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Telecom Argentina S A : 1 English translation of the Unaudited Condensed Consolidated Financial Statements as of June 30, 2022 - Form 6-K

Aug 11, 2022

08/11/2022 | 04:37pm BST Message : General Hornos 690 Argentina TELECOM ARGENTINA S.A. INDEX (In millions of Argentine pesos in current currency - Note 1.d) June 30, 27.3 12 12 734,470 10,827 745,297 F-1 CONSOLIDATED INCOME STATEMENTS (In millions of Argentine pesos in current currency, except per share data in Argentine pesos in current currency - Note 1.d) Three-month period 22 22 22 22 22 2,479 4,026 1.c See Note 22 for additional information on operating expenses per function. F-2 (In millions of Argentine pesos in current currency - Note 1.d) Three-month period 4,026 Currency translation adjustments (no effect on Income Tax) (802) 9 - (793) 3,233 F-3 (In millions of Argentine pesos in current currency - Note 1.d) Owners contribution Facultative (2) Equity attributable to non-controlling interest Total Equity 2,154 - Absorption of negative Retained earnings - - - - 2,154 2,154 - Reserves constitution (1) - - 2,154 (1) See Note 20 to these unaudited consolidated financial statements. (2) Correspond to the Facultative Reserves to maintain the capital investments level and the current level of solvency. (3) Correspond to Nucleo's Shareholders (4) See Note 2.b). F-4 (In millions of Argentine pesos in current currency - Note 1.d) Six-month period Net income (loss) for the period 31,879 Allowances deducted from assets 7 9 3,008 75,760 Property, plant and equipment acquisitions (42,170) 27.4 250 (29,751) (73,246) Proceeds from financial debt 2.b (6,049) (3,535) 27,025 (1,975) 21,515 The accompanying notes are an integral part of these unaudited consolidated financial statements. F-5 AS OF JUNE 30, 2022 AND 2021 (*) (In millions of Argentine pesos, except as otherwise indicated) INDEX F-6 Glossary of terms The following explanations are not technical definitions, but to assist the general reader to understand certain terms as used in these unaudited consolidated financial statements. The Company/Telecom Argentina/Telecom: Telecom Argentina S.A. Micro Sistemas/Pem/Cable Imagen/AVC Continente Audiovisual/Inter Radios/Personal Smarthome/Personal Security/NYSSA: Names corresponding to limited companies or limited responsibility companies that are directly or indirectly controlled according to the definition of the General Corporations Law, or were controlled by the Company, directly or indirectly: Micro Sistemas S.A.U., Pem S.A.U., Cable Imagen S.R.L., AVC Continente Audiovisual S.A., Inter Radios S.A.U., Personal Smarthome S.A., Personal Smart Security S.A.U., Negocios y Servicios S.A. Telecom USA/Núcleo/Personal Envíos/Tuves Paraguay/Televisión Dirigida/Adesol/Opalker: Names corresponding to foreign companies Telecom Argentina USA, Inc., Núcleo S.A.E, Personal Envíos S.A., Tuves Paraguay S.A., Televisión Dirigida S.A., Adesol S.A. and Opalker S.A., respectively, companies that are directly or indirectly controlled according to the definition of the General Corporations Law. La Capital Cable/Ver TV/TSMA: Names corresponding to limited companies La Capital Cable S.A., Ver T.V. S.A. and Teledifusora San Miguel Arcángel S.A., respectively, companies that are directly or indirectly associates according to the definition of the General Corporations Law. AFIP (Administración Nacional de Ingresos Públicos): National Public Revenue Administration BYMA (Bolsas y Mercados Argentinos): Buenos Aires Stock Exchange. Cablevisión: Company absorbed by Telecom since January 1, 2018, whose activities are continued by Telecom. CAPEX: Capital expenditures. CNV (Comisión Nacional de Valores): The Argentine National Securities Commission. CPCECABA (Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires): The Professional Council of Economic Sciences of the City of Buenos Aires. CVH: Cablevisión Holding S.A., controlling company of Telecom since January 1, 2018. DFI: Derivate Financial Instruments. DNU (Decreto de Necesidad y Urgencia): Decree of Urgency issued by the Argentine Government. ENACOM (Ente Nacional de Telecomunicaciones): The Telecommunications Regulatory Authority of Argentina. FACPCE (Federación Argentina de Consejos Profesionales en Ciencias Económicas): Argentine Federation of Professional Councils of Economic Sciences. Fintech: Fintech Telecom LCC, a Telecom shareholder. Fixed assets: Includes PP&E, Intangible assets, Goodwill and Rights of use assets. LAD (Ley Argentina Digital): Argentine Digital Law No. 27,078. IAS: International Accounting Standards. IASB: International Accounting Standards Board. ICT Services (Information and Communication Technology services): Services to transport and distribute signals or data, such as voice, text, video and images, provided or requested by third-party users, through telecommunications networks. IFRS: International Financial Reporting Standards, as issued by the International Accounting Standards Board. INDEC (Instituto Nacional de estadísticas y censos): The National Institute of statistics and cense. LGS (Ley de General de Sociedades): Argentine Corporations Law No. 19,550 as amended. Since the enforcement of the new Civil and Commercial Code its name was changed to "General Corporations Law". NYSE: New York Stock Exchange. PEN (Poder Ejecutivo Nacional): The executive branch of the Argentine government. PP&E: Properties, plant and equipment. RECPAM (Resultado por exposición a los cambios en el poder adquisitivo de la moneda): Inflation Adjustment Gain (Loss). Roaming: charges from the use of networks of other national and international operators. RT: Technical resolutions issued by the FACPCE. RT 26: Technical resolution No, 26 issued by the FACPCE, amended by RT29 and RT43. RMB: Official currency of Popular Republic of China. SCMA (Servicio de Comunicaciones Móviles Avanzadas): Mobile Advanced Communications Service. SOF. Secured Overnight Financing VAT: Value-Added Tax. VLG: VLG S.A.U. (formerly VLG Argentina LLC), a company that is a shareholder of the Company and controlled by CVH. In these unaudited consolidated financial statements, unless otherwise stated, Argentine peso amounts are stated in millions. F-7 a) Basis of preparation and significant accounting policies As required by the CNV, the unaudited consolidated financial statements of the Company have been prepared in accordance with RT 26 of FACPCE (and its amendments), which adopted IFRS as issued by the IASB, standards also adopted by the CPCECABA. For the preparation of these unaudited consolidated financial statements, the Company has elected to make use of the option provided by IAS 34 and has prepared them in its condensed form. Therefore, these financial statements do not include all the information required in an annual financial statement and, consequently, they must be read jointly with the annual financial statements as of December 31, 2021, which can be consulted at the Company´s website ( https://institucional.telecom.com.ar/inversores/informacionfinanciera.html ). Therefore, these unaudited consolidated financial statements were prepared following the same accounting policies as in the most recent annual financial statements, except for what is mentioned in Note 27.3. These unaudited consolidated financial statements were prepared including in the consolidation process the following companies: Company (c) Company indirectly acquired on April 5, 2022 for a total consideration of $0.1 million through subsidiary Personal Smarthome S.A. As of June 30, 2022 is a dormant entity. (d) NYSSA is a company acquired on June 1, 2022. For further information, see Note 27.4 to these consolidated financial statements. Data as of June 30, 2022 about the issuer arises from extra-accounting information. The preparation of these unaudited consolidated financial statements in accordance with IFRS requires that the Company's Management make estimates that affect the figures disclosed in the financial statements or its complementary information. Actual results may differ from these estimates. These unaudited consolidated financial statements were prepared in current currency as of June 30, 2022 (see item d) on an accrual basis of accounting (except for the statement of cash flows). Under this basis, the effects of transactions are recognized when they occur. Therefore, income and expenses are recognized at fair value on an accrual basis regardless of when they are received or paid. When significant, the differences between the fair value and the nominal amount of income and expenses are recognized as finance income or expense using the effective interest method. The figures as of December 31, 2021 and for the three and six-month periods ended on June 30, 2022, which are disclosed in these unaudited consolidated financial statements for comparative purposes, are a result of restating the financial statements as of such dates to values in constant currency as of June 30, 2022. This is as consequence of the restatement process of the financial information described in point d). When applicable, certain reclassifications were made for comparative purposes. These unaudited consolidated financial statements as of June 30, 2022, were approved by resolution of the Board of Directors' meeting held on August 9, 2022. F-8 TELECOM ARGENTINA S.A. These unaudited consolidated financial statements contain all disclosures required under IAS 34. Some additional disclosures required by the LGS and/or by the CNV have been also included. b) Segment information An operating segment is defined as a component of an entity that engages in business activities from which it may earn revenues and incur expenses, and whose financial information is available, held separately, and evaluated regularly by the chief operating decision maker. In the case of the Company, the Executive Committee and the Chief Executive Officer ("CEO") are responsible for controlling recourses and for the economic and financial performance of Telecom. The Executive Committee and the CEO have a strategic and operational vision of Telecom as a single business unit in Argentina, according to the current regulatory context of the converged ICT Services industry (adding to the same segment the activities related to the mobile services, internet services, cable television services and fixed telephony services, services governed by the same regulatory framework of ICT Services). To exercise its functions, both the Executive Committee and the CEO receive periodically the economic and financial information of Telecom Argentina and its subsidiaries (in currency of the date of each transaction), that is prepared as a single segment, and evaluate the evolution of business as a results generation unit, administrating the resources in a unique way to achieve the objectives. Regarding costs, they are not specifically appropriated to a type of service, considering that the Company has a single payroll and general operating expenses that affect all services in general (non-specific). On the other hand, decisions on CAPEX affect all the types of services provided by Telecom in Argentina and not specifically one of them. Based on what was previously described and under the accounting principles established in IFRS as issued by the IASB, it was defined that the Company has a single segment of operations in Argentina. Telecom carries out activities abroad (Paraguay, United States of America and Uruguay). These operations are not analyzed as a separate segment by the Executive Committee and the CEO, who analyze the consolidated information of companies in Argentina and abroad (in currency of the date of each transaction), considering that the activities of foreign companies are not significant for Telecom. The operations that Telecom carries out abroad do not meet the aggregation criteria established by the standard to be grouped within the "Services rendered in Argentina" segment, and considering that they do not exceed any of the quantitative thresholds identified in the standard to qualify as reportable segments, they are grouped within the category "Other abroad segments". The Executive Committee and the CEO evaluate the profitability for each reportable segment based on the measure of the Adjusted EBITDA. Adjusted EBITDA is defined as our net (loss) income less income taxes, financial results, Earnings (losses) from associates, depreciation, amortization and impairment of fixed assets. Presented below is the Segment financial information as analyzed by the Executive Committee and the CEO for the six-month periods ended June 30, 2022 and 2021: ☐ Net earnings per share Basic earnings per share is calculated by dividing the net income attributable to owners of the Parent Company by the weighted average number of ordinary shares outstanding during the period. On the other hand, diluted earnings per share is computed by dividing the net income for the period by the weighted average number of common shares issued and to be potentially issued at the end of the period. Since the Company has no dilutive potential common stock outstanding, basic and dilutive earnings per share amounts do not differ. For the three and six-month periods ended June 30, 2022 and 2021, the weighted average number of shares outstanding amounted to 2,153,688,011. d) Financial reporting in hyperinflationary economies Since Argentina has been considered a high-inflation economy for accounting purposes in accordance with IAS 29 since July 1, 2018, the financial information expressed in Argentine pesos is restated in constant currency of 30 June 2022. The table below shows the evolution of the indexes in the last two years and as of June 30, 2022 and 2021 according to official statistics (INDEC) in accordance with Resolution No. 539/18 and the devaluation of the Argentine peso vs. de US dollar for the same years / periods: F-10 Non-cash dividends Based on the powers delegated by Telecom Argentina's Ordinary and Extraordinary Shareholders' Meeting held on April 27, 2022, on June 2, 2022 the Board resolved to distribute non-cash assets dividends of Global Bonds of the Argentine Republic amortizable in US dollars for a nominal value of US$515,000,000: i) Global Bonds of the Argentine Republic amortizable in US dollars maturing on July 9, 2030 (the "2030 Global Bonds") for a nominal value of US$411,145,986 and ii) Global Bonds of the Argentine Republic amortizable in US dollars maturing on July 9, 2035 (the "2035 Global Bonds") for a nominal value of US$103,854,014. Consequently, considering the valuation of the aforementioned bonds at the date of distribution resolved by the Board of Directors, non- cash dividends amounted to $ 31,634 million Argentine pesos, and partially withdraw the "Voluntary reserve to maintain the Company's level of investments in capital assets and the current level of solvency" for such amount. Cash dividends distributed (**) Includes $3,586 of loans that do not represent cash movement. Most of the bank and other financing entities loans subscribed by the Company contain compliance ratios which are usual for this kind of agreements. As of June 30, 2022, Telecom has complied with them. Recent developments of Financial debt of the period as of the date of these unaudited consolidated financial statements are detailed below: Telecom Argentina Global Programs for the issuance of Notes In connection with the Notes Global Program for a maximum outstanding amount of US$3,000 million or its equivalent in other currencies, the Company announced the subscription of new series of notes. The amount of the Notes finally issued and its main characteristics are detailed below: F-16 Variable annual rate (Badlar plus spread of 1.5%) Quarterly basis $2,400 Telecom Argentina's General Extraordinary Shareholders' Meeting held on April 27, 2022, resolved, among others: (i) to extend for 5 years the term of the Notes Global Program for a maximum outstanding amount of US$3,000 million or its equivalent in other currencies ("the Program"); and (ii) to extend from December 28, 2022 and for an additional 5 years the delegation to the Board of Directors of the powers to determine and modify the terms and conditions of the Program and of the Notes to be issued under it within the maximum amount in circulation authorized, with powers to sub-delegate powers to some of its members and/or officials of the first line of management. Bank and other financing entities loans Banco Santander Río S.A. Loan During March and June 2022, the Company entered into two loan agreements with Santander Río Bank S.A. for a total amount of $3,500 million and $1,000 million, respectively. Total principal will be settled by one installment at maturity dates, which will be on March 9, 2023 and June 22, 2023, respectively. The loans bear interest that will be paid in a monthly basis from its issuance dates until its maturity dates at a fixed rate of 44.5% and 47%. China Development Bank Shenzhen Branch ("CDB") Loan During the first semester of 2022 the Company has subscribed new tranches for a total of RMB 244 million, equivalent to $4,279 million. On July 27, 2022 the Company has subscribed a new tranche for a total of RMB 36.7 million, equivalent to $700 million. Industrial and Commercial Bank of China (Argentina) S.A.U. ("ICBC") Loan On January 21, 2022, the Company repaid the remaining balance of a loan agreement with ICBC Bank for $69 ($67 of principal and $2 of interest). BBVA Argentina Bank S.A. Loans ("BBVA") During March 2022, the Company subscribed two loan agreements with BBVA for a total amount of $1,000 million and $1,500 million, respectively. Total principal will be settled by one installment at maturity dates, which will be on March 10, 2023 and May 17, 2023, respectively. The loans bear interest that will be paid in a monthly basis from its issuance dates until its maturity dates at a fixed rate of 43.9% and 44.85%. International Finance Corporation ("IFC") loan On June 28, 2022 the Company executed a proposal for a credit line to finance the expansion of fixed and mobile network coverage with IFC for a total amount of up to US$184.5 million, as requested in a timely manner by the Company (the "Loan"). The Loan will accrue compensatory interest payables semiannually for periods that are due at an annual rate equal to 6-month SOF plus the margin of 6.5 percentage points. Likewise, the principal will be payable in eleven consecutive semi-annual equal installments from August 2024 and final maturity in August 2029. On July 15, 2022, the Company received the disbursement for the total amount, which was received net of debt issuance expenses. Loans for purchase of equipment Cisco Systems Capital Corporation During the first semester of 2022, the Company had additions for US$13.7 million, equivalent to $1,500 million, due between February and July 2026. In July 2022, the Company had additions for US$1 million, equivalent to $131, due in August 2026. F-17 Export Development Canada (EDC) On January 3, 2022, the Company submitted a proposal for an export credit line for a total amount of up to US$23.4 million to the following entities: (i) JPMorgan Chase Bank, N.A., as initial lender, residual risk guarantor and agent of the facility, (ii) JPMorgan Chase Bank, N.A., Buenos Aires branch as an onshore custody agent, and (iii) JPMorgan Chase Bank, N.A. and EDC as lead co-organizers, which was accepted on the same date. The line of credit is guaranteed by EDC, the official export credit agency of Canada. The funds received will be used to finance up to 85% of the value of certain imported goods and services, up to 50% of the value of certain national goods and services and the total payment of the EDC surplus equivalent to 14.41% of the total amount committed by the lenders under the line of credit. On June 14, 2022, the Company received a disbursement for a total amount of US$17 million, equivalent to $2,090 million, maturing in December 2026. The principal received accrues interest at an annual rate equal to 6-mont LIBO plus 1.20 percentage points. Finnvera On March 31, 2022, the Company received a disbursement for a total amount of US$11.4 million (US$9.7 million were received, because US$1.7 million corresponding to the premium equivalent to 14.41% of the total amount committed by the lenders under the credit line were deducted from the initial disbursement). With this disbursement, the total amount committed for this line of credit is completed. Peugeot On June 10, 2022, the Company executed a proposal for a credit line to finance the acquisition of 350 utility vehicles for a total amount of $1,042.7 million plus VAT. For each acquisition, the Company will pay an advance of 40% of the value, financing the remaining 60% in 36 consecutive monthly installments at the rate agreed at the time of each acquisition through PSA Finance Argentina and/or Banco BBVA. On June 27, 2022, the Company paid an advance for 198 utility vehicles for a total amount of US$669 million, financing $391 million. The agreed compensatory interest annual rate was 42.9%. On July 14, 2022, the Company paid an advance for 45 utility vehicles for a total amount of US$152 million, financing $88.9 million. The agreed compensatory interest annual rate was 47.9%. NOTE 12 - SALARIES AND SOCIAL SECURITY PAYABLES June 30, (42,114) (*) In 2022 includes $8,818 corresponding to the adjustment made in the Income tax affidavit of 2021 (see "Income Tax - Inflation Adjustment for Tax Purposes"). In 2021 includes the effect of the change in the income tax rate provided for in Law No. 27,630 for approximately $(58,300). Income Tax - Inflation Adjustment for Tax Purposes Given the judicial precedents detailed in Note 15 to the consolidated financial statements as of December 31, 2021 (section "Income tax - Actions for recourse filed with the Tax Authority") related to the different mechanisms used to recognize the effect of inflation in the assessment of income tax, on May 6, 2022, the Company filed the Income Tax affidavit for fiscal year 2021, considering the deduction of the restatement of the tax amortizations of all its fixed assets and intangible assets in accordance with the provisions of articles 87 and 88 of the Income Tax Law and allocating the computable tax loss carryforward from previous years in accordance with the update mechanism provided for in article 25 of the mentioned law. F-19 TELECOM ARGENTINA S.A. This, given the fact that the relationship that arises between the tax determined without the full application of the aforementioned adjustment mechanisms for tax inflation and the actual result subject to tax for the year, causes the application of an effective tax rate for the year 2021 which is confiscatory. If the Company would not resort to the full application of the adjustment mechanisms for tax inflation, a tax would be determined whose effective rate would consume 100% of the Company's income and would even reach its own generating capital, yielding an effective rate that would amount to 146.6%, which would exceed any reasonable tax limit, thus setting up a case of confiscation that seriously damages their constitutional rights and guarantees. Therefore, on the occasion of the presentation of the Income Tax affidavit for the fiscal period 2021, the Company made a presentation to AFIP, under the protection of the fiscal secrecy provided in the procedural law, in order to preserve its rights in a framework of transparency in its actions. As a consequence of the foregoing, the income tax charge for the period includes a lower charge of $7,517 million ($8,818 million in constant currency as of June 30, 2022), determined considering the weighting of the probability of occurrence of certain variables according to the aforementioned jurisprudential precedents. Due to the fact that the evaluation of whether or not a situation of confiscatory tax burden arises can only be carried out at the end of each fiscal year, the Company has not applied this criterion in the calculation of assets and liabilities for deferred income tax, nor in the estimation of the tax charge for the three and six-month periods ended June 30, 2022. It should be noted that, if new information became available, the Company may modify its judgments in relation to recognized tax liabilities, in which case such changes would impact on the income tax for the period in which such assessment is made. The Company's Management, with the assistance of its legal and tax advisors, believes that the arguments presented to AFIP in such reimbursement claims follow the same criteria as those considered by the Argentine Supreme Court in the precedents cited above, among others. Therefore, the Company believes that it has strong grounds to defend the criteria applied. NOTE 14 -OTHER TAXES PAYABLES June 30, (171) Telecom and its subsidiaries offset the financial assets and liabilities to the extent that such offsetting is provided by agreements and provided that Telecom has the intention to make such offsetting, in accordance with requirements established in IAS 32. The main financial assets and liabilities offset correspond to transactions with other national and international operators including interconnection, carriers and Roaming (being offsetting a standard practice in the telecommunications industry at international level that Telecom and its subsidiaries apply regularly). Offsetting is also applied to transactions with agents. Fair value hierarchy and other disclosures The measurement at fair value of the financial instruments of Telecom are classified according to the three levels set out in IFRS 13: - Level 1: Fair value determined by quoted prices (unadjusted) in active markets for identical assets or liabilities. - Level 2: Fair value determined based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (e.g. as prices) or indirectly (e.g. derived from prices). - Level 3: Fair value determined by unobservable inputs where the reporting entity is required to develop its own assumptions. Financial assets and liabilities recognized at fair value as of June 30, 2022 and December 31, 2021, and the level of hierarchy are listed below: June 30, 2022 252 (1) are included in Cash and cash equivalents, Investments and Guarantee of financial operations included in Other receivables F-22 TELECOM ARGENTINA S.A. The methods and assumptions used to estimate the fair values of each class of financial instrument above are detailed on Note 22 to annual financial statements as of December 31, 2021, except for other liabilities whose fair value was determined by the variation between the quoted values of certain public securities in foreign currency and Argentine pesos, for which their valuation qualifies as Level 2. The Company also has certain financial instruments that are not measured at fair value for which the book value approximates their fair value, except for: Financial Debt a) The fair value of Notes traded in active markets was measured based on quoted market prices at the end of the reporting period. As a result, its valuation classifies as Level 1. b) The fair value of Notes that are not traded in an active market was measured based on quotes provided by first-tier financial entities, so their valuation qualifies as Level 2. c) Fort the rest of the financial debt, the fair values were calculated based on cash flows discounted using a current lending rate, so as they are classified as level 3. NOTE 19 - PURCHASE COMMITMENTS The Company has entered into various purchase commitments with domestic and foreign suppliers amounting to approximately $130,995 as of June 30, 2022 (of which $35,803 corresponds to PP&E commitments). NOTE 20 - EQUITY (a) Capital Stock As of June 30, 2022 and December 31, 2021, the capital stock of Telecom Argentina amounts to $2,153,688,011, represented by the same number of common book-entry shares with nominal value of $1 peso, as detailed below: Class of Shares 2,153,688,011 As of the date of these unaudited consolidated financial statements, all the shares of Telecom Argentina are authorized by the CNV for public offering. Class B Shares are listed and traded on the leading companies' panel of the BYMA and the American Depositary Shares (ADS) representing 5 Class "B" shares of the Company are traded on the NYSE under the symbol TEO. (b) Provisions of the Telecom Ordinary and Extraordinary Shareholders' meeting The Ordinary and Extraordinary Shareholders' meeting of Telecom held on April 27, 2022 decided, among other issues, the following: (a) (b) to approve the Board of Directors' proposal expressed in current currency of March 31, 2022 using the National Consumer Price Index (National CPI), as provided by CNV Resolution No. 777/18, in respect to the unallocated retained earnings as of December 31, 2021 of $10,056,956,479 Argentine pesos ($ 11,797 million in current currency as of June 30, 2022): (i) to allocate $502,847,824 Argentine pesos ($ 556 million in current currency as of June 30, 2022) to "Legal Reserve", (ii) to allocate $9,554,108,655 Argentine pesos ($ 11,241 million in current currency as of June 30, 2022) to the "Facultative Reserve to maintain the capital investments level and the current level of solvency", and (iii) the reclassification of $18,817,248,927 Argentine pesos ($ 20,814 million in current currency as of June 30, 2022) from the "Facultative Reserve to maintain the capital investments level and the current level of solvency" to the "Contributed Surplus"; F-23 TELECOM ARGENTINA S.A. (c) approved to delegate to the Board of Directors the power to cancel before June 30, 2022 the "Facultative Reserve to maintain the capital investments level and the current level of solvency" in an amount such that it allows distributing a combination of Global Bonds 2030 and Global Bonds 2035 as non-cash assets dividends for a market value at the date of determination of its value of up to $41,000 million. For further information on the distribution of dividends see Note 2.b. NOTE 21 - REVENUES 30,485 (*) Includes ($90) and ($295) corresponding to net losses generated by DFI in the six-month period ended June 30, 2022 and 2021, respectively. (**) Includes ($170) and ($992) corresponding to net losses generated by DFI in the six-month period ended June 30, 2022 and 2021, respectively. (***) Includes $149 corresponding to income related to decreases in financial assets at amortized cost in the six-month period ended June 30, 2021. NOTE 24 - BALANCES AND TRANSACTIONS WITH COMPANIES UNDER SECTION 33 - LAW No. 19,550 AND RELATED PARTIES a) Controlling Company CVH is the controlling company of Telecom Argentina, holding directly and indirectly 28.16% of the capital stock of the Company. Additionally, both VLG S.A.U. (company controlled by CVH) and Fintech Telecom, LLC, contributed to the Voting Trust, according to the Shareholders' Agreement, shares representing 10.92% of the capital of the Company, respectively, so the shares subject to such agreement represent 21.84% of the capital of the Company (the "Shares in Trust"). According to the Voting Trust Agreement, the trustee appointed by CVH must vote the Shares in Trust as instructed or voted by CVH with respect to all issues except in respect of certain matters subject to veto under the Shareholders' Agreement. For further details on the Voting Trust Agreement and the Shareholders' Agreement, see Note 27 to the consolidated financial statements as of December 31, 2021. b) Related Parties For the purposes of these unaudited consolidated financial statements, related parties are those individuals or legal entities which are related to Telecom in terms of IAS 24. F-25 (4,249) The transactions discussed above were made by Telecom under the same conditions than would have been obtained from unaffiliated third parties. When Telecom's transactions represented more than 1% of its total shareholders' equity, they were approved according to Law No. 26,831, the Bylaws and the Executive Committees' Faculties and Performance Regulation. F-26 NOTE 25 - RESTRICTIONS ON DISTRIBUTION OF PROFITS Under the LGS, the by-laws of the Company and rules and regulations of the CNV, a minimum of 5% of net income for the year in accordance with the statutory books, plus/less previous years' adjustments and accumulated losses must be appropriated by resolution of the shareholders to a legal reserve until such reserve reaches 20% of the outstanding capital (common stock) plus inflation adjustment of common stock. NOTE 26 - ECONOMIC ENVIRONMENT The Company operates in a complex economic environment, with a strong volatility in the main variables, both at the national and international level. Since the World Health Organization declared COVID-19 a global pandemic on March 11, 2020, governments around the world, and in particular the Argentine Government, have put in place various measures throughout the years 2020 and 2021 to curb the spread of the virus. The implementation of such measures led to a marked decline in production levels and economic activity. During the first half of 2022, given the considerable decline in infection levels thanks to the large-scale vaccination campaigns that reached the whole population, and that the current cases mostly entail mild symptoms, the Ministry of Health issued Resolution No. 705 which waived the obligation to keep social distancing, establishing recommendations for general care at work, educational and social environments and at public transport, which include the use of face masks and ventilation in indoor settings. On the other hand, the international conflict that started in March 2022 between Ukraine and Russia also led to a fall in financial markets, an increase in the prices of raw materials and certain commodities (for example wheat and oil, among others), causing an increase in inflation rates, fluctuations in the exchange rate of foreign currencies, and an increase in interest rates. At the national level, the impact of the situation described above and the prevailing political conditions had an adverse effect on the Argentine economy in general and on the stock market in particular, mainly causing: i) an inflationary acceleration and higher devaluation of the Argentine peso, being the inflation rate for the six-month period of 36.2% and the variation of the Banco Nación Divisas $/US$ exchange rate of 21.9%; for the six-month period; ii) volatility in the stock market in which the Company operates. The market price of its shares in nominal values increased by 12.0% half-yearly, while in constant currency it decreased by 17.8%, due to the fact that the market price of shares is not usually directly affected by the inflation (It is important to note that the value of the shares has begun to recover at the date of presentation of these unaudited consolidated financial statements); iii) greater exchange restrictions on the access to the FX Market (MULC, for its Spanish acronym), which could affect the Company's ability to access it and also affect the value of foreign currency in existing alternative markets. The gap as of June 30, 2022 between the MULC and the existing alternative markets (Electronic Payment Market "MEP dollar") amounts to 97.5%; and iv) an increase in country risk and interest rates. These situations generate various consequences in the economic and financial situation of Telecom, such as a decrease in sales revenues (given the impossibility of transferring accumulated inflation to prices) and increases in labor costs that follow the inflationary increase, despite the efforts of the Company in reducing its costs. This results in operating loss as of June 30, 2022 of $8,535 million, compared to a profit of $8,698 million as of June 30, 2021, showing a total decrease of $17,233 million. On the other hand, it is worth mentioning that, as mentioned in previous paragraphs, given that the market price of the company's shares does not directly follow the inflationary increase, the Company value may occasionally be lower than the equity book value. This occurs mainly because fixed assets increase their values based on the inflation rate. The fact that these situations are maintained and last over time, may imply the need to review the valuation of fixed assets. Consequently, the Company's Management will continue to permanently monitor the evolution of the aforementioned situations and the evolution of the variables that affect its business in order to determine the potential impacts on its economic and financial position. Therefore, the Company's unaudited consolidated financial statements must be read in the light of these circumstances. F-27 Decree No. 690/20 - Amendment to the LAD On August 22, 2020, the PEN issued Decree No. 690/20 ("Decree N° 690/20") amending the LAD. Decree No. 690/20 declared ICT Services (which includes fixed and mobile telephony services, cable television and Internet) as well as access to telecommunications networks for and between licensees as "essential and strategic competition public services", and empowered the ENACOM to ensure accessibility. Decree No. 690/20 further established that the prices of: (i) the essential and strategic competition public ICT Services, (ii) the prices of those services provided in accordance with the Universal Service and (iii)the prices of those services determined by the ENACOM for public interest reasons, shall be regulated by ENACOM. Moreover, Decree No. 690/20 established that ENACOM is the agency responsible for the enactment of any regulation related to the ICT's PBU. Finally, Decree No. 690/20 suspended any price increases or changes set or announced by the ICT's licensees from July 31, 2020 to December 31, 2020. Decree No. 690/20 has been ratified by the Argentine Congress under Law No. 26,122 and has been regulated through ENACOM Resolutions No. 1,466/20 and 1,467/20. Resolution No. 1,466/20 allowed ICT licensees providing Internet access services, subscription broadcasting services through physical, radio-electric or satellite link, fixed telephony services and mobile telecommunications services -in all cases in their different and respective modalities- to increase retail prices for services up to 5% during January 2021. In order to establish the percentages approved, licensees must consider the prices effective as of July 31, 2020 as the price of reference. Such Resolution also provides that ICT Services Licensees may request a higher increase on an exceptional basis in accordance with the provisions of Section 48 of the LAD. Resolution No. 1,467/20 regulated the Compulsory Universal Telecommunication Service ("PBU") provided by Decree No. 690/20 for the different services provided by ICT licensees, establishing the price and the characteristics of each service plan, namely: ● ● PBU-TP: Compulsory Universal Basic Provision of subscription television services by physical or radio-electric or satellite link. The Company began to implement an increase in prices as from January 2021, in order to match the increase in its costs due to the inflation. Nevertheless, it failed to transfer to the price of its services the inflation accumulated in the period March-December 2020, as a result of different measures provided by the PEN. Additionally, the Company initiated legal proceedings before the Federal Court of Appeals on Administrative Litigation Matters challenging the constitutionality of Decree No. 690/20 and the aforementioned ENACOM Resolutions, which was notified to the PEN on October 7, 2021. In this context, the Company sought to obtain a precautionary measure suspending the application of the aforementioned ENACOM regulations and Decree No. 690/20. On January 29, 2021, the Company´s petition was denied and the precautionary measure rejected. The Company appealed such decision and, on April 30, 2021, the Chamber of the Federal Court of Appeals on Administrative Litigation Matters decided by majority to accept the Company's appeal, revoke the first instance court's decision and, consequently, grant the preliminary injunction requested by the Company, ordering the suspension of the effects of sections 1, 2, 3, 4, 5 and 6 of Decree No. 690/20 and of ENACOM resolutions provided as a consequence and their non-applicability to the Company. This preliminary injunction was initially granted for a period of six months and then extended for an additional six-month period until April 21, 2022, and an additional six-month period until October, 2022. As supported by the preliminary injunction granted, the Company increased the prices of its services in order to continue to match the increase in its costs due to the inflation. In reaching its decision, the Court considered, that the "configuration of circumstances prima facie lead to serious and founded questioning of Decree 690/2020's reasonability standard and legitimacy and of ENACOM's resolutions adopted as a consequence, due to the direct adverse effects they have on Telecom Argentina's property rights, which derive from Information and Communication Technology services provision, under a free competition system, ruled, authorized and granted (depending on the case), by the National State itself". The PEN and ENACOM filed appeals against the aforementioned decision of the Federal Court of Appeals on Administrative Litigation Matters, which were denied on June 18, 2021. F-28 TELECOM ARGENTINA S.A. On June 29, 2021, the PEN and ENACOM filed an appeal before the Argentine Supreme Court of Justice. As of the date of these consolidated financial statements, a decision on these legal proceedings remains is pending. Additionally, on March 18, 2022, the Federal Administrative Court of Appeals - Chamber II, obtained the first instance resolution dated October 21, 2021 that had extended the term of the precautionary measure. Against said ruling, both the PEN and the ENACOM filed extraordinary appeals, which are being substantiated. The Company, with the assistance of its legal advisors, is analyzing the actions that may be necessary in order to protect its rights. The Company's Management and its legal advisors, consider that the Company has solid legal arguments to support its position and that there is a reasonable likelihood that this matter will result in a favorable outcome for the Company, notwithstanding the fact that at this stage it is not possible to predict the final outcome of the claim. b) Spectrum incorporated to the Company under the corporate reorganizations of Telecom and the merger with Cablevisión In December 2017, the Company was served with ENACOM Resolution No. 5,644-E/2017, whereby that agency decided, among other things, to authorize the transfer in favor of Telecom Argentina of the authorizations and permits to use frequencies and allocations of numbering and sign-posting resources to provide the services held by Cablevisión, pursuant to effective regulations, and the agreement executed by Nextel Communications Argentina S.R.L. on April 12, 2017 (IF-2017-08818737-APN-ENACOM#MCO), whereby Telecom Argentina, in its capacity as absorbing company of Cablevisión, shall, within a term of two years as from the date on which the merger was approved by the CNDC and the ENACOM, return the radio-electric spectrum that exceeds the limit set under Section 5 of Resolution No. 171-E/17 issued by the Ministry of Communications. During 2019 Telecom Argentina proceeded with a partial return of the radio-electric spectrum that exceeds the limit set (40 Mhz).and completed it in March 2022 (40 Mhz). Moreover, on March 15, 2022, the ENACOM issued Resolution No. 419/2022 through which it accepted the return of spectrum by Telecom Argentina under the terms of ENACOM Resolution No. 5644-E/2017. Consequently, the Company recognized as of June 30, 2022 an impairment of $1,853 million in Depreciation, amortization and impairment of fixed assets line. c) ENACOM Resolution No. 798/2022 - On-demand allocation of spectrum blocks Through Resolution No. 798/2022 published in the Official Gazette on May 19, 2022, the ENACOM began the process for the on-demand allocation of spectrum blocks of the 2500-2570 MHz and 2620-2690 MHz frequencies for the provision of SCMA services. Through said Resolution, the ENACOM also approved the bidding terms and conditions and the list of locations for which there is spectrum available for the provision of SCMA services. On May 31, 2022, Telecom made a filing requesting the allocation of spectrum blocks under this process. As of the date of these unaudited consolidated financial statements, said allocation request has still not been approved. 2. Offers for Irrevocable Call Option on the minority Shares of Open Pass S.A. On December 29, 2021, the subsidiary Micro Sistemas received from two shareholders of Open Pass S.A. (a company that provides IT services related to software development and maintenance, with which Micro Sistemas has a contract for the use and development of the electronic wallet platform) offers for irrevocable call options for a total of 6,999,580 of the shares (representing 15% of total Open Pass S.A. capital stock). On January 4, 2022 Micro Sistemas accepted the offers by paying US$0.7 million as consideration for the granting of said purchase options. The call options could be exercised by Micro Sistemas, at its sole discretion, during a period of twelve (12) months from the date of acceptance. The call options include, together with the shares, the assignment and transfer of all the economic and political rights inherent therein. If the options are exercised, the price to be paid for the shares has been determined at US$7.5 million. As of the date of these unaudited consolidated financial statements, the call options were not executed. F-29 Assets classified as held for sale On March 21, 2022, the Company executed a pre-sale agreement for its building "Costanera" located at Las Heras 2502, Autonomous City of Buenos Aires, Argentina, for a total of US$ 6 million. On April 27, 2022, the Company's Board of Directors approved the proposal for the sale of the building. Subsequently, on June 6, 2022, an agreement was executed for the sale whereby the granting of the corresponding conveyance deed for the ownership and possession of property is subject to the condition precedent that the Company shall obtain ENACOM's authorization for the sale of the property due to the fact that said building is used for rendering ICT Services (the estimated term for obtaining ENACOM's authorization is 18 months as from the date of the sale agreement). As of June 30, 2022, the Company received an advance payment of US$ 2 million. Due to the fact that the carrying amount will be recovered primarily through a sale transaction, rather than through its continued use, that the building is available as is for immediate sale, and that its sale is highly likely, the asset complies with IFRS 5 guidelines to be considered a non-current asset held for sale. In addition, considering that the carrying amount of the assets associated with the sale exceeds its recoverable value, the Company, as of June 30, 2022, recognized an impairment of $ 1,250 million disclosed under Depreciation, Amortization, and Impairment of Fixed Assets. 4. Acquisition of NYSSA On June 1, 2022, the Company acquired 100% of the issued shares of NYSSA (represented by 10,000 shares, of $1,000 per share and represents one vote each), whose corporate purpose is to provide internet access services in Mendoza, Argentina, through a license granted by the ENACOM. The acquisition is expected to position the Company in Cuyo region, Argentina, thus increasing broadband clients. Likewise, it will be integrated with the investment in sites budgeted by the Company in the province of Mendoza for the mobile service, generating the convergence of both products and unifying the Flow and Personal brands. The base price of the transaction was US$3.4 million. This price has been determined based on the number of NYSSA clients and is subject to adjustments established in the contract. As of June 30, 2022 the Company has paid the equivalent of 40% of the base price for a total amount of US$1.4 million (equivalent to $284.3 million). The remaining balance will be paid in four equal and consecutive annual installments, and will accrue an interest on balances of 6% per year in dollars. The installments may be paid, at the option of the Company, in Argentine pesos determined based on the variation between the quotation values of certain public securities in foreign currency and Argentine pesos established in the contracts. The Company recognized the debt at fair value, considering that the payments will be in Argentine pesos. The debt has been recognized as "Other liabilities" and the effects of the variation in its fair value will be recognize in "Financial discounts on assets, debts and others" within "Other financial results, net". As of June 30, 2022 the debt amounts to $512 million, of which $130 are current and $382 million are non-current. The Company's Management has made a preliminary determination of the fair value of the assets acquired and liabilities assumed (net assets) as of June 1, 2022 and the determination of the goodwill. Consequently, the values of assets and liabilities shown below are preliminary. Acquisition-related costs are recognized as expenses. Details of the purchase consideration, the net assets acquired and goodwill in currency of June 1, 2022 are as follows: Purchase consideration (i) Goodwill recognized represents the excess of the preliminary purchase consideration transferred over the preliminary fair value of the identifiable net assets acquired. The goodwill is attributable to the synergies that are expected to arise after the acquisition of the subsidiary. It is not amortized and its recoverable value must be tested for impairment at least annually. Goodwill is not deductible for tax purposes. It has been allocated to the Argentine UGE. Revenue and profit contribution of NYSSA The acquired business contributed revenues of $41 million and net loss of $1 million to the Group for the period from June 1, 2022 to June 30, 2022. NOTE 28 - SUBSEQUENT EVENTS TO JUNE 30, 2022 Term Loan On July 18, 2022, the Company pre-paid the remaining balance under the contract Term Loan executed on October 8, 2018 for US$142.2 million (US$140 million of principal and US$2.2 million of interest). The pre-payments made by the Company during the term of the contract did not generate penalties. BBVA Loan On July 13, 2022, the Company subscribed a loan agreement with BBVA Argentina Bank S.A. for a total amount of $211.4 million. Total principal will be settled by one payment at maturity date, which will be in July 2025. The loan bears interest that will be paid in a monthly basis from its issuance date until its maturity date at a fixed rate of 47.9%. Number Portability Regulation Through Resolution No. 1514/2022, published on July 26, 2022 in the Official Gazette, the ENACOM ordered a 60-calendar-day extension of the period for postponing the start of operations and implementation of Number Portability for Services. of Fixed Telephony that was established in Resolution No. 32/2022. Banco Santander Río Loan ("Santander") On July 27, 2022, the Company executed an addendum to Santander loan signed on August 18, 2022 for a total amount of $4,000 million, and agreed to change the amortization schedule of principal maturity that would take place on August 18, 2022, by deferring it to July 27, 2023. Additionally, a new fixed interest rate of 55% annual nominal was renegotiated from July 27, 2022. Interests in Joint Operations On July 27, 2022, the Ministry of the Chief Cabinet of the Province of Buenos Aires, communicated the UTE Ertach S.A. - Telecom Argentina S.A., the completion of the agreement, which was finalized on July 28, 2022. In addition, it requested to confirm which links covered as of today by the UTE, could be covered by each company that is part of it. Carlos Moltini (In millions of Argentine pesos or as expressly indicated) 1. General considerations As required by CNV regulations, the Company has prepared its unaudited consolidated financial statements as of June 30, 2022 under IFRS. As provided under Resolution No. 777 issued by the CNV on December 28, 2018, this Report discloses the comparative balances for the three and six-month periods ended June 30, 2021, restated to current currency as of June 30, 2022. The table below shows the evolution of the National Consumer Price Index (National CPI with the characteristics identified in Note 1.d) to the unaudited consolidated financial statements) of the last two years and as of June 30, 2022 and 2021 according to official statistics (INDEC) and the Banco Nación US dollar exchange rate used for the preparation of this operating and financial review and prospects and the accompanying financial statements: As of December During 1H22 consolidated revenues showed a decrease of 10.4% (-$30,621 vs. 1H21) amounting to $264,577. Albeit the greater demand for services, consolidated revenues decreased mainly because the rate of inflation for the last twelve months amounted to 64.0% and the Company did not transfer a portion of this effect to its prices. Services revenues amounted to $247,527 in 1H22 (-9.7% vs. 1H21) and represent 93.6% and 92.8% of consolidated revenues of 1H22 and 1H21, respectively. Mobile Services revenues amounted to $103,718 in 1H22 (-$5,904 vs. 1H21), Internet Services revenues amounted to $59,308 in 1H22 (-$2,243 vs. 1H21), Cable Television Services revenues amounted to $48,849 in 1H22 (-$9,635 vs. 1H21) and Fixed and Data Services revenues amounted to $33,404 in 1H22 (-$9,041 vs. 1H21). Equipment revenues decreased 19.6%, amounting to $17,050 in 1H22 and represent 6.4% of consolidated revenues. Consolidated Revenues include $33,412 and $130,351 in 1H22 and 1H21, respectively, related to the effect generated by the restatement in current currency as of June 30, 2022. Mobile Services Mobile Services revenues amounted to $103,718 (-$5,904 or -5.4% vs. 1H21), being the main business in term of service revenues (41.9% and 40.0% of services revenues in 1H22 and 1H21, respectively). The effect generated by the restatement in current currency as of June 30, 2022 included in mobile services revenues amounted to $13,024 and $48,381 in 1H22 and 1H21, respectively. Mobile services revenues in Argentina amounted to $94,957 (-$2,639 or -2.7% vs. 1H22), due to a decrease in the ARPU, partially offset by an increase of 4.2% in the number of customers. Mobile services customers in Argentina amounted to 20.1 million and 19.3 million as of June 30, 2022 and 2021, respectively. The main ratios related to the services provided to these customers were: ● As of June 30, 2022 and June 30, 2021, 58% of total customers are prepaid customers, and 42% are postpaid customers. ● ● The monthly average revenue per user ("ARPU") is $779.2 pesos per month in 1H22 (vs. $861.2 pesos per month in 1H21), representing a decrease of 9.5%. The effect generated by the restatement in current currency as of June 30, 2022 included in ARPU amounted to $95.6 pesos and $379.9 pesos in 1H22 and 1H21, respectively. ● The average churn rate per month positioned into 2.4% in 1H22 (vs. 1.5% average in 1H21). Regarding infrastructure, the Company continued to enhance the mobile Internet experience of its customers through the deployment of its 4G and 4G+ network throughout the country, reaching more than 14.6 million customers with 4G devices throughout the country. The traffic carried by 4G technologies in 1H22 corresponds to the 95% of the total traffic. Likewise, the number and variety of mobile offers with more data services to improve the connectivity of our customers were deepened, expanding the benefits of the plans to increase performance and their use. In this scenario, during 2H22 the WiFi Pass service was launched, which allows customers who are also subscribed to Internet service to activate free of charge gigabytes for exclusive use to share Internet from their handsets with any other device, without consuming data from their original plan. Mobile services revenues generated in Paraguay amounted to $8,761 (-$3,265 or -27.1% vs. 1H21) due to decrease in ARPU in constant currency, partially offset by the appreciation of the Guaraní against the Argentine Peso. II Internet Services Internet services revenues amounted to $59,308 in 1H22 (-$2,243 or -3.6% vs. 1H21) driven mainly by the 5.3% decrease in broadband ARPU, which amounted to $2,240 pesos in 1H22 (vs. $2,365.1 pesos in 1H21). The effect generated by the restatement in current currency as of June 30, 2022 included in ARPU amounts to $281.7 pesos and $1,046.6 pesos in 1H22 and 1H21, respectively. It should be noted that customers with service of 50Mb or higher represent 78% and 64% of the total customer base as of June 30, 2022 and 2021, respectively. Within this range, there are customers who have plans of 100 Mb, 300 Mb and 1,000 Mb that as of June 30, 2022 amounted to 1,349,380, 249,688 and 11,480, respectively (+80.2% as a whole compared to 1H21). This evidences the significant migration of clients with service of 50Mb to higher speeds in order to satisfy their demand for greater digitization. Internet services subscriber base amounted to 4.2 million 1H22 customers. Churn rate per month positioned into 1.5% and 1.7% as of June 30, 2022 and 2021, respectively. The effect generated by the restatement in current currency as of June 30, 2022 included in Internet Services revenues amounts to $7,544 and $27,232 in 1H22 and 1H21, respectively. Cable Television Services Cable Television Services revenues amounted to $48,849 in 1H22 (-$9,635 or -16.5% vs. 1H21). The variation is mainly due to a 13.9% decrease in ARPU, amounting to $2,239.3 pesos in 1H22 (vs. $2,602. pesos in 1H21). The effect generated by the restatement in current currency as of June 30, 2022 included in ARPU amounts to $292.8 pesos and $1,108.4 pesos in 1H22 and 1H21, respectively. Subscriber base in Argentina remains stable amounting to 3.3 million customers as of June 30, 2022, of which 1.2 million are subscribed to Flow. Churn rate per month of Cable television services positioned into 1.3% and 1.0% as of June 30, 2022 and June 30, 2021, respectively. Flow continue evolving with new facilities, innovative and quality content based on alliances with renowned national and international production companies as Disney+, Paramount+, Star+, Netflix and Amazon Prime Video, making Flow the lead entertainment comprehensive platform in Argentina. The services provided by Flow include TV, series, films and documentaries on demand and exclusive co-productions, as well as music and gaming. In addition, the consolidation of Esports as a locally consumed entertainment platform continued and will continue to grow as customer needs evolve. As part of the technological evolution of the Flow platform, the "Integrated Services Digital Broadcasting" (ISDBT) solution for digitizing the service began to be progressively available to the pay TV analog customer base. This new solution allows customers to have a digital service through their traditional cable connection without the need for a decoder. The deployment began in the cities of Neuquén, La Plata, Córdoba and Mar del Plata and areas surrounding each city and will continue to expand during the second half of 2022. The effect generated by the restatement in current currency as of June 30, 2022 included in Cable television services revenues amounts to $6,171 and $25,870 in 1H22 and 1H21, respectively. Fixed Telephony and Data Services Fixed Telephony and Data Services revenues amounted to $33,404 in 1H22 (-$9,041 or -21.3% vs. 1H21). The effect generated by the restatement in current currency as of June 30, 2022 included in Fixed and Data Services revenues amounts to $4,209 and $18,735 in 1H22 and 1H21, respectively. The average monthly revenue billed per user ("ARPU") of fixed telephony services amounted to $1,015.1 pesos in 1H22 (vs. $1,076.7 pesos in 1H21). The effect generated by the restatement in current currency as of June 30, 2022 included in ARPU amounts to $131.7 pesos and $477.5 pesos in 1H22 and 1H21, respectively. The B2B segment developed new solutions to help companies to boost their business and continue to evolve digital transformation in this new context. Additionally, the new security solution "Strengthening users" has been developed, which aims to reduce the risks of cybersecurity attacks on companies. This solution is intended to raise awareness of computer security, while measuring and analyzing the results to reduce the risks to which network users are exposed. III Furthermore, during the last quarter the corporate segment launched a new comprehensive communication campaign for its Cloud vertical. It reflects how the company continues to support companies in the process of digital transformation they are going through, helping in the evolution and growth of their e-commerce, logistics and stock movement platforms, among other services. Equipment Equipment revenues amounted to $17,050 (-$4,158 or -19.6% vs. 1H21). This variation is mainly due to a decrease in handsets sold as compared to 1H21 (-17%), partially offset by an increase in handset average sale prices as compared to 1H21. It is important to highlight that the Company, in terms of devices, continued to promote the updating of the handsets with financed offers and special discounts focused on the convergence of services. The effect generated by the restatement in current currency as of June 30, 2022 included in Equipment revenues amounts to $2,224 and $9,295 in 1H22 and 1H21, respectively. ● Operating costs (without depreciation, amortization and impairment of fixed assets) Operating costs (without depreciation, amortization and impairment of fixed assets) amounted to $183,731 in 1H22, which represents a decrease of $11,022 or -5.7% vs. 1H21. These lower costs are related with the decrease in interconnection and transmission costs, programming and content costs, cost of equipment and handsets, taxes and fees with the Regulatory Authority, commissions and advertising and fees for services, maintenance, materials and supplies, partially offset by an increase in employee benefit expenses and severance indemnities and bad debt expenses. The effect generated by the restatement in current currency as of June 30, 2022 included in operating costs amounts to $24,703 and $88,016 in 1H22 and 1H21, respectively. The operating costs breakdown is mainly as follows: Employee benefit expenses and severance payments Employee benefit expenses and severance payments amounted to $60,519 in 1H22 (+$2,792 or +4.8% vs. 1H21). The increase was mainly due to increases in salaries agreed by the Company with several trade unions for unionized employees, and also for non-unionized employees, together with related social security charges, and higher severance payments, partially offset by a decrease in net payroll of 2.9% vs 1H21, amounting to 22,385 employees as of June 30, 2022. The effect generated by the restatement in current currency as of June 30, 2022 included in employee benefit expenses and severance payments amounts to $7,228 and $25,496, as of 1H22 and 1H21, respectively. Interconnection and transmission costs Interconnection and transmission costs, which also includes charges for roaming, cost of international outbound calls and lease of lines and circuits, amounted to $8,118 in 1H22 (-$2,780 or -25.5% vs. 1H21). The decrease is mainly due to the new dynamics of the business that implies an optimization of links and sites partially compensated by an increase in the exchange rate in relation to the services fixed in US$. The effect generated by the restatement in current currency as of June 30, 2022 included in interconnection and transmission costs amounts to $1,018 and $4,829 in 1H22 and 1H21, respectively. Fees for services, maintenance, materials and supplies Fees for services, maintenance, materials and supplies amounted to $30,711 in 1H22 (-$2,914 or -8.7% vs. 1H21). The variation is mainly explained by the efficiency and management of resources through which maintenance and material costs decreased by $2,717 compared to 1H21. The effect generated by the restatement in current currency as of June 30, 2022 included in fees for services, maintenance, materials and supplies amounts to $4,641 and $15,550 in 1H22 and 1H21, respectively. Taxes and fees with the Regulatory Authority Taxes and fees with the Regulatory Authority, including turnover tax, municipal taxes and other taxes and fees, decreased, amounting to $20,370 in 1H22 (-$2,484 or -10.9% vs. 1H21). This decrease corresponds mainly to the effect of lower revenues in 1H22 vs. 1H21. Taxes and fees with the Regulatory Authority represent 7.7% of consolidated revenues in 1H22 and 1H21. The effect generated by the restatement in current currency as of June 30, 2022 included in taxes and fees with the Regulatory Authority amounts to $2,555 and $10,097 in 1H22 and 1H21, respectively. Commissions and advertising Commissions (including commissions paid to agents, collection commissions and other commissions) and advertising amounted to $14,765 in 1H

Chase Bank Investments

21 Investments

Chase Bank has made 21 investments. Their latest investment was in China Merchants Bank as part of their Corporate Minority - P2P on March 3, 2021.

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Chase Bank Investments Activity

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Date

Round

Company

Amount

New?

Co-Investors

Sources

3/22/2021

Corporate Minority - P2P

China Merchants Bank

$410M

Yes

3

2/23/2021

PIPE

NavInfo

$618.56M

Yes

2

5/5/2008

Series E

Deem

$100M

Yes

8/17/2000

Unattributed VC - II

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$99M

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0

8/10/2000

Unattributed VC - III

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$99M

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0

Date

3/22/2021

2/23/2021

5/5/2008

8/17/2000

8/10/2000

Round

Corporate Minority - P2P

PIPE

Series E

Unattributed VC - II

Unattributed VC - III

Company

China Merchants Bank

NavInfo

Deem

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Amount

$410M

$618.56M

$100M

$99M

$99M

New?

Yes

Yes

Yes

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Co-Investors

Sources

3

2

0

0

Chase Bank Portfolio Exits

11 Portfolio Exits

Chase Bank has 11 portfolio exits. Their latest portfolio exit was Lund International on May 10, 2019.

Date

Exit

Companies

Valuation
Valuations are submitted by companies, mined from state filings or news, provided by VentureSource, or based on a comparables valuation model.

Acquirer

Sources

5/10/2019

Acquired

$99M

1

1/17/2019

Acquired

$99M

4

3/30/2018

Divestiture

Chase Bank - Kenya

$99M

1

2/12/2004

Acquired

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$99M

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10

4/21/2003

Acquired

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$99M

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0

Date

5/10/2019

1/17/2019

3/30/2018

2/12/2004

4/21/2003

Exit

Acquired

Acquired

Divestiture

Acquired

Acquired

Companies

Chase Bank - Kenya

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Valuation

$99M

$99M

$99M

$99M

$99M

Acquirer

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Sources

1

4

1

10

0

Chase Bank Acquisitions

2 Acquisitions

Chase Bank acquired 2 companies. Their latest acquisition was Merchant Customer Exchange - Payments Technology on March 10, 2017.

Date

Investment Stage

Companies

Valuation
Valuations are submitted by companies, mined from state filings or news, provided by VentureSource, or based on a comparables valuation model.

Total Funding

Note

Sources

3/10/2017

$99M

Acquired Unit

1

5/2/2011

Debt

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$99M

$99M

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10

Date

3/10/2017

5/2/2011

Investment Stage

Debt

Companies

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Valuation

$99M

$99M

Total Funding

$99M

Note

Acquired Unit

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Sources

1

10

Chase Bank Partners & Customers

10 Partners and customers

Chase Bank has 10 strategic partners and customers. Chase Bank recently partnered with Instacart on July 7, 2022.

Date

Type

Business Partner

Country

News Snippet

Sources

7/25/2022

Partner

United States

Instacart and Chase deliver new Instacart Mastercard credit card

Instacart 's officials stated that they 've partnered with Chase for the Instacart credit card to offer yet another way to access rewards both on and off the Instacart platform .

1

4/25/2022

Partner

United States

Chase continues partnerships with DoorDash and Lyft

However , with the renewed partnership , cardholders can continue to earn up to 10X points with Lyft and complimentary DoorDash DashPass for a minimum of one year , depending on the card .

1

4/13/2022

Partner

United States

1

4/13/2022

Partner

United States

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10

4/5/2022

Partner

United Kingdom

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10

Date

7/25/2022

4/25/2022

4/13/2022

4/13/2022

4/5/2022

Type

Partner

Partner

Partner

Partner

Partner

Business Partner

Country

United States

United States

United States

United States

United Kingdom

News Snippet

Instacart and Chase deliver new Instacart Mastercard credit card

Instacart 's officials stated that they 've partnered with Chase for the Instacart credit card to offer yet another way to access rewards both on and off the Instacart platform .

Chase continues partnerships with DoorDash and Lyft

However , with the renewed partnership , cardholders can continue to earn up to 10X points with Lyft and complimentary DoorDash DashPass for a minimum of one year , depending on the card .

Subscribe to see more

Subscribe to see more

Subscribe to see more

Subscribe to see more

Sources

1

1

1

10

10

Chase Bank Team

28 Team Members

Chase Bank has 28 team members, including former Chief Financial Officer, Tom Ferree.

Name

Work History

Title

Status

Julie Novack

Founder

Former

Tom Ferree

Chief Financial Officer

Former

Elliot Friedman

Chief Financial Officer

Former

Mac Thompson

Chief Financial Officer

Former

Radhika Duggal

Chief Marketing Officer, Managing Director

Former

Name

Julie Novack

Tom Ferree

Elliot Friedman

Mac Thompson

Radhika Duggal

Work History

Title

Founder

Chief Financial Officer

Chief Financial Officer

Chief Financial Officer

Chief Marketing Officer, Managing Director

Status

Former

Former

Former

Former

Former

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