Telecom Argentina: A Contrarian Play on Latin American Telecom Growth Amid Volatility

The telecom sector in Latin America has long been a battleground for investors—marked by macroeconomic turbulence, regulatory uncertainty, and inflationary pressures. Yet amid this chaos, Telecom Argentina (TEO) has quietly emerged as a contrarian growth story, its Q1 2025 results revealing a company poised to capitalize on undervalued opportunities. With revenue diversification, margin improvements, and a strategic push into 5G, Telecom Argentina offers a compelling entry point for investors willing to navigate near-term risks for long-term rewards.

The Undervalued Catalysts: Revenue Resilience and Margin Strength

Telecom Argentina’s Q1 results underscore a shift from survival mode to sustainable growth. Consolidated revenue surged 27.8% YoY to P$1.36 trillion, driven by the acquisition of Telefónica Móviles Argentina (TMA) and organic expansion in mobile and broadband services. But what truly stands out is the 2.8-percentage-point jump in EBITDA margins to 33.1%, reflecting cost discipline and operational synergies.

This margin expansion is underappreciated. While peers in the region battle margin compression due to inflation and underinvestment, Telecom Argentina’s integration of TMA has unlocked economies of scale. Take mobile services: Telecom’s standalone margin rose to 34.1%, while TMA’s margin (25.1%) signals untapped upside as synergies are fully realized. Combined with ARPU growth of 19.4% in TMA’s mobile segment—a sign of premium service adoption—the company is pricing its way to profitability.

Net Debt: A Strategic Trade-Off, Not a Hindrance

Critics will point to Telecom’s 30.3% YoY rise in net debt to P$3.59 trillion, but this reflects a calculated bet on growth. The TMA acquisition added 40.2 million mobile subscribers, expanding Telecom’s dominance in Argentina’s fragmented telecom market. While leverage is elevated, the company’s inflation-adjusted revenue growth (+26.5% real-term) and foreign exchange gains provide liquidity buffers.

Compare this to sector peers like Claro and Movistar, which face similar debt burdens but lack Telecom’s recent margin momentum. Telecom’s debt trajectory is also self-correcting: its 2025 CAPEX of P$220 billion—focused on 5G and fiber—will boost efficiency and subscriber retention, further driving EBITDA.

5G: The Near-Term Catalyst Ignoring the Noise

Telecom Argentina’s 5G rollout is its most overlooked growth lever. The company has already deployed 260 sites nationwide, with coastal cities like Mar del Plata now covered. Its 3.5 GHz spectrum acquisition (100 MHz) positions it to capitalize on the GSMA’s forecast of 34.7 million 5G subscribers in Argentina by 2030—up from just 5.7 million today.

Crucially, the TMA acquisition adds 18.9 million mobile subscribers, many in high-income corridors where 5G demand is strongest. While CEO Roberto Nobile notes that only 8% of customers currently own 5G-ready devices, the GSMA’s timeline suggests this lag will reverse as affordability improves. Telecom’s P$350 million investment in spectrum and infrastructure is a down payment on future cash flows, not an expense.

Risks? Yes. But the Reward/Risk Ratio Favors Aggressives

The risks are clear: Argentina’s 55.9% annual inflation, regulatory delays on TMA integration, and currency volatility could pressure earnings. Yet these risks are already priced into Telecom’s valuation. With a market cap of just US$4.5 billion, the stock trades at a discount to peers despite its margin and revenue momentum.

Meanwhile, the provisional regulatory restrictions on TMA integration (set to expire in September 2025) create a clear catalyst. Once lifted, Telecom can consolidate operations, slashing costs and accelerating 5G deployment. Even skeptics must acknowledge that the company’s 25% YoY growth in broadband ARPU and 64% jump in mobile device sales signal a market hungry for better connectivity—a demand that will outlast macro headwinds.

Conclusion: A Contrarian’s Bargain

Telecom Argentina is a classic contrarian play: a company misunderstood by markets yet delivering on growth metrics that matter. Its margin expansion, strategic debt use, and 5G potential position it to outperform as Argentina’s telecom landscape consolidates. Yes, risks loom—currency swings, regulatory hurdles, and inflation—but the near-term catalysts (TMA integration, 5G milestones) make this a stock to buy on dips.

For aggressive investors with a 3–5 year horizon, Telecom Argentina offers a rare chance to profit from undervalued resilience in a stressed region. The question isn’t whether Latin American telecoms can grow—it’s who is priced to win. Telecom Argentina’s Q1 results say it’s them.

Time to act before the market catches up.