Spotlight: Telecom Argentina's strong market position

After acquiring competitor Telefónica Móviles, which consolidates the company as the biggest player in the country, Telecom Argentina reported strong 2024 results.

The Argentine telco was able to mitigate inflationary pressures and is expected to continue to show a robust financial and operational profile, supported by its strong cash flow generation, a relatively conservative capital structure and competitive strengths in both fixed and mobile services, according to an analysis by ratings agency Fitch.

Telecom Argentina returned to profit last year with net income of 1.03tn pesos (US$971mn) compared to a 544bn-peso loss in 2023, mainly driven by gains from foreign exchange differences. 

The company increased its mobile and cable TV subscribers but lost nearly 44,000 fixed broadband accesses during 2024. 

At the end of 2024, Telecom Argentina had 21.6mn mobile subscribers, up 621,000 from end-2023. Cable TV subscribers totaled 3.2mn, up 61,000 compared to December 2023. Fixed broadband accesses were 4.0mn.

Its main competitor, Claro, reported 288,000 new mobile subscribers in Q4, totaling 25.9mn, up 3.9% year-over-year. 

Claro also managed to gain fixed revenue generating units, adding 45,000 broadband and 11,000 TV subscribers in the last quarter of 2024. The company reported 14.2% growth in its fixed business last year to 3.7mn revenue generating units. 

Claro's 2024 operating profit was 706bn pesos, 10.1% growth compared to 2023. 

According to regulator Enacom, at end-3Q24 there were more than 63mn mobile accesses in Argentina. With nearly 15.5mn, Telefónica's Movistar brand was the third largest operator in the market. 

Capex

Telecom Argentina is traditionally a heavy investor in telecommunications and last year it disbursed 806bn pesos, which represented 19.5% of consolidated revenues. 

Capex excluding rights of use assets represented 13.8% of revenues. 

Neither Claro – part of Mexico's América Móvil group – nor Spain's Telefónica reported investments in Argentina during 2024. 

Telecom Argentina's investments were focused on expansion of cable TV and internet services to improve transmission and access speed, deployment and modernization of 4G mobile access sites – the network reached coverage of 98% of the population – as well as 5G expansion with the addition of 200 sites and expansion of mobile site connectivity by replacing radio links with high-capacity fiber optic connections.

Telefónica acquisition

"Fitch believes the acquisition will enhance Telecom Argentina's leading position in the local telecommunications market, reaching about 61% market share in the mobile segment and 47% in [the] fixed broadband segment according to the company," Fitch said.

Although the US$1.25bn acquisition of the Telefónica unit is already closed, the company may experience some regulatory hurdles as it could lead to a virtual monopoly. Regulatory measures could include return of spectrum, disinvestments or infrastructure sharing. 

The acquisition was financed by a US$970mn syndicated loan and a US$200mn bilateral loan. 

"Management expects synergies in opex related to the elimination of intercompany arrangement, brand unification, single transport network and interconnection as well as capex optimization, notably regarding FTTH development," Fitch said.