Fitch: Telefonica de Argentina's Ratings Unaffected by Debt Tender Offer Announcement

Fitch Ratings does not anticipate any change to Telefonica de Argentina S.A.'s (TASA) credit ratings following the announcement made by the company where it intends to repurchase approximately up to US$102 million in Obligaciones Negociables (ON). Fitch incorporates in TASA's ratings that its financial profile should improve over the medium term as the company continues to use free cash flow to pay debt, absent of cash distributions to shareholders or any redefinition of a target capital structure.

TASA's credit metrics are strong for the rating category, but are limited by Argentina's sovereign risk. The proposed tender offer, if successful, should improve the company's financial profile and will anticipate debt repayments for 2010 and 2011. On a pro forma basis, assuming the tender is successful, for the last 12 months (LTM) ended June 30, 2009 total debt to EBITDA and funds flow from operations (FFO) adjusted leverage should both approximate to 0.6 times (x) against 0.8x and 0.7x, respectively, registered at the end of June 2009. Net leverage should remain unchanged assuming a 1.5% premium paid above par for the bonds in the tender, as the company is expected to fund the tender with cash balances. As of June 30, 2009 LTM total net debt to EBITDA was 0.3x.

Fitch currently rates TASA as follows:

--Local currency Issuer Default Rating (IDR) 'BB-';

--Foreign currency IDR 'B+';

--National scale rating 'AA+(arg)';

--US$195.5 million in ONs due November 2010 'BB-/RR3'and 'AA+(arg)';

--US$30,000 in ONs due August 2011 'BB-/RR3'and 'AA+(arg)';

--US$134.6 million in ONs due August 2011 'BB-/RR3'and 'AA+(arg)'.

The Rating Outlook is Stable.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Contacts:

Fitch Ratings
Sergio Rodriguez, CFA, [phone] (Monterrey)
Cecilia Minguillon, [phone] (Buenos Aires)
or
Brian Bertsch, [phone]
(Media Relations, New York)
[e-mail]
Cindy Stoller, [phone]
(Media Relations, New York)
[e-mail]