Telecom Argentina (TEO) Risk Analysis

The Argentine government has historically exercised significant influence over the economy, and telecommunications companies have operated in a highly regulated environment. The Argentine government may promulgate numerous, far-reaching regulations affecting the economy and telecommunications companies, for example, the enaction of Decree No. 690/20 in August 2020 (see "Item 4-Information on the Company-Regulatory Authorities and Framework-Regulatory Framework-Decree No. 690/20 - Amendment to the LAD - Controversy"), and the nationalization of the private pension and retirement system in 2008 (see "-The Argentine government may exercise greater intervention in private sector companies, including Telecom Argentina"). Additionally, the agreements between the Argentine government, the Paris Club, and the IMF have been fundamental for restructuring Argentina's debt and stabilizing its economy. See "-Argentina's ability to obtain financing from international markets is limited, which could affect its capacity to implement reforms and sustain economic growth." The Argentine government is expected to pursue negotiations for a new program with additional financing to accelerate the removal of foreign exchange restrictions. However, the success of these measures will depend on the continued implementation of economic reforms and the political support needed to maintain macroeconomic stability and sustainable economic growth. We cannot assure the Argentine government will be successful in future negotiations with the IMF, which could affect the Argentine government's ability to implement reforms and public policies and boost economic growth, or the impact the result of such renegotiations will have in Argentina's ability to access international capital markets (and indirectly in our ability to access those markets). Moreover, the long-term impact of these measures and any future measures taken by the Argentine government on the Argentine economy, as a whole and in the telecommunication sector remains uncertain. It is possible that such reforms could be disruptive to the economy and adversely affect the Argentine economy and the telecommunications industry, and consequently, our business, results of operations and financial condition. We are also unable to predict the measures that the Argentine government may adopt in the future, and how they will impact on the Argentine economy and our results of operations and financial condition. In the event of any economic, social or political crisis, companies operating in Argentina may face the risk of strikes, expropriation, nationalization, mandatory amendment of existing contracts, and changes in taxation policies including tax increases and retroactive tax claims. In addition, Argentine courts have sanctioned modifications on rules related to labor matters, requiring companies to assume greater responsibility for the assumption of costs and risks associated with sub-contracted labor and the calculation of salaries, severance payments and social security contributions. Since we operate in a context in which the governing law and applicable regulations change frequently, also as a result of changes in government administration, it is difficult to predict if and how our activities will be affected by such changes. On the other hand, since assuming office on December 10, 2023, the Milei administration has announced a range of economic and policy reforms, which impact on the future economic and political environment is uncertain. No assurances can be made as to the policies that may be implemented by the Argentine administration, or that political developments in Argentina, will not adversely affect the Argentine economy or our business, financial condition or results of operations. In addition, we cannot assure that future economic, regulatory, social and political developments in Argentina will not impair our business, financial condition or results of operations, or cause the market value of our shares to decline. On December 21, 2023, the Milei administration issued Decree of Necessity and Urgency No. 70/2023, entitled "Bases para la Reconstrucción de la Economía Argentina" (Foundations for the reconstruction of the Argentine economy) establishing various initiatives for the deregulation of the economy and reduction of the size of the public administration and public expenses. Such decree remains mostly in effect. The decree includes a series of legal, institutional, tax, and criminal reforms affecting various sectors of the economy. Additionally, the decree declares a public emergency in economic, financial, fiscal, social security, defense, tariff, energy, health and social matters until December 31, 2025, extendable for two additional years, and delegates numerous legislative powers to the PEN for the duration of the public emergency. This decree is subject to the subsequent legislative control established by Section 99, paragraph 3, of the Argentine Constitution and Law No. 26,122, which provides that the decree shall remain in force until it is rejected by both Houses of the Argentine Congress. On March 14, 2024, the Senate rejected the decree, thus preventing it from being fully approved by the Argentine Congress. The Milei administration also submitted to the Argentine Congress a significant number of reforms through the omnibus bill, entitled "Bases y Puntos de Partida para la Libertad de los Argentinos" (Foundations and Starting Points for the Freedom of the Argentine People or "Ley de Bases"). After months of negotiation, on June 28, 2024, the bill finally passed, and the Ley de Bases was finally approved. The key points entailed by this approval are the following: - Emergency: Ley de Bases declares public emergency on administrative, economic and energy matters for a one-year period. Also, legislative powers are delegated to the PEN in the terms of Section 76 of the Argentine Constitution. The PEN must report monthly and in detail to the Argentine Congress about the exercise and the results of this delegation;- State Reform: Regarding the reorganization of the state, the law establishes the bases of legislative delegations, namely: i) to improve the functioning of the state; ii) to reduce the oversizing of the state structure; and iii) to ensure effective internal control in the national public administration. Also, regarding the privatization of public companies, the law determined that the companies "subject to total or partial privatization with concession" are: Energía Argentina S.A.; Intercargo S.A.U.; Agua y Saneamientos Argentinos S.A.; Belgrano Cargas y Logística S.A.; Railway Operating Society S.E. ("SOFSE"); and Corredores Viales S.A. Likewise, reforms and modifications were introduced to laws No. 19,549 (National Administrative Procedures), No. 25,164 (Regulation of National Public Employment), and No. 24,185 (Collective Labor Agreements);- Incentive Regime for Large Investments: The creation of the "Régimen de Incentivos para Grandes Inversiones" (Incentive Program for Large Investments) which establishes a legal and regulatory framework to promote investment in productive projects in Argentina in certain strategic sectors. This program will provide incentives, legal certainty and protection of acquired rights for projects that meet the established requirements. It is declared that large investments under the Incentive Regime for Large Investments ("RIGI") are of national interest and benefit Argentina, the Argentine Provinces, the City of Buenos Aires and the municipalities. Its objectives are to encourage "large investments", promote economic development, strengthen competitiveness, increase exports and services, generate employment and provide stability to future investments. Throughout the sections, the deadlines, the subjects authorized to participate, the specific requirements of the RIGI, tax incentives and exchange incentives are regulated;- Concessions: The possibility of the Argentine government to grant public work concessions to private or public entities for the construction, conservation or exploitation of public works and for the provision of public services through the collection of rates, tolls or other remunerations;- Energy: Various modifications are included in laws No. 17,319 (Hydrocarbons), 24,076 (Natural Gas) and 26,741 (Fiscal Oil Fields). The National Gas and Electricity Regulatory Entity is created, replacing the Electricity Regulatory Entity ("ENRE") and the Gas Regulatory Entity ("ENARGAS"). On the other hand, the PEN is empowered to adapt laws No.15,336 (Electrical Energy) and No. 24,065 (Electrical Regulatory Framework); and - Labor modernization: Various modifications are introduced in laws No. 24,013 (Employment), No. 20,744 (Employment Contract Law) and No. 26,727 (Agrarian Work). Likewise, Law No. 25,323 (which increased the amount of compensation in cases where the employment relationship was not registered or was poorly registered, but the claim was filed after the termination of the employment relationship) is repealed. Modifications include the extension of the trial period or the exemption from sanctions and criminal actions for those employers who have not made the corresponding contributions, in exchange for regularizing the employee. Additionally, the workers will be considered direct employees of the employer who registers the employment relationship, and it will no longer be possible to assimilate a direct relationship between a third-party employee and the contracting user company that leverages claims for salary differences. In addition, as of September 2, 2024, Decree No. 777/2024 reduced the PAIS tax ("Impuesto Para una Argentina Inclusiva y Solidaria") from 17.5% to 7.5%, only for the acquisition of foreign currency for purposes of paying imports of goods and freight. In accordance with Law No. 27,541, the validity of the PAIS Tax ended on December 22, 2024. On September 11, 2024, the lower house of the Argentine Congress ratified President Milei's veto to the bill that sought to improve retirement benefits. Therefore, the decision over the bill became final and the Argentine Congress was barred from reconsidering the bill for the remainder of the parliamentary year. On October 9, 2024, the lower house also ratified the presidential veto of legislation that would have shored up public university funding, which also prevented the Argentine Congress from insisting on this initiative for the remainder of the parliamentary year. The social, political and economic impact of the reforms and measures announced by the Argentine government to date, the consequences of Ley de Bases and other laws enacted, and the impact of future reforms and measures that may be proposed remains uncertain. The ambitious deregulation scheme purported to be enforced by means of Decree No. 70/2023 and Ley de Bases could affect our business, results of operations and financial condition. We cannot assure that future economic, regulatory, social and political developments in Argentina will not adversely affect our business, financial condition or results of operations, or cause the decrease of the market value of our securities.

Extreme weather phenomena caused by climate change may damage our infrastructure, disrupt our ability to build and maintain parts of our network, affect our suppliers in providing the necessary products and services to ensure the quality and coverage of our network, or require us to incur significant costs to enhance the climate resilience of our infrastructure. Any of these situations could delay our network deployment plans, disrupt service to our customers, increase our costs, and negatively impact our operational results. While we do not currently consider the potential losses or costs associated with the physical effects of climate change to be material, accurately and precisely forecasting future impacts remains challenging due to the dynamic nature of climate change and its effects on the environment and we can provide no assurances that such losses or costs will not become material in the future.

Since we generate a substantial portion of our revenues in Argentine Pesos (the functional currency of Telecom), any devaluation may negatively affect the U.S. dollar value of our earnings while increasing, in Peso terms, our expenses and capital expenditures denominated in foreign currency. The Argentine Peso has been subject to significant devaluation against the U.S. dollar in the past and may be subject to fluctuations in the future. The value of the Argentine Peso compared to other foreign currencies is dependent, among other factors, on the level of international reserves maintained by the BCRA, which have also shown significant fluctuations in recent years. The Argentine macroeconomic environment, in which we operate, has been affected by the continued devaluation of the Argentine Peso, which in turn has and could continue to have a direct impact on our financial and economic position. The value of the Argentine Peso has fluctuated significantly over time. In 2024, the Argentine Peso continued to depreciate against the U.S. dollar. However, the Peso devalued at a slower rate compared to the previous year, with a monthly depreciation rate of around 2%. According to Banco de la Nación Argentina, the Peso/dollar exchange rate stood at P$1,032 per US$1.00 as of December 31, 2024, evidencing an appreciation of the U.S. dollar against the Argentine Peso of approximately 27.7% from its value of P$808.45 per dollar on December 31, 2023 (compared to 356.3% and 72.5% in the years ended December 31, 2023 and 2022, respectively). If we analyze the behavior of the average exchange rate, during 2024 it stood at P$925.2 per dollar. As a result of the Argentine Peso's increased volatility, the Argentine government and the BCRA implemented several measures to stabilize its value. The continued devaluation of the Argentine Peso during the past years has had and continues to have a negative impact on the payment of foreign currency denominated debts by local private sector debtors to unrelated foreign entities, and has also led to an increase in inflation, which in turn has a direct impact on real wages. The devaluation has also negatively impacted businesses whose success is dependent on domestic market demand and adversely affected the Argentine government's ability to honor its foreign debt commitments. Higher restrictions to access the official FX Markets were imposed starting 2020, with a view to reducing the loss of international reserves generated by a greater demand of U.S. dollars by individuals and companies. These restrictions have resulted in the creation of multiple reference exchange rates, such as the "blue chip swap" rate (contado con liquidación), MEP dollar (Mercado Electrónico de Pagos), and soybean dollar (dólar soja), among others. Some of these exchange rates are only available to certain markets participants, or in the activities in which the currency is held. In addition, dealing with certain of these reference rates might directly affect the access of the Company to the Argentine Single and Free Exchange Market ("MULC" for its Spanish acronym). The requirements to access these different exchange rates, as well as the actual exchange rate of each option, vary significantly from one another. In previous years, the BCRA has established certain requirements to access the local exchange market to repay cross-border financial debts, particularly, for principal payments on loans and securities with amortization schedules between October 15, 2020, and December 31, 2021. As of the date of this Annual Report, this framework has not been renewed. It is not possible to guarantee that requirements of this kind will not be reinstated in the future by the BCRA or that other regulations with similar effects will be issued that would require the Company to refinance its obligations, which in turn could have a negative impact on the Company, and in particular, in the Company's ability to meet its debt obligations. See "Risks Relating to Telecom Argentina's Shares and ADSs-Restrictions on transfers of foreign exchange and the repatriation of capital from Argentina may impair your ability to receive dividends and distributions on, and the proceeds of any sale of the Class B Shares underlying the ADSs and "Item 10-Additional Information-Foreign Investment and Exchange Controls in Argentina-Specific provisions for inward remittances-External financial indebtedness". In October 2022, the former administration issued the General Resolution No. 5,271/2022 creating the Argentine System of Imports ("SIRA") and the Argentine System of Imports and Foreign Payments of Services ("SIRASE"), an import licensing and approval system created to preserve hard currency reserves within the BCRA. All products and services were under the scope of the SIRA framework, which required Argentine importers to submit a SIRA or SIRASE request for all imports before shipping products or contracting services from abroad. The implementation of this system ultimately generated major import approval delays and barriers to foreign exchange availability for Argentine companies during 2023 and, because of the inability for companies to access the MULC, this was the only time in recent years when many Argentine companies had to extend or renegotiate their commercial debts with foreign suppliers. Due to this situation, in 2023, we were unable to access the MULC to meet most of our foreign currency obligations for imports of goods and services essential to our operations, leading to the accumulation of commercial debt. If past due, this additional commercial debt was treated as financial debt for purposes of calculating the Company's financial ratios, in accordance with the definitions incorporated in some of our debt contracts. On December 26, 2023, the Milei administration issued General Joint Resolution No. 5,466/2023, establishing a new Statistical System for Imports (SEDI) and repealing the previous framework under General Resolution No. 5,271/2022. As of the date of this Annual Report, the accumulated commercial debt from 2023 has been settled. The Milei administration implemented policies aimed at modifying Argentina's macroeconomic conditions, such as reducing the fiscal deficit, reforming the National State, privatizing public companies and rationalizing the current spending of the national administration. These measures and any future measures may generate volatility in economic and financial conditions. To address the issue of increasing commercial debts, under the Milei administration, the BCRA has been offering U.S. dollar-denominated securities (BOPREAL, standing for Bond for the Reconstruction of a Free Argentina in Spanish), which can only be subscribed by importers with overdue debts for goods with customs registration and/or services rendered until December 12, 2023. As an alternative, BOPREALs may have been used for easier access to foreign currency, whether through the collection of interest or principal upon maturity, or through the sale of the bonds in the secondary market in exchange for dollars paid abroad. Importers of goods and services may not repay debts incurred prior to December 12, 2023, by any other means, except for dollars held abroad, without jeopardizing access to the official exchange market. Pursuant to current BCRA rules, importers will not be entitled to access the MULC for 90 days if they have conducted exchange transactions involving the sale/purchase of securities (other than BOPREALs) settled in dollars abroad. In this regard, between January and May 2024, the BCRA completed the Series 1, 2 and 3 BOPREAL auctions issuing their maximum amounts of US$5,000 million, US$2,000 million and US$3,000 million, respectively. Series 3 of BOPREAL was also qualified for subscription by those who have debt related to payment of dividends (BCRA Communication "A" 7999) and comply with certain conditions. Given the options currently provided by the BCRA, we managed the stock of commercial debt that was accumulated due to the aforementioned restrictions. We participated in the auctions of BOPREAL 1 and 2 Series during January and February 2024. The bonds allowed us to agree on a settlement of the existing commercial debt with our main vendors, which we negotiated with each counterparty on a one-by-one basis. The success of the government measures is uncertain and any further depreciation of the Argentine Peso or our inability to acquire foreign currency could have a material adverse effect on our financial condition and results of operations. We cannot predict the effectiveness of these measures, nor whether, or to what extent, the value of the Argentine Peso may depreciate or appreciate against the U.S. dollar or other foreign currencies, nor our ability to meet our liabilities denominated in foreign currencies, or how these uncertainties will affect demand for the services we provide. Furthermore, no assurance can be given that, in the future, no additional currency or foreign exchange restrictions or controls will be imposed. Existing and future measures may negatively affect Argentina's international competitiveness, discouraging foreign investments and lending by foreign investors or increasing foreign capital outflow which could have an adverse effect on economic activity in Argentina, and which, in turn, could adversely affect our business and results of operations. Depreciation of the Argentine Peso against major foreign currencies may have a material adverse effect on our financial condition and results of operations and an adverse impact on our capital expenditure program and increase the Argentine Peso amount of our trade payables and borrowings denominated in foreign currencies. As of December 31, 2024, P$2,627,952 million of our liabilities net were denominated in foreign currencies. Despite that Telecom seeks to manage the risk of devaluation of the Argentine Peso, by entering from time to time into certain DFI agreements and futures contracts to hedge some of its exposure to foreign currency fluctuations, Telecom remains highly exposed to risks associated with the fluctuation of the Argentine Peso. In addition, the devaluation of the Argentine Peso and foreign exchange restrictions may affect compliance with our covenants. See "-Risks Relating to Telecom and its Operations-Restrictive covenants in Telecom's outstanding indebtedness may restrict its ability to pursue its business strategies." Any restrictions on transferring funds abroad imposed by the Argentine government could undermine our ability to pay dividends on our ADSs or make payments (of principal or interest) under our outstanding indebtedness in U.S. dollars, as well as to comply with any other obligation denominated in foreign currency. See "Item 10-Additional Information-Foreign Investment and Exchange Controls in Argentina".

On September 1, 2019, the Argentine government issued Executive Decree No. 609/19 (as amended) which, inter alia, reinstated certain foreign currency exchange restrictions, most of which had been progressively repealed as from 2015. Decree No. 609/19 was further regulated, amended and complemented by several regulations issued by the BCRA (included, but not limited to, Communication "A" 6844, as further amended, supplemented and restated). Since then, the Argentine government implemented monetary and foreign exchange control measures that included restrictions on the transfer of funds abroad, including dividends, without prior approval by the BCRA or fulfillment of certain requirements. In line with the restrictions that were in place in the past, the BCRA issued new regulations setting forth certain limitations on the flow of foreign currency into and from the Argentine foreign exchange market, aimed both at generating economic stability and supporting the country's economic recovery. On April 30, 2020, the BCRA issued Communication "A" 7001 (as amended by Communication "A" 7030 and Communication "A" 7042 and as further amended and supplemented from time to time) setting forth certain limitations on the transfer of securities into and from Argentina. Pursuant to Communication "A" 7001 access to the Argentine foreign exchange market for the purchase or transfer of foreign currency abroad (for any purpose) shall be subject to BCRA's prior approval, if the individual or entity seeking access to the Argentine foreign exchange market has sold securities which settled in foreign currency or transferred any such securities to foreign depositaries during the immediately preceding 90 calendar days. Further, Communication "A" 7001 sets forth that the individual or entity must undertake not to perform any such sale or transfer during the succeeding 90 days after such access. In these cases, the Depositary for the ADSs may hold ADS holders' Argentine Pesos and may cannot convert them into foreign currency. In addition, Communication "A" 7106 placed certain restrictions on foreign exchange transactions carried out by individuals, specifically with regards to payments with credit cards in foreign currency or with debit cards made abroad. Under Communication "A" 7106, it was also established that non-residents are not allowed to sell securities executed abroad in the local stock market in exchange for foreign currency. We cannot predict how the current restrictions on foreign transfers of funds may change after the date hereof and whether they may limit our ability to fulfill our commitments in general and, in particular, our obligations underlying the ADSs. In addition, any future adoption by the Argentine government of restrictions to the movement of capital out of Argentina may affect the ability of our foreign shareholders and holders of ADSs to obtain the full value of their Class B Shares and ADSs and may adversely affect the market value of the ADSs.

Our industry is subject to significant changes in technology and the introduction of new products and services. We cannot predict the effect of technological changes on our business. New services and technological advances related to the telecommunications, cable television, internet, digital solutions and Fintech Services industries are likely to offer additional opportunities to compete against us on the basis of cost, quality or functionality. It may not be practicable or cost-effective for us to replace or upgrade our installed technologies in response to our competitors' actions. Responding to such change may require us to devote substantial capital to the development, procurement or implementation of new technologies, and may depend on the final cost in local currency of imported technology and our ability to obtain additional financing. No assurance can be given that we will have the funds to make the capital expenditures to improve our systems, compete with others in the market or replace equipment used in connection with our businesses. Moreover, internet, cable television and mobile telephony services are characterized by rapidly changing technology, evolving industry standards, changes in customer preferences and the frequent introduction of new services and products. To remain competitive, we must invest in network, constantly upgrade our access technology and software for the internet service market, improve the commercial offers and the user experience and continue to enhance our mobile networks by expanding our network. There can be no guarantees that our attempts to innovate and diversify our business will be successful. Future technological developments may result in decreased customer demand for certain of our services or even render them obsolete. In addition, as new technologies develop, equipment may need to be replaced or upgraded or network facilities (in particular, mobile and internet network facilities) may need to be rebuilt in whole or in part, at substantial cost, to remain competitive. These enhancements and the implementation of new technologies will continue requiring increased capital expenditures.

The effects of, and any damage caused by, exposure to an electromagnetic field were and are the subject of careful evaluations by the international scientific community, but until now there is no scientific evidence of harmful effects on health. We cannot rule out that exposure to electromagnetic fields or other emissions originating from wireless handsets will not be identified as a health risk in the future. Telecom complies with the international security standards established by the World Health Organization and Argentine regulations -which are similar and mandatory for all Argentine mobile operators. Our mobile business may be harmed as a result of any future alleged health risk. For example, the perception of these health risks could result in a lower number of customers, reduced usage per customer or potential consumer liability, all of which could have a material adverse effect on our financial condition and results of operations.