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TEO- Telecom Argentina SA


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"From Telecom Italia Call: Will Get €2B from Asset Sales, Italian, Brazilian Towers, Says Received Signed Unsolicited Offer for Telecom Argentina"

This news seems to be flying under the radar...

 

Dominant Telecom Co in Argentina

valued around 7 PE.

Potential dividend distribution by EOY 2013

 

I'll post more later...but wanted to get this out to everyone since the price is not reflecting the news announced just 30 mins ago!

 

 

 

 

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From today's WSJ:

BUENOS AIRES—As head of a hedge fund that specializes in distressed debt, David Martinez has had lots of practice trying to figure out when an asset's value has been beaten down so much that it is a buy. He has just made an unusual call: Invest in Argentina. Mr. Martinez's investment group, Fintech Advisory, plans to buy Telecom Argentina TECO2.BA +1.23% and related assets for $960 million from Telecom Italia, TIT.MI +1.91% which is selling its Argentine unit to pay down debt. Mr. Martinez confirmed the purchase Friday.

 

"Argentina presents incredible long-term growth opportunities, in my view the highest in Latin America," said Mr. Martinez in an interview. "There is tremendous value in the company. Clearly Argentine values are depressed, but the long-term potential is overwhelming."

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  • 4 weeks later...

TEO currently trades at $18.50 / share

around a 6 PE and

has positive net cash on the balance sheet ( rare for a telecom co.)

 

dividend uncertainty, political risk and inflation weighing on valuation.

 

Political risk could diminish in 2015 with a new admin.

 

If this traded in line with other telco's there is at least 50% upside.

 

Take a look

 

 

 

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touché!

 

I had a feeling that was coming.

 

This is worth a quick read:

http://online.wsj.com/news/articles/SB10001424052702304868404579190051195934082

 

"BUENOS AIRES—As head of a hedge fund that specializes in distressed debt, David Martinez has had lots of practice trying to figure out when an asset's value has been beaten down so much that it is a buy. He has just made an unusual call: Invest in Argentina."

 

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  • 2 weeks later...
  • 1 month later...

"S&P CAPITAL IQ LOWERS OPINION ON ADSS OF TELECOM ARGENTINA TO SELL FROM HOLD

(S&P Capital IQ)

We reduce our 12-month target price by $5 to $15, based on revised P/E and peer EV/EBITDA analysis. We maintain our 2013 earnings per ADS forecast of $2.91, but reduce '14's by $0.19 to $2.54 and '15's by $0.14 to $2.73. Argentina's currency depreciated sharply yesterday, and we are concerned regarding further depreciation in the currency and the Argentina's current economic stability. While we expect solid wireless revenue growth from higher postpaid penetration, we look for inflation to remain at high levels and operating costs to increase."

 

So I was supposed to hold at $20 a share and now sell at $15? No thanks...

 

 

 

 

 

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  • 1 month later...

In my opinion, the political "macro" environment in Argentina overwhelms any individual company fundamentals.  Most public companies trade significantly below what a similar company would trade for in Chile or Brazil for a reason.  A "multi year time frame" might not be long enough...I believe you have to be willing to hold companies through entire political cycles, which could take significantly more than several years.  There have been modest improvements on the political front recently, but it is far from clear how the government will handle continued reserve depletion without further devaluation or significantly reduced fiscal spending...

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I understand your macro point but draw a different investment conclusion.

 

2015 could bring a more "free market" administration in Argentina. Also, I like the fact that TEO has a  large contrarian value fund who has significant skin in the game now and experience in Argentina. I believe he will be an advocate for change and shareholder friendly actions.

 

We will see how it goes...

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I get that too.  Don't forget a year or two before the last elections, people were also saying a more "free market" administration could win...All I am saying is be sure to have a clearly thought out plan B...simply identifying securities trading significantly below "intrinsic" value in Argentina and holding them long term can be a risky proposition...

 

I havent looked at TEO in a long time.  I thought NTL held the controlling shares...

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  • 2 weeks later...

I'm not sure how cheap this looks to me.

 

In USD, they have about 600m of cash on the b/s, they earned around 400m in 2013 and trade at about 4bln. About 10x earnings. Verizon trades at 11-12x earnings and doesn't have any of the risks of operating in Argentina.

 

Is it the fact that they are overcapitalized and can optimize their capital structure?

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  • 3 weeks later...

Just saw a headline that Howard Marks bought some TEO.

 

Earnings Out and Dividend Announced:

 

http://finance.yahoo.com/news/telecom-argentina-announces-consolidated-first-130100275.html

 

"Other Relevant Matters

 

The Board of Directors of Personal, in its meeting held on April 23th, 2014 resolved to distribute P$1,100 million (equivalent to P$3.54 per share) as cash dividends, partially applying the Reserve for Future Cash Dividends created by the General Ordinary and Extraordinary Unanimous Shareholders Meeting held the same day. Moreover, it resolved that this cash dividend distribution should be paid in two installments: the first one of P$600 million to be made available to its shareholders (Telecom Argentina and Nortel Inversora) as from May 8th 2014 and the second one of P$500 million to be made available as from June 10th, 2014."

 

 

 

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