Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2016 AND 2015
(In
millions of Argentine pesos, except as otherwise indicated)
INDEX
|
|
|
Page
|
|
|
Glossary of terms
|
7
|
|
|
Notes to the unaudited condensed consolidated financial statements
|
|
|
1
|
Basis of preparation of the unaudited condensed consolidated financial statements and significant accounting policies
|
9
|
|
2
|
Breakdown of the main accounts
|
12
|
|
3
|
Supplementary cash flow information
|
24
|
|
4
|
Segment information
|
28
|
|
5
|
Balances and transactions with companies under sect. 33 of Law No. 19,550 and related parties
|
31
|
|
6
|
Commitments and contingencies of the Telecom Group
|
33
|
|
7
|
Equity
|
34
|
|
8
|
Restrictions on distribution of profits
|
36
|
|
9
|
Selected consolidated quarterly information
|
36
|
|
10
|
Recent developments corresponding to the nine-month period ended September 30, 2016 for the Telecom Group
|
36
|
|
11
|
Subsequent events to September 30, 2016
|
43
|
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.
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.
BCBA
(Bolsa de Comercio de Buenos Aires):
The Buenos Aires Stock Exchange.
BCRA
(Banco Central de la República Argentina):
The Central Bank of Argentina.
CNC
(Comisión Nacional de Comunicaciones):
The Argentine National Communications Commission.
CNV
(Comisión Nacional de Valores):
The Argentine National Securities Commission.
Company
or Nortel
: Nortel Inversora 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, the parent company of Sofora.
IAS
:
International Accounting Standards.
IASB
:
International Accounting Standards Board.
ICT:
Information and Communication Technologies
.
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.
LAD
(Ley Argentina Digital):
Argentine Digital Law No. 27,078.
LGS
(Ley de Sociedades Comerciales):
Argentine Corporations Law No. 19,550 as amended. Since the enforcement of the new Civil
and Commercial Code its name was changed to “
Ley General de Sociedades
”.
Micro
Sistemas:
Micro Sistemas S.A.
NDF:
Non-Deliverable Forward.
Núcleo
:
Núcleo S.A.
NYSE:
New York Stock Exchange.
PEN
(Poder Ejecutivo Nacional):
The executive branch of the Argentine government.
Personal
:
Telecom Personal S.A.
PP&E
:
Property, plant and equipment.
Regulatory
Bodies:
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 RT 29 and RT 43.
SAC:
Subscriber Acquisition Costs.
SBT
(Servicio básico telefónico): Basic telephone service.
SC
(Secretaría de Comunicaciones):
The Argentine Secretary of Communications.
SEC:
Securities and Exchange Commission of the United States of America.
SECTIC
(Secretaría de Tecnologías de la Información y las Comunicaciones): ICT Secretary.
SMS:
Short message systems.
Sofora:
Sofora Telecomunicaciones S.A. Nortel’s controlling company.
SU:
The availability of Basic telephone service, or access to the public telephone network via different alternatives, at an affordable
price to all persons within a country or specified area.
Telecom
Group / Group
: Telecom Argentina and its consolidated subsidiaries.
Telecom
Argentina
: Telecom Argentina S.A.
Telecom
Italia Group:
Telecom Italia S.p.A and its consolidated subsidiaries, except where referring to the Telecom Italia Group as
Telecom Argentina’s operator in which case it means Telecom Italia S.p.A and Telecom Italia International, N.V.
Telecom
USA
: Telecom Argentina USA Inc.
TLRD
(Terminación Llamada Red Destino):
Termination charges from third parties’ wireless networks.
Tuves:
Tuves Paraguay S.A.
US
GAAP:
United States of America Accounting Standards.
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.
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 RT 43) 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 September 30, 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 September 30, 2016 and December 31, 2015 and for the nine-month periods
ended September 30, 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 September 30, 2016, considering
Telecom Argentina’s total outstanding shares Nortel’s equity interest in
Telecom Argentina’s total capital amounts to 54.74% as of September 30, 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 September 30, 2016 was approved by resolution of the Board of
Directors’ meeting held on November 8, 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;
|
|
|
●
|
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 Telecom Group’s 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 tables set forth the computation of basic and diluted net income per share for the periods indicated:
|
|
Nine-month
periods
ended September 30,
|
|
|
2016
|
2015
|
|
Numerator:
|
|
|
|
Net
income attributable to Nortel
|
1,362
|
1,530
|
|
Net
income available to Class “B” Preferred Shares
|
(666.73)
|
(748.97)
|
|
Net
income available to common shares
|
695.27
|
781.03
|
|
Denominator:
|
|
|
|
Number
of common shares outstanding
|
5,330,400
|
5,330,400
|
|
Basic
and diluted net income per common share
|
130.44
|
146.52
|
|
|
|
|
|
Class
“B” Preferred Shares:
|
|
|
|
Numerator:
|
|
|
|
Net
income available to Class “B” Preferred Shares
|
666.73
|
748.97
|
|
Denominator:
|
|
|
|
Number
of Class “B” Preferred Shares outstanding
|
1,470,455
|
1,470,455
|
|
Basic
and diluted net income per Class “B” Preferred Share
|
453.42
|
509.34
|
|
|
e)
|
Application
of IAS 29 (Financial reporting in “hyperinflationary” economies)
|
IAS
29 establishes the conditions under which an entity shall restate its financial statements if it is located in an economic environment
considered “hyperinflationary”. It is worth mentioning that if at any time an economy qualifies as “hyperinflationary”
as a result of the qualitative and quantitative assessment established by paragraph 3 of IAS 29, the restatement of financial
statements must be made retroactively from the date of the revaluation used as deemed cost (February 2003 for entities of Telecom
Group located in Argentina) or from the acquisition date for assets acquired after that date.
In
compliance with the provisions of IAS 29, the Company’s Management periodically verifies the evolution of official statistics
as well as the general factors of the economic environment in the countries in which the Telecom Group operates.
Although
the standard does not establish an absolute rate at which hyperinflation is deemed to arise, usually a cumulative inflation rate
over three years approaching or exceeding 100% is used as reference in conjunction with other qualitative factors related to the
macroeconomic environment.
The
Company analyzes the economic environment as required by the provisions of IAS 29, based on the inflation rates published by the
National Institute of Statistics and Census (INDEC), following the same criteria adopted by the accounting profession in the Argentine
Republic.
After
declaring a state of statistical emergency in January 2016 and due to the reorganization of the INDEC structure, that agency was
impelled to publish the Internal Wholesale Price Index for November and December 2015 and the Consumer Price Index for the period
November 2015- April 2016. Under these circumstances, the INDEC suggested the alternative utilization of Price Indexes published
by the Province of San Luis and the City of Buenos Aires, which are integral part of the National Statistic System until the INDEC
publishes Price Indexes in compliance with international standards of quality. Finally, in May 2016 the INDEC published the Internal
Wholesale Price Index (“IPIM”) retroactively from January 2016 while the Consumer Price Index (“IPC”)
was published from May 2016.
Therefore,
for year 2015 the Company analysis was performed according to Consumer Price Index and Internal Wholesale Price Index published
by the INDEC until October 2015 and it was complemented applying November and December 2015 Price Index published by the Province
of San Luis and the City of Buenos Aires, as the INDEC suggested. It is worth mentioning that this simplified procedure as provided
in paragraph 17 of IAS 29 was performed due to the unavailability of official statistics at national level.
The
tables below show the evolution of these indexes in the last three years according to official statistics (INDEC), with the exceptions
explained above regarding the use of alternative indexes for November and December 2015:
|
|
2013
|
2014
|
2015
(*)
|
|
Consumer
Price Variation
|
|
|
|
|
Annual
|
10.9%
|
23.9%
|
20.6%
|
|
3
years accumulated
|
34.7%
|
52.4%
|
65.8%
|
|
|
|
|
|
|
Internal
Wholesale Price Variation
|
|
|
|
|
Annual
|
14.8%
|
28.3%
|
19.2%
|
|
3
years accumulated
|
46.2%
|
66.5%
|
75.4%
|
(*)
Consumer Price Index and Internal Wholesale Price Index published by the INDEC until October 2015 were 11.9% and 10.6% respectively.
These rates (which contain ten months accumulated), were complemented with November and December 2015 Consumer Price Index average
rates for these two months published by the Province of San Luis and the City of Buenos Aires (7.8%).As of the date of these Financial
Statements we have taken note that the INDEC will not publish Internal Wholesale Price Index for November and December 2015 nor
they will review the inflation rates for prior periods.
According
to the high inflation levels in Argentina registered in the last years, the Company’s Management has further assessed the
characteristics set out in paragraph 3 of IAS 29, including (i) the quantitative condition provided in section (e) “
the
cumulative inflation rate over three years is approaching, or exceeds, 100%
”, as well as (ii) the qualitative characteristics
contained in paragraphs a) to d) of that paragraph. Based on the analysis made at December 31, 2015 and with the evidence available
as of the date of issuance of the consolidated financial statements then ended, the Company’s Management concluded that
Argentina did not qualify as a “hyperinflationary” country in terms of IAS 29.
Under
US GAAP the argentine economy was not considered highly inflationary at December 31, 2015 according with the conclusions of the
“International Practices Task Force” (IPTF) dated May 2016, to which the Company has had access. An extract of the
meeting, stated the following: “
The SEC staff noted the IMF’s concerns on the accuracy of the inflation data. However,
the SEC staff noted that they have not observed objectively verifiable data that would indicate the economy of Argentina is highly-inflationary
at December 31, 2015.
The staff would expect
registrants to monitor the level of inflation, in combination with other pertinent factors and data points, in determining whether
Argentina should be considered a highly-inflationary economy.
”
While
there may be differences in the definition of a “hyperinflationary” environment between IFRS and US GAAP, the Company
believes that the assessment of the macroeconomic situation of a country should be substantially similar under both accounting
frameworks and, therefore, considers that the IPTF conclusion is consistent with the conclusions arrived in the analysis made
by the Company’s Management.
Additionally,
while the CNV required public companies the full implementation of IFRS-as issued by the IASB- from periods beginning on January
1
st
, 2012, Decree No. 664/03 continues to be in force as of the date of issuance of these consolidated financial statements.
Through this Decree, the PEN instructed the control authorities –including the CNV- not to accept filings of restated financial
statements. This legal restriction is foreseen in the current Regulations of the CNV (Title IV - Chapter III - Article 3 - paragraph
1).
NORTEL
INVERSORA S.A.
Developments
of the 9M16
The
indexes published by the INDEC as from May 2016 (a variation for the nine month period ended September 30, 2016 of 29.5 % for
the IPC and 31.3% for the IPIM and a variation for the three-year period of approximately 99.8% for the IPC and approximately
108.4% for the IPIM) have shown high level of inflation that reflects among other factors the impact on internal price due to
the devaluation of the argentine peso against the US dollar since December 2015, the elimination of exchange rate restrictions
and the increase of the public service rates allowed by the Government after more than ten years of rate freezing.
All
these qualitative and quantitative circumstances, require that issuers, regulatory authorities both in Argentina and abroad, and
the accounting profession reach a conclusion whether the argentine economy qualifies as “hyperinflationary” under
the terms of IAS 29 for the year 2016. Discussions on this matter have been recently initiated among the players involved in the
assessment process and it is expected that resolutions will be reached before the issuance of the annual financial statements
as of December 31, 2016.
Company’s
Management believes that the periodic assessment of the macroeconomic environment of the countries in which it operates and the
possible restatement of financial statements in accordance to IAS 29, represent an element of care and concern for investors,
analysts and regulators of capital markets where Argentine companies list their equity and debt securities, related to the impact
that such restatement might have on their financial position and results of operations of Argentine companies, including Nortel.
In
the case that IAS 29 should be applied in Argentina during year 2016 as a result of the consensus reached by the argentine accounting
profession and the regulatory authorities both in Argentina and abroad, Management of the Company has performed an aggregate estimation
of its effects taking into account that the restatement for inflation should be made from February 2003 only for argentine entities
of the Group and using the IPIM evolution published by the INDEC (which increased approximately 498% in the period February 2003
– September 2016, assuming an inflation rate of 7.8% for November - December 2015 period as explained above).
The
Company’s Management will continue monitoring the characteristics and the evolution of the inflation rates in Argentina
in order to comply properly with IAS 29 provisions, with special consideration of the pronouncements of argentine regulators –
which as of the date are forbidden to accept the filing of financial statements restated for inflation according to Decree No.664/03
and its supplementary standards. The Company’s Management will also monitor the pronouncements of foreign regulators, as
well as the evaluation that the accounting profession will perform with regards to the uniform application of IAS 29 together
with other issuers that apply IFRS in the Argentine Republic.
NOTE
2 – BREAKDOWN OF THE MAIN ACCOUNTS
|
CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
|
September
30,
|
December
31,
|
|
CURRENT
ASSETS
|
2016
|
2015
|
|
a)
Cash and cash equivalents
|
|
|
|
Cash
|
28
|
25
|
|
Banks
|
500
|
245
|
|
Time
deposits
|
79
|
217
|
|
Other
short-term investments
|
366
|
450
|
|
|
973
|
937
|
|
b)
Investments
|
|
|
|
Government
bonds at fair value
|
708
|
616
|
|
Government
bonds at fair value – US dollar linked
|
—
|
576
|
|
Government
bonds at amortized cost – US dollar linked
|
—
|
133
|
|
Provincial
and Municipal government bonds at amortized cost – US dollar linked
|
36
|
74
|
|
Provincial
and Municipal government bonds at amortized cost
|
36
|
31
|
|
|
780
|
1,430
|
|
c)
Trade receivables
|
|
|
|
Fixed
Services
|
1,879
|
1,449
|
|
Personal
Mobile Services – Services sales
|
3,333
|
2,659
|
|
Personal
Mobile Services – Equipment sales
|
3,101
|
1,759
|
|
Núcleo
Mobile Services
|
270
|
182
|
|
Subtotal
|
8,583
|
6,049
|
|
Allowance
for doubtful accounts
|
(601)
|
(386)
|
|
|
7,982
|
5,663
|
NORTEL
INVERSORA S.A.
Movements
in the allowance for current doubtful accounts are as follows:
|
|
|
|
|
|
Nine-month
periods ended
September
30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
(386)
|
(292)
|
|
Additions
– Bad debt expenses
|
(844)
|
(410)
|
|
Uses
|
631
|
362
|
|
Currency
translation adjustments
|
(2)
|
—
|
|
At
the end of the period
|
(601)
|
(340)
|
|
|
September
30,
|
December
31,
|
|
d)
Other receivables
|
2016
|
2015
|
|
Prepaid
expenses
|
532
|
346
|
|
Expenses
reimbursement
|
127
|
95
|
|
Unionized
employees advances
|
46
|
57
|
|
Subscriber’s
handsets insurance
|
75
|
3
|
|
Tax
credits
|
41
|
165
|
|
Restricted
funds
|
26
|
26
|
|
Receivables
for return of handsets under warranty
|
18
|
9
|
|
Tax
on personal property – on behalf of shareholders
|
14
|
25
|
|
Guarantee
deposits
|
6
|
5
|
|
PP&E
disposal receivables
|
1
|
26
|
|
NDF
|
—
|
466
|
|
Prepaid
expenses related parties (Note 5.c)
|
—
|
36
|
|
Other
|
174
|
112
|
|
Subtotal
|
1,060
|
1,371
|
|
Allowance
for other receivables
|
(24)
|
(25)
|
|
|
1,036
|
1,346
|
Movements
in the allowance for other receivables are as follows:
|
|
Nine-month
periods ended
September
30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
(25)
|
(23)
|
|
Additions
|
(1)
|
(3)
|
|
Uses
|
2
|
1
|
|
At
the end of the period
|
(24)
|
(25)
|
|
|
September
30,
|
December
31,
|
|
e)
Inventories
|
2016
|
2015
|
|
Mobile
handsets and other
|
2,306
|
2,218
|
|
Advances
for mobile handsets acquisitions
|
—
|
47
|
|
Fixed
telephones and equipment
|
17
|
14
|
|
Subtotal
|
2,323
|
2,279
|
|
Allowance
for obsolescence of inventories
|
(80)
|
(86)
|
|
|
2,243
|
2,193
|
Movements
in the allowance for obsolescence of inventories are as follows:
|
|
Nine-month
periods ended September 30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
(86)
|
(73)
|
|
Additions
– Fees for services, maintenance and materials
|
(36)
|
(23)
|
|
Uses
|
42
|
8
|
|
Currency
translation adjustments
|
—
|
1
|
|
At
the end of the period
|
(80)
|
(87)
|
NORTEL
INVERSORA S.A.
Sale
and cost of equipment and handsets by business segment is as follows:
|
|
Three-month
periods
ended September 30,
|
|
Nine-month
periods
ended September 30,
|
|
|
2016
|
2015
|
|
2016
|
2015
|
|
|
Profit
(loss)
|
|
Sales
of equipment and handsets - Fixed Services
|
13
|
25
|
|
78
|
48
|
|
Cost
of equipment and handsets – Fixed Services
|
(39)
|
(31)
|
|
(126)
|
(64)
|
|
Total
equipment loss – Fixed Services
|
(26)
|
(6)
|
|
(48)
|
(16)
|
|
Sales
of equipment and handsets – Personal Mobile Services
|
1,711
|
1,235
|
|
5,649
|
3,468
|
|
Cost
of equipment and handsets – Personal Mobile Services
|
(1,441)
|
(990)
|
|
(4,308)
|
(2,627)
|
|
Deferred
Costs SAC – Personal Mobile Services
|
30
|
11
|
|
56
|
25
|
|
Total
equipment income – Personal Mobile Services
|
300
|
256
|
|
1,397
|
866
|
|
Sales
of equipment and handsets – Núcleo Mobile Services
|
91
|
40
|
|
217
|
106
|
|
Cost
of equipment and handsets – Núcleo Mobile Services
|
(106)
|
(59)
|
|
(291)
|
(166)
|
|
Deferred
Costs SAC – Núcleo Mobile Services
|
8
|
13
|
|
38
|
41
|
|
Total
equipment loss – Núcleo Mobile Services
|
(7)
|
(6)
|
|
(36)
|
(19)
|
|
Total
equipment and handsets sale
|
1,815
|
1,300
|
|
5,944
|
3,622
|
|
Total
cost of equipment and handsets (net of SAC capitalization)
|
(1,548)
|
(1,056)
|
|
(4,631)
|
(2,791)
|
|
Total
income for sale of equipment and handsets
|
267
|
244
|
|
1,313
|
831
|
|
NON-CURRENT ASSETS
|
September
30,
|
December
31,
|
|
f)
Trade receivables
|
2016
|
2015
|
|
Fixed
Services
|
17
|
17
|
|
Personal
Mobile Services – Equipment sales
|
—
|
300
|
|
Núcleo
Mobile Services – Equipment sales
|
241
|
164
|
|
|
258
|
481
|
|
g)
Other receivables
|
|
|
|
Prepaid
expenses
|
266
|
166
|
|
Credit
on SC Resolution No. 41/07 and IDC
|
84
|
84
|
|
Restricted
funds
|
32
|
32
|
|
Tax
on personal property – on behalf of shareholders
|
31
|
31
|
|
Regulatory
credits (Paraguay)
|
27
|
22
|
|
Tax
credits
|
28
|
29
|
|
Guarantee
deposits
|
14
|
12
|
|
Other
|
11
|
28
|
|
Subtotal
|
493
|
404
|
|
Allowance
for regulatory matters
|
(84)
|
(84)
|
|
Allowance
for doubtful accounts (tax on personal property)
|
(31)
|
(31)
|
|
Allowance
for other tax credits
|
(17)
|
(17)
|
|
|
361
|
272
|
Movements
in the allowance for regulatory matters are as follows:
|
|
Nine-month
periods ended
September
30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
(84)
|
(85)
|
|
Uses
|
—
|
1
|
|
At
the end of the period
|
(84)
|
(84)
|
Movements
in the allowance for doubtful accounts (tax on personal property) are as follows:
|
|
Nine-month
periods ended
September
30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
(31)
|
(31)
|
|
Additions
|
—
|
—
|
|
At
the end of the period
|
(31)
|
(31)
|
Movements
in the allowance for tax credits are as follows:
|
|
Nine-month
periods ended
September
30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
(17)
|
(17)
|
|
Additions
|
—
|
—
|
|
At
the end of the period
|
(17)
|
(17)
|
|
|
September
30
|
December
31,
|
|
h)
Investments
|
2016
|
2015
|
|
Municipal
government bonds at amortized cost – US dollar linked
|
59
|
—
|
|
Provincial
and municipal government bonds at amortized cost
|
8
|
62
|
|
Government
bonds at amortized cost – US dollar linked
|
—
|
261
|
|
Tuves
shares purchase option
|
18
|
9
|
|
2003
Telecommunications Fund
|
1
|
1
|
|
|
86
|
333
|
|
i)
PP&E
|
|
|
|
Land,
buildings and facilities
|
1,240
|
1,088
|
|
Computer
equipment and software
|
1,849
|
1,885
|
|
Switching
and transmission equipment (i)
|
4,973
|
4,368
|
|
Mobile
network access and external wiring
|
7,922
|
5,643
|
|
Construction
in progress
|
3,576
|
3,015
|
|
Other
tangible assets
|
686
|
567
|
|
Subtotal
PP&E
|
20,246
|
16,566
|
|
Materials
|
2,210
|
1,652
|
|
Valuation
allowance for materials
|
(65)
|
(52)
|
|
Impairment
of PP&E
|
(398)
|
(203)
|
|
Total
PP&E
|
21,993
|
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:
|
|
Nine-month
periods ended
September
30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
18,218
|
13,933
|
|
CAPEX
|
6,403
|
3,577
|
|
Materials
|
893
|
1,110
|
|
Total
PP&E additions
|
7,296
|
4,687
|
|
Currency
translation adjustments
|
406
|
(124)
|
|
Consumption
of materials
|
(346)
|
(216)
|
|
Decrease
|
(30)
|
(60)
|
|
Depreciation
of the period
|
(3,088)
|
(2,166)
|
|
At
the end of the period
|
22,456
|
16,054
|
Movements
in the valuation allowance for materials are as follows:
|
|
Nine-month
periods ended
September
30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
(52)
|
(24)
|
|
Additions
- Fees for services, maintenance, and materials
|
(17)
|
(5)
|
|
Uses
|
4
|
—
|
|
At
the end of the period
|
(65)
|
(29)
|
Movements
in the impairment of PP&E are as follows:
|
|
Nine-month
periods ended
September
30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
(203)
|
(100)
|
|
Additions
– Impairment of PP&E
|
(196)
|
(72)
|
|
Additions
– Fees for services
|
—
|
(8)
|
|
Depreciation
of the period
|
1
|
1
|
|
Uses
|
—
|
49
|
|
At
the end of the period
|
(398)
|
(130)
|
|
|
September
30,
|
December
31,
|
|
j)
Intangible assets
|
2016
|
2015
|
|
SAC
– fixed services
|
109
|
116
|
|
SAC
– mobile services
|
1,377
|
1,156
|
|
Service
connection or habilitation costs
|
116
|
107
|
|
3G/4G
Licenses
|
5,154
|
5,443
|
|
PCS
License
|
588
|
588
|
|
Rights
of use and exclusivity
|
231
|
248
|
|
Other
intangible assets
|
1
|
1
|
|
|
7,576
|
7,659
|
Movements
in Intangible assets are as follows:
|
|
Nine-month
periods ended
September
30,
|
|
|
2016
|
2015
|
|
At
the beginning of the year
|
7,659
|
5,331
|
|
Acquisitions
|
1,296
|
958
|
|
4G
Licenses acquisitions
|
—
|
2,256
|
|
Currency
translation adjustments
|
19
|
(6)
|
|
Amortization
of the period
|
(1,398)
|
(989)
|
|
At
the end of the period
|
7,576
|
7,550
|
|
CURRENT LIABILITIES
|
September
30,
|
December
31,
|
|
k)
Trade payables
|
2016
|
2015
|
|
For
the acquisition of PP&E
|
4,667
|
5,022
|
|
For
the acquisition of other assets and services
|
3,447
|
2,992
|
|
For
the acquisition of inventory
|
1,143
|
1,335
|
|
Subtotal
suppliers
|
9,257
|
9,349
|
|
Agent
commissions
|
472
|
525
|
|
|
9,729
|
9,874
|
|
l)
Deferred revenues
|
|
|
|
On
prepaid calling cards – Fixed and Mobile Services
|
250
|
312
|
|
On
mobile customer loyalty programs
|
85
|
78
|
|
On
international capacity rental
|
59
|
47
|
|
On
connection fees – Fixed Services
|
36
|
35
|
|
From
CONATEL – Núcleo Mobile Services
|
6
|
5
|
|
Other
|
15
|
—
|
|
|
451
|
477
|
|
m)
Financial debt
|
|
|
|
Bank
overdrafts – principal (Personal)
|
6,236
|
3,062
|
|
Bank
overdrafts – principal (Telecom Argentina)
|
16
|
—
|
|
Bank
overdrafts – principal (Núcleo)
|
—
|
84
|
|
Bank
loans – principal (Personal)
|
598
|
—
|
|
Bank
loans – principal (Núcleo)
|
434
|
193
|
|
Notes
– principal (Personal)
|
566
|
—
|
|
Accrued
interests (Personal)
|
124
|
104
|
|
Accrued
interests (Núcleo)
|
7
|
8
|
|
|
7,981
|
3,451
|
|
n)
Salaries and social security payables
|
|
|
|
Annual
complementary salaries, vacation and bonuses
|
1,176
|
850
|
|
Social
security payables
|
299
|
324
|
|
Termination
benefits
|
113
|
88
|
|
|
1,588
|
1,262
|
|
o)
Income tax payables
|
|
|
|
Income
tax payables 2015
|
—
|
1,733
|
|
Income
tax payables 2016
|
1,549
|
—
|
|
Income
tax retentions and payments in advance
|
(956)
|
(1,288)
|
|
Law
No. 26,476 Tax Regularization Regime
|
6
|
5
|
|
|
599
|
450
|
|
p)
Other taxes payables
|
|
|
|
VAT,
net
|
290
|
452
|
|
Tax
withholdings
|
178
|
201
|
|
Internal
taxes
|
116
|
111
|
|
Tax
on SU
|
109
|
91
|
|
Regulatory
fees
|
87
|
74
|
|
Turnover
tax
|
65
|
143
|
|
Municipal
taxes
|
45
|
46
|
|
Perception
Decree No. 583/10 ENARD
|
21
|
20
|
|
Tax
on personal property – on behalf of shareholders
|
14
|
25
|
|
|
925
|
1,163
|
|
q)
Other liabilities
|
|
|
|
Compensation
for directors and members of the Supervisory Committee
|
38
|
38
|
|
Guarantees
received
|
14
|
12
|
|
Other
|
9
|
11
|
|
|
61
|
61
|
|
NON-CURRENT
LIABILITIES
|
September
30,
|
December
31,
|
|
r)
Trade payables
|
2016
|
2015
|
|
For
the acquisition of PP&E
|
25
|
52
|
|
|
25
|
52
|
|
s)
Deferred revenues
|
|
|
|
On
international capacity rental – Fixed Services
|
263
|
290
|
|
On
mobile customer loyalty programs
|
100
|
84
|
|
On
connection fees – Fixed Services
|
85
|
79
|
|
From
CONATEL– Núcleo Mobile Services
|
—
|
4
|
|
|
448
|
457
|
|
t)
Financial debt
|
|
|
|
Notes
– principal (Personal)
|
147
|
713
|
|
Bank
loans – principal (Personal)
|
—
|
509
|
|
Bank
loans – principal (Núcleo)
|
245
|
227
|
|
|
392
|
1,449
|
|
u)
Salaries and social security payables
|
|
|
|
Termination
benefits
|
136
|
117
|
|
Bonuses
|
50
|
40
|
|
|
186
|
157
|
|
v)
Income tax payables
|
|
|
|
Law
No. 26,476 Tax Regularization Regime
|
7
|
10
|
|
|
7
|
10
|
|
w)
Other liabilities
|
|
|
|
Pension
benefits
|
130
|
95
|
|
Legal
fees
|
4
|
4
|
|
Other
|
3
|
2
|
|
|
137
|
101
|
x)
Income tax asset and deferred income tax asset and liability
The
Telecom Group 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 September 30, 2016
|
Telecom
Argentina
|
Telecom
USA
|
Total
|
|
The
Company
|
Personal
|
Núcleo
|
Total
|
|
Allowance
for doubtful accounts
|
53
|
2
|
55
|
|
—
|
247
|
13
|
260
|
|
Provisions
|
329
|
—
|
329
|
|
—
|
158
|
—
|
158
|
|
PP&E
|
—
|
—
|
—
|
|
—
|
—
|
19
|
19
|
|
Inventory
|
—
|
—
|
—
|
|
—
|
108
|
—
|
108
|
|
Termination
benefits
|
77
|
—
|
77
|
|
—
|
—
|
—
|
—
|
|
Deferred
revenues
|
82
|
—
|
82
|
|
—
|
—
|
—
|
—
|
|
Pension
benefits
|
46
|
—
|
46
|
|
—
|
—
|
—
|
—
|
|
Other
deferred tax assets, net
|
128
|
—
|
128
|
|
—
|
—
|
2
|
2
|
|
Total
deferred tax assets
|
715
|
2
|
717
|
|
—
|
513
|
34
|
547
|
|
PP&E
|
(406)
|
—
|
(406)
|
|
—
|
(119)
|
—
|
(119)
|
|
Intangible
assets
|
(86)
|
—
|
(86)
|
|
—
|
(558)
|
—
|
(558)
|
|
Cash
dividends from foreign companies
|
—
|
—
|
—
|
|
—
|
(*) (149)
|
(50)
|
(199)
|
|
Equipment
sales in installments
|
—
|
—
|
—
|
|
—
|
(185)
|
—
|
(185)
|
|
Investments
|
—
|
—
|
—
|
|
(3)
|
(2)
|
—
|
(5)
|
|
Other
deferred tax liabilities, net
|
—
|
—
|
—
|
|
—
|
(8)
|
—
|
(8)
|
|
Total
deferred tax liabilities
|
(492)
|
—
|
(492)
|
|
(3)
|
(1,021)
|
(50)
|
(1,074)
|
|
Total
deferred tax assets (liabilities), net
|
(**) 223
|
2
|
225
|
|
(3)
|
(**) (508)
|
(***) (16)
|
(527)
|
|
|
|
|
|
|
|
|
|
|
|
Action
for recourse tax receivable of Telecom Argentina
|
98
|
—
|
98
|
|
|
|
|
|
|
Total
Income tax assets
|
321
|
2
|
323
|
|
|
|
|
|
|
|
(*)
|
Includes
(20) recorded in Other comprehensive income for the nine-month period ended September 30, 2016.
|
|
|
(**)
|
Includes
10 and (65) in Telecom Argentina and Personal, respectively, corresponding to the reversal of temporary differences related to
the 2015 income tax affidavits.
|
|
|
(***)
|
Includes
(42) corresponding to liabilities reclassifications and 8 corresponding to currency translation adjustments over opening balances.
|
|
|
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 (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 September 30, 2016
|
|
|
|
Date
due
|
Cash
and cash equivalents
|
Investments
|
Trade
receivables
|
Income
tax
assets
|
Other
receivables
|
|
Total
due
|
—
|
—
|
1,680
|
—
|
—
|
|
Not
due
|
|
|
|
|
|
|
Fourth
quarter 2016
|
973
|
52
|
4,339
|
—
|
661
|
|
First
quarter 2017
|
—
|
3
|
983
|
—
|
147
|
|
Second
quarter 2017
|
—
|
709
|
727
|
—
|
132
|
|
Third
quarter 2017
|
—
|
16
|
253
|
—
|
96
|
|
October
2017 thru September 2018
|
—
|
31
|
197
|
—
|
159
|
|
October
2018 thru September 2019
|
—
|
24
|
21
|
—
|
91
|
|
October
2019 and thereafter
|
—
|
12
|
40
|
—
|
111
|
|
Not
date due established
|
—
|
19
|
—
|
323
|
—
|
|
Total
not due
|
973
|
866
|
6,560
|
323
|
1,397
|
|
Total
|
973
|
866
|
8,240
|
323
|
1,397
|
|
|
|
|
|
|
|
|
Balances
bearing interest
|
445
|
847
|
1,682
|
—
|
—
|
|
Balances
not bearing interest
|
528
|
19
|
6,558
|
323
|
1,397
|
|
Total
|
973
|
866
|
8,240
|
323
|
1,397
|
|
|
|
|
|
|
|
|
Average
annual interest rate (%)
|
(a)
|
(b)
|
(c)
(d)
|
—
|
—
|
(a) 366
are assets in argentine pesos bearing interest between 28.4% and 28.9% and 79 are assets in foreign currency bearing interest
at 0.17%.
(b) 44
are assets in argentine pesos bearing interests between 13.1% and 25.6% (24.1% average rate), 708 are assets in foreign currency
bearing interest at 7% and 95 are US dollar linked bonds bearing interests between 0.40% and 1.95% (1.56% average rate).
(c) From
due trade receivables 91 bear 50% over the Banco de la Nación Argentina 30-day interest rate paid by banks, 716 bear
50% over the Banco de la Nación Argentina notes payable discount rate, 793 bear 48% and 26 bear 36%.
(d) From
not due trade receivables 25 bear 41%, 29 bear 8.3% and 2 bear 34.2%.
|
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
|
666
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Not
due
|
|
|
|
|
|
|
|
|
|
Fourth
quarter 2016
|
7,694
|
307
|
6,009
|
733
|
2
|
—
|
910
|
19
|
|
First
quarter 2017
|
588
|
50
|
629
|
626
|
1
|
—
|
—
|
1
|
|
Second
quarter 2017
|
672
|
47
|
1,258
|
210
|
119
|
—
|
15
|
39
|
|
Third
quarter 2017
|
109
|
47
|
85
|
19
|
477
|
—
|
—
|
2
|
|
October
2017 thru September 2018
|
18
|
151
|
177
|
109
|
5
|
—
|
—
|
22
|
|
October
2018 thru September 2019
|
—
|
44
|
215
|
37
|
2
|
—
|
|
7
|
|
October
2019 and thereafter
|
7
|
253
|
—
|
40
|
—
|
—
|
—
|
108
|
|
Not
date due established
|
—
|
—
|
—
|
—
|
—
|
527
|
—
|
—
|
|
Total
not due
|
9,088
|
899
|
8,373
|
1,774
|
606
|
527
|
925
|
198
|
|
Total
|
9,754
|
899
|
8,373
|
1,774
|
606
|
527
|
925
|
198
|
|
|
|
|
|
|
|
|
|
|
|
Balances
bearing interest
|
72
|
—
|
8,325
|
—
|
9
|
—
|
—
|
—
|
|
Balances
not bearing interest
|
9,682
|
899
|
48
|
1,774
|
597
|
527
|
925
|
198
|
|
Total
|
9,754
|
899
|
8,373
|
1,774
|
606
|
527
|
925
|
198
|
|
|
|
|
|
|
|
|
|
|
|
Average
annual interest rate (%)
|
6%
|
—
|
(e)
|
—
|
9%
|
—
|
—
|
—
|
|
|
(e)
|
7,025
are liabilities in argentine pesos bearing interests between 26.8% and 27.5%, 614 are
liabilities in foreign currency bearing three-month LIBOR plus 8.75% and 686 are liabilities
in guaraníes bearing interests between 9.30% and 13%.
|
|
z)
Foreign currency assets and liabilities
|
|
|
The
following table shows a breakdown of the Company and the Telecom Group’s net liability financial position exposure to currency
risk as of September 30, 2016 and December 31, 2015.
|
09.30.16
|
|
Amount
of foreign currency (i)
|
Exchange
rate
|
Amount
in local currency (ii)
|
|
Assets
|
|
|
|
|
US$
|
118
|
15.210
|
(3)
1,775
|
|
G
|
282,215
|
0.003
|
770
|
|
EURO
|
6
|
17.063
|
106
|
|
|
Total
assets
|
|
2,651
|
|
Liabilities
|
|
|
|
|
US$
|
(439)
|
15.310
|
(6,727)
|
|
G
|
(389,491)
|
0.003
|
(1,062)
|
|
EURO
|
(11)
|
17.213
|
(192)
|
|
|
Total
liabilities
|
|
(7,981)
|
|
|
Net
liabilities
|
|
(5,330)
|
|
|
(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
708 corresponding to Government bonds valued at fair value (equivalent to US$ 45 million).
|
In
order to partially reduce this net liability position in foreign currency the Company and theTelecom Group, as of September 30,
2016, holds investments adjustable to the variation of the US$/$ exchange rate (dollar linked) by $95. So, the net liability position
in foreign currency amounted to $5,235 as of September 30, 2016 (equivalent to approximately US$ 342 million).
|
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 valued 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. According to this, the
Company and the Telecom Group’s 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.
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 September 30, 2016 and December 31, 2015:
|
|
As
of September 30, 2016
|
As
of December 31, 2015
|
|
Investments
|
Book
value
|
Fair
value (*)
|
Book
value
|
Fair
value (*)
|
|
|
|
|
|
|
|
Government
bonds (US dollar linked)
|
—
|
—
|
394
|
365
|
|
Provincial
government bonds in pesos
|
44
|
44
|
32
|
32
|
|
Provincial
and municipal government bonds (US dollar linked)
|
95
|
90
|
135
|
118
|
|
Total
|
139
|
134
|
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 September 30, 2016 and December 31, 2015 is as follows:
|
|
As
of September 30, 2016
|
|
|
Trade
receivables
|
Other
receivables
(1)
|
Trade
payables
|
Other
liabilities (1)
|
|
Current
and non-current assets (liabilities) - Gross value
|
10,236
|
464
|
(11,750)
|
(86)
|
|
Offsetting
|
(1,996)
|
(16)
|
1,996
|
18
|
|
Current
and non-current assets (liabilities) – Book value
|
8,240
|
448
|
(9,754)
|
(68)
|
|
|
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)
|
(89)
|
|
Offsetting
|
(1,688)
|
(12)
|
1,688
|
14
|
|
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
September 30,
|
|
Nine-month
periods
ended September 30,
|
|
|
2016
|
2015
|
|
2016
|
2015
|
|
ac)
Total revenues and other income
|
Profit
(loss)
|
|
Services
|
|
|
|
|
|
|
Voice
– Retail
|
1,241
|
846
|
|
3,333
|
2,379
|
|
Voice
– Wholesale
|
336
|
255
|
|
995
|
734
|
|
Data
|
731
|
451
|
|
2,133
|
1,290
|
|
Internet
|
1,513
|
1,198
|
|
4,351
|
3,273
|
|
Subtotal
Fixed Services
|
3,821
|
2,750
|
|
10,812
|
7,676
|
|
Voice
– Retail
|
2,215
|
1,850
|
|
6,255
|
5,109
|
|
Voice
– Wholesale
|
534
|
466
|
|
1,442
|
1,395
|
|
Data
|
1,563
|
1,763
|
|
5,103
|
5,376
|
|
Internet
|
2,827
|
1,594
|
|
7,497
|
4,283
|
|
Subtotal
Personal Mobile Services
|
7,139
|
5,673
|
|
20,297
|
16,163
|
|
Voice
– Retail
|
223
|
148
|
|
628
|
441
|
|
Voice
– Wholesale
|
39
|
24
|
|
111
|
80
|
|
Data
|
116
|
72
|
|
321
|
220
|
|
Internet
|
259
|
127
|
|
705
|
388
|
|
Subtotal
Núcleo Mobile Services
|
637
|
371
|
|
1,765
|
1,129
|
|
Total
service revenues (a)
|
11,597
|
8,794
|
|
32,874
|
24,968
|
|
Equipment
|
|
|
|
|
|
|
Fixed
Services
|
13
|
25
|
|
78
|
48
|
|
Personal
Mobile Services
|
1,711
|
1,235
|
|
5,649
|
3,468
|
|
Núcleo
Mobile Services
|
91
|
40
|
|
217
|
106
|
|
Total
equipment revenues (b)
|
1,815
|
1,300
|
|
5,944
|
3,622
|
|
Total
revenues (a) + (b)
|
13,412
|
10,094
|
|
38,818
|
28,590
|
|
Other
income
|
|
|
|
|
|
|
Fixed
Services
|
11
|
4
|
|
25
|
12
|
|
Personal
Mobile Services
|
3
|
—
|
|
9
|
3
|
|
Total
other income (c)
|
14
|
4
|
|
34
|
15
|
|
|
|
|
|
|
|
|
Total
revenues and other income (a)+(b)+(c)
|
13,426
|
10,098
|
|
38,852
|
28,605
|
Telecom
Group’s service revenues by type of service (regardless of the segment originates) are as follows:
|
|
Nine-month
periods ended
September 30,
|
|
|
2016
|
%
|
2015
|
%
|
|
Voice
Retail
|
10,216
|
31
|
7,929
|
32
|
|
Voice
Wholesale
|
2,548
|
8
|
2,209
|
9
|
|
Total
Voice
|
12,764
|
39
|
10,138
|
41
|
|
Data
|
7,557
|
23
|
6,886
|
27
|
|
Internet
|
12,553
|
38
|
7,944
|
32
|
|
Total
service revenues
|
32,874
|
100
|
24,968
|
100
|
Telecom
Group’s services revenues by customer segment and billing mechanism are as follows:
|
|
Three-month
periods
ended September 30,
|
|
Nine-month
periods
ended September 30,
|
|
Services
|
2016
|
2015
|
|
2016
|
2015
|
|
Retail
|
Profit
(loss)
|
|
Monthly
Charges
|
3,037
|
2,147
|
|
8,512
|
5,929
|
|
Voice
|
859
|
492
|
|
2,207
|
1,358
|
|
Internet
|
1,377
|
1,118
|
|
3,975
|
3,061
|
|
Bundles
(Voice and Internet)
|
308
|
231
|
|
894
|
642
|
|
Data
|
493
|
306
|
|
1,436
|
868
|
|
Measured
services
|
164
|
168
|
|
472
|
480
|
|
Connection
and reconnection fees
|
32
|
24
|
|
95
|
74
|
|
Pre-cancellation
contract fees
|
9
|
5
|
|
26
|
16
|
|
Others
|
6
|
5
|
|
15
|
16
|
|
Wholesale
|
|
|
|
|
|
|
Monthly
Charges
|
355
|
207
|
|
995
|
603
|
|
Cell
sites and links rental
|
124
|
65
|
|
312
|
190
|
|
Data
|
231
|
142
|
|
683
|
413
|
|
Fixed
and mobile interconnection
|
191
|
170
|
|
620
|
484
|
|
Others
|
27
|
24
|
|
77
|
74
|
|
Total
Fixed services
|
3,821
|
2,750
|
|
10,812
|
7,676
|
|
Retail
|
|
|
|
|
|
|
Monthly
Charges
|
3,718
|
2,925
|
|
10,755
|
8,045
|
|
Voice
|
135
|
260
|
|
419
|
703
|
|
Internet
|
53
|
53
|
|
163
|
154
|
|
Bundles
(Voice and Internet)
|
3,507
|
2,587
|
|
10,101
|
7,103
|
|
Others
|
23
|
25
|
|
72
|
85
|
|
Measured
services
|
2,538
|
2,075
|
|
7,288
|
6,216
|
|
Postpaid
|
263
|
258
|
|
849
|
758
|
|
Prepaid
and Cuentas Claras
|
2,275
|
1,817
|
|
6,439
|
5,458
|
|
Reconnection
fees
|
72
|
53
|
|
204
|
156
|
|
Pre-cancellation
contract fees
|
75
|
42
|
|
181
|
97
|
|
Damage
management services
|
96
|
76
|
|
277
|
197
|
|
Others
|
106
|
35
|
|
150
|
56
|
|
Wholesale
|
|
|
|
|
|
|
Interconnection
|
443
|
386
|
|
1,168
|
1,144
|
|
Roaming
|
68
|
71
|
|
212
|
225
|
|
Others
|
23
|
10
|
|
62
|
27
|
|
Total
Personal mobile services
|
7,139
|
5,673
|
|
20,297
|
16,163
|
|
Retail
|
|
|
|
|
|
|
Monthly
Charges
|
245
|
147
|
|
689
|
440
|
|
Internet
|
26
|
32
|
|
76
|
73
|
|
Bundles
(Voice and Internet)
|
219
|
115
|
|
613
|
367
|
|
Measured
services
|
278
|
165
|
|
807
|
536
|
|
Postpaid
|
20
|
16
|
|
32
|
25
|
|
Prepaid
and Plan Control
|
258
|
149
|
|
775
|
511
|
|
Reconnection
fees
|
4
|
3
|
|
12
|
8
|
|
Pre-cancellation
contract fees
|
19
|
6
|
|
45
|
13
|
|
Others
|
9
|
3
|
|
51
|
24
|
|
Wholesale
|
|
|
|
|
|
|
Interconnection
|
30
|
19
|
|
86
|
57
|
|
Roaming
|
3
|
1
|
|
16
|
18
|
|
Others
|
49
|
27
|
|
59
|
33
|
|
Total
Núcleo mobile services
|
637
|
371
|
|
1,765
|
1,129
|
|
Total
services revenues
|
11,597
|
8,794
|
|
32,874
|
24,968
|
Operating
expenses disclosed by nature of expense amounted to $33,358 and $24,166 for the nine-month periods ended September 30, 2016 and
2015, respectively.
The
main components of the operating expenses are the following:
|
|
Three-month
periods ended
September 30,
|
|
Nine-month
periods ended
September 30,
|
|
|
2016
|
2015
|
|
2016
|
2015
|
|
|
Profit
(loss)
|
|
Employee
benefit expenses and severance payments
|
|
|
|
|
|
|
Salaries
|
(1,978)
|
(1,431)
|
|
(5,149)
|
(3,764)
|
|
Social
security expenses
|
(566)
|
(463)
|
|
(1,606)
|
(1,207)
|
|
Severance
indemnities and termination benefits
|
(183)
|
(105)
|
|
(339)
|
(240)
|
|
Other
employee benefits
|
(53)
|
(37)
|
|
(124)
|
(85)
|
|
|
(2,780)
|
(2,036)
|
|
(7,218)
|
(5,296)
|
|
Interconnection
costs and other telecommunication charges
|
|
|
|
|
|
|
Fixed
telephony interconnection costs
|
(90)
|
(85)
|
|
(329)
|
(236)
|
|
Cost
of international outbound calls
|
(82)
|
(39)
|
|
(205)
|
(121)
|
|
Lease
of circuits and use of public network
|
(120)
|
(88)
|
|
(353)
|
(249)
|
|
Mobile
services - charges for roaming
|
(96)
|
(96)
|
|
(354)
|
(288)
|
|
Mobile
services - charges for TLRD
|
(236)
|
(250)
|
|
(713)
|
(665)
|
|
|
(624)
|
(558)
|
|
(1,954)
|
(1,559)
|
|
Fees
for services, maintenance, materials and supplies
|
|
|
Maintenance
of hardware and software
|
(138)
|
(80)
|
|
(376)
|
(234)
|
|
Technical
maintenance
|
(311)
|
(210)
|
|
(964)
|
(598)
|
|
Service
connection fees for fixed lines and Internet lines
|
(73)
|
(63)
|
|
(189)
|
(164)
|
|
Service
connection fees capitalized as SAC
|
3
|
3
|
|
10
|
9
|
|
Service
connection fees capitalized as Intangible assets
|
12
|
12
|
|
31
|
26
|
|
Other
maintenance costs
|
(126)
|
(117)
|
|
(367)
|
(312)
|
|
Obsolescence
of inventories – Personal Mobile Services
|
(15)
|
(17)
|
|
(36)
|
(23)
|
|
Call
center fees
|
(370)
|
(322)
|
|
(1,034)
|
(972)
|
|
Other
fees for services
|
(216)
|
(187)
|
|
(622)
|
(568)
|
|
Compensation
for Directors and Supervisory Committee members
|
(16)
|
(12)
|
|
(45)
|
(32)
|
|
|
(1,250)
|
(993)
|
|
(3,592)
|
(2,868)
|
|
Taxes
and fees with the Regulatory Authority
|
|
|
Turnover
tax
|
(702)
|
(522)
|
|
(2,055)
|
(1,513)
|
|
Taxes
with the Regulatory Authority
|
(289)
|
(228)
|
|
(836)
|
(651)
|
|
Tax
on deposits to and withdrawals from bank accounts
|
(148)
|
(106)
|
|
(410)
|
(298)
|
|
Municipal
taxes
|
(98)
|
(68)
|
|
(288)
|
(202)
|
|
Other
taxes
|
(74)
|
(64)
|
|
(220)
|
(183)
|
|
|
(1,311)
|
(988)
|
|
(3,809)
|
(2,847)
|
|
Commissions
|
|
|
|
|
|
|
Agent
commissions
|
(780)
|
(626)
|
|
(2,263)
|
(1,777)
|
|
Agent
commissions capitalized as SAC
|
372
|
268
|
|
1,046
|
781
|
|
Distribution
of prepaid cards commissions
|
(200)
|
(152)
|
|
(558)
|
(464)
|
|
Collection
commissions
|
(308)
|
(264)
|
|
(944)
|
(661)
|
|
Other
commissions
|
(29)
|
(25)
|
|
(76)
|
(74)
|
|
|
(945)
|
(799)
|
|
(2,795)
|
(2,195)
|
|
Cost
of equipments and handsets
|
|
|
|
|
|
|
Inventory
balance at the beginning of the period/year
|
(2,552)
|
(805)
|
|
(2,279)
|
(794)
|
|
Plus:
|
|
|
|
|
|
|
Purchases
|
(1,390)
|
(2,606)
|
|
(4,863)
|
(4,413)
|
|
Deferred
costs from SAC
|
38
|
24
|
|
94
|
66
|
|
Decreases
from allowance for obsolescence
|
17
|
4
|
|
42
|
8
|
|
Mobile
handsets lent to customers at no cost
|
15
|
9
|
|
42
|
24
|
|
Decreases
not charged to material cost
|
1
|
2
|
|
10
|
2
|
|
Less:
|
|
|
|
|
|
|
Inventory
balance at period end
|
2,323
|
2,316
|
|
2,323
|
2,316
|
|
|
(1,548)
|
(1,056)
|
|
(4,631)
|
(2,791)
|
|
Advertising
|
|
|
|
|
|
|
Media
advertising
|
(112)
|
(153)
|
|
(333)
|
(380)
|
|
Fairs
and exhibitions
|
(33)
|
(30)
|
|
(105)
|
(108)
|
|
Other
advertising costs
|
(32)
|
(38)
|
|
(110)
|
(103)
|
|
|
(177)
|
(221)
|
|
(548)
|
(591)
|
|
|
Three-month
periods ended
September 30,
|
|
Nine-month
periods ended
September 30,
|
|
|
2016
|
2015
|
|
2016
|
2015
|
|
|
Profit
(loss)
|
|
Cost
of VAS
|
|
|
|
|
|
|
Cost
of mobile VAS
|
(336)
|
(303)
|
|
(1,101)
|
(884)
|
|
Cost
of fixed VAS
|
(14)
|
(10)
|
|
(41)
|
(26)
|
|
|
(350)
|
(313)
|
|
(1,142)
|
(910)
|
|
Other
operating costs
|
|
|
|
|
|
|
Transportation,
freight and travel expenses
|
(231)
|
(206)
|
|
(777)
|
(523)
|
|
Delivery
costs capitalized as SAC
|
17
|
23
|
|
115
|
56
|
|
Rent
of buildings and cell sites
|
(185)
|
(137)
|
|
(560)
|
(388)
|
|
Energy,
water and others
|
(202)
|
(83)
|
|
(651)
|
(320)
|
|
International
and satellite connectivity
|
(49)
|
(71)
|
|
(161)
|
(145)
|
|
|
(650)
|
(474)
|
|
(2,034)
|
(1,320)
|
|
D&A
|
|
|
|
|
|
|
Depreciation
of PP&E
|
(1,105)
|
(774)
|
|
(3,087)
|
(2,165)
|
|
Amortization
of SAC and service connection charges
|
(381)
|
(276)
|
|
(1,087)
|
(733)
|
|
Amortization
of 3G/4G licenses
|
(96)
|
(96)
|
|
(289)
|
(227)
|
|
Amortization
of other intangible assets
|
(9)
|
(18)
|
|
(22)
|
(29)
|
|
|
(1,591)
|
(1,164)
|
|
(4,485)
|
(3,154)
|
|
Gain
(loss) on disposal of PP&E and impairment of PP&E
|
|
|
|
|
|
|
Gain
(loss) on disposal of PP&E
|
1
|
8
|
|
(4)
|
21
|
|
Impairment
of PP&E – access PP&E swap
|
(61)
|
(62)
|
|
(196)
|
(72)
|
|
|
(60)
|
(54)
|
|
(200)
|
(51)
|
The
operating expenses disclosed by function are as follows:
|
Operating
costs
|
(7,024)
|
(5,219)
|
|
(20,467)
|
(14,335)
|
|
Administration
costs
|
(790)
|
(489)
|
|
(1,936)
|
(1,353)
|
|
Commercialization
costs
|
(3,738)
|
(3,023)
|
|
(10,649)
|
(8,253)
|
|
Other
expenses – provisions
|
(25)
|
(7)
|
|
(106)
|
(174)
|
|
Gain
on disposal of PP&E and impairment of PP&E
|
(60)
|
(54)
|
|
(200)
|
(51)
|
|
|
(11,637)
|
(8,792)
|
|
(33,358)
|
(24,166)
|
|
ae)
Financial results
|
|
|
Finance
income
|
|
|
|
|
|
|
Interest
on time deposits
|
—
|
12
|
|
—
|
19
|
|
Gains
on investments (Argentine companies notes and governments bonds)
|
18
|
131
|
|
224
|
200
|
|
Gains
on other short-term investments
|
15
|
42
|
|
50
|
124
|
|
Interest
on receivables
|
101
|
43
|
|
252
|
133
|
|
Tuves
share purchase option
|
18
|
—
|
|
7
|
—
|
|
Foreign
currency exchange gains
|
(6)
|
46
|
|
96
|
86
|
|
Total
finance income
|
146
|
274
|
|
629
|
562
|
|
Finance
expenses
|
|
|
|
|
|
|
Interest
on loans – Personal
|
(450)
|
(186)
|
|
(1,038)
|
(257)
|
|
Interest
on loans – Telecom Argentina
|
(32)
|
—
|
|
(116)
|
—
|
|
Interest
on loans – Núcleo
|
(17)
|
(6)
|
|
(46)
|
(18)
|
|
Interest
on salaries and social security payable, other taxes payables and accounts payable
|
(11)
|
(7)
|
|
(25)
|
(19)
|
|
Interest
on provisions
|
(49)
|
(24)
|
|
(166)
|
(113)
|
|
Pre
s
ent
value effect of salaries and social security payable and other taxes payables
|
(15)
|
(1)
|
|
(17)
|
(3)
|
|
Foreign
currency exchange losses
(*)
|
(177)
|
(109)
|
|
(836)
|
(290)
|
|
Pension
benefits financial cost
|
(9)
|
(7)
|
|
(28)
|
(21)
|
|
Other
|
(5)
|
(4)
|
|
(11)
|
(8)
|
|
Total
finance expenses
|
(765)
|
(344)
|
|
(2,283)
|
(729)
|
|
|
(619)
|
(70)
|
|
(1,654)
|
(167)
|
(*)
Includes 4 and (11) of net foreign currency exchange gains (losses) generated by the NDF in the nine-month periods ended September
30, 2016 and 2015, respectively. Includes (21) and 36 of net foreign currency exchange gains (losses) generated by the NDF in
the three-month periods ended September 30, 2016 and 2015, respectively.
NORTEL
INVERSORA S.A.
af)
Income taxes
Income
tax expense for the nine-month periods ended September 30, 2016 and 2015 consists of the following:
|
|
Profit
(loss)
|
|
|
The
Company
|
Telecom
Argentina
|
Telecom
USA
|
Personal
|
Núcleo
|
Total
|
|
Current
tax expense
|
(10)
|
(300)
|
(8)
|
(1,209)
|
(22)
|
(1,549)
|
|
Deferred
tax benefit (expense)
|
—
|
65
|
2
|
127
|
(1)
|
193
|
|
Income
tax expense as of September 30, 2016
|
(10)
|
(235)
|
(6)
|
(1,082)
|
(23)
|
(1,356)
|
|
|
|
|
|
|
|
|
|
Current
tax expense
|
(10)
|
(305)
|
(3)
|
(1,219)
|
(9)
|
(1,546)
|
|
Deferred
tax benefit
|
2
|
29
|
—
|
18
|
—
|
49
|
|
Income
tax expense as of September 30, 2015
|
(8)
|
(276)
|
(3)
|
(1,201)
|
(9)
|
(1,497)
|
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)
|
|
|
P
re-tax
income on a separate return basis
|
7,173
|
114
|
7,287
|
|
Non
taxable items – Income from investments
|
(3,445)
|
9
|
(3,436)
|
|
Non
taxable items – Other
|
35
|
46
|
81
|
|
Subtotal
|
3,763
|
169
|
3,932
|
|
Weighted
statutory income tax rate
|
35%
|
(*)
|
|
|
Income
tax expense at weighted statutory tax rate
|
(1,317)
|
(29)
|
(1,346)
|
|
Income
tax on dividends from foreign companies - Núcleo
|
(12)
|
—
|
(12)
|
|
Other
changes in tax assets and liabilities
|
2
|
—
|
2
|
|
Income
tax expense as of September 30, 2016
|
(1,327)
|
(29)
|
(1,356)
|
|
Pre-tax
income on a separate return basis
|
8,001
|
83
|
8,084
|
|
Non
taxable items – Income from investments
|
(3,812)
|
4
|
(3,808)
|
|
Non
taxable items – Other
|
25
|
(22)
|
3
|
|
Subtotal
|
4,214
|
65
|
4,279
|
|
Weighted
statutory income tax rate
|
35%
|
(*)
|
|
|
Income
tax expense at weighted statutory tax rate
|
(1,475)
|
(12)
|
(1,487)
|
|
Income
tax on dividends from foreign companies - Núcleo
|
(10)
|
—
|
(10)
|
|
Income
tax expense as of September 30, 2015
|
(1,485)
|
(12)
|
(1,497)
|
(*)
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 Company’s and Telecom Group’s cash management and whose balances fluctuate according to the Group’s needs
(as happened as of December 31, 2014). Bank overdrafts are disclosed in the statement of financial position as financial debts.
During 9M16 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.
|
|
September
30,
|
|
December
31,
|
|
|
2016
|
2015
|
|
2015
|
2014
|
|
Cash
and cash equivalents
|
973
|
705
|
|
937
|
1,004
|
|
Bank
overdrafts
|
—
|
—
|
|
—
|
(141)
|
|
Total
cash and cash equivalents
|
973
|
705
|
|
937
|
863
|
NORTEL
INVERSORA S.A.
Additional
information on the breakdown of the net cash flow provided by operating activities is given below:
|
|
Nine-month
periods
ended September 30,
|
|
|
2016
|
2015
|
|
Collections
|
|
|
|
Collections
from customers
|
40,195
|
30,554
|
|
Interests
from customers
|
252
|
133
|
|
Interests
from time deposits and other short-term investments
|
50
|
142
|
|
Mobile
operators collections
|
376
|
375
|
|
Subtotal
|
40,873
|
31,204
|
|
Payments
|
|
|
|
For
the acquisition of goods and services and others
|
(12,526)
|
(9,199)
|
|
For
the acquisition of inventories
|
(4,757)
|
(4,439)
|
|
Salaries
and social security payables and severance payments
|
(6,756)
|
(5,016)
|
|
CPP
payments
|
(270)
|
(308)
|
|
Income
taxes (includes tax returns and payments in advance)
|
(1,294)
|
(1,202)
|
|
Other
taxes and taxes and fees with the Regulatory Authority
|
(7,871)
|
(5,842)
|
|
Foreign
currency exchange differences related to the payments to suppliers
|
(1,071)
|
(310)
|
|
Inventory
suppliers
|
(269)
|
(125)
|
|
PP&E
suppliers
|
(1,189)
|
(57)
|
|
Other
suppliers
|
(107)
|
(17)
|
|
NDF
liquidation
|
494
|
(111)
|
|
Subtotal
|
(34,545)
|
(26,316)
|
|
Net
cash flow provided by operating activities
|
6,328
|
4,888
|
●
Changes
in assets/liabilities components:
|
Net
decrease (increase) in assets
|
|
|
|
Trade
receivables for services sales
|
(1,723)
|
(1,082)
|
|
Trade
receivables for equipment sales
|
(1,119)
|
—
|
|
Other
receivables
|
215
|
(278)
|
|
Inventories
|
(101)
|
(1,562)
|
|
|
(2,728)
|
(2,922)
|
|
Net
increase (decrease) in liabilities
|
|
|
|
Trade
payables
|
(707)
|
395
|
|
Deferred
revenues
|
(48)
|
33
|
|
Salaries
and social security payables
|
353
|
201
|
|
Other
taxes payables
|
(229)
|
(52)
|
|
Other
liabilities
|
40
|
27
|
|
Provisions
|
(92)
|
(112)
|
|
|
(683)
|
492
|
Income
tax paid consists of the following:
|
Tax
returns and payments in advance
|
(1,017)
|
(1,057)
|
|
Other
payments
|
(277)
|
(145)
|
|
|
(1,294)
|
(1,202)
|
|
|
a)
|
Main
non-cash operating transactions:
|
|
SAC
acquisitions offset with trade receivables
|
229
|
160
|
|
PP&E
disposal receivables offset with trade receivables
|
25
|
—
|
|
VAT
offset with income tax payments
|
54
|
50
|
|
|
b)
|
Most
significant investing activities:
|
PP&E
acquisitions include:
|
PP&E
additions (Note 2.i)
|
(7,296)
|
(4,687)
|
|
Plus:
|
|
|
|
Payments
of trade payables originated in prior periods acquisitions
|
(1,426)
|
(1,269)
|
|
Less:
|
|
|
|
Acquisition
of PP&E through incurrence of trade payables
|
1,826
|
2,740
|
|
Mobile
handsets lent to customers at no cost
(i)
|
42
|
24
|
|
Asset
retirement obligations
|
46
|
—
|
|
|
(6,808)
|
(3,192)
|
|
|
(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.
4G
Licenses acquisitions include:
|
|
Nine-month
periods
ended September 30,
|
|
|
2016
|
2015
|
|
Acquisition
of 4G Licenses (Notes 2.j)
|
—
|
(2,256)
|
|
|
—
|
(2,256)
|
|
Intangible
assets acquisitions include:
|
|
|
|
Intangible
assets additions (Note 2.j)
|
(1,296)
|
(958)
|
|
Plus:
|
|
|
|
Payments
of trade payables originated in prior periods acquisitions
|
(199)
|
(119)
|
|
SAC
acquisitions offset with trade receivables
|
(229)
|
(160)
|
|
Less:
|
|
|
|
Acquisition
of intangible assets through incurrence of trade payables
|
407
|
343
|
|
|
(1,317)
|
(894)
|
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:
|
Government
bonds acquisition
|
—
|
(1,051)
|
|
Argentine
companies notes collection
|
—
|
28
|
|
Government
bonds sale
(*)
|
1,051
|
—
|
|
Government
bonds collection
|
88
|
26
|
|
|
1,139
|
(997)
|
(*)
Correspond to the sale of BONAD 2016/2017/2018 bonds hold as of December 31, 2015, that generated a gain of 81 included in “Gain
on investments” line item in Finance Income.
|
|
c)
|
Financing
activities components:
|
The
following table presents the financing activities components of the consolidated statements of cash flows:
|
Bank
overdrafts – Personal
|
3,774
|
3,122
|
|
Bank
overdrafts – Telecom Argentina
|
16
|
—
|
|
Bank
overdrafts – Núcleo
|
343
|
—
|
|
Bank
loans – Personal
|
—
|
346
|
|
Bank
loans – Núcleo
|
345
|
—
|
|
Total
financial debt proceeds
|
4,478
|
3,468
|
|
Bank
overdrafts – Personal
|
(600)
|
—
|
|
Bank
overdrafts – Núcleo
|
(438)
|
—
|
|
Bank
loans – Núcleo
|
(193)
|
(25)
|
|
Total
payment of financial debt
|
(1,231)
|
(25)
|
|
Bank
overdrafts – Personal
|
(813)
|
(189)
|
|
Bank
overdrafts – Telecom Argentina
|
(116)
|
—
|
|
Interests
from Notes – Personal
|
(158)
|
—
|
|
Interests
and related costs on bank loans – Personal
|
(56)
|
(27)
|
|
Interests
on bank loans – Núcleo
|
(46)
|
(22)
|
|
Total
payment of interest and related costs
|
(1,189)
|
(238)
|
According
to Note 11.d), Personal has accepted funds from the International Finance Corporation (IFC) for an amount of US$ 400 million that
will allow to reschedule the deadlines and modify the cost of the Group’s financial debt.
Cash
dividends from Nortel
Fiscal
year 2016
The
Company’s General Ordinary and Extraordinary Shareholders’ Meeting held on April 29, 2016, provided, among other things,
to increase in $1,891 the “Voluntary reserve for future cash dividends payments”, by delegating into the Company’s
Board of Directors the authority to determine the timing and conditions of the reversal and allocation to dividends payment of
such reserve.
The
Company’s Board of Directors, at its meeting held on April 29, 2016, resolved to partially reverse the “Voluntary
reserve for future cash dividends payments” in the amount of $380 and distribute such amount in cash dividends to the “Class
B” Preferred Shares and to the Ordinary Shares in the amount of approximately $186 (equivalent to $126,5 pesos per share)
and $194 (equivalent to $36,4 pesos per share), respectively, which were available to the shareholders since May 17, 2016. The
amount paid includes: (i) income tax withholdings on dividends paid to shareholders in the amount of $19 and (ii) recovery of
tax on personal property – on behalf of shareholders withholdings in the amount of $10.
NORTEL
INVERSORA S.A.
The
Company’s Board of Directors, at its meeting held on August 9, 2016, resolved to partially reverse the “Voluntary
reserve for future cash dividends payments” in the amount of $172 and distribute such amount in cash dividends to the “Class
B” Preferred Shares and to the Ordinary Shares in the amount of approximately $84 (equivalent to $57.3 pesos per share)
and $88 (equivalent to $16.5 pesos per share) respectively, which were available to the shareholders since August 30, 2016.
As
of September 30, 2016, the “Voluntary reserve for future cash dividends payments” amounted to $8,339.
Fiscal
year 2015
The
Company’s General Ordinary and Extraordinary Shareholders’ Meeting held on April 29, 2015, provided, among other things,
to allocate $2,039 to the already existing “Voluntary reserve for future cash dividends payments” (equivalent to the
Retained Earnings as of December 31, 2014), by delegating into the Company’s Board of Directors the authority to determine
the timing and conditions of the reversal of such reserve. After the mentioned allocation, the “Voluntary reserve for future
cash dividends payments” amounted to $7,570.
The
Company’s Board of Directors, at its meeting held on May 18, 2015, resolved to partially reverse the “Voluntary reserve
for future cash dividends payments” in the amount of $570 and distribute such amount in cash dividends to the “Class
B” Preferred Shares and to the Ordinary Shares in the amount of approximately $279 (equivalent to $189,8 pesos per share)
and $291 (equivalent to $54,6 pesos per share), respectively, which were available to the shareholders since June 1, 2015. As
of September 30, 2015, such Reserve amounted to $7,000.The amount paid includes: (i) income tax withholdings on dividends paid
to shareholders in the amount of $28 and (ii) recovery of tax on personal property – on behalf of shareholders withholdings
in the amount of $9.
Cash
dividends from Telecom Argentina
Fiscal
year 2016
Telecom
Argentina’s Board of Directors’ Meeting held on April 29, 2016, resolved to allocate $2,000 of the “Reserve
for future cash dividends payments” to a cash dividend distribution in two installments: $700 that was available to shareholders
since May 13, 2016 and $1,300 that was available to shareholders since August 26, 2016. From the total amount paid by Telecom
Argentina, $888 corresponds to non-controlling shareholders.
Fiscal
year 2015
Telecom
Argentina’s Ordinary Shareholders’ Meeting held on April 29, 2015, approved the payment of cash dividends of $804
(equivalent to $0.83 pesos per outstanding share), which was made available to shareholders since May 11, 2015. From the total
amount paid by Telecom Argentina, $357 corresponds to non-controlling shareholders.
Cash
dividends from Núcleo
Fiscal
year 2015
Núcleo’s
Ordinary Shareholders’ Meeting held on March 26, 2015, approved the distribution of cash dividends for an amount equivalent
to $63 (that corresponds to 35,000 million of Guaraníes translated to argentine pesos at the exchange rate of the approval
day), with the following schedule of payments:
|
Month
of dividends
payment
|
Dividends
corresponding to
Personal
|
Dividends
corresponding to non-
controlling
shareholders
|
Total
|
|
May
2015
|
42
|
21
|
63
|
|
Total
(*)
|
42
|
21
|
63
|
(*)
As of the payment date, the amounts were 41 and 20, respectively.
Likewise,
Núcleo’s Board of Directors, at their meeting held on December 17, 2015, approved the distribution of cash dividends
for an amount of $80 (that corresponds to 35,000 million of Guaraníes translated to argentine pesos at the exchange rate
of the approval day). The corresponding tax withholdings were paid in January 2016 (of which $1 corresponded to ABC Telecomunicaciones,
the minority shareholder).
NORTEL
INVERSORA S.A.
|
|
d)
|
Additional
information required by IAS 7
|
In
January 2016, IAS 7 was amended through the incorporation of paragraphs 44A to 44E. This amendment included additional information
requirements that allow financial statements’ users to assess changes in liabilities generated by financing activities.
Although these disclosures are mandatory for annual periods beginning on or after January 1, 2017, the Telecom Group’s Management
has adopted the early application option set forth in IAS 7. Reconciliation between the opening and closing balances of liabilities
generated by financing activities is disclosed below.
|
|
Balances
as of
December
31, 2015
|
Transfers
|
Cash
Flows
|
Accrued
interests
|
Exchange
differences
and
currency translation adjustments
|
Balances
as of
September
31, 2016
|
|
Bank
overdrafts – Personal
|
3,062
|
—
|
3,174
|
—
|
—
|
6,236
|
|
Bank
overdrafts – Telecom Argentina
|
—
|
—
|
16
|
—
|
—
|
16
|
|
Bank
overdrafts – Núcleo
|
84
|
—
|
(95)
|
—
|
11
|
—
|
|
Bank
loans – principal (Personal)
|
—
|
509
|
—
|
—
|
89
|
598
|
|
Bank
loans – principal (Núcleo)
|
193
|
372
|
(193)
|
—
|
62
|
434
|
|
Notes
– principal (Personal)
|
—
|
566
|
—
|
—
|
—
|
566
|
|
Accrued
interests
|
112
|
—
|
(1,189)
|
1,200
|
8
|
131
|
|
Total
current financial debt (Note 2.m)
|
3,451
|
1,447
|
1,713
|
1,200
|
170
|
7,981
|
|
Notes
– principal (Personal)
|
713
|
(566)
|
—
|
—
|
—
|
147
|
|
Bank
loans – principal (Personal)
|
509
|
(509)
|
—
|
—
|
—
|
—
|
|
Bank
loans – principal (Núcleo)
|
227
|
(372)
|
345
|
—
|
45
|
245
|
|
Total
non-current financial debt (Note 2.t)
|
1,449
|
(1,447)
|
345
|
—
|
45
|
392
|
|
|
|
|
|
|
|
|
|
Total
financial debt
|
4,900
|
—
|
(a)
2,058
|
1,200
|
215
|
8,373
|
|
|
(a)
|
Correspond
to $4,478 of debt proceeds, $1,231 of principal payments and $1,189 of interest payments.
|
NOTE
4 – SEGMENT INFORMATION
As
of September 30, 2015 and 2016, the Telecom Group carried out its activities through six companies which were consolidated by
the end of the nine-month periods ended September 30, 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 nine-month periods ended September 30, 2016 and 2015 was as follows:
NORTEL
INVERSORA S.A.
|
For the nine-month period ended September 30, 2016
|
|
|
Fixed
|
Mobile
Services
|
|
Elimi-
|
|
|
|
Services
|
Personal
|
Núcleo
(*)
|
Subtotal
|
Nortel
|
nations
|
Total
|
|
Total
revenues and other income (1)
|
12,337
|
26,067
|
1,987
|
28,054
|
—
|
(1,539)
|
38,852
|
|
Employee
benefit expenses and severance payments
|
(5,335)
|
(1,727)
|
(151)
|
(1,878)
|
(5)
|
—
|
(7,218)
|
|
Interconnection
costs and other telecommunication charges
|
(712)
|
(2,033)
|
(168)
|
(2,201)
|
—
|
959
|
(1,954)
|
|
Fees
for services, maintenance, materials and supplies
|
(1,657)
|
(2,141)
|
(159)
|
(2,300)
|
(12)
|
377
|
(3,592)
|
|
Taxes
and fees with the Regulatory Authority
|
(824)
|
(2,914)
|
(61)
|
(2,975)
|
(10)
|
—
|
(3,809)
|
|
Commissions
|
(241)
|
(2,375)
|
(217)
|
(2,592)
|
—
|
38
|
(2,795)
|
|
Cost
of equipments and handsets
|
(126)
|
(4,252)
|
(253)
|
(4,505)
|
—
|
—
|
(4,631)
|
|
Advertising
|
(61)
|
(406)
|
(81)
|
(487)
|
—
|
—
|
(548)
|
|
Cost
of VAS
|
(41)
|
(1,009)
|
(92)
|
(1,101)
|
—
|
—
|
(1,142)
|
|
Provisions
|
(39)
|
(67)
|
—
|
(67)
|
—
|
—
|
(106)
|
|
Bad
debt expenses
|
(98)
|
(662)
|
(84)
|
(746)
|
—
|
—
|
(844)
|
|
Other
operating expenses
|
(1,008)
|
(1,076)
|
(113)
|
(1,189)
|
(2)
|
165
|
(2,034)
|
|
Operating
income before D&A
|
2,195
|
7,405
|
608
|
8,013
|
(29)
|
—
|
10,179
|
|
Depreciation
of PP&E
|
(1,220)
|
(1,442)
|
(425)
|
(1,867)
|
—
|
—
|
(3,087)
|
|
Amortization
of intangible assets
|
(159)
|
(1,160)
|
(79)
|
(1,239)
|
—
|
—
|
(1,398)
|
|
Gain
on disposal and impairment of PP&E
|
13
|
(214)
|
1
|
(213)
|
—
|
—
|
(200)
|
|
Operating
income
|
829
|
4,589
|
105
|
4,694
|
(29)
|
—
|
5,494
|
|
Financial
results, net
|
(142)
|
(1,531)
|
(9)
|
(1,540)
|
28
|
—
|
(1,654)
|
|
Income
before income tax expense
|
687
|
3,058
|
96
|
3,154
|
(1)
|
—
|
3,840
|
|
Income
tax expense
|
(241)
|
(1,082)
|
(23)
|
(1,105)
|
(10)
|
—
|
(1,356)
|
|
Net
income
|
446
|
1,976
|
73
|
2,049
|
(11)
|
—
|
2,484
|
(*)
Includes non-material operations of Personal Envíos (Revenues 16, Operating income before D&A (7), Operating income
(9) and Net loss (9)).
|
Net
income attributable to Nortel (Controlling Company)
|
248
|
1,099
|
27
|
1,126
|
(11)
|
—
|
1,363
|
|
Net
income attributable to non-controlling interest
|
198
|
877
|
46
|
923
|
—
|
—
|
1,121
|
|
|
446
|
1,976
|
73
|
2,049
|
(11)
|
—
|
2,484
|
(1)
|
Service
revenues
|
10,812
|
20,297
|
1,765
|
22,062
|
—
|
—
|
32,874
|
|
Equipment
revenues
|
78
|
5,649
|
217
|
5,866
|
—
|
—
|
5,944
|
|
Other
income
|
25
|
9
|
—
|
9
|
—
|
—
|
34
|
|
Subtotal
third party revenues
|
10,915
|
25,955
|
1,982
|
27,937
|
—
|
—
|
38,852
|
|
Intersegment
revenues
|
1,422
|
112
|
5
|
117
|
—
|
(1,539)
|
—
|
|
Total
revenues and other income
|
12,337
|
26,067
|
1,987
|
28,054
|
—
|
(1,539)
|
38,852
|
|
|
☐
|
Statement
of financial position information
|
|
PP&E
|
10,860
|
8,951
|
2,182
|
11,133
|
—
|
—
|
21,993
|
|
Intangible
assets, net
|
426
|
7,066
|
85
|
7,151
|
—
|
(1)
|
7,576
|
|
Capital
expenditures on PP&E (a)
|
2,518
|
3,469
|
416
|
3,885
|
—
|
—
|
6,403
|
|
Capital
expenditures on other intangible assets (b)
|
142
|
1,095
|
59
|
1,154
|
—
|
—
|
1,296
|
|
Total
capital expenditures (a)+(b)
|
2,660
|
4,564
|
475
|
5,039
|
—
|
|
7,699
|
|
Total
additions on PP&E and intangible assets
|
3,269
|
4,845
|
478
|
5,323
|
—
|
|
8,592
|
|
Net
financial asset (debt)
|
363
|
(6,928)
|
(592)
|
(7,520)
|
604
|
—
|
(6,553)
|
|
|
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
|
36,670
|
36,321
|
28,012
|
|
Abroad
|
2,182
|
2,531
|
2,585
|
|
Total
|
38,852
|
38,852
|
30,597
|
NORTEL
INVERSORA S.A.
|
For the nine-month period ended September 30, 2015
|
|
|
Fixed
|
Mobile
Services
|
|
Elimi-
|
|
|
|
Services
|
Personal
|
Núcleo
(*)
|
Subtotal
|
Nortel
|
nations
|
Total
|
|
Total
revenues and other income (1)
|
9,162
|
19,743
|
1,244
|
20,987
|
—
|
(1,544)
|
28,605
|
|
Employee
benefit expenses and severance payments
|
(3,853)
|
(1,344)
|
(95)
|
(1,439)
|
(4)
|
—
|
(5,296)
|
|
Interconnection
costs and other telecommunication charges
|
(508)
|
(2,025)
|
(113)
|
(2,138)
|
—
|
1,087
|
(1,559)
|
|
Fees
for services, maintenance, materials and supplies
|
(1,290)
|
(1,776)
|
(109)
|
(1,885)
|
(8)
|
315
|
(2,868)
|
|
Taxes
and fees with the Regulatory Authority
|
(601)
|
(2,200)
|
(40)
|
(2,240)
|
(6)
|
—
|
(2,847)
|
|
Commissions
|
(195)
|
(1,895)
|
(142)
|
(2,037)
|
—
|
37
|
(2,195)
|
|
Cost
of equipments and handsets
|
(64)
|
(2,602)
|
(125)
|
(2,727)
|
—
|
—
|
(2,791)
|
|
Advertising
|
(76)
|
(457)
|
(58)
|
(515)
|
—
|
—
|
(591)
|
|
Cost
of VAS
|
(26)
|
(823)
|
(61)
|
(884)
|
—
|
—
|
(910)
|
|
Provisions
|
(85)
|
(89)
|
—
|
(89)
|
—
|
—
|
(174)
|
|
Bad
debt expenses
|
(57)
|
(339)
|
(14)
|
(353)
|
—
|
—
|
(410)
|
|
Other
operating expenses
|
(668)
|
(686)
|
(69)
|
(755)
|
(2)
|
105
|
(1,320)
|
|
Operating
income before D&A
|
1,739
|
5,507
|
418
|
5,925
|
(20)
|
—
|
7,644
|
|
Depreciation
of PP&E
|
(965)
|
(970)
|
(230)
|
(1,200)
|
—
|
—
|
(2,165)
|
|
Amortization
of intangible assets
|
(134)
|
(797)
|
(58)
|
(855)
|
—
|
—
|
(989)
|
|
Gain
on disposal and impairment of PP&E
|
25
|
(76)
|
—
|
(76)
|
—
|
—
|
(51)
|
|
Operating
income
|
665
|
3,664
|
130
|
3,794
|
(20)
|
—
|
4,439
|
|
Financial
results, net
|
132
|
(267)
|
(57)
|
(324)
|
25
|
—
|
(167)
|
|
Income
before income tax expense
|
797
|
3,397
|
73
|
3,470
|
5
|
—
|
4,272
|
|
Income
tax expense
|
(279)
|
(1,201)
|
(9)
|
(1,210)
|
(8)
|
—
|
(1,497)
|
|
Net
income
|
518
|
2,196
|
64
|
2,260
|
(3)
|
—
|
2,775
|
(*)
Includes non-material operations of Personal Envíos, which started operating on January 1
st
, 2015 (Revenues
6, Operating income before D&A (2), Operating income (3) and Net loss (3)).
|
Net
income attributable to Nortel (Controlling Company)
|
288
|
1,221
|
24
|
1,245
|
(3)
|
—
|
1,530
|
|
Net
income attributable to non-controlling interest
|
230
|
975
|
40
|
1,015
|
—
|
—
|
1,245
|
|
|
518
|
2,196
|
64
|
2,260
|
(3)
|
—
|
2,775
|
(1)
|
Service
revenues
|
7,676
|
16,163
|
1,129
|
17,292
|
—
|
—
|
24,968
|
|
Equipment
revenues
|
48
|
3,468
|
106
|
3,574
|
—
|
—
|
3,622
|
|
Other
income
|
12
|
3
|
—
|
3
|
—
|
—
|
15
|
|
Subtotal
third party revenues
|
7,736
|
19,634
|
1,235
|
20,869
|
—
|
—
|
28,605
|
|
Intersegment
revenues
|
1,426
|
109
|
9
|
118
|
—
|
(1,544)
|
—
|
|
Total
revenues and other income
|
9,162
|
19,743
|
1,244
|
20,987
|
—
|
(1,544)
|
28,605
|
|
|
☐
|
Statement
of financial position information
|
|
PP&E
|
8,544
|
6,107
|
1,244
|
7,351
|
—
|
—
|
15,895
|
|
Intangible
assets, net
|
399
|
7,083
|
69
|
7,152
|
—
|
(1)
|
7,550
|
|
Capital
expenditures on PP&E (a)
|
1,655
|
1,742
|
180
|
1,922
|
—
|
—
|
3,577
|
|
Capital
expenditures on intangible assets – 4G License (b)
|
—
|
2,256
|
—
|
2,256
|
—
|
—
|
2,256
|
|
Capital
expenditures on other intangible assets (b)
|
138
|
747
|
73
|
820
|
—
|
—
|
958
|
|
Total
capital expenditures (a)+(b)
|
1,793
|
4,745
|
253
|
4,998
|
—
|
—
|
6,791
|
|
Total
additions on PP&E and intangible assets
|
2,096
|
5,503
|
302
|
5,805
|
—
|
—
|
7,901
|
|
Net
financial asset (debt)
|
464
|
(1,853)
|
(197)
|
(2,050)
|
61
|
—
|
(1,525)
|
|
|
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
|
27,261
|
27,041
|
22,916
|
|
Abroad
|
1,344
|
1,564
|
1,444
|
|
Total
|
28,605
|
28,605
|
24,360
|
NORTEL
INVERSORA S.A.
NOTE
5 – BALANCES AND TRANSACTIONS WITH COMPANIES UNDER SECT. 33 OF LAW No. 19,550 AND RELATED PARTIES
All
shares of common stock of Nortel belong to Sofora. As of September 30, 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 September
30, 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 which are related
(in terms of IAS 24) to the 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:
|
|
c)
|
Balances
with related parties
|
|
CURRENT
ASSETS
|
Type
of related party
|
September
30,
|
December
31,
|
|
|
|
2016
|
2015
|
|
Cash
and cash equivalents
|
|
|
|
|
Banco
Atlas S.A. (a)
|
Other
related party
|
3
|
2
|
|
|
|
3
|
2
|
|
Trade
receivables
|
|
|
|
|
Editorial
Azeta S.A. (a)
|
Other
related party
|
1
|
—
|
|
TIM
Participações 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
|
2
|
1
|
|
|
|
3
|
18
|
|
Other
receivables
|
|
|
|
|
Latin
American Nautilus Ltd. (b)
|
Other
related party
|
—
|
36
|
|
Caja
de Seguros S.A. (c)
|
Other
related party
|
—
|
3
|
|
|
|
—
|
39
|
|
|
(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.
|
CURRENT
LIABILITIES
|
Type
of related party
|
September
30,
|
December
31,
|
|
Trade
payables
|
|
2016
|
2015
|
|
Grupo
Italtel (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
Participações 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
|
12
|
12
|
|
Haras
El Capricho S.A. (f)
|
Other
related party
|
—
|
1
|
|
Telteco
S.A. (g)
|
Other
related party
|
—
|
5
|
|
|
|
12
|
349
|
|
Financial
debt – Notes (Current and Non-Current)
|
|
|
|
|
La
Estrella Sociedad Anónima de Seguros de Retiro S.A. (d)
|
Other
related party
|
100
|
—
|
|
Experta
ART S.A. (d) (e)
|
Other
related party
|
40
|
—
|
|
Experiencia
ART S.A. (f)
|
Other
related party
|
60
|
—
|
|
|
|
200
|
—
|
|
|
d)
|
Transactions
with related parties
|
|
|
Transaction
description
|
Type
of related party
|
Nine-month
periods ended
September
30,
|
|
|
|
|
2016
|
2015
|
|
Revenues
and Other income
|
|
|
Profit
(loss)
|
|
Banco
Atlas S.A. (a)
|
Voice
– Retail
|
Other
related party
|
—
|
1
|
|
Editorial
Azeta S.A. (a)
|
Voice
– Retail
|
Other
related party
|
2
|
2
|
|
Telecom
Italia Sparkle S.p.A. (b)
|
Voice
– Wholesale
|
Other
related party
|
4
|
16
|
|
Latin
American Nautilus Argentina S.A. (b)
|
Voice
– Wholesale
|
Other
related party
|
2
|
8
|
|
TIM
Participações S.A. (b)
|
Voice
– Wholesale
|
Other
related party
|
2
|
5
|
|
Telecom
Italia S.p.A.
|
Voice
– Wholesale
|
Indirect
parent company until March 8, 2016
|
2
|
3
|
|
Caja
de Seguros S.A. (c)
|
Voice
– Retail
|
Other
related party
|
58
|
183
|
|
Caja
de Seguros S.A. (c)
|
Equipment
|
Other
related party
|
43
|
197
|
|
Experta
ART S.A. (d) (e)
|
Voice
– Retail
|
Other
related party
|
3
|
—
|
|
Total
revenues and other income
|
116
|
415
|
|
Operating
costs
|
|
|
|
|
Editorial
Azeta S.A. (a)
|
Advertising
|
Other
related party
|
(3)
|
(2)
|
|
Latin
American Nautilus Ltd. (b)
|
International
outbound calls and data
|
Other
related party
|
(19)
|
(58)
|
|
Grupo
Italtel (b)
|
Maintenance,
materials and supplies
|
Other
related party
|
(10)
|
(58)
|
|
Telecom
Italia Sparkle S.p.A. (b)
|
International
outbound calls and other
|
Other
related party
|
(7)
|
(43)
|
|
TIM
Participações S.A. (b)
|
Roaming
|
Other
related party
|
(17)
|
(10)
|
|
Telecom
Italia S.p.A.
|
Fees
for services and roaming
|
Indirect
parent company until March 8, 2016
|
(3)
|
(13)
|
|
Latin
American Nautilus Argentina S.A. (b)
|
International
outbound calls
|
Other
related party
|
(2)
|
(5)
|
|
Latin
American Nautilus USA Inc. (b)
|
International
outbound calls
|
Other
related party
|
(1)
|
(4)
|
|
Universal
Music Argentina S.A. (b)
|
VAS
costs
|
Other
related party
|
(4)
|
—
|
|
Caja
de Seguros S.A. (c)
|
Insurance
|
Other
related party
|
(9)
|
(22)
|
|
Experta
ART S.A. (d) (e)
|
Salaries
and social security
|
Other
related party
|
(94)
|
(71)
|
|
La
Estrella Sociedad Anónima de Seguros de Retiro (d)
|
Insurance
|
Other
related party
|
—
|
(5)
|
|
Telteco
S.A. (g)
|
Fees
for services
|
Other
related party
|
(13)
|
—
|
|
Total
operating costs
|
(182)
|
(291)
|
|
Finance
costs
|
|
|
|
|
Experiencia
ART S.A. (f)
|
Notes interests
|
Other
related party
|
(12)
|
—
|
|
Experta
ART S.A. (d) (e)
|
Notes interests
|
Other
related party
|
(8)
|
—
|
|
La
Estrella Sociedad Anónima de Seguros de Retiro (d)
|
Notes interests
|
Other
related party
|
(19)
|
—
|
|
Total
finance costs
|
(39)
|
—
|
|
Purchases
of PP&E
|
|
|
|
|
Grupo
Italtel (b)
|
|
Other
related party
|
18
|
38
|
|
Telteco
S.A. (g)
|
|
Other
related party
|
8
|
—
|
|
Total
purchases of PP&E
|
26
|
38
|
|
|
|
|
|
|
|
|
|
(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.
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 Telecom Argentina’s 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 Telecom Group’s Key Managers, including social security contribution, amounted to $141 and $63 for the nine-month
periods ended September 30, 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
September 30,
|
|
Nine-month
periods ended September 30,
|
|
|
2016
|
2015
|
|
2016
|
2015
|
|
Salaries
(*)
|
13
|
7
|
|
36
|
26
|
|
Variable
compensation (*)
|
11
|
6
|
|
24
|
15
|
|
Social
security contributions
|
6
|
4
|
|
18
|
12
|
|
Hiring
bonuses
|
—
|
—
|
|
5
|
—
|
|
Termination
benefits
|
24
|
—
|
|
58
|
10
|
|
|
54
|
17
|
|
141
|
63
|
(*)
Gross compensation. Social security contributions and income tax retentions that are deducted from the gross compensation are
in charge of the employee.
As
of September 30, 2016, $30 remained unpaid.
As
of September 30, 2016 and 2015, Nortel has recorded a provision of $8 and $5, respectively, for the fees of its Board of Directors’
members. The members and alternate members of the Board of Directors do not hold executive positions in Nortel.
NOTE
6 – COMMITMENTS AND CONTINGENCIES OF THE TELECOM GROUP
The
Telecom Group has entered into various purchase orders amounting in the aggregate to approximately $7,336 as of September 30,
2016 (of which $3,160 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, Telecom Argentina’s Management, 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 September 30, 2016, the Telecom
Group has recorded provisions in an aggregate amount of $1,668 ($84 for regulatory contingencies deducted from assets and $1,584
included under provisions) to cover potential losses under these claims 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 September 30, 2016, these restricted
funds totaled $58 (included under “Other receivables” item line in the consolidated statement of financial position).
NORTEL
INVERSORA S.A.
Provisions
consist of the following:
|
|
Balances
|
Additions
|
|
Decreases
|
Balances
|
|
|
as
of December 31, 2015
|
Capital
(i)
|
Interest
(ii)
|
Reclassi-
fications
|
Classified
to liability
|
Payments
|
as
of
September 30, 2016
|
|
Current
|
|
|
|
|
|
|
|
|
Provision
for civil and commercial proceedings
|
112
|
—
|
—
|
10
|
(14)
|
(16)
|
92
|
|
Provision
for labor claims
|
51
|
—
|
—
|
78
|
—
|
(48)
|
81
|
|
Provision
for regulatory, tax and other matters claims
|
44
|
—
|
—
|
59
|
—
|
(26)
|
77
|
|
Total
current provisions
|
207
|
—
|
—
|
147
|
(14)
|
(90)
|
250
|
|
Non-current
|
|
|
|
|
|
|
|
|
Provision
for civil and commercial proceedings
|
240
|
3
|
34
|
(10)
|
—
|
—
|
267
|
|
Provision
for labor claims
|
329
|
75
|
60
|
(78)
|
—
|
—
|
386
|
|
Provision
for regulatory, tax and other matters claims
|
407
|
28
|
27
|
(59)
|
—
|
—
|
403
|
|
Asset
retirement obligations
|
189
|
46
|
45
|
—
|
—
|
(2)
|
278
|
|
Total
non-current provisions
|
1,165
|
152
|
166
|
(147)
|
—
|
(2)
|
1,334
|
|
|
|
|
|
|
|
|
|
|
Total
provisions
|
1,372
|
(i) 152
|
166
|
—
|
(14)
|
(92)
|
1,584
|
|
|
Balances
|
Additions
|
|
Decreases
|
Balances
|
|
|
as
of December 31, 2014
|
Capital
(iii)
|
Interest
(ii)
|
Reclassi-
fications
|
Classified
to liability
|
Payments
|
as
of
September 30, 2015
|
|
Current
|
|
|
|
|
|
|
|
|
Provision
for civil and commercial proceedings
|
71
|
34
|
19
|
53
|
(25)
|
(49)
|
103
|
|
Provision
for labor claims
|
51
|
—
|
—
|
42
|
—
|
(50)
|
43
|
|
Provision
for regulatory, tax and other matters claims
|
77
|
—
|
—
|
(12)
|
—
|
(13)
|
52
|
|
Total
current provisions
|
199
|
34
|
19
|
83
|
(25)
|
(112)
|
198
|
|
Non-current
|
|
|
|
|
|
|
|
|
Provision
for civil and commercial proceedings
|
228
|
33
|
26
|
(53)
|
—
|
—
|
234
|
|
Provision
for labor claims
|
288
|
73
|
51
|
(42)
|
—
|
—
|
370
|
|
Provision
for regulatory, tax and other matters claims
|
441
|
34
|
8
|
(12)
|
—
|
—
|
471
|
|
Asset
retirement obligations
|
123
|
—
|
9
|
—
|
—
|
—
|
132
|
|
Total
non-current provisions
|
1,080
|
140
|
94
|
(107)
|
—
|
—
|
1,207
|
|
|
|
|
|
|
|
|
|
|
Total
provisions
|
1,279
|
174
|
113
|
(iv) (24)
|
(25)
|
(112)
|
1,405
|
|
|
(i)
|
106
included in Provisions and 46 included in CAPEX.
|
|
|
(ii)
|
Included
in Finance costs, in the line Interest on provisions.
|
|
|
(iii)
|
Included
in Provisions.
|
|
|
(iv)
|
Reclassified
to Other receivables.
|
NOTE
7 – EQUITY
Equity
includes:
|
|
September
30,
|
December
31,
|
|
|
2016
|
2015
|
|
Equity
attributable to Nortel (Controlling Company)
|
10,513
|
9,605
|
|
Equity
attributable to non-controlling interest
|
8,458
|
8,048
|
|
Total
equity (*)
|
18,971
|
17,653
|
(*)
Additional information is given in the consolidated statements of changes in equity.
Class
“B” Preferred Shares are listed on the Mercado de Valores de Buenos Aires S.A. (Buenos Aires Securities Market). In
addition, Morgan Guaranty Trust of New York, as depositary under the Deposit Agreement dated May 27, 1997 has issued ADSs (American
Depositary Shares) representing rights over Class “B” Preferred Shares pursuant to the terms of the above mentioned
Deposit Agreement.
The
Class “B” Preferred Shares and the ADSs have been registered with the SEC and, as from June 16, 1997, the ADSs are
listed on the NYSE. The ADSs are also listed on the Luxemburg 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 September 30, 2016, these shares represent 78.38% of Nortel capital
stock.
NORTEL
INVERSORA S.A.
(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:
|
|
●
|
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.
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, 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, Section 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).
NORTEL
INVERSORA S.A.
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 September 30, 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 September 30, 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
|
|
Total
9M15
|
28,590
|
7,644
|
4,439
|
(167)
|
2,775
|
1,530
|
|
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
|
|
June
30,
|
12,951
|
3,351
|
1,714
|
(485)
|
794
|
436
|
|
September
30,
|
13,412
|
3,440
|
1,789
|
(619)
|
756
|
412
|
|
Total
9M16
|
38,818
|
10,179
|
5,494
|
(1,654)
|
2,484
|
1,362
|
NOTE
10 – RECENT DEVELOPMENTS CORRESPONDING TO THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 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).
NORTEL
INVERSORA S.A.
On
October 16, 2015, AFTIC’s Resolution No. 491/2015 was published in the Official Gazette, 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 July 22, 2016 Fintech informed Telecom
Argentina the modifications to certain terms of the OPA announced previously by Fintech, including the offering price. The offered
price has been amended from $46 argentine pesos per share to US$ 3.925 per share (from which US$ 0.050 (five cents) should be
deducted per share as cash dividends paid on May 13, 2016, together with any other cash dividend to be paid by Telecom Argentina
from the date of the OPA’s announcement to the date of the OPA´s payment.
On
September 6, 2016, the CNV’s Board of Directors approved the formal terms of the OPA. Subsequently, on September 14, 15
and 16 of 2016, Fintech published in “
El Cronista Comercial
” newspaper the notice provided on the CNV Rules
(modified by complementary notices published in the same newspaper on October 5, 6 and 7-the first-, and on October 26, 27 and
28- the second-) setting the opening and closing dates of the OPA and the amendments to the “OPA Notice” published
on February 24, 2016. The end of the OPA and its additional deadline took place on November 4, 2016 for Argentina.
On
November 7, 2016, Fintech informed to the Company that, having ended the OPA’s offers reception period in Argentina, a total
of 12,337,723 Class “B” shares acceptances were received, representing 1.253% of Telecom Argentina’s total capital.
Simultaneously,
Fintech had launched an OPA in the United States of America, which offers reception period is expected to expire on November 23,
2016. This OPA does not affect in any way the OPA launched by Fintech in Argentina.
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.
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”.
NORTEL
INVERSORA S.A.
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’s and Personal’s filings to the Regulatory Authority due to price
changes in accordance with the LAD
|
|
|
●
|
Change
of price in fixed services
|
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 issuance of these consolidated financial statements, Telecom Argentina has communicated the new rate to its affected
customers.
|
|
●
|
Change
of CPP price in mobile services
|
On
June 14, 2016, Personal informed ENACOM that, as from August 15, 2016, the TLRD price, in CPP mode for calls from fixed origin
to mobile destination, without distinguishing time band, will be $0.90 argentine pesos plus VAT per minute, with a discount during
the first 120 days, during which the price will be $0.66 argentine pesos plus VAT per minute.
Personal
–through fixed operators– informed the changes of the mentioned prices to its affected subscribers.
On
August 18, 2016, ENACOM ordered Personal to refrain from modifying the amounts established by SC Resolution No. 48/03. Personal
submitted its response on August 26, 2016, maintaining the right to increase the price informed. Personal’s Management and
its legal counsel consider that they have strong legal and factual arguments to maintain the price increase. As of the date of
issuance of these consolidated financial statements, ENACOM has not rejected the disclaimer presented by Personal.
|
|
c)
|
Commission
for the reform, update and unification of the LAD and the Law of Audiovisual Communication
Services
|
Section
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 Ministry of Communications through Resolution No. 9/16 provided 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.
On
April 8, 2016, the Congress voted in favor of the validity of the DNU No. 267/15.
Through
Resolution No. 1,098-E/16 published on October 31, 2016, the Ministry of Communications extended for 180 calendar days the term
for the preparation of the Reform, Update and Unification project for Laws No. 26,522 and 27,078.
|
|
d)
|
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 SC Resolution 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 economic 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.
NORTEL
INVERSORA S.A.
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.
On
September 1, 2016, Personal filed a presentation before the Ministry of Communications explaining the reasons for finding essential
the suspension of the term for submission of the OR provided in Section 2 Resolution No. 38/16 of the Ministry of Communications,
until the 700MHz frequencies that compose Lot 8 (awarded and paid by Personal) were in full conditions of use and the spectrum
of Lot 1 of the Frequency Public Auction developed by SC Resolution No. 38/14 was allocated and “on-air”. Through
the mentioned presentation it was also requested: a) the removal of Section 10 of Annex I of the above-mentioned rule (which does
not allow agreements with VMO on an exclusive basis); b) that ENACOM attaches interference measurements carried out in the 700MHz
Band awarded to Personal; and c) that ENACOM informs whether it has definitively resolved all the claims made by the users of
such band. As of the date of issuance of these consolidated financial statements, the resolution of the mentioned presentation
is pending.
ENACOM
Resolution No. 2,642/16 approved the new SU Regulation, which was published on May 31, 2016.
The
new Regulation still requires a contribution of 1% of the aggregate accrued income from the provision of ICT services, net of
applicable taxes and duties, including the possibility of granting exemptions, in which case those persons obliged to pay shall
comply with the obligations set forth by the Regulatory Authority.
As
of the date hereof, issuance by the Regulatory Authority of the regulations relating to the information regime to be followed
in order to show compliance with the SU obligations is still pending. Telecom Argentina and Personal have continued complying
with the submittal of their monthly statements to the ENACOM, with all the formalities in effect before issuance of Resolution
No. 2,642/16.
As
of the date of issuance of these financial statements, Telecom Argentina and Personal’s Managements are analyzing the legal
and constitutional impact of Resolution No. 2,642/16.
Through
ENACOM Resolution 6,981 -E/16 issued on October 19, 2016, the Regime Information for FFSU Deposit Investment Contributions and
the FFSU Investment Contributions settlement forms and interest reports were approved and will be in force since January 1, 2017.
Through
ENACOM Resolution 7,243 -E/16 issued on October 24, 2016, the licensees of ICT services were summoned, for the term of 30 calendar
days, to present the projects within the Connectivity Program approved by ENACOM Resolution No. 3,597/16 aimed to promote the
universalization of Broadband Internet service in areas without coverage and/or the strengthening of quality service in areas
with unsatisfied needs.
|
|
f)
|
Decree
No. 798/16: Federal Plan for the Development of Competitiveness and Quality Conditions
of the Mobile Communications Services
|
Decree
No. 798 published in the Official Gazette on June 22, 2016 – issued within the scope of the Ministry of Communications–
approved the Federal Plan for the development of competitiveness and quality conditions of the SCM, which strategic axis is to
favor greater market efficiency, with quality services, at fair and reasonable prices.
NORTEL
INVERSORA S.A.
The
above referred plan provides that within 90 days the Ministry of Communications shall, i) begin to adequate the set of rules approved
by SC Resolution No. 157/97 (CPP rules) to the LAD provisions; ii) update the General Clients Regulation of SCM following up on
the process initiated by SC Resolution No. 12/2013, including the introduction of mechanisms that allow clients to access information
about the service quality and obtain discounts and/or compensations for their services in case of breach of the required quality
levels; iii) initiate the process of adequating the Regulation about Administration, Management and Control of the Radioelectric
Spectrum to the LAD provisions, for the purpose of increasing competition in all services; iv) update the Federal Awarding Table
of Radioelectric Spectrum Bands, so as to increase the availability of frequencies for the provision of mobile communication services,
for which purpose the Ministry of Communications shall initiate the procedures set forth in Section 30 of the LAD; v) incorporate
to the General Regulation of the Universal Service approved by ENACOM Resolution No. 2,642/16 a priority to consider eligible
for programs with SU funding projects to be developed in Municipalities that have adopted the regulation proposed by the Code
of Good Practices for the Deployment of Mobile Communications Network prepared by the Argentine Federation of Municipalities and
Operators of Mobile Communications, and sponsored by the former Secretary of Communications of the former Ministry of Federal
Planning, Public Investment and Services, of August 20, 2009, or contemplate regulations of similar characteristics that do not
disrupt by fact or by law, the deployment of said network; vi) design a Federal Contingency Plan for catastrophic events; vii)
update the Federal Interconnection Regulations, the Regulation of Licenses for Telecommunication Services and the Rules of Number
Portability approved by SC Resolution No. 98/10.
This
Decree also provides that the Ministry of Communications, through the ENACOM, shall within 60 days prepare measurement protocols
to allow exteriorization of the quality perception of SCM users, taking into account UIT parameters, and review and update quality
rules for the ICT service networks in applicable areas.
In
addition, the ENACOM shall perform measurements of non ionising radiations in order to control that they are within levels not
harmful to human health, and the Agency of State-owned Assets Management (“AABE”) shall, as the Entity governing the
public policy on state-owned real estate, perform procedures and administrative acts, and enter into applicable contracts, to
grant the use –against payment– of terraces, roofs, towers, sites and/or any installation, plant or sector of state
owned assets that may be suitable for the installation of structures that may carry antennas, equipment and other installations
relating to the telecommunication services, information and communications technology, and/or audiovisual communication. The AABE
shall facilitate the list of state owned assets with a potential capability for such installations, to the licensees of such services
and to independent companies of passive infrastructure sharing.
Among
other aspects, the Decree provides that, as a way to encourage the fast deployment of networks and infrastructure sharing, the
use of state-owned real estate on which radio bases are installed within three months of the Decree’s date of publication
in the City of Buenos Aires, and within six months in the rest of the country, shall be free during the first year. In those same
cases, the lease shall be free during the first three years when the infrastructure is shared between two Mobile Services Licensees,
and during the first four years, when it is shared between more than two Licensees. The same benefit shall be granted to independent
companies of passive infrastructure sharing when the above referred conditions are met.
As
of the date of issuance of these financial statements, issuance of the rules regulating the above mentioned provisions is still
pending.
|
|
g)
|
Disengagement
of Spectrum
|
Pursuant
to SC Resolution No. 25/15 of June 11, 2015, Personal acquired the Frequency Bands SCMA 713-723 Mhz and 768-778 Mhz, which made
up Lot 8 and were pending of award by the SC.
On
June 25, 2015 Personal paid the offered amounts corresponding to the awarded Frequency Bands (which were equivalent to US$ 247.3
millions) pursuant to the provisions of the Bidding Terms and Conditions and its complementary clarifying documents, as a result
of which the whole amount of the sum offered for Lot 8 was paid. In addition, in its bid documents, Personal stated that such
Lot formed a unique and comprehensive block for purposes of complying with the obligations undertaken in connection with the deployment
of the SCMA, also expressing that the Federal Government has the obligation to cause the awarded bands to be free from occupants
and interferences.
Pursuant
to SC Resolution No. 18/14, it was decided that the frequency bands from 698 to 806MHz had to be disengaged before a deadline
of two years, following which, the irradiating systems involved in the migration had to stop their emissions.
NORTEL
INVERSORA S.A.
Pursuant
to ENACOM Resolution No. 6,396/16, published in the Official Gazette on July 22, 2016, it was decided that the licensees covered
by the migration provided by SC Resolution No. 18/14 that are currently providing services within the frequency range from 698
MHz to 806 MHz, may elect to: (i) continue to provide their respective services temporarily, in other frequencies corresponding
to the bands awarded to the broadcasting service, particularly band 512-698 MHz, subject to technical feasibility verified in
each case, and for the period set forth in Section 2 of Resolution No. 6,396/16; or (ii) request the awarding of a band width
equivalent to the one currently authorized to them, in the destination band from 12.2 to 12.7 GHz.
As
of the date of issuance of these financial statements, the deadline provided by SC Resolution No. 18/2014 for the disengagement
of the band from 698 to 806 MHz expired on July 18, 2016. However, such frequency band continues to be occupied.
On
the other hand, execution by the Regulatory Authority of the “Agreement for Authorization of Frequency Bands Use”
corresponding to the bands awarded to Personal as a result of the public bid called pursuant to the provisions of SC Resolution
No. 38/14 is still pending.
Personal
has submitted a filing before the ENACOM, requesting a clarification on what deadline applies to the operators involved in the
migration to comply with the provisions of ENACOM Resolution No. 6,396/16. In addition Personal has requested to review all documentation
relating to the migration of services that are operating in the bands that were awarded to it pursuant to SC Resolution No. 25/15.
|
|
h)
|
Legal
Procedures relating to the Definition of the Scope of Fixed and Mobile Telephone Services
under Broadcasting Law No. 22,285, repealed by Law No. 26,522 of Audiovisual Communication
Services
|
The
Group offers a wide range of telecommunications services in the market, including, among others, those referred to as VAS, which
provide additional functionality to the basic services of voice transmission through a telecommunications network. Recent developments
about these procedures are described below:
Within
the context of a claim filed by Supercanal S.A. in 2003, an injunction was ordered against the fixed and mobile telephone companies,
by which the Court ordered them to abstain from
“providing supplementary broadcasting services or issuing any kind of
broadcasting contents and programming”,
as well as
“making any advertisement relating to future services to
be provided, or the provision of television services as VAS or any other kind of technical method through the fixed or mobile
telephone and Internet services that they provide”.
On
May 10, 2016, the judge decided that the claim is moot, ordered the lifting of the injunction and the closing of the claim.
|
|
✓
|
Claim
by the Argentine Association of Cable Television
|
Within
the context of a claim filed by the Argentine Association of Cable Television in 2006, an injunction was ordered against the fixed
and mobile telephone companies, by which the Court ordered them to abstain from
“transmitting, repeating and/or providing
directly or indirectly broadcasting services or their supplementary services”
, based on the former Broadcasting Law
No. 22,285. Subsequently, such injunction was extended to the commercialization of the Superpack service (joint offer of satellite
television services provided by DirecTV and telephone and Internet services provided by Telecom Argentina, where each entity invoiced
the services provided by it directly to the final customer).
On
June 18, 2015 a lower Court decided to postpone the declaration that the claim was moot and to limit the term of the injunction
for six months. The decision was appealed by Telecom Argentina and other defendants. On October 8, 2015 the Court of Appeals decided
the revocation of the judge’s decision that the claim is moot and ruled that the injunction has ceased to apply. Against
this decision, the plaintiff has filed an extraordinary resource. On March 17, 2016, the Court of Appeals rejected the resource.
The plaintiff filed a complaint with the Supreme Court on March 29, 2016, which it was dismissed by the Supreme Court on August
4, 2016 and ended the claim.
|
|
i)
|
Lawsuit
against Personal on changes in services prices
|
In
June 2012 the consumer trade union “Proconsumer” filed a lawsuit against Personal claiming that the company did not
provide the clients with enough information regarding the new prices for the services provided by Personal between May 2008 and
May 2011. It demands the reimbursement of the increase in the price billed to customers for a period of two months.
According
to the provisions of the Supreme Court on May 27, 2016, the demand will continue its proceedings in the commercial courts.
NORTEL
INVERSORA S.A.
|
|
j)
|
Claims
for “Project AFA Plus”
|
In
June 2016 Telecom Argentina initiated a compulsory pre-judicial mediation procedure. The first audience, held on July 12, 2016,
was attended by both parties. A second audience was held on August 3, 2016 and a new one was held on August 23, 2016, which resulted
in no agreement between the parties.
|
|
k)
|
Law
No. 27,181 Statement of public interest in the protection of the Argentine government’s
equity interest that are part of the FGS investment portfolio (Sustainability Guarantee
Fund)
|
As
mentioned in Note 19 to the Consolidated Financial Statements as of December 31, 2015, on October 6, 2015 Law No. 27,181 was published
in the Official Gazette, which:
(i)
declared of public interest the protection of the Argentine government’s equity interest in the investment portfolio of
the Sustainability Guarantee Fund of the Argentine Pension Integrated System (FGS) and its equity interests or share holdings
in companies in which the Argentine government is a minority partner or where the Ministry of Economy and Public Finances holds
shares or equity interest. Transfer of those interests is forbidden without prior authorization of two-thirds (2/3) of the National
Congress.
(ii)
created the “Agencia Nacional de Participaciones Estatales en Empresas” (Argentine National Agency for Government
Equity Interests in Companies) (ANPEE).
On
July 22, 2016, Law No. 27,260 of “Historic Reparation for Retired Persons and Pensioners”, abolishing Law No. 27,181
in its Section 35, was published in the Official Gazette. In addition, Section 30 of Law No. 27,260 provides that the transfer
of shares of public corporations authorized by the CNV that are part of the FGS is banned without a previous and express authorization
of the Federal Congress if, as a result of such transfer, the FGS’s holding of the above referred securities becomes less
than 7% of the aggregate assets of the FGS. The following exceptions apply: “
1.Tender offers addressed to all holders
of such assets at a fair price authorized by the CNV, pursuant to the terms of Chapters II, III and IV of Title III of Law No.
26,831. 2. Swaps of shares for other shares of the same or another corporation as a result of a merger, split or other corporate
reorganization.”
|
|
l)
|
Decree
No. 894/16: exercise of corporate, political and economic rights by the ANSES
|
Decree
No. 1,278/12 provided that the Secretary of Economic Politics and Development Planning of the Ministry of Economy and Public Finances
was in charge of the execution of the policies and acts relating to the exercise of the corporate rights attached to the equity
participations in corporations where the Federal State is a minority shareholder, and for such purpose approved a set of Rules
applicable to representatives and directors appointed by the shares or equity participations held by the Federal State.
On
July 28, 2016, Decree No. 894/16 was published, modifying Decree No. 1,278/12 and providing that in those corporations which shares
are part of the FGS’ portfolio, the corporate, political and economic rights corresponding to such shares shall not be exercised
by the Secretary of Economic Politics and Development Planning, but shall instead be exercised by the Federal Management of Social
Security (“ANSES”).
In
addition, Decree No. 894/16 provides that the Directors appointed by the ANSES shall have the functions, duties and powers set
forth in the LGS, the Capital Market Law No. 26,831 and their complementary regulations, all other rules applicable to the corporation
in which they act as directors, and their bylaws and internal regulations, and that they shall be exposed to all the liabilities
applicable under such rules, not being subject to the provisions of Decree No. 1,278/12 and 196/15 (the latter in connection with
its delimitation of responsibility).
|
|
m)
|
Repeal
of Income tax on dividend payments
|
Law
No. 26,893 and Decree No. 2,334/13 stated that dividends and profits, in cash or in any kind -except in shares or share participation
- distributed by companies and other entities established in the country made available as from September 23, 2013, were subject
to a withholding tax of 10%, excluding dividends received by corporations and other local entities, that continued not computable
for the purposes of the tax.
Law
No. 27,260 repealed the above mentioned provision, as a result of which, as from July 23, 2016 all dividends and profits, in cash
or in any kind, made by companies and other entities established in the country (such as Telecom Argentina), regardless their
beneficiary, are not subject to the aforementioned withholding.
In
August 2016, Telecom Argentina and Personal have concluded the salary negotiation process with various telecommunications unions
for the period July 2016 – June 2017. Pursuant to the agreements reached, the unionized employees will receive in installments
different fixed amounts per category, representing an annual raise of 37%.
NORTEL
INVERSORA S.A.
3Q16
salary increases affected the Telecom Group’s operating results in approximately $404. For 4Q16 an additional cost of approximately
$281 is expected (figures not covered by the limited review of the independent external auditors).
|
|
o)
|
Regulation
Draft for Mobile Communication Service Subscribers
|
SECTIC
Resolution 6-E/16 issued on September 16, 2016 declared the opening of the Procedure provided by the General Regulation for the
Standards Participatory Preparation in relation to the “Regulation for Mobile Communication Service Subscribers” published
in the Official Bulletin and on the ENACOM website. This Procedure invites citizens to express their opinions and proposals regarding
the Regulation draft. The deadline for opinions and proposals submission expired on November 1, 2016. Personal submitted its comments
to the Regulation draft.
|
|
p)
|
Amendment
Draft to the “Number Portability Regulation”
|
Through
SECTIC Resolution 7-E/16 issued on September 16, 2016, the ICT Secretary declared the opening of the Consultation Document procedure
provided by the General Regulation of Public Hearings and Communications Consultation Documents, in relation to the “Number
Portability Regulation” Amendment Project. The presentation of opinions and proposals deadline expired on October 17, 2016.
Personal presented its opinion to the amendments proposed in the published Project.
|
|
q)
|
“Consultation
on Interconnection and ICT Services Network Access” Document
|
Through
SECTIC Resolution 9-E/16: published on September 22, 2016, the ICT Secretary declared the opening of the procedure provided by
the General Regulation of Public Hearings and Communications Consultation Documents in relation to the document “Consultation
on Interconnection and ICT Services Networks Access”. On October 20, 2016, Telecom Argentina submitted to the ICT Secretary
its opinions and proposals for the published consultation.
NOTE
11 –SUBSEQUENT EVENTS TO SEPTEMBER 30, 2016
a)
Dividends Distribution
The
Company’s Board of Directors, at their meeting held on October 24, 2016, approved the distribution of $540 as cash dividends
in advance, subject to the ratification by the Ordinary General Shareholders´ Meeting in which the annual Financial Statements
shall be considered, of which $264 (equivalent to $179.8 pesos per share) shall be paid as cash dividends in advance to the Class
“B” Preferred Shares, and $276 (equivalent to $51.7 pesos per share) shall be paid as cash dividends in advance to
the shares of common stock. The dividends in advance were made available to the shareholders as from November 7, 2016.
|
|
b)
|
Tuves’
shares purchase option
|
On
October 4, 2016, Núcleo’s Board of Directors authorized the execution of the shares purchase option that TU VES S.A
(Chile) granted to Núcleo in order to acquire the controlling interest in Tuves.
On
October 6, 2016 Tuves’ shareholders accepted Núcleo’s proposal for executing the shares purchase option (70%
Tuves’ total capital), which is subject to the CONATEL’s previous approval.
As
of the date of issuance of these consolidated financial statements, the CONATEL has not concluded on this matter.
|
|
c)
|
Mobile
Services Parcial Interruption
|
On
October 5, 2016, while upgrading some Personal’s network equipment, an equipment failure caused difficulties in establishing
voice communications in some random areas for approximately five hours. The rest of the mobile services, such as data, were not
affected. Clients could continue communicating by data instant messaging and other applications without inconveniences. The failure
affected approximately one million mobile subscribers across the country.
Due
to this partial interruption, during October 2016, Personal subsidized to its prepaid subscribers a full day of calls to other
Personal’s subscribers and also subsidized to postpaid subscribers a full day of their monthly charges.
|
|
d)
|
Notes’
Global Issuance Program
|
Personal’s
Ordinary and Extraordinary Shareholders’ Meeting held on December 2, 2010 had approved the creation of a Note’s Global
Issuance Program for a maximum circulation amount up to U$S 500 million or its equivalent in other currencies for a five year
period. On October 13, 2011, the CNV had authorized the mentioned Program through Resolution No. 16,670.
NORTEL
INVERSORA S.A.
Personal’s
Ordinary Shareholders’ Meeting held on May 26, 2016 authorized to extend the due date and expand the Program’s maximum
circulation amount up to U$S 1,000 million or its equivalent in other currencies.
On
October 20, 2016, the CNV authorized the extension and expansion of the mentioned Program through Resolution No. 18,277.
On
November 3, 2016 the CNV authorized the issuance of two series of Notes (Series III in argentine pesos and Series IV in US dollars)
for a maximum amount up to $1,500 million each. Additional information on this subscription announcement can be consulted in the
“Relevant Facts” section on the CNV website (
www.cnv.gob.ar
) and in the “Investors” section on
Personal’s website (www.personal.com.ar).
On
July 5, 2016, Personal accepted an offer from the International Finance Corporation (IFC) for the assessment and transfer of funds
for purposes of financing investment needs, work capital and debt refinancing for an amount of up to US$ 400 million.
On
October 6, 2016 Personal and the IFC signed the loan agreement for an amount of US$ 400 million and for a six year period, payable
in 8 equal half-yearly installments since the 30
th
month, with a 6 month LIBO rate + 400bp. This loan will be used
to deploy the 4G network and refinance short-term financial liabilities. The loan terms include standard commitments for this
type of financial transactions.
On
October 26, 2016 Personal received the loan proceeds for an amount of US$ 392.5 million (net of expenses of US$ 7.5 million).
|
|
|
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 September 30, 2016, the consolidated
statements of income and of comprehensive income for the three and nine-month periods ended September 30, 2016, the consolidated
statements of changes in equity and of cash flows for the three and nine-month periods ended September 30, 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:
|
|
a)
|
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;
|
|
|
b)
|
The
separate condensed interim financial statements are derived from accounting records kept
in their formal respects in conformity with legal provisions;
|
|
|
c)
|
We
have read the Operating and financial review and prospects, on which, as regards those
matters that are within our competence, we have no observations to make;
|
|
|
d)
|
As
of September 30, 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 $126,358.61 and was not due at that date.
|
City
of Buenos Aires, November 8, 2016
|
PRICE
WATERHOUSE & CO. S.R.L.
(Partner)
|
|
C.P.C.E.C.A.B.A.
Tº 1 Fº 17
|
|
Dr.
Marcelo D. Pfaff
Public
Accountant (UBA)
C.P.C.E.C.A.B.A.
T° 156 F° 84
|