Consolidated Operating Revenues

Mobile Services

As of September 30, 2016 clients with mobile services amounted to 22.4 million vs. 22.0 million as of 9M15.

Third parties Revenues amounted to P$27,928 million (+33.8% vs. 9M15) as a result of the commercial strategy that promotes the consumption of value added services (‘VAS’) through a wide offer of 4G Smartphones together with data plans suitable to clients’ needs.

Telecom Personal in Argentina

As of September 30, 2016, Personal reached 19.9 million subscribers in Argentina vs. 19.4 million in 9M15, where postpaid clients represented 33% of the subscriber base.

In 9M16, third parties Revenues reached P$25,946 million (+P$6,315 million or +32.2% vs. 9M15) while Service Revenues (excluding sales of equipment and devices) amounted to P$20,297 million (+25.6% vs. 9M15), with 62.1% corresponding to VAS revenues (vs. 59.8% in 9M15). VAS revenues amounted to P$12,600 million (+30.4% vs. 9M15). Moreover, handset sales reached P$5,649 million, an increase of +62.9% vs. 9M15, equivalent to 21.8% of total revenues.

Due to a higher consumption of VAS, the average monthly revenue per user (‘ARPU’) amounted to P$108.2 during 9M16 (+21.8 % vs. 9M15).

Commercial Initiatives

During 3Q16, Personal continued promoting the evolution of services with the deployment of its network and infrastructure according with 4G/LTE technology,

Mobile Customers & Revenues in Argentina (in billion P$)

reaching 600 locations, including all 23 capital cities and the AMBA region, with more than 4.3 million subscribers actively using the technology. Additionally, new functions that allow improvements in the voice and data services were incorporated. Among them, the 3G HD voice service in a national scale for calls between Personal clients that have technically suitable devices to use this functionality, thus improving substantially the call experience.

Moreover, with the aim of evolving the 4G technology and maximizing its customer experience, Personal incorporated to its device offer a selection of handsets for P$2,199, for all the packs and payable in 12 monthly installments. This proposal is included in the ‘Access to Mobile Internet’ program, coordinated with the Ministry of Communications. Additionally, and because of the Children’s day, Personal presented a wide dedicated offer with special benefits and financing plans.

Regarding the strategy associated to alliances in innovation and differential content to its ‘Play’ platform, Personal added new qualified contents as Disney movies in the Video section.

Meanwhile, as part of its strategy associated with Sports, Personal accompanied as official sponsor the Argentine Olympic Delegation in the Olympic Games in Río 2016. Moreover, Personal added exclusive contents to its Personal Play Sports site together with a special data offer to those who travelled to the Olympic Games. Moreover, Personal accompanied the National male Basketball team tour and presented for the fifth consecutive year the ‘Personal Rugby Championship’ with benefits to clients in matches where ‘Los Pumas’, the National Rugby team, played in Argentina and in London.

Mobile consumption of Telecom Personal in Argentina

(*) Includes reestimation of consumption of minutes and SMS per client

Telecom Personal in Paraguay (‘Núcleo’)

As of September 30, 2016, Núcleo’s subscriber base surpassed 2.5 million clients. Prepaid and postpaid customers represented 81% and 19%, respectively.

Núcleo generated revenues from third parties equivalent to P$1,982 million during 9M16 (+60.5% vs. 9M15). VAS revenues amounted to P$1,026 million (+68.8% vs. 9M15) representing 58.1% of 9M16 service revenues (vs. 53.9% in 9M15). The evolution of Núcleo’s sales measured in pesos was influenced by the appreciation of the Guarani respect to the Peso.

Fixed Services (Voice, Data & Internet)

During 9M16, revenues generated by fixed services amounted to P$10,890 million, +41.0% vs. 9M15; with Data revenues (+65.3% vs. 9M15) and Internet (+32.9% vs. 9M15) growing the most in the segment.

Voice

Total service revenues reached P$4,328 million in 9M16 (+39.0% vs. 9M15). This increase combines price increases in the corporate segment as well as in the retail segment, which became effective as of May 2016.

Lines in service & Fixed Voice Revenues (in billion P$)

As a result, the average monthly revenue billed per user (‘ARBU’) reached P$93.1 in 9M16, +43.7% vs. 9M15.

Revenues generated by measured services totaled P$1,524 million, an increase of P$209 million or +15.9% vs. 9M15 mainly due to a higher penetration of flat rate packs of local and national long distance calls.

Monthly charges and supplementary services reached P$1,736 million, an increase of P$744 million or +75.0% vs. 9M15 due to the above mentioned price increases in the corporate and retail segments. The customer base remained relatively stable.

Fixed and mobile interconnection revenues amounted to P$620 million (+28.1% vs. 9M15). Meanwhile, other revenues totaled P$448 million (+39.1% vs. 9M15). Both revenue lines were affected by price increases related to the FX variation as these services are denominated in foreign currency.

Data and Internet

Data service revenues (services mainly offered to Corporate segment and Government) amounted to P$2,133 million (+P$843 million or +65.3% vs. 9M15), gaining weight over total revenues of the fixed service and strengthening the position of Telecom as an integrated ICT provider. This increase was mainly due to the FX rate variations that affected those contracts that are adjusted by the $/U$S exchange rate.

With the aim of being an integral provider of solutions to the business segment, Telecom has implemented a solution called ‘Tienda Soluciones’, allowing professionals to choose online services for their businesses such as productivity solutions, security and entertainment.

Internet Service revenues totaled P$4,351 million (+P$1,078 million or +32.9% vs. 9M15), mainly due to a commercial offer with higher speeds, where 6Mb and 10Mb (ultra broadband or UBB) leads the clients’ preference. In addition, 10Mb or UBB subscriber base reached 33% of the customer base vs. 25% in 9M15.

As of September 30, 2016, the subscriber base continued at 1.8 million ADSL accesses representing 45.6% of Telecom’s fixed lines in service. In addition, ADSL ARPU reached P$260.4 in 9M16, +30.7% when compared to 9M15 while the monthly churn rate resulted in 1.5% in 9M16 vs. 1.4% in 9M15.

Consolidated Operating Costs

Consolidated Operating Costs totaled P$33,329 million in 9M16, an increase of P$9,183 million, or +38.0% vs. 9M15 (including ‘Results on disposal and write-down of PP&E’ that resulted in a loss of P$200 million in 9M16 vs. a loss of P$51 million in 9M15). This increase in costs is mainly due to higher sales, the high competition in mobile and Internet business, the effects of higher direct and indirect labor costs in the cost structure, the increase in fees for services related to the suppliers’ price adjustment, and the increase in cost of handsets sold, among other costs.

Broadband Acceses & Revenues

Consolidated Costs % Revenues

(*) Includes results on disposal of PP&E andwrite-down of PP&E

The cost breakdown is as follows:

- Employee benefit expenses and severance payments totaled P$7,213 million (+36.3% vs. 9M15), mainly affected by increases in salaries to unionized as well as non-unionized employees together with the social security contributions associated to the new collective bargaining agreement set as of 3Q16. Total employees at the end of the period amounted to 16,241.

- Interconnection costs and other telecommunication charges (including TLRD, Roaming, Interconnection, international settlement charges and lease of circuits) amounted to P$1,954 million, +25.3% vs. 9M15. This increase resulted from higher costs related to TLRD and roaming.

- Fees for services, maintenance, materials and supplies amounted to P$3,580 million (+25.2% vs. 9M15), mainly due to costs’ increases in technical maintenance and systems licenses, higher costs related to the search of new sites and storage expenses. In addition increases in maintenance and fees for services costs due to higher costs recognized to suppliers were evidenced.

- Taxes and fees with regulatory authorities reached P$3,799 million (+33.7% vs. 9M15), impacted mainly by higher revenues as well as higher bank debit and credit taxes related to collection flows and suppliers payments and dividends paid during 9M16 vs. 9M15.

- Commissions (Commissions paid to agents, prepaid card commissions and others) totaled P$2,795 million (+27.3% vs. 9M15), as a result of the increase in commissions paid to commercial channels as well as collection fees, both associated to the increase in handset sales. Agent commissions capitalized as SAC amounted to P$1,046 million (+33.9% vs. 9M15).

- Cost of handsets sold totaled P$4,631 million (+65.9% vs. 9M15), due to handsets sales with higher costs unit prices. Deferred costs from SAC amounted to P$94 million (+42.4% vs. 9M15).

- Advertising amounted to P$548 million (-P$43 million vs. 9M15).

- Depreciation and Amortization reached P$4,485 million (+42.2% vs. 9M15). PP&E depreciation amounted to P$3,087 million (+42.6% vs. 9M15) resulting from the incorporation of assets related to the investment plan that the Group has been executing; amortization of SAC and service connection costs totaled P$1,087 million (+48.3% vs. 9M15) meanwhile, amortization of 3G/4G licenses amounted P$289 million (+27.3% vs. 9M15) and amortization of other intangible assets reached P$22 million (-24.1% vs. 9M15).

- Other Costs totaled P$4,124 million (+46.7% vs. 9M15). This increase was mainly due to VAS costs that totaled P$1,142 million (+25.5% vs. 9M15), related to the increase of sales of those services. Bad debt expenses reached P$844 million (+105.9% vs. 9M15) mainly influenced by the financing plans for the sale of handsets in the mobile business. Bad debt expenses represented 2.5% of consolidated costs and 2.2% of consolidated revenues.

D&A (in billion P$)

Consolidated Financial Results

Net Financial Results amounted to a loss of P$1,682 million, a loss of P$1,490 million vs. 9M15. This was mainly due to a higher debt position that generated higher losses in net financial interests of P$1,139 million in 9M16 (-P$884 million vs. 9M15) and losses of FX results net of NDF instruments for P$748 million in 9M16 (vs. a loss of P$205 million in 9M15) mainly due to the peso depreciation that occurred in December 2015. Meanwhile, gains on mutual funds and other investments amounted to P$254 million (-P$46 million vs. 9M15).

Consolidated Net Financial Position

As of September 30, 2016, Net Financial Position (Cash, Cash Equivalents and financial Investments minus Loans) resulted in a Debt Position of P$7,157 million, a variation of P$5,571 million when compared to the Net Financial Position as of September 30, 2015, after the cash dividend payment of Telecom Argentina for an amount of P$2,000 million distributed in May 2016 (P$700 million) and in August 2016 (P$1,300 million) and higher payments of capex.

Capital Expenditures

During 9M16, the Company invested P$7,699 million (+69.8% vs. 9M15 without considering the spectrum payment of P$2,256 million occurred in 2Q15). Of this amount, P$2,660 million were allocated to Fixed Services and P$5,039 million to Mobile services, focusing on maximizing network capacity with the aim of enhancing the customer experience and quality of current and future services. In relative terms, Capex reached 19.8% of consolidated revenues vs. 15.9% in 9M15 without considering the payment of 4G licenses that was made during 2015.

The main investment projects are associated to the expansion of Fixed Broadband services, to improve transmission and access speeds offered to clients, the deployment of coverage and capacity of the 3G and 4G networks to sustain the development of Mobile Internet delivering a better service quality along with the deployment of innovative Value Added Services. Moreover, transmission and transport networks had been extended in order to face the growing demand of services that fixed and mobile customers are requiring.

Moreover, in the mobile segment Personal continued with the deployment of its network and infrastructure with 4G/LTE technology across the country including all the capital provinces, reaching 74% of the population.

Relevant Matters

Second Dividend Payment

The Management of the Company, in accordance to the powers delegated by the Board of Directors in its meeting held on April 29, 2016, resolved that the distribution of the

Net Financial Debt
(in billion P$)

Capex (In billion P$)

second payment of cash dividends to Shareholders for the amount of P$ 1,300,000,000 was to start on August 26, 2016.

The amount distributed was equivalent to P$1.34 per outstanding share in circulation or P$6.71 per ADR, prior to Personal Asset Tax deductions - if applicable-.

Resolution No. 38/16: Virtual Mobile Operators Regulation

Resolution No. 38/16, issued by the Ministry of Communications on May 5, 2016, approved the new Virtual Mobile Operators Regulation (‘VMO’) and nullified Resolution SC No. 68/14, that had previously approved the Regulation of Virtual Mobile Operators by the former Secretary of Communications.

The mentioned Resolution determines that Network Mobile Operators (‘NMO’), which have the spectrum and infrastructure (among them, Personal), shall present, within 120 days since the date of issuance of the Resolution, a Reference Offer (‘the RO’) for those interested in providing VMO services.

On September 1, 2016, Personal made a presentation to the Ministry of Communications, with founded reasons to postpone the term for the RO presentation, until 700MHz included in Lot 8 bands, awarded and paid by Personal, were in conditions and able to be used, and also when Spectrum included in Lot 1 from the Public Auction performed according to Resolution N° 38/14 is awarded and ‘on-air’. In addition, it was required the elimination of section 10, Annex 1 from the above mentioned Resolution, where it determines that agreements with the virtual mobile operators in exclusive conditions are forbidden, and it was requested to instruct ENACOM to perform interference measurements on the 700MHz Band awarded to Personal and inform if it has solved claims executed by previous occupiers of the Band.

Modification of CPP prices for mobile services

On June 14, 2016, Personal informed to ENACOM the new prices that would be effective from May 15, 2016. On August 18, 2016 ENACOM ordered Personal to abstain from implementing the price adjustment established in Resolution N° 48/03. On August 26, Personal answered the notification supporting the price increase informed. Personal’s Management, following legal counsel, considers that they have solid reasons to sustain the price increase.

Other Relevant Matters

International Finance Corporation Loan

On July 5, 2016, Personal accepted a proposal from the International Finance Corporation (IFC, a member of the World Bank Group) for the evaluation and movement of funds in order to finance investment needs, working capital and debt refinancing.

On October 5, 2016, in the context of the Annual IMF and World Bank meetings in Washington and with the participation of the Ministry of Treasury and Public Finance of Argentina, Mr. Alfonso Prat Gay, Telecom Personal and the IFC signed a 6 years-financing package for an amount of U$S400 million for the mobile operator of the Telecom Group.

Telecom Personal Negotiable Notes Program and Series Issuance

The Ordinary and Extraordinary Shareholders Meeting of Telecom Personal held on December 2, 2010 approved the creation of a Global Program of Negotiable Notes for an amount up to U$S500 million or its equivalent in other currencies for the period of five years. On October 13, 2011 the Argentine National Securities Commission (‘CNV’, Comisión Nacional de Valores) has approved such Program through Resolution N° 16.670.

The Ordinary Shareholders Meeting of Telecom Personal held on May 26, 2016 authorized the extension and increase of the maximum amount of the Program to U$S1,000 million or its equivalent in other currencies.

On October 20, 2016 the CNV, approved the extension and the increase of the maximum amount of the above mentioned Program through Resolution N° 18.277.

On November 3, 2016 Telecom Personal announced to the investor community that it is offering the Series III of non-convertible Notes, denominated in pesos at a floating interest rate with a maturity of 18 months from the date of issuance and settlement, and for a total nominal value of P$500,000,000, and the Series IV of non-convertible Notes, denominated in dollars at a fixed interest rate with a maturity of 24 months from the date of issuance and settlement, and for a total nominal value of U$S50,000,000. Telecom Personal can increase the amount of each Series up to a maximum amount of P$1,500,000,000 each.

Telecom Personal was rated AA + (local rating) by Fix (Fitch Ratings), highlighting the credit quality and financial strength of the Company.

The funds will be used to refinance short term debt, to finance the investment in tangible assets in Argentina and working capital in Argentina.

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Ownership Structure

Nortel Inversora S.A. (“Nortel”), which acquired the majority of the Company from the Argentine government, holds 54.74% of Telecom’s issued common stock. Nortel is a holding company whose common stock (approximately 78% of capital stock) is owned by Sofora Telecomunicaciones S.A. Additionally, Nortel capital stock is comprised of preferred shares that are held by minority shareholders.

As of September 30, 2016, Telecom continued to have 984,380,978 shares issued and 969,159,605 shares outstanding.

For more information, please contact Investor Relations: