 or 36% vs. 1Q12 and is directly related to the increase in the postpaid subscribers’ base in the Personal Mobile Services segment and the increase in the commissions prices.

Cost of equipment and handsets

Cost of equipments and handsets amounted to $661 (+$118 or 22% vs. 1Q12) mainly due to an increase in the average unit cost of sales (+58% vs. 1Q12) and to a decrease in the handsets sold (-25% vs. 1Q12) in the Personal Mobile Services segment.

In the other hand, SAC deferred costs from handsets sold to postpaid and “Cuentas Claras” subscribers amounted to $103, -$3 or -3% vs. 1Q12.

Advertising

Advertising amounted to $154 (-$10 or -6% vs. 1Q12), mainly due to a reduction in the commercial campaigns of Personal as compared to 1Q12.

Cost of VAS

Cost of VAS amounted to $131 (+$71 vs. 1Q12), mainly due to the increase of VAS sales in the Personal Mobile Services segment (mainly the SMS service) as a consequence of several campaigns launched by Personal and a higher offer oriented towards SMS usage.

Provisions

Provisions totaled $40, both in 1Q13 and 1Q12.

Bad debt expenses

Bad debt expenses amounted to $93 (+$24 vs. 1Q12), representing approximately 1.5% and 1.3% of the consolidated revenues in 1Q13 and 1Q12, respectively. The increase is observed mainly in the Personal Mobile Services segment as a consequence of higher aging of the accounts receivables.


*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF MARCH 31, 2013*

IV

TELECOM ARGENTINA S.A.

Other operating costs

Other operating costs amounted to $286 (+$46 vs. 1Q12). The increase was mainly due to higher prices on related services, especially in transportation, freight and travel expenses, among others, in the operations in Argentina; and the increase of rent prices, as a result of new agreements and the renegotiation of some of the existing ones.

•

Operating income before depreciation and amortization

Operating income before depreciation and amortization amounted to $1,799 (+$152 or 9% vs. 1Q12), representing 30% of consolidated revenues in 1Q13 vs. 32% in 1Q12. This growth was mainly fueled by the Mobile business in Argentina and Paraguay (+$117 or 10% vs. 1Q12).

Depreciation and amortization

Depreciation and amortization amounted to $691 (+$76 or 12% vs. 1Q12). The increase in PP&E depreciation amounted to $41, in amortization of SAC and service connection costs $36 and a reduction in amortization of other intangible assets of $1.

Gain on disposal of PP&E

The gain amounted to $7, +$6 vs. 1Q12 and was mainly due to the sale of vehicles in the Fixed Services segment.

•

Operating income

Operating income amounted to $1,115 in 1Q13 (+$82 or +8% vs. 1Q12). The margin over consolidated revenues represented 18% in 1Q13 (vs. 20% in 1Q12). Personal Mobile Services segment shows the higher increase (+$60 vs. 1Q12).

•

Financial results, net

Financial results, net resulted in a net gain of $135, representing an improvement of $74 vs. 1Q12. This was mainly due to higher financial interest on cash equivalents and investments (+$30 vs. 1Q12) and a lower financial cost for provisions ($15 vs. 1Q12).

•

Net income

Telecom Argentina reached a net income of $813 in 1Q13, +$105 or +15% when compared to 1Q12. Net income attributable to Telecom Argentina amounted to $802 in 1Q13, +$104 or +15% as compared to 1Q12.

•

Net financial assets

As of March 31, 2013, Net financial assets (Cash and Cash Equivalents plus financial investments minus Financial debt) amounted to $4,020, showing an increase of $1,038 as compared to March 31, 2012 (amounting to $2,982), mainly due to an increase in the generation of cash from operating activities of the Telecom Group that was partially offset by the cash dividends paid to Telecom Argentina’s shareholders in May 2012 (amounting to $807). The Fixed Services segment has net financial assets of $999, the Personal Mobile Services segment has net financial assets of $3,118 and the Núcleo Mobile Services segment has net financial debt of $97.

•

Capital expenditures (CAPEX)

CAPEX composition for 1Q13 and 1Q12 is as follows:


	In millions of $				% of participation						Variation
	1Q13		1Q12		1Q13			1Q12			$			%
Fixed Servicies		284		298		38	%		43	%		(14	)		(5	)
Personal Mobile Services		393		349		53	%		51	%		44			13
Núcleo Mobile Services		64		43		9	%		6	%		21			49

Total CAPEX		741		690		100	%		100	%		51			7

PP&E CAPEX amounted to $519 and intangible assets CAPEX amounted to $222 in 1Q13, while in 1Q12 amounted to $492 and $198, respectively.

In relative terms, CAPEX represented 12% of consolidated revenues in 1Q13 (13% in 1Q12), and were intended mainly for the External wiring and network access equipment, Transmission and Switching equipment, Computer equipment and SAC.


*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF MARCH 31, 2013*

V

TELECOM ARGENTINA S.A.

PP&E and intangible assets additions (CAPEX plus materials additions) for 1Q13 and 1Q12 are as follows:


	In millions of $				% of participation						Variation
	1Q13		1Q12		1Q13			1Q12			$			%
Fixed Services		313		355		39	%		48	%		(42	)		(12	)
Personal Mobile Services		396		350		50	%		47	%		46			13
Núcleo Mobile Services		84		38		11	%		5	%		46			121

Total additions		793		743		100	%		100	%		50			10

Main PP&E CAPEX projects are related to the expansion of fixed broadband services in order to improve transmission and speed available to customers; deployment of 3G services to support the growth of mobile Internet together with the launch of innovative VAS services and the expansion of transmission and transport networks to meet the growing demand of services of our fixed and mobile customers.

•

Relevant matters

1.	*Resolutions of the Annual and Extraordinary Shareholders’ Meeting of Personal*

Personal’s shareholders, at their meeting held on April 10, 2013, approved, among other items, the Annual Report and financial statements as of December 31, 2012 and the allocation of Retained Earnings as of December 31, 2012 as follows: (i) the constitution of a Special Reserve for implementation of IFRS by $405, (ii) the constitution of a voluntary reserve for the finance of working capital and capital expenditures in Argentina by $233 and (iii) the allocation of $1,950 to the reserve for future cash dividends. The shareholders also approved the delegation of authority in Personal’s Board of Directors to determine the amount, time, terms and conditions to allocate the reserve for future cash dividends and the reserve for the finance of working capital and capital expenditures in Argentina.

2.	*Resolutions of the Annual General Shareholders’ Meeting of Telecom Argentina*

Telecom Argentina’s shareholders, at their meeting held on April 23, 2013, resolved, among other items: (a) the approval of Telecom Argentina’s Annual Report and financial statements as of December 31, 2012; (b) to adjourn the session until May 21, 2013 to consider the allocation of Telecom Argentina’s Retained Earnings as of December 31, 2012; (c) to set at eleven the number of regular and alternate directors of Telecom Argentina for a three year term, and to set at five the number of regular and alternate members of the Supervisory Committee of Telecom Argentina for a one year term, and to appoint the persons who will occupy those positions.

Summary of comparative consolidated statements of financial position


	March 31,
	2013		2012		2011
Current assets		7,486		5,826		4,119
Non-current assets		11,126		9,989		8,760

Total assets		18,612		15,815		12,879

Current liabilities		5,830		5,259		4,487
Non-current liabilities		1,781		1,681		1,194

Total liabilities		7,611		6,940		5,681

Equity attributable to Telecom Argentina (Controlling Company)		10,801		8,736		7,070
Equity attributable non-controlling interest		200		139		128

Total Equity		11,001		8,875		7,198

Total liabilities and equity		18,612		15,815		12,879

Summary of comparative consolidated income statements


	1Q13			1Q12			1Q11
Revenues and other income		6,073			5,130			4,149
Operating costs		(4,958	)		(4,097	)		(3,191	)

Operating income		1,115			1,033			958
Financial results, net		135			61			19

Net income before income tax expense		1,250			1,094			977
Income tax expense		(437	)		(386	)		(337	)

Net income		813			708			640
Other comprehensive income, net of tax		63			25			47

Total comprehensive income		876			733			687

Attributable to Telecom Argentina (Controlling Company)		842			715			666
Attributable to non-controlling interest		34			18			21


*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF MARCH 31, 2013*

VI

TELECOM ARGENTINA S.A.

Statistical data (in physical units)

•

Fixed services

Voice and data services


	1Q13					1Q12					1Q11					1Q10					1Q09
	Accumulated		Quarter			Accumulated		Quarter			Accumulated		Quarter			Accumulated		Quarter			Accumulated		Quarter
Equipment lines		3,807,737		1,551			3,799,811		2,899			3,800,594		(34,973	)		3,843,809		(8,350	)		3,849,385		1,016
NGN lines		1,092,483		48,115			955,312		(40,306	)		880,338		26,928			754,660		11,776			605,156		10,896

Installed lines (a)		4,900,220		49,666			4,755,123		(37,407	)		4,680,932		(8,045	)		4,598,469		3,426			4,454,541		11,912

Lines in service (b)		4,109,286		(18,572	)		4,138,370		(2,765	)		4,110,304		3,222			4,057,953		(2,307	)		4,008,421		(1,635	)

Customers lines (c)		4,027,422		(17,735	)		4,054,491		(2,343	)		4,024,236		5,177			3,966,266		(1,161	)		3,915,573		254

Public phones installed		35,874		(939	)		39,158		(921	)		43,543		(1,303	)		48,683		(1,592	)		55,864		(2,511	)

Lines in service per 100 inhabitants (d)		20.4		(0.2	)		20.7		(0.1	)		20.7		(0.1	)		20.6		(0.1	)		20.6		—

Lines in service per employee (e)		371		1			370		(3	)		377		(2	)		366		—			359		1

a)	Reflects total number of lines available in Switches, considered independently of its technology (TDM or NGN).

b)	Includes customers lines, own lines, public telephones and DDE and ISDN channels.

c)	The number of customers is measured in relation to the physical occupation of network resources.

d)	Corresponding to the Northern Region of Argentina.

e)	Defined as lines in service / number of actual employees.

Internet

1Q13

1Q12

1Q11

1Q10

1Q09

Accumulated

Quarter

Accumulated

Quarter

Accumulated

Quarter

Accumulated

Quarter

Accumulated

Quarter

Total ADSL subscribers

1,626,000

(3,000

)

1,566,000

16,000

1,407,000

27,000

1,232,000

18,000

1,060,000

28,000

•

Mobile services

Personal


	1Q13					1Q12				1Q11				1Q10					1Q09
	Accumulated		Quarter			Accumulated		Quarter		Accumulated		Quarter		Accumulated		Quarter			Accumulated		Quarter
Post-paid subscribers		2,415,000		29,000			2,226,000		48,000		1,886,000		81,000		1,613,000		22,000			1,472,000		49,000

“Cuentas Claras” plans		3,583,000		106,000			3,176,000		37,000		2,814,000		18,000		2,707,000		(2,000	)		2,822,000		15,000

Prepaid subscribers		12,763,000		43,000			12,672,000		258,000		11,841,000		415,000		10,454,000		403,000			8,832,000		529,000

Dongles (*)		353,000		(39,000	)		473,000		11,000		341,000		35,000		174,000		50,000			45,000		14,000


Total subscribers		19,114,000		139,000			18,547,000		354,000		16,882,000		549,000		14,948,000		473,000			13,171,000		607,000


Lines per employee		3,642		—			3,734		—		3,831		—		3,829		—			3,535		—

Núcleo


	1Q13					1Q12					1Q11					1Q10					1Q09
	Accumulated		Quarter			Accumulated		Quarter			Accumulated		Quarter			Accumulated		Quarter			Accumulated		Quarter
Post-paid subscribers		29,000		(1,000	)		30,000		1,000			26,000		1,000			24,000		—			23,000		(1,000	)

“Plan control” subscribers		270,000		9,000			227,000		7,000			199,000		8,000			161,000		8,000			143,000		3,000

Prepaid subscribers		1,888,000		16,000			1,829,000		37,000			1,604,000		—			1,604,000		(1,000	)		1,649,000		2,000

Dongles (*)		142,000		10,000			110,000		10,000			63,000		15,000			19,000		7,000			—		—


Subtotal mobile		2,329,000		34,000			2,196,000		55,000			1,892,000		24,000			1,808,000		14,000			1,815,000		4,000

Internet subscribers - Wimax		6,000		—			7,000		(1,000	)		9,000		(1,000	)		11,000		(1,000	)		16,000		1,000


Total subscribers		2,335,000		34,000			2,203,000		54,000			1,901,000		23,000			1,819,000		13,000			1,831,000		5,000


Lines per employee ()**		5,354		—			5,119		—			4,581		—			4,336		—			4,281		—

(*)	Corresponds to mobile Internet subscribers with post-paid, “Cuentas Claras”, “Plan control” and prepaid contracts.

(**)	Internet Wimax subscribers are not included.

Consolidated ratios


	1Q13		1Q12		1Q11
Liquidity (1)		1.28		1.11		0.92
Solvency (2)		1.45		1.28		1.27

Locked-up capital (3)		0.60		0.63		0.68

(1)	Current assets/Current liabilities.

(2)	Total equity/Total liabilities.

(3)	Non-current assets/Total assets.


*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF MARCH 31, 2013*

VII

TELECOM ARGENTINA S.A.

Outlook

In this fiscal year the growth prospects for fixed line services are expected to continue in line with the evolution experienced in recent years as a result of the market maturity. Arnet Broadband business got well-positioned to continue to capture market opportunities.

The mobile business is expected to continue expanding its subscriber base, although at more moderate rates than those of recent years. Mobile Internet is expected to continue to gain further presence among our customer base. Value Added Services are expected to continue to be one of the key sources of revenues growth. Personal is expected to continue to work on expanding the mobile Internet experience, considering the access restriction to additional spectrum faced by the mobile operators in the national market. Coverage expansion and speed access improvement to 3G and HSDPA+ networks, and the more complete portfolio of advanced mobile devices will be the drivers to success in its operation in the Argentine market.

The strategy implemented by the Company’s Management sets forth the basic standards that will enable the Telecom Group to reach its objectives of improving quality of service, strengthening its market position and increasing operating efficiency to meet the growing demands of the dynamic telecommunication market in which it operates. The Telecom Group’s investment plans are based on this future vision and on its commitment to its country and people.

Enrique Garrido

Chairman of the Board of Directors


*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF MARCH 31, 2013*

VIII

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In millions of Argentine pesos)


	Note	March 31, 2013		December 31, 2012
ASSETS
Current Assets
Cash and cash equivalents	2		3,968		3,160
Investments	2		155		563
Trade receivables	2		2,213		2,181
Other receivables	2		610		449
Inventories	2		540		633

Total current assets			7,486		6,986

Non-Current Assets
Trade receivables	2		20		23
Deferred income tax assets	2		67		62
Other receivables	2		279		119
Investments	2		52		70
Property, plant and equipment (“PP&E”)	2		9,193		9,035
Intangible assets	2		1,515		1,514

Total non-current assets			11,126		10,823

TOTAL ASSETS			18,612		17,809

LIABILITIES
Current Liabilities
Trade payables	2		3,475		3,659
Deferred revenues	2		386		362
Financial debt	2		55		43
Salaries and social security payables	2		610		635
Income tax payables	2		602		458
Other taxes payables	2		512		552
Dividends payables	2		33		—
Other liabilities	2		31		40
Provisions	6		126		134

Total current liabilities			5,830		5,883

Non-Current Liabilities
Trade payables	2		21		20
Deferred revenues	2		340		329
Financial debt	2		99		101
Salaries and social security payables	2		117		128
Deferred income tax liabilities	2		186		220
Income tax payables	2		12		12
Other liabilities	2		64		51
Provisions	6		942		907

Total non-current liabilities			1,781		1,768

TOTAL LIABILITIES			7,611		7,651

EQUITY (see Unaudited Condensed Consolidated Statement of Changes in Equity)
Equity attributable to Telecom Argentina (Controlling Company)			10,801		9,959
Equity attributable to Non-controlling interest			200		199

TOTAL EQUITY	7		11,001		10,158

TOTAL LIABILITIES AND EQUITY			18,612		17,809

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


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS

(In millions of Argentine pesos, except per share data in Argentine pesos)


		Three-month periods ended March 31,
	Note	2013			2012
Revenues	2		6,064			5,126
Other income	2		9			4

Total revenues and other income			6,073			5,130

Employee benefit expenses and severance payments	2		(868	)		(677	)
Interconnection costs and other telecommunication charges	2		(484	)		(408	)
Fees for services, maintenance, materials and supplies	2		(556	)		(477	)
Taxes and fees with the Regulatory Authority	2		(602	)		(462	)
Commissions	2		(502	)		(449	)
Cost of equipments and handsets	2		(558	)		(437	)
Advertising	2		(154	)		(164	)
Cost of VAS	2		(131	)		(60	)
Provisions	6		(40	)		(40	)
Bad debt expenses	2		(93	)		(69	)
Other operating expenses	2		(286	)		(240	)
Depreciation and amortization	2		(691	)		(615	)
Gain on disposal of PP&E			7			1

Operating income			1,115			1,033
Finance income	2		205			130
Finance expenses	2		(70	)		(69	)

Net income before income tax expense			1,250			1,094
Income tax expense	2		(437	)		(386	)

Net income for the period			813			708


Attributable to:
Telecom Argentina (Controlling Company)			802			698
Non-controlling interest			11			10

			813			708


Earnings per share attributable to Telecom Argentina– basic and diluted	1.d		0.81			0.71

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


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions of Argentine pesos)


	Three-month periods ended March 31,
	2013		2012


Net income for the period		813		708


Other components of the Statements of Comprehensive Income
Currency translation adjustments (non-taxable)		63		25

Other components of the comprehensive income, net of tax		63		25


Total comprehensive income for the period		876		733


Attributable to:
Telecom Argentina (Controlling Company)		842		715
Non-controlling interest		34		18

		876		733

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


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In millions of Argentine pesos)


	Equity attributable to Telecom Argentina
	Capital stock (1)		Inflation adjustment of capital stock		Total capital stock		Legal reserve		Voluntary reserve for future investments		Currency translation adjustment		Retained earnings		Total		Equity attributable to non- controlling interest			Total Equity
Balances as of January 1, 2012		984		2,688		3,672		451		—		46		3,852		8,021		144			8,165

Dividends from Núcleo (2)		—		—		—		—		—		—		—		—		(23	)		(23	)
Comprehensive income:
Net income for the period		—		—		—		—		—		—		698		698		10			708
Other comprehensive income		—		—		—		—		—		17		—		17		8			25

Total Comprehensive Income		—		—		—		—		—		17		698		715		18			733


Balances as of March 31, 2012		984		2,688		3,672		451		—		63		4,550		8,736		139			8,875


Balances as of January 1, 2013		984		2,688		3,672		573		2,553		106		3,055		9,959		199			10,158

Dividends from Núcleo (3)		—		—		—		—		—		—		—		—		(33	)		(33	)
Comprehensive income:
Net income for the period		—		—		—		—		—		—		802		802		11			813
Other comprehensive income		—		—		—		—		—		40		—		40		23			63

Total Comprehensive Income		—		—		—		—		—		40		802		842		34			876


Balances as of March 31, 2013		984		2,688		3,672		573		2,553		146		3,857		10,801		200			11,001

(1)	As of March 31, 2013 and 2012, there were 984,380,978 shares issued and fully paid.

(2)	As approved by the Ordinary Shareholders’ Meeting of Núcleo held on March 16, 2012.

(3)	As approved by the Ordinary Shareholders’ Meeting of Núcleo held on March 22, 2013.

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


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of Argentine pesos)


		Three-month periods ended March 31,
	Note	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period			813			708
Adjustments to reconcile net income to net cash flows provided by operating activities
Bad debt expenses and other allowances			111			67
Depreciation of PP&E	2		467			426
Amortization of intangible assets	2		224			189
Consumption of materials	2		30			44
Gain on disposal of PP&E	2		(7	)		(1	)
Provisions	6		51			67
Interest and other financial losses			(35	)		(8	)
Income tax expense	2		437			386
Income tax paid	3		(339	)		(217	)
Net increase in assets	3		(356	)		(76	)
Net decrease in liabilities	3		(108	)		(255	)

Total cash flows provided by operating activities			1,288			1,330

CASH FLOWS FROM INVESTING ACTIVITIES
PP&E acquisitions	3		(732	)		(845	)
Intangible assets acquisitions	3		(215	)		(190	)
Proceeds from the sale of PP&E			7			—
Investments not considered as cash and cash equivalents	3		426			—

Total cash flows used in investing activities			(514	)		(1,035	)

CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financial debt	3		(7	)		(3	)
Payment of interest	3		(2	)		(2	)

Total cash flows used in financing activities			(9	)		(5	)



NET FOREIGN EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS			43			14


INCREASE IN CASH AND CASH EQUIVALENTS			808			304
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR			3,160			2,818

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD			3,968			3,122

See Note 3 for additional information on the consolidated statements of cash flows.

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


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2013 AND 2012

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

INDEX


		Page

	Glossary of terms		7

	Notes to the unaudited condensed consolidated financial statements

1	Basis of preparation of the unaudited condensed consolidated financial statements and significant accounting policies		9

2	Breakdown of the main accounts		10

3	Supplementary cash flow information		18

4	Segment information		19

5	Related party transactions		22

6	Commitments and contingencies of the Telecom Group		24

7	Equity		25

8	Restrictions on distribution of profits		25

9	Selected consolidated quarterly information		25

10	Recent developments corresponding to the quarterly period ended March 31, 2013		25

11	Subsequent events as of March 31, 2013		26

TELECOM ARGENTINA S.A.

GLOSSARY OF TERMS

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

ADS: Telecom Argentina’s American Depositary Share, listed on the New York Stock Exchange, each representing 5 Class B Shares.

Argentine GAAP: Generally Accepted Accounting Principles in force in Argentina for the Company (without considering the adoption of IFRS).

CNC (Comisión Nacional de Comunicaciones): The Argentine National Communications Commission.

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

Company or Telecom Argentina: Telecom Argentina S.A.

CPCECABA: The Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires.

D&A: Depreciation and amortization.

DLD: Domestic long-distance.

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.

IDC: Tax on deposits to and withdrawals from bank accounts.

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

Micro Sistemas: Micro Sistemas S.A.

Nortel: Nortel Inversora S.A. Telecom’s controlling company.

Núcleo: Núcleo S.A.

NYSE: New York Stock Exchange

OCI: Other Comprehensive Income.

Personal: Telecom Personal S.A.

PP&E: Property, plant and equipment.

Regulatory Bodies: Collectively, the SC and the CNC.

RT: Technical resolutions issued by the FACPCE.

RT26: Technical resolution No, 26 issued by the FACPCE, amended by RT29.

SAC: Subscriber Acquisition Costs.

SC (Secretaría de Comunicaciones): The Argentine Secretary of Communications.

SEC: Securities and Exchange Commission of the United States of America.

Sofora: Sofora Telecomunicaciones S.A. Nortel’s controlling company.

Springville: Springville S.A.

SU: The availability of Basic telephone service, or access to the public telephone network via different alternatives, at an affordable price to all persons within a country or specified area.

Telecom Group: Telecom Argentina and its consolidated subsidiaries.

TELECOM ARGENTINA S.A.

Telecom Italia Group: Telecom Italia and its consolidated subsidiaries, except where referring to the Telecom Italia Group as Telecom Argentina’s operator in which case it means Telecom Italia and Telecom Italia International, N.V.

Telecom USA: Telecom Argentina USA Inc.

TLRD (Terminación Llamada Red Destino): Termination charges from third parties’ wireless networks.

VAS (Value-Added Services): Services that provide additional functionality to the basic transmission services offered by a telecommunications network such as voicemail, message signaling, caller-ID, call transferring, call waiting, call conferencing, IVR dialing, ring back tones, SMS (Short Message Service), MMS (Mobile Multimedia Services), automatic call routing, access to wireless Internet and access to email via BlackBerry.

TELECOM ARGENTINA S.A.


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

Basis of preparation and significant accounting policies

These consolidated financial statements have been prepared in accordance with RT 26 as adopted by the CPCECABA, and as required by the CNV.

For the preparation of these consolidated financial statements, the Company has elected to make use of the option provided by IAS 34, so, these consolidated financial statements do not include all the information required in an annual financial statement, and must be read jointly with the 2012 annual consolidated financial statements which can be consulted at the Company’s website (www.telecom.com.ar/inversores).

For the preparation of these consolidated financial statements, the Company followed the same accounting policies applied in its most recent annual consolidated financial statements with the exception of the valuation of Pension benefits included in “Other non-current liabilities”.

In connection with these pension benefits granted to Telecom Argentina’s unionized employees, the Company has applied IAS 19 revised (Employee Benefits), issued by the IASB in June 2011, which introduced modifications related to the recognition of actuarial gains and losses, the presentation of changes in assets and liabilities arising from defined benefit plans (which should be presented within OCI), as well as greater disclosure requirements for defined benefit plans. IAS 19 revised is mandatory for periods beginning on or after 1 January 2013. The adoption of this standard would generate a reduction of $0.2 in Retained Earnings at the beginning of year 2013 with charge to OCI. Based on materiality grounds, the opening balance of Retained Earnings has not been changed and the provisions of the new standard have been applied in the determination of fiscal year 2013 results of operations.

The preparation of these consolidated financial statements in conformity with IFRS requires the Company’s Management to use certain critical accounting estimates. Actual results could differ from those estimates.

These consolidated financial statements (except for cash flow information) are prepared on an accrual basis of accounting. Under this basis, the effects of transactions and other events are recognized when they occur. Therefore income and expenses are recognized at fair value on an accrual basis regardless of when they are perceived 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 over the relevant period.

These consolidated financial statements have also been prepared on a going concern basis, as there is a reasonable expectation that Telecom Argentina and its subsidiaries will continue its operational activities in the foreseeable future (and in any event with a time horizon of more than twelve months).

Publication of these consolidated financial statements for the period ended March 31, 2013 was approved by resolution of the Board of Directors’ meeting held on April 29, 2013.

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 “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 is considered more appropriate and representative of the specific business of the Group as evaluated by the Management, and are in line with the industrial sector of telecommunications;

•

the consolidated statements of comprehensive income include the profit or (loss) for the period as shown in the consolidated income statement and all components of other comprehensive income;

TELECOM ARGENTINA S.A.

•

the consolidated statements of changes in equity have been prepared showing separately (i) profit (loss) for the period, (ii) other comprehensive income (loss) for the period, and (iii) transactions with owners in their capacity as owners (controlling and non-controlling);

•

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 consolidated financial statements contain all material disclosures required under IAS 34. Some additional disclosures required by the Argentine Corporations Law and/or by the CNV have been also included.

Segment reporting

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 Executive Officer (“CEO”).

Operating segments are reported in a consistent manner with the internal reporting provided to the CEO, who is responsible for allocating resources and assessing performance of the operating segments at the net income (loss) level and under the accounting principles effective (IFRS) at each time for reporting to the Regulatory Bodies. The accounting policies applied for segment information are the same for all operating segments.

Information regarding segment reporting is included in Note 4.

Net income per share

The Company computes net income per common share by dividing net income for the period attributable to Telecom Argentina (Controlling Company) by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and dilutive potential common shares then outstanding during 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, 2013 and 2012, the weighted average of shares outstanding totaled 984,380,978 shares.

NOTE 2 – BREAKDOWN OF THE MAIN ACCOUNTS


	March 31, 2013			December 31, 2012
	March 31, 2013			December 31, 2012
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CURRENT ASSETS
a) Cash and cash equivalents
Cash		14			12
Banks		197			120
Time deposits		3,694			2,624
Mutual funds		63			404

		3,968			3,160


b) Investments
Investments over 90 days maturity		107			540
Argentine companies Notes		21			1
Loan to Nortel (Note 5.c)		7			2
Government bonds		20			20

		155			563


c) Trade receivables
Fixed services		887			853
Personal mobile services		1,512			1,469
Núcleo mobile services		65			61

Subtotal		2,464			2,383
Allowance for doubtful accounts		(251	)		(202	)

		2,213			2,181

TELECOM ARGENTINA S.A.

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


	March 31, 2013			December 31, 2012
	(3 months)			(12 months)
At the beginning of the year		(202	)		(170	)
Additions – Bad debt expenses		(93	)		(275	)
Uses		44			243

At the end of the period/year		(251	)		(202	)


	March 31, 2013			December 31, 2012
d) Other receivables
Prepaid expenses		261			206
Prepaid expenses related parties (Note 5.c)		91			—
Receivables for suppliers indemnities		28			61
Tax credits		83			54
Restricted funds		13			13
Compensation Fund		10			19
Expenditure reimbursement		43			38
Other		96			73

Subtotal		625			464
Allowance for doubtful accounts		(15	)		(15	)

		610			449

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


	March 31, 2013			December 31, 2012
	(3 months)			(12 months)
At the beginning of the year		(15	)		(12	)
Additions		—			(3	)

At the end of the period/year		(15	)		(15	)


	March 31, 2013			December 31, 2012
e) Inventories
Mobile handsets		543			626
Fixed telephones and equipment		21			15

Subtotal		564			641
Allowance for obsolescence of inventories		(24	)		(8	)

		540			633

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


	March 31, 2013			December 31, 2012
	(3 months)			(12 months)
At the beginning of the year		(8	)		(19	)
Additions – Fees for services, maintenance, materials and supplies		(19	)		(14	)
Uses		3			25

At the end of the period/year		(24	)		(8	)


	March 31, 2013			December 31, 2012
NON CURRENT ASSETS
f) Trade receivables
Fixed services		20			23

		20			23


g) Deferred income tax assets
*Net deferred income tax assets in Argentina (Telecom Argentina)*
Allowance for doubtful accounts		43			40
Provisions		246			248
Termination benefits		59			63
Other deferred income tax assets, net		107			108
Deferred income tax liabilities in Argentina
PP&E and intangible assets		(396	)		(405	)

*In Argentina*		59			54

TELECOM ARGENTINA S.A.


	March 31, 2013			December 31, 2012
*Net deferred income tax assets abroad (Núcleo and Springville)*
Tax loss carryforwards		1			1
Allowance for doubtful accounts		3			2
PP&E		11			11
Valuation allowance		(1	)		(1	)
Deferred income tax liabilities abroad
Other deferred income tax liabilities		(6	)		(5	)

*Abroad*		8			8

		67			62

h) Other receivables
Credit on SC Resolution No. 41/07 and IDC		85			85
Restricted funds		23			22
Tax credits		17			17
Prepaid expenses		90			86
Prepaid expenses related parties (Note 5 c)		153			—
Credit on minimum presumed income tax		4			4
Other		9			7

Subtotal		381			221
Allowance for regulatory matters		(85	)		(85	)
Allowance for doubtful accounts		(17	)		(17	)

		279			119

Movements in the allowance for regulatory matters are as follows:


	March 31, 2013			December 31, 2012
	(3 months)			(12 months)
At the beginning of the year		(85	)		(90	)
Uses		—			5

At the end of the period/year		(85	)		(85	)

Movements in the allowance for doubtful accounts are as follows:


	March 31, 2013			December 31, 2012
	(3 months)			(12 months)
At the beginning of the year		(17	)		(17	)
Additions		—			(1	)
Uses		—			1

At the end of the period/year		(17	)		(17	)


	March 31, 2013			December 31, 2012
i) Investments
Argentinean companies Notes		51			69
2003 Telecommunications Fund		1			1

		52			70


j) PP&E
Land, buildings and installations		899			900
Computer equipment and software		1,167			1,196
Switching and transmission equipment (i)		2,247			2,286
Mobile network access and external wiring		2,544			2,531
Construction in progress		1,734			1,534
Other tangible assets		311			322
Materials		305			280

Subtotal		9,207			9,049
Valuation allowance for materials		(14	)		(14	)

		9,193			9,035

(i)	Includes tower and pole, transmission equipment, switching equipment, power equipment, equipment lent to customers at no cost and handsets lent to customers at no cost.

TELECOM ARGENTINA S.A.

Movements in PP&E (without allowance for materials) are as follows:


	March 31, 2013			December 31, 2012
	(3 months)			(12 months)
At the beginning of the year		9,049			8,262
CAPEX		519			2,415
Materials		52			159

Total PP&E additions		571			2,574
Currency translation adjustments		85			131
Decreases		(1	)		(1	)
Consumption of materials		(30	)		(125	)
Depreciation of the period/year		(467	)		(1,792	)

At the end of the period/year		9,207			9,049

Movements in the valuation allowance for materials are as follows:


	March 31, 2013			December 31, 2012
	(3 months)			(12 months)
At the beginning of the year		(14	)		(15	)
Additions - Fees for services, maintenance, and materials		—			(5	)
Uses		—			6

At the end of the period/year		(14	)		(14	)


	March 31, 2013		December 31, 2012
k) Intangible assets
Licenses		588		588
SAC		591		586
Service connection or habilitation costs		93		94
Rights of use		223		227
Other intangible assets		20		19

		1,515		1,514

Movements in Intangible assets are as follows:


	March 31, 2013			December 31, 2012
	(3 months)			(12 months)
At the beginning of the year		1,514			1,488
CAPEX		222			842
Currency translation adjustments		3			4
Amortization of the period/year		(224	)		(820	)

At the end of the period/year		1,515			1,514


	March 31, 2013		December 31, 2012
CURRENT LIABILITIES
l) Trade payables
PP&E suppliers		1,166		1,427
Other assets and services suppliers		1,624		1,607
Inventory suppliers		585		584

Subtotal suppliers		3,375		3,618
Agent commissions		89		30
SU reimbursement		11		11

		3,475		3,659

m) Deferred revenues
Deferred revenue on prepaid calling cards		290		270
Deferred revenue on connection fees		31		30
Deferred revenue on sale of capacity and related services		33		34
Deferred revenue on customer loyalty programs		30		26
Deferred revenue from CONATEL		2		2

		386		362

n) Financial debt (Núcleo)
Bank loans		50		40
Accrued interest		5		3

		55		43

o) Salaries and social security payables
Vacation and bonuses		415		391
Social security payables		117		144
Termination benefits		60		60
Restructuring debt		9		14
Compensation Fund contributions		9		26

		610		635

TELECOM ARGENTINA S.A.


	March 31, 2013			December 31, 2012
p) Income tax payables
Income tax payables		2,006			1,520
Payments in advance of income taxes		(1,407	)		(1,065	)
Law No. 26,476 Tax Regularization Regime		3			3

		602			458

q) Other taxes payables
VAT, net		155			180
Tax on SU		90			88
Tax withholdings		63			91
Internal taxes		60			55
Turnover tax		56			54
Regulatory fees		47			48
Municipal taxes		18			17
Retention Decree No.583/10 ENARD		10			9
Other		13			10

		512			552

r) Dividends payables
Related parties (Note 5.c)		33			—

		33			—

s) Other liabilities
Legal fees		—			12
Guarantees received		9			7
Other		22			21

		31			40

NON CURRENT LIABILITIES
t) Trade payables
PP&E suppliers		21			20

		21			20

u) Deferred revenues
Deferred revenue on sale of capacity and related services		221			217
Deferred revenue on connection fees		63			64
Deferred revenue on customer loyalty programs		47			39
Deferred revenue from CONATEL		9			9

		340			329

v) Financial debt (Núcleo)
Bank loans		99			101

		99			101

w) Salaries and social security payables
Termination benefits		117			128

		117			128

x) Deferred income tax liabilities (Telecom Personal)
Deferred income tax assets
Allowance for doubtful accounts		(68	)		(54	)
Provisions		(130	)		(120	)
Inventory		(21	)		(19	)
Other		(6	)		(3	)
Allowance for deferred income tax assets		23			23
Deferred income tax liabilities
PP&E and intangible assets		332			348
Other		56			45

Net deferred income tax liabilities		186			220

y) Income tax payables
Law No. 26,476 Tax Regularization Regime		12			12

		12			12

z) Other liabilities
Suppliers guarantees on third parties claims		9			12
Pension benefits (Note 1.a)		42			38
Legal fees		12			—
Other		1			1

		64			51

TELECOM ARGENTINA S.A.

aa) Aging of assets and liabilities at March 31, 2013


Date due	Cash and cash equivalents			Investments			Trade receivables			Deferred income tax assets		Other receivables		Trade payables			Deferred revenues		Financial debt			Salaries and social security payables		Income tax payables			Other taxes payables		Dividends payables		Deferred income tax liabilities		Other liabilities
Total due		—			—			898			—		—		(d) 115			—		—			—		—			—		—		—		—

Not due
Second quarter 2013		3,968			118			1,277			—		378		3,355			315		16			392		599			512		16		—		26
Third quarter 2013		—			7			22			—		89		5			24		8			72		1			—		—		—		3
Fourth quarter 2013		—			10			10			—		81		—			22		18			64		1			—		17		—		1
First quarter 2014		—			20			6			—		62		—			25		13			82		1			—		—		—		1
April 2014 thru March 2015		—			51			14			—		130		21			96		38			43		3			—		—		—		23
April 2015 thru March 2016		—			—			6			—		76		—			46		26			29		3			—		—		—		2
April 2016 and thereafter		—			—			—			—		73		—			198		35			45		6			—		—		—		39
Not date due established		—			1			—			67		—		—			—		—			—		—			—		—		186		—

Total not due		3,968			207			1,335			67		889		3,381			726		154			727		614			512		33		186		95

Total		3,968			207			2,233			67		889		3,496			726		154			727		614			512		33		186		95


Balances bearing interest		3,757			206			923			—		—		44			—		154			—		22			—		—		—		4
Balances not bearing interest		211			1			1,310			67		889		3,452			726					727		592			512		33		186		91

Total		3,968			207			2,233			67		889		3,496			726		154			727		614			512		33		186		95


Average annual interest rate (%)		(a	)		(b	)		(c	)						17	%				10,28	%				9	%								6	%

(a)	$63 bear 9.31%, $876 bear 8.34% and $2,818 bear 14.49%.

(b)	$107 bear 17.78%, $7 bear 23.18%, $21 bear 19.10%, $51 bear 5.09%, $10 bear 8.84%, $10 bear 20.08%.

(c)	$78 bear 50% over the Banco de la Nación Argentina 30-day interest rate paid by banks, $223 bear 50% over the Banco de la Nación Argentina notes payable discount rate, $14 in financing plans bear 28%, $38 bear 8.3%, $557 bear 28.28%, and $13 bear 36%.

(d)	At the date of these consolidated financial statements, $72 was cancelled.

ab) Foreign currency assets and liabilities


	03.31.13						12.31.12
	Type and amount of foreign currency (i)			Amount in local currency (ii)			Type and amount of foreign currency (i)			Amount in local currency (ii)
Net positions	US$	(109	)		(576	)	US$	(138	)		(686	)
Net assets (liabilities)	G	(153,785	)		(194	)	G	(118.791	)		(136	)
	EURO	(16	)		(106	)	EURO	(10	)		(63	)
	SDR	3			24		SDR	3			22

					(852	)					(863	)

(i)	US$ = United States dollar; G= Guaraníes; SDR= Special Drawing Rights.

(ii)	As foreign currency figures and their amount in argentine pesos are in millions, the calculation of the amount of the foreign currency by its exchange rate could not be exact.


	Three month periods ended March 31,
	2013		2012
	Profit (loss)
CONSOLIDATED INCOME STATEMENTS

ac) Total revenues and other income
*Services*
Voice – Retail		629		607
Voice – Wholesale		185		175
Internet		575		458
Data		213		163

Subtotal Fixed services		1,602		1,403

Voice – Retail		1,214		1,077
Voice – Wholesale		448		425
Internet		391		276
Data		1,615		1,323

Subtotal Personal Mobile services		3,668		3,101

Voice – Retail		87		86
Voice – Wholesale		22		18
Internet		62		26
Data		78		63

Subtotal Núcleo Mobile services		249		193

Total service revenues (a)		5,519		4,697

*Equipment*
Fixed services		14		18
Personal Mobile services		518		405
Núcleo Mobile services		13		6

Total equipment revenues (b)		545		429

*Other income*
Fixed services		8		3
Personal Mobile services		1		1

Total other income (c)		9		4


Total revenues and other income (a)+(b)+(c)		6,073		5,130

TELECOM ARGENTINA S.A.

ad) Operating costs

Operating expenses disclosed by nature of expense amounted to $4,958 and $4,097 for the three-month periods ended March 31, 2013 and 2012, respectively.

The main components of the operating expenses are the following:


	Three month periods ended March 31,
	2013			2012
	Profit (loss)
Employee benefit expenses and severance payments
Wages and salaries		(642	)		(491	)
Social security expenses		(195	)		(138	)
Severance indemnities and termination benefits		(11	)		(29	)
Other employee benefits		(20	)		(19	)

		(868	)		(677	)

Interconnection costs and other telecommunication charges
Fixed telephony interconnection costs		(55	)		(53	)
Cost of international outbound calls		(37	)		(37	)
Lease of circuits		(42	)		(39	)
Mobile services - charges for roaming		(135	)		(86	)
Mobile services - charges for TLRD		(215	)		(193	)

		(484	)		(408	)

Fees for services, maintenance, materials and supplies
Maintenance of hardware and software		(80	)		(66	)
Technical maintenance		(112	)		(84	)
Service connection fees for fixed lines and Internet lines		(37	)		(30	)
Service connection fees capitalized as SAC		2			2
Service connection fees capitalized as Intangible assets		6			5
Other maintenance costs		(71	)		(51	)
Call center fees		(157	)		(147	)
Other fees for services		(104	)		(103	)
Directors and Supervisory Committee’s fees		(3	)		(3	)

		(556	)		(477	)

Taxes and fees with the Regulatory Authority
Turnover tax		(324	)		(238	)
Taxes with the Regulatory Authority		(150	)		(118	)
Tax on deposits to and withdrawals from bank accounts		(61	)		(49	)
Municipal taxes		(42	)		(30	)
Other taxes		(25	)		(27	)

		(602	)		(462	)

Commissions
Agent commissions		(358	)		(311	)
Agent commissions capitalized as SAC		103			76
Distribution of prepaid cards commissions		(139	)		(123	)
Collection commissions		(92	)		(71	)
Other commissions		(16	)		(20	)

		(502	)		(449	)

Cost of equipments and handsets
Inventory balance at the beginning of the period		(641	)		(555	)
Plus:
Purchases		(588	)		(559	)
Deferred costs from SAC		103			106
Transfer from materials		—			(1	)
Net decreases from allowance for obsolescence		1			3
Mobile handsets lent to customers at no cost		2			1
Replacements to customers		1			4
Less:
Inventory balance at period end		564			564

		(558	)		(437	)

TELECOM ARGENTINA S.A.


	Three month periods ended March 31,
	2013			2012
	Profit (loss)
Advertising
Media advertising		(85	)		(97	)
Fairs and exhibitions		(36	)		(36	)
Other advertising costs		(33	)		(31	)

		(154	)		(164	)

Cost of VAS
Cost of mobile VAS		(129	)		(58	)
Cost of fixed VAS		(2	)		(2	)

		(131	)		(60	)

Other operating costs
Transportation, freight and travel expenses		(93	)		(79	)
Delivery costs capitalized as SAC		7			7
Rental expense		(65	)		(52	)
Energy, water and others		(85	)		(74	)
International and satellite connectivity		(31	)		(30	)
Other		(19	)		(12	)

		(286	)		(240	)

D&A
Depreciation of PP&E		(467	)		(426	)
Amortization of SAC and service connection costs		(219	)		(183	)
Amortization of other intangible assets		(5	)		(6	)

		(691	)		(615	)

As required by the Argentine Corporations Law, the operating expenses disclosed by function are as follows:


Cost of sales and services	(2,989	)	(2,421	)
General and administrative expenses	(201	)	(152	)
Selling expenses	(1,735	)	(1,485	)
Other expenses - provisions	(40	)	(40	)
Gain on disposal of PP&E	7		1

	(4,958	)	(4,097	)

ae) Financial results
Finance income
Interest on cash equivalents	105		80
Interest on investments (Argentine companies Notes and Government bonds)	5		—
Interest on receivables	25		20
Gains on Mutual Funds	9		5
Interest on related parties (Note 5.d)	—		1
Foreign currency exchange gains	60		24
Other	1		—

Total finance income	205		130

Finance expenses
Interest on loans	(4	)	(3	)
Interest on salaries and social security payable, other taxes payables and accounts payable	(4	)	(2	)
Interest on provisions	(11	)	(27	)
Loss on discounting of salaries and social security payable, other taxes payables and other liabilities	(3	)	(6	)
Foreign currency exchange losses	(47	)	(31	)
Other	(1	)	—

Total finance expenses	(70	)	(69	)

	135		61

TELECOM ARGENTINA S.A.

af) Income taxes

Income tax expense for the three-month periods ended March 31, 2013 and 2012 consists of the following:


	Profit (loss)
	The Company			Personal			Núcleo			Total
Current tax expense		(110	)		(365	)		(7	)		(482	)
Deferred tax benefit		5			39			1			45

Income tax expense as of March 31, 2013		(105	)		(326	)		(6	)		(437	)

Current tax expense		(70	)		(311	)		(5	)		(386	)
Deferred tax benefit (expense)		(5	)		6			—			1
Valuation allowance		—			(1	)		—			(1	)

Income tax expense as of March 31, 2012		(75	)		(306	)		(5	)		(386	)

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


	In Argentina			Abroad			Total
	Profit (loss)
Pre-tax income on a separate return basis		1,833			40			1,873
Non taxable items – Other income from investments		(624	)		—			(624	)
Non taxable items – Other		1			3			4

Subtotal		1,210			43			1,253
Weighted statutory income tax rate		35	%		(	*)

Income tax expense at weighted statutory tax rate		(423	)		(6	)		(429	)
Income tax on cash dividends from foreign companies		(6	)		—			(6	)
Other changes in tax assets and liabilities		(2	)		—			(2	)

Income tax expense as of March 31, 2013		(431	)		(6	)		(437	)

Pre-tax income on a separate return basis		1,632			35			1,667
Non taxable items – Other income from investments		(573	)		—			(573	)

Subtotal		1,059			35			1,094
Weighted statutory income tax rate		35	%		(	*)

Income tax expense at weighted statutory tax rate		(371	)		(5	)		(376	)
Income tax on cash dividends from foreign companies		(7	)		—			(7	)
Other changes in tax assets and liabilities		(2	)		—			(2	)
Changes in valuation allowance		(1	)		—			(1	)

Income tax expense as of March 31, 2012		(381	)		(5	)		(386	)

(*)

Effective income tax rate based on weighted statutory income tax rate in the different countries where the Company has operations. The statutory tax rate in Argentina was 35% for all the periods presented, in Paraguay was 10% plus an additional rate of 5% in case of payment of dividends for all the periods presented, in Uruguay the statutory tax rate was 25% for all the periods presented and in the USA the effective tax rate was 39.5%, for all the periods presented, respectively.

NOTE 3 – SUPPLEMENTARY CASH FLOW INFORMATION


• *Changes in assets/liabilities components:*

	Three month periods ended March 31,
	2013			2012
Net (increase) decrease in assets
Trade receivables		(116	)		(56	)
Other receivables		(74	)		(11	)
Other receivables related parties (Note 5.c)		(244	)		—
Inventories		78			(9	)

		(356	)		(76	)

Net (decrease) increase in liabilities
Trade payables		(46	)		(125	)
Deferred revenues		31			33
Salaries and social security payables		(50	)		(25	)
Other taxes payables		(37	)		(21	)
Other liabilities		3			(45	)
Provisions		(9	)		(72	)

		(108	)		(255	)


Income tax paid consists of the following:

Payments in advance		(310	)		(194	)
Other payments		(29	)		(23	)

		(339	)		(217	)

TELECOM ARGENTINA S.A.


• *Main non-cash operating transactions:*

	Three month periods ended March 31,
	2013			2012
VAT credit balances offset with income taxes payments		—			23
Compensation Fund contribution reclassified between:
Provisions and Other receivables and Salaries and social security payables		—			39
Provisions and Other liabilities		—			21
SAC acquisitions offset with trade receivables		7			28

• *Most significant investing activities:*

PP&E acquisitions include:

PP&E additions (Note 2.j)		(571	)		(545	)
Plus:
Payments of trade payables originated in prior years acquisitions		(581	)		(640	)
Less:
Acquisition of PP&E through incurrence of trade payables		418			339
Mobile handsets lent to customers at no cost		2			1

		(732	)		(845	)


Intangible assets acquisitions include:

Intangible assets additions (Note 2.k)		(222	)		(198	)
Plus:
Payments of trade payables originated in prior years acquisitions		(66	)		(80	)
SAC acquisitions offset with trade receivables		(7	)		(28	)
Less:
Acquisition of intangible assets through incurrence of trade payables		80			116

		(215	)		(190	)

The following table presents the cash flows from purchases, sales and maturities of securities which were not considered cash equivalents in the statement of cash flows:


Investments over 90 days maturity	431		—
Loan to Nortel	(5	)

	426		—

•

Financing activities components:

The following table presents the financing activities components of the consolidated statements of cash flows:


Payment of bank loans – Núcleo	(7	)	(3	)

Total payment of financial debt	(7	)	(3	)

Payment of interest on bank loans – Núcleo	(2	)	(2	)

Total payment of interest	(2	)	(2	)

NOTE 4 – SEGMENT INFORMATION

The Group conducts its business through six legal entities each one has been identified as an operating segment.

The Company has combined the operating segments into three reportable segments: “Fixed services”, “Personal Mobile Services” and “Núcleo Mobile Services” based on the nature of products provided by the entities and taking into account the regulatory and economic framework in which each entity operates.

TELECOM ARGENTINA S.A.

Segment financial information for the three-month periods ended March 31, 2013 and 2012 was as follows:

For the three-month period ended March 31, 2013


• *Income statement*

	Fixed			Mobile services
	services			Personal			Núcleo			Subtotal			Eliminations			Total
Total revenues and other income (1)		1,907			4,215			265			4,480			(314	)		6,073
Employee benefit expenses and severance payments		(618	)		(229	)		(21	)		(250	)		—			(868	)
Interconnection costs and other telecommunication charges		(129	)		(551	)		(45	)		(596	)		241			(484	)
Fees for services, maintenance, materials and supplies		(245	)		(327	)		(24	)		(351	)		40			(556	)
Taxes and fees with the Regulatory Authority		(132	)		(461	)		(9	)		(470	)		—			(602	)
Commissions		(44	)		(445	)		(26	)		(471	)		13			(502	)
Cost of equipments and handsets		(15	)		(529	)		(14	)		(543	)		—			(558	)
Advertising		(38	)		(101	)		(15	)		(116	)		—			(154	)
Cost of VAS		(2	)		(120	)		(9	)		(129	)		—			(131	)
Provisions		(13	)		(27	)		—			(27	)		—			(40	)
Bad debt expenses		(22	)		(69	)		(2	)		(71	)		—			(93	)
Other operating expenses		(162	)		(133	)		(11	)		(144	)		20			(286	)

Operating income before D&A		487			1,223			89			1,312			—			1,799
Depreciation of PP&E		(216	)		(206	)		(45	)		(251	)		—			(467	)
Amortization of intangible assets		(24	)		(191	)		(9	)		(200	)		—			(224	)
Gain on disposal of PP&E		5			—			2			2			—			7

Operating income		252			826			37			863			—			1,115
Financial results, net		49			83			3			86			—			135

Net income before income tax expense		301			909			40			949			—			1,250
Income tax expense, net		(105	)		(326	)		(6	)		(332	)		—			(437	)

Net income		196			583			34			617			—			813


Net income attributable to Telecom Argentina (Controlling Company)																	802
Net income attributable to non-controlling interest																	11

																	813


(1)

Service revenues		1,602			3,668			249			3,917			—			5,519
Equipment revenues		14			518			13			531			—			545
Other income		8			1			—			1			—			9

Subtotal third party revenues		1,624			4,187			262			4,449			—			6,073
Intersegment revenues		283			28			3			31			(314	)		—

Total revenues and other income		1,907			4,215			265			4,480			(314	)		6,073


• *Statement of financial position information*

PP&E		5,444			2,851			898			3,749			—			9,193
Intangible assets, net		369			1,114			33			1,147			(1	)		1,515
Capital expenditures on PP&E (a)		263			203			53			256			—			519
Capital expenditures on intangible assets (b)		21			190			11			201			—			222
Total capital expenditures (a)+ (b)		284			393			64			457			—			741
Total additions on PP&E and intangible assets		313			396			84			480			—			793
Net financial asset (debt)		999			3,118			(97	)		3,021			—			4,020


• *Geographic information*

Total revenues and other income

Total non-current assets

Breakdown by location
of operations

Breakdown by location
of the Group’s
customers

Breakdown by
location of operations

Argentina

5,796

5,749

10,176

Abroad

277

324

950

Total

6,073

11,126

TELECOM ARGENTINA S.A.

For the three-month period ended March 31, 2012


• *Income statement*

	Fixed			Mobile services
	services			Personal			Núcleo			Subtotal			Eliminations			Total
Total revenues and other income (1)		1,669			3,536			200			3,736			(275	)		5,130
Employee benefit expenses and severance payments		(496	)		(166	)		(15	)		(181	)		—			(677	)
Interconnection costs and other telecommunication charges		(127	)		(451	)		(31	)		(482	)		201			(408	)
Fees for services, maintenance, materials and supplies		(221	)		(280	)		(18	)		(298	)		42			(477	)
Taxes and fees with the Regulatory Authority		(109	)		(347	)		(6	)		(353	)		—			(462	)
Commissions		(36	)		(404	)		(24	)		(428	)		15			(449	)
Cost of equipments and handsets		(10	)		(422	)		(5	)		(427	)		—			(437	)
Advertising		(38	)		(114	)		(12	)		(126	)		—			(164	)
Cost of VAS		(2	)		(52	)		(6	)		(58	)		—			(60	)
Provisions		(28	)		(12	)		—			(12	)		—			(40	)
Bad debt expenses		(14	)		(53	)		(2	)		(55	)		—			(69	)
Other operating expenses		(136	)		(113	)		(8	)		(121	)		17			(240	)

Operating income before D&A		452			1,122			73			1,195			—			1,647
Depreciation of PP&E		(200	)		(196	)		(30	)		(226	)		—			(426	)
Amortization of intangible assets		(24	)		(158	)		(7	)		(165	)		—			(189	)
Gain on disposal of PP&E		1			—			—			—			—			1

Operating income		229			768			36			804			—			1,033
Financial results, net		(16	)		78			(1	)		77			—			61

Net income before income tax expense		213			846			35			881			—			1,094
Income tax expense, net		(75	)		(306	)		(5	)		(311	)		—			(386	)

Net income		138			540			30			570			—			708


Net income attributable to Telecom Argentina (Controlling Company)																	698
Net income attributable to non-controlling interest																	10

																	708


(1)

Service revenues		1,403			3,101			193			3,294			—			4,697
Equipment revenues		18			405			6			411			—			429
Other income		3			1			—			1			—			4

Subtotal third party revenues		1,424			3,507			199			3,706			—			5,130
Intersegment revenues		245			29			1			30			(275	)		—

Total revenues and other income		1,669			3,536			200			3,736			(275	)		5,130


• *Statement of financial position information*

PP&E		4,979			2,716			657			3,373			—			8,352
Intangible assets, net		377			1,096			23			1,119			—			1,496
Capital expenditures on PP&E (a)		281			173			38			211			—			492
Capital expenditures on intangible assets (b)		17			176			5			181			—			198
Total capital expenditures (a)+ (b)		298			349			43			392			—			690
Total additions on PP&E and intangible assets		355			350			38			388			—			743
Net financial asset (debt)		716			2,370			(104	)		2,266			—			2,982


• *Geographic information*

Total revenues and other income

Total non-current assets

Breakdown by location
of operations

Breakdown by location
of the Group’s
customers

Breakdown by
location of operations

Argentina

4,922

4,864

9,292

Abroad

208

266

697

Total

5,130

9,989

TELECOM ARGENTINA S.A.

NOTE 5 – RELATED PARTY TRANSACTIONS

a)	Controlling company

Nortel, residing in A. Moreau de Justo 50 - 11th floor – Autonomous City of Buenos Aires, holds 54.74% stake in the Company, meaning that exercises control of the Company in the terms of Art. 33 of Law No. 19,550. As of March 31, 2013, Nortel owns all of the Class “A” shares (51% of total shares of the Company) and 7.64% of the Class “B” shares (3.74168% of total shares of the Company).

All of the common shares of Nortel belong to Sofora. As of March 31, 2013 these shares represent 78.38% of the capital stock of Nortel.

b)	Related parties

Related parties (as described in IAS 24) are those legal entities or individuals which are related to the indirect shareholders of the Company.

Under IAS 24, Telefónica, S.A. (of Spain) and its controlled companies, including Telefónica de Argentina S.A. and Telefónica Móviles de Argentina S.A. are not considered related parties. As of the date of these consolidated financial statements, such situation has been confirmed by the commitments assumed before the Argentine Antitrust Commission (or the “CNDC”) to ensure the separation and independence between the Telecom Italia Group and the Telecom Group, on one hand, and Telefónica S.A. (of Spain) and its controlled companies, on the other, with respect to their activities in the Argentine telecommunications market, such as it has been corroborated by the applicable authorities.

c)	Balances with related parties

•

Direct parent company


	March 31,		December 31,
	2013		2012
CURRENT ASSETS
Investments
Nortel		7		2

		7		2

•

Related parties


	Type of related party	March 31,		December 31,
	Type of related party	2013		2012
CURRENT ASSETS
Trade receivables
TIM Participacoes S.A. (a)	Other related party		1		—
Telecom Italia Sparkle S.p.A. (a)	Other related party		2		9
Telecom Italia S.p.A. (a)	Indirect parent company		3		1
Caja de Seguros S.A. (b)	Other related party		47		21
Latin American Nautilus Argentina S.A. (a)	Other related party		2		1

			55		32


Other receivables
Latin American Nautilus Argentina S.A. (a) (d)	Other related party		91		—

			91		—


NON-CURRENT ASSETS
Other receivables
Latin American Nautilus Argentina S.A. (a) (d)	Other related party		153		—

			153		—


CURRENT LIABILITIES
Trade payables
Grupo Italtel (a)	Other related party		99		97
Latin American Nautilus Ltd. (a)	Other related party		—		30
Telecom Italia S.p.A. (a)	Indirect parent company		13		22
Telecom Italia Sparkle S.p.A. (a)	Other related party		4		10
Latin American Nautilus USA Inc. (a)	Other related party		1		2
Latin American Nautilus Argentina S.A. (a)	Other related party		—		1
TIM Participacoes S.A. (a)	Other related party		10		2
Caja de Seguros S.A. (b)	Other related party		27		23
La Caja Aseguradora de Riesgos del Trabajo ART S.A. (b)	Other related party		4		5

			158		192


Dividends payables
ABC Telecomunicaciones S.A.	Other related party		33		—

			33		—

TELECOM ARGENTINA S.A.

d)	Transactions with related parties


	Transaction description	Type of related party	Three month periods ended March 31,
			2013			2012
			Profit (loss)
Telecom Italia Sparkle S.p.A. (a)	Voice – Wholesale	Other related party		5			6
TIM Participacoes S.A. (a)	Voice – Wholesale	Other related party		3			4
Telecom Italia S.p.A. (a)	Voice – Wholesale	Indirect parent company		1			1
Caja de Seguros S.A. (b)	Voice – Retail	Other related party		41			20
Caja de Seguros S.A. (b)	Equipment	Other related party		19			12
Standard Bank (b) (c)	Voice – Retail	Other related party		—			1
Standard Bank (b) (c)	Data	Other related party		—			4
Standard Bank (b) (c)	Equipment	Other related party		—			1

Total revenues and other income				69			49


Latin American Nautilus Ltd. (a)	International outbound calls and data	Other related party		(24	)		(25	)
Grupo Italtel (a)	Maintenance, materials and supplies	Other related party		(16	)		(15	)
Telecom Italia Sparkle S.p.A. (a)	International outbound calls and other	Other related party		(8	)		(7	)
TIM Participacoes S.A. (a)	Roaming	Other related party		(6	)		(6	)
Telecom Italia S.p.A. (a)	Fees for services and roaming	Indirect parent company		(4	)		(4	)
Latin American Nautilus Argentina S.A. (a)	International outbound calls	Other related party		(2	)		(2	)
Latin American Nautilus USA Inc. (a)	International outbound calls	Other related party		(2	)		(1	)
La Caja Aseguradora de Riesgos del Trabajo ART S.A.(b)	Salaries and social security	Other related party		(10	)		(7	)
Caja de Seguros S.A. (b)	Insurance	Other related party		(4	)		(4	)
La Estrella Compañía de Seguros S.A. (b)	Insurance			(2	)		(1	)

Total operating costs				(78	)		(72	)


Standard Bank (b) (c)	Interest	Other related party		—			1

Total financial results				—			1


Grupo Italtel (a)		Other related party		27			10

Total purchases of PP&E				27			10

(a)	Such companies relate to Telecom Italia Group.

(b)	Such companies relate to W de Argentina - Inversiones S.L.

(c)	This entity is no longer related party as from November 2012.

(d)	Corresponds to an agreement of lease-mode IP international capacity until December 2016. The Company paid approximately $267.6 on February 2013 for this agreement.

The transactions discussed above were made on terms no less favorable to the Company than would have been obtained from unaffiliated third parties. The Board of Directors approved transactions representing more than 1% of the total shareholders’ equity of the Company, after being approved by the Audit Committee in compliance with Decree No. 677/01 and Law No. 26,831.

e)	Key Managers

Compensation for the Key Managers, including social security contribution, amounted to $13 and $12 for the three month periods ended March 31, 2013 and 2012, respectively, and was recorded as expenses under the item line “Employee benefits expenses and severance payments”. The total expense remuneration is comprised as follows:


	Three month periods ended March 31,
	2013		2012
Salaries (*)		7		5
Variable compensation (*)		4		5
Social security contributions		2		2

		13		12

(*)	Gross compensation. Social security and income tax retentions are in charge of the employee.

As of March 31, 2013 and 2012, an amount of $5 and $6 remained unpaid, respectively,

As of March 31, 2013 and 2012, the Telecom Group has recorded a $2 provision for the fees of the Telecom Argentina’s Board of Directors members. The members and alternate members of the Board of Directors do not hold executive positions in the Company or Company’s subsidiaries.

TELECOM ARGENTINA S.A.

NOTE 6 – COMMITMENTS AND CONTINGENCIES OF THE TELECOM GROUP

a)	Purchase commitments

The Company has entered into various purchase orders amounting in the aggregate to approximately $2,970 as of March 31, 2013 (of which $811 corresponds to PP&E commitments), primarily related to the supply of switching equipment, external wiring, infrastructure agreements, inventory and other service agreements.

b)	Contingencies

The Telecom Group is a party to several civil, tax, commercial, labor and regulatory proceedings and claims that have arisen in the ordinary course of business. In order to determine the proper level of provisions, Management of the Company, based on the opinion of its internal and external legal counsel, assesses the likelihood of any adverse judgments or outcomes related to these matters as well as the range of probable losses that may result from the potential outcomes. A determination of the amount of provisions required, if any, is determined after an analysis of each individual case.

The determination of the required provisions may change in the future due to new developments or unknown facts at the time of the evaluation of the claims or changes as a matter of law or legal interpretation. Consequently, as of March 31, 2013, the Telecom Group has recorded provisions in an aggregate amount of $1,153 to cover potential losses under these claims ($85 for regulatory contingencies deducted from assets and $1,068 included under provisions) and certain amounts deposited in the Company’s bank accounts have been restricted as to their use due to some judicial proceedings. As of March 31, 2013, these restricted funds totaled $36 (included under “Other receivables” item line in the consolidated statement of financial position).

Provisions consist of the following:


	Balances		Additions (reversals)							Decreases						Balances
	as of December 31, 2012		Capital (i)		Interest (ii)		Reclassifications			Classified to liability			Payments			as of March 31, 2013
Current
Provision for civil and commercial proceedings		33		—		—		6			—			(1	)		38
Provision for labor claims		32		—		—		2			—			(4	)		30
Restructuring (iii)		54		—		—		—			(16	)		—			38
Provision for regulatory, tax and other matters claims		15		—		—		9			—			(4	)		20

Total current provisions		134		—		—		17			(16	)		(9	)		126

Non-current
Provision for civil and commercial proceedings		145		19		2		(6	)		—			—			160
Provision for labor claims		255		6		1		(2	)		—			—			260
Provision for regulatory, tax and other matters claims		432		15		6		(9	)		—			—			444
Asset retirement obligations		75		—		3		—			—			—			78

Total non-current provisions		907		40		12		(17	)		—			—			942


Total provisions		1,041		40		12		—			(16	)		(9	)		1,068

(i)	Included in Provisions.

(ii)	$11 Included in Finance costs and $1 to currency translation adjustments.

(iii)

As of the date of these consolidated financial statements, the Telecom Group has continued with the restructuring plan implementation begun in 4Q12, estimating that it would be substantially concluded during 2Q13.


	Balances		Additions (reversals)							Decreases						Balances
	as of December 31, 2011		Capital (i)		Interest (ii)		Reclassifications			Classified to liability			Payments			as of March 31, 2012
Current
Provision for civil and commercial proceedings		16		—		—		—			—			—			16
Provision for labor claims		128		—		—		3			(51	)		(59	)		21
Provision for regulatory, tax and other matters claims		29		—		—		(2	)		—			(13	)		14

Total current provisions		173		—		—		1			(51	)		(72	)		51

Non-current
Provision for civil and commercial proceedings		117		7		3		—			—			—			127
Provision for labor claims		220		19		15		(3	)		(9	)		—			242
Provision for regulatory, tax and other matters claims		384		14		8		2			—			—			408
Asset retirement obligations		61		—		1		—			—			—			62

Total non-current provisions		782		40		27		(1	)		(9	)		—			839


Total provisions		955		40		27		—			(60	)		(72	)		890

(i)	Included in Provisions.

(ii)	Included in Finance costs.

TELECOM ARGENTINA S.A.

NOTE 7 – EQUITY

Equity includes:


	March 31,		December 31,
	2013		2012
Equity attributable to Telecom Argentina (Controlling Company)		10,801		9,959
Equity attributable to non-controlling interest		200		199

*Total equity ()**		11,001		10,158

(*)	Additional information is given in the consolidated statements of changes in equity.

Telecom Argentina’s capital stock amounts to $984.380.978, and is represented by an equal number of ordinary shares, $1 argentine peso of nominal value and entitled to one vote per share. As of March 31, all the shares are fully paid.

The Company’s shares are authorized by the CNV, the Buenos Aires Stock Exchange (the “BCBA”) and the New York Stock Exchange (the “NYSE”) for public trading. Only Class “B” shares are traded since Nortel owns all of the outstanding Class “A” shares and Class “C” shares are dedicated to the employee stock ownership program.

Each ADS represents 5 Class B shares and are traded on the NYSE under the ticker symbol TEO.

NOTE 8 – RESTRICTIONS ON DISTRIBUTION OF PROFITS

The Company is subject to certain restrictions on the distribution of profits. Under the Argentine Corporations Law, the by-laws of the Company and rules and regulations of the CNV, a minimum of 5% of net income for the year in accordance with the statutory books, plus/less previous years adjustments and accumulated losses, if any, must be appropriated by resolution of the shareholders to a legal reserve until such reserve reaches 20% of the outstanding capital (common stock plus inflation adjustment of common stock).

As provided by RG No. 609/12 of the CNV, positive retained earnings generated by the adoption of IFRS since fiscal year 2012, amounting to $370, must be reassigned to a Special Reserve that can only be unaffected for its capitalization or to absorb negative retained earnings. The constitution of the Special Reserve will be considered by the Ordinary Annual Shareholders’ Meeting to be held on May 21, 2013.

NOTE 9 – SELECTED CONSOLIDATED QUARTERLY INFORMATION


Quarter	Revenues		Operating income before D&A		Operating income		Financial results, net		Net income		Net income attributable to Telecom Argentina
Fiscal year 2013:
March 31,		6,064		1,799		1,115		135		813		802

		6,064		1,799		1,115		135		813		802

Fiscal year 2012:
March 31,		5,126		1,647		1,033		61		708		698
June 30,		5,254		1,492		849		51		586		577
September 30,		5,645		1,587		921		47		629		616
December 31,		6,092		1,844		1,163		70		809		794

		22,117		6,570		3,966		229		2,732		2,685

NOTE 10 – RECENT DEVELOPMENTS CORRESPONDING TO THE QUARTERLY PERIOD ENDED MARCH 31, 2013

Regulatory Recent Developments

Administrative complaints in connection with Personal’s service cuts

On March 11, 2013, the CNC notified Personal of the administrative complaint related to a network incident that took place on March 8, 2013, affecting only the 3G services in the Autonomous City of Buenos Aires and certain clients of a few localities in the North Region of Argentina. The incident lasted only around two and a half hours.

TELECOM ARGENTINA S.A.

Personal filed its defenses against such penalty procedures, alleging its illegality. However, on April 5, 2013, the CNC notified Personal a Resolution which, among other issues, applies a sanction of $6, together with the obligation to pay a compensation amount of $30 pesos to each affected customer.

As of the date of these financial statements, Personal’s Management, with the advice of its legal counsels, understands that there are solid arguments to file defenses against such penalty, and is currently assessing which legal defenses should be filed against the above mentioned CNC’s Resolution. However, Personal cannot assure that it will have a favorable result in the administrative stage.

Resolutions of the Annual Shareholders’ Meeting of Núcleo

Núcleo’s shareholders, at their meeting held on March 22, 2013, approved, among other items, the following distribution of cash dividends:

Month of dividends payment

Dividends
corresponding to
Personal

Dividends
corresponding to
non-controlling
shareholders

Total

May, 2013

34.0

16.5

50.5

October, 2013

34.0

16.5

50.5

Total

68.0

33.0

101.0

NOTE 11 – SUBSEQUENT EVENTS AS OF MARCH 31, 2013

1.	*Administrative Complaints in connection with Personal’s Service Cuts*

On April 4, 2013, the CNC notified Personal of an administrative complaint related to a network incident that took place on April 2, 2013, affecting the provision of services in the City of La Plata, due to the floods resulting from the devastating storm that occurred in such city.

As of the date of these financial statements, Personal’s Management is assessing its legal defenses against the above mentioned penalty procedure.

2.	*Resolution SC No. 1/13*

On April 8, 2013, SC Resolution No. 1/13 was published in the Official Bulletin, establishing that all mobile operators should guarantee the service provision, even in emergencies or catastrophe situations, in which case the normal service provision must be restored in a maximum period of one hour. Mobile operators must, in all cases, prioritize the access to emergency services in the affected areas.

In addition, Resolution No. 1/13 requires that mobile operators present within 45 days a contingency plan for emergency situations, for purposes of guaranteeing the continuity of services in such circumstances.

As of the date of these financial statements, Personal’s Management is analyzing the effects that this new Resolution could have on its operations and its financial situation, as well as the actions that should be taken.

3.	*Resolutions of the Annual and Extraordinary Shareholders’ Meeting of Personal*

TELECOM ARGENTINA S.A.

4.	*Resolutions of the Annual General Shareholders’ Meeting of Telecom Argentina*


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

Free translation from the original in Spanish for publication in Argentina

LIMITED REVIEW REPORT ON THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

To the Shareholders, President and Directors of

Telecom Argentina S.A.

Legal address: Alicia Moreau de Justo 50

Autonomous City of Buenos Aires

Tax code: 30-63945373-8

We have reviewed the accompanying condensed interim consolidated financial statements of Telecom Argentina S.A. (“Telecom”), and its subsidiaries, including the consolidated statement of financial position at March 31, 2013, the consolidated statements of income, comprehensive income, changes in equity and of cash flows for the three-month period ended March 31, 2013, and the selected explanatory notes. The balances and other information for the year 2012 and for the interim periods are an integral part of these financial statements and, therefore, they should be considered in relation to those statements.

The Company’s Board of Directors is responsible for the preparation and presentation of these financial statements in accordance with International Financial Reporting Standards, adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) as professional accounting standards and added by the National Securities Commission (CNV) to its regulations, as approved by the International Accounting Standard Board (IASB). Therefore, they are responsible for the preparation and presentation of the condensed interim consolidated financial statements mentioned in paragraph 1., in accordance with International Accounting Standard No. 34 “Interim Financial Reporting” (IAS 34). Our responsibility is to express a conclusion based on the review that we have performed with the scope detailed in paragraph 3.

Our review was limited to the application of the procedures established by Technical Pronouncement No. 7 of the Argentine Federation of Professional Councils in Economic Sciences for limited reviews of financial statements for interim periods which consist, mainly, of the application of analytical procedures on the amounts disclosed in the condensed interim consolidated financial statements and of inquiries of the Company staff responsible for the preparation of the information included in the condensed interim consolidated financial statements and its subsequent analysis. This review is substantially less in scope than an audit, the objective of which is to express an opinion on the financial statements under examination. Accordingly, we do not express an opinion on the Company’s consolidated financial position, consolidated statement of comprehensive income and consolidated cash flows.

4.	Based on our review, nothing has come to our attention that causes us to believe that the condensed interim consolidated financial statements mentioned in paragraph 1. have not been prepared, in all material respects, in accordance with International Accounting Standard No. 34.

5.	In accordance with current regulations, in connection with Telecom, we report that:

the condensed interim consolidated financial statements of Telecom are transcribed into the “Inventory and Balance Sheet” book and as regards those matters that are within our competence, they are in compliance with the provisions of the Commercial Companies Law and pertinent resolutions of the National Securities Commission;

the condensed interim separate financial statements of Telecom arises from accounting records kept in all formal respects in conformity with legal regulations;

we have read the Operating and financial review and prospects, on which, as regards those matters that are within our competence, we have no observations to make;

at March 31, 2013, the debt corresponding to withholdings and contributions to the Argentine Integrated Social Security System according to the Company’s accounting records amounted to $ 52,568,687.01, none of which was due at that date.

Autonomous City of Buenos Aires, April 29, 2013

PRICE WATERHOUSE & CO. S.R.L.

(Partner)

C.P.C.E.C.A.B.A. Vº 1 Fº 17

Dr. Alejandro P. Frechou

Public Accountant (UBA)

C.P.C.E.C.A.B.A. V° 156 F° 85

CORPORATE INFORMATION

•

INDEPENDENT AUDITORS Price Waterhouse & Co S.R.L. (member of PricewaterhouseCoopers)

•

STOCK MARKET INFORMATION (Source: Bloomberg)

BCBA


	Market quotation ($/share)				Volume of shares
Quarter	High		Low		traded (in millions)
1Q12		20.40		16.10		10.1
2Q12		18.55		17.45		12.8
3Q12		16.10		14.30		13.9
4Q12		16.10		12.30		9.0
1Q13		25.95		16.40		18.1

NYSE*


	*Market quotation (US$/ADR)**				Volume of ADRs
Quarter	High		Low		traded (in millions)
1Q12		21.23		17.28		16.3
2Q12		21.94		17.51		18.2
3Q12		17.55		10.00		24.6
4Q12		12.31		9.39		12.6
1Q13		15.92		12.13		27.0

*	Calculated at 1 ADR = 5 shares

•

INVESTOR RELATIONS for information about Telecom Argentina S.A., please contact:

In Argentina

Telecom Argentina S.A.

Investor Relations Division

Alicia Moreau de Justo 50, 10^th Floor

(1107) Autonomous City of Buenos Aires

Tel,: 54-11-4968-3628

Argentina

Outside Argentina

JP Morgan Chase

Latam ADR Sales & Relationship Mgmt.

1 Chase Manhattan Plaza Floor 21

New York 10005

USA

Tel.: 1-212-552-3729

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INTERNET http://www.telecom.com.ar/inversores/index.html

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DEPOSIT AND TRANSFER AGENT FOR ADRs

J.P. Morgan Depositary Receipts

1 Chase Manhattan Plaza, Floor 58

New York, NY 10005

(866) JPM-ADRS

adr@jpmorgan.com – www.adr.com

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Telecom Argentina S.A.

Date:	May 17, 2013	By:	/s/ Enrique Garrido
			Name:	Enrique Garrido
			Title:	Chairman