Telecom Argentina SA :TEO-US: Earnings Analysis: Q1, 2017 By the Numbers : May 25, 2017

Telecom Argentina SA reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Telecom Argentina SA – TIM Participacoes S.A. Sponsored ADR, Millicom International Cellular S.A., Telefonica Brasil S.A. Sponsored ADR Pfd, Nortel Inversora SA Sponsored ADR Pfd Class B, America Movil SAB de CV Sponsored ADR Class L and Telecom Italia S.p.A. Sponsored ADR (TSU-US, MIICF-US, VIV-US, NTL-US, AMX-US and TI-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 946.14 million, Net Earnings of USD 125.47 million.
  • Gross margins widened from 47.05% to 51.60% compared to the same period last year, operating (EBITDA) margins now 32.51% from 27.27%.
  • Year-on-year change in operating cash flow of 354.89% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 946.14 925.78 889.89 899.96 850.43
Revenue Growth (%YOY) 11.25 -18.33 -18.04 -15.91 -16.36
Earnings (mil) 125.47 96.33 49.5 55.59 63.16
Earnings Growth (%YOY) 98.66 56.62 -42.55 -46.13 -46.39
Net Margin (%) 13.26 10.41 5.56 6.18 7.43
EPS 0.65 0.5 0.26 0.29 0.32
Return on Equity (%) 37.56 31.32 16.62 18.05 19.09
Return on Assets (%) 15.66 12.85 6.98 7.79 8.43

Access our Ratings and Scores for Telecom Argentina SA

Market Share Versus Profits

Revenues History
Earnings History

TEO-US‘s change in revenue this period compared to the same period last year of 11.25% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that TEO-US is holding onto its market share. Also, for comparison purposes, revenues changed by 2.20% and earnings by 30.25% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 47.05% to 51.60% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 27.27% to 32.51% compared to the same period last year. For comparison, gross margins were 50.33% and EBITDA margins were 29.61% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

TEO-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently -1.84, compared to last year’s level of -42.86 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

TEO-US‘s change in operating cash flow of 354.89% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 16.11% to 21.04% and (2) one-time items. The company’s pretax margins are now 20.47% compared to 11.56% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Telecom Argentina SA

Company Profile

Telecom Argentina SA engages in the provision of telecommunications services. It operates through the following segments: Fixed Services, Personal Mobile Services and Nucleo Mobile Services. The Fixed Services segment offers basic telephone services; interconnection services; data transmission and internet services; information and communication technology services; other telephone services; and sale of equipment. The Personal Mobile Services provides voice, data, internet services, and sells mobile communication devices. The Nucleo Mobile Services offers telecommunication services in Paraguay. The company was founded on January 5, 1990 is headquartered in Buenos Aires, Argentina.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of TEO-US.