- Depreciation and Amortization and Results on disposal and write-down of PP&E reached P$3,034 million (+52.7% vs. 1H15). PP&E depreciation amounted to P$1,982 million (+42.5% vs. 1H15) resulting from the incorporation of assets related to the investment plan that the Group has been executing; amortization of SAC and service connection costs totaled P$706 million (+54.5% vs. 1H15); meanwhile, amortization of 3G/4G licenses amounted P$193 million (+47.3% vs. 1H15) and amortization of other intangible assets reached P$13 million (+18.2% vs. 1H15).

- Other Costs totaled P$2,773 million (+46.7% vs. 1H15). This increase was mainly due to VAS costs that totaled P$792 million (+32.7% vs. 1H15), related to the increase of sales of those services, especially in the mobile business. Bad debt expenses reached P$518 million (+84.3% vs. 1H15) mainly influenced by the financing plans for the sale of handsets in the mobile business. Bad debt expenses represented 2.4% of consolidated costs and 2.0% of consolidated revenues.

Consolidated Financial Results

Net Financial Results amounted to a loss of P$1,046 million, an increase of P$927 million vs. 1H15. This was mainly due to a higher debt position that generated higher losses in net financial interests of P$681 million in 1H16 (-P$594 million vs. 1H15) and losses of FX results net of NDF instruments for P$558 million in 1H16 (vs. a loss of P$142 million in 1H15) mainly due to peso depreciation that occurred in December 2015. Meanwhile, gains on mutual funds and other investments amounted to P$232 million (+P$102 million vs. 1H15).

Consolidated Net Financial Position

As of June 30, 2016, Net Financial Position (Cash, Cash Equivalents and financial Investments minus Loans) resulted in a Debt of P$5,422 million, a variation of P$4,344 million when compared to the Net Financial Position as of June 30, 2015, after the cash dividend payment of P$700 million distributed in May 2016 and higher payments of capex.

Capital Expenditures

During 1H16, the Company invested P$4,495 million (+84.7% vs. 1H15 without considering the spectrum payment of P$2.256 million occurred in 2Q15). Of this amount, P$1,403 million were allocated to Fixed Services and P$3,092 million to Mobile services, focusing on maximizing network capacity with the aim of enhancing the customer experience and quality of current and future services. In relative terms, Capex reached 17.7% of consolidated revenues vs. 13.2% in 1H15 without considering the payment of 4G licenses that was made in 2015.

During 1H16, the Company expanded by 80% the capacity of the 3G network in the City of Buenos Aires and the Greater North Buenos Aires area, for which it carried out a technological reconversion of its entire network infrastructure. As part of the development of its strategic plan, an equipment modernization across the country was also implemented. The expansion of the 3G network capacity will result in a significant

improvement in the quality of voice and data services, maximizing the use of spectrum that was awarded in 2014 and 2015.

In addition, Personal continued with the deployment of its network infrastructure and the 4G/LTE technology throughout the country covering all provincial capitals, and reaching 70% of the population in those locations.

All of these initiatives enabled the Company to double the capacity of its mobile network over the last year and a half, in order to cope with the exponential increase in data traffic that has been occurring over the last years, and that is expected to continue growing in at hand of massive use of smartphones.

The greatest challenge for the coming years is to continue with the deployment of 4G/LTE launched in December 2014, with an emphasis to reach quality standards by means of enhancing the power 3G/HSDPA+ networks with the objective of increasing capacity, coverage, efficiency, and to optimize the user experience of our customers.

Regarding the access network, the Company continued with the deployment of fiber optic infrastructure (FO) in the different architectures and technologies, according to the demands and situations of the different geographical areas. In order to connect to the mobile network base stations, Telecom continued with the deployment of urban access’ FO rings, in specific centrals and locations. Also, the deployment of ‘ultra broadband’ continued with new technologies that allow the expansion of network capacity throughout the country, together with higher speeds and security for our customers.

Relevant Matters

Dividend Payment

The Company’s Board of Directors on its meeting held on April 29, and in accordance to the powers delegated to it by the General Shareholders’ Meeting, decided to withdraw the amount of P$700,000.000 of the ‘Reserve for Future Cash Dividends’ and to distribute that amount as cash dividends. That was made available to Shareholders’ as from May 13, 2016 and the amount distributed was equivalent to P$0.7222752541 per outstanding share in circulation and P$3.61 per ADR.

Resolution No. 38/16: Virtual Mobile Operators Regulation

Resolution No. 38/16, issued by the Ministry of Communications on May 5, 2016, approved the new Virtual Mobile Operators Regulation (‘VMO’) and nullified Resolution SC No. 68/14, that had previously approved the Regulation of Virtual Mobile Operators by the former Secretary of Communications.

The mentioned Resolution sets that Network Mobile Operators (‘NMO’), which have the spectrum and infrastructure (among them, Personal), shall present, within 120 days since the date of issuance of the Resolution, a Reference Offer (‘the RO’) for those interested in providing VMO services. The RO shall be annually published in the NMO and Regulatory Authority institutional web sites, and shall provide the economical and technical conditions (that must be freely established between the parties, reasonable, and non discriminatory terms), clearly stating the price and conditions of the services to

be provided.

This new Regulation applies for Mobile Communications Services (SCM), which includes Mobile Telephony Service (STM), Cellular Mobile Radiocommunications Service (SRMC), Personal Communications Service (PCS) and Mobile Advanced Communications Service (SCMA). The Resolution also provides the modalities and procedures for the subscription of Service Agreements between the NMO and the VMO, that will state the terms and conditions for the NMO to provide the VMO access to its telecommunications networks and, if needed, network interconnection.

Decree No. 798/16: National Plan to develop Competitive Conditions and Mobile Communication Services Quality

On June 22, 2016 Decree No. 798/16 was approved with the aim of reaching efficiencies in the market, with services quality at fair and reasonable prices. In this sense, the Ministry of Communications should in 90 days: -update the General Rules for clients of Mobile Communication Services; -incorporate into the General Universal Service Rules, the priority to consider eligible programs with funds from the Universal Service to projects developed in those municipalities that have adopted the rules proposed in the ‘Código de Buenas Prácticas para el Despliegue de Redes de Comunicaciones Móviles’; -prepare a National Contingency Plan for disaster events; -update the National Interconnection Rules and the Telecommunication Services Licenses Rules and –update the Number Portability Regime; among other tasks.

Moreover, through this Decree, the Agency of Administration of Public Estate (‘Agencia de Administración de Bienes del Estado’) is instructed, as the principal body of the Public Real State administration, to perform procedures, administrative acts and respective recruitments to provide places for the installation of antennas in public buildings, such as terraces, roofs, towers which are suitable for the installation of the antenna structure, equipment and installations associated to ICT services. Meanwhile, a Commission for the deployment follow-up and the Mobile Advanced Communications Service (SCMA) quality will be created, and it will be integrated by three members of ENACOM and three members of Ministry of Communications.

Other Relevant Matters

Mobile Internet Access Plan

As of July 18^th, 2016, a new offer of 4G handsets associated with the program ‘Ahora 12’, and at accessible prices was presented, regardless of the service plan chosen by the customer. In addition, the customer will receive a start up benefit of P$240 credit for voice, SMS or browsing. This action is part of the Mobile Internet Access Plan, launched by the Communication and Production National Ministries and involves the three operators. The objective is that 8 million customers replace their 2G and 3G handsets for 4G devices, allowing an important decongestion of the network.

Income tax on dividend payments removal

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^rd, 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.

The Law No. 27,260 revoked the above mentioned disposition so that as from July 23^rd, 2016 all dividends and profits, in cash or in any kind, distributed by companies and other entities established in the country (as is the case of Telecom Argentina), regardless their beneficiary are not subject to the aforementioned tax.

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Qwnership Structure

Nortel Inversora S.A. (“Nortel”), which acquired the majority of the Company from the Argentine government, holds 54.74% of Telecom’s issued common stock. Nortel is a holding company whose common stock (approximately 78% of capital stock) is owned by Sofora Telecomunicaciones S.A. Additionally, Nortel capital stock is comprised of preferred shares that are held by minority shareholders.

As of June 30, 2016, Telecom continued to have 984,380,978 shares issued and 969,159,605 shares outstanding.

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