Good day, everyone, and welcome to the Telecom Argentina Second Quarter 2012 Earnings Conference Call. Today’s call is being recorded. Participating on today’s call, we have Mr. Franco Bertone, Chief Executive Officer of Telecom Argentina; Mr. Adrián Calaza, Chief Financial Officer; Mr. Pedro Insussarry, Finance Director; and Mrs. Solange Barthe Dennin, Manager of Investor Relations. And at this time, I'd like to turn the conference over to Mr. Pedro Insussarry. Please go ahead, sir.

Good morning to everybody. On behalf of Telecom Argentina, I’d like to thank you for participating in this conference call. As mentioned by our host, the purpose of this call is to share with you the consolidated results of the Telecom Argentina Group that corresponds to the first half of fiscal year 2012 ended last June 30, 2012. We would like to remind you that for all those that have not received our press release or presentation, you can call our Investors Relations office or download them from the Investor Relations section of our website located at www.telecom.com.ar/investors. Additionally, this conference call is being broadcasted through our webcast feature available in such section and can also be replayed through this same channel. Before we continue with the conference call, I would like to go over some Safe Harbor information and other details of the call, as we usually do in our quarterly conference calls. We would like to clarify that during the conference call and Q&A session, we may produce certain forward-looking statements about Telecom’s future performance, plans, strategies and targets. Such statements are subject to uncertainties that could cause Telecom’s actual results and operations to differ materially. Such uncertainties include, but are not limited to, the effects of the public emergency law and complementary regulation, the effects of ongoing industry and economic regulation, possible changes in the demand for Telecom products and services, and the effects of marginal factors such as changes in general market or economic condition, in legislation or in regulation. Our press release dated July 30, 2012, a copy of which is being included in our Form 6-K report to be furnished to the SEC, describes certain factors that may affect any forward-looking statements that we may produce during this session. Furthermore, we urge the audience…

Thank you, Pedro and good morning to everyone. This quarter operating performance was good though a lower growth pace affected margin. Business environment was quite challenging and under these conditions the strength of our balance sheet and positive cash position is a very valuable asset to drive market growth. As a matter of fact, we had a successful MNP start as we have reached first in customer choice, we also made further progress in mobile revenue share leadership and we stay leaders in post-paid net adds. We believe that smartphones are even strong sustained VAS revenue growth particularly mobile Internet that grew 82% year-on-year is a silent proof of a successful strategy. In the Fixed business, we continue leveraging bundling and flat pricing to grow retail revenues despite regulated (inaudible). For the Corporate segment, this quarter we launch integrated cloud computing services. And to conclude the business highlight, let me stress again how important is our strong balance sheet in this challenging environment and mention the P$807 million as dividend payment that we made this quarter. Please turn to slide six. Our mobile business performed well during this quarter with a head start in the MNP where we lead really net ports with strong fortunes to capture high value customers, that actually represent three out of four ports-in were recorded. Our (inaudible) and success with value customer is also shown by the post-paid segment 14% year-on-year post the increase having captured close to 60% of the market post-paid net adds. This rose ARPU 10% year-on-year to P$54.3. 3G line growth has been strong posting a 92% year-on-year increase reaching 21% of our customer base. Leveraging 3G customer base will maintain consisting growth of VAS revenue. We retained leadership of revenue shares at 34.5% of the market or service revenues as…

(Operator Instructions) We'll take our first question from Alex Garcia with Citibank.

Good morning everyone. Thanks for the question. I would like to hear from you what are the dynamics for readjusting tariff, first on the mobile and broadband because in the past I had the idea that you guys always tried to catch-up with inflation, have that inflation forecast and try to transfer that to the final price to the customer and you never had any and you showed that, but it seems that this quarter, this process was interrupted. I wanted to understand what is different now, and are you guys waiting for something to readjust prices? Are you guys don't feel that it's time to adjust prices and then margins will continue under pressure? That will be my first question. Then the second question would be regarding the retention costs. We saw handset sales increasing a lot, retention costs increasing a lot. And I believe that you guys are kind of like giving handsets from an outsider, giving handsets for the customer to continue on your base, I want to see if that is -- if you share that view, and but most important how long do you think this pressure from the mobile number portability will continue? And that's basically my, the two questions I have. Thank you.

Right, about the dynamics of how we adjust tariffs, I will give you the reason, set profit nor is that practice in the market. I mean, its as a matter of fact, as you noticed, the last significant price revision we had for mobile was really a year ago. That is really making harder the comparison of this quarter result with last year, because last year we enjoyed quite a significant revision of prices as all industry did. This year this is not -- this hasn’t happened consider that number portability started April 1st, so we are really just completed the first trimester of that as you see in from our quarter results and we did well. So, I think that we have not gone into discount schemes but on the other hand that we haven't adjusted prices upward either, you know that we will not stay very long. I think that we are quite happy how we position ourselves with MNP, and I think that readjusting tariffs will resume shortly. As a matter of fact the effect did not exist on broadband services or fixed broadband services and how our prices will be in the future including designing of new product that will incorporate additional value for us has been already communicated to the market, it will take place pretty shortly. In relation to retention and acquisition cost, as far as we had said, cost is concern. Yes, they have quite a heavy impact on that, I mean, the reason of keeping pushing upgrading our customer base equipments goes to keep fostering and improving share of value added services. And the share of our other services out of total mobile revenues I think is within a good choice and it is really successful. We don’t expect to think to get out of hand at all as we did it in the past. Certainly, I mean that is another element that's strengthened during the MNP preparation in the first quarter of the year and continued in the second quarter of the year. So, the reason sort of seasonality if you wish to finalize that all this kind of cost and this kind of cost increase because of the portability process being launched a while ago. But I mean the process is going well and we're happy with our results but we don't expect -- please don't expect us to push out of proportion on these leverages.

We will take our next question from Michel Morin with Morgan Stanley.

So, just to clarify, if I can, your answer to the previous question. Your pricing on mobile and your decision to not raise prices, if I heard you correctly, since October of last year, has -- is entirely related to mobile number portability and your desire to remain competitive, is that correct?

Oh! Sorry, yes, it is correct.

Okay. So it's --

And price was up. And you may have not noticed in this market anyway adjustments on our prices has been already announced in the market for the second half.

Okay. You've already announced higher prices for the second half?

Yes, yes.

Okay. So, essentially there was no moral suasion from the government to avoid any price increases, that has not been a factor?

There wasn't I mean, absolutely, no.

Okay. And then, on CapEx, I see in your slides that you allude to -- well, first of all, you're running pretty low year-to-date relative to your guidance. And I think in your slide you do allude to some questions issues that may be delaying you a little bit. So I was wondering if we should continue to assume that you're sticking with the guidance on CapEx?

Well, there is a seasonality on this as well, I mean, traditionally I'm not saying that it why should be. But as a matter of fact, I mean we tend to have a slow start at the beginning of the year because of the planning phase, but if there is anyway that our CapEx expenditure this year are up or about what we had a year ago, so there is not this effect so far. There are certainly certain issue related to in general to imports. We're really cooperating very closely with the authority to ward this around. So far we don't expect any specific problems.

Okay.

The other I think, the other item is being that is part of our CapEx forecast for the year, is a bit for the frequency, for the spectrum option that really is not -- has been delayed so far and as currently we don't have a firm date for that to happen.

We'll take our next question from Ricardo Cavanagh with Itau BBA.

Yes, good morning and well thanks for the call. I have two questions. The first one is on the mobile market. How are you performing on the prepaid segment? And the second is also on the mobile market and if you can discuss what is the percentage of smartphones in the country, and what is your outlook in terms of growth going forward for that segment in light of economic deceleration? Thank you.

Right. You probably noticed that I mean we put much stronger focus on the postpaid segment than on the prepaid that is already I mean a strong percentage of our customer base and is over 70% -- I'm sorry, over 30% of our customer base is prepaid and we had in April 8% lines in service, mobile lines in service growth from 17.4 million to 18.7 million this semester, while the growth of postpaid has been almost twice as much has been over 14%. So that's our focus, that is reflected on the what we bid, in how we perform in number portability as well where the percentage of high value customer coming into our service are even higher of that -- of the percentage I mentioned before. And in terms of smartphones, I mean, we really considered smartphones to have at least 3G capabilities and the percentage I gave you I think during the initial speech, I mean, we've had 21% of our base being 3G by the end of the semester that is almost twice as much as we had a year ago. So we're really keep pushing on that side of the business.

Okay, thank you. And just following up on the first one. Do you think that in terms of the revenue market share growth that you've been sustaining over the past two years on a very successful, do you expect this situation to continue?

Well, as you see from the graph, it is a very tight race. I mean among the three operators the spread, if anything, I mean to mention is that spread between number one in the market and number three in the market nowadays is less than half than it was three years ago. So its the marketing is definitely getting more competitive and I must say we're quite pleased that we took the shift there to pass from number three to number one. So we don't expect that percentage to increase in a substantial or in a significant manner, but we are certainly confident we will be able to maintain the leadership, particularly in the -- if you were to look at the same metrics that are not available for the post-paid market I think that the market share would be even stronger.

Okay. Great and just one final and it will be on the cash. Given the restrictions in place and how are you -- what are you basically doing with the cash?

Ricardo, this is Pedro. Basically, what we are doing is, we are basically paying our suppliers, funding our CapEx, basically using the cash flow for general purposes and obviously with the excess cash as we're a peso generating company we are basically investing that excess cash in, basically term deposits and peso-nominated instruments.

We'll take our next question comes from Stanley Martinez from Legal & General Investment Management. Stanley Martinez - Legal & General Investment Management: Good morning everyone and thank you for taking my questions. If I can turn back to personnel for a moment, I know the year over year increase in Half One VAS particularly on data and Internet, but I do note that there was slower sequential comparisons, and wondered whether if there was any reduction you saw in growth in terms of actual volumes in SMS or terabits on your network or were you instead trying to drive elasticity of the net effect in terms of lower unit prices, and do you expect it to return to what you consider more normal sequential revenue growth on that in Q3 and in the second half of year? That is my first question please?

There are certain elements that are in fact of those you mentioned but due to the SMS. In sense of SMS, I mean, we are still round the 300 message per month per subscriber. But we know there is a marginal decline after many, many years of sustained growth over the last six months. That is basically due to the fact that we are being promoting much stronger than the past Internet services or the pre-paid customers as well. I mean, the one peso per month price that we launched a year ago was quite successful. And is that messaging needs of our customer has been partially switched from SMSes to what's up kind of application web available. So, I mean to say that SMS is not any longer the only messaging system available with our customer and that is generating some decline in the number of messages average per month of the basis. On the other end, I mean, yeah, I mean in terms of if you look to mobile meaning of usage there is going to be that it is not been a substantial increase in that respect but as you can know this all in all the growth on our revenue and the growth of our ARPU are coming mainly from data services. And out of latest services from web browsing and broadband rather than SMS. So, I mean the growth drivers of the past that are minutes and SMSes are not -- don't play that role any longer. All in all I mean, the 23% that we had in revenues year-on-year is still a strong growth. We do not expect any decline of those figures even in the near future. Stanley Martinez - Legal & General Investment Management: Great. That makes sense, Franco. And if I can just ask a broader question about how you are approaching the market commercially in a slower gross out environment, it sounds like, are you looking to perhaps change your commercial approach to reduce what you might say some posturing in the marketplace by withdrawing what you might consider some more of the stimulative and competitive offers in order to try to regain some of the revenue market share that although you gained on a year-on-year basis you lost in the second quarter it looks like about 30 basis points?

While amended there is no particular slowdown I do not know where you notice that. But in general terms the fact that we are driving revenue much stronger that line is the consistent approach we had over time. And we are continuing with that, we are happy with that and we believe that, to an extent, we have anticipated direction that the market in general will take since the penetration percentage of mobile services over the Argentina population is quite high and won't grow significantly in the past -- in the future as fast as in the past. And if it will it will generate a lot of churn. So, I mean we're definitely gearing more towards a higher volume customer and more stable customer and that is reflected on our figures for quoting number of lines and growth in both segment and the revenues. The fact that, I mean, over the last year end a half we climb to position number one in revenues but only position number two in line reflects exactly that. That is our focus and we will maintain it. Stanley Martinez - Legal & General Investment Management: So, you will continue the investment in seeding smartphones in the marketplace in the second half to continue the gain in postpaid, as well some of your competitors may withdraw and that seems to be operative message, is that right?

That is a game planned for the second half as well.

We will take our next question from Rizwan Ali from Deutsche Bank.

My question is related to CapEx. Can you just clarify, in your previous question you said, the CapEx remains the same, which is about P$4.5 billion. But the question I mean, does this 4.5 number include what you may pay for the license which maybe your spectrum which will be auctioned off later this year?

Yes, the P$4.5 billion does include projected investment into the license. And obviously, if -- hopefully not but if that auction won't take place the corresponding amounts will not be expended. No, but that -- I mean to answer your question yes the 4.5 does include our estimate cost for the license.

And how much are you expecting for the cost of license?

Well, it's a question, I'm not going to answer.

And then second thing is do you expect improvement in your margins given that you're finally increasing your wireless pricing. The second half margin should be expected to improve over what we've seen so far this year?

I'll just say really to maintain our margin, I mean, certainly we'll be striving for improving them. But certainly we'll be under lot of pressure given the general environment, local and international.

We'll take our next question from Federico Chapto with Raymond James.

I've two questions. The first one is related to the company's cost structure. Considering the slowdown in consumption and given the deceleration this may come from revenues, which part of the cost structure do you think you might be able to reduce cost in case the economic environment continues to deteriorate? And my second question is related to guidance you provided at the beginning of the year. You were expecting a double-digit EBITDA growth. So my question, what if you remain confident of achieving that this year? Thanks. Adrián Calaza: Okay. I'm going to answer you first question. Then I'll let Frank return to you the second one. Yeah, of course, given the context we have a lot of pressure on our cost side. We've been working hard this year, and as a matter of fact you can see that we risked some efficiency on the interconnection cost or also on other costs related to the industrial and general and administration cost. We've been working very hard and as a matter of fact if you consider this cost without the increase on the energy cost we've been -- this cost have been growing in a lower pace than the inflation. So we will continue working on this side. You know that we'll continue to have pressures on rent, labor, and labor related costs. And we will continue, as Frank was also was saying before, we'll continue with our commercial efforts. So I think that our work it's -- should be in all our cost but mainly on general and industrial cost.

As far as the year-end, we really maintaining our expectation of double-digit growth that we met in terms of the revenues and we haven't met in terms of EBITDA in this first semester. We missed it not by much but we did. So, we still maintain the expectation to add another digit in the second half. Certainly the overall condition will make it tough thing to achieve. We don't expect to change any way our prospect unless there is a deterioration on the macroeconomic conditions that at the moment we've not foreseeing.

We'll take our next question from Sean Glickenhaus, HSBC.

We read that one of your competitors is focusing on extending its cell locations. I know that given these locations or cell site locations are tough to come by in Argentina that probably all the mobile operators are doing so. But can you talk a little bit about what -- how you're going about this and especially given the continued strong growth of mobile data, the importance of this for your strategy? Thanks.

I'm not too sure to the news you're referring to, but in general terms in terms of infrastructure we will continue our way of deployment. As a matter of fact, we're introducing some additional new design from the investment program of this year that would basically match better with the growing restriction we're experiencing in the industry is experiencing in getting local authorities' authorization to set up towers and et cetera, et cetera. So that is getting harder by the time. So what we're doing is colocating our equipment with the network of our competitors. I mean there is a level of cooperation that was unusual in the past. And we're also redesigning our network infrastructure in such a way where we can use as much as possible existing infrastructure to attach to it transceivers and antenna. The type of initiative we are referring to you know is typical of looking for within some sort of cash in terms of cash from operation is we are not in that conditions and we have no plan to that extent.

(Operator instructions). We will take our next question from Felipe Pereira from Barclays.

I have two questions. First, could you please update us with the salary negotiations of 2012? As per my understanding they are about to be completed. And my second question is, you mentioned earlier in the call that you expect (inaudible) to increase price as in second half of the year. Could you please give us an estimate as how much do you expect increase of prices? And this price increase would be only on wireless or would be on broadband as well? Thank you.

Salary negotiations as a matter of fact are being concluded and the overall year-on-year increase is significant lower than what we had last year and you would probably find in official notification shortly, but I can anticipate to you that several percentage point below what was granted a year ago. In terms of space prices, yeah, we are continually maintaining our pricing schemes. There is no restrictions beside obviously the regulated prices that are de-frozen from 2001 and as a the matter of fact is a blend of more than changing the offer prices is to revise and modulate in different manner, the promotions that we have on the market and launching of new products. So, in general terms, the listed new price really reflects an additional content of service of higher bandwidth or supplementary service associated with, for example, DSL. So, it's hard to say what the percentage increase there is profit changes. What we are looking into is to see the overall blend of those product and compared to the historical one and we expect anyway something in the range of 10% to affect our revenues. None is a caveat, as I said, as price increase, but as a different portfolio product that increase new product as well. That is for broadband, the something similar will be done for the mobile services, and again and even more for my mobile services, the level of discount in promotion for supplementary service including the promotional manner in certain offer it won't make the difference rather than change in the stipulated in nominal price level. We are not going to affect the pre paid prices anywhere.

We'll take our next question from Michel Morin with Morgan Stanley.

Thanks for taking the follow up. I just want to ask a little bit about broad band, its on your slide ten, its seems that the other players there grew little bit faster than you did in terms of accesses, and I was wondering if you could comment as to whether or not that is them taking share in the regions where you overlap or is it simply that there is faster growth in some of the regions where you do not compete? Thank you.

That's correct. I mean, we grew less than the non-competitor particularly of the cable competitor. As a matter of fact I mean the growing speed of subscriber broadband lines that are being offered on the market is putting our offer under pressure since we're still operating with ADSL on the symmetrical copper pairs. Our FFTC deployment is out respond and solution to address this issue. Deployment did start in the first semester of this year will reach a critical match to offer the market nationwide new product, new upgraded product sometime early next year. So, I'm afraid that till then we will keep having some marginal dilution of our market share but your obviously strongly betting on the upgrade of our network that is underway and will become fit for commercial activity in the next six months as I said before.

We will take our last question from Stanley Martinez with Legal & General Investment Management. Stanley Martinez - Legal & General Investment Management: Thanks. Just two real brief follow-up questions if I could please. First on employee benefit expense and severance payments, just wondering whether there was any one time or true-ups in that line item in the P$850 million this past quarter. Just it looks like you growing slightly above the mid 20% per employee growth rate that we have seen in the past? And then, coming back briefly to CapEx, I recognize the puts and takes with respect to the importation but of course, there has also been a big appreciation in the peso since the initial guidance back to parent company's full year's results in February. So, what sort of a base level of CapEx, is it down to P$3.5 billion basis potentially, just if you could give some sensitivities around the guidance, I would appreciate that? Thanks.

Yeah, in HR cost yes, I think you picked a real fact that is, I mean, we implemented in the second quarter this year an agreement reached with union and as a matter of fact to, put to bed a long standing litigation we had that did imply to unionize a substantial portion of a fixed operation employees that were contracted out of the union. That did generate that increase that you saw and is one-off effect that we had in the quarter. As far as the CapEx is concerned I mean, we are really targeting the 4.5. I mean, we do not expect a drop that as you are suggesting a 3.5 and we are actually working to prevent that from happening. Stanley Martinez - Legal & General Investment Management: Okay, great. Thanks for answering.

Obviously, we have no control on the spectrum auction and that could be a factor. Thank you.

We will take our next question from Arthur Burns with Deltech.

I know it’s an awkward question, but is there anything more specific you can talk about on the ongoing dividend policy please?

Yeah. As a matter of fact not really at this point in time. I mean, the issue will be addressed in due time but sometime early next year. We don’t expect anything along in terms of dividend to happen in the next six months.

Joyce, do we have I think the answer is okay with the person who is asking and if we have additional questions and we follow on.

At this time there are no further questions.

Okay. Well, thank you very much for being at our conference call for the quarter. Please do not hesitate in contacting Investor Relation group for any further inquiry you may have. And have a great day all of you and thank you so much and hopefully we’ll meet you soon again. Thank you.

And that concludes today’s conference. Thank you for your participation.