Edgar Filing: TELECOM ARGENTINA SA

6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of August, 2014

Commission File Number: 001-13464

Telecom Argentina S.A.

(Translation of registrant’s name into English)

Alicia Moreau de Justo, No. 50, 1107

Buenos Aires, Argentina

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F

Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

Telecom Argentina S.A.

TABLE OF CONTENTS

Item

Unaudited Condensed Consolidated Financial Statements as of June 30, 2014

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2014

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2014 AND 2013

INDEX


Operating and financial review and prospects as of June 30, 2014		I

Unaudited condensed consolidated financial statements

Unaudited consolidated statements of financial position		1

Unaudited consolidated income statements		2

Unaudited consolidated statements of comprehensive income		3

Unaudited consolidated statements of changes in equity		4

Unaudited consolidated statements of cash flows		5

Notes to the unaudited condensed consolidated financial statements		6

Limited review report on condensed interim consolidated financial statements

Corporate information

TELECOM ARGENTINA S.A.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014

(In millions of Argentine pesos or as expressly indicated)


1.		*General considerations*

As required by CNV regulations, the Company has prepared its consolidated financial statements as of June 30, 2014 under IFRS. Additional information is given in Note 1 to the consolidated financial statements.


2.		*Telecom Group’s activities for the six-month periods ended June 30, 2014 (“1H14”) and 2013 (“1H13”)*

Total revenues and other income for 1H14 amounted to $15,615 (+22.7% vs. 1H13), operating costs – including depreciations, amortizations and gain on disposal of PP&E and impairment of PP&E– amounted to $12,997 (+21.9% vs. 1H13), operating income before depreciation and amortization amounted to $4,119 (+13.7% vs. 1H13) – representing 26.4% of consolidated revenues and -210 bp vs. 1H13–, operating income amounted to $2,618 (+27.1% vs. 1H13) and net income amounted to $1,836 (+24.5% vs. 1H13). Net income attributable to Telecom Argentina amounted to $1,805 in 1H14 (+24.1% vs. 1H13).


					Variation

	1H14		1H13		$		%

Revenues		15,585		12,713		2,872	22.6
Other income		30		13		17	130.8
Operating costs without depreciation and amortization		(11,496)		(9,102)		(2,394)	26.3

Operating income before depreciation and amortization		4,119		3,624		495	13.7
Depreciation and amortization		(1,511)		(1,399)		(112)	8.0
Gain on disposal of PP&E and impairment of PP&E		10		(165)		175	n/a

Operating income		2,618		2,060		558	27.1
Financial results, net		154		214		(60)	(28.0)

Income before income tax expense		2,772		2,274		498	21.9
Income tax expense		(936)		(799)		(137)	17.1

Net income		1,836		1,475		361	24.5


Attributable to:
Telecom Argentina (Controlling Company)		1,805		1,454		351	24.1
Non-controlling interest		31		21		10	47.6

		1,836		1,475		361	24.5


Basic and diluted earnings per share attributable to Telecom Argentina (in pesos)		1.86		1.48

—

Total revenues and other income

During 1H14 consolidated total revenues increased 22,6% (+$2,872 vs. 1H13) amounting to $15,585 mainly fueled by the Broadband, data transmission and mobile businesses, while consolidated other income increased 130.8% (+$17 vs. 1H13), mainly due to penalties imposed to suppliers in the Fixed Services segment and income from prescribing obligations from Personal.


					Variation

	1H14		1H13		$		%

*Services*
Voice – Retail		1,386		1,297		89	6.9
Voice – Wholesale		453		376		77	20.5
Internet		1,503		1,191		312	26.2
Data		683		441		242	54.9

Subtotal Fixed Services		4,025		3,305		720	21.8

Voice – Retail		2,595		2,338		257	11.0
Voice – Wholesale		976		966		10	1.0
Internet		1,425		915		510	55.7
Data		3,677		3,364		313	9.3

Subtotal Personal Mobile Services		8,673		7,583		1,090	14.4

Voice – Retail		280		177		103	58.2
Voice – Wholesale		54		65		(11)	(16.9)
Internet		207		124		83	66.9
Data		164		157		7	4.5

Subtotal Núcleo Mobile Services		705		523		182	34.8

Total services revenues		13,403		11,411		1,992	17.5

*Equipment*
Fixed Services		31		30		1	3.3
Personal Mobile Services		2,115		1,235		880	71.3
Núcleo Mobile Services		36		37		(1)	(2.7)

Total equipment revenues		2,182		1,302		880	67.6

Total revenues		15,585		12,713		2,872	22.6



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

TELECOM ARGENTINA S.A.

Services revenues amounted to $13,403 (+17.5% vs. 1H13) and represented 86.0 % of consolidated revenues (vs. 89.8% in 1H13). Equipment revenues increased 67.6%, amounting to $2,182 and represented 14.0% of consolidated revenues (vs. 10.2% in 1H13).

Fixed Services

During 1H14, services revenues generated by this segment amounted to $4,025, +$720 or 21.8% vs. 1H13, where Internet revenues have grown the most (+$312 or 26.2% vs. 1H13), followed by data transmission services (+$242 or 54.9% vs. 1H13) and voice retail services (+$89 or 6.9% vs. 1H13).

Voice

Voice retail revenues amounted to $1,386 in 1H14 (+6.9% vs. 1H13). The results of this line of business are still affected by frozen tariffs of regulated services. Revenues from regulated services reached approximately 29% of the segment services revenues in 1H14 (vs. 33% in 1H13).

Monthly Charges and Supplementary Services increased $44 or 8.0% vs. 1H13, to $592, as a consequence of an increase in supplementary services (not regulated), mainly due to an increase of their prices and, to a lesser extent, to the increase in the subscriber base.

Revenues generated by measured services (Local Measured Service, Domestic Long Distance and International Long Distance services) amounted to $740, (+$63 or 9.3% vs. 1H13), mainly due to the increase of domestic plans and long national distance plans. According to this, DLD revenues increased 5.0% vs. 1H13 and revenues from local measured service increased 4.3% vs. 1H13. The Average Monthly Revenue per User (“ARBU”) amounted to $55.7 pesos per month in 1H14 vs. $51.2 pesos per month amounted in 1H13, representing an increase of 8.8%. The remaining retail voice revenues amounted to $54 in 1H14 (-25.0% vs. 1H13). The decrease was mainly due to a decrease in consumption and customers of public telecommunication services and a decrease in rehabilitation and one-time charges.

Voice wholesale revenues (including fixed and mobile interconnection revenues and lease of circuits, together with the revenues generated by the subsidiary Telecom USA amounting to $49) amounted to $453 in 1H14 (+20.5% vs. 1H13). Interconnection fixed and mobile revenues amounted to $302 (+15.7% vs. 1H13 as a result of the general increase in prices and, to a lower extent, by a slight increase in traffic with mobile operators). The other wholesale revenues amounted to $151 in 1H14 (+31.3% vs. 1H13), mainly due to higher prices related to cell sites rentals due to the variation of the $/US$ exchange rate.

Internet

Internet revenues amounted to $1,503 (+$312 or 26.2% vs. 1H13) mainly due to the expansion of the Broadband service (+5.6% of customers vs. 1H13) and an increase in average prices resulting in an improvement in the Average Monthly Revenue per User (“ARPU”), that amounted to $143 pesos per month in 1H14 vs. $119.3 pesos per month in 1H13 (+19.9% vs. 1H13). As of June 30, 2014, Telecom Argentina reached approximately 1,726,000 ADSL customers. These connections represent approximately 42.1% of Telecom Argentina’s fixed lines in service (vs. 39.7% in 1H13). The churn rate per month amounted to 1.3% in 1H14 (vs. 1.5% in 1H13).

Internet revenues represent 9.6% of consolidated revenues (similar to 1H13) and 37.3% of Fixed Services segment revenues (vs. 36.0 % in 1H13).

Data

Data transmission revenues amounted to $683 (+$242 vs. 1H13), of which $2 were generated by the subsidiary Telecom USA. These revenues were generated focusing on the Company’s position as an integrated TICs provider (Datacenter, VPN, among others) for wholesale and government segments. The increase was primarily due to higher prices related to the variation of the $/US$ exchange rate, the increase of IP transit services customers, VPN IP services customers (private data networks services that replaces the point to point services) and IP direct lines customers in the retail segment, to the increase in customers and higher prices related to the variation of the $/US$ exchange rate of Integra services, mainly in the Large Customer segment, to higher prices related to the variation of the $/US$ exchange rate of the VPN-IP services in the Wholesale segment and to an increase in the monthly charges and transmission Datacenter services (especially in Hosting and Housing monthly charges, and Value added services transmission).



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

TELECOM ARGENTINA S.A.

Personal Mobile Services

During 1H14, total services revenues amounted to $8,673, +$1,090 or 14.4% vs. 1H13, being the principal business segment in revenues terms (64.7 % and 66.4% of services consolidated revenues in 1H14 and 1H13, respectively). Personal reached 19.8 million subscribers in Argentina (+2.4% vs. 1H13). Approximately 67.8% of the subscriber base is prepaid subscribers and 32.2% is postpaid subscribers (including “Cuentas claras” plans and Mobile Internet dongles). The churn rate per month amounted to 2.9% in 1H14 (vs. 2.8% in 1H13).

Voice

Voice retail revenues amounted to $2,595 in 1H14 (+11.0% vs. 1H13). The increase was mainly due to the increase in the lines billed, mainly fueled by the increase in monthly charges prices and the increase in the subscriber base (especially prepaid and “Cuentas claras” subscribers), partially offset by a slight decrease in postpaid customers. Traffic voice sales decreased $106 or 11.0% vs. 1H13 mainly due to the decrease of the Minutes of Use (“MOU”). The MOU amounted to $94.9 pesos per month in 1H14 as compared to $110.3 pesos per month amounted in 1H13, representing a decrease of 14.0%, which was mainly generated by the prepaid segment.

Voice wholesale revenues amounted to $976 in 1H14 (+1.0% vs. 1H13). The increase was mainly due to higher TLRD traffic and to the increase of mobile leases, mainly due to new agreements and to the renegotiation of the existing ones, partially offset by a decrease in roaming revenues with other operators.

Internet

Mobile Internet revenues amounted to $1.425 (+$510 or 55.7% vs. 1H13). This increase is mainly explained by the increase in browsing services consumption of Personal’s subscribers, which was mainly fueled by the increase in the offer of services, plans and packs (including VAS) launched by Personal. This growth was fueled by new subscribers, the migration of the existing ones to higher-value plans and the increase of subscribers that acquired Smartphone (47.2% in 1H14 vs. 32.8% in 1H13), which facilitate Internet browsing. Internet flat rate services revenues have decreased mainly due to the decrease of Mobile Internet dongles subscribers (-33.6% vs.1H13).

Data

Mobile data services revenues amounted to $3,677 (+$313 or 9.3% vs. 1H13). This increase was mainly due to the constant SMS with contents sales increase as a result of several campaigns launched by Personal, which represented an inter-annual increase of $333 vs. 1H13. This increase was reflected both in prepaid and postpaid customers and is mainly due to average prices increases and, to a lesser extent, to the increase of the subscribers base. However, the main component of VAS revenues are SMS consumption, which have remained constant as compared to 1H13, although experiencing a decrease in TOU (-35.5% vs. 1H13).

As a consequence of the increase in VAS use (especially Internet browsing and SMS with contents), ARPU increased to $70.0 pesos per month in 1H14 (vs. $63.8 pesos per month in 1H13), which represents an increase of 9.7%.

VAS revenues (data and Internet) amounted to $5,102 (+19.2% vs. 1H13) and represented 58.8% of Personal Mobile Services’ services revenues (vs. 56.4% in 1H13).

Núcleo Mobile Services

This segment generated services revenues equivalent to $705 during 1H14 (+$182 or 34.8% vs. 1H13) mainly due to the appreciation of the Guaraní respect to the argentine peso (+40% inter-annual), generating a positive effect in Núcleo’s revenues conversion, and to the Internet revenues increase over the mentioned conversion effect, mainly related to the increase of browsing generated by subscribers with mobile equipment prepared for that purpose. As of June 30, 2014, Núcleo’s subscriber base reached 2.4 million customers. Prepaid and postpaid subscribers (including “Plan Control” subscribers and mobile Internet subscribers) represented 79.8% and 20.2% in 1H14, respectively. The MOU amounted to $54.2 pesos per month in 1H14 as compared to $61.8 pesos per month in 1H13, representing a decrease of 12.3%, which generated a decrease in voice traffic of approximately 7.6% in Guaraníes, especially in the prepaid segment.

VAS revenues (data and Internet) amounted to $371 (+32.0% vs. 1H13) and represented 52.6% of Núcleo Mobile Services segment services revenues (vs. 53.7% in 1H13).



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

III

TELECOM ARGENTINA S.A.

Equipment

Revenues from equipment amounted to $2.182, +$880 or 67.6% vs. 1H13. This increase is mainly related to the Personal Mobile services segment with an increase of $880 vs. 1H13. The increase was mainly due to an increase in handset’s average sale prices (+92.1 % vs. 1H13), partially offset by lower handsets sold (-9.8% vs. 1H13). This situation was mainly generated by a subsidy reduction policy, the increase in average prices related to higher-value handsets demand (those with 3G browsing aptitude), the business strategy to attract high-value subscribers, a decrease in discounts as a result of the finalization of commercial promotions and lower retail revenues. In the Núcleo Mobile Services segment the decrease was mainly due to a decrease in the handsets sold, partially offset by the effect of the appreciation of the Guaraní respect to the argentine peso. The equipment sale result amounted to a gain of $289 in 1H14 vs. a gain of $14 in 1H13, net of $57 and $164 of SAC capitalization, respectively.

—

Operating costs

Consolidated operating costs –including depreciations, amortizations and gain on disposal of PP&E and impairment of PP&E– totaled $12,997 in 1H14, which represents an increase of $2,331 or +21.9% vs. 1H13. The increase in costs is mainly a consequence of a higher revenues, higher expenses related to competition in mobile and Internet businesses, higher direct and indirect labor costs on the cost structure of the Telecom Group in Argentina, the increase in fees for services related to higher supplier prices, the increase in the cost of equipment and handsets, the increase in taxes and fees with the Regulatory Matters, the increase of VAS costs and the effect of the appreciation of the Guaraní (+40% inter-annual) respect to the argentine peso, affecting the operations in Paraguay.


					Variation				Variation in $ by segment
For the six-month periods ended June 30, 2014	1H14		1H13		$		%		Fixed Serv.		Personal M. Serv.		Núcleo M. Serv.
Employee benefit expenses and severance payments		(2,537)		(1,873)		(664)		35.5		(490)		(158)		(16)
Interconnection costs and other telecommunication charges		(1,020)		(1,006)		(14)		1.4		(64)		50		-
Fees for services, maintenance, materials and supplies		(1,599)		(1,214)		(385)		31.7		(156)		(215)		(14)
Taxes and fees with the Regulatory Authority		(1,564)		(1,248)		(316)		25.3		(77)		(233)		(6)
Commissions		(1,480)		(1,242)		(238)		19.2		(26)		(192)		(20)
Agent commissions capitalized as SAC		362		218		144		66.1		10		131		3
Cost of equipment and handsets		(1,950)		(1,452)		(498)		34.3		(1)		(489)		(8)
Cost of equipment and handsets capitalized as SAC		57		164		(107)		(65.2)		-		(113)		6
Advertising		(341)		(286)		(55)		19.2		(17)		(34)		(4)
Cost of VAS		(406)		(301)		(105)		34.9		(2)		(92)		(11)
Provisions		(102)		(97)		(5)		5.2		(30)		25		-
Bad debt expenses		(233)		(165)		(68)		41.2		(12)		(51)		(5)
Other operating expenses		(683)		(600)		(83)		13.8		(28)		(41)		(14)
Subtotal		(11,496)		(9,102)		(2,394)		26.3		(893)		(1,412)		(89)
Depreciation of PP&E		(1,106)		(955)		(151)		15.8		(66)		(32)		(53)
Amortization of SAC and service connection charges		(393)		(432)		39		(9.0)		(17)		67		(11)
Amortization of other intangible assets		(12)		(12)		-		-		-		-		-
Gain on disposal of PP&E and impairment of PP&E		10		(165)		175		n/a		125		51		(1)
Total operating costs		(12,997)		(10,666)		(2,331)		21.9		(851)		(1,326)		(154)

The costs breakdown is as follows:

Employee benefit expenses and severance payments

Employee benefit expenses and severance payments amounted to $2,537 (+$664 or 35.5% vs. 1H13). The increase was mainly due to increases in salaries agreed by Telecom Argentina with several trade unions for the unionized employees and also to non-unionized employees, together with related social security charges and to increases in severance payments (+$79 or 184.6% vs. 1H13). With a total headcount of 16,549 by the end of 1H14, slightly lower than 1H13 between employees and eventual employees, lines in service per employee reached 371 in the Fixed Services segment (slightly lower than 1H13), subscribers per employee reached 3,912 in the Personal Mobile Services segment (+6.3% vs. 1H13) and subscribers per employee reached 5,618 (+3.6% vs. 1H13) in the Núcleo Mobile Services segment.

Interconnection costs and other telecommunication charges

Interconnection costs and other telecommunication charges (including charges for TLRD, Roaming, Interconnection costs, cost of international outbound calls and lease of circuits) amounted to $1,020 (+$14 or 1.4% vs. 1H13). The increase was mainly due to higher traffic volume in the international market, partially offset by the TLRD traffic decrease vs. 1H13.

Fees for services, maintenance, materials and supplies

Fees for services, maintenance, materials and supplies amounted to $1,599, +$385 or 31.7% vs. 1H13. The increase was mainly due to higher maintenance costs of radio bases, systems and buildings in the mobile services segments, as a result of the variation in the $/US$ exchange rate, an increase in technical assistance cost of radio bases, higher system licenses maintenance costs and higher costs of building maintenance. There were also increases in other maintenance costs and fees for services, mainly due to higher costs recognized to suppliers in all segments.



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

TELECOM ARGENTINA S.A.

Taxes and fees with the Regulatory Authority

Taxes and fees with the Regulatory Authority (including turnover tax, fees with the Regulatory Authority, IDC, municipal and other taxes) amounted to $1,564 (+25.3% vs. 1H13), influenced mainly by the increase in revenues of fixed and mobile services, by the increase in equipment sales in Argentina, by the increase of the IDC related to the dividends payment and by higher collections and payments to suppliers in 1H14 vs. 1H13.

Commissions

Commissions (including Agent, distribution of prepaid cards and other commissions) amounted to $1,480 (+$238 or 19.2% vs. 1H13). The increase was mainly due to the increase in Agents’ commissions (associated to higher revenues) as a result of higher customer’s acquisition and retention costs recognized to them and the increase of outsourced sales commissions and collection commissions, especially of handsets sold, partially offset by lower prepaid cards sales and lower prepaid recharges.

On the other hand, agent commissions capitalized as SAC amounted to $362, +$144 or 66.1% vs.1H13, and it’s directly related to the increase in the “Cuentas claras” subscribers’ base in the Personal Mobile Services segment and the increase in the commissions prices.

Cost of equipment and handsets

Cost of equipments and handsets amounted to $1,950 (+$498 or 34.3% vs. 1H13) mainly due to an increase in the average unit cost of sales (+52.1% vs. 1H13), partially offset by a decrease in the units of handsets sold (-9.8% vs. 1H13) in the Personal Mobile Services segment.

On the other hand, SAC deferred costs from handsets sold amounted to $57, -$107 or -65.2% vs. 1H13. The lower capitalized amount was mainly due to the significant reduction of subsidies provided to customers in the Personal Mobile Services segment, especially in the “Cuentas claras” segment.

Advertising

Advertising amounted to $341 (+$55 or 19.2% vs. 1H13), mainly due to higher commercial campaigns of Personal as compared to 1H13.

Cost of VAS

Cost of VAS amounted to $406 (+$105 or 34.9% vs. 1H13). The increase was mainly due to the increase of VAS sales in the Personal Mobile Services segment, especially the SMS with content service, which grew $333 as compared to 1H13, as a consequence of several campaigns launched by Personal. SVA costs represented approximately 5.6% and 4.9% of the SVA sales in 1H14 and 1H13, respectively.

Provisions

Provisions amounted to $102, +$5 or 5.2% vs. 1H13. The increase was mainly due to higher regulatory and municipal claims (+$20 vs. 1H13), partially offset by lower labor claims ($6 vs. 1H13) and lower civil and commercial claims ($9 vs. 1H13).

Bad debt expenses

Bad debt expenses amounted to $233 (+$68 or 41.2% vs. 1H13), representing approximately 1.5% and 1.3% of the consolidated revenues in 1H14 and 1H13, respectively. The major increase is observed in the Personal Mobile Services segment by $51 as a consequence of higher aging of the accounts receivables and higher incidence of handsets sales financed by Personal. These charges have also increased in Telecom Argentina by $10 in the Government and Corporate segment.

Other operating costs

Other operating costs amounted to $683 (+$83 or 12.3% vs. 1H13). The increase was mainly due to higher prices on related services, especially in transportation, freight and travel expenses (+$56 or 27.1% vs. 1H13), among others, in the operations in Argentina; and the increase of rent prices (+$38 or 25% vs. 1H13), as a result of new agreements and the renegotiation of some of the existing ones.

—

Operating income before depreciation and amortization

Operating income before depreciation and amortization amounted to $4,119 (+$495 or 13.7% vs. 1H13), representing 26.4% of consolidated revenues in 1H14 (vs. 28.5% in 1H13). This growth was mainly fueled by the Personal Mobile Services segment (+$418 or 17.0% vs. 1H13).



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

TELECOM ARGENTINA S.A.

Operating income before depreciation and amortization generated by equipment and handset sales amounted to $289 in 1H14 vs. $14 in 1H13 (+$275 or 1,964% vs. 1H13), while operating income before depreciation and amortization generated by services sales amounted to $3,830 in 1H14 vs. $3,610 in 1H13 (+$220 or 6.1% vs. 1H13).

Depreciation and amortization

Depreciation and amortization amounted to $1,511 (+$112 or +8.0% vs. 1H13). The increase in PP&E depreciation amounted to $151 partially offset by a decrease in amortization of SAC and service connection costs of $39 due to lower levels of capitalization of subsidies from the sale of mobile handsets and the extension of the contractual terms for mobile customers from 18 to 24 months. The increase in depreciation and amortization corresponds 74.1% to the Fixed Services segment and 25.9% to the mobile services segments.

Gain on disposal of PP&E and impairment of PP&E

Gain on disposal of PP&E amounted to $10, +$3 vs. $7 amounted in 1H13, and was mainly related to the Fixed Services segment. Impairment of PP&E amounted to $172 in 1H13 and was mainly related to the discontinuation of a commercial system of Personal (amounting to $50) and to the write-down of some projects of Telecom Argentina that presented uncertainty regarding their development and future associated cash flows (amounting to $122).

—

Operating income

Operating income amounted to $2,618 in 1H14 (+$558 or 27.1% vs. 1H13). The margin over consolidated revenues represented 16.8% in 1H14 (vs. 16.2% in 1H13). Personal Mobile Services segment shows the higher increase (+31.2% vs. 1H13).

If the impairment of PP&E recorded in 1H13 was excluded, the operating income increase would have been 17.3% vs. 1H13.

—

Financial results, net

Financial results, net resulted in a net gain of $154, representing a decrease of $60 vs. 1H13. The decrease was mainly due to higher foreign currency exchange losses (+$160 vs. 1H13), higher interests on provisions (+$27 vs. 1H13) and higher losses on NDF (+$6 vs. 1H13), partially offset by higher financial interest on time deposits and other investments – including Interest on related parties– (+$69 vs. 1H13), higher gains on mutual funds (+$57 vs. 1H13) and higher interests on receivables (+$24 vs. 1H13).

—

Net income

Telecom Argentina reached a net income of $1,836 in 1H14, +$361 or +24.5% when compared to 1H13. Net income attributable to Telecom Argentina amounted to $1,805 in 1H14, +$351 or +24.1% as compared to 1H13.

—

Net financial assets

As of June 30, 2014, Net financial assets (Cash and Cash Equivalents plus financial investments minus Financial debt) amounted to $3,807, showing a decrease of $1,287 as compared to June 30, 2013 (amounting to $5,094). This decrease was mainly due to a decrease in the generation of cash from operating activities of the Telecom Group, mainly by higher CAPEX payments and higher equipment and handsets acquisitions affected by the devaluation of the argentine peso vs. the US dollar, cash dividends paid to its shareholders’ for a total amount of $1,637 (including tax withholding on cash dividends) and treasury shares acquisitions of $378 during 2H13. The Fixed Services segment has a financial asset of $1,650 and the Personal Mobile Services segment has a financial asset of $2,411, while the Núcleo Mobile Services segment has a net financial debt of $254.



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

TELECOM ARGENTINA S.A.

—

Capital expenditures (CAPEX)

CAPEX composition for 1H14 and 1H13 is as follows:


	In millions of $				% of participation						Variation
	1H14		1H13		1H14			1H13			$		%
Fixed Services		899		671		40	%		43	%		228		34.0
Personal Mobile Services		1,241		765		55	%		49	%		476		62.2
Núcleo Mobile Services		125		118		5	%		8	%		7		5.9
Total CAPEX		2,265		1,554		100	%		100	%		711		45.8

PP&E CAPEX amounted to $1,806 and intangible assets CAPEX amounted to $459 in 1H14, while in 1H13 amounted to $1,137 and $417, respectively.

In relative terms, CAPEX represented 14.5% of consolidated revenues in 1H14 (12.2% in 1H13), and were intended mainly for the external wiring and network access equipment, transmission and switching equipment, computer equipment and SAC.

PP&E and intangible assets additions (CAPEX plus materials additions) for 1H14 and 1H13 are as follows:


	In millions of $				% of participation		Variation
	1H14		1H13		1H14	1H13	$		%
Fixed Services		1,131		789	45%	46%		342	43.3
Personal Mobile Services		1,229		768	49%	45%		461	60.0
Núcleo Mobile Services		134		149	6%	9%		(15)	(10.1)
Total additions		2,494		1,706	100%	100%		788	46.2

Main PP&E CAPEX projects are related to the expansion of fixed broadband services in order to improve transmission and speed offered to customers; deployment of 3G services to support the growth of mobile Internet together with the launch of innovative VAS services and the expansion of transmission and transport networks to meet the growing demand of services of our fixed and mobile customers and also improve our services protection quality.


3.		*Telecom Group’s activities for the three-month periods ended June 30, 2014 (“2Q14”) and 2013 (“2Q13”)*

Telecom Group’s net income amounted to $930 in 2Q14, +$268 or 40.5% vs. 2Q13. Net income attributable to Telecom Argentina amounted to $916 in 2Q14 (+$264 or 40.5% vs. 2Q13).

Total revenues and other income increased 22.3% vs. 2Q13 and operating income before depreciation and amortization amounted to $2,007 (+$182 or 10.0% vs. 2Q13), representing 24.7% of the consolidated revenues (vs. 27.4% in 2Q13). Operating income amounted to $1,241 (+$296 or 31.3% vs. 2Q13). Financial results, net amounted to $186 (+$107 or 135.4% vs. 2Q13), while income tax amounted to $497 (+$135 or 37.3% vs. 2Q13).


					Variation

	2Q14		2Q13		$		%

Revenues		8,119		6,649		1,470		22.1
Other income		20		4		16		400.0
Operating costs without depreciation and amortization		(6,132)		(4,828)		(1,304)		27.0

Operating income before depreciation and amortization		2,007		1,825		182		10.0
Depreciation and amortization		(772)		(708)		(64)		9.0
Gain on disposal of PP&E and impairment of PP&E		6		(172)		178		n/a

Operating income		1,241		945		296		31.3
Financial results, net		186		79		107		135.4

Income before income tax expense		1,427		1,024		403		39.4
Income tax expense		(497)		(362)		(135)		37.3

Net income		930		662		268		40.5

Attributable to:
Telecom Argentina (Controlling Company)		916		652		264		40.5
Non-controlling interest		14		10		4		40.0

		930		662		268		40.5

Basic and diluted earnings per share attributable to Telecom Argentina (in pesos)		0.94		0.66



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

VII

TELECOM ARGENTINA S.A.

During 2Q14 consolidated revenues increased 22.1% (+$1,470 vs. 2Q13) amounting to $8,119, mainly fueled by mobile services (including handset sales), Broadband and data transmission in the Fixed Services segment.


					Variation
*Services*	2Q14		2Q13		$		%
Voice – Retail		704		668		36	5.4
Voice – Wholesale		228		191		37	19.4
Internet		777		616		161	26.1
Data		364		228		136	59.6
Subtotal Fixed Services		2,073		1,703		370	21.7
Voice – Retail		1,250		1,127		123	10.9
Voice – Wholesale		488		518		(30)	(5.8)
Internet		781		503		278	55.3
Data		1,890		1,767		123	7.0
Subtotal Personal Mobile Services		4,409		3,915		494	12.6
Voice – Retail		148		90		58	64.4
Voice – Wholesale		28		43		(15)	(34.9)
Internet		107		62		45	72.6
Data		79		79		-	-
Subtotal Núcleo Mobile Services		362		274		88	32.1
Total services revenues		6,844		5,892		952	16.2



*Equipment*
Fixed Services		18		16		2	12.5
Personal Mobile Services		1,236		717		519	72.4
Núcleo Mobile Services		21		24		(3)	(12.5)
Total equipment revenues		1,275		757		518	68.4



Total revenues		8,119		6,649		1,470	22.1

Consolidated operating costs –including depreciation, amortization and gain on disposal of PP&E and impairment of PP&E– amounted to $6,898 in 2Q14, which represented an increase of $1,190 or 20.8% vs. 2Q13. The increase in costs is mainly a consequence of a higher revenues, higher expenses related to competition in mobile and Internet businesses, higher direct and indirect labor costs on the cost structure of the Telecom Group in Argentina, the increase in fees for services related to higher supplier prices, the increase in taxes and fees with the Regulatory Matters, the increase in the cost of equipment and handsets, the increase in taxes and fees with the Regulatory Matters, the increase of VAS costs and the effect of the appreciation of the Guaraní respect to the argentine peso, affecting the operations in Paraguay.

Consolidated operating costs included an impairment of PP&E charge of $172 in 2Q13. If these one-time charges were excluded, the increase of operating costs in 2Q14 would have reached 24.6% vs. 2Q13.


					Variation
	2Q14		2Q13		$		%
Employee benefit expenses and severance payments		(1,354)		(1,005)		(349)	34.7
Interconnection costs and other telecommunication charges		(505)		(522)		17	(3.3)
Fees for services, maintenance, materials and supplies		(844)		(658)		(186)	28.3
Taxes and fees with the Regulatory Authority		(809)		(646)		(163)	25.2
Commissions		(806)		(637)		(169)	26.5
Agent commissions capitalized as SAC		229		115		114	99.1
Cost of equipment and handsets		(1,144)		(791)		(353)	44.6
Cost of equipment and handsets capitalized as SAC		26		61		(35)	(57.4)
Advertising		(177)		(132)		(45)	34.1
Cost of VAS		(215)		(170)		(45)	26.5
Provisions		(65)		(57)		(8)	14.0
Bad debt expenses		(115)		(72)		(43)	59.7
Other operating expenses		(353)		(314)		(39)	12.4
Subtotal		(6,132)		(4,828)		(1,304)	27.0
Depreciation of PP&E		(568)		(488)		(80)	16.4
Amortization of SAC and service connection charges		(198)		(213)		15	(7.0)
Amortization of other intangible assets		(6)		(7)		1	(14.3)
Gain on disposal of PP&E and impairment of PP&E		6		(172)		178	n/a
Total operating costs		(6,898)		(5,708)		(1,190)	(20.8)

CAPEX amounted to $1,203 in 2Q14 and amounted to $813 in 2Q13 (+$390 or 48.0%).

In 2Q14 the operating income before depreciation and amortization generated by equipment and handset sales (including SAC activations) amounted to $157 (+$130 or 481% vs. 2Q13). The operating income before depreciation and amortization generated by services sales amounted to $1.850 (+$52 or 2.9% vs. 2Q13).



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

VIII

TELECOM ARGENTINA S.A.


4.		*Summary of comparative consolidated statements of financial position*


	June 30,
	2014		2013		2012		2011
Current assets		8,346		8,987		5,277	3,505
Non-current assets		15,309		11,089		10,012	8,959
Total assets		23,655		20,076		15,289	12,464


Current liabilities		8,695		6,801		5,019	4,300
Non-current liabilities		2,094		1,729		1,620	1,232
Total liabilities		10,789		8,530		6,639	5,532
Equity attributable to Telecom Argentina (Controlling Company)		12,538		11,349		8,503	6,790
Equity attributable non-controlling interest		328		197		147	142
Total Equity		12,866		11,546		8,650	6,932
Total liabilities and equity		23,655		20,076		15,289	12,464


Net financial position
Financial assets		4,107		5,267		2,356	1,425
Financial debts		(300)		(173)		(133)	(189)
Net financial assets		3,807		5,094		2,223	1,236


5.		*Summary of comparative consolidated income statements*


	2Q14		2Q13		2Q12		2Q11		1H14		1H13		1H12		1H11
Revenues and other income		8,139		6,653		5,259		4,457		15,615		12,726		10,389	8,601
Operating costs		(6,898)		(5,708)		(4,410)		(3,486)		(12,997)		(10,666)		(8,507)	(6,672)
Operating income		1,241		945		849		971		2,618		2,060		1,882	1,929
Financial results, net		186		79		51		(2)		154		214		112	17
Income before income tax expense		1,427		1,024		900		969		2,772		2,274		1,994	1,946
Income tax expense		(497)		(362)		(314)		(333)		(936)		(799)		(700)	(670)
Net income		930		662		586		636		1,836		1,475		1,294	1,276
Other comprehensive income, net of tax		27		(34)		(4)		13		233		29		21	60
Total comprehensive income		957		628		582		649		2,069		1,504		1,315	1,336


Attributable to Telecom Argentina (Controlling Company)		934		631		574		635		1,957		1,473		1,289	1,301
Attributable to non-controlling interest		23		(3)		8		14		112		31		26	35


6.		*Statistical data (in physical units)*

Fixed services

Voice and data services (in thousands, except for lines in service per inhabitants and employees)


	1H14				1H13				1H12				1H11				1H10
	Accumulated		Quarter		Accumulated		Quarter		Accumulated		Quarter		Accumulated		Quarter		Accumulated		Quarter
Equipment lines		3,528		-		3,823		15		3,804		4		3,804		3		3,834	(10)
NGN lines		1,184		8		1,108		16		987		32		923		43		777	22
Installed lines (a)		4,712		8		4,931		31		4,791		36		4,727		46		4,611	12

Lines in service (b)		4,103		(5)		4,114		5		4,148		10		4,119		9		4,066	8

Customers lines (c)		4,025		(3)		4,033		6		4,064		10		4,033		9		3,975	9

Public phones installed		31		(2)		35		(1)		39		-		42		(1)		47	(2)

Lines in service per 100 inhabitants (d)		20,2		-		20.4		-		20.7		-		20.7		-		20.6	-

Lines in service per employee (e)		371		(2)		373		2		370		-		372		(5)		368	2

a) Reflects total number of lines available in Switches, considered independently of its technology (TDM or NGN).

b) Includes customers lines, own lines, public telephones and DDE and ISDN channels.

c) The number of customers is measured in relation to the physical occupation of network resources.

d) Corresponding to the Northern Region of Argentina.

e) Defined as lines in service / number of actual employees.



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

TELECOM ARGENTINA S.A.

Internet (in thousands)

1H14

1H13

1H12

1H11

1H10

Accumulated

Quarter

Accumulated

Quarter

Accumulated

Quarter

Accumulated

Quarter

Accumulated

Quarter

Total ADSL subscribers

1,726

1,634

1,594

1,457

1,274

Mobile services

Personal (in thousands, except customers per employee in units)


	1H14		1H13		1H12		1H11		1H10
	Accumulated	Quarter	Accumulated	Quarter	Accumulated	Quarter	Accumulated	Quarter	Accumulated	Quarter
Post-paid subscribers	2,303	(62)	2,437	22	2,296	70	1,988	102	1,660	47

“Cuentas claras” plans	3,853	(3)	3,644	61	3,232	56	2,887	73	2,737	30

Prepaid subscribers	13,407	(54)	12,905	142	12,714	42	12,125	284	10,727	273

Dongles (*)	213	(18)	321	(32)	481	8	392	51	210	36

Total subscribers	19,776	(137)	19,307	193	18,723	176	17,392	510	15,334	386

Lines per employee	3,912	1	3,680	38	3,651	(83)	3,789	(42)	3,907	78

Núcleo (in thousands, except customers per employee in units)


	1H14		1H13		1H12		1H11		1H10
	Accumulated	Quarter	Accumulated	Quarter	Accumulated	Quarter	Accumulated	Quarter	Accumulated	Quarter
Post-paid subscribers	29	1	29	-	29	(1)	27	1	24	-

“Plan control” subscribers	308	4	278	8	238	11	207	8	170	9

Prepaid subscribers	1,904	(25)	1,906	18	1,849	20	1,664	60	1,604	-

Dongles (*)	141	(6)	162	20	119	9	76	13	26	7

Subtotal mobile	2,382	(26)	2,375	46	2,235	39	1,974	82	1,824	16

Internet subscribers - Wimax	5	-	6	-	7	-	9	-	11	-

Total subscribers	2,387	(26)	2,381	46	2,242	39	1,983	82	1,835	16

Lines per employee ()**	5,618	(142)	5,422	68	5,174	55	4,634	53	4,375	38

(*)	Corresponds to mobile Internet subscribers with post-paid, “Cuentas claras”, “Plan control” and prepaid contracts.

(**)	Internet Wimax subscribers are not included.


7.		*Consolidated ratios*


	1H14	1H13	1H12	1H11
Liquidity (1)	0.96	1.32	1.05	0.82
Solvency (2)	1.19	1.35	1.30	1.25
Locked-up capital (3)	0.65	0.55	0.65	0.72

(1)

Current assets/Current liabilities.

(2)

Total equity/Total liabilities.

(3)

Non-current assets/Total assets.


8.		*Outlook*

In this fiscal year the evolution prospects for fixed line services will continue in line with the trend of recent years, influenced by the maturity of the market and the replacement of the fixed-service for the mobile-service. Arnet Broadband business got well-positioned to continue to capture market opportunities.

During 2014 Personal will continue to work on the mass of the mobile Internet experience, assuming the responsibility over quality of services with the continuity of the technological upgrading of the national network. The recent auction of additional spectrum launched by the Regulatory Authority is a fundamental step for the resolution of one of the national mobile industry’s critical needs that will allow quality services improvement and the launch of new services. Personal has started to work on the analysis of the auction conditions to increase its spectrum within the limits ruled by the regulation in force. We will also continue working with the Regulatory Authority in order to enable the municipalities to install the necessary sites to improve the network coverage of all operators.

Coverage expansion and speed access improvement to 3G and HSPA+ networks with the more complete portfolio of advanced mobile devices will continue to be the drivers to our revenues through proposals of value. The opportunity to grow in capacity data will come from the network evolution to 4G, once the spectrum that the Government has auctioned is available and the plan of such technology is developed.



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

TELECOM ARGENTINA S.A.

During 1H14 some changes to the economic policy of the Government which, among other things, would seek to improve public finances, competitiveness of the country, the BCRA reserves and lower inflation rates were introduced. These changes have depreciated the argentine peso against the U.S. dollar and new inflation rates calculated by the INDEC using a new methodology have been determined, impacting directly over the pricing policies, the cost and investment structures of the companies, the levels of employment and consumption of the population and of our customers in particular. Additionally, the Argentine Government, as of the date of this Operating and Financial Prospect, is negotiating with bonds holders that have not tendered in the exchange offers in 2005 and 2010. The results of these negotiations would have relevant consequences for the country and the financial and non-financial private sector.

The Telecom Group’s Management will continue to monitor these macroeconomic variables to achieve its strategic objectives of improving quality of service, strengthening its market position and increasing its operational efficiency to meet the growing demands of the dynamic telecommunication market without neglecting the return on investment for the shareholders. The investment plans of the Telecom Group are based on the Telecom Group’s commitment to its country and its people.

Enrique Garrido

Chairman of the Board of Directors



				*OPERATING AND FINANCIAL REVIEW AND PROSPECTS AS OF JUNE 30, 2014*

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In millions of Argentine pesos)


		June 30,	December 31,
ASSETS	Note	2014	2013
Current Assets
Cash and cash equivalents	2	2,582	5,224
Investments	2	626	123
Trade receivables	2	3,417	2,986
Other receivables	2	689	646
Inventories	2	1,032	772

Total current assets		8,346	9,751

Non-Current Assets
Trade receivables	2	11	21
Deferred income tax assets	2	195	128
Other receivables	2	255	242
Investments	2	900	243
Property, plant and equipment (“PP&E”)	2	12,361	11,226
Intangible assets	2	1,587	1,519

Total non-current assets		15,309	13,379

TOTAL ASSETS		23,655	23,130

LIABILITIES
Current Liabilities
Trade payables	2	5,305	6,130
Deferred revenues	2	470	423
Financial debt	2	26	15
Salaries and social security payables	2	732	741
Income tax payables	2	659	801
Other taxes payables	2	668	667
Dividends payables	2	627	-
Other liabilities	2	43	49
Provisions	6	165	224

Total current liabilities		8,695	9,050

Non-Current Liabilities
Trade payables	2	-	1
Deferred revenues	2	448	453
Financial debt	2	274	220
Salaries and social security payables	2	126	118
Deferred income tax liabilities	2	-	126
Income tax payables	2	9	10
Other liabilities	2	81	68
Provisions	6	1,156	1,033

Total non-current liabilities		2,094	2,029

TOTAL LIABILITIES		10,789	11,079

EQUITY (see Unaudited Condensed Consolidated Statement of Changes in Equity)
Equity attributable to Telecom Argentina (Controlling Company)		12,538	11,783
Equity attributable to non-controlling interest		328	268

TOTAL EQUITY	7	12,866	12,051

TOTAL LIABILITIES AND EQUITY		23,655	23,130

The accompanying notes are an integral part of these consolidated financial statements.


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS

(In millions of Argentine pesos, except per share data in Argentine pesos)


		Three-month periods ended June 30,		Six-month periods ended June 30,
	Note	2014	2013	2014	2013
Revenues	2	8,119	6,649	15,585	12,713
Other income	2	20	4	30	13
Total revenues and other income		8,139	6,653	15,615	12,726
Employee benefit expenses and severance payments	2	(1,354)	(1,005)	(2,537)	(1,873)
Interconnection costs and other telecommunication charges	2	(505)	(522)	(1,020)	(1,006)
Fees for services, maintenance, materials and supplies	2	(844)	(658)	(1,599)	(1,214)
Taxes and fees with the Regulatory Authority	2	(809)	(646)	(1,564)	(1,248)
Commissions	2	(577)	(522)	(1,118)	(1,024)
Cost of equipments and handsets	2	(1,118)	(730)	(1,893)	(1,288)
Advertising	2	(177)	(132)	(341)	(286)
Cost of VAS	2	(215)	(170)	(406)	(301)
Provisions	6	(65)	(57)	(102)	(97)
Bad debt expenses	2	(115)	(72)	(233)	(165)
Recovery of restructuring costs	2	-	8	-	8
Other operating expenses	2	(353)	(322)	(683)	(608)
Depreciation and amortization	2	(772)	(708)	(1,511)	(1,399)
Gain on disposal of PP&E and impairment of PP&E	2	6	(172)	10	(165)
Operating income		1,241	945	2,618	2,060
Finance income	2	264	260	1,063	465
Finance expenses	2	(78)	(181)	(909)	(251)
Income before income tax expense		1,427	1,024	2,772	2,274
Income tax expense	2	(497)	(362)	(936)	(799)
Net income for the period		930	662	1,836	1,475



Attributable to:
Telecom Argentina (Controlling Company)		916	652	1,805	1,454
Non-controlling interest		14	10	31	21
		930	662	1,836	1,475



Earnings per share attributable to Telecom Argentina – basic and diluted	1.d	0.94	0.66	1.86	1.48

The accompanying notes are an integral part of these consolidated financial statements.


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions of Argentine pesos)

Three-month periods

Six-month periods

ended June 30,

2014

2013

2014

2013

Net income for the period

930

662

1,836

1,475

Other components of the Statements of Comprehensive Income

Will be reclassified subsequently to profit or loss

Currency translation adjustments (non-taxable)

(34)

233

Other components of the comprehensive income, net of tax

(34)

233

Total comprehensive income for the period

957

628

2,069

1,504

Attributable to:

Telecom Argentina (Controlling Company)

934

631

1,957

1,473

Non-controlling interest

(3)

112

957

628

2,069

1,504

The accompanying notes are an integral part of these consolidated financial statements.


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In millions of Argentine pesos)


	Equity attributable to Telecom Argentina (Controlling Company)
		Owners Contribution
		Outstanding shares				Treasury shares
	Capital nominal value (1)		Inflation adjustment		Capital nominal value (1) (2)		Inflation adjustment (2)		Treasury shares acquisition cost (2)		Legal reserve		Special reserve for IFRS implemen- tation		Voluntary reserve for future dividends payments		Voluntary reserve for capital investments		Voluntary reserve for future investments		Deferred results		Retained earnings		Total		Equity attributable to non- controlling interest		Total Equity

Balances as of January 1, 2013		984		2,688		-		-		-		572		-		-		-		2,553		107		3,055		9,959		199		10,158

Dividends from Núcleo (3)		-		-		-		-		-		-		-		-		-		-		-		-		-		(33)		(33)
Legal Reserve (4)		-		-		-		-		-		153		-		-		-		-		-		(153)		-		-		-
Special reserve for IFRS implementation (4)		-		-		-		-		-		-		351		-		-		-		-		(351)		-		-		-
Voluntary reserve for future dividends payments (4)		-		-		-		-		-		-		-		1,000		-		-		-		(1,000)		-		-		-
Voluntary reserve for capital investments (4)		-		-		-		-		-		-		-		-		1,200		-		-		(1,200)		-		-		-
Voluntary reserve for future investments (4)		-		-		-		-		-		-		-		-		-		351		-		(351)		-		-		-
Treasury Shares Acquisition (2)		(3)		(9)		3		9		(83)		-		-		-		-		-		-		-		(83)		-		(83)
Comprehensive income:
Net income for the period		-		-		-		-		-		-		-		-		-		-		-		1,454		1,454		21		1,475
Other comprehensive income		-		-		-		-		-		-		-		-		-		-		19		-		19		10		29

Total Comprehensive Income		-		-		-		-		-		-		-		-		-		-		19		1,454		1,473		31		1,504



Balances as of June 30, 2013		981		2,679		3		9		(83)		725		351		1,000		1,200		2,904		126		1,454		11,349		197		11,546





Balances as of January 1, 2014		969		2,646		15		42		(461)		725		351		-		1,200		2,904		190		3,202		11,783		268		12,051

Dividends from Núcleo (5)		-		-		-		-		-		-		-		-		-		-		-		-		-		(52)		(52)
Dividends (6)		-		-		-		-		-		-		-		-		-		-		-		(1,202)		(1,202)		-		(1,202)
Legal Reserve (6)		-		-		-		-		-		9		-		-		-		-		-		(9)		-		-		-
Voluntary reserve for capital investments (6)		-		-		-		-		-		-		-		-		1,991		-		-		(1,991)		-		-		-
Comprehensive income:
Net income for the period		-		-		-		-		-		-		-		-		-		-		-		1,805		1,805		31		1,836
Other comprehensive income		-		-		-		-		-		-		-		-		-		-		152		-		152		81		233

Total Comprehensive Income		-		-		-		-		-		-		-		-		-		-		152		1,805		1,957		112		2,069



Balances as of June 30, 2014		969		2,646		15		42		(461)		734		351		-		3,191		2,904		342		1,805		12,538		328		12,866

(1) As of June 30, 2014 and 2013, total shares (984,380,978), of $1 argentine peso of nominal value each, were issued and fully paid. As of June 30, 2014, 15,221,373 were treasury shares.

(2) Corresponds to 15,221,373 shares of $1 argentine peso of nominal value each, equivalent to 1.55% of total capital. The treasury shares acquisition costs amounted to 461. See Note 7 – Equity to the consolidated financial statements.

(3) As approved by the Ordinary Shareholders’ Meeting of Núcleo held on March 22, 2013.

(4) As approved by the Ordinary Shareholders’ Meeting of the Company held on May 21, 2013 (second tranche).

(5) As approved by the Ordinary Shareholders’ Meeting of Núcleo held on March 28, 2014.

(6) As approved by the Ordinary Shareholders’ Meeting of the Company held on May 21, 2014 (second tranche).

The accompanying notes are an integral part of these consolidated financial statements.


				Adrián Calaza		Enrique Garrido
				Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of Argentine pesos)


		Six-month periods ended June 30,
	Note	2014	2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period		1,836	1,475
Adjustments to reconcile net income to net cash flows provided by operating activities
Bad debt expenses and other allowances		297	222
Depreciation of PP&E	2	1,106	955
Amortization of intangible assets	2	405	444
Consumption of materials	2	108	76
Gain on disposal of PP&E	2	(10)	(7)
Impairment of PP&E	2	-	172
Recovery of restructuring costs	6	-	(8)
Provisions	6	161	140
Interest and other financial losses		(363)	(41)
Income tax expense	2	936	799
Income tax paid	3	(1,297)	(842)
Net increase in assets	3	(950)	(899)
Net (decrease) increase in liabilities	3	(225)	774

Total cash flows provided by operating activities		2,004	3,260

CASH FLOWS FROM INVESTING ACTIVITIES
PP&E acquisitions	3	(2,658)	(1,425)
Intangible assets acquisitions	3	(478)	(384)
Proceeds from the sale of PP&E		12	10
Investments not considered as cash and cash equivalents	3	(1,211)	(355)

Total cash flows used in investing activities		(4,335)	(2,154)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from financial debt	3	-	43
Payment of financial debt	3	(6)	(18)
Payment of interest	3	(13)	(8)
Payment of cash dividends and related tax withholdings	3	(672)	(16)
Treasury shares acquisition	3 / 7	-	(83)

Total cash flows used in financing activities		(691)	(82)



NET FOREIGN EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS		380	49


(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(2,642)	1,073
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR		5,224	3,160

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		2,582	4,233

See Note 3 for additional information on the consolidated statements of cash flows.

The accompanying notes are an integral part of these consolidated financial statements.


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

TELECOM ARGENTINA S.A.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2014 AND 2013

(In millions of Argentine pesos, except as otherwise indicated)


INDEX

		Page

	Glossary of terms	7

	Notes to the unaudited condensed consolidated financial statements

1	Basis of preparation of the unaudited condensed consolidated financial statements and significant accounting policies	9

2	Breakdown of the main accounts	10

3	Supplementary cash flow information	21

4	Segment information	23

5	Related party balances and transactions	26

6	Commitments and contingencies of the Telecom Group	28

7	Equity	30

8	Restrictions on distribution of profits	31

9	Selected consolidated quarterly information	31

10	Recent developments corresponding to the six-month period ended June 30, 2014 for the Telecom Group	31

TELECOM ARGENTINA S.A.

GLOSSARY OF TERMS

The following explanations are not intended as technical definitions, but to assist the general reader to understand certain terms as used in these unaudited consolidated financial statements.

AMBA (Área Metropolitana de Buenos Aires): the Metropolitan Area of Buenos Aires.

ADS: Telecom Argentina’s American Depositary Share, listed on the New York Stock Exchange, each representing 5 Class B Shares.

ARSAT (Empresa Argentina de Soluciones Satelitales S.A.): the Satellite Solutions National Argentine Company.

BCBA (Bolsa de Comercio de Buenos Aires): The Buenos Aires Stock Exchange.

CNC (Comisión Nacional de Comunicaciones): The Argentine National Communications Commission.

CNDC (Comisión Nacional de Defensa de la Competencia): Argentine Antitrust Commission.

CNV (Comisión Nacional de Valores): The Argentine National Securities Commission.

Company or Telecom Argentina: Telecom Argentina S.A.

CONATEL (Comisión Nacional de Telecomunicaciones del Paraguay): The Regulatory Authority of Paraguay.

CPCECABA (Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires): The Professional Council of Economic Sciences of the City of Buenos Aires.

“Cuentas claras”: Under the “Cuentas claras” plans, a subscriber pays a set monthly bill and, once the contract minutes per month have been used, the subscriber can obtain additional credit by recharging the phone card through the prepaid system.

D&A: Depreciation and amortization.

DLD: Domestic long-distance.

ENARD (Ente Nacional de Alto Rendimiento Deportivo): National High Sport Performance Organization.

FACPCE (Federación Argentina de Consejos Profesionales en Ciencias Económicas): Argentine Federation of Professional Councils of Economic Sciences.

IAS: International Accounting Standards.

IASB: International Accounting Standards Board.

IDC: Tax on deposits to and withdrawals from bank accounts.

IFRS: International Financial Reporting Standards, as issued by the International Accounting Standards Board.

LSC (Ley de Sociedades Comerciales): Argentine Corporations Law.

Micro Sistemas: Micro Sistemas S.A.

NDF: Non-Deliverable Forward.

Nortel: Nortel Inversora S.A., the parent company of the Company.

Núcleo: Núcleo S.A.

NYSE: New York Stock Exchange.

Personal: Telecom Personal S.A.

PP&E: Property, plant and equipment.

Regulatory Bodies: Collectively, the SC and the CNC.

TELECOM ARGENTINA S.A.

Roaming: a function that enables mobile subscribers to use the service on networks of operators other than the one with which they signed their initial contract. The roaming service is active when a mobile device is used in a foreign country (included in the GSM network).

RT: Technical resolutions issued by the FACPCE.

RT 26: Technical resolution No, 26 issued by the FACPCE, amended by RT29.

SAC: Subscriber Acquisition Costs.

SBT (Servicio básico telefónico): Basic telephone service.

SC (Secretaría de Comunicaciones): The Argentine Secretary of Communications.

SEC: Securities and Exchange Commission of the United States of America.

Sofora: Sofora Telecomunicaciones S.A. Nortel’s controlling company.

Springville: Springville S.A. Personal sold its equity interest in Springville on February 19, 2014.

SU: The availability of Basic telephone service, or access to the public telephone network via different alternatives, at an affordable price to all persons within a country or specified area.

Telecom Group: Telecom Argentina and its consolidated subsidiaries.

Telecom Italia Group: Telecom Italia S.p.A and its consolidated subsidiaries, except where referring to the Telecom Italia Group as Telecom Argentina’s operator in which case it means Telecom Italia S.p.A and Telecom Italia International, N.V.

Telecom USA: Telecom Argentina USA Inc.

TLRD (Terminación Llamada Red Destino): Termination charges from third parties’ wireless networks.

VAS (Value-Added Services): Services that provide additional functionality to the basic transmission services offered by a telecommunications network such as SMS, Video streaming, Personal Video, Personal Cloud, M2M (Communication Machine to Machine), Social networks, Personal Messenger, Contents and Entertainment (content and text subscriptions, games, music ringtones, wallpaper, screensavers, etc), MMS (Mobile Multimedia Services) and Voice Mail, among others.

TELECOM ARGENTINA S.A.


NOTE 1 –		BASIS OF PREPARATION OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation and significant accounting policies

These consolidated financial statements have been prepared in accordance with RT 26 (as amended by RT 29) of FACPCE as adopted by the CPCECABA, and as required by the CNV.

For the preparation of these consolidated financial statements, the Company has elected to make use of the option provided by IAS 34, so, these consolidated financial statements do not include all the information required in an annual financial statement, and must be read jointly with the 2013 annual consolidated financial statements which can be consulted at the Company’s website (www.telecom.com.ar/inversores).

Entities included in consolidation and the respective equity interest owned by Telecom Argentina as of June 30, 2014 is presented as follows:


Company	Percentage of capital stock owned and voting rights (a)	Indirect control through	Date of acquisition	Segment that consolidates (Note 4)
Personal	99.99%		07.06.94	Personal Mobile Services
Micro Sistemas (b)	99.99%		12.31.97	Fixed Services
Telecom USA	100.00%		09.12.00	Fixed Services
Núcleo (c)	67.50%	Personal	02.03.98	Núcleo Mobile Services

(a) Percentage of equity interest owned has been rounded.

(b) Dormant entity as of June 30, 2014 and December 31, 2013 and for the six-month periods ended June 30, 2014 and 2013, respectively.

For the preparation of these consolidated financial statements, the Company followed the same accounting policies applied in the most recent annual financial statements. As from January 1, 2014 certain amendments to IAS 32 have come into effect, clarifying the meaning of “currently has a legally enforceable right to compensation” and how compensation requirements which offset gross amounts that do not operate simultaneously should be applied. The Telecom Group mainly offset financial assets and liabilities that relate to Interconnection transactions, TLRD and Roaming with other national and foreign operators. See Note 2.ac). The application of these new provisions has not had a significant impact on these consolidated financial statements.

The preparation of these consolidated financial statements in conformity with IFRS requires the Company’s Management to use certain critical accounting estimates. Actual results could differ from those estimates.

These consolidated financial statements (except for cash flow information) are prepared on an accrual basis of accounting. Under this basis, the effects of transactions and other events are recognized when they occur. Therefore income and expenses are recognized at fair value on an accrual basis regardless of when they are perceived or paid. When significant, the difference between the fair value and the nominal amount of income and expenses is recognized as finance income or expense using the effective interest method over the relevant period.

These consolidated financial statements have also been prepared on a going concern basis, as there is a reasonable expectation that Telecom Argentina and its subsidiaries will continue its operational activities in the foreseeable future (and in any event with a time horizon of more than twelve months).

Publication of these consolidated financial statements for the period ended June 30, 2014 was approved by resolution of the Board of Directors’ meeting held on July 29, 2014.

Financial statement formats

The financial statement formats adopted are consistent with IAS 1, In particular:

•

the consolidated statements of financial position have been prepared by classifying assets and liabilities according to “current and non-current” criterion. Current assets and liabilities are those that are expected to be realized/paid settled within twelve months after the period-end;

•

the consolidated income statements have been prepared by classifying operating expenses by nature of expense as this form of presentation is considered more appropriate and representative of the specific business of the Telecom Group as evaluated by the Management, and are in line with the industrial sector of telecommunications;

TELECOM ARGENTINA S.A.

•

the consolidated statements of comprehensive income include the profit or (loss) for the period as shown in the consolidated income statement and all components of other comprehensive income;

•

the consolidated statements of changes in equity have been prepared showing separately (i) profit (loss) for the period, (ii) other comprehensive income (loss) for the period, and (iii) transactions with shareholders (controlling and non-controlling);

•

the consolidated statements of cash flows have been prepared by presenting cash flows from operating activities according to the “indirect method”, as permitted by IAS 7.

These consolidated financial statements contain all material disclosures required under IAS 34. Some additional disclosures required by the LSC and/or by the CNV have been also included, among them, complementary information required in the last paragraph of Article 1 Chapter III Title IV of the CNV General Resolution No. 622/13. Such information is disclosed in Notes 2 and 6 to these consolidated financial statements, as admitted by IFRS.

Also, some reclassifications to the comparative figures of the consolidated statements of cash flows have been included in the lines total cash flows provided by operating activities and total cash flows used in investing activities with the purpose of improving the information comparability.

Segment reporting

An operating segment is defined as a component of an entity that engages in business activities from which it may earn revenues and incur expenses, and whose financial information is available, held separately, and evaluated regularly by the Chief Executive Officer (“CEO”).

Operating segments are reported in a consistent manner with the internal reporting provided to the CEO, who is responsible for allocating resources and assessing performance of the operating segments at the net income (loss) level and under the accounting principles effective (IFRS) at each time for reporting to the Regulatory Bodies. The accounting policies applied for segment information are the same for all operating segments.

Information regarding segment reporting is included in Note 4.

Net income per share

The Company computes net income per common share by dividing net income for the period attributable to Telecom Argentina (Controlling Company) by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and dilutive potential common shares then outstanding during the period. Since the Company has no dilutive potential common stock outstanding, there are no dilutive earnings per share amounts.

For the six-month period ended June 30, 2013 the weighted average number of shares outstanding totaled 984.090.580 shares. For the six-month period ended June 30, 2014 the weighted average number of shares outstanding totaled 969.159.605 shares. The changes in the weighted average number of shares outstanding for each period are a consequence of the Treasury Shares Acquisition Process that began in May 2013. For further information, see Note 7 to the consolidated financial statements.

NOTE 2 – BREAKDOWN OF THE MAIN ACCOUNTS


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION	June 30,		December 31,
CURRENT ASSETS	2014		2013
a) Cash and cash equivalents
Cash		14		12
Banks		148		336
Time deposits		1,900		3,949
Mutual funds		520		927

		2,582		5,224

b) Investments
Investments over 90 days maturity		487		-
Argentine companies notes		108		86
Provincial government bonds		17		35
Government bonds		14		2

		626		123

TELECOM ARGENTINA S.A.


	June 30,		December 31,
c) Trade receivables	2014		2013
Fixed Services		1,088		950
Personal Mobile Services		2,488		2,170
Núcleo Mobile Services		127		105

Subtotal 3,703				3,225
Allowance for doubtful accounts		(286)		(239)

		3,417		2,986

Movements in the allowance for current doubtful accounts are as follows:


	June 30,		December 31,
	2014		2013
	(6 months)		(12 months)
At the beginning of the year		(239)		(202)
Additions – bad debt expenses		(231)		(283)
Uses		186		249
Currency translation adjustments		(2)		(3)

At the end of the period/year		(286)		(239)


	June 30,		December 31,
d) Other receivables	2014		2013
Prepaid expenses		373		276
Expenditure reimbursement		95		91
Investment reimbursement		10		-
Prepaid expenses related parties (Note 5.c)		64		76
Tax credits		52		50
Restricted funds		21		26
Receivables for suppliers indemnities		7		6
Guarantee deposits		7		5
Receivables for return of handsets under warranty		4		9
NDF		-		42
Other		75		83

Subtotal 708				664
Allowance for other receivables		(19)		(18)

		689		646

Movements in the allowance for other receivables are as follows:


	June 30,		December 31,
	2014		2013
	(6 months)		(12 months)
At the beginning of the year		(18)		(15)
Additions (*)		(2)		(3)
Uses		1		-

At the end of the period/year		(19)		(18)

(*) Included in Bad debt expenses as of June 30, 2014.


	June 30,		December 31,
e) Inventories	2014		2013
Mobile handsets		1,136		849
Fixed telephones and equipment		11		8

Subtotal 1,147				857
Allowance for obsolescence of inventories		(115)		(85)

		1,032		772

Movements in the allowance for obsolescence of inventories are as follows:


	June 30,		December 31,
	2014		2013
	(6 months)		(12 months)
At the beginning of the year		(85)		(8)
Additions – Fees for services, maintenance and materials		(62)		(109)
Uses		33		32
Currency translation adjustments		(1)		-

At the end of the period/year		(115)		(85)

TELECOM ARGENTINA S.A.

Sale and cost of equipment and handsets by business segment is as follows:


	Three-month periods ended June 30,				Six-month periods ended June 30,
	2014		2013		2014		2013
	Profit (loss)
Sales of equipment and handsets - Fixed Services		18		16		31		30
Cost of equipment and handsets – Fixed Services		(20)		(19)		(35)		(34)

Total equipment loss – Fixed Services		(2)		(3)		(4)		(4)

Sales of equipment and handsets – Personal Mobile Services		1,236		717		2,115		1.235
Cost of equipment and handsets – Personal Mobile Services		(1,087)		(737)		(1,850)		(1.361)
Deferred Costs SAC – Personal Mobile Services		13		54		36		149

Total equipment income – Personal Mobile Services		162		34		301		23

Sales of equipment and handsets – Núcleo Mobile Services		21		24		36		37
Cost of equipment and handsets – Núcleo Mobile Services		(37)		(35)		(65)		(57)
Deferred Costs SAC – Núcleo Mobile Services		13		7		21		15

Total equipment loss – Núcleo Mobile Services		(3)		(4)		(8)		(5)

Total equipment and handsets sale		1,275		757		2,182		1.302
Total cost of equipment and handsets (net of SAC capitalization)		(1,118)		(730)		(1,893)		(1.288)

Total income for sale of equipment and handsets		157		27		289		14


	June 30,		December 31,
	2014		2013
NON-CURRENT ASSETS
f) Trade receivables
Fixed Services		10		19
Núcleo Mobile Services		1		2

		11		21

g) Other receivables
Prepaid expenses		121		100
Credit on SC Resolution No. 41/07 and IDC		85		85
Tax credits		27		20
Prepaid expenses related parties (Note 5 c)		62		88
Investment reimbursement		25		-
Restricted funds		23		37
Other		15		14

Subtotal 358				344
Allowance for regulatory matters		(85)		(85)
Allowance for doubtful accounts (tax on personal property)		(18)		(17)

		255		242

Movements in the allowance for regulatory matters are as follows:


	June 30,		December 31,
	2014		2013
	(6 months)		(12 months)
At the beginning of the year		(85)		(85)
Additions		-		-

At the end of the period/year		(85)		(85)

Movements in the allowance for doubtful accounts (tax on personal property) are as follows:


	June 30,		December 31,
	2014		2013
	(6 months)		(12 months)
At the beginning of the year		(17)		(17)
Additions		(1)		-

At the end of the period/year		(18)		(17)


	June 30,		December 31,
	2014		2013
h) Investments
Government bonds		862		219
Provincial and municipal government bonds		37		13
2003 Telecommunications Fund		1		1
Argentine companies notes		-		10

		900		243

TELECOM ARGENTINA S.A.


	June 30,		December 31,
i) PP&E	2014		2013
Land, buildings and installations		968		963
Computer equipment and software		1,340		1,476
Switching and transmission equipment (i)		2,879		2,558
Mobile network access and external wiring		3,478		3,091
Construction in progress		2,859		2,436
Other tangible assets		385		377

Subtotal PP&E 11,909				10,901
Materials		631		502

Subtotal PP&E and materials 12,540				11,403
Valuation allowance for materials		(24)		(21)
Impairment of PP&E		(155)		(156)

Total PP&E 12,361				11,226


(i)		Includes tower and pole, transmission equipment, switching equipment, power equipment, equipment lent to customers at no cost and handsets lent to customers at no cost.

Movements in PP&E (without allowance for materials and impairment of PP&E) are as follows:


	June 30,		December 31,
	2014		2013
	(6 months)		(12 months)
At the beginning of the year		11,403		9,049
CAPEX		1,806		3,964
Materials		229		363

Total PP&E additions 2,035				4,327
Currency translation adjustments		319		194
Consumption of materials		(108)		(147)
Decrease		(3)		(22)
Depreciation of the period/year		(1,106)		(1,998)

At the end of the period/year		12,540		11,403

Movements in the valuation allowance for materials are as follows:


	June 30,		December 31,
	2014		2013
	(6 months)		(12 months)
At the beginning of the year		(21)		(14)
Additions - fees for services, maintenance, and materials		(3)		(7)

At the end of the period/year		(24)		(21)

Movements in the impairment of PP&E are as follows:


	June 30,		December 31,
	2014		2013
	(6 months)		(12 months)
At the beginning of the year		(156)		-
Additions (i)		-		(172)
Uses (ii)		1		16

At the end of the period/year		(155)		(156)


(i)		Included in Gain on disposal and impairment of PP&E as of December 31, 2013.
(ii)		As of June 30, 2014, 1 was included in Depreciation of PP&E. As of December 31, 2013, 1 was included in Gain on disposal and impairment of PP&E and 15 in Depreciation of PP&E.


	June 30,		December 31,
j) Intangible assets	2014		2013
Licenses		590		589
SAC – mobile services		608		541
SAC – fixed services		71		64
Rights of use and exclusivity		219		227
Service connection or habilitation charges		97		96
Other intangible assets		2		2

		1,587		1,519

TELECOM ARGENTINA S.A.

Movements in Intangible assets are as follows:


	June 30,		December 31,
	2014		2013
	(6 months)		(12 months)
At the beginning of the year		1,519		1,514
CAPEX		459		887
Currency translation adjustments		14		8
Amortization of the period/year		(405)		(890)

At the end of the period/year		1,587		1,519


CURRENT LIABILITIES	June 30,	December 31,
k) Trade payables	2014	2013
For the acquisition of other assets and services	1,997	2,236
For the acquisition of inventory	1,576	1,399
For the acquisition of PP&E	1,481	2,271

Subtotal suppliers	5,054	5,906
Agent commissions	251	224

	5,305	6,130

l) Deferred revenues
On prepaid calling cards	332	293
On customer loyalty programs	56	51
On international capacity rental	44	42
On connection fees – Fixed Services	34	34
From CONATEL – Núcleo Mobile Services	4	3

	470	423

m) Financial debt - Núcleo
Bank loans	20	10
Accrued interest	6	5

	26	15

n) Salaries and social security payables
Vacation and bonuses	435	483
Social security payables	224	191
Termination benefits	73	67

	732	741

o) Income tax payables
Income tax payables	1,195	1,987
Income tax retentions and payments in advance	(539)	(1,189)
Law No. 26,476 Tax Regularization Regime	3	3

	659	801

p) Other taxes payables
VAT, net	227	143
Tax withholdings	117	130
Tax on SU	93	91
Internal taxes	69	73
Turnover tax	60	81
Regulatory fees	58	56
Municipal taxes	27	24
Tax on personal property – on behalf of shareholders	5	13
Perception Decree No.583/10 ENARD	12	12
Tax withholdings on Telecom Argentina’s dividends (Note 3)	-	44

	668	667

q) Dividends payables
Related parties – Nortel (Note 5.c)	334	-
Public offering	267	-
Related parties – ABC Telecomunicaciones S.A. (Note 5.c)	26	-

	627	-

r) Other liabilities
Compensation for directors and members of the Supervisory Committee	23	20
Legal fees	12	12
Guarantees received	7	13
Other	1	4

	43	49

TELECOM ARGENTINA S.A.


NON-CURRENT LIABILITIES	June 30,		December 31,
s) Trade payables	2014		2013
For the acquisition of PP&E		-		1

		-		1

t) Deferred revenues
On international capacity rental		286		301
On customer loyalty programs		83		75
On connection fees – Fixed Services		67		66
From CONATEL– Núcleo Mobile Services		12		11

		448		453

u) Financial debt - Núcleo
Bank loans		274		220

		274		220

v) Salaries and social security payables
Termination benefits		110		111
Bonuses		16		7

		126		118

w) Income tax payables
Law No. 26,476 Tax Regularization Regime		9		10

		9		10

x) Other liabilities
Pension benefits		79		64
Suppliers guarantees on third parties claims		2		4

		81		68

y) Deferred income tax asset and liability

Telecom Group’s deferred income tax asset and liability consist of the following:


	As of June 30, 2014										As of December 31, 2013
	Telecom Argentina		Personal		Núcleo		Telecom USA		Total		Argentina		Abroad

Tax loss carryforwards		-		-		-		-		-		-		(1)
Allowance for doubtful accounts		(49)		(71)		(7)		(1)		(128)		(98)		(4)
Provisions		(309)		(144)		-		-		(453)		(433)		-
PP&E		-		-		(15)		-		(15)		-		(12)
Inventory		-		(116)		-		-		(116)		(48)		-
Termination benefits		(58)		-		-		-		(58)		(58)		-
Government bonds valuation differences		-		(90)		-		-		(90)		(29)		-
Other deferred tax assets, net		(137)		-		-		-		(137)		(133)		-
Allowance for deferred tax assets		-		-		-		-		-		27		1

Total deferred tax assets		(553)		(421)		(22)		(1)		(997)		(772)		(16)

PP&E and intangible assets		377		323		-		1		701		716		-
Cash dividends from foreign companies		-		89		5		-		94		66		4
Other deferred tax liabilities, net		-		7		-		-		7		-		-

Total deferred tax liabilities		377		419		5		1		802		782		4

Net deferred tax liabilities / (assets)		(176)		(2)		(17)		-		(195)		10		(12)

Net deferred tax liabilities / (assets) as of December 31, 2013		(116)		126		(12)		-		(2)

z) Aging of assets and liabilities as of June 30, 2014


Date due	Cash and cash equivalents	Investments	Trade receivables	Deferred income tax assets	Other receivables
Total due	-	-	(c) 1,164	-	-
Not due
Third quarter 2014	2,582	489	2,200	-	426
Fourth quarter 2014	-	94	27	-	102
First quarter 2015	-	43	16	-	77
Second quarter 2015	-	-	10	-	84
July 2015 thru June 2016	-	412	4	-	155
July 2016 thru June 2017	-	450	3	-	62
July 2017 and thereafter	-	37	4	-	38
Not date due established	-	1	-	195	-
Total not due	2,582	1,526	2,264	195	944
Total	2,582	1,526	3,428	195	944

Balances bearing interest	2,420	1,525	1,190	-	-
Balances not bearing interest	162	1	2,238	195	944
Total	2,582	1,526	3,428	195	944

Average annual interest rate (%)	(a)	(b)	(d)	-	-

(a) 971 are assets in argentine pesos and bear between 1.76% and 28.55% (average 5.11%) and 1,449 are assets in foreign currency and bear between 0.21% and 2.33% (average 1.23%).

(b) 161 are assets in argentine pesos and bear between 1.95% and 27.13% (average 5.46%) and 1,364 are assets in foreign currency and bear between 0.3% and 7%.

(c) From due trade receivables 93 bear 50% over the Banco de la Nación Argentina 30-day interest rate paid by banks, 263 bear 50% over the Banco de la Nación Argentina notes payable discount rate and 3 bear 8.30%.

(d) From not due trade receivables 19 bear 28%, 28 bear 8.3%, 761 bear 37.5%, and 23 bear 36%.

TELECOM ARGENTINA S.A.


Date due	Trade payables		Deferred revenues		Financial debt		Salaries and social security payables		Income tax payables		Other taxes payables		Dividends payables		Other liabilities
Total due		(a) 226		-		-		-		-		-		-	-
Not due
Third quarter 2014		5,079		369		10		381		1		663		601	6
Fourth quarter 2014		-		35		3		107		1		-		26	1
First quarter 2015		-		33		9		163		1		-		-	1
Second quarter 2015		-		33		4		81		656		5		-	35
July 2015 thru June 2016		-		136		47		57		3		-		-	3
July 2016 thru June 2017		-		57		90		32		2		-		-	1
July 2017 and thereafter		-		255		137		37		4		-		-	77
Not date due established		-		-		-		-		-		-		-	-
Total not due		5,079		918		300		858		668		668		627	124
Total		5,305		918		300		858		668		668		627	124

Balances bearing interest		37		-		300		-		17		-		-	1
Balances not bearing interest		5,268		918		-		858		651		668		627	123
Total		5,305		918		300		858		668		668		627	124

Average annual interest rate (%)		(b)		-		9,3%		-		9%		-		-	6%

(a) As of the date of these consolidated financial statements, 30 were cancelled.

(b) From not due trade payables, 35 bear 9% and 2 bear 6%.

aa) Foreign currency assets and liabilities

The following table shows a breakdown of Telecom Group’s net assessed financial position exposure to currency risk as of June 30, 2014 and December 31, 2013.


06.30.14
Amount of foreign currency (i)		Exchange rate		Amount in local currency (ii)
Assets
US$	391		8.033	3,142
G	124,550		0.002	227
EURO	1		10.991	12
	Total assets			3,381
Liabilities
US$	(369)		8.133	(3,012)
G	(280,555)		0.002	(511)
EURO	(14)		11.148	(162)
	Total liabilities			(3,685)
	Net liabilities (iii)			(304)

(i) US$ = United States dollar; G= Guaraníes.

(ii) As foreign currency figures and their amount in argentine pesos are in millions, the calculation of the amount of the foreign currency by its exchange rate could not be exact.

(iii) Comprised of net financial asset in US$ equivalent to 130, a net financial liability in EURO equivalent to (150) and a net financial liability in G equivalent to (284).

In order to partially reduce this net liability position in foreign currency, the Telecom Group, as of June 30, 2014, entered into several NDF contracts to purchase a total amount of US$ 5 million and holds investments adjustable to the variation of the US$/$ exchange rate (dollar linked) by $152 and mutual funds whose main underlying asset are financial assets dollar linked for a total amount of $344 as of June 30, 2014. These instruments cover completely the net liability position in foreign currency of the Telecom Group as of June 30, 2014.


12.31.13
Amount of foreign currency (i)		Exchange rate		Amount in local currency (ii)
Assets
US$	315		6.481	2,038
G	114,349		0.002	160
EURO	1		8.939	13
	Total assets			2,211
Liabilities
US$	(500)		6.521	(3,262)
G	(281,392)		0.002	(396)
EURO	(17)		9.011	(153)
	Total liabilities			(3,811)
	Net liabilities (iii)			(1,600)

(i) US$ = United States dollar; G= Guaraníes.

(ii) As foreign currency figures and their amount in argentine pesos are in millions, the calculation of the amount of the foreign currency by its exchange rate could not be exact.

(iii) Comprised of net financial liabilities in US$ equivalent to (1,224), in EURO equivalent to (140) and in G equivalent to (236).

In order to partially reduce this net liability position in foreign currency, the Telecom Group, as of December 31, 2013, entered into several NDF contracts to purchase a total amount of US$138 million and holds investments adjustable to the variation of the US$/$ exchange rate (dollar linked) by $78 and mutual funds whose main underlying asset are financial assets dollar linked for a total amount of $300. The portion of the net liability position in foreign currency not covered by these instruments amounted to $328 as of December 31, 2013.

TELECOM ARGENTINA S.A.

ab) Information on the fair value of investments in Government bonds and argentine companies notes valued at amortized cost

Below are shown the investments in Government bonds and argentine companies’ notes valued at amortized cost and their respective fair value as of June 30, 2014 and December 31, 2013:


	As of June 30, 2014				As of December 31, 2013
Investments	Book value		Fair value *()**		Book value		Fair value (*)
Government bonds		876		1,153		221		313
Provincial government bonds in pesos		-		-		35		35
Provincial and municipal government bonds (dollar linked)		54		50		13		15
Argentine companies notes in pesos		10		11		31		31
Argentine companies notes (dollar linked)		98		115		65		71
Total		1,038		1,329		365		465

(*) According to IFRS selling costs are not deducted.

ac) Offsetting of financial assets and financial liabilities

The information required by the amendment to IFRS 7 as of June 30, 2014 and December 31, 2013 is as follows:


	As of June 30, 2014
	Trade receivables		Other receivables (1)		Trade payables		Other liabilities (1)		Salaries and social security payables
Current and non-current assets (liabilities) - Gross value		5,616		206		(7,495)		(47)		(859)
Compensation		(2,188)		(5)		2,190		2		1
Current and non-current assets (liabilities) – Book value		3,428		201		(5,305)		(45)		(858)








	As of December 31, 2013
	Trade receivables		Other receivables (1)		Trade payables		Other liabilities (1)		Salaries and social security payables
Current and non-current assets (liabilities) - Gross value		4,697		281		(7,850)		(60)		(860)
Compensation		(1,690)		(37)		1,719		7		1
Current and non-current assets (liabilities) – Book value		3,007		244		(6,131)		(53)		(859)

(1) Only includes financial assets and financial liabilities according to IFRS 7.


CONSOLIDATED INCOME STATEMENTS	Three-month periods ended June 30,				Six-month periods ended June 30,
	2014		2013		2014		2013
ad) Total revenues and other income	Profit (loss)
*Services*
Voice – Retail		704		668		1,386		1,297
Voice – Wholesale		228		191		453		376
Internet		777		616		1,503		1,191
Data		364		228		683		441

Subtotal Fixed Services		2,073		1,703		4,025		3,305

Voice – Retail *()**		1,250		1,127		2,595		2,338
Voice – Wholesale		488		518		976		966
Internet *()**		781		503		1,425		915
Data *()**		1,890		1,767		3,677		3,364

Subtotal Personal Mobile Services		4,409		3,915		8,673		7,583

Voice – Retail		148		90		280		177
Voice – Wholesale		28		43		54		65
Internet		107		62		207		124
Data		79		79		164		157

Subtotal Núcleo Mobile Services		362		274		705		523

Total service revenues (a)		6,844		5,892		13,403		11,411

*Equipment*
Fixed Services – excluding networks construction contracts		17		16		26		30
Fixed Services – networks construction contracts		1		-		5		-
Personal Mobile Services		1,236		717		2,115		1,235
Núcleo Mobile Services		21		24		36		37

Total equipment revenues (b)		1,275		757		2,182		1,302

Total revenues (a) + (b)		8,119		6,649		15,585		12,713

(*) 1H13 comparative figures include certain reclassifications originated in a revenues allocation criteria improvement of mobile postpaid plans. According to this, in 1H13 mobile Voice Retail and Data revenues were adjusted downwards by $7 and $36, respectively, while mobile Internet revenues were adjusted upwards by $43. The same effects have been applied in the 2Q13 comparative figures, showing a decrease of $4 and $18 in mobile Voice Retail and Data revenues, respectively, offset by an increase of $22 in mobile Internet revenues.

TELECOM ARGENTINA S.A.


	Three-month periods ended June 30,		Six-month periods ended June 30,
	2014	2013	2014	2013
*Other income*	Profit (loss)
Fixed Services	8	4	17	12
Personal Mobile Services	12	-	13	1
Total other income (c)	20	4	30	13



Total revenues and other income (a)+(b)+(c)	8,139	6,653	15,615	12,726

Telecom Group’s service revenues by type of service (regardless of the segment originates) are as follows:


	Six-month periods ended June 30,
	2014		%		2013		%
Voice Retail		4,261		32		3,812		34
Voice Wholesale		1,483		11		1,407		12

Total Voice		5,744		43		5,219		46

Internet		3,135		23		2,230		19
Data		4,524		34		3,962		35

Total service revenues		13,403		100		11,411		100

ae) Operating costs

Operating expenses disclosed by nature of expense amounted to $12,997 and $10,666 for the six-month periods ended June 30, 2014 and 2013, respectively.

The main components of the operating expenses are the following:


	Three-month periods ended June 30,		Six-month periods ended June 30,
	2014	2013	2014	2013
	Profit (loss)
Employee benefit expenses and severance payments
Salaries	(976)	(735)	(1,805)	(1,377)
Social security expenses	(306)	(220)	(566)	(415)
Severance indemnities and termination benefits	(46)	(32)	(122)	(43)
Other employee benefits	(26)	(18)	(44)	(38)
	(1,354)	(1,005)	(2,537)	(1,873)


Interconnection costs and other telecommunication charges
Fixed telephony interconnection costs	(72)	(59)	(137)	(114)
Cost of international outbound calls	(46)	(32)	(100)	(69)
Lease of circuits and use of public network	(69)	(56)	(135)	(98)
Mobile services - charges for roaming	(104)	(177)	(237)	(312)
Mobile services - charges for TLRD	(214)	(198)	(411)	(413)
	(505)	(522)	(1,020)	(1,006)


Fees for services, maintenance, materials and supplies
Maintenance of hardware and software	(105)	(81)	(208)	(161)
Technical maintenance	(184)	(117)	(354)	(229)
Service connection fees for fixed lines and Internet lines	(55)	(50)	(103)	(87)
Service connection fees capitalized as SAC	1	1	2	3
Service connection fees capitalized as Intangible assets	8	8	15	14
Other maintenance costs	(70)	(59)	(137)	(112)
Obsolescence of inventories – Personal Mobile Services	(30)	(39)	(62)	(57)
Call center fees	(280)	(184)	(499)	(341)
Other fees for services	(122)	(123)	(239)	(227)
Compensation for Directors and Supervisory Committee members	(7)	(14)	(14)	(17)
	(844)	(658)	(1,599)	(1,214)


Taxes and fees with the Regulatory Authority
Turnover tax	(437)	(356)	(844)	(680)
Taxes with the Regulatory Authority	(176)	(155)	(346)	(300)
Tax on deposits to and withdrawals from bank accounts	(91)	(49)	(171)	(110)
Municipal taxes	(52)	(43)	(105)	(83)
Other taxes	(53)	(43)	(98)	(75)
	(809)	(646)	(1,564)	(1,248)

TELECOM ARGENTINA S.A.


	Three-month periods ended June 30,				Six-month periods ended June 30,
	2014		2013		2014	2013
Commissions	Profit (loss)
Agent commissions		(477)		(363)	(854)	(721)
Agent commissions capitalized as SAC		229		115	362	218
Distribution of prepaid cards commissions		(139)		(150)	(281)	(289)
Collection commissions		(164)		(101)	(295)	(193)
Other commissions		(26)		(23)	(50)	(39)

		(577)		(522)	(1,118)	(1,024)

Cost of equipments and handsets
Inventory balance at the beginning of the period/year		(1,154)		(564)	(857)	(641)
Plus:
Purchases		(1,158)		(1,069)	(2,293)	(1,657)
Deferred costs from SAC		26		61	57	164
Decreases from allowance for obsolescence		11		3	33	4
Mobile handsets lent to customers at no cost		10		2	17	4
Decreases not charged to material cost		-		2	3	3
Less:
Inventory balance at period end		1,147		835	1,147	835

Cost of equipments and handsets (i)		(1,118)		(730)	(1,893)	(1,288)

(i) Include 4 related to equipment constructions costs as of June 30, 2014. No costs were recorded for this concept as of June 30, 2013.
Advertising
Media advertising		(109)		(75)	(190)	(160)
Fairs and exhibitions		(34)		(20)	(82)	(56)
Other advertising costs		(34)		(37)	(69)	(70)

		(177)		(132)	(341)	(286)

Cost of VAS
Cost of mobile VAS		(213)		(168)	(400)	(297)
Cost of fixed VAS		(2)		(2)	(6)	(4)

		(215)		(170)	(406)	(301)

Recovery of restructuring costs
Dismissals indemnities (ii)		-		8	-	8

		-		8	-	8

(ii) Corresponds to the recovery of the provision related to the Restructuring Plan finished in June 2013.
Other operating costs
Transportation, freight and travel expenses		(139)		(114)	(263)	(207)
Delivery costs capitalized as SAC		13		10	23	17
Rent of buildings and cell sites		(102)		(90)	(193)	(155)
Energy, water and others		(90)		(92)	(183)	(196)
International and satellite connectivity		(35)		(36)	(67)	(67)

		(353)		(322)	(683)	(608)

D&A
Depreciation of PP&E		(568)		(488)	(1,106)	(955)
Amortization of SAC and service connection charges		(198)		(213)	(393)	(432)
Amortization of other intangible assets		(6)		(7)	(12)	(12)

		(772)		(708)	(1,511)	(1,399)

Gain on disposal of PP&E and impairment of PP&E
Gain on disposal of PP&E		6		-	10	7
Impairment of PP&E (iii)		-		(172)	-	(172)

		6		(172)	10	(165)

(iii) Includes 50 corresponding to the impairment of a commercial system of Personal, 109 corresponding to the impairment of construction in progress and materials of Telecom Argentina and 13 corresponding to prepaid expenses related to the write-down assets of Telecom Argentina as of June 30, 2013. The operating expenses disclosed by function are as follows:
Operating costs		(4,351)		(3,397)	(8,095)	(6,386)
Administration costs		(351)		(299)	(648)	(500)
Commercialization costs		(2,137)		(1,783)	(4,162)	(3,518)
Other expenses – provisions (Note 6.b)		(65)		(57)	(102)	(97)
Gain on disposal of PP&E and impairment of PP&E		6		(172)	10	(165)

		(6,898)		(5,708)	(12,997)	(10,666)

TELECOM ARGENTINA S.A.


	Three-month periods ended June 30,			Six-month periods ended June 30,
	2014		2013	2014		2013
af) Financial results	Profit (loss)
Finance income
Interest on time deposits		103	150		260	255
Gains on investments (Argentine companies notes and governments bonds)		30	3		73	8
Gains on Mutual Funds		38	8		74	17
Interest on related parties (Note 5.d)		-	1		-	1
Interest on receivables		44	31		80	56
Foreign currency exchange gains		52	64		534	124
Gain on NDF (Note 10.14)		(3)	-		42	-
Other		-	3		-	4
Total finance income		264	260		1,063	465
Finance expenses
Interest on loans - Núcleo		(6)	(4)		(12)	(8)
Interest on salaries and social security payable, other taxes payables and accounts payable		(11)	(4)		(20)	(8)
Interest on provisions		(39)	(32)		(70)	(43)
Present value effect of salaries and social security payable, other taxes payables and other liabilities		(2)	(2)		(3)	(5)
Foreign currency exchange losses *()**		6	(139)		(756)	(186)
Losses on NDF (Note 10.14)		(26)	-		(48)	-
Other		-	-		-	(1)
Total finance expenses		(78)	(181)		(909)	(251)
		186	79		154	214

(*) Include 202 and 42 of foreign currency exchange losses generated by the acquisition of US$ 85 million and US$ 15 million of Government bonds in the six-month periods ended June 30, 2014 and 2013, respectively.

ag) Income taxes

Income tax expense for the six-month periods ended June 30, 2014 and 2013 consists of the following:


	Profit (loss)
	The Company		Telecom USA		Personal		Núcleo		Total
Current tax expense		(266)		(3)		(874)		(14)		(1.157)
Estimated income tax payable on cash dividends from foreign companies		-		-		(15)		-		(15)
Fiscal year 2013 return adjustment		5		-		-		-		5
Deferred tax benefit		60		-		170		1		231

Income tax expense as of June 30, 2014		(201)		(3)		(719)		(13)		(936)

Current tax expense		(222)		(2)		(733)		(13)		(970)
Estimated income tax payable on cash dividends from foreign companies		-		-		(10)		-		(10)
Fiscal year 2012 return adjustment		-		-		(3)		-		(3)
Deferred tax benefit		73		-		111		2		186
Valuation allowance		-		-		(2)		-		(2)

Income tax expense as of June 30, 2013		(149)		(2)		(637)		(11)		(799)

Income tax expense for the periods differed from the amounts computed by applying the Company’s statutory income tax rate to pre-tax income as a result of the following:


	In Argentina		Abroad		Total
	Profit (loss)
Pre-tax income on a separate return basis		4,140		116	4,256
Non taxable items – Income from investments		(1,484)		-	(1,484)
Non taxable items – Other		20		(23)	(3)
Subtotal		2,676		93	2,769
Weighted statutory income tax rate		35%		(**)
Income tax expense at weighted statutory tax rate		(937)		(16)	(953)
Income tax on dividends from foreign companies		(15)		-	(15)
Fiscal year 2013 return adjustment		5		-	5
Recovery of valuation allowance		27		-	27
Income tax expense as of June 30, 2014		(920)		(16)	(936)

TELECOM ARGENTINA S.A.


	In Argentina	Abroad		Total
	Profit (loss)
Pre-tax income on a separate return basis	3,403		79		3,482
Non taxable items – Income from investments	(1,209)		-		(1,209)
Non taxable items – Other	2		(6)		(4)
Subtotal	2,196		73		2,269
Weighted statutory income tax rate	35%		(*)
Income tax expense at weighted statutory tax rate	(768)		(13)		(781)
Income tax on dividends from foreign companies	(10)		-		(10)
Other changes in tax assets and liabilities	(3)		-		(3)
Fiscal year 2012 return adjustment	(3)		-		(3)
Changes in valuation allowance	(2)		-		(2)
Income tax expense as of June 30, 2013	(786)		(13)		(799)

(*) Effective income tax rate based on weighted statutory income tax rate in the different countries where the Telecom Group has operations. The statutory tax rate in Argentina was 35% for all the periods presented, in Paraguay was 10% plus an additional rate of 5% in case of payment of dividends for all the periods presented, in Uruguay the statutory tax rate was 25% for 2013 and in the USA the effective tax rate was 39.5%, for all the periods presented, respectively.

NOTE 3 – SUPPLEMENTARY CASH FLOW INFORMATION

•

Changes in assets/liabilities components:


	Six-month periods ended June 30,
	2014			2013
Net (increase) decrease in assets
Trade receivables		(620)			(444)
Other receivables		(86)			8
Other receivables related parties (Note 5.c)		31			(216)
Inventories		(326)			(199)
Investments not considered cash and cash equivalents		51			(48)

		(950)			(899)

Net (decrease) increase in liabilities
Trade payables		(211)			807
Deferred revenues		26			54
Salaries and social security payables		(49)			(126)
Other taxes payables		55			49
Other liabilities		6			18
Provisions		(52)			(28)

		(225)			774


Income tax paid consists of the following:

Tax returns and payments in advance		(1,198	)		(774)
Other payments		(99	)		(68)

		(1,297	)		(842)


• *Main non-cash operating transactions:*

VAT credit balances offset with income taxes payments		-			8
SAC acquisitions offset with trade receivables		187			88

• *Most significant investing activities:*

PP&E acquisitions include:

PP&E additions (Note 2.i)		(2,035)			(1,289)
Plus:
Payments of trade payables originated in prior periods acquisitions		(1,419)			(743)
Less:
Acquisition of PP&E through incurrence of trade payables		779			603
Mobile handsets lent to customers at no cost (i)		17			4

		(2,658)			(1,425)

(i)

Under certain circumstances, Personal and Núcleo lend handsets to customers at no cost pursuant to term agreements.

Handsets remain the property of the companies and customers are generally obligated to return them at the end of the respective agreements.

TELECOM ARGENTINA S.A.

Intangible assets acquisitions include:


	Six-month periods ended June 30,
	2014	2013
Intangible assets additions (Note 2.j)	(459)	(417)
Plus:
Payments of trade payables originated in prior periods acquisitions	(101)	(80)
SAC acquisitions offset with trade receivables	(187)	(88)
Less:
Acquisition of intangible assets through incurrence of trade payables	269	201

	(478)	(384)

The following table presents the cash flows from purchases, sales and maturities of securities which were not considered cash equivalents in the statement of cash flows:


Investments over 90 days maturity	(483)	(329)
Argentine companies notes acquisition	(16)	-
Government bonds acquisition	(804)	(34)
Argentine companies notes collection	25	3
Government bonds collection	67	11
Loan to Nortel	-	(6)

	(1,211)	(403)

•

Financing activities components:

The following table presents the financing activities components of the consolidated statements of cash flows:


Debt proceeds - Núcleo	-	43

Total financial debt proceeds	-	43

Payment of bank loans – Núcleo	(6)	(18)

Total payment of financial debt	(6)	(18)

Payment of interest on bank loans – Núcleo	(13)	(8)

Total payment of interest	(13)	(8)

Acquisition of treasury shares- Telecom Argentina	-	(83)

Cash dividends from Telecom Argentina

The Company’s Ordinary Shareholders’ Meeting held on April 29, 2014, approved, in its second tranche of deliberations held on May 21, 2014, the payment of cash dividends in two equal installments of $601. The first installment was made available to shareholders on June 10, 2014. The amount paid includes: (i) income tax withholdings on dividends paid to shareholders in the amount of $11 and (ii) tax on personal property – on behalf of shareholders withholdings in the amount of $10. The second installment will be paid in September 2014 on the date the Board of Directors provides.

During 1Q14 the Company paid $44 related to tax withholdings on dividends paid to its shareholders by the end of 2013 in order to comply with its tax obligations. The amounts paid finally corresponded to: (i) income tax withholdings on dividends paid to its shareholders during December 2013 in the amount of $17 and (ii) dividends paid to its shareholders in the amount of $27.

Cash dividends from Núcleo

Núcleo’s shareholders, at their meeting held on March 28, 2014, approved the distribution of cash dividends for an amount equivalent to $160. The shareholders also decided to delegate in Nucleo’s Board of Directors of the authority to determine the amount and time for the payments of these cash dividends.

On May 5, 2014 Nucleo’s Board of Directors determined the following schedule of payments for the cash dividends:


Month of dividends payment	Dividends corresponding to Personal	Dividends corresponding to non- controlling shareholders – ABC Telecomunicaciones	Total
May 2014	54	26	80
October 2014	54	26	80

*Total ()**	108	52	160

(*) Correspond to 90,000 millions of Guaraníes approved by the Ordinary Shareholders’ Meeting of Núcleo, translated to argentine pesos at the exchange rate of the date of its approval.

TELECOM ARGENTINA S.A.

The Ordinary Shareholders’ Meeting of Núcleo held on March 22, 2013 approved the following cash dividend payment:


Month of dividends payment	Dividends corresponding to Personal	Dividends corresponding to non- controlling shareholders – ABC Telecomunicaciones	Total
May 2013	34	16	50
October 2013	34	17	51

*Total ()**	68	33	101

(*) Correspond to 80,000 millions of Guaraníes approved by the Ordinary Shareholders’ Meeting of Núcleo, translated to argentine pesos at the exchange rate of the date of its approval.

NOTE 4 – SEGMENT INFORMATION

Until fiscal year ended December 31, 2013, the Telecom Group carried out its activities through six companies, each identified as an operating segment. On February 19, 2014 Personal sold its equity interest in Springville; which results, assets and liabilities were included in the “Personal Mobile Services” segment and which figures were immaterial, as disclosed in Note 10.15 to the consolidated financial statements. Therefore, as from June 30, 2014, the Telecom Group carries out its activities through the five remaining companies which were consolidated by the end of fiscal year 2013 (Note 1.a).

The Telecom Group has combined the operating segments into three reportable segments: “Fixed Services”, “Personal Mobile Services” and “Núcleo Mobile Services” based on the nature of products provided by the entities and taking into account the regulatory and economic framework in which each entity operates.

TELECOM ARGENTINA S.A.

Segment financial information for the six-month periods ended June 30, 2014 and 2013 was as follows:

For the six-month period ended June 30, 2014

Income statement


	Fixed		Mobile Services						Elimi-
	Services		Personal		Núcleo		Subtotal		nations		Total
Total revenues and other income (1)		4,834		10,856		746		11,602		(821)	15,615
Employee benefit expenses and severance payments		(1,826)		(654)		(57)		(711)		-	(2,537)
Interconnection costs and other telecommunication charges		(323)		(1,223)		(92)		(1,315)		618	(1,020)
Fees for services, maintenance, materials and supplies		(681)		(966)		(65)		(1,031)		113	(1,599)
Taxes and fees with the Regulatory Authority		(348)		(1,193)		(23)		(1,216)		-	(1,564)
Commissions		(101)		(974)		(70)		(1,044)		27	(1,118)
Cost of equipments and handsets		(35)		(1,814)		(44)		(1,858)		-	(1,893)
Advertising		(77)		(227)		(37)		(264)		-	(341)
Cost of VAS		(6)		(374)		(26)		(400)		-	(406)
Provisions		(80)		(22)		-		(22)		-	(102)
Bad debt expenses		(52)		(171)		(10)		(181)		-	(233)
Other operating expenses		(348)		(358)		(40)		(398)		63	(683)
Operating income before D&A		957		2,880		282		3,162		-	4,119
Depreciation of PP&E		(510)		(454)		(142)		(596)		-	(1,106)
Amortization of intangible assets		(68)		(309)		(28)		(337)		-	(405)
Gain on disposal of PP&E		9		1		-		1		-	10
Operating income		388		2,118		112		2,230		-	2,618
Financial results, net		191		(34)		(3)		(37)		-	154
Income before income tax expense		579		2,084		109		2,193		-	2,772
Income tax expense, net		(204)		(719)		(13)		(732)		-	(936)
Net income		375		1,365		96		1,461		-	1,836


Net income attributable to Telecom Argentina (Controlling Company)											1,805
Net income attributable to non-controlling interest											31
											1,836


(1)
Service revenues	4,025	8,673	705	9,378	-	13,403
Equipment revenues	31	2,115	36	2,151	-	2,182
Other income	17	13	-	13	-	30
Subtotal third party revenues	4,073	10,801	741	11,542	-	15,615
Intersegment revenues	761	55	5	60	(821)	-
Total revenues and other income	4,834	10,856	746	11,602	(821)	15,615

q Statement of financial position information
PP&E	7,011	4,005	1,345	5,350	-	12,361
Intangible assets, net	373	1,154	61	1,215	(1)	1,587
Capital expenditures on PP&E (a)	834	876	96	972	-	1,806
Capital expenditures on intangible assets (b)	65	365	29	394	-	459
Total capital expenditures (a)+(b)	899	1,241	125	1,366	-	2,265
Total additions on PP&E and intangible assets	1,131	1,229	134	1,363	-	2,494
Net financial asset (debt)	1,650	2,411	(254)	2,157	-	3,807

Geographic information


	Total revenues and other income				Total non-current assets
	Breakdown by location of operations		Breakdown by location of the Group´s customers		Breakdown by location of operations
Argentina		14,823		14,678	13,864
Abroad		792		937	1,445
Total		15,615		15,615	15,309

TELECOM ARGENTINA S.A.

For the six-month period ended June 30, 2013

Income statement


		Fixed		Mobile Services					Elimi-
		Services		Personal	Núcleo		Subtotal		nations		Total
Total revenues and other income (1)			3,955	8,874		565		9,439		(668)	12,726
Employee benefit expenses and severance payments			(1,336)	(496)		(41)		(537)		-	(1,873)
Interconnection costs and other telecommunication charges			(259)	(1,144)		(93)		(1,237)		490	(1,006)
Fees for services, maintenance, materials and supplies			(525)	(749)		(49)		(798)		109	(1,214)
Taxes and fees with the Regulatory Authority			(271)	(960)		(17)		(977)		-	(1,248)
Commissions			(85)	(912)		(53)		(965)		26	(1,024)
Cost of equipments and handsets			(34)	(1,212)		(42)		(1,254)		-	(1,288)
Advertising			(60)	(193)		(33)		(226)		-	(286)
Cost of VAS			(4)	(282)		(15)		(297)		-	(301)
Provisions			(50)	(47)		-		(47)		-	(97)
Bad debt expenses			(40)	(120)		(5)		(125)		-	(165)
Recovery of restructuring costs			8	-		-		-		-	8
Other operating expenses			(328)	(297)		(26)		(323)		43	(608)
Operating income before D&A			971	2,462		191		2,653		-	3,624
Depreciation of PP&E			(444)	(422)		(89)		(511)		-	(955)
Amortization of intangible assets			(51)	(376)		(17)		(393)		-	(444)
Gain on disposal of PP&E and impairment of PP&E			(116)	(50)		1		(49)		-	(165)
Operating income			360	1,614		86		1,700		-	2,060
Financial results, net			72	152		(10)		142		-	214
Income before income tax expense			432	1,766		76		1,842		-	2,274
Income tax expense, net			(151)	(637)		(11)		(648)		-	(799)
Net income			281	1,129		65		1,194		-	1,475

	Net income attributable to Telecom Argentina (Controlling Company)										1,454
	Net income attributable to non-controlling interest										21
											1,475

	(1)
	Service revenues		3,305	7,583		523		8,106		-	11,411
	Equipment revenues		30	1,235		37		1,272		-	1,302
	Other income		12	1		-		1		-	13
	Subtotal third party revenues		3,347	8,819		560		9,379		-	12,726
	Intersegment revenues		608	55		5		60		(668)	-
	Total revenues and other income		3,955	8,874		565		9,439		(668)	12,726

	q Statement of financial position information
	PP&E		5,508	2,801		852		3,653		-	9,161
	Intangible assets, net		372	1,084		33		1,117		(1)	1,488
	Capital expenditures on PP&E (a)		620	420		97		517		-	1,137
	Capital expenditures on intangible assets (b)		51	345		21		366		-	417
	Total capital expenditures (a)+(b)		671	765		118		883		-	1,554
	Total additions on PP&E and intangible assets		789	768		149		917		-	1,706
	Net financial asset (debt)		1,074	4,164		(144)		4,020		-	5,094

Geographic information


	Total revenues and other income				Total non-current assets
	Breakdown by location of operations		Breakdown by location of the Group´s customers		Breakdown by location of operations
Argentina		12,136		12,041	10,177
Abroad		590		685	912
Total		12,726		12,726	11,089

TELECOM ARGENTINA S.A.

NOTE 5 – RELATED PARTY BALANCES AND TRANSACTIONS

a)	Controlling group

Nortel, residing in A. Moreau de Justo 50 - 11th floor –Ciudad Autónoma de Buenos Aires, holds 54.74% stake in the Company, meaning that exercises control of the Company in the terms of Art. 33 of Law No. 19,550. As of June 30, 2014, Nortel owns all of the Class “A” Preferred shares (51% of total shares of the Company) and 7.64% of the Class “B” Preferred shares (3.74% of total shares of the Company).

As a result of the Company’s Treasury Shares Acquisition Process as of June 30, 2014, Nortel’s equity interest in Telecom Argentina amounts to 55.60% of the outstanding shares. Pursuant to Section 221 of the LSC, the rights of treasury shares shall be suspended until such shares are sold, and shall not be taken into account to determine the quorum or the majority of votes at the Shareholders’ Meetings.

All of the common shares of Nortel belong to Sofora. As of June 30, 2014 these shares represent 78.38% of the capital stock of Nortel.

Sofora’s shares belong to Telecom Italia S.p.A, (32.5%), to Telecom Italia International N.V. (35.5%), (Telecom Italia S.p.A. y Telecom Italia International N.V., jointly, the “Telecom Italia Group”) and to W de Argentina - Inversiones S.L. (32%).

During 2011, Telecom Italia International N.V. acquired 8% of all Nortel Preferred Class “B” Shares and Telecom Argentina Class “B” shares, representing 1.58 % of Telecom Argentina’s capital stock, through Tierra Argentea S.A. (Tierra Argentea), its controlled company incorporated in Argentina.

On November 14, 2013, Telecom Italia S.p.A y Telecom Italia International N.V. (jointly, the “Sellers”) and Tierra Argentea (a company controlled by the Sellers) announced the acceptance of an offer by the Fintech Group to acquire the controlling stake held by the Telecom Italia Group in Telecom Argentina, owned by the Sellers, through its subsidiaries Sofora, Nortel and Tierra Argentea.

On December 10, 2013, Tierra Argentea transferred to the Fintech Group Telecom Argentina’s Class B shares representing 1.58% of its capital stock and Nortel’s ADRs representing 8% of the total Nortel’s Preferred Class “B” Shares.

The closing of the sale of the shares held by the Telecom Italia Group in Sofora is conditional upon obtaining certain required regulatory approvals.

The economic rights of Telecom Italia Group in Telecom Argentina amounted to 19.30% as of June 30, 2014.

More information is available in “Relevant Facts” section of the CNV at www.cnv.gob.ar, and in “Company filings search” section (Telecom Italia S.p.A) of the SEC in www.sec.gov.

b)	Related parties

For the purposes of these financial statements, related parties are those individuals or legal entities which are related (in terms of IAS 24) to the Telecom Italia Group or W de Argentina - Inversiones SL, except Nortel and companies under sect. 33 of Law No. 19,550 (subsidiaries or affiliates).

Under IAS 24, Telefónica, S.A. (of Spain) and its controlled companies, including Telefónica de Argentina S.A. and Telefónica Móviles de Argentina S.A. are not considered related parties. As of the date of these consolidated financial statements, such situation has been confirmed by the commitments assumed before the CNDC to ensure the separation and independence between the Telecom Italia Group and the Telecom Group, on one hand, and Telefónica S.A. (of Spain) and its controlled companies, on the other, with respect to their activities in the Argentine telecommunications market, such as it has been corroborated by the applicable authorities.

The Telecom Group has transactions in the normal course of business with certain related parties. For the periods presented, the Telecom Group has not conducted any transactions with executive officers and/or persons related to them.

TELECOM ARGENTINA S.A.

c)	Balances with related parties

—

Direct parent company


		June 30,	December 31,
CURRENT LIABILITIES		2014	2013
Dividends payables
Nortel		334		-

		334		-

— Related parties

CURRENT ASSETS	Type of related party	June 30,	December 31,
Trade receivables		2014	2013
Telecom Italia Sparkle S.p.A. (a)	Other related party	2		1
TIM Participacoes S.A. (a)	Other related party	2		-
Latin American Nautilus Argentina S.A. (a)	Other related party	3		1
Telecom Italia S.p.A. (a)	Indirect parent company	4		-
Caja de Seguros (a) (b)	Other related party	1		-

		12		2

Other receivables
Latin American Nautilus Ltd. (a) (c)	Other related party	64		76
Caja de Seguros S.A. (a) (b)	Other related party	34		27

		98		103

NON-CURRENT ASSETS
Other receivables
Latin American Nautilus Ltd. (a) (c)	Other related party	62		88

		62		88

CURRENT LIABILITIES
Trade payables
Italtel Group (a)	Other related party	63		176
Latin American Nautilus Ltd. (a)	Other related party	8		3
Telecom Italia S.p.A. (a)	Indirect parent company	4		12
Telecom Italia Sparkle S.p.A. (a)	Other related party	9		9
Latin American Nautilus USA Inc. (a)	Other related party	2		2
Latin American Nautilus Argentina S.A. (a)	Other related party	1		-
TIM Participacoes S.A. (a)	Other related party	5		1
Caja de Seguros S.A. (a) (b)	Other related party	2		38
La Caja Aseguradora de Riesgos del Trabajo ART S.A. (a) (b)	Other related party	7		6

		101		247

Dividends payables
ABC Telecomunicaciones S.A.	Other related party	26		-

		26		-

d) Transactions with related parties

—

Direct parent company


	Transaction description		Six-month periods ended June 30,
Financial results			2014		2013
Nortel	Interest			-	1

		Total financial results		-	1

— Related parties
	Transaction description	Type of related party	Six-month periods ended June 30,
			2014		2013
Services rendered			Profit (loss)

TIM Participacoes S.A. (a)	Voice – Wholesale	Other related party		8	10
Telecom Italia Sparkle S.p.A. (a)	Voice – Wholesale	Other related party		15	7
Telecom Italia S.p.A. (a)	Voice – Wholesale	Indirect parent company		2	2
Latin American Nautilus Argentina S.A. (a)	Voice – Wholesale	Other related party		4	-
Caja de Seguros S.A. (a) (b)	Equipment	Other related party		177	106
Caja de Seguros S.A. (a) (b)	Voice – Retail	Other related party		43	29

		Total services rendered		249	154

TELECOM ARGENTINA S.A.

Transaction

description

Type of related party

Six-month periods ended

June 30,

2014

2013

Services received

Profit (loss)

Latin American Nautilus Ltd. (a)

International outbound calls and data

Other related party

(67)

(52)

Grupo Italtel (a)

Maintenance, materials and supplies

Other related party

(22)

(20)

Telecom Italia Sparkle S.p.A. (a)

International outbound calls and other

Other related party

(25)

(14)

Telecom Italia S.p.A. (a)

Fees for services and roaming

Indirect parent company

(4)

(11)

TIM Participacoes S.A. (a)

Roaming

Other related party

(18)

(7)

Latin American Nautilus Argentina S.A. (a)

International outbound calls

Other related party

(5)

(4)

Latin American Nautilus USA Inc. (a)

International outbound calls

Other related party

(3)

La Caja Aseguradora de Riesgos del

Trabajo ART S.A. (a) (b)

Salaries and social security

Other related party

(28)

(23)

Caja de Seguros S.A. (a) (b)

Insurance

Other related party

(11)

(9)

La Estrella Seguros de Retiro S.A. (a) (b)

Insurance

Other related party

(4)

Total services received

(187)

(147)

Purchases of PP&E

Grupo Italtel (a)

Other related party

Total purchases of PP&E

(a)	Such companies relate to Telecom Italia Group.

(b)	Such companies relate to W de Argentina - Inversiones S.L.

(c)	Corresponds to an agreement of lease-mode IP international capacity until December 2016. The Company paid approximately $267.6 on February 2013 for this agreement.

The transactions discussed above were made on terms no less favorable to the Telecom Group than would have been obtained from unaffiliated third parties. The Board of Directors approved transactions representing more than 1% of the total shareholders’ equity of the Company, after being approved by the Audit Committee in compliance with Law No. 26,831.

e) Key Managers

Compensation for the Key Managers, including social security contribution, amounted to $40 and $30 for the six-month periods ended June 30, 2014 and 2013, respectively, and was recorded as expenses under the item line “Employee benefits expenses and severance payments”. The total expense remuneration is comprised as follows:


	Three-month periods ended June 30,				Six-month periods ended June 30,
	2014		2013		2014		2013
Salaries (*)		7		7		17		14
Variable compensation (*)		4		4		9		8
Social security contributions		3		3		7		5
Termination benefits		-		3		7		3

		14		17		40		30

(*) Gross compensation. Social security and income tax retentions are in charge of the employee.

As of June 30, 2014 and December 31, 2013, an amount of $11 and $25 remained unpaid, respectively.

As of June 30, 2014 and 2013, the Telecom Group has recorded $8 liabilities, respectively, for the fees of its Board of Directors members. The members and alternate members of the Board of Directors do not hold executive positions in the Company or Company’s subsidiaries.

NOTE 6 – COMMITMENTS AND CONTINGENCIES OF THE TELECOM GROUP

a)	Purchase commitments

The Telecom Group has entered into various purchase orders amounting in the aggregate to approximately $4,918 as of June 30, 2014 (of which $1,891 corresponds to PP&E commitments), primarily related to the supply of switching equipment, external wiring, infrastructure agreements, inventory and other service agreements.

TELECOM ARGENTINA S.A.

b)	Contingencies

The Telecom Group is a party to several civil, tax, commercial, labor and regulatory proceedings and claims that have arisen in the ordinary course of business. In order to determine the proper level of provisions, Management of the Company, based on the opinion of its internal and external legal counsel, assesses the likelihood of any adverse judgments or outcomes related to these matters as well as the range of probable losses that may result from the potential outcomes. A determination of the amount of provisions required, if any, is determined after an analysis of each individual case.

The determination of the required provisions may change in the future due to new developments or unknown facts at the time of the evaluation of the claims or changes as a matter of law or legal interpretation. Consequently, as of June 30, 2014, the Telecom Group has recorded provisions in an aggregate amount of $1,406 to cover potential losses under these claims ($85 for regulatory contingencies deducted from assets and $1,321 included under provisions) and certain amounts deposited in the Company’s bank accounts have been restricted as to their use due to some judicial proceedings. As of June 30, 2014, these restricted funds totaled $44 (included under “Other receivables” item line in the consolidated statement of financial position).

Provisions consist of the following:


	Balances	Additions		Reclassi- fications	Decreases		Balances
	as of December 31, 2013	Capital	Interest (ii)	Reclassi- fications	Classified to liability	Payments	as of June 30, 2014
Current
Provision for civil and commercial proceedings	133	-	-	(17)	(47)	(7)	62
Provision for labor claims	44	-	-	34	-	(36)	42
Provision for regulatory, tax and other matters claims	47	-	-	23	-	(9)	61
Total current provisions	224	-	-	40	(47)	(52)	165
Non-current
Provision for civil and commercial proceedings	139	24	17	17	-	-	197
Provision for labor claims	263	10	25	(34)	-	-	264
Provision for regulatory, tax and other matters claims	525	57	24	(23)	-	-	583
Asset retirement obligations	106	2	4	-	-	-	112
Total non-current provisions	1,033	(i) 93	70	(40)	-	-	1,156

Total provisions	1,257	93	70	-	(47)	(52)	1,321



	Balances	Additions (reversals)		Reclassi- fications	Decreases		Balances
	as of December 31, 2012	Capital	Interest (ii)	Reclassi- fications	Classified to liability	Payments	as of June 30, 2013
Current
Provision for civil and commercial proceedings	33	-	-	49	-	(3)	79
Provision for labor claims	32	-	-	14	-	(15)	31
Restructuring	54	(iv) (8)	-	-	(46)	-	-
Provision for regulatory, tax and other matters claims	15	-	-	42	-	(10)	47
Total current provisions	134	(8)	-	105	(46)	(28)	157
Non-current
Provision for civil and commercial proceedings	145	33	5	(49)	-	-	134
Provision for labor claims	255	16	10	(14)	-	-	267
Provision for regulatory, tax and other matters claims	432	48	24	(42)	-	-	462
Asset retirement obligations	75	-	4	-	-	-	79
Total non-current provisions	907	(iii) 97	43	(105)	-	-	942

Total provisions	1,041	89	43	-	(46)	(28)	1,099

(i)	102 included in Provisions, 2 included in currency translation adjustment and a recovery of (11) for Personal’s obligations prescriptions included in Other income.

(ii)	Included in Finance costs, in the line Interest on provisions

(iii)

Included in Provisions.

(iv)	The restructuring plan was implemented during 4Q12 and concluded in 2Q13.

TELECOM ARGENTINA S.A.

NOTE 7 – EQUITY

Equity includes:


	June 30, 2014	December 31, 2013
Equity attributable to Telecom Argentina (Controlling Company)	12,538	11,783
Equity attributable to non-controlling interest	328	268

*Total equity ()**	12,866	12,051

(*) Additional information is given in the consolidated statements of changes in equity.

(a) Capital information

The capital stock of Telecom Argentina amounted to $984,380,978, represented by an equal number of ordinary shares, of $1 argentine peso of nominal value and entitled to one vote per share. The capital stock is fully integrated and registered with the Public Registry of Commerce.

The Company’s shares are authorized by the CNV, the BCBA and the NYSE for public trading. Only Class “B” shares are traded since Nortel owns all of the outstanding Class “A” shares; and Class “C” shares are dedicated to the employee stock ownership program, as described below.

Telecom Argentina’s breakdown of capital stock as of June 30, 2014 is as following:


	Registered, subscribed and authorized for public offering

Shares	Outstanding shares		Treasury shares		Total capital stock

Ordinary shares, $1 argentine peso of nominal value each
Class “A”		502,034,299		-		502,034,299
Class “B”		466,858,524		15,221,373		482,079,897
Class “C”		266,782		-		266,782

Total		969,159,605		15,221,373		984,380,978

Each ADS represents 5 Class B shares and are traded on the NYSE under the ticker symbol TEO.

(b) Acquisition of Treasury Shares

The Company’s Ordinary Shareholders’ Meeting held on April 23, 2013, which was adjourned until May 21, 2013, approved at its second session of deliberations, the creation of a “Voluntary Reserve for Capital Investments” of $1,200, granting powers to the Company’s Board of Directors to decide its total or partial application, and to approve the methodology, terms and conditions of such investments.

In connection with the above mentioned, on May 22, 2013, the Board of Directors approved a Company’s Treasury Shares Acquisition Program in the market in Argentine pesos (the “Treasury Shares Acquisition Program”) so as to avoid any possible damages to the Company and its shareholders derived from fluctuations and unbalances between the shares’ price and the Company’s solvency, for the following maximum amount and deadline:

•

Maximum amount to be invested: $1,200.

•

Deadline for the acquisitions: until April 30, 2014.

According to the offer made on November 7, 2013 by the Fintech Group for the acquisition of the controlling interest of the Telecom Italia Group in Telecom Argentina (see Note 5.a to these consolidated financial statements), Telecom Argentina suspended the acquisition of treasury shares and its Board of Directors considered appropriate to request the opinion of the CNV on the applicability of the new provisions contained in the rules issued by that entity (Title II, Chapter I, Art.13 and concurring) with respect to the continuation of the Treasury Shares Acquisition Program.

The CNV did not answer the Company’s request and the Telecom Argentina’s Board of Directors, at its meeting held on May 8, 2014, decided to conclude the request considering that the Treasury Shares Acquisition Program finished on April 30, 201, which had been approved by Telecom Argentina’s Board of Directors Meeting held on May 22, 2013.

Telecom Argentina’s Board of Directors, at its meeting held on June 27, 2014, decided to request a new opinion from the CNV to confirm whether Telecom Argentina is obliged to refrain from acquiring treasury shares in the market under Section 13, Chapter I, Title II of the CNV rules (NT 2013).

Pursuant to Section 67 of Law No. 26,831, the Company must sell its treasury shares within three years of the date of acquisition. Pursuant to Section 221 of the LSC, the rights of treasury shares shall be suspended until such shares are sold, and shall not be taken into account to determine the quorum or the majority of votes at the Shareholders’ Meetings. No restrictions apply to Retained Earnings as a result of the creation of a specific reserve for such purposes named “Voluntary Reserve for Capital Investments”.

TELECOM ARGENTINA S.A.

As of June 30, 2014 the Company owns 15,221,373 treasury shares, representing 1.55% of its total capital. The acquisition cost of these shares in the market amounted to $461.

NOTE 8 – RESTRICTIONS ON DISTRIBUTION OF PROFITS

The Company is subject to certain restrictions on the distribution of profits. Under the LSC, the by-laws of the Company and rules and regulations of the CNV, a minimum of 5% of net income for the year in accordance with the statutory books, plus/less previous years adjustments and accumulated losses, if any, must be appropriated by resolution of the shareholders to a legal reserve until such reserve reaches 20% of the outstanding capital (common stock plus inflation adjustment of common stock). Telecom Argentina has already reached the maximum amount of its Legal Reserve according to LSC provisions.

NOTE 9 – SELECTED CONSOLIDATED QUARTERLY INFORMATION


Quarter	Revenues		Operating income before D&A		Operating income		Financial results, net		Net income		Net income attributable to Telecom Argentina
Fiscal year 2014:
March 31,		7,466		2,112		1,377		(32)		906		889
June 30,		8,119		2,007		1,241		186		930		916
		15,585		4,119		2,618		154		1,836		1,805
Fiscal year 2013:
March 31,		6,064		1,799		1,115		135		813		802
June 30,		6,649		1,825		945		79		662		652
September 30,		7,114		1,930		1,203		163		886		870
December 31,		7,460		2,010		1,255		151		893		878
		27,287		7,564		4,518		528		3,254		3,202

NOTE 10 – RECENT DEVELOPMENTS CORRESPONDING TO THE SIX-MONTH PERIOD ENDED JUNE 30, 2014 FOR THE TELECOM GROUP

1. Resolution SC No. 5/13

On July 2, 2013, SC Resolution No. 5/13 was published approving the “Telecommunication service quality regulation”, which establishes, among others, exigent quality parameters required for telecommunication services provided through mobile and fixed public networks, for all the operators in Argentina and the obligation to provide periodic information to the CNC.

CNC Resolution No. 3,797/13 was published on November 13, 2013, supplementing SC Resolution No. 5/13 and approving the Audit Procedures and Technical Verification of Service Quality Regulation of Telecommunications Services Manual.

As of the date of issuance of these consolidated financial statements, Telecom Argentina and Personal continue analyzing the operational aspects required by the new regulations as well as its regulatory and economic impact and applicable actions to be taken. However, pursuant to the provisions of CNC Resolution No. 3,797/13, the Company and Personal have complied with the presentation of the “Technical Reports” (detailed technical specifications of the measurement process) and have also made their presentations providing the required information pursuant to the provisions of SC Resolution No. 5/13. Notwithstanding this, and as the enforcement of this Resolution is subject to compliance with specific items for implementation with prior approval of the CNC, Telecom Argentina and Personal have made the relevant legal reserves in each of their presentations.

2. Changes in the pricing method of mobile services and the information requirements on the commercial conditions of mobile services plans

SC Resolution No. 26/13 issued on December 17, 2013 changed the pricing method of calls originating on mobile services and the mechanism for informing the CNC of the commercial conditions of existing plans. The new resolution establishes that calls originated by users of mobile communications will be charged per second and the pricing of each call will comprise a fixed value corresponding to the Initial Communication Block (including up to the first 30 seconds), plus additional charges per second after the 30th second of communication has elapsed.

TELECOM ARGENTINA S.A.

As of the date of issuance of these consolidated financial statements, Personal has made the necessary implementations to comply with the new provisions. Also, the CNC has initiated audits designed to verify the compliance of Personal with the implementation of the new pricing method, according to which has initiated some sanctioning processes in which Personal have already filed its defense, which are in progress.

3. Information Disclosure of Mobile Communication Services

On June 11, 2014, Joint Resolution No. 29 of the SC and No. 81 of the Secretary of Commerce was published in the Official Bulletin, establishing new rules concerning the information that mobile communication services providers must disclose to consumers, regularly and free of charge. The Resolution became effective at the end of July, 2014.

As of the date of issuance of these consolidated financial statements, Personal was making certain necessary developments in its systems, in order to allow for the implementation of the new rules. However, Personal has also made a filing before the Regulatory Authorities (SC and Secretary of Commerce) expressing that certain aspects contained in the Resolution require further clarification before its implementation. In addition, Personal has attended meetings with the applicable Regulatory Authorities, as a result of which on July 22, 2014 it submitted its timetable for the implementation of the above mentioned rules before the CNC.

4. Spectrum

•

Decree No. 671/14

Decree No. 671, published in the Official Bulletin on May 14, 2014, superseded Sections 2nd and 3rd of Decree No. 2,426 issued on December 13, 2012, which provided that the remaining spectrum in 850 MHz and in 1,900 MHz be assigned to the state-owned operator ARSAT. Such remaining spectrum had been subject to a public auction called by Resolution SC No. 57/11, which later became ineffective for reasons of opportunity, merit and convenience.

The above mentioned Decree also readjusts the previous assignments of the new spectrum bands, instructing the SC to implement the applicable measures to assign both 108 MHz of the bands contained between 698-806 MHz, and 120 MHz between the 1,710-1,770 and 2,110-2,170 MHz bands “exclusively to the Land Mobile Service”.

In addition, the above mentioned Decree instructs the SC to call a public auction for this new spectrum, in addition to the remaining spectrum in the 850 and 1,900 MHz bands mentioned above (band 1,900: 30 MHz in the North Area and AMBA; 35 MHz in the South Area, and band 850: 7.5 MHz in AMBA).

•

Resolution SC No. 17/14

Resolution SC No. 17, published in the Official Bulletin on May 16, 2014, assigns 120 MHz of the 1,710-1,770 MHz and 2,110-2,170 MHz bands to the Land Mobile Service, leaving previous assignments without effect.

In addition, Resolution SC No. 17 ratifies the suspension, in effect since 2001, to make new assignments of frequencies in the band segments next to those, from 1,770-850 MHz and from 2,170-2,200 MHz.

The above mentioned Resolution also provides that systems which are currently operating by other operators in the newly assigned bands must migrate within a two year period, for which purpose they must contact the applicable Regulatory Authority, within 60 days of the publication of such Resolution, to coordinate their systems’ migration.

•

Resolution SC No. 18/14

Resolution SC No. 18, published in the Official Bulletin on May 19, 2014, assigns 108 MHz of the 698 to 806 band to the Land Mobile Service, leaving previous assignments (broadcasting and fixed systems) without effect.

In addition, this Resolution, as well as Resolution No. 17/14 referred to above, provides that systems which are currently operated by other operators in the above mentioned band must migrate within a two year period, for which purpose they must contact the applicable Regulatory Authority, within 60 days of the publication of this Resolution, to coordinate their systems’ migration.

TELECOM ARGENTINA S.A.

•

Resolution SC No. 37/14

Resolution SC No. 37, published in the Official Bulletin on July 7, 2014, approved the General Regulations for the Advanced Mobile Communications Service (SCMA), which defines such service as: “telecommunications wireless service which, by the use of digital access technology, supports low and high user’s mobility, high rates of data transfer, interoperability with other fixed and mobile networks, with capacity for international roaming and oriented to the switch of packages that allow the use of a broad range of applications, including those based on multimedia content”.

The SCMA shall be provided by using the 698 to 806 MHz band (108 MHz) and the 1,710 to 1,770 MHz and 2,110 to 2,170 MHz bands (120 MHz). A 60 MHz limit of maximum spectrum for each provider is set forth and all the national territory is considered as a sole Area of Use of this service.

The network technology and architecture shall be freely chosen by each provider. However, certain minimum parameters are set forth, such us supporting bandwidth channels of 10, 15 and 20 MHz, and reaching theoretical high peak speeds of 100 and 50 Mbps, for the descending and ascending connections respectively, for a 20 MHz channel (equivalent, in this condition, to spectral efficiencies of 5 and 2.5 bps/MHz, respectively, for each direction of transmission). It also sets forth minimum speeds of 14Mbps for the descending connections and 6Mbps for the ascending connections.

The SCMA shall be subject to the rules set forth in these Regulations, the List of Conditions issued for the frequency bands auctions to be used for the provision of this service and the regulations to be approved to such effect.

•

Resolution SC No. 38/14

Resolution SC No. 38, published on the Official Bulletin on July 7, 2014, provided that: (i) call a public auction for the assignment of the remaining frequencies of the Personal Communications Service (PCS) and of the Mobile Cellular Radiocommunications Service (SRMC), as well as the new spectrum for the Advanced Mobile Communications Service (SCMA) recently created and (ii) approve the List of Conditions to auction simultaneously all of the remaining spectrum of the 850 and 1,900 MHz bands, and the 698 to 806 MHz bands, plus 90 MHz of the 1,710/1,770 – 2,110/2,170 MHz bands for the SCMA service (leaving outside of the auction and available for future use, 30 MHz corresponding to the 1,755-1,770 and 2,155-2,170 sub-band), complying with the applicable spectrum maximums (50 MHz for SRCM + PCS and 60 MHz for SCMA).

The above mentioned List of Conditions set forth the general principles and conditions of the auction, the applicable rules, the auction timetable, the List of Conditions purchase price ($200,000 pesos), the economic capacity ( Equity of $1,500) and conditions of the offerors (they shall be telecommunications licensees), the economic-financial and technical documentation to be submitted for the prequalification, the coverage compliance obligations of the successful bidders, the base values of the frequency bands to be auctioned, and the procedures and formalities of the public auction.

The List of Conditions organizes the aggregate of the spectrum to be auctioned in 10 Lots:

The first one, to be auctioned exclusively among entering operators who qualify for the public auction, shall be comprised of 20 MHz in the 1,900 MHz band for each of the three Regions, plus 20 MHz in the 700 MHz band and other 20 MHz in the 1,700/2,100 MHz band.

Another six lots shall be comprised by spectrum segments in the 850 and 1,900 MHz bands, which would allow two of the current mobile operators (Claro and Personal), if they become successful bidders, to complete their respective spectrum limits –taking into account that Movistar has already reached its limit- in each of the Regions of operation of the SRMC and PCS services: Personal could acquire up to 5 MHz in the North Area, up to 7.5 MHz in the AMBA and up to 10 MHz in the South Area, while Claro could acquire up to 5 MHz in the North Area, up to 10 MHz in AMBA and up to 5 MHz in the South Area.

And three final lots, comprised, each one, by combinations of segments of 20 or 30 MHz of new spectrum in the 700 and 1,700/2,100 MHz. bands (creating two lots of 50 MHz and the last one of 40 MHz., respectively).

The MHz base price for the bandwidth to be auctioned shall be fixed in U.S dollars, as detailed below:


BAND	MHZ	BASE		PRICE
	(in U$S millions)

SCMA (700 MHz)			9.87
SCMA (1.7/2.1 GHz)			9.44
SRMC			6.00
PCS Area I			1.00
PCS Area II			4.40
PCS Area III			0.60

TELECOM ARGENTINA S.A.

The selection procedure for the best economic offer shall consist of an auction of each of the lots.

The authorizations for the use of the frequencies subject to the public auction shall be granted for a fifteen (15) year period starting on the date on which the administrative act of choosing a bidder is notified. Once such period ends, the SC may extend it if expressly required by the successful bidder (which extension shall be subject to the price and conditions to be determined by the SC).

The List of Conditions provide for certain coverage obligations to be reached within a five year period (places of up to 500 habitants throughout the country and almost all the corridors of relevant federal and provincial roads, setting forth various intermediate stages for complying with such unfolding). It also imposes certain obligations of domestic roaming (which are not taken into account for the calculation of the coverage obligations) and of sharing of passive infrastructure with the Entering Operators (in up to 50% of the sites that the latter must unfold). In addition, as consideration for the acquisition of even only one of the six lots corresponding to the SCRM or PCS services, the current mobile operators must guarantee that all their sites provide broad band of at least 1Mbps (descending), at the end of the fifth year.

5. Universal Service

Telecom Argentina

On March 19, 2014 the CNC notified Telecom Argentina of an accusation in connection with an alleged breach of Resolution No. 2,516/13 (and its amendment Resolution No. 3,998/13) stating that Telecom Argentina had omitted to submit the SU calculations corresponding to the period January 2001 - June 2007 and ordering Telecom Argentina to submit such calculations and, if applicable, to make the corresponding payments.

As of the date of issuance of these consolidated financial statements, Telecom Argentina has filed its complaint against this imputation disclosing the defense arguments supporting its right and for which corresponds to the CNC rescind the accusation extended to Telecom Argentina in relation to the mentioned regulation.

Personal

On April 9, 2014 Personal filed, pursuant to the SC’s request, a new adaptation of the Project filed in connection with Resolution No. 9/11. This new filing consists only of additional detailed information about the Project’s scope.

6. Increase in the Regulator’s Penalty Activities

Telecom Argentina is subject to various penalty procedures, in most cases promoted by the Regulatory Authority, for delays in the reparation and installation of service to fix-line customers. Although generally a penalty considered on an individual basis does not have a material effect on Telecom Argentina’s equity, there is a significant disproportion between the amounts of the penalty imposed by the Regulatory Authority and the revenue that the affected customer generates to Telecom Argentina.

Since fiscal year 2013, the CNC significantly increased its penalty activities, increasing the amount of accusations and penalties, as well as the individual amount of each of the latter. In several cases the penalties imposed during 2013 had twice the economic value of the penalties imposed to Telecom Argentina in previous periods for the same alleged offences and such tendency continues during the first semester of 2014.

As a result of the above, and notwithstanding the defense arguments submitted by Telecom Argentina at the administrative level, sanctions and penalties received in 1H14 vs. 1H13 (measured in terms of alleged violations) increased 203% and 259%, respectively. Likewise, losses recorded during the six-month period ended on June 30, 2014 for contingencies of regulatory nature in Telecom Argentina have significantly increased, reaching an amount of $50 (vs. $27 in 1H13 or +85%), which is included in item “Provisions” in the Income Statement. In determining the provisions for regulatory sanctions, the Telecom Argentina’s Management, with the assistance of its legal counsel, has determined the likelihood of such sanctions being imposed, the amount thereof based on historical information and contemplating various probable scenarios of prescription of sanctions and penalties received and the results of legal actions that Telecom Argentina has undertaken to demonstrate the disproportionate penalties imposed by the Regulatory Authority.

7. Profit Sharing Bonds

Different legal actions were brought, mainly by former employees of Telecom Argentina, against the Argentine government and Telecom Argentina, requesting that Decree No. 395/92 – which expressly exempted Telefónica de Argentina S.A. and Telecom Argentina from issuing the profit sharing bonds provided in Law No. 23,696 – be struck down as unconstitutional and, therefore, claiming compensation for the damages they had suffered because such bonds had not been issued.

TELECOM ARGENTINA S.A.

Legal action’s statute of limitations criteria: Supreme Court Verdict “Dominguez c/ Telefónica de Argentina S.A.”

In December 2013, the Argentine Supreme Court ruled on a similar case to the above referred legal actions, “Domínguez c/ Telefónica de Argentina S.A”, overturning a lower court ruling that had barred the claim as having exceeded the applicable statute of limitations since ten years had passed since the issuance of Decree No. 395/92.

The Argentine Supreme Court ruling states that the Civil and Commercial Proceedings Court must hear the case again to consider statute of limitations arguments raised by the appellants that, in the opinion of the Argentine Supreme Court, were not considered by the lower court and are relevant to the resolution of the case.

After the Argentine Supreme Court’s verdict in the case “Domínguez c/ Telefónica de Argentina S.A.” and until the date of issuance of these financial statements, only two chambers of the Civil and Commercial Federal Proceedings Court have issued opinions interpreting the doctrine developed by the Argentine Supreme Court in its verdict. On March 7, 2014, Chamber I, in the case “Cufre, Pedro c/ Telecom”, following the doctrine that derives from the Argentine Supreme Court’s verdict, acknowledged that the statute of limitations must be applied periodically –as of the time of each balance sheet-. However, it has limited the statute of limitations period to five years, applying statute of limitations rules specifically applicable to periodic obligations.

On April 15, 2014, Chamber III in the case “Luna, Tadeo c/ Telecom” ruled, by a majority of votes, that the statute of limitations must not be applied periodically, but that instead, was exceeded ten years after the issuance of Decree No. 395/92, therefore upholding the interpretation Chamber III had prior to the Argentine Supreme Court’s verdict.

As of the date of issuance of these consolidated financial statements, the chambers of the Civil and Commercial Proceeding Court do not seem to hold a uniform interpretation of the Argentine Supreme Court’s verdict in the case “Dominguez c/ Telefónica”, therefore not allowing to accurately assess the effect that the Argentine Supreme Court’s verdict would eventually have over the financial condition and results of operations of Telecom Argentina.

Criteria for determining the relevant profit for compensation calculation: ruling of the Civil and Commercial Federal Proceedings Court in Plenary Session “Parota c/ Estado Nacional y Telefónica de Argentina S.A.”

On February 27, 2014, the Civil and Commercial Federal Proceedings Court issued a verdict in plenary session in the case “Parota, Cesar c/ Estado Nacional”, as a result of a complaint filed against Telefónica de Argentina S.A. In its verdict the court ruled: “that the determination of the credit corresponding to the former employees of Telefónica de Argentina S.A. as a result of the profit sharing bonuses shall be calculated based on the taxable income of Telefónica de Argentina S.A. on which the income tax liability is to be assessed”.

The Court explained that in order to make such determination: “it is necessary to clarify that “taxable income” (pre-tax income) means the amount of income subject to the income tax that the company must pay, which generally means gross income, including all revenue obtained during the fiscal year (including contingent or extraordinary revenue), minus all ordinary and extraordinary expenses accrued during such fiscal year”.

As of the date of issuance of these consolidated financial statements, the effect of the above referred ruling on the cases in which Telecom Argentina is a party cannot be determined, since it will depend on the interpretation to be made by each chamber of the Court as to which accounting items must be considered in those cases in which Telecom Argentina is a party.

8. Sales representative claims

During 1Q14, two former sales representatives of Personal brought legal actions for alleged untimely termination of their contracts and have submitted claims for payment of different items such as commission differences, value of customers lists and lost profit. Personal believes, based on the assistance of its legal counsel, that certain items included in the claims would not be sustained while other items, if sustained, would result in significantly lower amounts. As of the date of issuance of these consolidated financial statements, the mentioned legal actions are on discovery phase and with expert opinions in preparation. Personal’s Management, based on the assistance of legal counsel, has recorded provisions that it estimates are sufficient to cover the risks associated with these claims, and wouldn’t have a negative impact on Personal results and financial statements.

TELECOM ARGENTINA S.A.

9. Interest Rate at the Labor Courts of the City of Buenos Aires

On May 21, 2014 the National Labor Court of Appeals agreed, as a result of a divided vote, that the interest rate applicable to the cases under its jurisdiction in the City of Buenos Aires shall be the nominal annual rate applicable to free use of funds personal loans of the National Bank of Argentina for a 49 to 60 month term (currently 3% per month). The Court also resolved that in those cases that the Court sentences are still pending, this new rate shall be applied as from the date on which each amount is due.

As from 2002 the above mentioned Court had resolved to apply the interest rate resulting from the monthly average of the interest rate used by the National Bank of Argentina for the granting of loans (currently 2.055% per month). Therefore, this new agreement represents an increase in the interest rate, which the Company has reflected in its assessment of the provisions for pending labor claims. Although this Court’s decision is not compulsory for lower Courts, an additional risk exists since the Courts might intend to apply such rate retroactively to labor credits not yet acknowledged by a Court sentence.

Telecom Group’s Management, with the advice of its legal counsels, considers that there are solid legal arguments to argue against the retroactive application of this new rate. As of the date of issuance of these consolidated financial statements, the result deriving from this decision of the Court of Appeals is not clear, until the lower Courts issue future opinions making their positions clear. Nevertheless, should a disadvantageous resolution prevail, we estimate that it shall not have a significant impact on the Group’s financial position and results of operations.

10. Legal Procedures relating to the Definition of the Scope of Fixed and Mobile Telephone Services under Broadcasting Law No. 22,285, repealed by Law No. 26,522 of Audiovisual Communication Services

The Group offers in the market a wide range of telecommunications services, including, among others, those referred to as SVA, which provide additional functionality to the basic services of voice transmission through a telecommunications network.

Certain judicial developments took place during the 2Q14 in connection with the VAS, referred to the provision of streaming services, known as video on demand, and also a Supreme Court of Justice opinion relating to the marketing of a service called Superpack.

•

Supercanal Case

Within the context of a claim filed by Supercanal S.A. in 2003, an injunction had been ordered against the fixed and mobile telephone companies, by which the Court ordered them to abstain from “providing supplementary broadcasting services or issuing any kind of broadcasting contents and programming”, as well as “making any advertisement relating to future services to be provided, or the provision of television services as VAS or any other kind of technical method through the fixed or mobile telephone and Internet services that they provide”.

In 2012 a lower Court decided to consider the case “abstract” and to terminate the injunction. However, on February 18, 2014, the Court of Appeals overruled such decision, and the judge must now make a decision on the appeals filed against the injunction, which were still pending.

On June 16, 2014 Telecom Argentina filed before the Courts a request to terminate the injunction, arguing among other reasons that new Law No. 26,522 of Audiovisual Communication Services has repealed the former law, under which the injunction had been ordered. Subsidiarily, Telecom Argentina has also requested that the injunction be adjusted between the limits of the new law, thus removing from it the VAS, Internet and/or video on demand services.

Products marketed by the Telecom Group that could be affected by this claim are those called “Arnet Play” and “Personal Video”, which revenues during the six-month period ended on June 30, 2014, amounted to approximately $17 and $86, respectively.

•

Claim by the Argentine Association of Cable Television

Within the context of a claim filed by the Argentine Association of Cable Television in 2006, an injunction had been ordered against the fixed and mobile telephone companies, by which the Court ordered them to abstain from “transmitting, repeating and/or providing directly or indirectly broadcasting services or their supplementary services”, based on the former Broadcasting Law No. 22,285.

TELECOM ARGENTINA S.A.

Subsequently, such injunction was extended to the marketing of the service called Superpack (joint offer of satellite television services provided by DirecTV and telephone and Internet services provided by Telecom Argentina, where each entity invoiced the services provided by it directly to the final customer), which was suspended by an appeal filed by Telecom Argentina before the Supreme Court of Justice. However, on June 3, 2014, the Supreme Court rejected such appeal because it did not refer yet to a final decision on the substantial issue that must be resolved by such Court. According to this, the Company suspended the marketing of the above referred joint offer with DirecTV from June 4, 2014, as a prudential measure. The suspension of this joint offer only meant to the Group a decrease in commissions revenues for new subscribers that our network marketed in favor of DirecTV, and a decrease in costs from commissions conceded to DirecTV for subscribers that the latter captured for the Telecom Group, which were not relevant during the six-month period ended June 30, 2014.

On June 10, 2014, the Company claimed to the Courts that the substantial issues under the claim have become “abstract” and the injunctions have become ineffective as a result of the new Law No. 26,522 of Audiovisual Communication Services –which repealed the former law under which the injunction had been ordered.

Although the Company’s Management, with the advice of its legal counsels, believes that there are solid legal arguments to continue providing the VAS discussed in these procedures, as of the date of issuance of these consolidated financial statements, we cannot assure the final result of these claims.

11. New Law of Promotion of Registered Labor and Prevention of Labor Fraud

On June 2, 2014, Law No. 26,940 of Promotion of Registered Labor and Prevention of Labor Fraud was published in the Official Bulletin. This new Law, among other issues, creates a Public Registry of Employers with Labor Penalties (the “Registry”) and defines a range of labor and social security offenses pursuant to which an employer is to be included in such Registry.

The employers included in the Registry shall be subject to various kinds of penalties, such as: not being allowed to participate in public programs, benefits or subsidies, not having access to public banks credits, not being allowed to enter into agreements or receive authorizations to use state owned assets, or not being authorized by the Government to provide public services nor granted licenses. In addition, those employers who commit the same offence pursuant to which they were included in the Registry within three years of the penalty will not be allowed to deduct their labor costs from the income tax, as long as they remain included in the Registry.

To become effective, the new Law must be regulated by the Executive Branch of the Argentine Government. As a result, as of the date of issuance of these consolidated financial statements, we cannot estimate the relevance of the economic-financial impact that this new rule will have on the companies located in Argentina.

12. Salary agreements

In June 2014 Telecom Argentina concluded the salary negotiation process with various telecommunications unions for the period July 2014 – June 2015. Pursuant to the agreement reached, the unionized employees will receive in two installments, July 2014 and January 2015, different fixed amounts per category, representing an average annual raise of 30%. The increase corresponding to the first installment will be approximately 18.5% and will affect in approximately $265 million Telecom Argentina’s operating results for the second semester of 2014 (amount which includes the social security expenses related to the agreed salary increase).

13. Information on the demerger of Telco S.p.A

As informed by Telecom Italia S.p.A. –hereinafter “TI”– in its latest Form 20-F, the Italian company Telco S.p.A is one of its main shareholders, with a participation of the 22.4% of the voting shares of TI –company that indirectly controls Telecom Argentina S.A. –.

On June 26, 2014 Telco S.p.A issued a press release calling a General Extraordinary Shareholders’ Meeting, to be held on July 9, 2014, in order to consider its own demerger, pursuant to the right of its shareholders, Assicurazioni Generali S.p.A., Mediobanca S.p.A. and Intesa SanPaolo S.p.A., to require such demerger, which closing is subject to obtaining the corresponding authorizations from the applicable authorities.

TELECOM ARGENTINA S.A.

The relevant portion of the press release issued by Telco S.p.A is follows:

“(…).The Board also acknowledged receipt of the notices received from shareholders Assicurazioni Generali S.p.A. (also in the name and on behalf of the Telco S.p.A shareholders which are also Generali group companies), Mediobanca S.p.A. and Intesa Sanpaolo S.p.A. on June 16, 2014, stating their intention to exercise their right to request the demerger of Telco S.p.A under the terms of the shareholders’ agreement. The Board also unanimously approved the proposed partial demerger of the company (the “Demerger”) as a result of which four newly-incorporated beneficiary companies, 100%-owned by each shareholder, will be allocated the respective shareholder’s stake in Telecom Italia currently held by Telco S.p.A (equal to 22.4% of Telecom Italia’s ordinary share capital), as follows: 14.77% to the newco owned by Telefónica, 4.32% to the newco owned by the Generali Group, and 1.64% to each of the newcos owned respectively by Intesa Sanpaolo and Mediobanca.

As part of the Demerger, Telco will also repay all its bank debt outstanding (€660 million as of April 30, 2014) and the bond issue subscribed to by its shareholders (€1,750 million nominal value, plus €70 million in interest accrued to April 30, 2014), plus the interest that will accrue until the repayment date, via funds to derive from a shareholders’ loan to Telco S.p.A, which will be disbursed pro rata to the shareholders’ investment in the company immediately prior to the execution of the Demerger. With the Demerger, then, each newco will be allocated the respective share of the shareholders’ loan as well as the relevant Telecom Italia stake.

Completion of the Demerger is subject to the requisite clearances from the following authorities: Conselho Administrativo de Defesa Econômica “CADE” (Brazilian antitrust authority); Agência Nacional de Telecomunicações “ANATEL” (Brazilian regulatory authority);Comisión Nacional de Defensa de la Competencia “CNDC” (Argentinean antitrust authority) and, for those matters which fall within its scope of responsibility, Istituto per la Vigilanza sulle Assicurazioni IVASS (Italian insurance regulatory authority).

Telco S.p.A will continue to exist with a minimal share capital and with no Telecom Italia shares held, in order to deal with the remaining assets and liabilities on the balance sheet. The company will then be placed in liquidation once this phase is complete.

The Telco S.p.A demerger will also be submitted to the approval of shareholders in the extraordinary general meeting called to take place on July 9th.

As of the date on which the Demerger becomes effective, every effect of the shareholders’ agreement in force between the shareholders of Telco S.p.A shall cease to be effective.

Milan, June 26, 2014.”

Following up on the above information, on July 9, 2014 Telco S.p.A. issued a new press release, informing that the General Extraordinary Shareholders’ Meeting held on such date “approved the proposed partial demerger of Telco S.p.A, as already approved by the Board of Directors and disclosed on June 26, 2014, the completion of which is subject to the requisite clearances from CADE, Anatel, CNDC and, for those matters which fall within its scope of responsibility, Istituto per la Vigilanza sulle Assicurazioni IVASS.”

14. Financial transactions to mitigate foreign exchange risk

Considering the fluctuations of the exchange rate between the US Dollar and the Argentine Peso during 1H14 (+25%), and due to the existence of commercial commitments denominated in US Dollars as of June 30, 2014 Personal entered into several NDF agreements during 1H14 to purchase a total amount of US$ 136 million (of which US$ 131 million matured between March and June 2014 and the remaining US$ 5 million will mature between November 2014 and March 2015). The purpose of these NDF is to eliminate the risks associated to the fluctuation of the future exchange rate and to align the payment currency of Personal’s commercial commitments (item covered) to its functional currency.

Personal Management has classified those agreements as effective cash flow hedges and has assessed the documentation requirements, the qualitative and quantitative effectiveness assessment and the possibility to designate partial hedges, as permitted by IFRS 9. As the effect of the fluctuation of the exchange rate over the hedged items is recognized in the Income Statement, changes in the fair value of NDF (net loss of approximately $6) have also been recognized in the Income Statements, within Finance income and expenses - NDF. Personal recognizes the hedging instruments results, distinguishing between gains and losses of such agreements that generate assets and liabilities, as appropriate, without offsetting balances with different counterparties. As of June 30, 2014, Personal has a $0.4 million balance included in current Accounts Payables related to the US$ 5 million NDF remaining to such date.

Also, in order to mitigate the currency risk Personal acquired in 1H14 Government bonds denominated in U.S. dollars (Boden 15 and Bonar 2017), at a cost of $771, with an annual interest rate of 7%, also in U.S. dollars. Foreign exchange differences generated by the purchase of these government bonds were recognized in “Foreign currency exchange losses”.

TELECOM ARGENTINA S.A.

15. Sale of the equity interest in Springville

On February 10, 2014 Personal’s Board of Directors decided to approve the sale of such equity interest (representative of 100% of Springville capital stock) for a total amount of US$ 27,223.

According to the terms and conditions of the offer accepted by Personal, on February 19, 2014 the transfer of the shares was concluded and Personal collected the mentioned amount, equivalent to $0.2, generating a gain of $0.4 for the reversal of the amount included in “Currency translation adjustments”.

Accounting treatment

In accordance with IFRS 5, investment in Springville was classified as “Asset available for sale” as of December 31, 2013. This asset was valued at the lower amount between the booked value and the fair value less costs of sale. The results were presented as results in discontinuation as of June 30, 2013. Assets, liabilities, operating expenses and cash flows considered by Personal accounts related to Springville, are not material, and in any case reach the minimum magnitude to be segregated in the statement of financial position, income statement, statement of comprehensive income or statement of cash flow of Personal. Below are detailed information on the assets, liabilities, net results and cash flows in discontinuation - net of eliminations- related to Springville that were consolidated as of December 31, 2013 and June 30, 2013:

Assets and liabilities - discontinued operations

The Statement of Financial Position as of December 31, 2013 includes the following Springville’s assets and liabilities consolidated to such date:


	As of December 31, 2013
	(in thousands of pesos )
ASSETS
Current Assets
Cash and cash equivalents		3
Other receivables, net		433

Total current assets		436

Impairment of assets available for sale		(250)

TOTAL ASSETS – DISCONTINUED OPERATIONS		186


LIABILITIES
Current Liabilities
Trade payables		143
Other liabilities		57

Total current liabilities		200

TOTAL LIABILITIES – DISCONTINUED OPERATIONS		200

Net results - discontinued operations

The Income Statement and the Statement of Comprehensive Income for the six-month period ended June 30, 2013 include the following Springville results consolidated to such date:

Income statements


	Six-month period ended June 30, 2013
	(in thousands of pesos)
Fees for services		(9)
Rental and maintenance expenses		(138)
Taxes		(1)
Energy, water and others		(11)

Operating losses		(159)
Finance income – Exchange differences		3
Finance expenses – Exchange differences		(8)

Losses before income tax expense		(164)
Income tax expense		(2)

Net losses – discontinued operations		(166)

Currency translation adjustments (non-taxable)		24

Total comprehensive income – discontinued operations		(142)

Cash Flows - discontinued operations

The Statement of Cash Flows for the six-month period ended June 30, 2013 includes the following Springville’s cash flows consolidated to such date:


	Six-month period ended June 30, 2013
	(in thousands of pesos )
CASH FLOWS FROM OPERATING ACTIVITIES

Total cash flows used in operating activities		(65)



NET FOREIGN EXCHANGE DIFFERENCES AND CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS		3


DECREASE IN CASH AND CASH EQUIVALENTS		(62)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR		77

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		15

TELECOM ARGENTINA S.A.

16. Conversion of Class “C” shares

Pursuant to the authorization approved by the General Ordinary and Extraordinary and Special Class “C” Shares Meetings of Telecom Argentina held on December 15, 2011 and following the request of individual holders, on June 12, 2014, 656 Class “C” shares were converted, in an eight tranche, into an equal number of Class “B” shares. As of the date of issuance of these financial statements, conversion is pending for 266,782 Class “C” shares.

17. Organization of a New Company for the Provision of Mobile Financial Services

Núcleo’s Board of Directors, at its meeting held on May 5, 2014, approved the organization of a new company for the provision of Mobile Financial Services in Paraguay. This company will be supervised by the Central Bank of the Republic of Paraguay. The bylaw of the new company, named “Personal Envíos S.A.”, was granted on July 24, 2014. As of the date of issuance of these consolidated financial statements, the registration of the new company in the corresponding Public Registers is still pending. The capital stock of this new company is 3,000 million of Guaraníes (equivalent to approximately $5.5), distributed as follows: Núcleo 97%, whose contribution will be in kind (transaction system), Personal 2% and ABC Telecomunicaciones 1%.

As of the date of issuance of these consolidated financial statements, there have been no capital contributions. Nucleo’s Management expects to complete the transactions registration in the third quarter of this year, during which the new company would start operating.


Adrián Calaza		Enrique Garrido
Chief Financial Officer		Chairman of the Board of Directors

“Free translation from the original in Spanish for publication in Argentina”

LIMITED REVIEW REPORT ON CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

To the Shareholders, President and Directors of

Telecom Argentina S.A.

Legal address: Alicia Moreau de Justo 50

City of Buenos Aires

Tax Code No.: 30-63945373-8

Introduction

We have reviewed the accompanying condensed interim consolidated financial statements of Telecom Argentina S.A. and its subsidiaries (“Telecom” or the “Company”), which comprise the consolidated statement of financial position as of June 30, 2014, consolidated statements of income and of comprehensive income for the three and six- month periods ended June 30,2014, the consolidated statements of changes in equity and of cash flows for the six- month period ended June 30, 2014 and selected explanatory notes.

The balances and other information for the fiscal year 2013 and interim periods are an integral part of the above-mentioned financial statements and therefore they should be considered in relation with those financial statements.

Management Responsibility

The Board of Directors of the Company is responsible for the preparation and presentation of the financial statements in accordance with International Financial Reporting Standards, adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) as professional accounting standards and incorporated by the National Securities Commission (CNV) to its regulations, as approved by the International Accounting Standards Board (IASB), and is therefore responsible for the preparation and presentation of the condensed interim consolidated financial statements mentioned in the first paragraph, in accordance with International Accounting Standard No. 34 “Interim Financial Information” (IAS 34). Our responsibility is to express a conclusion based on the review we have performed with the scope detailed in section “Scope of our review”.

Scope of our review

Our review was limited to the application of the procedures established under International Standards on Review Engagements ISRE 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”, adopted as a review standard in Argentina by Technical Pronouncement No. 33 of the FACPCE and approved by the International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists of inquiries of Company personnel responsible for preparing the information included in the condensed interim consolidated financial statements and of analytical and other review procedures. This review is substantially less in scope than an audit performed in accordance with International Auditing Standards; consequently, a review does not enable us to obtain assurance that we will get to know all significant matters that could be identified in an audit. Therefore, we do not express an opinion on the consolidated financial position, the consolidated comprehensive income and the consolidated cash flow of the Company.

Conclusion

On the basis of our review, nothing has come to our attention that causes us to believe that the condensed interim consolidated financial statements mentioned in the first paragraph of this report are not prepared, in all material respects, in accordance with International Accounting Standard No. 34.

Report on compliance with current regulations

In compliance with provisions currently in force, we inform, as regards Telecom, that:

The condensed interim consolidated financial statements of Telecom are transcribed into the “Inventory and Balance Sheet” book and are in compliance, as regards matters within our field of competence, with the provisions of the Commercial Companies Law and pertinent resolutions of the National Securities Commission;

b)	The separate condensed interim financial statements are derived from accounting records kept in their formal respects in conformity with legal provisions;

c)	We have read the Operating and financial review and prospects, on which, as regards those matters that are within our competence, we have no observations to make;

d)	As of June 30, 2014, the debt of Telecom accrued in favor of the Argentine Integrated Social Security System, as shown by the Company’s accounting records, amounted to $ 98,407,098.09 and was not claimable at that date.

City of Buenos Aires, July 29, 2014

PRICE WATERHOUSE & CO. S.R.L.

Dr. Carlos A. Pace (Partner)

C.P.C.E.C.A.B.A. Tº 1 Fº 17

Dr. Carlos A. Pace

Public Accountant (UBA)

C.P.C.E.C.A.B.A. T° 150 F° 106

CORPORATE INFORMATION

•

INDEPENDENT AUDITORS Price Waterhouse & Co S.R.L. (member of PricewaterhouseCoopers)

•

STOCK MARKET INFORMATION (Source: Bloomberg)


		BCBA



	Market quotation ($/share)		Volume of shares
Quarter	High	Low	traded (in millions)
2Q13	31.00	22.50	12.2
3Q13	37.00	22.80	14.9
4Q13	39.50	28.50	10.3
1Q14	38.40	28.00	4.7
2Q14	49.00	34.50	5.4


		NYSE*



	*Market quotation (US$/ADR)**		Volume of ADRs
Quarter	High	Low	traded (in millions)
2Q13	16.73	13.40	13.6
3Q13	20.11	13.93	15.1
4Q13	21.19	17.10	11.9
1Q14	19.07	14.78	12.2
2Q14	23.86	17.77	12.4

* Calculated at 1 ADR = 5 shares

•

INVESTOR RELATIONS for information about Telecom Argentina S.A., please contact:


		In Argentina
		Telecom Argentina S.A.
		Investor Relations Division
		Alicia Moreau de Justo 50, 10^th Floor
		(1107) Autonomous City of Buenos Aires
		Tel,: 54-11-4968-3628
		Argentina


		Outside Argentina
		JP Morgan Chase
		Latam ADR Sales & Relationship Mgmt.
		1 Chase Manhattan Plaza Floor 21
		New York 10005
		USA
		Tel.: 1-212-552-3729

•

INTERNET http://www.telecom.com.ar/inversores/index.html

•

DEPOSIT AND TRANSFER AGENT FOR ADRs


		J.P. Morgan Depositary Receipts
		1 Chase Manhattan Plaza, Floor 58
		New York, NY 10005
		(866) JPM-ADRS adr@jpmorgan.com – www.adr.com

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Telecom Argentina S.A.

Date: August 28, 2014	By:	/s/ Enrique Garrido
		Name:	Enrique Garrido
		Title:	Chairman