NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2016 AND 2015
(In millions of Argentine pesos,
except as otherwise indicated)
INDEX
NORTEL
INVERSORA 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.
ADS:
Nortel’s American Depositary
Share, listed on the New York Stock Exchange, each representing 5 Class B Shares.
ADSL (Asymmetric
Digital Subscriber Line):
A type of digital subscriber line technology (DSL); a data communications technology that enables
faster data transmission over copper lines than a conventional voiceband modem can provide.
AFTIC (Autoridad
Federal de Tecnologías de la Información y de las Comunicaciones):
The decentralized and autonomous agency in
the scope of the PEN appointed as the Regulatory Authority in the LAD. AFTIC was replaced by the ENACOM.
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.
CPP:
Calling Party Pays.
“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.
Fintech
: Fintech Telecom LLC, Sofora’s
controlling company.
IAS
: International Accounting Standards.
IASB
: International Accounting Standards
Board.
IDC (Impuesto a los débitos y
créditos bancarios)
: Tax on deposits to and withdrawals from bank accounts.
IFRS
: International Financial Reporting
Standards, as issued by the International Accounting Standards Board.
IGJ
(Inspección General
de Justicia):
General Board of Corporations
.
LAD (Ley Argentina Digital):
Argentine
Digital Law
.
LGS (Ley General de Sociedades):
Argentine
Corporations Law No. 19,550 as amended. Since the enforcement of the new Civil and Commercial Code its name was changed to “General
Corporations Law”.
Micro Sistemas:
Micro Sistemas S.A.
NDF:
Non-Deliverable Forward.
Nortel:
Nortel Inversora S.A.
Núcleo
: Núcleo S.A.
NORTEL
INVERSORA S.A.
NYSE: New York Stock Exchange.
PCS (Personal Communications Service):
A mobile communications service with systems that operate in a similar manner to cellular systems.
PEN (Poder Ejecutivo Nacional)
: The
executive branch of the Argentine Government.
Personal
: Telecom Personal S.A.
Personal Envíos:
Personal
Envíos S.A.
PP&E
: Property, plant and equipment.
Regulatory Authority:
Previously,
the SC, the CNC and the AFTIC. Since the issuance of the Decree of Need and Urgency No.267/15, the Regulatory Authority is the
National Communications Agency (ENACOM).
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.
SCM
(
Servicio de Comunicaciones
Móviles
): Mobile Communications Service.
SCMA
(
Servicio de Comunicaciones
Móviles Avanzadas
): Mobile Advanced Communications Service.
SEC:
Securities and Exchange Commission
of the United States of America.
SMS:
Short message systems.
Sofora:
Sofora Telecomunicaciones
S.A. Nortel’s controlling company.
SRMC (Servicios de Radiocomunicaciones
Móviles Celular):
Cellular Mobile Radiocommunications Service.
STM (Servicio Telefónico Móvil):
Mobile Telephone Service.
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 Argentina
: Telecom Argentina
S.A.
Telecom Group/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.
Telefónica:
Telefónica
de Argentina S.A.
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.
NORTEL
INVERSORA S.A.
NOTE
1 – BASIS OF PREPARATION OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING
POLICIES
a)
Basis of preparation and significant accounting
policies
As required by the CNV for most of public
companies, these consolidated financial statements have been prepared in accordance with RT 26 of FACPCE (as amended by RT 29)
and in accordance with IFRS as issued by the IASB, as adopted by the CPCECABA.
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 2015 annual consolidated
financial statements which can be consulted at the Company’s website (www.nortelsa.com.ar/inversores).
As of March 31, 2016, entities included
in the consolidation process and the respective equity interest owned by Nortel and Telecom Argentina is presented as follows:
|
Subsidiaries
|
Percentage
of capital stock owned by
Nortel and voting
rights (i)
|
Percentage
of capital
stock owned by
Telecom Argentina
and voting rights (i)
|
Indirect
control
through
|
Date
of
acquisition
|
Segment
that consolidates
(Note 4)
|
|
Telecom
Argentina
|
(iv)
55.60%
|
|
|
11.08.90
|
Fixed
Services
|
|
Personal
|
0.01%
|
99.99%
|
Telecom
Argentina
|
07.06.94
|
Personal
Mobile Services
|
|
Micro
Sistemas (ii)
|
0.01%
|
99.99%
|
Telecom
Argentina
|
12.31.97
|
Fixed
Services
|
|
Telecom
USA
|
|
100.00%
|
Telecom
Argentina
|
09.12.00
|
Fixed
Services
|
|
Núcleo
(iii)
|
|
67.50%
|
Personal
|
02.03.98
|
Núcleo
Mobile Services
|
|
Personal
Envíos (iii)
|
|
67.50%
|
Núcleo
|
07.24.14
|
Núcleo
Mobile Services
|
|
|
(i)
|
Percentage
of equity interest owned has been rounded.
|
|
|
(ii)
|
Dormant
entity as of March 31, 2016 and December 31, 2015 and for the three-month periods ended March 31, 2016 and 2015.
|
|
|
(iii)
|
Non-controlling
interest of 32.50% is owned by the Paraguayan company ABC Telecomunicaciones S.A.
|
|
|
(iv)
|
Corresponds
to Nortel’s equity interest in Telecom Argentina as of March 31, 2016, considering Telecom Argentina’s total outstanding
shares. Nortel’s equity interest in Telecom Argentina’s total capital amounts to 54.74% as of March 31, 2016.
|
For the preparation of these consolidated
financial statements, the Company followed the same accounting policies applied in the most recent annual 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 Nortel 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 March 31, 2016 was approved by resolution of the Board of Directors’ meeting held on May
9, 2016.
b)
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 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;
|
NORTEL
INVERSORA 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 LGS 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.
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 Telecom Group’s 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 as issued by the IASB) 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.
The Company
computes net income per common share by dividing net income for the period attributable to Nortel (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.
The
following table sets forth the computation of basic and diluted net income per share for the three-month periods ended on March
31, 2016 and 2015:
|
|
Three-month
periods
ended March 30,
|
|
|
2016
|
2015
|
|
Numerator:
|
|
|
|
Net
income attributable to Nortel
|
514
|
573
|
|
Net
income available to Class “B” Preferred Shares
|
(251.61)
|
(280.50)
|
|
Net
income available to common shares
|
262.39
|
292.50
|
|
Denominator:
|
|
|
|
Number
of common shares outstanding
|
5,330,400
|
5,330,400
|
|
Basic
and diluted net income per common share
|
49.22
|
54.87
|
|
|
|
|
|
Class
“B” Preferred Shares:
|
|
|
|
Numerator:
|
|
|
|
Net
income available to Class “B” Preferred Shares
|
251.61
|
280.50
|
|
Denominator:
|
|
|
|
Number
of Class “B” Preferred Shares outstanding
|
1,470,455
|
1,470,455
|
|
Basic
and diluted net income per Class “B” Preferred Share
|
171.11
|
190.75
|
NORTEL
INVERSORA S.A.
NOTE 2 – BREAKDOWN OF
THE MAIN ACCOUNTS
|
CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
|
March
31,
|
December
31,
|
|
CURRENT
ASSETS
|
2016
|
2015
|
|
a)
Cash and cash equivalents
|
|
|
|
Cash
|
35
|
25
|
|
Banks
|
309
|
245
|
|
Time
deposits
|
328
|
217
|
|
Other
short-term investments
|
54
|
450
|
|
|
726
|
937
|
|
b)
Investments
|
|
|
|
Government
bonds at fair value
|
675
|
616
|
|
Government
bonds at fair value – US dollar linked
|
40
|
576
|
|
Government
bonds at amortized cost – US dollar linked
|
—
|
133
|
|
Provincial
and Municipal government bonds at amortized cost – US dollar linked
|
—
|
74
|
|
Provincial
and Municipal government bonds at amortized cost
|
112
|
31
|
|
|
827
|
1,430
|
|
|
|
|
|
c)
Trade receivables
|
|
|
|
Fixed
Services
|
1,843
|
1,449
|
|
Personal
Mobile Services – services sales
|
3,207
|
2,860
|
|
Personal
Mobile Services – equipment sales
|
2,128
|
1,558
|
|
Núcleo
Mobile Services
|
242
|
182
|
|
Subtotal
|
7,420
|
6,049
|
|
Allowance
for doubtful accounts
|
(486)
|
(386)
|
|
|
6,934
|
5,663
|
Movements in the allowance for current doubtful
accounts are as follows:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
(386)
|
(292)
|
|
Additions
– bad debt expenses
|
(255)
|
(180)
|
|
Uses
|
157
|
111
|
|
Currency
translation adjustments
|
(2)
|
—
|
|
At
the end of the period
|
(486)
|
(361)
|
|
|
March
31,
|
December
31,
|
|
d)
Other receivables
|
2016
|
2015
|
|
Prepaid
expenses
|
507
|
346
|
|
NDF
|
422
|
466
|
|
Tax
credits
|
202
|
165
|
|
Expenses
reimbursement
|
90
|
95
|
|
Unionized
employees advances
|
—
|
57
|
|
Restricted
funds
|
23
|
26
|
|
PP&E
disposal receivables
|
1
|
26
|
|
Tax
on personal property – on behalf of shareholders
|
32
|
25
|
|
Receivables
for return of handsets under warranty
|
7
|
9
|
|
Guarantee
deposits
|
6
|
5
|
|
Prepaid
expenses related parties (Note 5.c)
|
—
|
36
|
|
Other
|
129
|
115
|
|
Subtotal
|
1,419
|
1,371
|
|
Allowance
for other receivables
|
(27)
|
(25)
|
|
|
1,392
|
1,346
|
Movements in the allowance for other receivables
are as follows:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
(25)
|
(23)
|
|
Additions
|
(2)
|
(*)
(3)
|
|
At
the end of the period
|
(27)
|
(26)
|
(*) Included
in Bad debt expenses as of March 31, 2015.
NORTEL
INVERSORA S.A.
|
|
March
31,
|
December
31,
|
|
e)
Inventories
|
2016
|
2015
|
|
Mobile
handsets and others
|
2,863
|
2,218
|
|
Advances
for mobile handsets acquisitions
|
—
|
47
|
|
Fixed
telephones and equipment
|
30
|
14
|
|
Subtotal
|
2,893
|
2,279
|
|
Allowance
for obsolescence of inventories
|
(90)
|
(86)
|
|
|
2,803
|
2,193
|
Movements in the allowance for obsolescence
of inventories are as follows:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
(86)
|
(73)
|
|
Additions
– Fees for services, maintenance and materials
|
(17)
|
(5)
|
|
Uses
|
13
|
3
|
|
At
the end of the period
|
(90)
|
(75)
|
Sale and cost of equipment and handsets by business segment
is as follows:
|
|
Three-month
periods
ended March 31,
|
|
|
2016
|
2015
|
|
|
Profit
(loss)
|
|
Sales
of equipment and handsets - Fixed Services
|
33
|
10
|
|
Cost
of equipment and handsets – Fixed Services
|
(45)
|
(19)
|
|
Total
equipment loss – Fixed Services
|
(12)
|
(9)
|
|
Sales
of equipment and handsets – Personal Mobile Services
|
1,957
|
881
|
|
Cost
of equipment and handsets – Personal Mobile Services (net of SAC capitalization)
|
(1,381)
|
(593)
|
|
Total
equipment income – Personal Mobile Services
|
576
|
288
|
|
Sales
of equipment and handsets – Núcleo Mobile Services
|
60
|
22
|
|
Cost
of equipment and handsets – Núcleo Mobile Services (net of SAC capitalization)
|
(73)
|
(28)
|
|
Total
equipment loss – Núcleo Mobile Services
|
(13)
|
(6)
|
|
Total
equipment and handsets sale
|
2,050
|
913
|
|
Total
cost of equipment and handsets (net of SAC capitalization)
|
(1,499)
|
(640)
|
|
Total
income for sale of equipment and handsets
|
551
|
273
|
|
|
March
31,
|
December
31,
|
|
|
2016
|
2015
|
|
NON-CURRENT
ASSETS
|
|
|
|
f)
Trade receivables
|
|
|
|
Fixed
Services
|
23
|
17
|
|
Personal
Mobile Services – equipment sales
|
432
|
300
|
|
Núcleo
Mobile Services – equipment sales
|
222
|
164
|
|
|
677
|
481
|
|
g)
Other receivables
|
|
|
|
Prepaid
expenses
|
211
|
166
|
|
Credit
on SC Resolution No. 41/07 and IDC
|
84
|
84
|
|
Restricted
funds
|
35
|
32
|
|
Tax
on personal property – on behalf of shareholders
|
31
|
31
|
|
Tax
credits
|
29
|
29
|
|
Guarantee
deposits
|
12
|
12
|
|
Regulatory
receivables (Paraguay)
|
26
|
22
|
|
Other
|
31
|
28
|
|
Subtotal
|
459
|
404
|
|
Allowance
for regulatory matters
|
(84)
|
(84)
|
|
Allowance
for doubtful accounts (tax on personal property)
|
(31)
|
(31)
|
|
Allowance
for other tax credits
|
(17)
|
(17)
|
|
|
327
|
272
|
Movements in the allowance for regulatory
matters are as follows:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
(84)
|
(85)
|
|
Uses
|
—
|
1
|
|
At
the end of the period
|
(84)
|
(84)
|
NORTEL
INVERSORA S.A.
Movements in the allowance for doubtful
accounts (tax on personal property) are as follows:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
(31)
|
(31)
|
|
Additions
|
—
|
—
|
|
At
the end of the period
|
(31)
|
(31)
|
Movements in the allowance for other tax
credits are as follows:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
(17)
|
(17)
|
|
Additions
|
—
|
—
|
|
At
the end of the period
|
(17)
|
(17)
|
|
|
|
|
|
|
March
31,
|
December
31,
|
|
|
2016
|
2015
|
|
h)
Investments
|
|
|
|
Government
bonds at amortized cost
|
73
|
261
|
|
Provincial
and municipal government bonds at amortized cost
|
72
|
62
|
|
Tuves
Paraguay S.A. shares purchase option
|
—
|
9
|
|
2003
Telecommunications Fund
|
1
|
1
|
|
|
146
|
333
|
|
|
|
|
|
i)
PP&E
|
|
|
|
Land,
buildings and facilities
|
1,139
|
1,088
|
|
Computer
equipment and software
|
1,903
|
1,885
|
|
Switching
and transmission equipment (i)
|
4,439
|
4,368
|
|
Mobile
network access and external wiring
|
6,168
|
5,643
|
|
Construction
in progress
|
3,159
|
3,015
|
|
Other
tangible assets
|
565
|
567
|
|
Subtotal
PP&E
|
17,373
|
16,566
|
|
Materials
|
2,034
|
1,652
|
|
Valuation
allowance for materials
|
(54)
|
(52)
|
|
Impairment
of PP&E
|
(227)
|
(203)
|
|
Total
PP&E
|
19,126
|
17,963
|
(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:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
18,218
|
13,933
|
|
CAPEX
|
1,472
|
623
|
|
Materials
|
461
|
130
|
|
Total
PP&E additions
|
1,933
|
753
|
|
Currency
translation adjustments
|
290
|
(3)
|
|
Consumption
of materials
|
(94)
|
(68)
|
|
Decrease
|
(7)
|
(1)
|
|
Depreciation
of the period
|
(933)
|
(677)
|
|
At
the end of the period
|
19,407
|
13,937
|
Movements in the valuation allowance for
materials are as follows:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
(52)
|
(24)
|
|
Additions
- Fees for services, maintenance, and materials
|
(4)
|
(4)
|
|
Uses
|
2
|
—
|
|
At
the end of the period
|
(54)
|
(28)
|
NORTEL
INVERSORA S.A.
Movements in the impairment of PP&E
are as follows:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
(203)
|
(100)
|
|
Additions
– Impairment of PP&E
|
(24)
|
(3)
|
|
At
the end of the period
|
(227)
|
(103)
|
|
|
March
31,
|
December
31,
|
|
j)
Intangible assets
|
2016
|
2015
|
|
SAC
– fixed services
|
111
|
116
|
|
SAC
– mobile services
|
1,260
|
1,156
|
|
Service
connection or habilitation costs
|
108
|
107
|
|
3G/4G
licenses
|
5,346
|
5,443
|
|
PCS
license
|
589
|
588
|
|
Rights
of use and exclusivity
|
245
|
248
|
|
Other
intangible assets
|
1
|
1
|
|
|
7,660
|
7,659
|
Movements in Intangible assets are as follows:
|
|
March
31,
|
March
31,
|
|
|
2016
|
2015
|
|
|
(3
months)
|
(3
months)
|
|
At
the beginning of the year
|
7,659
|
5,331
|
|
CAPEX
|
430
|
241
|
|
Currency
translation adjustments
|
13
|
—
|
|
Amortization
of the period
|
(442)
|
(280)
|
|
At
the end of the period
|
7,660
|
5,292
|
|
|
|
|
|
CURRENT
LIABILITIES
|
March
31,
|
December
31,
|
|
k)
Trade payables
|
2016
|
2015
|
|
For
the acquisition of PP&E
|
5,412
|
5,022
|
|
For
the acquisition of other assets and services
|
3,185
|
2,992
|
|
For
the acquisition of inventory
|
2,173
|
1,335
|
|
Subtotal
suppliers
|
10,770
|
9,349
|
|
Agent
commissions
|
491
|
525
|
|
|
11,261
|
9,874
|
|
l)
Deferred revenues
|
|
|
|
On
prepaid calling cards – Fixed and Mobile services
|
247
|
312
|
|
On
connection fees – Fixed Services
|
79
|
78
|
|
On
international capacity rental
|
44
|
47
|
|
On
mobile customer loyalty programs
|
35
|
35
|
|
From
CONATEL – Núcleo Mobile Services
|
6
|
5
|
|
|
411
|
477
|
|
m)
Financial debt - Núcleo
|
|
|
|
Bank
overdrafts – principal (Personal)
|
2,143
|
3,062
|
|
Bank
overdrafts – principal (Telecom Argentina)
|
710
|
—
|
|
Bank
overdrafts – principal (Núcleo)
|
115
|
84
|
|
Bank
loans – principal (Núcleo)
|
366
|
193
|
|
Accrued
interest (Personal)
|
64
|
104
|
|
Accrued
interest (Núcleo)
|
8
|
8
|
|
Accrued
interest (Telecom Argentina)
|
6
|
—
|
|
|
3,412
|
3,451
|
|
n)
Salaries and social security payables
|
|
|
|
Annual
complementary salaries, vacation and bonuses
|
868
|
850
|
|
Social
security payables
|
289
|
324
|
|
Termination
benefits
|
81
|
88
|
|
|
1,238
|
1,262
|
|
o)
Income tax payables
|
|
|
|
Income
tax payables 2015
|
1,733
|
1,733
|
|
Income
tax payables 2016
|
664
|
—
|
|
Income
tax retentions and payments in advance
|
(1,678)
|
(1,288)
|
|
Law
No. 26,476 Tax Regularization Regime
|
5
|
5
|
|
|
724
|
450
|
NORTEL
INVERSORA S.A.
|
|
March
31,
|
December
31,
|
|
p)
Other taxes payables
|
2016
|
2015
|
|
VAT,
net
|
250
|
452
|
|
Tax
withholdings
|
96
|
201
|
|
Internal
taxes
|
146
|
111
|
|
Tax
on SU
|
105
|
91
|
|
Turnover
tax
|
76
|
143
|
|
Regulatory
fees
|
88
|
74
|
|
Municipal
taxes
|
47
|
46
|
|
Perception
Decree No.583/10 ENARD
|
23
|
20
|
|
Tax
on personal property – on behalf of shareholders
|
32
|
25
|
|
|
863
|
1,163
|
|
q)
Other liabilities
|
|
|
|
Compensation
for directors and members of the Supervisory Committee
|
42
|
38
|
|
Guarantees
received
|
13
|
12
|
|
Other
|
9
|
11
|
|
|
64
|
61
|
|
NON-CURRENT
LIABILITIES
|
March
31,
|
December
31,
|
|
r)
Trade payables
|
2016
|
2015
|
|
For
the acquisition of PP&E
|
52
|
52
|
|
|
52
|
52
|
|
s)
Deferred revenues
|
|
|
|
On
international capacity rental – Fixed Services
|
281
|
290
|
|
On
mobile customer loyalty programs
|
85
|
84
|
|
On
connection fees – Fixed Services
|
80
|
79
|
|
From
CONATEL– Núcleo Mobile Services
|
3
|
4
|
|
|
449
|
457
|
|
t)
Financial debt - Núcleo
|
|
|
|
Notes
– principal (Personal) (*)
|
713
|
713
|
|
Bank
loans – principal (Personal)
|
573
|
509
|
|
Bank
loans – principal (Núcleo)
|
225
|
227
|
|
(*)
Net of 8 of debt issuance expenses in both periods.
|
1,511
|
1,449
|
|
|
|
|
|
u)
Salaries and social security payables
|
|
|
|
Termination
benefits
|
107
|
117
|
|
Bonuses
|
48
|
40
|
|
|
155
|
157
|
|
v)
Income tax payables
|
|
|
|
Law
No. 26,476 Tax Regularization Regime
|
9
|
10
|
|
|
9
|
10
|
|
w)
Other liabilities
|
|
|
|
Pension
benefits
|
107
|
95
|
|
Legal
fees
|
4
|
4
|
|
Other
|
3
|
2
|
|
|
114
|
101
|
NORTEL
INVERSORA S.A.
x) Income tax assets and deferred income tax
Telecom Group’s and the Company’s
income tax assets and deferred income tax asset and liability consist of the following:
|
|
Deferred
tax assets
|
|
Deferred
tax liabilities
|
|
As
of March 31, 2016
|
Telecom
Argentina
|
Núcleo
|
Telecom
USA
|
Total
|
|
The
Company
|
Personal
|
Total
|
|
Allowance
for doubtful accounts
|
69
|
6
|
1
|
76
|
|
—
|
197
|
197
|
|
Provisions
|
312
|
—
|
—
|
312
|
|
—
|
142
|
142
|
|
PP&E
|
—
|
17
|
—
|
17
|
|
—
|
—
|
—
|
|
Inventory
|
—
|
—
|
—
|
—
|
|
—
|
114
|
114
|
|
Termination
benefits
|
61
|
—
|
—
|
61
|
|
—
|
—
|
—
|
|
Deferred
revenues
|
75
|
—
|
—
|
75
|
|
—
|
—
|
—
|
|
Pension
benefits
|
38
|
—
|
—
|
38
|
|
—
|
—
|
—
|
|
Other
deferred tax assets, net
|
93
|
—
|
—
|
93
|
|
—
|
—
|
—
|
|
Total
deferred tax assets
|
648
|
23
|
1
|
672
|
|
—
|
453
|
453
|
|
PP&E
|
(373)
|
—
|
—
|
(373)
|
|
—
|
(224)
|
(224)
|
|
Intangible
assets
|
(84)
|
—
|
—
|
(84)
|
|
—
|
(511)
|
(511)
|
|
Cash dividends from
foreign companies
|
—
|
(5)
|
—
|
(5)
|
|
—
|
(**) (135)
|
(135)
|
|
Investments
|
—
|
—
|
—
|
—
|
|
(4)
|
(9)
|
(13)
|
|
Other
deferred tax liabilities, net
|
—
|
—
|
—
|
—
|
|
—
|
(36)
|
(36)
|
|
Total
deferred tax liabilities
|
(457)
|
(5)
|
—
|
(462)
|
|
(4)
|
(915)
|
(919)
|
|
Total
deferred tax assets (liabilities), net
|
191
|
18
|
1
|
210
|
|
(4)
|
(462)
|
(466)
|
|
|
|
|
|
|
|
|
|
|
|
Action
for recourse tax receivable of Telecom Argentina
|
98
|
—
|
—
|
98
|
|
|
|
|
|
Total
income tax assets
|
289
|
(*)
18
|
1
|
308
|
|
|
|
|
|
|
Deferred
tax assets
|
|
Deferred
tax liabilities
|
|
As
of December 31, 2015
|
Telecom
Argentina
|
Núcleo
|
Telecom
USA
|
Total
|
|
The
Company
|
Personal
|
Total
|
|
Allowance
for doubtful accounts
|
61
|
8
|
1
|
70
|
|
—
|
151
|
151
|
|
Provisions
|
314
|
—
|
—
|
314
|
|
—
|
129
|
129
|
|
PP&E
|
—
|
14
|
—
|
14
|
|
—
|
—
|
—
|
|
Inventory
|
—
|
—
|
—
|
—
|
|
—
|
99
|
99
|
|
Termination
benefits
|
65
|
—
|
—
|
65
|
|
—
|
—
|
—
|
|
Deferred
revenues
|
73
|
—
|
—
|
73
|
|
—
|
—
|
—
|
|
Pension
benefits
|
33
|
—
|
—
|
33
|
|
—
|
—
|
—
|
|
Other
deferred tax assets, net
|
78
|
4
|
—
|
82
|
|
—
|
—
|
—
|
|
Total
deferred tax assets
|
624
|
26
|
1
|
651
|
|
—
|
379
|
379
|
|
PP&E
|
(390)
|
—
|
(1)
|
(391)
|
|
—
|
(260)
|
(260)
|
|
Intangible
assets
|
(86)
|
—
|
—
|
(86)
|
|
—
|
(478)
|
(478)
|
|
Cash dividends from foreign
companies
|
—
|
(6)
|
—
|
(6)
|
|
—
|
(***) (113)
|
(113)
|
|
Investments
|
—
|
—
|
—
|
—
|
|
(3)
|
(61)
|
(64)
|
|
Other
deferred tax liabilities, net
|
—
|
(1)
|
—
|
(1)
|
|
—
|
(17)
|
(17)
|
|
Total
deferred tax liabilities
|
(476)
|
(7)
|
(1)
|
(484)
|
|
(3)
|
(929)
|
(932)
|
|
Total
deferred tax assets (liabilities), net
|
148
|
19
|
—
|
167
|
|
(3)
|
(550)
|
(553)
|
|
|
|
|
|
|
|
|
|
|
|
Action
for recourse tax receivable of Telecom Argentina
|
98
|
—
|
—
|
98
|
|
—
|
—
|
—
|
|
Total
income tax assets
|
246
|
19
|
—
|
265
|
|
—
|
—
|
—
|
(*) Includes
(2) recorded in Other comprehensive income for the three-months period ended on March 31, 2016.
(**) Includes
(18) recorded in Other comprehensive income for the three-months period ended on March 31, 2016.
(***) Includes
(25) recorded in Other comprehensive income for the year ended on December 31, 2015 and (12) corresponding to a reclassification
of deferred tax liabilities to income tax payables related to withholdings of cash dividends from foreign companies.
|
y) Aging of assets and liabilities as of March 31, 2016
|
|
Date
due
|
Cash
and cash equivalents
|
Investments
|
Trade
receivables
|
Income
tax
assets
|
Other
receivables
|
|
Total
due
|
—
|
—
|
1,689
|
—
|
—
|
|
Not
due
|
|
|
|
|
|
|
Second
quarter 2016
|
726
|
608
|
3,895
|
—
|
754
|
|
Third
quarter 2016
|
—
|
—
|
585
|
—
|
425
|
|
Fourth
quarter 2016
|
—
|
50
|
487
|
—
|
127
|
|
First
quarter 2017
|
—
|
169
|
278
|
—
|
86
|
|
April
2017 thru March 2018
|
—
|
98
|
668
|
—
|
178
|
|
April
2018 thru March 2019
|
—
|
24
|
9
|
—
|
65
|
|
April
2019 and thereafter
|
—
|
23
|
—
|
—
|
64
|
|
Not
date due established
|
—
|
1
|
—
|
308
|
20
|
|
Total
not due
|
726
|
973
|
5,922
|
308
|
1,719
|
|
Total
|
726
|
973
|
7,611
|
308
|
1,719
|
|
|
|
|
|
|
|
|
Balances
bearing interest
|
382
|
972
|
1,661
|
—
|
—
|
|
Balances
not bearing interest
|
344
|
1
|
5,950
|
308
|
1,719
|
|
Total
|
726
|
973
|
7,611
|
308
|
1,719
|
|
|
|
|
|
|
|
|
Average
annual interest rate (%)
|
(a)
|
(b)
|
(c)
(d)
|
—
|
—
|
(a)
328 are assets in US dollars that bear 0.20% and 54 are other short-term investments that bear 42.09% average.
(b)
297 are assets in argentine pesos (32 bearing interests between 15% and 30.4% and 265 are US dollar linked bonds bearing interests
between 0.40% and 2.48%), and 675 are assets in foreign currency that bear 7%.
(c)
From due trade receivables 75 bear 50% over the Banco de la Nación Argentina 30-day interest rate paid by banks, 741 bear
50% over the Banco de la Nación Argentina notes payable discount rate, 775 bear 49.5% and 26 bear 36%.
(d)
From not due trade receivables 17 bear 45%, 35 bear 8.3% and 3 bear 34.2%.
NORTEL
INVERSORA S.A.
|
Date
due
|
Trade
payables
|
Deferred
revenues
|
Financial
debt
|
Salaries
and social security payables
|
Income
tax payables
|
Deferred
income tax liabilities
|
Other
taxes payables
|
Other
liabilities
|
|
Total
due
|
(e) 1,046
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Not
due
|
|
|
|
|
|
|
|
|
|
Second
quarter 2016
|
8,671
|
280
|
2,675
|
706
|
710
|
—
|
860
|
55
|
|
Third
quarter 2016
|
974
|
44
|
452
|
168
|
1
|
—
|
—
|
1
|
|
Fourth
quarter 2016
|
506
|
43
|
118
|
147
|
1
|
—
|
—
|
1
|
|
First
quarter 2017
|
64
|
44
|
167
|
217
|
12
|
—
|
3
|
7
|
|
April
2017 thru March 2018
|
44
|
148
|
1,364
|
87
|
4
|
—
|
—
|
13
|
|
April
2018 thru March 2019
|
—
|
62
|
147
|
36
|
5
|
—
|
—
|
4
|
|
April
2019 and thereafter
|
8
|
239
|
—
|
32
|
—
|
—
|
—
|
97
|
|
Not
date due established
|
—
|
—
|
—
|
—
|
—
|
466
|
—
|
—
|
|
Total
not due
|
10,267
|
860
|
4,923
|
1,393
|
733
|
466
|
863
|
178
|
|
Total
|
11,313
|
860
|
4,923
|
1,393
|
733
|
466
|
863
|
178
|
|
|
|
|
|
|
|
|
|
|
|
Balances
bearing interest
|
89
|
—
|
4,765
|
—
|
11
|
—
|
—
|
—
|
|
Balances
not bearing interest
|
11,224
|
860
|
158
|
1,393
|
722
|
466
|
863
|
178
|
|
Total
|
11,313
|
860
|
4,923
|
1,393
|
733
|
466
|
863
|
178
|
|
|
|
|
|
|
|
|
|
|
|
Average
annual interest rate (%)
|
6%
|
—
|
(f)
|
—
|
9%
|
—
|
—
|
—
|
|
|
(e)
|
As of the date of these
consolidated financial statements, 506 were cancelled.
|
|
|
(f)
|
3,465
are liabilities in argentine pesos bearing interests between 27.50% and 32.40%, 586 are
liabilities in foreign currency bearing three-month LIBOR plus 8.75% and 714 are liabilities
in guaraníes bearing interests between 9.30% and 10.25%,
|
|
z) Foreign currency assets and liabilities
|
|
|
The following table shows a breakdown
of the Company and Telecom Group’s net assessed financial position exposure to currency risk as of March 31, 2016 and December
31, 2015.
|
03.31.16
|
|
Amount
of foreign currency (i)
|
Exchange
rate
|
Amount
in local currency (ii)
|
|
Assets
|
|
|
|
|
US$
|
111
|
14.600
|
(iii)
1,617
|
|
G
|
321,457
|
0.002
|
829
|
|
EURO
|
4
|
16.608
|
70
|
|
|
Total
assets
|
|
2,516
|
|
Liabilities
|
|
|
|
|
US$
|
(602)
|
14.700
|
(8,688)
|
|
G
|
(394,578)
|
0.002
|
(1,018)
|
|
EURO
|
(13)
|
16.758
|
(214)
|
|
|
Total
liabilities
|
|
(9,920)
|
|
|
Net
liabilities
|
|
(7,404)
|
(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)
Includes 675 corresponding to Government bonds valued at fair value (equivalent to US$ 44 million).
In order
to partially reduce this net liability position in foreign currency the Company and the Telecom Group, as of March 31, 2016, holds
investments adjustable to the variation of the US dollar/$ exchange rate (US dollar linked) by $265, and other short-term investments
whose main underlying asset are financial assets dollar linked for a total amount of $28, so the
net liability position in foreign currency amounted to $7,111 as of March 31, 2016 (equivalent to US$484 million). Additionally,
the Group has entered into several NDF contracts to purchase a total amount of US$112 million. The portion of the net liability
position in foreign currency not covered amounted to US$ 372 million as of March 31, 2016.
|
12.31.15
|
|
Amount
of foreign currency (i)
|
Exchange
rate
|
Amount
in local currency (ii)
|
|
Assets
|
|
|
|
|
US$
|
103
|
12.940
|
(iii)
1,353
|
|
G
|
234,194
|
0.002
|
520
|
|
EURO
|
4
|
14.068
|
54
|
|
|
Total
assets
|
|
1,927
|
|
Liabilities
|
|
|
|
|
US$
|
(538)
|
13.040
|
(7,015)
|
|
G
|
(348,051)
|
0.002
|
(771)
|
|
EURO
|
(14)
|
14.210
|
(191)
|
|
|
Total
liabilities
|
|
(7,977)
|
|
|
Net
liabilities
|
|
(6,050)
|
|
|
(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)
|
Includes 616 corresponding
to Government bonds at fair value (equivalent to US$ 46 million).
|
In order to partially
reduce this net liability position in foreign currency, the Company and the Telecom Group, as of December 31, 2015, hold
investments adjustable to the variation of the US dollar/$ exchange rate (US dollar linked) by $1,105 and other short-term
investments whose main underlying asset are financial assets dollar linked for a total amount of $338, so the net liability
position in foreign currency amounts to $4,607 as of December 31, 2015, equivalent to approximately US$ 353 million.
Additionally, the Group entered into several NDF contracts as of December 31, 2015 amounting to US$ 165 million, so, the
portion of the net liability position in foreign currency not covered by these instruments amounted to US$ 188 million as of
December 31, 2015.
NORTEL
INVERSORA S.A.
aa) 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 March 31, 2016 and December
31, 2015:
|
|
As
of March 31, 2016
|
As
of December 31, 2015
|
|
Investments
|
Book
value
|
Fair
value (*)
|
Book
value
|
Fair
value (*)
|
|
|
|
|
|
|
|
Government
bonds (US dollar linked)
|
73
|
65
|
394
|
365
|
|
Provincial
government bonds in pesos
|
32
|
32
|
32
|
32
|
|
Provincial
and municipal government bonds (US dollar linked)
|
152
|
133
|
135
|
118
|
|
Total
|
257
|
230
|
561
|
515
|
(*)
According to IFRS selling
costs are not deducted.
ab) Offsetting of financial assets
and financial liabilities
The information required by the amendment
to IFRS 7 as of March 31, 2016 and December 31, 2015 is as follows:
|
|
As
of March 31, 2016
|
|
|
Trade
receivables
|
Other
receivables (1)
|
Trade
payables
|
Other
liabilities (1)
|
|
Current
and non-current assets (liabilities) - Gross value
|
9,372
|
713
|
(13,074)
|
(87)
|
|
Offsetting
|
(1,761)
|
(16)
|
1,761
|
16
|
|
Current
and non-current assets (liabilities) – Book value
|
7,611
|
697
|
(11,313)
|
(71)
|
|
|
As
of December 31, 2015
|
|
|
Trade
receivables
|
Other
receivables (1)
|
Trade
payables
|
Other
liabilities (1)
|
|
Current
and non-current assets (liabilities) - Gross value
|
7,832
|
822
|
(11,614)
|
(79)
|
|
Offsetting
|
(1,688)
|
(12)
|
1,688
|
12
|
|
Current
and non-current assets (liabilities) – Book value
|
6,144
|
810
|
(9,926)
|
(67)
|
(1) Only includes
financial assets and financial liabilities according to IFRS 7.
|
CONSOLIDATED INCOME STATEMENTS
|
Three-month periods
ended March 31,
|
|
|
2016
|
2015
|
|
ac) Total revenues and other income
|
Profit (loss)
|
|
Services
|
|
|
|
Voice – Retail
|
975
|
745
|
|
Voice – Wholesale
|
352
|
235
|
|
Data
|
689
|
407
|
|
Internet
|
1,390
|
973
|
|
Subtotal Fixed Services
|
3,406
|
2,360
|
|
Voice – Retail
|
2,049
|
1,702
|
|
Voice – Wholesale
|
465
|
481
|
|
Data
|
1,735
|
1,845
|
|
Internet
|
2,202
|
1,188
|
|
Subtotal Personal Mobile Services
|
6,451
|
5,216
|
|
Voice – Retail
|
201
|
148
|
|
Voice – Wholesale
|
34
|
26
|
|
Data
|
99
|
80
|
|
Internet
|
214
|
129
|
|
Subtotal Núcleo Mobile Services
|
548
|
383
|
|
Total service revenues (a)
|
10,405
|
7,959
|
|
Equipment
|
|
|
|
Fixed Services
|
33
|
10
|
|
Personal Mobile Services
|
1,957
|
881
|
|
Núcleo Mobile Services
|
60
|
22
|
|
Total equipment revenues (b)
|
2,050
|
913
|
|
Total revenues (a) + (b)
|
12,455
|
8,872
|
|
Other income
|
|
|
|
Fixed Services
|
9
|
4
|
|
Personal Mobile Services
|
2
|
3
|
|
Total other income (c)
|
11
|
7
|
|
|
|
|
|
Total revenues and other income (a)+(b)+(c)
|
12,466
|
8,879
|
NORTEL
INVERSORA S.A.
Telecom Group’s service revenues
by type of service (regardless of the segment originates) are as follows:
|
|
Three-month periods ended March 31,
|
|
|
2016
|
%
|
2015
|
%
|
|
Voice Retail
|
3,225
|
31
|
2,595
|
33
|
|
Voice Wholesale
|
851
|
8
|
742
|
9
|
|
Total Voice
|
4,076
|
39
|
3,337
|
42
|
|
Data
|
2,523
|
24
|
2,332
|
29
|
|
Internet
|
3,806
|
37
|
2,290
|
29
|
|
Total service revenues
|
10,405
|
100
|
7,959
|
100
|
Telecom Group’s services revenues
by customer segment and billing mechanism are as follows:
|
|
Three-month periods
ended March 31,
|
|
Services
|
2016
|
2015
|
|
Retail
|
Profit (loss)
|
|
Monthly Charges
|
2,653
|
1,811
|
|
Voice
|
612
|
422
|
|
Internet
|
1,278
|
918
|
|
Bundles (Voice and Internet)
|
280
|
188
|
|
Data
|
483
|
283
|
|
Measured services
|
151
|
154
|
|
Connection and reconnection fees
|
29
|
23
|
|
Pre-cancellation contract fees
|
9
|
5
|
|
Others
|
5
|
4
|
|
Wholesale
|
|
|
|
Monthly Charges
|
297
|
184
|
|
Cell sites and links rental
|
93
|
62
|
|
Data
|
204
|
122
|
|
Fixed and mobile interconnection
|
237
|
155
|
|
Others
|
25
|
24
|
|
Total Fixed services
|
3,406
|
2,360
|
|
Retail
|
|
|
|
Monthly Charges
|
3,418
|
2,480
|
|
Voice
|
43
|
190
|
|
Internet
|
53
|
48
|
|
Bundles (Voice, SMS and Internet)
|
3,295
|
2,215
|
|
Others
|
27
|
27
|
|
Measured services
|
2,351
|
2,119
|
|
Postpaid
|
293
|
183
|
|
Prepaid and Cuentas Claras
|
2,058
|
1,936
|
|
Reconnection fees
|
59
|
46
|
|
Pre-cancellation contract fees
|
41
|
20
|
|
Damage management services
|
84
|
56
|
|
Others
|
33
|
14
|
|
Wholesale
|
|
|
|
Interconnection
|
361
|
392
|
|
Roaming
|
85
|
79
|
|
Others
|
19
|
10
|
|
Total Personal mobile services
|
6,451
|
5,216
|
|
Retail
|
|
|
|
Monthly Charges
|
215
|
147
|
|
Internet
|
25
|
26
|
|
Bundles (Voice, SMS and Internet)
|
190
|
121
|
|
Measured services
|
260
|
190
|
|
Postpaid
|
6
|
4
|
|
Prepaid and Plan Control
|
254
|
186
|
|
Reconnection fees
|
4
|
2
|
|
Pre-cancellation contract fees
|
12
|
3
|
|
Others
|
20
|
13
|
|
Wholesale
|
|
|
|
Interconnection
|
27
|
20
|
|
Roaming
|
5
|
5
|
|
Others
|
5
|
3
|
|
Total Núcleo mobile services
|
548
|
383
|
|
Total services revenues
|
10,405
|
7,959
|
NORTEL
INVERSORA S.A.
ad)
Operating costs
Operating expenses disclosed by nature of
expense amounted to $10,475 and $7,204 for the three-month periods ended March 31, 2016 and 2015, respectively.
The main components of the operating expenses
are the following:
|
|
Three-month periods
ended March 31,
|
|
|
2016
|
2015
|
|
|
Profit (loss)
|
|
Employee benefit expenses and severance payments
|
|
|
|
Salaries (*)
|
(1,573)
|
(1,108)
|
|
Social security expenses (*)
|
(513)
|
(346)
|
|
Severance indemnities and termination benefits
|
(51)
|
(63)
|
|
Other employee benefits
|
(38)
|
(27)
|
|
|
(2,175)
|
(1,544)
|
|
(*)
In 2016 includes approximately (107) related to onetime bonus payment and (48) related to its social security expenses.
|
|
|
|
|
|
Interconnection costs and other telecommunication charges
|
|
|
|
Fixed telephony interconnection costs
|
(142)
|
(75)
|
|
Cost of international outbound calls
|
(61)
|
(40)
|
|
Lease of circuits and use of public network
|
(120)
|
(79)
|
|
Mobile services - charges for roaming
|
(145)
|
(104)
|
|
Mobile services - charges for TLRD
|
(239)
|
(202)
|
|
|
(707)
|
(500)
|
|
Fees for services, maintenance, materials and supplies
|
|
|
|
Maintenance of hardware and software
|
(118)
|
(72)
|
|
Technical maintenance
|
(320)
|
(189)
|
|
Service connection fees for fixed lines and Internet lines
|
(50)
|
(42)
|
|
Service connection fees capitalized as SAC
|
3
|
2
|
|
Service connection fees capitalized as Intangible assets
|
7
|
6
|
|
Other maintenance costs
|
(99)
|
(81)
|
|
Obsolescence of inventories – Mobile Services
|
(18)
|
(5)
|
|
Call center fees
|
(299)
|
(304)
|
|
Other fees for services
|
(190)
|
(197)
|
|
Compensation for Directors and Supervisory Committee members
|
(12)
|
(10)
|
|
|
(1,096)
|
(892)
|
|
Taxes and fees with the Regulatory Authority
|
|
|
|
Turnover tax
|
(662)
|
(476)
|
|
Taxes with the Regulatory Authority
|
(272)
|
(211)
|
|
Tax on deposits to and withdrawals from bank accounts
|
(119)
|
(89)
|
|
Municipal taxes
|
(91)
|
(60)
|
|
Other taxes
|
(65)
|
(38)
|
|
|
(1,209)
|
(874)
|
|
Commissions
|
|
|
|
Agent commissions
|
(732)
|
(482)
|
|
Agent commissions capitalized as SAC
|
341
|
200
|
|
Distribution of prepaid cards commissions
|
(176)
|
(158)
|
|
Collection commissions
|
(300)
|
(159)
|
|
Other commissions
|
(23)
|
(24)
|
|
|
(890)
|
(623)
|
|
Cost of equipments and handsets
|
|
|
|
Inventory balance at the beginning of the period/year
|
(2,279)
|
(794)
|
|
Plus:
|
|
|
|
Purchases
|
(2,171)
|
(670)
|
|
Deferred costs from SAC
|
35
|
20
|
|
Decreases from allowance for obsolescence
|
13
|
3
|
|
Mobile handsets lent to customers at no cost
|
10
|
6
|
|
Decreases not charged to material cost
|
—
|
1
|
|
Less:
|
|
|
|
Inventory balance at period end
|
2,893
|
794
|
|
|
(1,499)
|
(640)
|
|
Advertising
|
|
|
|
Media advertising
|
(108)
|
(110)
|
|
Fairs and exhibitions
|
(44)
|
(49)
|
|
Other advertising costs
|
(40)
|
(32)
|
|
|
(192)
|
(191)
|
NORTEL
INVERSORA S.A.
|
|
Three-month
periods
ended March 31,
|
|
|
2016
|
2015
|
|
|
Profit
(loss)
|
|
Cost
of VAS
|
|
|
|
Cost
of mobile VAS
|
(377)
|
(287)
|
|
Cost
of fixed VAS
|
(13)
|
(6)
|
|
|
(390)
|
(293)
|
|
Other
operating costs
|
|
|
|
Transportation,
freight and travel expenses
|
(251)
|
(142)
|
|
Delivery
costs capitalized as SAC
|
44
|
13
|
|
Rent
of buildings and cell sites
|
(179)
|
(122)
|
|
Energy,
water and others
|
(211)
|
(131)
|
|
International
and satellite connectivity
|
(54)
|
(35)
|
|
|
(651)
|
(417)
|
|
D&A
|
|
|
|
Depreciation
of PP&E
|
(933)
|
(677)
|
|
Amortization
of SAC and service connection charges
|
(338)
|
(216)
|
|
Amortization
of 3G/4G licenses
|
(98)
|
(59)
|
|
Amortization
of other intangible assets
|
(6)
|
(5)
|
|
|
(1,375)
|
(957)
|
|
Gain
on disposal of PP&E and impairment of PP&E
|
|
|
|
Gain
on disposal of PP&E
|
2
|
6
|
|
Impairment
of PP&E – Fixed services
|
5
|
5
|
|
Impairment
of PP&E – Personal Mobile services
|
(29)
|
(8)
|
|
|
(22)
|
3
|
|
|
|
The
operating expenses disclosed by function are as follows:
|
|
|
|
|
|
Operating
costs
|
(6,580)
|
(4,224)
|
|
Administration
costs
|
(538)
|
(393)
|
|
Commercialization
costs
|
(3,321)
|
(2,497)
|
|
Other
expenses – provisions
|
(14)
|
(93)
|
|
Gain
on disposal of PP&E and impairment of PP&E
|
(22)
|
3
|
|
|
(10,475)
|
(7,204)
|
|
ae)
Financial results
|
|
|
|
Finance
income
|
|
|
|
Gains
on investments
|
170
|
11
|
|
Gains
on other short-term investments
|
31
|
42
|
|
Interest
on receivables
|
64
|
42
|
|
Foreign
currency exchange gains
|
108
|
20
|
|
Other
|
—
|
1
|
|
Total
finance income
|
373
|
116
|
|
Finance
expenses
|
|
|
|
Interest
on loans
|
(312)
|
(44)
|
|
Interest
on salaries and social security payable, other taxes payables and accounts payable
|
(5)
|
(4)
|
|
Interest
on provisions
|
(57)
|
(53)
|
|
Present
value effect of salaries and social security payable, other taxes payables and other liabilities
|
(3)
|
(1)
|
|
Foreign
currency exchange losses
(*)
|
(526)
|
(85)
|
|
Interest
on pension benefits
|
(10)
|
(7)
|
|
TUVES
share purchase option
|
(10)
|
—
|
|
Total
finance expenses
|
(923)
|
(194)
|
|
|
(550)
|
(78)
|
(*)
Includes 100 and (22) of foreign currency exchange gains (losses) generated by the NDF in the three-month period ended March
31, 2016 and 2015, respectively.
NORTEL
INVERSORA S.A.
Income
tax expense for the three-month periods ended March 31, 2016 and 2015 consists of the following:
|
|
|
|
|
Profit
(loss)
|
|
|
|
|
The
Company
|
Telecom
Argentina
|
Telecom
USA
|
Personal
|
Núcleo
|
Total
|
|
Current
tax expense
|
(1)
|
(141)
|
(4)
|
(499)
|
(8)
|
(653)
|
|
Deferred
tax benefit (expense)
|
(1)
|
43
|
1
|
106
|
(3)
|
146
|
|
Income
tax expense as of March 31, 2016
|
(2)
|
(98)
|
(3)
|
(393)
|
(11)
|
(507)
|
|
|
|
|
|
|
|
|
|
Current
tax expense
|
(1)
|
(150)
|
(1)
|
(523)
|
(6)
|
(681)
|
|
Deferred
tax benefit
|
(3)
|
47
|
—
|
81
|
2
|
127
|
|
Income
tax expense as of March 31, 2015
|
(4)
|
(103)
|
(1)
|
(442)
|
(4)
|
(554)
|
|
|
|
|
|
|
|
|
|
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
|
2,665
|
48
|
2,713
|
|
Non
taxable items – Income from investments
|
(1,272)
|
2
|
(1,270)
|
|
Non
taxable items – Other
|
6
|
30
|
36
|
|
Subtotal
|
1,399
|
80
|
1,479
|
|
Weighted
statutory income tax rate
|
35%
|
(*)
|
|
|
Income
tax expense at weighted statutory tax rate
|
(489)
|
(14)
|
(504)
|
|
Income
tax on dividends from foreign companies - Núcleo
|
(7)
|
—
|
(7)
|
|
Other
changes in tax assets and liabilities
|
3
|
—
|
3
|
|
Income
tax expense as of March 31, 2016
|
(493)
|
(14)
|
(507)
|
|
Pre-tax
income on a separate return basis
|
2,978
|
48
|
3,026
|
|
Non
taxable items – Income from investments
|
(1,428)
|
(1)
|
(1,429)
|
|
Non
taxable items – Other
|
1
|
(19)
|
(18)
|
|
Subtotal
|
1,551
|
28
|
1,579
|
|
Weighted
statutory income tax rate
|
35%
|
(*)
|
|
|
Income
tax expense at weighted statutory tax rate
|
(543)
|
(5)
|
(548)
|
|
Income
tax on dividends from foreign companies - Núcelo
|
(6)
|
—
|
(6)
|
|
Income
tax expense as of March 31, 2015
|
(549)
|
(5)
|
(554)
|
(*)
Effective income tax rate based on weighted statutory income tax rate in the different countries where the Telecom Group has operations.
For the period presented, the statutory tax rate in Argentina was 35%, in Paraguay was 10% plus an additional rate of 5% in case
of payment of dividends and in the USA the effective tax rate was 39.5%.
NOTE
3 – SUPPLEMENTARY CASH FLOW INFORMATION
For
purposes of the statements of cash flows, cash and cash equivalents comprise cash, bank current accounts and short-term highly
liquid investments (with a maturity of three months or less from the date of acquisition) and bank overdrafts, which integrate
the Telecom Group’s cash management and whose balances fluctuate according to the Group’s needs (as happened as of
December 31, 2014 and as of March 31, 2015). Bank overdrafts are disclosed in the statement of financial position as financial
debts. During 1Q16 bank overdrafts have been part of the permanent short-term financing structure of Personal, so, net funds requests
under that method (with maturities less than three months) are included in financing activities.
|
|
March
31,
|
|
December
31,
|
|
|
2016
|
2015
|
|
2015
|
2014
|
|
Cash
and cash equivalents
|
726
|
1,452
|
|
937
|
1,004
|
|
Bank
overdrafts
|
—
|
(491)
|
|
—
|
(141)
|
|
Total
cash and cash equivalents
|
726
|
961
|
|
937
|
863
|
NORTEL
INVERSORA S.A.
Additional
information on the breakdown of the net cash flow provided by operating activities is given below:
|
|
Three-month
periods
ended March 31,
|
|
|
2016
|
2015
|
|
Collections
|
|
|
|
Collections
from customers
|
12,010
|
9,459
|
|
Interests
from customers
|
64
|
42
|
|
Interests
from time deposits
|
31
|
42
|
|
Mobile
operators collections
|
132
|
137
|
|
NDF
|
159
|
—
|
|
Subtotal
|
12,396
|
9,680
|
|
Payments
|
|
|
|
For
the acquisition of goods and services and others
|
(3,678)
|
(2,788)
|
|
For
the acquisition of inventories
|
(1,061)
|
(1,404)
|
|
Salaries
and social security payables and severance payments
|
(2,176)
|
(1,540)
|
|
NDF
|
—
|
(111)
|
|
CPP
payments
|
(192)
|
(203)
|
|
Income
taxes (includes tax returns and payments in advance)
|
(415)
|
(352)
|
|
Other
taxes and taxes and fees with the Regulatory Authority
|
(2,555)
|
(2,029)
|
|
Foreign
currency exchange differences related to the payments to suppliers
|
(884)
|
(90)
|
|
Inventory
suppliers
|
(300)
|
(70)
|
|
PP&E
suppliers
|
(408)
|
(12)
|
|
Other
suppliers
|
(176)
|
(8)
|
|
Subtotal
|
(10,961)
|
(8,517)
|
|
Net
cash flow provided by operating activities
|
1,435
|
1,163
|
|
|
|
|
|
·
Changes in assets/liabilities components:
|
|
|
|
|
|
Net
(increase) decrease in assets
|
|
|
|
Trade
receivables for services
|
(896)
|
(380)
|
|
Trade
receivables for equipment
|
(760)
|
—
|
|
Other
receivables
|
(91)
|
2
|
|
Inventories
|
(620)
|
(9)
|
|
|
(2,367)
|
(387)
|
|
Net
(decrease) increase in liabilities
|
|
|
|
Trade
payables
|
1,135
|
(1,066)
|
|
Deferred
revenues
|
(83)
|
16
|
|
Salaries
and social security payables
|
(28)
|
(60)
|
|
Other
taxes payables
|
(265)
|
40
|
|
Other
liabilities
|
21
|
3
|
|
Provisions
|
(23)
|
(11)
|
|
|
757
|
(1,078)
|
|
|
|
|
|
Income
tax paid consists of the following:
|
|
|
|
Tax
returns and payments in advance
|
(313)
|
(307)
|
|
Other
payments
|
(102)
|
(45)
|
|
|
(415)
|
(352)
|
|
|
|
|
|
·
Main non-cash operating transactions:
|
|
|
|
|
|
SAC
acquisitions offset with trade receivables
|
73
|
58
|
|
VAT
offset with income tax payments
|
14
|
—
|
|
|
|
|
|
·
Most significant investing activities:
|
|
|
|
|
|
|
|
PP&E
acquisitions include:
|
|
|
|
|
|
PP&E
additions (Note 2.i)
|
(1,933)
|
(753)
|
|
Plus:
|
|
|
|
Payments
of trade payables originated in prior periods acquisitions
|
(1,077)
|
(862)
|
|
Less:
|
|
|
|
Acquisition
of PP&E through incurrence of trade payables
|
1,232
|
520
|
|
Mobile
handsets lent to customers at no cost
(i)
|
10
|
6
|
|
|
(1,768)
|
(1,089)
|
|
|
(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.
|
NORTEL
INVERSORA S.A.
Intangible
assets acquisitions include:
|
|
Three-month
periods
ended March 31,
|
|
|
2016
|
2015
|
|
Intangible
assets additions (Note 2.j)
|
(430)
|
(241)
|
|
Plus:
|
|
|
|
Payments
of trade payables originated in prior periods acquisitions
|
(174)
|
(112)
|
|
SAC
acquisitions offset with trade receivables
|
(73)
|
(58)
|
|
Less:
|
|
|
|
Acquisition
of intangible assets through incurrence of trade payables
|
234
|
147
|
|
|
(443)
|
(264)
|
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
|
—
|
1
|
|
Government
bonds acquisition
|
—
|
(60)
|
|
Argentine
companies notes collection
|
—
|
28
|
|
Government
bonds sale (*)
|
947
|
—
|
|
Government
bonds collection
|
4
|
18
|
|
|
951
|
(13)
|
(*)
Correspond to the sale of BONAD 2016/2017/2018 Government bonds hold as of December 31, 2015 that generated a gain of 170 included
in “Gain on investments” line item in Finance Income.
|
|
·
|
Financing
activities components:
|
The
following table presents the financing activities components of the consolidated statements of cash flows:
|
Bank
overdrafts (Personal)
|
478
|
—
|
|
Bank
overdrafts (Telecom Argentina)
|
710
|
—
|
|
Bank
overdrafts (Núcleo)
|
18
|
—
|
|
Bank
loans (Personal)
|
—
|
353
|
|
Bank
loans (Núcleo)
|
122
|
—
|
|
Total
financial debt proceeds
|
1,328
|
353
|
|
Bank
overdrafts (Personal)
|
(1,396)
|
—
|
|
Bank
loans (Núcleo)
|
(25)
|
(9)
|
|
Total
payment of financial debt
|
(1,421)
|
(9)
|
|
Bank
overdrafts (Personal)
|
(259)
|
(31)
|
|
Bank
overdrafts (Telecom Argentina)
|
(11)
|
—
|
|
Notes
– interests (Personal)
|
(52)
|
—
|
|
Bank
– interests (Personal)
|
(15)
|
(12)
|
|
Bank
– interests (Núcleo)
|
(14)
|
(10)
|
|
Total
payment of interest and related costs
|
(351)
|
(53)
|
NOTE
4 – SEGMENT INFORMATION
As
of March 31, 2015 and 2016, the Telecom Group carries out its activities through six companies which were consolidated by the
end of the three-month periods ended March 31, 2016 and 2015 (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.
Segment
financial information for the three-month periods ended March 31, 2016 and 2015 was as follows:
NORTEL
INVERSORA S.A.
For
the three-month period ended March 31, 2016
q
Income
statement
|
|
Fixed
|
Mobile
Services
|
|
Elimi-
|
|
|
|
Services
|
Personal
|
Núcleo
(*)
|
Subtotal
|
Nortel
|
nations
|
Total
|
|
Total
revenues and other income (1)
|
3,967
|
8,448
|
610
|
9,058
|
—
|
(559)
|
12,466
|
|
Employee
benefit expenses and severance payments
|
(1,617)
|
(512)
|
(45)
|
(557)
|
(1)
|
—
|
(2,175)
|
|
Interconnection
costs and other telecommunication charges
|
(264)
|
(772)
|
(57)
|
(829)
|
—
|
386
|
(707)
|
|
Fees
for services, maintenance, materials and supplies
|
(508)
|
(638)
|
(53)
|
(691)
|
(3)
|
106
|
(1,096)
|
|
Taxes
and fees with the Regulatory Authority
|
(262)
|
(927)
|
(19)
|
(946)
|
(1)
|
—
|
(1,209)
|
|
Commissions
|
(65)
|
(770)
|
(69)
|
(839)
|
—
|
14
|
(890)
|
|
Cost
of equipments and handsets
|
(45)
|
(1,381)
|
(73)
|
(1,454)
|
—
|
—
|
(1,499)
|
|
Advertising
|
(16)
|
(152)
|
(24)
|
(176)
|
—
|
—
|
(192)
|
|
Cost
of VAS
|
(13)
|
(350)
|
(27)
|
(377)
|
—
|
—
|
(390)
|
|
Provisions
|
9
|
(23)
|
—
|
(23)
|
—
|
—
|
(14)
|
|
Bad
debt expenses
|
(42)
|
(193)
|
(20)
|
(213)
|
—
|
—
|
(255)
|
|
Other
operating expenses
|
(333)
|
(334)
|
(36)
|
(370)
|
(1)
|
53
|
(651)
|
|
Operating
income before D&A
|
811
|
2,396
|
187
|
2,583
|
(6)
|
—
|
3,388
|
|
Depreciation
of PP&E
|
(379)
|
(423)
|
(131)
|
(554)
|
—
|
—
|
(933)
|
|
Amortization
of intangible assets
|
(52)
|
(365)
|
(25)
|
(390)
|
—
|
—
|
(442)
|
|
Gain
on disposal and impairment of PP&E
|
11
|
(34)
|
1
|
(33)
|
—
|
—
|
(22)
|
|
Operating
income
|
391
|
1,574
|
32
|
1,606
|
(6)
|
—
|
1,991
|
|
Financial
results, net
|
(105)
|
(460)
|
8
|
(452)
|
7
|
—
|
(550)
|
|
Income
before income tax expense
|
286
|
1,114
|
40
|
1,154
|
1
|
—
|
1,441
|
|
Income
tax expense
|
(101)
|
(393)
|
(11)
|
(404)
|
(2)
|
—
|
(507)
|
|
Net
income
|
185
|
721
|
29
|
750
|
(1)
|
—
|
934
|
(*)
Include no material operations of Personal Envíos (Revenues 5, Operating income before D&A (2), Operating income (2)
and Net loss (2)).
|
Net
income attributable to Nortel (Controlling Company)
|
103
|
401
|
11
|
412
|
(1)
|
—
|
514
|
|
Net
income attributable to non-controlling interest
|
82
|
320
|
18
|
338
|
—
|
—
|
420
|
|
|
185
|
721
|
29
|
750
|
(1)
|
—
|
934
|
(1)
|
Service
revenues
|
3,406
|
6,451
|
548
|
6,999
|
—
|
—
|
10,405
|
|
Equipment
revenues
|
33
|
1,957
|
60
|
2,017
|
—
|
—
|
2,050
|
|
Other
income
|
9
|
2
|
—
|
2
|
—
|
—
|
11
|
|
Subtotal
third party revenues
|
3,448
|
8,410
|
608
|
9,018
|
—
|
—
|
12,466
|
|
Intersegment
revenues
|
519
|
38
|
2
|
40
|
—
|
(559)
|
—
|
|
Total
revenues and other income
|
3,967
|
8,448
|
610
|
9,058
|
—
|
(559)
|
12,466
|
q
Statement
of financial position information
|
PP&E
|
9,608
|
7,388
|
2,130
|
9,518
|
—
|
—
|
19,126
|
|
Intangible
assets, net
|
433
|
7,126
|
102
|
7,228
|
—
|
(1)
|
7,660
|
|
Capital
expenditures on PP&E (a)
|
540
|
834
|
98
|
932
|
—
|
—
|
1,472
|
|
Capital
expenditures on intangible assets (b)
|
42
|
360
|
28
|
388
|
—
|
—
|
430
|
|
Total
capital expenditures (a)+(b)
|
582
|
1,194
|
126
|
1,320
|
—
|
—
|
1,902
|
|
Total
additions on PP&E and intangible assets
|
833
|
1,313
|
217
|
1,530
|
—
|
—
|
2,363
|
|
Net
financial debt
|
(198)
|
(2,566)
|
(530)
|
(3,096)
|
69
|
—
|
(3,225)
|
q
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
|
11,771
|
11,634
|
25,692
|
|
Abroad
|
695
|
832
|
2,552
|
|
Total
|
12,466
|
12,466
|
28,244
|
NORTEL
INVERSORA S.A.
For
the three-month period ended March 31, 2015
q
Income
statement
|
|
Fixed
|
Mobile
Services
|
|
Elimi-
|
|
|
|
Services
|
Personal
|
Núcleo
(*)
|
Subtotal
|
Nortel
|
nations
|
Total
|
|
Total
revenues and other income (1)
|
2,883
|
6,136
|
407
|
6,543
|
—
|
(547)
|
8,879
|
|
Employee
benefit expenses and severance payments
|
(1,143)
|
(368)
|
(32)
|
(400)
|
(1)
|
—
|
(1,544)
|
|
Interconnection
costs and other telecommunication charges
|
(163)
|
(698)
|
(38)
|
(736)
|
—
|
399
|
(500)
|
|
Fees
for services, maintenance, materials and supplies
|
(378)
|
(575)
|
(36)
|
(611)
|
(3)
|
100
|
(892)
|
|
Taxes
and fees with the Regulatory Authority
|
(183)
|
(678)
|
(12)
|
(690)
|
(1)
|
—
|
(874)
|
|
Commissions
|
(54)
|
(536)
|
(46)
|
(582)
|
—
|
13
|
(623)
|
|
Cost
of equipments and handsets
|
(19)
|
(593)
|
(28)
|
(621)
|
—
|
—
|
(640)
|
|
Advertising
|
(16)
|
(158)
|
(17)
|
(175)
|
—
|
—
|
(191)
|
|
Cost
of VAS
|
(6)
|
(265)
|
(22)
|
(287)
|
—
|
—
|
(293)
|
|
Provisions
|
(40)
|
(53)
|
—
|
(53)
|
—
|
—
|
(93)
|
|
Bad
debt expenses
|
(49)
|
(129)
|
(5)
|
(134)
|
—
|
—
|
(183)
|
|
Other
operating expenses
|
(207)
|
(221)
|
(24)
|
(245)
|
(1)
|
35
|
(417)
|
|
Operating
income before D&A
|
625
|
1,862
|
147
|
2,009
|
(5)
|
—
|
2,629
|
|
Depreciation
of PP&E
|
(298)
|
(301)
|
(78)
|
(379)
|
—
|
—
|
(677)
|
|
Amortization
of intangible assets
|
(42)
|
(222)
|
(16)
|
(238)
|
—
|
—
|
(280)
|
|
Gain
on disposal and impairment of PP&E
|
8
|
(5)
|
—
|
(5)
|
—
|
—
|
3
|
|
Operating
income
|
293
|
1,334
|
53
|
1,387
|
(5)
|
—
|
1,675
|
|
Financial
results, net
|
5
|
(85)
|
(9)
|
(94)
|
11
|
—
|
(78)
|
|
Income
before income tax expense
|
298
|
1,249
|
44
|
1,293
|
6
|
—
|
1,597
|
|
Income
tax expense
|
(104)
|
(442)
|
(4)
|
(446)
|
(4)
|
—
|
(554)
|
|
Net
income
|
194
|
807
|
40
|
847
|
2
|
—
|
1,043
|
(*)
Include no material operations of Personal Envíos (Revenues 2, Operating income before D&A (1), Operating income (1)
and Net loss (1)).
|
Net
income attributable to Nortel (Controlling Company)
|
108
|
448
|
15
|
463
|
2
|
—
|
573
|
|
Net
income attributable to non-controlling interest
|
86
|
359
|
25
|
384
|
—
|
—
|
470
|
|
|
194
|
807
|
40
|
847
|
2
|
—
|
1,043
|
(1)
|
Service
revenues
|
2,360
|
5,216
|
383
|
5,599
|
—
|
—
|
7,959
|
|
Equipment
revenues
|
10
|
881
|
22
|
903
|
—
|
—
|
913
|
|
Other
income
|
4
|
3
|
—
|
3
|
—
|
—
|
7
|
|
Subtotal
third party revenues
|
2,374
|
6,100
|
405
|
6,505
|
—
|
—
|
8,879
|
|
Intersegment
revenues
|
509
|
36
|
2
|
38
|
—
|
(547)
|
—
|
|
Total
revenues and other income
|
2,883
|
6,136
|
407
|
6,543
|
—
|
(547)
|
8,879
|
q
Statement
of financial position information
|
PP&E
|
7,761
|
4,708
|
1,337
|
6,045
|
—
|
—
|
13,806
|
|
Intangible
assets, net
|
389
|
4,840
|
64
|
4,904
|
—
|
(1)
|
5,292
|
|
Capital
expenditures on PP&E (a)
|
300
|
284
|
39
|
323
|
—
|
—
|
623
|
|
Capital
expenditures on intangible assets (b)
|
36
|
185
|
20
|
205
|
—
|
—
|
241
|
|
Total
capital expenditures (a)+(b)
|
336
|
469
|
59
|
528
|
—
|
—
|
864
|
|
Total
additions on PP&E and intangible assets
|
404
|
522
|
68
|
590
|
—
|
—
|
994
|
|
Net
financial asset (debt)
|
260
|
502
|
(241)
|
261
|
186
|
—
|
707
|
q
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
|
8,444
|
8,368
|
18,384
|
|
Abroad
|
435
|
511
|
1,493
|
|
Total
|
8,879
|
8,879
|
19,877
|
NORTEL
INVERSORA S.A.
NOTE
5 – RELATED PARTY BALANCES AND TRANSACTIONS
All shares of common
stock of Nortel belong to Sofora. As of March 31, 2016 these shares represent 78.38% of Nortel’s capital stock.
Sofora’s capital stock consists of
shares of common stock, with a par value of $1 argentine peso each and one vote per share. As of March 31, 2016, Sofora’s
shares are held by Fintech Telecom LLC (68%) and W de Argentina Inversiones S.A. (32%). Additionally, Fintech holds 18,086,059
Class B shares of Telecom Argentina, which represent 1.837% of Telecom Argentina’s total capital stock.
Fintech Telecom LLC, a Delaware (United States)
limited liability company, is a wholly-owned direct subsidiary of Fintech Advisory Inc. and its primary purpose is to hold, directly
and indirectly, the securities of Telecom Argentina. Fintech Advisory Inc., a Delaware (United States) company, is directly controlled
by Mr. David Martínez (a member of Telecom Argentina’s Board of Directors). Fintech Advisory Inc. is an investor and
investment manager in equity and debt securities of sovereign and private entities primarily in emerging markets.
In connection with the Shareholders’
Agreement entered into by the Telecom Italia Group and W de Argentina Inversiones S.A., as last amended on October 24, 2014 (“the
New Shareholders’ Agreement”), Fintech Telecom LLC adhered as a party to the New Shareholders’ Agreement by means
of execution of a Deed of Adherence, following its acquisition of 17% of Sofora’s capital stock. On March 8, 2016, as a result
of its acquisition of 51% of Sofora’s shares, Fintech acquired all the rights and obligations of the Telecom Italia Group
under the New Shareholders´ Agreement.
For the purposes of these
consolidated financial statements, related parties are those individuals or legal entities that are related (in terms of IAS 24)
to Telecom Italia Group, Fintech Telecom LLC or W de Argentina - Inversiones S.A., except Nortel and companies under sect. 33 of
the LGS, as explained below.
In connection with the
change of control explained in Note 10.a), on March 8, 2016, Fintech Telecom LLC acquired 51% of Sofora’s shares from the
Telecom Italia Group. As a result, Fintech Telecom LLC acquired the indirect control of the Telecom Group, increasing its holding
in Sofora to 68% of Sofora’s shares and voting rights. Therefore, the transactions disclosed in d) below corresponding to
the Telecom Italia Group are those performed until March 8, 2016, as from which date the Telecom Italia Group has ceased to be
a related party of the Telecom Group. Please note that no operations with related parties of Fintech Telecom LLC conducted as from
March 8, 2016 have been identified.
For the periods presented, the Telecom Group
has not conducted any transactions with Key Managers and/or persons related to them, as described above:
NORTEL
INVERSORA S.A.
|
|
c)
|
Balances with related parties
|
|
CURRENT ASSETS
|
Type
of related party
|
March
31,
|
December
31,
|
|
|
|
2016
|
2015
|
|
Cash and cash equivalents
|
|
|
|
|
Banco Atlas S.A. (a)
|
Other related party
|
3
|
2
|
|
|
|
3
|
2
|
|
Trade receivables
|
|
|
|
|
Editorial Azeta (a)
|
Other related party
|
2
|
—
|
|
TIM Participacoes
S.A. (b)
|
Other related party
|
—
|
13
|
|
Latin American Nautilus
Argentina S.A. (b)
|
Other related party
|
—
|
1
|
|
Telecom Italia S.p.A.
|
Indirect parent company
until March 8, 2016
|
—
|
3
|
|
Experta ART S.A. (d)
(e)
|
Other related party
|
—
|
1
|
|
|
|
2
|
18
|
|
Other receivables
|
|
|
|
|
Latin American Nautilus
Ltd. (b)
|
Other related party
|
—
|
36
|
|
Caja de Seguros S.A.
(c)
|
Other related party
|
—
|
3
|
|
|
|
—
|
39
|
|
CURRENT LIABILITIES
|
|
|
|
|
Trade payables
|
|
|
|
|
Italtel Group (b)
|
Other related party
|
—
|
160
|
|
Latin American Nautilus
Ltd. (b)
|
Other related party
|
—
|
53
|
|
Telecom Italia S.p.A.
|
Indirect parent company
until March 8, 2016
|
—
|
28
|
|
Telecom Italia Sparkle
S.p.A. (b)
|
Other related party
|
—
|
27
|
|
Latin American Nautilus
USA Inc. (b)
|
Other related party
|
—
|
3
|
|
Latin American Nautilus
Argentina S.A. (b)
|
Other related party
|
—
|
2
|
|
TIM Participacoes
S.A. (b)
|
Other related party
|
—
|
2
|
|
Universal Music Argentina
S.A. (b)
|
Other related party
|
—
|
10
|
|
Caja de Seguros S.A.
(c)
|
Other related party
|
—
|
46
|
|
Experta ART S.A. (d)
(e)
|
Other related party
|
11
|
12
|
|
Haras El Capricho
S.A. (f)
|
Other related party
|
—
|
1
|
|
Telteco S.A. (g)
|
Other related party
|
—
|
5
|
|
|
|
11
|
349
|
|
Financial debt
– Notes (Current and Non-Current)
|
|
|
|
|
La Estrella Sociedad
Anónima de Seguros de Retiro S.A. (d)
|
Other related party
|
101
|
—
|
|
Experta ART S.A. (d)
(e)
|
Other related party
|
40
|
—
|
|
Experiencia ART S.A.
(f)
|
Other related party
|
60
|
—
|
|
|
|
201
|
—
|
|
|
d)
|
Transactions with related parties
|
|
|
Transaction
description
|
Type
of related party
|
Three-month
periods
ended March 31,
|
|
|
|
|
2016
|
2015
|
|
Services
rendered
|
|
|
Profit
(loss)
|
|
Editorial
Azeta (a)
|
Voice
– Wholesale
|
Other
related party
|
2
|
—
|
|
Telecom
Italia Sparkle S.p.A. (b)
|
Voice
– Wholesale
|
Other
related party
|
4
|
5
|
|
Latin American Nautilus
Argentina S.A. (b)
|
Voice
– Wholesale
|
Other
related party
|
2
|
2
|
|
TIM
Participacoes S.A. (b)
|
Voice
– Wholesale
|
Other
related party
|
2
|
2
|
|
Telecom Italia S.p.A.
|
Voice
– Wholesale
|
Indirect
parent company until March 8, 2016
|
2
|
—
|
|
Caja
de Seguros S.A. (c)
|
Voice
– Retail
|
Other
related party
|
58
|
59
|
|
Caja
de Seguros S.A. (c)
|
Equipment
|
Other
related party
|
43
|
55
|
|
|
|
Total services rendered
|
113
|
123
|
|
|
(a)
|
Such
companies relate to ABC Telecommunications Group of Paraguay (Non-controlling shareholders’
of Núcleo).
|
|
|
(b)
|
Such
companies related to Telecom Italia Group until March 8, 2016.
|
|
|
(c)
|
Until
March 30, 2015 this company related both to Telecom Italia Group and W de Argentina -
Inversiones S.A. Since March 31, 2015 and until March 8, 2016 it related to Telecom Italia
Group.
|
|
|
(d)
|
Until
March 30, 2015 this company related both to Telecom Italia Group and W de Argentina -
Inversiones S.A. Since March 31, 2015 it relates to W de Argentina - Inversiones S.A.
|
|
|
(e)
|
Until
September 9, 2015 this company was La Caja Aseguradora de Riesgos del Trabajo ART S.A.
|
|
|
(f)
|
Such
companies relate to W de Argentina – Inversiones S.A.
|
|
|
(g)
|
Such
company relate to a Board of Directors member appointed by W de Argentina – Inversiones
S.A.
|
NORTEL
INVERSORA S.A.
|
|
Transaction
description
|
Type
of related party
|
Three-month
periods
ended March 31,
|
|
|
|
|
2016
|
2015
|
|
Services
received
|
|
|
Profit
(loss)
|
|
Latin American Nautilus
Ltd. (b)
|
International
outbound calls and data
|
Other
related party
|
(19)
|
(23)
|
|
Grupo Italtel (b)
|
Maintenance,
materials and supplies
|
Other
related party
|
(10)
|
(3)
|
|
Telecom Italia Sparkle S.p.A.
(b)
|
International
outbound calls and other
|
Other
related party
|
(7)
|
(12)
|
|
TIM Participacoes S.A.
(b)
|
Roaming
|
Other
related party
|
(17)
|
(6)
|
|
Telecom Italia S.p.A.
|
Fees
for services and roaming
|
Indirect
parent company until March 8, 2016
|
(3)
|
(3)
|
|
Latin American Nautilus
Argentina S.A. (b)
|
International
outbound calls
|
Other
related party
|
(2)
|
(2)
|
|
Latin American Nautilus
USA Inc. (b)
|
International
outbound calls
|
Other
related party
|
(1)
|
(2)
|
|
Universal Music Argentina
S.A. (b)
|
VAS
costs
|
Other
related party
|
(4)
|
—
|
|
Caja de Seguros S.A. (b)
|
Insurance
|
Other
related party
|
(9)
|
(9)
|
|
Experta ART S.A. (d) (e)
|
Salaries
and social security
|
Other
related party
|
(30)
|
(22)
|
|
La Estrella Sociedad Anónima
de Seguros de Retiro S.A. (d)
|
Insurance
|
Other
related party
|
—
|
(2)
|
|
Telteco S.A. (g)
|
Fees
for services
|
Other
related party
|
(8)
|
—
|
|
|
|
Total services received
|
(110)
|
(84)
|
|
|
|
|
|
|
Finance
costs
|
|
|
|
|
Experiencia
ART S.A. (f)
|
Notes interests
|
Other
related party
|
(1)
|
—
|
|
Experta
ART S.A. (d) (e)
|
Notes interests
|
Other
related party
|
(1)
|
—
|
|
La
Estrella Sociedad Anónima de Seguros de Retiro S.A. (d)
|
Notes interests
|
Other
related party
|
(2)
|
—
|
|
|
|
Total finance costs
|
(4)
|
—
|
|
Purchases
of PP&E
|
|
|
|
|
Grupo
Italtel (b)
|
|
Other
related party
|
18
|
6
|
|
Telteco
S.A. (g)
|
|
Other
related party
|
4
|
—
|
|
|
|
Total purchases of PP&E
|
22
|
6
|
|
|
(a)
|
Such
companies relate to ABC Telecommunications Group of Paraguay (Non-controlling shareholders’
of Núcleo).
|
|
|
(b)
|
Such
companies related to Telecom Italia Group until March 8, 2016.
|
|
|
(c)
|
Until
March 30, 2015 this company related both to Telecom Italia Group and W de Argentina -
Inversiones S.A. Since March 31, 2015 and until March 8, 2016 it related to Telecom Italia
Group.
|
|
|
(d)
|
Until
March 30, 2015 this company related both to Telecom Italia Group and W de Argentina -
Inversiones S.A. Since March 31, 2015 it relates to W de Argentina - Inversiones S.A.
|
|
|
(e)
|
Until
September 9, 2015 this company was La Caja Aseguradora de Riesgos del Trabajo ART S.A.
|
|
|
(f)
|
Such
companies relate to W de Argentina – Inversiones S.A.
|
|
|
(g)
|
Such
company relate to a Board of Directors member appointed by W de Argentina – Inversiones
S.A.
|
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 Telecom Argentina, 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 $22 and $18 for the three-month periods ended March 31, 2016 and 2015, 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 March 31,
|
|
|
2016
|
2015
|
|
Salaries (*)
|
10
|
9
|
|
Variable compensation (*)
|
5
|
5
|
|
Social security contributions
|
4
|
4
|
|
Termination benefits
|
3
|
—
|
|
|
22
|
18
|
(*) Gross compensation.
Social security and income tax retentions are in charge of the employee.
As of March 31, 2016 an amount of $5 remained
unpaid.
As of March 31, 2016 and 2015, Nortel has
recorded a provision of $2 for both periods for 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.
NORTEL
INVERSORA S.A.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
OF THE TELECOM GROUP
The Telecom Group has entered into various
purchase orders amounting in the aggregate to approximately $7,068 as of March 31, 2016 (of which $3,457 corresponds to PP&E
commitments), primarily related to the supply of switching equipment, external wiring, infrastructure agreements, inventory and
other service agreements.
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 Telecom Argentina, 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 March 31, 2016, the Telecom Group has recorded provisions in an aggregate amount
of $1,505 to cover potential losses under these claims ($84 for regulatory contingencies deducted from assets and $1,421 included
under provisions) and certain amounts deposited in the Telecom Group’s bank accounts have been restricted as to their use
due to some judicial proceedings. As of March 31, 2016, these restricted funds totaled $58 (included under “Other receivables”
item line in the consolidated statement of financial position).
Provisions consist of the following:
|
|
Balances
|
Additions
|
|
Decreases
|
Balances
|
|
|
as
of
December
31, 2015
|
Capital
|
Interest
(ii)
|
Reclassi-
fications
|
Classified
to liability
|
Payments
|
as
of
March 31,
2016
|
|
Current
|
|
|
|
|
|
|
|
|
Provision
for civil and commercial proceedings
|
112
|
—
|
—
|
(7)
|
—
|
(4)
|
101
|
|
Provision
for labor claims
|
51
|
—
|
—
|
13
|
—
|
(6)
|
58
|
|
Provision
for regulatory, tax and other matters claims
|
44
|
—
|
—
|
37
|
—
|
(13)
|
68
|
|
Total
current provisions
|
207
|
—
|
—
|
43
|
—
|
(23)
|
227
|
|
Non-current
|
|
|
|
|
|
|
|
|
Provision
for civil and commercial proceedings
|
240
|
2
|
11
|
7
|
—
|
—
|
260
|
|
Provision
for labor claims
|
329
|
11
|
21
|
(13)
|
—
|
—
|
348
|
|
Provision
for regulatory, tax and other matters claims
|
407
|
—
|
10
|
(37)
|
—
|
—
|
380
|
|
Asset
retirement obligations
|
189
|
2
|
15
|
—
|
—
|
—
|
206
|
|
Total
non-current provisions
|
1,165
|
15
|
57
|
(43)
|
—
|
—
|
1,194
|
|
|
|
|
|
|
|
|
|
|
Total
provisions
|
1,372
|
(i) 15
|
57
|
—
|
—
|
(23)
|
1,421
|
|
|
Balances
|
Additions
|
|
Decreases
|
Balances
|
|
|
as
of
December
31, 2014
|
Capital
(iii)
|
Interest
(ii)
|
Reclassi-
fications
|
Classified
to liability
|
Payments
|
as
of
March 31,
2015
|
|
Current
|
|
|
|
|
|
|
|
|
Provision
for civil and commercial proceedings
|
71
|
34
|
18
|
7
|
—
|
(2)
|
128
|
|
Provision
for labor claims
|
51
|
—
|
—
|
9
|
—
|
(8)
|
52
|
|
Provision
for regulatory, tax and other matters claims
|
77
|
—
|
—
|
3
|
—
|
(1)
|
79
|
|
Total
current provisions
|
199
|
34
|
18
|
19
|
—
|
(11)
|
259
|
|
Non-current
|
|
|
|
|
|
|
|
|
Provision
for civil and commercial proceedings
|
228
|
10
|
7
|
(7)
|
—
|
—
|
238
|
|
Provision
for labor claims
|
288
|
24
|
16
|
(9)
|
—
|
—
|
319
|
|
Provision
for regulatory, tax and other matters claims
|
441
|
25
|
9
|
(3)
|
—
|
—
|
472
|
|
Asset
retirement obligations
|
123
|
—
|
3
|
—
|
—
|
—
|
126
|
|
Total
non-current provisions
|
1,080
|
59
|
35
|
(19)
|
—
|
—
|
1,155
|
|
|
|
|
|
|
|
|
|
|
Total
provisions
|
1,279
|
93
|
53
|
—
|
—
|
(11)
|
1,414
|
|
|
(i)
|
14 included in Provisions and 1 included
in currency translation adjustments.
|
|
|
(ii)
|
Included in Finance costs, in the
line Interest on provisions
|
|
|
(iii)
|
Included
in Provisions.
|
NORTEL
INVERSORA S.A.
NOTE 7 – EQUITY
Equity includes:
|
|
March
31,
|
December
31,
|
|
|
2016
|
2015
|
|
Equity
attributable to Nortel (Controlling Company)
|
10,186
|
9,605
|
|
Equity
attributable to non-controlling interest
|
8,590
|
8,048
|
|
Total
equity (*)
|
18,776
|
17,653
|
(*)
Additional information is given in the consolidated statements of changes in equity.
The Company has implemented a mechanism
that allows Class “B” Preferred Shares to be traded in the United States of America and other places through ADS-denominated
securities.
Class “B”
Preferred Shares converted into ADS were registered with the SEC, and since June 16, 1997 are listed on the NYSE. They are also
listed on the Luxembourg Stock Exchange since 1992.
(a) The Company’s capital stock
On September 9, 2003 Nortel took note of
the agreement reached by the France Telecom Group with W de Argentina - Inversiones S.A. for the sale of their interest in the
Company. In December 2003, the France Telecom Group and the Telecom Italia Group transferred their interests in Nortel to a new
company called Sofora, while France Telecom Group sold its entire stake in Sofora to W de Argentina - Inversiones S.A.
Thus, all shares of common stock of Nortel
belong to Sofora. As of December 31, 2015, these shares represent 78.38% of Nortel capital stock.
(b) Class “B” preferred shares
Class “B” preferred
shares are subject to Argentine laws and to the jurisdiction of the City of Buenos Aires commercial courts.
The Terms of Issuance of
Class “B” preferred shares provide, among other terms, that:
|
|
a)
|
Class “B” preferred shares are not redeemable.
|
|
|
b)
|
A non cumulative dividend equivalent to a percentage (49.46%) of the Company’s profits legally available for distribution.
On April 25, 1997, an Extraordinary Shareholders’ Meeting resolved to amend section 4(a) (“right to dividends”),
reducing the formula for the calculation of dividends by 50 basic points (0.50%, currently 48.96%) beginning on June 16, 1997.
This resolution was filed with the Public Registry of Commerce on July 16, 1997 under number 7,388.
|
|
|
c)
|
Holders of Class “B” preferred shares are entitled to attend
the shareholders’ meetings of the Company but their attendance shall not be required to reach quorum and they shall not have
the right to vote under any circumstances, except as specifically set forth in Section 6 of the Terms of Issuance, which provides
that the Class “B” preferred shares shall have the right to vote only in the following circumstances: (i) lack of complete
payment
of
Class
“B” preferred dividends; ii) non-compliance with any of the obligations provided for in Section 9 of the Terms of Issuance;
or iii) in any of the events specifically provided for in the LGS. If such right to vote were triggered, each holder of Class “B”
preferred shares shall be entitled to cast one vote per share and shall vote jointly with the shares of common stock; except for
those matters relating to the election of Directors, in which case the holders of Class “B” preferred shares shall
be entitled to elect one regular director and one alternate director, pursuant to Section 15 of the Company’s Bylaws, Class
“B” preferred shares’ right to vote shall cease upon the disappearance of the circumstances that triggered such
right.
|
|
|
d)
|
Class “B” preferred shares rank
pari passu
without any preference among them, and in case of winding up
have priority with respect to the shares of common stock of Nortel.
|
The Company was admitted
to the public offering regime on December 29, 1997, pursuant to CNV Resolution No. 12,056. On January 27, 1998, as a result of
such admittance, the BCBA authorized the listing of the Company’s Class “B” preferred shares.
(c) Acquisition of Treasury Shares of
Telecom Argentina
Telecom Argentina’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 Telecom Argentina’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 foregoing, on May
22, 2013, Telecom Argentina’s Board of Directors approved a Treasury Shares Acquisition Program of Telecom Argentina in the
market in Argentine pesos (the “Treasury Shares Acquisition Program”) for the purpose of avoiding any possible damages
to Telecom Argentina and its shareholders derived from fluctuations and unbalances between the shares’ price and Telecom
Argentina’s solvency, for the following maximum amount and with the following deadline:
NORTEL
INVERSORA S.A.
|
|
·
|
Maximum amount to be invested:
$1,200.
|
|
|
·
|
Deadline for the acquisitions:
until
April 30, 2014.
|
As a result, Telecom Argentina’s treasury
shares acquisition has caused Nortel to increase its political and economic rights from 54.74% to 55.60% of the outstanding capital
stock of Telecom Argentina as of June 30, 2014.
According to the offer made on November 7,
2013 by Fintech Telecom LLC 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 Telecom Argentina’s
request and the 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, 2014, 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,
Telecom Argentina must sell its treasury shares within three years of the date of acquisition. Pursuant to Section 221 of the LGS,
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”, which, as of
March 31, 2016 amounted to $3,191. On April 29, 2016, the Ordinary and Extraordinary Shareholders’ Meeting approved an additional
3 year extension for the disposal due date of treasury shares provided by Section 67 of Law No. 26,831.
As of March 31, 2016, Telecom Argentina 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, decreasing Telecom Argentina’s equity in such amount. This accounting treatment decreased Telecom Argentina’s
investment value and the Company’s Equity in $155, which is disclosed in the Statements of Changes in Equity as “Subsidiary’s
treasury shares acquisition effect”.
NOTE 8 – RESTRICTIONS ON DISTRIBUTION
OF PROFITS
The Company is subject to certain restrictions
on the distribution of profits. Under the LGS, 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). Nortel reached the maximum amount of its Legal Reserve according
to LGS and CNV provisions previously disclosed.
NOTE 9 – SELECTED CONSOLIDATED QUARTERLY INFORMATION
|
Quarter
|
Revenues
|
Operating
income before
D&A
|
Operating income
|
Financial
results, net
|
Net
income
|
Net income attributable
to Nortel
|
|
Fiscal year 2015:
|
|
|
|
|
|
|
|
March 31,
|
8,872
|
2,629
|
1,675
|
(78)
|
1,043
|
573
|
|
June 30,
|
9,624
|
2,491
|
1,458
|
(19)
|
935
|
514
|
|
September 30,
|
10,094
|
2,524
|
1,306
|
(70)
|
797
|
443
|
|
December 31,
|
11,906
|
3,198
|
1,766
|
(900)
|
659
|
361
|
|
|
40,496
|
10,842
|
6,205
|
(1,067)
|
3,434
|
1,891
|
|
Fiscal year 2016:
|
|
|
|
|
|
|
|
March 31,
|
12,455
|
3,388
|
1,991
|
(550)
|
934
|
514
|
|
|
12,455
|
3,388
|
1,991
|
(550)
|
934
|
514
|
NORTEL
INVERSORA S.A.
NOTE 10 – RECENT DEVELOPMENTS CORRESPONDING TO THE THREE-MONTH
PERIOD ENDED MARCH 31, 2016 FOR THE TELECOM GROUP
|
|
a)
|
Change of indirect parent company of the Telecom Group
|
On November 14, 2013, Telecom Italia S.p.A
and Telecom Italia International N.V. (jointly, the “Sellers”) and Tierra Argentea (a company controlled by the Sellers)
announced the acceptance of an offer by Fintech Telecom LLC 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. Closing of the transfer of
the Telecom Italia Group’s shares in Sofora was subject to certain required regulatory authorizations.
On December 10, 2013,
Tierra Argentea transferred to Fintech Telecom LLC Telecom Argentina’s Class B shares representing 1.58% of Telecom Argentina’s
capital stock and Nortel’s ADRs representing 8% of Nortel’s Preferred Class “B” Shares.
On October 25, 2014,
Telecom Italia S.p.A. announced its acceptance of an offer by Fintech Telecom LLC to amend and restate the agreement announced
on November 14, 2013. Within the frame of this amendment agreement: 1) on October 29, 2014 Telecom Italia International N.V. transferred
17% of Sofora’s capital stock to Fintech Telecom LLC; 2) it was confirmed that the transfer of the 51% controlling interest
in Sofora was subject to the prior approval of the telecommunications regulatory authority (previously the SC, then the AFTIC and
currently the ENACOM).
On October 16, 2015,
AFTIC’s Resolution No. 491/2015 was published in the Official Bulletin, denying authorization for the transfer of Telecom
Italia’s controlling equity interest in Sofora to Fintech. Such Resolution was challenged in several opportunities by Fintech,
the Sellers, W de Argentina Inversiones S.A., Telecom Argentina and Personal.
On February 17, 2016
Telecom Argentina was notified of ENACOM Resolution No. 64/16 pursuant to which ENACOM partially revoked AFTIC Resolution No. 491/15
and decided to continue analyzing the transfer of Telecom Italia Group’s shares in Sofora.
On February 24, 2016,
Telecom Argentina was notified of Fintech Telecom LLC’s intention to launch a Mandatory Tender Offer (the “OPA”)
resulting from a change of control event for all Class B common shares of Telecom Argentina listed on the Buenos Aires Securities
Market, or Mercado de Valores de Buenos Aires S.A. The OPA’s background and purpose, price, timing and terms of acceptance,
and details of the facts that condition its performance, are described in an OPA notice published in the newspaper “El Cronista
Comercial” on February 24, 2016, in page No.5.
On March 7, 2016, ENACOM
Resolution No. 277/16 authorized Fintech’s acquisition of 51% of Sofora’s shares of common stock, and on March 8, 2016,
the transfer of Telecom Italia Group’s 51% stake in Sofora to Fintech was closed.
In addition, Sofora’s
Unanimous General Ordinary and Extraordinary Shareholders’ Meeting held on March 8, 2016 approved, among other items, the
performance of duties of the members of the Board of Directors and Supervisory Committee appointed by the Sellers in Sofora, and
the appointment of new members of the Board of Directors and Supervisory Committee of Sofora to replace those members previously
appointed by the Sellers, for a term ending on the date of the next Shareholders’ Meeting that shall consider Sofora’s
2015 financial statements. On March 8, 2016, new members of the Board of Directors of Nortel, Telecom Argentina and Personal appointed
by Fintech replaced those members previously appointed by the Sellers.
Personal’s Unanimous
General Ordinary and Extraordinary Shareholders’ Meeting held on March 29, 2016 and the Telecom Argentina’s and Nortel’s
General Ordinary and Extraordinary Shareholders’ Meetings held on April 8, 2016 approved, among other items, the performance
of duties of the directors and members of the Supervisory Committee appointed by the Sellers in such companies, and the appointment
of new members of the Board of Directors and the Supervisory Committee of such companies to replace those members previously appointed
by the Sellers, for a term ending on the date of the next Shareholders’ Meetings that shall consider Telecom Argentina and
Personal 2015 financial statements, and Nortel’s 2016 financial statement, respectively.
NORTEL
INVERSORA S.A.
The above mentioned Meetings
also resolved to grant indemnity to the directors and alternate directors and members of the Supervisory Committee who resigned
from their positions following the change of control, and to the former directors and members of the Supervisory Committee nominated
or appointed by the former controlling shareholder, to the extent and within the scope permitted by applicable law, for a period
of 6 years.
On March 8, 2016, the
change of Sofora’s controlling shareholder became effective and, accordingly, the Telecom Italia Group ceased being the Company’s
indirect controlling shareholder (position assumed by Fintech). Based on such facts, on April 15, 2016 Telecom Argentina and Personal,
and on April 20, 2016 the Company and Sofora, notified the CNCD that the
“Telco and TI-W Commitments have become moot
and have completely lost its cause and purpose”.
Additional information
regarding the transaction between the Telecom Italia Group and Fintech as well as the OPA promoted by Fintech is available in the
“Relevant Facts” section of the CNV at www.cnv.gob.ar, and in the “Company
filings” section (Telecom Italia S.p.A and Telecom Argentina) of the SEC at www.sec.gov.
|
|
b)
|
Telecom Argentina filings to the Regulatory Authority under the LAD
|
On February 1, 2016, Telecom Argentina informed
the ENACOM, that effective May 15, 2016, the new rate of SBT for residential segment will be $50 argentine pesos (plus VAT) and
that the “Retired” customer’s category will have a discount of 50% on the mentioned new rate.
However, on March 11, 2016, Telecom Argentina
informed the ENACOM that the new rate of SBT for the residential segment will be $38 argentine pesos (plus VAT), since May 1
st
,
2016, in response to a collaboration request made by the Regulatory Authority taking into consideration the special circumstances
of the current macroeconomic environment in Argentina.
As of the date of these consolidated financial
statements, Telecom Argentina has communicated the new rate to its affected customers.
|
|
c)
|
Resolutions of the Ordinary Shareholders’ Meeting of Núcleo
|
Núcleo’s General Ordinary Shareholders’
Meeting held on March 29, 2016 resolved, among other items, the following:
|
|
1. To approve Núcleo’s Annual Report and financial statements as of December 31, 2015,
|
|
|
2. To appoint new members and alternate members of the Board of Directors and of the Supervisory Committee,
|
|
|
3. To allocate all net income of fiscal year 2015 to Retained Earnings.
|
|
|
d)
|
Decreto No. 267/15 – Amendments to the LAD
|
Article 28 of Decree of Need and Urgency
(“Decreto de Necesidad y Urgencia” or hereinafter the “DNU”) No.267/15 created, within the Ministry of
Communications, the Commission for the Preparation of the Reform, Update and Unification Draft Law of Laws No.26,522 and 27,078
(“the Commission”). The Commission will be responsible for the study of both laws reforms under the principles established
therein.
On April 15, 2016, the Communication Ministry
through Resolution No. 9/16 stated that the Commission shall be composed by 6 members and 1 Secretary, who will perform their duties
“ad honorem”. The Resolution also appointed its members. The Commission should submit a pre-draft of reform, updating
and adaptation of a unified system of the Regulatory Framework Law for the Telecommunications and Audiovisual Communication Services
in Argentina, within the 180 days from the date of its constitution. This term could be extended at the Commission’s request.
According to Law No. 26,122, rejection of
a Decree by both Chambers of Congress would repeal the Decree, while upholding the rights acquired during its enforcement (Article
24 of Law No. 26,122). On April 8, 2016, the Congress voted in favor of the validity of the DNU No. 267/15, so it has entered into
has entered into force.
NORTEL
INVERSORA S.A.
NOTE 11 – SUBSEQUENT EVENTS TO
MARCH 31, 2016
|
|
a)
|
Resolutions of the Company’s Unanimous Ordinary and Extraordinary Shareholders’
Meeting
|
The Company’s Unanimous Ordinary and
Extraordinary Shareholders’ Meeting held on April 29, 2016 resolved, among other items, the following:
|
|
1. To approve the Annual Report and financial statements of Nortel as of December 31, 2015;
|
|
|
2. To increase in $1,891 the “Voluntary reserve for the future distribution of dividends”; and
|
|
|
3. To authorize the Board of Directors of the Company to determine the timing and amounts to be deducted from such
reserve, as well as their distribution as cash dividends.
|
The Board of Directors of the Company, at
its meeting held on April 29, 2016, resolved to deduct and distribute from the above mentioned reserve AR $380 million, which shall
be made available to shareholders as from May 17, 2016.
|
|
b)
|
Resolutions of the Unanimous Ordinary and Extraordinary Shareholders’ Meeting of
Personal
|
Personal Unanimous Ordinary and Extraordinary
Shareholders’ Meeting held on April 14, 2016 resolved, among other items, the following:
|
|
1. To approve Personal’s Annual Report and financial statements as of December 31, 2015;
|
|
|
2. To increase in $2,839 the “Reserve for future cash dividends” (equivalent to the remaining Retained
Earnings as of December 31, 2015); and
|
|
|
3. To authorize Personal’s Board of Directors to determine the time, terms and conditions of the allocation and
distribution of such reserve.
|
Personal’s Board of Directors, at its
meeting held on April 26, 2016, resolved to allocate the above mentioned Reserve to a cash dividend distribution for an amount
of $1,300. The mentioned cash dividends will be available to shareholders starting May 13, 2016.
|
|
c)
|
Partial repayment of capital stock of Micro Sistemas
|
Considering that as of December 31, 2015
Micro Sistemas fell under the provisions of section 206 of the LGS, which requires a mandatory reduction of capital stock, the
Shareholders’ Meeting of Micro Sistemas held on April 12, 2016, approved a partial repayment of capital stock amounting to
$250,000 argentine peso. This partial repayment will allow Micro Sistemas to overcome its inclusion in the provisions of section
206 of the LGS and to strengthen its equity. The mentioned partial repayment became effective on April 19, 2016 through a bank
deposit.
|
|
d)
|
Resolutions of the General Ordinary and Extraordinary Shareholders’ Meeting of Telecom
Argentina
|
Telecom Argentina’s General Ordinary
and Extraordinary Shareholders’ Meeting held on April 29, 2016, resolved, among other items, the following:
|
|
1. To approve Telecom Argentina’s Annual Report and financial statements as of December 31, 2015;
|
|
|
2. The constitution of a “Reserve for future cash dividends” amounting to $3,403 (equivalent to the total
Retained Earnings as of December 31, 2015); and
|
|
|
3. To authorize Telecom Argentina’s Board of Directors to determine the allocation and distribution of such reserve
according to business development, in one or several installments of up to $2,000, to be distributed to shareholders as cash
dividends payable during 2016.
|
Telecom Argentina’s Board of Directors,
at its meeting held on April 29, 2016, resolved to allocate $2,000 of the mentioned Reserve to a cash dividend distribution in
two installments: $700 that will be available to shareholders from May 13, 2016 and $1,300 that will be available to shareholders
during August 2016 (the specific date will be decided by the Telecom Argentina’s Management).
Additionally, Telecom Argentina’s Board
of Directors approved the appointment of Mr. Germán Vidal and Mr. Ignacio Morán to perform duties as CEO and CFO
of the Telecom Group, respectively, starting on May 12, 2016.
NORTEL
INVERSORA S.A.
|
|
e)
|
Resolution No. 38/16 Mobile Virtual Operators Regulation
|
Resolution No. 38/16, issued by the Ministry
of Communications on May 5, 2016, approved the new Regulation of Virtual Mobile Operators (“VMO”) and repealed Resolution
SC No. 68/14, which had approved the Regulation of Virtual Mobile Operators previously stated by the ex SC.
The mentioned Resolution provides that Network
Mobile Operators (“NMO”), which have spectrum and infrastructure (among them, Personal), shall file, within 120 days
since the Resolution issuance, a Reference Offer (“the RO”) for those interested in providing VMO services. The RO
shall be annually published in the NMO and the Regulatory Authority institutional web sites, and shall provide the economical and
technical conditions (that will be freely established between the parties, reasonable, and nondiscriminatory), clearly stating
the price and conditions of the services to be provided.
This new Regulation applies for Mobile Communications
Service (SCM), which includes Mobile Telephone Service (STM), Cellular Mobile Radiocommunications Service (SRMC), Personal Communications
Service (PCS) and Mobile Advanced Communications Service (SCMA). The Resolution also provides the procedures for the Services Contracts
subscription between the NMO and the VMO, which will state the terms and conditions for the NMO to provide the VMO telecommunications
network access and, if needed, telecommunications network interconnection.
As of the date of issuance of these consolidated
financial statements, Personal Management is assessing the legal, constitutional, operational, economic and financial impacts
of the new Resolution.
|
|
|
Baruki González
|
|
|
|
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
Nortel
Inversora S.A.
Legal
address: Alicia Moreau de Justo 50 – Floor 11
City
of Buenos Aires
Tax
Code No.: 30-64389741-1
Introduction
We
have reviewed the accompanying condensed interim consolidated financial statements of Nortel Inversora S.A. and its subsidiaries
(the “Company”), which comprise the consolidated statement of financial position as of March 31, 2016, the consolidated
statements of income and of comprehensive income for the three-month periods ended March 31, 2016, the consolidated statements
of changes in equity and of cash flows for the three-month period ended March 31, 2016 and selected explanatory notes.
The
balances and other information for the fiscal year 2015 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, as approved by the International Accounting Standards Board (IASB), which have
been 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 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).
Scope
of our review
Our
review was limited to the application of the procedures established under International Standards on Review Engagements 2410 “Review
of Interim Financial Information Performed by the Independent Auditor of the Entity” (ISRE 2410) approved by the International
Auditing and Assurance Standards Board (IAASB) and adopted as a review standard in Argentina by Technical Pronouncement No. 33
of the FACPCE. 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 would became aware of 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 Nortel Inversora S.A., that:
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a)
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The condensed
interim consolidated financial statements of Nortel Inversora S.A. 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;
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b)
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The separate
condensed interim financial statements are derived from accounting records kept in their
formal respects in conformity with legal provisions;
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c)
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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;
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d)
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As of
March 31, 2016, the debt of Nortel Inversora S.A. accrued in favor of the Argentine Integrated
Social Security System, as shown by the Company’s accounting records, amounted
to $98,678.98 and was not due at that date.
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City
of Buenos Aires, May 9, 2016
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PRICE
WATERHOUSE & CO. S.R.L.
/s/ Mario
A. Julio (Partner)
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C.P.C.E.C.A.B.A. Tº
1 Fº 17
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Mario
A. Julio
Public
Accountant (UBA)
C.P.C.E.C.A.B.A.
T° 323 F° 222
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