Telecom Argentina SA :TEO-US: Earnings Analysis: Q3, 2016 By the Numbers : November 15, 2016

Telecom Argentina SA reports financial results for the quarter ended September 30, 2016.

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, Telecom Italia S.p.A. Sponsored ADR and America Movil SAB de CV Sponsored ADR Class L (TSU-US, MIICF-US, VIV-US, NTL-US, TI-US and AMX-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 889.89 million, Net Earnings of USD 49.50 million.
  • Gross margins narrowed from 48.27% to 47.52% compared to the same period last year, operating (EBITDA) margins now 25.83% from 25.08%.
  • Year-on-year change in operating cash flow of 157.42% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from 13.52% to 13.86%.

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

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 889.89 899.96 850.43 1133.57 1085.71
Revenue Growth (%YOY) -18.04 -15.91 -16.36 5.19 5.63
Earnings (mil) 49.5 55.59 63.16 61.51 86.16
Earnings Growth (%YOY) -42.55 -46.13 -46.39 -49.2 -14.1
Net Margin (%) 5.56 6.18 7.43 5.43 7.94
EPS 0.26 0.29 0.32 0.32 0.45
Return on Equity (%) 16.62 18.05 19.09 15.74 19.62
Return on Assets (%) 6.98 7.79 8.43 7.36 9.82

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Market Share Versus Profits

Revenues History
Earnings History

TEO-US‘s change in revenue this period compared to the same period last year of -18.04% 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 -1.12% and earnings by -10.96% 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 year-on-year earnings decline was driven by the drop in gross margins from 48.27% to 47.52%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from 25.08% to 25.83%. For comparison purposes, gross margins were 46.88% and EBITDA margins were 26.40% in the previous 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

Cash Versus Earnings – Sustainable Performance?

TEO-US‘s change in operating cash flow of 157.42% 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


Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from 13.52% to 13.86%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from 12.26% to 8.69%.

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

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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.

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