<Page>
FORM 6-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of: NOVEMBER 14, 2001
[GRAPHIC OMITTED]
TRICOM, S.A.
(Translation of registrant's name into English)
AVENIDA LOPE DE VEGA NO. 95, SANTO DOMINGO, DOMINICAN REPUBLIC
(Address of principal executives offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F |_|
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes |_| No |X|
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_________
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TRICOM, S.A.
QUARTERLY REPORT
FOR THE
THIRD QUARTER
ENDED
SEPTEMBER 30, 2001
<Page>
TABLE OF CONTENTS
PAGE
GENERAL INTRODUCTION...........................................................1
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS...............................................2
Consolidated Balance Sheets as of December 31, 2000 and September
30, 2001 (unaudited).....................................................2
Consolidated Statements of Operations for the Three and Nine Months
ended September 30, 2000 and 2001 (unaudited)............................4
Consolidated Statements of Cash Flows for the Nine Months ended
September 30, 2000 and 2001 (unaudited)..................................5
Supplemental Schedule for the Three and Nine Months ended
September 30, 2000 and 2001 (unaudited)..................................6
Notes to Financial Statements............................................6
ITEM 2. INFORMATION ON THE COMPANY.........................................7
ITEM 3. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION............................................8
ITEM 4. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK..............................................................14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................15
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.........................15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...................................15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............15
ITEM 5. OTHER INFORMATION.................................................15
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K..................................15
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GENERAL INTRODUCTION
UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES TO THE "COMPANY" OR
"TRICOM" REFER TO TRICOM, S.A. AND ITS CONSOLIDATED SUBSIDIARIES AND THEIR
RESPECTIVE OPERATIONS, AND INCLUDE TRICOM'S PREDECESSORS.
PRESENTATION OF CERTAIN FINANCIAL INFORMATION
The Company prepares its consolidated financial statements in conformity
with generally accepted accounting principles in the United States. The Company
adopted the United States dollar as its functional currency effective January 1,
1997.
In this Quarterly Report references to "$," "US$" or "U.S. dollars" are to
United States dollars, and references to "Dominican pesos" or "RD$" are to
Dominican pesos. This Quarterly Report contains translations of certain
Dominican peso amounts into U.S. dollars at specified rates solely for the
convenience of the reader. These translations should not be construed as
representations that the Dominican peso amounts actually represent such U.S.
dollar amounts or could be converted into U.S. dollars at the rate indicated.
The average of prices of one U.S. dollar quoted by certain private commercial
banks (the "Private Market Rate") as reported by Banco Central de la Republica
Dominicana (the "Central Bank") on September 28, 2001 was RD$16.83 = US$1.00,
the date closest to the date of the most recent financial information included
in this Quarterly Report. The Federal Reserve Bank of New York does not report a
noon buying rate for Dominican pesos. On November 7, 2001, the Private Market
Rate was RD$16.92 = US$1.00.
FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report, which are not
historical facts, are forward-looking statements that involve risks and
uncertainties. Management cautions the reader that these forward-looking
statements are only predictions; actual events or results may differ materially
as a result of risks facing the Company. Such risks include, but are not limited
to, the following factors: competition; declining rates for international long
distance traffic; reliance on resellers; our inability to minimize credit risks;
customer churn; rapid technological change; rejection of our concession
agreement in the Dominican Republic; cellular fraud; our ability to implement
our business plan on schedule, including our Central American strategy; social,
political and economic conditions in our existing and target markets; our
significant capital expenditure and working capital requirements and our need to
finance such expenditures; the effect of our indebtedness on our ability to fund
expansion and remain competitive and of restrictions contained in such
indebtedness; concerns about health risks associated with wireless equipment;
our inability to manage effectively our rapid expansion; our inability to obtain
licenses or concessions in markets outside the Dominican Republic; the continued
growth of the Dominican and Central American economies, demand for
telecommunication services in the Dominican Republic and Central America;
moderation of inflation; and the continuation of a favorable political, economic
and regulatory environment in each of the Dominican Republic and Central
America.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRICOM, S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN US$)
<Table>
<Caption>
DECEMBER 31, SEPTEMBER 30,
============= =============
2000 2001
ASSETS (UNAUDITED)
Current assets:
Cash on hand and in banks $ 18,199,552 $ 38,099,891
Accounts receivable:
Customers 21,970,677 22,541,341
Carriers 8,729,886 6,946,979
Related parties 1,663,396 356,172
Officers and employees 556,577 792,580
Other 1,601,119 3,184,115
------------- -------------
34,521,655 33,821,187
Allowance for doubtful accounts (2,394,903) (3,189,369)
------------- -------------
Accounts receivable, net 32,126,752 30,631,818
Inventories, net 9,541,093 9,152,615
Prepaid expenses 7,947,531 3,728,566
Deferred income taxes 801,008 990,826
------------- -------------
Total current assets 68,615,936 82,603,716
------------- -------------
Investments 3,289,459 3,988,189
Property and equipment, net 586,223,900 642,490,296
Other assets at cost, net of amortization 24,310,564 31,777,924
------------- -------------
$ 682,439,859 $ 760,860,125
============= =============
</Table>
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TRICOM, S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
(IN US$)
<Table>
<Caption>
DECEMBER 31, SEPTEMBER 30,
============= =============
2000 2001
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable:
Borrowed funds - banks $ 82,131,865 $ 133,978,550
Borrowed funds - related parties 31,410,612 25,764,750
Current portion of long-term debt 3,213,939 1,152,398
------------- -------------
116,756,416 160,895,698
------------- -------------
Current portion of capital leases 5,308,310 2,043,717
Accounts payable:
Carriers 13,835,276 6,773,148
Related parties 2,093,385 160,369
Suppliers 21,653,727 21,140,704
Other 242,582 752,070
------------- -------------
37,824,970 28,826,291
Other liabilities 19,990,490 18,372,484
Accrued expenses 14,035,182 16,086,490
------------- -------------
Total current liabilities 193,915,368 226,224,680
------------- -------------
Reserve for severance indemnities 9,727 46,153
Deferred income tax 974,867 1,097,546
Capital leases, excluding current portion 15,520,965 14,511,859
Long-term debt, excluding current portion 261,222,759 273,184,289
------------- -------------
Total liabilities 471,643,686 515,064,527
------------- -------------
Minority interest -- 4,352,084
Shareholders' equity:
Class A Common Stock at par value RD$10: Authorized
55,000,000 shares; 9,700,000 shares issued at December 31,
2000 and September 30, 2001 6,210,025 6,210,025
Class B Stock at par value RD$10: Authorized 25,000,000
shares at December 31, 2000 and September 30, 2001;
19,144,544 issued at December 31, 2000 and September 30, 2001 12,595,095 12,595,095
Additional paid-in-capital 159,981,808 160,734,795
Additional investment of capital (note 2) -- 40,000,000
Retained earnings 34,033,002 23,927,356
Other comprehensive income-foreign currency translation (2,023,757) (2,023,757)
------------- -------------
Shareholders equity, net 210,796,173 241,443,514
------------- -------------
$ 682,439,859 $ 760,860,125
============= =============
</Table>
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TRICOM, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN US$)
<Table>
<Caption>
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
=============================================================
2000 2001 2000 2001
=============================================================
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
OPERATING REVENUES:
Toll $ 7,591,337 $ 7,769,767 20,991,678 $ 22,215,869
International 22,010,363 21,272,185 58,968,569 60,862,735
Local service 13,483,002 15,987,408 37,536,727 46,364,483
Data and Internet 1,071,967 2,146,784 1,544,421 6,024,925
Cellular & PCS 9,021,849 10,182,725 26,311,409 28,228,114
Paging 435,893 242,855 1,347,817 832,273
Sale of equipment 726,822 465,846 4,334,056 2,652,019
Installation and activation fees 3,531,983 2,405,657 10,084,946 9,390,783
Other 46,179 180,860 110,911 555,334
-------------------------------------------------------------
TOTAL OPERATING REVENUES 57,919,395 60,654,087 161,230,534 177,126,535
OPERATING COSTS:
Satellite connections and carrier (excluding
network depreciation expense of $7,516,749,
$11,617,289, $20,392,169 and $32,464,595 for
the three month period ended September 30,
2000 and 2001 and the nine month period ended
September 30, 2000 and 2001, respectively,
included below) 17,832,242 17,821,403 47,149,731 49,470,744
Network depreciation expense 7,516,749 11,617,289 20,392,169 32,464,595
Expense in lieu of income taxes 3,333,873 2,522,431 8,832,265 9,002,698
General and administrative expenses 15,767,355 22,279,748 45,846,378 58,575,833
Cost of equipment sold 476,526 382,548 2,144,573 2,178,545
Amortization expense 163,425 158,796 690,192 474,172
Non-network depreciation expense 1,651,913 2,761,356 4,719,400 7,352,477
Other 382,932 487,960 1,158,799 1,472,688
-------------------------------------------------------------
TOTAL OPERATING COSTS 47,125,015 58,031,531 130,933,507 160,991,752
OPERATING INCOME 10,794,380 2,622,556 30,297,027 16,134,783
-------------------------------------------------------------
OTHER INCOME (EXPENSES):
Interest expense (8,799,715) (8,682,346) (24,594,014) (28,495,020)
Interest income 1,347,187 665,045 2,601,321 1,533,802
Foreign exchange gain (loss) 232,790 (26,850) (102,439) (289,285)
Other, net (77,630) (26,159) (192,803) 515,410
-------------------------------------------------------------
OTHER EXPENSES, NET (7,297,368) (8,070,310) (22,287,935) (26,735,093)
-------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES, CUMULATIVE
EFFECT OF ACCOUNTING CHANGE AND MINORITY INTEREST 3,497,012 (5,447,754) 8,009,092 (10,600,310)
Income taxes, net (160,210) (150,000) (431,028) (250,861)
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE AND MINORITY INTEREST 3,336,802 (5,597,754) 7,578,064 (10,851,171)
Cumulative effect of accounting change (note 3) -- -- (16,452,799) --
EARNINGS (LOSS) BEFORE MINORITY INTEREST 3,336,802 (5,597,754) (8,874,735) (10,851,171)
Minority interest -- 95,021 -- 155,047
-------------------------------------------------------------
NET EARNINGS (LOSS) $ 3,336,802 $ (5,502,733) $ (8,874,735) $ (10,696,124)
=============================================================
Earnings (loss) per common share:
Earnings (loss) before cumulative effect of
accounting change $ 0.12 $ (0.19) $ 0.28 $ (0.38)
Cumulative effect of accounting change -- -- (0.60) --
-------------------------------------------------------------
Earning (loss) per common share $ 0.12 $ (0.19) $ (0.32) $ (0.37)
=============================================================
AVERAGE NUMBER OF COMMON SHARES USED IN CALCULATION 28,844,544 28,844,544 27,355,493 28,844,544
=============================================================
</Table>
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TRICOM, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN US$)
<Table>
<Caption>
NINE MONTH PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
============= ============
2000 2001
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net earnings (loss) $ 8,874,735 $(10,696,124)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Allowance for doubtful accounts 4,751,135 5,173,937
Cumulative effect of accounting change for installation and
activation revenues (note 3) 16,452,799 --
Deferred income tax (benefit) provision -- (67,139)
Depreciation and amortization 25,111,571 39,817,072
Expense for severance indemnities -- 1,070,374
Minority interest -- (155,047)
Non-cash consulting expenses 690,192 752,987
Net changes in assets and liabilities:
Accounts and notes receivable (12,009,953) (3,679,003)
Inventories 903,901 388,478
Prepaid expenses 2,778,248 4,218,965
Long-term accounts receivable 88,988 --
Other assets (1,001,811) (6,876,882)
Accounts payable 15,302,584 (8,998,679)
Other liabilities (15,280,622) (1,618,006)
Accrued expenses (3,282,953) 2,051,308
Reserve for severance indemnities (27,783) (1,033,948)
------------- ------------
Total adjustments 34,476,296 31,044,417
------------- ------------
Net cash provided by (used in) operating activities 43,351,031 20,348,293
------------- ------------
Cash flows from investing activities:
Cancellation of investments (305,171) (698,730)
Acquisition of property and equipment (131,605,688) (96,083,468)
------------- ------------
Net cash used in investing activities (131,910,859) (96,782,198)
------------- ------------
Cash flows from financing activities:
Borrowed funds from banks 14,180,536 50,837,578
Borrowed funds (paid to) from related parties 50,541,257 (5,645,861)
Capital lease payments (13,665,284) (3,264,593)
Increase of common stock and additional paid-in capital 66,772,826 40,000,000
Minority interest -- 4,507,131
Payments of long-term debt (246,950) (2,061,541)
Proceeds from issuance of long term debt 4,902,297 11,961,530
Short terms obligations 4,099,696 --
------------- ------------
Net cash provided by financing activities 126,584,378 96,334,244
------------- ------------
Net increase in cash and cash equivalents 38,024,550 19,900,339
Cash and cash equivalents at beginning of the period 13,459,566 18,199,552
------------- ------------
------------- ------------
Cash and cash equivalents at end of period $ 51,484,116 $ 38,099,891
============= ============
</Table>
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TRICOM, S.A. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE
(IN US$)
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
========================== ===========================
PRE-SAB 101 POST-SAB 101 PRE-SAB 101 POST-SAB 101
Installation and activation fees $ 2,603,804 $ 3,531,983 $ 10,874,368 $ 10,084,946
Total operating revenues $56,991,216 $57,919,395 $162,019,956 $161,230,534
Operating income $ 9,866,201 $10,794,380 $ 31,086,449 $ 30,297,027
Net earnings (loss) $ 2,568,833 $ 3,336,802 $ 8,798,514 $ (8,874,735)
Earnings per common share $ 0.09 $ 0.12 $ 0.32 $ (0.32)
</Table>
TRICOM, S.A. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The Company considers that all adjustments (all of which are normal
recurring accruals) necessary for a fair statement of financial position and
results of operations for these periods have been made; however, results for
such interim periods are subject to audit. Results for such interim periods are
not necessarily indicative of results for a full year.
NOTE 2 - ADDITIONAL INVESTMENT OF CAPITAL
On May 9, 2001, GFN Corporation, one of our major shareholders, committed
to provide us $40 million in additional equity. GFN advanced funds to us on an
interest free basis, which will be used to subscribe for Class A Common Stock on
the same basis, offered to all shareholders in a Rights Offering.
NOTE 3 - ADOPTION OF SAB-101
Effective January 1 2000, the Company adopted the Staff Accounting
Bulletin (SAB 101) "Revenue Recognition" issued by the Securities and Exchange
Commission (SEC). The adoption of SAB 101 resulted in a change in the revenue
recognition policy regarding installation and activation revenues. Such change
required the Company to recognize net revenues from installation and activation
over the average service life based on the experience of the Company (35
months). This change in the revenue recognition method required the Company to
recognize a cumulative effect of accounting change in net revenues from
installations and activations for $16,452,799 during the nine months ended
September 30, 2000, which is presented as a separate item in the accompanying
consolidated statements of operations.
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ITEM 2. INFORMATION ON THE COMPANY
RECENT DEVELOPMENTS
CABLE SYSTEM ACQUISITION
On October 26, 2001, we completed the acquisition of Telecable Nacional,
C. por A., the largest multi-channel system operator in the Dominican Republic's
pay-TV market. We paid approximately $1,130 per subscriber equivalent or $63.7
million, payable $41.8 million in cash and with 3,375,000 shares of our Class A
Common Stock.
Telecable is the leader of the Dominican cable TV market with an estimated
43% market share, serving approximately 52,000 residential subscribers with
approximately 150,000 homes passed and an additional 8,000 commercial customers.
Telecable operates primarily in the capital city of Santo Domingo, where it has
an estimated 90% market share, and the resort cities of Puerto Plata and La
Romana. Approximately 70% of Telecable's cable network has been recently
upgraded to 750 MHz; and it is expected that the network will be fully upgraded
by 2002. For the year ended December 31, 2000, Telecable had revenues of
approximately $17.0 million, earnings before taxes of approximately $2.9 million
and earnings before interest, taxes, depreciation and amortization of
approximately $5.5 million.
RIGHTS OFFERING TO SHAREHOLDERS
On July 25, 2001, we announced that our Board of Directors had authorized
and set certain terms for a Rights Offering to holders of our common stock and
ADSs. The purpose of the Rights Offering is to provide all current shareholders
with the opportunity to buy more shares on the same basis as GFN Corporation,
one of our major shareholders, which previously advanced to us $40 million in
additional equity, on an interest free basis, which will be used to subscribe
for Class A Common Stock on the same basis, offered to all shareholders. The
Rights Offering will involve the offer of newly issued ADSs for a maximum
aggregate amount of approximately $100 million. Our Board of Directors will
determine the subscription price of the ADSs and the number of ADSs to be
offered at a later date. We will use any proceeds generated from the exercise of
rights in this Rights Offering for general corporate purposes, including to
fund, in part, our acquisition of Telecable Nacional and for working capital.
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<Page>
ITEM 3. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
REVENUE RECOGNITION
We derive our operating revenues primarily from toll revenues,
international settlement revenues, cellular and PCS services, local services,
the sale of equipment and installations. The components of each of these
services are as follows:
Toll revenues are amounts we receive from our customers in the Dominican
Republic for international and domestic long distance calls, as well as
interconnection charges received from Codetel, the incumbent local service
provider, and other carriers, for calls that originate in or transit their
networks but terminate in our network. Residential and commercial
customers, calling card users, cellular and PCS subscribers, retail
telephone centers, and large corporate accounts generate toll revenues.
Toll revenues are recognized as they are billed to customers, except for
revenues from prepaid calling cards that are recognized as the calling
cards are used or expire.
International revenues represent amounts recognized by us for termination
of traffic from foreign telecommunications carriers to the Dominican
Republic. The amount that we receive is based on the minutes that the
foreign telecommunications companies have terminated in the Dominican
telecommunications network, either on our own network or on other
networks, including revenues derived from our U.S.-based international
long distance prepaid calling cards.
Local service revenues consist of monthly fees, local measured service and
local measured charges for value-added services, including call
forwarding, three-way calling, call waiting and voice mail, as well as
calls made to cellular users under the calling-party-pays system, and
revenues from other miscellaneous local access services. Local measured
service includes monthly line rental for a specified number of calls
within a defined area, plus a charge for additional calls.
Data/Internet revenues consist of fixed monthly fees received from our
residential and corporate customers for high-speed broadband data
transmission and Internet connectivity services. These services include
traditional dial-up connections, dedicated lines, private networks, frame
relay, digital subscriber lines, or xDSLs, that provide high-bandwidth
transmission of voice and data over regular telephone lines, and very
small aperture terminals, or VSATs, that are relatively small satellite
antennas used for high speed satellite-based single to multiple point data
transmissions, including for the Internet. These revenues were included as
part of local service revenues until the second quarter of 2001.
Cellular and PCS revenues represent fees received for mobile cellular and
PCS services, including interconnection charges for calls incoming to our
cellular and PCS subscribers from other companies' subscribers. Cellular
and PCS revenues do not include fees received for international long
distance calls generated by our cellular and PCS subscribers, which are
included in toll revenues. Cellular and PCS fees consist of fixed monthly
fees, per minute usage charges and additional charges for value-added
services, including call waiting, call forwarding, three-way calling, and
other miscellaneous cellular and PCS services.
Paging revenues consist of fixed monthly charges for nationwide service
and use of paging equipment and activation fees. Since 1999, we have
de-emphasized paging services and we no longer actively market these
services.
Revenues from the sale of equipment consist of sales fees for customer
premise equipment, including private branch exchanges, automatic branch
exchanges, which are small versions of a phone
-8-
<Page>
company's central switching system often used by private companies, key
telephone systems, residential telephones, cellular and PCS handsets and
paging units.
Installation revenues consist of fees we charge for installing local
access lines, private branch exchanges and key telephone systems, as well
as fees for activating cellular phones and PCS. Beginning on January 1,
2000, we have recognized these revenues over the estimated period in
which, based on our experience, we retain clients for such services,
approximately 35 months. In prior periods, we recognized these revenues
when they were collected.
Other revenues consist of revenues that are not generated from our core
businesses, including commissions received for providing package handling
services for a courier and commissions received for collection services
for utility companies.
The following table sets forth each category of revenues as a percentage
of total operating revenues for the period indicated:
<Table>
<Caption>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
================ ================
2000 2001 2000 2001
==== ==== ==== ====
Toll ............................... 13.1% 12.8% 13.0% 12.5%
International ...................... 38.0 35.1 36.6 34.4
Local service ...................... 23.3 26.4 23.3 26.2
Data / Internet .................... 1.9 3.5 1.0 3.4
Cellular and PCS ................... 15.6 16.8 16.3 15.9
Paging ............................. 0.8 0.4 0.8 0.5
Sale and lease of equipment ........ 1.3 0.8 2.7 1.5
Installations ...................... 6.1 4.0 6.3 5.3
Other .............................. 0.1 0.3 0.1 0.3
</Table>
- ----------
Note: Percentages may not add up to 100% due to rounding.
The following table sets forth certain items in the statements of
operations expressed as a percentage of total operating revenues for the period
indicated:
<Table>
<Caption>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
============= =============
2000 2001 2000 2001
==== ==== ==== ====
Operating costs ............................ 81.4% 95.7% 81.2% 90.9%
Operating income ........................... 18.6 4.3 18.8 9.1
Interest expense, net ...................... (12.9) (13.2) (13.6) (15.2)
Other income (expenses) .................... (12.6) (13.3) (13.8) (15.1)
Earnings before cumulative effect of
accounting change and minority interest .... 5.8 (9.2) 4.7 (6.1)
Net earnings (loss) ........................ 5.8 (9.1) (5.5) (6.0)
</Table>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE SAME PERIODS IN
2000
OPERATING REVENUES. Our total operating revenues increased 4.7% to US$60.7
million for the three-month period ended September 30, 2001 from US$57.9 million
for the three-month period ended September 30, 2000.
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<Page>
Revenues increased 9.9% to $177.1 million for the nine-month period ended
September 30, 2001 from $161.2 million for the nine-month period ended September
30, 2000. This growth resulted primarily from increases in revenues generated by
our local and data/Internet services.
TOLL. Toll revenues increased 2.4% to $7.8 million during the 2001 third
quarter from $7.6 million for the 2000 third quarter, and grew by 5.8% to $22.2
million during the first nine months of 2001 compared to $21.0 million during
the first nine months of 2000, primarily as a result of higher interconnection
charges and a higher volume of domestic long distance traffic. Revenues derived
from interconnection charges increased 18.7% to $2.2 million during the 2001
third quarter from $1.9 million for the 2000 third quarter, and grew by 19.3% to
$6.1 million during the first nine months of 2001 compared to $5.1 million
during the first nine months of 2000. This increase was partially offset by a
decrease in revenues received for outbound international calls. Revenues from
outbound international calls decreased by 13% to $3.8 million during the 2001
third quarter from $4.4 million for the 2000 third quarter, and decreased by
8.8% to $11.2 million during the first nine months of 2001 compared to $12.2
million during the first nine months of 2000, primarily as a result of a
decrease in the price per minute for outbound international calls for
residential and commercial customers. The average price per minute for outbound
international calls declined to $0.47 in the 2001 third quarter from $0.93 in
the 2000 third quarter.
Domestic long distance minutes increased by 8.8% to 13.1 million minutes
during the 2001 third quarter from 12.0 million minutes during the 2000 third
quarter, and grew by 13.8% to 38.3 million minutes during the first nine months
of the year compared to 33.6 million during the first nine months of 2000.
Outbound international minutes increased by 3.6% to 8.7 million in the 2001
third quarter from 8.4 million minutes during the 2000 third quarter, and grew
by 7.0% to 25.8 million minutes in the first nine months of 2001 compared to
24.1 million during the first nine months of 2000, reflecting increased traffic
volume from our cellular and PCS customers.
INTERNATIONAL. International revenues decreased 3.4% to $21.3 million
during the 2001 third quarter from $22.0 million for the 2000 third quarter, and
grew by 3.2% to $60.9 million during the first nine months of 2001 compared to
$59.0 million during the first nine months of 2000. Continued pricing pressures
for traffic between the United States and the Dominican Republic contributed to
the decrease in international revenues during the third quarter. Our average
settlement rate was $0.04 per minute during the 2001 third quarter compared to
$0.07 per minute during the 2000 third quarter.
Southbound minutes increased by 25.8% to 191.6 million minutes in the 2001
third quarter from 152.3 million during the 2000 third quarter, and by 32.7% to
521.4 million minutes in the first nine months of 2001 compared to 392.8 million
minutes in the first nine months of 2000. TRICOM USA accounted for 88% of our
total southbound minutes in the 2001 third quarter compared to 74.4% in the same
period last year. Total international minutes increased by 24.7% to 201.0
million minutes in the 2001 third quarter from 161.1 million during the 2000
third quarter, and by 31.4% to 549.0 million minutes in the first nine months of
2001 compared to 417.7 million minutes in the first nine months of 2000.
LOCAL SERVICE. Local service revenues increased 18.6% to $16.0 million
during the 2001 third quarter from $13.5 million for the 2000 third quarter, and
grew by 23.5% to $46.4 million during the first nine months of 2001 compared to
$37.5 million during the first nine months of 2000. The continued growth in the
number of local lines in service resulted in increased local service revenues
for the period. In the third quarter of 2001, we added 8,482 net local access
lines compared to 9,783 net local access lines added in the third quarter of
2000. Our local service subscriber base grew approximately 20.4% to 169,893
local access lines in service at September 30, 2001 compared to 141,117 local
access lines in service at September 30, 2000.
As a result of a higher number of lines in service, measured local service
revenues increased by 15.3% to $3.3 million in the 2001 third quarter from $2.9
million in the 2000 third quarter, and by 23.1% to $9.5 million in the first
nine months of 2001 compared to $7.7 million in the first nine months of 2000.
Revenues from monthly fees increased by 15.4% to $10.2 million in the 2001 third
quarter from $8.8 million in the 2000 third quarter, and by 22.5% to $30.1
million in the first nine months of 2001 compared to $24.5 million in the first
nine months of 2000. Our average monthly churn rate for local service was 1.6%
in the 2001 third quarter compared to 2.0% in the 2000 third quarter. We
calculate our average monthly churn rate by dividing the number of subscribers
disconnected during a given period by the sum of subscribers at the beginning of
each month during such period.
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DATA AND INTERNET. Data and Internet revenues increased 100.3% to $2.1
million during the 2001 third quarter from $1.1 million for the 2000 third
quarter, and grew by 290.1% to $6.0 million during the first nine months of 2001
compared to $1.5 million during the first nine months of 2000. The continued
growth in the number of data and Internet subscribers resulted in increased
revenues for the period. Our data and Internet subscriber base grew by 52.4% to
8,606 at September 30, 2001 compared to 5,646 at September 30, 2000. Revenues
from monthly fees increased by 95.0% to $1.7 million in the 2001 third quarter
from $882,000 in the 2000 third quarter, and by 264.4% to $4.9 million in the
first nine months of 2001 compared to $1.4 million in the first nine months of
2000.
CELLULAR AND PCS. Our cellular and PCS revenues increased 12.9% to $10.2
million in the 2001 third quarter from $9.0 million in the 2000 third quarter,
and grew by 7.3% to $28.2 million during the first nine months of 2001 compared
to $26.3 million during the first nine months of 2000. At September 30, 2001, we
had 332,436 cellular and PCS subscribers compared to 253,447 at September 30,
2000. As a result of a higher average subscriber base, airtime minutes increased
28.7% to 53.5 million in the 2001 third quarter from 41.6 million in the 2000
third quarter, and grew by 26.0% to 152.2 million during the first nine months
of 2001 compared to 120.8 million during the first nine months of 2000. The
average price per airtime minute declined to $0.22 in the 2001 third quarter
from $0.24 in the 2000 third quarter. Our average monthly churn rate for
cellular and PCS services decreased to 3.1% in the 2001 third quarter from 3.5%
in the 2000 third quarter.
PAGING. Paging revenues decreased 44.3% to $243,000 in the 2001 third
quarter from $436,000 in the 2000 third quarter, and by 38.3% to $832,000 during
the first nine months of 2001 compared to $1.3 million during the first nine
months of 2000, primarily as a result of our decision to focus on having new
customers move away from paging services and into prepaid cellular services. At
September 30, 2001, we had 17,878 paging subscribers compared to 22,485 paging
subscribers at September 30, 2000. Our average monthly churn rate for paging
services remained steady at 2.0% in the 2001 third quarter.
SALE OF EQUIPMENT. Revenues from the sale and lease of equipment decreased
35.9% to $466,000 in the 2001 third quarter from $727,000 in the 2000 third
quarter, and decreased by 38.8% to $2.7 million during the first nine months of
2001 compared to $4.3 million during the first nine months of 2000, primarily as
a result of lower sales of private branch exchanges and key telephone systems
and cellular and PCS handsets.
INSTALLATION AND ACTIVATION FEES. Installation revenues decreased 31.9% to
$2.4 million during the 2001 third quarter from $3.5 million during the 2000
third quarter, and decreased by 6.9% to $9.4 million during the first nine
months of 2001 compared to $10.1 million during the first nine months of 2000.
The Company added 74,000 combined gross local access lines and cellular
subscribers in the 2001 third quarter compared 82,000 in the 2000 third quarter.
The decrease in installation revenues was due primarily to an aggressive
promotional marketing strategy including lowered subscriber activation fees for
local and wireless services, designed to capture a significant share of the
market growth.
OPERATING COSTS. Major components of operating costs are:
o satellite connections and carrier costs, which include amounts owed
to foreign carriers for the use of their networks for termination of
outbound traffic and payments for international satellite circuit
leases;
o interconnection costs, which are access charges paid primarily to
Codetel and other operators in the Dominican Republic, and payments
for international satellite circuit leases;
o depreciation of network equipment and leased terminal equipment
and non-network depreciation expense;
o expenses in lieu of income tax; and
o general and administrative expenses, which include salaries and
other compensation to personnel, maintenance expenses, marketing
expenses and other related costs.
Our operating costs increased to $58.0 million in 2001 third quarter from
$47.1 million in the 2000 third quarter, and to $161.0 million during the first
nine
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months of 2001 compared to $130.9 million during the first nine months of 2000.
These results reflect higher network depreciation expenses resulting from the
Company's capital investment program and increased general and administrative
expenses. As a percentage of revenues, operating costs increased to 95.7% in the
2001 third quarter from 81.4% in the 2000 third quarter, and to 90.9% during the
first nine months of 2001 compared to 81.2% during the first nine months of
2000.
SATELLITE CONNECTIONS AND CARRIER COSTS. Satellite connections and carrier
costs were approximately the same, $17.8 million in 2001 and 2000 third quarter,
and increased by 4.9% to $49.5 million during the first nine months of 2001
compared to $47.1 million during the first nine months of 2000, primarily as a
result of higher interconnection costs. Interconnection costs increased by 5.0%
to $7.4 million in the 2001 third quarter from $7.1 million in the 2000 third
quarter, and by 7.4% to $21.3 million during the first nine months of 2001
compared to $19.8 million during the first nine months of 2000, as the result of
a higher volume of traffic terminating in other networks.
NETWORK DEPRECIATION AND NON-NETWORK DEPRECIATION EXPENSE. Network
depreciation increased 54.6% to $11.6 million in the 2001 third quarter from
$7.5 million in the 2000 third quarter, and by 59.2% to $32.5 million during the
first nine months of 2001 compared to $20.4 million during the first nine months
of 2000, as a result of the Company's continued capital investment and domestic
and international network expansion programs. Non-network depreciation expense
with respect to other fixed assets grew 67.2% to $2.8 million in the 2001 third
quarter from $1.7 million in the 2000 third quarter, and by 55.8% to $7.4
million during the first nine months of 2001 compared to $4.7 million during the
first nine months of 2000.
EXPENSE IN LIEU OF INCOME TAXES. We make payments to the Dominican
government in lieu of income tax equal to 10% of gross domestic revenues, after
deducting charges for access to the local network, plus 10% of net international
revenues. Expense in lieu of income taxes also includes a tax of 2% on
international settlement revenues collected. Expense in lieu of income taxes
during the 2001 third quarter decreased by 24.3% to $2.5 million from $3.3
million in the 2000 third quarter, and increased by 1.9% to $9.0 million during
the first nine months of 2001 compared to $8.8 million during the first nine
months of 2000.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
41.3% to $22.3 million in the 2001 third quarter from $15.8 million in the 2000
third quarter, and by 27.8% to $58.6 million during the first nine months of
2001 compared to $45.8 million during the first nine months of 2000. The
increase in the amount of general and administrative expenses was the result of
higher marketing and promotional costs and a greater amount of commissions paid
to wholesale distributors of prepaid cards as a result of higher revenues from
sales of the cards in the U.S. As a percentage of total operating revenues,
general and administrative expenses increased to 36.7% in the 2001 third quarter
compared to 27.2% in the 2000 third quarter.
During the past quarter, we intensified our marketing and sales efforts to
increase our market share into the high-end residential and corporate markets.
As a result, marketing and promotional expenses increased by 121% to $2.4
million during the 2001 third quarter from $1.1 million in the 2000 third
quarter, reflecting the Company's strong level of customer acquisitions. For the
first nine months of 2001, marketing and promotional expenses increased by 20.6%
to $4.1 million during the first nine months of 2001 compared to $3.2 million
during the first nine months of 2000. Commissions paid for prepaid cards
distribution grew 15.9% to $5.7 million in the third quarter of 2001 from $4.9
million in the third quarter of 2000, and grew 35.1% to $17.1 million in the
nine months ended September 30, 2001 from $12.6 million in the nine months ended
September 30, 2000, primarily as a result of a higher number of prepaid cards
sold in the United States and the expansion of our prepaid cellular subscriber
base in the Dominican Republic.
COST OF EQUIPMENT AND OTHER COSTS. Cost of equipment sold, which consist
of the cost of sale of customer premise equipment, including private branch
exchanges and key telephone systems, as well as cellular and PCS handsets,
decreased by 19.7% to $383,000 in the 2001 third quarter from $477,000 in the
2000 third quarter, and increased by 1.6% to $2.2 million during the first nine
months of 2001 compared to $2.1 million during the first nine months of 2000.
Other costs, which consist of the cost of sale of prepaid services, increased by
27.4% to $488,000 in the 2001 third quarter from $383,000 in the 2000 third
quarter, and increased by 27.1% to $1.5 million during the first nine months of
2001 compared to $1.2 million during the first nine months of 2000.
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OPERATING INCOME. Operating income decreased to $2.6 million in the 2001
third quarter compared to $10.8 million in the 2000 third quarter, and to $16.1
million during the first nine months of 2001 compared to $30.3 million during
the first nine months of 2000. Higher depreciation expenses related to our
capital investments, combined with increased general and administrative
expenses, negatively impacted our operating margins.
OTHER INCOME (EXPENSES). Other expenses increased by 10.6% to $8.1 million
in the 2001 third quarter from $7.3 million in the 2000 third quarter, and by
20% to $26.7 million during the first nine months of 2001 compared to $22.3
million during the first nine months of 2000, reflecting increased interest
expenses resulting from higher levels of short-term borrowings and vendor
financing to support the Company's capital investment program.
NET EARNINGS (LOSS). Loss before cumulative effect of accounting change
and minority interest totaled $5.6 million, or $0.19 per share, in the 2001
third quarter compared to earnings of $3.3 million, or $0.12 per share, in the
2000 third quarter. Loss before cumulative effect of accounting change and
minority interest totaled $10.9 million for the nine-month period ended
September 30, 2001, or $0.38 per share, compared to earnings before cumulative
effect of accounting change and minority interest of $7.6 million, or $0.28 per
share, for the nine-month period ended September 30, 2000. Including the $16.5
million cumulative effect of accounting change for the adoption of SAB 101, we
had a net loss of $8.9 million, or $0.32 per share, in the first nine months of
2000.
EBITDA. Earnings before interest and other income, taxes and depreciation
and amortization decreased by 16.1% to $19.7 million in the 2001 third quarter
from $23.5 million in the 2000 third quarter, primarily as a result of lower
operating income, and increased by 0.8% to $65.4 million during the first nine
months of 2001 compared to $64.9 million during the first nine months of 2000.
We calculate earnings before interest and other income and expenses, taxes and
depreciation and amortization prior to the deduction of payments to the
government in lieu of income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Substantial capital is required to expand and operate our
telecommunications networks. For the first nine months of the year, we made
capital expenditures of $96.1 million for the installation of additional local
access lines, enhancement of our cellular and PCS network in the Dominican
Republic, expansion of international facilities and other network improvements.
Expansion of international facilities included the installation of a switch in
Miami, Florida and investments related to our Central America expansion. We
currently anticipate making capital expenditures totaling approximately $123.8
million in 2001 for increasing capacity and coverage in our local access and
mobile networks, expanding our international facilities to support increased
traffic volume, expanding our local network and other international expansion
and for the implementation of our Central American strategy, primarily in
Panama. We anticipate making no capital expenditures for expansion into other
areas in Central America in 2002.
In addition, as we expand our operations into new areas we will be
required to support increased working capital and capital expenditure needs. We
have satisfied our working capital requirements and funded capital expenditures
from cash generated from operations, short and long-term borrowings, trade
finance, capital leases, vendor financing and equity and debt issuances. We
believe our cash generated by operations and borrowings available to us are
sufficient to fund our capital expenditures for 2001. We frequently evaluate
potential acquisitions and joint venture investments. Acquisitions or
investments may require us to obtain additional financing. There can be no
assurance that additional funding sources will be available to us on terms that
we find acceptable or at all.
Net cash provided by operating activities was $43.4 million and $20.3
million during the nine months ended September 30, 2000 and September 30, 2001,
respectively. We had net accounts receivable of $32.1 million and $30.6 million
at December 31, 2000 and September 30, 2001, respectively. Our indebtedness was
approximately $450.6 million at September 30, 2001, of which $200.0 million was
our 11 3/8% senior notes due 2004, $87.7 million was in long-term borrowings and
capital leases, with maturities ranging from two to six years, and $162.9
million was short-term bank loans, telecommunications equipment financings,
trade financings and current portion of capital leases and of long-term debt. At
September 30, 2001, our U.S. dollar borrowings, other than the 11 3/8% senior
notes due 2004, had interest rates ranging from 6.36% per annum to 13% per
annum, and our peso borrowings had interest rates ranging from 17% per annum to
20% per annum. At September 30, 2001, our U.S.
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dollar borrowings, other than the 11 3/8% senior notes due 2004, totaled $224.2
million and our peso borrowings totaled $26.4 million.
We have credit facilities, which, in the aggregate, permit us to borrow up
to $292.4 million. At September 30, 2001, there was $236.4 million outstanding
under these facilities and $14.2 million of commercial paper outstanding in the
Dominican market. We had approximately $56.0 million available for borrowing
under these facilities, of which $28.6 million was under facilities with
maturities of less than one year. At September 30, 2001, we had additional
approvals from Dominican banks and institutions of $90.0 million of short-term
and long-term credit facilities and $202.4 million of U.S. dollar-denominated
credit facilities from international banks.
At September 30, 2001, our current liabilities exceeded our current assets
by $143.6 million. This reflects our short-term borrowings with related
companies, local and international banks. Dominican banks lend on a short-term
basis in order to negotiate interest rates should market conditions change,
without necessarily demanding the repayment of credit facilities. It is our
belief that the existence of negative working capital does not affect adversely
the continuity of our business. We will seek additional credit facilities with
international banks to refinance our short-term credit facilities. During 2000,
we obtained the approval of credit guarantees from Export-Import Bank of the
United States of up to $56.0 million for loans to be made by The International
Bank of Miami, N.A. to be used for purchases of communications equipment and
material from Motorola and other U.S. suppliers. At September 30, 2001, the
amount of $31.8 million has been disbursed under these facilities. The credit
guarantees will be repayable over a five-year period.
On May 9, 2001, GFN Corporation, one of our major shareholders, committed
to provide us $40 million in additional equity. GFN advanced funds to us on an
interest free basis, which will be used to subscribe for Class A Common Stock on
the same basis, offered to all shareholders in a Rights Offering.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141")
and No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 141
requires all business combinations initiated after June 30, 2001 to be accounted
for using the purchase method. Under SFAS 142, goodwill and intangible assets
with indefinite lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Separable intangible
assets that are not deemed to have indefinite lives will continue to be
amortized over their useful lives (but with no maximum life). The amortization
provisions of SFAS 142 apply to goodwill and intangible assets acquired after
June 30, 2001. With respect to goodwill and intangible assets acquired prior to
July 1, 2001, we are required to adopt SFAS 142 effective January 1, 2002.
Currently, we do not believe that the provisions of SFAS 142 will have a
significant effect on our results of operations and financial position.
ITEM 4. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The following discussion about market risks to certain financial
instruments includes "forward-looking" statements that involve risks and
uncertainties. Actual results could differ materially from those projected in
the forward-looking statements.
We are exposed to market risks from adverse changes in interest rates and
foreign exchange rates. We do not hold or issue financial instruments for
trading purposes.
INTEREST RATE RISK
Our interest expense is sensitive to changes in the general level of
interest rates in the United States and in the Dominican Republic. At September
30, 2001, we had outstanding $200 million aggregate principal amount of
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senior notes. The senior notes bear interest at 11 3/8% per annum and mature in
the year 2004. The fair value of such senior notes was approximately $186
million and $187 million at December 31, 2000 and September 30, 2001,
respectively.
Our primary exposure to market risk for changes in interest rates relates
to our short-term borrowings from Dominican banks. Primary exposure is based on
the potential of short-term interest rate variation, not on exposure to changes
in fair market value of our long-term debt. At December 31, 2000 and September
30, 2001, we had $198.8 million and $250.6 million, respectively, outstanding of
short-term and long-term borrowings, other than our senior notes due 2004 but
including trade finance, outstanding from Dominican and international banks,
mostly denominated in U.S. dollars of which $189.1 million and $224.2 million,
respectively, was U.S. dollar-denominated, and the remaining $9.7 million and
$26.4 million, respectively, was peso-denominated. At December 31, 2000 and
September 30, 2001, of the $189.1 million and $224.2 million, respectively, U.S.
dollar-denominated debt, $55.8 million and $69.9 million, respectively, was
borrowed from the Dominican bank financial market, while the remaining $133.3
million and $154.3 million, respectively, was borrowed from international banks.
Of the total $198.8 million and $250.6 million outstanding, at December 31, 2000
and September 30, 2001, respectively, $137.2 million and $160.1 million,
respectively, had fixed interest rates, while the remaining $61.6 million and
$90.5 million, respectively, had variable interest rates. At September 30, 2001,
our short-term and long-term U.S. dollar-denominated borrowings bore interest at
rates ranging from 6.36% per annum to 13% per annum. At September 30, 2001, our
short-term and long-term Dominican peso-denominated borrowings bore interest at
rates ranging from 17% to 20% per annum. A 10% increase in the average rate for
our variable rate debt would have increased our net income loss for the 2001
second quarter by approximately $1.5 million.
FOREIGN EXCHANGE RISKS
We are subject to currency exchange risks. During the first nine months of
2001, we generated revenues of $60.9 million in U.S. dollars and $116.2 million
in Dominican pesos. In addition, at September 30, 2001, we had $224.2 million of
U.S. dollar-denominated debt outstanding, excluding the $200.0 million principal
amount of the 113/8% senior notes due 2004.
The impact of changes in foreign exchange rates is determined by measuring
the effect of percentage changes in the range of rates during the year for our
Dominican peso-denominated assets and liabilities. The model reflects the
weighted average change in exchange rates as resulting in the same percentage
change in foreign exchange gains or losses.
Dominican foreign exchange regulations require us and other
telecommunications companies to convert all U.S. dollar revenues into Dominican
pesos at the official exchange rate, and to purchase U.S. dollars at the private
market exchange rate. Although the official exchange rate now fluctuates and is
tied to the private market rate, the official exchange rate tends to be lower
than the private market rate. During the first nine months of 2001, the average
official exchange rate was RD$16.66 per $1.00 while the average private market
rate was RD$16.85 per $1.00.
Our functional currency is the U.S. dollar and, as a result, we must
translate the value of Dominican peso-denominated assets into U.S. dollars when
compiling our financial statements. This translation can create foreign exchange
gains or losses depending upon fluctuations in the relative value of the
Dominican peso against the U.S. dollar. During the 2001 third quarter, we
recognized an approximate $27,000 foreign exchange loss. If the Dominican peso
had devalued by an additional 10% against the U.S. dollar on average in 2001, we
would have realized an additional foreign exchange loss of approximately $2,700.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following is a description of certain recent developments in
litigation:
ALL AMERICA CABLES & RADIO LITIGATION
On August 13, 2001, Instituto Dominicano de Telecomunicaciones, or
Indotel, the Dominican telecommunications regulator, issued an order, in
response to a complaint filed by All America Cables & Radio, a subsidiary of
Centennial Communications Corp., that we are not dominant in the Dominican
market and that the interconnection agreement we offered to All America was not
discriminatory. The interconnection agreement that we offered to enter into with
All America was the same as we entered into with France Telecom in the Dominican
Republic and which, we understand, All America has with Codetel and which
Codetel has with France Telecom. Indotel further ruled that if we granted to All
America the economic concessions that it seeks from us, the allowance would
create discrimination against other carriers in the Dominican Republic,
violating the Dominican law and the Dominican constitution.
On September 14, 2001, Indotel issued an order, in response to a motion
submitted by All America for reconsideration of the August 13, that ratified the
August 13 order and ordered us and All America to enter into an interconnection
agreement on substantially the terms and conditions that we proposed.
On September 4, 2001, Centennial and its affiliates filed a complaint
against Tricom USA Inc. with the United States Federal Communications Commission
claiming that
o We refused to provide Centennial's affiliate in the Dominican
Republic with sufficient facilities and reasonable,
nondiscriminatory terms for connecting traffic between ours and its
network in the Dominican Republic.
o Centennial should not pay to Tricom, S.A. the market rate for
terminating calls to Tricom customers in the Dominican Republic
determined by Indotel, approximately US$.042 per minute, but should
pay $US.011 per minute; our refusal to agree to this rate is
discriminatory; and even if Centennial pays the same international
termination rate as Tricom USA, Tricom USA gets a benefit because it
is affiliated with Tricom, S.A.
o We engage in discriminatory behavior because other U.S. carriers
including Tricom USA get better interconnection capacity from
Tricom, S.A. between the United States and the Dominican Republic
than does Centennial.
o We are harming competition in the United States by limiting the
number of interconnection facilities we have made available to
connect calls from Centennial's customers to ours, inflating the
price for local termination of international traffic and refusing in
general to deal with Centennial on a nondiscriminatory basis.
o We are violating the conditions of the license granted to Tricom USA
by the FCC to operate as a facilities based carrier which provides
that neither Tricom USA nor any persons controlling it would
participate in any favorable interconnection arrangements or special
concessions not available to other U.S. carriers.
Centennial requests that the FCC:
o order Tricom USA to cease accepting special concessions from Tricom
S.A.;
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o require Tricom USA and Tricom S.A. to provide adequate
interconnection capacity to Centennial and reduce the access charge
to a level consistent with costs;
o find that Tricom USA is liable to Centennial for damages to
compensate Centennial for the losses that it suffered as a result of
Tricom's violations of law and the FCC's rules; and
o revoke Tricom USA's Section 214 license if Tricom USA does not stop
receiving special concessions from Tricom, S.A.
We have replied to Centennial's complaint with the FCC on October 13,
2001. We responded that:
o Indotel is the regulator with jurisdiction over the complaint and
Centennial is attempting to appeal the decision by Indotel in the
action brought by All America Cables & Radio Inc. against Tricom in
the Dominican Republic;
o Centennial failed to provide any evidence that Tricom USA accepts
special concessions from Tricom S.A.;
o The relief sought by Centennial is improper as Tricom USA owns no
facilities in the Dominican Republic and the FCC has no jurisdiction
over Tricom S.A., which is the only entity that could provide the
interconnection capacity sought by All America Cables & Radio.
We requested that the FCC reject jurisdiction over the matter or deny the
relief sought by Centennial in its entirety.
On November 2, 2001, the parties attended a settlement conference with
the FCC. However, the parties did not reach a settlement.
On November 13, 2001, Indotel informed us that it would impose monetary
sanctions on All America if it did not execute within five days the
interconnection agreement that we had proposed and which Indotel determined
in August 2001, among other things, was not discriminatory.
BELLSOUTH LITIGATION
On May 8, 2001, BSC of Panama, S.A., a subsidiary of BellSouth, which owns
one of the two cellular telecommunications concessions granted by the Panamanian
government, requested that the Panamanian ENTE REGULADOR DE LOS SERVICIOS
PUBLICOS, or ENTE, investigate Tricom Panama, S.A. for violations of the
Telecommunications Act and the ENTE's regulations. Bell South claimed that
Tricom Panama:
o will use its iDEN based trunking services to provide cellular
telecommunications services, in violation of our license; and
o although we proved that our iDEN system has been modified to disable
"hand off" capabilities, the fact that the equipment has these
capabilities represents a breach of regulations and our license.
The ENTE has not issued any ruling on BellSouth's request, but has stated
publicly that Panamanian regulations do not limit the provision of mobile
services to a particular technology.
On August 24, 2001, BellSouth requested that the ENTE initiate a legal
review before the Third Chamber of the Panamanian Supreme Court of Justice, of
the interpretation given by the ENTE to the definition of "Conventional Trunking
System Services." BellSouth alleges that the interpretation given by the ENTE to
the definition of "Conventional Trunking System Services," found in Resolution
No. JD-025 of December 12, 1996 violates several articles of the
Telecommunications Act, including that the ENTE's interpretation allows a
trunking service provider to use any mobile system, including any type of
cellular systems, as long as the "Hand-Off" capabilities is disabled.
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Bell South claims that this violates the Telecommunications Act, which states
that cellular services are a Type A Service that can only be provided by
BellSouth and the other holder of a Type A License, Cables & Wireless.
The ENTE has replied that it only regulates services and not technology
and that the definition of "Conventional Trunking System Services" protects the
temporary exclusivity regime given to cellular services because it does not
allow the participation of new cellular service providers in the Panamanian
market. The license given to Tricom Panama is for the operation of conventional
trunking services, which it plans to operate with the iDEN system.
The legal review by the Third Chamber of the Panamanian Supreme Court of
Justice requested by Bell South cannot be undertaken until the Supreme Court
resolves a constitutional review regarding the lack of procedure for it to
undertake a legal review of the sort sought by BellSouth. To date, the Supreme
Court has not indicated whether it will review the procedure.
On August 28, 2001, BellSouth obtained a precautionary order from the
Seventh Civil Court of the First Judicial Circuit requiring Tricom Panama to
cease all activity directly or indirectly related to the installation and supply
of telecommunication services using Motorola's iDEN system. This order forms
part of a tort claim, submitted by BellSouth on September 4, 2001, against
Tricom for US$20,000,000 for the possible damages that Tricom Panama may cause
BellSouth in the event that Tricom Panama initiates operations of an iDEN-based
trunking service.
On September 11, 2001 Tricom Panama submitted a motion before the Seventh
Civil Court to substitute a bond for the precautionary order to cease its
activities and at the same time appealed to the Superior Civil Chamber the
precautionary order itself. On October 1, 2001, the Seventh Civil Court denied
Tricom Panama's motion and, on October 8, 2001, Tricom Panama also appealed this
decision to the Superior Civil Chamber. The Tricom Panama defense if based on
the following principles:
o only the ENTE has by law the power to discontinue public utilities
services;
o this precautionary measure can only be applied to real property (not
to personal property);
o there is no imminent damage that justifies the precautionary
measure.
On September 11, 2001, BellSouth submitted a complaint stating that Tricom
Panama was in default of the court order.
Tricom Panama also submitted a motion to the Seventh Civil Court to
dismiss Bell South's tort claim and to invalidate the precautionary order, due
to the court's lack of jurisdiction over a matter that should be decided by the
ENTE. On September 28, 2001, Tricom Panama filed a US$1,000,000 damages
counterclaim against BellSouth for the public campaign set against Tricom Panama
by BellSouth and for the unfounded investigation requested before the ENTE.
We believe, based on the advice of our Panamanian legal counsel, that Bell
South should not succeed in its claims because:
o BellSouth cannot claim any damages caused by Tricom Panama
activities, since Tricom Panama operations are protected under a
legitimate Conventional Trunking System Services license.
o The ENTE is the only authority empowered to declare that the
telecommunications services to be provided by Tricom Panama are not
conventional trunking services, or that the iden system cannot be
used to provide conventional trunking systems.
Tricom Panama has yet to finish installation of their telecommunication
equipment and has not begun to advertise or offer other services, therefore,
BellSouth can not prove any possible damages derived from Tricom Panama's
operations.
On November 5, 2001, Tricom Panama requested that the ENTE investigate
BellSouth for violations of the Telecommunications Act and its concession
agreement on account of the failure of BellSouth to (i) recognize the
jurisdiction of the ENTE, (ii) follow proper procedure in connection with the
precautionary measure it obtained and (iii) provide interconnection.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 9, 2001, GFN Corporation, one of our major shareholders, committed
to provide us $40 million in additional equity. GFN advanced funds to us on an
interest free basis, which will be used to subscribe for class A Common Stock on
the same basis, offered to all shareholders in a Rights Offering. The Class A
Common Stock to be issued to GFN Corporation is exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 27, 2001, the Company held its annual meetings of
shareholders. The following were the matters voted upon by shareholders and the
number of votes cast for, against and withheld for each matter: (1) The approval
of the written report of the Statutory Auditor, dated April 4,2001, on the
financial condition of the Company and its financial statements approved by the
Board of Directors- 191,920,930 votes for, 9,610 votes against and 15,182
abstentions; (2) The release of the Statutory Auditor from liability for claims
of the Company or the shareholders for any actions taken by him during the
fiscal year ended December 31, 2000 in his capacity as Statutory Auditor -
191,816,277 votes for, 115,200 votes against and 14,245 abstentions; (3) The
approval of the written report of the Chairman of the Board of Directors and
Chief Executive Officer, dated August 13, 2001, regarding the operations of the
Company for the fiscal year ended December 31, 2000 - 191,911,505 votes
for,6,785 votes against and 27,432 abstentions; (4) The approval of the
financial statements for the fiscal year ended December 31, 2000 - 191,918,530
votes for, 10,310 votes against and 16,882 abstentions; (5) The release of the
Chairman of the Board and of the other members of the Board from liability for
claims of the Company or the shareholders for actions taken in their capacities
as directors of the Company during the fiscal year ended December 31, 2000 -
191,802,855 votes for; 118,347 votes against and 24,520 abstentions; (6) The
declaration of net operating losses for Tricom, S.A. and its subsidiaries on a
consolidated basis for the fiscal year ended December 31, 2000 of US$7,225,635 -
191,915,332 votes for, 14,090 votes against and 16,310 abstentions; (7) The
election of Messrs. Manuel Arturo Pellerano Pena, Hector Castro Noboa, Carl H.
Carlson Barruos, Marcos J. Troncoso Mejia, Juan Felipe Mendoza, Anibel De
Castro, Kevin Wiley, Ralph Smith, Richard Haning, Theodore Schaffner, Edwin
Corte and Marino Ginebra to serve as directors of the Company and hold office
for a term of one year, subject to the conditions established in the By-Laws -
191,866,652 votes for, 15,350 votes against and 63,720 abstentions; and (8) The
election of Mr. Agustin Lizardo to serve as Statutory Auditor and to hold office
for a term of one year, subject to the conditions established in the By-Laws and
in the Commercial Code of the Dominican Republic - 191,869,702 votes for, 12,900
votes against and 63,120 abstentions.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K
(a) Exhibits.
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None.
(b) Reports on Form 6-K. The Company filed with the Securities and
Exchange Commission Reports on Form 6-K on July 18, announcing the
acquisition of Telecable Nacional, C. por A., and on August 15, 2000
reporting the Company's results of operations for the three months
ended June 30, 2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRICOM, S.A
Dated: November 20, 2001 By: s/ Carl Carlson
------------------------------------
Carl Carlson
Executive Vice President
and Member of the
Office of the President
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