Good day everyone, and welcome to the Telecom Argentina TEO Fourth Quarter 2016 Earnings Conference Call. Today's call is being recorded. Participating on today's call, we have German Vidal, Chief Executive Officer; Mr. Ignacio Moran; Mr. Pedro Insussarry, Director of Finance and Ms. Solange Barthe Dennin, Investor Relations Manager. At this time, I'd like to turn the conference over to Ms. Solange Barthe Dennin, please go ahead ma'am.

Thank you very much Dan. Good morning, on behalf of Telecom Argentina, I would like to thank everybody for participating on this conference call. As mentioned by our moderator, the participants of today's conference call are German Vidal, Chief Executive Officer; Ignacio Moran; Pedro Insussarry, Director of Finance acting as CFO, and myself, Solange Barthe Dennin, Manager of Investor Relations. As we have publicly announced today, Ignacio Moran is participating on the call and his position as CFO is transitioning to Pedro Insussarry. German Vidal will address this issue in further remark. In relation to the conference call, the purpose of the call is to share with you the results of the fourth quarter results 2016 ending December 31, 2016. We would like to remind all of those that have not received our press release or presentation that they can call our Investor Relation office to request the documents or download them from the Investor Relations section of our website located at www.telecom.com.ar. Additionally, this conference call and slide presentation is being broadcasted through the webcast feature available in such section and can also be replayed through these same channels. 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 this type of events. 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 effect of ongoing industry and economic regulation, possible changes in the demand for Telecom's products and services, and the effect of more general factors…

Thank you Solange. Good morning to everyone. We invite you to a quick review of our vision and strategy. Please refer to Slide 6, where we want to share with you the business anchors that support our vision and review the strategic highways that we have mentioned on previous conference calls. There are three main business anchors that we have conceived as pillars of our strategy; gaining share in individuals, households and company segments; driving operational excellence and efficiency while transforming customer experience. Each one of the highlights, what we are doing in terms of investment there are a few that are focused towards a customer-centric vision, working to offer convergent services. We're orienting our efforts to reach the customers' home or premises in order to gain share in a vertical manner and addressing the two main factors of growth for the future market that are; the management of new generation content and cloud services. These are the drivers that support the business anchors, mentioned before. With respect to the strategic highways in Slide 7, we will go over some achievements we have accomplished during the past year and some action plans that we are currently working with. As for our infrastructure and investment plan, we can mention that we already executed ARS1.4 billion of our 2016-2019 CapEx plan that contemplates investments for an amount of over ARS4000 million. We implemented a virtualized core infrastructure, increased our 4G sites by 37% and reached a 4G penetration of 5.5 million customers. For coming actions, we foresee CapEx of more than ARS13 billion for 2017. In relation to the customer centric vision, we are working towards an integration of our operations and a revision of our business support processes. Additionally, our recently acquired convergent CRM system will contribute significantly in this sense,…

Thank you German. Please turn to Slide 19, where we can review our consolidated revenues and EBITDA. In the fiscal year 2016, consolidated revenues amounted to ARS53.2 billion with a 31% year-on-year growth. In turn, service revenues in Argentina grew at a solid pace of 30%, thanks to the strong performance of internet services both in mobile and fixed broadband, together with corporate ICT services and fixed voice. We find interesting to remark that we observe, when we observed the quarterly performance of service revenues coming from the operations in Argentina, we note that the growth rates of 2016 has remained at a steady 30%, on acceleration to that registered in 2015. Moreover, EBITDA verified a positive evolution year-on-year, growing by 33% as we have concentrated in improving our revenue quality and profitability. EBITDA margin stood at 27% for the full year. But when we look at the quarterly performance, we can see that there is a consolidated trend in margins as the evolution improves when compared to the similar period of 2015, reaching 29% in the fourth quarter of 2016. Please refer to Slide 20, where we show the performance of EBITDA with a breakdown analysis of its different components. The Company has been taking some actions to gain operational efficiency and manage its cost structure. Despite increased cost of handsets, labor and other expenses that have negatively affected margins, relative savings were obtained in marketing and sales costs, fees for services, maintenance and materials interconnection costs and direct taxes. The final effect has been an expansion of margins of approximately 30 basis points. Let's move on to Slide 21, where we summarize the performance of our operating income that amounted to ARS7.8 billion with a 26% increase year-on-year. EBIT was mainly affected by the 42% growth in depreciation…

Thank you Pedro. Well, as we mentioned at the beginning of the call, Ignacio will be transitioning and leaving Telecom and the whole team would like to thank Ignacio. He is retiring for personal reasons after a year of great achievements and high impact in the transformation process of Telecom. So really we want to thank Ignacio, and we have no doubt that he is one of the top executive talents of Argentina. But since one of the strengths of Telecom is our internal talent and our succession planning, we are proud to announce the promotion to Director of Pedro who will drive the success of the Company and this new process that we have begun last year in his new responsibility. Thank you.

So having concluded with the presentation, we are now open to answer any questions you may have. Thank you, German.

[Operator Instructions] We will take our first question from Ricardo Cavanagh from Itau.

I wanted to ask a question on the comment that you placed at the end of the press release, regarding the amount of money that is going to be transferred for future dividend payments that -- well if not mistaken, it represents roughly like the equivalent of 15% of market cap. If you can shed some light on if that money is going to be distributed and an idea of timing? And then, second question is on the number of clients that I see have been falling a bit in the quarter and just what is the trend there? What do you expect going forward and perhaps what is the reason? Thank you.

Okay, Ricardo, I'll take the first part of the question. It's important to remember the current Argentine regulation regarding retained -- basically non-distributed or retained earnings. As you may know, there is a regulation in place which can be a rule that obliges the companies to allocate all the balance of returned earnings or to give a specific allocation or to a specific reserve or to issuance of capital and other applications. So basically at the end, when the Annual Shareholders Meeting resolves on the distribution of earnings -- allocation of earnings, the balance of returned earnings has to be zero by the end of the fiscal year. So, this is an important factor, understanding what the Board is proposing to shareholders that, by the way, we'll have to decide on this issue in our Annual Shareholders Meeting that will take place by the end of April. The second factor which is important to mention is that, we had different reserves that the Board is proposing to the shareholders to basically withdraw or to release the reserves and to allocate those balances into the reserve for future dividends. So that also increases the proposed total amount of reserves for future dividends going forward. Lastly, and just to take an example, as of the end of fiscal year 2015, the reserve for future dividends was approximately ARS6 billion and the shareholders decided to distribute only ARS2 billion. So in other words, what I'm trying to hint here and give you some sense is that, despite the Board is proposing this simplification of the reserves and basically consolidating everything into a reserve for future dividends, that doesn't mean that that shareholders will decide to distribute the entire balance of the reserve. And lastly, the decision of the allocation of the earnings is basically -- and a distribution of a cash dividend is obviously a decision of shareholders according to the corporation law in Argentina, okay? Okay, and your second question, Ricardo, was?

Yes, number of clients. I see that it's quite an impressive deployment of 4G and all that you mentioned in terms of quality of service, and yet the number of clients has been falling a bit and perhaps is voluntarily, it is something that Telecom does on purpose. I want to understand which are those clients that are migrating elsewhere and if this comes from a Company decision to focus on a certain segment, if this is to increase competition and what do you expect going forward?

As you mentioned -- those figures were part of our strategy. Last year was a year, as Solange mentioned at the beginning of the call that the performance of the economy affected most of the industry sectors of Argentina and our sector was included. So our strategy was more on the quality of our revenue than in gaining market share at any cost. And in some specific segments, we have concentrated in value customers, such as in the prepaid segment or in the internet access, home access service. And our strategy, as you also mentioned, taking care of the quality of our services, NPS and putting the client in the center of our organization is that we are going to be concentrated in gaining more services in the clients where we are today than gaining more new clients. We have a great opportunity selling dual play or triple play, and in the future quad play in the clients that we have today and our efforts are in that direction.

Okay, thank you very much.

[Operator Instructions] We will now take our next question from Fernando Suarez from AR Partners.

Regarding your wireless business, I have one quick question. I was wondering, what's your guidance on data penetration per subscriber? And if I may, a second one, where do you see the data consumption by subscriber for the next year or the next quarter [on this]? Thank you.

Well, thank you for the question. What we are expecting is based on the last two years of growth of data traffic in our backbone and the data traffic in our backbone almost double every year and we understand that that will be the trend for the years to come. Also that traffic in our, of data traffic in our network will double as we are pushing more 2G clients to 4G services and that depends on the speed of our deployment of our 4G LTE network that we will continue with high investments during this year and the next year and in the commercial offers to incentivate the new type of services that are leveraging the data traffic service. We understand that Argentina, although the higher percentages of growth in data traffic has a lot of room for improvement as the average of data traffic of Argentina is at still under the average of the regions. So we see there a high opportunity and we want to be positioned as leaders in data traffic for our mobile clients.

And can I ask what would happen in the case of a new spectrum auction that the government is putting the rules on and how much time do you think you could wait for a new spectrum auction that the current 4G spectrum that you have is capable to support this growth for the next two years, let's say?

Well, you know that our traffic figures and studies and our calculation is determining that with the same base of clients and with the same pattern of traffic usage, our spectrum we will have a limit between 2019 and 2020. But with the new conversations that we are having and all the industry is having based on the new decree, we are very optimistic that we will access to more spectrum in the next coming months. So we don't see any issues there.

[Operator Instructions] And at this time, it appears there are no further questions.

Okay, thank you everybody for participating of our quarterly conference call. Thank you for your questions. And any further questions you may have, you can call our Investor Relations office, Solange and her team and we hope to meet soon and obviously in our following quarterly conference calls. Okay, thank you very much. Good day to everybody.

And again, that will conclude today's conference. We thank you all for your participation.