Fitch Upgrades Telecom Personal to 'A(arg)' & Affirms International Scale IDRs.

BUENOS AIRES, Argentina & MONTERREY, Mexico -- Fitch Ratings has affirmed Telecom Personal S.A.'s (Personal) foreign and local currency Issuer Default Rating at 'B', and the senior unsecured at 'B/RR4', and revised the Rating Outlook of the international scale IDRs to Positive from Stable. Approximately US$200 million in debt is affected by the rating action. Fitch has also upgraded the national scale rating of Personal to 'A(arg)' from 'BBB+(arg)' with a Stable Rating Outlook.

The upgrade in the national scale and the revision of the Rating Outlook to Positive in the international scale reflect the company's growing cash flow, improved operating performance, stable debt levels, and expected overall improvement in the company credit profile. Telecom Personal's ratings reflect its improved financial and operating profile, strong brand recognition and market position, improved customer mix, and implicit support from parent company Telecom Argentina. Increased competition, high capital expenditures, and negative free cash flow generation temper the ratings.

Personal is the most important business segment and operating subsidiary of Telecom Argentina (TEO) in terms of revenue and growth prospects. The strong relationship of Telecom with Personal is reflected by cross default covenants and the financing of Personal by Telecom for up to US$150 million in case of financial needs. The wireless business is strategically important to TEO which is well positioned to take advantage of the fixed-mobile convergence. The wireless business provides growth and revenue diversification to the mature fixed-line business, and at least partially offsets the migration of traffic from fixed to wireless networks. The strategy of growing its customer base on higher average revenue per user (ARPU) post-paid customers improves the revenue mix and its profitability for the long term. Personal is now the most important business unit of TEO in terms of consolidated revenues and, as the mobile business gains scale and matures, should contribute more to cash flow generation. For the first six months of 2006, Telecom's consolidated revenues and EBITDA from Personal's operations in Argentina accounted for 51% and 37%, respectively; and considering its Paraguayan unit Nucleo, revenues and EBITDA accounted for 56% and 42%, respectively.

The entrance of America Movil and the consolidation of the operations of Telefonica Movistar and Movicom Bell South increased competition and accelerated subscriber growth, initially resulting in a loss of market share that stabilized during 2006. Personal grew its subscriber base at a slower pace than the competition, in part due to its strategy of acquiring post-paid customers versus America Movil's CTI unit's strategy of increasing prepaid users. Personal nationwide market share is 30%. The company's strong brand recognition results in strong market share in the northern part of Argentina where Telecom has an incumbent position, with an estimated market share of approximately 40%.

Credit protection measures have improved over the last year, as better than expected subscriber growth has affected overall revenues and EBITDA positively, despite lower EBITDA margins when compared with previous years associated with increased subscriber acquisition costs (SAC). Fitch expects EBITDA margins may tend to improve over the medium term helped by increased service revenues and a reduction in SAC as mobile penetration matures and subscriber growth slows down. Total debt to EBITDA has improved substantially to 2.0 times (x) for the first six months of 2006, from 3.0x in the same period of 2005 as EBITDA continues to grow. Total consolidated debt at June 30, 2006 totaled ARP1,278 million, ARP1,248 owed by Telecom Personal, and the rest in Nucleo.

Personal is the wireless provider of incumbent operator Telecom Argentina S.A. (TEO), providing services in Argentina and Paraguay over a GSM network. The company has 7.7 million users, with an estimated 30% market share in Argentina and a customer mix of 66% prepaid and 34% postpaid as of June 30, 2006. For the full year ended Dec. 31, 2005, consolidated revenues and EBITDA accounted for ARP2.8 billion and ARP378 million, respectively.

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