Executive Summary / Key Takeaways

• Transformative Acquisition Drives Revenue Growth: Telecom Argentina's strategic acquisition of Telefónica Móviles Argentina (TMA) has significantly bolstered its market position, leading to a substantial 44% real year-over-year revenue increase in the first half of 2025. This move underscores a bold play for scale and market leadership in a dynamic Argentine telecommunications landscape.
• Operational Strength Amidst Financial Headwinds: Despite robust revenue and ARPU growth, the company reported a net loss of ARS 75.6 billion in H1 2025, primarily due to financial costs and dollar-denominated debt, highlighting the persistent macroeconomic challenges in Argentina. However, EBITDA margins expanded slightly to 30% in H1 2025, demonstrating effective operational management.
• Aggressive Network and Digital Expansion: Telecom Argentina is rapidly advancing its 5G rollout, targeting nearly 900 active sites by year-end 2025, and continues to expand its Fiber-to-the-Home (FTTH) network. Its FinTech arm, Personal Pay, is a significant market player with almost 3 million clients and substantial growth in payment volumes, diversifying revenue streams and enhancing customer engagement.
• Proactive Debt Management and Capital Allocation: The company has actively managed its debt profile, including a recent RMB 530 million loan from the Bank of China and a successful US$800 million bond issuance in May 2025. A flexible CapEx strategy for 2025, potentially reaching US$2 billion including the TMA acquisition, balances network investment with financial prudence.
• Resilience in a Challenging Macro Environment: Operating in an economy marked by high inflation and currency volatility, Telecom Argentina has demonstrated resilience through dynamic pricing strategies and stringent cost controls. The company's ability to maintain or increase EBITDA margins for five consecutive quarters (up to Q2 2024) reflects its adaptability.

A New Chapter: Consolidating Leadership in a Dynamic Market

Telecom Argentina S.A. (TCMFF), a foundational telecommunications provider in Argentina since its inception in 1979, is undergoing a significant strategic evolution. Operating in a market characterized by high inflation and currency volatility, the company has consistently adapted its business model, expanding from traditional mobile and fixed-line services to embrace high-speed internet, digital entertainment, and innovative FinTech solutions. This strategic pivot, culminating in the transformative acquisition of Telefónica Móviles Argentina (TMA), positions Telecom Argentina to consolidate its leadership and unlock new avenues for growth in a rapidly digitizing economy.

The Argentine telecommunications landscape is intensely competitive, with major players like Telefonica (Movistar), America Movil (Claro), and Millicom (Tigo) vying for market share. Telecom Argentina's strategy has been to leverage its deep local market understanding, integrated service offerings, and a strong brand presence to differentiate itself. The recent acquisition of TMA is a game-changer, significantly enhancing its scale and competitive footprint. This move, alongside aggressive investments in next-generation networks and digital platforms, underscores a commitment to not just compete, but to lead.

Technological Edge: Powering Connectivity and Digital Innovation

At the heart of Telecom Argentina's strategy lies a robust commitment to technological advancement, forming a critical competitive moat. The company is aggressively deploying next-generation infrastructure to deliver superior connectivity and support its expanding digital ecosystem.

The rollout of 5G technology is a cornerstone of this strategy. Telecom Argentina plans to nearly triple its 5G sites by year-end 2025, aiming to reach approximately 900 active sites. The company has already deployed 300 5G sites and 8,000 4G sites, and has launched its standalone 5G core, enabling advanced enterprise and consumer services such as network slicing and IoT applications. This investment is strategically directed towards high-density urban centers and high-value customers, with deployment pacing adjusted based on market readiness and the adoption of 5G-ready devices, which currently represent about 8% of its customer base. The "so what" for investors is clear: a leading 5G network enhances service quality, supports higher ARPU, and provides a platform for new revenue streams in a data-hungry market.

In its fixed access network, Telecom Argentina is prioritizing Fiber-to-the-Home (FTTH) expansion. This involves deploying new FTTH over 4,300 new blocks in the first half of 2024, including overlaying its Hybrid Fiber-Coaxial (HFC) network to decompress and upgrade performance. The company is actively migrating legacy xDSL customers to FTTH, with FTTH already representing 18% of its total broadband subscriber base in H1 2024. The benefits are tangible: enhanced speeds (85% of subscribers had speeds of 100 Mbps or more by Q4 2023), improved customer experience, and a more efficient, future-proof network infrastructure. This technological upgrade directly contributes to customer retention and ARPU growth, as evidenced by broadband ARPU growing above inflation year-over-year in H1 2024.

Beyond core connectivity, Telecom Argentina's FinTech arm, Personal Pay, represents a significant digital innovation. Launched in 2022, this digital wallet has rapidly achieved a relevant market position, boasting almost 3 million onboarded clients as of June 2024. Its total payment volume multiplied by an astounding 61x and total payment number by 21x year-over-year by June 2024, with ARS 311 billion in client funds invested in mutual funds, positioning it as the second most important player in terms of client account balances. This platform offers remunerated balances and strategic partnerships, creating a strong value proposition that attracts both Telecom and non-Telecom clients, diversifying the company's revenue base and deepening customer engagement.

Financial Performance and Strategic Resilience

Telecom Argentina's financial performance in the first half of 2025 reflects a period of significant strategic transformation and ongoing macroeconomic challenges. The acquisition of Telefónica Móviles Argentina (TMA) was a pivotal event, driving consolidated revenues to ARS 3.3 trillion in H1 2025, a real increase of over 44% year-over-year. This substantial top-line growth was primarily fueled by the consolidation of TMA's results over four months, alongside a 5.3% increase in ARPU and 1.9% subscriber growth for Telecom (excluding TMA).
Despite this impressive revenue expansion, the company reported a net loss of ARS 75.6 billion in the first half of 2025. This net loss, reversing prior-year gains, underscores the fragility of financial results in Argentina's volatile economic climate, primarily attributed to financial costs and the impact of dollar-denominated debt. However, operational profitability showed resilience, with EBITDA margins expanding slightly to 30% in H1 2025. This margin improvement, a trend observed for five consecutive quarters up to Q2 2024, is a testament to effective cost management, including labor costs increasing below inflation and reductions in bad debt and handset costs.

The company's liquidity and capital structure are actively managed to navigate these complexities. As of June 30, 2024, gross debt stood at $2.8 billion, with a net debt of $2.4 billion. The net debt-to-EBITDA ratio was 2.2x, "practically in line with levels observed before the December 2023 devaluation," demonstrating strong resilience to FX depreciation. In July 2024, Telecom Argentina successfully returned to international debt capital markets with a $500 million issuance of notes due 2031, attracting over $1.3 billion in offers. This issuance, along with tender and exchange offers for 2025 and 2026 notes, significantly improved the maturity profile and reduced the total cost of debt. More recently, in September 2025, the company secured a RMB 530 million loan from the Bank of China (BACHY), maturing in September 2028, further diversifying its financing sources.

Capital expenditure plans for 2025 are substantial, with a budget of around $500 million for basic maintenance CapEx. However, including the US$1.2 billion acquisition of Telefónica Argentina, total CapEx for 2025 could reach up to US$2 billion, representing approximately 18% of revenues. This flexible approach allows the company to monitor cash flow, inflation, and FX stability before committing to postponable investments, such as additional 5G site deployments.

Competitive Landscape and Strategic Positioning

Telecom Argentina operates in a highly competitive telecommunications market, primarily against Telefonica (Movistar), America Movil (Claro), and Millicom (TIGO) (Tigo). The acquisition of TMA has fundamentally reshaped this landscape, granting Telecom Argentina significantly increased scale and market presence, particularly in mobile and fixed broadband. In H1 2025, Telecom (excluding TMA) reported 20.9 million mobile accesses, while TMA added 19.3 million, creating a formidable combined entity.

Telecom Argentina differentiates itself through a multi-pronged strategy:

• Integrated Service Offering: The company's convergent strategy, bundling mobile, broadband, and Pay TV (Flow) services, aims to enhance customer loyalty and ARPU. Its Flow platform, with almost 1.5 million unique customers in H1 2024, continues to perform well.
• Pricing Power and Local Expertise: In mobile, Telecom Argentina has historically demonstrated higher ARPU, approximately 20-30% above competitors, indicating strong pricing power. Its deep understanding of the local market allows for tailored pricing strategies and customer retention actions, including discounts and promotions, which are crucial in a high-inflation environment.
• Digital Ecosystem: The rapid growth of Personal Pay positions Telecom Argentina as a leader in the FinTech space, attracting clients from across the telecom sector and leveraging strategic partnerships. This digital wallet creates a sticky ecosystem, enhancing customer value beyond traditional telecom services.
• B2B Solutions: The B2B segment, representing around 18% of revenues in Q1 2024, is a growing area where contracts are often linked to FX evolution, providing a natural hedge against currency depreciation. The company's focus on ICT solutions, including rural connectivity and IoT, positions it for growth in enterprise markets.
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While larger global players like Telefonica (TEF) and America Movil (AMX) benefit from economies of scale and diversified international revenue streams, Telecom Argentina's strengths lie in its localized execution, integrated offerings, and aggressive digital transformation. The company's proactive approach to network modernization, particularly in 5G and FTTH, aims to match or exceed competitors' technological advancements, even as it manages the financial implications of such investments.

Outlook and Key Risks

Management expresses cautious optimism for the remainder of the year, anticipating a normalization of margin generation and a continued slowdown in inflation, potentially stabilizing at a 2-3% floor. This moderation in inflation, coupled with a relatively stable exchange rate, is expected to facilitate better pass-through of price increases and a recovery of U.S. dollar-denominated figures. The company has launched new promotions designed to provide price predictability for customers while still allowing for ARPU increases. Positive indicators such as low delinquency rates and increased prepaid phone consumption further support this outlook.

However, significant risks remain. The H1 2025 net loss underscores the ongoing challenge of high financial costs and dollar-denominated debt in a volatile Argentine economy. While the company has proactively secured waivers from multilateral creditors to adjust its net debt-to-EBITDA maintenance ratio until March 31, 2025, and has actively managed its debt maturity profile, the structural weakness related to dollar exposure and high interest payments continues to erode balance sheet flexibility. Labor costs, which historically track inflation, remain a challenge, though management has been successful in negotiating wage increases with a strategic lag. Competitive pressures, including aggressive pricing from some rivals, also necessitate a careful balance between price adjustments and customer retention.

The planned CapEx for 2025, potentially reaching US$2 billion including the TMA acquisition, represents a substantial investment. While necessary for network modernization and competitive positioning, its execution will be closely monitored against cash flow generation and macroeconomic stability. The upcoming departure of CFO Gabriel Blasi in Q4 2025 also introduces a leadership transition to watch.

Conclusion

Telecom Argentina (TCMFF) stands at a pivotal juncture, having strategically expanded its market footprint through the acquisition of Telefónica Móviles Argentina and aggressively invested in next-generation technologies and digital services. This bold transformation, coupled with a resilient operational strategy focused on dynamic pricing and stringent cost management, positions the company for long-term growth in a challenging yet evolving market. While the macroeconomic environment in Argentina continues to present financial headwinds, as evidenced by the H1 2025 net loss, the company's proactive debt management, robust network expansion, and burgeoning FinTech ecosystem provide strong foundational elements for future value creation. Investors should closely monitor the company's ability to translate its enhanced scale and technological leadership into sustainable bottom-line profitability as the Argentine economy stabilizes, leveraging its strategic moves to solidify its position as a leading integrated telecommunications and digital services provider.