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CMA Equity: Telecom Argentina S.A. (April 2007)

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** During the fiscal year ended Dec-06, TECO posted revenues of AR$ 7.437 MM (up 30,1% compared to figures at Dec-05. EBIT reached AR$ 912 MM compared to AR$ 504 MM the year before. The positive performance was mainly attributable to the increase in mobile telephony?s customer base, that boosted sales for this business unit to AR$ 4.319 MM (up 54,4% YoY).

** Our revenue projections for the next fiscal year were set at AR$ 8.475 and remain consistent with wireless telephony growth that will contribute to more than 60% of top-line income.

** This unit is experiencing fast expansion and the Company is earmarking large investments in order to maintain its market share and get ready for the IP convergence. Capex for FY07 is expected to be around US$ 420 MM, of which 55% will be spent to upgrade network in order to prepare for the launch of UMTS 3G technology. We remain confident in the growth and profitability outlook of this business unit.

** On the other hand, basic telephony business represents a source of stable cash-flow for the Company, and has a soaring segment (broadband) in which TECO's market share reaches 28,8% as of Dec-06 (vs. 24,8% in Dec-05). During FY06, broadband adds boasted a 102,2% YoY, in line with penetration growth which is likely to reach 75% by 2010. TECO looks to prop up internet market share as it is the main issue when it comes to triple play services offering.

** We maintain our BUY recommendation for TECO with a new fair value estimate of AR$ 15,46 and an upside potential of 15,83% from the current market value.
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