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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
Col. Centro de Ciudad Santa Fe
México, D.F., 01210
(Address of principal executive offices)
Director of Investor Relations
Tel. + (52) 55 4770-1170
Fax. + (52) 55 5147-3820
juan.sotomayor@maxcom.com
Maxcom Telecomunicaciones, S.A.B. de C.V.
C. Guillermo González Camarena No. 2000
Col. Centro de Ciudad Santa Fe
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
None
11% Senior Notes due 2014, not registered on an exchange
(Title of Class)
o Large accelerated filer | o Accelerated filer | þ Non-accelerated filer |
o U.S. GAAP | o International Financial Reporting Standards as issued by the International Accounting Standards Board | þ Other |
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Exhibit 6.1 | ||||||||
Exhibit 7.1 | ||||||||
Exhibit 8.1 | ||||||||
Exhibit 12.1 | ||||||||
Exhibit 12.2 | ||||||||
Exhibit 13.1 | ||||||||
Exhibit 13.2 |
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• | competition in local services, data, Internet and Voice over Internet Protocol services; | ||
• | our ability to service our debt; | ||
• | limitations on our access to sources of financing on competitive terms; | ||
• | significant economic or political developments in Mexico and the U.S.; | ||
• | changes in our regulatory environment, particularly developments affecting the regulation of the telecommunications industry; | ||
• | our need for substantial capital; | ||
• | general economic conditions, including the economic slow-down in the U.S. and Mexico, due to the global financial crisis; | ||
• | the global telecommunications downturn; | ||
• | performance of financial markets and thus our ability to refinance our financial obligations when they come due; | ||
• | our history of operating losses; |
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• | the risks associated with our ability to implement our growth strategy; | ||
• | customer attrition; | ||
• | technological innovations; | ||
• | currency fluctuations and inflation in Mexico; | ||
• | currency exchange rates, including the Mexican Peso — U.S. dollar exchange rate; | ||
• | changes in the policies of central banks and/or foreign governments; and | ||
• | the risk factors discussed under “Risk Factors.” |
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As of the Year Ended December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008(1) | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(Thousands of constant December 31, 2007 and nominal December 31, 2008 pesos and thousands of U.S. | ||||||||||||||||||||||||
dollars(1), except per share data) | ||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||
MFRS | ||||||||||||||||||||||||
Net revenues | Ps. | 968,604 | Ps. | 1,242,104 | Ps. | 1,741,692 | Ps. | 2,345,719 | Ps. | 2,683,229 | U.S.$198,171 | |||||||||||||
Operating costs and expenses: | ||||||||||||||||||||||||
Network operating costs | (341,823 | ) | (414,332 | ) | (676,977 | ) | (976,979 | ) | (1,120,167 | ) | (82,730 | ) | ||||||||||||
Selling, general and administrative expenses | (417,683 | ) | (505,566 | ) | (607,505 | ) | (722,618 | ) | (819,642 | ) | (60,535 | ) | ||||||||||||
Depreciation and amortization | (373,606 | ) | (304,066 | ) | (300,468 | ) | (370,227 | ) | (551,889 | ) | (40,760 | ) | ||||||||||||
Total operating costs and expenses | (1,133,112 | ) | (1,223,964 | ) | (1,584,950 | ) | (2,069,824 | ) | (2,491,698 | ) | (184,025 | ) | ||||||||||||
Operating (loss) income | (164,508 | ) | 18,140 | 156,742 | 275,895 | 191,531 | 14,146 | |||||||||||||||||
Other expenses | (884 | ) | (6,883 | ) | (18,777 | ) | (12,819 | ) | (12,616 | ) | (932 | ) | ||||||||||||
Restructuring charges | — | — | — | — | (49,491 | ) | (3,655 | ) | ||||||||||||||||
Impairment of long-lived assets | — | — | — | — | (532,315 | ) | (39,314 | ) | ||||||||||||||||
Employees’statutory profit changes | — | — | — | (3,257 | ) | (1,173 | ) | (87 | ) | |||||||||||||||
Other expense, net | (884 | ) | (6,883 | ) | (18,777 | ) | (16,076 | ) | (595,595 | ) | (43,988 | ) | ||||||||||||
Comprehensive financial results: | ||||||||||||||||||||||||
Interest expense and commissions, net | (41,818 | ) | (109,351 | ) | (144,032 | ) | (232,912 | ) | (255,662 | ) | (18,882 | ) | ||||||||||||
Interest gain | — | 4,494 | 8,591 | 55,793 | 53,994 | 3,988 | ||||||||||||||||||
Exchange (gain) loss, net | (1,567 | ) | 41,902 | (6,568 | ) | 4,826 | (149,048 | ) | (11,008 | ) | ||||||||||||||
Effects of valuation of financial instruments | — | (20,338 | ) | 13,324 | 20,421 | 83,323 | 6,154 | |||||||||||||||||
Gain on monetary position | 96,132 | 23,849 | 21,503 | 25,231 | — | — | ||||||||||||||||||
Total comprehensive income (cost) of financing | 52,747 | (59,444 | ) | (107,182 | ) | (126,641 | ) | (267,393 | ) | (19,748 | ) | |||||||||||||
Total income taxes | (31,277 | ) | (28,725 | ) | (60,050 | ) | (96,982 | ) | 233,694 | 17,260 | ||||||||||||||
Net (loss) income | (143,922 | ) | (76,912 | ) | (29,267 | ) | 36,196 | (437,763 | ) | (32,331 | ) | |||||||||||||
Earnings per share: | ||||||||||||||||||||||||
Basic | (0.49 | ) | (0.19 | ) | (0.07 | ) | 0.06 | (0.55 | ) | (0.04 | ) | |||||||||||||
Diluted | (0.49 | ) | (0.19 | ) | (0.07 | ) | 0.06 | — | — | |||||||||||||||
U.S. GAAP | ||||||||||||||||||||||||
Operating (loss) income | (215,782 | ) | (5,891 | ) | (50,610 | ) | 217,182 | 44,139 | 3,260 | |||||||||||||||
Net (loss) income | 1,319,220 | 185,616 | 12,459 | 160,999 | (240,058 | ) | (17,730 | ) | ||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||
Basic | 6.55 | 0.67 | (2.13 | ) | 0.29 | (0.30 | ) | (0.022 | ) | |||||||||||||||
Diluted | 6.55 | 0.67 | (2.13 | ) | 0.27 | (0.30 | ) | (0.022 | ) | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
MFRS | ||||||||||||||||||||||||
Cash and cash equivalents | 67,142 | 241,218 | 739,291 | 2,539,535 | 1,591,405 | 232,558 | ||||||||||||||||||
Restricted cash | 6,198 | — | 23,462 | — | — | — | ||||||||||||||||||
Working capital(3) | (24,469 | ) | (126,398 | ) | 29,083 | 281,811 | 447,199 | 33,028 | ||||||||||||||||
Restricted cash to long term | 14,149 | 8,283 | — | — | — | — | ||||||||||||||||||
Frequency rights, net | 105,178 | 92,960 | 88,374 | 80,930 | 66,716 | 4,927 | ||||||||||||||||||
Telephone network systems and equipment, net | 1,925,911 | 2,248,685 | 3,157,197 | 4,188,946 | 4,684,413 | 345,969 | ||||||||||||||||||
Preoperating expenses, net | 171,240 | 132,046 | 98,340 | 77,902 | 50,863 | 3,756 | ||||||||||||||||||
Intangible assets, net | 408,463 | 327,701 | 334,489 | 208,802 | 209,683 | 15,486 | ||||||||||||||||||
Labor obligations upon retirement | — | 15,977 | 15,068 | 17,650 | — | — | ||||||||||||||||||
Rent deposits and other assets | 297,856 | 470,905 | 580,600 | 618,524 | 578,401 | 42,718 | ||||||||||||||||||
Total assets | 2,971,668 | 3,411,377 | 5,065,904 | 8,014,100 | 7,916,472 | 584,673 | ||||||||||||||||||
Long-term liabilities | 767,163 | 953,927 | 1,882,104 | 2,380,424 | 2,818,630 | 208,171 | ||||||||||||||||||
Total liabilities | 1,204,114 | 1,485,455 | 2,788,990 | 2,983,261 | 3,415,303 | 252,238 | ||||||||||||||||||
Capital stock | 2,700,151 | 2,963,206 | 3,327,482 | 5,410,251 | 5,410,244 | 399,575 | ||||||||||||||||||
Additional paid-in capital | 966,817 | 237,114 | 253,096 | 888,056 | 816,443 | 60,299 | ||||||||||||||||||
Accumulated deficit | (1,899,414 | ) | (1,274,398 | ) | (1,303,664 | ) | (1,267,468 | ) | (1,705,231 | ) | (125,940 | ) | ||||||||||||
Repurchase of shares | — | — | — | — | (20,287 | ) | (1,498 | ) | ||||||||||||||||
Total shareholders’ equity | 1,767,554 | 1,925,922 | 2,276,914 | 5,030,839 | 4,501,169 | 332,435 | ||||||||||||||||||
Total number of shares | 277,224,018 | 277,224,018 | 482,334,778 | 789,818,829 | 789,818,829 | 789,818,829 | ||||||||||||||||||
U.S. GAAP | ||||||||||||||||||||||||
Long-term liabilities | 517,766 | 756,921 | 1,882,104 | 2,380,424 | 2,818,630 | 208,171 | ||||||||||||||||||
Total Shareholders equity | 1,091,245 | 1,276,860 | 1,676,612 | 4,555,341 | 4,218,046 | 311,525 | ||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
MFRS | ||||||||||||||||||||||||
Capital expenditures(4) | 387,982 | 482,669 | 1,041,877 | 1,248,407 | 1,631,001 | 120,458 | ||||||||||||||||||
Ratio of earnings to fixed charges(5) | — | — | 1.05 | 1.51 | — | — | ||||||||||||||||||
Resources arising from operating activities | 298,753 | 322,353 | 87,898 | 303,158 | 446,171 | 32,952 | ||||||||||||||||||
Resources derived from financing activities | 107,390 | 334,394 | 1,452,052 | 2,745,493 | 219,632 | 16,221 | ||||||||||||||||||
Resources used in investing activities | (387,982 | ) | (482,669 | ) | (1,041,877 | ) | (1,248,407 | ) | (1,613,933 | ) | (119,197 | ) | ||||||||||||
U.S. GAAP | ||||||||||||||||||||||||
Cash (used in) provided by operating activities | 156,994 | 761,531 | (120,905 | ) | 164,439 | 438,861 | 32,413 | |||||||||||||||||
Cash provided by (used in) financing activities | 155,835 | 103,205 | 1,531,744 | 2,916,477 | (105,440 | ) | (7,787 | ) | ||||||||||||||||
Cash used in investing activities | Ps. | (267,264 | ) | Ps. | (470,451 | ) | Ps. | (904,888 | ) | Ps. | (1,245,081 | ) | Ps. | (1,281,551 | ) | U.S.$(94,652 | ) | |||||||
Ratio of earnings to fixed charges(5) | — | 2.9 | 1.6 | 2.2 | — | — |
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(1) | Peso amounts were converted to U.S. dollars at the exchange rate of Ps.13.54 per U.S.$1.00 reported by the Banco de México as its buying rate for pesos on December 31, 2008. Such conversions are for the convenience of the reader and should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated, or at any other rate. | |
(2) | Pursuant to MFRS, financial data for all periods up to 2007 in the financial statements have, unless otherwise indicated, been restated in constant pesos as of December 31, 2007. Restatement into December 31, 2007 pesos is made by multiplying the relevant nominal peso amount by the inflation index for the period between the end of the period to which such nominal peso amount relates and December 31, 2007. The inflation index used in this annual report for 2004 figures is 1.1156, for 2005 is 1.0796 and for 2006 is 1.0376. | |
(3) | Working capital is defined as current assets (excluding cash and cash equivalents and restricted cash) less current liabilities (excluding short-term debt and current maturities of long-term debt, which includes interest payable). | |
(4) | Capital expenditures include telephone network systems and equipment, intangible assets and other assets. Investing activities in the consolidated statements of changes in financial position for the years ended December 31, 2004, 2005, 2006 and 2007 are net of dispositions. For the year ended December 31, 2008 the capital expenditures are presented accordingly to the statement of cash flows and only include acquisitions. | |
(5) | Ratio of earnings to fixed charges is defined as fixed charges divided by earnings. Fixed charges are defined as the sum of: (a) interest expensed and capitalized, (b) amortized premiums, discounts and capitalized expenses related to indebtedness, (c) preference security dividends requirements. Earnings are defined as the sum of: (a) pre-tax income from continuing operations; (b) fixed charges; and (c) amortization of capitalized interest; less the following items: (a) interest capitalized; and (b) preference security dividend requirements of consolidated subsidiaries. Fixed charges include interest expense, capitalized interest and the portion of operating lease rental expense that represents the interest factor. The fixed charge coverage deficiency under MFRS was Ps. 112.1 million in 2004, Ps.47.7 million in 2005 and Ps. 721.8 million in 2008. Under U.S. GAAP, the fixed charge coverage deficiency was Ps.1,349.9 million in 2004 and Ps.395.9 million in 2008. |
Buying Rate(1) | ||||||||||||||||
Period End | Average(2) | High | Low | |||||||||||||
2004 | Ps. | 11.26 | Ps. | 11.31 | Ps. | 11.63 | Ps. | 10.82 | ||||||||
2005 | 10.71 | 10.93 | 11.40 | 10.41 | ||||||||||||
2006 | 10.88 | 10.92 | 11.48 | 10.43 | ||||||||||||
2007 | 10.87 | 10.94 | 11.27 | 10.66 | ||||||||||||
2008 | 13.54 | 11.17 | 13.92 | 9.92 | ||||||||||||
December 2008 | 13.54 | 13.37 | 13.76 | 13.12 | ||||||||||||
January 2009 | 14.20 | 13.86 | 14.22 | 13.35 | ||||||||||||
February 2009 | 14.93 | 14.47 | 14.85 | 14.14 | ||||||||||||
March 2009 | 14.33 | 14.72 | 15.37 | 14.05 | ||||||||||||
April 2009 | 13.87 | 13.48 | 14.39 | 13.05 | ||||||||||||
May 2009 | 13.23 | 13.25 | 13.84 | 12.87 | ||||||||||||
June 2009 | 13.31 | 13.36 | 13.65 | 13.16 |
(1) | Source: Banco de México. | |
(2) | Represents the average rates for each period indicated, calculated by using the average of the exchange rates on the last day of each month during the period. |
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• | municipal or regional political events or local rulings; | ||
• | our ability to obtain permits to use public rights of way; | ||
• | our ability to generate cash flow or to obtain future financing necessary for such build out; |
• | unforeseen delays, costs or impediments relating to the granting of municipal and state permits for our build out; |
• | delays or disruptions resulting from physical damage, power loss, defective equipment or the failure of third party suppliers or contractors to meet their obligations in a timely and cost-effective manner; and |
• | regulatory and political risks relating to Mexico, such as the revocation or termination of our concessions, the temporary seizure or permanent expropriation of assets, import and export controls, political instability, changes in the regulation of telecommunications and any future restrictions or easing of restrictions on the repatriation of profits or on foreign investment. |
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• | physical damage; | ||
• | power loss; | ||
• | capacity limitations; | ||
• | software defects as well as hardware and software obsolescence; | ||
• | breaches of security, whether by computer virus, break-in or otherwise; | ||
• | failure to interconnect with carriers linking us with our customers; | ||
• | denial of access to our sites for failure to obtain required municipal or other regulatory approvals; and | ||
• | other factors which may cause interruptions in service or reduced capacity for our customers. |
• | customer delinquency; | ||
• | our limited coverage area that restricts our ability to continue providing service when a customer moves; |
• | our failure to meet service levels required by our customers; | ||
• | our failure to provide, efficiently or on competitive terms, other services demanded by our customers; | ||
• | a decline in the national or international economic conditions (in particular with our residential customers); and | ||
• | promotional and pricing strategies of our competitors; |
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• | make it more difficult for us to satisfy our obligations with respect to our indebtedness; |
• | require us to dedicate a substantial portion of our cash flow from operations to debt service payments, reducing the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes; |
• | limit our flexibility in planning for, or reacting to, changes in the telecommunications industry; |
• | limit our ability to take advantage of opportunities for acquisitions and other business combinations; |
• | place us at a competitive disadvantage compared to our less leveraged competitors; |
• | increase our vulnerability to both general and industry-specific adverse economic conditions; and |
• | limit our ability to obtain additional financing or obtain it on commercially reasonable terms, to fund future working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing. |
• | incur additional indebtedness; |
• | pay dividends or make other distributions on our capital stock or repurchase our capital stock or subordinated indebtedness; |
• | make investments or other specified restricted payments; |
• | create liens; |
• | enter into mergers, consolidations, sales of substantially all of our assets and other forms of business combinations; |
• | enter into change of control transactions; |
• | sell assets and subsidiary stock; and | ||
• | enter into transactions with affiliates. |
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• | increased competition and focus by our competitors on increasing market share; |
• | recent technological advances that permit substantial increases in the transmission capacity of both new and existing fiber-optic networks, resulting in long-distance overcapacity; |
• | increased participation of traditional fixed-line competitors; |
• | the entrance of cable television operators into certain markets where we currently offer service; and |
• | the entrance of new competitors, such as broadcasting companies or theComisión Federal de Electricidad. |
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• | rights and obligations granted under the concessions to install, operate and develop public telecommunications networks may only be assigned with the prior authorization of the SCT; |
• | neither the concession nor the rights thereunder or the related assets may be assigned, pledged, mortgaged or sold to any government or country; and |
• | the Mexican government (through the SCT) may permanently expropriate any telecommunications concession and claim any related asset for reason of public interest or may temporarily seize the assets related to the concessions in the event of natural disasters, war, significant public disturbance or threats to internal peace or for other reasons relating to economic or public order. |
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• | inflation can adversely affect consumer purchasing power, thereby adversely affecting consumer demand for our services and products; and |
• | to the extent inflation exceeds our price increases, our prices and revenues will be adversely affected in real terms. |
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• | 450 MHz, 1.9 GHz (Personal Communications Services) and 3.4-3.7 GHz (fixed wireless local loop) nationwide and regional frequency bands; |
• | 7, 15, 23 and 38 GHz frequency bands for nationwide point-to-point microwave transmission links; and | ||
• | 10.5 GHz frequency band for regional point-to-multipoint microwave transmission service. |
• | Axtel, S.A.B. de C.V.; | ||
• | Alestra, S. de R.L. de C.V.; | ||
• | Bestel, S.A. de C.V.; | ||
• | Iusatel, S.A. de C.V.; and | ||
• | Marcatel, S.A. de C.V. |
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• | Telcel, S.A. de C.V. with nationwide Personal Communications Services and cellular concessions; |
• | Movistar (Telefónica Móviles) with nationwide Personal Communications Services and regional cellular (regions 1 through 4) concessions; |
• | Grupo Iusacell, S.A.B. de C.V. with regional cellular (regions 5 through 9) and nationwide Personal Communications Services concessions; |
• | Unefón, S.A.B. de C.V., an affiliate of Grupo Iusacell, S.A.B. de C.V., with a nationwide Personal Communications Services concession; and |
• | Nextel de México, S.A. de C.V. (NII Holdings, Inc.) through enhanced specialized mobile radio licenses. |
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• | LineaMax Residencial.This service provides a high-quality wireline telephone line with value-added features available, including voice mail, call waiting, call forwarding, three-way calling, call blocking, speed dialing and unlisted numbers. |
• | Larga Distancia Max.This product provides domestic and international long-distance services to those of our local telephony customers who require long-distance service. We do not offer our long-distance service separately from our local telephony service. |
• | CentralMax.This service provides customers in residential developments with all of the functions of a private branch exchange using centrex technology (central functionality for simulating a private branch exchange), without having to acquire and maintain equipment. It allows customers to communicate with the common areas of the development with four-digit internal calling. The features offered under this product include call waiting, call forwarding, three-way calling, direct inward dialing, direct outward dialing, intercom dialing, call transfer, speed dialing, call hold, call pick up, outgoing call blocking and distinctive ringing. |
• | I-line.This is our Voice over Internet Protocol service, which uses an analog-to-digital telephone adapter to allow any conventional telephone to access the telephone network through any broadband connection around the world. |
• | Internet Max.This service uses a traditional telephone line and modem to provide dial-up Internet access at speeds of up to 56 Kbps. We provide this service to customers, regardless of whether they have a Maxcom telephone line. |
• | SpeediMax(ADSL). This is our broadband Internet access service with speeds of 128, 256 and 512 Kbps and also 1 and 2 Mbps using Asymmetric Digital Subscriber Line (ADSL) transmission technology over ordinary telephone lines. |
• | AsistelMax.This service provides basic telephone medical and home assistance to our residential customers in case of emergency. |
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• | Paid TV services.This service provides digital television content to our residential customers over our copper network using Internet Protocol including value added features such as video on demand, digital video recording and interactive guide. |
• | MaxcomCel:This is our residential mobile communication service. Which is provided through a cellular network. This postpaid service is only available for our existing customers. |
• | LineaMax Comercial.This service is identical to LineaMax Residencial, except that it also includes multi-line hunting. |
• | CentralMax.This service provides business customers with all of the functions of a private branch exchange using centrex technology, without having to acquire and maintain equipment. The features offered under this product include four-digit internal calling, call waiting, call forwarding, three-way calling, direct inward dialing, direct outward dialing, intercom dialing, call transfer, speed dialing, call hold, call pick up, outgoing call blocking, single digit access to attendant and distinctive ringing. Optional solutions include voice mail, music-on-hold, multi-line hunting and operator services. |
• | TroncalMax Digital.This service provides digital trunks for business customers that need highly reliable access to and from the public telephone network through their existing Private Branch Exchange. This service is sold in groups of 10, 20 or 30 trunks. The groups can be configured with direct inward dial, direct outward dial, caller identification or main telephone number assignments. |
• | TroncalMax Analógica.This service provides business customers with connectivity to their analog private branch exchange or key systems. The features available with this product are multi-line hunting, caller identification and call barring. |
• | MaxcomCel:This is our business mobile communication service. Which is provided through a cellular network. This postpaid service is only available for our existing customers. |
• | SpeediMax. This is our broadband Internet access service for small businesses with speeds of 128, 256 and 512 Kbps and also 1 and 2 Mbps using Asymmetric Digital Subscriber Line transmission technology over ordinary telephone lines. An Asymmetric Digital Subscriber Line provides a secure, dedicated link to the Internet or a company’s internal data network. |
• | 1-800 Numbers.This service is available to our customers interested in receiving toll-free calls into their call centers or businesses. |
• | Dedicated Internet Access.This service offers Internet access at high speed within a clear channel access to the Internet backbone. |
• | Digital private lines.This service provides highly reliable dedicated circuits between two or more physical locations. |
• | Hosted Private Branch Exchange.This service provides our business customers with all of the functions of an Internet Protocol Private Branch Exchange using Voice over Internet Protocol technology, without having to acquire and maintain expensive equipment. The features offered under this service include those of CentralMax as well as other Internet Protocol enhanced services such as web portal setup, “click to dial,” hosted directory and Microsoft Outlook integration. |
• | I-line.This is our Voice over Internet Protocol service, which uses an analog-to-digital telephone adapter to allow any conventional telephone to access the telephone network through a customer’s broadband connection. We market this service to customers who make and receive a significant volume of international and domestic long-distance calls. This service includes additional voice features such as call waiting, caller identification and voice mail. |
• | E-Security.This service provides managed security including perimetral anti-virus, content filter and spyware solutions. Maxcom supplies all of the software and hardware equipment as an integrated solution for our customers. |
• | SOSMax.This service provides preventive and corrective maintenance to our customers’ IT equipment. |
• | Audio Conference.This service provides our business customers with operator-assisted and non-attendant teleconferencing services, with value-added features including recording of the conference, sound options, warning entry, password and e-mail notification. |
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Year Ended December 31 | ||||||||||||
Segments* | 2008 | 2007 | 2006 | |||||||||
(In millions) | ||||||||||||
Residential | Ps. | 1,055.6 | Ps. | 897.9 | Ps. | 685.5 | ||||||
Business | 809.1 | 648.2 | 495.4 | |||||||||
Public Telephony | 428.7 | 386.4 | 253.1 | |||||||||
Wholesale | 359.5 | 376.0 | 262.4 | |||||||||
Other Revenue | 30.2 | 37.2 | 45.3 | |||||||||
Total Revenues | Ps. | 2,683.2 | Ps. | 2,345.7 | Ps. | 1,741.7 | ||||||
* | The above segments are comprised of homogeneous customers. |
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Metropolitan | Central | |||||||||||||||
Services | Area | South | North | Total | ||||||||||||
(In millions) | ||||||||||||||||
Local | Ps. | 1,558.0 | Ps. | 726.4 | Ps. | 20.5 | Ps. | 2,304.9 | ||||||||
Long Distance | 236.7 | 74.4 | 9.0 | 320.1 | ||||||||||||
Rent of dedicated links | 0.4 | — | — | 0.4 | ||||||||||||
Sale of equipment to customers | 8.7 | 1.9 | 0.1 | 10.7 | ||||||||||||
Capacity Leasing | 47.1 | — | — | 47.1 | ||||||||||||
Total Revenues | Ps. | 1,850.9 | Ps. | 802.7 | Ps. | 29.6 | Ps. | 2,683.2 | ||||||||
Metropolitan | Central | |||||||||||||||
Services | Area | South | North | Total | ||||||||||||
(In millions) | ||||||||||||||||
Local | Ps. | 1,398.7 | Ps. | 517.2 | Ps. | 1,915.9 | ||||||||||
Long Distance | 171.3 | 175.2 | Ps. | 10.3 | 356.8 | |||||||||||
Rent of dedicated links | 0.2 | 0.1 | 0.3 | |||||||||||||
Sale of equipment to customers | 10.7 | 3.7 | 14.4 | |||||||||||||
Capacity Leasing | 58.3 | 58.3 | ||||||||||||||
Total Revenues | Ps. | 1,639.2 | Ps. | 696.2 | Ps. | 10.3 | Ps. | 2,345.7 | ||||||||
Metropolitan | Central | |||||||||||||||
Services | Area | South | North | Total | ||||||||||||
(In millions) | ||||||||||||||||
Local | Ps. | 934.5 | Ps. | 385.3 | Ps. | 1,319.8 | ||||||||||
Long Distance | 220.1 | 121.6 | Ps. | 28.4 | 370.1 | |||||||||||
Rent of dedicated links | 0.3 | 0.2 | 0.5 | |||||||||||||
Sale of equipment to customers | 6.1 | 8.4 | 14.5 | |||||||||||||
Capacity Leasing | Ps. | 36.8 | 36.8 | |||||||||||||
Total Revenues | Ps. | 1,197.8 | Ps. | 515.5 | Ps. | 28.4 | Ps. | 1,741.7 | ||||||||
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• | Identify clusters through market research. Our market research is designed to identify residential customers and small- and medium-sized businesses. Once we identify potential customers within the clusters, based on the marketing sales forecast we design the deployment of the access network to cover them. We perform a return on investment and profitability analysis for each cluster to assure that the investment made in such cluster meets our return benchmarks. |
• | Deploy clusters through the implementation of a sales plan for each cluster based on our network deployment schedule. We commence promoting our services at the same time we build our network. These coordinated and parallel efforts help reduce the time between network deployment and revenue generation. |
• | Fill in clusters by offering our services to all customers within the cluster. Marketing efforts are focused on achieving the highest penetration within our clusters. |
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• | offer a flexible, large selection of services; | ||
• | provide tailored service packages; | ||
• | quickly introduce products and services; | ||
• | deliver near real-time activation and disconnection; | ||
• | deliver a high quality of service; | ||
• | minimize activation errors; and | ||
• | provide accurate and timely billing services. |
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• | Spanish language support for invoices and documentation; |
• | a high degree of integration among all operational support systems components; | ||
• | flow-through of information, provisioning and service activation; | ||
• | capabilities to monitor, manage and resolve network problems; | ||
• | allowance for growth on a modular scalable basis; and | ||
• | support of administrative operations for financial controls. |
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• | enacting regulations and technical standards for the telecommunications industry; | ||
• | ensuring that holders fulfill the terms of their concessions and permits; | ||
• | suspending operators without concessions; | ||
• | resolving interconnection controversies between competitors; and | ||
• | maintaining a registry of applicable rates. |
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• | the type and technical specifications of the network, system or services that may be provided; | ||
• | the allocated spectrum frequencies, if applicable; | ||
• | the geographical region in which the holder of the concession may provide the service; | ||
• | the required capital expenditure program; | ||
• | the term during which such service may be provided; | ||
• | the payment, where applicable, required to be made to acquire the concession, including, where applicable, the participation of the Mexican government in the revenues of the holder of the concession; | ||
• | the amount of the performance bond; and | ||
• | rights granted to and obligations imposed on the concession holder. |
• | Mexican individuals; and | ||
• | Mexican corporations in which non-Mexicans own 49% or less of the full voting stock and that are not otherwise controlled by non-Mexicans, except in the case of concessions for cellular and personal communications services, where foreign investment participation may exceed 49% of the voting stock with prior approval of the Mexican Foreign Investment Bureau of the Mexican Ministry of Economy (Secretaría de Economía). |
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• | expiration of its term; | ||
• | resignation by the concession holder or the permit holder; | ||
• | revocation; or | ||
• | dissolution or bankruptcy of the concession holder or the permit holder. |
• | failure to exercise the rights of the concession within 180 days of the grant; | ||
• | failure to provide interconnection services to other holders of telecommunications concessions and permits without reason; | ||
• | loss of the concession or permit holder’s Mexican nationality; | ||
• | unauthorized assignment, transfer or encumbrance of the concession or permit; | ||
• | unauthorized interruption of service; | ||
• | taking any action that impairs the rights of other concessionaires or permit holders; | ||
• | failure to comply with the obligations or conditions specified in the concession or permit (including making any necessary investments and capital expenditures); and | ||
• | failure to pay to the Mexican government its fee for the concession or, where applicable, its participation in the revenues of the holder of the concession. |
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• | basic local telephony; | ||
• | the sale or lease of network capacity for the generation, transmission or reception of signs, signals, writings, images, voice, sounds or other information of any nature; | ||
• | the purchase and lease of network capacity from other carriers, including the lease of digital circuits; | ||
• | value-added services; | ||
• | operator services; | ||
• | data, video, audio and video conference services, except for cable or other restricted television, continuous music or digital audio; | ||
• | credit or debit telephone cards; and | ||
• | public telephony. |
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• | the carrying of switched traffic between two different local calling areas that requires the use of a dialing prefix for its routing; |
• | the sale or lease of network capacity for the generation, transmission or reception of signs, signals, writings, images, voice, sounds or other information of any nature; |
• | the purchase and lease of network capacity from other carriers and domestic and international long-distance telephony. |
• | those which require a concession for frequency bands of the radio electric spectrum for specific uses; |
• | those which require a concession to occupy and exploit geostationary orbital positions and satellite orbits assigned to Mexico; | ||
• | those which require a concession to operate radio or television broadcasting systems; and | ||
• | cable or other restricted television. |
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• | two consecutive frequency segments in the 15 GHz band, with a 56 MHz bandwidth; | ||
• | three consecutive frequency segments in the 23 GHz band, with a 56 MHz bandwidth; and | ||
• | two consecutive frequency segments in the 23 GHz band, with a 100 MHz bandwidth. |
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• | File information related to each concessionaire’s shareholders on the first quarter of every year; | ||
• | Prepare a monthly report on any failures and interruptions of the services; |
• | Prepare quarterly quality of services reports which shall be filed before the SCT if required; |
• | Prepare commercial practices guidelines which shall be available for review by any third party; |
• | Prepare an emergency response plan which shall be filed before the SCT during the following six months after the relevant concession granting date; |
• | Notify the SCT of any relevant event that could affect the provision of the services or the performance of the network; | ||
• | Register its service fees with the COFETEL each time they are modified; |
• | File within the following 150 days after the last day of the preceding fiscal year (i) the corresponding audited financial statements, (ii) a description of the principal assets of the network, and (iii) a report on the employee training and teaching programs that are being implemented; | ||
• | Prepare a quarterly report on the status of the expansion and coverage of the network; |
• | Make available the internal statistics on traffic, routing and performance of the network; |
• | Grant a surety bond in favor of the Federal Government to guarantee its obligations under the concession; |
• | File with the SCT within the following 60 days after the concession granting date a plan describing the coverage and extension of the network; and |
• | File with the SCT the form of agreement to be entered with the concessionaire’s subscribers. |
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Gross International | ||||||||||||||||
Mexican GDP | Reserves as of the | |||||||||||||||
Inflation | Average | Annual Growth | End of Each Year | |||||||||||||
Year Ended December 31 | Rate | 28-day Cetes | Rate* | (Billion) | ||||||||||||
2004 | 5.2 | % | 6.8 | % | 4.2 | % | U.S.$64.2 | |||||||||
2005 | 3.3 | % | 9.2 | % | 3.0 | % | U.S.$74.1 | |||||||||
2006 | 4.1 | % | 7.2 | % | 4.8 | % | U.S.$76.3 | |||||||||
2007 | 3.8 | % | 7.2 | % | 3.3 | % | U.S.$87.2 | |||||||||
2008 | 6.5 | % | 7.7 | % | 2.8 | % | U.S.$95.3 |
* | The Central Bank of Mexico no longer publishes the Mexican GDP and/or its variations according to the calculation methodology used for the figures presented for the years ended December 2004, 2005, 2006 and 2007, hence calculation methodology for the figures for the year ended December 31, 2008 differs. |
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• | increasing the peso-carrying costs of our U.S. dollar-denominated debt and capital expenditure requirements; |
• | decreasing the purchasing power of Mexican consumers, resulting in a decrease in demand for telephony services; and |
• | resulting in our inability, due to competitive pressures, to increase our prices in response to such inflation. |
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• | installation charges of voice lines; |
• | monthly fees for the rental of voice lines, which depending on the product, include a certain number of free local calls; |
• | usage charges of voice lines, which can include a combination of local calls above those already included in the monthly fees, long distance minutes, as well as minutes to mobile numbers under the “Long Distance Calling Party Pays” system; and |
• | charges relating to value-added services such as voice mail, call waiting, call forwarding, three-way calling and caller identification; |
• | public telephony services; |
• | mobile services; |
• | revenues derived from our strategic and commercial alliances with cable television operators, which are offset by the corresponding amount we are charged by the cable television operator; and |
• | the sale of telephone sets. |
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• | Internet dial-up access; |
• | asymmetric digital subscriber line; |
• | dedicated Internet access; |
• | managed services; |
• | digital private lines; and |
• | lease of backbone capacity. |
• | network operating costs, which include: (i) technical expenses (comprised of electric power, site leases and maintenance of telecommunications equipment); (ii) installation expenses, when applicable; and (iii) disconnection expenses; |
• | selling, general and administrative expenses, which primarily include: (i) salaries, wages and benefits; (ii) fees, which are primarily related to consulting, legal and accounting services; (iii) leasing costs, which are primarily related to our headquarters, warehouses and other facilities; (iv) marketing expenses, which are primarily related to the implementation of our branding campaign, general advertising and promotions; and (v) allowance for doubtful accounts (related to past due accounts receivable); and |
• | depreciation and amortization mainly related to pre-operating expenses, frequency rights, telephone network systems and equipment and intangibles. |
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• | interest expense and interest income; |
• | effects of valuation of financial instruments; |
• | net foreign exchange gains or losses; and |
• | net gains or losses on monetary position up to December 31, 2007. |
• | it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate; and |
• | changes in the estimate or different estimates that we could have selected would have had a material impact on our financial condition or results of operations. |
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Year of Loss | Amount | Year of Maturity | ||||||
(in thousands of pesos) | ||||||||
1999 | Ps. | 18,109 | 2009 | |||||
2000 | 102,156 | 2010 | ||||||
2001 | 32,292 | 2011 | ||||||
2002 | 282,004 | 2012 | ||||||
2003 | 35,388 | 2013 | ||||||
2004 | 79,533 | 2014 | ||||||
2005 | 138,698 | 2015 | ||||||
2006 | 74,058 | 2016 | ||||||
2007 | 269,142 | 2017 | ||||||
2008 | 437,467 | 2018 | ||||||
Total | Ps. | 1,468,847 | ||||||
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Year Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net revenues | 100 | % | 100 | % | 100 | % | ||||||
Operating cost and expenses: | ||||||||||||
Network operating costs | 41.7 | 41.6 | 38.9 | |||||||||
Selling, general and administrative expenses | 30.5 | 30.9 | 34.9 | |||||||||
Depreciation and amortization | 20.6 | 15.8 | 17.3 | |||||||||
Total operating cost and expenses | 92.8 | 88.3 | 91.0 | |||||||||
Operating profit (loss) | 7.1 | 11.7 | 9.0 | |||||||||
Other expenses: | ||||||||||||
Other expenses | (0.6 | ) | (0.5 | ) | (1.1 | ) | ||||||
Restructuring charges | (1.8 | ) | — | — | ||||||||
Impairment of long-lived assets | (19.8 | ) | — | — | ||||||||
Comprehensive (income)/cost of financing | (10.0 | ) | (5.4 | ) | (6.2 | ) | ||||||
Income tax | 8.7 | (4.1 | ) | (3.4 | ) | |||||||
Net loss (income) for the year | 16.3 | % | (1.5 | )% | 1.7 | % | ||||||
• | Residential revenues represented 39.3% of total revenues during 2008, compared with 38.3% in the previous year of 2007. Revenues in the residential business reached Ps. 1,055.6 million in 2008, an increase of 17.6% in comparison to Ps. 897.9 million in 2007. The increase was mainly driven by an increase in mobile services, residential Paid TV RGUs and data followed by voice in comparison to 2007. |
• | Commercial revenues represented 30.2% of total revenues during 2008, compared with 27.6% in 2007. Revenues in the commercial business totaled Ps. 809.1 million in 2008, an increase of 24.8% in comparison to Ps. 648.2 million in the year 2007. This increase in revenues was explained by an increase in the average revenue per customer that we recorded and a 20% increase in the number of RGUs. |
• | Public Telephony represented 16.0% of total revenues during 2008 in comparison with 16.5% in 2007. Revenues in this segment totaled Ps. 428.7 million in 2008, an increase of 10.9% in compared to Ps. 386.4 million in 2007. The growth in the public telephony business was primarily driven by the increase in number of public telephones, which grew 42.2%. |
• | In 2008, wholesale revenues totaled Ps. 359.5 million, a decrease of 4.4% in comparison to Ps.376.0 million in the same period in 2007. This year-over-year decrease in the Wholesale business was mainly driven by a decrease in the “on-net equal access termination rates” earlier in the year due to a more competitive market environment in particular with national calling party pays. |
• | Revenue from other services accounted for 1.1% or Ps. 30.3 million of total revenues in 2008, a decrease from the Ps. 37.2 million recorded in the same period last year. Other revenues are primarily comprised of lease of microwave frequencies and CPE sales. |
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Year Ended December 31 | ||||||||||||
2008 | 2007 | % | ||||||||||
(In millions) | ||||||||||||
Residential | Ps. | 1,055.6 | Ps. | 897.9 | 17.6 | % | ||||||
Commercial | 809.1 | 648.2 | 24.8 | % | ||||||||
Public Telephony | 428.7 | 386.4 | 10.9 | % | ||||||||
Wholesale | 359.5 | 376.0 | (4.4 | )% | ||||||||
Other Revenue | 30.3 | 37.2 | (18.5 | %) | ||||||||
Total revenues | Ps. | 2,683.2 | Ps. | 2,345.7 | 14.4 | % | ||||||
ARPU | ||||||||||||
2008 | 2007 | % | ||||||||||
(In U.S. dollars) | ||||||||||||
Company | ||||||||||||
Monthly charges | $ | 17.3 | $ | 15.7 | 10.2 | % | ||||||
Usage | 29.4 | 29.0 | 1.4 | % | ||||||||
Subtotal | 46.7 | 44.7 | 4.5 | % | ||||||||
Non-recurring | 2.0 | 2.3 | (13.0 | )% | ||||||||
Total company | $ | 48.7 | $ | 47.0 | 3.6 | % | ||||||
At December 31 | ||||||||||||
2008 | 2007 | % | ||||||||||
RGUs: | ||||||||||||
Residential | 331,368 | 242,888 | 36.4 | % | ||||||||
Commercial | 84,891 | 70,749 | 20.0 | % | ||||||||
Public Telephony | 35,415 | 24,910 | 42.2 | % | ||||||||
Wholesale lines | 22,860 | 22,395 | 2.1 | % | ||||||||
Total lines | 474,534 | 360,942 | 31.5 | % | ||||||||
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• | a Ps. 134.5 million, or 16.4% increase in network operating services resulting mainly from: |
• | a Ps. 48.9 million higher fixed-to-mobile interconnection costs due to an increase of 18.3% in overall RGUs; |
• | a Ps. 36.8 million increase related to our paid TV content and internet services; |
• | a Ps. 24.3 million increase in costs related to circuit leases and ports required for our backbone and last mile connectivity as a result of the network expansion during the year; |
• | a Ps. 20.8 million higher operational cost of public telephony services due to an increase of 42.2% in RGU ’s in service; |
• | a Ps. 17.1 million higher long distance interconnection costs as a result of increased long distance traffic related to the wholesale business; and, |
• | This increase was partially offset by a Ps. 13.4 million decrease in CATV network costs as we terminated our strategic alliance with Megacable during 2008. |
• | a Ps. 8.6 million, or 6.3% increase in technical expenses primarily due to: |
• | a Ps. 8.3 million increase in costs associated with leases of sites and poles; and, |
• | a Ps. 0.3 million increase in other technical expenses. |
• | Installation expenses for 2008 amounted to Ps. 18.7 million which is the same as the amount recorded in 2007. |
• | a Ps.181.7 million, or 49.0%, increase in depreciation and amortization expenses mainly related to: |
• | a Ps. 175.6 million increase due to new capital investments; and, |
• | a Ps. 6.1 million increase due to MFRS inflation recognition adjustments in accordance with Standard B-10 of the NIFs. |
• | Selling general and administrative expenses increased Ps. 97.0 million, or 13.4% primarily due to: |
• | a Ps. 82.6 million increase in salaries, wages and benefits related to an increasing headcount; |
• | a Ps. 26.2 million increase in bad debt expense due to an increase in sales volume and customers; |
• | a Ps. 20.0 million increase in external commissions and external advisors; |
• | a Ps. 3.9 million increase in office space leases; and, |
• | These expenses were partially offset by Ps. 35.7 million in lower employee stock option plan, insurance and other sales, general and administrative expenses. |
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Year Ended December 31 | ||||||||||||
2008 | 2007 | % | ||||||||||
(In millions) | ||||||||||||
Interest expense — Net | Ps. | (263.7 | ) | Ps. | (230.1 | ) | 14.6 | % | ||||
Exchange gain (loss) — Net | (178.5 | ) | 25.2 | (808.3 | )% | |||||||
Gain on monetary position | — | 42.6 | — | % | ||||||||
Capitalized interest | 174.8 | 35.7 | 389.6 | % | ||||||||
Total comprehensive cost of financing | Ps. | (267.4 | ) | Ps. | (126.6 | ) | 111.2 | % | ||||
• | a Ps. 33.6 million or 14.6% increase in interest paid as a result of a higher average outstanding balance of debt during 2008 compared to 2007; |
• | a Ps. 178.5 million exchange rate loss compared to a net exchange rate gain of Ps. 25.2 million recognized in the same period last year mainly due to a depreciation of the Mexican peso of 24.6% during 2008 compared with a peso appreciation of 0.1% during 2007; |
• | The company recorded a monetary position gain of Ps. 42.6 million which does not compare to 2008 as a result in the change in the accounting standards in Mexico; inflationary accounting is not required in a low-inflationary environment; and |
• | a Ps. 139.1 million higher capitalized interest mainly due to a higher depreciation of the Mexican peso as previously explained. |
• | Residential revenues represented 38.3% of total revenues during 2007, compared with 39.4% in the year of 2006. Revenues in the residential business reached Ps. 897.9 million in 2007, an increase of 31.0% in comparison to Ps. 685.5 million in 2006. The increase was mainly driven by the introduction of mobile services, residential Paid TV RGUs, followed by data and voice in comparison to 2006. |
• | Commercial revenues represented 27.6% of total revenues during 2007, compared with 28.4% in 2006. Revenues in the commercial business totaled Ps. 648.2 million in 2007, an increase of 30.8% in comparison to Ps. 495.4 million in the year 2006. This increase in revenues was mainly attributed to a higher number of RGUs from other services, mobile services, voice lines and data services in comparison to 2006. |
• | Public Telephony represented 16.5% of total revenues during 2007 in comparison with 14.5% in 2006. Revenues in this segment totaled Ps. 386.4 million in 2007, an increase of 52.6% compared to Ps. 253.1 million in 2006. The growth in the public telephony business was primarily driven by the increase in number of public telephones, which grew 48.1%. |
• | In 2007, Wholesale revenues totaled Ps. 376.0 million, an increase of 43.4% or Ps. 113.6 million in comparison to Ps.262.4 million in the same period in 2006. This year-over-year increase in the Wholesale business was mainly driven by the increase in the long distance termination business lines in service. |
• | Revenue from other services accounted for 1.6% or Ps. 37.2 million of total revenues in 2007, a decrease from the Ps. 45.3 million recorded in the same period last year. Other revenues are primarily comprised of lease of microwave frequencies and CPE sales. |
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Year Ended December 31 | ||||||||||||
2007 | 2006 | % | ||||||||||
(In millions) | ||||||||||||
Residential | Ps. | 897.9 | Ps. | 685.5 | 31.0 | % | ||||||
Commercial | 648.2 | 495.4 | 30.8 | % | ||||||||
Public Telephony | 386.4 | 253.1 | 52.6 | % | ||||||||
Wholesale | 376.0 | 262.4 | 43.4 | % | ||||||||
Other Revenue | 37.2 | 45.3 | (17.9 | %) | ||||||||
Total revenues | Ps. | 2,345.7 | Ps. | 1,741.7 | 34.7 | % | ||||||
ARPU | ||||||||||||
2007 | 2006 | % | ||||||||||
(In U.S. dollars) | ||||||||||||
Company | ||||||||||||
Monthly charges | $ | 15.7 | $ | 15.5 | 1.3 | % | ||||||
Usage | 29.0 | 24.9 | 16.5 | % | ||||||||
Subtotal | 44.7 | 40.4 | 10.6 | % | ||||||||
Non-recurring | 2.3 | 2.4 | (4.2 | )% | ||||||||
Total company | $ | 47.0 | $ | 42.8 | 9.8 | % | ||||||
At December 31 | ||||||||||||
2007 | 2006 | % | ||||||||||
RGUs: | ||||||||||||
Residential | 242,888 | 201,911 | 20.3 | % | ||||||||
Commercial | 70,749 | 55,922 | 26.5 | % | ||||||||
Public Telephony | 24,910 | 16,815 | 48.1 | % | ||||||||
Wholesale lines | 22,395 | 9,840 | 127.6 | % | ||||||||
Total lines | 360,942 | 284,488 | 26.9 | % | ||||||||
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• | a Ps.275.8 million, or 50.5%, increase in network operating services resulting mainly from: |
• | a Ps.89.3 million higher operational cost of public telephony services due to a 48.1% increase in lines in service; |
• | a Ps.84.7 million increase in long distance interconnection costs as a result of increased long distance traffic related to the 43.4% increase in the wholesale business; |
• | a Ps.60.1 million increase in local-to-mobile interconnection costs associated with a significant increase in local-to-mobile traffic due to a 26.9% increase in overall RGU business; |
• | a Ps.35.5 million increase in costs related to the lease of ports and circuits required for our backbone and last mile connectivity as a result of our network expansion; and |
• | a Ps.6.2 million increase in other cost related to our paid TV content, internet services, and CATV network cost, among others. |
• | a Ps.23.1 million, or 20.3%, increase in technical expenses primarily due to: |
• | a Ps.26.0 million increase in maintenance costs as a result of an increasing telephone network; and |
• | a Ps.5.8 million increase in the cost associated with power and electricity services. |
• | a Ps.1.1 million, or 6.3%, increase in installation expenses were mainly due to a 21.6% increase in RGUs installed in the residential and commercial division. |
• | a Ps.69.8 million, or 23.2%, increase in depreciation and amortization expenses mainly related to: |
• | a Ps.15.4 million increase due to new capital investments; |
• | a Ps.16.6 million increase due to a reduction in the useful life for public telephony; and |
• | a Ps.37.8 million increase due to MFRS inflation recognition adjustments in accordance with Statement B-10 of the Mexican Institute of Public Accountants. |
• | Selling, general and administrative expenses increased Ps.90.8 million, or 14.9% primarily due to: |
• | a Ps.108.8 million increase in salaries, wages and benefits related to an increasing headcount including the Ps.3.3 million paid for employee profit sharing; |
• | a Ps.16.2 million increase in bad debt due to an increase in sales volume and customers; |
• | a Ps.7.3 million increase in marketing, promotional and advertising expenses; and |
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Year Ended December 31 | ||||||||||||
2007 | 2006 | % | ||||||||||
(In millions) | ||||||||||||
Interest expense — Net | Ps. | (177.1 | ) | Ps. | (127.3 | ) | 39.2 | % | ||||
Exchange gain (loss) — Net | 25.2 | (1.4 | ) | (1,878.6 | )% | |||||||
Gain on monetary position | 25.2 | 21.5 | 17.3 | % | ||||||||
Total comprehensive cost of financing | Ps. | (126.6 | ) | Ps. | (107.2 | ) | 18.2 | % | ||||
• | a Ps.49.7 million, or 39.2%, increase in interest paid as a result of a higher average outstanding balance of debt during 2007 compared to 2006; |
• | a Ps.26.6 million exchange loss on our dollar-denominated debt due to the effect of peso appreciation of 0.1% during 2007 compared with 1.5% peso depreciation during 2006; and |
• | a Ps.3.7 million, or 17.3%, increase in gain on net monetary position, as a result of the effect on higher liabilities during 2007 when compared to 2006. |
1 | Working capital is defined as current assets (excluding cash and cash equivalents and restricted cash) less current liabilities (excluding short-term debt and current maturities of long-term debt, which includes interest payable). |
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• | indebtedness, not to exceed U.S.$10.0 million at any time outstanding, represented by capital lease obligations, financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment used in the permitted business of the company, in an aggregate principal amount, including all permitted refinancing indebtedness incurred to renew, refund, refinance, replace, defease or discharge any such indebtedness; |
• | hedging obligations for the purpose of managing our exposure to fluctuations in interest rates with respect to indebtedness permitted to be incurred by us pursuant to the indenture or protecting us against currency fluctuations in the ordinary course of business and not for speculative purposes; and |
• | indebtedness not to exceed U.S.$10.0 million in an aggregate principal amount at any time outstanding, including all permitted refinancing indebtedness incurred to renew, refund, refinance, replace, defease or discharge such indebtedness. |
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As of December 31, | As of December 31, | |||||||||||||||
2008(1) | 2007(2) | |||||||||||||||
Pesos | Dollars | Pesos | Dollars | |||||||||||||
(In thousands) | ||||||||||||||||
Short Term and Long Term Vendor Financing: | ||||||||||||||||
Vendor financing denominated in pesos | Ps. | 4,354.0 | U.S.$321.6 | Ps. | 11,479.2 | U.S.$1,056.4 | ||||||||||
Vendor financing denominated in dollars | — | — | 1,293.8 | 119.1 | ||||||||||||
Total vendor financing | 4,354.0 | 321.6 | 12,773.0 | 1,175.5 | ||||||||||||
Long Term Payable Bonds Denominated in U.S. Dollars: | ||||||||||||||||
U.S.$200 million senior notes due 2014 (U.S.$150 million issued on December 20, 2006, U.S.$25 million issued on January 10, 2007 and U.S.$25 million issued on September 5, 2007) bearing interest at a rate of 11%, maturing on December 15, 2014 | 2,707,660.0 | 200,000.0 | 2,173,240.0 | 200,000.0 | ||||||||||||
Accrued interest | 13,919.5 | 1,028.2 | 11,172.2 | 1,028.2 | ||||||||||||
Total long term payable bonds denominated in U.S. dollars | Ps. | 2,721,579.5 | U.S.$201,028.2 | Ps. | 2,184,412.2 | U.S.$201,028.2 | ||||||||||
(1) | Nominal pesos as of December 31, 2008. Peso amounts were converted to U.S. dollars solely for the convenience of the reader at the rate of Ps.13.5383 per U.S.$1.00 as reported by the Banco de México on December 31, 2008. Such conversions should not be construed as a representation that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated, or at any other rate. | |
(2) | Constant pesos as of December 31, 2007. Peso amounts were converted to U.S. dollars solely for the convenience of the reader at the rate of Ps.10.8662 per U.S.$1.00 as reported by the Banco de México on December 31, 2007. Such conversions should not be construed as a representation that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated, or at any other rate. |
i. | Instead of the statement of changes in financial position, the financial statements shall include the statements of cash flows for all the periods presented comparatively with those of the current year, except for financial statements of periods prior to 2008; |
ii. | Cash inflows and cash outflows are reported in nominal currency units, thus not including the effects of inflation; |
iii. | Two alternative preparation methods (direct and indirect) are established, without stating preference for either method. Furthermore, cash flows from operating activities are to be reported first, followed by cash flows from investing activities and lastly by cash flows from financing activities; |
iv. | Captions of principal items are to be reported gross, with certain exceptions and require disclosure of the composition of items considered cash equivalents. |
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At December 31, 2008 | ||||
(Thousands of nominal pesos) | ||||
Net resources provided by operating activities | Ps. | 446,171.2 | ||
Net resources used in investing activities | (1,613,933.0 | ) | ||
Net resources provided by financing activities | 219,632.0 |
At December 31, | ||||||||||||
2007 | 2006 | % | ||||||||||
(Thousands of constant pesos) | ||||||||||||
Net resources provided by operating activities | Ps. | 303,158.0 | Ps. | 87,898.3 | 244.9 | % | ||||||
Net resources used in investing activities | (1,248,407.4 | ) | (1,041,877.4 | ) | 19.8 | % | ||||||
Net resources provided by financing activities | 2,745,493.3 | 1,452,052.4 | 89.1 | % |
• | Ps.86.1 million increase in resources resulting from an decrease in accounts receivable when compared to the Ps.285.0 million used in 2007 with the Ps.199.0 million used in 2008; |
• | Ps.66.4 million decrease in resources resulting from a decrease in liabilities and other assets when compared to the Ps.90.0 million increase in resources provided in 2007 with the Ps.23.6 million increase in resources provided in 2008; and |
• | Ps.10.2 million decrease in resources resulting from an increase in inventory, when compared to the Ps. 2.5 million decrease in 2007 with the Ps. 7.6 million increase in 2008. |
• | Ps.34.0 million decrease in resources resulting from an increase in accounts receivable when compared to the Ps.251.0 million used in 2006 with the Ps.285.0 million used in 2007 as a result of our incremental operations, including a larger customer base and higher revenues; |
• | Ps.77.2 million increase in resources resulting from a increase in liabilities and other assets when compared to the Ps.14.7 million decrease in resources provided in 2006 with the Ps.62.5 million increase in resources provided in 2007; |
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• | Ps.38.6 million increase in resources resulting from a decrease in restricted cash when compared to the Ps.15.2 million used in 2006 with the Ps.23.4 reduced in 2007 due to the cancellation of bank credits with IXE, Banorte and one swap transaction made on December 2007; |
• | Ps.21.7 million increase in resources resulting from an decrease in inventory, when compared to the Ps.19.2 million used in 2006 with the Ps.2.5 million reduced in 2007; and |
• | Ps.14.3 million decrease in resources resulting from a increase in prepaid expenses, when compared to the Ps.18.4 million used in 2006 with the Ps.4.1 million used in 2007. |
• | Ps.183.4 million decrease in resources resulting from an increase in accounts receivable as a result of our incremental operations; |
• | Ps.178.2 million decrease in resources resulting from a decrease in short term liabilities; |
• | Ps.15.1 million decrease in resources resulting from an increase in inventory; and |
• | Ps.29.9 million increase in case resulting from a decrease in prepaid expenses. |
• | Ps.2,643.4 million provided from the net proceeds of our initial public offering in 2007; |
• | Ps.210.7 million used to the payment of Ps. 214.4 millions of the senior notes interest, Ps. 20.3 paid in the share repurchase program when compared with Ps.24.0 of hedging valuation on 2007; |
• | Ps.71.6 million used to exercise of the stock option program in 2008; |
• | Ps. 8.4 million used to pay vendor financing in 2008; and |
• | Ps.408.3 million increase in resources from Ps.534.4 million senior notes revaluation compared with the payment of Ps.126.1 million of the used to redeem U.S.$11,590 of our 133/4% B series bonds maturing on April 1, 2007. |
• | Ps.2,643.4 million provided from the net proceeds of our initial public offering in 2007 when compared to with the Ps.364 million generated in 2006 by the sale of our common stock to Grupo VAC; |
• | Ps.456.6 million provided by the senior notes due 2014 issuance (U.S.$50 million) in 2007 including a hedge valuation of Ps. 24.0 million when compared with Ps. 1,209.2 million net proceeds for senior notes due 2014 issuance (issuance of US$150 million and payment of US$42.7 million) made in 2006; |
• | Ps.130.8 million used to redeem U.S.$11,590 of our 133/4% B series bonds maturing on April 1, 2007; |
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• | Ps.155.6 million used to redeem Ps. 150.0 million plus accrued interest of our commercial paper maturing May 17, 2007; |
• | Ps. 80.8 million used to pay vendor financing in 2006 compared to Ps. 12.8 million used in 2007, a Ps.68.0 million decrease. Most of our vendor financing is related to vehicles, telecommunications and office equipment; and |
• | Ps.157.3 million used to pay bank financing (a Ps. 78.4 million credit facility with IXE Bank and a Ps.78.9 million credit facility with Banorte Bank) and Ps.36.0 million used to pay other financing activities in 2006. |
• | Ps.364.3 million provided by the sale of our common stock to Grupo VAC Investors for U.S.$ 31.2 million; |
• | Ps.1,692.6 million provided by the senior notes due 2014 issuance; |
• | Ps.483.4 million used to pay (i) $5.1 million of senior notes due 2007 and (ii) $ 36.1 million of senior step-up note due 2009; |
• | Ps.157.3 million used to pay (i) Ps.51.4 million on the Ixe Banco short term credit facility, (ii) Ps.20.5 million on the Banco Mercantil del Norte short term credit facility, (iii) Ps.27.0 million on the Ixe Banco long term credit facility, and (iv) Ps.58.4 million on the Banco Mercantil del Norte long term credit facility; |
• | Ps.235.4 million used for the capitalization of liabilities held with a related party in connection with the acquisition and sale of a subsidiary; and |
• | Ps.63.1 million used for other operating activities. |
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• | a minimum consolidated leverage ratio of less than 4.00 to 1.00 on or after January 1, 2008 and on or before December 31, 2009 and 3.50 to 1.00 on or after January 1, 2010; |
• | a minimum fixed charge coverage ratio of 2.00 to 1.00; |
• | no default (as defined in the indenture) must have occurred and be continuing or result from the payment of the cash dividend; and |
• | the dividend payments together with the aggregate amount of all other restricted payments (as defined in the indenture) do not exceed certain amount determined in the indenture based on, among other things: (i) the consolidated net income of the company, (ii) the net cash flows from equity offerings, (iii) the lesser of the return on the restricted investments or the original amount of the restricted investment, (iv) the lesser of the fair market value (as defined in the indenture) of the company’s investment on a subsidiary after its redesignation as a restricted subsidiary or the original fair value as of the date in which such subsidiary was originally designated as unrestricted subsidiary. |
Inflation | ||||||||||||
December 31, | NCPI | Year | Accumulated | |||||||||
2008 | 133.761 | 6.53 | % | 18.85 | % | |||||||
2007 | 125.564 | 3.76 | % | 11.56 | % | |||||||
2006 | 121.015 | 4.05 | % | 7.52 | % | |||||||
2005 | 116.301 | 3.33 | % | 3.33 | % |
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• | The growth in broadband access; |
• | The convergence of services and industries, as evidenced by the introduction of voice, data and video bundles in the market; |
• | Industry competitors forming alliances to sell and package bundles under one simple price strategies; |
• | Multi-service IP services; and |
• | Mobile services. |
Payment Due by Period | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(In thousands of pesos) | ||||||||||||||||||||
Contractual Obligations: | ||||||||||||||||||||
Long-Term Debt Obligations* | Ps. | 2,707,660.0 | Ps. | — | Ps. | — | Ps. | — | Ps. | 2,767,660.0 | ||||||||||
Capital (Finance) Lease Obligation | 4,354.0 | 4,354.0 | — | — | — | |||||||||||||||
Vendor Financing | 17,725.9 | 17,725.9 | — | — | — | |||||||||||||||
Capital Lease and Vendor Financing Accrued Interest at December 31, 2008 | 44.3 | 44.3 | — | — | — | |||||||||||||||
Accounts Payable to Grupo VAC** | 36,091.4 | 2,167.3 | 2,552.3 | 2,552.3 | 28,819.5 | |||||||||||||||
Debt Obligations Interest | 1,787,055.6 | 310,252.7 | 595,685.2 | 595,685.2 | 285,432.5 | |||||||||||||||
Operating Lease Obligation | 325,779.5 | 73,789.7 | 132,089.3 | 115,713.1 | 4,187.4 | |||||||||||||||
Interest to Account Payable to Grupo VAC** | 48,693.7 | 3,461.5 | 6,540.2 | 6,029.8 | 32,662.1 | |||||||||||||||
Total | Ps. | 4,927,404.3 | Ps. | 411,795.4 | Ps. | 736,867.0 | Ps. | 719,980.4 | Ps. | 3,058,761.5 | ||||||||||
* | For further information see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and capital resources-Financing sources and liquidity” | |
** | For further information see “Item 4. Information on the Company — B. Business overview-Legal Matters and Administrative Proceedings-Mexican Federal Power Commission (Comisión Federal de Electricidad) Litigation” |
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Name | Age | Position | ||||
Eduardo Vázquez | 46 | Director and Chairman of the Board | ||||
Adrián Aguirre Gómez | 58 | Director and Vice Chairman of the Board | ||||
Gabriel Vázquez | 48 | Director | ||||
Lauro A. González Moreno (*) | 47 | Director | ||||
Marco Provencio Muñoz (*) | 50 | Director | ||||
Rodrigo Guerra Botello (*) | 67 | Director | ||||
Jacques Gliksberg | 51 | Director | ||||
Lorenzo Barrera Segovia(*) | 50 | Director | ||||
Juan Jaime Petersen Farah (*) | 50 | Director | ||||
Jorge Garcia Segovia (*) | 51 | Director |
* | Independent Directors pursuant to New York Stock Exchange listing standards, applicable federal U.S. securities laws including Rule 10 A-3, and the Mexican Securities Market Law. |
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Name | Age | Position | ||||
Eduardo Vázquez | 46 | Chief Executive Officer | ||||
William Nazaret | 48 | Chief Operating Officer | ||||
José Antonio Solbes | 42 | Chief Financial Officer | ||||
Juvenal Gárnica | 52 | Chief Technology Officer | ||||
Eduardo Legorreta | 43 | Vice President of Commercial Sales |
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• | our general strategy; |
• | guidelines for the use of corporate assets; |
• | on an individual basis, any transactions with related parties, subject to certain limited exceptions; |
• | unusual or non-recurrent transactions and any transactions that imply the acquisition or sale of assets with a value equal to or exceeding 5% of our consolidated assets or the provision of collateral or guarantees or the assumption of liabilities equal to or exceeding 5% of our consolidated assets; |
• | the appointment or removal of the chief executive officer; |
• | accounting and internal control policies; and |
• | policies for disclosure of information. |
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• | advise the board of directors with respect to matters assigned to it under the Mexican Securities Market Law, including: (a) our internal control and internal audit guidelines, (b) our accounting policies by referenced to financial reporting standards, (c) our financial statements, (d) the appointment of our external auditors, and (e) transactions that either are outside the ordinary course of our business or, in relation to the results of the immediately preceding fiscal quarter, constitute (i) the acquisition or disposition of assets or (ii) the provision of guaranties or the assumption of liabilities, in each case, equal to or greater than 5% of our consolidated assets; |
• | evaluate, analyze and supervise the work performed by our external auditors, including (a) review with them our annual and interim financial statements; (b) approve non-audit services provided by them; (c) resolve any disagreements between them and management; and (d) ensure their independence and objectivity; |
• | discuss our financial statements with the chief financial officer for their preparation and review and issue a recommendation to the board of directors with respect to committee’s approval; |
• | inform the board of directors of the status of the internal control and internal audit system, including any detected irregularities; |
• | advise the board of directors with respect to the annual report of our chief financial officer; |
• | assist the board of directors in preparation of the report on our principal accounting and financial information policies and criteria; |
• | seek the opinion of independent experts and other advisors when required or deemed necessary; |
• | investigate possible violations of operational guidelines and policies or of the internal control, internal audit and accounting records system; |
• | request periodic meetings with management and any information related to internal control and internal audit; |
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• | call a shareholders’ meeting and request the inclusion of matters it considers appropriate on the agenda; |
• | supervise and discuss with the board of directors our internal control system relating to risk management and compliance with applicable laws; |
• | ensure the existence of control mechanisms to provide that consistent unaudited financial information is presented to the board of directors; |
• | report to the board of directors on any detected significant irregularities and on its activities in general and review and propose amendments to its rules; |
• | supervise, review and discuss the audit procedures of our internal audit; |
• | receive from our external auditors a report that includes an analysis of: (a) all critical accounting policies utilized by us; (b) all policies and financial reporting standards that differ from those utilized by us and that have been discussed with management, including the implications of using such policies and practices; and (c) any other written communications regarding significant matters between our external auditors and management, including the annual letter to management, in which our external auditors summarize their recommendations regarding our internal controls identified during the audit process; |
• | establish procedures for receiving, retaining and addressing complaints regarding accounting, internal controls and audit matters, including procedures for confidential submission of such complaints; |
• | review and analyze with management and our external auditors this annual report and the quarterly results presented to the Securities and Exchange Commission, or SEC; |
• | oversee the execution of resolutions adopted at shareholders’ meetings by the board of directors; and |
• | perform any other functions pursuant to its mandate or expressly conferred by the board of directors. |
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Series A Common Stock | ||||||||||||
Beneficial Ownership | Shares | |||||||||||
Shareholders | Number | Percentage | Underlying CPOs | |||||||||
Jacques Gliksberg(1) | 319,484,851 | 40.5 | % | 287,484,851 | ||||||||
Marco Viola(1)** | 319,146,856 | 40.4 | % | 287,146,856 | ||||||||
Eduardo Vázquez (3) | 76,831,006 | 9.7 | % | 48,831,006 | ||||||||
Jesus Gustavo Martinez (3)** | 76,831,006 | 9.7 | % | 48,831,006 | ||||||||
Gabriel Vázquez (3) | 76,831,006 | 9.7 | % | 48,831,006 | ||||||||
Efrain Ruvalcaba (3)** | 76,831,006 | 9.7 | % | 48,831,006 | ||||||||
Adrián Aguirre Gómez(2) | 14,549,048 | 1.84 | % | 11,549,043 | ||||||||
Lauro González Moreno | * | * | — | |||||||||
Maria Guadalupe Aguirre Gómez(2)** | 14,549,048 | 1.84 | % | 11,549,043 | ||||||||
Rodrigo Guerra Botello | * | * | — | |||||||||
Marco Provencio Muñoz | * | * | — | |||||||||
Lorenzo Barrera Segovia | * | * | — | |||||||||
Juan Jaime Petersen Farah | * | * | — | |||||||||
Jorge Garcia Segovia | * | * | — | |||||||||
José Antonio Solbes | * | * | — | |||||||||
All executive officers and directors as a group (14 persons) | 410,864,905 | 52.04 | % | 347,864,900 |
* | Less than one percent. Pursuant to the Instruction to Item 6E of Form 20-F, individual share ownership is not disclosed. | |
** | Alternate director. |
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Series A Common Stock | ||||||||||||
Beneficial Ownership | Shares | |||||||||||
Shareholders | Number | Percentage | Underlying CPOs | |||||||||
Bank of America Corporation(1) | 319,484,851 | 40.5 | % | 287,484,851 | ||||||||
Nexus Maxcom Holdings (1) | 319,484,851 | 40.5 | % | 287,484,851 | ||||||||
The Bank of New York Mellon Corporation(2) | 55,894,104 | 7.07 | % | 55,894,104 |
* | Less than one percent. Pursuant to the Instruction to Item 6E of Form 20-F, individual share ownership is not disclosed. | |
(1) | Based upon information set forth in the Schedule 13G/A filed on February 13, 2009, includes shares of Series A common stock beneficially owned, directly or indirectly by the following reporting persons: Nexus-Maxcom Holdings I, LLC, Nexus Partners I, LLC, Nexus-Banc of America Fund II, L.P., Nexus Partners II, L.P., Jacques Gliksberg, Marco Viola. Additionally, Bank of America Corporation has retained Nexus Partners and Messrs. Gliksberg and Viola to manage all shares of Series A Common Stock beneficially owned by BAS Capital Funding Corporation (“BAS Capital”), which is the direct beneficial owner of 3,055,035 shares of Series A Common Stock, or approximately 0.4% of the total outstanding Series A Common Stock, BankAmerica Investment Corporation (“BAIC”), which is the direct beneficial owner of 338,347 shares of Series A Common Stock, or approximately 0.04% of the total outstanding Series A Common Stock, BASCFC-Maxcom Holdings I, LLC (“BASCFC”), which is the direct beneficial owner of 85,741,832 shares of Series A Common Stock, or approximately 10.9% of the total outstanding Series A Common Stock and Nexus-Maxcom Holdings. As a result, Nexus Partners and Messrs. Gliksberg and Viola may be deemed to be the indirect beneficial owners of the shares beneficially owned directly by BAS Capital, BAIC, BASCFC and Nexus-Maxcom Holdings. | |
(2) | Based upon information set forth in the Schedule 13G filed on March 17, 2009, includes shares of Series A common stock beneficially owned, directly or indirectly by the following reporting persons: MBC Investments Corporation, Neptune LLC, Mellon International Holding SARL, Mellon International Ltd., Newton Management Ltd. and Newton Investment Management Ltd. |
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Mexican Stock Exchange | New York Stock Exchange | |||||||||||||||
(Mexican pesos per CPO) | (U.S. dollars per ADS) | |||||||||||||||
High | Low | High | Low | |||||||||||||
Annual Highs and Lows | ||||||||||||||||
2009(through June 23, 2009) | Ps. | 8.35 | Ps. | 4.20 | $ | 4.26 | $ | 1.70 | ||||||||
2008 | 23.70 | 5.29 | 16.03 | 2.16 | ||||||||||||
2007 (beginning October 19, 2007) | 31.00 | 19.00 | 19.98 | 12.17 | ||||||||||||
Quarterly Highs and Lows 2009: | ||||||||||||||||
First Quarter | Ps. | 8.35 | Ps. | 4.20 | $ | 4.26 | $ | 1.86 | ||||||||
Second Quarter (through June 23, 2009) | 6.90 | 4.51 | 3.50 | 1.70 | ||||||||||||
2008: | ||||||||||||||||
First Quarter | Ps. | 20.39 | Ps. | 16.50 | $ | 13.25 | $ | 9.89 | ||||||||
Second Quarter | 23.70 | 16.10 | 16.03 | 9.44 | ||||||||||||
Third Quarter | 18.91 | 11.00 | 12.75 | 7.01 | ||||||||||||
Fourth Quarter | 12.86 | 5.29 | 8.00 | 2.16 | ||||||||||||
2007: | ||||||||||||||||
Fourth Quarter (beginning October 19, 2007) | Ps. | 31.00 | Ps. | 19.00 | $ | 19.98 | $ | 12.17 | ||||||||
Monthly 2009: | ||||||||||||||||
January | Ps. | 8.35 | Ps. | 6.20 | $ | 4.26 | $ | 3.03 | ||||||||
February | 7.50 | 5.80 | 3.43 | 2.74 | ||||||||||||
March | 6.19 | 4.20 | 2.90 | 1.86 | ||||||||||||
April | 6.50 | 4.55 | 3.06 | 2.13 | ||||||||||||
May | 6.90 | 4.51 | 3.50 | 1.70 | ||||||||||||
June (through June 23, 2009) | 6.53 | 5.30 | 3.45 | 2.70 | ||||||||||||
2008: | ||||||||||||||||
January | Ps. | 19.94 | Ps. | 16.50 | $ | 12.90 | $ | 9.89 | ||||||||
February | 20.39 | 18.53 | 13.25 | 11.76 | ||||||||||||
March | 19.28 | 17.29 | 12.52 | 11.02 | ||||||||||||
April | 19.20 | 16.38 | 12.53 | 9.44 | ||||||||||||
May | 21.80 | 16.10 | 14.66 | 10.61 | ||||||||||||
June | 23.70 | 17.51 | 16.03 | 11.79 | ||||||||||||
July | 18.91 | 14.10 | 12.75 | 9.73 | ||||||||||||
August | 14.54 | 11.05 | 10.02 | 7.60 | ||||||||||||
September | 14.39 | 11.00 | 9.56 | 7.01 | ||||||||||||
October | 12.86 | 5.80 | 8.00 | 2.52 | ||||||||||||
November | 8.90 | 5.29 | 5.03 | 2.16 | ||||||||||||
December | 9.00 | 7.16 | 4.66 | 3.55 | ||||||||||||
2007: | ||||||||||||||||
October (beginning October 19, 2007) | Ps. | 31.00 | Ps. | 26.60 | $ | 19.98 | $ | 17.01 | ||||||||
November | 27.70 | 22.67 | 18.80 | 14.35 | ||||||||||||
December | 26.32 | 19.00 | 17.83 | 12.17 |
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% of Total | ||||||||
Number | Capital | |||||||
Class of Shares | of Shares | Structure | ||||||
Series A common stock | 789,818,829 | 100 | % | |||||
Total | 789,818,829 | 100 | % |
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• | our board of directors and the president or secretary of the board; |
• | shareholders representing at least 10% of our outstanding capital stock who request the board of directors or the audit and corporate practices committee to call a shareholders meeting; |
• | a Mexican court of competent jurisdiction, in the event the board of directors does not comply with a valid request of the shareholders described immediately above; |
• | the audit and corporate practices committee; and |
• | any shareholder, provided that no annual ordinary meeting has been held for two consecutive years or the annual shareholders meeting did not to address the matters required to be addressed in an annual shareholders’ meeting. |
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• | approve the financial statements for the preceding fiscal year; |
• | elect directors; |
• | discuss and approve the audit and corporate practices committee’s, the board of directors’ and the chief executive officer’s annual report; |
• | determine how to allocate net profits for the preceding year (including, if applicable, the payment of dividends); and |
• | determine the maximum amount of resources allocated to share repurchases. |
• | an extension of our duration or voluntary dissolution; |
• | an increase or decrease in the fixed portion of our capital stock; |
• | any change in our corporate purpose or nationality; |
• | any merger or transformation into another type of company; |
• | any issuance of preferred stock; |
• | the redemption of shares with retained earnings; |
• | any amendments to our bylaws; |
• | any other matters provided for by law or our bylaws; or |
• | the cancellation of the registration of our class A common stock or CPOs representing such shares at the Mexican National Securities Registry or any stock exchange (except for automated quotation systems). |
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• | Holders of at least 5% of our outstanding shares, whether directly or through CPOs or ADSs, are required to initiate action against some or all of our directors for violations of their duty of care or duty of loyalty, for our benefit, in an amount equal to the damages or losses caused to us. Actions initiated on these grounds have a five year statute of limitations. |
• | Holders of at least 10% of our outstanding share capital, whether directly or through CPOs or ADSs, are able to: |
• | request a call for a shareholders’ meeting; |
• | request that resolutions with respect to any matter on which they were not sufficiently informed be postponed; and |
• | appoint one member of our board of directors and one alternate member of our board of directors except that for non-Mexican holders of CPOs or ADSs this right will only be exercisable if a majority of our directors are appointed by Mexican investors. See “Description of the CPO Trust.” |
• | Holders, whether directly or through CPOs or ADSs, of 20% of our outstanding share capital to oppose any resolution adopted at a shareholders’ meeting and file a petition for a court order to suspend the resolution within 15 days following the adjournment of the meeting at which the action was taken, provided that the challenged resolution violates Mexican law or our bylaws, the opposing shareholders either did not attend the meeting or voted against the challenged resolution, and the opposing shareholders deliver a bond to the court to secure payment of any damages that we may suffer as a result of suspending the resolution in the event that the court ultimately rules against the opposing shareholder. |
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• | the average quotation price on the Mexican Stock Exchange for the 30 days prior to the date of the offer; or |
• | the book value, as reflected in the report filed with the CNBV and the Mexican Stock Exchange. |
• | concurrently with the termination of the CPO trust and distribution of the underlying shares, the registration of the Series A common stock with the Mexican National Securities Registry maintained by the CNBV and, if necessary, the registration of the distribution of such shares under the Securities Act; |
• | the listing of the shares on the Mexican Stock Exchange; |
• | those required to modify our bylaws to permit unrestricted foreign ownership and/or control of our capital stock (and the CPOs); |
• | the preparation of proxy materials for and the solicitation of shareholder, and CPO holder, approval of the termination of CPO trust and any required or advisable amendments to our bylaws; and |
• | causing all filings, notices, applications and permits related to, and obtaining approvals and authorizations of, such termination and distribution. |
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• | the impossibility of continuing with our current line of business; |
• | the resolution of our shareholders at an extraordinary general shareholders’ meeting; |
• | the reduction of the number of our shareholders to fewer than two; and |
• | the loss of two-thirds of our capital stock. |
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• | the CPO trust agreement between us and the CPO trustee (and persons contributing shares of Series A common stock to the trust from time to time); and |
• | a CPO trust deed, pursuant to which the CPO trustee will issue CPOs in accordance with the CPO trust agreement. |
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• | a split or a consolidation of our Series A common stock; |
• | a capitalization affecting or redemption of our Series A common stock; |
• | any other reclassification or restructuring of our Series A common stock; or |
• | any merger, consolidation, or spin-off. |
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• | verification of the due execution and terms of the CPO trust; |
• | verification of the existence of the shares Series A common stock being held in the CPO trust; |
• | authentication, by its signature, of the certificates evidencing the CPOs; |
• | exercise the rights of CPO holders in connection with the payment of any dividend to which they are entitled; |
• | undertaking of any other action required to protect the rights, actions or remedies to which they are entitled; |
• | calling and presiding over general meetings of CPO holders; and |
• | execution of decisions adopted at general meetings of CPO holders. |
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• | the right to cause the CPO trustee to distribute dividends or other distributions it has received; |
• | the right to cause the common representative to enforce and protect rights of CPO holders; and |
• | the right to bring action against the common representative, for civil liabilities in the event of willful misconduct. |
• | distribute the shares of Series A common stock underlying CPOs held by Mexican holders of on a pro rata basis; and |
• | with respect to shares of Series A common stock underlying CPOs held by non-Mexicans, the CPO trustee will: |
• | sell or distribute the applicable shares Series A common stock in the CPO trust, and then distribute the proceeds to CPO holders on a pro rata basis; |
• | extend the period for the CPO trust agreement; or |
• | create a new trust similar to the CPO trust to which it will transfer all of the applicable shares of Series A common stock, so that the non-Mexican holders may be the beneficiaries of economic rights in respect of such shares on a pro rata basis. |
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• | Change the nominal or par value of the CPOs; |
• | Reclassify, split or consolidate any of the deposited securities; |
• | Distribute securities on the CPOs that are not distributed to ADS holders; |
• | Recapitalize, reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action |
• | The cash, shares or other securities received by the depositary will become deposited securities. Each ADS will automatically represent its equal share of the new deposited securities. |
• | The depositary may, and will if we ask it to, distribute some or all of the cash, shares or other securities it received. It may also deliver new ADRs or ask ADR holders to surrender their outstanding ADRs in exchange for new ADRs identifying the new deposited securities. |
• | are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith; |
• | are not liable if either of us is prevented or delayed by law or circumstances beyond our control from performing our obligations under the deposit agreement; |
• | are not liable if either of us exercises discretion permitted under the deposit agreement; |
• | are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement; |
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• | are not liable for any special, consequential or punitive damages for any breach of the terms of the deposit agreement; |
• | have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on an ADS holders behalf or on behalf of any other person; and |
• | may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper person. |
• | payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any CPOs or other deposited securities; |
• | satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and |
• | compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents. |
• | when temporary delays arise because: (i) the depositary, the CPO trustee or the Foreign Registrar has closed its transfer books or we have closed our transfer books; (ii) the transfer of CPOs is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend on our Series A common stock or any other security deposited with the CPO trustee; |
• | if the ADS holder owes money to pay fees, taxes and similar charges; and |
• | when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to the ADSs or to the withdrawal of CPOs or other deposited securities. |
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• | a minimum consolidated leverage ratio of less than 4.25 to 1.00 on or before December 31, 2007, 4.00 to 1.00 on or after January 1, 2008 and on or before December 31, 2009 and 3.50 to 1.00 on or after January 1, 2010; |
• | no default (as defined in the indenture) must have occurred and be continuing or result from the payment of the cash dividend; and |
• | the dividend payments together with the aggregate amount of all other restricted payments (as defined in the indenture) do not exceed a certain amount determined in the indenture based on, among other things: (i) the consolidated net income of the company, (ii) the net cash flows from equity offerings, (iii) the lesser of the return on the restricted investments or the original amount of the restricted investment, (iv) the lesser of the fair market value (as defined in the indenture) of the company’s investment on a subsidiary after its redesignation as a restricted subsidiary or the original fair value as of the date in which such subsidiary was originally designated as unrestricted subsidiary. |
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• | the senior notes are placed through banks or brokerage houses in a country with which Mexico has entered into a tax treaty for the avoidance of double taxation that is in force; |
• | we have delivered notice of the offering of the senior notes to the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) pursuant to Article 7 of the Mexican Securities Market Law (Ley del Mercado de Valores); and |
• | certain periodic information requirements by the Mexican Ministry of Finance (Secretaría de Hacienda y Crédito Público) are complied with. |
• | our shareholders who own, directly or indirectly, individually or jointly with related parties, more than 10% of our voting stock; or |
• | legal entities 20% or more of whose stock is owned, directly or indirectly, individually or jointly with related parties, by the us or by persons related to us. |
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ITEM 15T . CONTROLS AND PROCEDURES |
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Year Ended December 31 | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Audit Fees(1) | Ps. | 0.0 | Ps. | 8.1 | ||||
Audit-Related Fees(2) | 0.6 | 1.1 | ||||||
Tax Fees (3) | 0.0 | 0.4 | ||||||
All Other Fees | Ps. | 0.0 | Ps. | 0.0 |
Year Ended | ||||
December 31 | ||||
2008 | ||||
(In millions) | ||||
Audit Fees(1) | Ps. | 5.2 | ||
Audit-Related Fees(2) | 0.0 | |||
Tax Fees (3) | 0.0 | |||
All Other Fees(4) | Ps. | 0.2 |
(1) | Audit Fees include fees associated with the annual audit of our consolidated financial statements. Audit fees also include fees associated with Securities and Exchange Commission statutory, annual reporting audit requirements and internal control over financial reporting. | |
(2) | Audit-Related Fees are fees that support the auditing and reporting process, but are not directly related to it. | |
(3) | Tax Fees include fees associated with preparation of tax filings and fees for assistance with tax planning and tax compliance matters. | |
(4) | Other Fees includes fees for advisory and training services. |
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Approximate value of | ||||||||||||||||||
Total number of CPOs | CPOs that may yet be | |||||||||||||||||
Total number of | Average price paid | purchased for the repurchase | purchased under the | |||||||||||||||
Period | Dates | CPOs purchased | per CPO(1) | program | repurchase program(2) | |||||||||||||
2008: | ||||||||||||||||||
January | — | — | — | — | — | |||||||||||||
February | — | — | — | — | — | |||||||||||||
March | — | — | — | — | Ps. | 36.2 | ||||||||||||
April | From April 15 to | |||||||||||||||||
April 29, 2008 | 1,841,900 | Ps. | 17.7094 | 1,841,900 | Ps. | 29.2 | ||||||||||||
May | From May 5 to May | |||||||||||||||||
30, 2008 | 2,198,800 | Ps. | 18.3854 | 2,198,800 | Ps. | 24.5 | ||||||||||||
June | From June 3 to June | |||||||||||||||||
30, 2008 | 702,800 | Ps. | 19.4713 | 702,800 | Ps. | 22.2 | ||||||||||||
July | From July 2 to July | |||||||||||||||||
31, 2008 | 387,100 | Ps. | 16.8034 | 387,100 | Ps. | 18.1 | ||||||||||||
August | From August 1 to | |||||||||||||||||
August 28, 2008 | 580,800 | Ps. | 12.9328 | 580,800 | Ps. | 11.1 | ||||||||||||
September | From September 9 to | |||||||||||||||||
September 29, 2008 | 272,800 | Ps. | 12.4724 | 272,800 | Ps. | 10.9 | ||||||||||||
October | From October 1 to | |||||||||||||||||
October 27, 2008 | 388,800 | Ps. | 9.8259 | 388,800 | Ps. | 9.1 | ||||||||||||
November | From November 4 to | |||||||||||||||||
November 21, 2008 | 89,900 | Ps. | 7.0312 | 89,900 | Ps. | 8.5 | ||||||||||||
December | From December 1 to | |||||||||||||||||
December 31, 2008 | 147,100 | Ps. | 7.8380 | 147,100 | Ps. | 8.5 | ||||||||||||
2009: | ||||||||||||||||||
January | From January 7 to | |||||||||||||||||
January 29, 2009 | 196,200 | Ps. | 7.0726 | 196,200 | Ps. | 7.8 |
(1) | Average price paid is presented in nominal pesos. | |
(2) | Approximate value of CPOs that may yet be purchased under the repurchase program is presented in millions of nominal pesos. |
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NYSE Standards | Our Corporate Governance Practices | |
Director Independence. Majority of board of directors must be independent. §303A.01 | Director Independence.Pursuant to the Mexican Securities Market Law and our bylaws, our shareholders are required to appoint a Board of Directors of no more than 21 members, 25% of whom must be independent. Certain persons are per se non-independent, including insiders, control persons, major suppliers and any relatives of such persons. In accordance with the Mexican Securities Market Law, our shareholders’ meeting is required to make a determination as to the independence of our directors, though such determination may be challenged by the CNBV. There is no exemption from the independence requirement for controlled companies. | |
Executive Sessions. Non-management directors must meet regularly in executive sessions without management. Independent directors should meet alone in an executive session at least once a year. §303A.03 | Executive Sessions.Our non-management directors have not held executive sessions without management in the past, and under our bylaws and applicable Mexican law, they are not required to do so. | |
Nominating/Corporate Governance Committee. Nominating/corporate governance committee of independent directors is required. The committee must have a charter specifying the purpose, duties and evaluation procedures of the committee. §303A.04 | Nominating Committee.We currently do not have, and are not required to have, a nominating committee. However, Mexican law requires us to have one or more committees that oversee the corporate governance function. We have an audit and corporate practices committee which performs corporate governance functions. | |
Compensation Committee. Compensation committee of independent directors is required, which must evaluate and approve executive officer compensation. The committee must have a charter specifying the purpose, duties and evaluation procedures of the committee. §303A.05 | Compensation Committee.We are not required to have a compensation committee. We have an audit and corporate practices committee, which assists our board of directors in evaluating and compensating our senior executives. All of the members of the audit and corporate practices committee are independent. | |
Audit Committee.Audit committee satisfying the independence and other requirements of Exchange Act Rule 10A-3 and the more stringent requirements under the NYSE standards is required. §§303A.06, 303A.07 | Audit Committee.We have an audit and corporate practices committee of three members. Each member of this committee is independent, as independence is defined under the Mexican Securities Market Law, and also meets the independence requirements of Exchange Act Rule 10A-3. Our audit committee operates primarily pursuant to (1) a written charter adopted by our board of directors and (2) Mexican law. For a detailed description of the duties of our audit and corporate practices committee, see “Management — Committees — Audit and Corporate Practices Committee.” | |
Equity Compensation Plans. Equity compensation plans require shareholder approval, subject to limited exemptions. §§303A.08 & 312.03 | Equity Compensation Plans.Shareholder approval is required for the adoption and amendment of an equity-compensation plan. | |
Shareholder Approval for Issuance of Securities. Issuances of securities (1) that will result in a change of control of the issuer, (2) that are to a related party or someone closely related to a related party, (3) that have voting power equal to at least 20% of the outstanding common stock voting power before such issuance or (4) that will increase the number of shares of common stock by at least 20% of the number of outstanding shares before such issuance require shareholder approval. §§312.03(b)-(d) | Shareholder Approval for Issuance of Securities.Mexican law and our bylaws require us to obtain shareholder approval of the issuance of equity securities. Treasury stock, however, may be issued by the board of directors without shareholder approval. |
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NYSE Standards | Our Corporate Governance Practices | |
Corporate Governance Guidelines.Listed companies are required to adopt and maintain corporate governance guidelines, addressing, among other things, director qualification standards, director responsibilities, director access to management and independent advisors, management succession and annual performance evaluations of the board. §303A.09 | Corporate Governance GuidelinesWe operate under corporate governance principles that we believe are consistent with the principles of Rule 303A.09, and which are described in the Company’s website under “Corporate Governance”. | |
Code of Business Conduct and Ethics.A code of business conduct and ethics is required, with disclosure of any waiver for directors or executive officers. The code must contain compliance standards and procedures that will facilitate the effective operation of the code. §303A.10 | Code of Business Conduct and Ethics.We have adopted a code of ethics, which has been accepted by all of our directors and executive officers and other personnel. We also will post all waivers therefrom by any of our directors or executive officers on our website. We will provide a complimentary copy of our code of ethics upon request. | |
Conflicts of Interest. Determination of how to review and oversee related party transactions is left to the listed company. The audit committee or comparable body, however, could be considered the forum for such review and oversight. §307.00. Certain issuances of common stock to a related party require shareholder approval. §312.03(b) | Conflicts of Interest.In accordance with Mexican law and our bylaws, the audit and corporate practices committee must provide an opinion regarding any transaction with a related party that is outside of the ordinary course of business, which transactions must also be approved by the board of directors. Pursuant to the Mexican Securities Market Law, our Board of Directors will establish certain guidelines regarding related party transactions that do not require Board approval. | |
Solicitation of Proxies. Solicitation of proxies and provision of proxy materials is required for all meetings of shareholders. Copies of such proxy solicitations are to be provided to NYSE. §§402.00 & 402.04 | Solicitation of Proxies.We are required under Mexican law to solicit proxies and provide proxy materials for meetings of shareholders. In accordance with Mexican law and our bylaws, we are also required to inform shareholders of all meetings by public notice, which states the requirements for admission to the meeting, provides a mechanism by which shareholders can vote by proxy and makes proxies available. Under the deposit agreement relating to the ADSs, holders of the ADSs receive notices of shareholders’ meetings and, where applicable, instructions on how to vote at the shareholders’ meeting either in person or through a person having a proxy specifically designated by the shareholder. |
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December 31, 2008, 2007 and 2006
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2008 | 2007 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,591,405 | 2,539,535 | |||||
Accounts receivable: | ||||||||
Customers, net of allowance for doubtful accounts of $161,936 and $107,652 for 2008 and 2007, respectively | 716,203 | 517,254 | ||||||
Value added tax recoverable | 164,448 | 198,583 | ||||||
Other accounts receivable | 77,650 | 54,676 | ||||||
958,301 | 770,513 | |||||||
Inventory — Net | 40,876 | 33,249 | ||||||
Prepaid expenses — Net | 30,778 | 40,341 | ||||||
Total current assets | 2,621,360 | 3,383,638 | ||||||
Long lived assets: | ||||||||
Telephone network systems and equipment — Net (Note 7) | 4,684,413 | 4,188,946 | ||||||
Intangible assets — Net (Note 8) | 209,683 | 208,802 | ||||||
Preoperating expenses — Net | 50,863 | 77,902 | ||||||
Frequency rights — Net (Note 9) | 66,716 | 80,930 | ||||||
Other assets: | ||||||||
Intangible asset derived from employee benefits (Notes 6b. and 14) | — | 17,650 | ||||||
Deferred income taxes — Net (Note 19) | 148,114 | — | ||||||
Prepaid expenses — Net | 15,381 | 21,289 | ||||||
Guaranty deposits | 8,315 | 6,943 | ||||||
Derivative financial instruments (Notes 5o. and 13) | 105,270 | 13,475 | ||||||
Other assets | 6,357 | 14,525 | ||||||
Total assets | $ | 7,916,472 | 8,014,100 | |||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 469,328 | 489,486 | |||||
Accruals | 45,505 | 24,109 | ||||||
Current installments of obligations under capital leases | 4,354 | 8,087 | ||||||
Customer deposits | 2,518 | 2,801 | ||||||
Other taxes payable | 61,048 | 67,182 | ||||||
Accrued interests (Note 11) | 13,920 | 11,172 | ||||||
Total current liabilities | 596,673 | 602,837 | ||||||
Long-term liabilities : | ||||||||
Senior notes (Note 11) | 2,707,660 | 2,173,240 | ||||||
Obligation under capital leases, excluding current installments | — | 4,686 | ||||||
Other accounts payable | 80,872 | 78,174 | ||||||
Derivative financial instruments (Notes 5o. and 13) | 8,472 | — | ||||||
Deferred income taxes — Net (Note 19) | — | 97,742 | ||||||
Labor obligations upon retirement (Note 14) | 21,626 | 26,582 | ||||||
Total long-term liabilities | 2,818,630 | 2,380,424 | ||||||
Total liabilities | 3,415,303 | 2,983,261 | ||||||
Shareholders’ equity (Notes 15 and 16) | ||||||||
Capital stock | 5,410,244 | 5,410,251 | ||||||
Additional paid-in capital | 816,443 | 888,056 | ||||||
Deficit | (1,705,231 | ) | (1,267,468 | ) | ||||
Repurchase of shares | (20,287 | ) | — | |||||
Total shareholders’ equity | 4,501,169 | 5,030,839 | ||||||
Commitments and contingencies (Note 20) | ||||||||
Total liabilities and shareholders’ equity | $ | 7,916,472 | 8,014,100 | |||||
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2008 | 2007 | 2006 | ||||||||||
Net revenues (Note 17) | $ | 2,683,229 | 2,345,719 | 1,741,692 | ||||||||
Operating costs and expenses: | ||||||||||||
Network operating costs | (1,120,167 | ) | (976,979 | ) | (676,977 | ) | ||||||
Selling, general and administrative expenses (Note 6) | (819,642 | ) | (722,618 | ) | (607,505 | ) | ||||||
Depreciation and amortization | (551,889 | ) | (370,227 | ) | (300,468 | ) | ||||||
Total operating costs and expenses | (2,491,698 | ) | (2,069,824 | ) | (1,584,950 | ) | ||||||
Operating income | 191,531 | 275,895 | 156,742 | |||||||||
Other expenses: | ||||||||||||
Other expenses | (12,616 | ) | (12,819 | ) | (18,777 | ) | ||||||
Restructuring charges (Notes 5n and 14) | (49,491 | ) | — | — | ||||||||
Impairment of long-lived assets (Notes 5(h), 5(i), 7, 8 and 9) | (532,315 | ) | — | — | ||||||||
Employees’ statutory profit sharing (Notes 6 and 19) | (1,173 | ) | (3,257 | ) | — | |||||||
Other expenses, net | (595,595 | ) | (16,076 | ) | (18,777 | ) | ||||||
Comprehensive financing cost — Net (Note 18) | (267,393 | ) | (126,641 | ) | (107,182 | ) | ||||||
(Loss) income before income taxes | (671,457 | ) | 133,178 | 30,783 | ||||||||
Income taxes (Note 19): | ||||||||||||
Current tax expense | (12,162 | ) | (50,700 | ) | — | |||||||
Deferred tax benefit (expense) | 245,856 | (46,282 | ) | (60,050 | ) | |||||||
Total income tax benefit (expense) | 233,694 | (96,982 | ) | (60,050 | ) | |||||||
Net (loss) income for the year | $ | (437,763 | ) | 36,196 | (29,267 | ) | ||||||
(Loss) earnings per share (Note 5t): | ||||||||||||
Basic (loss) earnings per common share (pesos) | $ | (0.55 | ) | 0.06 | (0.07 | ) | ||||||
Diluted (loss) earnings per common share (pesos) | $ | (0.53 | ) | 0.06 | (0.06 | ) | ||||||
Weighted average basic shares (thousands) | 789,819 | 560,176 | 442,928 | |||||||||
Weighted average diluted shares (thousands) | 829,337 | 606,144 | 467,628 |
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Additional | Retained | Total | ||||||||||||||||||
Capital | paid-in | earnings | Repurchase | stockholders’ | ||||||||||||||||
stock | capital | (deficit) | of shares | equity | ||||||||||||||||
Balances as of December 31, 2005 | $ | 2,963,206 | 237,114 | (1,274,397 | ) | — | 1,925,923 | |||||||||||||
Increase in capital stock (Note 15) | 364,276 | — | — | — | 364,276 | |||||||||||||||
Stock options plans (Note 16) | — | 15,982 | — | — | 15,982 | |||||||||||||||
Comprehensive net loss | — | — | (29,267 | ) | — | (29,267 | ) | |||||||||||||
Balances as of December 31, 2006 | 3,327,482 | 253,096 | (1,303,664 | ) | — | 2,276,914 | ||||||||||||||
Increase in capital stock (Note 15) | 2,082,769 | 597,836 | — | — | 2,680,605 | |||||||||||||||
Stock options plans (Note 16) | — | 37,124 | — | — | 37,124 | |||||||||||||||
Comprehensive net income | — | — | 36,196 | — | 36,196 | |||||||||||||||
Balances as of December 31, 2007 | 5,410,251 | 888,056 | (1,267,468 | ) | — | 5,030,839 | ||||||||||||||
Decrease in capital stock (Note 15) | (7 | ) | — | — | — | (7 | ) | |||||||||||||
Stock options plans (Notes 15 and 16) | — | (71,613 | ) | — | — | (71,613 | ) | |||||||||||||
Repurchase of shares (Note 15) | — | — | — | (20,287 | ) | (20,287 | ) | |||||||||||||
Comprehensive net loss | �� | — | — | (437,763 | ) | — | (437,763 | ) | ||||||||||||
Balances as of December 31, 2008 | $ | 5,410,244 | 816,443 | (1,705,231 | ) | (20,287 | ) | 4,501,169 | ||||||||||||
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2008 | ||||
Cash flows from operating activities: | ||||
Loss before taxes | $ | (671,457 | ) | |
Items related to investing activities: | ||||
Depreciation and amortization | 551,889 | |||
Impairment of long lived assets | 532,315 | |||
Loss on sale of telephone network systems and equipment | 82,496 | |||
Items related to financing activities: | ||||
Financial instruments | (83,323 | ) | ||
Interest expense | 217,210 | |||
Subtotal | 629,130 | |||
Customer accounts receivable | (198,949 | ) | ||
Recoverable value added tax | 34,135 | |||
Other accounts receivable | (22,974 | ) | ||
Inventory | (7,627 | ) | ||
Prepaid expenses | 9,563 | |||
Trade accounts payable, provisions and other acumulated liabilities | 1,238 | |||
Income taxes paid | (7,320 | ) | ||
Customer deposits | (283 | ) | ||
Other liabilities and taxes payable | (3,436 | ) | ||
Changes in employees benfits and provisions | 12,694 | |||
Net cash provided by operating activities | 446,171 | |||
Cash flows from investing activities: | ||||
Capital expenditures (including interest capitalized in the amount of $62,029 in 2008) | (1,631,001 | ) | ||
Proceeds from sale of telephone network systems and equipment | 4,364 | |||
Increase in other non-current assets | 12,704 | |||
Net cash used in investing activities | (1,613,933 | ) | ||
Cash flows from financing activities: | ||||
Bonds payable | 534,420 | |||
Decrease in capital stock | (7 | ) | ||
Stock options plans | (71,613 | ) | ||
Interest paid | (214,462 | ) | ||
Capital lease, payment of credits | (8,419 | ) | ||
Repurchase of shares | (20,287 | ) | ||
Net cash provided by financing activities | 219,632 | |||
Net decrease in cash and equivalents | (948,130 | ) | ||
Cash and cash equivalents: | ||||
At beginning of year | 2,539,535 | |||
At end of year | $ | 1,591,405 | ||
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2007 | 2006 | |||||||
Operating activities: | ||||||||
Net income (loss) | $ | 36,196 | (29,267 | ) | ||||
Add charges (deduct credits) to operations not requiring (providing) funds: | ||||||||
Depreciation and amortization | 370,227 | 300,468 | ||||||
Deferred income taxes | 46,282 | 60,050 | ||||||
Stock options plan | 37,124 | 15,982 | ||||||
Accelerated amortization of debt | — | 17,671 | ||||||
Employee benefits | 5,752 | 4,642 | ||||||
Net financing from (investing in) operating accounts: | ||||||||
Accounts receivable | (285,004 | ) | (251,021 | ) | ||||
Inventories | 2,540 | (19,160 | ) | |||||
Prepaid expenses | 4,109 | 18,414 | ||||||
Restricted cash and other current assets and liabilities | 85,932 | (29,881 | ) | |||||
Resources provided by operating activities | 303,158 | 87,898 | ||||||
Financing activities: | ||||||||
Capital stock increases | 2,643,369 | 364,276 | ||||||
Proceeds from loans and bonds payable, net of payments and capitalizations | 126,160 | 1,092,993 | ||||||
Derivative financial instruments | (24,036 | ) | (5,217 | ) | ||||
Resources provided by financing activities | 2,745,493 | 1,452,052 | ||||||
Investing activities: | ||||||||
Telephone network systems and equipment, net of dispositions | (1,160,359 | ) | (1,130,118 | ) | ||||
Acquisition of subsidiaries | (33,576 | ) | (101,173 | ) | ||||
Intangible assets | (54,472 | ) | 190,425 | |||||
Other assets | — | (1,011 | ) | |||||
Resources used in investing activities | (1,248,407 | ) | (1,041,877 | ) | ||||
Increase of cash and cash equivalents | 1,800,244 | 498,073 | ||||||
Cash and cash equivalents: | ||||||||
At beginning of year | 739,291 | 241,218 | ||||||
At end of year | $ | 2,539,535 | 739,291 | |||||
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F-7
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F-8
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F-9
Table of Contents
a. | Acquisition of Sierra Comunicaciones Globales: |
Net assets | ||||||||||||
Book Value | recognized at | |||||||||||
of net assets as | fair value as of | |||||||||||
of November 15, | Goodwill | November 15, | ||||||||||
2007 | allocation | 2007 | ||||||||||
Assets: | ||||||||||||
Current assets | $ | 45 | — | 45 | ||||||||
Fixed assets | 10,935 | 21,814 | 32,749 | |||||||||
10,980 | 21,814 | 32,794 | ||||||||||
Liabilities: | ||||||||||||
Current liabilities | (112 | ) | — | (112 | ) | |||||||
Net acquired assets | 10,868 | 21,814 | 32,682 | |||||||||
Net assets fair value | (32,682 | ) | — | (32,682 | ) | |||||||
Cost in excess of book value of subsidiaries | $ | (21,814 | ) | 21,814 | — | |||||||
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b. | Acquisition of Grupo Telereunion: |
Net assets | ||||||||||||
Book value of | Negative | recognized at | ||||||||||
net assets as of | goodwill | fair value as of | ||||||||||
June 30, 2006 | allocation | June 30,2006 | ||||||||||
Assets: | ||||||||||||
Current assets | $ | 56,530 | — | 56,530 | ||||||||
Fixed assets | 421,572 | (166,944 | ) | 254,628 | ||||||||
Intangible assets | 224,844 | (224,844 | ) | — | ||||||||
Deferred taxes | 37,467 | (37,467 | ) | — | ||||||||
740,413 | (429,255 | ) | 311,158 | |||||||||
Liabilities: | ||||||||||||
Current liabilities | (211,278 | ) | — | (211,278 | ) | |||||||
Net acquired assets | 529,135 | (429,255 | ) | 99,880 | ||||||||
“Net assets fair value” | (99,880 | ) | — | (99,880 | ) | |||||||
Book value in excess of cost of subsidiaries (negative goodwill) | $ | 429,255 | (429,255 | ) | — | |||||||
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Net revenues | $ | 88,414 | ||
Cost | (61,223 | ) | ||
Expenses | (1,259 | ) | ||
Depreciation | (10,418 | ) | ||
Operating income | $ | 15,514 | ||
Net income | $ | 26,755 | ||
F-12
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Subsidiary company | % | Line of business | ||||
Corporativo en Telecomunicaciones, S. A. de C. V. | 99.9 | Technical personnel services | ||||
Maxcom Servicios Administrativos, S. A. de C. V. | 99.9 | Administrative personnel services | ||||
Maxcom SF, S. A. de C. V. | 99.9 | Financial services | ||||
Outsourcing Operadora de Personal, S. A. de C. V. | 99.9 | Technical personnel services | ||||
TECBTC Estrategias de Promoción, S. A. de C. V. | 99.9 | Technical personnel services | ||||
Maxcom TV, S. A. de C. V. * | 99.9 | Cable television services |
Subsidiary company | % | Line of business | ||||
Maxcom USA, Inc. * | 100.0 | International telecommunications services | ||||
Telereunion, S. A. de C. V. | 99.9 | Long distance and infrastructure leasing | ||||
Telscape de México, S. A. de C. V. | 99.9 | Real estate services | ||||
Sierra USA Communications, Inc. | 100.0 | International telecommunication services | ||||
Sierra Comunicaciones Globales, S. A. de C. V. | 99.9 | Infrastructure leasing |
* | Dormant companies. |
F-13
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F-14
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a. | Recognition of the effects of the inflation |
Inflation | ||||||||||||
December 31, | NCPI | Year | Accumulated | |||||||||
2008 | 133.761 | 6.53 | % | 18.85 | % | |||||||
2007 | 125.564 | 3.76 | % | 11.56 | % | |||||||
2006 | 121.015 | 4.05 | % | 7.52 | % | |||||||
2005 | 116.301 | 3.33 | % | 3.33 | % |
b. | Cash and cash equivalents |
F-15
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c. | Inventories |
d. | Telephone network systems and equipment |
F-16
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e. | Intangible assets |
F-17
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f. | Concessions |
g. | Frequency rights |
h. | Preoperating expenses |
i. | Impairment of long lived assets. |
F-18
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j. | Liabilities and accruals |
k. | Transactions in foreign currencies |
l. | Income Tax (IT), Asset Tax (AT), Flat Rate Business Tax (IETU), and Employees’ Statutory Profit Sharing (ESPS) |
F-19
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m. | Employees’ Statutory Profit Sharing (“ESPS”) |
n. | Employee benefits |
o. | Derivative financial instruments |
F-20
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p. | Revenue recognition |
F-21
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F-22
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q. | Business and credit concentration |
r. | Stock-options compensation |
F-23
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2007 | 2006 | |||||||
Volatility of expected price per share | 30.00 | % | 30.00 | % | ||||
Risk-free interest rate | 4.89 | % | 5.00 | % | ||||
Expected life of options | 3.25 | 3.50 |
s. | Information by segments |
business, public telephony, wholesale and others.
F-24
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t. | (Loss) earnings per share |
u. | New accounting standards |
(i.) | The obligation to consolidate special purpose entities (SPEs) when controlled. |
(ii.) | The possibility, under certain rules, of presenting unconsolidated financial statements when the parent is, in turn, a subsidiary with no minority interest or when the minority stockholders do not object to the fact that consolidated financial statements are not issued. |
(iii.) | Consideration is given to the existence of potential voting rights that might be exercised or converted in favor of the entity as parent and that may change its involvement in decision making at the time of assessing the existence of control. |
(iv.) | Additionally, regulations relating to the valuation of permanent investments have been transferred to a different bulletin. |
F-25
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(i) | Equity method of accounting is required for SPEs where significant influence is exercised. |
(ii) | Consideration is given to the existence of potential voting rights that might be exercised or converted in favor of the entity as parent and that may change its involvement in decision making at the time of assessing the existence of significant influence. |
(iii) | A specific procedure and a limit for recognizing the associated entity’s losses are provided. |
(i) | The definition of intangible assets is narrowed to establish that separability is not the only condition for the intangible asset to be identifiable; |
(ii) | Subsequent outlays for research and development projects in progress should be expensed as earned if they are part of the research phase or as an intangible asset if they meet the criteria to be recognized as such; |
(iii) | Greater detail is provided to account for the exchange of an asset, in accordance with the provisions of international standards and other NIF; |
(iv) | The presumption that an intangible asset may not exceed a useful life of twenty years was eliminated; |
F-26
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(i) | Recognition of the effects of inflation — An entity operates in a) an inflationary economic environment when cumulative inflation over the immediately preceding 3-year period is equal to or greater than 26%; and b) non-inflationary economic environment, when inflation over the aforementioned period is less than 26%. |
F-27
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(ii) | Price index — the use of the National Consumer Price Index (NCPI) or the change in the value of the Investment Unit (UDI) may be used for determining the inflation for a given period. |
(iii) | Valuation of inventories and of foreign machinery and equipment — The possibility of using replacement costs for inventories and specific indexation for foreign machinery and equipment is no longer allowed. |
(iv) | Equity adjustment for non-monetary Assets — On the effective date of this NIF, the unrealized portion of the equity adjustment for non monetary assets, which is maintained in stockholders’ equity, should be identified to be reclassified to earnings of the year when the originating item is realized. The realized portion or when is not practical to identify the unrealized portion, the realized and unrealized portions should be reclassified to retained earnings. |
(v) | Monetary Position Gains or Losses (included in Deficit/Excess in Equity Restatement) will be reclassified to retained earnings on the effective date of this NIF. |
(i) | Elimination of the recognition of an additional liability and the related intangible asset or any comprehensive item as a separate element of stockholders’ equity. |
(ii) | Employee benefits are classified in four principal categories; direct short-term and long term, termination and post-employment benefits. NIF D-3 establishes a maximum five-year period for amortizing unrecognized/unamortized items while actuarial gains or losses may be recognized as earned or incurred. Unlike termination benefits, post-employment benefits actuarial gains or losses may be immediately recognized in results of operations or amortized over the expected service life of the employees. |
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(iii) | The use of nominal rates and the incorporation of the term salary increases due to promotions. |
(iv) | ESPS, including deferred ESPS, shall be presented in the statement of income as ordinary operations, preferably within “other income and expenses”. Furthermore, NIF D-3 establishes that the asset and liability method should be used for determining deferred ESPS; any effects arising from the change in method shall be recognized in retained earnings, without restatement of prior years’ financial statements. |
(i) | the balance of the cumulative IT effects resulting from the initial adoption of Bulletin D-4 in 2000 is reclassified to retained earnings, unless identified with any other comprehensive item pending reclassification. On January 1, 2008 there were no IT effects reclassified to retained earnings. |
(ii) | the accounting treatment of ESPS (current and deferred) is transferred to NIF D-3, as mentioned in paragraph (b) above. |
(i) | Instead of the statement of changes in financial position, the financial statements shall include the statements of cash flows for all the periods presented comparatively with those of the current year, except for financial statements of periods prior to 2008; |
(ii) | Cash inflows and cash outflows are reported in nominal currency units, thus not including the effects of inflation; |
(iii) | Two alternative preparation methods (direct and indirect) are established, without stating preference for either method. Furthermore, cash flows from operating activities are to be reported first, followed by cash flows from investing activities and lastly by cash flows from financing activities; |
(iv) | Captions of principal items are to be reported gross, with certain exceptions and require disclosure of the composition of items considered cash equivalents. |
F-29
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(i) | Replacing integrated foreign operation and foreign entity concepts by those of recording, functional and reporting currencies, requiring that translation be made based on the economic environment in which the entity operates, regardless of its dependency on the holding company. | |
Includes translation procedures for instances where the recording and reporting currencies differ from the functional currency and provides for the option not to conduct such translation in companies not subject to consolidation or valuation based on the equity method. |
(ii) | The accounting changes produced by the initial application of this standard shall be recognized based on the prospective method; that is, in a non-inflationary economic environment, without modifying the translation already recognized in the consolidated financial statements of prior periods, at the time of issue. |
F-30
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Estimated | ||||||||||||
useful | ||||||||||||
2008 | 2007 | life (years) | ||||||||||
Telecommunications network and equipment | $ | 3,440,327 | $ | 2,944,366 | 17 | |||||||
Public telephony equipment | 582,734 | 377,916 | 8 | |||||||||
Leasehold improvements | 1,076,420 | 821,883 | 10 | |||||||||
Radio equipment | 397,444 | 330,736 | 30 | |||||||||
Line installation cost | 533,473 | 402,306 | 20 | |||||||||
Electronic equipment | 266,047 | 266,047 | 25 | |||||||||
Capitalized expenses due to construction of networks | 425,636 | 337,159 | 30 | |||||||||
Capitalized comprehensive financing cost | 241,235 | 66,525 | 10 | |||||||||
Computer equipment | 222,413 | 147,703 | 5 | |||||||||
Transportation equipment | 65,138 | 52,112 | 4 | |||||||||
Office furniture | 39,661 | 26,863 | 10 | |||||||||
Other | 28,179 | 20,476 | 10 | |||||||||
Engineering equipment | 20,450 | 13,227 | 10 | |||||||||
Subtotal | 7,339,157 | 5,807,319 | ||||||||||
Accumulated depreciation and amortization | (2,566,889 | ) | (2,082,785 | ) | ||||||||
Impairment charge (See note 5i) | (500,684 | ) | — | |||||||||
Subtotal | 4,271,584 | 3,724,534 | ||||||||||
Construction in progress | 412,829 | 464,412 | ||||||||||
$ | 4,684,413 | $ | 4,188,946 | |||||||||
F-31
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2008 | 2007 | |||||||
Transportation equipment | $ | 4,740 | 3,534 | |||||
Total | $ | 4,740 | 3,534 | |||||
Useful | ||||||||||||
2008 | 2007 | life (years) | ||||||||||
Infrastructure rights | $ | 178,964 | $ | 178,964 | 30 and 15 | |||||||
Debt issuance costs | 62,283 | 60,340 | 8 | |||||||||
Software licenses | 273,941 | 213,543 | 3.3 | |||||||||
515,188 | 452,847 | |||||||||||
Accumulated amortization | (285,238 | ) | (244,045 | ) | ||||||||
Impairment charges for intangible assets (See note 5i) | (20,267 | ) | — | |||||||||
$ | 209,683 | $ | 208,802 | |||||||||
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2008 | 2007 | |||||||
Frequency rights | $ | 155,309 | $ | 155,309 | ||||
Less — Accumulated amortization | (82,144 | ) | (74,379 | ) | ||||
Impairment charges (See note 5i) | (6,449 | ) | — | |||||
$ | 66,716 | $ | 80,930 | |||||
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Table of Contents
2008 | 2007 | 2006 | ||||||||||
Commission and administrative services paid to: | ||||||||||||
BBG Wireless (1) | $ | 7,709 | — | — | ||||||||
Electromecánica de Guadalajara, S. A. de C. V. (2) | 5,697 | 7,425 - | ||||||||||
Automotriz Rio Sonora (3) | 5,122 | — | — | |||||||||
Road Telco & Consulting, S. A. de C. V. (5) | 1,975 | 2,309 | 1,639 | |||||||||
GS Comunicación (6) | 1,063 | — | — | |||||||||
Autokam Regiomontana, S. A. de C. V. (3) | 844 | 343 | — | |||||||||
Ingeniería Avanzada en Construcción, S.A. de C.V. (7) | 765 | — | — | |||||||||
Vázquez Eduardo (8) | 480 | 459 | — | |||||||||
Vázquez Gabriel Agustín (8) | 480 | 459 | — | |||||||||
Solís Gilberto (6) | 332 | — | — | |||||||||
Bank of America, Co. (9) | 315 | 378 | 397 | |||||||||
Inmobiliaria Radio Centro (8) | 264 | — | — | |||||||||
MG Radio (4) | 101 | — | — | |||||||||
Inmobiliaria AutoKam, S. A. de C. V. (8) | 101 | 98 | — | |||||||||
Aguirre Adrián (10) | 31 | — | — | |||||||||
Sierra Madre Automotriz, S. A. de C. V. (3) | — | 318 | — | |||||||||
Comercializadora Road el Camino, S. A. de C. V. (11) | — | — | 323 | |||||||||
Advertisement services provided by Difusión Panorámica, S. A. de C. V. (4) | — | — | 22 | |||||||||
Total | $ | 25,279 | $ | 11,789 | $ | 4,351 | ||||||
Revenues from telephony services collected from related parties | $ | 966 | $ | 1,020 | $ | 940 | ||||||
(1) | Corresponds to cluster construction. | |
(2) | Corresponds to interest payments and a portion of the capital pertaining to a loan to settle Telereunion’s debt with the Comisión Federal de Electricidad (CFE). See note 20. | |
(3) | Corresponds to costs related to the purchase of vehicles. | |
(4) | Corresponds to advertising services. | |
(5) | Mr. Adrián Aguirre (Maxcom shareholder) is also a shareholder of Road Telco & Consulting, S. A. de C. V. The transactions correspond to administrative services and sale of telephone lines. |
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(6) | Corresponds to payments regarding marketing consulting services. | |
(7) | Corresponds to the installation of public telephones. | |
(8) | Corresponds to lease of sites and offices owned by a relative of a Maxcom shareholder. | |
(9) | Corresponds to expenses related to the debt restructuring and travel expenses of Bank of America (Maxcom shareholder). | |
(10) | Corresponds to expenses reimbursed. | |
(11) | Mr. Adrián Aguirre (Maxcom shareholder) is also a shareholder of Comercializadora Road el Camino, S. A. de C. V. Transactions correspond to administrative services and sale of telephone lines. |
2008 | 2007 | |||||||
Accounts Receivable: | ||||||||
Porcelanatto, S. A. de C. V. | $ | 29 | — | |||||
Guijarro de Pablo y Asociados, S.C. | 21 | — | ||||||
Difusión Panorámica, S. A. de C. V. | 15 | — | ||||||
Proa Mensaje y Comunicación, S. A. de C. V. | 11 | — | ||||||
Road Telco & Consulting, S. A. de C. V. | 9 | — | ||||||
Sport and Therapy Center, S. A. de C. V. | 8 | — | ||||||
Safe Iberoamericana, S. A. de C. V. | 1 | — | ||||||
Shareholder María Guadalupe Aguirre Gómez | 1 | — | ||||||
Shareholder María Elena Aguirre Gómez | 1 | — | ||||||
Shareholder Gabriel Vazquez | 1 | — | ||||||
Shareholder Ricardo Arevalo Ruíz | — | 2 | ||||||
$ | 97 | 2 | ||||||
F-35
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2008 | 2007 | |||||||
Accounts Payable: | ||||||||
Electromecánica de Guadalajara, S. A. de C. V. | $ | 36,091 | 36,370 | |||||
Autokam Regiomontana, S. A. de C. V. | 441 | — | ||||||
GS Comunicación, S. A. de C. V. | 244 | — | ||||||
Automotriz Río Sonora, S. A. de C. V. | 236 | — | ||||||
Ingenieria Avanzada en Construcción, S. A. de C. V. | 112 | — | ||||||
Nexus Partners | 30 | — | ||||||
Inmobiliaria Radio Centro | 25 | — | ||||||
Shareholder Adrián Aguirre Palme | 22 | — | ||||||
Shareholder Eduardo Vazquez | — | 36 | ||||||
Shareholder Gabriel Vazquez | — | 36 | ||||||
Road Telco & Consulting, S. A. de C. V. | — | 23 | ||||||
Inmobiliaria Autokam, S. A. de C. V. | — | 8 | ||||||
$ | 37,201 | 36,473 | ||||||
2008 | 2007 | |||||||
Long term: | ||||||||
Senior Notes maturing in 2014, bearing interest at a fixed annual rate of 11%, payable semiannually as from June 15, 2007. | $ | 2,707,660 | $ | 2,173,240 |
F-36
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F-37
Table of Contents
2008 | 2007 | |||||||
Assets | 121,987 | 223,278 | ||||||
Liabilities | (221,164 | ) | (223,196 | ) | ||||
Net (liabilities) assets in dollars | (99,177 | ) | 82 | |||||
Exchange rate at end of the year ($1 to the 1.00 dollar) | $ | 13.54 | $ | 10.87 | ||||
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Effects in operations | ||||||||||||
Counter-party | Notional | Basic conditions | 2008 | 2007 | ||||||||
Bank Morgan | 75,000 | Interest Received: 11% | (52,820 | ) | (4,563 | ) | ||||||
Stanley AG | USD | Periodicity: Semi-annual | ||||||||||
Maturity: December 15, 2010 | ||||||||||||
(808,200) | Interest Paid: 11.505% (Fixed) | |||||||||||
MXP | Periodicity: Semi-annual | |||||||||||
Maturity: December 15, 2010 | ||||||||||||
Merrill Lynch | 75,000 | Interest Received: 11% | (52,450 | ) | (4,352 | ) | ||||||
Capital Markets | USD | Periodicity: Semi-annual | ||||||||||
AG | Maturity: December 15, 2010 | |||||||||||
(808,200) | Interest Paid: 11.505% (Fixed) | |||||||||||
MXP | Periodicity: Semi-annual | |||||||||||
Maturity: December 15, 2010 |
F-39
Table of Contents
Host Leasing | Effects in operations | |||||||
Contract | Notional | Maturity | 2008 | |||||
MATC Digital | 0.5 | October 2009 | 0.02 | |||||
(San Marcos) | USD | |||||||
MATC Digital | 0.8 | September 2009 | 23 | |||||
(E. Zapata) | USD | |||||||
MATC Digital | 0.3 | June 2009 | 5 | |||||
(Chiquihuite) | USD | |||||||
Grande River | 0.9 | October 2009 | 26 | |||||
Communications | USD | |||||||
Enlace Digital | 2.5 | September 2009 | (34 | ) | ||||
Telecomunicaciones | USD | |||||||
CarrierCOM | 1.5 | February 2009 | 12 | |||||
USD | ||||||||
Grupo Promotor | 151 | December 2012 | 8,440 | |||||
Jomer | USD |
F-40
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Benefits | ||||||||||||||||
2008 | ||||||||||||||||
Termination | Retirement | Total | 2007 | |||||||||||||
Net cost for the year: | ||||||||||||||||
Labor cost | $ | 1,552 | 2,983 | 4,535 | 3,629 | |||||||||||
Financial cost | 698 | 2,027 | 2,725 | 1,091 | ||||||||||||
Actuarial loss | 5,899 | — | 5,899 | — | ||||||||||||
Prior service (2007 unamortized items): | ||||||||||||||||
Amortization of prior service cost and plan modifications | 964 | 2,951 | 3,915 | — | ||||||||||||
Amortization of transition liability | — | — | — | 1,032 | ||||||||||||
Net cost for the year | $ | 9,113 | 7,961 | 17,07 | 4 5,752 | |||||||||||
Benefits | ||||||||||||
Termination | Retirement | Total | ||||||||||
Current benefit obligation (CBO) | $ | 11,514 | 25,836 | 37,350 | ||||||||
Unrecognized items: | ||||||||||||
Transition liability | (3,856 | ) | (11,175 | ) | (15,031 | ) | ||||||
Actuarial loss | — | (693 | ) | (693 | ) | |||||||
Projected liability, net | $ | 7,658 | 13,968 | 21,626 | ||||||||
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Benefits obligations | ||||||||
by concept of: | ||||||||
Seniority | ||||||||
Premium | Severance | |||||||
Current benefit obligation (CBO) | $ | 1,283 | 24,906 | |||||
Present liability, net | 1,283 | 24,906 | ||||||
Minus: projected liability, net | (1,283 | ) | (7,256 | ) | ||||
Additional liability | $ | — | 17,650 | |||||
Projected benefit obligation (PBO) | $ | 1,480 | 33,002 | |||||
Unrecognized items: | ||||||||
Transition asset (liability) | 507 | (19,295 | ) | |||||
Actuarial loss | (310 | ) | (6,452 | ) | ||||
Projected liability, net | $ | 1,677 | 7,255 | |||||
Benefits | ||||||||||||
Termination | Retirement | Total | ||||||||||
CBO at the beginning of the year | $ | 33,002 | 1,480 | 34,482 | ||||||||
Current labor cost | 4,049 | 487 | 4,536 | |||||||||
Financial Cost | 2,608 | 118 | 2,726 | |||||||||
Yearly real payments charged to the allowance | (3,939 | ) | (442 | ) | (4,381 | ) | ||||||
Actuarial (loss) gain for the period | (64 | ) | 51 | (13 | ) | |||||||
CBO at the end of the year | $ | 35,656 | 1,694 | 37,350 | ||||||||
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2008 | 2007 | 2006 | ||||||||||
Retirement/Seniority Premium: | ||||||||||||
CBO | $ | 1,694 | 1,480 | 1,125 | ||||||||
Total actuarial loss | 360 | 311 | 246 | |||||||||
Termination: | ||||||||||||
CBO | $ | 35,656 | 33,002 | 25,979 | ||||||||
Total actuarial loss | 6,233 | 6,452 | 1,365 |
Benefits | ||||||||
2008 | 2007 | |||||||
Discount rate reflecting the value of the current obligations | 8.16 | % | 8.16 | % | ||||
Compensation increase rate | 5.56 | % | 5.56 | % | ||||
Employee Remnant Average Labor Life (Applicable to benefits upon retirement) | 29.5 years | 28.90 years |
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• | 6,088,896 Series “A-1” shares to Series “A” shares, at a one to one ratio; | |
• | 10,181,950 Series “B-1” shares to Series “B” shares, at a one to one ratio; | |
• | 220,714,874 Series “N-1” shares to Series “N” shares, at a one to one ratio, and | |
• | 26,867,820 Series “N-2” shares to Series “N” shares, at a one to one ratio. |
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1. | To make a public offering of Ordinary Participation Certificates (CPO) in Mexico, in the form of shares by offering these securities at the Bolsa Mexicana de Valores, S.A. B. de C.V. and other foreign markets in the form of American Depositary Shares (ADS) or other securities or instruments representing the CPOs or the shares of the Company, in accordance with applicable laws, including, without limitation, the US Securities Act of 1933, and upon registration of the corresponding securities with the Securities and Exchange Commission, so that the necessary funds may be raised in order to continue the development and growth of the Company and pay its debts. The CPOs are equivalent to three shares and the ADSs are equivalent to seven CPOs. | |
2. | The conversion and/or reclassification of all the shares under the Series “A”, “B”, and “N”, into new common and registered Series “A” shares with no par value, representing both the fixed and the variable portion of the capital stock, as applicable. | |
3. | Amend the Company’s overall bylaws, including the creation of a number of intermediate management bodies, and other changes required under the Mexican Stock Market Law to convert the Company to a publicly traded company (“Sociedad Anónima Bursátil” or S. A. B.). | |
4. | Cancel 45,768,803 of the Company’s treasury shares. | |
5. | Increase the variable capital stock by issuing up to 260,000,000 common and registered Series “A” shares with no par value, representing the variable portion of the capital stock of the Company and 45,768,803 registered Series “A” shares, with no par value, representing the variable portion of the capital stock, to be kept at the treasury. |
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offering and the over-allotment option was $2,751,713, and the issuance expenses amounted to $100,931, net from tax effects.
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Series and Class of Shares | 2008 | 2007 | 2006 | |||||||||
Issued and outstanding: | ||||||||||||
Series “A” Class I (fixed portion) | 1,528,827 | 1,528,827 | 1,528,827 | |||||||||
Series “A” Class II (variable portion) | 788,290,002 | 788,290,002 | 15,760,793 | |||||||||
Series “A1” Class II (variable portion) | — | — | — | |||||||||
Series “B” Class II (variable portion) | — | — | 16,611,595 | |||||||||
Series “B1” Class II (variable portion) | — | — | — | |||||||||
Series “N” Class II (variable portion) | — | — | 448,433,563 | |||||||||
Series “N1” Class II (variable portion) | — | — | — | |||||||||
Series “N2” Class II (variable portion) | — | — | — | |||||||||
Subtotal | 789,818,829 | 789,818,829 | 482,334,778 | |||||||||
(treasury shares)
2008 | 2007 | 2006 | ||||||||||
Series “A” | 11,000,000 | 307,010 | — | |||||||||
Series “N” | — | — | 45,901,176 | |||||||||
Series “N1” | — | — | — | |||||||||
Subtotal | 11,000,000 | 307,010 | 45,901,176 | |||||||||
Total authorized shares | 800,818,829 | 790,125,839 | 528,235,954 | |||||||||
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2008 | 2007 | |||||||
Capital stock | $ | 4,814,428 | 4,814,435 | |||||
Restatement effect | 595,816 | 595,816 | ||||||
Total capital stock | $ | 5,410,244 | 5,410,251 | |||||
a. | Executive plan — under the aforesaid plan, there were 575,000 stock options available as a grant for officer’s performance for the years of 1998, 1999 and 2000. | |
b. | New stock option plan for executives — As of December 31, 2005, the Board of Directors and shareholders of the Company authorized an aggregate of 17,998,500 options to remunerate officers for the services they rendered during the years 2002, 2003 and 2004. Also, part of these options served as extraordinary remunerations granted to certain key officers in case of a change in the control of the Company. | |
c. | Members of the Board of Directors and members of various committees — For each meeting of the Board or of the different committees of the Company where directors and members of the different committees attend, they receive an option to purchase 2,500 shares at an exercise price of 0.01 dollars per share. The chairman of the Board or of the different committees is entitled to receive options to subscribe 5,000 shares at the same above mentioned exercise price. Options granted in each meeting may be exercised immediately and expire three years after, beginning on the date when granted, except when the same Board or the shareholders’ meeting provides another mechanism. | |
d. | Signing bonuses and other bonuses for officers or directors — From time to time the Company has granted signing bonuses, special bonuses and other bonuses by way of stock options. There was a reserve of 246,215 N1 Series, Class II treasury shares, available so that the management or the Board of Directors may grant options on these shares as part of the signing bonuses negotiated and signed to contract new key officers with the Company. |
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2008 | 2007 | 2006 | ||||||||||||||||||||||
Weighed | Weighed | Weighed | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Options | Price USD | Options | Price USD | Options | Price USD | |||||||||||||||||||
Outstanding at beginning of year | 37,277 | $ | 0.37 | 36,651 | $ | 0.38 | 18,099 | $ | 0.65 | |||||||||||||||
Granted | 552 | 0.01 | 5,151 | 0.25 | 36,076 | 0.24 | ||||||||||||||||||
Exercised | (11,041 | ) | 0.06 | (339 | ) | 0.31 | — | — | ||||||||||||||||
Cancelled | — | — | (4,186 | ) | 0.27 | (17,524 | ) | 0.65 | ||||||||||||||||
Outstanding at the end of the year | 26,788 | 0.31 | 37,277 | 0.37 | 36,651 | 0.38 | ||||||||||||||||||
Options exercisable at the end of the year | 14,751 | 0.31 | 21,208 | 0.41 | 7,112 | 0.99 | ||||||||||||||||||
Weighted average price of options granted during the year (denominated in U.S. dollars) | $ | 0.01 | $ | 0.25 | $ | 0.24 | ||||||||||||||||||
Weighted | ||||||||
average | ||||||||
grant-date | ||||||||
Non vested granted Options | Options | fair value | ||||||
Balance at January 1, 2008 | 13,656 | USD | 0.10 | |||||
Vested | (5,118 | ) | 0.10 | |||||
Forfeited | (5,373 | ) | 0.10 | |||||
Balance at December 31, 2008 | 3,165 | USD | 0.10 |
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2008 | 2007 | |||||||
Granted | 17,916 | 35,272 | ||||||
Granted/Vested | 14,751 | 21,616 | ||||||
Granted nonvested | 3,165 | 13,656 | ||||||
Available | 8,872 | 2,005 | ||||||
Total authorized options | 26,788 | 37,277 |
Weighted | ||||||||
average | ||||||||
grant-date | ||||||||
Granted/Vested Options | Options | fair value | ||||||
Balance at January 1, 2008 | 21,616 | USD | 0.12 | |||||
Granted | 552 | 0.15 | ||||||
Exercised | (11,041 | ) | 0.07 | |||||
Vested | 5,118 | 0.10 | ||||||
Forfeited | (1,494 | ) | 0.12 | |||||
Balance at December 31, 2008 | 14,751 | USD | 0.14 |
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Weighted | Weighted | Weighted | ||||||||||||||||||||||
Stock | average | Directors | average | average | ||||||||||||||||||||
Option | unit price | & | unit price | unit price | ||||||||||||||||||||
Plan | USD | Officers | USD | Total | USD | |||||||||||||||||||
Cash out for share acquisition | 72,450 | 6.6 | 9,384 | 6.3 | 81,834 | 6.5 | ||||||||||||||||||
Cash in from exercised options | (7,082 | ) | (0.6 | ) | (4,079 | ) | (2.7 | ) | (11,161 | ) | (0.9 | ) | ||||||||||||
Total | 65,368 | 5.9 | 5,305 | 3.5 | 70,672 | 5.6 |
Modified plan | Previous | |||||||||||
2007 | 2006 | Plan | ||||||||||
Requisite service period | 3 years | 3 years | 5 years | (*) | ||||||||
Fair value on modification date (dollars) | 0.149 | 0.090 | 0.000 | |||||||||
Exercise price (dollars) | 0.31 | 0.31 | 0.50 | |||||||||
Unrecognized compensation cost in July 2006 (in dollars: 0 x 23,837,331 options) | — | — | N/A |
(*) | At the modification date most options had been already vested. |
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Dollars | ||||
Fair value of modified option at July 2007 | 0.149 | |||
Fair value of modified option at July 2006 | 0.090 | |||
Fair value of original option at July 2006 | 0.000 | |||
Incremental value of modified option at July 2007 | 0.149 | |||
Incremental value of modified option at July 2006 | 0.090 | |||
Incremental value of modified option at July 2007 | 0.149 | |||
Incremental value of modified option at July 2006 | 0.090 | |||
Unrecognized compensation cost for original option | 0.000 | |||
Total compensation cost to be recognized in 2007 | 0.149 | |||
Total compensation cost to be recognized in 2006 | 0.090 | |||
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New | Plan for the | Options for Board | ||||||||||||||
employee stock | Chairman | members and | ||||||||||||||
option plan | of the Board | executives | Total | |||||||||||||
Granted | 17,339,922 | 4,385,781 | 1,827,845 | 23,553,548 | ||||||||||||
Expected forfeitures | (3,467,984 | ) | — | — | (3,467,984 | ) | ||||||||||
Outstanding options authorized | 17,871,587 | — | 1,057,055 | 18,928,642 | ||||||||||||
Options vested during the year | 1,817,543 | 1,330,800 | 9,357,457 | 12,505,800 |
2008 | 2007 | |||||||
Authorized options | 43,961,391 | 44,915,241 | ||||||
Options granted | (25,032,749 | ) | (42,471,437 | ) | ||||
Available options | 18,928,642 | 2,443,804 |
Vesting Period | Volatility | Exercise Price | Risk Free Rate | Fair value | ||||||||||||
3.25 years | 30 | % | 0.31 dollars | 4.89 | % | 0.149 dollars |
Vesting Period | Volatility | Exercise Price | Risk Free Rate | Fair value | ||||||||||||
3.5 years | 30 | % | 0.31 dollars | 5.00 | % | 0.090 dollars |
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A) | Employee Incentive Program. |
a. | The yearly incentive goal, which may be given to the Company’s officers and employees who are eligible under the scope of the Executive Incentive Program, is to reward management for value generation to the Company in a given period of time. | ||
b. | The minimum requirement for the incentives to be awarded is a value generation of 15% year versus year. The following formula is how value generation is calculated: | ||
Value Generation for the year = EBITDA * 8 (eight) — net indebtedness + shareholders’ dividends — shareholders’ increase to the capital stock. | |||
c. | The amount of the yearly incentive is allocated individually and is subject to the yearly performance evaluation. | ||
d. | The yearly incentive is divided into three parts: |
i. | One part will be awarded through cash. | ||
ii. | One part will be awarded through stock options in order to receive ADRs, CPOs or any other instrument whose underlying values represent Maxcom’s capital stock. | ||
iii. | One part will be awarded through stock options in order to receive ADR’s, CPO’s or any other instrument whose underlying values represent Maxcom’s capital stock. |
B) | Compensation for Directors and Committee members. |
a. | Directors and Committee members will receive each year options to purchase up to $120 in the form of CPOs, with the exception of the Chairman of the Board who will receive each year options to purchase up to $240 in the form of CPOs. |
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2008 | ||||
Issuance expenses, net | $ | (6,055 | ) | |
Stock option plan cost | 5,114 | |||
Cost of shares acquired for issuance upon exercise of stock options net | (70,672 | ) | ||
$ | (71,613 | ) | ||
Segment | 2008 | 2007 | 2006 | |||||||||
Residential | $ | 1,055,639 | 897,855 | 685,492 | ||||||||
Business | 809,130 | 648,165 | 495,433 | |||||||||
Public Telephony | 428,733 | 386,404 | 253,136 | |||||||||
Wholesale | 359,518 | 376,092 | 262,304 | |||||||||
Others | 30,209 | 37,203 | 45,327 | |||||||||
Total revenues | $ | 2,683,229 | 2,345,719 | 1,741,692 | ||||||||
Operating costs and expenses | (2,491,698 | ) | (2,069,824 | ) | (1,584,950 | ) | ||||||
Operating income | $ | 191,531 | 275,895 | 156,742 | ||||||||
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Metropolitan | Central- | |||||||||||||||
Services | Area | South | North | Total | ||||||||||||
Year ended December 31, 2008: | ||||||||||||||||
Local | $ | 1,558,015 | 726,438 | 20,488 | 2,304,941 | |||||||||||
Long distance | 236,706 | 74,374 | 9,014 | 320,094 | ||||||||||||
Rent of dedicated links | 402 | — | — | 402 | ||||||||||||
Sale of equipment to customers | 8,740 | 1,873 | 77 | 10,690 | ||||||||||||
Capacity leasing | 47,102 | — | — | 47,102 | ||||||||||||
Total revenue | $ | 1,850,965 | 802,685 | 29,579 | 2,683,229 | |||||||||||
Total assets as of December 31, 2008 | $ | 9,578,452 | 1,298,685 | 308,373 | 11,185,510 | |||||||||||
Accumulated depreciation and amortization | (2,949,318 | ) | (232,333 | ) | (87,387 | ) | (3,269,038 | ) | ||||||||
Total assets | $ | 6,629,134 | 1,066,352 | 220,986 | 7,916,472 | |||||||||||
Acquisition of telephone network systems and equipment during 2008 | $ | 1,339,919 | 269,019 | 22,063 | 1,631,001 | |||||||||||
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Metropolitan | Central- | |||||||||||||||
Services | Area | South | North | Total | ||||||||||||
Year ended December 31, 2007: | ||||||||||||||||
Local | $ | 1,398,683 | 517,154 | — | 1,915,837 | |||||||||||
Long distance | 171,308 | 175,234 | 10,375 | 356,917 | ||||||||||||
Rent of dedicated links | 180 | 119 | — | 299 | ||||||||||||
Sale of equipment to customers | 10,698 | 3,646 | — | 14,344 | ||||||||||||
Capacity leasing | 58,322 | — | — | 58,322 | ||||||||||||
Total revenue | $ | 1,639,191 | 696,153 | 10,375 | 2,345,719 | |||||||||||
Total assets as of December 31, 2007 | $ | 8,728,860 | 814,161 | 553,864 | 10,096,885 | |||||||||||
Accumulated depreciation and amortization | (1,735,440 | ) | (71,547 | ) | (275,798 | ) | (2,082,785 | ) | ||||||||
Total assets | $ | 6,993,420 | 742,614 | 278,066 | 8,014,100 | |||||||||||
Acquisition of telephone network systems and equipment during 2007 | $ | 651,006 | 476,519 | 32,834 | 1,160,359 | |||||||||||
Metropolitan | Central- | |||||||||||||||
Services | Area | South | North | Total | ||||||||||||
Year ended December 31, 2006: | ||||||||||||||||
Local | $ | 934,524 | 385,265 | — | 1,319,789 | |||||||||||
Long distance | 220,131 | 121,633 | 28,459 | 370,223 | ||||||||||||
Rent of dedicated links | 342 | 157 | — | 499 | ||||||||||||
Sale of equipment to customers | 6,062 | 8,360 | — | 14,422 | ||||||||||||
Capacity leasing | 36,759 | — | — | 36,759 | ||||||||||||
Total revenue | $ | 1,197,818 | 515,415 | 28,459 | 1,741,692 | |||||||||||
Total assets as of December 31, 2006 | $ | 5,867,306 | 325,527 | 386,778 | 6,579,611 | |||||||||||
Accumulated depreciation and amortization | (1,463,580 | ) | (50,039 | ) | (88 | ) | (1,513,707 | ) | ||||||||
Total assets | $ | 4,403,726 | 275,488 | 386,690 | 5,065,904 | |||||||||||
Acquisition of telephone network systems and equipment during 2006 | $ | 987,954 | 141,454 | 710 | 1,130,118 | |||||||||||
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2008 | 2007 | 2006 | ||||||||||
Comprehensive financial results: | ||||||||||||
Interest expense and commissions | $ | (317,633 | ) | (285,858 | ) | (178,153 | ) | |||||
Interest income | 53,994 | 55,793 | 8,591 | |||||||||
Exchange gain income (loss) — Net | (261,787 | ) | 4,826 | (6,568 | ) | |||||||
Effect of valuation of financial instruments | 83,323 | 20,421 | 13,324 | |||||||||
Gain on monetary position | — | 42,586 | 33,753 | |||||||||
$ | (442,103 | ) | (162,232 | ) | (129,053 | ) | ||||||
Capitalized in telecommunications equipment and network (Note 7) | $ | 174,710 | 35,591 | 21,871 | ||||||||
Total recorded in results of operations | $ | (267,393 | ) | (126,641 | ) | (107,182 | ) | |||||
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December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(Loss) profit before income tax expense | $ | (671,457 | ) | 133,178 | 30,783 | |||||||
Statutory income tax rate | 28 | % | 28 | % | 29 | % | ||||||
Income tax expense (benefit) | (188,008 | ) | 37,290 | 8,927 | ||||||||
Increase (decrease) on income tax expense resulting from: | ||||||||||||
Inflationary effects | (19,163 | ) | 2,080 | 24,021 |
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December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Non-deductible expenses | 10,254 | 14,017 | 1,301 | |||||||||
Change in valuation allowance | (34,498 | ) | 39,272 | — | ||||||||
Cancellation of allowance on asset tax for prior years(1) | 31,679 | |||||||||||
Non-taxable income | (2,888 | ) | — | — | ||||||||
Others | 609 | 4,323 | (5,878 | ) | ||||||||
Income tax expense (benefit) | (233,694 | ) | 96,982 | 60,050 | ||||||||
Effective income tax rate | 35 | % | 73 | % | 195 | % | ||||||
(1) | As of December 31, 2005, the Company believed it had possibilities of recovering asset tax paid in prior years, based on the results of legal proceedings initiated and the fact that the prior Asset Tax Law allowed for deduction of liabilities in computing net assets. However, during the last quarter of 2006, the conditions of the legal process changed radically and together with the changes to the Asset Tax Law, effective as from January 1, 2007, which now precludes the inclusion of liabilities in determining the asset tax base, the Company concluded that there were not enough grounds to obtain a favorable resolution, and decided to record a valuation allowance in the total amount of said tax. Asset tax is incurred at the rate of 1.25% over the net amount of certain assets only when this tax exceeds income tax payable. |
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2008 | 2007 | |||||||||||||||
IT | ESPS | IT | ESPS | |||||||||||||
Deferred assets: | ||||||||||||||||
Allowance for doubtful accounts | $ | 39,372 | — | 21,775 | — | |||||||||||
Labor obligations upon retirement | 6,055 | 2,162 | 2,076 | 741 | ||||||||||||
Derivative financial instruments | 2,372 | — | — | — | ||||||||||||
Provisions | 37,691 | 13,461 | 9,656 | 3,449 | ||||||||||||
Tax credit carryforwards | 39,272 | — | 39,272 | — | ||||||||||||
Tax loss carryforwards | 411,277 | — | 267,420 | — | ||||||||||||
Total gross deferred assets | 536,039 | 15,623 | 340,199 | 4,190 | ||||||||||||
Less valuation allowance | 184,948 | 14,995 | 129,073 | 3,953 | ||||||||||||
Deferred assets, net | 351,091 | 628 | 211,126 | 237 | ||||||||||||
Deferred liabilities: | ||||||||||||||||
Prepaid expenses | 13,190 | 628 | 17,269 | 237 | ||||||||||||
Telephone network system and equipment, frequency rights, intangible assets and preoperating expenses — Net | 189,787 | — | 291,599 | — | ||||||||||||
Total gross deferred liabilities | 202,977 | 628 | 308,868 | 237 | ||||||||||||
Net deferred assets (liabilities) | $ | 148,114 | — | (97,742 | ) | — | ||||||||||
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2008 | 2007 | |||||||
Net change in deferred income tax asset (liability) | $ | (245,856 | ) | 9,046 | ||||
Tax effect of deductible expenses related to the issuance of shares recorded net in the additional paid-in capital | — | 37,236 | ||||||
Deferred income tax expense (benefit) | $ | (245,856 | ) | 46,282 | ||||
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Year of | Year of | |||||||
loss | Amount | expiration | ||||||
1999 | $ | 18,109 | 2009 | |||||
2000 | 102,156 | 2010 | ||||||
2001 | 32,292 | 2011 | ||||||
2002 | 282,004 | 2012 | ||||||
2003 | 35,388 | 2013 | ||||||
2004 | 79,533 | 2014 | ||||||
2005 | 132,644 | 2015 | ||||||
2006 | 74,058 | 2016 | ||||||
2007 | 269,142 | 2017 | ||||||
2008 | 443,521 | 2018 | ||||||
$ | 1,468,847 | |||||||
2009 | $ | 73,790 | ||
2010 | 69,590 | |||
2011 | 62,499 | |||
2012 | 58,754 | |||
2013 and thereafter: | 61,146 | |||
$ | 325,779 | |||
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2009 | $ | 31,710 | ||
2010 | 30,910 | |||
2011 | 29,539 | |||
2012 | 22,329 | |||
2013 and thereafter: | 5,636 | |||
$ | 120,124 | |||
2009 | $ | 4,396 | ||
Total | $ | 4,396 | ||
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i. | Claim brought by the Secretaría de Hacienda y Crédito Público as a result of a tax audit of Telereunion for the fiscal year 2004: |
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Quoted prices | Significant | |||||||||||||||
in active | other | Significant | ||||||||||||||
Balance at | markets for identical | observable | unobservable | |||||||||||||
December 31, | assets | inputs | inputs | |||||||||||||
2008 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Short-term investments(1) | 1,500,270 | 11,702 | 1,488,568 | — | ||||||||||||
Derivative Instruments, (net) | 96,798 | — | 96,798 | |||||||||||||
Total | $ | 1,597,068 | $ | 11,702 | $ | 1,585,366 | $ | — | ||||||||
(1) | Short-term investments are classified in the balance sheet as cash and cash equivalents. The carrying value and fair value of cash and cash equivalents as of December 31, 2008 is $1,591,405, of which $1,500,270 represents the fair value of the short term investments. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net (loss) income under MFRS | $ | (437,763 | ) | $ | 36,196 | $ | (29,267 | ) | ||||
Adjustments: | ||||||||||||
Amortization of pre-operating expenses (a) | 22,123 | 20,438 | 32,030 | |||||||||
Capitalization of interest (b) | (112,738 | ) | (716 | ) | 49,945 | |||||||
Amortization of capitalized interest (b) | (12,118 | ) | (11,896 | ) | (27,136 | ) | ||||||
Installation revenues and related costs (c) | (2,824 | ) | (6,758 | ) | �� | 858 | ||||||
Installation costs not charged to customers (d) | (154,716 | ) | (60,640 | ) | (213,247 | ) | ||||||
Debt restructuring (e) | — | — | 197,006 | |||||||||
Capitalized internal compensation cost (f) | 143 | 143 | 143 | |||||||||
Impairment charge (g) | 532,315 | — | — | |||||||||
Severance Indemnity liability (h) | 2,405 | (682 | ) | (908 | ) | |||||||
Reversal of SAB 108 (j) | — | — | 3,035 | |||||||||
Recognition of deferred taxes (k) | (76,885 | ) | 184,914 | — | ||||||||
Total US GAAP adjustments | 197,705 | 124,803 | 41,726 | |||||||||
Net (loss) income under U.S. GAAP | $ | (240,058 | ) | $ | 160,999 | $ | 12,459 | |||||
Basic and diluted earnings per share: | ||||||||||||
Numerator: | ||||||||||||
Net (loss) income under U.S. GAAP | $ | (240,058 | ) | $ | 160,999 | $ | 12,459 | |||||
less: preferred stock dividend(1) | — | — | (539,738 | ) | ||||||||
Net (loss) income under U.S. GAAP available for common shareholders, used for basic computation | (240,058 | ) | 160,999 | (527,279 | ) | |||||||
Net (loss) Income under U.S. GAAP available for common shareholders, used for dilutive computation | (240,058 | ) | 160,999 | (527,279 | ) | |||||||
Denominator: | ||||||||||||
Weighted average of common shares used in basic computation (thousand) | 789,819 | 560,176 | 247,853 | |||||||||
Add: dilutive impact of stock options and warrants(2) | — | 45,968 | — | |||||||||
Weighted average of common shares used in dilutive computation (thousand) | 789,819 | 606,144 | 247,853 | |||||||||
Earnings per share, basic | (0.30 | ) | 0.29 | (2.13 | ) | |||||||
Earnings per share, diluted | (0.30 | ) | 0.27 | (2.13 | ) |
(1) | Earnings available to the common shareholders in 2006 were reduced for the fair value of a stock dividend paid to the preferred shareholders in the form of the Company’s common shares in the amount of $ 539.8 million. The weighted average number of shares for 2006 reflects the application of the “two-class method” specified by EITF 03-06. | |
(2) | According to FAS 128. |
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As of December 31, | ||||||||
2008 | 2007 | |||||||
Shareholders’ equity under MFRS | $ | 4,501,169 | $ | 5,030,839 | ||||
Accumulated adjustments: | ||||||||
Preoperating expenses (a) | (391,951 | ) | (391,951 | ) | ||||
Amortization of preoperating expenses (a) | 336,172 | 314,049 | ||||||
Capitalization of interest (b) | 8,440 | 121,178 | ||||||
Amortization of capitalized interest (b) | (64,465 | ) | (52,347 | ) | ||||
Installation revenues and related costs (c) | (76,805 | ) | (73,981 | ) | ||||
Installation costs not charged to customers (d) | (738,412 | ) | (583,696 | ) | ||||
Capitalized internal compensation cost (f) | (2,000 | ) | (2,143 | ) | ||||
Impairment charge (g) | 532,315 | — | ||||||
Severance Indemnity liability (h) | (11,297 | ) | (1,590 | ) | ||||
SAB 108 initial effects (i) | 7,034 | 7,034 | ||||||
SAB 108 effects for the year (j) | 3,035 | 3,035 | ||||||
Recognition of deferred taxes (k) | 111,420 | 184,914 | ||||||
Total U.S. GAAP adjustments | $ | (286,514 | ) | $ | (475,498 | ) | ||
Shareholders’ equity under U.S. GAAP | $ | 4,214,655 | $ | 4,555,341 | ||||
Year Ended | ||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
Balance at the beginning of the year | $ | 4,555,341 | $ | 1,676,612 | ||||
Net (loss) income under U.S. GAAP | (240,058 | ) | 160,999 | |||||
(Decrease) increase in capital stock | (7 | ) | 2,045,646 | |||||
Increase in premium on issuance of shares | — | 634,960 | ||||||
Stock option plan | (71,613 | ) | 37,124 | |||||
Repurchase of shares | (20,287 | ) | — | |||||
Severance Indemnity liability (FAS 158 effects), net of tax of $3,391 | (8,721 | ) | — | |||||
Balance at the end of the year | $ | 4,214,655 | $ | 4,555,341 |
F-72
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F-73
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(a) | The exchange with the primary holder is accounted for as a combination of types as the primary holder received both New Senior Notes and stock in exchange for the Old Senior Notes exchanged. A gain was recorded, as the adjusted carrying value of the Old Senior Notes exchanged was greater than the total future cash payments of the New Senior Notes at the time of the exchange. To calculate the gain on the restructuring, the carrying value of the Old Senior Notes was reduced by the fair value of the equity interest granted as well as all legal and other costs in relation to the restructuring, to determine the adjusted carrying value, which was compared to the gross future cash payments under the terms of the New Senior Notes to determine the gain. | |
(b) | The other holders exchanged Old Senior Notes for New Senior Notes, which is accounted for as a modification of terms under FAS 15 due to the extension of the maturity date and the increase in total interest payments. Since the carrying amount of the Old Senior Notes on October 2004 did not exceed the total future cash payments of the New Senior Notes, no gain on the exchange with the other holders was recognized. |
F-74
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F-75
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2007 | ||||
Labor obligation at retirement asset as of December 31, 2006 | $ | 15,068 | ||
Labor obligation at retirement asset as of December 31, 2007 | 17,650 | |||
Amortization of past service cost | 2,582 | |||
Amortization of variances in assumptions | (992 | ) | ||
Cost reduction under US GAAP* | $ | 1,590 | ||
* | As mentioned previously, for Mexican FRS purposes the Company eliminated the related intangible asset. This effect was reversed for US GAAP purposes, resulting in a Ps. 1,590 increase in net income. |
OCI | AOCI | |||||||
AOCI beginning balance at January 1, 2008 | ||||||||
Net loss | $ | (240,058 | ) | |||||
SFAS 158 effect of the year (net of deferred income tax effect of $3,391) | (8,722 | ) | ||||||
Other comprehensive income | (8,722 | ) | $ | (8,722 | ) | |||
Comprehensive income | $ | (248,780 | ) | |||||
AOCI ending balance at December 31, 2008 | $ | (8,722 | ) | |||||
F-76
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F-77
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Period in which the | Period in which the | Period in which the | ||||||||||||||
Misstatement | Misstatement | Misstatement | ||||||||||||||
Originated (1) | Originated (1) | Originated (1) | Adjustment recorded | |||||||||||||
Year Ended | Year Ended | Year Ended | as of | |||||||||||||
December 31, 2003 | December 31, 2004 | December 31, 2005 | January 1, 2006 | |||||||||||||
Labor liabilities (2) | $ | (15,977 | ) | $ | — | $ | (647 | ) | $ | (16,624 | ) | |||||
Capitalized interest (3) | (4,576 | ) | (1,310 | ) | 613 | (5,273 | ) | |||||||||
Increasing-debt rate (4) | — | (3,682 | ) | (8,321 | ) | (12,003 | ) | |||||||||
Stock-option plan (5) | — | (603 | ) | (2,890 | ) | (3,493 | ) | |||||||||
Embedded derivatives (6) | — | — | 7,292 | 7,292 | ||||||||||||
Debt restructuring (7) | — | 137,597 | 6 | 137,603 | ||||||||||||
Installation costs not charged (7) | — | (111,511 | ) | 1,593 | (109,918 | ) | ||||||||||
Installation revenues and costs (8) | — | — | 11,593 | 11,593 | ||||||||||||
Other (9) | 11,346 | (9,534 | ) | (3,955 | ) | (2,143 | ) | |||||||||
Deferred income taxes (10) | — | — | — | — | ||||||||||||
Impact on net income(11) | $ | (9,207 | ) | $ | 10,957 | $ | 5,284 | |||||||||
Retained earnings(12) | $ | 7,034 | ||||||||||||||
(1) | We previously quantified these errors under the roll-over method and concluded that they were immaterial, individually and in the aggregate. | |
(2) | We were not recognizing this difference for severance indemnity as required by U.S. generally accepted accounting principles (see reconciling item h.). As a result of this error, our severance indemnity expense was understated by $16.0 million in 2003 and by $0.6 million in 2005, no expense recognition is applicable for 2004. We recorded a $16.6 million increase in our liability for severance indemnity as of January 1, 2006 with a corresponding reduction in retained earnings to correct these misstatements. | |
(3) | We incorrectly amortized capitalized interest expenses in 2005 and prior years. As a result of this error, our expenses were understated in 2003 by $4.6 million, in 2004 by $1.3 and overstated by $0.6 million in 2005. We recorded a $5.3 million decrease in our capitalized interest as of January 1, 2006 with a corresponding reduction in retained earnings to correct these misstatements. | |
(4) | We were not adjusting our expenses for increasing-debt rate as required by U.S. generally accepted accounting principles to the interest method. As a result of this error, our interest expense was understated by $3.7 million in 2004 and by $8.3 million in 2005. We recorded a $12.0 million increase in our liability for interest payable as of January 1, 2006 with a corresponding reduction in retained earnings to correct these misstatements (see item j. below for reversal in 2006). | |
(5) | We were not recognizing compensation cost expense as required by U.S. generally accepted accounting principles. As a result of this error, our compensation expense was understated by $0.6 million in 2004 and by $2.9 million in 2005. We recorded a $3.5 million increase in our additional-paid in capital for stock-option plans as of January 1, 2006 with a corresponding reduction in retained earnings to correct these misstatements. |
F-78
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(6) | We were not recognizing the effect in income generated by embedded derivatives as required by U.S. generally accepted accounting principles. As a result of this error in both GAAPs in 2005, our income was understated by $7.3 million. We recorded a $7.3 million increase in our assets as of January 1, 2006 with a corresponding increase in retained earnings to correct these misstatements. This balance does not represent a difference between GAAPs, however for MFRS purposes this effect was immaterial for being adjusted (see item j. below for reversal in 2006). | |
(7) | We were incorrectly presenting the accumulated amortization related to debt restructuring and installation costs not charged to customers. As a result of both reclassification errors, our income was understated by $26.1 million in 2004 and by $1.6 million in 2005 (amounts presented net). We recorded a $27.7 million increase in our assets as of January 1, 2006 with a corresponding increment in retained earnings to correct these misstatements. | |
(8) | We were incorrectly recognizing the effect in income generated by the amortization installation revenues and costs. As a result of this error, our income was understated by $11.6 million in 2005. We recorded a $11.6 million increase in our assets as of January 1, 2006 with a corresponding increment in retained earnings to correct these misstatements. | |
(9) | We incorrectly recorded minor entries representing preoperating expenses, leasehold improvements and revenue recognition. As a result of these errors, our expense was overstated by $11.3 million in 2003 and understated by $9.5 million in 2004 and $4.0 million in 2005. We recorded a $2.2 million increase in the Company’s liabilities for these concepts as of January 1, 2006 with a corresponding reduction in retained earnings to correct these misstatements. | |
(10) | No deferred taxes were calculated in the application of the SAB 108 as those balances would represent a deferred tax asset for the net balance to be adjusted on January 1, 2006, that is not deemed recoverable and should be fully reserved for accounting purposes. | |
(11) | Represents the net over-statement of net income for the indicated periods resulting from these misstatements | |
(12) | Represents the net reduction to retained earnings recorded as of January 1, 2006 to record the initial application of SAB 108. |
December 31, 2006 | ||||
Preoperating expenses | $ | (1,676 | ) | |
Increasing debt rate (1) | 12,003 | |||
Embedded derivatives (2) | (7,292 | ) | ||
$ | 3,035 | |||
(1) | These notes were called in advance during 2006 and thus, outstanding payable balances under U.S. GAAP were eliminated. | |
(2) | In 2006, the Company started recognizing embedded derivatives in their local books, therefore, this reconciling item is reversed. |
F-79
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• | borrow money; | |
• | pay dividends on our capital stock; | |
• | purchase stock or repay subordinated indebtedness; | |
• | sell assets; and | |
• | consolidate or merge into other companies. |
F-80
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Quoted prices | Significant | |||||||||||||||
Fair value at | in active | other | Significant | |||||||||||||
December 31, | markets for | observable | unobservable | |||||||||||||
2008 | identical assets | inputs | inputs | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Senior Notes(1) | $ | 2,044,283 | — | 2,044,283 | — |
(1) | Senior notes are carried at amortized cost and their carrying value as of December 31, 2008 is $2,707,660. The $2,044,283 represents the estimated fair value of the notes. See Note 11 “Bonds Payable”. |
F-81
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F-82
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F-83
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SFAS 109 | SFAS 109 | |||||||||||
Applied to | Applied to | |||||||||||
MFRS | U.S. GAAP | |||||||||||
December 31, 2008: | Balances | Balances | Total | |||||||||
Deferred tax assets | ||||||||||||
Allowance for doubtful accounts | $ | 39,372 | — | $ | 39,372 | |||||||
Labor obligations upon retirement | 6,055 | (1,970 | ) | 4,085 | ||||||||
Derivative financial instruments | 2,372 | — | 2,372 | |||||||||
Provisions | 37,691 | — | 37,691 | |||||||||
Installation revenues | — | 21,505 | 21,505 | |||||||||
Installation costs not charged to customers | — | 206,755 | 206,755 | |||||||||
Tax credit carryforwards | 39,272 | — | 39,272 | |||||||||
Tax loss carryforwards | 411,277 | — | 411,277 | |||||||||
Total gross deferred tax assets | 536,039 | 226,290 | 762,329 | |||||||||
Less valuation allowance | (184,948 | ) | — | (184,948 | ) | |||||||
Net deferred tax assets | $ | 351,091 | 226,290 | 577,381 | ||||||||
Deferred tax liabilities | ||||||||||||
Telephone network equipment and leasehold improvements, frequency rights, intangible assets, impairment and preoperating expenses | $ | (189,787 | ) | (114,870 | ) | (304,657 | ) | |||||
Prepaid expenses | (13,190 | ) | — | (13,190 | ) | |||||||
Total gross deferred tax liabilities | (202,977 | ) | (114,870 | ) | (317,847 | ) | ||||||
Net deferred tax asset | $ | 148,114 | 111,420 | 259,534 | ||||||||
SFAS 109 | SFAS 109 | |||||||||||
Applied to | Applied to | |||||||||||
MFRS | U.S. GAAP | |||||||||||
Balances | Balances | Total | ||||||||||
December 31, 2007: | ||||||||||||
Deferred tax assets: | ||||||||||||
Bad debt allowance | $ | 21,775 | — | $ | 21,775 | |||||||
Tax loss carry forwards | 267,420 | — | 267,420 | |||||||||
Accruals | 51,004 | — | 51,004 | |||||||||
Installation revenues | — | 20,715 | 20,715 | |||||||||
Installation costs not charged to customers | — | 163,435 | 163,435 | |||||||||
Total gross deferred tax assets | 340,199 | 184,150 | 524,349 | |||||||||
Valuation allowance | (129,073 | ) | — | (129,073 | ) | |||||||
Net deferred tax assets | 211,126 | 184,150 | 395,276 | |||||||||
Deferred tax liabilities: | ||||||||||||
Prepaid expenses | (17,269 | ) | — | (17,269 | ) | |||||||
Telephone network equipment and leasehold improvements, frequency rights, intangible assets and preoperating expenses | (291,599 | ) | 764 | (290,835 | ) | |||||||
Total gross deferred tax liabilities | (308,868 | ) | 764 | (308,104 | ) | |||||||
Net deferred tax (liability) asset | $ | (97,742 | ) | $ | 184,914 | $ | 87,172 | |||||
F-84
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F-85
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Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Operating activities: | ||||||||||||
Net (loss) income under U.S. GAAP | $ | (240,058 | ) | $ | 160,999 | $ | 12,459 | |||||
Adjustments to reconcile net income (loss) to net cash flow provided by operating activities: | ||||||||||||
Depreciation and amortization | 476,813 | 328,269 | 167,721 | |||||||||
Hedging valuation | (83,323 | ) | (24,036 | ) | (5,217 | ) | ||||||
Allowance for doubtful accounts | 39,956 | 5,318 | 36,556 | |||||||||
Monetary gain | — | (15,533 | ) | (21,503 | ) | |||||||
Deferred income tax | (168,971 | ) | (138,632 | ) | 60,051 | |||||||
Severance indemnity | 14,669 | 6,434 | 4,642 | |||||||||
Stock option plan | 5,114 | 37,124 | 15,982 | |||||||||
Loss on sale of fixed assets | 82,496 | 6,166 | 1,369 | |||||||||
Other | 67,255 | (1,000 | ) | |||||||||
Foreign currency exchange gain (loss) | 534,420 | (47,957 | ) | (90,781 | ) | |||||||
661,116 | 385,407 | 180,279 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (227,744 | ) | (319,003 | ) | (321,562 | ) | ||||||
Inventory | (7,627 | ) | 2,540 | (19,160 | ) | |||||||
Prepaid expenses | 9,563 | 2,091 | 14,271 | |||||||||
Other assets and liabilities | 3,353 | 93,404 | 25,267 | |||||||||
Cash flow provided by (used in) operating activities | 438,861 | 164,439 | (120,905 | ) | ||||||||
Investing activities: | ||||||||||||
Acquisition of fixed assets | (1,298,619 | ) | (1,126,022 | ) | (772,773 | ) | ||||||
Proceeds on sale of fixed assets | 4,364 | (6,371 | ) | 4,428 | ||||||||
Purchase of Telereunion, net of cash acquired | — | — | (101,173 | ) | ||||||||
Purchase of Sierra, net of cash acquired | — | (33,576 | ) | — | ||||||||
Acquisition of intangible assets | 12,704 | (79,112 | ) | (35,370 | ) | |||||||
Cash flow used in investing activities | (1,281,551 | ) | (1,245,081 | ) | (904,888 | ) | ||||||
Financing activities: | ||||||||||||
Restricted cash | — | 23,462 | (15,179 | ) | ||||||||
Capital (decrease) increase — Net of equity issuance cost | (7 | ) | 2,643,369 | 357,348 | ||||||||
Cost of shares acquired for issuance upon exercise of stock options, and issuance costs | (76,727 | ) | ||||||||||
Bank financing and debt payments | (8,419 | ) | 131,432 | (460,666 | ) | |||||||
Repurchase of shares | (20,287 | ) | — | — | ||||||||
Senior notes issued — Net of debt issuance cost | — | 118,214 | 1,650,241 | |||||||||
Cash flow (used in) provided by financing activities | (105,440 | ) | 2,916,477 | 1,531,744 | ||||||||
Effect of exchange rate changes on cash and cash equivalents | — | (35,591 | ) | (7,878 | ) | |||||||
Net increase in cash and cash equivalents | (948,130 | ) | 1,800,244 | 498,073 | ||||||||
Cash and cash equivalents at beginning of the year | 2,539,535 | 739,291 | 241,218 | |||||||||
Cash and cash equivalents at end of the year | 1,591,405 | 2,539,535 | 739,291 | |||||||||
Interest paid | $ | 276,434 | $ | 271,973 | $ | 139,716 | ||||||
Income taxes paid | $ | 7,320 | $ | 25,530 | $ | 1,396 | ||||||
Supplemental disclosures about non-cash activities Optical fiber and links reclassification | — | — | 144,241 | |||||||||
(Decrease) increase on fixed assets acquired Under capital lease | 4,740 | (50,791 | ) | 15,620 |
F-86
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Under U.S. GAAP, such items are considered part of operating income.
F-87
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F-88
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F-89
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F-90
Table of Contents
NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TECBTC | SCG | Telereunión | USA | Telscape | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Balance sheet as of December 31, 2008: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents and Current restricted cash | $ | 1,585,470 | 185 | 1,037 | 377 | 225 | 170 | 29 | 112 | 3,800 | 0 | 1,591,405 | ||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable — net | 1,061,998 | 12,140 | 75,368 | 15,948 | 191,314 | 110 | 50 | 2,427 | 212 | 71,902 | 2,609 | 1,163 | (476,940 | ) | 958,301 | |||||||||||||||||||||||||||||||||||||||||
Inventory — net | 40,876 | 40,876 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses | 24,167 | 1,124 | 4,985 | 92 | 22 | 373 | 15 | 30,778 | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment in subsidiaries | 341,530 | 8,820 | (350,350 | ) | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Frequency rights — net | 66,716 | 66,716 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Telephone network system and Equipment net | 4,503,806 | 11,143 | 139,939 | 8,540 | 20,985 | 4,684,413 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Preoperating expenses — net | 50,595 | 268 | 50,863 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets — net | 209,683 | 209,683 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | 2,151 | 406 | 7 | 4,497 | 1,235 | 19 | 8,315 | |||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses long term | 15,381 | 15,381 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | 105,270 | 105,270 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred taxes | 90,996 | 864 | 5,931 | 77 | 16,280 | 1 | 8 | 3,145 | 29,995 | 817 | 148,114 | |||||||||||||||||||||||||||||||||||||||||||||
Other assets | 6,377 | (20 | ) | 6,357 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 8,105,016 | 14,719 | 96,148 | 16,494 | 212,316 | 110 | 319 | 2,627 | 14,529 | 243,556 | 14,963 | 22,965 | (827,290 | ) | 7,916,472 | ||||||||||||||||||||||||||||||||||||||||
Total liabilities | $ | 3,603,847 | 13,777 | 70,834 | 8,633 | 3,394 | 7 | 292 | 1,669 | 111 | 184,491 | 4,565 | 624 | �� | (476,941 | ) | 3,415,303 | |||||||||||||||||||||||||||||||||||||||
F-91
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NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TECBTC | SCG | Telereunión | USA | Telscape | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock and Additional Paid- In Capital | 6,226,687 | 96 | 66 | 55 | 171,497 | 127 | 56 | 54 | 11,308 | 712,814 | 13,044 | 97,874 | (1,006,991 | ) | 6,226,687 | |||||||||||||||||||||||||||||||||||||||||
Accumulated deficit | (1,705,231 | ) | 846 | 25,248 | 7,806 | 37,425 | (24 | ) | (29 | ) | 904 | 3,110 | (653,749 | ) | (2,646 | ) | (75,533 | ) | 656,642 | (1,705,231 | ) | |||||||||||||||||||||||||||||||||||
Repurchase of shares | (20,287 | ) | (20,287 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total shareholders’ equity | 4,501,169 | 942 | 25,314 | 7,861 | 208,922 | 103 | 27 | 958 | 14,418 | 59,065 | 10,398 | 22,341 | (350,349 | ) | 4,501,169 | |||||||||||||||||||||||||||||||||||||||||
Total liabilities and shareholders — equity | $ | 8,105,016 | 14,719 | 96,148 | 16,494 | 212,316 | 110 | 319 | 2,627 | 14,529 | 243,556 | 14,963 | 22,965 | (827,290 | ) | 7,916,472 |
F-92
Table of Contents
NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TECBTC | SCG | Telereunión | USA | Telscape | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Total shareholders’ equity under Mexican GAAP | $ | 4,501,169 | 942 | 25,314 | 7,861 | 208,922 | 103 | 27 | 958 | 14,418 | 59,065 | 10,398 | 22,341 | (350,349 | ) | 4,501,169 | ||||||||||||||||||||||||||||||||||||||||
Preoperating expenses | $ | (391,951 | ) | (391,951 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of preoperating expenses | 336,172 | 336,172 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization of interest | 8,440 | 8,440 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of capitalized interest | (64,465 | ) | (64,465 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation revenues | (76,805 | ) | (76,805 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation costs | (738,412 | ) | (738,412 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized internal compensation cost | (2,000 | ) | (2,000 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment charge | 532,315 | 532,315 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance indemnity liability | (11,297 | ) | (11,297 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
SAB 108 initial effect | 7,034 | 7,034 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAB effects for the year | 3,035 | 3,035 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recognition of deferred taxes | 111,420 | 111,420 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total shareholders’ equity under US. GAAP | $ | 4,214,655 | 4,214,655 |
F-93
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NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TECBTC | SCG | Telereunión | USA | Telscape | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Statements of Operations for the year ended December 31, 2008: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | $ | 2,676,392 | 80,022 | 502,434 | 90,880 | 17,535 | 213 | 42,644 | 2,535 | 1,164 | (730,590 | ) | 2,683,229 | |||||||||||||||||||||||||||||||||||||||||||
Operating cost and expenses | (2,581,692 | ) | (75,630 | ) | (424,476 | ) | (86,651 | ) | (11 | ) | (11 | ) | (16,725 | ) | (203 | ) | (35,321 | ) | (2,092 | ) | (15 | ) | 731,129 | (2,491,698 | ) | |||||||||||||||||||||||||||||||
Integral (cost) income of financing | (267,025 | ) | (126 | ) | (1,683 | ) | (159 | ) | 17,728 | (35 | ) | 3 | (16,066 | ) | (29 | ) | (1 | ) | (267,393 | ) | ||||||||||||||||||||||||||||||||||||
Other income (expenses) | (265,438 | ) | (3,368 | ) | (51,066 | ) | (999 | ) | 15,284 | (3 | ) | 4 | 3,126 | (18,206 | ) | 74 | (1,590 | ) | (39,719 | ) | (361,901 | ) | ||||||||||||||||||||||||||||||||||
Net (loss) income | $ | (437,763 | ) | 898 | 25,209 | 3,071 | 33,001 | 0 | (14 | ) | 779 | 3,139 | (26,949 | ) | 488 | (442 | ) | (39,180 | ) | (437,763 | ) | |||||||||||||||||||||||||||||||||||
Net (loss) income for the year under Mexican GAAP | $ | (437,763 | ) | 898 | 25,209 | 3,071 | 33,001 | 0 | (14 | ) | 779 | 3,139 | (26,949 | ) | 488 | (442 | ) | (39,180 | ) | (437,763 | ) | |||||||||||||||||||||||||||||||||||
Amortization of preoperating expenses | 22,123 | 22,123 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization of interest | (112,738 | ) | (112,738 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of capitalized Interest | (12,118 | ) | (12,118 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation revenues | (2,824 | ) | (2,824 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation costs | (154,716 | ) | (154,716 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized internal compensation cost | 143 | 143 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment | 532,315 | 532,315 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance indemnity liability | 2,405 | 2,405 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recognition at deferred taxes | (76,885 | ) | (76,885 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss (income) for the year Under U.S. GAAP | $ | (240,058 | ) | (240,058 | ) |
F-94
Table of Contents
NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TECBTC | SCG | Telereunión | USA | Telscape | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Statement of Cash Flows under U.S. GAAP for the Year Ended December 31, 2008: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income the year under U.S. GAAP | (240,058 | ) | 898 | 25,209 | 3,071 | 33,001 | 0 | (14 | ) | 779 | 3,139 | (26,949 | ) | 488 | (442 | ) | (39,180 | ) | (240,058 | ) | ||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 440,104 | 203 | 20,150 | 938 | 15,418 | 476,813 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other adjustments to reconcile net income to cash provided by operating activities | 428,588 | (852 | ) | (1,648 | ) | (76 | ) | (16,280 | ) | (1 | ) | (8 | ) | (3,146 | ) | (29,995 | ) | (817 | ) | 48,596 | 424,361 | |||||||||||||||||||||||||||||||||||
Net change in working capital | (213,818 | ) | (1,258 | ) | (25,367 | ) | (3,053 | ) | (19,295 | ) | 0 | 15 | (840 | ) | (193 | ) | (17,409 | ) | (1,910 | ) | 1,259 | 59,614 | (222,255 | ) | ||||||||||||||||||||||||||||||||
Resources (used in) provided by Operating activities | 414,816 | (1,212 | ) | (1,806 | ) | (58 | ) | (2,574 | ) | 0 | 0 | (69 | ) | 3 | (54,203 | ) | (484 | ) | 0 | 84,448 | 438,861 | |||||||||||||||||||||||||||||||||||
Resources used in financing activities | (102,692 | ) | 10,510 | (13,258 | ) | (105,440 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Resources (used in) provided by investing activities | (1,252,698 | ) | 42,320 | 17 | (71,190 | ) | (1,281,551 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | (940,574 | ) | (1,212 | ) | (1,806 | ) | (58 | ) | (2,574 | ) | 0 | 0 | (69 | ) | 3 | (1,373 | ) | (467 | ) | 0 | (0 | ) | (948,130 | ) | ||||||||||||||||||||||||||||||||
Beginning balances | 2,526,044 | 1,398 | 2,842 | 435 | 2,799 | 0 | 239 | 26 | 1,485 | 4,267 | 0 | 0 | 2,539,535 | |||||||||||||||||||||||||||||||||||||||||||
Ending balances | 1,585,470 | 185 | 1,037 | 377 | 225 | 0 | 0 | 170 | 29 | 112 | 3,800 | 0 | (0 | ) | 1,591,405 |
F-95
Table of Contents
NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TECBTC | Telereunión | USA | Telscape | SCG | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Balance sheet as of December 31, 2007: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents and Current restricted cash | 2,526,044 | 1,398 | 2,842 | 435 | 2,799 | 239 | 1,485 | 4,267 | 26 | — | 2,539,535 | |||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable — net | 742,528 | 6,338 | 53,419 | 11,748 | 170,804 | 110 | 51 | 1,552 | 16,406 | 14,550 | 2,081 | 19 | (249,093 | ) | 770,513 | |||||||||||||||||||||||||||||||||||||||||
Inventory — net | 33,249 | 33,249 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses | 49,471 | 339 | 1,966 | 9 | 9,830 | 15 | 61,630 | |||||||||||||||||||||||||||||||||||||||||||||||||
Investment in subsidiaries | 299,637 | 4,969 | (304,606 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Frequency rights — net | 80,930 | 80,930 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Telephone network system and Equipment net | 3,944,727 | 202,410 | 9,478 | 20,985 | 11,346 | 4,188,946 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Preoperating expenses — net | 77,634 | 268 | 77,902 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets — net | 208,802 | 208,802 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Obligations | 1,890 | 15,760 | 17,650 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | 1,038 | 257 | 7 | 4,276 | 1,350 | 15 | 6,943 | |||||||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | 13,475 | 13,475 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other assets | 9,270 | 5,272 | (17 | ) | 14,525 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 7,986,805 | 10,222 | 84,235 | 12,192 | 177,879 | 110 | 319 | 1,791 | 231,481 | 28,325 | 23,066 | 11,391 | 553,716 | ) | 8,014,100 | |||||||||||||||||||||||||||||||||||||||||
Total liabilities | 2,955,966 | 10,178 | 84,130 | 7,402 | 1,958 | 7 | 278 | 1,612 | 151,374 | 18,415 | 400 | 112 | (248,571 | ) | 2,983,261 | |||||||||||||||||||||||||||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock and Additional Paid- In Capital | 6,298,307 | 96 | 66 | 55 | 171,496 | 127 | 56 | 53 | 702,304 | 13,044 | 97,875 | 11,308 | (996,480 | ) | 6,298,307 | |||||||||||||||||||||||||||||||||||||||||
Accumulated deficit | (1,267,468 | ) | (52 | ) | 39 | 4,735 | 4,425 | (24 | ) | (15 | ) | 126 | (622,197 | ) | (3,134 | ) | (75,209 | ) | (29 | ) | 691,335 | (1,267,468 | ) | |||||||||||||||||||||||||||||||||
Total shareholders’ equity | 5,030,839 | 44 | 105 | 4,790 | 175,921 | 103 | 41 | 179 | 80,107 | 9,910 | 22,666 | 11,279 | (305,145 | ) | 5,030,839 | |||||||||||||||||||||||||||||||||||||||||
Total liabilities and shareholders — equity | 7,986,805 | 10,222 | 84,235 | 12,192 | 177,879 | 110 | 319 | 1,791 | 231,481 | 28,325 | 23,066 | 11,391 | (553,716 | ) | 8,014,100 | |||||||||||||||||||||||||||||||||||||||||
Total shareholders’ equity under Mexican GAAP | 5,030,839 | 44 | 105 | 4,790 | 175,921 | 103 | 41 | 179 | 80,107 | 9,910 | 22,666 | 11,279 | (305,145 | ) | 5,030,839 | |||||||||||||||||||||||||||||||||||||||||
F-96
Table of Contents
NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TECBTC | Telereunión | USA | Telscape | SCG | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Preoperating expenses | (391,951 | ) | (391,951 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of preoperating expenses | 314,049 | 314,049 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization of interest | 121,178 | 121,178 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of capitalized interest | (52,347 | ) | (52,347 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation revenues | (73,981 | ) | (73,981 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation costs | (583,696 | ) | (583,696 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized internal compensation cost | (2,143 | ) | (2,143 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance Indemnity liability | (1,590 | ) | (1,590 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
SAB 108 initial effect | 7,034 | 7,034 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAB effects for the year | 3,035 | 3,035 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recognition of deferred taxes | 184,914 | 184,914 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total shareholders’ equity under US. GAAP | 4,555,341 | 4,555,341 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-97
Table of Contents
NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TECBTC | Telereunión | USA | Telscape | SCG | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Statements of Operations for the year ended December 31, 2007: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | 2,339,795 | 56,594 | 409,537 | 78,075 | 3,521 | 42,294 | 6,675 | (590,772 | ) | 2,345,719 | ||||||||||||||||||||||||||||||||||||||||||||||
Operating cost and expenses | (2,052,063 | ) | (54,565 | ) | (415,628 | ) | (73,266 | ) | (17 | ) | (7 | ) | (10 | ) | (3,339 | ) | (55,897 | ) | (8,523 | ) | 590,234 | (2,073,081 | ) | |||||||||||||||||||||||||||||||||
Integral (cost) income of financing | (112,592 | ) | (46 | ) | 1,026 | (253 | ) | 391 | (4 | ) | (2 | ) | (22 | ) | (13,541 | ) | (1,520 | ) | (78 | ) | (126,641 | ) | ||||||||||||||||||||||||||||||||||
Other income (expenses) | (138,944 | ) | (890 | ) | 2,553 | (1,360 | ) | 11,889 | (52 | ) | 17,701 | 322 | (400 | ) | (620 | ) | (109,801 | ) | ||||||||||||||||||||||||||||||||||||||
Net (loss) income | 36,196 | 1,093 | (2,512 | ) | 3,196 | 12,263 | (11 | ) | (12 | ) | 108 | (9,443 | ) | (3,046 | ) | (478 | ) | (1,158 | ) | 36,196 | ||||||||||||||||||||||||||||||||||||
Net (loss) income for the year under Mexican GAAP | 36,196 | 1,093 | (2,512 | ) | 3,196 | 12,263 | (11 | ) | (12 | ) | 108 | (9,443 | ) | (3,046 | ) | (478 | ) | (1,158 | ) | 36,196 | ||||||||||||||||||||||||||||||||||||
Preoperating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of preoperating expenses | 20,438 | 20,438 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization of interest | (716 | ) | (716 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of capitalized Interest | (11,896 | ) | (11,896 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation revenues | (6,758 | ) | (6,758 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation costs | (60,640 | ) | (60,640 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt restructuring | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized internal compensation cost | 143 | 143 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Severance indemnity liability | (682 | ) | (682 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Reversal of SAB 108 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss (income) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recognition at deferred taxes | 184,914 | 184,914 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss (income) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the year Under U.S. GAAP | 160,999 | 160,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-98
Table of Contents
NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TECBTC | Telereunión | USA | Telscape | SCG | Elimination | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Statement of Cash Flows under U.S. GAAP for the Year Ended December 31, 2007: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income the year under U.S. GAAP | 160,999 | 1,093 | (2,512 | ) | 3,196 | 12,263 | (11 | ) | (12 | ) | 108 | (9,443 | ) | (3,046 | ) | (478 | ) | (1,158 | ) | 160,999 | ||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 314,601 | 13,668 | 328,269 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other adjustments to reconcile net income to cash provided by operating activities | (93,909 | ) | 414 | (5,200 | ) | (11,958 | ) | (4,499 | ) | 11,291 | (103,861 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net change in working capital | (246,075 | ) | (1,046 | ) | 12,734 | (2,793 | ) | (954 | ) | 11 | 280 | 121 | 4,273 | 4,527 | 478 | 93 | 7,383 | (220,968 | ) | |||||||||||||||||||||||||||||||||||||
Resources (used in) provided by Operating activities | 135,616 | 461 | 5,022 | 403 | (649 | ) | 268 | 229 | (9,669 | ) | 1,481 | 93 | 31,184 | 164,439 | ||||||||||||||||||||||||||||||||||||||||||
Resources used in financing activities | 2,913,462 | 3 | (927 | ) | 3,939 | 2,916,477 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Resources (used in) provided by investing activities | (1,215,275 | ) | (3,303 | ) | (268 | ) | 7,180 | 1,370 | (67 | ) | (34,718 | ) | (1,245,081 | ) | ||||||||||||||||||||||||||||||||||||||||||
Effect of inflation on cash and cash equivalents | (35,186 | ) | (405 | ) | (35,591 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 1,798,617 | 464 | 1,719 | 403 | (649 | ) | 229 | (3,416 | ) | 2,851 | 26 | 1,800,244 | ||||||||||||||||||||||||||||||||||||||||||||
Beginning balances | 727,427 | 934 | 1,123 | 32 | 3,448 | 10 | 4,901 | 1,416 | — | 739,291 | ||||||||||||||||||||||||||||||||||||||||||||||
Ending balances | 2,526,044 | 1,398 | 2,842 | 435 | 2,799 | — | — | 239 | 1,485 | 4,267 | — | 26 | 2,539,535 | |||||||||||||||||||||||||||||||||||||||||||
F-99
Table of Contents
NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TET | Telereunión | USA | Telscape | Elimination | Consolidated | ||||||||||||||||||||||||||||||||||||||||
Balance sheet as of December 31, 2006: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents and Current restricted cash | 750,889 | 934 | 1,123 | 32 | 3,448 | 10 | 4,901 | 1,416 | — | 762,753 | ||||||||||||||||||||||||||||||||||||||||||
Accounts receivable — net | 439,423 | 30,098 | 220,461 | 45,443 | 167,741 | 114 | 52 | 673 | 57,386 | 12,833 | 2,159 | (491,126 | ) | 485,257 | ||||||||||||||||||||||||||||||||||||||
Inventory — net | 35,790 | 35,790 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses | 64,412 | 264 | 988 | 10 | 51 | 15 | 65,740 | |||||||||||||||||||||||||||||||||||||||||||||
Investment in subsidiaries | 306,567 | 1,666 | (308,233 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||
Frequency rights — net | 88,374 | 88,374 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Telephone network system and Equipment net | 3,060,002 | 209,590 | 10,861 | 20,984 | 3,301,437 | |||||||||||||||||||||||||||||||||||||||||||||||
Preoperating expenses — net | 98,340 | 98,340 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets — net | 190,249 | 190,249 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Obligations | 1,600 | 13,468 | 15,068 | |||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | 369 | 391 | 7 | 4,449 | 742 | 15 | 5,973 | |||||||||||||||||||||||||||||||||||||||||||||
Deferred tax | 2,393 | 2,393 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other assets | 14,548 | (18 | ) | 14,530 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 5,048,963 | 33,287 | 240,106 | 45,485 | 175,638 | 114 | 52 | 683 | 272,670 | 25,122 | 23,143 | (799,359 | ) | 5,065,904 | ||||||||||||||||||||||||||||||||||||||
Total liabilities | 2,772,049 | 34,338 | 237,491 | 43,890 | 11,979 | — | — | 611 | 182,194 | 12,170 | — | (505,732 | ) | 2,788,990 | ||||||||||||||||||||||||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock and Additional Paid- In Capital | 3,580,578 | 93 | 66 | 55 | 171,497 | 127 | 55 | 54 | 703,231 | 13,045 | 97,873 | (986,096 | ) | 3,580,578 | ||||||||||||||||||||||||||||||||||||||
Accumulated deficit | (1,303,664 | ) | (1,144 | ) | 2,549 | 1,540 | (7,838 | ) | (13 | ) | (3 | ) | 18 | (612,755 | ) | (93 | ) | (74,730 | ) | 692,469 | (1,303,664 | ) | ||||||||||||||||||||||||||||||
Total shareholders’ equity | 2,276,914 | (1,051 | ) | 2,615 | 1,595 | 163,659 | 114 | 52 | 72 | 90,476 | 12,952 | 23,143 | (293,627 | ) | 2,276,914 | |||||||||||||||||||||||||||||||||||||
Total liabilities and Shareholders — equity | 5,048,963 | 33,287 | 240,106 | 45,485 | 175,638 | 114 | 52 | 683 | 272,670 | 25,122 | 23,143 | (799,359 | ) | 5,065,904 | ||||||||||||||||||||||||||||||||||||||
Total shareholders’ equity under Mexican GAAP | 2,276,914 | (1,051 | ) | 2,615 | 1,595 | 163,659 | 114 | 52 | 72 | 90,476 | 12,952 | 23,143 | (293,627 | ) | 2,276,914 | |||||||||||||||||||||||||||||||||||||
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NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TET | Telereunión | USA | Telscape | Elimination | Consolidated | ||||||||||||||||||||||||||||||||||||||||
Preoperating expenses | (391,951 | ) | (391,951 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of preoperating expenses | 293,611 | 293,611 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization of interest | 121,894 | 121,894 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of capitalized interest | (40,451 | ) | (40,451 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Installation revenues | (67,225 | ) | (67,225 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Installation costs | (523,056 | ) | (523,056 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized internal compensation cost | (2,285 | ) | (2,285 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Severance Indemnity liability | (908 | ) | (908 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
SAB 108 initial effect | 7,034 | 7,034 | ||||||||||||||||||||||||||||||||||||||||||||||||||
SAB effects for the year | 3,035 | 3,035 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total shareholders’ equity under US. GAAP | 1,676,612 | 1,676,612 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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ON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TET | Telereunión | USA | Telscape | Elimination | Consolidated | ||||||||||||||||||||||||||||||||||||||||
Statements of Operations for the year ended December 31, 2006: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | 1,716,316 | 45,170 | 338,295 | 63,114 | 907 | 88,308 | 14,171 | (524,589 | ) | 1,741,692 | ||||||||||||||||||||||||||||||||||||||||||
Operating cost and expenses | (1,585,904 | ) | (43,871 | ) | (334,952 | ) | (61,413 | ) | 4,455 | (886 | ) | (71,801 | ) | (15,167 | ) | 524,589 | (1,584,950 | ) | ||||||||||||||||||||||||||||||||||
Integral (cost) income of financing | (122,543 | ) | 10 | (100 | ) | (114 | ) | 4,360 | (4 | ) | (2 | ) | (3 | ) | 10,488 | 798 | (72 | ) | (107,182 | ) | ||||||||||||||||||||||||||||||||
Other income (expenses) | (37,136 | ) | (308 | ) | 1,811 | (51 | ) | (13,742 | ) | 1 | 29 | (29,431 | ) | (78,827 | ) | |||||||||||||||||||||||||||||||||||||
Net (loss) income | (29,267 | ) | 1,001 | 5,054 | 1,536 | (4,927 | ) | (4 | ) | (2 | ) | 18 | 26,996 | (169 | ) | (72 | ) | (29,431 | ) | (29,267 | ) | |||||||||||||||||||||||||||||||
Net (loss) income for the year under Mexican GAAP | (29,267 | ) | 1,001 | 5,054 | 1,536 | (4,927 | ) | (4 | ) | (2 | ) | 18 | 26,996 | (169 | ) | (72 | ) | (29,431 | ) | (29,267 | ) | |||||||||||||||||||||||||||||||
Preoperating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of preoperating expenses | 32,030 | 32,030 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization of interest | 49,945 | 49,945 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of capitalized Interest | (27,136 | ) | (27,136 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Installation revenues | 858 | 858 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Installation costs | (213,247 | ) | (213,247 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Debt restructuring | 197,006 | 197,006 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized internal compensation cost | 143 | 143 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Severance Indemnity liability | (908 | ) | (908 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Reversal of SAB 108 | 3,035 | 3,035 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss (income) for the year Under U.S. GAAP | 12,459 | 12,459 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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NON-GUARANTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | Maxcom | Sierra | ||||||||||||||||||||||||||||||||||||||||||||||||||
Maxcom | CTE | MSA | OOP | MSF | USA | TV | TET | Telereunión | USA | Telscape | Elimination | Consolidated | ||||||||||||||||||||||||||||||||||||||||
Statement of Cash Flows under U.S. GAAP for the Year Ended December 31, 2006: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income the year under U.S. GAAP | 12,459 | 1,001 | 5,054 | 1,536 | (4,927 | ) | (4 | ) | (2 | ) | 18 | 26,996 | (169 | ) | (72 | ) | (29,431 | ) | 12,459 | |||||||||||||||||||||||||||||||||
Depreciation and amortization | 159,284 | 8,437 | 167,721 | |||||||||||||||||||||||||||||||||||||||||||||||||
Other adjustments to reconcile net income to cash provided by operating activities | (47,558 | ) | 47,657 | 99 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net change in working capital | (87,032 | ) | (214,152 | ) | (301,184 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Resources (used in) provided by Operating activities | 37,153 | 1,001 | 5,054 | 1,536 | (4,927 | ) | (4 | ) | (2 | ) | 18 | 26,996 | (169 | ) | (72 | ) | (187,489 | ) | (120,905 | ) | ||||||||||||||||||||||||||||||||
Resources used in financing activities | 1,326,567 | 205,177 | 1,531,744 | |||||||||||||||||||||||||||||||||||||||||||||||||
Resources (used in) provided by investing activities | (861,744 | ) | (43,144 | ) | (904,888 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Effect of inflation on cash and cash equivalents | (7,560 | ) | (318 | ) | (7,878 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 494,416 | 1,001 | 5,054 | 1,536 | (4,927 | ) | (4 | ) | (2 | ) | 18 | 26,996 | (169 | ) | (72 | ) | (25,774 | ) | 498,073 | |||||||||||||||||||||||||||||||||
Beginning balances | 233,011 | 8,207 | 241,218 | |||||||||||||||||||||||||||||||||||||||||||||||||
Ending balances | 727,427 | 1,001 | 5,054 | 1,536 | (4,927 | ) | (4 | ) | (2 | ) | 18 | 26,996 | (169 | ) | (72 | ) | (17,567 | ) | 739,291 | |||||||||||||||||||||||||||||||||
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Amounts expressed in Million of Mexican Pesos ($)
Balance at | Charged to | |||||||||||||||||||
Beginning of | Cost and | Balance at End | ||||||||||||||||||
Period | Expenses | Deductions | of Period | |||||||||||||||||
Allowance for doubtful accounts | 2008 | $ | 107.7 | $ | 106.3 | $ | (52.0 | ) | $ | 161.9 | ||||||||||
2007 | $ | 92.7 | $ | 63.4 | $ | (48.4 | ) | $ | 107.7 | |||||||||||
2006 | $ | 74.3 | $ | 59.6 | $ | (41.2 | ) | $ | 92.7 | |||||||||||
Allowance for obsolete and slow- moving supply inventories | 2008 | $ | 0.3 | (0.3 | ) | $ | — | $ | — | |||||||||||
2007 | $ | 0.3 | — | (0.3 | ) | $ | 0.1 | |||||||||||||
2006 | $ | 0.3 | — | — | $ | 0.3 | ||||||||||||||
Allowance for obsolete and slow- moving network inventories | 2008 | $ | 9.3 | 21.7 | $ | (17.3 | ) | $ | 13.7 | |||||||||||
2007 | $ | 10.0 | — | $ | (0.7 | ) | $ | 9.3 | ||||||||||||
2006 | $ | 10.2 | — | $ | (0.1 | ) | $ | 10.0 |
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1.1 | * | Amended and Restated Bylaws(estatutos)of Maxcom Telecomunicaciones, S.A. de C.V. (English translation). | ||
2.1 | Senior Note Indenture, dated December 20, 2006, among Maxcom Telecomunicaciones, S.A. de C.V., Maxcom Servicios Administrativos, S.A. de C.V., Outsourcing Operadora de Personal, S.A. de C.V., Técnicos Especializados en Telecomunicaciones, S.A. de C.V., Corporativo en Telecomunicaciones, S.A. de C.V., Maxcom SF, S.A. de C.V., Maxcom TV, S.A. de C.V., Maxcom USA, Inc. and Deutsche Bank Trust Company Americas, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 26, 2007, is incorporated herein by reference. | |||
2.2 | First Supplemental Indenture, dated September 5, 2007, among Maxcom, the guarantors a party thereto and Deutsche Bank Trust Company Americas, as trustee, filed as an exhibit to our registration statement on Form F-1/A (No. 333-145800), filed with the SEC on November 1, 2007, is incorporated herein by reference. | |||
2.3 | * | Second Supplemental Indenture, dated January 25, 2008, among Sierra Comunicaciones Globales, S.A. de C.V., the existing guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee. | ||
2.4 | Form of Deposit Agreement among Maxcom, the Depositary named therein and all holders of American Depositary Shares issued thereunder, filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on October 2, 2007, is incorporated herein by reference. | |||
2.5 | Form of Registration Rights Agreement by and among Maxcom, Nexus-Maxcom Holdings I, LLC, BASCFC-Maxcom Holding I, LLC, BAS Capital Funding Corporation, BankAmerica Investment Corporation and the other stockholders party thereto, filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on October 2, 2007, is incorporated herein by reference. | |||
2.6 | Third Amended and Restated Securityholders Agreement, dated July 20, 2006, among Maxcom Telecomunicaciones, S.A. de C.V. and certain of its shareholders, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 26, 2007, is incorporated herein by reference. | |||
3.1 | CPO Trust Agreement effective April 25, 2002 among Maxcom., its shareholders and Banco Nacional de México, S.A., Institución de Banca Múltiple, Grupo Financiero Banamex Accival, as trustee, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on July 1, 2002, is incorporated herein by reference. | |||
3.2 | CPO Trust Agreement, dated October 17, 2007, among Maxcom Telecomunicaciones, S.A. de C.V., its shareholders and Nacional Financiera, S.N.C. (English translation), filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on October 17, 2007, is incorporated herein by reference. | |||
3.3 | CPO Deed, dated October 17, 2007, among Nacional Financiera, S.N.C., Institución de Banca de Desarrollo, Monex Casa de Bolsa, S.A. de C.V., Grupo Financiero Monex and Comisíon Nacional Bancaria y de Valores (English translation), filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on October 17, 2007, is incorporated herein by reference. | |||
4.1 | Agreement for the use of infrastructure and installation of fiber optic cable on the highways between Puebla and México, dated August 18, 1998, between Amaritel, S.A. de C.V. (the predecessor of Maxcom Telecomunicaciones, S.A. de C.V.) and Iusatel, S.A. de C.V., filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.2 | Interconnection Agreement for long-distance services, dated January 22, 1999, between Amaritel and Teléfonos de México (Telmex) valid for an initial period of two years between February 1, 1999 and January 1, 2001, and in effect thereafter in accordance with article 42 of the Mexican Telecommunications law, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.3 | Local Interconnection Service Agreement, dated November 24, 1998, between Amaritel, S.A. de C.V. and Teléfonos de México, S.A. de C.V., filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. |
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4.4 | Amendment to Local Interconnection Service Agreement, dated February 25, 1999, between Amaritel, S.A. de C.V. and Teléfonos de México, S.A. de C.V., originally entered into on November 24, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.5 | Metropolitan Network Capacity Sale Agreement, dated April 28, 2000, between Maxcom Telecomunicaciones, S.A. de C.V. and Metro Net, S.A. de C.V., as amended on December 21, 2000, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 29, 2001, is incorporated herein by reference. | |||
4.6 | Telecommunications Service Agreement, dated November 15, 1999, between Maxcom and Teléfonos de México, S.A. de C.V. , filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.7 | Telecommunications Service Agreement, dated March 9, 1999, between Maxcom and Bestel S.A. de C.V., pursuant to which Bestel will provide long-distance and private call services to Maxcom, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.8 | Concession for the installation and operation of telecommunications services granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on December 20, 1996, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.9 | Amendment to Concession for the installation and operation of telecommunications services granted to Amaritel by the Secretary of Telecommunications and Transport on December 20, 1996, dated September 8, 1999, extending the coverage of such concession to include various additional municipalities of the State of Mexico, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.10 | Amendment to Concession for the installation and operation of telecommunications services granted to Amaritel by the Secretary of Telecommunications and Transport on December 20, 1996, dated December 7, 1999, authorizing Maxcom to employ whatever technologies it deems appropriate in providing telecommunications services to various municipalities, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.11 | Amendment to Annex A and B of Concession for the installation and operation of telecommunications services granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on December 20, 1996, dated September 27, 2001, extending the coverage of such concession to include all of Mexico, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.12 | Concession for a public telecommunications network in telecommunications regions 3, 5 and 8 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 29, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.13 | Concession for the operation of point-to-multipoint microwave telecommunications services in Region 5 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 23, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.14 | Concession for the operation of point-to-multipoint microwave telecommunications services in Region 3 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 23, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.15 | Concession for the operation of point-to multipoint microwave telecommunications services in Region 8 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 29, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.16 | Concessions for the nationwide operation of point-to-point microwave telecommunications services using five frequency bands in the 56 MHz bandwidth, each granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on June 4, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. |
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4.17 | Concessions for the nationwide operation of point-to-point microwave telecommunications services using two frequency bands in the 100 MHz bandwidth, each granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on June 4, 1998, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.18 | Amendment to Concession for the operation of point-to-multipoint telecommunications services in Regions 3, 5, 8 granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on April 1, 1998, dated October 12, 1999, regarding the start date for the initiation of services, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.19 | Amendment to Concession for the installation and operation of telecommunications services granted to Amaritel, S.A. de C.V. by the Secretary of Telecommunications and Transport on December 20, 1996, dated September 24, 1999 eliminating financial restrictions, filed as an exhibit to our registration statement on Form F-4 (No. 333-11910), filed with the SEC on May 5, 2000, is incorporated herein by reference. | |||
4.20 | Warrant Agreement, dated as of March 17, 2000, between Maxcom Telecomunicaciones, S.A. de C.V. and The Bank of New York, as warrant agent, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 29, 2001, is incorporated herein by reference. | |||
4.21 | Dark Fiber Optic Purchase Agreement, dated as of August 13, 2002, between Maxcom Telecomunicaciones, S.A. de C.V. and Bestel S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2003, is incorporated herein by reference. | |||
4.22 | Transactional Lease Termination Agreement, dated as of May 20, 2003, among Maxcom Telecomunicaciones, S.A. de C.V. and Jacobo Zaga Romano, Jacobo Zaga Buzali, et.al., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2003, is incorporated herein by reference. | |||
4.23 | Capacity Sale Agreement, dated as of October 15, 2003, between Maxcom Telecomunicaciones, S.A. de C.V. and Axtel, S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 24, 2004, is incorporated herein by reference. | |||
4.24 | Credit Agreement, dated April 28, 2004, by and among Banco Santander Mexicano, S.A., Institución de Banca Mútiple Grupo Financiero Santander Serfin, as lenders, and Maxcom, as borrower, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2005, is incorporated herein by reference. | |||
4.25 | Credit Agreement, dated April 13, 2005, by and among Ixe Banco, S.A., Institución de Banca Mútiple, Ixe Grupo Financiero., as lenders, and Maxcom, as borrower, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2005, is incorporated herein by reference. | |||
4.26 | Amendment dated August 5, 2004 to Exhibit B of the Master Agreement to Supply Local Interconnection Services, dated February 25, 1999, between Maxcom and Telefonos de México, S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2005, is incorporated herein by reference. | |||
4.27 | Credit Agreement, dated April 13, 2005, by and among Ixe Banco, S.A., Institución de Banca Múltiple, Ixe Grupo Financiero, as lenders, and Maxcom, as borrower, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference. | |||
4.28 | Credit Agreement, dated October 25, 2005, by and among Ixe Banco, S.A., Institución de Banca Múltiple, Ixe Grupo Financiero, as lenders, Maxcom, as borrower and Maxcom SF, S.A. de C.V. as joint and several obligor, and amendment dated December 13, 2005, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference. | |||
4.29 | Credit Agreement, dated October 21, 2005, by and among Banco Mercantil del Norte, S.A., Institución de Banca Múltiple, Grupo Financiero Banorte, as lenders and Maxcom, as borrower, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference. | |||
4.30 | Irrevocable Trust Agreement, dated November 21, 2005, by and among Maxcom, as settlor, Banco Mercantil del Norte, S.A., Institución de Banca Múltiple, Grupo Financiero Banorte and Ixe Banco, S.A., Institución de Banca Múltiple, Ixe Grupo Financiero, as trust beneficiaries and HSBC México, S.A., Institución de Banca Múltiple, Grupo Financiero HSBC, Trust Division, as trustees, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference. | |||
4.31 | Minutes of Maxcom Shareholders Meeting dated August 31, 2005 approving the spin-off, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference. |
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4.32 | Stock Purchase Agreement, dated November 22, 2005, by and among Maxcom and Maxcom SF, S.A. de C.V., as sellers and Tiendas Comercial Mexicana, S.A. de C.V. and Controladora Comercial Mexicana, S.A. de C.V., as buyers, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference. | |||
4.33 | Supply and Installation Agreement of Video Through DSL (IPTV) System dated December 15, 2006 by and among Maxcom Telecomunicaciones, S.A. de C.V., Alcatel Bell N.V. and Alcatel México, S.A. de C.V., filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 26, 2007, is incorporated herein by reference. | |||
4.34 | The First Executive Stock Option Plan, which includes a Trust Agreement, dated May 31, 1999, among Maxcom Telecomunicaciones, S.A. de C.V. and Banco Nacional de México (English translation) , filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on September 12, 2007, is incorporated herein by reference. | |||
4.35 | Second Executive Stock Option Plan, dated July 17, 2006 (English translation), filed as an exhibit to our registration statement on Form F-1/A (No. 333-144771), filed with the SEC on September 12, 2007, is incorporated herein by reference. | |||
6.1 | * | Computation of earnings per share. | ||
7.1 | * | Computation of ratio earnings to fixed charges | ||
8.1 | * | Subsidiaries of the Registrant. | ||
11.1 | Maxcom’s Code of Ethics adopted March 2006, filed as an exhibit to our annual report on Form 20-F, filed with the SEC on June 30, 2006, is incorporated herein by reference. | |||
12.1 | * | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a). | ||
12.2 | * | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a). | ||
13.1 | * | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350. | ||
13.2 | * | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
* | Filed herewith. |
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ADSL | (Asymmetrical Digital Subscriber Line) ADSL is a physical-layer protocol that supports up to 8 Mbps bandwidth downstream and up to 1 Mbps upstream. The asymmetrical aspect of ADSL technology makes it ideal for Internet browsing, video on demand, and remote LAN access. Users of these applications typically download more information than they send. ADSL also allows simultaneous voice communication by transmitting data signals outside of the voice frequency range. | |
Band | A range of frequencies between two defined limits. | |
Bandwidth | The relative range of analog frequencies or digital signals that can be passed through a transmission medium, such as glass fibers, without distortion. The greater the bandwidth, the greater the information carrying capacity. Bandwidth is measured in Hertz (analog) or Bits Per Second (digital). | |
Capacity | Refers to the ability to transmit voice or data over telecommunications networks | |
Carrier | A licensed provider of telecommunications transmission services by fiber, wire or radio. | |
Centrex service | A business telephone service developed originally by Lucent Technologies which offers private branch exchange type features directly from the local telephone company central office, such as voicemail, call pick-up group, abbreviated dialing and multi-line hunting. | |
Churn | Refers to customer line attrition and is measured as the percentage of disconnects from service relative to the total subscriber base over a given period of time. | |
COFETEL | Comisión Federal de Telecomunicaciones,the Mexican Federal Telecommunications Commission. | |
Digital | Describes a method of storing, processing and transmitting information through the use of distinct electronic or optical pulses that represent the binary digits 0 and 1. Digital transmission/switching technologies employ a sequence of discrete, distinct pulses to represent information, as opposed to the continuously variable analog signal. | |
DSLAM | Digital Subscriber Line Access Multiplexer. A technology to concentrate traffic in ADSL implementations through time division multiplexing at the central office. | |
E1 | A digital telephony format that carries data at the rate of 2.048 Mbps (DS-1 level). E-1 is the European and Latin American version of North American T-1, though T-1 is 1.544 Mbps. | |
Fiber optic technology | Fiber optic systems use laser-generated light to transmit voice, data and video in digital format through ultra-thin strands of glass. Fiber optic systems are characterized by large circuit capacity, good sound quality, resistance to external signal interference and direct interface to digital switching equipment and digital microwave systems. A pair of fiber optic strands using advanced transmission technologies is capable of carrying multiple 2.5 or 10 Gbps communication streams. Because optical signals disperse over distance, they must be regenerated/amplified at sites located along the fiber optic cable. Fiber optic systems using earlier generation fiber require frequent intervals between regeneration/amplifier sites. Greater distances between regeneration/amplifier sites afforded by the use of advanced fiber generally translate into substantially lower installation and operating costs and fewer potential points of failure. | |
Fixed wireless local loop | A wireless local telephony service using the 3.4-3.7 GHz frequency band. | |
FTTH | Fiber-to-the-home, reference to an all fiber-optic public telephone network design, where broadband services are delivered to the customer premises/network interface by fiber optic. | |
Gbps | Gigabits per second. A measurement of speed for digital signal transmission expressed in billions of bits per second (Gbps). | |
Gulf region | 115 cities and towns in eleven states in eastern Mexico, which includes the cities of Puebla, Tampico, Veracruz, Reynosa, Cancún, Chetumal, Mérida, Ciudad del Carmen, Campeche, Coatzacoalcos and Tuxtla Gutiérrez, among others. | |
Hertz | The unit measuring the frequency with which an alternating electromagnetic signal cycles through the zero-value state between lowest and highest states. One hertz(abbreviated Hz) equals one cycle per second. KHz (kilohertz) stands for thousands of hertz; MHz (megahertz) stands for millions of hertz and GHz (gigahertz) stands for billions of hertz. |
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ISDN | Integrated Services Digital Network ISDN is an international standard that provides end-to-end digital connectivity to support a wide range of voice, data and video services. | |
Kbps | Kilobits per second, a measurement of speed for digital signal transmission expressed in thousands of bits per second. | |
Lambdas | Lambdas are used as the symbol for wavelength in lightwave systems. Fiber optic systems may use multiple wavelengths of light, with each range of wavelengths appearing in a “window,” roughly corresponding to a color in the visible light spectrum. | |
LAN | Local area network, a private data communications network linking a variety of data devices, such as computer terminals, personal computer terminals, personal computers and microcomputers, all housed in a defined building, plant or geographic area. | |
Microwave technology | Although limited in capacity compared with fiber optic systems, digital microwave systems offer an effective and reliable means of transmitting lower volume and narrower bandwidths of voice, data and video signals over short and intermediate distances. Microwaves are very high frequency radio waves that can be reflected, focused and beamed in a line-of-sight transmission path. As a result of their electro-physical properties, microwaves can be used to transmit signals through the air, with relatively little power. To create a communications circuit, microwave signals are transmitted through a focusing antenna, received by an antenna at the next station in the network, then amplified and retransmitted. Because microwaves disperse as they travel through the air, this transmission process must be repeated at repeater stations, which consist of radio equipment, antennae and back-up power sources, located on average every 30 kilometers along the transmission route. | |
Mbps | MegaBits per second. A measurement of speed for digital signal transmission expressed in millions of bits per second (Mbps). | |
Multi-line hunting | A value-added service that allows for multiple calls to be received with a single telephone number. | |
PCS | Personal Communications Services. PCS has come to represent two things: first, a digital wireless communications service operating over the 1.9 GHz band; and second, more generically, a wireless communications service utilizing a digital network that offers typical features such as voice, video and data applications, short messaging, voicemail, caller identification, call conferencing and call forwarding. Generic PCS suppliers promote this service on the ability of its features to be customized, or “bundled,” to the needs of the individual customers. | |
Point- to-multipoint microwave transmission | A transmission using microwave technology by which a single signal goes from one origination point to many destination points. | |
Point-to-point microwave transmission | A transmission using microwave technology by which a signal goes from one point to another, usually connected by a dedicated transmission line. | |
POTS | Plain Old Telephone Service. The basic service supplying standard single line telephones, telephone lines and access to the public switched network. | |
Revenue Generated Unit (RGU) | Represents an individual service subscriber who generates recurrent revenue for the Company. | |
SCT | Secretaría de Comunicaciones y Transportes, the Mexican Ministry of Communications and Transportation. | |
Switch | A device that opens or closes circuits or selects the paths or circuits to be used for transmission of information. Switching is the process of interconnecting circuits to form a transmission path between users. | |
Teledensity | Teledensity is a measure of telephony service in a population. It is calculated by dividing the total subscriber base (number of lines in service) by the inhabitants and multiplying by 100. It is generally used as a comparative measure of network development. All teledensity figures are reported in subscribers per 100 inhabitants. | |
Triple play services | Triple play services consist combination of voice, data, and video services offered as a bundled service for a price that is less than the price of the individual services acquired individually. |
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VoIP | Voice over Internet Protocol services consist in the technology that provides telephone companies with the ability to carry normal telephony-style voice over an Internet Protocol-based Internet with POTS-like functionality, reliability, and voice quality. | |
VPN | Virtual Private Network. A network design offering the appearance and functionality of a dedicated private network. | |
Web-hosting | A service performed by Internet service providers (also known as ISPs) and Internet access providers (also known as IAPs) consisting in the hosting of outside companies web pages to be displayed on the Internet. | |
xDSL | XDSL is a physical-layer protocol that supports bandwidth downstream and upstream. |
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MAXCOM TELECOMUNICACIONES, S.A.B. DE C.V. | ||||
By: | /s/ Jose Antonio Solbes | |||
José Antonio Solbes | ||||
Chief Financial Officer | ||||
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6.1 | Computation of earnings per share. | |||
7.1 | Computation of ratio earnings to fixed charges | |||
8.1 | Subsidiaries of the Registrant. | |||
12.1 | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a). | |||
12.2 | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a). | |||
13.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350. | |||
13.2 | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
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