Consolidated Financial Highlights (in millions of Chilean pesos) (except EPS figures)

Transcription

1 Second Quarter 2015 Results Santiago, Chile Empresa Nacional de Telecomunicaciones S.A. (Bolsa de Comercio de Santiago: ENTEL) the Company or Entel, today announced unaudited results for the second quarter (2Q15), ended June 30, All figures are expressed in Chilean Pesos and are reported according to International Financial Reporting Standards (IFRS) and local regulations issued by the Superintendencia de Valores y Seguros. The exchange rate on June 30, 2015 was Ch$ /US$ 1. Average inflation from 2Q14 to 2Q15 was 4.2%. Consolidated Financial Highlights (in millions of Chilean pesos) (except EPS figures) 2Q15 2Q14 Var.(%) 1Q15 6M15 6M14 Var.(%) Total Revenues 436, ,058 7% 433, , ,877 5% EBITDA 88, ,459-13% 101, , ,418-13% EBITDA Margin 20% 25% 23% 22% 26% Operating Income (EBIT) 21,592 42,917-50% 36,197 57, ,314-43% Net Financing Cost -29,098-19,408-50% -16,214-45,313-37,461-21% Tax 8,507 2, % -4,941 3,566-3,776 n.a Net Income 1,000 26,170-96% 15,041 16,041 60,077-73% EPS % % 2Q15 Highlights: Total mobile customers reached 11,896,840 in 2Q15, increasing 2% compared to 2Q14. Mobile customers in Chile totaled 9,896,466, declining 3% compared to 2Q14, led by a reduction in the prepaid (voice and MBB) segment. Postpaid subscriber base (voice and MBB) increased 3%, reaching 36% of the total customer base. Entel Perú s posted 2,000,374 customers in 2Q15, increasing 38% and 2% compared to 2Q14 and 1Q15, respectively. Robust growth in postpaid with 93 thousand additions in the quarter, while prepaid declined due to iden disconnections. Consolidated Revenues were Ch$ billion, increasing 7% compared to 2Q14, growing in Entel Perú and Chile. Consolidated EBITDA reached Ch$ 88.7 billion, declining 13% compared to 2Q14, due to higher losses in Entel Perú. Operating income totaled Ch$ 21.6 billion. Net income amounted to Ch$ 1.0 billion, declining compared to 2Q14, due to lower operating income and higher financial expenses. IR Contacts in Santiago, Chile Carmen Luz De La Cerda Investor Relations Officer Tel (56-2) cdelacerda@entel.cl Ximena Luco Investor Relations Analyst Tel (56-2) xluco@entel.cl 1

2 Comments from the Chief Financial Officer: The Chilean economy grew, albeit with weaker momentum so far this year. In this scenario, the Company continues pursuing value customers and mobile data penetration, with strong revenue share in the mobile industry. Entel Perú continued improving after the brand launch in 4Q14, driven by solid growth in postpaid customers. The Company has the most modern 2G, 3G and 4G networks, and continued expanding the brand and market position. Consolidated revenue increased 7% associated with improvements in Entel Perú (+44%). Also, in Chile revenues grew in mobile services, integrated solutions for the Corporate & SME segment and in Entel Hogar. EBITDA for the period declined 13%, due to higher losses in Entel Perú, associated with acquisition costs related to the postpaid customer base growth in the quarter. EBITDA in Chile increased regardless extraordinary charges posted during the quarter. Net income declined as a result of lower operating income and higher net financing costs, due to higher outstanding debt and inflation in the period. In Chile, a corporate reorganization was carried to achieve a more flattened, flexible and efficient organization, in order to meet the best standards for the telecommunications industry. Note: Please see the accompanying presentation at in the Investors section for additional information. This document contains certain forward-looking statements which are based on management s expectations, as well as on a number of assumptions concerning future events resulting from currently available information. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are out of Entel s control, which could cause actual results to materially differ from such statements. 2

3 Financial Highlights For Entel Group excluding Entel Perú (in millions of Chilean pesos) 2Q15 2Q14 Var.(%) 1Q15 6M15 6M14 Var.(%) Total Revenues 386, ,240 4% 384, , ,216 2% EBITDA 128, ,646 4% 137, , ,256 6% EBITDA Margin 33% 33% 36% 34% 33% Operating Income (EBIT) 68,263 69,424-2% 78, , ,666 3% 2Q15 Highlights: Total mobile customers in Chile posted 9,896,466, declining 3% compared to 2Q14. The prepaid client base declined 6% (voice and mobile broadband), while postpaid customers increased 3% (voice and mobile broadband) representing 36% of the customer base. Revenues reached Ch$ billion, a 4% increase compared to 2Q14, growing in mobile services, data/it and Internet in the Corporate & SME segment, Entel Hogar services in the Consumer segment and to a lower extent in call center due to new contracts in Chile. These increases were in part offset by lower long distance revenue in both DLD and ILD, infrastructure rentals to other operators and in the low margin traffic business. The Company continued delivering its strategy focused on high-value customers and growing mobile data penetration, with a strong position in the revenue share of the mobile industry. EBITDA reached Ch$ billion, expanding 4% during the quarter. This increase was largely explained by higher service and equipment margins, together with lower client acquisition and retention costs. On the other hand, administrative expenses increased primarily associated with the one-time expenses accrued in the quarter, for Ch$8.2 billion, related to a corporate restructuring and union bargaining process agreement. The EBITDA margin of 33% was flat compared to the same period of last year. Excluding the one-time expenses, EBITDA and EBITDA margin increased 10% and 213 basis points, respectively. 3

4 MAIN BUSINESS OPERATING FIGURES FOR ENTEL (excluding the Mobile Peru Operation) Mobile Suscribers (in thousands) 10,167 10,110 10,102 10,009 9, MOBILE ARPU (in thousans $) ,357 6,293 6,279 6,205 6,109 2,868 2,907 2,962 2,962 2,955 2Q14 3Q14 4Q14 1Q15 2Q15 Postpaid Voice Chile Prepaid Voice Chile MBB Chile 2Q14 3Q14 4Q14 1Q15 2Q15 ARPU Chile MOU (in minutes) CHURN (%) 3.15% 2.65% 2.67% 2.76% 2.77% 2Q14 3Q14 4Q14 1Q15 2Q15 MOU Av. Chile 2Q14 3Q14 4Q14 1Q15 2Q15 Av. Churn Chile % Mobile Data / Postpaid Base 62% 66% 69% 71% Local Telephony (in thousands) % Q14 3Q14 4Q14 1Q15 2Q15 Lines in Services Wireless Home Access Trunk IP-NGN-Bundling Access 2Q14 3Q14 4Q14 1Q15 2Q Domestic & International Long Distance Traffic (in million of minutes) RGU "Entel Hogar" (in thousands) Q14 3Q14 4Q14 1Q15 2Q15 Corporate and SME Residential 2Q14 3Q14 4Q14 1Q15 2Q15 4

5 Consumer Segment Chile BUSINESS DEVELOPMENT BY SEGMENTS Consumer segment revenue increased 5% compared to 2Q14. The expansion was driven by mobile services (+4%), due to significant growth in mobile data revenue, coupled to fixed line services (+22%) driven by progress in Entel Hogar. The increase in mobile revenue was driven by mobile data revenue (+27%) due to mobile Internet services fostered by smartphone and data penetration together with the adoption of hard-cap multimedia Revenue Distribution 6% plans. This was in part offset by lower voice services mainly in prepaid due to a reduction in customer base and lower MOU. Equipment sales revenue grew (+3%), expanding in postpaid. As of June 30, 2015, the mobile customer base decreased (-4%) compared to 2Q14, reaching 8,448,956 clients. The decline was driven by the prepaid segment (including MBB), dropping 6%. The reduction in prepaid was primarily associated with lower handset promotions, due to the reduction in the mobile termination rates effective January The postpaid customers (including MBB) continued its growth trend y-o-y (+3%), mainly in high value plans. Consistent with higher smartphone penetration and alternative ways of browsing, the MBB base decreased (-29%). The total client base mix reached 36% in postpaid and 64% in prepaid customers. In terms of overall satisfaction, brand preference and top of mind surveys Entel maintained its leadership across all segments, driven by best service experience and infrastructure. This was supported by the 2014 Best Customer Experience (BCX) award received during June 2015, for the third consecutive year in the category Telecommunications in Latin America. The Company continued successfully delivering on its strategy, focused on high-value customers and fostering data penetration. Data usage penetration reached 71% of the postpaid customers as of June 30, 2015, increasing compared to the 60% in the previous year and 69% in the first quarter of Additionally, in 4G services (in the 2.6 MHz band provided since 2014), the Company reached 523 thousand clients, increasing 18% when compared to 1Q15 (444 thousand users). The Company continued expanding its multimedia postpaid offering based on data plans (with hard-cap) including unlimited voice service. The reduction in mobile termination rates starting late January 2014 (-75%) and 2015 (-16%), impacted the prepaid segment where the levels of promotions and handsets subsidies declined, leading to a reduction in the client base. Currently, different offerings are being enabled to foster data usage, such as prepaid recharge incentives and new plans with flat tariffs to call three favorite numbers. Blended ARPU increased 5% during the quarter, largely explained by higher mobile data usage (Internet mobile). 94% Mobile Services & Equipment Fixed Services 5

6 Blended churn rate increased to 2.77% compared to 2.65% in 2Q14, primarily in voice services across all segments and in part offset by lower MBB (including M2M), while remained almost unchanged compared to 1Q15. Fixed line services revenue increased 22%, explained by the Entel Hogar which provides voice, data and satellite TV to selected residential segments. Revenue increased 56% compared to 2Q14, driven by a 45% RGU growth (reaching 326 thousand subscribers and 24 thousand net additions during 2Q15), all this sustained by a self-installable pack, improved TV content, together with advertising efforts. LD revenue declined driven by a drop in ILD revenue due to lower traffic and tariffs, together with the end of the DLD services. Corporate & SME Segment Corporate & SME segment revenues grew 4% compared to 2Q14. This growth was driven by fix line services (+7%), mainly in data / IT services (+15%), related to integrated solutions over MPLS-IP infrastructure. Moreover, improvements in the SME services sustained by the development of GPON networks as well as data center services. Also, mobile services revenue rose (+3%), driven by higher mobile data service (+20%) due to the higher adoption of multimedia plans. 43% Revenue Distribution 57% Mobile Services & Equipment Fixed Services This was in part offset by lower voice services, in-line with lower outgoing traffic. Equipment sales revenue increased. As of June 30, 2015, the mobile customer base increased (3%) compared to 2Q14, reaching 1,447,510 clients. The growth was mainly attributed to M2M connections, in-line with the growth of applications in the market. Consistent with the goal to expand the offering, new mobile plans were launched for the segment. All multimedia plans with data capacity of over 2GB were improved by unlimited voice services and 4G access. Entel is well placed to take advantage of the data transformation in the Corporate & SME segment, supporting enterprises access to flexible mobile and fixed solutions with scalable infrastructure; not only supporting device connectivity but also the cloud and big data environments which allow to process data and develop innovative business models. With the highest-standards in data centers and a planned surface area of 8,000 m² used as back up and hosting services, Entel supports the development of its customers with first class service. During June 2015, Entel was awarded with the Building Performance Training Programme Award, for excellence in the operation of three data centers locations (Ciudad De Los Valles, Longovilo and Amunátegui). This recognition was granted by the international consulting Chartered Institution of Building Services Engineers (CIBSE). 6

7 During the quarter, the key contracts highlighted below were signed, among others: Health Ministry (health services): the company increased the scope of its current contract with this client, adding integrated services (voice, data and internet) to support telemedicine rooms and support new hospitals with added infrastructure. Penta Security (Insurance): this innovative project will collect information through the introduction of mobile devices, which will allow the client to provide car insurance policy based on driver s behavior. All this supported by high quality technology platforms. Network Rental (including traffic business) and Call Center Revenues declined 6% in the quarter, due to lower revenue in the low margin traffic business as a result of a reduction in incoming traffic, together with lower revenues in infrastructure rentals to fixed line operators. This was in part offset by higher revenues from rental in mobile and virtual mobile operators. Also, call center services posted growth. 42% Revenue Distribution 58% Network rentals Call Center Americatel Perú Revenues for the quarter amounted to US$ 10.9 million, a 4% decline compared to figures reported in 2Q14. This decrease was mainly associated with lower wholesale and LD revenue. Wholesale declined due to lower average traffic and tariffs, while the decline in LD revenue was due to lower traffic in DLD and ILD. NGN-IP integrated services (voice, data and internet) partially offset the decline with a 4% increase. Quartely Revenues (US$ thounsand) 11,418-4% 10,922 1,518 1,277 1,923 1,559 7,978 8,086 2Q14 2Q15 Data, Local & NGN Wholesale LD (*) Exchange rate: SOL/US$ Over the quarter, operating costs and expenses increased 1% compared to 2Q14, mainly attributed to an increase in administrative costs and depreciation and amortization due to the expansion of the NGN-IP services, in part offset by a decrease in access charges. In 7

8 Postpaid Prepaid Second Quarter 2015 Results consequence, EBITDA was US$2.3 million, 14% lower than 2Q14. EBIT totaled US$ 0.9 million in 2Q15, reflecting a decrease of 41% y-o-y. Entel Perú Mobile Suscribers (in thounsand) Base Mix 1,493 1,453 1, , , ,960 2, ,506 1,297 1,960 2,000 1,738 1,493 1,453 1, ,083 46% 54% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 4G/3G/2G HPPTT/iDEN MBB Postpaid Prepaid Mobile ARPU (US$) Churn (%) 9.23% % 7.32% 7.31% 6.44% 6.54% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 (*) Exchange rate: SOL/US$ ARPU Churn The mobile operation in Peru continued to deliver on its overall strategy after the launch in October 2014 of the Entel brand, consolidating its unique user experience, supported by a world class infrastructure with a progressive deployment. The Company received three Effie Awards, which recognized the new services launched and the quality of its promotions. In the same line, the commercial offering has been expanded and improved across the board in postpaid, with attractive plans and the best browsing experience. The consolidation of a clear and transparent offering (including voice and data) has fostered the growth in the postpaid client base. Also, the Company continued growing capillarity in wholesale distribution channels to enlarge the scope in the prepaid segment, along with new services including data, voice, and SMS at flat rates for all destinations. Additionally, the campaign Desenrédate con entel;) prepago was implemented during the quarter. Entel has been a relevant player following the portability process changes implemented during July Since then and until June 30, 2015 net adds from portability were 190 thousand; of which postpaid customers represented 85%. During 2Q15 portability net gains totaled 63 thousand with postpaid representing 95%. As of June 2015, the mobile subscriber base reached 2,000,374 customers, expanding 38% compared to 2Q14, mainly driven by 2G/3G/4G clients in both segments. The client base grew 2% compared to 1Q15. Net additions in the quarter reached 41 thousand, largely explained by 221 thousand net additions and internal migrations in 2G/3G/4G clients in part offset by a 8

9 decline in iden customers, mainly in prepaid. ARPU increased 3% compared to 2Q14, reaching US$ 11.4, and compared to 1Q15 had a slight decline of 1%. Churn rate reached 9.23% in 2Q15, rising from the 7.32% reported in 2Q14, and increasing compared to 1Q15. The main factors were the disconnection of iden users and 2G/3G/4G prepaid clients, in part offset by lower postpaid churn rate of 2G/3G/4G customers. On April 1, 2015, new mobile termination rates became effective, dropping the incoming and outgoing tariffs by 31% and 57%, respectively. Gradual reductions are set for 2016 and These reductions boost Entel s competitiveness in the mobile market. REVENUE (US$thounsand) 60,441 60,925 58,905 5,336 6,985 7,078 68,757 11,747 79,222 11,530 84,667 15,481 EBITDA (US$ thounsand) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15-15,454 55,106 53,939 51,827 57,009 67,691 69,186-31,235-37,089-54,771-63,184 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Services & Others Equipment Total Revenues -85,225 (*) Exchange rate: SOL/US$ (*) Exchange rate: SOL/US$ EBITDA Revenues in 2Q15 reached US$ 84.7 million, increasing (in local currency) 39% and 7% compared to 2Q14 and 1Q15, respectively. The expansion was driven by service revenue (+37%), supported by the client base growth along postpaid and prepaid, together with higher equipment sales revenue (+122%). EBITDA reported a loss of US$ 63.2 million in the quarter, higher than the US$ 31.2 million loss of 2Q14. The higher loss was a result of the operations expansion, primarily affecting subscriber acquisition costs to meet the strong growth of 38% in the client base. The above impacted equipment sales margins, sales commissions and advertising expenses. Operating income posted a loss of US$ 74.5 million in the quarter. 9

10 Consolidated Financials Consolidated Revenue (in millions of Chilean pesos) Total Revenues Mobile services Chile 2Q15 2Q14 Var.(%) 1Q15 6M15 6M14 Var.(%) 436, ,058 7% 433, , ,877 5% 289, ,310 4% 289, , ,686 1% Mobile services Perú 50,972 35,494 44% 49, ,066 71,243 40% Data services (includes IT) Local telephony (includes NGN-IP) 37,229 32,642 14% 34,859 72,089 66,661 8% 14,799 12,612 17% 13,921 28,720 23,860 20% Long distance 4,458 7,359-39% 5,076 9,533 15,490-38% Internet 6,957 5,676 23% 6,364 13,321 11,960 11% Other Telecommunications companies 11,130 11,671-5% 10,814 21,945 20,604 7% Traffic business 4,841 8,013-40% 6,123 10,964 14,996-27% TV Services 5,569 4,536 23% 5,295 10,864 8,420 29% Americatel Perú 6,284 6,291 0% 6,795 13,079 12,273 7% Call Center services and others 2,657 1, % 2,201 4,858 3,732 30% Others Revenues - Non core (1) 2,653 2,375 12% 3,163 5,817 9,952-42% (1) Other revenues (Non-core): revenues which are not a part of the Company s core business include gains/(losses) in sales of fixed assets and interest accrued on past due invoices Consolidated revenues during the quarter reached Ch$ billion, a 7% increase compared to 2Q14, mainly driven by: a) A 44% increase in Entel Perú (in local currency 39%), associated with an expansion in service revenue (+37%), together with higher equipment sales revenue (+122%). The total customer base reached 2,000,374, growing 38%, driven by strong 2G/3G/4G customer expansion in both segments. ARPU increased 3% compared to 2Q14, reaching US$ b) A 4% increase in mobile services in Chile, associated with higher service revenue (+3%), driven by mobile data aligned with increased smartphone penetration, and in part offset by lower voice service revenue. Equipment sales also increased (+7%), driven by postpaid, while prepaid decreased. The average customer base declined 2%, while ARPU increased 5%. The customer base decrease (-3%) was caused by the prepaid segment including voice and MBB (-6%). The postpaid segment (including MBB) increased (+3%). MBB continued a declining trend, aligned to higher smartphone penetration and migration to browsing alternatives. The increase in ARPU (+5%) is associated with higher mobile data usage explained by mobile internet revenue growth (+42%) and in part offset by a decline in voice. Blended churn rate reached 2.77%, increasing compared to 2.65% in 2Q14. The increase was due to a higher churn rate in voice services across all segments. c) Data services (including IT) increased 14%, driven by strong growth in integrated solutions over MPLS-IP network and IT services in the Corporate & SME segment, supported by a competitive offering and world class infrastructure and services. d) Local telephony increased 17%, leveraged by solid growth in Entel Hogar voice services associated with a 64% increase in RGU s (216 thousand), due to a competitive offering supported by Autopack self-installable services. The Corporate & SME segment also grew in IP voice services backed by solid infrastructure and high quality standards. 10

11 e) Call center services and others posted an increase of 146%, mainly attributable to services in Chile and the absence of a one-time charge in 2Q14. f) A 23% increase in Internet revenue, driven by GPON infrastructure deployed in areas with a large presence of SMEs. g) TV services increased 23%, supported by an enhanced offering, marketing campaigns and sales process. RGU s reached 88 thousand. h) An increase in other revenue (Non-core) associated with the mobile operation in Peru. The above mentioned increases were partially offset by: a) A 40% decline in the low margin traffic business, due to lower incoming traffic and in part offset by higher tariffs. b) A 39% drop in long distance revenue; driven by lower revenue in ILD and DLD services, impacted by lower traffic and average tariffs across all segments, together with the end of DLD services effective August c) A slight decline in Americatel Perú, in-line with the drop in wholesale revenue due to lower traffic, and partially offset by higher revenue in integrated solutions (including voice, data & Internet) in the enterprise segment. Revenues in the first half of 2015 expanded 5% compared to the same period

12 Consolidated Cost of Operation (in millions of Chilean Pesos) 2Q15 2Q14 Var.(%) 1Q15 6M15 6M14 Var.(%) Cost of Operations Access charges & payments to corresp. Salaries and expenses 415, ,141 14% 397, , ,564 11% 25,548 29,384-13% 32,585 58,133 66,456-13% 65,244 54,056 21% 58, , ,378 17% Outsourced, supplies and equipment services 13,046 9,731 34% 12,206 25,251 23,167 9% Bad debt provisions 13,805 11,974 15% 12,484 26,289 25,522 3% Advertising, sales commissions & expenses 128, ,577 14% 119, , ,342 15% Depreciation, amortization and impairment Others 67,084 59,542 13% 65, , ,105 13% 102,413 86,877 18% 96, , ,594 13% Consolidated costs of operations for the quarter reached Ch$ billion, a 14% increase compared to 2Q14. The increase was driven by the Entel Perú expansion and one-time expenses in Chile associated with the corporate reorganization and negotiation related to a union agreement. a) Advertising, sales commissions and sales expenses increased 14%, directly associated with higher sales activity in Entel Perú, impacting equipment costs and sales commissions, together with advertising related to the prepaid segment. This was partially offset by lower equipment costs and sales commissions in Chile, in-line with lower sales activity. b) Salaries grew 21% mostly due to extraordinary impacts in Chile related to the corporate restructuring, which entailed a more flattened, flexible and efficient organization, and also to the union agreement negotiation with the Entel PCS union. Furthermore, costs grew in Entel Perú and in call center due to higher activities. c) Depreciation, amortization and impairment expenses increased 13%, driven by Corporate & SME client projects, network infrastructure and facility expansions in Chile, along with the Entel Perú network upgrade and expansion. d) An increase of 34% in outsourced, supplies and equipment services, mainly explained by higher IT cost in Chile along with the Entel Perú network deployment. e) A 15% increase in bad debt, mainly in the Consumer segment in Chile (absence of a onetime positive impact in 2Q14), together with higher costs in Entel Perú. f) Others increased 18%, as a result of the Entel Perú network expansion and higher satellite rental services in Americatel Perú. In Chile, higher costs related to leases, maintenance costs and third party services. The above mentioned increases in costs were partially offset by: a) A 13% decline in access charges and payments to correspondents, impacted by the reduction in mobile termination rates in Chile, effective late January 2015 (16%), together with lower traffic in the low margin traffic business both in Chile and Americatel Perú. These declines were in part offset by the Entel Perú mobile operation. Cost of operations in the first half 2015, increased 11% compared to the same period of EBITDA and Operating Income EBITDA during 2Q15 reached Ch$ 88.7 billion, decreasing 13% compared to the Ch$ billion reported in 2Q14. The decline is driven by the expansion in Entel Perú and its higher 12

13 sales activity during the quarter. This was partially offset by improvements across all segments in Chile despite the one-time expense associated with the reorganization and union agreement. EBITDA margin in 2Q15 was 20%, lower than the 25% reported in 2Q14. Operating income reached Ch$ 21.6 billion, declining compared to 2Q14, mainly impacted by the expansion in the Mobile Perú operations. For the first half 2015, EBITDA and Operating Income declined 13% and 43%, respectively. EBITDA margin reached 22%, declining from the 26% reported in the same period Financial Expenses Results (in millions of Chilean Pesos) 2Q15 2Q14 Var.(%) 1Q15 6M15 6M14 Var.(%) Net Financing Cost and Others Net Financial Expenses Price Level adjustment, F/X & Market to Market Accruals -29,098-19,408-50% -16,214-45,313-37,461-21% -18,898-11,510-64% -11,104-30,002-22,760-32% -10,200-7,898-29% -5,111-15,311-14,700-4% Net Financing Costs and Others in 2Q15 posted a loss of Ch$ 29.1 billion, increasing compared to the Ch$ 19.4 billion loss in 2Q14. This was impacted by higher level of net debt, higher losses in hedging derivatives mark-to-market accruals and higher inflation in Chile related to debt instruments denominated in U.F. (Unidades de Fomento). Net Income Net Income in the period reached Ch$ 1.0 billion, compared to Ch$ 26.2 billion reported in 2Q14, impacted by lower operating margins, coupled to higher net financing costs. For the first half of 2015, Net Income declined 73%, reaching Ch$ 16.0 billion compared to

14 BALANCE SHEET Consolidated Balance Sheet (in millions of Chilean Pesos) 6M15 6M14 Var.(%) Assets 2,961,133 2,306,245 28% Current assets 690, ,343 47% Property, plant & equipment, net 1,658,613 1,438,339 15% Others Non-current assets 611, ,563 54% Liabilities & shareholders equity 2,961,133 2,306,245 28% Current liabilities 451, ,388-8% Non Current Liabilities 1,563, ,381 74% Shareholders equity 945, ,477 3% Financial Ratios Jun/15 Dic/14 Current assets/current liabilities EBITDA*/ Net Financial expenses* Net Financial debt/ebitda* Total liabilities/(equity + min. interest) * EBITDA & Net Financial expenses last 12 months, according to Local Bond covenants. Jun/14 As of June 30, 2015, gross financial debt increased 64% totaling Ch$ 1,518.4 billion. The increase was in line with the company s expansion plans in Peru, together with a 16% increase in the Ch$/US$ exchange rate impacting U.S. dollar denominated outstanding debt. Net debt (gross debt less cash and net balances from F/X hedging instruments, including mark-to-market accruals) during the period reached Ch$ 1,197.6 billion, a 37% increase compared to the Ch$ billion reported in 2Q14. 14

15 RECENT EVENTS On July 10, 2015, Standard & Poor s affirmed its rating for Entel at BBB, adding a negative watch. The outlook change was primarily based on increased debt leverage. In July 2015, Novator Partners LLP international fund launched operations under the brand WOM. During January 2015, the fund took the control of 100% shares of Nextel Chile operations. 15

16 Company Description With annual revenues of Ch$ 1,668,052 million reported as of December 2014, Empresa Nacional de Telecomunicaciones S.A. provides mobile, internet, data and IT services, as well as local and long-distance telephony to both consumers clients and enterprises in Chile. The Company also has mobile operations in Peru and recently launched the Entel Perú brand. The Company is listed on the Chilean Stock Exchange (Bolsa de Comercio de Santiago) under the ticker symbol ENTEL. For more information please visit: 16

17 SEGMENTS REVENUE AND EBITDA FINANCIAL INFORMATION (in millions of Chilean Pesos) Segments Operational 2Q15 2Q14 Var.(%) 1Q15 6M15 6M14 Var.(%) Consumers Revenue 228, ,777 5% 227, , ,240 2% EBITDA 73,335 67,728 8% 80, , ,910 12% EBITDA Margin (%) 32% 31% 35% 34% 31% Corporate and SME Revenue 131, ,777 4% 128, , ,426 2% EBITDA 43,753 38,738 13% 43,178 86,931 77,033 13% EBITDA Margin (%) 33% 31% 34% 33% 30% Networks rentals (including traffic business) & Call Center Revenue 28,765 30,713-6% 29,660 58,425 58,172 0% EBITDA 9,723 11,120-13% 10,740 20,463 20,050 2% EBITDA Margin (%) 34% 36% 36% 35% 34% Americatel Perú Revenue 6,827 7,216-5% 7,540 28,518 21,988 30% EBITDA 1,471 1,735-15% 1,757 3,228 2,942 10% EBITDA Margin (%) 22% 24% 23% 11% 13% Adjustments and Eliminations (exc. Entel Perú) Revenue -8,981-10,243-12% -8,456-31,588-21,609 46% EBITDA -23 4, ,321 Consolidated Results (exc. Entel Perú) Revenue 386, ,240 4% 384, , ,216 2% EBITDA 128, ,646 4% 137, , ,256 6% EBITDA Margin (%) 33% 33% 36% 34% 33% EBIT 68,263 69,424-2% 78, , ,666 3% EBITDA Margin (%) 18% 19% 20% 19% 19% Entel Perú Revenue 52,972 36,947 43% 51, ,419 74,691 40% EBITDA -39,585-21,188-87% -35,568-75,153-30, % EBITDA Margin (%) -75% -57% -69% -72% -41% Adjustments and Eliminations Revenue -2,507-1, % -2,659-5,166-2, % EBITDA Consolidated Results Revenue 436, ,058 7% 433, , ,877 5% EBITDA 88, ,459-13% 101, , ,418-13% EBITDA Margin (%) 20% 25% 23% 22% 26% EBIT 21,592 42,917-50% 36,197 57, ,314-43% EBITDA Margin (%) 5% 11% 8% 7% 12% 17

18 EBITDA Breakdown by Services (in millions of Chilean Pesos) EBITDA Results 2Q15 2Q14 Var.(%) 1Q15 6M15 6M14 Var.(%) Total 88, ,459-13% 101, , ,418-13% Mobile Services Chile 111, ,447 8% 121, , ,939 11% Fixed Services 13,878 13,148 6% 12,430 26,307 22,438 17% Others(*) 2,397 7,051-66% 3,296 5,693 15,879-64% Entel Perú -39,585-21,188-87% -35,568-75,153-30, % (*) Others: Call Center, Americatel Perú & Others. Individual Results ENTEL Perú (in thousands of US$) 2Q15 2Q14 Var.(%) 6M15 6M14 Var.(%) ENTEL PERU (US$) (US$) (US$) (US$) Total Revenues 84,667 60,925 39% 163, ,366 35% Cost of Operations 159, ,586 58% 303, ,799 64% Depreciation and Amortization and Impairment 11,329 8,426 34% 22,027 16,744 32% Salaries & Expenses 18,280 15,919 15% 36,128 17, % EBITDA -63,184-31, % -117,955-46, % EBITDA Margin -75% -51% -72% -38% Operating Income -74,514-39,662-88% -139,982-63, % Operating Margin -88% -65% -85% -52% Individual Results Americatel Perú (in thousands of US$) 2Q15 2Q14 Var.(%) 6M15 6M14 Var.(%) Americatel Perú (US$) (US$) (US$) (US$) Total Revenues 10,922 11,418-4% 22,515 21,548 4% Cost of Operations 10,046 9,940 1% 20,246 19,147 6% Depreciation and Amortization and Impairment 1,470 1,257 17% 2,889 2,299 26% Salaries & Expenses 2,223 1,924 16% 4,204 3,841 9% EBITDA 2,346 2,735-14% 5,158 4,699 10% EBITDA Margin 21% 24% 23% 22% Operating Income 876 1,479-41% 2,269 2,400-5% Operating Margin 8% 13% 10% 11% Values in US$, exchange rate US$/Soles: $

19 Entel Group Consolidated Income Statement (in thousands of Chilean Pesos) YTD INCOME STATEMENT M$ M$ Operating Revenues 864,293, ,925,121 Other Revenues 5,797,371 4,034,875 Salaries and Expenses (124,029,881) (106,378,221) Depreciation and amortization (131,339,763) (115,243,829) Impairment and bad debt (27,306,784) (27,382,920) Other Operating Expenses (529,646,252) (480,558,592) Other Gain (Loss) 19,832 5,917,141 Gain (Loss) of Operating Activities 57,788, ,313,575 Financial income 4,749, ,662 Financial expenses (34,751,814) (23,211,104) Exchange gain (Loss) (7,368,226) (4,147,621) Other monetary adjustment (7,942,527) (10,552,454) Profit/(loss) before income Tax 12,475,658 63,853,058-80% Income Tax 3,565,629 (3,776,146) Var.(%) Net Income for the period 16,041,287 60,076,912-73% Earnings per share Other Income and (Expense), debit / credit directly to Equity Cash Flow Coverage (14,015,660) 6,304,393 Conversion Adjustments (4,788,142) 16,500,884 Income Tax Conversion Adjustments 1,884,222 - Income Tax Cash Flow Coverage 3,153,523 (600,034) Other Income and Expense with debits and credits in the Equity, Total (13,766,057) 22,205,243 Net Results 2,275,230 82,282,155-97% 19

20 Entel Group Consolidated Balance Sheet (in thousands of Chilean Pesos) ASSETS Var.(%) Current assets 690,814, ,440,823-22% Cash and cash equivalents 172,003, ,919,376 Other financial assets 16,016,679 13,146,216 Other non financial assets 32,913,335 28,790,192 Trade and other receivables 288,984, ,591,179 Accounts receivable from related entities 319, ,035 Inventory 103,723, ,121,667 Tax assets 76,852,930 52,380,158 Non-current assets 2,270,318,697 2,154,354,580 5% Other Financial Assets 136,309, ,727,551 Other non Financial assets 2,957,438 2,992,605 Trade and other receivables 6,678,928 5,467,969 Intangible assets 139,786, ,924,227 Goodwill 47,181,646 47,193,868 Property, plant and equipment 1,658,612,728 1,614,978,515 Deferred tax assets 278,792, ,069,845 TOTAL ASSETS 2,961,133,059 3,035,795,403-2% LIABILITIES AND SHAREHOLDERS EQUITY Var.(%) Current Liabilities 451,602, ,386,773-23% Other financial liabilities 21,019,211 20,772,473 Trade and other payables 401,447, ,009,412 Other provisions 2,425, ,492 Income tax 6,453,762 12,866,595 Other liabilities non financial 20,256,599 23,557,801 Non Current Liabilities 1,563,764,183 1,493,063,768 5% Other financial liabilities 1,500,955,074 1,434,258,466 Other long term provisions 23,942,372 19,596,432 Deffered income tax 19,899,179 19,989,741 Employee severance and others 10,020,766 10,226,233 Other non financial liabilities 8,946,792 8,992,896 Equity 945,765, ,344,862-1% Paid-in Capital 522,667, ,667,566 Retained Earnings 439,136, ,949,779 Other Reserves (16,038,540) (2,272,483) Equity Attributable to Controlling Shareholders 945,765, ,344,862 Equity of Non Controlling - - TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 2,961,133,059 3,035,795,403-2% 20

21 Glossary of Terms ARPU: Average Revenue per User (presented on a monthly basis) BPO: Business Process Outsourcing CAPEX: Capital Expenditures Churn: Disconnection Rate; presented on a monthly basis DLD: Domestic Long Distance Data mobile revenue: includes Internet mobile and MBB revenues EBIT: Operating earnings EBITDA: Operating earnings before interest, taxes, depreciation, amortization and fixed assets impairment EDGE: Enhanced Data rates for GSM Evolution; technology that provides GSM the capacity to handle data services EPS: Earnings per Share GAAP: Generally Accepted Accounting Principles GPON: Gygabit Passive Optical Network GPRS: General Packet Radio Service; enables GSM networks to offer higher capacity, Internet-based content and packet-based data services; a second generation technology. GSM: Global System for Mobile communications HARD-CAP MULTIMEDIA PLANS: an Internet data plan that does not surpass a certain pre-set contracted limit. HSPA: High Speed Packet Access. A family of high-speed 3G digital data services that use GSM technology. The service works with HSPA mobile phones, as well as laptops and portable devices with HSPA modems HPPTT: High Performance Push to Talk. HSDPA: High Speed Downlink Packet Access; an enhanced (third generation) mobile telephony communications protocol in the High-Speed Packet Access (HSPA) family HSDPA + Dual Carrier: A wireless broadband standard based on HSPA that is defined in 3GPP UMTS release 8, which enables mobile broadband speeds of up to 22 Mbps iden iden: Integrated Digital Enhanced Network. Motorola-developed technology for an integrated radio system called MIRS (Motorola Integrated Radio System). IFRS: International Financial Reporting Standards ILD: International Long Distance IT: Information Technology LIS: Lines in Service LTE: Long Term Evolution, the fourth generation of radio technologies designed to increase the capacity and speed of mobile telephone networks M2M: Machine to Machine, includes the automation of communication processes between machines (Machine to Machine), between mobile devices and machines (Mobile to Machine), and between man and machines (Man to Machine) MBB: Mobile broadband including M2M data cards. Mobile Service Chile Revenue: includes mobile services and equipment revenue. Mobile Service Peru Revenue: includes mobile services and equipment revenue. Mobile Data Revenue: includes mobile Internet and MBB revenue. MOU: Minutes of Use per subscriber; the ratio of traffic in a given period to the average number of subscribers during the same period; presented on a monthly basis. 21

22 MPLS: Multiprotocol Label Switching; a switching technology created to provide virtual circuits in IP networks Net Debt: Total short and long term debt less cash and net balances from hedging activities Net Debt / EBITDA: The ratio of total short and long term debt less cash and net balances from hedging activities to trailing 12-month period income before interest, taxes, depreciation and amortization NGN: Next Generation Network; the convergence of publically switched telephone networks (PSTN), voice networks, the internet and data networks Other Revenues Non-core: revenues which are not a part of the Company s core business; concepts included are gain / (loss) in sales of fixed assets and interest accrued on past due invoices and leasing operations RGU: Revenue Generating Units; number of services subscribed per customer, commonly used for residential services SAC: Subscriber Acquisition Cost; the sum of handset subsidies, marketing expenses and commissions to distributors for handset activation. Handset subsidies are calculated as the difference between equipment cost and equipment revenues SG&A: Selling, General and Administrative Expenses SME: Small & Medium-Sized Enterprises SMS: Short Message Service VAS: Value Added Services, includes non-core services, all services beyond standard voice and data transmissions. Services included are; chat, concourses, general information, GPRS, IVR, ringtones, games, video contents and others VAS Revenue: Mobile revenue including VAS services, SMS and MSM WIMAX: Worldwide Interoperability for Microwave Access, a standard-based wireless technology, which provides network access 3.5G: Commercial name for HSDPA, the third generation service provided by Entel 4G: Is the fourth generation of mobile telecommunications technology, succeeding 3G and preceding 5G. 22